Aterian, Inc.

corporate development.

Please go ahead. Thank you for joining us today to discuss Atarian's third quarter 2022 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 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 Atterian's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Atterian'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 in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our third 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.

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 of ATN for those who are newer to our story. I will then review key takeaways from the third quarter of this year. I'll then discuss our challenges and how we're dealing with them, including the economy and micro-level pressure from supply chain disruptions and inflation. I'll then summarize how we see the long-term prospects for Ethereum. For those who are new 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 owns and operates It's many consumer brands selling products across various categories on channels such as Amazon, Walmart, Shopify, and eBay, both domestically and internationally. To allow us to scale, we invest in building our own proprietary software platform called AIM. AIM 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, it 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 agile supply chain to drive scale and profitability. Moving now to our key takeaways from our third quarter. I'll start with a quick summary of the main points and then discuss them in more detail. International supply chain is finally showing signs of a return to the old normal. Dramatic hikes in global shipping rates that negatively affected us for over a year have continued to subside. We're now shipping containers at rates close to the pre-pandemic levels. We believe that our defensive strategy of protecting market shares through the last year has worked out, and it's now time to get back on the offensive. We're not fully focused on making 2023 a pivotal year for Ethereum. Through the fourth quarter of this year, we'll continue to attempt to maintain our lower prices to liquidate expensive excess inventory while using this effort to also attempt to gain as much market share as possible for our products. These efforts will hurt our adjusted EBITDA for the remainder of 2022, but we believe they will put us in a strong position to reignite growth in 2023. We've also taken measures to reduce our fixed costs by restructuring teams and removing certain roles to set us on a path to profitability. It will take time to see the full effect of these actions, but we believe that starting in 2023, we will begin to show improvements to our profitability metrics with a target of turning profitable at the adjusted EBITDA level starting in Q3 next year. I would like to now elaborate on each of these points and explain why we're optimistic that with the above-mentioned actions, management is taking the right steps towards putting Ethereum on track. I'll start by focusing on international supply chain updates. As many listeners who have been following our company in the last couple of years know, keeping rates for international containers has been the main culprit in putting pressure on our business model. As a reminder, the supply chain crisis that followed the COVID-19 pandemic led to a 5x increase in cost of shipping containers from China to the U.S. This increase required us in turn to increase our own prices for our products by an average of 20%. While the price increase was important, our blended contribution margin year-to-date was reduced to approximately 6% versus our target of 15%. Additionally, the necessary price increases combined reduced consumer spending and overall inflation have hurt our top-line sales. Even though these difficult and unpredictable conditions limited our ability to drive sustainable growth, we opted to focus on protecting market share for our products until shipping prices come back to normal. The good news is that our bets seem to have worked. This past week, we've been able to secure shipping containers at pre-pandemic rates. We've also overall been able to protect our portfolio from losing relative market share. Which leads to the second point I mentioned, Earlier, it's not time to get back on the offensive, and we're aggressively pushing initiatives designed to prepare us for a strong 2023 with our eyes set on profitability in the second half of the year. The most important initiative has already started in the third quarter of this year. With a mandate, we gave our teams to pursue lower price strategies in an effort to cycle through our current low margin excess inventory position. We've made this decision so that we can replenish new inventory at a higher margin given the latest normalization of shipping rates. While not every product in our portfolio may have the same opportunity to do so, we're doing our best to capitalize on these aggressive pricing strategies to secure better long-term market share. As with traditional retail, sale volumes and overall demand increase typically drives more visibility for trending products in brick-and-mortar stores. Similarly, for us, Amazon and other e-commerce platforms we operate on typically reward sales increase with better visibility and ranking for our product. It is therefore our goal to increase sales velocity at the expense of our margins now in order to get as much market share as possible and then hopefully see the inventory coming in at a lower cost basis, allowing for margin increase. If our plan works as we hope, we'll We believe that we'll be able to enter Q2 of 2023 with our products driving more sales, but also benefiting from the improved shipping costs to show stronger margins. As I mentioned earlier, our management team is focused on achieving profitability by the second half of 2023. We believe that in the current market conditions, attracting new investors and creating shareholder value starts with fixing the core metrics of our business and regaining trust. We've had to make some painful decisions in the last 12 months to protect the company as the macro-level environment shifted rapidly from focused on growth to focused on profitability. Our profitability and overall goals for 2023 are not without risks. And in particular, the geopolitical tensions still at play in Europe and the Asia-Pacific region cannot be ignored. We're operating based on data that we are seeing at present. The recessionary environment seems to have resolved the supply chain concerns. However, we're closely monitoring the looming energy crisis as potential future increase in gas prices could have a negative impact on our last-mile shipping rates. Furthermore, the COVID zero policy in China is a concern as it can lead to factory shutdowns and other disruptions to our supply chain. Finally, a further decline in consumer spending given inflation and the Fed's current monetary policy and a focus on increasing unemployment could potentially hamper expectations for overall sales forecast next year. At this time, we're of the opinion that demand will remain relatively flat and that the negativity in consumer sentiment has mostly settled. Nevertheless, we remain optimistic that despite these risks, 2023 is an important year for us to push forward by launching new products as well as resuming our M&A strategy. Additionally, our efforts to strengthen our balance sheet have positioned us to start Q4 with $46 million in cash, which gives us confidence to weather further possible disruptions. With regard to growth in general, we continue to invest cautiously in driving long-term organic growth by slowly ramping up new products and investing in our operational capabilities in the European Union to allow us to continue to expand our business internationally. While we are being conservative with our expectations from organic growth, we're also dedicating resources to seeking opportunities to accelerate growth through M&A. The e-commerce industry as a whole has experienced extreme disruption similar to those affecting us, including our competitors in the Amazon aggregator space. As a result, we're actively looking into opportunities to consolidate brand assets that we believe will be synergistic to Ethereum, given the investments we made to build a scalable infrastructure. Our efforts so far have been productive, and we're hopeful that our opportunism could play off and allow us to acquire additional positive contribution margin, generating businesses to accelerate our path to profitability. I want to thank our team and shareholders who continue to believe in us. We're working tirelessly to make 2023 the year that sets us back on track to continue to build the leading CPG platform in e-commerce. With that, I'll pass it to Adi to discuss the quarter's financials.