CuriosityStream Inc.

Hello and welcome to the CuriosityStream Q3 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star 1 on your telephone keypad. If you would like to withdraw your question, again press the star 1. I'll now turn the conference over to Denise Garcia, Investor Relations. Please go ahead.

Thanks, JL. Welcome to CuriosityStream's discussion of its third quarter 2023 financial results. Leading the discussion today are Clint Finchcombe, 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 guaranteed for 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 quarterly report on Form 10-Q for the quarter ended September 30, 2023, 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.

Thank you, Denise, and good afternoon. I appreciate you all joining us today. Also with me on this call are our COO and General Counsel, Tia Cudahy, and our CFO, Peter Wesley. This was another good quarter for us as we moved closer to sustained profitability. We grew sequential revenue by 11%. We improved our adjusted free cash flow for a fourth straight quarter as we cut our cash burn to $3 million. Well, actually increasing our marketing spend by approximately 20% in the second quarter. We introduced our new pricing plans to new direct customers and to a cohort of our existing subscribers. As most of our annual subscribers have not come up for renewal, and as our channel store partners are just now beginning to adopt or announce our increased pricing, we anticipate it will take through the end of 2024 for the price increase to fully roll through the financials. We entered into long-term licensing agreements with several new partners in Europe and North America. And as follow-up to my Q2 remarks, in order to expand the top of our marketing and promotional funnel and further monetize our content, we leaned into two of our advertising initiatives as we launched into broadcast syndication for the first time in September with two seasons of Fourth and Forever. Also in September, we began rolling out an AVOD package with the top U.S. AVOD distributors. And we are delighted with the week-over-week growth to date. We have a large, evergreen, globally appealing library of content, thousands of hours that we are now putting to work across new platforms that we believe will both increase and enhance the reliability, durability, and predictability of our revenues going forward. In regard to revenue, I'm delighted to report that our direct revenue services, CuriosityStream, ODU, our smart bundle, grew in a quarter where real growth was a real challenge for most streaming services. ARPU is up, and our channel store partners are helping us grow more in that environment than we have in previous years. Traditional content licensing, an inherently lumpy area, increased significantly from Q2. As we work to add revenue that is less lumpy, that is more predictable, reliable, durable, and substantial, we're moving more aggressively into advertising vehicles that we believe we are uniquely suited to leverage and which require no additional cash investment. I mentioned AVOD and broadcast syndication as two of our ad initiatives. We've also prepared 12 channels for fast and free-to-air distribution in the factual genres of science, history, nature, motors, kids, and additional categories where we hold a leadership position. Additionally, we will be working with a terrific team to help grow our YouTube and audience-first channels, a very small piece of our business today that we believe offers significant upside. The last ad initiative I will mention is linear pay TV advertising. We currently run spot advertising with a small subset of our pay TV distributors. We plan to light up several more in 2024. All of these initiatives are tied to simple metrics, impressions, ratings, and CPMs. None of these require significant additional costs, and cumulatively, we believe they will help ensure that we improve the overall durability and growth of our company. Lastly, our heightened presence across these platforms should play a key role in reducing our reliance on paid marketing in the long run. While Peter will discuss certain non-cash impairments in our broader third quarter financials in greater detail later in the call, I couldn't be more enthusiastic about our march toward positive adjusted free cash flow, an important milestone within our reach. Through additional cost reductions within cost of revenue and G&A expense lines, We are reducing our cost to a level that will drive both flexibility and profitability. And while we have a strong, critical mass library that has enabled us to significantly reduce our annual content spend, we further fortified our content war chest by adding over 200 targeted genre titles in Q3 through a variety of strategic, opportunistic, and cost-effective acquisition initiatives. As to content, top highlights from the quarter include the premiere of our eight-part original series, History, the interesting bits, a fast-paced journey into the weird, wild, and salacious details behind history's biggest events, a three-part series, Nature's Hidden Miracles, a look at the surprising ways many different species secretly collaborate to survive, which was co-produced with our terrific partners at the NHK, and a three-part series, Queens of Ancient Egypt, a brand-definitional original that sheds new light on some of the most mysterious and powerful women in history. In August, We also premiered a second season of Rescued Chimpanzees of the Congo with the iconic Jane Goodall, which captures the final steps in a decades-long effort to rehabilitate and release an amazing cast of orphaned chimpanzees at Jane's Chimpunga Sanctuary back into the wild. In addition to our collaborative commissioning work with great factual producers, Curiosity Studios released its own slate of originals, including the dramatic little-known story of the hunt for the first Nazi jet and new episodes of our cutting-edge science and tech strand, Breakthrough, covering everything from the latest advances in AI to predictions of where and when the next big earthquake will strike and the first U.S. mission to recover a sample from an asteroid. Looking forward, we're all really excited about today's premiere of Connections, a modernized reboot of the historic series hosted by James Burke, who many consider the world's smartest man. and by our upcoming celebration of all things Dinosaur and Dino Week, anchored by the premiere of Amazing Dino World 2. Let me close by sharing what we've said in the past. In a transitioning media environment where many companies have overspent, some are trying to lazily course correct, we like our position. In light of the production slowdowns that have adversely affected the 2024 film business and possibly additional workforce instability next year, We believe that consumers and expanding roster of third-party buyers will place an even higher value on existing premium factual content and brand-safe relationships. In sum, we continue to believe that our direct subscriber base and direct platform, our broad and deep content library, our multi-year partner agreements, our strong cash position, our public currency, and our lack of debt are uniquely favorable attributes that provide us with a firm foundation and exceptional flexibility. I'd like to now pass the baton to my friend and colleague, Peter, who, like James Burke, many consider the smartest man in our room. Over to you, Peter.