Thank you for standing by, and good day everyone. My name is Arji and I'll be your conference operator today. At this time, I would like to welcome everyone to the Aterian Inc. Q1 Earnings Report. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Devin Sullivan of The Equity Group. Please go ahead.

Thank you, Arji, and thank you, everyone, for joining us today to discuss Aterian's first quarter 2025 financial results. On today's call are Arturo Rodriguez, the company’s Chief Executive Officer; and Josh Feldman, the company’s Chief Financial Officer. A copy of today's press release is available on the Investor Relations section of Aterian's website at aterian.io. Before we get started, I would like to remind everyone that the remarks on this call may contain forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995 that are based on current management expectation. These may include, without limitation, predictions, expectations, targets, or estimates, including those regarding our anticipated financial performance, business plans and objectives, future events and developments, and actual results could differ materially from those mentioned. These forward-looking statements also involve substantial risks and uncertainties, some of which may be outside of our control and that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties, among others are discussed in our filings with the SEC. We encourage you to review these findings for a discussion of these risks, including our annual report on Form 10-K and our quarterly report on Form10-Q both of which are available on the investors portion of our company’s 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 except as required by law. This call will also contain certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin, which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and comparability with our past performance, and facilitate period-to-period 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 again is available on the Investor 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, the most directly comparable GAAP financial measure on a forward-looking basis, without unreasonable efforts because items that impact this GAAP financial measure are not within the company's control or cannot be reasonably predicted. So with that said, I'd now like to turn the call over to Arturo Rodriguez, Aterion's Chief Executive Officer. Artie, please go ahead.

Thank you, Devin, and thank you, everyone, for joining us today. On today's call, I'll be covering one, a brief overview of our Q1 results and how they reflect continued progress from the foundational changes we made throughout 2024. Two, a summary of the actions we're taking to proactively navigate the recently announced tariff environment and its broader macroeconomic effects. And three, an update on our 2025 outlook in light of these developments. Following my remarks, our CFO, Josh will walk through our first quarter financial results in greater detail. For the first quarter of 2025, net revenue was $15.4 million compared to $20.2 million in Q1 2024. This decline primarily reflects our previously announced SKU rationalization, which prioritize our most profitable products, along with softer consumer demand and reduced Amazon traffic due to changes in its affiliate program. Adjusted EBITDA loss slightly improved to $2.5 million from $2.6 million. While we observed some softness in the consumer demand during the latter part of the quarter, we were pleased with the overall performance. Looking beyond Q1, the landscape shifted significantly following the April 2, 2025 announcement on global trade policies, particularly those impacting imports from China. While incremental tariff rates have just come down this week to 30% from their peak of 145%, they remain materially higher than historical norms, and we expect continued volatility. Our 2025 plan anticipated increased tariff exposure, but the speed and magnitude of these policy shifts both upwards and downwards, have introduced volatility, supply chain constraints and ongoing uncertainty, especially as consumer spend remains cautious. At Aterian, resilience, tenacity and agility are part of our DNA. For some time now, we have been actively strategizing around long-term growth and sourcing, consistently landing on diversified product mix and supply chain as critical to ensuring sustainable growth…

Thanks, Artie. Good evening, everyone. As Artie mentioned, the tariff landscape shifted dramatically in early April, requiring immediate and decisive action. While our 2025 plans already contemplated heightened tariff exposure, the speed and scope of the changes went well beyond our expectations. Our response has been focused on executing what's within our power to ensure margin preservation and long-term competitiveness. In response to the recent tariff announcements, we've initiated a fixed cost reduction program aimed at generating $5 million to $6 million in annualized savings. Roughly $4 million of these savings will come from US headcount reductions, primarily achieved by consolidating teams under a leaner leadership structure with most changes taking effect by the end of Q3. The remaining $1 million to $2 million will be driven by broader fixed cost efficiencies implemented over time. We expect to fully realize the benefit of these initiatives by early 2026. Turning to Q1. While we saw some softness in consumer demand, particularly late in the quarter, we're pleased with our progress. Net revenue for the first quarter of 2025 declined 24% to $15.4 million from $20.2 million in the year ago quarter, primarily reflecting last year's SKU rationalization and changes to Amazon's affiliate marketing program. Adjusting for the SKU impact of SKU rationalization, net revenue would have only declined approximately 19%. Our launch revenue was $0.4 million during Q1 2025 and Q1 2024. As planned, we have one new product category launch in the first quarter. While we are suspending our Asian sourced product launches for 2025, we are shifting our focus to consumables sourced in the US. Overall gross margin for the first quarter decreased to 61.4% from 65.1% in the year ago quarter. The year-over-year decline was primarily related to product mix. Our overall Q1 2025 contribution margin, as defined…

[Operator Instructions] Your question comes from the line of Brian Kinstlinger from Alliance Global Partners. Please go ahead.

Hi. Thank you. This is Kevin for Brian. Just for the first question, with China tariffs at 30%, can you talk a little bit more about your inventory plans in the near term and then in the medium term?

Yes. I'll grab that, Kevin. How are you doing? So listen, this whipsaw has been a little bit -- it's been keeping us on our toes for sure. What we've done is two things, right? We have -- fortunately, we had a lot of manufacturing that was ongoing as the tariff announcement on April 2 was evolving, we parked those in China, and we didn't bring them in right away to see if there was other opportunities to either ship them to other regions -- and -- or potentially navigate other opportunities to bring them in while the tariff numbers solidified. At the same time, as we said in our prepared remarks, we've been raising prices to slow the velocity down. We've been starting to do that in April up until the recent announcement this week. So we still feel that we're well positioned, at least from an inventory and supply perspective with our manufacturers, to produce the products we need for 2025. That said, I think where we have a little bit of concern is a little bit on the containers because as we expect, and it's been in the news, everyone's now rushing to bring products in. So fortunately for us, a lot of our products have been manufactured. So it's just about getting the boats in. We have a less of a time line to manufacture goods, so since a lot of them have been manufactured. I think I'll add to that is the good news is our supply chain is somewhat diversified already on containers. We use Amazon as a big partner. We use a couple of other steamship lines. And of course, we use some of the spot rates through Flexport. So we feel comfortable that we have the opportunities to secure the boats we need to get our goods in. But certainly, we are still revisiting what else should we do in the next 90 days to advance order, just to make sure we have a stable tariff environment, and we know that the numbers right now, so we take advantage of that. But certainly, we don't see any immediate stock outs. But certainly, as it evolves, we'll continue to monitor that.

Great. Thank you. And -- sorry.

Please go ahead.

And kind of off what you were talking about with the pricing strategy, could you talk a little bit more about that? And how have you seen consumers react? Have you seen any consumers react to the changes you've already made?

Yes. So, sure. I mean, listen, the Amazon -- where we sell in Amazon and mostly a lot of e-commerce, I would say, it's very price sensitive, right? And so it's not just a factor when you deal wholesale and retail, right? You agree with Walmart to raised the price and is what it is, right? They're still going to buy wholesale. This is a direct impact to the consumer. So if you raise prices, you may see our velocity go down. We've seen a mixed results. We've seen some velocity go down as we raise prices. Again, it's unclear to determine if that's softness or if that's just people not willing to buy price cost -- a product that costs X or Y. And so -- and especially because we're so diversified in our product mix, it's been mixed results, some positives and negatives to be very frank. I think right now, we still feel very well positioned across our core products. We haven't really lost ranking or positioning. Most of our products still are in the top 5 or top 3 or at least certainly on the first page, even with these pricing increases. So it's a little bit hard to sort of break that out and really detail what is actually related to consumer softness versus an impact on pricing. But certainly, we feel pretty good that we have pricing flexibility certainly to move up on the 30%. I think at the 145%, there was a lot more difficult, frankly, but it's a 30% still more than we anticipated, and it's not linear, right? Certain -- if you got to move up 30% on -- and really half because your costs are of roughly half, let's say, just keep massive, you're really moving up 15% on your pricing. Some products work, some products don't. And so it is kind of a mixed bag to figure out which we're really doing well, which is really impacted. But certainly, it's a very fluid situation. We are taking wins where we can and where we're seeing not the same success we expect, we are revisiting the pricing strategy.

Thank you. And last one, given how everything will play out with tariffs is uncertain. Is there any way to speed up your diversification strategy in terms of manufacturing?

We're going to go as fast as we can, right? I think the one thing I'll caveat is, we want to go as fast as we can. At the same time, we still want to produce quality products, right? We believe we have good line of sight to move a lot of our products and diversify them as we see best. At the same time, we are doubling down as consumables products, as we said in the prepared remarks, right? So I think the combination of both of those will really help us diversify and I think puts us in a really good spot for 2026 certainly. But yes, we're going to go as fast as humanly possible.

Thank you very much.

That ends our Q&A session, and we appreciate your participation. I will now turn the call over to Devin Sullivan of the Equity Group. Please go ahead.

Thank you, Arji. As part of Aterian's Shareholder Perks Program, which as a reminder, investors can sign up for at aterian.io/perks. Participants have the ability to ask management questions during our earnings calls. So we want to thank all of our shareholder perks for their participation, for their loyalty and their program and for their questions. We picked two of the most popular questions that have been submitted by our shareholders, and I'll read them now for Artie and Josh to respond. So the first question, will the company be paying any dividends in the future?

Thanks, Devin, I'll take that one. So as we noted in our release and in our remarks, our restructuring plans are going to require about $2.3 million of cash. So between that and the current macro inventory environment and the uncertainty around tariffs, we feel prudent to conserve our cash at this point. But more broadly, we're very much focused on long-term growth and reinvesting profits back into the company, and that's really our priority right now. And also, we mentioned we paused our share buyback program, but we do expect to execute on this once the macro environment has stabilized.

All right, Josh. The second question. Would management consider revising its policy of granting employee stock options given the impact of those options on the company's P&L statement?

I can take that one, Josh.

Yes.

All right. Thanks, Devin. Look, like most companies, we award shares to our executives, it's a way to incentivize their performance and align -- we believe it aligns the interest of all tiering shareholders. Our long-term incentive grants typically vest over 3 years. If the stock does well, they benefit just like our shareholders. We understand it has a P&L impact. It does allow us to manage cash because you mind, it's about a total comp, right? If you can give more shares is less cash comp versus regular base comp salary. And ultimately, that extra cash we do invest into the business for long-term growth. Listen, our team thinks the stock is considerably undervalued. So, for us, as a small company, it's a great tool to attract and retain a high level of talent. And if this team is successful like we expect to be, everyone is going to win in this. So, sure, as we evolve, we'll always revisit our policy. But for now, it's a great tool for us to bring in and retain talent.

Great. Thank you, Arty. So, with those two questions answered, we will wrap-up today's call. We want to thank everyone for their participation today. We look forward to speaking with you on our next earnings call. And that will end everything for today. Thanks again for your participation. And Arji, you may -- everyone -- Arji and everyone, you may disconnect.