Gaia, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing also presents unaudited fourth-quarter results. Financial amounts are in U.S. dollars; annual results are audited.
Business context
Gaia operates a subscription streaming service and online community focused on yoga, transformation, alternative healing and “seeking truth.” It reported one operating segment and more than 10,000 titles; approximately 37% of members were outside the United States. On December 22, 2021, Gaia acquired Yoga International, adding a stand-alone yoga subscription offering and more than 4,000 hours of content.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | $79.6 million | $66.8 million |
| Gross profit / margin | $69.0 million / 86.8% | $58.2 million / 87.1% |
| Operating income (loss) | $2.0 million | $(4.6) million |
| Net income | $3.7 million | $0.5 million |
| Operating cash flow | $20.9 million | $11.7 million |
| Investing cash flow | $(23.9) million | $(0.2) million |
- Revenue increased 19.2%, primarily due to a higher average member count and increased average monthly revenue per member, including growth in Events+.
- Selling and operating expenses rose 6.5% to $60.6 million, but declined to 76.1% of revenue from 85.2%. Advertising expense was nearly flat at $31.3 million.
- Gross margin edged down as content amortization increased with investment in original and native-language content. Net income included a $2.0 million income tax benefit, primarily associated with deferred tax liabilities from the Yoga International acquisition.
- Fourth-quarter revenue was $20.8 million versus $18.6 million a year earlier; operating income was $0.1 million versus $0.5 million, and net income was $2.1 million versus $0.3 million. Q4 gross margin was 85.8%, down from 87.1%.
- Cash was $10.3 million at year-end, down from $12.6 million. Current liabilities were $29.8 million and current assets $15.0 million; current liabilities included $14.8 million of deferred subscription revenue.
- Recognized mortgage debt, including the current portion, was approximately $6.3 million. The campus mortgage bears 3.75% interest and matures in December 2025; Gaia guarantees the loan. Long-term lease liabilities were $7.2 million, with $0.7 million current.
- Investing cash use reflected $6.5 million of net cash consideration for Yoga International and $17.3 million of additions to the media library, software, equipment and other assets. Gaia issued shares worth $9.7 million as acquisition consideration.
Changes, outlook and notable items
- Operating cash flow increased by $9.2 million year over year. Management attributed improvement to operating efficiencies and management of payables and advance annual subscription receipts.
- Management expected positive operating cash flow to continue in 2022 and said cash on hand, expected operating cash flow and potential financing were expected to support short- and long-term needs. It planned to invest approximately 20% of consolidated revenue annually in content and platform enhancements; management described this spending as discretionary and scalable.
- Yoga International’s preliminary purchase price was $17.2 million, comprising $7.5 million cash consideration and $9.7 million in Gaia shares. The preliminary allocation included $9.2 million of identifiable intangible assets and $11.6 million of goodwill, subject to measurement-period adjustments. The acquired business contributed $0.3 million revenue and a $32,000 net loss from acquisition through year-end.
- Management said mobile privacy changes during 2021 increased online advertising costs and reduced new-member additions achievable within the allocated marketing budget. It also cited competition, member cancellations, content and production costs, cybersecurity and privacy, international regulation, and the ongoing effects of COVID-19 among key risks.
- Management reported no material adverse effect expected from probable, estimable litigation matters. The auditor issued an unqualified opinion on the 2021 financial statements; its critical audit matter included valuation of Yoga International’s acquired intangible assets. The company stated disclosure controls and internal control over financial reporting were effective; the external auditor was not engaged to audit internal controls.
Important facts for investors to verify
- Whether membership growth, retention and revenue per member can sustain revenue growth as online advertising acquisition costs rise.
- How Yoga International performs after integration, and whether the preliminary acquired-asset valuations, goodwill and deferred consideration change during the measurement period.
- Whether operating cash flow remains positive after discretionary content and technology investment, and how cash and debt obligations evolve.
- The sustainability of reported net income given the acquisition-related tax benefit and the continuing valuation allowance on deferred tax assets.
- The effects of founder voting control: the CEO held approximately 79% of voting power through Class B shares and related holdings.