MICS - Singing Machine Reports $17.1 Million in Second Quarter Revenue; 23% Increase in Year-to-Date Sales
Fort Lauderdale, FL, Nov. 14, 2022 (GLOBE NEWSWIRE) -- The Singing Machine Compa ny, Inc. (“Singing Machine” or the “Company”) (NASDAQ: MICS ) – the worldwide leader in consumer karaoke products – today announced its second quarter financial results for the three months ended September 30, 2022.
Second Quarter Highlights :
- Net sales for the quarter of $17.1 million; fiscal year-to-date revenue of $28.8 million (an increase of 23% over the same period in the prior year).
- Gross profit increased by approximately $0.6 million to $3.9 million (representing a 23% gross margin) compared to $3.3 million (or 19% gross margin) in the prior year (an overall increase of 4% compared to the prior year same period). The improvement was in part due to lower inbound logistics and transportation expenses.
- Income from Operations of approximately $0.6 million for the quarter; the Company continues to demonstrate ability to produce profitable quarters.
- Strengthened balance sheet with a successful $15 million senior secured line of credit refinancing with Fifth Third Bank on October 14, 2022.
- Fully diluted EPS of $0.08 for the quarter and $0.11 for the year-to-date period.
Management Commentary:
Gary Atkinson, Singing Machine CEO, commented, “This was a very strong quarter for our Company. We are very pleased to share our results of operations, particularly in a challenging overall economic environment.”
“We have aggressively sought to sell product into our best retail partners throughout the year, and that was a key factor for our $17 million in top line sales for the quarter which helped contribute to the 23% growth in year-to-date net sales and almost $29 million in net sales for the fiscal-year-to-date period. We’re proud of these results and our ability to continue to perform and deliver despite some of the overall headwinds facing the retail industry today.”
“More importantly, we were able to accomplish our goal at the beginning of the year which was to improve gross margins by over 400-basis point compared to the same quarter last year. To overcome last year’s supply chain challenges, our team worked hard this year to shift a majority of our business to FOB-China thereby improving the timing and efficiency of shipments to avoid any potential supply-chain disruptions and to ensure our retail customers remained in-stock on key karaoke products.”
“As we enter our holiday quarter, the market remains volatile and challenging with generally elevated levels of inventory present throughout the entire consumer products market. However, through our long-standing partnerships at retail and our commitment to innovation, we firmly believe we are well-positioned to remain the market leader today and well into the future.”
“We continue to look for and invest into new serviceable markets and business verticals within the karaoke category that are currently untapped in the U.S. market. We believe there are a number of significant growth opportunities where we can be very competitive while driving new sales growth at compelling margins,” concluded Mr. Atkinson.
Earnings Call Information:
The Company will host a conference call today, Monday, November 14, 2021, beginning at 5:00 PM Eastern time to discuss these results and answer questions. If you would like to participate on the call, please dial (800) 343-4849 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
Singing Machine ® is the leading provider of karaoke products to consumers across the world. The Company offers the industry's widest line of at-home and in-car karaoke entertainment products, which allow consumers to find a machine that suits their needs and skill level. The Company’s products are sold in over 25,000 locations worldwide, including at well-known retailers such as Amazon, Costco, Sam’s Club, Target, and Walmart. As the most recognized brand in karaoke, Singing Machine products incorporate the latest technology and provide access to over 70,000 songs for streaming through its mobile app and select WiFi-capable products. To learn more, go to www.singingmachine.com .
Investor Relations Contact:
Brendan Hopkins
(407) 645-5295
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. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2022 |
| March 31, 2022 |
| (unaudited) |
| Assets |
| Current Assets |
| Cash |
| $ |
| 2,978,683 |
| $ |
| 2,290,483 |
| Accounts receivable, net of allowances of $277,953 and $122,550, respectively |
| 10,640,685 |
| 2,785,038 |
| Due from Crestmark Bank |
| 1,076,988 |
| 100,822 |
| Accounts receivable related party - Stingray Group, Inc. |
| 81,665 |
| 152,212 |
| Inventories, net |
| 16,022,436 |
| 14,161,636 |
| Prepaid expenses and other current assets |
| 158,238 |
| 344,409 |
| Deferred financing costs |
| - |
| 7,813 |
| Total Current Assets |
| 30,958,695 |
| 19,842,413 |
| Property and equipment, net |
| 532,505 |
| 565,094 |
| Deferred tax assets |
| 812,478 |
| 892,559 |
| Operating Leases - right of use assets |
| 862,279 |
| 1,279,347 |
| Other non-current assets |
| 193,841 |
| 86,441 |
| Total Assets |
| $ |
| 33,359,798 |
| $ |
| 22,665,854 |
| Liabilities and Shareholders’ Equity |
| Current Liabilities |
| Accounts payable |
| $ |
| 10,133,744 |
| $ |
| 5,391,265 |
| Accrued expenses |
| 2,544,287 |
| 1,732,355 |
| Revolving line of credit - Iron Horse Credit |
| 2,500,000 |
| 2,500,000 |
| Refunds due to customers |
| 93,925 |
| 97,968 |
| Reserve for sales returns |
| 1,690,606 |
| 990,000 |
| Current portion of finance leases |
| 7,988 |
| 7,605 |
| Current portion of installment notes |
| 77,479 |
| 74,300 |
| Current portion of operating lease liabilities |
| 848,723 |
| 876,259 |
| Subordinated note payable - Starlight Marketing Development, Ltd. |
| 352,659 |
| 352,659 |
| Total Current Liabilities |
| 18,249,411 |
| 12,022,411 |
| Finance leases, net of current portion |
| 6,528 |
| 10,620 |
| Installment notes, net of current portion |
| 99,098 |
| 138,649 |
| Operating lease liabilities, net of current portion |
| 60,374 |
| 457,750 |
| Total Liabilities |
| 18,415,411 |
| 12,629,430 |
| 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; 3,108,814 and 1,221,209 shares issued and outstanding, respectively |
| 31,088 |
| 12,212 |
| Additional paid-in capital |
| 29,511,317 |
| 24,902,694 |
| Accumulated deficit |
| (14,598,018 |
| ) |
| (14,878,482 |
| ) |
| Total Shareholders’ Equity |
| 14,944,387 |
| 10,036,424 |
| Total Liabilities and Shareholders’ Equity |
| $ |
| 33,359,798 |
| $ |
| 22,665,854 |
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| For the Three Months Ended |
| For the Six Months Ended |
| September 30, 2022 |
| September 30, 2021 |
| September 30, 2022 |
| September 30, 2021 |
| Net Sales |
| $ |
| 17,113,636 |
| $ |
| 17,368,973 |
| $ |
| 28,805,690 |
| $ |
| 23,434,623 |
| Cost of Goods Sold |
| 13,149,667 |
| 14,041,669 |
| 21,661,191 |
| 18,529,449 |
| Gross Profit |
| 3,963,969 |
| 3,327,304 |
| 7,144,499 |
| 4,905,174 |
| Operating Expenses |
| Selling expenses |
| 899,590 |
| 733,485 |
| 1,504,787 |
| 1,311,467 |
| General and administrative expenses |
| 2,417,405 |
| 1,776,997 |
| 4,787,829 |
| 3,198,349 |
| Depreciation |
| 62,323 |
| 66,809 |
| 120,390 |
| 135,080 |
| Total Operating Expenses |
| 3,379,318 |
| 2,577,291 |
| 6,413,006 |
| 4,644,896 |
| Income from Operations |
| 584,651 |
| 750,013 |
| 731,493 |
| 260,278 |
| Other (Expenses) Income |
| Gain - related party |
| - |
| - |
| - |
| 11,236 |
| Gain from Payroll Protection Plan loan forgiveness |
| - |
| - |
| - |
| 448,242 |
| Gain from settlement of accounts payable |
| - |
| 236,472 |
| - |
| 236,472 |
| Interest expense |
| (185,827 |
| ) |
| (110,864 |
| ) |
| (345,940 |
| ) |
| (210,393 |
| ) |
| Finance costs |
| - |
| (9,375 |
| ) |
| (7,813 |
| ) |
| (26,297 |
| ) |
| Total Other (Expenses) Income, net |
| (185,827 |
| ) |
| 116,233 |
| (353,753 |
| ) |
| 459,260 |
| Income Before Income Tax Provision |
| 398,824 |
| 866,246 |
| 377,740 |
| 719,538 |
| Income Tax Provision |
| (102,357 |
| ) |
| (173,873 |
| ) |
| (97,276 |
| ) |
| (145,778 |
| ) |
| Net Income |
| $ |
| 296,467 |
| $ |
| 692,373 |
| $ |
| 280,464 |
| $ |
| 573,760 |
| Net Income per Common Share |
| Basic |
| $ |
| 0.10 |
| $ |
| 0.43 |
| $ |
| 0.11 |
| $ |
| 0.40 |
| Diluted |
| $ |
| 0.08 |
| $ |
| 0.43 |
| $ |
| 0.09 |
| $ |
| 0.39 |
| Weighted Average Common and Common |
| Equivalent Shares: |
| Basic |
| 3,071,131 |
| 1,593,929 |
| 2,484,660 |
| 1,448,603 |
| Diluted |
| 3,610,188 |
| 1,605,134 |
| 2,961,631 |
| 1,460,967 |
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended |
| September 30, 2022 |
| September 30, 2021 |
| Cash flows from operating activities |
| Net Income |
| $ |
| 280,464 |
| $ |
| 573,760 |
| Adjustments to reconcile net income to net cash used in operating activities: |
| Depreciation |
| 120,390 |
| 135,080 |
| Amortization of deferred financing costs |
| 7,813 |
| 26,297 |
| Change in inventory reserve |
| (93,447 |
| ) |
| 53,890 |
| Change in allowance for bad debts |
| 155,403 |
| 118,321 |
| Loss from disposal of property and equipment |
| - |
| 4,394 |
| Stock based compensation |
| 231,213 |
| 34,727 |
| Change in net deferred tax assets |
| 80,081 |
| 145,778 |
| Paycheck Protection Plan loan forgiveness |
| - |
| (448,242 |
| ) |
| Gain - related party |
| - |
| (11,236 |
| ) |
| Gain from extinguishment of accounts payable |
| - |
| (236,472 |
| ) |
| Changes in operating assets and liabilities: |
| Accounts receivable |
| (8,011,050 |
| ) |
| (9,409,973 |
| ) |
| Due from Crestmark Bank |
| (976,166 |
| ) |
| 4,557,120 |
| Accounts receivable - related parties |
| 70,547 |
| (70,880 |
| ) |
| Inventories |
| (1,767,353 |
| ) |
| (13,721,821 |
| ) |
| Prepaid expenses and other current assets |
| 186,171 |
| 23,155 |
| Other non-current assets |
| (107,400 |
| ) |
| 50,262 |
| Accounts payable |
| 4,742,479 |
| 16,409,171 |
| Accrued expenses |
| 811,932 |
| 381,213 |
| Customer deposits |
| - |
| (53,249 |
| ) |
| Refunds due to customers |
| (4,043 |
| ) |
| (46,686 |
| ) |
| Reserve for sales returns |
| 700,606 |
| 903,731 |
| Operating lease liabilities, net of operating leases - right of use assets |
| (7,844 |
| ) |
| 5,655 |
| Net cash used in operating activities |
| (3,580,204 |
| ) |
| (576,005 |
| ) |
| Cash flows from investing activities |
| Purchase of property and equipment |
| (87,801 |
| ) |
| (77,599 |
| ) |
| Net cash used in investing activities |
| (87,801 |
| ) |
| (77,599 |
| ) |
| Cash flows from financing activities |
| Proceeds from Issuance of stock - net of transaction expenses |
| 3,362,750 |
| 9,000,580 |
| Payment of redemption and retirement of treasury stock |
| - |
| (7,162,452 |
| ) |
| Net proceeds from revolving lines of credit |
| - |
| 1,977,006 |
| Payment of deferred financing charges |
| - |
| (37,501 |
| ) |
| Payments on installment notes |
| (36,372 |
| ) |
| (33,451 |
| ) |
| Proceeds from exercise of stock options |
| - |
| 4,800 |
| Proceeds from exercise of pre-funded warrants |
| 168,334 |
| - |
| Proceeds from exercise of common warrants |
| 865,202 |
| - |
| Payment on subordinated note payable |
| (150,000 |
| ) |
| Payments on finance leases |
| (3,709 |
| ) |
| (4,440 |
| ) |
| Net cash provided by financing activities |
| 4,356,205 |
| 3,594,542 |
| Net change in cash |
| 688,200 |
| 2,940,938 |
| Cash at beginning of year |
| 2,290,483 |
| 396,579 |
| Cash at end of period |
| $ |
| 2,978,683 |
| $ |
| 3,337,517 |
| Supplemental disclosures of cash flow information: |
| Cash paid for interest |
| $ |
| 331,225 |
| $ |
| 249,734 |
| Equipment purchased under capital lease |
| $ |
| - |
| $ |
| 23,651 |
| Issuance of common stock and warrants for stock issuance expenses |
| $ |
| - |
| $ |
| 547,838 |
| Operating leases - right of use assets and lease liabilities at inception of lease |
| $ |
| - |
| $ |
| 16,364 |