Gaia, Inc. (GAIA) Earnings

Management highlights

Good afternoon, everyone. This first quarter marked the beginning of our deliberate refocus back to a direct member base and a pricing discipline. In March, the 15th percent price increase was implemented in about 80% of our regions for monthly members. For our annual members, the increase will be effective as a subscription renewal. During the first quarter, we delivered $1.5 million of operating and $1.1 million of free cash flow. Kristen will tell you about her plan to improve both our retention and ARPU at least 20% between the fourth quarter of last year and fourth quarter of this year. This quarter reflects an important step in Gaia's evolution as we continue to execute on a strategy centered on strengthening the quality, durability, and profitability of our membership base. We are prioritizing growth in direct membership, reducing reliance on lower value third-party member acquisition, taking a disciplined approach to discounting and promotions, and rebuilding our direct marketing capabilities. We continue to invest in the core elements that define the Gaia experience, content, AI, personalization, and community. Recent releases include the Monroe Institute Experience, the fourth season of Missing Links with Greg Braden, and we recently launched a new monthly live format that enables members to engage directly with their favorite Gaia hosts in real time. On the AI side, we have improved our model meaningfully, reducing our costs and improving the quality of responses. We are also launching AI-powered Tarot and astrology features. We've partnered with Amagi with the launch of fast channels to support top-of-funnel Gaia marketing efforts.

Guidance

Our goal remains to reach breakeven in the fourth quarter of this year and profitable for the year 2027. We expect near-term pressure on revenue growth as we make the transition to direct membership while still expecting growth versus last year. We are targeting our next milestone of $150 million in revenue and $39.3 million in adjusted EBITDA by 2029.

Segment performance

Revenues for the first quarter of 2026 increased to $24.3 million from $23.8 million in the first quarter of 2025, primarily driven by increased ARPU and partially offset by the reduction of discounted pricing. Gross profit in the first quarter was $20.9 million. Unchanged from last year, gross margin was 86%. Operating cash flow was $1.5 million, with free cash flow of $1.1 million, reflecting ongoing operational discipline and representing the ninth consecutive quarter of positive free cash flow. Our annualized gross profit per employee increased to $816,000, up from $806,000 in the year-ago quarter.

Analyst Q&A

• Q: Perhaps your phone is on mute. Oh, sorry about that. I was on mute. But thank you guys for taking my question. First one for me, you know, if we think about this pivot here to the direct channel, you know, why do you feel like now is the right time to make this switch in the emphasis here?

  A: The timing reflects what I've learned over the past three quarters. Like when I stepped into the CEO role, the company already had a growth strategy in motion with a focus on third-party channels and discounted memberships. My role was to assess whether that strategy was still working, especially for the long term. As marketing commitments to those channels increased, the data showed that they were generating customers with higher churn and lower margins, and that didn't support the full Gaia experience. But at the same time, we are making important investments into AI products and community that are designed to deepen engagement and create more value for our direct members. And so third party, like I said, third party members just do not have access to those features off our platform. So this is a disciplined decision as newly into this role based on data, customer behavior, and our long-term mission. And so I believe right now is the right time to focus our resources on higher quality growth, stronger retention, and better marketing.

• Q: And then if we think back to last quarter, I know you guys did communicate low double-digit growth for FY26. So based on everything that you had talked about, it sounds like, you know, we shouldn't be expecting low double-digit growth for this year. Any commentary that you can give us on what, you know, we could expect growth to be, it sounds like you guys did say you expect the business to grow year on year, but any color there would be helpful.

  A: Yeah, so really our overarching theme, as we've been talking, is our continued positive free cash flow to achieve that 20% to 25% ARPU by Q4 of this year. And then that will lead to our breakeven P&L for the fourth quarter and full year 2027 profitability for next year. We will see a short to midterm lull or kind of consistent Revenue field for the next quarter or two with it in the second half of the year things up ticking to achieve that q4 break-even P&L

• Q: Can you talk a little bit about gross margin, why it was down a little in the quarter, and where you expect it to be as you go through this transition?

  A: Yeah, so for Q1, 86%. On paper, that does look as though it's down as a percentage year on year. We did have a one-time true upper on royalties in Q1 of last year, so when you normalize that, it was flat at exactly 86% gross margins. With that being said, however, good question, because we will see a small revenue mix shift from our non-ESFOD business, kind of leading to a slight decline in our gross margin percentage as we proceed through the year, just kind of making sense that some of those businesses are growing at a slightly higher growth rate. So I can go over that in more detail with all of you when we run through your models. But we're talking about a a two to three point by the end of the year on gross margins, but we'll still be running as we go into 2027 back up around 86%.

• Q: And can you break out, was there a contribution from Indotown and some of your marketplace initiatives in the quarter?

  A: There were. They were non-material. They were on track to what we were expecting. Really that 86% for Q1 was on plan to what we were expecting from them. The mix shift really isn't going into effect there as much as it will in Q2 through Q4.

• Q: And I know you revised your top line guidance, but did I hear you still expect to be profitable by the fourth quarter?

  A: That's correct. Yes.

• Q: I was curious, like, what the kind of product roadmap is with Ignaton and marketing plans. plan for the year and just any kind of data around your expectations for how the year should roll out for Ignaton?

  A: At Biohacking, we're going to introduce a new product, what's called REM sleep, what increases dramatically for the REM sleep. And we probably also introduce a new peptide to get rid of the wrinkles. But, you know, on a peptide, we're not totally sure we do it right on the conference or after. We have a few other non-supplement technologies. It's a technology company, and we want to be careful so it's not viewed. on some people because today we have questions about this being a supplement company. We don't expect the supplement will produce majority of the revenue at all, but for this year, it would. So that's kind of the biohacking, but we will introduce some of the non-supplement product as a vision without launching it in an event.

• Q: And what about the capital position at Ignaton? Do they, like, how does that look? Are they still, is there still plenty of cash there?

  A: Yeah, the company operates close to breakeven and has about $5 million cash and no debt.

• Q: Can you update us just on what's launched? I'm not sure if any of that's launched or the timing around the kind of key initiatives around community.

  A: Yeah, sure. I'll take that. So community, it remains an important part of the long-term vision for Gaia because we believe it has the ability to deepen engagement and increase intention. And right now we are on target to launch a beta version by the end of this year for community. Like, we are in a testing for sharing a playlist and sharing of profiles right now.

• Q: What percent of your revenue is still derived there? And if we look forward a year or two, where is that going to shift? Is there anything else in your subscription platform that you think, whether it's third-party or something else, that you're also kind of – it's under assessment? Are there other areas that you might deprioritize as well?

  A: The third-party, historically, we always had a limit. It has to be revenue below 20%, and it was there until, like I said, two and a half years ago. It was always like high teens. And then for us two and a half years it shifted a lot and get to kind of low 20s to you know and Close to not quite 25, but there and needs to go back into below 20% Did I answer a question Yeah, how quickly do you expect it to get back to that targeted range, Yurka? A: Within 12 months.