GAIA (GAIA) Q2 2026 earnings call transcript

Good afternoon, everyone. As we discussed on our last call, our business today reflects a deliberate tradeoff we said we were making, prioritizing the long-term quality of our member base over near-term growth. That transition, combined with higher industry marketing costs in April and May, weighed on our results this quarter. As we told you, we were making a deliberate shift toward our direct member base, and that this transition would put near-term pressure on revenue growth as we partially pulled back from lower-value regions like Latin America and from third-party acquisition channels.

In fact, the revenue decline in the second quarter came from our international business. That is exactly what you are seeing in our results, and it's consistent with the plan we laid out. We still remain focused on two metrics, reducing churn and growing ARPU, targeting a 20% improvement each by the fourth quarter of this year. We are on track against this framework. I want to be direct that we are not taking the softness in our top line lightly, and we've taken swift action across the organization in response. On the marketing side, we experienced a temporary spike in customer acquisition costs in April and May, driven by an algorithm change at a major advertising partner. We identified the issue and have since brought it back in line with our expectations.

For context on why we manage acquisition costs this closely, on average, a direct member today has a lifetime value of over $500 against a customer acquisition cost of $85. That roughly six-to-one relationship is why we are willing to give up lower quality revenue to protect it, and an increase in CPA is something we move quickly to correct. We view this as a reminder of the importance of diversifying our acquisition channels as we build out our direct marketing capabilities, and it is an area we have actively been addressing.

More broadly, since late February, we've undertaken a systematic review of spend across the organization in marketing, technology, and overhead, and we've made targeted reductions to our vendor costs. We expect to benefit from all the cost reductions by the end of the year These are not one cuts We believe they reflect a more disciplined sustainable cost structure going forward As an example our annualized gross profit per employee increased both annually and sequentially to demonstrating our continued efforts to increase efficiency Now, turning to content, we continue to invest in expanding and strengthening GAIA's programming slate. This quarter, we signed best-selling author, transformational coach, and hypnotherapist Jim Curtis to host a new series launching in October. The series will feature conversations with leading voices across wellness, spirituality, and culture, including guests such as Judd Apatow and Jack Osborne.

We believe Jim's strong public profile, engaged following, and notable guest lineup will help us reach a broader audience. This, combined with a much larger slate of new returning content launched during the quarter, including the fourth season of Greg Braden's Missing Link, Astrology 101, reflecting the continued popularity of astrology, and The Pulse, a new podcast hosted by Ben Stewart.

We also introduced GAIA Shorts, the best of our long-form content, as a new way to help members discover more of our vast library. These five-minute clips highlight key moments and ideas from our deeper, long-form programming, making it easier for members to explore more of what GAIA has to offer. GAIA shorts consistently rank as the most popular content when released, and we believe they can become an important tool for increasing content discovery and engagement across the platform.

Lastly, an update on Ignaton. In May, we introduced two new products at the Biohacking Conference. First was Igni REM sleep. It supports longer REM sleep, fewer sleep interruptions, and an easier return to sleep after waking, helping deliver a better quality sleep overall. And then second was Igni Peptide Eye Serum, which is designed to support more hydrated, youthful-looking eyes while reducing the appearance of wrinkles, puffiness, and dark spots.

In Ignaton's first year of supplement sales, we've been encouraged by the results, which serve as a strong proof of concept for the Ignaton quantum technology. And while we don't comment on future products, we believe we're only beginning to scratch the surface of the Ignaton technology's potential applications.

With that, I'd like to turn the call over to Jan Nuda, our Chief Operating Officer, to talk more about how we are evolving the GAIA product experience and using AI to support that work. Jan rejoined GAIA last October after previously spending several years with the company as an executive between 2016 and 2021. Jan?

Thank you, Kirsten. It's great to speak with you today. Before I get into product, I want to talk about AI, because at GAIA, it is both how we operate and what we build. Internally, we use it across content production, product development, and marketing operations. It is a productivity accelerator that lets lean teams scale their impact and respond to market dynamics faster than we otherwise could. And it is a direct contributor to the cost savings Ned will walk you through in a moment.

Externally, it is increasingly how members find and experience our content, and those experiences are available only to our direct members. Our AI guide has proven to be a leading engagement driver, and that is what informed our decision to build the AI-powered TARO, Oracle, and Horoscope experiences we launched this quarter. The early data is strong. Members spend more time per session with the AI TARO experience than with any previous AI feature we have launched. More importantly, it drives incremental return visits and incremental content viewership. This is not engagement sitting beside the library. It is engagement that pulls members back into it. That is how a daily habit becomes retention. On discovery, we are testing moments, our vertical short form experience generated with AI, which brings the best moments in our library into the format people are already used to on their phones.

Early signals are encouraging on two dimensions, engagement with the feature itself, and incremental long form viewership. We will size that for you as the rollout broadens Turning to community we have launched the ability for members to build and share rich profiles and to find and share playlists and individual titles with both members and non And we opened an early alpha circle which lets members chat directly with one another In our test groups more than 70 of members have opted in Here why that matters GAIA content is about transformation Members come to us while they are questioning something healing something or changing the way they see the world And that is usually a solitary experience The people closest to them are often not on the same path Members tell us this directly.

The community they already have does not understand the transformation they are going through. So, they have been doing the meaningful work of their lives alone. The circle is built to change that. And the commercial logic follows. A member can cancel a content library. It is much harder to leave people who understand you. Connection is the most durable retention mechanic in any subscription business, and it is the one thing we have never offered. Every one of these experiences, the AI feature, moments, circles, is only available to a direct member.

That is the mechanism behind the turn improvement we are targeting for the fourth quarter, and it is why we are willing to trade near-term revenue to get there. Now, over to Ned for the financial details.

Thank you, Jan. Now, revenues for the second quarter of 2026 were $23.3 million, a decrease of 5% from the year-ago quarter. This primarily reflects the impact of our shift in marketing away from discounted members with a lower dependency on third-party partners toward direct member acquisition. It also reflects continued competition for consumer spending and engagement across the broader SVOD industry, which we anticipated at the beginning of this year.

Gross profit was $19.9 million, down from the prior year, with gross margin of 85.3%, compared to 86.7% in the second quarter of 2025. The decline in margin was primarily attributable to lower revenue against a relatively fixed content cost base. Selling and operating expenses were $21.6 million compared to $20.6 million in the prior year period, reflecting our change in marketing headwinds and continued investment in Initon.

Corporate general and administrative expenses decreased to $1.5 million from $2.9 million, reflecting our ongoing concentration on cost reductions. Net loss for the quarter was $3.0 million, or negative $0.12 per share as planned. Compared to a net loss of $1.8 million or negative $0.07 per share in the second quarter of 2025. Our cash balance was $5.3 million as of June 30, 2026, with a fully available $10 million line of credit.

The seasonality of annual member renewals impacted our cash inflows by $2.4 million versus the first quarter. This, together with lower revenue and higher marketing costs, were the primary drivers of our cash position this quarter. Since the start of our cost review, we've executed or identified over $3 million in annualized savings. Given the transition we're managing through, we expect the third quarter to remain challenging, with results similar to what we're reporting today. With the added pressure of the advertising cost spike that impacted our business in April and May, we are no longer forecasting break-even net income for the fourth quarter of this year. Instead, our focus is on returning to positive free cash flow in Q4.

We continue to operate with a solid balance sheet and no debt outside our small campus mortgage, and we have full access to our $10 million line of credit if needed. That completes my summary, and that concludes our remarks. So I would like to open the call for questions. Operator?

We're really looking for Q4 to get us back on the free cash flow front at this time. Okay. And then, you know, with that, not driving in the fourth quarter to profitability, and, you know, you covered a couple things on the call, but just, you know, so we're aware, can you just walk us through what those couple of things were just so it's at, you know, top of mind and we can fully understand sort of the, The change there from the commentary last quarter.

Yeah, absolutely. It was really the seasonality of our annual member renewals impacted our cash inflows. But really from a revenue standpoint, it had to do with the higher marketing costs that Kirsten commented on in the April and May timeframe. Those headwinds really have kind of proven to push back our expectations for the year. But we are getting that back on track, as Kirsten had said. But that's really the main difference.

Okay. Got it. Well, thank you for taking my questions. Yep. Thanks, Ryan.

I will come in and I will look for Jan and Kirsten to give a little bit of color. But, yeah, we saw these headwinds in kind of the April and May timeframe, and it caused a higher CPA than we have been accustomed to or had been planning. We have been working very closely with our marketing team to go out and, while we are going through this change to the direct customers, We really weren't anticipating, again, some of these headwinds, we had a different algorithm with one of our major advertising partners.

And so we have that back on a better track. And maybe Jan, you could elaborate a little bit.

Yeah. Hey, Jim. Just one thing to clarify. We already have done this. There were three things that happened at once during that early Q2 time period. One, rebuilding our direct acquisition without discounting is a huge piece. Two, our price increase. And third, the algorithm changes at a major advertising partner. We've taken deliberate steps since then to kind of reduce our dependency on said advertising partner so this doesn't happen again.

Yeah, that's a great question, Jim. As we said previously, our plan is still to continue working on community and launching it through the end of Q4. As we launch it, we're measuring very closely its impact on retention so we can get a sense of timing and payoffs.

So we actually, as you know, we increased our pricing as of March 1st of this year. We don't anticipate raising our pricing again until 2028. I think that answers your question, Jim.

Thank you, everyone, for joining, and we look forward to speaking with you when we report our third quarter results in early November.