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spk_0: everyone and welcome to the singing machines year and earnings call at this time all participants analyst 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 perceive the star and one on your touched on phone please note this call may be record did it is now my pleasure to turn today programme overture brendan hopkins please go ahead
spk_1: i forgive you for taking the time to join us today we have a quick says the harbor will get started except resort information contained herein famous the can't record for public statements that i'm a pursuant to safe harbor visions of scary when jason the format ninety nine five boy looking statements about no no no reason uncertainties which may cause actual results if you to periods to differ materially from for celtic results well with that said electronic all over to gary atkinson feel the machine
spk_2: thank you brian this is gary essence company ceo i also have with me final marquee company see a phone and bernardo mellow company vp a sales and marketing i'd like to start up by thanking everybody for joining today's call to discuss our fiscal twenty twenty one year and results lionel will start the call by discussing the numbers in more detail and bernardo will give an update on sales initiatives but i wanted to start to call off by saying the management team here is very proud to share the results of the sense as to gear particularly given all the challenges that we all experience last year by all measures siskel twenty one was very very strong your for us where we were able to fully exit execute upon our plan we successfully were able to drive explosive sales growth by almost twenty percent we were able to expand margins by almost six percent we successfully were able to lower expensive his and subsequently report it over two point two million dollars in net income which works out to about a five point one million dollar turnaround from the prior year further from a technology perspective we were also successful and executing and launching a new integrated digital music content subscription service that launched in our new wife i enabled machines that we launched into costco and sam's club last year the pilot program was a very successful program in terms of hi hi hardware sell through and subscription conversion rates were also extremely positive we're going to touch a little bit more on that later in the call but for that i want to turn it over to vinyl marquee to cover the numbers in more detail
spk_3: thank you very good afternoon everyone
spk_4: i just wanna touch on some of the highlights of the financial sector and came to for fiscal year twenty twenty one obama net sales perspective we did forty five point eight million versus thirty point five million last year that's an increase of seven point three million dollars
spk_5: our new carry carpool karaoke line
spk_4: contributed it an additional two point seven million dollars over the prior year to that increase covert was a good to us in many ways demand was very very heavy him that caused a couple of things one doesn't obviously we're able to get rid of a lot of inventory that we had access on the prize year and a reduced our overstock tremendously are from the year before when we have seen some some low traffic over over the christmas holidays so like contributed approximately two point one million dollars to the increase in our that sales palm and if you remember correctly in the prior year we had a damaged goods situation of good that we had shipped to a large customer that were damaged and we had taken one point six hour and to shift
spk_6: against that which we had to repeat of that thankfully to here
spk_4: and co op marketing power co op incentives if he will programs emily was selling for a full full price or to holiday due to comes with i mean and demand and just to of the obvious some the the christmas season peak season last year i'm many of the larger retailers the not run their customary co op incentive program so consequently we spent about nine hundred thousand dollars a lesson for programs that we did the before gross profit margin was twelve point three million versus a point two million and was an increase in gross profit margin four point one million dollars our sales increase contributor approximately one point five million dollars to that are co collapsed asked spending less than that nine hundred thousand dollars in collapse also contributed four foot four point one three and the wrestlers on gross profit margin increase gross profit percentage wise we did twenty six point seven percent and gross profit margin versus twenty one point two percent in the prior year as a five point five point increase in the gross profit margin percentages the collapse okay be as the less ending on the call programs contributed approximately three point three point margin to that hum the ratio couple karaoke products sold compared to the prior year
spk_7: hum also contributed another one point five points of margin with the rest of the point seven percent increase due to the mix of products sold including the new product line the streaming line relaunch which carried a relatively higher margin than than the normal products are solely expenses were four point more four point oh millions
spk_4: versus four point three million in the prior year about three hundred thousand dollars less than selling expenses we end up spending approximately five hundred thousand less on the carpool karaoke product which in the prior prayer we have at about half a million dollars to launch if we did not have to launch this year was already launched and it did take off this year a whole lot better than what we have intercepted and prayer we thought the pry would be a lot better but it turned out that this year was
spk_8: was there for a couple karaoke that five hundred thousand is offset by having to pay royalty of approximately two hundred thousand dollars over the prior year
spk_4: so the net effect is are selling expenses were lower by about three hundred thousand general administrative expenses six point five vs six point six million
spk_6: with so we kept all this volume increases kept the general administrative expenses relatively flat income from operations one point four million versus a three point two million loss enterprise you sales are up no damage good this you carry over from the price you have and expenses were flapper down the selling spencer's the operating expenses will either flattered now i'm other income never saw it as we had a lot of one time pick up city will this year
spk_4: we had approximately one point four million dollars in insurance green and those damaged goods from the prior year so we had taken a pretty big loss are due to the uncertainty of what our insurance company would actually pay out so the damage good we recovered all that plus more if he will and under damaged goods so we recovered one point four million dollars and in the insurance proceeds we also receives approximately
spk_6: another one hundred thousand dollars from
spk_4: i'm are the benefactor who caused the damage goods proud of problem as well
spk_6: hum these increases in other income or offset by interest expense additional interest expense of approximately two hundred thousand dollars and that was due to the of the different banking or solution that i have to enter since we have such a
spk_4: a problem with no income last year on our banking relationships are we had to change our banking relationships because we're considered a bit more risky at the time and that cost us a couple hundred thousand dollars in interests ah net income was two point one vs two point eight million loss of four point nine million dollar increase putting things that we did very well we're is the inventory we are lowered our inventory by approximately two point one million dollars off and again we ended up year last year with them anywhere from two to two and half measles excess inventory and we were able to move all of that out there are in this year doesn't demand and the take off of the carpool karaoke products on accounts payable while we had stretched pebbles a little bit at the end that year about all of them just occurring now and we reduce accounts payable by two point seven million dollars on all that having been said that the highlights the fiscal year two thousand and one and i just wanted add a cabbie as it were already starting out the pretty well
spk_6: in fiscal year twenty two as the
spk_4: we've got already received a forgiveness are
spk_2: a paywall protection program loan of approximately four hundred fifty thousand dollars and those results will show in the first quarter selection as my reports
spk_9: thank you little this point in a call we're going to turn over to burn are a mellow who have given up on on sales and marketing
spk_10: hello guys are your of october some of the some of the highlights for the year the team brutally previously mentioned
spk_9: we are pretty pretty big better year i'm
spk_11: you know is it didn't come with our challenges
spk_9: we did have some challenges overall but
spk_12: for the most part you know we remain strong with are strong accounts and we grew a strong accounts
spk_10: some grew higher than expected we had some numbers plugged in than we thought we would be able to grow but a given day you know that the momentum that that we gathered early during the pandemic lasted all the way through the entire fiscal year now we even seen some of the camps of the endemic to of the account now we're still maintaining a pretty healthy sales i'm a you know similar sort of big winners obviously you were accounts cancer had a food component of within within the retail mom you know target sam's club walmart cosco on those count those accounts that does that kept of foot traffic going on as people provide by the central products are buying groceries
spk_9: we saw a high number of of consumers ever take that opportunity to go look for family entertainment or waiter entertained or case keep on the no active inside the house
spk_11: ah i'm a and you know there were looking at the singing products and on you know and see machine been the leader in in the home karaoke business really benefited from that case in point or start always on with target
spk_10: he also i just started asking for a high demand on products about or around a broader may of last year on luckily you know we came into this into the fiscal year with with some good backup inventory we had ended the you would about seven point seven million dollars of inventory on they usually we we we have to promote on to sort of really with release some little goes into and into cash flow but this year around were able to just the supplies is that amanda was there is stored away a couple karaoke catching fire on kickstarter became bio as you guys have heard before on previous calls and on does started sort of the way but it wasn't it wasn't the only success or you're actually higher price points where where doing well on portable bikes were all microphones are doing well so blue to microphones carpool karaoke and accessories because people they were buying musical instruments were going to sing a machine microphone for their accessory needs
spk_9: the same and dollar target to go from five point three million dollars that cause to almost ten million dollars to you
spk_10: within the fiscal year three digit and nine point seven million dollars which is essential because we've we've been pretty much flatter or or even for the last for five years a target on and we saw significant sales and it was on it was not only driven by the sales armed with the foot traffic in the stores were
spk_9: got a forty percent increases digital sales as well which which i'm you know both well for us because that people don't specifically looking for a single machine products ah
spk_11: with carpool karaoke i'm in another thing happened with with with charge was the usually we have trouble sales account for about forty five to fifty percent of the general sales throughout the year last year
spk_9: trouble so only accounted for about twenty percent on we switch the strategy
spk_10: i'm into just you know letting the the that doesn't dictate itself as at retail and and we saw that success carries a we didn't do it to the as arm with taji we and and we saw this year with other to the i still maintain a similar sales to was twelve november and december on the other thing that his eyes that we saw was that we launch with them a bluetooth microphone which we had been hesitant to to really dive into on to this more to sing along products but we can ignore what was happening in the marketplace or launched an item with them and we couldn't keep it in stock actually we couldn't produce enough items so we lost money on the table they're armed issue we've we've we've we've definitely definitely produced and plan accordingly and and that item still has as challenges keep it in stock so we have we
spk_9: look for that for that category to continue to grow without a some different colors and different items and we're looking to introduce some new products
spk_10: by the end of this year on that category to the point that for targeted accounted for about twenty five percent of the overall sales we think that number to grow to about thirty to thirty five percent and those items come with higher higher are gross margins for so is something of wanted deathly concentrate on
spk_11: i'm walmart continues to be extremely strong arm is they made a mistake the last year by now buying enough into it to the man so we felt like we left about another sixty thousand units i'm on the table that we could have through but still they had their the business increase two million
spk_10: not as you have a year on and or continue to be a number one customer for to support the line black friday was extremely successful last year and when it went well sell to when when well i'm although that black friday didn't happen during the the thanksgiving holiday it happened the first week of november it was too a successful because the carry all the way through november instead of just been concentrating on those two days and also helped us out approval items are within the category so i'm walmart has committed against good numbers this year on the funny bought into what the projections are are are going to be and we've got those orders in house and were shipping and we made road rules or the commitment to the factory so we haven't had some of the challenges that others are facing to try to gather inventory
spk_13: on amazon was another one of the big winners last year you know another one of those retailers as the kind of flat for us on with the challenges that we are facing from the compass from the competitors and map in the marketplace on he he did a faces last year old a marketplace group
spk_10: and some of the competitors continue to grow their business cigarette machine grew right run along with them on we increase the business overall from about six point one million dollars in and ship good to a little bit over ten million dollars and we're already projecting
spk_14: an additional twenty percent increase to see or ah for amazon as well so the d v d had to be the stroke if they'd with coffee karaoke did a friend a promotion was the pushback only two october arm we sold our complete allotment with them within the first hour
spk_10: saudi ratified to and cyber monday and we had similar success of where they had a qb see type of program to sort of product and and and number with they did extremely well be duplicated again twenty twenty one so i'm there all door all for the success of the couple care you okay
spk_9: have you know continue promo sales were down again i'm read sales were up so we don't have to fun as as many promos at amazon arm or a a best friend he was up because we see that that's the best bang for the but but we delete it allows us substantial margin that we sell was not given us the same back to the bus
spk_8: we we advocated some of those ah span into a a mess and and really turned out well for us on sam's club another another good success story there on for the first time we started a spring summer program as as you know based on what was happening with the punjab
spk_10: megan in dallas successful so now turned out to twenty twenty one their sign of bringing product now in june as opposed to august september like they've done in the past and we just started see some urges reading on the sales
spk_15: and it seems very promising as to what we could do for twenty twenty one so i'm it didn't come without challenges we get ourselves as a sense to them and cosco we introduce of reggie white of which was our first wife five pedestal on thousand little bit challenging to get production you know the technology and involved in
spk_9: it was was a big overtake for us long so we had a touchdown production from my you know unexpected forty something thousand pieces to about thirty five and that contributed to some la salle there but on this year we we are resolved allows us the the production challenges
spk_10: and his full speed have would would cost go on it or the bank that big on that items this year on we don't with wu said as you was deceased themselves is over europe
spk_9: you know you're a guy had ordered in the us would allow their lockdowns and a lot of the retailers are closed so some of our distributors there will were a lot conservative or did not move forward with the line so we thought of we strategize of the how are going to attack europe and twenty twenty two
spk_10: so stay tuned for that best i last saw a lot of the floor space they wanted to have their isles cleaned up so that they could be some good social distancing for their shoppers so by using the floor space who last of us some of the promotional they'll get done the year before that initiative is still in place for this year so it was still finding ways to may be pegged the items instead of putting on the floor the states or from you from one news there and i'm and just overall always you know we got to reintroduce karaoke to a lot of different families ah is as is that you know let's have some good reviews some good positive messages or what we're doing and double minimum carried over to twenty
spk_2: one to ah we were glad to see that we are now developing some new products were for twenty twenty one and a year and and twenty twenty two that's going to capitalize on on some of those things that that that we saw were hard and friendly on a dumb and yes so we look forward and and of some of the other things for questioning in the back in i know if you want to get some more specific silva of stick around for that of without is that i had to go back over to go to give you more the overdue perfect perfect thank you for and i do i do i make sure we save a few months answer questions but i also just want to quickly touch on before we wrap it up on our side bernardo touched on the new wife i stream and product that we launched last year into cosco and sam's club so from a technology perspective it was not a large number of units that we launched but it was a new initiative to grow our wife by streaming subscription service and given it was a pilot run the results were very very successful from my music subscription perspective we were able to reduce a lot of friction in the on boarding process so we were seeing a lot more users that were buying that new machine that were on boarding registering creating accounts and and ultimately subscribing so we were very very happy with the results as a pilot program and as been are a said we're were
spk_16: we're pushing that initiative forward where we're building more devices with that technology going into cosco again this year
spk_17: and ultimately will be looking to bring that price points down to more and more of our products so we're very happy with where we see the future direction of our our music subscription services going so
spk_0: with that being said i see we have a couple minutes left i want to turn it over for for today at this time
spk_18: one
spk_19: i once again our once asked now possible i have a question
spk_3: guy said must be nice to have an entire year without some some disaster spoiling everything has to ha
spk_4: get get you specific things here and lionel er imagine the ppp loans there was a first round in a second round because it has four hundred and forty five thousand our ppp alone and in the first round
spk_20: and last i heard you like you got you got that their forgiven him in the first quarter of twenty fiscal twenty two
spk_19: yeah that's more advantageous yeah just a few months ago and went ahead and give us for forgiveness on that we were able to participate in round one that's where we got all the funding when round to came along they discontinued giving it to chinese own companies
spk_21: we are a to get around a wellness our we could either that we did qualify because regular show in a certain sections of revenue and a certain quarter when we have lost more the next person i forget what the percentage was but the fact that we were i'm fifty one percent chinese on we could now
spk_4: participate
spk_19: answer to that okay i'm going to ask about around two sort of the the forgiveness on as an as ppp you on that that isn't enough a fiscal twenty one isn't that is not of you'll see that come through in the first quarter of twenty two that income that taxable
spk_10: that is not taxable really
spk_9: cool
spk_13: okay
spk_10: i've been reading all about supply chain issues from know it's just a shortage the shortages of ships and shortages containers and and it's i think i should you guys to achieve it up years year
spk_13: you're in with your your orders by a couple of months to try this
spk_11: try to deal with that it is it's a big problem than before a service years and kid getting a product in on top
spk_13: you know that that's that's a good question of you know it's it's public knowledge in the market that there's a lot of challenges with i see shortages and and just supply or lot of these secondary factories closed during during the coven and never reopen i'm obviously the high demand for product the has a man for for screens
spk_9: has also tapped into that we were very early enough rejections in our older making this year on is so we we had placed orders for the year that around january february
spk_22: to help secure some of that inventory so we had it been
spk_13: his diaries as as as on others have on but we have had some challenges on
spk_10: you know fortunately the retailers are being very understanding this year arm with price increases the be very understanding with shipments and be completed the year on or you know switch along a and do hybrid of programs were like for example
spk_13: sam's club instead of buying twenty six thousand of of of one item the boss twenty thousand of an item in the facility other six thousand with another skew that we were able to supply so
spk_19: we we did blood that are retailers have partnered with us on this year to to sort of law i'm you know help was a in areas that we face challenges accept some of the price increases on and things like that but but yeah if you're still challenges and on it also crossing our fingers because it doesn't support delays and things like dazzling but yeah we we anticipated some of his and with the place orders are yawn on use the urges to the usual this you thanks lot of bernardo it while you're still talking
spk_2: is it some thought am as ignorant as what what is a m s of it's it's it's basically is think of it as google adwords but within the amazon platform so i'm good old amazon now because of of the growth of or the marketplace non labor kneel down big brands customers are going in there on amazon has created a platform that allows you to paid for key words in basically on your own brand as exact that in it's in it's crucial crucial to the growth of the business so what we said doj was you know falling traps to somoza the is a marketing you know that they was pitching us in the past and just really concentrating on the in on the and amazon marketing platform or that allows you to be full of key words and and within the cat
spk_8: so it's been a key words okay can and when he mascot educate me about that
spk_23: i'm ready
spk_19: another item of kind of a small thing that understand we we we have warehouse space are no on the west coast and enters were able to read out some of that too
spk_22: can i use the space little extra money different if i'm not mistaken on is that an hour so read it warehouse space go in at a premium these days
spk_19: arizona on the west coast or we are we doing well with that as a result or or or what is that a minor thing that doesn't even matter anymore yeah no that's a great question erica me we were actually before this call we were just talking about and we we do run a truce retail operation with the leftovers space that we have nowhere else and you're correct them in warehouse especially in southern california right now is is on fire on me that whole categories doing really really well right now
spk_2: especially with the growth of the commerce everybody is looking for warehouse and logistics space so were doing really well we've we've passed on a lot of rate increases two or three feel customers we're growing that operation has been growing one hundred percent year over year this year compared to last year so it's it's during very very well i mean it's it's not choose meaningful numbers at this point though is there is room to scale that that business a little bit so yeah no it's it's doing well just went out of be quicker didn't miss anything about the fourth quarter and in specific
spk_24: it was there and tell their that told you what to expect going forward it
spk_2: and also lot of these
spk_25: or the pandemic business can have had a long tail the people expected some getting a city that kind of can tell from the from the fourth quarter
spk_26: yeah i think fourth quarter for us mean typically obviously fourth quarter is not a strong quarter for us it's sort of you know counter season all it says that while from from january to the end of march
spk_19: but what we are hearing and a lot of meetings different are as having with retail is that even though a lot of vaccines are are obviously coming down the pipeline and and people are getting vaccinated and getting back out into the real world retailers are still expecting to see a strong the other still expectancy strong demand particularly for for home goods and for home entertainment and the forecast that we're seeing so far for this year reflect that so
spk_9: if anything were seeing retailers that are trying to pull orders and early because a lot of shortages that you had mentioned
spk_10: in one your first question
spk_9: so i think a lot of that's going to work on our favor
spk_11: archer
spk_10: or just one little thing at more longer term
spk_11: is there any prospect on horizon at all for something like a company something like toys r us to come back to kind of helpless revised brick and mortar sales
spk_27: read read you know is that businesses started to on really split up amongst couple of accounts you know the sense of toys business is is he has been growing on you know that close to now in a nice assembled now is with
spk_8: i used to be allowed to remain in aus amazon really sick and some of that business charges toys
spk_19: is taking a similar business and see walmart as capital as short as regards to the point now that i'm
spk_28: that are on the brick and mortar side of there's enough
spk_9: this is due to our
spk_10: big retailers that we started to warm to sort of ah that may step towards was business as much i see now love we are in in a situation is how to increase our business with those big retailers by introducing new product lines that sort of go with him either different departments or help grow our current department
spk_9: within those stores
spk_29: i'm substantially so for example walmart we are now doing some this is on the other trotted size of him with pitching the toy department as we do business on the electronics are now so that's always that's how we're we're we're looking to combat are some that lost business and pleasure
spk_28: as accept or monopolizes on and off i'll i'll jump back in the queue thanks very much i said
spk_3: next
spk_4: a third looking at thirty four sales and are baptists correctly was for point five million which is substantially higher than it's than and three or four number of years i was wondering if you could tell me what's the reason for that was
spk_8: in in what to for me to why we came much yeah we came out of the season a lot sweeter than than we usually see my the come out of seasons right so everybody has substantial sell to on a and then we started getting ah spring summer orders
spk_30: are are a lot earlier this year on even to the size of even do some direct important business on earlier than expected to see as well so yeah fourth quarter on that basis continue to goes the the amazon does just continue to go so we were shipping out every single week of
spk_9: hey and again you know like target on the microphone we just couldn't keep up with the demand because we introduced to the the same microphone to amazon and between the two retailers on they were taken as soon as the containers coming within couple we sure we were coming from something out of that inventory so yeah me with was still see it was so seems of strong sales on even though it all out of the money being spent now traveling for the summer of retailers if we're just trying to get back in stock
spk_10: a okay
spk_11: also i notice and cooking
spk_31: for the gross margin was almost fifteen point four percent
spk_32: with the reason was for that yeah that that's typical of the fourth quarter i mean that's when everybody takes there are solidify all of the programs i mean we do our best or injured estimate what's the seltzer was going to be in the fourth quarter so that was a crew as we go a long enough advertising allowance and things of that nature that my in other by it's about line ah but it's typical in the fourth quarter that when when the actual numbers come up with something comes up a little bit stronger and we had to sell for those co op program think another the program your over year was down there worse there was strong software the fourth quarter and we had to a bumper some of those collapse
spk_13: on on i'm resigning couple close okay
spk_9: seasonality in autism muslim worthy it won't see them all of your yeah it's been a so seasonal you know is it really took off last year of on april and may
spk_13: the summer was really strong with it because people are driving around in all
spk_11: on it you know we we is is it was most rubin on by the activity of people use in a on social media on which is now we've kind of slow them down and now we're looking to wrap it up as we launch carpool karaoke to play know so you'll see copper to
spk_13: so couple karaoke to put on launching years some time in mid august on a job you're a full fledged social media campaign to go along with it
spk_33: i'm a question
spk_0: i think for take my question is will be easy to touch on the carpool karaoke friend
spk_2: overall demand sustainability extreme excitement last year and and what that tells you a and informs for inventory planning
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