Kaspien Holdings Inc.

Good afternoon. Welcome to Caspian's fiscal second 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 four 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 CEO, Kunal Chopra. Sir, please proceed.

Welcome everyone and thank you for joining us today. After the market closed, we issued a press release announcing our results for the fiscal second quarter ended July 31st, 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. To begin today, I'd like to run through a high-level overview of our operational highlights from the fiscal second quarter. Then I'll turn the call over to Caspian Holdings CFO, Ed Sapienza, to discuss our financial results for the quarter. Edge 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. And with that, let's get started. In the fiscal second quarter, we responded well in the face of global supply chain challenges that have impacted businesses the world over. Stemming from the COVID-19 pandemic, industry-wide headwinds meant sales were harder to come by, and many brands and marketplaces were limited in their ability to meet demand when it was there. While many organizations have been severely impacted operationally and also financially by inventory shortages and inflationary price increases, I am pleased to report that our team has navigated the terrain effectively during this period, which is a testament to their abilities as well as the resiliency of our operating model. Our past operational decisions, including setting up a distributed flexible supply chain, allowed us to better respond in current circumstances. In recent months, we have successfully mobilized our teams to establish a more robust directive fulfillment model by utilizing our regional warehousing locations to minimize gaps in lead times across the supply chain. In some cases, we also introduced drop shipping as an option for select partners. This coordinated response provided a better experience for our brand partners who had been previously reliant on Amazon FBA. And despite these logistical challenges, I'm pleased to report that we have been able to drive a 50 basis point increase in overall GMV, a 33% increase in subscription GMV, and a 16% increase in subscription monthly recurring revenue during the period. Within our strategic grants, GMV increased 5.5%, signifying the continued durability of our most meaningful lines as well. Our non-Amazon marketplaces also continue to perform well. registering 72% growth as a group, largely driven by success on our new and growing Target Plus program. Traditionally, much of our business has been transacted on Amazon, and we are pleased to see growth in our up-and-coming marketplaces as we look to expand to a more representative omni-channel enterprise. Also, while the retail arm of our business was most directly impacted by industry headwinds, We were encouraged to see that our subscriptions vertical continued to show year-over-year improvement, including a 27% increase in our partner accounts. We also doubled the number of account managers to support existing and anticipated growth going forward. These increases further proved that Caspian has a real opportunity to expand in our subscriptions area regardless of the macroeconomic environment. On the product side of things, we also made significant platform technology upgrades this quarter in service of our mission to become a one-stop shop for our partners. More specifically, we implemented reporting capabilities in our platform dashboard, improved product targeting management, added sponsored brand video management to our ad manager software, and developed a new partner-central rapid prototype, among other updates, which I'll explain more fully in a few minutes. The broader point is that these ongoing improvements will position us well for greater partner success and satisfaction in the future. As an aside, in August, our ad manager software was even awarded the Marketing Automation Innovation Award in the fourth annual Martech Breakthrough Awards, which are hosted by a leading market intelligence organization that recognizes the top companies, technologies, and products in the global marketing, sales, and advertising technology industry today. Past winners have included global leaders such as Adobe, HubSpot, Shopify, the Trade Desk, and Squarespace, among others. To be included in such a prestigious group is both humbling and also a testament to the great work we have done to lead with our technology first. We appreciate that MarTech Breakthrough can recognize our commitment to excellence for all our customers and their important and valued small businesses around the world. All this is just to say we're continuing to improve, grow, expand, and refine in all key areas of our business. I look forward to delving deeper, but before I go 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 second quarter ended July 31st, 2021. Net revenue in the second quarter decreased 18% to $34.9 million from $42.3 million in the comparable year-ago period. The decrease in net revenue was primarily attributable to ongoing supply challenges in our Fulfillment by Amazon, or FBA, US segment, which were offset by continued growth in our other marketplaces. Over the six months ended July 31st, 2021, net revenue increased 2% to $75.5 million from $73.9 million in the comparable year ago period. The increase in net revenue was driven by improved performance from non-Amazon marketplaces and the subscription segment. Moving on to gross profit, This quarter, gross profit decreased 17% to $8.8 million or 25.3% of net revenue from $10.7 million or 25.3% of net revenue in the comparable year-ago period. Gross profit over the first six months of this fiscal year was $18.6 million or 24.7% of net revenue compared to $18.6 million or 25.2% of net revenue over the comparable year-ago period. The decrease in gross profit was primarily attributable to a reduction in net revenue on the Amazon U.S. platform. Gross margin year-over-year remained flat despite a decline in merchandise margin rate as a result of the leveraging of fulfillment fees and warehousing and freight expenses. Turning to our selling general and administrative expenses for the second quarter of 2021, our SG&A expenses decreased at 9% to $10.2 million or 29.3% of net revenue from $11.2 million or 26.4% of net revenue in fiscal Q2 of last year. SG&A expenses over the six months ended July 31st, 2021 decreased 14% to $20.9 million or 27.6% of net revenue from $24.3 million or 32.9% of net revenue in the comparable year-ago period. The decrease in SG&A expenses was primarily attributable to a decline in general and administrative expenses. Our loss from operations for the second quarter was $1.4 million compared to a loss from operations of $493,000 in the comparable year-ago period. The increase in operating loss was the result of the decline in net revenue partially offset by a decrease in cost of sales and SG&A expenses. Over the first six months of the fiscal year, loss from operations totaled $2.2 million, an improvement from $5.7 million in the comparable year-ago period. The improvement in operating results was the result of higher net revenue and a reduction in selling general and administrative expenses. Our net income for the second quarter totaled $82,000 or 3 cents per share compared to a net loss of $899,000 or 49 cents per share in Q2 of 2020. Over the six months ended July 31st, 2021, net loss was $1.3 million compared to a loss of $6.3 million in a comparable year-ago period. The improvement to net income and loss for both periods was driven by a reduction in SG&A expenses as well as a $1.9 million benefit resulting from the company's Paycheck Protection Program loan being forgiven during the period. Adjusted EBITDA, a non-GAAP measure, was a loss of $754,000 compared to an adjusted EBITDA of $23,000 for the same year-ago period. For the six months ended July 31st, 2021, our adjusted EBITDA loss was $1 million compared to a loss of $4.7 million in the comparable year-ago period. Moving to the balance sheet, we ended the quarter with $2.6 million in cash compared to $1.8 million as of January 30th, 2021. We ended the quarter without any borrowings on our credit facility and had $10.1 million in availability. Over the six months ended July 31st, 2021, our cash used in operations was $4.9 million compared to $8.1 million over the same year ago period. We expect to be in a borrowing position with our line of credit at the end of fiscal third quarter with increased sales in the fourth quarter providing a partial counterbalance to pay down the investment. Inventory at the end of the quarter was $25 million compared to $20.6 million as of August 1st, 2020. 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.