Yahoo Finance Gaia, Inc. (NASDAQ:GAIA) Q4 2023 Earnings Call Transcript
Gaia, Inc. (NASDAQ:GAIA) Q4 2023 Earnings Call Transcript March 27, 2024
Gaia, Inc. misses on earnings expectations. Reported EPS is $-0.08 EPS, expectations were $-0.01. GAIA isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to Gaia Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jirka Rysavy. Thank you. You may begin.
Ned Preston: Just real quick, I just want to make sure, do we need any forward-looking. This is Ned Preston, the CFO. Any forward-looking statements that we need to read as we head in here? If not, it's covered in our 8-K and our earnings release, but -- and I will make sure at the end, if I need to read that, we will go ahead and do so. With that, I'll hand it over to Jirka.
Jirka Rysavy: Thanks, Ned, and good afternoon, everyone. So we continue to build Gaia increasing momentum. And our member count at the end of 2023 grew over 800,000 benchmark, and we expect to finish our first quarter at about 838,000, which is a good milestone towards our 15% revenue growth target for 2024. The annualized gross profit per employee in the fourth quarter grew to over $660,000, up from $535,000 in last year quarter. That growth was the key driver to our $8.4 million or 10% of revenue cash flow improvements. Revenue for the quarter increased to $20.7 million from $19.6 million in the year ago quarter, primarily because of our growth of the member base. Member growth was increasing during the year, growing sequentially by additional 16,000 in the fourth quarter, ending to 806,000 up from 759,000 on December 31, 2022.
We expect the member growth to accelerate during 2024. Gross profit for the quarter increased to $17.7 million from $17.0 million in the fourth quarter of 2022. This gross margin at 85.4% was kind of in line with the year. The net loss was $2.1 million or $0.09 compared to a net loss of $1.4 million or $0.07 last year in the last quarter. Because of higher marketing spend and increased amortization. But our operating cash flow increased by $2.1 million, and our free cash flow increased from $1.7 million to a positive $1 million. The cash balance as of December 31 '23 was $7.8 million with an unused $10 million line of credit, which is compared to net cash of $2.6 million, which was like $11 million -- $11.6 million in cash, but with $9 million borrowing on our $10 million credit line end of the last year.
Revenue for the whole year was $80.4 million compared to $82 million in 2022, as a company was still recovering from the post-COVID subscriber contraction, which was experienced by whole industry during the second part of 2022. So why the loss for the year increased $2 million to $5.6 million because of increased marketing spend amortization, our free cash flow improved, as I mentioned, by $8.4 million to a positive $1.1 million for the year from the loss of $7.3 million in last year, even when we increased marketing spend to 41% of revenue from 37.2% revenue. The free cash flow was helped by elimination of about $5 million of annualized expenses, which was finalized in the beginning of the year and included about 36 headcounts cut, which previously we had to bring in as a kind of balancing the efficiency work because the work-from-home mandates would exist previously.
We expect our member growth to accelerate in 2024, as I said, and we now expect to about double our net member addition from 16,000 we just reported in the fourth quarter to about 32,000 during the first quarter. And now Ned will speak to you more about the results. Go ahead, Ned.
Ned Preston: Hello. Yes. Thank you, Jirka. Revenue for the fourth quarter of 2023 increased 6% to $20.7 million from $19.6 million in the fourth quarter of 2022. Primarily, this was driven by our growth of the member base. Member growth increased during the year, growing sequentially by an additional 16,000 members during the fourth quarter with the member count ending the year at 806,000 members, up from 759,000 on December 31, 2022. We expect member growth to further accelerate with continuing increases of our ARPU during 2024. Gross profit in the fourth quarter increased to $17.7 million from $17.0 million in the fourth quarter of 2022. Gross margin was 85.4%, in line with the year. Net loss was $1.8 million or negative $0.08 per share as compared to net loss of $1 million or negative $0.05 per share in the year ago quarter with higher amortization, but operating cash flow improved by $2.1 million and free cash flow improved $1.7 million to $1 million, up from negative $0.7 million during the same quarter last year.
The cash balance as of December 31, 2023, was $7.8 million, with an unused $10 million line of credit compared to net cash of $2.6 million or $11.6 million of cash with $9 million of borrowing against the line of credit a year ago. Shifting to the 2023 full year financial results. Revenue for the year was $80.4 million as compared to $82 million in 2022 as the company was recovering from the post-COVID subscriber contraction experienced industry-wide during the latter part of 2022. Loss for the year was negative $5.6 million or negative $0.27 per share as compared to a loss of $3.6 million or negative $0.19 per share for 2022. With increased marketing spend and amortization, however, operating cash flow improved by $4.2 million. For the year, free cash flow improved by $8.4 million to $1.1 million from negative $7.3 million, even as we increased marketing to 41.1% of revenue from 37.2% in the prior year.
The free cash flow was helped by elimination of $5 million in annualized spending, finalized it in the beginning of the year, which included 36 headcounts added previously to offset reduced efficiency because of work-from-home mandates. The company decided to restate the consolidated financial statements for 2022 and the first three quarters of 2023, making some presentation changes to be in line with the industry. None of these changes or the restatement impacts our revenue or free cash flow, and we are already reflecting this in the release. We expect our member growth to accelerate during 2024 as we are now forecasting to double our net member additions from 16,000 in the fourth quarter of 2023 to 32,000 in the first quarter of 2024, finishing the first quarter with about 838,000 members while continuing to generate positive free cash flow.
With that, I will hand it over to James Colquhoun, Gaia's CEO.
James Colquhoun: Thank you, Ned, and thank you, Jirka, and hello, everyone. As Jirka mentioned, we have continued our trend on executing on cash flow positive growth for the final three consecutive quarters of 2023. We found continued improvements in marketing efficiency with some of our lowest customer acquisition costs since the beginning of 2021 and continued our execution on improving ARPU on an annualized basis. Since moving into the role as CEO as of December, I've centered my initial focus on improving marketing efficiency and the return on cash from our marketing spend. Key to this success has been the rollout of our direct-to-pay campaigns in Q4, which has had to result in improving retention by incentivizing members to skip a trial period and move directly to a paid in full membership with a focus on our annual plan.
Additionally, to facilitate this transition has been the continued rollout of our Gaia Marketplace Initiative where members can show a curated selection of experiences, retreats, courses and physical goods with access to exclusive member-only discounts. This project is aimed at supporting the conscious life cycle of our members whilst also improving cash flow and increasing the company's gross revenue as we booked the [indiscernible] from sales at 100% gross margin. In Q4, we also implemented further projects leveraging AI within the organization from improvements at a product level to building efficiencies and cost savings on a team level. Key to this was launching an AI-powered search engine trained on our exclusive categorical metadata and transcripts, unlocking the power of our transformational conscious media library of over 10,000 titles in English, Spanish, French and German.
Members can now enter search queries related to their transformational interest and quickly uncover the most relevant films, series episodes, yoga classes or documentaries to stream. We continue to look into further ways we can capitalize on our exclusive content library and data as we move forward. These projects are aimed at continuing our focus on establishing Gaia as the world's leading player in the conscious and transformative media space and leveraging our capacity to use AI to find more efficient ways to reach our target audience and grow our community. 2023 was also a landmark year for us. On the content side, we released over 1,500 titles across our four languages and produced five live events. Our top programs in 2023 included our original series releases of Channeling: A Bridge to the Beyond, Biohacking with Dave Asprey, Ancient Civilization Season 5 and an original documentary called Healing Vibrations.
Moving forward for 2024, our focus will be to continue to execute on improving our marketing efficiency, the rollout of our Marketplace Initiative, a renewed focus on our Premium Membership Tier, growing improvements in ARPU all maintaining cash flow positive growth. And I know it's been some time since our last announcement, and we're looking forward to updating you all on our Q1 numbers shortly. As a quick sneak peek, we relaunched our premium membership tier with a new rebrand from Events+ to Gaia+ and celebrated with a sold-out immersion event at our GaiaSphere Event Center and a new record of over 52,000 unique live stream attendees from across the globe. And with that, I'll pass back to Jirka to close up.
Jirka Rysavy: Yes. So before I close out, actually, I'd like to let Ned to read the forward-looking statements, which we neglected to reach front of the statement and then I close up.
Ned Preston: Okay. I'll go through this quickly. As I said, in the 8-K as well as the earnings release, but forward-looking statement, the press release contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are forward-looking statements that involve risks and uncertainties. When used in this discussion, we intend to use the words anticipate, believe, contemplate, continue, could, estimate, expect, future, hope, intend, may, might, objective, ongoing plan, potential, predict, project, should, strive, target, will and would and similar expressions as they relate to us to identify such forward-looking statements. Forward-looking statements include, without limitation, the company's plans related to restatement of the financial statements, our ability to attract new members and retain existing members, our ability to compete effectively including for customers with different modes of entertainment, maintenance and expansion of device platforms for streaming, fluctuation and customer usage of our service.
Fluctuations in quarterly operating results service disruptions, product risks, general economic conditions, future losses, loss of key personnel, price changes, brand reputation, acquisitions, new initiatives, we undertake, security and information systems legal liability for website content, failure of third parties to provide adequate service, future Internet-related taxes, our founders control of us, litigation consumer trends, the effect of government regulation and programs the impact of public health threats increased including the coronavirus COVID-19 pandemic and a response to it and other risks and uncertainties including in our filings with the U.S. Securities and Exchange Commission. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those implied by forward-looking statements, including the outcome of the company's completion of the qualification and evaluation of the specific impact of the errors identified in the company's financial results and previously issued financial statements including the possibility of material adjustments thereto, the discovery of additional and unanticipated information during the procedures required by completing before the company is able to file its annual report on Form 10-K for the year ended December 31, 2023, and the application of accounting or tax principles in an unanticipated manner.
Also additional risk factors set forth in the company's periodic filings with the SEC, including, but not limited to, those risks and uncertainties listed in the section entitled Risk Factors in the company's annual report and Form 10-K filed with the SEC. We caution you that no forward-looking statement as guarantee of future performance, and you should not place undue reliance on these forward-looking statements, which reflect our views only as of the date of the press release. We undertake no obligation to update any forward-looking information. With that, I'm going to pass it back to Jirka.
Jirka Rysavy: Thank you. So it's the interesting thing, I would have a final thought. So for the summary, we started this year with $7.8 million in cash and $10 million of unused credit line. And our current view on our four business indicators for 2024, we expect our revenue to grow about 15%, as we said in the last call. And that is with continuing growth of ARPU. We're also planning to increase our gross profit for our employee going forward and continue to deliver a positive free cash flow. And this concludes our remarks. And now I'd like to open to the questions. So operator, please.
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