CST: 26/08/2016 14:51:48   

Singing Machine Company Announces Record Earnings in 3rd Quarter Release

192 Days ago

FORT LAUDERDALE, FL--(Marketwired - Feb 16, 2016) - 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 31, 2015     December 31, 2014     December 31, 2015     December 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