CuriosityStream Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Financial Performance: Achieved highest ever quarterly adjusted pre-cash flow, eighth consecutive quarter of increased pre-cash flow, third consecutive quarter of positive free cash flow ($2.6 million adjusted free cash flow, up ~$6M year-over-year). Top line revenue and EBITDA increased sequentially.
• Partnerships and Distribution: Launched PayTV channels in Europe and Latin America; Amazon added Curiosity University to Prime Video channel store. Launched 4 FAST channels with Samsung TV Plus, rolled out AVOD packages with major partners (Pluto, Tubi, Roku). Executed 9 content licensing agreements.
• Content Initiatives: Expanded Summer Doc-Busters programming, released new specials from Ancient Engineering, premiered multiple science, history, and nature specials.
• Cost Containment: Leveraging AI-infused tools, reduced vendor costs, and organizational incentives to rationalize cost base, with room to reduce expenses further.

Segment Performance

• Direct Subscription Revenue: Grew 13% year-over-year, with annualized direct revenues exceeding annualized operating expenses on a cash basis.
• Content Licensing, Bundled Distribution, etc.: Generated $2.8 million in the third quarter, down from $7 million a year ago, driven by timing of transactions and non-cash barter deals.
• Gross Margin: Third quarter gross margin was 54%, up from 46% a year ago. Excluding content amortization, gross margin was 90% compared to 80% a year ago.

Guidance

• Fourth Quarter: Expect revenue in the range of $12 million to $14 million and adjusted free cash flow in the range of $2 million to $3 million.

Risks

• Forward-looking statements: Actual results may differ from forward-looking statements due to various risks, uncertainties, and assumptions. Content licensing deals have acceptance periods which can impact revenue recognition.

Question and Answer

Q: How do you view monetization of FAST channels versus growing awareness of the subscription streaming service and balancing those two efforts?

A: AVOD and FAST offer revenue opportunities and promotional benefits; leveraging assets to promote subscription services is beneficial.

Q: Use of Gen AI for cost reduction and licensing to large language models?

A: Gen AI used in customer service, editing, and languaging for cost reduction. Licensing to large LLMs is under consideration, but unit economics are important.

Q: Dividend outlook and gross margin sustainability?

A: Dividend likely maintained, with potential for growth. Gross margin excluding content amortization is sustainable, but large licensing deals may impact overall margin.

Q: Top line growth catalysts and new partners?

A: Licensing, PayTV agreements, and FAST/AVOD expansion are catalysts. Anticipate 20-30 new partners in traditional media and technology areas.