Algorhythm Holdings, Inc. Q2 FY2023 earnings call

• Expanded relationship with Walmart by moving products into their consumer electronics department, which helped offset sales softness in other areas. - Converted Sam's Club program to FOB-China to avoid supply chain uncertainty and improve product flow. - Secured key retail relationships and shelf listings with major customers. - Revamped the Karaoke app with official album covers and a music catalog over 70,000 songs. - Plans to expand into automotive and brick-and-mortar Karaoke markets, leveraging innovation in these areas.

For the three-month period ended September 30, 2022, net sales were $17.1 million compared to $17.4 million in 2021. Gross profit was $3.9 million vs. $3.3 million in 2021, with gross margin increasing from 19.2% to 23.2%. For the six-month period ended September 30, 2022, net sales were $28.8 million vs. $23.4 million in 2021, and gross profit was $7.1 million vs. $4.9 million in 2021. Gross margin improved from 20.9% to 24.8% over the six-month period. The revenue growth was driven by increases from major customers, offset by some decreases from other top customers.

• Continued focus on introducing new technology and expanding product offerings in key retailers. - Anticipation of consumer reaction during the holiday season. - Long-term vision to be the dominant brand for Karaoke both at home and outside of home.

• Macro factors including global pandemic, supply chain issues, inflation, rising interest rates, and worker shortages. - Significant one-time general and administrative expenses related to equity events and regulatory filings. - Impact of inflation on operating expenses, particularly in logistics.

Q: How is the shipments going for fiscal Q3?

A: All direct port shipments are pretty much done for Q3, but domestic shipments are lagging a bit behind due to retail being risk-averse.

Q: Do you anticipate any significant programs going forward with Best Buy?

A: Best Buy is approached through the dot-com strategy, with a long-term plan to develop a line that can leverage their Geek Squad for installation.

Q: Sales drop and consumer spending?

A: Higher price points in Walmart TE and Costco are doing well, helping offset some softer sales.

Q: Future vision for the company?

A: Plans to expand into automotive, brick-and-mortar Karaoke markets, and grow music revenue through the Karaoke app, leveraging the razor-and-blade model.