Q2 2023 Aterian Inc Earnings Call
[music].
Good afternoon, and welcome to the Aterian incorporated second quarter 20, twenty-three earnings report conference call.
All participants will be and listen only mode should you need assistance. Please signal of confidence specialist by pressing the starkey followed by zero <unk>.
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And it is being recorded.
I would now like to turn the conference over to Alea, Krasowski, Vice President Investor Relations and corporate development. Please go ahead.
Thank you for joining us today to discuss the <unk> second quarter 20 twenty-three earnings results.
On today's call or Joe <unk>, Arturo Rodriguez R. Co C E O S.
A copy of today's press releases available on the Investor Relations section of <unk> website at <unk> Dot I O.
Before we get started I want to remind everyone that the remark.
Marks on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Based on current management expectations.
[noise] include without limitation.
<unk> 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 uncertainty.
Some of which may be outside of our control and that could cause actual results the different materials from those expressed or implied by such statements.
Risks and uncertainties among others are discussed in our filings with the S. D C.
We encourage you to review these filings for a discussion of these risks, including our annual report on Form 10-K filed on March 16th 2023, and a quarterly report on Form 10-Q, which is when it is available.
The investors portion of our website at <unk> Dot I O.
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.
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.
Consistency and compare ability with our past performance and facilitate periods of 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 investors portion of our website at <unk> Dot I O.
Please note that our definition of these measures may differ from similarly, titled <unk> 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 it's GAAP financial measure are not within the companies control.
<unk> or cannot be reasonably predict it.
With that I will turn the call over to John .
Thank you and thank you everyone for joining us today.
I am going to discuss a recent management change the challenges we experienced in the second quarter, and then share with you or near term strategy with a focus on our path to adjusted EBITDA profitability.
He will then cover our financial results for the second quarter.
Outlook for Q3.
As previously announced as of July 27th.
I have taken on the role of co C E o's of material.
I want to thank you needs to re co founder and former C. E O <unk> on behalf of myself already are bored and our people for his relentless and tireless efforts to Stewart at <unk>.
It's been a long journey for already and I as we both joined the children over five years ago prior to its I P O.
I'm very proud to say that practically from day, one already and I have been strong business partners, taking a tyrion through its I P O as well as helping interior navigate a number of headwinds over the years, including the terrorists on Chinese imports.
COVID-19 pandemic the supply chain crisis rapidly escalating cough and now it's <unk> current challenges given the high consumer inflationary environment and the reductions and ships in consumer discretionary spending in particular.
Grocery products that we sell.
Arty will continue to serve it CFO and will lead the company operationally, which includes oversight of our supply chain of technology.
I will lead primarily on revenue strategy and growth related initiatives, while there will likely be bumps in the road ahead arty.
Are excited and grateful for the opportunity to lead a cheery and into the future.
Moving onto the second quarter results.
Ah results reflect reduced consumer discretionary spending across our portfolio and to some extent unfavourable weather patterns and parts of the United States, where we expected stronger sales of our environmental appliances in particular for our dehumidifier and air conditioning product lines.
We also experienced significant pricing pressure in light of the above and we're also impacted by competitive dynamics that come with selling on unlimited shells marketplaces, such as Amazon, which is where we earn almost all of our revenues today.
We expect reduce consumer discretionary spending and competitive pricing and other competitive pressures to continue through at least the rest of 2023.
Having said that we do believe that we have a strong set of core products and we will be taking actions in the coming months to better position materials organic business for sustainable adjusted EBITDA profitability and growth.
The Cheeriest primary goal is to continue to deliver high performing products that provide.
Consumers with great value for the price and that results in good margins for it <unk>.
As far as strategy in the near term already and I will be leading with three recurring themes around revenues and operations focus simplification and stabilization.
Today I want to share with you review and how we intend to focus which is the first cornerstone on materials path to profitability.
Believe that by narrowing our product portfolio to our most profitable and promising products like Squatty Party. For example, we can unlock a path to sustainable profitability in particular with the consumer first and Omnichannel strategy non.
Non core skews and our historical approach to being radically products Ignostic had been a drag on the experienced profitability and operations and on our ability to focus.
<unk> rationalization process will be thoughtful and deliberate will take several months to implement and we look forward to providing updates on this effort.
Continuing on the theme of focus.
While technology remains highly important for our success I wanted to be clear today that we do not intend to pursue selling our technology is a service.
In addition, while affiliate marketing will remain an important component of our overall marketing strategy, we have shut down deal Mojo our affiliate marketing platform.
As a reminder, jewel Mojo was intended to be a platform where in exchange for a fee.
<unk>, which serve as an intermediary matching publishers and third party brands that we do not own or control.
Well not material to our financial resolved not pursuing these initiatives will allow us to drive further focus.
Regarding geographic expansion in particular in Europe , It will not be a focus area for us in the near term.
While we do have our Squatty party and our transfer paper business is currently selling in Europe and.
And we expect that to continue for now we do not intend to expand that to that G. O given the need to remain highly focused on driving success in the U S market.
Lastly.
And it grows coming from M&A will continue to be part of our strategic roadmap.
[noise] summarize we believe that by focusing on our best products, starting with the rationalization of non-core and unprofitable skews.
Arriving in Omnichannel strategy and.
And by more thoughtfully launching new products that consumers love, we can deliver a profitable baseline for our business from which we can grow.
In the coming months, we look forward to discussing our progress and to also share with you other strategic initiatives relating to our efforts to focus simplify and stabilize our business with that I'll pass it along to already thank you.
Good evening everyone.
Thanks, Joe and welcome to your first earnings call is cosio mm.
I'm very honored and humbled to have the opportunity to co leader tearing into its futures.
<unk>, how can you be more excited partner with you Joe and the rest of the team.
Do you have some great products and brands supported by impresses supply chain in Tech and most importantly are fantastic people.
Together with every single person is hearing we're going to continue to successfully navigate some of the remaining obstacles that challenged us over the past few years of highlight earlier by Joe.
Joan I strongly believe that our path to profitability is achievable. So it will take longer than originally anticipated.
Regardless of the that the way we have continued to improve our balance sheet, which we will we will give us the runway to get to our goal of adjusted EBITDA profitability.
John I have a lot of work to do as we embark on our respective missions.
However, our shared initial vision of focusing simplifying in stabilizing adhering towards profitability and ultimately back to growth is resolute.
Now here are the financial performance details of our second quarter.
For the second quarter of 2023, net revenues declined 39.5% to $35.3 million from $58.3 million in the year ago quarter, primarily due to reduce consumer discretionary spending insignificant competitive pricing presses cross our portfolio.
Looking at our second quarter net revenue by Phase is defined in our press release, the $35.3 million broke down as follows 31 million sustain less than 1 million and launch and 4.2 million and liquidate an inventory normalization revenue.
<unk> net revenue of 58.3 million by face broke down as follows.
54.1 million, assisting 1.3 million and launch and 2.9 million and liquidate inventory normalization.
After seeing that revenue decrease of $23.1 million is from reduce consumer discretionary spending and significant competitive pricing pressure cross the portfolio when a particular dehumidifier in air conditioning product lines.
Liquidation net revenue increased by $1.3 million from our strategic initiatives to sell off higher price inventory and to normalize inventory levels.
For new product variations were launch very late in the second quarter tripping phenomenal revenue in the period, we are continuing to play a new product introductions later in 2023 with the tiny being opportunistic.
Overall gross margin for the second quarter declined to 42.2% from 53.8% in the year ago quarter and decrease from 54.8% in Q1 of 2023.
The reduction was driven by pricing pressures during the period product mix, our continued strategic initiatives to sell a higher price inventory and normalize inventory levels and a 2.5 million increase the inventory obsolescence reserve. This reserve was primarily from expiring essential oils and other product impacts from changes in our forecast.
This reserve had a negative impact of seven one per cent on a gross margin.
Excluding this impactor gross margin would've been 49.3 per cent.
Our overall Q2 2023 contribution margin is the finding our earnings release.
Negative 3.6 per cent, which decreased compared to prior year C. M, 9.7% decrease compared to first quarter of 2023 C. M. A 5.9 per cent.
The decrease in contribution margin was driven by pricing pressure during the period product mix. Our continues strategic initiative of higher price inventory normalize inventory levels and $2.5 million increase in inventory off lessons reserve. Excluding this reserve impact RCM would've been positive 3.5 per cent.
Q2, 2023, sore sustained product contribution margin Kline, oh year over year to 2.1% versus 13.3 per cent in Q2 of 2022.
The decreasing contribution margin was driven by pricing pressure during the period product mix.
Continue strategic initiatives to sell off higher price inventory and the 2.5 million increase in the inventory off lessons reserve.
Excluding this reserve impact on a C M for sustained would have been positive 10.1.
Per cent looking.
Looking deeper into contribution margin for Q2, 2023 are variable sales and distribution expenses as a percentage of net revenues increased to 45.8% as compared to 44.1% a year ago quarter.
This increase in sales and just for using expenses, primarily dude product makes an increase in fulfilling fees and an increase in online advertising costs.
In the period, we took a 1.2 million dollar charge for restructuring expenses, primarily from our May 9th announcement of our plan of our workforce reduction.
Previously stated we expect this plan to reduce the cost by 6 million annually, we expect to see the effects of those savings to start in Q3 of 2023.
Are operating loss of $36 $4 million, a second quarter increased from 10.1 million compared to the year ago quarter. As we continue to normalize our business from the impacts of supply chain and strengthening our balance sheet by our continues strategic initiative to sell it.
Higher price inventory or.
Our second quarter of 2023 operating loss includes $3.2 million of non-cash stock compensation expense, a non-cash loss and impermanent tangibles of $22.8 million and restructuring cost of $1.2 million, while our second quarter of 2022 operating loss included a gain of 1.7 million from the change in fair value for not liabilities and 6 million non-cash stock compensation.
An expense.
That loss of the quarter of $34.8 million increase from a loss of $16.3 million in the year ago quarter. As we continue to normalize our business from the impacts of supply chain and strengthen our balance sheet by your continued strategic initiative to solve higher price inventory.
Our second quarter net loss of 2023 includes impact from our operating loss as described.
Earlier, plus a gain of fair value aren't liability of 2.2 million, while our second quarter of 2022 net loss includes the impact of our operating loss as described early plus 6 million impact from a change in fair value warrants.
Adjusted EBITDA loss of 8 million is the finding our earnings release increase from a loss of $3.7 million a second quarter of 2022.
The previously mentioned 2.5 million increasingly Turiaf lessons reserve had a negative impact on our adjusted EBITDA, excluding the impact or just to even it would have been a loss of $5 $5 million.
Going to the balance sheet at June 30th we had a cast of approximately 28.9 million compared to 33.9 million at the end of March 31st 2023.
Decreasing cashless expect is permanently driven by your net loss in the period 5.3 million net inflows from working capital in repayments of approximately 5.5 million on a credit facility.
We continue to focus on normalizer inventory levels in the second quarter of 2023 by liquidating, our highest cost non-core inventory. We are pleased with our progress, but do need more time to get her inventory at the appropriate levels, especially considering reduce consumer demand.
At June 30th our inventory level was at 36.7 million down from 44 million at the end of the first quarter of 2023 and down from $76 1 million in the year ago quarter or.
Credit facility bounce at the end of the second quarter of 2023 was $15.7 million down from 19.1 million at the end of the first quarter of 2023.
As we look at Q3 2023, considering the impact of inflation and a reduction consumer spend we believe that net revenues will be between $32.5 million and $37.5 million.
This represents a decrease from the same quarter last year of approximately 45 per cent using the middle of the range.
Expect to continue to see similar to the office and consumers spent for the remainder of the year.
For Q3, 2023, we expect adjusted EBITDA loss to be in the range of $4.5 million to 5.5.
We originally targeted just even a possibility in the second half of 2023, Harvard with continued expectation of softness in consumer spending through at least the rest of the 2023 and as we previously announced we don't believe it.
We don't believe that's profitability is achievable in this year, although Joan are currently working through our strategy envision. We currently believe that targeting at Jesse profitability in the summer of 2024 is more realistic than this year.
Further we believe based on our current forecasts, we have sufficient cash above our covenants to achieve this go without raising additional equity that's purely state if we prefer additional financing it will be properly for growth through M&A.
In closing we believe it will continue to navigate through obstacles that challenged us over the past few years.
Joseph My shared initial vision of focusing sympathizing and stabilizing of turning towards Profitabilities priority one.
<unk> will take time and tremendous effort and we are excited for that challenge. We believe are solid balance sheet led by our cash balance normalizing inventory levels and continued access of our credit to sit with mid cap will allow us to be laser focus on driving our core business towards that just either profitability.
With that I'll turn it back to the operator to open the call up to questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you're using a speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble a roster.
Our first question comes from Marvin Fong would be T. I G. Please go ahead.
Alright.
Order until and Joe welcome to the C O O. So.
Question just on the on the on the initiative to do I guess uhm rationalize the portfolio and focused on your most profitable offering. So I guess two questions on this maybe the first one could you maybe give us an idea of.
What.
What how much of the revenue base, you know what kind of be.
Be included in this kind of more profitable.
Viewpoint, so like no.
How much can we expect to see that.
70 days to kind of be.
Rationalized.
Mmm Mmm or did you Wanna do you Wanna take that minority.
Got it Joe Thanks, Marvin fit to hear Ya I hope you're doing well yeah. It's a good question. This is Margaret it's just that we're 12 <unk>.
<unk> our primary focus we're working through that we do think that any rationalization will do will have some impact that we don't think right now it's hard to say, but we don't think it's gonna be <unk>.
Hoover material from a revenue perspective based off where are our current guidance is.
That said I I I do think.
We're we're very excited to do this is that we think the impact on the profitability as a lot stronger than it is on the revenue, but we still need time to work through it.
Mentioned will be able to hopefully provide more color on that and and our next earnings call, but but we don't think it's going to.
B as material.
<unk>, what we're currently seeing it on our current consumers current guidance numbers.
Okay, Great I guess another question on the topic, but.
I know you said you just one day, then but is it possible that whole Brian might be eliminated or does it that'd be more like surgical <unk>.
Give me the cough plan.
<unk> looked at.
You know I'll I'll I'll take that one already I think we're we're for sure gonna be so we're gonna do a line review Marvin right skew by skew across all the brands. So it will definitely be surgical now in the course of that work we might decide to to jettison you know <unk>.
One or more brands that really don't that don't drive any P&L meaningfully today, but it's you know right now we're thinking of it more surgically great and then we'll see if that expands to brands.
Okay, perfect and maybe already just the.
One piano question there'll be the the fixed distribution coffee with that kind of increase quarter over quarter <unk>.
A one time thing can we expect that to to come back down I know you mentioned the restructuring savings. It's just start kicking in but just why did that jumping this quarter and what can recycle.
So so I think from memory any more and there is some restructuring costs in there. So I think when you're back that out I think you'll you'll probably be more normal, but certainly we do expect that fixed cost to actually start coming down a bit more than two three anyway as as we can.
Kind of action the restructuring.
Perfect. Okay. Thanks, Okay.
The next question is from Brian canceling or with a lion's Global partners. Please go ahead.
Hi, Thanks for taking my questions guys first one maybe you I'm. So sorry I missed it when you talk about how much inventory you still have remaining as part of the plan liquidation process misuse that were high priced or overboard.
Alrighty, Yeah, just grab that thanks, Hey, Brian How're, you Doin' hope you're doing well.
Listen, we're still working through that right I think in some aspect.
We went from some time last year at 76 million <unk> really put that down to 36 I, we're very pleased and what we've been doing and how we've been fixing up but as we federally we've got a little bit more work to do we didn't really state a number out there Ryan, but I I think in general what we said in the past his license there's always gonna be some component of enjoy the <unk> pleased with its long on and write an inventory is never perfect.
We we want that number to be below 10% of our average balances I think right now, we're probably looking at that number being 15% to 17.5% versus 10. So so from an average basis. So that's roughly I got finally got for something like that but that's kind of the the amount I want to sort of work down, but obviously you know that that's still very fluid as as we can.
Kind of work with both ski rationalization that turns consumer environment, but that's kind of what we're thinking right now.
Alright, Thanks, and then you obviously highlighted the pricing pressure in the cooling and air quality products.
No that's been a meaningful piece of your business at least historically.
Curious simply under the court or have you begun to see pricing pressure in other spheres.
I I I can I can take that already you can you can jump in.
I would say that you know generally speaking you know you need it it's in pockets, but you know there's there's there's pricing pressure is you know across across the portfolio right and in some cases, though we have some very strong products that that you well have very strong margins there.
Best sellers.
And then in in in other areas that I think are a little more discretionary you're seeing you know you're you're you're seeing pressure there as well let people you know <unk>.
You know obviously get their daily run rates and also you know get get out of their inventory.
Okay last question for me.
You highlighted at returning to profitability adjusted EBITDA basis, more likely December of 2024.
Well it sounds like $6 million in annual Hotbox.
In order to get back to positive adjusted EBITDA.
Have to cut more or well or do you expect it all to come from returning to revenue growth.
Go ahead I'll, let me grab that does that one yeah. Thanks. So so so Brian quick question I listen we believe as we focus our product portfolio and Brandon that you mentioned are receiving will natural recover right as I think I've highlighted earlier when the question.
The the rationalization, probably a bigger drag unprofitably top line revenue.
So when you're kind of when you kind of factor that in I think you know again early targets you'd think to see them probably gets.
Pretty quickly above that 13% number that we haven't seen in a while and maybe even closer to our target of 15, I think when you factor that in even on a reduced revenue you're kind of right there, especially after the six cost cutting that we just did Riley I think our total fixed costs I think will be run reading kind of below $23 million.
And that's before any type of rationalization on on on an efficiency that comes out of supply chain for doing less skews you know, there's gonna be efficiencies that naturally come through that right. So I think when you factor that all in I think that's how we kind of see it and that's that's what we have a line of cider, but we still have a lot of work to get there as we mentioned.
And we were gonna roll up your sleeves, and really focus on doing that but that's kind of how you kind of that's how we see it and how we can get there.
Great. Good luck guys. Thank you so much thank.
<unk> thanks for <unk>.
The next question is from Alex Ferman with Craig Hallum Capital Group. Please go ahead.
Hey, guys. Thanks for taking my question already I think you mentioned about $6 million the annualized cost cut that you're gonna see starting in the current quarter of <unk> can you give us a little bit more granular sense of you know what that $6 million is how much of that is head count versus other six.
Expensive and then how much did we expect to see in the third quarter and the fourth quarter of this year and and when would you expect to see the full run rate of that in the piano.
Hey, I was how're you doing and thanks for the question I.
I would say that.
Predominant amount of savings there was people I would say probably 90% 95 per cent of that number is coming from people cough at this point in time.
I do think that we'll start seeing some of the most of the impacts in Q3, but I would say the full run rate you'd probably expect some time in pretty close in queue for if not totally bikes you want and there's there's a little bit of tiny elements. There that we have to work through but you start seeing the impacts of the savings in Q3, you see a lot bigger portion of that in Q4, and then I would.
Say by Q1 of next year, you definitely see 100 per cent of that coming through.
Okay. That's that's really helpful. And then can you just kind of from a high level just give us a sense here you know if you think about you know rationalizing them F. K U. What right. Now are you are you know top performing most profitable brand that that you're really going to be.
[noise] willing to put investment and and marketing dollars behind.
[noise] sure I can I can take that one already so <unk> squatty parties are great brand right. It's the product right Squatty potty right. So that's a great brand. We we have a few other brands pure scheme, we have an oil brand or paper brand.
You know we've got some home kitchen appliance brands that these are all brands that again have some excuse in them that needs to be rationalized, but that have some really really great products and then and so you know, we'll we'll provide more color on you know where where we think we're gonna make you know a bigger baths.
You know in the coming months, Alex, but but those are you know those.
Those are the areas, where you know we we.
We think we'll be spending most of our time.
For now.
Okay. That's that's very helpful. Thank you very much.
You're welcome.
The next question is from Matt Koranda with Roth M. K M. Please go ahead.
Hey, guys. Good evening, just wanted to get a little bit more color on explosively, what's driving sort of the the erosion in your your declines in the third quarter.
The third quarter I'll look I think implies things I've I've gotten a little worse in the last month I guess, so what categories. In particular have you seen erosion in and then maybe could you clarify for US like are you are you losing top of search in any of those categories or cause it seems a little too stark to chalk it all up to macro weakness uhm. So I just wanted to see if you could maybe put upon.
Appointment I'm I'm sort of or there's some categories or maybe we've lost top of search and then just lastly, maybe address the pricing dynamics versus unit volume pressure that you're saying it sounds like you're you're saying that there's some pricing pressure and some competition in some categories. So maybe we just put a finer put on that as well for us.
Alrighty I can try to address this and then maybe you can just jumping over me.
Perfect. Thank you okay. So Matt in you know.
Mmm second quarter, right, the the environmental appliances or or or the products that you know, we expect to sort of drive most of the P&L. So those are our air conditioners and dehumidifier.
When.
When it comes to dehumidifier it.
It's interesting so you know I <unk> I just thought I spoke about this in my remarks, a little bit you know there was a loss of rank. There you know we had a product that and this is this is part of the challenges of being on on a market place right. We had a product that came into the category that's not actually a D.
Humidifier.
But it but it took the best seller tag away from US. So you know that that's the.
<unk>, it's very differentiating and when you lose that tag you you you've taken immediate hit.
On on velocity right sales velocity.
On top of that.
And again you know this is the challenge the being on the market place. There are other competitors right that are.
Getting a best seller tag that they don't deserve to have so if you're in front of your computer and you type in dehumidifier, you'll see a brand.
Called nine Scott.
<unk> has the best seller tag on it.
But when you <unk> you when you click on the best seller tag right and do the work you'll see that it's the number one ranked product for Christmas stockings. Okay.
So you know it's you know there is there is there are players out there that are sort of gaining the algorithm. It's confusing consumers. We had another product come in to the category that also shouldn't have the tag.
All of which.
You know create.
It makes it harder for the consumer to find our product even though we know we have a great product and it's well price than it does the job.
So you know.
<unk>, that's that's the kind of dynamic that you know that we're that we're seeing you know sort of in the <unk> category right in that you know and those kinds of things can sort of.
Make or break you right in the quarter and then you know because the weather.
It hasn't been incredible humidity and in the second quarter right. It started out rather you know a rather mild season, you know folks are loaded up on inventory right and they need they need to exit for the season. So you know prices come down and so you know you you start to see a little bit of pressure that way as well.
I bet you know that's that's that's what I've got for you I don't know if there's a follow up or already if you want to add anything there.
No I think I'd, you already answered well I think Matthew your point.
We did see some improvement in our run rate, especially when we got into July cause I think in some aspects. It started heating up so we could see the numbers increase a bit but we're still we're still being very cautious as as we guided because you know the the consumer spend in some of these other very particular, good point that you brought up or or just.
You know, we're just trying to be cautious there right. We don't we have we've seen some improvements, but we're still being cautious. So that's why I think when you look at the guide. We're we're kind of almost spot classic you too and and keep in mind you really similar to Q2 Q3 has like too strong months in September starts to wane.
And even August 2nd half August 10th Wayne Weather's been very unpredictable. Some maybe we'll have some good news at the end, but certainly we're being cautious there and that's why the numbers look relatively flat in Q3 persist you too.
Okay. Okay fair enough cause and then maybe just as a follow up to Joe's comments. That's interesting I guess, how do you raise that sort of for lack of a better term like the seller gamesmanship issue with Amazon, What's your Avenue for redress as Amazon receptive to to you guys sort of highlighting some of the challenges with a product listing.
That you mentioned, how do how do you get through that.
Yeah. We look we don't we don't have you know, Jeff Bezos on speed dial.
But we you know we we have our people constantly filing complaints we do have.
Amazon Representatives that you know, we'll we'll take our phone call right, but it's it's a very large or we know they care about these things right integrity on the marketplace of Super important, but it's not just something that uhm gets fixed overnight on that.
Okay, Alright, and fair enough and then just on the inventory right down can you guys cover maybe I missed it too I've been bouncing between calls here, but what what was that focused in any particular category, where maybe you're winding down product or maybe just put a.
<unk>. Please spell out what was written down for us because yeah, yeah sure sure sure <unk> that the I I think we can be said in prepared remarks, it was probably expiring essential oils, especially with the consumer downturns that we saw you know we had some big plan for.
Moving out of those oils, and unfortunately, which we couldn't get them done in time when someone expires in rallies gonna expire within a certain date range right. You've got 60 days to sell it you still have to take the charge to them cause I won't let you put it on the platform.
Okay got it I'll take care of somebody like I was thinking.
At this time I'd like to turn the conference over to Alea Krasowski. Please go ahead.
Thanks.
Part of our shareholder probe Perks program, which is a reminder, investors can sign up for it at <unk> Dot I O forward Slash perks participants have the ability to ask management questions on our earnings calls I wanted to thank all of the shareholder perks participants for their loyalty their participation in the program and their questions I have picked a few of.
The most popular questions that they have submitted.
Question number one [noise].
What is the progress with your European expansion.
You know I think I address this in the remarks, you know <unk>.
You know we're right right now.
We've got a lot of wood to chop right with ski rationalization, and we think there's a lot of opportunity.
In the U S markets, and that's where we want to focus having said that we appreciate that.
International expansion is important and it's something we will continue to think about it.
When the time is right for the company.
Great. Thanks update on the reverse split efforts given the annual meeting of German.
Upgrade this once you've already so you know the real quick update there is.
You know, we we expect to get the approval to affect the reverse split you know we.
Right now again, you know the the theme of the day is focus so you know for US you know quote closing in on on the path to adjusted EBITDA profitability is is the name of the game. You know we we continue to think about whether we will need to reverse the stock.
And that's that's really all we we can comment on at this time, but you know or you know <unk>, we're doing the work where valuating. It we're thinking a lot about it.
Great and the last question was what is the plan to increase transparency and regain shareholder confidence.
Oh, Thank you so I like.
I just wanted to say you know already and I are extremely grateful you know that you know we get these questions and you know we appreciate the engagement we appreciate.
The support we realize that were largely a retail stock today.
You know I think.
Before already and I just took this while we were both.
Fiduciary is added <unk> and you know, we we endeavor always to be transparent bright that's that's that's extremely important for us so we.
We expect to continue to be transparent and you know for US you know.
We know we have a lot of work to do and hopefully if if we can get on that path to.
Profitability that will go a long way to re establishing confidence.
Great. Thank you.
This concludes the question and answer questions. The call in terms of the upcoming calendar material management will be participating in the H C. Wainwright 25th annual Global investment Conference on September 11th through 15th in New York.
<unk> 2023 L. D. Microbe main event 16 October 3rd through fifth in Los Angeles, Craig Hallum, 14th annual Alpha Select conference in New York on November 16th we look forward to speaking with you want future calls the signs or call you and you may now disconnect.
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