Koss Corporation — Fourth Quarter and Full Year 2026 Earnings Summary

Financial Performance

• Q4 2026 net sales reached $3,263,853, a 5.8% increase from $3,084,210 in Q4 2025.
• Q4 2026 net income was $476,801, a turnaround from a net loss of $232,696 in Q4 2025.
• Q4 2026 basic and diluted earnings per share were $0.05, compared to a loss of $0.02 per share in the prior year quarter.
• Full year 2026 net sales totaled $13,020,773, up 3.1% from $12,624,170 in fiscal year 2025.
• Full year 2026 net loss narrowed to $391,464, an improvement of $483,367 compared to a net loss of $874,831 in fiscal year 2025.
• Full year 2026 basic and diluted net loss per share was $0.04, compared to $0.09 in fiscal year 2025.
• Gross margin improved to 41.9% for fiscal year 2026 from 37.8% in fiscal year 2025.
• Q4 2026 gross profit was $1,990,152 versus $1,111,044 in Q4 2025.
• Full year 2026 gross profit was $5,452,411 versus $4,773,598 in fiscal year 2025.
• Q4 2026 operating income was $267,298, compared to an operating loss of $439,199 in Q4 2025.
• Full year 2026 operating loss was $1,512,451, narrowing from $1,737,123 in fiscal year 2025.
• Q4 2026 total other income, net was $213,050, compared to $212,555 in Q4 2025.
• Full year 2026 total other income, net was $1,131,879, up from $879,774 in fiscal year 2025, driven by $250,000 in other income.
• Q4 2026 interest income was $213,508, compared to $212,555 in Q4 2025.
• Full year 2026 interest income was $883,995, compared to $879,774 in fiscal year 2025.
• Q4 2026 income tax provision was $3,547, compared to $6,052 in Q4 2025.
• Full year 2026 income tax provision was $10,892, compared to $17,482 in fiscal year 2025.

Guidance and Future Outlook

• The company's "diversification by acquisition" strategy aims to reshape its profile over the next five years by creating additional predictable, recurring revenue streams.

Business Segments and Product Lines

• Direct-to-consumer (DTC) sales were the primary growth driver in Q4 2026, increasing 36.2% year-over-year.
• Koss.com sales increased 45.6% year-over-year in Q4 2026.
• The Porta Pro wired and wireless headphones family led strong DTC performance in Q4 2026.
• Sales to domestic distributors increased approximately 12% year-over-year in Q4 2026.
• Full year 2026 sales growth was primarily driven by a custom headphones sale to a customer in the Education market segment.
• Full year 2026 DTC sales and sales to several domestic distributors showed substantial increases compared to the prior year.
• European markets experienced year-over-year declines in Q4 2026 due to distributors slowing stock replenishments and maintaining lower stock levels.

Market and Competitive Landscape

• Tariff refunds totaling $1.0 million received in Q4 2026 for previously paid import duties on products from China helped offset tariff impacts and contributed to gross margin improvement.
• A favorable customer mix, including higher volumes of higher-margin DTC and domestic distributor sales, fueled the increase in gross margins for fiscal year 2026.

Risks and Challenges

• European market performance remains challenged by distributor inventory management and declining sales.
• The press release lists numerous forward-looking risks including economic fluctuations, product development success, consumer receptivity to new technologies, competition, pricing, supply chain disruptions, foreign manufacturing concerns, trade policy changes, geopolitical instability, litigation, and integration risks associated with acquisitions.

Management Commentary and Tone

• Michael J. Koss, Chairman and CEO, highlighted DTC sales as the biggest contributor to Q4 2026 growth, citing strong performance in the Porta Pro family.
• Management noted that while domestic distributor sales remained strong, European markets continue to show declines.
• Management attributed full-year sales growth to the Education market custom sale, strong DTC sales supported by online marketing and social media, and adequate inventory replenishment in domestic distributor segments.
• Management emphasized that tariff refunds and a favorable customer mix were key factors in the gross margin expansion from 37.8% to 41.9% for the fiscal year.

Other Key Points

• The company received $1.0 million in tariff refunds in the fourth quarter of fiscal year 2026.
• The company markets high-fidelity headphones, wireless Bluetooth speakers, computer headsets, telecommunications headsets, active noise canceling headphones, and wireless headphones.
• Weighted-average number of basic shares for Q4 2026 was 9,466,438, compared to 9,390,855 in Q4 2025.
• Weighted-average number of basic shares for full year 2026 was 9,462,904, compared to 9,363,117 in fiscal year 2025.