Kidpik Corp. (NASDAQ:PIK) Q2 2023 Earnings Call Transcript

Kidpik Corp. (NASDAQ:PIK) Q2 2023 Earnings Call Transcript August 15, 2023

Operator: Greetings, and welcome to the Kidpik Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ezra Dabah. Thank you, Ezra. You may begin.

Ezra Dabah: Thank you, operator, and thank you, everyone, for joining us today. We are pleased to welcome everyone to today's call where we will review Q2 2023 and provide an update on Kidpik’s business. We will begin with a review of our financial business highlights, followed by a financial review, which, Jill, our Chief Accounting Officer, will take us through. I'd like to start by sharing that our second quarter earnings were, for the most part, consistent with our first quarter. During the second quarter, we continued to take action to execute our plan to reduce inventory levels while maintaining our gross margin of about 60%. We are focused on increasing sales from our current inventory level, which we believe will support our cash flow needs in the short term.

In preparing for the back-to-school season, we have taken the opportunity to elevate the look and feel of our brand and the experience of our subscription service and to further enhance shopping options. We believe that the combination of our marketing team's efforts to vividly showcase our unique app and the confidence children feel while wearing Kidpik against the backdrop of Central Park. With the tech advancements made by our technology team, we have enriched our brand and website user experience. In our continued commitment to value addition, we recently launched exclusive member benefits, including a 10% discount at our Kidpik shop for active members. Our active subscriber base has been stable over the second quarter and year-to-date.

We believe we hold a competitive advantage within the kids clothing subscription marketplace by our ability to personalize and deliver head-to-toe stylized outfits at a great value. We continue to explore other paid and unpaid channels to generate new opportunities for conversions. Having our own proprietary Kidpik brand gives us the opportunity to expand beyond our subscription boxes. In the second quarter, we have grown our e-commerce shop sales by 72% over the same period last year. We also experienced sales increases and demand for our products on the Walmart e-commerce platform. We invite you to visit kidpik.com and shop.kidpik.com to view our back-to-school collection and experience the technology that drives it. With that, I will turn the call over to Jill to detail the financial highlights for the quarter.

Jill?

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Jill Pasechnick: Thank you, Ezra. Q2 revenue was $3.4 million, a decrease of 7.7% year-over-year and a decrease of 8.6% quarter-over-quarter. The decrease in revenue was primarily driven by a decrease in subscription box sales. Looking at Q2 revenue by channel, subscription sales were approximately $2.6 million, a decrease of 12.3% quarter-over-quarter. Third-party website sales were lower at $427,000, a decrease of 23.6% quarter-over-quarter. Online website sales increased by 71.9% to $414,000 for the quarter. Moving to revenue by subscription for the quarter. Active subscriptions or recurring boxes decreased by 17.8% to $2.2 million year-over-year. New subscriptions of first box increased by 32.7% to $0.4 million. Total subscriptions decreased by 12.3% to $2.6 million, which represents 76% of total revenue.

Turning to gross margin. Gross margin for the quarter was 60.2%, a year-over-year decrease of 80 basis points. Shipped items for the second quarter decreased by 18% to 290,000. Keep rate for the second quarter was 75.1% versus 69.2% for the second quarter last year. On the bottom line, net loss for the quarter was approximately $2 million or a loss of $0.26 per share compared to a net loss of $1.6 million or a loss of $0.21 per share for the second quarter last year. Speaking to non-GAAP, adjusted EBITDA for the quarter was negative $1.7 million compared to negative $1.1 million for the second quarter last year. Now to the balance sheet and cash flow. Cash at the end of the quarter was approximately $163,000 compared to $2.5 million at the end of 2022.

We used $0.4 million in operating cash flow for the 26-week period compared to [$4.0] (ph) million last year. In order to improve our cash position, we have significantly reduced purchases of new inventory and may enter into a cash advance or other financing arrangements. As of July 1, 2023, we had $11 million in total current assets, $6 million in total current liabilities and working capital of $4.9 million. With that, I will turn the call back to the operator for Q&A. Operator?

Q - :

Operator: [Operator Instructions] Thank you. There are no questions at this time. I would like to hand the floor back over to management for any closing comments.

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