Q1 2021 Kaspien Holdings Inc Earnings Call
[music].
Good afternoon, welcome to Caspian and preschool first quarter of 2021 earnings conference call joining us today, our company CEO Kunal Chopra C O O mutual Bailey.
Caffeine Holdings, Inc, CFO, and Kansas, and Caspian and Inc. CFO, Brian quoted following their remarks.
We will open the call for your questions.
And then before we conclude I'll provide the necessary cautions regarding the forward looking statements made by management on this call I.
I would like to remind everyone that this call will be recorded and made available for replay via link available on Investor Relations section of the company's website now I'd like to turn the call.
Over on the Caspian CEO and algebra Sir Please proceed.
Welcome everyone and thank you for joining us today on our first earnings call.
After the market close we issued a press release announcing on results for the fiscal first quarter ended may for 2021.
Copy of the press release is available and the Investor Relations section of our website.
I encourage all listeners to view our release for additional information on what we'd be discussing today.
And with that we'll get started.
Recognizing that many of you listening might be new to the Caspian story.
Like to start with a brief.
A few of the business and then I'll turn the call over to gasoline holdings, CFO, and Pepe and Joe to discuss our financial results for the quarter and.
And your remarks will be followed by comments from the CFO of our operating subsidiary Caspian Inc. Pavlicek.
Who will provide some additional disclosures around our key performance and.
Okay, Lastly, I'll come back on to provide more operational and analysis and closing remarks before turning the call over to questions.
But first I'd like to provide a little bit of background on our company.
Founded as Transworld Entertainment, and 19 and 72, our operations, where historically divided between 2 business.
Mccain and retail and and recently and it's equal.
Within retail we operating a business called for your entertainment or F Y E bike shock.
And if I was on brick and mortar retailer for various legacy media products, including videos and Pee Dee.
As of 2019 and flight segments operated.
Segment, and 10 stores totaling approximately $1.2 million square feet of real estate.
As it relates to E Commerce, and 2016, we acquired E mails and leading third party online retailer.
<unk> used a data driven approach to digital marketplace retailing working with proprietary software.
200, and ecommerce insight to identify new distributors and wholesalers isolate emerging product trends and optimized price positioning and inventory purchase decisions.
In February 2020, we fully committed to our e-commerce and growth strategy.
Sold our ownership position in FY.
Software and subsequently rebranded as Kasper and holdings.
Today gasoline has adopted improved and expanded on our legacy to build a leading e-commerce marketplace growth platform.
We offer and expansive suite of software and services to help brands grow on major online marketplaces, including Amazon.
By Amazon and international Walmart target ebay and others.
We have spent the last decade building and implementing proprietary technologies for brand protection marketing optimization and fulfillment efficiency to generate strong revenue growth forecast and customize won't be called off partner.
We are an integral.
And part of the trillion dollar online marketplace landscape and are positioned to lead third party seller brand growth services for us to call.
We reach our partner to for main avenues retail by acquiring inventory from brands and then using our expertise and economies of scale to sell it on online market places.
Agency by offering our services to brands, who benefit from our expertise and pay as a fee.
Software by licensing our proprietary software to brands, who want to handle that marketplace optimization inhouse and lastly for the complete acquisition of brands that are complementary to our existing portfolio.
All weekend.
And the foundation of our operations, which has steadily grown year over year, while representing the majority of revenues.
However, we are taking a diversified approach to growth through on additional lines of business.
Our goal is to provide a comprehensive set of solutions to address partners' needs at all stages of the online selling journey.
And didn't see and software businesses represent higher margin strong lifetime value opportunities to provide services to partners, who either need additional help to our subject matter and experience or a fully capable of managing their operations, but need the technology stack to do so.
At the end of the spectrum or new acquisition model.
Model also provides partner was at a clear exit strategy, maybe it can drive outsized results based on our expertise and selling through online platforms.
We have a lot of exciting things going on and our company and I look forward to sharing our story with you on the coming quarters and years.
With that overview completed I'll now get into the results for the.
In short it was another strong performance for Caspian in.
And the fiscal first quarter, we improved year over year, and nearly every meaningful financial metrics and kpis.
While we have consistently grown on top line over the past several quarters. We've also seen significantly decreased SG&A cost as a percentage of net revenue.
And we have been able to improve performance, while also adding efficiency.
Our retail business produced a healthy double digit revenue increase and we drove major growth and our subscriptions.
Gross merchandize value on G. M V saw nearly 50% increase overall with a greater than 100 per cent increase and subscription G. M D.
The subscription segment.
And now contributes 33% of total GMB further supporting our diversified approach to scale.
Highlighting our commitment to subscription growth over the last fiscal quarter, we've nearly doubled the size of the subscription fee.
This portion of the business is expanding rapidly and we feel that SaaS provides a great growth.
Both opportunities for cash spend overall.
Across our business, we are pushing to continue growing on internal themes and high growth and high ROI business line.
We have a lot of exciting updates to share, but before I go any further and go to turn the call over to Caspian Holdings, CFO and sappy Enzo to discuss our financial results for the quarter and greater.
And that email Ed.
Thank you can al.
Turning now to our financial results for the fiscal first quarter ended may for 2021.
Our net revenue and the first quarter increased 29% for $46 million up from $31.6 million.
And Q1 of last year and.
The increase and net revenue was primarily attributable to continued strength on the Amazon U S marketplace, Amazon International Walmart target and other marketplaces.
During the period.
We saw an increase in percentage.
<unk> of revenue contribution from our businesses outside of the Amazon U S business, which has historically been our largest contributor.
While we continue to grow steadily within the channel on a dollar basis. The outperformance, we saw within Amazon and international and other new markets contributed.
To this spread.
As we continue to increasingly diversify and expand our revenue streams. We expect this positive trend to continue.
Moving on to gross profit this quarter, we made a reclassification to move several line items that were historically booked under cost.
For goods sold to our selling general and administrative or SG&A expense segment.
Among these expenses were Amazon related commissions, which we pay based on our sales volume.
These changes do not have an impact on our operating or net income.
It should be noted that our gross.
And we'll show a material increase when compared to prior reporting.
However, we believe this update provides a better reflection of both our gross profit and SG&A expenses.
We have and will continue to update comparable year period going forward to ensure comparisons are on.
Mark for life basis.
This quarter gross profit increased 24% to $9.8 million or 24, 1% of net revenue from $7.9 million or 25, 1% of net revenue and the comparable year ago period.
While.
Gross margin decreased overall, our merchandise margin rate increased 50 basis points to 46, 7% compared to 46, 2% and last year's period.
The overall increase in gross profit was primarily attributable to the increase and both net revenue and merchandise margin.
Today's press release includes a table that reconciles our merchandise gross profit to gross margin.
I encourage listeners on the call to review our release for those additional details.
Turning to our selling general and administrative expenses for.
The first quarter of 2021.
Our SG&A expenses decreased 19% to $10.7 million from $13.1 million and fiscal Q1 of last year.
The decrease in SG&A expenses was primarily driven by a $3.7 million decline and general and administrative expenses.
Partially offset by a $1.3 million increase and selling expenses.
The increase and selling expenses is attributable to an increase and marketplace fees due to the net revenue increase.
Our loss per operation from operations for the quarter was 800.
$1000 compared to a loss from operations of $5.2 million and the comparable year ago period.
The improvement and operating results was primarily attributable to higher net revenue and a reduction and SG&A expenses.
Our net loss for the first quarter totaled.
$64 million or <unk> 61.
Per diluted share compared to a net loss of $5.4 million or $2.97 per diluted share and Q1 of 2020.
The improvement and net loss for the quarter was primarily attributable to.
Higher net revenue and the reduction and SG&A expenses.
Adjusted EBITDA and non-GAAP measure was a loss of $258000 compared to a loss of $4.7 million for the same year ago period.
Moving on to the balance sheet.
And we ended the quarter with $5 million and cash compared to $1.8 million as of January 32021, and $7.1 million as of May 2nd 2020.
During the quarter the company raised approximately $13.5 million and gross proceeds.
Prior to deducting underwriting discounts commissions and estimated offering expenses and an underwritten offering of 416600 shares of common stock at a price to the public of $32.50 per share.
A portion of these proceeds were used.
And to pay back $6.3 million and short term borrowings among other expenditures.
We are confident and our cash position to support our growth needs for the foreseeable future.
Cash used in operations was $2.5 million compared to a use of $6.5 million.
And the comparable year ago period.
Inventory at quarter, and was $22.6 million compared to $17.2 million and the comparable year ago period.
This completes my financial summary, I'd now like to turn the call over to Brock for additional.
<unk> insight into our Kpis for the quarter.
Brock.
Thanks, Ed turning now to our <unk> results for the fiscal first quarter ended made for 2021.
Starting with gross merchandise volume or GMB and fiscal Q1 P. M D across our platform increased 48% to.
For $63.4 million from $42.9 million and that come from comparable year ago period.
Included in that number and its retail G. M D as well as subscription GNP retail Dnb was up 30% to $42.6 million compared to $32.8 million in the comparable year ago period.
Subscription.
Scripts, and Dnb increased 105% to $20.9 million or <unk> 33 per cent of total GMB compared to $10.2 million or 23, 7% of total GNP and the comparable year ago period, when compared with Q4 of last year G and be decreased over both the retail and subscription segments by 10%.
2%, respectively and <unk>.
Should be noted that fiscal Q4, historically represents our strongest sales performance owing to increases in retail sales during the holiday season.
The quarter over quarter reflects the seasonality going forward, we generally expect to continue reliably growing G. M b, both in retail and subscription on a year over year.
Sent in 'twenty.
Total active partner count at the end of fiscal quarter..1 was approximately 845, including 708 retail partners and 137 subscription partners. This.
And this represents an 8% overall increase and the partner base on a sequential basis driven by a 124.
Basis, and increase in subscription partners and offset by a 2 per cent decrease and retail partners. The companys retail partner base decreased due to the rationalization of retail partners based on revenue margin and working capital considerations.
First quarter G. M D per active partner increased 37 per cent for $75000 and 2021.
As compared.
Per cent $55000 and the first quarter of fiscal 2020 as noted in today's release, we expect this metric to steadily grow over time as partners derive more value from the Caspian platform, leading to greater partner sales and increase engagement across more product lines.
Subscription and lifetime value to customer acquisition cost ratio or L. T V.
And to cap ratio as of May for 2020, 1 was $3 for assets with an average payback period of 7.7 months. This is an improvement compared to a ratio of 3 <unk> and $8.1 months recorded and the prior quarter and <unk>.
Scripts and partners continue to mature and adopt more features of the Caspian platform. We also.
We expect these metrics to improve over time.
During the fiscal first quarter subscription monthly recurring revenue, our MRI and <unk> increased approximately 106% to $149000 compared to $73000 at the end of the comparable year ago period.
Retail segment gross revenue per partner for the first fiscal quarter increased 32 per cent.
And to $60000 from $45000 and the comparable year ago period.
We would like to highlight the value on our platform is bringing to our partner base, our largest partners on our platform experienced a 44% year over year net revenue growth and the first fiscal quarter of 2021 relative to the same period and 2020.
That completes my summary.
Summary, I'd now like to turn the call back over to canola for additional insights into our operational progress during the quarter as well as an outlook going forward and all.
Thanks Brock.
You just heard and further to my comments from earlier the fiscal first quarter was a strong performance from Caspian and a continuation of that.
The consistent results, we've delivered over the past few quarters.
But beyond the strong financial metrics. We are also continuing to drive on business forward and a lot of other ways, which I'd like to take some time outlining here.
Right now we have a number of major operations initiative work, including new product launches and sales and marketing programs and Boston.
And the ships marketplace Park leadership content, and a new brand acquisition strategy.
I'll now take a minute to go through to these areas more fully beginning the truck.
For the last few months, we have launched 3 new products on the Caspian platform, including our sponsor on brand management day parking and agent.
Sales prediction services.
Sponsored brand management helps partners drive additional traffic and visibility to their brand on the Amazon marketplace and improve sales conversion.
Day parking, which is integrated with our AD manager service enables Amazon and advertisers to scheduled pay per click.
Ads to run only during the days and times that deliver the best results on.
And manager is 1 of the only add management applications available that offers day party, giving us a significant competitive edge.
Lastly agency sales prediction allows partners to more accurately forecast future channel sales.
To optimize the inventory positioning and demand planning to improve revenues and margins on Amazon.
Our cash spend our mission is to optimize and girl brands on today's leading online market places and we continue to expand our value proposition to serve our brand partners to become a 1 stop shop for everything marketplace growth.
Moving to sales.
Sales and marketing our teams have been hard at work over the last quarter refining our inbound marketing strategy that has yielded 2200, new marketing qualified leads are MTO and 770 sales qualified leads our SQL and this year to date. These.
These marketing leads have resulted in a projected 153000.
And the deal so far this year, 34% of which isn't on subscriptions division, resulting in additional monthly recurring revenue.
Last year, we put a lot of focus on operationalized, our sales and marketing teams and the benefits of those investments on now showing and the quality of our 1 deals.
Immersion rates for our marketing and.
And sales pipeline have remained steady this quarter yet the average closed deal size has improved by 30 per cent compared to the prior quarter the market opportunity for our platform of software and services continues to grow at breakneck speed.
For our research the latest number of Amazon Sellers has reached an all time high of 6.
<unk> billion of which $1.6 million and are active.
So far this year there is reported at 348000, new sellers have joined the Amazon marketplace, expanding our scope and total addressable market.
We have sophisticated marketing strategies in place to reach the most relevant of these Amazon sellers to social ads email marketing bids.
Search ads display ads content marketing and more.
In March we announced our approval to sell on target Dot com. So it's invite only target plus program.
And as a target plus partner Caspian is 1 of the only third party sellers currently approved to sell on target Dot com.
Since that announcement at least 17 brands have a flight to act.
2 brands and marketplace Waitlist 1.
1 of a few on boarding parts for that market place.
We are pleased with the initial traction we're seeing and this new marketplace.
Also related to business development, we have recently begun and relationship with international grocery and Brian Kruger and support of our.
And I'll get to serve our brands wherever their customers experience day.
Our brands customer shop on many distribution channels and through strategic partnerships like with Kroger, we aim to expand our reach outside of just Amazon and Walmart.
And this is solid and fire approach towards serving our partners on multiple leading marketplaces and a true omni.
Channel like fashion.
We will be conducting initial tests with Kroger and fiscal Q2 and look forward to sharing our results as we work closely together.
Within the e-commerce landscape cash spend is relatively known names to our core constituency, but we believe there is ample ground to cover to position ourselves as a business and thought leaders.
Activity is where we've been actively engaged to grow the Caspian breath.
We've been conducting content trades, as and blogs, webinars and ebooks with 8 other companies, including vantage BP 11 consulting E Comm engine and sell a smile seller zone.
He and law deliver and my FBA prep with.
And we published 50.
For pieces of content, just this year, including 37 blog posts and podcast episodes and fight E books on for recognized bringing the latest E Commerce news and strategies to our audience are blocked subscriber population has grown 32% year to date and 355% since may 2020.
Demonstrating that readers and.
Content valuable.
For example on state of Amazon and 'twenty 'twenty, 1 the boat, helping e-commerce professionals chop that back for the Euro has 357 downloads since March 15th.
We are continuing to drive the conversation on all things ecommerce and the feedback we're getting is validating our time spent and be there.
I'll now take a minute to discuss updates on our brand acquisition strategy at a high level. We believe there are opportunities to expand our offerings for strategic acquisitions and the brands and services are highly complementary to our existing technology and business.
<unk> spent the last several months developing and initiating a program focused on identifying and ultimately acquiring.
Find out online brands.
Our approach has been deliberate and thoughtful and our intention is to only engage with brands that would be highly complementary to our current operation when included under the catchment umbrella.
Caspian has partnered with over 4000 and brands to date, giving his experience as well as high quality data to identify.
And I and acquire brands that will benefit from our platform.
As of today's call, we have a promising pipeline of companies that we feel would be good fits.
8 and our sourcing we've developed and neural network models called sales that allows us to intelligently score and acquisition target accounts.
Our current pipeline is 160 for companies.
Then to finally being evaluated to be clear, we don't expect most of these to ultimately result in deals, but the broader point is that we have a tremendous opportunity to drive incremental value, even just within our own customer base.
I look forward to providing you with updates on this exciting new area for us in the coming months.
Before we turn the call over.
And discussions I'd like to provide a brief outlook on our operations.
And I hope I've made clear in my remarks cash spend is increasingly becoming a part of the e-commerce fabric as.
As global ecommerce growth, we plan to grow alongside it.
At the same time any macroeconomic impacts that befall our industry will also impact of Covid.
Covid 9.
19, being the obvious recent example in the fiscal second quarter last year, as retail and business and shut down and E Commerce stepped up.
With an extended screen placed on the online sales industry for the better part of 12 months, we've seen supply chain challenges that have been well documented.
These supply chain disruptions are impacting.
Over for businesses Cashman and fluid.
And as it relates to our financial forecast our results and the first quarter are a strong indication on the performance, we expect to drive and the years ahead.
And it relates to fiscal Q2, our performance in 2020 reflected and outsized demand from a world economy at home that has since begun to the door to more normalized activity.
All of these spikes and sales were a 1 time event, which we do not expect to recur during this next quarter.
To be clear, we firmly expect to continue growing over the long term and guest spend remains well positioned to capitalize on the continued global acceleration of e-commerce adoption and expanding market opportunities and the long run.
We.
We remain committed to helping businesses of all sizes grow online. This means offering that software technology and Knowhow to guide our partners for the increasingly complex landscape of digital marketplaces.
Day to our approach has led us to expand from 1 of the origin on third party retailers to a comprehensive platform of software and tech.
My name for it services.
Going forward, we plan to support more marketplaces expand to new geographies and layer on new business models on top of for our existing platform.
We also intend to acquire brands, both within and outside our portfolio and have the data and technology to drive outsized results for those businesses.
In summary, we are encouraged about our potential.
Potential through the next few quarters as we continue 2021 cash business and the strong position, both operationally and financially and we have the team resources and strategy to take full advantage of the long term E Commerce evolution and.
With that we're ready to open the call for your questions operator. Please.
Please provide the appropriate instructions.
Thank you.
At this time and will be conducting a question and answer session.
If you'd like to ask a question. Please press star 1 on your telephone keypad and confirmation tone will indicate your line is and the questions for you you.
You May press Star 2.
And to remove your question from the.
Participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
1 moment, please while we poll for questions.
And our first question is from Roma and.
Do you and Israel with 8 capital. Please proceed.
With your question.
Hi, good afternoon. Thanks for taking my question and congratulations on a quarter.
So I can tell you you referred to some changes and the marketplace. Overall is the world is kind of getting back to normal whatever that new normal will be defined as but I wonder if you could talk about how that affects you certainly appreciate your commentary on how that affects.
Thanks for your core business, how does that affect your marketing to new potential customers to you know with new strategic partners that you've just recently signed on such as targets such as Kroger and.
How how do you see that evolving here over the next few months and quarters. Thank you.
Thank you Rommel, yes, great question, I mean big picture strategy.
Got it and he doesn't change I mean, our goal is to continue to just solve brands.
Cross all the different distribution channel that they are shopping and I thought there, Brian and customers are shopping at whether that's on Amazon and whether that's on Kroger on whether it's on target and Walmart et cetera. So a big picture strategy isn't going to change we're going to continue to sell our brands across the different channels.
What we're generally seeing is knocking on a day, there's some general softness as a whole across the industry right now and but big picture. There's a lot of supply chain issues that we're seeing across the board and so that's where the issues come into play as do you know how do we make sure that we can get inventory appropriately to the channels, where our customers are actually shopping at.
So the challenge is on more on the back and I think as opposed to really on that front, and we're still seeing demand and be pretty high but a little bit of softness in general saw strategy Big picture is not going to change we're going to continue to push forward with everything that we're doing marketing advertisement across all these different channels and in omni channel like manner with.
The core focus now on the supply chain side, which is a big effort for us.
Okay. That's very helpful. Thanks very much.
Youre welcome.
Yeah.
And just as a reminder for everyone. If you have a question you May press star 1 on your telephone and keep.
And do.
Billings for will ensure that you are in the question and assay cube.
And also when you do if you do crestar, 1 and we'd like to remove yourself from the queue and always price start to doing so will take yourself out on the question and answer for you.
And our next question is from Jay Cool room from the more group. Please proceed with your question.
Hello, and thanks for taking my question.
And my question on price of new Amazon storage limitations put in place for FBA sellers and wondering.
Net cash burn and brand and the issues as a result, and new storage limitations and if theres any changes for the business model.
And as long and new categories, such as grocery.
Kris those limitations and the impact kind of England, and the branch and I'm looking at today.
And you.
Great. So I will start you're in with our general approach and then I'd like to hand, it over to Mitch our COO to give us more specifics on the SBA side of things Big.
Picture our strategy is to take a diversified approach, we're taking a diversified approach on the front and we're taking a day looks like they've identified approach on the back and on the front and we don't want to put all our eggs in 1 basket, which is the Amazon and we want to expand to multiple international and market places, we want to expand to Walmart target Kroger et cetera et cetera.
The same principle applies for the backend as well, we don't want to put all our exited and the SBA basket. So we have our oil and warehouse and Spokane and we are working with multiple third party logistics providers like my FBA per Rep would deliver and these are all part of our and die ecosystem on distribution on the backend and saw a general approach is to not.
And with our eggs in 1 basket, but to try to diversify as much as possible that being said you know of course, the Amazon and limitations have affected us and what we're doing is we are transferring a lot of that inventory now to third party logistics providers and are on warehouse as well, but Mitch if you can just add some more detail to that I would appreciate it.
Yeah, Thanks, Ken I'll happy to and and thank you Jay for the question. Yeah can also can all spot on with the approach of diversification from a supply chain standpoint.
What we've observed and what we're noticing is on some of these limitations or restrictions that Amazon is putting in place from an inventory standpoint continue to be moving targets.
I I I believe that those those inconsistency and may persist so the focus across Caspian and and what has allowed us to be agile through this is having that diversified approach are already in our infrastructure and so 1 thing that has been a key focus for us is really creating a curated strategy.
And our partners and that strategy can be different whether it's by category I buy or by size type of of the merchandise that we're working with to come up with the most optimal solution for how warehousing. This inventory to make sure. We're maximizing the coverage across all the different channels that we were selling through so yeah.
With that it's a it's a testament to the agility and the partnership that we have with a lot of our with a lot of our partners.
Excellent. Thank you.
Once again and a higher reminder, if anyone has.
You May press Star 1 on your telephone keypad.
Doing this would mean have yourself joined today's question and answer queue.
And at this time. This concludes our question and answer session I would now like to turn.
And any question back over to Mr. Shaw for his closing remarks.
Excellent. Thank you today for and for joining us on the call I, especially want to thank our employees partners and investors for their continued support I appreciate everyone's time today, operator back to you.
Before we conclude today's call I would like to provide Caspian Sea Harbor statement that includes important cautions regarding forward looking statements made during this call. During today's call. There were for looking statements made regarding future events within the meaning of the private Securities Litigation Reform Act from 1995 share any.
Statements in this communication or forward looking statements.
The statements contained herein day are not statements of historical fact may include forward looking statements and involve a number of risks and uncertainties. We have used the word anticipate believe could estimate expect intend may plan predict project and similar terms and phrases, including references and assumptions.
And this call to identify forward looking statements. These forward looking statements are made based on management's expected expectations and beliefs concerning future events and are subject to uncertainties and factors that could cause actual results to differ materially from the results expressed and the statements. The following factors are among those that may cause actual results to differ materially from.
From the Companys for looking statements risk of a disruption of current plans and operations of Caspian and the potential difficulties and customer and supplier and an employer retention.
The outcome of any legal proceeding and that maybe you instituted against the company the company and level of debt and related and predictions and limitations unexpected costs charges.
<unk> expenses for liabilities.
And its ability to a profit to operating hours at Goldman concern.
Deteriorating economic conditions and macroeconomic factors the impact of the COVID-19 pandemic and other risks described and the company filing with the S. E C. Such as its quarterly reports on form 10-Q and annual reports on forms.
And then 10 basket.
And I should keep in mind and any forward looking statement made by us on this call or elsewhere and pertains only as of the date on which we make it new risks and uncertainties come up from time to time, and it's impossible for us to predict these events or how they may affect us and that of these risks and uncertainties you should keep in mind that any forward looking statements made on this call.
And so it might not occur thank.
Thank you for joining us today for cash is critical first quarter 'twenty 'twenty, 1 and earnings conference call.
Now disconnect.
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