Gaia sees 14% revenue growth and improved margins, while pivoting to an AI-focused strategy for future member engagement and profitability.

OPERATOR - (00:01:38)

Good afternoon. Welcome to Gaia's third quarter 2025 earnings conference call. At this time all participants are in a listen only mode. Joining us today from Gaia are Yerka Risovi., Executive Chairman, Kirsten Medvedic, CEO and Ned Preston, CFO. After the speaker's presentation, there will be a question and answer session. Before we begin, Gaia's management team would like to remind everyone that Management's prepared remarks contain forward looking statements and management may make additional forward looking statements in response to your questions, including but not limited to, statements of expectations, future events or future financial performance. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. Although we believe these expectations are reasonable, Gaia Management undertakes no obligation to revise any statements to reflect changes that occur after this call. Actual events or results could differ materially. These statements are based on current expectations of the Company's management and involve inherent risks and uncertainties, including those identified in the risk factors section of Gaia's latest annual report on Form 10K filed with the SEC. All non GAAP financial measures referenced in today's call are reconciled in the Company's earnings press release to the most directly comparable GAAP measure. This call also contains time sensitive information that is accurate only as of the time and date of this broadcast. November 3, 2025. Finally, I would like to remind everyone that this conference call is being webcast and a recording will be made available for replay on Gaia's investor relations websiteat ir.gaia.com. at this time I'd like to turn the call over to Gaia's chairman Yerka Risovi.. Please go ahead.

Yerka Risovi - Executive Chairman - (00:03:35)

Good afternoon everyone. During the third quarter we grew our revenue 14% and our gross margin improved by an additional 30 basis points to 86.4 from 86.1 a year ago quarter. The member count at the same period grew to 883,000 a year ago we raised our subscription prices for most of our members by $2. So while the losses from the price increase resulted in lower member growth, our revenue grew to 100 million run rate or 25 million during the quarter up from 22 million in the last year quarter. Our annualized gross profit for employee increased to 814,000 up from 703,000 in a year ago quarter which was obviously driving further improvement. Our free cash flow. The value of our subsidiary Igniton, using pricing from its recent fundraising, it's about 106 million. Valuing GAIA's 2/3 ownership interest in Igniton is about 70 million. Igniton products are now available on Gaia Marketplace. You can get More information on igniton.com. the Gaia cash position improved significantly to 14.2 million from 4.4 million a year ago. Now Kirsten will speak more about business.

Kirsten Medvedic - CEO - (00:05:14)

Kirsten thank you Jurka so last week marked an important step in Gaia’s evolution as we continue moving from a traditional subscription video on demand (SVOD) model to an AI forward company, one that brings together conscious media, community and technology. We launched our new AI guide in beta to our direct members and the early results have been very encouraging. Session depth and repeat usage are both trending upward, confirming what we believed from the start that Gaia’s curated content library paired with our customized AI creates a truly distinctive and engaging experience. Now, as we move toward full rollout, this experience will expand to include personalized guidance, contextual recommendations, and integrated chats across both app and web. Beyond helping members discover content that fits their evolving interests, our AI acts as a research companion, helping members find what's relevant to them faster while keeping the experience fresh and evolving. This direction reflects our commitment to grow in step with our members and the world around us, integrating intelligent technology in service of human potential and positioning Gaia at the leading edge of how people connect, how they learn and transform in an increasingly digital world. AI will also play a central role in how we express our brand. It will become an integral part of our marketing, helping people discover Gaia, understand our mission, and meet them where they are on their spiritual path. In addition to AI, we're actively developing Gaia’s community platform. While we're not ready to share specifics yet, we plan to launch next year. Our vision is for members to explore, learn, transform, and then naturally find their community of like minded individuals to learn and share together. We expect 2026 to be a key transition year for us, focused on advancing the technology and infrastructure that will deliver outstanding value to our direct Gaia.com members. This work will position Gaia for the next stage of growth as we fully integrate content, community and AI into a seamless, cohesive experience. As part of this evolution, we're also reframing how we define success. Traditional viewership metrics no longer capture the actual depth of connection we're building with the intersection of AI content and community engagement actually becomes the true measure of value. This shift better reflects our mission, our technology, and the growing resonance within our direct member base. That being said, our third party members don't have access to these new AI or community features as they're not supported on external platforms and with churn nearly double on the larger platforms and revenue per subscriber roughly half compared to our direct members. We believe our focus is better spent on deepening those direct member relationships. So going forward we'll prioritize revenue and members with higher Average Revenue Per User (ARPU). Today, about 2/3 of our direct members have been with Gaia for more than a year and that number continues to grow. This ongoing loyalty strengthens our foundation and positions. Gaia for a greater long term profitability now over to NED to talk about the financials.

Ned Preston - Chief Financial Officer - (00:08:50)

Thank you Kirsten for the third quarter of 2025, Gaia delivered revenue of 25.0 million, up from 22 million or 14% year over year, driven by growth in both Average Revenue Per User (ARPU) and member count. Total members increased in Q3 to 883,000. Gross profit increased 14% to 21.6 million from 19.0 million in Q3 of 2024, with gross margins expanding to 86.4% up from 86.1%. Net loss was negative 1.2 million or negative $0.05 per share versus negative 1.2 million or negative 5 cents per share in Q3 of 2024. Operating cash flow was 0.3 million with free cash flow of 0.9 million representing the seventh consecutive quarter of positive free cash flow and further reflecting ongoing operational discipline. For the first nine months of 2025, free cash flow was $3.2 million, up from $1.8 million during the same period of last year. Our cash balance increased to $14.2 million as of September 30, 2025, up from $4.4 million a year ago with a fully available $10 million line of credit. In July, Gaia also renewed its credit line for an additional three years with improved terms including a lower interest rate, a wider range of permitted use. The company's financial position continues to strengthen with double digit revenue growth, improving margins and a growing cash balance through accelerating cash flow generation. And we have all of this with zero debt outside of the mortgage on our campus which we are in the process of renewing by the end of this year. In summary, we continue to manage costs carefully and maintain healthy margins while investing in the strategic areas that will create long term value for shareholders. I will now turn the call back over to Jurka.

Yerka Risovi - Executive Chairman - (00:10:49)

So for the summary so we expect our annual growth rate for this year to be in low double digits and similar. Probably revenue growth for the next year is continually increasing our ARPU and obviously generating free positive cash flow so this concludes our remarks. I would like to open the call for the question. Operator, Sachi.

Sachi - (00:11:14)

Thank you. At this time, we'll open the line for questions from the company's publishing analysts. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up set before pressing the star keys. One moment please, while we poll for questions. The first question is from Ryan Myers from Lake Street Capital. Please go ahead.

Ryan Myers - Equity Analyst at Lake Street Capital - (00:11:49)

Hey guys, thank you for taking my questions. First one for me. You know, you called out some losses from the customers on price increases. So just curious what the churn number was during the quarter and kind of how that compares to what churn is historically.

UNKNOWN - (00:12:06)

Well, for the price increases, you can roughly figure out you experience about half of the price increase as an additional churn from the because you increase prices. So there's definitely, you know, some people, they kind of respond to it, but it's. You get the delta about half of it and we kind of view it positive. That's where we kind of expect it. And we, based on their experience, we probably do another price increase next year. We don't really use specific number because we try to do it and everybody does it different. Like for let's say Netflix, if the customer come back in 10 months, it's the same customer. For us, it's different customer. And pretty much 80% of losses happen for six months. So it's the numbers on its own doesn't really make sense.

Ryan Myers - Equity Analyst at Lake Street Capital - (00:13:02)

Okay, fair enough. And then, you know, with the AI offering that you guys talked a little bit about, you know, how do you think that changes the core subscription model? Any additional details on that I think would be helpful.

UNKNOWN - (00:13:16)

Well, I think, you know, keep in mind it's still in beta, but you know, it is considered a conversational experience that will connect our members with the right content and the interaction will now be measured as an engagement. So our feeling is ARPU will increase and so will and churn will decrease.

Ryan Myers - Equity Analyst at Lake Street Capital - (00:13:38)

Okay, got it. And then, you know, lastly, did you guys see any significant growth in the ignaton offering on the actual Gaia Marketplace?

UNKNOWN - (00:13:48)

Well, we didn't really launch Igniton some Gaia marketplace till after Labor Day. So we started I think selling it like. So we have only like three weeks in the quarter and so it went pretty well. Obviously there is no cost to that. We probably sold it was 300 grand, but it also was a new item so. But you know, so it's still for igniton is to kind of stabilize all the lines. We find different outside fulfillment houses and stuff and they will probably continue till end of the quarter fourth quarter. So I don't expect really push revenue in igniton for this year until next year.

Ryan Myers - Equity Analyst at Lake Street Capital - (00:14:36)

Okay, got it. Thank you for taking my questions.

UNKNOWN - (00:14:39)

Thanks Ryan.

Sachi - (00:14:42)

The next question is from George Kelly from Roth Capital Partners. Please go ahead.

George Kelly - Equity Analyst at Roth Capital Partners - (00:14:48)

Hey everyone, thanks for taking my questions. George, just a couple. Hi. First just a couple of follow ups from the prior questions. It sounded like you're a little uncertain about taking pricing, core subscription pricing early next year. Did I hear that right? Is that still in the plan and if so how much do you plan to take?

UNKNOWN - (00:15:11)

Our plan is to go like probably somewhere in mid April time for another $2.

George Kelly - Equity Analyst at Roth Capital Partners - (00:15:19)

Okay. Okay, understood. And then there was also discussion on the call about with your AI features really prioritizing the direct channel, how should we think about that as far as you know, partner marketing spend and you just allocating sort of marketing resources behind partners like is there going to be some churn or some slower growth by channel next year as you sort of really emphasize the direct. And how is that going to I mean how are you thinking about subscriber growth next year with those kind of changes?

UNKNOWN - (00:16:00)

Well you know if we're going to raise prices it's typically the most of the hit you take the months you introduce it because all the monthly which is like half of the business monthly subscription compare annual it will kind of decide if they will continue or not. So that's typically you know I said about if we don't raise the prices the revenue growth and member growth is as a percentage about same. If you do price increase the member gross it's maybe half of the revenue growth. So you're going to I assume that's what we saw this year. That's what we're going to see next year. You know and also we continue to see challenges with advertising efficiencies and targeting on our third party platforms which we can't fully control. So our focus will remain on sustainable profitable member growth and not short term volume.

George Kelly - Equity Analyst at Roth Capital Partners - (00:17:00)

Okay.

UNKNOWN - (00:17:02)

Because if you have go to third party the churn is more than double ours and the revenue what we book is half of ours. So it's really what we need one person for the same revenue, just one person on our direct rather than four on outside parties. So it's just, you know, that's what she meant by the Higher value members.

George Kelly - Equity Analyst at Roth Capital Partners - (00:17:27)

Okay, understood. And then still on the core business, as you improve the sort of curation tools and you're discovering, I know it's still early days, but you're discovering sort of what people are most interested in wanting and learning about. Do you expect to raise your content spend or do you think it's in a good place where it sits now?

UNKNOWN - (00:17:53)

No, we are raising our content spend about 23% from the prior year. So we will continue to make more content.

George Kelly - Equity Analyst at Roth Capital Partners - (00:18:03)

So next year, I'm just thinking of round numbers. I mean next year, like what's a good kind of ballpark? Maybe you're not ready to give that, but how should we think about content spend next year?

UNKNOWN - (00:18:12)

We're not ready to give that, but I could say it's 23% more. No, I mean in a rough figure because we are going to right now look at engagement, which includes community and AI, but if you would strip that and just look at pure content investment, probably about 15 million.

George Kelly - Equity Analyst at Roth Capital Partners - (00:18:35)

Okay. Okay. And then just a last question. One from major spec to Ignaton. I thought that the official big launch was in September. It sounds like maybe you're pushing it out a little bit. Like what have you seen? Did you put much marketing behind it in September? Is there any more detail you can give there? And that's all I had. Thank you.

UNKNOWN - (00:18:56)

All we did to put it in Gaia Marketplace and sent an email to Gaia members. We didn't do any marketing push and we probably won't do anything until like Christmas time.

George Kelly - Equity Analyst at Roth Capital Partners - (00:19:15)

Okay, thanks.

Sachi - (00:19:18)

The next question is from Jim Sidoti from Sidoti and company. Please go ahead.

Jim Sidoti - Equity Analyst at Sidoti and Company - (00:19:23)

Hi, good afternoon. Thanks for taking the question. Jerka. I think I heard you say the Ignaton revenue was about 300k. Was that for the month or for the quarter?

UNKNOWN - (00:19:34)

No, that was just the igniton product on Gaia Marketplace. The revenue for the quarter was I think one. No, about 700. That's from the product. Yeah, probably 700.

Jim Sidoti - Equity Analyst at Sidoti and Company - (00:19:55)

So you know, once this is fully launched, do you think this is a three, over $3 million a year product?

UNKNOWN - (00:20:03)

We expect to be pretty much close to it in this year. Close to 3 million in 2025? Well, yes.

Jim Sidoti - Equity Analyst at Sidoti and Company - (00:20:13)

Okay.

UNKNOWN - (00:20:13)

Yeah. So hey Jim, I can get into it in a little more detail actually for this year it's going to be on a run rate of around 3 million. But for this year, because we launched it kind of 2/3 of the way through the year, we'll finish this year about half, you know, about approximately half of that heading into 2026. I think that's, that's when you would expect the higher number.

Jim Sidoti - Equity Analyst at Sidoti and Company - (00:20:34)

And what will the impact on gross margin be?

UNKNOWN - (00:20:38)

It's run right now 82%, so it's slightly behind below the 86 guide us.

Jim Sidoti - Equity Analyst at Sidoti and Company - (00:20:45)

Okay, but still pretty healthy gross margin.

UNKNOWN - (00:20:48)

Yes.

Jim Sidoti - Equity Analyst at Sidoti and Company - (00:20:49)

Okay. All right. And in terms of the AI, can you just kind of detail how do you monetize that? Is that going to be greater member retention or help support price increases? You know, what is the ultimate goal of the AI investment?

UNKNOWN - (00:21:10)

Well, there's several of them, but I kind of believe it would have pretty good engagement on its own. As we see some people really spend more time on search through the AI. We spend a lot of time incorporated a lot of, you know, ancient books and videos from our side. So it's quite different from other AIs could be. So it's really proprietary and, and then it will really function also as a search for Gaia for all the videos. So if you ask any questions, we will recommend videos which we have on the topics. So that's really the kind of main function and based by early indication, it was a good call because the engagements are already very good and increasing and.

Jim Sidoti - Equity Analyst at Sidoti and Company - (00:22:09)

Right. Thank you.

UNKNOWN - (00:22:15)

Thanks, Jim.

OPERATOR - (00:22:18)

At this time, this concludes our question and answer session. I'd like to turn the call back over to Mr. Reesevi for his closing remarks.

Yerka Risovi - Executive Chairman - (00:22:28)

Thank you everyone for joining and we look forward to speaking with you when we report our fourth quarter results, which will be in early March next year. Thank you.

OPERATOR - (00:22:39)

Thank you for joining us today for GAIA's third quarter 2025 earnings conference call. You may now disconnect.