GAIA - Earnings call transcript Q2 2022

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Operator

Good afternoon, everyone. Thank you for participating in today’s conference call to discuss Gaia Incorporated’s Financial Results for the Second Quarter Ended June 30, 2022.

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. safe of under XXXX. the Litigation Private constitutes Act Reform following harbor the statement Securities The The that risks involve discussed numerous matters today assumptions, and include uncertainties. forward-looking statements Commission, losses, to These uncertainties membership XX-Q. changes, detailed our risks Form our retention reputation, including customer in business include, rates, not preferences, brand of filings limited from XX-K consumer Securities costs, but conditions, personnel, time-to-time are growth, and future on with and acquisition Form competition, changing price acquisitions loss key other Exchange general reports the and member and Gaia forward-looking assumes no obligation to publicly update or statements. revise any With that, I over to would CEO, turn the to now Jirka. call like Gaia’s go Please ahead.

Jirka Rysavy

good everyone. you, afternoon, and Thank

from So that we operate achieve able infrastructure. and effort just to ended $XX.X to and which owned major we member of technology our count XX X% Revenue June for quarter, XXX,XXX independence, which year months now achieved Gaia business a before up are to means XX, to milestone quarter increased end million the the hardware our is ago finalizing quarter. on the our nine

– infrastructure expenses more Yoga incremental definitely intangible about to speak per effort was really the decline a amortization to quarter quarter. the to million finalizing This the had Gross is ago, share, now Paul year second technological margin And compared over negative per $X.X EBITDA to independence. and was seasonally in from we year pulled is slowest our second XX%. operation X% compared from Net profit $X.X back spend on million continued million will share International. half and because However, and improved from result. $X.XX a or growth million a member in of a EBITDA $XXX,XXX. one, $XX,XXX improved $X.X our also per this marketing our some And $X.XX to another reflects $X.X our and integrating also our income asset ago. employee

Paul Tarell

we second to was the added lower which historically primarily Prior marketing the year member through net X% XXXX. amortization Gross compared the by as to prior member the We the spend during shift up to where content XX,XXX a in due marketing net ago in typically May The second of approximately of summer June, in patterns, driven base the we same compared XXXX. but the which were additions seasonal back quarter, decrease March The Northern XX.X% we year. pandemic year of May $XX.X primarily resulted in the prior quarter, period the to patterns experienced efficacy reduced XXXX, efforts, XXX,XXX decline shifted new is XX, ending first members. with quarter quarter the slightly declined for Revenues XX,XXX to sequential additional margins to prior our up for for as we start and down contraction reduced from August, members, slight to million during to each the XX.X% members experienced people XXX,XXX Hemisphere. a subscriber our saw their members quarter year. from the new in into XXXX, by the in experienced

the during second quarter, during had accrue we as we renewal the in annual of the XXXX headwinds have addition, pandemic. we QX for members In further the number added large

marketing conserve aggregate total elected of to a to more second limit As of revenues spending the a member the a period. result $X.X million, for of the the for in our favorable half seasonal to acquisition or factors, seasonal spend we of XX% quarter

customer the on second acquisition adequate ensuring result, independence quarter on strategy While we return and we this number an led members to focused a remain financial of a reduction of the long-term our during our in maintaining efforts. as added

out building costs the English We expanding also on to lower compared continue customer audiences and market. leverage allow the Spanish, our German to relative offerings these acquisition us and French to domestic to focus efforts

or approximately technology second and expenses costs revenues. increases future legacy we XX-month expenses $X.X us or and revenues; quarter million, acquisition the and during as independence, to completed of the of hosting We incurred During to quarter million XXXX, selling our million from incremental of our XX% potential G&A marketing project and insulate were operating $X.X excluding technological corporate provider. X% enable $X.X were price expenses, of member related and related

to technology project expenses the having optimizing going focus our these forward on reduce completed. as we been initial with expect of We spend phase now the

to improvements in the in or marks was during $X.XX another of per and September. begin the complete EBITDA. operations for Yoga by office million expect consecutive [$X.X work the EBITDA million] was $X.XX income quarter of the integration and the quarter, International quarter. also or ago million benefits recognizing compared [sic] back year in second revenues share quarter continuing implemented Net positive $X.X efficiency XX% $X.X of the to We we $X.X or from per million share related

business to of legacy as project. Jirka amortization International operations the of technology transactional exited related operating from loss associated net income which Overall, to was reflects Yoga the we part expenses reduction was and the primarily independence with acquisition. the elevated that core intangibles, As the the discontinued increased mentioned, of $X.X sales due impact the million, implementation phase

approximately June reduction XX, balance compared to overall cash end. our XXXX, of balance of year in was as $X.X million, which $X.X an million payables Our reflects

to revenue Operator? through I’d marketing expect growth. to With call focused continue up open flow support we that, content the seasonal questions. for to discipline cash remain to maintaining While like summer, we on the financial headwinds and and continuing and long-term our the initiatives evolve

Operator

Wold B. Instructions] take first from Securities. go with our [Operator We’ll you. question Eric Thank ahead. Riley Please

Eric Wold

afternoon. Good you. Thank

reduction not Paul, the subscribers? than into trends. obviously, surprising but the return there at kind Anything of to So certain – of normal on start what large coming make of would just to seasonality X-year of that in I would the subscriber can kind of give that you can there more mentioned, that seasonal a more and something little or in you from tell cohorts tough can it that subscribers anything the Was know the of to we was could renewing, of anything cost-related if you that length movements go kind of sense dive seem comps normal were add that you pandemic, age socio-economic the deeper a than be you weren’t possible. detail

Paul Tarell

Sure. Yeah.

the I very marketing the did looking of see look what we as like. alarming the adding it obviously is quarter. been factor of through cohorts at we’ve new retention. that this something look all attention I’ve to, on spend, as it that’s that been trends the of of data by X-years-plus future honestly, for weren’t the sign subscribers, there’s problem we’ve paying new And we a might future really I retention been pullback up compounded The to to close indicative backwards during discern for think going the and with because last business, And, was today running monthly then biggest the that relates kind the we that quarter subscribers nothing

X-month drop off to We’re historical X-month we’ve band or typically seen. that in retention seeing that

of new the in efficacy retention So net the no subscribers. matter change dynamics. really adding there’s of a It’s

Jirka Rysavy

pretty add kind better retention or so than much I historical. Yeah, to actually The retention. actually improved, steady somewhat – would of and it’s

new to losses. addition the really members, it’s it’s not the So

Eric Wold

you. Got it. Thank

or the you then, paid kind mentioned pullback in June, And of Is subscribers. Paul, in been? it spend the normal the – Is it right given difficulty patterns? a has Okay. tailwind as Has still in how that return marketing to and obviously it as May seasonal to easier? getting now now? difficult adding environment normal is headwind is a right I guess, more of seasonal been

Paul Tarell

cost on spend, the have summer. is that’s it the we’ve winter media spring really per what guest-to-member we’re relates correlation corresponding because conversion to from precipitated the I you back neutral And us what has guest-to-member seeing the each of in steadily to a into would if conversion. adding cost gone into declined the the member. inverse marketing say as rate pulling as reduction That’s a we’re really

relatively guest-to-member. media in time we what the what is we’ve with while overall year, of consistently rates So is were from behaving to the conversion this seen responding

Eric Wold

me, is monetize know value I built ways, in that that the sense then any getting content a the other recognition the people, it opinion. to other of any by clearly, at exclusive selling library platforms. final investors Got for But this just you’ve that. in I guess, valuation, off, my be does maybe in is years not shown exclusive, – you It’s licensing options there? other some considerations to other And it. through larger over one. either content look can’t at it it’s question and make

Paul Tarell

Jirka, answer one. that let, I’ll

Jirka Rysavy

we’ll pretty to with to started talk happened. we’re Well, – far how see kind obviously, this going finalized it, Netflix happy retention, anything, as not also year, of actually We since we – we several we projects. about and as that our do

I is the So, to definitely Day, talked like end look possible. classic but now plays always times as it for do some talked nothing year. a several before, about could plan something. but we’ll something potentially we other to we see way we would how the don’t with market we right post like it’s I of we But there players. and the how having right stuff It’s We’ll Labor – do is or something, we need before see now like think television kind potentially of what do ads

Eric Wold

both. Thank it. Got you,

Operator

Jacob Street Capital go take ahead. question with Stephan from our next Lake Please We’ll Markets.

Jacob Stephan

a more. the Maybe focus kind acquisition taking between Yeah. on customer Hey, questions. for to legacy just and thanks guys, business? acquisition the of talk bit just I and if little acquisition new the differences wanted customer Yoga the International you spend the my about

Paul Tarell

to seeing which space platform. headwind been line we patterns pre-XXXX. significant had seen for we’re caused what in the in-studio return historically with that’s yoga has the that generally, there’s online a getting to that digital practice, say I’d signups really seasonal Yeah, obviously But in is some

in unwinding our as So, again, trying years it’s to, we’ve have but to think and been is we that to and this not used And, different press all we’re I patterns I summer, X where we’re it. really anything don’t a reversion what gone spring a that’s behavior position a into there. rapid again, of have seeing trend what we’re And, and historical we’ve gotten experienced been. believe that there’s than that a

we into day would us start new adding that there, a efforts more trends So not our that things if the back go for so on be spend there, are the to subscribers. for time work, we historical integration ready favorable on we’d period, office the completing accelerating be they rather period and save more where tell when as can return focusing and dollars the post-labor

Jacob Stephan

see potentially some costs. maybe maybe from is content still about Okay. Or At a talk own acquiring it more And more little synergies is acquisition? your you effective? just generating point, content Or cheaper? through still content cost this could

Paul Tarell

time effective expansion, tips that. little the just would I that’s content fill own a to buy need bit But really a with we’re generally of parts creator, creating favor the with think the with I say Jirka, acquiring. library let, licensing build more our style versus the unless the looking where as of is at cost on add arrangement in or in in there’s of built geographic really the I’ll component commentary content

Jirka Rysavy

for I looking what see as think don’t costs increasing it, us, for accurate. we is see but content I – all. people It’s – to on if going Paul you’re pressure other it mean No. at said

don’t years when thing pressure the and ago, decision. same on number but peg it more pay to we they or pay it licensing of we kind much unless of creation. would out, X push we see so add subscribers, X, animation And kind our it’s pretty we stuff, think any we of either and but I

Jacob Stephan

Okay. Maybe just last one.

perceived Looking any how the and events, have public your subscription? have been live by progress events premium live seen you upsell to customers? with your the at And

Paul Tarell

answer first. second the are events by The them reception that part the I’ll the phenomenal. attend people of

online that Promoter Net both high-XXs audience participates live. in-person Score as we We’re and the audience, poll the

of now. soft kind the in a We’re the right schedule spot in

and tie up, really our So we events. we’ll as more marketing fall, the efforts those into try have coming we around go to events

effective done little we’re in spot to soft really we’re, right to of not a bit try now. summertime out into potential around them we we fall to again, traveling. differently, gift-giving and ramping with just something up that, historically significantly with it But the that. our the going messaging on the people So as relates think particularly really winter a be doing focusing holiday opportunity getting to efforts about that and as and and It’s haven’t for

Jacob Stephan

you. That’s all have. Okay. Great. I Thank

Operator

ahead. go from Wuilloud question Research. Tower our Water Thierry take next with We’ll Please

Thierry Wuilloud

afternoon. good taking questions. for Thanks Yes, my

those Although or at there on curious, language you effort? was you some of of that you’ve answered quite traction them foreign already. international in a are seeing update Is I few the stage? any areas

Paul Tarell

my the Yeah, as still pretty new a in of we’re mentioned languages, market spend actually pretty remarks, it’s I because able opportunity. effectively to prepared off money on

would So on us spend a that’s we bit because spending. the domestic have to English back than ordinarily, allowed percentage we wise pulled more

our CPA like. So ramping expectation going still on innings up it’s in-language But, to retention marketing early on a being continue into say I’d figuring campaigns, good with us get and But primarily a on and the and avenue for out of learnings fall. conversion we’re look rates the I’d we’re getting good and what all say, firing rates invest to and focus it. cylinders

Thierry Wuilloud

this have events be curious, of nice is end year the the I when bit maybe destination. – that more. Okay. plus traveling of you time kind And it’s people good more think Colorado of a Great. are a be little was will pushing because, a could But of you quarter, be I would third would a thought again, year,

Paul Tarell

talk of XX XX but we’re we about. what catalog agree Well, the component it specifically talking subscription we’re focused that’s speaking on with that events, Events+, have or relates about $XXX the a we’ve really as really you to the robust I’d the when events we’re pretty now had. And digital we now with of it, and subscription

events able that period, we while and to already the the upcoming So are the sprinkling selectively of as we’ll in promoting available, back catalog fall get events. marketing into start be time

Thierry Wuilloud

much. Okay. Great. very you Thank

Operator

We’ll Instructions] take Securities. Riley a Eric with follow-up B. [Operator from ahead. go Wold Please

Eric Wold

this on come from the stood how circling of on QX you – surprise the Kind for what was the Thanks. months rate conference Appreciate a you end I the in X at thought it. QX? end guess, I call year trends, the of to much of any run for back thoughts it guess, seasonality the I guess, back of a exiting the subscriber kind kind at Paul, updated call ago. on the of where quarter? normal versus

Paul Tarell

we happen, May solidified think shift May, trend we to Day. did and this we after I back. the stage, got early in spoke into we’re think at as rolled as looking going that as June it of the when At strongly quite Yeah, post-Memorial and through hadn’t end what’s I but dynamic Labor and the understanding trying really predict the see seasonally pattern historical to Day to when start not is

tells to that that this have period for playing we’re occur So until we otherwise. us information

But out. net at So middle hard the and still and think and no for because to real point, it’s gauge predict. is have – on prediction it’s us a focus on stay we’re of to ride EBITDA the this to I positive income the what side this summer in the

there. to growth dynamics chase aren’t And so drive that’s the and looking to a spend perspective really subscriber not what trying at it if we’ll be from

Eric Wold

Thank helpful. you. That’s

Operator

questions time, for additional back I’d the to any we like conference in closing to this At management queue. remarks. have turn the or no further

Jirka Rysavy

you, Thank quarter a everyone with joining, to for look thanks much. in you very forward November. will you speak Thank Okay. and to we and report early we third and

Operator

Ladies and today’s appreciate discussion. concludes We your this gentlemen, participation.

now may You disconnect

Gaia (GAIA) 2 Aug 222022 Q2 Earnings call transcript