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. 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's studio system, driven by the ambition and vision of first-generation immigrant pioneers. This world-class series blends power, scandal, greed, and profound insight into the human condition. We're eager to see how it resonates with Netflix's broad audience. The dataset licensing for AI training in the form of premium video, audio, scripts, and study guides grew substantially for the third quarter in a row. In addition to these premier, ethically sourced corpuses, we also licensed about 9 million tokens of code for the first time ever. While video sits firmly at the top of the dataset leaderboard in value and demand, our licensing of code is a testament to the value of controlling rights to all manner of IP for licensing and an illustration of the principle, land and expand, which we are doing and will continue to do by overdelivering and delighting our partners. We are asked frequently by investors and content partners to help them better understand the lifespan and durability of data licensing for AI training and other initiatives. Is this recurring they ask? Is this one and done? Do you know how many millions or billions of video hours are needed? What is your moat? What happens if you run out of video? Aren't you concerned about legal and regulatory issues? What will be the impact when the biggest studios move into this area? Will synthetic training data replace authentic data? These are good and important questions, and while no one can perfectly predict the future, we have a tight team who has spent the last 16 months working on making CURI the dominant AI video licensor. This work has been done hands-on day by day, partner by partner, shoulder to the wheel. While we have many unique advantages, four critical ones are: one, our deep and curated global premium video and audio library; two, long-standing relationships with rights-holding premium content producers around the world; three, programming services worldwide that we are simultaneously feeding; and number four, something that really sets us apart, the technical capability to now structure our data in a superior manner to our peers. We believe we've had more conversations across the licensing and model training ecosystem than our competitors, and we've translated these conversations into executed partnerships. Our perspective isn't theoretical. It hasn't come from commissioning an overpriced study or from spending time in the faculty lounge. Our point of view is rooted in real-world experience. Indeed, every new type of business model tends to go through a period of early chaos and uncertainty. But eventually, the cloud is clear, and the blue sky presents itself. In regard to the questions I cited earlier, we know that large-scale AI models require enormous volumes of video data for training. Simply put, as they become more advanced, they need to be fed more. Scaling laws in AI show that additional video improves accuracy and generative capabilities even with diminishing marginal returns. AI companies not generating continuous performance gains are losing. Further, freshness and recency are critical because cultural trends, products, and virtual references are constantly evolving. In other words, models need ongoing updates to stay relevant and avoid obsolescence. As to synthetic data, it is incomplete. Simulated video can augment real data but doesn't fully replicate real-world physics, actions, or the diversity and context of authentic video and data. We believe the market for high-quality, ethically sourced rights-cleared video and audio content is incredibly durable and will only grow for the foreseeable future. We are reviewing real video and audio RFPs. So we do have some insight into the quantity requirements, millions of hours, and category and structural imperatives. Everyone should do their own research, but there are estimates that the industry-wide need for video could range from billions to tens of billions of hours. Some of what I just shared may sound a bit like consultant speak, so I'll speak more plainly to the recurring nature of this business. Everyone wants seconds and thirds and some already fourths and fifths. So for us, this is de facto recurring revenue, which again comes from having the overall best corpus of video and audio in the industry and from working to treat our partners on all sides of the equation like gold. Will you run out of content to license? No chance. Just as painters are always painting the Golden Gate Bridge, always, it never stops. We are similarly continuously creating and acquiring content for our streaming services and channels around the world. Further, the hyperscalers and the many other AI companies who are—and who we believe will—license video for training want to work with partners who control a highly reputable critical mass of content. They tell us that this typically means a minimum of several hundred thousand hours. The long-term durability and recurring nature of this revenue is further sustained by the additional monetizable grants of rights that are emerging and will be required. To be clear, we are granting today only a training right. In the future, we will negotiate and license additional monetizable rights. A few examples include display rights, certain derivative rights, transformative rights, certain reproduction rights, and adaptation rights. Another near certainty is that we will be asked to license rights in the future that we haven't even contemplated today. Another common question is, what is your moat? The most obvious tangible moat is our superior volume of premium rights-cleared content available for license. The largest studios have libraries of 100,000 to 225,000 hours. We have control of and access to exponentially more hours than that, and our volume is growing every day. In addition, our ability to structure our data gives us a real competitive advantage. I'm referring to our ability to clip, index, label, and annotate at scale, hundreds of thousands of hours into any segment length in a very short time to index, to annotate, and again, to label at scale. Think traditional metadata on steroids, but steroids wildly more powerful than the ones given to the best Eastern European javelin throwers. This structured metadata makes the content we supply that much more valuable to our licensee partners. Intangibly, it's also simply action, action, action, enhancing our existing relationships and building new ones. As we have done and as we continue to do the hard foundational work, we are well armed to execute at a scale we think beyond potentially anyone in the space. Again, I'm referring to our ability to structure our data, clip, index, label, and annotate. We are now able ourselves to create this type of metadata for our content that we would not have thought possible even 3 or 4 months ago. This metadata makes the content we supply that much more valuable to the AI licensees. Lastly, on this topic, it's critical to be able to distinguish between signal and noise. All of us are deluged every day with viewpoints around AI from seemingly every information source, like legal and regulatory concerns. What did the President just announce? What did the AIs say on a popular podcast? Will your job be replaced? What are the threats to humanity and our personal security that we need to address? How do we keep the God in the box? Is China beating us in the race? For our purposes, 99% of this is noise, meaning irrelevant or distracting data. Now more than ever, we will be successful by simply focusing on the signal, which is the meaningful information we need to detect, understand, and act on in the direct service of our business objectives, namely meeting the licensing needs of our AI partners. We see and hear the signal. We will not be distracted by the noise. Over the past century, value creation in media has consistently migrated to those able to capitalize on paradigm-shifting innovation. From the first TV broadcast in 1928, the global satellite lake of 1967 that brought billions together to watch the Beatles, and from cable and DTH in the late 20th century to the rise of YouTube in 2005 and Netflix's streaming model in 2007. Every new wave crowned new leaders and left slow movers behind. Today, as we enter the mid-2020s, we are standing at the threshold of the most profound disruption and advancement yet. This is not an iteration; it's a redefinition and one that will surely bring about a reordering across many, if not all, industries. Looking ahead to 2026, we at CURI are confident in two dynamics: One, we will license more video and data than we did in 2025; and two, we will be the or among the dominant licensors of video for AI model training. In closing, we believe our strong balance sheet, $31 million in liquidity and no debt, and our continued double-digit growth in both top-line revenue and cash flow, our leadership in AI video and data licensing, our library of over 1 million hours of video, and our $0.32 annual dividend position us as a high-performance outlier amid a historical technological revolution. The rapid acceleration of AI is not just reshaping industries; it is redrawing the competitive landscape. We believe CURI is uniquely positioned to capitalize on this shift. Our diversified revenues from subscriptions, licensing, and advertising, our expanding ecosystem of technology and media partners, and our public market currency create powerful operating leverage and optionality. Simultaneously, our disciplined cost rationalization efforts ensure efficiency without compromising growth.

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 two, 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 direct-to-consumer, 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. Regarding other operating expenses, combined costs for advertising and marketing plus G&A were down 8% compared to last year as we continue to benefit from our ongoing cost rationalization. And excluding stock-based compensation, G&A declined 10% from a year ago. As I mentioned earlier, adjusted EBITDA was $3 million in the second quarter compared to a loss of $1 million a year ago, and adjusted free cash flow was $2.9 million in the quarter compared with $2.5 million a year ago. In June, we paid dividends of $10.4 million, including our ordinary Q2 dividend of $4.6 million as well as a $5.8 million special dividend. And at yesterday's closing price, our shares currently provide for about a 6.5% dividend yield. We ended the quarter with total cash and securities of $30.7 million and no outstanding debt. We believe our balance sheet remains in great shape and that this provides us significant operating flexibility. Looking forward, for the third quarter, we expect revenue in the range of $15 million to $18 million. And for 2025, we expect adjusted free cash flow in the range of $11 million to $13 million for the full year. With that, we can hand it back to Bella and open the call to questions.

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...

We are in the core media business because we have a strong, global, and durable subscription video-on-demand service that represents the essence of our company. You might wonder why we continue with this focus while also engaging in technology licensing. Our response is that all these aspects work harmoniously together. Looking ahead, we envision three robust revenue streams: subscription, licensing, and advertising. We anticipate steady growth in our subscription business, bolstered by wholesale agreements that solidify our foundation. We expect rapid growth in licensing, which is a promising area, and while our advertising segment is still in its early stages, it has significant potential for steady and high growth over time. The synergy between these components is key; our substantial library for AI licensing has been built on the strong relationships we maintain with producers and distributors worldwide. We continually acquire content for our subscription services, linear pay-TV channels, AVOD, and FAST. This existing infrastructure makes it easier to add the capability to license AI rights and other rights. Ultimately, everything works together, and operating in just one of these areas would be challenging.

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 stacks. 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 revenue 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 on an ongoing basis. But essentially, right now, the only cost that we see going up would be storage and delivery costs 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.

Your next question comes from the line of Kris Tuttle with IPO.

You all did an excellent job addressing everything, so I don't have many questions. However, Clint, you mentioned something about code that caught my attention. I would like to learn more about what that entails and whether we should expect to see more of it in the future, as it was quite an intriguing comment.

Yes, thank you for your question, Kris. As we started licensing data for AI training, we assessed our resources and examined the industry landscape. It's clear that video remains at the forefront in terms of value and demand, followed by audio, images, study guides, and scripts, which are also valuable. Additionally, we had code. In the early stages of AI training licensing, a lot of code was collected from internet sources such as GitHub, alongside some proprietary code that was licensed out. Honestly, I never expected that we would have the opportunity to license our code, but we have included it in our sales materials with several partners. As we develop relationships with these companies and as their needs evolve, it's something we can offer. I can't really comment on its long-term value, but I believe it highlights the importance of owning and controlling quality intellectual property. That's a significant point. If you have control over millions of hours of video and other data, there will always be ways to monetize that. I want to emphasize that this is somewhat unique and unexpected, and it represents additional rights that we are monetizing. I believe there will be more licensing opportunities that we have yet to discover. I hope that clarifies things.

Yes, I have a follow-up question related to what Laura mentioned. There's entertainment content, but there are also millions of hours of high-quality training video content created, particularly in the hospitality industry. Are you currently involved in those areas, and how significant are they? Is this something that is on your roadmap? I'm trying to understand where it stands in terms of timeline.

That's a great question, Kris. We're not currently focused on that area. Our main priority in the video space is to continue expanding our extensive factual entertainment library. We have also significantly increased our scripted content, which includes general entertainment, movies, series, and animations for kids. Additionally, we've made substantial growth in our sports content and audio offerings. Regarding promotional or instructional videos, they can certainly hold value, but the challenge lies in whether they are accessible before or after a paywall. Much of the free content circulating on the Internet may already be well-processed. However, there is a vast amount of video outside traditional media ownership that holds licensing potential. If we consider the models that may require billions or tens of billions of hours of video, it won't all be synthetic or merely free content from the Internet; there is definitely potential value there. Right. So, it does become a value. You just need a lot of it.