Singing Machine Company Announces Record Earnings in 3rd Quarter Release
/EINPresswire.com/ -- FORT LAUDERDALE, FL -- (Marketwired) -- 02/16/16 -- The Singing Machine Company, Inc. ("Singing Machine" or the "Company") (OTCQB: SMDM) announces the financial results for its third quarter ended December 31, 2015.
Highlights:
- Earnings per share for the quarter ended December 31, 2015 was $0.05 and $0.07 for the nine-months year-to-date.
- Singing Machine shipped approximately 1.4 million units in nine-month period through December 31, 2015.
- Net sales increased by 14% to $20.6M for the quarter.
- Net sales for the nine month period increased by 23% to $45.2M.
- Gross margins increased by 4.7% to 27.1% for the quarter.
- Net income for the quarter increased by 100% to $2.0M.
-
Inventory decreased by 46% to $4.0M.
Singing Machine reports net sales of approximately $20.6 million in its third fiscal quarter ended December 31, 2015, up from approximately $18.1 million reported for the same period last year (an increase of 14%). The increase in net sales was attributable to an increase in sales to the Company's major retailers. Gross margin increased to 27.1% compared to 22.4% in the same quarter in 2014 as a result of more favorable costing and pricing. The Company reports gross profits of approximately $5.6 million up from $4.1 million in the prior year (a 37% increase).
Operating expenses in the quarter ended December 31 were $3.4 million compared to $2.4 million in the same quarter of 2014. This increase was primarily the result of an increase in selling expenses due to the increased sales volume. General and administrative expenses increased slightly by 8% to approximately $1.4 million.
As a result the Company reports income from operations of approximately $2.2 million for the quarter, compared to approximately $1.7 million in the prior year. The Company reports December 2015 quarter net income of approximately $2.0 million (or $0.05 per share), compared to approximately $1.0 million (or $0.03 per share) in the same quarter last year.
Nine-Month Financial Results:
Through the first nine months of its fiscal year, the Company reports net sales increased by 23% to $45.2 million and income from operations increased by 120% to approximately $3.3 million, compared to net sales and income from operations in the same nine-month period last year of approximately $36.6 million and $1.5 million, respectively.
Net income for the first nine months improved to $2.6 million, compared with $0.9 million in the same period last year.
Management Commentary:
Commenting on the results, Gary Atkinson, CEO, said, "It was a fantastic quarter for Singing Machine. We saw improvements across all key financial metrics, including sales growth, margin improvement, and a doubling in net income for the quarter. We also reduced inventory by approximately $3.6 million compared to the same time last year."
"Hardware sales during the recent holiday season continue to perform strongly. Our retailers reported on average over 90% sell-through on Singing Machine products. We saw one major retail customer double their business with Singing Machine this year and sales to the United Kingdom grew by 100% year-over-year. Per a recent report by The NPD Group, a leading global information company, ranked Singing Machine #1 in the Electronic Entertainment category during the month of December on a sales velocity per weighted store metric."
Atkinson commented on the new Singing Machine Karaoke Download Store's success, "We got off to a terrific start with our new Karaoke Download Store. We beat internal forecasts and saw over 200,000 unique song downloads in the final two weeks in December. Almost 50% of our music download revenue in December was generated from our new Download Line of karaoke products. The Download line represented approximately 5% of our overall hardware sales during the nine-month period. We intend to aggressively expand our Download Line in the coming year, which we believe will significantly drive further recurring revenue to the Download Store."
Atkinson concluded, "We begin calendar 2016 in a great position -- we are fresh off a fantastic holiday quarter with strong sell-through, light on current model inventory, and with the biggest and best retailers now carrying Singing Machine products year-round."
Earnings Call Information:
The Company will host a conference call today, February 16, beginning at 11:00 am Eastern time to discuss these results and answer questions.
If you would like to participate on the call, please dial 877-876-9174 and use conference ID: SMDM.
An audio rebroadcast of the call will be available later in the day after the earnings call and can be heard at: www.singingmachine.com/investors.
About The Singing Machine
Based in the US, Singing Machine® is the North American leader in consumer karaoke products. The first to provide karaoke systems for home entertainment in the United States, the Company sells its products world-wide through major mass merchandisers and on-line retailers. We offer the industry's widest line of at-home karaoke entertainment products, which allow consumers to find a machine that suits their needs and skill level. As the most recognized brand in karaoke, Singing Machine products incorporate the latest technology for singing practice, music listening, entertainment and social sharing. The Singing Machine provides consumers the best warranties in the industry and access to over 10,000 songs for streaming and download. Singing Machine products are sold through most major retailers in North America and also internationally. See www.singingmachine.com for more details.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates and projections about the Company's business based, in part, on assumptions made by management and include, but are not limited to statements about our financial statements for the fiscal year ended March 31, 2015. You should review our risk factors in our SEC filings which are incorporated herein by reference. Such forward-looking statements speak only as of the date on which they are made and the company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2015 March 31, 2015
----------------- ---------------
(Unaudited)
Assets
Current Assets
Cash $ 232,940 $ 116,286
Accounts receivable, net of allowances
of $146,912 and $174,131,
respectively 10,298,788 1,466,168
Due from PNC Bank - 137,415
Accounts receivable related party -
Cosmo Communications Canada, Ltd 359,205 -
Accounts receivable related party -
Winglight Pacific, Ltd 271,188 -
Accounts receivable related party -
Starlight R&D, Ltd. 5,738 -
Inventories, net 4,078,156 7,448,167
Prepaid expenses and other current
assets 152,048 92,609
Deferred financing costs 74,077 74,077
Deferred tax asset, net 745,488 449,274
----------------- ---------------
Total Current Assets 16,217,628 9,783,996
Property and equipment, net 486,525 466,571
Other non-current assets 11,394 11,394
Deferred financing costs, net of current
portion 40,125 95,683
Deferred tax asset, net of current
portion 1,118,231 1,856,281
----------------- ---------------
Total Assets $ 17,873,903 $ 12,213,925
================= ===============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 2,145,198 $ 2,767,180
Note payable related party - Ram Light
Management, Ltd. 833,091 496,496
Due to related party - Ram Light
Management, Ltd 483,247 583,247
Due to related party - Starlight
Electronics Co., Ltd 931,201 -
Due to related party - Starlight R&D,
Ltd. - 554,031
Due to related party - Cosmo
Communications Canada, Inc. - 40,256
Due to related party - Starlight
Consumer Electronics Co., Ltd. 101,540 208,672
Accrued expenses 2,066,912 452,651
Revolving line of credit 1,791,141 -
Current portion of capital lease 4,288 12,628
Obligations to customers for returns
and allowances 6,691 399,419
Warranty provisions 1,061,854 197,873
----------------- ---------------
Total Current Liabilities 9,425,163 5,712,453
Long-term capital lease, net of current
portion - 1,078
Note payable related party debt - Ram
Light Management, Ltd. net of current
portion - 603,504
Accrued expenses, net of current portion - 46,495
Subordinated related party debt -
Starlight Marketing Development, Ltd. 1,924,431 1,924,431
----------------- ---------------
Total Liabilities 11,349,594 8,287,961
----------------- ---------------
Commitments and Contingencies
Shareholders' Equity
Preferred stock, $1.00 par value;
1,000,000 shares authorized; no
shares issued and outstanding - -
Common stock, Class A, $0.01 par
value; 100,000 shares authorized; no
shares issued and outstanding - -
Common stock, Class B, $0.01 par
value; 100,000,000 shares authorized;
38,161,635 and 38,117,517 shares
issued and outstanding, respectively 381,616 381,175
Additional paid-in capital 19,322,410 19,307,966
Accumulated deficit (13,179,717) (15,763,177)
----------------- ---------------
Total Shareholders' Equity 6,524,309 3,925,964
----------------- ---------------
Total Liabilities and Shareholders'
Equity $ 17,873,903 $ 12,213,925
================= ===============
See notes to the condensed consolidated financial statements.
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For Three Months Ended For Nine Months Ended
------------------------ ------------------------
December December December December
31, 2015 31, 2014 31, 2015 31, 2014
----------- ----------- ----------- -----------
Net Sales $20,667,069 $18,086,370 45,194,527 $36,583,388
Cost of Goods Sold 15,066,443 14,034,505 33,784,839 28,853,864
----------- ----------- ----------- -----------
Gross Profit 5,600,626 4,051,865 11,409,688 7,729,524
Operating Expenses
Selling expenses 1,936,715 1,078,905 4,225,677 2,690,939
General and
administrative
expenses 1,431,993 1,258,643 3,736,230 3,454,761
Depreciation 47,497 33,969 122,162 96,173
----------- ----------- ----------- -----------
Total Operating Expenses 3,416,205 2,371,517 8,084,069 6,241,873
----------- ----------- ----------- -----------
Income from Operations 2,184,421 1,680,348 3,325,619 1,487,651
Other Expenses
Interest expense (91,847) (118,713) (244,765) (200,198)
Financing costs (18,519) (18,519) (55,558) (33,952)
----------- ----------- ----------- -----------
Total Other Expenses (110,366) (137,232) (300,323) (234,150)
----------- ----------- ----------- -----------
Income Before Income Tax
Provision 2,074,055 1,543,116 3,025,296 1,253,501
Income Tax Provision (67,142) (509,252) (441,836) (397,995)
----------- ----------- ----------- -----------
Net Income $ 2,006,913 $ 1,033,864 2,583,460 $ 855,506
=========== =========== =========== ===========
Income per Common Share
Basic $ 0.05 $ 0.03 $ 0.07 $ 0.02
Diluted $ 0.05 $ 0.03 $ 0.07 $ 0.02
Weighted Average Common
and Common
Equivalent Shares:
Basic 38,161,635 38,117,517 38,140,458 38,090,756
Diluted 38,686,019 38,645,514 38,638,925 38,589,350
See notes to the condensed consolidated financial statements.
The Singing Machine Company, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For Nine Months Ended
--------------------------------------
December 31, 2015 December 31, 2014
----------------- -------------------
Cash flows from operating activities:
Net Income $ 2,583,460 $ 855,506
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation 122,162 96,173
Amortization of deferred
financing costs 55,558 33,952
Change in inventory reserve 139,000 (103,000)
Change in allowance for bad debts (27,219) 81,523
Stock based compensation 14,885 44,307
Change in net deferred tax assets 441,836 397,995
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable (8,805,401) (6,942,761)
Accounts receivable - related
parties (636,131) -
Inventories 3,231,011 (1,710,616)
Prepaid expenses and other
current assets (59,439) (1,325)
Other non-current assets - 6,236
Increase (decrease) in:
Accounts payable (621,982) 2,479,331
Due to related parties 129,782 368,359
Accrued expenses 1,567,766 879,896
Warranty provisions 863,981 512,038
Obligations to clients for
returns and allowances (392,728) (194,580)
---------------- ------------------
Net cash used in operating
activities (1,393,459) (3,196,966)
---------------- ------------------
Cash flows from investing activities:
Purchase of property and equipment (142,116) (35,599)
---------------- ------------------
Refund of restricted cash - 138,042
Net cash (used in) provided by
investing activities (142,116) 102,443
---------------- ------------------
Cash flows from financing activities:
Net proceeds from revolving line of
credit 1,928,556 2,445,062
Payment on note payable related
party - Ram Light Management, Ltd. (266,909) -
Payment of deferred financing costs - (222,231)
Payments on long-term capital lease (9,418) (9,006)
---------------- ------------------
Net cash provided by financing
activities 1,652,229 2,213,825
---------------- ------------------
Net change in cash 116,654 (880,698)
Cash at beginning of period 116,286 1,354,099
---------------- ------------------
Cash at end of period $ 232,940 $ 473,401
================ ==================
Supplemental disclosures of cash flow
information:
Cash paid for interest $ 218,733 $ 170,729
================ ==================
Supplemental Disclosures of non-cash
financing activity:
Conversion of related party
payables to note payable $ - $ 1,100,000
================ ==================
See notes to the condensed consolidated financial statements.
Investor Relations Contact:
Brendan Hopkins
(407) 645-5295
investors@singingmachine.com
www.singingmachine.com
www.singingmachine.com/investors
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