Kaspien Holdings Inc. Reports Fiscal Second Quarter 2022 Results

SPOKANE, Wash., Sept. 13, 2022

Recent Operational Highlights

• The Company reported the two highest sales days in Company history during the Amazon Prime Day event on July 12^th and 13^th.
     
• Through disciplined inventory and cash management, the Company reduced the cash outflow from operations for the thirteen weeks ended July 30, 2022 to $0.1 million from $5.7 million for the thirteen weeks ended April 30, 2022 and compared with $2.4 million in the comparable year ago period.
     
• On July 14, 2022, the Company closed on an equity offering. The gross proceeds to the Company from the private placement, after deducting placement agent fees and other estimated offering expenses payable by the Company, were approximately $7.1 million. The Company intends to use the net proceeds from the private placement for working capital and other general corporate purposes.
     
• During the first half of 2022, management implemented the following strategic initiatives, operational efficiencies, and other considerations directed toward improving performance, operations, and cash flow:
      
• Vendor Rationalization and Remediation. Using a profit-driven approach, the Company determined there was an opportunity to rationalize and remediate its vendor portfolio to improve profitability, streamline core operations and improve efficiency. Rationalization and remediation activities included terminating unprofitable vendors and improving vendor relationships through negotiations focused on improving gross margin and supply chain efficiencies. Total active partner count as of July 30, 2022 was approximately 172, including 150 retail partners and 22 subscription (Agency and Software as a Service) partners.
     
• SG&A Rationalization. The Company implemented strategic initiatives to create operational efficiencies directed towards improving operating performance and cash flow to align with the current and future business focus. As part of these initiatives, a reduction in force was implemented during the second quarter of fiscal 2022. Additional reductions implemented included expenses related to technology and hardware.

Management Commentary

"In response to the decline in operating results in Fiscal 2021, we implemented several strategic initiatives to create operational efficiencies while focusing diligently on inventory and cash management. Our team continues to be focused on scalable, efficient growth and improving the unit economic of our business as we enter the holiday season." said Kaspien interim CEO Brock Kowalchuk

Fiscal Second Quarter 2022 Financial Results
Results compare 2022 fiscal second quarter ended July 30, 2022 to 2021 fiscal second quarter ended July 31, 2021 unless otherwise indicated.

• Net revenue decreased 3% to $33.9 million from $34.9 million in the comparable year-ago period. The decrease in net revenue was primarily attributable to declines in Fulfillment by Amazon ("FBA") US, which were partially offset by continued growth in Subscription revenue. Gross merchandise value ("GMV") increased 14% to $72.4 million, compared to $63.5 million in the comparable year-ago period. Subscription GMV increased 36.4% to $36.7 million (50.7% of total GMV), compared to $26.9 million (42.4% of total GMV) in the comparable year-ago period.
      
• Gross profit decreased 24% to $6.7 million or 19.8% of net revenue from $8.8 million or 25.3% of net revenue in the comparable year-ago period. The decrease in gross profit was primarily attributable to a reduction in net revenue on the Amazon US platform, a decrease in merchandise margin, and increased warehousing and freight expenses. The table below summarizes the year-over-year comparison of gross margin:

		Thirteen Weeks Ended ARIVA.DE Börsen-Geflüster Kurse Kaspien Holdings 0,0061 $ -35,5%						Change
(amounts in thousands)		July 30, 2022			July 31, 2021			$		%
Merchandise margin		$	14,121		$	15,936		$	(1,815)	-11.4 %
% of net revenue			41.6 %			45.7 %			-4.1 %
Fulfillment fees			(4,655)			(5,393)			738	-13.7 %
Warehousing and freight			(2,739)			(1,708)			(1,031)	60.4 %
Gross profit		$	6,727		$	8,835		$	(2,108)	-23.9 %
% of net revenue			19.8 %			25.3 %

• Selling, General & Administrative ("SG&A") expenses were $10.2 million or 30.1% of net revenue as compared to $10.2 million or 29.3% of net revenue in the comparable year-ago period. During the quarter, the Company implemented certain strategic initiatives to create operational efficiencies to reduce general and administrative expenses.
     
• Loss from operations was $3.5 million, compared to a loss from operations of $1.4 million in the comparable year-ago period. The increase in operating loss resulted from the decline in net revenue, a reduction in merchandise margin and increased warehousing and freight expenses.
     
• Net loss was $4.4 million, or $1.69 per diluted share, compared to net income of $82,000, or $0.03 per diluted share, in the comparable year-ago period.
     
• Adjusted EBITDA loss (a non-GAAP metric reconciled below) was $3.2 million, compared to an adjusted EBITDA loss of $0.8 million in the comparable year-ago period.
     
• As of July 30, 2022, the Company had $1.3 million in cash, compared to $1.2 million as of January 30, 2021 and $2.6 million as of July 31, 2021.
     
• Cash used in operations during the thirteen weeks ended July 30, 2022 was $0.1 million, compared to $2.4 million in the comparable year-ago period. The reduced cash used in operations was due more disciplined supply chain and working capital management.
     
• Inventory at quarter end was $29.4 million, compared to $25.0 million as of July 31, 2021.
     
• As of July 30, 2022, the Company had borrowings under its credit facility of $3.9 million and had $7.7 million available for borrowing.

Fiscal First Half 2022 Financial Results
Results compare six months ended July 30, 2022 to six months ended July 31, 2021 unless otherwise indicated.

• Net revenue decreased 13% to $65.7 million from $75.5 million in the comparable year-ago period. This decrease in net revenue was driven by declines in the Company's FBA US segment.
     
• Gross profit was $13.6 million or 20.7% of net revenue, compared to $18.6 million or 24.7% 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 US platform, a decrease in merchandise margin and increased warehousing and freight expenses. The table below summarizes the year-over-year comparison of gross margin:

• SG&A expenses decreased 0.7% to $20.7 million or 31.5% of net revenue from $20.9 million or 27.6% of net revenue in the comparable year-ago period. The decrease in SG&A expenses was primarily attributable to a $1.5 million decline in selling expenses partially offset by a $1.4 million increase in general and administrative expenses.
     
• Loss from operations totaled $7.1 million compared to a loss from operations of $2.2 million in the comparable year-ago period. The increased loss was due to lower sales and gross margin.
     
• Net loss was $8.8 million, compared to a net loss of $1.3 million in the comparable year-ago period.
     
• Adjusted EBITDA loss (a non-GAAP metric reconciled below) was $6.5 million, compared to a loss of $1.0 million in the comparable year-ago period.
     
• Cash used in operations was $5.9 million, compared to $4.9 million in the comparable year-ago period.

About Kaspien
Kaspien Holdings Inc. (f/k/a Trans World Entertainment Corporation) (NASDAQ: KSPN) is a leading e-commerce marketplace growth platform, offering an expanding suite of software and services to help brands grow on Amazon, Walmart, Target, eBay, and other online marketplaces. Founded in 1972 as a brick-and-mortar retailer and rebranded as Kaspien in 2020, the Company has spent the last decade building and utilizing proprietary technologies for brand protection, marketing optimization, and fulfillment efficiency to generate rapid revenue growth for its partners. Through innovative strategies and best-in-class technologies, Kaspien has earned the trust of many leading brands, including 3M, Strider Bikes, and ZippyPaws. For more information, visit kaspien.com.

Non-GAAP Financial Measures
Adjusted EBITDA is defined as net loss, adjusted to exclude: (i) income tax expense; (ii) Other (income) loss; (iii) interest expense; and (iv) depreciation expense. Our method of calculating adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. We use adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present adjusted EBITDA as a supplemental measure because we believe such a measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial performance under GAAP in the United States and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP.

	Thirteen Weeks Ended			Twenty-Six Weeks Ended
	July 30,	July 31,		July 30,	July 31,
(amounts in thousands)	2022	2021		2022	2021
Net loss	$        (4,416)	$              82		$         (8,846)	$    (1,335)
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