GAIA - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, everyone, and thank you for participating in today’s Conference Call to Discuss Gaia’s Financial Results for the Third Quarter ended September 30, 2019.

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

Following some prepared remarks, we will 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 Security 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 Please Gaia’s Rysavy. the ahead. that, you. Thank With Jirka turn go

Jirka Rysavy

acquire the of the than you, quarter from subscriber doubling year. of value lifetime good Thank year same the the planned. in and afternoon, the ratio to ratio we Rochelle, cost and quarter last in and as increased XXX,XXX million quarter during XX% decreased everyone. ago million of between from the XXX% to Revenue marketing The $XX.X revenue the a X.X with in are last to We the ended of as quarter significantly same year. early third had cost subscriber revenue expected X:X to quarter. the increased XX% subscribers $XX.X We percent

to both and than with operations on growth, planned plan now from September live scale subscription Sphere our event $XXX we XX% We a We cash runs on. earlier in months expectations. reached our revenue first EBITDA Live EBITDA ahead campus and successfully completed upgrade full in from and flow positive Gaia Access our and the positive streaming on also positive of our of

in cash. $XX.X the of million End we have quarter,

should XXXX. the cash – year of high-XXs rate annual Revenue about expect next growth – XX% mid-XXs, then in quarter quarter reach first of free for flow July and in with earnings be and growth We to and full-year positive XX%. for the fourth in and

Paul And more to now results. speak will the

ahead. good So

Paul Tarell

year-ago quarter, $XX.X to the XX.X%, compared from ending XX.X% Gross a sequentially the members. $X.X XX% decrease second but in the quarter in compared up profit the quarter, with Revenues slight from million third with million in million XXXX. increased year-ago of to paying in quarter in third quarter, year-ago $XX.X quarter the to in to $XX.X% Thanks. XXX,XXX gross the to margins increased

on have content increased the primary call, spending, noted amortization, As our the live the of new driver by attracted offering. change last platform several our series includes growth to to with talent this Gaia hosted we and which marquee is tied content Sphere

completed October free the our live awareness great incremental at Gaia sold success. ticket capture in the at audience hour We viewing and $XXX. drive average Friday XXX e-mails. online out of utilized night with the people Speaking to of on three first we interest the in events an have of Sphere event The which, and event price was with

marketing plan Targeted many to exceeding in current us allowed to Access the our internal weekend expectations, with our Live convert members traction this to viewers of $XXX the active audience over these

up is marketing the which Sphere. third primarily second were Gaia due of $X.X from quarter acquisition depreciation approximately XXXX, excluding the increased expenses, in other $X.X member and costs quarter Operating to related and million expenses million, the to

from revenues, XXX,XXX which $X.X million, per XX% the which were where XX% costs XXX,XXX more quarter, profit Total improved increased quarter, is year-ago million, $XX.X XXX% the of than from gross employee revenues. to quarter. we Our acquisition spent year-ago during up the member or or in of

to significantly this XXXX. the to the value for on quarter CPA both from of quarter We lifetime the and $XX have lifetime increasing in been year-ago ratio the value improving CPA by down reducing third CPA. year focused in Average $XX quarter was

member-driven our have on significant member calls, growth discussed been a of focus prior initiatives. referrals As

new released sharing So the I’m recently excited year have base. the tools that been member testing past entire over we to to announce we

for is tools, that can Gaia unique XX via members these anywhere link content share With hours. active

communicate to going paying leads from for in The from drive the can qualified and addition conversion expect support share to direct the and In conversion engagement drive our opportunities CPA. with members is are increased also a with the negligible we to encouraging continued we forward. early we this that to content sharing, traction improvements functionality gathering CPA

XX% during sustainable our meaningful made of to of the fourth quarter EBITDA month cash path EBITDA crossing quarter did of reducing us positive achieve the the for to reduced from on our and a XXXX. in have flows for from flows to operations allowed September quarter the of model, We EBITDA down full for in the year-ago negative XXXX, September. becoming operations positive cash X% XXXX to with capital This, over for million month working positive million, our used from combined our We $X.X negative $X.X generate goal negative to margins quarter. in our third of progress the

be expectations. meaningfully impact member base revenues, the pricing us including forward. trials have will Effective XX, we consistent eliminated those trial not This in but October the returned for line count This with a will quarter, we fourth two-week reported from is as content member to model the charge. services subscription consumer going free in will impact $X.XX with and the XXXX, and not the brings

Even end we with members, year expect paying to the around XXX,XXX counting trial members. our

we at approximately XXXX. trial purposes, period XX,XXX in December $X.XX comparison members the XX, had For

from improvements Live expense in in annual XXXX to in XXXX. current significantly reduce July management, of We and retention, balance our get cash With flows the growth with our traction expect of the in continued million, current to cash liquidity. free Access, cash of XXXX, to of first-half quarter our fourth utilization $XX.X ability sustained the XX% with with we’re comfortable early disciplined

Rochelle? like the questions. open that, to I up call would With for

Operator

Thank And our be Eric Instructions] electronically. B first you. The Riley. hear conducted question, from session will question-and-answer [Operator with Wold we’ll

Eric Wold

of guess, how guidance the in guidance? trending to guess, acquisition July. quarters I of Can couple of major the that I guess, by I for sense to content kind adjusted see one, few now over September, next you’ve spending questions. the drivers reaffirmed and positive the getting cash afternoon. A flow positive a Thank underlying you. give achieved Good free you our month us specifically, do costs relative of current of you included subscriber levels? EBITDA the

Paul Tarell

Sure.

absolute perspective, the So I’ll I’ll much acquisition hand that costs answer talk to over settled pretty and Jirka on willing a quarter-to-quarter. customer about to quarter into customer we’ve From spend the to we’re content. – dollars it acquisition

revenue the next margins as operations, cash going to we’re able offset that’s to able flat drop with So continuing year, well, down we’re to through the from grow as will we start to look making the into EBITDA content. which flow to stay that in that relatively be investment increase

Jirka Rysavy

It’s you there’s something do your might your side. – side, noise some of on kind from

revenue, we On don’t we same earlier can free positive reach XX%. but limit the plan that. content, would if Obviously, to spend content the cash the we’re as about about we do actually increasing flow spending, content

we good trajectory. in very a I think

Eric Wold

due And build live CapEx this it spend what and is this events the total the of content what that spend would be there? was the non-recurring, year year? of then total to part out And CapEx

Paul Tarell

is but be about full-year, I we quarter don’t to for million spending the $X stuff million Sphere $X things. we The rearview were mirror and in out point. the this related the to numbers a to on of going $X product to million call guided $XXX on then Gaia have that the million last build another non-recurring content the all at probably side

Eric Wold

importantly, probably would And spending revenue I gravitate you to point to that to, that in guess, reduce kind one, plan then same at of subscription, need to due kind kind the towards kind lastly, of growth? on get positive of seeing results then what And more basis? Okay. does order the consumers start meaningfully impact of XXX a premium to your needs on

Paul Tarell

far, what events actually about think anything don’t per are of upgrades. that had the up not They’re net But are Live that interesting three lot signing se. members. need I so we’ve Yes. Access people was we new for a the

at positive attract to new So bringing ability of terms people that’s in for Gaia. their to us talent that a in and we’re looking the

pretty particular, this it content anywhere event, a October with In not right host unique hot that’s available that’s was else now.

capitalize will rest this to of of year. which drove into So able awareness, a the that lot be ongoing

any penetration acquisition to not get spend incremental from conversion a adjusted Live levels down on all point, margin. We’ve for there’s costs customer our rate. to that is we So Access need anything certain the where

Eric Wold

you I new complete I those live look sense But are of of paid but want whether at these three guess, people whether own into one event, live, if combination – guess, those you And events And get at those the as last I Gaia? know one – them up far. not, me. members? to were the bringing of much for only events who to well attend, their guess, to what you stream I’m to the into so live if followers I look attracting as of percentage had attended you’ve you’re a who know how kind share. or the it you kind trying didn’t

Paul Tarell

He’s talent talking was we’d for June with who while. we’ve had, someone that was about events the I think that someone you’re event. it depends platform been a on three that the had. which [ph] the that’s on Gregg,

XXX signing new level. net So Gaia, were and members and up October it who But new much the August so Gaia Joe], to predominantly at ph were for there. or that [Carolyn wasn’t events upgrading

ability So to be a terms But we’ll it’ll more be going time, in balanced we missing conversions, the countdown and people it’ll and builds, as of what start that around a because which over on better see is just upgrade. it’s it using the to event the the event, upgrades catalyst basis. event –as members events to the of by event have fear is market to good get conversion to is to kind a a out for of

Eric Wold

Paul Jirka. Sounds good. Thanks, and

Jirka Rysavy

Yes.

Operator

with And next, to Steven Frankel Dougherty. move we’ll

Steven Frankel

How events then does calendar thank Good through grow for QX? the afternoon, you. and how are And many that XXXX? on live

Paul Tarell

want the to Gaia that do calling of talent fit what us, people into pause ones taking we’re space we these we’re building the our And up and our that looking with X at a content but Tier now are We scheduled actually purposefully next calendar marquee kind them this what rest use early to umbrella. year for of the with of be X incentivizing year. which picking risk content Tier in in is to that are events, the also

But we and funding on do paying aren’t the at then a all. rev we’ll them. share necessarily cost They’re

have dynamic the time. we the with it’ll But we’re that marquee down trying already over I perspective, on. nail date from be believe four locked to in So fifth a

Steven Frankel

about Okay. And forward? then should a how of rate we sustainable subs growth think going

Jirka Rysavy

on want more it’s really member, we mean, $XXX a have obviously, revenue, I important. to to focus us because, Well, for

But XX%-plus others. – still So otherwise, try we to a will next subs ratio would XX% didn’t about rate – be we hard somewhere project will this so said what but subs I to to growth let’s growth. probably be say, member revenue $XXX focus, growth, XX% XX% to which growth, of to for XX%-plus year, compared

Steven Frankel

Okay, great. you. Thank

Operator

to And next, on Argento we’ll Street mark with move Lake Capital Mark Markets.

Mark Argento

September. Congrats in now you and still the do had think flow July guys. you’ll positive hitting on cash free much cash How I EBITDA afternoon, flow know free good in between cash you and Hey, that XXXX mentioned positive. July? think consume

Paul Tarell

We’re provide tell entirely we quarter to in as like. getting But traction. what discretionary specific is it’s gives breathing looking million investment. used will sub-$X content important content with look room that you terms But guidance we on at going not investment on this based note looks at the operations in our to to us we of that cash are what that the that more

can, of we level we to reason pull So for no need back us a spend. there’s commitments whatever if tie specific that contractual to

So have we’re with cash getting committed to that today. the balance we the sheet there on

Jirka Rysavy

content, we from to it’s compared The see different very what industry.

really no We do a don’t content we pressure to need on more and content. have also have big

a Netflix plenty we of probably number almost the is the library double – with has have right We have titles what U.S. now.

So we product in pressure. growing up end don’t

that. spend now as about – content don’t revenue to XX% clearly lower we same and can clearly steadily are growing we have we do So

that depends. also than million for more of easily kind We that. dollars, even can that’s So a adjust few

reached even on Live but – than so have content we what don’t the there. we have should issues earlier we spend, expect free with to EBITDA flow. get to traction And have the and any adequate Access, it’s the we our planned positive cash cash Also,

Mark Argento

content investment should continue losses putting the But it. operating decline. Got to aside,

for about spend see don’t think You cranking quarter, the how do terms in of or seasonality any up of the biz? the seasonality you holiday

Paul Tarell

our in The enabling media number for Yes. mentioned majority difference that were spend events focus we converting QX have are from We’ve spend the a had actually focusing of is need that media. the people contribute hadn’t not prepared concerted of that get that And as the a membership. significant of to the done QXs, And in we to we’re signed really to either up share to reducing on going dollars that paid what type on in my to that really in help remarks, do exposed the of to A, prior world Gaia paying two what that to had awareness. done to that’s members be would we we’re for. where impressions out I

Jirka Rysavy

will I far we And EBITDA as quarter cash positive free plan every flow and of said, the operating We upgrade cash as decline on. also in to from – meaningfully. use flow, cash as now

every Q second So down pretty it’s between quarter. now will should – be the trajectory it end go of the and

Mark Argento

just I M&A some looking do quarter, the landscape or out? a What you more in for you you And how Got see a out overall pivoting bit, out market Are playing know you small do base acquisition from see streaming an is little there? subscribers. last the content made And it. actively a added perspective? subscriber

Jirka Rysavy

several actually a we years, small with small out that to on lot really those We some] find about three people tracked three scales. for we at acquisition, of that good looked plan. very available. of was This it and [announced are bunch years There acquisitions. a There’s people talked scoped [ph] acquisition a and complementary

I not we acquisition. in my acquisition analysis. acquiring clearly some three other And this There’s did what we it’s would it’s – high in model, it’s However, this to not built But really afraid. life. to. need want not to that be buy over benefits get with you

be the least, plan our to meaningful, for don’t any growth. now at of we So meaningful right acquisition part

kind be – talk So be it, of it But find of we that’s by but growth when about we spend if all it’s year next we addition, you can kind do there would just wouldn’t – out, into organic. we assume rate, acquisition can one certain replace like acquisition.

same on flows about impact and the we’ll be the cash So stuff.

we come, our internally. or more But U.S. as pick they U.S. the something while acquisition active you. can discussion there to markets look at, look not in establish the now few I then but three a at, we there’ll there’s international Thank like in four think can even in it’s But right is

Operator

Aftahi Next ROTH we’ll [Operator Instructions] with Darren move to Capital Partners.

Dillon Heslin

congrats Dillon Darren. is for Hi, my your guys, Thanks on this and September EBITDA. taking on question for

on, rolled sort talked link, users have traction just to is what’s help the some forward you’re you’re of at the out organic an on to of And layer – So that all plan of seeing? you organic your looking on do there XX-hour with sort front tools some some about that the of you’re Do you that seeing growth you’ve organic you incentive or additional the for program? of send top sort on out. tools there,

Paul Tarell

in them a of reverse about thinking progression rolling – we’re how it the answer order, So all, I’ll out. first the it’s of because

thing do to it had members is Historically, we able to a give we a quarter. couple limited we to wanted content. ability shares the share the of first to Gaia functionality, this be So but

we really So member into scarcity a our base. mindset got

So basically what retraining a doing is behavior. we’ve – it been out rolling now as

money. reaching at and from earn program, to as come can to bringing you them You actually sharing out and our identifying people they to want that convert good about where it can much share incentivizing members getting are into people start will as them and ambassador then

they’re well bringing and have to can to member around are the member motivation. into that become get and that just XXX is The But able into referrals. them, Gaia to growing retained – sharing working now it, building enough talk on we that team people a are progression XX we’ve get people from share doing help my people about through are identified into majority couple of want to ambassadors the the then five the that’s out that there. intrinsic referrals of And – program things that have and sub-XX in they that members people because from

to you to use here dumping actually of out content, member one year come it to want curate where people a for the we’re can So them versus Gaia give than page Gaia experience experience as experience that that portals, is something should to to library. ability the version be next that the – year broader you ability calling from into goes just of coming landing next early just piece the more which and it is

So the community. coming. now could we that out a that. be testing be and future that, ambassadors sure it of about the We’ve our But member all doing of some is any want out the are to into bigger with those intent for scaled what be. roll to building been We’ll really be functionality available would that make

And then where plans, still them. we’re we rewards, and shaping do it goes from have there but from some incentives

don’t I from not yet. some our each improvements quarter from should here, would to But functionality say, incremental – comment So you that that I on ready I’m side. hear in

Dillon Heslin

you. think with on some of that ticket price, thank you’ve do there’s live success then you or the think the that events, some far, you’ve of seen optimized there? And upside more do Great, you so sort

Paul Tarell

lot pricing. a queue I better understanding anything a is as that you at you of if from look seats, finite you took get demand think number a at

to given of events ticket demand there for a talent-specific it’s three going result be much of as that. we’ve But terms there is up and average prices with in improvements made seat. come some and So really a how

seating preferred and But price with enough a to one in meet-and-greet. interest there did this was was, what get point we higher-level a

the ticket price being something be more up-sell it’s revenue So to that change opportunities I experience going the needs meaningfully. around about versus think to

Dillon Heslin

are content on And there? are you. at Sort trending just in Thank how things anymore the you have And side, translations? it. you invested international of seeing? then what all Got

Jirka Rysavy

don’t then that everything market testing But there’s you German, subscribe you some you e-mail, till call internationally, market. an over We get always nine in German. when if Germany before, we like something. months, more really Well, with have because you international, parity, you especially or months, six we not we that can – still sustainability the is see part, if if to the had our what goal in your English experience new issues which get from answer we last aggressively information, to go means was

so that upgrade a is who staff, German bilingual we have to at So everybody their deal native. with who’s

for experience kind somebody so we would same operate And from, who of Europe, it’s subscribed say, there. as

So that get we was kind little our on growing main will We we of slowly that cash international. as We side. flow thing. probably, expand of positive, kind more

begin now, at. wasn’t focus of positive we for of everything it now, kind signs relax, – for earlier, everything by focus EBITDA get are positive very EBITDA. and where kind But right Obviously, to as there the us, positive from the all the getting and main we

So company. now driving much things focus will over or we for next And growth. our main the member-driven that’s main the pretty is right call quarter be two what

Dillon Heslin

you. Thank

Operator

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

Jirka Rysavy

thank look for thank you you, very much report speaking forward in with our you and annual we joining, and you. results So will Thank to we February. and everyone,

Operator

today’s and does Ladies gentlemen, teleconference. this conclude

participation. and disconnect for at your your may thank time, this lines You you

Gaia (GAIA) 4 Nov 192019 Q3 Earnings call transcript