Good day and welcome to the LiveXLive Media Fourth Quarter and Fiscal 2019 Earnings Conference Call. 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..

Good afternoon, and welcome to LiveXLive Media financial results and business update conference call for the fourth quarter and fiscal year 2019 ended March 31, 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 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 full fiscal year 2019 and future growth of the business. Actual results may differ materially from those discussed in this call for a variety of reasons.

Please refer to our filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements, including those described in the company’s Annual Report on Form 10-K for the year ended March 31, 2018 and subsequent SEC filings.

Importantly, this conference call contains time-sensitive information that is accurate only as of the date of this call, June 13, 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 the Investor Relations section of the website at ir.livexlive.com. And we 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 June 13, 2019 only and except as required by law, we do not undertake any obligation to update or revise this information after the date of this call. Now, let me turn the call over to Rob.

Rob?.

Great, thank you so much. So welcome everyone, Rob Ellin. Thanks for joining the call, I couldn’t be prouder of the remarkable progress that LiveXLive has made in its first full year as a public company.

Our vision was to create a social live music platform and to give global audiences the best seat in the house for major festivals and music content everyday of the year. We have evolved into one of the authentic voices in live music. We delivered record financial performance this year generating $33.7 million in revenues, up over 350% year-over-year.

In Q4 we posted $9.2 million in revenues, up 30% year-over-year. Metrics are growing at a rapid pace with monthly active users have surpassing 1.4 million, in 2019 that number was 1.1 million, as well as through our paid subscribers, which were approximately were 680,000 year end, representing over 50% year-over-year growth.

Additionally, we delivered 51 million live streams across 24 festivals and live events compared to 7 events in 2018.

Our live streams have generated over 400 hours of live content and featured more than 400 of the biggest artists in the world, including iconic performances from Taylor Swift, the Chain Smokers, Katy Perry, Post Malone, Travis Scott, Red Hot Chili Peppers, and many more.

We crossover all genres and music and now include more than 250 pieces of original programming on our network as well.

We continue to enhance our management team and Board, adding valuable members and unique -- with unique capabilities and expertise in original programming, distribution, artists relationships and technologies, as well as deep Wall Street and M&A experience.

Some of these additions include David Schulhof, Chief Development Officer, as well as Tad Ro, Head of Product. David expertise extends from finance to music driven film, television content, music publishing rights management and just recently sold his last company for almost $100 million.

Tad, a Webby Award winning innovator has developed and launched digital products across mobile, web and over the top platforms and connected devices for companies including Verizon, Virgin Mobile, Spin Media, and was a driving force in envisioning our next generation app, which we launched last month.

We also added our largest investor Ramin Arani, as well as Patrick Wachsberger to a Board of Directors last year. Ramin a 26 year veteran of Fidelity previously led the Puritan Fund Fidelity over $27 billion. He was also again our lead investor in our IPO.

Patrick oversaw all aspects of Lionsgate feature film production acquisition and worldwide distribution, as the Chairman of the Motion Picture Group at Lionsgate. During his tenure the stock went from $7.25 to almost $45 a share and the company's feature film slate generated over $10 billion in box office.

Key to our success in evolution in 2019 of securing and developing compelling original content and expanding our distribution and sponsorship. First content, and then original programming. LiveXLive Playbook is to remain independent and partner with the biggest and best live music programmers in the world.

We dramatically expanded our partnership with AJ as well as Live Nation Insomniac, the dance leader -- the thought leader in dance music globally, with over 30 festivals and a 1,000 live music events a unique partnership for LiveXLive.

We successfully launched LiveZone our sports center of music, we increased our traffic by over 75% per day, and has significantly expanded our original programming slate, LiveZone helped bring pop culture together, including artists, athletes, fashion, eSports, press, art and culinary in the center of the biggest hip hop festival Rolling Loud.

LiveZone mixes music, news, commentary, festival updates and artist interviews to provide context to our premier events.

The original festival based content is given a leg up on our offering on authentic voice to music news, and gives fan a guided and cultural experience distinct to each event, enhancing consumer experience with over 300 pieces of original content, including artists interviews, lifestyle segments and original shows and pilots on the LiveXLive platform.

As an artist centric platform, it was critical to bring ambassadors in each genre of music starting with our partnership with the iconic hip hop star, Nas his brand Mass Appeal. Sponsorship, LiveXLive continues to expand distribution around the globe.

Adding to the exclusive partnerships across all Tesla's we are now in 85 other automobiles as well as across almost all major carriers including Verizon, Sprint and T-Mobile.

We've launched apps across Roku, Apple, eBay, Amazon Fire, partnering with YouTube, Facebook, Twitter, Townsquare Media and Dailymotion, as well as we introduced LiveXLive’s global streaming app across 40 million Samsung TVs.

On the sponsorship side, we're just touching the surface of bringing bands, brands and fans together adding two Fortune 500 companies here in Samsung as key sponsor partners. We introduced Kia to deliver a branded experience and with Samsung, we delivered our first 360 VR experience across an entire festival at Rolling Loud.

In short, fiscal 2019 was a year of building the foundation, widening our competitive mode, subscriber -- driving subscriber growth and showing early results in sponsorship revenue. The momentum from 2019 sets us up for significant growth heading into 2020. I'm now going to turn 2020. We came out of the gates flying.

The live music industry is growing, a $50 billion industry. Goldman Sachs estimates that there will be 1.2 billion paying subscribers of music services by 2030, as well as by 2023 the global over the top paid subscribers will also exceed over $1.2 billion.

LiveXLive platform is in the eye of the storm at the intersection of live, streaming, and over the top. The launch of our new app. As promised, we launched early, we officially launched the next generation subscription based social live music platform across audio and video.

We have combined the best of slacker radio with the best pop culture events around the world.

The new platform provides brands, bands and fans one touch access to live events, audio streams, original content, a library of podcasts, video on demand, and the ability to have fully immersive experience through message, chat, by a hat, by a T-shirts, and social sharing.

The new app enhances the audio and video experience through features like multi view perspective of the stage and vertical edge-to-edge video, support of both live streams and video on demand playback, and a music service that most importantly uniquely personalizes for each user.

We now have over 400 curated channels and will stream over 50 live music events this year. Projecting 50 live music events plus exclusive original programming, we're way ahead of schedule of becoming a 24x7/365 music channel. Competition. There is no one else doing what we're doing in any meaningful way or with any scale.

There is a wide open lane for us and we have barely scratched the surface of what we can accomplish. Metrics, the first two months of 2020 LiveXLive came out of the box swinging. We passed almost 720,000 subscribers. We're now getting close to 1.5 million MAUs, live streamed seven events and hit 20 million live streams.

85 artists, 125 hours of content that run rate drastically outpaces our full year 2019 events, and live stream views almost doubling all of our metrics across the board. Management. From 2020, we continue to expand our management and our board in the first quarter, we added Ken Solomon to our Board of Directors.

During his career, he built the nation's largest and furthest reaching digital distribution network with 18 major broadcast groups and covering 93% of U.S. television household. He served as President of Universal Studios Television and has more than 20 years of experience in cable, new media, TV production, distribution, advertising.

He has also pioneered in the licensing and original series across multiple network platforms with Law & Order, SVU, NBC and USA Network and now runs the Tennis Channel. Additionally, we've just added Steve Baltin joined as Editorial Director this quarter.

Steve is central to the development of LiveXLive programming, and as a talent consultant he will be further our original content programming slate significantly. Steve has written about music for publications including Rolling Stone, Forbes, Billboard, and Vice, he also hosted TV series and interviewed hundreds of the biggest artists in the world.

Content and original programming. We again have maintained our independence through 2020. Now partnering with iHeart and SGE. iHeart is the number one audio company with a quarter of a billion monthly listeners and a greater reach than any other media company in the United States.

SGE has created and produced 50 multi-genre lifestyle and music festivals, most exciting is they’re often in partnership of curated by the artist.

This has extended our festival footprint with exclusive live streaming rights to a minimum of 17 iHeart and 11 SGE, including iHeart and SGE event, Wango Tango, iHeart Country, the SGE events of Mad Decent and Block Party, Camp Anarchy featuring world class artists like Taylor Swift, Billie Eilish, Jonas Brothers, Halsey, 5 Seconds to Summer.

We've also launched LiveXLive Presents, our event or exclusive private branded events featuring top music talent, which have included album releases in mini festivals make us a true partner with the artists and the labels. We have featured audios such as Nas, Jollie XEX, Davies, Crombio and Writ [ph].

As mentioned earlier, we launched lives only in 2019, in 2020 we launched live news room and broadcast.

We continue to broaden our line with over 50 host and anchors, the aggregation of the most exclusive pop-culture music events in major cities and the ability to launch channels with insomniac in iHeart and SGE as well as a full slate of original content have created a unique opportunity for sponsors and advertisers to reach millennials.

Our next big initiative will be the launch LiveXLive’s 30 on 30, a slated documentaries to give bands an up close and personal look at their favorite artists. 2020 distribution and sponsorship, advancing strategic partnerships and sponsorships remains a key priority of the company. Right out of the gate we partner with Tencent.

Video to live stream EDC Las Vegas throughout China. Tencent has more than 89 million subscribers and nearly 900 million monthly active users, which significantly expanded our global reach to the leading video platform in China and represents a massive long-term opportunity.

Another exciting venture for the company is our recent cross promotion with Taylor Swift on our own Facebook page. This alone drove 250,000 viewers and 24,000 consecutive views. There is a larger and grandiose opportunity to continue to do that with artists across their own social media.

Continuing on distribution and partners, we have now partnered with Sinclair, their assets over at STIRR the largest owner of local television stations.

So we now have the ability to distribute across local radio, as well as local television and as you watch with Sinclair they just bought the YES Network and Dodges [ph] network as well as the all of the Fox local stations. Sponsorship, we’re feeling the momentum, heading in the right direction and seeing over 500% increase in RFPs.

Providing confidence to expand our sales team, we went from one sales men in the third quarter of last year, we now have four and we shortly will have 10 plus sales people by year-end.

Our key brand sponsorship expanded with the addition of [indiscernible] hitting over 12 million live stream at EDC, as well as [indiscernible] debuted officially at EDC Mexico where we exceeded 3 million live streams.

Our neutral and independent position in the industry has allowed us to partner with labels, promoters, publishers, managers and most importantly the biggest artists in the world creating an incremental revenue stream across the entire music industry.

In conclusion, music is the universal language bands, brands and fans join together to unify around live music. We have aggregated very similar to ESPN 30 years ago, seventh [ph] largest sporting events the biggest music events in the world. We now are partners with the two largest promoters of music, Live Nation and AEG.

We have the digital rights the largest festival in Switzerland, Brazil, Budapest, we have the largest dance music festivals, we have the largest hip hop festivals and we continue to grow that and partner with all the remaining thought leaders in live music.

We reiterate our guidance, the five year guidance that we believe -- humbly believe we will hit 10 million paying subscribers, a very small percentage of that one point paying subscribers, a very small percentage of that 1.2 billion total subscribers. We’ll have a 24x7/365 live music channel around the globe.

In 2020, our guidance will be between $50 million and $65 million in revenues. We expect to exceed over 1 million paying subscribers, 2 million MAUs. We expect to stream 600 to 800 of the biggest artists in the world. We expect to stream 800 plus hours of live programming.

We expect to -- based on the trajectory today of 20 million for the first two months to hit over 100 million live streams. Imagine the flywheel explodes with just a small conversion of 1% of that viewership converting to subscription and imagine a CPA, CPM coming from the sponsors and advertisers across that 100 million plus viewers.

With that, I'm going to hand it off to Mike Z, our CFO, and I'll join back in at the end for questions.

Mike?.

Great, thank you, Rob. We ended our fiscal 2019 with strong results. The $33.7 million in revenue, adjusted operating loss of $12.6 million and record KPIs in fiscal 2019, including over 50% net paid subscriber growth year-over-year, and live streaming 24 events over 50 million viewers during the year.

Moreover, we had another record quarter in Q4 2019, including Q4 revenue of $9.2 million, adjusted operating loss of $1.9 million and contribution margins of $2.2 million. Given this as our fiscal 2019 earnings call.

The first portion of my prepared remarks will provide commentary on our fiscal 2019 performance, with the latter part on Q4 2019 financial results as compared to Q4 2018. More specifically on fiscal 2019.

Fiscal 2019, consolidated revenue was $33.7 million, up over 350% year-over-year from $7.2 million fiscal in 2018 due in part to the timing of our acquisition of Slacker and 52% growth in our paid subscribers year-over-year, and to a lesser extent from growth in our advertising and licensing services.

As a reminder, Q4 2018 was the first quarter with Slacker included in our operations. Ending fiscal 2019 paid subscribers grew to 680,000 or by a net 233,000 from ending paid subscribers in fiscal 2018. We ended fiscal 2019 with 90% of our revenue from subscription and 10% from advertising and licensing.

Fiscal 2019 contribution margin was $2.5 million as compared to $0.5 million in fiscal 2018. The year-over-year improvement of $2 million was driven by improve margins from our subscription services of approximately 32.5% in fiscal 2019, as compared to approximately 25.8% in fiscal 2018.

The year-over-year improvement in subscription margins was largely driven by the growth and shift in our customer base towards our plus subscription offering, which is our most profitable. Offsetting this was spending of approximately $8.3 million to live stream and produced 24 events in fiscal 2019 at an average of $345,000 per event.

By comparison, we spent a total of $1.3 million in fiscal 2018 to produce five events at an average cost of $260,000 per event. The year-over-year increase in our average cost per event was largely driven by two of our more elaborate festivals stream in fiscal 2019, EDC Vegas and Rolling Loud Los Angeles.

Excluding the cost to produce these events in fiscal 2018, the average cost per festival in fiscal 2018 would have been closer to fiscal 2018. Fiscal 2019 adjusted operating loss was $12.6 million versus $6.1 million in fiscal 2018.

The increase year-over-year was driven in parts from the growth in our music operations, which produced 19 more live events than fiscal 2019 versus 2018, coupled with the expansion of our team and growth initiatives extended during the year.

Offsetting these were year-over-year improved contribution margins, and higher capitalized and truly development software costs. Now I would like to discuss the financial performance in Q4 fiscal 2019 versus Q4 of fiscal 2018 in more details.

Q4 2019 revenue was $9.2 million, up 30% year-over-year from $7.1 million in Q4 2018 due to year-over-year growth in our paid subscribers. I’ll get deeper into revenue drivers later in my prepared remarks. Q4 2019 contribution margin was $2.2 million as compared to $1.6 million in Q4 2018.

The year-over-year improvement of $0.6 million or 38% was driven by improved margins across our subscription business, offset with higher overall live stream events produced in Q4 of 2019 versus Q4 of 2018.

Q4 adjusted operation loss was $1.9 million versus $2.4 million in the Q4 of 2018, $0.5 million improvement was driven by the previously discussed margin improvement in music operations, which was slightly offset by increased operating expenses largely driven by the expansion of our team and growth initiatives extended during the quarter.

During Q4 2019 we also capitalized approximately $0.9 million of internally developed software cost. Now I’d like to discuss the Q4 financial performance across our music operations and corporate divisions.

Turning to music operations, our music operations consist of our audio and internet radio services along with our live stream operations including sales and marketing and product development and to a lesser extent certain general and administrative costs.

As previously discussed our Q4 revenue of $9.2 million was up 30% year-over-year from Q4 of 2018 largely due to growth across our paid subscribers year-over-year. During Q4 our music operations generated $8.4 million in subscription revenue as compared to $6.5 million in Q4 of 2018.

Driving this improvement was a 52% increase in ending net paid subscribers across our music platform. We ended Q4 with 680,000 paid subscribers, up 233,000 from ending Q4 of 2018 of approximately 447,000 paid subscribers.

The annual 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.

To further grow our paid subscriber base, we continue to invest in online marketing campaigns and more recently launched our unified music application, which now combines our live and audio music services under one application.

With over 100 million live streams projected for fiscal 2020 we now have the ability to engage our live stream viewers and convert them into paid subscribers. Through today ending paid subscribers have increased to 720,000. Our Q4 contribution margin was $2.2 million versus $1.6 million in Q4 of 2018.

The improvement of $0.6 million year-over-year was driven by improved margins from the growth and mix of our paid subscription business, partially offset by five live stream events produced in Q4 of 2019 versus zero in Q4 of 2018.

As a percentage of revenue contribution margins across our subscription services was 37% in Q4 of 2019, a significant improvement over 26.5% in Q4 of 2018.

This was driven by a shift in customer mix with a larger percentage of net new paid subscribers coming from B2B and radio plus offerings, which are generally more profitable versus other subscription services.

Coupled with a one-time benefit and an accounting adjustment recorded in the period, excluded the accounting adjustment Q4 subscription margins would have been closer to 33% or an increase of 6.54 percentage points from Q4 of 2018. Offsetting this was $1.3 million of production cost in Q4 to produce five live events versus zero in Q4 of 2018.

During Q4 our average cost to produce a live events was approximately $268,000 per event. Q4 music operations adjusted operating loss was $1.5 million as compared to $1.2 million in Q4 of 2018.

The year-over-year increase of $0.3 million is largely driven by higher operating expenses to support the various growth initiatives and new initiatives and events in Q4 of 2019 versus Q4 of 2018, offset by previously discussed improvements in music operations contribution margin in Q4 versus Q4 of 2018.

Turning to corporate, our corporate division principally consist of general administrative functions such as executive, finance, legal and other areas to support the entire company, including any public company initiatives and supporting functions. Q4 corporate adjusted operating loss was $0.4 million as compared to $1.2 million in Q4 of 2018.

The decrease was largely due to a higher number of professional fees and consultants paid through stock-based compensation arrangements versus cash. Now, I would like to discuss the trends in our operating expenses.

Excluding non-cash stock-based compensation, amortization expense, depreciation and certain non-recurring operating expenses of $6.6 million in Q4 of 2019 and $4.8 million in Q4 of 2018. Q4 of 2019 and Q4 of 2018 operating expenses were flat at $4 million.

Note that our non-cash stock-based compensation, amortization expense, depreciation and certain non-recurring operating expenses increased $1.8 million year-over-year. This was largely driven by higher stock-based compensation, largely associated with stock issued to our growing employee base.

Turning to our balance sheet, we ended Q4 2019 with cash of $13.7 million, up from ending cash of $10.3 million at Q4 of 2018. Year-over-year increase was largely driven by net cash proceeds from financing of $8.3 million, offset by net cash outflows from operations of $5.8 million and investing activities of $2.5 million year-over-year.

The year-to-date net cash usage from operations was largely driven by our adjusted operating loss, offset by net cash savings in our working capital, driven principally by active management of our payables over fiscal 2019. Now, I would like to update you on a few additional items.

As of March 31, 2019, we had approximately $167,000 warrants outstanding, and approximately $2.9 million of potential common stock underlying our secured debentures and unsecured convertible notes. We ended the quarter with approximately 52.3 million common shares outstanding.

In March 2019, we extended the maturity of approximately $4.8 million in non-secured convertible notes due May 2021. As of today, we have a total $12.5 million approximately in secured convertible debentures outstanding. Turning to guidance. for full year 2020, we are guiding as follows.

Revenue of $50 million to $65 million, adjusted operating loss of $10 million to $15 million, CapEx range from $3 million to $5 million. We expect to live stream over 50 live music festivals and events in fiscal 2020.

Lastly, I would like to point out that fiscal 2019 was the first year LiveXLive was subject to full internal controls Sarbanes Oxley implementation and compliance, including external auditor partnered station under our controls. Moreover, we are reporting our annual results 15 days earlier than prior year.

These factors when combined with a limited finance team and a new external audit firm will result in a delay in filing our March 31, 2019 10-K, which is due this Friday.

We fully expect to file our 10-K within the prescribed 15-day extension period, if not sooner, and do not expect any material differences from our Q4 2019 financial results furnished today. That concludes my prepared remarks. We'd now like to open the line for Q&A..

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

Great. Thanks, guys. Thanks for taking the question. So I wanted to ask a few if possible. One on subscribers and we look at the additions this quarter, and the current run rate and where you are in the 720,000 subs as of today.

Can you just talk about whether that's the right run rate going forward in terms of subscribers just looking for just additional sort of color on the subscriber run rate? And then as it relates to subscribers on the partnerships, Rob you talked about, the partnership with Tesla, the 85 auto OEM mobile providers.

And Mike, I think you talked about the distribution across those. But can you just help us look for perhaps the contribution, I'm looking for just a breakout of contribution between your partners, and then also just, your own and operated or primary. I think that would be helpful just to give some color on subscribers.

And then maybe Mike on guidance the last question, just talk about maybe where you're most surprised in the fourth quarter, given where numbers came out understanding the subscription issues. And then also on 2020, with revenue $50 million to $65 million is relatively wide range.

Can you just talked about maybe some of the assumptions to get you to the higher end, and also the lower end of guidance that would be helpful? Thanks, guys. much appreciate it. Hopefully you got all that. .

Sure. Thanks, Ron. Let me take your first question. So subs in terms of run rate. I mean, listen, we're at the early stages, we just launched our brand new application. The application now combines live over the legacy audio services.

So now we have the ability to engage customers, and try to convert them, whereas historically, we were pushing impressions from one application over to the other. So as far as run rate, our expectation is you're going to see that paid subscriber base start to accelerate more so in probably the latter part of Q2, and in the back half of the year.

But during the early part, we're still in the early phases, right, of getting branding and et cetera out on that. As far as the breakdown in terms of subscribers, B2B versus consumer, we don't provide a whole lot of detail in terms of the base.

But one thing that I have mentioned is where we're growing is in the most profitable area of subscription, which is our plus offering. So today, we offer freemium, we offer radio plus, and we offer a premium subscription, and the most profitable of which for us, is the one right in the middle.

And that's what we're continuing to focus on and continuing to grow. And our expectation is over the course of the next 12 to 24 months, we're going to announce more strategic partnerships with third parties to continue to grow right in that sweet spot.

On the guidance side, you had mentioned the low and the high end, and then maybe any surprises with respect to Q4. I mean, I think we've been pretty transparent in terms of -- we're very excited about the platform we're building. And we're still in the nascent phases in terms of monetizing that platform, including building our own sales team.

I mean, as of today, we've got a handful at the beginning of -- at the end of Q3, we had two sales people. So, again, expectations are the advertising and the licensing is going to grow. When is that going to happen? Rob will tell you, he knows it's going to happen hopefully soon, but I wouldn't call that a surprise.

I think it's just taking a little bit longer than what we had anticipated. As far as the Delta from the low end to the high end, it's really on -- I mean, we have a couple of unknowns. One is, how well are we going to be able to monetize the live users in terms of converting into paid subscribers.

As Rob mentioned, if we can convert 1% of these of the $100 million plus that come over to our platform, then it's a home run. We're going to be on the high end side. If the percentage is somewhat smaller, we're going to be on the lower end. On top of that, the timing of win, the flywheel takes off as far as subscribers or as far as advertising.

I think you'll see the early part, being somewhat consistent with the back half of our year. And that’s really starting to take off as we get into the second half of this year..

Got it, super helpful. Go ahead, Rob..

Ron, let me just jump in for a second in that, again, just so you’ll understand. As the new app is now been launched, all of this traffic is now going into the funnel, which is why you’re seeing our MAUs climb so fast. They’re climbing almost 70,000 a month. And as you know, we took Slacker from losing over $20 million a year.

Now to being very profitable. As we now put Slacker and LiveXLive together into one platform that entire 100 million plus listeners watchers that come through it now have the opportunity to become subscribers of LiveXLive. Whereas previously you would have had to convince them by putting an advertisement on LiveXLive to go to Slacker.

So it's a real exciting and again, you don't need a very big percentage at 1%. These numbers could be easily at the high end of that. But we wanted to be conservative of prudent coming out of it, as we see the beginning stages of the new launch. .

That's great. And I think that that's super helpful. And Rob, I've got ask just on the music rights, you talked about the 400 hours of live content. Clearly 50 plus events, large festival this year. Any update on adding the -- being able to watch these events, maybe after they're completed. And obviously LiveZone is adding to the content.

I just wanted to ask about the content, and I'll get back in the queue. Thanks, guys..

Sure. I mean, first part of that, if you are on a platform, you'll see a tremendous amount of VOD more and more would be coming on. Right. But the overall, not Universal Music, the Universal deal. As you know, Jerry and Mike are deep in the trenches of negotiating that now.

And we hope to have that completed, as we said before by the end of the second quarter. .

Thank you. .

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

Hi, good morning. Thanks so much. Can you talk about the strategy in signing of non-Tesla plus offering customers.

How are you communicating with live viewers? You mentioned that and when someone's streaming an event, how does the viewer know about the Slacker product? For example, are there up or Slacker ads on the stage or will there be LiveZone discussing that product?.

Yes. So Brian, just to take a step back, there is no Slacker anymore, right? It's all LiveXLive, we've aggregated and taken the best of Slacker to combine it with LiveXlive so that for the first time ever, you have a next generation subscription that offers you all the audio you can need plus the best pop culture events in the world live.

So we do -- our strategy is across the entire platform everyone from our host to our anchors to our partners, as an example, iHeart is marketing through their billboards as well as their 250 million plus listeners to come watch on LiveXLive.

So we've got that great opportunity to leverage and arbitrage our partners to help us to really build that mass audience. And then, number one, most important is the artists themselves.

Right? We talked a little bit about Taylor Swift, Taylor Swift, across Facebook first time done, we cross promoted and put the live stream across our Facebook page, over 250 million -- over 250,000 listeners in under 30 minutes. As well as 24,000 consecutive viewers. Everybody across the board is super excited to see that.

And you can only imagine what those numbers could be a Facebook opens up the API on Instagram, and allows these artists with 50 million and 100 million followers to live stream across them. And then the artists themselves just hitting their social media is the biggest way we drive traffic.

They're hitting their social media and telling their fans and they're super fans come watch on our network..

Right.

But on the audio side, are they pitching the audio side and is LiveZone talking about the audio side?.

Sure, sure. All of that, there is no audio versus video anymore. It's now one app, right? The combined app and platform gives you the ability to have both audio and video. So we utilize our hosts and our anchors, right in our correspondence and across both audio and video to do that.

We integrate, right because we own all digital rights to these events, that we have both audio and video driving that audience and driving them to subscription.

And you're starting to see those numbers, as I’ve just said to -- as I was just articulating you’re starting to see MAUs really climb to our free subscribers are now just about equal to our paid subscribers. And that's going to start to surpass that number dramatically shortly, as we're growing those about 70,000-75,000 a month.

And that's because this traffic is now all that's being driven into the funnel to the overall platform. .

Okay.

And the advertising side, do you guys have any information that's been discussed with you and why some of the RFPs didn't materializing the revenue? Why were brands reluctant? And what do you think the trigger is in converting the advertisers? Is it just simply more viewers more eyeballs? What's being communicated if anything?.

Yes, I think this is -- candidly, this is the beginning of the beginning of revolution. You got to think of this like ESPN 30 years ago to dominoes effect.

As more and more sponsors come in you're watching from a wide perspective, the numbers going through the roof right, Live Nation stock is up to $15 billion, it’s not happened by accident because ticket sales are climbing right as well as sponsorships climbing, think of it like ESPN, think of it as sports 30 years ago.

First, the sponsors are going to go into live events and as they continue to grow their numbers, we're already driving 35 times the audience. The enhancement of that to offer the consumer, offer the brands rather than having 100,000 people watch, to have 3.5 million people watch is very compelling.

So we're seeing great times there, our RFPs are up over 500%, I can’t tell you that any one of them was a shocker turning -- agreeing or not agreeing. It was exciting to land here in Samsung and have two Fortune 100 companies as partners. It's great to see those [indiscernible].

So we're crossing over multiple different genres of sponsors and the mix of the RFPs really crossover just about everything. And it's very similar sports was 30 years ago..

Great. Last question I have, in non-Tesla vehicles can you quantify the impact on subscribers for example more sale on the paid subscribers, is it a model where you get three free months and then it turns into potential opportunities to be a paid subscriber or can they have a free service on the audio side with another vehicle as well..

Yes, I’m going to hand this to Mike to give the response on it, but there is nothing like Tesla, it’s a very, very unique partnership to have a partnership that you're literally paid directly from Tesla and it’s for the life of the car. But Mike why don’t you take over and give Brian what you got on that..

I mean, Brian, when you think about Tesla our relationship is with Tesla, and so Tesla has a white label solution that they are passing off to their drivers. Whereas with mostly other auto makers they maybe on Apple car play or as an option, but the consumer has to opt in versus the actual auto manufacture.

So for us we're agnostic in terms of where that consumer is coming from, we just know it’s a consumer that’s engaging across our platform..

The exciting part of that, Brian, is really the fact that when Tesla chose us right, it really just give you the opportunity that many other car companies going to give you an opportunity to be one of the options.

Hopefully in the very near future, we have a real initiative around B2B and opportunities that are like Tesla looking at the retail market, from Coscos [ph] to Wall-Marts, to targets, to loyalty programs.

We think there are some really unique spot that as from an audio standpoint, our audio, let alone now adding the best live music events, we have a huge advantage in that, we are one of the only independent that are left out there.

So we have an opportunity that we could really be able to pick up some other partnerships similar to Tesla in other industries, as well. And then as mostly from my background all of my businesses are mobile centric, the cycle is changing.

And as that cycle changes, we will see more and more carriers looking for either a white label solution or other partners that they want to be very careful not to continue to allow Apple and the Android to collect all of their data and not have their data on their own.

And you’re seeing just about every carrier around the globe starting to go back in and own their own content. So it could be a perfect storm for us with the carriers as well globally..

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

Hey, guys. Good morning. So just a couple of questions, Mike, could you help us for modeling purposes with what you think the stock-based compensation might look like for 2020? Is that going to mitigate the expense growth like it did last year..

Yes, I would expect something similar in terms of stock-based compensation year-over-year. Most of our options or RSUs are employees driven. They typically have between two to four years of vesting. Really the past fiscal year was the first quarter of that vest. So my expectation is you’d see something pretty consistent year-over-year..

The growth or the -- could we just model that….

Are you talking about the growth from this year versus last year, are you talking about guidance for next year versus this fiscal year?.

Yes, I'm talking about guidance for this year. Like if we model -- if we kind of took Q4 and….

Yes. So, again, when you're modeling this coming fiscal year, it's going to look something consistent as the prior year..

You mean growth year-over-year?.

Correct. Well, no, no not that growth. If you take the Q4 exit of stock-based compensation and just look at the quarterly trends. It'll be build....

Okay. Got that. Then could you go into a little bit like, one of your expense items, it's growing probably the quickest is your product development. Is that like, LiveZone, what's going into that? The convert of the app or….

Exactly. So there's a number of things, so over the past 12 months, our product development team has launched new applications across Android and Apple, as well as Roku, Amazon TV and Apple TV.

On top of that, we've done the whole migration from launching our live platform, right? It's sort of the beginning of fiscal 2019 and migrating that into the legacy Slacker product. So a lot of that development and time effort has been extended on that..

Okay. And then, I just have kind of two questions about some of the metrics that Rob mentioned. One is, he said traffic on LiveZone is going up 75% per day..

Yes. .

Is that -- did I get that right?.

Yes, so Jon, what I mean by that is during the time that we've had LiveZone, instead of having 1 million viewers, we have 1.75 million viewers, so just to clarify that. So as we roll this out more, is a real confidence level that that will increase the traffic numbers overall dramatically..

Okay.

And then talk a little bit more about this -- you say your RFPs for advertising opportunities, I guess are up 500% from like, when -- what's the starting point of that, I guess?.

Yes, so that really is sort of ending Q3 to -- or beginning of Q3 versus ending Q4..

Okay.

So those six months, kind of?.

Yes..

Okay. And then one last question, when you stream Taylor Swift on the Facebook page and got those 275,000 views.

Was there a bug or anything that said brought to you by LiveXLive or visit our app? Or how were you able to promote yourself there?.

Yes. So all got our LiveXLive branding..

So people saw that when they were watching Taylor?.

Correct..

Okay, thank you..

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

Hi, good morning. It might be a little early to comment on this, but since you launched your Live app, LiveXLive app. What you saw in terms of conversion rates.

Does it support rates in the 0.5% to 1% type of from free to paid or is there anything you can say to that? And then, secondly, what's your thoughts of the churn that you see on your subscriber base outside of Tesla, which doesn't have it? Thank you. .

Yes. So let Mike take the second half, the first half, it's too early to judge we haven't spent any money marketing yet to really get the marketing campaign out. It's just starting literally this week.

But what I could tell you as an example is when BTS did their iHeart performance on our network, we picked up 15,000 downloads of the app, that could have never happened. When they had to go over from LiveXLive to Slacker to make that decision. So it's pretty exciting and pretty compelling what these numbers could look like.

Mike, you want to answer the second part?.

Yes. Hey, Allen. As far as churn, I mean listen we historically haven't talked about our churn for a variety of reasons the largest reason is healthy portion of our revenues 41% in the first -- in the 12 months of fiscal 2019 of our revenue came from Tesla. Now that churn really skews on the overall subscriber base.

We’re sub-5% in terms of churn overall. And we look across our products across sort of non-B2B, our churn that’s actually very competitive. But we haven’t given up a lot of guidance, but hopefully that may help you..

Sure.

And Tesla was what percent of the sales in the fourth quarter?.

In the fourth quarter we don’t give that, but for the year-to-date it was 41%. .

Okay.

And then when you provided guidance on CapEx of $3 million to $5 million does that include capitalized software or is that just CapEx?.

Yes that includes capitalized software..

Okay.

And how many festival events do you plan to stream in the next quarter?.

We haven’t broken it down, Allen. We haven’t broken it down by quarter what we said we’re going to do 50 really exciting that we’ve done already seven in the first two months, right. So it’s pretty indicative we’re going to hit that 50 plus.

And then the beauty which have now with the partnerships with Live Nation and Insomniac AG and now adding SGE and iHeart is we really -- we have the ability to do up to a thousand events, right. So we’re going to very cautiously move this just like the NFL Networks did. We’re going to move from last year 24, we expect to do 50 plus this year.

But the future is so bright as to how many we can do and that all of our partners are growing and it’s just a great time to have these exclusive partners..

How do you think about -- this is my last question, your marketing spend in fiscal 2020 compared to 2019 and maybe talk about how some of your partners can kind of subsidize that for you?.

Sure, sure. So -- and I don’t really use the word subsidize it’s a great partnership. So last year we spend $1.5 million total in marketing, which is nothing for a subscription business. The exciting part of this business is; A, we’re getting closer and closer with the artist, we have a bigger audience relationship team, right.

Those partnerships with Nas and you’re going to see more of those ambassadors in each genre of music coming as part of the LiveXLive platform. More and more artists are streaming, the fans and the artists are demanding it, so it gets exciting it used to be about 50% stream it’s now probably 80%.

So the more they hit the social media they’re going to drive a lot of traffic. Then iHeart is kind of the perfect storm having them as a partner and that they have access to their 250 million plus listeners that they are driving those consumers to watch on LiveXLive. And that’s a fabulous -- it’s been a couple of items to put some numbers on it.

It’s millions and millions and millions of dollars of marketing to drive those audio listeners to LiveXLive. So really exciting partnership in that. I also think there are better opportunities coming to be able to integrate with the ticket sales and be able to potentially add subscription to those ticket sales.

So there’s a lot of stuff that we can do with our partners as our relationship get stronger and stronger and the more traffic we drive, we’re more excited the promoters as well as the artist are about what our platform can do for them as well. .

Thank you. .

The next question comes from Kevin Dede of H.C. Wainwright. Please go ahead..

Good morning, guys. Mike, you left me with the impression that you’re not going to be spending too much more in development. I was just wondering if you could tie that to other features and functionality that you intend to add to the after the course of the year and next.

Talked a little bit about it, but I was just wondering if you could give us a little bit more of what you think you’ll do?.

Kevin, let me jump in on the features and then I’ll hand it to Mike in terms of capital side of it. From a features side this is really an MVP app it’s beautiful, it’s was just chosen as top 10 on Android, I expect the same kind of accolades from Apple. So really exciting and the reaction has been pretty spectacular.

The next level of this that we will be adding into this will be our social features. And you're starting to see some of those as you watch our event, you'd be able to see message boards and chats.

But you still going to be able to buy merchandise and buy ticketing, flight tickets to these events and really integrating giving the consumer really the opportunity to really participate, as close to the live event as possible.

And then if for any of you that watched what happened with Fortnite just think of Fortnite putting the live stream of marshmallow into Fortnite with the content we have, we're going to stream 800 plus of the biggest artists in the world. You can have an opportunity to be able to really look at monetization from that angle as well.

Mike do you want to talk about CapEx?.

Yes, I think it's more on product development, correct?.

Correct. .

Yes. So we're going to be spending a little bit more year-over-year in terms of product development. Rob, mentioned some features. But this is going to continue to rollout with more great features, like ticketing, merchandising, social applications. This is a constantly evolving process. So, yes, we're going to continue to spend.

And as we grow and offer more rich feature set, we're going to continue to spend dollars on product development..

So what's the takeaway then, Mike? Is that that what was it roughly $8 million gap? Is that something that you'd expect to see next year?.

I expect to see it a little bit higher..

Okay,.

On a net basis. But remember, it's a little bit circular to the extent that I'm creating more functionality across my platform. There's also an expectation that I'll be capitalizing more. So it’s not going open grow like crazy. It's a little bit circular, but from a cash perspective. Yes, my expectation is that's going to continue to grow.

And remember, we're going to be producing more and more events. So, as we do that, and we get better with that, in terms of the technical stuff we will be doing around the events, in LiveZone et cetera that is going to be helpful..

All right, that was my next question. So it seems like you rolled to the fourth quarter spending roughly $270,000 per event. But that seemed to be a little bit higher than the average for the full year. So could you just talk to, I guess, how those expenses have increased in partnerships and adding LiveZone..

Yes, so let's just -- so the average for the year was about $350,000.And Q4 was a little under $270,000. So our average in Q4 was much less than -- and as I explained in my prepared remarks that was driven by -- we've got two festivals in fiscal 2019 that is some more elaborate, which is EDC I guess which is our largest festival that we produce.

And then Rolling Loud in Los Angeles, which we did in Q3 of fiscal 2019. Where we launch LiveZone and a bunch of other things, and we extended it a few more dollars versus the average. Going forward, though we expect that average to continue to decline. Today we're spending roughly about $20,000 per hour, maybe that's the best way to think about it.

We expect that to go somewhere in the neighborhood of about $15,000 per hour across those events. So maybe 5% reduction there..

And just to give you an idea on EDC so you understand because that's really where the cost goes up. EDC has 240 artists, it's more than double, in most cases triple the quadruple any other festival. They also have nine stages, just a massive event with 156,000 people. So the cost of that one is really where that cost goes up dramatically.

Our overall cost structure is going down. As Mike just articulated, you're going to see this go from $20,000 an hour for triple A content down to somewhere between $14,000 and $15,000 this year..

But could you offer a little background on that though, Rob? I mean, why the dramatic drop?.

It's for the lot of reasons. Number one is, the more events that we're doing. We have economies of scale to be able to negotiate with the truck companies, the camera companies. We’ve bring the host in-house versus paying them on one-off events, we’re going to pay and win more. We bring the team on to staff, as opposed to being freelance.

And we were just more efficient. And then because of the structure and the partnerships included in the number that Mike's giving you right includes everything from sponsorship guy from advertising, I'm sorry -- our marketing dollars to production.

So all those are included in it, whereas, again with iHeart and with the artists doing more of it, we're getting a lot of that advertising is going to come from our partners as well..

Okay. Last question just sort of conceptual. You seem -- I mean, you like to make comparisons to sports and the video and in the video world, there are so many more brands delivering over the top right. On top of Hulu, Netflix, Amazon, et cetera, you see new ones coming out all the time, HBO, Paramount.

So I just like to understand where your confidence comes from given this huge surge in over the top video providers that you'll be the singular exclusive music video provider?.

Well, I think right off the top is that we're live. This is original programming, right? So, the fact that we're live, live and live separates us from everyone. And there really isn't another music platform that exists.

So, my humble opinion this is and you’re starting to see it with our partnership with Sinclair and you saw it with Tencent and our partnerships with MTV International previously, right, is that any -- what happened is the world de-bundle and now you're watching it re-bundle again, right.

As it re-bundles, a humble opinion of our team is, that all of these platforms are going to need a music channel 38% of every video that's watched in the internet is music, it’s hard to imagine that they're not going to use a music channel as part of it. So we don't think we're going to be a lone ranger here.

We're big fans of what's happening in the over the top space. But I do believe that this is going to be similar to cable and satellite, right when they first came along. There were two avenues you could spread your tentacles with your content. Today, there's 100.

Soon, they're going to be squeezed back down to somewhere between 10 and 20 of them, Right? And you're going to see them all aggregate and consolidate together. And just we believe that all those platforms you are going to have a music channel on them.

And if I won't be just one there'll be multiple music channels, but there'll be no one that has the authenticity that we have. That is the authentic voice in live music and is able to deliver live sports, live events and live is critical right now to where the world is going in terms of traffic and audience..

Okay, Rob. Thanks, Mike. Thanks for taking my questions..

This concludes our question-and-answer session. I would like to turn the conference back over to Robert Ellin, Chief Executive Officer for any closing remarks..

Excellent. So I just want to thank everyone for great questions. Again, just to highlight the excitement of where we're going. We now have the ability to stream up to 1,000 music events. We're going to be cautious and smart about it. And continue to grow a steady pace, but not get over our key tips here.

But it's really exciting that if we can just take a small percentage of the number of artists that are performing on our platform. The flywheel starts with an hinges [ph] the number of piece of real estate, those pop culture events.

The number of artists have performed on our stage, that traffic that goes into the funnel, some small percentage is going to convert to subscribers. Some small percentage is going to buy merchandise, is going to buy tickets.

And sponsors are going to pay some fair price between $25 and $100 CPM or higher down the line is coming, right? We feel the momentum building. And then the finale of this is, is that in the very near future. This library content will be the only ones in the world that has it.

So I think there's going to be enormous value in having the best pop culture events, both the pictures, getting images of this as well as the live video of it, as well as all of the original programming that we’re creating.

And as you can see by the team that's joining, it's a very sophisticated team that has built some of the biggest cable networks, some of the biggest media companies, some of the biggest music companies and there's just a real passion around what we're building. And hopefully that’s going to spread the street.

As most of you know, last quarter, I bought a lot of stock at the end of the quarter at much higher prices. So this is an exciting time to be looking at where our company is at and where the growth is. It’s not for the fainted heart, but there is an absolute opportunity to moon shot here.

And you got a world class management team really digging in to make this work. Thank you everyone. I appreciate it and we look forward to the individual calls..

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