Good day and welcome to the LiveXLive Media Q2 2020 Earnings Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Emily Greenstein with Investor Relations. Please go ahead. Emily Greenstein;The Blueshirt Group;Associate: Thank you. Good morning, and welcome to LiveXLive Media's Financial Results and Business Update Conference Call for the Second Quarter of Fiscal Year 2020, ended September 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 not guarantees of future performance or results 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 financial results for the full fiscal year 2020 and the future growth and plans in the business. There can be no assurance that the company's attempts at any or all of these endeavors will be successful. 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, the company's quarterly report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 8, 2019, the company's quarterly report on Form 10-Q for the quarter ended September 30, 2019, which the company expects to file with the SEC on or about November 8, 2019, with subsequent SEC filings. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of this call, November 7, 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, November 7, 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. I'd also like to highlight to investors that the call is being recorded. We are making it available to investors and the media via webcast and a replay will be available on our website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of the company and any redistribution, retransmission or rebroadcast of the call in any form without the company's express written consent, is strictly prohibited. Now, let me turn the call over to Rob. Rob?

Excellent. Thank you, Emily. Thank you for joining today's call. LiveXLive has come a long way since the beginning of the year. We delivered record performance in Q2, generating $9.6 million in revenues, up 20% year-over-year. Contribution margin increased to $1.3 million year-over-year. Paid subscribers have reached 775,000 representing over a 40% increase year-over-year. Additionally, in Q2 2020, we livestreamed 10 events versus 8 last year, driving over 27 million views. To date the fiscal year, we have livestreamed 21 music events and reached over 60 million livestreams as compared to a total of 24 events and 51 million livestreams for the entirety of fiscal 2019. Our livestreams have generated over 265 hours of live content and featured more than 225 of the biggest artists in the world, including performances by music icons across all genres such as Taylor Swift, Madonna, BTS, P!nk, Post Malone, Bon Jovi, Billie Eilish and Zedd. We also developed and made more than 300 original pieces of content available to our users. We continued to grow in Q2, expanding our marketing and distribution partnerships and offering unique and selective original content for the most important pop culture events around the globe. LiveXLive streamed Rock in Rio for the 5th time, generating a record setting 12.5 million livestreams as well as a record-breaking social engagement. We also launched LiveCause, a philanthropic initiative that gives artists a platform to support the charities they are most passionate about. LiveCause also supported Amazonia Live, Rock in Rio's project to rebuild the Amazon Rain Forest. This quarter we entered into a strategic partnership with Zoom Media to feature our content in more than 3,500 interactive screens in health clubs and gyms across the US. Not only did our audience expand by 34.5 million people, but we are once bringing fans…

Thank you, Rob. LiveXLive already reaches 179 countries. We have partnerships with 3 of the major wireless carriers, Verizon, Sprint and T-Mobile, and we are already in 85 automobiles. Our app is available across Roku, Apple TV, Fire TV, IOS and Android devices, as well as Samsung TVs and social platforms including Facebook, Instagram, YouTube, Twitter and Twitch. We are now diversifying our content stack with more original and acquired content and more frequent 365 live programming. From album release parties to club shows to secret popup events, this live, social and original content programming diversification will be key as we seek a strong position in the exploding OTT and rebundled, cable rebundled space. We will be the sole live music and live star linear network in this new wave of channels being distributed across the ever expanding pay and AVOD video landscapes. This is powering many of our conversations with carriers, satellite and cable, and the big social players. Every platform needs live and every platform needs music. And LiveXLive has both. We are set up for dominant position in the massive rebundling of content across major platforms. Following the success of livestreams of Rock in Rio and Electronic Daisy Carnival Las Vegas, across Sinclair's platform, STIRR, we have expanded our partnership to include our first branded, linear 24/7 channel. We expect to announce many similar partnerships in the near future. Artist partnerships are becoming more and more central to our strategy. We are hyper engaged with the artist and manager communities as we develop deeper partnerships for unique content and co-marketing opportunities and figure out new ways to reach and monetize social audiences together. Artists are already actively using our content across their socials. Everyone from Taylor Swift to J. Lo to Iron Maiden has cross-posted their entire…

Great. Thank you, Dermot. We closed Q2 2020 with strong results, with $9.6 million in revenue, adjusted operating loss of $3.7 million, contribution margin of $1.1 million and record KPIs through Q2 fiscal 2020 including livestreaming 10 events to over 27 million viewers during the quarter and ending Q2 2020 with paid subscribers of 775,000. The first portion of my prepared remarks will provide commentary on our Q2 2020 performance with the latter part on Q2 2020 financial results as compared to Q2 2019. More specifically, on Q2 Fiscal 2020. Q2 2020 consolidated revenue was $9.6 million, up 20% year-over-year from $8 million in Q2 2019 due to over 40% growth in our paid subscribers year-over-year. Ending fiscal 2020 paid subscribers grew to 775,000 or by a net 226,000 from ending paid subscribers in Q2 2019 of 549,000. Q2 2020 contribution margin was $1.1 million as compared to a contribution loss of $0.2 million in Q2 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 34% in Q2 2020 as compared to approximately 28% in Q2 2019. In Q2 2020, we spent $2.1 million for 10 livestream events versus $2.4 million for 8 livestream events in Q2 2019. Q2 2020 adjusted operating loss was relatively flat year-over-year at $3.7 million in Q2 2020 versus $3.6 million in Q2 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 non-recurring expenses. As Rob discussed in his prepared remarks, our recent growth has enabled us to gain economies of scale and made us more efficient going forward. As a result, we expect our adjusted operating loss to be reduced by…

[Operator Instructions] Our first question will come from Ron Josey with JMP Securities.

This is David on for Ron. Your guidance assumes a flattish sequential revenue for the remaining of the fiscal year. Can you talk about the drivers of this guidance? And any additional insight in the assumptions around subs in advertising?

It's a combination, David. How are you? Thank you. A combination of a little bit slower sponsorship. We've just hired our chief head of sales. Jason Miller has just joined us. As well as a drop-off from China in that we had substantial revenues coming through from Tencent and other partners who were distributing content that based on the macro issues we have seen. As well as, as has been publicly disclosed, that the US sales for Tesla have been off. So we're real excited about the second half of the year and as Mike has articulated, we're going to stream close to double the amount of events last year at a much lower cost. So we've taken our cost structure down dramatically. Our losses will be substantially less than the first half of the year. We went to come out conservatively and confident with where the second half of the year will be.

The next question will come from David Bain with Roth Capital.

Great. I just have 3 questions if I could, First, I wanted to follow-up with something Dermot touched on. Obviously, linear TV ratings made a decline, but the cord cutting to OTT, the Netflix, the Primes, I mean that's moving and they will now be seeking I think differentiated content. So given that, could we get a little bit deeper update on STIRR, the Sinclair go-live? Any datapoints you can share on viewership or what have you? How revenue could evolve from the channel model especially as you continue to expand that offering?

I think it's too early to release years of data. Just that the tests we have done on the platform are really making a difference and they're drastic and we're starting to integrate with not just the OTT platform, but the broadcast channels and their network. For example, when we do a show in particular regions, the local broadcast channels for Sinclair support the show. So we're seeing some great early results and then in Q1 we hope to continue the partnership with the previously stated launch of a linear channel.

Just to add to that, David, we moved this from, very similar to our iHeart partnership where originally it was a test and now we're streaming all their live music events, the same thing has happened with Sinclair. We did a test on 3 events and we can't give the metrics yet, but they were so exciting that Sinclair has now moved that to a full channel going to 2020. And they are aggressively pushing for us to do it as early as possible.

Great. Second one, Spotify, Apple, the others, they continue to look for content. Have you heard anything new in terms of like a real push into the live categories, particularly festivals? I know they've acknowledged the value, but it seems like you guys continue to grab the real estate. Anything on the competitive landscape at this point? And then to that end, and I don't want to go too far with this, put in a potential change of control, is that real estate transferable?

Yes, so all of our contracts obviously have little different terms in them, but the opportunity to transfer in the right partnership is a pretty smooth and easy way to do it. On the first part of it, on the competition side, as I articulated earlier in the presentation, is that we really knocked out all of our competitors. So Red Bull and Yahoo were competing with a lot of money. Those days are over. We really there's a white paper again and we really control and dominate the space and continue to grow. We don't see any signs of anyone else entering and really competing with us. We actually see telltale signs that, like iHeart, there could be additional partners, that we really are an added value to the audio side and enhancement to the audio side. And really for those audio partners, live is really not in their DNA today. It's really more -- it's part of -- it's a loss leader for their business like iHeart is. So we think there's a big opportunity for us to continue partnership like that and actually enhance our relationship with other audio partners.

Great, just last one if I could, I mean obviously your guidance doesn't take into consideration a potential acquisition, at least of any significance. To that end, can you discuss what some of the major checkmarks are for an acquisition from maybe a financial standpoint, EBITDA neutral, positive, from a strategic standpoint? Just given you've acquired so much content real estate at this point, what makes sense?

Sure. The metrics that are going to make sense are subscribers, content, traffic. All the metrics that we discussed in this call. We are full speed ahead. It's been 20 months since the acquisition of Slacker. We fully expect that by year-end we'll be completing our next acquisition and it will be extremely accretive on a revenue side and on a consolidated basis we'll be pushing more and more towards better and better bottom line results and that ROI that we discussed throughout the call.

The next question will be from Brian Kinstlinger with Alliance Global Partners.

This is Jake stepping in for Brian. I believe in April you rebranded Slacker to LiveXLive and launched your integrated platform in addition to increasing your advertising and marketing spending. With that said, do you expect to begin seeing a stronger conversion from freemium to paid subscribers, as it looks like we haven't quite seen it yet?

We just launched as of the end of May. the MVP app, which consolidates the 2. There's a time period that it takes to building out that brand, extending that brand. We're seeing some exciting metrics as to free subscribers starting to convert to paid subscribers. And as we've launched the social aspects, those immersive aspects of our app, messaging, chat, buy a hat, buy a t-shirt, and really giving the consumer an experience, as we add micropayments and pay per view, we think more and more that will lead to consumers spending more and more time on our platform and more and more converting to subscribers. Just to finish, Brian, it's still in the very early stages of this and we're just launching 2.0 of LiveXLive and really see some telltale signs that these metrics are really starting to kick in. As you can see by the additional management team that we added, there's a real focus now on revenues and driving both subscription as well as sponsorship.

Great. Then based on the RFP pipeline, conversations you're having with brands, do you expect a ramp in advertising revenue during the second half of fiscal year 2020?

I think the answer to that as you can see by the estimates that we put out, the guidance that we put out, sponsorship is a little bit slower than we had hoped, but at the same time, as I've articulated for the last 6 quarters, we really had not hired our sales team until we just hired Jason as of this month. Where we really see the telltale signs, like sports, where we're no longer trying to sell a one-off property on its own. Trying to sell EDC or Rock in Rio, we're really packaging these like sports, like the ACC or like the MBA where we're starting to look at sponsorships that are way bigger, that really price these things where I think they deserve. As you can see by Live Nation and what's happening on the live side of sponsorship, that's a massively growing industry. If you just look at the tail on that, as more and more sponsor dollars pull into live music, we're already driving 35x to 40x the audience digitally. Those sponsors are going to come. And I think Jason joining and with a spectacular career in delivering sponsors, all genres of sponsors, I think it's a telltale sign of what's to come. I can't promise you whether it's this quarter or next quarter, but certainly in the very near future you're going to see a big pickup in sponsorship. The RFPs are up over 600%. So the confidence is building, but you never know the day that that really kicks in. But we're confident and hopeful now.

Okay, great. Then one last one. Just when a subscriber streams a live event, what was the average time that they were streaming for?

Each platform is a little bit different, but the average is over 10 minutes. So very much like sports, these are pretty spectacular numbers in terms of minutes watching. The engagement is getting longer, the artists are getting more and more engaged. As Dermot articulated, J. Lo and Taylor Swift all cross promoted across their Facebook and streamed across their own Facebook pages. This is pretty magical to have these giant social media stars promoting LiveXLive and helping to build our brand. This is, again, we're in -- if we've moved from the first inning, we're now in the second inning of this. We really have done a pretty amazing job of infiltrating and bringing artist relations. We now have over 7 people in artist relationships, up from 3. That's not including senior management, and you can just see more and more telltale signs that the artists themselves are getting more and more engaged on our platform and driving more and more of our traffic. And I think in the very near future, you're going to see those artists drive a substantial amount of our subscription as well.

The next question comes from Jack Vander Aarde with Maxim Group.

I just want to touch on the guidance reduction quickly again and just get a sense as to how much of this is driven by the advertising and license segment? It seems like paid subscribers and subscription revenue were in line with at least my expectations. So how much of this is related to that segment, the other segment?

It's mostly related to both sponsorship and we've articulated sponsorship and distribution. Which is a combination of those distributors, including China, which was an excellent partner for us. We're hoping that macro issue is resolved shortly and those numbers can come back in. We'd have to rethink guidance at some point if it does. But that was certainly a hit this year. As well as with Jason just joining, we have to give him an opportunity to really go for the jugular. As I've always said on these calls, we have set the tone that we have the biggest pop culture events in the world. We didn't want to misprice these and sell subscriptions at deep discounts and set a price that would take 3 or 4 years to recover from. So we're really, with Jason now joining and Dermot joining, we're really confident that we're looking for big-ticket items and making sure that the sponsorship dollars are reflective of the product and the original programming we're delivering.

Got it, that makes sense. And then as for gross margin, which there is upside in gross margin this quarter relative to expectations, how much of this is related to just the revenue mix that resulted this quarter? And then how should we think about gross margin directionally trending on a quarterly basis for the remainder of this year?

If you unbundle the components here, the subscription side of the business was 34% from a contribution margin perspective as opposed to 28%, so that drove a substantial amount, virtually all of the benefit, the $1.3 million benefit year-over-year. And then going forward as we mentioned, we're going to be getting some giant economies of scale. Our average cost per event was about $200,000 this quarter and we fully expect that to continue to decrease in the second half of the year. And so I think you're going to see an uplift in, I know you will see an uplift, in contribution margin going forward.

Got it. So would it be correct to assume a sequential increase for the next 2 quarters?

That would be correct.

I think to add to that, thanks, Mike. And just to add to that, I just did an interview where I was asked about the pricing of music. So if you just took the audio component of this, there's been a price war out there between Apple and Amazon and YouTube and Spotify. Now that we have over 1,500 live music events locked up for multiple year deals, we now have enough content that we can start thinking about raising those prices for subscription. We're carefully looking at the right time, but it certainly makes sense that our subscription model should be looking at a higher pricing in the very near future. Dermot and I are carefully going through that and we'll make a decision in the very near future as to pricing. But see opportunities that, the price war can't go on forever, the opportunity to raise prices. And the fact that we're delivering so much exclusive original programming, really puts us in a position that we can separate ourselves from a pricing standpoint as more and more of our content is original programming.

The next question comes from Barry Sine with Spartan Capital.

First question, Rob, you mentioned Tesla in your remarks. And there's been a lot of chatter as you know around that relationship. Could you characterize where that relationship is today? And then on a related note, what would it require and what would it take for you to follow them globally with that relationship?

As you know, Barry, we can't talk about it a lot. We're under our agreements. What I can say is that we have continued to grow with them and we need to continue to grow in other places. Because no matter how fast they grow, we're going to need to, if this is really going to work to the size we're looking at and really deliver this original programming around the globe, we're going to have to expand. So you're starting to see our monthly users grow. We're averaging 1.3 million monthly users. So more and more free subscribers are coming into our platform. We're really excited about the overall growth and Tesla has been a fantastic partner. But it's very important for us to grow and as everybody knows, Spotify has been added to the car. There are a lot of alternatives within cars, including just the ability to do airplay right onto your phone. So we've expanded now, we're across 85 other cars as well as across carriers round the globe, and all of these initiatives, from iHeart and their 260 million listeners, being offered the opportunity to watch on LiveXLive, to artists. When you artists like J. Lo and 75 million followers telling their audience, their fans, their super fans, their social media to come watch on LiveXLive, we've got to continue to expand our opportunities around the globe. And again, Tesla is a fantastic partner but we've got to keep growing outside of Tesla and keep expanding outside of Tesla in order to achieve the goals of this company.

Okay, that's helpful. Switching gears, the hire of Jason Miller, you've long talked about a key goal for the company has been the hiring of a new head of sales. So you've now achieved that. One, could you talk about the organization underneath him? How large is it? What are they doing? And then also, when you hired him, give us a rough sense of what we should expect to see externally from his efforts. I think you said it's probably not a quarter, 2 quarters, but when might we see A), some press releases, and B), something in the advertising or sponsorship revenue line as a result of his hire?

Sure. Again, just being careful and what we said in the guidance, Jason is a seasoned veteran who has done a substantial amount of sponsorship, both live as well as across cable channels. Delivered very meaningful numbers that will change the course of history for LiveXLive. Because we really have a few dollars in sponsored revenues. So this is a seasoned veteran, I couldn't be happier to have him join the team. With Dermot and Jason leading this charge, we're real excited about it. On top of that, we have some expertise now in Chicago who came out of Live Nation, we have some expertise in Los Angeles that came out of iHeart. So we continue to expand the team. And then maybe the most exciting part of it is, because of Jason's relationships and Dermot and I's relationships, we now have a partnership with iHeart that their entire sales team is upselling sponsorship to all the iHeart events. The same thing with Live Nation. And so at a really high level, we get to work together with our partners to deliver those sponsors. Because as you guys know, they are participating in the backend and that's really the uniqueness to the partnerships with Insomniac and Live Nation and AG and iHeart.

Next question, I guess for Mike. Mike, kind of hidden in the release, it didn't get a lot of focus, was this $1.3 million legal cost in the quarter. In my mind, that's pretty significant. That's about 35% of your reported adjusted operating loss. And I think you said that was nonrecurring. Can you talk about what that related to? I know you said it was a prior acquisition, and is that truly nonrecurring? If I wanted to look at the recurring results of the business, would it be fair to strip that out of what you just reported?

Yes, thanks, Barry. It's 100% nonrecurring. It's a defense cost of, you can read our disclosures, of a legacy acquisition. And we've added it back.

And with that, we have a deductible and covered by insurance in that, Barry. So this is fully covered going forward by the insurance companies. It's an ongoing -- we acquired the assets of a company called Wantickets. We can't go into a lot of detail, but we acquired it for a tiny amount, and you can read it in the disclosures, but as you know, litigation can be expensive, so you have no choice but to engage and make sure that it goes away smoothly. As you can read in the disclosures, there's very little exposure to this. Based on the fact we didn't buy the company, all we bought was some assets of it.

Okay. My last question, could you give us a sneak preview of what we can expect in terms of festival events for the next quarter or 2?

We're going to come out with that shortly, Barry. We'll put out an updated list of events. But it's going to be extremely exciting. Again, as you saw this quarter, it was way more exciting than we expected, then we added Life is Beautiful at the last second and we streamed with Juice WRLD and 070 from Allied Esports Trucks. We added multiple additional iHeart events. You're going to see more and more original programming. You're going to see more and more LiveXLive present events. So we'll be shortly putting out a programming lineup. And as we said, we're going to be around 40 events for this year. So I think we did 11 in the second half of last year, in that range, 10 or 11. So we're going to more than double it and our costs have gone down dramatically and they're going to continue to go down. The economies of scale are really kicking into place, our partnerships are getting better and better. So our cost per acquisition of the content, our cost per production, our cost for marketing has all gone down. And the exciting part is we're driving a bigger and bigger audience.

Barry, I'll just add, this is Dermot, we're looking at Festival 2.0 where we just have deeper, deeper relationships with the festivals where we partner on driving ticket sales, bundling subscriptions, and sharing an upside in revenue. So really pay attention to the next wave of festival announcements where we have much deeper partnerships.

And Barry, we've never talked about it, but think of that bundling of subscriptions is starting to convert ticket buyers into subscribers.

The next question will come from Jon Hickman with Ladenburg. It appears Mr. Hickman inadvertently disconnected his line. At this time, I'm showing no further questions. So I'd like to turn the conference back over to you, Mr. Ellin, for any closing remarks.

Terrific. Thank you, everyone, for joining. It's been a really exciting quarter and we look forward to the next 6 months of the year, really to some amazing talent performing on our stages, and really focusing the business, 2.0. That 2.0 is going to be more and more content, stronger and stronger support from the artists, more and more traffic driven, and more and more ROI, conversion through subscription sponsorship and a real focus on that. We couldn't be more excited that, again, we've become the authentic thought leader in this space. It's a wide-open space, if we continue to do this and continue to deliver, we're going to deliver that next generation MTV we talked about 2 years ago when we took the company public. Thank you very much and I'm happy everyone joined.

Thank you, Sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.