Gaia, Inc. Class A Stock

Good afternoon. Welcome to Gaia's Second Quarter 2026 Earnings Conference Call.

[Operator Instructions] Joining us today from Gaia are Kiersten Medvedich, CEO; Yon Nuta, COO; and Ned Preston, CFO. After speakers' 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, but 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 could 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 in 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, August 10, 2026. Finally, I would like to remind everyone that this conference call is being webcast, and a recording will be made available for replay on Gaia's Investor Relations website at ir.gaia.com.

At this time, I'd like to turn the call over to Gaia's CEO, Kiersten Medvedich. Please go ahead.

Good afternoon, everyone. As we discussed on our last call, our business today reflects a deliberate trade-off we said we were making, prioritizing the long-term quality of our member base over near-term growth. That transition, combined with higher industry marketing costs in April and May, weighed on our results this quarter. As we told you, we were making a deliberate shift toward our direct member base and that this transition would put near-term pressure on revenue growth as we partially pulled back from lower-value regions like Latin America and from third-party acquisition channels. In fact, the revenue decline in the second quarter came from our international business. That is exactly what you are seeing in our results, and it's consistent with the plan we laid out.

We still remain focused on two metrics: reducing churn and growing ARPU, targeting a 20% improvement each by the fourth quarter of this year. We are on track against this framework. I want to be direct that we are not taking the softness in our top line lightly, and we've taken swift action across the organization in response.

On the marketing side, we experienced a temporary spike in customer acquisition costs in April and May, driven by an algorithm change at a major advertising partner. We identified the issue and have since brought it back in line with our expectations. For context on why we manage acquisition costs this closely, on average, a direct member today has a lifetime value of over $500 against a customer acquisition cost of $85. That roughly 6:1 relationship is why we are willing to give up lower quality revenue to protect it and an increase in CPA is something we move quickly to correct. We view this as a reminder of the importance of diversifying our acquisition channels as we build out our direct marketing capabilities, and it is an area we have actively been addressing.

More broadly, since late February, we've undertaken a systematic review of spend across the organization in marketing, technology and overhead, and we've made targeted reductions to our vendor costs. We expect to benefit from all of the cost reductions by the end of the year. These are not onetime cuts. We believe they reflect a more disciplined, sustainable cost structure going forward. As an example, our annualized gross profit per employee increased both annually and sequentially to $819,000, demonstrating our continued efforts to increase efficiency.

Now turning to content. We continue to invest in expanding and strengthening Gaia's programming slate. This quarter, we signed a best-selling author, transformational coach and hypnotherapist, Jim Curtis, to host a new series launching in October. The series will feature conversations with leading voices across wellness, spirituality and culture, including guests such as Judd Apatow and Jack Osbourne. We believe Jim's strong public profile, engaged following and notable guest lineup will help us reach a broader audience. This, combined with a much larger slate of new returning content launched during the quarter, including the fourth season of Gregg Braden's Missing Links, Astrology 101, reflecting the continued popularity of Astrology and The Pulse, a new podcast hosted by Ben Stewart.

We also introduced Gaia Shorts, the best of our long-form content as a new way to help members discover more of our Gaia's library. These 5-minute clips highlight key moments and ideas from our deeper long-form programming, making it easier for members to explore more of what Gaia has to offer. Gaia Shorts consistently rank as the most popular content when released, and we believe they can become an important tool for increasing content discovery and engagement across the platform.

Lastly, an update on Igniton. In May, we introduced two new products at the Biohacking Conference. First was IgniREM Sleep. It supports longer REM sleep, fewer sleep interruptions and an easier return to sleep after waking, helping deliver a better quality sleep overall. And then second was IgniPeptide Eye Serum, which is designed to support more hydrated, youthful-looking eyes while reducing the appearance of wrinkles, puffiness and dark spots. In Igniton's first year of supplement sales, we've been encouraged by the results, which serve as a strong proof of concept for the Igniton Quantum technology. And while we don't comment on future products, we believe we're only beginning to scratch the surface of the Igniton technology's potential applications.

With that, I'd like to turn the call over to Yon Nuta, our Chief Operating Officer, to talk more about how we are evolving the Gaia product experience and using AI to support that work. Yon rejoined Gaia last October after previously spending several years with the company as an executive between 2016 and 2021. Yon?

Thank you, Kiersten. It's great to speak with you today. Before I get into product, I want to talk about AI because at Gaia, it is both how we operate and what we build. Internally, we use it across content production, product development and marketing operations. It is a productivity accelerator that lets lean teams scale their impact and respond to market dynamics faster than we otherwise could. And it is a direct contributor to the cost savings Ned will walk you through in a moment. Externally, it is increasingly how members find and experience our content, and those experiences are available only to our direct members.

Our AI guide has proven to be a leading engagement driver, and that is what informed our decision to build the AI-powered Terra, Oracle and Horoscope experiences we launched this quarter. The early data is strong. Members spend more time per session with the AI Terra experience than with any previous AI feature we have launched. More importantly, it drives incremental return visits and incremental content viewership. This is not engagement sitting beside the library. It is engagement that pulls members back into it. That is how a daily habit becomes retention. On discovery, we are testing moments. Our vertical short-form experience generated with AI, which brings the best moments in our library into the format people are already used to on their phones. Early signals are encouraging on two dimensions: engagement with the feature itself and incremental long-form viewership. We will size that for you as the rollout broadens.

Turning to community. We have launched the ability for members to build and share rich profiles and to find and share playlists and individual titles with both members and non-members. And we opened an Early Alpha circle, which lets members chat directly with one another. In our test groups, more than 70% of members have opted in. Here's why that matters. Gaia's content is about transformation. Members come to us while they are questioning something, healing something or changing the way they see the world. And that is usually a solitary experience. The people closest to them are often not on the same path. Members tell us this directly, the community they already have does not understand the transformation they are going through. So they have been doing the meaningful work of their lives alone. Circle is built to change that.

And the commercial logic follows. A member can cancel a content library, it is much harder to leave people who understand you. Connection is the most durable retention mechanic in any subscription business, and it is the one thing we have never offered. Every one of these experiences, the AI features, moments, Circle is only available to a direct member. That is the mechanism behind the churn improvement we are targeting for the fourth quarter, and it is why we are willing to trade near-term revenue to get there.

Now over to Ned for the financial details.

Thank you, Yon. Revenues for the second quarter of 2026 were $23.3 million, a decrease of 5% from the year ago quarter. This primarily reflects the impact of our shift in marketing away from discounted members with a lower dependency on third-party partners toward direct member acquisition. It also reflects continued competition for consumer spending and engagement across the broader SVOD industry, which we anticipated at the beginning of this year. Gross profit was $19.9 million, down from the prior year with gross margin of 85.3% compared to 86.7% in the second quarter of 2025. The decline in margin was primarily attributable to lower revenue against a relatively fixed content cost base.

Selling and operating expenses were $21.6 million compared to $20.6 million in the prior year period, reflecting our change in marketing headwinds and continued investment in [ content ]. Corporate, general and administrative expenses decreased to $1.5 million from $2.9 million, reflecting our ongoing concentration on cost reductions. Net loss for the quarter was $3.0 million or negative $0.12 per share as planned compared to a net loss of $1.8 million or negative $0.07 per share in the second quarter of 2025. Our cash balance was $5.3 million as of June 30, 2026, with a fully available $10 million line of credit.

The seasonality of annual member renewals impacted our cash inflows by $2.4 million versus the first quarter. This, together with lower revenue and higher marketing costs were the primary drivers of our cash position this quarter. Since the start of our cost review, we've executed or identified over $3 million in annualized savings. Given the transition we're managing through, we expect the third quarter to remain challenging with results similar to what we're reporting today. With the added pressure of the advertising cost spike that impacted our business in April and May, we are no longer forecasting breakeven net income for the fourth quarter of this year. Instead, our focus is on returning to positive free cash flow in Q4. We continue to operate with a solid balance sheet and no debt outside our small campus mortgage, and we have full access to our $10 million line of credit if needed.

That completes my summary, and that concludes our remarks. So I would like to open the call for questions. Operator?

Now we will take our first question from Ryan Meyers with Lake Street Capital.

First one from me, Ned, I appreciate the commentary that you gave us on the third quarter revenue. But as we think about the fourth quarter, I think if I remember back to last earnings call, you guys talked about maybe a return to double-digit growth in Q4. So based on the commentary and what you guys have seen thus far, I mean, how should we be thinking about the fourth quarter from a revenue perspective?

Yes. Ryan, thanks for the question. So we, as I mentioned, expect Q3 to be similar to Q2. But we look to that to be the bottom of the revenue. We will grow from Q3 to Q4 sequentially. But Q4, as I said, will not drive us to profitability. We're really looking for Q4 to get us back on the free cash flow front at this time.

Okay. And then with that not driving in the fourth quarter to profitability. And you covered a couple of things on the call, but just so we're aware, can you just walk us through what those couple of things were just so it's top of mind that we can fully understand sort of the change there from the commentary last quarter?

Yes, absolutely. It was really the seasonality of our annual member renewals impacted our cash inflows. And really from a revenue standpoint, it had to do with the higher marketing costs that Kiersten commented on in the April and May time frame. Those headwinds really have kind of proven to push back our expectations for the year. But we are getting that back on track, as Kiersten has said, but that's really the main difference.

Our next question is from Jim Sidoti with Sidoti & Company.

So Ned, how do you get those marketing costs back on track?

I'll comment, and I'll look for Yon and Kiersten to give a little bit of color. But yes, we saw these headwinds in kind of the April and May time frame, and it caused a higher CPA than we've been accustomed to or had been planning. We've been working very closely with our marketing team to go out. And while we're going through this change to the direct customers, we really weren't anticipating kind of -- again, some of these headwinds, we had a different algorithm with one of our major advertising partners. And so we have that back on a better track. And maybe, Yon, you could elaborate a little bit.

Yes. Jim, just one thing to clarify, we already have done this. There were three things that happened at once during that early Q2 time period. One, rebuilding our direct acquisition without discounting is a huge piece. Two, our price increase; and third, the algorithm changes at a major advertising partner. We've taken deliberate steps since then to kind of reduce our dependency on said advertising partner, so this doesn't happen again.

Okay. All right. And you continue to invest in the AI and to build the community. What's your sense on timing for those investments to pay off?

Yes, that's a great question, Jim. As we've said previously, our plan is still to continue working on community and launching it through the end of Q4. As we launch it, we're measuring very closely its impact on retention, so we can get a sense of timing and payoff.

And do you still think that annual price increases are something you can count on? Or are you starting to back off from that strategy?

So we actually -- as you know, we increased our pricing as of March 1 of this year. We don't anticipate raising our pricing again until 2028. I think that answers your question, Jim.

At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Ms. Medvedich for her closing remarks.

Thank you, everyone, for joining, and we look forward to speaking with you when we report our third quarter results in early November.

Thank you for joining us today for Gaia's Second Quarter 2026 Earnings Conference Call. You may now disconnect.

Good afternoon. Welcome to Gaia's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Joining us today from Jirka Rysavy, Chairman; Kiersten Medvedich, 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, but not limited to, statements of expectations, future events or future financial performance. These statements do not guarantee fee performance and therefore, undue reliance should not be placed upon them.

Although we believe these expectations are reasonable, CI management undertakes no obligation to revise any statements to reflect changes that occur after this call. Actual events or results could differ materially. These statements are based on current expectations of the company's management involve inherent risks and uncertainties, including those identified in the Risk Factors section of Gay's latest annual report on Form 10-K filed with the SEC.

All non-GAAP financial measures represent today's call are reconcilable in the company's earnings release, press release to the most directly comparable GAAP measure. This call also contains time-sensitive information that is accurate only as of the timing date of this broadcast, May 4, 2026.

Finally, I'd like to remind everyone that the conference call is being webcast, and a recording of this will be available -- will be made available for replay on Gaia's Investor Relations website at ir.gaia.com. At this time, I'd like to turn the call over to Gaia's Chairman, Jirka Rysavy. Please go ahead.

Good afternoon, everyone. This first quarter marked the beginning of our deliberate focus back to a direct member base and a pricing discipline. In March, the price increase was implemented in about 80% of our regions for monthly members. For our annual members, the increase will be effective as the subscription renewal. During the first quarter, we delivered $1.5 million of operating and EUR 1.1 million of free cash flow.

Now Kiersten will tell you about our plan to improve both our retention and ARPU at least 20% between the fourth quarter of last year and fourth quarter of this year. Kiersten?

Thank you, Jirka. This quarter reflects an important step in Guy's evolution as we continue to execute on a strategy centered on strengthening the quality durability and profitability of our membership base. After 3 quarters in the CEO role, I have a clear view of where Gaia's greatest opportunity lies, and I am confident the strongest path forward is to prioritize our direct relationship with members where we can deliver the full guy experience, deepen engagement and capture the greatest lifetime value from our content, technology and brand.

Over the past several years, there was a meaningful focus on driving subscriber growth from third-party platforms, supported by increased marketing spend and lower CPAs in those channels. While that supported top line growth, those members generated lower ARPU, and experienced higher churn and do not have access to the core features that we believe will define Gaia's future. In addition, because those relationships sit with the platforms rather than with GAIA, we do not know who those subscribers are and have no ability to engage them directly.

That is why we are prioritizing growth in direct membership where we can deliver the full guy experience and drive stronger long-term economics. As a reflection of that focus for the fourth quarter of 2026, compared with the fourth quarter of 2025, Gaia is targeting an approximate 20% reduction in churn and a 20% to 25% increase in ARPU. As a result, we are making deliberate changes to how we grow, specifically, one, reducing our reliance on lower-value third-party member acquisition; two, taking a very disciplined approach to discounting and promotions, and three, rebuilding our direct marketing capabilities with new leadership and partners, including our recently amended CMO, Tracy Benson, who has decades of experience scaling iconic consumer brands and high-growth companies.

We also recently onboarded new agency partners across paid media and brands. These actions are intentional, and they come with a trade-off. We expect near-term pressure on revenue growth as we make this transition while still expecting growth versus last year. We are doing this because we believe these changes will materially improve the long-term economics of the business. To today, our average member lifetime value exceeds $500 before reflecting the impact of our recent price increase. This is 6x our current CPA of $85. We believe this is the metric that matters, growing a high direct -- high-value direct member base requires a more deliberate approach, 1 built on brand strength, marketing efficiency, retention and member experience, and we are giving the organization the time and focus needed to execute that transition. Now what gives us confidence is the strength of our existing direct member base.

I have mentioned this before, approximately 70% of our direct members have been with Gaia for more than 1 year, and about 40% have been with us for more than 3 years. This level of loyalty reinforces our belief that the direct model supports a more enduring and a more valuable business over time. This is also reflected in the broader recognition of our platform Guy was recently ranked the #2 mindfulness and wellness app by Newsweek, which we believe speaks to the strength of our content brand and member experience. At the same time, we continue to invest in the core elements that define the guy experience, content, AI, personalization and community.

We continue to strengthen our content slate with programming that is closely aligned with the Gaia brand and the interest of our audience. Recent releases include the Monro Institute experience, the fourth season of missing links with Gregg Braden, and we recently launched a new monthly live format that enables members to engage directly with their favorite guy hosts in real time.

Additionally, Q1 has shown meaningful product improvements across our core engagement driving initiatives. These improvements are rolled out slowly and deliberately to make sure these changes are supportive to our goals. On the AI side, we have improved our model meaningfully reducing our costs and improving the quality of responses. We are also launching AI-powered Turow and astrology features, giving members more reasons to engage with Gaia on a daily basis. All these improvements help reinforce our direct member experience.

Turning to Ignite -- we're excited that Erica will be interviewed by Dave Asbury at the Biohacking Conference on May 28. We believe this is an important opportunity for Urca to discuss the Ignatin technology and broaden awareness of the brand. Now to support our top of funnel Gaia marketing efforts, we have partnered with Amagi with the launch of fast channels, allowing us to introduce Gaia to new audiences through curated content experiences. We view this as a brand-building and discovery channel that ultimately drives users back to our direct platform for access to a bigger offering. As we said last quarter, our goal remains to reach breakeven in the fourth quarter of this year and profitable for the year 2027.

We believe the actions we are taking today are strengthening the foundation of the business in support of that objective. Now stepping back, we see Gaia as the intersection of several long-term ships. More people are seeking content that supports growth, meaning and transformation. And at the same time, they expect more personalized, interactive and connected community experiences. We believe Gaia is uniquely patient at that intersection.

Gaia has always been for people who see the world differently, people asking deeper questions and seeking greater meaning. Our role is to help them find their why and support them on their journey. When we look ahead, we see a clear opportunity to build a stronger company, one defined not just by growth, but by quality, engagement and durability. The choices we are making today reflect that focus, and we believe they will drive more meaningful long-term value for both our members and our shareholders. Now over to Ned for the financial details.

Thank you, Kiersten. Revenues for the first quarter of 2026 increased to $24.3 million from $23.8 million in the first quarter of 2025, primarily driven by increased ARPU and partially offset by the reduction of discounted pricing. Gross profit in the first quarter was $20.9 million, unchanged from last year, gross margin was 86%. Due to the initiatives Kiersten discussed, net loss was $1.3 million or negative $0.05 per share compared to a net loss of $1 million or negative $0.04 per share in the year ago quarter.

Our annualized gross profit per employee increased to $816,000, up from $806,000 in the year ago quarter, driving further improvements in our free cash flow. Operating cash flow was $1.5 million with free cash flow of $1.1 million, reflecting ongoing operational discipline and representing the ninth consecutive quarter of positive free cash flow. Our cash balance was $13.1 million as of March 31, 2026, aligned to the $13.1 million at the end of Q1 of 2025 with a fully available $10 million line of credit.

As we navigate this transition, our focus remains on maintaining a strong financial foundation while investing in long-term value creation. We continue to operate with high margins positive free cash flow and a solid balance sheet with no debt outside our small campus mortgage. While we anticipate near-term pressure on growth as we reposition the business, we believe our disciplined approach to cost management and capital allocation will drive improvement to our unit economics and profitability over time.

This approach is illustrated in the pro forma revenue benchmark scenario included in our investor presentation available on our website. This analysis outlines our business model at $100 million, $150 million and $200 million in revenue. We were pleased to nearly reach the first milestone in 2025, finishing the year at $99 million in revenue and $15.8 million in adjusted EBITDA. We are now targeting our next milestone of $150 million in revenue and $39.3 million in adjusted EBITDA by 2029.

That completes my summary. I'd now like to turn the call back over to Jirka for his closing comments.

So this concludes our remarks. So I'd like to open the call for questions. Operator?

[Operator Instructions] Our first question today is coming from Ryan Meyers from Lake Street Capital Markets. [Operator Instructions]

Sorry about that. I was on the -- first one for me, if we think about this pivot here to the direct channel, why do you feel like now is the right time to make this switch and the emphasis here on direct?

So the timing reflects what we've learned -- what I've learned over the past 3 quarters. Like when I stepped into the CEO role, the company already had a growth strategy in motion with a focus on third-party channels and discounted memberships. So my role was assessed whether that strategy was still working, especially for the long term. areas marketing commitments to those channels increased, the data showed that they were generating customers with higher churn and lower margins and that didn't support the full guy experience.

And so -- but at the same time, we are making important investments into AI products and community that are designed to deepen engagement and create more value for our direct members. And so third party, like I said, third-party members just do not have access to those features of our platform. So this is a disciplined decision as newly into this role based on data, customer behavior and our long-term mission. And so I believe right now is the right time to focus our resources on higher quality growth. PAUSE stronger retention and better margins.

Okay. Makes sense. And then if we think back to last quarter, I know you guys did communicate low double-digit growth for FY '26. So based on everything that you had talked about, it sounds like we shouldn't be expecting low double-digit growth for this year. Any commentary that you can give us on what we could expect growth to be? It sounds like you guys do expect the business to grow year-on-year, but any color there would be helpful.

Yes. Ryan, it's Ned. Yes, so really, our overarching theme, as we've been talking, is our continued positive free cash flow to achieve that 20% to 25% ARPU by Q4 of this year. And then that will lead to our breakeven P&L for the fourth quarter and full year 2027 profitability for next year. We will see a short to midterm [ lul ] or kind of consistent revenue field for the next quarter or 2 with -- in the second half of the year, things upticking to achieve that Q4 breakeven P&L.

Next question comes from Jim Sidoti from Sidoti & Company.

Can you talk a little bit about gross margin? Why it was down over in the quarter and where you expect it to be as you go through this transition?

Yes. Jim, yes, so for Q1, 86%, on paper, that does look as though it's down as a percentage year-on-year. We did have a onetime true-up around royalties in Q1 of last year. So when you normalize that, it was flat at exactly 86% gross margins. With that being said, however, good question because we will see a small revenue mix shift from our non-SVOD business kind of leading to a slight decline in our gross margin percentage as we proceed through the year, just kind of making sense that some of those businesses are growing at a slightly higher growth rate.

So I can go over that in more detail with all of you when we run through your models. But we're talking about a 2 to 3-point by the end of the year on gross margins, but we'll still be running as we go into 2027, back up around 86%.

Okay. And can you break out was there a contribution from [ Minato ] and some of your marketplace initiatives in the quarter?

There were. They were nonmaterial. They were on track to what we were expecting. Really, that 86% for Q1 was on plan to what we're expecting from them. the mix shift really isn't going into effect there as much as it will in Q2 through Q4.

Okay. And I know you revised your top line guidance, but did I hear you still expect to be profitable by the fourth quarter?

That's correct. Yes.

Our next question today is coming from George Kelly from Roth Capital Partners. [Operator Instructions]

First one is just on [ Igniton. ] I think you said that your com plans to present at the May Biohacking conference. So I was curious, like what the kind of product road map is with Ignatin and marketing plan for the year? And just any kind of data around your expectations for how the year should roll out for a Ignatan.

At biohacking, we're going to introduce new products, which all REM sleep, what increases dramatically for you on sleep. And we probably also introduce a new peptide with grid of the wrinkles -- and -- but on a peptide, we're not totally sure we do it right on the conference or after. We have a few other non supplement technology as it's a technology company, and we want to be careful, so it's not viewed on some people because today, we have questions about this being a supplement company.

We don't expect the supplemental PAUSE produced majority of the revenue at all. But for this year, it would, so that's kind of the biohacking, but we will introduce some of the supplement product as a vision without launching it in a event.

Okay. Okay. And what about the capital position at Ignite do they? Like how does that look? -- still -- is there still plenty of cash there?

Yes. The company operates close to breakeven and has about $5 million cash and no debt.

Okay. Okay. And then second question from me PAUSE is on community. Can you update us just on what's launched. I'm not sure if any of that's launched or the timing around the kind of key initiatives around community?

Yes, sure. I'll take that. So community, it remains an important part of the long-term vision for Gaia because we believe it has the ability to deepen engagement and increase intention. And right now, we are on target to launch a beta version by the end of this year for community. Like we are in a testing for sharing a playlist and sharing of profiles right now.

Okay. And then maybe one last question just on the deprioritization of the third-party channel. But what percent of your revenue is still derived there? And if we look forward a year or 2, where is that going to shift? Anything else in your subscription platform that you think, whether it's third-party or something else that you're also kind of -- it's under assessment? Or are there other areas that you might de-prioritize as well?

Well, the third party historically, we always had a limit should has to be revenue below 20%. And it was there till like so 2.5 years ago, it was all of this is like high teens. And then for us 2.5 years, it shifted a lot and get to kind of low 20s and close to not quite 25, but there and needs to go back into below 20%.. Did I answer your question?

Yes. How quickly do you expect it to get back to that targeted range Jirka?

Within 12 months?

Within 12 months, okay.

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

Thank you, everyone, for joining, and we look forward to speaking with you when we will report our second quarter results in early August. PAUSE Thank you.

Thank you for joining us today for Gaia's First Quarter 2020 Earnings Conference Call. You may now disconnect.

Good afternoon. Welcome to Gaia's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Joining us today from Gaia are Jirka Rysavy, Chairman; Kiersten Medvedich, CEO; and Ned Preston, CFO. [Operator Instructions].

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, but 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 could 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 in 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, March 2, 2026.

Finally, I would like to remind everyone that this conference call is being webcast, and a recording will be made available for replay on Gaia's Investor Relations website at ir.gaia.com.

At this time, I'd like to turn the call over to Gaia's Chairman, Jirka Rysavy. Please go ahead.

Good afternoon, everyone. Our first quarter was a good one. Our revenue increased to $25.5 million with a gross margin of 87.6%, which was above 87.1% average for the year. Free cash flow increased $1.1 million to $1.7 million, and our member count reached first time over 900,000.

Revenue for the year grew 11% to $99 million, driven by increased member count and higher ARPU. Gross margin for the year improved 100 basis points to 87.1% from 86.1%. Our gross profit per employee increased to $827,000 from $730,000 during last year. Our free cash flow grew $2.2 million to $4.9 million. Our cash position end of the year improved to $13.5 million from $5.9 million a year ago.

And Kiersten will now speak about business.

Thank you, Jirka. Good afternoon, everyone. The past quarter marked an important milestone in Gaia's evolution as we continue building on our strong SVOD foundation while advancing toward a more integrated AI platform. We delivered a strong fourth quarter, growing revenue to $25.5 million and exiting the year at an annualized run rate of approximately $100 million. Subscriber growth for the quarter remained solid, adding 20,000 members.

For the year, we generated approximately $5 million in free cash flow and operating efficiency continued to improve with gross profit per employee increasing to $825,000, up from $730,000 last year. With disciplined management of operating expenses, we see a clear path to profitability in 2026.

Now before moving forward, I would like to briefly address a leadership update. In January, James Colquhoun's contract reached its conclusion, and we have transitioned his responsibilities to our new Chief Operating Officer, Yonathan Nuta. Yon previously spent over 5 years in executive leadership roles at Gaia from 2016 to 2021 before rejoining the company. He also served as Chief Product Officer at Babylon and Fabric bringing additional operational and product leadership experience to Gaia. With the leadership transition complete, we are focused on execution and building momentum across the business.

Moving forward, our direct channel remains central to our progress. Approximately 2/3 of our direct members have been with Gaia for more than 1 year, and that percentage continues to increase. That level of loyalty speaks to the strength of our community and supports long-term lifetime value expansion. With continued investment in AI and community, the direct platform delivers a differentiated experience, driving double retention and approximately double the revenue per member compared to third-party distribution. This directly shapes our distribution strategy. Third-party platforms simply do not support the AI and community capabilities that defined the next phase of Gaia. And as a result, we are intentionally concentrating our capital and innovation focus on our direct platform.

Subscriber growth remains important. However, as this strategy progresses, beginning this quarter, we will no longer report total subscriber count as a primary metric. As our business matures, we believe revenue growth, free cash flow, lifetime value and earnings provide a clear reflection of the health of our model consistent with broader SVOD industry trends. Importantly, this strategic focus is translating into financial performance, and we expect to achieve profitability in the fourth quarter this year. With high gross margins and continued operating discipline, incremental revenue is increasingly flowing through to the bottom line, positioning Gaia for sustained profitability and long-term value creation.

This year, we will continue to integrate AI across the business. AI is now embedded across major functions from our code base to content production and creative workflows, improving speed, scalability and efficiency. This is reflected in our continued improvement in gross profit per employee. Late last year, we launched a beta version of our AI Guide to direct members, generating more than 2 million prompts in its first 60 days. Early engagement data showed deeper session activity and increased repeat usage following interaction with the feature. Although still early, these trends reinforce our view that combining purpose-built AI with our predominantly exclusive content library enhances the direct member experience.

Now as rollout expands, we are extending AI-driven capabilities, including personalized onboarding, intelligent recommendations, enhanced search and contextual guidance, further strengthening the engagement and long-term value member. Given the strength of our direct member relationships and engagement trends, we are implementing a price increase that begins this quarter and will roll out progressively throughout the year. We are approaching this thoughtfully and churn patterns are tracking favorably relative to the prior price increase.

In closing, 2026 represents an important year for Gaia. We're entering it from a position of financial strength, strong performance and a clear commitment to our members. We are staying focused on the steady progress as we build a stronger company for the long term.

Now over to Ned for the financial details.

Thank you, Kiersten. Revenues for the fourth quarter 2025 increased to $25.5 million from $25.1 million (sic) [ $24.1 million ] in the fourth quarter of 2024, primarily driven by growth of our member base and increasing ARPU. Gross profit in the fourth quarter increased to $22.3 million from $21.3 million in the fourth quarter of 2024. Gross margin was 87.6% for the fourth quarter. Net loss improved to negative $0.5 million or negative $0.02 per share as compared to a net loss of negative $0.8 million or negative $0.03 per share in the year ago quarter. Operating cash flow was $1.8 million for the fourth quarter with free cash flow improving $1.1 million from a year ago quarter to $1.7 million, representing the eighth consecutive quarter of positive free cash flow.

Shifting to the 2025 full year financial results. Revenue for the year was $99.0 million as compared to $89.3 million in 2024, representing 11% growth on a year-over-year basis. Gross profit increased to $86.2 million from $76.9 million in 2024. Gross margin increased to 87.1% from 86.1% -- we expect gross margin to remain at this level for fiscal year 2026. Loss for the year was negative $4.5 million or negative $0.18 per share as compared to a loss of $5.2 million or negative $0.22 per share for 2024, with increased marketing spend and amortization and an operating cash flow of $5.7 million.

For the year, free cash flow improved by $2.2 million to $4.9 million from $2.7 million in the prior year, further reflecting ongoing operational discipline. Our cash balance increased to $13.5 million as of December 31, 2025, up from $5.9 million a year ago with a fully available $10 million line of credit.

The company's financial position continues to strengthen with double-digit revenue growth, improving margins and a growing cash balance through accelerating cash flow generation. We have all of this with 0 debt outside our mortgage on our campus, which we finalized a new 5-year extension in December.

In summary, Gaia has a strengthening balance sheet. 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.

That completes my summary. I'd now like to turn the call back over to Jirka for his closing comments.

For a summary, in this year, we expect similar annual revenue growth rate as we just had with continuing growth of ARPU and focus on direct member, increasing gross profit per employee and continued generation of positive cash flow.

This concludes our remarks. So I would like to open the call for questions. Operator, please?

[Operator Instructions] Our first question comes from Ryan Meyers with Lake Street Capital.

Kiersten, congrats on the great quarter and being able to deliver on both the ARPU and the member growth. So just thinking about the member growth that you have seen, can you just speak to the willingness of your customers and their ability to continue to pay these higher prices as you guys enact the price increases as you did in the fourth quarter? And then how you're thinking about that in Q4 -- or sorry, in 2026?

Sure. Well, our member growth in Q4 was driven by strong execution and typical seasonal strength within our core SVOD business. And as far as our price increase, we are delivering more value to our members between rolling out our AI Guide and a very strong content slate and our AI personalization. So as the price increase, we already rolled it out this quarter, and we're already seeing lower churn as compared to last year or the previous price increase.

Got it. And then -- as we think about 2026 and some of the initiatives that you guys do have, Igniton is obviously one of those, how should we think about potentially the ability to monetize that? And then just how you're thinking about that double-digit growth in 2026, maybe the balance across ARPU, and I know you're not going to be giving the member growth or the member number anymore, but just kind of unpack that double-digit growth rate for us in 2026 and what we should be watching for?

Yes. Ryan, it's Ned. So for 2026, our growth will really be coming mostly from our core business. So in regards to the price increase, our shift to more of a direct member base as well as just general momentum that we have. That will be the driver, and we'll be watching ARPU quite closely. We will, on top of that, have some of these new business initiatives. You just mentioned Igniton, but we have some others that will add, and we've given some numbers in the past. But really at this point, on a nearly $100 million revenue business, those are not material yet. The majority of our growth will come from our core business.

On the question about Igniton, Igniton did $3.2 million in 2025. And we really introduced the Igniton products in the second part of the year. Otherwise, it was helped by Photonics. So it will grow. I don't want to speak how fast, but it's definitely -- will probably grow faster than the core business. And I think it was all the questions.

The next question comes from the line of George Kelly with ROTH Capital Partners.

First, just wanted to make sure I didn't miss something. Did you reiterate the guidance for double-digit revenue growth in 2026?

Yes. George, it's Ned. Yes, that's correct. We are reiterating the numbers that you have for 2026. No changes there.

What I said in the call will be roughly same as this year.

And then how much pricing are you taking?

So we're between 14% and 17% price increases. And again, that's to all new customers and to all existing customers in opt-out countries, similar to what we did in October of '24.

Okay. And then a couple of other questions for me. AI licensing, I was wondering if you could give any detail just on the status, if that's still something you're contemplating? And if so, what's the expected timing and materiality of any of those potential AI licensing deals?

Yes. So that really didn't factor in, in Q4. We're really still at the beginning stages of our AI and content licensing efforts. We're still going down that path, and we anticipate maybe a small pickup. But again, these are onetime nonrecurring revenue streams. And anything that would hit here in 2026 would really drive a little bit of upside. The numbers that we've reiterated to you are really our core business, and we're not reliant on those really nonmaterial numbers from licensing. So nothing yet. It's not something that we're going to stop pursuing, but it's not something that we're dependent on either.

Okay. Okay. And then last one for me is just about community. I was wondering if you could go to the mailback -- can you hear me...

Can you repeat that question?

Yes. Sorry about that. So community. Can you give more detail just about the sort of timing of different community initiatives and what you're most excited about, I guess, with respect to the community offering in 2026?

Okay. So for community, we remain on track to launch the community experience later this year, and I will be very, very excited to talk about it when we're closer to launch. But right now, we're still building it.

It's kind of closer to -- that means we might do the different tests, but actual launching is closer to the end of the year.

Yes.

The next question comes from James Sidoti with Sidoti & Company.

Can you give us a sense on what percentage of your 900,000 subscribers are third-party subscribers and what the plan is to convert those subscribers to direct subscribers?

Yes. Jim, it's Ned. So really, we have shared that in the past. I think we've, in the past, talked about trying to limit that to 20% from a number of third-party members as well as revenue attribution. So we'll work towards kind of bringing that down a couple of percentage points to Kiersten's earlier points around kind of a focus on first party. So for 2025, it was around that 20% level, and we'll take it from there going forward.

Okay. And do you have specific things you can do to convert those that 20% to direct members? And can you give us a sense on how that -- how you can accomplish that?

We're not going to planning to per se actively convert a lot. We'll convert some percentage. But I think it's a valid channel. We just need to focus on marketing on our direct channel.

Yes. And we'll be coming out with really strong brand campaigns this year so to let the broader audience know what the value prop is for coming to Gaia as a direct member.

And it sounds like you expect to continue to be free cash flow positive. Any plans for that cash? Are there acquisition targets out there? Do you plan to share buyback? Can you share what your plans are for that?

Yes. So Jim, just to be clear, our plan is to continue to be free cash flow positive. We've been free cash flow positive the last 8 quarters. But what Kiersten shared earlier is for us to be P&L positive by Q4 of this year and really not to comment on any of those other specifics. We have a strong business model with our SVOD business. We are rolling out some of these new strategic initiatives, but not really ready to comment on any sort of acquisition or other elements at this time.

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

Well, thank you, everyone, for joining, and we look forward to speaking with you when we report the first quarter results in early May. Thank you.

Thank you for joining us today for Gaia's Fourth Quarter 2025 Earnings Conference Call. You may now disconnect.

Good afternoon. Welcome to Gaia's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

Joining us today from Gaia are Jirka Rysavy, Executive Chairman; Kiersten Medvedich, CEO; and Ned Preston, CFO. [Operator Instructions]

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, but 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 could 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 in 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, November 3, 2025.

Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on Gaia's Investor Relations website at ir.gaia.com.

At this time, I'd like to turn the call over to Gaia's Chairman, Jirka Rysavy. Please go ahead.

Good afternoon, everyone. During the third quarter, we grew our revenue 14% and our gross margin improved an additional 30 basis points to 86.4% from 86.1% a year ago quarter. Member count at the same period grew to 883,000.

A year ago, we raised our subscription prices for most of our members by $2. So while the losses from the price increase resulted in lower member growth, our revenue grew to $100 million run rate or $25 million during the quarter, up from $22 million in the last year quarter.

Our annualized gross profit per employee increased to $814,000, up from $703,000 in the year-ago quarter, which is also obviously driving further improvement in our free cash flow.

The value of our subsidiary, Igniton, using pricing from its recent fundraising, it's about $106 million. But valuing Gaia's 2/3 ownership interest in Igniton, it's about $70 million. Igniton products are now available on Gaia Marketplace. You can get more information on igniton.com.

The Gaia cash position improved significantly to $14.2 million from $4.4 million a year ago.

Now Kiersten will speak more about business. Kiersten?

Thank you, Jirka. So last week marked an important step in Gaia's evolution as we continue moving from a traditional SVOD model to an AI-forward company, one that brings together conscious media, community and technology. We launched our new AI Guide in beta to our direct members.

And the early results have been very encouraging. Session depth and repeat usage are both trending upward, confirming what we believed from the start: that Gaia's curated content library, paired with our customized, AI creates a truly distinctive and engaging experience. Now as we move towards full rollout, this experience will expand to include personalized guidance, contextual recommendations and integrated chats across both app and web.

Beyond helping members discover content that fits their evolving interests, our AI acts as a research companion, helping members find what's relevant to them faster while keeping the experience fresh and evolving. This direction reflects our commitment to grow in step with our members and the world around us, integrating intelligent technology in service of human potential and positioning Gaia at the leading edge of how people connect, how they learn and transform in an increasingly digital world.

AI will also play a central role in how we express our brand. It will become an integral part of our marketing, helping people discover Gaia, understand our mission and meet them where they are on their spiritual path.

In addition to AI, we're actively developing Gaia's community platform. While we're not ready to share specifics yet, we plan to launch next year. Our vision is for members to explore, learn, transform and then naturally find their community of like-minded individuals to learn and share together.

We expect 2026 to be a key transition year for us, focused on advancing the technology and infrastructure that will deliver outstanding value to our direct gaia.com members. This work will position Gaia for the next stage of growth as we fully integrate content, community and AI into a seamless, cohesive experience.

As part of this evolution, we're also reframing how we define success. Traditional viewership metrics no longer capture the actual depth of connection we're building. With the intersection of AI, content and community, engagement actually becomes a true measure of value. This shift better reflects our mission, our technology and the growing residents within our direct member base.

That being said, our third-party members don't have access to these new AI or community features as they're not supported on external platforms. And with churn nearly double on the larger platforms and revenue per subscriber roughly half compared to our direct members, we believe our focus is better spent on deepening those direct member relationships.

So going forward, we'll prioritize revenue and members with higher ARPU. Today, about 2/3 of our direct members have been with Gaia for more than a year, and that number continues to grow. This ongoing loyalty strengthens our foundation and positions Gaia for a greater long-term profitability.

Now, over to Ned to talk about the financials.

Thank you, Kiersten. For the third quarter of 2025, Gaia delivered revenue of $25.0 million, up from $3.0 million, or 14% year-over-year, driven by growth in both ARPU and member count. Total members increased in Q3 to 883,000.

Gross profit increased 14% to $21.6 million from $19.0 million in Q3 of 2024, with gross margins expanding to 86.4%, up from 86.1%. Net loss was negative $1.2 million or negative $0.05 per share, versus negative $1.2 million or negative $0.05 per share in Q3 of 2024.

Operating cash flow was $0.3 million, with free cash flow of $0.9 million, representing the seventh consecutive quarter of positive free cash flow and further reflecting ongoing operational discipline. For the first 9 months of 2025, free cash flow was $3.2 million, up from $1.8 million during the same period of last year.

Our cash balance increased to $14.2 million as of September 30, 2025, up from $4.4 million a year ago, with a fully available $10 million line of credit. In July, Gaia also renewed its credit line for an additional 3 years with improved terms, including a lower interest rate and a wider range of permitted use.

The company's financial position continues to strengthen with double-digit revenue growth, improving margins and a growing cash balance through accelerating cash flow generation. And we have all of this with 0 debt outside of the mortgage on our campus, which we are in the process of renewing by the end of this year.

In summary, we continue to manage costs carefully and maintain healthy margins while investing in the strategic areas that will create long-term value for shareholders. I will now turn the call back over to Jirka.

So for the summary, so we expect our annual growth rate for this year to be in low double digits and similar probably revenue growth for the next year, thus continually increasing our ARPU and obviously generating positive free cash flow.

So this concludes our remarks. So I would like to open the call for the questions. Operator, Sachi?

[Operator Instructions] The first question is from Ryan Meyers from Lake Street Capital.

First one for me, you called out some losses from the customers on price increases. So just curious what the churn number was during the quarter and kind of how that compares to what churn is historically.

Well, for the price increases, you can roughly figure out you lose about half the price increase as additional churn from the -- because you increase prices. So there's definitely some people, they kind of respond to it. But if you get the delta, about half of it. And we kind of view it positively. That's where we kind of expect it. And we, based on the experience, we'll probably do another price increase next year.

The churn, we don't really use a specific number because we try to do it and everybody does it different. Like for, let's say, Netflix, if the customer comes back in 10 months, it's the same customer. For us, it's a different customer. And pretty much 80% of losses happen first 6 months. So it's -- the numbers on its own doesn't really make sense.

Okay. Fair enough. And then with the AI offering that you guys talked a little bit about, how do you think that changes the core subscription model? Any additional details on that, I think, would be helpful.

Well, I think keep in mind, it's still in beta, but it is considered a conversational experience that will connect our members with the right content. And the interaction will now be measured as an engagement. So our feeling is ARPU will increase and so will -- and churn will decrease.

Okay. Got it. And then lastly, did you guys see any significant growth in the Igniton offering on the actual Gaia Marketplace?

Well, we didn't really launch Igniton on Gaia Marketplace until after Labor Day. So we started, I think, selling it like -- so we have only like 3 weeks in the quarter. And so it went pretty well. Obviously, there is no cost to that. We probably sold about $300,000. But it also was a new item.

So it's, still for Igniton, it's to kind of stabilize all the lines. We find different outside fulfillment houses and stuff. And they will probably continue until end of the quarter, fourth quarter. So I don't expect to really push revenue in Igniton for this year until next year.

The next question is from George Kelly from ROTH Capital Partners.

First, just a couple of follow-ups from the prior questions. It sounded like you're a little uncertain about taking pricing -- core subscription pricing early next year. Did I hear that right? Is that still in the plan? And if so, how much do you plan to take?

Our plan is to go like probably somewhere in mid-April time for another $2.

Okay. Understood. And then there was also a discussion on the call about -- with your AI features really prioritizing the direct channel. How should we think about that as far as partner marketing spend and you just allocating sort of marketing resources behind partners? Like is there going to be some churn or some slower growth by channel next year as you sort of really emphasize the direct? And how is that going to -- I mean, how are you thinking about subscriber growth next year with those kind of changes?

Well, if we're going to raise prices, typically most of the hit you take the months you introduce it, because all the monthly, which is like half of the business, monthly subscription compared to annual, will kind of decide if they will continue or not. So that's typically I said about if we don't raise the prices, the revenue growth and member growth as a percentage is about same. If we do price increase, the member growth is maybe half of the revenue growth. So you're going to -- I assume that's what we saw this year, that's what we're going to see next year.

And also, we continue to see challenges with advertising efficiencies and targeting on our third-party platforms, which we can't fully control. So our focus will remain on sustainable profitable member growth and not short-term volume.

Then as Kiersten said, because if you have -- go to third party, their churn is more than double of ours, and the revenue, what we book, is half of ours. So it's really we need 1 person -- for the same revenue, just 1 person on our direct rather than 4 on outside parties. So it's just -- that's what she meant by the higher value members.

Okay. Understood. And then still on the core business, as you improve the sort of curation tools, and you're discovering, I know it's still early days, but you're discovering sort of what people are most interested and wanting and learning about, do you expect to raise your content spend? Or do you think it's in a good place where it sits now?

No, we are raising our content spend about 23% from the prior year. So we will continue to make more content.

So next year, I'm just thinking of round numbers, I mean, next year, like what's a good kind of ballpark? Maybe you're not ready to give that. But how should we think about content spend next year?

We're not ready to give that, but I could say it's 23% more.

No. I mean in a rough figure, because we're going to right now look at engagement, which includes community and AI, but if you would strip that and just look at pure content investment, probably about $15 million.

Okay. And then just a last one for me, just back to Igniton. I thought that the official big launch was in September. It sounds like maybe you're pushing it out a little bit. Like what have you seen? Did you put much marketing oomph behind it in September, or is there any more detail you can give there? And that's all I had.

All we did is to put it in Gaia Marketplace and send e-mail to Gaia members. We didn't do any marketing push, and we probably won't do anything until like Christmas time.

The next question is from Jim Sidoti from Sidoti & Co.

Jirka, I think I heard you say the Igniton revenue was about $300,000. Was that for the month or for the quarter?

No. That was just Igniton product on Gaia Marketplace, the revenue for the quarter was I think -- yes, probably $700,000.

So once this is fully launched, do you think this is an over $3 million a year product?

We expect to be pretty much close to it in this year.

Close to $3 million in 2025.

Well -- yes.

Jim, I can get into it in a little more detail. Actually, for this year -- it's going to be on a run rate of around $3 million. But for this year, because we launched it kind of 2/3 of the way through the year, we'll finish this year about half -- approximately half of that. Heading into 2026, I think that's when you would expect the higher number.

And what will the impact on gross margin be?

It's right now 82%, so it's slightly below the 86% which Gaia does.

Okay. But still a pretty healthy gross margin.

Yes.

Okay. Right. And in terms of the AI, can you just kind of detail, how do you monetize that? Is that going to be greater member retention or helps support price increases. What is the ultimate goal of the AI investment?

Well, there's several of them. But I kind of believe it would have pretty good engagement on its own as we see some people really spend more time on search through AI. We spend a lot of time incorporating a lot of ancient books and videos from our side, so it's quite different than other AIs could be. So it's really proprietary.

And then it will really function also as a search for Gaia for all the videos. So if you ask any questions, we will recommend videos which we have on the topics. So that's really the kind of main function. And based by early indication, it was a good call because the engagements are already very good and increasing. And we launched it like a week ago.

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

Well, thank you, everyone, for joining, and we look forward to speaking with you when we report our fourth quarter results, which will be in early March next year. Thank you.

Thank you for joining us today for Gaia's Third Quarter 2025 Earnings Conference Call. You may now disconnect.