Greetings, everyone. I'm Terry Filbert. I'm an analyst at Water Tower Research, covering, emerging growth company. I have with me this morning Paul Tarell, CFO of Gaia. Paul, good morning. Morning. Good afternoon. Just for our investors and our listeners, thank you for joining us. We will have a recording of the fireside chat. We'll also have a transcript/management series in a couple of days after the chat that you can access on our website or also on Gaia's website. Paul, let's first discuss the Gaia Marketplace that you and Jirka mentioned on the quarterly earnings call. I believe you said it would consist mostly of non-tangible goods, I believe that means services. Can you maybe give us a bit more color on what those services would be, who the providers would be, so on and so forth? Sure. I'll set a little bit of context for this for those that didn't listen to the call, and provide some of what we provided in the remarks on the call. When we think about Gaia Marketplace, we're really looking at creating a two-sided marketplace with our members on one side and merchants on the other side. The reason that we're going down this route is, as we started to explore AVOD or ad-supported video, which is what the majority of the other entertainment-based streaming providers are going to help subsidize customer acquisition and their content investment. We really evaluated where those marketing dollars or advertising dollars would come from, and a good portion of advertising dollars spent on the Internet today comes from industries that we wouldn't want to support on our platform. Big Pharma, financial services, and the like. As you start to winnow down the pool of available ad dollars, it didn't really start to pencil out from a ROI perspective to do the infrastructure that would be necessary to support an ad layer given the limited dollars that are there. What we looked at instead was, is there a way to effectively bring value to our members that also helps create an incremental revenue stream? That's where we ended with this marketplace idea and working very similar to the way a Costco might work, where you pay your monthly membership, or excuse me, your annual membership fee, and in exchange for that, you get access to pricing and goods and services via Costco.com through other vendors at a discount with the, you know, Costco standing behind it as well. That's where the idea came from. As we started to look at that, we said, okay, that's a very interesting idea. For those that have been paying attention for a while, we sold our physical goods distribution business back in 2016 to get into non-tangible subscription offerings. We don't wanna go backwards into having to deal with inventory and AR and receivables and all those things. What's the way that we can get into this? We started to look at it from the perspective of what did we learn from Yoga International when we bought them, and where did they generate a good chunk of their cash flows prior to us buying them. They actually had à la carte courses that they were selling for premium dollars for those people that wanted those courses. That's where the combination of all these ideas coalesced into saying, "Okay, let's do this." We looked at what it would take to make the investment to bring it up. We're gonna stand up. It'll look great from the perspective of the web experience, but we're not taking any inventory risks, and we're really looking at non-tangible goods to start with. Courses, meditation trainings, retreats, those types of offerings, where we can advertise it on our service to our members, and they will get a discount if they decide to buy it. The vendor partners will get access to our audience without having to spend traditional, quote-unquote, "marketing dollars." They'll just pay for it as part of a rev share with Gaia. Interesting. How will you introduce that to your members? Is it gonna be banner ads? Is it gonna be an email campaign? How will you launch it and promote it? I think we have to be mindful about not over-promoting it for people that aren't interested in it, because then we're just changing advertising from one thing to another. It's about making it available on the site via a top-level navigation and then email communications around it and potentially some. We have a spot that we do every week called This Week on Gaia, where we highlight upcoming shows that are either out or coming out. We can weave it into there. I wouldn't expect that we're gonna do a lot of on-site promotion to subscription members. We will do it more through secondary messaging on email to make people aware of it, let it build from there. We've really de-risked our thinking on this. We're not trying to make a quick pivot into needing to generate massive amounts of revenue from this business. We look at it as a offering that will be beneficial to our members and also beneficial to other vendors that are in the space that are competing in a very crowded, expensive, and getting more inefficient every day digital advertising market. We look at it as a triple win, one for Gaia, in that we can expand our revenue and margin profile via this revenue stream. One also for our members because they get access to things that they might be interested in at a discount, and then obviously for the vendor partners because they're tapping into a very primed audience that they wouldn't necessarily be able to advertise against otherwise. You indicated on the quarterly call that you conducted a survey and that half of your members expressed interest. Do you have a little bit of color around that? Is it you have a high degree of confidence in that, in that, you know, maybe half of the members interested, or what are your thoughts there? I think that was really a signal to say, are we gonna move forward here? Based on that signal, we decided to move forward in a very pragmatic way, which is minimum investment upfront using partners or relationships that we've already either have from teacher relationships, ambassador relationships, or just from our inner network of people being able to create warm introductions to service providers that are out in the space, and then really not making a big investment in it. You know, what are my expectations? My expectations are that this will be valuable over time. The worst thing we could do is put high level of expectations on a short time horizon on it and then have to over-invest in getting it launched and out the door. That's not what we're trying to do. I assume modest investment in terms of launching that you probably have already incurred some of those costs and whatever incremental cost it might be, that's already in the numbers you've talked for 2023, correct? Yes, for 2023. In terms of the cost, we looked at it. We already had kind of a merchandise store where you could buy Gaia branded products if you were a member. Through that vendor partner, we've looked at extending the store and the capabilities, and we are. So we're really talking about a little bit of monthly licensing to tap into that vendor partner in terms of upfront investment. Then, you know, low, not even 6 figures, right? We're talking about mid double-digit thousands in terms of internal investment from engineering resources perspective to get this stood up. Then it'll fund itself from there. As it gets traction, we intend to reinvest the traction back into allowing it to scale and grow. If you look at it from the, you know, the real investment perspective, you're talking somewhere in the, you know, $50,000-$100,000 range, inclusive of internal resources that would be doing something else. Yeah. Okay, great. If we switch to your core business, to the video streaming business, you've indicated some positive development in the French and German language markets. Is the ramp there something maybe similar to what you experienced in the U.S. or in the English market in 2017, 2018, 2019? You know, like, the low-hanging fruits or the most interested members are really gravitating to your offering or can you give us any color there? Sure. I think it's more akin to where we were in 2015 and 2016 before we really started ramping up paid media efforts on the English side, the domestic English side. We are getting high affinity members that are being attracted to the Gaia platform. We're seeing conversion rates and early retention signals that indicate that it's a healthy cohort of members. We're learning from what we learned as we were trying to scale the English offering with marketing dollars or advertising dollars. We understand that there's an upper limit to how fast you can deploy those dollars without negatively affecting performance. We're really looking at it as an incremental marginal growth play for us as it relates to the overall business and investing in it pragmatically. It's not like where we were in 2017 and 2018, where we have a well-funded balance sheet and a subscale English offering that we need to get to scale as quickly as possible. This is more about adding on incremental regions and markets in a pragmatic way and ensuring that we're getting the right level of ROI on a per member basis right out of the gate. Not over-investing to get to scale, but really ensuring that per member customer acquisition and lifetime value numbers make sense based on where we are today. Yeah, the high affinity comments you make, I think that make sense. You at an early stage of the, of the ramp. In terms of the marketing, the issues or the changes that Apple introduced, maybe it's 18 months ago now, is that affecting you over there in the same way as here or, or are the rules different? What, what can you say about that? I don't have a solid answer because I don't know a before and after because we weren't really doing the marketing, there when those changes were rolling out. We've adapted to the reality of where it is, and we're seeing good, as I said, good CPA, good conversion rates and healthy engagement, and so we're just running from there. I don't have any way to correlate pre and post. I will say that privacy has already always been higher on the. Yeah ... E.U side of things than it has been on the U.S side of things. you know, we're operating in the environment that we're in, not looking at where we were before. Yes, it may be affecting us, but we're still making it work. I think it disproportionately affected us in the U.S because the changes were so massive and the entire digital advertising ecosystem was predicated on data that's no longer available, and everyone's having to scramble. Service providers, marketing spenders, and consumers to a certain extent. In the U.S., if we switch the conversation to that market. You had the headwind most of last year, I think maybe the COVID bulge, if you will, people who tried your service during COVID and then went on to other things. Are you at the end of that purging, if you will, of those members, or how do you see the situation? I don't, I don't want to define an end to the situation. The bulk of the people that joined us during the height of COVID that were diminishing levels of engagement have started to cycle off of the program, and the ones that are left are engaged and staying. It's still a big cohort of people, right? There's always going to be a little bit of a factor of that as they come up, particularly for annual renewals, just because of the size of them. As we look at the significant headwind that we experienced in late 2021 and pretty much all of 2022, I would say that it's dissipated at this point. And we're starting to see the direct member base get some traction, albeit at a, at a more methodical rate than what it was during the go-go days of COVID. We're starting to see some net growth, as we said on the call. The overall member base is still being negatively impacted by our third-party subscription partners, of which Amazon and Comcast are our two largest ones. We believe that's somewhat structural tied to their underlying business because they have. On the Comcast side, they obviously have a big headwind against cable cutting, right? As people are moving more and more... Yeah. -to subscription standalone offerings because the cable bill is so expensive. On the Amazon Prime side, you have to pay for Amazon Prime in order to get access to Amazon Prime Video. There's like a double paywall in front of it. I think people, particularly with the uncertainty that's coming in and the inflationary pressures on the majority in goods and services, I think a lot of what we see when we look at the data across all the Amazon Prime Video premium subscription offerings, they're all seeing some net contraction, which tells us that it's likely tied to something systemic at the Amazon Prime level. Yeah. That's part of the reason why we limit our exposure to those third-party partners, because we don't wanna get too dependent on them. Yeah. I mean, that's... You mentioned something interesting. You can track the engagement of your members, that must be a really strong predictor of whether they renew or whether they stay on and so, and so forth. Correct. On the direct members. Again, this is part of the reason why... On the direct members. This is part of the reason why third-party members have been limited, because we don't have any intelligence on individual members. We know in aggregate what's being viewed by platform, I don't understand at the individual consumer level, you kind of take what you get. Where on the direct side, we understand what people are engaging with, we can use that to tune our email communications to them. We can use it to tune on-site promotion to them. We can start to glean what's healthy customer acquisition and what's unhealthy customer acquisition based on one-month and 3-month and 6-month retention from a variety of signals that we get. Yes, we can understand at the individual customer level, as you aggregate that up into cohorts, we can also start to get some intelligence. That's part of the reason why we've been able to, even with the issues of our advertising data getting more limited, we're able to increase the efficacy of it because we're starting to adapt to the reality that we may not know stuff about an individual consumer, but we understand stuff about the overall advertising campaign and the health of the customers that came in. So we can start to use the math to get back to, okay, what's a healthy amount of money to spend on a given campaign and platform, and then how do we reallocate and optimize those dollars? Okay. Well, that's very interesting. I didn't realize you have less information. I mean, it makes sense when you explain things, but that you have less information on the members that are not the direct members. You have aggregate information for those, but you don't have the same granularity that you have for your direct members. Correct. That's the trade-off, right? You get access to a bigger audience, but you know less about them. You indicated also on the call that you're expecting positive cash flows this year, I think to the tune of $7 million-$9 million, both as a result of streamlining on the cost side and maybe the better trends you're seeing on the headcount side. Is there a meaningful contribution from Gaia Marketplace in there or is it? How would you qualify that or describe? I would say generally there's not a meaningful contribution from Gaia Marketplace unless it gets traction. As I said, we're relatively de-risking it to get it ramped up because, you know, with the uncertain economic environment, the last thing we wanna do is over-invest in it and then have these be kind of premium marginal utility items that might face some demand pressure if things continue to erode as it relates to the U.S. and global economies and consumer sentiment. The way that we get to those numbers is pretty foundational to how we've run this business overall. We know what our EBITDA margins are, and we were pressured in 2022 as we and 2021, as we were contracting our member base. The EBITDA margins were there, but the cash flows from operations weren't because as the subscription base declined. Deferred revenue also unwound, so we didn't get the benefit of the negative working capital that you would get when you grow. As we've made it through 2022 and we see that we've kinda stabilized at our new member base and we're starting to see some incremental, albeit modest growth in our direct member base, the negative working capital cycle is gonna kick back in. So where that was a headwind for us in 2022 as it relates to cash flow from operations, it'll be neutral to benefit for us as you look at 2023. If you think similar $ EBITDA to where we were this year, rather than a drag through working capital on the cash flow statement, we'll start to get neutral or benefit from that. The majority of the savings that we implemented is on development and capitalized items for the most part as it relates to the investing side of the cash flow statement. That's where you're gonna start to see the benefit of this $7 million-$9 million kicking in, is, you know, even in a low growth scenario, we feel pretty confident about the low-end range of that number. If we start to get some traction in the second half of the year, which again, we're not banking on, but we're starting to see some green shoots, and if they continue to manifest, then we should start to be able to see the upper end of that range. Then it's just really a question of what do we reinvest it back into. Content takes a little bit longer lead time. Marketing is relatively quick, but the discipline that we've learned over 2022 and early 2023 is ensuring we're getting the right ROI on the spend, and that we're not just spending the money to drive near-term growth, but we're spending the money to increase long-term cash flows. That's really been the big shift in late 2021 and 2022 as we've adapted to the new realities of post-COVID. Right. The $7 million-$9 million in cash flows, does it translate also a little bit to EBITDA, or is it purely from working capital improvement or the cost reduction and the healthier maybe top line will lead to a positive EBITDA? I mean, stepping back a little bit, you've had this model where you were kind of reinvesting in marketing and targeting a little bit of a break-even point there. Are we maybe past that at this stage? I think we are taking it one step at a time. In the current market environment, cash is important, and getting to solid, sustainable free cash flows is critically important for us. Market cycles change, and there will be a lot less competition in a year from now as some of these weaker players that have aspirations to get to free cash flow that can't make it. I won't say that we've turned a corner, but what we've done over our 30-plus year operating history as Gaia with Jirka's ownership and stewardship of it, has been responsive to the market environments to ensure that we can maintain our own destiny. That's really what we're at right now. We focused on financial independence, we focused on technology independence. Now we're focusing on marketing and growth independence so that we give ourselves optionality going forward. That's really what we're focused on. I don't wanna comment on what the long-term plan is because the long term, as one of my investor mentors told me, is a series of short terms. We're just going to continue to adapt and react to the short terms, have a longer-term vision that we can execute on with some optionality, and then be opportunistic because we're in a better position than most companies of our size and scale to navigate through uncertain waters for the next 9-12 months. Valuations will come back around and our business will continue to perform, and that's what we're focused on. Well, Paul, great. I think that was an interesting conversation. There's really some encouraging catalyst that we can look for. It'll be interesting to see how Gaia Marketplace does. I don't feel there's a huge amount of expectation built up in that effort, but it'll be interesting to see that. As you said, it seems like there's some green shoots on the membership growth again, maybe with the French and German and more stability in the U.S. I think for me, that kind of covers what I was hoping to cover today. That was very helpful. Any closing comments from you? Are we good for the day? I think we're good. I think that was a pretty meaty conversation for people to digest. Yeah. So we'll provide a transcript, an edited transcript, so people can go back and really absorb the information. That was very. Yeah, that was helpful. Thank you, Paul. Thank you to our listeners, to the live listeners and the recorded listeners. Again, there will be a recording on our website, watertowerresearch.com. In a couple of days or so, we'll have a transcript that will also be available to all on our website. Thank you very much. Have a great rest of the day. Goodbye now. Bye.