LiveOne, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended September 30, 2021 (fiscal 2022). Unaudited results are consolidated and include PodcastOne and CPS; CPS was not included in the comparable 2020 period. LiveOne operates a livestream and on-demand audio, video, podcast, events and merchandise platform.
Key financial metrics
| Metric | Three months ended September 30, 2021 | Six months ended September 30, 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | $21.9 million, up 51% | $60.7 million, up 142% | $14.6 million and $25.1 million, respectively |
| Gross profit / contribution margin | $5.9 million; 26.8% of revenue | $13.7 million; 22.6% of revenue | $4.3 million / 29.3%; $7.1 million / 28.4% |
| Operating loss | $9.7 million | $19.6 million | $7.1 million and $12.9 million |
| Net loss | $15.2 million; $0.19 per share | $23.3 million; $0.30 per share | $10.2 million and $17.7 million |
| Operating cash flow | Used $7.0 million in the six-month period | Used $4.9 million | |
| Cash, cash equivalents and restricted cash | $16.7 million at September 30 | Down from $18.8 million at March 31, 2021 |
At September 30, total assets were $89.6 million, total liabilities $87.0 million and stockholders’ equity $2.6 million. Working capital was deficient by $17.6 million. Debt included $15.0 million principal on secured convertible notes, $7.7 million on unsecured convertible notes, a $7.0 million revolving credit balance and about $0.8 million of other notes payable. The company reported compliance with debt covenants at quarter-end.
Changes versus the prior comparable period
- Quarterly revenue growth reflected higher subscriptions (+28%), advertising (+60%, principally PodcastOne) and $3.0 million of merchandising revenue from CPS. Ticket and event revenue declined 90% to $0.1 million, and sponsorship and licensing revenue declined 18%.
- For the six months, revenue growth also included CPS merchandising, and higher sponsorship/licensing and ticket/event revenue, principally associated with the Social Gloves event in the first quarter. That event contributed about $6.2 million of production costs.
- Cost of sales grew faster than revenue for the six-month period, and contribution margin as a percentage of revenue fell to 22.6% from 28.4%. General and administrative costs rose 94% to $18.6 million, including higher stock-based compensation and personnel costs.
- Quarterly net loss increased year over year. Six-month loss from operations widened, while net loss also reflected $4.3 million of debt-extinguishment expense. The six-month comparison included a $2.5 million gain from forgiveness of PPP loans.
- Paid music-platform subscribers were approximately 1.257 million at September 30, up 34% from a year earlier; some subscribers are subject to a contractual dispute and related revenue is not being recognized.
Outlook, risks and unusual items
- Going concern: Management stated that recurring losses, the $17.6 million working-capital deficit and operating cash use raise substantial doubt about the company’s ability to continue as a going concern within one year. Continued operations depend on growth, cost management and additional financing; there is no assurance financing will be available on acceptable terms. The company cited $121.5 million remaining under its shelf registration statement.
- Outlook: Management expects to invest in product and engineering over the next 12–24 months and aims to grow subscribers, digital events, advertising and commerce. It expects on-premise events to increase as COVID-19 conditions permit, but gave no specific financial guidance. Results may vary with event timing, revenue mix, content costs and financing access.
- COVID-19 and customer concentration: Pandemic-related uncertainty continued to affect in-person events and programmatic advertising. One OEM customer, identified in risk disclosures as Tesla, accounted for 24% of six-month revenue versus 45% a year earlier; one customer accounted for 35% of quarterly revenue. The customer relationship may be terminable or renegotiated.
- Debt and financing: The $7.0 million asset-secured revolving facility matures June 2023. Harvest secured convertible notes carry 8.5% interest, require a $10.0 million aggregate cash-deposit minimum and were extended to June 2023. A Trinad related-party amendment extended unsecured notes to May 2023; its accounting resulted in the $4.3 million extinguishment loss. Substantial principal maturities and potential dilution from equity or convertible financing remain risks.
- Litigation: A New York lawsuit seeks approximately $26.7 million; management said loss was not probable but acknowledged a potentially material range of loss. A separate dispute relates to the Social Gloves event. LiveOne also filed claims seeking at least $100 million; outcomes are uncertain.
- Controls and unusual items: Management concluded disclosure controls were not effective because of material weaknesses identified previously; remediation was ongoing. The quarter included recognition of a $1.2 million employee-retention payroll tax credit. A $2.9 million PodcastOne contingent consideration liability was classified as current. Gramophone Media was acquired after quarter-end, on October 17, 2021, for cash and stock plus possible contingent cash consideration.
Important facts for investors to verify
- Whether LiveOne can fund operations and meet debt obligations without additional capital, and the terms and dilution of any financing.
- The sustainability and margins of event-related revenue, particularly the Social Gloves event, and the impact of event costs on contribution margin and cash flow.
- The continuation and economics of the major OEM customer relationship, including subscriber counts subject to dispute and revenue not recognized.
- Progress in remediating material weaknesses in disclosure controls, and the status and potential exposure of the pending lawsuits.
- Post-quarter results and purchase accounting for Gramophone, as well as any material changes in COVID-19-related operations or liquidity.