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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 will now hand over to our host, Aaron Sullivan, CFO, to begin. Aaron, please go ahead.
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 you 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 certain 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, 2023, 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. 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 the call is being recorded. The company is making 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. It is the property of the company and I agreed distribution transmission or rebroadcast of this call or the webcast in any form without the company's expressed written consent to be 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 and demand for Microcap stocks began to decline and softened almost 2 years ago. We made major strategic decisions then to protect our shareholders' capital, take aggressive cost-cutting measures and solely 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 Slack to radio and PodcastOne. This is the largest divergence disconnect that I've seen in 40 years in the public markets between large and Microcaps. Growth at any cost is not the way right now.
Over the past 2 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 history with 0 debt and over $28 million in short-term assets.
On our audio business, when we acquired Slacker and PodcastOne, the 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 [Technical Difficulty] million, a record number and $10.3 million of EBITDA just for the first 6 months. We raised our EBITDA and cash flow guidance on the audio business to $18.5 million to $21 million EBITDA. That combined effort has been a $35 million swing from the time of these acquisitions.
To clearly articulate and simplify why our hockey stick growth is coming from these 2 key revenue streams. One is subscription and 2 sponsorships. Our subscribers have grown 8x from 400,000 to over 3.3 million in the 5-year period. Our sponsorship has grown 2.5x with over 700 blue-chip sponsors on our platform this year.
In September this year, LiveOne completed the spin out of PodcastOne as a separately public company on December [Technical Difficulty], management commitment to increase shareholder value issued a dividend of 18% to our shareholders. The spin out made PodcastsOne, the first stand-alone podcast and trade on a national exchange. So far, for the first time, investors now have the opportunity to invest directly in that fast-growing podcast business. Trading between $60 million and $100 million valuation since it started trading on NASDAQ LiveOne owns 80%, leaving LiveOne's remaining 4 subsidiaries trading at a nominal valuation. PodcastOne doubling the number of top creators on its platform in the 3-year period, adding 18 already this year at an average of about $350,000 revenues per podcast. We have increased revenues to $21 million to the 6 months and growing, up from the $20 million when we acquired the business.
We currently have over 100 podcasts in the pipeline. This is about 7x our normal pipelines and over 10 potential acquisitions, the largest opportunity in the history of PodcastOne. I encourage everyone to listen to the separate podcast on earnings and business update called 1:30 Eastern today.
Now to Slacker Radio. We just extended our Tesla partnership for the tenth straight year. Every Tesla car sold in North America comes with a paid membership to LiveOne. These members are paid directly to LiveOne by Tesla. Expanding our management team with a clear focus on B2B partnerships, we identified 5 verticals and now over 27 blue-chip billion-dollar-plus companies in our pipeline. This almost -- this combined efforts combined opportunities almost guarantee another huge growth year for next year already in place before we've even finished our ninth month of this year.
I indicated last year, we will pass over 10 million members within 5 years and over $1 billion in revenues. Over the past 12 months, we have added 600 record -- 679,000 new paid members and an average of over $3 ARPU past 3.3 million total members, 2.4 million paid members. We expect to pass over 4 million total members by the end of next year and over 3 million paid members.
To better understand these metrics, Goldman Sachs issued a report that industry will hit 1.7 billion paying subscribers by 2027. LiveOne would only need 1% of that addressable market to easily surpass that number. Given the strength in the business, we believe our stock is extremely undervalued, so we recently expanded our buyback program to $8.5 million, leaving almost $5 million of additional buying.
Now I'd like to hand it off to Aaron Sullivan, our CFO. Thank you, Aaron.
I'll spend just a few minutes providing a very brief overview of our results for the second quarter of fiscal 2024, which has ended September 30.
Consolidated revenue for the 3-month period ended September 30, 23, were $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.
For the second quarter of fiscal '24, revenue consists of 58% membership and 42% sponsorship advertising, merchandising and other compared to 54% membership and 46% advertising sponsorship and merchandise in the prior year period. Consolidated adjusted EBITDA for Q2 FY '24 was $2.8 million. On a U.S. GAAP basis, LiveOne posted a consolidated net loss of $6.5 million or $0.07 per share diluted --for diluted share in Q2 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 3 members were approximately $3.3 million as of September 30. Note that included in the total numbers are 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? .
So just to wrap it up before we go to Q&A. Balance sheet, the strongest it's ever been in the history of the company, $28 million of short-term assets, 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, 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.
Aaron, this is Sherman on for Brian. Firstly, could you share any updates on cash? More specifically, how many podcasts and Kast have you onboarded and how many more do you expect to onboard and over what time frame? .
So on Kast, we've onboarded, 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 5 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 podcast added to the network.
And then outside of Kast, can you talk about what reasonable goals are for the numbers of titles you hope to onboard annually?
So this is going to be a really special year 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 them are existing podcasts, right, that are moving from other networks that the doors of OpenNet right now, it has been for the last 3 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 I see the floodgates opening, this should be -- the second half year should be very similar to the first half of the year. And I can see us at a 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?
Good question. So most of that is coming from the merchandise business. We have 2 things. One was, as I articulated in the call, we made the determination to focus all of our energy on our audio business, right? and in buying back stock and in cleaning and strengthening the balance sheet. So the merchandise business, we are starting to cut. We just took $2 million of cost out that we announced a couple of weeks ago. We're looking at costs that -- and revenues that are not as profitable. Some -- a little bit of it is some of the cash ones that take a little bit to sign on board, but most of it is coming from the merchandise side of the business.
Our next question comes from [indiscernible] of Water Tower Research.
Rob, a couple of questions. You mentioned 5 verticals. Can you give us a sense for what they are for new potential flat trip partners? .
Yes. And these are just the beginning, right? There's going to be way more verticals. So for anyone that knows my background and knows what I've built with Digital Turbine, right, you're going to have carriers which we've already been a partner with Verizon, T-Mobile, right? and have been partners with many others. So carriers, additional auto companies like Tesla, additional merchandise companies, right? and being careful in giving names 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, right, anyone that is competing with Amazon is going to need that [indiscernible] and satellite operators as well as personal gym equipment, anything from the telecoms in the world to gym equipment. And 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 numbers. Do you have a way to -- is it new partners that you brought in? Or is it existing members -- existing partners that are growing the member [indiscernible] on the platform? .
[indiscernible] right, we have a spectacular relationship with Tesla, right, that is continuing to grow and now has been extended for its tenth year. We're going to continue to grow our partnerships, utilizing all of our podcast creators, all of our social media creators, all of our talent creators as well as our B2B partnerships. And we're really special in where we separate ourselves from the rest of the crowd is threefold. This is number 1 in pricing. We're by far the lowest in the industry, right? We're 1/3 of the price of most of our competitors. Number 2 is 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 3 is white labeling, being able to provide a white label solution and be able to call it Tesla Radio, Verizon radio or for that matter, almost any [indiscernible] 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 for membership and 42% from sponsorship. Is that -- do you see that trending higher on membership as time goes? Or do you think that's a good balance. Currently, how should we think about that? .
What's nice to see is we've got 2 horses in the race now running fast, right? 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, right? And the same thing on the Slacker side of it, on the audio side of it, we've grown from 20 -- each of these businesses started at $20 million when we're acquiring and Slacker is which we've opened 2 years longer is now doing this year will be $65 million, right? And the same thing on podcast was doing $20 million. These were both losing a lot of money. They're now profitable, right? And our [indiscernible] 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 2-horse race here where they're going to be pretty neck and neck over the next 3 years.
I appreciate your comments on the microcap sector and how kind of unprecedented that the current situation is, but hopefully better times ahead.
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 a record. Does that mean the best quarter you've had in corporate history or the best third quarter you've ever had?
Yes, it will be the best quarter in the history of the company. And we can see by a lot of the metrics that we've already announced, we've already -- we're giving telltale signs of where the growth is and what the growth is. We're growing about 60,000 subscribers a month, right? We're announcing almost a new podcast every 2 weeks. So it's really kind of -- now the model has become really easy, as you know, Jon, every new podcast we're adding $350,000 to $500,000 of revenues. So you see those announcements, you can easily figure those out, right [indiscernible] somewhere in the 10% to 15% net margins, that's right in profits. Same thing in subscribers, right? Every subscriber that we're adding, right. Every pay subscriber that we're adding, we're adding in the between $3 to $3.5 ARPU, right, with about 30% margins.
So if we can continue to do that, continue to add those, you know the 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 -- won't hit the numbers, we would like to because the IPO took longer than we expected, the uplisting took longer than we expected. But I see telltale signs that the Kast Media 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? .
No, just we're being very cautious, right? We just took another $2 million of cost out of the business. We're being very cautious on what pieces of business we do, right, any risk business. We're not doing any of those live shows and [indiscernible] on them, as you and I have talked about before. And 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 [indiscernible], 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, right? If our stock is get to trade at almost a nominal valuation right now, we're just going to keep buying back stock right now.
[Operator Instructions] At this stage, we have no further questions. I'll hand back over to Rob Ellin for any closing remarks.
I just want to thank everyone thank you for joining, and I appreciate it, and we look forward to next quarter's numbers. Please join the podcast call in a few -- in the short period. Thank you, everyone.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.