Kidpik Corp.

Ladies and gentlemen, thank you for standing by and welcome to KidPick Corp. full year and fourth quarter 2021 earnings conference call. Today's call will be conducted by the company's chief executive officer, Ezra Dabba, and its chief financial officer, Adir Kazba. Before I turn the call over to Mr. Ezra Dabba, I'd like to remind you that statements made in this conference call concerning future revenues, results from operations, financial position, markets, economic conditions, growth objectives, 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 GAL. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. With that said, I'd like to turn the call over to Ezra Debye to begin.

Thank you, Operator. We are happy to welcome everyone to our second conference call as a public company. We're going to start with a review of our financial and business highlights, followed by a financial review, which Adir, our CFO, will take us through, and we will then open the call to Q&A. Moshe Daba, my son, who is our Chief Technology Officer and Chief Operating Officer, is also available for any questions you may have. I will start by commenting on top-line margins and some of our KPIs, both in terms of where we stand and some of the drivers and trends we have seen. First, Q4 revenue of $5.3 million brought our annual revenue to $21.8 million, which represents nearly a $6 million increase. or 29% increase versus the prior year. The drivers of that growth were largely unchanged from what we discussed last quarter, namely the sales from boys and toddler product lines and from our fashionable and established girls subscription box. Also for the year, sales of our online e-commerce shop, although small, increased by 75% to 785,000. The fourth quarter ended up being challenging. As discussed in our Q3 call, the revenue reduction was mainly due to changes in data access and availability across social media advertising platforms, which impacted new customer acquisitions. We believe this challenge will remain in place in the near future. We are working to overcome this market-wide change. We are intensifying our focus on existing channels such as Google Search, our newly expanded Ambassador Program, Tic Tac, Pinterest, and Snapchat. In addition, we aim to build upon our existing brand partnerships and introduce new collaborations similar to our partnership with Disney that we announced earlier this month, which will enable us to gain brand awareness amongst new customer databases that contain our target audiences. The team is also in process of adding new customer acquisition channels. We are initiating a paid influencer campaign strategy where we will enlist key influencers in the fashion and parenting space to share their experience with KidPic with their many followers. We are pursuing YouTube and connected TV as advertising channels to communicate our convenient, free, personalized styling service to new audiences. And for the first time, We are planning to roll out targeted in-home direct mail for this upcoming summer season. It's important to note that the fundamentals of our business are strong and the future of our industry is projected to strengthen. We have an executive management team that has built a time-tested and great brand in the children's wear industry. Our combined knowledge of in-house merchandising, sourcing, and branding, coupled with the immense technology we have built with data-driven analytics, gives us a unique position within the kid subscription marketplace and enable us to deliver great product and value to a price-sensitive children's wear consumer. This bodes well for our company as we play in the subscription market known to be one of the fastest growing industries. The service we provide is reviewed by our members, and I quote, all around great, amazing subscription, KidPick knows my kid, obsessed, and in general, lots of love and thanks. We have over 15,000 five-star reviews with more happy reviews coming in daily. We are excited to be fulfilling our mission of changing the way parents shop by delivering personally styled, high-quality outfits that make kids look great and inspire confidence. Lastly, we have built our own KidPick fashion brand which gives us the opportunity to expand beyond subscription by selling our brand through other e-commerce platforms and retail channels. At this time, we are focused on growing our own website e-commerce sales on shop.kitbig.com, which we invite you all to experience and where we see great growth opportunities. So the key takeaways are that we have strong potential for growth and believe we will overcome the current challenge and re-accelerate the pace of new acquisitions. We are confident that the team, the product, and the underlying business value proposition that we have at KitBig will enable us to scale and reach our growth objectives. Our products and services are appealing to parents who value more quality family time, having an expert stylist for their child, getting outfits that make the children look great and feel confident, and the fun unboxing experience and discovery we provide. Last but not least, at a subsequent event to the quarter's end, we announced that Bot Sitchel, joined our board of directors as an independent board member. Bart is known for his marketing expertise, having spent 13 years at McKenzie & Company and almost a decade as chief marketing officer at Burlington Stores. We are excited to have Bart join KidPick and believe he brings great marketing experience, resources, and value to our company. Welcome, Bart. With that, I'll turn over the call to Adir. Adir?

Thank you, Ezra. As Ezra mentioned, Q4 revenue was $5.3 million, a decrease of 10% year-over-year. The decrease in revenue during the fourth quarter was mainly because a reduction in new customer acquisition in the fourth quarter of 2021 due to changes in data access and availability across social media advertising platforms. The revenue for the year 2021 increased by 29% to $21.8 million compared to $16.9 million last year. The increase in revenue for the year was a result of higher sales in each of our product lines, girls' collections, Boy's collections, which we launched in June 2020, and Tudor collections, which we launched in March 2021. Looking at full year revenue by channel, subscription sales increased by 23% to $18.4 million. Amazon sales increased by 70% to $2.6 million. Online website sales increased by 75% to 785K. During the full year revenue by product line, girls apparel increased by 10% to 16.7 million. Boys apparel increased by 140% to 4.4 million. Toodler revenue was 819K versus zero last year. Looking at Q4 revenue by channel, subscription sales were 4.3 million, a decrease of 18% year over year. Amazon sales increased by 51% to 729K. Online website sales increased by 87%, to $279K, turning to Q4 revenue by product line. Girls apparel decreased by 15% to $4 million. Boys apparel decreased by 9% to $1 million. Toodler revenue was $244K versus zero last year. Moving to full-year revenue by subscription. Active subscription or recurring boxes increased by 36.9% to 15.6 million. New subscriptions of first boxes decreased by 19.8% to 2.9 million. Total subscriptions increased by 23.3% to 18.4 million. That represents 84% of total revenues. Turning to gross margin, gross margin for the quarter was 58.7%, an increase of 120 basis points compared to 57.5% in the fourth quarter of 2020. For the year, gross margin was 59.5%, an increase of 110 basis points compared compared to 58.4% last year. Shipped items for the fourth quarter decreased by 19% to 477K, compared to 589K last year. Full-year shipped items were approximately 2.2 million, compared to 1.7 million last year, an increase of 24.9%. Keep rate for the fourth quarter was 70.8% compared to 64.8% last year. Full year average keep rate was 69% compared to 66.1% last year. The keep rate for the full year and the quarter represents a record for the company. On the bottom line, Net loss for the quarter was approximately $1.9 million or a loss of $0.28 per share compared to $1.3 million or a loss of $0.34 per share last year. The net loss for the year was approximately $5.9 million or a loss of $1.05 per share. compared to approximately net loss of 4.2 million or a loss of $1.12 per share last year. Speaking to non-GAAP adjusted EBITDA, for the quarter was 1.4 million compared to 1.1 million last year, primarily due to a 564K increase in net loss offset partially by 329K in equity-based compensation expense recorded in the fourth quarter. Now to balance sheet and cash flow. Cash at the end of the year was approximately 8.4 million compared to 133K at the end of 2020. We completed our IPO in November 2021 issuing about 2.1 million shares at a public offering price of $8.50 per share, resulting in aggregate gross proceeds of $18 million and net proceeds of approximately $16.1 million. In November 2021, after the IPO, we paid off in full the $3.2 million our line of credit. As of January 1, 2022, we had $22.2 million in total current assets, $7.4 million in total current liabilities, and a working capital of $14.8 million. With that, I will turn it back to the operator for Q&A. Operator?