Good morning, and welcome to the LiveXLive Media Second Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. At this time, I would like to turn the conference over to Whitney Kukulka, Investor Relations. Please go ahead.

Good morning, and welcome to LiveXLive financial results conference call for the second quarter of fiscal year 2019 ended September 30, 2018. Joining me on today’s call are Rob Ellin, Co-Founder and CEO; and Mike Zemetra, CFO. 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 risks and uncertainties. These statements include but are not limited to statements regarding the future performance of LiveXLive including expected financial results for the third quarter and full year 2019 and the future growth in our business. Actual results may differ materially from those discussed in this call for a variety of reasons. Please refer to the Company’s filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements, including those described in the Company’s Annual Report on Form 10-K for the year ended March 31, 2018 and subsequent SEC filings. Importantly, this conference call contains time sensitive information that is accurate only as of date of this call November 14, 2018. You will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today in our earnings release, which is posted on the Investor Relations of the website at ir.livexlive.com. And I encourage you to periodically visit our IR website for important content. The following discussion including responses to your questions reflects management’s view as of today November 14, 2018 only and except as required by law, we do not undertake any obligation to update or revise this information after the date of this call. Now let me turn the call over to Rob Ellin. Rob?

Thank you, Whitney. Thanks everyone for joining us. LiveXLive has made tremendous progress in our second fiscal quarter. Just many of you new to story, let me reiterate a few of the key principles of our business. First our mission statement, we founded LiveXLive to deliver the first ever social live music platform around the globe, providing the consumer with the most authentic and immersive music experience in the last 25 years. Our mission is simple, to bring new experience in live music and entertainment to music fans, wherever music is watched and listened to around the world. At the highest level, our goal is to bring fans, bands and brands together, while enhancing value and introducing new revenues to the entire music industry. We accomplish this by leveraging technology to capitalize on the mega trends of our industry including live streaming, over-the-top delivery, mobile and highly, shareable content. LiveXLive allows music fans to seamlessly move through our apps to watch their favorite artist perform, their favorite festivals, concerts, award shows, fans to move seamlessly through our site and our apps to approach to watch the greatest music festivals. This includes original programming, including interviews, backstage, behind the scenes, red carpet in a full slate of original programming. We deliver all this while using technology to offer the most immersive experience with consumers that while watching you can chat and message. And in the very near future, you will be able to date, buy tickets and acquire merchandise. We get you as close to live experience as possible. You may not be standing in the venue, but we will give an opportunity to certainly have the best seat in the house. As useful way to frame our business is that we’re utilizing the ESPN playbook applying to the music industry,…

Great and thank you, Rob. We continue to the first half of our fiscal 2019 with strong results including Q2, 2019 revenue of $8 million, adjusted operating loss of $3.6 million and record subscriber in festival live streams during the period. Given our lack of operating history year-over-year, my Q2 financial commentary will focus on quarter-over-quarter sequential performance as compared to the first quarter of fiscal year 2019. More specifically on Q2; Q2 consolidated revenue was $8.0 million up 5% quarter-over-quarter from $7.6 million in Q1, 2019 due to quarter-over-quarter growth in our paid subscribers. I will get into deeper discussion into revenue drivers later in my prepared remarks. Q2 consolidated contribution margin with a loss of $0.2 million as compared to a loss of $0.9 million in Q1, 2019. The sequential improvement of $0.7 million quarter-over-quarter was principally driven by improved margins across our subscription business, coupled with lower overall costs to produce live stream festivals in Q2 versus Q1 2019. Again, I will discuss these drivers later in my prepared remarks. Q2 adjusted operating loss was $3.6 million versus $4.6 million in Q4 2018 – sorry, Q1 2019, the $1 million improvement quarter-over-quarter was driven by the previously discussed margin improvement from our music operations and to a lesser extent from decreased general and administrative expenses largely driven by timing of year-end audit and personnel related fees. During Q2 and Q1 2019, we also capitalized approximately 0.7 million in each quarter of internally developed software cost. Now, I would like to discuss the financial performance across our music operations in corporate divisions. Turning to music operations, our music operations consists of our audio and internet radio services from Slacker radio, which we acquired in December 2017 along with our live stream operation, sales, marketing and product development supporting…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question will be from Ron Josey of JMP. Please go ahead.

Hi, this is David on for Ron. Few questions, with $35 million music festivals, festival live stream since May 17, can you talk about perhaps some of the tests you’re running from an advertising perspective? And what do you think needs to happen for advertising to start to ramp here? And number two, we noticed more of an integration of LiveXLive content and fees across Slacker. Can you talk about the integration here of both apps and how you plan, how you see this playing out over time? And then finally on Tesla, how should we think about a Model 3 in Tesla sales relative to Slacker subscriber growth. Thank you.

Okay. So as again, first question, was just to make sure I have from, so on the advertising front, as Mike articulated, we are highly competent and we’ve just started to build out our sales team, expect to announce our CRO imminently and are highly competent that you’ll start to see the first real rollout sponsorship and advertising at Rolling Loud in December.

Got It.

So the integration of LiveXLive and Slacker has happened quicker and more efficiently. I mean, imagine Mike Bebel who is President of Slacker has done an absolutely spectacular job. Any of you met him and his background running Napster and PressPlay and Universal Digital. We’ve done a couple of things. So the first thing we did is, we’ve integrated video. It’s a Slacker. So as you listen to Slacker, you’d have the ability to watch our live events. 50% of our daily users are watching the live event. And second thing, we’ve done is in the interim of watching our sponsorship, right from December is we’ve utilized the inventory by marketing Slacker, which is driven over 10 million impressions to Slacker and we hope to see substantial conversion of that over a period of time. And you always had something, previously we just really building that funnel again, that didn’t exist previous to our acquisition of Slacker bridge, really exciting to see the amount of impressions that are being driven there. In terms of Tesla is really simple, exciting, right for everyone. We’re in every U.S. car, all models, as Tesla and our – we had a subscriber. We fully expect you to continue to grow that and we hope to in the very near future to be looking at expanding outside of the U.S. to the global markets. Dave, is that answer your questions?

Yes, that was helpful. Thank you.

[Operator Instructions] And the next question will come from Kevin Dede of HCW. Please go ahead.

Yes. Thanks a lot for taking my call. Couple of things, I see, can you just driven a little bit on the use of capital, specifically how about improved. It’s not so clear to me and I was wondering if you could talk a little too about the production cost per festival. And whether or not the increased that you’re expecting is associated with LiveZone, maybe just some more detail there.

Sure, sure. So as Mike articulated our cost per festival went down substantially this quarter. And as we’ve articulated previously, we brought all of our production team in house, our directors, our producers, we’ve also, because of the massive amounts of live events. So we’re doing the amount of days we’re doing. We’ve negotiated economies of scale with the truck companies and cameras and staff and so on. So our costs were about $300,000 per festival. LiveJournal app add a little bit of cost, but not substantially, because we already have our trucks, our cameras, our system, our hosts and our anchors for at these live events. So there won’t be a substantial additional cost to that.

So did I misunderstand Rob, did he not say that he expected cost per festival to increase in December? I’m just kind of maybe I misunderstood.

No, no. So in Q1, we produced EDC Vegas, right, which will be or at least to-date is our most expensive festival. So on a per average cost, we did five festivals. We are about $600,000 in Q1. In Q2 that average over eight festivals went down to about $300,000. We’ve always said that on average will be between $300,000 to $400,000, and we fully expect that to continue throughout the remainder of this year.

Okay, perfect.

And then on use of capital, you want me to go ahead and answer that?

Yes, yes, yes. Thank you, thank you.

Yes. So during the quarter, we had an improvement in our – we’ll call it our cash burn, which would be our operating expenses in our CapEx. More specifically on cash flows from operations, it was $1.3 million, right, negative. That was driven by our adjusted operating loss of $3.6 million, right, offset by a benefit in working capital, largely driven by us actively managing our payables. On top of that, we incurred roughly about $0.7 million of CapEx, largely associated with capitalize internally developed software.

Okay, okay. Yes, sure. I can view it and go into details of the offline. I also curious about the launch of LiveZone, and that’s the – is that the Rolling Loud festival in LA mid-December.

Correct. So I highly recommend anyone that has an opportunity to turn this. It’ll be the launch. So we’ve test, launched, as you’ve probably watched, we’ve had about 25 correspondence in host, right. And if you think CNN or ESPN, who have from around the globe reported on, interviewed backstage and brought us these great experiences, right. We’re bringing that all together, right, with the addition of Matt Baxter and the rest of the content team to launch LiveZone, which will be that SportsCenter of music and give the ability to move from live – from stage to stage and from live event around the globe.

Okay. Could you just give us a sort of bird’s eye view of the physical setup? I mean, how many stages will there be? How many sort of counters are you expecting? Is there a stage or is there sort of a production room backstage at each event or each stage?

Yes. Just to give you a chapped it today, because this is going to be a pretty special weekend we’re launching, but just think of it like the Olympics or the U.S. Open, right, or SportsCenter. We’re going to have the best piece of real estate inside of the stadium, right, with an opportunity to bring all those artists, right, in for interviews, right, and to be able – for them to be able to participate in the experience where those hosts and anchors, right, or bringing their fans to them around the globe.

Yes. I think it’s important, Kevin, that we’re going to be showcasing some new branded sponsorship capabilities, not just only across LiveZone, but across the festival in general, as well as bringing into the forefronts of new and exciting technologies with a specific partner. So we’re super excited about all the things we’ll be showcasing. So stay tuned.

Okay. So that partnership is almost to the point where you could announce it.

We’ll hopefully be announcing it shortly. We’re not quite there yet.

Right, okay. And you mentioned a sponsorship at the festival too. So that includes, obviously, you touched on the IMAG Board. Can you talk a little bit of that?

I wouldn’t specifically focus on the area sponsorship, just know that we’ll be launching LiveZone, its full capabilities. We’ll also be our live stream sponsorship capabilities, and then other events – other areas as they come up.

Kevin, what’s exciting about this is now our sales team has the opportunity to sell across from live to digital. So our inventory increases dramatically. We have some of the best pieces of real estate inside the live event. And then the ability as you can see by the numbers that typically these events are driving about 100,000 tickets sales per day, right. And we’re hitting about an average of about 3 million people viewing, so about 10 times the weekend audience already and growing. So for advertisers, they have an opportunity to participate both in live, as well as reach 3 million viewers across our network.

Okay. Yes, thanks for touching on that, Rob, because that was my next question. You know, sort of the – how to cap off your monetization of the whole deal. All right, well, I had a 100 more questions, but I cede the floor for now.

Great. Thanks. Thank you, Kevin.

Thanks.

And Ladies and gentlemen, that will conclude our question-and-answer session. I would like to hand the conference back to Rob Ellin for any closing remarks.

Sure. I just want to thank everyone for attending and it’s great to see additional new people joining the call. It’s really exciting to see almost 40,000 new subscribers so far in the last six weeks. So we continue to grow in the first quarter. So we’re going to grow 10,000 a month to 20,000, and as you can see now it’s more like 25,000 to 30,000 a month. And we expect that to increase dramatically, and as I stated before, we see very much insight going from 600,000 to 1 million in the near-term.

Thank you, sir. Ladies and gentlemen, the conference has concluded. We thank you for attending today’s presentation. At this time, you may disconnect your lines.