The Singing Machine Company, Inc.

Good morning, everyone, and welcome to Slinging Machines' second quarter fiscal 2024 financial results earnings call. My name is Natalie, and I will be your operator today. As a reminder, today's call is being recorded. We have a brief safe harbor, and then we'll get started. This call contains forward-looking statements under U.S. federal securities law. These statements are subject to risk and uncertainties that could cause actual results to differ maternally from historical experience or present expectations. A description of some of the risk and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statement included in our current and periodic fillings. I would now like to turn the call over to Gary Atkinson, company CEO.

Good morning, ladies and gentlemen. I would like to start off this morning by thanking everyone for taking the time to listen in and participate in our second quarter 2024 earnings call. Joining me on today's call, I have Lionel Marquis, Company CFO, and Bernard O'Mello, Chief Revenue Officer. As is customary with our business, the second quarter is typically one of the busiest times of our fiscal year. This is when we start to deliver our programs for the holidays to our retail partners. And we are very, very active in fulfilling these orders daily from July through October with final replenishments into November and drop shipments starting in December. Due to the timing of our longstanding warehouse lease and its expiration in Ontario, California back in August, we were challenged to execute a complete transition from a 100% in-house logistics model to a fully outsourced 3PL model right at the peak of our shipping season. For those that may not be aware, this process involved a complete overhaul in our entire customer fulfillment operations process, which impacted staffing, IT integration, accounting data flow, internal reporting, and customer relationship management. While this was a massive undertaking for the entire team, I am very pleased with how this team has executed and made it happen day in and day out for weeks on end as we made the transition. The impacts moving forward should be significant to our business. We avoided absorbing significant rent cost increases related to our previous warehouse. We've eliminated a large percentage of our workforce, and we've moved our entire logistics returns and repairs model to a variable just-in-time solution that should mitigate hundreds of thousands of dollars in costs increases annually for the foreseeable future. Beyond this major milestone, it was largely business as usual. Supply chain challenges and inbound container prices have fully normalized for this year. We saw customer demand revert much closer to our normal just-in-time delivery model. We also participated in several forward-looking industry events, such as last month's Toy Fair in New York, that indicate that 2024 should see further stabilization and improvement in the overall US retail environment. We were very active presenting and promoting our upcoming 2024 product offering, which include our new Sesame Street licensed line of products, along with new karaoke innovations and technologies that we plan to unveil in the early part of 2024. With this context in mind, I would like to turn the call over to Lionel Marquis, company CFO to present greater details on the results of operations for our second quarter.

Thank you, Gary. Good morning, everyone. And without further delay, I'd like to walk through some of the brief highlights of results of operations for our second quarter ended September 30th, 2023. Revenues for the three months ended September 30th, 2023 were $15.9 million. as compared to 17.1 million for the same period in the prior year. The decrease was due to delays and a few delays in product shift in late September that will ultimately shift in the first two weeks of October and an increase of approximately $900,000 in co-op incentive accruals planned for the holiday promotions. And this was an increase over 2022. Gross profit margin, gross profit for the second quarter of fiscal 2024 was approximately 3.7 million, yielding a 23.2% gross profit margin as compared to approximately 3.9 million or 22.8 in margins in the second quarter of fiscal 2023. Overall, the difference in dollar terms was due to the decrease in revenues, as we've already detailed. However, the improvement in margins in the first quarter of this year is primarily due to slight changes in the product mix and a decrease in ocean container prices that lowered the company's cost of inbound freight. Operating expenses. During the second quarter of 2024, operating expenses increased to 3.6 million compared to 3.3 million during the second quarter of the prior year. The increase was in part due to Approximately $0.2 million increase in selling expenses associated with a one-time marketing promotion, and $0.1 million in general and administrative expense increase. Just a brief note on liquidity as of September 30, 2023, we had cash in hand of approximately $3.2 million. During the next 12-month period, plan on financing our working capital needs primarily from a combination of vendor financing, cash on hand, and projected cash flows from operations. I'd like to now turn the call back over to Bernardo and to Gary.