Thank you for standing by, and welcome to the LiveOne, Inc. Fourth Quarter and Full Year Fiscal 2022 Webcast. My name is Sam, and I will be your moderator for today's call. [Operator Instructions] I'd now like to turn the call over to our host, Aaron Sullivan, Interim CEO (sic) [ CFO ]. Aaron?

Thank you. Good morning, and welcome to LiveOne's business update and financial results conference call for the company's fourth quarter and full fiscal year ended March 31, 2022. Presenting on today's call are Rob Ellin, CEO and Chairman; and myself, Aaron Sullivan, Interim CFO. I would like to remind you that some of the statements made on today's call are forward-looking and are based on current expectations, forecasts and assumptions that involve various risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of the company, including expected future financial results and expected future growth in the business. Actual results may differ materially from those discussed on the call for a variety of reasons. Please refer to the company's filings with the SEC for information about factors, which could cause the company's actual results to differ materially from these forward-looking statements, including those described in its annual report on Form 10-K for the year ended March 31, 2022, and subsequent SEC filings. You will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today in the company's earnings release, which is posted on its Investor Relations website at ir.liveone.com. And the company encourages you to periodically visit its IR website for important content. The following discussion, including its responses to your questions, contains time-sensitive information and reflects management's views as of the date of this call, June 29, 2022. And except as required by law, the company does not undertake any obligation to update or revise this information after the date of this call. I'd like to highlight to investors that this call is being recorded. The company is making it available to investors and the media via webcast, and a replay will be available on its website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of the company and any redistribution, retransmission or rebroadcast of the call or the webcast in any form without the company's expressed written consent is strictly prohibited. Now I would like to turn the call over to LiveOne's CEO, Rob Ellin.

Thank you, Aaron, and good morning, everyone. I would like to thank you for joining for our fourth quarter and fiscal year 2022 business update and financial results. Despite this challenging environment, we posted a record $117 million in revenues in fiscal year 2022 ended March 30, 2022, a year-over-year increase of over $51 million or 79% and revenue for the quarter at $23.4 million, an 11% increase compared to last year. I'm happy to report, we are maintaining our previous guidance of $125 million to $140 million and adjusted EBITDA of $5 million to $10 million. For the current first quarter of fiscal '22, we expect to report revenues of approximately $23 million, adjusted EBITDA of $500,000 to $1 million positive. This will be the first time in the company's history that we will achieve positive EBITDA. As the environment and the backdrop in the capital market has changed over the past 2 quarters, we have strategically pivoted to accelerate our path and time line to achieve positive EBITDA. As part of LiveOne's plan to focus on generating cash from operations on a consolidated basis, our team has implemented in cost and expense reductions from both operations and corporate overhead, which is anticipated the result in over $23 million in current savings. I believe we still have an opportunity to further increase efficiencies and reduce costs as we focus on streamlining our operations and generating positive EBITDA. In addition to cost savings, we improved our balance sheet again with over $5.5 million in payables and short-term liabilities extinguished. As many of you may know, through our 9-year exclusive partnership with Tesla, a LiveOne Slacker Radio membership is preinstalled as a default radio service in every new Tesla car sold in America. LiveOne is paid directly from Tesla for all…

Thanks, Rob. I'll spend just a few minutes to provide an overview of the results for our year-end and fourth fiscal quarter ended March 31, 2022. Full year fiscal 2022 revenue was a record $117 million, a 79% increase as compared to $65.2 million in fiscal 2021. Contribution margin increased 48% to a record $24 million versus $16.2 million in fiscal 2021, and our adjusted EBITDA was a loss of $13.4 million with record KPIs, including a 47% net increase in paid members year-over-year. For full fiscal year 2022, our revenue was comprised of 34% subscription and 66% advertising sponsorship merchandising and ticketing events compared to 51% subscription and 49% advertising sponsorship and ticketing events in the prior year period. For the fourth quarter of fiscal 2022, revenue increased 11% year-over-year to $23.4 million, while contribution margin increased 12% to $5.1 million, and our adjusted EBITDA was a loss of $4.8 million. We ended Q4 with 1.48 million paid members, a net increase of 400,000 as compared to 1.07 million paid members reported at March 30, 2021. Total members, including free memberships, was over 2.35 million at June 26, 2022. Included in the total numbers are certain members who are subject of the contractual dispute for which we are currently not recognizing revenue. Briefly turning to the balance sheet. We ended Q4 with cash of $13.2 million, including restricted cash of $300,000. And now let me hand it back over to Rob.

Great, Aaron, and thank you for the great job you've done. I've previously spoken about our unique flywheel business model associated in a complementary business where the component pieces create a synergistic offering to consumers, listen, watch, attend, engage and transact. We are expanding revenue opportunities with B2C customers for further monetization through subscriptions and memberships, premium content, pay-per-view and live events, on selling membership packages, including merchandise, NFPs and integrating consumer products that will have ownership positioning. Our B2B activities and opportunities continue to grow traction, especially with the significant advertise sponsored deals that we are securing from blue chip companies as well as other NFP and gamification opportunities. I fully expect this year to be able to expand our partnership with sponsors, our 7-figure deals are growing almost on a monthly basis, and we fully expect our first 8-figure deal this year. We see significant opportunity to grow our Slacker streaming radio membership service, both through new partnerships with major automotive Google Android platform and with white label partnerships of the Internet of Things from smartwatches, markets to connected fitness device, devices manufacturers to outdoor video. We also expect this year to be able to expand our relationship with carriers around the globe. As we see the cycle starting to change, carriers are fighting back with Apple and Android to own their own content and own their own partnerships with their consumers. We're excited about the return of our live music events through calendar 2022 and look to really press the gas pedal on live events in calendar '23. Lastly, we have strategically implemented significant cost and expense reduction from both operations and corporate overhead, and we are now positioned to achieve positive EBITDA for the first time in our history in current June 2022 quarter with at least $500,000 to $1 million of EBITDA for the quarter. I want to thank everyone for their support, especially our shareholders for their continued support. Thank you very much, and I'll open it up to any questions.

[Operator Instructions] Our first question comes from the line of Brian Kinstlinger with Alliance Global Partners.

Great to really see the cost cutting and the changes that are coming in the business. If I could start with the costs. Can you break down the cost cutting effort at a high level? How much is people, how much is maybe office space or supplier agreements. I just want to get a handle on what's being cut.

Yes. So to start with Brian, the beginning part of this is one of the big costs that we had last year is our content costs, right? And because the world was shut down for 2 years in order to program all of our original programming or wood shows on music events and so on, the cost was close to $20 million. That cost is going to drop in half because you now have most of that programming has been built. Those franchises have built. We now have well over 300 franchises across our platform. So that's a big cost savings. And then in terms of people, we've been able to consolidate as the doors have opened from COVID, right? We've been able to consolidate the 6 acquisitions and the cream is rising and the top of the stars of this company, and you're going to see more and more of those. As you see the spin-offs of these divisions, you're going to see those operators of those divisions really shine and be able to pick their teams across the board, so our Head of Sales, our Head of Marketing across the company, and we've been able to put those synergies together. And then we've worked hard to clean up our balance sheet. As you know, when we acquired Slacker Radio, a big part of that acquisition is we took on close to $50 million of payables. We've done an exceptional job this year, and Aaron has done just -- literally [ has proven ] to be just a superstar CFO in doing this, has really cleaned the balance sheet up tremendously, as you see that $5.5 million of additional extinguishment on payables, and you're going to see more of those coming. Aaron do you want to add anything to that?

I think you covered it, Rob. Thanks.

So with the $20 million in cost of content last year that's coming down dramatically, is that where we'll start to see the gross margin expand to some of the goals that you had talked about in the past, maybe the mid- to upper 20s? Maybe even -- is that what the majority of the cost cuts are and where we'll see the benefits to EBITDA positive?

Aaron, do you want to take that?

Yes. I think there's a significant portion there. That's absolutely right. So we're expecting to see -- in the past, we haven't had positive contribution margins from our Live Events business. We're expecting to see contribution margin in that piece of the business. But there is a substantial amount of operating expense that's coming out. So I would say you expect to be in those 2 lines.

Great. And then can you remind us of the seasonality in the revenue guidance based on live events. I know you have some major events waiting. You've got some seasonal businesses. How do we think about that based on basically COVID not being an impact to live events as much as it ever wise in a while?

Yes. I mean there's going to be seasonality in this business in multiple ways, right. Our tentpole events are going to kick in, in the third and fourth quarter as well as that fourth quarter advertising and all advertising businesses is going to grow substantially. And then our merchandise business, a large portion is going to come in that fourth quarter as well. So this was a terrific quarter. And I think you'll see growth every quarter going forward. As you look at that $125 million to $140 million guidance number, you'll continue to see growth in each quarter going forward.

Fourth quarter in December when you advertise [indiscernible] or fourth fiscal quarter?

Just to clarify, that should be -- our Q3 is where we see the advertising and the merchandising.

December is always [indiscernible].

Fiscal Q3 [indiscernible] Q4.

Yes. 2 more questions. Firstly, how do you think about a recession impacting paid subscribers? You've done really well in the last 2 quarters adding paid subscribers. So how could that, a, impact that or churn and/or ticket sales? How is that contemplated at the low end of revenue guidance?

I think we're pretty fortunate, and we've been very cautious in our numbers in this. And that's just starting with Tesla, right? You have $100 oil price plus, right, you're going to see a tremendous amount of automated cars, right, hitting the road. And every car that hits the road, we pick up another subscriber, right? So I think we're being pretty conservative in those numbers. But then our expansion into these B2B partnerships that we've talked about, and I think you're going to see more and more of those across all platforms that have 10 million to 2.5 billion eyeballs, right? We're going to win this right on B2B partnerships. We're not going to win on one customer at a time. So a lot of those partnerships already have a tremendous amount of subscribers, both free and paid, that we'll get a partner up with. And I think you're going to see in the second and third quarter, you're going to see a tremendous amount of those B2B partnerships. And it's one area that we're growing the business, right? And I've gotten a lot of calls on that in the last couple of days and that even though we've made substantial cuts, you're seeing us higher on the B2B side. And we're only hiring as we land those B2B partnerships.

Great. Lastly, on Tesla. On the connectivity side, customers staying connected, how could changes to their policies improve your churn or impact churn at all?

Yes. I mean it's been quite interesting, and this has been exciting for us. We're built into the connectivity package now. And it's hard to imagine with a $70,000 average car that anybody is ever going to have a car without connectivity ever again, right, especially at those levels. So we're seeing a tremendous [indiscernible] that's built into that $10 package. For the first time, Tesla has always paid us directly. They're going to continue to pay us directly, but they're starting to take some of their cost out as consumer is paying for probably 10% of those so far. And by the end of this year, will be 30% of those are going to be paid directly from the customer to Tesla and then to us, right? We get our piece of that $10. So I think it's excellent, and I think it's exciting and puts us in a very strong position going forward to continue to grow that. And who knows, next is hopefully, we expand and we've talked about this a lot. It's been hard for us to expand with those payables outstanding with record labels and publishers, we're getting pretty close now where we can really expand overseas and expand the rest of the world.

The next question is from Jon Hickman with Ladenburg.

Rob, Aaron, I was wondering if you could elaborate a little bit on your kind of the key event, live events for the September and December quarters? I know there's spring awakening, but could you talk about the others that you're expecting?

Yes. Yes, I want to be a little bit careful on this in that we've announced that we're going to spin out our pay-per-view business, like just this weekend, last 2 week -- just the last 2 weekends alone we did T-Pain, we did B.I. So you're going to see a lot of those digital live events and that full flywheel kicking in where it's a live event, but it also is a pay-per-view event, right? And so as many of you know, our social boxing, right, will be a tentpole event this year again. And stay tuned, there'll be an announcement on that quickly. We've just announced a partnership with Ben Silverman, who liked to produce The Office and some of the biggest reality TV shows in the world, not only to do that next event, but to actually launch a league and react and announce a reality TV show around it. And I think you're going to see the spin-off of that division very shortly. And as that happens, there'll be multiple announcements where like UFC or like wrestling, you're going to see many events happening around that. And that was a big part of revenues for live last year. Then we've announced over 100 live music events, right, and those continue to grow. So you're going to see it from all fronts. I don't think you're going to see that it's -- I don't think you're going to see just one event. I think you're going to see many events. And we're really excited to talk about that in this upcoming quarter.

One more question. So -- if I look at your guidance for Q1 and your $23 million -- and $23.5 million and your EBITDA of $0.5 million to $1 million. It looks seeming like you're going to have to have cash operating expenses somewhere in the like $8.5 million. Am I calculating that right?

Aaron, do you want to take that?

Yes, I think that's pretty close to what we have.

And then there was a fairly big drop in stock-based comp for Q4. What do you expect going forward?

I think it's going to -- there was a onetime impact there. I think you'll see it increased but not quite to the levels it has been previously.

More like $1 million a quarter, something like that?

I think that's probably a good benchmark there.

That's it from me. Nice quarter by the way.

Yes. And Jon, just to highlight that, as we said, we expect $5 million to $10 million of EBITDA right this year. So each quarter...

For the year

It's going to grow significant -- right, it's going to grow significantly from here. And these -- a lot of these cost savings, a lot of the changes we're making are just kicking in. So it's really, really exciting to see this company. And you've been around me for a long time. And when the cycles change, right, you've got to change with it and you got to move quickly. So we're fighting hard and we're shooting for $10 million this year.

The next question comes from the line of Kevin Dede with H.C. Wainwright.

So Rob, when does your superstar CFO become permanent?

It's great query. I couldn't ask them who have done a better job and he's just completed the K and moved from there. So stay tuned, it's coming imminently. And I mean this [ seriously ], he's done as good a job as anybody I've worked with over the years and really proving in a difficult situation, right, stepping up. And Mike Q was excellent. Mike took a very, very big job. Aaron had to step into last second, really replaced most of his team. He's just done an outstanding job. And I keep hearing the credits across the board from our banks to investors across the board what a great job he's doing. So we're proud of Aaron and stay tuned.

You mentioned 2 million subs, right? So that's paid subscribers. And is that this calendar year as your target?

Yes. So we haven't given an exact date on -- yes, we haven't given an exact date on that. But listen, just on Tesla alone, if they do 1 million cars this year, you got to expect they could sell every car they can make right now. You're going to grow substantially on that now being in 86 other cars, the partnership with Android Automotive. And as I said, you're going to see more of those B2B deals like we did with Facebook for pay-per-view and like we did with TikTok and we did Music Lives. We're going to be leveraging and partnering with massive audiences that are already built, right, who need music. And I think that -- and I've been talking about this for a long time, and it was part of why we hired JPMorgan, right, as you know. You're just going to see more of these B2B partnerships. And like when we're in a digital turbine, you start going to see that cycle change every 7 to 8 years. The carriers start fighting back, right, and all these distributors are starting to fight back with it. A, they want to own their own content, B, they want to own their own relationship with their customers. And we're seeing telltale signs that the floodgates you're opening to massive B2B partnerships like Tesla, like we have with Verizon and T-Mobile and Sprint in the past. I think those stores are starting to open back up. And as that cycle changes, it puts us in a very strong visit. We have so much robust content. We have all the commodity content, right, that everyone else has. We're half the price right of our competitors, and we're offering all this original programming, fiber -- internet radio stations, 2,000 artisans on a platform, 300 original podcasts. And I just see telltale signs there's going to be a lot of B2B deals coming that have very low risk to us, excellent margins and real substantial upside to us without us having to go out and market and spend $80 a sub. We're going to be partnering with those partners who already have those subs and already have that traffic in audience.

So it just seems to me and apologies for my ignorant perspective on this, but it seems to me that in order to expand that as rapidly as you hope, you're going to need a little more international expansion. Can you give us an update on where that stands and the acquisition of licenses you'll need?

Yes. So twofold. We fully expect to start announcing licenses in the very near future, lot expanding those. As you know, about 1/3 of our audience is overseas already, right, that traffic and audience coming in. So we're already seeing advertising dollars and sponsored dollars come that way. And next will be subscription. And what I would say to you is that 2 million number does not include any overseas, right? As you know, Spotify is 50% U.S., 50% overseas. Same thing with Netflix, right? So if we land those overseas licenses, we're going to be talking about a lot bigger number in the very near future.

And then last question for me, Rob, please. Just give us some insight on your conversion from members to paid subscribers. Can you give us any indication on the trends you're seeing and churn?

Yes. I mean we have the lowest churn in the industry. The membership program is starting to really kick in a high year. What we've always talked about is superfans, right? We're a creative first platform focused on superfans. Those superfans spend money on everything from subscription, right, and having that audio, music and so on to watch your live events to our pay-per-view events to buying a hat, buying a T-shirt, buy an NFT, right. As you know, we did our first dollars in NFTs last year, and it was millions of dollars. We expect that to grow substantially. So what we're looking for is create a first platform, focus on those superfans. The more superfans we get, the stickier they are, and more relevant they are in terms of spending across our entire platform. And we're seeing more and more of that every day and we're seeing the same customers. It's so exciting to put our podcast and Tesla are now be able to see not only a subscription but also be able to have our creators talking to that audience on a regular basis. And the same thing across our website, it's taking across our app, right? We're seeing more and more of that traffic translate into superfans and want to stay with us and not just listen to the audio, not just listen to a podcast, not just watch pay-per0-view, be able to touch all the tentacles we built here in all those TAMs across all those subsidiaries, right, all have massive upside. But together, the sum of the parts gives you the most significant membership, I think, ever created in music, right, that is built on original programming. And if we keep beating and keep building on original programming, have that unique [indiscernible] to us, we're really putting ourselves in a unique position to build this company.

We have a follow-up from the line of Brian Kinstlinger with Alliance.

I have a few. First of all, you've added more than 100,000 paid subscribers for 2 consecutive quarters, which obviously is great. And it makes sense, given Tesla sales have been so strong. I want to look at it at a different perspective. If -- what is the conversion cycle for nonpaid members? And what is the conversion rate? I know Tesla is doing so strong, but on the other side of the business, how well are you doing converting and how long is it taking?

It's a great question. We're converting about 6% to 8% into long-term memberships, right? And as we said, live is just opening back up like just the beginning of it, right? The conversion of a ticket fire, conversion of a pay-per-view buyer. You know the habitual behavior of that consumer. You know what music they like, what sports they like. You understand what they're doing in advance. It's a lot easier to tailor, right in our tech team and our tech is one of the greatest in the world, right? And so much of that is now built again for those super fans. I think we're going to continue in that 6% to 8% rate. And if we do, we're going to succeed and beat that 2 million number quickly and most important is for long-term investors. We've said we're going to get to 10 million subscribers. That's less than 1% of the addressable market by 2027. If you get to 10 million subscribers, that's $0.5 billion in revenues, which is only 1% of this market. right? In podcasting, podcasting is growing to $10 billion, right? It's just starting, right? It's just taking off. It was a $600 million industry. We're now talking about well over $1 billion going to $5 billion by 2027, right? We're #8 in the world in it. In our pay-per-view business, same thing. And as you cross over these, right, the more you hit those superfans, the better the conversion is. And it's not just conversion, it's that stickiness and how long they stay with you and how much they spend, right? We're never going to beat Spotify or [indiscernible] to get to hundreds of millions of subscribers. We're focused on those superfans, those sticky fan. And we're giving them this amazing content, right, all for half the price of any of our competitors.

Great. 2 more on the numbers. What would the impact of spinning off pay-per-view be on your EBITDA guidance? Is it is meaningful?

Well, remember, we're not -- it's still going to be a wholly owned subsidiary. We're only spinning out a piece of it, right, and being careful on these valuations, right. You know where these valuations are, right? We're trading at such a low valuation that, a, we're buying back stock, we just announced we bought back 1.2 million shares, right? We're going to expand that buyback now to the 2 million shares we promised. I personally as well as Board members have been buying back stock. We're trading at such a low valuation. But if you separate the parts of this, we're only going to sell a percentage of any one of these divisions. And hold on tight. When that happens, right, we may unleash a tremendous amount of value to our shareholders, including, a, they'll get a piece of the subsidiary, right? And b, is that those subsidiaries got to get value, right, in the fair -- in the open market privately, like these valuations are way more robust than we're looking at today and where we're trading at 50% of this year's revenues. That opportunity is really unique to spin out the division. But the revenues and bottom line will still fall to LiveOne, and that will have the control position of that subsidiary, and there may be multiple subsidiaries that end up spinning out in this market.

And then lastly, I didn't see the 10-K, maybe it's out since the call. But given the buybacks as well as using stock to -- I think, paper to take out some of the payables, where is the outstanding share count today?

So it's about -- right about 80 million fully diluted, maybe a little bit lower now with the shares that we bought back. And we've just got our approval to...

[indiscernible].

No, no, 80 million.

No. Sorry, sorry, Sorry. Yes. Yes, I was thinking of something else, sorry.

Yes, about 80 million. So again, we're trading at a $60 million market cap on $125 million to $140 million in revenue. So we're going to continue to buy back. And we just got the approvals, right, to continue that buyback. And we certainly plan to do that. And as I've stated in the street every time the window is open, I continue to buy in the open market as well as many of my Board members, and so we'll continue to do that. As we do the spinout, right, as you do that spinout, it's going to give us a bunch of cash as well. It's giving you an opportunity. Maybe that expands the buyback at that point if it continues to trade the way it's trading today.

We have no further questions waiting at this time. So I'd like to hand the call back over to Robert for closing remarks.

I just want to thank everyone for their support. It's a difficult market. This is an exciting time for LiveOne, really hitting just about every metric across the board. Billions of downloads of our podcasts. We've now broken through 50 billion listens across our audio since inception. We've had 5 billion engagements across our live streaming. Not only did the consumer listen, but they -- and watched, they actually repurposed that and sent that back out to socials. So we're starting to build the brand and we're starting to build a moat here that I see a tremendous amount of upside. And I look forward to our Q coming out, which is only a couple of weeks away, and showcasing that EBITDA positive, the changes that Aaron and I have implemented, the disciplines that we've implemented, and I expect that EBITDA to continue to grow. And as I said earlier, $5 million to $10 million this year, but my entire team is focused on hitting that $10 million EBITDA number. So thank you, everyone, and I appreciate your time and I appreciate all of you as shareholders in this difficult market.

That concludes the LiveOne, Inc. Fourth Quarter and Full Year 2022 Webcast. Thank you all for your participation. You may now disconnect your lines.