CuriosityStream Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 6, 2025

There are 8 speakers on the call.

Operator

Thank you for standing by. My name is Carrie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Curiosity Stream Q1 twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I would now like to turn the call over to Tia Cudahy, Chief Operating Officer of Curiosity Stream. Please go ahead.

Speaker 1

Thank you, and welcome to CuriosityStream's discussion of its first quarter twenty twenty five financial results. Leading the discussion today are Clint Stinchcomb, CuriosityStream's Chief Executive Officer and Brady Hayden, 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. During this call, we may make statements related to our business that are forward looking statements under the federal securities laws.

Speaker 1

These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties and assumptions. Our actual results could differ materially from expectations reflected in any forward looking statements. Please be aware that any forward looking statements reflect management's current views only, and the company undertakes no obligation to revise or update these statements nor to make additional forward looking statements in the future. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's press release. Additional information will also be set forth in our quarterly report on Form 10 Q for the quarter ended 03/31/2025, when filed.

Speaker 1

In addition, reference will be made to non GAAP financial measures. A reconciliation of these non GAAP measures to comparable GAAP measures can be found on our website at investors.curiositystream.com. Unless otherwise stated, all comparisons will be against our results for the comparable 2024 period. Now I'll turn the call over to Clint.

Speaker 2

Thank you, Tia. We have a lot of good news to share today. Our Q1 revenue of $15,100,000 was up 26% year over year and 7% sequentially. Our net income was positive for the first time and improved $5,400,000 year over year. Adjusted EBITDA was positive and improved to $1,100,000 Brady will provide more color about other positive key metrics.

Speaker 2

Two years ago, in March 2023, we explained our determination to achieve positive cash flow in our operations and to join the ranks of companies that have enduring business metrics. We increased our cash flow in every consecutive quarter from Q4 twenty twenty two to Q4 twenty twenty four, and we've achieved positive cash flow over the past five quarters. In Q1 twenty twenty five, our EBITDA performance caught up with our sustained positive cash flow, and today, we are gratified to report that we were adjusted EBITDA positive for the first time, as well as net income positive, landmark achievements for our company. Because we believe that the volume of our cash flow and surplus cash beyond that needed for operations belongs to our shareholders, we implemented a dividend program in Q1 of twenty twenty four and paid our first dividend in April of last year. In March of this year, we announced an increase to our dividend zero zero four dollars per quarter or $0.16 annualized.

Speaker 2

Today, our outlook on future performance gives us the confidence to announce another increase to our quarterly dividend. We are doubling it to $08 or $0.32 annualized. We are delighted to give this extra return to our loyal shareholders, many of whom have been committed to our enterprise for well over five years. We work for the benefit and interest of our shareholders and we are proud to do so. I mentioned last quarter that 2025 is returned to top line growth and continued bottom line growth, both at double digit percentages.

Speaker 2

While we aren't providing specific year end guidance, we remain confident in hitting these marks. Third party licensing and distribution opportunities are accessible to us, provided we execute optimally, at a scope and scale greater than at any time in company history. As such, we remain focused on the five growth pillars we outlined in March, which again are: one, increased licensing of high volumes of video, audio and other data to traditional media companies and also to tech companies building and fine tuning AI products two, continued rationalization of our annual expenses three, leveraging falling translation costs to accelerate global growth four, launching new currencies to reduce subscription friction internationally and five, selectively enhancing our talent density. In light of this focus, we've entered into several new third party agreements in The US and internationally. We've added extensively to our deep and increasingly wide library of video, audio, and other data, And we recently rolled out 10 new currencies.

Speaker 2

On the content front, we continue to seek to entertain and enlighten viewers with original premieres, like the second season of Deadly Science, profiling the many brave men and women who paid the ultimate price in pursuit of their enormous breakthroughs. Our one hour collaboration with the popular YouTube franchise, Economics Explained, exploring how The US became the largest and most influential economy in human history, and breakthrough asteroid impact, a look at cutting edge efforts to explore one of Earth's greatest threats. We also continue to strengthen our core offerings in science, history, nature, and tech with specials like Cleopatra, The Mystery of the Mummified Hand, Fast, The Celestial Eye, and Mysteries of the Bayou Tapestry, a revealing look at the remarkable two twenty four foot narrative embroidery that has taught us so much about the end of the Vikings and the beginning of the nights and the feudal system in Europe. To reinforce what we've said in the past, we believe our strong balance sheet, dollars 39,000,000 in liquidity and no debt, and our continued double digit growth in both top line revenue and cash flow make us stand out in the current environment. Moreover, we believe our global subscription proposition, our rising roster of technology and traditional media partners, our public currency and our ongoing rationalization of our cost structure are uniquely favorable attributes that provide us with durable, sustainable market advantages and exceptional flexibility.

Speaker 2

I'd like to thank my colleagues and our existing shareholders for investing the time, energy and resources critical to building Curing. And I really hope there are many potential future shareholders allocating time today and in the days ahead to better understand our story and trajectory. I'll now yield to my talent colleague, our CFO, Brady Hayton.

Speaker 3

Thank you, Clint, and good afternoon, everyone. Our full financial results will be presented in the 10 Q that we'll file in the next day or two, but let me quickly go through some of the first quarter results that we want to highlight. As Clint said, we achieved another significant milestone in the first quarter as we reported earnings of $300,000 or $01 per share, our first quarter of positive net income in the company's history and a $5,400,000 improvement from 2024. Likewise, we reported our first ever positive adjusted EBITDA, which came in at $1,100,000 an improvement of $3,900,000 from a year ago. Adjusted free cash flow came in at $2,000,000 the high end of our guidance range and an increase of $800,000 compared to last year.

Speaker 3

This also represented the fifth sequential quarter of positive adjusted free cash flow. Revenue for the first quarter was $15,100,000 compared to $12,000,000 a year ago, while our direct subscription revenue at about $9,000,000 was down slightly. This was more than offset by our licensing revenue, grew by about $4,000,000 First quarter gross margin was 53%, an improvement from 44% a year ago, driven by continued reductions in content amortization. As expected, our cash cost of revenue increased slightly from a year ago, a result of acquiring more rights to license content through revenue share arrangements and associated storage costs. Operating expenses declined in the first quarter as combined costs for advertising and marketing plus G and A were down $1,000,000 or 11% compared to last year, a continued result of our ongoing cost rationalization.

Speaker 3

And excluding stock based compensation, G and A declined 19% from a year ago. As I mentioned earlier, adjusted EBITDA was $1,100,000 in the first quarter compared to a loss of $2,800,000 a year ago. And adjusted free cash flow was $2,000,000 in the quarter compared with $1,200,000 a year ago. In March, we paid our Q1 dividend of $2,300,000 meaning we have now returned $6,300,000 to shareholders since announcing the dividend program just over a year ago. We ended the quarter with total cash and securities of $39,100,000 and no outstanding debt.

Speaker 3

We believe our balance sheet remains in great shape and that this provides us with significant operating flexibility. For second quarter guidance, we expect revenue in the range of 16,000,000 to $17,000,000 and adjusted free cash flow in the range of 2,000,000 to $3,000,000 With that, we can hand it back to the operator and open the call to questions.

Speaker 1

Thank you, and welcome to Curiosity Stream's discussion of its

Operator

Your first question will come from Dan Medina from Needham and Company.

Speaker 4

Good afternoon and congratulations on the great numbers. I have a my my question is is really on the cost side, Clint and Brady. And it's can you talk a little bit about how Gen AI may have contributed to coming in well below what we estimated for costs? Thank you.

Speaker 2

Great question, Dan. I really appreciate that. And I would say the good news is we've been able to reduce our costs largely without leveraging and accessing the emerging tools that are available to us from AI. Certainly as we look forward, we believe that big advantages available to us through Gen AI are, you know, one in translation. We've said like, as soon as we can get to a point where we can translate our content into, you know, 60 languages at minimal cost, you know, as compared to the 10 to 12 that we're in today, that will have a meaningful impact.

Speaker 2

We do use we do use it today a bit, you know, on the editing side as it relates to sequencing and organizing content. So there's some help there, but for the most part, we brought down our costs by really just kind of a shoulder to the wheel approach. And I think spent a lot of time every week just, you know, grinding on what's essential, what's nonessential, and what's what's revenue generating and and what's not. So good news is we still have, we believe, you know, considerable considerable headroom as it relates to reducing and rationalizing our cost base and the tools that become available to us, you know, as a result of GenAI. Yeah.

Speaker 2

We'll we'll only accelerate and enhance that effort.

Speaker 4

Great. Thank you.

Operator

Your next question will come from David Marsh with Singular Research.

Speaker 5

Hey, guys. Thanks for taking the questions and congrats on a great quarter. Thanks, David. So I just wanted to start on the top line. I mean, could you give us a little bit more granularity in terms of the what drew what was the what were the key drivers were for the revenue growth relative to you know, licensing versus subscribe subscriptions?

Speaker 2

Yeah. I'd be happy to. So as as you saw from our numbers, virtually everything is is up. In regard to our direct subscription revenue, that's down a little bit year over year. In direct subscription revenues, it's largely a function of our marketing spend today.

Speaker 2

So we're hyper focused on the efficiency of that spend. And so that spend might be a little lumpy at times. And that lumpiness is really tied in small part to seasonality, but in larger part to the various value exchanges that we can secure with various marketing channels. And so as we look to optimize our CPA, you'll see us be really opportunistic at certain times of the year when we can simply just get much more bang for our buck in regard to the variety of ad products and elements available to us. Our churn continues to be low, but I think what you'll see us do as it relates to the direct subscriptions is we'll manage that to a certain level.

Speaker 2

And again, it's largely tied to our marketing spend. Obviously, where we had, you know, significant growth was on the licensing side. And we've done a lot of work to build a really big and broad corpus of content, namely, you know, video, audio, text, images, etcetera. And this type of content is appealing to a broad array of companies, you know, technology companies, traditional media companies. And in in light of that, we just have a lot more opportunity, I think, available to us as a company today than frankly in any time in in company history.

Speaker 2

So it's a I would say, Dave, a kind of a broad broad result of, you know, many of new licensing partners, new advertising partners, new subscription partners, and, we're really excited about what's potentially available to us over the course of the rest of the year.

Speaker 5

Thanks. It's really helpful. And then just turning to the cost side, mean, job It was down 16% year over year. You guys were able to ring out a fair amount of cost.

Speaker 5

That a sustainable level going forward? Or could there be some things that kind of creep back in the back part of the year as you try to market to different channels and different partners?

Speaker 3

Yes, Dave. We've talked about this before, but our one of our biggest costs, which is a non cash cost, of course, is our content amortization. That's continued to decline every quarter over the past several quarters and we've talked about that. It's I am told our 10 Q is going to be filed in the next few minutes. But you'll see in there we had a substantial loss in our content amort in Q1.

Speaker 3

And then, yes, our marketing costs will maybe were historically a bit low in Q1 compared to where we would be in say Q4 when we maybe ramp up our costs towards the holiday season and when we have a lot of renewals with our subscription base. Otherwise, I think we'll see a continued decline declining trend in our G and A throughout the year as some of our cost reduction efforts continue to roll off from the last twelve to eighteen months.

Speaker 5

Got you. And then if I could just get one more in. Looking at the dividend change, I mean, I guess, I would say congratulations on the confidence to raise it as much as you have. But just doing a little bit of back of the envelope math, it looks like that's probably going to be about $4,500,000 a quarter at the new rate, if I'm doing my math right.

Speaker 3

And

Speaker 5

just looking at the cash flow guidance of 2% to 3%, I guess the question is, given the timing of the raise and just looking beyond the second quarter, do you guys have confidence that you're going to be able to generate sufficient cash flow to be able to cover that dividend without eating into your reserves?

Speaker 2

We have tremendous confidence in the business throughout the rest of the year. If we didn't, we certainly wouldn't have doubled the dividend like we did. Whereas we think it's conceivable that we'll be able to pay the dividend from operations. At the same time, we have a lot of cash reserve, far more than enough to absorb a dividend payment as it relates to quarters, which can be a little bit lumpy in our business. So our intent today is to pay the majority of it or all of it from operations.

Speaker 2

At the same time, you know, we really believe that the volume of our cash and our surplus cash beyond that needed for operations belongs to our shareholders. That's why we implemented a dividend program. That's why we've increased it. And we're just really gratified to give this extra return to loyal shareholders, particularly those who've been with us for a long time, some over five years. And as I can just say, Dave, we work for the benefit and interest of our shareholders and we're proud to do that.

Speaker 2

And we're a unique company and that despite our size, we have the ability to pay that dividend and we'll seek to play to kind of all our advantages to drive shareholder value.

Speaker 5

Great. Hey, thanks very much guys. Appreciate it.

Speaker 2

Thank you, Dave. Thank you.

Operator

Your next question will come from Patrick Scholl from Barrington.

Speaker 4

Hi. I was wondering if you could, sorry if I missed this, but if you could talk a little bit on the direct business and any sort of, consumer trends that you're seeing there.

Speaker 2

Sure. I think, you know, the big thing to note there is that our overall our overall direct subscription revenue, again, is largely a function of our marketing spend. And, you know, as we're hyper focused on the efficiency of that spend on, you know, optimizing our CPA, you'll see some lumpiness, pretty minimal, within a pretty minimal window as it relates to our direct subscription business. But we will be going forward, you'll just see us be a lot more opportunistic at certain times of the year. So we'll have quarters where there's certainly more growth than others.

Speaker 2

But as we sit here today, we're managing our direct subscription business to something that is flat to a little bit up or a little bit down. And that's in light of the fact that we have so many large opportunities in front of us and if we're able to execute on those then you know, we'll have more money to allocate for marketing and, you know, we'll have additional ways to grow our direct business. At the same time, you know, we anticipate many new launches of our subscription services from existing partners like Amazon, Apple, Roku, and new less obvious partners across the world. The pace and location of these new launches, that also has an impact on our direct subscribers and direct subscription revenue. Hopefully, that's helpful, Pat.

Speaker 4

Yeah. Thank you.

Operator

Your next question will come from Ed Schneider with Quantum Technology.

Speaker 6

Yes. I have a question on the basically on the size and the sources of the pipeline for your AI licensing beyond q two. If you can just give any more color on that, that'd be great.

Speaker 2

Appreciate that question, Ed. So we can't offer up specific names per confidentiality requirements, but in light of the quality and the quantity of our corpus, again, video, audio, text, and images, we have appealed to a broad set of licensees. And so this includes the most obvious, you know, like the tech hyperscalers who are publicly active in licensing data and, you know, cumulatively spending, you know, hundreds of billions in in CapEx. It also includes many other AI companies who have distinct training needs and who raise meaningful capital to allocate to data licensing. And, you know, beyond the hyperscalers and the smaller largely private AI companies, there's also an emerging public sector marketplace, meaning departments and agencies of the federal government who have budget to license video and other data.

Speaker 2

So hopefully, Silver Spring location gives us a proximity advantage here. But these are large meaningful deals that will have a significant impact on the company. And in regard to how it impacts our profitability, I think you can assume a 40% to 50% margin for these types of agreements. Does that answer the question? Gross margin.

Speaker 2

Yes.

Speaker 6

Yes, gross margin. Yes, that's really good. Thanks. Thanks. That was very helpful.

Speaker 2

Thank you.

Operator

Your next question will come from Chris Tuttle with IPOCandy.

Speaker 7

Thanks very much for taking my question. Thanks for all your hard work. It's obviously evident in the results. The one question I get most often from folks that we we talk to talk to about this name is the relationship you have on the AI content side, they wonder about the duration and sustainability, like, to think about it. As you add content, are are these relationships that you're building where you think in the long term, you know, these these can continue to repeat and grow?

Speaker 7

Not the same as, you know, strictly speaking, recurring revenue, but that's the the big question that I get from from folks that we've presented this to.

Speaker 2

Yeah. I look. I I think it's a very fair question. And, Chris, I'm really glad that you asked it. And let me first start by saying, like, if you control a library of, you know, hundreds and hundreds of thousands of hours of video and audio in into, you know, the millions, you're always gonna be able to monetize that.

Speaker 2

That that is the history of the media and and technology business. As it relates to some of the technology and AI work that we're doing today, you know, I've done directly or in parts of hundreds of content licensing agreements, you know. Most of them are not written as recurring agreements. So typically, a company like ours is delivering content to a licensed partner and then provide the partner accepts the content. We then recognize all of that revenue at the start of the term.

Speaker 2

And so while it might not look, you know, like a subscription recurring agreement in the traditional sense, it really be it certainly can become de facto recurring. And for us to be super clear, it has. Every partner we've worked with today has asked for more data beyond our initial agreement. So if we continue to build strong relationships by delivering high quality diverse content on time and at the scope and scale they're looking for, we will have effectively a robust recurring business. And the other part I might add here is will we be granting, you know, exactly the same scope of rights today, you know, namely like an AI video training right a year from now, two years from now, three years from now?

Speaker 2

You know, I can't say for certain. I'd say it's highly likely. But what we do know for sure, you know, based on decades of, you know, content and data licensing practices is, again, if we control high volume, there'll be considerable demand for our corpus. We also know that, you know, the hyperscalers and many others, they don't want to work with hundreds of licensors. They aren't today and they won't.

Speaker 2

They wanna work at scale with a very finite number. And lastly, you know, as I alluded to, you know, we believe there'll be new grants of rights twelve months from now that don't exist today or, you know, have not been specifically negotiated. So I think our our approach is, you know, just like we do in other areas of of our third party business, continue to build great relationships with these companies and continue to look for many ways to partner with them so that it works for our good and and ideally for our partners' good.

Speaker 7

Alright. That's super helpful. Thanks, guys, and congratulations again. That's a that's a great result.

Speaker 2

Thank you, Chris.

Operator

This concludes the Q and A portion of today's conference call.

Speaker 2

Great. Thank you.

Operator

And this does conclude today's conference. You may now disconnect.

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Key Takeaways

  • Q1 revenue of $15.1 million rose 26% year-over-year and 7% sequentially, with CuriosityStream reporting its first-ever positive net income ($0.3 million) and positive adjusted EBITDA ($1.1 million).
  • Gross margin improved to 53% from 44% a year ago, driven by lower content amortization and an 11% reduction in operating expenses through continued cost rationalization.
  • Licensing revenue grew by approximately $4 million year-over-year, offsetting a slight dip in direct subscription revenue as the company prioritizes marketing efficiency and expands AI/data licensing partnerships.
  • The quarterly dividend was doubled to $0.08 per share ($0.32 annualized), underscoring management’s confidence in sustaining cash flow and returning surplus capital to shareholders.
  • For Q2, CuriosityStream forecasts revenue of $16 million–$17 million and adjusted free cash flow of $2 million–$3 million, while executing its five growth pillars including AI licensing, cost optimization, and global market expansion.
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Earnings Conference Call
CuriosityStream Q1 2025
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