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Gaia(GAIA) - 2021 Q1 - Quarterly Report
GaiaGaia(US:GAIA)2021-05-02 16:00

PART I—FINANCIAL INFORMATION This section presents GAIA, INC.'s unaudited interim condensed consolidated financial statements for Q1 2021 and 2020, including balance sheets, statements of operations, changes in equity, and cash flows, prepared under GAAP Item 1. Financial Statements (Unaudited) This section presents GAIA, INC.'s unaudited interim condensed consolidated financial statements for Q1 2021 and 2020, including balance sheets, statements of operations, changes in equity, and cash flows, prepared under GAAP - The interim financial statements are unaudited and contain only normal recurring adjustments, prepared in accordance with GAAP, and should be read with the 2020 Annual Report on Form 10-K9 Condensed Consolidated Balance Sheets This section provides a snapshot of GAIA, INC.'s financial position, detailing assets, liabilities, and equity as of March 31, 2021, and December 31, 2020 | Metric (in thousands) | March 31, 2021 | December 31, 2020 | Change (in thousands) | | :------------------------ | :------------- | :---------------- | :-------------------- | | Cash | $13,045 | $12,605 | +$440 | | Total current assets | $17,038 | $16,375 | +$663 | | Total assets | $112,170 | $110,017 | +$2,153 | | Total current liabilities | $22,643 | $21,323 | +$1,320 | | Total liabilities | $36,893 | $35,782 | +$1,111 | | Total equity | $75,277 | $74,235 | +$1,042 | Condensed Consolidated Statements of Operations This section outlines GAIA, INC.'s financial performance for the three months ended March 31, 2021 and 2020, including revenues, expenses, and net income or loss | Metric (in thousands, except per share data) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | | :----------------------------------------- | :------ | :------ | :-------------------------- | | Revenues, net | $18,896 | $14,511 | +$4,385 (+30.2%) | | Cost of revenues | $2,438 | $1,901 | +$537 (+28.2%) | | Gross profit | $16,458 | $12,610 | +$3,848 (+30.5%) | | Income (loss) from operations | $424 | $(3,265)| +$3,689 | | Net income (loss) | $358 | $(3,580)| +$3,938 | | Basic earnings per share | $0.02 | $(0.19) | +$0.21 | | Diluted earnings per share | $0.02 | $(0.19) | +$0.21 | Condensed Consolidated Statements of Changes in Equity This section details the changes in GAIA, INC.'s equity for the three months ended March 31, 2021, reflecting net income, stock issuance, and other equity adjustments | Metric (in thousands, except shares) | Balance at Jan 1, 2021 | Issuance of Common Stock (in thousands) | Net Income (in thousands) | Balance at Mar 31, 2021 (in thousands) | | :--------------------------------- | :--------------------- | :-------------------------------------- | :------------------------ | :------------------------------------- | | Total Equity | $74,235 | $684 | $358 | $75,277 | | Accumulated Deficit | $(75,834) | — | $358 | $(75,476) | | Additional Paid-in Capital | $150,067 | $684 | — | $150,751 | | Common Stock Shares | 19,182,951 | 17,895 | — | 19,200,846 | Condensed Consolidated Statements of Cash Flows This section presents GAIA, INC.'s cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2021 and 2020 | Cash Flow Activity (in thousands) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | | :-------------------------------- | :------ | :------ | :-------------------------- | | Net cash provided by operating activities | $5,188 | $2,006 | +$3,182 | | Net cash used in investing activities | $(4,774)| $(3,601)| $(1,173) | | Net cash provided by financing activities | $26 | $120 | $(94) | | Net change in cash | $440 | $(1,475)| +$1,915 | | Cash at end of period | $13,045 | $10,019 | +$3,026 | Notes to interim condensed consolidated financial statements This section provides detailed explanations and additional information supporting the interim condensed consolidated financial statements 1. Organization, Nature of Operations, and Principles of Consolidation This note describes Gaia, Inc.'s business, its global digital video subscription service, and the accounting principles applied in its consolidated financial statements - Gaia, Inc. operates a global digital video subscription service with approximately 8,000 titles, 80% of which are exclusive, focusing on Yoga, Transformation, Alternative Healing, and Seeking Truth content1920 - The company adopted ASU 2019-12 on January 1, 2021, with no material impact on its financial position or results of operations24 2. Revenue Recognition This note explains Gaia, Inc.'s policies for recognizing revenue, primarily from subscription fees, and the treatment of deferred revenue - Revenues are primarily from subscription fees, billed in advance, and recognized ratably over the subscription term26 - Deferred revenue comprises collected but unearned subscription fees, recognized over the remaining subscription term26 3. Equity and Share-Based Compensation This note details Gaia, Inc.'s equity transactions and the accounting treatment for share-based compensation expenses | Metric (in thousands) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | | :------------------------------- | :------ | :------ | :-------------------------- | | Share-based compensation expense | $613 | $465 | +$148 (+31.8%) | | Stock options exercised | 0 | 24 | -24 | | Net proceeds from option exercises | $0 | $120 | $(120) | 4. Goodwill and Other Intangible Assets This note provides information on Gaia, Inc.'s goodwill and other intangible assets, including their carrying values and any changes during the period - Goodwill remained unchanged from December 31, 2020, to March 31, 202128 - Other unamortized intangible assets, primarily domain names, were $571,000 as of March 31, 2021, and December 31, 202028 5. Debt This note outlines Gaia, Inc.'s debt obligations, including details of its mortgage loan and future long-term debt maturities - A $13 million mortgage loan was secured on December 28, 2020, with a fixed interest rate of 3.75% and a maturity date of December 28, 202529 Long-term Debt Maturities (in thousands) | Long-term Debt Maturities (in thousands) | Amount (in thousands) | | :--------------------------------------- | :-------------------- | | 2021 (remaining) | $105 | | 2022 | $144 | | 2023 | $150 | | 2024 | $156 | | 2025 | $5,800 | | Total | $6,355 | 6. Leases This note provides details on Gaia, Inc.'s lease arrangements, including right-of-use assets, lease liabilities, and future lease payment obligations Lease Metric (in thousands) | Lease Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------------- | :------------- | :---------------- | | Right-of-use lease asset, net | $8,437 | $8,622 | | Operating lease liability (current) | $698 | $691 | | Long-term lease liability | $7,775 | $7,952 | | Cash paid for operating lease liabilities (Q1) | $250 | $0 | Future Lease Payments (in thousands) | Future Lease Payments (in thousands) | Amount (in thousands) | | :----------------------------------- | :-------------------- | | 2021 (remaining) | $751 | | 2022 | $1,001 | | 2023 | $1,001 | | 2024 | $1,008 | | 2025 | $1,035 | | Thereafter | $5,317 | | Future lease payments, gross | $10,113 | | Less: Imputed interest | $(1,640) | | Operating lease liability | $8,473 | 7. Earnings Per Share This note presents the calculation of Gaia, Inc.'s basic and diluted earnings per share for the periods presented, including factors affecting dilution | EPS Metric (in thousands, except per share data) | Q1 2021 | Q1 2020 | | :----------------------------------------------- | :------ | :------ | | Net income (loss) | $358 | $(3,580)| | Basic earnings per share | $0.02 | $(0.19) | | Diluted earnings per share | $0.02 | $(0.19) | | Weighted-average common stock outstanding (Basic) | 19,201 | 18,482 | | Weighted-average number of shares (Diluted) | 19,724 | 18,482 | - Employee stock options with exercise prices greater than the average market price were excluded from diluted EPS calculation as anti-dilutive34 8. Income Taxes This note details Gaia, Inc.'s income tax expense, deferred tax assets, valuation allowances, and net operating loss carryforwards Income Tax (in thousands) | Income Tax (in thousands) | Q1 2021 | Q1 2020 | | :------------------------ | :------ | :------ | | Total income tax expense | $0 | $69 | - A full valuation allowance is maintained on deferred tax assets due to historical operating losses and plans for revenue growth and content library investment35 - As of March 31, 2021, net operating loss carryforwards were $90.1 million for federal and $24.3 million for state35 9. Contingencies This note discusses Gaia, Inc.'s assessment of potential losses from legal proceedings and other contingencies - Management believes that probable and estimable losses from legal proceedings would not materially adversely affect financial condition, results of operations, or cash flows36 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses GAIA, INC.'s financial condition and operational results for Q1 2021, covering revenue growth, expense management, profitability, strategic outlook, liquidity, and cash flow Forward-Looking Statements This section identifies forward-looking statements and highlights the inherent risks and uncertainties that could affect future results - Forward-looking statements are identified by words like 'anticipate,' 'believe,' 'plan,' and 'expect,' and are subject to risks including economic conditions, competition, and the COVID-19 pandemic37 Overview and Outlook This section provides an overview of Gaia, Inc.'s business model, strategic goals, and financial performance for the period, including the impact of COVID-19 - Gaia operates a global digital video subscription service with approximately 8,000 titles, 80% exclusive, targeting a unique member base interested in yoga, transformation, alternative healing, and seeking truth3941 - The core strategy is to grow the subscription business domestically and internationally by expanding exclusive content, enhancing the user interface, and extending streaming service to new devices42 - The company reported net income of $0.4 million for the first three months of 2021, a $4.0 million improvement from a net loss of $3.6 million in the prior year45 - COVID-19 initially led to increased demand and improved member retention from March to July 2020, but online advertising costs returned to historical norms by August 202044 Results of Operations This section analyzes Gaia, Inc.'s financial performance for the three months ended March 31, 2021 and 2020, detailing key revenue and expense line items | Metric (in thousands, except per share data) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | % of Revenue (2021) | % of Revenue (2020) | | :----------------------------------------- | :------ | :------ | :-------------------------- | :------------------ | :------------------ | | Revenues, net | $18,896 | $14,511 | +$4,385 (+30.3%) | 100.0% | 100.0% | | Cost of revenues | $2,438 | $1,901 | +$537 (+28.2%) | 12.9% | 13.1% | | Gross profit margin | 87.1% | 86.9% | +0.2 pp | 87.1% | 86.9% | | Selling and operating expenses | $14,538 | $14,458 | +$80 (+0.6%) | 76.9% | 99.6% | | Corporate, general and administration | $1,496 | $1,417 | +$79 (+5.6%) | 7.9% | 9.8% | | Income (loss) from operations | $424 | $(3,265)| +$3,689 | 2.2% | (22.5)% | | Net income (loss) | $358 | $(3,580)| +$3,938 | 1.9% | (24.7)% | Revenues, net This subsection analyzes the net revenues for the period, detailing the primary drivers of changes in revenue | Metric (in thousands) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | | :-------------------- | :------ | :------ | :-------------------------- | | Revenues, net | $18,896 | $14,511 | +$4,385 (+30.3%) | - The increase in revenues was primarily driven by an increase in both members and average monthly revenue per member47 Cost of revenues This subsection examines the cost of revenues and its relationship to net revenues for the reporting periods | Metric (in thousands) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | % of Net Revenues (2021) | % of Net Revenues (2020) | | :-------------------- | :------ | :------ | :-------------------------- | :----------------------- | :----------------------- | | Cost of revenues | $2,438 | $1,901 | +$537 (+26.3%) | 12.9% | 13.1% | Selling and operating expenses This subsection details the selling and operating expenses incurred and their proportion to net revenues for the periods | Metric (in thousands) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | % of Net Revenues (2021) | % of Net Revenues (2020) | | :-------------------- | :------ | :------ | :-------------------------- | :----------------------- | :----------------------- | | Selling and operating | $14,538 | $14,458 | +$80 (+0.6%) | 76.9% | 99.6% | Corporate, general and administration expenses This subsection analyzes corporate, general, and administration expenses, including factors contributing to their changes | Metric (in thousands) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | % of Net Revenues (2021) | % of Net Revenues (2020) | | :-------------------- | :------ | :------ | :-------------------------- | :----------------------- | :----------------------- | | Corporate, general and administration | $1,496 | $1,417 | +$79 (+7.1%) | 7.9% | 9.8% | - The increase was primarily due to increased costs of insurance50 Net income This subsection presents the net income or loss and basic earnings per share for the periods, highlighting the change in profitability | Metric (in thousands, except per share) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | | :-------------------------------------- | :------ | :------ | :-------------------------- | | Net income (loss) | $358 | $(3,580)| +$3,938 | | Basic earnings per share | $0.02 | $(0.19) | +$0.21 | Seasonality This section discusses the seasonal patterns affecting member growth and acquisition spending, and their impact on net revenue - Member growth is generally greatest in Q4 and Q1 (October-February) and slowest in May-August, reflecting consumer viewing habits52 - Seasonality drives quarterly variations in member acquisition spending but does not cause corresponding seasonality in net revenue52 Liquidity and Capital Resources This section assesses Gaia, Inc.'s ability to meet its short-term and long-term financial obligations, including cash position and funding plans - Budgeted content and capital expenditures for the remainder of 2021 are $12 million to $16 million, primarily for expanding the content library and digital platforms, to be funded by cash flows from operations54 - Cash flows from operations have been increasing since October 2019, with $5.2 million generated in Q1 2021, covering $4.8 million in media library and product investments54 - Cash balance increased to $13.0 million as of March 31, 202154 - Management believes cash on hand, expected cash from operations, and potential capital raising capabilities are sufficient to fund operations short-term and long-term56 Cash Flows This section analyzes the changes in cash flows from operating, investing, and financing activities for the reporting periods | Cash Flow Activity (in thousands) | Q1 2021 | Q1 2020 | Change (YoY) (in thousands) | | :-------------------------------- | :------ | :------ | :-------------------------- | | Net cash provided by operating activities | $5,188 | $2,006 | +$3,182 | | Net cash used in investing activities | $(4,774)| $(3,601)| $(1,173) | | Net cash provided by financing activities | $26 | $120 | $(94) | | Net change in cash | $440 | $(1,475)| +$1,915 | - Operating cash flow improvement was primarily driven by a $4.2 million increase in earnings before depreciation, amortization, and share-based compensation57 - Increased cash used in investing activities was due to higher investment in the original content library58 - Decline in financing cash flows was due to mortgage payments and lower proceeds from stock option exercises59 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, GAIA, INC. is not required to provide quantitative and qualitative disclosures about market risk under SEC rules - GAIA, INC. is a smaller reporting company and is not required to provide market risk disclosures60 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated and deemed disclosure controls and procedures effective as of March 31, 2021, with no material changes in internal control Evaluation of Disclosure Controls and Procedures This section details the evaluation of the effectiveness of the company's disclosure controls and procedures by management - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2021, by management, including the CEO and CFO61 Changes in Internal Control over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting during the quarter - No material changes in internal control over financial reporting occurred during Q1 202162 PART II—OTHER INFORMATION This section contains additional information not covered in Part I, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings The company reported no legal proceedings for the period - No legal proceedings were reported65 Item 1A. Risk Factors As a smaller reporting company, GAIA, INC. is not required to provide risk factor disclosures under SEC rules - GAIA, INC. is a smaller reporting company and is not required to provide risk factor disclosures66 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities or use of proceeds were reported67 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities for the period - No defaults upon senior securities were reported68 Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable69 Item 5. Other Information The company reported no other information for the period - No other information was reported70 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, as well as Inline XBRL documents - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)72 SIGNATURES The report was duly signed by Gaia, Inc.'s CEO and CFO on May 3, 2021, certifying its submission under the Securities Exchange Act of 1934 SIGNATURES The report was duly signed by Gaia, Inc.'s CEO and CFO on May 3, 2021, certifying its submission under the Securities Exchange Act of 1934 - The report was signed by Jirka Rysavy (CEO) and Paul Tarell (CFO) on May 3, 202175