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spk_0: it a day everyone and welcome to today's singing machine announces a third quarter earnings call with a time over gives you cancer no listen only mode litter you will have the opportunity to ask questions from the question and answer session you may register a tough questions at any time repressing the store and one or a touchdown phone humor which are yourself from the cube pressing the pound key please note this call may be recorded and i will be sending by should you need any assistance it is ah my pleasure to turn the conference over to brendan hopkins please go ahead
spk_1: but you that he thought bigger than for joining us today we have a brief safe harbor and then we'll get started a superstar it was amazing between here in the same time for store for making statements or may proceed with the safe harbor freight provisions of the private securities with litigation reform act of nineteen ninety five for looking statements about know unknown risks and uncertainties that may god or actual results in future periods to differ materially from forecasted results without said i like cervical over to gary atkinson feel the same machine
spk_2: thank you brandon good afternoon everyone my name is gary atkinson chief executive officer of the singing machine company i want to thank you all for taking the time to join our earnings call for a third quarter ended december thirty first twenty twenty one's joining me on the call today is lionel marquee companies yeah so and bernardo mellow vp of global sales and marketing i'd like to start a call today by saying i couldn't be more pleased with the results and the effort to me entire team during the twenty twenty one year as you are all aware there were many many supply chain challenges last year in fact it was the most disruptive year we have ever experienced from a supply chain perspective so i'm particularly proud of these results given the storage containers and significant unexpected rise and free toss the we encountered last year semiconductor and component shortages that we face during production and significant port and trucking delays that we faced when we finally built our products and brought them into the states so that being said i'm thrilled to say that despite all of those challenges we successfully overcame all of those obstacles during the third quarter ended december thirty first we defended and expanded our retail presence while driving revenue for the quarter up twenty five percent to twenty one point two million compared to the same quarter of the prior year we successfully glue year to date revenue for the nine month period by six percent now up to forty four point seven million income from operations for the quarter increase thirty percent of to one point seven million in summary we not only survives the supply chain challenges of last year and we thrived i also have some positive news to share regarding our new recline user content business sure our strategic key partnership with the single group we continue to focus on the digital content subscription aspect of our business a recurring revenue a recurring subscription business continues to accelerate with twenty five percent increase in year over a year subscription revenue across all platforms including ios android and a proprietary integrated wife byproduct in fact the primary driver of growth came from the new wife i study
spk_1: product which was carried and cosco and sam's club nationwide this last year
spk_2: we saw digital subscription from that device grocery three hundred and seventy percent year over year as we remain the number one brand at home karaoke with the largest and strongest as to what we believe we are well positioned to scale the subscription revenue business by focusing intently on converting a fleet of karaoke products in the higher technology devices that support the recurring that model we also continue to succeed at all major retailers nationwide including walmart target cosco sam's club and amazon where we descended on market share and even saw opportunities to refill stores before the holidays do to our strong sell through and demand as we move into the new calendar year were already hard at work to secure more retail shelves face and add new technologies to i'm ashamed to better support the subscription business we look forward to counter twenty twenty two and sharing these developments with you now i'll turn the call over salon or marquee who will talk through the third quarter numbers more detail
spk_3: the as on us very good afternoon everyone i'd like to cover some key financial highlights bastard quarter ended december thirty first twenty twenty one compared to our third quarter ended december thirty one twenty twenty as gary mentioned earlier net sales were twenty one point one million compared to seventeen point zero million for the three month period ended december thirty one twenty twenty one and twenty twenty respectively these results represent an increase of four point two million or twenty four percent increase net sales for a nine month period we're forty four point seven million compared to forty two point three million an increase of two point four million for approximately six percent as gary mentioned earlier despite significant global challenges and delays and transporting goods from china and additional dollars extracting this from the port of l a
spk_4: a major customers are flexible and extended season seasonal delivery deadlines and that allowed us bob to continue shipping late into the holiday season and continue to support from product man i southern sales and marketing will expand on the customer relations issue in his discussion later argos profit for the three month period was five point three million compared to five a million representing an increase of approximately three hundred thousand dollars
spk_3: gross profit for the nine month period were ten point two million compared to eleven point eight million and that represented an increase of one point six million dollars
spk_4: we experienced a drop a gross profit margin of approximately five hundred basis points are merely due to cost increases and components i have a limited supply due to the supply chain disruptions during the global pandemic
spk_3: as was significant increases in transportation costs also related to the global supply constraints of twenty twenty one and come from operations
spk_4: for the three month period we're one point seven million compared to one point five male male was an increase of two hundred thousand dollars and come from operations for a nine month period which you point eight million compared to three point two man a decrease of approximately one point to make the dollars the company was successful in executing strict cause control measures was in the selling general administrative expenses categories are in a three month period this is a key contributing factor and the company's ability to generate thirteen point three percent higher operating income during the three months ended december thirty one twenty twenty one compared to the same period in the prior year however the abrupt developments related cost a good sold were primarily the country with a primary contributor to the overall decrease in income for i'm operations for the full nine month period
spk_3: so as a result of these the storm these discussions net income so the three month period one point four million compared to one point two million representing a few hundred thousand dollar increase for the quarter their income for the nine month periods where a two point eight million compared to three point four million for the same period and twenty twenty how we ended december thirty one twenty twenty one extra cash position at seven point three million dollars compared to this at four point four million on december thirty first twenty twenty as we leveraged are outstanding accounts receivable inventory improved are working capital position to nine point eight million compared to seven point six million dollars a year ago inventory of december thirty first twenty one was eleven point one million compared to five point three million in the prayer primarily due to the unprecedented back up and delays of the portal officials experience
spk_4: this of experience across all industries were good intended for holidays shipments are not able to be delivered timely since then all the guys have now been received and all those good consist of actors and in demand products and are expected to ship during the cartel in fact having these goods on hand could be an advantage in some instances should we continue to experience some of these delays during the upcoming season
spk_3: the total outstanding debt financing sort of our financing facilities was approximately eight point six million december thirty one twenty twenty one compared to only hundred thousand hours in a primary a price you as of december thirty first twenty twenty one we are in compliance with all of our lenses covenants relationships alert advent of or lenders remains really strong as they've been very flexible and accommodating with regards to our needs ourselves to see will increased by three point two million due to later than usual shipments and our inventory increased by five point eight million as we mentioned earlier due to the port of los angeles delays and we have leverage both assets to of financing facilities to strengthen our cash in hand by two point my two point nine million dollars and i work and capital by two point two million dollars we continue to collect an outstanding receivables and when using proceeds pay down debt interest expense or overall receivable face largely current the current payment terms with the vast majority these dallas is due to the company been owed by national household retailers with excellent credit quality
spk_4: saw together we believe our balance she's a strong as ever been we continue to believe that with our cash on him
spk_3: or financing facilities now working capital we have adequate liquidity to support the business for the next twelve months and that is my reports back to gallery
spk_2: thank you i will appreciate the update is this point of the call i want to turn it over to bernardo mellow our pp of global sales and marketing who will give us an update on sales to have been on
spk_5: so i'm thinking of joining
spk_6: i'll continue the this amount of as everyone on the night in or or overall or third quarter was strong to the sigma some a brutal you know the category
spk_5: the karaoke hope the ontario considered will remain strong a year after a lot of the stimulus pandemic spicy or we saw on and in some cases across retailers increase all the demand for whom karaoke still top of mine for consumers on are taught to required this computers soldiers had had done a use the woman told deployment held strong in all through your mind items with coverage on all thirty nine hundred stores for those products on remaining salt and in in the in the game new electronic category a warmer beyond your the van and blood slaughtered of could once again three weeks prior to the traditional thanksgiving weekend on which we solved
spk_2: on one feels resort results with on ninety eight percent cells you for both dotcom and in life
spk_5: on the charger once again killed all items and in about seven three hundred plus stores as part of the legacy electronic or to the item or during the holiday was was well with almost one hundred percent job you and then the rest of the item saw so on the scene strong salt and twelve even though got to increase some of the msrp on what is he login sales at all and in some of those items and in particular the party blue to michael from continue strong sales in your to and now is accounting for about twenty percent of global sales so that that category all to his to dwell on for or other regional and national stores on what a discount a specialty stores was too so strong demand gone were invited to holiday
spk_7: anyway bhutto yeah
spk_5: to fulfill lot of his orders law by haven't been given tories those the mother common among the make so he was still able to fulfill those are those the man a the commerce goals amazon add another storm season on the followed up a moment is prime data we had to the cigarette machine and in that moment to continue to the holiday on given an example of turkey week which is your size a week
spk_8: i'm
spk_5: we saw that promotions seven ran average school
spk_6: the results on specially on t of the items with top selling in the entire category so on again the sigma she bradford amazon on his key for drug trafficking and the earn and strong sales on a drop ship expanded this year too so
spk_5: i'm nontraditional discovery retailer some with some with some department stores and we saw some on gaming stores well i'm an indoor sales a strong arm so we now position to continue to expand as drop ship of i'm looking forward to it on the publish about the clouds be stronger than ever would cost one sam's expanding their doors swordsman
spk_1: to to include more than just one traditional skew on costco for example carried our watch live streaming machine on for the such a year and they were able to increase shelter
spk_5: in the demand we were shipping stuff isn't a week before christmas we should than a just to try to fulfill splashing some of those west coast on club that guy that the saw that hired a man in california and texas and ozone and things like got so on the doubles well and that also builds a strong business case for us on on that recurring revenue machine armed and we're looking to expand that is that sort of technology or or or i'm cathy technology into the future so we we had to strong element those clouds are going to continue to support us and are you get into that a little bit more him as he as the conversation as soon as he will remain will make sure we're still in the uk in italy and france and stream and australia and although the had how did this restrictions that and us in terms of little shutting down the shore we still sort of sick in australia on and have already had strong commitments full calendar your twenty twenty two on so doesn't settle all for to call back over to go and i'll stick around i'm i'm sure you guys who have another mojito questions or the and twelve so obvious answer that
spk_9: perfect perfect thanks you bernardo ah jubilee we have a a lot of calls today and i i want to be mindful of time so am i think let's let's open it up for some q and a so we can make sure we can imagine everyone's questions
spk_0: this time if you would like to ask a question please post a store and want all your touchdown sound we draw your question at any time by pressing the pound key once again to ask a question please post a store and one touchdown
spk_10: however pass a moment to allow questions to que
spk_0: and once again it is star and what if you would like to join the queue star and one what are now our first question from eric dickerson with third century please go ahead feel any soap and
spk_11: guys
spk_12: yeah interest years of talked a little bit about the inventory situation and then he did a message sham school years about sell through
spk_5: i get there is no toy story of my impression is correct was on the plus side we've got a great sell through during christmas others
spk_12: that going to be a lot of returns from retailers and on the minus side we get sir ninian tory sitting around because it didn't arrive in time for christmas and why no says it will get it also this year and it's all current inventory but
spk_2: do i have ever basically correct impression they are registered as filler yeah that's a great and thanks thanks eric appreciate that i know litle touched on a little bit in his in a statement earlier about inventory it we did end up with more than for it and we typically like to coming out of the holiday season but the reason for that i think was pretty clear in the port of l a was having a significant delays and backlog in terms of processing vessels and containers so we ended up taking it a lot of inventory late
spk_13: that we just simply was no sign the moon so we do have some we do have said inventory all of the inventory that we have is is active item
spk_12: they're all it's good product that we
spk_2: currently ship to all of our customers and i think the nice silver lining to this is if supply chain challenges continue through this year and we believe they will
spk_5: we have inventory that's good that's already in our warehouse ready to go so or maybe lionel er been are as you guys have an extra call you on it yeah those of us are gonna be one of the key is about as you don't normally on your like to have cellphones and like the eighty five percent because i mean that you started as a retelling you plan to correctly on we got some so choose you know in the ninety eight one hundred percent you know and and and we would have even an added some additional inventory arm and time that dummy that mean i would love some some additional sales on on on the table which bodes well for us
spk_14: i'm and like gary said on the inventories good so we've already got some early comments on on some of that and been toying with of your confidence on a movement that to or twenty twenty two
spk_12: okay yeah i guess i get that i have of basically the right impression them
spk_1: he he mention the as supply chain
spk_15: this year's end of the ships are still perfect at one hundred sure how this little here
spk_12: and a scam
spk_16: brendan mention a while back you might you considered maybe reducing the size of the products so that we could ship more stuff in a container and eighty cut shipping classes and shipping costs are really just ago stay high this year don't you think
spk_2: yeah me what are you know how you feel supply chain going forward so we're we're we're seeing is pretty much the same the status quo on supply chain we're still seeing container costs that that remain high you know maybe not as high as well as the peak of last they're still hovering right around that sort of system thousand dollars for a forty foot container so we're not we're not expecting supplies to just magically ease up for this year but the way we're approaching it is now we have advanced knowledge of it so we're building and bernardo in the sales team their their aggressively building in those increased ah transportation costs into our new programs for twenty twenty two any other initiatives that been harder work on his were actually trying to transition a lot of our customers over to an echo be china program and so what that means is
spk_17: our customers will actually take possession of the inventory
spk_18: from the port in china
spk_2: the that way we all are day
spk_13: yeah walmart does that currently now there are they've been one of the biggest in terms of sad because you know walmart they have the best global supply chain of probably any company in the world so they're they're in a much better position to deal with three costs and containers and
spk_2: they're they're just better at a time we are
spk_5: and we think are other customers are also better at it and they can pass along those cost savings to their customers so where were using that to go in and and renegotiate some of our programs and just try to push that risk back off onto the players choose to deal with those supply chain challenges the yeah and another just to you a little bit on that on the it's a well known in a world issue and without partnerships and of intelligence we've been to transfer i'm saying he were quoting
spk_7: a teacher programs based on x price of containers and
spk_5: ten an innovator to be made aware of it wow from the get go inside some a something that has been talked about something that that we are included in future quotations and arm them again said you know we try to wow
spk_19: medicaid some of those issues by on by also on switching some of the programs from a domestic to a direct input
spk_12: yeah so help
spk_20: okay yeah i got some were separate our our suburban second accused of something else have a chance to thank you
spk_0: thanks eric
spk_10: and once again it is star and one or your touchdowns on if you would like to join the queue
spk_21: little muscle trans jordan to private investors please don't show any soap
spk_22: thank you hi what is the manager trent
spk_23: oh crap that can cause the products from your come he did cut a why
spk_22: i want to buy your product
spk_21: and then second a question
spk_22: ah about the money factor you china right
spk_5: in case you know i'm a guy came up from becoming the are more the are now china york and relationship our company or what the your how what on our she was so important that are your product
spk_16: i'll take the first one game and he has of the settlement on okay sure
spk_5: you know your in that's a good question about the products you know it
spk_1: you know we're celebrating a forty year this year in business you know we are we've been around since nineteen eighty two and and we were the leader i'm in ninety ninety nine hundred percent of our business with karaoke i'm sure we tend to on lead with technology on our products are mostly
spk_5: on to karaoke products which is the true karaoke experience of having the product synchronize well with be on screen lyrics on so you were not just to along for
spk_24: i'll sing along solution which is what most mossadegh competitors are doing we're to karaoke solutions arm with a partnership is with we offer and to and solution was that that was well as machine and and ah spain and asked him and his music
spk_5: am in you know what we said we just said to to have better quality pay attention more to the products and i'm and and that's why the retailers really rely on does to july this category
spk_2: the phone and i'll pass on the second half to to dahlia to talk about car manufacturers hydrogen if i understood the are your question right i think you're asking why chain and what happens if it gets worse
spk_22: i were you referring to manufacturing or just wish to
spk_2: transportation them and port both feet capital of canada let us unite you to become was you know and both process has she yeah yeah so we we remain committed to looking at supply chain from a global perspective so where we've looked and investigated at working with other contract manufacturers based outside of china so we've looked it's not a thailand with not in malaysia we looked at them a few others some asian countries particularly when the trade war was going on with china
spk_13: i'm so we've got some relationships that we could leverage if we needed to if the supply chain situation gets significantly worse i think the challenge though is that most of the components to go into our products they all come right out of china a lot of the manufacturing of the pc be a boards
spk_2: the word the plastic inject and a lot of other related components they all stem from china so even buying even buying goods some as a thailand or or malaysia they're they're still sourcing those components from china so that's that's been the challenge i'm trying to diversify our supply chain away but we do have relationships if we need to where we could
spk_13: divert some other manufacturing to other countries and we've also also look into a supply chain continues to worsen
spk_2: we know that there's a dock workers
spk_13: i'm union out in the port of l a and we know that context coming up here in the summer of two thousand twenty two so we're we're looking now investigating different ports to bring our products into just to ensure that is
spk_25: these can see these problems continue to worsen the nice will have a plan b in a plan see this case it gets to that so
spk_0: hopefully that said that answers your question
spk_26: yeah thank you so much
spk_2: thank you
spk_27: most next twenty mike showing with my crew cab club please go ahead
spk_5: oh i'm given the supply chain issues to what extent you have sales that shifted from fiscal que three to fiscal que four
spk_28: fiscal que three so are so that the quarter that we just announced this morning
spk_5: we have not a lot i don't think gripen or i mean we've were no hampshire we we saw some about or or the rest import switch over on from two to two three that is what does number was a significant i'm ought to three numbers best lee i'm was because it does it doesn't increase demand of and we were shipping domestic later the usual usually we try to close most of our domestic shipments into the clubs and into the stores see his the disease in november or because of all the traffic desk
spk_29: going to on this year
spk_0: we saw some strong demands and we extended data to december we to december we three a in some insists and so on is that were
spk_30: a similar increases happened on and the in some of the stuff that came in domestically plus we still supplemented or direct input business with domestic on with domestic extra the man stuff so on yeah it was a combination of to but but
spk_31: but it was that retailers accepted this year for us to break that normal mode of second week of november into note december we to a with three due to somebody some of on some unexpected in high demand
spk_12: okay thank you
spk_1: the next phase eric decker sandwich third century
spk_16: yeah i guess some back and right so we're
spk_12: i guess it's big projects are afoot here to them
spk_32: at least their shares and from the o t c two x market to nasdaq
spk_2: can you tell me here how that's going contractor but he tells about that fisher i'd be happy to answer that we eric so we i need to be careful i i we can't talk about nasdaq that's what i can say is that we are working on uplifting from the o t c up on to a national exchange and that that project continues to move forward so we we submitted an application to one of the national exchanges already
spk_33: and wherein pretty regular communication with their team
spk_2: it's our belief we we think we need of violence right now for an uplifting with the exception of our stock price obviously and also the total number shareholders you need to have at least two three hundred thou my shareholders or not plus so in terms of how we respond to those challenges we turn our last annual meeting we successfully received support i'm from shareholders to do a reverse stock split so that way we can meet t shirt requirements if we do get successfully
spk_34: uplifted
spk_16: and also with engage with probably one of the best law firms in a country when it comes to handling applies so we think we're going to be able to successfully resolve any and all deficiencies right now in the application and we think we're in an excellent position to move forward with a pretty timely
spk_35: and official of hosting onto one of those national exchanges so you know were excited about this because we think it has great potential to unlock a lot of shareholder value in others it out he sees and it's a sign exchange but i think most people would agree that it's not it's not a national exchange like like a mazda
spk_36: and why i see so we think it's gonna be a great events the company
spk_0: okay
spk_37: yeah yeah goodness
spk_10: very much
spk_38: under faith tasered and once again it is star and one touchdowns on if you would like to join the queue
spk_2: for another moment did your next question from credit private investor please go ahead hi i'm interested in art and new machine for last four months recently i saw one of the electric a legal company or tesla ah basically announcing the karate for the got any plans you have to let the the other automotive companies like general motors afford a toilet to and croker systems and sell it like with them that's a that's a great observation i'm i'm glad you brought that up we we obviously saw that news the day it came out for making that announcement and to be clear for tesla announced just for the china market that they're going to be releasing in car microphones that work with their karaoke entertainment system so we we know we we work with sting ray thing raise the company that powers chest was a karaoke content in the park so we already have that great strategic relationship with steamed rice and i guess i can say right now where were pushing towards
spk_13: trying to establish that relationship with tesla we we we obviously with the first shirts and move with the carpool karaoke microphones that we launched so we know the space we know we were seeing the gross and the in car karaoke entertainment
spk_2: category and we think it's a
spk_39: we think it's a vibrant category to continue to be in and we think it makes perfect sense and i wish we see
spk_0: that that carrier dreams are very very popular inside of automobiles and
spk_2: we think we have the right really already in place to take advantage of it and we already know the category so i think come in i mean it's nothing that's been ironed out yet at the a good we make it a good partner for this category him we deafening want to be in it
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