KOSS Koss Dashboard

Management Discussion

• For the three and nine months ended March 31, 2021, net sales decreased 16.7% and 1.7%, respectively.  The decrease in net sales was driven by decreased sales to mass retail customers in the US.  Improved sales to export distrbutors offset a portion of the US mass retail declines.
• Net sales in the domestic market were approximately $2,693,000 in the three months ended March 31, 2021, compared to approximately $4,227,000 in the prior year period.  Sales to mass retail customers decreased due to reduced product placement.  Net sales to certain distrbutors were negatively impacted in the quarter ended March 31, 2021 due to timing of shipments and sales recognition that was delayed until the fiscal fourth quarter.  In March 2020, there was a surge in demand as pandemic related shutdowns took place causing many people to work and study remotely.  Current year comparisons to the three months ended March 31, 2020, show declines in several channels due to the strength in last year’s numbers.  The Company made the final shipment of a non Koss branded product to a mass retailer in the US during the quarter ended March 31, 2021.  The loss of net sales for this product will likely increase margins since it had very low margins compared to other products.
• Domestic net sales were approximately $10,292,000 in the nine months ended March 31, 2021 compared to $11,870,000 in the prior year period.  Sales to mass retail customers decreased due to reduced product placement.  In addition, mass retail net sales included a large back-to-school promotion in the nine months ended March 31, 2020 that did not take place in 2021.  The other declines were in the educational markets and sales to online retailers.  Net sales in the educational markets, which primarily are driven by the need for headphones in testing services, declined as a result of timing of shipments, as there were large shipments at the end of our fiscal quarter ended June 30, 2020.  Sales in educational markets also decreased during the nine months ended March 31, 2021 compared to the prior year period due to many schools closing as a result of the pandemic.  Sales through online retailers declined as the Company shifts to more Amazon Seller Central.  These were partially offset by growth in the Company Direct to Consumer (“DTC”) online sales channels and certain US-based distributors.  Sales through DTC online channels increased by approximately 2.5 times compared to the prior year period.  The online sales activity was driven by COVID-19 directives, which have caused many people to work and study remotely and have resulted in sales of communication headsets to facilitate that work and study.  Certain domestic distributors had higher sales due to COVID-19 related customer demand.