LiveOne, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended December 31, 2023; filed February 12, 2024. LiveOne operates music streaming and membership services, podcasting, merchandising, and live-event businesses. PodcastOne completed its spin-out and Nasdaq direct listing on September 8, 2023; LiveOne continued consolidating it and reported a 26.5% non-controlling interest at quarter-end.
Financial performance and liquidity
| Metric | Three months ended Dec. 31 | Nine months ended Dec. 31 |
|---|---|---|
| Revenue | $31.2 million, up 14% from $27.3 million | $87.5 million, up 18% from $74.1 million |
| Operating loss | $0.8 million, versus $0.6 million | $3.5 million, versus $1.3 million |
| Net loss | $2.2 million, versus $2.5 million | $10.7 million, versus $4.6 million |
| Net loss attributable to LiveOne | $1.6 million, versus $2.5 million | $9.7 million, versus $4.6 million |
| Basic and diluted loss per share | $0.03, unchanged | $0.13, versus $0.05 |
| Operating cash flow | Not reported for the quarter | $3.8 million provided, versus $4.6 million used |
For the nine months, investing activities used $2.8 million and financing activities used $3.2 million. Cash, cash equivalents and restricted cash declined $2.2 million to $6.5 million. At December 31, current assets were $26.2 million and current liabilities $47.7 million, a reported working-capital deficit of $21.5 million. Total liabilities were $56.6 million.
Debt included a $7.0 million senior secured ABL facility and $1.6 million of notes payable, including the Capchase loan; the filing reports total consolidated indebtedness of approximately $8.6 million, net of fees and discounts. The ABL rate was 11% at quarter-end. LiveOne reported compliance with applicable ABL and Capchase covenants. The PodcastOne bridge notes converted into PodcastOne shares following the spin-out.
Reported cost of sales was $23.3 million for the quarter and $63.0 million for the nine months. The filing’s quarterly MD&A cost-of-sales detail instead totals $23.6 million; accordingly, a precise quarterly gross-margin comparison is unclear from the filing text. Nine-month contribution margin, a non-GAAP measure, was $24.5 million versus $25.6 million.
Changes and operating drivers
- Membership services revenue rose 26% for the quarter and 27% for the nine months, primarily from growth associated with the largest OEM customer. LiveOne reported approximately 2.3 million paid music members at quarter-end, up 44% year over year; this count includes members subject to a contractual dispute for whom the company is not recognizing revenue.
- Advertising revenue increased 25% for the quarter and 23% for the nine months, with management citing PodcastOne growth.
- Merchandising revenue fell 21% for the quarter and 20% year to date, attributed to lower retail and direct-to-consumer demand. Ticket/event revenue was minimal year to date, and sponsorship and licensing revenue also declined, reflecting fewer events.
- The OEM customer represented 49% of quarterly revenue and 52% of nine-month revenue, according to the revenue note. The filing identifies Tesla in its risk-factor discussion and reports Tesla at 48% of nine-month revenue.
- Quarterly segment revenue was $10.4 million for PodcastOne, $16.8 million for Slacker, and $4.0 million for Media Group. Slacker reported $5.1 million of net income, while PodcastOne and Media Group reported net losses of $2.6 million and $3.1 million, respectively. Segment figures include the effects of the spin-out and non-controlling interest.
Outlook, risks and unusual items
- Going concern: Management states that recurring losses, the $10.7 million nine-month net loss and working-capital deficit raise substantial doubt about LiveOne’s ability to continue as a going concern within one year of issuance. Management plans to rely on improved operating results, spending rationalization and access to additional capital; there is no assurance financing will be available on acceptable terms. The company has an effective shelf registration statement with capacity to raise up to $150 million.
- Customer concentration: The company’s dependence on Tesla/OEM revenue is a major risk. The filing says the customer relationship may be terminated for convenience and warns that a change in service, subsidy, or member-count terms could materially reduce revenue.
- Debt, royalties and financing obligations: The ABL is secured by substantially all assets and includes liquidity and borrowing-base covenants. The filing cites $4.0 million owed to SoundExchange under a settlement at December 31, 2023 and warns that noncompliance could trigger defaults. It also reports $20.3 million in aggregate royalties owed to performing-rights organizations, as well as guaranteed content payments of $3.8 million for the remainder of fiscal 2024. Series A preferred stock carries a 12% annual cumulative dividend and includes a $5.0 million mandatory cash redemption feature, subject to its terms.
- Legal matter: In the Schnaier/Wantickets litigation, the May 2023 jury outcome included awards to both sides that the company said were not material. Plaintiffs indicated intent to appeal; the company said the remaining outcome is uncertain and a potential loss could have a material adverse effect.
- Other items: LiveOne recorded a $0.1 million impairment related to winding down Gramophone. Stock-based compensation was $5.8 million for the nine months, versus $2.9 million. The company repurchased $1.7 million of its shares during the nine-month period. Management expects continued product and engineering investment over the next 12–24 months and says margins may improve as the platform matures, but provides no quantified financial guidance.
- Controls: Management concluded disclosure controls were not effective at quarter-end because of material weaknesses previously identified in the 2023 Form 10-K; remediation was ongoing.
Key facts investors should verify
- Whether LiveOne can address its going-concern uncertainty, working-capital deficit and upcoming debt and preferred-stock cash obligations without unfavorable financing or material dilution.
- The durability of the Tesla/OEM relationship, the customer’s share of revenue, and the contractual dispute affecting the reported paid-member count and revenue recognition.
- The quarterly cost-of-sales inconsistency: the statements report $23.3 million, while the MD&A cost-category detail totals $23.6 million.
- The status and payment schedule of the SoundExchange settlement, accrued royalties, content guarantees and related lender covenant requirements.
- Progress remediating material weaknesses in disclosure controls and any developments in the Wantickets litigation or potential appeal.