• Revenue: Increased by 10% to $22.2 million from $20.2 million in the year-ago quarter.
• Gross Margin: Improved to 86% from 85.2% in the year-ago quarter.
• Gross Profit: Increased by 11% to $19.1 million from $17.2 million in the year-ago quarter.
• Net Loss: Negative $1.2 million or negative $0.05 per share, compared to negative $8 million or negative $0.04 per share in the year-ago quarter.
• Free Cash Flow: Positive $100,000, marking the sixth consecutive quarter of positive cash flow.
• Member Count: Grew by 7% to 846,000 from 790,500 in the year-ago quarter.
• Cash Balance: $4.4 million with an unused $10 million line of credit.

• Warning! GuruFocus has detected 4 Warning Sign with GAIA.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Gaia Inc (NASDAQ:GAIA) reported a 10% increase in revenue for the third quarter, reaching $22.2 million.
• The company achieved its sixth consecutive quarter of positive operating and free cash flow, with an improvement of about $1.5 million this year.
• Gross profit increased by 11%, with gross margins improving to 86% from 85.2% in the previous year.
• Gaia Inc (NASDAQ:GAIA) successfully implemented a subscription price increase, which is expected to boost revenue to nearly $24 million in the fourth quarter.
• The company launched a partnership with 11 Labs for AI-powered dubbing and translation services, enhancing content accessibility for a global audience.

Negative Points

• The initial subscription price increase led to a flat member count for the quarter.
• Net loss for the quarter was $1.2 million, compared to a net loss of $8 million in the previous year, partly due to the absence of the employee retention tax credit.
• The price increase for legacy members resulted in a temporary impact on member count.
• There was a slightly higher churn rate observed with third-party platforms compared to direct channels.
• The company anticipates that the full migration of members to the new pricing will not be completed until the end of 2025, affecting immediate revenue growth.

Q & A Highlights

Q: Can you elaborate on the impact of the recent price increase on your subscriber base? A: James Colquhoun, COO, explained that the price increase was implemented for both new and existing members. For new members, acquisition costs initially rose but later stabilized. For existing members, a test in the UK showed a positive revenue impact despite a slight increase in churn. The rollout to third-party platforms had a higher churn than direct channels. The company is optimistic about growth in Q4 as they continue to implement price increases for legacy members.

Q: When do you expect the majority of your subscriber base to transition to the new pricing? A: James Colquhoun, COO, stated that approximately 60% of the member base will be on the new pricing by the end of the year. The remaining 30-40% will transition over the next three quarters due to annual memberships. The full impact of the price increase will be seen in 2025.

Q: What are your expectations for the Gaia Marketplace and Gaia Plus in the coming quarters? A: James Colquhoun, COO, mentioned that the Marketplace launched in August and will contribute fully in Q4. It is expected to be profitable by mid-2025. Gaia Plus, the premium membership tier, is growing 3-4 times faster than the total membership, indicating a strategic focus on ARPU and revenue growth.

Q: How do live events contribute to Gaia Plus membership growth? A: James Colquhoun, COO, explained that live events enhance the community aspect and tangibility of Gaia, encouraging member upgrades and attracting new members. The premium tier is growing at a faster rate, which is beneficial for the company's long-term economics.

Q: Do you anticipate needing to raise additional capital in the near term? A: Ned Preston, CFO, stated that Gaia has generated positive free cash flow for six consecutive quarters and does not currently need to raise additional capital. They plan to refile their S3 but have no immediate plans for a capital raise.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.