Good day, and welcome to LiveXLive Media Q1 2020 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. After today's presentation, there'll be an opportunity to ask questions. 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 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 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, 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. 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 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. After our first full year as a public company on NASDAQ, we can humbly say we've become a global leader in live music. We delivered record performance in Q1, generating $9.5 million in revenue, up 25% year-over-year. Paid subscribers reached 733,000, representing over a 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 livestreamed 12 music events and reached over 28 million views to date. Our Q1 livestreams generated 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 many others, including more than 300 original pieces of content available for our users. We have continued to build out a world-class management team, and this quarter, we named Dermot McCormack as President. Dermot is a key player in the AOL sale to Verizon for $4.5 billion and brings unique leadership abilities, including the development of original content technology, modernization, and distribution expertise. Dermot's previous experience includes serving as AOL's Global President of Video and Studios, overseeing the video business, and developing episodic programming. Just a quick introduction from Dermot, a great addition to our team, and he's going to give you an update on our 2020 content strategy.

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 strive 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 accustomed to seeing on social media. We want to highlight narratives that provide insight and access that entertain and enlighten, ultimately bringing us together 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 innovative ways—from full-featured documentaries to two-minute bios, travel shows, festival entourage series, daily hits, weekly shows, and live music from everywhere. Ultimately, music is a lifestyle that is live, social, and represents something deeper, 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 arrive. 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 key cities around the world; expanding our distribution partnerships and sponsorships; and continuing to build and acquire transformative technology for our content and original programming. In May, we launched our MVP app, our 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 worldwide. The new app provides fans with one-touch access to live events, audio streams, original content, podcasts, video-on-demand, and social sharing. It enhances the audio and video experience with 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 is uniquely personalized for each user. With over 400 new curated channels, we will stream over 50 live music events this year and exclusive original programming, quickly becoming a dominant force—a 24/7, 365 social music destination for users globally. In July, we launched the 2.0 version that provides consumers with social elements, the most immersive experience closest to attending in person. This includes the ability to buy merchandise from your car to your home or anywhere in between, chat, connect with friends and other music fans, and simultaneously watch the best live music events worldwide. As an artist-focused platform, we expanded our artist relationship team this quarter from three professionals to seven, with legendary performer Perry Farrell joining us as the second brand ambassador alongside Hip-Hop star Nas. Perry is the founder of Lollapalooza and the godfather of alternative rock. Perry is expanding his pop-up, 'I Am the DJ' audio channel, to curate a 24/7 experience and co-create original episodic content for LiveXLive. We continue to partner with the biggest and best music programmers globally. Most recently, we signed an exclusive partnership with festival organizer Afro Nation, providing us with global livestreaming, video-on-demand, virtual reality, mobile, theatrical, and television rights. The partnership launched last weekend with a livestream from Portugal, where we connected people and cultures through music, capturing the amazing spirit of the festival. We have again expanded LiveZone, which mixes music news, commentary, and festival updates with artist content. This content proves we have a unique offering and an authentic voice in music, giving fans a more guided and cultural experience for each event, enhancing consumer experience with over 300 pieces of original content, including artist interviews, lifestyle segments, and original show pilots on the LiveXLive platform. This quarter we expanded LiveZone to include daily shows across both audio and video. In terms of distribution and sponsorship, LiveXLive continues to acquire distribution partners globally. Our reach expanded from 125 countries to 179 countries, and we are now present in every country in the world. The Tesla partnership continues to grow, and we are now available in 85 other automobiles, as well as across major carriers Verizon, Sprint, and T-Mobile. We expect to look at opportunities for global expansion by the end of the second quarter. Our apps are also available across Roku, Apple TV, and Amazon Fire devices, with a launch on 40 million Samsung TVs imminent. We've partnered with YouTube, Facebook, Twitch, Twitter, Townsquare Media, Dailymotion, Tencent, and Sinclair, which gives us access to platforms with between 10 million to 1.5 billion monthly users—all of which crave live streaming and music. For the second year in a row, we livestreamed the biggest dance music festival in the world, EDC from Las Vegas. We struck distribution agreements with Sinclair Broadcasting Group, STIRR, and China's leading platform, Tencent Video. Our partnership with STIRR and Tencent Video provides a fantastic opportunity to fully experience the can't-miss festival of the year, expanding our brand globally to a massive audience in China and to the largest pool of local television stations in the United States. This quarter, we also entered into a strategic partnership with digital marketing and consumer data management company SRAX to offer over 16 million users the option of exchanging points on BIGtoken, earned by sharing data, for a livestream premium subscription. In addition to driving subscriber growth, this will target specific audiences by generating data related to music choices and listening habits. We continue to add global sponsors, including Fortune 100 companies like Kia, Samsung, Dos Equis, and Corona, with our RFPs having increased by over 500%. We continue to see opportunities for significant growth. We've expanded our sales team to five professionals and soon expect to grow to over 10, announcing a Chief Revenue Officer by the end of the second quarter. To wrap up future plans, Q1 reinforced the momentum from a great year in 2019, and we have our sights set on significant growth for the rest of 2020. The total addressable market for live music is now over $50 billion, with 1.2 billion paying subscribers for music subscriptions estimated by 2030, as well as a global over-the-top market projected to reach 1.2 billion by 2023 according to Goldman Sachs. Those numbers were just raised from 800 million last year, and with over 250 million paying subscribers, the LiveXLive platform is at the eye of the storm, at the intersection of livestreaming and over-the-top. The maturation of our flywheel is looking strong and expanding dramatically with the last pieces converting more and more traffic into subscribers and sponsors, merchandise sales, ticket sales, and data. Our new app is proving we are one step closer to completing the cycle. All of these trends are strong tailwinds for what we plan for the rest of 2020 and beyond. Maintaining a truly independent position in the industry has allowed us to partner with labels, promoters, publishers, managers, and, most importantly, the biggest artists in the world, creating a brand-new incremental revenue stream across the music industry. Music is the universal language, and LiveXLive is becoming the destination and network for a 24/7, 365 social live music experience. We came out of the gates, expanding our partnerships and exclusive channels with SGI, Insomniac, and iHeart. We now have over 1,000 live music events to choose from. This year, we expect to stream over 50 events. Our traffic was 50 million last year, and we've already achieved over 28 million year-to-date, putting us on a run rate of well over 100 million for the current year. We will shortly pass 750,000 paid subscribers, with a full-court press to reach 1 million by year-end. This is just the beginning of a revolution in live music. Our long-term goal is to surpass 5 million subscribers over five years, representing a tiny percentage of that 1.2 billion projected by Goldman Sachs, and the 250 million that already exist today, translating to $0.5 billion in revenues from subscriptions alone. The exciting development in our relationship with the music industry is that we are in the final stages of expanding our partnership to include conversion to some equity from the industry, somewhere in the $2 million to $3 million range, along with extending our payables over $10 million for two years. Now I'm going to hand off to Mike Zemetra, our CFO. Mike?

Great. Thank you, Rob. We began fiscal 2020 with strong results, with $9.5 million in revenue, an 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 compared to Q1 2019 specifically. Q1 2020 consolidated revenue was $9.5 million, up 25% year-over-year from $7.6 million in Q1 2019 due to the 50% growth in our paid subscribers. Ending fiscal Q1 2020, paid subscribers grew to 733,000 or by a net 243,000 from the ending paid subscribers in Q1 2019. We ended Q1 2020 with 90% of our revenue from subscriptions and 10% from advertising and licensing. Q1 2020 contributed a margin of $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, along with improved margins from our subscription services at approximately 33% in Q1 2020 compared to approximately 24% in Q1 2019. In Q1 2020, we spent $2.7 million for nine livestream events and 11 total produced events, flat year-over-year versus Q1 2019. Q1 2020 adjusted operating loss was flat year-over-year at $4.6 million for both fiscal 2020 and 2019, largely driven by a $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. I'd like to discuss the Q1 financial performance across our music operations and corporate divisions. Our music operations consist of audio and Internet radio services along with livestream operations, including sales, marketing, product development, and to a lesser extent, certain general and administrative costs. For Q1, our revenue of $9.5 million was up 25% year-over-year from Q1 2019 due to growth across our paid subscribers. During Q1, our music operations generated $8.6 million in subscription revenue compared to $6.6 million in Q1 2019. Driving this improvement was a 50% increase in net paid subscribers across our music platform, ending Q1 with 733,000 paid subscribers, up 243,000 from Q1 2019's 490,000 paid subscribers. The annual net increase in paid subscribers was driven by our B2B customer-driven business, which includes Tesla and increased additions across our consumer paid subscription services. We continue to invest in our online marketing campaigns. In mid-May, we launched our unified music application, combining our live and audio music services under one single application. With over 28 million livestreams viewed year-to-date, we now have the ability to engage our livestream viewers and convert them into paid subscribers. We remain very excited about this crossover. While data on engagement across live video and our audio platform is encouraging, we want to remind everyone that we are still in the early phases of this and are working to better understand consumer engagement across both applications. We ended Q1 2020 with a contribution margin of $0.5 million versus a contribution loss of $0.8 million in Q1 2019. The improvement of $1.3 million year-over-year was driven by growth and mix of our paid subscription business, coupled with flat production expenses. In Q1 2020, we also spent approximately $2.7 million on nine livestream events and 11 total produced events at an average cost of $251,000 per event. By comparison, we spent a total of $2.7 million in Q1 2019 to livestream and produce five events at an average of $559,000 per event. The greater than 50% year-over-year improvement in our average cost per event was driven by ongoing initiatives by the company, along with a higher number of events in Q1 2020 versus Q1 2019. Excluding the cost to produce EDC Vegas, the average cost per festival would have been less than $200,000 in Q1 2020 compared to approximately $350,000 in Q1 2019. Our Music Operations adjusted operating loss was $3.1 million compared to $2.9 million in Q1 2019. The year-over-year increase of $0.2 million was driven by higher sales, marketing, and product development operating expenses to support growth initiatives in Q1 2020 versus Q1 2019, offset by a $1.3 million improvement in Music Operations contribution margin. Turning to Corporate, our Corporate division consists of general and administrative functions such as executive, finance, legal, and other areas that support the entire company, including any public company driven initiatives and support functions. Q1 corporate adjusted operating loss was relatively flat year-over-year at $1.5 million compared to $1.7 million in Q1 2019. Now, I'd like to discuss trends in our operating expenses year-over-year. Excluding non-cash stock-based compensation, amortization expenses, depreciation, and certain non-recurring operating expenses of $5.7 million in Q1 2020 and $5.6 million in Q1 2019. Q1 2020 and Q1 2019 operating expenses were in the range of $5.8 million versus $3.8 million, respectively, a net increase of $1.3 million year-over-year. This increase was driven by approximately $1 million in sales and marketing expenses and $0.5 million in product development expenses, which were related to the higher number of events in Q1 2020 coupled with an increase in new product development initiatives including the launch of our new music app in May 2019. Offsetting this was a $0.2 million improvement in G&A expenses year-over-year. Turning to our balance sheet, we ended Q1 2020 with cash of $10 million, down from $13.7 million at March 31, 2019. The decrease was largely driven by net cash outflows from operations of $2.5 million, investing activities of $0.5 million, and repayments of debentures of $0.7 million during the period. This cash usage was largely driven by our adjusted operating loss, offset by net cash savings in our working capital, driven principally by active management of our payables. In July 2019, we sold 5 million shares in a $10.5 million direct registered offering of our common stock, raising net proceeds after direct expenses of approximately $9.5 million and bringing our ending cash position to approximately $20 million immediately following the closing. Now, we would like to update you on a few additional items. As of June 30, 2019, we had approximately $167,000 warrants outstanding and $3.0 million of potential common stock underlying our secured debentures and unsecured convertible notes. We ended the quarter with approximately 52.5 million common shares outstanding and, including the July 2019 registered offering of our common stock, now have an estimated 57.5 million common shares outstanding as of today. As of June 30, we had a total of approximately $16.6 million in debt outstanding, inclusive of $1.7 million in deferred debt issuance cost and fair value embedded derivatives. Finally, we are currently finalizing the extension of over $10 million in current payables with key vendors to be paid over two years, including settling between $2 million to $3 million in LiveXLive stock. Turning to guidance, for full-year 2020, we are reiterating our previous guidance of revenue of $50 million to $65 million, adjusted operating loss of $10 million to $15 million and capital expenditures range from $3 million to $5 million. That concludes my prepared remarks. We'd now like to open the line for Q&A.

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

Great. Thanks for taking the question. I have a few, please. Just for clarification on the call, you talked about 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 as the number of festivals grow? And then, Mike, could you provide some additional details regarding 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 something else? I'd love to understand that. And then lastly, both of you mentioned some equity with the music industry around your payables. Any additional insight here would be super helpful. So asking about concerts, the equity for the payables, and then the cost per festival. Thank you, guys.

So for the 40 versus 50, festivals versus total events. We now have over a thousand live music events. This year we'll stream over 50 events chosen from that bucket of over a thousand. Regarding festivals, I can't think of any that have chosen not to stream with us again. However, we're selective with each of the festivals. We develop transformative technology that studies social graphs to select which events to pursue based on the artist's social graph size. We're excited about the partnerships and regarding competitors, there is really no one else left. Red Bull and Yahoo! are gone, so it's an open field for us to choose the best partners to deliver an exceptional consumer experience.

To address the last two, the cost per festival is impacted by our partnership with iHeart, in addition to economies of scale. We are constantly learning and making decisions to lower our budgets and leverage economies of scale as we ramp up production. Regarding the equity, we're actively looking to improve our balance sheet opportunistically with some key vendor and supplier relationships willing to take up to $2 million to $3 million in equity. We are in discussions and looking to finalize those shortly.

To add to that, this is just the beginning. Our partners in the music industry have been great allies. We expect, as Mike articulated, to extend over $10 million over a two-year period with a portion converting to equity. This is only the start, and we'll continue to position ourselves as thought leaders in the industry as we seek the largest partnerships on distribution and global expansion.

Got it. Thank you, guys.

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, when do you expect acceleration in conversion rates to happen? Is it this quarter or more in the second half of the year?

Yes, definitely too early, Brian. This was the launch of the MVP app. The social aspects are just starting to integrate. We added social features in July with the 2.0 version, which includes chat, merch purchasing, and ticket buying, followed by pay-per-view and micropayments. We’re excited and seeing promising signs, but it’s still too early for concrete commitments on size and expansion. Mike, do you want to add anything?

Yes, the good news is we are seeing high engagement among active users today. But as Rob mentioned, we are in early phases and will continue evaluating it. When we better understand the numbers, we will provide more information.

Great. That leads me to what I was going to ask next. Can you quantify the average time a subscriber spends on your site or watches a live stream? I think this is an attractive metric for advertisers. And as we discuss advertising, we've heard about 500% increase in RFQs for two quarters. When do you think that will materialize into stronger advertising dollars?

I wish I could say it will happen tomorrow; it could be. Those RFPs are coming in, indicating the tailwinds are heading in the right direction. We've just added more sales personnel and are very close to announcing our Chief Revenue Officer. We will keep growing those RFPs, and the floodgates could open any day now.

Are you able to quantify how long a subscriber watches an event? Is it a handful of minutes, or half an hour?

Yes, it's usually above 15 minutes. For example, during the Wango Tango event with Taylor Swift, over 250,000 people watched a small 35-minute set. Facebook was very excited about the concurrent view numbers across our user base, where people were watching for the entirety of the stream.

Great, last question.

Just think about how magical that is. We cross-promoted from LiveXLive across Taylor Swift's Facebook page, leading to significant brand recognition with over 250,000 views and 24,000 concurrent viewers. It’s simply staggering, and think about the potential when the API opens up for Instagram.

Yes, great. Exciting. Lastly, can you give any update, if there is one, on the video-on-demand negotiations? Do you think that will happen in this fiscal year, or are we still pretty far apart?

We're aiming for the end of the second quarter to finalize those negotiations. The supportive partnership with labels and the music industry suggests we are moving forward rapidly.

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 have a couple of questions. You mentioned the average cost to produce a festival this quarter has decreased. You also mentioned that excluding the Vegas festival, the cost was lower. Can you remind me what that number was?

The average cost was $251,000, and excluding Vegas, it was $200,000.

To provide some context, the partnership with iHeart is a significant gain. We're obtaining a wealth of content and establishing a relationship with artists who gain more visibility through iHeart's 260 million listeners. Additionally, their marketing efforts and billboards are further promoting LiveXLive, leading to significant cost savings in marketing. We anticipate much higher marketing costs than the $1.5 million we spent last year. The partnership's value will be reflected in both marketing and cost management as we scale up operations.

Got it. That's helpful. Thanks for the color there. Do you have a ballpark figure of where you'd expect the average cost per festival to trend towards the end of this year? Or is that not how to think about it?

The trend is heading in the right direction, and we believe there will soon be a festival that will pay us to produce these livestreams. Artists are increasingly asking for livestream opportunities, and as numbers grow, so does demand.

Got it. Lastly, could you expand on how the new combined LiveXLive and Slacker app is performing and how it's impacting subscriber growth?

Yes, we haven't disclosed specific numbers, but we are growing around 25,000 to 30,000 subscribers a month. Slacker previously lost close to 25,000 subscribers a month. The response to the new app has been very positive, reflected in top ratings on Android and similar expectations from Apple. We're satisfied by the early reviews of our new app, which provides a next-generation audio experience alongside the best live content. This app utilizes machine learning to enhance user habits.

The next question comes from Jon Hickman of Ladenburg. Please go ahead.

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

We currently have five, and we expect that number to grow again shortly, beyond ten. We will be announcing a Chief Revenue Officer soon, who has real experience in sponsorships and original programming.

Can you provide insight into how many of your subscribers each month come from partners like Tesla and carriers and how many come directly from organic growth?

We don't disclose those specific numbers. However, we continue to see a healthy percentage from our B2B side, including Tesla, as well as positive organic growth from consumers as we stabilize and grow beyond losses.

So to clarify, you had 733,000 at the end of June and now you expect that to exceed 750,000?

Correct, over 740,000.

We expect to surpass 750,000 imminently.

So that’s approximately 7,000 subscribers gained in July?

It's probably closer to 10,000.

Okay, thank you.

Thanks, Jon.

Hello, Rob and Mike. Thank you. Mike, can you talk about the business model with increased upfront production costs expected in the first half and accelerating revenue in the second half? How do you foresee improvement in cash flow trends for this fiscal year? Regarding margins and revenue mix, you mentioned a 90/10 split in subscriber revenue; would a 30% margin be a reasonable estimate for subscribers? Plus, can you shed light on conversion trends from viewers to subscribers? Lastly, what are your subscriber trends expected for the remainder of the fiscal year considering visibility to Tesla's domestic production?

Regarding the cost per event, our most elaborate event occurred in this quarter, which is EDC Vegas. If we exclude that, our production costs were sub $200,000. Expectation is that cash burn will be higher in the first half of the year, similar to last year. On the 90/10 split, our aim is to have a balanced split between advertising and subscriptions, targeting a range of 15%-20% in advertising revenue within a few years. We'll continuously push toward that goal. For original programming, we believe live programming is the tip of the spear. The goal now is to produce more music-related programming, increasing our advertising revenue opportunities and converting more subscribers from the existing programming. We plan to extend relationships with viewers who are attracted to live shows. Dermot's onboarding was exciting, as he brings relations and implementation experience in enhancing our programming. Expect to see management further expanded to boost original programming. Customer lifetime revenue is expected to rise with increased content offerings. We foresee further international expansion and acquisitions as needed, working towards developing capabilities organically as we scale. We are also witnessing carrier-level contests returning, similar to past patterns. The opportunity to connect with carriers is strong, reinforced by partnerships that may allow us to rebuild subscriber bases with control over data with potential partnerships. It's an exciting time as we see the market reawakening for a white-label partnership structure driven by recent shifts in the industry to drive our growth internationally.

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

Thank you very much.

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

Thank you so much for joining us today. We are demonstrating significant momentum, and the flywheel is kicking into high gear. Owning the best pop culture events around the world while hosting the biggest artists adds value and builds a massive audience. We project over 120 million livestreams this year. Even if we convert a small portion of those into subscribers, it will create a significant increase in overall numbers, leading to multiple revenue streams. We are optimistic about our management upgrades and, as mentioned, a small conversion of audience leads to sponsorships via increased RFPs and accelerated growth. Thank you for participating. We look forward to updating everyone on the next conference call.

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