CuriosityStream Inc. — Q3 2023 Form 10-Q Summary
Business context and reporting period
CuriosityStream provides factual entertainment through direct and app-based subscription video-on-demand services, distribution partners, bundled offerings, content licensing, enterprise subscriptions, advertising and sponsorships. The filing covers the quarter and nine months ended September 30, 2023. The company operates as one reporting segment.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Revenue | $15.6 million | $23.6 million | $42.1 million | $63.5 million |
| Gross profit | $7.1 million | $10.0 million | $14.7 million | $25.1 million |
| Gross margin | 45.6% | 42.4% | 34.9% | 39.6% |
| Operating loss | $23.9 million | $4.4 million | $39.7 million | $39.9 million |
| Net loss | $26.6 million | $4.5 million | $44.2 million | $36.4 million |
| Net loss per share | $0.50 | $0.09 | $0.83 | $0.69 |
| Net cash used in operating activities | Not provided for the quarter | Not provided for the quarter | $13.6 million | $30.7 million |
Q3 revenue declined 34%, driven by a 47% decrease in license-fee revenue and a 16% decrease in subscription revenue. Nine-month revenue also declined 34%. Direct Business revenue was essentially flat for the nine-month period at $25.5 million, while Content Licensing declined to $10.7 million from $21.7 million.
As of September 30, 2023, cash and cash equivalents were $40.3 million, restricted cash was $0.5 million and short-term investments were zero, compared with $15.0 million of short-term debt securities at December 31, 2022. Total liquidity including restricted cash was $40.8 million. The filing reports no debt borrowings; liabilities primarily consisted of accounts payable, deferred revenue, leases and other current obligations.
Total assets were $106.3 million and stockholders’ equity was $76.9 million at September 30, 2023. Content assets declined to $45.9 million from $68.5 million at year-end 2022. Current liabilities were $24.2 million, including $13.0 million of deferred revenue.
Material changes versus the prior comparable period
- Q3 net loss increased by $22.1 million, primarily because of a $19.0 million content-asset impairment, lower revenue and a $2.3 million impairment of the Nebula equity investment.
- For the first nine months, net loss increased by $7.9 million despite a $21.7 million reduction in total operating expenses. Cost of revenues, advertising and marketing, and general and administrative expenses declined by $11.0 million, $19.2 million and $6.9 million, respectively.
- Advertising and marketing expense declined 61% for the nine-month period, reflecting strategic changes and cost-saving measures.
- Operating cash outflow improved to $13.6 million from $30.7 million, but the company remained significantly unprofitable and cash-flow negative.
- Investing activities provided $14.0 million, principally from maturities of debt securities, compared with $60.7 million in the prior-year period.
- The company began recording trade and barter transactions in the second quarter of 2023. These generated $5.2 million of Q3 revenue and $8.2 million for the nine-month period, while $7.1 million of content-asset additions were non-cash trade and barter transactions.
Guidance, outlook, risks and unusual items
Management stated that cash levels, including readily convertible money-market investments, are expected to support ongoing operations, capital expenditures and working capital for at least the next twelve months. Management also expects continued net losses and plans to continue content and property expenditures, although at a slower rate than in prior periods. No specific revenue, earnings or subscriber guidance was provided.
The $19.0 million content impairment resulted from revised subscriber-growth and cash-flow forecasts, competitive and macroeconomic pressures, declining streaming-industry valuations and the company’s declining market capitalization. Management noted that further reductions could be required if future revenue estimates deteriorate.
Nebula provided notice of non-renewal effective at the end of 2023. The company expects the associated revenue-share arrangement to expire then, and recorded a $2.3 million impairment of its Nebula investment. The company’s Smart Bundle currently includes Nebula and other third-party services.
Remaining fixed performance obligations were $9.5 million as of September 30, 2023. Content commitments totaled $1.6 million, of which $1.5 million was not yet recorded as a liability, and future advertising commitments totaled $1.3 million. Operating lease liabilities totaled $4.7 million on a present-value basis.
The filing identifies continuing risks related to subscriber growth, competition, content monetization, reliance on licensing and distribution partners, cash burn, valuation of content assets and equity investments, and the use of estimates in impairment testing. No material changes to previously disclosed risk factors or material legal proceedings were reported.
Important facts for investors to verify
- Whether the company can stabilize subscription and content-licensing revenue after the 2023 declines and the loss of certain bulk, licensing and distribution arrangements.
- The sustainability of the stated twelve-month liquidity outlook given recurring losses, negative operating cash flow and continued content spending.
- The assumptions supporting the $19.0 million content impairment and whether additional impairments may be required.
- The financial and subscriber impact of Nebula’s non-renewal after December 31, 2023.
- The proportion and economic substance of trade and barter revenue, including the $8.2 million recognized during the first nine months.
- Future cash obligations for content, advertising and leases, and the company’s ability to fund them without additional financing.
- Potential dilution from approximately 6.7 million outstanding warrants and 2.4 million restricted stock units; the filing does not report warrant exercises during the period.