LiveOne, Inc. (NASDAQ:LVO) Q3 2022 Earnings Call Transcript February 9, 2023
Operator: Hello, and welcome to the LiveOne, Inc. Q3 Fiscal 2023 Financial Results and Business Update Webcast. My name is Elliot, and I will be coordinating your call today. . I’d now like to hand over to Aaron Sullivan, Interim CFO. The floor is yours. 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 third quarter ended December 31, 2022. Presenting on today’s call are Rob Ellin, CEO and Chairman; and myself, Aaron Sullivan, Interim CFO. 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, 2022, and subsequent SEC filings. You will 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. And the company encourages you to periodically visit its 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 9, 2023.
And except as required by law, the company does not undertake any obligation to update or revise this information after the date of this call. I’d like to highlight to investors that this call is being recorded. The company is making it available to investors and the 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, retransmission or rebroadcast of the call or the webcast in any form without the company’s express written consent is strictly prohibited. Now I would like to turn the call over to LiveOne’s CEO, Rob Ellin.
Robert Ellin: Thank you, Aaron, and good morning, everyone. I’d like to thank everyone for joining us today for our fiscal year 2023 third quarter business update and financial results. The consolidation — we are proud to say the consolidation, 18 months of work of 6 acquisitions and each of our subsidiaries, is complete. We have cut over 30% of our staff, and the stars of our organization have risen to the top. We’ve been humbled by COVID, COVID variances; epic market crashes, especially in media and technology, but we have survived and we have thrived. It’s time to showcase our team’s expertise at building billion-dollar companies. I can proudly tell you that all of our debt is now gone, converted into preferred equity at $2.10 this week, and we now have over $27.5 million in short-term assets.
The company has repurchased 2 million shares of stock, and starting early next week, will start to buy back $2 million worth of additional shares. We’ve gone from a story stock to a growth stock to now a value stock, trading at 60% of revenues and 5x adjusted EBITDA while our peers trade at 3.3x revenues. As we’ve consolidated our Audio Division, delivered record revenues of $64 million and a record adjusted EBITDA of $15 million. When we acquired Slacker Radio and acquired PodcastOne, they were both losing substantial amounts of money. I can proudly tell you now, those combined businesses will do well over $85 million and over $18 million of adjusted EBITDA, an increase of 105% compared to adjusted EBITDA of last year. We’re growing in every area.
Our membership has exploded, adding over 620,000 paid members since December 31, ’21, and a 45% increase, taking our total membership to 1.96 million and a total — our total members, including free, of 2.8 million. What I’ve told the street is we expect to within 5 years get to 10 million members. This is a very tiny piece of the overall TAM of the Audio business. To all the stocks come out and said they’re going to be 1.7 billion paying subscribers, up from this year’s 375 million. This will be less than 1% of the TAM of the industry. We’ve hit record number of sponsors on the platform. We had 7 pre-COVID. We have passed over 300 this year and expect by March 31 to have over 400 sponsors on our platform this year. Our B2B partnerships are getting more and more exciting.
Number one, obviously, is our Tesla partnership, which continues to grow. And we just see telltale sign this is going to be a spectacular year for Tesla and for LiveOne. We’ve added partnerships with Google Android Automotive to be able to white-label for other car companies as well as many other products across everything from retailers to sell carriers, to social meeting, to cable companies. Candidly, anywhere with 10 million to 2.5 billion eyeballs is going to need a music platform. We’re one of 12 less than that have all of the technology, partnerships with the record labels and the publishers and the ability to deliver subscription sponsorship as well as all of the great things we do in media and original programming. We recently launched a very exciting division, LiveOne brands.
We’ve just announced a partnership between 2 pop culture stars, Jeremy as well as Winemaker Russell Beva, and we’ll be launching the MVP version very shortly of our new consumer product. PodcastOne. We filed our S-1 on December 27, and we expect to begin trading very shortly. Company has delivered record revenues, has over 11 million unique viewer, listeners a month and growing, and we have over 300 podcasts in the platform and has grown from million for the quarter. That TAM as well. As you look at your opportunity of growth here, the TAM has just passed $1 billion in revenues for the overall podcast business, and it’s on its way to $10 billion over the next 5 years. Now I’d like to hand it back over to Aaron, and I’ll finish off with some comments at the end.
Aaron Sullivan: Thanks, Rob. I’ll spend just a few minutes to provide an overview of the results for our fiscal ’23 first 9 months and third quarter ended December 31, 2022. Consolidated revenue for the 3- and 9-month periods ended December 31, 2022, was $27.3 million and $74.1 million, respectively. Our Audio Division posted revenue for the 3- and 9-month periods of $22 million and $64 million, respectively. For the third quarter ended December 31, 2022, revenue was comprised of 49% membership and 51% advertising sponsorship merchandising and ticketing events compared to 33% membership and 67% advertising sponsorship and ticketing events in the prior year period. Consolidated adjusted EBITDA for the 3 and 9 months was $3.1 million and $9.4 million, respectively.
On a U.S. GAAP basis, LiveOne posted a consolidated net loss of $3.2 million or $0.04 per diluted share in Q3 fiscal ’23 and a net loss of $5.3 million or $0.06 for the 9 months ended December 31, 2022. Our Audio Division’s adjusted EBITDA for the 3- and 9-month periods was also a record of $5.1 million and $15 million, respectively. As of February 7, we had approximately 1.96 million paid members, a net increase of 620,000 or 45% compared to December 31, 2021. Total members include free memberships or approximately 2.8 million at February 7, 2023. Included in the total members are certain members who are currently subject to a contractual dispute for which we are not currently recognizing revenue. Turning briefly to the balance sheet. We ended Q3 with cash of $8.5 million, including restricted cash of $300,000.
And now I will turn it back over to Rob.
Robert Ellin: Just to wrap it up, everyone, I just want to highlight some of the exciting points that we’ve hit on in our press release as well as in this conference call. Number one, record numbers across the board; number two, world-class management, world class board, huge growth in sponsorship as well as membership. LiveOne grows every time Tesla grows. Every day a car hits the road, we grow alongside of them. We’re now in 68 of the cars and growing. And we now have a partnership with Android Automotive to be able to white-label for any car company, right, as well as many other industries in a similar fashion. We started our buyback. We bought back $2 million shares. Next week, we will begin buying back additional shares.
I’ve personally been a buyer of stock. This company’s stock is extraordinarily undervalued, and I’m extremely excited to see some of the new shareholders that have joined us, have been adding to their positions, and I look forward to a spectacular year for the company. And I want to thank everyone for joining us and be patient with us in a difficult market. We’re going to be here for the long term, and we’re going to deliver a spectacular year this year. Thank you. Now I’d open it up to any questions.
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Operator: . First question comes from Brian Kinstlinger from Alliance Global.
Brian Kinstlinger: And it’s great to see the job you’ve done in rightsizing the business. Can you quantify podcast download trends in December — in the December quarter versus last December? And then I assume there, there is significant growth which is being offset by challenges in the advertising market. So maybe if you could quantify what you’re seeing there as well.
Robert Ellin: Yes. I mean I think it’s going to be a very difficult year of advertising market. Part of the beauty of podcasting is that you have a huge direct response, and you actually have material numbers backing, right, because in the digital side of it in podcasting, you know exactly what the numbers are. So I think we’re going to have to fight that trend. But at the same time, we’re adding so many podcasts to our network. And we see just telltale really exciting signs that are happening in the industry, not just the TAM but also directionally, right? The competitors who are also partners of ours like Spotify and Apple and so on have really — they’ve spent a lot of money acquiring a tremendous amount of companies at massive valuations.
As you probably saw, our Sirius radio just brought out podcast business at 15x revenues. We just raised our money in PodcastOne literally at less than 2x revenues at a $68 million valuation. We’re about to go public with it. We see the trends look great. We were ranked #4 on Podtrac as Best Sales Team. I think we have the best sales team in the entire industry. They come out of iHeart and Sirius and they’ve had that expertise. And I just see just terrific trends for our business specifically, but we will have to fight overall sponsor and advertising trends.
Brian Kinstlinger: And can you possibly — if you’re able to share the December quarter download trends in 2022 versus 2023 — sorry, 2022 versus 2021 in the December quarter?
Robert Ellin: I think you’ll see that shortly as part of our first announcements that come out in the IPO. But I don’t think — and Aaron, correct me if I’m wrong, I don’t think that we’ve reported any of those trends yet.
Brian Kinstlinger: Okay. From a high level, are they growing? With all the new content you’re putting on a growing significantly? Or should we think about it is not growing significantly.
Robert Ellin: Yes. All of our trends have been substantially up. It’s kind of a self-fulfilling prophecy, Brian. As you know, revenues are driven based on traffic and audience, right? So our revenues have gone up substantially at the same time so as our traffic gone up substantially. And some of that is — and fair to some of that is we added when we did our deal with Kevin Connolly and his company, we added an extra 14 podcasts. Every time we add podcast, you’re adding additional traffic.
Brian Kinstlinger: Yes. And then can you update us on the strategy on tentpole events? Do you know of any LiveOne tentpole events that you will have in the next 12 months? And if so, can you tell us roughly when you think those might occur?
Robert Ellin: Yes. I mean we just announced Music Lives, which is our biggest event we ever did in the history of the company, which reached 135 million live streams and did over 5 billion engagements, right? We just announced a competition that is the All-Stars of all of the LiveOne programming that we’ve done, right, to launch the All-Stars and Music Lives there’ll be record-breaking number of artists. I think we had over 100 the last time, way higher than that this time. It will be a competition with the winter winning at the end of December, but there’ll be an event in each of these quarters coming up. And then I fully expect our next social boxing coming shortly. As you know, I announced a partnership with Ben Silverman, where the great producers, right, of television Reality TV, including the office.
We announced a partnership to launch a Reality TV show around social boxing. And as you know, we did well north of $15 million in year’s EBITDA when the last one we did. So we took a little bit of a step back, right, for this year to consolidate, right, the 6 acquisitions internally. We cleaned up the balance sheet dramatically. We’re now debt-free, and we now put ourselves in a position of really exciting to be able to move forward this year with multiple tentpole events.
Brian Kinstlinger: Great. And speaking of the debt conversion and the settlement of SoundExchange, those were both great. Can you tell us what the total shares outstanding are today with everything that’s going on?
Robert Ellin: Yes, so we have about $85 million…
Brian Kinstlinger: quarter, of course, but it’s changed, right?
Robert Ellin: Yes. We have about $85 million shares outstanding, right, in that range, right? And then you’ll have — the debt is now convertible — is now preferred equity at $2.10. So of that $21 million converted, right, you’re going to have about $96 million shares outstanding. So I say fully diluted, if that all was done, right? Obviously, the stock has to be extremely higher than this. You’d have about $100 million shares outstanding.
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