PodcastOne Q1 2025 Earnings Call Transcript

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Provided by Quartr
August 13, 2024

There are 7 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the PodcastOne, Inc. 1st Quarter Fiscal 2025 Financial Results and Business Update. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer session. I would now like to turn the conference over to Aaron Sullivan, Chief Financial Officer. You may begin.

Speaker 1

Thank you, and welcome to PodcastOne's Q1 fiscal 2025 business update and financial results conference call and webcast. Presenting on today's call are Kit Gray, President of Podcast 1 Rob Ellin, CEO and Chairman of Live 1 and Executive Chairman of Podcast 1 and myself, Aaron Sullivan, CFO of Live 1 and Podcast 1. I'd 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 business, including the 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.

Speaker 1

Please refer to PodcastOne'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 Podcast 1 Form 10 ks for the year ended March 31, 2024 filed by the company with the SEC on July 1, 2024 and subsequent SEC filings made by the company. 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 its Investor Relations website for important content. Following discussion, including responses to your questions, contains time sensitive information and reflects management's view as of the date of this call, August 13, 2024. And as required by law, the company does not undertake any obligation to update or revise this information after the date of this call.

Speaker 1

I'd like to highlight to investors that this call is being recorded. Podcast 1 is making it available to investors and the media via webcast and replay will be available on Podcast 1's IR website in the Events section shortly following the conclusion of the call. Additionally, it is property of the company and any redistribution, retransmission or rebroadcast of the call or the webcast in any form that the company's expressed written consent is strictly prohibited. I'll spend just a minute providing a very brief overview of our results for the Q1 of fiscal 2025 ended June 30th. Consolidated revenue for the 3 month period ended June 30, 2024 was a record $13,200,000 an increase of 24% from the prior year period.

Speaker 1

Consolidated adjusted EBITDA for the Q1 fiscal 2025 was a loss of $300,000 which is primarily driven by the timing of content acquisition costs. Company is debt free and Live 1 owns approximately 72% of Podcast 1. The month of July 2024, the company had a U. S. Unique monthly audience of approximately 5,500,000 and global downloads and streams of approximately 17 $800,000 Now, I would like to turn the call over to PodcastOne's President, Ted Gregg.

Speaker 2

Thank you very much, Aaron, and thank you everyone for your time today. I hope you're having a good one. As you can see from Aaron's earlier comments, we've had a very positive and positive quarter at Podcast 1. The core of our business is performing very well. We are acquiring sales representation and distribution rights of new shows at a great pace.

Speaker 2

We are growing our existing programs in terms of audience and monetization and launching some very successful new programs. In the last 12 months, we've added 37 new podcasts, bringing a total of 187 shows. This year alone, our fiscal year, we've added 9 new podcasts and sold our 2nd major show to a top 5 streaming platform, further solidifying our position in podcasting and creating a slate of podcasts primed for TV and film adaptation. Our downloads are 6% higher than they were in fiscal year Q4 2024. Our programmatic advertising continues to lead and were 18% higher than it was in fiscal year q4 2024, allowing us to monetize not only our current consumption of podcast, but old episodes.

Speaker 2

So as new people find our shows, they can go back and listen, and we can monetize those those that consumption. Our hit shows are doing great. I've Had It was nominated for 2, Iheart podcast awards, and Baby Mama No Drama won for the 2nd year in a row, a Webby. So congrats to those 2 terrific properties. We value those relationships.

Speaker 2

And in fact, we have just recently signed them both to extension. We're very excited about this. They are corridor for our network and our future. We have new projects in line with them and it's very exciting. We are also finding and developing new revenue channels for existing partners and company resources and using our company resources that are already existing, which limits costs and, has high margins and profitability.

Speaker 2

As I mentioned earlier, we're using we're really growing our 2nd window slate of programming for TV and film, but you'll also hear about us in the near future launching Podcast 1 Pro, which is our production division, that allows our expert producers and our network of 187 shows and millions of downloads on a monthly basis attract companies that want to create their own podcast. We offer our expertise, our credibility, and we help them build their shows. We actually have been doing this for quite some time, but we're ramping this part of our business up over the next 6 to 12 months. We just got an extended renewal from MotorTrend, therefore. We've done deals with Microsoft and one of our leading advertising agencies, Oxford Road.

Speaker 2

And we just recently signed a deal where the CEO and founder of Lovesac will be, will be doing a podcast to talk about his his business and how he grew his business and continues to grow it throughout our network. We're very excited about this new division and putting more resources into that. We are also revamping some of our paywall projects. We have the Adam Corolla network that just relaunched their strategy, which includes new programming from Jay Moore and Adam Corolla that will be exclusively behind the paywall. We are having a relationship with Apple on the A and E slate and creating commercial free programming and other offerings on the cold case files, I Survived and their other new hit show Crime and Investigation.

Speaker 2

And we're launching a soon to be housewives paywall that you guys will learn more about in the next week or 2. But that's very exciting and offers really new revenue channels for us with limited work on both the talent and our side. So we're excited about this. As always, our our focus will be, again, to launch, grow, and acquire the representation of existing podcasts. We have still a very, very strong funnel of shows that we're considering to be a part Podcast 1, and those new programs will be highlighted throughout the next year.

Speaker 2

We have many bigger deals too with some 8 Secret B2B business deals such as the one we mentioned earlier this year. We have probably 4 or 5 of those in the funnel. And this will help us not only with our business operations and growth on that side of things, but acquire new companies and get really on our path to being a $100,000,000 company in the next few years. So as you can see, we're really excited about what we're doing at PodcastOne. Our core business is growing.

Speaker 2

We have great new revenue channels, and we're excited about the future. That being said, I'm going to hand it over to our CEO, Rob Allen, and he can take it from here. Thank you.

Speaker 3

Yes. Thanks, Kit and congratulations. I think you're hearing it in Kit's voice and I think you're hearing it in the messaging of the numbers that are coming out. This B2B deal has been spectacular. We'll add $2,000,000 a month as this is ramping up.

Speaker 3

And as you can hear, in Kit, there's 4 or 5 others that are very close. And if you can land a couple more of those, we're going to be quickly talking about $100,000,000 plus podcast business. So very much like Slacker, we bought it doing $20,000,000 of revenues losing money. It's now due on a run rate to do $85,000,000 and very profitable. Kit's done a great job with his team, with Sue and Eli to do the same here.

Speaker 3

They've taken it from $20,000,000 of revenues since Kit became President. We're now at a run rate to do well over $50,000,000 and we'll shortly be talking about how this is moving towards $100,000,000 So, really exciting and really energized where the business is going. Kit didn't talk much but about the television side, but we've sold our 2nd major podcast to television. This is hugely accretive to us, has no cost to us. And I can tell you that each of the networks will be in for well over $1,000,000 right by the time they get off the ground and could be 1,000,000 and 1,000,000 of dollars to our company and we've got about 10 projects in the works.

Speaker 3

We expect to have a slate of podcasts made for television and it couldn't be more excited about where it's going. So teams did a great job. We'd like to open it up to any questions and any thoughts you have. Thank you.

Operator

Your first question comes from the line of Sean McGowan with ROTH Capital. Your line is open.

Speaker 4

Good morning, Kit. How are you?

Speaker 2

Hey, Sean. Good to hear from you, man. Thanks. I'm doing well. How about yourself?

Speaker 4

Good. Very good. Very good. The earthquake notwithstanding, but it's all good.

Speaker 2

Yes. Crazy.

Speaker 4

Could you I bet you felt it even more than we did down here in Newport, it's something. Could you help us contextualize some of these new shows like without giving numbers just sort of maybe rank some of the new shows in terms of the descending order of revenue importance so we have a kind of little sense of what the key ones are?

Speaker 2

Sure. As the new shows come on, it's really exciting. You've got really the focus of the talent. You're really launching a heavy marketing campaign, introducing our huge fan base to to these shows, and then their fans are testing it too, right, as they use their social media and their communities to dive in and and test the show, see if they like it, hear what they have to say. You know, we've had some great press with with some of the most recent shows, and, they're they're having great success.

Speaker 2

So, you know, unfortunately, like, one show that we we, we launched the campaign managers, we had to put that on a little bit of a hiatus as, David Fluth actually got hired by Kamala Harris to be on her staff, to seek out presidency. So, you know, it's you never really see that coming, but it's pretty neat, right? I mean, there's a show that we launched, maybe 3 or 4 months ago that was growing really nicely, had some had some really good engagements and good press and, you know, and then and then David has to to head off. So we're talking about doing some things that the the campaign will, or Kamala's team will let us do, but it was interesting. Now the other shows that we have launched that are really in our real our sweet spot, I guess, you'd say, the female acting shows, those are doing great.

Speaker 2

So they're write off. They're really doing an excellent job. We've got advertisers testing them. The talent is working hard. We're doing, you know, every couple of weeks, we do calls with the talent to make sure, you know, they're motivated and staying on, on path.

Speaker 2

So, you know, it's part of the process and it's not like you just start out and have 50,000, 100,000 listeners. It takes a little bit of time. But we are seeing some really, really good growth in those. And, you know, so that's that's good news. I you know, really, they're on on path to what we thought they would do.

Speaker 2

We've had, some really neat ones too, like the opportunists, had some new episodes come out, and, you know, those are actually far exceeding what we had thought. So that's great news and that's keeping that network of programs or seasons of programs doing really well too. So yes, we're in line. We're doing great. And really, I think the key to seeing real significant growth is acquiring shows that have an audience and then making sure the ones that we have that are successful continue to grow and evolve.

Speaker 2

I mentioned I've had it. We're actually in the process. We just signed them to an extension, and they're adding a political shift. If you ever listen to that program, you'll know they're very politically motivated. So they're going to actually have a a political show that'll be running, 2 or 3 times a week, which which is really exciting for us too.

Speaker 2

So you'll see more about that in the press. But, yeah, there's a lot of lot of cool things. We got another show that's about to start with 2, wrestlers slash comedians, the NamUs Brothers. We have ownership in that show as well. So, you know, that's one that I think has a real chance to become, you know, kind of like the patent he got hired by ESPN of of wrestling, right, and and to bring the comedic side of things, like, a k a, like, part of my take of Forest Tool that into wrestling world.

Speaker 2

So we're really excited about that and really excited about a lot of the conversations we have going on.

Speaker 3

Yes, just to add to that, with the Opportunist, Sean, this is round 3. This is after you've had Vigilante and Barnum Town Opportunist, which we launched for almost nothing, literally almost no cost, is having great numbers again. I'm in deep conversations about a television show on it. And that's got 3 seasons of it. So there's multiple different potential opportunities there.

Speaker 3

So we're hoping to see a 3rd television show sold this year.

Speaker 4

Great segue into my next question. So as you talk about that, sort of second form monetization, can you remind us what the I know the upfront is a kind of de minimis, but what would be the timing of when these things would actually come to fruition and could be seen by an audience? And related to that, what's the timing of any additional revenue to Podcast 1? I assume it comes in through Podcast 1 and not through some other entity of Live 1, is that right?

Speaker 3

Correct, correct. It comes through the Podcast 1 and it's not a small amount, right. These can be right upfront money from anywhere from $250,000 to $1,000,000 day 1 and I think they're going to go higher. When you think about scripts selling for $1,000,000 right here you have a script, but you also have proof that you have 1,000,000 of downloads. So there could be very substantial money in it and there was a terrific amount of money in the last one.

Speaker 3

So we think we'll start to see that and the timing to get them off the ground could be anywhere from 90 days to 12 months, depends how fast the studios are moving, what slate they're in, what time of year you sign them. So the goal is to have a slate of 12 of these, right, and keep moving these. And again candidly, we never expect to sell 2 so quickly and beyond to the 3rd and potential 4th with ransom as well. So we're really excited about it. It could be very significant money over the next couple of years.

Speaker 4

And what's the timing of the revenue recognition on that? You get an upfront payment, but you probably don't book that right away as revenue and then what happens when additional cash comes in?

Speaker 3

No, I think we book it right away, right?

Speaker 1

Yes. The upfront we can record right away is there's no further obligation. It can get a little complicated. It's all tied to future performance, right? If the upfront is associated with future obligations, we spread it over time.

Speaker 1

But generally, there is no further obligation on an upfront.

Speaker 4

Okay. And then does that sort of count as against future royalties that there could be a delay between them when you would that recognition and then when you could have recognized additional revenue once you get turned out? Just remind me of what the accounting

Speaker 3

is. Not really. It's the upfront money is to buy the rights to it. But it all depends. These are all negotiations as to what the structure is.

Speaker 3

So every one of them is going to look a little differently. But most of the upfront money is not going to be counted against the royalty. That's to buy the rights to it. Then they got to go spend substantial money, right? Vigilante, they're in they've already spent studios already in for $1,000,000 plus scripts and redoing the scripts and rewriting and our options coming up again shortly, they're going to have to write another check on it.

Speaker 4

All right, great. Well, congratulations on the progress. Thank you.

Operator

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

Speaker 5

Hey, good morning folks.

Speaker 2

Hey, Barry. How are

Speaker 4

you doing?

Speaker 5

Hey. In terms of additional monetization, you guys covered a lot on TV and film rights. You also have a live event, I know coming up in October and I guess you're planning more of those. Could you talk a little bit more about live events? I know there's one and what else you're doing there and might that be a more significant revenue driver going forward?

Speaker 2

Yes. So we just did a live event in New York City with a show called the Gals on the Go. They went down to a new store opening and did a podcast there. They did some social media around it and it was a substantial 6 figure deal or maybe an hour and a half of work for us. So it was tremendous.

Speaker 2

It didn't take into our already existing revenue. It was just an added show that they did and you know, that was awesome. I I think we're looking at doing more of those, when they when they come across our desk. You'll be seeing more of that. It's a big initiative of ours.

Speaker 2

Part of the Podcast 1 Pro that I mentioned earlier, that will be some of the things that we incorporate into those deals as well where once they get the brands get their feet wet, they'll start to work with our talent to do live shows from stores and stuff like that. So, those type of opportunities are really, really neat for us. I think what you'll see with us over the next 6 months, especially with the I've had it team, we might do some, you know, special debate podcasting that will be live, you know, so you'll be able to hear their take. They'll be able to do some live pay per view, meet and greet type stuff coming up around the elections with their new show. That's part of the deal.

Speaker 2

So you'll see more and more of that as we get into it. Our fans love that kind of stuff. So there's that.

Speaker 5

And then from a revenue standpoint, the top line was obviously very strong in the quarter. Was there was that all advertising? I assume there's some non advertising revenue from some of these licensing deals that's starting to contribute to the top

Speaker 2

line? Yes. Some of it will be mostly still advertising is our core business, but you'll see, we've had some production deals as well. Like I said, the MotorTrend and those other deals that have added they've added to our bottom line. Some of these live shows will be in it as well.

Speaker 2

And we're revamping our paint wall experience, like I mentioned. So that will also be included into our revenue when we move forward.

Speaker 3

Yes. And what you're also seeing is you're starting to see that $20,000,000 plus contract kick in, right, as that's ramping up. So that distribution will ramp up and you'll start to see better margins later in the year on that. Is there some cost going into it? And then eventually it will be way more profitable to us.

Speaker 3

But it's a great win for us in revenues, but even more importantly, how much traffic and audience there is and in that traffic and audience and having these mass distribution deals and kid again just repeating it is very shortly going to be announcing multiple deals like that. They're going to give us distribution in other places and we've done a brilliant job. The team has done a great job. We're in Spotify, Apple, Amazon, Samsung TVs is right across this big streaming platform. You're going to see multiple B2B deals that have 10,000,000 to 3,000,000,000 in audience that want to have podcasts on their network.

Speaker 5

Okay. And then turning to EBITDA, EBITDA was slightly negative in the quarter And I know, Kit, you and I have discussed a goal to get that positive and to grow that in line with what LiveONE is doing on an overall basis. It would seem to me there's some drivers that are going to help drive that positive, which are the rights you've talked about and then this $24,000,000 contract. The other thing within EBITDA I want to confirm and maybe this is for Aaron is it looks like there was an impairment charge that's not backed out of the EBITDA and that's non cash. So the real EBITDA loss, I would think is a little bit less than what you've reported.

Speaker 5

So if you can comment on EBITDA, please?

Speaker 1

Yes. So that impairment charge was related to a show we acquired that we're no longer pursuing. And so that's that. Yes, look, we're very close to kind of adjusted EBITDA breakeven. We've had some additional content acquisition costs that are hurting that number.

Speaker 1

And that's just simply kind of volume of new shows, right? So we expect those to be profitable in the near term over the next kind of 12 months or so. So we expect to see that as we're adding those shows contribution margin increases a little bit and that will flow right down to our adjusted

Speaker 5

non cash?

Speaker 1

Let me get back to you on that, Barry. It might be in the depreciation line.

Speaker 2

Okay.

Speaker 1

Let me confirm.

Speaker 5

Okay. And then, Kit, can you kind of elaborate a bit more on the corporate strategies? I think I understand some of them that's going to drive that EBITDA line positive.

Speaker 2

Yes, sure, Barry. Basically, as we add shows and start up new shows, the comps are pretty insignificant. And we don't need to hire more salespeople or really more producers currently, at the current pace that we're at. So when we add these shows, it will mostly decide to like sales commission and some bandwidth costs and stuff like that. The margins will be great, right?

Speaker 2

So that's where we need to just continue to harp on acquiring more shows, launching more shows, again, because that baseline cost won't expand that much, right? So we continue doing that. And then doing like what Rob said about the 2nd window, using our content that we have and our with the talent to sell things like the Gals on the Go live show, which isn't really adding to our costs and more work and stuff like that. It's just doing a little bit more to get a lot more in terms of revenue and better margins. You'll see making sure we have social media involved in it just kind of add more to what we have.

Speaker 2

We're not actually doing more shows and do more programming, but we're getting more stuff to sell bigger deals. You'll see the same thing with the paywall. And, again, with PodcastOne Pro, you know, we're charging really good money for you know, these clients to do podcasts and and run promotion through our, our network of podcast fans, which is there's no cost to that really. We'll be able to just use existing producers and so forth. So that's all going to be high margin type stuff.

Speaker 2

So we're starting to put more and more focus on to those type of things and keeping our core business going, and it should see you should see some great EBITDA next year or next quarter.

Speaker 5

Okay. We'll hold you to that. Thank you very much, gentlemen.

Speaker 2

Thanks, Barry.

Operator

And we have our next question comes from the line of Leo Carpio with Trunar. Your line is open.

Speaker 6

Good morning, gentlemen from Kate Todd. I wanted to dig in on to the advertising environment for podcasting. What did you see in terms of the rate, in terms of an economic impact? And what's the potential impact of the upcoming 2024 presidential election on your outlook? Thanks.

Speaker 2

We don't have as much of an impact really besides David taking that job, which we didn't see coming, which isn't necessarily the worst thing. If that show comes back, depending on, you know, what happens to him if he stays with Kamala or or, you know, if Trump wins, however that works out, I think it gives him even more credibility in in terms of having a good show. So, there's that. But besides that, we don't we don't have a lot. I mean, what I think you're going to see in podcasting is people will try to, you know, the the campaigns will try to get, advertising into a lot of the shows, but a lot of the talent won't let, you know, those types of advertisements be part of their programs, understanding that, you know, half of the people in the world like one side and half of people like the other side, and and it usually, you know, creates conflict.

Speaker 2

Such an intimate listening experience, so they they don't really like having that in involved. What it will help is, you'll see, cable and print and online marketing spends will be pushed, and I believe that will fall or trickle down into podcasting, where you're going to see advertisers that still need to advertise and grow, that aren't going to buy into the cluttered world of, you know, local media, print, all that type of stuff, and that should help us out in terms of advertising rates and dollars flowing into podcasting.

Speaker 6

Okay. And then turning to talent, how is the pipeline for new talent and potential acquisitions? Is it still the same 100 plus shows you're looking at or is it changed?

Speaker 2

Yes. We win 1, we lose 1, another new one comes in. Right? So it's, there's a constant influx of of podcasts, either reaching out to us or we have a team that goes out and reaches to directly to podcasts, to managers, to agents. We're in constant review of a lot of shows.

Speaker 2

We're also we've got a bunch of M and A type opportunities. So I think that's probably remained pretty consistent and growing a little bit, I would say, in our list if I were to guess. So yeah, still really strong on that front. A lot of shows that need that need some help, and we're there to take them off. So it's exciting.

Speaker 2

It's exciting to be us right now.

Speaker 6

Okay. And then last question, looking back like 2, 3 years ago versus today, the conversations in terms of podcast talent, is it a case where they're coming to you now, whereas 2 years ago or 3 years ago, you had to go and make the pitch for them? Is that the situation you're having now?

Speaker 2

I think there's more agents involved in the process now that are reaching out just like we are reaching out to shows. What I think you're finding is that there's more shows that aren't getting the deals that they got the 1st or second time around. Those are changing. Maybe they're not getting as much in terms of minimum a minimum guarantee payment or the right split. The big ones seem to still be getting those big deals.

Speaker 2

You see the Smartlist the Dax Shepherds and the caller daddy type shows. Those are they're still seeing pretty significant deals even with Rogan and so forth. But these middle tiers are it's competitive out there. I'm not going to mislead you guys, but there's a lot more conversations. There are a lot of people that are saying, hey, I want the right partner understanding that they might get a bigger piece of or a smaller piece of a much larger pie rather than a big piece of a small pie.

Speaker 2

So there's a lot of conversations going on. It's just always evolving.

Speaker 6

All right. Thanks and congrats on the quarter.

Speaker 2

Thank you. Appreciate it.

Operator

There are no further questions at this time. Mr. Gray, I turn the call back over to you.

Speaker 2

Thank you so much everyone. I really appreciate it and look forward to having another great quarter. And I'm always available if you guys need to do a call or have some questions, please feel free to reach out and listen to your podcast on Podcast 1. Thank you very much. Bye.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

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