Q3 2023 Aterian Inc Earnings Call
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Speaker 1: Thank you for joining us today to discuss Eterion's third quarter 2023 earnings results.
Thank you for joining us today to discuss materials third quarter 2023 earnings results.
Speaker 1: On today's call are Joe Risco and Arturo Rodriguez, our co-CEO.
On today's call are Joe or skull, and Arturo Rodriguez, our co Ceos.
Speaker 1: A copy of today's press release is available on the investor relations section of Eterion's website, www.eterion.io.
A copy of today's press release is available on the Investor Relations section of <unk> website at <unk> Dot I O.
Speaker 1: 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 the current
That are based on current management expectations.
Speaker 1: 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.
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.
Speaker 1: These forward-looking statements involve substantial risk and uncertainty.
These forward looking statements involve substantial risks and uncertainties.
Speaker 1: 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 states.
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.
Speaker 1: 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 10K filed on March 16, 2023, and our quarterly report on form 10Q. When it is available on the investor portion of our website, editorian.io.
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 filed on March 16 2023.
Our quarterly report on.
On Form 10-Q, when it is available on the Investor portion of our website at <unk> Dot IL.
Speaker 1: You should not place undue reliance on these forward looking states.
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.
Speaker 1: 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.
Speaker 1: 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.
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.
Take period to period comparisons of our core operating results.
Speaker 1: reconciliation of these non- GAAP measures to the most comparable GAAP measures and definitions of these indications are included in our earnings release, which is available on the investor portion of our website at editarium.io. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies.
Reconciliation of these non-GAAP measures to the most comparable GAAP measures and definitions to feed <unk>.
These indications are included in our earnings release, which is available on the investor portion of our website at editorial <unk>. Please note that our definition of these measures may differ from similarly, titled metrics presented by other companies.
Speaker 1: We are unable to provide a reconciliation of non-GAAP-adjusted EBITDA margin to net income margin.
We are unable to provide a reconciliation of non-GAAP adjusted EBITDA margin to net income margin.
Speaker 1: the most directly comparable GAAP financial measure on a forward looking basis without unreasonable efforts because of 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.
The most directly comparable GAAP financial measure on a forward looking basis without unreasonable efforts because of items that impacted 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.
Speaker 2: Thank you, Ilya, and thank you everyone for joining us today. Today.
Thank you Elliot and thank you everyone for joining us today.
Today I'm going to cover our Q3 results the.
Speaker 2: The progress on our previously announced SKU Rationalization Program, other efforts we are making to focus, simplify and stabilize our business, and an update on our on-the-channel expansion efforts to position Ethereum for growth. All as we continue working towards our previously stated goal of achieving a justice EBITDA profitability in the summer of 2024.
The progress on our previously announced SKU rationalization program. Other efforts, we are making to focus simplify and stabilize our business and an update on our omni channel expansion efforts to position material for growth.
As we continue working towards our previously stated goal of achieving adjusted EBITDA profitability in the summer of 2024.
Speaker 2: already will then cover in more depth our financial results for the third quarter and will provide our outlook for Q4.
<unk> will then cover in the war in more depth, our financial results for the third quarter and will provide our outlook for Q4.
Speaker 2: Our third quarter results continue to reflect significant pricing and other pressures in order to remain competitive on Amazon, which is where we earn most of our revenue.
Our third quarter results continue to reflect significant pricing and other pressures in order to remain competitive on Amazon, which is where we earn most of our revenues.
Speaker 2: While we also continue to see reduced consumer discretionary spending for the product categories we operate in.
While we also continue to see reduced consumer discretionary spending for the product categories. We operate in.
Speaker 2: In certain of our key categories, such as in our dehumidifiers business, we have lost market.
In certain of our key categories such as in our Dehumidifies business, we have lost market share.
Speaker 2: These factors taken together have had a material impact on our results, and we expect these pressures to continue through the rest of the fourth quarter.
These factors taken together have had a material impact on our results and we expect these pressures to continue through the rest of the fourth quarter having.
Having said that.
Speaker 2: We have set in motion a number of other efforts to regain market share and to optimize our core brands and the skews that will remain part of the materials go forward this.
We have set in motion a number of other efforts to regain market share and to optimize our core brands and Skus that will remain part of materials go forward business.
Speaker 2: As a reminder, last quarter we outlined our near-term strategy to focus, simplify, and stabilize how we operate in order to not only position a tearion for adjusted EBITDAW profitability, but also to position ourselves for long-term growth.
As a reminder, last quarter, we outlined our near term strategy to focus simplify and stabilized how we operate in order to not only position a cheery and for adjusted EBITDA profitability, but also to position ourselves for long term growth.
Speaker 2: The first step in that process was to focus our business by reducing the number of skews across our portfolio. And please report that we have made
The first step in that process was to focus our business by reducing the number of skus across our portfolio.
I'm pleased to report that we have made significant progress.
Speaker 2: We have substantially completed our review and we expect our GoFo or business to consist of approximately 1,700 SKUs and approximately 50% reduction in our overall SKU.
We have substantially completed our review and we expect our go forward business to consist of approximately 1700, skews and approximately 50% reduction in our overall SKU count.
Speaker 2: We reviewed each of our SKUs based on a number of criteria, with historical and expected profitability being the main decision drivers. We are discontinuing SKUs across
We reviewed each of our Skus based on a number of criteria with historical and expected profitability being the main decision drivers.
We are discontinuing skus across all of our brands.
Speaker 2: with the lion's share of reductions coming from our central oil business, where we are standardizing our sense sizes and formulation.
With the lion's share of reductions coming from our essential oils business, where we are standardizing our sense sizes and formulations to simplify our supply chain, while still remaining focused on the consumer.
Speaker 2: simplify our supply chain while still remaining focused on this.
Speaker 2: Going forward, a Turion will be focused on the following brand.
Going forward material will be focused on the following brands.
Speaker 2: Squatty Potty, our market-leading toilet stool business. Mueller Living, our kitchen appliance and accessories business.
Squatty party, our market, leading toilet stool business Mueller living our kitchen appliance and accessories business.
Speaker 2: Pure steam or steam-related appliance business, home labs or larger home appliance business, photo-paper direct, or iron-on apparel transfer business, and the various brands that comprise our central oils business.
Sure steam are seem related appliance business home labs are larger home appliance business photo paper direct our iron ore and apparel transfer business and the various brands that comprise our essential oils business.
Speaker 2: In the coming months, we will continue to assess the performance of our go-forward SKUs and brands, driving focus on their profitability and competitive positioning to ensure stable performance and to reposition them for growth.
In the coming months, we will continue to assess the performance of our go forward Skus and brands driving focus on their profitability and competitive positioning to ensure stable performance and to reposition them for growth.
Speaker 2: As a result of this skew rationalization process, however, we do expect further liquidations in Q4, which already will address in his remark.
As a result of this SKU rationalization process. However, we do expect further liquidations in Q4, which already will address in his remarks.
Speaker 2: Post-Squeue rationalization, we have a number of other ongoing initiatives to focus, simplify, and stabilize our business as we continue to ensure that how we operate is best optimized to support the GoPro with this.
Post SKU rationalization, we have a number of other ongoing initiatives to focus simplify and stabilize our business as we continue to insure that how we operate is best optimized to support the go forward business.
Speaker 2: One initiative I'd like to highlight today and that we believe drives synergies for us is our project to greatly reduce the number of Amazon accounts we use to market and sell our products from 31 accounts to 8 accounts. Essentially, one...
One initiative I'd like to highlight today and that we believe drive synergies for US is our project to greatly reduce the number of Amazon accounts, we used to market and sell our products from 31 accounts to eight accounts SM.
Essentially one account per brand.
Speaker 2: Executing on this will reduce complexity and will make us more agile from a revenue, technology, planning and operations perspective.
Executing on this will reduce complex complexity and will make us more agile from a revenue technology planning and operations perspective.
Speaker 2: We have also taken actions to strengthen our relationship with Amazon. And we believe that deepening this relationship will create further cost savings and efficiencies in our business.
We have also taken actions to strengthen our relationship with Amazon and we believe the deepening this relationship will create further cost savings and efficiencies in our business.
Speaker 2: Lastly, in the fourth quarter, we will continue to assess cost-having opportunities across the business.
Lastly, in the fourth quarter, we will continue to SaaS cost saving opportunities across the business.
Speaker 2: Collectively, we believe these and other initiatives will position Echirian well as we enter 2024. From an omni-channel perspective,
<unk>, we believe these and other initiatives will position <unk> well as we enter 2024.
From an Omnichannel perspective, we have also made progress we.
Speaker 2: We have recently launched two of our foldable Squatty Potty stools in Walmart.
We have recently launched two of our Foldable Squatty Party stools and Walmart.
Speaker 2: While it's still early, we are optimistic about the performance of these SKUs, and we will be launching in the fourth quarter a national advertising campaign to support squatting.
While it is still early we are optimistic about the performance of these skus and we will be launching in the fourth quarter, our national advertising campaign to support Squatty.
In addition.
Speaker 2: We also have recently launched our TikTok shop for Squatty Potty.
We also have recently launched our tick tock shop for Squatty Party we.
Speaker 2: We also expect to have many of Ethereum's other SKUs available for sale on TikTok Shop during the fourth quarter.
We also expect to have many of the Chileans other skus available for sale I'll take talk shop during the fourth quarter.
Speaker 2: While TikTok Shop itself is a relatively new e-commerce platform, we are optimistic about its potential to drive incremental growth across Ethereum's product portfolio as we endeavor to meet consumers everywhere they shop.
While kick tuck shop itself is a relatively new E. Commerce platform, we are optimistic about its potential to drive incremental growth across our <unk> product portfolio as we endeavor to meet consumers everywhere they shop.
Speaker 2: The TikTok model leans heavily into social commerce, relying on user-generated content and consumer discovery versus Amazon, which relies primarily on search. And we believe this shift in consumer behavior will be important as e-commerce continues to evolve.
The tick tock model leans heavily into social commerce, relying on user generated content and consumer discovery versus Amazon, which relies primarily on search and we believe this shift in consumer behavior will be important as E. Commerce continues to evolve.
Speaker 2: We also continue to explore other channels that we believe can drive profitable revenues for our existing product portfolio, and we hope to provide further updates with respect to these efforts in the coming quarters.
We also continue to explore other channels that we believe can drive profitable revenues for our existing product portfolio and we hope to provide further updates with respect to these efforts in the coming quarters.
Speaker 2: Lastly, we continue to launch new products and I'd like to highlight that we plan in the fourth quarter to strategically expand our essential oils portfolio to address consumer needs for healthier chemical-free products.
Lastly, we continue to launch new products and I'd like to highlight that we plan in the fourth quarter just to strategically expand our essential oils portfolio to address consumer needs for healthier chemical free products.
Speaker 2: Regarding M&A, it remains an area of focus, and we remain patient and disciplined with respect to these opportunities.
Regarding M&A it remains an area of focus and we remain patient and disciplined with respect to these opportunities.
Speaker 2: Today, we are working through a significant transition of our business, and we remain laser-focused on those efforts, but we are still forward-looking, planting seeds for growth, and we believe these combined efforts will yield significant benefits for Ethereum in 2024 and beyond.
Today, we are working through a significant transition of our business and we remain laser focused on those efforts, but we are still forward looking planting seeds for growth and we believe these combined efforts will yield significant benefits for a period in 2024 and beyond overall.
Speaker 3: Overall, we are excited about the progress that we have made to focus, simplify and stabilize Ethereum's business. And we remain optimistic that with this narrower focus on our core SKUs and brands, and by pursuing our omni-channel strategy, we will be able to achieve adjusted EBITDA profitability in the summer of 2024. With that, I'll pass it on to Arti. Thank you.
Overall, we are excited about the progress that we've made to focus simplify and stabilize materials business and we remain optimistic that with this narrower focus on our core skus and brands and by pursuing our Omnichannel strategy, we will be able to achieve adjusted EBITDA profitability in the summer of 2024 with that.
I'll pass it onto party. Thank you.
Okay.
Thanks, Joe Good evening everyone.
Speaker 4: In Q3, we saw our revenue continue to be impacted by reduced consumer discretionary spending and competitive
In Q3, we saw our revenue continued to be impacted by reduced consumer discretionary spending and competitive pricing pressures.
Speaker 4: The hard decisions in Q2 of this year to adjust our fixed costs is putting us on our path towards profitability.
However, the.
The hard decisions in Q2 of this year to adjust our fixed cost is putting us on a path towards profitability.
Speaker 4: This is evident as we reduced the year-over-year Q3 adjusted EBITDA loss by 51% and our net loss improved by over 94%.
This is evident as we reduced the year over year Q3, adjusted EBITDA loss by 51%.
And our net loss improved by over 94%.
Further.
Speaker 4: We continue to strengthen our balance sheet, reducing our cash burn, normalizing our inventory, and reducing the balance of our credit system.
We continue to strengthen our balance sheet, reducing our cash burn normalizing, our inventory and reducing the balance of our credit facility.
Speaker 4: We still have a lot of work in front of us. Joey and I and the rest of the team at Ethereum are very motivated to take that on.
We still have a lot of work in front of us, Joe and I and the rest of the a few minutes hearing a very motivated to take that off.
Speaker 4: We're also very pleased with our progress on focusing, simplifying, and stabilizing Ethereum, and we continue to be optimistic on our goals of achieving adjusted EBITDA profitability in the summer of 2024.
We're also very pleased with our progress on focusing simplifying and stabilizing material.
And we continue to be optimistic on our goals of achieving adjusted EBITDA profitability in the summer of 2024.
Speaker 4: Now, moving on to revenue details for the third quarter of 2023, net revenue declined 40.2 percent to 39.7 million from 66.3 million in the year-ago quarter, primarily due to reduced consumer discretionary spending and competitive pricing pressures across our portfolio.
Now moving on to revenue details for the third quarter of 2023.
Net revenue declined 42% to $39 7 million from $66 3 million in the year ago quarter.
Primarily due to reduced consumer discretionary spending and competitive pricing pressures across our portfolio.
Speaker 4: Our $39.7 million third quarter net revenue by phase as defined in our press release broke down as follows.
Our $39 7 million third quarter net revenue by phase as defined in our press release broke down as follows.
Speaker 4: $32.3 million in sustain, $0.4 million in launch, and $7.0 million in liquidate and inventory normalization.
$32 3 million and sustain.
$4 million in launch and seven.
And liquidate inventory normalization.
Speaker 4: The year-go-quarter net revenues of $66.3 million by phase broke down as follows.
The year ago quarter, net revenues of $66 3 million by phase broke down as follows 50.
Speaker 4: $54.2 million in sustain, $1.6 million in launch, and $10.5 million in liquidate and inventory normalization.
<unk> $54 2 million of sustain $1 6 million in launch and $10 5 million and liquidate inventory normalization.
Speaker 4: Our sustained net revenue decrease of $21.9 million is from reduced consumer discretionary spending and competitive pressures across the portfolio, but in particular, our dehumidifier and air conditioning product.
Our sustained net revenue decrease of $21 9 million is from reduced consumer discretionary spending and competitive pressures across the portfolio, but in particular, our <unk> fire air conditioning product line.
Speaker 4: Our liquidation net revenue decreased by 3.5 million as we continue to sell off higher priced inventory to normalize inventory levels, but in reduced volumes than last year. As we enter what we hope are the final phases of this strategic initiative.
Our liquidation net revenue decreased by $3 5 million as we continued to sell off higher priced inventory to normalized inventory levels and reduced volumes in last year as we enter what we hope are the final phase of this strategic initiative.
Speaker 4: Six variations were launched late in the third quarter. We are continuing to be thoughtful in the timing of our new product.
Fixed variations were launched late in the third quarter, we are continuing to be thoughtful and the timing of our new product launches.
Speaker 4: Overall gross margin for the third quarter increased to 49.4% from 45.5% in the year ago quarter and increased from 42.2% in Q2 of 2023. The improvement was driven by product mix and better pricing on liquidation sales.
Overall gross margin for the third quarter increased to 49, 4% from 45, 5% in the year ago quarter and increased from 42, 2% in Q2 of 2023.
The improvement was driven by product mix and better pricing on liquidation sales.
Speaker 4: Our overall Q3 2023 contribution margin, as defined in our earnings release, was 3%, which increased compared to prior year's 1.1%, and increased compared to second quarter's 2023 CM of negative 3.6%.
Our overall Q3 2023 contribution margin as defined in our earnings release was 3%, which increased compared to prior year's one 1% an increase compared to the second quarter of 2023 <unk> of negative three 6%.
Speaker 4: The increased contribution margin was driven by product mix, improved pricing on inventory liquidations, offset by competitive pricing pressures on a core business.
The increase in contribution margin was driven by product mix improved pricing on inventory liquidation offset by competitive pricing pressures on our core business.
Speaker 4: Q3 2023 saw our sustained products contribution margin decline slightly year-over-year to 9% versus 10% in Q3 2022. The decrease in contribution margin was driven by competitive pricing pressures and product mix and certain initiatives to normalize end-of-the-season inventory.
Q3, 2023 star sustained product contribution margin declined slightly year over year to 9% versus 10% in Q3 2022.
The decrease in contribution margin is driven by competitive pricing pressures and product mix and certain initiatives to normalized ended the season inventory.
Speaker 4: Looking deeper into our contribution margin for Q3 of 2023, our variable sales and distribution expenses as a percentage of net revenue increased to 46.3% as compared to 44.4% in the year-ago quarter.
Looking deeper into our contribution margin for Q3 of 2023, our variable sales and distribution expenses as a percentage of net revenue increased to 46, 3% as compared to 44, 4% in a year ago quarter.
Speaker 4: This increase in sales and distribution expense is predominantly due to product mix and an increase in online advertising.
This increase in sales and distribution expense is predominantly due to product mix and an increase in online advertising costs.
Speaker 4: Our operating loss of $6.5 million in the third quarter improved from $108.9 million compared to the year-ago quarter in an improvement of approximately 94 percent, driven by the normalization and improvement of our balance sheet and the reduction of fixed costs offset by our continued strategic initiative to sell off higher-priced inventory.
Our operating loss of $6 5 million in the third quarter improved from $108 9 million compared to the year ago quarter, and an improvement of approximately 94% driven by the normalization and improvement of our balance sheet and the reduction of fixed costs offset by our continued strategic initiatives selloff higher price inventory.
Speaker 4: Our third quarter 2023 operating loss includes $1.2 million of non-cash stock compensation expense and restructuring costs of $0.4 million.
Our third quarter 2023 operating loss includes $1 2 million of noncash stock compensation expense.
Restructuring costs of $1 4 million.
Speaker 4: While our third quarter 2022 operating loss included a gain of $0.8 million from the change in fair value of earn out liabilities, a non-cash loss of $90.9 million from the impairment on goodwill, a non-cash loss of $3.1 million on the impairment of intangibles, and $2.9 million of non-cash stock compensation.
While our third quarter 2022 operating loss included a gain of $2 8 million from the change in fair value of earn out liability.
Noncash loss of $90 9 million from the impairment on goodwill.
Noncash loss of $3 1 million on the impairment of intangibles and $2 9 million of noncash stock compensation.
Speaker 4: Our net loss for the quarter, $6.3 million, improved from a loss of $116.9 million in the year-ago quarter, an improvement of approximately 95 percent, driven by the normalization and improvement of our balance sheet and the reduction of fixed costs offset by our continued strategic initiative to sell off higher-priced inventory.
Our net loss for the quarter of $6 3 million improved from a loss of $116 9 million in the year ago quarter, an improvement of approximately 95% driven by the normalization and improvement of our balance sheet and the reduction in fixed costs offset by our continued strategic initiatives to sell off higher priced inventory.
Speaker 4: Our third quarter 2023 net loss includes the impacts of our operating losses described earlier, plus a change in fair value warrant liability of 0.6 million. While a 3rd quarter, 2020.
Our third quarter 2023 net loss includes the impacts of our operating loss described earlier plus a change in fair value of warrant liability of <unk> 6 million.
While our third quarter 2022 net loss includes the.
Speaker 4: The impacts of our operating losses described earlier, plus a gain of 5.5 million in net charges from the change in fair value of warrants, and a loss of 12.8 million from derivatives related to the offering of common stock made in 2022.
The impacts of our operating losses described earlier plus a gain of $5 5 million and net charges from the change in fair value of warrant.
And a loss of $12 8 million from derivative related to the offering of common stock made in 2022.
Speaker 4: Our adjusted EBITDA loss of $4.4 million as defined in our earnings release improved by 51% from a loss of $9.1 million in the third quarter of 2022.
Our adjusted EBITDA loss of $4 4 million as defined in our earnings release improved by 51% from a loss of $9 1 million in the third quarter of 2022.
Now going to the balance sheet.
Speaker 4: At September 30th, we had cash of approximately $28 million compared to $28.9 million at the end of June 30th, 2022.
September 30, we had cash of approximately $28 million compared to $28 9 million at the end of June 32023.
Speaker 4: The decrease in cash, as expected, is predominantly driven by our net loss in the period and the repayments of approximately $1.7 million on a credit facility, offset by $5.2 million of net income.
The decrease in cash as expected is predominantly driven by our net loss in the period and the repayment of approximately $1 $7 million on our credit facility offset by $5 2 million of net inflows from working capital.
Speaker 4: At September 30th, our inventory level was at $31.5 million, down from $36.7 million at the end of the second quarter of 2023, and down from $60.5 million in the year-ago quarter. We continue to make strong progress normalizing the high-cost non-court inventory, but given the weakness in consumer demand, it has taken us longer than originally anticipated. However, we do believe, based on our current forecast,
At September 30, our inventory level was at $31 5 million down from $36 7 million at the end of the second quarter 2023, and down from $60 5 million in the year ago quarter. We continue to make strong progress normalizing the high cost non core inventory, but given the weakness in consumer demand has taken us longer than originally anticipated.
However, we do believe based on our current forecast, we expect to be substantially completed by completed by the end of the fourth quarter of 2023.
Speaker 4: We expect to be substantially completed by the end of the fourth quarter of 2023.
Speaker 4: Further, we've elected to purchase inventory in advance for the 2024 season to avoid expected tariff impact in early 2024, primarily around our beverage cooler products, which will lead to higher inventory balance than normal through Q2 of 2024.
Further we have elected to purchase inventory in advance for the 2024 season to avoid expected tariff impact in early 2024.
Primarily around our beverage cooler products, which will lead to higher inventory balance than normal through Q2 of 2024.
Speaker 4: Our credit facility at the end of the third quarter of 2023 was 14.2 million down from 15.7 million at the end of the second quarter of 2020.
Credit facility at the end of the third quarter of 2023 was $14 2 million down from $15 7 million at the end of the second quarter of 2023.
Speaker 4: As we close 2023, we do expect our cash balance at the end of the fourth quarter will decrease to the low to mid-20 million range as we are paying for inventory purchases and receiving goods in advance in order to ensure the avoidance of expected tariff impacts in early 2020.
As we close 2023, we do expect our cash balance at the end of the fourth quarter will decrease to the low to mid $20 million range. As we are paying for inventory purchases and receiving goods in advance in order to ensure the avoidance of expected tariff impact in early 2024.
Speaker 4: As we look at Q4 2023, considering the impact of inflation and reduction in consumer spend, we believe that net revenues will be between 28 and 32 million. This represents a decrease from the same quarter last year of approximately 45 percent using the middle of the range.
As we look at Q4 2023, considering the impacts of inflation and reduction consumer spend we believe that net revenues will be between 28 and $32 million. This represents a decrease from the same quarter last year of approximately 45% using the middle of the range.
Speaker 4: For Q4 2023, we expected just either law of to be in the range of 6.5 million to 7.5.
For Q4, 2023, we expect adjusted EBITDA loss to be in the range of $6 5 million to $7 5 million.
Speaker 4: The middle of this range represents an improvement of approximately 44% compared to last year.
The middle of this range represents an improvement of approximately 44% compared to last year's fourth quarter as.
Speaker 4: As compared to third quarter 2023, this includes an estimated incremental $2 million negative impact from anticipated fourth quarter pricing initiatives for higher priced inventory in relation to Black Friday and Cyber Monday sales.
As compared to the third quarter 2023. This includes an estimated incremental $2 million negative impact from anticipated fourth quarter pricing initiatives for higher price inventory in relation to black Friday, and cyber Monday sales program.
Speaker 4: We continue to be optimistic on our goal and continue to target adjusting EBITDA profitability in the summer of 2024.
We continue to be optimistic on our goal and can you target adjusted EBITDA profitability in the summer of 2024.
Speaker 4: We also believe, based on our current forecast, we have sufficient cash above our covenants to achieve this goal without raising additional equity.
We also believe based on our current forecast we have sufficient cash above our covenant achieved this goal without raising additional equity as.
Speaker 4: as we previously stated, if we pursue additional equity or financing, it will be predominantly for growth through M&A.
As we previously stated if we pursue additional equity or financing it will be predominantly for growth through M&A.
Speaker 4: In closing, our shared vision of focusing, simplifying, and stabilizing curing towards profitability continues to be priority number one.
In closing our shared vision of focusing simplifying and stabilizing turning towards profitability continues to be priority number one we.
Speaker 4: We continue to make progress on this goal, but it will take time and tremendous effort, which continues to excite and motivate us and our dedicated workforce across the globe.
We continue to make progress on this goal, but it will take time and tremendous effort, which continues to excite and motivate us and our dedicated workforce across the globe.
Speaker 4: We believe our solid balance sheet, led by our cash balance, normalizing inventory levels, and continue access to our credit facility with MidCap. We'll allow us to be laser focused on driving our core business towards just the appropriate process.
We believe our solid balance sheet led by our cash balance normalizing inventory levels and continued access to our credit facility with Midcap will allows us will allow us to be laser focused on driving our core business towards adjusted EBITDA profitability.
Speaker 4: With that, I'll turn it back to the operator to open the call up to questions.
With that I'll turn it back to the operator to open the call up to questions.
This now is now open for your questions.
Speaker 5: To ask a question, this time, please press star, then the number 1 on your telephone keypad.
To ask a question today's Chen Please press star gender number one on your telephone keypad.
Speaker 5: We'll pause for just a moment to compile the Q&A raw file.
We'll pause for just a moment to compile the Q&A roster.
Yes.
Yes.
Yeah.
Okay.
Okay.
Okay.
Speaker 5: Your first question comes from the line of Matt Coranda with Rod MkM. Your line is open.
Your first question.
Comes from the line of Matt Koranda.
We drew up empty Eddie your line is open.
Speaker 3: Hey, guys, it's Mike Zabrinon from that. Maybe just starting on the 2024 adjusted EBITDA profitability target. It's just help us understand to what degree the new target relies on a more optimized inventory balance versus maybe overall demand normalization versus new product growth driving demand. Artie, you want to take that one?
Hey, guys, Mike <unk> on for Matt.
Maybe just starting on the 2024 adjusted.
Adjusted EBITDA profitability target.
Help us understand to what degree the new target relies on a more optimized inventory balance versus maybe overall demand normalization versus new product growth driving demand.
Or do you want to take that one.
I'll grab that Joe.
So listen I think we believe by focusing our portfolio. This is going to lock a lot of efficiencies across the board and lead to recovery of RCM, especially as move away from less profitable products, we think that <unk> getting back to like 13% plus and eventually when we eventually get to our target of 15% is really going to unlock that goal.
Speaker 4: We believe by focusing our portfolio, this is gonna lock a lot of efficiencies across the board and lead to recovery of our CM, especially as we move away from less profitable products.
Speaker 4: We think that CM getting back to like 13% plus and eventually to our target of 15% is really gonna unlock that goal that just would even have profitability.
The EBIT profitability.
Speaker 4: You know, some of the things that we're working on, if you're mentioning, we do believe that, you know, a lot of the inventory will be back to normal pricing as we kind of get into early 2024, especially now that containers are back to 2019 pricing. Further, you know, we're working on a lot of FOB initiatives, particularly in the oil, that will help us improve our CM by the time we get to summer of 2024.
Some of the things that we're working on you mentioned, we do believe that a lot of the inventory we will be back to normal pricing as we kind of get into early 2024.
Especially now the containers are back to 2019 pricing further we're working on a lot of F&B initiatives, particularly in the oil that will help us improve our cm by the time, we get to summer 2024.
Speaker 4: Plus, I think as Joe mentioned, as we focus down the portfolio, we're going to be hyper-focused on these course views, which will drive a lot more effective initiatives across the listings and resulting in what we believe will be improved CM. Also, we got a bunch of other initiatives that we'll talk at later dates about, but that should improve a lot of the efficiencies across product development and supply chain.
Yes, I think as Joe mentioned as we focused on the portfolio, we're going to be hyper focused on these core skus, which will drive a lot more effective initiatives across the listings and resulting in what we believe will be improved and also we got a bunch of others initiatives that we'll talk at later dates about but that should and crews.
A lot of the efficiencies across product development supply chain.
Speaker 4: We think we've got a good line of sight, we've got a lot of work to do, but certainly we feel very optimistic that the goal that we set off by in August , that we're still heading in the right direction.
We think we got good line of sight.
Lot of work to do but certainly we feel very optimistic that the goal that we set off by <unk>.
That we're still we're still heading in the right direction for that.
Speaker 2: Yeah, already if it's okay to add.
Yes.
It's okay to add.
Speaker 2: Matt, you know, obviously I agree with everything already said and we're just looking at the core material in business when we think about profitability next year.
Sure.
Matt.
Obviously I agree with everything already said.
We're just looking at at the core material business, when we think about profitability next year.
Okay.
Speaker 1: Got it, for a mix sense. And maybe on the initiative of moving from 31 to 8M is on accounts. You just, could you provide us a little bit more color on, you know, what is this process consists of? Are we incurring any one time costs as a result? How long will it take? And then where should we look to in the coming quarters to start see the benefits of this initiative?
Got it.
Makes sense.
And maybe on the <unk> initiative of moving from 31 to eight Amazon accounts.
Just can you provide us a little bit more color on what are those process consist of OEM incurring any onetime costs as a result, how long will it take and then where should we look to in the coming quarters to start seeing the benefits of this initiative.
Are you do you think that one already.
Speaker 4: Yeah, okay. So, so a lot of it, you know, to Joe's earlier point, listen, you know, in the past.
Yes, okay. So so a lot of it.
To Joe's earlier point listen.
In the past.
Speaker 4: Historically the way a lot of Amazon businesses run they were run across multiple counts Especially considering how much power Amazon has to to a particular business, right? If you're one account Amazon shut you down, you know create a lot of
Historically, the way a lot of Amazon business, Ron they were run across multiple accounts.
Especially considering how much power Amazon has.
Think of the business right, if you're one account Amazon shut you down it creates a lot of impact.
Speaker 4: That said, as that plastic in the marketplace says matured, it's a lot more acceptable to have multiple accounts.
That said.
Lastly on the marketplace has matured a lot more acceptable have multiple accounts.
Speaker 4: I think where we're thinking and what we think efficiencies will happen that will lead to improved profitability is about getting down to one account per brand. So not only does the team can be very hyper-focused on that one account for that brand and all the products for that brand, it does take away a lot of repetitive natures that we might have had when we were closer to 30 accounts.
I think where we're thinking and what we think efficiencies will happen that will lead to improved profitability is about getting down to one account per brand. So not only does it seem to be very hyper focus on that one account for that brand and all the products of that brand. It does takeaway a lot of repetitive nature that we might have.
When we were closer to 30 accounts.
Speaker 4: But I think this is more of a efficiency. Now, it's not going to directly result immediately just by going to eight accounts, but it's a better CM. It's going to just lead to a lot of more that hyper focus and efficiency across the organization that should unlock the path towards improve CM and improve marketing programs and improve other initiatives that you would do on any particular account. It's kind of hard to quantify exactly, but it's part parcel of the plan to get to profitability overall.
I think this is more of a efficiency now let's talk about directly result, immediately just by going to eat accounts the better.
It's going to just lead to a lot of more that hyper focus and efficiency across the organization that shouldnt lock the path towards improved cm and improved marketing program in Peru.
Other initiatives that you would do on any particular account.
Hard to quantify exactly but it is part and parcel of the plan to get to profitability overall.
Speaker 2: Yeah, I would just add that it's, you know, the way to think about it. It's even though you're selling on one platform.
Yes, I would just add that it's.
The way to think about it it's even though you are selling on one platform.
Speaker 2: It's almost like you're selling on different platforms when you're operating out of different seller accounts. The way you look at data, just even a basic example from a planning perspective.
It's almost like you're selling on different platforms, when you're operating out of different salary accounts. The way you look at data.
Just just even a basic example from a planning perspective.
Speaker 2: when you have inventory, now you're, you don't just send it to Amazon, now you're shipping it into almost like four different channels, one account, two account, 30 accounts, right? It just, there's so much efficiency that come from...
When you have inventory now.
You don't just send it to Amazon now you're shipping it into almost like four different channels, one account to account 30 accounts right.
There is so much efficiencies that come from.
Speaker 2: now ring down the accounts. Right? So it's a powerful move for us, even though as I already pointed out, it's not something that's immediately quantifiable. So.
<unk> down the accounts right.
It's a powerful move for us even though.
As already pointed out its not something thats immediate immediately quantifiable.
So.
Hopefully that helps.
Speaker 6: Yeah, okay. So providing more of operational line of sight versus quantifiable impact.
Okay.
Providing more of the operational line of sight versus.
Quantifiable.
Impact.
That's the right way to think about it.
Speaker 2: Correct, correct, I would say for the most part that's true.
Correct correct I would say for the most part that is true.
Okay got it.
Speaker 6: Okay, last one for me. Maybe just speak to the overall demand environment that we're seeing. Are there certain product categories that are requiring deeper discounting than others? Are certain products showing strength? And just elaborate on any new or persistent trends we're seeing from the end consumer.
Okay last one for me, maybe just speak to the overall demand environment that we're seeing are there certain product categories.
That are requiring deeper discounting than others or certain products showing strength.
Elaborate on any new or persistent trends worsen Zimmer.
Speaker 3: Yep, I'll take this one already and you can jump then.
Yes.
I'll take this one already and you could you could jump jump in.
Speaker 3: Thanks so I would say overall what we're seeing right and and and the way we use it the way we think about it is through
So I would say overall, what we're seeing right and the way we use it the way we think about it is through search on platforms right.
Speaker 3: on platforms, right? We see that overall...
We see that overall, it's down across the categories that we operate in great having.
Speaker 3: It's down across the categories that we operate in. Right? Having said that.
Having said that the demand environment is still there people are buying.
Speaker 3: The demand environment is still there. People are buying, you know, they're buying in the categories that we're in. So, you know, the demand is, the demand is gown, but it's still there.
They are buying in the categories.
That were that were in so.
The demand is the demand is down but it's still there.
I would say.
Speaker 3: You know, we have, you know, again, we've pointed out.
We have again as I pointed out we struggled a little bit in the in.
Speaker 3: We struggled a little bit in the home appliance space. You know, T.E. Midifiers had pressure. Air conditioners had a lot of pressure. Certain of our kitchen appliances had pressure. Probably the air.
The home appliance space G Humidifiers and pressure on air Conditioners had a lot of pressure.
Certain of our kitchen appliances had pressure.
Probably the area.
Speaker 3: that had the least pressure is Squatty Potty, right? It's a very strong brand. You know, I think
That had.
The least pressure squatty body right, it's a very strong brand.
I think we regained.
Speaker 3: share in our oil business, right? There's here's the new one there, and, you know, that category for us has started to improve.
Share in our oil business right.
And they're in.
That category for US has started to improve.
But thats.
Speaker 2: You know, that's sort of the analysis from a demand perspective across our business. Thank you very much.
That's sort of the analysis from a demand perspective across our business.
Got it makes sense, thanks, guys Thats it from me.
Welcome.
Speaker 5: Our next question comes from the line of Brian Kinslinger with Alliance Global Partners.
Our next question comes from the line of Brian Kingston.
<unk> Alliance Global partners.
Okay great.
Speaker 7: Great, thanks so much. Talk about losing some share just now in your response as well as your prepare in March.
Great. Thanks, so much.
Can you talk about losing some share just now in your response as well as your prepared remarks I'm.
Speaker 7: I'm wondering, is there any change in a part of reviews that impacted it, or is it maybe Amy is proving not to be as effective in a shrinking demand environment? I mean, there's several categories you just mentioned, so I'm just trying to understand what you think is driving that, is it increased competition? Yeah, thanks for any help.
I'm wondering is there any change in a product reviews that impacted it.
Or is it maybe Amy is proving not to be as effective in a shrinking demand environment. I mean, there are several categories. You just mentioned so I'm just trying to understand what you think.
Is driving that is it increased competition.
Yes, thanks for anyhow.
Speaker 3: Yeah, it's, uh, yeah, no worries. Um, so, so Brian , it's, um.
Yes.
Yeah, no worries so to Brian.
Speaker 3: You know, like when just looking at the dehumidifiers and I talked about this on the last earnings call, right? I think, you know, there's, we were the best selling dehumidifier for quite some time. And then,
You know like when.
Just looking at the Dehumidified, then I talked about this on the last earnings call right.
I think there is we were the best selling dehumidifier for quite some time and then.
Speaker 3: you know we we lost the best seller tag and that you know like when you lose that best seller tag on it has an immediate impact on on demand right and now we think we think we can get that back but that that has an immediate
We lost the best seller tag and that like when you lose that best seller tag.
It has an immediate impact on on demand right. Now we think we think we can get that back but that that has an immediate.
Speaker 3: Impact it's it's not really an anything It's simply Competition on marketplaces is extremely intense. So Even if you have a best-selling product in a category You know, you kind of have a bullseye in your back and people are coming for you You know like I think today even in the toilet stool category. I searched for a toilet stool and I think
Impact.
Not really anything.
It's simply competition on marketplaces is extremely intense so.
Even if you have a best selling product in the category.
You kind of have a bulls eye on your back and people are coming for you like I think today, even in the toilets tool category I searched for toilet stool and I think there were thousands of results that came back for that product category. So the competition is extremely intense.
Speaker 3: There were thousands of results that came back for that product category. So the competition is extremely intense.
Speaker 3: And it's every day, right? You have new entrants, people, you know,
And it's every day right.
You have new entrants.
People.
Speaker 3: making aggressive pricing decisions, etc. It's just a very, it's a very competitive environment. And then I think from a social proof perspective,
Okay.
Making aggressive pricing decisions et cetera, it's just a very it's a very competitive environment.
And then I think from a social proved perspective.
Speaker 3: You know, there's some areas where I think we can do better. In making sure we get good social proof, there's some products that I think need improvements or refreshments and we're working on that. And that's part of our strategy, you know, to continue to launch products, better ones, to replace ones that are, you know, that are out there today and to launch more, you know, sort of the variation type of strategy where we have good, better, better best products to sort of address.
There are some areas, where I think we can do better in.
And making sure we get good social proof theres some products that.
Need improvements are refreshments and we're working on that.
And that's part of our strategy to continue to launch products better ones to replace ones that are.
That are out there today until launch more.
Sort of the variation type of strategy, where we have good better best products to sort of address.
Speaker 3: a wide variety of consumer needs, so, you know, it's challenging, but I think manageable for us.
A wide variety of consumer needs. So.
It's it's it's challenging but I think.
Manageable for us.
Speaker 7: So is that dehumidifier best selling CAD lost representative of several categories? And is it because of a increased competition but also because maybe you lack the volume and inventory to meet demand? And so that's the result. Is it an interesting thing? Is that a broader picture of what's going on in lots of different issues?
So is that due.
<unk> made a fire best selling tag launched representative of several categories and is it because of a increased competition, but also because maybe you lap the volume and inventory to meet demand and so that's the result is an interesting thing is that a broader picture of what's going on and lots of it.
Skus.
Speaker 3: I would say that if the dehumidifier is not the only category where we compete for the best seller tag, it's in the other, you know, we have that issue in a couple of other categories.
I would say that it's.
The dehumidifier is not the only category, where we can.
<unk> for the best seller tag.
It's in the other we have that issue in a couple of other categories.
Speaker 3: And I'm sorry, I missed the rest of the question. Sorry. No, that's basically him.
And I'm, sorry, I missed the rest of the question sorry.
Got it.
Basically here.
Speaker 4: Sorry, yeah, I was going to add it. Sorry, I was going to add it to that show. Yeah, thank you. Right, yeah, I don't think it's because of lack of inventory and it's like that. I think we've always been conservative when it comes to inventory. I know in the past, we used to disclose inventory shorts, but obviously we've been long on inventory, we've normalized. So it's not an inventory. I think it's particularly right to what Joe's point is, it's more the competitive pressures that you're seeing is why we lost. It's not an inventory related.
Sorry, Yes, I was going to add sorry go ahead art to that Joe Yes. Thank you.
Right, Yes, I don't think it's because of lack of inventory or anything like that I think we've always been conservative when it comes on inventory I know in the past we used to disclose inventory shorts, but obviously, we've been long on inventory with normalizing. So right that have been inventory I think it's particularly right to what Joe's point is it's more of the competitive pressures.
Are you seeing is why why we lost a ton of inventory related thing.
Speaker 7: In general. No, great. And the last question I have is we looked at 2024. I know you're not giving guidance. Nor do I.
In general yes, Okay, Great and then the last question I have as we look to 2020 for I know youre, not giving guidance nor do I pretend to thank you will.
Speaker 7: kind of think you will. But with the
But with the.
Speaker 7: inventory that was high price that you had discount. That challenges behind you for the most part, I think.
Inventory that was high price that you had to discount is that challenges behind you for the most part I think.
<unk>.
Speaker 7: Are we thinking that you hope to be profitable unless revenue because of left skews? Or can you, do you believe with your existing skews that you'll go for with? You can offset the lost revenue from skews you plan to discontinue.
Are we thinking that you hope to be profitable on less revenue because of less skus or can you do you believe with your existing Skus that Youll go for with you can offset the lost revenue from Skus you plan Ta does.
Discontinue.
Alright, why don't you take that one.
Speaker 4: Yeah, Brian , yes. I think we do expect with the improvement in CM that we anticipate by being very focused.
Yes, Brad.
Yes, I think I think we do expect with the improvement in cm that we anticipate by being very focused.
Speaker 4: and some of the initiatives that Joe's highlighted that on lower revenue we can get the profit.
And some of the initiatives that Joe highlighted that on lower revenue, we can get the profitability.
Speaker 6: But we were still working through and obviously we'll probably be able to report more details when we go to Q4 because we're still kind of piloting. But the effort that Joe talked about, but yeah, theoretically even though it'll be a little bit lower revenue, we do anticipate that the increase the end we should still get at the profit rate.
We're still working through and obviously, we'll probably be able to report more details. When we go to Q4, because we're still kind of finalizing a lot of the efforts that Joe talked about.
But yes, theoretically even though it will be a little bit lower revenue, we do anticipate that.
The increase then you should still get at the property.
Okay. Thanks, guys.
Speaker 5: Again, if you would like to ask a question, press star then the number 1 on your telephone key.
Again, if you would like to ask a question first and then the number one on your telephone keypad.
Speaker 5: There are no further questions at this time. Mr. Gowalski, I turn the call back over to you.
There are no further questions at this time.
Terry.
I'll turn the call back over to you.
Speaker 1: Thank you. As part of our Shareholder Perks program, which is a reminder, investors can sign up for at atarian.io 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 and their participation in the program and their questions. I picked a few of the most popular questions that they have submitted.
Thank you as part of our shareholder Perks program, which as a reminder, investors can sign up for at <unk> Dot IL forward Slash perks participants have the ability to ask management questions on our earnings calls.
Wanted to thank all of the shareholder perks participants for their loyalty and their participation in the program and their questions I picked a few of the most popular questions that they have submitted.
First question is.
Speaker 1: would it here and consider adding any subscription based product
<unk> consider adding any subscription based products.
Speaker 3: Thank you. Thank you. Thank you. Julia. Just before I answer that, that's a great question. I just want to say, you know, we
Thank you. Thank you. Thank you Leah just before I answer that that's a great question.
I just wanted to say.
Speaker 3: We, you know, we're great for the retail crowd.
Yeah.
We're grateful for the retail crowd.
Speaker 3: Apologies, we've got some sirens going by. We're grateful for the retail crowd. You know, we do follow, we can't comment on it, but we do follow the different groups. And so we appreciate the support. Regarding subscription-based products, and we do have...
Apologies, we've got some we've got some sirens going by.
<unk> for the retail crowd.
We do.
We do follow we can't comment on it but we do follow.
The different groups.
And so we appreciate the support regarding subscription based products and we do have we.
Speaker 3: We do have our essential oils business that we do think of as something that has the potential for subscription based. That's probably the only category today that really has legs for that kind of a model.
We do have our essential oils business.
That we do think of as something that has the potential.
For subscription based.
That's probably the only category today.
That really has legs for that kind of a model.
Speaker 3: And then, obviously, we do think about either acquiring businesses or launching products that could have a model like that, but that's, you know, that's how we think about subscription-based.
And then obviously, we do think about either acquiring businesses or launching products that could have a model like that.
But thats.
That's that's how we think about subscription based products.
Speaker 1: Thanks, Joe. The next question is, does it turn in plan to expand to any additional platforms?
Thanks, Joe. The next question is does it <unk> planned to expand to any additional platforms.
Speaker 3: You know, the answer there is yes, we talked a little bit about it. You know, we're opening up TikTok shop. We're very excited about that. We are looking at other platforms where it makes sense for a tear, for a tearance product portfolio to, to perform so hopefully.
Okay.
The answer there is yes, we talked a little bit about it.
We're opening up ticks up shop, we're very excited about that.
We are looking at other platforms, where it makes sense for a tier for our <unk> product portfolio to perform so hopefully.
Speaker 3: We'll have more updates on that in the future, but that's, you know, that's all for now. Thank you.
We will we'll have more updates on that in the future, but that's that's all for now thank you.
Speaker 1: Great. This concludes the Q&A portion of the call. In terms of the upcoming calendar, Eterian Management will be participating in the Craig Hallam 14th Annual Alpha Select Conference on November 16th in New York. We look forward to speaking with you on future calls. This ends our call. You may now disconnect.
Great. This concludes the Q&A portion of the call in terms of the upcoming calendar Aterian management will be participating in the Craig Hallum, 14th annual Alpha Select conference on November 16th in New York, We look forward to speaking with you on future calls. This ends our call you may now disconnect. Thank you.
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Okay.
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Speaker 8: I.
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Speaker 8: And.