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spk02: 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.
spk05: 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?
spk03: 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?
spk02: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Again, the command to put yourself into queue is star 1 on your telephone keypad. One moment, please, while we poll for questions. All right, first question comes from Eddie Riley with EF Hutton. Please proceed with your question.
spk00: Hey, guys. I was wondering if you'd comment on the social media advertising environment today versus maybe in the fourth quarter. I'm wondering if Facebook has maybe done anything in order to make advertising more effective, or is it roughly the same as a few months ago?
spk01: Hey, this is Mojo. I'll take that. Okay. It's a good question.
spk04: It's definitely been a struggle with Facebook being able to get the data in terms of the restrictions that iOS 14 has put in place. Facebook, I believe, has been making some improvements, and they're every day changing their algorithms, what they're telling us to help us identify customers on a better basis.
spk00: Okay, gotcha. And on the keep rate, congrats there. Is this more driven from existing customers or new customers? Could you unpack that a little bit for me on what's really driving the increase in keep rate?
spk01: Marshall, do we have that answer? Is it existing versus new?
spk05: Go ahead, Adil.
spk03: Yes, for KeepRate, we saw improvement of KeepRate on a quarterly basis. And the KeepRate is increasing anywhere between a point or two points, between quarter to quarter in the last year or so. So it's just showing the improvement of the platform, our ability to... to get merchandise that our customers want. So we are very happy, very pleased with the level of keep it, as we saw in the last quarter, of 70.8%, and for the year, 69%.
spk05: Eddie, as you know, the vast majority of our business is subscription, which is repetitive. So it's definitely coming from both. but the vast majority is repetitive, almost 80%.
spk00: Okay, great. And then it looks like Amazon sales have increased a lot. Could you give me some color on what you're doing to drive growth in that channel?
spk05: Well, there's much more growth we have in that channel. At this particular time, we are basically only selling, I would say, a couple of handful of basic items of ours. And so we see more growth, more growth in Amazon. Again, because we have a brand and because we could sell it through other platforms, we look forward in the future to basically be not just on Amazon, potentially be on eBay, on Walmart, on Target stores, and potentially other platforms. So we do look forward to expand the platform that we sell the KitPick product through.
spk00: Gotcha. And finally, last one for me on shipping and handling. What's the term of the contracts you guys have?
spk04: Our contract with FedEx is somewhat evergreen. There are are some portions of the contract expiring in January of 23. And those portions, I don't know if we have any public information about that, but it does not have to do with our discounted rates. The part that's expiring has to do with another part of the contract.
spk00: I was wondering if you guys had any ability to potentially increase prices per box to maybe offset any increases in shipping prices?
spk05: Yeah, we have over the past couple of quarters actually, you know, increased our prices somewhat to, you know, overcome some of the additional expenses for bringing the merchandise in from the Far East. So no different than we have seen most other retailers do the same. So, we'll continue to do so and make sure that our IMUs targets are met to the extent that we experience any additional costs.
spk01: All right, great. Thanks, guys. Appreciate it. Thank you. Thank you.
spk02: Our next question comes from Susan Anderson with B Reilly. Please proceed with your question.
spk06: Hi, good evening. I was curious, I may have missed this, I got on late, but did you guys say why the subscription box revenue was down in the quarter?
spk05: Mainly due to acquisitions being down during the quarter, new acquisitions.
spk06: Got it. Okay, got it.
spk05: It has to, yeah.
spk03: We said that there was new restrictions on, privacy restrictions on certain social media platforms that impact the acquisition. Got it.
spk06: Okay. And then I guess I'm just curious, along those lines, you're not seeing, though, I guess any change in consumer spending behavior by your customer just given inflation and maybe cycling of the stimulus from last year as we kind of look into this year?
spk05: We haven't seen that as of now.
spk06: Okay. And then I guess just how are you thinking about the drivers of growth by channel for this year? And then like how are you, the Disney partnership, you know, what do you think that's going to mean for the brand and just driving awareness to the brand? And then with the subscription boxes, are you expecting those to be down again in first quarter?
spk05: Yeah, we are expecting that to continue at this particular time. We have taken quite a few measures to change that. We are implementing a paid influencer program as we speak. We are intensifying collaborations with other companies similar to what we did with Disney. We are intensifying looking at other channels that we haven't really played in before, specifically connected TV, YouTube, which will be new to us. And we look forward to intensifying some of the other channels that we really haven't played much in, such as Pinterest, Tic Tac, Snapchat, and the like.
spk06: Got it. And did you guys talk about what you're expecting just in terms of growth by channel for the this year and how you think the new Disney partnership will have an impact on, I guess, awareness of the brand and help to drive growth.
spk05: Yeah. On the whole, we don't speak about, uh, future projections. So we really haven't commented on that. Um, we have done the Disney partnership as it relates to the new movie, uh, cheaper by the dozen. And, uh, This is the second time or maybe even a third time that we have done a partnership with Disney, so we look forward to others in the future.
spk06: Great. Okay, thanks so much, you guys.
spk01: Thank you. Thank you.
spk02: We have reached the end of the question and answer session. I'd now like to turn the call back over to Ezra Debaugh for closing comments.
spk05: Thank you, operator. Thank you all for joining us today. Thank you for your interest. Thank you for your support. If you have any additional questions, please contact us at ir.kitbic.com. Wishing everybody a great day and great upcoming new month of April. Thank you.
spk02: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
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