Koss Corporation Releases Third Quarter Results

Rhea-AI Summary

Koss , a high-fidelity headphone company, reported a decline in net sales for the third quarter of 2024 compared to the same period last year. The company experienced lower sales in the direct-to-consumer space and from a European distributor, leading to a net loss for the quarter and nine months ended March 31, 2024. The decline in gross margins was attributed to lower volume of higher margin sales and selling through inventory from suppliers at inflated freight rates. Koss remains cautious about future sales due to factors like consumer confidence, rising prices, and geo-political turmoil.

Positive

• None.

Negative

• The decline in net sales for the third quarter of 2024 compared to the same period last year.

• The net loss reported for the third quarter and nine months ended March 31, 2024.

• The decline in gross margins attributed to lower volume of higher margin sales and selling through inventory from suppliers at inflated freight rates.

• The caution expressed by Koss about future sales due to factors like consumer confidence, rising prices, and geo-political turmoil.

Insights

Financial Analyst

Examining Koss Corporation's reported decline in net sales of $743,234, or 22%, along with an increased net loss of $313,780 this quarter suggests a company grappling with significant headwinds. The year-to-date numbers are also concerning, showing a 6.5% decrease in net sales and a swing from net income to net loss when comparing this nine-month period to the last year. These figures potentially reflect a problematic trend in consumer spending, heightened by inflation and operational hurdles, such as increased freight rates. From a shareholder perspective, the drop in earnings per share to <$0.03>, down from <$0.02> in the previous year, could have a negative impact on investor confidence and could be indicative of underlying challenges in maintaining profitability. These financial indicators necessitate close monitoring for future quarters to evaluate whether this downturn is temporary or signifies a deeper issue within the company or its industry.

Market Analyst

The direct-to-consumer sales slump of nearly 30% is an alarming metric, as this channel often boasts higher margins and indicates consumer engagement with the brand. Market trends show that high inflation and increasing costs are affecting discretionary spending, particularly for non-essential items such as high-fidelity headphones. Sales in the European market also appear to be declining, which is problematic, as it suggests that the company's challenges are not isolated to one geographic region. However, the mention of new customer orders in Eastern Europe and a notable sale to a new customer offers a glimmer of hope. This dichotomy of struggling core markets and new opportunities might indicate that strategic pivots or expansion could be essential for recovery. Investors will be interested in how the company plans to capitalize on these areas of sales favorability amidst broader economic pressures.

Supply Chain Analyst

The CEO's statement regarding the unfavorable impact of inflated freight rates on gross margins sheds light on the supply chain disruptions faced by Koss Corporation. Supply chain management is a critical component in maintaining cost-effectiveness and meeting consumer demand. The geopolitical turmoil in Eastern Europe and the Middle East contributes to this complexity, which investors should consider when evaluating the potential for ongoing issues. Prospective stakeholders should take note of the company's ability to navigate these disruptions and potentially leverage alternative strategies to mitigate such risks in the future. Additionally, supply chain resilience could become a important differentiator in the industry, proving pivotal for the company's success moving forward.

MILWAUKEE, Wis., May 09, 2024 (GLOBE NEWSWIRE) -- Koss Corporation (NASDAQ: KOSS) (the “Company”), a U.S. based high-fidelity headphone company, has reported its results for the third quarter ended March 31, 2024.

Net sales for the three months ended March 31, 2024 were $2,637,606, which is a decline of $743,234, or 22.0%, compared to $3,380,840 for the same period in the prior year. The net loss for the third quarter ended March 31, 2024 was $313,780 compared to a net loss of $224,480 for the same three-month period in the prior year. Basic and diluted loss per common share for the quarter was $0.03 compared to basic and diluted loss per common share of $0.02 for the comparable three-month period one year ago.

For the nine months ended March 31, 2024, net sales of $9,371,668 were down $654,634, or 6.5%, versus sales of $10,026,302 for the nine months ended March 31, 2023. The nine-month net loss was $840,542 compared to net income of $8,579,052 for the same period last year. Basic and diluted net loss per common share was $0.09 for the nine months ended March 31, 2024. This compared to basic and diluted income per common share of $0.93 and $0.88, respectively, for the same nine-month period in the prior year.

“A downturn in sales in the direct-to-consumer (DTC) space of nearly 30%, which appears to be a result of a slowdown in consumer spending amid high inflation, energy and borrowing costs, drove the overall decline in sales for the first nine months of the fiscal year,” Michael J. Koss, Chairman and CEO, said today. “We also saw a decline in year-to-date sales from one of our largest European distributors, however, restocking and new customer orders in Eastern Europe helped to partially offset that decline. Other sales favorability included a notable sale to a new Koss customer during the year-to-date period as well as continued improvement in sales to e-tailers.”

“The lower volume of higher margin DTC sales, combined with the unfavorable impact of selling through inventory brought in from suppliers at inflated freight rates during prior periods, were the main contributing factors to the decline in gross margins year over year,” Koss continued. “Continued declines in consumer confidence, rising prices, and geo-political turmoil in Eastern Europe and the Middle East may continue to impact our sales and lead to supply chain disruptions.”

About Koss Corporation

Koss Corporation markets a complete line of high-fidelity headphones, wireless Bluetooth® speakers, computer headsets, telecommunications headsets, active noise canceling headphones, and wireless headphones.

Forward-Looking Statements

This press release contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “aims,” "anticipates," "believes," "estimates," "expects," "intends," "plans," “thinks,” "may," "will," “shall,” "should," “could,” “would,” "forecasts," "predicts," "potential," "continue," or the negative of such terms and other comparable terminology. These statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Actual events or results may differ materially. In evaluating forward-looking statements, you should specifically consider various factors that may cause actual results to vary from those contained in the forward-looking statements, such as general economic conditions, inflationary cost environment, supply chain disruption, the impacts of the COVID-19 pandemic, geopolitical instability and war, consumer demand for the Company's and its customers' products, competitive and technological developments, foreign currency fluctuations, and costs of operations. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances or new information. In addition, such uncertainties and other operational matters are discussed further in the Company's quarterly and annual filings with the Securities and Exchange Commission.

KOSS CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	Three Months Ended								Nine Months Ended
	March 31								March 31
	2024				2023				2024				2023
Net sales	$	2,637,606			$	3,380,840			$	9,371,668			$	10,026,302
Cost of goods sold		1,796,083				2,076,482				6,354,015				6,390,557
Gross profit		841,523				1,304,358				3,017,653				3,635,745
Selling, general and administrative expenses		1,451,247				1,749,341				4,572,049				27,907,247
(Loss) from operations		(609,724	)			(444,983	)			(1,554,396	)			(24,271,502	)
Other income		—				—				—				33,000,000
Interest income		214,814				189,593				636,482				314,482
(Loss) income before income tax provision (benefit)		(394,910	)			(255,390	)			(917,914	)			9,042,980
Income tax provision (benefit)		(81,130	)			(30,910	)			(77,372	)			463,928
Net (loss) income	$	(313,780	)		$	(224,480	)		$	(840,542	)		$	8,579,052
(Loss) income per common share:
Basic	$	(0.03	)		$	(0.02	)		$	(0.09	)		$	0.93
Diluted	$	(0.03	)		$	(0.02	)		$	(0.09	)		$	0.88
Weighted-average number of shares:
Basic		9,254,795				9,206,135				9,243,559				9,183,042
Diluted		9,254,795				9,206,135				9,243,559				9,791,627

CONTACT:	Michael J. Koss
	Chairman & CEO
	(414) 964-5000
	mjkoss@koss.com

FAQ

What were the net sales for Koss for the third quarter ended March 31, 2024?

Koss reported net sales of $2,637,606 for the third quarter ended March 31, 2024, which was a decline of 22.0% compared to the same period last year.

What was the net loss for Koss for the third quarter ended March 31, 2024?

The net loss for Koss for the third quarter ended March 31, 2024 was $313,780, compared to a net loss of $224,480 for the same period last year.

What factors contributed to the decline in gross margins for Koss ?

The decline in gross margins for Koss was attributed to lower volume of higher margin sales and selling through inventory from suppliers at inflated freight rates.

What concerns were expressed by Koss about future sales?

Koss expressed concerns about future sales due to factors like consumer confidence, rising prices, and geo-political turmoil in Eastern Europe and the Middle East.