Good morning or good afternoon all, and welcome to the LiveOne Inc. Q1 Fiscal 2024 Financial Results and Business Update Webcast. My name is Adam, and I will be your operator for today. I will now hand the floor to Aaron Sullivan to begin. Aaron, please go ahead when you are ready.

Good morning, and welcome to Live One's business update and financial results conference call for the company's first quarter ended June 30, 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 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, 2023, and subsequent SEC filings. You'll 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 the Investor Relations website for important content. The following discussion, including responses to your questions, contains time-sensitive information and reflects management's views as of the date of this call, August 10, 2023. And except as required by law, the company does not undertake any obligation to update or revise this information after the date of the call. I'd like to highlight to investors that this call is being recorded. The company is making it available to investors and 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 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, and thank you all for joining this very special day for Live. Five years ago, my team entered the fast-growing digital audio market with the acquisition of Slacker Radio. At the time of acquisition, it was a very distressed asset with $20 million in revenues and almost $10 million in losses and has spent over $180 million building the assets. Today, and I'm proud to say that we've just raised our guidance to $123 million to $130 million in revenues. On the audio side of it alone, we raised our guidance to $103 million to $110 million with a staggering $18 million to $21 million of EBITDA. We promised the Street when I started this that by the end of 2027, LiveOne's Slacker Radio would capture 10 million subscribers and over $1 billion in revenues by the end of 2027. The opportunity is so big that the total addressable market for this industry, according to Goldman Sachs, is over 1.7 billion paying subscribers alone. Today, I can humbly guide that by the end of 2027, we expect not only to reach that 10 million but to surpass 15 million subscribers. We say this with confidence because LiveOne is growing over 800,000 subscribers, which is a 50% increase, and our ARPU is over $3. The pipeline for our B2B partnerships has never been greater. Each of these potential partners has 10 million to 2.5 billion addressable eyeballs. At 15 million and $3 ARPU, we will surpass $600 million in revenues. That's before any ad revenues or an increase in pricing, of which LiveOne's Slacker is the only one in the industry that has not raised prices, and we're currently at a 65% discount to all our competitors today. Slacker Radio expects to begin trading in a reverse merger with ROCL SPAC by the end of October. Separately, we acquired PodcastOne, which was also doing about $20 million in revenues at the beginning of COVID. Today, I can proudly announce that Kit and our team achieved over $10.6 million for the quarter, or a run rate of $42 million. When you combine that with the acquisition of the Kast Media assets we've been announcing and the acquisition of Fantasy Guru, our run rate will be well over $50 million. For the first time ever, we will talk about our guidance for 2027 for podcasting and expect that to continue to grow at this rate and hit over $250 million in revenues. The podcast industry has matured from $400 million to $1.4 billion since COVID. The industry expects it to grow to $5 billion to $7 billion by 2027. We have just moved up dramatically from #13 to #10 on Podtrac, passing the likes of CNN. We expect this year to be in the top set. We also, although it's been delayed multiple times, expect to start trading on a major exchange under the symbol PODC in the next two to four weeks. With the largest pipeline of potential podcasts and over 10 potential acquisition candidates, we will continue to roll off. We expect to continue to grow at a 30% to 50% year-over-year growth. We now have over 250 podcasts on the network, a 150% increase since acquiring the company. Pre-COVID, LiveOne had 10 sponsors; proudly today, we have passed over 700 sponsors on our network. As we move from audio back into video, Pay-Per-View One has been announcing multiple different Pay-Per-View events across podcasts with Adam Corolla, music festivals and social media events, social blocks. We delivered over $28 million and $4 million of EBITDA during COVID. It was a $60 billion market and growing. Our tech team has delivered world-class technology that is live-streamed to over 5 billion engagements and 350 million live streams and 3,000 artists. We humbly project by 2027 over $100 million in revenues in our Pay-Per-View and live streaming business, which could easily be multiples of that number based on our audience size. Splitmind and Drumify, our newest acquisition publishing arm, is revolutionizing the industry, utilizing the best producers, artists, songwriters combined with AI to deliver the first-of-its-kind royalty-sharing platform. With a total addressable market of over $100 billion, we guide to over $100 million in revenues by 2027. Our merchandise business has struggled; we acquired it during COVID. It suffered because we didn't have any of our live events or partnerships with Live Nation AG. But we've just announced a very unique collaboration, the first of many to come, with Jeremih and Russell Bevan, who is the winemaker in Napa Valley, known for more than 100-point wines, with the brand name 'Birthday Sex' with Jeremih. We've sold out in the first week, and we are now growing substantially. We're guiding that business to expect 10 to 20 celebrity brands this year, aiming for over $100 million as well in 2027. Together these five divisions, we easily surpass $1 billion in revenues and over $150 million in EBITDA. I want to thank everyone for their patience and support, and we couldn't be more excited about the company, the spinouts that are about to happen with PodcastOne and Slacker Radio, and the opportunity for each of our five divisions to grow and mature. With that, I want to open it up to any questions anyone has. Thank you again for attending.

Our first question comes from Brian Kinstlinger from Alliance Global Partners.

Great. And really, congratulations on this turnaround. It's taken a while, but you've done great work. Can you touch on the pipeline of podcasting in terms of M&A, what are the ranges in terms of sizes you're looking at? What are the general valuations that you hope in your discipline to acquire companies at and then just speak to maybe the mix in cash and stock and retaining management of how the plan will work?

Yes. Great question, Brian. I think you know me long enough now and all of our acquisitions are in that one-time revenue range. They've historically been with stock. We've done this because our stock is down. We have been acquiring it with the stock in PodcastOne. So on PodcastOne, we announced the valuation is well over $200 million when the stock is trading well below that. So we utilized our currency in PodcastOne to acquire both Fantasy Guru as well as the assets of Kast Media. We have over 10 acquisitions right now in the pipeline and they're really exciting. They range anywhere from about $5 million up to $35 million to $40 million. They make growth from here soon. But this is that unique opportunity right now to acquire the smaller podcast networks and add them into the fold. Our team is the best in the business, Kit, Eli, and Sue have proven this over and over again. And we just see the excitement and energy of it. You're seeing us announce on top of the acquisition. You're seeing us announce almost on a biweekly basis, another podcast with traffic and audience that already exists, moving over to our platform. I think you're going to see more and more of that. So the pipeline for potential podcasts to move over is over 100, with over 10 acquisitions right now. It couldn't be more exciting. This is a great time to roll up the space.

And if I remember correctly, the acquisitions of Kast and Fantasy Guru have lower CPMs and your opportunities to increase CPMs when they're onboarded to your platform. Is that generally how when you look at those 10 or so in your pipeline, how it will work? They'll have lower CPMs, they come on to you? And immediately or at least once you negotiate, you'll be able to generate higher revenue than just what they have?

Yes, I think it's a combination of things because we're a full 360 podcast network. I'm going to hand this to Kit in a second. Broadly, our team does everything for those podcasts, and we act as a community, so we utilize our other podcasts to grow them. The size of our sales force is dramatically different than that of a small podcast network. Kit, why don't you take over from that?

Yes. Sure. Yes, the ultimate goal is to raise CPMs, but it's a process, right? A lot of the shows that we're acquiring, whether through acquisitions or even just one-offs, where shows are leaving other networks or new shows are starting, the first phase of that process is to get demand on their inventory, start to sell out unsold inventory, give good packages to advertisers so they invest, test, and work with these shows, get comfortable with these shows, then that's where the CPMs start to grow. We have comfort with those advertisers to do things beyond just the regular spots and dots of what you would hear in a podcast; to include exclusive episodes, content just around brands, social interaction, video, all of these types of things. That's where you're going to see increased CPMs. The competitors we go against every day are very much focused on just the basic spots and dots, and we're able to excel in that, but excel in all the other aspects we've just discussed. So that's one of the main growth factors. We get these shows on the network, and they start making more money than they ever have. We do more together, we do more episodes, and we really charge forward.

Just to add to that, guys. We just recently started to move over and signed some of the Kast Media podcasters who have struggled and have been owed money. Kast had two salespeople. Just as an example, without using names, one of the first podcasts that came over, which would be one of the largest traffic podcasts, we did triple the revenues the first month compared to what they had previously.

But I think because you filled their inventory or because you had better advertising, why did you do triple the revenue?

Both. Across the board, we just have a plethora of advertisers already on our platform. We're able to go to them and use that great talent and those numbers to expand the opportunity with them and grow our existing advertisers. Programmatic also kicked in.

Right. Two more questions for me. The first is your numbers jumped up in the first quarter before the acquisitions. I know you had some new content coming on. You're speaking to M&A. Is there also a meaningful piece of organically creating new shows? Or will M&A dominate the addition of content?

Kit, do you want to take that?

Yes. Yes. I mean, what we're trying to do is look at shows that are smaller that are on our network that we know we can't get to the next level. Rather than exhaust our resources after 9 to 12 months trying to elevate them, we then churn out the bottom 15% to 20% of the network. At the same time, we're growing the network by adding bigger programs with more opportunities that will be top 10, top 20 shows on our network, which will drive real revenue. We get them into our system and continue to grow beyond what we ever thought. So those are your strategies of growth. When you look at the network, you're always trying to clean it up, get more efficient, and bring in bigger ones.

I would say, Brian, two of our newest shows we just added are already in the top 10. So you're seeing brand-new shows that are really exciting and coming out strong with very strong numbers.

What shows are those?

We just acquired Brendan Schaub. In his network, he has three shows, including The Golden Hour, The Fighter and the Kid, and The Brendan Schaub Show. We have some more news, which is a really big news show that does well in both the audio space and the YouTube video space. Those are just a few of the new acquisitions that have occurred over the last two to three weeks. In the meantime, we're launching new shows on PodcastOne and acquiring shows from competing networks that are unhappy with their current situation and they're coming over. For instance, I had a podcast from two women out of Oklahoma, one a lawyer and one an interior decorator. They were hilarious. They were just on the Today Show last week. Their show came over to us with 20,000 downloads an episode. This is a bit of an anomaly, but it's due to hard work on our end and theirs as well. That show is now doing over 125,000 downloads an episode and we'll crack seven figures in revenue. We're discussing launching another episode with them where they'll have three episodes a week, including one on Saturday. So that’s the strategy: to find these people that fit into our mold and we can grow their revenues from low six figures to seven figures and potentially even more.

One of the other great developments happening in this space is because it's not nearly as competitive, everyone is willing to pay these exorbitant minimum guarantees or prices. We're negotiating much better deals than we've ever got before. Kit and the team have always played moneyball, but now they're executing strategies that you will see more 60-40 deals and 50-50 deals than you did previously. We've always avoided those 80-20 deals, which has proven to be the right methodology, and the team really understands what the right deals are.

Okay. Lastly, do the Kast and Fantasy Guru acquisitions depend on PodcastOne trading on its own? Or is there any obstacle in closing those acquisitions?

No, it's already happening. We're purchasing certain assets, as we've already announced several shows. I fully expect you're going to see us announce some major shows any minute now. With Fantasy Guru, I expect it to close in the next 30 days. It's an exciting time to finalize it because it coincides with the football season. We're really excited about this. They have never conducted any advertising or sponsorship, and it crosses over both radio and podcasting. We're seeing a truly exciting opportunity to dramatically expand that business and utilize our creators and podcasters to drive more subscribers.

The next question comes from Jon Hickman from Ladenburg.

Rob, can you elaborate on you said two to four weeks before the podcast starts trading on a national exchange. Can you elaborate on why you think it's going to be that soon after all the delays?

Yes. I mean, I can't say too much, but what we said in the press release is that after being approved by the SEC, Nasdaq asked us for our audited statements, which was not an unreasonable request. It was just eight months into the process. As you know, we've delivered those audited statements, and they are filed publicly. So that's all completed. I'm very confident that we will trade on a major exchange shortly. It will probably be up to us as to what day we choose to trade and ensure we do the right road show in advance, and get out to the Street ahead of time. This has obviously taken longer than we expected, but none of these things are easy. This is the first time we've done an uplifting and a partial dividend simultaneously, and I believe it turned out to be a blessing in disguise. We increased the dividend dramatically, secured two acquisitions, and we’re not done yet. This is an exhilarating time for the company and for PodcastOne. We get to showcase our numbers for this quarter, showcasing a $10.6 million figure, which is a substantial jump from where we were. I’m very proud of the team and where this is going and truly excited about these acquisitions. Kit just mentioned Brendan is already on our network, and he will be one of the top three traffic guys on our network and brings more and more male sports-related content. We have a massive female network, and we're just going to keep growing.

One last question. You raised guidance, but the Kast Media and Guru revenues aren't in the new guidance until they close, right?

Correct.

The next question comes from Joseph Salino from Joseph Stone Capital.

Hey, Rob. Congratulations on a job well done, you and your team, hats off to you guys. My question was already answered by a previous investor, so you can take the next call.

Our next question comes from Sean McGowan from ROTH MKM.

Let me start with a couple of housekeeping things: the change in the terms of the podcast spin-off and the dividend, I mean, that was already announced, right? That change is already out there at 19%?

Yes. Correct.

Okay, and on the valuation of the podcast, well, first on the trading. So there's not anything material yet that you need to do. It's just a question of when it actually goes effective. Is that the right way to read what you're saying?

Yes. I think it's more than that. I mean, we're effective already, right? Effectively, you're a public company. We're just waiting for an exchange to be ready. I'm very hopeful that we're on the 5-yard line, in fact, we may even be on the 2-yard line as of today.

Right. I meant that there's nothing material that you have to deliver. It's more on them now; it's not like they're waiting on you, you've done everything you have to do, right?

Correct. Correct. One of the things we should clarify, and we've made this clear before, but I should reiterate on the call, Sean, just to give you round numbers, anyone who owns 100,000 shares of LiveOne is going to receive about 4,800 shares of PodcastOne between $8 and $12. If you take the low end of the range at $8, this is a sizable dividend for shareholders of record who own it at the time we're officially listed in the next couple of weeks.

Yes. Now on the valuation that you've referenced a couple of times that was done through a third party, that depends on some changes in the industry over the last six months or so. I guess the flip side of you being able to get content more favorable deals is maybe the mood around the category is a little different. Can you talk a little bit about your confidence in the prior valuations that were done?

Yes. I would say the confidence is even higher. Sirius Radio bought a podcast network doing $10 million in revenues for $150 million in cash, only six months ago. If anything, Spotify and Sirius’ stocks have gone up substantially. Spotify came back down a little, but they've increased very significantly from when that valuation was done. If anything, the valuations have gone higher in this space. We're pretty excited about it. The opportunity of acquiring smaller networks is that Spotify, Apple, Sirius, and iHeart are no longer interested in these small entities—they're just too small for them. They've gobbled up a tremendous number and have big market shares in those areas. I believe it's an exciting time for us to consolidate the smaller networks since there is really no home for them anymore. You have Odyssey and Westwood, and there’s a lot of debt out there among the radio companies that have built podcast networks. I think there's a huge opportunity to consolidate this space and effectively grow it. I think we're the only game in town that can buy the small networks and do what Kit and his team can accomplish.

Makes sense. Circling around to Splitmind. Can you give us a little bit more detail on this Madden deal, like this could be an example, right? How does this work economically?

Yes, great. I'm going to hand that to Josh because you and I have been in the trenches of the gaming business and have seen how much money is generated with music inside these games. So Josh, why don't you jump in and talk about where that’s going, not just for games, but also film, television, and overall the publishing side of our business.

In general, publishing revenue comes from synchronizations and licenses. As we've engaged with this asset, we're already showing how much value we can generate by making revenue from that side of the business. Madden is the most prized video game in the U.S. In fact, I believe it is the highest-selling video game or at least the highest-selling sports game. We're the title track; we’re on every commercial, internet commercials, and nationwide campaigns. That, combined with our work for the new Gerard Butler film Kandahar, and doing the music for the Emmys last year means we're on track to continue to grow the publishing business more on the sync and licensing side. We're always focused on creating hit songs— that’s a given, that’s our daily business—but you can't overlook how much revenue can actually come from sync and licensing opportunities as we grow.

I think this is such a high-profile public test case on this model. Without getting into specifics about dollars or percentages, just conceptually, how does this work? What's the basis of the revenue that you get from that? Is it a flat rate? Is it based on the number of times the game is played? Is there a number of times the music actually plays? What's the basis of the revenue?

It's all-encompassing. But there is a significant flat fee when you initially sign up for that agreement. If you check all the other artists involved in that Madden project, they're not low-fee artists—it's the most coveted placement in the video game space, in my opinion.

Okay. A couple of other questions. So Rob, is the trading—any more details on the Slacker trading? You mentioned it's a little sooner than anticipated, assuming that it actually happens then? Or is that what you guys had in mind?

Yes. I believe you're going to get a lot of clarity in the next two weeks. We signed the merger agreement a couple of weeks ago. I had the chance to meet with Byron over in the Hamptons yesterday, and just finalizing things. We have to file our audit check for Slacker, which will be exciting because people will finally get to see the numbers. I've been in the audio music business for a long time. Nobody could ever profit. We produce substantial revenues. Collaborating with Tesla is incredible; it's our tenth year in business, and they are having an excellent year. It's an amazing partnership. We will continue to grow our B2B deals. You'll likely see our recruitment efforts on LinkedIn and other platforms. We're aggressively hiring, even though we consolidated 150 roles and eliminated $31 million in costs. We’re bringing on B2B personnel, revenue, and sales teams because the growth cycle is explosive right now. We expect to see indicators that I will surpass 10 million subscribers before 2027. If we add one more automobile company or one international carrier or a social media company, all of these partners will support us. I previously built digital turpentine from collaborations with carriers. There's no reason we can't partner with a major automaker and provide them valuable content and a comprehensive 360 experience. Furthermore, being the lowest price in the market and the only ones open to white-labeling like with Tesla means we’re in a great position. With 15 players in this competitive space, we're looking at a growing market of 1.7 billion paying subscribers and believe we can capture significant market share. I have confidence that you'll see additional partnerships this year.

Last quick question, maybe for Aaron. When do you expect the 10-Q to be filed?

Sean, we expect on Monday the 14th.

And Sean, just before you jump, one more thing I forgot to add. One of the things I mentioned to the Street is when we announced the deal to merge into the SPAC, I wouldn't go forward with that deal unless we had additional roll-up acquisition opportunities available that could lead to expansive growth and the potential for accretive acquisition valuations. Good opportunities are becoming available.

We have no further questions, so I'll hand the call back to the management team for any concluding remarks.

I want to thank everyone for their patience and for being our partners. We couldn't be more excited about the company. I fully expect by 2027, we will be a $1 billion-plus company. It's just math. When you look at these numbers and the trajectory and growth forecasts, we're currently growing over 800,000 subscribers this year, which is over a 50% year-over-year increase. Our podcasting business is seeing similar growth. Our sponsorships have surged from seven sponsors pre-COVID to over 700. I couldn't be prouder of this team, and we're moving in the perfect direction to capitalize on our opportunities. Thank you, everyone, for attending and continue to support the company.

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