Algorhythm Holdings, Inc. Q1 FY2024 earnings call

• Transition from in-house to 3PL logistics was a major undertaking during peak shipping season, but the team executed well. It avoided significant rent cost increases, eliminated a large workforce percentage, and moved to a variable just-in-time logistics returns and repairs model. • Supply chain challenges and inbound container prices normalized. Customer demand reverted to normal just-in-time delivery model. Participated in Toy Fair indicating retail environment stabilization. • Presented upcoming 2024 product offering including Sesame Street licensed line and new Karaoke innovations. • Lionel discussed revenues, gross profit margin, operating expenses, and liquidity, stating cash on hand was $3.2 million as of September 30, 2023, and plans to finance working capital needs from vendor financing, cash on hand, and projected cash flows. • Bernardo discussed holiday season sales, noting retail environment challenges but continued demand for Karaoke, changes in Walmart, performance in Sam's Club, Target, Amazon strategy, international performance in Canada, U.K., and Australia.

Revenues for the three months ended September 30, 2023, were $15.9 million compared to $17.1 million in the same period of the prior year. Gross profit for the second quarter of fiscal 2024 was approximately $3.7 million, yielding a 23.2% gross profit margin, whereas in the second quarter of fiscal 2023, gross profit was approximately $3.9 million with a 22.8% margin. Operating expenses during the second quarter of 2024 increased to $3.6 million compared to $3.3 million in the prior year's second quarter.

• Plan to finance working capital needs over the next 12 months from vendor financing, cash on hand, and projected cash flows from operations. • Anticipate continued sales in holiday season with focus on Karaoke products, leveraging partnerships and new product offerings. • Expect further growth in international markets, particularly Canada, and continued business in U.K. • Look to drive back-end dollars through music subscription via new streaming app in WiFi model.

• Challenge of transitioning from in-house to 3PL logistics during peak shipping season impacted operations. • Retail environment challenges with consumers shifting to essentials, affecting buying patterns. • Dependence on vendor financing and cash flows for working capital needs