CuriosityStream Inc. Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; the filing is an annual report, not a quarterly Q4 filing. CuriosityStream operates a single reporting segment providing factual video and audio content through direct subscriptions, distribution partners, content licensing, enterprise subscriptions, advertising and sponsorships.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $78.0 million | $71.3 million | Up 10% |
| Subscriptions revenue | $35.0 million | $24.8 million | Up 41% |
| License-fee revenue | $41.0 million | $43.3 million | Down 5% |
| Operating loss | $55.3 million | $52.5 million | Loss increased $2.8 million |
| Net loss | $50.9 million | $37.6 million | Loss increased 35% |
| Net loss per diluted share | $0.96 | $1.02 | Loss per share improved |
| Net cash used in operating activities | $39.5 million | $73.2 million | Outflow decreased 46% |
Margins: Cost of revenues was $51.5 million, implying an approximate gross margin of 34.0%, compared with approximately 48.5% in 2021. Operating margin was approximately negative 70.8%, and net margin was approximately negative 65.2%.
- Revenue growth was driven primarily by a $6.0 million increase in direct subscriber fees and a $4.2 million increase in corporate subscription revenue.
- Cost of revenues increased 41% to $51.5 million, principally because content amortization increased $11.4 million and revenue-share expense increased $3.4 million.
- Advertising and marketing expense decreased 22% to $40.7 million, while general and administrative expense increased 8% to $37.5 million.
- The company recorded $3.6 million of goodwill and intangible-asset impairment charges, including $2.8 million of goodwill impairment and $0.8 million of intangible-asset impairment.
- A $5.4 million non-cash gain from the change in fair value of warrant liabilities partially offset the operating loss; the comparable 2021 gain was $15.2 million.
- Cash, cash equivalents and restricted cash totaled $40.5 million at year-end, supplemented by $15.0 million of short-term debt securities. Total assets were $154.1 million and stockholders’ equity was $117.6 million.
- The filing reports no conventional debt outstanding. The $1.2 million PPP loan was forgiven in April 2022. Operating lease liabilities totaled approximately $5.0 million at year-end, and current content liabilities totaled $2.9 million.
- Management stated that available cash and readily convertible investments are expected to fund operations, capital expenditures and working capital for at least the next twelve months.
Material changes versus the prior period
- Subscriptions increased from 35% to 45% of revenue, while license fees declined from 61% to 52% of revenue.
- Bundled distribution revenue declined from $14.3 million to $11.7 million. Management disclosed that termination of one bundled distribution agreement in the third quarter contributed to a subscriber decline.
- Content assets decreased from $72.7 million to $68.5 million, reflecting $39.3 million of amortization against $34.8 million of additions.
- Content obligations declined materially from $39.0 million at December 31, 2021 to $11.5 million at December 31, 2022, including $8.6 million not yet recognized as balance-sheet liabilities. The obligations are expected to be paid during 2023.
- Cash flow improved primarily because of lower content additions and the sale or maturity of debt securities. Investing activities provided $62.7 million in 2022 versus using $74.9 million in 2021; 2021 also included $148.3 million of financing inflows from equity issuance and warrant exercises.
- The company adopted ASC 842 lease accounting on January 1, 2022, recognizing approximately $5.3 million of lease liabilities and $4.0 million of right-of-use assets without a material income-statement or cash-flow impact.
Guidance, outlook, commentary and risks
- No formal revenue, earnings or cash-flow guidance is provided. Management expects continued net losses and continued spending on content, marketing and operations.
- New standard-service subscribers beginning March 27, 2023 are scheduled to pay $4.99 per month or $39.99 per year, compared with existing standard pricing of $2.99 per month or $19.99 per year. The Smart Bundle is priced at $9.99 per month or $69.99 per year.
- The company reported approximately 23 million paying subscribers as of December 31, 2022, including direct, partner, bundled and enterprise subscribers. The filing notes that third-party subscriber data has not been independently verified.
- Approximately 78% of SVOD titles were licensed as of year-end; approximately 16% of licensed titles expire in 2023 and 48% expire in 2024, although some may be renewable.
- Key risks include continued operating losses and negative operating cash flow, dependence on additional financing, subscriber churn, competition from larger streaming services, reliance on distribution partners, content licensing and production commitments, impairment risk, cybersecurity and privacy exposure, international regulation and foreign exchange risk.
- Related-party activity is material to certain results: 2022 related-party revenue was $1.9 million, while related-party revenue-share expense was $4.3 million. The company also holds equity-method investments in Spiegel Venture and Nebula.
- Management concluded that disclosure controls and internal control over financial reporting were effective at December 31, 2022. As an emerging growth company, the company was exempt from auditor attestation of internal control effectiveness.
Important facts for investors to verify
- Whether the planned price increases improve average revenue per subscriber without materially increasing churn.
- The quality and persistence of the reported 23 million subscriber figure, including the portion derived from unverified third-party data and the impact of the terminated bundled agreement.
- Whether cash and short-term investments can sustain operations given the $39.5 million 2022 operating cash outflow and expected continuing losses.
- The renewal terms, pricing and cash requirements for licensed content expiring in 2023 and 2024.
- The magnitude and timing of the $11.5 million of content obligations and the additional advertising commitments.
- The sensitivity of future results to further goodwill, intangible-asset, content-asset or equity-investment impairments.
- The economics and governance risks of the Nebula and Spiegel Venture investments, including the amended Spiegel Venture option exercise dates beginning in 2026.
- Potential dilution from 4.6 million stock options, 0.8 million restricted stock units and approximately 6.7 million outstanding warrants reported at year-end.