CuriosityStream Inc.

Good day, everyone, and welcome to the CuriosityStream Q4 and full-year 2022 earnings call. If you have a question today, please press star 1 on your telephone keypad. I would now like to hand things over to Ms. Denise Garcia. Please go ahead.

Thank you. Welcome to CuriosityStream's discussion of its fourth quarter and full-year 2022 financial results. Leading the discussion today are Clint Cinchco, CuriosityStream's Chief Executive Officer, and Peter Wesley, CuriosityStream's Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions. But first, I'll review the Safe Harbor Statement. During this call, we may make statements related to our business that are forward-looking statements under the federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties, and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements. Please be aware, that any forward-looking statements reflect management's current views only, and the company undertakes no obligation to revise or update these statements, nor to make additional forward-looking statements in the future. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our investor relations website, as well as the risks and other important factors discussed in today's press release. Additional information will also be set forth in our annual report on Form 10-K for the fiscal year ended December 31, 2022, when filed. In addition, reference will be made to non-GAAP financial measures. A reconciliation of these non-GAAP measures to comparable GAAP measures can be found on our website at investors.curiositystream.com. Now I'll turn the call over to Clint.

Hello, everyone. I appreciate you all joining us today. Also on the call are our COO and general counsel, Tia Cuddy, our CFO, Peter Wesley, and our head of content, Rob Burke. Been hard at work since our last call, and I'm delighted to update you on our progress. We made some strategic commercial decisions in our content licensing business in Q4 and more recently that, while sacrificing immediate revenue and ostensibly better quarterly performance, we believe have put us firmly on the path to achieving positive adjusted free cash flow in the near term, and even firmer sustainability in the long term. We're focused on driving operational efficiencies and leveraging opportunities made possible by our strong, unique cash position. We also continue to focus on improving the economics of all of our partnerships and vendor agreements. We believe these decisions and actions and some others that Peter will address expand our overall opportunity and maximize profitability and sustainability despite short-term revenue impacts. As part of our continued focus on building long-term success, I'm happy to share that we exceeded our year-end target cash balance of $50 million by over $5 million, ending the year with over $55 million in cash and short-term investments and zero debt. Zero debt. We believe our strong balance sheet and positive cash flow are major competitive advantages in the current environment. While some industry players must raise capital, which is increasingly expensive and difficult to secure, We believe we have the cash resources to turn cash flow positive without the need for outside capital. Consistent with our focus on long-term value creation over short-term revenue opportunities, we also remain highly disciplined in third-party licensing and distribution negotiations. We know the value of our content. We won't enter into agreements that do not meet our valuation thresholds. We're in control of our own destiny, and our future is bright. Specifically, our direct consumer SVOD revenues grew 12% in the fourth quarter and 25% for the full year on a year-over-year basis. Looking ahead, we're optimistic about our ability to drive accelerated subscription revenue growth and profitability as we implement our new pricing structure, as we migrate to more efficient performance-based marketing, and as we execute on product innovation that will produce measurable return. On the pricing front, We recently completed an extensive three-month pricing test with over 3 million interactions. We expect the changes we made to our standard tier subscription pricing on March 27th will create a tailwind to revenue growth later this year and beyond. Specifically, we increased the cost of our standard service to $39.99 from $19.99 per year for new annual subscribers and to $4.99 from $2.99 per month for new monthly subscribers. We long maintained our $20 annual standard service price point despite the significant investments we've made to expand our content library and improve the user experience. We established our new price points following a rigorous process of testing and analysis that helped us to estimate the subscriber acquisition and retention impact of various pricing combinations. Specifically, we analyzed over 3 million sessions during the course of many weeks using nine different combinations of pricing and messaging. After thoroughly reviewing the data, we confirmed a range of pricing flexibility, and we believe we are striking the right balance between delivering value to our subscribers, optimizing lifetime value, and enhancing profitability. Even at a higher price point, we continue to believe our service represents an extraordinary value compared to other offerings in the market. We expect financial benefit of the price increase to build sustainably and gradually as new subscribers join and as annual subscribers renew over time. Our direct consumer subscriber retention remained industry-leading during the fourth quarter, as our incredibly talented content and marketing teams continued to leverage our critical mass content library of over 15,000 programs to deliver new and engaging experiences. A great example of this was our highly successful 100 Days of Curiosity campaign. The campaign kicked off September 23rd with our landmark original feature, Pompeii Disaster Street, and continued through the end of the year with a different existing series or special, refeatured on our service each day, and highlighted across all social channels with gratifying success. Many of the titles refeatured in the 100 Days campaign received more than 10 times the number of views they would normally receive on a typical day. Top performers included everything from Secrets of the Solar System, Ancient Engineering, and Eternal Egypt, to Planet Insect, Amazing Dino World, and Radioactive Forest, each of which saw their daily viewership increase from 5x to 25x in a single day. And nearly a week after we refeatured each title, they continued to deliver viewership levels much higher than they did previously. During the 100 Days of Curiosity campaign, social engagement jumped more than 200% from the previous three months. This was powered in large part by our strong video content, which drove a nearly 275% jump in video views during the 100 Days campaign as compared to the previous quarter. And the social growth we saw during that campaign continued into the first quarter, with engagements up 1,400% from January 1st to today. Throughout the quarter, we also continued to premiere more brand-defining original series like Oddly Satisfying Science, a second season of NYC Revealed, new episodes of our award-winning science and technology strand Breakthrough, featuring Flying Cars, Reefs of Hope, and Voyage Into the Sun, as well as our one-hour special, The Lucy Mission, Origins of the Solar System, and our ever-popular year-end wrap, Top Science Stories of 2022. Building on the success of 100 Days, Curiosity has already created several more campaigns to enhance program discoverability throughout 2023 and beyond, including Ancient Egypt Week, Space Week, and Dino Week. Turning to product innovation, We've been encouraged by the continued embrace of our Smart Bundle subscription plan. In fact, December was an all-time record month for Smart Bundle subscriber additions, resulting in 32% year-over-year Smart Bundle subscriber growth. And while the Smart Bundle continues to increase as a percentage of our base, we believe there's excellent runway for growth considering that less than 10% of our DTC subscribers are on this plan. We believe our Smart Bundle subscribers, many of whom have upgraded from our standard subscription Appreciate the plan's curated content of value. And at $70 per year, our smart bundle represents an 83% savings compared to subscribing to each service individually. And we have broad global rights with the majority of our six content providers, including DaVinci Kids, which we added to the bundle during the fourth quarter. DaVinci Kids significantly enhances our proposition for kids age 5 to 12 and is available in over 16 languages. Controlling the broad scope of rights with the majority of our content providers enables us to provide the smart bundle globally and expand our market opportunity. Additionally, based on our recent testing, we found, not surprisingly, that our increased standard tier pricing generated a higher rate of smart bundle conversions. As I mentioned earlier, we believe the macro environment with rising interest rates and diminished access to capital creates many challenges for most. It has significantly, though, increased our volume of inquiries from potential strategic and commercial partners. Besides strategic combination considerations, we're engaged with more scale partners around the world who are seeking high-quality, cost-effective alternatives from services like ours as compared to increasingly pricey content from legacy media companies. In addition, we believe our strong cash position increases our flexibility with regard to how we can structure our partnership agreements, both commercially and and strategically. We believe a strong cash position also enables us to lock up important tools and services at meaningful discounts, as we can buy in bulk and over a longer term. Nearly everything is on sale today. By that, I mean certain acquisition advertising inventory, certain influencer marketing services, technical products and services, and even non-core assets of other companies. We are aggressively taking advantages of these discounts, which may result in more cash out over a short period of time, but which we would trade for improvement in our longer-term performance. Looking ahead, we are confident that we have the right assets and capabilities in place to execute on our innovation and growth strategies. Despite all of the macro noise, we are currently in the midst of more global opportunities are opening up as Curiosity and One Day University are rolling out several new partners who will deliver millions of paying subscribers and Southeast Asia, Eastern Europe, Australia, and even North America. While we barely dipped our toe in the water in regard to third-party fast and AVOD opportunities, we have considerable upside here through aligning with the right partners around the world. We have thousands of titles that haven't run on any AVOD or fast platforms. And we recently hired a great leader and executor, an industry vet, Tom Pope, to head up our brand partnership efforts. Well, the turbulent macro environment has been a challenge in many respects. It has also presented new and compelling opportunities that didn't exist even a year ago. With the decisive actions we have taken to rationalize our annualized cost base, the heavy lifting of critical mass content creation and languaging behind us, an increased ETC pricing structure, and optimized scale partnerships, we see many ways to win in this environment and come out stronger on the other side. Before turning the call over to Peter for more detailed discussion of our financials, I'd like to thank our colleagues across the Curiosity ecosystem, all time employees, freelancers, sales agents, producers, editors, and our deeply appreciated third party business partners. Thank you for focusing on the signal through the noise and for your tireless commitments and your quality work. Together, we'll continue to help people around the world satisfy their curiosity through premium factual content and deliver Durable, profitable growth for our shareholders.