Koss (KOSS) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 FY2025 declined 5.1% year-over-year to $3.2 million, mainly due to lower domestic distributor, education/music customer sales, and the absence of a large custom order.

• Gross margin improved to 36.6% from 31.6% year-over-year, driven by favorable product mix and higher-margin DTC and European distributor sales.

• Operating loss widened to $637,133 from $468,589 in the prior year, with increased SG&A expenses and higher deferred compensation costs.

• Net loss was $419,535, or $(0.05) per share, compared to $257,609, or $(0.03) per share, in the prior year.

• Sales to top European distributors rose over 30% year-over-year, driven by the Porta Pro Wireless 2.0 launch; DTC sales increased, with record-setting daily sales on Amazon.

Financial highlights

• Net sales: $3.2 million, down 5.1% year-over-year.

• Gross profit: $1.17 million, up from $1.07 million; gross margin rose to 36.6%.

• SG&A expenses: $1.81 million, up 17.8% year-over-year, mainly due to deferred compensation.

• Interest income: $220,358, up slightly from $212,859 year-over-year.

• Cost of goods sold was $2.03M, down from $2.31M in the prior year quarter.

Outlook and guidance

• Management expects continued margin pressure from inflation, higher energy and transportation costs, and supply chain disruptions.

• Ongoing geopolitical risks, including trade tensions with China and conflicts in Eastern Europe and the Middle East, may impact operations and costs.

• The company anticipates utilizing federal and state NOL carryforwards to reduce effective tax rates in the near term.

• Company expects continued increases in freight rates and is monitoring supply chain disruptions ahead of the holiday season.