LiveOne, Inc. (NASDAQ:LVO) Q1 2024 Earnings Call Transcript

LiveOne, Inc. (NASDAQ:LVO) Q1 2024 Earnings Call Transcript August 10, 2023

LiveOne, Inc. beats earnings expectations. Reported EPS is $-0.01, expectations were $-0.02.

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

Aaron Sullivan: Good morning, and welcome to Live One’s business update and financial results conference call for the company’s first quarter ended June 30, 2023. Presenting on today’s call is Rob Ellin, CEO and Chairman of LiveOne. I would like to remind you that some of the statements made on today’s call are forward-looking and are based on current expectations, forecasts and assumptions that involve various risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of the company including expected future financial results and expected future growth in the business. Actual results may differ materially from those discussed on this call for a variety of reasons.

Please refer to the company’s filings with the SEC for information about factors, which could cause the company’s actual results to differ materially from these forward-looking statements, including those described in its annual report on Form 10-K for the year ended March 31, 2023, and subsequent SEC filings. You’ll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today in the company’s earnings release, which is posted on its Investor Relations website. The company encourages you to periodically visit Investor Relations website for important content. The following discussion, including responses to your questions, contains time-sensitive information and reflects management’s views as of the date of this call, August 10, 2023.

Photo by Austin Distel on Unsplash

And except as required by law, the company does not undertake any obligation to update or revise this information after the date of the call. I’d like to highlight to investors that this call is being recorded. The company is making it available to investors and media via webcast, and a replay will be available on its website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of the company and any redistribution, transmission or rebroadcast of this call or webcast in any form without the company’s expressed written consent is strictly prohibited. Now I would like to turn the call over to LiveOne’s CEO, Rob Ellin.

Robert Ellin: Thank you, Aaron, and good morning, and thank you all for joining this very special day for Live Five years ago, my team entered the fast-growing digital audio market with the acquisition of Slacker Radio. At the time of acquisition, it was a very distressed asset with $20 million in revenues and almost $10 million in losses and has spent over $180 million building the assets. Today, and I’m proud to say that we’ve just raised our guidance to $123 million to $130 million in revenues. On the audio side of it alone, we raised our guidance to $103 million to $110 million with a staggering $18 million to $21 million of EBITDA. We promised the Street when I started this — that by the end of 2027, LiveOne’s Slacker Radio would capture 10 million subscribers and over $1 billion in revenues by the end of 2027.

The opportunity is so big that TAM for this industry, according to Goldman Sachs, is over 1.7 billion paying subscribers alone. Today, I can humbly guide by the end of 2027, we expect not only to reach that $10 million but to pass over 15 million subscribers. We say this with confidence because LiveOne is growing over 800,000 subscribers, so you’re at a 50% increase and ARPU of over $3. The pipeline for our B2B partnerships has never been greater. Each of these potential partners have $10 million to $2.5 billion addressable eyeballs. At $15 million and $3 ARPU will pass over $600 million in revenues. That’s before any ad revenues or an increase in pricing of which LiveOne Slacker have been the only one in the industry have not raised prices, and we’re at a 65% discount to all of our competitors today.

Slacker Radio expects to begin trading in a reverse merger with ROCL SPAC by the end of October. Separately, we then acquired in the beginning of COVID, we acquired PodcastOne also doing about $20 million in revenues. Today, I can proudly announce that Kit and our team did over $10.6 million for the quarter or a run rate of $42 million. When you add that together with the acquisition of the Kast Media assets, which we’ve been announcing multiple podcasts and the acquisition of Fantasy Guru, our run rate will be well over $50 million. For the first time ever, we’ll talk about our guidance for 2027 for podcasting well and expect that to continue to grow at this rate and hit over $250 million in revenues. The podcast industry has matured from $400 million totaling $1.4 billion since COVID.

Industry expects it to grow now to $5 billion to $7 billion by 2027. We have just moved up the ladder dramatically from #13 to #10 on Podtracs, passing the likes of CNN. We expect this year to be in the top set. We also excitingly, even though it’s been delayed multiple times, expect to start trading on a major exchange under the symbol PODC in the next two to four weeks. With the largest pipeline of potential podcast and over 10 potential acquisition candidates, we will continue to roll off. We expect to continue to grow at a 30% to 50% year-over-year growth. We now have over 250 podcasts on the network, a 150% increase since acquiring the company. Pre-COVID LiveOne had 10 sponsors proudly today, we have passed over 700 sponsors on our network.

As we move from audio back into video, Pay-Per-View One has been announcing multiple different Pay-Per-View events across podcasts with Adam Corolla, [indiscernible] music festivals and social media events, social blocks. We delivered over $28 million and $4 million of EBITDA during COVID. It was $60 billion market and growing. Our tech team has delivered world-class technology that is live streamed to over 5 billion engagements and 350 million live streams and 3,000 artists. We humbly project by 2027 over $100 million in revenues in our Pay-per-View And live streaming business, and it could easily be multiples of that number based on our size of our audience. Splitmind and Drumify, our newest acquisition, publishing arm is revolutionizing the industry, utilizing the best producers, artists, song writers combined with AI to deliver the first of its kind royalty sharing platform.

With a TAM of over $100 billion, we guide to over $100 million in revenues by 2027. Our merchandise business has struggled, right? We acquired it during COVID. It suffered because we didn’t have any of our live events or any of our partnerships with Live Nation AG. But we’ve just announced a very unique collaboration, the first of many to come with Jeremih and Russell Bevan, who is the [Ben Ruth] of Napa Valley, the one winemaker more 100 point wine anywhere in the history to watch with the brand name “”Birthday Sex”” with Jeremih and we’ve run out of bottles already. We sold out in the first week, and we are now growing substantially. We’re guiding that business where we expect to have 10 to 20 celebrity brands this year to over $100 million as well in 2027.

Together these 5 divisions, we easily surpassed $1 billion in revenues and over $150 million in EBITDA. I want to thank everyone for their patience and staying with us, and we couldn’t be more excited about the company, the spin-outs at about to happen with PodcastOne and Slack radio and the opportunity of each of our 5 divisions to grow and mature. With that, I want to open it up to any questions anyone has. And I want to thank you again for attending.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Brian Kinstlinger from Alliance Global Partners.

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

Robert Ellin : Yes. Great question, Brian. I think you know me long enough now and all of our acquisitions are in that onetime revenue range. They’ve historically been with stock. We’ve done [indiscernible] because our stock is down, right? We have been acquiring it with the stock in PodcastOne. So on PodcastOne, we announced the valuation is well over $200 million when the stock is trading well below that. So we utilized our currency and PodcastOne to acquire both Fantasy Guru as well as the assets of Kast Media. We have over 10 acquisitions right now in the pipeline and they’re really exciting. They go anywhere from sort of the size of $5 million up to $35 million, $40 million in that range. They make growth from here soon.

But this is that unique opportunity right now to acquire the smaller podcast networks and add them into the fold and really our team is the best in the business, Kit, [Eli] and [Sue] approved net over and over again. And we just see the excitement and energy of it. You’re seeing us announce on top of the acquisition. You’re seeing us announce almost on a biweekly basis, another podcast with traffic and audience that already exist, moving over to our platform. And I think you’re going to see more and more of that. So the pipeline for potential podcast to move over is over 100 and acquisitions in over 10 right now. So it couldn’t be more exciting. And this is a great time to roll up the space.

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

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

Kit Gray : Yes. Sure.Yes, the ultimate goal is to raise CPMs, but it’s a process, right? A lot of this shows that we’re acquiring, whether by acquisitions or even just one-off where shows are leaving other networks or new shows are starting, the first phase of that process is to get demand on their inventory, start to sell out unsold inventory, give good packages to advertisers so they invest, test and work with these shows, get comfortable with these shows, then that’s where the CPM start to grow. We have comfort with those advertisers to do things beyond just the spots and dots of what you would hear in a podcast to include exclusive episodes, content just around brands, social interaction, video all of these type of things.