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Operator
Hello and welcome to the Live One Inc Q3 fiscal 2023 financial results and business update webcast. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during the presentation, you may do so by pressing star 1 on your telephone keypad. And I'd like to hand over to Aaron Sullivan, interim CFO. The floor is yours. Please go ahead.
Elliot
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 Ellen, 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, it's strictly prohibited. Now, I would like to turn the call over to LiveOne CEO, Rob Allen.
Rob Ellen
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 six acquisitions and each of our subsidiaries is complete. We've caught 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, we'll 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 five times adjusted EBITDA, while our peers traded 3.3 times 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 Podcast One, 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 31st to 21, and a 45% increase taking our total membership to 1.96 million, and our total members, including free, of 2.8 million. What I've told the street is we expect to, within five years, get to 10 million members. This is a very tiny piece of the overall TAM of the audio business. Goldman Sachs has 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 seven pre-COVID. We have passed over 300 this year and expect by March 31st 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 signs 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 cell carriers to social media to cable companies. Candidly, anyone with 10 million to 2.5 billion eyeballs is going to need a music platform. We're one of 12 left on earth 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, LiveWin Brands. We've just announced a partnership between two pop culture stars, Jeremiah, as well as winemaker Russell Bevin, and we'll be launching the MVP version very shortly of our new consumer product. Podcast one. We filed our S1 on December 27th and we expect to begin trading very shortly. Company has delivered record revenues, has over 11 million unique viewers, listeners a month and growing. And we have over 300 podcasts on the platform and has grown from 20 million to 8.7 million for the quarter. That TAM as well, As you look at your opportunity of growth here, the TAM has just passed a billion dollars in revenues for the overall podcast business, and it's on its way to $10 million over the next five years. Now I'd like to hand it back over to Aaron, and I'll finish off with some comments at the end. Thank you.
Elliot
Thanks, Rob. I'll spend just a few minutes to provide an overview of the results for our fiscal 23 first nine months and third quarter ended December 31, 2022. Consolidated revenue for the three and nine-month periods ended December 31, 2022 with $27.3 million and $74.1 million, respectively. Our audio division posted revenue for the three and nine-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 three and nine months was $3.1 million and $9.4 million respectively. On U.S. GAAP basis, slide one 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 six cents for the nine months ended December 31, 2022. Our audio divisions adjusted EBITDA for the three and nine month periods was also a record 5.1 and 15 million respectively. As of February 7th, we had approximately 1.96 million paid members and that increase of 620,000 or 45% compared to December 31, 2021. Total members include free memberships for approximately $2.8 million at February 7, 2023. Included in the total members are certain members who are currently the subject of 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 $300K. And now I will turn it back over to Rob.
Rob Ellen
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 them. We're now in 68 other 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 off by that we bought back 2 million shares. Next week we will begin buying back additional shares. I personally been a buyer stock. This company stock is extraordinarily undervalued and I'm extremely excited to see some of the new shareholders that have joined us. I've 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 spectacularly this year. Thank you. Now we'd open up to any questions.
Operator
Thank you. If you would like to ask a question, please press star one on the telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question, Brian Kinstler from Alliance Global. Your line is open.
Brian Kinstler
Great. Thanks so much, and it's great to see the job you've done in right-sizing the business. Can you quantify podcast download trends 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 can quantify what you're seeing there as well.
Rob Ellen
Yeah, I mean, I think it's going to be a very difficult, you know, advertising market. Part of the beauty of podcasting is that you have a huge direct response and you actually have material numbers backing, right? You know, because in the digital side of it, in podcasting, you know exactly what the numbers are. So I think, you know, 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 app, so on, have really, they've spent a lot of money acquiring, you know, tremendous amount of companies at massive valuations. As you probably saw at Sirius Radio, you know, just bought a podcast business at 15 times revenues. We just raised our money in podcast one, you know, literally at, you know, less than two times revenues at a $68 million valuation. We're about to go public with it. We see the trends look great. We were ranked number four on PodTrack as best sales team. I think we have the best sales team in the entire industry. They come out of iHeart and Sirius and have that expertise. And I just see, you know, just terrific trends for our business specifically. But we will have to fight overall sponsorship and advertising trends.
Brian Kinstler
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?
Rob Ellen
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 Kinstler
Okay. From a high level, are they growing? With all the new content you're putting out, are they growing significantly? Or should we think about it as not growing significantly?
Rob Ellen
all of our trends have been substantially up. Okay. 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 has our traffic gone up substantially. And some of that is, in fairness, 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 podcasts, you're adding additional traffic.
Brian Kinstler
Yep. And then can you update us on the strategy on tentpole events? Do you know of any live one 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?
Rob Ellen
Yeah. 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. We just announced a competition that is the all-stars of all of the Live One programming that we've done to launch the All-Stars of Music Lives. There'll be a record-breaking number of artists. I think we had over 100 the 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 at 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 Sultman, one of 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, you know, well north of $15 million in year G, but that was the 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 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 Kinstler
Great. And speaking of the debt conversion and the settlement with SoundExchange, those were both great. Can you tell us what the total shares outstanding are today with everything that's going on?
Rob Ellen
Yeah, so 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 if that 21 million converted, right, you're going to have about 96 million shares outstanding. So 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, I'd say.
Brian Kinstler
Great. Lastly, Aaron, if you could quantify any non-recurring 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 know I didn't see the nine-month number, but for six months, there were some cash uses, so maybe an update there would be great.
Rob Ellen
Yeah, so we haven't publicly put out any cash numbers. We will shortly. But obviously, with that settlement of sound exchange, which is extraordinarily exciting, right? We've had five years where we bought Slack Radio. We took on $45 million of payables when we acquired it, right? We finally are now down to where we have no substantial payouts left that haven't been settled yet. which really puts us in a very different position with the music labels, music publishers, multiple music partnerships have happened where they've taken equity at $2.10 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 from the last time we announced. And separate from the old payables, you can really look at substantial improvement in bottom line in cash flows of the company.
Brian Kinstler
Great. And Aaron, just if you can point out the non-recurring.
Elliot
Yeah, so non-recurring, there was just over about 700K of non-recurring items in the quarter.
Brian Kinstler
Great. All right. Thanks so much. Thanks, Brian, as always.
Operator
We now turn to John Hickman from Leidenberg. Your line is open.
John Hickman
Hey, maybe this is a question for Aaron, but operating expenses were 8.5 million this quarter. Could you maybe give us a little guidance about operating expense growth for the next 12 months or so?
Elliot
Hey, John. So there'll be a As I just noted, there was a one-time benefit in there of about 700K. So you can expect to see that when you kind of come back in. In terms of growth in the expenses, I wouldn't expect substantial growth. Now, you're going to see a little bit of kind of variability in terms of when expenses hit. And that's mainly on, you know, around the corporate side where we have audit fees will kind of hit in certain quarters. But I wouldn't expect it to be substantially higher than where we're at. We're going to see the benefits of a full year of cost saves going forward. We've continued to reduce expenses throughout the year. So I would expect a pretty consistent run rate to what we have right now, adding the $700K back in. Okay. Okay.
John Hickman
Um, and then, um, so you, in the press release, you said that, uh, slacker was growing about 40% on an annual basis. Do you have a number for that, for the podcast one business?
Elliot
We don't have a number as we kind of mentioned earlier. We don't have that, that download number yet, but expect to see that shortly.
John Hickman
Okay. Thank you.
Rob Ellen
And obviously, you know, John, as you know, we're in a quiet period in podcast. We'll be talking a lot more about it as the SEC has approved the, you know, we just got back the comment letters and we expect to start trading hopefully in the next 15 to 45 days maximum.
John Hickman
Okay.
Operator
Thanks. Our next question comes from Kevin Deed from HC Wainwright. Your line is open.
Kevin Deed
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 Live One access, or is it an additional thing that each car owner chooses upon purchase?
Rob Ellen
Yeah, so no, it's a little bit different than that. So the Android Automotive is the opportunity for us to give a white label solution. Now, what are the advantages of Slack Radio? Number one is our AI and our technology, right? And people just love the individual behavior and the understanding of our AI and those 44 patents we have to be able to deliver your next song, your next music, your next so on, right? Number two is our pricing, right? We're less than 30%. right, of our competitors, and now they're all raising prices, right? Sirius just announced they're raising their price by a dollar. Spotify announced they're raising their price. So we're going to be even lower than everyone, right? And number three is we're the only ones that I know of that are willing to white label and give you Tesla radio, give you Cadillac radio, give you BMW radio. So there's a huge opportunity, and this is not just for the audio industry. It's for anything from watches to gym equipment to Walmart to Costco. You know, as you know, I've built all my businesses off the back of massive partnerships with B2B partners. This is our opportunity now to really expand that business. And while we made all these cuts and cut 30% of our staff, we are adding in B2B because we're seeing, you know, unique opportunities to really grow the business with partners who have 10 million to 2.5 billion eyeballs. And, you know, for Android, it's just a great opportunity for them to sell, to upsell to other car companies, for them to be able to do what Elon did, which is just smarter than everybody else. To brand their radio, Cadillac Radio or BMW Radio, is just brilliant. It's just a great marketing strategy. It makes them look cooler and smarter.
Kevin Deed
And then can you give us an update on where you are in the international spectrum in attaining licenses? You can provide service there.
Rob Ellen
Say that one more time?
Kevin Deed
Yeah, Rob, I'm sorry. Just... I'm curious about where you are in obtaining the licenses you need to offer service internationally.
Rob Ellen
Yeah, so great question. This is the year to pull that off. And I know we've talked about it before, but with market conditions and COVID and really not raising capital throughout this process, it just took us time to clean up the balance sheet, clean up the payables, settle with the publishers and the record labels and really strengthen that position. I think this is our year to do that. I think it's a massive opportunity to expand overseas. If you remember when I used to talk about Digital Turbine, every time I always repeated, when the cycles change, you're going to see the carriers and others fight back, and they're going to start the battle to have a deeper and stronger relationship with their customers. That means they're going to have to own content. I see telltale signs that's going to grow dramatically. We are in very active negotiations, discussions to expand our licenses in either a partnership, and maybe 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 company, there's huge opportunities for expansion. first and foremost in Europe before anywhere else. But we are in discussion in India, Japan, and many other countries. And as you know, almost every one of my companies has had partnerships with global carriers. And this time, because it's audio and video, it's way more than just carriers. It can be cable. It can be satellite. It can be candle. It can be any of the streaming platforms. I believe they all have to have audio on their platforms. And I think we offer them something so unique with the content we have.
Kevin Deed
You mentioned, I think, what, 400 sponsors? You just offered a lot of data really quickly, and I can't hear that fast, so I apologize. But could you just review where you are with sponsors on which programs and which platforms, rather, and where you think that goes? I mean, with the sponsorship that you have with Slacker, the sponsors that you have with Podcast One versus...
Rob Ellen
uh the live one platform well okay so to try to simplify it for a second right you know start with the fact that we bought podcast one right we had one salesperson right we now have a 15 person sales team right those that sales team led by sue mcnamara and alex bro have combined 50 years you know background of selling for serious high heart and so on right Our sponsorships across the entire platform are growing. So we're growing our sponsors in podcasting. We're growing our sponsors across audio. We've just added podcasts into every Tesla car. And obviously it's only in the free tier of audio that you're going to get sponsorship, right? And most of that is going to be programmatic. But in podcasting, you get both. You get programmatic as well as direct response as well as straight sponsors. And then across our live programs, you've seen so many of them this year from Hyundai to Volkswagen to a huge event we just did with eBay. And you're just going to see those grow. You're going to see more and more of those. And the only events that we're doing now have to have a sponsor behind it who is paying for it with at least 20% net margins on it.
Kevin Deed
Okay. So, all right, then just taking a step back, you offered your prepared remarks. I think it was, what, 400 total sponsors currently now across all of your platforms?
Rob Ellen
By year end. So we're March 31st year end. So we've had over 300 so far, right? Part of the way to closing the year was over 400. Okay. Okay.
Kevin Deed
And then where were you – I know you offered a data point for year-end March 22. What was that number?
Rob Ellen
Year-end March 22 for a number of sponsors?
Kevin Deed
Yeah, I think you had a number.
Rob Ellen
We've grown from seven pre-COVID to about 300 last year to over 400 this year. Okay. All right. And next year – And next year will be well over 500.
Kevin Deed
Okay. Okay. All right. Thanks. That's all I was curious about for now. Thanks so much, Rob. Appreciate it.
Rob Ellen
Thanks as always, John. I appreciate you.
Operator
Our next question comes from Calvin Horry from Horry Capital. Your line is open. Hey, Rob. Good morning.
Calvin Horry
Hey, Rob. Did I miss something? Did you say you settled the sound exchange lawsuit?
Rob Ellen
Yeah, yeah, we did. We filed it in AK. So we settled the sound exchange lawsuit, paid out over two years with a healthy discount on it. What we announced is about $5.4 million of payables moving from short-term to long-term. So, you know, both the same day, you know, it was a $42 million swing in getting payments. getting all the debt converted to $2.10. We also moved $5.4 million in long-term. So really exciting week for the company and, you know, really strengthens our balance sheet dramatically. We also said this morning that our short-term assets went up by two and a half million from 25 million. We reported like three weeks ago to 27 and a half million. So it's very likely the next thing you get to see is, you know, a credit facility that we'll be able to borrow somewhere between, you know, 17 and $20 million against those short-term assets. And, So this is a dramatic improvement for us. And, you know, if the stock stays down at these levels, you know, we'll increase that buyback from $2 million to weigh more than that down the line.
Calvin Horry
Okay, great. Then one other thing you mentioned that probably going to spin off Slack sometime this year. Is there any further timing on that as well as a pay-per-view unit?
Rob Ellen
Yeah, I mean, I think you're going to see, you know, something happen, you know, pretty imminently. you know, the success of Podcast One and the fact that now the Podcast One S1 is filed, right? And shortly we'll be up in trading. You know, we're aggressively and actively in negotiations for who will be the right partners to come in there. And obviously, Slacker, we've said, throws off over $10 million of cash. We just increased the EBITDA of the overall audio business, right? I think we said $18 million today, right? So obviously, that $10 million of cash flow is going up substantially. So you'll see a much, I would expect a much, much higher valuation, right? Our peers are trading at 3.3 times revenues, right? If our audio division does 80 million, right? You're over $80 million, right? You're going to see, you know, you're going to see substantially higher than the 68 million that we did in podcast one, right? Otherwise we'll pass, right? It's not, you know, if it's not, you know, multiple of that, we would pass on it, but we're seeing a lot of aggressive, you know, active interest in it. And on the pay-per-view side, it's really interesting because we haven't, really pressed the envelope on this year is we've spent most of the time, right, consolidating, right, taking EBITDA up dramatically. That pay-per-view business has a billion dollars of upside. We're seeing a lot of really smart, you know, really serious interest around that division and that upside. And you probably know I started independent entertainment, you know, 30 years ago and took that to like, you know, went over a billion but traded, you know, almost half a billion dollars for an extended period of time. That's 30 years ago. I'm really, really excited about where we're going with pay-per-view and we're doing an event. I think Aaron wins, wins a emblem three. We just shot it the other night. When's the pay-per-view?
Elliot
Oh, that was air Tuesday. Okay. So the pay, right.
Rob Ellen
So we're doing pay-per-views, but this time a lot of those are coming from, they'll come from the record labels. They'll come from publishers. They'll come from managers who are bringing it in. They're bringing it in with a sponsor with it. So it's really exciting, really exciting. And, really energetic around it. And as you know, we've streamed over 3,000 artists, right? We've had over 5 billion engagements. The plan was always pre-COVID to launch pay-per-view for music festivals, big artists, right? We've done a lot of K-pop, as you probably read about, the whole works. Now's the time to really step on the gas on that. We're going to be very cautious and very careful about it, right? Really focus those on ones that are backed by a sponsor or they're backed and paid for directly from us. So we did T-Pain. They paid us $75,000 up front with 30% margins on it to stream it, and then with the upside of the pay-per-view as well.
Calvin Horry
Okay. And then finally, can you just clarify how much of Podcast One will be spun off to shareholders, existing shareholders?
Rob Ellen
Yeah, so between 5% and 10%. So, you know, think in between, think at about 7.5%, 7.5%. So, you know, 5%. The public filing says it's going to start trading at $150 million valuation. It's a lot of equity that's going to be divvied out to our shareholders in the next few weeks. So that means... Yeah, myself as a shareholder... What's that?
Calvin Horry
Live one will own 93% then?
Rob Ellen
Yeah, it's going to be less than that because remember we sold $8 million at a $68 million valuation. So live one's going to own about 80%. Yeah, a little bit higher than 80%. If you take 80% of 150, it's a big number.
Calvin Horry
Okay, great. All right, thanks, Rob. Good luck.
Rob Ellen
Yeah, and guys, just to add to it, I just got a note from Sue Macklin, my head of sales, telling me our advertisers are actually way higher than that this year, including programmatic. We would add hundreds of additional advertisers on top of the 400 of direct sales that we have.
Operator
This concludes our Q&A. I'll hand back to Rob Ellens, CEO, for any final remarks.
Rob Ellen
Yeah, just to wrap it up, I just want to thank everyone for their patience. This has been a humbling couple of years. I think we recognize very differently than most 18 months ago that the market was going to change and the temperature was going to change. I've gone through this before in my career for any of you that have been investors before, and I'm so proud of my team. They've come together. It's been a tough battle making cuts, but my team has come together, and we just have a world-class team, laser-focused on winning for all of our shareholders, and I think we're going to have a dramatic win this year. So thank you, everyone. Thank you for joining.
Operator
This call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
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