LiveOne Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 9, 2023

There are 6 speakers on the call.

Operator

Hello, everyone, and welcome to the LiveOne Inc. Q3 Results and Corporate Update Webcast and Conference Call. My name is Charlie, and I'll be coordinating the call today. You will have the opportunity to ask a question at the end of the presentation. I want to hand over to our host, Aaron Sullivan, CFO to begin.

Operator

Aaron, please go ahead.

Speaker 1

Thank you. Good morning, and welcome to LiveOne's business update and financial results conference call for the company's Q2 ended September 30, 2023. Presenting on today's call with me today is Rob Allen, 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 Certain 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.

Speaker 1

Actual results may differ materially from those 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 These forward looking statements, including those described in its annual report on Form 10 ks 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 view as of the date of this call, November 9, 2023. As except as required by law, the company does not undertake any obligation to update or revise this information after the date of the call.

Speaker 1

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 website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of the company and any Distribution, 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 Allen.

Speaker 2

Thank you, Aaron, and good morning, everyone. I'd like to thank everyone for joining us today. Investor appetite and demand for microcap stocks began to decline And softened almost 2 years ago. We made major strategic decisions then to protect our shareholders' capital, Take aggressive cost cutting measures and solely on predictable growth units with the highest Profit Margins in an effort to strengthen our balance sheet, drive profits and be a desirable place for investors when the market cycles change. We have used almost all of our resources to expand our audio division consisting of Slacker Radio and Podcast 1.

Speaker 2

This is the largest divergence disconnect that I've seen in 40 years in the public markets between large and micro caps. Growth at any cost is not the way right now. Over the past 2 years, I'm thrilled to announce That we have done a remarkable job of delivering $32,000,000 in consolidated cost savings And looking at another $3,000,000 to $5,000,000 over the next few months. We have purchased over 3,500,000 shares in the buyback and have left room to acquire another 5,000,000 shares. Our balance sheet is the best in company history with 0 debt And over $28,000,000 in short term assets.

Speaker 2

On our audio business, when we acquired Slacker and Podcast 1, The combined companies produced about $40,000,000 of revenues $15,000,000 annually and needed a lot of work to clean up. This morning, I'm proud to announce that our management teams have reported a combined audio business now delivering 52,600,000 A record number and $10,300,000 in EBITDA just for the 1st 6 months. We raised our EBITDA And cash flow guidance on the audio business to $18,500,000 to $21,000,000 of EBITDA. That combined effort has been a $35,000,000 swing from the time of these acquisitions. To clearly articulate and simplify why our hockey stick growth is coming from these 2 key revenue streams, 1 is subscription and 2 is sponsorships.

Speaker 2

Our subscribers have grown 8 times from $400,000 to over $3,300,000 in the 5 year period. Our sponsorship has grown 2.5 times with over 700 blue chip sponsors on our platform this year. In September this year, LiveOne completed the Spin out of Podcast 1 as a separately traded public company on December, Stumble PODC. Management commitment to increase shareholder value issued a dividend of 18% to our shareholders. The Spin Out made podcasts one of the first stand alone podcast network to list and trade on a national exchange.

Speaker 2

And so far, for the first time, investors now have the opportunity to invest directly in that fast growing podcast business. Trading between $60,000,000 $100,000,000 valuation since it started trading on NASDAQ, LiveOne owns 80%, Leaving LiveOne's remaining 4 subsidiaries trading at a nominal valuation. Podcast 1 is doubling the number of top creators on its platform in a 3 year period, adding 18 already this year At an average of about $350,000 in revenues per podcast, we've increased revenues to $21,000,000 and the 6 months and growing up from the $20,000,000 when we acquired the business. We currently have over 100 podcasts in the pipeline. This is about 7x our normal pipelines and over 10 potential acquisitions, the largest opportunity in the history of PodcastOne.

Speaker 2

I encourage everyone to listen to the separate Podcast 1 earnings and business update call at 1:30 Eastern today. Now to Slacker Radio. We just extended our Tesla partnership for the 10th straight year. Every Tesla car sold in North America comes with Paid membership to LiveOne. These members are paid directly to LiveOne by Tesla.

Speaker 2

Expanding our management team with a clear focus on B2B partnerships, we identified 5 verticals And I'm now over 27 blue chip $1,000,000,000 plus companies in our pipeline. This almost these combined efforts, combined opportunities almost guarantee another huge growth year for next year already in place before we've even finished our 9th month of this year. I indicated last year we will pass over 10,000,000 members within 5 years and over $1,000,000,000 in revenues. Over the past 12 months, we've added 6 A record 679,000 new paid members at an average of over $3 ARPU And now passed 3,300,000 total members, 2,400,000 paid members. We expect to pass over 4,000,000 total Members by the end of next year and over 3,000,000 paid members.

Speaker 2

To better understand these metrics, Goldman Sachs issued a report that industry will hit 1,700,000,000 paying subscribers by 2027. LiveOne would only need 1% of that addressable market to easily surpass that number. Given the strength in the business, we believe our stock is extremely undervalued. So we recently expanded our buyback program to $8,500,000 leaving almost $5,000,000 of additional buying. Now, I'd like to hand it off to Aaron Sullivan, our CFO.

Speaker 2

Thank you, Aaron.

Speaker 1

Thanks, Rob. I'll spend just a few minutes providing a very brief overview of our results for the Q2 of fiscal 2024, which is ended September 30. Consolidated revenue for the 3 month period ended September 30, 23 was 28,500,000 Slacker posted record revenue for Q2 of $16,400,000 and adjusted EBITDA of $5,000,000 and Podcast 1 posted revenue of $10,500,000 and adjusted EBITDA 100,000. For the Q2 of fiscal 2024, revenue consists of 58% membership and 42% sponsorship, Advertising, merchandising and other compared to 64% membership and 46% advertising, sponsorship and merchandise in the prior year period. Consolidated adjusted EBITDA for Q2 FY 2024 was €2,800,000 On a U.

Speaker 1

S. GAAP basis, LiveOne posted a consolidated net loss of $0.65 or $0.07 a share for diluted sorry, for diluted share in Q2 fiscal 2024. As of September 30, 2023, we had approximately 2,400,000 paid members, a net increase of 697 ks or 38% compared to the prior year. Total members, which include 3 members, were approximately 3,300,000 as of September 30. Note that included in the total members are certain members who are currently subject to a contractual dispute for which we are not currently recognizing revenue.

Speaker 1

Rob, I'll turn it back to you. We may have lost Rob. Operator, do you want to open it up for questions?

Speaker 2

Sorry, guys. Sorry, guys. So just to wrap it up before we go to Q and A, balance sheet, the strongest it's ever been in the history of the company, dollars 28,000,000 of short term assets, 0 debt, $15,000,000 of debt was converted at $2.10 and another $8,000,000 of debt was converted into PodcastOne stock at $3 well above both of those markets. Record subscriber growth, record listenership, largest pipeline in the history of the company, Record EBITDA, record cash flows, and a largest pipeline of acquisitions in the hopper as well. So with that, I'd like to open it up to Q and A.

Speaker 2

Thank you everyone for joining.

Operator

Thank Our first question comes from Brian Kinstlinger of Alliance Global Partners. Brian, your line is open. Please go ahead. Hi,

Speaker 3

Ara. This is Shervin on for Brian. Thanks for taking my questions. Firstly, could you share any updates on Cast? More specifically, how many podcasts from Cast have you onboarded and how many more do you expect to onboard And over what time frame?

Speaker 2

Yes. It's a great question. Thank you. So on Cast, we've onboarded, They had about 27 podcasts. We've onboarded around 6 or 7 at this point.

Speaker 2

It took a little longer than we expected because of the timing of the uplisting, which took us almost 5 months longer than we expected. But we're seeing great telltale signs. We'll continue to add podcasts and I think you should see an additional update over the next few days with substantial podcasts added to the network.

Speaker 3

Great. Thank you. And then outside of CASK, could you talk about what reasonable goals are for the numbers of titles you hope to onboard annually?

Speaker 2

Yes. So this is going to be a really special year and that we've onboarded 18 podcasts Already this year, we have over 100 in our pipeline that we're bidding on today. And these are existing almost all of them are existing podcasts, right, that are moving from other networks that The doors have opened that right now. It has been for the last 3 years, this has been a seller's market for podcasters. Right now it's a buyer's market for podcast networks.

Speaker 2

And so there's great opportunities and way better deals and economics for the networks than they were previously. And I see the floodgates opening. This should be the second half of the year should be very similar to the first half leader. And I can see us adding well over 30 podcasts this year.

Speaker 3

And lastly, can you touch on the lower revenue guidance range for fiscal 2024? How much is the result of the ad market versus the pace of onboarding new Podcast or any other factors that I might be missing?

Speaker 2

Yes, good question. So most of that is coming from the merchandise business. We have two things. One is, as I articulated in the call, we made the determination to focus all of our energy on our audio business, Right. And in buying back stock and in cleaning and strengthening the balance sheet.

Speaker 2

So our merchandise the merchandise business, we are starting to cut. We just took $2,000,000 of costs out of we announced a couple of weeks ago. We're looking at costs that and revenues that are not as profitable. Some a little bit of it is some of the cast ones are going to take a little bit to sign on board, but most of it is coming from the merchandise side of the business.

Speaker 3

All righty. Thanks so much. I'll hop back in the queue.

Operator

Thank you. Our next question comes from Thierry Willaud of Water Tower Research. Thierry, your line is open. Please proceed.

Speaker 4

Yes, good morning. Rob, a couple of questions. You mentioned 5 verticals. Can you give us a sense for what they are for New potential sector partners?

Speaker 2

Yes. And these are just the beginning, right? There's going to be way more vertical. So Yes, for anyone that knows my background and knows what I built with Digital Turbine, right, you're going to have carriers, Which we've already been a partner with Verizon, T Mobile, right, and have been partners with many others. So carriers, Additional auto companies like Tesla,

Speaker 3

additional

Speaker 2

Merchandise Companies, right, being careful in giving names, because as we said in the last call, Yes, this pipeline is very meaningful. It's over 27 companies in that pipeline and we expect to announce some of those shortly. So retailers, Right. Anyone that is competing with Amazon is going to need that. Cable and satellite operators, right, as well as personal gym equipment, anything from the telecommons in the world to gym equipment.

Speaker 2

I mean, there's going to be way more verticals that you're going to hear us talking about very shortly. We just hired a whole B2B team, and you'll be seeing us expanding that B2B team dramatically throughout the next few months.

Speaker 4

That's great. You mentioned a $675,000 increase in paid numbers. Do you have a way to Is it new partners that you brought in? Or is it existing members existing partners that are growing the members You know that are on the platform?

Speaker 2

All the above, Right.

Speaker 3

We have

Speaker 2

a spectacular relationship with Tesla, right, that is continuing to grow and now has been extended for its 10th year.

Speaker 1

We're going

Speaker 2

to continue to grow our partnerships, utilizing all of our podcast Creators, all of our social media creators, all of our talent creators, as well as our B2B partnerships. And we're really special in where we separate ourselves From the rest of the crowd is threefold. There's number 1 in pricing, we're by far the lowest in the industry, right? We're a third of the price of most of our competitors. Number 2 is service and that we can be nimble and have the ability to do things that we do for our customers that others can't do.

Speaker 2

And number 3 is white labeling, Be able to provide a white label solution and be able to call Tesla Radio or Verizon Radio or for that matter, almost Any one of our partners that is 10,000,000 to 1,000,000,000 users Have the ability to white label and utilize that solution, which there really is no one else in the industry has that capability of doing based on their size.

Speaker 4

Great. Maybe just one last question. You mentioned 58% of the revenue from membership and 42% from sponsorship. Is that do you see that

Speaker 2

trending higher on membership

Speaker 4

as time goes? Or As time goes or you think that's a good balance currently, how should we think about that?

Speaker 2

What's nice to see is we got 2 horses in the race now running fast, right? And so the podcast business Growing dramatically from $34,000,000 We gave guidance of $47,000,000 to $52,000,000 right on a run rate, Right. And the same thing on the Slacker side of it, on the audio side of it, we've grown from 20,000,000 each of these businesses started at $20,000,000 when we're acquiring them. Slacker is which we've owned for 2 years longer is now doing this year will be $65,000,000 right? And the same thing on podcast was doing $20,000,000 These were both losing a lot of money.

Speaker 2

They're now profitable, right? They're now EBITDA sizable EBITDA coming out of it. And on the podcast side, as you grow up from $20,000,000 you're seeing some real sizable growth. And I see a 2 horse race here where they're going to be pretty neck and neck over the next 3 years.

Speaker 4

Great. Hey, thanks for the answers, and nice quarter. I appreciate your comments on the microcap Sectors and how kind of unprecedented that current situation is, but hopefully better times ahead. Thanks again.

Speaker 2

Thank you. Appreciate you, Johnny. Thank you.

Operator

Our next question comes from Jon Hickman of Ladenburg Thalmann. John, your line is open. Please proceed.

Speaker 5

Rob, just one quick question. Will you elaborate on your comment that the current quarter, the December quarter is going to be a record? Does that mean the best quarter you've had in corporate history or the best third quarter you've ever had?

Speaker 2

Yes. Now it'll be the best quarter in the history of the company. And Yes, you can see by a lot of the metrics that we've already announced, right? We've already we're giving telltale signs of where the growth is and What the growth is, we're growing about 60,000 subscribers a month, right? We're announcing almost a new podcast every 2 weeks.

Speaker 2

So it's really kind of now the model has become really easy as you know John. Every new podcast we're adding $350,000 to $500,000 of revenues. So you see those announcements, you can easily figure those out, right? Guy in somewhere in the 10% to 15% your net margins to those right in profits. Same thing in subscribers, right?

Speaker 2

Every subscriber that we're adding, right, every paid subscriber that we're adding, we're adding in the between $3 to $3.5 ARPU, right, with about 30% margins. So if we can continue to do that, if we continue to add those, the quarter is just going to be a very special coming up and that's the reason we again raised our EBITDA guidance even though our revenues won't hit the numbers, We would like to because the IPO took longer than we expected or the uplifting took longer than we expected. But I see telltale signs that the Cast Media As well as the pipeline of podcasts are kicking in fast right now.

Speaker 5

So with the lower revenue guidance and the higher EBITDA, is that difference Coming out of expense control or better margin?

Speaker 2

Yes. Just we're being very cautious, right? We just took another $2,000,000 of cost out of the business. We're being very cautious in what pieces of business we do, any risk business, we're not doing any of those live Shows unless we're getting paid on them, as you and I have talked about before, and we'll start to see telltale signs. We're going to start to get paid a lot of money In next year, for us to produce those shows with margins very much like Social Gloves, but we're not going to do any of them Unless there is money upfront with a guaranteed profit on them, we're going to focus our energy on the core businesses that are working right now and delivering revenues.

Speaker 2

And we're going to use our capital to continue to strengthen the balance sheet and continue to buy back stock, right? If our stock is Going to trade at almost a nominal valuation right now. We're just going to keep buying back stock right now.

Speaker 5

Okay. Thank you.

Operator

Thank you. At this stage, we have no further questions. I'll hand back over to Rob Ellin for any closing remarks.

Speaker 2

I just want to thank everyone. Thank you for joining and appreciate it. And we look forward to next quarter's numbers. Please join the podcast call in a few in a short period. Thank you, everyone.

Operator

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.

Powered by Quartr
Earnings Conference Call
LiveOne Q2 2024
00:00 / 00:00