Gaia, Inc.

And thank you for participating in today's conference call to discuss Gaia Incorporated's financial results for the second quarter ended June 30th, 2021. Joining us today are Gaia CEO, Yurka Rusev and CFO, Paul Terrell. Following some prepared remarks, we will open the call for your 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 Form 10-K and Form 10-Q. GAIA assumes no obligation to publicly update or revise any forward-looking statements. Please note that today's call is being recorded. And with that, I would now like to turn the call over to GAIA's CEO, Yurko Ricevi. Please go ahead.

Thank you, Jenny, and good afternoon, everyone. Revenues for our second quarter increased 20% to 19.4 million with 770,000 members. Gross margin was steady at 87.1 percent. Even with 20 percent of the revenue gross, our operating expenses in dollars actually slightly decreased, improving significantly as percentage of revenue to 84 percent from 101 percent a year ago. Net income improved by $3.1 million to $600,003 per share, from net loss of $2.5 million and $0.13 loss. As a percentage of revenue, this represented an 18% improvement. Our EBITDA improved to $3.9 million, which is now 20% of revenue, from 800,005% of revenue in a year-ago quarter. These improvements were driven by an increase in gross profit for employee of almost 100,000, or 23 percent, to 535,000 from 436,000. And Paul will now talk, speak to you more about the results.

Thanks, Jerka. Revenues for the second quarter increased 20 percent to 19.4 million, with gross margin steady at 87.1 percent. This marks our fifth consecutive quarter of revenue growth, over 20 percent, while generating positive income and EBITDA. We ended the quarter with 770,200 paying members. Total member acquisition costs during the quarter were 7.7 million, or 40% of revenues, which improved from 52% of revenues in the year-ago quarter. The digital advertising market continued to be crowded and competitive during the quarter, which caused an uptick in our per customer acquisition costs to $74. Even with this uptick, our lifetime value to customer acquisition cost ratio is still over 4.5 to 1. Despite the challenging paid media market, we were able to drive 20,000 net ads during the quarter while staying within our overall target spend level. Our net growth for the period benefited from an annual renewal rate north of 60% for the large cohort of annual members we added during the lockdowns that occurred in the year-ago quarter. This strong renewal rate of the COVID cohort as the world has started to reopen and a variety of new streaming services have been launching is a testament to the quality and size of our original content library and our focus on an underserved niche audience. We also saw the benefit of early traction in our ambassador program that our new internal sales team has been focusing on scaling globally. Selling and operating expenses, excluding marketing and member acquisition costs in the second quarter, were $7 million, or 36% of revenues, which improved from 37% of revenues in the year-ago quarter. Corporate and G&A expenses in the second quarter improved to $1.5 million, down from $1.8 million in the year-ago quarter. EBITDA improved to $3.9 million, or 20% of revenues in the quarter, from $0.8 million, or 5% of revenues in the year-ago quarter. Again, this marks our fifth consecutive quarter of generating positive EBITDA, and the first quarter we have reached the 20% threshold. We generated net income of $600,000 or $0.03 per share during the second quarter of 2021, an improvement of $3.1 million from a net loss of $2.5 million or $0.13 per share in the year-ago quarter. We've been able to flow through to net income almost 100% of the incremental revenues generated in 2021 compared to the same period in the prior year. Cash flow from operations increased to 4.3 million during the quarter, an improvement of 2.4 million from the second quarter of 2020, and our seventh consecutive quarter of generating positive cash flows from operations. We increased our content investment during the quarter as planned, while also increasing our overall cash balance to 13.7 million. With 80% of our monthly viewership on original programming and our end-to-end content production fully in-house, We have continued to control the cost on a per hour basis to ensure that our new content is providing a high return on investment at our current member levels. Live events have restarted in full swing with a successful event completed in July and upcoming events each month from August to November. As we look to the second half of the year, we are putting our energy into growing the premium membership tier. We will be utilizing the upcoming events combined with a growing ambassador network to promote the $299 premium annual offering to new potential members, as well as a concentrated focus on educating current members on the additional value of this premium offering. This will allow us to continue to drive revenue growth and profitability while reducing the business model's dependence on paid media spend to drive member growth. Monthly ARPU, or average revenue per user, for the premium offering is $25 compared to our current blended monthly ARPU of $8.50. with operating margins on the incremental revenues north of 50%. As the results of this focus start to compound, we expect to generate higher operating margins at similar revenue levels, resulting in increased profitability. With that, I'd like to open up the call for questions. Operator?