LiveOne, Inc. (LVO) Earnings Call Transcript & Summary

Good morning, and thank you for standing by. Welcome to LiveOne's Fiscal Year 2027 First Quarter Ended June 30, 2026, Financial Results and Business Update Conference Call. [Operator Instructions] Presenting on today's call is Rob Ellin, CEO and Chairman of LiveOne; and Craig Christensen, Interim CFO 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 and 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 vary 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, 2026, 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 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, August 12, 2026. And except as required by law, the company does not undertake any obligation to update or revise this information after today's call. I'd like to highlight to all participants that this call is being recorded. The company will make 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 the 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. Good afternoon, everyone, and thank you for joining us. This was one of the most important and strongest quarters in the history of LiveOne. We delivered $19.3 million in revenues and $18.6 million of audio revenues at a record $6.3 million of adjusted EBITDA. Our podcast delivered revenues of record revenues of $16.2 million (sic) [ $16.1 million ] and $1.6 million of adjusted EBITDA. But maybe just as importantly, we increased our cash position by $3.3 million increased our stockholders' equity by $7 million and eliminated $5 million of liabilities for the quarter. We've now completed $7 million of our $12 million of stock repurchase program and fully are prepared to continue to grow that and buy more and more stock at these low prices. We also acquired 150,000 shares of PodcastOne and paid off all of the junior debt at PodcastOne. Our focus is simple: grow revenues, grow EBITDA, generate cash, strengthen the balance sheet and create shareholder value. And for the first time, I believe we see a very clear path to the next level of scale. Our B2B pipeline is stronger than it ever has been. We now have partnership and opportunities with over $10 trillion worth of companies across the world. We have signed major retail agreements with a 4-year agreement with one of the biggest retailers in the world. We are very close to a second retailer. And for the first time ever, we have partnered with Netflix and their 700 million global members. Our relationships continue to grow across Apple, Amazon, Alphabet, AT&T, Samsung, LG, VIZIO and many of the most important and largest companies in the world. We are also seeing very meaningful expansion with our existing partners, Amazon representing over $20 million. And Paramount has now passed and on its way to over $27 million in revenues. This continues to demonstrate the accelerating opportunity across our major global distribution partners. Based on the momentum we're seeing, we believe there is a clear path to over $250 million in revenues over the next 3 years. And importantly, this growth is happening against a dramatically leaner cost structure. We have cut our staff down from 350 people at a high to now around 80, and we are not just simply rebuilding revenues. We are building a much more profitable, scalable LiveOne with the potential for dramatically increasing EBITDA and cash flow. Our M&A pipeline is the strongest it's ever been with over $400 million of potential deals in the pipeline. We are evaluating carefully acquisitions, mergers across our businesses while continuing to receive substantial inbound interest from strategic and financial buyers looking to acquire individual LiveOne subsidiaries, assets or potentially the entire company. That gives us tremendous optionality. We can buy, merge, partner or monetize assets depending on which path creates the greatest value for our shareholders. PodcastOne is another critical part of our flywheel. We believe audio and video belong together. We are watching a transformative move in the industry as you see Netflix enter in a very strong way into podcasting and you see the likes of Fox buying up many podcast networks as well as OpenAI paying 13.5x revenues for a podcast network. This is the second round of acquisitions where there was over $10 billion of them in the first round, and I fully expect there'll be a larger scale acquisition mode, right, happening in the overall industry. It's very strong belief that you're going to see every streaming network, including the Apples, the Amazons and the Alphabets of the world or the YouTubes of the world acquiring podcast networks. We've also now officially sold our podcast Varnamtown to a major streaming partner, and we're hoping for a green light on that in the very near future. This adds to our PodcastOne IP of podcasts that can turn into television or films and dramatically increases our opportunity of generating substantial cash flow from these. AI adds another major layer across our audio and video content, data and intellectual properties. We have over 250,000 hours of video content, over 500,000 hours of audio content and growing. We see telltale signs that the LLMs are going to be buying up intellectual property content data at somewhere between $100 and $500 per hour on a nonexclusive basis. The most important message I want investors to take away from this, LiveOne flywheel is robust, it is working and is accelerating. More partners create more distribution, more distribution creates bigger audiences, more audience creates more revenues and more content creates more IP. The more IP creates more opportunities across streaming, television, AI licensing, commerce and M&A. And then there is the valuation. The industry companies are trading at about 3.7x revenues, while LiveOne is trading at about 65% of revenues. We believe this represents an extraordinary valuation disconnect. As we execute, grow revenues, expand EBITDA, generate cash and strengthen the balance sheet, we believe there is a significant opportunity to close that gap. After more than 30 years of building media and technology companies to over $10 billion worth of companies, I believe this is the strongest and most powerful collection of assets and opportunities I've ever assembled. I've been through this journey with many companies where stock has had its difficult times and then rebounds in a very extraordinary way. We watched this with Digital Turbine dropping almost $40 million and then 5 years later, trading to a $12 billion valuation. I believe LiveOne has today more assets, more revenue streams and more ways to win. Now it comes down to final execution. The flywheel is accelerating, and we see a very strong sign of hitting over $100 million in revenues in the very near future. With that, I want to hand it off to Craig, our CFO, who's done an amazing job and look forward to finalizing our call at the end. Thank you, Craig.

Thanks, Rob. I'll spend a few minutes just providing a brief overview of the results for our first quarter. Consolidated revenue for the 3 months ended June 30, 2026, was $19.4 million with positive adjusted EBITDA of $4.3 million. Our Audio division posted revenue for Q1 of $18.6 million and adjusted EBITDA of $6.3 million. The biggest driver of adjusted EBITDA was our Slacker business with stock-for-service deals that covered certain past liabilities as well as credit for future services. On a U.S. GAAP basis, for the first quarter, LiveOne posted a consolidated net loss of $3.1 million or negative $0.23 per basic and diluted share. This compares to net loss of $3.9 million or negative $0.40 per basic and diluted share in the same quarter last year. At the operating level, our PodcastOne business reported record revenue of $16.1 million and adjusted EBITDA of $1.6 million. Our Slacker business posted Q1 revenue of $2.5 million and adjusted EBITDA of $4.7 million. This was primarily driven by stock-for-service deals and the elimination of certain past liabilities. So overall, we see strong momentum in the first half of fiscal '27, led by the continued growth of PodcastOne. And as Rob mentioned, we have several strategic opportunities gaining traction, which we believe can support the continued growth and create long-term value. So Rob, I'll turn it back over to you.

And just to finalize, we are well in the process of our next M&A transaction. It's been a few years since we've completed one. But for anyone that knows me, they're usually super accretive, very much like PodcastOne. We acquired it doing $17 million in revenues and losing $5 million a year. It's now on a run rate to do well over $60 million this year as we finished off the quarter with almost what we started with 5 years ago when we acquired it and now is very strong EBITDA. We are going to continue to buy back stock aggressively down at these low valuations. And as a team, I couldn't be more proud of what they've accomplished this quarter to eliminate this kind of liabilities, create this kind of EBITDA has really been special and really hands, really special to see what our team has done, and we continue to look at ways to increase each of those. And again, we'll continue to buy back stock. So I want to thank everyone for joining. I thank our shareholders for the patience, and we look forward to a really exciting end of the year.

[Operator Instructions] Your first question from the line of Brian Kinstlinger with Alliance Global Partners.

My questions will be around the B2B deals, and I'll get back in the queue. At what point do you expect AT&T to begin offering their plans to automotive manufacturers? Are there any manufacturers that AT&T is already offering LiveOne's content if you buy a car? And if so, which?

Yes. So we're under [indiscernible] on that, so we can't give names at this point. But the answer is yes and now. We'll have a, hopefully, a very substantial update on that in the next 30 to 45 days and are really excited about that partnership. And Brian, you probably know, historically, this company has done and really before I was involved in it, has done most of their revenues through carriers, starting with Verizon and T-Mobile and obviously, AT&T being the biggest is really exciting for us to have this opportunity to grow with them.

Great. Similar question on smart TVs. You've got 3 of the largest that you are -- who's integrating your content. Are all 3 now selling TVs that consumers can buy with your content? And if so, can you talk about any evidence of usage, success, subscriptions, anything like that?

Yes. This is just the beginning of the beginning, but the answer is yes. We're across all 3 of them. And the marketing strategies are just starting to come into place, and we'll have a lot more clarity on that in the next 60 to 90 days. But really exciting. I mean not only is it exciting just to have the TVs, but obviously, when you're talking about the likes of VIZIO, right, you also have potential to move into Walmart, right? And when you're talking about Samsung, you have the opportunity of moving into Android. Again, Samsung was the biggest -- probably was the second largest partner in the history of the company with Slacker Radio and did hundreds of millions of dollars of revenues over almost 20-year period with them. So really exciting, not only just what you can do in automobiles, but getting inside of these large massive companies and building the relationships. As you know, Brian, once you're in the door and you have contractual relationships, you can really expand to other areas of the business as well. So the distribution is well beyond just TVs that we see and really exciting to have these opportunities. And we've used very tiny numbers, as you know, something like 0.5% to 1% penetration and a conversion off of that. And just take all the numbers of each of these companies, combine them. And we just need a little tiny piece of that for the revenues to really ramp up. And we expect that fourth quarter, right, as we've said throughout the year. It takes time as you put these in. People need to see them multiple times, right? They need to experience. They got to see the branding. They got to build a relationship with it. But we see, again, at a very tiny percentage conversion with these partners, just a massive opportunity.

I'm going to slip one more in, then I'll get back in the queue. You made a comment, Rob, that you have a B2B deal with one of the largest retailers in the world. You obviously are working with Amazon and everyone knows that. But is that something new? Is it one quick comment? I wasn't quite sure what to make of it? Or am I drawing maybe a blank on another announcement you had?

No. I mean we -- all I said is that it was a 4-year contract, right? We can't give names, as you know. And no different than we originally had our Paramount deal. We couldn't talk about the name for almost -- we didn't talk about it for almost 2 years, and now it's well over $27 million in revenues, right? This could be a massive, massive partnership. And shortly, we fully expect to be able to talk about it in detail.

Yes. And I mean to add to that, Brian, I think you're going to see us add ahead of partnerships in the retail area. You'll probably see the same thing in the carrier area. So as we've now shrunk the team dramatically, you will see some add-on team members coming shortly, including the President of the company, right, as well as area heads and sales heads of B2B divisions of where we're growing, right, carriers, auto, retailers, et cetera.

Your next question is from the line of Barry Sine with Litchfield Hills Research.

I want to start off and continue on the topic of B2B partners. Rob, you mentioned Netflix at the beginning of the call. And obviously, that's a big partner. Are you at liberty to expand on what you're doing with them? And if I was a Netflix subscriber, what would I see from LiveOne? Would I just see podcast? Or is it also music?

No. You're just going to see podcast to start, right? But this is my humble opinion. I did a podcast on this. I think it was 3 months ago, and maybe for once I'll be right, right? I came out and said very clearly that I fully expect that every streaming network will move into audio, right? No different than cable and satellite did, right? There are still more channels on cable and satellite for music choice than there is anything else. I fully expect that you're going to see the likes of Netflix, Warner, Paramount, Hulu, Disney, every one of these streaming networks are going to add audio to their platforms, where they add it as a distributor or they acquire them. And I see it as really intellectually smart for them to acquire them, right? You're seeing Netflix doing deals with iHeart. You saw Disney do a deal with iHeart, right? You see Sirius trying to buy iHeart. All this is coming in when you think about it, right, that audio streaming is charging the same price as Netflix is. Right, whether it's Spotify, Apple, they're basically almost the exact same price, except for the differences in audio, the music is already made, right? They don't have the risk of spending $10 billion to $20 billion producing content. So as they try so hard every year to increase their ARPUs, it makes so much sense to me that a Netflix should have an audio network, right? And having an audio network will drive -- give them the ability to raise their ARPUs way more than they can raise in the dollar a year that they're doing today. And I think the same thing on the audio side. So I think you're going to see a roll-up happening where you're going to see every streaming platform, including Apple, Amazon, who already have theirs, right? And YouTube, those have a music network, but they're going to go harder into podcasting and then you're going to see the other streaming platforms that are competing with them, right, are going to have to have an audio platform. It's going to be so important to them. And I think you'll see acquisitions happening in the space quickly.

Okay. And then my second question is around M&A specifically. You said you're close on the deal. And you've talked about criteria where you gave the deal being accretive. Where are you shopping? Are you shopping only in podcasting? I know Kit is always looking for perhaps to pick up companies.

No, no, no. We have -- yes. So we brought in Steve Lehman, right? Steve is Vice Chairman of LiveOne, and Steve's background is rolling up audio, right? He's done some video as well, but rolling up audio as a whole. So there's massive opportunities there. And there's a fractured market, right? You're either big or you're small and kind of left out there. We're looking at both, right? From the M&A side is we fully expect another acquisition that will be similar to Slacker limited PodcastOne where we acquire it extremely cheaply, right? It fits into our flywheel and it picks up substantial EBITDA for us and is extremely accretive. At the same time, we are looking at big chest moves that could be anything from a buy to a sell, right? The inbound calls are coming in on a regular basis. You guys are all watching as companies, again, podcast networks were bought up at like 5x to 15x revenues 5 years ago when the industry was a $600 million industry. Now it's a $25 billion industry and growing, right? As video has been added, it's going to continue to grow. And as that happens, I think you're going to see very aggressive moves in the media space. And you've started to see for the first time in 7 years, media stocks really moving, right? Media stocks have had just a miserable, miserable 7 years. Now you see Starz stock has grown at 3x and iHeart stock was up -- it was up 6.5x, 7x. Now it's still up 5x. Same thing with Lionsgate. All of a sudden, you're waking up. And part of that is because people are realizing how valuable the data is. That data may not just be valuable to other content partners, it could be enormously valued to the AI models, right? As you're figuring out human behavior, right, human movement, so on, you're going to need a substantial amount of content to keep feeding these LLMs and continue to feed them quickly. And they're not going to be able to get content from the majors, right? You just saw the settlement, right, that Anthropic just did, they paid a staggering $1.2 billion just to the book industry, right? We're stealing some books. I imagine what's going to happen and how long it's going to take to settle the film, music, television, right, stuff that has been effectively taken whether intentionally or not by the AI models, right, that is now all blocked. So I think we're going to have enormous value in the content we have, which content is data. And when you have data, it gives just huge value to these AI models.