LiveOne, Inc. (LVO) Q1 2023 Earnings Report, Transcript and Summary

Welcome to today's LiveOne, Inc. Q1 Fiscal 2023 Business Update and Earnings Webcast. My name is Jordan, and I'll be coordinating your call today. [Operator Instructions] I'm now going to hand over to Aaron Sullivan, CFO, to begin. Aaron, please go ahead.

Thank you. Good morning, and welcome to LiveOne's business update and financial results conference call for the company's first fiscal quarter ended June 30, 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 this 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. Following discussion, including responses to your questions, contains time-sensitive information and reflects management's view as of the date of this call, August 11, 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 the 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 us today for our fiscal year 2023 first quarter business update and financial results webcast. We have now completed the consolidation of our 6 acquisitions, reducing costs and overhead by the expected $23 million a year on an annual basis. We just announced our first EBITDA positive quarter as promised with over $2 million in EBITDA. In addition, we emphasized and expanded our digital and audio platform while largely deferring or eliminating some of our live and streaming events that were not expected to be profitable this year. These initiatives have allowed us to significantly pull forward our path and time line to achieve positive adjusted EBITDA as well as positive GAAP earnings. We are pleased to announce today that for the first time in the history of the company, we have achieved both positive adjusted EBITDA of $2 million as well as positive GAAP earnings. Our first quarter adjusted [ EBITDA of $2 million ] was well above our previous guidance of between $500,000 and $1 million and was $3.8 million improvement when compared to Q1 fiscal 2022. I'm pleased to be able to increase our fiscal 2023 adjusted EBITDA guidance to between $7 million and $11 million. This is our fourth increase since the end of last quarter, and we see telltale signs there may be room for further, as we'll talk about a little bit deeper into the announcement of a major partnership with the record labels. We also maintained our revenue guidance of $125 million to $140 million. Our digital business alone is expected to record a staggering $80 million of revenues and generate $16 million in EBITDA at the operating level. We've made enormous progress in our balance sheet. We recently extended all of our short-term debt to second quarter of calendar 2024. Thus far, we have completed a repurchase of 2 million shares of common stock from the current portion of our stock repurchase program. There's an additional substantial open market buying of LiveOne shares by a number of my Board members as well as myself. We will be actively looking and pursuing and expanding that buyback substantially in the near future if the stock remains at these low levels. Put simply, we feel strongly that the value of LiveOne stock is dramatically undervalued the sum of our parts, which includes our Slacker and PodcastOne pay-per-view units. In July 2022, we just announced that our podcast subsidiary closed an $8.1 million financing at $68 million as part of our intention to spin out PodcastOne as its own separate public company and to give it in apportion to all of you shareholders. We now have over 15,000 shareholders who will be receiving shares in that spinout. With the successful completion of the spinout, we believe PodcastOne will be the only major pure-play podcast company trading on the national stock exchange. We acquired PodcastOne in July of 2020 doing around $20 million in revenues. We publicly stated well over $8 billion in revenues for this quarter. It continues to experience robust growth with over 50 new podcast series that have been launched since 2020, and we have expanded distribution by making PodcastOne available in all of our Tesla cars and now in our Android Automotive vehicles partnership in North America. PodcastOne has the exclusive advertising sponsored rights for all of its podcast and content. People can access PodcastOne through our partnerships in distribution with Spotify, Apple, Samsung and iHeart. PodcastOne and its franchise of exclusive shows has grown to more than 250 podcasts and over 300 podcast episodes per week. PodcastOne was ranked #8 on Podtrac's list of top U.S. podcast in July -- companies in July with the U.S. uniquely monthly audience of 6.1 million. The ranking puts PodcastOne ahead of CNN, Fox, Barstool. And it's one of the only 2 independent podcast platforms left of the top 10 podcast publishers in the world. We previously announced our intention to also spin out our pay-per-view business as a separate public company. We anticipate that moving rapidly and expect it to happen in fiscal 2023. As many of you know, through our 9-year exclusive partnership with Tesla, LiveOne's Slacker Radio membership is pre-installed in every single Tesla car sold in America. LiveOne is paid directly by Tesla for all those memberships. We recently completed a brand-new user interface to refresh all the new top stations within Tesla car and added all of our podcasts into the vehicles. In December, we launched LiveOne's music streaming service, including PodcastOne content on Google Android Automotive, giving us the ability to white label to any car within that platform. The launch takes LiveOne into the car with a seamlessly integrated in-car experience without the need to use your mobile device and gives us distribution in many of the current and up-and-coming vehicles via Google Automotive, allowing consumers to enjoy the library of over 30 million songs, original exclusive content over 5 curated radio stations, over 250 original podcast and broadcasts, and we've had over 3,000 orders streamed on our platform. Android Automotive continues to see wide adoption from virtually all the major OEMs: Ford, Chevrolet, Nissan, Dodge, Volvo, Lincoln and others. The LiveOne Slacker app is now preinstalled in over 85 other automobiles as well as, of course, major cell carriers: Verizon, Sprint and T-Mobile. We've seen compelling growth opportunities to grow Slacker membership by partnering with other automotives just as we did with Tesla to their default radio service as well as other major other B2B partnerships like exercise equipment, smart watches and be part of loyalty programs for restaurant chain, credit card issuers and airlines. As of June 30, 2022, we had over 1.59 million paid members, a net increase of 432,000 or 37% as compared to last year. Total members including free membership are now over 2.35 million. We see a path to hitting that 10 million paid subscribers by 2027. That number puts this company at over $1 billion in revenues. A recent industry report estimated that total addressable market, or TAM, for streaming music to be 1.7 billion paying subscribers. So that 10 million is less than 1% of the addressable audience. If Slacker was able to capture just 1% of the TAM, that could mean well over $1 billion in average revenues. I would like to add that as a result of the successful integration of our advertising and sales division, LiveOne has grown our sponsorships from 7 to well over 300 and growing. And we have over 700 sponsors in the pipeline right now. In fact, PodcastOne has seen more 1 million-plus sales weeks in calendar 2022 than any time in its history, and we see an opportunity for the first time an 8-figure deal. I would now like to hand it back over to Aaron Sullivan to review our Q1 fiscal 2023 results. Thank you, Aaron.

Thanks, Rob. I'll spend just a few minutes to provide an overview of the results for our first fiscal quarter ended June 30, 2022. Q1 2023 revenue was $23.2 million. Contribution margin increased to 34% compared to 20% in fiscal '22. And our adjusted EBITDA was a record $2 million in Q1 2023 compared to a loss of $1.8 million in fiscal 2022, along with record KPIs, including a 37% increase in paid members year-over-year. On a U.S. GAAP basis, LiveOne posted record net income of $1.35 million or $0.02 per diluted share in Q1 fiscal 2023 versus a net loss of $8.1 million or a loss of $0.10 per diluted share in Q1 fiscal 2022. For the quarter ended June 30, 2022, our revenue was comprised of 52% subscription and 48% advertising, sponsorship, merchandising and ticketing event compared to 23% subscription and 77% advertising, sponsorship and ticketing events in the prior year period. We ended Q1 with 1.59 million paid members, a net increase of 400,000 as compared to 1.16 million paid members reported at June 30, 2021. Total members including free members was 2.36 million at June 30, 2022. Not included in the total numbers are certain members who are subject of a contractual dispute for which we are currently not recognizing revenue. Briefly turning to the balance sheet. We ended Q1 with cash of $11.3 million, including restricted cash of $300,000. And now let me hand it back over to Rob.

Okay. Just to finalize for everybody, [indiscernible] to read some of the recent [indiscernible] $2.10 [indiscernible] record partnership [indiscernible] 3 years, $2.10, well above the market, with this in a very unique [indiscernible]. And the reason we have to keep guidance is [indiscernible] right royalties to equity and truly make the [indiscernible] massive growth that we built here, right, [indiscernible] the higher cash flow goes, the higher the earnings level. And I couldn't [indiscernible] that we have now grown since inception, surviving COVID, [indiscernible] we now grow subscription [indiscernible] Slacker Radio to now [ 1.6 million ] [indiscernible] pre-COVID to now well over [ 200 ] and will surpass [indiscernible] starting to watch the flywheel [indiscernible]. With that, I'll open it up to questions. I'm proudly [indiscernible] of earnings as well. So please, anyone have any questions, we'd be happy to answer them now.

[Operator Instructions] Our first question comes from Barry Sine of Spartan Capital Securities.

Rob, just FYI, your audio is breaking up. The moderator comes through clear. I don't know if you can do anything, but let me go ahead with my questions. First of all, the sustainability of that positive EBITDA, the guidance is looking for a significant ramp-up in revenue over the next 3 quarters to hit your numbers versus 1Q. What do expenses look like? And how do you sustain positive EBITDA as you ramp up revenue?

Great question. So as you know, we have some of our tentpole events, which will happen at the end of the third quarter and beginning of fourth quarter. And hopefully, everyone can hear me clearly. So you're going to have [indiscernible], but as you know, right, as we did our big social media event last time, it was extraordinarily profitable with very, very healthy margins. So we feel very confident in that. Number two is we continue to take costs out of the business, right, and focus our energy as the temperature has changed on bottom line numbers. You're going to see more and more, right, EBITDA. You saw us just raised the guidance again to $7 million to $11 million of EBITDA, right, and we see big opportunities to potentially grow those again. And so we're really excited about where the margins are heading as well as where bottom line is heading.

Okay. And then on live events. You just called out a tentpole event, social media event. You've also in the past said that you're going to be -- your metric there is only events that are going to be profitable, and that requires advertising sponsorships. So if you're talking about getting back into doing this type of event, does that mean that you have good visibility on getting the sponsorship so that you can do the events profitably?

Yes. I mean we see exceptional visibility right now in the opportunities that are in front of us. And then, Barry, you and I have talked about this a lot, that our content costs have gone down every year. They continue to go down. Those content costs may turn out to now be -- as I articulated earlier, because of the success and the size of our community, right, we're getting festival owners, talent, creators, right, who want to put their content on our platform and pay us for all of our services, from production to distribution to marketing to delivery sponsors to NFTs, right? And this is not new to the company. It's exactly what we did with our Social Boxing the last time. We got paid on every component of it with no risk, right? So because our community has grown and we have billions of downloads of our podcast, 55 billion of our audio, we are now very much in that sweet spot that we are being [indiscernible] with the upside and the ability to drive that across our platform, getting paid with very little risk and a lot of upside on all sides of it. Does that make sense?

That makes sense. And just kind of a longer-term question on these tentpole live events. How important are they to the long-term brand value, building the brand value and visibility of the company? I know you've taken a pause this year, Spring Awakening, et cetera. But longer term, do you really need to have a lot of events in the mix to build the visibility of the company and keep that flywheel spinning faster and faster?

Yes. I mean we do. We do. And part of the beauty of this, as you know, is we paid very nominal fees for most of those rights, right? I've always articulated this as the ESPN of music, right? Now ESPN, some of their events they own, some of them they rent and some they're just the newsroom for, right? But sponsors and advertisers come in, in droves. And we just see the advertising responses literally lining up now that it's lining up so healthy. But again, we have the largest pipeline in history of this company of million-dollar deals, let alone sitting on opportunities that could be 8-figure deals for the first time in the history of the company. And it's really just self-fulfilling prophecy, Barry, the more traffic, the bigger audience you have, right, the more you're going to get paid.

And then my last question, just around the cash balance. There's one kind of non-GAAP cash item that I think is still out there and due, which is the insurance proceeds from the prior Spring Awakening that was interrupted by storms. And I think that was pretty significant. I know you can't book that in the financial statements. Is that still out there? What's the status on that? And what might we see in cash inflow when that comes in?

Yes, absolutely. And the insurance company has been extremely difficult, but we have made a lot of progress recently in that they've just they just made this all public, so I can tell you. They've just moved the case into New York. So there could be settlement offers coming soon. And our lawyers take it all on a contingency basis and think we're going to win millions and millions of dollars. And there could be worse damages that they caused us, the overall react business, by not making the payments they should have day 1. I mean there was no question of weather conditions, right? The entire event was shut down through for 8.5 hours, right, at the heart of the festival. So we think we have a good opportunity there and we don't like to count our chickens before they hatch. I think there's huge potential there, and certainly, the lawyers would not have taken contingency. So we may see something very soon.

Our next question comes from Brian Kinstlinger of Alliance.

This is [ Sheridan ] calling in for Brian. First question is, could you please break down the first quarter revenue from subscriptions and podcasting separately?

Aaron, do you want to respond to that? I don't think we can break it down yet from that. But go ahead, Aaron.

Yes. I gave the percentage of subscription in the prepared remarks. So you can kind of back into that. I'm just following it up here. So 52% of the quarterly revenue is subscription. And then actually, Rob, we will see a table in the 10-Q that breaks out advertising revenue. And I can say that that's primarily podcast-related, and that add about $9 million for the quarter.

So it's an exceptional number, Brian. As you know, we bought PodcastOne doing just about $20 million in revenues. That will put us on a run rate to almost double those numbers, right? If we continue at this level and podcast now that it's sitting in its own division may also be an acquisition vehicle to acquire other podcast companies. The opportunity is just growing for us. One of the only independent networks left. And as you can see, we just keep adding podcasts almost on a weekly basis as we pass Barstool and many others into that #7 or 8 slot every month.

All right. Second, in regards to the regional economy, how are CPMs trending in podcasting? And do you expect any pressure on pricing on advertising and sponsorship going forward in your business?

Well, I think you have a huge advantage in a difficult market. Media always does well, but most important, podcasting is getting so much attention. I mean this is the beginning of the beginning. It's in the first inning of where it's going. The industry is only passing $1 billion of revenues. It feels like a lot more because Spotify and Sirius and Apple have paid $20 billion for these companies. But the reality is only $1 billion, but it's on its way to $5 billion to $10 billion, right? And that's pretty quickly. So we're seeing more and more advertisers moving from other platforms and moving into podcasting and really understanding that direct response, a creator talking to their super fans is just enormously successful way to drive a product and sell a product, and actually because it's digitally, you know what the performance is in that. So we've seen telltale signs that there's going to be a very healthy one in podcasting. Even if there is a tough market right now, they're going to gain market share in many different places.

Sure. Sure. I definitely agree with that. But do you see some pressure on pricing right now given the recessionary fears from the advertisers? Like how is the CPMs trending?

Yes. So far, terrific. We have not seen that at this point. And we're certainly preparing in case there is some downturn in it. But so far, we've seen extremely healthy signs right now of where advertisers are pointing and podcasting and utilizing podcast networks. As Brian, you and I have talked about, we're starting to see more and more of our flywheel, right, how the pieces fit together. We've just had Adam Carolla on the road, LadyGang on the road, Jay Cutler the road and more and more. So more and more of our podcasts are going to drive additional revenue to us, from sponsorship, the direct response, live shows. We'll shortly start to announce our first own products, owning merchandise in conjunction with those podcasters, right? Last but not least, as you know, with our partnership that we announced with Patrick Wachsberger is second and third windows of television and film. And you know my background and what I've done in that space, and the fun that we've had and the amount of revenues we generated. We see really strong signs that more and more podcasts are going to turn it to television and film. So there's a lot of revenue streams that come out of it.

All right. Just one last question. Could you talk about the success of converting members to paid subscribers? And do you think that conversion rate has been for improvements? And like what are you guys doing to get there?

I mean we've been converting around 6% to 8% consistently of our free users, right? It really kind of depends where they come from. But I think that's going to stay pretty consistent. I don't think we're going to blow it away and be like 30%, 40%, 50% conversions. This is going to be -- some of our stuff is more you come to watch these great events. We're bringing them into the flywheel. We're driving sponsorship around it. We're getting you used to our brand and know our brand. I think we've done a really amazing job of, in 4 years, building a brand against massive partners and competitors that are out there, right? We've built an amazing brand and created a community that again we're starting to get paid for. I was starting to get paid for production. We all get paid for all the different skills in the 360 play across our network. So we see really strong signs that our brand is becoming really valuable, and the social numbers are growing exceptionally well as well.

Our next question comes from Jon Hickman of Ladenburg.

Nice quarter by the way. Could I ask a couple of model questions? There was a fairly significant jump in gross margins. Going forward, when you have your tentpole events, are margins going to be similar?

Aaron, do you want to take that?

Yes. So I think we have slightly higher margins in the current quarter than we'd expect on a tentpole quarter. So I would say our margin for the tentpole quarter will be closer to blended around 30% as opposed to our 34% in the current quarter.

And a little bit of that -- Jon, just to jump in. A little of that is going to depend on, right, how the accounting is looked at. As you know, we have a new auditor, right? We're looking forward to many things, including getting rid of our going concern and other exciting things that the consolidation and restructuring has done to the company, but also the way that the accountants previously at BDO valued like the revenues from Social Gloves was extremely -- in our opinion, was extremely high. It was a big number where a lot of it was almost like barter deals. You weren't -- part of that number, you were not truly getting any margins on. They were sort of going on one hand to the other hand. So we're going to see and we're going to know more about that, I would say, in the next 45 to 60 days as we announce that big event -- well, multiple big events.

Okay. And the big event is slated for the December quarter, right, not the September quarter?

I would think that it's more likely it is the end of the third quarter, beginning of the fourth quarter. But I want to be a little bit careful in that, that we publicly announced a partnership with Ben Silverman, so Ben, right, at NBC and one of the most prolific reality TV creators ever and created a little show called The Office. And so Ben and I are in heavy negotiations with many of the networks right now to do a reality TV show around that could be -- could change these numbers dramatically. So I want to be a little bit careful about picking the date because that could change it. It also can change our cost structure tremendously. Just think if you had a FOX, Netflix, Hulu, HBO or so on behind you. We're spending tens of millions of dollars putting a reality show to drive that show very much like what the Ultimate Fighter did for the UFC.

Okay. Okay. But definitely, we're not going to see that in the September quarter. So I just wanted to make sure I had that right. And then could you -- the expense reductions, are they -- should we model for that to be relatively consistent through the remainder of the year?

Yes. Yes.

Okay. And then my last...

So the reason we raised our guidance...

Go ahead.

Yes. So the reason we raised our guidance again is those expense reductions are proving to be extremely successful. Aaron has done a masterful job of really consolidating the businesses, the cream rising to the top, right, and these top talent from sales side, marketing side, production side, and we've been able to take a tremendous amount of cost out of the business. So I couldn't be prouder of the work that Aaron and our finance team has done in really putting this piece of the puzzle together and consolidating. And you can imagine how hard it is to consolidate 6 companies in the heart of COVID, right? Now it's become a lot easier.

Okay. Then my last question, could you elaborate a little bit on the spin-off of PodcastOne? The money that went in, the $8 million that you raised, could you tell us what percentage those investors are going to own and what percentage do you think the company is going to own and what percentage existing shareholders of LiveOne might own when it's all said and done?

Let me just -- Yes. let me give you right out of the 8-K, right? So what it publicly states in the 8-K is that the IPO, right, will be no less than $150 million valuation. That's right. Number 2 is the company will not give up more than 66%, Aaron? Just to be sure exactly.

Sorry, yes, we will maintain control of 66%. Yes.

Yes. All right. So figure if you did a $68 million, right? You did $8 million, right? $68 million valuation, right? You've got about 14% dilution, whatever you want to put in there, in that range, right? So you can kind of come to that number that's going to be somewhere in that range. And then we're going to spin out as part of that, staying above that 64%. That will include, right, any shares that we spin out to existing shareholders. And that will be -- it will be a very healthy number. It'll be somewhere in the 5% to 10% range, right, will be spun out to shareholders. But it will be great to have a community of that massive size going public profitable, right? EBITDA positive, profitable, right, with 15,000 shareholders day 1, right, and very healthy margins. So we're really excited for it, and we really do believe that Kit Gray and the team have just done an exceptional job and proven they really can run that business on their own, right, and operate their business on their own. And a lot of other things that came out of that, John, were the ability to keep some of our Board and advisory members, some of those, including gentlemen like Steve Bornstein, who built ESPN and the NFL network. You may see guys like this take bigger roles in the company now that we have a second company for them to be more active and proactive in. So it's really exciting to be the only pure-play podcasting business in the next 6 to 9 months maximum.

Next question comes from Kevin Dede of H.C. Wainwright.

It's Kevin Dede. Rob, you talked a lot about you're pulling cost out, can you speak at all to investments you're making, whether it's improvements in software or anything else you're doing on the platform to enhance the experience?

Yes. I mean that's on a daily basis. As you know, we have a world-class tech team out of San Diego, out of that Qualcomm world. They built for Elon Musk and Tesla. They continue to do an amazing job of building on technology right onto our platform. We've announced a partnership with Polygon. In NFTs, we've added a digital meet and greet platform that we've used for LadyGang and others. This is all built by our tech team in-house. So I couldn't be prouder of them. We'll continue to upgrade them. And then just in the Tesla cars alone, we've just added our podcasts and just did a complete upgrade of all that technology. So not a big cash number, not a big expense, right? Really just a really talented team that has been able to do that and continue to upgrade our product and make it the best product in the world.

Well, at one point, you were merging one tech platform with the Slacker platform. Can you give us -- I mean I know that was some time ago, but is that all complete?

I'm not sure what tech platform you're talking about. I assume you're talking about PodcastOne?

No, no, no. It was back in -- I think it was before that acquisition. I know that there were some things that you need to upgrade on Slacker in order to have it better. I assume that's done.

Yes. I mean it's always -- candidly, Kevin, it's always -- it's done, but we always upgrade, right? Every month, we'll continue to upgrade. And we have projects that Brad and the team is doing, and this is a brilliant group there. It's the best tech team I've ever had. And literally almost any project we give them, including NFTs, like they're able to handle, right? They're able to grow also. We utilize our partnerships, and that our partnership with Polygon, they're paid for the whole build-out for our NFT platform. So we're going to continue to leverage, right, large audiences, large distribution and large partners that believe in our content and need our content. As I've always said, anyone with 10 million to 2.5 billion eyeballs, must have live and must have music. We'll continue to do more and more B2B deals, more and more distribution of our content with those massive audiences from 10 million to 2.5 billion.

You mentioned NFTs, Rob. I was hoping you could talk a little bit more about how your artist-first platform is evolving. Maybe speak to more content producers that you're attracting. And is there any way to sort of quantify the NFT development effort?

I mean the only thing we could say to date is that right out of our Social Boxing, we did $3 million and sold 136,000 NFTs, right? So what we try to do is no different than our merch side, is listen, watch, engage, transact, right? We're not sitting here and coming out to you and say, hey, we're going to create the greatest set created in the world on our own. We're going to leverage massive partners in that world, right, in the metaverse, right, in the NFT world. We're going to partner with them to do it in conjunction with them and grow with them and grow up the backs of both their capital as well as their distribution.

Okay. So if we take a step back, can you talk about the artists that are coming over and how they're trying to leverage your NFT capability?

Sure. Just start right off the bat with what we did with T-Pain who hired us to produce his festival in Milwaukee, right? They paid us to produce it. They built NFTs around it, right? And they built marketing around it. They built merchandise around it. And they gave us the opportunity and liked what we did in Social Boxing with no risk to us, right, to have tremendous upside in getting paid if we deliver sponsors, paid for our distribution, paid for our marketing and paid for our services. So it's just -- and all on our platform. So instead of us paying and paying for that content, we're getting paid as well as getting all that traffic and audience. Same thing with LadyGang, right, and just doing a live event. We're now participating in those live events. New revenue streams with the same piece of talent, right, and growing. We just had -- the other night, we just did a big charity event, over 22 artists perform one night on our platform. So I think the biggest thing -- Kevin, the biggest thing in all of that is 3,000 artists now play into our platform, 3,000 artists take their social media and told their fans come listen and watch on LiveOne.

Okay. Is there any way to look at those 3,000 and try to figure how many of them have gone as far as having you guys build out NFTs for them? And then I guess I'm really curious about the Milwaukee example that you offered, Rob. Can you just kind of talk about the margin structure? Given that they're paying for the development of it, how much of the rev do you get to keep?

Yes. So taking a step back, I'm going to use Social Gloves as an example because it's the easiest, right? All the revenues to us, right? We got paid to bring in Hard Rock. They paid us $2 million. We got paid for the $3 million and NFT money came in. We got paid for every single ticket that came through the platform, which is all on ours, all the pay-per-views. We got paid for the merchandise, right? So everything runs to us, right? And as the sponsors come to us, we collect the money. And then we pay it out accordingly. So in every component of that, we try to have healthy 20, 30 points in margin on every one of the 360 position that we have.

Okay. Could you give us an update on where you are in taking that Tesla platform internationally?

Yes. I mean I think as you -- if you read the 8-K this week, this is telltale sign, LiveOne is now a 3-year partner with 1 of the top 10 record labels, right? It's a herd mentality in the music industry in that usually multiple parties come to the table. I think you're going to see us sign on every one of the labels, every publisher, get 2- to 3-year deals now. We've cleaned up our payables. We've cleaned up our balance sheet. We strengthened the company. And we proved that under the toughest times, we're going to grow, and we're going to perform, right? And just think about how big this could be, right? If record labels took stock instead of royalties, right, every dollar of that, a, is cash flow, b is EBITDA and 3 is earnings. So it's a self-fulfilled prophecy and that it's a win for them as well as they take equity, right? Their equity is going to go substantially higher as well of them helping us drive more EBITDA and earnings. And I think that's part of why we raised the guidance for this quarter. It's the fourth time we've raised it. If you saw 3 or 4 record labels come into it, you have to raise it substantially, right? Just think we pay -- we've said $80 million of our revenues, right, are coming from our subscription-based business, right, that portion of it, right, or audio business. Imagine there's a large chunk that gets paid like the music industry. If they become our partners, that means that they allow us to become way more profitable, have way more cash flow and way more earnings. So if you read that 8-K and if you believe that, that is a model going forward -- and remember, Universal Music took $10 million in royalties a couple of years ago at $4.12, $2.10 is a no-brainer right now, right? So imagine if we can continue to do that, we may -- Aaron and I are going to have to keep looking at where that EBITDA is and where this potentially go and then just think about what that number is going to be next year, right? If we continue to build these partnerships, continue to deliver these margins, right, yes, those EBITDA numbers really exploding. In the face of having Tesla also growing at the speed and our other car partnerships growing, we've got a lot of upside for those numbers. We want to under-promise, yes, going forward every quarter.

Do you need 4 record labels though in order to solicit Tesla's business for all their cars outside of the U.S.? That's kind of where I was going, Rob. What steps do you need to best take in order to have all the licensing?

Just reading between the line, Kevin, you're signing 3-year deals. The next step is you're signing international deals. It means the relationship has now grown to the next level. The confidence in our balance sheet, the confidence in our ability to be able to pay additional fees like the European rights, it's coming and it's coming quick.

Okay. All right. That helps, Rob.

And just to understand, again, we've talked about -- we've talked about this each quarter. Think about Spotify and Netflix and all these subscription models, 50% of their revenues is U.S. and 50% are overseas. So there's a massive growth opportunity for LiveOne. And one of the reasons that we win some of this business, including Elon, is our prices are so much lower, and our tech team works together in collaboration to white label these so that everyone can be as smart as Elon. It can be your Tesla radio. Now we don't have an ego here. So you're seeing more and more of those B2B partnerships. As you saw the announcement with Android Automotive and as you saw the recent announcement with ZYNC, these are all just uniquely positioned that the Spotifys of the world aren't going to white label for you. They're too big, and they're too powerful, and they've done too much work to build those brands. We're very confident and very comfortable in being a B2B partner, which is not about branding. It's about bottom line revenues and profits.

Okay. Rob, just to clarify on some comments that you and Aaron made regarding the spin-off. Did I understand correctly you're going to retain 64% or 66%? And if that's the case, that means that PodcastOne remains consolidated within LiveOne in the financials, correct?

Correct. We expect both PodcastOne and [ pay-per-view One ] to be consolidated inside of the parent company, right? The one risk that you have to that is that obviously, when you announced this, in which up to the world, we're one of the only independent podcast networks left. Everything else has been bought. It's been bought at huge valuations, including only a month ago, right, in the heart of this market crash, Conan O'Brien sold his to Sirius for $150 million. If you go read Sirius' story, they paid $150 million in cash for $10 million in revenues, right? So if we did $9 million this quarter, obviously, one of the exciting parts but also the risk here is that there could be a lot of excitement and energy around someone trying to buy that business as well. So our objective is to be consolidating them and keeping them, but we did re-up with JPMorgan. Part of it is offensive and part of it is defensive. Our job here as a fiduciary is to make sure that we again run the stock and get it to $5, $10 that we have multiple times before in any shape fashion we can and making sure that we're a good fiduciary, and we look at all the different ways to monetize for our shareholders.

[Operator Instructions] Our next question comes from Matthew Harrigan of Benchmark.

I'm really intrigued on the live video streaming entertainment side of it. I mean there aren't a lot of public vehicles through that pure play or concentrated, needless to say. I asked Eric Yuan over Zoom on that, and I think that it's very interesting 5 years out on the AR and the VR side as well, although he's very cautious about the near term on that. Since that's such an attractive market, what do you think the sustainable advantages you have are relative to some people who aren't engaged in it yet, Spotify, Pandora, LiveNation, et cetera. I know that's kind of the entry level. Maybe naive question, but I'd just like to know how -- or trying to get some sense for how sustainable [ your advantages are ].

Yes. It's actually a great question. And I'm a huge believer in live streaming. And I sold my last -- 2 companies ago. I sold liveone.com to [ Barry Diller ] for $1 billion, right, and that's almost 20 years now, right? And so we're a huge believer in live streaming. And we stuck to music, and it wasn't because we were smarter. It was because there was a [ white paper ]. It was wide open. MTV left the music industry 20 years ago, and they left this wide open. There are way more festivals, way more concerts, way more content, right? And now you've got social media where the talent has the ability, right, those creators have the ability to reach their audience in such a unique way. So we've had 5 billion engagements across our platform. And what I mean by 5 billion engagements is not only did they watch it, did the consumer watch, but they repurposed it and sent it back out across their social media and their friends. And as I said earlier, we have 3,000 artists full in our platform and skyrocketing every week. Last week, I think it was like 27 alone, right? We've got over 3,000 artists, all 3,000 artists that hit those social media and told their fans to watch and listen on LiveOne. Those numbers are going to continue to grow. COVID woke up the world because no one can make money going out and performing live, right? It's a lot easier for Justin Bieber, right, to perform digitally and do a live stream than it is for him to go travel 176 days and go on tour. Or maybe even better is the hybrid of it where it's part digital, part live, right? And if you think about this, right, we've streamed the biggest festivals on Earth. No different ESPN streams, the Yankees, the Dodgers, the Rangers, whatever your favorite team is, right? In music, we've done everything from Rock in Rio to EDC, EDC China, Japan, Jazz Montreux and the biggest artists around the world. Nobody has ever tested whether or not that works in pay-per-view. We know some sponsor dollar is going to come in because MTV, they spend millions and millions of dollars on it. My humble opinion is our pay-per-view business has absolutely explosive growth in that we just put a K-pop artist, I mean, we did $600,000 in a night, in a night, right? All they had to do was perform from a little theater. Like in Korea, they put on their performance, and they put it across their digital media. We're about to have a young star from Israel do the same. So when you have super fans, like there's a dollar amount sold. My belief is Rock in Rio had 89 million people watch and 1 million people attend. If you just hit 1 million people that pay $0.10 on the dollar to what they pay for a ticket, a ticket in Brazil is $100 on average. It is really expensive in Brazil. If you got $10, you got $10 times 1 million, you just created $10 million of revenues, right, in the weekend of the festival, a brand-new revenue stream that goes into the artist's hand, the agent's hand, the manager's hand, the writer's hand. And you just increased the penetration of the dollar amount to everyone in music substantially. So I think there's a massive opportunity, and I truly believe our pay-per-view business can be a unicorn on its own. I started years ago Independent Entertainment, which you may remember, went to $1.3 billion, $1.4 billion, 34 years ago, right? And you didn't have social media or the ability to reach around the world. You're just reaching the United States. So we see one event selling 136,000 tickets for one night. I just think there's a massive opportunity with very little risk if you handle it properly.

We have no further questions on the phone line, so I'll hand back for any closing remarks.

So to finalize, I just want to thank everyone and appreciate your support in a difficult market. We are going to continue as a company to underpromise and overperform. I'm proud of my team. We promised we were going to hit our first EBITDA positive of $500 million to $1 million. And we were 4x from the bottom of that number and 2x from the top of that number. So we just raised our guidance to $5 million to $11 million. That will be a $23 million, $24 million swing from last year. And we're laser-focused. We understand the temperature out there. We understand the world has changed, and we're laser-focused on delivering EBITDA and bottom line to our shareholders and increasing the value. And we'll be looking very, very closely in increasing our buyback. I personally have been a buyer every quarter. And I'll be looking myself to the open market as soon as a window opens again. So thank you, everyone, and I appreciate your time and I appreciate everyone's interest in LiveOne. Our team loves this company, and hopefully, everyone else will soon as well. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your lines.