LiveOne, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended September 30, 2023, corresponding to fiscal Q2 and first half of fiscal 2024. Unless stated otherwise, amounts below are in U.S. dollars and millions. The filing was signed November 20, 2023.
Business context
LiveOne operates music streaming and membership services, podcast advertising, merchandising, and live-event and media businesses. Its principal operations are in the United States. On September 8, 2023, subsidiary PodcastOne completed a direct listing and spin-out; LiveOne retained a controlling interest and continued consolidating PodcastOne.
Financial performance and liquidity
| Metric | Three months ended Sept. 30 | Six months ended Sept. 30 |
|---|---|---|
| Revenue, 2023 / 2022 | $28.5 / $23.5; up 21% | $56.3 / $46.8; up 20% |
| Gross profit, 2023 / 2022 | $7.3 / $8.6 | $15.1 / $15.7 |
| Operating loss, 2023 / 2022 | $2.5 / $1.0 | $2.8 / $0.8 |
| Net loss, 2023 / 2022 | $7.9 / $3.4 | $8.4 / $2.1 |
| Net loss per share, 2023 / 2022 | $0.09 / $0.04 | $0.11 / $0.02 |
| Operating cash flow, 2023 / 2022 | Not presented quarterly | $(0.045) / $(6.8) |
For the six months, revenue growth came mainly from membership services ($31.6 million, up 27%) and advertising ($21.5 million, up 22%). Merchandising fell 19% to $3.0 million; sponsorship and licensing fell 60% to $0.1 million; ticket/event revenue fell 94% to $0.014 million. Cost of sales grew faster than revenue, reducing gross profit. Six-month contribution margin, a company-defined non-GAAP measure, was $16.5 million versus $17.6 million; Adjusted EBITDA was $5.0 million versus $6.4 million.
At September 30, cash and restricted cash totaled $3.8 million, down from $8.6 million at March 31. Current assets were $26.2 million and current liabilities $46.7 million, producing a $20.4 million working-capital deficiency. Total liabilities were $57.1 million. Reported consolidated debt was approximately $8.7 million net of fees and discounts, including a $7.0 million senior asset-based credit facility and a $1.7 million Capchase loan. The ABL bears interest at prime plus 2.5%, subject to a 7% floor; the Capchase loan bears 9% interest.
Material changes and unusual items
- Paid music-platform members were approximately 2.3 million at quarter-end, up 44% from approximately 1.594 million a year earlier. The company said some counted members are subject to a contractual dispute and related revenue is not being recognized.
- The largest customer, identified in the risk disclosures as Tesla, accounted for roughly half of revenue in the periods discussed; the filing gives differing percentages in different sections. It represented 29% of accounts receivable at September 30.
- PodcastOne’s spin-out and direct listing resulted in outside ownership and non-controlling interest. The remaining PodcastOne bridge notes, approximately $7.02 million including interest, converted into PodcastOne shares. LiveOne also repaid $3.0 million of the bridge notes during the six-month period.
- Other expense included substantial non-cash fair-value changes in derivatives; six-month other expense was $5.6 million versus $1.3 million of expense in the prior-year period. The filing attributes the change in part to derivative valuation effects.
- LiveOne received a $1.0 million CARES Act reimbursement, reflected as a reduction in merchandising costs. The filing also reports $7.7 million of barter revenue for the six-month period.
- LiveOne repurchased 1.01 million shares for $1.6 million during the six months. It issued 1,053 Series A preferred shares as dividends; the preferred stock carries a 12% annual dividend and is convertible at $2.10 per common share.
Outlook, risks and contingencies
- Going concern: Management stated that the history of losses, $8.4 million six-month net loss, working-capital deficiency, and limited cash raise substantial doubt about the company’s ability to continue as a going concern within one year. Management expects to rely on operating improvements, cost rationalization, and possible equity or debt financing; financing availability and terms are not assured. An effective shelf registration permits offerings of up to $150 million, but does not ensure proceeds.
- Outlook: No quantified revenue or earnings guidance is provided. Management expects continued product and engineering investment during fiscal 2024 and significant technology investment over the next 12–24 months. It expressed an expectation that contribution margins and Adjusted EBITDA margins may improve as the platform matures.
- Customer and content concentration: The company warns that losing or renegotiating its key customer relationship could materially affect results. Music-content licensing costs, renewals, and royalty disputes also pose risks; the filing reports $16.9 million in aggregate royalties owed to performing-rights organizations.
- Debt and liquidity: The company was not in compliance with an ABL financial covenant at September 30 but said it cured the default within the cure period in October. The facility is secured by substantially all company and subsidiary assets and includes liquidity and borrowing-base covenants. The filing reports $4.8 million owed under the SoundExchange settlement; failure to meet settlement terms could create lender-default risk.
- Legal and contractual exposures: A long-running New York lawsuit produced a jury award of $0.23 million to a company subsidiary and $0.15 million to plaintiffs; plaintiffs indicated an intent to appeal but had not filed as of November 15, 2023. The company says the potential loss remains uncertain and could be material. Executive employment agreements could require aggregate severance payments of $10.5 million.
- Financial reporting controls: Management concluded disclosure controls were not effective at quarter-end because of material weaknesses previously identified in the 2023 Form 10-K. Remediation efforts were ongoing.
Key facts investors should verify
- Customer concentration disclosures and the status, economics, and renewal or termination terms of the Tesla agreement.
- Current liquidity, working-capital needs, financing access, and progress on management’s going-concern plans.
- ABL covenant compliance after the reported October cure, borrowing availability, minimum-liquidity requirements, and upcoming debt maturities.
- PodcastOne’s post-spin-out ownership, contribution to consolidated results, and the terms and potential dilution from its outstanding warrants.
- The basis for derivative valuation charges, the status of the SoundExchange settlement and other royalty balances, and any material developments in litigation.
- Progress in remediating material weaknesses and whether future filings report effective disclosure controls.