Good day. And welcome to the LiveXLive Media Third Quarter 2020 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Emily Greenstein, Investor Relations. Please go ahead. .

Thank you. Good morning, and welcome to LiveXLive Media's business update and financial results conference call for the company's third quarter ended December 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 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 our filings with the SEC for information about factors, which could cause our actual results to differ materially from these forward-looking statements, including those described in the company's annual report on Form 10-K for the year ended March 31, 2019, the company's quarterly report on Form 10-Q for the quarter ended December 31, 2019, 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 our Investor Relations website at ir.livexlive.com. And we encourage you to periodically visit the company's IR website for important content..

The following discussion, including responses to your questions, contains time-sensitive information and reflects management's view as of the date of this call, February 7, 2020, and except as required by law, we do not undertake any obligation to update or revise this information after the date of this call..

I'd like to highlight to investors that the call is being recorded. We are making it available to investors and the media via webcast, and a replay will be available on our website in the Investor Relations section shortly following the conclusion of the call..

Additionally, it is the property of the company and any redistribution, retransmission or rebroadcast of the call in any form without the company's expressed written consent is strictly prohibited..

Now let me turn the call over to Rob.

Rob?.

Good morning, everyone. I appreciate joining us on today's call. Today is transformational for LiveXLive, and we have a lot of exciting news to share. There is a slide deck on our IR site, which I'll also refer to in my remarks. As you've seen from our release, we have acquired a key asset in the fast-growing EDM space, React Presents.

I'll walk you through the strategic rationale of the deal and why it is so exciting..

And then Mike Zemetra, our CFO, will go through the numbers associated with the transaction and give you more details in our Q3 fiscal 2020 in operating and financial results and debt amendment, which we announced today, along with the other news. Then we will open it up to calls and questions..

This is a very exciting day for LiveXLive as we've taken the next step in the evolution of our company. We started by acquiring Slacker and built the subscriber base, which is now over 820,000 monthly subscribers with key partners, including Tesla.

We've locked up key assets in the form of livestreaming rights to many of the most important festivals around the world that are building a loyal, large following. Today, we are taking ownership of hundreds of live events and further building the reach and scale of our organization, and we're doing this in a very attractive economics..

We delivered on our promise to close an acquisition before the end of 2020 fiscal year, March 31.

M&A is a key part of our strategy of enhancing the value of our business, and our acquisition React brings us in the next evolution of the company, one where we focus on expanding our market footprint, claiming ownership of events, partnering directly with artists, working on improving our financials and adding a great deal of talent to our organization.

We are very excited about this transaction and getting into more details. You should expect more details in the very near future..

Turning to slide -- slides, Page 4. Let's dive in to React here. React is a key asset of lifestyle portfolio. React represents a club, concert and festival promotion company, generating almost $15 million in annual revenue calendar year 2019 through ticket sales, merch and other revenues.

React promotes over 250 live music events a year, including its marquee event in Spring Awakening Festival in Chicago, which is the largest EDM festival in the Midwest..

Turning to Slide 5. The transaction will be nondilutive when we acquire React for $2 million in convertible debt. And effective to reaction of -- the React Presents with LiveXLive will transform and disrupt the industry with increased efficiencies that we believe will drive greater shareholder value.

We are the first to fully combine audio, video, social and live events into one unique experience. Through the acquisition, we were able to expand into owning and managing our own events, which delivers cost certainty, provides ample opportunity to scale LiveXLive and fits right into the flywheel of what LiveXLive has already built.

Ownership of events significantly grows our audience while adding revenue and unlocking monetization paths, including ticketing, merchandising and converting ticket buyers into subscribers..

One of the most important exciting elements of this deal is that we will now have the ability to add a free subscription to LiveXLive with every ticket sale to an event. This allows us to have a direct engagement with artists' super fans, and it gives us a massive opportunity to turn super fans into paid subscribers.

After they try out the amazing content available LiveXLive, by serving the super fans and reconnecting them with the artists they love, we dramatically expand our audience and create a clear path to upsell paid subscribers..

On Slide 6, our live events will continue to garner some of the most high-profile artists, which will allow -- be able to partner with them directly. Our artist relationship team, which has meaningfully expanded, brings in the talent that gives ultimate leverage in the industry.

Similar to an affiliate program, artists will be incentivized to drive fans to our platform that increase ticket sales through cross-promotion on YouTube and Twitter and Facebook.

We are going to transform the industry, disrupt the industry, on a win by win basis by forging deeper partnerships with the artists and allowing them to participate in a piece of the subscription..

We are capitalizing on a macro trend where artist partnerships are becoming increasingly central to succeeding in the livestreaming industry. Our engagement with the community allows us to figure out new ways to reach and monetize social audiences together.

Artists continue to ask for permission to use our feeds to cross-posting on their own social networks. This ties directly to the strategic collaboration in driving ticket sales and subscriptions and showcasing deeper relationships with the artists and combining data and sponsorship in an innovative way.

This also gives us room to improve customer acquisition cost by utilizing nontraditional marketing tactics through artist partnerships and ticket sales..

We are building most important an artist-centric platform with direct ties to the entire music industry in curating and creating a brand-new revenue stream for the entire industry, and now more uniquely positioned in ever to execute on a massive global opportunity in driving significant growth in shareholder value over the long-term..

In addition to the deal, we reported solid Q3 results. We recorded performance, generating $9.7 million in revenues, up 8% year-over-year. Contribution in margin increased to $2.1 million, up 50% year-over-year. Paid subscribers have reached 820,000, representing over 28% growth year-over-year.

We livestreamed 9 additional events versus 6 in last year, driving over 67 million views year-to-date. Additionally, we ended the quarter with $14 million in cash and cash equivalents. We announced today a debt restructuring at attractive terms, shifting short-term debt to long term..

Before turning over to Mike to details, I'll close by saying that today is a transformational day for LiveXLive. We have added $15 million in revenues, expanded our audience reach with the addition of more than 250 programs and events and continue to filling our flywheel with event ownership and management.

We have now increased the number of years that we own our events in the hours of live events we're distributing.

Most importantly, we are partnering directly with the artists to turn super fans into subscribers, effectively providing brand-new revenue streams from managers, fans, labels by converting ticket sales into subscriptions, all this being achieved in compelling economics and attractive monetization path.

Stay tuned for more acquisitions coming imminently, and we're ready for round two..

Now I'd like to turn the call over to Mike Z, to go through more details on the deal, our debt amendment, and then I'll close out with the Q&A at the end. Thank you, everyone. .

Great. Thank you, Rob. My prepared remarks will include an overview of the React transaction and some key highlights of our Q3 2020 financial results..

Turning to Slide 7 in the deck, transaction overview. As Rob mentioned, we acquired react for $2 million in subordinated convertible debt with a 2-year term, 8% annual interest rate and a $4.50 per share conversion price. There's no immediate dilution or cash impact in the period..

On a pro forma basis, and assuming we acquired React, effective at the beginning of our fiscal year 2020 or April 1, 2019, our revenues would have been $53 million to $55 million or an increase of approximately 40% from our current fiscal March 2020 annual revenue guidance. The transaction is expected to close in this Q4 2020 quarter.

Please note that we do not expect the React acquisition to have a significant impact on our current fiscal March 2020 revenue and operating results, largely due to the seasonality of some of the festival events.

To echo Rob's comments, this acquisition brings us into the exciting live music event and festival business, where the TAM is estimated to be $29 billion annually in the U.S. market alone..

Turning to Slide 8. Some quick Q3 highlights. Q3 2020 was another record and exciting quarter. More specifically on Q3, we reached 820,000 paid subscribers, up 28% year-over-year.

We livestreamed 9 events plus the last weekend of Rock in Rio, including some of the most iconic artists in the world, such as J-Lo, Pink, Muse, the Red Hot Chili Peppers, Lady Antebellum, Jason Aldean and Luke Combs..

Year-to-date through today, we've livestreamed 36 events and generated over 60 million livestream views compared to 25 live events and 51 million livestream views in the entire prior fiscal year March 2019.

We signed 2 exciting new partnerships, 1 with Samsung to livestream of the 10 music events in VR, and another with ReachTV to showcase our original content across ReachTV's platform of the 100 million monthly travelers and airport venues and terminals..

Lastly, we are excited to welcome 2 new executives to our team, Garrett English, as our Chief Content Officer; and Jackie Stone as our Chief Marketing Officer. We hired Gary to develop and oversee all content creation, including the launch of LiveZone Weekly, a weekly news program focusing on lifestyle and music and the live music awards.

He has most recently served as the Executive Vice President of Live Event Programming, Specials and News at MTV, VH1, MTV2 and LOGO, and was the executive producer of the MTV Video Music Awards and MTV Movie & TV Awards. .

Jackie will oversee all marketing efforts across the company's music platform. She was recently the CMO of MiMedia, one of the fastest-growing consumer cloud platforms, and held past executive level of marketing positions with the Spanfeller Media Group, WebMD, Digitas and AOL..

Turning to Slide 9, a quick overview of our Q3 2020 financial results. We once again closed Q3 2020 with strong results.

With $9.7 million of revenue, largely driven by subscription growth, our adjusted operating loss of $2.1 million was down 19% year-over-year, largely due to our Q3 2020 contribution margin of $2.1 million, which was up 50% year-over-year due to improvements in our average cost per event. .

In Q3 2020, we lowered our average cost per event to approximately $150,000 as compared to approximately $300,000 per event in Q3 2019..

Now I'd like to discuss some of the trends in our operating expenses year-over-year.

Excluding noncash stock-based compensation, amortization expense, depreciation and certain nonrecurring operating expenses of $5.8 million in Q3 2020 and $3.2 million in Q3 2019, Q3 2020 and Q3 2019 operating expenses were $4.2 million versus $3.6 million, respectively, or a net increase of $0.6 million year-over-year.

The $0.6 million increase was driven by increases in sales and marketing expenses and product development, driven by a higher number of events and new product debt initiatives in the period, coupled with increases in personnel expenses such as the addition of our new president as we continue to upgrade our team..

Turning to our balance sheet. We ended Q3 2020 with cash of $14 million, up from ending cash of $13.7 million at March 31, 2019.

The year-to-date increase was largely driven by $0.3 million in net proceeds, one raised from the sale of 5 million shares of our common stock in Q2 2020, offset by net cash outflows from operations of $5.4 million, investing activities of $1.8 million and repayments of our debentures of $2.1 million.

The net cash usage from our 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, which, as a reminder, included the extension of approximately $10 million of payables with certain music partners to be paid over 2 years and a settlement of approximately $0.4 million in LiveXLive stock at $4.50 per share..

Now I would like to update you on a few additional items. As of December 31, 2019, we had approximately 167,000 warrants outstanding and approximately $2.8 million of potential common stock underlying our secured debentures and unsecured convertible notes. We ended the quarter with approximately 58.2 million common shares outstanding.

At December 31, we had a total of approximately $15.8 million in debt outstanding, inclusive of net $1.1 million in deferred debt issuance costs and $0.4 million of fair value-embedded derivatives.

And lastly, we amended our credit agreement with our secured debenture holders, whereby we were able to update certain financial covenants through June 2021. Today, we have approximately $10.6 million in principal outstanding, which is due long-term in June 2021 and reflected accordingly on our consolidated balance sheet..

Turning to Slide 10, financial guidance. We are reiterating our full year 2020 revenue of $38 million to $40 million, adjusted operating loss of $12 million to $14 million, CapEx in the range of $2 million to $3 million, and finally, we expect a livestream up to 40 live music festivals and events in fiscal 2020..

That concludes my prepared remarks. We now would like to open up the line for Q&A. .

[Operator Instructions] The first question today comes from Ron Josey of JMP Securities. .

I have a few, so I'll just try to go through them quickly. Just got to ask on React Presents, first and foremost, 250 presentations or events. The content calendar improved significantly with it. So I wanted to ask about how you'd plan to integrate React if the acquisition improves the content library. .

And when you're talking about free LiveXLive subscription, which is a good cross-sell there, just any sense on how many attendees on average there are per event, because I think that's pretty interesting. .

And lastly, you talked about $15 million in revenue. Any insight on contribution margin would help. .

And then just bigger picture, longer term, I think you've talked about 5 million subs in the next 5 years. I'm sure the goal is multiples of that.

Just -- can you just help us understand how do you plan to get there as -- each quarter and as you look to grow the subscription base?.

Yes. Let me try to answer the overall. So React is a company that's over 10 years old, very similar to when we acquired Slacker, right? It was originally tens of millions of dollars were invested into this company. They've sold millions of tickets. So we don't break it down by event now, Ron.

But overall, they'll sell hundreds of thousands of tickets this year. And the objective is this is, this will be a separate subsidiary that will tie in beautifully with LiveXLive Presents, our own events that we do.

So this gives us an opportunity that, again, our flywheel, we fill in a number of events, right, number of artists performing on our stages.

And the lifetime value of that customer now goes up dramatically, right? So if you think about that we've been talking about that we had 1,500 live events in an average of somewhere between 3.5 and 4 years, we now own 250 of these in perpetuity..

And then most important is it gives you a direct relationship with the artists, the managers, right, in putting these artists on stage. And in doing that, it gives us the ability to enhance that relationship and have the artists now start to promote subscription, right, directly to LiveXLive..

And then I think the most exciting part of this acquisition is that because we have the ability to stream all these events, we have the ability to convert a ticket buyer into a subscriber.

As I articulated in the beginning of the call, the first is going to be -- we're going to give you a free subscription, every ticket buyer, we'll get a free subscription to LiveXLive.

So if you're a Calvin Harris fan, you're now going to get all this rich media and get to watch all of these EDM events on our network, right? And then shortly after, we'll be upselling to paid subscribers. So we think this fits perfectly in our flywheel and really adds substantial revenues, which, as you can see, almost no dilution.

That conversion price is at the same price with the labels, and the publishers converted at $4.50 a share to sort of back where we were when we originally did the IPO..

But in terms of driving towards those 10 million subscribers, Ron, there are so many ways that we're going to continue to grow. When we announced Garrett English as our new head of programming, as part of that, we announced that we'll be launching multiple linear channels.

So when you think about a linear channel, whether cable, satellite and so on, right, it means that we're going to continue like we did with Sinclair Media, right, with STIRR. We're going to announce digital channels and linear channels across the board. And certainly, we expect to be adding to that lineup imminently, whether cable or satellite.

And as you know, all those platforms have anywhere from 10 million to 100 million monthly users, right?.

Number 2 is the wave is growing. Dermot likes to describe it as we're just riding that wave, right? That wave today is that, artists are demanding and requesting to now put their livestreams across their own social media, which gives us an amazing mechanism, right, to utilize the artists to help drive our marketing.

And that's why our marketing costs are so low. So we've now driven over 67 million people, a very small percentage of those convert, right, while our subscription grow substantially..

Next is conversion of tickets into subscribers. So all of these will continue to drive that flywheel. And we are confident that over a 5-year period, we'll drive over 10 million subscribers to our network. .

That's great. And congrats on the acquisition. Just one real quick follow-up, Rob. You talked about giving free or at least some access to the subscription service for attendees.

Is that possible to do for other events as well? Have you thought about that?.

Yes, great question. It's one of the most important aspects of our relationships. Our relationships are getting stronger and stronger. Our contracts are getting longer with each of the promoters, right? The biggest promoters in the world, right, of music from Insomniac to iHeart.

And we find it really exciting that to offer a consumer the ability to watch these live events from the comfort of their home to their phone to around the world, is really exciting.

And so building in and giving a free subscription start and then moving towards a paid subscriber, integrating those into ticket sales, we think, from our own events as well as from others is a huge opportunity for the company. .

Next question today comes from Thomas Sora (sic) [ Thomas Forte ] of D.A. Davidson. .

Congrats on the transaction. So the first question I had was, can you give us an update on your advertising efforts? I think you have a new executive running that. And then second, if you look at the industry, there was a lot of really good data on customer adds from Amazon to Apple to Spotify.

Does that change your view as far as the opportunity longer-term? And what could the 5 million subscriber number be further out?.

Sure. So right off the bat, just looking at that -- and we've always been confident in this from when we started this, we went public 2 years ago. We've always thought, we're 90% subscription, 10% sponsorship. So on the sponsored side, we hired Jason Miller. He's done hundreds of millions of dollars of sponsorship to music.

The ownership of React and the partnerships with Insomniac and iHeart where we get to upsell from live to digital, we think is super exciting. Our RFPs are up over 650%. So the confidence level is building on the sponsorship side.

And we're seeing telltale signs that the ability to both sell a sponsor live is digital -- and digital is really uniquely positioned. So we're excited about the -- Jason joining us. He's only 45 days into joining the company.

He's building a team here of salespeople, and then he's integrating with iHeart, Insomniac and others, to upsell live to digital with the help of their sales teams and having iHeart as a partner in their $2 billion sales team. Upselling is enormous opportunity for us.

It allows us to have a smaller sales team rather than having to build the gigantic sales team internally to leverage and partner with them, right?.

On the long term, in terms of subscribers, right, Goldman Sachs has raised the bar again. This is for any of you who know me, all of my companies that I help start or invest in always have to have a moonshot.

But this is the biggest TAM of any company we've been involved in, right? So to start with, right off the bat, Goldman says there going to be 1.2 billion paying subscribers in music. You're watching the rebundling of media today and you're just watching subscription growing enormously.

And very much like cable and satellite, you had a 40-year straight up run. I think you're going to watch the same thing as you rebundle media. It's hard for us to imagine.

And just very humbly, our team believes, and we talk about it more and more in each one of these calls, that every network platform with 10 million to 1.5 billion have eyeballs, must have live and must have music. .

The next question comes from David Bain of Roth Capital. .

Great. First, congrats on the acquisition and what looks like a great purchase price. Can you just give us a sense -- I think it was asked, but on the overall margins for React.

Maybe any kind of EBITDA profitability notes and just the revenue and EBITDA trajectory over the last 12 to 24 months?.

Yes, I'm going to hand it over to Mike for a second, and then I'll jump in this again. .

Yes. So in terms of historical margins, I mean, they're sort of smaller double-digit. And in terms of operating margin, we're not going to give a whole bunch of color on the historical because there's things in there that aren't really applicable to us.

But one thing that Rob mentioned is that we do plan on generating synergies, both from a revenue and operating perspective. So we expect this thing to be EBITDA-accretive out of the gate. .

And just -- and Dave, just to color it because you did a great job of articulating some of the real estate, right, play of LiveXLive and that we had 1,500 live events that we have locked up for 3 to 4 years.

Just think about adding, right, to a portfolio an additional 250 that we own in perpetuity, right?.

And as you look at sort of typical margins in this area and how big the industry is, this really puts us in a very unique position as the only company that is both doing it both live and digital and being able to do that..

And just like we did with Slacker, Slacker was -- had burned through $180 million or is somewhat of a restructuring, right, when we acquired it, we've turned it to millions and millions of dollars of EBITDA. We feel the same way that this fits right into our wheelhouse and with the skill of this team, right, and the talent that we have in the team.

And I'm really proud of what the overall team has done, right, to really turn Slacker, its operations extremely profitable. I think we could do the same thing here and really fits perfectly into our flywheel. .

And as I articulated, this is the first of -- this is not the end of our acquisitions in this space. And we expect the next one imminently, which will be larger in size than this one in a very similar fashion in terms of structure and the acquisition cost. .

Great.

And since you opened that one up, any kind of data points as to what would be next in terms of concept or strategy for -- on the acquisition road map?.

number of live events, number of artists performing on our stages, length of how long you own those, right, add substantial revenues and take a live ticket buyer and turn them into a subscriber, take artists for the first time ever, disrupt the industry and offer an opportunity for artists to participate in the subscription.

And you're going to be hearing more and more about that on each one of our calls and artists that are joining the platform, right. For the first time in history, actually participating in that subscription and taking your CPA costs down enormously for when the cost is or trying to just market out there and grab the subscriber. .

We're not looking for the average-dose subscriber. What we're looking for is those super fans, those passionate fans that are really engaged with the artist. .

And is there a way with this acquisition to kind of deepen your relationship with your other festival partners? Or will this just be separate and apart and -- from that standpoint? And is there any reason to worry about your other festival partners looking at you from a competitive standpoint? Or is that... .

I mean, candidly, we're so small, very similar when we acquired Slacker, we still partnered with iHeart. We're going across the board, very similar here. I think everyone's going to be excited about it, right? It's going to show our business in flywheel. We're really about the digital side, right? The live component of it is important.

We get a world-class management running that. But really, our business is about the digital side, and taking these artists, right, and driving subscription, right, and driving those super fans..

So I think -- I don't think this will have any effect other than positive and show the longevity and the ability that this company has been able to, with limited resources, again, acquire a great asset at substantial revenues, right, and again, add to that flywheel.

And so I think it's really exciting for the industry, and again, will help to drive additional revenue streams for everyone across the board. .

Right. And just final one, promise. It looks like all is on track for a guide.

Any chance to kind of give us a sense or any sort of data points on paid subscribers through February? Or anything really in 4Q we should take note of from -- any kind of just big picture standpoint?.

We can't give any further guidance on that. What I would say is our partnerships across the board from cash flow has been amazing, to iHeart has just been magical to have the ability that you have cash flow growing so fast and then to have iHeart now doing so many live events.

As you guys are watching on our network, yes, we just did a 30-day sizzle reel. And literally, the last 30 days, we've had French Montana, Anderson .Paak, Corday, Billie Eilish, Coldplay, BTS. I mean it's really just magical, the amount of live music we are putting on our platform and how strong our partnerships are growing.

And I expect to be expanding our relationship with each of those partners, right, and to be expanding the length of time that we have these partnerships. So I'm really excited about where this quarter is going and really where 2020 as a whole is going. .

Congrats again. Really like that purchase price as well. .

Next question comes from Brian Kinstlinger of Alliance Global Partners. .

Congratulations on the acquisition.

Can you break down the 250 events by music festival versus maybe concert or local events? And do the larger events drive the majority of your -- of their revenue?.

It's a great question. I would say it's about 50-50 in terms of revenues in that range. You're going to get a couple of festivals, and the rest of them are live events. So -- but the beauty of this is -- Brian is, every one of those ticket buyers are buying a ticket, right, to a live event to listen to their favorite artists.

And we get the opportunity, again, to take those super fans who are buying a ticket and spending the money to it to give them a free subscription to start with, but then to really push into the funnel and to push for a paid subscriber in the near future. .

Great. And then thinking about you compared React kind of to Slacker when you bought it.

Can you talk -- quantify revenues in 2019? Did they decline? Or did they increase? And at what rate?.

Yes. I mean, there's very little change between the last couple of years. This hasn't been a huge growth story, right, in that it was inside of a much larger holding company. So this was the original [ SFX ].

Over $700 million was invested into that company, as you know, right? And these are just spectacular assets that have been around for a long time, very similar to Slacker. This asset has been up around for over 10 years. It's enormously successful.

It's in one of our most important cities, in Chicago and in the Midwest, mostly in Chicago, and it gives us a real footprint there..

So we're really excited that this is just a terrific addition to our flywheel. It just fits in perfectly with the expansion of where we're going and gives us substantial more revenues. And as I said expect -- we expect the next acquisition imminently to fit in very similar to this in a very similar style and structure. .

Great. Is there a seasonality to their business? And is the plan to expand outside of Chicago? I know there's some in Michigan.

Or is that capital-intensive and not something you need to do right now?.

No, there actually have a very, very serious footprint in Michigan. But the opportunity will be via the next acquisition, we'll expand this into many other cities and states but we really are focused on those critical cities that really have a big footprint for music.

So you'll see more and more across Nashville, Chicago, Atlanta, New York, Miami, right, so you'll see -- Austin. You'll see a real focus on that because you get economies of scale there as well. And you get these super fans in those areas.

So we're really excited about it, and we're going to keep focusing on owning the biggest events, whether digitally or live in pop culture, right? So having a footprint of this size in Chicago is really important step for us as a company. .

Great. You mentioned the 650% increase in advertising RFPs. I think that's been improving steadily. You added Dermot. You added Jason. I guess, I'm curious with the new branding and packaging of your content.

Are we 2 or 3 quarters away? Are we sooner? When do you expect to start to see the benefits on the advertising side?.

Yes. We're going to be because we have candidly, Brian, as you know, we've missed before on this, right? We're really a subscription business, right? 90% of our revenues are subscription. So I want to be really careful going forward and be really conservative on it. We're very bullish. Jason is very bullish. Dermot is very bullish.

And as you know, with sponsorship, right, you just have to know when that -- when it really just explodes..

And when it does, it comes in waves. And so we've seen Kia, and we've seen Samsung, we've seen Dos Equis. And we're seeing those telltale signs, and you're seeing the enormous growth in sponsorship and live music at Live Nation and iHeart. So it feels like it's imminent. But I don't want to go quarter-by-quarter. I want to keep this conservative.

We're going to keep growing the revenues. And we've got a huge advantage with the acquisition of React in that, we now get to upsell directly, right? Those sponsors, those sales teams, which will be integrated together from the live event will now be together with the digital, right.

And they'll be up-selling and be able to offer those sponsors that unique opportunity like we did with LiveZone where Kia really just crushed it and was able to own the biggest hip-hop festival in the world to 3 days, right, and really have that footprint in front of over 3 million people..

So, we're really excited about it, but we want to be cautious, and we're optimistic. We want to be cautious to make sure that for all of our shareholders, all of our new shareholders, and for you guys as analysts that we're -- we under-promise and over-perform going forward. .

Sounds fantastic. And lastly, on numbers. Mike, can you -- I didn't see in the press release, subscription revenue versus other. .

Yes. So again, it's pretty consistent with the 90%, 10%. .

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

Congrats again on the acquisition. Just a couple of questions from me.

Given the $15 million revenue run rate of the acquisition and revisiting the initial guidance that was provided for this year, I was just wondering if you can disclose whether the acquisition was embedded within that original guidance provided? Or maybe it's just coincidental that, that bridges the initial guide?.

No, no. Our guidance is, as we said, Mike (sic) [Jack], we've held our guidance between $38 million and $40 million, so that's unrelated to the acquisition. We're not today putting out guidance for next year, but we will, obviously, at year-end.

So when we report March 31, we'll update our guidance to include this acquisition as well as, as I stated, we expect to close a larger acquisition imminently. .

Got it. And I apologize. To be more clear, the initial guidance for this year was higher than the $38 million to $40 million. And the $15 million revenue from this acquisition seems to kind of bridge to the initial guidance. So I was wondering if that was embedded 9 months ago for this year or so. .

This is Mike. No, it wasn't. So what I said in my prepared remarks is the guidance doesn't exclude any M&A. And the business we acquired does have some seasonality, where a large part of the revenues will come in the summer or the festival months. .

Okay. And then so you guys livestream 9 events for the quarter. And the average cost per event was significantly reduced again to about $150,000, if I heard that correctly.

Can you talk about more specific key drivers of what's allowing this continued event cost reduction?.

Yes. I mean just highlighting it, and hopefully, you guys have an opportunity to watch the events. We get to cherry-pick out.

We have over 1,500 live events, add the 250 that we acquired today, right? That 1,750 live events, we get to cherry-pick and choose which ones have the biggest participation by the artist, right? Meaning, they're driving most of the traffic by hitting the social media and telling their fans to watch.

Number two is the biggest participation by the festival owner or promoter, right? And number three is sponsorship, right, advertising, programmatic advertising. And going back to Brian's question before, if you're watching our events now, you see advertising in almost every single event.

So the programmatic advertising is really starting to kick in and just the beginning stages of it. But you're seeing advertising in almost every event now. So we get to cherry-pick which ones..

And then this partnership with iHeart is just magical. They have 271 million listeners. And Bob Pittman and John Sykes, geniuses and architects who built MTV, and it's sort of our passion to be the next-generation MTV.

Having them as a partner, putting more and more of their events on, the biggest part or the exciting part of our business model and the reason our cost has always been so low and continues to go down is because we're not paying for the talent in those, right, from a digital perspective.

So -- and it's the first time in my career, right, that I've ever seen a cost for AAA Media that is under $20,000 an hour. .

So for all of you guys that are covering Netflix and CBS and HBO, the cost of content is just exploding. And in music, very differently than in most contents. You look at the Super Bowl, right, you see the money they spent. But artists aren't paid for that performance because there's a shelf life to music that is well beyond any other content. .

Got it. And then lastly, I just -- I was wondering if you guys could just talk more about the Samsung partnership that was announced around December. It seemed like an exciting announcement.

I just want to know maybe from a financial contribution or revenue impact or subscriber growth, what is the plan with that Samsung partnership?.

Yes, great question. So because we buy all-digital rights across the board. And this is still the early stages of this industry. We're buying all-digital rights, including VR, AR or if they put a chip in your head, candidly. We're buying the digital rights for typically for 4 years-plus, right, and now that we own them alone even longer.

So our deal with Samsung, we can't talk about the economics yet. But what I can tell you is the livestreams and VR, 2 of our events, including Rolling Loud, there was few dollars in sponsorship and all the cost of production in it. But I think that there is a unique opportunity in AR, VR and 360 as a combination, to continue to grow that..

And then the other part of the Samsung deal that we haven't talked about a lot, because it took us a little longer than we expected to but expect to launch any minute now, is we also announced with Samsung to be across their 40 million smart TVs.

And so as we expand that relationship with Samsung, from being across and being on the home screen of those TVs and having an app in those TVs to also having a VR experience with them, and I expect to continue to grow that relationship with Samsung dramatically. .

The next question comes from Jon Hickman of Ladenburg. .

Nice acquisition. Can you -- almost or all of my questions have been asked and answered from the other analysts.

But could you give us a little insight into the kind of motivation for the guys from React to sell to you?.

Yes. I mean I can't talk for anybody else, but this is a brilliant group that has done a great job of taking an asset out of bankruptcy. That it's going to be a huge win for the DIP financing that acquired it. And they've been selling off their assets. They've been selling off many of them and many of them for a lot of money.

And this -- they're a big believer in what we're doing. And they're taking some risk in it in that our stock has been down recently, but they also have seen sort of the trading activity between these ranges.

So there are -- this was an opportunity for them to bring this into our world and to participate in the moonshot that we believe we have, and hopefully, they believe we have as well. .

Okay. And then just to be clear, the 250 events are recurring. Those are like -- those events happen every year for the last few years.

And there's no reason to think that they're not going to happen going forward?.

Yes. I mean, we expect to grow that number. Again, as you know, when a private equity buyer buys and the restructuring is selling off assets, they're not looking to grow these assets substantially, right? So for us, we see an opportunity to grow them.

And as I said before, we fully expect the next acquisition imminently, which will be large in this one, to fit in right into the same sweet spot and will expand us into other areas, other parts of the country, right? But we really fit right into that flywheel. So we expect to grow that number, Jon, substantially. .

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

Listen, I just thought I'd piggyback off of the direction Jon was going. I know you've talked a lot about something else in the pike -- coming down the pike. I was just wondering if you might be able to give us more insight on what's going to happen with genres. You've talked a little bit about geography.

These guys -- these React guys are going to be focused on electronic dance. You've got great relationships already with EDC.

Can you just kind of talk about how you see expanding genres? And how you expect to leverage your, I guess, your synergies and react it to the EDC stuff going forward?.

Yes. I mean, 2 different questions. One is in terms of genres, if you've been watching our platform, right, we just delivered a -- we just put out a 30-day sizzle reel. And it's really magical. I mean we've had Billie Eilish, Coldplay, BTS, Madonna, Taylor Swift, French Montana, Corday, Anderson .Paak. So we've covered every genre of music. .

We streamed the biggest African festival in the world. We streamed some of the biggest K-pop stars in the world. We've had the luxury, as you guys watch the Super Bowl, J-Lo was just magnificent. She performed on our stages last month. So we're going to continue to expand our tentacles across all genres of music..

React is literally very similar to what Slacker is to iHeart. React is such a tiny, tiny piece compared to what Insomniac is doing with EDC. They're just growing like a weed. And we're proud of them as partners. It's just amazing what they've done. They're doing over 30 festivals this year, over 1,000 music events.

And we love partnering with them and growing the partnership with them. And we're really excited, fully expect we're going to do one of their biggest events, right, EDC Mexico coming up in a few weeks. .

Okay. So I guess, you don't really want to speak to how you might take React and expand its -- the genres that you can funnel through that capability? Or is that... .

No, I think we're... .

Or is that something you plan on speaking to later?.

Well, what I would tell you is we've done 8 of our own live music events, which have been across all genres, right? So LiveXLive Presents, which will become part of the React platform that will move together on our own operated events.

So when you think about it, those events have been literally across -- pop culture, being pop artists, have being hip-hop artist and more from Nas on down. So really, we don't look at it as a genre of music. We look at it at what the event cost and what the profitability is.

And most important is, how many tickets do we sell and can we convert those ticket sellers into subscription..

And as I articulated in the call earlier, for the first time ever, we're taking a move that is the most disruptive move we've seen in music maybe in 20 years, which is to give the artist the ability to participate in that subscription. .

And I think it's going to disrupt the industry in a unique way. And as you saw yesterday, Corday, actually putting this VOD from our live performance last week and put it up and gave the opportunity for his fans to become a subscriber of our event. You're watching on a daily basis. Green Day just hit their social media.

This afternoon, if you guys have an opportunity, watch Green Day perform on our stages. And each one of them is just hitting their social media. Dermot does a brilliant job of articulating this. We're not starting this wave, we just riding the wave.

Artists are now demanding the ability and asking for the ability to livestream across their own social media pages. And it's just a massive opportunity for us to continue to drive our traffic. Our total marketing spend for this entire year has been under $3 million, and we've driven 67 million people to the network. .

All right.

So can you go and maybe give us a little more insight, Rob, on being able to take that ability that you have with the React to offer a free subscription to a ticket buyer? Is that something that you think you can transport to Insomniac's EDC Festival?.

I do. I do. I think it's -- my dear friend who runs Insomniac from an operations standpoint, he comes from the digital side. I bought -- I acquired his last company at The Mandalay. So he had a subscription business very much like this.

So we think there's a unique opportunity for the entire industry, that just think about the ability and data is becoming so important.

Right now, this week as poll starts is all about data, right? So as you think about getting to those super fans and driving an album and driving a song, right, the more you know their habitual behavior, the cost of the technology that was built by Slacker in that $200 million that was spent building it, building over 17 years.

We have a mousetrap that we're one of the only ones left in the world, maybe there's 10 of them that have that mousetrap that have the partnerships with every record label, those master agreements to publishers, but also has the mousetrap to understand habitual behavior of the consumer. .

So as we take a ticket sale, whether it's owned or it's -- whether it's owned via our digital partnership in those sort of 4-year contracts or it's owned long-term like we will in perpetuity with React, we look at them the same. That opportunity is for everyone to participate. The festival owner as well as artist can participate in that subscription..

And just think about the cost, the CPAs that it's costing for people to acquire a music subscriber, we have a very different mousetrap in that we're giving you all the commodity audio you need, but really, what we're giving you is we're separating ourselves from the crowd by giving you the best live music events in the world from the most important pop culture events in the world.

And the trend is changing that it used to be breaking out, and you want to break it from the Grammys. Now you want to break it from Coachella, and you want to break it from EDC. So we're right at the heart of the storm as Dermot, again, articulated.

So we're just jumping on these waves, number of subscribers, number of people going to live music events. There's a 0.5 billion people who are going to attend live music events..

And as you get back to the sponsorship side, because I know it's all in the back of your minds, and we owe it to you to deliver on that. Just think about the ability that we've driven 67 million people. Basically, on the digital side, we're driving 30x the audience of live event. But sometimes, it's as high as 1,000x the audience.

It's just going to keep growing. .

All right. Last question for me, Rob. Can you talk a little bit about what you might offer us going forward? It's going to be really difficult looking at your operations in the future as you add subscribers.

But I'm kind of curious about how you'll be able to tell us what sort of conversion rate you're getting from that opportunity that you have, offering free subscriptions to React folks and then seeing that conversion to paid subscribers.

Is there any sort of insight that you can give us that as you work those 2 businesses and integrate them, that you'll be able to tell us how well you're doing on that conversion?.

Yes, I think -- listen, we just acquired this. We just closed in the last 48 hours on this. So it's hard to -- and this will be the first time this has ever done. It's hard to give you an exact number on it, but you're going to start with, because free subscribers is a very profitable business.

We love the programmatic advertising, especially as the long-term advertising. The more traffic we drive, the larger the audience, right? It's kind of Captain Obvious, the more sponsorship dollars are going to come..

And this is the first time that we have enough content.

We can really be talking about selling bundles, bundles of dance music, bundles of rock and roll, bundles of hip-hop, like sports does before we were selling one-off properties, right? So what I would say is being able to take our own ticket buyers and immediately convert them into subscription is going to be a huge enhancement to our free subscribers.

I can't yet tell you what percentage you're going to convert. But if you just take a tiny percentage, 5%, 3%, 2%, any one of those, if you throw those into the flywheel, the number of people attending digitally or live, we have an opportunity that we can blow away the numbers that we have in our 5-year plan. .

The next question comes from Barry Sine of Spartan Capital Securities. .

A lot of questions have been asked on this acquisition. I want to ask from another perspective, which I thought was pretty interesting. You're funding this with -- correct me if I'm wrong, a 2-year convertible note that converts to equity in 2 years at $4.50. That's sharply higher, where the -- than where the stock has been recently.

So presumably, there's a message in there.

Could you talk about the negotiations or discussions? How you were able to issue a note like this with such a high conversion price?.

Yes. I mean, I think -- listen, it's a big overall theme here. We have a gigantic short in our stock. We've had in that short comes in now you have tax selling come in. We've sold this and the acquisition would have closed way quicker, and the next one would have closed way quicker if our stock can come down.

And so we've presented this company as you could look at the stock traded at $10 and traded at $1.50. If they want to be a participant, we want to be part of it.

No different than when we converted the record labels and the publishers at 4.5, 6 weeks ago, we wouldn't have done this deal unless it was a fair deal that reflected the value of the company, not the value of the stock today. .

And listen, some of what we deserved. We haven't hit our numbers yet. It's time to us -- for us to be more conservative. It's time for us to beat our numbers, and it's time to prove that we were going to get this acquisition done..

And so I'm really proud of my team. I can tell you that there's been very little sleep, and there won't be a lot of sleep for the next literally next couple of weeks as we close the next acquisition. It's really a credit to Jerry and to Mike and the overall team and to Dermot. All the hard work has gone into it.

Because as you see, while this acquisition was happening, simultaneously, we've had to fight the stock. But we've also had to put on 9 events this quarter with the biggest artists in the world. And we'll just continue that tonight with Green Day. It's almost becoming -- it almost comes like we walk over it like Green Day.

Green Day is a massive band that's performing tonight that we get paid millions of dollars to perform it at a major music festival and it's all [ partner ] tonight. So we're just going to keep doing it, and our team keeps growing..

We haven't talked about a lot about our EBITDA loss going down dramatically, down from $4 million, $8 million in the first half, down to $2.1 million this last quarter. And this acquisition will be very helpful. We had some revenues. We had some people, there's going to be some synergies between the companies.

I think this is a really, really -- this is an inflection point for this company. For any of you that have been involved in my companies historically, they've always been buy and build. They've always had some restructuring to them.

But like I said on Slacker, we've taken Slacker from losing $20 million a year and spending over $180 million, building it to extremely profitable. We think the combination here and the skill of this team, we have a massive team that have run billions of dollars of companies. We've been running a little company.

But bigger in scale we get, the more prudent, the smarter we can get about how we run our operations. And we're a very cognizant group that the days all losing money got to end quickly, and we got to move towards profitability in the very near future. .

Okay, that's great. My other question is on something you haven't talked about a lot. You've teased the 2020 introduction of the LiveXLive live music awards. And I know Garrett came out of MTV, and their video music awards have become a major event. This strikes me as having the potential to be the same thing for live music especially with the artists.

The artists are probably really going to be very interested in these award shows and increase the visibility of the brand.

Could you talk a little bit more about maybe the time line, what you're looking to do? And how significant this award show will be?.

Yes. Let me highlight by saying the significance of Garrett joining. Imagine this guy is now here. He's here for under 90 days, and has streamed over 20 events. With the minute he stepped in, our head director stepped down, our head producer stepped down, knowing that they just -- you got one of the most skilled professionals in the industry.

So Dermot did a brilliant job in bringing Garrett in. And those live award shows, I'm a huge sports fan, so for you guys who are sports fans. I'd look at it like the ESPYs. When you think about -- you watch the Grammys, we have more people watch some of our live music and that's more people watch EDC than watch the Grammys this year.

So we're really excited about it. And we think it's transformational for the industry to have that..

And when you watch Pink fly outside of the Nokia Center or Chris Brown or you see the performance Pink did for us at Rock in Rio, where she was on a trapeze, flying over 150,000 people in that massive stadium Rock in Rio.

I think that collaborations like we did this weekend where Anderson .Paak and Corday played together for the first time, these are magical things that got to be captured. And I think they're going to be captured in a unique way..

And Live Music Awards is some I've been working on for 3 years. With Garrett here and being the executive producer of the VMAs, I think it's a huge addition to our team. And it's not the only original program, you're going to be seeing a lot of it. You're going to be seeing a lot of LiveZone. You're going to be seeing a lot of our own pilots.

You're going to be seeing more and more of those original programs around these events with almost no additional costs or nominal costs tied to it because of the fact we get to leverage these tent pole events with the artists already performing. .

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

Yes, just in finality, guys, this is -- this is that transformative chess move for the company that puts us in a position to really start growing this company dynamically. We're not finished with our acquisitions. We're going to add another acquisition imminently.

So we're super excited about where the growth is going and where we're going to take this company. And we've built this on so little money. This entire network has been built on under $35 million and with over 67 million people this year, over 100 million livestreams in the last 2 years. Just keep putting these numbers into the flywheel. .

And if we can continue to dominate this space, there is no competitor. The competitors that came in here are now gone. We have a dominant position. And yes, we're proud to be partners with everyone from Insomniac to iHeart and continue to grow that.

And we really do believe that we have the ability to build a brand-new revenue stream for everyone in music..

So thank you very much for attending this call. We look forward to the next call, and I expect that to be in the very near future. .

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