Algorhythm Holdings, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Sale of Singing Machine: The sale generated $4.5 million, reduced liabilities, strengthened the balance sheet, and freed capital for SemiCab. The consumer electronics market faced headwinds, leading to the strategic divestment.
• SemiCab Growth: Acquired SemiCab India in May 2025. Secured 5 new contracts with large fast-moving consumer group companies in India. Existing clients expanded volume by over 100%. Fleet grew from 140 to 450 trucks, annualized revenue run rate increased to approximately $23 million, and the annualized revenue run rate over the past 12 months increased by almost 300% to ~$7 million.
• Financials: Sales for the three months ended June 30, 2025, were $2.7 million compared to $2.4 million in the prior year. Net loss decreased to $809,000 from $6.2 million in the comparable period last year. Selling expenses decreased due to lower Singing Machine sales. General and administrative expenses decreased but are expected to increase for SemiCab's growth.

Segment Performance

• Singing Machine: The business was sold for $4.5 million in total consideration, reducing liabilities by approximately $4 million. In the second quarter of 2025, Singing Machine accounted for $1.5 million of sales.
• SemiCab: Acquired in May 2025. Its revenue run rate tripled to over $7 million since January 2025. It is expected to generate $2–$2.5 million in revenue during the third quarter and projected to increase to $15–$20 million over the next 12 months. Gross profit for the three months ended June 30, 2025, was $954,000 compared to $324,000 in the prior year period, with gross margin increasing to 35% from 13%.

Guidance

• SemiCab is expected to generate $2–$2.5 million in revenue during the third quarter and $15–$20 million over the next 12 months.
• Net loss is anticipated to decrease in the next 12 months due to the sale of Singing Machine, but will be partially offset by investments in SemiCab's growth.
• Operating expenses are expected to decrease significantly with the sale of Singing Machine but will increase for SemiCab's growth. Capital raising via equity or debt is anticipated to fund SemiCab's growth.

Risks

• Tariffs and supply chain disruptions affected Singing Machine, but SemiCab is not directly exposed to these.
• Dependence on large customers in India; any reduction in their demand could impact SemiCab.
• Need for continued investment in SemiCab's growth could affect financial performance.

Q: Thoughts on profit margins and operating expenses going forward?

A: Margins are expected to be in the range of 5–10% due to SemiCab's smaller margins, but growth is anticipated to outweigh margin differences. Operating expenses are expected to decrease significantly with the sale of Singing Machine but will increase for SemiCab's growth.

Q: Impact of tariffs and India layoffs on SemiCab?

A: SemiCab is not exposed to tariffs. Large customers in India have significant demand, and the platform optimizes truck utilization, so tariffs and India layoffs are not anticipated to impact SemiCab materially.

Q: Capital raising plan?

A: Likely equity sales may be part of the capital-raising plan, and debt could also be considered, with working capital needed to fund SemiCab's growth.

Q: Expansion outside India?

A: Expansion outside India is possible, as large multinational customers could expand SemiCab into other regions like Australia, the Middle East, Europe, and the US.

Q: Distinction of SemiCab from digital freight brokers?

A: SemiCab is not just a digital freight broker. It is a software platform designed to reduce empty miles, improving truck utilization to 85%+ in India, whereas digital freight brokers primarily act as load boards.