Aterian, Inc.

Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until that time, your lines will again be placed on music hall. Thank you for your patience. Thank you for standing by. My name is Alex and I will be your conference operator today. At this time, I would like to welcome everyone to the Ethereum Incorporated Q1 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 this 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. I would now like to turn the call over to Ilya Grazovsky, Vice President, Investor Relations and Corporate Development. Please go ahead.

Thank you for joining us today to discuss Ethereum's first quarter 2024 earnings results. On today's call are Joe Risico, our co-CEO, and Arturo Rodriguez, our co-CEO and CFO. A copy of today's press release is available on the Investor Relations section of Ethereum's website at ethereum.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 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 may also involve substantial risk and uncertainties, some of which may be outside of the 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 discussions of these risks, including our annual report on Form 10-K filed on March 19th, 2024, and our quarterly report on Form 10-Q 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 compatibility with our past performance, and facilitate period-to-period comparisons for 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 eterion.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 GAAP financial measures 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 discuss our Q1 results, and then I'm going to discuss the actions we're taking to foster organic and inorganic growth for Ethereum in 2024 and beyond as we continue our efforts to focus, simplify, and stabilize Ethereum's core business, and as we continue on our mission of achieving adjusted EBITDA profitability in the second half of 2024. Artie will then cover in more depth our financial results for the first quarter and will provide our outlook for Q2. For those of you joining us for the first time, I'll start with a quick primer on Ethereum. Ethereum owns and operates its own consumer products brand. We market and sell consumer products in the following categories. Home and kitchen appliance and accessories to our home labs Mueller and PureScene brands. Health and wellness products. primarily through our Squatty Potty brand, iron-on transfer paper products through our PPD or Photo Paper Direct brand, and essential oils products through an umbrella of brands, including Healing Solutions. Today, we sell our products primarily in the U.S., and we earn most of our revenues from the Amazon.com marketplace. With respect to Q1 performance, overall, we are pleased as we are seeing results from our efforts to focus, simplify, and stabilize Ethereum's core business. As a quick recap, we've rationalized our SKU portfolio, we've reduced our number of seller accounts, we've simplified our logistics and technology infrastructure, we've jettisoned non-core initiatives, and we've better organized our revenue and operational workflows. And of course, we continue to assess and to refine each of the above with a view towards optimizing for profitable growth and scale. While the macroeconomic environment remains uncertain, and we continue to experience pricing pressure in the highly competitive discretionary product categories in which we operate, in Q1, we improved gross margin to 65 percent, and we improved contribution margin to 16 percent. versus Q1 of last year. I'd like to note that we expect our gross margin percentage to fluctuate quarter to quarter for the rest of 2024 due to pricing and product mix, but to remain strong. And we do expect our contribution margin percentage to remain primarily in line with Q1 results, both of which we believe position us well to achieve adjusted EBITDA profitability for the second half of 2024. In addition, we also have a good handle on our fixed cost structure. We believe that this cost structure, together with our healthy balance sheet, will allow us to pursue both organic and inorganic growth strategies. Overall, we remain on track to achieve our previously stated goal of adjusted EBITDA profitability, and we believe we can continue to position Ethereum for scaling growth. With respect to our organic growth strategy, While we had no product launches in Q1, we continue to work hard across our portfolio with respect to each of our brands, and we expect to launch a number of products in Q2 relating to our home labs, essential oils, and Mueller Living brands. We've been working hard to revitalize our new product development strategies, and we are seeing progress, and we are seeing opportunities to strengthen, stabilize, and grow our business. From an omnichannel perspective, we continue to focus on expanding channels and geographies, primarily with a focus on marketplaces. As previously disclosed, we expanded to MercadoLibre as part of our partnership with them. And while the preliminary results are not material to our financial results, we are optimistic that this partnership and channel will help us drive growth through our existing products and potentially through new product launches. We have also begun sales on Amazon's Canada marketplace for certain of our products, and we will continue to expand our portfolio on that marketplace. And we have expanded our portfolio of products for sale on Wayfair's marketplace. We are also actively working to expand to other marketplaces, including Amazon Mexico, Walmart Mexico, and Target Plus, and we will provide updates with respect to each of these initiatives in the coming quarters. And lastly, we are continuing to assess expansion to other domestic and international marketplaces. With respect to our inorganic growth strategy, in Q1, we saw an increase in higher quality M&A opportunities. And while we remain disciplined and focused We do believe there will be opportunities for Tyria to pursue a creative and synergistic transaction as we progress in 2024. Overall, growth from M&A remains an important part of our overall strategy, and we are excited and optimistic that we will be able to realize meaningful growth from this strategy. Lastly, and importantly, I want to recognize our team. We are a lean but formidable group of people It's gotten smaller given the restructuring from earlier this year, but we do believe this team is highly capable of driving growth, and Artie and I are very proud of the work that's been done and that is being done. And now with that, I will pass it along to Artie. Thank you very much.