Aterian, Inc.

Thank you for standing by and good day, everyone. My name is RG and I will be your conference operator today. At this time, I would like to welcome everyone to the Ethereum Inc. Q1's 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. Thank you. I would now like to turn the call over to Devin Sullivan of the Equity Group. Please go ahead.

Thank you, Argie, and thank you, everyone, for joining us today to discuss Ethereum's first quarter 2025 financial results. On today's call are Arturo Rodriguez, the company's chief executive officer, and Josh Feldman, the company's chief financial officer. A copy of today's press release is available on the investor relations section of Aetherian's website at aetherian.io. Before we get started, I would like 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 those regarding our anticipated financial performance, business plans and objectives, future events and developments, and those 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 on Form 10-K and our quarterly report on Form 10-Q, both of which are available on the investor section of our company's website at atrium.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 comparison of our core operating results. Reconciliation of these non-GAAP measures to the most comparable GAAP measures and the definition of these indicators are included in our earnings release, which again is available in the investor portion of our website at atarion.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 or cannot be reasonably predicted. With that said, I'd now like to turn the call over to Arturo Rodriguez, Aterion's Chief Executive Officer. Artie, please go ahead.

Artie Rodríguez- Thank you, Devin. And thank you, everyone, for joining us today. On today's call, I'll be covering, one, a brief overview of our Q1 results and how they reflect continued progress from the foundational changes we made throughout 2024. Two, a summary of the actions we're taking to proactively navigate the recently announced tariff environment and its broader macroeconomic effect. And three, an update on our 2025 outlook in light of these developments. Following my remarks, our CFO, Josh, will walk through our first quarter financial results in greater detail. For the first quarter of 2025, net revenue was $15.4 million compared to $20.2 million in Q1 of 2024. This decline primarily reflects our previously announced SKU rationalization, which prioritized our most profitable products, along with softer consumer demand and reduced Amazon traffic due to changes in its affiliate program. Adjusted EBITDA loss slightly improved to $2.5 million from $2.6 million. While we observed some softness in the consumer demand during the latter part of the quarter, we were pleased with the overall performance. Looking beyond Q1, the landscape shifted significantly following the April 2, 2025 announcement on global trade policies, particularly those impacting imports from China. While incremental tariff rates have just come down this week to 30% from their peak of 145%, They remain materially higher than historical norms, and we expect continued volatility. Our 2025 plan anticipated increased tariff exposure, but the speed and magnitude of these policy shifts, both upwards and downwards, have introduced volatility, supply chain constraints, and ongoing uncertainty, especially as consumer spend remains cautious. At Ethereum, resilience, tenacity, and agility are part of our DNA. For some time now, we have been actively strategizing around long-term growth and sourcing. consistently landing on diversified product mix and supply chain as critical to ensuring sustainable growth and profitability. While tariffs have certainly been impactful, they are ultimately accelerating the execution of this strategy to ensure we maintain the financial runway to evolve and strengthen our business. Today, we're announcing a set of decisive strategic initiatives designed to minimize the operational impacts of tariffs and broader macroeconomic pressures. While many of these were already part of our long-term roadmap, the current environment requires a faster pace of execution. At a high level, we are focused on four strategic moves, each within our control, that we believe will position Tyrian for long-term success. First is accelerating our plan of resourcing and diversifying our manufacturing. Two, advancing our evolution toward a more resilient model by deepening our expansion to consumables, the majority of which will be U.S. manufactured. strategically raising prices, and four, reducing fixed costs. In detail, I will add color and expand on each of these actions. The first, accelerated resourcing, which will include inventory and supply chain optimization. We are fast-tracking efforts to move production and diversify into regions with more favorable costs and tariff structures. Our new goal is to manufacture no more than 30% of our goods in China by the end of 2025, accelerating our previous target of reducing Chinese sourcing to below 40% by the second half of 2026. We've already seen some early wins. For example, we shifted certain dehumidifier reorders from mid-summer delivery from China to Indonesia. We are partnering with our manufacturing base to identify cost-saving opportunities, renegotiate pricing, and shift fulfillment to non-U.S. geographies as part of a geo-expansion when possible. This allows us to redirect certain inventory while mitigating tariff impacts. While our Chinese partners remain highly collaborative, reshoring to the U.S. is not currently viable for our electrical products in the near term. Number two, new product launches from low-tariff regions. Our squatty-potty flushable wipes continue to track for late Q3 2025 launch. With that, we are doubling down on consumable products, and we will launch additional wipe-based products in 2025. We are further expanding our consumable push and expect to announce additional U.S.-sourced consumable products launching in 2025, which are predominantly exempt from tariffs. We expect to announce those items specifically no later than our next earnings call. With this, we are temporarily pausing new category launches from Asia, particularly hard electronic goods, until we can resource or gain more clarity on the trade environment. Number three, strategic pricing adjustments. We are implementing pricing increases across our portfolio to recoup margin loss and moderate velocity, retiming orders to provide runway to find alternative resourcing avenues, and to buy time to see how the tariff 90-day windows conclude. And finally, number four, fixed cost reductions. As part of our response to the tariff analysis, we launched a fixed cost reduction initiative targeting 5 to 6 million in annualized savings. Approximately 4 million of that will come from headcount reductions, including open roles, predominantly in the U.S., by consolidating teams under a smaller leadership structure, with most of the changes taking full effect in Q3. The remaining 1 to 2 million will be realized gradually through broader fixed cost efficiencies. We expect these saving initiatives to be fully in place by early 2026. For those employees impacted, I would like to thank them for their incredible achievements, and I am certain they will continue to prosper in their post-Ethereum lives. We remain committed to driving long-term growth via new product introductions, channel expansions, and entering new international markets combined with operating efficiencies and cost discipline. Supported by our strong balance sheet and the decisive actions already underway, we are confident in our ability to navigate this period of adjustment and successfully execute our long-term strategies. We will preserve capital as part of this process and firmly believe that we can navigate these headwinds without raising equity capital in 2025. To ensure this, our Board of Directors has paused the initiation of our previously announced share repurchase program, which was scheduled to start this month in May 2025 and runs through March 2027. That said, we continue to believe Ethereum stock is significantly undervalued and we remain committed to long-term shareholder value creation. Once the current environment stabilizes, we will revisit the timing and structure of our buyback programs. While these actions improve our long-term positioning, the current volatility makes forecasting difficult. As such, we are withdrawing our guidance. While our fundamentals remain strong, we are recessing how pricing, supply chain dynamics, and consumer behavior will evolve during the rest of 2025. That said, we continue to believe the actions we are taking position its hearing to return to growth and profitability beyond 2025, even under prolonged tariff pressure. Assuming we execute as planned, we do not foresee a return to the outside losses of the past. In closing, just three months ago, we shared that Ethereum was pivoting from a turnaround story into a growth story. While recent macroeconomic shifts present new headwinds, we remain confident in our long-term trajectory. We are focused both on short-term mitigation and long-term value creation. Four key moves, all which we believe we control, will help us address the short-term impacts from tariffs to strengthen and diversify Ethereum over the long-term, ultimately unlocking value creation. To reconfirm, We are, one, accelerating our plan of resourcing and diversifying our manufacturing. Two, advancing our evolution to a more resilient model by deepening our expansion into consumables, the majority of which will be U.S. manufactured long-term. Three, raising prices. And four, reducing fixed costs. Even in the face of tariff pressures, our goal remains clear to build a growing, profitable company The initiatives we've outlined today are not a change in direction. They represent an acceleration of the transformation we began in 2024. While the tariff landscape is more significant than we anticipated, our size and agility allows us to respond quickly and decisively. Despite today's uncertainty, we believe Ethereum's future is strong, and the opportunities ahead of us are significant. Lastly, I want to thank our team and our shareholders. We've navigated significant change over the past 18 months, and with continued discipline and agility, We believe the best is yet to come for Tyria. With that, I'll turn it over to Josh.