Q3 2022 Kidpik Corp Earnings Call

Hello, and welcome to the Kid pick third quarter 2022 financial results 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 todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.

To withdraw your question. Please press Star then two please.

Please note this event is being recorded.

I would now like to turn the conference over to Azure adoption. Please go ahead.

Thank you operator.

We are pleased to welcome everyone to today's call.

Where we will review Q3, 2022.

To provide an update on the business.

You'll begin Ms review of our financial and business highlights.

Road by a financial review, which would be our CFO will take us through.

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

Moshe I buy my Sun, our Chief Technology Officer, and Chief operating Officer.

Also available for any questions that you may have.

I'd like to start by sharing that as third quarter results were for the most spot.

<unk> was our most recent earnings despite the increasingly challenging macro environment and the continued impact of changes in social media privacy policy.

Our new customer acquisitions.

On a macro level.

Inflation increased interest rates and declining consumer confidence.

Weakened consumer sentiment, resulting in lower discretionary spending compared to the previous year.

Yeah.

In the face of a challenging consumer environment, we have taken actions to ensure the health of our company.

We have substantially reduced purchases by new inventory.

And I've focused on increasing sales from our comment elevated inventory level, which we believe will support our cash flow needs in the short term and give us the runway needed to scale, our subscriber business, a surprising subscriber base and demonstrate a profitable business formula in it.

Additionally, we have taken other actions, including reduction in various operating costs.

Our team is committed to making the business profitable during the third quarter, we have managed to level off and keep the number of active subscribers constant.

We are focused on growing our member base through new and existing paid and unpaid channels.

We are also increasing our proprietary brand sales through our own E Commerce site shop that could take dotcom and other third party platforms.

During the third quarter, we achieved a meaningful increase in engagement with our customers and prospective customers.

Unpaid social initiatives, which supports market.

Basketball program.

We are continuously upgrading our proprietary technology platform to improve the customer experience and introduce new products and categories with the goal of growing sales.

During the third quarter.

We added size 12, and 18 months to our existing product offering introduced huskins NIM sizes, and a selection of our basic bottoms and tops.

And we have recently launched a limited edition NASA collection for holiday gifting that inspires learning for boys and girls.

Our competitive advantage of delivering to head to toe stylists athletes at great value is appealing to parents and grandparents were seeking convenience and style support when it comes to getting their kids dressed in confidence as they grow.

While also enjoying the excitement of unboxing and the fun of discovery together as a family.

The customer satisfaction about subscription service as demonstrated by the 29000 average four star reviews.

We look forward to finding efficient ways to introduce many more customers to our personalized subscription service.

Yeah.

I think now on proprietary brand <unk>.

Is there opportunity to expand beyond the box.

We have recently developed technology that will allow us to list up products for sale.

Third party retail e-commerce platform with the goal of increased distribution brand visibility and sales.

We invite you all to visit our newly launched holiday website at <unk> Dot com to see elevated E Commerce brand experience with added new UX convenient features.

Through a revamped website customers can shop fashion items gift items.

We made it up its restart boxes.

Famous basics and the many items you mean recently listed as gifts under $10 for the holiday season.

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

With that I'll turn the call over to a dear to detail the financial highlights for the quarter.

Oh Dear.

Thank you Luisa.

You'll see revenue was 3.6, maybe one a decrease of 34, 8% year over year.

And a decrease of 3.7% quarter over quarter.

The decrease in revenue was primarily driven by a decrease in subscription books sense.

Looking at Q3 revenue by channel subscription Sands were approximately $2 9 million a decrease of 39, 6% year over year.

Amazon says was lower at 469, K, a decrease of 17, 6% year over year.

Online the website says increased by 14, 5% to 297 K.

Moving to revenue by subscription for the quarter active subscriptions or carrying boxes decreased by 46%.

Two to four inch freely on year over year.

New subscriptions first bulks decreased by 35, 2% to 600 K.

Total subscriptions decreased by 39, 6% to $2 9 million down 3%, 79% of total 11.

Turning to gross margin.

Gross margin for the quarter was 16, 3% a year over year increase of 210 basis points.

Sheep item for the third quarter decreased by 36% to 350 8-K.

Keep it for the first quarter.

It's 68, 5%, which is in line without rate last year.

Well the bottom line net loss for the quarter was approximately 2.4 million or a loss of 32 cents per share compared to net loss of $1 2 million or a loss of 22 cents per share last year.

Yeah.

Speaking to non-GAAP adjusted EBITDA for the quarter was a net loss of $2 1 million compared to a net loss of one 4 million last year.

No.

Our balance sheet and cash flow.

Cash at the end of the quarter was approximately 220 okay.

Which we used 7 million in operating cash flow.

The 39 weeks.

Compared to five 6 million last year.

In order to improve our cash position in the near term, we plan to significantly reduce our purchases of new inventory.

And if available.

Enter into a cash advance so other financing arrangements.

As of October 1st 2022.

We added 15.8 medium and total current assets $6 1 million in total current liabilities.

And they're walking capital of $9 7 million.

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

Thank you.

We'll now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

You were using a speakerphone please pick up your handset before pressing the keys.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Today's first question comes from Edward Riley with E. F. Hutton. Please go ahead.

Okay.

Hi, guys.

A reversal in new subscriptions is it's nice to see just going from Q2 to Q3, while I'm wondering what's driving this and maybe if you could provide any information on the trends in October and November .

Okay.

Hi, how are you doing it's hard for us to provide information in October we usually don't do that.

As it relates to basically.

Managing to keep high subscription constant and not having it Paul.

We are.

We did.

Very nicely on.

Why do you feel about existing channels, we actually found a way to.

Facebook to work once again.

Oh, Wow that channel is quite broken and it really happy too.

See that working again for us.

And were using.

Other channels as many as we can and are very very focused going forward on maximizing every possible channel to get acquisitions.

At the same time, you also buy it.

Focused in making sure that the CAC acquisition is it reasonable kayak to make sure that the CAC to LTV ratio is profitable not just spending.

The stake of increasing subscribers.

Making sure that the CAC is a reasonable cash for us and it's profitable.

TV.

Yeah.

Okay got you. Thanks.

But Facebook working for you guys again, it seems to be a cause to be a pretty big deal.

Yeah.

I'm just wondering if there any other channels that.

You used in the past that that might begin to show improvement again.

Well, we've tried pinterest for quite a few quite a few times to know US well, we are actually really happy to see Pinterest working of course to some extent more expensive than the Google or Facebook channel, but it's working and in a reasonable way for us.

So from that point of view, it's it's nice to see using using at the channels as well using ambassador is in a much bigger way.

We are focused on.

Oh, which is actually increasing.

So we are focused on every and every possible channel and we think there's more room for us to.

Our focus in even a bigger way going forward.

Okay great.

And you mentioned some some cost cutting initiatives that you guys are taking where are these cost coming from and I'm wondering if you could maybe quantify how much savings you're expecting.

Okay.

Constant coming I mean, I don't do you want to take this yes.

Yeah. So so.

We are looking on several items on our operating expenses, we we some over the course of the already cut or eliminated.

And some of the costs, we are planning to do in doing this the Q4 of <unk>.

22, but it's not just one line item it says several.

And seven plus with a plan to reduce.

Okay.

Great.

That's all I had thank you.

Mhm, Thank you right.

This concludes our question and answer session I would like to turn the conference back over to Al <unk> for any closing remarks.

Okay.

Thank you operator, and thank you all for joining us today.

Keep your continued support and interest in <unk>.

If you have any additional questions. Please contact us if I could pick that con.

Wishing everyone, a great day, and inspiring and healthy holiday season.

Yeah.

Yeah.

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