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Gaia(GAIA) - 2021 Q4 - Annual Report
GaiaGaia(US:GAIA)2022-02-27 16:00

PART I Business Gaia operates a global digital video subscription service with over 10,000 exclusive titles across four primary channels, focusing on in-house content and strategic acquisitions for growth - Gaia operates a global digital video subscription service with over 10,000 titles, 80% of which are exclusive, across four primary channels: Yoga, Transformation, Alternative Healing, and Seeking Truth1112 - In December 2021, Gaia acquired Yoga International, adding over 4,000 hours of unique yoga content and expanding its standalone yoga offering1325 - Key competitive strengths include exclusive and proprietary content (75% of viewership from in-house production), worldwide distribution rights, and a unique member base, positioning Gaia as a complementary service to larger entertainment-driven streaming providers21222324 - Growth drivers include continuous investment in streaming content, service improvements, leveraging the overall adoption of internet TV, international market expansion (37% of members are outside the U.S.), and premium membership offerings like Events+ and GaiaSphere2627282930 - Gaia operates in a single reporting segment, with revenues primarily derived from subscription fees, differentiating itself through exclusive niche content despite intense competition4042 - Member growth historically shows seasonal variations, with the greatest growth in Q4 and Q1 (October-February) and slowest during May-August, though the global pandemic shifted this pattern in the past two years43 Risk Factors Gaia faces significant risks including the ongoing COVID-19 impact, member attraction and retention challenges, intense competition, growth management, content liabilities, data security, and international operational complexities - The COVID-19 pandemic continues to pose risks, including volatility, uncertainty, economic disruption, and potential impacts on consumer demand, ability to pay, and employee operations5153 - Failure to attract and retain members, intense competition in the streaming market, and the inability to manage growth (especially international expansion) could adversely affect the business and future profitability545860 - Risks associated with content include potential liability for defamation, copyright infringement, misinformation, and unforeseen production costs; problematic content could also damage reputation and lead to partner refusal666869 - Data loss, security breaches, and cyber-attacks on network or information systems (including those of third parties) could lead to service degradation, unauthorized data disclosure, theft of intellectual property, and significant financial and reputational harm81868788 - Reliance on third-party partners for content streaming, potential changes in network operator policies (e.g., usage-based pricing, internet neutrality), and evolving privacy laws and regulations pose operational and financial risks759192 - Intellectual property risks include inadequate protection of trademarks and proprietary rights, potential infringement claims, and piracy of video content, which could diminish brand value and reduce revenues939598 - International operations face additional risks such as adapting content for cultural differences, managing foreign operations, compliance with U.S. and local laws, adverse tax consequences, currency exchange rate fluctuations, and differing payment systems103 - Jirka Rysavy, the founder, chairman, and CEO, holds approximately 79% of voting stock, giving him substantial control over shareholder-approved matters and preventing a change of control without his consent108 Unresolved Staff Comments There are no unresolved staff comments applicable to the registrant - Not Applicable113 Properties Gaia's principal properties include headquarters and production studios in Louisville, CO, and Honesdale, PA, with the Colorado campus partially owned and subject to a master lease Principal Physical Properties (as of December 31, 2021) | Location | Size (sq. ft.) | Use | Ownership Status | | :------------- | :------------- | :-------------- | :--------------------- | | Louisville, CO | 138,502 | Headquarters | Partially Owned/Leased | | Louisville, CO | 11,760 | Production Studio | Owned | | Honesdale, PA | 3,800 | Production Studio | Leased | - On September 9, 2020, Gaia's subsidiary sold a 50% undivided interest in a portion of its Colorado campus, retaining 50% ownership and full ownership of studio facilities, and subsequently leased the property under a master lease until September 30, 2030116 - The Colorado facility is subject to a $13.0 million mortgage with Great Western Bank116 Legal Proceedings Management believes current legal proceedings will not materially adversely affect Gaia's financial condition, results of operations, or cash flows - Management believes that current legal proceedings will not have a material adverse effect on financial condition, results of operations, or cash flows117 Mine Safety Disclosures This item is not applicable to Gaia, Inc - Not applicable118 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Gaia's Class A common stock trades on NASDAQ, with no dividends paid in 2021 or 2020, and details provided on equity compensation plans - Gaia's Class A common stock is listed on the NASDAQ Global Market under the symbol "GAIA"119 - As of February 22, 2022, there were 3,271 shareholders of record for Class A common stock and one for Class B common stock119 - No dividends were declared or paid during the twelve months ended December 31, 2021 and 2020121 Equity Compensation Plan Information (as of December 31, 2021) | Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price, per share, of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | | :------------------------------------------- | :---------------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------ | :------------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | 1,227,838 | $8.18 | 1,543,985 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 1,227,838 | $8.18 | 1,543,985 | Reserved This item is reserved and not applicable - This item is reserved124 Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Gaia's financial performance, highlighting $3.7 million net income in 2021, 19.2% revenue growth, improved operating efficiency, and $20.9 million cash flow from operations, alongside strategic content investments and COVID-19 impacts - Gaia operates a global digital video subscription service with over 10,000 exclusive titles, focusing on yoga, transformation, alternative healing, and seeking truth, targeting an underserved member base127129 - The core strategy is to grow domestically and internationally by expanding content, enhancing user interface, extending service to new devices, and building a conscious community130 - The COVID-19 pandemic initially boosted demand but later led to increased online advertising costs and reduced new member acquisition efficiency in 2021133 Consolidated Results of Operations (in thousands, except per share data) | Metric | 2021 | 2020 | | :----------------------------------- | :-------- | :-------- | | Revenues, net | $79,573 | $66,827 | | Cost of revenues | $10,526 | $8,651 | | Gross profit margin | 86.8% | 87.1% | | Selling and operating expenses | $60,577 | $56,937 | | Corporate, general and administration | $6,125 | $5,867 | | Acquisition costs | $360 | — | | Income (loss) from operations | $1,985 | $(4,628) | | Interest and other income (expense), net | $(265) | $5,327 | | Income before income taxes | $1,720 | $699 | | Provision for (benefit from) income taxes | $(2,011) | $180 | | Net income | $3,731 | $519 | | Basic EPS | $0.19 | $0.03 | | Diluted EPS | $0.19 | $0.03 | - Revenues increased by $12.8 million (19.2%) in 2021, primarily due to an increase in average members and higher average monthly revenue per member from the Events+ premium offering136137 - Cost of revenues increased by $1.8 million (20.7%) in 2021, with a slight gross profit margin decline (86.8% from 87.1%) due to increased content amortization from original and native language content investments138 - Selling and operating expenses increased by $3.7 million (6.5%) but decreased significantly as a percentage of revenues (76.1% from 85.2%) due to increased revenues and personnel costs for international growth139 - Net income for 2021 was $3.7 million, compared to $0.5 million in 2020, benefiting from a partial valuation allowance release related to deferred tax liabilities from the Yoga International acquisition59135142 - Cash flows from operations improved by $9.2 million in 2021, reaching $20.9 million, which funded $17.3 million in content library and technology platform investments162168169 - The company expects to continue generating positive cash flows from operations in 2022 and plans to invest approximately 20% of consolidated revenues annually into its content library and technology platform162163 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Gaia is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Gaia is not required to provide quantitative and qualitative disclosures about market risk171 Financial Statements and Supplementary Data This section presents Gaia's audited consolidated financial statements for 2021 and 2020, detailing $3.7 million net income in 2021, $133.7 million total assets, key accounting policies, and the impact of the Yoga International acquisition - The consolidated financial statements include the balance sheets, statements of operations, changes in shareholders' equity, and cash flows for the years ended December 31, 2021 and 2020173 Consolidated Balance Sheets (in thousands) | ASSETS | 2021 | 2020 | | :----------------------------------- | :---------- | :---------- | | Current assets: | | | | Cash | $10,269 | $12,605 | | Accounts receivable | $2,728 | $2,024 | | Prepaid expenses and other current assets | $1,986 | $1,746 | | Total current assets | $14,983 | $16,375 | | Media library, software and equipment, net | $50,558 | $39,231 | | Right-of-use lease asset, net | $7,871 | $8,622 | | Real estate, investment and other assets, net | $31,394 | $28,500 | | Goodwill | $28,870 | $17,289 | | Total assets | $133,676 | $110,017 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Current liabilities: | | | | Accounts payable, accrued and other liabilities | $14,962 | $8,947 | | Deferred revenue | $14,847 | $12,376 | | Total current liabilities | $29,809 | $21,323 | | Long-term mortgage, net | $6,109 | $6,250 | | Long-term lease liability | $7,234 | $7,952 | | Deferred taxes | $309 | $257 | | Total liabilities | $43,461 | $35,782 | | Total shareholders' equity | $90,215 | $74,235 | | Total liabilities and shareholders' equity | $133,676 | $110,017 | Consolidated Statements of Operations (in thousands, except per share data) | Metric | 2021 | 2020 | | :----------------------------------- | :-------- | :-------- | | Revenues, net | $79,573 | $66,827 | | Cost of revenues | $10,526 | $8,651 | | Gross profit | $69,047 | $58,176 | | Total operating expenses | $67,062 | $62,804 | | Income (loss) from operations | $1,985 | $(4,628) | | Interest and other income (expense), net | $(265) | $5,327 | | Income before income taxes | $1,720 | $699 | | Provision for (benefit from) income taxes | $(2,011) | $180 | | Net income | $3,731 | $519 | | Basic EPS | $0.19 | $0.03 | | Diluted EPS | $0.19 | $0.03 | Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | 2021 | 2020 | | :----------------------------------- | :---------- | :---------- | | Net cash provided by operating activities | $20,867 | $11,650 | | Net cash used in investing activities | $(23,858) | $(176) | | Net cash provided by (used in) financing activities | $655 | $(10,363) | | Net increase (decrease) in cash | $(2,336) | $1,111 | | Cash at beginning of year | $12,605 | $11,494 | | Cash at end of year | $10,269 | $12,605 | - The acquisition of Yoga International on December 22, 2021, for $17.2 million (cash and Class A common stock) expanded Gaia's content library by 4,000 hours and added a standalone yoga subscription service, resulting in $11.6 million in goodwill239240243244 Identifiable Intangible Assets Acquired from Yoga International (in thousands) | Asset Class | Total (in thousands) | Estimated Life (months) | | :------------------ | :------------------- | :---------------------- | | Customer relationships | $2,000 | 48 | | Content library | $6,970 | 90 | | Tradenames | $270 | 48 | | Total | $9,240 | | - Media library, software, and equipment increased to $50.6 million in 2021 from $39.2 million in 2020, with amortization expense of $6.5 million in 2021238 - Goodwill increased to $28.9 million in 2021 from $17.3 million in 2020, primarily due to the Yoga International acquisition254 - As of December 31, 2021, there was $5.2 million of unrecognized cost related to non-vested share-based compensation, expected to be recognized over a weighted-average period of 3.63 years276 - A valuation allowance of $15.3 million was established against deferred tax assets in 2021 due to cumulative losses over a three-year period279 Geographical Revenue Data (in thousands) | Region | 2021 (in thousands) | 2020 (in thousands) | | :------------ | :------------------ | :------------------ | | United States | $44,283 | $40,687 | | International | $35,290 | $26,140 | | Total | $79,573 | $66,827 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There have been no changes in or disagreements with accountants on accounting and financial disclosure - None285 Controls and Procedures Management concluded that Gaia's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes during the year - Management concluded that disclosure controls and procedures were effective as of December 31, 2021286 - No material changes in internal control over financial reporting occurred during the year ended December 31, 2021288 - Management assessed and concluded that internal control over financial reporting was effective as of December 31, 2021290 Other Information This item states that there is no other information to report - None291 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to Gaia, Inc - Not applicable292 PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance, including the Code of Ethics, is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement294 - Gaia has adopted a Code of Ethics applicable to all employees, including executive officers, which is available on its corporate website295 Executive Compensation Information regarding executive compensation is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement - Information on executive compensation is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement296 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of certain beneficial owners and management is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement, with equity compensation details in Part II, Item 5 - Information on security ownership and related stockholder matters is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement297 - Equity compensation plan information is detailed in Part II, Item 5 of this report298 Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement299 Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2022 Annual Meeting of Shareholders Proxy Statement300 PART IV Exhibits and Financial Statement Schedules This section lists the consolidated financial statements and a comprehensive array of exhibits, including various agreements and corporate documents, many incorporated by reference - This item lists the consolidated financial statements and a comprehensive list of exhibits filed as part of the Form 10-K report301 - Exhibits include the Merger Agreement for Yoga International acquisition, corporate articles and bylaws, stock certificates, descriptions of securities, long-term incentive plans, employee stock purchase plans, lease agreements, and loan agreements302303 SIGNATURES SIGNATURES The report is duly signed by Gaia, Inc.'s Chief Executive Officer, Chief Financial Officer, and other directors as of February 28, 2022 - The report is signed by Jirka Rysavy (CEO and Director) and Paul Tarell (CFO) along with other directors, dated February 28, 2022307308