Algorhythm Holdings, Inc. Q2 FY2024 earnings call

• Closed acquisition of AI-powered freight transportation software company SemiCab, an all-stock deal. - Advancing automotive initiative for microphone business, optimistic about growth in Karaoke category. - Finalizing corporate rebranding. - Net sales decrease in Q2 2024 due to lower sell-through, especially with Walmart. - Focus on clearing older inventory to optimize working capital. - WiFi model expansion including new model at Sam's Club, deployment to various retailers and countries. - Traditional model still present in retailers with promotional price points. - Launch of TikTok store shop and Sesame Street Karaoke plus line. - Emerging automotive opportunity with Karaoke microphones in cars, leveraging partnership with Stingray Group. - TV market opportunity with Karaoke on big screen TV using microphone.

For the three months ended June 30, 2024, net sales decreased to approximately $2,440,000 million from approximately $2,625,000 million in the same period of 2023, a decrease of approximately $185,000. Gross profit decreased to approximately $324,000 from approximately $529,000 in the same period of 2023, a decrease of approximately $205,000. Gross margins for the three months ended June 30, 2024 were 13.3% compared to 20.2% in the same period of 2023. Total operating expenses increased to approximately $6,478,000 million in 2024 Q2 from approximately $2,960,000 million in 2023 Q2, with the majority of the increase due to a non-cash write-off of impaired operating lease assets. Net loss for the quarter was $6,119,000 million or a loss of $0.95 per share in 2024 Q2 compared to a loss of $2,460,000 million or a loss of $0.64 per share in 2023 Q2. The WiFi enabled models, digital offerings with app and Stingray Music partnership are key areas, with a new WiFi model entering Sam's Club electronic department, Costco carrying it for the second year, and expansion to other retailers and countries.

• Currently in normal busy season, focused on rebuilding liquidity and pushing out seasonal sales orders. - In 2025, mostly introducing strictly WiFi enabled models, which have been well-received and aligned with partnership with Stingray for new technologies.

• Retail shelf space redefining and traditional brick-and-mortar retail sales challenges continuing. - Uncertainties related to the acquisition of SemiCab, including integration and execution risks.

Q: Why would a Karaoke company buy an AI software company?

A: The legacy Karaoke business faces retail pressure. SemiCab has the potential to disrupt the $1 trillion global freight industry, showing 90% efficiency in reducing empty miles, and can create higher floor value for the company, so Singing Machine acquired it to reinvent and grow the business