Nogin, Inc.

The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1. Good afternoon. Welcome to Noggin, Inc.' 's third quarter 2022 earnings conference call. At this time, our participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. As a reminder, this call is being recorded. Joining us today from Noggin are Jonathan Huberman, co-CEO, Don Nugent, co-CEO, and Shariar Ramadi, COO and CFO. Before we begin, Noggin's management team would like to remind everyone that statements made and or answers that may be given to questions asked on this call are or may contain forward-looking statements that are subject to risk and uncertainties related to future events and or the future financial or business performance of Noggin. Actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements include but are not limited to Noggin's expectation or predictions of financial and business performance and conditions, the development and adoption of Noggin's platform and cost reduction measures, as well as competitive and industry outlooks. Forward-looking statements are subject to risks, uncertainties, and assumptions, and they are not guarantees of performance. is not under any obligation to and expressly disclaims any obligation to update, alter, or otherwise revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. In addition, a description of some of the risks and certainties that could cause actual results to differ materially from those indicated by forward-looking statements on this call can be found in the risk factor section of our quarterly report on form 10Q for the quarter ended September 30th, 2022 to be filed with the SEC later today and in other filings with the SEC. On today's call, we will also refer to certain non-GAAP measures including non-GAAP revenue and adjusted EBITDA that we view as important in assessing the performance of our business. These metrics exclude certain items as discussed in our release under the heading non-GAAP financial measures. Therefore, these measures should not be considered in isolation or as an alternative to operating income, net income, cash flow from operations, or any other profitability, liquidity, or performance measures derived in accordance with GAAP. You should be aware that that the company's presentation of these measures may not be comparable to similar titled measures used by other companies. A reconciliation of each non-GAAP measure to the comparable GAAP measure is available in our earnings release and our quarterly report on Form 10-Q for the quarter ended September 30, 2022 on Noggin's Investor Relations page at www.ir.noggin.com. Finally, I would like to remind everyone that a webcast replay of this call will be available via the link provided in today's earnings release, as well as on our website at www.noggin.com. Now, I'd like to turn the call over to Noggin's co-CEO, Jonathan Schubertman.

Thank you. Welcome, everyone, and thank you for joining us this afternoon on our first earnings call. To begin today's discussion, I'd like to provide a quick overview of our business and review our quarterly highlights. before turning the call over to our COO and CFO, Shariar Rahmadi, to both discuss our financial results for the quarter and provide our outlook for the rest of 2022 and 2023. After that, I'll share some closing remarks before opening the call for questions. As retail e-commerce continues to grow and become more sophisticated, there is a large market opportunity to help merchants who need robust e-commerce sophistication but lack the expertise, capital, and personnel to manage it all. Noggin's commerce as a service platform satisfies this need in a few ways. First, Noggin provides a headless end-to-end technology platform that merchants can plug into instead of paying to integrate multiple technologies. This helps merchants save money, focus on their core business, and accelerate their time to market. Second, Noggin delivers advanced capabilities that are generally too complex and costly for many brands to buy, build, or manage on their own. These capabilities include a robust customer platform, social commerce abilities, and AI integrations. The benefits of these capabilities allow our customers to uniquely and intelligently engage with their customers or prospects throughout their e-commerce journey and to increase sales and profitability. Third, Noggin includes leading edge R&D and innovation as a service so that clients are never required to expand resources on their e-commerce operations. Further, Noggin eliminates the need to re-platform because as we build new features and tools, you're immediately available to our clients. Therefore, as we grow and continue to scale our e-commerce product and service offerings, our clients' e-commerce operations are able to scale in parallel. And lastly, Noggin drives identifiably incremental performance for our customers based on insights from our robust proprietary data asset, insights unavailable to most outside of the Noggin platform. Our modern approach to commerce allows brands and sellers to grow more profitably and without upfront costs while still allowing them to focus their efforts on their strengths instead of on the complicated and resource-intensive nuances of e-commerce. Noggin's business model includes taking a percentage of brand e-commerce sales conducted through our Cast platform, which ensures complete alignment between ourselves and our clients. Our growth strategy is rooted in three key pillars. Develop and continuously advance our innovative and scalable commerce as a service platform, increase sales and marketing efforts to drive our brand pipeline, and expand our client base into new markets and products throughout e-commerce. We continue to make progress on all these fronts as we look to the remainder of 2022 and beyond. I would now like to take a few minutes to reflect on this past quarter. Overall, our third quarter was an opportunity to improve the performance of the business and strengthen our partner relationships. Since closing our business combination in August, we have begun comprehensive cost reduction and performance improvement initiatives. The results of these are already showing success As we expect, these initiatives will enable us to significantly grow our CAAS business in 2023, while also enabling us to reach EBITDA profitability during 2023. Our third quarter performance issues were largely driven by two legacy deals that required us to purchase inventory, both signed in 2021, during a volatile period of COVID impact and supply chain disruption. While our cash business remained healthy, these anomalous deals had a significant impact on our 2022 results to date, due in large part to pandemic-induced supply chain issues. Now that the bulk of the impact is behind us, we expect to return to our previous rates of revenue growth over the next few quarters. And as I said earlier, EBITDA profitability in 2023. As for the platform itself, I'm happy to report that we unveiled version X of Intelligent Commerce, Marking the arrival of machine learning customer segmentation and smart sort merchandising capabilities to the noggin commerce platform. We expect that noggin clients will be able to elevate their customer experience and increase potential profits with new segmentation and merchandising capabilities. We are steadily onboarding customers onto these tools and expect them to drive significantly differentiated performance for a new and existing brands. In addition, our sales efforts are driving a robust pipeline, including eight new brands signed to the Intelligent Commerce platform during the quarter. In total, we believe that our efforts in the third quarter will allow us to get back to executing effectively on our growth strategy. Especially in the current economic environment, brands are searching for ways to reduce costs while driving improved results. And we believe that our platform is uniquely positioned to help customers do that. With Noggin, high performance, and cost effectiveness, are never mutually exclusive choices. We are confident in our technology, our team, and our strategy, and look forward to generating strong momentum through the fourth quarter and into 2023. With that, I turn the call over to our COO and CFO, Shariar Rahmadi, to discuss our third quarter financial results and updated outlook in greater detail. Shariar.

Thank you, John. Turning now to our financial results for the third quarter ended September 30th, 2022. As John mentioned, our net revenue includes product-related revenue that stems from two previous deals that involve sales related to first-party inventory purchases. As that inventory is sold, generated revenue appears within net revenues in our GAAP results. Our non-GAAP revenue, however, is generated by the core commerce as a service platform and associated services. We typically view non-GAAP revenue as a more accurate indicator of the business, and expect our GAAP and non-GAAP revenues to converge over time. GAAP net revenue in the third quarter decreased 22% to $21 million from $26.9 million in the comparable year-ago period. The decrease in net revenue was primarily due to a decrease in net product revenue during the period caused by the aforementioned and non-recurring supply chain issues associated with two of our customer agreements. GAAP net revenue for the first nine months of 2022 increased 20% to $66.5 million from $55.2 million in the comparable year-ago period. The increase in year-to-date net revenue was primarily due to increases in net product revenue and net revenue from related parties during the period, which were only included in partial year results in 2021. Non-GAAP revenue a non-GAAP measurement of operating performance decreased 11% to $15.9 million from $17.8 million in the comparable year-ago period. The decrease in non-GAAP revenue was primarily due to decreased product revenue through the platform in the quarter, driven by previously noted supply chain challenges. Non-GAAP revenue over the first nine months of 2022 increased 15% to $53.1 million from 43.5 million in the comparable year-ago period. The increase in non-GAAP revenue was primarily due to an increase in cash, shipping, and marketing revenue. Operating loss in the third quarter increased to 11.9 million compared to an operating loss of 2.3 million in the comparable year-ago period. Operating loss for the first nine months of 2022 increased to 27.6 million compared with an operating loss of 5.4 million in the comparable year ago period. The increase in operating loss over both periods was primarily due to an increase in operating costs and expenses. This increase was largely driven by the losses associated with the previously mentioned product deals from 2021 that were adversely affected by supply chain challenges, as well as discounted pricing in Q3 2022. The company expects fourth quarter gap net loss to range between negative 4.5 million to negative 6.5 million, and for adjusted EBITDA to improve to range between negative 3.0 to 5.0 million dollars. Before I turn the call back over to John, I'll now take a few minutes to provide an update on our financial outlook for 2022. Moving forward, Noggin expects to provide annual guidance for net revenue, non-GAAP revenue, and adjusted EBITDA. We expect the company's financial results in the fourth quarter to be positively impacted by existing customer sales, new customer agreements, and the initial results of a comprehensive cost reduction and performance improvement program. Our cost and performance-related initiatives are expected to produce meaningful results in Q4, including an approximate $2 million benefit to adjusted EBITDA. The goal of the cost and performance improvement program is to drive continuous efficiency throughout our business while simultaneously achieving or exceeding internal and customer KPIs. In addition, we're providing the following financial outlook for our full year 2022. We expect net revenue to range between 93 million and 96 million and expect non-GAAP revenue to range between 72 million and 74 million. We're also updating our financial forecast for the 2023 calendar year. We now expect net revenue to range between 97 and 100 million and non-GAAP revenue to range between 88 and 95 million, which would imply 18 to 25% year-over-year growth. We also expect net income to improve and adjusted EBITDA to be positive for the full year 2023. We anticipate that the impact of the company's cost and performance improvement program for the full year 2023 will be between 15 and $20 million. and expect to have the majority of initially identified initiatives complete by the end of the 2023 first quarter. While this program will initially include a combination of cost actions and operating efficiencies and is key to achieving our 2023 adjusted EBITDA guidance, its benefits are expected to continue beyond 2023 and allow us to grow with the benefits of significantly increased operating leverage in the future. We look forward to updating you on the status of these specific efforts and activities in the quarter ahead. That completes my summary. I'd now like to turn the call back over to John.