Angel Studios Q3 2026 Earnings Call Transcript

Angel Studios (NYSE:ANGX) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Angel Studios reported a 108% year-over-year increase in Q3 2026 revenue, reaching $159 million, with a positive operating cash flow of $10.3 million.

Guild revenue nearly doubled to $115.6 million, with an 86% increase in paying Guild membership to 2.94 million members.

The company surpassed its goal of 750 releases for 2026 by 46 releases, driven by partnerships and successful theatrical titles.

Angel Studios achieved significant marketing efficiency, reducing Guild sales and marketing intensity by 27% and improving adjusted EBITDA losses by 90.2% year over year.

The company plans to expand its international presence cautiously while maintaining financial discipline and leveraging free cash flow for growth.

Neal Harmon, CEO, highlighted the use of AI for content production and marketing, which has helped avoid additional hiring costs.

Fourth quarter expectations include four theatrical releases, with a focus on leveraging the holiday season for increased Guild growth.

Management reiterated guidance for an adjusted EBITDA loss of less than $25 million for 2026, noting significant improvements in financial metrics.

Full Transcript

OPERATOR

Good morning. At this time I’d like to welcome everyone to Angel Studios’ Q3 2026 earnings call. All lines have been placed on mute to prevent any background noise. I will now turn the call over to Luke Jensen, Head of Investor Relations. You may begin your conference.

Luke Jensen (Head of Investor Relations)

Hello everyone. Welcome to Angel Studios’ third quarter 2026 earnings call. Joining me are Angel Studios’ co-founder and CEO Neal Harmon and Angel Studios’ 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 email 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 (Chief Executive Officer)

Thank you, Luke, 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 Studios. 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 Studios 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 Happiness, 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 Studios. This is what excites us about growing the library: more opportunities for members to find a 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 eight films in theaters last year and this year we will release ten, with seven scheduled in the second half alone, our fastest release pace to date. In fact, this month we have two 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 number one on iTunes. If you haven’t seen it, it’s very worth the trip. Theatrical releases also introduce new viewers to Angel Studios, 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 Bad Man, Drummer Boy, Hershey, and 0 AD.

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 US, SVOD cumulatively lost 1.7 million subscribers. Angel Studios 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’s working, our execution is improving, and we’re 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 three this past weekend with $9.3 million at 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 re-watching 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 version A with version B with two separate samples of the Angel Guild. We had those results the following week and found that our idea yielded an eight-point higher Angel Guild score and a double-digit increase in view-through rate. This change has never been possible for 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 Studios is very exciting and it’s never been done before. Scott, please walk us through the financial results.

Edward Scott Klossner (Chief Financial Officer)

Thanks, Neal, and welcome. Last quarter I talked about how our finance team and our sales and marketing teams were 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 two 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 this 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, acquisition slowed some. Last year we spent heavily through this 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 four 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 115.6 million and is up 95% year over year and 27% over Q2. 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’ve reduced the cost of driving Guild growth from 75% in Q3 2025 to 55% in Q3 2026. And that does three things. First, it helps produce positive operating cash flow of $10.3 million in the quarter. Second, our adjusted EBITDA loss for the nine 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 10 cents 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 up front 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. 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. Marketing expenses only grew 42%. 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 lets 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 Studios 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. It’s the plan we laid out at the start of 2026, and the execution of that plan has produced three strong quarters to date. And with that, I’ll turn it over to the operator for questions.

OPERATOR

Thank you. We will now be conducting a question-and-answer session. If you’d like to be placed into the question queue and you’re dialed in over the phone, please press star 1 on your telephone keypad. If you’d like to ask a question over the webcast, please use the raise-your-hand function located at the bottom of your screen. Once again, to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

You may press star 2 if you’d like to remove your question from the queue. One moment, please, while we poll for questions. Our first question today is coming from Jason Helstein from Oppenheimer. Your line is now live.

Jason Helstein (Analyst at Oppenheimer)

Hey, thanks for taking the questions, Neal. So, you know, 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 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 talked about is typically a strong quarter?

And then given that you’ve now been positive free cash flow every quarter this year, it feels as if, and kind of you’re guiding to positive EBITDA next year and you should have meaningfully positive free cash flow, just how are you thinking about longer-term investment in maybe 2027 and beyond? Is the goal to kind of keep growing that EBITDA or is it prioritize growth and kind of more focus on kind of maintaining profitability but prioritize growth?

Thank you. And then one quick follow-up.

Neal Harmon (Chief Executive Officer)

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’s 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 three 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.

Edward Scott Klossner (Chief Financial Officer)

Yeah, Jason, on the contribution margin question, the way I would look at it is like this: Guild revenue is a cumulative number from members that have been with us a year and six months and three 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 if not efficient, we pull back. Meaning that in Q3, perhaps, 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 quarter, you’ll tend to see contribution margin be off a little bit because we will spend more in sales and marketing vis-à-vis that base of revenue that sits in the Guild.

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

Neal Harmon (Chief Executive Officer)

And then finally on the fourth quarter, when we look at 2023, 2024, 2025, 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, to be able to take advantage of the growth in Q4. And that’s what we intend to do.

Jason Helstein (Analyst at Oppenheimer)

And just as you think about next year, you’ve obviously added a lot of library content. Do you think you proportionally 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—potential new members—to what’s already on the service, as opposed to the same rate of adding content, how are you thinking about that as we think about next year?

Neal Harmon (Chief Executive Officer)

Great question. And just as a reminder to everyone on the call unfamiliar with the model, Angel Studios doesn’t have to pay upfront for the titles that we bring on. We sign a revenue-sharing agreement. So whether we add one title or 10 titles, it’s the same to Angel Studios. The key to us is delivering 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 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.

Jason Helstein (Analyst at Oppenheimer)

Thank you.

Neal Harmon (Chief Executive Officer)

Thanks, Jason.

OPERATOR

Thank you. Our next question today is coming from Eric Wolf from Texas Capital. Your line is now live.

Eric Wolf (Analyst at Texas Capital)

Thank you. Good morning. I just want to follow up on the last point on the slate for next year. I know you’re not going to give the full slate until April for 2027, but maybe just remind us how many theatrical releases you’ve confirmed and announced at this point, and then maybe how that pipeline is shaping up given the strength you’ve seen in membership growth and success—what you’ve seen from inbounds on titles that would be more appropriate for the theater versus just going directly to streaming.

Neal Harmon (Chief Executive Officer)

Great question. We’ve got some great titles that have already been announced for next year. There was a release out on Road to Ruin starring Michael Keaton and Morgan Freeman. 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. 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 three or four titles so far this year, but we’re saving the announcements, the important announcements, for CinemaCon.

Great question. 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 release almost all titles in Spanish simultaneous to English. The Drummer Boy, because of that last-minute test that we did, the Spanish is coming out I think mid this month. 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. But I wouldn’t like for expecting Angel Studios to go and dump a bunch of money outside of the parameters that we’ve been operating with. We don’t currently have any plans to do that.

OPERATOR

Thank you. Next question is coming from Eric Handler from Roth Capital. Your line is now live.

Eric Handler (Analyst at Roth Capital)

Good morning. Thanks for the question, 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, in the trailing last seven 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 email promotion in quite some time. It also coincided with the opening of Drummer Boy.

So I’m curious, is it movies in 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 (Chief Executive Officer)

So we’ve been building awareness around Angel Studios over the last three years, and those awareness metrics continue to increase for aided and unaided awareness around Angel Studios. And promotions, when they’re delivered at a time when people are expecting 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.

The majority of our members by far are coming through non-promotional 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.

Edward Scott Klossner (Chief Financial Officer)

Yeah, 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 — you know, 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. Neal likes to use the term, when the tide is coming in is when we will market heavy and try to acquire customers. When that tide’s 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 yeah, it’s sort of that combination of things that creates opportunity, and we make sure that we spend into that opportunity.

Neal Harmon (Chief Executive Officer)

But to your point — and I’m glad you picked up on this, Eric — 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 will see on a successful release like Drummer Boy, that actually becomes wind at our back with the Guild membership numbers as well. Then we’ll experience more of that as soon as Drummer Boy gets released for Guild members to view. Good question.

Eric Handler (Analyst at Roth Capital)

That’s helpful. And then just as a follow-up, as you add more content to the streaming platform, 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, as long as people like it, is going to get consumed?

Neal Harmon (Chief Executive Officer)

So, Eric, that’s a great question. We have noticed that as we’re becoming broader, 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. This is kind of a stereotype, but if somebody likes Hallmark movies — and there are some Hallmark-style movies that are on Angel Studios — then Angel Studios needs to show them those types of movies. But if somebody’s turned off by Hallmark movies, then Angel Studios 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 re-engineered 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: as we grow to three and then to 10 million Guild members, that problem is going to be more and more important for us to get right.

Eric Handler (Analyst at Roth Capital)

Thanks, Neal.

OPERATOR

Thank you. As a reminder, that’s star one to be placed into the question queue. Our next question is coming from Thomas Forte from Maxim Group. Your line is now live.

Thomas Forte (Analyst at Maxim Group)

Great, thanks. So, Neal, Scott, congratulations on the quarter. I have two 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 updated 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, etc.?

Neal Harmon (Chief Executive Officer)

Yeah, 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’ll 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. Determining where those are and getting behind those titles is what Angel’s 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 — Young David, Tuttle Twins, The Wingfeather Saga — now that those are 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. Then 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, 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 this last week where we recognized that we didn’t have to hire nine 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. 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 two parts to your question. Will you help me with that?

Edward Scott Klossner (Chief Financial Officer)

Yeah. 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, view, adapt, and implement. What we’re doing using the Ad Factory is we can 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 and with our marketing, allows us to get the best-producing ad content out to our potential customers quickly and cost efficiently. So that all helps play into our ability to increase our adjusted EBITDA over time with revenue.

Neal Harmon (Chief Executive Officer)

And hyper-targeted. 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. Then we surface the ones that justify greater TLC from our marketing team. Our marketing team is able to go focus more heavily on our main titles, and these long-tail library titles are getting addressed by our technology and also by a combination of the technology and the team.

So that’s how we’re scaling. I’m glad you asked the question, and I hope that was helpful.

Thomas Forte (Analyst at Maxim Group)

Great. Thanks, Neal. Thanks, Scott.

OPERATOR

Thank you. Our next question today is coming from Ryan Myers from Lake Street Capital. Your line is now live.

Ryan Myers (Analyst at Lake Street Capital)

Hey guys, thanks for taking my question. 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.

Edward Scott Klossner (Chief Financial Officer)

Sure. You know, 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 force to grow. The real, you know, 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, a 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, you know, cash flow positive means of doing so vis-à-vis—again, remember, we market 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.

You know, 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 that’s resonating with our customers and bring in more Guild members than a year-ago quarter.

Ryan Myers (Analyst at Lake Street Capital)

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

Edward Scott Klossner (Chief Financial Officer)

Yeah. When you consider content acquisition costs, remember, because we use a—

Ryan Myers (Analyst at Lake Street Capital)

I think you said customer acquisition. Did you say content or customer? I said—yeah, I’m referring to customer acquisition cost.

Edward Scott Klossner (Chief Financial Officer)

Ah, I see. If you look at just straight CPMs, I mean, there wasn’t a big, a real change in, you know, 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 membership with Angel Studios or 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, you know, we’ve come a long way in the last 12 months, or even, you could say nine 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, you know, every day we come to work.

Ryan Myers (Analyst at Lake Street Capital)

That’s good to hear. Thanks for taking my questions.

Edward Scott Klossner (Chief Financial Officer)

Thanks, Ryan.

OPERATOR

Thanks. Thank you. 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 (Chief Executive Officer)

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 marketing continued the trend all year that it’s getting more efficient. Angel Studios 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. 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.

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