Singing Machine Announces Results of Operations For Second Quarter Fiscal 2024

Rhea-AI Summary

Singing Machine Company, Inc. (MICS) reported its Q3 2023 financial results, with revenues at $15.9 million, down 7.0% from the previous year. The gross margins improved to 23.2%, and operating expenses increased by 9.0%. The net income decreased to $0.1 million, attributed to lower sales and increased operating expenses. The company maintains a conservatively capitalized balance sheet with $3.2 million cash on hand and a positive working capital position of approximately $8.7 million with no material debt as of September 30, 2023.

Positive

• None.

Negative

• Revenues decreased by 7.0% from the previous year, net income decreased to $0.1 million, and operating expenses increased by 9.0%.

Fort Lauderdale, FL, Nov. 21, 2023 (GLOBE NEWSWIRE) -- The Singing Machine Company, Inc. (“Singing Machine” or the “Company”) (NASDAQ: MICS) -- the North American leader in consumer karaoke products -- today released its results of operations for the three months ended September 30, 2023. Financial highlights are as follows:

• Revenues for the 3 months ended September 30, 2023 were $15.9 million, as compared to $17.1 million for the same period in the prior year. The $1.2 million (7.0%) decrease was largely due to a backlog of orders late in the quarter that moved into early third quarter and a $0.9 million co-op incentive accrual for planned holiday promotions.
  
• Gross margins were 23.2% for the three-months ended September 30, 2023, as compared to 22.5% for the same period in the prior year. The slight improvement was largely the result of changes to newer, higher-margin yielding product mix and a significant reduction in ocean container prices that lowered the Company’s cost of inbound freight.
  
• Operating expenses were $3.6 million for the three-months ended September 30, 2023, as compared to $3.3 million for the same period in the prior year. The $0.3 million (9.0%) increase was in part due to approximately a $0.2 million increase in selling expenses, and approximately a $0.1 million increase in general and administrative expenses.
  
• The Company generated a net income of $0.1 million for the three months ended September 30, 2023, as compared to $0.6 million. The decrease in profitability was in part due to lower sales, and in part to the modest increase in operating expenses for the quarter.
  
• The Company continued to maintain a conservatively capitalized balance sheet with $3.2 million cash on hand, a positive working capital position of approximately $8.7 million and no material debt as of September 30, 2023.
  

Gary Atkinson, Singing Machine’s Chief Executive Officer, commented, “We are pleased to share our results of operations for this quarter with shareholders. We experienced several unique challenges this past quarter, most notably with our transition from an in-house logistics and shipping model to a fully outsourced 3PL model. After ten plus years of perfecting this process in-house, it was a significant accomplishment for the team to transition to this new model during our busiest time of year. This transition to an outsourced logistics model is expected to help mitigate the costs of rising warehousing and staffing expenses for the Company for many years to come.”

“Overall, I feel the Company is weathering the general headwinds facing the US retail environment very well. We have maintained all of our shelf space with our big box retailers, anticipated changes in retail demand, managed inventory down by $3.0 million compared to the same period last year, and we have successfully expanded our presence into Canada with more retail distribution supported by a local 3PL Canada warehouse.”

“This quarter we were also very active delivering new products to the market, which have been well-received as we gear up our marketing efforts for the upcoming buying season with our global retail partners in early 2024. We are looking to finish the current holiday season with strength and focus, and I personally look forward to providing further updates to all shareholders soon,” concluded Mr. Atkinson.

Earnings Call Information:

The Company will host a conference call today, Tuesday, November 21, 2023, beginning at 10:00 AM Eastern time to discuss these results. If you would like to participate on the call, please dial 800-225-9448 and use conference ID: MICS.

An audio rebroadcast of the call will be available later in the day after the earnings call and can be heard at: www.singingmachine.com/investors.

About The Singing Machine

The Singing Machine Company, Inc. 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

		September 30, 2023				March 31, 2023
		(unaudited)
Assets
Current Assets
Cash		$	3,212,564			$	2,894,574
Accounts receivable, net of allowances of $243,412 and $165,986, respectively			10,901,701				2,075,086
Due from banks			152,148				-
Accounts receivable related parties			164,923				239,078
Inventories			13,042,627				9,639,992
Prepaid expenses and other current assets			303,342				350,735
Total Current Assets			27,777,305				15,199,465
Property and equipment, net			457,173				633,207
Operating leases - right of use assets			4,002,595				561,185
Other non-current assets			346,239				254,740
Total Assets		$	32,583,312			$	16,648,597
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable		$	12,526,485			$	1,769,348
Accrued expenses			2,747,502				2,265,424
Prepaids from customers			1,305,271				583,323
Reserve for sales returns			2,289,251				900,000
Other current liabilities			84,253				98,957
Current portion of operating lease liabilities			112,647				508,515
Total Current Liabilities			19,065,409				6,125,567
Other liabilities, net of current portion			14,844				103,997
Operating lease liabilities, net of current portion			3,825,115				87,988
Total Liabilities			22,905,368				6,317,552
Commitments and Contingencies			-				-
Shareholders’ Equity
Preferred stock, $1.00 par value; 1,000,000 shares authorized; no shares issued and outstanding			-				-
Common stock $0.01 par value; 100,000,000 shares authorized; 4,220,259 and 3,184,439 shares issued and 4,220,259 and 3,167,489 outstanding, respectively			42,203				31,675
Additional paid-in capital			31,514,831				29,822,205
Subscriptions receivable			-				(5,891	)
Accumulated deficit			(21,879,090	)			(19,516,944	)
Total Shareholders’ Equity			9,677,944				10,331,045
Total Liabilities and Shareholders’ Equity		$	32,583,312			$	16,648,597

The Singing Machine Company, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		For the Three Months Ended								For the Six Months Ended
		September 30, 2023				September 30, 2022				September 30, 2023				September 30, 2022
Net Sales		$	15,930,563			$	17,113,636			$	18,555,566			$	28,805,690
Cost of Goods Sold			12,196,677				13,260,617				13,972,830				21,863,138
Gross Profit			3,733,886				3,853,019				4,582,736				6,942,552
Operating Expenses
Selling expenses			1,169,088				899,590				1,614,362				1,504,787
General and administrative expenses			2,458,848				2,368,778				5,293,160				4,706,272
Total Operating Expenses			3,627,936				3,268,368				6,907,522				6,211,059
Income (Loss) from Operations			105,950				584,651				(2,324,786	)			731,493
Other (Expenses) Income
Gain on disposal of fixed assets			44,296				-				44,296				-
Interest expense			(52,711	)			(185,827	)			(81,656	)			(353,753	)
Total (Expenses) income, net			(8,415	)			(185,827	)			(37,360	)			(353,753	)
Income (Loss) Before Income Tax Benefit			97,535				398,824				(2,362,146	)			377,740
Income Tax Benefit			-				(102,357	)			-				(97,276	)
Net Income (Loss)		$	97,535			$	296,467			$	(2,362,146	)		$	280,464
Net Income (Loss) per Common Share
Basic		$	0.02			$	0.10			$	(0.58	)		$	0.11
Diluted		$	0.02			$	0.08			$	(0.58	)		$	0.09
Weighted Average Common and Common Equivalent Shares:
Basic			4,220,259				3,071,131				4,063,697				2,484,660
Diluted			4,220,259				3,610,188				4,063,697				2,961,631

The Singing Machine Company, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		For the Six Months Ended
		September 30, 2023				September 30, 2022
Cash flows from operating activities
Net (loss) income		$	(2,362,146	)		$	280,464
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation			234,448				120,390
Change in inventory reserve			132,386				466,000
Change in allowance for bad debts			77,426				155,403
Gain from disposal of property and equipment			(44,296	)			-
Stock based compensation			99,259				231,213
Amortization of right of use assets			433,086				417,068
Deferred taxes			-				80,081
Changes in operating assets and liabilities:
Accounts receivable			(8,904,041	)			(8,011,050	)
Due from banks			(152,148	)			(976,166	)
Accounts receivable - related parties			74,155				70,547
Inventories			(3,535,021	)			(2,326,800	)
Prepaid expenses and other current assets			47,393				193,984
Other non-current assets			(91,499	)			(107,400	)
Accounts payable			10,757,137				4,742,478
Accrued expenses			482,078				811,932
Refunds due to customers			721,948				(4,043	)
Reserve for sales returns			1,389,251				700,606
Operating lease liabilities			(533,237	)			(424,912	)
Net cash used in operating activities			(1,173,821	)			(3,580,205	)
Cash flows from investing activities
Purchase of property and equipment			(67,978	)			(87,801	)
Disposal of property and equipment			53,860				-
Net cash used in investing activities			(14,118	)			(87,801	)
Cash flows from financing activities
Proceeds from issuance of stock, net of offering costs			1,603,895				3,362,750
Collection of subscriptions receivable			5,891				-
Payments on installment notes			(103,857	)			(36,372	)
Proceeds from exercise of common stock warrants			-				865,203
Proceeds from exercise of pre-funded warrants			-				168,334
Payments on finance leases			-				(3,709	)
Net cash provided by financing activities			1,505,929				4,356,206
Net change in cash			317,990				688,200
Cash at beginning of year			2,894,574				2,290,483
Cash at end of period		$	3,212,564			$	2,978,683
Supplemental disclosures of cash flow information:
Cash paid for interest		$	6,280			$	331,225
Right of use assets exchanged for lease liabilities		$	3,874,496			$	-

FAQ

What were Singing Machine Company, Inc.'s (MICS) Q3 2023 revenues?

The revenues for Q3 2023 were $15.9 million, down 7.0% from the previous year.

What were the gross margins for Singing Machine Company, Inc. (MICS) in Q3 2023?

The gross margins improved to 23.2%.

What were the operating expenses for Singing Machine Company, Inc. (MICS) in Q3 2023?

Operating expenses increased by 9.0% to $3.6 million.

What was the net income for Singing Machine Company, Inc. (MICS) in Q3 2023?

The net income decreased to $0.1 million.

What is Singing Machine Company, Inc.'s (MICS) cash position as of September 30, 2023?

The company has $3.2 million cash on hand and a positive working capital position of approximately $8.7 million with no material debt.