Ladies and gentleman, thank you for standing by. And welcome to the Mohawk Group Holdings Incorporated Q1 Earnings Report Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker, Ilya Grozovsky. Please go ahead.

Thank you for joining us today to discuss Mohawk's first quarter earning results. On the call are Yaniv Sarig, Co-Founder and CEO, and Fabrice Hamaide, Chief Financial Officer. A copy of today’s press release is available on the Investor Relations section of Mohawk’s website. I would like to remind you that certain statements we will make in this presentation are forward-looking statements. These statements reflect Mohawk’s judgment and analysis only as of today and actual results may differ materially from current expectations based on various factors affecting Mohawk’s business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements made in this conference call, we refer you to the disclaimer regarding forward-looking statements included in our first quarter earnings release as well as our filings with the SEC. We do not undertake any obligation to update or alter any forward-looking statements whether as a result of new information, future events, or otherwise. In addition, the company may refer to certain non-GAAP metrics on this call. Explanation of these metrics and a reconciliation of non-GAAP to U.S. GAAP metrics can be found in the earnings release filed earlier today. With that, I will turn the call over to Yaniv.

Thanks, Ilya, and good afternoon everyone. Thank you for joining us today for this call. I would like to first and foremost thank our entire team at Mohawk for all their hard work during the last several months. Many of whom have been working remotely during this challenging time. Keeping our people safe continues to be our number one priority. I would also like to thank our vendors, suppliers and other business partners who have been incredibly supportive in helping us ensure we have business continuity. For those on the call, we hope that you and your family and loved ones are safe and healthy. COVID-19 has been a clear reminder to all of us that we can't take our reality for granted and that adapting your mindset is essential in times of crisis. Mohawk’s vision is rooted in leveraging data and supply chain agility to quickly adapt to market needs, without limiting ourselves to a particular category of products. The events of last month were an important opportunity to put our business model and our culture to the test. I’m very proud of the adaptability that our team has demonstrated through this crisis. We announced last week that we have launched a new consumer brand called Holonix to meet the demand for personal protection products. Identifying through the data the type of products consumers need during a pandemic is less of a feat in the case of a black swan event of this magnitude. Our market research model within AIMEE has proven to be more useful to validate market size and competition than to find white spaces in the market, which nevertheless was very beneficial. Based on our supply chain, marketing, and operations, that swift reaction was required to identify the right partners and set our roadmap for products for our new brand. While launching Holonix was a top priority for the company, we also recognize that we have the ability to assist those in great need for personal protection equipment (PPE) and have dedicated a cross-functional team to this effort. I want to thank the members of this team for working around the clock to help with the effort we are making to secure product for many essential workers and others who are in need. As a company involved in manufacturing, importing, and selling products across various categories, we believe we have all the moving pieces required to assist in the current situation. It is therefore our responsibility to step up and do everything we can to join the fight against COVID-19. And we will continue to do so in a way that is commercially viable for our company while maintaining strong ethics and responsibility. COVID-19 has also played an accelerating role in our company's core model. E-commerce dramatically moved forward in its adoption, whether through our owned and operated brands or our managed SaaS business. We believe that the capabilities that we've been building are now more valuable than ever. With our main channel, Amazon, seeing massive growth in demand for its services, our sales accelerated as we announced an increase of approximately 43% in our revenues during the first quarter of 2020 versus the first quarter of 2019. Our technology platform, AIMEE, and supply chain integration with 3PL warehousing partners proven valuable during the first few weeks of the pandemic. As we were able to maintain high levels of service and delivery where other logistics services saw disruptions and delays in delivering items to consumers. As we announced in our press release earlier today, we're continuing to witness an acceleration in our growth in April. We closed April at approximately 75% growth versus the same month last year while seeing improvements in overall contribution margin as well. At this time, pending any unforeseen events or disruptions, we maintain an expectation that the company will show positive adjusted EBITDA in Q3 as well as Q4 of this year. Given the uncertainty surrounding COVID-19, we put forward these estimates, cautioning those on the call that macro global events or other unforeseen incidents related to COVID-19, including further supply chain disruption, could interfere with our plans. From a strategic perspective, Mohawk Group’s management is convinced that we need to take steps to secure profitability at the adjusted EBITDA level while maintaining healthy growth. We've built an incredible company with a powerful supply chain and technology platform over the last few years. Now more than ever, our execution on our model is essential to our mission of building the CPG company of the future. I want to thank our entire team for all the hard work and dedication we have shown through the years. We're looking to make 2020 a turning point year for Mohawk Group. Finally, I'd like to thank Peter Datos for his tenure as Mohawk’s COO in the past years. We're excited to welcome Pramod K.C. starting June 1 as our new COO based in Shenzhen. We believe that cultivating our executive leadership at the operational level in Asia is an important strategic investment for the company. Pramod brings over 18 years of experience in consumer product development, operations, and supply chain management in China. His strong technical background in electromechanical engineering, as well as his senior management experience, which includes overseeing teams of up to 200 employees across product development, sourcing and procurement, and quality control, makes him an ideal choice to run our operations department. We're thrilled to bring Pramod's leadership to our executive team. With that, I'll pass it on to Fabrice to discuss our financial results.

Thanks, Yaniv, and good afternoon everyone. Before discussing our results, I also want to take the opportunity to thank the first responders, healthcare workers, and medical providers who are on the front lines of the COVID-19 battle, and our thoughts are with those that have been impacted. I would first like to note that we and other companies have decided to provide monthly revenue information as the COVID-19 situation creates significant uncertainty for outsiders as to its impact on our business, and providing such information will give better visibility. We plan on providing the monthly revenue results through Q2 and we'll reevaluate the need for monthly results in Q3. Now moving to reviewing the operational performance details of our first quarter. For the first quarter of 2020, net revenue increased 43.6% to $25.6 million from $17.8 million in the year-ago period and was in line with our positive pre-announcement in early April. The increase was primarily attributable to increased direct sales volume of $8.1 million or 47.7% growth of existing products as well as new products launched in the second half of 2019. Our Q1 performance also benefited from the accelerated shift to online spending that began mid-March with the outbreak of COVID-19 even as overall consumer spending experienced a pullback due to the pandemic. Following a 62% year-over-year increase in March net revenue, the trend picked up pace as we moved into Q2 with April 2020 net revenue increasing approximately 75% versus April 2019. Gross margin for the first quarter increased 280 basis points from a year ago to 40.2% and was up 160 basis points on a sequential basis, excluding the write-off of expired inventory products that impacted the fourth quarter. The year-over-year improvement in gross margin was due to improved product unit economics in our sustained products, as well as lower price promotions and coupons on our launched products. As mentioned on our last call, we're now reporting our net revenue by each phase of our owned and operated products. As a reminder, they are launch, sustain, SaaS, liquidation, and other. We defined the launch phase as the period of time, which on average lasts approximately three months, where we are investing aggressively in marketing spend, being pricing, coupons, brand rebates, or advertising that have a negative contribution margin on the product in order to gain a foothold in the marketplace. As defined, contribution margin is revenue minus all of our variable costs. After the launch phase, products are expected to enter the sustain phase. We target that these products will have a positive contribution margin of 10% or more. Our target contribution margin can be impacted by charges related to excess inventory, exceptional logistics charges related to Amazon and FedEx or UPS relationships, and all prime status to name a few. Finally, for products that do not reach sustain or that we decide to exit, they move to our liquidation phase. The other categories include maybe SaaS and liquidation and other. For our first quarter 2020, our sustain revenue was approximately $16.9 million versus first quarter 2019 sustain revenue of $13.3 million. For our Q1 2020, our launch revenue was approximately $6.2 million versus our Q1 launch revenue of $2.7 million, in Q4 launch revenue itself was $3 million on a trailing basis. In Q1 2020, we launched 16 products, which is less than the expected 20 products and primarily due to COVID-19 related delays. The increase in launch revenue in the quarter was also due to late launches in Q4 that still were in their launch phase in Q1. Our Q1 2020 SaaS revenue was approximately $0.4 million versus our Q4 SaaS revenue of $0.3 million and $0.5 million in Q1 2019. Finally, Q1 2020 liquidation and other revenue was approximately $2.2 million versus our Q4 liquidation and other revenue of $2 million, and $1.2 million in the first quarter of 2019. Our overall Q1 2020 contribution margin was negative 2.9%, an improvement versus the prior year 4.5% and the Q4 2019 of 6.6%. Our sustain contribution margin was 6.4% versus the prior year’s negative 0.8% and the Q4 2019 of 5.8%. The year-over-year improvement was driven by significantly improved unit economics and margin expansion on our sustain revenue, which more than offset the margin drag from the increase in launch revenue. On a trailing quarter basis, the improvement was likely driven by the liquidation phase, as our Q4 results contained impacts from certain inventory write-offs. I would note our sustain contribution margin was impacted as we incurred one-time costs related to the opening of our additional warehouses. We're now at nine operational warehouses and over 50% of our sales are now delivering in one day to our customers at a lower fulfillment cost. Fixed costs for Q1 2020 were $5.7 million or 22% of net revenue, compared to $4.8 million or 27% of net revenue in the first quarter of 2019. The $0.9 million increase was driven by public company costs, such as audits and D&O insurance. Our headcount at the end of Q1 2020 was 146 versus 142 at the end of Q1 2019. The improvement in fixed cost as a percentage of net revenue from 27% to 22% highlights our ability to launch new products and grow revenue while keeping fixed costs essentially flat. We expect significant fixed cost reductions in the second half, both from our public company costs as well as our operational costs as we continue to benefit from the automation provided by our platform. Adjusted EBITDA for Q1 2020 decreased to a loss of $6.4 million from a loss of $5.6 million in Q1 2019, driven by public company costs as well as the additional launch of new products. On a sequential basis, adjusted EBITDA improved from the loss of $7.6 million in Q4 2019. Our path to profitability is a function of more revenue reaching the sustain phase, margin expansion of our sustain products, and continuing to optimize our fixed cost structure as we continue to automate, which will lead to continued improvement in adjusted EBITDA. Turning to the balance sheet. As of March 2020, we had $14.1 million of cash, compared to $30.4 million at the end of December 31st, 2019. Cash used in operating activities for Q1 was $17.2 million, compared to cash used in operating activities of $12.1 million in Q4 2019, which was impacted by increased cash operating loss and increased cash usage in working capital, as we increased our inventory on hand, due to traditional seasonality. Based on historical trends, we expect to generate cash from working capital in Q2 and Q3. Overall cash burn was $16.3 million, compared to $5.3 million in Q4 2019, due to significant increased working capital spending. Our total debt as of March 31st, 2020 was $39.9 million, consisting of borrowing under our revolving credit facility and our $15 million term loan, as compared to total debt of $37.9 million as of December 31st, 2019, an increase that reflects our planned increased inventory. As it relates to coronavirus, as discussed on our Q4 call, the outbreak of COVID-19 in January had an unfavorable impact on some of our key manufacturing partners in China. In addition to negatively impacting operations for our team in Shenzhen, who are responsible for product sourcing and development among other things. Our key manufacturing partners in China reopened on February 10, and quickly reached over 90% capacity early in March 2020. In March 2020, the COVID-19 outbreak became increasingly widespread in the U.S., and given its impact across the U.S., including temporary closures of many businesses, shelter-in-place, and other governmental regulations, despite a significant overall decrease in consumer spending, we have seen an increase in demand for our products across multiple categories as consumers are spending a larger share of their spending online. I would note that the longer-term impact on our revenues, profitability, and financial position is uncertain at this time, though the current trend seems to indicate that the shift to online spending far outweighs the overall contraction in consumer spending and likely represents a step function increase in the adoption of online shopping. In terms of our outlook for 2020, we expect to launch approximately 10 new products during the second quarter or approximately 20 in the second half. We're slowing down our rate of launch due to the data volatility we see in consumer behavior, which provides a more complex environment for our launch process, as well as our focus on reaching profitability in Q3 and Q4. For 2020, we currently expect net revenue to be in the range of $165 million to $175 million, an increase from our previously stated guidance of $160 million to $170 million. This improved outlook is driven primarily by continued growth of our existing product portfolio and the positive contribution from new products launched in 2020. We have incorporated potential impacts of COVID-19 in terms of inventory constraints for existing products, plans, delays in new product launches, consumer spending contraction, and the overall shift to online commerce into our guidance. We expect positive adjusted EBITDA in Q3 and now we expect to achieve positive adjusted EBITDA in Q4 2020, driven by further improvement in our fixed cost leverage ratio and higher revenue growth due in part to the accelerated adoption of online spending. With that, I'll turn it back to the operator for questions. Thank you.

Our first question comes from Tom Forte with D.A. Davidson. Your line is open.

Great. Thank you for taking my question. I hope everyone is doing well and staying safe. So the question I had is I wanted to address what I think is the biggest misunderstanding when it comes to your story in investors, and it's the role of Amazon. So in particular, when Amazon leaned into essentials, what challenges did that create for Mohawk Group, and what opportunities did it create for Mohawk Group?

Fabrice, let me take that one. Hey Tom, thanks for the question. So as I think a lot of people on the call know, when retail was closed to consumers, Amazon saw incredible uptake in demand to the point where their own fulfillment warehouses were literally crumbling under the load. I think everyone has been aware that they've tried to hire another 100,000 people to work across their warehouses and anticipated to continue. We at Mohawk, of course, since Amazon is a large channel for us, some of our products that still rely on the Amazon Logistics infrastructure were impacted by this, obviously a situation that Amazon was going through. But at the same time, the investment we made on the technology side started over three years ago with building up our own software and retail infrastructure to do our own fulfillment. As almost 80% of our revenue today is flowing through our fulfillment platform, we were able to really mitigate the effects on Mohawk and continue to operate pretty much completely without any interruptions on our core revenue products. Right? That allowed us not only to be there for consumers and help them with the product that they need, but given that most other third-party sellers who were using Amazon Logistics saw delays in shipping, we had an advantage during this period of time as our products continued shipping within the one or two day times that we had put on our own platform. Right? So here again is an example of how on one hand being reliant on the Amazon platform has been very useful for Mohawk, but at the same time, the investment in the technology has proven to be really unique and positioned us in a unique place to not be over-dependent as well, right? So from that perspective, we saw a significant uptake in sales and continue to see that. Another thing we should mention is that more coincidentally than actually in planning, right? A lot of the categories that we decided to get into because the data in the regular course of consumerism showed a significant opportunity when we saw certain items and some categories just absolutely fly off the shelves, specifically we launched a line of freezers and chest freezers as part of our home knobs category. We saw those items really fly off the shelves in the first couple of days after the announcement that COVID-19 would cause people to stay at home. So products like the freezers, products like the standing desk for home office, products like the hair trimmers, those were all products that we had brought into the market due to more traditional data showing us that we could take market share, leading to a massive increase in demand and sales during the first days of the pandemic as people were looking for these items, not knowing when they would be able to buy them in stores. Overall, I think that while COVID-19 is indeed a challenging environment for every company out there, I’d say that through our investments in technology and infrastructure, we were able to navigate the situation pretty well. But the unknown is still ahead of us, and so we say that cautiously.

Thank you. I’m going to step back in the queue. Thanks.

Thank you. And our next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Your line is open.

Great. Hi. Thanks guys. As you expanded the protective equipment and wellness market, I'm curious, I'm trying to understand your comments; if you are going to use the same guidepost, for example, as you make hand sanitizer, where there is significant demand, are you going to look past being the top two or three sellers, for example? And will this be a way to be socially responsible while also making money on those products?

So on these types of products, right, those two initiatives that I spoke about in the call just a few minutes ago. One is our more traditional core business model where, again, the data is showing us increased demand for PPE equipment. We, on the core business, decided to launch a brand focused specifically on that, and just in our traditional way, use the software and data to zoom in on particular needs. Specifically with Holonix, for example, the first product that we launched is a unique kind of set of portable hand sanitizers. Those are patches that you can take anywhere. Those are really focused on searches by consumers that are more related to on-the-go and travel. We wanted to bring a form factor to the market that was unique from that perspective, and that's the first product we decided to do purely based on what we typically do with the data and how we bring products to market. And that's again something that we will continue to do across the entire category. At the same time, as I mentioned earlier in my comments, given that we have all the moving pieces to help with, I would say, more kind of like B2B type of business, where a lot of demand for PPE in the market is out there for states, government, and hospitals, we decided to allocate some resources, specifically a cross-functional team that would look particularly at that opportunity and have again put in place an effort to help at the same time, and again in a business sustainable way, with this effort, given that we have all the needs and moving pieces to go and do that, right? So we felt that it was a responsibility as well as an opportunity for us to do so. And we'll continue to do that as the demand increases for both the PPE B2B, but also more importantly with our core business as the Holonix brand.

Great. Thanks, Yaniv. Can you – I don't know if you can give this or have an idea yet. Do you know of the 30 products that you expect to introduce in the second, third, and fourth quarter? How many will be from this new category?

Yes, it’s a great question. As Fabrice mentioned before, on one hand, we have exponentially explosive data on all the demand for PPE, right, which is quite interesting and exciting when you're able to capture that data and you have the supply chain to react quickly to it. So there is definitely an inclination to go and try to take advantage of the momentum that's happening in that category, and probably take a lot of those products will come up. Other products coming in, in those 30 products that we mentioned are going to go into that category. At the same time, you know, as again, Fabrice mentioned earlier, since there's so much volatility still in the – I'd say demand for more traditional consumer goods, we want to see how things pan out in the next say quarter or so to really figure out exactly how much of those products this year will go into the other category. So the situation is quite fluid. We're looking at a lot of opportunities across both sides of this equation, right, both the more traditional items on a day-to-day basis and the PPE related items. We're convinced that, obviously with Holonix and the PPE, the demand is going to stay strong in our opinion for a while and it does make a lot of sense to go in and again leverage the data and the supply chain that we have to quickly react to this and take market share where we can in the long run, not just for the crisis, of course. So again, the situation is still fluid, we're evaluating, we're always prioritizing on-the-go, based on the data. But a significant part of that allocation should probably definitely end up under the Holonix brand to answer your question.

Great. One last question, I'll get back in the queue for Fabrice. The inventory build was quite significant, I'm sure that used a good amount of cash. Can you talk about, for the products that are driving growth in March and April? Are you easily replacing that inventory?

Yes, the fulfillment side of things from a supply chain perspective is really completely back to normal. Now, to be honest, we – as I indicated, I mean, we see growth across almost all of our products and some of them are outliers and are not just growing, but exploding, right? So I can mention, for example, Yaniv, I think, was talking about it. Over the course of confinements, those products actually changed. It started with freezers and we ended up actually running out of freezers because of astronomical growth compared to standard levels, despite our inventory position. We still ended up actually running our inventory. So then after that, you've got manufacturing cycle shipping and so on and so forth, which takes place and there is nothing you can do about that. After that, it moved to air purifiers, and then it moved to hair trimmers after the third week of confinement when people realized that they could not go to the barbershop. So, after the fifth week of confinements, being totally bored or needing to actually get out of the house, they ended up jumping on everything that had grooming tools in it. So those are outliers around exceptional basis, but for the normal significant growth that we've seen across all products from that shift to online spending, thanks to our inventory position, we have not run out short and we are actually able to replenish at the normal rate without any significant disruption.

Sorry, just one follow-up to that, Fabrice. To that end, consumers and all people around want another freezer and another refrigerator right now to have as much food as they can. How long does it take to build inventory back up for products like that or others that are being completely acquired?

Yes. The real issue here is you have to separate in the increase in volume, the blip from the permanent growth of e-commerce. So a portion of the growth that you saw, for example, in e-commerce is a massive fear of food supply chain disruptions. Therefore, people are pulling up on extra food that's a one-time blip demand. The second part of the increase in demand is a more permanent or short-lived part, but most of it will be long-lived, representing a permanent acceleration of the online, meaning that, the online channel will take a bigger share of the total chest freezer market sold every year. You want to reorder for that movement, not for the blip, because blip demand won't last forever. If you reorder based on the blip itself, you end up being inventory long for a long time, right, as the blip disappears. So it's – the challenge on the inventory side today is to always actually parse the increase in demand from the blip factor or the one-time factor versus the permanent market share gain in the overall consumer spending in chest freezers, right? So it’s not always easy. We are making a strong focus on profitability. So instead of carrying inventory for a long period of time, we will actually potentially on occasion be inventory short on some products if we don't parse the extra demand correctly between the blip and the permanent growth factor. But overall that's one of the advantages of being data-driven, so you can actually see the overall change and then you can see afterward that chest freezers may go back down, not to the level before, not to their lows before, but still higher than before. When you see that, then you can actually assess correctly what is the long-term market share gain of online and the overall consumer spending, and that's on that basis that you actually build your inventory.

Great. Thanks so much. I'll get back in the queue.

Yes.

Thank you. Our next question comes from the line of Allen Klee with National Securities. Your line is open.

Yes, hi. Could you talk a little about how you think about the revenue run rate to get to be sustainably profitable? And perhaps if you could address this in terms of contribution margin and fixed costs? The way I look at it from what you just said now, you said a $5.7 million fixed cost this quarter, and then, I don't know if you assumed the blended contribution margin of – if I made up 8%, that would imply around $71 million of revenue to get you there. Is that the way you think of it or is there some other way that we should be? Thank you.

So yes. Thanks, Allen for the question. That's a very important question. So remember that our blended contribution margin is actually made of – or impacted massively by the number of parts that we launched, right? As you saw, in Q1, we launched a massive number of new products and we also had all of the ones that were launched in December, which was also – so we launched a record number of products in Q1, right? That degrades your CM significantly. By slowing down the new launches, this will improve the overall CM. Then on the sustain CM itself, you're gaining a nail with the new warehousing platform that we implemented through our Q1. The new deal that we signed with UPS three weeks ago is fully operational, and 99.9% of our grids right now are shipped by UPS. You’re going to see margin expansion starting to happen quite a bit. That was one of the intentions of moving to that new operational flow. So that's on the CM side. You’re going to see CM expansion on sustain because the proportion of sustained sales will increase, especially with Q2 and Q3 being our seasonally high numbers. You will start seeing a bigger CM, positive CM contribution dollars. At the same time, as I indicated, one of the benefits of the platform is that as we automate things, it allows us to then go back down on our investment in fixed costs because we automated a new portion of the platform, for example. Our fixed costs are actually going to go down from the $5.7 million, not so much in Q2, a little bit in Q2, but not much, but more significantly in Q3 and Q4. It is also linked to the fact that it is our one year, so June 14 will be our one year anniversary of public company listing. Some costs are extremely high during the first year, that can go down because we're not the same company anymore. I'm thinking of D&O insurance, for example, where rates are extremely high on the first year and then go back down quite significantly starting on year two. So our fixed costs will go down as well. You have the combination of margin expansion on the CM business, margin expansion on the sustain business, a higher proportion of sustain business in total sales, and lower fixed costs as well. That’s how you actually achieve that profitability level in Q3 and Q4.

That's very helpful. Thank you. And turning to your third-party logistics opportunity to sell to others, first off, how do we think about how big an opportunity it is and if you've had any traction there? Second, just what you just said about benefiting from your new deal with UPS. It's interesting because the companies I cover that actually do warehouses and logistics for e-commerce. And then if you just look at Amazon, their costs are going up significantly to provide services because of what they have to do with social distance and safety measures. I was just wondering if there is a risk that those higher costs of running their businesses could get passed along to you?

I'll take the cost side and Yaniv will talk to the SaaS side. That works, Yaniv?

Okay, perfect.

Great. So on the cost side, the advantage of our platform is that we actually are distributed on the warehousing side. That's where you have most of that extra costs because of social distancing, having fewer workers in the warehouse, and so on and so on. We have the benefit of having out of the nine warehouses, those are actually supported by six different companies, right? So we can always actually – of course, the rules are different state-by-state. The situation of COVID-19 is different by state-by-state. All of those elements actually play into having a different implementation of the social distancing, and needing extra workers. The carrying cost of our providers is not as significant. The second reason is most of the revenue that we derive through our FBM platform on our fulfillment network are what we call oversized. They are very simple from the logistics, from the warehousing, and pick and pack process. It is not a complex process where you have one person or multiple people going into multiple aisles, crossing each other and so on. When you buy a dehumidifier, the order is for the dehumidifier. One person goes, gets the dehumidifier, puts the label on it, and it's on the deck ready to be picked up by UPS. There is very little interaction with multiple people. So we don't have those extra costs in social distancing because by definition, the type of products that we sell are carried by a single person in a single aisle. Right? So that's the reason why we're not suffering from that. And then finally, in the case of UPS, there’s one person in a truck. The cost of UPS is not significantly going up, but UPS is very, very happy to pick up our increased volume. Right? We shipped through FBM last year, ourselves through our fulfillment network approximately 1.4 million individual orders, while we had shipped the year before less than 600,000. Everyone wants that growth, and that's the reason why we're actually having purchasing power, which benefits us. They still make money, short of that. But they're making less margin with us than before because they have growth with us. That's on the cost side. I'll let Yaniv respond on the update from a SaaS perspective.

Yes. Thank you, Fabrice. So yes, in terms of offering the Platform-as-a-Service, particularly when it comes to fulfillment, as Fabrice mentioned, the independence of the logistics platform from Amazon, coupled with the optimizations we've done around categories that are what we call oversized, is giving us a unique advantage. I think we talked about it in the past, but one of the challenges that a lot of the other logistics platforms have when they warehouse and ship larger items is that they do it at maximum cost for smaller items that can be in their portfolio as well. Therefore, the price, typically for oversized item shipping through the Amazon FBA platform or other competing logistics platforms are quite高. The strategy we're taking here is also visible from our roadmap on the products; we've gone into significantly higher size categories and optimized our fulfillment platform to be very, very cost-efficient. In fact, typically most cautious competitors are, when it comes to oversized products, then focus on initial larger items. Companies out there who are selling furniture, appliances, and all sorts of other industrial items that are typically larger size. We have a very compelling value for them just purely in unit economics when it comes to shipping their items. So what we're doing is we're focusing on these companies first, giving them not only fulfillment, but the other capabilities that the platform is providing, which includes automation and marketing, but with the anchor of attractive unit economics that is quite strong and helps us position our fulfillment as well. So there's going to be unique advantages to both legs that we've built; our owned and operated and the third-party customers all flow through the same logistics, which gives us economies of scale. So as we put in more revenue on the platform, whether it's owned and operated or through SaaS, we're continuing to increase volumes and thus leverage better overall capability for both parties, including better revenue opportunities on our own products. So it's a volume play. I think that we are already Mohawk itself with our owned and operated businesses, and already significant players in terms of volumes should help us bring in sellers and vendors on e-commerce platforms to benefit from that. That's a strategy we're going after.

Thank you. Very helpful. My last question is, have there been any changes in the metrics of the success rates of your launches and the average revenue per product sold?

The average revenue per product sold is actually obviously a variable to the products that we sell. I mean, we launched a line of dehumidifiers, some chest freezers, products like this, which are of course higher value or ticket items from a price perspective. When it comes to the success ratio where you analyze all of the products that launch from December all the way through end of March, a significant majority of them are still actually in launch phase. So it's too early to actually give an update on the success ratio, and we will provide a better visibility actually to the success ratio of the Q1 launches, for example, when we get to announce the Q2 numbers in late July or early August. By then they either move to sustain or they actually move to liquidate, and we have actually completed the entire cycle by then.

Okay. Thank you so much.

Yes.

Thank you. And our next question comes from the line of Matt Koranda with Roth Capital Partners. Your line is open.

Hi, it's Scott stepping in for Matt. Congrats on the quarter. First, so you guys raised the guide by $10 million. And we talked about April being up 75%, after March being up 62%. Kind of help us understand the building blocks to that guide. Is that just partially demand falling as consumers come out of lockdown? Or is it also like how do you tie that also to like the new product launches?

Yes, so first, of course, as we're going to launch less products overall, right? I mean, we're on pace to actually launch six or seven products a month, right? And we're really taking it down for the moment until we see more stability in the data itself, right? We don't know how long it's going to be. So we're taking a very prudent and cautious approach from that perspective and saying—waiting for the moment for the rest of the year. We're planning on a slowdown number of launches; we may very well actually decide to or have the opportunity to accelerate, should the market conditions change, right? But of course, nobody knows how the COVID situation is going to impact us in the rest of Q2, Q3, or even Q4, right? So we're taking a cautious approach to that. So that's actually a negative view on the top line. On the other side, as we said, I mean, right now we're seeing a significant acceleration in sales, as you noted, 75% in April. So if you were to take a straight line and say these guys are growing 75% or only increasing by $10 million because we don't know where they—they know that a portion of that 75% will stay. Once the blip side of things disappears, once retail stores open, the other thing that we actually know as well is that the adoption of online spending will remain. So as consumer spending will increase overall, they're spending, sooner or later, the consumer will increase their spending. Overall, a bigger share of it will stay online. How much? We don't know yet. So there's a lot of uncertainty which we baked into that number. It came to a lot of very strong positive factors, some short-term, some long-term, like the adoption of online, our advantage on fulfillment and delivery mid-dates, for example. Some negative with slowing down the rate of growth of new products. That's the reason why we came to that $165 million to increase our top-line guidance by $10 million. We will provide in due course a revisit if needed when we announced Q2 and Q3.

Got it. That's fair enough. Thank you for walking us through that. And kind of just on the PPE and SaaS-like the managed SaaS and then the 3PL, are you seeing any of your customers just go straight—the ones who are using FBA just go straight to Mohawk's 3PL rather than going by managed SaaS? How do you think about that?

So the offering is somewhat related, right? When we offer the managed SaaS service, right, fulfillment is either not part of it, right, when you look at smaller categories of items, for example. Say a client that would be more on the makeup side, right. We would advise them to take our managed SaaS offering, but leverage the Amazon network and FBA network unless there are interruptions because of COVID-19. In those cases, we would advise them to use our other modules, but not use the fulfillment because for these types of items, we don't necessarily yet have an advantage or will have a competitive edge in the very short period of time for the fulfillment costs, right? So really it depends a lot on the nature of the managed SaaS client where in some cases, we would offer them all the modules including fulfillment. In some cases, it might be just for selling products. So it's a bit of an à la carte approach. But as I mentioned before, because of the quite obvious advantage on the unit economics with the oversized, we're looking to focus right now more on these types of companies. Of course, if others come in and are interested in the offering, regardless of the fulfillment, we'll look at them as well. But from an outbound perspective, our focus is more on those larger oversized categories. Does that make sense?

Yes, it does. Thanks. Very helpful.

Thank you. And I'm not showing any further questions at this time. I'd now like to turn the call back to your speakers.

Thank you everyone for your time today. I appreciate the time on the call, and we will look forward to speaking to you again in the next earnings call. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a great day.