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LiveXLive Media, Inc. (LIVX) Q3 2019 Earnings Conference Call Transcript

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LiveXLive Media, Inc.  (NASDAQ: LIVX)
Q3 2019 Earnings Conference Call
Feb. 12, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the LiveXLive Media Third Quarter 2019 Earnings Conference Call and Webcast. 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.

Whitney Kukulka -- Director

Thank you. Good afternoon, and welcome to the LiveXLive financial results conference call for the third quarter of fiscal year 2019 ending December 31st, 2018. Joining me on today's call are Rob Ellin, Co-Founder and CEO, 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 risks and uncertainties. These statements include, but are not limited to statements regarding the future performance of LiveXLive, including expected financial results for the fourth quarter and full year 2019 and the future growth of the business. Actual results may differ materially from those discussed in this call for a variety of reasons. Please refer to the Company's 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 31st, 2018 and subsequent SEC filings. Importantly, this conference call contains time sensitive information that is accurate only as of the date of this call, February 12th, 2019.

You will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today in our earnings release, which is posted on the Investor Relations section of the website at ir.livexlive.com. And I 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, February 12th, 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 Ellin. Rob?

Robert S. Ellin -- Chairman and Chief Executive Officer

Thanks everyone for joining us today -- on today's call. Our third quarter -- this third fiscal quarter has been transformative for LiveXLive. We are thrilled with our Q3 results and the progress we have made so far this year. During the quarter, we streamed six daily (ph) platforms and events, including initial (inaudible) of our second Rolling Loud and expanded our partnership with Live Nation, streaming the Mac Miller Celebration tribute, successfully launching our partnership with iHeart Media. And we successfully launched LiveZone, an exciting development for the future LiveXLive, as we -- and we continue to expand the breadth of our relationship with all of our key partners, AEG, Insomniac, Live Nation and others.

LiveZone is the sportscenter of music and will change the way live music is consumed. We solidified LiveXLive as an authentic voice globally in live music, bringing top culture into the zone. We are creating communities, social communities around our hosts, our artists, our bands, our genres and events. The combination of eight hosts and huge support from artists, we delivered 3.5 million views in a two-day festival. That is approximately a 75% increase in viewership per day. We are successfully aggregating content, featuring superstars, not only in music, but in music lifestyle, in art, in fashion, influencers, sports stars as well as e-sports stars.

In Q3, we again delivered record financial performances across all metrics. We posted $9 million in revenues, up 13% for the quarter. We now reached, and the first time, we're reporting 1.2 million active users. We have had impressive subscriber growth, adding approximately 94,000 and ending the quarter with 643,000, representing 17% sequential growth. Year-to-date, as of today, we have livestreamed 22 high-profile global festivals and events, attracting more than 47 million views.

Our livestreams have generated over 400 hours of live content and featured 400 of the biggest artists in the world, including performances by music icons such as Cardi B, Lil Wayne, Tiesto, Post Malone, Chance The Rapper, Travis Scott, Diplo, French Montana and John Mayer, and more than 250 pieces original program and short form content.

We remain focused on strengthening our balance sheet and diligently managing cash flow. We've increased our cash position this quarter modestly from $14.1 million to $14.3 million. We continue to strengthen our world-class leadership team, specifically focused on original programming and strategic M&A. David Schulhof joined as Chief Development Officer. David brings unique experience in the industry and has earned high-level relationships with artists, labels, managers, and agents and will lead our content creation, partnerships, and M&A initiatives.

David came out swinging and already delivered a huge multi-year partnership with Mass Appeal and Nas as our first ambassador for hip-hop, content creators and curators of urban programming. This 360-degree partnership to create, produce, and distribute original hip-hop and urban culture content gives us a unique edge in the genre and unlocks new brand opportunities.

We have also added two additional Board members. Film and TV legend Patrick Wachsberger, Founder and CEO of Picture Perfect and former Chairman of Lionsgate, and the Founder and CEO of Summit Entertainment. His critique (ph) includes La La Land, Hunger Games, Twilight and The Hurt Locker, and world-renowned investor and board member in media and technology, Ramin Arani. Ramin spent the last 26 years at Fidelity, most recently as the lead portfolio manager for the $27 billion Fidelity Puritan Fund. The Puritan Fund led our IPO. He supported our vision and mission as an early investor in LiveXLive and his experience and deep industry knowledge insight will bring tremendous value to our Company.

Before diving to the quarter and our expectations for the evolution of LiveXLive, I'll first reiterate a few key principles of our business. You've heard us frame our business using ESPN playbook and applying to the music industry to create the next generation MTV. We are currently creating the largest live social music network, utilizing mobile first technology and partnering with thought leaders in live music. Our mission is simple, to bring a new experience of live music and entertainment to music fans, wherever music is watched and listened to around the world. At the highest level, our goal is to bring together fans, bands, and brands and help to unify the world around live music.

We accomplish this by leveraging technology to capitalize on highly shareable content that is revolutionary in our industry, including livestreaming, over-the-top delivery, mobile, and looking around the corner to the next generation technologies such as AR and VR. LiveXLive allows music fans to seamlessly move through our apps to watch their favorite artist perform at their favorite festivals, concerts, and award shows. This includes interviews, backstage, behind the scenes, red carpet, and a full slate of original programming. We have now defined ourselves as a global thought leader and authentic voice in live music, and we are positioning ourselves to be the Netflix of live music as we head into the fourth quarter of 2019 and into 2020.

We are a very ambitious company that aims to change the game, unify the world, and we just touched the surface of where the Company is going today. We've built a leadership team and board of world-class executives from multi-billion dollar companies with unsurpassed experience and connections that will serve us well for the years to come. Live music is now a $50 billion industry. We are well positioned to capitalize on this massive global demand in over-the-top and live music streaming. We are right in the heart of the storm of live and streaming.

Our growth strategy is anchored around three main objectives; live streaming the largest pool of music events in the world, offering exciting original content, growing our partnerships and sponsorships. We believe these key priorities will continue to drive traffic, viewership, subscriber growth, and creating more monetization opportunities.

My team has done a tremendous job changing the trajectory of Slacker Radio since our acquisition. We grew our subscriber base to 657,000 users. That is up over 50% in a year. And achieved, for the first time, EBITDA profitability during the entire first -- the entire third fiscal quarter. Slacker's technology and programming unit enhanced (ph) platforms relay the live streams and added over 100 additional program channels. We now have programming (inaudible) 400 curated channels available to users from DJs to VJs unique original programs.

LiveXLive streamed 22 festivals and events with over 47 million live streams as of today and is driving over 14 million impressions to Slacker. We have been focused on consolidating and integrating the business group and we are preparing for the 2020 launch of the integrated product. In Q4, we plan to launch our best app yet.

We have made significant advances to our products and technology in the quarter. We are giving our Slacker audience the ability to create communities. We launched our newest social feature Slacker Studio, which reinvents the coin (ph), enhancing social features in Slacker, allowing the consumer to share and to create communities around artists, around festivals, around genres of music. We are connecting users across devices, from your car to your office to your home and anywhere in between, starting with audio, adding video, and laying in cutting technology to drive more subscribers, sponsorship, merchandise sales. Fans can listen, chat, share, and buy merchandise and create a social experience, adding to the time they spend engaged in a LiveXLive platform, effectively creating the most immersive experience in live to the consumer on a daily basis.

We launched our global over-the-top streaming app on over 40 million Samsung Smart TVs, extending our consumer reach to music fans globally. We also collaborated with Samsung to deliver our first 360 VR platform experience from Rolling Loud. Second, developing a slate of original content and programs. The launch of LiveZone, the sportscenter of live music at Rolling Loud was a game changer for our industry. It provided exclusive pre and post coverage of festivals with anchors and correspondents reporting culture and content. We had eight correspondents at the event and featured more than 75 interviews with artists, athletes, including major artists such as Nas, Offset, Lil Yachty. LiveZone has helped deliver over 3.5 million live streams, representing over 100% increase when compared only a few months before at Rolling Loud in the Bay Area that streamed last quarter.

Growing our LiveZone music show experience unlocks the opportunity to reach music fans around the clock and around the world, and further differentiates LiveXLive from any other music network. The activation of LiveZone also enables initiatives, onsite opportunities for advertisers and brands, which will be key to unlocking the future monetization opportunities. We demonstrated this successfully with our partners, with Kia and Samsung.

Another exciting initiative for us is LiveXLive Presents. These are our own original curated events to promote our brand and help drive more user engagement across some of the largest entertainments in the world -- events in the world. LiveXLive Presents has featured top musical talent such as Rick Ross, Nas, Charli XCX, Playboi Carti, Chromeo, Tierra Whack. As you saw in our press release this morning, we have livestreamed our fifth event Sunday night. Immediately following the Grammys, the event produced 1.1 million live views across LiveXLive's music platform, turning a packed VIP event for hundreds of industry insiders into a global media event.

Our third priority is advancing sponsorship opportunities and strategic partnerships. As I mentioned earlier, we livestreamed Rolling Loud festival in Los Angeles. We debuted key brand partnerships with Fortune 100 companies, Kia and Samsung. With Kia as a sponsor of Rolling Loud and Samsung running point on our first VR initiative, we delivered a fully immersive 360 experience to consumers.

As LiveXLive has maintained its independence and focused efforts on partnering with the best live music curators and programmers, we've now expanded our lineup with iHeart Media, creating a direct partnership with Bob Pittman and John Sykes, the experts who created MTV and VH1. We successfully streamed ALTer EGO. ALTer EGO features the biggest names in alternative rock and is the premier nationwide alternative music event of the year. With tickets selling out in less than a minute of release, we gave fans the opportunity to view this livestream on any device. iHeart is a very exciting partnership. They have 248 million listeners, giving us an opportunity to help build both of our brands.

We have a neutral and independent position in the industry that has allowed LiveXLive the opportunity to partner with all labels, promoters, publishers, artists, managers, and most importantly, the biggest artists in the world, creating a brand-new revenue stream for the overall music industry.

To sum up, our user base can view content from award shows, concerts, festivals, music venues, and now even more original content including pilots, personalities, and a whole slate of music industry and lifestyle pieces. We are creating and aggregating the best content available in music over the last 25 years, which stimulates engagement and drives future growth. We believe that that quality content creates an engaged audience, creating more monetization opportunities beyond subscription and sponsorship. Music is a universal language and our opportunity is not limited by geography, genre, or audience.

We're in this game for the long haul. Our long-term goals remain the same. First, we believe, within five years, we will have at least 10 million paid subscribers on our platform. We've already surpassed 650,000 paying subscribers, 1.2 million monthly users, and expect to continue growing at a double-digit rate each quarter, and we are on our march to 2 million, which we plan to achieve over the first half of our fiscal 2020.

Secondly, we believe we can stream over 100 festivals and events a year. We will stream 27 this year and we are now upping our number for next year and expect to stream over 40 events next year. Third, we expect to have enough content aired 24 hours a day, seven days a week. We are making strong progress here and believe the launch of LiveZone brings us close to that goal. Fourth, we continue to expand our distribution footprint across all digital platforms. We've now partnered with YouTube, Facebook, Twitch, Dailymotion, Tencent, and continue to add distribution across platforms that have 10 million to 1.5 billion plus viewers.

We look forward to seeing investors and analysts on the road at upcoming events. We will be presenting at the JMP Technology Conference in San Francisco on February 25th, and we're always happy to set up meetings for anyone interested.

I am going to go -- I'm going to hand this off to Mike Zemetra to walk through our third quarter financial results and expectations for Q4 in more detail and then we will open up to questions. Thank you.

Michael L. Zemetra -- Chief Financial Officer

Great. Thank you, Rob. We continued the second half of our fiscal 2019 with strong results, including Q3 2019 revenue of $9 million, adjusted operating loss of $2.6 million, and record subscriber and event livestreams during the quarter. Given our lack of operating history year-over-year, my Q3 financial commentary will continue to focus on quarter-over-quarter sequential performance as compared to the prior year third quarter.

More specifically on Q3, Q3 consolidated revenue was $9 million, up 13% quarter-over-quarter from $8 million in Q2 2019 due to quarter-over-quarter growth in our paid subscribers, and to a lesser extent, from growth in advertising and licensing. I will get deeper into revenue drivers later in my prepared remarks.

Q3 consolidated contribution margin was $1.4 million as compared to a loss of $0.2 million in Q2 2019. The sequential improvement of $1.6 million quarter-over-quarter was principally driven by improved margins across our subscription business, coupled with lower overall livestream events produced in Q3 versus Q2 2019.

Q3 adjusted operating loss was $2.6 million versus $3.6 million in Q2 2019. The $1 million improvement quarter-over-quarter was driven by the previously discussed margin improvement from our music operations, which was slightly offset by increased operating expenses, largely driven by the expansion of our team and growth initiatives expanded during the quarter. During Q3 and Q2 2019, we also capitalized approximately $0.7 million in each quarter of internally developed software costs.

Now I would like to discuss the financial performance across our music operations and corporate divisions. Turning to music, our music operations consists of our audio and Internet radio services along with our livestream operations, including sales, marketing, and product development, and to a lesser extent, certain general and administrative costs. As previously discussed, our Q3 revenue of $9 million was up 13% quarter-over-quarter from Q2 2019, largely due to growth across our paid subscribers and advertising and licensing revenue quarter-over-quarter.

First, I would like to discuss the growth in our subscription revenue. During Q3, our music operations generated $8.1 million in subscription revenue as compared to $7.2 million in Q2 2019, a 13% improvement quarter-over-quarter. Driving this improvement was a 17% sequential increase in any (ph) net paid subscribers across our music platform. We ended Q3 with 643,000 paid subscribers, up 94,000 or 17% from Q2 of 549,000 paid subscribers. The quarterly net increase in paid subscribers was driven in part by the strength of our B2B consumer-driven business, which includes Tesla, a major North American telecom providers, and also from increased additions across our consumer paid subscription services.

We are continuing to invest in online marketing campaigns, including leveraging impressions from live events to further grow our paid subscriber base. Through today, any paid subscribers have increased by a net 211,000 or 47% to 657,000 from 446,000 since March 31st 2018. We continue to remain confident in our paid subscriber growth throughout the remainder of fiscal 2019.

Next, I would like to talk -- discuss the growth in our advertising and licensing revenue. During Q3, our music operations generated $0.9 million in advertising and licensing revenue, up 29% from $0.7 million in Q2. The increase was largely driven by new branded partnerships in Q3, which included Kia and Samsung. During Q3, Kia sponsored the launch of LiveZone, our sportscenter of music at the Rolling Loud festival in Los Angeles. And Samsung partnered with us to livestream virtual reality across Samsung VR devices. We truly believe in the long-term value of virtual reality in music and hope to announce more exciting and similar partnerships moving forward.

Our Q3 contribution margin was $1.4 million versus a loss of $0.2 million in Q2 2019. The sequential improvement of $1.6 million quarter-over-quarter was driven by improved margins from the growth and mix of our paid subscription business, coupled with a lower number of livestream events in Q3 versus Q2. As a percentage of revenue, our contribution margin across our subscription business improved significantly by 5.0 whole percentage points from approximately 28% in Q2 to 33% in Q3. This was driven by a higher mix of B2B and Radio Plus subscribers, which are generally more profitable versus other subscription services, coupled with a one-time benefit from an accounting adjustment recorded in the period. Excluding the accounting adjustment, Q3 subscription margins would have been closer to 31% or an increase of 3.0 whole percentage points from Q2. Moreover, we incurred $1.7 million of production costs in Q3 to produce six live events versus $2.4 million in Q2 to produce eight live events. Consistent with Q2, our average cost to produce a live event was approximately $0.3 million per festival.

Q3 music operations adjusted operating loss was $1.3 million as compared to $2.4 million in Q2,2019. The quarter-over-quarter improvement was largely driven by the previously discussed improvement in music operations contribution margin in Q3 versus Q2.

Turning to corporate, our corporate division principally consists of general and administrative functions such as executive, finance, legal, and other areas that support the entire company, including any public company driven initiatives and supporting functions. Q3 corporate adjusted operating loss was consistent with Q2 at $1.3 million as compared to $1.2 million in Q2.

Now I would like to discuss the trends in our operating expenses quarter-over-quarter. Excluding non-cash stock-based compensation, amortization expense, depreciation and certain non-recurring operating expenses of $3.2 million in Q3 2019 and $6.0 million in Q2 2019, Q3 operating expenses were $3.9 million in Q3 versus $3.3 million in Q2, an increase of 18% or $0.6 million quarter-over-quarter. The quarter-over-quarter increase was largely due to higher personnel cost to support our growth, coupled with higher professional fees, principally related to newer public company compliance initiatives.

Note that our non-cash, stock-based compensation, amortization expense, depreciation, and certain non-recurring operating expenses decreased $2.8 million quarter-over-quarter. This was largely driven by the finalization of purchase accounting associated with the December 2017 Slacker acquisition, which resulted in accounting adjustments to goodwill and our identified intangible assets, the latter of which required us to reverse approximately $2 million of amortization expense from prior periods in Q3.

Turning to our balance sheet. We ended Q3 2019 with cash of $14.3 million, up from ending cash of $14.1 million at Q2 2019. The quarter-over-quarter increase was largely driven by net cash proceeds from operations of $0.9 million, offset by net cash outflows from investing activities of $0.7 million in Q3. The Q3 net cash from operations improved by $2.1 million quarter-over-quarter, largely driven by the quarter-over-quarter improvement in our adjusted operating loss, coupled with net savings in our working capital driven principally by active management of our payables in the period.

Now I would like to update you on a few additional items. As of December 31st, 2018, we had approximately 167,000 warrants outstanding and approximately 2.7 million of potential common stock underlying our secured debentures and unsecured convertible notes. We ended the quarter with approximately 52 million common shares outstanding.

In February 2019, we also amended our securities purchase agreement to increase our 12.75% senior-secured convertible debentures by$3.2 million in the aggregate, bringing total principal funding to date to $13.8 million today versus $10.6 million at the end of Q3 2019. Of the $3.2 million financing received in February 2019, net proceeds to us after original issue discount, banker and outside legal fees, was approximately $2.9 million. As of today, a total of 13.3 million secured convertible debentures is outstanding.

Turning to guidance, we are reiterating our full year 2019 guidance as follows; revenue of $37.5 million to $45 million; adjusted operating loss of $10 million to $12 million; CapEx range from $2 million to $3 million. Consistent with our previous communications, we expect to livestream up to 27 festivals and events in fiscal 2019.

Lastly, I would like to point out a few conferences we will be presenting at in the upcoming quarter. As Rob mentioned, we will be at the JMP Securities 2019 Conference, which will be held on February 25th at the Ritz-Carlton in San Francisco, California, and we'll also be presenting at the 31st Annual ROTH Conference, which will take place from March 17th through the 19th at the Ritz-Carlton Laguna Niguel, California.

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

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Brian Kinstlinger with Alliance Global Partners. Please go ahead.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Thanks so much. Hi, guys.

Robert S. Ellin -- Chairman and Chief Executive Officer

Hey, Brian.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Based on the implied fourth quarter revenue guidance and the current subscriber growth, which is a little bit slower sequential, I assume you're expecting a significant pickup in revenue from your advertising or non-monthly subscriptions. So can you talk about what those sources are and whether you have new sponsors coming on like a Kia or Samsung?

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. So there should be combination. Brian, thanks for the question. It's a combination of our continued growth with Tesla. We're now in 80 of their cars. We're in every carrier in the United States other than AT&T and we hope to begin (ph) soon. As well as these partnerships with Kia and Samsung have led to, and Mike will walk through a little bit more detail, but RFPs that give us an opportunity to see a dominos (ph) effect with sponsors, very similar to what ESPN saw thirty years ago, as the sponsors start come in, it's exciting to see two Fortune 100 companies join the party.

With that, we've also articulated first time that we drove 14 million impressions to Slacker. So we're just filling that funnel at Slacker. We've turned it around. It's now EBITDA profitable for the first time in the history of the Company and when we acquired it, there was no funnel. So that $14 million is continuing to grow. We hope to convert a small percentage of those, if we can just convert 1% of them, it's going to be a pretty staggering growth. As you know, we raised our guidance from 10,000 subscribers a month to 20,000 to 25,000. So in the very near future, we may have to raise that number again. Mike, do you want to add anything to that?

Michael L. Zemetra -- Chief Financial Officer

Yeah. I mean, I'll just say that if we look back at our last quarter versus today, the number of RFPs on an absolute dollar basis is up 500%, over 500%. So while we're still in the early stages of subscription -- not subscription, but in the advertising and promotion side, we feel like we'll definitely hit the ground running so.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

So advertising should have a bigger sequential growth quarter -- in the current quarter.

Michael L. Zemetra -- Chief Financial Officer

I mean, timing, always TBD. We're still in the early stages, but we feel really good about it.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Yeah. Okay. And then can you talk about the progress you're making? We've discussed it about -- with the major record labels extending the replay rights. Do you think that -- of festivals. Do you think that is three months away, six months away, or a year away, what are your thoughts on that?

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. Great question. So we've made tremendous progress on that. And with that, we stated that we are going to launch our app. We'll be shipped off to (inaudible) in April live and we fully expect to launch in the middle of May. So with that, we hope to have all those partnerships in place in time for the launch of the next generation of our app. And we won't go into much more detail than we have publicly previously, but that app is transformative. It'll be the first fully immersive app that goes across from audio to video, so from your car to your home and everywhere in between, and simultaneously, while you're listening or watching, the ability to chat, message via app, buy a T-shirt, and keep the audience engaged, and for the first time ever, create full communities around artists, genres as well as the festivals.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Last question, a two-part one. Can you talk about the marketing you expect for that new app, so you can maximize adoption? And then are the price points similar to the Slacker price points?

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. So we haven't publicly disclosed the price points, but effectively you can think of it very similar to Slacker, where really what we're doing is, we're taking Slacker. Slacker has now become Slacker Plus, which is Slacker plus original programming plus live events. The next generation of it, it will be that all these while (ph) including the ability to be able to message, chat and all that we've just discussed. So the price points, we expect to be similar, will go from premium to $999 (ph), and there'll be an element that could even go even a little bit higher than that.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

And the ad campaign, sorry, that was the other part of the question, is there going to be some major ad campaign to maximize adoption?

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah, absolutely. So one of the great points about this, Brian, as you've been watching, is the massive audience that are being driven by these festivals. So we have the luxury that one of the greatest marketing tools we have is the sociogram. We've built technology that studies the sociogram of these artists. And for the 27 festivals this year, we have a potential reach of a fan base of up 2.2 billion people. If we can just drive a small percentage of that audience, there is significant marketing for this. And then of course, we have our own initiatives as well that -- you'll start to see all those new launches. As we move to consumer oriented, of course Slacker, just for Valentine's Day alone, we have many different propositions that are going out already. So we are already starting the process I think (ph) even previous to the next generation of the app.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Thank you so much.

Operator

The next question comes from Ron Josey with JMP Securities. Please go ahead.

Ron Josey -- JMP Securities -- Analyst

Great. Thanks for taking the question. Just two follow-ups and then two maybe bigger picture questions. Rob, can you just repeat the timing on the new app with the integration? I think I heard something in April and mid-May, but I wasn't sure. If you can just repeat that and maybe the partnerships (ph) there, that would be helpful.

Robert S. Ellin -- Chairman and Chief Executive Officer

Sure, sure. So the expectation is to deliver by the middle of April the latest to deliver it to Apple, and for the launch of it to be right around festival season, so right around May 15th. And as you know, we have a really exciting lineup again from May that includes EDC and many other -- of the biggest music events in the world.

Ron Josey -- JMP Securities -- Analyst

Got it. And just to be clear, this new app, is this the integration with Slacker, so it's not a two-app environment, everything is maybe on Slacker or LiveXLive or maybe some more info on what the new app would have?

Robert S. Ellin -- Chairman and Chief Executive Officer

Sure. So what we publicly stated is that we're going to integrate, which will become one brand. And as you can look at Slacker and where Slacker is going, Slacker has done such a magnificent job without really any additional cost of building out all of our technology like BAM (ph) which sold to Disney (ph) for $3.5 million. We have the capabilities -- that right now our app is across Amazon, Roku, Apple TV, we partnered with Twitch and YouTube, Facebook. So we really have the capabilities to deliver this around the world.

Ron Josey -- JMP Securities -- Analyst

And the new app would have those capabilities. Okay. And then maybe bigger picture then, Mike, one last one for you, but bigger picture, Rob, I think you said 40 live festivals in fiscal year '20. That's up from 27 this past fiscal year. Can you just talk about maybe, are these new festivals coming because of AEG, Insomniac and now iHeart or is this sort of you all going out to the individual festival holders? And then when you think maybe the next year or perhaps three years out, one of the questions we continue to get is where is the growth going to come from? Is it the subscription side? Is it the advertising side? And so if you could just maybe help us understand where that growth is in the next three years, advertising and subscription. Then I do have one follow-up, Mike.

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. So you guys -- to read between the lines a little bit, we stated 40 as a minimum. If you read between the lines, to start with, Insomniac is over 23 events, but we've only committed to -- that we'll do a minimum six to seven of them, but they continue to grow that and they're going to add another seven events this year. So we have an opportunity to do a staggering amount of both hip-hop as well as dance music festivals, which are the biggest in the world, the EDC China, Japan, Mexico, we're doing our first ever event from Mexico City. iHeart, we've only announced two (inaudible) content so far, but it was a super successful launch with one being a festival and then one being from their theaters. So we are confident and hopeful that we're going to expand our partnership greatly. And it's really been across the board. We continue to add independent festivals and continue to add festivals from each of the major promoters of music in the world.

Ron Josey -- JMP Securities -- Analyst

Got it. And then, Mike, maybe just one last one. I think you said ending the quarter with $14.3 million in cash equivalents. You did add, I think, 3 point something -- $3.2 million in debt. I didn't see the cash flow this coming quarter, but I think you -- this quarter, and I think you said there is still active payables management. Can you just talk a little bit about the cash balance, how you manage that and active payables management? I do get questions on that. So what does that mean? Thank you.

Michael L. Zemetra -- Chief Financial Officer

Yeah. Sure. So if you look at where the cash was derived from, in my prepared remarks, I said that about $0.7 million went out in CapEx during the quarter and that we had $0.9 million positive of working -- of operation -- cash flow from operations in the period. And part of that was driven from the net -- sequentially, part of that was driven from, we had an improved adjusted operating loss of $1 million during the year -- or during the quarter. And then we've been actively managing our payables. We're going to continue to actively manage our cash, and it's important to us. We did take on some additional debt financing because you never know with the capital markets and where they can go, but we feel real good about our position right now. Does that answer your question?

Ron Josey -- JMP Securities -- Analyst

Yeah. I think, to be actively managing payables, like when are those due or how does that -- is that a cause for -- like how do you manage that, I guess? And I'll go back in the queue. Thank you.

Michael L. Zemetra -- Chief Financial Officer

Yeah. I mean, sometimes we will negotiate upfront to -- I mean, instead of paying 100% in cash, maybe portions in stock and then other times, we'll be negotiating -- we inherited a ton of payables with the Slacker acquisition and so we're constantly trying to manage those. It's just really managing the timing.

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. And Mike's being humble about it, on this, Ron. Just to be clear, the $3 million is addition to the $14.3 million. So what we've done is we've increased our increased our alignment JV stake, which as you know is convertible at $10 a share, although it's a high interest rate, 8 plus (ph), and it shows the support of our debt holders and our belief in the business. So pretty remarkably, we actually today have more cash than when we closed the IPO. At the IPO, it was only $22.5 million. So we are now currently over $17 million in cash as of today with that additional $3 million post the end of the quarter.

Ron Josey -- JMP Securities -- Analyst

That's very helpful. Thanks guys. Appreciate it.

Operator

(Operator Instructions) The next question comes from Kevin Dede with H.C. Wainwright. Please go ahead.

Kevin Dede -- H.C. Wainwright -- Analyst

Good afternoon, guys. It's Kevin Dede. Yeah. Rob, Mike and maybe you just help me make sure I understand you're meeting guidance, at least the low end, right, that implies a pretty strong quarter, big sequential pop-up. And I just want to make sure I've got the expectations for the number of festivals and the other underlying assumptions that you've included straight.

Robert S. Ellin -- Chairman and Chief Executive Officer

So we've announced 22 events. We're stating that we're going to do 27 for this year, so from a number of events. As you know, this weekend, we had a spectacular weekend, we did our first -- fifth LiveXLive Presents event with an amazing lineup, Rick Ross, Charli XCX, and drove 1.1 million livestreams, this way lower cost level than it is on other events for us. So we're going to continue to do those events and -- so we expect to do a minimum of five of them before year-end.

Kevin Dede -- H.C. Wainwright -- Analyst

Okay. Could...

Michael L. Zemetra -- Chief Financial Officer

Hey, Kevin.

Kevin Dede -- H.C. Wainwright -- Analyst

Yeah.

Michael L. Zemetra -- Chief Financial Officer

So to reiterate, I'm not sure if you heard when we were speaking with Brian, again, if you look at the pipeline of RFPs on the advertising and sponsorship front, quarter-over-quarter, they're up 500% in absolute dollars. So while we're in the middle of the first innings, still early, that -- I have never seen an increase like that in my life quarter-over-quarter. And again, as we start to build more in terms of events, more eyeballs, engaging more in terms of advertisers and outreach, you're going to see the revenue start to pick up sequentially pretty substantially quarter-over-quarter.

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. The other part in that is -- is that the subscribers, a lot of those kicked in, 94,000 kicked in in December. So we're just starting to see the revenues from that and just starting to kick in and obviously those are accretive. Because we have such a unique partnership with Tesla, those customers have very little churn of (inaudible) or no churn of (inaudible). So you're going to continue to grow your revenues top line with the subscription as well.

Kevin Dede -- H.C. Wainwright -- Analyst

Okay. So Mike, I appreciate your point. Yeah, I didn't hear a little bit of the commentary to Brian, but I think I'm just losing the numbers. What was the revenue outside of music in the September quarter? Was, what, roughly $600,000?

Michael L. Zemetra -- Chief Financial Officer

You're talking about advertising and sponsorship?

Kevin Dede -- H.C. Wainwright -- Analyst

Yeah. $600,000...

Michael L. Zemetra -- Chief Financial Officer

$700,000 in Q3 and it was $900,000 -- or sorry in Q2, and $900,000 in Q3.

Kevin Dede -- H.C. Wainwright -- Analyst

Okay.

Michael L. Zemetra -- Chief Financial Officer

And then subscription revenue was about $7.2 million in Q2 and it was $8.1 million in Q3.

Kevin Dede -- H.C. Wainwright -- Analyst

Okay. All right. So your point is that that level of growth in -- outside of subscription and will help push you, given that what you've got, but I think you had six festivals all told in the March quarter...

Michael L. Zemetra -- Chief Financial Officer

We had six festivals in the third quarter. That's correct.

Kevin Dede -- H.C. Wainwright -- Analyst

Six in the third, and what's the number for the fourth? (inaudible) your 27.

Michael L. Zemetra -- Chief Financial Officer

So we publicly stated that we've streamed 22 events as of today and then we probably expect to stream 27 by the end of the year.

Robert S. Ellin -- Chairman and Chief Executive Officer

So you can probably -- you can look at somewhere between six and eight this quarter, just to simplify it.

Kevin Dede -- H.C. Wainwright -- Analyst

Six to eight?

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. We've already -- we've already done two.

Kevin Dede -- H.C. Wainwright -- Analyst

Right. Got you. Okay. And then -- and Rob, you brought up a really great point and I was hoping you could sort of elaborate on this. Do you think there is some, I guess, scale efficiencies in concert promotion? I mean, it's hard to imagine, given that you're adding so much more -- you're adding so much more to each festival that you do.

Robert S. Ellin -- Chairman and Chief Executive Officer

I mean, yeah.

Kevin Dede -- H.C. Wainwright -- Analyst

Especially with LiveZone. So could you just kind of talk to that a little bit?

Robert S. Ellin -- Chairman and Chief Executive Officer

Absolutely. And Ron, as you and I've discussed before, we just hired our sales team. We have made -- even at our Board level, we should have rushed and hired a sales team earlier. We haven't even announced our Chief Revenue Officer yet, but we have three very talented revenue team members now, which really just started six months ago. And the reason for that is that our humble belief was that selling individual festivals, although exciting, (inaudible) big-ticket items. So what we've done is, we believe that we're going to sell these in bundles. They're going to sell across the entire platform of all 27 festivals, so to 40 plus or they can sell in genres, hip-hop, selling all the hip-hops, selling all the (inaudible) depending on which sponsor and what kind of audience they are looking for. And what we've seen is, as Mike has articulated, the RFPs have just increased dramatically and that we now have so much content that is real conversations about having real partners right now.

Kevin Dede -- H.C. Wainwright -- Analyst

Well, I'd argue you have a couple of real partners already, Rob. I guess what I'm just wondering would be about the festival promotion on the expense side, given the amount of extra services that you're providing.

Robert S. Ellin -- Chairman and Chief Executive Officer

I mean, that's the exciting part of this because my costs are actually going down. So -- and they're going down for multiple reasons. They're going down because of economies of scale. We have the ability to negotiate with our truck companies, our camera companies, to negotiate cost as we add more and more content, as we are by far the thought leader in (inaudible) now. I mean, as we've talked about before, we've knocked out all of our competitors, except for (inaudible) who is still doing a few festivals, but really there is no one else that's competing even close to us. So we've been able to negotiate deals in that. We brought team members in-house to keep costs down as well as all the technology advances that we've built here, and as we launch our next generation of our app, I think it's going to give us even more room to take those costs down.

Kevin Dede -- H.C. Wainwright -- Analyst

Okay. Fair enough. Thanks, Rob. But what happens when -- I mean, especially when you start talking about streaming concerts that are outside the US, I know you're throughout Mexico, and I think Japan. What happens when...

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. So we've streamed already, Ron, all over the world, but we've been streaming in Brazil. We streamed four festivals -- I'm sorry, Kevin, we streamed four festivals from Brazil already. The last four years we've streamed from Lisbon, we streamed Jazz Montreux from Switzerland, we streamed Paleo from Switzerland as well. So we've got a staggering amount of the biggest music events in the world. And part of the beauty over there is our cost in most cases is very lower. And the reason for that is, as an example, Rock in Rio has a partnership with Globo. So Globo streams for Brazil, we get the rights for the rest of the world and our cost structure is way lower than we have -- when we are streaming alone the entire event. The same exists with Jazz Montreux as well as with Paleo.

Kevin Dede -- H.C. Wainwright -- Analyst

Okay. Okay, fair enough. Thanks, gentlemen. And nice job.

Robert S. Ellin -- Chairman and Chief Executive Officer

Thank you.

Michael L. Zemetra -- Chief Financial Officer

Thank you.

Operator

The next question comes from Austin Moldow with Canaccord Genuity. Please go ahead.

Austin Moldow -- Canaccord Genuity -- Analyst

Hi, thanks for taking my questions. I have a question at -- kind of at the intersection of your main sort of music platform, original programming and your Slacker asset. Given what we've seen in the podcast industry as of late with acquisitions and investments and the size of the non-music addressable market, do you have any plans to go after podcast listeners in any way ? I wonder if there is a way to uniquely go after that for you given that a lot of podcasts, at least the ones that I listen to, seem to be doing a lot of touring and live shows nowadays.

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. It's a great question. So we just announced a partnership with Josh Altman, Josh has a TV show called Million Dollar Listing. And from that, we announced our show, which is very similar to a podcast. Really what these podcasts are about, I think the story line is getting a little overblown in it. It's really about original programming. And I think, brilliantly, that podcasts are a unique way to try to find original programming and with the team that we currently have and the team that is just added between David Schulhof and Patrick, we've added real experts, and at the end of the game, it's very critical to us to be the thought leaders and have the best original programming in the world, whether it's a podcast, whether it's a short-form content, whether it's a documentary or it's a movie, our objective is to be the authentic voice in music and certainly podcasts are another interesting tool to add to our (inaudible).

Austin Moldow -- Canaccord Genuity -- Analyst

Got it. Got it. And my last question is, more of your philosophy around monetizing your OTT viewing. I'm just wondering kind of how you think about subscription versus ad supported viewing and what you think -- I know a lot of the commentary was around the number of subscribers, but I'm wondering what you think is the biggest opportunity for you going forward, just given a lot of what's happened in January alone with some of the biggest media and Internet companies launching their own ad supported viewing features.

Robert S. Ellin -- Chairman and Chief Executive Officer

Well, part of the beauty of this is, we're the only one in this lane. So as everybody is competing against each other and they are going head to head, the luxury is, we're the only one that are doing this in music. So -- and we're the only ones who have been doing it for -- in 25 years. So I think we are uniquely positioned that because we have so much original programming, our margins, as Mike articulated, is very higher. About 90% of our revenues are subscription; 10% coming from sponsorship, but part of the uniqueness of our model is, as we launch the next generation of the app and we've tested all these pieces including messaging and chat and merchandise, just from EDC alone, we drove 30,000 people to the EDC merch side.

So Mike likes to call it the 10-legged octopus. We have made viral here that the more of the real estate we own, the bigger and better events, the more traffic we drive, the bigger percentage of that audience is going to convert to sponsors, subscription, merch sales, ticket sales as well as this amazing data, and then at the end of the game, we own a staggering amount of VOD as well as pictures that give us multiple different revenue streams to drive us off of. Do you want to add anything to that, Mike?

Michael L. Zemetra -- Chief Financial Officer

Yeah. I mean, I think, as Rob mentioned, we're heavy believers in the subscription model. Today we're 90%-10%. I think the long-term view is, there is a balance there, where you're kind of maybe 20%, 30% on the sponsorship side, but I think they're always going to interplay. I think the day and age of just being a unilateral model has gone. And so you're going to want to bring on paid listeners as well as listeners who want to listen for free, and they don't mind your advertising or seeing advertising. So it will always be some combination, and as we swivel around different types of channels, I think those mix will be even more exciting.

Austin Moldow -- Canaccord Genuity -- Analyst

Okay. Thanks very much for the insight.

Operator

And our last question today comes from Andrew Boone with Quantum Capital. Please go ahead.

Andrew Boone -- Quantum Capital -- Analyst

Hi, guys. Thanks for taking the question. I had a quick one on just your strong net adds in the quarter. Understood that you guys highlighted kind of telecom bundles as well as marketing as well as Tesla. I'm just trying to parse that right in terms of what that looks like going forward and how much you guys control your top of funnel. Thank you.

Robert S. Ellin -- Chairman and Chief Executive Officer

So what's interesting in the space right now is that Coachella has just reupped their deal with -- three-way deal between T-Mobile, Coachella and YouTube, and they paid over $5 million for that. Coachella probably having somewhere between 8 million, 10 million, about the same amount of viewers that we had at EDC up until this year. So you've seen the signs and indications that the sponsors are ready. We're seeing the RFPs, so that excitement is coming around it, but this is the beginning of the beginning of a revolution in the space and this is all just beginning.

Michael L. Zemetra -- Chief Financial Officer

Yeah. Maybe I can help. In terms of how the outlook is in terms of subscribers and how much we control, I mean, I think today we have -- we feel pretty confident. We're obviously -- we're not spending that much in terms of cap because we have got a wonderful relationship with a very large growing entity called Tesla. And having some visibility in that, there is turning out public guidance out there and we're in every North American car. And on top of that, we can control the funnel by either dialing it up or dialing it down in terms of acquiring subs. So I think we have pretty good visibility. As Rob mentioned, we're going to be launching our new flagship product really in the kickoff of festival season, which will happen in May, and we are super-excited about that and we're in the process of planning in terms of how we are going to be marketing and are approaching that.

Andrew Boone -- Quantum Capital -- Analyst

Can you just help me to validate Rob's point in terms of low single digits is organic, in terms of coming through a non-bundled channel or is that more like half? If I look at Tesla and December sales, call it 25,000 were kind of December. You guys were back-end loaded in the quarter. Like how do I think about that versus what's in my model right now? You know what I mean?

Michael L. Zemetra -- Chief Financial Officer

Yeah. So I think that the best way to do it is we started off the year by adding 10,000 net subscribers per month. That was in the first quarter. Second quarter, we added 20,000. The last quarter, we added 30,000. And I think we anticipate that momentum to continue throughout the remainder of this year. And then as we head into next year, there will be an acceleration of growth, largely relating to this flagship product they're going to be launching.

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. This is the first time we gave a number that (inaudible) to 1 million subscribers. We're feeling very confident that the combination of Tesla, the continued traffic that is being driven from LiveXLive to drive impressions to Slacker, us adding additional channels, over 100 channels over Slacker, including some key channels with Josh Altman and others, the announcement of Nas launching his own channel on there, we are highly confident that by mid-year, we'll hit -- you'll see that 1 million subscriber number.

Andrew Boone -- Quantum Capital -- Analyst

Great. Thank you, guys.

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Rob Ellin for any closing remarks.

Robert S. Ellin -- Chairman and Chief Executive Officer

Yeah. I just want to thank everyone. It has been a really transformative and exciting quarter for the Company. We really have started to move our mission toward that social live music network. As we talked about that platform, you think about Facebook and how fast they grew with social aspect. We positioned ourselves where music is the universal language. There is no better communities than music. There is no one in this lane that is doing it. And because we have the luxury of partnering with these great partners like Live Nation and AEG and Insomniac and iHeart, we have a tremendous amount of opportunity to partner with them and grow this together. And to build those -- and as we build on this, we'll be the first fully immersive experience to the consumer that brings them as close to the live event and gives them the best seat in the house. So, again, my team -- I couldn't be prouder of my team. We continue to grow the team and we look forward to the next couple of quarters with all of you.

Operator

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

Duration: 61 minutes

Call participants:

Whitney Kukulka -- Director

Robert S. Ellin -- Chairman and Chief Executive Officer

Michael L. Zemetra -- Chief Financial Officer

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Ron Josey -- JMP Securities -- Analyst

Kevin Dede -- H.C. Wainwright -- Analyst

Austin Moldow -- Canaccord Genuity -- Analyst

Andrew Boone -- Quantum Capital -- Analyst

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