Hello, everyone, and welcome to the LiveOne Inc Q3 Fiscal 2024 Financial Results and Business Update Call. And thank you for standing by. My name is Davvy, and I'll be coordinating your call today. [Operator Instructions] And I would now like to hand the call over to your host, Aaron Sullivan, CFO, to begin. So Aaron, please go ahead.

Thank you. Good morning, and welcome to LiveOne's business update and financial results conference call for the company's third quarter ended December 31, 2023. Presenting on today's call is Rob Ellin, CEO and Chairman of LiveOne. 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 filing 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 our annual report on Form 10-K for the year ended March 31, 2023, 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. The company encourages you to periodically visit Investor Relations website for important content. The following discussion, including responses to [Technical Difficulty] time-sensitive information and reflects management's view as of the date of the call, February 8, 2024. And except as required by law, the company does not undertake any obligation to update or revise this information after the day 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, transmission or rebroadcast of this call or webcast in any form without the company's express or 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'd like to thank you for joining us today. It's a really exciting time at LiveOne, and I'm extremely pleased on how all areas of our business are performing. It was truly a spectacular quarter and one that illustrates the power of our creative first model focused on super fans which rewards the talent and enriching the shareholders. As we near the close of fiscal 2024, we conservatively guided consolidated revenues to $115 million to $120 million, and we raised our guidance for fiscal 2025 to $145 million to $155 million. Of note, our Audio Division contributing revenues of $130 million to $140 million and $20 million to $25 million of EBITDA with over $17 million of positive cash flow. I'm so proud of our Audio team considering the time of the acquisitions of Slacker Radio and PodcastOne, the combined pro forma revenue was around $40 million with 400,000 members losing $15 million a year. Today's Slacker Radio has proudly passed 3.5 million members. This past quarter, added over 300,000 members and close to 700,000 year-over-year. We are guiding this year over 1 million new members. This past quarter, we onboarded 24 new podcasts signed to long-term contract, and we signed almost every one of our current podcast shows. We have a pipeline of over 100 existing podcasts that's 10 times the amount that any in history shows that we believe and many will join our network. We focus on great creators with amazing stories that can benefit and the increased engagement by joining our family. These shows are averaging about $350,000 annual in revenues to over $7 million adding. This gives us a unique clarity and strong comparability to achieve our 2025 financial guidance. Also as we expand our podcast roster in…

Thanks, Rob. I'll spend just a few minutes providing a very brief overview of our results for the third quarter of fiscal 2024, the quarter ended December 31, 2023. Consolidated revenue for the 3-month period ended December 31, '23, was $31.2 million. Slacker posted record revenue for Q3 of $16.8 million and adjusted EBITDA of $6.8 million. PodcastOne posted revenue of $10.4 million and adjusted EBITDA loss of $400,000. For the third quarter of fiscal '24, revenue consists of 54% membership and 46% advertising sponsorship merchandise and others compared to 49% membership and 51% advertising sponsorship and merchandise and other in the prior year period. Consolidated adjusted EBITDA for Q3 fiscal '24 was $3.3 million. On a U.S. GAAP basis, consolidated net loss of $2.6 million or $0.03 per diluted share for Q3 fiscal '24. Rob, I'll turn it back to you.

Great. Thank you, Aaron. Again, a spectacular quarter for the company, huge growth again in conclusion. I just want to reiterate as each of my prior companies has broken that $100 million mark in revenues, whether it was Digital Turbine, in JAKs, THQ, Forward Industries, Grand toys, each have had substantial 5 times to 100 times runs for their shareholders. . I'm confident and cited because I believe this is the biggest opportunity in my career. I personally invested over $18 million in this company and increased our company's stock buyback to $10 million because I see where we're headed and strongly believe our stock is valued. We've said we were going to achieve hitting 10 million subscribers is over a 5-year period. We're well on that way and super compare going to hit there. If we do, we'll be over $1 billion in revenues and this will be -- the stock will be substantially higher. I want to thank everyone for their support and look forward to any questions. Thank you.

[Operator Instructions] Our first question today comes from Brian Kinstlinger from Alliance Global Partners. Brian, please go ahead. Your line is open.

Congrats on your 8-figure sponsorship deal with PodcastOne. First, is this a new sponsor or a larger agreement from an existing sponsor? I guess I'm trying to understand that this is all incremental revenue to podcasts current run rate?

Yes. So this is a brand-new partner. It started at the end of last year when we announced it. It will continue to grow. And it's way more than 8 figures. It's well over $20 million, and you'll start to see that incremental growth in this quarter and substantially higher as each quarter goes forward. This gives us a streaming partner, one of the biggest in the world, the Fortune 500 company and gives us a massive audience to reach content.

And then more broadly, we in the Googles and Facebooks of the world that the ad market is finally beginning to strengthen. And then we also have an election year ahead, which usually helps the ad market. First, are you seeing the same signs in the market where pricing might begin to strengthen and then will podcast benefit from political ad trends?

The answer to both is yes. We're already seeing that. And we're seeing telltale signs that this is going to be a fantastic year. As you can see by the numbers we announced this morning in PodcastOne. We almost matched last year, right? We did $32 million last year. We're at $31 million and change already with a quarter to go, and obviously, our fourth quarter, especially with this new contract is going to be quarter ever in the history of the company. So we're seeing telltale signs it's strong. Politics does work in advertising. But I think the biggest thing, Brian, to look at is the trends in podcasting. The usage, the number of people that are moving the podcast demographics that are moving, it's getting younger and younger as well and also the number of sponsors that are moving into podcasting. It's really a maturing business and what I've told everyone is this business was going to grow when we bought podcast from $4 million to eventually $5 million to $7 million. What I would tell you now, it's going to be way more like $7 million to $10 million by 2030. So there's a big market developing. And this is really a unique time for our advertising and podcast business.

The heart of the question, clear PodcastOne revenue is growing. Growth is a function of downloads versus price. I think you grew download 15%, if I read an article correctly, or unique visitors. So I guess I'm wondering what the pricing trends as I speak to the ad market is pricing generally been flat and you expect to increase? Has it been increasing? Just speak to pricing on the ad side, if you could.

Yes. I mean I can talk from the overall market, right, is increasing somewhat, right? But really what's happening for us is because we built this community, right, we're able to sell across the community and part of the excitement, and you'll see when you see podcast at Brendan and Schwab move over and Brendan moved over and doing -- he's already doing 2x what he was doing before because of our community, we're able to upsell and sell very different CPA with CPMs and some of the bigger guys are who are mostly doing programmatic advertising. So as a trend, the trend is our friend, the industry itself is going up. But for us, we're going up even higher because our community continues to grow.

I have a couple more, if you don't mind. First, and I ask this every quarter, I may have missed it. Can you speak to the number of podcasts that are pending on boarding and speak to the expected time frame? I could be wrong, but I think last quarter, you had 6 to the 27 from cast might be reading my notes wrong. So if I'm wrong, sorry. And then there's probably other spending. So just maybe, I guess, through what's pending a time frame.

We announced we added 24 this year. That's by far a record for the company, right? We're now up to 180 podcasts. What we said is, for the first time in history, we have over 100 podcasts on our pipeline. And the reason that's happened is if you read the announcement on Spotify, they hired a mid-team with very talented team of creators and they just got rid of them, and they woke up and realized they're the best at distribution, right? And we're a great partner for the distribution. But they're really managing these small podcasts does not make sense for him. So a lot of these contracts, there was $28 billion back in the industry. The industry was -- the trend was it was a seller's market for podcasts, both podcast networks as well as podcasters right now is a buyer's market. You're going to see from Amazon and Spotify and Apple and Sirius, a lot of these podcasts that do $250,000 to $5 million in revenues. The contracts are coming up and they really need a place that can't hold them and support them right in this market. And it's really not going to happen in these big companies. It's not really the right place in the base. So just the biggest pipeline we've ever had, and I fully expect to beat that 24 number. We'll have still a lot more coming in this fourth quarter, and I expect to beat that number of, call it, 27 to 30 this year. I fully expect to beat that next year. And just looking at our pipeline and how close we are on many of these. I think you'll see some really exciting announcements. You'll see some major, major podcasters moving over to our platform like Brendan did. It's rare that you see those kind of moves, but you're going to see them in a unique way. And the big guys they're going to control distribution which is wonderful that we have these partnerships with Spotify and Apple and Samsung and so on, right? But they're also going to be focused on the of the world decided $250 million contract, right? And the show just moved over from Amazon, $100 million a year for SmartList, right? There's more and more money pouring into the system, but the big guys are going to focus on how it stars and Joe Rogan. And we're going to have an unbelievable opportunity to acquire existing podcasts with traffic and audience as well as like we did with Cash Media. I fully expect we said we have 10 acquisitions in the pipeline. I fully expect additional acquisitions in the podcast space as well this year that are hugely accretive to our bottom line.

Last question I have, I think -- I don't think you discussed it, but I think it's a really important point that you and I have discussed in the past. So maybe you can share any stats for recently onboarded podcast how they perform compared to when they were on other platforms, not on the PodcastOne platform in the first 6 months or so, I think that we've had a good discussion and then I think it would be helpful if you could share some stats.

And I think this is a credit to Kit Eli and, and they've got 65 years of history in doing billions of dollars of revenues in radio, right? Sue Ran sales for Howard Stern and all 3 of them being on the who was a pioneer radio and created one of the great public companies and radio with this company previously with Westwood One. Our team has been able to move over podcast and without giving names, we moved over on podcast that literally had 20,000 downloads. It's making it a couple of dollars, very talented, 2 women, very talented from a small town. We moved them onto our platform. We put a mom with the Vanderpump, we put them on to all the house-wide which we're most powerful and they've now grown to 150,000 downloads and they're doing millions of dollars of revenues. So -- and there's multiple stories like that. And very few companies are left that can do that when they have a community that they're really working on the sales, the marketing, the PR, the production, all of it in one and working with that talent to deliver a way better CPAs and way more traffic, way more audience. You also put them on -- good morning America and put them on TV and did all the work of PR firm that really grow them and I couldn't be more proud of it. Brendan’s show has exploded since it came on a network. It's up 2.5 times since it from being over a cash media.

Our next question is from Jon Hickman from Ladenburg. Jon, please go ahead. Your line is open.

Rob, could you walk through like how podcast becomes a streaming or television-type asset? And what the revenues what your portion of the revenues could be?

Thanks, Jon. I mean, you and I go back a long way. I think I met you when I owned atmosphere films, and I had a slate of television and moment. I was very fortunate, those films turned out to be one or turned out to the move the movie 300, and the other 1 turned out to be. And we did well over $1 billion of revenues. Here's the beauty of this model. You take a podcast like Barnam Town. My partner and Board member, Patrick Waxberger, one of the great creatives of content Maven the Street, just won an Academy work for, created Twilight, Lala Land, came to us with a show called Town, okay? An amazing story, right? I'll make it really brief, but 300 people little town for any of you old enough to know this band called, a plan at in this little town of 300 people out Carolina, and all of a sudden, everybody explodes and becomes rich. Much coming out of the little money is coming out of their pockets. So how much money is created system. And of course, what happens and CIA and FBI and drug enforcement and tax authorities and so on. There's a little counter 300 people. That show I highly believe it's going to become the bidding work for the streaming networks. It's the story of Pablo Escobar infiltrating in little town in North Carolina. And for anyone who has an opportunity to listen to it, I think you got to really enjoy it. You've seen the shale seeing any of these true Triumph type shows. This is one of the best I've ever seen. And I think that's 1 of our 4 shows we've announced so far. Stay tuned because there's going to be a lot more announced any minute now. These 4 are all in this quarter, right? Opportunists, Digilanthia has already sold to a major studio. They just wired a $70,000 just to start with. So John, when you look at these things, you're going to start to get production money, you're going to start to get back-end money. And as we grow it, we expect to do 10 to 12 of those shows a year, which we're doing anyway, right? They're on our platform. Make some money of the podcast, but then sell to that second window where there's no risk in Netflix or Apple or Amazon or HBO buys the rights to it. And we sit there with the catchers met and collect money for the rest of our lives. I'm very fortunate when I did 300, it's now almost 20 years. Those royalty checks come into life. And so this really exciting next generation of where podcast is going.

So is there any cost to you to do that?

In fact.

Where is 100% margin.

Correct. Once we -- yes. So as an example, right, on Vigilant, we just got a 70,000 check, right? We get that check, right? It's already handed off, right? They've already hired the writers, the right. We're executive producers on it, and we'll continue to get paid as producers on it. We'll continue to get paid back and is successful. And literally, if it makes it, you make it the first year, you're going to get paid a lot of money. In mid second and third year, this becomes mailbox money for life.

Who in your shop is shepherding that initiative?

Yes. So there's a team of people. So remember, it starts as a podcast, right? Podcast audio. Imagine that now you can go instead of scripts and book sell for $1 million, $2 million, right? Then you get a high re-orientate here you already have proof that the shows you're already up the traffic sorry, there, the audience is already there. And now you're selling to Netflix and you own, okay, the show is already #4 on Apple, right? It's already had 100,000 downloads in the first week. They've got proof of concept. They've got proof of customer base. It's a very unique model. And I'm really excited about this. I think it's going to be a real winner for us. And it will take a little bit of time, but just as the small bits of money coming in, come next year to be very substantial, one coming in and growing every year.

Real quick. Can you remind the 4 that you've already announced Jilani, Barmentown, what are the other two?

Yes. So opportunist, which amazingly just we want just launched of doing 100,000 downloads. We're making a lot of money just off the reruns already, right? So that first 3 years of it, we acquired that from Cash Media. This already sold to a major network guy. Opportunities is partnered with a network to do a documentary up just 1 season of it. Guy, we're out with 2 other seasons to the networks and the other one is called loss in Panama. Will add another one almost -- we'll probably add another one every couple of weeks, Jon right now.

Our next question is from Sam Lee. It appears that Sam has disconnected. I'll move on to our next question. Our next question is from Sean McGowan from ROTH MKM. Sean, please go ahead your line is open.

Are you able to hear me? Let me start with Aaron. First of all, congratulations, Aaron, on the recent promotions. But second, can you give us an idea exactly when the 10-Q will be out?

So we are looking at so it will be early next week. Deadline is Wednesday, the 14th. We hope to get it out maybe a day or 2 sooner.

Would you mind repeating those percentage breakdowns on the revenue between subscription and ad? And any kind of color you could provide on revenue outside of those 2 categories?

Yes, sure. So let's see. I think we mentioned that Slacker revenue was $16.8 million for the quarter and PodcastOne was $10.4 million. So that's 2 big buckets there. And then in terms of the percentage, it's 54% membership and then 46% advertising sponsorship, merchandise and other for the current quarter and then the prior year quarter was 49% membership and 51% advertising sponsorship merchandising and other.

That's just within audio, but can you just give me any color on revenue outside of that? Just any meaningful trends going on there?

So the outside of that, you've got basically merchandise revenue make up the remainder.

And then on the $20 million deal, if you could provide a little bit more color on that, for example, what time frame does that cover? And is all of that revenue going to be booked in kind of in 1 bucket? Or will it be spread around?

That will be -- that's over the course of the calendar '24. So you should see it in a relatively straight line manner over that period. And that will be in the advertising category. .

Okay. So it's all podcast?

Correct.

Then back to Slacker for a second. Any updates or color on expanded relationship with Tesla or with any other equipment manufacturers in it in the past that there could be some additional partners, audio streaming, anything there?

Yes. So let me jump in on that, Sean. So what we just announced is that we expanded our pipe from 35 to 42 partners, right, -- streaming partners, the first of many of these B2B deals. And we fully expect that at those 42, somewhere in the 5% to 10% of those will close this year. So anywhere from 2 to 4 of those. And each of those are with $1 billion to multitrillion dollar companies. Very similar to this type of deal. And so we can't be more excited about the pipeline. We brought a great team out of Microsoft, who's done billions of dollars of B2B deals and as you know, Sean, my entire business and digital turbine was built off the backs of B2B deals. That was just with carriers and hardware companies. We have 8 verticals here. So we fully expect to expand our auto business. We fully expect to expand our carrier business. And historically, Slacker has had partnerships with everybody from Samsung to Verizon to T-Mobile and as interest rates rise, and you're going to hear this theme exactly as I described in Digital Turbine for 7 years. The same trend is here as interest rates are going up, those commodity businesses must have a closer relationship and must own the data of their customers, and you're seeing more and more of those partners now lining up with content and owning their own content and having their own content deals versus giving it to Apple and Android and just allowing them to own all that data. So really exciting pipeline, the biggest by far in the history of the company. It's the one area that we're adding people. We're now at the 4 people in B2B. We'll continue to add to that group. And you'll probably see some announcements around that and expanding that B2B as we announce the next deal.

And when you talk about those 35 to 42 partners, is that all within Slacker or does that include partnerships that would be in podcast?

Auto partnerships, right? So even though this first deal is a podcast, that doesn't mean it can't expand to radio, right? So it doesn't mean it can't expand to our live streaming all of our paper view. We have these mass libraries of video. So don't be surprised if you start to see an asset cross over both of them.

And then last thing, Rob, could you give us a little bit more color on what we should expect to see in other products coming soon in celebrity? Is there any -- can you give us a little peak there? I mean the --its off to a great site, but what other things should we expect to see in the coming quarters?

I mean, be patient because it's coming any minute now, right? What I said is you're going to see another 2 or 3 products launched. So we have 2 lines already that are being launched -- you're going to see us across big spaces, things like coffee, right, cosmetics. So when you think about what's happened in the industry, the social media stars, which we live with every day, when they're podcasts with the musicians with social media so, we work with all of them, right? You think of Logan Paul and Prime and how it's now doing $1.5 billion in revenues, right? And think you think of Kim Kardashian and $700 million of revenues in 2 years and what she's done for the cosmetic industry and think of go back to Avion right inside of being created inside of it. We see this great opportunity with very little to no cost to us to be able to partner with our creators with already having the rev shares built and be able to launch products and find out if the social media drives it. If their social media drives it, you're going to have a great brand if it doesn't drive it. There's a pretty good chance that's going to be one you're going to pass on. So we expect to launch 10 to 12 -- I'm sorry, 12 this year, and we'll expand it 10 to 12 a year after and further the year after it. These will all be with very little cost to us. It's really just an extension of our content and new revenue streams that come out of it. And I can't wait to do the ones with podcasters because with podcasters, just think about it, right? 50% of the business is direct response. So they have proven records that you're selling products, right, directly off that podcast because these podcasts have super fans. So they don't have to be massive businesses, but they could be hugely accretive and usually grow our business overnight.

Our next question is a follow-up from Brian Kinstlinger. Brian, please go ahead. Your line is open.

I have two. The first one, I just want -- I'm sure lots of people are thinking this about this $20 million deal. So I'm going to ask it to make sure we're all thinking about it the right way. If I look at PodcastOne's revenues, you've been at about $10.5 million for each of the 3 quarters plus or minus. Is the way to think about it that you could do $42 million-ish this year, whatever it is, plus or minus? And next year is you're already off the $20 million higher, so 50% growth based on that $20 million deal? Or is there something I'm not thinking about the right way there?

Yes. We'll come out, Brian. We can't go any deeper than we publicly announced. What we said is we expect to be on a run rate of $45 million to $50 million. We're going to have to update that shortly and give us a minute to do that, but we haven't publicly announced anything deeper there, but you're certainly thinking the right way, right? And one of the exciting things here is you have -- you now have your advertising business growing almost as fast as your Audio business is, right? So this is the first time we have 2 moonshots happening at the same time.

The second one, I just -- maybe for Aaron on the cost side. The pros and cons, if you could just walk me through what the first. On the OpEx side, it's substantially down in the December quarter to September quarter. I assume that's your cost-cutting efforts. I want to make sure there's nothing onetime and this is kind of indicative of the near term or lower as you've talked about in the past. And on the gross margin side, I'm not sure what impacted the mix. It was a little bit lower than it's been for the last many quarters. So just if you could just take me through the dynamics on the cost side and how we should think about them going forward?

Yes. Thanks, Brian. So the OpEx question, I think we're -- this does not -- overall, there's not any onetime -- significant onetime matters in here. It came down a little bit from last quarter, simply because we had substantial costs related to spinning off PodcastOne. So you had accounting and legal costs, et cetera, public filing costs in previous quarters. So you don't have that noise kind of going forward. So that's -- that's that. And then on the margin side, there's about 3 percentage points of additional spend in the current quarter where we're out acquiring content. We expect that to kind of normalize in the coming quarters. So you should see an increase of about 2%, 3% there. And I think that's kind of the runway we've been on previously. So should drop. Sorry, it dropped down this quarter should pick back up in coming quarters.

[Operator Instructions] Our next question is from Thierry Willard from Water Tower Research. Your line is open. Please go ahead.

Yes. And you've already covered a lot of ground. So I just have just 1 question. You're guiding to a very substantial jump in EBITDA for the fourth quarter. And I was wondering if you could give us some color how much of that is seasonal? Is it driven by a onetime deal? Or is it and what part of it is maybe leverage in the model?

So I'll take Rob, and then you can jump in. So for Q4, as I mentioned earlier, we had a lot of kind of onetime noise in kind of Q2, Q1 -- Q2 with a little bit leading into the current quarter on our efforts to spin out PodcastOne. So that's behind us. So we're expecting to see some cost savings there. As the audio business continues to grow into Q4, we just see additional contribution down to the down to the bottom line there. And that's really kind of the 2 driving trends there in the EBITDA for our expected for Q4. I don't know, Rob, if you have anything else to add?

Yes. I mean I would just say not PodcastOne. we had also filed a public offering for a Slack Radio to emerging to a Slacker, which we subsequently pulled because the market was so terrible, but also because the company is growing so fast, right, revenues and EBITDA. So we had the cost of 3 audits legal fees and so on is very expensive. And Aaron, who has just made CFO, he's just done a great job of that, and a great job of managing it. And you'll see -- I think you'll see those margins come back through this coming quarter.

So I mean if I summarize that, the EBITDA level you're forecasting for the fourth quarter is maybe a sustainable level going forward and in kind of a new quarterly basis?

Yes. I mean our EBITDA, as you can see, and we don't break down by quarter, but we did put out guidance for next year where we said our Audio business, we're just going to do $130 million to $140 million, right, with $20 million to $25 million of EBITDA, right? So you're starting to see some real traction and real move towards cash flow and bottom line.

We have no further questions. So I'd like to hand back to Rob Ellin for any closing or further remarks.

I just want to thank everyone and appreciate your time in a difficult market like this. This is a great time for our company and growth. We're going to continue to buy stock. We'll be able to buy stock in the next couple of days. Now if the earnings are often we'll continue to buy stock. And if we're going to trade down at these low levels, we'll expand that buyback again if we need to. So I want to thank everyone and thank you for spending the time, and we appreciate your support in a tough market. .

Thank you, everyone, for joining today's call. You may now disconnect your lines, and have a lovely day.