CuriosityStream Inc. (CURI) is a leading global media and entertainment company known for its award-winning documentary features, factual entertainment, and specialist factual content. Founded in 2015 by John Hendricks, the former chairman of Discovery Communications and founder of the Discovery Channel, CuriosityStream has established itself as a prominent player in the rapidly evolving streaming landscape.
Business Overview and History
CuriosityStream was launched with a mission to provide premium factual entertainment that informs, enchants, and inspires. The company's flagship streaming service, CuriosityStream, offers a vast library of over 15,000 programs spanning a diverse range of categories, including science, history, society, nature, lifestyle, and technology. Over the years, CuriosityStream has steadily expanded its content portfolio, forging strategic partnerships with leading nonfiction producers and leveraging its global reach.
Initially starting as a direct-to-consumer subscription video on-demand (SVOD) platform, CuriosityStream has since diversified its distribution model. The company has established affiliate agreement relationships with major multichannel video programming distributors (MVPDs) and virtual MVPDs (vMVPDs) to make its content available through their platforms. Additionally, CuriosityStream has entered into content licensing arrangements to grant other media companies certain distribution rights to its programs.
To differentiate itself in the competitive SVOD market, CuriosityStream has focused on its unique value proposition of providing high-quality, niche factual entertainment content. The company has also adapted its strategies to capitalize on emerging trends such as the growth of free, ad-supported streaming TV (FAST) channels and the increasing importance of partnerships with technology and media companies.
In October 2020, CuriosityStream underwent a transformative event when it merged with Software Acquisition Group Inc., a special purpose acquisition company (SPAC), in a reverse merger transaction. This move enabled CuriosityStream to become a publicly traded company, listed on the NASDAQ exchange under the ticker symbol CURI. The infusion of capital from this transaction has provided CuriosityStream with the resources to accelerate its growth and expand its global footprint.
Financial Performance
Financials
CuriosityStream's financial performance has shown mixed results in recent years. For the fiscal year 2023, the company reported total revenue of $56.89 million, a decline of 27% compared to the previous year. This decrease was primarily driven by a decline in content licensing and bundled distribution revenue, which offset the growth in the company's direct-to-consumer business.
The company's net loss for the fiscal year 2023 was $48.90 million, compared to a net loss of $50.92 million in the previous year. The company's adjusted EBITDA, a non-GAAP metric, was a loss of $2.10 million in 2023, an improvement from a loss of $11.69 million in 2022.
For the most recent quarter (Q3 2024), CuriosityStream reported revenue of $12.60 million, a 19% decrease compared to the same period in 2023. This decline was primarily due to decreases in Content Licensing and Bundled Distribution revenue, partially offset by 13% growth in Direct Business revenue. The net loss for Q3 2024 was $3.06 million, while operating cash flow (OCF) and free cash flow (FCF) both stood at $2.26 million.
Liquidity
In terms of liquidity, CuriosityStream ended the fiscal year 2023 with $37.72 million in cash and cash equivalents, along with $14.99 million in short-term investments. As of the most recent quarter (Q3 2024), the company reported $9.72 million in cash and restricted cash. The company's current ratio, a measure of its short-term liquidity, stood at 1.9 as of Q3 2024, indicating a relatively strong ability to meet its near-term obligations. The debt-to-equity ratio was 0.0641, suggesting a conservative capital structure with low leverage.
Operational Highlights and Initiatives
During the fiscal year 2023 and into 2024, CuriosityStream continued to execute on its strategic initiatives to drive growth and diversify its revenue streams. The company expanded its global footprint by strengthening its partnerships with multinational video programming distributors (MVPDs) and virtual MVPDs (vMVPDs), as well as digital distribution platforms. These partnerships have enabled CuriosityStream to reach more viewers across various international markets, with its service now available in over 175 countries.
CuriosityStream operates its business through several key product segments:
1. Direct Business: This segment generates revenue from consumers subscribing directly to its streaming platform through its owned and operated website, mobile applications, and partner relationships. For Q3 2024, Direct Business revenue was $9.79 million, up 13% year-over-year, representing 78% of total revenue. The growth in this segment was primarily driven by price increases implemented across its Direct-to-Consumer (DTC) offerings starting in 2023.
2. Content Licensing: This segment generates revenue by licensing CuriosityStream's existing content library to other media companies. In Q3 2024, Content Licensing revenue was $1.66 million, a 67% decrease compared to the same period in 2023, primarily due to a lower volume of trade and barter deals.
3. Bundled Distribution: Through this segment, CuriosityStream offers its content, including 24/7 linear channels and video-on-demand library, to MVPDs and vMVPDs in exchange for annual fixed fees or fees per subscriber. For Q3 2024, Bundled Distribution revenue was $0.97 million, a 33% decrease year-over-year.
4. Other Revenue: This includes advertising, sponsorships, and other miscellaneous sources. In Q3 2024, Other revenue was $0.19 million, a 56% decrease from the prior year period.
Furthermore, CuriosityStream has made significant strides in its advertising and sponsorship efforts. The company has launched several free, ad-supported streaming television (FAST) channels, including Curiosity Now, Curiosity Español, and Curiosity Science, in partnership with leading platforms such as Samsung TV Plus, Fubo, Tubi, and Roku. These FAST channel initiatives have allowed CuriosityStream to generate additional revenue streams and increase the visibility of its content.
In addition, CuriosityStream has continued to invest in its content production and licensing activities. The company has expanded its portfolio of original factual programming, collaborating with renowned production companies and storytellers to deliver high-quality, engaging content to its global audience. Substantial portions of its video library have been localized from English into eleven different languages, enhancing its appeal to international audiences.
Risks and Challenges
CuriosityStream faces several risks and challenges that could impact its future performance. The highly competitive streaming landscape, with the presence of well-established players like Netflix, Disney+, and Amazon Prime Video, poses a significant challenge for the company. CuriosityStream must continue to differentiate its offering and maintain its appeal to attract and retain subscribers.
The company's reliance on content licensing and distribution partnerships also presents certain risks. The failure to secure or renew favorable licensing agreements or the loss of key distribution partners could adversely affect CuriosityStream's revenue and profitability.
Additionally, the company's ability to efficiently manage its content production and acquisition costs will be crucial in maintaining its margins and achieving profitability. Balancing investments in new content with the monetization of its existing library will be a critical focus for CuriosityStream's management.
Outlook and Guidance
For the fiscal year 2024, CuriosityStream has provided the following guidance:
- Revenue in the range of $48 million to $52 million - Adjusted EBITDA in the range of $0 million to $2 million
The company's outlook reflects its focus on driving growth in its direct-to-consumer business, expanding its global distribution partnerships, and optimizing its content and operational expenses. CuriosityStream's management remains committed to delivering positive cash flow and improving its financial performance over the long term.
In its most recent earnings call, CuriosityStream highlighted several positive developments:
- The company generated its highest ever quarterly adjusted free cash flow of $2.6 million in Q3 2024, representing a year-over-year improvement of nearly $6 million. - CuriosityStream increased its top-line revenue and EBITDA sequentially from Q2 2024 to Q3 2024. - Direct subscription revenue grew 13% year-over-year in Q3 2024. - The Q3 2024 adjusted free cash flow of $2.6 million was at the high end of their guidance range.
For Q4 2024, CuriosityStream provided the following guidance:
- Revenue in the range of $12 million to $14 million - Adjusted free cash flow in the range of $2 million to $3 million
Conclusion
CuriosityStream's journey as a leading global factual entertainment company has been marked by steady progress and strategic initiatives. Despite the challenges posed by the competitive streaming landscape, the company has demonstrated its ability to diversify its revenue streams and strengthen its global footprint. As CuriosityStream continues to invest in its content, partnerships, and operational efficiency, the company appears well-positioned to capitalize on the growing demand for high-quality, informative, and engaging factual entertainment.
The company's focus on its Direct Business segment, which now accounts for 78% of total revenue, shows promise, especially with the growth in direct-to-consumer subscriptions. However, the declines in Content Licensing and Bundled Distribution segments highlight the need for continued adaptation and optimization of its business model.
CuriosityStream's improved cash flow performance and positive guidance for Q4 2024 suggest that the company is making progress in its efforts to achieve sustainable profitability. The expansion of its content library, localization efforts, and strategic partnerships with global distributors and platforms position the company well for potential future growth.
Investors should closely monitor the company's execution of its strategies, particularly its ability to grow its Direct Business segment, optimize its content investments, and improve overall profitability. The evolving media industry landscape and increasing competition in the streaming market will continue to present both challenges and opportunities for CuriosityStream in the coming years.