Live Ventures Incorporated — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023; this filing reports annual results, not standalone fourth-quarter results. Live Ventures is a diversified holding company operating in retail entertainment, retail flooring, flooring manufacturing, steel manufacturing, and corporate/other businesses.
Financial performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $355.2 million | $286.9 million |
| Gross profit / gross margin | $115.6 million / 32.5% | $97.8 million / 34.1% |
| Operating income | $15.4 million | $25.9 million |
| Net income (loss) | $(0.1) million | $24.7 million |
| Adjusted EBITDA (non-GAAP) | $31.5 million / 8.9% of revenue | $38.4 million / 13.4% |
| Net interest expense | $12.7 million | $4.2 million |
| Operating cash flow | $26.0 million | $6.4 million, as reclassified |
Revenue rose 23.8%, substantially reflecting acquisitions, while operating income and Adjusted EBITDA fell. Higher operating costs, acquisition-related expenses, and interest expense contributed to the earnings decline. FY2022 net income included an approximately $11.4 million gain from the ApplianceSmart bankruptcy settlement; FY2023 included a $2.75 million SW Financial settlement gain and a $1.70 million loss on its disposition. Cost of revenue increased to 67.5% of sales from 65.9%.
Segment results
- Retail-Entertainment: Revenue declined 9.3% to $78.1 million; operating income was $9.3 million versus $12.6 million.
- Retail-Flooring: Flooring Liquidators, acquired in January 2023, contributed $75.9 million revenue and a $0.3 million operating loss for the reported period.
- Flooring Manufacturing: Revenue fell 16.1% to $109.8 million; operating income declined to $6.1 million from $14.2 million, reflecting weaker demand and higher raw-material costs.
- Steel Manufacturing: Revenue increased 46.7% to $88.9 million, mainly from acquisitions; operating income was $8.0 million versus $8.9 million. PMW’s lower-margin profile weighed on segment gross margin.
- Corporate and Other: Revenue fell to $2.5 million from $9.3 million, primarily following the shutdown and deconsolidation of SW Financial.
Financial position, debt, and liquidity
- At September 30, 2023, cash was $4.3 million, current assets were $182.9 million, current liabilities were $97.8 million, and working capital was approximately $85.0 million.
- Reported total consolidated principal indebtedness was approximately $152.8 million, including $102.3 million of notes payable, $11.0 million of related-party notes, and $39.5 million of seller notes. Floating-rate borrowings were approximately $56.8 million. Net interest expense more than tripled year over year.
- Cash availability was approximately $37.1 million: $4.3 million of cash and $32.8 million available under revolving facilities. Management said it expected cash, operating cash flows, and revolver availability to fund operations and scheduled debt payments for at least 12 months.
- Cash used in investing was $63.9 million, mainly for acquisitions and capital expenditures; financing provided $37.6 million. Cash declined by $0.3 million during the year.
- Balance-sheet lease liabilities were approximately $92.8 million, comprising operating and finance lease obligations. Contractual undiscounted lease payments totaled $208.7 million.
- The company reported compliance with loan covenants at year-end. Common-stock dividends were not planned; the company paid approximately $900 in Series E preferred dividends.
Material changes, outlook, and risks
- Acquisitions: Flooring Liquidators was acquired for a net purchase price of approximately $78.7 million; PMW for approximately $26.8 million; Cal Coast Carpets assets for $1.3 million; and Harris Flooring Group brands and inventory for $10.1 million. Acquisitions contributed to higher revenue, debt, goodwill, intangible assets, and lease commitments.
- Outlook: No specific financial guidance or numerical forecast is provided. Management expects legacy directory-services revenue and operating income to continue declining and is no longer accepting new customers in that business. The company intends to continue evaluating acquisitions and may need additional debt or equity financing.
- Key risks: Significant indebtedness, floating interest rates, refinancing and covenant constraints, acquisition integration and execution, economic and consumer-demand weakness, inflation and raw-material availability, and exposure to flooring and steel industry cycles. Flooring imports may also be affected by UFLPA-related restrictions on PVC supply.
- Legal matters: The SEC’s civil case against the company and executives remained in discovery after unsuccessful mediation; the company denies the allegations. A related securities class action had a motion to dismiss pending. Other proceedings include a seller holdback dispute, with the company asserting counterclaims for more than $4.5 million, and a California wage-and-hour class action for which the company said potential losses could not yet be estimated.
- Related-party matters: The company has loans from entities affiliated with CEO Jon Isaac and a subsidiary CEO, related-party leases, and other transactions disclosed in the filing. CEO Jon Isaac and Isaac Capital Group together controlled approximately 48.8% of voting power as of December 11, 2023.
- Subsequent events: Flooring Liquidators acquired Carpet Remnant Outlet for $8 million on October 13, 2023. Vintage Stock refinanced its prior revolver with a $15 million Bank Midwest facility on October 17, 2023, maturing October 2024.
Most important facts for investors to verify
- Whether acquired businesses can sustain earnings and cash generation sufficient to service the increased debt and interest burden.
- Current borrowing availability, interest-rate exposure, upcoming maturities, and compliance with lender covenants.
- Progress and potential financial consequences of the SEC case, securities class action, holdback dispute, and wage-and-hour litigation.
- Whether weaker flooring and retail demand, inflation, and supply-chain constraints continue to pressure margins and cash flows.
- Acquisition purchase-price allocations, goodwill and intangible-asset valuations, and the long-term economics of sale-leasebacks and related-party arrangements.
The independent auditor issued an unqualified opinion on the consolidated financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not provide an attestation on internal control.