Safe Harbor Statement.
Statements made in this Form 10-Q which are not purely historical are
forward-looking statements with respect to the goals, plan objectives,
intentions, expectations, financial condition, results of operations, future
performance and business of the Company, including, without limitation, (i) our
ability to gain a larger share of the web hosting and podcasting industries, our
ability to continue to develop services acceptable to our industries, our
ability to retain our business relationships, and our ability to raise capital
and the growth of the web and podcasting hosting and domain industries, and (ii)
statements preceded by, followed by or that include the words "may", "would",
"could", "should", "expects", "projects", "anticipates", "believes",
"estimates", "plans", "intends", "targets", "tend" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and
important factors (many of which are beyond the Company's control) that could
cause actual results to differ materially from those set forth in the
forward-looking statements, including the following, in addition to those
contained in the Company's reports on file with the Securities and Exchange
Commission: the outbreak of the coronavirus ("COVID-19") and the global spread
of the COVID-19 pandemic during 2020, general economic or industry conditions,
nationally and/or in the communities in which the Company conducts business,
changes in the interest rate environment, legislation or regulatory
requirements, conditions of the securities markets, changes in the web hosting
and podcasting industries, the development of services that may be superior to
the services offered by the Company, competition, changes in the quality or
composition of the Company's services, our ability to develop new services, our
ability to raise capital, changes in accounting principles, policies or
guidelines, financial or political instability, acts of war or terrorism, other
economic, competitive, governmental, regulatory and technical factors affecting
the Company's operations, services and prices.
Accordingly, results actually achieved may differ materially from expected
results in these statements. Forward-looking statements speak only as of the
date they are made. The Company does not undertake, and specifically disclaims,
any obligation to update any forward-looking statements to reflect events or
circumstances occurring after the date of such statements.
Founded in 2015, Liberated Syndication Inc ("the "Company,", "parent", "we," or
"us" and words of similar import), a Nevada corporation, provides podcast
hosting services through its wholly-owned subsidiary Webmayhem Inc., a
Pennsylvania corporation ("Libsyn"), and web hosting services through its
wholly-owned subsidiary Pair Networks, Inc., a Pennsylvania corporation ("Pair"
or "PNI"). The Company's consolidated financial statements include the financial
statements of Libsyn and Pair. Libsyn's focus is on our podcasting business,
while Pair's focus is on web hosting and domains.
Our corporate offices consist of approximately 3,100 square feet of office space
located at 5001 Baum Blvd, Suite 770, Pittsburgh, PA 15213. Our telephone number
is (412) 621-0902. We also maintain an office at 2403 Sidney St., Suite 210,
Pittsburgh, PA consisting of approximately 34,700 square feet.
Libsyn is a podcast service provider offering hosting and distribution tools
which include storage, bandwidth, RSS creation, distribution, and statistics
tracking. Podcast producers can choose from a variety of hosting plan levels
based on the requirements for their podcast. Podcast producers' sign-up online
at www.libsyn.com, using their credit card to subscribe to a monthly plan.
Libsyn offers a basic, getting started plan for $5 per month and more advanced
plans that include more storage, advanced statistics, and podcast apps. Plans
are designed to provide full-featured podcast tools with generous storage and
bandwidth transfer. LibsynPro service is an enterprise solution for professional
media producers and corporate customers that require media network features and
Libsyn supports both audio and video podcasts, allowing producers to upload
podcast episodes through the Libsyn interface or via FTP to manage publishing to
online directories, web portals, content aggregators, App marketplaces and
social media platforms for both download and streaming.
Approximately 62% of the downloads from shows that Libsyn distributes reach
audiences using Apple's iOS, Apple Podcasts and Apple's iTunes platform which
includes iTunes on the computer, iPads, iPhones, Apple Watch, Apple TV, and
Apple's Podcasts App on iOS devices. Libsyn also enables distribution to
destinations like Google Play Music and aggregators such as Spotify, Pandora,
and iHeartRadio. The OnPublish feature enables podcast episodes to be posted to
social media sites such as Facebook, Twitter, YouTube, Linked-In and blogging
platforms like WordPress and Blogger. Libsyn also provides a podcast player that
can be embedded on websites or shared via social media.
Libsyn's podcast platform architecture allows for expansion of distribution
destinations and OnPublish capabilities. Using the Libsyn service, podcast
producers can more broadly distribute and promote their shows to attract larger
Pair Networks, Inc. ("Pair")
Pair, founded in 1996, is one of the oldest and most experienced Internet
hosting companies providing a full range of fast, powerful and reliable web
hosting services. Pair offers a suite of Internet services from shared hosting
to virtual private servers to customized solutions with world-class 24x7 on-site
customer support. Based in Pittsburgh, Pair serves businesses, bloggers,
artists, musicians, educational institutions and non-profit organizations around
Pair offers a variety of hosting plan levels; value add Internet services and
domain registration. Through the Pair Account Control Center (ACC), customers
can manage their hosting accounts and domains from one place.
Customers can choose from a variety of web hosting plan levels based on their
requirements and applications. Pair Hosting offers shared servers, virtual
private servers, dedicated servers and optimized WordPress hosting as managed
services. With over twenty years of experience in Internet hosting, Pair has the
expertise to build and manage reliable and powerful hosting solutions. The
managed service and 24x7 support allow customers to focus on their core business
without having to worry about hardware, operating systems, network connectivity
Shared web hosting is a great option for startup or smaller businesses as the
website sits on the same server with other websites and shares resources such as
memory and Central Processing Unit (CPU). Basic website applications such as
email and file sharing are ideal for shared server offerings.
Virtual private servers
Virtual private servers (VPS) is a step up from a shared hosting solution in
that specific server resources are allocated directly for a customer's use,
assuring performance levels. This is a more secure and reliable option that
separates a customer's site from others and is ideal for storage or database
applications for businesses, developers, and fast-growing sites.
Dedicated servers provide yet another level of security and performance for
those who need more processing power or storage. Servers are built to customer
specifications and tuned for performance, reliability and efficiency to meet the
demand of more robust applications. Through Pair QuickServe (QS), a powerful
hosting solution with tremendous capacity and speed, servers are ready for a
customer's use quickly and fully managed to keep them up to date.
Pair hosting also offers self-managed service through server collocation, which
delivers the advantages of the powerful infrastructure that was built behind the
fully managed offerings. For those customers who want to purchase their own
hardware, collocation service in Pair's data center allows for unmanaged service
with the security and reliability of the diverse network, physically secure
facilities, backup power and redundant climate control.
WordPress (WP) is one of the fastest growing Content Management Systems (CMS)
powering web sites today. Pair offers a managed WP product line that is
optimally configured for performance and security. This managed WP service
provides fast performance, high availability and security by keeping sites up to
date with the latest WP core updates and patches and ensuring hardware and
network speed and uptime. The WP service offers a range of scalable solutions
from several to unlimited WP sites, ideal for single sites through enterprise
Pair Hosting customers sign-up online at www.pair.com, using their credit card
to subscribe to a monthly or annual plan. Pair offers a basic, getting started
plan with a custom domain for $5.95 per month with a basic drag and drop website
builder and more advanced plans that include additional storage, processing
power and add-ons like eCommerce and WordPress. Plans are designed to provide
full-featured web hosting tools for all levels including backups, account
control and security and operating system maintenance and upgrades.
Pair Domains offers custom domains for Top Level Domains (TLDs) including
dot-com, dot-org, and dot-net that vary in price from $7.00 to $70 per year
based on the TLD. Customers can search for available domains and sign-up online
at www.pairdomains.com using their credit card for a one to ten-year domain name
purchase or domain transfer. All domain names registered by Pair include
enhanced services such as custom and dynamic Domain Name System (DNS) which
controls your domain name's website and email, WHOIS privacy, email forwarding,
and a drag and drop website builder.
Results of Operations
Three months Ended March 31, 2020 and 2019.
During the three months ended March 31, 2020, the Company recorded revenues of
$6,252,751, a 0.5% decrease from revenues of $6,282,979 for the same period in
2019. The decrease for 2020 reflects a decrease due to Pair's hosting and domain
offerings and a slight decrease to LibsynPro revenue, offset by an increase in
Libsyn4 hosting revenue. Libsyn contributed $3,779,264 and $3,334,635 of revenue
during the first three months of 2020 and 2019, respectively. Pair contributed $
2,473,487 and $2,948,344 of revenue during the first three months of 2020 and
Libsyn4 hosting revenue increased $450,552, or 17% during the first three months
ended March 31, 2020 when compared to the same period in 2019 due to the growth
in the number of podcasts on the network. LibsynPro revenue decreased slightly
by 4% as a result of relatively flat revenue from producers using the LibsynPro
networks and using our platform. Advertising revenue decreased $48,891 during
the first three months of 2020 versus the same period of 2018. The decrease
resulted from decrease in the dollars being spent on ad campaigns during the
first three months of 2020 with existing advertisers. Premium subscription
revenue increased $66,228.
The Company recorded total costs and operating expenses of $4,834,330 during the
first three months of 2020, a 2% increase as compared to total costs and
operating expenses of $4,719,576 during the same period of 2019. Libsyn
contributed $2,165,048 to total costs and operating expenses during the first
three months of 2020, and $2,066,782 during the same period in 2019. Pair
contributed $2,669,282 to total costs and operating expenses during the first
three months of 2019 and $2,652,794 during the same period in 2018.
During the first three months of 2020, cost of revenue totaled $807,236, a 3.9%
increase as compared to $839,640 for the same period in 2019. Libsyn contributed
$503,482 while Pair contributed $303,754 to the cost of revenue during the first
three months of 2020. Libsyn recorded a decrease in bandwidth costs and ad
sharing paid to producers offset by an increase in credit card processing fees,
and colocation fees during the first three months of 2020 versus 2019. Pair
recorded a decrease in domain name fees and internet fees. Cost of revenue as a
percentage of revenue for Libsyn decreased to 13% during the first three months
of 2020 from 21% during the same period in 2019. This is a reflection of the
reduction in the bandwidth rate to deliver the podcasts, off-set by an increase
in bandwidth usage during the first three months of 2020 due to the growth in
the number of podcasts and increased podcast consumption on the Libsyn Platform.
Cost of revenue as a percentage of revenue for Pair increased to 12% during the
first three months of 2020 from 9% during the same period in 2019. This is due
primarily to the increase in domain name purchase fees and internet connectivity
General and administrative expenses totaled $1,950,041 during the first three
months of 2020 versus $1,828,539 during the same period in 2019, an increase of
7%. The increase was driven primarily due to an increase in legal and advisory
fees, wage expense, and insurance costs, offset by a decrease in professional
fees as well as a reduction of non-cash expense for Libsyn. General and
administrative expense for Pair during the first three months of 2020 was
$842,422 and $686,643 for the same period in 2019. General and administrative
for Libsyn for the same periods was $1,141,896 and $781,888, respectively.
Technology expenses represented $581,070 during the first three months of 2020
versus $454,638 in 2019, driven by an increase in wage expense during the first
three months of 2020. Selling expenses during the first three months of 2020
were $230,812 versus $194,794 during the same period in 2019 driven by an
increase in advertising expense. Customer support expenses in the first three
months of 2020 were $751,167 versus $659,868 during the same period in 2019
driven by the increase in support staff costs.
Depreciation and amortization expenses consist of charges relating to the
depreciation of the property and equipment used in our operations and the
amortization of intangible assets. Depreciation and amortization expense for the
first three months of 2020 was $514,004 and $742,097 during the same period in
2019. During the first three months of 2020, Libsyn contributed $20,040 and Pair
contributed $492,964 to depreciation and amortization expense.
Interest expense for the first three months of 2020 was $62,342 compared to
$86,842 in the three months of 2019, which represents interest on the loan
facility obtained in connection with the acquisition of Pair. Interest expense
for the three months of 2020 was offset with interest income of $58,434,
resulting in net cash expenditure of $3,908.
Income tax expense for the three months ended March 31, 2020 was $304,536, which
represents a change in the deferred tax assets and the expected federal balance
due for the three month period ended March 31, 2020. Income tax expense for the
three months ended March 31, 2019 was $327,010.
The Company's net income was $1,120,111 for the three months ended March 31,
2020. This represents a $80,512 decrease from $1,200,623 for the three months
ended March 31, 2019. Earnings per share remained the same at $0.04 per share
for the first three months of 2020 when compared to the first three months of
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