Q3 2023 LiveOne Inc Earnings Call
Can you quantify podcast download trends in December in the December quarter versus last December and then I assume there are there is significant growth, which is being offset by challenges in the advertising market. So maybe if you could quantify what youre seeing there as well.
Yes, I mean, I think it's going to be a very difficult advertising market.
Part of the beauty of Podcasting is is that you have a huge direct response and you actually add material numbers backing right.
Yes.
Digital side of it and podcasts.
Exactly what the numbers are so I think we're going to have to we're going to have to fight that trend, but at the same time, we're adding so many podcast through our network and we see just tell tale really exciting sites that are happening in the industry not just the Tam, but also directionally right.
<unk> also are partners of ours like Spotify and App. So on have really expect a lot of money acquiring a tremendous amount of companies that match evaluations as you probably saw at Sirius radio.
Bought our podcast business at 15 times revenues.
We just raised our money in podcast, one literally less than two times revenues at $68 million valuation, we're about to go public with it we see the trends look great.
We were ranked number four on contract as best sales team I think we have the best sales team in the entire tire industry. They come out of I heart seriously have that expertise.
See just terrific trends for our business, specifically, but we will have to fight overall sponsorship and advertising trends.
And can you, possibly if you're able to share the December quarter download trends in 2022 versus 2023.
Sorry, 2022 versus 21 in the December quarter.
I think youll see that shortly as part of our first announcements that come out.
And the IPO, but I don't think and Eric correct me, if im wrong I don't think that we have reported any of those trends yet.
Okay from a high level or are they growing with all that with all the new content. You are putting on are they growing significantly or should we think about it.
It is not growing significantly.
All of all of our trends had been substantially up.
Okay.
Okay.
Sort of a self fulfilling its kind of a self fulfilling prophecy, Brian as you know.
Revenues are driven based on traffic and audience right. So our revenues brought up substantially at the same time. So it was a rapid gone up substantially and some of that some of that is it fair to some of that is we added when we did our deal.
Kevin Conway and his company, we added an extra 14 podcasts every time, we add podcast youre, adding a different additional traffic.
Okay.
Yep.
And then can.
Can you update us on the strategy on Tentpole events do you know of any <unk> 10 kilograms that you will have in the next 12 months and if so can you tell us roughly when do you think those might occur.
Yeah, I mean, we just announced a 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, we just announced a competition that is the all stars of all of the live one programming.
Programming that we've done right to launch.
The all stars of music lives.
There'll be <unk>.
A record breaking number of artists that we had over 100 last time way higher than that this time it'll be a competition with the winner winning at the end of December but there'll be an event that 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 Denso men with a great producers right of TV.
In 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 huge EBITDA with last one we did so we took a little bit of a step back right for this year to consolidate right the six acquisitions and internally we clean.
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 with multiple tentpole events.
Great.
Speaking of the.
The debt conversion and the.
Settlement Lasalle has changed as we are both great can you tell us.
What the total shares outstanding are today with everything that's going on.
Yes.
Hi, gentlemen.
But it's changed right.
Yeah.
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 that 21 billion converted right. You can have you can have about 96 million shares outstanding so to say fully fully diluted if at all was done right now.
The stock has to be extremely higher than this.
You'd have you'd have about 100 million shares outstanding.
Great Lastly, Aaron if you could quantify any nonrecurring benefits in the December quarter, such as gains in accounts payable and then.
If either of you could talk about when you expect to be free cash flow positive I I know I didn't see the nine month numbers for six months there were some cash usage. So maybe an update there would be great.
Yes, so we haven't publicly put any out any cash numbers, we will shortly.
But obviously with that settlement of sound exchange, which extraordinarily exciting right. We've had five years, where we bought slacker radio we took on $45 million payables. When we acquired it right. We finally are now down to where we have no substantial pay up select that havent been settled which really puts us in a very different position with the music labels music publisher.
There's multiple music partnerships have happened, where they've taken equity at $2 10, central or higher some as high as four.
So it really puts us in a great position, we haven't yet talked about free cash flow, but you can see our cash is up for the last time, we announced in a separate.
Separate from the old payables right you can really you can really look at.
<unk> improvement in bottom line and cash flows of the company.
Okay.
Great to hear and just if.
If you can quantify sorry.
But yes, so not nonrecurring there was just just over about 700 K.
Nonrecurring items in the quarter.
Great.
Great. Thanks, so much.
Thanks, Brian .
We now turn to Jon Hickman from Ladenburg. Your line is open.
Yeah.
Hi, maybe.
Maybe this is a question for Aaron but.
Operating expenses were $8 5 million this quarter.
Could you may.
Maybe give us a little guidance about.
Operating expense growth for the next 12 months or so.
Hey, John .
So.
There'll be a.
As I just noted there was there was a onetime benefit in there of about 700 K. So you can expect to see that when you are trying to come back.
And Brian .
In terms of growth.
And the expenses I Wouldnt expect substantial growth now you're going to see a little bit of pause.
Variability in terms of when when expenses hit and that's mainly on.
Around the corporate size, where we have our audit fees will kind of hit in certain quarters.
But I wouldn't expect it to be.
Would be substantially higher than from where we're at.
We're going to see the benefits of full year of cost saves going forward right. We continue to reduce expenses.
Throughout the year.
So I would expect a pretty consistent run rate to what we have right now.
Adding the 700 K back in.
Okay.
And then.
So you in the press release, you said that.
Second was growing about 40%.
On an annual basis do you have a number for that for the podcast one business.
Okay.
Yeah.
We don't have a number as we kind of mentioned early we don't have that download number yet, but I expect to see that shortly.
Okay. Thank you.
And obviously, John as you know, we're in a quiet period and podcasts to what we'll be talking a lot more about it as the as the FCC has proved the.
We just got back the comment letters that we expect to start trading hopefully in the next 15% to 45 days.
Okay. Thanks.
<unk>.
Okay.
Our next question comes from Kevin Dede from H C. Wainwright Your line is open.
Thanks, Good morning, everybody.
Rob you talked about.
The white label with Android now is that baked in so that any car that runs Android auto has.
As LIBOR and access or is it an additional thing that each car.
Owner chooses upon purchase.
Yes.
It's a little bit different than that so the Android automotive is the opportunity for us to white label give a white label solution.
What are the advantages slacker radio number one is our AI and our technology right and people just love it.
Rich will behavior and the understanding of our AI and those 44 patents, we have to be able to deliver your next on your next music. Your next Shawn right number two is our pricing right.
Less than 30% right of our competitors and now they're all raising prices right serious just announced they're raising their price by dollar Spotify announced price. So we're going to be lower than that one.
And number three is we're the only ones that I know of that are we.
Willing to white label and give you tactical radio give you Cadillac radio give you BMW radio. So there's this huge opportunity and this is not just for the audio industry. It's for anything from what is a gym equipment to Walmart Costco as you know I built all my business is off the back of massive partnerships would be.
<unk> partners. This is our opportunity now to really expand that business and while we made all these costs and cut 30% of our staff.
Our adding in <unk>, because we are seeing.
Unique opportunities to really grow the business with partners, who have $10 million to $2 5 billion eyeballs for.
For Android is just great opportunity for them to sell to up sell to other car companies for them to be able to do with <unk>, which is this smarter than everybody else.
Ran their radio Cadillac radio a BMW radio.
It's just a great marketing strategy. It makes it look cooler and smarter.
And then could you give us an update on where you are in the international spectrum and obtaining licenses you can provide service there.
Okay.
Yes.
Yeah, one more time.
Yes, Rob I'm sorry, just.
I'm curious about where you are in obtaining the licenses you need to offer service internationally.
Yes. So great question. This is this is the year to pull that off.
And I know, we've talked about it before that.
With market conditions, and Colgate really not raising capital throughout this process is this took us time to clean up the balance sheet cleanup the payables right settle with the publishers and the record labels and really strengthen that position I think this is our year to do that I think is a massive opportunity expand overseas.
If you remember when I used to talk about digital turbine every time I always repeat it when the cycles change right youre going to see.
Carriers, and others fight back and I'm going to start to battle to have a deeper and strong relationship with their customers right and that means they can have their own content.
I see telltale signs that's going to grow dramatically.
Very active negotiations discussions to expand our licenses in either a partnership it may be with someone who already has them or ourselves overseas and obviously Tesla would be number one right, they're paying over $8 per sub to Spotify right now it would be a huge cost savings for them, but I think every carrier car come.
There's huge opportunities for expand first and foremost in Europe before anywhere else, but we are in discussion in India, Japan and many other countries as you know every one of my companies.
At partnerships with global carriers, and this time, because its audio and video it's way more than just carriers right. It can be cable it can be satellite it can be candidly it can be any of the streaming platforms. I believe they all have to have already on their platforms and I think we offer them something so unique with the content we have.
You mentioned I think what 400 sponsors.
It was just offered a lot of data really quickly.
Can't hear to that fast so I apologize, but could you just review, where you are with sponsors on which programs on which platforms rather.
And where you think that goes.
I mean with that.
The sponsorship do you have a slack or the sponsors that you have with podcast one versus.
The <unk> platform.
Well, okay. So.
Tried to simplify per second right.
Start with the fact that when we bought podcast one right we had one salesperson.
We now have a 15 person sales team right.
That sales team led by Sue Mcnamara and Alex Pro has combined 50 years background of selling for serious.
Art and showing that our.
Our sponsorships across the entire platform of growth. So we're growing our sponsors in podcast thing we're growing our sponsors across audio we've just added podcast and Youtube every Tesla car.
And obviously, it's only in the free tier of audio that youre going to get sponsorship right. Most of that can be programmatic, but in podcast you get both programmatic as well as.
As well as direct response as well as straight sponsors and then across our lead programs you've seen so many of them. This year from fund I to Volkswagen two huge event, we just did with ebay and you just got to see those grow you can see more and more of those in the only events that we're doing now have that a sponsor behind it.
Paying for it with at least 20% net margins on it.
Okay. So alright, then just taking a step back you offered in your prepared remarks I think it was what 400 total sponsors currently now across.
All of your platforms.
By year end.
So I'm watching where march 31st year at <unk>.
Over 300, so far right.
Part of way to closing the year with over 400.
Okay.
And then where are you I know you offered a data point for year end March 'twenty, two what was that number.
Year end March 'twenty two.
For a number of spots.
Yeah, I think you had a number on that yet.
We've got we've grown from seven pre COVID-19 to about 300 last year to over 400 this year.
Okay, Alright, and next year and next year and next year will be well over 500.
Okay.
Okay alright. Thanks.
So I was curious about for now thanks, so much I appreciate it.
Okay. Thanks, as always John I appreciate it.
Our next question comes from Calvin Harris from Jorge Capital. Your line is open.
Hey, Rob good morning.
Did I Miss something did you say you settled to Soundexchange lawsuit.
Yes, yes, we did and we filed an 8-K. So we settled the soundexchange lawsuit paid out over two years with <unk>.
Healthy discount on it.
When we announced is about $5 $4 million of payables moving from short term to long term. So both the same day it was a $42 million swing and getting getting all the debt converted 2010. We also moved $5 4 million long term, so really exciting week for the company and really.
Strengthens our balance sheet dramatically. We also said this morning that our short term assets went up by $2 5 million from $25 million, we reported like three weeks ago to $27 5 million. So it's very likely the next thing you see is a credit facility that we'll be able to borrow somewhere between.
17% and $20 million against our short term assets and so this is a dramatic improvement for us if the stock stays down at these levels will increase that buyback from $2 million to way more than that down the line.
Okay great.
And then one other thing you mentioned that.
Probably going to spin off slacker.
Sometime this year is there any sort of timing on that as well as the pay per view unit.
Yes, I mean, I think I think you're going to see something.
Something happened pretty eminently.
The success of podcast, one and the fact that now the <unk> filed right.
And shortly we'll be up in trading.
We're aggressively and actively in negotiations for it will be the right partners to come in there and obviously slacker, we've said throws off over $10 million of cash we just increase the EBITDA. The overall audio business right. I think we said 18 million today right. So obviously that $10 million of cash flows is going up substantially so you'll.
See a much I would expect a much much higher valuation right. Our peers are trading at three three times revenues right. If our audio division does $80 million right over $80 million right, you're going to see again.
I actually higher than the $68 million that we did in podcast one light otherwise we'll pass right.
If it's a multiple of that that we would pass on it but we're seeing a lot of aggressive.
Active interest in it and on the pay per use side, it's really interesting because we haven't really pushed the envelope on this year is we've spent most of the time right consolidating right, taking EBITDAR up dramatically that pay per view business has $1 billion of upside we're seeing a lot of really smart.
Really serious interest around that division in that upside and you probably know I started independent attainment.
30 years ago into that like went over $1 billion of trade it.
Obviously, you have a $1 billion for an extended period of time, that's 30 years ago, I'm really really excited about where we go with pay per view and we're doing an event I think the Windsor.
Windsor emblem three.
We just shot at the other night wins the pay per view.
Yes <unk>.
Thanks.
Okay.
Right.
We're doing pay per views, but this time a lot of those are coming from they will come from the record labels and publishers outcome for managers, who were bringing it in there bringing in with the sponsor with it. So it's really really exciting and really energetic around it and as you know we've screened over 3000 artists right. We've added <unk> 5 billion engagements the plan.
Was always pre COVID-19 to launch pay per view for music festivals.
Big artist right, we've done a lot of K pop as you probably read about the whole works now is the time to really step on the gas and that we're going to be very cautious and very careful about it right and really focus those are the ones that are backed by a sponsor.
They're back and paid for directly from US. So we did see pain, they paid us $75000 upfront with 30% margins on it to streaming and then with the upside of the pay per view as well.
Okay.
And then finally can you just clarify how much of podcast one will be spun off to shareholders.
<unk> shareholders.
Yes, so between 5% and 10%.
So thinking between thinking about 77.
Seven 5%.
The public filing says, it's going to start trading at $150 million valuation, which a lot of equity, it's going to be giving that out to our shareholders in the next few weeks.
So that means almost.
Almost to shareholders.
What's that.
Right.
93%.
Yes, it's a little it's going to be less than that because remember we sold $8 billion at a $68 million valuation. So a LIBOR LIBOR is going to own about 80%, yeah, a little bit higher to a set of it you.
If you take 80% or $1 50, it's a big number.
Okay, Great Alright.
Alright, Thanks, Rob Good luck.
And guys just to add to it I just got a note from shoe Mcnamara My head of sales don't meet our advertiser actually way higher than that this year, including including programmatic, we would add hundreds of additional advertisers.
On top of the 400 that of.
Direct sales that we have.
This concludes our Q&A I'll now hand back to Rob LNG for any final remarks.
Yeah, just just to wrap it up I just want to thank everyone for their patience right. This has been a humbling.
A couple of years I think we recognize very differently than most 18 months ago that the market was going to change in the cafeteria is going to change I have gone through this before in my career for any view them in batches before and I'm. So proud of my team they've come together right. It's been tough battle, making cuts that my team has come together and wish him well.
Klas team laser focused on winning for all of our shareholders and I think we can have a dramatic win this year. So thank you everyone. Thank you for joining.
This call is now concluded wed like to thank you for your participation you may now disconnect your lines.
Yeah.
[music].
Yeah.