Gaia, Inc.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Gaia's financials results for the second quarter ended June 30th, 2023. Joining us today are Gaia's CEO, Yurka Rizavi, and CFO, Ned Preston. 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 our ability to attract new members and retain existing members, our ability to compete effectively, including for customer engagement with different modes of entertainment, maintenance, and expansion of device platforms for streaming, taxation, customer usage of our service, fluctuations in quarterly operating results, service disruptions, production risks, general economic conditions, future losses, loss of key personnel, price changes, brand reputation, acquisitions, new initiatives we undertake, security and information systems, legal liability for website content, failure of third parties to provide adequate service, future internet-related taxes, Our founders control of us, litigation, consumer trends, the effect of government regulation and programs, the impact of public health threats, including the coronavirus COVID-19 pandemic and our response to it, 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 now like to turn the call over to Gaia's CEO, Irka Roussevi. Please go ahead.

Good afternoon, everyone, and I'm glad that we can report positive results. Revenue for the second quarter increased again sequentially to $19.8 million from $19.6 million. But it's still down from the last quarter of 20.7 million due to post-COVID subscriber construction as experienced industry-wide during 2022. Member count increased during the quarter by 8,000 to 774,500, with virtually all the growth coming from our direct subscribers. Our ARPU, which is showing steady growth, as it increased from 795 in 2019 to 846 in 2020 to 860 in 2021 and 875 in 2022. It now shall be further supplemented by the launches of Gaia Marketplace, which is now rolling to a select group of our members. The total operating expenses in the quarter were about $950,000 higher than in the year above quarter. still including a tail of the contracts and related expenses incurred as a result of our 20% staff reduction that was completed during the first quarter. While we've still reported gap loss, the company has returned to net cash generation. Cash balance in June 30 was $10.9 million, and I would let Annette now speak more about the results.

Thank you, Juerka. Revenues for the second quarter were 19.8 million, a slight sequential increase for the second consecutive quarter, continuing the return to growth in our member base during the first half of 2023. Compared to a year ago quarter, revenues declined 4%, due primarily to the hard compare against Q2 2022, which benefited from the COVID-related subscriber growth experienced in 2020 and 2021. In the quarter, we continued to invest in and release new content, particularly to support our language expansion efforts. As a result of these strategic growth investments, gross margins were 85.7% during the second quarter of 2023, and we expect them to remain at this level the near term as we expand our language offerings and tactically support the growth of the business. Total member acquisition costs during the quarter were 8.2 million, or 41% of revenues, compared to 7.2 million in the year-ago quarter. In the quarter, we benefited from our efforts to optimize customer acquisition costs over the past several quarters, with per customer acquisition costs down 9% sequentially. In the second quarter, we experienced growth in our direct member base, which is a continuation from the first quarter. Additionally, we witnessed a return to growth among our largest third-party partners, which is a reversal of the contraction we experienced in the first quarter. The growth in both our direct member base and third-party member bases during the quarter is building our confidence that we are through the worst of the post COVID member unwinding. Selling and operating expenses, including marketing and member acquisition costs in the second quarter were 8.9 million or 45% of revenues, which is up slightly from the prior year period. This increase reflects the end of contracts and related expenses incurred as a result of the company's cost improvements that were completed during the first quarter. Corporate GNA, and corporate expense in the second quarter were 1.5 million or 8% of revenues, down 15% from the prior year period. We expect to realize most of the benefits of the cost reductions undertaken in the first quarter in the second half of 2023 and anticipate the cost improvements will support the financial state of the business going forward. During the second quarter of 2023, we recorded a net loss of 1.7 million, or negative $0.08 per share compared to the net income of $0.1 million in the year-ago period. The decline was primarily driven by the reductions in revenues between periods. Adjusted EBITDA was $3.1 million, or 16% of revenues, in the quarter, and we generated free cash. Our deferred revenues for the second quarter were $15.5 million, an increase of $1.4 million from the year-ago period. We expect to continue to benefit from the inherent negative working capital cycle in our business model as we continue to grow our member base and revenues. In addition, we expect to be in a position to continue generating cash flows from operations in excess of the cash flows we reinvest back into our content library and production enhancements going forward. Due to our in-house production capabilities and lack of contractual commitments tied to our content production, we have significant discretion in the amount and timing of our investments. This flexibility allows us to adjust our investment levels as needed to withstand a downturn in the macroeconomic environment if necessary. Through the company's focus on accelerating growth and a return to positive operating margins, we have made tremendous progress over the past several quarters on numerous key areas of improvement for the business. With continued disciplined execution and the launch of Gaia Marketplace, We are well-positioned to continue growing revenues and to remain cash flows positive going forward. With that, I will hand it back to Jirka for some closing remarks.