Live Ventures Incorporated is a diversified holding company that has strategically acquired and operates a portfolio of businesses across various industries. With a focus on value-oriented acquisitions of domestic middle-market companies, Live Ventures has built a multi-faceted organization that weathered recent economic headwinds.
Business Overview and History
Incorporated in 1968 and headquartered in Las Vegas, Nevada, Live Ventures operates through five distinct segments: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate & Other. This diversified structure has allowed the company to navigate fluctuating market conditions and capitalize on emerging opportunities.
Live Ventures has undergone significant transformations since its inception. Originally operating as a computer software company, it has evolved over the years to become a diversified holding company. In 2015, the company made a strategic move into the flooring manufacturing business by acquiring Marquis Industries, a leading carpet manufacturer and distributor. This acquisition not only expanded Live Ventures’ footprint in the flooring industry but also positioned the company as a vertically integrated player.
Around the same time as the Marquis Industries acquisition, Live Ventures also acquired Vintage Stock, a furniture retail business specializing in entertainment media products. This move further diversified the company’s portfolio and marked its entry into the retail sector.
In 2017, Live Ventures continued its expansion by purchasing ApplianceSmart, a retailer of new and special-buy household appliances. However, this acquisition was later divested in 2020 as part of the company’s strategic realignment to focus on its core business segments.
The year 2020 brought challenges for Live Ventures, as the company faced issues related to restatements of its financial statements. This led to an ongoing SEC investigation, which has had implications for the company’s operations and reputation.
More recently, Live Ventures has made significant strides in expanding its presence in both the retail and flooring sectors. In 2023, the company acquired Flooring Liquidators, a leading flooring retailer and installer in California and Nevada. This transformative deal not only added scale to Live Ventures’ operations but also brought complementary capabilities to its existing flooring business.
The company’s diversification efforts extended beyond flooring and retail. Live Ventures has also made strategic acquisitions in the steel manufacturing space, including Precision Marshall, Kinetic, and Central Steel. These acquisitions have further broadened the company’s business mix and strengthened its position in the manufacturing sector.
Financial Performance and Ratios
For the fiscal year ended September 30, 2023, Live Ventures reported total revenue of $355.17 million, a 23.7% increase from the prior year’s $286.91 million. However, net income declined from $24.74 million in fiscal 2022 to a loss of $102,000 in fiscal 2023. Operating cash flow for fiscal 2023 was $26.00 million, and free cash flow was $15.99 million.
The company’s gross profit margin decreased from 34.0% in fiscal 2022 to 32.5% in fiscal 2023, driven by higher costs of goods sold. Operating expenses as a percentage of revenue increased from 23.3% to 28.2% over the same period, primarily due to higher general and administrative expenses.
Live Ventures’ balance sheet remains reasonably solid, with a current ratio of 1.87 and a debt-to-equity ratio of 2.44 as of September 30, 2023. The company’s cash position decreased from $4.60 million at the end of fiscal 2022 to $4.31 million at the end of fiscal 2023.
Recent Developments and Outlook
During the third quarter of fiscal 2024, which ended on June 30, 2024, Live Ventures reported a 35.4% increase in revenue to $123.9 million, compared to $91.5 million in the prior-year period. However, the company incurred a net loss of $2.9 million, or $0.91 per share, compared to net income of $1.1 million, or $0.33 per share, in the third quarter of fiscal 2023. Operating cash flow for the quarter was $11.75 million, and free cash flow was $10.13 million.
The increase in revenue was primarily attributable to the acquisitions of PMW, which was acquired in the fourth quarter of fiscal 2023, and Central Steel, which was acquired in May 2024. These acquisitions collectively added $21.1 million in revenue. The Retail-Flooring and Flooring Manufacturing segments also contributed to the revenue growth, with increases of $9.5 million and $3.8 million, respectively. These gains were partially offset by a decrease of $1.5 million in the Retail-Entertainment segment.
Gross profit for the third quarter of fiscal 2024 was $37.0 million, up from $32.2 million in the prior-year period. However, the gross margin percentage decreased from 35.2% to 29.9%, primarily due to the lower-margin PMW acquisition and decreased margins in the Steel Manufacturing segment.
General and administrative expenses increased by $6.8 million, or 29.4%, to $30.1 million, primarily due to the acquisitions of PMW, CRO, and Johnson. Sales and marketing expenses also increased by $2.4 million, or 73.0%, to $5.9 million, driven by expanded sales personnel and increased convention and trade show activity.
Interest expense rose by $750,000, or 21.6%, to $4.3 million, reflecting the additional debt incurred for the PMW, CRO, and Johnson acquisitions.
Liquidity
As of June 30, 2024, Live Ventures had total cash availability of $34.4 million, consisting of $4.7 million in cash and $29.7 million in available borrowing capacity under its various credit facilities. The company’s working capital decreased from $85.0 million as of September 30, 2023, to $57.5 million as of June 30, 2024, primarily due to the reclassification of PMW’s long-term debt and seller finance loans to current liabilities due to a covenant breach.
The company’s current ratio stood at 1.44, while its quick ratio was 0.44. The debt-to-equity ratio remained at 2.44 as of June 30, 2024.
Segment Performance
Live Ventures operates through five key segments: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other.
The Retail-Entertainment segment, consisting of Vintage Stock, generated revenue of $16.50 million for the three months ended June 30, 2024, a decrease of 8.4% compared to the prior year period. Gross profit margin for this segment improved to 57.9% from 54.7%, due to a shift in sales mix toward higher-margin used products. Operating income for the segment was $1.33 million, compared to $1.55 million in the prior year quarter.
The Retail-Flooring segment, comprising Flooring Liquidators, reported revenue of $36.98 million for the quarter, an increase of 34.7% year-over-year. This growth was driven by expansion in the builder design and installation business, as well as the acquisitions of Carpet Remnant Outlet (CRO) and Johnson Floor & Home. Gross profit margin for the segment decreased slightly to 36.6% from 37.8%. Operating income improved to $1.50 million from $1.05 million in the same period last year.
The Flooring Manufacturing segment, which includes Marquis Industries, saw revenue increase by 14.0% to $31.26 million. This growth was primarily due to higher sales associated with the acquisition of the Harris Flooring Group brands. Gross profit margin improved to 24.7% from 23.3%, while operating income slightly decreased to $1.86 million from $2.02 million.
The Steel Manufacturing segment, consisting of Precision Industries, The Kinetic Co., Precision Metal Works, and CSF Holdings, reported a significant revenue increase of 112.1% to $39.05 million. This growth was largely attributable to the acquisitions of Precision Metal Works and Central Steel. However, gross profit margin decreased to 15.8% from 29.2% due to lower margins of the acquired businesses and decreased production efficiencies. Operating income for the segment declined to $1.37 million from $2.70 million in the prior year quarter.
The Corporate and Other segment saw a 63.1% decrease in revenue to $0.83 million, primarily due to the closure of Salomon Whitney LLC in May 2023. This segment reported an operating loss of $1.93 million, compared to a loss of $1.76 million in the prior year quarter.
Risks and Challenges
Live Ventures’ diversified business model has helped it navigate recent economic headwinds, but the company faces several risks and challenges:
Debt Financing: The company’s reliance on debt financing to fund acquisitions and operations exposes it to interest rate risk and potential covenant breaches, as seen with PMW’s recent covenant violation.
Industry-Specific Headwinds: Certain segments, such as Retail-Flooring, have faced challenges due to rising interest rates and a slowdown in the housing market, which have affected demand and margins.
Regulatory and Legal Risks: The company is involved in several ongoing legal proceedings, including an SEC investigation and a related class action lawsuit, which could result in significant financial and reputational consequences.
Competitive Landscape: Live Ventures operates in highly competitive industries, which could pressure margins and market share if the company is unable to effectively differentiate its offerings and maintain its competitive edge.
Outlook and Guidance
While Live Ventures has not provided specific quantitative guidance for future periods, management has acknowledged facing industry-specific headwinds, particularly in the Flooring Liquidators segment due to higher interest rates and their impact on the housing market. Despite these challenges, the company remains committed to adapting its businesses to navigate the current economic environment and maintains confidence in its long-term buy-build-hold strategy.
Conclusion
Live Ventures’ diversified business model and strategic acquisitions have enabled the company to navigate recent economic challenges, as evidenced by the 35.4% year-over-year revenue growth in the most recent quarter. However, the integration of new acquisitions, debt financing risks, industry-specific headwinds, and ongoing legal proceedings present significant hurdles that the management team must continue to address.
The company’s performance across its various segments has been mixed, with strong growth in the Retail-Flooring and Steel Manufacturing segments offset by challenges in the Retail-Entertainment and Corporate segments. The recent acquisitions have contributed significantly to revenue growth but have also led to margin pressure and integration costs.
Live Ventures’ liquidity position remains stable, with $34.4 million in total cash availability. However, the reclassification of certain long-term debt to current liabilities due to a covenant breach highlights the importance of careful debt management.
Investors should closely monitor the company’s ability to efficiently integrate its acquisitions, manage its debt levels, and adapt to evolving market conditions to assess the long-term viability of Live Ventures’ growth strategy. While the company faces near-term challenges, its diversified portfolio and management’s commitment to operational improvements provide potential for future growth and value creation.
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