Koss Corporation

What they do

Koss designs, manufactures and sells stereo headphones and related personal listening accessories under the Koss name and private label, sourcing finished headphones from manufacturers in Asia and producing some products at its Milwaukee, Wisconsin plant. Products are sold through U.S. and international distributors, audio specialty stores, the internet, national retailers, grocery and electronics retailers, prisons, school systems, and to OEM customers. Koss Corp B.V. and Koss U.K. Limited exist for EU and U.K. requirements, and international sales run through domestic representatives, personnel in the Netherlands and the Caucasus region, and independent foreign distributors.

Revenue drivers

• Stereo headphones for music listening — About 80% of fiscal 2026 sales; sold through distributors, retailers, DTC and internationally.
• Communications, education, metal detector and OEM headphones — About 20% of fiscal 2026 sales; includes custom headphones sold to the Education market and products for other manufacturers.
• Direct-to-consumer (DTC) and koss.com — DTC grew 36.2% in Q4 FY2026 and koss.com rose 45.6%; led by Porta Pro wired and wireless headphones.
• Domestic distributors and international distributors — Domestic distributor orders rose 40% in the March 2026 quarter and about 12% in Q4 FY2026, while European and Asian markets declined.

Recent performance

Fiscal 2026 net sales were $13,020,773, up 3.1% from $12,624,170 in fiscal 2025, driven primarily by a custom headphones sale to the Education segment and DTC growth. Fourth-quarter fiscal 2026 net sales were $3,263,853, up 5.8% year over year, and net income was $476,801 versus a $232,696 net loss in the prior-year quarter. Full-year net loss narrowed to $391,464, or $0.04 per diluted share, from $874,831, or $0.09, in fiscal 2025. Gross margin improved from 37.8% in fiscal 2025 to 41.9% in fiscal 2026, helped by $1.0 million of tariff refunds and a favorable customer mix. In the March 2026 quarter, net sales rose 1.6% to $2,824,763 while gross margin fell to 35.5% and SG&A rose to 61.0% of sales.

Strategy

Management announced a 'diversification by acquisition' strategy in fiscal 2026, aiming to acquire strong cash flow companies outside consumer electronics to generate predictable, recurring revenue over one to five years. The company says its intellectual property enforcement campaign and cash management support this transition, and that existing cash, equivalents and operating cash flows can meaningfully fund it. Near-term SG&A is expected to increase during the acquisition phase. Koss also continues to invest in DTC through online marketing and social media campaigns, and to defend its approximately 400 trademarks and nearly 170 patents.

Risks

• International sales decline — European distributor stock replenishment delays cut nine-month export sales 42.3%, and a Canadian distributor stopped buying U.S. products for political reasons.
• Tariffs and trade policy — Import duties on products from China adversely affected fiscal 2026 results, partly offset by $1.0 million of tariff refunds received in the fourth quarter.
• Customer concentration and order timing — Growth in fiscal 2026 depended on a custom headphones sale to one Education market customer that may not repeat.
• Acquisition integration and cost risk — The new diversification by acquisition strategy may increase SG&A, strain management time and disrupt the existing headphone business.

Outlook

Management expects the diversification by acquisition strategy to substantially change Koss's financial profile over the next one to five years and create predictable, recurring revenue streams. Near-term SG&A costs are expected to increase during the acquisition phase. The company believes existing cash, cash equivalents and operating cash flows will meaningfully support funding the transition. No specific revenue or earnings guidance was provided.