Koss Corporation Reports Decline in Net Sales and Increased Net Losses in Q3 2024

Koss Corporation reported its financial results for the three months ended September 30, 2024, revealing a decline in net sales and an increase in net losses compared to the same period in the previous year. Net sales decreased by 5.1% to $3.2 million, down from $3.4 million in the prior year. This decline was primarily driven by a significant drop in domestic sales, which fell 16.7% to $2.2 million, largely due to a 20% decrease in sales to U.S. distributors and a 55% drop in the Education and Music markets. However, the company saw an 86% increase in sales to European distributors and a 100% increase in sales to a Georgian distributor, contributing to a rise in export sales.

Despite the decrease in sales, Koss Corporation's gross profit improved to $1.2 million, up from $1.1 million, resulting in a gross margin of 36.6%, an increase of 500 basis points from the previous year. Selling, general, and administrative expenses rose by 17.8% to $1.8 million, which contributed to a loss from operations of $637,133, compared to a loss of $468,589 in the same period last year. The loss before income tax provision also widened to $416,775 from $255,730, leading to a net loss of $419,535, compared to $257,609 in the prior year. The loss per common share increased to $(0.05) from $(0.03).

On a positive note, Koss Corporation reported a net cash provided by operating activities of $201,554, a significant improvement from the cash used in operating activities of $(713,247) in the same period last year. The company also experienced a net decrease in cash and cash equivalents of $(86,349), a notable improvement from $(1,106,783) in the previous year. As of September 30, 2024, cash and cash equivalents stood at $2.8 million, up from $2.0 million a year earlier.

Strategically, Koss Corporation has been actively involved in enforcing its intellectual property rights, particularly concerning patents related to wireless audio technology, and is currently engaged in lawsuits against several competitors. The company has also amended its credit agreement, extending the maturity date to October 31, 2026, and has no outstanding borrowings on its $5 million revolving credit facility. The ongoing macroeconomic challenges, including inflation and supply chain disruptions, continue to impact the company's operations and sales strategies.