Q2 2022 Kidpik Corp Earnings Call

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Good afternoon and welcome to the KidPick second quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2.

Please note, this event is being recorded.

I would now like to turn the conference over to Ezra DeLa, Chief Executive Officer. Please go ahead.

Thank you, Gary.

We are happy to welcome everyone to today's call to review Q2 2022 and provide an update on the business.

We're going to start with a review of our financial and business highlights.

followed by a financial review which Adir, our CFO , will take us through.

And we will then open the call to Q&A.

Moshadaba, my son, Chief Technology Officer and Chief Operating Officer, is also available for any questions.

Chief Technology Officer and Chief Operating Officer is also available for any questions you may have.

I'd like to start by sharing that new customer revenue and conversion rates increased over the past two months.

We have seen our active subscriber base increase over the past month.

KIPIC's second quarter results fell below our expectation as a result of continued weakness in new customer acquisitions.

and partly due to a decline in industry-wide consumer confidence.

As we previously mentioned, the rate of our new customer acquisition has been impacted by privacy policy changes across social media, which resulted in a 33% lower revenue for the second quarter of 2022.

To address the impact of social privacy policy changes, we have launched several new programs that are beginning to show results.

We have expanded our brand ambassador program.

are focused on our search platform strategy and leveraging our own robust database.

as well as focusing on other channels.

We are constantly working to improve the customer experience and introduce new products and categories for our members to purchase.

Just last week, we launched Kitpick Baby, adding sizes 12 and 18 months to our existing product offerings.

which present an opportunity for growth among our existing members in addition to new target audiences.

We have relaunched our brand website which we invite you to see, presenting an elevated image for the back to school season.

We have added new features to our eCamm's website, HitPickShop, creating a convenient and streamlined way for both members and non-members to shop items, curated outfits, pre-styled boxes.

and our famous 2-4 basics a la carte with no subscription required.

In addition, we are testing an in-home direct mail program that is rolling out as we speak.

We are continuing to explore other paid and unpaid channels to generate new opportunities.

for conversions.

Our team has decades of experience operating a business with an integrated model.

and has honed their expertise across design, merchandising and procurement.

This coupled with the proven proprietary technology and algorithm we have built.

uniquely position us to scale and reach our profitable growth objectives.

Our competitive advantage was in the kid subscription marketplace.

is their ability to deliver

Head to toe, stylized outfits at a great value.

Disposition us.

to service a wide audience.

within the 50 billion and growing children's work marketplace.

As mentioned previously, in the second quarter, we introduced the 12-piece box option.

delivering even more items for our members to purchase in each box.

We are happy to report that almost half of our new members are opting for the bigger box and the keep rate of the 12 piece box are very similar to the traditional 8 piece box.

We are dedicated to fulfilling our mission.

to change the way parents shop by delivering personally styled high quality outfits that make the kids look great and inspire confidence.

Our products and services are appealing to parents who are seeking convenience and style support when it comes to getting their kids dressed.

while also enjoying the excitement of the unboxing and fun discovery experience.

Positive customer engagement is illustrated by the 28,000 average four-star reviews of our service from happy parents and grandparents.

By the way, 15% of active file are actually grandparents. Here's a quote from a grandma.

It has been a remarkable year with Kitbix. The clothes are durable, great quality and quite chic for our 8 and 5 year olds.

The shoes are always a hit too. I would definitely recommend this box to anyone who wants to streamline shopping.

There's always a variety of mix and match outfits. Oh, so versatile.

And a quote from mom basically describes what we are about. My daughter absolutely loves and looks forward to a box every month. I wish I could tell her stylist what a great job she always does.

We have kept everything in each and every single box. As a busy, working mother, it saves me time and my kids look great.

I must tell you this is the type of reviews that drives us to excel and do more.

Having your own brand.

also gives us the opportunity to expand beyond the box.

As mentioned in our first quarter call, we have now implemented a software that enables us to market and sell our branded apparel and shoes on third-party e-commerce platforms.

We are also seeking major retail partnerships with the goal of increased distribution and brand visibility.

We invite you all to please visit us at Kitpick.com to see our new e-commerce brand experience for the Baptist school season.

Thank you for your interest and we look forward to seeing our strategy deliver profitable growth in the years to come.

With that, I will turn the call over to Adir to detail the financial highlights of the quarter.

to a year to detail the financial highlights of the quarter. Here are a few updates onrange financial rootEGIin Buckwad Law,

Thank you, Ezra.

Future revenue was $3.8 million, a decrease of 33.4% year over year.

The decrease in revenue was primarily driven by a decrease in subscription box sales.

due to a reduction in new customer acquisitions in the second quarter of 2022.

Looking at Q2 revenue by channel.

Subscription sales were approximately 3 million, a decrease of 38% year-over-year.

Amazon sales was lower at 559k, a decrease of 22% year over year.

Online website sales increased by 103% to 241K.

Moving to revenue by subscription for the quarter. Active subscriptions or recurring boxes decreased by 31.6% to 2.7 million.

New subscription of first box decreased by 66.1% to 0.3 million

Total subscriptions decreased by 38.4% to 3 million that represents 79% of total revenue.

Turning to gross margin, gross margin for the quarter was 61%, a year-over-year increase of 70 basis points.

shift item for the second quarter decreased by 39%

to 354k.

rate for the first quarter was 69.2% which is in line with our keep rate last year.

On the bottom line, net loss for the quarter was approximately $1.6 million or a loss of $0.21 per share compared to a net loss of $1.4 million or a loss of $0.26 per share last year.

Speaking to non-GAAP adjusted EBDAP,

For the quarter was a net loss of 1.1 million compared to a net loss of 1.2 million last year.

Now to the balance sheet in Cashflow.

cash at the end of the quarter was approximately 2.5 million compared to 8.4 million at the end of 2021.

We used $4.8 million in operating cash flow for the 26-week period.

compared to 3.8 million last year.

We're currently looking at various financing options available to the company in order to enhance our cash position.

As of July 2nd, 2022, we had 17.1 million in total current assets.

$5.3 million in total current liabilities.

and a working capital of 11.8 million.

With that, I will turn the call back to the operator for Q&A. Operator.

We will now begin the question and answer session.

To ask a question, you may press star, then one on your telephone keypad.

If you are using a speakerphone, please pick up your handset before pressing the keys.

To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Our first question is from Edward Riley

Hey guys, thank you for taking my question. I was wondering if you could maybe quantify what you're seeing for the new customer revenue of the two recent months. I was wondering if we should expect new purchases in Q3 to be above that of Q2?

Well, we are seeing an increase in conversions over the past months. As we have mentioned, we have also seen an increase in conversions over the past months.

for the first time over the past year in active subscribers.

So.

At this particular moment, we look forward to that trend to continue into the third and fourth quarter.

Okay, how long do customers typically keep a subscription for?

Yes, Eddie, that's something that we have not shared before.

It's a good bunch of time, but we haven't shared that stat before.

Okay.

For the baby boxes, congrats on rolling that out. I was wondering what percentage of current subscribers maybe might be interested in that box as well.

Which box is that? The pre-styled gift boxes?

The baby box? The baby box?

Well, we just launched it and we've seen, of course, conversions come through like we have before when we launched toddler.

As it relates to a percentage, it's hard to say what that might be. It just launched in late last week.

Mm-hmm.

But you know, you know, it's another two sizes so potentially could increase the business over time

by anywhere from three to five percent.

Do you guys have data on your subscribers that have children in the 12 to 18 month range?

No. No. We only have data on our actual subscribers as to what their age is. We want to help them give us their age.

But as to who else potentially is in the household, we do not.

Okay, and then I'm wondering if you could maybe unpack how the discussion with retail partners has been. Thank you, and good morning.

We're just beginning that.

We wanted to wait for our look and feel and our elevated aspirational look that we just rolled out of Back to School before contacting them. We have our eyes on a few retailers and we look forward to contact them over the next few weeks.

Okay, that's it for me. Thank you.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Ezra DeBoff for any closing remarks.

Thank you.

Thank you, operator.

Thank you all for joining us today. We remain optimistic about our growth potential.

Thank you for your continued support and interest in KidBake.

If you have any additional questions, please contact us at IR at kitbig.com.

Wishing everybody a great day and an inspiring and healthy fall season. It's amazing that we don't talk about summer anymore. It kind of came and left.

So quickly.

Have a great season ahead and thank you again for your interest.

and thank you again for your interest. All the best.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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The chorus call. Please hold. An operator will be with you shortly. Hello, what conference would you like? Hi, it's the Keith Pick.