Good afternoon. My name is Krista and I will be your conference operator today. I'd like to welcome everyone to the CuriosityStream Fourth Quarter and Full Year 2024 Earnings Conference Call. Please note that this -- that today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Brett Maas with CuriosityStream’s Investor Relations. You may begin your conference.

Thank you, and welcome to CuriosityStream’s discussion of its fourth quarter and full year 2024 financial results. Leading the discussion today are Clint Stinchcomb, CuriosityStream’s Chief Executive Officer, and Brady Hayden, CuriosityStream’s Chief Financial Officer. Following management’s prepared remarks, we will be happy to take your questions. But first, I'll review the safe harbor statement. During this call, we may make statements related to our business that are forward-looking statements under the federal securities laws. These statements are not guarantees of future performance, but rather are subject to a variety of risks, uncertainties, and assumptions. Our actual results could differ materially from expectations reflected in any forward-looking statements. Please be aware that any forward-looking statements reflect management’s current views only and the company undertakes no obligation to revise or update these statements nor to make additional forward-looking statements in the future. For a discussion of the material risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's press release. Additional information will also be set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, when filed. In addition, reference will be made to non-GAAP financial measures. A reconciliation of these non-GAAP measures to comparable GAAP measures can be found on our website at investors.curiositystream.com. Unless otherwise stated, all comparisons will be against our results for the comparable 2023 period. Now I'll turn the call over to Clint. Clint, floor is yours.

Thank you, Brett. We took big steps forward in 2024. To speak plainly, we delivered a year-over-year cash flow increase of about $26 million in 2024. More specifically, we lost about $16 million in cash in 2023 and we made about $10 million in 2024. We did this by executing on the cost rationalization we promised and by securing higher margin revenue across our subscription services, which represent recurring revenue and also, in our advertising and licensing initiatives which represent largely variable revenue. I’m gratified to share that 2025 will be a return to topline growth and continued bottom line growth. Q4, we delivered our ninth straight quarter of increased cash flow and as such our highest ever adjusted free cash flow at $3.3 million. Our topline revenue also exceeded our guidance. Our subscription revenue grew both sequentially and year-over-year. Our variable revenue grew sequentially and while down slightly from the prior year quarter, we believe it is important and helpful to understand that by increasing our overall roster and categories of partners, which enabled higher margin revenue, we laid additional and critical groundwork for heavy overall improvement in 2025. Our confidence in 2025 is driven by five factors. Number one, we aggregated and amassed rights to hundreds of thousands of hours of monetizable video and audio which we are putting to work on our own platforms and in licensing agreements. Our licensing agreements are with both traditional media partners and technology partners that are in need of content to train and fine tune large language models to accelerate their AI product rollouts in an environment of increasing competition. Over the past handful of months, we have delivered and licensed over 8 million minutes of video and audio, and we are in the process of delivering much more. We have…

Thank you, Clint, and good afternoon, everyone. Our full financial results are presented in the back of the press release that we just issued a few minutes ago as well as the 10-K that we’ll file in the next few days. But let me quickly go through some of the results that we want to highlight for the fourth quarter as well as full year 2024. We have remained intensely focused on expense discipline and operating efficiency, and we believe our 2024 results demonstrate the excellent progress we have made over the past several quarters. As Clint said, we achieved another milestone in the fourth quarter, as adjusted free cash flow came in at $3.3 million, which exceeded guidance and was an improvement of $5.7 million from prior year. This also represented the highest quarterly adjusted free cash flow in the company’s history, and nine quarters of sequential improvement in this metric. For the full year, adjusted free cash flow was $9.5 million, an improvement of $25.5 million from 2023. To put that number in context, we improved our 2024 cash flow by an amount equal to half of our annual revenue. Looking more at revenue. Fourth quarter revenue was above our guidance range, coming in at $14.1 million, compared to $12.6 million in Q3, and $14.8 million in the prior-year quarter. Our direct business remained our largest revenue category, generating $9.4 million in Q4 and $38.6 million for the full year, continuing to demonstrate a predictable, recurring revenue stream. Total revenue of $51.1 million was lower for the full year, although this was mostly the result of entering fewer non-cash transactions in 2024 than in 2023. If you take out these non-cash deals, our 2024 revenue was essentially flat year-over-year. Fourth quarter gross margin of 52% increased from 45%…

[Operator Instructions] And your first question comes from Patrick Sholl with Barrington Research. Please go ahead.

Hi. Thank you. I was just wondering if you could talk a little bit more about the revenue expectations for Q1 and full year. So you had mentioned earlier about like separating out subscription and the advertising and content licensing as kind of recurring versus variable growth. I was kind of wondering how you're seeing the contribution of those kind of two different types of revenue into the 2025 expectations.

Yeah. Thank you for the question, Pat. It's a really good one and I'm glad that you asked it. One thing that I said in my opening remarks is that, in light of our current overall annualized operational costs, these are significantly lower than our recurring revenue, which we consider to be our subscription revenue. So, this dynamic ensures a really hard minimum of annual free cash flow and gives us the flexibility to take some calculated swings, potentially some large swings. So when we're talking about subscription and when we're talking about recurring revenue, typically talking about anything that is subscription oriented. And so then you go to variable. So variable historically is licensing and advertising. So when we're thinking, the question I've been asked many times is, okay, are some of these big licensing deals that you anticipate doing this year, are those recurring? And so I think it's critical to understand this. I've done directly or been parts of hundreds and hundreds of content licensing agreements. Most of them are not recurring. So typically a company like ours is delivering content to a partner. The partner accepts the content, and then we then recognize the revenue at the start of the term. It used to be upon acceptance of the content, it's now at the start of the term. So it's not recurring in the traditional sense, but it can become de facto recurring if we build a strong relationship with a content partner by delivering high quality, diverse content on time and at the scope and scale they're looking for. As early as we are in this practice of licensing video to non-traditional partners for AI training purposes, we've already had clients ask for a second and third order after we fulfilled the first. So a…

Yeah. That was very helpful. And then I was just on just the overall subscriber activity, I guess, can you just talk about how you kind of approach managing the service and kind of in like those general increased macro uncertainty and what learnings you have from I guess 2022 and the uncertainty in that period?

Yeah, thanks for asking. So, look, if you look at the direct subscription business today, you've got Netflix and you have Amazon who have escape velocity. Those are completely different animals. I think there's been some good news in the press recently for some existing legacy services like Max in regard to their subscriber numbers for a couple of reasons. One is they've embraced bundling from kind of a partner level and also from a wholesale level. So I think you are seeing a certain return to almost a traditional cable pay TV business, not exactly, but in part. And so that's happening. However, those are exceptions. Like, if you look at most of the hundreds of streaming services in business today, to the extent that they're growing, they're doing a price increase for the most part. Just look at the big ones and you can see, okay, the price increases are really, really frequent. And then also they're embracing, bundling, and other approaches. I think that, for the larger services, what tends to get people to subscribe to those are big specials. Well, whereas most of the consumption comes from series with lots and lots of episodes, 300, 400, typically targeted to kids or adults for sure. But what we've learned like over the last, even just like over the last six weeks is most streams -- the most streamed content series last year was Bluey. I don't know if you have young kids Pat, but if you do you've heard of that, 55 billion minutes over the course of the year, so that's a lot. I think number two was Grey's Anatomy. That's a good series, there's hundreds of episodes, and that makes up a significant portion of Netflix's consumption as they've shared. So I think that what we're seeing is cost rationalization, a reliance on some key specials to get people to come to the service, and then a robust library to keep people engaged and subscribed. And by the way, that's our strategy as well, on a slightly different level than some of these multi-billion-dollar companies. But that's the approach. And so, with our subscription services, we push hard with our partners. And because of our global appeal, we have a number of new launches in our pipeline. But then at the same time, we want to make sure that we have a certain number of great, exciting specials that will generate some press to help get people into the service. And then we want to make sure that we have a really robust library. And so as part of one benefit to all of this content that we've amassed, in large part for licensing to the hyperscalers, we're also getting additional rights as we aggregate that content that we can put to work in AVOD, in FAST, in PayTV, and then across our subscription services.

Okay, thank you.

Your next question comes from the line of Laura Martin with Needham. Please go ahead.

Hi there. I think, Clint, could you update us on what's going on with your FAST channels and your ad-driven businesses?

Sure. I think that as it relates to our FAST channels and our ad-driven businesses, again, one thing we're really enthusiastic about is just in light of the high, high level of volume of content that we've been acquiring, aggregating over the last nine to 10 months, in addition to being able to license that out, we're able to start putting that to work. There's a lag between obviously when we have it and when we provide it to one of the large platform partners, and then when they publish it, and then when we get paid. But that lag will work itself out. But I'm excited about FAST for a number of reasons. One is we're getting a number of new launches for our flagship service. And then our three US Hispanic services that are being distributed by [Australia] (ph), we believe are outperforming others in that category. And based on what we've seen to date and with the number of new partner launches coming up, we're really excited about what that will yield. At the same time, while we're focused on our owned and operated fast channels, AVOD channels, and incorporating advertising into more of our PayTV channels, there is, in certain cases, if we think the economics make sense, we will just do some straight licensing deals with those partners as well. So that revenue over the course of 2025 will show up as licensing revenue as compared to advertising revenue. But we continue to -- that continues to be a good, strong, durable area that will only add to our variable revenue over the course of the year. Thank you for asking, Laura.

And then my follow-up is back on the data licensing. You sort of talked about it a little bit, but I'm really interested in how the contracts for the tech companies, so your non-traditional endemic, are different from like your normal media licensing. It sounds like maybe they're shorter and then you do it and it's almost like a project by project. Then they come back and ask for more. Whereas over at Reddit, those deals are like three to five year deals. So I'm a little, so can you describe how the traditional licensing is different from your traditional media licensing.

I'm really glad that you asked that. And so we don't know this for a fact, but we believe that we've probably done more in this space from a licensing standpoint than any other media company. Doesn't mean that all of the agreements that we've done have started yet because the rev rec has started based on the term. But similar to traditional content licensing, we're delivering an agreed upon amount of content to the partner. So just like we would deliver 50 hours or 10 feature films to HBO, we're going to deliver a big batch, big ranging batch of content to a technology partner. And I think the first difference, Laura, is in volume. I mean they just -- the volume is just by orders of magnitude greater. And obviously, the price that they'll pay on a per hour basis is lower than pay for feature film, obviously. But provided you have the volume, you can be in really good shape. And so we deliver the content, they accept it. The revenue is recognized when the term starts. We have in a few cases, we have what might be referred to as sort of de facto additional content delivery based on some of the terms and conditions. But what you see in that space because there's like big tranches of needs, it's typically one agreement, a tranche of content and then you get paid on that. So that's the sort of industry standard market there. But again, I cannot emphasize this enough. The key -- this is the key to any -- like, look, I've been involved in so many content licensing agreements over the years that I've had four-year agreements where they're contractually obligated to purchase a certain amount of content from us, and then they don't…

So helpful. So interesting and so helpful. And I totally agree that these rights are going to change names, and they're going to have to relicense everything they're doing today in two years, there's going to be a whole new things they want to do with them.

I've never seen our IP lawyer so excited, Laura. It’s fantastic.

Thanks, guys.

Thank you, Laura.

And we have no further questions in our queue at this time. And ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.