Gaia, Inc.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Gaia, Inc.' 's financial results for the fourth quarter and full year ended December 31, 2022. Joining us today are Gaia's CEO, Yurka Risavi, and CFO, Paul Terrell. Following some prepared remarks, we'll open the call up for your questions. Before we get started, however, I would like to take a minute to read the Safe 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, 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 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. With that, I would like to turn the call over to GAIA's CEO, Yurka Rizavi. Please go ahead.

Thank you, and good afternoon, everyone. I'm glad that I can report some positive news. After the challenging 2022, when both revenue and adjusted EBITDA increased only in single digit due to COVID lockdown members' cleanup, we have already seen overall member growth in 2023. Growth came from our direct membership, while the third-party providers like Amazon were still negative in January and February. In 2022, revenue increased 3% to $82 million from $79.6 million in 2021, and member count ended December 31st at 759,000 members. Gross profit for 2022 increased to $71.1 million, or 86.7% of revenue, up from $69 million in 2021. adjusted EBITDA increased to $17.5 million from $16.8 million in prior year. During the last few months, we have eliminated over $5 million in annualized spending, which included approximately 36 headcounts, mostly contractors. They were added over the last two years to offset the reduced efficiency we experienced as a result from kind of work-from-home mandates. We expect to see the benefits of this savings to begin in the second quarter. Our efforts in French and German markets started to generate meaningful results, and we also signed new agreement to launch Gaia on Amazon Mexico, and Gaia also became part of new Google subscription venture YouTube Primetime. End of end of second quarter 2023, we also plan to launch a Gaia marketplace, focusing our existing member base to increase ARPU and revenue with only minimum marketing expense. Paul will now talk to you about results.

Revenues were up 3% for the year with fourth quarter revenues of 19.6 million. Gross margins improved for the fourth quarter to 86.7%. from 85.8% in the year-ago quarter. For the year, gross margins of 86.7% were relatively consistent with the prior year. As we continue to invest in and release new content, particularly to support our growing language expansion efforts, we have increased our viewership on the exclusive portion of our content library to over 85%. We expect content amortization to bring expected gross margins down to the 85% level in 2023. Total member acquisition costs during the quarter were $7.7 million, or 40% of revenues, compared to $8.2 million, or 39% of revenues in the year-ago quarter. Despite the seasonal headwinds we typically experience during the holiday season, we were able to reduce our per customer acquisition costs by approximately 10% from the prior year quarter, which led to growth in our direct member base during the fourth quarter. We did, however, continue to experience net member base contraction in our larger third-party distribution partners leading to an overall decline in our member base during the quarter. Based on third-party analysis we receive, this third-party trend is not GAIA-specific. Selling and operating expenses, excluding marketing and member acquisition costs in the fourth quarter, were $8.2 million, or 42% of revenues, which is up from the prior year due primarily to increased technology operating expenses. Corporate and G&A expenses in the fourth quarter were $1.6 million, or 8% of revenues, in line with the year-ago quarter. We have implemented significant cost reduction measures over the past few months, as Yurka mentioned, which we will begin to see the benefits of during the second quarter of 2023. We had a net loss of $0.9 million, or $0.04 per share, during the fourth quarter of 2022, compared to net income of $2.1 million, or $0.11 per share, in the year-ago period. The prior period reflected a tax benefit of $2 million due to a partial valuation allowance release triggered in connection with our acquisition of Yoga International. For 2022, we had a net loss of $3.1 million, which included an anticipated $2 million settlement accrual with the SEC that we announced with our third quarter 2022 results and the related legal fees. We are awaiting final approval from the Commission on the proposed settlement and have no further updates at this time. With the proposed settlement, we anticipate our ongoing legal fees related to this matter will no longer be a headwind on earnings. Excluding the anticipated settlement accrual and related legal fees, we had slightly positive net income for 2022. Adjusted EBITDA was 3.9 million or 20% of revenues in the quarter compared to 4.1 million or 20% of revenues in the year-ago quarter. Adjusted EBITDA for the full year was 17.5 million or 21% of revenues compared to 16.8 million, or 21% of revenues in 2021. Now that we have worked through the rapid growth and subsequent declines in our member base as a result of COVID, our working capital cycle has stabilized, and we expect to begin to benefit from the negative working capital generated from our members' upfront subscription payments. We will also benefit from the $5 million in reductions that Yurka mentioned on our expenses, and we'll be in a position to begin generating cash flows from operations in excess of the cash flows we reinvest back into our content library and product enhancements. We expect this to allow us to begin generating cash flows during the year and provides flexibility for us to reinvest those cash flows for future growth or withstand a future downturn in the macroeconomic environment. We spent the past year adjusting to a rapidly evolving post-COVID environment to get ourselves back to a place of financial independence. rolled out our business continuity initiative to gain technological independence, and are now focused on creating growth drivers to allow for marketing independence and sustained growth of revenues and cash flows. With that, I'll hand it back to Jurka for some closing remarks.