LiveXLive Media, Inc.
Q4 2021 Earnings Call Transcript

Published: 28 Jun 2021

[Operator:]

Good afternoon, and welcome to the LiveXLive Media Fourth Quarter 2021 Business Update Call. All participants will be in listen-only mode. . After today’s presentation, there will be an opportunity to ask questions. . Please note, this event is being recorded. I would now like to turn the conference over to Michael Quartieri, Executive Vice President and Chief Financial Officer. Please go ahead.

[Michael Quartieri:]

Thank you. Good afternoon, and welcome to LiveXLive Media’s business update and financial results conference call for the company's fourth quarter and the fiscal year ended March 31, '21. Presenting today on the call are Rob Ellin, CEO and Chairman; and myself, Mike Quartieri, Executive Vice President and Chief Financial Officer.

[Robert Ellin:]

Mike, thank you so much. Good afternoon, and thank you for joining us today for our fiscal fourth quarter and year-end business update. For most all of us, dealing with COVID over roughly the past 1.5 years has been very challenging experience, the lock-ins meant remote learning for schools, limited social interactions, working from home, and of course, no live music, no live events or festivals. But for LiveXLive, we’ve (ph) and opportunistic over the past year. We made 2 major acquisitions and successfully completed the integration of all of our business units that make up our flywheel. We’ve substantially expanded our content offering. Today, I'm proud to announce we offer the ultimate audio and video, music and media subscription platform that includes approximately 30 million songs, 500 curated radio stations, 250 of the most important podcast and vodcast, newsroom, original audio and video content, all for under $9.99 a month, plus 2,500 of the biggest live events around the world coming back in the very near future.

[Michael Quartieri:]

Thanks, Rob. Let me spend a few minutes to provide a brief overview of the preliminary fiscal '21 and Q4 results. We ended our fiscal '21 with strong results with revenue growing 69% year-over-year to a record $65.2 million. Our adjusted operating loss narrowed to $5.8 million with record KPIs, including a 27% net increase in paid subscribers year-over-year. Moreover, we had another record quarter in our fourth quarter, including revenue of $21 million, adjusted operating loss of $2.5 million and contribution margin of $4.6 million. On a full year fiscal '21 basis, consolidated revenue was $65.2 million, up 69% year-over-year from $38.7 million in fiscal '20, due in large part to our successful acquisitions of PodcastOne and CPS, coupled with increases in pay-per-view and sponsorship revenue. We ended fiscal '21 with 1,073,000 paid subscribers, a net increase of 225,000 as compared to 848,000 subscribers at March 31, 2020. Please note that included in the total number as of March 31, '21 are certain subscribers which are subject to a contractual dispute, which we are currently not recognizing revenues. The acquisitions of PodcastOne and CPS were accretive to our operating results, enhanced our working capital position and provided diversification to our revenue base. For fiscal '21, our revenue was comprised of 51% subscription and 49% advertising, sponsorship, merchandising and pay-per-view ticketing compared to 93% subscription and only 7% advertising in fiscal '20. Fiscal '21 contribution margin increased 177% year-over-year to $16.2 million as compared to $5.9 million in fiscal '20. The year-over-year improvement was driven by the additions of PodcastOne and CPS during the year, along with margin improvement from our live events and related sponsorship revenue. During fiscal '21, we live streamed 146 events at an average cost of $56,000 per event, an improvement of over 60% year-over-year. In addition, our sponsorship revenue increased by $3.6 million during the year. The year-over-year improvement in our live events was largely driven by cost efficiencies realized from the scale of our business. Fiscal '21 operating loss was $5.8 million compared to $12.6 million in fiscal '20. This improvement stems from improved contribution margin from our live events, increased sponsorships noted previously and continued operating efficiencies in our subscription business.

[Robert Ellin:]

Thanks, Mike. Great as always. So, this has been a spectacular year for this company during a very trying time. I couldn't be more proud of my team. We see the flywheel really exploding right now on every area of our business, right? And when you combine all of them together into one subscription property, now all of our audio, 30 million songs; all of our video, right, 140 live events, 1,800 artists approximately this year, all of our original programming is all in one, right? As you go out with that, on an average, our ARPU has increased now to $3.50. I see telltale signs those prices could be increasing again. We have explosive growth in our pay-per-view business. We said we did over $16 million. We're only at $2 million the last time we reported. So you can imagine, in the last couple of months, how much revenues have been driven. So we see telltale signs here that we have now been able to integrate all the acquisitions, all the internal growth, bringing the management teams together, this world class management together to really position this company to hitting that goal of 10 million paid subscribers within 5 years right at $1 billion plus in revenues. So I want to thank everyone, thank everyone for their patience this year in sticking with this company, and I couldn't be prouder of our team.

[Operator:]

. Our first question today comes from Laura Martin with Needham.

[Laura Martin:]

Congratulations on the great numbers and fantastic reallocation of revenue diversification. That's fantastic news. Maybe a couple. One is, I would say that fiscal '21 really demonstrates what the unit economics are for a digital LiveXLive, I'm interested in how you think the unit economics for live events have -- are compared to digital? So (ph) is telling us that when they go back to live events, the margins fall, as live events are more expensive. So I understand that live events add revenue. What I'm sort of focused on is what's about to happen to profitability and return on capital as live events come back for the whole entity. Could you comment on that?

[Robert Ellin:]

Sure. So for us, this is the perfect opening trade because we're both a live events business as well as we're a distributor and partner for live events. And as you look at Social Gloves that we just launched, and we just launched the female version of it that we just announced coming up in September, right, that event, we were hired as a producer, we were hired as a sponsor, we were hired the distributed, right? We had no risk in it, right? We're getting paid for each component of it. So it's really exciting that the talent of this team has come together and proven that they can deliver the live event, right, from a stadium, take it all the way to your home and make sure that throughout the process, we can drive new revenues, right, with no risk. So we're going to have some risk in our live side of the business where we're actually putting on those Laura. But I think the margins are going to get healthier and healthier for us because we have that mix of both, just like ESPN does in sports, right? And just to give you a little color, this event did over $10 million in revenues. So as you think of that $10 million of revenues, and we had no risk in it, we're getting paid for to produce it, to distribute it, to bring in sponsors. Our margins are going to be very, very healthy this quarter coming up.

[Laura Martin:]

Okay. All right. So okay, great. And then advertising, I think there's an outlook for a really robust advertising outlook for the next 18 months as theaters reopen and travel comes back and the rest of the world solves COVID. My question is that's a huge part of your total revenue, can you talk about where you guys are in the ad cycle for LiveXLive? And what -- are you getting the benefit of some of the reopening trade and advertising strength? Or are you locked into sponsorship. So really, it is reactive to the upside as selling 30-second spots is proving out to be now as we come out of the recession?

[Robert Ellin:]

We're in that fortunate position when you have AAA content. As you know, the advertisers are coming in with way bigger dollars, right? We have everything from branded content to sponsored dollars. Some of our podcasting will always be tied to spots and dots, right, and part of it. But because you have AAA content, right, you're going to have very robust numbers that come out of the sponsorship. And as you saw, we just started to announce our first 7-figure deals with Hyundai and Hard Rock. So our sponsored dollars this quarter again, just in what we've publicly announced already will blow away any quarter in the history of the company. As you see the new sponsorship team coming out...

[Laura Martin:]

I was just going to ask about programmatic versus sponsorship. So when I think about 30-second ad units compared to sponsorships, which are sort of presold big deals, what's the mix of those, Rob?

[Robert Ellin:]

We don't break that down today, Laura, right? So we haven't broken those down by pieces, right, as the maturation comes, I'm sure Mike is going to get into way more detail on that. But we got the luxury that we have all of it, right? The programmatic is important to us, right? But we're way more of a sales team, right? Our sales team, and you and I have had this conversation, and we're probably getting close to 20 people in sales. This company is going to tip the opposite way from going being 1 salesperson a year ago pre-COVID to being a large percentage of the company being focused on sales, marketing and driving revenues. So this is an inflection point for the company. And as we said, we grew from 4 to 23 sponsors. If you read between the lines, right, you just see in the events we've done this quarter, we've had over 23 sponsors. So we're growing that substantially. And the integration between them and the cooperation between the teams is so unique that you can now sell -- radio has been around for 100 years. Podcast has been around for 10 years, arguably, right? Live streaming has been around for many. But now that you're selling all of it across the board, you're starting to see real revenue streams that with a whole process in building this flywheel that we're starting to see advertisers market across our entire platform.

[Operator:]

Our next question comes from Ron Josey with JMP Securities.

[Ronald Josey:]

Rob and Michael, I wanted to ask a question on guidance and then just a little more on pay-per-view. So maybe Rob and Michael, can you go through just the guidance a little bit more. This is the third time raise this calendar year, I think. So can you maybe talk about the pipeline and what you're seeing as things open back up, Social Glove is clearly a hit. We enjoyed it for sure. The Spring Awakening is going, moving, is in the pipeline, I think CPS is contributing. So just help us understand a little bit more of just like the tailwinds to the business, how you view pay-per-view fitting in? And then, Rob, to the pay-per-view question, we saw the next Social Gloves site coming on here. But just talk to us a little bit more about the pipeline coming up for pay-per-view? And how we might think about all of these shows that are being produced by LiveXLive?

[Robert Ellin:]

Yes. So I'm going to give you a 40,000 feet, then I'm going to hand it to Mike. I think the starting point of it is, is that -- and you and I have talked about this Ron, we wanted to prove our pay-per-view that our production and our technology were all going to work. Because there's a lot of little companies and a lot of big companies, including Showtime that have tested this and thought they could just enter the digital pay-per-view world. And there's a lot of issues, right, including breakage and churn and latency and so on. We proved to perfection, right, 2 weekends ago. We proved to perfection and everything worked perfectly, and we did our biggest revenues in the history of the company. And we immediately announced the next one right behind it, right, because of that success. You're going to see the same thing happening with artists. You'll see the same thing happen across multiple different genres of pop culture. So we're really excited about that. Number two is, right, as the world opens up, right, and you see the reentry of this, we've only announced so far on live event other than Social Gloves -- one live event outside the social side with Social Gloves in the female version, right? We announced Spring Awakening, you know we do 40 to 50 shows a month. The Chicago Midwest area has been slower to open, right? We see telltale signs that things are opening widely right now, and I'd be really surprised if you didn't see get us back to 40 or 50 events, it may even grow from there. So what I'd say is we had great hesitancy in raising the guide again, but we had no choice. It was too obvious in the numbers that we hit and just people seeing it that we hadn't raised the guidance. And we're going to have to reconsider it again soon. So with that, let me hand it to Mike, and Mike, why don't you articulate where we are on all fronts?

[Michael Quartieri:]

Yes. Look, in relation to where the tailwinds coming, if you just really walk down the income statement, it's across all areas. Tesla is going to continue to pump out cars, and so that helps our subscription business, obviously. When you look at the expansion of PodcastOne, not only are we seeing improvement in our rates, as Rob describes them, spots and dots, but you're also getting new podcasts that are coming in. And so that's part of that strategic investment that we were making and to help really emphasize and drive that. In addition, when you look at our CPS business that's contributing, CPS as of these 3/31 numbers was only with us for literally a quarter and 8 days. And so where you really see the benefit of CPS is really coming through on things like Social Gloves where it gets fully integrated into 1 product offering that we have that not only can support a pay-per-view event that is our event or someone else's event in which we're the producer in performing those services on their behalf as an agent. The other side of that is the expansion within podcast, we're getting more and more of that talent tied into the CPS business. And so although CPS has been a great piece of business prior to joining LiveXLive now that it's getting more fully integrated into the flywheel, we see a lot of opportunities and benefits going forward. The next big piece of it is, to your point, about live events and what is going to open and how many live events can we get moving forward with between now and, call it, the next 6 to 12 months out? And that's going to be another key driver. Just like with Social Gloves, a live event for Spring Awakening, well, all merchandise will run through CPS. And so getting that flywheel really humming is where we're at, and that's what makes it most exciting for us to then go out and raise the guidance that we did again this past -- today, I should say. But as we look into the future and we get more clarity as to the timing and the scope of those future events coming, we'll be adjusting our guidance accordingly as a go-forward basis.

[Robert Ellin:]

Mike just adding the 2 acquisitions that we just announced as well, which closed shortly, which are great tuck-in acquisitions and again, fit perfectly in the flywheel.

[Operator:]

Our next question will come from Tom Forte with D.A. Davidson.

[Thomas Forte:]

Great. So one question and one follow-up. So my original question, when you think about next fiscal year, what's your expectation baked into your guidance on live events? I know you talked about, I think, something in Chicago where you were selling tickets. Are you expecting gradual reopening? Are you only expecting the Chicago event? How are you thinking about live events over the next fiscal year? And how much of that is reflected in your guidance? And then a follow-up question.

[Robert Ellin:]

So the only thing in that guidance today, Tom, is the beginning of Spring Awakening being super-conservative on it. We haven't announced any of the typical 40 to 50 live events we do, including some of our smaller festivals. So fully expect that's coming. But we are being conservative and careful, right? As you know, there's still some issues globally that are happening and some hotspots that are happening. So we want to be a little bit careful on that. But what I would tell you this is we didn't stream 1,800 artists and 120 -- 140 live events last year for no reason. That talent team that we've put together is going to be doing live events not only in the Midwest area, but it's going to be expanding around the globe. So both live and digital. So I fully expect a lot more coming from the area of our live business in the very near future.

[Thomas Forte:]

And then recognizing you might be early, how should we think about a very successful event like Social Gloves and that driving your subscriber count or your ability to leverage events like that to drive your subscriber count?

[Robert Ellin:]

I mean we've been careful for multiple reasons on what we've actually announced on this. But you can read between the lines and now we did over $10 million in revenues. We announced, I think, 8,500 subscribers right? So you kind of run the numbers and build back to a model. We've said 6% to 8% of the pay-per-views or 6% of ticket sales convert to subscribers. So if we continue at that rate, this would be a staggering number, right? You start adding all your live events and you start to grab subscribers from your live events and from your digital events, right, the metrics on this explode. Mike, do you want to add anything on that?

[Michael Quartieri:]

No. I think that's the exact piece of -- also part of the flywheel. And just the momentum and the tailwinds that we have behind us is, as we get more and more of these live events to come up, we'll be able to capitalize on that and get more subscribers into the flywheel. Unfortunately, when you look back to 2020, the company was completely hamstrung throughout that entire period. And most of, I'd say, when I say 2020, I mean the calendar year 2020, because there were no live events, so that piece of the flywheel and that realm of how we get and acquire users was really hamstringing the company, and now that's starting to come off.

[Robert Ellin:]

And Tom, Spring Awakening is typically 1/3 of the revenues of React, right, our Chicago division. So that $20 million in revenues approximately, right, you're talking about $6 million, $7 million in Spring Awakening. I think we can actually beat that number this year because ticket sales are just -- they're just exploding. As we said in this press release, they're just selling so quickly, it looks like can go higher. And if they allow us in Chicago, we're going to try to increase it, because we moved into a park that we eventually could go to 60,000. If they increase that from 30,000 a day to 40,000, it could be bigger. But the rest of those live events just in that area will really be another great enhancement to this company. And I'm hoping knock on wood, we're going to be able to announce expansion to all those live events coming back very shortly.

[Operator:]

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

[Unidentified Analyst:]

This is Jacob on for Brian. With advertising budget strengthening across the board, can you describe what this is net for PodcastOne? Are you back to pre-pandemic revenue contribution, which I believe is about $28 million or is PodcastOne on recovery? And maybe you can talk about the last -- the trends you've seen in the last 6 months or so?

[Robert Ellin:]

Yes. So I mean, just simply, we're ahead of that $28 million, if you just take the last 2 quarters, right? This was -- this quarter was above $7 million. Last quarter, it was above $7 million, right? As you enter, there is some seasonality here. So we're really excited about where PodcastOne is going. And as Mike articulated before, we've added some brand new revenue streams. Number one is we've probably added 25 new podcasts, including Jay Cutler and Anitta, the biggest star in Brazil and Pitbull and many others, right? And I think the same thing, this is going to continue to occur. The brand and the franchise of podcast is just becoming a more and more important brand. It's one of the only independent networks left. And it’s the only one that provides a full 360 play. But the second thing we did is, and we've talked about this a little bit more before, is expanding into broadcast. And we're just seeing tremendous, tremendous action coming from the sponsors, right, as you saw by Hyundai deal, or Pepsi deal coming into the podcast/vodcast side where they want to see these podcasters expand their offerings beyond just audio. And the next will be we've announced with Patrick Wachsberger and with Jared, Jingle, right. We've announced with both of them podcast networks like slates in movie and television, most of you know, I owned Atmosphere Films and do the movie 300 and so on. This is an amazing model. These are podcasts. You're spending very little money on if they work and they turn into a television show or a movie, there is a whole secondary market of revenues that can come from it, including selling to the Netflixes and Amazons of the world.

[Unidentified Analyst:]

Okay. And are you able to break down Social Glove's revenue by offering such as ticketing pay per view and merchandise sponsorship?

[Robert Ellin:]

We haven't. But again, if you look at our pay-per-view number, you can kind of back your way into pretty close to the number. This was a staggering -- it was an amazing event, really amazingly produced, critically acclaimed. We also own all the rights going forward to the docuseries, right, to the halo content in this. So it's not stopping, right? And just to give you an idea, and I apologize, I left this out. In the last 12 months, our socials have grown over 150%, right? So LiveXLive as a brand is becoming synonymous with authentic voice in music, but now it's starting to become authentic brand in pop culture itself.

[Operator:]

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

[Barry Sine:]

Two questions, if you don't mind. First of all, I want to stay on the topic of live festivals. If I think about LiveXLive prior to the pandemic, you partnered with all the big festival promos, Live Nation, iHeart, AEG, with some of the biggest festivals out there. Does that business come back? And you've got more ways with the flywheel now to monetize that, and to what extent, I wouldn't think that React presents as much of a competitor to those guys, you can still do their festivals as well as do your own which React presents. To what extent does that old business come back?

[Robert Ellin:]

It's fantastic. I mean, just start with iHeart, right? The lineups are bigger than ever, right? The traffic is bigger than ever. And the ticket sales are bigger than ever. And just look at Live Nation stock, look at iHeart stock, right? So we have a lineup -- I can't even remember how many -- 50 million plus social media followers are on our lineup for iHeart. So on September 17, you're going to see our next version of our boxing right okay? But you're also going to see Ariana Grande, Justin Bieber, Ed Sheeran, all on it. So you're seeing a vibrant -- everyone is woken up and realized that the digital side is important, and it's now here to stay. But just like ESPN did 30 years ago, those live events drive everything, and they're going to continue to drive it. So we couldn't be more excited, and we have 2,300 events to choose from. We're going to be selective. We're going to be careful. We're going to make sure that they're accretive. We're going to make sure there's a sponsor. We're going to make sure that we can drive subscribers from it. But I couldn't be more excited. And September 17 is going to be the biggest weekend in the history of LiveXLive by a distance.

[Barry Sine:]

And you're in a much better position now to monetize them than you were prior to the pandemic, I would assume as well?

[Robert Ellin:]

Yes. I spoke to Steve Bornstein about this, who built ESPN, in his first 8 years, sponsors just didn't come right? There was this fear factor about doing digital and putting things on television that would hurt live events, right? Whatever we work up through afterwards is live events, right? Sports has grown so big and so large that hundreds of billions of dollars have been made across the globe in live sports. I think the same thing is about to happen in music. And one day, you may see LiveXLive is the first company that did exactly what we did at Social Gloves. Imagine we had -- Rock in Rio had 1 million people attend and that 70 million people watched last year. Imagine if 1% of them bought a pay per view ticket. So let's say the average ticket is $100. What if it sold for $10? And very much like Social Gloves, I think it's almost a guarantee. So it's just a matter of time. It's a matter of acceptance in it, right? It's a matter of growing it, but it's creating a brand-new revenue stream that what happens that flows through from the talent to the managers, to the agents, across the board. The second thing that happens is the maturation of sponsorship, it's just coming way faster than we could have dreamed of, right? You got -- no, I only hired my first salesperson December ago right before COVID right? And then COVID hit, right? We're now up to probably 20-plus people in sales, and we'll be at 25 to 30 very quickly, right? Why is that? Sponsorship is working up to how big both the social live events are, but most important is music. They've woken up to how big the traffic and audience is.

[Barry Sine:]

My second question, Rob, you threw out a piece of news that nobody asked about it, I thought it was pretty big, which is that you expect this quarter to obtain rights to streaming music for Europe. Obviously, you have the North America relationship with Tesla, that's a huge market for Tesla. And I've heard in the past that one of the reasons you wanted those European rights was to be able to follow Tesla into Europe. So can we -- am I reading this correctly? Is that a pretty big piece of news that -- I know it takes a while to do something with somebody like Tesla, but perhaps fiscal 2023, we could start seeing subscription revenue come out of Tesla in Europe. Is that realistic to look at it that way?

[Robert Ellin:]

I can't give you anything that isn't material and done yet, but what I would tell you this is a couple of things. Number one, Universal Music converted 10 million of net payables at $4.14 into equity, right? Number 2 is all the record labels now, all the payables we picked up from Slacker are now paid off. Our balance sheet is now acceptable to everyone, right? We've had a weak balance sheet. We've done these acquisitions. We've done these partnerships, right, with a weak balance sheet. And all the record labels and publishers knew that when we bought Slacker, right? They knew going in and they accepted and they turned on the lights for us, right? Now the lights are very different, right? It's very different. The emotional, the financial relationship between is very different. And then as we publicly said for the first time, Elon personally approved the budget for all of connectivity in the car, right, through the end of this year. That's the first time we've ever seen that, that has been done and approved, and we can talk about it. So I think there's huge opportunities, not only with Tesla, but across the board for us to expand, right? And -- you may notice that we went from 73 cars, I think, to now 88 cars, right? You're going to continue to see that. And there's no reason to believe that in this year, we couldn't land another car company as well as expanding with Tesla across the globe.

[Operator:]

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

[Robert Ellin:]

I just want to thank everyone for your patience. This has been a trying year for everyone. I've been through this previously in previous companies. They're in tough times, or they’re in stock market times or it's companies themselves. We were a public venture capital company went public. So everyone that supported us from $7 million of revenues to $38 million to now $65 million, right, that 110 million is 120 million today that we've just announced our guidance to we're really looking forward to this year. We're looking forward to talk to you at the end of this quarter. It's certainly going to be our biggest quarter, our 13th biggest -- and biggest quarter by far in history, right? And I think there's way more to come. And I think we've really positioned ourselves uniquely to simplify the business model and that everything has been integrated, that we are purely a music and media subscription platform that you have the ability to come on today for an average of $3.50, right? You come in for free or for $9.99, but you have the ability to get such a tremendous amount of content and original programming that I don't think you can get anywhere else in the world. And so we look forward to talking to you again at the end of this quarter, and I want to thank everyone for the support during tough times. And hopefully, this is now just a race to the top now. So thank you.

[Operator:]

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