CuriosityStream Inc. (CURI) on Q1 2021 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by and welcome to the CuriosityStream First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Thank you. I’ll now turn the conference over to Denise Garcia with Investor Relations. Please go ahead.
Denise Garcia: Thank you. Welcome to CuriosityStream’s discussion of its first quarter 2021 financial results. Leading the discussion today are Clint Stinchcomb, CuriosityStream’s Chief Executive Officer; and Jason Eustace, CuriosityStream’s Chief Financial Officer. Following management’s prepared remarks, we will be happy to take your questions. But first, I’ll review the safe harbor statement.
Clint Stinchcomb: Thank you, Denise. I’d like to thank everyone for joining our first quarter 2021 earnings call. I’m delighted to have with us today, our COO and General Counsel, Tia Cudahy; our CFO, Jason Eustace; and our Chief Product Officer and EVP of Content Strategy, Devin Emery. After my comments, I will turn the call over to our CFO, Jason Eustace, to review the financials. At the close of Jason’s remarks, we will open up the call for questions. CuriosityStream’s mission is to provide premium factual entertainment that informs, enchants and inspires. As a pure-play streaming service, we are capitalizing on current and emerging worldwide trends favoring on-demand content. Our security and robust business model with multiple avenues of content monetization and our differentiated content offering provides us with several key competitive advantages. And our focus on factual content, which has longevity and engaging appeal across multiple demographics and geographies is key to our success. Let me talk about the first quarter. I’m pleased to report robust growth in our direct subscription businesses, where we grew subscribers over 80% year-over-year during the quarter is our high value subscribers and we are adding them at a rapid clip. We will continue to delight our customers through high quality content additions and product innovations, which you will see from us in the coming quarters. We're also pleased to announce that we have acquired One Day University, the founder led company, which shares our core value of providing inspiring, engaging and informative content for people who want to know more.
, : Production is also well underway on some of our most ambitious feature docks including biotech on groundbreaking Black American Aviator, Bessie Coleman and have all, the gripping story of why Hollywood actor Michael Enright gave up everything to fight alongside Kurdish forces in Syria during their long and brutal war against ISIS.
, : Production is also well underway on some of our most ambitious feature docks including biotech on groundbreaking Black American Aviator, Bessie Coleman and have all, the gripping story of why Hollywood actor Michael Enright gave up everything to fight alongside Kurdish forces in Syria during their long and brutal war against ISIS.
Jason Eustace: Thanks, Clint. I'm also excited about our increased visibility into our 2021 revenue goal and the exciting business development activities we announced this quarter. With over $178 million of cash and investments on our balance sheet at the end of the quarter, we're in the strongest position in our history to execute our multifaceted growth strategy. Before reviewing the first quarter financials, I'll give a brief update on the 10K we refiled earlier this month. The SEC recently required companies that have completed a spec transaction to reclassify private placement warrants as liabilities. As a result of the reclassification, we recognized incremental non-operating expense of $10 million for the year ended December 31, 2020. There was no material impact on to our historically recorded cash and cash equivalents or cash flows from operating, investing or financing activities. During the first quarter of 2021, we recognized an incremental $3.8 million and other expense related to the change in the fair value of our warrant liability. Now let's review our first quarter financials. CuriosityStream’s Q1’21 revenues grew 33% to $9.9 million from $7.5 million in Q1 of 2020. This was led by direct-to-consumer, partner direct and higher program sales. Cost of revenue was about $4.2 million, or 42% of revenue, compared to 36% of revenue in Q1 2020, primarily due to an increase in our content amortization as a result of timing and a number of titles released in Q1 2021 compared to the same quarter prior year.
Operator: And your first question comes from Tom Forte with D.A. Davidson & Company.
Tom Forte: Great, thanks for taking my questions. I had three questions in total. So the first one I have, Clint, previous calls you talked about the opportunity to advance your sponsorship efforts when pandemic related restrictions ease and you get the opportunity to meet with companies once again. Can you give us an update on these efforts?
Clint Stinchcomb: Yes, thank you for the question, Tom. I'd say the things are still not quite as open as we'd like. But we did recently add some strong brands to our advertising roster in the consumer technology and financial services space. Our team are like coiled springs, they are ready to meet with anyone in person virtually anywhere, anytime in the world. And so if things open up, this roster of brand partners will only increase.
Tom Forte: Great. And then my second question is, I was wondering if CuriosityStream gets a halo effect when one of your content providers does show another channel as David Attenborough did on Earth Day with a show on Apple TV plus?
Clint Stinchcomb: Yes, definitely. We think it's actually additive to CuriosityStream, additive to the category when Netflix will offer a program or a series like that, or Apple TV will offer a program or a series like that. And so, for us, as we've said in the past, we want to be the most reliable destination for factual entertainment and provided we continue to mark our territory in that way. We will benefit from the halo effect of that type of content and other services.
Tom Forte: Excellent. All right. And then my third question, thank you for taking my question. On the One Day University acquisition really looks like a great acquisition on first blush. But we're in particular intrigued with the notion alive. Reminds us a little of what clubhouse is doing. The clubhouse is only focused on audio and video elements as well. How can we think about your live content strategy in general? And for One Day University in particular?
Clint Stinchcomb: Well, audio was actually built on a live in-person events started by a entrepreneur Steven Schrager more than 10 years ago. He wanted a place where curious people could spend a fun and engaging day or half day in community with other curious people, listening to our country's greatest minds. And so I think what attracted people is, Steven built a Rockstar of Italy master instructional talent, the best in the country, from Catherine Sanderson at Danvers, who is well known for her work on the Science of Happiness to the Great American History and Louis Masur from Rutgers, Anatole Enza from Georgetown, Scott Galloway from NYU. So, Stevens created, the best collection of professors that you can find I think anywhere in the world. And so we believe that, as the world opens back up, we will, will work closely with Steven and his team, to even increase, the number of live events that are done every year. And, what we believe is important, and we're not alone in this is that over time, the most successful digital media companies whether it's an online and offline presence, and a passionate off-line presence meaning, live in-person presence. Over the long-term we'll deliver new direct subs, new brand partners, and ultimately reduce our CAC.
Tom Forte: Great. Thanks, Clint for taking my question.
Clint Stinchcomb: Thank you, Tom.
Operator: And your next question comes from .
Q –Unidentified Analyst: Thanks for the question. I just had a follow-up on the One Day University acquisition. Could you talk about the financial profile and potential synergies from the acquisition and just how you're thinking about integration of that asset? And how you could potentially I don't know if you potentially could bundle the services together and do utilize content or exactly how you're going to sort of integrate the two businesses together?
Clint Stinchcomb: Yes, so. Steven, in his head of operations, Kevin Brennan, he run a great company right now, it's small, it's 910 people. And so we will need some time to properly integrate ODU into our tech stack and marketing operations and to identify and pursue optimal pricing and packaging scenarios. But they will continue to operate ODU as a standalone business. And you know, the next few months, we'll work closely with Stephen and the rest of the team to leverage as many synergies as possible. There will be a lot more to come there, in regard to specifics, but we're really excited about what we'll be able to do together. And what will be able to - how will be able to health grow One Day university. Do you want to add anything to that?
Jason Eustace: No, I was going to say, I think the point that we want to make is that we're going to hopefully with the acquisition, we hope to amplify their presence in the marketplace, specific enough spots, as well as the other lines of the business to really propel their growth going forward.
Q –Unidentified Analyst: And you talked about some lumpiness in revenue for the year, particularly related to third-parties. Could you provide a little bit more color just on your expectations for growth for the year? Do you expect revenue trends to accelerate sort of each quarter throughout the year? And do you think you were impacted at all just on the subscription side, due to tough COVID comps in the first half? Or is that not that very much of a factor?
Clint Stinchcomb: It has not been much of a factor I mean, churn might pick up a little bit as we kind of go into Q2, but we're not expecting a major increase there as those COVID subscriptions kind of anniversary. And so that that could go up a little bit, but overall, we're expecting the next three quarters obviously be bigger than the one we just had, because we have to hit that 71. So they will be much bigger in order to hit that 71 for the full-year.
Q –Unidentified Analyst: Okay. Thank you.
Operator: And your next question comes from Dan Kurnos, with The Benchmark Company, LLC. And Dan, your line is open.
Dan Kurnos: Hi, thanks. Good evening. Jason just to be clear the 71 is exclusive on the acquisition? Correct?
Jason Eustace: Inclusive.
Dan Kurnos: Okay. And then Clint also just some color. I know you talked about offline and online presence. So I'm just curious if you're kind of viewing this, this is not really a pivot, this is ancillary, synergistic, and potential for you to take some of your own talents and some of the pipeline and potentially drive it offline, as well as getting more of their talent online. Is that the right way to view this?
Clint Stinchcomb: Yes.
Dan Kurnos: Okay. And then maybe if you can just give us kind of an update on sort of the international push? Obviously, there's been a lot of noise in Asia, unfortunately, due to COVID. But just in general, kind of the international MVPD expansion strategy, where we are there?
Clint Stinchcomb: Yes, we continue to meet with international distribution partners, obviously, not in-person. And I think that you'll see the fruits of our labor in the second, third and fourth quarter this year, as it relates to those conversations. We have a great team. We have a varsity team that's out there in lots of conversations. And because as things open up more, that's only a tailwind for us. We're excited about the opportunity to meet more in person with people, but conversations are good and strong. Some of these third-party deals take a while to actually get across the finish line. I mean there are a lot of deals that are available to us. But we're trying to do the right. Strike the right long-term partnerships with the right distributors of scale.
Dan Kurnos: Got it. And last one just on pricing. Obviously, that's probably not now you're still building up a library. I know historically, you've talked about your ability to take pricing. Just wonder, as you layer this acquisition in where the library is, when you start to have those conversations?
Clint Stinchcomb: That's referring to price elasticity with distributors or on the direct side. I'm sorry.
Dan Kurnos: No on the DTC side.
Clint Stinchcomb: Yes, on the DTC side. So, yes, we do believe that we have considerable price elasticity, providing great value at $3 a month or $20 per year. We are testing some premium tier options, where we're providing the people, additional features and benefits and even additional content for those people that subscribe to our premium tier, which we previously referred to as our 4K tier. So I think over the next few months, you'll see just some interesting things there.
Dan Kurnos: Perfect. Thanks for all the color guys. Appreciate it.
Clint Stinchcomb: Thanks.
Operator: Your next question comes from Darren Aftahi with ROTH Capital Partners.
Darren Aftahi: Hey, guys. Good afternoon. Thanks to my questions. The million incremental subs sequentially, what was kind of a mix of direct versus bundled?
Clint Stinchcomb: Yes, it follow the same mixture that we've what typically seeing with. So it's outsized to the bundle side of the house, but definitely we're seeing greater growth or greater pickup on the stronger ARPU side on the direct side.
Darren Aftahi: Got it. And then the improvement in visibility is directly related to what from last quarters call.
Jason Eustace: Third-party distribution agreements.
Darren Aftahi: And I guess my last one following-up on the lumpiness. With advertising revenue typically being down in the first quarter, is that kind of what was contributory or program sales? I know you guys just kind of emphasize the second half of the year in terms of that being much faster growth, but like how do we think about sponsorship and program sales is going to move quarter-to-quarter?
Clint Stinchcomb: It's a really hard thing to predict, quite honestly, because with program sales, it's going to be dependent on when that production is actually finished. So if the production we anticipated to be ready at the end of June, and it's quite - it's delayed in production that could then flip into July or August. So we're going to wait to figure out what's the best time to take delivery of the product. So we can recognize the revenues that that sometimes is what's going to cause some of that that lumpiness in our quarter-to-quarter on the program sales side. And similarly on the sponsorship side, it takes a while to get those deals going. And so while we have every expectation for them to fall within certain quarters, we're much more focused on what the full-year number is going to be. And we have high probability. We know we're going to hit that $71 million. So it's just we don't we're not. It's not fine tune down to each and exact every quarter as far as when it's going to fall.
Darren Aftahi: That's fair. I just guess for you Jason. What's the right share count to be using on a go-forward basis?
Jason Eustace: That's 52 on a fully diluted, sorry, basic and then 66 on a fully diluted.
Darren Aftahi: Great. Thank you.
Jason Eustace: Yep.
Operator: Your final question comes from Logan Thomas with Stifel.
Logan Thomas: Hi, there. Thanks for taking the question. I think this has been asked a couple different times. But I'll go ahead and just asking maybe a slightly different way on the guide for the year. Wondering if you can just talk to directionally how much of the incremental growth from here implied in the guide is from the program sales versus the other buckets subscription and affiliate licensing. And then trying to extrapolate that up to a higher level question. How are you thinking about the scalability of the program sales revenue streams, maybe either as a source of pain for subsidizing content costs, and just more of the mid to longer-term picture on program sales in general would be helpful?
Jason Eustace: No, I mean, perfect sales is still going to continue to be a key part of our revenue stack. And our program strategy. It allows us access to high quality content, where we get to subsidize it with a third-party distributor where we're currently not in those territory. So it's a great business model for us. And to the degree that the contents still there, and when - as we're growing, it's still going to be a big part of our revenue stack going forward. So and as it relates to the lumpiness for the quarters, it's just I mean, we're much more focused on the long-term, it's a $71 million marathon, it's not quarter-to-quarter. So that's, I think, that's the way we look at it. And we continue to have strong growth in our strongest ARPU section of the business on the partner direct and the direct. And we continue to sign up long-term distribution, third-party bundled distribution partners. So I think those are the way - that's the way I look at the business to look at it as a positive impact. And I'll say a high probability that we're going to hit that $71 million for the next year.
Clint Stinchcomb: As Jason said, it's sometimes hard to predict quarter-to-quarter on when content will deliver. But what we liked about the program sales businesses and de-risks our overall business and it is, annuals and multi-annual obligated with contractual revenue.
Logan Thomas: Got it. Thanks for the detail. And then a final one. Apologies if I missed this, but the 80% year-over-year on the direct subscribers. Was there an update on the size of the direct subscriber base? And then, with that just anything to call out on new content, or the marketing strategy fronts, they're moving the needle are worth calling out on acquisition and retention? Thanks.
Clint Stinchcomb: Yes, I mean, on the direct side, we're still in that between 1 million or 2 million direct DTC subs is where we currently are as of first quarter. So it's a little bit of a broader range, but it's still where we see I'll say continued rapid growth. And I don't know if there's anything. Devin, do you want to add on customer acquisition, if there's certain channels that are working better.
Devin Emery: All of our channels are continuing to work well as they have. Although is a very strong second half of the year in terms of content that's going to be going on the subscription service. So we're excited for the word of mouth that's going to generate and help catalyze our marketing activities. As we were talking about earlier in the call, we are now at the anniversary date of when we brought on a lot of people from last year where quarantine was starting. And the renewal rates are in line with what we typically see which are, we're releasing information a couple of weeks ago, they’re industry best. So these people who signed up at discounted rates, when we were doing the discounting and quarantine, are now renewing at the standard and high levels that we typically see, and their renewal prices are 70% higher than they were. Obviously, that's not reflected in Q1. But as they as they are renewing, they're going to standard pricing 70% higher than they paid initially. And they're renewing very nicely for us. So a lot of good stuff that we're seeing right now on the direct business and we're going to be able to continue to use that strong engagement to be able to catalyze and continue our strong growth on the DSP side.
Logan Thomas: Great. Thanks, guys.
Clint Stinchcomb: Thank you, Logan.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
