Hello, everyone, and welcome to the LiveOne Inc Q3 Fiscal 2024 Financial Results and Business Update Call. Thank you for joining us. My name is Davvy, and I will be coordinating your call today. Now, I would like to hand the call over to your 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 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 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 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 the Investor Relations website for important content. The following discussion, including responses to time-sensitive information, 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 today’s 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 with 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 enriches 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 is 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, we added over 300,000 members and close to 700,000 year-over-year. We are guiding for over 1 million new members this year. This past quarter, we onboarded 24 new podcasts signed to long-term contracts, 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, and we believe many will join our network. We focus on great creators with amazing stories that can benefit from increased engagement by joining our family. These shows are averaging about $350,000 annually in revenues, adding up to over $7 million. This gives us a unique clarity and strong comparability to achieve our 2025 financial guidance. Also, as we expand our podcast roster and our sponsorships, we now have over 600 advertisers and partners growing, as well as over 10 podcasts as potential acquisitions similar to what we did with Cash Media. Kit, Sue, Eli, and the rest of the podcasting team have done an amazing job, and you will have an opportunity to listen to Kit present at 11:30. I'm excited to announce that this past quarter, we closed our first-ever $20-plus million B2B deal with one of the largest streaming platforms in the world, a Fortune 500 company. This, combined with our extension of our 10-year partnership with Tesla, extending their contract for at least another 18 months, ensures increasing monthly revenues, which provides us with full confidence that our business plan will yield more and more of these B2B deals. We now have over 42 potential B2B partnerships in our pipeline across eight verticals. In my 30-plus year history of high-level involvement in media and technology companies, anytime our companies surpass the $100 million mark in revenues, with most of this almost guaranteed recurring next year, it has always provided both myself and my management team confidence in the runway and the ability to drive further revenues and sizable EBITDA for our shareholders. This is the LiveOne Flywheel. It starts with creative-first, focused on super fans, driving traffic and engagement, and producing multiple revenue streams from the same piece of content. This quarter, our only negative EBITDA division, our merchandise CPS, has cut over $5 million in costs and will continue to cut up to $7.5 million to $10 million in costs, using those savings to accelerate our celebrity brands. We will launch between 8 to 12 celebrity brands, starting with Birthday with Geremia and Russell Devon. We sold out in our first few weeks of the first round of product. This past year, our publishing division was proudly nominated for 3 Grammies and took home 2. The award is just the beginning; we created Sounds Productions, a platform to compete with Splice, where producers upload their beats and sounds to a storefront for other creators to purchase them. Like Splice, this is a subscription-based service, but the big difference is our company owns the creative IP and receives royalty payments. There is nothing better for our young artists than receiving mailbox money every month. This model motivates and attracts creative talent to our platform, driving traffic and audience engagement with very little cost to us and unlimited revenue potential. Revenues increased over 300% in our first year. I'd also like to highlight that we created a subsidiary of PodcastOne, Pulp Studio 1, focused on the ownership of scripted IP, more specifically focused on second windows of selling to television and film. This quarter, we proudly announced the acquisition and launch of 4 shows: Opportunist, Lost in Panama, Vigilante, and a show that I cannot disclose yet, which has already partnered with a major streaming platform and is waiting to be greenlit as a scripted TV show. Another one of these shows has partnered with a different platform and is already sold as a documentary. Our supply is deep and our possibilities are endless. I really hope everyone had an opportunity to listen to our newest podcast Town, hosted by a great example of the type of podcasts we are targeting, which have the traction to be major studio productions. We believe we currently have two podcasts that have the potential to turn into scripted shows, with more on the horizon, either creating our own or acquiring existing podcasts and promoting them within our community. Once again, only more and more IP licenses and merchandise are coming in the future; this division could become the most profitable within the company. Given the current strength and future potential of our business, we believe our stock remains extremely undervalued. We have increased our buyback from $4 million to $10 million, leaving approximately $6 million of capacity. Thank you, everyone, for your time and attention, and I'd like to hand it back to our CFO, Aaron Sullivan, for Q3 results.

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, 2023, 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 2024, revenue consists of 54% membership and 46% advertising, sponsorship merchandise, and others compared to 49% membership and 51% advertising, sponsorship, and merchandise in the prior year period. Consolidated adjusted EBITDA for Q3 fiscal 2024 was $3.3 million. On a U.S. GAAP basis, consolidated net loss was $2.6 million or $0.03 per diluted share for Q3 fiscal 2024. Rob, I'll turn it back to you.

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

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 whether 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, a Fortune 500 company, and gives us a massive audience to reach with our content.

And then more broadly, are we seeing in the Googles and Facebooks of the world that the ad market is finally beginning to strengthen? 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 will podcasts 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 the best quarter ever in the history of the company. So we're seeing strong trends. 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 into the podcasting demographics is getting younger and younger, as well as the number of sponsors that are moving into podcasting. It's a maturing business, and what I've told everyone is this business was going to grow when we bought podcasting from $4 million to eventually $5 million to $7 million. What I would tell you now is 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 downloads 15%, if I read an article correctly, or unique visitors. So I guess I'm wondering what the pricing trends are as I speak to the ad market; has pricing generally been flat, and do you expect it to increase? Just speak to pricing on the ad side, if you could.

The overall market is experiencing some growth. However, for us, the significant advantage comes from the community we've built, which allows us to sell effectively within it. For instance, when you look at podcasts like Brendan and Schwab, Brendan has seen a doubling of his performance due to our community support. We're achieving better upsell rates and operating at a different cost per acquisition compared to others who are largely focused on programmatic advertising. Overall, the industry is trending upwards, but our growth is even more pronounced thanks to the continuous expansion of our community.

I have a couple more, if you don't mind. First, I ask this every quarter; maybe I missed it. Can you speak to the number of podcasts that are pending onboarding and speak to the expected time frame? I could be wrong, but I think last quarter you had 6 to 27 from Cast; I 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 and the 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 that for the first time in history, we have over 100 podcasts in our pipeline. And the reason that's happened is if you read the announcement on Spotify, they hired a mid-team with a very talented team of creators and they just got rid of them, and they woke up and realized they're the best at distribution. And we're a great partner for distribution, but they're really managing these small podcasts, which doesn't make sense for them. A lot of these contracts, there was $28 billion in the industry. The trend was that it was a seller's market for podcasts, both podcast networks and podcasters; right now, it is a buyer's market. You're going to see from Amazon, Spotify, 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 support them right in this market. It's really not going to happen in these big companies. So, we have 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 it.

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 podcasts, 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 I think it would be helpful if you could share some stats.

I think this is credit to Kit, Eli, and the team, who have combined over 65 years of history in doing billions of dollars of revenues in radio. Sue ran sales for Howard Stern, and all three of them were pioneers in radio and created one of the great public companies in radio with this company previously with Westwood One. Our team has been able to move over podcasts and without giving names, we moved over one podcast that literally had 20,000 downloads, making just a couple of dollars—very talented, two women from a small town. We put them on our platform, we put them on with the Vanderpump, we put them on all the housewives, which are the most powerful, and they've now grown to 150,000 downloads and are doing millions of dollars in revenues. And there are multiple stories like that. 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 CPA 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 a PR firm to really grow them, and I couldn't be prouder of it. Brendan’s show has exploded since it joined our network. It's up 2.5 times since transitioning from Cash Media.

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

Rob, could you walk through how a podcast becomes a streaming or television-type asset and what the revenues and 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 film. I was very fortunate; those films turned out well. One turned out to be the movie 300, and the other one turned out well. We did well over $1 billion in 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, just won an Academy Award for creating Twilight and La La Land. He came to us with a show called Town, okay? An amazing story. I'll make it really brief, but it’s about a town of 300 people in North Carolina that suddenly faces upheaval due to an unexpected influx of wealth. What happens is of course drawing attention from various authorities. This is a powerful narrative. That show is highly positioned to generate significant interest among streaming networks. You’ll soon see what I mean. This is one 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 four are all in this quarter. Opportunists and Digilanthia have already sold to a major studio; they just wired a $70,000 initial payment. So, Jon, when you look at these things, you're going to start to see production money coming in, plus back-end money. And as we grow, we expect to do 10 to 12 of those shows a year, which we're doing anyway.

So is there any cost to you to do that?

In fact, no.

Where is 100% margin?

Correct. Once we... Yes. So as an example, right, on Vigilant, we just got a $70,000 initial payment for the show. We receive that payment immediately. It's already transitioned to development, they've hired the writers, and we’re executive producers on it. We will continue to get paid as producers on it, and we'll continue to receive back-end payments as the show becomes successful. If it makes it, you make it your first year, you're going to get paid a lot of money. In the mid-second and third years, 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. Imagine that now you can sell scripts and books for $1 million, $2 million, right? Then you get a high royalty rate to reorientate. You already have proof that the shows are generating audience engagement, and now you're selling rights to Netflix. We own proof of concept and audience 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.

Real quick. Can you remind me of the four that you've already announced—Jilani, Barnam Town? What are the other two?

Yes. So, Opportunist was the one we just launched and it’s doing well, with over 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. The other one is called Lost in Panama. We'll be announcing more shortly. We're likely to add another episode every couple of weeks 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 of exactly when the 10-Q will be out?

We are looking at early next week. The deadline is Wednesday the 14th. We hope to get it out maybe a day or two sooner.

Would you mind repeating those percentage breakdowns on the revenue between subscription and advertising? And any kind of color you could provide on revenue outside of those two 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 those are the two big buckets there. And in terms of the percentage, it's 54% membership and then 46% advertising, sponsorship, merchandise, and other for the current quarter. In the prior year quarter, revenue was 49% membership and 51% advertising, sponsorship, and merchandise and other.

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

Outside of that, you've got basically merchandise revenue making 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 one bucket, or will it be spread around?

That will be over the course of calendar 2024. 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 the expanded relationship with Tesla or with any other equipment manufacturers in the past that there could be some additional partners for audio streaming?

Yes. So let me jump in on that, Sean. We just announced that we expanded our pipeline from 35 to 42 partners, streaming partners, the first of many of these B2B deals. We fully expect that from those 42, somewhere in the 5% to 10% of those will close this year, so anywhere from 2 to 4 of those. Each of those are with billion-dollar to multitrillion-dollar companies, very similar to this type of deal. We couldn't be more excited about the pipeline. We brought a great team out of Microsoft, who has also done billions of dollars in B2B deals, and as you know, Sean, my entire business and Digital Turbine was built off the backs of B2B deals with carriers and hardware companies. We have 8 verticals here. So, we fully expect to expand our auto business as well as our carrier business. Historically, Slacker has had partnerships with everyone from Samsung to Verizon to T-Mobile. As interest rates rise, you're going to hear this theme be 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. We’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 of that data. So we've got a really exciting pipeline, the biggest by far in the history of the company. It's the one area that we're adding people to. We're now at 4 people in B2B and will continue to add to that group. You'll probably see some announcements around that and expanding 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 for 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 pay-per-view. We have these mass libraries of video. So, don't be surprised if you start to see an asset crossover 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 it's off to a great start, but what other things should we expect to see in the coming quarters?

I mean, be patient because it's coming any minute now. What I said is you're going to see another 2 to 3 products launched. We have two lines already that are being launched. You're going to see us across big spaces like coffee and cosmetics. 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, we work with all of them. You think of Logan Paul and Prime and how it’s now doing $1.5 billion in revenues. Think of Kim Kardashian and $700 million in revenues in 2 years, and what she's done for the cosmetics industry. Go back to Avion 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 revenue shares built, and to be able to launch new 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 that. 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. I can't wait to do the ones with podcasters because with podcasters, just think about it; 50% of the business is direct response. They have proven records of selling products 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 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? Then next year, you're already at $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 in the right direction, right? And one of the exciting things here is you now have your advertising business growing almost as fast as your audio business is, right? So this is the first time we have two 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 one-time 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 substantial one-time matters in here. It came down a little bit from last quarter, simply because we had substantial costs related to spinning off PodcastOne. You had accounting and legal costs, public filing costs, in previous quarters. You don’t have that noise going forward. That’s that. 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. I think that's kind of the runway we've been on previously. So, sorry; it dropped down this quarter but should pick back up in coming quarters.

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 one question. You're guiding to a very substantial jump in EBITDA for the fourth quarter. I was wondering if you could give us some color on how much of that is seasonal? Is it driven by a one-time deal, or what part of it is maybe leverage in the model?

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

Yes. I would just say not PodcastOne—we had also filed a public offering for Slacker Radio 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 three audits, legal fees, and so on, which is very expensive. Aaron has just made CFO, and he’s done a great job managing it. You'll see those margins come back this coming quarter.

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. If we're going to trade down at these low levels, we'll expand that buyback again if we need to. 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.