Digital video fitness and self-improvement lifestyle platform operator Gaia (NASDAQ: GAIA)
stock has been selling off as the reopening
trend continues to gain steam. The provider of digital subscriptions for its yoga, transformation, alternative healing and awareness services, and online community
has experienced growth throughout the pandemic and appears to continue to build on the momentum
. The pandemic
has created a new lifestyle template for well-being and awareness of natural
, mediation, yoga, exercise, and fitness
. Gaia is capitalizing on this trend with its management of cost containment tempered with growing average revenue per user (ARPU), increase investment in content and improving renewal rates. In fact, over 60% of the Company’s annual subscription members nearly a year ago illustrating just how sticky and loyal its network and customers are. Prudent investors seeking to get exposure in this segment can watch for opportunistic pullbacks in shares of Gaia.
Q2 2021 Earnings Release
On Aug. 2, 2021, Gaia released its fiscal second-quarter 2021 results for the quarter ending June 2021. The Company reported an adjusted earnings-per-share (EPS) profit of $0.03 excluding non-recurring items versus consensus analyst estimates for a profit of $0.02, beating estimates by $0.01. Revenues rose 20% year-over-year (YOY) to $19.44 million. EBITDA margins improved to 20% as the Company completed a fourth consecutive quarter of positive earnings and cash flow. Gaia CFO Paul Tarell commented, “The second quarter of 2021 represented another solid quarter of execution on our plan to generate net income and cash flows while driving revenue and member growth. We are looking forward to the second half of the year, when our event lineup at GaiaSphere will be in full swing, which will allow us to promote our $299 premium subscription tier to current and prospective members.”
Conference Call Takeaways
Gaia CEO Jirka Rysavy set the tone, “Revenues for our second quarter increased 20% to $19.4 million with 770,000 members. Gross margin was steady at 87.1%. Even with 20% of the revenue gross, our operating expenses in dollars actually slightly decreased improving significantly as a percentage of revenue to 84% from 101% a year ago. Net income improved by $3.1 million to $600,000 or $0.03 per share from net loss of $2.5 million and $0.13 loss. As a percentage of revenue, this represented an 18% improvement. Our EBITDA improved to $3.9 million, which is now 20% of revenue from $800,000 and 5% of revenue in the year ago quarter. These improvements were driven by an increase in gross profit for employee of almost $100,000 or 23% to $535,000 from $436,000.” CFO Tarell chimed in, “We ended the quarter with 770,200 paying members. Total member acquisition costs during the quarter were $7.7 million or 40% of revenues, which improved from 52% of revenues in the year ago quarter. The digital advertising market continued to be crowded and competitive during the quarter, which caused an uptick in our per customer acquisition cost to $74. Even with this uptick, our lifetime value to customer acquisition cost ratio is still over 4.5 to 1. Despite the challenging paid media market, we were able to drive 20,000 net adds during the quarter, while staying within our overall target spend level. Our net growth for the period benefited from an annual renewal rate, north of 60%, for the large cohort of annual members we added during the lockdowns that occurred in the year ago quarter. The strong renewal rate of the COVID cohort as the world has started to reopen and a variety of new streaming services have been launching is a testament to the quality and size of our original content library and our focus on an underserved niche audience. We also saw the benefit of early traction in our Ambassador program that our new internal sales team has been focusing on scaling globally.” The Company closed the quarter with $13.7 million cash.
Live Events to Bolster ARPU
CFO Tarell concluded We will be utilizing the upcoming events, combined with a growing Ambassador network to promote the $299 premium annual offering to new potential members, as well as a concentrated focus on educating current members on the additional value of this premium offering. This will allow us to continue to drive revenue growth and profitability while reducing the business model's dependence on paid media spend to drive member growth. Monthly ARPU or average revenue per user for the premium offering is $25 compared to our current blended monthly ARPU of $8.50 with operating margins on the incremental revenues north of 50%.”
GAIA Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for GAIA stock. The weekly rifle chart breakdown has an inverse pup and stochastic mini inverse pup downtrend with a falling 5-period moving average (MA) at the $11.01 Fibonacci (fib) level and weekly lower Bollinger Bands (BBs) at the $9.25 fib. The weekly market structure low (MSL) buy triggers above $10.83. The daily final chart has an ugly inverse pup breakdown powered by the stochastic low band mini inverse pup. The daily 5-period MA resistance is falling at $9.75 with lower daily BBs near the $8.73 fib. The charts are not pretty to say the least, but they are creating an opportunity in spite of the panic selling. Prudent and risk-tolerant investors opportunistic pullback levels at the $8.73 fib, $8.28 fib, $7.87 fib, $7.51 fib, $6.98 fib, and the $6.44 fib level. The upside trajectories range from the $12.05 fib up to the $15.03 fib level.
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