Courtside Group, Inc. Common Stock (PODC) 13 Aug 242025 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. My name is Deserie, and I will be your conference operator today. At this time, I would like to welcome everyone to the PodcastOne, Inc.

First Quarter Fiscal 2025 Financial Results and Business update. [Operator Instructions]

I would now like to turn the conference over to Aaron Sullivan, Chief Financial Officer.

You may begin.

Thank you, and welcome to PodcastOne's First Quarter Fiscal 2025 Business Update and Financial Results Conference Call and Webcast. Presenting on today's call are Kit Gray, President of PodcastOne; Rob Ellin, CEO and Chairman of LiveOne and Executive Chairman of PodcastOne; and myself, Aaron Sullivan, CFO of LiveOne and PodcastOne. 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 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 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 PodcastOne's Form 10-K 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.

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 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.

I'd like to highlight to investors that this call is being recorded. PodcastOne is making it available to investors and the media via webcast, and a replay will be available on PodcastOne's IR website in the Events 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 expressed written consent is strictly prohibited.

I'll spend just a minute providing a very brief overview of our results for the first quarter of fiscal 2025 ended June 30. Consolidated revenue for the 3-month period ended June 30, '24 was a record $13.2 million, an increase of 24% from the prior year period. Consolidated adjusted EBITDA for the Q1 fiscal '25 was a loss of $300,000, which is primarily driven by the timing of content acquisition costs. Company is debt-free and LiveOne owns approximately 72% of PodcastOne. In the month of July 2024, the company had a U.S. unique monthly audience of approximately 5.5 million and global downloads and streams of approximately 17.8 million.

Now I would like to turn the call over to PodcastOne's President, Kit Gray.

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 productive and positive quarter at PodcastOne. The core of our business is performing very well.

We are acquiring sales representation and distribution rights of new shows at a great pace.

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 second major show to a top 5 streaming platform, further solidifying our position in podcasting and creating a slate of podcast prime 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.

So as new people find our shows, they can go back and listen and we can monetize those -- that consumption.

Our hit shows are doing great. I've Had it was nominated for 2 iHeart Podcast Awards, and Baby Mamas No Drama won for the second year in a row at Webby.

So congrats to those 2 terrific properties. We value those relationships. And in fact, we have just recently signed them both to expansion. We're very excited about this. They're core to 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 our existing partners and company resources and using our company resources that are already existing, which limits cost and has high margins and profitability.

As I mentioned earlier, we're using -- we're really growing our second window slated programming for TV and film. But you'll also hear about us in the near future, launching PodcastOne 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 agency [indiscernible] and we just recently signed a deal where the CEO and founder of Lovesac will be doing a podcast to talk about 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 Carolla network that just relaunched their strategy, which includes new programming from J. Moore and Adam Carolla that will be exclusively behind the table.

We are having a relationship with Apple on the A&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. 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 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 of PodcastOne and those new programs will be highlighted throughout the next year.

We have many bigger deals, too, with some 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 company and get really on our path to being a $100 million 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.

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 Ellin, and he can take it from here. Thank you.

Yes. Thanks, Kit, congratulations.

I think you're hearing it from Kit's voice and I think you're hearing it and the messaging of the numbers that are coming out. This B2B deal has been spectacular. We'll add $2 million a month as this is ramping up. And as you can hear from 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 million-plus podcast business.

So very much like [ Slacker ], we bought it doing $20 million in revenues, losing money. It's now doing -- on a run rate to do $85 million and very profitable.

Kit has done a great job with his team with and surely he likes to do the same here. They've taken it from $20 million of revenues since Kit became president, we're now at a run rate to do well over $50 million, and we'll shortly be talking about how this is moving toward $100 million.

So really exciting and really energize where the business is going.

Kit didn't talk much, but about the television side. But we've sold our second major podcast in television. This is hugely accretive to us, has no cost to us and to tell you that each of the networks will be in for well over $1 million, right, by the time they get off the ground. And it could be millions and millions of dollars to our company, and we've got about 10 projects in the works.

We expect to have a slate of podcast made for television and I couldn't be more excited about where it's going.

So team's done a great job.

We'd like to open it up to any questions and any thoughts you have. Thank you.

[Operator Instructions] Your first question comes from the line of Sean McGowan with ROTH Capital.

Kit, how are you?

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

Good, very good. Very good.

You're quite notwithstanding, but it's all good. Could you -- I bet you felt it even more than we did out here in [ Newport is ] something. Could you help us contextualize some of these new shows like without giving numbers to sort of maybe rank, some of the new shows in terms of the descending order of revenue importance, so we have kind of a little sense of what the Q1s are?

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 these shows. And then their fans are testing it, too, right, as they use their social media and their communities to dive in and test the show, see if they like it, hear what they have to say. We had some great press with some of the most recent shows and they're having great success.

So unfortunately, like one show that we launched the campaign managers. We had to put that on a little bit about hiatus as David Plouffe actually got hired by Kamala Harris to be on her side to pick our presidency.

So it's -- you never really see that coming. But it's pretty unique, right? I mean there's the show that we launched maybe 3 or 4 months ago that was growing really nicely, had some really good engagement and good press and then David has to head off.

So we're talking about doing some things that 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 in real -- our sweet spot, I guess, you'd say the female acting shows, those are doing great.

So they're right off -- they're really doing an excellent job. We've got advertisers testing them. The talent is working hard. We're doing -- every couple of weeks, we do calls with the talent to make sure they're motivated and staying on path, so it's part of the process. And it's not like you just start out and have 50,000 or 100,000 listeners. It takes a little bit of time, but we are seeing some really, really good growth in those.

And so that's good news.

Really, they're on path to what we thought they would do. We've had some really neat ones, too, like The Opportunist had some new episodes come out, and 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. I mentioned I've had it -- we're actually in the process. We just signed on to an extension and are 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 political show that will be running 2 or 3 times a week, which is really exciting for us.

So you'll see more about that in the press.

But, yes, there's a lot of historical things. We've got another show that's about to start with -- to wrestlers/comedians, the name is Brothers.

We have ownership in that show as well.

So that's one that I think has a real chance to become kind of like the [ patent accuracy ] before he got hired by [indiscernible], a wrestler, right, and to bring the comedic side of things, like [ KKA ], as part of my take, of course, that into wrestling world.

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

Yes. And just to add to that, with the opportunities, Sean, this is round 3. This is after you've had Vigilante and [ Bottom Down ], Opportunist, which we launched for almost nothing, literally almost on 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.

And so we're hoping to see a third television show sold this year.

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 kind of de minimis, but what would be the timing of when these things would actually come to fruition and to be seen by an audience. And related to that, what's the timing of any additional revenue to PodcastOne? I assume that comes in through PodcastOne and through some other entity of LiveOne, is that right?

Correct, correct. It comes through PodcastOne, and it's not a small amount, right? These can be right upfront money from anywhere from $250,000 to $1 million day 1 and I think they're going to go higher. When you think about scripts selling for $1 million, right here you have a script, but you also have proof that you have millions of downloads.

So there could be very substantial money in it, and there was a terrific amount of money in the last one.

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's later and 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 third and potential fourth with Ransom as well.

So we're really excited about it. It could be very significant money over the next couple of years.

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?

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

Yes. The upfront we can, of course. By the way, 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. But generally, there is no further obligation on an upfront.

Okay. And then does that sort of count as against future royalties that there'd be a delay between than when you -- that recognition and then when you could recognize additional revenue once you get your data, just remind me what the accounting is?

Not really. The upfront model is to buy the rights to it. But it all depends. These are all negotiations as to what the structure is.

So every one of them is going to look a little differently. But mostly the upfront money is not going to be counting as royalties.

So that's to buy the rights to it, and they got to go spend substantial money. Vigilante, they're in -- they've already spent -- the studio has already in for $1 million-plus scripts and redoing the scripts and rewriting our options coming up again shortly, they're going to have to write another check on it.

Congratulations on the progress.

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

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 are you doing there? And might that be a more significant revenue driver going forward?

Yes.

So we just did a live event in New York City with a show called Gals on the Go. They went down to a new store opening into the podcast there. They did some social media around it. And it was a substantial 6-figure deal were maybe 1.5 hours of work for us, so it was tremendous. It didn't take into our already existing revenue, it was just an added show that they did and that was awesome.

I think we're looking at doing more of those when they come across their desk will be -- you'll be seeing more of that. It's a big initiative of ours, part of all the PodcastOne Pro that I mentioned earlier, that will be some of the things that we incorporated in those deals as well where once they get -- the brands get their peak led, they'll start to work with our talent to do live shows from stores and stuff like that.

So those types 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 special debate podcasting that will be live, 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 within Asia, that's part of the deal.

So you'll see more and more of that as we get into an advanced level that kind of stuff.

So there's that.

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 line?

Yes.

Some of it will be -- mostly is still advertising as our core business, but you'll see we've had some production deals, 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. And we're revamping our paywall experience, like I mentioned.

So that will also be included into our revenue when we move forward.

Yes. And what you're also seeing is you're starting to see that $20 million-plus contract kicked 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. There's some costs going into it. And then eventually it will be way more profitable to us, 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 Kit, again, just repeating it, is very shortly we'll be announcement multiple deals like that, that are 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 TV, is right across this big streaming platform.

You're going to see multiple B2B deals that have 10 million to 3 billion in audience that want to have podcast on their network.

Okay. And then turning to EBITDA. EBITDA was slightly negative in the quarter. And I know, Kit, you and I have discussed the 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 are some drivers that are going to help drive that positive which are the rights you've talked about and then this $24 million 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 noncash.

So the real EBITDA loss, I would think, is a little bit less than what you've reported.

So if you can comment on EBITDA, please?

Yes.

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

And Ellin, just to confirm, that impairment was not backed out in the reconciliation you did on EBITDA, even though it's noncash?

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

Let me confirm it.

Okay. And then Kit, can you kind of elaborate a bit more on the corporate strategies.

I think saying some of them that's going to drive that EBITDA line positive?

Yes, sure, Barry. Basically, as we add shows and start up new shows, the costs 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? 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 during like what Rob said about the second window using our content that we have in our access to 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. We're not actually doing more shows and 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, we're charging really good money for these clients to do podcasts and run promotions through our network and podcasts, 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.

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

[Operator Instructions] And we have our next question comes from the line of Leo Carpio with Gunnar.

[indiscernible]. I just wanted to dig in on to the advertising environment for podcasting. What have you seen in terms of the rates given an economic impact? And what's the potential impact of the upcoming 2024 presidential elections on the...

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 what happens to him if he stays with Kamala or if Trump wins, however that works out, I think it gives him even more credibility in terms of having a good show.

So there's that.

But besides that, we don't have a lot. I mean what I think you're going to see in podcasting as people will try to -- the campaigns will try to get advertising into a lot of the shares, but a lot of the talent won't let those types of advertisements be part of their programs, understanding that half of the people in the world like one side and half on people like the other side and it usually creates conflict, such an intimate listening experience, so they don't really like having that involved.

What it will help is you'll see cable and print and online marketing spend will be pushed and I believe that will fall or trickle down into podcasting where you're going to see advertisers, they still need advertising grow that aren't going to buy into the cluttered world of local media, print, all that type of stuff. And that should help with that in terms of advertising rates and dollars flowing in the podcasting.

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 change?

Yes. We win one, we lose one, another new one comes in, right? So there's a constant influx of podcasts by they reaching out to us or we have a team that goes out and reaches to directly to podcast, to managers, to agents. We're in constant review of a lot of shows. We're also -- we've got a bunch of M&A type opportunities.

So I think that's probably remaining pretty consistent and growing a little bit, I would say, in our list, if I were to guess. Yes, still really strong on that front. A lot of shows that need some help, and we're there to take them off.

So it's exciting to be us right now.

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

I think there's more agents involved in the process now that are reaching out, just like we are reaching out the shows. What I think you're finding is that there's more shows that aren't getting the deals that they got the first or second time around, those are changing. Maybe they're not getting as much in terms of minimum guarantee payment or the right split.

The big ones seem to still be getting those big deals.

You see the [indiscernible] and the Dax Shepard and the call or Daddy-type show. Those are -- they're still seeing pretty significant deals even with Rogue and so forth. But these middle tiers are -- it's competitive out there. I'm not going to mislead you guys, but it's -- 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 pod.

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

Congrats on the quarter.

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

Okay. 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 and on PodcastOne. Thank you very much. Bye.

Ladies and gentlemen, this concludes today's conference call.

You may now disconnect.