Gaia, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Dollar amounts below are in millions unless stated otherwise. Gaia operates a global subscription video service and online community; its library includes more than 10,000 titles. The December 2021 Yoga International acquisition expanded its yoga offering.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $21.831 | $18.896; up 15.3% as reported |
| Gross profit / margin | $18.926 / 86.7% | $16.458 / 87.1% |
| Operating income / margin | $0.307 / 1.4% | $0.424 / 2.2% |
| Continuing-operations income | $0.247 | $0.358 |
| Net income | $0.086 | $0.358 |
| Operating cash flow | $4.003 | $5.188 |
| Cash at period end | $8.398 | $10.269 at Dec. 31, 2021 |
Cost of revenue was $2.905 million; operating expenses were $18.619 million, including $0.049 million of acquisition costs. Interest and other expense, net, was $0.060 million; income tax provision was zero. Basic and diluted EPS were reported as $0.00, including a $0.01 per-share loss from discontinued operations.
Q1 investing cash outflow was $5.828 million, including $4.981 million for media library, property and equipment additions and $0.847 million for acquisitions and intangible assets. Financing cash outflow was $0.046 million. Cash declined by $1.871 million.
At March 31, current assets were $13.210 million and current liabilities $28.511 million. Total assets were $132.785 million; total liabilities were $41.944 million and shareholders’ equity was $90.841 million. Long-term mortgage, net, was $6.074 million; lease liabilities totaled $7.775 million, including the current portion. The mortgage bears fixed interest of 3.75% and matures in December 2025; Gaia guarantees the mortgage.
Changes versus the prior comparable period
- Revenue rose $2.935 million, primarily due to more members and higher average monthly revenue per member.
- Gross margin declined 0.4 percentage points, mainly reflecting increased content amortization, including original and acquired Yoga International content.
- Selling and operating expenses increased $2.247 million to $16.785 million, driven by personnel, technology, international expansion and Yoga International costs. Corporate, general and administration expense rose to $1.785 million from $1.496 million.
- Operating income decreased to $0.307 million from $0.424 million. Net income also included a $0.161 million loss from discontinued operations; Q1 2021 had no such loss.
- Cash from operations fell $1.185 million, primarily due to working-capital timing, particularly accounts payable and deferred revenue. Investing outflow increased, primarily due to deferred consideration for the Yoga International acquisition.
Outlook, commentary and risks
- Management budgeted $10–$15 million of content and capital expenditures for the remainder of 2022, mainly for content and digital-platform capabilities, and intended to fund them from operating cash flow. Spending is discretionary and can be scaled to available cash flows.
- Management expected positive operating cash flow for the remainder of 2022 and believed cash on hand, operating cash generation and potential financing capacity would be sufficient for short- and long-term needs; it cautioned that acquisitions, development and unexpected operating needs could change cash requirements.
- Management attributed pressure on member acquisition to higher online advertising costs, including effects from mobile privacy changes beginning in summer 2021. It also cited seasonality, competition, membership growth, consumer trends, economic conditions, acquisitions, technology and security, regulation, litigation, and COVID-19 as risks or uncertainties.
- Yoga International’s one-time transactional course-sales business is being wound down as contractual commitments lapse; its content will be offered through a premium membership tier. The related $0.161 million quarterly loss was presented as discontinued operations.
- The company reported no material litigation proceedings and stated disclosure controls were effective, with no material changes in internal control during the quarter. Management maintained a full valuation allowance on deferred tax assets; gross NOL carryforwards were $76.8 million federal and $20.7 million state.
Important facts for investors to verify
- Member growth, churn and average monthly revenue per member, which management identified as drivers of revenue growth.
- Whether increased content, technology and acquisition-related costs translate into sustainable subscriber growth and margin improvement.
- Cash generation relative to planned $10–$15 million remaining-2022 content and capital expenditures, and the resulting liquidity position.
- Integration and performance of Yoga International, including the transition of course content to premium membership and the discontinued business’s final costs.
- Mortgage covenants and guarantee exposure, lease obligations, and the impact of marketing-cost, privacy, competition and other disclosed risks.