LiveOne, Inc. (NASDAQ:LVO) Q2 2024 Earnings Call Transcript

LiveOne, Inc. (NASDAQ:LVO) Q2 2024 Earnings Call Transcript November 9, 2023

LiveOne, Inc. misses on earnings expectations. Reported EPS is $-0.04 EPS, expectations were $-0.01.

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. [Operator Instructions]. I want to hand over to our host, Aaron Sullivan, CFO, to begin. 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 second quarter ended September 30, 2023. Presenting on today’s call with me today 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 in this call from a variety of reasons.

Please refer to the company’s filings with the SEC for information about factors which could cause the company’s actual results to differ materially from these forward-looking statements, including those described in its annual report on Form 10-K for the year ended March 31, 2023, and subsequent SEC filings. You’ll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today in the company’s earnings release, which is posted on its investor relations website. The company encourages you to periodically visit investor relations website for important content. The following discussion, including responses to your questions, contains time-sensitive information and reflects management’s view as of the date of this call, November 9, 2023.

And 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. 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 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 I read distribution, transmission, or rebroadcast of this call or the 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 everyone for joining us today. Investor appetite demand for micro-cap stocks began to decline and soften almost two years ago. We made major strategic decisions then to protect our shareholders’ capital, take aggressive cost cutting measures, and solely put 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 PodcastOne. 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 two years, I’m thrilled to announce that we have done a remarkable job of delivering $32 million in consolidated cost savings, and are looking at another $3 million to $5 million over the next few months. We have purchased over 3.5 million shares in the buyback and have left room to acquire another 5 million shares. Our balance sheet is the best in company’s history with $0 debt and over $28 million in short-term assets. On our audio business, we acquired Slacker and PodcastOne to combined companies produced about $40 million in revenues and $15 million annually. And need 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 $52.6 million, a record number and $10.3 million of EBITDA just for the first six months.

We raised our EBITDA and cash flow guidance on the audio business $18.5 million to $21 million of EBITDA. That combined effort has been a $35 million swing from the time of these acquisitions. To clearly articulate and simplify why our hockey stick growth is coming from these two key revenue streams. One is subscription, and two is sponsorship. Our subscribers have grown eight times from 400,000 to over 3.3 million 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 PodcastOne as a separately traded public company on December, symbol PODC. Management commitment to increase shareholder value issued a dividend of 18% to our shareholders.

The spin out made PodcastOne, the first stand-alone podcast network to list and trade on a national exchange. And so far for the first time, investors now have the opportunity to invest directly in that fast-growing podcast business. Trading between $60 million and 100 million valuation since it started trading on Nasdaq, LiveOne owns 80%, leaving wide ones remaining for subsidiaries trading at nominal valuation. PodcastOne is doubling the number of top creators on its platform in the three-year period, adding 18 already this year. At an average about $350,000 in revenues per podcast. We have increased revenues to $21 million for the six months and growing up from the $20 million 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. I encourage everyone to listen to the separate PodcastOne 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 a paid membership to LiveOne. These members are paid directly to LiveOne by Tesla. Expanding our management team with a clear focus on B2B partnerships, we identified five verticals and have now over 27 blue-chip billion-dollar-plus companies in our pipeline. This combined efforts — combined opportunities almost guarantee another huge growth year for next year already in place before we even finished our 9th month of this year.

I indicated last year we’ll pass over 10 million members within five years and over $1 billion in revenues. Over the past 12 months, we’ve added a record 679,000 new paid members, an average of over $3 ARPU. And now passed 3.3 million total members, 2.4 million paid members. We expect to pass over 4 million total members by the end of next year and over 3 million paid members. To better understand these metrics, Goldman Sachs issued a report that the industry will hit 1.7 billion 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 $8.5 million, leaving almost $5 million of additional buying.

Now I’d like to hand it off to Aaron Sullivan, our CFO. Thank you, Aaron.

Aaron Sullivan: Thanks, Rob. I’ll spend just a few minutes providing a very brief overview of our results for the second quarter of fiscal 2024, which is ended September 30. Consolidated revenue for the three-month period ended September 30, ’23, was $28.5 million. Slacker posted record revenue for Q2 of $16.4 million and adjusted EBITDA of $5 million. And PodcastOne posted revenue of $10.5 million and adjusted EBITDA of $100,000. In the second quarter of fiscal ’24, 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 FY24 is $2.8 million. On a US GAAP basis, LiveOne posted a consolidated net loss of $6.5 million or fiscal ’24.

As of September 30, 2023, we had approximately 2.4 million paid members, a net increase of 697,000 or 38% compared to the prior year. Total members, which include free members were approximately 3.3 million as of September 30. Note that included in the total members or certain members who are currently subject to a contractual dispute for which we are not currently recognizing revenue. Rob, I’ll turn it back to you. We may have lost Rob. Operator, do you want to open it up for questions?

Rob Ellin: Sorry, guys. So just to wrap it up before we go to Q&A. Balance sheet, the strongest it’s have been in history of the company, $28 million of short-term assets with $0 debt. $15 million of debt was converted at $2.10 and another $8 million 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, a 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&A. Thank you, everyone, for joining.

See also 12 Countries That Produce the Best Music and 10 Best Battery Stocks To Buy.

Q&A Session

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

Unidentified Analyst: And this is on for Brian. Thanks for taking my questions. Firstly, could you share any updates on ? More specifically, how many podcasts from cast have you onboarded and how many more do you expect to onboard and over what timeframe?

Rob Ellin: It’s a great question. Thank you. So on cast, they had about 27 podcasts. We’ve onboarded around 6 or 7 at this point. It took a little longer than we expected because of the timing of the uplisting, which took us almost five 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.

Unidentified Analyst: Great, thank you. And then outside of cast, can you talk about what the reasonable goals are for a number of titles you hope to onboard annually?

Rob Ellin: Yeah. 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 are existing podcasts that are moving from other networks that the doors have open. That right now it has been –. For the last three years, this has been a seller’s market for podcasters. Right now, it’s a buyer’s market for podcast networks. And so there’s great opportunities and way better deals and economics for the networks than they were previously. And actually the floodgates opening. This should be — the second half of year should be very similar to the first half of the year. And I could see us adding well over 30 podcasts this year.

Unidentified Analyst: And lastly, can you touch on the lower revenue guidance range for fiscal ’24? How much is the result of the ad market versus the pace of onboarding new podcasts or any other factors that I might be missing?

Rob Ellin: Yeah. Good question. So most of that is coming from the merchandise business. We have two things. One is, as articulate in the call, we made the determination to focus all of our energy on our audio business, and in buying back stock, and in cleaning and strengthening the balance sheet. So our merchandise, the merchandise business, we are starting to cut — we just took $2 million of costs out that we announced a couple of weeks ago. We’re looking at costs and revenues that are not as profitable. Some — a little bit of it is — some of the cash wants to take a little bit sign on board but most of it is coming from the merchandise side of the business.

Unidentified Analyst: All right. Thanks so much. I’ll hop back in the queue.

Operator: [Operator Instructions]. Our next question comes from Thierry Wuilloud of Water Tower Research.

Thierry Wuilloud: Good morning. Rob, a couple of questions. You mentioned five verticals. Can you give us a sense for what they are for new potential flagship partners?

Rob Ellin: Yes. And these are just the beginning. There’s going to be way more verticals. So yeah, for anyone that knows my background and knows what I’ve built with Digital Turbine, you’re going to have carriers, which we’ve already been a partner with Verizon, T-Mobile, and have been partners with many others. So carriers, additional auto companies like Tesla, additional merchandise companies. I’m being careful in giving names because as we said in the last call, this pipeline is very meaningful. It’s over 27 companies in that pipeline, and we expect to announce some of those shortly. So retailers, anyone that is competing with Amazon is going to need that. Cable and satellite operators as well as a personal gym equipment, anything from the telecoms in the world to gym equipment.

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.

Thierry Wuilloud: That’s great. You mentioned 675,000 increase in paid members. Do you have a way to — is it new partners that you brought in? Or is it existing partners that are growing the members, that are on the platform.