Algorhythm Holdings, Inc. (RIME) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents mixed signals. Positive aspects include revenue growth from SemiCab and reduced net loss. However, challenges such as the need for capital, tariff risks, and lower profit margins persist. The Q&A section did not provide additional clarity. Overall, the market might react neutrally, balancing growth potential against significant risks.

Key Financial Performance

Sales for Q2 2025 $2.7 million, up from $2.4 million in Q2 2024 (year-over-year increase of $0.3 million). The increase was primarily due to the addition of SemiCab India on May 2, 2025.

Singing Machine Sales for Q2 2025 $1.5 million. Sales were negatively impacted by increased inflation and tariffs implemented on April 2, 2025, as all Singing Machine products are manufactured in China. The business is also seasonal, with most sales generated in the second half of the calendar year.

SemiCab Sales for Q2 2025 $1.2 million. SemiCab's revenue run rate has tripled to more than $7 million since January 2025, driven by new contracts and expanded operations.

Gross Profit for Q2 2025 $954,000, up from $324,000 in Q2 2024 (year-over-year increase of $630,000). Gross margin increased to 35% from 13%, primarily due to one-time adjustments made to inventory reserves and co-ops associated with the Singing Machine business.

Selling Expenses for Q2 2025 $234,000, down from $547,000 in Q2 2024 (year-over-year decrease of $313,000). The decrease was due to reduced online marketing and social media advertising campaigns for Singing Machine's karaoke products.

General and Administrative (G&A) Expenses for Q2 2025 $1.5 million, down from $2.1 million in Q2 2024 (year-over-year decrease of $600,000). The decrease was primarily due to reduced G&A expenses from the Singing Machine business, partially offset by increased expenses for the growth and development of SemiCab.

Net Loss for Q2 2025 $809,000, down from $6.2 million in Q2 2024 (year-over-year decrease of $5.391 million). The decrease was primarily due to $3.9 million in operating lease impairment expenses incurred in 2024 and lower G&A expenses.

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Operating Highlights

SemiCab AI logistics platform: Accelerated growth with a focus on scaling operations. Secured 5 new contracts with major Indian FMCG companies and expanded contracts with existing clients by 100%-200%. Fleet expanded from 140 to 450 trucks, increasing annualized revenue run rate to $23 million.

Market expansion in India: Acquisition of SemiCab India in May 2025. Strengthened vendor relationships and built operational teams to support growth. Expanded geographic lanes and volume for existing clients.

Operational efficiencies: Optimized truck utilization to 85%, reducing empty miles and unlocking value for customers. Gross margin increased to 35% from 13% due to inventory adjustments, though future margins are expected to align with SemiCab's lower-margin model.

Strategic shift: Divested Singing Machine business for $4.5 million, reducing liabilities by $4 million and lowering cash burn. Pivoted focus entirely to SemiCab, targeting high-growth AI logistics opportunities.

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Risk or Challenges

Singing Machine Business Challenges: The consumer electronics market, particularly consumer karaoke, has faced persistent headwinds including declining sales year-over-year, rising costs, uncertain global tariffs, inflation, and supply chain disruptions. These factors led to the strategic decision to divest the Singing Machine business.

SemiCab Growth Risks: The company requires significant working capital to fund SemiCab's growth, including fleet expansion and operational scaling. This may necessitate additional equity or debt financing, which could dilute shareholder value or increase financial liabilities.

Tariff and Economic Risks in India: Potential reductions in overall goods flow in and out of India due to tariffs or economic conditions could impact freight demand. However, the company mitigates this risk by working with large multinational companies with consistent demand.

Operational Scaling Challenges: The integration and scaling of SemiCab India require substantial investment in working capital, vendor relationships, and team building. Any delays or inefficiencies in these areas could hinder growth.

Profit Margin Pressure: SemiCab operates with lower profit margins (5-10%) compared to the legacy Singing Machine business (25-30%). This could impact overall profitability despite higher growth potential.

Dependence on Key Customers: SemiCab's growth is heavily reliant on a few large multinational customers. Any loss or reduction in business from these customers could significantly impact revenue.

Global Expansion Risks: Plans to expand SemiCab beyond India into regions like Australia, the Middle East, Europe, and the U.S. could face logistical, regulatory, and competitive challenges.

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Guidance & Outlook

Revenue Projections: SemiCab is expected to generate between $2 million and $2.5 million in revenue during Q3 2025. Over the next 12 months, SemiCab's revenue run rate is projected to increase to between $15 million and $20 million.

Margin Expectations: Gross profit margins are expected to decrease to closer to breakeven in the near term due to SemiCab's current margins. SemiCab's margins are anticipated to range from 5% to 10%, lower than the historical margins of Singing Machine.

Operating Expenses: Operating expenses are expected to decrease significantly due to the sale of Singing Machine. However, these reductions will be partially offset by increased investments in the growth and development of SemiCab.

Net Loss: Net loss is expected to decrease over the next 12 months, primarily due to the sale of Singing Machine. However, this will be partially offset by increased investments in SemiCab.

Fleet Expansion: SemiCab's fleet has grown from 140 to 450 trucks, enabling an increase in annualized revenue run rate to approximately $23 million. Further fleet expansion is anticipated to support growth.

Customer Growth and Expansion: SemiCab has secured five new contracts with major Indian consumer goods companies and expanded geographic lanes and volumes with existing clients by over 100% to 200%. Further growth in customer contracts and geographic expansion is expected.

Market Expansion: While the current focus is on India, there are plans to expand SemiCab's operations to other regions, including Australia, the Middle East, Europe, and the U.S., leveraging relationships with multinational clients.

Capital Requirements: The company plans to raise additional capital to finance SemiCab's growth, primarily to support working capital needs and fleet expansion. This may include equity sales and factoring arrangements in India.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Review of Unclear Management Responses

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

RIME Transcript

Algorhythm Holdings, Inc. (RIME) Q3 2025 Earnings Call Transcript

Positive11-19

The earnings call highlights significant revenue growth, a promising shift to a high-margin SaaS model with the Apex platform, and successful customer acquisition. Despite concerns about truck dependency and gross losses, the positive outlook on market expansion, especially in the U.S., and reduced net losses indicate a positive sentiment. The Q&A session reinforced this optimism with clear communication from management. Although there are challenges, the overall sentiment leans positive due to strategic growth initiatives and improved financial metrics.

Algorhythm Holdings, Inc. (RIME) Q2 2025 Earnings Call Transcript

Unknown8-22

Algorhythm Holdings, Inc. (NASDAQ:RIME) Q1 2025 Earnings Call Transcript

Unknown5-20

The earnings call presents a mixed picture. Positive aspects include strong growth in SemiCab's operations and improved gross margins. However, there are significant concerns such as decreased sales in the karaoke segment, increased expenses, and substantial non-cash losses. The Q&A section reveals a lack of clarity on future business models, which adds uncertainty. Additionally, no specific shareholder return plans were announced. Considering these factors, the stock price is likely to remain stable, resulting in a neutral prediction.

Earnings call transcript: Algorhythm Holdings’ Q1 2025 sees strategic shifts amid sales decline

Unknown5-16

The earnings call reveals several challenges: declining sales, increased expenses, and economic headwinds, notably from trade tariffs and inflation. Despite some positive developments, such as improved gross margins and regained Nasdaq compliance, the Q&A session highlights uncertainties, particularly regarding the new business model in the US. The lack of clear guidance and increased competition further contribute to a negative sentiment. While the freight optimization plan is promising, its impact is not immediate. Given these factors, the stock price is likely to experience a negative reaction in the short term.

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