Gaia, Inc.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Gaia, Inc.'s financial results for the first quarter ended March 31, 2020. Joining us today are Gaia's CEO, Jirka Rysavy, and CFO, Paul Terrell. Following some prepared remarks, we will open the call for questions. Before we get started, however, I would like to take a minute to read the Safe Harbor language. The following constitutes the safe harbor statement under the Private Securities Litigation Reform Act of 1995. The matters discussed today include forward-looking statements that involve numerous assumptions, risks, and uncertainties. These include, but are not limited to, general business conditions, historical losses, competition, changing consumer preferences, subscriber costs, and retention rates, acquisitions and other risks and uncertainties, detailed from time to time in our filings with the Securities and Exchange Commission, including our reports on the Form 10-K and Form 10-Q. GAIA assumes no obligation to publicly update or revise any forward-looking statements. With that, I would now like to turn the call over to GAIA's CEO, Jirka Rysavy. Please go ahead.

Thank you, and good afternoon, everyone. So revenue for the first quarter increased 16% to $14.5 million, affected about half a million by cancellation of the live streaming events. We ended the quarter with 605,000 members, slightly above expectation, even after absorbing impact of our price increases earlier in the quarter. As a result of the stay-at-home orders in late March, we seen uptick in the new member growth, It continued in April, so as of today, we already have over 625,000 members. During the quarter, we generated again not only the positive EBITDA, adjusted EBITDA as planned, which was an improvement over $4 million, but also generated $2 million in the cash flow from operation, also $6.7 million improvement. Cash used during the quarter was reduced 80%, or $6.5 million, to about $1.5 million, and we ended the quarter with $10 million in cash. We fully expect to reach our key milestone of positive earnings and free cash flow in July as planned and communicated about 15 months ago. We are even more confident with the current uptick in member growth and the continuing decrease of our member acquisition costs as well as our first quarter 22% improvement in our gross profit per employee to now $382,000. And Paul will talk to you more about the quarter, so go ahead, Paul.

Revenues in the first quarter increased 16% to $14.5 million compared to the year-ago quarter. Gross profit in the first quarter also increased 16% to $12.6 million from $10.9 million in the year-ago quarter. with a slight decrease in gross margins to 86.9% compared to 87.2% in the year-ago quarter, but this is in line with the fourth quarter of 2019. We expect to maintain this margin level through 2020. During the quarter, we finalized and implemented price increases with all new monthly members and all annual members at the new pricing levels. We elected to honor legacy monthly pricing of $9.95 for approximately 95,000 monthly members that joined prior to January 2019. We ended the quarter with 605,100 members, which reflects the loss of approximately 20,000 members during the quarter who declined to renew at the new price levels. These member losses were offset by increasing interest in GAIA and our unique content offering, coinciding with the stay-at-home orders that began in mid-March. The member count and revenues for Q1 do not show the impact of this momentum, as people who signed up in the final week of the quarter did not have the opportunity to convert to paying members until early April. The increased interest has continued through April, and as Jirka mentioned, we are now over 625,000 members, with momentum continuing to be in our favor. Selling and operating expenses, excluding marketing and member acquisition costs in the first quarter were 6.9 million or 47% of revenues. Corporate and GNA expenses in the first quarter were 1.4 million or 10% of revenues. Our focus on continued operating efficiency and expense rationalization over the last 15 months has been successful. Our gross profit per employee has increased to 382,000 up from $322,000 in the year-ago quarter. We intend to continue growing revenues and gross profit during the rest of the year with minimal increases in headcount. Total member acquisition costs were $7.6 million or 52% of revenues, which is down from $8.5 million or 68% of revenues in the year-ago quarter. I'm happy to report that our organic growth initiatives, including referrals from our existing members, are continuing to gain traction. which combined with reduced rates on advertising inventory during the second half of March allowed us to improve our average CPA for the quarter down to $68 from $82 in the year-ago quarter. More importantly, with the annual plan selection continuing in the 28% to 30% range for new signups, we have significantly improved the cash conversion cycle on our customer acquisition efforts, reducing repayment time down to three to four months for each monthly cohort. We had another quarter of positive adjusted EBITDA margins and cash flows from operations as planned, both of which were significantly improved from the year-ago quarter. We've also improved overall cash used during the quarter to $1.5 million. This brings total cash used in the prior six months down to $1.6 million, an improvement of $19.4 million, or 93%, from the comparable period a year ago. With our cash balance of $10 million, our current member count, continued improvements in retention as we mature our member base's average tenure, and ongoing efforts to continue to scale organic growth initiatives, we are confident in our ability to get to free cash flows and positive earnings beginning this July. The second quarter is off to a great start for Gaia. More and more people are seeking out our content during this challenging time, bringing awareness of our brand and its benefits to a wider audience. Our path to free cash flow in July is tracking better than our plan, and we look forward to our next update in early August when we report our second quarter results. With that, I would like to now open the call up for questions. Operator?