Australian music-streaming service Guvera is preparing to go public in July, but the release of its IPO prospectus has shed new light on its business.
Guvera generated AU$1.2m ($0.87m) of revenues in its last full fiscal year (ending on 30 June 2015), but recorded a net loss of AU$81.1m ($58.9m) for the year thanks to an AU$34.2m cost of sales, $25.4m of administrative expenses and AU$9.5m of marketing expenses, among other costs.
That followed a net loss of AU$29.7m in Guvera’s fiscal 2014. In the first half of its fiscal 2016 (i.e. the last six months of 2015) the company generated another AU$1.2m of sales, but recorded an AU$55.7m net loss.
The IPO prospectus also breaks down the company’s minimum guaranteed payments to music rightsholders, which are recorded as assets and amortised over the period of usage, or impaired where required. In its fiscal 2015, AU$13.8m was recorded as impairment and $4.7m as usage, while in the first half of its fiscal 2016, $5.7m was recorded as impairment and $11.4m as usage.
This isn’t a fledgling business: the prospectus notes that Guvera has raised more than AU$180m of funding over the past seven years; that it now has more than 14 million users in 10 countries; and that it intends to raise between AU$40m and AU$80m – although possibly up to AU$100m if oversubscribed – from its IPO on the Australian Securities Exchange.
Guvera says it plans to focus on 10 markets in particular, post-IPO: Australia, the US, India, Russia, Mexico, Indonesia, the Philippines, Saudi Arabia, the UAE and Vietnam.
The prospectus also offers an update on some legal matters relating to Guvera. The company is facing an employment tribunal case in the UK from former employees of Blinkbox Music, which it acquired in early 2015.
Those staff are seeking up to £10m in compensation, although Guvera maintains it will be able to successfully defend itself. It is also facing an AU$6.9m lawsuit from former Guvera COO Michael de Vere, who headed up the company’s UK business at the time of the Blinkbox acquisition.
Meanwhile, the recent administration of B2B firm Omnifone is also affecting Guvera, for which it provided content ingestion in 17 countries. Omnifone’s administrators stopped providing that service on 6 May, and have requested payment for “outstanding amounts owed by Guvera to Omnifone” which Guvera is disputing.
The prospectus suggests that the company may take action against Omnifone “for failure to carry out its contractual obligations in the periods prior to and after it was placed into Administration”.
Still, Guvera is hoping that investors are enticed by its business. “Primarily focused on mobile digital advertising, today Guvera’s revenue model replicates that of a major social media company,” wrote chairman Phil Quartararo in the prospectus.
“The provision of music is a mass-market service, and the Directors and I believe Guvera is the best positioned music company to take advantage of this mobile advertising explosion.” With the IPO process underway, we’ll find out whether investors agree.