Kidpik Corp.

Ladies and gentlemen, thank you for standing by and welcome to Kid Pick Corporation's third quarter 2021 earnings conference call. Today's call will be conducted by the company's chief executive officer, Ezra Dabar, and its chief financial officer, Adir Kasav. Before I turn the call over to Mr. Ezra Dabar, I'd like to read you the company's abbreviated safe harbor statement. I'd like to remind you that statements made in this conference call concerning future revenues, results from operations, financial position, markets, economic conditions, product releases, partnerships, and any other statements that may be construed as a prediction of future performance or events are forward-looking statements, which may involve known and unknown risks and uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides a useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. With that said, I'll turn the call over to Mr. Devar Ezra.

Thank you, John. We are happy to welcome everyone to our first conference call as a public company. We thank you for your trust and for your interest. We will start by reviewing some financial and operating highlights, followed by financial review, which Adir will take us through, and we will then open the call for Q&A. Moshe Daba, my son, who is our Chief Technology Officer, is also available for any questions you may have. From a financial highlight perspective, Q3 revenue was $5.6 million, an increase of 20.3%. On a nine-month basis, revenue was $16.6 million, an increase of 49.5% over the same period last year. Driving those results are sales from our new Boy Subscription Box Collection, which we launched last year in June of 2020, a continued increase in our girl subscription box business, and to a lesser extent, our new toddler box collection that we launched earlier this year at the end of March 2021. Recurring subscription revenue was $14.2 million, or 85.5% of our total revenue for the nine-month period compared to with 9.7 million or 87.7% in the previous period. This past November, we successfully completed an upsized 18 million IPO and went public on NASDAQ. I'd like to take a moment to thank our team for this big milestone achievement, thank our professional consultants for their direction and help, NASDAQ for welcoming us, and many of you, our new shareholders, for trusting in us. We look forward to achieving our growth objectives by leveraging our merchandising expertise, the technology we have built, and the knowledge our team has gained over the past five years in the rapidly growing subscription industry and the massive children's apparel market. For context, 2021 revenue in the U.S. children's apparel market alone is projected to reach nearly $50 billion. Subscription is one of the fastest-growing industries, and we believe we here at KidPick have the potential to be the leader in the kids' clothing subscription space. Our management team has a track record of fast growth, specifically in the children's apparel market. As you may know, key members of the Key Pick team took the children's play stores public in 1997 and grew the chain from $150 million to over $2 billion in revenue in a period of just 10 years. As you can imagine, it was a wonderful and exhilarating write-up. Together, we have more than 150 plus years of collective experience in children's wear, controlling and building our own in-house brands across design, merchandising, procurement, specialty retail, brand building, e-commerce, and marketing. We believe this gives us a strong competitive advantage to drive growth and maximize sales. The IPO has strengthened our balance sheet, giving us the ability to take KidPick to the next level and drive shareholder value. We look forward to growing vertically by increasing our subscriber base and horizontally by introducing new apparel categories and other kids' products. Looking at the vertical subscriber growth, While we have been negatively impacted in our subscriber base this fourth quarter due to iOS privacy changes, we have put a strategy in place to optimize the performance of our social channels, Facebook, Instagram, TikTok, YouTube, Pinterest, and Snapchat. To offset the iOS privacy challenge, we are implementing an organic growth strategy. With this strategy, Our goal is to leverage our most important asset, our customers, by enlisting and encouraging our customers to be advocates of the KitPik brand. Customers will share their experience with KitPik and be rewarded with credit for referrals acquired through their social channels. This program will be integrated with our proprietary Refer-A-Friend technology platform. In addition, We plan to scale our influencer ambassador program in which we partner with fashion and lifestyle influencers to promote the Kid Pick brand, and in return, they can earn an affiliate commission on referrals. Brand partnership is another vehicle we are looking to expand. We have partnered with Lego and Disney in the past, and are planning to grow our partnership with with other non-competitive subscription box companies to drive traffic to our website and build brand awareness. On the horizontal growth front, we're looking to expand our product offering beginning in the second half of 2022 by introducing Husky and Slim collections and adding newborn sizes 12 and 18 months to our service. Lastly, We are building our own KidPic brand. This gives us the opportunity to expand beyond subscription by selling our brand through other channels. At this time, we intend to focus on growing our own website e-commerce sales and increasing KidPic sales on the Amazon platform. Taken together, our performance in Q3 and our IPO in November resulted from the hard work and dedication of our team over the last five years. Since our inception in 2016, we have successfully launched subscription-based children's apparel lines, standing on the shoulders of decades of experience growing revenue and brands in the children's apparel industry. With a bolstered balance sheet, channel strategy, and our proven proprietary technology to support scale. We are excited about the future of KitBic. With that, I will turn the call over to Adir. Adir?

Thank you, Ezra. As Ezra mentioned, Q3 net sales increased by 20.3% to 5.6 million compared to 4.6 million in the third quarter of 2020. The increase in revenue was primarily driven by our new merchandise offerings of boys' collections beginning in June 2020, an increase in girls' collections, and increase in Tudor collection, which will launch in March 2021. Looking at Q3 revenue by channel, subscriptions increased by 18.2% to 4.7 million. Amazon sales increased by 17.2% to 569K. And online website sales increased by 96% to 259K. Turning to Q3 revenue by product line, girls apparel increased by 6.3% to $4.2 million. Boys apparel increased by 60.4% to $1.1 million. Toodler revenue was $273,000. Shifting to nine month results, nine month revenue increased by 49.5% year over year to 16.6 million. Looking at nine month revenue by channel, subscriptions increased by 45.8% to 14.2 million. Amazon sales increased by 77.9% to 1.9 million. and online website sales increased by 69.1% to 506K. Turning to nine-month revenue by product line. Girls apparel increased by 21.9% to 12.6 million. Boys apparel increased by 376% to 3.3 million. Toodler revenue was $574K and was only launched in March 2021. Moving to nine-month revenue by subscription. Active subscriptions or recurring boxes increased by 55.7% to $11.5 million. New subscriptions for the first boxes increased by 14.9% to 2.7 million. Total subscriptions increased by 45.8% to 14.2 million. That represents 85.5% of total revenue. Turning to gross margin. Gross margin was 58.2% compared to 59.3% in the third quarter of 2020. Nine-month gross margin was 59.8% compared to 58.9% last year. Shipped items. increased by 18.9% of 559K compared to 470K in the third quarter of 2020. Nine-month shipped items were approximately 1.7 million compared to 1.1 million last year, an increase of 47.5%. Average keep rate for the third quarter was 68.8% compared to 68.2%. Nine months average keep rate was 68.5% compared to 67 last year. On the bottom line, net loss was approximately 1.2 million or a loss of 22 cents per share. compared to approximately a loss of 1 million or a loss of 26 cents per share in the third quarter of 2020. Nine months net loss was approximately 4 million or a loss of 77 cents per share compared to 2.9 million or a loss of 78 cents per share last year. Now, To balance sheet and cash flow. Cash and cash equivalent at the end of the third quarter was approximately 205K compared to 133K at the end of 2020. After quarter end, KitPick completed an IPO issuing about 2.1 million shares at a public offering price of $8.5 per share. resulting in aggregate gross proceeds of $18 million and net proceeds of approximately $16.1 million. Line of credit at the end of the third quarter totaled $3.2 million, compared to $2 million at the end of the fiscal year 2020. In November 2021, we paid in full the outstanding $3.2 million line of credit. Net cash used in operating activities increased to $5.6 million for the 39 weeks this year, compared to $2.4 million for cash used during the 39 weeks last year. With that, I will turn back to the operator for Q&A. Operator?