Company Provides Second Quarter 2024 Results of Operations
Rhea-AI Summary
The Singing Machine Company (NASDAQ: MICS) reported its Q2 2024 results, highlighting a strategic shift in its legacy business model. Net sales decreased by 7% to $2.44 million, while gross profit fell by 38.8% to $324,000. The company focused on cost control, reducing operating expenses from $2.9 million to $2.6 million year-over-year. However, a $3.9 million non-cash impairment charge led to increased total operating expenses.
Key highlights include:
- Stable existing customer revenues
- Significant reduction in short-term liabilities by 43.8% to $9.1 million
- Strategic shift towards non-retail channels and music subscription model
- Completion of SemiCab acquisition on July 3, 2024
Positive
- Reduced operating expenses from $2.9 million to $2.6 million year-over-year
- Decreased short-term liabilities by 43.8% to $9.1 million
- Completed strategic acquisition of SemiCab on July 3, 2024
- Maintained position as #1 brand in consumer karaoke
Negative
- Net sales decreased by 7% to $2.44 million
- Gross profit fell by 38.8% to $324,000
- Gross margins declined from 20.2% to 13.3%
- $3.9 million non-cash impairment charge related to hospitality lease
- Operating loss of $2.3 million in Q2 2024
News Market Reaction 1 Alert
On the day this news was published, MICS gained 7.14%, reflecting a notable positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
Business Reflects Strategic Shift in Legacy Business Model
Fort Lauderdale, FL, Aug. 19, 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 June 30,2024.
“We are pleased to report our second quarter results of operations,” commented Gary Atkinson, CEO of the Singing Machine. “We spent much of the second quarter focused on the necessary due diligence, legal and audit work to close the SemiCab acquisition. Despite these added expenses, we were successful in controlling overall costs, maintain a strong balance sheet, and preparing for a business holiday retail season for our legacy consumer electronics business.”
Second quarter operational highlights were as follows:
1) Stable Existing Customer Revenues: Sales were largely flat at
2) Strict Cost Control Across Legacy Operations: Operating expenses for the second quarter were
3) Deleveraged Balance Sheet: The Company focused heavily on contracting its balance sheet, converting short term assets to cash, and significantly reducing its short-term liabilities. In total, short-term liabilities decreased
4) Strategic Shift in the Legacy Business Model: For the legacy consumer electronics business, the strategic shift has accelerated. The Company made significant headway into expanding its karaoke product assortment into non-retail channels. The Company also continues to see growth in its music subscription model tied to its WiFi enabled karaoke devices.
5) Prioritization of SemiCab: Much of the second quarter corporate activities focused on the legal, audit, and due diligence process for the completion of the SemiCab acquisition, which was completed on July 3, 2024. With that transaction now complete, the executive team of the Company is now focused on integration, client expansion, revenue growth and critical vendor relationships.
“As we will expand on in our earnings call, we are now focused on getting back to growth. First, as we begin to enter the Fall season, our production, sales and operations teams are ramping up to execute a successful holiday season. Our manufacturing suppliers are producing inventory and shipping products in coordination with the coming holiday season and retail and consumer demand. The Singing Machine brand remains the #1 brand in consumer karaoke and continues to occupy the bulk of retail shelf space for this coming season. Separately, we are integrating with our new team at SemiCab and aligning them for growth as we collectively push to rapidly expand our customer base, drive revenues and unlock the potential of this exciting, highly-scalable, AI-technology across multiple geographies in the global logistics space.”
Results of operations for the first quarter are summarized as follows:
- Net Sales- Net sales for the three months ended June 30, 2024, decreased to approximately
$2,440,000 from approximately$2,625,000 representing a decrease of approximately$185,000 (7.0 %) as compared to the three months ended June 30, 2023. The decrease was primarily due to lower overall sell-through results during the past holiday season, mostly with our largest customer, Walmart, which in turn diminished inventory restocking requirements during the first six months of the calendar year which is historically off-peak shipping season. - Gross Profit- Gross profit for the three months ended June 30, 2024 decreased to approximately
$324,000 from approximately$529,000 representing a decrease of approximately$205,000 (38.8% ) as compared to the three months ended June 30, 2023. Gross margins for the three months ended June 30, 2024 were13.3% as compared to20.2% for the three months ended June 30, 2023. Approximately$260,000 of the decrease in gross profit was primarily due the increased sales in excess inventory which yielded significantly lower margin than current models sold and was offset by a decrease in expenses of approximately$57,000 associated with the miscellaneous logistics costs relate to the timing of receipt of new goods. - Operating Expenses- During the three months ended June 30, 2024, total operating expenses increased to approximately
$6,478,000 , compared to approximately$2,960,000 during the three months ended June 30, 2023. This represents an increase in total operating expenses of approximately$3,518,000 from the three months ended June 30, 2023. The increase in operating expenses was primarily due to the write-off of impaired operating lease assets of approximately$3,878,000 related to the hospitality lease. This increase in operating expenses was offset by a decrease in seasonal debt reserves of approximately$156,000 , a decrease in logistics costs of approximately$124,000 associated with the closing of the warehouse operation and outsourcing of logistics to a third-party logistics company, acceleration of depreciation expense of approximately$130,000 recognized in the prior year on impaired fixed assets associated with the closing of the warehouse.
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
| June 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 1,245,000 | $ | 6,703,000 | ||||
| Accounts receivable, net of allowances of | 2,349,000 | 7,308,000 | ||||||
| Due from Oxford Bank | 187,000 | - | ||||||
| Accounts receivable related parties | 414,000 | 269,000 | ||||||
| Inventory | 6,910,000 | 6,871,000 | ||||||
| Returns asset | 619,000 | 1,919,000 | ||||||
| Prepaid expenses and other current assets | 67,000 | 136,000 | ||||||
| Total Current Assets | 11,791,000 | 23,206,000 | ||||||
| Property and equipment, net | 305,000 | 404,000 | ||||||
| Operating leases - right of use assets | 178,000 | 3,926,000 | ||||||
| Other non-current assets | 93,000 | 179,000 | ||||||
| Total Assets | $ | 12,367,000 | $ | 27,715,000 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 3,676,000 | $ | 7,616,000 | ||||
| Accrued expenses | 1,842,000 | 2,614,000 | ||||||
| Refund due to customer | 1,171,000 | 1,743,000 | ||||||
| Customer prepayments | 38,000 | 687,000 | ||||||
| Reserve for sales returns | 2,174,000 | 3,390,000 | ||||||
| Other current liabilities | 37,000 | 75,000 | ||||||
| Current portion of operating lease liabilities | 165,000 | 84,000 | ||||||
| Total Current Liabilities | 9,103,000 | 16,209,000 | ||||||
| Other liabilities, net of current portion | - | 3,000 | ||||||
| Operating lease liabilities, net of current portion | 4,136,000 | 3,925,000 | ||||||
| Total Liabilities | 13,239,000 | 20,137,000 | ||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ (Deficit) Equity | ||||||||
| Preferred stock, | - | - | ||||||
| Common stock | 64,000 | 64,000 | ||||||
| Additional paid-in capital | 33,465,000 | 33,429,000 | ||||||
| Accumulated deficit | (34,401,000 | ) | (25,915,000 | ) | ||||
| Total Shareholders’ (Deficit) Equity | (872,000 | ) | 7,578,000 | |||||
| Total Liabilities and Shareholders’ (Deficit) Equity | $ | 12,367,000 | $ | 27,715,000 | ||||
See notes to the condensed consolidated financial statements
The Singing Machine Company, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | |||||||||||||
| Net Sales | $ | 2,440,000 | $ | 2,625,000 | $ | 4,866,000 | $ | 6,008,000 | ||||||||
| Cost of Goods Sold | 2,116,000 | 2,096,000 | 4,040,000 | 4,659,000 | ||||||||||||
| Gross Profit | 324,000 | 529,000 | 826,000 | 1,349,000 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Selling expenses | 547,000 | 445,000 | 1,177,000 | 1,257,000 | ||||||||||||
| General and administrative expenses | 2,053,000 | 2,515,000 | 4,212,000 | 4,670,000 | ||||||||||||
| Operating lease impairment expense | 3,878,000 | - | 3,878,000 | - | ||||||||||||
| Total Operating Expenses | 6,478,000 | 2,960,000 | 9,267,000 | 5,927,000 | ||||||||||||
| Loss from Operations | (6,154,000 | ) | (2,431,000 | ) | (8,441,000 | ) | (4,578,000 | ) | ||||||||
| Other (Expenses) Income | ||||||||||||||||
| Gain from Employee Retention Credit Program refund | - | - | - | 704,000 | ||||||||||||
| Interest expense | (17,000 | ) | (29,000 | ) | (45,000 | ) | (69,000 | ) | ||||||||
| Total Other (Expenses) Income, net | (17,000 | ) | (29,000 | ) | (45,000 | ) | 635,000 | |||||||||
| Loss Before Income Tax Benefit (Provision) | (6,171,000 | ) | (2,460,000 | ) | (8,486,000 | ) | (3,943,000 | ) | ||||||||
| Income Tax Benefit (Provision) | 52,000 | - | - | (1,502,000 | ) | |||||||||||
| Net Loss | $ | (6,119,000 | ) | $ | (2,460,000 | ) | $ | (8,486,000 | ) | $ | (5,445,000 | ) | ||||
| Loss per common share | ||||||||||||||||
| Basic and diluted | $ | (0.95 | ) | $ | (0.64 | ) | $ | (1.32 | ) | $ | (1.56 | ) | ||||
| Weighted Average Common and Common Equivalent Shares: | ||||||||||||||||
| Basic and diluted | 6,418,061 | 3,872,447 | 6,418,061 | 3,487,299 | ||||||||||||
See notes to the condensed consolidated financial statements
The Singing Machine Company, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended | ||||||||
| June 30, 2024 | June 30, 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (8,486,000 | ) | (5,445,000 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 105,000 | 238,000 | ||||||
| Provision for estimated cost of returns | 1,301,000 | 1,820,000 | ||||||
| Provision for inventory obsolescence | - | 271,000 | ||||||
| Credit losses | 14,000 | 7,000 | ||||||
| Operating lease impairment expense | 3,878,000 | - | ||||||
| Loss from disposal of property and equipment | - | 3,000 | ||||||
| Stock based compensation | 36,000 | 138,000 | ||||||
| Amortization of right of use assets | 20,000 | 316,000 | ||||||
| Change in net deferred tax assets | - | 1,399,000 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 4,945,000 | 6,303,000 | ||||||
| Due from banks | (187,000 | ) | - | |||||
| Accounts receivable - related parties | (145,000 | ) | 87,000 | |||||
| Inventories | (38,000 | ) | (1,714,000 | ) | ||||
| Prepaid expenses and other current assets | 69,000 | (167,000 | ) | |||||
| Other non-current assets | (64,000 | ) | (135,000 | ) | ||||
| Accounts payable | (3,940,000 | ) | 560,000 | |||||
| Accrued expenses | (771,000 | ) | (1,939,000 | ) | ||||
| Customer deposits | (572,000 | ) | - | |||||
| Refunds due to customers | (649,000 | ) | 577,000 | |||||
| Reserve for sales returns | (1,217,000 | ) | (2,604,000 | ) | ||||
| Operating lease liabilities | 291,000 | (329,000 | ) | |||||
| Net cash used in operating activities | (5,410,000 | ) | (614,000 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | (6,000 | ) | (137,000 | ) | ||||
| Net cash used in investing activities | (6,000 | ) | (137,000 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from sale of stock, net of offering costs | - | 1,640,000 | ||||||
| Net payments on revolving lines of credit | - | (1,761,000 | ) | |||||
| Other | (42,000 | ) | (33,000 | ) | ||||
| Net cash used in financing activities | (42,000 | ) | (154,000 | ) | ||||
| Net change in cash | (5,458,000 | ) | (905,000 | ) | ||||
| Cash at beginning of year | 6,703,000 | 2,795,000 | ||||||
| Cash at end of period | 1,245,000 | 1,890,000 | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | 40,000 | 24,000 | ||||||
| Equipment purchased under capital lease | - | 55,000 | ||||||
See notes to the condensed consolidated financial statements
FAQ
What were Singing Machine's (MICS) Q2 2024 net sales?
How did Singing Machine's (MICS) gross profit change in Q2 2024?
What was the impact of the SemiCab acquisition on Singing Machine (MICS)?
How did Singing Machine (MICS) manage its short-term liabilities in Q2 2024?
