Gaia, Inc.

Good afternoon, everyone, and thank you for participating in today's conference call. We discuss Gaia, Inc.' 's financial results for the fourth quarter and full year ended December 30th, 2020. Joining us today are Gaia's CEO, Yurko Rizavi, and CFO, Altarell. Following some prepared remarks, we'll open the call for your questions. Before we get started, however, I'd like to take a minute to read the State Harbor language. The following constitutes a 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 the time in our filings with the Securities and Exchange Commission, including our reports on Form 10-K, and Form 10-Q. GAIA assumes no obligation to publicly update or revise any forward-looking statements. And with that, I'd now like to turn the floor over to GAIA's CEO, Jirka Reesavi. Please go ahead.

Thank you, and good afternoon, everyone. So we ended 2020 on a very positive note, achieving all our goals, generating positive net income and cash flow for the year, while growing revenues over 20%. Revenue for the quarter increased 27% to 18.6 million. Our gross margin increased to 87.1%. We ended the quarter with 728,000 members, representing net ed of 31,000 for the quarter and 129,000 for the year. Even with this growth, we were actually able to reduce our overall expenses even in absolute dollars, to $62.8 million from $64.8 million a year ago and as a percentage of revenue to 94% from 119%, partially due to improvement of our gross profit per employee by 37% to $525,000 from $384,000. During the fourth quarter, we generated net income of $300,000 or $0.02 per share, EBITDA of $3.5 million or 18.8% of revenue, and cash flow from operation of $4.5 million on 24% of revenue. For the year, we have transitioned to a positive income of $0.5 million on $0.03 per share, which is an $18.7 million improvement from last year's loss of $18.2 million, or $1 a share. EBITDA improved by $15 million, or 22% of revenue, to a positive $7.4 million from a loss of $7.6 million. Our lifetime value of the average member also improved to over $320 from $300. Our cash position at the end of the year grew to $12.6 million, a reverse in years of the cash use, to an increase to $1.1 million for the year and $3.9 million for the quarter. All these metrics represent all-time bests for Gaia since we sold the legacy Gaia-branded yoga products in July 2016 and focused exclusively on building our direct-to-consumer digital offering. We have completed the, I would call it, final phase of our transition to sustainable pure play streaming video platform that is able to continue to grow revenue over 20% while growing profitably and growing positive cash flow. Since the sale of the yoga products is 2016, we have grown revenue at 46% of compounded annual growth rate. and members at 38% of CAGR. Same time as improving EBITDA margin from negative 90% in 2016 to positive 11% in 2020 and 19% in the fourth quarter. And Paul will not speak more to the results. Paul? Revenues for 2020 increased 24% to $66.9 million, with an improvement in gross margins to 87.1%.

Revenues for the fourth quarter increased 27% to $18.6 million, with gross margins also improving to 87.1%. We expect to be able to maintain or gradually improve these margins going forward. We ended the year with 727,600 members, which represents net growth in line with our expectations for the quarter. For the year, we added 129,000 members, and also crossed the threshold needed to continue to grow revenues 20-plus percent while maintaining profitability and positive cash flows. Selling and operating expenses, excluding marketing and member acquisition costs in the fourth quarter, were $6.3 million, or 34% of revenues, down from $6.7 million, or 45% of revenues, in the year-ago quarter. Corporate and GMA expenses in the fourth quarter were $1.4 million, For 2020, selling and operating expenses excluding marketing and member acquisition costs were $25.5 million or 38% of revenues, a meaningful improvement in both absolute dollars and as a percentage of revenues from 2019 where we spent $28.2 million or 52% of revenues. Total member acquisition costs during the quarter were $8 million or 43% of revenues. As we anticipated, the digital advertising market became very competitive starting in October and continuing through mid-December. This impacted our CPA, but we were able to maintain our discipline and still achieve our financial goals for the quarter. In October, we began renewing our first cohorts of new annual members from 2019 when our annual take rate for new members shifted from sub-10% to between 25% and 30% of new sign-ups. And I'm happy to report So with almost five months of data on the first removal of these groups, we've been retaining these numbers at a 60-plus percent rate. EBITDA improved to $3.5 million, or 19% of revenues in the quarter, from $0.2 million, or 1% of revenues in the year-ago quarter. For 2020, EBITDA improved $15 million to $7.4 million, or 11% of revenues, from a negative $7.6 million, or negative 14% of revenues. an improvement of almost 200%. We also improved our cash flow from operations to $4.5 million during the quarter, subsequently from the third quarter by $1.2 million, or 36%. For the full year, we generated $11.7 million in cash flows from operations, a $14.3 million improvement from cash used in operations of $2.6 million a year ago. For the full year, we were able to generate $1.1 million in cash compared to cash used of $18.5 million in 2019. We generated net income of $0.3 million or $0.02 per share in the fourth quarter of 2020 compared to a net loss of $2.8 million or $0.15 per share in the year-to-a-quarter. And for the year, we generated net income of half a million or $0.03 per share compared to a net loss of $18.2 million or $1 per share in 2019. As Jerica mentioned, we have completed our transition to a pure play streaming video on demand platform capable of generating sustainable revenue growth of 20 plus percent while maintaining profitability and generating cash going forward. We also own our content production facilities and have a world class team of content creators devoted to our mission and vision that allows us to produce content internally for a fraction of the cost per hour that other streaming platforms are incurring. Our original productions represent 80% of our viewership on a monthly basis and clearly differentiate us from other offerings. As we look to 2021 and beyond, we're focused on continuing to build on the solid operational and financial foundation we have laid over the past five years. We have several initiatives that we believe will allow us to accelerate our revenue growth in 2022 and beyond, including our premium live access offering, for which we now have a solid 2021 schedule of events booked, German, French, and Spanish language expansion, including native language original content, and finally, our Gaia community, which we recently launched in an invite-only beta program to our most engaged members. While these initiatives will take some time to pay off, we are very excited about what the future holds for Gaia. And with that, I'd like to open up the call for questions. Greg? Thank you very much, sir. And ladies and gentlemen, that is star one on your telephone keypad for any questions at this time. If you just make sure that you have your mute function turned off to allow us to receive that signal. Once again, star one for any questions. And first, from Roth Capital Partners, we have Darren Aftahi.