Gaia (GAIA) 5 Nov 182018 Q3 Earnings call transcript

Company Profile

Participants

Jirka Rysavy	Chairman & CEO
Paul Tarell	CFO
Mark Argento	Lake Street Capital Markets
Eric Wold	B Riley
Steven Frankel	Dougherty

Call transcript

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Operator

Good afternoon, everyone and thank you for participating in today's conference call to discuss Gaia Inc.'s Financial Results for the Third Quarter Ended September 30, 2018.

Joining us today are Gaia's CEO, Jirka Rysavy; and CFO, Paul Tarell.

Following some prepared remarks, we'll open the call for your questions.

Before we get started, however, I would like to take a minute to read the Safe Harbor language. The following constitutes the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. include that today risks numerous discussed uncertainties. and matters forward-looking involve statements assumptions, The are to, and and and not historical but filings Form uncertainties include, These limited XX-K in time-to-time including changing and risks our preferences, our detailed acquisitions, on from losses, the general consumer subscriber Commission, rates, Form costs Securities XX-Q. retention with other and Exchange competition, conditions, business reports to obligation update revise publicly statements. Gaia assumes no any or forward-looking over like now CEO, to would to I call Gaia's Rysavy. the that, With Jirka turn Please go ahead.

Jirka Rysavy

James and you, good Thank afternoon everyone.

obviously Our subscriber third milestone ahead growth the ago. of target. XXX,XXX And we which million expectations. to keeps We needed to next our rate X this days September year on XX% XXX,XXX our up quarter results three ahead a subscriber ended subscribers than was grew of million reach XX surpassed X.X early from plan;

margin Our keep for XX.X%, to points basis expect fourth gross we the same grew and again for quarter. above to this XX level

Alternative have our We launched Healing. fourth channel,

Our represents primary third approximately fall XXXX, subscribers. for our was now which one-third of channel, viewing in launched Transformation,

Alternative the coming Healing years. will similar trajectory follow that meaningfully growth contributing expect We into a to our channel

quarter selected our some online will XXXX, from center from also include annual as offering premium premium for $XXX, of existing as be opening live streaming subscription will which our well The offering. the other in it We available second our campus subscription created include also the of new streaming event as unlimited an events events. new will our in

reach to far now geographical XXX We also expanded our countries.

which $XX and $XX about of our XX million campus. As million we have [ph] on line credit of mix cash unused is in September

XXXX. switch earnings to about when And have about now of talk a you numbers. will quarter flow more $X the and positive to to million to in unused $X first quarter cash expect Paul We million cash free we

Paul Tarell

million to quarter the compared year revenues quarter. XX% Thanks, in continued quarter Gross profit to increased from million $X.X ago Jirka. in Streaming growth. year $XX.X strong in the third due $X.X the XX be to subscriber to million increased the third quarter third ago in continued in margin increased of to The quarter margin continued driven XX.X%, cost from our XX.X% Gross per up and increase by and points in last has efficiency streaming revenues content. subscriber the basis gross increased year. to

X% the gross As through million this our million the $X.X almost model we excluding to of leverage quarter. to expenses were as to year in $X.X scale third offering expenses, the maintain margins the the revenues Operating growth continue compared increase in moderate the Jirka highlights level This mentioned, third expect compared to fourth customer acquisitions at of for quarter. year-over-year. we quarter with ago the XX:X in quarter leverage costs of

gross use to per per was the that we from a employee; introducing quarter. are this ago $XXX,XXX, leverage, gross We profit quarter third for metric $XXX,XXX profit employee average the attract year in of up XXXX,

of above number this to to with employee XXXX quarter expect per gross projected fourth We $XXX,XXX. grow profit continue

expectations. to Subscriber and together costs acquisition XXX% the segments we're our offerings. and and in revenues with in six revenues third associated streaming to the despite second quarter German the more month provide premium this we acquisitions revenue with XXXX maintain ongoing launch period subscriber which streaming XX% spend, costs our for previously marketing a quarter. our is on period We about Healing metric expect Customer include increased continue Healing the forward. of buildout our subscription incurred line which We plan revenues which with quarter. translate costs language of these were additions and customer our basis Alternative decrease offering, to includes costs the through in XXXX QX efficient Alternative will after for in associated launching of during this quarter the as customer This weighted towards of to on as quarter continue with the library XXX% transformation This of updates we to premium percentage streaming level as offering. of new acquisition through very represented well Spanish, our as continuing seeking and Combining French, subscription all existing going were the provided XX% the meaningfully a of cost truth expenses into channel, streaming quarterly beyond. at spend of our

and the have undrawn expect left $X Operator? growth cash to million questions. positive we through flow $XX.X $X we current $XX of in to of in transitioning have Jirka and the investing to sheet between XXXX, QX million. credit of of cash million on As call million We continue With balance our cash plan our as for line up and earnings on the an credit of XXXX mentioned, free line in and XX, to I cash like September that, would open upon XXXX. utilizing

Operator

today we'll Argento Street first Capital with Lake from [Operator Markets. question And our Instructions] take Mark

Mark Argento

changes changes any content I'd about as see launch to Then like if any wanted -- other see stats been channel, to Healing, early the you've hosts major the of to got offerings there or find some your out just channels, latest any Alternative check-in there? updates a other little of all if any at bit well? those those or on to have more

Jirka Rysavy

channel our expect be kind and retention cannot say therefore [ph] give we acquisition probably months will it's size we like couple know really even would next but just just a and really we of data we X,XXX to call will call it's right so very on would will but sure where we kind I but probably it, nine costs retention, being so trends. onwards say nine start need don't actually it from that about much kind days, test U.S. We like launched XX much, to as that's similar initiatives, Healing, the little will is after that. hard speak we retention just far probably of as good the cannot of it till to I any probably than positive now, any expect one have a next million in till know so it, yoga the call to would it Alternative update know what that about acquisition we of of largest transformation, Healing it's obviously the -- It's close kind probably but did of you now as months Alternative see we of bigger The titles launch.

members the kind episodic -- first had impact also replaced specific in on for was Gaia of up individual the had we right what the interesting, now brand, subscribe [indiscernible], because viewing we is it which time, new of we our since posts no host and our to content sessions club of show and this our For the to hosts; our -- added had we change. and made in viewing that it not program. one was subscription, one proves host of several replace generally and it's we guests kind XX% it of But interesting actually a

go of every that a when Then than our percentage Paul seekers. bigger series said is really yogi, for once we good much So June, seekers we now especially acquisition obviously so yogi, second are year. that's even suggesting right as the that we before of year, practice. like this much like always of for about the other for focus a be the obviously, -- while more so Transformation; cost lower was that in host will some said on be expensive the much lifetime for that list in might streamings even it's seekers; why focus changing surely the they quarter in first shift when But part part that pretty on -- value actually are channels, which

on now. yogi's So seekers represented right it more we of -- right focus really in them -- fall kind actually segment now of because largest now the like seekers of quarter, the to than one-third we when was the have second shift we're -- kind about kind

Paul Tarell

time it's from XX% of Yes, at June but XX. XX% was like up so and was we with balanced and QX that transformation it they -- more I think Seeking Truth it Seeking XX%, indexing, over said last were pretty Truth

Jirka Rysavy

next revenue of question, which And of we CPA always continue first is lower kind year, we'll Did Mark? see Yogi answer through the specter spot your the of that percentage kind year for boosts more the when probably of our positions. dominant the cost our acquisition of had

Mark Argento

model, on one channels, you per around terms revenue the have that's premium the maybe quick Any more kind I ARPU? any pricing, offering rolling out. of add And in of in know as just -- helpful. follow-up any opportunity on of pricing you pay-per-channel terms -- or you're Yes, new more thoughts content thoughts on average

Jirka Rysavy

we do expect even in Well, obviously but the it's on not really have model ARPU revenues and will an if year -- much the impact the on premium small first ARPU. on actually own, it's take

price the price launch also We and different Netflix $XXX when this similar to is used actually kind from next -- few offering points average months of offering because -- $XX. for testing was our we going which play now to you like was

do raise you test So will this testing. quarter but -- more and for tell really prices, opened next we to but will will definitely us place we it so we

Operator

with Next we'll hear Wold from Riley. Eric B

Eric Wold

the subscriber I sure I acquisition -- revenues as of a understand make correctly; to streaming want just cost I XXX%? you you is heard Paul, percent

Paul Tarell

Yes, for the quarter.

Eric Wold

pullout, what I percentage know was? costs, towards kind subscription; in talked then, of dollar then highlight Alternative maybe acquisitions geared you And your directly about the maybe not what subscribed anywhere other amount quarter. quarter? you been breaking I that the the And kind in may was you of premium contribution there know organic and It launch this include to Healing

Jirka Rysavy

probably at but to it's which disclosed would it kind it -- -- more kind slightly dig say averages quarters, -- I'm kind due we also where you're look it that the track and of not the more but more new But Spanish two it on especially I from don't we with see the it's sure over again. can you really over at that's way to -- going we average, the hid channel, into it not never actually a of I'm some especially have both, lot we really will the that's number, was the process so I but through hundred -- being organic mean, probably look organic last their where next review; up sure number, that everything by going other I translation, we launching I simple are activities. XXX -- actually on come to not of if want kind if time of this, start can from of

Eric Wold

QX QX through in QX level on And the 'XX. of you end then positive free a you spend and that kind of profitability -- what goal staying it you spend year the you confidence by this if of can profitable million starting then guess kind getting about to end through drop cost then flow and manner? and I cash in that subscriber acquisition that still the dramatically reach talked QX gives averaging starting subscriber the reducing of at in cost and customer 'XX do

Jirka Rysavy

we is Yoga also initiatives think faster I into of we've able current [ph] to percentage then few member definitely and gain for in driver one as we're cost things; And program the back half that small much I we've the given can people total the kicking holidays, there it's today primary a is dollars, that's they it's our us many start the and been expect well. XXs, channels. expect be that next that contribute as ones really are period that's programs investing building So referral we those the for season to to work, low of that into quarters discussing And five to growing; than half will like have are Also those fundamentally headcount organic, many of that any lower right now, than the so touch as peak before months that be with of about we're to well a think point five those kind into going starting and going being from over to ads big acquisition add January. go been we're subscribers they And number but two we have rolling how two less total at how we cut one of a behind traction year. keep or will we [ph]. beyond to it's the -- the to that us so reach ask next meaningfully

our keep spend continue. department what now some we new convert to the We obviously, customer; have playing we these to right member So that's so probably all people; basically so build all. expect need into at which retention we less as to has with year trend ago the department didn't team XX

Eric Wold

to is per month sort level think live putting have we cost about that from offered And involved of subscriber do that then per what and previous there is is prices breakeven on obviously average the obviously subscribers on some how guess to There the with and what's offering, a quarter? it the current $XXX; a raised make base delta would [ph] be previous subscription because I -- number on a the previous there prices of is or events, a to think worthwhile? live these because of ends I premium certain

Jirka Rysavy

of Yes, we second to I start mean probably to XXXX probably, basis and of this then I breakeven we expect kind half mean on operate in to XXXX and year kind are when of it's basis. next P&L part and --

let's $XXX. we we so them, we'll might so but starting offerings -- start have of not of because eight at the have offering year the first -- would and say priced that main we And like limit for the quarter, place probably for it's the events prime each would we're number

you kind and if $XXX standards second which basis, have revenues that would mean a [ph] on it breakeven on kind So where versus between annual any should because cautiously have we be $XXX kind the that upgrade -- doesn't to we try la but for. people might charge both happen cost so of carte not go of typically is industry And, we quarter of -- we the buy some breakeven. basis operate wouldn't but and

Operator

with our next Dougherty Steven has question. Frankel

Steven Frankel

parts the has especially different there material starters, interest? of change the in any value between For of subscriber, been lifetime the

Jirka Rysavy

new meaningful has been at we is go obviously there the change bringing to we've No, of been only growth you rate. change as look higher at in number continued when no it. The that people this have

buy overall that meaningful how [indiscernible], So of seasons drill look of changes brings into in the you in XX-year when likes averages the and no by band. composition you kind down but

Paul Tarell

the first number slow down we and like the kind because Once we quite now -- as bit pretty of of that XXXX go obviously mix, to then who that's will of and be you're kicked increasing see won and I get going to achieve of value percentage of to would increase then with steady XX%; the mix, but decrease; would going number people remember to a time we any new probably difference. expect the kind see obviously XX%, the lowest you're start to more quarter first to between then. we so we to meaningful

Steven Frankel

TV And for did you or now? and the is other TV stepped I experiment kind effective where an are of up day spending a that ad the marketing, you wondering that money? was just notice whether one-off a channel

Jirka Rysavy

And our we're do is -- there things hear which our ad I'm because it's or it's TV. probably tightly there we print a stuff targeted today. to members -- anything I say a Yoga of of you of catching and TV more… like we pretty anything that it refer kind don't online journal -- meaningfully able see customer involved did exchanges will, on small I limited, as pretty would do by actually the We no, glad but one Board like online, if plan; they a why company that don't say including to XX% target is you is I it that always some highly advertise with that saw is So but are to think the [ph] we don't fit one hot is think much and

Paul Tarell

when for [ph] with XX% being advertising on one don't cable on in is we channel of those that payments [indiscernible] pay free our because impressions terms up. the and caveat shows a it channel

Steven Frankel

today? in Internet where on kind YouTube Facebook that -- spending how versus today you kind wild terms Instagram And versus versus are of online, is focus of the of

Paul Tarell

looking of we're those to all on dollars platforms as continue increasing explore yield that We spending. the we're for

campaign can been one opportunities YouTube have tools those have but explore perspective. channels perform any as better others English shifting from as what better bit and of terms are So well. their there on we're we filtering of international out in to more to meaningfully And given the a back see and gotten also to starting targeting little locations speaking

Jirka Rysavy

on of Zealand some those higher actually of part, than from in capita number States. countries international, Australia, actually it's doing better like States. the and Also subscribers United certain United conversion this than Per that are countries New

Steven Frankel

seen your three last months international you component? the in have uptick in a And material

Paul Tarell

Co-related expanding it, building that's have been we've to manager soon that the we effort with marketing to that tasked international out. now

let's a learn of period media, decent geography from the by are we paid see it Spanish more up it's to when a really obviously investment perspective, Spanish starting break QX been decent some side in So in you for we're what's get part driving there, things means. started the say some of and increased organic until starting a because to library down to of traction. But can't was had we but big that's via content to see predominantly just then traction test of it language language, available terms

Jirka Rysavy

are running months so traction; ahead And non-English might first area, unoriginal would small about say of relatively success think on it is definitely on time start the we're based the expectation, say I version something some German to talk numbers very we some in time, promising we titles. it's there where definitely but traction. I to is we next our of both actually obviously that too focus -- have few before, up translating last but it also we right as English quite we -- now there. for language but what promising it's didn't so really both international that producing there But to just it's it's are kind are very and some call they some talk content have there more a more but we -- good the put and Spanish have

Steven Frankel

is percentage base large as today? a how international of your And

Jirka Rysavy

XX%. about It's

growing. we north what And to too it's nicely we track that's of we us those and our third-party on English. start for very all is you the can if XX% of so, and like regularly. quarter, are overall if But important but numbers probably picked it's you direct, just of actually stuff, those to XX%. provide think north subscribers obviously up take this Comcast so non-U.S. relatively call because -- because It's easy number them is small number It

Operator

next Partners. question with will [ph] Capital from come Our ROTH Darren

Unidentified Analyst

I about earlier on wanted follow-up subscriber ads. to question

numbers; for Given guys XQ that at is initiatives? of follow-up a of current or of that a XQ we're maybe in it's I you once some XQ, I'm it of in then off were the bit. a month the sort how you of more seasonal if and look those consensus sort of marketing see in before -- And new reaching strength I'll some report ads in the into curious then this offering given implied larger step-up and you XQ can piggyback quarter. sort comfortable and just

Jirka Rysavy

our quarter for like between always us. till February, talking best for it's it's time Well, pretty fourth without consensus us, quarter but [ph], good mid-October the very much staff like really early

going last to think when quarter, time of are to -- and can XQ, a talk best going for the it, to before same took you're try you want it So business, about previous have on mean, it do but it's November year we we after; impactful, that it break you Paul I right a because the it we're anybody year but months but year, first little best kind really Netflix you election don't it's of this especially really have week to do the this will the I think compete strongest kind generally see the I last always one. it saw of the you be quarter see Christmas in to going it to not year,

Paul Tarell

And is one I actually better leads. would last add capture that year this the we've than there, to things we of year a lot started do email

get from actually So that a email to if strong pretty list our of email, we to one use gate go pages, someone look right is out the coming of we conversion and to our their grab we November so don't list. landing timeframe to actually email

early quarter the XX% this and to it's from do leads ponds. too opportunity to new us us first with together And Alternative because especially it, is XX% new growing through next it's But then give most number consistently so always three probably quarter our it for quarter up see Healing have all also be the you Alternative revenues actually kind this but see for will aspect driver we'll we're lower the spend new the same I what Healing is is comment a thing, if believe In don't year, that will first we lot a a obviously, the lower. little yet that's obviously will of QX fourth quarter, we interesting for quarter quarter to over we -- that call the play, that Yoga; see more say a know last going mostly trend we going first when of meaningful than of by what that parts and at to how the is channel you quarter part last I'd the perspective acquisition from mostly how being be kind -- fishing because on and to fourth so to new on that. Yogi's. the fourth us channel CPI of there marketing cost see the be you year, percentage see when new -- mostly first actually of channel I organics, -- the on the and the typically cost, seekers, So XQ, January. you channel, you're guess of fourth will QX. January-February going the look that's our year of to net but with what addition the in kept is going It's But email compared help

And be to that towards it also us, helpful this did, will Transformation so assuming especially second next like the we'll same year. part do

Unidentified Analyst

a And yet then, on started at haven't of do And premium the free you offering; you marketing be offering? marketing have there those that any on if one all if regular of free channel? efforts, trail that to of then, or for sort you onto with who is who or plan those them sort can like a when that starting? boost thoughts to for of premium event doing aren't like entice earning see you may And sort

Jirka Rysavy

of well in kind certain but then subscribers. I if the something we people will you to it. to this, as we free I think as We kind we like call will upsell our do existing test official don't those -- of -- people most real some want marketing, start general be would of when you public, the -- premium hit, start most subscribers. don't And -- Like don't things this will consider of we doing to kind will because New the as Well, as free, be far of when discount January like after marketing Year. general

we to ordeals. but no however, free there free is combined now plan have I now do any some do deals So any will for but right might we don't think

you of I we're you kind additional of was $XXX. and think of of an margin -- we can as ARPU an but generally on into you're for subscribers some be buy the player as average $XXX, -- the subscribers. There of market person, than what -- new if basically looking can have more kind just if speakers some you will this so it's databases we the offering number pre-tax annual

Paul Tarell

expecting contribution convert to And to really date member we're interested And existing 'XX to new. offering, meaningful we as to your the clarify earlier at net convention learning from be and as versus but premium the a mostly year revenue try thing them ground. not our base for get the being I'm marketing this looking we're off we'll perspective get

Operator

Next we'll Boon hear Quantum [ph] Andrew Capital. with from

Unidentified Analyst

then process ARPU user later $X the down shareholders. even think you there million I pushing guys there seem don't the that quarter-to-quarter; callout just $XX any goal -- gaining have kind than the is dilute be sooner million or rather maybe you you And of know, just guys Is to towards of Thank profitability a start secondly, to traction? million as to in as you cash on about initiatives quarter? you. goal, was want guys multiple as

Paul Tarell

meaningfully We trust our that on really to first is quarter past revenue no in reality the first the contribute ARPU get the I briefly into in the $X.XX month, added don't the but that in with subscribers month. added quarter must have

on ARPU then really growth to from But the your pretty when we perspective, a average the per should at perspective it's have quarterly just downward as as basis up but convention just second the come was XX% the growing rate plus they come in, the soon and from for create function question, of to rate. user subscribers quarter. I'll let what saw question. revenue Jirka a in we Steven's back some a keep our as again, take meaningfully pressure going I'd value like down, revenue So lifetime contribute the

Jirka Rysavy

have we today about mean the for kind switch should line have have clear switch the to if change year, we so to above so obviously I the was guidance should when end earlier of we $X million, $X that million profitability. get market and we but left; pretty us, we that we their brought $XX to next -- of million we condition would about wouldn't that say change, as

notice, switch do it to very a profitability can to us probably is in For we month. short

week are, the and condition, is much now. right how profitability. to do And if if two have to deploying of pricing, want $X -- right run of conditions but now or on as an theoretically million the about plan of as consistent budget, now the we in plan so is we but changes. I We're much. I economy hitting that's we is numbers a the cash like can unchanged few meaningful we things to between years see but the don't that so right the for market have; we us, it's coming us, expect change the provide kind acquisition, change kind Probably so it's now, update it the So could year, all what days effect -- can new early the customer said, not any But to we to something, our -- years. a we'll can for the ahead us any pretty for [ph] look cash attest but change, there kind know, you in quarters. pretty for the when X remained switched business When that's plan for left in of with it

Operator

[Operator Instructions] We'll hear now Instructions]. [Operator [indiscernible]. from

Unidentified Analyst

couple but the EBIT changed you've for questions years few on years. a since thoroughly and of ago? you had of touched and original number in a whether I'm there kind parts what's curious the anything's you XXXX, a that had I $XX had of long I million but think time you one number, a just there -- if -- out changed moving from lots last few pretty plan

Jirka Rysavy

we it's from I of to I is wouldn't target, kind -- our model would XXXX but say our -- we there about Please than thinking plans mean, did to how change. there XXXX. I numbers is as understand, fast the change a grow numbers. to more upside so not those accurately, of the is XXXX any anything, hit want Yes, if say we model kind actually decide in -- pretty

Unidentified Analyst

curious, I XX get more that you -- what's customers would more color mentioned retention of on maybe kind gratifying mix color of then team; that? just on to Is I was And get What that. love love services? more number would to to the I the that.

Paul Tarell

and a is, the had of groups and reality big the with ones. all couple think you've them put under within I organization umbrella the different we two as took one

of people the necessarily number recommendation our that So inform that network engines using also onsite the into a are data doing. relations retention so leadership. our folks engineering data now And rolls and lot the but scientists, actually customer our team the data merchandising not to better then

of team a of team and So from I'd I scientists customer using the of what call merchandisers, are tools so just analyst that always are that members our on effective was isn't those have. most to people say to our for to broad promote library recommendation we our probably that the the we for data because that people then same our built look with a the them if all and we we members diverse balance site perspective, such the realized is machine relations content of doing people that size content and actually

Jirka Rysavy

marketing tweak as is crossing this of kind there [indiscernible]. the this now team And probably to what they're merchandising part newcomer

this organic why also coming sophisticated in, of I one then is that people what they reason the be see that's flexible, could our more up think more fluid more because be [ph]. come when to

to impact think part our big think of conversion -- of I I our that's base. kind of member So the increasing organic a

Operator

comes Our from next question [indiscernible].

Unidentified Analyst

seen of trying what any competitors you doing? Have to evidence you're do

Jirka Rysavy

try of Theirs between different set, will we especially merely actually competitors need there of I we say, we small them. would see kind of do. We people lot a board but of be so competitors priced of month, now watch try the -- it. that like mean, set is the we know, we likely would on fraction of kind kind -- they've offering. less space to science. competitor really, is is small do in very relatively in similar the and Interestingly launched. of XX-XX is something Yoga $XX there our there right what meaningful not is there but and discussion it's a side much and would no to had any there But a they kind There would consider guys, is hey, if you -- nobody than in at our something $XX really differently; where to look competitors who of they Yoga track there no are

Operator

question-and-answer like over to to our session. this time closing turn call this for I'll At the Mr. concludes now remarks. back Rysavy

Jirka Rysavy

we to really which results very thanks we our when much. everyone very joining. annual Thank for will early And look with you report speaking and you Thank March. be much, you forward

Operator

today's concludes this does gentlemen, Ladies teleconference. and

time. may You disconnect at participation. your lines your this Thank for you

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