Company Provides First Quarter 2024 Results of Operations
The Singing Machine Company (NASDAQ: MICS) announced its Q1 2024 financial results, reporting a net sales decline to approximately $2.43 million, a 29% drop from Q1 2023. Gross profits fell by 39% to $0.50 million, with gross margins decreasing from 24.2% to 20.7% due to outsourced logistics costs. Operating expenses dropped to $2.79 million, with selling expenses decreasing and G&A expenses remaining flat. The company reported a net loss of $2.37 million, a $0.62 million improvement YoY. Strategic financial initiatives include improving product sales mix, reducing fixed overhead, and strict cost control, aimed at optimizing profitability moving forward.
- Net loss reduced by approximately $0.62 million compared to Q1 2023.
- Selling expenses decreased from approximately $0.81 million to $0.63 million.
- Focus on higher price-point product sales is expected to improve future profitability.
- Closure of California warehouse and shift to outsourced 3PL model reduced fixed overhead costs.
- Net sales decreased by 29% to approximately $2.43 million compared to Q1 2023.
- Gross profits dropped by 39% to $0.50 million.
- Gross margins fell from 24.2% to 20.7%, impacted by outsourced logistics costs.
- Total operating expenses were still high at approximately $2.79 million.
- Net loss stood at approximately $2.37 million in Q1 2024.
Insights
The Singing Machine Company’s recent financial results for Q1 2024 reveal significant operational shifts and strategic cost-cutting measures. Despite a
The financial summary indicates a net loss of
The shift towards higher price-point, best-in-class karaoke products supporting a music subscription model could be a strategic pivot to capture more value from each customer. This model aligns with broader industry trends where companies aim to leverage subscription revenues for consistent cash flows. However, the initial decline in sales and gross profits suggests that the market is still adjusting to this shift. Investors should watch closely how the market responds to this high-end product mix and whether it translates to improved margins as projected by the company.
Another factor to consider is the performance impact of the outsourced logistics model. Moving repairs and logistics to contract manufacturers in China might streamline operations in the long run, but the near-term challenges and associated costs have clearly impacted margins. It's important to monitor how quickly these changes stabilize and start reflecting positively on the financial statements.
Given the aggressive cost-cutting measures and strategic positioning for higher-margin products, there is potential for future growth, but the transition period presents risks that need to be carefully managed and communicated to stakeholders.
Fort Lauderdale, FL, May 16, 2024 (GLOBE NEWSWIRE) -- The Singing Machine Company, Inc. ("Singing Machine") (NASDAQ: MICS) – the worldwide leader in consumer karaoke products, today announced its results of operations for the three-months ended March 31, 2024.
"We are pleased to report our first quarter results of operations," commented Gary Atkinson, CEO of the Singing Machine. "We have focused on three core areas of operations, which we believe will lead to overall improved profitability in the coming quarters:
1) Improved product sales mix. We are focused on selling more of our higher price-point, best-in-class karaoke products that support our music subscription model. This is expected to improve sell-through rates, reduce marketing expenses, and improve gross margins going forward.
2) Reduce fixed overhead. With the closure of our California warehouse lease and our shift to a fully outsourced 3PL model, we were able to reduce headcount, eliminate our occupancy costs in California, and switch to a more variable operating structure.
3) Strict Cost Control. We have aggressively worked to identify areas where we can reduce recurring operating expenses, particularly in the areas of IT infrastructure, headcount, and occupancy.
"With three aggressive financial initiatives, we are actively looking to optimize our immediate financial profile. We have sought to eliminate virtually all non-working capital liabilities. We have streamlined our operations. At this point, our Board of Directors is asking us to consider all strategic options and we are open to this path as a management team. We anticipate providing meaningful updates on this development in the near term," concluded Mr. Atkinson.
Results of operations for the first quarter are summarized as follows:
- Revenues: Net sales of approximately
$2.43 million for the three-months ended March 31, 2024. This represents a$1.0 million (29% ) decrease from approximately$3.38 million in sales for the same period in 2023. Primary factors for the decline are as follows:- Holiday sell through results at our largest customer were lower in Q4 2023 than in the same period in 2022. As a result, restocking demand in Q1 2024 was negatively impacted.
- The Company has also shifted its sales focus to dedicate more resources to its higher margin top-tier product lines. This is expected to lower overall unit sales but improve gross margins and operating margins over the next year.
- Gross Profits: Gross profits were approximately
$0.50 million for the first quarter of 2024, as compared to approximately$0.82 million for the same period in 2023. This represents a decrease of$0.3 million , or39% for the three months ended March 31, 2024 as compared to March 31, 2023.- Gross margins were
20.7% for Q1 2024, as compared to24.2% for Q1 2023. - Margins in Q1 2024 were negatively impacted by approximately
$0.7 million in allowances for repairs under the Companies new outsourced logistics model. In prior years, repairs were handled in house at the Company’s in-house logistics hub in Ontario, CA. Since September of 2023, all repairs are now the responsibility of our contract manufacturers in China.
- Gross margins were
- Operating Expenses: Total operating expenses were approximately
$2.79 million for the three months ended March 31, 2024, as compared to approximately$2.97 million for the same period in 2023.- Selling expenses were approximately
$0.63 million in Q1 2024, as compared to approximately$0.81 million in Q1 2023. - General and administrative expenses were approximately
$2.2 million for Q1 2024, which was flat compared to the same period in 2023. - General and administrative expenses are expected to decrease modestly going forward. The Company has taken steps to reduce payroll, reduce IT expenses, and reduce certain aspects of occupancy costs.
- Selling expenses were approximately
- Net Income: The Company reported a net loss of approximately
$2.37 million , which represents approximately a$0.62 million improvement year over year.
About The Singing Machine
The Singing Machine Company, Inc. (NASDAQ: MICS) is the worldwide leader in consumer karaoke products. Based in Fort Lauderdale, Florida, and founded over forty years ago, the Company designs and distributes the industry's widest assortment of at-home and in-car karaoke entertainment products. Their portfolio is marketed under both proprietary brands and popular licenses, including Carpool Karaoke and Sesame Street. Singing Machine products incorporate the latest technology and provide access to over 100,000 songs for streaming through its mobile app and select WiFi-capable products and is also developing the world's first globally available, fully integrated in-car karaoke system. The Company also has a new philanthropic initiative, CARE-eoke by Singing Machine, to focus on the social impact of karaoke for children and adults of all ages who would benefit from singing. Their products are sold in over 25,000 locations worldwide, including Amazon, Costco, Sam’s Club, Target, and Walmart. To learn more, go to www.singingmachine.com.
Investor Relations Contact:
investors@singingmachine.com
www.singingmachine.com
www.singingmachine.com/investors
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as "may", "could", "expects", "projects," "intends", "plans", "believes", "predicts", "anticipates", "hopes", "estimates" and variations of such words and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks and are based upon several assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the Company's control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the risk factors described in the Company's filings with the Securities and Exchange Commission. The forward-looking statements are applicable only as of the date on which they are made, and the Company does not assume any obligation to update any forward-looking statements.
The Singing Machine Company, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 4,125,000 | $ | 6,703,000 | ||||
| Accounts receivable, net of allowances of | 3,305,000 | 7,308,000 | ||||||
| Accounts receivable related parties | 133,000 | 269,000 | ||||||
| Inventory | 6,493,000 | 6,871,000 | ||||||
| Returns asset | 1,262,000 | 1,919,000 | ||||||
| Prepaid expenses and other current assets | 214,000 | 136,000 | ||||||
| Total Current Assets | 15,532,000 | 23,206,000 | ||||||
| Property and equipment, net | 352,000 | 404,000 | ||||||
| Operating leases - right of use assets | 3,841,000 | 3,926,000 | ||||||
| Other non-current assets | 179,000 | 179,000 | ||||||
| Total Assets | $ | 19,904,000 | $ | 27,715,000 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 3,947,000 | $ | 7,616,000 | ||||
| Accrued expenses | 2,315,000 | 2,614,000 | ||||||
| Refund due to customer | 1,443,000 | 1,743,000 | ||||||
| Customer prepayments | 408,000 | 687,000 | ||||||
| Reserve for sales returns | 2,419,000 | 3,390,000 | ||||||
| Other current liabilities | 58,000 | 75,000 | ||||||
| Current portion of operating lease liabilities | 55,000 | 84,000 | ||||||
| Total Current Liabilities | 10,645,000 | 16,209,000 | ||||||
| Other liabilities, net of current portion | - | 3,000 | ||||||
| Operating lease liabilities, net of current portion | 4,029,000 | 3,925,000 | ||||||
| Total Liabilities | 14,674,000 | 20,137,000 | ||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity | ||||||||
| Preferred stock, | - | - | ||||||
| Common stock | 64,000 | 64,000 | ||||||
| Additional paid-in capital | 33,448,000 | 33,429,000 | ||||||
| Accumulated deficit | (28,282,000 | ) | (25,915,000 | ) | ||||
| Total Shareholders’ Equity | 5,230,000 | 7,578,000 | ||||||
| Total Liabilities and Shareholders’ Equity | $ | 19,904,000 | $ | 27,715,000 | ||||
See notes to the condensed consolidated financial statements
The Singing Machine Company, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Net Sales | $ | 2,426,000 | $ | 3,383,000 | ||||
| Cost of Goods Sold | 1,924,000 | 2,564,000 | ||||||
| Gross Profit | 502,000 | 819,000 | ||||||
| Operating Expenses | ||||||||
| Selling expenses | 630,000 | 812,000 | ||||||
| General and administrative expenses | 2,159,000 | 2,153,000 | ||||||
| Total Operating Expenses | 2,789,000 | 2,965,000 | ||||||
| Loss from Operations | (2,287,000 | ) | (2,146,000 | ) | ||||
| Other (Expenses) Income | ||||||||
| Gain from Employee Retention Credit Program refund | - | 704,000 | ||||||
| Other Expense | - | (1,000 | ) | |||||
| Interest expense | (28,000 | ) | (40,000 | ) | ||||
| Total Other (Expenses) Income, net | (28,000 | ) | 663,000 | |||||
| Loss Before Income Tax Provision | (2,315,000 | ) | (1,483,000 | ) | ||||
| Income Tax Provision | (52,000 | ) | (1,502,000 | ) | ||||
| Net Loss | $ | (2,367,000 | ) | $ | (2,985,000 | ) | ||
| Loss per Common Share | ||||||||
| Basic and Diluted | $ | (0.37 | ) | $ | (0.96 | ) | ||
| Weighted Average Common and Common Equivalent Shares: | ||||||||
| Basic and Diluted | 6,418,061 | 3,114,397 | ||||||
See notes to the condensed consolidated financial statements
The Singing Machine Company, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended | For the Three Months Ended | |||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (2,367,000 | ) | $ | (2,985,000 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Depreciation | 52,000 | 55,000 | ||||||
| Provision for estimated cost of returns | 658,000 | 1,380,000 | ||||||
| Provision for inventory obsolescence | - | 139,000 | ||||||
| Credit losses | 101,000 | 27,000 | ||||||
| Loss from disposal of property and equipment | - | 3,000 | ||||||
| Stock based compensation | 19,000 | 74,000 | ||||||
| Amortization of right of use assets | 84,000 | 87,000 | ||||||
| Change in net deferred tax assets | - | 1,399,000 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 3,902,000 | 4,922,000 | ||||||
| Accounts receivable - related parties | 136,000 | 43,000 | ||||||
| Inventories | 379,000 | (175,000 | ) | |||||
| Prepaid expenses and other current assets | (78,000 | ) | 40,000 | |||||
| Other non-current assets | - | (156,000 | ) | |||||
| Accounts payable | (3,669,000 | ) | (315,000 | ) | ||||
| Accrued expenses | (299,000 | ) | (970,000 | ) | ||||
| Refunds due to customer | (300,000 | ) | 490,000 | |||||
| Prepaids from customers | (279,000 | ) | - | |||||
| Reserve for sales returns | (971,000 | ) | (2,035,000 | ) | ||||
| Operating lease liabilities | 75,000 | (89,000 | ) | |||||
| Net cash (used in) provided by operating activities | (2,557,000 | ) | 1,934,000 | |||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | - | (95,000 | ) | |||||
| Net cash used in investing activities | - | (95,000 | ) | |||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of stock, net of offering costs | - | 36,000 | ||||||
| Subscriptions receivable | - | (6,000 | ) | |||||
| Net payment on revolving lines of credit | - | (1,761,000 | ) | |||||
| Payments on installment notes | (21,000 | ) | (19,000 | ) | ||||
| Proceeds from exercise of common stock warrants | - | 14,000 | ||||||
| Payments on finance leases | - | (3,000 | ) | |||||
| Net cash used in financing activities | (21,000 | ) | (1,739,000 | ) | ||||
| Net change in cash | (2,578,000 | ) | 100,000 | |||||
| Cash at beginning of year | 6,703,000 | 2,795,000 | ||||||
| Cash at end of period | $ | 4,125,000 | $ | 2,895,000 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 27,000 | $ | 24,000 | ||||
| Non-Cash investing and financing cash flow information: | ||||||||
| Equipment purchased under capital lease | $ | - | $ | 55,000 | ||||
See notes to the condensed consolidated financial statements
FAQ
What were the Q1 2024 net sales for Singing Machine (NASDAQ: MICS)?
How did Singing Machine's Q1 2024 gross profits compare to Q1 2023?
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What strategic initiatives is Singing Machine implementing to improve profitability?
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Why did Singing Machine's gross margins decline in Q1 2024?
What changes did Singing Machine make to its overhead costs?
