Good afternoon, everyone, and welcome to the Singing Machine Fiscal 2023 Financial Results Earnings Call. My name is Travis and I'll be your operator. As a reminder today's call is being recorded. We will have a brief Safe Harbor and then we will get started. This call contains forward-looking statements under the U.S. Federal Securities Laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statement included in our current and periodic filings. I would now like to turn the call over to Gary Atkinson, Company CEO. Please go ahead, sir.

Thank you, Travis. Hi, good afternoon, everybody. This is Gary Atkinson, Singing Machine's CEO. Joining me on today's call is also Lionel Marquis, the company's CFO and Bernardo Melo, the company Chief Revenue Officer. I'd like to start off today's call by thanking everybody for taking the time to listen in and participate in our fiscal year 2023 earnings call. The 12 months ended March 31, 2023 was a challenging year for Singing Machine, not unlike what many other consumer electronics companies experienced last year. Coming out of the multi-year pandemic and subsequent global supply chain breakdown in calendar 2021, our retail partners, suppliers and logistics partners, all faced uncertainty as to the supply of semiconductors, manufacturing and transportation. As we moved into Calendar 2022, these supply chain issues created a backlog of inventory that finally entered the retail pipeline in the early part of 2022. As the year went on, consumers coped with the negative economic impact of the strong inflationary pressures, rising interest rates, and the conflict in Ukraine. Retailers were faced with higher inventory levels and lowering consumer demand, which consequently caused them to cut new orders. All of these factors unfortunately combined together to negatively impact our 2022 holiday retail season, which again unfortunately dominated what was otherwise a very successful and encouraging year for our company and our team. Before our CFO, Lionel Marquis provides a deeper insight into our fiscal year financial performance, I would like to take a few minutes to highlight some of our key milestones that we achieved during the year. First, we successfully uplisted to the NASDAQ in May of 2022. This was a major accomplishment for our team as this represented many months of hard work, persistence and diligence. As I'm sure all of you listening today are aware…

Thanks, Gary. Good afternoon, everyone. Without any further delay, I'd like to walk through the results of operations of our fiscal year ending March 31, 2023. To start with revenues. The revenues for the fiscal year 2023 were approximately $39.3 million. This represents a decrease of approximately $8.2 million or 17.3%, as compared to approximately $47.5 million for fiscal year 2022. We experienced a broad based decrease in sales including at four out of our five box retail partners. The decrease in sales was largely due to two main factors. First, customers began the holiday season with excess inventory due to late deliveries in calendar 2021, and due to the lock-jammed supply chains during the latest stages of global pandemic. This generated an overstock situation or position in the first few months of 2023, which made the retail buying representative slightly more conservative during the summer of 2022. Secondly, the news of economic recession. Inflation, interest rate hikes dampened our retail partners' expectations for the holiday season, which all resulted in these customers taking more risk-averse approach to buying leading up to the 2022 holiday season. Several of our major customers required significant co-op promotion incentives on goods sold to assist in holiday inventory sell-through. Co-op promotion incentives for the fiscal year ended March 31, 2023 increased to $2.3 million or 6% of net sales as compared to approximately $1.7 million or 3.6% of net sales for the fiscal year ended March 31, 2022. Talk about gross profit, gross profit for the fiscal 2023 was approximately $9.2 million, yielding a 23.4 percentage of total revenues, compared to approximately $10.8 million or 22.8% of sales for fiscal 2022. The net effect resulted in a decrease of approximately $1.6 million as compared to the same period in 2022. If margin had held…

Yeah, thank you, Lionel, and hello, everyone. Thanks for listening to our presentation today. I'm pleased to have the responsibility to provide you some -- everyone with some color on how our key relationships have weathered the recent economic headwinds, as well as our best estimate for how we see coming holiday -- for the coming holiday sales seasons. First, I'd like to provide a brief summary of the overall health and stability of our key account relationships. For year-to-date, our overall commitments from customers are in line with demand from last year. Our last largest accounts are being very precise about ordering, making commitments a little later in the year than normal, but we believe this should benefit out profitability in several ways. First, our manufacturing partners are just really eager to win our businesses here. As obviously, China, things are tough there, they have been making some pricing concessions. For our domestic business, we've seen that the container costs decreased from at peak $18,000 to $20,000 a container, we're seeing containers now ship as low as $2,000 in some cases. We also expect sell-through rates to decline dramatically due to the conservative buying patterns that they're making. Similarly, we have our co-op costs being generally flat, as buyers truly need our inventory just to meet Black Friday sale surge. Lastly, we have seen chargebacks expenses and inventory reserves decreasing for the same reason. While these costs are all expected to decrease, our sales prices to our retail partners remain unchanged. There's virtually no restock remaining from the lingering effects of COVID-19. We successfully worked all of the excess off without inventory write-downs or bad debt from our retail partners. We have been in a very clean net position with our clients. And we expect significant reduction or remain flat in our co-op or other post sales adjustments that normally negatively impact our gross margin. As a result, we anticipate gross margins to greatly improve and helping to impact net earnings even as net sales remain largely unchanged. Looking beyond the holiday season, we're also executing a number of new and exciting fronts to help drive revenues into 2024 and beyond. We're expanding our relationship with Walmart, we see Amazon becoming a strong source of growth in our online sales effort, as we have recently signed a new agency that's top tier in this industry. So we're seeing some new strategies for Amazon and we think we can make a strong push there. We're also very bullish on the prospects of landing one or more pilot accounts in the auto space. And our marketing efforts are expected to ramp up as we build market awareness for our integrated karaoke solutions, and customization capabilities, as we look to become embedded into the outdoor entertainment console. I look forward to provide further updates soon. With that I'll turn the call over back to our CEO, Gary to wrap up our presentation.

Perfect, thank you Bernardo. I want to make sure we save some time here for some Q&A. But finally, I just -- I would like to emphasize how proud I am of our team's accomplishments during this past year. Obviously we're, as a management team, we're disappointed in the overall results from a financial perspective. But given how fiscal 2023 began, with a great deal of uncertainty, and retailers adjusting to the lingering effects of COVID and its impacts on logistics, inventory, and obviously retail consumers, I felt like we adapted rapidly. We positioned our brand and products in a way to capture as much market share as possible, especially with the overall challenges that we've all been seeing in the market. And finally, it's equally important to say that we've made a lot of great progress on a lot of exciting new fronts. So transitioning to NASDAQ, taking key steps to enter the automotive and soon to be hospitality spaces within karaoke, are all part of our long term focus on sustained profitable growth, maintaining our best-in-class brand, and world class partnerships in all we do. So that being said, I believe 2023 reflected our vision well, and the milestones that we accomplished are just only the beginning of where we intend to go. So with that being said, I'd like to turn the call back over to our moderator and open it up now for any Q&A.

Yes, sir. [Operator Instructions] We do have a question from Dodd Richards [ph], private investor.

Okay. I would like to ask, was there anything about the holiday season that you were unprepared for otherwise, could have been executed better? And plus follow-up that with out of the holiday season, this holiday season, buying of large retailers compared to last year?

Yeah, I can, you want to jump on that Bernardo, go for it.

Yeah, I mean, I just -- I'll give some insight. And then you could go ahead. But I think the biggest thing that we were unprepared for is our retailers in the past have been really good about committing to their forecasts and their order plan. And it had never changed for all the years, we've been dealing with those retailers and they delayed the orders longer and longer into the season until finally, we had to increase our co-ops to sort of entice them, and assure them that, that we were going to get sell-through, but yeah, just the lateness of them, of how they reacted and how that affected our business. This season we've gone -- everybody's gone a little bit conservative. I mean, we are still not out of the woods yet with how the economy is, but we have a good plan. And orders are starting to ship now in late July and August. And we should see a good August and September going through for the holiday season.

And I'll also just add to that, too, by saying that, I think the biggest difference we're seeing this year is our retailers, their distribution pipeline is much cleaner this year than it was last year. So last year, we entered the holiday season, there was a lot of inventory that had piled up after the supply chain struggles. And so the retailers had to clean through that inventory first before they started placing new purchase orders. Whereas this year, they've already had a long chance to wipe through that inventory. And we were starting off on a much cleaner slate. So we're feeling more confident this year that it's -- we should be seeing more repeat replenishment orders coming in just given how clean the channels are. I hope that answers the question.

Yeah, and I think one thing also that I just know, Gary that one thing we want to really emphasize to everybody, we have not lost or decreased any shelf space. As a matter of fact, there's some increases in shelf space. The numbers might be a little bit more conservative, but our presence on the shelf space is still remaining very strong and in some cases has increased in size. So I did want to point that out.

I do have a follow-up question, if you don't mind. How do you see the supply chains evolving? I know you mentioned the container price is coming down offering now. Is there a lot of noise around global logistics, especially with regards to China right now? And do you anticipate this having any impact on your ability to ship product for the foreseeable future?

Yeah, we're seeing I mean -- yeah, sure. I mean, we're seeing and obviously the global logistics and supply chain market has really settled down considerably since 2021, 2022. We're seeing almost like record lows for container prices to ship a container from China to Los Angeles. They're now down to $2,000 a container or less and previously, they'd been as high as $20,000 a container. So we're seeing significant cost savings just bringing goods into the States. And in general, trucking is getting easier. Ports seem to be flowing better. So it's really a return kind of back to normal, if I can say that. And so everything right now seems to be moving smoothly.

Perfect. Thank you for taking my question.

All right. Thank you.

[Operator Instructions] Our next question comes from Scott David, private investor.

Okay, well, thank you for letting me take those question here. I really have two basic questions. And it's kind of what you left us with at the very end of your wrap up. Mr. Atkinson. Can you kind of give us a sense why you seem excited about this automotive opportunity? I mean, is this from your carpool karaoke experience? And my other one, so karaoke has been in bars for years? And there's a very strong link between bars and hospitality and the karaoke space. Why would you see this as a growth market?

That's a great question. So I'll start off by answering the automotive part of your question first. So yeah, I mean we're really excited about the automotive category in general. You're right carpool karaoke has given us at least five years of experience in the market developing microphones for cars. And that's not a trivial -- it's not a trivial thing. And when we went to the Consumer Electronics Show last January, and we announced our entrance into the automotive space, we saw overwhelming -- and honestly overwhelming response to the product. And we've built a microphone that integrates with most major automotive brands. And we saw a lot of interest in the product. We've got the support of one of our strategic investors in the Stingray Group that has the content that works in the infotainment system of most cars. So we've seen the success, I mean Tesla was probably the first to launch microphones in their cars. It's only in the China market. But from what we understand that's been successful. And so we've had a lot of conversations with a lot of major automotive brands to bring karaoke microphones into the car. Now it hasn't gone as quickly as we had hoped. A lot of these automotive guys, they just, I think in the broader sort of economic environment, they've been a little bit more conservative. I think the other thing that we've been dealing with is that they're looking forward. They're building cars, or they're developing cars now that will be on the road in 2024, 2025. So it's been a little slower than we would have liked to just sort of start signing our first partnerships. But the interest is there, the market is huge. You think about the millions and millions of new cars,…

Thank you.

Thank you.

We have no further questions in the queue at this time. I would now like to turn the call back over to today's speakers.

Excellent. All right. Well, I appreciate everybody's time today to listen to our presentation. So we look forward to talking to you all again at our first quarter earnings report, which is just right around the corner. So with that Happy Friday. Everybody, have a great weekend, and we'll talk to you all soon. Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at anytime.