Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until then, your lines will again be placed on music hold, and we thank you for your patience. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the LiveOne, Inc. third quarter fiscal 2025 financial results and business update webcast. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to Aaron Sullivan, Chief Financial Officer. You may begin. 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, 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 which could cause the company's results to differ materially from these forward-looking statements, including those described in its annual report on Form 10-K for the year ended December 31, 2024, and subsequent SEC filings. You will find reconciliations of non-GAAP 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, February 14, 2025. 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 would 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 a property of the company and any redistribution, transmission, or rebroadcast of this call or the 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. Good morning, everyone, and thank you for joining. This has been an extraordinarily challenging and exciting quarter for the company. Thanks to the unwavering dedication and relentless drive of the LiveOne team, we have achieved record revenues of $95 million in the first nine months, and over $29 million for the quarter, underscoring our ability to navigate an extraordinary challenge and turn it into the biggest opportunity in the history of the company. Our audio business, Slacker Radio and Podcast One, I am pleased to report, broke $90 million in revenues for the first time in the history of the company, accompanied by $14.1 million of adjusted EBITDA for the nine months. This outstanding performance demonstrates our ability to pivot, buy, and thrive. We have made significant strides to diversify the business and diversify our partnerships, especially in the B2B partnerships with major deals signed in the last ninety days adding over $44 million in revenues, including $25 million with a Fortune 500 media conglomerate, and $16.5 million with Amazon. We expect to close at least two more partnerships by year-end. The pipeline is robust with over seventy B2B partnerships in various stages of development with billion to trillion dollar companies. Now for the challenge and the opportunity of a lifetime. Our partnership with Tesla changed dramatically from being a white label partner in Tesla cars with a guaranteed $3 a month from Tesla as long as the customer, that car owner, signed up and paid $9.99 for connectivity. We have now renewed our contract for the twelfth straight year with Tesla, providing for the first time ever each front property with our logo, with our branding, right in the front of every single Tesla car. And the amazing part, this is in perpetuity. With the help and support of Tesla, and using AI marketing, and multiple strategies the company has used over the years, to convert all of the car owners into true subscribers, both free and paid. For the first time ever, we will have data and information of each of our subscribers. This is a multibillion dollar opportunity. For anyone that has been an investor or part of my companies over the years, we shoot for the moon. This is now that unique moonshot you have that you are going to struggle and take some hits in revenues for a period of time. But as you look at the future of this, all you have to believe is that you can get over $3 a month. So you have the speech front real estate, and now the rents have been going up to twelve years. We were not able to raise our rents at all. These numbers have exceeded any expectations of management analysts, and most of all, Tesla themselves. Since December, we signed over a staggering 800,000 plus new users. That is 40% of the entire pool of the two million Tesla cars in North America. This collaboration is nothing short of transformative. We believe the partnership provides a proof of concept that can help us with the success of signing those B2B partners. Imagine partners with ten million to a billion plus eyeballs. I have been talking about a flywheel for the last seven years at UCaaS sign those massive B2B deals, this proof now think about whether a Facebook, an Amazon, a Walmart, a Microsoft, an Amex. Anymore than ten million to a billion eyeballs. If we can convert 40%, even if we can convert one or two percent of those users, we have a multibillion dollar opportunity. As we move forward, pivoting our business model, leveraging our partnerships, and delivering our music platform to your large user bases, in B2B deals. In addition to our continued growth, I am pleased to reiterate that LiveOne has committed $12 million to a stock buyback program. We currently have $6.2 million remaining on that program and a company shows the confidence we will continue to buy ensure our confidence, in the future, of our company, and provide that proof of concept that the company and the management are backing and believers in our company. We are committed to continue our growth both in terms of revenue and market presence. Our cash position increased by $4 million, almost $11 million, after paying off $3 million to East West Bank, and acquiring 900,000 shares, of our subsidiary, Podcast One. I could not be more excited about where podcasting is going. The presidency was won with the help of podcasting. Fox just bought Red Podcast Network for over fifteen times revenues. Conan O'Brien's network sold for over fifteen times revenues to Sirius. You are seeing deals that Kelsey Brothers selling for $150 million. Smart List for $125 million. We have one of the biggest networks in podcasting. I am excited to share that Podcast One subsidiary has achieved record revenues and traffic for the quarter. We have expanded our network to become the eighth largest in the industry, have secured a major partnership with Amazon, a three-year deal worth $16.5 million, and have just guided to $51 million in revenues and for the first time, positive EBITDA for the year. Positive EBITDA for the year means the fourth quarter has to be substantial EBITDA, and we fully expect that that number is going to continue going forward for the year. These achievements demonstrate our commitment to delivering high-quality content and innovative solutions to our audience, advertising partners. We are excited about the future of LiveOne and Podcast One, and we look forward to continued growth. To further accelerate growth, we are working with multiple bankers, including JPMorgan, to explore all M&A opportunities that can enhance our business and unlock additional values. This step aligns with our strategic goals of expanding our market presence and strengthening our office. I want to thank our employees, our partners, our shareholders, for our continued trust and support, and I look forward to the following point. Thank you, everyone, and I will open it up to Q&A.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. Star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute. When asking your question. Again, it is star one if you would like to ask a question. And your first question comes from the line of Brian Kinstlinger with Alliance Global Partners. Your line is open.

Great. Thanks so much. So on your website, you offer Slacker Radio for $3.33 per month. Today, I look it's $39.99 for the year. Is this the ARPU we should suggest we think about going forward? It's the most It's the question I get most from an investor is they want to try to understand what the ARPU looks like going forward.

Yeah. I think it's a great question, and I think that dynamic is challenging to answer exactly. But we did say recently, we will be raising up prices. As this change with Tesla has happened, what we found is we found a lot of people want to buy a year-long subscription. Is exceptional for us. We found is that pricing elasticity is an opportunity to raise prices substantially. As you are aware and have seen with Spotify, they've raised their pricing substantially. They just announced another price increase. So I think this is the opportunity now that the company is collecting real data actually has an understanding of not only having a VIN number of a car, but actually having names and data and emails and credit cards. This would be the time that we're really going to find out how far we can expand those. But if you look at the industry, we're the top ten in the industry. Yeah. We're the lowest by far in terms of pricing. I think it's this huge opportunity to increase our prices over the next twelve months.

Okay. And if I were to buy a Tesla today, do I get free service for some period of time? Just curious how a new Tesla plays out now.

Yeah. It's a great question. You have the opportunity. Right? And remember, this all just happened as of December fourth. On December fourth, we renewed our contract. Changed dynamically. Right? That contract can be guaranteed $3 a month. Right? Now we have the opportunity to upsell that customer with the help of Tesla. You have the opportunity of getting a subscription right, that is monthly or for a year. Right. Or you have the opportunity now as of thirty days ago to be able to turn that service back on. Right? You look in your car, every single Tesla car on the left-hand side. You'll see our logo for the first time ever. You click on that button. And if you choose it, you could either choose ad-supported or you can have a subscription with no ads.

I get that. I'm curious. For example, I buy my car. I have three months of Sirius radio for a month. Then it goes away. But I have the aux. Do I get Is it going to start playing day one? And then turn and then you have to have so much time to select ad-supported or buy. That's what I'm curious about.

Yeah. Great question. We have not yet. As of thirty days ago, we launched the free ad-supported into our shop. And excitement, Right. As we said yesterday, we have signed over 450,000 free ad-supported subscribers. And what we decided to do that is that we've had such success with twelve years with Tesla in the usage. Right? The time. People spent. Right? We didn't want to take the risk that they switched and didn't sign up for a subscription because it could be a little clunky and a little complicated. Well, hey. To do it. You have to hit a barcode. Right? You gotta sign up. You gotta put your information in. You gotta put a credit card in. Well, this gave them an easy way that we get them back into the funnel, we get those consumers back in the funnel. We give them. And when you turn on the music, you'll get your five favorite songs you've listened to, whether you've been subscribed for a year or for twelve years. Right? You'll get your five favorite songs and then our DJs and DJs will invite you to a special offer to sign up for a subscription. I can't answer you yet. We're learning every day. And, you know, figuring out daily what that next offering is going to be. And some of it will be free for all forever. Some will be discounted offers, and we'll come up with strategies and what works the best. Right? We're learning on the job here. But, I mean, the fact that we've signed this many subscribers is just substantial. You know, you've rarely ever seen a model where you can sign 40% of the total allocated pool of cars. You sign 800 out of two million. Even the more amazing part is they're using it for an average of like thirty-six minutes, three times a day. Right? It shows proof of how much people love our service. Right. How loyal they are to our service, and I think that's going to continue. And it'd be a telltale sign that I can't imagine not going to deliver way more than $3 a month. Right? Whether it's ad-supported or subscribers down the line.

Okay. Last question I've got. Related to Podcast One. You've added a number of new shows and new talent. We've talked about this for quarters. Your costs are going up twice as fast as revenue over the last twelve to eighteen months. Would have expected eventually the gross margin would stabilize and start to increase it shows that it's six to nine months ago start to drive revenue to offset that new content. Maybe talk about what's delaying the revenue streams and given these dynamics, has anything at all changed on your onboarding strategy?

Not at all. I mean, what you have right now is, you know, when you sign these deals is some upfront money. The industry right, whether you like it or not, advertisers pay in ninety to one hundred and twenty days. It takes time to onboard them. And some of these, you're writing checks upfront. And if people aren't even moving over to our network for four or five months because they're on contract with who they were before. It's also a challenging environment. Right? You know, you gotta be aggressive right now. And you gotta get people into the funnel and sign them. Right? And once you sign them, right, you're going to start to see all those brand-new revenue streams that you've been talking about, that eventually change those margins dynamically. Right. Right now, if you look at AudioBoom, a public company, you're going to see worse. Their margins are even lower than us. Right? So it's right now, it's a land grab. Right? And you gotta grab those great talents. Right? And you gotta grab as many of them as you can that you believe fit into the dynamic. Should be a network. And that'll change them.

Just to follow-up on that. How do you think about that? How do you think the time when it takes to start to see the trend reverse? I mean, you've seen your margins get cut significantly. What when do we get back to ten percent? Are we over a year out? Are we eighteen months? Just maybe talk about that.

I think it's happening right now. I've been talking about the last two quarters. You know, Brian, you and I have watched in so many industries. Right? You have the first wave. Right? You watched seventeen billion dollars of acquisition in some of the wildest deals. Wondery was across the street from me. They sold to three hundred and fifty million dollars. Right? They were doing the same revenues we're doing today. Right. Okay. I'm sorry. They were doing what we were doing when I bought the company. Right? So they sold for like thirty times revenues. You watched Amazon, Apple, Sirius, Spotify, iHeart, like everybody out there. Right? And then it was left with little networks. The smaller networks are out there. Right? And the radio companies who are obviously struggling terribly with their own issue. Right? And now you're starting to see that second round of acquisitions. When you see Conan O'Brien sell for fifteen times revenues and then you see Red sell for around the same. Right? You're starting to see where some of it's desperation. Some of it's perspiration, some of it's just the reality of how big podcasting has become. Right? Trump, you said he won the election off of podcasting. He just announced a head of media for podcasting. Right? The world is changing there and what Rupert Murdoch amazingly, you know, probably out of some desperation as well, realized yesterday, he's got to go back and buy podcasts because he's losing all his talent. All the talent's moving away from radio and television. So as the big guys start to roll those back up. Right. Where we sit in the world right? We sit in the world of under five million dollar podcasts. Right? Maybe we'll get to a ten million one. We sit and show that micro cap land of the best podcasts is where true podcasting is. I think the model is going to change again dynamically as these acquisitions happen. The roll-up will happen. And then the pricing will come back in a way better form in the next six to nine months.

Great. Thank you so much, Rob.

Sounds great. And your next question comes from the line of Sean McGowan with Roth Capital Partners. Your line is open.

Morning, Rob. Good morning, Aaron. How are you?

Good, Sean. How are you doing?

Good. A couple of questions back on the Tesla situation. So are with the ad-supported subscribers, are you yet monetizing any of that advertising? Like, are you up and running with that?

We are just touching this. All just happened. Right? On December fourth, we launched the paid service. Yo, shock and awe, we signed an amazing number of subscribers. Right? We then said, we've gotta take a little bit of risk here. Which will definitely cut some of the paid subscribers. Because we can get it three day one. You may not sign for those who we knew would take a little bit of risk in it. I couldn't believe in my wildest dreams, Sean, we would sign, you know, four hundred and fifty thousand and be adding still today, we're still adding five to eight thousand a day of ad-supported subscribers. So we've signed this partnership with Dax, the biggest programmatic advertising company, right, in the world. Right? We signed a deal. I think we announced it thirty days ago. We're just in the beginning of it. Advertising takes ninety to one hundred twenty days minimum to really kick in. But if you listen today, if you have a Tesla car, you'll start to see ads hitting. There are still some technology things that are just coming into play. Right? And I'm hoping that Tesla is going to relaunch and re-alert, right, when they upgrade this software the next time, they're going to tell all these car owners again that they have an opportunity for paid and free. As they do that, right, we'll be building more and more of that traffic and audience and understanding of that traffic and audience and usage to be able to lock in those advertisers. And I fully expect in six to nine months, I can't imagine we're not going to beat $3 a month on the ad-supported, and I can't imagine we won't be way higher than $3 a month on the paid side. And then, you know, Spotify just came out and they were asked, you know, they were asked just recently why do they have an ad-supported? Right? And their answer was because sixty percent of those within a twenty-four month period convert to long-term subscribers. Right? I'm not expecting sixty percent but if we could have twenty or thirty percent of them convert to long-term subscribers, right, we're going to be building that base strongly. Right? We're going to build them back that guaranteed revenues, and then our advertising is really going to start to take off. And it hopefully explodes into the second, third, fourth quarter of this year.

Okay. I believe it or not, what I was kinda getting at with your question is this might sound a little surprising is why isn't the gross margin actually lower because aren't you paying the record labels for the music that these listeners are listening to and not really getting revenue for it? But, like, how are those costs recorded and why isn't that actually more out of whack?

Yeah. I mean, to be honest with you, you're not even seeing that yet. Right? That just started with thirty days into that. Right? So, yes, there is some element. Right? Every day you add another ad-supported, until you drive those revenues. You're absolutely going to have some cost, right, not a giant cost, but you're going to have some cost before that advertising comes in and pays for it. But you're not really seeing that yet.

Okay. So you wouldn't expect to see that margin pressure in that interim period? Like, I was bracing myself for actually a worse gross margin performance in Slacker because you're paying out the record companies but not getting the revenue yet for these new subscribers. So is that are you just not paying very much to the record labels at this time?

No. It's not that. Remember, the ad-supported only launched thirty days ago. So you only have thirty days of it. Right? So it's in the quarter.

Okay. Last question is, how close are we to seeing revenue from sources other than Slacker and Podcast? You know, you talked a lot about that, and I know you made a lot of progress. So press releases about coffee, but, like, how close are we to that being needle moving?

You know, I don't know about needle moving, but exciting. Right? You know, our publishing business grew, you know, another hundred percent or so. Right? We just got a number one song with Scissor that will be a big payday for us. You don't have to get to giant revenues to have huge value. Right? In publishing, they sell for, as you know, you know better than anybody. You know, you guys own part of Renaissance. Right? These are, you know, twelve to twenty-five times EBITDA numbers. So we see really exciting stuff happening with our publishing business. It's with Splitline and Dramify. Our products business, we just launched our coffee Coffee Edge a couple of days ago. We sold out first day? I would say this is our year to have some transformative moves. I think it's going to be dynamic? It's going to take our revenues, you know, it going to take it up ten million dollars, twenty million dollars? No. But is it going to be on a trajectory? Right? Do we have those kind of abilities over the next two to three years? Absolutely.

K. Thank you.

And then on our television side, yeah, we didn't talk about this on the call, but we sold our second show. We sold Varnum Town to a major streaming platform. So that's three that are sold now. And those three that are sold, I mean, if you really hit those, a television show and, you know, just, you know, just going back, you know, my career, the movie three hundred and Spider web comic. Chronicles. Right? And just the royalty fees on that, those were tens and tens of millions of dollars. Are just pure profit with no risk. Right? We have no risk in these deals. If they hit his television shows, they're going to be extraordinary. You know, bottom line increases for us.

Yeah. I can't wait to see. I can't wait. It'll be good. Alright. Thank you.

Thanks, man. Me too.

And as a reminder, and with no further questions at this time, I will turn the call back to Mr. Robert Ellin for closing remarks.

Thank you everyone. Thank you for joining. Again, this is a transformative time for the company. A complicated time, but exciting time. And, you know, as I have said probably a few times on this call, I mean, I never in my wildest dreams, Aaron never in his wildest dreams. No one in our management team, all of our Slacker Radio guys have been doing this for, you know, the better part. Some of them have been here as much as two decades have been at the company and have seen some amazing, you know, B2B partnerships but nobody's ever seen 40% conversion. This is a telltale sign of how much our product is liked. Right? There's a reason that we've been award-winning. Gonna struggle a little bit. We're gonna fight through this. We survived COVID. Lost all of our live business, came out bigger and stronger than ever. We're gonna do the same thing here. I can confidently tell you that if you're looking at twelve months, this is the first time the company has had an opportunity to be a multibillion dollar company over the next two to three years. And, yeah, these B2B deals we have seventy of them in the pipeline. We're landing them. They're starting to come in. We've announced five of them so far. Keep landing these B2B deals and you know, every one of my companies from Digital Turbine to Majesco to Transcribe. Every one of them were built on the backs of B2B deals and I say this totally humbly. I've never had a stock that didn't go to twenty-five dollars or better. A few have gone to a hundred dollars or better. We never know when they really take off when lightning strikes. But this is a different market out there. This is a different world out there. We got a lot of work to do. But I could tell you confidently this is the first time that I see, you know, a multibillion dollar company over the next twenty-four to thirty-six months. If we stay focused, we keep executing. We fight through the difficult times, and I just want to thank everyone for joining, and thanks for staying with us. And we'll continue to fight here, and you'll see us in the market buying back stock very shortly. Thank you.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.