GAIA INC

Previous wording

Revenues, net. Revenues increased $2.242 million, or 11%, to $22.081 million during the three months ended June 30, 2024, compared to $19.839 million during the three months ended June 30, 2023. This was primarily driven by an increase in member count.

Current wording

Revenues, net. Revenues increased $2.0 million, or 10%, to $22.2 million during the three months ended September 30, 2024, compared to $20.2 million during the three months ended September 30, 2023. This was primarily driven by an increase in member count as well as improvements in ARPU (“Average Revenue Per User”).

Previous wording

Cost of revenues. Cost of revenues increased $1.0 million or 17.9% to $6.6 million during the six months ended June 30, 2024, compared to $5.6 million during the six months ended June 30, 2023 related to the increase in revenues and increased content amortization. Gross profit margin decreased during the six months ended June 30, 2024 to 85.0% from 85.8% for the six months ended June 30, 2023 primarily due to increased content amortization related to an overall increase in our investment of our original content offerings and revenue mix.

Current wording

Cost of revenues. Cost of revenues increased $0.1 million or 3.3% to $3.1 million during the three months ended September 30, 2024, compared to $3.0 million during the three months ended September 30, 2023, which is primarily related to the increase in revenues and revenue mix. Gross profit margin increased during the three months ended September 30, 2024 to 86.0% from 85.2% for the three months ended September 30, 2023 primarily due to improvements in ARPU.

Previous wording

Selling and operating expenses. Selling and operating expenses increased $1.6 million, or 9.4%, to $18.7 million during the three months ended June 30, 2024, compared to $17.1 million for the three months ended June 30, 2023, driven primarily by an increase in marketing expense and people related expenses. As a percentage of net revenues, selling and operating expenses decreased to 84.7% for the three months ended June 30, 2024 compared to 86.1% for the three months ended June 30, 2023.

Current wording

Selling and operating expenses. Selling and operating expenses increased $2.1 million, or 12.9%, to $18.4 million during the three months ended September 30, 2024, compared to $16.3 million for the three months ended September 30, 2023, driven primarily by the absence of the ERTC (“Employee Retention Tax Credit”) benefit recognized in the third quarter 2023. Without the credit of $1.75 million in 2023, selling and operating expense during the three months ended September 30, 2023 would have been $18.1 million. As a percentage of net revenues, selling and operating expenses increased to 83.0% for the three months ended September 30, 2024 compared to 80.4% for the three months ended September 30, 2023.

Previous wording

Corporate, general and administration expenses. Corporate, general and administration expenses increased $0.5 million, or 33.3% to $2.0 million for three months ended June 30, 2024 from $1.5 million for three months ended June 30, 2023, driven primarily by increases in public company expenses. As a percentage of net revenues, these expenses increased to 9.0% for the three months ended June 30, 2024 from 7.7% for the three months ended June 30, 2023.

Current wording

Corporate, general and administration expenses. Corporate, general and administration expenses increased $0.6 million, or 42.9% to $2.0 million for three months ended September 30, 2024 from $1.4 million for three months ended September 30, 2023. As a percentage of net revenues, these expenses increased to 9.1% for the three months ended September 30, 2024 from 7.1% for the three months ended September 30, 2023.

Previous wording

Revenues, net. Revenues increased $4.3 million, or 10.9%, to $43.8 million during the six months ended June 30, 2024, compared to $39.5 million during the six months ended June 30, 2023. This was primarily driven by an increase in member count.

Current wording

Revenues, net. Revenues increased $6.2 million, or 10.4%, to $65.9 million during the nine months ended September 30, 2024, compared to $59.7 million during the nine months ended September 30, 2023. This was primarily driven by an increase in member count as well as an increase in ARPU.

Previous wording

Cost of revenues. Cost of revenues increased $0.6 million or 21.4% to $3.4 million during the three months ended June 30, 2024, compared to $2.8 million during the three months ended June 30, 2023 related to the increase in revenues and revenue mix. Gross profit margin decreased during the three months ended June 30, 2024 to 84.5% from 85.7% for the three months ended June 30, 2023 primarily due to increased content amortization related to an overall increase in our investment of our original content offerings and other costs.

Current wording

Cost of revenues. Cost of revenues increased $1.1 million or 12.8% to $9.7 million during the nine months ended September 30, 2024, compared to $8.6 million during the nine months ended September 30, 2023, which is primarily related to the increase in revenues and revenue mix. Gross profit margin decreased during the nine months ended September 30, 2024 to 85.3% from 85.6% for the nine months ended September 30, 2023 primarily due to increased content amortization related to an overall increase in our investment of our original content offerings and revenue mix.

Previous wording

Selling and operating expenses. Selling and operating expenses increased $3.3 million, or 9.9%, to $36.5 million during the six months ended June 30, 2024, compared to $33.2 million for the six months ended June 30, 2023, driven primarily by an increase in marketing expense and people related expenses. As a percentage of net revenues, selling and operating expenses decreased to 83.3% for the six months ended June 30, 2024 compared to 84.1% for the six months ended June 30, 2023.

Current wording

Selling and operating expenses. Selling and operating expenses increased $5.4 million, or 10.9%, to $54.9 million during the nine months ended September 30, 2024, compared to $49.5 million for the nine months ended September 30, 2023, driven primarily by an increase in marketing expense and people related expenses in addition to the absence of an ERTC benefit recognized in the third quarter 2023. Without the credit of $1.75 million in 2023, selling and operating expense during the nine months ended September 30, 2023 would have been $51.3 million. As a percentage of net revenues, selling and operating expenses increased to 83.2% for the nine months ended September 30, 2024 compared to 82.8% for the nine months ended September 30, 2023.

Previous wording

Corporate, general and administration expenses. Corporate, general and administration expenses increased $0.3 million, or 9.1% to $3.6 million for six months ended June 30, 2024 from $3.3 million for six months ended June 30, 2023, driven primarily by increases in public company expenses. As a percentage of net revenues, these expenses were 8.3% for both the six months ended June 30, 2024 and 2023.

Current wording

Corporate, general and administration expenses. Corporate, general and administration expenses increased $0.9 million, or 19.1% to $5.6 million for nine months ended September 30, 2024 from $4.7 million for nine months ended September 30, 2023. As a percentage of net revenues, these expenses increased to 8.5% for the nine months ended September 30, 2024 from 7.9% for the nine months ended September 30, 2023.

Previous wording

Our budgeted content and capital expenditures for the remainder of 2024 are expected to be between $6.0 to $8.0 million which we intend to fund with cash flows generated from operations. These planned expenditures will be predominately utilized to expand our content library and build out the capabilities of our digital platforms. The planned expenditures are discretionary and, with our in-house production capabilities, we have the ability to scale expenditures based on the available cash flows from operations. We began to generate positive cash flows from operations since 2020 and have continued to generate cash flows from operations since. We expect to continue generating positive cash flows from operations during the remainder of 2024. We generated approximately $3.9 million in cash flows from operations during the six months ended June 30, 2024. As of June 30, 2024, our cash balance was $5.5 million.

Current wording

Our budgeted content and capital expenditures for the remainder of 2024 are expected to be between $3.0 to $4.0 million which we intend to fund with cash flows generated from operations. These planned expenditures will be predominately utilized to expand our content library and build out the capabilities of our digital platforms. The planned expenditures are discretionary and, with our in-house production capabilities, we have the ability to scale expenditures based on the available cash flows from operations. We began to generate positive cash flows from operations in 2020 and have continued to generate cash flows from operations since. We expect to continue generating positive cash flows from operations during the remainder of 2024. We generated approximately $4.3 million in cash flows from operations during the nine months ended September 30, 2024. As of September 30, 2024, our cash balance was $4.4 million.

Previous wording

As described in Note 10, in April 2024, the Company entered into a series of transactions with its subsidiary, Igniton, and a third-party entity to purchase a perpetual license for a total of $16.2 million of consideration comprised of $10.2 million of cash and $5.0 million of common stock of Igniton and $1.0 million of the Company’s equity security investment in Telomeron (the “License Purchase”).

Current wording

As described in Note 10, in April 2024, the Company entered into a series of transactions with its subsidiary, Igniton, and a third-party entity to purchase a perpetual license for a total of $16.2 million of consideration comprised of $10.2 million of cash and $5.0 million of common stock of Igniton and $1.0 million of the Company’s equity security investment in Telomeron (the “License Purchase”). The license allows the Company to utilize the technology developed by the third party. This license is being recorded within the Technology license, net line item on the condensed consolidated balance sheets. The License Purchase was primarily funded through an equity financing through Igniton which raised $6.8 million of cash from third-party investors.

Previous wording

While there can be no assurances, we believe our cash on hand, our cash expected to be generated from operations, our $10 million revolving line of credit, our potential additional borrowing capabilities now that we have a history of generating positive operating cash flows, and our potential capital raising capabilities will be sufficient to fund our operations on both a short-term and long-term basis. However, our projected cash needs may change as a result of acquisitions, product development, unforeseen operational difficulties, or other factors.

Current wording

While there can be no assurances, we believe our cash on hand, our cash expected to be generated from operations, our potential additional borrowing capabilities now that we have a history of generating positive operating cash flows, and our potential capital raising capabilities will be sufficient to fund our operations on both a short-term and long-term basis. However, our projected cash needs may change as a result of acquisitions, product development, unforeseen operational difficulties, or other factors.

Previous wording

Operating activities. Cash flows provided by operations increased approximately $2.6 million during the first six months of 2024 compared to the same period in 2023. The increase was primarily driven by changes in earnings, timing of working capital, primarily accrued liabilities and deferred revenues.

Current wording

Operating activities. Cash flows provided by operations increased approximately $1.6 million during the first nine months of 2024 compared to the same period in 2023. The increase was primarily driven by changes in earnings and the timing of working capital, primarily accrued liabilities and deferred revenues.

Previous wording

Investing activities. Cash flows used, including the investing activities within our 71% owned subsidiary, decreased $10.6 million during the first six months of 2024 compared to the same period in 2023 due primarily to a technology license acquired during the quarter. Excluding this subsidiary license purchase, the cash flow would be a decrease of $0.6 million.

Current wording

Investing activities. Cash flows used, including the investing activities within our 71% owned subsidiary, increased $10.9 million during the first nine months of 2024 compared to the same period in 2023 due primarily to a technology license acquired during the second quarter. Excluding this subsidiary license purchase, the cash flow used would be a decrease of $3.0 million.

Previous wording

Financing activities. Cash flows provided by financing activities were primarily impacted by repayment of long term debt

Current wording

Financing activities. Cash flows provided by financing activities were primarily impacted by raising funds through Gaia’s subsidiary, Igniton.