LiveOne, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended March 31, 2023, compared with fiscal 2022. Although the request refers to 2022 Q4, this filing is an annual report, not a quarterly filing. LiveOne operates music streaming and live-event services, PodcastOne, and personalized merchandise businesses.
Key financial results
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $99.6 million | $117.0 million |
| Cost of sales | $66.8 million | $93.0 million |
| GAAP gross profit | $29.5 million | $20.2 million |
| Operating loss | $2.2 million | $37.9 million |
| Net loss | $10.0 million | $43.9 million |
| Net loss per share, basic and diluted | $0.12 | $0.56 |
| Cash used in operating activities | $3.8 million | $9.1 million |
| Cash used in investing activities | $2.5 million | $4.0 million |
| Cash provided by financing activities | $1.8 million | $7.5 million |
Contribution margin, a non-GAAP measure, was $32.8 million versus $24.0 million. Adjusted EBITDA was $10.9 million versus a loss of $13.4 million; management cautions that this measure is not a substitute for GAAP results.
- Revenue mix: Membership $52.4 million (+27%); advertising $35.1 million (+4%); merchandise $10.8 million (-30%); sponsorship and licensing $0.4 million (-94%); and ticket/event $0.8 million (-96%). Membership growth was primarily attributed to the largest OEM customer. Prior-year sponsorship and event revenue included Social Gloves and Spring Awakening activity without comparable events in FY2023.
- Segments: Audio Group revenue was $86.8 million (+17%) and Adjusted EBITDA was $18.2 million, versus $8.9 million. Media Group revenue was $12.8 million (-70%) and Adjusted EBITDA loss was $1.5 million, versus a loss of $9.7 million. Corporate Adjusted EBITDA loss improved to $5.8 million from $12.6 million.
- Liquidity: At March 31, 2023, cash and cash equivalents were $8.4 million, restricted cash was $0.2 million, current assets were $27.7 million, and current liabilities were $44.5 million. Working-capital deficiency was $16.8 million; accumulated deficit was $224.3 million.
- Debt and obligations: Reported consolidated debt was approximately $11.9 million net of fees and discounts, including a $7.0 million secured revolving line and a PodcastOne bridge loan carried at $4.7 million net. The filing lists $4.7 million of debt principal due in FY2024 and $7.2 million thereafter. Accrued royalties totaled $16.6 million. Content-provider minimum guarantees and other contractual guaranteed payments were $8.6 million for FY2024, $0.6 million for FY2025, and $0.3 million for FY2026.
Material changes and unusual items
- Revenue fell 15%, mainly reflecting the absence of prior-year events; membership and advertising increased but did not offset declines in merchandise, sponsorship/licensing, and ticket/event revenue.
- Operating expenses declined substantially, including lower general and administrative costs, personnel, marketing, and stock-based compensation. The company recorded a $1.4 million intangible-asset impairment related to React Presents after reducing events and ceasing to market the brand.
- In February 2023, approximately $21.2 million of notes and accrued interest were exchanged for Series A perpetual convertible preferred stock. The preferred stock carries a 12% annual dividend and is convertible at $2.10 per common share; specified terms require a $5 million redemption by August 2024 or upon certain qualifying financing. The transaction also included common-share issuances and restrictive covenants.
- LiveOne settled SoundExchange litigation over royalties following a $9.8 million court judgment. The settlement requires monthly payments over 24 months and additional payments in certain financing circumstances, provided the company remains in compliance.
- The company repurchased 2.22 million common shares for $2.2 million during FY2023. The filing also reports 90.1 million common shares outstanding as of June 26, 2023.
Outlook, risks, and contingencies
- Going concern: The company and its auditor state that recurring losses, negative operating cash flow, and a net capital deficiency raise substantial doubt about LiveOne’s ability to continue as a going concern within one year after issuance of the financial statements. Management plans to improve operations, reduce costs, and seek additional equity or debt financing; no financing is assured.
- Management outlook: No clear quantitative revenue or earnings guidance is provided. Management expects continued product and engineering investment in FY2024 and over the following 12–24 months, and believes margins may improve as the platform matures. It also describes plans to expand internationally and pursue a PodcastOne spin-out; these plans depend on approvals, lender and investor consents, and market/listing conditions.
- Customer concentration: Tesla, the principal OEM customer, generated $44.3 million, or 44% of FY2023 revenue, up from 28% of revenue in FY2022. The relationship may be terminated or changed, and some membership revenue is subsidized by the OEM. The company also says certain reported paid members are subject to a contractual dispute and revenue is not being recognized for them.
- Financing and dilution: Debt covenants, maturity obligations, preferred-stock dividends/redemption terms, and possible additional financing could constrain operations or dilute common shareholders. Series A preferred shares are convertible into approximately 10.1 million common shares as of March 31, 2023.
- PodcastOne note dispute after year-end: A noteholder agent alleged a default over a redemption payment and demanded accelerated payment, including claimed 16% default interest. LiveOne and PodcastOne dispute the alleged default and say the payment was timely. As of June 29, 2023, the filing reports approximately $3.1 million of principal and ordinary accrued interest held by noteholders other than LiveOne.
- Controls and legal matters: Management concluded disclosure controls and internal control over financial reporting were ineffective, citing material weaknesses in entity-level controls, complex debt/equity accounting, business-combination accounting, and inventory-obsolescence reserves. The Wantickets trial resulted in a favorable net outcome for the company in May 2023, though plaintiffs indicated they intended to appeal. Other risks include music-rights costs and disputes, advertising demand, live-event cancellations, privacy/cybersecurity, competition, and Nasdaq listing compliance.
Most important facts for investors to verify
- Cash runway, near-term financing availability, covenant compliance, and repayment schedules for secured debt and PodcastOne notes.
- Terms and actual performance of the SoundExchange settlement, including payment status and the $16.6 million accrued royalty balance.
- Tesla/OEM contract renewal, revenue concentration, paid-member definitions, and the disputed members for which revenue is not recognized.
- Status of the PodcastOne noteholder default dispute, PodcastOne listing/spin-out plans, required consents, and any resulting liquidity or dilution.
- Progress in remediating material weaknesses and whether future filings identify additional accounting adjustments or control deficiencies.
- Whether expected margin improvements and event, advertising, and membership growth materialize without relying on non-GAAP measures alone.