LiveOne, Inc. Price & Performance (LVO)

Good morning and welcome to LiveOne's business update and financial results conference call for the company's third quarter ended 12/31/2024. Presenting on today's call with me is Rob Ellens, 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, included 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 on its annual report on Form 10 ks for the year ended 03/31/2024 and subsequent SEC filings. You'll 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 Following discussion, including responses to your questions, contains time sensitive information reflects management's view as of the date of this call. 02/14/2025.

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'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 a property of the company and any distribution, transmission or rebroadcast of this call or the webcast in any form without company has expressed written consent strictly prohibited. Now, I would like to turn the call over to LiveOne's CEO, Rob Allen. Thank you, Alan. Good morning, everyone, and thank you everyone for joining.

This has been an extraordinarily challenging and exciting order for the company. Thanks to the unwavering dedication and relentless drive of the LiveOne team we've achieved record revenues of $95,000,000 in the first nine months and $29,000,000 plus for the quarter. Underscoring our ability to navigate an extraordinary challenge and turn it into the biggest opportunity of the history of the company. Our audio business, Slacker Radio and Podcast One, I'm pleased to report broke $90,000,000 in revenues for the first time in the history of accompanied by $14,100,000 of adjusted EBITDA for the nine months. This outstanding performance demonstrates our ability to pivot [indiscernible] We've made significant strides to diversify the business and diversify our partnerships. Especially in the B2B partnerships with buy deals signed in the last ninety days adding over $44,000,000 in revenues. Including $25,000,000 with Fortune 500 MediaTron, and $16,500,000 with Amazon. We expect to close at least two more partnerships by year end. Our pipeline is robust with over 70 B2B partnerships in various stages of development with billion dollars to trillion dollars companies. [indiscernible] 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 to the twelfth straight year with Tesla. Providing for the first time ever beachfront property with our logo, with our branding, right in the front of every single Tesla car. And the amazing part, this is in [indiscernible] 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 multi billion dollar opportunity. For anyone that's been an investor or part of my companies over the years, we shoot for the This is now that unique moonshot you have that you're 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 for twelve years. We weren't 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's 40% of the entire pool of the 2,000,000 car 2,000,000 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 10,000,000 to 1,000,000,000 plus eyeballs. I've been talking about a flywheel for the last seven years as you see us sign those massive B2B deals, this proof now think about whether a Facebook and Amazon, a Walmart, a Microsoft, AmEx, any more than $10,000,000 to $1,000,000,000 eyeballs. If we can give birth 40%, even if we can convert 1% or 2% of those users, we have a multibillion dollar opportunity. As we move forward, we're pivoting our business model, leveraging our partnerships and delivering our music platform to large user bases in B2B deals. In addition to our continued growth I'm pleased to reiterate that LiveOne has committed $12,000,000 to stock buyback program. We currently have $6,200,000 remaining on that buyback. That program and shows the confidence we will continue to buy and show 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 $4,000,000 almost $11,000,000 after paying off $3,000,000 to East West Bank and acquiring 900,000 shares, of our subsidiary, Podcast One. I couldn't be more excited about where podcasting is going. The presidency was one with the help of podcasting. Fox just fought Podcast Network for over 15 times revenues. Conan O'Brien network sold for over 15 times revenues to Sirius. You're seeing deals, the Kelsey Brothers selling for $150,000,000 Smart List for $125,000,000 We have one of the biggest networks in podcasting. I'm excited to share that Podcast One subsidiary has achieved record revenues and traffic for the quarter. We've expanded our network to become the eighth largest in the industry have secured a major partnership with Amazon a three year deal worth $16,500,000 and have just guided to $51,000,000 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 innovative solutions to our audience advertising partners, we're 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 and A opportunities that can enhance our business and unlock additional values. This steps aligns 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 Boston support, and look forward to the following point. Thank you everyone and I'll open it up to Q and A. Thank you. We will now begin the question and answer session. Please pick up your handset and ensure that your phone is not on mute. And your first question comes from the line of Brian Kinst Kinstlinger with Alliance Global Partners.

Great. Thanks so much. So on your website, you offer Slack radio for $3.33 per month. Today, I look it's $39.99 for the year Is this the ARPU we 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 look [indiscernible] going forward. Yes, I think it's a great question. I think that dynamic is challenging to answer exactly.

But we did say recently, we'll be raising our 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. Which is exceptional for us.

We found is that [indiscernible] elasticity, there's an opportunity to raise prices substantially. As you're 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 just having a VIN number of a car, but actually having [indiscernible] Rob Ellen and the names and Gator and emails and credit cards and so on, 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 10 in the industry. Yes, we're the lowest by far in terms of pricing. Think there's a 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 to attract me for some period of time? Just curious how a new Tesla plays out now.

Yes, it's a great question. You have the opportunity right? And remember this all just happened as of December 4. On December 4, we renewed our contract, changed dynamically right, that contract from a guaranteed $3 a month right? Now we have the opportunity to upsell that customer with the help of Tesla, [indiscernible] You have the opportunity of getting 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 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 subscription with no ads. Right. So I get that. I'm curious for example, buy my car, I have three three Sirius radio for a month. And 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 [indiscernible] That's what I'm curious about.

Yes, great question. We have not [indiscernible] as of thirty days ago, we launched the free ad supported and to our shock and excitement, Right.

We said yesterday, we've signed over 450,000 free ad supported subscribers. And what we decided to do that is that we've had such success for 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 subscription because it's a little clunky and a little complicated. Well, I have to do it. You have to get a barcode, right? You got got to sign up, you got to put your information in, you got to put a credit card in, Well, this gave them an easy way that we get him 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 a subscriber 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 a subscription. I can't answer yet. We're learning every day. And figuring out daily what that next offering is going to be.

And some of it will be free forever. Some will be discounted offers and we'll come up with strategies and 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 it's so substantial You've rarely ever seen a model where you can sign 40%. Of the total allocated pool of cars. We signed 800 out of 2,000,000. Dollars And even the more amazing part is they're using it for an average of like thirty six minutes, three times a debt. 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'll 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 as Joe was added 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 when you're signing these deals, there's some upfront money right? The industry right, whether you like it or not, advertisers pay in ninety days to one hundred and twenty days. It takes time to onboard them. And some of these you're writing checks upfront, and if people are already moving over, to our network for four or five months because they're on the contract with who they were before. It's also a challenging environment. Right? You got to be aggressive right now. And you got to 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 and I and Brian have been talking about, that eventually change those margins dynamically. Right. Right now, if you look at AudioBoom, 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 got to grab those great talents right?

And you got to grab as many of them as you can that you believe fit into the dynamics of your network. And that will change And 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. When do we get back to 10%? Are we over a year out? Are we eighteen months? Just maybe talk about that. I think I think it's happening right now. I've been talking about for the last two quarters Brian, you and I have watched in so many industries, right? You have the first wave right? You watched $17,000,000,000 of acquisition in some of the wildest deals, Wondery, across the street and you sold the $350,000,000 right? They were doing the same revenues we're doing today. Right. Guy, I'm sorry, they were doing same revenues, we were doing when I bought the company, right? So they sold for like 30 times revenues. You watched Amazon, Apple, you watch Amazon, Apple, Sirius, Spotify, iHeart, by everybody out there. [indiscernible] 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 15 times revenues, 15 times revenues and then you see red sell for around the same right, you're starting to see where some of its desperation some it's perspiration, some it's just reality of how big podcasting has become, right? Trump has said he won the election off of podcasting. He just announced a head of media for podcasting. Right? Guy that the world is changing there and what Rupert Murdoch amazingly probably out of some desperation as well realized yesterday he's got to go back and buy podcast because he's losing all those now. All the talent is 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 $5,000,000 podcast. Right? Maybe we'll get to a $10,000,000 one. We sit and show that micro cap land of the best [indiscernible] I think the model is going to change again dynamically as these acquisitions happen.

The roll up will happen. The pricing will come back in a way better form in the next six to nine months? So much, Rob. Thanks, Brian.

Your next question comes from the line of Sean McGaughan with ROTH Capital Partners. Your line is open.

Good 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 with the ad supported, subscribers, are you yet monetizing any of that advertising? Are you up and running with that?

We are just touching this all just happened, right? December 4, we launched the paid service Shock and awe, we signed an amazing amount of subscribers, right?

We then said, we've got to 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 dream, Sean, 450,000 and be adding still today we're still adding like 5,000 to 8,000 a day of ad supported subscribers. So we signed this partnership with Dax, the biggest programmatic advertiser, 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 90 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's 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 their software the next time they're going to tell all these foreigners again that they have an opportunity [indiscernible] 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 then Spotify just came out and they were asked just recently why do they have an answer for it? Right. Their answer was because 60% of those within a twenty four month period convert to long term subscribers.

Right? I'm not expecting 60% but if we could have 20%, 20%, 30% 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 at guaranteed revenues and then our advertising is really going to start to take off and hopefully it explodes into until the second, third, fourth quarter of this year.

Okay. Believe it or not, what I was kind of getting at with [indiscernible] 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? Like how are those costs recorded and why isn't that actually more out of whack?

Mean, to be honest with you, you're not even seeing that yet, right? That just started. We're thirty days into that. Right? So yes, there is some element, right, Every day you add another ad supported until you drive those revenues, absolutely going to have some costs, 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 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 the ad supported only launched thirty days ago.

So you only have thirty days of it, right? It's in the quarter.

Yes, all right.

Yes. So you're not really getting that in last quarter.

Okay. Last question is how close are we to seeing revenue from sources other than Slack around podcast? 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?

I don't know about needle moving, but exciting, right? Publishing our publishing business grew another 100% or so. Right? We just got a number one song with Scissor that will be big payday for us. You don't have to get to giant revenues tab. Huge value, right, publishing their software as you know, you know better than anybody, you guys own part of Renaissance, right? These are 12 to 25x EBITDA numbers. So we see really exciting stuff happening with our publishing business [indiscernible] Our product business, we just launched our coffee as a couple of days ago. We sold out I would say this is our year to have some transformative moves. I think it's going to be dynamics? Are you going to take our revenues it going to take it up $10,000,000 $20,000,000 No. But is it going to be on a trajectory right, that we have those kind of abilities over the next two to three years? Absolutely. Great.

Thank you.

And then on our television side, yes, we didn't talk about this on the call, but we sold our second show We sold Varnam Cown 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, television show and just going back my career at the movie 300 and Spiderwick comic, Chronicles, right? And just the royalty fees on those with 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 bottom line increases for us.

I can't wait to see Barnet's hands. I can't wait.

Question And with no further questions, So thank you everyone. Thank you for joining. Again, this is a transformative time for the company, a complicated time, but exciting time. And as I've 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 Slack or radio guys have been doing this for the better part, some of them have been here as much as two decades, a minute at the company and have seen some amazing B2B partnerships but nobody's ever seen 40% conversion. This is a telltale sign of how much our product is like right? There's a reason that we've been award winning going to struggle a little bit. We're going to fight through this. We survived COVID. Lost all of our live business, came out bigger and stronger than ever. We're going to do the same thing here in 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 yes, these B2B deals we have 70 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 every one of my companies from Digital Turbine to Majesco to Tragic, everyone of them were built on the backs of B2B deals And I say this totally humbly. I've never had a stock didn't go to $25 or better.

A few have gone to $100 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 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 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.