Good afternoon. My name is Bella, and I'll be your conference operator today. I'd like to welcome everyone to the CuriosityStream Second Quarter 2025 Earnings Conference Call. Please note that today's call is being recorded. [Operator Instructions] I will now turn the call over to Tia Cudahy with CuriosityStream. You may begin your conference.

Thank you, and welcome to CuriosityStream's discussion of its second quarter 2025 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 quarterly report on Form 10-Q for the quarter ended June 30, 2025, 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 2024 period. Now I'll turn the call over to Clint.

Thank you, Tia. To state the obvious, we are living and operating today in an extraordinary and transformational time in media and technology. While I will talk later about what this revolution means for CURI, I'd first like to share our Q2 highlights. Quarterly revenue grew by 53% year-over-year from $12.4 million to $19 million, far exceeding the high end of our guidance. Revenue also grew sequentially from Q1 by 26%. Net income was again positive and improved by nearly $3 million year-over-year. Adjusted EBITDA grew by over $4 million year- over-year from negative $1 million to positive $3.1 million, also exceeding the high end of our guidance. More granularly, our subscription revenue increased sequentially and our licensing revenue powered by video and audio for AI training grew considerably. In short, our business is strong and strengthening across the board. Brady will provide more color around these and other key metrics in his part. In regard to our subscription revenue trajectory, we recently entered into new and expanded multiyear wholesale distribution agreements in Asia, Latin America and the U.S., which we believe will ensure our overall subscription revenue, is up and to the right for the foreseeable future. Further underscoring our confidence, we recently launched CuriosityStream and Curiosity University in new international markets with retail channel store partners like Prime Video channels. We licensed a slate of traditional individual titles and series to both new and returning partners, including public broadcasters, pay-TV channels and academic distributors across the U.S., Europe, Asia and Latin America. Today, August 5, we premiere a major series on the world's most influential streaming platform, Netflix. Titans: The Rise of Hollywood is a 6-episode premium drama that chronicles the extraordinary rise of Hollywood studio system, driven by the ambition and vision of first-generation immigrant pioneers. This…

Thank you, Clint, and good afternoon, everyone. Our full results will be presented in the 10-Q that we'll file in the next day or 2, but let me quickly go through some of the second quarter results that we want to highlight. Clint said, in the second quarter, we reported revenue of $19 million, exceeding our guidance and a 53% increase compared to $12.4 million a year ago. We continue to generate net income in the second quarter with earnings coming in at $0.8 million or $0.01 per share and a $2.8 million improvement from 2024. Likewise, we reported another quarter of positive adjusted EBITDA, which came in at $3 million, an improvement of $4 million from a year ago and also the highest adjusted EBITDA in company history. Adjusted free cash flow came in at $2.9 million, near the high end of our guidance range and an increase of $0.4 million compared to last year. This also represented our sixth quarter in a row of positive adjusted free cash flow. Revenue for the second quarter was led by content licensing, which came in at $9.3 million, an increase from last year of over $8 million, driven by significant new business from AI licensing. Our subscription revenue, which we consider our D2C, partner direct and bundled distribution revenues was also $9.3 million in the second quarter. This was a $1.7 million decline from last year, but a sequential increase from Q1, a trend that we believe will continue. Second quarter gross margin was 53%, a slight improvement from 52% a year ago. While we're seeing continued reductions in content amortization, our cash cost of revenue increased slightly, a result of growth we're seeing in the licensing of content that we have acquired through revenue share arrangements and associated storage costs.…

[Operator Instructions] Your first question comes from the line of Laura Martin with Needham.

Great results. Congratulations, you guys. My first question is, so financial theory told us we must ignore cost. So my question is why are you in the media business, the core media business, which is...

Why are we in core media business. Yes. It's a great question, Laura, and I appreciate you asking that. I think we're in the core media business because we have a subscription video-on-demand business that is strong, that is global, that is durable and I think represents the core of who we are as a company. And so I think you may be asking like, okay, if you're doing this type of technology licensing, why are -- why do you continue to do this? And our answer is, all of this works hand in glove. All of this works closely together. I mean the vision that we have for Curiosity over the near, mid and long term, Laura, is that we will have three solid revenue pillars: subscription business, a licensing business and an advertising business. We believe our subscription business will grow steadily. We've done a lot of work to enter into certain wholesale agreements and other agreements that we believe really firm up the foundation and put us in a position to grow steadily. So we believe subscription will grow steadily. Licensing, we believe, will grow rapidly and it's certainly a high-growth area. And then advertising, which for us is still nascent, I think holds significant steady and high-growth opportunity over time. And I say everything works together because the reason that we're able -- the reason that we've been able to build such a large library for AI licensing is because of all the existing relationships that we have around the world with producers and distributors. We're constantly acquiring content for our three subscription services, for our linear pay-TV channels, for AVOD, for FAST. And so because we're doing this, because we have the people in place, the processes in place to do this, it's not a huge extra lift to add on the ability to license AI rights or other rights as well. So we're in it because it all works hand in glove. It all works together, and I think it'd be very difficult to be in just one of these today.

And then what are the extra costs to the extent you start aggregating more and more content and licensing to a broader swath of people, they all have different needs. They all have different tech stack. What should we expect to see cost increases happen as you pivot more towards this high-growth licensing for business?

One of the things we're very proud of is we've amassed a library of over 1 million hours of content, primarily on a rev share basis. So what that means is as we license our content, obviously, if it's our content, there's 100% margin. If it's our partners' content, we're paying out a piece to them. And so it's maybe 40% to 50% margin, something in that frame. So our approach, because as we got into this, we knew a couple of things. We knew that we were going to have to amass a lot of content in order to make it a meaningful business. And we knew that we need to work with a lot of partners. But at the same time, like we also have told you and many other people that we're going to run a profitable business. So we needed to do all of that in a way that didn't layer on cost to our business today. So we can continue to amass content like this. Over time, would it make sense for us to pay outright for certain large libraries that are available. We'll look at that as an ongoing basis. But essentially, right now, the only cost that we see going up would be storage and delivery cost to some extent. But in the grand scheme of things, those are relatively de minimis.

So like hosting costs and R&D costs and hiring that doesn't add a lot to the cost structure.

It does not, Laura. We pride ourselves on being a tight company of 42 full-time people. And I think over the course of this year, we'll be at $1.5 million to $2 million per employee in revenue.

[Operator Instructions] Your next question comes from the line of Kris Tuttle with IPO.

You guys did a great job covering everything, so I don't have a lot of questions. One thing you did say that surprised me, Clint, is you said something about code. And I guess I wanted to understand a little bit more about what that is and how that -- if that's something that we should be looking for more of in the future, and that's a pretty interesting comment.

Yes. Thank you for asking, Kris. As we began licensing data for AI training, we took a look at what we had and we took a look at the industry. And obviously, like video, as I said, that sits -- that's at the top of the leaderboard in terms of value, in terms of demand. Audio is kind of underneath that. Images, study guide, scripts, those are valuable as well. But we did also have code. In the earliest days of AI training licensing, there was a lot of code that was that was scraped from the Internet sites like GitHub. There was also some sort of proprietary code that wasn't there that people licensed out. I never thought in a million years, to be honest with you, that we would be able to license our code. But we've included it in our sales materials with a number of different partners. And so as we build relationships with these companies and as their needs evolve and change, it is something that we have. I don't -- I can't really speak to the long-term value of it, the long-term nature. I just think it goes to the value in owning and controlling good IP. That's, I think, the big point here. And that's why I think if you control millions of hours of video and other data, there will always be ways to monetize that. And I just point this out as something that is just kind of unique, unsuspected and representative of something else that I said, like I've talked about these additional rights that we monetize. I think it's in addition to potentially data that we're not aware is valuable. I think there will be additional like licensing rights that we haven't even contemplated today. So hopefully, that's helpful.

Yes. I mean one slightly expanded follow-on question there, which I guess gets a little bit into what Laura was bringing up. There's entertainment content. And then there are -- I can't even tell you how many millions of hours of training video content has been built at very high levels of quality, for instance, in the hospitality industry and things like that. Are those areas that you're currently involved in, how significant -- I mean, is that on the road map? I'm just trying to gauge where that is on the time line.

I think it's a really good question, Kris. And we're not actively looking at that right now. What we're primarily focused on amassing in the video space is obviously continuing to build out our massive factual entertainment library. But as part of this, we've definitely increased our scripted content, meaning general entertainment, movies, series, animation, kids. We've increased significantly our sports content. And we've increased significantly some of our audio content as well. So as it relates to those types of videos, whether they're promotional or instructional, I think they can absolutely have value, particularly if they've -- the challenge comes, have they been in front of the paywall or behind the paywall. So a lot of that content, if it's free, running around on the Internet, there's a good chance that it's already been trained on. At the same time, there is a whole lot of video, to your point, outside of what traditional media companies own that has value in the licensing space. And if you believe that these models will need billions or tens of billions of hours of video, and it certainly can't all be synthetic, and it can't all be stuff that's been freely available on the Internet, it could definitely have value.

Yes. All that stuff is -- Four Seasons doesn't put that stuff outside of the paywall.

Right. So it becomes -- it does become a value. You just need a lot of it.

day.