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spk_0: everyone and welcome to today's the singing machine third quarter earnings call at this time all participants analysts and only mode later you will have an opportunity to ask questions during the question and answer session you may register to ask a question at any time by pressing the star and one on your touchstone phone please be advised this call may be recorded it is now my pleasure to turn the program over to friend and hopkins please go ahead
spk_1: thank you i think iran is on the joint the will receive arbor will get started because of resort information between here in the same as this particular form of the same me pursuant to the save other provisions of the by the securities litigation format and nineteen ninety five for the same in both no no no business or these which may god or actual results if you to periods to differ materially forecasted results know like over to gary atkinson ceo the same machine
spk_2: thank you brandon's good afternoon ladies and gentlemen i want to thank everybody for taking the time this afternoon to get an update on the results of our third quarter that was just released this morning wanna start off by saying we're obviously very very pleased with the results from this third quarter or holiday quarter it was a very very strong quota for us in which we were able to deliver on a lot of key performance goals for instance we were able to grow topline sales by twenty two percent year over year to the third quarter or we were successful and in being a able to expand margin significantly up to close to thirty percent for the quarter and we were able to deliver a whopping earnings per share of nine cents you to date and three cents for the quarter so we're very very pleased with the results with we're we're excited to talk about them with you today and with that being said will be turning the call over to lionel or who is the company cfl plan on going to be giving us a bit simpler and details behind the numbers and then after that we're going to turn it over to the narrow mellow is our vp of global sales and marketing and been i will give us an update on some of the a good results that we saw over the holidays and talk a little bit about what we're seeing going a new fiscal twenty two so how does he said i want to turn over to lionel
spk_3: good afternoon everybody despite the start off by talking a little bit about the amended returns by now you've probably seen an amended hesitate for fiscal year twenty twenty which covers both fiscal years twenty twenty five nineteen as was defended tend to fuck you want to have this fiscal year in reviewing our internal controls we identified an issue related to the way that we have that reporting co op emotional hours since the adoption of accounting standards code six or six which deals with revenue recognition some contracts essentially we are honored to determine the the colossus promotional ounces which have historically been held up are operating in selling expensive should have been classified as a reduction of revenue upon adoption of that code when we adopted on april first two thousand and eighteen for fiscal year two thousand twenty
spk_4: on the amended returns that were filed reflects the corrections that were made to be in compliance with a se six the sex with regards to come to promotional out there was no change the net income earnings per share any of the finance nor was there any change to any of the financial statements as a rich only five other than the income statements as as was originally filed the only changes occurred was a reduction in net sales in the amount of the cola allowances and a corresponding decrease the operating and selling expensive were operating so expenses for the period that were originally recorded as such a complete amended by the filings so i'm about to review the results of two three and all changes were made to be in for for both comparative years ah have now been made including in this quarter so what i'm about to tell you
spk_3: in terms of review is we are measuring apples to apples we did we stay surprise you and the company all without having to set up going to proceed to the highlights okay net sales for the quarter were up by three million one hundred and sixteen thousand dollars and had a date we were up family and seven hundred fifty thousand dollars approximately eight hundred thousand dollars has to do with less cooperatives promotional allows on
spk_4: during the season we did not ah this christmas season we did not participate in and many of the the color programs because of poses a lot of them were extended started a different periods are plus the demand was hi there was not a need a request to do those seasonal promotions as we know
spk_3: we do as large so we took about a hundred thousand dollars both here day and quarter to date on that are our carpool karaoke sales both for the corner and for the year we increased by one point five million dollars are we finally saw the results of this carpool karaoke taking off the way we thought it would last year and a little bit of a delay but this year was very very strong palm and again the only difference a year to date is an additional one point five million dollars worth of damage goods that we have last year with on
spk_4: pacific guys shipments that was damaged in france is remember correctly
spk_3: are we didn't have that problem this year
spk_4: so consequently those were the highlights on sale
spk_5: a gross profit margin
spk_3: when some approximately family and nine hundred seventy four thousand dollars up from two million three hundred seventy one thousand last year it's about a two point six million dollar increase about six hundred thousand dollars or that increase for the quarter was due to the sales increase
spk_6: i'm less cool off
spk_7: eight cooperatives
spk_3: marketing allowances would down by hundred thousand dollars
spk_4: and there was also a margin pick up of one point two million dollars and won at martian pick up have to do with
spk_8: the the carpool karaoke
spk_9: product
spk_3: sales increased for the are years as they were eleven million seven and fifty nine thousand versus seven million eight hundred and five thousand last year pick up a homeless for man
spk_4: pick up of almost four million dollars there was a sales increase of approximately one point
spk_10: one point zero
spk_4: a million dollars they were less collapse and the were last year but two hundred thousand hours and the with margin pick up of approximately two point one million dollars
spk_3: gross profit percentage twenty nine point three vs seventeen point one last year the cpj products of the carpool karaoke product yields a lot higher margin almost twice the amount that normal products do with the increase in that the
spk_4: and increase of a quarter of approximately five margin points the collapse lung collapsed approximately three hundred thousand also contributed a number five points of origin and the remaining two point two points of margin would do to the product mix of what we sold
spk_3: increase in those items are good at date twenty seven point eight vs twenty point in the prize you that's approximately a seven point percentage points pick up on margins
spk_4: carpool karaoke year's day subsidies approximately four points
spk_3: corporate marketing allowances less the less hundred thousand dollars or contributors another two point eight and another point on product mix in terms of what we so
spk_6: ah i'm selling expenses
spk_11: when from
spk_3: when they seven hundred forty one thousand last year to one for nine one this year approximately two hundred fifty thousand dollars less than last year on
spk_4: get day it was down by about one hundred twenty thousand dollars and it's primarily due to the the carpool karaoke roll out that we did last year we spend a lot of discretionary market pushing their products last year old and this year it took off on it's own we did not need to spend anywhere near that kind of money to promote it's all promotional
spk_12: that was the last year
spk_4: odd general and administrative expenses on the and nine twenty five this year versus one million four hundred forty two last year is increased approximately four hundred and eighty three thousand four quarter most as it was in payroll executive bonuses
spk_3: cause some changes we made up the warehouse on some some bonuses for
spk_4: are are regular employees some of it's covered related we have done some challenging time for with it him personnel a couple of bouts with was covered in a warehouse our warehouse for what we have to shut down for few days and get everybody tested that there was some some extra set of involved there to as well
spk_3: there was also seventy thousand dollar increase in the california wrestling with our a rental agreement for the warehouse space that we did
spk_8: coming off of six year some
spk_4: that rent went up substantially spaces and a premium when you get a date or cnn
spk_3: sensors were five point one million versus five million dollars in the prior year
spk_4: ha off about eighty two thousand dollars you today
spk_3: we didn't have the increase like a set of table by three hundred and eighty six thousand dollars but it was offset okay by approximately three i'm forty six thousand dollars
spk_4: of damaged goods damaged goods on that happened last year we had some out of pocket expenses associated with that so the people of all increases offset by the fact that we didn't have any damaged good charges to ask him to come here income from operations one million amos one point five million dollars or compared to eight hundred eighty nine thousand dollars in the prior year
spk_3: ah again mostly is gross profit as was discussed earlier you today's top three million one hundred and sixty thousand dollars versus a loss of one million one hundred thirty two thousand and four point three million dollars of again mostly gross profit margin as we discussed a few minutes ago other income on for the corner were sixty two thousand dollars on our income cinema vs on hundred thousand dollars on deduction in the prior year the interest expense increased the hundred and forty thousand dollars
spk_8: paul again we have to since we did our new deal with the financing situation is cost us a lot more money than the deal that we had before this is offset by one hundred and eighty eight thousand dollars of a
spk_4: one time pick up for our related party cosmos on some that sales that we have deemed not collected to them not collectible to them last year as often
spk_8: we did we were able to pick some of them back up
spk_3: have you today or me to fourteen and other income nest okay versus one hundred and sixty six thousand all
spk_4: decrease or or loss if he will or it's and if will insist twenty passionately one point four million dollars in other income one point one million dollars insurance recoveries met damaged goods that we have to
spk_13: last year the
spk_4: approximately another four hundred thousand dollars from concession over accounts payable extinguishment that we we receive from the vendor who caused the damage on another two hundred thousand and again at the hundred eighty thousand dollar up from from cosmo of are related party we also had an increase of those so things were also by an increasing interest expense of approximately two hundred sixty five thousand dollar she's a day on net income one one point one point two mandelson net income vs a losses seven hundred fifty thousand last year to pick up of one point nine million dollars and we have three point o mostly point four million dollars
spk_14: him on income
spk_4: this year versus a million three last year of pick up of approximately four point four million dollar so she could see most of those big one time losses that we took last year were able to recover most of those this year
spk_8: recovery all of them this year so obviously you were reaping the benefits of that tissue from a cash flow perspective
spk_3: hum inventory a couple of things on the balance sheet of know their inventory last year at this time at the end of december was eight point one million dollars
spk_4: inventory is now and stuff five point three million dollars so that's a drop of approximately two point eight million dollars in inventory very positive we have we ended up with lot of excess inventory last year couple of million dollars worth of we were able to move back and more this year palm probably even less a little money on the table to demand for computers covert period stay at home stuff was was very strong i'm would put their cash to produce we had approximately about six men six point six million dollars and accounts payable last year old to avengers the stuff and and that has reduced to three point nine million dollars almost four million dollars currently or at the end of the period of twelve thirty one so we took most of their cash to be generous and tory paid off all the old debts from last year
spk_15: in terms of accounts payable are below
spk_4: a car with our with our concerns are sealed so that's my report is very positive response
spk_16: and i'm sure wrong
spk_4: sales will have plenty to say about some successes
spk_2: perfect was i think you little are detailed report we appreciate it within to turn the call over hour to been automotive vp of global sales and marketing for more sales insight into what happened during the third quarter with the go have been on a
spk_17: the guys
spk_18: yeah
spk_19: wanted of recap bomb
spk_17: third quarter than the you're in general
spk_1: home
spk_20: you know the person gonna come by town
spk_1: i'm given the highlights of overdose i just want to go get it get into that a little bit and and also be some time for questions than answers as and but i'm you know
spk_17: so for the zero this was clearly we we've we've really had a good year
spk_1: with with a major retail partnerships on some similar to retailers com or strengthening their their position with the machine branding and be seen that on across
spk_18: you know we becoming more relevant to to the either the toy the plumber the consumer electronics department in those particular retailers for example targets this year
spk_1: really had a better year earlier that year the she seventy one percent of the year over year
spk_21: the calendar year and and i'm a lot of that was was attributed to on
spk_1: they just they were one of the are the winners
spk_21: in in carpool karaoke
spk_1: a lot of when when when the item got really popular with to talk
spk_17: everybody was was charging targets on it
spk_1: in they have been a inventory were able to ship have some additional inventory on they died on that item to golf but it wasn't just a one trick pony we we had we have huge success with with our court karaoke items as well i'm in victory a little bit of a higher price for the little her entry level could be as high as seventy nine ninety nine on the also the to step up in as one forty nine and with see you drop off in in any of others high priced matter they were big winners for hours on unfortunately we did transition out of corporate karaoke at the brick and mortar stores but but we we we came with another had held microphone that also stood it's own on
spk_21: and for the year about twenty five percent of the business was done the handheld microphone with target which allows them to have to increase or their gross margin on
spk_22: by thirteen to fifteen percent and for us to also increase or gross margin in the so it's a strategy that we want to take to go to school twenty twenty two as well that we can expand about that with other retailers as well amazon is another one of those rico's that that that benefited from
spk_1: tom some people rush into online to do so you know to to do their shopping i'm sick of be seen again
spk_17: continues to do really good numbers would amazon we were able to reduce or or marketing expense drastically with with with amazon was transitioning some of that expensive to amazon
spk_1: marketing services so immersed in and is totally paid out to
spk_17: please also was well i'm we increase or margin they were trees are pressured presence there i'm in a didn't have to do a lot of promotions with either amazon and target this year as a matter of fact wouldn't participate in black friday with targets and still beating the same number of sales from or years and so
spk_1: oh i'm you know we we were able to prove to them that this is the only a promotional arm category that is is is marketed well and and supported well with with inventory in the store on the karaoke to perform for them as a matter of fact the the a target even awarded us
spk_17: holiday and cap would be brought in some to we added items on with the electronics department and cross promoted with the toy department on is is that the performed really well ended up selling to on about ninety eight percent of all of that promotional on and kept i was given sox will look at a grandfather that in this year and only expand on it to subaru together to arm all stores you soon so
spk_1: i'm getting back to amazon arm
spk_17: the aside reserve
spk_1: we're still saw showing really good numbers now and in our in our to for on with about one hundred and one percent year over year from a we were doing last year
spk_17: so the trends continue and is not a was just a twenty twenty number the trend is really consider moving forward and as a matter of fact we had a lover boy majority we could probably even to do those numbers are hire as as little mention were coming out of the the year when less inventory that we had last year
spk_1: i'm not only that but also good inventory oh but we've pretty much sold out through all of our and of lies and and sort of inventory we we sold out on that on twenty twenty without having to discount many other
spk_17: your whole caused on on a lot of those items so weird a much better
spk_18: i'm a toy situation right now i'm due to the sales in the shell to add that to tell us a cosco sam's club
spk_17: and and target ah but we did not have to take over stock returns on and every we did we were very very minimal all but we ended up just settling out
spk_1: because of that the the have been told number was so low that we settled out on on our sub josh should now be those does overstock so don't know the should be positive for us another thing that happened was the launch of i new pedestal unit on which is why five why five naval units
spk_18: we didn't know how to perform because it was gonna be at a higher price point they don't know what the clubs are used to carry about thirty to forty dollars higher than usual and energy another year we we performed really well so we're would have somebody commitments for twenty twenty two on on that particular model
spk_17: i'm actually going a little bit stronger for twenty twenty two on other things that that the other hand i should a year we to back or agitated distribution on we've done that now direct so now we've established direct relationship with toys was from gospel canada the source on a month others
spk_21: on the we're continuing to expand it is actually market on and yell it is it's a previous years that market was steadily go down for us and enough for sheer taken it over with increase will increase dozens of rocks
spk_1: on other other things a general talk about europe to still you know is a challenge situation for hours or made uk distributor on has seen a lot of competition from his head hoped bikes i saw him so of that the numbers are after europe
spk_17: ah but you know what we're hoping that was six opening up in europe that that the number could bounce back but
spk_1: our strategy for this years just continue to strengthen our our our business with archie retailers who have already started making some early commitments knowing the charges are coming out of asia
spk_17: ah n n so things are starting to shape up on the other thing that that the other hand i said i wanted to go over on your odds are direct to consumer business
spk_1: increase sales this year a lot of it was was triggered by said the soviet
spk_17: partnerships that we had on the woods with some influencers and and with a company called of digital all those shows that they were promoting your items on six arcade and we were signed up directly on our website i'm obviously i talked about the inventory coming out much better also to help your situation where a lot of the items are good sellable moving forward on inventory oh and job and then gross margin was up to you know not not only with it and who makes a big contributor to that will call to karaoke and some of our party might but also on the pedestal was he was fully listed with no promotion for the most part
spk_2: so so that that generated some good gross margins as well
spk_0: ah and you know wu said are all have some of the i like forget to china touch on and then if you have some questions afterwards we could discuss in the cuny a transfer to user okay thank you brian good job i do know we are gonna come up close to time here and i want to make sure people have an opportunity for question so why don't we want to we open it up for a a now and i'm sure we'll will continue as people ask questions at this time as you would like to ask questions please press star and one touchdown once again that star and one to ask a question
spk_21: we will pass for a moment to our questions to que
spk_1: and we will take our first question
spk_23: like challenger micro capped class like go ahead
spk_17: have a question and carpool karaoke out what can you tell us about the seasonality of that product you know versus the seasonality oh regular public line yeah that's a that's that's that's a great question and i'm and i'm glad you asked it actually
spk_1: one of the real positive of cotton karaoke was that it was in a seasonal as our traditional karaoke product it is actually the the popularity of it ashley large in in late march early april on ended and we had some really strong numbers during the summer and what we what we think was the because this is the on the use of this product is mostly for cars on the we think that their parents or by find it is alerted the kids reminded of to do it why they were doing you know the summer vacations or are driving around in the summer i'm
spk_18: and to continue writing to fall and and holiday so i'm right now we're still see some strong numbers we just watched it on cosco dot com and in it's wants to some good some pretty solid numbers that ah without a promotion behind it on it also amazon's numbers of remain pretty strong
spk_17: i'm here in january and february so it seems that is not a seasonal as as or as other items and and and that's why we want to focus on expanding on the handheld bikes right arm because of those are are are more year round business and i think you also mentioned that prepared remarks that there's going to be a refreshing or for karaoke one one would we expect to see that
spk_24: guess when we were looking allowed should i'm about sure the derby summer or but we're probably going to launch you know i'm late summer on august and in dutch to coincide with some of the
spk_25: the retail sat at the store and also we are planning another point the promotion of with amazon on the what we know this year on so that we to transition into the to point out on a fine day is going to move up from october the rumors rather is go
spk_4: back to july salaam after after we after we get to that promotion there were looks a lot since i'm in august okay and that someday i'm long point of view you have an opportunity now to refinance with the great results you put out in the past year ah the answer to that is possibly i'm checking into those possibilities now but in tanzania think against it this this a good size
spk_8: out clause to get out now it's only a two year we haven't even been to the first year yes
spk_25: so i would have to see something on the table that boy
spk_0: be favorable for a longer period of time maybe i've gotta eat some it's as is going out ah but if six
spk_2: not favorable enough to at least make reasonable three years and terms recovery that we remain more as i asked until it expires but i am i'm looking at the possibilities
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