LiveOne Inc (LVO) 2025 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the LiveOne, Inc third quarter fiscal 2025 financial results and business update webcast. (Operator Instructions)

Thank you. And I would now like to turn the conference over to Aaron Sullivan, Chief Financial Officer. Mr. Sullivan, you may begin.

Thank you. Good morning, and welcome to LiveOne's business update and financial results conference call for the company's third quarter ended December 31, 2024. Presenting on today's call with me is Rob Ellin, CEO and Chairman of LiveOne. I would like to remind you that some of the statements made on today's call are forward-looking and are based on current expectations, forecasts and assumptions that involve various risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of the company, including expected future financial results and expected future growth in the business.

Actual results may differ materially from those discussed on this call for a variety of reasons. Please refer to the company's 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-K for the year ended March 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 has been posted on its Investor Relations website. The company encourages you to periodically visit the 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, February 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 the property of the company, and any redistribution, 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 Ellin.

Thank you, Aaron. Good morning, everyone, and thank you, everyone, for joining. This has been an extraordinarily challenging and exciting quarter for the company. Thanks to the unwavering dedication and relentless drive of the LiveOne team, we've achieved record revenues of $95 million in the first nine months and $29 million plus for the quarter, underscoring our ability to navigate an extraordinary challenge and turn it into the biggest opportunity in the history of the company.

Our Audio business, Slacker Radio and PodcastOne, I'm pleased to report, broke $90 million in revenues for the first time in the history of the company, accompanied by $14.1 million of adjusted EBITDA for the nine months.

This outstanding performance demonstrates our ability to pivot, survive and thrive. We've made significant strides to diversify the business and diversify our partnerships, especially in the B2B partnerships with five deals signed in the last 90 days, adding over $44 million in revenues, including $25 million with Fortune 500 media conglomerate and $16.5 million 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 to trillion-dollar companies.

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 for the 12 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 perpetuity.

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 multibillion-dollar opportunity. For anyone that's been an investor or part of my companies over the years, we shoot for the moon. 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 this beachfront real estate, and now the rents have been going up for 12 years, but 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 million Tesla cars in North America. This collaboration has been 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 million to 1 billion-plus eyeballs. I've been talking about a flywheel for the last seven years.

And as you see us sign those massive B2B deals, this proof, now think about whether a Facebook, an Amazon, a Walmart, a Microsoft, an Amex, anyone with 10 million to 1 billion eyeballs, if we can convert 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 million through a stock buyback program. We currently have $6.2 million remaining on that buyback 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 million to almost $11 million after paying off $3 million to East West Bank and acquiring 900,000 shares of our subsidiary, PodcastOne.

I couldn't be more excited about where podcasting is going. The presidency was won with the help of podcasting. Fox just bought Red podcast network for over 15 times revenues, Conan O'Brien's network sold for over 15 times revenues to Sirius. You're seeing deals -- the Kelce brothers selling for $150 million, SmartLess for $125 million. We have one of the biggest networks in podcasting.

I'm excited to share the PodcastOne 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 $16.5 million, and have just guided to $51 million 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 PodcastOne, and we look forward to continued growth.

To further accelerate our growth, we are working with multiple bankers, including JPMorgan, to explore all M&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 offerings. I want to thank our employees, our partners, our shareholders for continued trust and support, and I look forward to the following quarter.

Thank you, everyone, and I'll open it up to Q&A.

(Operator Instructions) Brian Kinstlinger, Alliance Global Partners.

So on your website, you offer Slacker Radio for $3.33 per month. Today I looked, and 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 investors. They want to try to understand what the ARPU looks like going forward.

Yes. I think it's a great question, and 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 is happening, what we found is we found a lot of people want to buy a year-long subscription, which is exceptional for us. What we found is, is that pricing elasticity, there's an opportunity to raise prices substantially.

As you're aware and have seen with Spotify, they've raised their prices 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 Brian Kinstlinger and Rob Ellin and the names and data and e-mails and credit cards and so on.

This will 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. I think there's a huge opportunity to increase our prices over the next 12 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 -- and remember, this all just happened as of December 4. On December 4, we renewed our contract, changed dynamically that contract from a guaranteed $3 a month. Now we have the opportunity to upsell that customer with the help of Tesla, okay? You have the opportunity of getting subscription that is monthly or for a year, or you have the opportunity now as of 30 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. No. So I get that. I'm curious, for example, I buy my car. I have free Sirius radio for a month and then it goes away after I have the option -- do I get -- is it going to start playing day one and then you have to -- have so much time to select ad-supported or buy? That's what I'm curious about.

Yes, great question. We have not yet -- as of 30 days ago, we launched the free ad-supported. And to our shock and excitement, as we said yesterday, we have signed over 450,000 free ad-supported subscribers. And what we decided to do that is, is that we've had such success for 12 years with Tesla in the usage and the time people spend, 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. What do I have to do? You have to get a barcode. You 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 them back into the funnel. We get those consumers back in the funnel. We give them. And when they 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 12 years. You'll get your five favorite songs. And then our DJs will invite you to a special offer to sign up for subscription.

I can answer you that 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 what works the best. 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 million out of 2 million.

And even the more amazing part is they're using it for an average of like 36 minutes three times a day. It shows proof of how much people love our service, how loyal they are to our service. And I think that's going to continue. And it will be a telltale sign that I can't imagine we're not going to deliver way more than $3 a month, whether it's ad-supported or it's subscribers down the line.

Okay. Last question I've got, related to PodcastOne. 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 12 to 18 months.

I would have expected eventually the gross margin would stabilize and start to increase as shows 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. The industry, whether you like it or not, advertisers pay in 90 to 120 days. It takes time to onboard them. And some of these, you're writing checks upfront, and the people aren't even moving over to our network for four or five months because they're under contract with who were there before.

It's also a challenging environment. You got to be aggressive right now and you got to get people into the funnel and sign them. And once you sign them you're going to start to see all those brand new revenue streams that you and I, Brian, have been talking about that eventually change those margins dynamically. So right now, if you look at Audioboom, a public company, you're going to see worse. Their margins are even lower than us.

So it's -- right now, it's a land grab. And you got to grab those great talents and you're going 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 a follow-up on that. How do you think about that? How do you think of 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 18 months? Just maybe talk about that.

I think it's happening right now. I've been talking about for the last two quarters. Brian, you and I have been watching so many industries. You have the first wave. You watched $17 billion of acquisition and some of the wildest deals. Wondery was across the street and it sold for $350 million. They were doing the same revenues we're doing today -- I'm sorry, they were doing the same revenues we were doing when I bought the company. So they sold for like 30 times revenues.

You watched Amazon, Apple, Sirius, Spotify, iHeart buy everybody out there. And then there was left with little networks, the smaller networks are out there and the radio companies who are obviously struggling terribly with their own issues. And now you're starting to see that second round of acquisitions.

When you see Conan O'Brian sell for 15 times revenues, 15 times revenues, and then you see Red sell for around the same, you're starting to see where some of it's desperation, some of it's perspiration, some of it's just reality of how big podcasting has become. Trump has said he won the election off podcasting. He just announced a Head of Media for podcasting. That the world is changing there. And what Rupert Murdoch amazingly -- probably had some desperation as well, realized yesterday he's got to go back and buy podcast because he's losing all his talent.

All the talent is moving away from radio and television. So as the big guys start to roll those back up, where we sit in the world, we sit in the world of under $5 million podcasts. Maybe we'll get to a $10 million one. We sit in sort of that micro-cap land of the best podcasters who are true podcasters. I think the model is going to change again dynamically.

As these acquisitions happen, the roll-up will happen and then the pricing will come back in a way better form in the next six to nine months.

Sean McGowan, ROTH Capital Partners.

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. December 4, we launched the paid service, shocking all. We signed an amazing amount of subscribers. We then said we've got to take a little bit of risk here, which will definitely put some of the paid subscribers because if you can get a free day one, you may not sign for those. So we knew we'd take a little bit of risk in it. I couldn't believe in my wildest dream, Sean, that we would sign 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 advertising company in the world. We signed a deal, I think we announced it 30 days ago, we're just in the beginning of it. And advertising takes 90 to 120 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.

And I'm hoping that Tesla is going to relaunch and realert, when they upgrade their software the next time, they're going to tell all these car owners again that they have an opportunity for paid and free. As they do that 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 be $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 Spotify just came out and they were asked just recently, why do they have an ad-supported?

And their answer was because 60% of those within a 24-month period convert to long-term subscribers. I'm not expecting 60%. But if we could have 20%, 30% of them convert to long-term subscribers, we're going to be building back that base strongly, we're going to be building back that guaranteed revenues. And then our advertising is really going to start to take off and hopefully explodes into the second, third, fourth quarter of this year.

Okay. Believe it or not, what I was kind of getting at with the question 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?

Yes. I mean, to be honest, you're not even seeing that yet. That just started. We're 30 days into that. So yes, there is some element. Every day you add another ad-supported. Until you drive those revenues, you're absolutely going to have some cost. It's 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 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 levels at this time?

No, it's not that. Remember, the ad-supported only launched 30 days ago. So you only have 30 days of it. So that's.

Okay. 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 Slacker and podcast? You talked a lot about that and I know you made a lot of progress, saw the press releases about Coffee. But like how close are we to that being needle-moving?

I don't know about needle-moving, but exciting. Publishing -- our Publishing business grew another 100% or so. We just got a number one song with SZA. That will be a big payday for us. You don't have to get to giant revenues to have huge value.

In Publishing, they sell for, as you know -- you know better than anybody, you guys own part of Renaissance. These are 12 times to 25 times EBITDA numbers. So we see really exciting stuff happening with our Publishing business and with Splitmind and Drumify.

Our product business, we just launched our coffee a couple of days ago. We sold out in the first day. I would say this is our year to have some transformative moves. Do I think it's going to be dynamic? Is it going to take our revenues -- is it going to take it up $10 million, $20 million?

No. But is it going to be on a trajectory? Do we have those kind of abilities over the next two to three years? Absolutely. And then on our television side, yes, we didn't talk about this on the call, but we sold our second show.

We sold Varnamtown 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 to my career, I have the movie, 300 and Spiderwick Chronicles. And just the royalty fees on those were tens and tens of millions of dollars and just pure profit with no risk. We have no risk in these deals. If they hit as television shows, they are going to be extraordinary bottom line increases for us.

I can't wait to see Varnamtown. I can't wait. It will be good.

Me too.

(Operator Instructions) And with no further questions at this time, I will turn the call back to Mr. Robert Ellin for closing remarks.

So thank you, everyone. Thank you for joining. Again, this is a transformative time for the company, a complicated time but an 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 Slacker Radio guys have been doing this for the better part, some of them have been here as much as two decades, have been at the company and have seen some amazing B2B partnerships. But nobody has ever seen 40% conversion.

This is a telltale sign of how much our product is liked. There's a reason that we've been award-winning. We're 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. And I can confidently tell you that looking out 12 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 these B2B deals, we have 70 of them in the pipeline. We're landing them. They're starting to come in.

We've announced 5 of them so far. We keep landing these B2B deals. And every one of my companies from Digital Turbine, to Majesco, to THQ, everyone 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've got a lot of work to do. But I can tell you confidently, this is the first time that I see a multibillion-dollar company over the next 24 to 36 months if we stay focused, we keep executing, we fight through the difficult times.

And I just want to thank everyone 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.