Kaspien Holdings Inc.

Good afternoon. Welcome to Caspian's fiscal first quarter 2021 earnings conference call. Joining us today are company CEO Kunal Chopra, COO Mitchell Bailey, Caspian Holdings Inc. CFO Ed Sapienza, and Caspian Inc. CFO Brock Kowalczyk. Following their remarks, we will open the call for your questions. Then, before we conclude, I'll provide the necessary cautions regarding the forward-looking statements made by management during this call. I would like to remind everyone that this call will be recorded and made available for replay via a link available in the investor relations section of the company's website. Now, I would like to turn the call over to Caspian's CEO, Kunal Chopra. Sir, please proceed.

Welcome, everyone, and thank you for joining us today on our first earnings call. After the market closed, we issued a press release announcing our results for the fiscal first quarter ended May 1st, 2021. A copy of the press release is available in the investor relations section of our website. I encourage all listeners to view our release for additional information on what we'll be discussing today. And with that, we'll get started. Recognizing that many of you listening might be new to the Caspian story, I'd like to start with a brief overview of the business. Then I'll turn the call over to Caspian Holdings CFO, Ed Sapienza, to discuss our financial results for the quarter. Ed's remarks will be followed by comments from the CFO of our operating subsidiary, Caspian Inc., Brock Kovalchuk, who will provide some additional disclosures around our key performance indicators. Lastly, I'll come back on to provide more operational 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 in 1972, Our operations were historically divided between two business segments, retail, and in recent years, e-commerce. Within retail, we operated a business called Foyer Entertainment, or FYE for short. FYE was a brick and mortar retailer for various legacy media products, including videos and CDs. As of 2019, the FYE segment operated 210 stores, totaling approximately 1.2 million square feet of real estate. As it relates to e-commerce, in 2016, we acquired eTales, a leading third-party online retailer. eTales used a data-driven approach to digital marketplace retailing, working with proprietary software and e-commerce insights to identify new distributors and wholesalers, isolate emerging product trends, and optimize price positioning and inventory purchase decisions. In February 2020, we fully committed to our e-commerce growth strategy, sold our ownership position in FYE, and subsequently rebranded as Caspin Holdings. Today, Caspin has adopted, improved, and expanded on our legacy to build a leading e-commerce marketplace growth platform. We offer an expansive suite of software and services to help brands grow on major online marketplaces, including Amazon, Amazon 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 for Caspian customers whom we call our partners. We are an integral part of the trillion-dollar online marketplace landscape and are positioned to lead third-party seller brand growth services for years to come. We reach our partners through four main avenues. Retail by acquiring inventory from brands and then using our expertise and economies of scale to sell it on online marketplaces. 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 their marketplace optimization in-house. And lastly, to the complete acquisition of brands that are complementary to our existing portfolios. Our retail arm is 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 our 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. Our agency and software businesses represent higher margin, strong lifetime value opportunities to provide services to partners who either need additional help through our subject matter and experience or are fully capable of managing their operations but need the technology stack to do so. At the end of the spectrum, our new acquisition model also provides partners with a clear exit strategy where we can drive outsized results based on our expertise in selling through online platforms. We have a lot of exciting things going on at our company, and I look forward to sharing our story with you in the coming quarters and years. With that overview completed, I'll now get into the results for the quarter. In short, it was another strong performance for Caspian. In the fiscal first quarter, we improved year over year in nearly every meaningful financial metric and KPI. While we have consistently grown our top line over the past several quarters, we've also seen significantly decreased SG&A costs as a percentage of net revenue, meaning 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 in our subscription business. Gross merchandise value, or GMV, saw a nearly 50% increase overall, with a greater than 100% increase in subscription GMV. The subscription segment now contributes 33% of total GMV, 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 team. This portion of the business is expanding rapidly, and we feel that SAS provides a great growth opportunity for Caspian overall. Across our business, we are pushing to continue growing our internal teams in high growth and high ROI business lines. We have a lot of exciting updates to share, but before I go any further, I'm going to turn the call over to Caspian Holdings CFO, Ed Sapienza, to discuss our financial results for the quarter in greater detail. Ed?

Thank you, Kunal. Turning now to our financial results for the fiscal first quarter ended May 1st, 2021. Our net revenue in the first quarter increased 29% to $40.6 million, up from $31.6 million in Q1 of last year. The increase in net revenue was primarily attributable to continued strength on the Amazon US Marketplace, Amazon International, Walmart, Target and other marketplaces. During the period, we saw an increase in percentage of revenue contribution from our businesses outside of the Amazon US 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 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 of 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 margin will 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 periods going forward to ensure comparisons are on a like-for-like 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 in 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% in last year's period. The overall increase in gross profit was primarily attributable to the increase in both net revenue and merchandise margin rate. 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 in fiscal Q1 of last year. The decrease in SG&A expenses was primarily driven by a $3.7 million decline in general administrative expenses, partially offset by a $1.3 million increase in selling expenses. The increase in selling expenses is attributable to an increase in marketplace fees due to the net revenue increase. Our loss from operations for the quarter was $861,000 compared to a loss from operations of $5.2 million in the comparable year-ago period. The improvement in operating results was primarily attributable to higher net revenue and the reduction in SG&A expenses. Our net loss for the first quarter totaled $1.4 million or 61 cents per diluted share, compared to a net loss of $5.4 million or $2.97 per diluted share in Q1 of 2020. The improvement in net loss for the quarter was primarily attributable to higher net revenue and the reduction in SG&A expenses. Adjusted EBITDA, a non-GAAP measure, was a loss of $258,000 compared to a loss of $4.7 million for the same year-ago period. Moving on to the balance sheet, we ended the quarter with $5 million in cash, compared to $1.8 million as of January 30, 2021, and $7.1 million as of May 2, 2020. During the quarter, the company raised approximately $13.5 million in gross proceeds prior to deducting underwriting discounts, commissions, and estimated offering expenses in an underwritten offering of 416,600 shares of common stock at a price to the public of $32.50 per share. A portion of these proceeds were used to pay back $6.3 million in short-term borrowings among other expenditures. We are confident in 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 in the comparable year-ago period. Inventory at quarter end was $22.6 million compared to $17.2 million in the comparable year-ago period. This completes my financial summary. I'd now like to turn the call over to Brock for additional insights into our KPIs for the quarter. Brock?