Algorhythm Holdings Reports Third Quarter 2024 Results

Rhea-AI Summary

Algorhythm Holdings (NASDAQ: RIME) reported Q3 2024 results with revenues of $10.6 million, down 33% from $15.9 million in Q3 2023. The company posted net income of $1.2 million, up from $0.1 million year-over-year. Operating expenses decreased to $1.1 million from $3.6 million, including a $3.9 million non-cash gain from lease termination. Shareholders' equity improved to $2.7 million from a deficit of $(0.9) million.

Key developments include closing the SemiCab acquisition, securing multiple pilot contracts with major CPG companies, and establishing an OEM partnership with BYD for automotive karaoke technology. The company believes it has regained compliance with Nasdaq's Minimum Equity Rule.

Positive

• Net income increased to $1.2 million from $0.1 million YoY
• Shareholders' equity improved to $2.7 million from $(0.9) million deficit
• Secured multiple multimillion-dollar pilot contracts through SemiCab
• Established strategic OEM partnership with BYD for automotive technology
• Operating expenses reduced to $1.1 million from $3.6 million

Negative

• Revenue declined 33% to $10.6 million from $15.9 million YoY
• Softened demand for audio and in-home entertainment products
• Additional $1.3 million in operating expenses from SemiCab acquisition

Insights

Financial Analyst

The Q3 results paint a complex picture. While $10.6M in revenue shows a concerning 33% decline year-over-year, the strategic pivot toward higher-margin products and reduced promotional pricing suggests a deliberate transformation. The improvement in shareholders' equity from -$0.9M to $2.7M is particularly significant for maintaining Nasdaq compliance.

The acquisition of SemiCab and new pilot contracts with major CPG companies represent promising diversification efforts. However, the $1.3M in additional operating expenses from the acquisition and increased legal fees warrant monitoring. The reported net income of $1.2M appears positive but is largely influenced by a $3.9M non-cash gain from lease termination, masking underlying operational challenges in the core business.

Technology Industry Analyst

The strategic pivot from traditional retail-focused karaoke business to technology partnerships, particularly the BYD deal, marks a significant transformation. The automotive OEM partnership with BYD, a major global EV manufacturer, opens new revenue streams and validates the company's technology. The integration of SemiCab's AI-driven logistics platform and expansion into multiple Fortune 500 clients demonstrates a calculated move into enterprise technology solutions.

The reduction in traditional retail relationships while pursuing OEM partnerships across automotive, television and set-top-box markets indicates a fundamental business model shift from consumer electronics to technology solutions provider. This transformation, while potentially disruptive short-term, positions the company for more sustainable growth in higher-margin segments.

Fort Lauderdale, FL, Nov. 20, 2024 (GLOBE NEWSWIRE) -- Algorhythm Holdings, Inc. (“Algorhythm”) (NASDAQ: RIME) – an AI-driven technology and consumer electronics holding company, announced today its results of operations for the three- and nine- month periods ended September 30, 2024.

CEO Commentary

“We are pleased to share our third-quarter results,” said Gary Atkinson, CEO of Algorhythm. “This was a highly active and transformational period for our business. We focused on integrating our recent acquisition of SemiCab, secured notable new pilot contracts for SemiCab’s logistics technology platform, and finalized a landmark OEM partnership for our automotive karaoke technology with BYD, a leading global EV manufacturer. Additionally, we supported our legacy retail karaoke partners as they prepared for the holiday season. I am proud of our team for successfully managing critical initiatives across multiple fronts, driving our business forward.”

Business Highlights and Key Events

Algorhythm achieved several milestones during the third quarter, marked by strategic realignment and growth initiatives across its two key operating subsidiaries:

• July 3^rd: The Company closed the acquisition of SemiCab, an emerging AI-driven logistics transportation company.
• September 5^th: The Company rebranded as Algorhythm Holdings, Inc. to fully reflect the shift to a holding company model. SemiCab and Singing Machine will continue to operate under their own distinct brands.
• October 7^th: SemiCab secured a multimillion-dollar pilot contract with a $200 billion consumer packaged goods client for multiple US metropolitan markets.
• October 9^th: SemiCab won a multimillion-dollar pilot contract with a $10 billion Indian multinational consumer packaged goods manufacturer.
• October 17^th: SemiCab was awarded a multimillion-dollar pilot contract with Apollo Tyres, a top ten global tire manufacturer based in India.
• November 13^th: The Company filed an 8-K announcing it believes to be back in compliance with Nasdaq’s Minimum Equity Rule. As of the date of this report, the Company reported shareholders’ equity of $2.9 million.
• November 14^th: Singing Machine announced a formal partnership with BYD to integrate Singing Machine microphone technology into BYD’s vehicles globally. The agreement also includes technology partnerships between Stingray Group, Inc., a global leader in digital music content, and manufacturing collaboration with BYD for mass production of the Company’s karaoke automotive microphone.
  

Additionally, the Company anticipates completing the acquisition of SMCB Solutions Private Limited (“SemiCab India”) during Q4 2024. SemiCab India continues to serve Fortune 500 clients under both pilot and scalable long-term contracts. In the karaoke division, Singing Machine is actively focusing on OEM partnerships across automotive, television, and set-top-box markets, aligning with its broader strategy to prioritize technology-driven solutions while reducing reliance on traditional retail relationships.

Third Quarter Operational Results

Third quarter operational highlights were as follows: 

1. Revenues: Sales for Q3 2024 totaled $10.6 million, compared to $15.9 million in Q3 2023, a decline of $5.3 million (33%). The decrease reflects a strategic focus on higher-margin products, reducing promotional pricing strategies with two top-five customers. Sales were also impacted by general inflationary pressures and softened demand for audio and in-home entertainment.

2. Operating Expenses: Operating expenses for Q3 2024 were $1.1 million, down from $3.6 million in Q3 2023. This includes a $3.9 million non-cash gain from early termination of an operating lease. Excluding non-cash items, the Company incurred $1.3 million in additional operating expenses related to SemiCab’s acquisition and increased legal and professional fees.

3. Balance Sheet: Shareholders’ equity improved significantly, increasing from a deficit of $(0.9) million as of June 30, 2024, to $2.7 million as of September 30, 2024.

4. Net Income: The Company reported net income of $1.2 million for Q3 2024, compared to $0.1 million for the same period in 2023.

Conference Call Details:

Management will host a conference call at 10:00 am Eastern time to discuss the financial results and provide a business update.

Date: Wednesday, November 20, 2024
Time: 10:00 a.m. ET
Dial-in number: (888)-800-3146
Conference ID: RIME

An audio rebroadcast of the call will be available later in the day at: https://ir.algoholdings.com/

About Algorhythm Holdings

Algorhythm Holdings, Inc. is a diversified holding company with two primary investments. The first is SemiCab, an emerging leader in the AI-driven global logistics industry. The second is The Singing Machine Company, the world’s leading brand in the consumer karaoke market.

SemiCab is a cloud-based Collaborative Transportation Platform built to achieve the scalability required to predict and optimize millions of loads and hundreds of thousands of trucks. To orchestrate collaboration across manufacturers, retailers, distributors, and their carriers, SemiCab uses real-time data from API-based load tendering and pre-built integrations with TMS and ELD partners. To build fully loaded round trips, SemiCab uses AI/ML predictions and advanced predictive optimization models. On the SemiCab platform, shippers pay less and carriers make more while not having to change a thing.

Since 2020, SemiCab has enabled major retailers, brands and transportation providers to address these common supply-chain problems globally. SemiCab's Orchestrated Collaboration™ AI model has proven to increase transportation capacity, improve asset utilization, reduce empty miles, lower logistics costs, and provide visibility into the entire transportation network. Models show the technology has the capability of saving shippers tens of billions of dollars annually through optimization. Further, SemiCab’s technology also has the potential to play a key role in the improved sustainability model globally. Based on its proven ability to improve truck utilization rates from 65% to over 90%, this results in a dramatic reduction in the carbon footprint of the industry. The optimization of existing truck utilization can add approximately 30% more trucking capacity without adding more trucks, drivers or driven miles which addresses common problems plaguing the industry like severe driver shortage and road congestion. Trucking optimization could also eliminate approximately 25% of CO2 emissions attributable to road freight.

For additional information regarding SemiCab: http://www.semicab.com

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@algoholdings.com
www.algoholdings.com

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. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as "expects," "anticipates," "believes," "will," "will likely result," "will continue," "plans to," "potential," "promising," and similar expressions. These statements are based on management's current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements, including the risk factors described from time to time in the Company's reports to the SEC, including, without limitation the Company’s Transition Report on Form 10-KT for the transition period from April 1, 2023 to December 31, 2023, the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this press release. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this press release to conform our statements to actual results or changed expectations, or as a result of new information, future events or otherwise.

ALGORHYTHM HOLDINGS, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30, 2024				December 31, 2023
		(Unaudited)
Assets
Current Assets
Cash		$	621,000			$	6,703,000
Accounts receivable, net of allowances of $266,000 and $174,000, respectively			4,330,000				7,308,000
Due from Banks			22,000				-
Accounts receivable, related party			157,000				269,000
Inventory			7,328,000				6,871,000
Returns asset			1,081,000				1,919,000
Prepaid expenses and other current assets			867,000				136,000
Total Current Assets			14,406,000				23,206,000
Property and equipment, net			318,000				404,000
Operating leases - right of use assets			137,000				3,926,000
Other non-current assets			41,000				179,000
Intangible assets, net			1,356,000				-
Goodwill			3,354,000				-
Total Assets			19,612,000			$	27,715,000
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable		$	8,743,000			$	7,616,000
Accrued expenses			4,303,000				2,614,000
Refund due to customer			462,000				1,743,000
Customer prepayments			-				687,000
Reserve for sales returns			2,212,000				3,390,000
Merchant cash advances payable			303,000				-
Notes payable			50,000				-
Current portion of notes payable to related parties			265,000				-
Current portion of operating lease liabilities			135,000				84,000
Other current liabilities			15,000				75,000
Total Current Liabilities			16,488,000				16,209,000
Other liabilities			-				3,000
Notes payable to related parties, net of current portion			385,000				-
Operating lease liabilities, net of current portion			-				3,925,000
Total Liabilities			16,873,000				20,137,000
Commitments and Contingencies
Shareholders’ (Deficit) 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; 11,079,678 issued and 9,752,755 shares outstanding at September 30, 2024 and 6,418,061 issued and outstanding at December 31, 2023.			98,000				64,000
Additional paid-in capital			35,995,000				33,429,000
Accumulated deficit			(33,206,000	)			(25,915,000	)
Non-controlling interest			(148,000	)			-
Total Algorhythm Holdings Shareholders’ Equity			2,739,000				7,578,000
Total Liabilities and Shareholders’ Equity		$	19,612,000			$	27,715,000

See notes to the condensed consolidated financial statements

ALGORHYTHM HOLDINGS, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2024				September 30, 2023				September 30, 2024				September 30, 2023
Net Sales		$	10,622,000			$	15,931,000			$	15,488,000			$	21,939,000
Cost of Goods Sold			8,247,000				12,197,000				12,287,000				16,582,000
Gross Profit			2,375,000				3,734,000				3,201,000				5,357,000
Operating Expenses
Selling expenses			653,000				1,169,000				1,830,000				2,426,000
General and administrative expenses			4,339,000				2,459,000				8,552,000				7,403,000
Net (gain) loss on early termination of operating lease			(3,874,000	)			-				4,000				-
Total Operating Expenses			1,118,000				3,628,000				10,386,000				9,829,000
Income (Loss) from Operations			1,257,000				106,000				(7,185,000	)			(4,472,000	)
Other (Expenses) Income
Gain on disposal of fixed assets			-				44,000				-				44,000
Gain from Employee Retention Credit Program refund			-				-				-				704,000
Interest expense			(283,000	)			(53,000	)			(328,000	)			(122,000	)
Total Other (Expenses) Income, net			(283,000	)			(9,000	)			(328,000	)			626,000
Income (Loss) Before Income Tax Benefit			974,000				97,000				(7,513,000	)			(3,846,000	)
Income Tax Benefit (Provision)			-				-				-				(1,502,000	)
Consolidated Net Income (Loss)			974,000				97,000				(7,513,000	)			(5,348,000	)
Net (income) loss attributable to non-controlling interest			221,000				-				221,000				-
Net Income (Loss) Available to Common Stockholders		$	1,195,000			$	97,000			$	(7,292,000	)		$	(5,348,000	)
Income (Loss) per common share
Basic and diluted		$	0.13			$	0.03			$	(0.99	)		$	(1.44	)
Weighted Average Common and Common
Equivalent Shares:
Basic and diluted			9,095,504				4,220,259				7,341,204				3,726,259

See notes to the condensed consolidated financial statements

ALGORHYTHM HOLDINGS, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		For the Nine Months Ended
		September 30, 2024				September 30, 2023
Cash flows from operating activities
Net loss		$	(7,513,000	)		$	(5,348,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			159,000				289,000
Amortization of intangible assets			44,000				-
Provision for estimated cost of returns			839,000				1,095,000
Provision for inventory obsolescence			-				271,000
Credit losses			92,000				104,000
Gain on termination of operating lease			(246,000	)			-
Net gain from disposal of property and equipment			-				(42,000	)
Stock based compensation			616,000				174,000
Amortization of right of use assets			194,000				520,000
Change in net deferred tax assets			-				1,399,000
Changes in operating assets and liabilities:
Accounts receivable			3,079,000				(3,982,000	)
Due from banks			(22,000	)			(152,000	)
Accounts receivable - related parties			(303,000	)			117,000
Inventories			(456,000	)			(3,424,000	)
Prepaid expenses and other current assets			(718,000	)			87,000
Other non-current assets			151,000				(248,000	)
Accounts payable			394,000				10,442,000
Accrued expenses			(198,000	)			(486,000	)
Refunds due to customers			(1,967,000	)			1,212,000
Reserve for sales returns			(1,180,000	)			(646,000	)
Operating lease liabilities			116,000				(622,000	)
Payment of early termination fee on operating lease termination settlement			(150,000	)			-
Net cash (used in) provided by operating activities			(7,069,000	)			760,000
Cash flows from investing activities
Purchase of property and equipment			(70,000	)			(163,000	)
Cash received from purchase of SemiCab Inc			17,000				-
Disposal of property and equipment			-				55,000
Net cash used in investing activities			(53,000	)			(108,000	)
Cash flows from financing activities
Proceeds from sale of stock, net of offering costs			1,489,000				1,640,000
Payments on merchant cash advances payable			(327,000	)			-
Net payment from revolving lines of credit			-				(1,761,000	)
Other			(122,000	)			(113,000	)
Net cash provided by (used in) financing activities			1,040,000				(234,000	)
Net change in cash			(6,082,000	)			418,000
Cash at beginning of year			6,703,000				2,795,000
Cash at end of period		$	621,000			$	3,213,000
Supplemental disclosures of cash flow information:
Cash paid for interest		$	320,000				80,000
Non-Cash investing and financing cash flow information:
Common stock issued for purchase of SemiCab Inc		$	569,000			$	-
Equipment purchased under capital lease		$	-			$	55,000
Right of use assets exchanged for lease liabilities		$	136,000			$	3,874,000

See notes to the condensed consolidated financial statements

FAQ

What was Algorhythm Holdings (RIME) revenue in Q3 2024?

Algorhythm Holdings reported revenue of $10.6 million in Q3 2024, a 33% decrease from $15.9 million in Q3 2023.

What major partnerships did RIME secure in Q3 2024?

RIME secured an OEM partnership with BYD for automotive karaoke technology and multiple pilot contracts through SemiCab with major CPG companies, including a $200 billion CPG client and Apollo Tyres.

How much net income did RIME report in Q3 2024?

RIME reported net income of $1.2 million in Q3 2024, compared to $0.1 million in Q3 2023.

When did RIME complete the SemiCab acquisition?

RIME completed the acquisition of SemiCab on July 3rd, 2024.