Gaia(US:GAIA)2019-11-05 02:21Financial Data and Key Metrics Changes - Revenue in Q3 2019 increased by 25% to $13.7 million from $10.9 million in the same quarter last year [5][9] - The number of subscribers reached 595,000, with a significant improvement in the subscriber lifetime value to cost to acquire ratio, now at 4:1 compared to 2.1 in the previous year [5][9] - Marketing costs as a percentage of revenue decreased to 49% from 125% in the same quarter last year [5][13] - Gross profit increased to $11.9 million, with gross margins slightly decreasing to 86.8% from 87.3% year-over-year [9][10] - EBITDA margins improved from negative 75% in Q4 2018 to negative 7% for Q3 2019, achieving positive EBITDA in September [17][20] Business Line Data and Key Metrics Changes - The company successfully completed its first full-scale live streaming event, which exceeded expectations for the $299 Live Access subscription [6][11] - Operating expenses, excluding marketing and member acquisition costs, increased to $7.6 million, primarily due to increased depreciation and expenses related to the Gaia Sphere [12] - Member acquisition costs were reduced to $6.7 million, or 49% of revenues, down from $13.6 million, or 125% of revenues in the previous year [13][14] Market Data and Key Metrics Changes - The company expects revenue growth in the mid-20s for Q4 2019 and high-20s for Q1 2020, with an annual growth rate of about 30% anticipated for 2020 [7][20] - The company plans to end the year with around 600,000 paying members, despite changes in how trial members are counted [18][19] Company Strategy and Development Direction - The company is focused on increasing the lifetime value to cost per acquisition ratio by improving lifetime value and reducing acquisition costs [14] - There is a strategic emphasis on member-driven growth initiatives, including new sharing tools for members to promote content [15][16] - The company plans to maintain content spending at a growth rate similar to revenue growth, around 30% [25][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive free cash flow by July 2020, with a disciplined approach to expense management [20][41] - The company is not aggressively pursuing international markets at this time, focusing instead on achieving positive EBITDA [65][66] - Management indicated that the trajectory of cash utilization will decline significantly in the upcoming quarters [20][46] Other Important Information - The company has returned to a two-week free trial model, eliminating the $0.99 charge, which will impact reported member counts but not revenues [18] - The company has a current cash balance of $11.6 million, which is expected to support operations until free cash flow is achieved [20] Q&A Session Summary Question: What are the major underlying drivers for achieving positive free cash flow by July? - Management indicated that customer acquisition costs will remain flat while revenue continues to grow, which will help improve EBITDA margins [24] Question: What is the total content spend expected this year? - The company anticipates spending about $3 million to $4 million per quarter on content, with no significant non-recurring costs related to the Gaia Sphere build-out [26] Question: How many live events are scheduled for Q4 and how will that grow in 2020? - Management stated that there is a planned pause in live events for the remainder of the year, with a focus on marquee events starting early next year [36] Question: What is the expected sustainable growth rate of subscribers going forward? - Management aims for a 30% revenue growth rate, with subscriber growth projected to be around 20% [38] Question: How much cash is expected to be consumed before reaching free cash flow? - Management did not provide specific guidance but noted that cash used in operations has been reduced significantly [41] Question: What is the company's perspective on M&A activity? - Management indicated that while there are opportunities for small acquisitions, the focus will remain on organic growth [52] Question: What tools are being rolled out to enhance organic growth? - The company is implementing new sharing tools for members and plans to introduce additional features to enhance community engagement [60]