Good day. And thank you for standing by. Welcome to the Aterian Q1 2022 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Ilya Grozovsky, Director of Investor Relations and Corporate Development.

Thank you for joining us today to discuss Aterian’s first quarter 2022 earnings results. On today’s call are Yaniv Sarig, Co-Founder and CEO; and Arturo Rodriguez, our Chief Financial Officer. A copy of today’s press release is available on the Investor Relations section of Aterian’s website at aterian.io. I would like to remind you that certain statements we will make in this presentation are forward-looking statements. And these forward-looking statements reflect Aterian’s judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Aterian’s business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of these risks and uncertainties associated with the forward-looking statements to be made on this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements that is included in our first quarter earnings release, as well as our filings on 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 can be found in the earnings release filed earlier today. With that, I will turn the call over to Yaniv.

Thank you, Ilya. And thank you everyone for joining us today. On the call today, I'll go over the following topics. I'll start with a quick introduction to Aterian for those who are new to our story. I'll then review key takeaways from the first quarter of this year. I'll then discuss the continued challenges we're dealing with given the economy and macro level pressure from supply chain disruptions and inflation. I will then summarize the long-term prospects for Aterian. So for those who are newer to the story, here's what you need to know about our company. Aterian is part of a new breed of technology-enabled consumer product companies. We focus on building, acquiring, and partnering with e-commerce brands online. Aterian owns and operates 14 consumer brands, selling products across various categories on channels such as Amazon, Walmart, Shopify, and eBay. To allow us to scale, we've invested in building our own proprietary software platform called AIMEE. AIMEE enables our team to manage our business more efficiently by injecting technology into processes that would otherwise have to be executed manually and would require hiring an unscalable and unsustainable workforce. Through its ability to analyze vast amounts of data and automate daily recurring tasks, AIMEE allows our team to find new product opportunities we can launch under our brands, manage these products to scale effectively across various channels, automate certain marketing and fulfillment tasks, and much more. Our goal in the long term is to become one of the most efficient consumer companies in the world. Expanding our footprint globally, we’re continuing to invest in technology and agile supply chain to drive scale and profitability. Moving on to our key takeaways from the first quarter, I'll start with a quick summary of the main points and then discuss them in more detail. Notwithstanding inflationary and supply chain pressures, we believe that once the macro level environment improves, Aterian is more than ever well positioned to become a leader in the space. We have an incredible team which keeps getting better. And our resolve to build a leading consumer platform in e-commerce is stronger than ever. Global recession fears are mounting but we think that there is a silver lining. As global demand for products cool down, we expect to see improvement in supply chain and logistics costs. We believe that we have the balance sheet necessary and many additional levers we can pull to get through this difficult environment. We're preparing to resume growth and profitability when the macro level challenges subside. We're focusing on strengthening our team and infrastructure. We hired Anton von Reuden as our new Global COO and I’m working closely with him on preparing the organization for rapid and systemic scale. We're looking at acquisition targets constantly with an important focus on brands that are less affected by the supply chain crisis. We're being diligent, cautious, and patient in this driven environment. With these important points in mind, I'd like to now discuss each of them in further detail. It's no surprise that the macro level environment continues to put near-term pressure on our business. At the same time, our leadership continues to be excited about Aterian’s long-term prospect and focus on laying the groundwork necessary to ignite growth. The last couple of weeks have made it clear to everyone that the economy is witnessing a whiplash effect driven by the monetary policies adopted by governments around the world to counter the COVID-19 pandemic. Many people ask us why supply chains have been so dramatically disrupted in the last year and a half. There's no simple answer, but it's obvious to us that the massive injection of cash by governments around the world to stimulate a global economy during the pandemic is a big part of the culprit. With most travel services being unavailable during the initial lockdowns of 2020, governmental monetary support was dramatically skewed towards retail online consumption. With consumer appetite for products skyrocketing, logistics companies could not react fast enough to invest in more ships and airplanes to transport goods. Given this asymmetric demand for shipping services against limited capacity, prices of shipping skyrocketed, further escalating inflation. On Amazon itself, we're seeing an increase in the price of goods across most categories. As many on this call have probably anticipated after reviewing the financial results of large online retailers, we're now seeing the effects of the pendulum swing in the opposite direction. Consumers are seeing prices going up everywhere. And as a result, demand for products is weaker compared to the shopping spree we saw in the last two years. For Aterian’s investors, the latest signs of reduced consumer demand should actually be quite encouraging. How can I say that when we are looking down the barrel of a potential painful recession? Well, simply because our business really getting back to growth and profitability is predicated on returning to normalized shipping costs. Unfortunately, the only way to get there is to reduce global consumer demand for products. While this downturn in demand might spell doom for other companies in our industry, it will not for Aterian. Things may get more difficult before they get better, but we're already preparing for what happens when markets stabilize and create a new baseline from which we can grow our business. We have the balance sheet to get through a long downturn and many levers to pull in case of additional challenges. More importantly, our team has never been stronger and our resolve to prove ourselves has never been more steadfast. For long-term investors who believe in us, the critical question is when will that new baseline form and what will be the growth from that point on. On a global level, the e-commerce buying experience in 2020 represented a 26.5% year-over-year revenue growth compared to 2019. In 2021, year-over-year e-commerce revenue continued to grow, but at a much smaller rate of 16.3% compared to the previous year, and this year e-commerce is expected to add around 12.2% on global growth compared to 2021. The expected year-over-year revenue growth rates starting in 2023 will be between 9% to 10%. More importantly, e-commerce is predicted to represent 23.6% of all retail sales globally by 2025 versus 17.9% in 2020. So while the immediate year-over-year comparisons are challenging in the long-term, e-commerce is predicted to continue rapid growth. At Aterian, we're preparing to take advantage of that growth. As part of these preparations, we're strengthening our team with talent across the board. We're excited to welcome Anton von Reuden to Aterian as its new global COO; Anton brings over 22 years of experience in e-commerce operations. Anton was also previously the CEO and President of Boosted Commerce, an e-commerce aggregator of brands, which trades over $380 million in capital to acquire smaller online brands. As we prepare to expand and grow the number of brands we manage, agile processes and automation through technology are going to be critical to scale our model. We're looking forward to turning our parent company into a well-oiled machine, giving our portfolio brands all the necessary building blocks of e-commerce-as-a-Service. Regarding our acquisition strategy, we remain very excited about the opportunity to do accretive acquisitions driving strategic value for Aterian. During the first quarter, our team has continued to evaluate many opportunities. We're remaining disciplined in valuation, given the inflated performance of targets due to the COVID-19 e-commerce acceleration. Given that most of these targets expect to be valued based on the performance of the trailing 12 months, we believe that valuations will come down over the course of the year. We expect to be able to capitalize on the current market conditions to acquire a number of these targets at a later stage for more reasonable valuation. There’s been a lot of press recently about the challenges faced by e-commerce aggregators. Just last year, many raised astronomical amounts of money to pursue a similar acquisition strategy to ours. The press is reporting on many of these companies that are struggling with similar challenges and the ones we highlighted since last year. One of the main challenges affecting our peers is the lack of the infrastructure and technology to support the complex effort of managing a portfolio of brands online. Without systems to monitor and aggregate product performance in real time and automate manual functions, most of these companies need to hire a non-scalable workforce of analysts and marketers. The difference between these companies and Aterian is in our years of investing in building our AIMEE platform, which allows us to operate the brands we build or acquire with more efficiency and less overhead. This is key for success for those pursuing a platform strategy. We believe that our revenue to employee headcount remains best in class and will continue to improve over time. We’ve also been in this business for much longer than most of these companies, and we’ve successfully navigated challenges affecting our industry for many years, proving that our culture can weather whatever is coming next. With that, let me turn the call to Artie for a more in-depth discussion of the quarter's financials.

Thank you, Yaniv, and good evening, everyone. Here are the financial performance details of our first quarter. For the first quarter of 2022, net revenue decreased 13.3% or $6.4 million to $41.7 million from $48.1 million in the year-ago quarter, primarily due to a decrease in net revenues from our sustained business of $4 million and $1.8 million resulting from our previously announced plan to pause new product launches. The first quarter net revenue of $41.7 million is comprised primarily of $29.8 million of organic business, which includes revenue from our built brands and acquired brands starting one year after our purchase, $9.6 million of net revenue from our acquisitions and $2.3 million of wholesale. The year-ago quarter net revenue of $48.1 million was comprised primarily of $17.4 million from our organic business, $28.7 million of net revenue from our acquisitions, and $1.8 million of wholesale. As a reminder, the acquisition of Healing Solutions closed on February 2, 2021, and as a result, moved into the organic category starting February 2, 2022, and the acquisition of Smash closed on December 1, 2020, and as a result, moved into our organic category starting December 1, 2021. Our sustained revenue landed at $37.9 million for Q1 2022 versus $41.9 million in Q1 2021. The $4 million decrease in revenues was primarily due to our acquisition revenue decreasing $19.1 million to $9.6 million for Q1 2022 from $28.7 million in Q1 2021, largely due to our acquisitions of Smash and Healing Solutions being owned for a year and now shifting to our organic categorization. Our remaining acquisition revenue continues to be in line with expectations for PPD and Squatty outside of seasonality and timing of the closing of those acquisitions. Our acquisition revenue decrease was offset by our organic revenue increasing by $15.1 million from the move of our acquisition revenue into organic offset by reductions in the overall organic revenue stemming from increased pricing on our products affected by global supply chain disruptions, which led to reduced sales velocity and impacts from the termination of government stimulus support and the initial unfavorable impact of inflation on consumers. As mentioned, our business also saw a year-over-year decrease in launch phase revenue of $2.6 million to $0.8 million. As planned, we did not launch any new product this quarter compared to 2021 in last year’s first quarter. As we have mentioned previously, we’ll continue to pause on launching new products until we believe the time is right and until the macroeconomic environment is more predictable. Finally, on net revenue, we suffered from inventory shortages in the quarter, which we estimate to have an impact of approximately $2 million in the current period as compared to inventory shortages of approximately $6 million in the prior year period. Overall gross margin for the first quarter increased to 56.6% from 54.1% in the year-ago quarter. Our gross margin improvement versus last year was predominantly due to a favorable product mix from the inclusion of our acquired brand, though offset by increased costs. We believe the increased cost of shipping containers impacted our gross margin by approximately 2% in the first quarter of 2022. Our overall Q1 2022 contribution margin as defined in our earnings release was 9.2%, which decreased compared to the prior year contribution margin of 12.7%. Q1 2022 saw our sustained product contribution margin decrease to 12.5% compared to 14% in Q1 2021. Within Contribution Margin, our sales and distribution expenses were negatively impacted by global supply chain disruptions and higher costs associated with last mile fulfillment, given inflationary pressures and carrier tightness in the quarter. Our Q1 variable sales and distribution expenses as a percentage of net revenue increased to 47.5% as compared to 45.2% in the year-ago quarter. We expect to see these impacts continue in the current quarter. While we continue to look for ways to mitigate higher cost dynamics in our supply chain and last mile costs, we believe we will continue to see contribution margin pressures for 2022 due to inflationary cost increases. Our operating loss for the first quarter of 2022 was $36.3 million, which includes a charge of $29 million for goodwill impairment, $2.3 million of non-cash stock compensation expense, and a $2.8 million gain on the change in fair value earn-out liability. This compares to an operating loss of $27.8 million in Q1 2021, which includes a $15.6 million charge from the change in fair value of earn-out liabilities and $6.9 million of non-cash compensation expense. The $29 million goodwill impairment resulted from our reduced market capitalization as of March 31, 2022. Interest expense decreased in Q1 2022 to $0.8 million from $4.4 million in Q1 2021 as part of our debt refinancing, ultimately reducing our overall debt outstanding compared to 2021. The net loss for the first quarter of 2022 was $42.8 million, which includes a charge of $29 million for goodwill impairment, $2.3 million of non-cash stock compensation expense, impacts related to equity issuance and warrants of $7.6 million, and a $2 million gain related to a settlement from a seller note, and a $2.8 million gain on the change of fair value of the earn-out liability compared to the net loss of $82.6 million for the year-ago quarter, which includes $50.3 million of net charges from the change in fair value on cancellation of warrants, $15.6 million of charges from the change in the fair value of earn-out liabilities, and $6.9 million of non-cash compensation expense. Finally, adjusted EBITDA, as defined in our earnings release for the first quarter of 2022, was a loss of $4.5 million compared to a loss of $1.2 million in the first quarter of 2021. Turning to the balance sheet, at March 31, 2022, we had cash of $44.5 million compared to $30.3 million at the end of December 31, 2021. The increase in cash was predominantly driven by the recent financing that raised $27.5 million, partially offset by increased inventory levels in anticipation of increased volumes for the summer season. Our increased inventory levels were strategically planned to address the continued supply chain concerns, particularly the time it takes to get goods on shore to address inventory shortages and to ensure appropriate inventory levels for our summer season products. We continue to be impacted by global supply chain disruptions, especially considering the inflationary pressures globally and the uncertainty stemming from the invasion of Ukraine. While we believe these issues are temporary, they limit our ability to forecast, and as a result, we will not be providing full-year guidance. However, as we look at our current Q2 and considering the current global environment, rising inflation, and continued difficulty with supply chain, we believe Q2 2022 net revenues will be below last year’s figure of $68 million. The first quarter of 2022 continued as 2021 left off, macroeconomic conditions have remained challenged and consumer buying habits remain unpredictable, but we are exiting this quarter with a strong balance sheet, very strong brands, and product portfolios. This positions us well to resume growth and drive the business to profitability as the world reverts to a more normal environment in the future. We continue to be very confident and proud of the business we have built, our products organic and acquired, our technology, our logistic network, and most importantly, our dedicated and hardworking people across the globe. Together, we believe Aterian will overcome these challenges and continue to be a leader in our industry. With that, I’ll turn it back to the operator to open the call up to questions.

Our first question comes from Brian Nagel with Oppenheimer. Your line is now open.

Hey guys, good afternoon.

Good afternoon.

Good afternoon.

So the question – the first question I have is, I appreciate all the color in the prepared comments, but with regard to supply chain and clearly there’s still a lot of moving parts out there. But I guess the question I have is, are you starting to see some relief in any parts of the supply chain, versus what we've seen over the last several quarters?

And Brian, thanks for the question. I have to say that we had some glimmers of hope, looking at the macro level environment and some indicators of improvements. Unfortunately, right now we’re back into looking at this with a big question mark as the COVID-19 policy in China is putting renewed pressure on the supply chains, particularly logistics there with ports not operating at full capacity. Obviously, everyone, I think on this call is aware of the lockdowns that are happening in China. We were hoping that after the year-end things would improve. A combination of the events in Ukraine, as well as the resurgence of COVID in China, make us a little more pessimistic in the short-term. Long-term, obviously, we believe that things will come back to normal, but unfortunately, it's not as quickly as we wanted to see it. We’re still kind of waiting to see the impact of the latest lockdowns in China on global supply chains.

That’s helpful, Yaniv. And then my second question, I think it’s probably more for Artie, but we talked about the cash on the balance sheet and the recent financing. But how should we think about particularly with the business in sort of this holding mode, if you will? I mean, the capital needs of the company through, I guess, the balance of 2022 or maybe beyond here.

Yes. Thanks, Brian. Yaniv, do you want to take that?

Sure. Artie, do you want to take that?

Yes. Thanks, Yaniv. Hey, Brian, thanks for the question. So, yes, I mean, listen, I think we said that previously and we still hold to that, is that you’re always going to see ups and downs in our business in the sense of the use of capital, especially as we enter the summer seasons. That said, we felt that the fundraise we did in March really strengthens our balance sheet. Our credit facility gives us a lot more working capital flexibility than we had in 2021. Assuming we continue to hit our forecast and all that, we think we’re well capitalized. That said, if we decide to do M&A or other strategic moves like that, we probably would need to do equity raises. But outside of that, from a business normal standpoint, I think we feel like the balance sheet is strong as of today.

Got it. Appreciate it. Thank you.

Thank you. Our next question comes from Tom Forte with D. A. Davidson. Your line is now open.

Great. Thanks for taking my question. One question and one follow-up. So for the first question, you talked about it a little in your prepared remarks, but you're a long-time student of e-commerce. Can you talk about how inflation is affecting e-commerce and how it’s affecting Aterian?

Sure. Inflation is obviously prevalent across the entire supply chain, and it doesn’t just affect us. It affects also our partners, whether it’s on the logistics side or on the manufacturing side. Unfortunately, it trickles all the way back to the customer, as costs across the board, including energy and materials, have gone up. You have an impact at every point of the supply chain, and what affects us at the end of the day is our cost of making the product and shipping them all the way to our warehouses where they’re ready to be shipped to customers. The landed cost of those products is now much higher than it used to be. Of course, as we discussed in previous calls, we are consistently focused on one thing, which is we can’t absorb the entire increase in cost. So we have to raise our prices, but we’re also very much determined to retain market share for our portfolio. So, the exercise for us is literally in real-time adjustment of all the variables affecting the P&L of every one of our products to find that sweet spot between holding market share, creating enough contribution margin for the product to be profitable, and raising prices. We’re seeing less sales, and with a smaller margin, the final contribution margin we expect from our portfolio products is lower. We believe that all of this represents a transient phase, impacted by the global events. We continue to maintain the strategy of retaining market share. We have had to increase our prices, and it has hurt our numbers and margins. Still, we think we've successfully navigated this environment. At the end of the day, for us and for every business out there, the same pattern emerges for consumers. Thus, discretionary earnings may not drive as much consumption as we saw in the last couple of years. And the effect, I think everyone on this call is noticing, is affecting several e-commerce companies. Overall, we believe we are forming a new baseline, and from there, e-commerce growth and growth for Aterian should resume.

Yes, thanks. So for my follow-up, I wanted you to talk about the near-term market environment for e-commerce and for Aterian. If you could rank order what you think is putting the most pressure on e-commerce sales in your sales: Is it consumers returning to physical stores and increase in discretionary income going to travel, or economic concerns regarding Russia-Ukraine? We're hearing a lot of different reasons from various e-commerce players on why the June quarter, in particular, is so challenging. I’d appreciate your thoughts.

Can I choose all of the above? But again, I think the... Yes, I think all of the above certainly applies to anyone in e-commerce. For Aterian specifically, we have a diversified portfolio of products. For those who follow us closely, we have maintained the strategy of leveraging the common denominator of all these brands to focus on fundamental e-commerce operations. This allows us to understand the impact of the current environment, which differs by category. Our portfolio has an inclination toward oversized products, thus we’ve developed technological and supply chain infrastructures providing a certain advantage. Unfortunately, this advantage has created a challenge for us in the current supply chain crisis, because oversized goods are more affected than smaller items, particularly given the dramatic increase in shipping container costs. In terms of your question regarding what affects us the most, the cost of shipping containers specifically has the most significant effect on Aterian. That said, we focus on mainstream product categories; therefore, the impact of consumers' discretionary earnings and their ability to deploy that into goods is less significant for us. Our products tend to be more essential. Thus, the main challenge is the cost of shipping containers. Other factors that you mentioned may be true, but they’re more pronounced for the remainder of the e-commerce landscape.

Thanks for taking my questions. I appreciate it.

Thank you.

Thank you. Our next question comes from Brian Kinstlinger with Alliance Global Partners. Your line is now open.

Great. Thanks so much for taking my questions. First, I’m curious to what degree working with third-party logistics companies like Amazon has benefited the P&L? Was there a material benefit in the first quarter, or was most of the inventory from shipping containers before these agreements? And then the same question for the current quarter thus far; are we beginning to see a shift of inventory that was using these better price containers? Are they starting to increase as a percentage of the mix to improve your unit economics at all?

Artie, why don’t I start answering this and see if you want to add anything? Thanks for the question. As we mentioned, we’re relying on several relationships, including Amazon Global Logistics, which is a big part of this, and we’re really happy with their help. As much as it’s on a year-over-year comparison, it’s tougher to see because last year, right, the cost of shipping of containers was not as bad. The supply chain crisis really became much worse around June, July, right? Whereas in the first quarter of last year, we had pricing that was beneficial. The year-over-year comp might not show it, but the help of Amazon Global Logistics and other partners has been significant. If we didn't have these relationships in place, things would have been much more difficult. Thus, we had a significant impact on our ability to bring goods at more reasonable prices, though still, obviously higher than the prices we were seeing in a more normalized environment. There’s also more reliability under the banner of a ship that is under Amazon’s shipping. I had to say, not perfectly either. Again, I think that the impact is there and it’s hard to see because the relative comparison to what would’ve been without it is tough to imagine. We’re very happy with that. Artie, I don't know if you want to add anything to that.

Yes. Thanks, Yaniv, and great answer. Yes. There’s definitely, listen – the partnerships we have can’t disclose pricing, but we’re certainly getting better rates than the spot rates and at times, much better than the spot rates. It's definitely, it could have been a lot worse without those deals. The other key thing is the reliability. I think you could see some of the short numbers are much different this year versus last year's quarter. Our partners have been able to really pinpoint timelines and meet them, so that we can ensure that products show up. That said, we’ve been buying inventory at a larger clip to make sure we do have more on hand to avoid some of those issues and to purchase in advance. Given that we've mentioned China has been shutting down in certain parts, it's less impactful to our supply chain. The thing that makes it a little tough is the mix, in the sense we’ve been buying for our summer seasons way ahead. So we’ve been taking advantage of better pricing, and you’ll see that hopefully in Q2 and Q3. So I think the comparable will still be a bit tough initially, but certainly as we continue to move through the inventory in upcoming quarters, you should start seeing a bit of an improvement in Q3 into Q4. That’s helpful in responding to your second part of the question.

Great. Yep. I have one follow-up. We’ve discussed inflation, obviously. In the past, you’ve mentioned the slow nature in which you can raise prices despite the cost of supplies increasing rapidly and seeking to avoid losing market share, while competitors may not be raising prices as swiftly. Can you provide a general update on how this is evolving in your market and perhaps characterize a general average increase in pricing for your SKUs?

Yes. Thanks for the question. So, as I mentioned, e-commerce is interesting and in a way it’s a bit of a metaphor for traditional retail, where at the end of the day, your visibility to customers in traditional retail on a physical shelf or online retail on a digital shelf results from your performance. The more your product sells, the more it will show up in advertisements. The more it will show up in searches, the more it will sell. It’s a kind of self-fulfilling prophecy. The challenge is that we’ve always been very data and detail-oriented in launching our products, with the belief that we have to generate great performance to continue seeing consistent sales. With costs increasing across the board, the dilemma is we have to raise the price to avoid margin compression, but if we increase them too much, our performance could suffer. Thus, we risk losing market share, and that can be difficult to regain, especially if other competitors capitalize on that and gain market share. The interesting aspect is that many companies facing this situation may liquidate product at reduced costs, or lower prices in ways that are unsustainable, dealing with the same challenges as we are. Now for us, the big question is whether someone liquidating inventory is trying to take market share or is simply exiting the market. Each SKU requires analysis in real time, which emphasizes the importance of having the right systems and analytics. Our investments in AIMEE provide our team with real-time visibility into product performance and are critical for making those decisions. Overall, despite the difficult environment, I think we’ve managed well, and I believe we’ll continue doing so. Does that answer resonate with your question?

Understood. Thank you.

No problem.

Thank you. Our next question comes from Matt Koranda with ROTH Capital. Your line is now open.

Hey guys, it’s Mike Zabran on behalf of Matt. Just a couple of questions on M&A strategy going forward. If you could just give some more color on what we’re seeing in terms of multiples and talk about how we’re thinking about funding this growth, whether through debt or equity? Lastly, could you help us understand what types of companies we’re looking at? Are we looking for distressed aggregators that just need operational improvement, or are we just looking for overall well-run businesses?

That’s a great question. Let me answer it, and then I’ll hand it over to Artie to see if he wants to add anything. Overall, as I said in the prepared remarks, long term, we’re super excited about M&A. We believe that there are multiple winners in this industry that focus on building the consumer platform of the future by managing a portfolio of brands at scale across many channels. The marketplace landscape is massive, and there’s room for multiple winners, not just on Amazon. Globally speaking, there are marketplaces appearing in pretty much every continent that are starting to dominate the online retail space. We want to excel at managing brands within those marketplaces. As I also mentioned in the remarks, the aggregator landscape, again, companies that raised significant funds to roll up smaller e-commerce brands, is beginning to experience pressure. They’re starting to understand that this is a challenging task, and without the right technological infrastructure, it is very hard to manage those businesses, particularly in the current macro environment. We believe that we will see consolidation in the aggregator space, and good companies will emerge from it—including Aterian—and there may be potential opportunities there. We’re continually evaluating targets. As I mentioned in the prepared remarks, we take great care to evaluate targets and avoid overpaying, especially considering the e-commerce acceleration over the last two years. We are cautious about the business and market conditions; we will be cautious for those targets within segments that are less impacted by supply chain issues, specifically businesses whose production facilities are in South America, Canada, or Europe. Yet, while we are excited long term, we're proceeding cautiously and waiting for circumstances to stabilize before we act. Artie, anything to add?

Yes. Thanks, Yaniv. I think we've established a stronger balance sheet with our recent fundraise, and it increases our flexibility to navigate disruptions, providing us the means for working capital. As mentioned, for any significant M&A activity, we’ll explore a financing mix, whether that be equity, debt, or a combination, including offerings of shares to sellers that are generating more interest given market conditions.

Got it. Very helpful. Thanks, guys. One more for me. Could you elaborate on the inventory composition in the quarter and help us get a sense of how much of that inventory is finished goods on the water versus how much is currently sitting in distribution centers?

Yes. Artie?

If I can answer that. Yes, absolutely. That's a good question. So roughly, I would say about $20 million is considered in transit, and the remaining amount, which is approximately $56 million, is sitting on hand.

That’s helpful. Thanks guys.

Thank you.

This concludes our question-and-answer session. I would now like to turn the conference back over to Ilya Grozovsky.

Thanks. 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 earnings calls. I want to thank all of the shareholder perks participants for their loyalty, their participation in the program, and their questions. I’ve picked a few of the most popular questions that they have asked. Please update us on what is happening with DealMojo and recurrent partnerships. Yaniv, can you handle that one?

Sure. Yes. Thanks, Ilya. And again, thanks to all our shareholders in the Shareholder Perks Program for participating in this. We continue to make strategic investments in everything related to publisher-driven business with DealMojo. As a reminder, 30% of customers in the United States search for products outside of marketplaces when looking for a solution. Often this traffic is captured by publishers, such as online magazines that promote products, coupon websites, etc. We built DealMojo as a destination for publishers and online sellers in e-commerce to partner around promotions, and it’s strategically important for Aterian. We continue to see progress there. We continue to onboard publishers. It’s still early, but it’s looking promising, and we’re going to continue to turn this into a destination for us. More news is coming soon regarding the recurring side of the business.

Thanks. Next question that was popular was, what is going on with Aterian’s international sales efforts?

Sure. We’ve made some progress on international sales, but it’s obviously not moving as fast as we’d wanted, mainly because of the disruptions affecting the supply chain. Europe is experiencing even more disruption than the U.S. In the meantime, we’re making a lot of infrastructure preparations for a more robust rollout. We’re setting up our logistics and necessary things for operations as we push back for growth. Once the supply chain normalizes, we believe there’s a sizable opportunity, especially in Europe, where we’re focusing now. We’re also examining potential acquisitions in those markets. But again, timing is uncertain at this point, given the disruptions.

Okay. And your final question from the Perks program is, can you update us on what you are doing about the alleged naked shorting of your stock?

Yes. We received questions about that. As we talked about in the past, we engaged a third-party firm that specializes in these matters. I can share that we sent several letters to well-known Wall Street institutions pointing out what our third-party investigative firm believes is a substantial share imbalance. It is a long process. We’re grateful for the support of our retail and institutional shareholders. In the long run, we’re focused on execution and believe that the prospect of our business amidst supply chain pressures is strong, which will positively affect the trading of our stock. We appreciate the support we are getting from our retail and institutional investors.

Thank you. This concludes the Q&A portion of the call. In terms of the upcoming calendar, Aterian management will participate in the Oppenheimer 7th Annual Emerging Growth Conference on May 10, the Craig-Hallum 19th Annual Institutional Investor Conference on June 1, and the Oppenheimer 22nd Annual Consumer and E-Commerce Conference on June 14 and 15. We look forward to speaking with you on future calls. This ends our call, and you may now disconnect. Thank you.

This concludes today’s conference call. Thank you for participating. You may now disconnect.