CuriosityStream Inc. 2021 Form 10-K Summary
Business context and reporting period
This filing is an annual report for the fiscal year ended December 31, 2021, rather than a standalone 2021 fourth-quarter filing. CuriosityStream operates a factual-content streaming and media business through direct subscriptions, partner distribution, bundled MVPD arrangements, program sales, corporate partnerships and other services. The company operates as one reporting segment and serves more than 175 countries.
As of December 31, 2021, management reported approximately 23 million total paying subscribers, although subscriber data from third-party distributors has not been independently verified. Standard pricing was $2.99 per month or $19.99 per year, with premium pricing of $9.99 per month or $69.99 per year. More than 85% of subscribers selected annual plans.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $71.3 million | $39.6 million | Up 80% |
| Cost of revenues | $36.7 million | $15.4 million | Up 138% |
| Gross profit | $34.6 million | $24.2 million | Up approximately 43% |
| Gross margin | Approximately 48.5% | Approximately 61.1% | Down approximately 12.6 percentage points |
| Advertising and marketing | $52.2 million | $42.2 million | Up 24% |
| General and administrative | $34.9 million | $20.9 million | Up 67% |
| Operating loss | $52.5 million | $38.8 million | Loss increased 35% |
| Operating margin | Approximately negative 73.7% | Approximately negative 98.0% | Improved |
| Net loss | $37.6 million | $48.6 million | Loss decreased 23% |
| Basic loss per share | $0.73 | $3.30 | Improved |
| Net cash used in operating activities | $73.2 million | $53.5 million | Outflow increased 37% |
Revenue consisted of $24.8 million of subscription revenue, $43.3 million of license-fee revenue and $3.1 million of other revenue. Program sales increased substantially to $24.8 million from $5.7 million, while direct-to-consumer revenue increased to $23.5 million from $15.2 million.
The net loss benefited from a $15.2 million non-cash gain from the change in fair value of the private-placement warrant liability, compared with a $10.1 million loss in 2020. Excluding the warrant valuation effect, operating performance remained materially loss-making.
At December 31, 2021, the company had $15.2 million of cash and cash equivalents, $2.3 million of restricted cash and $81.3 million of available-for-sale debt securities, including $65.8 million classified as short term. Total assets were $217.6 million and total liabilities were $55.6 million. The filing does not show conventional funded bank debt at year-end; the $4.5 million line of credit was terminated in July 2021. A $1.158 million PPP loan remained subject to forgiveness or repayment terms.
Material changes versus the prior comparable period
- Revenue grew 80%, driven by higher annual subscription fees, increased program sales, new bundled-distribution agreements and higher partner subscribers.
- Cost of revenues grew faster than revenue, primarily because content amortization increased $18.2 million to $27.9 million. The company began using accelerated content amortization for titles published after July 1, 2021.
- Advertising and marketing increased $10.0 million, including higher digital and radio spending, while television advertising declined.
- General and administrative expense rose $14.0 million because of higher personnel, stock-based compensation, public-company compliance, legal, finance and insurance costs.
- Operating cash outflow increased to $73.2 million, reflecting greater investment in content assets and working-capital needs.
- The company raised $94.1 million of net proceeds in a February 2021 common-stock offering and received approximately $54.9 million from public-warrant exercises.
- The company acquired One Day University for $4.5 million and Learn25 for approximately $1.5 million plus a potential earnout. It also acquired a 32% interest in Spiegel Venture for $3.3 million and a 12% interest in Nebula for $6.0 million, with a commitment to purchase additional Nebula interests for total consideration of approximately $12.5 million.
- The company restated its prior warrant accounting after the SEC Staff Statement on SPAC warrants. Private-placement warrants are classified as liabilities and remeasured through earnings each reporting period.
- Management reported that a material weakness related to warrant accounting identified for 2020 was remediated as of December 31, 2021. The company remains an emerging growth company and did not provide an external auditor attestation on internal control over financial reporting.
Outlook, commentary, risks and unusual items
Management expects continued net losses and negative operating cash flow while investing in content, marketing, personnel, technology and international expansion. The filing does not provide formal quantitative revenue, earnings or subscriber guidance. Management states that available cash, investments and financing resources are expected to support operations, capital expenditures and working capital for at least the next twelve months.
Content obligations totaled $39.0 million at year-end, including $9.7 million recognized as current content liabilities and $29.4 million not yet recognized on the balance sheet. Approximately $24.9 million was expected to be paid in 2022. The company also had specified advertising commitments of $12.1 million, primarily payable in 2022.
- Subscriber acquisition, retention and churn remain central risks, particularly given intense competition from larger streaming platforms with greater content and marketing resources.
- Program-sales revenue increased sharply but may be less recurring than subscription revenue and contributed to accelerated content amortization.
- Approximately 70% of SVOD titles were licensed; approximately 20% of licensed titles expire in 2022 and approximately 22% expire in 2023, subject to renewal rights for some titles.
- COVID-19, labor shortages, production delays, inflation and supply-chain disruption may affect content availability, costs and operating execution.
- The company relies heavily on third-party distributors, payment processors, cloud infrastructure and Amazon Web Services. It does not maintain live failover capability to another cloud provider.
- Privacy, cybersecurity, intellectual-property, international regulatory and content-licensing risks could result in increased costs, litigation, service interruptions or subscriber losses.
- Three customers accounted for 27% of 2021 revenue, and one customer accounted for 14%, indicating customer concentration.
- After year-end, the company’s market capitalization declined below book value. A sustained decline could trigger impairment testing and potentially charges against content assets, goodwill, intangible assets and other long-lived assets.
- Future results may be affected by non-cash warrant fair-value gains or losses, which can create substantial period-to-period volatility.
Important facts for investors to verify
- Reconcile the reported approximately 23 million paying subscribers with subscriber definitions, distributor reporting and the underlying recurring subscription revenue.
- Assess the sustainability and quality of the 2021 program-sales increase, including related-party revenue and customer concentration.
- Review the $39.0 million of content obligations, future advertising commitments and expected cash payments against the company’s operating cash burn.
- Evaluate whether the $81.3 million debt-security portfolio and remaining cash provide sufficient liquidity if operating losses persist or capital-market access weakens.
- Confirm the status and potential repayment obligation of the PPP loan and any remaining acquisition earnouts or investment commitments.
- Examine the warrant-accounting restatement, recurring fair-value exposure and the remediation of the prior material weakness.
- Review the expiration schedule and renewal economics for licensed content, particularly titles expiring in 2022 and 2023.
- Determine whether the company’s business model can achieve positive operating cash flow after marketing, content investment and public-company costs.