Aterian, Inc.

Good afternoon. I would like to welcome you to the Ethereum Inc. Q4 earnings report. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Ilya Grozovsky, Vice President, Investor Relations and Corporate Development. You may begin your conference.

Thank you. Thank you for joining us today to discuss Atarian's fourth 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 want to remind everyone that the remarks on the call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on 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 also involve substantial risks 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, Form 10-K, filed on March 16th, 2023, and our quarterly report on Form 10-Q, filed on November 8th, 2023, and our upcoming annual report on Form 10-K, when it is available, on the investor portion of our website at Ethereum.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 indicators are included in our earnings release, which is available on the investor portion of our website at Ethereum.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 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 touch on our 2023 year, including our fourth quarter financial results, and I will also discuss the actions we are taking to foster growth for Ethereum in 2024 and beyond, as we remain focused both on achieving adjusted EBITDA profitability in the second half of 2024 and on positioning Ethereum for substantial growth beyond 2024. Artie will then cover in more depth our financial results for the fourth quarter and will provide our outlook for Q1. For those of you joining for the first time today, a quick primer on Atterian. Atterian owns and operates its own brand, marketing and selling consumer products in the following categories. Home and kitchen appliances and accessories through our Home Labs, Mueller, and Pure Steam brands. Health and wellness, primarily through our Squatty Potty brand. Iron-on transfer paper through our PBD or Photo Paper Direct brand. And essential oils through an umbrella of brands, including Healing Solutions. We sell our products primarily in the U.S., and we derive most of our revenues from the Amazon.com marketplace. 2023 was a year of change for Ethereum, with Artie and I taking the co-CEO role last July. Artie and I have a strong partnership, and it's been a pleasure to be sharing the role with him. We set out on a mission to focus, simplify, and stabilize Ethereum, and together with our team, We have accomplished quite a bit to reposition the company for success in Gorky, and we are excited about the value we believe we can deliver for shareholders. Some of the things we have accomplished thus far include refocusing Ethereum as a consumer products company by eliminating non-core initiatives that don't serve our products business, shifting away from internal only developed software to a more agile and efficient third-party model, eliminating a significant number of non-core SKUs, further strengthening of our balance sheet through the amendment of our credit facility with our lender, restructuring our people and vendor costs to better align with our newly focused core business, reducing the number of seller accounts from 31 accounts to approximately eight, further streamlining our fulfillment operations, and further optimization of the marketing performance aspects of our core SKUs. We are pleased with the results of these actions thus far, and we look forward to growing Ethereum from this baseline. With respect to the fourth quarter, we are pleased with the trend in our operating results, and in particular the progress that we have made thus far to stabilize our business, notwithstanding pricing pressure across a number of highly competitive categories and a challenging discretionary spending environment. Our fourth quarter results also reflect the completion of our previously announced SKU liquidation program, which we believe has well positioned us for success in 2024 and beyond. We also continued efforts to optimize the marketing and performance of core SKUs. And while this work is never ending, we made progress on that front across each of our categories, and we are seeing early results from these efforts in Q1 of this year. In 2024, we will continue our strategy to focus and simplify, and to a lesser extent, given the work we've done thus far, stabilize how we operate in order to not only position Ethereum for adjusted EBITDA profitability, but also drive profitable top-line growth. We will be focused on product development, omnichannel expansion, and inorganic growth in new and existing categories. With respect to new products in 2024, will largely be focused on our existing portfolio, refreshing a number of existing products and also launching new products that are variations in our existing portfolio that we believe will provide value to a meaningful segment of consumers. For example, as previously announced, we expanded our essential oils portfolio to address consumer needs for healthier chemical-free products, and we have seen promising early results thus far. We intend to continue... to continue to expand this offering throughout the rest of our oils brands. In addition, we are working hard on our Squatty Potty brand with a view towards further expansion for its flagship toilet stool product and also expanding the product categories under the brand. We will continue to focus on our omnichannel strategy, primarily through expansion to new marketplaces that we believe can drive profitable revenues for our existing product portfolio. For example, and as previously disclosed, we launched on TikTok with most of our SKUs. Results to date have not been material. We intend to continue to invest in that platform and to evolve alongside that platform. Also, in the near term, we'll be launching a number of our products for sale on MercadoLibre in their Mexico-based marketplace, one of the leading marketplaces in Latin America. We'll also be expanding to Amazon Canada in the near term. And further, we are actively exploring a number of other marketplaces as we endeavor to position our products everywhere consumers are shopping. Regarding our inorganic strategy, M&A remains an area of focus. We recently completed a small investment in Forth & Hart, a leading ghee butter brand in the United States. We believe investments in new high-growth brands have the opportunity to help drive significant value for Ethereum. as well as open up new categories. We intend to continue to explore investing in earlier stage brands. We believe Ethereum can be a valuable partner. Before I pass it along to Arti, a few words on Ethereum's NASDAQ compliance with the $1 minimum bid rule. We expect to regain compliance prior to the April 22nd deadline set out by the NASDAQ through a reverse split. Today, we are not providing specifics on the reverse split ratio or timing. What I can say is that we are excited to regain compliance, given that we believe we have addressed the most significant underlying operating and other issues that have been affecting our stocks under performance over these last years.