Australian digital music firm Guvera has startled the industry by announcing an AU$100m ($72.2m) funding round, while talking up its plans for an IPO.
Yet the company’s latest financial results reveal that it lost AU$81.1m (US$58.6m) in its last financial year, which ended on 30 June 2015, following a AU$29.4m loss in the previous year.
The new funding round doesn’t come from the usual corps of venture capital firms, but rather from private investors in Guvera’s home country.
“A number of wealthy Australian families have been looking for new opportunities in the tech and digital space… but more specifically in mobile and digital. Guvera presents an opportunity in this space, and it’s growing quickly in Asia,” CEO Darren Herft told the Australian Financial Review.
Guvera raised two funding rounds of $5m each in 2009 when it originally launched as an ad-supported downloads service, then another $20m round in 2010. The company’s latest financial report reveals that it issued shares worth a further AU$57.7m in its 2014-15 financial year.
In the AFR interview, Herft said that work continues on plans for a Guvera IPO, although the company has not yet decided whether to list in Australia or the US.
He also offered some new stats: Guvera claims 15 million users globally, including 6.5 million in India, where it launched a year ago. Note, that’s registered users rather than active users: the AFR piece says that 40% of Guvera’s 1.4m users in Australia are active, for example.
Massive funding, IPO talk, user figures higher than many observers would have predicted… digital music veterans would be forgiven for wondering how this might all go wrong, having seen previous much-hyped firms crash and burn.
Sceptics may point to the Sydney Morning Herald’s report last year claiming Guvera lost $7.2m in its 2012-13 financial year, as well as a slapdown from the Australian Securities and Investments Commission over its attempts to raise an $8.8m funding round.
A recent class-action lawsuit from former employees of UK service Blinkbox Music – acquired by Guvera in January – and July newspaper ads in Australia from a Guvera shareholder trying to sell 5m shares, may offer more fuel for critics. As will Guvera’s latest financial results, filed recently in Australia.
The key figures: Guvera recorded just under AU$1.2m of sales revenues in the year ended 30 June 2015, but recorded a net loss for the year of AU$81.1m thanks to costs – including AU$34.2m cost of sales, AU$25.4m of administrative expenses and AU$9.5m of marketing expenses.
Those results compare to sales revenues of AU$401k in the 2013-14 financial year, when Guvera recorded a loss of AU$29.4m. Despite issuing AU$57.7m of shares during the 2014-15 fiscal year, the report reveals that “Cash at bank at 30 June [2015] was $6 million very similar to last 30 June closing bank balance.”
The report also addresses those IPO plans. “Guvera was planning for a 2015 IPO however this has been held up due to a number of factors,” it claims, citing the “longer than expected” time taken to ink licensing deals with labels in 2014 as having a knock-on effect on the growth of Guvera’s business.
“The Company is now pleased to report these items are now all in place as required for an IPO. As such, Guvera is pleased to advise that IPO planning has progressed and the Company expects to make a more formal announcement regarding the IPO at the commencement of 2016.”
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