The Singing Machine Company, Inc.

good afternoon everyone and welcome to the singing machines first quarter fiscal 2024 financial results earnings call my name is Travis and I will be your operator as a reminder today's call is being recorded we have a brief safe harbor and then we'll get started this call contains four liquid statements under US federal security laws these statements are subject to risk and uncertainties that could cause actual results to differ materially from historical experience or present expectations a description of some of the risk and uncertainties can be found in in the reports that we filed with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. I'll now turn the call over to Gary Atkinson, company CEO. Please go ahead, sir.

Thank you. Good afternoon, everybody. I want to start by thanking everybody for taking the time today to listen in and participate in our first quarter 2024 earnings call. Joining me today on today's call, I also have Lionel Marquis, company CFO. Before I turn the call over to Lionel to walk everyone through our results of operation, I would like to take a moment to help frame the unique nature of our first quarter results for fiscal 2024 versus the same time period last year. For those that have followed our company, you may recall we had a banner first quarter last year. We booked over 11 million in sales, and this was due to three main factors. Last year during the first quarter, we were successful in expanding our karaoke assortment into Walmart's consumer electronics department to ramp up and fill an incredible amount of linear shelf space at thousands of locations throughout the country. It required a very large amount of product. This resulted in a single purchase order to set the stores in excess of $3.1 million. Secondly, Coming off the heels of an unprecedented supply chain challenges in 2021, the company elected to convert all of its business with Sam's Club to an FOB China program. This gave our customer the ability to leverage its buying power to get better freight efficiencies. As a result of that, we booked 3.5 million in sales. At the time, the product left the docks in China and not when it left our warehouse facility in California. This accelerated sales almost three months earlier and into our first quarter of last year. And finally, the majority of the increase in sales for the first quarter of fiscal 2023 was the result of retailers trying to restock shelves that were empty due to a very strong 2021 holiday season and supply chain struggles that prevented inventory from reaching the retailer. With this in mind, we have returned to our historically normal rhythm of just-in-time sales. Retailers continue to release orders, particularly in August, and we expect September and October to be extremely active as we compress six to seven months of sales into a 12-week timeframe. This has many benefits for us, as we've been able to keep inventories lean, free up cash, and reduce the risk of overstock. We anticipate this change will help to reduce many of the frictional costs that take away from net sales and gross margins. namely returns, co-op fees, and markdown incentives. Overall, we are pleased with our operational performance, and we are optimistic on current holiday season. With this context in mind, I would now like to turn the call over to Lionel Marquis, our CFO, to present greater details on the results of operations for fiscal 2023.

Thank you, Gary. Good afternoon, everyone. And without further delay, I'd like to walk through the results of operations for our first quarter ended June 30th, 2023. Revenues for the three months ended June 30th, 2023 were $2.6 million as compared to $11.7 million for the same period in the prior year. Gary just provided a great deal of color on the dynamics of the respective quarters from a comparison perspective. I would like to simply add that for many years, our first quarter sales were historically a low point for us. One quarter for our company is often very slow immediately after Christmas, and the retail big box buyers are not normally very active until late spring or during our first quarter. It is that time that they typically begin to release orders for shipments, and we normally stage product in Southern California for final fulfillment in late summer to early fall. As a result of this lead time and buying pattern, we usually book revenue heavily from late July through late October. sometimes into the first week of November for last-minute orders. We're an extremely seasonal business model, and we very rarely generate more than $3.5 million in sales in our first quarter. With the exception of the last fiscal year, our previous three-year annual filings have disclosed that between 81% and 86% of our net sales were shipped during our second and third quarters, beginning in July and ending in December. We'll talk about gross profit for the first quarter of fiscal 2024 was approximately $900,000 yielding a 32.3% gross margin as compared to approximately 3.2 million and 27.2 gross profit margins in the first quarter of 2023. Overall, the difference in dollar terms was due to the differences in sales generated, as we have already detailed. However, the improvement in the margins in the first quarter of this year is primarily due to the fact that sales in this quarter did not include any material direct import shipments from China. Typically, when we were responsible for the logistics to bring the product into the U.S. and then fulfill from California, we were able to secure at least two or three percentage points and improve margins. This is a key factor for the improvements this year. But product mix also played a role in the improvement as well because direct imports Import shipments generally include holiday promotional products, shipments of holiday promotional products, and they just normally yield a lower gross profit margin. As well as operating expenses during the first quarter of 2024, operating expenses increased 3.3 million compared to 3.0 million during the first quarter of the prior year. The $300,000 million increase in expenses was almost entirely due to one-time expenses relating to the closure of our Ontario, California logistics hub. We elected to move to an entirely outsourced shipping model for our North American operations. We see this as a key way to contain logistics expenses in the coming years based on rising occupancy and labor costs that we want to proactively minimize and shift to a variable cost logistics model rather than carrying fixed overhead costs during non-peak seasons. Liquidity, as of June 30, 2023, we had cash on hand of approximately $1.6 million, and we had approximately $2.1 million available on our senior secured line of credit based on eligible collateral. The company reduced its overall working capital investments by approximately $1.2 million in the quarter as the management team focused heavily on inventory management in building and maintaining a liquid short-term capital position. The company also significantly reduced its short-term liabilities. Current liabilities of June 30th, 2023 decreased by approximately $800,000 to 5.5 million during the first quarter of fiscal year 24. During the next 12-month period, we plan on financing our working capital needs primarily from a combination of vendor financing, our revolving line of credit, proceeds collected after the fiscal year ended from the completion of our ATM offering, our ATM stock offering. The company believes that its cash on hand working capital net of cash, cash expected to be generated from its operating forecast along with availability of cash from its credit facilities will be adequate to meet the company's liquidity requirements for at least 12 months from the filing of this report. That is my report on finance. I'd like to turn the call back over to Gary.