Gaia, Inc.

Good afternoon. Welcome to GAIA's first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Joining us today from GAIA are Yurka Vasavi, Executive Chairman, James Calhoun, CEO, and Ned Preston, CFO. After the speaker's presentation, there will be a question and answer session. Before we begin, GAIA's management team would like to remind everyone that management's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions, including not limited to statements of expectations, future events, or future financial performance. These statements do not guarantee future performance, and therefore undue reliance should not be placed upon them. Although we believe these expectations are reasonable, GAIA management undertakes no obligation to revise any statements to reflect changes that occur after this call. Actual events or results can differ materially. These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the risk factors section of GAIA's latest annual report on Form 10-K filed with the SEC. All non-GAAP financial measures referenced in today's call are reconciled on the company's earnings press release to the most directly comparable GAAP measure. This call also contains time-sensitive information that is accurate only as of the time and date of this broadcast, May 12, 2025. Finally, I would like to remind everyone that this conference call is being a webcast and a recording will be made available for replay on GAIA's investor relations website at .GAI.com. I will now turn the call over to GAIA's executive chairman, Jericho Rosavie. Thank you. Go ahead.

Good afternoon, everyone. During the first quarter, we continue to deliver on positive free cash flow and double-digit growth. The revenue increased 12% and gross profit 15%. Gross margin improved to .8% up from .4% at the year-ago quarter. For the remainder of the year, we expect the gross margin to be in a range of 86% to 87%. Earnings were in line with expectations. Our member growth, member count grew to 867,000 and we are now focusing on high lifetime value members. Our annualized gross profit per employee increased to over 800,000 up from 680,000 a year ago. And with that, I'll turn the call over to James.

Thank you, Jericho, and good afternoon, everyone. Q1 was a solid start to the year. We saw continued momentum from 2024 carry forward with double-digit revenue growth and significant margin expansion. We're also seeing very strong progress in the strategic pillars we outlined during our capital raise in February. Following the $8 million offering, we've accelerated development of our generative AI product and the Gaia community platform. On the AI side, we're on track to launch Gaia's Conscious AI Companion on and before our next scheduled price increase in early 2026. Early internal testing has been exceptional and a recent research from Harvard shows that discovering one's purpose is now the third most common use case for generative AI and it's exactly the niche that Gaia is built to serve and we believe the product market fit here could be profound. As we look to the future, Gaia is fully embracing an AI first strategy, joining a growing number of companies like Duolingo, Google Matter, and Canva that are re-architecting their businesses around generative AI. These companies are demonstrating how AI can streamline operations, reduce costs, and significantly boost productivity across functions. And for Gaia, this shift is not just about enhancing the user experience, that this remains a key priority, it's also about building a leaner, more agile organization that can scale intelligently. By integrating AI into our content management, localization, and member engagement workflows, we expect to increase speed to market, reduce manual overhead, and optimize how our teams operate. These efficiencies will allow us to reallocate resources to our areas of highest impact such as community building, experiential offerings, and our conscious content development, whilst also delivering greater value to shareholders and members alike. In the coming quarters, you'll see us focus on optimizing marketing using AI, personalized content discovery with recommendations, and enhanced member support using intelligent systems. These investments are designed not only to support long-term ARPU growth, but also to expand gross profit per employee, making Gaia a more resilient, scalable business as we continue our mission to serve the global conscious community. On the community front, we've made meaningful progress in building our infrastructure and preparing for international meetups and chapter based engagement. Community is the final differentiator for Gaia, and will set us apart from every other streaming service in the market, and build the network effect around our content ecosystem. During Q1, Gaia marketplace revenue was lower compared to our expectations, which led to us missing revenue by approximately 1%. However, this did not affect our earnings or free cash flow. This was primarily due to a US Level 3 travel advisory for Egypt issued in October 2024. Intrepid travel have reported a 30% decline in bookings, and tourist travel overall is hovering around just 45% of pre-conflict levels. Because we were heavily weighted on Egypt trips in the first half of the year, this impacted our performance in that business line. We've since pivoted. In Q2, we launched a Peru based tour that has already sold out. We have additional inventory coming online later this year. And while Q2 may remain softer than we had originally anticipated on the marketplace side, we expect to perform in line with expectation for marketplace revenue in the back half of the year. Despite this, the core business continues to grow meaningfully as we scale towards our next milestones. With strong member retention and expanding Gaia Plus base and continued top line growth, we are well positioned for the year ahead. During our recent board discussions, we explored a number of high impact growth accelerators across both Gaia and Ignaton. These include deeper content and technology licensing opportunities, and expanded strategic partnerships. After careful reflection, I've decided to take on this mandate full time in the role of Chief Business Development Officer. In order to fully pursue these growth opportunities, I'll be transitioning the CEO role to our President, Kirsten Medvedich, effective at the end of Q2, and she will be on the next earnings call. Kirsten has been with Gaia for nine years, has an esteemed background in content with Sony television, and has been instrumental in scaling operations and delivering consistent performance across the business. I have complete confidence in her ability to lead Gaia through its next phase. Additionally, given our audience is over 70% female, this leadership evolution is in alignment with our global growing community and mission. This change will allow me to dedicate my focus towards unlocking the next level of expansion across both businesses and at the most meaningful value to the mission and organization. I look forward to continuing to support the leadership team in my new capacity and to helping realize the full potential of Gaia and Ignaton. Now I'll pass over to Ned for the financials.

Thank you, James. For Q1 2025, Gaia delivered revenue of $23.8 million, up $2.5 million, or 12% year over year. Gross profit increased 15% to $20.9 million, up from $18.2 million in Q1 of 2024, and our gross margin expanded to 87.8%, up from 85.4%. EPS improved one cent from Q1 last year to a net loss of negative four cents per share. Operating cash flow for the quarter was $1.3 million, and free cash flow was $0.7 million. Our cash balance at quarter end was $13.1 million, and our $10 million credit line remains fully available. In February, we also closed an underwritten offering of $8 million of common stock, raising approximately $7.0 million in net proceeds, which are now being allocated to AI development and Gaia community initiatives. We continue to manage costs carefully and maintain healthy margins while investing in the strategic areas that will create long-term value for our shareholders. With that, we'll open the call for questions.

At this time, we'll open the line for questions from the company's publishing analysts. The company requests that each participant limit their comments to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. First question,

Mark Ardjango with Lake Street. Please go ahead. Hey, Mark, are you out there? I'm sorry.

Mark can re-queue. Let's go to James Sidoti with Sidoti and Company.

Yes. Hello, this is Alex on for James. Thanks for taking questions. Great. Thanks, Alex. Yeah, of course. First question, maybe we could just get a quick update on Igniton. So is the launch, you know, that kind of still tracking as expected?

We're going to introduce the brand in the biotech conference in the end of this month. It would start to be available, but we would launch it on, you know, to the market on after July 4th.

Yes. Okay, great. Thank you. And then maybe just on the CEO transition, did I hear right, you know, a transition at the end of Q2? Yes, that's correct.

So end of Q2, Kirsten Medvedich will step into the CEO role. And as I mentioned, I'll be focusing on some of these high level licensing opportunities, which I think have enormous potential to expand Gaia's not only revenue, but also perception in the market.

Okay. And so Jerk, you know, kind of still staying in a chairman role and any other changes kind of anticipated to the management and the board there?

No, no, no board staying same as pretty much as is, same is the management team. So it was just, you know, change we talked about for a while, something like, you know, have expand the kind of coverage we do.

Great. Yeah, I appreciate the context. And, you know, I'll jump back into. Thank you. Thanks, Alex.

Next question, Mark or Django with Lake Street, please go ahead.

Hey, sorry about that, guys. My apologies. I just wanted to drill down a little bit on AI. James, I mentioned, you know, AI being a game changer potentially for you guys. Can you talk a little bit more? Is it going to be an app that you guys are going to be launching or maybe talk a little bit more on how you see AI specifically kind of rolling out on the platform?

Sure. Thanks, Mark. With regards to AI and our product, we're seeing it as an expansion of our current product line. Our members will be able to interact with a generative AI within our current product, whether that's on the web or within the app. And so if you're a user and you're watching content, in the future, imagine that you'll not only be able to then interact with the community online, with the technology features we're building out, but additionally with the AI, you'll be able to query some of the content deeper from the platform and have a conversational connection with this generative model that we'll be training on our data set and using that to give our members another interaction point with the brand and to help them stick on the platform longer and have a deeper interaction with our product.

Great. And have you guys been using any stricken any deals with any of the large hyperscalers to use any of your content at this point? Not

at this stage, Mark. I mean, it's something that we're talking about content licensing, we're talking about technology licensing for the Gaia and Ignaton businesses. And as these discussions have evolved, it's something that I have a personal interest in exploring and I think it could have a meaningful impact on the business. I think when we talk about content and technology licensing, there's a broad array of opportunities for us there. So I wouldn't target on one in particular, but this is something I'll be getting sinking my teeth into and looking to create a meaningful impact on the business, not only in terms of revenue, but also in terms of market cap and our attention in the marketplace.

Just last one for me, the community, it sounds like that's an area of continued focus. Where are you in terms of the platform today, in terms of either content or programs, and then where are you spending money, what are you doing from a development perspective in terms of getting community to where you want it to be?

Yeah, so we've obviously been starting on the development side in terms of securing technology partners, building out the team here internally in order to be able to execute on this. We anticipate having an alpha to test in the latter part of this year or even sooner and aiming to launch it once we do a beta as soon as possible. As I'd mentioned previously in my earnings transcript here at the top of the call, that this is the key differentiator we have as a brand and it's something that we're all hands on deck in terms of not only the technology build but also how do we introduce this to the market and to our community.

Yeah, I expect that the current plan is to launch it end of the first quarter next year, but it's plus minus a few months.

Right, and then last one, James, are you going to spend any time with investors still or how are you going to split your time now in your new role?

So as a shareholder myself, as you've probably seen from the filings, Mark, I'm in the same boat as many of our investors and I want to see that the company continues to evolve not only in terms of execution on mission but also in terms of scaling our market cap and our sort of visibility as a public company. So I'll be supporting Kirsten and Ned as much as possible and looking forward to staying in touch with all of our investors and hopefully seeing you at your conference as well later this year.

Great,

appreciate it. I'll hop back in the queue.

Once again, if you would like to ask a question, please press star one on your telephone keypad. Next question comes from George Kelly with Ross Capital Partners, please.

Hey everybody, thanks for taking my questions. Hey, George. Hey Ned. First, I was wondering if you could expand on something I think I heard in your two queue maybe being a little bit softer and you had hoped, did I hear that right? And is it Marketplace or is there some other dynamic that has impacted your Q2 results?

So hi, George. Yeah, that's correct. So when I was talking, as I mentioned in my prepared remarks, you know, Marketplace was a little softer in Q1 and that caused us, you know, it was about a 1% approximate. You know, we anticipate, you know, something similar in Q2 from Marketplace and because of the way that we had extra inventory for Egypt at the first half of this year, but like I mentioned, we pivoted to adding more Peru inventory at the latter half of this year and we're holding on our sort of internal numbers for Marketplace for Q3 and Q4. This is a new business unit that we really only launched in August last year as I know you're aware. So, you know, predicting seasonality differences and obviously this was more of a conflict, regional conflict issue caused some variance there. But like I mentioned, it's a very small top line variance and there will be no impact for Q1 in terms of EPS and free cash flow.

Okay, so there's no kind of broadening. Your commentary around Q2 is really just about Marketplace.

That's correct. The core business continues to perform in line with expectations and it's just Marketplace variance for Q1 and Q2 of this year.

Okay, understood. And then James, another question on the transition. I guess I'm curious that this licensing opportunity and then it sounds like maybe you're considering a different approach to the hyperscaler license opportunity. I guess where do you see the most opportunity around licensing and will a lot of your time now be focused on Igniton as well?

Yeah, George, how we look at it is that, you know, in particular after this previous board meeting, there was a lot of discussions around licensing opportunities on the media side for Gaia and then on the technology side for Igniton. I think one thing we've been clear on with regards to Igniton is that although we have, you know, supplements as our first product line, this is first and foremost a quantum technology company and by having some focus on licensing that technology will help to, you know, expand the aperture of that business's potential and so that's something that I'm very interested in being involved with. On the media side in terms of Gaia, there are some opportunities, like you mentioned, that are that have been discussed and there's also alternate media licensing opportunities that we're exploring. You know, these require a reasonably dedicated approach and it's something that I have a deep interest in and I think could have an enormous value to the organization and given Kirsten's proximity to my role and capacity to be able to support the organization by taking that in the short term basis at the end of Q2, it gives me the freedom to be able to focus fully on these opportunities and bring them to fruition.

Okay, okay, that's helpful and then maybe just one more quick one. The business that you discontinued in the quarter, was that, can you remind me just on the accounting treatment, is that revenue excluded for the whole quarter and then the second part of the question is how much revenue did that business contribute to ForQ?

Yeah, hey George, it's Ned. So that represented 1.2 million dollars of revenue last year and that has been removed. You'll see on our 10Q a line, discontinued business from here and so I can help you get to the apples, but it was 1.2 from last year and you'll see a line in 10Q that outlines that removal here in Q1.

Understood, okay, thank you. You bet.

Thanks, George.

At this time, this concludes our question and answer session. I'd now like to turn the call back over to Mr. Yurko Roussavi for his closing remarks.

Well, thank you everyone for joining and we look forward to speaking with you and your report I was seeking in early August. Thank you.

Thank you for joining us today for GAIA's first quarter 2025 earnings conference You may now disconnect your lines.