Fort Lauderdale, FL, Feb. 14, 2020 (GLOBE NEWSWIRE) -- The Singing Machine Company, Inc. (“Singing Machine” or the “Company”) (OTCQX: SMDM) – the North American leader in consumer karaoke products – today announced its financial results for its third quarter ended December 31, 2019.
Third Quarter Snapshot:
- Reported net sales of $15.5 million for the quarter; $40.4 million for the nine-months year-to-date period.
- Gross margins decreased for the quarter to 26.0% compared to 28.9% in the prior year; year-to-date gross margin improved to 26.4% compared to 24.6% last year over the same period.
- Operating expenses increased by approximately $1.1 million, of which approximately $0.6 million was due to more promotions run during the holiday quarter with the balance due to higher freight expenses on product returns.
- Reported net loss for the quarter of approximately $0.76 million.
Singing Machine reports net sales of approximately $15.5 million for the quarter-ended December 31, 2019 period compared to $19.4 million in the comparable quarter of the prior year. The decrease in net sales was primarily due to a decrease in sales to the Company’s UK distributor as well as approximately $1.6 million less sales to one major customer compared to the prior year. The decrease in net sales is also attributable to higher accrual for return reserves.
Gross profit margin decreased by 2.9% to 26.0% due to an increased reserve accrual on anticipated high-margin yield product returns coming back after the holidays that exceeded historical return rates.
For the quarter, total operating expenses increased by approximately $1.1 million due to the promotion and marketing of Carpool Karaoke Microphone as well as overall increased promotional funding at all of its retailers.
As a result, the Company reported a net loss of $0.76 million compared to net income of $1.3 million in the prior year. The pending insurance claim regarding the wet, damaged products is currently impacting the bottom-line by approximately $0.75 million.
Gary Atkinson, Singing Machine CEO, commented, “During our holiday quarter, Singing Machine continued to maintain market dominance and lead market share with heavy promotions and impressive visibility at all major retailers. Despite that, however, various factors contributed to missing our financial goals for the quarter. Particularly, holiday sales fell short of expectations as we experienced softer-than-expected sell-thru on various product lines. As a result, we have increased our accrual reserves for anticipated product returns coming back in our 4th quarter. Another contributing factor is the pending unresolved insurance claim for the wet, damaged merchandise that was reported in the prior quarter.” Atkinson added, “As we move into 2020, we continue to face challenging market conditions with the Coronavirus in China potentially impacting supply chain and product development for the coming fiscal year. We are however fortunate that the threat of tariffs have been removed from our karaoke machines and are now only impacting microphones that we import from China. Despite our setbacks and challenges, we still have a robust product roadmap of new, innovative karaoke offerings and the full support of our retailer partners. We look forward to the task of getting the Company back on-track.”
Earnings Call Information:
The Company will host a conference call today, Friday, February 14, beginning at 10:00 am Eastern time to discuss these results and answer questions. If you would like to participate on the call, please dial (877) 876-9174 and use conference ID: SMDM.
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.
For access to the full report, including financial tables, click here.
About The Singing Machine
Based in the U.S., Singing Machine® is the North American leader in consumer karaoke products. The first to provide karaoke systems for home entertainment in the United States, the Company sells its products worldwide through major mass merchandisers and on-line retailers. We offer the industry's widest line of at-home karaoke entertainment products, which allow consumers to find a machine that suits their needs and skill level. As the most recognized brand in karaoke, Singing Machine products incorporate the latest technology for singing practice, music listening, entertainment and social sharing. The Singing Machine provides consumers the best warranties in the industry and access to over 13,000 songs for streaming and download. Singing Machine products are sold through most major retailers in North America and also internationally. See www.singingmachine.com for more details.
This press release contains forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward‑looking statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management and include, but are not limited to statements about our financial statements for the fiscal year ended March 31, 2019. You should review our risk factors in our SEC filings which are incorporated herein by reference. Such forward‑looking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forward‑looking statement to reflect events or circumstances after the date of this release.