Greetings, and welcome to the CuriosityStream Third Quarter 2025 Financial Results Conference Call. Please note, this conference is being recorded. I will now turn the conference over to your host, Tia Cudahy, CuriosityStream's Chief Operating Officer. Please go ahead.

Thank you, and welcome to CuriosityStream's discussion of its third 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 September 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. We delivered strong Q3 results. Revenue grew 46% year-over-year to $18.4 million, exceeding guidance. Adjusted free cash flow rose 88% to $4.8 million, and adjusted EBITDA improved by $3.4 million year-over-year. Our three complementary growth pillars, subscriptions, licensing and advertising, are driving momentum and strengthening CuriosityStream's position at the intersection of knowledge, media and AI. I'll briefly recap the underpinnings of Q3 and then look ahead to 2026 and beyond. Licensing revenue increased over 40% year-over-year, reflecting the strength of our team, demand for our corpus, and the trusted relationships we built with traditional media partners and hyperscalers. We engaged with nine key partners across video, audio, script and code, and delivered over 1.5 million distinct assets. To achieve dominance as a provider of AI training data, we've assembled a nearly 2-million hour library of video and audio across multiple genres; content largely cannot be scraped from the open web. We've also expanded our large-scale data structuring and metadata capabilities so we can meet partners' volume requirements and bespoke specifications for high integrity and rich data sets. In parallel, we broadened traditional content partnerships with leading global broadcasters, streamers and pay TV networks, including AMC, Netflix, Foxtel, and a range of licensees across Asia. Overall subscription revenue, retail and wholesale combined was down year-over-year but increased sequentially every quarter in 2025. Importantly, our sequential growth in subscription revenue has been driven by daily operating focus, not simply by implementing price increases like many subscription services. In Q3, all three of our subscription services launched with partners in key English-speaking markets, the U.S., Australia, and New Zealand, as well as in our non-English market, Germany. Extensions with partners like Amazon and new multifaceted agreements with partners like TMTG further support this growth trajectory. While not yet a separate revenue pillar at scale, we continue to build on the solid foundation of our advertising business. Our U.S. Hispanic and flagship FAST channels recently launched on Amazon, Roku, LG, and Truth+. We also launched a two-hour branded block on Australia TV's free-to-air broadcast channel, an initiative we plan to replicate with additional partners. Given the quality and volume of content we control, we see meaningful advertising and sponsorship opportunities across FAST, AVOD, social, pay-TV, and free-to-air. To thoughtfully capture this opportunity, we plan to install a proven leader to run the business in early 2026. We are particularly proud that adjusted free cash flow increased 88% to $4.8 million this quarter. This reflects a focused growth strategy and a sustained commitment to rationalizing our cost base, especially hard, largely nondiscretionary costs. Cost discipline is a strategic advantage, one that supports pricing power, resilience, and durable growth. Despite higher storage and delivery expenses from managing a large content library, we more than offset those increases through disciplined expense management. Looking ahead, while we are not yet providing guidance for 2026, we expect overall subscription revenue, retail and wholesale to grow faster in 2026 than in 2025, supported by a strong launch pipeline and new pricing and packaging across our own services, including our premium tier. We anticipate high-growth licensing to continue and believe licensing will exceed subscription revenue in 2027, possibly earlier. We expect significant year-over-year growth with existing partners and believe our roster of AI licensing partners could double or even triple in 2026. Beyond training, we see additional monetizable grants of rights becoming part of our agreements. Given the quality and scale of our corpus, which we expect to more than double in 2026, and our ability to structure and deliver data at scale, we believe we will solidify our position as the leader or among the top two or three video licensors for AI development. In summary, we believe that we will continue double-digit growth in both revenue and cash flow, driven by our three complementary pillars: subscriptions, licensing, and advertising, while continuing to improve efficiency. We intend to pay 2026 dividends from cash generated by operations as we did in 2024. Our balance sheet remains strong with over $29 million in liquidity and no debt, giving us substantial flexibility. At today's share price, we're a growth company that also offers a dividend yield of well over 8%. It's an exciting time to be in the media business. Opportunities abound, and we intend to swarm them with discipline. Over to you, Brady.

Thanks, Clint, and good afternoon, everyone. Our full financial results will be in the 10-Q that we'll file in the next day or two, but let me hit some of our third quarter highlights. As Clint said, in the third quarter, we reported revenue of $18.4 million, exceeding our guidance and a 46% increase compared to $12.6 million a year ago. Likewise, we reported another quarter of positive adjusted EBITDA, which came in at $3 million. This was an improvement of $3.4 million from a year ago and essentially flat from last quarter, which was a record quarter for us. This was also our third sequential quarter of positive adjusted EBITDA. Adjusted free cash flow came in at $4.8 million, an increase of $2.3 million compared to last year. This also represented our seventh quarter in a row of positive adjusted free cash flow. Third quarter revenue was led by our subscription business, which came in at $9.3 million, a sequential increase. Content licensing came in at $8.7 million in the quarter, an increase of over $7 million or 425% from last year, driven by continued growth in AI training fulfillments. Looking at our year-to-date numbers, licensing generated $23.4 million through September, which in perspective is already over half of what our subscription business generated for all of 2024. Third quarter gross margin was 59%, improving from 54% last year. We continue to see reductions in noncash content amortization, although our distribution and storage costs have increased slightly due to licensing and acquisition of content through revenue share arrangements. Combined costs for advertising and marketing plus G&A were higher by 52% compared to last year. This increase was the result of a noncash charge for stock-based compensation of $7 million or about $0.12 on a per share basis. G&A also included a number of one-time expenses associated with our August secondary stock offering. Were it not for the noncash stock-based compensation and the common stock sale, G&A would have declined in the quarter. We reported a third quarter net loss of $3.7 million or $0.06 a share. This compares to a $3.1 million net loss in the third quarter of 2024. While our revenue was up materially from last year, the net loss was driven by the one-time charges and noncash stock-based compensation. Were it not for these specific nonrecurring or noncash charges, we would have posted our third quarterly net income this year. And as we said earlier, adjusted EBITDA was $3 million in the third quarter compared to a loss of $0.4 million a year ago. Adjusted free cash flow was $4.8 million in the quarter compared with $2.6 million a year ago. And through the first nine months of 2025, adjusted free cash flow was $9.6 million, which is more than the company generated for all of last year. In September, we paid our regular $4.6 million dividend, and we ended the quarter with total cash and securities of $29.3 million and no outstanding debt. We believe our balance sheet remains in great shape. Based on yesterday's share price, CuriosityStream is generating an adjusted free cash flow yield of over 7% and a current dividend yield of over 8%. Also just after the quarter end, on October 14, 6.7 million of our warrants expired unexercised. While these warrants have been trading well out of the money for some time, this expiration of all of the company's outstanding warrants reduces potential dilution and should eliminate any lingering share overhang associated with these instruments. Looking ahead, for the fourth quarter, we expect revenue in the range of $18 million to $20 million, which would imply full year 2025 revenue in the range of $70 million to $72 million or a 38% to 42% revenue increase from 2024. We expect fourth quarter adjusted free cash flow of $2.5 million to $3.5 million, which would imply full year 2025 adjusted free cash flow of $12 million to $13 million or a 27% to 37% free cash flow increase from 2024. We're not yet providing guidance for 2026, but we believe that our top line and bottom line growth will continue into next year. And although we're obviously using some of our cash and investment reserves to pay our dividends in 2025, we intend to fully cover our 2026 dividends from operating cash as we did in 2024. With that, we can hand it back to the operator and open the call to questions.

And our first question will come from Laura Martin with Needham & Company.

Clint, I'd like to ask you a strategic question first. I know you've been a media CEO for a long time, but the returns on capital in this new revenue stream from licensees are significantly higher. I'm unclear about why we're investing these excellent revenues in hiring someone for media in Australia, which typically has lower margins and returns on capital. Why not focus on becoming the leading independent AI experts and avoid media, which is part of our past? Why are we introducing lower-return investments simply because that’s our background? Let's start with that.

I appreciate the question, Laura. You were a bit hard to hear. Regarding the reference to Australia, I didn't quite catch what you meant. I believe I understand the basic context.

You're hiring, right? What's the new guy going to do when you hire in?

We haven't hired anyone new. We recently announced a promotion for one of our employees who has been focused on developing our AI relationships. We made that announcement last week, if that's what you were asking about.

No, I thought you said on the call that you were going to...

Yes, I mentioned on the call that we're going to hire a sales leader. Your question is valid, and I believe we've made significant progress on the cost side and throughout the company to get this business moving. However, we do need additional sales leaders, particularly some experienced ones. This presents us with an opportunity. Sometimes, bringing someone into the team is similar to the NFL draft; we may not be selecting purely for a specific role, but if we can onboard an exceptional player with real talent, we should seize that chance. I didn't mean to suggest that this new hire would only focus on one area; rather, they would play a vital role in revenue generation, which is crucial for us. While we've done well with costs and have established a solid foundation, if we can bring in a couple of strong players, it can accelerate our efforts. I hope I addressed that adequately, but if not, Laura, feel free to ask for clarification.

Well, I just want to be sure we're staying in the AI business is not...

Yes. 100% Yes, yes. Absolutely, Laura. Absolutely. And yes, and I know that you've expressed some concern in the past about smoothing out the revenue. And I'd love to address that if that's still a question on...

That was my second question, which is...

Okay. You're not the only one asking. So look, there will always be some lumpiness in licensing, but we're going to smooth it out over time. And we're going to accomplish this, and we are accomplishing this by both operational and contractual means. So operationally, as we increase our roster of partners, we reduce lumpiness. We believe that we'll double or triple our number of partners in the AI licensing area by the end of 2026. And in 2027, possibly earlier, as more open source models become accessible, there will potentially be hundreds and even thousands of companies who will need video to fine-tune specific models for consumer and enterprise purposes. Some refer to this as the open source and tune evolution. Contractually, structurally, SaaS, something you're familiar with, of course, Software as a Service. We know that's beloved by the software industry. We know that is beloved by investors. So with the type of volume we control, we've had discussions around structuring certain agreements as CaaS or Content as a Service, where we grant access over a term, so as a subscription with access to clouds of content with lots and lots of hours. Now in these deals, we need to make sure we have proper minimums in place and a few other safeguards, but this is a proven model that I think a lot of people love and that will enable smoother quarters and tighter predictability over time.

And our next question comes from Jason Kreyer with Craig-Hallum.

Great job, guys. So maybe kind of building on just the library and the AI opportunity. Clint, just curious if you could talk about how AI licensing has evolved over the last year. You had mentioned nine partners this quarter. Just maybe talk about how broad is the demand for your corpus and how frequently are those platforms coming back to get more and more of your content?

We have completed about 18 fulfillments to date across nine partners. Without naming specific partners, we've conducted two or three additional renewals with some key existing partners. Looking ahead to 2026, we anticipate that revenue from our existing partners will account for 60% to 80% of our AI licensing revenue, while 20% to 40% will come from new partners. We expect to significantly expand our roster and see substantial opportunities for licensing that go beyond just training rights, including additional grants of rights like display rights, transformative rights, adaptation rights, and possibly some rights that are not yet defined. We're focused on building long-term relationships and ensuring that our agreements are not one-time transactions. Regarding the evolution of our deals, early on, we aimed to help people finish content for model training. While there is still a demand for finished content and raw video, we now have the capability to structure data in ways many competitors cannot. This includes the ability to clip, index, and annotate content, allowing us to deliver it in 7- to 20-second clips with enriched metadata. Additionally, in the third quarter, we entered into some of our highest cost-per-hour or cost-per-minute agreements, reflecting our improved capability to create more customized content and structure data effectively.

And Clint, when you talk about having nearly 2 million hours in the library, how does that split between what's available for AI licensing, what's available for streaming by consumers? Or is that the same number for both?

Yes. No, it's not the same number. It's a good question. The overwhelming majority of that is for AI licensing. So we have a lot of content partners, probably over 150 different content partners for our subscription services and for our ad-supported services. And obviously, as we're building our AI library, so those are some of the first people that we went to. But the overwhelming majority of that is for AI licensing. We are increasing our volume of rights in our traditional platforms, but the overwhelming majority is for AI licensing.

You've nearly doubled that in like the last quarter or two or doubled the library. I'm going to assume that's a proxy for effectively doubling the AI library over the last quarter or two. Curious, is that an indication of, hey, you guys are getting better at figuring out what these AI platforms need and you're going out and sourcing a lot more of that? Or is there a different reason that we're not thinking about it and why you're adding so much more content to the library?

Well, you're 100% right on the first part. We are sourcing specific content. So that's part of it. At the same time, we feel like one of our advantages is the fact that we have existing relationships with so many production companies, so many distribution companies, so many creators, so many people who own and control large libraries of content that wherever it makes sense, we want to put our foot on the gas. And we're not going to be the #1 subscription service in the world. I mean Netflix and Amazon, they've got escape velocity. They have that covered. However, we believe that we can be, if not #1, one of the top two or three licensors of video for AI training and other purposes. And part of the way that you do that is you try to generate some escape velocity on your own. So as we build out the volume of our library, it makes us more appealing even more so as a one-stop shop for any of our partners.

And moving on to David Marsh with Singular Research.

Congrats on the quarter. I wanted to start by asking you, Brady, if you could clarify the stock-based compensation for this quarter. I know you mentioned it in your prepared remarks, but I'm still a bit confused. It would be great if you could provide a bit more detail.

Yes, certainly. The 10-Q will be released either tomorrow or the next day, possibly Friday, and it will contain many details related to stock-based compensation. Several employees received market-based stock-based compensation warrants and awards during the quarter, specifically in July. You will find some of these in the Form 4s submitted by the executives, and other employees also received similar awards. The introduction of market-based components this quarter required us to assign a much higher grant date fair value compared to awards that were purely time-based or solely performance-based. Due to the market component of these awards, we need to assess their value differently. The total value of all these awards, which will be detailed in the Q, is well into the eight figures, and we must expense this amount over a more accelerated timeline than we would for time-based awards over four years. This explains the unusually high stock-based compensation reported this quarter. Additionally, we have disclosed an amount that will need to be expensed over the next several quarters, which should make it easier for you to incorporate into your models. I hope that clarifies things for you, Dave.

Yes. That's really helpful. I appreciate it. Yes, it looks like almost $7 million a quarter. A couple of follow-up questions on that. How is that reflected in the current diluted share count, if it is at all? And how will it impact the share count going forward? And then just again, around SG&A, I mean, would you expect it to retreat pretty substantially in Q4? Is this an annual like accrual type thing? Or is this recurring quarterly?

Yes. So if you do the math and you look at all of our public filings, I'd say it was a majority of what we will do in a year were granted in the quarter. I wouldn't expect there to be anything to that level in the next several quarters. I don't know exactly what our stock-based compensation will be for Q4, but I think the majority of what we will do for this year's grants we had to expense in Q3.

Okay, that's helpful. Clint, I appreciate the insights around the licenses. Can you discuss content or subscriptions as well? Your team has introduced several new markets in recent quarters. Could you please provide an update on the reception and any momentum you're experiencing in those new markets and platforms?

I appreciate your question. I'd like to expand on what Brady mentioned. I want to emphasize that all our employee equity grants, including my own, are tied to the company's financial performance and quantitative goals. As a company, we are closely aligned with performance-based compensation, which is a core aspect of our culture and compensation structure. We are not a bloated media organization offering cushy salaries and guaranteed bonuses; we aim to be the opposite as a performance-driven company. Equity plays a vital role in this goal and also helps maintain a competitively advantageous operating budget. Regarding your question about subscriptions, we've launched several new initiatives with partners like Amazon in Australia and New Zealand. As they expand subscription-based services globally, we aim to collaborate with them. Establishing a subscription business comes with significant barriers to entry. Thus, beyond the reliable recurring revenue from our subscription services, it also serves as a protective advantage for our licensing efforts. Due to these partnerships and our pipeline visibility, we are very confident that our overall subscription revenue, both retail and wholesale, will grow at a faster rate in 2026 than in 2025. We're reassured by the visibility we have into the third-party pipeline, which includes new and significant wholesale distribution agreements set to begin, as well as new channel store launches for our subscription video on demand services in both the U.S. and abroad. Additionally, we're carefully planning and taking the necessary steps to implement new pricing and packaging in 2026. Many public and private companies in the subscription sector have grown mainly by raising prices, sometimes quite lazily. We do have the option to do so, but we're focusing on what we really need to achieve based on our marketing investments to increase our subscriber base.

Let me jump back in. I think I forgot to answer your question on dilution. A portion of the RSUs for Q3 already vested and those did factor into our share count for dilution purposes. We reported a net loss for the quarter, so it was overall anti-dilutive. But going forward, assuming we have net positive quarters, we'll certainly have to include all of those as fully diluted.

And Patrick Sholl with Barrington Research has our next question.

Just first one on the guidance in the quarter. Could you maybe just talk about the free cash flow guidance? It seems like relative to the increase in revenue, there's kind of limited free cash flow growth in the quarter. Is that mostly just a timing issue? Or is there anything to keep in mind there?

Timing issue.

Okay. And then on the content library for AI licensing. Can you just maybe talk about the different markets between the content that you have that is from maybe your partners that also work with you on the streaming side versus other partners? And just maybe the different dynamics on margins and use cases and partners for licensing there.

Yes. It's a good question, Pat, and thank you. So when we were first building our library for AI licensing, we went to people with whom we had great existing relationships. And most of those companies are in the factual space, nonfiction entertainment, science, technology, history, travel, lifestyle, etc. In an effort to try to generate, again, escape velocity or dominate in the space, we then, at the same time, or shortly thereafter, start reaching out to people that we knew distributors who controlled content in other genres, general entertainment, sports as an example. And so with that type of corpus and with the way that we're able to structure some of that data, that's made a real difference as it relates to our overall proposition. I mean people love our content and love working with us because we have diversity of content, we have high quality, and we're able to just enrich the data in a way that's unique. But we do have some content whereas a lot of the content that we have in our AI corpus, we could put on our services, there is some content that goes well beyond the factual content that you would see on any of our subscription services or our ad-supported services.

And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.