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.

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.

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…

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?

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.

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

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?

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.

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?

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.

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?

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.

All right. Thanks so much. I'll hop back in the queue.

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

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?

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.

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.

All the above. Now, we have a spectacular relationship with Tesla that is continuing to grow and now has been extended for its 10th year, but we're going to continue to grow our partnerships utilizing all of our podcast creators, all of our social media creators, all of account creators as well as our B2B partnerships. And we're really special. And we separate ourselves from the rest of the crowd is threefold. Number one in pricing, we're by far the lowest in the industry. We're a third of the price of most of our competitors. Number two, in service and that we can be nimble and have the ability to do things that we do for our customers that others can't do. And number three is white labeling, being able to provide a white label solution and be able to call it Tesla radio or a Verizon radio. For that matter, almost any one of our partners that is 10 million to 1 billion users have the ability to white label and utilize that solution, which there really is no one else in the industry has that capability of doing based on their size.

Great. Maybe just one last question. You mentioned 58% of the revenue from membership and 42% from sponsorship. Is that -- do you see that trending higher on membership as time goes or you think that's a good balance? Currently, how should we think about that?

What's nice to see is we've got two horses in the race now running fast. And so the podcast business has grown dramatically from $34 million. We gave guidance of $47 million to $52 million, right on a run rate. And the same thing on the Slacker side of it, on the audio side of it, we've grown from $20 million -- each of these businesses started at $20 million when we're acquiring them. Slacker, which we've owned two years longer is now doing -- this year, it'll be $65 million. And the same thing on podcast was doing $20 million. These were both losing a lot of money. They're now profitable. They're now EBITDA -- size about EBITDA coming out of it. And on the podcast side as you grow from $20 million, you're seeing some real sizable growth. And I see a two-horse race here where they're going to be pretty neck-and-neck over the next three years.

Great. Hey, thanks for the answers and nice quarter. I appreciate your comments on the microcap sectors and how kind of unprecedented that current situation is. But hopefully better times ahead. Thanks again.

Thank you. Appreciate you joining.

Our next question comes from Jon Hickman of Ladenburg Thalmann.

Rob, just one quick question. Will you elaborate on your comment that the current quarter, the December quarter is going to be record. Does that mean the best quarter you've had in corporate history or the best third quarter you have ever had?

Now to be -- it will be the best quarter in the history of the company. And this -- you can see by a lot of the metrics that we've already announced. We've already given telltale signs of where the growth is and what the growth is. We're growing about 60,000 subscribers a month. We're announcing almost a new podcast every two weeks. So it's really kind of -- now the model is to come really easy. As you know Jon, with new podcast, we're adding $350,000 to $500,000 of revenues. So you see those announcements, you can easily figure those out. Sky and somewhere in that 10% to 15% your net margins . Same thing in subscribers. Every subscriber that we're adding, every paid subscribers are already adding, we're adding in the -- between $3 to $3.5 ARPU with about 30% margins. So if we can continue to do that, we continue to add those, this quarter is just going to be -- it's going to be a very, very special quarter coming up. And that's the reason we, again, raised our EBITDA guidance, even though our revenues won't hit the numbers, we would like to because the IPO took longer than we expected but the uplisting took longer than we expected. But I see telltale signs that the cast media as well as the pipeline of podcasts are kicking in fast right now.

So with the lower revenue guidance and the higher EBITDA, is that difference coming out of expense control or better margin?

Nudge. Yeah, just we're being very cautious. We just took another $2 million of costs out of the business and being very cautious on what pieces of business we do. Any risk business -- we're not doing any of those live shows unless we're getting paid on them. As you and I have talked about before. And then we'll start to see telltale signs. We're going to start to get paid a lot of money in next year for us to produce those shows with margins very much like Social Gloves, but we're not going to do any of them unless there is money upfront. Unless there is money upfront with a guaranteed profit on them, we're going to focus our energy on the core businesses that are working right now and delivering revenues. And we're going to use our capital to continue to strengthen the balance sheet and continue to buy back stock. If our stock is traded at almost a nominal valuation right now, we're just going to keep buying back stock right now.

Okay, thank you.

[Operator Instructions]. At this stage, we have no further questions. So I'll hand back over to Rob Ellin for any closing remarks.

I just want to thank everyone. Thank you for joining and appreciate it, and we look forward to next quarter's numbers. Please join the Podcast's call on a few -- in a short period. And thank you everyone.

Ladies and gentlemen, this concludes today's call. Thank you for joining, and you may now disconnect your lines.