LiveOne Inc (LVO) 2020 Q4 法說會逐字稿

Good day, and welcome to the LiveXLive Media Q4 2020 Earnings Conference Call. (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 afternoon, and welcome to LiveXLive Media's business update and financial results conference call for the company's fourth quarter and fiscal year ended March 31, 2020. 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 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, 2020, and the company's other 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 views as of the date of this call, June 18, 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?

Thanks, Emily. Good afternoon, everyone. Thanks, everyone, for joining us today. I want to start by saying we hope everyone has been able to stay safe and healthy during these difficult times. Since we last reported, a lot has changed. Between the combination of COVID and the social unrest, surrounding racial injustice, there has been a meaningful impact on the live music industry.

Yesterday, we announced Juneteenth as an official LiveXLive holiday starting next year. It is important that everyone come together as a community and support each other, and LiveXLive is doing just that.

During these unprecedented times, when COVID has shut down live music concerts and festivals, LiveXLive has become one of the most important go-to streaming platforms to live digital music festivals and performances. Today, we are a full stack live streaming platform with the ability to monetize content in multiple ways and multiple times. As COVID shutdown live music events, we have quickly and successfully positioned LiveXLive as the leader in music live streaming. In the first half of calendar 2020, I'm proud to say we have already screened more music events to more people with more artists than in all of calendar 2019.

As an artist-first platform, LiveXLive provides artist, talent -- provides talent and artists, technology, production, distribution, marketing, sponsorship, with the ability for the first time ever to simulcast globally across all digital platforms. We recently launched pay-per-view, an exciting and important new initiative for LiveXLive where we will exclusively produce and live stream cutting edge, full-length pay-per-view contents. We are streaming pay-per-view as a natural extension of our long-standing expertise of streaming the largest temple of music festivals, the Super Bowl of music, Rock in Rio, EDC, Jazz Montreux of [seagate] around the world.

The platform allows LiveXLive to structure revenue share agreements with the artists via digital tickets, fan tipping, digital meet and greets, merchandise sales and sponsorship. As live music slowly reopens, we will be positioned as the first and only platform driving sponsorship and ticket sales for both digital and live.

We will be announcing, in the very near future, significant additions to our pay-per-view lineup. And we're proud to say our first small event drove over 8,000 tickets at an average of over $20 per ticket. Last quarter, we acquired React Presents: a club, concert, festival promotion company with access to over 250 live events per year, including Spring Awakening, by the largest EDM Festival in Chicago. React's calendar revenue was approximately $15 million. Although the time to hear the acquisition, React, just prior to COVID, was not part of the plan, we quickly pivoted our management team at React to expand our artist outreach team working on digital-only music events as opposed to premise events, which has worked out extraordinarily well with over 200 of our 1,300 artists stream to date coming from the Chicago team. Another recent important milestone was the announcement of our planned acquisition of PodcastOne. We expect to close imminently. PodcastOne recorded gross revenues of $27.5 million in calendar 2019. The acquisition not only rounds out and complements our music and video content stack that significantly diversifies our revenue model, adding a large advertising component to complement our existing subscription business. Importantly, we inherited -- inherit PodcastOne's experienced advertising team. We tripled the size of our current team today. And maybe most important is we bring PodcastOne's Chairman and Founder, Norman Pattiz, onto the LiveXLive senior management team. Norman is considered an icon and pioneer in the radio business. He was the founder of Westwood One, which he built into the largest radio network in America with a $4.5 billion-plus valuation in the public markets. And what I believe to be a testament to the value of LiveXLive shares, Norman agreed to an all-stock transaction.

PodcastOne generated a staggering 2.1 billion downloads annually and produces over 350 episodes per week. It's a library of over 300 podcasts, including shows from Adam Carolla; A Cold Case Files; Stone Cold, Steve Austin from wrestling; Shaquille O'Neal; Lady Gang; T.I.; Mike Tyson. With the acquisition, we have significantly -- significantly our opportunity cross-sell and cross-promote to respective subscribers, advertisers and sponsors as well as provide a collective artist and on-air count with expanded platform, increase their social media and online presence.

Since announcing the planned acquisition, we have already collaborated our 2 immensely successful video podcast with Adam Carolla's, PodcastOne Show. This is a unique live stream and video stream podcast format, which has been coined a vodcast. We added to Adam's performance this 2 favorite artists. We've streamed over 2.5 million people in these 2 shows. So to be looking both -- to be looking for both new streaming pay-per-view contents as well as some existing additions to our world-class podcast and vodcast lineup.

In addition, we remain optimistic with respect to additional acquisitions that could add new or complementary revenue verticals. LiveXLive, today, is a different company than it was 6 months ago. At the time, we were focused on ways to generate and increase digital traffic. Today, we are laser-focused on monetization, bottom line and what has become an enormous traffic and audience and branding of LiveXLive.

Our platform now stretches across 5 fast-growing industry segments: audio streaming, pay-per-view, OTT, podcasts and, of course, live event streaming. Each of these segments have the wherewithal to grow as a stand-alone business as well as to be part of an integrated model where we can monetize the same content many different times in many different ways. Like the major media networks, we can now produce, stream, curate original premium content having added new monetization features for artists including pay-per-view, virtual ticketing, virtual merchandise, subscription, digital tours and tipping, have numerous new and potentially significant revenue opportunities. We're now squarely focused on driving revenue and positive EBITDA.

Since April, our paid sponsorship has tripled across our platform, and we have live-streamed over 30 live music events with 60 million views versus 70 million total last year, featuring more than 1,000 of the biggest artists in the world, including Selena Gomez, Lizzo, John Legend, Tinashe, French Montana, Green Day, Lil Baby, Sting, Kesha.

Our management team and Board are loaded with industry leaders who have built, run, executed and exited multibillion-dollar companies. One of our numerous important management additions is our President, and my partner, Dermot McCormack. Dermot joined LiveXLive in July 2019. He previously ran AOL's Global as Global President, where he was the key player in helping to sell AOL to Verizon for $4.5 billion. Prior to that, he was Head of Digital for Viacom's Music Group, where he helped MTV build a user base of over 100 million followers. We feel we're following right in those footsteps.

We also added Bridget Baker to our Board. Outbound CNBC, Bridget was previously present of content distribution of NBCUniversal. She's involved in acquisitions, integrations totaling over $50 billion, including Bravo, Telemundo, Vivendi/Universal, Oxygen, Comcast. And as you hear more and more about distribution, you're going to hear more and more opportunities for us to expand our tentacles across those distributors around the world.

As I said, 2020 was a transformative year for LiveXLive. We are focused on the following 4 pillars: original content, programming, subscription, pay-per-view, advertising and sponsorship.

Starting off with original programming. We created a one-of-a-kind franchise called LiveXLive Presents, which is My Home To Yours. We showcased amazing artists like The Aces, Kayzo and broke baby bands and discovery of amazing artists. We introduced a new premium product as well, called Plug+ Play, which allows artists -- a live stream kit, which allowed artists to instantly plug into its platform and simulcast to all LiveXLive properties as well as through the artist home pages on their social media as well as the Facebook, Instagram, Twitter and Twitch.

We also expanded a uniquely exciting partnership with Sinclair and STIRR, the largest regional sports network, as ad-supported streaming service, allowing us to produce a slate of original program for newly launched music channels in STIRR. The channel will feature a LiveZone in the future, which STIRR will sponsor key events supporting our goal in acquiring audiences across platforms. LiveZone is our sports enter music, our red zone, right, our authentic news platform. What we like to refer is the sports in our music franchise, has increased traffic and significantly expanded our original programming slate.

More than ever, LiveZone's help bring pop culture artisan fans together with art, fashion, music, e-sports, and we'll continue to grow, and you'll see more and more partnerships across the live world, combining together with LiveXLive.

LiveXLive continues to expand distribution with partnerships and B2B deals around the globe. We have had an amazing 8-year relationship with Tesla. As many of you know, we are an exclusive partner whereby LiveXLive is pre-installed in every new Tesla car sold in America. Tesla is revving production up, and our partners remain strong. We are also in 85 automobiles as well as across major carriers: Verizon, Sprint and T-Mobile. And as we've publicly said previously, we are very close to expanding our offering to the rest of the globe and expanding our partnerships with labels and the publishers globally to be able to handle and service customers, B2B customers around the world.

We have apps across Roku, and Apple TV, and Amazon Fire, have partnered with YouTube, Facebook, Twitch, Twitter, Tencent, Dailymotion as well as a global streaming app across 40 million Samsung TVs. There are so many ways to monetize our content through these various distribution channels. Across 35 platforms, we have the ability to use -- it is basically the same content over and over again, both audio and video with mobile carriers, automobiles and OTT to monetize the same content over and over again.

In the sponsorship side, we are bringing brands, bands and fans together with companies like Kia, and Samsung and White Claw, as key partners. Sponsorships have tripled in recent months, including significant national sponsors.

Now I want to turn to what we've accomplished since April 1 and what lies ahead in 2021. We expect to collaborate with additional high-profile celebrities in the future, across all the pop culture, adding to a lineup of Shaquille and T.I. and Adam Carolla will be across podcasting, vodcasting, musics and [LeDragon], where we'll continue to expand those relationships and bring them deeper into the LiveXLive family. A big part of our strategy is building podcast and vodcast franchises, with highly recognizable names, their existing fan bases and loyal listeners.

We produced and aired our own franchise. Our Coachella, or EDC, or Rock in Rio, are digital, called Music Lives, a global live stream festival featuring 130 artists. We partnered with TikTok and a number of incredible artists to unite a global village with music. We really flipped the switch with this one. Streaming artist performances from their living rooms, backyards, rooftops, poolside and private studios. The festival broke all of our streaming records with an unbelievable 50 million views in 179 countries. It guarded a groundbreaking 5 billion video views on TikTok, with an average of over 200,000 concurrent users during the entire 48-hour stream.

That's a larger audience than Coachella or EDC or Rock in Rio has had at a live event. In addition, after the enormous success of Music Lives, we launched a subsequent franchise called Music Lives ON, a weekly multi-genre streaming series where artists promotes and cross-post across their social accounts before enduring live performances to drive audiences and we're averaging over 1 million viewers every Friday night.

A couple of weeks ago, we partnered with global superstar, DJ Kygo, to live stream his virtual Hour Festival. We debuted his new album and guarded 5 million views. The lineup was amazing: Zac Brown, Chelsea Cutler, Jimmy Buffett, OneRepublic. And we sort of broke the COVID 1.0 as we slowly come out of this very difficult time. OneRepublic performed for the first time inside of the theater. We continue to extend our footprint with our iHeart partnership, including recent events such as Elvis Duran, Stay At Home Ball and Rise Up New York. Just last night -- last month, we extended our live streaming partnership through 2022, which includes more than 25 events. We have exclusive international rights to distribute their top events, the iHeart Music Festival and iHeartRadio Jingle Ball. We are the first company to ever crossover, live and digital, which we've been doing so far for the last 4 years by streaming Rock in Rio and other events globally.

Going forward, we're actually putting on live events that LiveXLive presents with a digital element. Our next stop is going to be ticketed events at venues with pay-per-view and ticketing, digital, the aggregation of the most exclusive pop culture music events and ability to not only launch channels with their full slate of original content but also produce and own events and create franchises and drive new revenue streams, has created a new and unique opportunity for sponsorship and advertising to reach millennials.

Distribution and sponsorship. Advancing strategic distribution partnerships and sponsor remains a key priority. Right at the gate, we partnered with Facebook Oculus Venues to live stream Music Lives to the world. This introduced our content to a whole new set of global fans, with the addition of Oculus as well as a partnership and distribution sponsorship with TikTok, we're already on track to more than triple our sponsored revenue during the June quarter. This month, we released a new unified audio and video smart TV app, experience on Samsung TV, Apple TV, Roku, Amazon Fire to follow soon, reaching an estimated 90 million monthly active users. The app really offers that one-stop destination for audio and video.

With that, I'm going to hand this off to Mike Zemetra. Mike, thank you.

Great. Thank you, Rob. We ended our fiscal 2020 with strong results and in line with our prior annual financial guidance. With $38.7 million in revenue, adjusted operating loss of $12.6 million and record KPI in fiscal 2020, including 25% net paid subscriber growth year-over-year and live streaming 42 events to over 69 million viewers. Moreover, we had another record quarter in Q4 2020, including Q4 revenue of $9.9 million, an adjusted operating loss of $2.2 million and contribution margins of $2.2 million. Given this is our fiscal 2020 earnings call, the first portion of my prepared remarks will provide commentary on our fiscal 2020 performance with the latter part on Q4 2020 financial results as compared to Q4 2019.

More specifically on fiscal 2020. Fiscal 2020 consolidated revenue was $38.7 million, up 15% year-over-year from $33.7 million in fiscal 2019 due in large part to our paid subscribers year-over-year, offset by a slight decline in our advertising and licensing services. Ending fiscal 2020 paid subscribers grew to 849,000 or by a net 169,000 from ending paid subscribers in fiscal 2019. We ended fiscal 2020 with 93% of our revenue from subscription and 7% from advertising and licensing.

Fiscal 2020 contribution margin grew 136% (sic) [132%] year-over-year to $5.9 million as compared to $2.5 million in fiscal 2019. The year-over-year improvement of $3.4 million was driven by the growth in our paid subscriber base, coupled with margin improvements from our subscription services of approximately 34.2% in fiscal 2020 as compared to 32.1% in fiscal 2019. Offsetting this was spending approximately $7.3 million to live stream and produce 42 events in fiscal 2020 at an average of $174,000 per event, an improvement of over 50% year-over-year. By comparison, we spent a total of $8.3 million in fiscal 2019 to produce 24 events or at an average cost of $345,000 per event.

The year-over-year improvement in our average cost per event was largely driven by cost efficiencies realized from the scale of our business, coupled with an increase in the number of co-sponsored events with partners such as iHeartRadio. Heading into fiscal 2020, we expect to realize more cost efficiencies across our live productions as we augment 2 more digital-only and pay-per-view events. Fiscal 2020 adjusted operating loss was flat year-over-year at $12.6 million.

Now I would like to discuss the financial performances in Q4 fiscal 2020 versus 2019. Q4 2020 revenue was $9.9 million, up 8% year-over-year from $9.2 million in Q4 2019 due to year-over-year growth in paid subscribers, offset by a slight decline in advertising and licensing, which was partially impacted by COVID-19 beginning in March 2020.

I will get deeper into revenue drivers, along with the COVID-19 pandemic impact across our business later in my prepared remarks.

Q4 2020 contribution margin of $2.2 million was flat year-over-year despite an increase in revenue over the same period. This was largely driven by a onetime correcting entry booked in Q4 2019 to reduce cost of sales and properly state accrued royalty obligations by $0.4 million. As a result of this correcting entry, our subscription business generated approximately 38% contribution margin in Q4 2019. Excluding this correcting entry, the contribution margin would have been approximately 33.7% or approximating Q4 2020 contribution margin of 34.7%. Q4 adjusted operating loss was $2.2 million or slightly higher versus $1.9 million in Q4 2019 driven by higher overall corporate costs of $0.6 million from the addition of new personnel in Q4 2020 versus Q4 2019, including a new president and other initiatives to support the overall growth of the company. Offset by $0.4 million improvement in music services driven by reduced marketing spending in Q4 2020 versus 2019. In addition, we also capitalized approximately $0.6 million of internally developed software costs in Q4 2020 versus $0.9 million in Q4 2019.

Now I would like to discuss the Q4 financial performance across our Music Operations and corporate divisions. Turning to Music Operations. Our Music Operations consists of our audio and Internet video services along with our live stream operations, including sales, marketing and product development, and to a lesser extent, certain general and administrative costs. As previously discussed, our Q4 revenue of $9.9 million was up 8% from $9.2 million in Q4 2019, largely due to growth across our paid subscribers year-over-year. During Q4, our Music Operations generated $9.2 million in subscription revenue as compared to $8.4 million in Q4 2019. Driving this improvement was a 25% increase in ending net paid subscribers. As a reminder, we ended Q4 with 849,000 paid subscribers, up 169,000 from Q4 2019. The annual net increase in paid subscribers was driven in part by the strength of our B2B consumer-driven business, which includes Tesla and also from the increased net additions across our consumer paid subscription services. Note that during the latter part of March 2020, with the onset of the COVID-19 pandemic in the U.S., our subscriber growth began to slow across both our direct-to-consumer and B2B partners. We expect this trend to continue at least through the first quarter of fiscal 2021, which is reflected in our fiscal 2021 guidance.

Q4 2020 contribution margin of $2.2 million was flat year-over-year despite an increase in revenue over the same period, largely driven by the previously discussed onetime correcting entry booked in Q4 of 2019 to reduce cost of sales. During Q4 2020, we incurred approximately $1.2 million in production costs to produce 14 events at an average cost of approximately $86,000 per event, representing a 68% improvement in the average cost per event when compared to Q4 2019. As previously discussed, we are continuing to realize massive cost efficiencies on production as we scale our live events, and we foresee this trend continuing through Q1 2021. Comparably, we incurred $1.3 million in Q4 2019 to produce 5 live events at an average cost of approximately $268,000 per event. Q4 Music Operations adjusted operating loss was $1.1 million as compared to $1.5 million in Q4 2019 and year-over-year increase of $0.4 million was largely driven by lower marketing and operating expenses to support the various growth initiatives and events in Q4 2020, offset by the previously discussed decline in internally developed software cost in Q4 2020.

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. Q4 corporate adjusted operating loss was $1.1 million as compared to $0.5 million in Q4 2019. The increase was largely due to higher personnel costs, coupled with higher overall professional fees to support the various growth initiatives throughout fiscal 2020.

Now I would like to discuss the trends for operating expenses year-over-year. Excluding noncash stock-based compensation, amortization expense, depreciation and certain nonrecurring operating bases of $5.7 million in Q4 2020 and $6.6 million in Q4 2019. Q4 2020 operating expenses were $4.4 million, which were slightly higher versus Q4 2019 of $4.1 million. The Q4 increase was largely due to $0.5 million in higher corporate G&A expenses as a result of increased personnel and professional fees coupled with a decrease of $0.3 million in internally developed software capitalization, offset by the previously discussed $0.4 million improvement in music services, largely due to lower marketing expenses.

Turning to our balance sheet. We ended Q4 2020 with cash and restricted cash of $12.4 million, slightly down from ending cash and restricted cash of $13.9 million at Q4 2019. The year-over-year decrease was largely driven by net cash proceeds from financing of $5.8 million, offset by net cash outflows from operations of $4.9 million and investing activities of $2.4 million per year. The year-to-date net cash usage from operations was largely driven by our adjusted operating loss offset by net cash savings in our working capital driven principally by active management of our payables throughout fiscal 2020.

Now I would like to update you on a few additional items. In May 2020, we acquired PodcastOne. As a reminder, PodcastOne is one of the leading leaders in podcasting, producing more than 300 podcasts per week and generating over 2 billion downloads annually. Full calendar year 2019 revenues were $27.5 million, principally driven off of advertising. Assuming we acquired PodcastOne effective April 1, 2019, pro forma revenue for the entire fiscal 2020 would have been approximately $56 million. Historically, PodcastOne was growing its top line at 20% per year, and gross margins were slightly better than our subscription services, which are mid-30% today. We acquired PodcastOne with issuance of approximately 5.5 million shares and expect to close sometime in July, which is 3/4 of our fiscal year. We are excited to have Norman Pattiz join our team, who will also become our third largest shareholder upon closing the acquisition.

As of March 31, 2020, we had approximately 167,000 warrants outstanding and approximately $4.2 million of potential common stock underlying our secured debentures and unsecured convertible notes. We ended the quarter with approximately 59 million common shares outstanding. In April 2020, we obtained a $1.99 billion loan under the SBA's Paycheck Protection Program, which we plan to file for 100% forgiveness in Q2 2021. As of today, we have a total of $8.9 million in secured convertible debentures outstanding.

Lastly, we amended our credit agreement with our secured debenture holders in Q4 2020. As a result of this amendment, we're required to transfer $6.5 million of our cash into a restricted cash account. This is not a principal change as we have always been subject to holding a minimum cash requirement, which was $6.5 million throughout the entire fiscal 2020.

Turning to financial guidance. Full year fiscal 2021 guidance is as follows. Please note, this includes 3 quarters of the impact from PodcastOne, assuming the planned acquisition closes on July 1, 2020.

Revenue of $61 million to $67 million, representing a 65% increase year-over-year at the midpoint, with a mix of advertising revenue to be between 35% to 40% of our consolidated fiscal 2021. Annualized contribution margin of 30% to 35% of our revenue, an improvement of over 100% year-over-year versus fiscal 2019. Adjusted operating loss of $2.5 million to $5 million, representing a 70% improvement year-over-year at the midpoint.

With this, we are forecasting our combined music services segment to be profitable in fiscal 2021, with only the corporate overhead adjusted loss between $4 million to $5 million. Capital expenditures, which principally include internally capitalized labor costs in the range of $3.5 million to $5 million. And our expectation to live stream over 100 music festivals and events, an increase of over 140% year-over-year.

Now I would like to provide some color and guidance on Q1 2021. Q1 will include: one, a full quarter impact of COVID-19, which included the loss of over $8 million in forecasted top line revenue, including all-live on-premise music events such as our Spring Awakening Festival, and up to 50% declines in our programmatic advertising revenue; two, volatility in ending subscribers. Given the current lockdown on production initiatives within some of our larger customers, we do not expect ending subscribers to grow substantially in Q1 2020 -- '21 as compared to historical growth; and three, management-led cost and savings initiatives in Q1, including payroll and operating expense reductions totaling approximately $1.5 million of savings in Q1 2021. Factoring all of this, we expect the following in Q1 2021. Revenue between $10.4 million to $10.7 million, representing an increase of 10% year-over-year at the midpoint, an adjusted operating loss between $0.2 million to $0.5 million, an improvement of over $4.2 million or 92% year-over-year at the midpoint. Up to 40 live events and 70 million live views, matching what we did for the entire fiscal 2019 and sponsorship in excess of $1 million of revenue or 3x greater than any quarter since our existence.

Lastly, I would like to conclude with some final thoughts. Fiscal 2020 -- '21 will be a turning point in our evolution, showing massive financial progress, diversification in our revenue mix and radical improvement in our bottom line cost structure. We are laser-focused on strong pathways towards growth and profitability and execution. That concludes my prepared remarks.

I would like to turn it over to Rob for final thoughts, and then we can open the line up for Q&A. Rob?

To wrap up, fiscal 2020 was a year of incredible growth and progress for LiveXLive. COVID is proven to be a massive accelerator for streaming. Goldman Sachs recently raised their estimates on the back of faster-than-expected paid streaming adoption and now expect the streaming market to grow over 12% to reach $75 billion by 2030. As well as global paid subscribers exceed $1.2 billion in 2030. The LiveXLive platform is perfectly positioned in the center of the storm of the music ecosystem with audio, live event streaming, live events, pay-per-view, podcasting and over-the-top. Along with production, we believe these present 5 enormous opportunities to create both substantial revenue and shareholder value.

We have created a streaming music and content stack unlike any other company with audio, video, live music, social sharing, distribution, physical and transactional.

Thus far, our growth has largely been based on subscription-based revenue. We were previously focused on generating traffic and audience and building brand awareness. Now we are focused purely on monetization, driving revenue and generating cash flow. We are adding a meaningful advertising component with PodcastOne. And the scale of our traffic is now attracting national sponsors. Next year, we expect 40% of our revenues approximately to come from advertising sponsorship ticketing, with the remaining being subscription.

At the core, we are a technology company. With a world-class management team that enables audience to get the best seat in the house, anywhere in the world. We have built a competitive moat with great technology, new monetization paths, ownership of key assets, and a large subscriber base. Fantastic global partners, original programming and curation and the lowest cost of content I've ever seen at under $20,000 per hour for AAA content. Large-scale live music events will not come back meaningfully for this year, and perhaps even until the middle of next year. We have reached a pivotal moment in the music industry. Streaming numbers are topping those of television broadcast and artists are coming to help us navigate the new world, recognizing that we have the tools, creative ability and great partners during the time of unprecedentedly change. LiveXLive is well positioned to win, not only today's new normal of music but when live music comes back, it's going to come back bigger than ever. And that's we'll return bigger than ever. We have radically improved our revenue mix and profitable outlook. We are still just at the beginning of the stages of our story and intend to grow both organically and through M&A. Stay tuned to LiveXLive and stay healthy. We look forward to any questions anyone has. Thank you very much.

(Operator Instructions)

Our first question today comes from Ron Josey with JMP Securities.

Maybe 2 for Rob and one for Mike on just guidance. So Rob, with the 60 million live views since April 1. I'm wondering if you can unpack those or talk a little bit more about those viewers. Are they new to the platform? And are -- how often are they coming back given the franchises that you have to offer with Music Lives ON and everything else. So that's question one on just the 60 million live views, how often are these users coming back? And are they new? And then you mentioned also, Rob, international expansion with a partner. Can you just talk about maybe any insights on timing or how we might sort of understand the potential benefits of going international there? So that's 2 for Rob.

And then Mike, just on guidance, very helpful for the details on the full year in 1Q. Can you just help us understand a little bit more on how you view advertising and sponsorship revenues, sub revenue and then how React Presents sort of is included in that? And given PodcastOne's included in guidance, any reason why that wouldn't close? And then lastly, it looks like -- sorry for the long question, but it looks like adjusted operating loss is much lower in 1Q, but then I guess, loss sort of gets higher, if you will, as the year goes on. So talk about why. And then any insights on why cash with restricted cash coming up. Long question, but great to see the momentum here. And hopefully, you can help there.

So a lot of questions in one. I guess I'll start with the audience, right? So the audience and the mix of the audience is really unique. And that because we continue to -- as we talk about, Ron, from day 1, most of our traffic is going to come from the artists themselves. So because we're across all genres of music, right, we go from Selena Gomez to the Rolling Stones during this quarter, right? You're going to see traffic from many different demographics. So it's been staggering. And the 60 million is exciting enough, but the 5 billion effectively engagements, which is kids hashtagging and putting a LiveXLive video. Our brand is getting some real recognition. Our brand is getting out there. The inbound calls as you know, we've been chopping wood and breaking bricks for the last 4 years. The inbounds are coming in, and it's really exciting to see the opportunities there. And I think you're going to see more and more of those convert to free subscribers, paid subscribers. As I said, we sold 8,000 tickets in pay-per-view. We didn't do any marketing in that. It was our first one of it. You're going to see -- going forward you're going to see it on a weekly basis. You're going to see us monetize that traffic now that's coming in. So that side is really exciting.

On the podcast side, Norman may even jump in here in a minute. I think he was on a plane. So unfortunately, I think his plane is late. But he was trying to join here as well. The deal is closing imminently. The company is already integrating, right? We've already done Adam Carolla where we've taken out of Carolla and we added his 2 favorite music stars. So think of taking a podcast now turning it to a vodcast. A podcast would be a radio show, a vodcast to be a TV show. And now just think of it like a variety show, like Jimmy Kimmel or Saturday Night Live, we've added those elements to it that are really exciting and responses are really excited about it.

We'll stick with -- your third one. Ron, you have the third that was most important?

As -- you mentioned international. I was curious how that does it. But then, Mike, I want to make sure there's time on just the guidance and unpacking that and just the cash.

Yes. That's a critical question on the international. And what we told the Street is we'll have the licenses, either by acquisition or internally. As you know, Jerry Gold and Mike Bebel have done these licenses many times, right? Michael at Napster and PressPlay, [Randy versus] digital. And Jerry was CFO, Warner Music. So we have the right people doing this. They've done it so many times. Times I owned [Tuza] previously. So this is an interesting time and intriguing time that we did say there'll be an acquisition that is coming up very shortly, right? So one of those will give us those global licenses. And Ron, I know where your head is going with that. We think there's a massive opportunity that as you look at Spotify's numbers and Netflix. All of our revenues today from a subscription side come in the U.S. as we add those licenses, as you know, those companies, 50% of their revenue is coming overseas. So we think that's a huge growth opportunity for the company very shortly.

Yes. Okay. Ron, so in terms of guidance, and I will get your questions, I'll try to go in order here. So you were asking a little bit for the mixes, advertising, subscription or React, how do we think about that? I mean what I previously said that 30% to 35% of our revenue will come from advertising. That's going to be some combination of PodcastOne and new sort of sponsorship that's coming off our platform. And there is some COVID impact in terms of our historical programmatic advertising. And so there will be a little bit of decline there.

As far as Reacts, I mean, we're -- the government has basically shutdown live events so our forecast doesn't assume any live events are going to come to fruition this year. So any event that does open up, it will create some additional revenue opportunity. But at least for the foreseeable future in this fiscal year, we don't see that happening.

On PodcastOne, we're anticipated to close sometime in July, and we feel very confident on that date. So I don't think anything is going to move variable there.

As far as Q1 in terms of the adjusted operating loss, as I mentioned before, we instituted cost savings in the beginning of the quarter that totaled about $1.5 million. And those aren't going to be recurring. Those cost savings were instituted largely as a result of the uncertainty of COVID-19. They included payroll reductions for both Rob and myself, substantial that went throughout the entire quarter and including some operating expenses and, et cetera, that we were able to negotiate down. Those aren't necessarily permanent. And so you're getting an arbitrary benefit of about $1.5 million in the period. Does that make sense?

It does.

Okay. And then on the cash, as I mentioned before, we negotiated new terms with our existing lenders, which included covenants kind of going forward, financial covenants. As a result of that negotiation, we put about $6.5 million of our cash into a restricted cash account. But fundamentally, this isn't any different with how we were operating because there was always a minimum cash requirement, that $6.5 million, throughout the entire fiscal 2020.

Our next question comes from Thomas Forte with D.A. Davidson.

I had 2, then I wanted to get back in the queue. So the one -- the 2 questions I want to ask first and the ones I get asked most often by investors. How are you able to pivot your strategy so quickly? And then what's the role of live festivals in your strategy when they return in fall?

Yes. So great question, Tom. I mean the reality is we haven't really had to pivot tremendously from our core strategy, which was always to deliver digital festivals, right? When they started from a live event and were delivered digitally, right? What we've been able to do is elegantly, right, be able to take and enhance our team with the Chicago team we acquired React. And remember, we only acquired that for $2 million of junior debt, right, in that subsidiary. We took that team. We folded them in with the rest of our artist team and we've been able to secure more talent than we've ever been able to secure. So it's really exciting to see. And again, we've had over 1,200 artists this year so far versus the 275 we had last year. So 4, 5x in amount. It's just going to keep growing. And I think this was -- this is an inflection point that Rome wasn't built in a day. And like ESPN, like this was built, I'm not sure that anyone fully believed in this before COVID. Right now, they're actually realizing the staggering audiences that these are describing. As you probably read this week, BTS did a pay-per-view event drove $20 million in revenues. This isn't going away. And so I highlight that because as we move to live music. I'm a huge fan of live music. I love attending live music, right? But I'm also a big believer of live music will come back bigger than ever. 0.5 billion millennials attend and Gen Ys attends music festivals and 2/3 of the world goes to live music events. So it's going to come back. It's a matter of time when it comes back. It's exciting to see that Coachella announced that they're going to come back. Hopefully, if everything goes well in April. But that's still a long time away. And when it comes back, we're sitting there really where to catch this wind. We're across -- we're a full 360 play from our own live events to our amazing partnerships with Live Nation, like we announced today with Juneteenth. We're so proud to be doing this together with them. Our partnerships with iHeart, which we just expanded. So like ESPN did in sports, we've maintained our independence, we maintained our relationships, and we're the only ones in the world that are doing this as a day job. There's some people sitting out there and playing with the concept of being a competitor. But we have at least a 4-year head start. And I think it's going to be really difficult for anyone to truly compete in this. And if you believe in that authenticity around music, we've now can comfortably say that we've created an entire channel, a platform around authentic live music. And I hope you all get an opportunity to see LiveZone and all the components of that, that tie in very much to our business plan of being the ESPN of music.

Our next question comes from Laura Martin with Needham & Co.

I'd like you to parse for me -- help me understand this. So I love the sort of exploding new revenue stream thesis and growth drivers that you're talking about, Rob, coupled with these words that we're going to focus on monetization. First and foremost, Wall Street always loves that. All of which makes me feel like this should be a strong double-digit grower. And then -- now Mike gives me guidance, and he says, well, pro forma last year, it was $56 million, and now it's going to be $61 million. That's a 9% grower, like growthy to me. So tell me what it takes to get this company to 20% revenue growth or more at rising free cash flow. Is it just COVID needs to end? You need to have more ad revenue, which is higher margin? Like how do I get the numbers to match the storytelling of monetization focus on a rapidly expanding revenue like stream-based?

Do you want me to take that, Rob?

So let me give you a -- let me start with it, Mike. I'll give you 40,000 feet lower, great question, right? So Mike, and I don't know if everyone heard him, said that operationally, right, separate from the corporate overhead, right? The business is now moving into EBITDA positive today, right? So that's really exciting because last year it was $12 million to $15 million in negative EBITDA. We've been building a brand. We've been building traffic, right? We couldn't even really start to think about monetization. You and I have talked about this a lot more. We even start to hire a sales force until December. And then 3 months later, you had COVID, right? Well, now we've got a massive sales force with PodcastOne, right? And now you have a massive opportunity in terms of revenue. So where those guidance that you're looking at, those previously, right, when we bought React, that was $15 million of revenues. We counting that as 0 today, right, because I'm not smart enough to predict what day live streaming is going to open, but let's hope that some component of that piece where our business comes back. Second is, we're not counting any component of the Rock in Rios, the EDCs and so on that we've had massive partners and distributors, including Tencent, MTV International, major sponsors and Kia and Samsung. We can't count on that because the first we've heard of anybody opening is Coachella is next April, right? So we want to be very, very cautious and conscientious of that, right? And then last but not least is when you look at those numbers, remember, PodcastOne is we're only counting. We're not closing, right, until July 1, let's call it. So as we close that, right, you're only going to get -- because we're at March 31, you're only going to get 8, 9 months of their revenues. Does that help?

Excellent answer. Mike, do you have anything on this?

Yes. And then I think you hit it on the button. There is COVID impact across our business. I mean certainly, some of our larger OEM providers like Tesla are impacted. On top of that, Rob mentioned, React, we are anticipating upwards of $15 million plus in revenue. That has kind of put on the sidelines. And our advertising business is having a little bit of a challenge from a programmatic perspective. So when you take that and you look at PodcastOne as -- coming in for 8 to 9 month of the year, not the full year, we actually are growing at plus 20% at a quarter over year basis.

Perfect. Okay. That's a great answer. My other question is hidden assets. One of the things Wall Street tends to undervalue is human capital. And you just brought this 77-year old juggernaut called Norman Pattiz onto your Board, and he's the third-largest shareholder, so he's aligned with public shareholder interest. Could you walk through -- maybe he's on the call, but maybe it's better if you talk about it so you can brag. Could you talk about what hidden asset value he brings in a dealmaking business like yours that Wall Street is probably missing? In what ways, he can add value specifically to the income statement, either revenue or lowering cost for you?

Well, I think to start with, Laura, on that as I speak to Norm probably 7 or 8 times a day, right? Why this call is happening. I'm getting text. So we've already proven in before we closed the deal that we could put the #1 podcaster in the history, they wanted to get us book of records and be able to take that and combined pop culture of podcasting, right, sort of radio show to be a TV show and add music to it, right? And more and more of that is coming, right? You just saw today, we just announced a deal with Shaquille O'Neal. Shaquille O'Neal is a podcaster on our platform. For now, he's doing a major event with us in a couple of weeks, right? So you're going to see a lot of that crossover. And then between our team's relationships, right, it's fantastic having Norman there, as relationships to the agencies and the managers and the celebrities themselves, right? It's great. And what I love about Norman is when you talk about radio guys, Malcolm is in, Bob Pittman, these guys, they're just machines at selling, right? A lot of people have said to me that I didn't start selling earlier, but I never thought I had enough to sell yet, right? And I wouldn't get enough for it that I would discount the value we'll be getting because we didn't have full channel, right? We built this entire platform in $35 million, right? So having Norman there, right time, right place, right? It's a huge, huge addition to the company. And he is actively engaged on a daily basis. And I would say he's about as enthusiastic as I've seen them because I've been negotiating this deal with them. As you know, we've talked about this deal for almost 1.5 years with them. He's about as excited about his business and is excited about the crossover. One of the great parts with Norman on top of this of him as the salesman, right? Because he doesn't stop selling every day as he also has an army behind him. He's got 12, 13 guys behind him. We had 3 people in sales. We just went from 3 -- 3, 4 to 15 overnight. And the energy in the room is pretty spectacular. And Dermot just left town. He was just sitting with their sales force, right? And everyone's working together the best they can during COVID, some on Zoom, as you can't get together, but the sales forces are really excited. And as Mike articulated, our sponsored revenues is up 3x from any quarter before. And I think you're going to see that continue to grow.

Our next question comes from David Bain with ROTH Capital.

Great. I was hoping we could dive a little further into pay-per-view. It seems like that's potentially a significant franchise to monetize in the near term. I was hoping to kind of get an understanding of kind of the typical revenue share, maybe margins to LiveX? And if you have any data points in terms of back-end subscriber monetization, I know, Rob, you kind of touched on that, but those have become auto free subscribers through ticket buying. Are you already seeing a higher percentage of those moving over to subscribers? Or is it still a little early to gauge that?

Yes. I mean it's kind of captain obvious, right, that very different and Laura asked the question. And Ron asked a question, which is how does your traffic convert, right? We're just learning how it's going to convert. When you get someone into the funnel, right? They're coming in for free. But you know one thing for sure, when you're getting them in with a credit card, right, they're a lot closer to your heart, right, and your soul. So when they come in, as a subscriber, I'm buying it for an average of $20, right? Our whole offering, right, for the year, right, it's only $40, $50. You get really excited about what that penetration could be and what percentage you can convert. If you converted 20%, this is a lightning ride.

Absolutely. And on the revenue share and margins, just so we can get an idea to kind of look at our model and play with that a little bit?

I'm sorry, Dave, say that one more time.

On the revenue share, just again on pay-per-view and margins.

Yes, I can take that, Rob. So David, we're in the early stages on -- in terms of this model. And so in terms of revenue share, as we're building this, this is about buildings in the early stages. And it will also be variability on the artists. But just a meaningful amount of economics are going to come to us because not only are we streaming it across our own platform, we're also producing. So there's different ways in terms of monetizing. But it's still too early to give sort of indicative terms.

Okay. Okay. And then can you speak to PodcastOne, like compensation on the talent front. One, can stock be use to attract and retain talent you mentioned those -- some of those talents will become franchises in about themselves. And then could we get a sense as to how advertising revenue in the PodcastOne entity has held up as COVID hit, are you seeing some pent-up dollars in advertising fuel back into that if it has declined?

Mike, do you want to take that? Do you want to...

Yes, I'll take that. So I mean certainly, there's been an advertising impact across podcasting in general. It's not anywhere to the severity like what we're experiencing on our programmatic side. So my -- our thought process is if PodcastOne historically was a 20% grower. That's probably going to be the impact, at least, what we're seeing in the early stages of COVID, kind of that 20%. So yes, and that's built into all of our forecasts.

Okay. And then last question just on, I guess...

Just going back to that, David. In terms of your question before because I think it's a really important question. And yes, we've just -- again, for the first time in a long time, we've start to get our mojo back, right? So as you know, we've converted some of the record labels and the publishers going back at $4.50 a share. When the stock came down, that was impossible to do. As the volume picks up, it makes it way more intriguing. I think the same thing is for celebrity talent. We've just announced Meli and Jeremiah, right? We have Nas, who's a partner. I think you're going to see way more of those partnerships, right? And you're going to see them all wanting an equity component. They're all going to want to drink that Kool-Aid that Dr. Dre did when he made his money in beats. And we're seeing a very, very strong reaction. And I think you'll see that across vodcast -- podcasting, vodcasting as well as our ambassadorships as artists become more and more engaged and more and more part of our platform, more part of our family as we grow.

Awesome. And then just final one. And just quickly, if you could just spoonfeed me, I was trying to piece apart the profitability piece and guidance. Are we looking at sort of a sustained profitability or at least EBITDA-positive kind of at the end of this fiscal year? Is that kind of where this is if I can kind of think about it that way and then simplified cash.

David, if you could think about it...

Mike, let me take that 40,000 feet for a second, right? As we publicly said, we bought Slacker 2.5 years ago, it was lose -- it lost $180 million and had never seen a day of profitability. We turned that business extremely profitable, right? When we announced the deal for React, we said it's extremely accretive, right, in terms of revenues and bottom line. When we announced PodcastOne, we said the same, including balance sheet, right? So these are way easier, right, to transform those businesses and turn them profitable. So what you can start to look for is, and this is way before COVID, right? This is just our management's expertise and knowledge of both the public markets and private markets. When we worked to make it to the public markets, we made the determination. Our traffic was starting to get there. Our audience was there and our brand started getting some recognition. We had to start moving towards more and more, get our cost structure in place, get the economies of scale in place and move towards bottom line numbers.

Got it. Okay. And I guess just congrats on the ramp in new revenue sources and simultaneous improved profitability.

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

I wanted to go back, Rob, to something that you've already touched on and you had in the Q&A, which is that 6 months ago, you were pretty much exclusively a live-event company. You've successfully built a virtual events company to replace your revenue and you hit your numbers. So looking at a year or so from now when live events come back, do you think they replace the virtual? Or do you think they build on top of the virtual so now you have a larger company than you would have, absent having built this new virtual business during the pandemic?

Yes. I apologize. I know my speech are a little bit long, so they got lost in there. What we've said is we look forward to the day live music comes back. And I've always been enamored with the pay-per-view market, as you know, we've talked about it a lot, right? I help start -- I was in the pay-per-view market going back 30 years ago, literally going back and boxing and announced Magic Johnson and Michael Jordan 30 years ago. So I'm a huge believer in it. So what I do -- what I believe is that if live comes back, there is an intriguing combination that is very powerful. That if you could sell 150,000 tickets to Coachella, there's got to be a few tickets you can sell digitally. And the same thing, if you can sell tickets to a concert, whether it's one artist or multiple artists, and just watching BTS last week and watching what we're doing on our platform that we sold over 8,000 tickets without any marketing so far at all, right? And you probably hadn't heard of any of those bands, they're mostly jam bands. I think that there is a brand-new revenue stream that is coming here that is not in our guidance today. We have to learn and we got to educate, get smarter about it, but the fact that our technology is working. I think the ability to monetize through tipping, through gifting, through pay-per-view is going to be an enormous business. And when one band does $20 million in a day, right, stay tuned for what's coming with us because you know we stream the biggest artists in the world, right? So if you have the biggest artists in the world, whether there's Neder, whether there's Selena Gomez, whether it was BTS across the board, right? We've had them all on our platform. So if you know that it works one band can do $20 million in a day. We're still a small company. Pay-per-view could be a meaningful piece of our business in the very, very near future. And I would say, stay really close to your chair because those same artists that have worked with this before, don't have a forum today, right? There is no touring. There is no pay-per-view. There has to be a way to monetize. So because of the -- our content team, like Garrett English, who ran all of MTV live; the curation we do, it's not just about putting on the performance. And I think what's going to happen is we're going to start to see artists do what Chris Brown did with [D&E's], and artists going to get more creative about it because they have to, right? The experience of just playing from home isn't going to work forever, right? And neither was live streaming from Rock in Rio. So artists have to do something that is unique. And I look forward to that. I just see more and more of it. I can't tell you, Barry, how excited we are to see Kygo perform from -- literally, from a lake, right, and to see OneRepublic back in a theater, there are no fans in there yet, right? And just like the U.S. Open, but there's going to be an opportunity that we're going to be able to sell tickets to a live event and sell tickets to pay-per-view simultaneously. And as 5G comes, right, you're going to see enormous -- whether it's also someone else, you're going to see enormous revenues come in tipping, and we've already seen it from a donation standpoint, which effectively is tipping, but if it's charity, right, the iHeart event, the [GC] they raised $125 million, right, in tipping. So I think there's enormous opportunity and I love, love, love having credit cards versus people just coming to visit, watching music for a minute.

Next question is around advertising revenue. And you've talked about, you've built an incredible content portfolio, but your advertising revenue to date has been fairly minimal. And I know that's not something you've really focused on until recently, as you've said, you're adding a very strong advertising team with PodcastOne. How many folks are there? Have they started to look at the LiveXLive portfolio and what's their impressions? How quickly do you think that advertising team can ramp up and monetize what you already bring to the table on that merger?

So I mean numbers -- it's game of numbers, right? More salespeople you have, right, the better those salespeople are, the better shot you can have at advertising. Now if start from the premise of that podcasting, and when you hear this from Norman, you'll get an understanding that it's like the people that watch podcast, they watch it from beginning then, like the average amount of time watches like 40 minutes, right? So the excitement that their team has, right, around selling live music and selling our offering, it's very unique. I mean I think -- Barry, I think that this is an inflection point. I've gotten beaten up. As you know, just about every one of you on the phone has beaten me up that I didn't start advertising earlier, but I didn't want them to undersell the property. And you're starting to see on Friday nights, you saw White Claw, I'd be surprised if you don't see another advertiser this weekend, right? You're feeling that momentum, right? And this is a tough time to feel momentum for anything. But we feel momentum, and we feel excited about where advertising is going. So I think stay tuned and you're going to see more Kias and more Samsungs. And when distributors and the sponsors crossover, right, like Kia and Facebook, it's even more exciting because it gives you traffic as well as money.

Okay. My last question is around M&A. On both this call and your prior call, you've dropped a lot of little teasers in about things to come for M&A. On the last call, you had talked about, I think you used the word imminent that a transaction was imminent. Was that PodcastOne? Or is kind of Moby-Dick still out there waiting to be caught? And what is your -- if you can kind of wrap up all of the comments that you've made on M&A and describe to us what is your current M&A posture? What are you looking to add to the portfolio? And what kind of financial parameters? One difference now than versus a quarter ago is you have a much stronger equity to use, and you're using that, for example, with PodcastOne.

So great question. The answer is that PodcastOne was not that acquisition, as I said before. We believe that there is another acquisition that is very close, right? And we're super excited about it. And it's a lot easier than it was before, right? So remember, in the PodcastOne acquisition, we picked up $27.5 million in revenues and Norman became our #3 shareholder, right? Got you in the company, which is fantastic. Now on top of it. So -- and for -- going forward, that was really tough in this market, right? You're in the middle of COVID. The stock is not doing well during that period. Now our stock is doing better, right? We're now back at our highs, we're not in back in the middle of our range. But the exciting part is that people are going to look at our stock in a very different way. And we're already starting to see it from some of the royalties, as I said, the published and the record labels just starting to convert again, right? I think the same thing applies here. We're going to close another acquisition very, very shortly. And it's going to be a size. And it fits right in the flywheel, right? And I would say, again, the inbounds from everyone from acquisitions, right, acquisition candidates to distributors to artists to managers to labels.

Previously, we were a young company. We were kicking tires hard, right? There's been a lot of work, and there's a big mountain to climb, but we're feeling the strongest we've ever felt about acquisitions. We're feeling the strongest about partnerships. And I think you're going to see -- continue to see people are seeing too many press release in a row, but they're so good and they're so powerful. And they're such great events. But I think you're going to see more and more of that in, I would say, Barry, stay tuned and let's plan on speaking again very shortly is it's getting more and more exciting by the day.

Unfortunately, we have run out of time and only have time for one last question. For our final question, today will come from Brian Kinstlinger with Alliance Global Partners.

A lot of questions have already been asked, but I was going to ask on the international rights. Is there any benefit included in guidance? Is that more of an acquisition? And will that be a big catalyst instead to fiscal -- the next fiscal year?

I can answer that one. Nothing in our guidance reflects international expansion and/or acquisitions.

Great. And then the follow-up I had in my mind, obviously, a much shorter here. You mentioned being installed in every Tesla, I think if I heard you correctly. Does that -- is that similar internationally to the deal domestically? Or is that just installed and the purchaser would have to activate and/or pay for paid subscription.

So sorry, Brian. The question is, is it pre-installed on the Tesla vehicle...

Well, in the domestic...

In the domestic, yes. Yes, it's pre-installed. It comes with that.

Right. It's pre-installed and Tesla pays for the premium, pays for the paid membership. Internationally, now that you're going to be installed in every car does, Tesla -- are they going to pay for that subscriber? Or does a subscriber of the new car owner have to buy it?

Yes. The...

Yes. Let me take it, Mike, let me take this. So the answer to it is, historically, right, is we have had an almost perfect partnership, right? No cost per acquisition, no breakage, no churn, right? Tesla has tried some things along the way, they have tested whether or not the car owners are going to pay for it versus Tesla paying direct built-in to the -- built-in to their lease or the sale of the car, right? It looks to us like -- it looks very, very positive and very promising as to expanding relationships with Tesla over time and how that all could play out. But you can be sure they're going to test, right? They're always going to test things along the way. Does that help?

That helps. Yes, of course.

This will conclude our question-and-answer session as well as today's conference call. Thank you all for joining us on today's call. You may now disconnect.