LiveOne, Inc. (LVO) Q2 2021 Earnings Report, Transcript and Summary

Good day and welcome to the LiveXLive Media Q2 Fiscal 2021 Earnings and Business Update Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tenia Muhammad, Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to LiveXLive Media’s Business Update and Financial Results Conference Call for the company’s first quarter ended September 30, 2020. Joining me on today’s call are Rob Ellin, CEO and Chairman; Jerry Gold, Interim CFO; Dermot McCormack, President; and Norm Pattiz, Founder and Executive Chairman of LiveXLive’s wholly-owned subsidiary PodcastOne. 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 various risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of the company, including expected future financial results and future growth in the business. Actual results may differ materially from those discussed on this call for a variety of reasons. Please refer to the company’s filings with the SEC for information about factors, which could cause the company’s actual results to differ materially from these forward-looking statements, including those described in its Annual Report on Form 10-K for the year ended March 31, 2020, Quarterly Report on Form 10-Q in the quarter ended September 30, 2020, and subsequent SEC filings. 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 its Investor Relations website at ir.livexlive.com. And the company encourages you to periodically visit its IR website for important content. The following discussion, including responses to your questions, contains time-sensitive information and reflects management’s view as of the date of this call, November 16, 2020, and except as required by law, the company does not undertake any obligation to update or revise this information after the date of this call. I’d like to highlight to investors that the call is being recorded. The company is making it available to investors and the media via webcast, and a replay will be available on its 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 or the webcast in any form without the company’s expressed written consent is strictly prohibited. Now let me turn the call over to Rob. Rob?

Thank you, Tenia. Good afternoon and thank you for joining us today for our second quarter fiscal 2021 business update. Difficult times bring out the best in people. The foundation of LiveXLive has been built around a world-class management team and a board to deliver the first talent-centric platform focused on superfans. The LiveXLive COVID has accelerated our business development, maturation and brand recognition by multiple years as livestream festivals and concerts quickly progress from a complimentary offering to primary means of delivering and watching and listening to live digital festivals and performances. We have derisked the business by diversifying our revenue streams with the recent launch of pay-per-view, the additional substantial advertising and sponsorship revenue component as a result of the acquisition of PodcastOne. And we recently announced letter of intent to acquire E-Commerce Merchandise Company Custom Personalization Solutions, which recorded approximately $19 million in revenues in 2019. That acquisition is expected to close in the end of calendar 2020. I am pleased to report in the second quarter ended September 30, we recorded our 10th consecutive quarter of record revenue along with 148% increase in contribution margin. And given the momentum we see in the nearly all of our business verticals, we’re excited to raise our revenue guidance for the current fiscal year ended March 31 to between $63.5 million and $69.5 million. We also had a meaningful improvement in our balance sheet as shareholder equity increased by $20.3 million in working capital by $18.5 million. The improvement in our balance sheet as a result of a number of transactions, including two common stock transactions at $4.14, extended payment terms by over 12 months on $5.9 million of payables, entering into a $15 million senior secured convertible financing agreement at $4.50. Over the last six months LiveXLive livestreamed 103 events featuring 1,500-plus artists generating content, which has been reviewed by over 95 million times as compared to 22 events featuring 224 artists and over 60 million last year. I’m happy to report that one of our trophy live events, properties Spring Awakening is expanded to include a Spring Awakening festival in Cancun, Mexico. Scheduled late April 2021, we already have over 1.3 million in ticket sales, needless to say, there is significant pent-up demand for the return of live music events. Today LiveXLive has grown and evolved to be the leading talent-first platform focused on connecting artists with their superfans, building long-term sustainable valuable franchises, audio music, podcasting, vodcasting, OTT and pay-per-view, live streaming and video on demand and our distribution, which continues to expand. LiveXLive’s 24 hour linear OTT streaming channel now has a reach of over 300 million people on platforms like Amazon Fire and Roku, Apple TV, SLING, Xumo, STIRR, and both Samsung Smart TVs and Samsung TV Plus. We provide a platform for artists to simulcasts globally across all digital and social platforms with a fully integrated stack of cutting edge technology in-house production, distribution, marketing and sponsorship. We have built an unequaled flywheel that is positioned us at the forefront of what we believe is the paradigm shift to live streaming and one that will continue well after COVID. New monetization features for artists include pay-per-view virtual ticketing, merchandise subscription, digital tours, tipping all of which create numerous revenue share opportunities for both LiveXLive and the artists. With our recent launch into pay-per-view, we have sold tens of thousands of tickets in over 120 countries and exclusive produced and delivered livestream pay-per-view concerts by Grammy winner Pitbull, Modern Drummer Festival, Darius Rucker, K-Pop sensations, Monsta X and Wonho plus over 100 pay-per-view events with live from out there. Pay-per-view provides an opportunity to introduce millions of new visitors to LiveXLive, allowing us to grow our free register users and build a robust data relationship with credit holding customers at top of our sales funnel. We are fortunate to have amazing music industry partners, Live Nation iHeart, numerous record labels and publishers and of course, the hundreds of talented artists that make LiveXLive special, other partnerships, including TikTok, YouTube, Facebook, Twitch, Twitter, Tencent and Daily Motion. We have an exclusive partnership with Tesla for over eight years, where LiveXLive subscription is pre-installed in every Tesla car sold in America. The LiveXLive app is pre-installed in 85 other automobiles and growing as well as across major carriers, Verizon, Sprint and T-Mobile. Through our distribution partners and B2B deals around the globe, we now have 936,000 paying subscribers. With that, I’m going to hand it off to President of the company and my partner, Dermot McCormack. Dermot?

Thank you, Rob. One of the real bright spots over the last few months is the enormous progress we have made on the sponsorship front. We now have sponsorship deals with Pepsi, McDonald’s, KFC, Hyundai, obé Fitness, SIMPLE Mobile, Corona, Porsche, Chipotle, State Farm, Kia, White Claw, Mike’s Hard Lemonade, and Mentos Pure Fresh Gum. Most of these are new deals and we expect to see strong sponsorship and growth continue into the foreseeable future. We continue to produce a livestream or proprietary weekly concert franchise Music Lives ON, following the massive success of Music Lives digital event, which we call our digital Coachella. The original festival broke all our streaming records with an audience larger than any live Coachella or Lollapalooza event. An incredible 50 million views in 179 countries, 5 billion views on TikTok and an average of over 200,000 concurrent users. Music Lives event truly validated the value of live streaming. Music Lives ON has received over 8 million livestream views streaming more than 156 artists and weekly viewership continues to climb, showing a growth in brand awareness and interest in this growing franchise. It is one of the only music franchises that has consistently streamed live music every week during COVID. In early July, we closed the acquisition of PodcastOne, which complements our music and video content stack, as vodcasts to be offering and diversifies our revenue model by adding a significant advertising and sponsorship component, alongside our existing subscription business. We also have an experience advertising and sales team, which tripled the head count of our overall team. With us today to give a business update on PodcastOne is Norm Pattiz, Founder, and Executive Chairman of our wholly-owned division. Go ahead, Norm.

Thanks, Dermot. It's great to be here and it's great to pass along some very positive information. We had a good quarter with positive EBITDA at PodcastOne and are beginning to see the turnaround economically in the ad market. I think we're poised for a strong Q3 and since the merger with LiveX, we've added 12 new podcasts with a total social reach of over 287 million expanded our reach and programming with the launch of vodcast, the part of the PodcastOne network, which of course our video podcasts, blue-chip sponsors that committed to our shows that across our audio and video, offerings are very, very strong and very well-known. The Pitbull, vodcast and podcast continue to surpass our expectations, strong buy-in and support from advertisers like KFC, Pepsi, State Farm, Clorox, Talkspace, and NetSuite are to say the least encouraging. This was especially important as we build a true 360 degree offering with Pitbull, including pay-per-view vodcast, podcast and social elements of the campaign. Additionally, we had successful launches of the Michael Irvin podcast, a podcast with Dr. Steven Gundry, a leading health and wellness experts and a podcast featuring, massive influencers, Amanda Cerny, and Jacqueline Fernandez with a joint total reach of over 132 million followers across Instagram, TikTok, YouTube, Facebook, and Twitter. The past quarter, the LadyGang featuring Keltie Knight, Jac Vanek, and Becca Tobin has achieved a huge milestone with over a 100 million downloads. We just extended the deal with the LadyGang for another year, and we could not be more excited for what's in-store for PodcastOne and LadyGang next year. We also would like to share details of two key hires that we recently made. Ilana Susnow, the Head of our Marketing and Audience Development, and Alistair Walford, the new Head of Production. Ilana is a veteran television marketing executive with over a decade at NBC, Universal. And she'll oversee all marketing initiatives for PodcastOne and our numerous podcast. Alistair joins us from Warner Bros., where he served as Director of Production. And prior to that, led Gifted, Funny or Die’s commercial division, which working with some of the top directors and as in the world and large-scale advertising campaigns, he will oversee all aspects of production at PodcastOne. These two key hires, new exciting programs are take forward to announce shortly, and the overall podcasts industry, which this year is projected to gross over $1 billion in 2021. The future looks bright. Again, I want to mention that we had a good strong quarter with $5.1 million in revenue and $450,000 in positive EBITDA. That's our story. I'm sticking to it.

Excellent, thanks, Norm, and Jerry – handing it off to Jerry, our Interim CFO. Jerry, you take over, please.

Thank you, Rob. So as the team has been saying, it's been a very exciting year for us, and it's certainly a very exciting quarter. As we've mentioned for the 10-year in a row, we were about to report record revenue of $14.6 million, adjusted operating loss basically a breakeven $100,000 loss, across our operating division and record KPIs, including 29 live events over 75 million live views and 21% net subscriber growth year-over-year. On a consolidated basis, our revenue $14.6 million, up 52% year-over-year from $9.6 million in this in Q2 of 2020 due in large part to the growth in our live event, sponsorship, pay-per-view services and PodcastOne advertising year-over-year offset by a small decline in our programming – programmatic advertising and subscription services year-over-year. At September 30, 2020, subscribers go to 936,000, which includes certain subscribers that are subject to a contractual dispute, still a net increase of 161,000 from the prior quarter. We ended Q2 2021, our goal to diversify our revenue – we ended with Q2 2021 with 53% of our revenue from subscription, 39% from sponsorship, advertising and licensing, and 8% pay-per-view ticket sales, significantly diversifying our revenue streams compared to the prior year when 94% of our revenue was from subscription and 6% in advertising. Our contribution margin grew over 148% year-over-year to $4.3 million compared to $1.1 million in the prior period. Improvement was driven by the growth in sponsorship revenue, the addition of PodcastOne advertising coupled with overall margin improvements to 29.3% in the second quarter, as compared to 11.8% in the prior quarter. Our adjusting operating loss was $1.4 million in Q2, a 62% improvement from the AOL loss of $3.7 million in the prior period. The loss was driven by our operations – reduce loss was driven by our operations, which improved $1.9 million year-over-year with adjusted operating loss up basically breakeven. In our Operating division, again, revenue of $14.6 million, up to 52.5%, the growth is basically from live event sponsorship, pay-per-view services and the addition of PodcastOne advertising in the quarter was set by a decline in programmatic advertising and subscription revenue as I mentioned before. During Q2, our operation generated $5.5 million in sponsorships and advertising as compared to $600,000 in the prior quarter. Our Q2 2021 subscription revenue was $7.7 million, as compared to $9 million in the second quarter of 2020. This result is a decrease of the contractual dispute I mentioned before. And as a result of that, we are not recognizing revenue on those subscribers at this point. We are very confident that our conflict will be resolved in our favor that we will eventually be able to collect that revenue. Finally, we generated $1.1 million in ticket sales from the launch of our pay-per-view platform in May 2020. We expect the number of events and the average revenue per event across this platform to continue to grow throughout the remainder of 2021. Contribution margin of $4.3 million increased over 148% from Q2 as we discussed in the prior paragraph. In Q2, we spent $800,000 to produce 29 live events at an average cost of $28,000 per event and improvement of over 90% year-over-year. In the prior year, we spent $2.1 million to produce eight events in an average course of $262,500, as you can see a dramatic decrease in that cost, which was a large contributor to our margin improvement. Of the adjusted operating loss, again, approaching breakeven as compared to an adjusted operating loss of $2.1 million in the prior quarter, the improvement of $2 million was largely driven by improved contribution margin, which was offset by increased operating expenses from our acquired podcast business. Turning to corporate division, principally 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 supporting functions. Again, the loss increased is largely due to lower personnel costs, lower rent costs and driven by one-time COVID cost reduction savings from the prior period. Excluding non-cash stock-based compensation, amortization expense, depreciation and certain non-recurring operating expenses, Q2 2021 operating expenses increased $900,000 or 17% to $5.7 million compared to $4.8 million in the prior quarter, the increase was largely due to the addition of PodcastOne during the quarter, offset by lower direct marketing costs and product development costs driven partly by increased organic traffic from digital-only events. I think as Rob mentioned, we are considerably strengthened our balance sheet. We ended Q2 2021 with $21 million in cash, up $8.5 million from prior earning cash of $12.4 million in the prior year, increases are largely driven by net cash proceeds from financing of $14.5 million offset by net cash outflows from operations. Importantly again, strengthened the balance sheet of working capital increased by $18 million due to the financing previously mentioned. The one additional item, I think we talked about the addition of Custom Personalization Solutions and Rob already mentioned the increase in our guidance. And that concludes my prepared remarks. Now I’ll turn it back to Rob.

Thank you, gentlemen. As you can see, we put together a world-class team of experts who have each built, operate, and sold multi-billion dollar businesses. We're really excited to continue to grow the team and you'll see very shortly, we'll be announcing over a new CFO to the company, but really excited about the team and really excited about the prospects going forward. And so I'm going to open it up to Q&A, any questions you have.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Ron Josey with JMP Securities. Please go ahead.

Hi, this is David for Ron. First, can you walk us through the components of your full year revenue guidance and what gives you confidence there? Second, on the e-commerce acquisition for CPS, how do you plan to integrate that with the live and important events? And then on pay-per-view, how did Pitbull events perform and what does the pipeline of future events look like for pay-per-view? And then finally on advertising, can you talk about the progress around the sales force integration with PodcastOne? Thank you.

Okay. A lot of questions in one, which – let me try to answer first. So Pitbull, super exciting, we don't break down by revenues. But we did say we broke through $2 million of total pay-per-view revenues previously in a press release. So it's worked out extraordinarily well, but really what's worked out extraordinarily well, is the entire flywheel, not only is Pitbull and pay-per-view, he's in our podcasting, he's in our ambassador program, driving subscribers, right. And he's a long-term partner of the company. And I think you're going to see more and more of that. In terms of sponsorship, as you can see by the list of sponsors, almost on a weekly basis, we've been announcing another AAA sponsor from Pepsi to Corona, and you starting to see some of them be repeating customers or with Corona multi-year customers. And yes, I couldn't be more excited about the fact that LiveZone as well as Music lives ON literally has a sponsor almost every single event. This is the first time, we seeing that and the acquisition of PodcastOne and the sales team that we got as part of the acquisition has been a tremendous help. And that we now have an army of salespeople now selling, which is – we've never been able to talk about our team. It's been, we hired our first sales guy last December and then Corona, right? And now all of a sudden you're looking at a sales team that has 15 people. So really, really exciting on that side. Jerry, you want to – Jerry or Dermot, you want to jump in the others?

Well, I'm not sure which – the first question was about guidance. And I think what you've heard there is that we have greatly diversified our revenue streams, and the fact that our ticket sales for pay-per-view and the increase in our sponsorship and advertising, and with the addition to CPS, we are quite confident that we can achieve the guidance that we just gave you.

Yes. And just to give you a little color, a couple of our major pay-per-views including Pitbull, were delayed until October, in November. So Pitbull, Wiz Khalifa, Nelly, Jeremih, a lot of ones we have announced are hitting in this quarter, so really exciting the direction where that's going and really excited about, where we see this quarter.

Hopefully that answered your question.

And our next question comes from David Bain with ROTH Capital. Please go ahead.

Great. Thanks so much. I guess, first to start, pay-per-view revenue, that's trending well ahead of where we had it and I was hoping you could speak to maybe some of the ancillary revenue particularly, subscriber conversion, how that's maybe trended or trending from the pay-per-view events and maybe just the overall direct margins from pay-per-view now? And I would think that those would augment more upon the merchandising acquisition. Is that correct?

Yes. So we don't break it, as you know, David, we don't break those down. What I can tell you is we've sold over 50,000 tickets. So very different than when you come into flywheel on 95 million viewers where I come in for free, and then you've got to convert them, right? So these are coming at the top of the funnel. They're immediately becoming subscribers for free, but they're giving you a credit card. So actually locking and loading them day one, and then it's can you convert them into paid subscribers? And I think you're going to see more and more of that kicking in. As the merchant business kicks in, and we're already doing this, right? We're already giving you a fully immersive experience while you watching an artist, no different going to see Bruce Springsteen in concert and want to buy a hat or a T-Shirt. We give you the ability to chat, message and buy merchandise with virtual or real merchandise. So now we have the ability to actually own those merchant or owned specialty items in conjunction and empowers us, and it gives us the artists other revenue stream in partnership with LiveXLive.

Got it. Okay. And then in the past, we've discussed either an acquisition or your own path, maybe organically where you would acquire a European or global license. Is there any update there?

Yes. I would stay tuned. If you read between the lines, when our former CFO left, there was a big bonus for him, if an acquisition closed of material size. So yes, we're still in very much an acquisition mode. I'm really proud of my team. We did these acquisitions effectively at $4 or better just like the financing was done. So we're doing with very little dilution to our shareholders and I would fully expect the company is laser-focused on expanding globally. And as you could see by our artists that are performing on our stages and the amount of pay-per-view that we're doing the audience is everywhere, it's everything from K-Pop, right. We have buyers of our pay-per-view tickets all over the globe. So really exciting. And yes, the answer is, where laser focused is expanding the operations overseas.

All right, great. And just a comment is great, that you wrote a bifurcate for us, podcasts and pay-per-view and everything, and podcasts was ahead and nice to hear their EBITDA positive. Let others get in on the action. Thank you.

Thanks, David.

Our next question comes from Elliot Alper with D.A. Davidson. Please go ahead.

Great. Thanks. I want to ask about the CPS acquisition, I guess, how's that going to fit into the strategy of the company and how is this going to affect the margin mix and any color on the timeline of profitability of that business? And then secondly, just back to the financial guidance, curious if the change in guidance is including, the contribution of your CPS acquisition. I know that hasn't closed yet and it'll be about a quarter of overlap, but just any color there would be helpful. Thanks.

So the first part of it, again, is in the flywheel, we built this, that you can listen, watch, attend, engage and transact, and the beauty of this is, is on the merge side of it. Starting with the live side, I've already talked about, right, is into the flywheel that you can buy a hat or a T-Shirt, right, a memorabilia from it, but in podcasting, it gets even bigger because a lot of the revenues they come from sponsorship, but they also come from direct marketing, response marketing. So imagine owning those products and owning into the flywheel, the ability to own our own products in conjunction with the talent. So I really energized and it gives us an opportunity to really take our margins way higher. Again, continue to dilute as we built from day one, the commodity side of this business and move towards ownership.

And the other part of your question, it's already profitable. So it would definitely be accretive from an EBITDA AOL standpoint.

Okay, great. And then I guess just following up is that integrated into the fiscal 2021 new guidance? And then also, is there an organic revenue number you could share for the quarter?

So in that, we were not sharing what those numbers are today. What I would say to you is, as Norman articulated, like the podcast business sponsorship and advertising, right. Clearly, it was it almost a haul and we have very, very smartly ran that business to a very successful EBITDA number. So will the acquisition be extremely even this next acquisition, right, see an Slacker very profitable. You now have PodcastOne very profitable and you are going to have the next acquisition very profitable. So we're not breaking down numbers right now. But we're really excited about where the revenue growth is. And as Norm articulated, I think we added something like, 250,000 social media use amongst the podcast and vodcasts we announced. So we fully expect that each of these – each of the divisions of the company will be growing this quarter.

Great. Appreciate it.

I have this strange concept, which probably comes from having funded PodcastOne myself that being at the black is a good thing. And that really hasn't, I think that that's been embraced by everybody at the LiveXLive team. And that's one of the reasons why we like this marriage so much. We're going to grow and we're going to see audience growth and we're going to invest in that growth most certainly, but we always have our eye on the bottom line.

Yes. I think for everyone, just to highlight and finish, because I think we're going to be rushed off. As this company is laser focused on bottom line. We now can look at this business from a perspective where every quarter up until last quarter, we always talked about what our revenues were per event. The company now can be looked at revenues per hour. And so it's really getting exciting that coming into the flywheel with so many different revenue streams come from the same content, right? And we've added so many franchises as part of the acquisition with PodcastOne and the building of Music Lives and Music lives ON. And you guys hopefully you'll have an opportunity to watch our award show, which will be launched December – in the middle of December, we've already had over 1 million, 1.2 million, 1.3 million votes on that already. And if you don't know, Dermot and Garrett English, who is our Head of Production, was Executive Producer of the VMA's, which is still the most profitable piece of MTV have now launched the first ever digital award show. Think of it like the SPs of award shows. And so we're excited about the sponsorship around it. We're excited about the traffic around it. And we're excited about where the rest of this year goes.

Our next question comes from Jon Hickman with Ladenburg. Please go ahead.

I don't know who wants to answer this question, but how much did COVID effect your advertising on the Slacker side and on PodcastOne?

Well, I'll jump in on the PodcastOne side, it certainly had an effect. It's interesting, everybody's talking about how podcasts and audio listening actually went up during COVID and that's very, very true. That's a good thing. More audience to sell, but there were certain categories, particularly sports, which were negatively affected because there weren't any sports, live sports taking place. And of course, without live sports taking place, sports commentary and talk about what's going on in sports. And all of that kind of stuff was very negatively affected and advertisers held back, but we're seeing them come back. Nobody's going to stop advertising but they need to make sure that they get their supply chains back in line and that there are products that are going to deliver advertisers for products that they actually have to sell. We're very encouraged by what we see in terms of returning advertisers. But to say it didn't have an effect on us. When this thing came out of the blue, we would be being disingenuous. Of course it did, but we're pretty good at what we do. And we realize when you're in a digital medium a keyword is being able to pivot, to be able to deal with any kind of a situation, that you wind up in. And I think we've done that pretty successfully.

Yes. And I'll just jump in as well. I think on the LiveXLive side, we benefited from COVID. At the beginning of COVID, we had hundreds of physical events canceled. But because we were the premiere company that was delivering digital experiences, the pivot for us was pretty straightforward. And like Rob had said earlier, we had built franchises in that period. We broadcast weekly basis. And we've seen from tremendous shot in the arm in advertising that we could show that we expect to see things.

So how does it that jive with the comment about programmatic advertising?

Programmatic is just a piece or direct selling of the business that really took off, so whether we built a custom content, custom sponsorships. Programmatic is one type of business, we excel at all forms, but particularly, our direct business really got a shot in the opposite. Because we're content makers at a heart and programmatic can be commodity, but when we put out into the world, particularly when all the live music is going to shut down was the very unique offering and will continue to do.

Okay. And then could you elaborate a little bit on this contractual thing of subscriber?

Sure. So in the course of our relationship, under this contract, we have had some differences of view on the definition of certain of the terms. In reality, we actually have been – this is the second time we've been through it. And the first time we were able to resolve it very favorably, we are in the process of not only dealing with the contractual dispute, but we're in the process of trying to negotiate a longer and worldwide version of this contract. And we believe that somewhere in there, we will come to a resolution on that. We're very confident in our position. We have a great relationship with Tesla. We had hoped to get it done faster, but negotiations take a while as you know. Unfortunately, there are some accounting rules that my former colleagues in the public accounting world tightened up in terms of revenue recognition. So we are following that very conservative conclusion during this dispute that we will not recognize those revenues. But as I said, we’re 100% confident in our position and our relationship with Tesla and we’re looking for a longer and even more profitable relationship with them and believe it will get worked out.

Can you quantify how much cost you this quarter? Looks like it was more than $1 million.

Yes. That’s accurate, it was more than $1 million. You can see it now at 10-Q and the press release.

Okay. So if you get it back, do you have to recognize it as a gain for revenue?

I’m sorry. Say it again.

So if this works out favorably for LiveXLive, in the future do you recognize those loss revenues as a gain or how does that accounting work?

Most likely we’ll recognize it as special revenue.

Okay.

I mean, I’ll have to disclose it because it’ll be a number, but it will show up in revenue.

Okay. Thank you. That’s it for me.

Our next question comes from Barry Sine with Spartan Capital Securities. Please go ahead.

Hey, just to clarify on that last point. The dispute is a portion of Tesla revenue, not the full revenue. And then, my question – right, okay. Then my question is, obviously advertising is key and PodcastOne brought in a huge increase in the sales force. Question regarding integration. How well are the PodcastOne, the new salespeople that you were brought in doing in terms of selling the existing LiveXLive advertising inventory? Are they integrating well?

Let me answer the first part, and then I’m going to hand it to you Dermot. Just to go back to the Tesla number. If you remember the last quarter, right, we took down a $700,000 number for one month, right, because they had paid through May. So you can look at this number is about $2.1 million. So if you took that over a quarter, okay, so think about that in terms of what that could add in revenues going forward. And Dermot, why don’t you jump in on the advertising side?

Yes. A bunch of us on the call have been involved in many acquisitions and mergers over the years. And this to me was amazing because the cost of the advertising inventory on each side of the company is so complimentary. The success was almost instantaneous. We were able to kind of partner on Pitbull under a multiple platform deal out of the gate. Across the board, we have multiple deals gone out, we’re selling together. There is certain relationship with agencies and brands, the PodcastOne has – there’s some relationships that we have and it’s super complimentary, maybe one of the most complimentary sales – merging that I’ve seen. And we’re seeing results and we’re going to continue to see results.

Look, one of the reasons why I did this deal in the first place was because, it created a great opportunity to be in the podcast business and have something that no other podcaster has. It probably comes as a surprise to no one to know that there are bigger companies that are now in the podcasting business, but they’re all primarily from the audio business, whether it’s iHeart Media or in the platform side of the business, companies like Spotify. What we wanted to do and what I think we’re doing successfully at our sales department – our sales departments working together are doing successfully, has had something to offer that nobody else has to offer and get in a premium position in that area. Our salespeople are talking to each other daily, they’re passing information back and forth. It’s also one of the things that’s driving on the podcasting side. We’re going to be doing a lot more things that are music focused. At Westwood One, we were a music focused company. So it’s nice to be back in the music business in a much bigger way. But what you need to keep your sales department excited and on the cutting edge are doing exciting cutting edge things. And that’s exactly what we’re doing, being owned by LiveXLive and having everybody working on all of the assets that we have for the benefit of advertisers and consumers and of course, for artists first.

Okay. Just on that point, the lead time for advertising and subscription sales, I believe is pretty long. So this quarter I would believe does not represent the full potential and kind of the best is yet to come in terms of what the salesforce can do. Correct?

That’s a fair statement.

Thank you.

Our next question comes from Brian Kinstlinger with Alliance Global Partners. Please go ahead.

Great. Thank you. You highlighted 2019 revenue trends per CPS, but that’s quite gated given it predates COVID. Can you give us more recent revenue trends or some kind of information that helps us model a revenue contribution going forward?

Yes. The way I would look at this, we publicly stated that they’re going to do $20 million plus this year. And I would think this very much like PodcastOne. We said, it’s going to be accretive to the balance sheet. We said, it’s going to be accretive to EBITDA. So I’ll be thinking it very, very similarly to the success of the acquisition of PodcastOne and very similar to the success of Slacker and how profitable that is today, that this is going to be accretive in every way for the company immediately.

Great. And then, is there a thought to offering paid subscribers discounts to pay-per-view events, that’s adding more consumers maybe at higher prices to the recurring model?

Absolutely. And you’ll see some of that crossover and you’ll see some of that material relationship, including seeing in podcasting, you may see subscription coming. We’re certainly going to use the inventory at podcast to drive subscribers, right? And Adam Corolla has a very unique basis, Shaquille O’Neil, T.I., right. Many of our podcasters can bring in subscribers as well. And as you see what’s happening in the industry, right, that crossover is coming, which is we’re laser focused. This is a big percentage of our business versus Spotify, who’s paying $350 million for the same amount of revenues for $40 million companies, right. They’re putting it into that flywheel and they’re using it for two things. They’re using it to keep subscribers from leaving, right, as well as to bring in new subscribers. The beauty for us is, it’s very material and the materiality of turning them into subscribers and them staying long-term on the platform is, is again, you diluting the commodity part of the audio business that we all share. So I think you’re going to see our margins continue to get better and better, the best in the industry. And I think you are going to see that flywheel, how these cross over. Seeing Pitbull, which is magical, so that you can drive pay-per-view, right and immediately, – because live streaming is still in the first inning. Podcasting is in the third inning, right, maybe the second inning, right. And what’s happening is those advertisers who have that much confident, you can get a quick sale for podcasting are now buying it to both because they want a piece of all that. And as you saw about Pepsi deal, it couldn’t be any better than to have them pay and be a participant in all of it.

Great. Last question I have, last quarter you guys talked about $1 million in advertising and sponsorship with a legacy business. Is there a like for like number for this quarter?

Jerry or Dermot?

Yes. Well, you have to go back to the first question. I think if you look at the difference between advertising and sponsorship in the first quarter and the second quarter, I don’t have it open in front of me. That difference basically comes – well, you can’t really do it that way.

I mean, you’ve announced a bunch of partnerships. Did you grow up in the $1 million or is it – just trying to get a sense.

Yes. So I would say it this way, there’s growth that resulted from the acquisition. And I think there is growth that came from additional advertising and sponsorship that came around our pay-per-view events and all the live streaming that we’ve done. I think dramatic increase in those.

Just to add to that too. Many of these relationships are not single, so relationships they’re over abundance series of shows like a season to a certain extent. So, the will go over several quarters and many of these relationships.

And just to highlight again, as you look at the next quarter, and obviously I can’t give you too much detail, but we announced Pitbull was going to happen in September. It got pushed to October. We announced Wiz Khalifa and multiple those other ones, they all got pushed to October, November, December. So I think you’re going to see both sponsorship as well as pay-per-view, you’re going to see way more events, just matures. And we’re in the infancy stage of pay-per-view, but it couldn’t be more exciting. And the most important part of pay-per-view is not only just the pay-per-view event is that you’re getting a credit card. So the consumer that’s coming in that superfan that’s coming in, which we’re focused on is coming at the top of the funnel. And I think you’re going to see more and more a higher and higher percentage of those converted to subscription. I think we stated in the last call 6% or 8% converted to subscription.

And Rob, just to add to that. When the flywheel really works, we got pay-per-view, we got a sponsor to work with us on the pay-per-view. We got conversion to subscribers and we got merch sales and all sorts of different bundling opportunities. So when it will really work, like it does with Pitbull and many of the events we’re doing, we hit all our revenue goals. So, just know that advertising is a big part of the pay-per-view opportunity too, because we have such a great exclusive relationship with the artist.

All right, thanks guys.

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

Yes. Just final remarks is I want to thank my team and thank you shareholders for staying with us during this typical time. Live music was completely shut down or tentpole events of Rock in Rio and EDC did not happen this year. None of our live events happen from React. We’re really excited. We mentioned today, that we launched Spring Awakening, Cancun or trophy property in the live business, right? So we normally do 30 to 40 live music events year a month and plus Spring Awakening, which was $15 million, $16 million in revenues. We’re really excited to see the thirst and the energy when COVID is done. And it will be one day, right? Live music is going to come back and my team humbly believes it’s going to be like the Roaring Twenties. We really get to come back and we’re the only company in the world that is positioned today to not only prove that live streaming is the next-generation music video and is driving audio sales. But it also is going to drive ticket sales. And it’s going to be just like sports 30 years ago, there was a fear factor when ESPN came along, that people wouldn’t attend live events, right? What happened? More teams, more players, more money and billions and billions and billions of dollars. And I feel the same way about music. I think that, it’s very sad what’s happening to the community. My team is thoughtfully partnered with Hyundai and Porsche to put live events inside of theaters that were literally going bankrupt. And the sponsors gave real money to help that and we put artists to work. So really proud of what we’re doing and really proud of what we’re building here. And I think when COVID is over, we’re the only company in the world that is truly positioned to do both Rock in Rio, we’ll sell subscription, we will sell digital tickets, EDC, we’ll sell digital tickets and the world will grow with that. And we’re position that we have the entire flywheel from production, right? All the way to sales and everything in between this position with some of the top executives in the world who have built again multi-billion dollar businesses and been able to both build an exit them. So, great team we have, great partnerships we have. We survived this and we’re going to grow bigger and bigger. So I want to thank everyone for spending the time today. And really appreciate, I appreciate your support and look forward to talking with you in next quarter.

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