Thank you for joining us today to discuss Aterian’s Third Quarter 2023 Earnings Results. On today's call are Joe Risico and Arturo Rodriguez, our Co-CEOs. A copy of today's press release is available on the Investor Relations section of Aterian's website at iterian.io. Before we get started, I want to remind everyone that the remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on current management expectations. These may include without limitation, predictions, expectations, targets or estimates, including regarding our anticipated financial performance, business plans and objectives, future events and developments, and actual results could differ materially from those mentioned. These forward-looking statements also involve substantial risks and uncertainties, some of which maybe outside of our control and that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties among others are discussed in our filings with the SEC. We encourage you to review these filings for a discussion of these risks, including our Annual report on Form 10-K filed on March 16th, 2023 and our quarterly report on Form 10-Q, when it is available on the Investors portion of our website at aterian.io. You should not place undue reliance on these forward-looking statements. These statements are made only as of today, and we undertake no obligation to update or revise them for any new information as required by law. This call will also contain certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin, which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency, and comparability with our past performance and facilitate period-to-period 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 aterian.io. Please note that our definition of these measures may differ from similarly-titled metrics presented by other companies. We are unable to provide a reconciliation of non-GAAP adjusted EBITDA margin to net income margin to the most directly comparable GAAP financial measure on a forward-looking basis without unreasonable efforts because items that impact this GAAP financial measure are not within the company's control and/or cannot be reasonably predicted. With that, I will turn the call over to Joe.

Thank you, Ilya, and thank you everyone for joining us today Today, I'm going to cover our Q3 results, 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 omnichannel expansion efforts to position Aterian for growth, all as we continue working towards our previously stated goal of achieving adjusted EBITDA profitability in the summer of 2024. Arty will then cover in more depth our financial results for the third quarter, and we'll provide our outlook for Q4. 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. While we also continue to see reduced consumer discretionary spending for the product categories we operate in, in certain of our key categories, such as in our dehumidifiers business, we have lost market share. 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 said that, we have set in motion a number of other efforts to regain market share and to optimize our core brands and the SKUs that will remain part of Aterian's go-forward business. 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 Aterian for adjusted EBITDA profitability, but also to position ourselves for long-term growth. 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. We have substantially completed our review, and we expect our go-forward business to consist of approximately 1,700…

Thanks, Joe. Good evening, everyone. In Q3, we saw our revenue continue to be impacted by reduced consumer discretionary spending and competitive pricing pressures. However, hard decisions in Q2 of this year to adjust our fixed cost is putting us on our path towards profitability. 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, we continue to strengthen our balance sheet, reducing our cash burn, normalizing our inventory and reducing the balance of our credit facility. We still have a lot of work in front of us. Joe and I and the rest of the team at Aterian are very motivated to take that on. We're also very pleased with our progress on focusing, simplifying and stabilizing Aterian and we continue to be optimistic on our goals of achieving adjusted EBITDA profitability in the summer of 2024. Now moving on to revenue details for the third quarter of 2023. Net revenue declined 40.2% 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. Our $39.7 million third quarter net revenue by phase, as defined in our press release, broke down as follows: $32.3 million in sustain, $0.4 million in launch and $7.0 million in liquidate and inventory normalization. The year ago quarter net revenues of $66.3 million by phase broke down as follows: $54.2 million in sustain, $1.6 million in launch and $10.5 million in liquidate and inventory normalization. Our sustain net revenue decreased of $21.9 million is from reduced consumer discretionary spending and competitive pressures across the portfolio but in particular, our dehumidifier air conditioning product line. Our liquidation net revenue decreased by $3.5 million as we continue to sell…

The floor is now open for your questions. [Operator Instructions] Your first question comes from the line of Matt Koranda with ROTH MKM. Your line is open.

Hey, guys. It's Mike Zabran on for Matt. Maybe just starting on the 2024 adjusted EBITDA profitability target. 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?

Arty, you want to take that one?

Yes. 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 the recovery of our CM, especially as we move away from less profitable products. We think that CM getting back to like 30% plus. And eventually, when we eventually to our target of 15% is really going to unlock that goal of adjusted EBITDA profitability. Some of the things that we're working on, you're mentioning, we do believe that a lot of the inventory 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 FOB initiatives, particularly in the oil that will help us improve our CM by the time we get to summer 2024. Plus, I think, as Joe mentioned, we focused on the portfolio, we're going to be hyper focused on these core SKUs, which will drive a lot more effective initiative across the listings and resulting in what we believe will be improved CM. And also, we got a bunch of other initiatives that we'll talk at a later date about, but that should improve a lot of the efficiencies across product development and supply chain. We think we got a good line of sight. We 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 for that.

Ari, if it's okay to add, Matt, obviously, I agree with everything I already said and -- we're just looking at the core Aterian business when we think about profitability next year?

Got it. That makes sense. And maybe on the initiative of moving from 31 to Amazon accounts, just could just – can you provide us a little bit more color on what does this process consist of? Are we 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 to see the benefits of this initiative?

Ari, you make that or?

Yes. Okay. So a lot of it, to Joe's earlier point, listen, in the past, historically, the way a lot of the Amazon business is run. They were run across multiple accounts, especially considering how much power Amazon has to a particular business, right? If you're an accountant is going to shut you down, it creates a lot of impact. That said, as that platform in the marketplace has matured, it's a lot more acceptable to have multiple 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 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 this is more of an efficiency, it's not going to directly result immediately just by going to eight accounts that it's a better CM. It's going to just lead to a lot of more of that hyper focus and efficiency across the organization that should unlock the path towards improved CM and improved marketing program and improve other initiatives that you would do on any particular account. It's kind of hard to quantify exactly, but it just -- it's part of parcel of the plan to get to profitability overall.

Yes, I would just add that it's the way to think about it, it's -- even though you're selling on one platform, 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, 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, two account, 30 accounts, right? It just -- there's so much efficiencies that come from narrowing down the accounts, right? So it's a powerful move for us, even though, as already pointed out, it's not something that's immediately quantifiable. So hopefully, that helps.

Yes. Okay. So it's providing more of operational line of sight versus quantifiable impact. Is that the right way to think about it?

Correct. Correct. I would say, for the most part, that's true.

Okay. Got it. Okay. Last one for me. Maybe just speak to the overall demand environment that we're seeing, are there certain product categories that's that are requiring deeper discounting than others or certain products showing strength? Maybe just elaborate on any new or persistent trends we're seeing from that consumer?

Yes. I'll take this one, Arty, and you could jump in. 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? We see that overall, it's down across the categories that we operate in, right? Having said that, the demand environment is still there. They're buying in the categories that we're in. So the demand is down, but it's still there. I would say, we have -- again, as I pointed out, we struggled a little bit in the home appliance space. Do you humidifiers had pressure. Air conditioners had a lot of pressure. Certain of our kitchen appliances had pressure -- probably the area that had the least pressure is Squatybody, right? It's a very strong brand. I think we gained share in our oil business, right? The peers demand there. And that category for us has started to improve. But that sort of the analysis from a demand perspective across our business.

Got it. Makes sense. Thanks, guys. That's it for me.

You're welcome.

Our next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Your line is open.

Great. Thanks so much. You've talked about losing some share just now in your response as well as your prepared remarks. I'm wondering, is there anything changed 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, yes, no worries. So Brian, it's like when -- just looking at the dehumidifiers, and I talked about this on the last earnings call, right? I think there's -- we were the best-selling dehumidifier for quite some time. And then we lost the best seller tag -- and that -- like when you lose that best seller tag, it has an immediate impact on demand, right? And now we think we can get that back, but that has an immediate impact. 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 kind of have a bull's eye on your back and people are coming for you. I think today, even in the toilet stool category, I searched for a toilet tool, and I think there were thousands of results that came back for that product category. So the competition is extremely intense, and it's every day, you have new entrants, people making aggressive pricing decisions, et cetera. It's just a very competitive environment. And then I think from a social proof perspective, there are 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 to continue to launch products, better ones to replace ones that are out there today and to launch more, sort of, the variation type of strategy where we have good, better, best products to address a wide variety of consumer needs. So it's challenging, but I think manageable for us.

So is that dehumidifier best-selling tag lost representative of several categories? And is it because of increased competition, but also because maybe you lack the volume and inventory to meet demand. And so that's the result. I'm just trying to think is that a broader picture of what's going on in lots of different SKUs?

I would say that it's -- the dehumidifier is not the only category where we compete for the best seller tag. It's in other we have that issue in a couple of other categories. And I'm sorry, I missed the rest of the question, sorry.

That’s it, basically, yeah.

I was going to add to that Joe. Brian, 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 to inventory. I know in the past, we used to disclose inventory shorts, but obviously, with the loan on inventory it would normalize. And so it's out of 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 a ton and inventory-related thing in general.

Great. And the last question I have, as we look to 2024, I know you're not giving guidance nor do I pretend to think you will. But with the inventory that was high price that you had to discount, is that challenges behind you for the most part, I think, 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 you'll go forward, you can offset the lost revenue from SKUs you plan to discontinue?

Arty, why don't you take that one?

Yeah. Brian, yes, I think we do expect with the improvement in CM that we anticipate by being very focused and some of the initiatives that Joe has highlighted that on lower revenue, we can get to profitability. 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 highlighting a lot of the efforts that Joe talked about. But yeah, theoretically, even though it will be a little bit lower revenue, we do anticipate that the increased CM should still get us profitable.

Okay. Thanks guys.

[Operator Instructions] There are no further questions at this time. Mr. Grozovsky. I'll turn the call back over to you.

Thank you. As part of our shareholder perks program, which as a reminder, investors can sign up for at aterian.io/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. First question is, would Aterian consider adding any subscription-based products.

Thank you, Ilya. Just before I answer that, that's a great question. I just want to say we -- we're grateful for the retail crowd. Apologies, we've got some sirens going by. We're grateful for the retail crowd. 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 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. And then obviously, we do think about either acquiring businesses or launching products that could have a model like that but that's how we think about subscription-based products.

Thanks, Joe. The next question is, does Aterian plan to expand to any additional platforms?

The answer there is, yes, we talked a little bit about it. We're opening up TikTok [ph] shop. We're very excited about that. We are looking at other platforms where it makes sense for Aterian's product portfolio to perform. So hopefully, we'll have more updates on that in the future. But that's all for now. Thank you.

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 16 in New York. We look forward to speaking with you on future calls. This ends our call. You may now disconnect. Thank you.