LiveOne, Inc. (LVO) Q3 2019 Earnings Report, Transcript and Summary

Good day and welcome to the LiveXLive Media Third Quarter 2019 Earnings Conference Call and Webcast. 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. I would now like to turn the conference over to Whitney Kukulka, Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to LiveXLive financial results conference call for the third quarter of fiscal year 2019 ending December 31, 2018. Joining me on today’s call are Rob Ellin, Co-Founder and CEO; 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 including expected financial results for the four quarter and full-year 2019 and the future growth of the 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 the date of this call, February 12, 2019. 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 section 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 February 12, 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 Ellin. Rob?

Thanks everyone for joining us on today's call. Our third quarter [technical difficulty] has been transformative for LiveXLive. We are thrilled with our Q3 results and the progress we have made so far this year. During the quarter, we [technical difficulty] and events including [technical difficulty] and extended all partnership [technical difficulty] successfully launching our partnership with iHeart Media. And we successfully launched LiveZone, an exciting development for future of LiveXLive as we -- and we continued to expand the breadth of our partnership with all of our key partners, AEG, Insomniac, Live Nation and others. LiveZone is the sportscenter in music and will change the way live music is consumed. We solidify LiveXLive as an authentic voice globally in live music, bringing pop culture into the zone. We’re creating communities, social communities around our host, our audience, our bands, our genres and events [ph]. The combination of 8 hosts and huge support from audience, we delivered 3.5 million views in a two-day festival. That is approximately 75% increase in viewership per day. We are successfully aggregating content, featuring superstars, not only in music, but in music lifestyle and fashion, influencers, sports stars as well as esports stars. In Q3, we again delivered record financial performances across all metrics. We posted $9 million in revenues, up 13% for the quarter. We now reach and the first time we're reporting 1.2 million active users. We have added impressive subscriber growth, adding approximately 94,000 and ending the quarter with 643,000, representing 17% sequential growth. Year-to-date, as of today, we have livestreamed 22 high profile global festivals and events, attracting more than 47 million views. Our livestreams have generated over 400 hours of live content and featured 400 of the biggest artists in the world, including performances by music icons such as Cardi B, Lil Wayne, Post Malone, Chance the Rapper, Travis Scott, Diplo, French Montana, and John Mayer. And more than 250 pieces of original program in short-form content. We remain focused on strengthening our balance sheet and diligently managing cash flow. We've increased our cash position this quarter modestly from $14.1 million to $14.3 million. We continue to strengthen our world-class leadership team, specifically focused on original programming and strategic M&A. David Schulhof joined as Chief Development Officer. David brings unique experience in the industry and has earned high level relationships with artists, labels, managers, and agents, and will lead our content creation, partnerships and M&A initiatives. David came out swinging and already delivered a huge, multiyear partnership with Mass Appeal and Nas as our first Ambassadors for hip hop, content creators and curators of urban program. This 360-degree partnership to create, produce and distribute original hip hop and urban culture content gives us a unique edge and the genre and unlocks new brand opportunities. We've also added two additional Board members. Former TV legend, Patrick Wachsberger, founder and CEO of Picture Perfect, and former Chairman of Lionsgate, and the founder and CEO of Summit Entertainment. His credits include La La Land, Hunger Games, Twilight and The Hurt Locker. And world renowned investor and board member in media and technology, Ramin Arani. Remain spent the last 26 years at Fidelity, most recently as a lead portfolio manager for the $27 billion Fidelity Puritan Fund. The Puritan Fund led our IPO. He supported our vision and mission as an early investor in LiveXLive. And his experience and deep industry knowledge insight will bring tremendous value to our company. Before we dive into the quarter and our expectations for the evolution of LiveXLive, I’ll first reiterate few key principles of our business. You’ve heard us frame our business using ESPN playbook and apply it to the music industry to create the next generation MTV. We are currently creating the largest live, social music network, utilizing modern -- mobile first technology and partnering with thought leaders in live music. Our mission is simple, to bring a new experience of 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 together fans, bands and brands, and helping unify the world around live music. We accomplish this by leveraging technology to capitalize on highly shareable content that is revolution in our industry, including livestreaming, over-the-top delivery, mobile and looking around the corner to next generation technologies such as AR and VR. LiveXLive allows music fans to seamlessly move through our apps to watch their favorite artists perform at their favorite festivals, concerts and award shows. This includes interviews, backstage, behind the scenes, red carpet and a full slate of original programming. We have now defined ourselves as a global thought leader and authentic voice in live music. And we are position ourselves to be the Netflix of live music as we head into the fourth quarter of 2019 and into 2020. We're very ambitious company the aims to change the game, unify the world, and we just touched the surface of where the Company is going today. We’ve built leadership team and Board of world class executives for multi-billion-dollar companies with unsurpassed experience in connections that will serve us well for the years to come. Live music is now a $50 billion industry. We are well-positioned to capitalize on this massive global demand in over-the-top and live music streaming. We're right in the heart of the storm of live and streaming. Our growth strategy is anchored around three main objectives. Livestreaming, the largest pool of music events in the world, offering exciting original content, growing our partnerships and sponsorships. We believe these priorities will continue to drive traffic, viewership, subscriber growth and creating more monetization opportunities. Our team has done a tremendous job changing the trajectory of Slacker Radio since our acquisition. We grew our subscriber base to 657,000 users, that is up over 50% in the year, and achieved for the first time, EBITDA profitability in the entire third fiscal quarter. Slacker’s technology and [technical difficulty] platforms to enable livestreams and added over 100 additional program channels. We now have programming 400 curated channels available to users from DJs to VJ, unique original programs. LiveXLive streamed 22 festivals and events with over 47 million livestreams as of today and is driving over 14 million impressions to Slacker. We've been focused on consolidating and integrating the businesses, and we are preparing for the 2020 launch of the integrated product. In Q4, we plan to launch our best app yet. We have made significant advancements to our products and technology in the quarter. We're giving our Slacker audience the ability to create communities. We launched our newest social feature Slacker Studio, which reinvents the calling, enhancing social features in Slacker allowing the consumer to share and create communities around artists, around festivals, around genres of music. We're connecting users across devices from your car, to your office, to your home and anywhere in between, starting with audio, adding video and layering cutting technology to drive more subscribers, sponsorship, merchandise sales. Fans can listen, chat, share and buy merchandise and create a social experience adding to the time they spend engaged on a LiveXLive platform, effectively creating the most immersive experience in life of a consumer on a daily basis. We launched our Global OTT, over-the-top streaming app on over 40 million Samsung Smart TVs, extending our consumer reach to reach music fans globally. We also collaborated with Samsung to deliver our first 360 VR segment experience [indiscernible]. Second, developing a slate of original content and programs, the launch of LiveZone, the sportscenter live music and rolling out as a game changer for our industry. It provided exclusive pre and post coverage of festivals with anchors and correspondents reporting culture and content. We had eight correspondent event and featured more than 75 interviews with artists, athletes, including Nas, Lil Yachty. LiveZone has helped deliver over 3.5 million livestreams, representing over 100% increase when compared only a few months before at Rolling Loud in the Bay Area that streamed last quarter. Growing our LiveZone music show experience unlocks the opportunity to reach music fans around the clock and around the world and further differentiate LiveXLive from any other music network. The activation of LiveZone also enables initiatives, onsite opportunities for advertisers and brands, which will be key to unlocking the future monetization opportunities. We’ve demonstrated this successfully with our partners with Kia and Samsung. Another exciting initiative for us is LiveXLive Presents. These are our own original, curating events to promote our brand and help drive more user engagement across some of the largest entertainments in the world -- events in the world. LiveXLive Presents has featured top musical talents such as Rick Ross, Nas, Charli XCX, Playboi Carti, Chromeo, Tierra Whack. As you saw in our press release this morning, we livestreamed our fifth event Sunday night. Immediately following the Grammys, the event produced 1.1 million live use across LiveXLive music platform turning a packed VIP event for hundreds of industry insiders into a global media event. Our third priority is advancing sponsorship opportunities and strategic partnerships. As I mentioned earlier, we livestreamed Rolling Loud festival in Los Angeles. We debuted key brand partnerships with Fortune 100 companies Kia and Samsung. With Kia’s sponsor Rolling Loud and Samsung running point on our first VR initiative, we delivered a fully immersive 360 experience. As LiveXLive has maintained its independence and focused efforts on partnering with the best live music curators and programmers. We have now expanded our lineup with iHeartMedia, creating a direct partnership with Bob Pittman and John Sykes, the experts who created MTV and VH1. We successfully streamed ALTer Ego. ALTer Ego, features the biggest names in alternative rock as the premier nationwide alternative music events of the year with tickets selling out in less than a minute of release. We gave fans the opportunity to utilize this livestream on any device. iHeart is a very exciting partnership with 248 million listeners, giving us an opportunity to help build both of our brands. We have a neutral and independent position in the industry that has allowed LiveXLive the opportunity to partner with our labels, promoters, publishers, parties, managers and most importantly the biggest artists in the world, creating a brand new revenue stream for the overall music industry. To sum up, our user base can view content from award shows, concerts, festivals, music venues, and now even more original content including pilots, personalities and a whole slate of music industry and lifestyle pieces. We are creating and aggregating the best content available in music over the last 25 years, which stimulates engagement and drive future growth. We believe that that quality content creates an engaged audience, creating more modernization opportunities beyond subscription services and sponsorship. Music is the universal language and our opportunity is not limited by geography, genre or audience. We’re in this game for the long haul. Our long -term goals remain the same. First, we believe within five years, we will have at least 10 million paid subscribers on our platform. We already surpassed 650,000 paying subscribers, 1.2 million monthly users and expect to continue growing double-digit rates each quarter, and we're on a march to 1 million, which we plan to achieve over the first half of our fiscal 2020. Second, we believe we can stream over a 100 festivals and events a year. We will stream 27 this year and we are now upping our number for next year and expect to stream over 40 events next year. Third, we expect to have enough content aired 24 hours a day, seven days a week. We're making strong progress here and believe the launch of LiveZone brings us closer to that goal. Fourth, we continue to expand our distribution footprint across all digital platforms. We have now partnered with YouTube, Facebook, Twitch, Dailymotion, Tencent and continue to add distribution across platforms that have 10 million to 1.5 billion plus years. We look forward to seeing investors and analysts on the road at upcoming events. We’ll be presenting at the JMP Technology Conference in San Francisco on February 25th, and we're always happy to set up meetings for anyone interested. I'm going to hand this off to Mike Zemetra to walk through our third quarter financial results and expectations for Q4 in more detail. Then, we’ll open up to questions. Thank you.

Great. Thank you, Rob. We continued the second half of our fiscal 2019 with strong results, including Q3 2019 revenue of $9 million, adjusted operating loss of $2.6 million, and record subscriber and event livestreams during the quarter. Given our lack of operating history year-over-year, my Q3 financial commentary will continue to focus on quarter-over-quarter sequential performance as compared to the prior year third quarter, more specifically on Q3. Q3 consolidated revenue was $9 million, up 13% quarter-over-quarter from $8 million in 2Q 2019, due to quarter-over-quarter growth in our paid subscribers and to a lesser extent from growth in advertising and licensing. I will get deeper into revenue drivers later in my prepared remarks. Q3 consolidated contribution margin was $1.4 million, as compared to a loss of $0.2 million in Q2 2019. The sequential improvement of $1.6 million quarter-over-quarter was principally driven by improved margins across our subscription business coupled with lower overall livestream events produced in Q3 versus Q2 2019. Q3 adjusted operating loss was $2.6 million versus $3.6 million in Q2 2018. The $1 million improvement quarter-over-quarter was driven by the previously discussed margin improvement from our music operations, which was slightly offset by increased operating expenses, largely driven by the expansion of our team and growth initiatives expanded during the quarter. During Q3 and Q2 2019, we also capitalized approximately $0.7 million in each quarter of internally developed software costs. Now, I would like to discuss the financial performance across our music operations and corporate divisions. Turning to music. Our music operations consist of our audio and internet radio services along with our livestream operations, including sales, marketing and product development, and to a lesser extent, certain general and administrative costs. As previously discussed, our Q3 revenue of $9 million was up 13% quarter-over-quarter from Q2 2019, largely due to growth across our paid subscribers and advertising and licensing revenue quarter-over-quarter. First, I would like to discuss the growth in our subscription revenue. During Q3, our music operations generated $8.1 million in subscription revenue as compared to $7.2 million in Q2 2019, a 13% improvement quarter-over-quarter. Driving this improvement was a 17% sequential increase in ending net paid subscribers across our music platform. We ended Q3 with 643,000 paid subscribers, up 94,000 or 17% from Q2 of 549,000 paid subscribers. The quarterly net increase in paid subscribers was driven in part by the strength of our B2B consumer-driven business, which includes Tesla and major North American telecom providers and also from increased additions across our consumer paid subscription services. We are continuing to invest in online marketing campaigns including leveraging impressions from live events to further grow our paid subscriber base. Through today, any paid subscribers have increased by a net 211,000 or 47% to 657,000 from 446,000 since March 31, 2018. We continue to remain confident in our paid subscriber growth throughout the remainder fiscal 2019. Next, I would like to talk -- discuss the growth in our advertising and licensing revenue. During Q3, our music operations generated $0.9 million in advertising and licensing revenue, up 29% from $0.7 million in Q2. The increase was largely driven by new branded partnerships in Q3, which included Kia and Samsung. During Q3, Kia sponsored the launch of LiveZone, our sportscenter music at the Rolling Loud festival in Los Angeles. And Samsung partnered with us to livestream virtual reality across Samsung VR devices. We truly believe in the long-term value of virtual reality and music and hope to announce more exciting and similar partnerships moving forward. Our Q3 contribution margin was $1.4 million versus a loss of $0.2 million in Q2 2019. The sequential improvement of $1.6 million quarter-over-quarter was driven by improved margins from the growth and mix of our paid subscription business coupled with a lower number of livestream events in Q3 versus Q2. As a percentage of revenue, our contribution margin across our subscription business improved significantly by 5.04 percentage points from approximately 23% in Q2 to 33% in Q3. This was driven by a higher mix of B2B and radio plus subscribers, which are generally more profitable versus other subscription services, coupled with a onetime benefit from an accounting assessment recorded in the period. Excluding the county adjustment, Q3 subscription margins was closer to 31% or an increase of 3.04 percentage points from Q2. Moreover, we incurred $1.7 million of production costs in Q3 to produce six live events versus $2.4 million in Q2 to produce eight live events. Consistent with Q2 our average cost to produce a live event was approximately $0.3 million for festivals. Q3 music operations adjusted operating loss was $1.3 million as compared to $2.4 million in Q2 2019. The quarter-over-quarter improvement was largely driven by the previously discussed improvement and music operations contribution margin in Q3 versus Q2. Turning to corporate. Our corporate division principally consists of general and administrative functions such as executive finance, legal and other areas that support the entire Company, including public company driven initiatives and supporting functions. Q3 corporate adjusted operating loss was consistent with Q2 at $1.3 million as compared to $1.2 million in Q2. Now, I would like to discuss the trends in our operating expenses quarter-over-quarter. Excluding noncash stock-based compensation, amortization expense, depreciation and certain nonrecurring operating expenses of $3.2 million in Q3 2019 and $6.0 million in Q2 2019. Q3 operating expenses were $3.9 million in Q3 versus $3.3 million in Q2, an increase of 18% or $0.6 million quarter-over-quarter. The quarter-over-quarter increase was largely due to higher personnel costs to support our growth, coupled with higher professional fees, principally related to newer public company compliance initiative. Our noncash stock-based compensation and amortization expense, depreciation and certain nonrecurring operating expenses decreased $2.8 million quarter-over-quarter. This was largely driven by the finalization of purchase accounting associated with the December 2017 Slacker acquisition, which resulted in accounting adjustments to goodwill and our identified intangible assets. The latter of which required us to reverse approximately $2 million of amortization expense from prior periods in Q3. Turning to our balance sheet. We ended Q3 2019 with cash of $14.3 million, up from ending cash of $14.1 million at Q2 2019. The quarter-over-quarter increase was largely driven by net cash proceeds from operations of $0.9 million offset by net cash outflows from investing activities of $0.7 million in Q3. The Q3 net cash from operations improved by $2.1 million quarter-over-quarter, largely driven by the quarter-over-quarter improvement in our adjusted operating loss coupled with net savings in our working capital driven principally by active management of our payables in the period. Now, I would like to update you on a few additional items. As of December 31, 2018, we had approximately 167,000 warrants outstanding and approximately 2.7 million of potential common stock underlying our secured adventures and unsecured for convertible notes. We ended the quarter with approximately 52 million common shares outstanding. In February 2019, we also amended our securities purchase agreement to increase our 12.75% senior secured convertible debentures by $3.2 million in the aggregate, bringing total principal funding to-date to 13.8 million today versus 10.6 million at the end of Q3 2019. Of the 3.2 million financing received in February 2019, net proceeds to us after original issue discount, banker and outside legal fees, was approximately 2.9 million. As of today, a total of 13.3 million secured convertible debentures is outstanding. Turning to guidance. We are reiterating or full-year 2019 guidance as follows: Revenue of $37.5 million to $45 million; adjusting operating loss of 10 to $12 million; CapEx range from 2 to $3 million. Consistent with our previous communications, we expect the livestream of the 27 festivals and events in fiscal 2019. Lastly, I would like to point out a few conferences, we will be presenting at, in the upcoming quarter. As Rob mentioned, we will be able at the JMP Securities 2019 Conference, which will be held on February 25th at the Ritz Carlton in San Francisco, California. And we also be presenting at the 31st Annual Roth Conference, which will take place March 17 through the 19th at the Ritz Carlton, Laguna Niguel, California. That concludes my prepared remarks. We would now like to open up the line for Q&A.

Thanks so much. Hi, guys. Based on implied fourth quarter revenue guidance and the current subscriber growth, which is a little bit slower sequential, I assume you’re expecting significant pickup in revenue from the advertising or nine-monthly of subscriptions. So, can you talk about what those sources are, and whether you have new sponsors coming on like a Kia or Samsung?

Yes. So, there should be a combination, Brian. Thanks for the question. It’s combination of our continued growth with Tesla. We're now in 80 other cars. We’re in every carrier in the United States other than AT&T and we hope to be in soon, as well as these partnerships with Kia and Samsung have led to, and Mike will walk through a little bit more detail, but RFPs that give us an opportunity to see a domino’s effect with sponsors, very similar to what ESPN saw 30 years ago. As those sponsors start to come in, it's exciting to see two Fortune 100 companies join the party. With that, we've also articulated first time that we drove 14 million impressions to Slacker. So, we're just filling that funnel at Slacker. We’ve turned it around. It's now EBITDA profitable for the first time in the history of the company. And when we acquired it, there was no funnel. So, that 14 million is going to continue to grow. And we hope to covert a small percentage of those. If we can just convert 1% of them, it's going to be pretty staggering growth. As you know, we’ve raised our guidance from 10,000 subscribers a month to 20,000 to 25,000. So, in the very near future, we may have to raise that number again. Mike, do you want to add anything to that?

Yes. I mean, I’ll just say that if we look back at our last quarter versus today, the number of RFPs on an absolute dollar basis is up 500%, over 500%. So, while we're still in the early stages of subscription -- not subscription, but in the advertising and promotional side, we feel like we definitely hit the ground running. So, we feel good.

So, advertisers should have a bigger sequential growth quarter in the current quarter?

I mean, timing, always TBD, [ph] we're still in the early stages but we feel really good about it.

And then, can you talk about the progress you're making? We've discussed it about with the major record labels, extending the replay rights. Do you think that -- of festivals, do you think that is three months away, six months away, are we a year away? What are your thoughts on that?

Yes. Great question. So, we made tremendous progress on that. And with that we stated that we're going to launch our app. It will be shipped off to [indiscernible] in April and we fully expect to launch in the middle of May. So, with that, we hope to have all those partnerships in place in time for the launch of the next generation of our app. And we’re going to much more detail, we have publically previously. But that app is transformative, it'll be the first fully immersive app that goes across from audio and the video. So, from your part, your home and everyone in between and simultaneously while you're listening or watching, you have the ability to chat, message buy app, buy t-shirt and keep the audience engaged. And for the first time ever, create full communities around artists, the genres as well as the festivals.

Last question, a two-part one. Can you talk about the marketing, you expect for that new app, so you can maximize adoption? And then, are the price points similar to the Slacker price points?

So, we haven’t publicly disclosed the price points. But effectively, you can think of it very similar to slack. What really -- what we're doing is we're taking Slacker, Slacker has now become Slacker Plus, which is Slacker Plus original [indiscernible] plus live events, right? The next generation of it will be that all these [indiscernible] including the ability, the ability to be able to message, chat or discuss. So, the price points we expect to be similar. We'll go from premium to 9.99 and there'll be an element that could even go even a little bit higher than that.

And the ad campaign, sorry that was the other part of the question. Is there going to be some major ad campaign to maximize adoption?

Absolutely. So, one of the great parts about this, Brian, as you’ve been watching, is the massive audience that have been driven by these festivals. So, we have the luxury that one of the greatest marketing tools we have is the social graph. We built technology that studies the social graph of these artists. And for the 27 festivals this year, we have a potential reach of a fan base of up 2.2 billion people. We can just drive a small percentage of that audiences. There is significant marketing for this. And then, of course, we have our own initiatives as well that you'll start to see all of those in new launches as we move through consumer oriented across Slacker, just for Valentine's Day alone we many different propositions that are going out already. So, we’re starting to press that button, even previously to the next generation gap.

The next question comes from Ron Josey with JMP Securities. Please go ahead.

Just two follow-ups and then two maybe bigger picture questions. Rob, can you just repeat the timing on the new app with the integration? I think I heard something in April and mid May but I wasn't sure. If you can just repeat that and maybe the partnership out there, that would be helpful.

Sure. So, the expectation is to deliver by the middle of April the latest to deliver it to Apple, and for the launch of it be right around the festival season, so right around May 15th. And as you know, we have a really exciting lineup again from May that includes EDC and many other biggest music events in the world.

And just to be clear, this new app, is this integration with Slacker, so it's not a two-app environment, everything is maybe on Slacker or LiveXLive or maybe some more info on what the new app would have?

Sure. So, what we publically stated is that we're going to integrate, which will become one brand. And as you can look at Slacker and where Slacker is going, Slacker has done such a magnificent job without really any additional costs of building out all of our technology, like BAM, which is sold to Disney $3.5 billion. We have the capabilities but right now our app is across Amazon, Roku, Apple TV. We’ve partnered with Twitch and YouTube and Facebook. So, we really have the capabilities to deliver this around the world.

And the new app would have those capabilities. Okay. And then, maybe bigger picture and then Mike one last one for you. But bigger picture, Rob, I think you said 40 live festivals in fiscal year ‘20, that's up from 27 this past fiscal year. Could you just talk about maybe -- are these new festivals coming because of AEG, Insomniac and now iHeart or is this sort of you all going out to the individual festival holders? And then, when you think maybe the next year or perhaps three years out, one of the questions we continue to get is, where is the growth going to come from? Is it the subscription side, is the advertising side? And so, if you could just maybe help us understand where that growth is in the next three years, advertising subscription? And then, I do have one follow-up, Mike.

Yes. So, you guys -- to read between the lines a little bit, we sated 40 as a minimum, right. If you read between the lines, to start with Insomniac, it’s over 23 events, right. But we’ve only committed to that will do a minimum like 6 to 7 of them, but they continue to grow that and they’re going to add another seven events this year. So, we have an opportunity to do a staggering amount of both hip hop as well as dance music festivals, which are the biggest in the world, the EDC, China, Japan, Mexico. We're doing our first ever event from Mexico City. iHeart, we've only announced two pieces of content so far. But, it was just super successful launch with one being a festival and one being theaters. So, we are confident and hopeful that we're going to expand our partnership greatly. And it's really been across the board. We continue to add independent festivals and continue festivals from the each of the major promoters of music in the world.

And then, Mike, maybe just one last one. I think, you said ending the quarter with $14.3 million in cash equivalents. You did add, I think, 3 point something point 2 million in debt. I didn't see cash flow this coming quarter but I think you -- this quarter, and I think you said there was still active tables management. Can you just talk a little bit about the cash balance, how you manage that and active tables and management? I do get questions on that. So, what does that mean? Thank you.

Yes, sure. So, if you look at where the cash was derived from, in my prepared remarks, I said that about $0.7 million went out in CapEx during the quarter, and that we had $0.9 million positive of cash flow from operations in the period. And part of that was driven from the net sequentially -- part of that was driven from improved adjusted operating loss of a $1 million during the year -- or during the quarter. And then, we've been actively managing our payables. We're going to continue to actively manage our cash, and it's important to us. We did take on some additional debt financing because you never know with the capital markets where they can go. But, we feel real good about our position right now. Does that answer your question?

Yes. I think, so the actively managing payables, like when are those due or how does that -- is that a cause for -- like how do you manage that I guess? And I’ll go back in the queue. Thank you.

Yes. Sometimes we will negotiate upfront to instead of paying 100% in cash, maybe portions in stock. And then, other times, we’ll be negotiating -- we inherited a ton of payables for the Slacker acquisition. And so, we're constantly trying to manage those. And it's just really managing the timing.

Mike is being humble about it on this front. Just to be clear, the $3 million is addition to the $14.3 million. So, we've done is we've increased our line which JP date [ph] which is you know is convertible $10 a share. So it’s almost a high interest rate for us, and it shows the support of our debt holders of the business. So, pretty remarkable -- we actually have today more cash than when we closed the IPO. The IPO was only $22.5 million. So, we're now currently over $17 million in cash as of today with that additional $3 million post the end of the quarter.

[Operator instructions] The next question comes from Kevin Dede with H.C. Wainwright. Please go ahead.

Good afternoon, guys. It’s Kevin Dede. Rob, Mike, maybe you just help me, make sure I understand you’re meeting guidance at least the low end, right. That implies a pretty strong quarter, big sequential pop-up. And I just want to make sure I've got the expectations to number of festivals and the other underlying assumptions that you've included straight.

So, we've announced 22 events, right; we stated that we’re going to do 27 for this year. So, from a number of events, this weekend we had a spectacular weekend. We did our first -- our fifth LiveXLive Presents event with an amazing line up Rick Ross, Charli XCX and drove 1.1 million live streams. This had a way lower cost level than it is on another events for us. So, we're going to continue to do those events. So, we expect to do a minimum of five of them before year end.

Okay.

Hey, Kevin. Just to reiterate, I am not sure if you heard when we were speaking with Brian. But, again, if you look at the pipeline of RFPs on the advertising and sponsorship front, quarter-over-quarter, they are up 500% in absolute dollars. So, while we're in the middle of the first innings, right, still early, that -- I’ve never seen an increase like that in my life, quarter-over-quarter. And again, as we start to build more in terms of events, more eyeballs, engaging more in terms of advertisers and outreach, then, you're going to see the revenue start to pick-up sequentially pretty substantially quarter-over-quarter. The other part and that is that the subscribers, a lot of those kicked in -- 94,000 kicked in, in December, right. So, we’re just starting to see the revenues from that and just starting to kick-in and obviously those are the free to -- and because we have such a unique partnership with Tesla, those customers have very little churn breakage to no churn breakage [ph]. So, you're going to continue to grow your revenues, topline with the subscription as well.

Okay. So, Mike, I appreciate your point. Yes, I could hear a little bit of commentary of the Brian. But, I think, I'm just losing the numbers. What was the revenue outside of music in the September quarter? Was what, roughly 600,000?

You're talking about advertising and sponsorship?

Yes.

$700,000 in Q3, and it was $900,000 -- sorry in Q2, and $900,000 in Q3.

Okay.

And then, subscription revenue was about $7.2 million in Q2 and it was $8.1 million in Q3.

So, your point is that that level of growth outside of subscription will help push you, given that what you've got -- what actually your six festivals all told, in the March quarter?

We had six festivals in the third quarter, that's correct.

Six in the third, and what's the number for the fourth, to hit your 27?

So, we’ve publicly stated that we’ve streamed 22 events as of today. And then, we fully expect to stream 27 by the end of the year.

So, you can look at somewhere between [indiscernible] this quarter. Just to simplify.

6 to 8?

Yes. We've already done two.

And then, and Rob, you brought up another great point. And I was hoping you could sort of elaborate on this. Do you think there's some I guess scale efficiencies in concert promotion? I mean, it's hard to imagine given that you're adding so much more, granting so much more to each festival that you do, I mean especially with LiveZone. So, could you just kind of talk to that little bit?

Absolutely. And you and I’ve discussed before. We just hired our sales team [technical difficulty] we should have rushed and hired a sales team earlier. We’ve really -- we haven’t even announced our Chief Revenue Officer yet. But, we have three very talented team members now, right, which really just started six months ago. And the reason for that is that our humble belief that selling individual festivals [technical difficulty] big ticket items. So, what we've done is we believe that we're going to [technical difficulty]. They're going to sell across the entire platform of all 27 festivals, plus or they can sell in genres, hip hop, selling all the hip hop, selling [technical difficulty] depending on which sponsors and [technical difficulty] audience are looking for. And what we've seen is, as Mike has articulated, the RFPs have just increased dramatically and that we now have so much content that there is real conversations about having real partners right now.

Well, I'd argue, you have a couple of real partners already, Rob. I guess, what I'm just wondering is about the festival promotion on the expense side, given the amount of extra services that you're providing.

I mean, that's the exciting part of this [technical difficulty]. And they are going down for multiple reasons; they are going down because of economies of scale; we have the ability to negotiate with our truck companies, our camera companies, to negotiate cost as we had more and more content, as we have right [technical difficulty]. And as we’ve talked about before, we've knocked out all of our competitors, except [indiscernible] still doing a few festivals but really there is no one else who is competing even close this. So, we've been able to negotiate deals in that. We brought team members in-house to keep cost down as well as all the technology advantages that we’ve built. And as we launch our next generation of our app, I think it’s going to give us even more room to take those costs down.

Okay. Fair enough. Thanks Rob. But, what happens when -- I mean, especially, when you start talking about streaming concerts that are outside the U.S.? I know, you threw out Mexico, and I think Japan.

Yes. So, we've streamed already, Ron, all over the world. We've been streaming in Brazil, we streamed four festivals -- I'm sorry, Kevin. We’ve streamed four festivals from Brazil already, like the last four years, we’ve stream from visiting, we streamed Jazz Montreux from Switzerland, we streamed Paleo from Switzerland as well. So, we've got a staggering amount of the biggest music events in the world. And part of the beauty over there is our cost in most cases is way very lower. And the reason for that is an example Rock in Rio has a partnership with Global. So Global is for Brazil; we get the rights for the rest of the world. And our cost structure is very lower than when we are streaming alone the entire event. The same exists with Jazz Montreux as well as with Paleo.

The next question comes from Austin Moldow with Canaccord Genuity. Please go ahead.

Hi. Thanks for taking my questions. I have a question kind of at the intersection of your main sort of music platforms, original programming, and your Slacker asset. Given what we've seen in the podcast industry as of late with acquisitions and investments and the size of the non-music addressable market, do you have any plans to go after podcast listeners in any way? I wonder if there's a way to uniquely go after that for you, given that a lot of podcasts, at least the ones that I listened to seem to be doing a lot of touring and live shows nowadays.

Yes. It's a great question. So, we just announced a partnership with Josh Altman. Josh does a TV show, called Million Dollar Listing. And from that, we announced our show, which is very similar to the podcast, like really what these podcasts are about. And I think the storyline is getting a little overblown in. It is really about original programming. And I think brilliantly that podcasts are unique way to trying to find the original program thing. And with the team that we currently have and the team that has just been added between David Schulhof and Patrick, like we've added real experts and the end, the game is very critical for us to be the thought leader and have the best original programming the world. Whether it's a podcast, whether it’s a short-form content, whether it’s a documentary or whether it’s a movie, our objective is to be authentic voice in music, and certainly podcasts are another interesting tool to add to our roaster.

Got it. And my last question is, more your philosophy around monetizing your OTT viewing. I'm just wondering kind of how you think about subscription versus ad-supported viewing and what you think -- I know a lot of the commentary was around the number of subscribers but I'm wondering what you think is the biggest opportunity for you going forward, just given a lot of what's happened in January alone with some of the biggest media and internet companies launching their own ad-supported viewing features?

Well, part of the beauty of this is, we’re the only one in this lane, right. So, as everybody is competing against each other and they’re going head to head, the luxurious is we’re the only one that are doing this in music. And we’re the only ones that have been doing it for 25 years. So, I think we’re uniquely positioned that because we have so much original programming. Our marketing [ph] as Mike articulated is way higher, right. About 90% of our revenue is subscription, 10% of them are coming from sponsorship. But, part of the uniqueness of our model is as we launch the next generation app, and we’ve tested all these pieces including messaging and chat and merchandise, just from EDC alone, we drove 30,000 people to the EDC merge site, right. So, Mike likes to call it the 10-legged octopus. We have [technical difficulty] here that the more [technical difficulty] we own, the bigger and better events, the more traffic we drive, the bigger percentage of that audience is going to convert to sponsors, subscription, [technical difficulty] ticket sales as well as amazing data. And then, at the end of the day, a staggering amount of VOD as well pictures that give us multiple different revenue streams to drive this offer. Do you want to add anything to that Mike?

Yes. I mean, I think, as Rob mentioned, we're heavy believers in the subscription model. Today, we're at 90%-10%. I think, the long-term view is there's a balance there where you're kind of maybe in the 20%, 30% on the sponsorship side. But, I think they're always going to interplay. I think the day and age are just being unilateral models. And so, you're going to want to bring on paid listeners as well as listeners who want to listen for free, and they don't mind hearing advertising or seeing advertising. So, it'll always be some combination. And as we swivel around different types of channels, I think those mix will be more exciting.

And our last question today comes from Andrew Boone with Quantum Capital. Please go ahead.

Hi, guys. Thanks for taking the questions. I had a quick one on just your strong net adds in the quarter. Understood that you guys highlighted kind of telecom bundles as well as marketing as well as Tesla. Just trying to parse that, right, in terms of what that looks like going forward and how much you guys control your top of funnel. Thank you.

So, what's interesting in the space right now is that Coachella [ph] has just reupped their deal with -- three-way deal between T-Mobile, Coachella and YouTube [ph]. And they paid $5 million for that. Coachella probably added somewhere between 8 and 10 million, about the same amount viewers that we had in EDC, up until this year. So, you’ve seen the signs and indications that the sponsors are ready. We're seeing the RFPs. So, that excitement is coming around it. But, this is the beginning of the beginning of a revolution in the space. And this is all just beginning.

Maybe I can help. In terms of how the outlook is and in terms of subscribers and how much we control, I mean, I think, today, we have -- we feel pretty confident. We're obviously -- we're not spending that much in terms of cash, because we have got a wonderful relationship with a very large growing entity called Tesla. And having some visibility in that there's plenty of public guidance out there, and we're in every North American car. And on top of that, we can control the funnel by either dialing it up or dialing it down in terms of acquiring more subs. So, I think we have pretty good visibility. As Rob mentioned, we're going to be launching our new flagship product really at the kick-off of festival season, which will happen in May. And we're super excited about that and we're in the process of planning in terms of how we're going to be marketing and approaching that.

Can you just help me to validate Rob’s point in terms of low-single-digits is organic in terms of coming through a non-bundled channel or is that more like half? If I look at Tesla and December sales, call it 25,000 were kind of December. You guys were backend loaded in the quarter, like, how do I think about that versus what's in my model right now? You know what I mean?

Yes. So, I think the best way to do it is we start off the year by adding 10,000 net subscribers per month, in the first quarter; second quarter we added 20,000; the last quarter, we added 30,000. I think, we anticipate that momentum to continue throughout the remainder of this year. And then, as we head into next year, there will be an acceleration of growth, largely related to this flagship product we’re going to be launching.

Yes. And this is the first time we gave number that on watch to 1 million subscribers. We're feeling very confident that the combination of Tesla, the continued traffic that is being driven from LiveXLive to drive your impressions to Slacker, plus adding additional channels, over 100 channels over Slacker including some paid channels, Josh Altman and others, the announcement of Nas launching his own channel on there, we are highly confident that by mid-year, we'll hit, you see that 1-million-subscriber number.

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Rob Ellin for any closing remarks.

Yes. I just want to thank everyone. This is really transformative and exciting quarter for the Company. We really have started to move our mission towards that social live music network. As we talk about that platform, you think about Facebook, how fast they grew from a social aspect. We’ve positioned ourselves with music as a universal language. There is no better communities than music; there's no one in this lane that is doing it. And because we have the luxury of partnering with these great partners like Live Nation at AEG, Insomniac and iHeart, we have a tremendous amount of opportunity to partner with them and grow this together. And to build those together, and as we build on this, we’ll be the first fully immersive experience to consumer that brings them close to live events and gives them a best seat in the house. So, again, my team -- I couldn't be prouder of my team. We continue to grow the team and we look forward to the next couple of quarters with all of you.

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