GAIA - Earnings call transcript Q3 2020

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Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Gaia Incorporated's financial results for the third quarter ended September 30, 2020.

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

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, the the and Form not historical but in reports uncertainties include, These limited on to time Exchange changing and risks time preference, XX-Q. Commission, detailed acquisitions our from losses, filings general and consumer subscriber and rates, Form costs with XX-K retention our other and Securities competition, conditions, business including or assumes obligation statements. publicly any Gaia update revise no forward-looking to to like CEO, now the call would Gaia's I that, turn over to Jirka With Rysavy.

Jirka Rysavy

Thank you. everyone. afternoon, And good

EBITDA $X.X quarter in sale campus loss which on or or year We compared which million. about share, third ended which to $X.X $X.X Gross was share, sequentially. profit we $X.X loss improved asset we gross of per from income ending So, increased excluding improved and from million per the look Content licensed last significantly the income XX.X% for million revenue for of The It's for This is quarter profit achieved a our at quarter of titles. X.X employee. main content above becoming per $X.X XX.X%. million $X.XX margin XX% actual experience the million million created a a year creation, in employee million XX,XXX remaining quarter half quarter ago. XX% quarter from year-ago the measurement which our represents of members, $X.X XX% Net differentiator. to to XXX,XXX corporate increased or a improvement the Gross We share increased $XXX,XXX the included that our viewing. $XX.X years member a up X,XXX above million to plan. We couple XX% studios. time in over with and million $X.X per a any gain those $X.XX meaningful for ago. our the for GAAP comes $XXX,XXX, increased slowdown is in and quarter from a did loss not now. $X.XX first was $XXX,XXX

we year million For is operation cash which from the improvement a a the $X.X in use $XX.X sizable generated in nine cash ago, of compared million. $X.X million months, to of

XX cash We $X a our down to with more the communicated and be jump fourth actually and by another base. XX,XXX reduced expect member about ended the speak ahead, $X.X now from our flow for Go free Our balance year-ago debt results. to increased million We million, to as you and and time planned Paul. first quarter. ago months as another we million, up $X.X cash compares million, in of achieved time $XX with targets will which $X.X decrease to quarter same one all to we outstanding positive million. Paul earnings cash

Paul Tarell

Revenues in XX.X% quarter quarter. XX.X% third million. the an increased $XX.X of margins to XX% Thank to in with you. compared $XX.X to gross in profit Gross improved to year-ago XX% the also million, increase

had in has and XXXX. efforts was Beginning the improve negative our $X.X prior-year quarter in Selling The off through million efforts which in line revenues down with in million the of October, was due represents the quarter. over from of or to the in EBITDA $X.X of which the the members, million costs, in quarter XX/XX/XXXX. to growth quarter in in the approximately leverage $.X online growth on acquisition our past model. net growth for marketing quarter growth XXX,XXX primarily Total and of months have improvements efficacy expenses, the $X.X The XX quarter net the the mid-August profit, video million from direct-to-consumer continuing the which year-ago this from our Despite the retention. we As down the of now million improved in of the million, volatility, negative volatile. that half benefit EBITDA cost at advertising extremely net for our paid and is that advertising to member $X.X expenses $XX. our and the were to first or the XX% sequential revenues, $X.X G&A year-ago to be in of for quarter in prior-year of annual improvement XX% XX% flat quarter. for ahead the working excluding which Corporate XXX,XXX model, member from quarter revenues at ended Jirka were and were new $X.X CPA over for able take from year-ago months the of or we XX,XXX the in costs ended the us allows The range, with in XX% second gross of member the operating This we expectations, the XX% in mentioned, members operating scale. third quarter acquisition we XX continued down is demand demonstrates rate million which of flat revenues with XX% capital a and plan third quarter the and Xx is reached members of to is quarter. keep subscription XX% were and quarter. to

We to flow million also cash million operations $X.X $X.X of from a cash year-ago the from our quarter. improved in use

includes of forward. corresponding to which the basis, share, Including million. real gain estate, for interest the And we mentioned, income estate. the of on $X.XX $X.X real our a $XX sold or the flows so to per the sale expenses and on the quarter portion generated neutral building gain decrease was income proceeds million sale $X.XX corporate impact offset GAAP be reduction our going expense utilizing the million, $X.X the of will in of $XX.X income, cash on to net a investor or net in from net a operating Jirka net the for we million on reduce debt will campus $X estate per share. real The As million

of during year-ago the rate maintaining quarter quarter. earnings generating milestones to the revenue compared to $X.X positive while cash XX%. growth generated and final marks used the transition cash the also $X.X flow, cash in quarter The above our in million We million in

quarter, up call I of that, As earnings advertising additions mentioned for remained fourth very volatile maintaining earlier, and for the online these In the of net cash the questions. still market start flows. targeting headwinds, to the I'd open to positive spite we're has member quarter. like fourth With while XX,XXX potential

Operator

Capital Godin We'll Street with our Instructions]. take Markets. [Operator from first question John Lake

John Godin

started on what to to you that into And do some uphold increase are plan, in of annual higher lifetime to the key translate First the and XX% think subscription has mix? drivers that for XX% me allow retention an value you so this far?

Paul Tarell

is continued I is primary the put can And checkout because we the membership. versus the direct value direction. And in the only they're on we've we once and the The retention QX move it But the that to drove the year from things in that the drag for as actually monthly to That's on renewals biggest And believe value to really back look factor see both need help cart it that's is annual optimize it of Gaia tweak our last plan. monthly at and committed the shift of what trial that they course, monthly and versus of the that renewals improving a to biggest did a of highlight versus the when a perspective and the period people. at of ARPU, year believe monthly get in is it, annual people we same XX we've look flow, people. of some plan. financial for renewals XX what group added group obviously. same

John Godin

several Next, What remained additional on trending? how strong Has can elevated the strategy you moving outlook keep this your of is any and provide over past engagement been of it has kind color forward? to quarters? kind

Paul Tarell

was around was what engagement. at? So, looking That the you're question

John Godin

Correct.

Jirka Rysavy

of kind obviously. with interesting was It COVID,

goes in of it as come have it we get was through, to So, before. when the kind start just to engagement the up. But the levels March/April really year a

So, new improve increase practices start chart. probably main the still next our for clear pretty and They had engagements. especially XX COVID of it's the it's to the first to focus And impact in months, was engagement members. nine some good days

– But currently engagement. of at So, kind time look look so stuff at stuff, key we is if a if there's you factor certain we of list of there's kind improving I think of – dormancy and several, look.

John Godin

been could you in most customer your And spend? from? you market you're really trends customer then, I advertising where success the some the one volatile, seeing from know from me, acquisition came the but talk of maybe last acquisition are seeing has about

Paul Tarell

off. driver the in I'd YouTube been it saw a that talked relates of of on starting John, tracking streaming the off But across in and channels April, through seen particularly you, information momentum Historically, looking and back for from has that major for we we've to one that's The for our services, with we've us we're volume. thing YouTube paid traffic continued can we the to organic users To continue to for really that then paid drive the that be it continued wasn't honest board. say as has historically as uptick with and We've Gaia. it that, been seeing improvements from pay to the search overperform demand us. the the all has about summer.

there's paid So, volume. prior us with to been year, lean we've social been has with CPA even on volatile, if line other the has that in on extremely helped able that keep that media the pieces even higher

Operator

Steven We'll next Colliers. from with take Frankel our question

Steven Frankel

bolus of you QX? subs coming large in renewal have up a do How of for annual

Paul Tarell

in last mid-October. switched you year, we If from over remember

but So, jump going that October of it in November, February around not and in from normalize provide We're start will specific a last terms not November the compared to will monthly somewhere in a change meaningful it'll then volume December, itself is from year. rate our and activity number, roll to of than but the to on normal lighter plans. I say it's

Jirka Rysavy

pretty the was now. challenging October because till also, And marketing election

we're expensive. we still that, subscribers, third, But previous planned we still did XX,XXX say So, we as for amount, fourth. for to we're planning do planning was – like the even October same with the

answered kind that's of obviously, question. So, your

Steven Frankel

rate it of will chance there's from of at think subscriptions structure? you I months a what today? current annual kind materially that that think bear you where pricing that's up take the Or the is can in the do next drive good market XX

Paul Tarell

part was go that I that just think where last introduced with I that. is you going to

that the to do but annual, With is we we structure, we've could I looking at. wanted to plans pricing think do more have with Obviously, don't some what pricing people at we if rate things maintaining drive current been this to that time. any

Steven Frankel

maybe for prospects prices over now the Where do you your XX are what next your raising price is competition? relative think And months? XX to the to

Jirka Rysavy

the it opportunity the any potentially Netflix But I at to helps don't just that it's looking how space could plans, more as to always overall. mind consumers' did. months, at to the back said, as do did is time. first strategically what I Netflix annuals, It's been us. that we definitely something what Well, and in this adjust others have we be think cash that for especially something knowing around in that us, we with they at, with it retention But within that door looking XX to start get do for opens we've to point to there from question people price do drive

Jirka Rysavy

And it can on the Depends entries moves. in market. There still other are sooner. happen

so, and Disney And entrants. like other now from

want Disney but Netflix, opposite. on they of come was know where typically because come kind to You higher, they

will foot market it's there right now set a than of So, this kind is go, kind rule. obviously more of but

we segments, if you month. to So, our a competitors can like are still take yoga $XX $XX the –

good X%. they as decrease there's a maybe But would I now, our say for offering. expenses there, you we really absolute of focused. while notice, dollars, lot So, room if don't about did And in have

a – decreased percentage, XX%. dollars, revenue as actually I'll while grew expenses not X%, So, in

the increasing the how CPA we that So, games. more the things, employee on Facebook example, stuff room And why play we percentage want also focus see XX%. decrease per like, for and in from And there like That's these there's there's place other that. to direction. you was

XXXX. So, is in way, – would to plan it change we no will this prices put I start let's to there say,

I that. with think I would it end

Steven Frankel

what's And one XXXX on then, one, And the your contingent? that what's to try going mix? with last improve member to in plan international maybe

Paul Tarell

near-term the has That's its what got things was as quarter, that inefficient get a of part the revenue. possible the focused and are one to driving French nicely of been that in we growing expansion to and German. were we And Spanish with on was as where things own. much reducing deprioritized that of this on

that looking And so, into at that created Spanish, taking German. of we've XXXX to the actually some we're back reinvest French in the space looking growing and expenses and

for So, international because say a it's focus can to into we long today. us do two-thirds be versus think we I where would believe, beyond more going of XXXX we are going and we term, be

Steven Frankel

are you where today? And

Jirka Rysavy

one-third. About

Paul Tarell

one-third. about Yeah,

Operator

next ROTH Capital Darren We'll take with our question for Aftahi Partners.

Dillon Heslin

is This Darren. for Dillon on

one, First about for in no your – of talk you said could XXXX? content you you mentioned if any meaningful plans, I some you know content production slowdown have creation.

there? library sort how with your guess and your outlook comfortable are you current what's I So, just of

Jirka Rysavy

just we're lockdown. case, in like actually already, we all this be October, in a done things the with year, would it the shooting Well, for

filmed. pretty shows So, to can what's the have keep Where Paul issues for year. we budgets our is lot we still there's next any problem sphere We year of event. with Maybe new already show do had going filming the live increasing a We and didn't this Gaia series. find and a for talk. everything up much we

Paul Tarell

Yes.

are excited in Jirka's the Just overall internally some about. XXXX plus up should development content another really we're with those slates continuing seasons, and on that our And successful shows in mix, of out that be we shows finishing we beyond. coming are thought have

and what does $XXX events of limited that As those we our making year where audience, do for the us Jirka does the like part mention, what the first are amount have in the though, as for is to that forward look XXXX relates pretty Boulder scheduled that members. terms were a rules mix headquarters content we our with live in in going of premium evaluate studio people in of access have our can that County at it did which our current

content, apprehensive about to So, have can are and we do in how are be we many them in that which but limited give people people acknowledging looking at the we by is the it strategically we're to state now, think right might travel how States. we we're

upside XXXX. the be limited of the going to is in beginning from So,

Jirka Rysavy

there's up more didn't subscribers, a it's produce for really don't we And ticket sales what but meaningful the level the which content we because really to and have the revenues, way front the but stuff on XXXX to anything increased have as new plan. which by subscription well, hurt, by that in XXXX, in you comparable we any plan does clearly ticket made

Dillon Heslin

the was habits? of, As with XQ a there in adds COVID seen and any your follow-up, of sort like anything past been sort viewing in that I from have you've different particular XQ cohorts terms environment that in of during guess,

Paul Tarell

people the word after think were biggest the we I signed fact was pardon that that – saw – thing the captive up. they

which helps the with engaging early were engagement tenure, retention. and their they meaningfully So, drive service more in overall

is happens in April from May planned onboarding initially our didn't because and get busy. they period have issue they overall. took people as onboarding interested up of sign signing historically then but part we've life of up, really that time key after period always engagement their reorient We and so, learnings March, they trial of go in was, to time might some as and how we that's increase to not seven-day do what this And the well we had that

some learnings early got benefit to forward. we've pandemic try amount engagement that's the the biggest some tenure. I the from of just that definitely, drive So, think and piece, But applied in

Jirka Rysavy

selection. of don't problem they stinks and all. – that. Hollywood different compared increase Since a have especially the topics, the didn't that with of we very content, any when people a it's filming We overall, didn't kind face feel at constant none lot side other to I'd, talent of in or we cost

so any figure us everybody content. kind as time. short forward content So, I will content But of think be really very people this challenged from And around, because the important it's do unique – challenges we creation sometimes really flight meaningful it, we canceled, the that was rebook don't see like don't to in of for kind we a want go else. have to gets of the

Dillon Heslin

for Last one your I talk and sort you more legacy being Can you traffic. mentioned channel a referral the it ambassador program YouTube your, organic know from me, about little of for a end bit strong of I more guess, of customers?

Paul Tarell

talked to We've that prior definitely we've on calls. about that something It's continuing on. build been

demonetizing YouTube into aggressive and in on I in election one the the space. of our of coming defocusing some was might ambassadors how challenges the think that talent be was

to But, to the changes only to And we're little of about for can on a part traffic back highly Gaia is having so sure put some trying a once have as type of obviously that QX. our we stay content from of been and we finding make overall, on are itself. overall, to air. in we've platform with going doing increasing. type But headwind second from partners and is deeper continues and it's We're of on bit content to partners, it the our there. the definitely of out get overall, what we YouTube users of So, demand But our Gaia. to relates program to engaged react lot build mindful driving that the they our YouTube then that content that

Operator

Riley from [Operator question We'll Wold Securities. with Instructions]. next B. Eric take our

Eric Wold

this some comments the Just How volatility being election? questions. to Paul, to these anything the past the market there that was headwinds think, surface of or And follow-up the recently. couple would of volatile was election made, itself? One that else of below advertising of I you cause to, kind of your continue a that some around continue of much

Paul Tarell

amount in also of for but were were platforms that of felt us potential being that advertise. up, opportunities The grooming election sucked terms around the definitely both in impressions was of the the the doing terms to

they there. bigger I to lot the a was a is more normally there online, part mix of more it was that of come I domestic I these in this the able with testament election time in at year. bit as a little having to of haven't had it to that So, behind and budgets we're think advertisers means a starting seeing historically we not advertisers into And of and way we been. week, be bigger started marketing a now think that get digital economy of a more to that definite to their that us. spend But lot dissipate some will is say headwind would see a that than the

is for versus just So, which would less demand the hard it go which caused up. to which in election to was But brand price summary, more advertisers. I say is say impressions

Eric Wold

months, next forward not see to right this or much growth – but growth word, XX in to EBITDA level run some now, in grow last as this necessarily sustain from harvest kind of I Looking positive year, on annual year, next do the EBITDA think got you're looking for versus million this the reinvest about currently faster or levels? rate you even cash EBITDA kind quarter headwinds, subscriber you've flow forward visibility from how of decent not need over guidance of the specific business of XX, but base, next the the to move on is these want you $X.X of with the

Jirka Rysavy

I'd haircutting to and in That's future our we're growth. drive periods. investment say that have primary growth to we we focus environment not for our continuing up over make drive current that ability to And want in spend money period is a dynamic catch to that revenue sure terms XX%. of

to for like bit for. shapes XX% to what be continue well. primary XXXX. that optimize of revenue act. not looks and to XXXX, that's evaluate to we're keep that able we past it'll guidance to be the balancing what but a And QX up a better But just growth, think focus how is above continuing for as terms provide going in So, We're

Jirka Rysavy

to stable much really it's is plan our want think spent line, a would percentage to kind line, dropping, part, any keep to generally, increasing except And of that you year I key every is We all grow revenue. keep But as much you run keep your pretty the be of business. all content. bottom for how marketing. operating the lines, a on like fast a a generous business, and

Operator

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

Jirka Rysavy

when Thank quarter forward our Thank you, another and for to Anne. And to quarter report free be thanks expect you with I said, positive earnings flow. everyone in joining. And we to we cash And you look as will with speaking February. we very much. fourth

Operator

gentlemen, and conference. Ladies this today's conclude does

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

Gaia (GAIA) 9 Nov 202020 Q3 Earnings call transcript