The Singing Machine Company, Inc.
Q3 2023 Earnings Call Transcript
Published:
- Operator:
- Good day, everyone, and welcome to today's Singing Machine’s Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask a question during the question-and-answer session. [Operator Instructions] Please note that this call may be recorded. [Operator Instructions] It's now my pleasure to turn the conference over to Mr. Brendan Hopkins. Please go ahead.
- Brendan Hopkins:
- Thank you, and thanks, everyone for joining us today. We have a brief safe harbor and then we'll get started. So except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known, unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results. With that said, I would like to turn the call over to Gary Atkinson, CEO of The Singing Machine Company.
- Gary Atkinson:
- Thank you, Brendan. Good morning, ladies and gentlemen. As Brendan mentioned, my name is Gary Atkinson. I am The Singing Machines CEO. I'm joined this morning by Lionel Marquis, company’s CFO. I'd like to thank everybody for taking the time to be part of our third quarter earnings call today to discuss the results of the December 31, 2022 quarter. First, I'd like to provide context around our sales numbers for the quarter and the seasonality of our business for those that are not as familiar with our annual sales patterns. Despite our wholesale sell-in numbers for this quarter, demand for consumer karaoke products remained very strong. The real challenge to this quarter was timing and getting our products into retail. Normally, our sales cycle is heavily driven by daily demand, which gradually depletes inventory from viral audit shelve space. At this point, we do our best to replenish inventory on the shelves during the non-peak months. Primarily in fiscal year Q2 and fiscal year Q3, our retailers bulk up on inventory as needed in preparation for the holiday season. Last calendar year that traditional sales cycle was partially disrupted by the lingering effects of the COVID-19 pandemic and supply chain disruptions. There was a buildup of retail inventory on the shelves at the end of the first quarter of calendar 2021, which slowly started to make the retailers gradually more cautious throughout the rest of the year. This trend was not unique to our business and affected most year-round brands that sell into retail. As a result, we saw sales become increasingly front loaded over the calendar year. We are pleased, however, to report that we did experience very strong retail at sell-through numbers for the products that we were able to place. Simply put, the quantities of inventory that we were able to get onto retail shelves sold well. This was despite retailers' concerns and reactions to the elevated risk factors surrounding the overall economy in the back half of the year. We still continue to see steady demand for our products, and we believe that reflects well on our brand and on our technology. I will now turn the call over to Lionel Marquis, company’s CFO, who will go over the financials in more detail.
- Lionel Marquis:
- Thank you, Gary. Good morning to everyone, and thanks for participating in our third quarter earnings call. This morning, I'd like to share some key financial takeaways for our third quarter ended December 31, 2022. We saw a significant decrease in net sales for the three months ended December 31, 2022, as compared to the three months ended December 31, 2021, with revenues of $7.1 million compared to $21.2 million, respectively. Net sales for the nine months ended December 31, 2022 and 2021 were $35.9 million compared to $44.7 million, respectively. We experienced decreases in net sales to all of our major customers of approximately $8.8 million year-to-date. We attribute this decrease in net sales to the following factors
- Gary Atkinson:
- All right. Thank you, Lionel. Before we move to Q&A, I'd like to finish on one final point. We believe the core demand drivers for our products remain unchanged. We are still the number one brand and the captain of the thriving karaoke category that is expanding, not shrinking. Consumers are interacting with music and singing more so than ever. Our goal is still to deliver a best-in-class product that brings people together to enjoy music and karaoke. Our technology provides the highest quality experience and capabilities to bring families and friends together to share music and community, whether that's in home, in car or in person. To that point, we are not seeing any pullback in excitement or enthusiasm for the karaoke category. We're not forecasting to lose any shelf space in karaoke for the coming year, and we believe we will start to see a return to normal. Beyond this quarter, we are very excited about our emerging automotive segment that we successfully launched and demoed at CES last month. We look forward to providing more substantive updates in these efforts in the near future. With that, that concludes our report. I'd like to turn it over now to any questions that might be out there.
- Operator:
- Gary Atkinson:
- Okay. Well, I want to thank everybody today for attending our third quarter earnings update. We certainly look forward to talking to you all again at our next earnings report when we discuss the fourth quarter and the full fiscal year results. In the meantime, if anybody has any further questions, feel free to contact Brendan Hopkins or myself. Thank you all, everybody, and enjoy the rest of your day, take care.
- Operator:
- This does conclude today's program. Thank you for your participation. You may disconnect at any time. Have a good day.