Good day, and welcome to LiveXLive Media Q1 2020 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instruction] After today's presentation, there'll be an opportunity to ask questions. [Operator Instruction] Please note, this event is being recorded. I would now like to turn the conference over to Emily Greenstein, Investor Relations. Please go ahead.

Good morning, and welcome to LiveXLive Media's financial results and business update conference call for the first quarter of fiscal year 2020 ended June 30, 2019. Joining me on today's call are Rob Ellin, CEO and Chairman; and Mike Zemetra, CFO. 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 risks and uncertainties. These statements include but are not limited to statements regarding the future performance of LiveXLive Media including expected results for the full fiscal year 2020 and to future growth in the business. Actual results may differ materially from those discussed in this call for a variety of reasons. Please refer to our filings with 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, 2019 filed with the SEC on June 24, 2019 and subsequent SEC filings. Importantly, this conference call contains time sensitive information that is accurate only as of the date of this call, August 6, 2019. 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 our Investor Relations website at ir.livexlive.com and we encourage you to periodically visit the Company's IR website for important content. The following discussion, including responses to your questions, reflects management's view as of today, August 6, 2019 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. Rob?

Thank you very much, Emily. Thanks, everyone, for joining us on today's call. We started out our fiscal 2020 with great momentum. We have continued to deliver the most immersive, innovative and high-quality livestream experience to music fans around the world, and after our first full-year as a public company on NASDAQ, we can humbly say we've become the global thought we are in live music. We delivered record performance in Q1 generating $9.5 million in revenues, up 25% year-over-year. Paid subscribers reached 733,000, representing over 50% increase year-over-year growth. Additionally, we livestreamed 9 events in Q1 versus 5 in Q1 last year, driving over 22 million views as compared to a total of 51 million last year. Year-to-date, we have now livestreamed 12 music events and reached over 28 million views to date. Our Q1 livestreams have generate over 120 hours of live content and featured more than 90 of the biggest artists in the world, including performances by music icons across all genres such as BTS, ASAP Rocky, Alesso, Madonna, The Jonas Brothers, Taylor Swift and included more than 300 original pieces of content available for our users. We've continued to build-out a world-class management team and this quarter we named Dermot McCormack as President, a key player in the AOL sale to Verizon for $4.5 billion, Dermot brings unique leadership ability, including the development of original content technology, modernization and distribution expertise. Dermot previously served as AOL's Global President of Video and Studios where he oversaw the video business from brands ranging from Huffington Post to TechCrunch and developed episodic programming, including James Franco Making A Scene and Steve Buscemi winning – Emmy Award winning Park Bench. Dermot also oversaw the interactive and broadband divisions as a Senior VP at Cablevision, where he was an integral part of their growth. As he achieved the highest household penetration, through his prior role with Viacom, he helped MTV build a user base of over a 100 million followers, leading MTV musician as the most valued music site on the web. Just a quick intro from Dermot, a great addition to our team and he's going to give you an update on our 2020 content, the next-generation where the business is rolling.

Good morning, everybody. As we love to bolster our live content with new original content, the overarching theme for our approach going forward will be storytelling, artist first, and community-driven. We will take to find and tell unique stories in and around music from a fan and artist perspective, and not just the typical stories or soundbites we are used to seeing in social media. We want to highlight the stories that give insight and access that entertain and enlighten, that ultimately delight and unite us around common themes. Music is a rich tapestry. Every song has a story; every musician has one; every venue; fan, and festival have one. We want to weave together these stories in new formats. We hope to integrate brands in new innovative ways, from full featured documentaries to two-minute bios, from travel shows to festival entourage series, from daily hits to weekly shows and live music from everywhere. Ultimately, music is a lifestyle that is live, social and stands for something and our content will reflect that lifestyle. Thank you, Rob.

Thank you, Dermot, and you'll be hearing a lot more from him as the next conference calls come on. As we continue to expand, our growth strategy remains centered around three major objectives: offering unique original content, including the most important pop culture events from the most important cities around the world; expanding our distribution partnerships ad sponsorships; and continue to build and buy transformative technology, our content and original programming. In May, we launched our MVP app, next-generation, social live music and subscription platform across audio and video. We have combined the best of Slacker Radio with the greatest premier music events around the world. The new app provides brand extension fans, one touch access to live events, audio streams, original content, podcasts, video-on-demand and social sharing. The new app enhances the audio and video experience to features like multi-view perspectives of stages, vertical edge-to-edge video supporting both livestreams and video-on-demand playback and a music service that uniquely personalized for each user. With over 400 new curated channels, we will stream over 50 live music events this year and exclusive original program, we are quickly becoming a dominant force, 24/7, 365, a social music destination for users globally. In July, we launched the 2.0 version that provides consumers the social elements, the most immersive experience closest to attending in person includes the ability from your car to your home or anywhere in between to buy merchandise, chat, mash with your friends and other music fans, and also simultaneously watching the best live music events in the world. As an artist-focused platform, we expanded our artist relationship team this quarter from three professionals to seven and as legendary performer Perry Ferall joined us this quarter as the second brand ambassador alongside Hip-Hop star Nas. Perry is the founder of Lollapalooza…

Great. Thank you, Rob. We began fiscal 2020 with strong results with $9.5 million in revenue, adjusted operating loss of $4.6 million, contribution margin of $0.5 million and record KPIs through Q1 fiscal 2020, which included 50% net paid subscriber growth year-over-year and livestreaming nine events to over 22 million viewers during the quarter. My prepared remarks will provide commentary on our Q1 2020 performance as compared to Q1 2019 more specifically. Q1 2020 consolidated revenue was $9.5 million, up 25% year-over-year from $7.6 million in Q1 2019 due to the aforementioned 50% growth in our paid subscribers year-over-year. Ending fiscal 2020, paid subscribers grew to 733,000 or by a net 243,000 from ending paid subscribers in Q1 2019. We ended Q1 2020 with 90% of our revenue from subscription and 10% from advertising and licensing. Q1 2020 contribution margin was $0.5 million as compared to a contribution loss of $0.8 million in Q1 2019. The year-over-year improvement of $1.3 million was driven by growth in paid subscribers, coupled with improved margins from our subscription services of approximately 33% in Q1 2020 as compared to approximately 24% in Q1 2019. In Q1 2020, we also spent $2.7 million for nine livestream events and 11 total produced events, which was flat year-over-year versus Q1 2019. Q1 2020 adjusted operating loss was flat year-over-year at $4.6 million in Q1 fiscals 2020 and 2019, largely driven by $1.3 million increase in contribution margin, offset by a net $1.3 million increase in operating expenses excluding non-cash depreciation, amortization, stock-based compensation and certain non-recurring expenses. Now I'd like discuss the Q1 financial performance across our music operations and corporate divisions. Turning to music operations, as a reminder, our music operations consists of our audio and Internet radio services along with our livestream operations, including sales,…

We will now begin the question-and-answer session. [Operator Instructions] The question comes from Ron Josey of JMP Securities. Please go ahead.

Great. Thanks for taking the question. A few please. Just on – let's just go one by one. So Rob, just for a clarification on the call you talked about, I think streaming 50 concerts, but in the press release it's 40. Can you clarify the expectation here on the 40 or 50? And then maybe bigger picture, why wouldn't a festival come back and stream with you all just thinking bigger picture as the number of festivals grow. And then, Mike, if you could provide some additional details you talked about the cost per festival at $250,000, ex EDC, $200,000. You said ongoing initiatives drove that down. Can you provide more details here? Is it the partnership with iHeart? Is it more or is it something else would love to understand that. And then, last one and trust me last one here, just both of you, I think, mentioned some equity in the form – with the music industry around your payables. So any additional insight would be super helpful. So asking about concerts, the equity for the payables and then the cost per festival. Thank you, guys.

Yeah. So [indiscernible] 40 versus 50 is festivals versus total events. So we now have run – we have now signed exclusive arrangements with over a 1,000 live music events. So answering your second part of your question, like, this year we'll stream over 50 events as well which we will choose from that bucket of a 1,000 plus. And in terms of festivals, I can't think of any of them that have chosen not to stream with us again. But we're being selective in each of the festivals. As you know, we build transformative technology that studies a social graph to choose which is the right events to do based on the size of that social graph of the artist that's performing on it. We're really excited about the partnerships and in terms of the competitors today in the industry there really is nobody left. Red Bull and Yahoo! are all gone. So really it's an open field for us and we try to be selective and choose the best partners that really – the same objective as us to deliver the most quality experience to the consumer just possible.

Yes. Maybe, I'll take the last two. On the cost per festival, part of this is our partnership with iHeart, but we're also getting economies of scale. I mean, we're constantly learning and making active decisions to lower our budgets and focus on some economies of scale as we drive in more production. With respect to the equity side, I mean, listen, we're constantly trying to improve our balance sheet. This is opportunistic with some key vendors and suppliers across our music platform that are willing to take up to $2 million to $3 million of equity. And so we're actively in discussions and looking to finalize those in the coming weeks.

And Ron just to add to that, this is just the beginning. Our partners in the music industry have been great partners throughout this. We expect, as Mike articulated, over $10 million to extend over a two-year period as well as a piece converting to equity. And I think that's just the beginning, right. I think, we'll be in watch closely as we continue to perform and continue to be the thought leader here, right. It's going to position us stronger and stronger to become for the industry to be larger partners with us both on a distribution side, expanding overseas as well as having additional equity in the company.

Got it. Thank you, guys.

The next question comes from Brian Kinstlinger of Alliance Global Partners. Please go ahead.

Hi guys, thanks so much. Nice quarter. Can you talk about the impact the integrated app is having on conversion so far or is it too early? And if it is too early, can you talk about when you expect that acceleration increases in conversion rate to happen? Is it in this quarter or is it more in the second half of the year?

Yes. I think I'll take this to start with and Mike will add into it. It's definitely too early, Brian. This was the launch of the MVP app, right. So the social aspects are just starting to be added. So we've just started to add those social aspects. In July, we launched what would be our 2.0 version, which includes chat, mash and ability to buy merch, right. Soon will be ability to buy tickets and go deeper into that. And then, we'll start to add pay-per-view and we'll add the ability tipping and micropayments. So this is really the beginning of that launch of the app. It's exciting, and we're seeing some good signs, but it's definitely too early to really – to start to commit the size and the expansion of it yet. Mike, you want to add anything to that?

Yes, I mean, the good news is, we're seeing some high engagement among active users today. But yeah, Rob's right. We're still in the early phases. We just launched this. And so we're going to continue to evaluate it. And as we get better, we'll give you guys more information.

Great. And then maybe...

And Brian, just to add to that, I apologize. Just to add to that, just the re-branding and the name change, usually when that happens you are going to have some fallout from it. What I could tell you really exciting about this is, is that adding video, the experiences and has the time that people are spending on the site. And we remarkably were able to keep almost all of that audience and increase that audience that came out from purely from Slacker now into the joint app.

Great. That leads me what I was going to ask next. Maybe you can quantify the average time either a subscriber is on your site or watches a livestream. I think this is an attractive metric to advertisers. And then as we talk about advertising, we've heard 500% increase in RFQs for two quarters. Maybe talk about when you think that is going to materialize into stronger advertising dollars.

Yes. In fairness, I wish I could say to you that it's tomorrow morning and it could be, right. As these RFPs are coming in, the tailwinds are heading in the right direction. We've just added more sales people, right. We're going to continue to add more sales people. We're very close to announcing or our Chief Revenue Officer, right. So we're going to continue to expand the team. We are going to keep growing those RFPs. And the flood gates could open, literally could be tomorrow or it could take six months. And I wish I could give you a simple answer, but as you know, in almost all sponsorship-based businesses, right, as the traffic grows and the audience grows, it's a self-fulfilling prophecy it's coming. It's just a matter of what date it actually hits.

Are you able to provide or quantify how long maybe a subscriber is watching event? Is it a handful of minutes? Is it half hour?

Yes. It's usually above 15 minutes, and what's really exciting is with Wango Tango, Taylor Swift actually sent her feed into her Facebook account and over 250,000 people watched it, a small 35-minute set. Facebook got a very excited about this because they had never seen the concurrent views that were happening across the user base. People were watching it pretty much for the entire stream. So this is really exciting.

Right, last question.

Just think about how magical that is. What we did is, we cross-promoted, right, from LiveXLive across Taylor Swift's own Facebook page, right, giving us huge branding. Ryan Seacrest was one of the hosts interviewing and so on, right, got that huge branding. And as Mike said, over 250,000 people watched, but even more important for Facebook was 24,000 consecutive viewers. Those are staggering numbers and just think about, when the API opens up for Instagram, where those numbers could go.

Yes, great. Exciting. Lastly, can you give any update, if there is one, on the video-on-demand negotiations? Do you think that is going to happen in this fiscal year, maybe an agreement? Or are you still pretty far apart?

No, I think we're shooting for the end of the second quarter, right. And what's exciting here is as you see the labels and you see the music industry more and more supportive of us, right. They've been great partners throughout this as you can tell, and on how much flexibility they've given us. The telltale signs are – is that, this is moving rapidly.

Great, thanks so much, guys.

The next question comes from Allen Klee of Maxim Group. Please go ahead.

Hi, this is Jack Vander Aarde. I am on for Allen. I just had a couple of questions. What was – you mentioned the average cost to produce a festival this quarter has decreased. And then you also mentioned that excluding the Vegas festival that the cost was much lower, the average cost. Can you remind me what that number was?

Yes. So the average cost, I believe, was to $251,000 and then if you exclude Vegas, it was $200,000.

And just to add a little color. Mike covered this before, really exciting in the iHeart partnership is you're getting multiple different wins with it. Number one is you're getting a staggering amount of content and a relationship with the artists because they have 260 million listeners that they get way more value from the artist and get the artist to do more than [indiscernible] that can do if you didn't have 260 million listeners. Number two is, across all those radio stations, iHeart is marketing, right, to come watch on LiveXLive. So that is taking on marketing costs where, I think we talked about last year $1.5 million that was the total marketing for the year, right. Those numbers are going to be very much in line right now quarter-by-quarter that because of the power of iHeart, they're also placing us across their billboards. So marketing on their billboards, come watch on LiveXLive. It's just a spectacular partnership and iHeart has been in seven out of the 11 events, and it brought some of the biggest artists in the world, BTS, probably the biggest artist band in the world right now, over 1 billion views and one on billboards, so Taylor Swift as well as this great event that we did with Madonna. I just see that partnership continuing to grow and expand. I also see the opportunity that their sales team, right, upselling from live to digital is a great enhancement to our small sales force where they do billions of dollars with the revenues from their sales team. This could be really exciting that that part of the partnership could really be expanding. And the second part that Mike talked about is economies of scale. The bigger we get, the more leverage we have to negotiate with all of our vendors to get our costs in line. So our cost as we articulate is under $20,000 an hour, this quarter, which probably in the $12,000 to $13,000 an hour. As you're reading all this and with the cost of AAA content is, it's typically anywhere from $0.5 million to Game of Thrones at $7 million, $8 million per episode, right. It's really exciting to be able to bring this AAA content at this cost level.

Got it, that's helpful. Thanks for the color there. And then, if I were to look at just – do you guys have a number of where you'd expect just in rough ballpark terms of where you'd see the average cost per festival, kind of trending towards the end of this year? Or is that not really how to think about it?

I think the trend is – I think the trend is heading in the right direction And I think in the very near future, there's going to be a festival that pays us to produce these, because what's happening is that the artists are demanding, right, that the livestream happens, right. It's kind of captain obvious that, would you rather perform in front of a 150,000 people at EDC or would you rather perform in front of 10 million plus, right, and these numbers just keep growing, right. As we mature and our industry matures, this is still the beginning of the beginning of a revolution in this space. As the numbers get bigger, the artists want more and more of this. As I've always talked about, the artists have historically, whether it's the Super Bowl, whether it's Jimmy Kimmel, whether it's Saturday Night Live, whether its radio, right, these are great marketing opportunities that usually is not about dollars and cents. It's about marketing, because the shelf life of music is way longer than it is in sports or other places.

Got it. And then lastly, could you just expand a little further on how the new combined LiveXLive and Slacker app is performing and kind of what you're seeing in terms of the pickup in subscribers as it relates to that development?

Yes, we haven't disclosed numbers on that, other than we're growing around 25,000 to 30,000 subscribers a month, right, and remember going back, we had to make up for the losses. Slacker was losing close to 25,000 subscribers a month. So far it's been really, it's been elegant. The response has been fantastic. We've got a Top 10 rating on Android. We expect similar with Apple. The reviews have been terrific. So we're really excited about the new app and this is a next-generation app. It's a first time ever that you can get all the commodity audio experience that you can get across other platforms and enhanced with the best live content in the world and all with the computer learning and habitual behavior of the consumer, the ability to bring them the – both fresh audio and video related to their habitual behavior.

Got it. All right, thanks, guys. That's it for me.

[Operator instruction] The next question comes from Jon Hickman of Ladenburg. Please go ahead.

Hi. Rob or Mike, can you remind how many sales guys do you have now from the...?

Five. Yes, we now have five. And we shortly will be growing that again, Jon. We expect by year-end to have over 10. Most important is, as I said, we'll be announcing a Chief Revenue Officer in the very near future, who brings a real experience across sponsorship, across original programming, music, et cetera.

Okay, and then – so can you give us some kind of – I don't know, insight into how many of your subscribers each month are coming from, like the partners like Tesla and the carriers and how many are coming directly, maybe organically from people who want to or saw a stream and now want to be a subscriber because they want continued content?

Yes, I mean for a lot of reasons, we don't disclose that. I mean, a healthy percentage continue to come from our B2B side, which includes Tesla and some of the major carriers. But we are seeing a healthy percentage come from the consumer side as well, as Rob mentioned, when we first inherited the Slacker property, it was losing subscribers. I mean, we're seeing net positive growth on both the consumer as well as the B2B side.

So just to make sure I have the numbers right here, you said at the end of June you had 733,000?

Correct.

And now you have, as the end of July, I guess you're reporting 740,000?

Over, 740,000.

Yes. We expect to pass 750,000 imminently.

Okay. So that's somewhere over 7,000 subscribers that you've gotten in the month of July.

It's probably closer to 10,000, Jon.

Okay. Okay, thank you. That's it for me.

Thanks, Jon.

The next question comes from Ashok Kumar of ThinkEquity. Please go ahead.

Hello, Rob and Mike. Thank you. Mike, can you talk about the business model, right with more production costs loaded in first half and second half and revenue mix accelerating in the second half. Could you talk about that improvement in cash flow and trend for the fiscal year? And then in terms of margins and the revenue mix, you had indicated 90/10 split in favor of subscribers, would a 30% margin – for subscribers, would that be the right number to look at? And also the conversion from viewers to subscribers, do you any trend there? And just on the earlier question and is it at a high level? What do you see subscriber trends for the remainder of fiscal year taking into account what visibility you have to Tesla's domestic production. Thank you.

Okay, lots of questions there. So the first question was on the cost per event. So as I mentioned before, our most elaborate event happened this quarter, which is EDC Vegas. If we exclude that, our production costs were sub $200,000. I think the expectation...

Is it more at a high level – for your event, it is just the production costs were front-end loaded. I was just getting some clarification in terms of cash burn trends given that your revenues have accelerated in the second half and you will have less – cost?

Yes. I mean, I think what you're going to see is similar to what we had last year, where the first half of the year, the cash burn was higher, in the back half of the year. You're going to see that trend. Is that your question?

Yes, please. Thank you.

Yes, okay. On the 90/10 split, we're going to hopefully see that move more towards the advertising side. Our goal is to get that more balanced somewhere between, call it, 15% to 20% advertising. Again, that's our goal. We're still in the early phases and we're going to continue to push towards that.

And maybe Dermot can talk about, I mean, doing the expanding charter from live music to live events, right. And it's an expanding price, not zero-sum opportunity and the caliber of management that you've been able to attract, could you just talk about – at a high level, in terms of how do you see that holding out and translating that into business opportunity over the next fiscal year and so?

Sure, yes. I mean, we began with live programming, which we feel is the tip of the spear. The goal now is to build more music related programming to engage the users more, to give us more opportunity to create advertising revenue, to give us more opportunity to convert subscribers into – from programming into subscribers. So the goal is really to extend the relationship with people who may come in for a live show and we want to sort of continue to extend the relationship around original programming to increase time spent, open up inventory. So that's the general goal. We also will continue to look at bigger and better distribution options. We will need more programming to do that. So the general goal is to use live programming as a tip of the spear and build around it to continue to expand our brand as the premier music lifestyle program, and we think there's a huge opening to do that.

Okay. Dermot as you expand your footprint…?

Part of the exciting part of bringing – part of the exciting part of bringing Dermot onboard is that he has so many relationships of executives who have worked for him on original programming. So I think you're going to see – very quickly, you're going to see additional management joining this company. You saw David Hasselhoff right, you've now seen the partnerships with Nas and with Perry, right. You're going to continue to see those ambassadors of music as well as executives we've added to our artist relationship team from three to seven, probably grow again any minute now. So as an artist-centric platform, building communities around these artists, Dermot's background and experience in running teams in this space, you're going to see some world-class experts joining the team on original programming.

And, Rob, and also, I guess, lifetime revenue of your customers or your subscribers will increase, right, with increase in content, right? So that's probably a safe assumption?

Yes. That's the general goal.

Got it. And would you plan – I mean given you're expanding the international footprint, do you see any requirement to – can you develop organically or do you that you need to acquire some assets in technology or otherwise to reflect your operational goals?

I think, it will come from both. As you know, my history and my team is to buy and build. But probably the exciting part is you're seeing a trend now that the carriers are starting to fight back, right, and so – and it happens every seven or eight years, right. When the carriers start to fight back, they're just unique opportunities. As part of the conclusion of this call, I could tell you that we're really excited about the opportunity that we were losing so many subscribers when we bought Slacker, right. It's starting to level off now and you're starting to hear from the carriers around the globe, the opportunity that they're going to want to control their own data, right, and have partnerships. And with having Slacker, we're one of eight or nine technologies left in the world that Sirius and Spotify and Pandora all traded at $4 billion to $40 billion, right, same thing with Tencent in China that we're one of eight or nine technologies left in the world. So you can easily see a white label solution partnership that could be similar to our Tesla deal with carriers around the globe, and that may be the trigger that really launches our international presence from that. And then we enhance the experience by not making it audio by having those 400 curated channels across audio, as well as the best, most important pop culture events in live. And I think it's going to be really exciting to see how the carriers could be a participant in our growth.

Congratulations, Robert, Dermot, and Mike. Thank you very much.

Thank you.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Ellin for closing remarks.

Hey, great. Well, thank you so much, everyone, for joining and we're getting more and more excited. The flywheel here is really starting to kick in, right. Own the best pop culture events around the world have the biggest artists in the world, drive a massive audience. We're on a run rate to have over 120 million livestreams this year. If we can just convert a tiny percentage of those to subscribers, right, these numbers start to wheel – the flywheel really starts to kick in. Now that we've launched merch, we're starting to test it. We drove 60,000 people for the EDC merch site guy and we think the same thing will happen with tickets.There's so many different revenue streams that can come from this audience, right. And so we're really excited about the direction of where everything is going, including the additional upgrades in management, recent upgrades in management. So a small percentage of this starts to convert and the sponsorship, the small piece of that 500%, and increase in RFPs starts to kick in, and this flywheel really starts to move quickly. So, thank you everyone for participating, and we look forward to the next conference call and updating you again.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.