CuriosityStream Inc. 2020 Form 10-K Summary
Business context and reporting period
This Form 10-K covers the fiscal year ended December 31, 2020; it is not a quarterly filing. CuriosityStream is a factual-entertainment streaming company offering direct subscriptions, partner distribution, bundled MVPD licensing, program sales, corporate and association partnerships, and sponsorships. On October 14, 2020, the company completed its reverse recapitalization with Software Acquisition Group Inc. and began trading as CURI and CURIW on Nasdaq.
The company reported approximately 15 million total paying subscribers at December 31, 2020 and operated a library of more than 3,100 nonfiction episodes, including approximately 1,000 original, commissioned, or co-produced documentaries.
Key financial metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $39.6 million | $18.0 million | +120% |
| Subscription revenue | $16.5 million | $9.8 million | +69% |
| License-fee revenue | $22.5 million | $8.2 million | +174% |
| Operating expenses | $78.6 million | $62.5 million | +26% |
| Operating loss | $(38.9) million | $(44.4) million | Improved $5.5 million |
| Net loss | $(38.6) million | $(42.5) million | Improved $3.9 million |
| Net loss attributable to common stockholders | $(52.4) million | $(58.4) million | Improved $6.0 million |
| Basic and diluted loss per share | $(2.77) | $(4.44) | Improved |
Cost of revenues was $15.4 million, implying a gross margin of approximately 61%. The operating margin was approximately negative 98%, and the net margin was approximately negative 98%. Advertising and marketing expense was $42.0 million, or approximately 106% of revenue. General and administrative expense was $21.1 million, including higher stock-based compensation and public-company costs.
- Net cash used in operating activities was $52.9 million, compared with $44.7 million in 2019.
- Investing activities provided $25.5 million, primarily from net sales and maturities of investments.
- Financing activities provided $36.0 million, principally from the business combination and PIPE financing, net of offering costs.
- Cash, cash equivalents, and restricted cash totaled $17.4 million at December 31, 2020. The company also held $33.2 million of investments at fair value.
- Content assets, net increased to $32.9 million from $16.6 million, while content obligations totaled $26.0 million, including $23.9 million not yet recognized as balance-sheet liabilities.
- No balance was drawn on the $4.5 million line of credit at year-end. The facility was extended in February 2021 to mature February 28, 2022 and is collateralized by $4.5 million of restricted cash.
- The company had a $1.2 million PPP loan, for which it applied for forgiveness. If forgiveness is rejected, repayment may be required.
Material changes versus the prior comparable period
- Revenue more than doubled, driven by higher direct subscription fees, new or expanded bundled MVPD relationships, increased program sales, and higher partner activity.
- License-fee revenue became the largest revenue category at 57% of total revenue, compared with 46% in 2019. Subscription revenue declined to 42% of total revenue from 54%.
- Bundled MVPD revenue increased by approximately $8.4 million, and program-sales revenue increased by approximately $5.2 million.
- Cost of revenues increased 126%, primarily because of higher content amortization, including $1.8 million of accelerated amortization related to program-sales contracts.
- General and administrative expense increased 51%, reflecting higher salaries, bonuses, stock-based compensation, public-company professional fees, and insurance.
- Operating and net losses narrowed despite substantial revenue growth, but the company remained heavily loss-making and cash-flow negative.
- Preferred stock converted into common stock in connection with the business combination, substantially improving reported stockholders’ equity from a $91.5 million deficit at December 31, 2019 to $65.8 million of equity at December 31, 2020.
- After year-end, the company raised $94.1 million of net proceeds in a February 2021 public offering and received approximately $55 million from the exercise of 4.8 million warrants. Management stated that these proceeds mitigated capital risk through at least 2021.
Guidance, outlook, commentary, risks, and unusual items
The filing does not provide formal revenue, earnings, subscriber, or margin guidance. Management expects continued net losses and significant expenditures for content, marketing, personnel, technology, and expansion, but believes financing proceeds, cash balances, and available borrowing capacity will support operations for at least the next twelve months.
- COVID-19 disrupted employee operations, travel, partner activity, and content production. Although the pandemic temporarily increased subscriber growth relative to forecasts, management cautioned that this acceleration may not continue.
- The business depends on attracting and retaining subscribers, controlling churn, expanding distribution relationships, and maintaining compelling content.
- Content licensing and production commitments are long-term and largely fixed. Approximately 64% of titles were licensed at year-end; 29% of licensed titles were scheduled to expire in 2021 and 31% in 2022, subject in some cases to renewal options.
- The top three customers represented 41% of 2020 revenue, and one customer represented 26%, creating customer-concentration risk.
- The company relies heavily on third-party platforms, payment processors, content distributors, cloud infrastructure, and Amazon Web Services. Service interruptions, cybersecurity incidents, privacy violations, or partner changes could materially affect results.
- International operations expose the company to foreign exchange, privacy, tax, content-rights, regulatory, censorship, and political risks.
- Content assets are subject to estimates regarding viewing patterns, useful lives, recoverability, and accelerated amortization. A decline in subscriber demand or content performance could result in impairment or additional charges.
- The company is an emerging growth company and smaller reporting company. Management did not provide an internal-control effectiveness assessment for 2020, and the auditor did not provide an internal-control attestation.
- No material legal proceedings were pending as of the filing date, according to management.
Most important facts for investors to verify
- Whether subscriber growth and approximately 15 million reported paying subscribers translate into sustainable, high-quality recurring revenue and lower churn.
- Whether the company can reduce its approximately $52.9 million annual operating cash burn and achieve positive operating cash flow.
- The timing and amount of the $26.0 million of content obligations, including $22.4 million expected to be paid in 2021.
- The renewal economics and potential cost increases for licensed titles expiring in 2021 and 2022.
- The concentration and durability of bundled MVPD, program-sales, and other large-customer revenue.
- The effect of the February 2021 equity offering and warrant exercises on liquidity, dilution, and future capital requirements.
- Whether PPP loan forgiveness is obtained and whether any repayment obligation remains.
- Future stock-based compensation, outstanding options, warrants, and potential dilution; 11.5 million warrants and 4.7 million options were outstanding at December 31, 2020.