Live Ventures Incorporated — Form 10-Q Summary
Business context and reporting period. This filing covers the three months ended December 31, 2021, Live Ventures’ fiscal first quarter of 2022. The diversified holding company operates Retail (Vintage Stock and ApplianceSmart), Flooring Manufacturing (Marquis), and Steel Manufacturing (Precision Marshall), with Corporate & Other activities. Unless stated otherwise, financial amounts below are in millions of dollars.
Key financial metrics
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Revenue | $75.2 | $62.5 |
| Gross profit / margin | $27.6 / 36.7% | $22.3 / 35.7% |
| Operating income / margin | $10.4 / 13.8% | $7.3 / 11.7% |
| Net income | $6.5 | $5.3 |
| Adjusted EBITDA (non-GAAP) | $12.1 | $9.9 |
| Net cash from operating activities | $4.2 | $7.7 |
| Capital expenditures | $3.1 | $3.3 |
- Revenue rose about 20%; gross profit increased about 24%. Basic and diluted earnings per share were $4.14 and $2.04, respectively, versus $3.45 and $1.63.
- Cash was $10.0 at December 31, up from $4.7 at September 30, 2021. Working capital was $42.5, compared with $33.8 at September 30; current assets were $105.2 and current liabilities $62.7.
- Long-term debt, net of issuance costs and including its current portion, was $57.9; related-party notes were an additional $4.0. Debtor-in-possession liabilities were separately reported at $11.2. Operating lease liabilities totaled $35.2.
- The company reported $28.8 of available borrowing under revolving credit facilities and said it was in compliance with loan covenants at quarter-end.
Changes versus the prior comparable period
- Retail revenue increased about 17%, primarily from higher pricing and three Vintage Stock store openings; ApplianceSmart sales declined. Flooring revenue grew 9%, and Steel revenue grew 27%.
- Steel operating income increased to $1.7 from $0.1, attributed mainly to higher gross profit, improved manufacturing efficiency, and pricing. Retail and Flooring operating income also increased modestly.
- Gross margin improved by 1.0 percentage point and operating margin by 2.1 points. Management attributed revenue growth across businesses to higher selling prices and, in manufacturing, stronger demand; price increases reflected inflationary cost pressures.
- Net interest expense declined to $1.0 from $1.5, while general and administrative expenses rose 15% to $14.2, mainly due to employee compensation and related costs.
- Operating cash flow fell to $4.2 from $7.7, primarily due to inventory purchases and payments of accrued liabilities. Inventory rose to $73.9 from $70.7 at September 30.
Outlook, risks, contingencies, and unusual items
- No specific financial guidance was provided. Management said cash, operating cash generation, and available revolver capacity were expected to fund operations and scheduled obligations for at least 12 months. It may seek debt or equity financing for acquisitions, refinancing, or other strategic investments; equity financing could dilute existing holders.
- On January 20, 2022, after quarter-end, the company refinanced Precision Marshall’s Encina loans. The replacement facility totaled $29.0: $23.0 revolving, $3.5 machinery and equipment lending, and $2.5 capital expenditure lending.
- ApplianceSmart remained in Chapter 11. Its reorganization plan was confirmed at a December 14, 2021 hearing; a final decree and emergence were expected after the plan is fully satisfied. ApplianceSmart reported quarterly revenue of $0.1 and a pretax loss of $0.2.
- The SEC filed a civil complaint in August 2021 alleging financial reporting, disclosure, and other securities-law violations against the company and executive officers. Defendants deny the allegations; motions to dismiss were under submission, and discovery was stayed pending those motions. The SEC seeks injunctions and monetary and other remedies.
- Management reported disclosure controls and internal control over financial reporting were ineffective at December 31, 2021, citing material weaknesses in written control documentation, subsidiary-level evaluation procedures, and segregation of duties/resources. Remediation was planned, with completion targeted during fiscal 2022, but timing was not assured.
- Management described continuing COVID-19 uncertainty and potential effects on supply chains, employees, customers, store traffic, revenue, earnings, liquidity, and cash flows. Inflationary costs were being passed on through pricing where possible.
Important facts for investors to verify
- Track cash conversion and working-capital needs, particularly inventory growth and the decline in operating cash flow.
- Review debt maturities, borrowing-base availability, refinancing terms, covenant compliance, and the separately reported ApplianceSmart debtor-in-possession liabilities.
- Monitor the SEC litigation and ApplianceSmart bankruptcy for developments, potential outcomes, and any financial effects.
- Assess progress and evidence of remediation of the disclosed material weaknesses in internal controls.
- Separate reported GAAP results from management’s non-GAAP Adjusted EBITDA, and review the contribution and sustainability of segment results, including SW Financial and the declining directory-services business.