Angel Studios (ANGX) Q3 2026 Earnings Call Transcript

Motley Fool Transcribing, The Motley FoolWed, November 11, 2026 at 7:46 PM UTC

0

Image source: The Motley Fool.DATE

Nov. 11, 2026

CALL PARTICIPANTS -

Head of Investor Relations - Luk Janssens

Co-Founder and Chief Executive Officer - Neal Harmon

Chief Financial Officer - Scott Klossner

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS -

Total Revenue -- $159 million, representing 107.7% year-over-year growth driven by both the Guild and theatrical business segments.

Guild Revenue -- $115.6 million, increasing 95.3% year over year as the company expands its paying member base.

Paying Guild Members -- 2.94 million, an 86.1% increase year over year reflecting 1.36 million net new members added over the past 12 months.

Net Member Additions -- 335,000 members approximately, compared with 269,000 additions in the prior year quarter.

Gross Margin -- 63%, compared to 55% in the third quarter of 2025 and 54% in the second quarter of 2026.

FY2026 Adjusted EBITDA Guidance -- less than $25 million loss, as management reiterated its full-year objective.

Net Loss -- $5.2 million, or $0.03 per share, significantly narrowing from a loss of $38.5 million in the prior year period.

Operating Cash Flow -- $10.3 million positive, contributing to a year-to-date positive operating cash flow of $29.1 million.

Guild Marketing Efficiency -- 55% of Guild revenue, an improvement from 75% in the third quarter of 2025.

Adjusted EBITDA Loss -- $3.2 million, compared to a loss of $32.6 million in the prior year period.

Average Revenue Per Member (ARPU) -- $13.73, representing a $0.10 increase from the second quarter of 2026.

Annual Recurring Revenue (ARR) -- $484 million approximately, calculated based on current membership levels and monthly revenue averages.

Cash and Cash Equivalents -- $45.6 million, up from $44.1 million at the start of the year.

Notes Payable -- $75.5 million, down from $97.2 million at the beginning of 2026.

Theatrical Revenue -- $29.0 million, compared to $5.5 million in the third quarter of 2025, led by the release of Young Washington.

Bitcoin Holdings -- 304 bitcoin, valued at $25.4 million as of Sept. 30, 2026.

Theatrical Release Volume -- 10 films planned for 2026, including seven scheduled for the second half of the year.

Theatrical Box Office -- $47 million for Young Washington domestically, marking the company's highest-grossing release of the year.

Library Growth -- 1,500 releases approximately, up from 837 releases at the end of 2025.

Common Stock Outstanding -- 196,323,468 shares, which included an increase of 9.4 million shares to complete the acquisitions of Tuttle Twins and The Wingfeather Saga.

Nine-Month Adjusted EBITDA Loss -- $10.9 million, compared to a $78.8 million loss in the first nine months of 2025.

Deferred Revenue -- $98.5 million, up from $66.5 million at the end of 2025, reflecting growth in annual Guild memberships paid in advance.

Angel Studios, Inc. (NYSE:ANGX) reported a significant expansion in its financial results for the third quarter, headlined by total revenue more than doubling year over year. Management attributed the growth to the scaling of the Angel Guild membership base and a productive theatrical slate, specifically the high-grossing film Young Washington. The company highlighted its ability to expand membership while reducing marketing intensity and improving adjusted EBITDA losses. Management indicated that the platform is operating more efficiently through the implementation of internal technology like the Ad Factory, even as the broader streaming industry faces subscriber headwinds.

Management reported that Angel added approximately 335,000 net new paying members in a quarter where the U.S. premium streaming video-on-demand market lost 1.7 million subscribers.

The company surpassed its 2026 library growth goal of 750 releases early, reaching over 1,500 total titles by the end of the third quarter.

CEO Harmon stated that Drummer Boy: The Musical opened in the top three at the domestic box office with $9.3 million and the accompanying album reached the number one position on iTunes.

Management noted that the company avoided hiring nine additional staff members due to internal AI innovations that streamlined company processes.

CEO Harmon noted that versioning tests with the Angel Guild yielded an 8-point higher score and a double-digit increase in view-through rates for the film Drummer Boy.

The company is testing international expansion in Mexico, Latin America, the United Kingdom, and Canada using a crawl, walk, run strategy.

INDUSTRY GLOSSARY -

Angel Guild: A community-driven membership platform where participants screen and vote on films and television series for production and distribution.

Ad Factory: An internal proprietary technology tool used by Angel Studios to create and test marketing assets at high volume.

SVOD (Subscription Video on Demand): A service that provides users with unlimited access to a content library for a recurring fee.

ARPU (Average Revenue Per User): A metric used to measure the average revenue generated from each active member or subscriber.

Adjusted EBITDA: A non-GAAP financial measure that excludes interest, taxes, depreciation, amortization, and other non-core expenses like stock-based compensation and gains or losses on digital assets.

Full Conference Call Transcript

Operator: Good morning. At this time, I'd like to welcome everyone to Angel's Q3 2026 Earnings Call. [Operator Instructions] I will now turn the call over to Luk Janssens, Head of Investor Relations. You may begin your conference.

Luk Janssens: Hello, everyone. Welcome to Angel's third quarter 2026 earnings call. Joining me are Angel's Co-Founder and CEO, Neal Harmon; and Angel's CFO, Scott Klossner. Before we begin, I would like to remind everyone that certain statements made on today's call, including statements regarding future financial performance, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Information regarding these risks and uncertainties is included in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. These forward-looking statements represent our outlook only as of the date of this call, and we undertake no obligation to update any forward-looking statements, except as required by applicable law. During this call, we may refer to certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are available in our earnings press release. These cautionary statements apply to all forward-looking statements wherever they appear in this call, including in the question-and-answer session.

Our earnings press release is available on our Investor Relations website at angx.com, where we also encourage you to sign up for our e-mail alerts. Neal and Scott will take approximately 20 minutes for their opening remarks before we turn the call over to questions. Thank you all for joining us. And now I'll pass the call over to Neal.

Neal Harmon: Thank you, Luk, and good morning, everyone. I'm glad you've taken the time to join us this morning, bright and early. We decided to do the call before the market opens at your request, and we are at an inflection point here at Angel. We've proved to ourselves and our investors that we can deliver strong Guild growth and do so with a much more efficient sales and marketing budget. Angel more than doubled revenue year-over-year to $159 million in the third quarter. For the year, we generated $29.1 million in positive operating cash flow. This is a key contributor to our growth model philosophy. Guild revenue reached $115.6 million, nearly double the prior year quarter.

Paying Guild membership grew 86% year-over-year to 2.94 million. These results provide further evidence that our model is working. We're delivering across the different parts of the business and seeing the power of those parts working together. Let me walk through the progress. First, technology and marketing execution. We built Ad Factory in-house and began testing in March and really started hitting our stride in Q3. Our lean marketing team now uses it for theatrical releases, Guild acquisition, giveaways, brand awareness and merchandise, including preparation for Black Friday. We pair that increased output with disciplined investment. More creative gives us more opportunities to find what resonates and our return criteria determine where we put additional spending. Second, stories.

We set a goal of adding 750 releases during 2026. By the end of September, we were already approximately 91% of the way there, putting us ahead of our planned pace. Today, we're pleased to announce that we surpassed this goal by already 46 releases. That growth comes from partnerships with film and intellectual property owners, our own theatrical titles and television series curated by members of the Angel Guild, specifically for our audience. Third-party studio films like Paddington and The Pursuit of Happyness, also approved by the Guild, are recognizable stories that broaden what we can offer alongside the original films and series members already associate with Angel. This is what excites us about growing the library.

More opportunities for members to find the story they love, discover something unexpected and share a great experience with their families. That's the experience we're building with the Guild. I'm grateful for the care our members bring to voting, for showing up to support our theatrical releases and for monthly and annual memberships that make it possible to pay the storytellers and bring more stories to our audience. Third, theatrical distribution. We released 8 films in theaters last year. And this year, we will release 10 with 7 scheduled in the second half alone, our fastest release pace to-date. In fact, this month, we have 2 films releasing in November. We've never done that before.

Young Washington led the third quarter, delivering $47 million at the domestic box office being a great launching pad for the founder cinematic universe we are building. Last weekend, Drummer Boy: The Musical surpassed The Greatest Showman's opening weekend domestic box office. And the Drummer Boy album rocketed to #1 on iTunes. If you haven't seen it, it's very worth the trip. Theatrical releases also introduced new viewers to Angel, deepen our filmmaker relationships and add new films and series to the library, supporting Guild acquisition and retention. Our fourth quarter slate includes Angel and the Badman, Drummer Boy, Hershey and Zero A.D.

From a Western to a musical, to the roots of an iconic company, concluding the season with the story of the birth of Christ. It's a slate built for the holiday season when families come together and go to the movies. We're excited about the experiences these films can create for our audience and how they can carry momentum into the growth of the Guild. Now let me address the pace of Guild growth. We added approximately 335,000 net new paying members in Q3, compared with approximately 269,000 in Q3 2025, and while achieving positive operating cash flow. We ended September with 2.94 million paying members. That's an increase of 1.36 million net new members year-over-year.

It's worth taking a moment to put our strong Q3 performance into a wider industry context. While the premium streaming video-on-demand market contracted in calendar Q3 2026, we actually delivered positive growth. As you can see from this chart provided by Antenna, U.S. SVOD cumulatively lost 1.7 million subscribers. Angel bucked that trend by adding roughly 335,000 net new paying members. Importantly, we managed to deliver this strong performance in a seasonally weak quarter, while reducing Guild sales and marketing intensity by 27% and improving our adjusted EBITDA losses by 90.2% year-over-year. That says a lot about the strength of the Guild and about the foundation we're building for future growth.

Last call, we said that the back-to-school season is softer for streaming engagement and acquisition throughout the market. This year, we took a more disciplined approach to investing throughout that period, aligning marketing spend with the returns available, maximizing return on ad spend. That discipline gives us a stronger foundation to pursue end of the year holiday growth. Looking ahead, we believe the market opportunity is over 40x domestically and growing over 18% annually internationally. There's a large audience seeking high-quality values-driven entertainment. And at 2.94 million paying Guild members, we're still early, very early in reaching it. This quarter strengthens our confidence in what we're building.

The model is working, our execution is improving, and we are seeing substantial opportunity ahead. Let me share with you an experience we had around Drummer Boy, which highlights the power of our community and of the Angel Guild. Drummer Boy opened in the top 3 this past weekend with $9.3 million in the box office. It tracked well internally with the Guild with a score of 91%, and its Rotten Tomatoes audience score is currently at 94%. My family has especially enjoyed rewatching it repeatedly and engaging with the music. It is so, so fun. But right before we shipped the files to all the theaters, we had an idea how we could improve the film.

And we quickly cut together a new version of the film, and we tested a version A with a version B with 2 separate samples of the Angel Guild. We had those results the following week and found that our idea yielded an 8-point higher Angel Guild score and a double-digit increase in view-through rate. This change has never been possible by any company that releases films to theaters previously. That's the power of the Angel Guild, and it's going to change the entire outcome of Drummer Boy and also the future of how that title will help us grow this community. So what we're building here at Angel is very exciting and it's never been done before.

Scott, please walk us through the financial results.

Scott Klossner: Thanks, Neal, and welcome. Last quarter, I talked about how our finance team and our sales and marketing teams work hand in glove and how we coordinate in real time on Guild acquisition, measuring spend, directing it to where it earns the best return. Today, I'll walk through how this process performed exceptionally well during Q3. When we met in January, we told you our intention was to live within our balance sheet means and produce the best Guild growth we can. We delivered on that. This leadership team sets out its ambitions, explains its actions and then delivers. I want to take a minute, though, to discuss how the quarter unfolded because it's the best example of that discipline.

The first half of Q3 looked a lot like the end of Q2 with the beginning of the America250 campaign and members joining the Angel Guild at an accelerated pace. Then in the last 2 weeks of September and into October, market dynamics shifted, and that's a seasonal pattern tied to back-to-school and the broader slowdown in viewing that comes with it. Our paid media partners have also validated the seasonal pattern and its effect on the broader streaming industry. We've seen it in prior years, and we planned for it when we built our 2026 guidance. We stayed on course. We kept marketing to the ROI parameters that we set. And as expected, acquisitions slowed some.

Last year, we spent heavily through the same period relative to our revenue, and our adjusted EBITDA loss was $32.6 million. This year, it was $3.2 million. Revenue more than doubled, while marketing expenses only grew 42%. We stayed disciplined, and you can see that in our adjusted EBITDA improvement and also in $10.3 million of positive operating cash flow. And now we're heading into a seasonally stronger fourth quarter with 4 theatrical releases and a library that's growing at a record pace, as Neal mentioned. And we expect fourth quarter growth to meet our expectations, which are built into our full year guidance. So let's talk specifically about the Q3 results.

Total revenue for the quarter was $159 million, up 108% year-over-year and up 42% from Q2. Recurring revenue from our Guild business was at $115.6 million and is up 95% year-over-year and 27% up over Q2. Now the Angel Guild grew to 2.94 million paying members, and we're very ambitious about where we can take it, especially given how efficiently we're driving that growth. Guild marketing as a percent of Guild revenue continues to improve. We reduced the cost of driving Guild growth from 75% in Q3 2025 to 55% in Q3 2026. And that does 3 things. First, it helps produce positive operating cash flow of $10.3 million in the quarter.

Second, our adjusted EBITDA loss for the 9 months ended September 30 of this year was only $10.9 million, compared to a loss last year of $78.8 million. And third, I can confidently reiterate our full year guidance in 2026 of an adjusted EBITDA loss of less than $25 million. Now this management team started the year setting an ambitious $113 million reduction in adjusted EBITDA loss year-over-year, and it's been a focus of our teams internally. With an ambitious Q4 ahead of us growing our Guild, we reiterate that guidance. Other operating metrics in the core Guild business are also performing well. Trailing 12-month average revenue per member was $13.73, up $0.10 from last quarter.

And average revenue per member moves with the mix between tiers, promotional activity and members choosing an annual membership. And remember, annual memberships come at a discount to the member, but they also bring in cash upfront and those customers retain better than monthly membership members. That puts our annual recurring revenue at approximately $484 million. We get there by multiplying the 2.94 million Guild members paying an average of $13.73 a month by 12 months. Now gross margin in the quarter was 63%, compared to 55% in Q3 of 2025 and 54% in Q2 of 2026. A greater mix of theatrical revenue generates a higher gross margin percentage.

Net loss in Q3 was $5.2 million or $0.03 per share, compared to a net loss of $38.5 million or $0.25 per share in the prior year period. Q3 revenue grew 108% year-over-year, and marketing expenses only grew 42%. And all of our other operating expenses combined grew at only 18%. And operating cash flow for the year-to-date is a positive $29.1 million, compared to a negative $52.5 million in the same period last year. And that $81.6 million swing reflects the plan we set out to deliver for shareholders in 2026. This positive operating cash flow will let us keep investing in Guild growth, while operating within our means.

We had cash and cash equivalents of $45.6 million as of the end of the quarter, up $1.5 million from $44.1 million at the start of the year. And notes payable stand at $75.5 million, down from $97.2 million at the start of the year. Now put those pieces together, and you can see how Angel has performed. Disciplined investing in member growth strengthens our financial position, losses shrink and operating cash flow stays positive. And that stronger balance sheet sets the table for continued member growth and investment. And it's the plan we laid out at the start of 2026. And the execution of that plan has produced 3 strong quarters to-date.

And with that, I'll turn it over to the operator for questions.

Operator: [Operator Instructions] Our first question today is coming from Jason Helfstein from Oppenheimer.

Jason Helfstein: So clearly, we're seeing nice improvement this year in contribution margin on the Guild, and so I mean, look, we can look at it either as a like straight-up contribution margin or sales and marketing as a percent of revenue. That number kind of has been bouncing around a little bit. So just, I guess, how should we think about contribution margin or sales and marketing as a percent of Guild revenue as we're going to go into the fourth quarter, which you guys talked about as typically a seasonally strong quarter?

And then given that you've now been positive free cash flow every quarter this year, -- and kind of you're guiding to kind of positive EBITDA next year and you should have meaningfully positive free cash flow. Just how are you thinking about longer-term investment in maybe 2020 and beyond? Like, is the goal to kind of keep growing that EBITDA? Or is it prioritized growth and kind of more focus on kind of maintaining profitability but prioritize growth? And then one quick follow-up.

Neal Harmon: Thank you, Jason. I'll let Scott speak to the contribution margin in the first question. I'll speak to the second one. Our priority, given the fact that there's almost 140 million households in the U.S. alone, 90% of which pay for a streaming service and the market is growing 18% year-over-year internationally. Our priority is growing into that amazing total addressable market with our model. Our message is resonating. We had unbelievable first 3 years of growth with the Angel Guild. And our intention is to continue to grow into that market within our own means. So I don't see our posture changing next year, and we're very excited about how early we are in the growth of this market.

Scott Klossner: Yes. Jason, on the contribution margin question, it's basically -- the way I would look at it is like this is, Guild revenue is a cumulative number for members that have been with us a year and 6 months and 3 months and maybe only a month. That number compared to the growth of the actual Angel Guild. The reason it bounces around a little bit is because we spend sales and marketing as it is very efficient or not efficient, we pull back, meaning that in Q3, perhaps we may -- we're still going to market into the results, meaning we have targeted metrics that we market into.

If it's a slower period, then we won't market quite as heavily and that revenue that's there from the base of the Guild membership versus how much we spend will move from quarter-to-quarter or month-to-month actually based on how well the metrics are performing in terms of acquisition. And when we go into a quarter that is a high acquisition month, quarter rather, you'll tend to see contribution margin be off a little bit because we will spend more in sales and marketing vis-a-vis that base of revenue that sits in the guild.

So it will bounce around a little bit, but it's somewhat -- it's not massive swings, but you'll see some swing from quarter-to-quarter based on how well we're performing on the marketing side.

Neal Harmon: And then finally, on the fourth quarter, when we look at 2023, '24, '25, the trend is -- and prior, the trend is clear, leading into the holidays, especially from Thanksgiving to Christmas, that's our big growth time. And then after Christmas, from Christmas to New Year's, is the highest streaming week of the entire year. So we're well positioned because we had so much discipline in Q3. We're well positioned to be able to take advantage of the growth in Q4, and that's what we intend to do.

Jason Helfstein: And just as you think about next year, you've obviously added a lot of library content. Do you think you proportionately, you need to add as much content next year relative to, let's say, what you've added this year or the prior year, given that a lot of this is exposing people to what is new -- potential new members to what's already on the service as opposed to the same rate of kind of adding content? So just how are you thinking about that as you think about next year?

Neal Harmon: Great question. And just as a reminder to everyone on the call unfamiliar with the model, Angel doesn't have to pay upfront for the titles that we bring on. We sign a revenue sharing agreement. So whether we add 1 title or 10 titles, it's the same to Angel. So the key to us is delivering the very -- the best first title based on what we know about a user and the best second title. That's the key to retention for Angel. That's what we're testing into. That's what drives our technology decisions and our title decisions. And so the pace at which we've added titles in 2026 actually, we would anticipate increasing with our growth in 2027.

Now the pace at which we release in the theaters is a different equation. We don't foresee going to theaters with more than 12 titles in a year. And we're doing 10 this year. That number, we haven't given, and we'll give the slate in April of 2027. But the number of streaming releases, we anticipate that growing as the Guild size grows and then the number of theatrical releases tapering off.

Operator: Our next question today is coming from Eric Wold from Texas Capital.

Eric Wold: I just want to follow-up on the last point on the slate for next year. I know you're not going to give a full slate until April for '27. But maybe just remind us how many theatrical releases you've confirmed and announced to this point? And then kind of maybe how that pipeline is shaping up given the strength you've seen in membership growth and success, kind of what you've seen kind of from inbounds on titles that would be more appropriate for the theater versus just going directly to streaming.

Neal Harmon: Great question. We've got some great titles that have already been announced for next year. There was a release out on Rode to Ruin, starring Michael Keaton and Morgan Freeman. So both top 50 in the world actors on one project together. That's really exciting. We've also mentioned New York Minute with Neil McDonough and his team. We've -- I'm not going to be able to remember all the titles right here on the call because I don't have them in front of me. We've mentioned, I think, 3 or 4 titles so far this year, but we're saving the announcements, the important announcements for CinemaCon.

Eric Wold: Got it. And then a follow-up question, update us on the plans now that you kind of -- you're generating positive operating cash flow. Obviously the hope is that continues. Maybe kind of update us on the plans to expand more broadly internationally? Where are you on those plans? What could we potentially see in '27? Kind of what -- how would you frame any kind of upfront capital upfront spend commitment kind of launch more broadly into those markets?

Neal Harmon: Great question. So we -- our intention is to grow within our means, and we have the balance sheet to be able to grow consistent with consensus expectations from the analysts without further tapping our credit line. And so our intention is to continue to grow within our means. Now the business, as you can tell, is -- the free cash flow is really opening up opportunities for us. So I would anticipate more activity around international, but this is very much a crawl, walk, run for us. We've already been doing testing here in the U.S. with Spanish. We released almost all titles in Spanish simultaneous to English.

The Drummer Boy because of that last-minute test that we did, we -- the Spanish is coming out, I think mid this month. But -- but that -- so we've been doing that, and that's in preparation to go into Mexico and Latin America. And then we've also been doing some tests in the U.K. and in Canada to make our systems multinational, and we'll continue to crawl, walk, run. And you'll hear about it as we experience more and more success in that space.

So -- but I wouldn't like for -- expecting Angel to go and dump a bunch of money outside of the parameters that we've been operating with that we're not currently -- we don't have any plans to do that.

Operator: Our next question is coming from Eric Handler from ROTH Capital.

Eric Handler: Neal, I wonder if we could just sort of dissect membership growth a bit here. I've seen, at least based on your online tracker, and on the trailing last 7 days, you've added about 65,000 members, which is the highest number since July. So it's good to see things moving in that direction again. I noticed middle to late of last week, I received my first e-mail promotion in quite some time. It also coincided with the opening of Dummer Boy. So I'm curious, is it movies and theaters that drive more growth? Is it the promotions? Is there a way to dissect that?

Or is it just when you have both going at the same time, you get twice the bang for your buck?

Neal Harmon: So we've been building awareness around Angel over the last 3 years, and those awareness metrics continue to increase for aided and unaided awareness around Angel. And promotions when they're delivered at a time when people are expecting in a promotion and they're in a buying state, the holiday period is a great time for that. We've got Black Friday. We have Christmas, and then we have the New Year's run for streaming. All of those are opportunities for buying activity. And we are very careful in positioning our promotions so that they're when consumers would expect them and that we have a good balance as we grow.

Advertisement

The majority of our members by far are coming through nonpromotional efforts and through the Ad Factory, and through our theatrical titles and the way that they grow into new genres and new actors. But then these promotions are also helpful for spurts of growth when people are expecting it. Scott?

Scott Klossner: Yes. I think one thing that's really key here, Eric, and I think you've touched on it, which is because we market into success or market into the metrics, what will occur is that we're capturing demand more than creating demand. There's creating demand efforts out there. Our whole theatrical slate is about creating awareness and whatnot. But we market heavily to circumstances that increase conversion and thus allow us to hit our metrics. What that means essentially is that when there's demand, we will market heavy into it, whether it's a seasonal demand or a title-driven demand or a theatrical opportunity that we have.

Those things will corral and you will see our spending really adjust and go forward when the demand is there. And Neal likes to use the term when the tide is coming in is when we will market heavily and try to acquire customers. When that tide is going out, we'll hold and wait until the opportunity arrives. So that's why you see some dips and some rising in terms of both marketing spend, as I was saying in an earlier question, and secondarily, in terms of customer acquisition. So yes, it's sort of that combination of things that creates opportunity, and we make sure that we spend into that opportunity.

Neal Harmon: But to your point, and it was a great -- I'm glad you picked up on this, Eric, is that we did have a breakthrough this year where we're able to figure out because previously, the theatrical releases, we would do a release that would create a marketing splash, but it was all about selling tickets. And this year, we have discovered some approaches, and in our testing, we've discovered ways to sell Guild memberships at the same time that we create that splash. And what that does is it just allows us to make a bigger splash because it's funded by the Guild growth marketing engine and by the theatrical marketing engine.

So you do -- you will see on a successful release like Drummer Boy, that actually becomes wind at our back with the Guild membership numbers as well. But then we'll see -- we'll experience more of that as soon as Drummer Boy gets released for Guild members to view. Good question.

Eric Handler: That's helpful. And then just as a follow-up, as you add more content to the streaming platform, I'm curious and that platform diversifies across a wide range of genres. Are there any patterns or takeaways you have from what people are most interested in? Or is it just anything you put on there is as long as people like it is going to get consumed?

Neal Harmon: So Eric, that's a great question. We have noticed that as we're becoming broader that there are different audiences within the Angel Guild and serving each of them, learning about each of them is a very, very high priority for us. And so if somebody -- this is kind of a stereotype, but if somebody likes Hallmark movies and there are some Hallmark style movies that are on Angel, then Angel needs to show them those types of movies. But if somebody is turned off by Hallmark movies, then Angel should show them the titles that are more mainstream, perhaps more gritty or secular.

So determining who the Guild member is and delivering them the titles they want, or if a particular Guild member loves documentaries, then the experience should adjust to them and documentaries should be their primary experience. We're learning to do that, and we've reengineered our platform to make that more possible. We have a lot of work to do there. But that's the insight that we're having is as we grow to 3 million and then to 10 million Guild members, that problem is going to be more and more important for us to get right.

Operator: [Operator Instructions] Our next question is coming from Thomas Forte from Maxim Group.

Thomas Forte: Great. So Neal, Scott, congratulations on the quarter. I have 2 questions on AI. Neal, you've been very thoughtful in the past with your comments on AI and how that's going to change content creation. So I'd appreciate your thoughts on that. And then for my second question, on that internally created ad tech, how is your team leveraging AI to market more efficiently, including on social networks, legacy media, et cetera?

Neal Harmon: Yes, great question. So our thinking on AI is that AI is going to drop the cost of production and increase the quantity of titles coming to the market. You had slop before AI, and there will be slop moving forward at a greater volume. But then you also have diamonds in the rough before AI, and you're going to have it during the AI era. And determining where those are and getting behind those titles is what Angel is really good at because of the Angel Guild. So that's where titles are heading. The second thing that we're actually doing is because we purchased some of our shows, the David and Young David, Tuttle Twins, The Wingfeher Saga.

Now that those are -- we're all under the same roof, we have enabled all of these partners to use AI tools, to innovate on AI tools to figure out content production, and we're using that to try to teach the rest of the filmmaker community how to do so. So that's another approach that we have currently in the company. Then finally, and I've mentioned this before that we just -- pretty much everyone here is an engineer.

Everybody here has their own AI account that has access to company systems and data in a very secure manner so that the team can implement and innovate on their own processes and solve problems within the company that allow us to scale. We just had an internal report just this last week where we recognized that we didn't have to hire 9 new people because of an innovation that happened in AI. And so that's been very, very important to us that we just adopt it, that we understand it.

And -- now we've predicted that there's going to be an AI film that gets released this year -- by the end of this year or early next that is a full-length feature film that people will love. We haven't seen that film yet, and we're still anticipating that's going to be coming as people figure out and understand these tools. Now I know there were 2 parts to your question. Will you help me with that?

Scott Klossner: Yes. So I'll go ahead on the second one, the Ad Factory. Think about the Ad Factory in this sense, because we're very dynamically driven in the sense that we actually are able to test and implement and innovate quickly. It's sort of like the old adage adapt, view, adapt and implement. And what we're doing is using the Ad Factory can actually create many assets at a very swift pace to allow us to see which assets are working the best when we go out there and market. And when we get some that don't market as well, we can quickly adapt and adjust based on that.

So that sort of change or that ability to move quickly within our testing capability with our marketing allows us to get the best producing content -- or ad content out to our potential customers quickly and cost efficiently. So that all sort of helps play into our ability to increase our adjusted EBITDA over time with revenue.

Neal Harmon: And hyper targeted.

Scott Klossner: Yes.

Neal Harmon: So as you can see, we already surpassed the 750 release goal by 48 titles this year. And we were able to go and launch hyper-targeted campaigns around every title that's released. And then we surface the ones that justify greater TLC from our marketing team. But our marketing team is able to go focus more heavily on our main titles, and then these long-tail library titles are getting addressed by our technology and then also by a combination of the technology and the team. So that is -- that's how we're scaling. I'm glad you asked the question, and I hope that was helpful.

Operator: Our next question today is coming from Ryan Meyers from Lake Street Capital.

Ryan Meyers: First one for me, if we think about the operating cash flow during the quarter, Scott, maybe can you just talk about how much of that reflects the sort of sustainable underlying cash generation of the business versus just some working capital benefits from deferred revenue and accrued royalties?

Scott Klossner: Sure. If you look at cash flow quarter-over-quarter this year versus last year, it's not just in the deferred revenue side. The deferred revenue side provides working capital for us to grow. The secondary key is that is a reduction of losses over time based on our marketing as a percent of revenue. So you've seen our net income losses come down or adjusted EBITDA losses, however you're looking at it, come down over time. And that's a function of the effectiveness of our marketing team and marketing into our growth. And that, combined with the amount of members that we have as a base to provide us revenue over time.

And it actually works the same in theatrical that we use the really efficient means in the way that we market on our theatrical releases as well to make sure that we always stay on a cash flow -- at a minimum of cash flow even basis on a release in theaters and in many times profitably into the theaters. So the key is not just deferred revenue that comes from annual memberships that can provide cash immediately for a year's worth of watching, but also the fact that we've been able to adjust our marketing spend as a percent of total revenue, which brings down the losses.

And then that combination of things, along with just continued efficiency on our G&A spend and our continued effectiveness in terms of our being able to grow the Guild membership and provide cash flow positive means of doing so. Vis-a-vis, again, remember, we mark it into our numbers and some of those include how quickly or how many members come in on basic versus premium, annual versus monthly and the whole combination of things to give us the result that we're looking for. We set out the year to knock basically $100 million worth of losses off of our income statement from last year to this year, over $100 million.

And we've been able to do that by continuing to efficiently spend and operate the business and bring in great films and stories that's resonating with our customers.

Neal Harmon: And bring in more Guild members than a year ago quarter.

Scott Klossner: Yes.

Neal Harmon: Yes.

Scott Klossner: For sure.

Ryan Meyers: Okay. And then just lastly, can you maybe touch on what you're seeing across customer acquisition costs and what some of those payback periods are looking like and maybe how that's trending relative to earlier this year or even last year?

Scott Klossner: Yes. When you consider content acquisition costs, remember, because we use a...

Neal Harmon: I think he said customer acquisition. Did you say content or customer?

Ryan Meyers: I said -- yes, I'm referring to customer acquisition costs.

Neal Harmon: Okay.

Scott Klossner: I see. If you look at just straight CPMs, I mean, there wasn't a real change in the CPM. We have the same seasonality pretty much that we anticipate from prior years. But the effectiveness of the customer acquisition, again, is benefited by a multitude of things. One are the assets that we're utilizing that are created with our Ad Factory being able to have great stories and films and series helps us support our customer base, make it more attractive to the customer, increasing their marginal utility of owning a membership with Angel being part of the membership.

So as we continue to sort of improve on all fronts, you're seeing that benefit come in the form of operating cash flow and reduced losses year-over-year and at the same time, while growing the Guild. And so it's been a remarkable year in many ways in the sense that we've come a long way in the last 12 months or even you could say, 9 months, if you're just looking at this year. And it's not just any one thing.

It's literally a collaborative effort across the teams both on the theatrical side, on the Guild acquisition side, on the technology side, every part of the business has really had a strong year, and we're just looking to improve upon that every month and every day we come to work.

Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Neal Harmon: Thank you. Folks, as I reflect on the call today, I'm pleased with our team's progress. Guild growth in Q3 bucked the industry trend to deliver positive growth. And sales and marketing continued to trend all year that it's getting more efficient. Angel as a whole is growing and getting stronger, while generating positive operating cash flow. And most importantly, our model remains differentiated and robust, making audiences happier. It's because of curation by the Guild, values-driven films and TV series for everyone and generous revenue share with our storytelling partners. I'm so optimistic about where we can take all of this. Thanks for joining us today and see you next time.

Scott Klossner: Thank you.

Operator: Thank you. That does conclude today's webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.

Should you buy stock in Angel Studios right now?

Before you buy stock in Angel Studios, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Angel Studios wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $341,157!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,037,753!*

Now, it’s worth noting Stock Advisor’s total average return is 834% — a market-crushing outperformance compared to 207% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

See the 10 stocks »

*Stock Advisor returns as of November 11, 2026.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Original Article on Source

Source: “AOL Entertainment”