CuriosityStream Inc. — Q1 2022 Form 10-Q Summary
Business context and reporting period
CuriosityStream operates a single-segment factual-entertainment streaming business offering direct and app-based subscriptions, affiliate distribution, bundled services, program sales, and corporate or association partnerships. The filing covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021. The company reported approximately 24 million total paying subscribers at March 31, 2022.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $17.6 million | $9.9 million | Up 77% |
| Cost of revenues | $11.9 million | $4.2 million | Up 185% |
| Gross profit and margin | $5.8 million; 32.8% | $5.8 million; 58.2% | Margin declined |
| Advertising and marketing | $14.8 million | $12.2 million | Up 21% |
| General and administrative | $10.5 million | $8.7 million | Up 20% |
| Operating loss and margin | $(19.5) million; (110.6%) | $(15.2) million; (153.0%) | Loss widened; margin improved |
| Net loss | $(15.9) million | $(18.8) million | Loss improved 15% |
| Basic and diluted loss per share | $(0.30) | $(0.39) | Improved |
| Cash used in operating activities | $(12.3) million | $(12.6) million | Outflow decreased slightly |
Subscription revenue was $8.4 million, or 47% of total revenue, while license-fee revenue was $9.2 million, or 52%. Program sales revenue increased materially and was a major contributor to the revenue increase. The company recognized a $3.9 million gain from the change in fair value of its warrant liability, compared with a $3.8 million loss in the prior-year quarter.
At March 31, 2022, cash and cash equivalents were $22.7 million, restricted cash was $2.2 million, and short-term debt-securities investments were $60.0 million. Cash, cash equivalents, and restricted cash totaled $24.9 million. Total liabilities were $53.7 million, including $5.2 million of operating lease liabilities and $1.8 million of warrant liability. The filing does not show traditional interest-bearing debt outstanding at March 31, 2022.
Material changes versus the prior comparable period
- Revenue increased $7.7 million, primarily from a $3.5 million increase in subscription revenue and a $4.2 million increase in license-fee revenue.
- Direct-to-consumer subscription revenue benefited from higher annual-plan activity, while corporate subscription revenue increased following a bulk agreement with Redbox.
- Program-sales revenue increased $3.8 million, reflecting a larger volume of program-sales arrangements.
- Cost of revenues increased $7.7 million, mainly because content amortization increased $6.3 million. Accelerated amortization was driven by program sales, newly published titles, and the company’s accelerated content-amortization policy.
- Content assets increased to $78.1 million from $72.7 million at December 31, 2021, while content additions were $14.5 million during the quarter.
- Operating loss increased by $4.3 million, despite higher revenue, because operating expenses grew faster than revenue.
- Net loss improved because of the favorable warrant-liability valuation adjustment and higher revenue, partially offset by higher operating costs and a $0.2 million loss from equity-method investments.
- The company adopted lease accounting guidance effective January 1, 2022, recognizing $3.9 million of operating lease right-of-use assets and $5.2 million of lease liabilities at March 31, 2022. Prior periods were not retrospectively adjusted.
Cash flow, outlook, risks, and unusual items
Operating cash burn remained significant at $12.3 million in Q1 2022. Investing activities provided $19.8 million, primarily from maturities and sales of debt securities, while financing activities used $0.1 million. Management stated that available cash and readily convertible debt-securities investments should support operations, capital expenditures, and working capital for at least the next twelve months, but also expects continued net losses and ongoing spending on content, marketing, personnel, and infrastructure.
The company had $22.4 million of content obligations at March 31, 2022, including $18.4 million not yet recorded on the balance sheet, and $17.3 million of specified advertising commitments. It also committed to eight quarterly payments of approximately $0.8 million to acquire an additional 13% interest in Nebula. The PPP loan was forgiven in full on April 16, 2022, after the reporting date.
A sustained decline in the company’s share price triggered interim impairment testing of content assets, goodwill, and finite-lived intangible assets. No impairment was recorded at March 31, 2022. Management disclosed that the share price and market capitalization declined further after quarter-end; a sustained decline could require additional testing and potentially material non-cash impairment charges. The asset group’s estimated carrying-value cushion was approximately 10% based on the company’s testing.
Key operating risks include continued losses and cash burn, the ability to acquire and retain subscribers efficiently, high content and marketing costs, reliance on assumptions used in content amortization and impairment testing, valuation changes in liability-classified warrants, and execution of distribution and program-sales arrangements. The filing provides no formal financial guidance or specific full-year revenue or profitability targets.
Important facts for investors to verify
- Confirm subscriber definitions, composition, and whether the reported approximately 24 million paying subscribers are comparable with prior periods.
- Assess the sustainability and quality of the 77% revenue growth, particularly the contribution from program sales and non-recurring or fixed-fee arrangements.
- Monitor gross margin after the substantial increase in content amortization and revenue-share costs.
- Reconcile cash burn with the company’s $82.7 million of cash, restricted cash, and short-term debt-securities investments and evaluate the expected runway.
- Review the timing and funding requirements for the $22.4 million of content obligations, $17.3 million of advertising commitments, and Nebula investment payments.
- Track post-quarter-end share-price performance and the potential for impairment charges affecting the $78.1 million content-asset balance and $2.8 million goodwill balance.
- Consider the dilution and valuation effects of 6.7 million outstanding warrants, 5.3 million options, and 1.0 million restricted stock units.