Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Denise Garcia, Investor Relations. Thank you, please go ahead, ma'am.
Thanks, David. Welcome to CuriosityStream's discussion of its fourth quarter and full year 2020 financial results. Leading the discussion today are Clint Stinchcomb, CuriosityStream's Chief Executive Officer, and Jason Eustace, CuriosityStream's Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions. 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 federal securities law. 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 the 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 websites, as well as the risks and other important factors discussed in today's press release. Additional information will also be set forth in our annual report on Form 10-K for the year ended December 31st, 2020, when filed. In addition, reference will be made to non-GAAP financial measures. Now I'll turn the call over to Clint.
Thank you, Denise. I'd like to thank everyone for joining our fourth quarter and full year 2020 earnings call. I'm delighted to have with us today our COO and General Counsel, Tia Cudahy, our CFO, Jason Eustace, and our Chief Product Officer and EVP of Content Strategy, Devin Emery. After my comments, I will turn the call over to our CFO, Jason Eustace, to review the financials. At the close of Jason's review, we will open up the call for questions. CuriosityStream's mission is to provide premium factual entertainment that informs, enchants, and inspires. As a pure play streaming service, we are capitalizing on current and emerging worldwide trends favoring on-demand content.
Our sturdy and robust business model with multiple avenues of content monetization and our differentiated content offering provides us with several key competitive advantages, and our focus on factual content, which has longevity and engaging appeal across multiple demographics and geographies, is key to our success. Let me talk about our success in 2020. I'm pleased to report that we had a record end to the year and fourth quarter. Our year-end 2020 revenue was more than double our 2019 annual revenue, and more than four times our 2018 annual revenue. Revenue in the fourth quarter grew 70% year-over-year to $11.4 million, driven by continued strength in direct subscription revenue, with program sales and sponsorship also contributing to our success in the quarter. Our team produced these results through a pandemic, while also crossing several milestones during the year. I couldn't be prouder of what we've accomplished.
I'll start with the fourth quarter. On a year-over-year basis, paying subscribers grew 50% to approximately 15 million, with continued strength in subscribers on annual plans and international subscribers. We continue to build up our content library and increase our distribution partnerships worldwide. I'll share more details about each of these highlights, starting with growth in subscribers. A couple of factors contributed to these results. First, Q4 is typically our most active time for new subscribers, which in turn can produce a high churn rate. This year, we reduced our already low monthly churn by more than 25% year-over-year. We attribute this churn decrease to improvements in marketing content and product that we implemented throughout the year and that we continue to implement.
Our mix of targeted investments in awareness marketing tactics and direct response efforts aimed at keeping our customer acquisition cost efficient also contributed to these results. We continue to optimize our business to our North Star metrics, revenue, and paying subscribers. Compared to 2019, at the end of the fourth quarter 2020, we increased our direct subscriber count by nearly 100% and increased our LTV by 48%, both while decreasing our total overall marketing budget year-over-year. This demonstrates the impact of the efficiency-focused and agile marketing strategy we continually employ. We continue to deliver unique, relevant, and current perspectives through groundbreaking new content.
During the quarter, we premiered original series like "Engineering the Future," narrated by the renowned Patrick Stewart, which explores the new era of green mega machines focused on wind, aviation, and fusion, and the landmark original franchise, "Beyond the Spotlight," executive produced by Leonardo DiCaprio and his team at Appian Way, which reveals how celebrities like Shaquille O'Neal, Kristen Bell, and Samuel Jackson are channeling their personal passions to help change the world. During the election cycle, we also premiered our special, "Fighting for Lincoln: The Wide Awakes," which explores the powerful but long-forgotten paramilitary movement that many believe delivered Abraham Lincoln to the presidency, and the companion three-part miniseries, "Electing Lincoln," which reveals the key events in the run-up to the 1860 election that sparked America's Civil War.
We also greenlit our largest and most ambitious slate of original programming yet for 2021, including notable projects like "The Rescue: Chimpanzees of the Congo with Jane Goodall," "The Royals in Color," "The History of Wall Street," "The CEO of Sinaloa," "The Year That Rocked the World," and many others. We will make more announcements about our new program franchise in the coming weeks and months. We continue to invest in the distinct content that defines us. Nature, history, science, travel, and every category in the factual genre. We will see more new originals this year than at any time in our history. Our acquisition strategy will continue to expand a library that is already largely unrivaled and goes deeper than others into topics that our viewers already care about or have yet to discover.
Also during the quarter, we entered an international distribution partnership with Tata Sky, one of India's largest content distribution and pay TV platforms, and grew our distributed subscribers via partnerships with Russian operators. Not surprisingly, an increasing number of brands have an interest in the premium factual SVOD space, especially as it relates to telling factual stories about the marketplace in which they operate. We began recognizing revenue from sponsorship and brand partnerships in the fourth quarter with brand partners from the financial services and health and wellness categories. As an example, one was interested in sponsoring content we developed about the perils and promise of blockchain. Blockchain, Bitcoin, and crypto are a story they wanted to own, and they trusted CuriosityStream's partnership team to get it right. Another brand we worked with is becoming a global leader in connected fitness.
Their business, like many in their space, has experienced a boom in growth as a result of COVID-19. They were interested in creating content that explores the phenomenon in connected fitness, so CuriosityStream created "The World Interrupted: Evolution of Fitness" for this partner and promoted it across several platforms. It has also been very well received by our audience, both behind and in front of the paywall. Moving on to the year. We crossed significant milestones in every area of the business. We grew revenue to a record $40 million. We generated approximately 15 million paying subscribers with notable strength in direct-to-consumer and international.
We improved the features and functionality of our product during the year by adding multi-language support for audio tracks and captions, launching our own linear app experience, significantly improving search and discovery within our apps, and improving our quality of service infrastructure to allow us to better proactively improve customer experience. We significantly strengthened our management team with strong leadership hires in the areas of third-party U.S. distribution, international distribution, brand partnerships, audience development, and finance. We increased the quantity and quality of our content library and continue to have one of the largest streaming factual content libraries in the world. A few highlights in this area for 2020 included the landmark 90-minute special, "Pompeii: Disaster Street," featuring exclusive access to the first excavation of Pompeii in more than 70 years.
The epic three-part series, "The History of Home," is narrated by renowned woodworker and Parks and Recreation director of parks, Nick Offerman. The eight-part series, "Fourth and Forever: Muck City," is a compelling portrait of an iconic South Florida community on the banks of Lake Okeechobee that has produced some of the NFL's biggest stars. In October, we became the first publicly traded media company focused on streaming factual content. More recently, in the first quarter of 2021, we completed a follow-on offering, raising approximately $100 million in proceeds, which we intend to invest in programming and marketing. This process also enabled us to strengthen our investor base with blue-chip long-term institutional holders. Put another way, we plugged a $125 million redemption gap through this secondary initiative and through warrant exercises.
I can't emphasize enough the importance of and value in being able to focus on running the business without the additional responsibility of raising money. We are entering 2021 in a position of strength. Strong balance sheet, and a leading factual content library streaming. As we have more than 80% of our year-end revenue target committed, over 80%, we're off to a strong start and on track to achieve our year-end revenue goal for 2021. I'd now like to turn the presentation over to the architect and engineer of our fortress balance sheet, our talented CFO, Jason Eustace.
Thanks, Clint. I'm also excited about our strength entering 2021 and our 2020 accomplishments. Before I review our fourth quarter financials, I'll note that we have included our unaudited financial statements of operations for the fourth quarter and the full year for 2020, as well as our net loss to EBITDA reconciliation in today's press release. Our audited financials will be included in our 10-K filing, which we'll be filing next week. Now let's review the fourth quarter financials. CuriosityStream's Q4 2020 revenues grew 70% to $11.4 million, up from $6.7 million in Q4 2019. This was led by direct-to-consumer and distribution subscription revenue. We continue to increase all of our revenue lines year-over-year with new contributions from sponsorship and advertising.
Cost of revenue was $4.7 million or 41% of revenue compared to 36% of revenue in Q4 2019, primarily due to an increase in the content amortization as a result of timing and the number of titles released in Q4 2020 compared to the same quarter the prior year. As a result, the Q4 gross margin was 59% compared to about 64% in Q4 2019. Advertising and marketing expenses were $13.3 million, a 14% decrease year-over-year, and a sequential increase of approximately $5 million, as we noted last quarter. CuriosityStream's overall operating expenses increased 16% to $22.2 million from $19.1 million in the fourth quarter of 2019. Fourth quarter EBITDA remains relatively flat compared to fourth quarter 2019, at a loss of $15.5 million compared to an EBITDA loss of $14.8 million last year.
CuriosityStream's ending cash and investment balances on December 31st, 2020, total $42.4 million, compared with $60 million at the end of 2019. On October 15th, at the closing of our business combination with Software Acquisition Group, we received $49 million, and more recently, in February of this year, we closed an additional public offering of approximately $101 million. We are on track with our plans for 2021 to deliver $71 million in revenue, which is consistent with our disclosure during the business combination. We have good visibility on our revenue, and over 80% of our 2021 revenue goal is committed at this point. We expect some lumpy quarters as our new lines of business, such as program sales and sponsorships, ramp up and create an outsized second half of the year. Now I'll turn it back over to David to open the line for questions.
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pounder hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dan Kurnos with The Benchmark Company. Your line is open.
Great. Thanks. Good evening, guys. Maybe just talk about the DTC sub-trends. Obviously, you finished the year strong. I don't know if you guys got to 1 million on DTC on the net, especially on the domestic side. Maybe just help us think about the balance of the year, some of the puts and takes. There's stimulus, and a lot of people are talking about that driving an uptake in ad spot. Obviously, you guys have annual pricing, so that will mitigate some of the benefits in the back half of the year. In terms of upside to targets and where you think that goes, and maybe counterbalance that, if you will, on the corporate side, either progress or how you think about how the reopening impacts the way that you consider that bucket. Thanks.
Thank you, Dan. I'll take it and then yield to Jason. I think the opening trends are a real positive for us, especially as it relates to our third-party businesses. As you mentioned, we had great growth in our direct service over the course of last year. Based on what we've seen so far this year, we don't see that slowing down. Where we do see opportunity is with the world opening up. I can tell you I'm personally on my way to South Florida later this week.
There's a big media community in Miami, and then I'm headed to L.A. next week, where more is opening up out there. I think just that general trend of being able to sit down and community with people and share our story as it relates to our third-party partners, that's only positive for us. As things open up more internationally, that will be only more positive there. That's an excellent trend for us, and we're optimistic that it will only have a positive impact on our direct business as well.
Yeah. The only thing I'd add there is that we continue to see the growth that we saw coming out of the third quarter, continuing into the fourth quarter, and then continuing into the first part of 2021. It's strong continued growth on that direct side of our business. Nothing's really changed. Even with the overall larger economic profile changing, things opening up, it has not negatively impacted our business.
Great. Maybe you'll see some tailwinds with some of the stimulus money coming through. Then, just on the program sales and advertising, I know it still makes sense. You talked about the back half of the year phenomenon, just maybe some of the conversations you're having. Obviously, again, stimulus should play a big role in this, and I know you guys are developing your go-to-market and how this is going to play out. There's clearly a huge demand for content, and there's obviously a big demand for advertising that probably ramps as the year goes on. Just any incremental color you can give on how you see that shaping up over the year would be helpful. Thank you.
Yeah. On the brand side, I would say that we hired a great leader for our brand partnerships in the business last year. Nate Stamos spent the majority of his career at Time Inc., I think he's sown a lot of seed since he started. All of those conversations and meetings that he's had will begin to bear fruit as he executes on a lot of what Devin Emery's vision is for how we maximize brand partnerships. We definitely see that business growing. Then, as it relates to program sales, the nice thing about that business is that we conduct it two ways. One is through some modest library programming sales in parts of the world where it can be promotional for us, or it's not going to cause any heartburn to our other businesses.
We also engage in pre-sales constructs, which gives us a lot of visibility into revenue that is going to hit six to nine to 12 months down the line, just because of the nature of production. The fact that we're in the factual space has enabled us to continue to produce content right through the pandemic. We haven't had any of the issues that, or nearly the issues that, most scripted companies have. We've got some great partners there, meaningful media companies who are excited about working with us over the long term as well.
Got it. Really helpful. Thanks, guys. Appreciate it.
Thank you.
Your next question comes from the line of Laura Martin with Needham. Your line is open.
Hi there. Can you hear me okay, you guys?
Perfectly, Laura.
Great. You said that sub growth was driven by international, so I'm curious as to what international revenue was as a % in Q4. When you gave us the projection for next year, can you size the international component of that? Is that growing or is it staying the same in terms of % of total revenue contribution?
Obviously, our direct business grew a lot. The majority of our direct subscribers came from the U.S. The majority of our bundled subscribers came from international. What I can tell you on a year-over-year basis is that our international revenue grew by seven points year-over-year. We see that's a growing trend for sure. The majority of our direct subscribers today are in the U.S. The slight majority of our bundled subscribers are outside the U.S., but over time, the revenue and subscribers will be dominated internationally, basically.
Okay, cool. My recollection is that about 30% of your library hours are owned by you 100%, and 70% is licensed. Were those numbers stable in Q4? When you look out to Q4 of next year, do you expect any shift to that given your aggressive content creation planning for 2021?
No, we like that mix, and we'll continue to do more and better great originals. At the same time, we have a lot of excellent relationships around the world, and we see a lot of great content that's available for acquisition that we can acquire at really palatable and efficient rates, sometimes as part of broader deals. We anticipate that mix to stay about the same.
Okay. How long are those deals? Are they five-year deals?
Three- to five-year deals when it comes to acquisition, typically. Yeah.
Okay, great. That's fabulous. Thanks, guys. Good numbers. Thanks very much.
Thank you, Laura.
Take care, Laura.
Your next question comes from the line of Jim Goss with Barrington Research. Your line is open.
Thanks. You mentioned a couple of the key programming areas you've developed, such as Pompeii. I'm wondering how you are planning to use this unique programming to build subscribers. In which areas do you think that would focus, then relative to DTC and bundled and program sales, et cetera?
The short answer is, as we're in the content monetization business, we look to monetize across multiple platforms and businesses. I think it's a great question that you asked, Jim, and I'm going to have Devin speak to it a little bit more as it relates to the direct business.
Yeah. The tentpole programming is a key part of our overall marketing that goes right alongside kind of what our conceptual marketing is , right? We're out there telling people what CuriosityStream is, and then we're able to use these tentpole programs to drive people in specifically for programs. You'll see us promote that across all of our channels, and then you'll also see us promote that specifically on platforms where we can draw people directly into some of our tentpoles and then get them to sign up and stay with us. I would say that the majority of our marketing tends to be focused on what CuriosityStream is, the concept of what we are, the full value that you get in terms of the library and the platforms, and then we're able to use Pompeii and our other great tentpoles like History of Home for more targeted and interest-specific marketing that we do.
I know you are trying to build visibility. Are there ways you can promote this programming to attract attention aside from the bundle distribution that you're looking at and, say, the corporate and educational subscriptions that you're using to create some of that visibility? Are there certain areas where you think you can do that, especially with this higher -profile content that I think you're drawing attention to? You also mentioned the blockchain and connected fitness, very interesting, a unique take on things that occurred. How might those tie into all these processes as well?
That's a good point, and yes, we are doing that. A good example of that is what we did with History of Home, right? We had Nick Offerman attached to that. It made for a really great opportunity to use him, use the show to specifically market that show. He has a lot of love, right? People really like Nick Offerman. They like everything that he's in. We're able to use that to hit that group of people, right?
You heard his voice on the radio, you saw him and heard him on television spots, as well as on social media. Yes, when we have shows like that, which we have more and more of, we do create show-specific campaigns that are able to leverage the talent involved and that are able to leverage the strength of the programming. We're absolutely doing that. We'll continue to do more and more of that. Clint, you want to take that second part?
Well, I would say we actually have a feature doc this year that we'll put marketing resources behind it, but Davos wants to premiere it there. Just to give you a sense of the scope and scale of some of the projects that we're working on. We recognize we're not a hit-reliant service or hit-reliant business, but obviously, if we can find more and bigger content that resonates with the cultural zeitgeist, that will only have a positive impact on the business.
Okay. Maybe one last one, and maybe this is way off base, but we look at the theatrical exhibitors and studios also, and with the changes in windows, it's creating a focus on blockbusters, which could create some void on the smaller end of the film releases. Do you think there's any of the content you're creating that could play a role in filling some of that void that you could release theatrically, especially since you're creating in very high quality?
I think the answer is we have the quality to be able to do that, and what it would come down to is the business case there.
Okay. All right. Thank you.
Thank you, Jim.
Again, if you would like to ask a question, press star one on your telephone. Your next question comes from the line of Logan Thomas with Stifel. Your line is open.
Hi, Clint and Jason. Thanks for taking the question. First question is just relating to the pace of investments and particularly related just to the over the next 12 months, how you're thinking about prioritizing investing across these multiple growth areas and multiple revenue streams, multiple monetization streams that you talk about. That'd be helpful just to frame that up for how investors should think about the pace of investments and how aggressive you want to go after these areas.
Yeah. It's a great question. I think that we continue to see great growth with our direct service. We're supremely confident that if we allocate more marketing and promotional resources to that, we can continue to grow it at a really meaningful level. I think that we're always in conversations with the board about whether or not it makes sense to really put our foot on the gas there, kind of beyond the plan that we're operating under right now. We're focused on hitting our year-end target, and we're obviously supremely confident in that. Would we love to potentially spend a little bit more money on the marketing and promotional side to grow that direct business? The answer is yes. Also, because we think we have price elasticity as it relates to that. It's something that we continually look at and continually review.
Okay. That makes sense. Just one other question, if I can, on the 80% committed, I think Jason spoke to this a bit, but just to tie it up, as we think about it, the 80% committed comes from the direct annual subscribers, active licensing agreements with distributors, and committed program sales. Are there any other sorts of chunky items in there that investors should be thinking about in order to kind of bridge to that 80% level from the current run -rate?
Yeah. I think the one thing that you have to take into consideration is that we do have the two newer lines of revenue with that program sales and the brand sponsorship side, which is going to create a little bit more of a lumpy quarter-to-quarter cadence. You're going to have sequential, potentially down quarters and some that can have big swings one after the next as well, just because some of those program sales deals can be quite substantial or some of the brand sponsorships can be.
As those mature, we'll get to a more run -rate business. We'll definitely hit our full -year numbers of 71. We definitely are 80% committed. Certain lines of business, we do have a greater line of visibility, like you articulated on the direct, the partner direct, the recurring contracts we have on the distribution side. There still remains the need to get on top of that within certain lines of business as well.
Okay. Thanks for the detail, Jason. Thanks, Clint.
Thank you, Logan.
Your next question comes from the line of Tom Forte with D.A. Davidson. Your line is open.
Great. Thanks for taking my question, congrats on the quarter. I had one question and one follow-up. The first question is, you talked about the reopening of basically everything. To what extent, if at all, was your production negatively impacted by COVID? If it was impacted, where do things stand today?
Yeah. The good news, Tom, is that we produced right through COVID, and we premiered new programming right through COVID. Now, you had to get a little creative in certain cases. Some of the productions that we were in the pacing extended a little bit. We did some interviews over Zoom, as compared to doing them in person, if people weren't comfortable sitting with a camera crew. I would say that we learned a lot, and we even got a little bit more efficient in certain cases. I would say that going forward, it's only getting better. That said, there are a few pockets or places internationally where it's still a little bit difficult.
In light of the flexibility that we have around production schedules and in light of the fact that again, we're in the factual space and not the scripted space, we're confident that everything that we're working on will continue to go according to plan and deliver around the times that we're anticipating we'll all deliver. Does that answer your question, Tom? Yeah, okay.
It does. Thank you. I knew that you had some advantages, as far as you weren't dependent on large numbers of actors and things of that nature that were working in your favor. I just wasn't sure to what extent you were still disrupted. Okay, the second question I had was, as more subscription video on demand or hybrid subscription video on demand, advertising video on demand services come online, do you think that's had any impact at all on your viewership?
Yeah, I feel like we're running our own race. There's more content to watch every day on all kinds of platforms. You mentioned these AVOD platforms. If you look deep into the AVOD platforms, the companies that own the AVOD and FAST platforms, whether that's Fox , Paramount , Samsung or whoever, they're making a lot of money, and certainly some of the programming partners are doing well there.
There's a lot of content on those services that just is not getting watched and kind of has hash marks as it relates to the ratings. For us, there's always going to be more content produced. That's the nature of the beast, and that's the trend. That's why we're focused on maintaining a premium brand position as the leading factual content provider. We feel like if we do that, and we continue to run our own race and execute on the plan that we have, everything's going to work out well.
Great. If I had time, I would ask one more question. Anecdotally, I've enjoyed a lot of the content on the platform. You talked about the Lincoln material you had. It was excellent. You have great stuff on big cats that my children enjoy. Is it still the case that your viewership is widely spread out, meaning no one individual title or handful of titles represents a dominant portion of your viewership?
That's correct. Our product overall is very widely accessible, very widely loved. What we find is that people use it in different ways, right? By being very broad, we can capture a large percentage of the market. What we are focused on from a content and product perspective, as well as people use it in kind of their own individualized way, and as different cohorts use it in different ways, we can also adjust our products to be able to make it easiest to do so, right?
An easy example of this is Curiosity Kids, right? If kids are using our product, we can make it feel , look, and interact slightly differently with different programming than if their parents are. Even in the same household. To answer your question, yes, it's still very broad-based, but we can continually do more and more to engage each different demographic, psychographic, based on the behavior that they're displaying on our platform.
Great. Thank you for taking my questions.
Thank you, Tom.
Thank you, Tom.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.