Aterian, Inc.

Welcome to a Tarion Inc. Q1 earnings report conference call. My name is James, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the Q&A session, if you have a question, please press star 1 on your phone. And I'd like to turn the call over to Ilya Gorzovsky, Director of Investor Relations and Corporate Development. Ilya, please go ahead.

Thank you. Thank you for joining us on today's call to discuss Atarian's first quarter 2021 earnings results. On today's call are Yaniv Sarig, co-founder and CEO, and Arturo Rodriguez, our chief financial officer. A copy of today's press release is available on the investor relations sections of Atarian's website at atarian.io. I would like to remind you that certain statements we make in this presentation are forward-looking statements, and these forward-looking statements reflect Atarian's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Atarian's business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included on our first quarter earnings release, as well as our filings with the SEC. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information future events, or otherwise. In addition, the company may refer to certain non-GAAP metrics on this call. Explanation of these metrics can be found in the earnings release filed earlier today. With that, I will turn the call over to Yaniv.

Thanks, Ilya, and good afternoon, everyone. I'm really excited for this first conference call with Ethereum, following our rebranding announcement last week. Changing our company name to Ethereum was an important decision we thoughtfully considered over a significant period of time. First of all, it was about telling our story more concisely. As a company at the intersection of e-commerce, technology, and consumer products, we often found that those new to our story had a difficult time grasping the full breadth of our vision. Thanks to the strong work of our team, our new website does a great job at explaining our business and the differentiation our team is driving the consumer product industry. As many of you are aware, this week, an anonymous short seller made various unfounded claims against our business practices and integrity and offered to reap profits from a decline in our stock. We welcome questions from all our shareholders and have always been proud to showcase what our incredible team has built through the years on the technology, marketing, and supply chain side. Yesterday, we issued a release where we addressed the factual inaccuracies and mischaracterizations. If you wish to spend time with us to learn more about our efforts to build a scalable consumer product platform for e-commerce, please reach out to Uday Grozovsky, our director of IR, whose email can be found at the bottom of our earnings release. We welcome investors to see live demonstration of our ME platform, to answer questions about our business, to go to our go-to-market strategy, all subject to our IFD, of course. We hope that the content we share helps those who are interested in our company understand what our tech platform actually does, the nuances of online marketing, and the efforts we have made to be competitive while remaining compliant with rules and regulations. Q1 was an incredible learning opportunity for our company. While we faced the most difficult supply chain challenges in the history of our firm, despite all our efforts, we were not able to maximize the full potential of our portfolio revenue. Regardless, I know that we learned a lot and improved on many fronts. In my seven years leading this company, I have learned that every time our team is tested, we come out stronger and more capable. To our sourcing, supply chain, and operations team, I've watched you fight through the incredible complexity of daily supply chain disruption, both domestically and internationally, while continuing to work on the supply chain optimization of our recent acquisitions. On behalf of all shareholders, I thank you for your efforts and dedication, as well as our ability to creatively solve difficult problems on the fly. To give more context to the audience today regarding the scale of the crisis, According to Drury, a maritime research and consulting service, the historical shortage of containers in Q4 and Q1 2021 has led to a three- to four-time increase in cost of shipping, while the reliability of marine schedules has plummeted to 55% by September 2020, as reported by Sea Intelligence. Comprised by the increased demand for e-commerce items and continued growth of certain top products, we struggle to keep inventory on hand and missed approximately $6 million in sales for the quarter. Over the past three quarters, we believe that we missed a cumulative approximately $20 million in revenue as a result of inventory shortages. We continue to monitor the challenging international shipping environment and have chosen to remain conservative with our adjusted EBITDA guidance in case shipping rates, container congestion, pricing of last-mile shipping, and other supply chain factors continue to increase and affect our bottom line. We expect to have more clarity on the normalization of the supply chain irregularities in the coming months. As most of you already read in our earnings press release today, we're proud to announce that we're officially adding two new brands to our portfolio. As previously mentioned, we closed the acquisition of Photopaper Direct, a leading online brand in the office and printing business based in the United Kingdom. Photopaper Direct has established itself as a category leader in various internet media product categories and created a strong mode on Amazon. This strong addition to our portfolio further diversifies our product categories as well as our footprint on various marketplaces in Europe. We intend to leverage the company's local team expertise in the European market to accelerate our international expansion. Additionally, we're super excited to announce that Squatty Potty is joining us here in family, adding a nationally loved brand to our portfolio. Squatty Potty has brought to market health and personal care products with a touch of humor and an abundance of caring for others while creating an entire category in the space. According to our estimates, an average of a million searches of Squatty Potty products occur on Amazon.com every month. With a product appearing early on Shark Tank and video ads watched over 30 million times on YouTube, we believe Squatty Potty is poised to continue to dominate the market it's created, which is a significant opportunity expanding the brand's success in the United States into international channels, as well as developing additional products to delight the brand's followers. On a broader note, we continue to pursue our M&A strategy and review new opportunities on a weekly basis. We intend to continue to invest in our team infrastructure and deal flow capabilities to drive growth through the acquisitions. When it comes to launching new products, this quarter marks a record for our company with 21 new products introduced. While initially we projected launching a higher amount of products, we recalibrated in favor of quality and timing and are very happy with our achievements on that front given the complex challenges with blockchain that affected our manufacturing partners as well. Certain products that suffered delays have been put on hold as their launch could have missed seasonality-related windows. Additionally, COVID travel restrictions have prevented our team from being able to completely and fully run quality control procedures, which resulted in some cancellation and delay. Overall, our team have worked tirelessly to overcome these challenges, and I think we made the best possible judgment calls given our expectations versus the reality that's been imposed on us. We're looking forward to the challenges and exciting opportunities ahead in Q2 and beyond. Lastly, I thought it was important on this call to address questions around some of the management team's selling of stocks during the last open trading window. As we mentioned in previous earnings calls, most of management's stock holding, including mine, are in the form of restricted stocks. And as you may know, taxes for these shares are due at a time of vesting, and no individual on the team is able to cover those taxes without selling. Also, we've elected to preserve the company's cash for growth versus covering management's significant tax liabilities. Most of the shares that were sold were done to cover taxes with some individuals choosing to sell additional shares after many years of hard work. It's important to mention, too, that we've required the management team several times to delay the vesting of their shares and even on one occasion to forfeit their shares in order to protect the potential downward pressure on the company's share price that could have resulted from tax-related selling. Our management team includes some of the hardest-working and most dedicated people I've ever had the privilege of partnering with, and they remain extremely invested in the company's long-term success. On a personal note, as part of my long-term wealth planning, and as reported in 2019, I decided to gift a significant portion of my holding in the company to an irrevocable trust on behalf of the benefit of my children. This company is my life's work, and I continue to do everything in my power to lead in a way that drives maximum long-term shareholder value. With that, I'll pass it on to Arti for our finance update.