Hello, and welcome to the LiveOne Incorporated Q1 Fiscal 2025 Financial Results and Business Update Webcast. My name is Elliott, and I'll be coordinating your call today. I would now like to hand over to Aaron Sullivan, CFO. Please go ahead.

Thank you. Good morning and welcome to LiveOne's business update and financial results conference call for the company's first quarter ended June 30, 2024. 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 on 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, 2024, 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 your questions, contains time-sensitive information and reflects management's view as of the date of this call, August 13, 2024. And as except 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 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, 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 appreciate you joining us today. I'm excited to share the remarkable progress and achievements that LiveOne has made, driven by our strong commitment to a creator-first model. Our Audio Division, which includes Slacker Radio and PodcastOne, reached significant milestones in the first quarter of fiscal 2025. We recorded $31.9 million in revenues and $5.1 million in adjusted EBITDA, showcasing the effectiveness of our business strategy and execution. Looking forward, we anticipate a strong fiscal 2025 for the Audio Division, expecting revenues between $130 million and $140 million and adjusted EBITDA of $20 million to $25 million. Our robust foundation and exciting opportunities set us up for ongoing growth. Under Brad Konkol's leadership, Slacker Radio has seen exceptional growth, especially through our successful partnership with Tesla, which continues to expand. We brought on Bill Wittress nearly seven months ago, who has extensive experience from Microsoft in managing B2B deals worth hundreds of millions. He has developed a strategic roadmap for B2B partnerships, successfully securing four major additional deals and with 63 potential partnerships in the pipeline. We expect to finalize multiple partnerships with companies valued between $1 billion and $1 trillion before the year concludes. After successfully signing five additional major partnerships, including a $24 million deal with a Fortune 250 company that contributes about $2 million in monthly revenues, we have grown our B2B team from one to six professionals. We are actively hiring to lead each vertical and anticipate expanding our team to over 10 professionals focused on B2B initiatives. Our membership continues to grow steadily, increasing from 3.7 million to 3.9 million. We are maintaining cost-efficient marketing, spending under $1 million this year with minimal breakage, the lowest in the industry. PodcastOne, under Kit Gray's leadership, has seen significant success by adding 37 new podcasts in the last year, bringing our total to 187 podcasts. We have sold a second major show to a streaming partner, transitioning our podcast content into television and film, which promises substantial revenue over the coming years. Our publishing business, led by Josh Hallbauer, grew by 300% and won two Grammys. We partnered with Kartoon Studios to produce, publish, and distribute original programs for the Winnie-the-Pooh brand, backed by over $30 million. Our celebrity brands division, led by Sara Dee, plans to launch 10 to 12 celebrity brands in the next year, including Birthday Sex Chardonnay with Jeremih and Smyle Coffee with KYLE. We are increasing our stock buyback to $12 million. We have already bought back over 4.4 million shares, leaving us with an extra $6.3 million allocated to this program. This underscores our confidence in the company's future and our commitment to enhancing shareholder value. In summary, we believe our stock is significantly undervalued considering our impressive growth and boundless potential. We are confident in our direction and eager about the future. Thank you for your support and trust in LiveOne. I will now hand the call over to Aaron Sullivan to review the Q1 results.

Thanks, Rob. I'll spend just a minute providing a very brief overview of our results for the first quarter of fiscal 2025 ended June 30. Consolidated revenue for the three-month period ended June 30, 2024, was $33.1 million. Slacker posted record revenue for Q1 of $18.7 million and adjusted EBITDA of $5.4 million. PodcastOne posted record revenue of $13.2 million with an adjusted EBITDA loss of $300,000. For the first quarter of fiscal 2025, revenue consists of 56% membership and 44% advertising, sponsorship, merchandising, and other, compared to 64% membership and 46% advertising, sponsorship, and merchandise in the prior year period. Consolidated adjusted EBITDA for Q1 fiscal 2024 was $2.9 million. On a U.S. GAAP basis, LiveOne posted a consolidated net loss of $1.7 million or $0.02 per diluted share in Q1 fiscal 2025. As of June 30, 2024, total members, which include free members, were approximately 3.9 million. Note that included in 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.

Great. Great, Aaron, and thank you for the great job you've done. Just to wrap it up, the real focus right now is on those B2B partnerships, that first $24 million deal – the revenues are just kicking in. We're seeing the growth in our revenues. We're seeing our growth in our EBITDA, and we're seeing the opportunity that these B2B deals could lead to a hot streak here. And as we do, these are major companies. These are billion to trillion-dollar companies, major verticals across auto, obviously with Tesla expanding into other auto companies, carriers around the world, merchandise businesses, retailers, hotels, airlines. There are so many opportunities right now, and the team has really put together a fabulous lineup. And that's why we're going to expand the team; we're going to grow the team for the first time in almost four years, and we're going to focus all that energy on those big $20 million plus partnerships with major partners across those verticals. So I want to thank everyone for joining, and I open it up for any questions.

Thank you. Our first question comes from Brian Kinstlinger with AGP. Your line is open. Please go ahead.

Great. Thanks for taking my questions. It's great to see the solid sequential growth in podcast revenue. And you mentioned that the B2B partnership kicking in and beginning to have a material impact, sounds like about $2 million a quarter, I think you said. I'm curious, how much more does that partnership have to go in terms of reaching the peak run rate?

Yes. So we're not giving the exact numbers, Brian on it, but this is – it started in November and scales up. So I think you'll see that revenue growth in each quarter going forward, and yes, we couldn't be more excited about the partnership and the opportunity to get much bigger. This is the beginning of putting our content across large streaming platforms. I think it's so critical that the cost of content has become so expensive that it's almost $1 million and $1.6 million an hour of content, and the beauty of our content is we have AAA content with the biggest social media stars in the world. Right, it costs us under $3,000 an hour. So we have the opportunity to really grow that. And I see this as the first of many streaming partners and streaming networks. When you think about music choice on cable or satellite and how many channels offer audio, let alone video, and you think about MTV and country music channels, there really is no thought leader in music anymore. And we have an opportunity to really be that thought leader across audio and video.

Great. And then as it relates, I think so, correct me if I'm wrong, the $24 million B2B partnership you just mentioned, and it was on podcast press release, that's the one that was pending on the last call. That's in addition to the other one that's ramping. Is that right? And if that is right, can you comment on details such as, is that $24 million over some period of time, and how long do you think before that begins to ramp?

Yes. Let's be a little bit careful now. We're going to have a lot more details shortly on the next partnership, and we'll provide that publicly in the very near future. And I think it won't just be one, as we stated earlier, we've now signed four additional major partnerships, and we'll have some real clarity on that coming over the next couple of weeks.

But just to be clear that this $24 million partnership, because it just happens to be the same number, I want to be clear, that's different than the $27 million from November, right?

No, no, that's the same one, that started in November and is growing and is scaling up.

Can you discuss the inventory fill rates for podcasts? Specifically, how much improvement in these rates can we expect as you secure more partnerships?

Aaron, you want to take that?

Yes. I think we're seeing consistency in our kind of fill rates in terms of what we're able to sell through to partners. So we will try to optimize that. The quicker way to revenue though is just to increase the available inventory, right, and that's kind of what we're working towards. And yes, I think I'll leave with that. Rob, if you have anything to add?

Yes. I'm not sure I followed the exact question. I think what you're articulating with these additional B2B deals is not just inventory. This is traffic and audience, right? As we spread our tentacles across a Fortune 250 company, right, with a massive streaming network, we're getting more eyeballs onto ours, the more traffic, the more audience, the more advertising we're going to get. And I think that answers it, Brian. But I'm not sure I understood fully your question.

Yes. No, no, yes, we'll take it offline. Perfect. My last question is how aggressive are you advertising to increase your market share or growth in downloads and unique listeners?

How aggressive are you advertising to increase your market share or growth in downloads and unique listeners?

I guess I'm just curious if the budget is increasing and how you are acquiring new listeners.

Yes. The budget is now yields the beauty of this, of course, Spotify app continues and multiple TikTok multiple times, and yes, those opportunities to keep getting our content into new places where already the distribution and the traffic is built is really the key. And part of the beauty is, because we own our own technology, right, all those revenues come to us, right? The more traffic, the more audience, the more revenues we derive.

We now turn to Barry Sine with Hills Research. Your line is open. Please go ahead.

Good morning, gentlemen. How are you? Can you hear?

Excellent, Barry. Good to hear your voice.

Okay. Okay. Likewise. On the $63 million pipeline, I wonder if we can get a little more breakdown on that. Rob, you mentioned a number of different verticals. You're hiring senior managers for each of the verticals. How does that pipeline break down by vertical? And within that pipeline, how many of those have you tendered a contract to, say you're far along in the process? Could you give us a little more visibility on that pipeline?

Yes. While I may not be able to provide extensive legal details, I can assure you that we will definitely be adding more auto companies this year. Additionally, since our debt was converted at $2.10, our balance sheet is now in excellent shape, positioning us well for global expansion. We see plenty of opportunities with carriers worldwide, and I'm really enthusiastic about our prospects in retail. As you've observed with Amazon, the demand for rich media is significant, and all retailers—from Best Buy to Walmart to Costco—need to enhance their content to compete in the digital space. We're beginning to see my predictions materialize, like Walmart acquiring Vizio for $2.3 billion, after it sold for only $230 million just three years prior. This purchase indicates that they're gearing up to compete directly with Amazon and develop their own content similar to Amazon Prime. I'm seeing similar trends across all retailers, which is truly exciting. Regarding hotels, airlines, and loyalty programs, there is a tremendous opportunity for our company as one of only ten DSPs globally, and we are the third fastest-growing in this sector. We have unique content and are increasingly producing original material, such as tonight's event. We're expanding our original content portfolio, ranging from music to podcasts, which are also evolving into television shows. I believe more and more networks will seek our content. As for the $63 million pipeline, there are many more opportunities beyond that, with several prospects moving along nicely and positioned for closure within the next year.

And then continuing on that, I believe you've said that there are four deals that are actually signed. You can't discuss who they are, but as they go live, we'll see press releases with announcements on those. Any update on that process?

Oh yes, it's coming. So again, those are all we said before the year-end is coming. So the year is coming fast, right? And so you're going to see announcements on each one of those shortly. And with those, you'll see some details and highlights where they're going. And when you're talking about billion to trillion, multi-trillion dollar partners, right. You got to be careful what they're going to let you say and how much detail they’re going to give in it, right? But for us, as you can imagine, these are very meaningful, right? Every $20 million deal if four more deals hit, right, and we had those four deals, even if they're half the size of last one, that's going to put us in the $200 million range next year. What I've told the Street is our goal is to get 10 million subscribers, and 10 million subscribers will be doing $0.5 billion in revenues and $150 million in EBITDA. And that's the goal for the next couple of years.

And then I want to pick up on the word you've used a couple of times in the call, which is globally. In your script, you talk about serving carriers globally. And then a minute ago, in response to my question, you cited the balance sheet cleanup that'll allow you to go global. So that's been a long-term aspiration of the company to get global streaming rights. And one of the things I believe that kicks in almost automatically is Tesla automatically. So is that what you're alluding to? Is that you're closer to getting music streaming rights on a global or at least European basis? And what would the implications of that be?

I'm hoping you'll see very shortly. We've gone through some tough times here. We had to survive COVID and lost our entire live business. We were close to obtaining all those licenses and moving overseas, but it was unaffordable. Post-COVID, we lost 30% of our revenues and a significant part of the company's growth story, so we had to pivot. This team has done an incredible job of overcoming adversity and challenging times. We've shown that we will survive, and not only that, we will expand globally. For anyone familiar with my previous companies, including Digital Turbine, they've been built on relationships with carriers overseas. We have strong connections there, which positions us well for the company's future. If you look at all the memberships, whether it's Netflix or Spotify, half their revenues come from the U.S. and the other half from overseas. Currently, 25% to 28% of our traffic is international, but we haven't been generating any revenues from it. It needed to be affordable and make sense, and now is the right time for us to be able to do that. I believe you'll start to see long-term deals with our partners, including our existing partners, not just the 63 currently in the pipeline, but also the beginning of long-term partnerships and expansion of where our content can be offered.

Okay, that's great. For my last question, you mentioned live events. In the early history of the company before COVID, live events were the main focus. I found it interesting that you announced a live event in the Hamptons. Previously, you indicated that you wouldn't pursue live events unless they were profitable and that you would need to secure sponsorship for them. Is the company starting to re-enter the live events space? Does this mean you've figured out a more profitable approach?

Yes, absolutely. And the event that we're doing tonight, we have great sponsors from E11EVEN Vodka on, right? We're positioning ourselves again that we've proven right, and Josh Hallbauer runs our music has proven, yes, we had Teddy Swims play at our studio in Beverly Hills, right? And next, after seeing him on the streaming platform, the guy becomes one of the biggest stars in the world, right? We had Kid Laroi before anyone heard of him. So we're going back to our thesis that as a thought leader in music, it is critical to be a thought leader, and not just audio, but video. And now that we have the resources and we obviously have the relationships with the talent as well, the industry, this is the time to really step on the gas. And you're going to watch something pretty spectacular tonight. You're going to see 12 artists perform of all genres of music. You're going to see one of the greatest pianists, classical pianists play all the way up to the main squeeze. And in between, you're going to see some of the great R&B and Hip-Hop artists performing. So it's going to be a really special night. And our talent is getting closer to our company. As you can see by these celebrity deals, right, these celebrity partnerships, we don't only want to be able to derive revenues just by putting music up. We're starting to own products in conjunction with that talent. And I'm really proud of the team and what they've done. Sara, who's joined us as Head of our Celebrity Brands, brings a unique talent to the company, unique skill driving massive revenues. She was at White Claw when they were doing $600,000 in revenues. I think she left when they were doing about $4 billion. We see a huge opportunity to be able to drive more and more revenues, offer those relationships with podcasters, as well as with social media stars, including artists.

Okay. That's my questions. Congratulations on a great quarter, guys.

Thanks, Barry, and thanks for your support.

We now turn to Sean McGowan with ROTH Capital Partners. Your line is open. Please go ahead.

Thank you. I apologize if these questions have been asked already. I get dropped from the call a couple of times. First, Aaron, on cost of sales seems to be a little higher than we had expected, particularly at PodcastOne. Can you talk about what's driving that?

Yes. Hi Sean, how are you? Yes. So our content acquisition costs have been a little bit higher than we anticipated. That's kind of the upfront cost to signing some of these deals and new podcasts. Going forward, we expect it to level out over the next couple of quarters about where we're at today and then start to improve from there.

And tying that question for Rob then, is this surprising to you? I thought we were in an environment where it was actually going to be easier to pick up shows that were either getting dropped or not getting renewed on the same terms from other networks. Is that proving not to be the case or less of the case than you had expected?

No. No, it's actually really exciting. I mean, we're just starting so many podcasts. We're announcing one almost every week. And there's a cost to it, right? The way that it works, Sean, you and I have talked about this a little bit is you sign the podcast, right? You pay them some money, right? Even if they start doing the podcast the next morning, you're paying them for the next three months, and you're not collecting back your money for three months to four months. So there's a window of time. So I would say, Aaron hit it right on the nose. But it's really exciting how many podcasts we're signing, and they're adding about $350,000 to $500,000 on average per revenue. Every single one of these podcasts is a joint, so there's going to be a little cost to it in the beginning, but it can't really be better than growing the revenues right now and doing that. And we'll achieve, we'll get that in the back end when we start to get paid by the advertisers.

So it's not so much that you have to pay more per podcast to get them, it's just that you're signing more than you had expected to, so that's why the cost is higher.

Yes. Yes. This has been really exciting. There have been some really exciting signings as well that there's a little bit of money, it's got to go out the door day one.

Okay. Got it. And then in terms of, you talked a lot about these deals that you're in process with and signing and lining up more partners. So is your strategy then to only update or improve or increase the revenue guidance once the deals are signed? Because I would have thought that if you’re signing new deals and you close on some others, maybe you'd increase the revenue guidance. Is it you're just going to wait until they're nailed down?

I believe the current guidance is solid. As we announce the upcoming B2B deals, our distribution and audience will expand, leading to higher revenues. I wouldn't be surprised if we increase that guidance again at the end of the next quarter. However, we should review that number closely at the end of this quarter to ensure we exceed expectations. The market is challenging, and it's important for us to surpass the projected figures.

We now turn to John Liviakis with Liviakis Financial. Your line is open. Please go ahead.

Hey guys, congratulations on a strong quarter, and sorry for the technical problems on the conference call with Sean. There were some issues. But anyway, excellent presentation. Quick question for you. So at one time, the company disclosed its relationship with J.P. Morgan and represent them in strategic dialogue. Any comments you want to make and what your plans are there and how it's progressing?

I mean, we've always been an acquisition vehicle, and we've been hampered over the last couple of years from doing that, all the different difficulties that have been out there. This is certainly a time that both offensively and defensively, we are continuing to aggressively explore and are extremely excited about the opportunities that are out there, right. And as we keep moving up the ladder, we're number 11 in the world in podcasting. We're number 10 in audio, right. We're certainly a candidate that could come aggressively try to buy us, but we're also looking at some great assets that media assets have been decimated and probably even more on the public side than the private. There are some great assets out there that we will aggressively look at. If we could find another Slacker, we can find another PodcastOne, but both of those companies doing $20 million in revenues, right. Slacker is now at a run rate to do $85 million, right. We bought PodcastOne doing $20 million; it's now on a run rate to do over $50 million. If we can find another great asset that is accretive to us and fits in with the team and the skills that we have, we are absolutely aggressively looking on both sides, both offensively and defensively, and the entire J.P. Morgan team is coming in for the event tonight. So we're deep in the trenches with them on a regular basis on all the excitement and energy around both sides, both offensively and defensively.

Sounds great. The Slacker acquisition looks to be brilliant. And what a job that Brad's been doing. And any quick comment on that? You mentioned 63 B2B contracts in a pipeline, but actually now you're saying that that's really the core opportunities, and there's vastly more than that in a pipeline, that's an interesting comment. And what's the intellectual property there? How many patents do you have and how does that differentiate from the rest? It seems to be really taking off that business, its unique model, etc.

We have over 40 patents and are recognized as leaders in our field from a patent perspective. This is the first time we’re beginning to demonstrate the potential value of our intellectual property. For example, we have the rights to a podcast that we sold, and we will soon announce our partner. It's remarkable how we can take a podcast that required minimal investment and transform it into a significant television opportunity. With my and my team's extensive experience in filmmaking and television production, we can move forward without incurring any new costs. Owning that intellectual property opens up an additional revenue stream that could be substantial. I previously mentioned that we aimed to sell one project per year over the next few years, and we’ve already sold two this year. If we continue at this pace, it could result in tens of millions of dollars in profits for the company without additional expenses. Additionally, our streaming partners have already invested substantial funds in projects like Vigilante and Varnamtown. Our proven intellectual property and evidence of audience engagement give us a unique advantage in negotiations compared to entering with just a book or script. I previously owned Atmosphere Films and worked on successful projects like 300 and Spiderwick Chronicles, which shows the unpredictable nature of studio investments. We are genuinely excited about owning our intellectual property, as it drives our team’s success.

Great. Thank you, Rob.

We now turn to Sachem Ismalois, a Private Investor. Your line is open. Please go ahead.

Sorry, I was muted. Thank you for your presentation and congratulations on your remarkable results. And most of my questions have already been answered, but I still have some questions. And first of all, I noticed that your general and administrative costs quite increased. And could you explain it? How could you expose this?

Aaron, do you want to take it? I'm having a little trouble hearing.

I'll take that one. Yes, I think the question was, are G&A expenses have increased? So yes, two drivers to that.

Yes, that's right.

One is additional stock-based compensation. We've had some executive contracts that have stock-based comp in them, and that's kind of across the business units. And then specifically as it relates to PodcastOne and this is kind of included in consolidated results as well. And there's additional G&A, just as it's a separate public entity. So you've got additional legal accounting and just general public company expenses. That's really what's driving the increase in G&A.

So there's no extraordinary costs included there.

Sorry. I didn't quite catch that. Can you repeat that?

All some extraordinary costs were included in G&A costs?

Yes, I think it's difficult to hear you, but to answer your question, Aaron and our finance team have done an excellent job as we are filing two audited financials. There are additional costs involved, both legal and accounting, for the public companies LiveOne and PodcastOne. We also looked at the opportunity to collaborate with Slacker Radio, which incurred extra costs for the audits on Slacker. So, stay tuned for more updates on that; there will be some exciting developments. However, it's important to note that there are increased legal and accounting expenses associated with this.

Okay. Thank you. And one more question, is that revenue from Audio Division may be to some extent explained by seasonal factors. Is there any seasonal pressure in your Audio Division revenue?

Can you try that one more time? And I really apologize.

I think the question is, is there seasonal pressure across the business units? I think that's the question.

Seasonal factors?

And seasonal factors

Yes, we have some audio division revenue that may be explained by seasonal factors.

In our merchandise business and podcast, our third quarter, which is fiscal Q3 or calendar Q4, is our largest quarter. However, our subscription business does not experience seasonality, which balances things out a bit.

Okay. Thank you.

We have no further questions. I'll now hand back to Robert Ellin for any final remarks.

Yes. I think we covered a lot today. I think we covered a lot in the earnings and how spectacular the numbers were. I want to thank everyone for joining and thank everyone for the support. And we look forward to updating everyone very shortly on some major B2B partnerships. And those four that we have already signed will be announced shortly, and there'll be more to come. So thank you, everyone, and appreciate it, and we look forward to the next call.

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.