LiveOne, Inc. — Form 10-Q Summary
Business context and reporting period. LiveOne operates a music, entertainment and technology platform spanning streaming memberships, podcast advertising, merchandising, and live events. This unaudited filing covers the third quarter and first nine months of fiscal 2023, ended December 31, 2022; comparisons are with the corresponding 2021 periods. Amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Three months ended Dec. 31, 2022 | Three months ended Dec. 31, 2021 | Nine months ended Dec. 31, 2022 | Nine months ended Dec. 31, 2021 |
|---|---|---|---|---|
| Revenue | $27.3 million | $32.9 million | $74.1 million | $93.6 million |
| Operating loss | $0.6 million | $9.7 million | $1.3 million | $29.6 million |
| Net loss | $2.5 million | $11.8 million | $4.6 million | $35.1 million |
| Net loss per share | $0.03 | $0.15 | $0.05 | $0.45 |
| Operating cash flow | Not presented for the quarter | $(4.6) million | $(10.2) million |
Revenue mix and margins. Quarterly revenue fell 17%; membership services rose 25% to $13.4 million, while ticket/event revenue fell 91% to $0.6 million, merchandising fell 25% to $4.8 million, and sponsorship and licensing fell 94% to $0.1 million. Advertising was approximately flat at $8.5 million. For the nine months, membership revenue increased 29% to $38.2 million and advertising rose 3% to $26.1 million, but ticket/event, sponsorship and licensing, and merchandising revenue declined sharply. Company-defined non-GAAP Contribution Margin was $7.9 million, or 29% of revenue, for the quarter and $25.6 million, or 35%, for nine months; comparatives were $5.2 million (16%) and $18.9 million (20%). Adjusted EBITDA, also non-GAAP, was $3.1 million for the quarter and $9.4 million for nine months, versus losses of $4.8 million and $8.7 million, respectively.
Balance sheet and debt. At December 31, cash and cash equivalents were $8.3 million, with another $0.2 million restricted. Current assets of $27.7 million compared with current liabilities of $47.4 million, a $19.7 million working-capital deficit. Total assets were $66.6 million, total liabilities $78.9 million, and stockholders’ deficit $12.3 million. Reported debt included $13.7 million of senior secured convertible notes, $5.6 million of related-party unsecured convertible notes, a $7.0 million revolving credit balance, and a $3.8 million current PodcastOne bridge-loan balance, all as recorded net of applicable discounts where relevant. The company reported compliance with debt covenants at quarter-end.
Cash flow. Nine-month investing cash use was $2.0 million, principally property and equipment purchases. Financing provided $2.0 million, including PodcastOne bridge-loan proceeds, partly offset by $1.9 million of treasury-stock purchases. Cash, cash equivalents and restricted cash declined $4.7 million to $8.5 million.
Material changes and management commentary
- Audio revenue grew 17% for nine months, supported by membership growth; Media revenue declined 74%, mainly reflecting fewer events and no comparable Social Gloves or Spring Awakening events. Management reported approximately 1.9 million paid music-platform members at quarter-end, versus approximately 1.594 million a year earlier.
- Lower reported costs and losses reflected reduced event activity, staff and share-based compensation, as well as vendor-settlement credits. These improvements should be assessed against the substantial decline in event-related revenue and the nonrecurring nature of some expense reductions and credits.
- The company recorded a $1.4 million intangible-asset impairment after reducing React Presents events and ceasing to market that brand. Nine-month other income included a $2.2 million gain from settling PodcastOne acquisition contingent consideration.
- Management stated that it delayed new live tentpole and pay-per-view events until fiscal 2024, while expecting to resume or expand in-person events as conditions permit. It also expects significant product and engineering investment over the next 12–24 months. No quantified earnings or revenue guidance was provided.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern within one year of filing, citing its loss history, $19.7 million working-capital deficit and reliance on additional financing and operating improvements. A shelf registration permits up to $150 million of securities offerings, but financing availability and terms are not assured.
Risks, contingencies and subsequent events
- Customer concentration: Tesla accounted for 42% of quarterly revenue and 43% of nine-month revenue. The filing notes that the agreement may be terminated for convenience and that Tesla may change or discontinue the service.
- Debt and liquidity: In February 2023, approximately $21.2 million of Harvest and Trinad notes and related amounts were exchanged for Series A perpetual convertible preferred stock. It carries a 12% dividend and converts at $2.10 per common share; terms include a potential $5 million mandatory redemption and restrictions on certain financing and corporate actions. The exchange also included 800,000 common shares issued to the holders.
- Legal matters: A court entered a $9.8 million judgment for SoundExchange in October 2022. In February 2023, the company agreed to monthly payments over 24 months and certain additional payments if it obtains financing; SoundExchange agreed not to enforce the judgment while the company complies. Another lawsuit had remaining claims scheduled for trial in April 2023; management said loss was not probable but acknowledged the outcome and potential impact were uncertain.
- Licensing and royalties: The company reported $13.4 million in aggregate royalty payments owed to performing-rights organizations and recorded $4.3 million in accrued royalties among other long-term liabilities. Content-license costs, audits, and disputes could affect results and liquidity.
- Controls: Management concluded disclosure controls and procedures were not effective at quarter-end because of material weaknesses previously identified in the 2022 Form 10-K. Remediation was ongoing.
- Strategic plans: LiveOne intended to spin out PodcastOne and distribute a portion of its shares to eligible stockholders, subject to approvals, consents, listing requirements and other conditions. The filing also discusses a possible Slacker spin-out; neither transaction was assured.
Important facts for investors to verify
- Whether LiveOne can address the going-concern warning, working-capital shortfall and near-term cash needs without costly or dilutive financing.
- The status and economics of the Tesla agreement, including whether the reported member count and membership revenue remain durable. The filing describes member growth as 10%, although the stated counts of 1.594 million and 1.9 million do not reconcile to that percentage.
- The full cash-payment schedule and compliance requirements under the SoundExchange settlement, and any effect on the senior credit facility.
- The preferred-stock dividend, redemption and conversion implications, and the resulting potential dilution and cash obligations.
- Whether the PodcastOne and potential Slacker transactions receive required approvals and satisfy exchange-listing and financing conditions.
- Progress in remediating the disclosed material weaknesses and any changes to the company’s royalty liabilities, litigation exposure or event plans.