Gaia, Inc. Class A Common Stock 2026 Q2 Earnings Call

Please go ahead. Good afternoon, everyone.

As we discussed on our last call, our business today reflects the deliberate trade-off 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 6 to 1 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-time 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 $819,000, demonstrating our continued efforts to increase efficiency. Now, turning to content. We continue to invest in expanding and strengthening Gaia's programming slates.

This quarter, we signed best-selling author, transformational coach, and hypnotherapist Jim Kwik 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 Osbourne. 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 Gregg Braden's "Missing Links," "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 Igniton. In May, we introduced two new products at the Biohacking Conference. First was IgniREM 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 IgniPeptide Eye Serum, which is designed to support more hydrated, youthful-looking eyes while reducing the appearance of wrinkles, puffiness, and dark spots.

In Igniton's first year of supplement sales, we've been encouraged by the results, which serve as a strong proof of concept for the Igniton Quantum Wellness Technology. And while we don't comment on future products, we believe we're only beginning to scratch the surface of the Igniton technology's potential applications. With that, I'd like to turn the call over to Yonathan Nuta, our Chief Operating Officer, to talk more about how we are evolving the Gaia product experience and using AI to support that work. Yonathan rejoined Gaia last October after previously spending several years with the company as an executive between 2016 and 2021.

Yonathan? Thanks, Kiersten. 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 tarot, oracle, and horoscope experiences we launched this quarter. The early data is strong.

Members spend more time per session with the AI tarot 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 phone. 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-members.

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's why that matters. Gaia's 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. Circle is built to change that. 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 churn 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.