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Kidpik Corp. (NASDAQ:PIK) Q4 2022 Earnings Call Transcript

Kidpik Corp. (NASDAQ:PIK) Q4 2022 Earnings Call Transcript April 3, 2023

Operator: Good day. And welcome to the Kidpik Corporation Fourth Quarter and Fiscal Year 2022 Financial Results Conference Call. Please note this event is being recorded. I would now like to turn the conference over to your CEO, Ezra Dabah. Please go ahead, sir.

Ezra Dabah: Thank you, operator. And welcome everybody. We are pleased to welcome everybody to today's call, where we will review Q4 2022 and provide an update on the business. We will begin with a review of our financial and business highlights, followed by a financial review, which Adir, our CFO, will take us through and then we will open the call to Q&A. I'd like to start by sharing that our fourth quarter results were improved for the most part compared with our recent earnings. Our fourth quarter revenue was $4.7 million, up by 30.6% over the third quarter while keeping our operating expenses down resulting quarter-over-quarter reduction in net loss by 26.4%. In the face of a challenging consumer environment, we're taking actions to ensure our company's health.

We have substantially reduced purchases of new inventory and are focused on increasing sales, utilizing our current elevated inventory level, which we believe will support our cash flow needs in the short term. In addition, we took actions to reduce our go forward operating costs. Our goal is through a combination of driving increase in sales along with cost cutting measures to reduce our cash burn and to further extend our operating run rate. We continually upgrade our proprietary technology platform to improve customer retention and experience to grow our sales. During the fourth quarter, we began selling the Kidpik brand on Walmart.com and recently became a trusted partner. In addition, at the end of the fourth quarter, we expanded our product offering on Amazon.com, allowing us to market our full Kidpik collection through their marketplace.

kid, fashion, nike
kid, fashion, nike

Photo by Taylor Smith on Unsplash

We remain focused on acquiring new customers through performance based digital channels, including content marketing and social media. Our competitive advantage of delivering head to toe stylized outfits at affordable prices is appealing to parents and grandparents who are seeking convenience and style support when it comes to getting their kids dressed. Our service evolves with their children's style as they grow, while also enjoying the excitement of unboxing and the fun and discovery together as a family. The customer satisfaction of our subscription service continues to be demonstrated by the 29,500 average four star reviews. We look forward to finding efficient ways to introduce many more parents and grandparents through a convenient, time saving and personalized kid subscription service.

Having our own proprietary Kidpik brand gives us the opportunity to expand beyond the box. We have grown our online website sales by 121% over last year's fourth quarter. We are focused on increasing sales and brand exposure through a third party channel such as Amazon and Walmart. We witness the happiness we deliver to kids daily, and we look forward to more parents discovering the benefits of our service. Thank you for your interest and support. With that, I'll turn over the call to Adir to detail the financial highlights of the quarter. Adir?

Adir Katzav: Thank you, Ezra. Q4 revenue was $4.7 million, a decrease of 10% year-over-year. The revenue for the fiscal year 2022 decreased by 24.5% to $16.5 million, compared to $21.8 million last year. The decrease in revenue during the fourth quarter and the fiscal year 2022 was mainly due to a reduction in subscription box sales. Looking at Q4 revenue by channel. Subscription sales were approximately $3.5 million, a decrease of 17.1% year-over-year. Third party website sales decreased by 18.6%, to $593,000. Online website sales increased by 120.6%, to $615,000. Moving to revenue by subscription for the quarter, active subscription for recurring boxes decreased by 28.3%, to $2.9 million. New subscriptions for the first box increased by 247%, to $600,000.

Total subscriptions decreased by 17.1%, to $3.5 million. That represents 75% of total revenue. Turning to gross margin. Gross margin for the quarter was 58.9%, an increase of 20 basis points compared to 58.7% last year. For the fiscal year, 2022 gross margin was 59.9%, an increase of 40 basis points compared to 59.5% last year. Shipped items for the fourth quarter decreased by 21.6% to $374,000 compared to $477,000 last year. Full year shipped items were approximately $1.5 million, compared to $2.2 million last year, a decrease of 32.5%. Keep rate for the fourth quarter was 67.6%, compared to 70.8% last year. Full year keep rate was 68.3%, compared to 69% last year. On the bottom line, net loss for the quarter was approximately $1.8 million, or a loss of $0.23 per share compared to a net loss of $1.9 million, or a loss of $0.28 per share last year.

The net loss for the year was approximately $7.9 million, or a loss of $0.99 per share compared to approximately net loss of $5.9 million or a loss of $1.05 per share last year. Speaking to non-GAAP adjusted EBITDA for the quarter was a net loss of $1.5 million, compared to a net loss of $1.4 million last year. Now to the balance sheet and cash flow. Cash at the end of the year was approximately $601,000. We used $6.7 million in operating activities during the fiscal year 2022, compared to $11 million cash used in 2021. To improve our cash position, we have reduced purchases of new inventory and may enter into a financing arrangement. As of yearend, we had $14.6 million in total current assets, $6.3 million in total current liabilities, and a working capital of $8.3 million.

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

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