LiveOne, Inc. (NASDAQ:LVO) Q3 2024 Earnings Call Transcript

LiveOne, Inc. (NASDAQ:LVO) Q3 2024 Earnings Call Transcript February 8, 2024

LiveOne, Inc. misses on earnings expectations. Reported EPS is $-0.02 EPS, expectations were $-0.017. LVO isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello, everyone, and welcome to the LiveOne Inc Q3 Fiscal 2024 Financial Results and Business Update Call. And thank you for standing by. My name is Davvy, and I’ll be coordinating your call today. [Operator Instructions] And I would now like to hand the call over to your host, Aaron Sullivan, CFO, to begin. So Aaron, please go ahead.

Aaron Sullivan: 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 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 Investor Relations website for important content. The following discussion, including responses to [Technical Difficulty] time-sensitive information and 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 the day 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.

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 on 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 enriching 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 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, added over 300,000 members and close to 700,000 year-over-year. We are guiding this year over 1 million new members. This past quarter, we onboarded 24 new podcasts signed to long-term contract, 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 that we believe and many will join our network. We focus on great creators with amazing stories that can benefit and the increased engagement by joining our family.

These shows are averaging about $350,000 annual in revenues to over $7 million adding. This gives us a unique clarity and strong comparability to achieve our 2025 financial guidance. Also as we expand our podcast roster in our sponsorship, we now have over 600 advertisers and partners in growing as well as over 10 podcasts as potential acquisitions, very similar to what we did with Cash Media. Kit, Sue, Eli and the rest of the podcasting have done an amazing job, and you will have an opportunity to listen to kit presenting at 11:30 call. I’m excited to announce 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 and our business plan will provide more and more of these B2B deals, we now have over 42 potential B2B partnerships in our pipeline across 8 verticals.

In my 30-plus year history of high-level involvement in media and technology companies, anytime our companies have passed surpassed that $100 million in revenues with most of this almost guaranteed recurring next year. It has always provided both myself and my management team the 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 of costs and will continue to cut up to $7.5 million to $10 million of cost and use that cost saving 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, proudly our publishing division was nominated for 3 Grammies and took home 2. In the award to just the beginning, we created sounds productions platform to compete with splice where producers upload their beats and sound to a storefront for other creators to purchase them. Like Slice, this is a subscription-based service. But the big difference is our company and the creative only IP and receive 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, audience engagement, again, with very little cost to us in unlimited revenue potential, revenues increased over 300% in our first year.

I’d also like to highlight, we created a subsidiary of podcast on Pulp Studio 1, focused on 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 [indiscernible], which has already partnered with a major streaming platform and is waiting to be greenlit as a scripted TV show. Another one of those 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, is 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 to current podcasts have the potential to turn it to scripted shows and more on the horizon, either creating our own or acquiring existing podcasts and the promoting within our community. Once again, only more and more IP license and merchandise in coming years, the division could become the most profitable division within the company. Given the current strength and future potential of our business, we believe our stock remains extremely undervalued. We 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.

Aaron Sullivan: 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, ’23, 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 ’24, revenue consists of 54% membership and 46% advertising sponsorship merchandise and others compared to 49% membership and 51% advertising sponsorship and merchandise and other in the prior year period. Consolidated adjusted EBITDA for Q3 fiscal ’24 was $3.3 million. On a U.S. GAAP basis, consolidated net loss of $2.6 million or $0.03 per diluted share for Q3 fiscal ’24. Rob, I’ll turn it back to you.

Rob Ellin: Great. Thank you, Aaron. Again, a spectacular quarter for the company, huge growth again in conclusion. I just want to reiterate as each of my prior companies has broken that $100 million mark in revenues, whether it was Digital Turbine, in JAKs, THQ, Forward Industries, Grand toys, each have had substantial 5 times to 100 times runs for their shareholders. . I’m confident and cited because I believe this is the biggest opportunity in my career. I personally invested over $18 million in this company and increased our company’s stock buyback to $10 million because I see where we’re headed and strongly believe our stock is valued. We’ve said we were going to achieve hitting 10 million subscribers is over a 5-year period.

We’re well on that way and super compare going to hit there. If we do, we’ll be over $1 billion in revenues and this will be — the stock will be substantially higher. I want to thank everyone for their support and look forward to any questions. Thank you.

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Q&A Session

Operator: [Operator Instructions] Our first question today comes from Brian Kinstlinger from Alliance Global Partners. Brian, please go ahead. Your line is open.

Brian Kinstlinger: 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 that this is all incremental revenue to podcasts current run rate?

Rob Ellin: 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, the Fortune 500 company and gives us a massive audience to reach content.

Brian Kinstlinger: And then more broadly, we in the Googles and Facebooks of the world that the ad market is finally beginning to strengthen. And then 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 then will podcast benefit from political ad trends?

Rob Ellin: 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 quarter ever in the history of the company. So we’re seeing telltale signs it’s strong. 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 the podcast demographics that are moving, it’s getting younger and younger as well and also the number of sponsors that are moving into podcasting.

It’s really a maturing business and what I’ve told everyone is this business was going to grow when we bought podcast from $4 million to eventually $5 million to $7 million. What I would tell you now, 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.

Brian Kinstlinger: The heart of the question, clear PodcastOne revenue is growing. Growth is a function of downloads versus price. I think you grew download 15%, if I read an article correctly, or unique visitors. So I guess I’m wondering what the pricing trends as I speak to the ad market is pricing generally been flat and you expect to increase? Has it been increasing? Just speak to pricing on the ad side, if you could.

Rob Ellin: Yes. I mean I can talk from the overall market, right, is increasing somewhat, right? But really what’s happening for us is because we built this community, right, we’re able to sell across the community and part of the excitement, and you’ll see when you see podcast at Brendan and Schwab move over and Brendan moved over and doing — he’s already doing 2x what he was doing before because of our community, we’re able to upsell and sell very different CPA with CPMs and some of the bigger guys are who are mostly doing programmatic advertising. So as a trend, the trend is our friend, the industry itself is going up. But for us, we’re going up even higher because our community continues to grow.

Brian Kinstlinger: I have a couple more, if you don’t mind. First, and I ask this every quarter, I may have missed it. Can you speak to the number of podcasts that are pending on boarding and speak to the expected time frame? I could be wrong, but I think last quarter, you had 6 to the 27 from cast 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 a time frame.

Rob Ellin: 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, for the first time in history, we have over 100 podcasts on our pipeline. And the reason that’s happened is if you read the announcement on Spotify, they hired a mid-team with very talented team of creators and they just got rid of them, and they woke up and realized they’re the best at distribution, right? And we’re a great partner for the distribution. But they’re really managing these small podcasts does not make sense for him. So a lot of these contracts, there was $28 billion back in the industry. The industry was — the trend was it was a seller’s market for podcasts, both podcast networks as well as podcasters right now is a buyer’s market.

You’re going to see from Amazon and Spotify and 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’t hold them and support them right in this market. And it’s really not going to happen in these big companies. It’s not really the right place in the base. So just 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 to beat that next year. And just looking at our pipeline and how close we are on many of these. I think you’ll see some really exciting announcements. You’ll see some major, major podcasters moving over to our platform like Brendan did.