Kaspien Holdings Inc. Reports Fiscal Third Quarter 2022 Results - 13.12.22 - News

SPOKANE, Wash., Dec. 13, 2022

Management Commentary

"During the third quarter, we began seeing the results of our vendor rationalization and remediation strategy. Gross margin for the quarter improved to 22.6% from 19.8% in the second quarter and general and administrative expenses decreased $0.4 million from the prior year third quarter. Our focus for the fourth fiscal quarter is on prudent and strict inventory and cash flow management to set the foundation for fiscal 2023," said Kaspien interim CEO Brock Kowalchuk.

Fiscal Third Quarter 2022 Financial Results

Results compare 2022 fiscal Third quarter ended October 29, 2022 to 2021 fiscal Third quarter ended October 30, 2021 unless otherwise indicated.

Net revenue decreased 9.4% to $29.1 million from $32.2 million in the comparable year-ago period. The decrease in net revenue was primarily attributable to declines in Fulfillment by Amazon United States ("FBAUS"). Gross merchandise value ("GMV") for the three months ended October 29, 2022 was $63.9 million as compared to $63.5 million for the three months ended October 30, 2021. Retail GMV decreased 7.8% to $30.4 million compared to $33.0 million in the comparable year-ago period. Subscription GMV increased 9.8% to $33.5 million, or 52.4% of total GMV, compared to $30.5 million, or 47.6% of total GMV, in the comparable year-ago period.
Gross profit decreased 17.9% to $6.6 million or 22.6% of net revenue from $8.0 million or 24.9% of net revenue in the comparable year-ago period. The decrease in gross profit was primarily attributable to a reduction in net revenue for FBAUS, and a decrease in merchandise margin. 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)

October 29, 2022

October 30, 2021

$

%

Merchandise margin

$

12,691

$

14,653

$

(1,962)

-13.4 %

% of net revenue

43.5 %

45.5 %

-2.1 %

Fulfillment fees

(3,888)

(4,375)

487

-11.1 %

Warehousing and freight

(2,228)

(2,274)

46

-2.0 %

Gross profit

$

6,575

$

8,004

$

(1,429)

-17.9 %

% of net revenue

22.6 %

24.9 %

Selling, General & Administrative ("SG&A") expenses were $9.3 million or 31.8% of net revenue as compared to $10.0 million or 31.1% of net revenue in the comparable year-ago period. The decline in SG&A expenses was due to a reduction in Selling expenses related to the decline in Net revenue and a $0.4 million reduction in General and administrative expenses.
Loss from operations was $2.7 million, compared to a loss from operations of $2.0 million in the comparable year-ago period. The increase in operating loss resulted from the decline in net revenue and a reduction in merchandise margin.
Net loss was $3.6 million, or $0.92 per diluted share, compared to a net loss of $0.9 million, or $0.36 per diluted share, in the comparable year-ago period.
Adjusted EBITDA loss (a non-GAAP metric reconciled below) was $2.3 million, compared to an adjusted EBITDA loss of $1.4 million in the comparable year-ago period.
As of October 29, 2022, the Company had $0.8 million in cash, compared to $1.2 million as of January 30, 2021 and $1.8 million as of October 30, 2021.
Cash used in operations during the thirteen weeks ended October 29, 2022 was $6.3 million, compared to $5.1 million in the comparable year-ago period.
Inventory at quarter end was $37.4 million, compared to $30.0 million as of October 30, 2021.
As of October 29, 2022, the Company had borrowings under its credit facility of $9.5 million and had $5.2 million available for borrowing.

Fiscal First Nine Months Financial Results

Results compare nine months ended October 29, 2022 to nine months ended October 30, 2021 unless otherwise indicated.

Net revenue decreased 11.9% to $94.8 million from $107.7 million in the comparable year-ago period. This decrease in net revenue was driven by declines in the Company's FBAUS segment.
Gross profit was $20.2 million or 21.3% of net revenue, compared to $26.6 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:

	Thirty-nine Weeks				Change
		October 29,		October 30,	$		%
(amounts in thousands)		2022		2021	$		%

Merchandise margin	$	40,858	$	49,309	$	(8,451)	-17.1 %
% of net revenue		43.1 %		45.8 %		-2.8 %

Fulfillment fees		(13,110)		(16,218)		3,108	-19.2 %
Warehousing and freight		(7,593)		(6,455)		(1,138)	17.6 %
Gross profit	$	20,155	$	26,636	$	(6,481)	-24.3 %

% of net revenue		21.3 %		24.7 %

SG&A expenses decreased 2.9% to $30.0 million or 31.6% of net revenue from $30.9 million or 28.7% of net revenue in the comparable year-ago period. The decrease in SG&A expenses was primarily attributable to a $1.9 million decline in selling expenses partially offset by a $1.0 million increase in general and administrative expenses.
Loss from operations totaled $9.8 million compared to a loss from operations of $4.3 million in the comparable year-ago period. The increased loss was due to lower Net revenue and gross margin.
Net loss was $12.4 million, compared to a net loss of $2.2 million in the comparable year-ago period.
Adjusted EBITDA loss (a non-GAAP metric reconciled below) was $8.9 million, compared to a loss of $3.2 million in the comparable year-ago period.
Cash used in operations was $12.2 million, compared to $10.0 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; (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

Thirty-Nine Weeks Ended

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