Gaia at Sidoti Small-Cap Virtual Conference: Strategic Expansion Plans

On Thursday, 20 March 2025, Gaia Inc (NASDAQ: GAIA) presented at the Sidoti Small-Cap Virtual Conference, detailing its financial performance and ambitious growth strategies. The company highlighted a transition to positive free cash flow and outlined plans for international expansion and technological enhancements. However, Gaia also acknowledged challenges, such as achieving positive net income by 2026 or 2027.

Key Takeaways

• Gaia achieved positive free cash flow in Q4 and full-year 2024, driven by high gross margins.
• The company reported a 12% revenue increase in 2024, aiming for 13-14% growth in 2025.
• Strategic initiatives include international expansion, AI integration, and community features.
• Price increases led to an 11% net positive impact despite a 6.3% churn.
• Gaia plans to achieve positive net income by 2026 or 2027.

Financial Results

• 2024 Revenue: Over $90 million, marking a 12% year-over-year increase.
• Gross Margin: 86%, with a cash contribution margin of 93%.
• ARPU: Annualized at $107 in 2024.
• 2025 Projections: Revenue expected to surpass $101 million, with free cash flow projected to double to $5.7 million.
• Price Increase Impact: An 18% price hike for existing members resulted in a net positive impact of over 11%.

Operational Updates

• Content: 88% is exclusive, with in-house production capabilities. Gaia boasts a content efficiency multiple of 2.0.
• International Expansion: Operating in multiple languages, with 44% of members international. This is expected to grow to over 50% in three years.
• Distribution: Available on major platforms and through partnerships with YouTube and Amazon.
• Marketplace: Launched in Q3 2024, offering retreats, courses, and products with a 20% gross margin retention.

Future Outlook

• Revenue Growth: Aiming to exceed $101 million in 2025, with long-term goals of $150 million and beyond.
• Profitability: Targeting positive net income by 2026 or 2027, with adjusted EBITDA margins reaching 30% at $200 million in revenue.
• Strategic Focus: Emphasizing revenue growth and free cash flow improvements, leveraging high gross margins.

Q&A Highlights

• Price Increase Impact: Some members experienced price hikes up to 40%, affecting 80,000 to 100,000 annual memberships.
• AI and Community Monetization: Investments are expected to enhance retention and growth through improved product experience and network effects.
• Positive EPS: Gaia aims for positive earnings per share in the second half of 2026, contingent on strategic execution.

Gaia’s comprehensive strategies and financial insights are detailed in the full transcript below.

Full transcript - Sidoti Small-Cap Virtual Conference:

Jim, Analyst: Next up is Gaia. With us, we have the CEO, James Calhoun, and the CFO, Ned Preston. As always, this will be a thirty minute presentation. There should be some time at the end for a q and a. So so you have a question, you can type it into that q and a tab at the bottom of your screen.

And with that out of the way, James, it’s all yours.

James Calhoun, CEO, Gaia: Thank you, Jim. Pleasure to be here, and I appreciate your coverage of the company. I’m going to start with some details about Gaia and the business and where we’re at. And Ned will follow me with some financials, and we’ll we’ll we’ll kick off thereafter with with some q and a. So, at its core, Gaia runs a streaming video on demand service, which is a subscription business service.

And, Ned, if you’re able to jump forward there, here we go. So we serve content across an aggregate of generally underserved niches, And we have two different membership tiers on the standard side, which is $13.99 a month and a hundred and 19 a year. And then we have our Gaia Plus premium tier, which includes live broadcasts and workshops, which stream from our headquarters in Boulder, Colorado. We have content across three core categories. The first is personal growth and transformation.

The second is ancient wisdom and unexplainable mysteries. And then we have wellness, yoga, and meditation. And, you know, this category of yoga and meditation is synonymous with the brand. The previous incarnation of Gaia was Gaiam, which was a yoga products company, which sold off in 02/2016. And we use the capital from the proceeds of that sale to buy back stock and invest in digital only business.

Our core demographic, excuse female, older, 45 to 65, highly educated with high disposable household income. We like to call her the less. She’s a huge fan of the brand and of a lot of the talent that we have on the site. Next here shows a little bit on the finance highlights. We’ve seen a lot of investors come back to the stock over the past twelve months.

Ned and I joined as executives around the same time, around two years ago. I’ve been involved with the founder for almost ten years, sold the business into Gaia in 2019 and have been an active board member since that time and joined as an executive nearly two years ago now. And what we see in the business is that we have transitioned to positive free cash flow operations. So for Q4 and the full year 2024, we were positive free cash flow, enormous margins with an 86% gross margin and 93 cash contribution. And we also have something very interesting happening inside the business so that we have this accelerating CAC to LTV ratio in terms of the growth efficiency.

So pre COVID, you know, we were acquiring customers, you know, with a two to 2.83 times acquisition cost to LTV. So if if the LTV was was, say, 280, the acquisition cost was a hundred. Now that’s changed dramatically where the acquisition cost has remained relatively stable, you know, slight increase. However, our LTV has expanded dramatically given the the health and the tenure of the member base. And and now that’s over six x on the efficiency cycle, which is fantastic for the stabilization of the business.

Here is our total addressable market. We do this research based on global SVOD households, which this is the estimated number by 2029. Obviously, this is, there’s been a huge shift, a seismic shift in in the way that people consume content and the familiarity with with having a a a streaming platform or many to consume content either on on mobile devices or or on connected TV devices. And in terms of Gaia, content, you know, we we take this 10 down to our total addressable market size of 26,000,000 and a 5,000,000 subscriber target. On the revenue and members here, you can see the revenue step ups, you know, 42,000,000 in 2018 up to, just north of 90,000,000 for 2024, which is our recently published numbers.

Additionally, on the member count, you see the member increases there, over time, and we closed last year, 856,000 members, for 2024. This is where it gets really interesting on the ARPU slide and GP per employee to prove out not only the incremental improvements in return on our member base on a per unit basis, but also the gross profit per employee to prove out the leverage in the model. So you see here, ARPU being reported here on an annualized basis is is at a hundred and $7 for 2024. And we see that continuing to accelerate. We rolled out a price increase for new and for the first time in the company’s history, existing members in Q4 of twenty twenty four.

And the full impact of that will really hit in 2025. And we had great results with the price increase on on an average of an 18% increase. We saw a churn impact on that specific cohort of 6.3 by the end of twenty twenty four, which means that, we’re making, you know, 11% or or more of of the of the so definitely making the delta on that price increase. We also have another planned price increase scheduled for q one of twenty twenty six. And based on the results that we have here, we see that being having a great incremental flow through to gross profit.

On the right hand side here, we have gross profit per employee. And so this jumped up to 730,000 for 2024. And in q four, it was actually above 800,000. We see that the business has the capacity to go north of a million on GP per employee and even up to 1 and a half million. So as we add revenue subscribers top line, it’s it’s only incremental increases we need to make to to headcount in order to to sustain that revenue.

Next here, we have, content. So 88% of our content is exclusive, and we have our own in house production capacity, which means we have no no dependence on outside studios. Additionally, the way that members consume Gaia content is is unique compared to most streamers. You know, a lot of streamers, they amortize their content over seven years. However, most of the in general.

But, however, most of the consumption happens in the first six to twelve months. And and we see a lot more of a long tail effect in our content. And and one example of this is is that $2,000,000 of content produced in 2014, has returned 23,000,000 in lifetime gross profit. And a lot of the the the viewership on this cohort of titles from 2014 has happened in the last two to three years. And so people there’s more of a timeless effect to the content that we produce.

Additionally, here, we we ran this new table just to prove the efficiency of our production engine. Because of the in house staff, we’re not paying, we’re not paying margins to our outside production studios. You know, I come from a film production background. My my first two documentaries went to Netflix. I’ve done five featured documentaries and series.

And I I know that that that engine and the way that we’re able to produce in house is extremely efficient. And and one way to measure this is you take the gross profit of Gaia and Netflix, annualized from q four filings last year. You divide that into the amortized value of the content on the balance sheet, and you can see here the content efficiency multiple. So Netflix is 0.6, and we are we are two point o. Next, and, I’ll make sure we got time for for Ned to jump in here in a minute.

So on the international side, we have, 98% worldwide rights for our content library. You know, we’ve been very efficient, not only on the production side where we own all of our rights, but also for the small amount of content that we license from third party producers and distributors, we ensure that we do we do have worldwide rights for that library. So it’s very efficient for us to expand into other languages without the need for foreign operations. So we’re we’re currently live in Spanish, German, and French with fully dubbed versions of of this the site and content in those languages with team in house in our in our Boulder, Colorado campus that that manage those languages. So we can add future languages with team internally at our Boulder campus and and go into those markets without having to have overseas offices or representation in country.

Currently, we’re 44% international members. We see that growing north of 50% within three years, and we have members in over a 85 countries. In terms of distribution, we are on all the major app platforms, iPhone, Android, iPad, Roku, Fire TV, Apple TV. We also have third party distribution on YouTube and Amazon. We’re one of Amazon US’s prime video channel partners, fastest growing channels in The US.

They have an interest in these niche specialty channels, and it’s a good barometer for us in terms of the the the growing niche that we’re a part of. We also have Fios, Xfinity, and Comcast. And down the bottom of this slide, I find this very interesting. You can see the social proof that we have in the market. So on the iOS App Store, we have a 28,000 ratings from members of 4.8 out of five, which is an incredible rating on Amazon.

You know, 15,000 ratings, 4.1, and Trustpilot, ten thousand ratings, 4.3. So ranking very high there on on these, not so much net promoter scores, but certainly social proof in the app infrastructure. Next, these are just some future growth and ARPU and retention drivers that I think are noteworthy, and then Ned’s gonna jump into the finances. We launched marketplace, q three of twenty twenty four. This includes retreats, courses, and physical products that we offer to our members at a 10% discount.

We call it like a conscious Costco model. So you can tour Egypt with one of the talent from our show. It would normally cost you $11,000 Gaia members get a 1010% discount, which makes it 10,000 And then we keep about 20% of the transaction on average, so the remainder goes to the tour operator. But we booked that 20% as a % gross margin. So this is not about booking vanity sales.

This is about continuing to add high gross margin revenue to the top line. So you’ll see potentially in some of the projections that Jim has out there, our our gross margin is stepping up from 86 incrementally, slightly for for ’25 and beyond. As I mentioned earlier, we have a price increase increase slated in in March of twenty twenty six with the AI and community rollout. We we recently did a capital raise with with, Roth, and Ned can speak about their coverage shortly. And, we raised money for AI and community, which we intend to roll out also in q one of twenty twenty six.

So these two these two product updates and AI is almost table stakes. We need to do it. And instead of licensing our content to these mega LLMs, we’re gonna keep our content, train our own model on it, and, launch that for our members as sort of a research assistant and tool within the app. And then on the community side, we’re building a, a Reddit meets meetup.com, meets Facebook groups, and and, even WhatsApp. So our members can connect together, chat on these topics and eventually have in person meetups all around the world.

And this would be the the key differentiator that we have as a brand that separates us from, from other mainstream streamers. So Ned, over to you and I’ll jump back on for Q and A.

Ned Preston, CFO, Gaia: Yes. Thank you, James. Yes. So just to pick up a little bit on those last two points around our AI and community strategic initiatives, we did have a raise back in early February, and the reason we were able to do that is in such an efficient fashion as we had a very strong 2024 in Q4 specifically. So taking a look at our P and L from last year where we surpassed the $90,000,000 revenue mark, which represented 13 I’m sorry, 12% growth on revenue, and we continued to improve our gross margins that moved up a point from 85% to 86% and then our very strong cash contribution margin at 93%.

And you can kind of see what we’re spending on expenses and I’ll elaborate about the scale of our business in just a minute here. But if you go all the way to the bottom, it’s free cash flow. We finished 2024 at over $2,700,000 in free cash flow. We’ve been free cash flow positive for the last seven quarters running. And looking ahead to 2025 and beyond, Jim and the other analysts that are covering us, have us continuing to grow the top line.

We’ll be accelerating our revenue growth from 12% to 13% or 14% next year to over $101,000,000 And then our free cash flow will also be doubling from that $2,700,000 to approximately $5,700,000 in in 2025. So I want I wanted to kinda share that with you, and some people ask, well, then why did you need to raise money? Why did you need to raise the money? And it was really to accelerate AI and the community opportunity immediately. We have a very strong board, and they had said you really need to run, not walk when it comes to AI.

And, and so we needed to invest the money now, and we’re building that team. We’ve built part of the team and are continuing to build it so that those AI and community opportunities come to fruition here in 2025 and are ready to go in Q1 of next year when we intend to raise prices as James just covered. Here’s a revenue benchmark scenario, just kind of taking a look at what we see in the future. So that first column is really approximately what the consensus is for Gaia for 2025. We’ll be just over $100,000,000 in revenue and driving to over $5,500,000 in free cash flow.

But what’s really impressive about our model is the scale, because as we grow to $150,000,000 and beyond, you’ll see that our marketing expense continues to be around that 40%, forty two % of revenue. That’s our sales engine, our customer acquisition engine. But really, our operating expenses and other portions of the business don’t have to grow anywhere close to the rate of our revenue. So that falls to the bottom line. You’ll see our gross margins will continue to improve to kind of 87%, eighty eight %, cash contribution margin kind of that 93% to 94%.

But when you look at our adjusted EBITDA margin, that jumps from 17% this year to mid-20s and 30% out at $200,000,000 in revenue. And then our free cash flow more than doubles from 6% in this year to when we reach these other levels, we’ll be at 1522%. One of the things that I’ve been sharing with people, I’ll elaborate on my background in just a minute here, but I come from the SaaS high-tech industry. And I really thought think about Gaia as a as a SaaS company, as a spiritual or or content SaaS company. With our high margins at 93% cash contribution and high gross margin, a recurring revenue stream that’s growing and then deferred revenue, that’s improving, there’s something called the rule of 40, which is a best in class benchmark that we use in the SaaS world.

And we will be closing in on that rule 40, which is growing your revenue percentage as long with your EBITDA percentage, the combination of those two at 40% and above. And as we get to high teens on revenue growth and mid-20s on EBITDA, we’ll surpass that 40%. And all it really means is that you’re a fast growth at high profitability levels business, and that’s what we strive to be. Quick look at the balance sheet, very strong balance sheet as we close out 2024, just under $6,000,000 in cash that will obviously grow this year, not only with the infusion on on the raise, but also in the free cash flow we’ll generate throughout the year. And then one of the things we always like to share is is some things that are not on our balance sheet.

Some companies might have the member base or, you know, that they include in in the balance sheet, but we we don’t we don’t do that for a number of reasons. But, we we off balance sheet have about $180,000,000 of value around our 850,000 plus members. And then our, media library I’m sorry, the member base is worth almost $300,000,000 at $296,000,000 Our media library has been valued at $180,000,000 And then we have, net operating losses, of almost $19,000,000 So I guess the point here is that in addition to a strong balance sheet, these off balance sheet items really put in perspective how strong the business is if we ever had to. I’m not saying we anticipate we ever would, but have to go and sell this business, it would be worth on paper over $20 per share and even in a fire sale kind of mid teens. And so I think that helps put in perspective the value of our stock price.

And then lastly, here’s just a quick view of our management team. In addition to myself, I’ve been at this for quite a long time, a lot of high-tech companies like Cisco Systems and Oracle and Akamai out there on the East Coast. You you got you’ve heard from James, and and he he sold his company Food Matters and started FMTV. But a lot of people, are are aware of our our founder, Yirka Risavi, who started these very successful companies here in the Boulder, Colorado area, back in the nineties, namely Corporate Express, which became, Staples Advantage, as well as Wild Oats, a health food company or store that he sold to Whole Foods. And then since we became Gaia or previously known as Gaiam, we’ve been on the Nasdaq since 1999, so twenty five years as a publicly traded company.

Jirka Jirka has been very successful at incubating companies such as Real Good Solar, which he then sold off in around 02/2007 time frame. And we have since had some subsidiaries that were in the process of incubating and rolling out later this year. So with that, I think I’m gonna turn it back over to Jim, or we can just open it up for for questions, James, and I would love to to hear from you.

Jim, Analyst: Great. Great. Yeah. A couple of questions from the audience, some some from myself. But the first, the price increase that you put in effect last year, how many you know, what percentage of your membership now is paying a higher price and how much is left to go?

James Calhoun, CEO, Gaia: Sure. So we did increase prices for new members around q two and q three depending on the country and the currency. We’re currently in in USD, CAD, MXN, GBP, Euro, AUD, and NZD. In LatAm, we moved away from local currencies there just because of the instability, and we have a LatAm USD pricing. So we increased for new members in those territories, you know, q two and q three.

We did a test in The UK in q three with raising the prices for existing members. Because over the life cycle of the business, as we’ve increased prices historically, we’ve grandfathered people on legacy pricing, and that could be, you know, $7.99 from a company we acquired or $9.99 from from old Gaia pricing, and then we moved from $11.99 to $13.99. And so at this $13.99 price point, for existing members starting in q four, we increased the prices for all of those people on legacy pricing. So for most of them, they jumped up 18% from $11.99 to $13.99. Some of them moved up from $9.99 to $13.99, which is, you know, a much bigger jump, you know, closer to 40%.

And, given that this price increase for existing members included a lot of people on legacy pricing that could have been a much larger price increase, we’re very happy with the result in terms of the sort of net churn impact from that specific cohort. So like I mentioned, we have a 6.3% churn impact from that price increase, which is at least 18%. And so the delta on that we’re making is 10%, eleven %, even 12%. And so we’re very happy with those results. As we sit here now, we probably have still of the 856,000 members on our total member base around 80,000 to 100,000 that are still outstanding because of this, the annual membership tier.

So the annual members where the price increase was notified at the end of last year, their price increase anniversaries roll out throughout the next twelve months. So we’ll see those price increases still flow through till, until October for the annual members.

Jim, Analyst: With the investment in AI, one of the, one of the ways you use you will be using planning to use it is your your Gaia community. Now can you just talk a little bit more about that? Is that something you can monetize, or will that just help improve retention rates for further price increases?

James Calhoun, CEO, Gaia: So so with AI and community, these capital investments, first of all, they’re capitalized, so we’ll not hit the p and l until we launch them in in in in March of twenty twenty six. And but the way that we see it in terms of driving improvements in the business, on the AI front, first of all, it’s table stakes. Every company needs to be somewhat AI AI enabled. And and instead of us, like, licensing out our content library to third party, we’re choosing to maintain control over that exclusive content, which is a huge benefit to us as a business in terms of media replacement cost as well. You know, it’s over £150,000,000 which we don’t include on the balance sheet.

And that will drive, we believe, retention improvements in the product experience because people will be able to have a richer experience engaging with the product as a research assistant, chatting with quote unquote experts or querying certain topics in in in platform. So that’s a retention metric. On the community side, we see it as retention and growth. On the retention side, as people store more personalized data inside the platform, there’s a high propensity for people to stick. For instance, you know, those who have a streaming service like, Spotify, tend to keep the subscription because they’ve got their playlist, their, you know, their summer playlist, that it’s got the personalized data in there.

So it it starts to become more sticky. So we believe as our members engage more with the platform, make connections with other members in person and digitally, that will drive retention and also network effect from the flywheel effect of referrals. So then engaging that community to refer friends and members to either earn points or discounts off marketplace and so forth. And that will help us, kind of, maintain marketing spend and grow faster or reduce our paid marketing spend and supplement and offset that with more member driven growth.

Jim, Analyst: And when you talk about the, the content, you said there was a long tail on the content. I mean, is there a shelf life for your programs? Or or do you think, you know, ten years from now, people will still be watching some of the programs that you have out?

James Calhoun, CEO, Gaia: So we I mean, a lot of our content is is timeless per se, because it’s more about the topic and less about the production quality, although the quality is still very good of everything that we produce. Some of the documentaries that we license, which is a small percentage of our content library, are a little more dated because documentaries, you know, somewhat have a point in time where they seem more relevant. But for our original programming, we see a lot of legacy viewing. And for some shows, most of the viewing happens two, three years into the series being produced. So it’s a very obscure thing that happens to us compared to most streamers.

However, it’s great for our our brand because it’s much more stable in terms of consumption.

Jim, Analyst: Right. One of the questions from the audience, it basically says, you’d be able to attract more investors when you start to show positive net income. And based on, I think, one of the tables Ned produced, it sounds like you’re not that far from that at this point. You have any guidance when you think you start to report a positive EPS? Yeah.

I mean, we

Ned Preston, CFO, Gaia: yeah, Jim, thanks. And we’ve had this question come up before. Ideally, we would see that in 2026. We really need to concentrate here in 2025 executing on all these new strategic investments. But by 2026, assuming we continue to execute, we would get there on a quarterly basis in the second half and we’re striving to get it on a full year.

That might go into 2027. Again, we’re trying to grow as fast as we can with some of these new products and use the cash in an efficient manner. So certainly by 2027, but ideally, we’re shooting to try to make that happen in 2026.

Jim, Analyst: But it sounds like in terms of free cash flow, though, you expect that to be Correct.

Ned Preston, CFO, Gaia: We’ll continue to provide positive free cash flow quarterly and

James Calhoun, CEO, Gaia: I would point to the revenue pro form a because what happens with this style of business is that as we continue to grow top line, the incremental improvements in cash flow and EPS become more dramatic in a positive way. And so we’re patiently here executing on top line revenue growth with improvements in free cash flow, and we know the P and L will come. And when it does, it will be great. And we’ll probably see a lot more retail interest in the stock at that point and a much different valuation than we have today.

Jim, Analyst: Okay. Great. Well, we are just about out of time, but I just want to say, thank you both, Ned and James, for participating today in the presentation. I know we’ve kept you busy as well with meetings the past couple days. I appreciate that.

And, you know, we’re just around the corner from another earnings call, so we’ll be talking to you in a few weeks.

James Calhoun, CEO, Gaia: That’s right. We appreciate your coverage, Jim. Thank you.

Jim, Analyst: Alright. Thank you.

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