Aterian, Inc.

Thank you for standing by your Atarian Earnings Conference call. We'll begin momentarily. Again, thank you for your patience, and please continue to stand by. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Good day, and thank you for standing by. Welcome to the Atarian Q1 2022 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require assistance during the conference, please press star 0. I would now like to hand the conference over to your speaker today, Ilya Grasovsky, Director of Investor Relations and Corporate Development.

Thank you for joining us today to discuss Atarian's first quarter 2022 earnings results. On today's call are Yaniv Tsarig, co-founder and CEO, and Arturo Rodriguez, our Chief Financial Officer. A copy of today's press release is available on the Investor Relations section of Atarian's website at atarian.io. I would like to remind you that certain statements we will 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 these risks and uncertainties associated with the forward-looking statements to be made on this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter earnings release, as well as our filings on 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.

Thank you, Ilya, and thank you, everyone, for joining us today. On the call today, I'll go over the following topics. I'll start with a quick introduction to Ethereum for those who are newer to our story. I'll then review key takeaways from the first quarter of this year. I'll then discuss the continued challenges we're dealing with given the economy and macro-level pressure from supply chain disruptions and inflation. I will then summarize the long-term prospects for Ethereum. So for those who are newer to the story, here's what you need to know about our company. Ethereum is part of a new breed of technology-enabled consumer product companies. We focus on building, acquiring, and partnering with e-commerce brands online. Ethereum operates 14 consumer brands selling products across various categories on channels such as Amazon, Walmart, Shopify, and eBay. To allow us to scale, we invested in building our own proprietary software platform called Amy. Amy enables our team to manage our business more efficiently by injecting technology into processes that would otherwise have to be executed manually and would require hiring an unscalable and unsustainable workforce. Through its ability to analyze vast amounts of data and automate daily recurring tasks, AMI allows our team to find new product opportunities we can launch under our brands, manage these products at scale effectively across various channels, automate certain marketing and fulfillment tasks, and much more. Our goal in the long term is to become one of the most efficient consumer companies in the world, expanding our footprint globally while continuing to invest in technology and agile supply chain to drive scale and profitability. Moving now to our key takeaways from the first quarter. I'll start with a quick summary of the main points and then discuss them in more detail. Notwithstanding inflationary and supply chain pressures, we believe that once the macro-level environment improves, Ethereum is more than ever well-positioned to become a leader in the space. We have an incredible team, which keeps getting better, and our resolve to build a leading consumer platform in e-commerce is stronger than ever. Global recession fears are mounting, but we think that there is a silver lining. As global demand for products cool down, we expect to see improvement in supply chain and logistics costs. We believe that we have the balance sheet necessary and many additional levers we can pull to get through this difficult environment. We're preparing to resume growth and profitability when the macro level challenges subside. We're focusing on strengthening our team and infrastructure. We hired Anton Van Ruden as our new global COO, and I'm working closely with him on preparing the organization for rapid and systemic scale. We're looking at acquisition targets constantly with an important focus on brands that are less affected by the supply chain crisis. We've been diligent, cautious, and patient given the current environment. With these important points in mind, I'd like to now discuss each of them in further details. It's no surprise that the micro-level environment continues to put near-term pressure on our business. At the same time, our leadership continues to be excited about Ethereum's long-term prospects and focused on laying the groundwork necessary to ignite growth. The last couple of weeks have made it clear to everyone that the economy is witnessing a whiplash effect driven by the monetary policies adopted by governments around the world to counter the COVID-19 pandemic. Many people ask us why supply chains have been so dramatically disrupted in the last year and a half. There's no simple answer, but it's obvious to us in hindsight that the massive injection of cash by governments around the world to stimulate the global economy during the pandemic is a big part of the culprit. With most traveling services being unavailable during the initial lockdowns of 2020, government monetary support was dramatically skewed towards retail online consumption. With consumer appetite for products skyrocketing, logistics companies could not react fast enough to invest in more ships and airplanes to transport goods. Given this asymmetric demand for shipping services against limited capacity, prices of shipping skyrocketed, further escalating inflation. On Amazon itself, we're seeing an increase in price of goods across most categories. As many on this call have probably anticipated, after reviewing the financial results of large online retailers, we're now seeing the effects of the pendulum swing in the opposite direction. Consumers are seeing prices going up everywhere, and as a result, demand for products is weaker compared to the shopping spree we saw in the last two years. For Ethereum's long-term investors, the latest signs of reduced consumer demand should actually be quite encouraging. How can I say that when we are looking down the barrel of a potential painful recession? Well, simply because our business, for our business really, getting back to growth and profitability is predicated on returning to normalized shipping costs. And unfortunately, the only way to get there is to reduce global consumer demand for products. While this downturn in demand might spell doom for other companies in our industry, it will not for Ethereum. Things might get more difficult before they get better, but we're already preparing for what happens when markets stabilize and run a new baseline from which we can grow our business. We have the balance sheet to get through a long downturn and many levers to pull in case of additional challenges. More importantly, our team has never been stronger and our resolve to prove ourselves has never been more steadfast. For long-term investors who believe in us, the critical question is when will that new baseline form and what will be the expected growth from that point on? On a global level, the e-commerce boom experienced in 2020 represented a 26.5% year-over-year revenue growth compared to 2019. In 2021, year-over-year e-commerce revenue continued to grow, but at a much smaller rate of 16.3% compared to the previous year. And this year, e-commerce is expected to end at around 12.2% on global growth compared to 2021. The expected year-over-year revenue growth rate starting in 2023 will be between 9% to 10%. But more importantly, e-commerce is predicted to represent 23.6% of all retail sales globally by 2025. versus 17.9% in 2020. So while the immediate year-over-year comparisons are challenging, in the long term, e-commerce is predicted to continue its rapid growth, and at Ethereum, we're preparing to take advantage of that growth. As part of these preparations, we're strengthening our team with talent across the board. We're excited to welcome Anton Van Roeden to Ethereum as its new global COO. Anton brings over 22 years of experience in e-commerce operations. Anton was also previously the CEO and President of Boosted Commerce, an e-commerce aggregator of brands which raised over $380 million in capital to acquire smaller online brands. As we prepare to expand and grow the number of brands we manage, agile processes and automation through technology are going to be critical to scale our model. We're looking forward to turning our parent company into a well-oiled machine, giving our portfolio of brands all the necessary building blocks of e-commerce as a service. With regards to our acquisition strategy, we remain very excited about the opportunity to do a creative acquisition driving strategic value for Ethereum. During the first quarter, our team has continued to evaluate many opportunities. We're remaining disciplined in valuation given the inflated performance of targets due to COVID-19 e-commerce acceleration. Given that most of these targets expect to be valued based on the performance over the 12 months, we believe that valuations will come down over the course of the year. We expect to be able to capitalize on the impact of the current market conditions to acquire a number of these targets at a later stage for more reasonable valuation. There's been a lot of press recently about the challenges faced by e-commerce aggregators who just last year raised astronomical amounts of money to pursue similar acquisition strategy to ours. The press is reporting that many of these companies are now struggling with similar challenges than the ones we encountered since last year. One of the main challenges affecting our peers is lack of infrastructure and technology to support the complex effort of managing a portfolio of brands online. Without systems to monitor and aggregate product performance in real time and automate manual functions, most of these companies need to hire a non-scalable workforce of analysts and marketers. The difference between these companies and Ethereum is in our years of investing in building our AME platform, which allows us to operate the brands we build or acquire with more efficiency and less overhead. This is key for success for those pursuing a platform strategy. We believe that our revenue to employee headcount remains best in class and will continue to improve over time. We've also been in this business for much longer than most of these companies, and we've surmounted challenges affecting our industry for many years, proving that our culture of resilience can surmount whatever is coming next. With that, let me turn the call to Artie for a more in-depth discussion of the quarter's financial.