LiveOne Q3 2024 Earnings Call Transcript

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Provided by Quartr
February 8, 2024

There are 7 speakers on the call.

Operator

Hello, everyone, and welcome to the LiveOne Inc.

Operator

Q3 Fiscal 20 24 Financial Results and Business Update Call, and thank you for standing by. My name is Daisy, and I'll be coordinating your call today. And I would now like to hand the call over to your host, Aaron Sullivan, CFO to begin. So 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 Q3 ended December 31, 2023. Presenting on today's call with me 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 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.

Speaker 1

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 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 ks for the year ended 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, February 8, 2024.

Speaker 1

And except as required by law, the company does not undertake any obligation to I'd like to highlight to investors that this call is being recorded. The company is making it available investors and media via webcast and a replay will be available on its website in the Investor Relations section shortly following the proceedings 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 Bellin.

Speaker 2

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, I'm extremely pleased at how all areas of our business are performing. It was truly a spectacular quarter and one that illustrates the power of our creator first model focused on Super Fans, which rewards the talent and enriching the shareholders. As we near the close At fiscal 2024, we conservatively guided consolidated revenues to 115,000,000 to 120,000,000 And we raised our guidance for fiscal 2025 to $145,000,000 to $155,000,000 Of note, our audio division contributing revenues of $130,000,000 to $140,000,000 $20,000,000 to $25,000,000 of EBITDA with over $17,000,000 of positive cash flow.

Speaker 2

I'm so proud of our audio team considering at the time of the acquisitions Of Slacker Radio and Podcast 1, the combined pro form a revenue was around $40,000,000 with 400,000 members losing $15,000,000 a year. Today, Slacker Radio has proudly passed 3,500,000 members. This past quarter added over 300,000 members and close to 700,000 year over year. We are guiding this year over a 1000000 new members. This past quarter, we onboarded 24 new podcasts Signed a long term contract and we signed almost every one of our current podcast shows.

Speaker 2

We have a pipeline of over 100 existing podcasts. That's 10 times The amount of any in history shows us that we believe and many will join our network. We focus on Great creators with amazing stories that can benefit and achieve increased engagements by joining our family. These shows we're averaging about $350,000 annual in revenues. It's over $7,000,000 added.

Speaker 2

This gives us a unique clarity and strong confidence in our ability to achieve our 2025 financial guidance. Also as we expand our podcast roster and our sponsorship, we now have over 600 advertisers and partners and growing, as well as over 10 podcast networks as potential acquisitions, very similar to what we did with Cash Media. Kit, Sue, Eli and the rest of the podcast team 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 1,000,000 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 that our business plan will provide more and more of these B2B deals.

Speaker 2

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 $100,000,000 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 Live 1 flywheel. It starts with creative first, focus on super fans driving traffic and engagements and producing multiple revenue streams from the same piece of content.

Speaker 2

This quarter, Our only negative EBITDA division, our merchandise CPS has cut over $5,000,000 of costs And we'll continue to cut up to $7,500,000 to $10,000,000 of cost and use that cost saving to accelerate our celebrity brands. We will launch between 8 to 12 celebrity brands starting with Birthday Sex with Jeremiah and Russell Bevin. We sold out in our 1st few weeks of the 1st round of product. This past year, Proudly, our publishing division, Drumify and Splitline, was nominated for 3 Grammys and took home 2 Grammy wins. And the awards are just the beginning.

Speaker 2

We created Sound's productions platform to compete with Splice, where producers upload their beats and sound to a storefront for other creators to purchase them. Like Splice, this is a subscription based service. However, the big difference is our company and the creators 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 and unlimited revenue potential, revenues increased over 300% in our 1st year.

Speaker 2

I'd also like to highlight we created a subsidiary of Podcast 1 called Studio 1, focused on ownership of scripted IP, More specifically focused on 2nd 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 Barnum Town, which is 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, Barnum Town, Hosted by Carl McLaughlin is a great example of the type of podcast we are targeting, which have the traction to be major studio productions.

Speaker 2

We believe we currently have 8 to 12 current podcasts have the potential to turn into scripted shows and more on the horizon, either creating our own or acquiring existing podcasts and then promoting them within our community. Once again, owning more and more IP, Licensing 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 $4,000,000 to $10,000,000 leaving approximately $6,000,000 of capacity. Thank you everyone for your time and attention.

Speaker 2

And I'd like to hand it back to our CFO, Aaron Sullivan for Q3 results.

Speaker 1

Thanks, Rob. I'll spend just a few minutes providing a very brief overview of our results for the Q3 of fiscal 2024, the quarter ended December 31, 2023. Consolidated revenue for the 3 month period ended December 31, 2023 was $31,200,000 Slacker posted record revenue for Q3 of $16,800,000 and adjusted EBITDA of $6,800,000 Podcast 1 posted revenue of $10,400,000 and adjusted EBITDA loss of $400,000 For the Q3 of fiscal 2024, revenue consists of 54% membership and 46% advertising sponsorship, merchandise and other compared to 49% membership and 51% advertising sponsorship and merchandise and other in the prior year period. Consolidated adjusted EBITDA for Q3 fiscal 2024 was 3,300,000 And on a U. S.

Speaker 1

GAAP basis, Slide 1 posted consolidated net loss of $2,600,000 or $0.03 per diluted share for Q3 fiscal 'twenty four. Rob, I'll turn it back to you.

Speaker 2

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 $100,000,000 mark in revenues, Whether it was Digital Turbine, iOne, JAX, THQ, Forward Industries, Grant Toys, each have had substantial 5 to 100 times runs for their shareholders. I'm confident and excited because I believe this is the biggest opportunity in my career.

Speaker 2

I personally invested over $18,000,000 in this company And I increased our company stock buyback to $10,000,000 because I see where we're heading and strongly believe our stock is undervalued. We said we were going to achieve hitting 10,000,000 subscribers is over a 5 year period. We're well on that way and super confident we're going to hit there.

Speaker 1

If we do, will be

Speaker 2

over $1,000,000,000 in revenues and the stock will be substantially higher. I want to thank everyone for their support And look forward to any questions. Thank you.

Operator

Our first question today comes from Brian Kingslinger from Alliance Global Partners.

Speaker 3

Great. Thank you. Congrats on your 8 figure sponsorship deal with Podcast 1. First, is this a new sponsor or a larger agreement from an existing sponsor? I guess I'm trying to understand if this is all incremental revenue to podcast's current run rate?

Speaker 2

Yes. So this is a brand new partner. It started the end of last year when we announced it. It will continue to grow. And it's way more than 8 figures.

Speaker 2

It's well over $20,000,000 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, a Fortune 500 company, and gives us a massive audience to reach to showcase our content.

Speaker 3

Fantastic. And then more broadly, we've heard from 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?

Speaker 2

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 Podcast 1, we almost matched last year, right? We did $32,000,000 last year. We're at 31,000,000 and change already with a quarter to go and obviously our Q4, right, especially with this new contract is going to be the biggest quarter ever in the history of the company.

Speaker 2

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 to podcasts, the 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 1 $4,000,000 to eventually $5,000,000 to $7,000,000 What I would tell you now, it's going to be way more like $7,000,000 to $10,000,000 by 2,030.

Speaker 2

So there's a big market developing and This is really a unique time for our advertising and podcast business.

Speaker 3

Right. The heart of the question, it's clear Podcast 1 revenue is growing. Growth is a function of downloads versus price. I think you grew downloads 15%, if I read an article correctly, or unique visitors. So I guess I'm wondering what are the pricing trends as I speak to the ad market?

Speaker 3

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.

Speaker 2

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 podcasts like Brendan Schwab move over and Brendan moved over doing, you know, doing he's already doing 2 times what he was doing before. Because of our community, Way to upsell and sell very different CPA, the 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.

Speaker 3

Great. 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 onboarding and speak to the expected timeframe. I could be wrong, but I think last quarter you had 6 of the 27 from CAST.

Speaker 3

I might be reading my notes wrong. So if I'm wrong, sorry. And then there's probably others pending. So just maybe take us through what's pending in the timeframe?

Speaker 2

Yes. So we announced we added 24 this year. That's by far a record for the company, right? We're now up to close to 180 podcasts. What we said is for the first time in history, We have over 100 podcasts in our pipeline.

Speaker 2

And the reason that that's happening is, if you read the announcement from Spotify, They hired a massive team with very talented team of creators, and they just got rid of all of them. And they woke up and realized They're the best at distribution, right? And we're a great partner for them, distribution, but they're really managing these small podcasts. It does not make sense for me. So a lot of these contracts, there was $28,000,000,000 of acquisitions in the industry.

Speaker 2

The industry was the trend was It was a seller's market for podcasts, both podcast networks as well as podcasters. Right now, it's 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 $5,000,000 in revenues. Their contracts are coming up and they really need a place that can hold them and support them right in this market. And it's really not going to happen in these big companies.

Speaker 2

It's not really the right place in the base. So this is the biggest pipeline we've ever had, and I fully expect to beat that 24 number. We'll have still a lot more coming this Q4, and I expect to beat that number of, call it, 27 to 30 this year. I fully expect to beat that next year. I mean, just looking at our pipeline and how close we are on many of these, I think you'll see some really exciting announcements.

Speaker 2

You'll see some major, major podcasters moving over to our platform like Brendan did. It's rare that you see those kind of moves, you're going to see them in a unique way. And the big guys are going to they're going to control distribution, which is wonderful that we have these partnerships with Spotify and Apple and Samsung and So on, right? But they're also going to be focused on the Joe Rogan's of the world, just signed a new $250,000,000 contract, right? And the show just moved over from Amazon, dollars 100,000,000 a year for Smartlist, right?

Speaker 2

So there's more and more money pouring into the system, The big guys are going to focus on the Howard Sterns and the Joe Rogans, and we're going to have an unbelievable opportunity to acquire existing podcasts with traffic and audience As well as like we did with Cast Media, I fully expect we said we have 10 acquisitions in the pipeline. I fully expect additional acquisitions in the podcast space as well this year that are hugely accretive to our bottom line.

Speaker 3

Great. Last question I have, I think I don't think you discussed it, but I think it's really important point that you and I have discussed in the past. So maybe you could share any stats for Recently onboarded podcasts, how they perform compared to when they were on other platforms, not on the PodcastOne platform in the 1st 6 months or so? Think that we've had a good discussion and I think it would be helpful if you could share some stats.

Speaker 2

And I think this is a credit to Kit, Eli and Sue, and They've got 65 years of history in doing 1,000,000,000 of dollars of revenues in radio, right? Sue ran all the sales for Howard Stern and Mel Carmerson and All three of them trained under Norm Paddocks, who was a pioneer in radio and created one of the great public companies in radio With his company previously with Westwood One, our team has been able to move over podcasts and without giving names, we moved over 1 podcast They literally had 20,000 downloads. It was making it a couple of dollars, very talented, 2 women, very talented from a small town. We moved them onto our platform. We put them on with the Vanda pumps.

Speaker 2

We put them onto all the housewives. We put them on all of our female network, which we're most powerful. And they've now grown to 150,000 downloads and they're doing 1,000,000 of dollars of revenues. So and there's multiple stories like that. And very few companies are left that can do that where they have a community that they're really working on the sales, the marketing, the PR, the production, all of it in one And working with that talent to deliver them way better CPAs, way more traffic, way more audience.

Speaker 2

We also put them on Good Morning America and put them on TV and did all the cross work of PR firm to really grow them and couldn't be more proud of it. Brendan's show has exploded since he came on the network. It's up 2.5 times since from being over at Cast Media. Great.

Speaker 3

Thanks for all the details.

Speaker 2

Thanks, Brian. Appreciate it. Thank you.

Operator

Our next question is from Jon Hickman from Ladenburg. Jon, please go ahead. Your line is open.

Speaker 4

Hey, Rob. Could you walk through like how a podcast becomes a streaming or television type asset and what the revenues what your portion of the revenues could be?

Speaker 2

Yes. Great. Thanks, Sean. I mean, you and I go back a long way. I think I met you when I owned Atmosphere Films and I had a slate of television and film that I was very fortunate.

Speaker 2

Those films turned out to be one turned out to be the movie 300, another one turned out to be Spider Man Chronicle. And we did well over $1,000,000,000 in revenues. Here's the beauty of this model. You take a podcast like Barnum Town, my partner and board member, Patrick Watsburger, one of the great creators of content maybe in history, Just won an Academy Award for CODA, created Twilight, La La Land, came to us with a show called Barnum Town. Okay?

Speaker 2

An amazing story, right? And I'll make it really brief, but 300 people, little town, for any of you old enough to know this band called REO Speedwagon. A plane lands in this little town of 300 people In North Carolina, and all of a sudden everybody explodes and becomes rich. Money is coming out of the the little money is coming out of their pockets. So while how many how much money is created system and of course what happens murders and CIA and FBI and drug enforcement and tax Authorities and so on.

Speaker 2

It's a little town of 300 people. That show, I highly believe, is going to become a bidding war for the streaming networks. It's the story of Pablo Escobar infiltrating in Little Town in North Carolina. And if anyone who has an opportunity to listen to it, I think you're going to really enjoy it. If you've seen the show Ozark or you've seen any of these true crime type shows, This is one of the best I've ever seen and I think that's one of our 4 shows we've announced so far.

Speaker 2

Stay tuned because there's going to be a lot more announced any minute now. These 4 are all in this quarter, right? Opportunist, Vigilante has already sold to a major studio. They just wired a $70,000 Just to start with, John, when you look at these things, you're going to start to get production money, you're going to start to get back end money. And as we grow it, we expect to do 10 to 12 of those shows a year, which we're doing anyway, right?

Speaker 2

They're on our platform. Make some money off the podcast, But then sell for that 2nd window where there's no risk and Netflix or Apple or Amazon or HBO buys the rights to it. And we sit there with the catchers and collect money for the rest of our lives. I'm very fortunate when I did 300, it's now almost 20 years. Yes, those royalty checks coming to life.

Speaker 2

And so this is really exciting next generation of web podcast is going.

Speaker 4

So is there any cost to you to do that? 0.

Speaker 2

I mean 0. In fact,

Speaker 4

Whatever baked on those is 100% margin?

Speaker 2

Correct. Once we Yes. So as an example, right, on Vigilante, we just got a $70,000 check, right? We get that check, right? It's already handed off, right?

Speaker 2

They've already hired the writers to produce So on it, right, we're executive producers on it and we'll continue to get paid as producers on it. We'll continue to get paid back in It is successful and literally if it makes it you make it the 1st year, you're going to get paid a lot of money. It makes 2nd and 3rd year, Yes, this becomes mailbox money for life.

Speaker 4

So who in your shop is shepherding that initiative?

Speaker 2

Yes. So, I mean, there's a team of people. So remember, it starts as a podcast, right? So the podcast, you're starting it. Imagine that now you can go instead of scripts and books sell for $1,000,000 $2,000,000 right?

Speaker 2

Then you got to hire a writer. Well, here, you already have proof That the show is already up, the traffic is already there, the audience is already there, and now you're selling to Netflix and you're going, okay, the show is already number 4 on Apple, Right. It's already had a 100,000 downloads in the 1st week. They've got proof of concept. They've got proof of customer base.

Speaker 2

It's a very unique model and I'm really excited about this. I think it's going to be a real winner for us and will take a little bit of time, but just as the small bits of money coming in, come next year could be very substantial, money coming in and growing every year.

Speaker 4

Okay. Real quick, can you remind the 4 that you've already announced? The Gilani, Barmin Town, what are the other 2?

Speaker 2

Yep. So Opportunist, which amazingly just the reruns, just the reruns of doing 100,000 downloads. We're making a lot of money off the reruns already, right? So that first 3 years of it, we acquired that from Cash Media. Vigilante is already sold to a major network guy.

Speaker 2

Opportunist has partnered with a network to do a documentary of just one season of it. Guy, we're out with 2 other seasons to the networks and the other one is called Lost in Panama. Okay. And I think we'll add another one almost. We'll probably add another one every couple of weeks, John, right now.

Speaker 5

Okay.

Speaker 4

Okay. Go and do.

Speaker 2

Thank you. Appreciate you.

Operator

Thank you. Our next question is from Sam Lee. Sam, please go ahead. Your line is open. Please unmute yourself locally.

Operator

It appears that Sam has disconnected. So I'll move on to our next question. Our next question is from Sean McGowan from Roth MKM. Sean, please go ahead. Your line is open.

Speaker 6

Are you able to hear me?

Speaker 2

Yes. Hey, John. How are you doing, buddy?

Speaker 6

Yes. Pretty good. How are you? Let me start with Aaron. First of all, congratulations, Aaron, on the recent promotions.

Speaker 6

But second, can you give us an idea of exactly when the 10 queue will be out.

Speaker 1

Thanks, John. Appreciate it. So we are looking at also It will be early next week. Deadline is Wednesday 14th. We're hoping to get it out maybe a day or 2 sooner.

Speaker 6

Okay. Would you mind repeating those percentage breakdowns on the revenue between subscription and ad and any kind of color you could provide on revenue outside of those two categories?

Speaker 1

Yes, sure. So let's see. I think we mentioned that Slacker Revenue was $16,800,000 for the quarter and podcast 1 was $10,400,000 So That's 2 big buckets there. And then in terms of the percentages, it's 54% membership and then 46% advertising sponsorship merchandise and other for the current quarter and then the prior year quarter was 49% membership and 51% advertising sponsorship merchandising and other.

Speaker 6

Right. That's just within audio, but can you just give me any color on revenue outside of that, just any meaningful trends going on there?

Speaker 1

So the outside of that, you've got basically merchandise revenue makes up the remainder.

Speaker 6

Okay. And then on the $20,000,000 deal, if you could provide any a little bit Color on that, for example, what time frame does that cover? And is all of that revenue going to be booked in kind of in one bucket or will will be spread around.

Speaker 1

So that will be that's over the course of calendar 2024. So you should see it in a relatively straight line manner over that period. And that will be in the advertising category.

Speaker 6

Okay. So it's all podcast?

Speaker 1

Correct.

Speaker 6

I see. Then back to Slack for a second. Any updates or Color on expanded relationship with Tesla or with any other equipment manufacturers? I think you've hinted in the past that there could be You have some additional partners for audio streaming, anything new there?

Speaker 2

Yes. So let me jump in on that, Sean. So What we just announced is we expanded our pipeline from 35 to 42 partners, Right. Our streaming partner is the 1st in many of these B2B deals, and we fully expect that out of those 42, Somewhere in the 5% to 10% of those will close this year. So anywhere from 2 to 4 of those and each of those are with 1,000,000,000 to multi $1,000,000,000,000 companies, very similar to this type of deal.

Speaker 2

And so we couldn't be more excited about the pipeline. We brought a great team out of Microsoft We've done 1,000,000,000 of dollars of B2B deals. And as you know, John, my entire business in Digital Turbine was built off the backs of B2B deals. That was just with carriers and hardware companies. We have 8 verticals here.

Speaker 2

So we fully expect to expand our auto business. We fully expect to expand our carrier business. And historically, Slacker has had partnerships with Everybody from Samsung to Verizon to T Mobile and as interest rates rise, and you're going to hear this theme exactly as I described in Digital Turbine for over 7 The same trend is here as interest rates are going up, those commodity businesses must have a closer relationship and must own the data of their customers. And you're seeing more and more of those partners now, signing up with content and owning their own content have a known content deals versus giving it to Apple and Android and just allowing them to own all that data. So really exciting pipeline, the biggest by far In the history of the company, it's the one area that we're adding people.

Speaker 2

We're now up to 4 people in our B2B. We'll continue to add to that group and You'll probably see some announcements around that and expanding that B2B as we announce the next deal.

Speaker 6

Okay. And when you talk about those 35 to 42 partners, is that all within Flacker or does that include partnerships that would be in podcast?

Speaker 2

Auto partnerships, right, so even though This first deal is for podcast. That doesn't mean it can't expand to radio, right? So and it doesn't mean it can't expand to our live streaming All of our pay per view, we have these massive libraries of video. So don't be surprised if you start to see announcements that cross over both of them. Okay.

Speaker 6

Thank you. And then last thing, Rob, can you give us a little bit more color on What we should expect to see in other products coming soon in celebrity? Is there any can you give us a little peek there? I mean, The wine is off to a great start, but what other things should we expect to see in the coming quarters?

Speaker 2

Yes. I mean, be patient because it's coming any minute now, Right. What I said is you're going to see another 2 or 3 products launched. So we have 2 wines already that are being launched. You're going to see us across big spaces, things like coffee, Right, cosmetics.

Speaker 2

So when you think about what's happened in the industry, these social media stars, which we live with every day, whether they're podcasts, whether they're musicians, whether Social media stars, we worked with all of them, right? You think of Logan Paul and Prime and how it's now doing $1,500,000,000 in revenues, right? And You think of Kim Kardashian, dollars 700,000,000 of revenues in 2 years and what she's done for the cosmetic industry and you think of Go back to Avion right inside of Entourage and Tequila being created inside of it. We see this great opportunity with very little to no cost to us to be able to partner with our creators with already having the rev shares built and be able to launch products and find out if their social media drives it. If their social media drives it, you're going to have a great brand.

Speaker 2

If it doesn't drive it, there's a pretty good chance that's going to be one you're going to pass on. So we expect to launch 10 to 12, I'm sorry, 8 to 12 this year and will expand to 10 to 12 the year after and further the year after. These will all be with very little cost to us. It's really just an extension of our content and new revenue streams that come out of it. I can't wait to do the ones with podcasters because with podcasters, just think about it, right?

Speaker 2

50% of the business is direct response. So they have proven records that you're selling products, right, directly off that podcast because these podcasts have super fans. So they don't have to be massive businesses, but they can be hugely accretive and usually grow our business overnight.

Speaker 6

Great. Thank you very much.

Operator

Thank you. Our next question is a follow-up from Brian Kinstlinger. Brian, please go ahead. Your line is open.

Speaker 3

Thank you. I have 2. The first one, I just want I'm sure lots of people We're thinking this about this $20,000,000 deal. So I'm going to ask it to make sure we're all thinking about it the right way. If I look at PodcastOne's revenues, You've been at about $10,500,000 for each of the first three quarters plus or minus.

Speaker 3

Is the way to think about it That you're going to do $42,000,000 ish this year, whatever it is, plus or minus. And next year is You're already off to $20,000,000 higher, so 50% growth based on that $20,000,000 deal or is there something I'm not thinking about the right way there?

Speaker 2

Yes, we'll come out, Brian. We can't go any deeper than we publicly announced. What we said is we expect to be on a run rate of $45,000,000 to $50,000,000 With 4 to 5, we're going to have to update that shortly, and give us a minute to do that, but we haven't publicly announce anything deeper there, but you certainly think in the right way, right? And one of the exciting things here is you now have Your advertising business growing almost as fast as your audio business, right? So this is the first time we have 2 moonshots happening at the same time.

Speaker 3

Okay. That's good to hear. The second one, I just maybe for Aaron on the cost side. The pros and cons, if you could just walk me through it. But first, on the OpEx side, it's substantially down in the December quarter from September quarter.

Speaker 3

I assume that's your cost cutting efforts. I want to make sure there's nothing one time and this is kind of indicative of the near term or lower as you've talked about in the past. And then on the gross margin side, I'm not sure what impacted the mix. It was a little bit lower than it's been for the last many quarters. So just if you could just take me through the dynamics on the cost side and how we should think about them going forward?

Speaker 3

And that's all the questions I have. Thank you.

Speaker 1

Yes. Thanks, Brian. So the OpEx question, I think we're There's not overall, there's not any one time significant one time matters in here. It came down a little bit from last quarter simply because we had substantial costs related to spinning off So you had accounting and legal costs, etcetera, public filing costs in previous quarters. So you don't have that noise kind of going forward.

Speaker 1

So that's that. And then on the margin side, There's about 3 percentage points of additional spend in the current quarter where we're out acquiring content. We expect that to kind of normalize in the coming quarters. So you should see an increase of about 2%, 3% there. I think that's kind of the runway we've been on previously.

Speaker 1

So it should drop or sorry, It dropped down this quarter, so it should pick back up in coming quarters.

Speaker 3

Great. Thanks for the explanation.

Speaker 1

Thanks, Brian.

Operator

Thank you. Our next question is from Thierry Williard from Water Tower Research. Thierry, please go ahead. Your line is

Speaker 5

Yes. Thank you very much. Good quarter guys and you've already covered a lot of ground. So I just have just one You're guiding to a very substantial jump in EBITDA for the Q4. And I was wondering if could give us some color, how much of that is seasonal?

Speaker 5

Is it driven by a onetime deal? Or if And what part of it is maybe leveraging in the model?

Speaker 1

I'll take this Rob and then you can jump in. So for Q4, As I mentioned earlier, we had a lot of kind of one time noise in kind of Q2, Q1, Q2 with a little bit leading into the current quarter Our efforts to spin out Podcast 1, so that's behind us. So we're expecting to see Some cost savings there. As the audio business continues to grow into Q4, we're just seeing additional contribution down to the bottom line there. And that's really kind of the 2 driving trends there in the EBITDA for our expected EBITDA for Q4.

Speaker 1

I don't know, Rob, if you have anything else to add.

Speaker 2

Yes, I mean, I would just say, not just PodcastOne, we had also filed a public offering for a Slacker radio to merge into a SPAC, which we subsequently pulled because the market was so terrible, but also because the company is growing so fast, right, revenues and EBITDA. So we had the cost of Three audits, legal fees, so on was very expensive. And Aaron, who has just made CFO, has just done a great job of that and Great job of managing it and you'll see I think you'll see those margins come back this coming quarter.

Speaker 5

Great. So I mean, if I summarize that, the EBITDA level you're forecasting for the 4th quarter is maybe a sustainable level going forward and kind of a new quarterly basis?

Speaker 2

Yes. I mean, our EBITDA, as you can see, and we don't break down by quarter, but we did put out guidance for next year Where we said our audio business is going to do $130,000,000 to $140,000,000 right, with $20,000,000 to 20 $5,000,000 of EBITDA, right? So you're starting to see some real traction and real move towards cash flow and bottom line.

Speaker 5

Great. That's it for me guys. Thank you very much.

Speaker 2

Thank you.

Operator

Thank you. We have no further questions. So I'd like to hand back to Robert Ellin for any closing or further remarks.

Speaker 2

I just want to thank everyone and appreciate your time. And in a difficult market like this, this is a great time for our company and growth. We're going to continue to buy stock and we'll be able to buy stock in the next couple of days. Now if the earnings are off and we'll continue to buy stock and if we're going to trade down at these low levels, We'll expand that buyback again if we need to. So I want to thank everyone and thank you for spending the time and we appreciate your support in a tough market.

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Earnings Conference Call
LiveOne Q3 2024
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