Encouraging 4Q23 Results; New Member Growth Gaining Momentum
Gaia reported solid 4Q23 results, with revenue of $20.7 million, up 6% Y/Y. More importantly, the company reported its fourth consecutive quarter of member growth, ending the year with 806,000 members versus 759,000 at the beginning of the year. In fact, Gaia resumed member growth in 1Q23 with 7,000 new members. The company then added 8,000 members in 2Q23, 16,000 members in 3Q23, and 16,000 members in 4Q23. Gaia indicated it expects to add 32,000 members in 1Q24 and reach a new high watermark for total members. Gaia indicated it expects to increase revenue by 15% in 2024, which will be driven by a mix of member growth and ARPU growth. Growth in ARPU in 2024 should be driven by the continued development of the Gaia Marketplace, price increases for new members that will be introduced later in 2024, and by an increase in premium members, which should be helped by a refresh of the premium offering (Gaia +). Gaia generated free cash flow in 2023 despite increasing marketing spend from 37% of revenue in 2022 to 41% in 2023. The financial performance was further helped by post-COVID cost reductions executed in 1H23. The company ended the year with a strong balance sheet, with net cash slightly exceeding net debt. As previously disclosed, Gaia was forced to change auditors at the end of 3Q23 due to the decision of its previous auditors to exit the market for public company clients. With a new auditor and a new CFO (as of the summer of 2023), it was not surprising that the company announced some accounting restatements for 2022 and the first three quarters of 2023. The restatements do not appear material as they did not affect revenue or cash flow. The member count decline in 2022 post-COVID led some to worry about saturation and limited growth opportunities for Gaia. While the business was starting to turn around at the beginning of 2023, the company changed its CFO in the early summer and then promoted James Colquhoun to CEO later in the year. It is encouraging to see that the new team has been able to continue and accelerate the turnaround, with positive indications for 1Q24. With a solid balance sheet and the prospect of strong top-line growth in 2024, the Gaia story may well be worth revisiting.Gaia operates a global digital video subscription service and on-line community. The company's subscribers have access to a library of films, documentaries, interviews, yoga classes, transformation-related content, and majority of which are available to its subscribers for digital streaming. The company's network includes the following channels: Yoga, which provides access to streaming yoga, Eastern arts, and other movement-based classes; Transformation and Alternative Healing, which features content in the areas of alternative and integrative medicines, holistic healing, longevity, spiritual growth and consciousness; and Seeking Truth, which provides perspectives for today's changing world.
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