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KOSS CORP (KOSS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 net sales were $2.78M, up 5.4% year over year, but down sequentially versus Q2; the quarter posted a net loss of $0.32M and EPS of -$0.03 as higher SG&A offset gross margin gains .
  • Strength in Europe and Asia from new product launches and continued DTC momentum supported sales; domestic distributor softness and a ~60% drop in Education market sales (project postponement) pressured results .
  • Nine-month gross margin improved by over 600 bps year over year due to normalization of freight/transit costs, partially offset by obsolete product write-offs; management flagged newly announced China-related tariffs as a material cost headwind with a mitigation plan in development .
  • No formal guidance and minimal sell-side estimate coverage; consensus appeared unavailable for EPS and revenue for Q3 2025 via S&P Global, limiting “beat/miss” interpretation (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

  • Export distributor demand (Europe/Asia) drove overall sales improvement year-to-date, tied to successful new product sales and DTC growth: “A substantial increase in sales to our distributors in Europe and Asia... Direct-to-consumer (DTC) sales continue to contribute to the sales growth” .
  • Structural gross margin improvement: “margin improvement of over 600 basis points during the first nine months of fiscal year 2025 compared to the same period last year,” driven by prior-year sell-through of inventory landed at elevated transit costs now normalizing .
  • Interest income provided a tailwind to pre-tax results (Q3 interest income $0.21M), partially cushioning operating losses .

What Went Wrong

  • Education market demand fell sharply: “a near 60% drop in sales to the education markets, due to postponement of a large project,” and lower sales to domestic distributors offset growth elsewhere .
  • SG&A increased year over year in Q3 (to $1.60M vs. $1.45M), contributing to an operating loss of -$0.52M .
  • Inventory write-offs and tariff risks: obsolete product write-offs partially offset margin gains, and management expects “significant impact” on product costs from recent tariff announcements, with mitigation plans pending .

Financial Results

Income Statement Trend (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Net Sales ($USD)$3,201,868 $3,557,086 $2,781,006
Cost of Goods Sold ($USD)$2,028,942 $2,152,129 $1,696,334
Gross Profit ($USD)$1,172,926 $1,404,957 $1,084,672
SG&A ($USD)$1,810,059 $1,546,741 $1,603,678
Loss from Operations ($USD)-$637,133 -$141,784 -$519,006
Interest Income ($USD)$220,358 $238,686 $208,175
Net Income ($USD)-$419,535 $94,142 -$316,742
EPS (Basic/Diluted) ($USD)-$0.05 / -$0.05 $0.01 / $0.01 -$0.03 / -$0.03
Gross Margin (%)36.6% 39.5% 39.0%
EBIT Margin (%)-19.9% -4.0% -18.7%
Net Income Margin (%)-13.1% 2.6% -11.4%

Notes: Gross Margin = Gross Profit / Net Sales; EBIT Margin = Loss from Operations / Net Sales; Net Income Margin = Net Income / Net Sales (computed from cited figures).

Q3 2025 vs Prior Periods and Estimates

MetricQ3 2024 (YoY)QoQ (vs Q2 2025)Consensus (S&P Global)
Net Sales ($USD)$2,637,606 (YoY +5.4%) -21.8% vs $3,557,086 N/A*
EPS ($USD)-$0.03 (flat YoY) from $0.01 to -$0.03 N/A*
Gross Margin (%)N/A (not provided for Q3 2024)39.0% vs 39.5% N/A*
EBIT Margin (%)N/A (not provided for Q3 2024)-18.7% vs -4.0% N/A*
Net Income Margin (%)N/A (not provided for Q3 2024)-11.4% vs 2.6% N/A*

Estimates disclaimer: Values retrieved from S&P Global.*

Segment Breakdown

  • Not applicable; no segment disclosure provided in the Q3 press release or 8-K .

Selected KPIs and Operating Drivers

KPIQ1 2025Q2 2025Q3 2025Commentary
DTC performance“record-setting daily sales on Amazon” cited; DTC up YoY DTC growth contributed to margin expansion DTC continued to contribute to sales growth DTC channel remains a positive mix driver
Export distributor sales (Europe/Asia)+30% YoY at two largest European distributors; launch of Porta Pro Wireless 2.0 “over 100%” improvement vs prior year European sales (first six months) Substantial increase in sales, driven by new products New products and export strength underpin volume
Nine-Month Gross Margin (%)32.2% prior-year baseline vs ~38.4% current year (≈+620 bps) ——Management cites >600 bps improvement YTD
Education market demandDecline noted Lower sales vs PY ~60% drop due to project postponement Project timing a key headwind
Freight/tariff exposureFreight rates rising; longer lead times Monitoring potential tariffs; slight freight increases Tariffs expected to significantly impact product costs Supply chain/tariffs are active risks

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2025 / Q4 2025None providedNone providedMaintained (no formal guidance)
Gross MarginFY2025None providedCommentary: YTD improvement >600 bps; no numeric targetMaintained (no formal guidance)
SG&A / OpExFY2025None providedNone providedMaintained (no formal guidance)
Tariff impactOngoingNot applicable“Significant impact” on product costs expected; mitigation plan to be finalizedNew risk disclosure
Tax rateFY2025None providedNone providedMaintained (no formal guidance)

No formal quantitative guidance was issued in Q3 materials; management provided qualitative commentary on tariffs and margins .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
DTC / channel mixQ1: DTC up; Amazon daily records; mix supported margins . Q2: DTC sales supported higher margins .DTC continues contributing to growth .Positive, sustained.
Export distributors (EU/Asia)Q1: +30% YoY at two largest EU distributors; product launch . Q2: >100% improvement vs PY Europe in first half .Substantial increase in EU/Asia sales from new products .Strong, product-driven.
Education marketQ1/Q2: softness vs PY .~60% drop due to project postponement .Worsened in Q3.
Gross margin driversQ1: mix and new product improved gross margin to 36.6% . Q2: first-half gross margin 38.1% vs 32.3% PY .YTD margin +600+ bps; offset by write-offs .Improving structurally; transitory offsets.
Supply chain / tariffsQ1: rising freight, longer lead times . Q2: monitoring tariffs; slight freight increases .New tariffs to have significant cost impact; mitigation strategy underway .Risk intensifying.

Note: No earnings call transcript was available in the document set for Q3.

Management Commentary

  • “A substantial increase in sales to our distributors in Europe and Asia, mainly a result of the success of new product sales, was the primary driver of the improvement… Direct-to-consumer (DTC) sales continue to contribute to the sales growth…” — Michael J. Koss, Chairman & CEO .
  • “margin improvement of over 600 basis points during the first nine months of fiscal year 2025 compared to the same period last year… The write-off of some obsolete products during the current year partially offset those gains.” — Michael J. Koss .
  • “Given that a substantial portion of the Company’s products are sourced from China, the recent tariff announcements will have a significant impact on product costs… We have developed a strategic response and will finalize and implement as appropriate to mitigate adverse effects.” — Michael J. Koss .

Q&A Highlights

  • No earnings call transcript was published for Q3 2025 in our document set; no Q&A highlights available.

Estimates Context

  • S&P Global consensus estimates for Q3 2025 appeared unavailable for both EPS and revenue (no EPS or estimate counts returned).
  • With limited or no sell-side coverage, formal “beat/miss” analysis is not possible; investors should focus on operational drivers (channel mix, product launches, tariffs) until coverage expands.
MetricQ3 2025 Consensus (S&P Global)
Primary EPS Consensus MeanN/A*
Revenue Consensus MeanN/A*
Primary EPS - # of EstimatesN/A*
Revenue - # of EstimatesN/A*

Estimates disclaimer: Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Europe/Asia distributor strength and DTC growth are the primary positives; these mix effects supported gross margins despite domestic softness .
  • Sequential QoQ degradation (revenue -21.8%, margin compression) underscores volatility from order timing and Education market project delays; watch Q4 rebound potential as projects resume .
  • Structural gross margin recovery (>600 bps YTD) from normalized freight/transit costs is a key thesis pillar; risk is the offset from inventory write-offs and potential tariff-driven cost increases .
  • Tariffs represent the most material near-term headwind; management intends to mitigate through a strategic response (potential pricing, sourcing, or mix actions) — monitor updates and elasticity in DTC/export channels .
  • SG&A discipline is critical; elevated SG&A in Q3 relative to gross profit drove operating losses — track expense trajectory vs revenue cadence .
  • Interest income provides a small cushion to losses; balance-sheet optimization can continue to modestly improve pre-tax results .
  • With minimal sell-side coverage and no formal guidance, trading setups may hinge on cadence of new product launches, export order timing, and tariff updates; any confirmation of resumed Education projects could be a positive catalyst .