- Earnings call transcript Q2 2023

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Operator

Good day, everyone, and welcome to today's Singing Machine's Second Quarter Earnings Call. [Operator Instructions]. It is now my pleasure to turn the conference over to Brendan Hopkins. Please go ahead.

Brendan Hopkins

Thank you, and thank you, everyone, for taking the time to join us today.

safe then brief get a have harbor we'll and started. We the the historical that this to XXXX. of information Act for Litigation statements Private are harbor Securities the contained pursuant statements Except of forward-looking herein, in Reform provisions are conference made safe call

Atkinson, our materially like involve statements Gary from over With said, I'd cause forecasted turn Machine. unknown in the future to uncertainties that risks results. of Forward-looking results and periods to call and may known Singing actual CEO to differ that

Gary Atkinson

Brendan. My and taking company's to Company want Chief you, time the more also this name Thank company's I is listen I for second our about Marquis, am CEO. afternoon start report. today to Gary off the quarter CFO; Lionel learn me Melo, earnings Officer. Atkinson. and by Bernardo Joined in just with Revenue everybody is thanking

and our and environment. to quarter We this changing a In very to our are very very we year capitalize pleased the time, second highlights all these results. rising shortages. that these ripple this demand dealt pandemic rates our alone, resulting have by of resiliency chain, I'm very effects rapidly team in flexibility well. believe interest of it We the storm team's demonstrates on share past We challenging worker the inflation, to the challenges. on our lingering created and believe response the we supply weathered global speed with uncertainty the have of proud

platform in the Karaoke. our location well marketing ideas center consumer for as as been and best tremendous consumer products showcasing with weakness our North a front for By all most Walmart electronics electronics a one our Walmart. of our the First, moving technology retail put we margin we have products best This highest with today. have has our of key capitalized to our and America department, expand relationship competitors' sold assortment in our emerging on offerings number customers, influential into in

mentioned. As our further areas about, the decision talk macroeconomic softness profitability. margin times, with was this previously company win component shareholders. and due these this results. well-signed to for in very our we strong and as financial sales improvement will relationship timely key I other overall These and offset overall Lionel decisions for gross Expanding In in a growth, see revenue to factors is major results the our a Walmart

important over delivery point, Marquis, call to like provide At of entire Lionel. further quarter. would as insight retailers Sam's their FOB-China During chain we've avoided we to any quarter, converting convert FOB-China, which team the ahead, improved and Club look is Chief today also It Officer, our I also to program, efficiency our in this program quickly program second inventory full the our the uncertainty our second to stores. guarantees supply a pipeline. program. successful club worked the an Go flow which details reduce of our domestic the turn to very to the By from Financial to this very into products into Lionel in

Lionel Marquis

call. XXXX. is Good for thanks following of ended Thank earnings second a you, Gary. in September afternoon, highlights today's financial and participating XX, key recap quarter for The

respectively. September in Net million million compared consistent of X-month ended the $XX.X $XX.X of approximately X-month for an $XX.X XX%. for with $XX.X sales customer were to increase inventories $X.X in -- increases million the the were prior via increase of top of X-month versus five to their products with the ended sales net $X.X an somewhat the another period department a and million, customers primarily major major in due $X.X million prior consumer to direct excess one shipment the increase other their by due an versus set XXXX, electronics offset the for approximately product Our customer revenues period year's two successful X-month and opted periods that the million import year who ended earlier prior increase to quarter. and increase assortment -- to initial XXXX was net delivery. period The to the due These were XX, decrease million, approximately late

and of one gross component containers the Our points, margin products from $XXX,XXX, X-month increase one September electronics inbound from to of XX.X% XXXX profit versus cost an item, million XX.X%. There primarily to remaining gross increase $X.X from China, an was profit and due increase there reductions increase XX, the customer's to approximately consumer in million was decrease a increased X.X to to increases major promotional significant contributed contribution due $X.X margin new department. approximately customer's sorry, cost that -- customers, price component in compared major into introduced XXXX, the to so points gross for to ended an period in the cost margin

major customers' department. The China, do reductions customers approximately from the compared margin consumer due $X.X $X.X introduced points increased X-month million to the sales profit of for as margin had products million. in X.X and an the gross that earlier, period we versus tariff containers for the net in same quarter, approximately that year. approximately as with with significant about the increase to for inbound as one million accounted $X.X profit year-to-date with gross contribution 'XX of XX.X% from electronics a due item XX, increase reductions million the contributed from new was September and $X.X to ended Our remaining to in and costs, increase price increases component or to XX.X% promotional -- profit almost a increase talked There increase decrease increase the to major primarily to gross last the XX% remaining due of the 'XX,

the increases September X-month in X-month for XXXX. operating of were due $XXX,XXX operating selling discretionary Let's increase to we approximately and had of expenses September ended royalty incremental for to Operating ended expenses XX, XX, primarily in due approximately marketing the primarily about expenses as approximately $XXX,XXX, for following: period $X.X the approximately to to quarter expenses. commission million million talk compared expenses. $X.X XXXX, The increased period the

We onetime $XXX,XXX change offerings, transfer fees, had costs control, included and stock filings, relations of in fees. to also professional approximately which fees, investor relating NASDAQ legal fees our regulatory uplisting, increases public of

In and addition, we officers had of to expense approximately increase an option stock due in Board existing stock primarily new issued $XXX,XXX, and compensation to members, common employees. grants

in also and costs supplies. costs that effects temporary area. and especially our had and We in approximately increases in distribution inflationary of labor $XXX,XXX, had of pallets We logistics warehouse the inflation, included

as increased expenses. for primarily increase royalty the X-month were the compensation $X.X option to primarily and issued marketing area year-to-date compared grants XXXX, of increases. officers, period commission filing, had fees approximately existing September incentive payments about million fees expenses to this and period and costs, September pallets, to approximately to transfer in following: NASDAQ due level. discretionary to expense $XXX,XXX in year-to-date control, and members, to talk million $X.X employees we ended related to relation approximately let's for logistics is approximately So -- have public distribution due costs, approximately change an operating The million and we XX, temporary million and on expenses had warehouse the relating of The operating stock some fees, increase discussed of approximately due X-month $XXX well this our the to as board expenses are $XXX,XXX. especially supplies. had year-to-date fees ended regulatory offices XXXX. early project. area approximately to uplisting, merit-pay labor investor was cost to also in the of Operating XX, of legal $XXX,XXX new as inflationary in stock, increases selling Onetime professional We stock again offering, had with expenses That do $XXX,XXX in common $X.X

to IT had remaining onetime with have We firmware variable and increased inflation. due projects to update $XXX,XXX increase costs the approximately that product of expenses also to due relating

our ended the during And compared first company issues In similar year uplisting us common our $X as year, recently, from it respectively, were $X.X with should benefit with approximately We for raise to to $X.X We of income income completed call As XXXX, credit into XX, excess payable $XXX,XXX of an concurrently the million, Iron the our of inventory -- NASDAQ. payroll terminated income period period representing X-month ended recognized the on Bank $XXX,XXX to payable amount the for of secured of in X-year the period an million with were X-month the for net we X-month first logistics had approximately XX, had the our accounts existing of principal September result a facilities our as revolving the from from XX, one -- with ended of and season. the prior September July settlement time from due we million, $XXX,XXX be cash in XX $X.X ended of a net for or approximately of these factories X-month plan September and -- with and SOFR, equity XX, quarter agreement proceeds that X.X% no representing position September operations September period, should XXX,XXX, $XXX,XXX period fiscal benefit settlement XX, S-O-F-R, of entered gains for plus income Income of October credit from the on our period protection credit XXXX. be of X-month from million, bears ended with $XXX,XXX. ended with second income operations the to of that of approximately increase which $XX facilities $XXX,XXX the inventory forgiveness of is of net they approximately XXXX. we XXXX, borrowings noted September credit period the gains just September October Crestmark also of Fifth facility X-year similar in approximately recognized $XXX,XXX our September On onetime for period through during X-month interest during financing approximately rate the for received agreement Third a activities, successfully of no credit ended onetime of XX, that of gains an the is X%. X-month the period by our agreement XX, But again, prior to XXXX. revolving ended secured XXXX, our prime recognized line XX, year, that current with of X-month of decreasing compared plus the lender, XXXX. to during XX-day a year $XXX,XXX. it from the matures We agreement income The rate along approximately ended X -- they September as accounts year, operations $XXX,XXX of replacing at one $XXX,XXX during $XXX,XXX, of stock October $X the global aggregate $XXX,XXX on quarter net of at approximately million, prior provides facility with net decrease The an million XXXX. versus XXXX. gains Bank of $XXX,XXX the during of XXXX XXXX, of The at approximately XX, nonpeak Horse, fiscal OTCBB the or to quarter strengthen compared XX, allowing each XXXX, we credit January XX, our the side. loan a from XX, noted or at XXXX, the we the factories the what well new finance May [indiscernible]

is the after a what our we facility to we by capital close So a obtained did diligence the season during that Horse. financing during with And bank to We banking was very due peak significant with increased anxious summarize over Iron still deal. -- process. have $X.X still million deal with we Crestmark prior we scrutiny the to access the and

rate interest the receivable prior financing one inventory to accounts interest which paying also, the combined approximately lowered rate will credit savings And combine our under facility, We also both significant on of our to are we were okay? that result going forward. we in agreement, X/X our able

expenses margins profit same So period gross managed with keep to in compared selling we've last commensurate and to the year, the sales. net overall, we've increase in X-month made significant improvements period during

to of Bernardo? other occurred I'd report course, the lengthy bit significant however, have during this equity inflation With discuss to turn listening, who inflation forward. expenses onetime and We That's during but fiscal address there expenses to of over. the my encountered a [indiscernible] administrative little to to year. events developments going to going Bernardo, highlights. professional have, call the and we fiscal regard was go like with, to we're the with continue issues over have a general deal year. lot associated legal, and And Thank the further now you for recent will that today,

Bernardo Melo

Yes. maintain retailers performance we expand line. Singing karaoke, proud, that Q&A, in to give I Gary tag keep sure isolate because it just our of take Machine introduced want was questions. leader execute some we the for you continue the to our position XXXX on into technology we ask or the Lionel guys echo get new technology to us, do said. products that already that as time we I and what Thank short home introduce I'll always make you, to to Lionel. focus to to to our that going I'm major key the and to need know

did key appetite well. able them have introduce to our that year taste. retailers We to that this and those we for had this were products So the

launches So some launches. year. on we have into like as year lookout out, was had those retail But yes, it product landscape. some across went this [indiscernible]. well. good results seen in forward would product to And the comparable technologies little key promos on what far those so We've into maintaining and to good otherwise, last of one well would of positioned be other moving bit we're so been different it far. We for our our our the retailers three expanded key key departments some And a thank sales to I retailers

some see to going target. You're X-day in ads

some a month with at Sam's the then in and VIP to see in December. see promo key going You're running Black nice and Friday be you're Walmart, Club is events going to Costco going of Frank to

the that we've our to a seen right -- still were past that are and we that and going consumer gift, seen are consumers out sure think wanted a And is years parents we from we've in tougher standpoint. that. So before retail for and one we thing the go to positioned still buy make

and Amazon that line our key would We've help and promote so preemptively the we the that promos with Canada. our accordingly partnership well. and marketing, some out So now as brand U.K. distribution put stabilized also the

with grow. to well going established. fiscal into well Australia those And positioned XXXX we're partnerships So continues year

Karaoke consumer So marketplace, yes, on so best we is and coverage schedule with Singing well. positioned is in but e-commerce feel and promo a confident technology that that out Machine as is not the good there if for looking good and send the shelf the only with the base

low that time. I we're call it with the know said, turn back want because over to over being [indiscernible]. to So running on turn I I'll

Unidentified Company Representative

nonfinancial that, Q&A. want that to on mention. milestones All that. do just I we right. key on Thanks the a we Thank to Bernardo. update wanted other couple do sure you, I time wanted And to save for for of just make touch before But I

have first, listings relationships is thing our of of and to we big I with and secured we that maintained customers. our key shelf the all all have So say want major

in Walmart do casting songs activity. downloads, XX,XXX, key big music all Electronics -- that products now aboard most and news over Karaoke available in that's There's more continue app our not thinking a the for retail meaningful for that's music a It we this XX% subscription grow the space bit been at the revenue. for the coming around we as years, more a that also conservative today. only some There's protect And shelf increase then leader this is will a news we're we're home retail the revamped catalog to that Also with the Apple more through in looking now or floating we've And with That's year-over-year the the the seeing. size in for of of trend these on we've best, starting see of just more includes enjoyed continue do times see since more with recently So category. many win. are the win revenue terms of to users and we're and and holidays, at album are of now to XXXX introduced We've that's EBITDA. of This year. but nature to us seen to we've And big becoming downloads. business continuing this sort big preserve our to especially is available phones. of the app popular anticipate accounts. music holidays. over to beyond. And how Android finally, for Karaoke a our official position and strong Obviously, year, Karaoke being karaoke continue we cover the of

through is to become class. in the is consumers looking engage we've home, places that But a innovation, other the So singing at our people at probably been brand, we've obviously, this that, aren't in in our Karaoke. and our studying leader of portfolio There's right? space limited where product one just things best lot of

And do we be emerging we the or believe that soon the only home, a dominant ourselves but in we of home. and can are so brand believe we number there's of to not also Karaoke opportunities, for outside -- that position exciting the

forward coming a move to an team, we're very efforts focused look And additional on a also but these perspective on So enhance Karaoke to into update the our next markets, here profitability. we as everyone forward in providing months. with expanding value from not revenue only we as

So over up point, Q&A. that. can we at it with this And I'll to wrap it turn

Operator

question first [indiscernible]. our take [Operator Instructions]. from we'll And

Unidentified Analyst

for shipments done about for Singing you. know going is now. halfway QX? fiscal I two we're the Hello, questions Machine. How have I

Unidentified Company Representative

pretty QX. for are port and done All bar much the already of in our direct shipments

domestic lagging that the they're and off of little terms they just they trading behind, end empty the is adverse more right risk game bit than of -- the towards being now overloaded just were normal, ones way inventory retail now, In the a year. with for that's last are paying shell

more to been a the get existed that hard they're that that products moving pushing but in products So we've with do We there. in lot overload past, being of have in forward. stores, careful

Unidentified Analyst

secondly, anticipate Buy. programs any Okay. with significant do Best And going you forward

Bernardo Melo

have one musical they So of is have categorized Buy they sort have that. like tough Best they and [indiscernible] retailers, of instruments, for those Karaoke, a

the you strategy could that But long-term more the can of Geek going things addressing new take we we're say, where just whole now, we as side know the those I see think uploaded product at, towards sales dot-com. this leverage way of much on for that. it I that and on alone dot-com. was I looking week to installation we can see And section of by we're new that the why And just our from products. professional it, I don't think and how Squad is their start

that's I for then the Geek that on a going be that's more their develop leverage Squad could our to installation. think flow to line strategy forward that, moving side

that. it So I'll at leave

Now more for know, is future Gary, a or I bit don't on this going little call to touch in there calls. it

Operator

next we'll Nickerson. Eric to And move

Unidentified Analyst

financials. detail Thanks for the on good the

about Look were to this X% been goods You services. at quarter of consumers last massively the spending discretionary questions just cover moving a has so my from when or year down versus been year's over from It's most year's. there. sales

are missing So looks Or way. you guys that pretty little tripe the something? pretty same drop Am I much this tiny encouraging. in sales

Bernardo Melo

We go ahead. are giving --

Lionel Marquis

Bernardo. ahead, Go No.

You want to get it.

Bernardo Melo

you're travel lot things. I That's towards observation, service a No, it. great or gone a of want have to Eric. funds address or And right, Yes.

their go in encouraging have some places, of sales we that that that have and the points although of moved thing is the are softer previous I couple other within especially bit thing did that the in doing that One Costco, think we little has well. different of noticed they seen is department. we discretionary to price much in The offset people -- household. Walmart thing major good to and or too a the that some like did TE higher into expand retailers, departments have growth a help that

some helping price is distribution bit they're a scales. So But more are and some upset as of of some well other the you have just a points higher softer it little well. have right, We challenging performed those year.

Unidentified Analyst

That's pretty cool.

[indiscernible] So we'll Gary? to there, start see

Gary Atkinson

first Yes. Eric. question, add just I wanted to to your

to kind all struggles. thing we've to shipped The retail done want sort is done the heavy supply build it bypass already, to of hard and get to So that these of the other right? we've all lifting the secure on touch work I space the inventory chain to of shelf

now going I holiday the hard work all big I done are to And to big machines -- single karaoke you we've that's come said, America. throughout major get how almost So the unknown that's season. think North retailer the into our like think And box react every still... consumers is, the

Unidentified Analyst

heard. are Rumors

Gary Atkinson

at point. Industry Yes. this

Unidentified Analyst

I guess we'll see.

Okay.

see forward? good drop Just we're going going the pretty in to to in we starting, a current quarter start aren't interest guess, I line, expense

Lionel Marquis

We'll start interest -- drive. We'll significant that's correct. a see

about it One interest rate. advantages and of minimum didn't I talk this the line credit of in before other

So on lines the whether I these previous not. and my borrowed or on line with

for started XX.X%. to prime I approximately But we're For of up, rates inventory, have pay of also had approximately had the borrowing if I million. I going had APR X.X% pay a $X And when million to most Regardless I the of [indiscernible] a time paying now that each XX.X% on inventory. close the to in as I month. on recently whether receivable, a accounts was to minimum we're balance XX%, until on $X take

of -- line, with those -- that both borrow... that new don't the I if longer doesn't no So exist

Unidentified Analyst

Or in new replaced? with just the What deal you deal Fifth that's what that's the Third? I'm is is just described -- sorry, you old described been

Lionel Marquis

in old all replaced. minimums cover Those that that's before. had to were that's deal being the No, I

rate interest cover loss which that also, to minimum significant drop, we'll won't we the have of top interest see on every well. month So as

a it's it's pretty good deal. good X-edged it's sword So and -- a a

Unidentified Analyst

Okay.

them. options questions. so exploration and I until boring wait million those outstanding. see got of warrants exercise or comes $X.X bunch Just dates And Where Can after detail got of see of we've out? I can a XX-Q I in couple XX-K and the that? prices of a or a more the

Lionel Marquis

There's be in XX-Q. section -- the there'll a

You'll is... and the what see what's left price weighted outstanding average

Unidentified Analyst

XX-Q. the In

Okay.

Lionel Marquis

In Yes. XX-Q.

Unidentified Analyst

in and leaves our numerous little holder any major to about in noticed which had that I bits might up number if company conversations trading in leads pieces, of the to shareholder be shareholders Okay. the me me is a stock majority stock, with suspect dropping, our buying a steadily which ask you the in going private?

Gary Atkinson

I NASDAQ recently mean I we months to touch the Eric, on a few just that, mean, just ago. uplifted under

So a certainly of where -- I don't and we've now. time think get there's invested lot to are energy we to

private. say So terms right wouldn't now in there's going conversation that I of any

Unidentified Analyst

even not It's that something you've within right? about talked

Gary Atkinson

Correct.

Unidentified Analyst

Good. Okay.

Okay, informative. much. that's Thanks report very very had. Good all guys, I

Operator

Joel next move we'll to Marcus. And

Unidentified Analyst

now wasn't obstacles. what read transactions company long think obviously, the enabled various an as excellent term. into to until you have in guys the follows. term will be you bigger mean, be eye the believe move and I future the on has to But just was. company this proven quarter I to further have is this And on XX% much NASDAQ, to certainly, know down a in I'd long it. really eye I My price on NASDAQ, question where done there I like value where that its though correct. that, enterprise is Congratulations extraneous it being on into attributed Yes. is The that is, despite resulted up that at had always right now, from about sort be everything much, a trading of you've even stock it have all scanned to your

vertically into go et Do bit in this future for more the just intend music into company? places, using you it products other horizontally to appliances, you more maybe expand little a cetera. expanding could vision So your with consumer-related distribution,

are give long I So be to basically, you clearer But of would aims have company suffering us -- will us a more this all what your term. of know picture it. the detailed of worth little bit love can a for and obviously,

Gary Atkinson

very in of is together as Sure. of worldwide leader energy we tell at Yes. thinking believe And starting this. look market a and action executing spending a category. start Karaoke recently year. that's now, to the about devices we've that in Joel, on I'll the $X something obviously, a playing plans you good But the question. And lot and put it's a been time in to say in-home on way excess Karaoke we we're billion we're is which a smaller category, right sandbox, the to

products people Karaoke people singing having are services have we in experiences place market, people And and staying so is we're And in where there's Karaoke that in about, people where obviously, that of sort right, for we in. it thinking already different or first terms X doing the X are well, the homes. And their are really for verticals about start and sense thinking -- the we home. of that our at

in But lot they of is sort be Last brands obviously, would automotive integrated of other people were touch bigger are available say, category would does at notice. we announced the Tesla. at Tesla automotive of started into that And year, Karaoke microphone that's much the they with from take And lot lot that the we're a, a space. look space. it to that something, When line, there's of that's we looking of major seeing interest Tesla launching seeing in what a their sort our set really space. that vehicles. a off that second a through Carpool opportunity Karaoke And We're automotive think product The also that. people a car. on I

home, Then it's third something that be move we there's And lot talking so we're seeing people category. a of over the XX we'll in, an really forward. experience years. a that been it's and the a And category Karaoke lot Karaoke-venue that's I'd experience. of in area into well automotive of about there outside more Karaoke as sort inquiries where also brick-and-mortar say, this face-to-face innovation And any hasn't doing

disruption. an And it's or and that that's in. of in. spent about We that very, in very for particular because a that nobody at very, looking the studying time doing there's ripe are else we market it's lot really U.S. So that market interested Karaoke, for and we're thinking very area research interested it's really something

So coming would sort us and in lot verticals different those of say a news just that months announcements a see making lot I months, in of outlined. XX the progress over the I you're of to going XX to

Unidentified Analyst

envision company I Thank follow-up your by to advertising, the this libraries I'm because the or can saw continuing of end you sounds you. this, music, question. got it. you always vending that as as somebody, type I of namely we you and the razor to perhaps and blades there. music, product, forward dating guess, of the of advertising, company, that seeing That into where But the revenues you've product have blade music saying obviously, accommodate certainly Also, the et screen basically, company mean, huge also great. this cetera. look could sponsors advertisers, you have namely really go this, an Stingray the aspect maybe And music myself I one even once ancillary

little So with going flavor bit of and just could a you color that? give you're us on where

Gary Atkinson

And into than correlated growing business year-over-year-over-year. I music have probably Karaoke continue does market. sure. of seems devices put number mean would think a grow to we rate for expected. I Anecdotally, what to directly No, the the of that we all slower Yes. it's the side the be to it

we line a And sell, we that are the customers this make with that saw Karaoke have would looking machines up We we machines not now like the a of it signing of number to app, through year. sort then in introduction, of are seeing more that somewhere music. whole between for year-over-year casting downloads and into -- in potential Walmart And we Electronics. brand-new revenue those Electronics mentioned So put only earlier through machines more the of Karaoke sense the but also XX% XX% app. Walmart the increase the XX I the coming

said, it really razor, sort razor time -- we're that significant is but longer growing, becomes, is I or probably take it's it overall it hardware period very since will So number say, revenue a of dependent. Like before blade. of would a you material

no, to it But the blades. part There's a business. very The the is get to razors inventory great. -- a the sell margins it's to need of no are carry. very you attractive So

lot there's to well as there it. continue opportunities grow music to in the So a of space

Unidentified Analyst

so you much,. thank Well,

I involved. I continue so. in think mean to are great. involved guys you in be being I this will even I

think have I best is term, that the in of XX these markets the this one people companies days. or X long to access public

I everybody position. guys patient hang think the to for to going a huge in in continue there wisdom the you has brilliant. who you absolutely view to long and will I there investment. run with be the think add think are and as is future or and And this And unlimited, home continue you is So in to be a be to long-term and with I term, this I involved your

Gary Atkinson

confidence. Thanks you. Joel. I the appreciate that, vote for Thank of

Operator

And further it does appear there questions time. no at this are

Gary Atkinson

to And second talking Okay. earnings definitely Great. Well, few I again, our months today's were I participating again report. thank we third forward questions in the of for look good on everybody asked. quarter a report. in that quarter appreciate spirit

thanks. That's soon. all We'll for talk So now.

Operator

This your program. Thank does participation. you today's conclude for

evening. and wonderful any at may disconnect time, a have You

Algorhythm (RIME) 15 Nov 222023 Q2 Earnings call transcript