Business context and reporting period
Live Ventures Incorporated’s Form 10-K covers the fiscal year ended September 30, 2021, with fiscal 2020 as the comparable period. The filing reports annual results, not standalone 2021 fourth-quarter results. Live Ventures is a diversified holding company operating in retail (Vintage Stock and ApplianceSmart), flooring manufacturing (Marquis), steel manufacturing (Precision Marshall), and corporate and other activities, including SW Financial.
Financial performance and liquidity
Unless otherwise noted, amounts are in millions of dollars. Per-share amounts are in dollars.
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $273.0 | $191.7 |
| Gross profit / margin | $99.5 / 36.4% | $75.3 / 39.3% |
| Operating income / margin | $35.8 / 13.1% | $20.4 / 10.7% |
| Net income | $31.0 | $10.7 |
| Net income attributable to Live stockholders | $31.2 | $10.9 |
| Basic / diluted EPS | $19.92 / $9.80 | $6.40 / $3.09 |
| Net cash provided by operating activities | $29.2 | $28.8 |
| Cash at year-end | $4.7 | $9.0 |
Revenue increased approximately 42%. Gross margin declined 2.9 percentage points, while operating margin improved 2.4 points. FY2021 net income included $6.2 million of PPP loan-forgiveness gains and $1.8 million from a bankruptcy settlement; these unusual gains contributed to reported earnings. Interest expense was $5.2 million.
At September 30, 2021, working capital was $33.8 million, total indebtedness was approximately $58.2 million (including $4.0 million of related-party notes), and the company reported approximately $31.1 million of available borrowing under revolving facilities. Current and long-term operating lease liabilities totaled $36.5 million on a present-value basis. Management believed cash, operating cash flow, and available revolver capacity would fund operations and scheduled obligations for at least 12 months. The company reported compliance with its loan covenants at year-end.
Material changes versus the prior comparable period
- Retail revenue rose to $88.8 million from $73.6 million, primarily as Vintage Stock stores reopened after pandemic closures and benefited from new game and movie releases. ApplianceSmart revenue fell to $1.1 million from $4.0 million amid store closures and competition.
- Flooring revenue increased 18.8% to $130.2 million, attributed to product development and the Lonesome Oak acquisition. Segment operating income rose to $20.2 million from $16.1 million.
- Steel revenue was $49.3 million versus $8.0 million; FY2020 included only activity from Precision Marshall’s July 2020 acquisition. FY2021 steel operating income was $5.9 million.
- Cost of revenue grew faster than revenue, and consolidated gross margin narrowed. The company attributed higher costs partly to a full year of steel operations and inflation.
- Cash declined by $4.3 million. Investing outflows were $17.4 million, including $6.0 million for SW Financial and $10.8 million of property and equipment purchases. Financing outflows were $16.1 million.
- Live Ventures consolidated SW Financial as a variable interest entity in June 2021, recognizing $3.7 million of goodwill and $3.6 million of customer-relationship intangibles. The acquisition agreement contemplated total consideration of approximately $7.0 million.
Outlook, risks, contingencies, and unusual items
- Management’s liquidity outlook covers at least the next 12 months; the filing does not provide numerical revenue or earnings guidance. Marquis expected raw-material and labor availability to remain tight through 2022, with possible extended delivery lead times.
- ApplianceSmart remained in Chapter 11 at the fiscal year-end. A disclosure statement was approved in October 2021; a confirmation hearing for its reorganization plan was held December 14, 2021. Those events occurred after the reporting date.
- The SEC filed a civil complaint in August 2021 alleging financial, disclosure, and reporting violations relating to 2016–2018. The company disputed the allegations and filed a motion to dismiss; as of the filing, the motions were under submission and discovery was stayed. Potential remedies sought include injunctions, disgorgement, penalties, and officer-and-director bars.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at September 30, 2021, citing inadequate control documentation, evaluation procedures, and segregation of duties/resources. Management planned remediation during fiscal 2022. The financial statement audit opinion was unqualified; the auditor did not attest to ICFR.
- Key risks include COVID-19 effects, inflation and supply-chain constraints, cyclical retail and manufacturing demand, acquisition integration, substantial debt and variable-rate exposure, covenant restrictions, and potential impairment of goodwill or other assets. The company also disclosed litigation and other contingencies.
- Other notable items: 63 Vintage Stock stores; one ApplianceSmart store; approximately 1,253 employees. The company reported no common-stock dividend plan for the foreseeable future and no off-balance-sheet arrangements requiring disclosure.
Important facts for investors to verify
- Reconcile the $8.0 million of reported PPP-forgiveness and bankruptcy-settlement gains with recurring earnings and cash generation.
- Review debt maturities, borrowing-base availability, interest-rate terms, covenant headroom, and related-party borrowing and repayment terms.
- Track ApplianceSmart’s confirmed reorganization plan, remaining liabilities, and any effect on consolidated results or liquidity.
- Monitor the SEC litigation, potential financial exposure, and related legal costs and governance consequences.
- Assess progress on remediation of material weaknesses and whether disclosure controls and financial reporting become effective.
- Evaluate the sustainability of segment margins amid inflation, tight raw-material and labor markets, and the lower FY2021 gross margin.