Gaia, Inc.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Gaia Incorporated's financial results for the fourth quarter and full year ended December 31st, 2021. Joining us today are Gaia's CEO, Yurka Rissavi, 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. Following some prepared remarks, we will open the call for your questions. Before we get started, however, I'd like to take a minute to cover 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, future losses, competition, loss of key personnel, price changes, membership growth, brand reputation, changing consumer preferences, customer acquisition costs, member retention rates, acquisitions, and other risks and uncertainties detailed from time to time in our followings with the Securities Exchange Commission, including our reports on Form 10-K and Form 10-Q. Gaia assumes no obligation to publicly update or provide any forward-looking statements. With that, I would now like to turn the call over to Gaia's CEO, Yerka Arisavi. Please go ahead.

Thank you and good afternoon, everyone. So 2021 results represent a key milestone for GAIA as we have achieved our first year with a positive operating income and free cash flows. Since the sale of our yoga product business in 2016, we have grown revenues at 40% and compounded annual growth rate. and we approved EBITDA margins from negative 90% to positive 19%. During 2021, we grew our member count to 821,000, increasing revenue 19% to 79.6 million. We expect to exit 2022 with revenue run rate over 100 million. EBITDA for 2021 improved to 15.9 million, which represent a 60% of flow-through through the incremental revenues. Income from operation improved to two million from a loss of 4.6 million in 2020. Net income for the year increased to 3.7 million or 19 cents per share from half a million and three cents per share last year, which included a six million gain on a sale of portion of our campus. Net income for the quarter was $2.1 million, or $0.10 per share, compared to $0.3 million, or $0.02 per share, in the EuroGoGo quarter. Cash flow from operation for the year improved 79% to $20.9 million. Our cash and balance sheet on December 31 was $10.3 million, This is after the use of 6.5 million for acquisition of Yoga International and a French content library. To compare our cash balance in the beginning of the year was 12.6 million. We improved our gross profit per employee for another 40,000 to 565,000. Gross profit per employee at Yoga International was below 200,000. but the annual price of offering to members is doubling our annual at $199 to compare $99 at Gaia. Now, this will, for next few quarter, decrease our overall gross profit of employee, but it will help to drive our ARPU without actually increasing Gaia pricing. Our lifetime value of average member GAIA improved last year to over $350 from $320 the year before. Because of achieving our goal of annual operating income and free cash flow, we are now in good position to expand more aggressively internationally. And we can utilize our worldwide rights, which we have assembled to virtually all of our content. so we can further leverage our existing operating infrastructure. And Paul will talk to you about the results now.

Revenues were up 19 percent for the year with fourth quarter revenues up to 20.8 million. Gross margins declined slightly to 85.8 percent for the fourth quarter and 86.8 percent for the year due primarily to the impact of incremental content amortization added during the quarter. With the acquisition of Yoga International completed on December 22, 2021, adding approximately $1 million per year to our content amortization going forward, we anticipate gross margins for next year to be in line with the full-year 2021 levels. Total member acquisition costs during the quarter were $8.2 million, or 39% of revenues, compared to $8 million, or 43% of revenues, in the year-ago quarter. The ongoing impact of the iOS privacy changes and a crowded holiday season paid media market combined to create a headwind on our customer acquisition efforts during the quarter. We have continued to evolve our digital marketing strategies to adapt to the current environment and have seen some relief in early 22 from the per customer acquisition costs we experienced in the fourth quarter. With the addition of Yoga International, we now have an opportunity to expand our marketing efforts to reach consumers interested in the yoga lifestyle with a higher expected ARPU. Their basic offering is priced at $19.99 a month or $1.99 a year, which compares to our $99 a year. They also have a premium tier at $499 a year that includes access to a wide variety of courses that were historically marketed and sold on an a la carte basis. A combination of the premium plan and the 2x differential on the annual plan pricing should allow us to continue to expand overall ARPU going forward. Selling and operating expenses excluding marketing and member acquisition costs in the fourth quarter were $7.6 million or 36% of revenues. Corporate and G&A expenses in the fourth quarter were $1.6 million or 8% of revenues. For the full year, we improved total operating expenses to 84% of revenues compared to 94% of revenues in the prior year. We also incurred $360,000 in non-recurring acquisition costs related to the YI transaction. While YI did not have a material impact on our revenues or results of operations for 2021 due to the acquisition being completed on December 22nd, the impact on 22 operating expenses will include approximately $0.8 million of incremental amortization related to acquired intangible assets, which is in addition to the $1 million of additional content amortization previously noted. In addition to the incremental amortization, we also expect a slightly higher operating expense level during the first half of 22 from a historical trend due to the acquisition. We are in the process of completing our integration activities and identifying operating expense synergies across the combined company, but do not expect the benefits to show up on our operating results until the third quarter of 22. EBITDA was 3.6 million, or 17% of revenues in the quarter, which included the impact of the acquisition costs. We expect EBITDA margins for the first half of the year to be in line with the fourth quarter until we realize the operating expense synergies noted previously. Adjusted EBITDA, which excludes the acquisition costs and share-based compensation, increased to 4.5 million, or 22% of revenues, from 4 million in the year-ago quarter. We generated net income of $2.1 million or $0.10 per share during the fourth quarter of 2021 compared to $0.3 million or $0.02 per share in the year-ago period. Year-to-date, we have generated $3.7 million of net income or $0.19 per share. The 2021 results reflect an income tax benefit of $2 million as a result of a partial valuation allowance release during the fourth quarter triggered by the YIA acquisition. Our ability to generate cash flows from operations has continued to grow as we have scaled. This has allowed us to expand our strategic thinking as it relates to growth opportunities, as evidenced by our acquisition of Yoga International. As we look into 2022, we are focused on driving an annual revenue growth rate similar to 21. We're excited about the opportunities for GAIA to benefit from our global scale and the financial discipline we have continued to demonstrate while growing revenues and maintaining profitability. With that, I would like to open up the call for questions. Operator?