Good morning or good afternoon all, and welcome to the LiveOne Inc. Q1 Fiscal 2024 Financial Results and Business Update Webcast. My name is Adam, and I will be your operator for today. [Operator Instructions] I will now hand the floor to Aaron Sullivan to begin. Aaron, please go ahead when you are ready.

Good morning, and welcome to Live One's business update and financial results conference call for the company's first quarter ended June 30, 2023. Presenting on today's call 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 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 views as of the date of this call, August 10, 2023. And 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 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, and good morning, and thank you all for joining this very special day for Live Five years ago, my team entered the fast-growing digital audio market with the acquisition of Slacker Radio. At the time of acquisition, it was a very distressed asset with $20 million in revenues and almost $10 million in losses and has spent over $180 million building the assets. Today, and I'm proud to say that we've just raised our guidance to $123 million to $130 million in revenues. On the audio side of it alone, we raised our guidance to $103 million to $110 million with a staggering $18 million to $21 million of EBITDA. We promised the Street when I started this -- that by the end of 2027, LiveOne's Slacker Radio would capture 10 million subscribers and over $1 billion in revenues by the end of 2027. The opportunity is so big that TAM for this industry, according to Goldman Sachs, is over 1.7 billion paying subscribers alone. Today, I can humbly guide by the end of 2027, we expect not only to reach that $10 million but to pass over 15 million subscribers. We say this with confidence because LiveOne is growing over 800,000 subscribers, so you're at a 50% increase and ARPU of over $3. The pipeline for our B2B partnerships has never been greater. Each of these potential partners have $10 million to $2.5 billion addressable eyeballs. At $15 million and $3 ARPU will pass over $600 million in revenues. That's before any ad revenues or an increase in pricing of which LiveOne Slacker have been the only one in the industry have not raised prices, and we're at a 65% discount to all of our competitors today. Slacker Radio expects to begin trading in a reverse…

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

Great. And really, congratulations on this turnaround. It's taken a while, but you've done great work. Can you touch on the pipeline of podcasting in terms of M&A, what are the ranges in terms of sizes you're looking at? What are the general valuations that you hope in your discipline to acquire companies at and then just speak to maybe the mix in cash and stock and retaining management of how the plan will work.

Yes. Great question, Brian. I think you know me long enough now and all of our acquisitions are in that onetime revenue range. They've historically been with stock. We've done [indiscernible] because our stock is down, right? We have been acquiring it with the stock in PodcastOne. So on PodcastOne, we announced the valuation is well over $200 million when the stock is trading well below that. So we utilized our currency and PodcastOne to acquire both Fantasy Guru as well as the assets of Kast Media. We have over 10 acquisitions right now in the pipeline and they're really exciting. They go anywhere from sort of the size of $5 million up to $35 million, $40 million in that range. They make growth from here soon. But this is that unique opportunity right now to acquire the smaller podcast networks and add them into the fold and really our team is the best in the business, Kit, [Eli] and [Sue] approved net over and over again. And we just see the excitement and energy of it. You're seeing us announce on top of the acquisition. You're seeing us announce almost on a biweekly basis, another podcast with traffic and audience that already exist, moving over to our platform. And I think you're going to see more and more of that. So the pipeline for potential podcast to move over is over 100 and acquisitions in over 10 right now. So it couldn't be more exciting. And this is a great time to roll up the space.

And if I remember correctly, the acquisitions of Kast and Fantasy Guru have lower CPMs and your opportunities to increase CPMs when they're onboarded to your platform. Is that generally how when you look at those 10 or so in your pipeline, how it will work, they'll have lower CPMs, they come on to you? And immediately or at least once you negotiate you'll be able to generate higher revenue than just what they have?

Yes, I think it's a combination of things because we're a full 360 podcast network, and I'm going to hand this to Kit in a second, broadly, our team, we do everything for those podcasts and we act as a community, so we utilize our other podcasts to grow them, but also the size of our sales force is just dramatically different than the small podcast network. Kit, why don't you take over from that?

Yes. Sure.Yes, the ultimate goal is to raise CPMs, but it's a process, right? A lot of this shows that we're acquiring, whether by acquisitions or even just one-off where shows are leaving other networks or new shows are starting, the first phase of that process is to get demand on their inventory, start to sell out unsold inventory, give good packages to advertisers so they invest, test and work with these shows, get comfortable with these shows, then that's where the CPM start to grow. We have comfort with those advertisers to do things beyond just the spots and dots of what you would hear in a podcast to include exclusive episodes, content just around brands, social interaction, video all of these type of things. And that's where you're going to see increased CPMs. The competitors out there that we go against every day are very much the spots and dots of the world, and we're able to excel on that, but excel on all the other things that we just spoke about. So that's really one of the main growth factors. We get these shows on the network and we get them into our system and they start making more money than they ever have. We do more together, we do more episodes, and we really charge forward.

Just to add to that, guys. We just recently started to move over right, and signed some of the Kast Media podcasters variety who have struggled have been owed money, right the whole works. Kast had 2 salespeople. And just an example without using names, and you're going to read a lot about this very shortly, one of the first podcasts that came over, which would be one of the largest traffic of all of our podcast, we did triple the revenues the first month than they did previously.

But I think because you fill their inventory or because you had better advertising, why did you do triple the revenue?

Both. Across the board, we just -- we have so many advertisers already on our platform. We're able to go to them and use that great talent and use those numbers to expand the opportunity with them and grow our existing advertisers and then programmatic as well kicked in.

Right. Two more questions for me. The first is your numbers jumped up in the first quarter before the acquisitions. I know you had some new content coming on. You're speaking to M&A. Is there also a meaningful piece of organically creating new shows? Or will M&A dominate the content -- the addition of content? Sorry.

Kit, do you want to take that?

Yes. Yes. I mean, what we're trying to do is there are shows that are smaller that are on our network that we know we can't get to the next level. And rather than kind of use our resources after a 9-, 12-month string of trying to get it to where it needs to be. We then churn out the bottom, 15%, 20% of the network. And at the same time, we're growing the network by adding bigger programs with more opportunities that will be top 10, top 20 shows on our network, which will drive real revenue, right? And then we get them into our system and continue to grow beyond what we'd ever thought. So those are your those are your strategies, right, of growth. So when you look at the network, you're always trying to clean it up, get more efficient and bring in bigger ones and go from there.

I would say, Brian, two of our newest shows we just added are already in the top 10. So you're seeing brand-new shows that are really exciting really coming out of the box with very strong numbers.

What shows are those?

We just acquired Brendan Schaub. In his network, he has 3 shows, including the Golden hour, now or Fighter and the kid and The Brendan Schaub show. We have some more news, which is a really big news show that does not only really well in the audio space, but also in the YouTube video space. And those are just some of the new acquisitions that have heard -- that's occurred over the last 2 or 3 weeks. In the meantime, we're launching new shows on PodcastOne on an operated shows and we're acquiring other shows from competing networks that are unhappy with their current situation and they're coming over. For instance, I've had it, Two Women out of Oklahoma, one a lawyer and one an interior decorator, they're hilarious. They were just on the today show just last week. Their show came over to us with 20,000 downloads an episode. And this is a bit of an anomaly, but it's a lot of hard work, not only on our end, but their end, that show is doing over 125,000 downloads an episode and we'll crack 7 figures in revenue. We're talking to them about launching another episode where they'll have 3 episodes a week, one on Saturday. So that's the strategy, right, to find these people that fit into our mold and fit into our system and we can grow the revenues from low 6 figures to 7 figures even potentially even more, right? So that's really the strategy.

One of the other great -- Brian, one of the other great things that's happening in this space is because it's not nearly as competitive where everyone is willing to pay these crazy MGs or crazy prices. We're negotiating way better deals than we've ever negotiated before. And Kit and the team, as I've always described it, have always played moneyball, but now playing moneyball, you're going to see a lot more 60-40 deals and 50-50 deals than you did previously. And we've always stayed away from those 80-20 deals and it's proven to be the right methodology and the team really understood what the right deals were.

Okay. Lastly, this -- the Kast and Fantasy Guru acquisitions, disclosing them depend on PodcastOne trading on its own? Or is there any obstacle in closing those acquisitions? .

No, it's already happening, right? So Kast Media, we're buying certain assets of that, as we've already announced a couple of shows, and I fully expect you're going to see us announce some massive shows any minute now. With Fantasy Guru, I expect it to close in the next 30 days, right? It's an exciting time to close it because you go right in the football season. And we're really excited about this. They've never done any advertising and sponsorship. And it obviously crosses over radio as well as podcasting. So we see a really exciting opportunity to expand that business dramatically and utilize our creators and our podcasters to drive more subscribers.

The next question comes from Jon Hickman from Ladenburg.

Rob, can you elaborate on you said 2 to 4 weeks before podcast starts trading on a national exchange. Can you elaborate on why you think it's going to be that soon after all the delays?

Yes. I mean I can't say too much, but what we said in the press release is that after being approved by the SEC, Nasdaq asked us for our audited statements, right, which was not an unreasonable ask. It was just 8 months into the process. So as you know, we've delivered those audited, right? Those are filed publicly. And so that's all completed. And so I'm very, very confident that we will trade on a major exchange shortly. And it will probably be up to us as to what day we choose to trade and make sure that we do the right road show in advance, get out to the street in advance. And this has obviously taken a little bit longer than we expected and like everything. None of these are easy. It's the first time ever done that you've done an uplifting and a partial dividend at the same time. And what's happened is it's turned out to be a blessing in disguise. We increased the dividend dramatically. We pulled in 2 acquisitions, and we're not done, right? So this is a really exciting time for the company and really exciting for PodcastOne. We got to showcase the numbers for this quarter, showcasing a $10.6 million number. That's a big jump from where we were. So I'm really proud of the team, and I'm really proud of where this is going, and I'm really excited about these acquisitions. Kit just mentioned, Brendan is already on our network. It will be one of the top 3 traffic guys on our network and brings more and more male sports related, right? We have a massive female network. We're just going to keep growing and we see telltale sign just the right time and the right place for us to go forward.

One last question. You raised guidance, but the Kast Media and Guru those revenues aren't in the new guidance until -- because they haven't closed yet, right?

Correct.

The next question comes from Joseph Salino from Joseph Stone Capital.

Hey, Rob. Congratulations on a job well done, you and your team, hats off to you guys. My question was already answered by a previous investor, so you can take the next call.

[Operator Instructions] The next question comes from Sean McGowan from ROTH MKM.

Let me start with a couple of housekeeping things, the change in the terms of the podcast spin-off in the dividend, I mean, that was already announced, right? That change is already out there at the 19%?

Yes. Correct, [indiscernible] the public filings. That was already in the public filings as we approved with the SEC's approval.

Okay. And on the valuation of podcast, well, first on the trading. So there's not anything material yet to be done that you need to do. It's just a question of when it actually goes effective. Is that the right way to read what you're saying?

Yes. I think it's more than that. I mean, we're effective already, right? So effectively, you're a public company, to prove it. We're just waiting for an exchange, right, to be ready for that trading. And I'm very, very hopeful that we're on the 5-yard line. We're in the 5 -- yard line join, we may even be on the 2-yard line as of today.

Right. I meant that there's nothing material that you have to deliver like it's kind of -- the ball is in their court, if I can mix the metaphor. It's not like they're waiting on you to do something. You've done everything you got to do, right?

Correct. Correct. And one of the things we should make clear, and we've made this before, but I should make it clear on the call, Sean, just to give you round numbers, anyone owns 100,000 shares of LiveOne. You're going to receive about 4,800 shares of PodcastOne between $8 and $12. So if you take the low end of the range at $8, this is a very sizable dividend, right, for -- and that's only going to be shareholders of record who own it at the time that we're actually up and listed in the next couple of weeks.

Yes. Now on the valuation that you've referenced a couple of times that was done the third-party valuation, depends on some changes in the industry over the last half year or so. I guess the flip side of you being able to get content more favorable deals is maybe the mood around the category is a little different. So can you talk a little bit about your confidence in the prior valuations that were done?

Yes. I mean I would say the confidence is even higher. I mean, Sirius Radio bought a podcast network doing $10 million in revenues for $150 million in cash, only 6 months ago, right? And if anything, Spotify and Sirius' stocks have gone up substantially. Spotify came back down a little bit, but they're up very, very substantially from when that valuation was done. So if anything, the valuations have gone higher in the space. So we're pretty excited about it. And I think the opportunity of acquiring small ones is that Spotify and Apple and Sirius and iHeart they're not going to buy these little ones anymore. They're just too small for them, right? They've gobbled up a tremendous amount. They have big, big market shares in these. And I think it's an exciting time for us to be able to roll the smaller ones up because there really is no home for them anymore. And as you know, you got Odyssey and Westwood. There's a lot of debt out there amongst the radio companies that have built podcast networks. I think there's a huge opportunity to consolidate this space and really grow it in for us. I think we're the only game in town that can buy the small ones and do the things that Kit and his team do.

Makes sense. Circling around to splitmind. Can you just give us a little bit more color on this Madden deal, like this could be an example, right, of things that could happen. How does this work economically?

Yes. Great. So I'm going to hand that to Josh and I love the [indiscernible] because you and I have been -- Sean, you and I have been in the trenches of the game business and watch how much money is generated. I love music inside of these games. My kids play Madden literally nonstop and it's really exciting. So Josh, why don't you jump in and talk about where that's going, not just for games, but film, television, rein overall with the publishing side of our business.

Rob. I mean in general, publishing revenue comes from syncs and licenses. And I think that as we've got involved in this asset, we're really already showing how much value we can add on making revenue from that side of the business. Madden is the most prized video game in the U.S. I think it actually is the highest selling video game in the U.S. or at least the highest selling sports game. And we're track 1, we are the title track. We're the one that's on every commercial on all the Internet commercials and the nationwide commercials. And I think that, that mixed with the storing the music for the new Gerard Butler film Kandahar that just came out and doing the music for the Emmys last year, we're on track to really continue to grow the publishing business more on the sync and licensing side of the business. We're always focused on creating hit songs that's a given. That's our daily life of actual music creation, but you can't discount how much money you can really be making from the sync and licensing side. And as we grow, we'll continue to have more assets to be able to put inside of making money on that side of the business.

I think this is such a high profile kind of almost like a first real public test case on this model. So can you -- without getting into specifics of dollars or even in the percentages, but just kind of conceptually, how does this work? What's the basis of the revenue that you get from that? And is it a flat rate? Is it the number of times the game is played, is there the number of times the music actually plays? What's the basis of the revenue?

It's all encompassing. But there is a significant per side flat fee when you initially sign up for that. And if you look at all the other artists that are involved in that Madden project, they're not artists that do low fees. It really is the most coveted placement in the video game space, in my opinion.

Okay. A couple of other questions. So is the -- Rob, is the trading -- a little bit more color on the Slacker trading, like you said, a little sooner than you thought, assuming that it actually happens then? Or is that what you guys had in mind? .

Yes. I mean I think you're going to get a lot of clarity in the next 2 weeks, right? We signed the merger agreement a couple of weeks ago. I happen to be with Byron and the Hampton's right now, is with them yesterday and just finalizing. So we're ready to go. We have to -- our audit check to be filed right to Slacker, it will be the first time we're filling them, which would be really exciting, right? People are going to get to see the numbers. And I've been in the audio music business for a long time. I own [indiscernible] previously. And as you know, Sean, had an amazing run with the stock in it. What happened, no one could ever make money. We make a ton of money, right? This is printing cash. And obviously, having the Tesla partnership is -- and this being our tenth year in business with them and Tesla having a spectacular year is all exciting and obviously just an amazing partnership, right? And that's going to continue to grow our B2B deals, our pipeline of B2B, you'll probably see on LinkedIn and out there, we're out there aggressively even though we cut -- we consolidated 150 people in staff and took $31 million of cost out. We're hiring B2B people, revenue, salespeople, revenues people because right now, the flywheel is explosive, so we're going to be hiring nonstop. And we're seeing telltale signs that I said I'm going to blow through the 10 million subscribers now before 2027. And we see telltale signs, any one of those, one more automobile company, one international carrier right comes along, one social media company. All these guys have been partners over the years. And as you know, I built digital turbine off the backs of carriers. There's no reason that we can't pick up a carrier and really partner with them and give them content and give them the full 360 play. And the fact that we're the lowest price and the fact that we are willing to white label like we do with Tesla, we're the only ones in the world that can do that. There's only 15 companies in this space. It's growing to 1.7 billion paying subscribers and probably 3/4 of the world will have the music subscription. I think we're going to take a chunk of that space. And I think you're going to see another car company, you're going to see international rights. You're going to see them all coming this year. And finally, we've got the balance sheet in shape and the flywheel is kicking in so fast that there's no reason that we can't land a huge B2B partnership very shortly.

Okay. Last quick question maybe for Aaron. When do you expect the 10-Q to be filed?

Sean, we expect Monday 14.

And Sean, just before you jump, just one more thing I forgot to add to it. One of the things that I said to the Street is when we announced the deal, right, to merge into the SPAC, I wouldn't do that deal unless just like PodcastOne, we had other roll-up acquisition opportunities that could fit in there. So that may give us expansive growth and, again, at super accretive acquisition valuations, and there's some great assets right now that are coming available. So you may see that coming as well.

[Operator Instructions] We have no further questions, so I'll hand the call back to the management team for any concluding remarks.

I want to thank everyone for their patience for being our partners in this, right? We couldn't be more excited about the company. And as I said on the call, I fully expect by 2027, we would be a $1 billion-plus company. It's just math, right? When you look at these numbers and you look at the trajectory and the growth to we're growing right now, we're going to grow over 800,000 subscribers this year, all right? So over 50% year-over-year, our podcast business is doing very similar. Our sponsors have grown from 7 sponsors pre-COVID to over 700. I couldn't be more proud of this team and I think we really have this now. We have this in the perfect direction to really be able to run the table. And so I just want to thank everyone for attending and continue to support the company.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.