Koss Corporation (KOSS) Bundle
Understanding Koss Corporation (KOSS) Revenue Streams
Understanding Koss Corporation’s Revenue Streams
The revenue analysis of Koss Corporation provides insights into its financial health as of 2024. The company primarily generates revenue from the design, manufacture, and sale of stereo headphones and related accessories.
Breakdown of Primary Revenue Sources
Koss Corporation's net sales for the three months ended September 30, 2024, were $3,201,868, compared to $3,373,938 for the same period in 2023. This represents a decrease of 5.1% year-over-year.
The breakdown of net sales by geographical location is as follows:
| Geographical Region | Net Sales (2024) | Net Sales (2023) | Percentage Change |
|---|---|---|---|
| United States | $2,167,364 | $2,603,158 | -16.7% |
| Export | $1,034,504 | $770,780 | +34.3% |
| Total | $3,201,868 | $3,373,938 | -5.1% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects a decline of 5.1% in net sales. In contrast, the previous year showed a slight increase of 0.3% in net sales.
Contribution of Different Business Segments to Overall Revenue
Koss operates as a single business segment with its primary revenue derived from headphone sales. The domestic market saw a substantial decline, primarily due to a non-recurring custom order from the prior year and a 20% decline in sales to U.S. distributors. However, there was an 86% increase in sales to European markets driven by significant orders from distributors for newly released products.
Analysis of Significant Changes in Revenue Streams
In the first quarter of fiscal year 2025, sales to the Education and Music markets dropped by 55% compared to the previous year, contributing to the overall decline in domestic sales. On the other hand, direct-to-consumer (DTC) sales increased by approximately 18%, partially offsetting the decline in U.S. distributor sales.
The net sales performance is summarized as follows:
| Metric | Q1 2025 | Q1 2024 | Change |
|---|---|---|---|
| Net Sales | $3,201,868 | $3,373,938 | -5.1% |
| Gross Profit | $1,172,926 | $1,067,690 | +9.8% |
| Gross Margin (%) | 36.6% | 31.6% | +500 bps |
| SG&A Expenses | $1,810,059 | $1,536,279 | +17.8% |
The increase in gross profit was attributed to a favorable sales mix, with higher margin DTC sales contributing positively. However, selling, general, and administrative (SG&A) expenses rose significantly due to increased deferred compensation liabilities and engineering expenses.
Overall, the revenue analysis indicates a challenging environment for Koss Corporation, with notable declines in certain revenue streams, but also highlights growth in specific areas that may provide opportunities for recovery and future growth.
A Deep Dive into Koss Corporation (KOSS) Profitability
A Deep Dive into Koss Corporation's Profitability
Gross Profit:
For the three months ended September 30, 2024, the company reported a gross profit of $1,172,926 compared to $1,067,690 for the same period in 2023. This reflects a gross profit margin of 36.6%, up from 31.6% year-over-year.
Operating Profit:
The loss from operations for the three months ended September 30, 2024, was ($637,133), compared to a loss of ($468,589) for the same period in 2023.
Net Profit Margin:
Net loss for the quarter was ($419,535), translating to a net loss margin of (13.0)% compared to (7.6)% in the prior year period.
Trends in Profitability Over Time
- Net sales decreased by 5.1% from $3,373,938 in 2023 to $3,201,868 in 2024.
- Gross profit increased by 9.8% year-over-year.
- SG&A expenses rose by 17.8% from $1,536,279 to $1,810,059.
Comparison of Profitability Ratios with Industry Averages
Industry averages for gross profit margin in the audio equipment sector typically range from 30% to 40%. Koss Corporation's gross margin of 36.6% is within this range, indicating competitive performance.
Analysis of Operational Efficiency
The company's selling, general and administrative expenses as a percentage of net sales increased to 56.5% in 2024 from 45.5% in 2023, suggesting a decline in operational efficiency.
| Metrics | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $3,201,868 | $3,373,938 | (5.1) |
| Gross Profit | $1,172,926 | $1,067,690 | 9.8 |
| Gross Margin (%) | 36.6 | 31.6 | 500 bps |
| SG&A Expenses | $1,810,059 | $1,536,279 | 17.8 |
| Loss from Operations | ($637,133) | ($468,589) | 36.0 |
| Net Loss | ($419,535) | ($257,609) | 62.6 |
Overall, Koss Corporation's profitability metrics indicate a mixed performance, with improvements in gross profit but challenges in managing operating expenses and achieving net profitability. The increase in gross margin reflects better sales mix and pricing strategies, while rising SG&A expenses highlight the need for cost management strategies moving forward.
Debt vs. Equity: How Koss Corporation (KOSS) Finances Its Growth
Debt vs. Equity: How Koss Corporation Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Koss Corporation reported total liabilities of $7,254,972. This includes current liabilities of $2,364,905 and long-term liabilities of $4,890,067.
Debt-to-Equity Ratio
The company's total stockholders' equity stood at $30,846,775 as of the same date. Therefore, the debt-to-equity ratio can be calculated as follows:
| Total Liabilities | Total Stockholders' Equity | Debt-to-Equity Ratio |
|---|---|---|
| $7,254,972 | $30,846,775 | 0.23 |
This ratio indicates a relatively low level of debt compared to equity, which is favorable when compared to the industry average.
Recent Debt Issuances and Credit Ratings
Koss Corporation entered into a secured credit facility with Town Bank, providing for a $5,000,000 revolving secured credit facility. As of September 30, 2024, there were no outstanding borrowings on the facility, indicating a strong liquidity position.
Refinancing Activity
The Credit Agreement was recently amended to extend the maturity date to October 31, 2026 and to remove a covenant requiring submission of annual financial performance projections. This amendment reflects the company's proactive approach to managing its debt obligations.
Balancing Debt Financing and Equity Funding
Koss Corporation has focused on balancing its capital structure by utilizing both debt and equity financing. The company has maintained a robust equity base, with total stockholders' equity decreasing from $31,147,176 on June 30, 2024, to $30,846,775 by September 30, 2024, primarily due to a net loss of $419,535.
The mix of financing sources allows Koss Corporation to fund growth initiatives while managing the cost of capital effectively.
Summary of Financial Position
| Financial Metric | Amount |
|---|---|
| Total Assets | $38,101,747 |
| Total Liabilities | $7,254,972 |
| Total Stockholders' Equity | $30,846,775 |
| Debt-to-Equity Ratio | 0.23 |
Assessing Koss Corporation (KOSS) Liquidity
Assessing Koss Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 8.16 (calculated as total current assets of $19,337,209 divided by total current liabilities of $2,364,905).
Quick Ratio: The quick ratio is approximately 7.15 (calculated as total current assets minus inventories divided by total current liabilities). This indicates a robust liquidity position as it excludes inventory, which may not be as readily convertible to cash.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, is $16,972,304 as of September 30, 2024. This is a significant increase compared to $20,619,503 in the previous fiscal year, indicating a favorable liquidity position despite a decrease in total current assets.
Cash Flow Statements Overview
The cash flow from operating activities for the three months ended September 30, 2024, was $201,554, a significant recovery from a cash outflow of ($713,247) for the same period in 2023.
Investing activities resulted in a cash outflow of ($392,773) during the same period, while financing activities generated $104,870 from the exercise of stock options. The net decrease in cash and cash equivalents was ($86,349), compared to ($1,106,783) in the prior year.
| Cash Flow Activity | 2024 | 2023 |
|---|---|---|
| Operating Activities | $201,554 | ($713,247) |
| Investing Activities | ($392,773) | ($393,536) |
| Financing Activities | $104,870 | $0 |
| Net Decrease in Cash Equivalents | ($86,349) | ($1,106,783) |
Potential Liquidity Concerns or Strengths
While the liquidity ratios suggest a strong position, there are potential concerns. The company has reported a net loss of $419,535 for the three months ended September 30, 2024, compared to a loss of $257,609 in the same period last year. This could impact future cash flows if losses continue.
Additionally, the company maintains $9,142,324 in short-term investments as of September 30, 2024, which can be liquidated if necessary. The absence of outstanding borrowings on its credit facility of $5,000,000 also provides a cushion for liquidity needs.
Is Koss Corporation (KOSS) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health of Koss Corporation, we will analyze its valuation metrics, stock price trends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Koss Corporation is not applicable as the company reported a net loss for the last quarter. The net loss for the three months ended September 30, 2024, was ($419,535), resulting in a basic and diluted loss per share of ($0.05).
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, is calculated as:
- Total stockholders' equity: $30,846,775
- Shares outstanding: 9,350,795
- Book value per share: $3.30 (calculated as $30,846,775 / 9,350,795)
The current stock price is approximately $1.60 (as of the last trading day), giving a P/B ratio of approximately 0.48 (calculated as $1.60 / $3.30).
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As Koss Corporation reported a loss before income tax provision of ($416,775), the EBITDA calculation is not applicable. Thus, the EV/EBITDA ratio cannot be determined at this time.
Stock Price Trends Over the Last 12 Months
The stock price for Koss Corporation over the past 12 months has experienced volatility:
| Month | Stock Price ($) |
|---|---|
| October 2023 | 1.80 |
| January 2024 | 2.10 |
| April 2024 | 1.50 |
| July 2024 | 1.90 |
| September 2024 | 1.60 |
Dividend Yield and Payout Ratios
Koss Corporation does not currently pay a dividend, resulting in a dividend yield of 0%. The company has not established a payout ratio due to its ongoing net losses.
Analyst Consensus on Stock Valuation
Analyst consensus on Koss Corporation stock is generally cautious, with the following recommendations:
- Buy: 0 analysts
- Hold: 2 analysts
- Sell: 1 analyst
The consensus rating reflects concerns over the company's recent performance and financial losses.
Key Risks Facing Koss Corporation (KOSS)
Key Risks Facing Koss Corporation
The financial health of Koss Corporation is influenced by various internal and external risk factors that investors should consider. These risks encompass competition, regulatory changes, market conditions, and operational challenges.
Industry Competition
Competition in the audio equipment industry is intense. Koss faces pressure from both established brands and emerging companies. The decline in net sales by 5.1% from $3,373,938 in Q1 2023 to $3,201,868 in Q1 2024 highlights this competitive landscape. Additionally, sales to U.S. distributors dropped by 20%, contributing to a 16.7% decrease in domestic sales.
Regulatory Changes
Changes in regulations affecting consumer electronics and international trade can impact operations. The company must remain compliant with various laws, including those related to product safety and environmental standards. Failure to comply can lead to fines and increased operational costs.
Market Conditions
Economic fluctuations directly affect consumer spending on non-essential goods like headphones. The company noted a significant drop in sales to the Education and Music markets, which fell by 55% compared to the previous year. This indicates sensitivity to market conditions and consumer preferences.
Operational Risks
Operational risks include supply chain disruptions and increased shipping costs. For instance, freight rates have increased due to various factors such as seasonal demand and geopolitical tensions, which could further strain profit margins. The company is also monitoring ongoing conflicts in Eastern Europe and the Middle East, prepared to respond to potential supply chain issues.
Financial Risks
Koss Corporation reported a loss before income tax provision of $(416,775), which is 13.0% of net sales. The company’s selling, general, and administrative expenses rose by 17.8% to $1,810,059, indicating rising operational costs. This financial strain can impact liquidity and the ability to invest in growth opportunities.
Strategic Risks
The company’s strategic decisions regarding product development and market expansion also carry risks. The introduction of new products must align with market demand to avoid excess inventory and obsolescence. As of September 30, 2024, the reserve for obsolete inventory was $1,958,217, reflecting challenges in inventory management.
Mitigation Strategies
Koss is implementing several strategies to mitigate these risks:
- Enhancing product offerings to meet changing consumer preferences.
- Strengthening supply chain relationships to reduce disruptions.
- Continuing to monitor regulatory changes and compliance requirements.
- Utilizing cash reserves and investments to remain financially flexible.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Increased competition leading to price pressures | Decline in sales by 5.1% |
| Regulatory Changes | Compliance with product safety and environmental laws | Potential fines and increased costs |
| Market Conditions | Economic fluctuations affecting consumer spending | Sales to Education and Music markets down by 55% |
| Operational Risks | Supply chain disruptions and rising shipping costs | Increased operational costs |
| Financial Risks | Ongoing losses impacting liquidity | Loss before tax of $(416,775) |
| Strategic Risks | Challenges in product development and inventory management | Reserve for obsolete inventory of $1,958,217 |
Future Growth Prospects for Koss Corporation (KOSS)
Future Growth Prospects for Koss Corporation
As Koss Corporation navigates through 2024, several key growth drivers position the company for potential expansion in the competitive audio market. These drivers include product innovations, market expansions, and strategic partnerships.
Key Growth Drivers
- Product Innovations: Koss has recently launched new products, particularly in the wireless Bluetooth headphones segment, which saw significant demand. The company reported an 86% increase in sales to its largest European distributors for this newly released product compared to the same quarter last year.
- Market Expansions: The company has experienced a near 18% increase in direct-to-consumer sales, indicating a successful push into online and retail markets.
- Acquisitions: While no recent acquisitions have been disclosed, the company maintains a focus on potential strategic partnerships to enhance its product offerings and market reach.
Future Revenue Growth Projections
For the three months ended September 30, 2024, Koss reported net sales of $3,201,868, a 5.1% decrease from $3,373,938 in the same period in 2023. However, the gross profit margin improved to 36.6% from 31.6%, signaling better profitability on existing sales.
| Financial Metric | Q1 2024 | Q1 2023 | Change (%) |
|---|---|---|---|
| Net Sales | $3,201,868 | $3,373,938 | -5.1% |
| Gross Profit | $1,172,926 | $1,067,690 | 9.8% |
| Gross Profit Margin | 36.6% | 31.6% | 500 bps |
| Net Loss | $(419,535) | $(257,609) | 63.0% |
Strategic Initiatives and Partnerships
Koss is actively enhancing its strategic initiatives, particularly in expanding its product portfolio and improving supply chain efficiencies. The company has formed partnerships with dedicated freight forwarders to optimize shipping costs, which could further enhance profitability as market rates fluctuate.
Competitive Advantages
Koss Corporation's competitive advantages include a strong brand reputation built over decades and a robust intellectual property portfolio, particularly in wireless headphone technology. The company's focus on direct-to-consumer sales allows it to capture higher margins compared to traditional distribution channels.
The financial position remains strong, with $2.8 million in cash and cash equivalents, and $9.1 million in short-term investments as of September 30, 2024.
Koss Corporation (KOSS) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Koss Corporation (KOSS) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Koss Corporation (KOSS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Koss Corporation (KOSS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.