Q3 2024 LiveOne Inc Earnings Call

Participants

Aaron Sullivan; CFO; LiveOne, Inc.

Robert Ellin; Chairman and CEO; LiveOne, Inc.

Brian Kinstlinger; Analyst; Alliance Global Partners

Jon Hickman; Analyst; Ladenburg Thalmann Asset Management Inc

Sean McGowan; Analyst; ROTH Capital Partners, LLC

Thierry Wuilloud; Analyst; Water Tower Research LLC

Presentation

Operator

Hello, everyone, and welcome to the Liwan, Inc. Q3 fiscal 2024 financial results and business update call and thank you for standing by. My name is Daisy, and I'll be coordinating your call today. If you would like to register a question, please press star followed by one on your telephone keypad. And I would now like to hand the call over to your host, Arne Sullivan, CFO again. So Alan, please go.

Aaron Sullivan

Thank you. Good morning, and welcome to Ligand's Business Update and Financial Results Conference Call for the company's third quarter ended December 31st, 2023. Presenting on today's call is Ms. Rob-L and CEO and Chairman of Liwan. I would like to remind you that some of the statements made on today's call are forward-looking and are based on current expectations forecasts and assumptions that involve various risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of the Company, including expected future financial results and expected future growth in the business. Actual results may differ materially from those expressed on the call for a variety of reasons for it 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 our annual report on Form 10-K for the year ended March 31st, 2023 and subsequent SEC filings, you'll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today. The Company's earnings release, which is posted on its Investor Relations website, encourages you to periodically visit our Investor Relations website for important content following discussions, including responsiveness and any time sensitive information that reflects management's view as of the date of this call, February eighth, 2024 as required. 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 investors that this call is being recorded. The Company's 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. Additionally, it is the property of the Company and any redistribution, retransmission or rebroadcast of this call or webcast in any form without the Company's express written consent is strictly prohibited.
Now I would like to turn the call over to Lowell and CEL. well done.

Robert Ellin

Thank you Aaron, and good morning, everyone. I'd like to thank you for joining us today. It's a really exciting time at Lab One, and I'm extremely pleased in how all areas of our business are performing was truly spectacular quarter and one that illustrates the power of our creator. First model focused on super fans, which rewards the talent and enriching the shareholders as we near the close of fiscal 2024, we conservatively guided consolidated revenues to $115 million to $120 million, and we raised our guidance for fiscal 2025 to $145 million to $155 million. Of note, our audio division contributing revenues of [130 million to 140 million] and $20 million to $25 million of EBITDA with over $17 million of positive cash flow. I'm so proud of our audio team considering at the time of the acquisitions of Slacker radio and podcast one, the combined pro forma revenue was around $40 million with 400,000 members losing $15 million a year. Today, Slacker radio has proudly passed 3.5 million members this past quarter end at over 300,000 members, close to 700,000 year to year over year. We are guiding this year over 1 million new members.
This past quarter, we onboarded 24 new podcasts signed to long-term contract, and we signed almost every one of our current podcast shows. We have a pipeline of over 100 existing podcasts. That's 10 times the amount than any in any in history, choices that we believe many will join our network. We focus on great creators with amazing stories that can benefit achieved increased engagements by joining our family. This shows you're averaging about $350,000 annual revenues to over $7 million adding. This gives us unique clarity and strong confidence in our ability to achieve our 2025 financial guidance.
Also, as we expand our podcast rep roster in our sponsorship, we now have over 600 advertisers and partners and growing as well as over 10 podcast networks as potential acquisitions, very similar to what we did with cash media Kit, Sue, Eli and the rest of the podcast team have done an amazing job and you have an opportunity to listen to Kit presenting at 11:30 call. I'm excited to announce this past quarter we closed a first ever, $20 million-plus, a B2B deal with one of the largest streaming platforms in the world, a Fortune 500 company. This combined with our extension of our 10-year partnership with Tesla extended contracts for at least another 18 months, ensures increasing monthly revenues, which provides us with full confidence that our business plan will provide more and more of these B2B deals we now have over 42 potential B2B partnerships in our pipeline across eight verticals. In my 30 plus year history of high level involvement in media and technology companies. Any time our companies have passed surpassed that $100 million in revenues with most of this almost guaranteed recurring next year. It has always provided both myself and my management team. The confidence in the runway and the ability to drive further revenues and sizable EBITDA.
Now for our shareholders, this is the live one flywheel. It starts with creative first focus on super fans driving traffic and engagement and producing multiple revenue streams from the same piece of content this quarter, our own our only negative EBITDA division or merchandise [EPS] has cut over $5 million of costs, and we'll continue to cost up to [$7.5 million to $10 million] of costs and use that cost saving to celebrate our celebrity brands. We will launch between 8 to 12 celebrity brands, starting with birth defects with Jeremiah and Russell Bevin. We sold out in our first few weeks of the first round of product this past year. Proudly our publishing division to undefined split line was nominated for three Grammys and to come to granules. And I would suggest the beginning we created sounds productions platform compete, which place where produces upload their Beats and sound to storefront for other creators to purchase them. Likewise, this is a subscription based service, but the big difference is our company and to create his own the IP and receive royalty payments. There's nothing better for a young artist and receiving mailbox money every month. This model motivates and attract creative talent to our platform, driving traffic and audience engagement, again, with very little cost to us an unlimited revenue potential revenues increased over 300% in our 1st year.
I'd also like to highlight we created a subsidiary of podcasts, one called studio on focus on ownership of scripted IP was specifically focused on second with windows of selling television and film. This quarter, we proudly announced the acquisition and launch of four shows opportunities lost in Panama, vigilantly and Barnum town and which is already partnered with a major streaming platform and is waiting to be greenlit as a scripted TV show. Another one of those has partnered with a different platform and he's already sold as a documentary. Our supplies deepen our possibilities are endless. I really hope everyone had an opportunity to listen to our newest podcast them down hosted by Paul McLaughlin is a great example of the type of COD podcast We are targeting targeting, which have the traction to be major studio production. We believe we currently have eight to 12 current podcasts have the potential to turn into scripted shows in a more on the horizon, either creating our own or acquiring existing podcasts and promoting them with their community once again, owning more and more IP licensing merchandise in coming years, the division could become the most profitable division within the company. Given the current strength and future potential of our business, we believe our stock remains extremely undervalued. We increased our buyback from [4 million to 10 million], leaving approximately [6 million] of capacity.
Thank you, everyone, for your time and attention. And I'd like to hand it back to our CFO, Aaron Solomon, for Q. three. Repeat results.

Aaron Sullivan

Thanks, Rob. I'll spend just a few minutes providing a very brief overview of our results for the third quarter of fiscal 2024. The quarter ended December 31st, 2020, trips consolidated revenue for the three-month period ended December 31st, 2023, was $31.2 million. Soccer posted record revenue for Q3 of $16.8 million and adjusted EBITDA of $6.8 million. Project ONE posted revenue of $10.4 million, adjusted EBITDA loss of [400,000] for the third quarter of fiscal '24 revenue consists of 54% membership and 46% advertising sponsorship, merchandise and other compared to 49% membership and 51% advertising sponsorship and merchandise and other in the prior year period. Consolidated adjusted EBITDA for Q3 fiscal '24 was $3.3 million on a [GAAP to US GAAP] basis by one posted a consolidated net loss of $2.6 million or $0.03 per diluted share for Q3 fiscal 20 for RockPile. Turn it back to you.

Robert Ellin

Great. Thank you, Aaron. Again, a spectacular quarter for the Company, a huge growth again, in conclusion, I just want to reiterate, as each of my prior companies is broken that $100 million mark in revenues, whether it's digital turbine. I want Jakks THQ forward industries. Grand toys. Each have had substantial [5 to 100 times runs] for their shareholders. I'm confident excited because I believe this is the biggest opportunity in my career.
I personally invested over [$18 million] in this Company and I increased our Company stock stock buyback to $10 million because I see where we're headed and strongly believe our stock is undervalued. We said we were going to achieve hitting 10 million subscribers was over a five year period. We're well on that way at SuperCom category hit. There do will be over $1 billion in revenues, and this will be the stock will be substantially higher. And I want to thank everyone for their support and look forward to any questions.
Thank you.

Question and Answer Session

Operator

Brian Kinstlinger, Alliance Global Partners.

Brian Kinstlinger

Great.
Thank you. Congrats on your eight figure sponsorship deal with podcast. first is this a new sponsor or a larger agreement from an existing sponsor? I guess I'm trying to understand if this is all incremental revenue to podcast current run rate.

Robert Ellin

Yes. So this is a brand new partner. It started sort of the end of last year, we announced that it will continue to grow and it's way more than eight figures. It's well over $20 million, and you'll start to see that incremental growth in this quarter and substantially higher as each quarter goes forward. This gives us a streaming partner, one of one of the biggest in the world, Fortune 500 company and gives us a massive audience to reach to showcase our content.

Brian Kinstlinger

Fantastic. And then more broadly, we've heard from the Googles and Facebooks of the world that the ad market is finally beginning to strengthen. And then we also have an election year ahead, which usually helps the ad market.
First, are you seeing the same signs in the market where pricing might begin to strengthen and then we'll podcast benefit from political ad trends.

Robert Ellin

And the answer to both is yes, we're already seeing that and we're seeing telltale signs that this is going to be a fantastic year, as you could see by the numbers we announced this morning and podcast one, we almost matched last year right. We did $32 million last year were $31 million and change already with a quarter to go. And obviously our fourth quarter, right, especially with this new contract is going to be the biggest quarter ever in the history of the Company. So we're seeing telltale signs. It's strong. Politics does work in advertising, but I think the biggest thing Brian to look at is the trends in podcasting usage, the number of people that are moving, the podcast, the demographics that are moving to getting younger and younger as well and also the number of sponsors that are moving into podcasting. It's it's really a maturing business. And what I've told everyone is this business was going to grow and we bought podcasts went from $4 million to eventually $5 million to $7 million. What I would tell you and Alex can be way more like $7 million to $10 million by 2030. So it's a big market developing. This is really unique time for our advertising and podcast business.

Brian Kinstlinger

Right is the heart of the question? I declare podcast. One revenue is growing. Our growth is a function of downloads versus price. I think you grew downloads 15% if I read an article correctly or unique visitors. So I guess I'm wondering what are the pricing trends if I speak to the ad market, is pricing generally been flat and you expect to increase, has it been increasing? Just speak to pricing on the ad side, if you could yes.

Robert Ellin

I mean, I could talk to the overall market, right is increasing somewhat broad. But really what's happening for us is because we built this community, right? We're able to sell across the community and part of the excitement. And you'll see when when you see podcasts like Brendan Schwab move over and Brendan moved over doing, you know, doing what he started doing two times what it was doing before because of our community where there's upsell and sell at very different CPA with CPMs. And some of the bigger guys are who are mostly doing programmatic advertising. So as a trend, the trend is our friend. The industry itself is going up. But for us, we're going up even higher because our community continues to grow.
Great.

Brian Kinstlinger

I have a couple more if you don't mind. And first, I ask this every quarter, I may have missed it. Can you speak to the number of podcasts that are pending onboarding and speak to the expected timeframe. I could be wrong. I think last quarter you had [6 of the 27] from cast. I might be reading my notes wrong. So if I'm wrong, sorry, and then there's probably others pending So suggested maybe take us through what's pending in the timeframe.

Robert Ellin

Yesterday, we announced we added 24 this year that's by far a record for the company, right? We're now up to close to 180 podcasts, but we said it for the first time in history, we have over 100 podcasts in our pipeline. And the reason that that's happening is you read the announcement Spotify, they hired a massive team with very talented team of creators, and they just got rid of all. They woke up and realized the best distribution, right? And we're a great partner for them distribution, but they're really managing the small podcasts is not does not make sense for a lot of these contracts that was [$28 billion] back positions in the industry. The industry was the trend was it was a seller's market for podcasts. Both podcast networks as well as podcasters are right now is a buyer's market. You're going to see from Amazon and Spotify and Apple and Sirius, a lot of these podcasts that do $250,000 to $5 million in revenues. Your contracts are coming up and you really need a place that can cancel them and support them right in this market. And it's really not going to happen in these big companies. It's not really the right place in the base. So this is the biggest pipeline we've ever had. And I fully expect to beat that '24 number. We'll have still a lot more coming in this fourth quarter, and I expect to beat that number of [call it 27 to 30] this year. I fully expect to beat that next year. I mean, just looking at our pipeline and how close we are amenities, I think you'll see some really exciting announcements, you'll see some major major podcasters are moving over to our platform like Brendan did it's rare that you see those kind of moves, but you're going to see them in a unique way and the big guys are going to they're going to they're going to control distribution, which is wonderful that we have these partnerships with Spotify and Apple and Samsung and so on.
Right, but they're also going to be focused on the Joe Rogan to the world. You signed a new $250 million contract, right? And the shows just moved over from Amazon, $100 million a year for Spotless, right, just more and more money pouring into the system. But the big guys going to focus on how it serves and the Joe Rogan. And we're going to have a unbelievable opportunity to acquire existing podcast with traffic and audience as well as like we did cash media. I fully expect. We said we have 10 acquisitions in the pipeline. I fully expect additional acquisitions in the podcast space as well this year that are hugely accretive to our bottom line Great.

Brian Kinstlinger

Last question I have I think I don't think you discussed that I think is really important point that you and I have discussed in the past. So maybe you can share any stats for recently onboarded podcast, how they perform compared to when they were on other platforms?
Not in the podcast one platform in the first six months or so. I think that we've had a good discussion that I think would be helpful if you could share some stats.

Robert Ellin

And I think this is a credit to kit, Nillai and Sue and they've got 65 years of history in doing billions of dollars of revenues in radio rights who ran all of sales for Howard Stern and Mel Karmazin, all three of them trained on the new on patents who is a pioneer in radio and you know, creating one of the great public companies and great radio with this company previously with Westwood One our team has been able to move over podcasts and without giving names, we moved up one podcast that literally had 20,000 downloads, making it a couple of very talented to women, very talented from a small town. We moved them onto our platform. We put a moment the Vanderpump. So we put them onto all the housewives. We put them on all of our female network, which we're most powerful and have now grown to 150,000 downloads and they're doing millions of dollars of revenues. So we're and there's multiple stories like that and very few companies left that can do that with a community that they're really working on the sales, the marketing, the PR, the production, all of it in one and working with that talent to deliver and way better, CPAs, way more traffic way more audience. We also put them on Good Morning America and put them on TV and did all the cross work of a PR firm that really grow them, and I couldn't be more proud of it.
Brendan Brennan shows exploded since I came on a network, it's up 2.5 times sales from them are being broadcast media.

Brian Kinstlinger

Great.
Thanks for all the details.

Robert Ellin

Thanks, Brian. Appreciate your time.

Operator

Our next question is from Jon Hickman from Ladenburg John, please go ahead. Your line is open.

Jon Hickman

Yes, hey, Rob, I'm Could you walk through like how a podcast becomes a in our streaming or television type and asset and what the revenues, what your portion of the revenues could be?

Robert Ellin

Yes.
Great. Thanks, Jon. I mean you and I go back a long way. I think I met you when I owned atmosphere films and I had a sleeve of television and film and I was very fortunate, yes, those films turned out to be one one turned out to the movie. The movie 300 another, what turned out to be Spider with Chronicle, and we did well over $1 billion of revenues.
Here's the beauty of this model. You take a podcast like bottom down my partner and Board member.
Patrick, let's burger one of the great creators of content maybe in history. Just wondering, the Academy Award for Coda created Twilight Lala land came to us with a show called bottomed out, guys. The amazing story line, I'll make it really brief, but 300 people little town for any of you old enough to know this this spanned Coach REO Speedway, a plan, a plane lands in this little town of 300 people in North Carolina and all of a sudden everybody explosion becomes rich money is kind of get it out of the new models coming out of their pockets. So so wild, how many how much money is created system? And of course, what happens murders and CIA. and FPI. and drug enforcement and tax authorities and so on. This little kind of 300 people of that show I highly believe is going to come a bidding war for the streaming networks. It's the story of Pablo Escobar infiltrating little town in North Carolina, and it out in the Valley one who has an opportunity to listen to it, I think you're going to really enjoy it and you've seen the show ARC. Are you seeing any of these True Crime tribes type shows? This is one of the best I've ever seen. And I think that's one of our four shows we've announced so far. Yes, stay tuned because you're going to a lot more announced any minute now these all 4 in this quarter by opportunist vigil and he has already sold to a major studio. They just wired a $70,000 .
Just to start with you, John, when you look at these things, you're going to start to get production money, you're going to start to get your back end money. And as we grow it, we expect to do 10 to 12 of those shows a year, which we're doing anyway right there on our platform, make some money off the podcast, but then sell to that second window where there's no risk and Netflix or Apple or Amazon or HBO buys the rights to it. And we sit with the catcher's mitt and collect money for the rest of our lives. I'm very fortunate when I did 300 is now almost 20 years, yes, those royalty checks come into life. And so it's really exciting. The next generation of where podcast is going

Jon Hickman

so is there any cost to do that Europe being

Robert Ellin

zero impact embedded on losing whatever

Jon Hickman

Austrian cargo is 100% margin?

Robert Ellin

Correct.
Once once we once we yes. So as an example, right. And vigilantly, we just got to $70,000 a check, but we get that check writing some of it's already handed off, right? They've already hired the writers to produce. So on it, right, we're executive producers on it and we'll continue to get paid is produces on. It will continue to get paid back and it is successful and literally if it makes it, you make it the 1st year, we're going to get paid a lot of money and mix second and 3rd year, this becomes mailbox money to life. So how

Jon Hickman

who ruin your shop is shepherding that initiatives?

Robert Ellin

Theres is a team of people. So remember, it starts as a podcast, right? So the podcast, again, Nielsen Audio Imagine imagine that now you can go instead of scripts and book sell for $1 million, $2 million, right? Then you got to hire a writer here already approved at the shows are the up the traffic sorry, where the audience is already there and now you're selling to Netflix and Young.
Okay. The show is already number four on Apple, right? It's already had 100,000 downloads in the first week. They've got proof of concept proof of customer base to very unique model. And yes, I'm really excited about this. I think it's going to be a I think it's going to be a real winner for us and it will take a little bit of time. But just as the small, the small bits of money coming in some next year could be some very substantial money coming in and growing every year.

Jon Hickman

Hey, real quick. Can you remind the four that you've already announced for July, any farm in town? What are the other two?

Robert Ellin

Yes. So opportunist, which amazingly has just told me once just everyone's doing 100,000 downloads will make it a lot of money, just that's just off the relaunch already tied to that first three years of it when we acquired that from cash media, Joanne is already sold to a major network guy opportunities. So opportunities partnering with a network to do a documentary of just one season of IT guy. We're out with two other seasons, two new networks and the other one is called loss in Panama.

Jon Hickman

Okay.

Robert Ellin

And I think you will add another one on this.
We'll probably add another one every couple of weeks, John, right now.

Jon Hickman

Okay. Okay. Go go into.

Robert Ellin

Thank you. Appreciate you.

Operator

Thank you. Our next question is from [Sam Lee].
Sam.
Your line is open and I'm pleased on the talk lately.
As that Tom has disconnected. So I'll move on to our next question.
Our next question is from Sean McGowan from ROTH MKM. John, please go ahead. Your line is open.

Sean McGowan

Are you able to hear me say

Robert Ellin

hey, John Hayden. But yes, pretty good.

Sean McGowan

How are you?
Let me start with that with our and first of all, congratulations on the recent promotions, but second, can you give us an idea of exactly when the 10-Q will be out?

Aaron Sullivan

Thanks, John. Appreciate it. And so we are looking at both though it will be early next week deadline is Wednesday the 14th. We're hoping to get out maybe a day or two sooner.

Sean McGowan

Okay.
But would you mind repeating those percentage breakdowns on the revenue being between subscription and ad and and any kind of color you can provide on revenue outside of those two categories?

Aaron Sullivan

Yes, sure, Adam. So let's see. Thank you. We mentioned that Slacker revenue was $16.8 million for the quarter and podcast one was [$10.4 million]. So that's that's two big buckets there. And then in terms of the percentages, it's 54% membership and then 46% advertising sponsorship, merchandise and other for the current quarter and in the prior year quarter was 49% membership and 51% advertising sponsorship merchandising another growth, but

Sean McGowan

that's just within audio.
But can you just give me any color on revenue outside of that? Just any meaningful change going on there?

Aaron Sullivan

So the outside of that you've gotten it basically merchandise revenue make up the remainder, yes.

Sean McGowan

Okay. And then on the $20 million deal on CapEx, if you can provide any a little bit more color on that, for example, what timeframe does that cover? And is all of that revenue going to be booked in kind of in one bucket? Or will be will it be spread around.

Aaron Sullivan

So that will be that over the course of calendar 24. And so you should see it in a relatively straight line manner over that period and that that will be in the advertising categories.

Sean McGowan

Okay.
So it's all podcasts direct, I would say

Aaron Sullivan

correct.

Sean McGowan

then back to Slack historically.
And secondly, any updates or color on expanded relationship with Tesla or with any other equipment manufacturers? I think you've hinted in the past that there could be you have some additional partners for audio streaming, anything new there?

Robert Ellin

Yes. And let me jump in on that, Sean. So we just announced is that we expanded our pipeline from 35 to 42 partners, right? Our streaming partners, the first of many of these B2B deals. And we fully expect that at those 42, somewhere somewhere in the 5% to 10% of those, those will we'll close this year. And so anywhere from two to four of those in each of those are with billions to multi-trillion dollar companies, very similar to this type of deal. And so we couldn't be more excited about the pipeline. We bought a great team at Microsoft. We've done billions of dollars of B2B deals. And as you know, John, my entire business and Digital Turbine was built off the backs of B2B deals that was just with carriers and hardware companies. We have eight verticals here. So we fully expect to expand our our auto business and we fully expect to expand our carrier business. And historically, Slacker has had partnerships with everybody from Samsung, Verizon, T-Mobile and as interest rates rise and you're going to hear this theme exactly as I described in Digital Turbine for a seven year year is the same trend this year as interest rates are going up, those commodity businesses must have a closer relationship and must own the data. Are there customers. And you're seeing more and more of those partners now signing up with content, knowing their own content and having their own content deals versus giving it to Apple and Android and just allowing them to own all that data. So really exciting pipeline. The biggest by far in the history of the Company, it's the one area that we're adding people and we're now four people in our database. We'll continue to add to that group, and you'll probably see some announcements around that and expand that B to B as we announce the next the next deal.
Okay.

Sean McGowan

And then when you talk about those 35 to 42 partners or is that all within bloggers that include partnerships that would be in podcast you know, audio auto partnerships, right?

Robert Ellin

So even though this first deal is for podcasts, that doesn't mean it can't expand to radio, right? So it doesn't mean it can't expand to our live streaming of a pay-per-view. We have these massive libraries of video. So don't be surprised if you start to see announcements at crossover multiple.

Sean McGowan

Okay, thank you. And then last thing, Rob, can you give us a little bit more color on what we should expect to see at other products coming soon in celebrity is on can you give us a little peek there. I mean, the wind is off to a great start, but what other things should we expect to see in the coming quarters?

Robert Ellin

Yes. Yes, M&A be patient because it's coming any minute now, right. What I said is you're going to see another two or three products launched. So we have two wines already, and that will be a launch you're going to see us across big spaces, things like coffee, right, cosmetics. So when you think about what's happened in the industry, the social media storage, which we live with every day with their podcast with musicians with social media stars. We worked with all of them, I think Logan, Paul and Prime and how it's now doing [$1.5 billion] revenues, right and I think you think of Kim Kardashian, $700 million of revenue in two years and what she has done for the cosmetic industry. And I think I'll go back go back to, you know, in oh two RBO right inside of Entourage in Q2 are being created inside of it. We see this great opportunity with very little to no cost to us to be able to partner with our creators with already having the rev shares bill and be able to launch products and find out if there's social media driving at their social media drives it. You can have a great brand. It doesn't drive a pretty good chance that's going to be one you're going to pass on. So we expect to launch 10 to 12 I'm sorry, 8 to 12 this year and we'll expand to 10 to 12 the year after it. And for the year after these will all be with very little cost to us. It's really just an extension of our content and new revenue streams that come out of it. And I can't wait to do the ones with podcasters because with podcasters just thinking about it, right, 50% of the business is direct response. So they have proven records that you are selling products right directly up that podcast because these podcasts have super fans. So they're not to be massive businesses. Again, they can be hugely accretive and usually grow our business overnight.
Great.

Sean McGowan

Thank you very much.

Operator

Okay, thank you.
Our next question is a follow-up from Brian Kinstlinger.
Brian.
Please go ahead. Your line is open.

Brian Kinstlinger

Thank you, Peter.
And I to the first one, I just want I'm sure lots of people our thinking miss about is$20 million deal. So I'm going to ask it to make sure we're all thinking about the right way to look at podcast one's revenues you've been at about $10.5 million for each of the first three quarters, plus or minus. Is the way to think about it that you're going to do $42 million-ish this year, whatever it is plus or minus and next year is we are already off to $20 million higher, so 50% growth based on that $20 million deal? Or is there something I'm not thinking about the right way there?

Robert Ellin

Yes.
Look, we'll come out, Brian. We can't go any deeper than we publicly announce. What we said is we expect to be on a run rate of $45 million to $50 million with [four to five] (technical difficulty) . We're going to have we're going to have to update that shortly. And give us give us a minute to do that. But we haven't publicly announced anything deeper there, but you're certainly you certainly thinking the right way, right. And one of the exciting things here is you now have you now have your your advertising business growing almost as fast as your audio bit this?
Right.
So this is the first time we have two moon shots. It's happening at the same time.

Brian Kinstlinger

Okay.
That's good to hear. The second one, just maybe for Aaron, on the cost side and the pros and cons, if you just walk me through it. The first on the OpEx side, it's substantially down the December quarter to September quarter. I assume that's your cost cutting efforts. I want to make sure there's nothing one-time and this is kind of indicative of the near term or lower as you've talked about in the past. And then on the gross margin side, I'm not sure what impacted the mix. It was a little bit lower than it's been for the last many quarters. So just if you could just take me through the dynamics on the cost side, and how we should think about that going forward? And that's all the questions I have.

Aaron Sullivan

Thank you.
Yes, thanks, Brian. So on the OpEx question, I think we're you know, this did not and overall is not any one-time, significant one-time matters. And here it came down a little bit from last quarter, simply because and we had substantial costs related to spinning off podcast one. So you had accounting and legal costs, et cetera, probably filing costs in previous quarters. So so you don't have that noise kind of going forward. And so that's that's that. And then on the margin side, there's about three percentage points of additional spend in the current quarter where we're acquiring content. And we we expect that to kind of normalize in the coming quarter. So you should see an increase of about 2%, 3% there. And I think that's kind of the run rate we've been on previously. And so should should drug for association drop down this quarter should should pick back up and in coming quarters.

Brian Kinstlinger

Great.
Thanks for the explanation.

Aaron Sullivan

Thanks, Brent.

Operator

(Operator Instructions)
Thierry Wuilloud, Water Tower Research LLC. Terry, please go ahead. Your line is open.

Thierry Wuilloud

Yes, thank you very much. Good quarter, guys, and you've already covered a lot of ground. So I just have just one question, you're guiding to a very a substantial jump in EBITDA for the fourth quarter. And I was wondering if you could give us some color how much of that is seasonally driven by a one-time deal. Boy, part of it is maybe leverage in the model.

Aaron Sullivan

So I'll take this rather than you can you can jump in. So for Q4 and as I mentioned earlier, and we had a lot of kind of onetime noise in kind of Q2, Q1, Q2 with a little bit bleeding into the current quarter on our and efforts to spin a podcast one. So that's behind us. And so we're expecting to see some some cost savings there as the audio business continues to grow into into Q4, we just see additional contribution down to the down to the bottom line there. And that's really kind of the two driving trends there and the EBITDA for our expected EBIT for Q4.
I know, Rob, if you have anything else to add.

Robert Ellin

Yes. I mean, I would just say not just podcasts, one that we had also filed a public offering for Slacker radio to emerging to a spec, which we subsequently pulled because the market was so terrible, but also because the company is growing so fast, right, revenues and EBITDA. So we had the costs of three oh three audit our legal fees so on, that's very expensive. And Aaron, who is just made Seattle, it's just done a great job of that and a great job of managing it. And you'll see I think you'll see those margins come down. You had a strong quarter.

Thierry Wuilloud

Great.
So I mean, if I if I summarize that the EBITDA level you're forecasting for the fourth quarter is maybe a sustainable level going forward and and in kind of a new quarterly basis?

Robert Ellin

Yes. I mean, our EBITDA, as you can see and we don't break down by quarter, but we did put out guidance for next year where we said our audio business was going to do and [130 million to 140 million], right, with $20 million to $25 million of EBITDA, right? So you're starting to see some real traction and I'm showing real real move towards cash cash flow and bottom line.

Thierry Wuilloud

Great.
That's it for me, guys. Thank you very much.

Robert Ellin

Thank you.

Operator

Thank you. We have no further questions, so I'd like to hand back to Robert and then for any closing or further remarks.

Robert Ellin

Well, I just want to thank everyone and appreciate your time. And in a difficult market like this, you know, this is a great time for our company and growth. We're going to continue to buy stock and we'll be able to buy stock in the next couple of days.
Now the earnings are off and we'll continue to buy stock. And if we're going to trade at these low levels, we'll expand that buyback again if we need to. So I want to thank everyone and thank you for spending the time. We appreciate your support in a tough market.

Operator

Thank you, everyone, for joining today's call. You may now disconnect your line and have a lovely day.