Hello, everyone, and welcome to the LiveOne, Inc. Q3 results and corporate update webcast and conference call. My name is Charlie, and I'll be coordinating the call today. I want to hand over to our host, 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 second quarter ended September 30, 2023. Presenting on today's call with me 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 in this call for a variety of reasons. Please refer to the company's filings with the SEC for information about factors that 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 view as of the date of this call, November 9, 2023. And 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 redistribution, transmission, or rebroadcast of this call or the 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 everyone for joining us today. Investor appetite demand for micro-cap stocks began to decline and soften almost two years ago. We made major strategic decisions then to protect our shareholders' capital, take aggressive cost-cutting measures, and focus on predictable growth units with the highest profit margins in an effort to strengthen our balance sheet, drive profits, and be a desirable place for investors when market cycles change. We have used almost all of our resources to expand our audio division consisting of Slacker Radio and PodcastOne. This is the largest divergence I've seen in 40 years in the public markets between large and micro caps. Growth at any cost is not the way forward right now. Over the past two years, I'm thrilled to announce that we have accomplished delivering $32 million in consolidated cost savings and are looking at another $3 million to $5 million over the next few months. We have purchased over 3.5 million shares in the buyback and have left room to acquire another 5 million shares. Our balance sheet is the best in the company's history with $0 debt and over $28 million in short-term assets. In our audio business, we acquired Slacker and PodcastOne; combined, these companies produced about $40 million in revenues and $15 million annually, and needed a lot of work to clean up. This morning, I'm proud to announce that our management teams have reported a combined audio business now delivering $52.6 million, a record number, and $10.3 million of EBITDA just for the first six months. We raised our EBITDA and cash flow guidance on the audio business to $18.5 million to $21 million of EBITDA. That combined effort represents a $35 million swing from the time of these acquisitions to present. To clearly articulate and simplify why our substantial growth is coming from these two key revenue streams: one is subscription, and two is sponsorship. Our subscribers have grown eightfold from 400,000 to over 3.3 million in a 5-year period. Our sponsorship has grown 2.5 times with over 700 blue-chip sponsors on our platform this year. In September, LiveOne completed the spin-out of PodcastOne as a separately traded public company, symbol PODC. As a management commitment to increase shareholder value, we issued an 18% dividend to our shareholders. The spin-out made PodcastOne the first stand-alone podcast network to list and trade on a national exchange. For the first time, investors now have the opportunity to invest directly in that fast-growing podcast business. Trading between $60 million and 100 million valuation since it started trading on Nasdaq, LiveOne owns 80%, leaving wide room for subsidiaries trading at nominal valuations. PodcastOne is doubling the number of top creators on its platform in a three-year period, adding 18 already this year, averaging about $350,000 in revenues per podcast. We have increased revenues to $21 million for the six months, up from $20 million when we acquired the business. We currently have over 100 podcasts in the pipeline—about seven times our normal pipelines—and over 10 potential acquisitions, marking the largest opportunity in the history of PodcastOne. I encourage everyone to listen to the separate PodcastOne earnings and business update call at 1:30 Eastern today. Now to Slacker Radio: we just extended our Tesla partnership for the tenth straight year. Every Tesla car sold in North America comes with a paid membership to LiveOne. These members pay LiveOne directly through Tesla. Expanding our management team with a clear focus on B2B partnerships, we identified five verticals and have now over 27 blue-chip companies with billion-dollar-plus revenues in our pipeline. These combined opportunities almost guarantee another huge growth year for the upcoming year, all established before we finish our 9th month of this year. Last year, I indicated we would surpass 10 million members within five years and am projecting over $1 billion in revenues. Over the past twelve months, we've added a record 679,000 new paid members, averaging over $3 ARPU, and have now surpassed 3.3 million total members, with 2.4 million being paid members. We expect to exceed 4 million total members by the end of next year, with over 3 million paid members. To better understand these metrics, Goldman Sachs issued a report suggesting the industry will reach 1.7 billion paying subscribers by 2027. LiveOne would only need 1% of that addressable market to easily surpass that number. Given the strength in the business, we believe our stock is extremely undervalued. Consequently, we recently expanded our buyback program to $8.5 million, leaving almost $5 million of additional buying capacity. Now I'd like to pass it back to Aaron Sullivan, our CFO. Thank you, Aaron.

Thanks, Rob. I'll spend just a few minutes providing a very brief overview of our results for the second quarter of fiscal 2024, which ended September 30. Consolidated revenue for the three-month period ended September 30, '23, was $28.5 million. Slacker posted record revenue for Q2 of $16.4 million and adjusted EBITDA of $5 million. PodcastOne posted revenue of $10.5 million and adjusted EBITDA of $100,000. In the second quarter of fiscal '24, revenue consists of 58% membership and 42% sponsorship, advertising, merchandising, and other, compared to 64% membership and 46% advertising, sponsorship, and merchandise in the prior year period. Consolidated adjusted EBITDA for Q2 FY24 is $2.8 million. On a US GAAP basis, LiveOne posted a consolidated net loss of $6.5 million for fiscal '24. As of September 30, 2023, we had approximately 2.4 million paid members, a net increase of 697,000 or 38% compared to the prior year. Total members, which include free members, were approximately 3.3 million as of September 30. Note that included in the total members are certain members who are currently subject to a contractual dispute for which we are not currently recognizing revenue. Rob, I'll turn it back to you. We may have lost Rob.

Sorry, everyone. To wrap it up before we go to Q&A: our balance sheet is the strongest it's ever been in the history of the company, with $28 million of short-term assets and $0 debt. $15 million of debt was converted at $2.10, and another $8 million of debt was converted into PodcastOne stock at $3, well above both of those market values. We have record subscriber growth, record listenership, the largest pipeline in the company's history, record EBITDA, and the largest pipeline of acquisitions in the works as well. I'd like to open it up to Q&A. Thank you, everyone, for joining.

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

And this is on for Brian. Thanks for taking my questions. Firstly, could you share any updates on the onboarding of podcasts? More specifically, how many podcasts from Cast have you onboarded, and how many more do you expect to onboard and over what timeframe?

It's a great question. Thank you. So on Cast, they had about 27 podcasts. We've onboarded around 6 or 7 at this point. It took a little longer than we expected because of the timing of the uplisting, which took us almost five months longer than we expected, but we're seeing great telltale signs. We'll continue to add podcasts, and I think you should see an additional update over the next few days with substantial podcasts added to the network.

Great, thank you. And then outside of Cast, can you talk about what reasonable goals are for the number of titles you hope to onboard annually?

Yes. This is going to be a really special year as we onboarded 18 podcasts already this year. We have over 100 in our pipeline that we're bidding on today. Almost all of them are existing podcasts moving from other networks that have opened doors. For the last three years, this has been a seller's market for podcasters. Right now, it's a buyer's market for podcast networks, creating great opportunities and significantly better deals and economics for networks than were previously possible. I expect the second half of the year to be very similar to the first half, and I could see us adding well over 30 podcasts this year.

And lastly, can you touch on the lower revenue guidance range for fiscal '24? How much of this is due to the ad market versus the pace of onboarding new podcasts or any other factors that I might be missing?

Good question. Most of that is coming from the merchandise business. We made the determination to focus all of our energy on our audio business, stock buybacks, and strengthening the balance sheet. We just took $2 million of costs out that we announced a couple of weeks ago. We're reviewing costs and revenues that are not as profitable. Some revenue may be impacted temporarily, but most of it is coming from the merchandise side of the business.

All right. Thanks so much. I'll hop back in the queue.

Our next question comes from Thierry Wuilloud of Water Tower Research.

Good morning. Rob, a couple of questions. You mentioned five verticals. Can you give us a sense of what they are for new potential flagship partners?

Yes. These are just the beginning; there will be many more verticals to come. For anyone familiar with my background and previous work with Digital Turbine, we're focusing on carriers, which we've already partnered with Verizon, and T-Mobile, in addition to other players. We’re also looking into auto companies like Tesla, merchandise companies, retailers competing with Amazon, cable and satellite operators, and personal gym equipment. We’re just beginning, and we've hired a whole B2B team to significantly expand our outreach over the next few months.

That's great. You mentioned an increase of 675,000 in paid members. Do you have a way to identify if it's due to new partners that you brought in or existing partners that are growing the members on the platform?

It's all the above. We have a fantastic relationship with Tesla that continues to grow and has now been extended for its 10th year, and we're also expanding our partnerships using all our podcast creators, social media creators, and B2B partnerships. What sets us apart from the rest of the crowd is threefold. First, in pricing, we are significantly lower than our competitors, at about one-third the price. Second, in service – we can be nimble and provide unique solutions that others can't. And third, we offer white-labeling capabilities, allowing partners like Tesla to create Tesla Radio, or a Verizon Radio, for example. Not many competitors can offer this capability based on their size.

Great. Maybe just one last question. You mentioned 58% of revenue from membership and 42% from sponsorship. As time goes on, do you see that trend shifting more towards membership, or do you think that's a stable balance for now?

It's nice to see that we have two strong revenue streams running exponentially. The podcast business has dramatically grown from $34 million to our guidance of $47 million to $52 million, right on target. Slacker's growth has been similar, starting at $20 million when we acquired it and projected to reach $65 million this year. Both ventures have turned profitable after significant losses. As the podcast business grows from $20 million, we're seeing substantial growth, and I see our two revenue streams competing closely over the next three years.

Great. Thanks for your insights on the microcap sector and the unprecedented conditions. Hopefully, better times are ahead. Thanks again.

Thank you. I appreciate you joining.

Our next question comes from Jon Hickman of Ladenburg Thalmann.

Rob, just one quick question. Can you elaborate on your comment that the current quarter, the December quarter, will be a record? Does that mean it will be the best quarter in corporate history or the best third quarter you've ever had?

To be clear, it will be the best quarter in the history of the company. You can see by several metrics we've already announced. We're growing by about 60,000 subscribers a month and announcing almost a new podcast every two weeks. So the model has become much more straightforward. As you know, Jon, with new podcasts, we're adding $350,000 to $500,000 of revenues. If we continue this momentum, our upcoming quarter is set to be very special. This is why we've raised our EBITDA guidance – even though our revenue may not meet our expectations due to delays in the IPO process. But the signals from the podcast and cast media pipelines indicate rapid growth.

With the lower revenue guidance and the higher EBITDA, is that difference coming from expense control or improved margins?

Yes. We're being very cautious; we just eliminated another $2 million in costs and are closely scrutinizing our operations. We're avoiding any risky businesses unless we're getting paid upfront, as we discussed before. We'll focus on our core businesses that are delivering revenues while strengthening the balance sheet and buying back stock. Given that our stock is trading at a nominal valuation right now, we will continue stock buybacks.

Thank you.

At this stage, we have no further questions. So I'll hand back over to Rob Ellin for any closing remarks.

I just want to thank everyone. Thank you for joining, and we look forward to the next quarter's numbers. Please tune into the Podcast's call in a few minutes. Thank you, everyone.

Ladies and gentlemen, this concludes today's call. Thank you for joining, and you may now disconnect your lines.