Form 10-Q for the quarterly period ended December 31, 2024
Koss Corporation, a Delaware corporation, filed its Form 10-Q for the quarterly period ended December 31, 2024. The company reported a net loss of $1.4 million for the three months ended December 31, 2024, compared to a net loss of $1.1 million for the same period in 2023. For the six months ended December 31, 2024, the company reported a net loss of $2.7 million, compared to a net loss of $2.3 million for the same period in 2023. As of December 31, 2024, the company had cash and cash equivalents of $1.4 million, compared to $2.1 million as of June 30, 2024. The company’s total assets were $14.1 million as of December 31, 2024, compared to $15.3 million as of June 30, 2024. The company’s total liabilities were $6.4 million as of December 31, 2024, compared to $6.1 million as of June 30, 2024.
Overview of Fiscal 2025 Period Results
Koss Corporation reported mixed financial results for the three and six-month periods ended December 31, 2024 compared to the same periods in the prior fiscal year.
Revenue Trends:
- Net sales for the three-month period were $3,557,000, up 5.9% year-over-year, driven by a significant increase in sales to European distributors and a large custom headphone order, partially offset by lower sales to the education segment, domestic distributors, and e-tailers.
- For the six-month period, net sales of $6,759,000 were slightly ahead of the prior year, as the European and custom order gains were mostly offset by lower domestic distribution, education, and e-tailer sales.
- Export sales, particularly to Europe, were a bright spot, increasing 64.7% for the six-month period, while domestic sales declined 17.5% over the same period.
Profitability:
- Gross profit margin improved significantly, up 650 basis points to 39.5% for the three-month period and 580 basis points to 38.1% for the six-month period. This was driven by higher-margin European and direct-to-consumer sales, as well as the prior year’s impact of higher freight costs.
- Selling, general, and administrative expenses increased 7.6% for the six-month period, due to higher legal, advertising, and compensation costs, partially offset by lower stock-based compensation.
- The company continued to utilize its substantial net operating loss carryforwards, resulting in minimal federal income tax expense.
Liquidity and Capital Resources:
- The company maintained a strong financial position, with $2.5 million in cash and cash equivalents, $7.2 million in short-term investments, and $5.0 million in available credit facilities as of December 31, 2024.
- Cash flow from operations was negative for the six-month period, driven by the net operating loss, but was partially offset by improvements in working capital.
- Capital expenditures included the replacement of a building roof section and insurance policy premiums.
Outlook and Risks:
- The company faces ongoing macroeconomic and geopolitical challenges, including economic uncertainty, inflation, supply chain disruptions, and cybersecurity threats.
- While the impact on fiscal 2025 performance remains uncertain, the company will continue to monitor these factors and adjust as necessary.
- The company’s intellectual property enforcement program remains a focus, though outcomes are uncertain.
Overall, Koss Corporation delivered a mixed performance in the first half of fiscal 2025, with strength in export markets and margins offset by weakness in domestic sales. The company’s financial position remains solid, but it must navigate various economic and operational headwinds in the coming quarters.
