GAIA - Gaiam Inc.

[Homestead31]

A limited sample size, but it seems as if churn is much lower than expected by most.  its impossible to get accurate numbers due to differences in yoga vs seekers (example, Q1 is yoga heavy, so CAC sub is lower, and Nazca has been a great marketing tool, lowering direct CAC, even though Nazca clearly had costs) but just looking quickly at the last 3 quarters using CAC cost as the % of revenue number from the PR, and the % of life time value as "closer to 40%" from the con call, we can kinda triangulate a bit.  we know that Yoga has a higher churn rate.... which basically means that seekers stick around for ~5 years... and given that the business isn't that old, it basically means seekers have never left. 

 

if seekers have never left, there is likely un-tapped pricing power (which in my view should remain untapped in favor of growth).  Jirka mentioned on the call they think they have pricing power with Yoga as well.

 

switching gears, anecdotally, i had 2 recent conversations with friends that suggest that marketing spend on the yoga side may be starting to realize exponential benefits as the product/brand etc gain recognition.  one person based in California, and one person based in florida both said that they're wives and their wives friends all had GAIA related stuff on their FB pages.  at some point, there should be a marketing network effect.

 

this is likely even more true in the seeker community, which (as the investing community likes to point out) is a "strange group of conspiracy theorists."  That description may be true, and if it is, it probably makes it more likely that these people pass the word about GAIA's content to each other, creating marketing network effects. 

 

Q3 sub increase 33,200

Q3 CAC cost 6,000

Q3 CAC / sub 181

 

Q2 sub increase 30,500

Q2 CAC cost 5,968

Q2 CAC / sub 196

 

Q1 sub increase 45,300

Q1 CAC cost 6,305

Q1 CAC / sub 139

 

 

weighted average CAC/sub 167.64

% of lifetime value         42%

life time value            399.1

cost per month          9

# of months                 44.3

 

 

in any case, this is clearly still a "show me" story, but i think your steady state CAC costs are probably high, and that CAC per sub is going to trend down in the quarters to come.

[Homestead31]

actually - i made an error in the prior post.

 

according to IR, "life time value" is defined as average contribution margin, which is (revenue - content amortization - transaction costs)/(# of users * avg # of months).

 

in my previous post i was thinking of $399.1 as revenue, but this would actually be revenue after content amortization and transaction costs.  To get actual revenue we would have to add back content amortization and transaction costs.

 

in any case, it should mean that users stick around even longer than 44.3 months on average.

[KJP]

Q3 sub increase 33,200

Q3 CAC cost 6,000

Q3 CAC / sub 181

 

Q2 sub increase 30,500

Q2 CAC cost 5,968

Q2 CAC / sub 196

 

Q1 sub increase 45,300

Q1 CAC cost 6,305

Q1 CAC / sub 139

 

 

weighted average CAC/sub 167.64

% of lifetime value         42%

life time value            399.1

cost per month          9

# of months                 44.3

 

 

You're dividing reported CAC by net adds; I believe you should divide by gross adds, which requires some estimate of churn.  For example, if you use net adds, CAC/subs goes to infinity as total sub growth goes to zero.  That's not right.

 

If you divide CAC by gross adds and use the same percentage of CAC/LTV, you'll come up with a significantly lower LTV that is much closer to what the company has reported.

[Homestead31]

you are of course correct - i was focusing on the net adds b/c i was thinking about cash burn (ie how much does it cost to add net subs) and didn't switch back to gross adds before extrapolating to the life time value and # of months.

[namo]

Steady-State CAC -13087916.67

What were your hypotheses to reach this number?

[KJP]

Steady-State CAC -13087916.67

What were your hypotheses to reach this number?

 

311,000 subs

1/3 Yoga, 2/3 Seeking Truth (all other)

16 month average life Yoga

36 month average life Seeking Truth

$35 CAC for Yoga

$150 CAC for Seeking Truth

 

Steady State CAC = {Churned Off Subs}*{CAC/Sub}

Churned Off Subs = {Initial Subs}*{12/Average life in months}

Yoga Steady-State CAC = 1/3*311,000*12/16*35=$2.72 million

Seeking Truth Steady-State CAC = 2/3*311,000*12/36*150=$10.3 million

 

Those assumptions project $6.6 million in spend for Q3 when actual spend was only $6 million, so the assumed CAC may be too high or average life too short.

 

If you use, $51 CAC for Yoga and $122 CAC for Seeking Truth (my best estimate of 40% LTV for both) and the same average life assumptions noted above, you'd get a projected CAC for last quarter that's right around $6 million.  Those CAC assumptions produce a steady-state annual company-wide CAC of $12.4 million. 

 

 

[namo]

I forgot to reply to this. Thanks a lot for your thoughts, KJP, really appreciate them.

 

Interestingly, the final steady-state CAC is not very sensitive to your Yoga CAC / Seeker CAC assumptions: 13 M vs 12.4 M will not make or break the case.

 

I suspect the media library depreciation is overstated, but I'd be hard-pressed to provide credible alternate figures.

 

I've finally trimmed my position by more than half after the Q3 results; I'm sitting on the rest, which is probably not very rational... Fear Of Missing Out or the influence the old "letting the winners run" adage, who knows!

[Voodooking]

So was there ever a Spin Off here or was that just forgotten about??

 

I had it on an old watch-list because there was mention of it spinning off the subscription side... just wanted to check this aspect is dead in the water before I delete it off my list?

[thinkpad]

The spin off has been made. Now it only remains the videos subscription business.

[Voodooking]

Thanks for the update. So what is the parent ticker and which is the spin ticker?

[writser]

The spin-off was cancelled. They sold their other businesses to focus on streaming media instead. Also, please allow me to point out that one can find this information in two minutes by checking out the Gaia IR website and probably even faster using Google. Even Bing might work.

[KJP]

Customer acquisition costs continue to improve:  https://ir.gaia.com/press-releases/detail/243/gaia-reports-fourth-quarter-and-full-year-2017-results

 

During the call the company claimed it would now be breakeven at a 40% growth rate.  I don't see how that's possible based on the reported numbers unless there's a massive upward slope to the CAC curve, e.g., CAC/gross add at 20,000 adds/quarter would be much, much lower than CAC/gross add at 60,000 adds/quarter.

[KJP]

Also, the company put in place a $13 million credit line secured by its Colorado building and immediately drew $12 million on it.  That left them with $32 million in cash as of 12/31/17.  During the call, Rysavy said they're now aiming to get to 1,000,000 subs by the end of "next year."  It's unclear to me whether he meant year end 2018 or 2019.  In any event, it's hard to see how they have enough cash for that.  I suspect they'll need to, at a minimum, sell and leaseback the building to extract additional cash from it.

[btgmf]

Customer acquisition costs continue to improve:  https://ir.gaia.com/press-releases/detail/243/gaia-reports-fourth-quarter-and-full-year-2017-results

 

During the call the company claimed it would now be breakeven at a 40% growth rate.  I don't see how that's possible based on the reported numbers unless there's a massive upward slope to the CAC curve, e.g., CAC/gross add at 20,000 adds/quarter would be much, much lower than CAC/gross add at 60,000 adds/quarter.

 

The comment about 40% growth was at 1M subs. Jirka earlier said that he thought at breakeven today they'd be higher than 20% (but CFO says they don't estimate this since they've built everything towards growing at 80%). Also, there should be a significant upward slope on CAC -- whatever portion or their growth is organic is all free.

 

I'd think of growth available at breakeven today like this. Quarter had $7.3M of gross profit, and they had by their estimate $7.3M of acquisition costs and implicitly $6.1M of other costs. That means they could have spent $1.2M of acquisition costs at breakeven, before considering things that are costs today but you wouldn't need if you were actually running at breakeven (e.g. translation costs, staffing ahead of growth, etc.).

[KJP]

Customer acquisition costs continue to improve:  https://ir.gaia.com/press-releases/detail/243/gaia-reports-fourth-quarter-and-full-year-2017-results

 

During the call the company claimed it would now be breakeven at a 40% growth rate.  I don't see how that's possible based on the reported numbers unless there's a massive upward slope to the CAC curve, e.g., CAC/gross add at 20,000 adds/quarter would be much, much lower than CAC/gross add at 60,000 adds/quarter.

 

Also, there should be a significant upward slope on CAC -- whatever portion or their growth is organic is all free.

 

I'd think of growth available at breakeven today like this. Quarter had $7.3M of gross profit, and they had by their estimate $7.3M of acquisition costs and implicitly $6.1M of other costs. That means they could have spent $1.2M of acquisition costs at breakeven, before considering things that are costs today but you wouldn't need if you were actually running at breakeven (e.g. translation costs, staffing ahead of growth, etc.).

 

What are you referring to as "organic growth"?  Word-of-mouth referrals?

 

Regarding your breakdown of the quarterly numbers, yes, they're implying that could grow at 20+% by spending only $1.2 million/quarter on CAC, but how is that plausible?  $1.2 million of quarterly CAC is about $5 million of annual CAC.  I don't see how $5 million of annual CAC is sufficient to simply keep subs constant after accounting for churn, much less grow the business at 20+%.

 

For example, they currently have 365,000 subs.  Historically the suggestion has been that the breakdown is roughly 1/3 yoga subs that last 16 months and 2/3 seeking truth-type subs that last three years.  Those numbers may be dated, but they would produce annual churn of 91,000 yoga subs  and 81,000 seeking truth subs on a beginning sub base of 365,000.  If CAC is down to 35% LTV, that would imply cost per yoga sub of $44 and cost per seeking truth sub of $104, which implies total annual CAC spend solely to replace churn of about $12.5 million.  And that's a no-growth CAC spend, not 20+% growth. Note that these churn and CAC/sub estimates produce a number the is roughly equal to Q4's $7.3 million CAC spend.

 

 

[btgmf]

Also, the company put in place a $13 million credit line secured by its Colorado building and immediately drew $12 million on it.  That left them with $32 million in cash as of 12/31/17.  During the call, Rysavy said they're now aiming to get to 1,000,000 subs by the end of "next year."  It's unclear to me whether he meant year end 2018 or 2019.  In any event, it's hard to see how they have enough cash for that.  I suspect they'll need to, at a minimum, sell and leaseback the building to extract additional cash from it.

 

The end of next year means 2019 (see their investor presentation p.14). Assuming declining sub growth, they'd get to 1M if they grew subs by 75% in 2018, 60% in 2019.

 

In terms of cash, I think you probably have to get through cash burn in 2018 and 2019 (by end of 2019, they would be getting close to breakeven, assuming Jirka estimate of breakeven at 1M subs and 40% growth is correct).

 

To me, 2018 burn looks like this:

- Revenue: $50M, consisting of $48.5M of streaming revenue (assume streaming revenue grows 85%; if you start year at 80% sub growth and end at 75%, then average sub growth for year will be in high 70's; streaming revenue has been above sub growth) and $1.5M of DVD

- Gross profit: $43M (assume flat 86% gross margins)

- Non-acquisition costs: $21M (Q4 17 at $4.8M; CFO said this would roughly double if business grows 10x; assume it grows at 20% annual rate)

- Corporate / G&A: $5.5M (was $5.6M in 2017; declined YoY in 2017 slightly)

- So before acquisition costs, you have $16.5M

- Acquisition costs were $26M in 2017 -- question is how much more they'll be in 2018; they were 90% of revenue in 2017, and Jirka says that they'll be lower as % of revenue in 2018; I'll assume $40M, or 80% of revenue

- Then operating loss would be around $23.5M for 2017

- They also will burn some cash because content spend outpaces content D&A, though slightly offset by growth in deferred revenue -- capex over D&A was $7.5M in 2017, $3M in 2016 (deferred revenue was around $1M each year); I assume this is $9M

- So total burn would be around $32.5M in 2018

 

For 2019, a similar set of assumptions has

- $85M revenue (60% sub growth; average subs higher because growth rate starts at 75% and ends at 60%; revenue growth slightly above sub growth)

- $73M of gross profit (86% gross margins)

- $25M non-acqusition costs

- $5.5M corporate / G&A

- Then before acquisition costs you have $42.5M -- burn will be whatever they spend above this, plus excess of capex over D&A

 

As is obvious, big driver of cash needs are acquisition costs. Based on numbers from Q4 17, it seems that Q4 17 showed some significant improvement in costs.

 

Q4 17

- Spend: $7.3M (also includes language spending which presumably didn't help much with sub growth in this quarter)

- Gross subs added sequentially: sub growth of 53,500 plus assumed churn of 12% of 311,000 = 37,300; total is 90,800

 

Q4 16

- Spend: $4.5M

- Gross subs added sequentially: sub growth of 22,300 plus assumed churn of 12% of 202,300 = 24,300; total is 46,600

 

So this year they added 95% more gross subs (90,800 / 46,600) while only spending 62% more ($7.3M / $4.5M), inclusive of drag from foreign language spending.

 

Getting back to the question of cash needs then, they have $20M in cash plus whatever they end up getting from the building (via debt or sale / leaseback).

 

[KJP]

Also, the company put in place a $13 million credit line secured by its Colorado building and immediately drew $12 million on it.  That left them with $32 million in cash as of 12/31/17.  During the call, Rysavy said they're now aiming to get to 1,000,000 subs by the end of "next year."  It's unclear to me whether he meant year end 2018 or 2019.  In any event, it's hard to see how they have enough cash for that.  I suspect they'll need to, at a minimum, sell and leaseback the building to extract additional cash from it.

 

The end of next year means 2019 (see their investor presentation p.14). Assuming declining sub growth, they'd get to 1M if they grew subs by 75% in 2018, 60% in 2019.

 

In terms of cash, I think you probably have to get through cash burn in 2018 and 2019 (by end of 2019, they would be getting close to breakeven, assuming Jirka estimate of breakeven at 1M subs and 40% growth is correct).

 

To me, 2018 burn looks like this:

- Revenue: $50M, consisting of $48.5M of streaming revenue (assume streaming revenue grows 85%; if you start year at 80% sub growth and end at 75%, then average sub growth for year will be in high 70's; streaming revenue has been above sub growth) and $1.5M of DVD

- Gross profit: $43M (assume flat 86% gross margins)

- Non-acquisition costs: $21M (Q4 17 at $4.8M; CFO said this would roughly double if business grows 10x; assume it grows at 20% annual rate)

- Corporate / G&A: $5.5M (was $5.6M in 2017; declined YoY in 2017 slightly)

- So before acquisition costs, you have $16.5M

- Acquisition costs were $26M in 2017 -- question is how much more they'll be in 2018; they were 90% of revenue in 2017, and Jirka says that they'll be lower as % of revenue in 2018; I'll assume $40M, or 80% of revenue

- Then operating loss would be around $23.5M for 2017

- They also will burn some cash because content spend outpaces content D&A, though slightly offset by growth in deferred revenue -- capex over D&A was $7.5M in 2017, $3M in 2016 (deferred revenue was around $1M each year); I assume this is $9M

- So total burn would be around $32.5M in 2018

 

For 2019, a similar set of assumptions has

- $85M revenue (60% sub growth; average subs higher because growth rate starts at 75% and ends at 60%; revenue growth slightly above sub growth)

- $73M of gross profit (86% gross margins)

- $25M non-acqusition costs

- $5.5M corporate / G&A

- Then before acquisition costs you have $42.5M -- burn will be whatever they spend above this, plus excess of capex over D&A

 

As is obvious, big driver of cash needs are acquisition costs. Based on numbers from Q4 17, it seems that Q4 17 showed some significant improvement in costs.

 

Q4 17

- Spend: $7.3M (also includes language spending which presumably didn't help much with sub growth in this quarter)

- Gross subs added sequentially: sub growth of 53,500 plus assumed churn of 12% of 311,000 = 37,300; total is 90,800

 

Q4 16

- Spend: $4.5M

- Gross subs added sequentially: sub growth of 22,300 plus assumed churn of 12% of 202,300 = 24,300; total is 46,600

 

So this year they added 95% more gross subs (90,800 / 46,600) while only spending 62% more ($7.3M / $4.5M), inclusive of drag from foreign language spending.

 

Getting back to the question of cash needs then, they have $20M in cash plus whatever they end up getting from the building (via debt or sale / leaseback).

 

Thanks for posting your thoughts on cash flow.  The estimates match my ballpark numbers and I think support the idea that they don't have enough cash on hand currently to fund the plan, because you have them burning through existing cash in 2018 and at least the first few quarters of 2019 are likely to be cash flow negative as well.

 

With your 12% quarterly churn estimate and $7.3 million Q4 CAC spend, you get ~$80/CAC/sub.  If you annualize churn to 48% on a 365,000 sub base, you'd get annualized churn of 175,000, which is in the same ballpark as my estimate above.  At $80/CAC/sub, you need to spend $14 million just to replace the churned off subs.  That is why I'm saying it doesn't make sense to me to say the company is even GAAP profitable today in steady-state, much less could grow 20+% and still breakeven.

 

Back of the envelope:

Subs: 365,000

Avg monthly rev/sub: 9

Annual Rev:  39.5 million

Gross Margin:  85%  [implies only $6 million in annual content costs/web development]

Gross Profit:  $33.5 million 

Non-CAC OpEx:  ($21 million)

Corp overhead:  (5.5 million)

pre-CAC EBIT: $7 million

Steady-State CAC:  ($12-$14 million)

Steady-State EBIT:  ($5 - $7 million)

 

How much could really be sliced from OpEx, content and web development considering that they need to bring in 175,000 new subs a year just to tread water?

 

 

 

 

[btgmf]

 

What are you referring to as "organic growth"?  Word-of-mouth referrals?

 

Regarding your breakdown of the quarterly numbers, yes, they're implying that could grow at 20+% by spending only $1.2 million/quarter on CAC, but how is that plausible?  $1.2 million of quarterly CAC is about $5 million of annual CAC.  I don't see how $5 million of annual CAC is sufficient to simply keep subs constant after accounting for churn, much less grow the business at 20+%.

 

For example, they currently have 365,000 subs.  Historically the suggestion has been that the breakdown is roughly 1/3 yoga subs that last 16 months and 2/3 seeking truth-type subs that last three years.  Those numbers may be dated, but they would produce annual churn of 91,000 yoga subs  and 81,000 seeking truth subs on a beginning sub base of 365,000.  If CAC is down to 35% LTV, that would imply cost per yoga sub of $44 and cost per seeking truth sub of $104, which implies total annual CAC spend solely to replace churn of about $12.5 million.  And that's a no-growth CAC spend, not 20+% growth. Note that these churn and CAC/sub estimates produce a number the is roughly equal to Q4's $7.3 million CAC spend.

 

By organic, I just mean anything that's not paid. It could be word-of-mouth, but also organic search, content marketing from already-expensed stuff (e.g. Nazca videos they've mentioned), etc.

 

And I agree that $1.2M per quarter is very unlikely to be enough to grow the business at 20%+ per year. But as I said in my original post, $1.2M is an unrealistic lower bound for what would be available to them in a much lower growth (e.g. 20%, 30%, 40%, etc.) situation. We obviously can't see the exact amount of additional expenses they'd have available to them, but we do know that they are likely substantial, e.g. translation costs (which are inflating acquisition spending), salaries for people (customer service, marketing, content creation, distribution, etc.) when you're hiring ahead of that growth, etc.

 

So to me the overall math looks like this:

- They spent $7.3M on acquisition in the quarter -- we know part of this is foreign language (which doesn't affect sub growth today); let's assume it's $300K (I have no idea what is a reasonable estimate)

- So then there's $7.0M of acquisition this quarter

- They have $1.2M to spend before breakeven, plus whatever portion of their $5M of run-rate non-acquisition costs are related to 80% growth (let's assume $1M of $5M in costs could be cut if you were only growing at 20% to 40% rather than 80%)

- Then they'd have $2.2M to spend before breakeven, compared to the $7.0M they spent ex-language -- so they'd only have 31% of what they actually spent

- They'd get more than 31% of gross subs if they only spent 31% of what they spent, because any customer acquisition program will have increasing marginal costs in a period (e.g. because of organic customer additions, plus the fact that you could first cut highest cost channels of acquisition) -- let's say they could spend 31% of actual but still get 50% of gross subs; 50% of 90,800 is 45,400

- Then for quarter assuming 12% churn per quarter on average subs of 338K in the quarter means they lost 40,600 subs in the quarter

- So for quarter they'd add 4,800 subs, which over the year would be about 6% growth

 

Above estimate is very sensitive to assumed churn rate, assumed portion of $5M in non-acquisition costs that are related to 80% growth, and efficiency in CAC you'd get if cutting spend by a lot. I just wanted to throw some reasonable numbers together to see if Jirka's statement is generally consistent or clearly inconsistent with my understanding of the numbers. IMO his statement is generally consistent, though obviously not provable.

 

 

[KJP]

 

Above estimate is very sensitive to assumed churn rate, assumed portion of $5M in non-acquisition costs that are related to 80% growth, and efficiency in CAC you'd get if cutting spend by a lot. I just wanted to throw some reasonable numbers together to see if Jirka's statement is generally consistent or clearly inconsistent with my understanding of the numbers. IMO his statement is generally consistent, though obviously not provable.

 

Thanks for the thoughts.  I agree outsiders like us can only make our best guess about what spending could be cut, etc.

[btgmf]

 

Above estimate is very sensitive to assumed churn rate, assumed portion of $5M in non-acquisition costs that are related to 80% growth, and efficiency in CAC you'd get if cutting spend by a lot. I just wanted to throw some reasonable numbers together to see if Jirka's statement is generally consistent or clearly inconsistent with my understanding of the numbers. IMO his statement is generally consistent, though obviously not provable.

 

Thanks for the thoughts.  I agree outsiders like us can only make our best guess about what spending could be cut, etc.

 

No problem -- thanks for all your thoughts and earlier work as well. I mostly agree with your estimates, with the caveat that to me there is often a range of possibilities to the upside (but we don't have good enough data to know).

 

My general position on GAIA and Jirka is that

1. I can't verify a lot of what I'd want to verify from what they disclose (e.g. they have enough cash including the building to get to breakeven; they could grow above 20%+ at breakeven today; CAC is coming in better than expected) -- I feel like with certain reasonable assumptions these things seem plausible, but with certain other reasonable assumptions they seem unlikely.

2. This seems like an easily solveable problem if you have the data, i.e. if you're Jirka and the CFO. It should be straightforward to model out.

3. Their incentives strongly suggest they are saying what they believe (i.e. that they're not saying X while believing Y), e.g. Jirka selling nothing into the tender, CFO buying shares. I don't see anything that raises a red flag on that front.

 

So to me #2 and #3 are pretty strong signals that I should believe what I can't verify. But it is uncomfortable to not be able to verify some of the important things here and to have to rely on what they say.

[thinkpad]

Again a strong quarter:

http://content.equisolve.net/gaia/news/2018-08-06_Gaia_Reports_Second_Quarter_2018_251.pdf

 

Confcall:

http://seekingalpha.com/article/4195537-gaia-inc-gaia-ceo-jirka-rysavy-q2-2018-results-earnings-call-transcript?app=1&dr=1

 

Above their target to reach 1M subscribers by the end of 2019.

500.000 subscribers will be reached in september.

Less money spent for a stronger growth (around 65% with 40% organic)

 

Good ! :)

 

[SnarkyPuppy]

You'll have a company with ~$60-$80mm in ebit earnings power (FY2020) before CAC related S&M.  5x current EV.  Committed and incentivized to cap CAC at 50% LTV.  Directionally trending positive metrics of CAC and LTV (inc churn).  Likely additional tailwinds in price increases (alluded to in recent CC for next year) and international (no CAC investment so far - all organic).  Subs growing 40% organically and directionally trending positive. 

[KJP]

You'll have a company with ~$60-$80mm in ebit earnings power (FY2020) before CAC related S&M.  5x current EV.  Committed and incentivized to cap CAC at 50% LTV.  Directionally trending positive metrics of CAC and LTV (inc churn).  Likely additional tailwinds in price increases (alluded to in recent CC for next year) and international (no CAC investment so far - all organic).  Subs growing 40% organically and directionally trending positive.

 

What do you mean by "subs growing 40% organically"?

[SnarkyPuppy]

You'll have a company with ~$60-$80mm in ebit earnings power (FY2020) before CAC related S&M.  5x current EV.  Committed and incentivized to cap CAC at 50% LTV.  Directionally trending positive metrics of CAC and LTV (inc churn).  Likely additional tailwinds in price increases (alluded to in recent CC for next year) and international (no CAC investment so far - all organic).  Subs growing 40% organically and directionally trending positive.

 

What do you mean by "subs growing 40% organically"?

 

Jirka Rysavy 18Q2 CC:

 

"Thank you, Justin and good afternoon everyone. So our second quarter results ended again ahead of our expectations. Subscribers grew 68% to 466,000 from 277,800 a year ago. This puts us ahead of the growth rate needed for us to reach our next target of one million subscribers by end of the next year.  While we invested during the quarter about $1 million less than we budgeted in our member marketing plan. This was partly helped by increasing number of members joining us by organic means. Remember, acquisition coming from organic channel was up again during the quarter and is now solidly over 40%"

[KJP]

You'll have a company with ~$60-$80mm in ebit earnings power (FY2020) before CAC related S&M.  5x current EV.  Committed and incentivized to cap CAC at 50% LTV.  Directionally trending positive metrics of CAC and LTV (inc churn).  Likely additional tailwinds in price increases (alluded to in recent CC for next year) and international (no CAC investment so far - all organic).  Subs growing 40% organically and directionally trending positive.

 

What do you mean by "subs growing 40% organically"?

 

Jirka Rysavy 18Q2 CC:

 

"Thank you, Justin and good afternoon everyone. So our second quarter results ended again ahead of our expectations. Subscribers grew 68% to 466,000 from 277,800 a year ago. This puts us ahead of the growth rate needed for us to reach our next target of one million subscribers by end of the next year.  While we invested during the quarter about $1 million less than we budgeted in our member marketing plan. This was partly helped by increasing number of members joining us by organic means. Remember, acquisition coming from organic channel was up again during the quarter and is now solidly over 40%"

 

I see.  I thought you meant "organic" growth alone would have produced 40% sub growth, rather than that 40% of new subs came from the "organic channel."