Aterian, Inc.

Thank you for joining us today to discuss Atarian's third quarter 2023 earnings results. On today's call are Joe Risco and Arturo Rodriguez, our co-CEOs. A copy of today's press release is available on the investor relations section of Atarian's website at atarian.io. Before we get started, I wanted to remind everyone that the remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the current management expectations. These may include, without limitation, predictions, expectations, targets, or estimates, including regarding our anticipated financial performance, business plans and objectives, future events and developments, and actual results could differ materially from those mentioned. These forward-looking statements involve substantial risk and uncertainties, some of which may be outside of our control and that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties, among others, are discussed in our filings with the SEC. We encourage you to review these filings for a discussion of these risks, including our annual report on Form 10-K filed on March 16, 2023, and our quarterly report on Form 10Q when it is available on the investor portion of our website at eterion.io. You should not place undue reliance on these forward-looking statements. These statements are made only as of today, and we undertake no obligation to update or revise them for any new information except as required by law. This call will also contain certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin, which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and comparability with our past performance, and facilitate period to period comparisons of our core operating results. Reconciliation of these non-GAAP measures to the most comparable GAAP measures and definitions of these indications are included in our earnings release, which is available on the investor portion of our website at editarian.io. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies. We are unable to provide a reconciliation of non-GAAP adjusted EBITDA margin to net income margin the most directly comparable GAAP financial measure on a forward-looking basis without unreasonable efforts because of items that impact this GAAP financial measure are not within the company's control and or cannot be reasonably predicted. With that, I will turn the call over to Joe.

Thank you, Ilya, and thank you everyone for joining us today. Today I'm going to cover our Q3 results. the progress on our previously announced skew rationalization program, other efforts we are making to focus, simplify, and stabilize our business, and an update on our omnichannel expansion efforts to position Ethereum for growth, all as we continue working towards our previously stated goal of achieving adjusted EBITDA profitability in the summer of 2024. Artie will then cover in more depth our financial results for the third quarter and will provide our outlook for Q4. Our third quarter results continue to reflect significant pricing and other pressures in order to remain competitive on Amazon, which is where we earn most of our revenues. While we also continue to see reduced consumer discretionary spending for the product categories we operate in, in certain of our key categories, such as in our dehumidifiers business, we have lost market share. These factors taken together have had a material impact on our results, and we expect these pressures to continue through the rest of the fourth quarter. Having said that, we have set in motion a number of other efforts to regain market share and to optimize our core brands and the SKUs that will remain part of Ethereum's go-forward business. As a reminder, last quarter we outlined our near-term strategy to focus, simplify, and stabilize how we operate in order to not only position Ethereum for adjusted EBITDA profitability, but also to position ourselves for long-term growth. The first step in that process was to focus our business by reducing the number of SKUs across our portfolio. I'm pleased to report that we have made significant progress. We have substantially completed our review, and we expect our go-forward business to consist of approximately 1,700 SKUs an approximately 50% reduction in our overall SKU count. We reviewed each of our SKUs based on a number of criteria, with historical and expected profitability being the main decision drivers. We are discontinuing SKUs across all of our brands, with the lion's share of reductions coming from our essential oils business, where we are standardizing our scents, sizes, and formulations to simplify our supply chain while still remaining focused on the consumer. Going forward, Ethereum will be focused on the following brands. Squatty Potty, our market-leading toilet stool business. Mueller Living, our kitchen appliance and accessories business. Pure Steam, our steam-related appliance business. Home Labs, our larger home appliance business. Photo Paper Direct, our iron-on apparel transfer business. And the various brands that comprise our essential oils business. In the coming months, we will continue to assess the performance of our go-forward SKUs and brands, driving focus on their profitability and competitive positioning to ensure stable performance and to reposition them for growth. As a result of this SKU rationalization process, however, we do expect further liquidations in Q4, which Artie will address in his remarks. Post-SKU rationalization, we have a number of other ongoing initiatives to focus on simplify, and stabilize our business as we continue to ensure that how we operate is best optimized to support the Go Forward business. One initiative I'd like to highlight today and that we believe drives synergies for us is our project to greatly reduce the number of Amazon accounts we use to market and sell our products, from 31 accounts to eight accounts, essentially one account per brand. Executing on this will reduce complexity, and will make us more agile from a revenue, technology, planning, and operations perspective. We have also taken actions to strengthen our relationship with Amazon, and we believe that deepening this relationship will create further cost savings and efficiencies in our business. Lastly, in the fourth quarter, we will continue to assess cost-saving opportunities across the business. Collectively, we believe these and other initiatives will position Ethereum well as we enter 2024. From an omnichannel perspective, we have also made progress. We have recently launched two of our foldable Squatty Potty stools in Walmart. While it's still early, we are optimistic about the performance of these SKUs, and we will be launching in the fourth quarter a national advertising campaign to support Squatty. In addition, we also have recently launched our TikTok shop for Squatty Potty. We also expect to have many of Ethereum's other SKUs available for sale on TikTok Shop during the fourth quarter. While TikTok Shop itself is a relatively new e-commerce platform, we are optimistic about its potential to drive incremental growth across Ethereum's product portfolio as we endeavor to meet consumers everywhere they shop. The TikTok model leans heavily into social commerce, relying on user-generated content and consumer discovery. versus Amazon, which relies primarily on search, and we believe this shift in consumer behavior will be important as e-commerce continues to evolve. We also continue to explore other channels that we believe can drive profitable revenues for our existing product portfolio, and we hope to provide further updates with respect to these efforts in the coming quarters. Lastly, we continue to launch new products, and I'd like to highlight that we plan in the fourth quarter to strategically expand our essential oils portfolio to address consumer needs for healthier, chemical-free products. Regarding M&A, it remains an area of focus, and we remain patient and disciplined with respect to these opportunities. Today, we are working through a significant transition of our business, and we remain laser-focused on those efforts. But we are still forward-looking, planting seeds for growth, And we believe these combined efforts will yield significant benefits for Ethereum in 2024 and beyond. Overall, we are excited about the progress that we have made to focus, simplify, and stabilize Ethereum's business. And we remain optimistic that with this narrower focus on our core SKUs and brands, and by pursuing our omni-channel strategy, we will be able to achieve adjusted EBITDA profitability in the summer of 2024.

With that, I'll pass it on to Artie. Thank you. Thanks, Joe. Good evening, everyone.