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

Thank you, Ilya, and thank you everyone for joining us today. Today, I'm going to cover our Q3 results, the progress on our previously announced SKU rationalization program, other efforts we are making to focus, simplify, and stabilize our business, and an update on our omnichannel expansion efforts to position Aterian for growth, all as we continue working towards our previously stated goal of achieving adjusted EBITDA profitability in the summer of 2024. Arty will then cover in more depth our financial results for the third quarter, and we'll provide our outlook for Q4. Our third quarter results continue to reflect significant pricing and other pressures in order to remain competitive on Amazon, which is where we earn most of our revenues. While we also continue to see reduced consumer discretionary spending for the product categories we operate in, in certain of our key categories, such as in our dehumidifiers business, we have lost market share. These factors taken together have had a material impact on our results and we expect these pressures to continue through the rest of the fourth quarter. Having said that, we have set in motion a number of other efforts to regain market share and to optimize our core brands and the SKUs that will remain part of Aterian's go-forward business. As a reminder, last quarter, we outlined our near-term strategy to focus, simplify and stabilize how we operate in order to not only position Aterian for adjusted EBITDA profitability, but also to position ourselves for long-term growth. The first step in that process was to focus our business by reducing the number of SKUs across our portfolio. I'm pleased to report that we have made significant progress. We have substantially completed our review, and we expect our go-forward business to consist of approximately 1,700 SKUs and approximately 50% reduction in our overall SKU count. We reviewed each of our SKUs based on a number of criteria with historical and expected profitability being the main decision drivers. We are discontinuing SKUs across all of our brands with the lion's share of reductions coming from our essential oils business, where we are standardizing our scents, sizes, and formulations to simplify our supply chain, while still remaining focused on the consumer. Going forward, Aterian will be focused on the following brands: Squatty Potty, our market-leading toilet stool business, Mueller Living, our kitchen appliance and accessories business, PurSteam, our steam-related appliance business, Home Labs, our larger home appliance business, photo paper direct, our iron ore and apparel transfer business and the various brands that comprise our essential oils business. In the coming months, we will continue to assess the performance of our go-forward SKUs and brands driving focus on their profitability and competitive positioning to ensure stable performance and to reposition them for growth. As a result of the SKU rationalization process, however, we do expect further liquidations in Q4, which Arty will address in his remarks. Post SKU rationalization, we have a number of other ongoing initiatives to focus, simplify and stabilize our business as we continue to ensure that how we operate is best optimized to support the go-forward business. One initiative I'd like to highlight today, and that we believe drives synergies for us, is our project to greatly reduce the number of Amazon accounts we use to market and sell our products from 31 accounts to eight accounts, essentially one account per brand. Executing on this will reduce complexity and will make us more agile from a revenue, technology, planning, and operations perspective. We have also taken actions to strengthen our relationship with Amazon, and we believe that deepening this relationship will create further cost savings and efficiencies in our business. Lastly, in the fourth quarter, we will continue to assess cost-saving opportunities across the business. Collectively, we believe these and other initiatives will position Aterian well as we enter 2024. From an omnichannel perspective, we have also made progress. We have recently launched two of our foldable Squatty Potty stools in Walmart. While it's still early, we are optimistic about the performance of these SKUs and we will be launching in the fourth quarter a national advertising campaign to support Squatty. In addition, we also have recently launched our TikTok Shop for Squatty Potty. We also expect to have many of Aterian’s other SKUs available for sale on TikTok Shop during the fourth quarter. While TikTok Shop itself is a relatively new e-commerce platform, we are optimistic about its potential to drive incremental growth across Aterian’s product portfolio, as we endeavor to meet consumers everywhere they shop. The TikTok model means heavily into social commerce relying on user-generated content and consumer discovery versus Amazon, which relies primarily on search, and we believe this shift in consumer behavior will be important as e-commerce continues to evolve. We also continue to explore other channels that we believe can drive profitable revenues for our existing product portfolio, and we hope to provide further updates with respect to these efforts in the coming quarters. Lastly, we continue to launch new products, and I'd like to highlight that we plan in the fourth quarter to strategically expand our essential oils portfolio to address consumer needs for healthier chemical-free products. Regarding M&A, it remains an area of focus, and we remain patient and disciplined with respect to these opportunities. Today, we are working through a significant transition of our business. And we remain laser-focused on those efforts, but we are still forward-looking, planting seeds for growth, and we believe these combined efforts will yield significant benefits for Aterian 2024 and beyond. Overall, we are excited about the progress that we have made to focus, simplify and stabilize Aterian’s business, and we remain optimistic that with this narrower focus on our core SKUs and brands and by pursuing our omnichannel strategy, we will be able to achieve adjusted EBITDA profitability in the summer of 2024. With that, I'll pass it on to Arty. Thank you.

Thanks, Joe. Good evening, everyone. In Q3, we saw our revenue continue to be impacted by reduced consumer discretionary spending and competitive pricing pressures. However, hard decisions in Q2 of this year to adjust our fixed costs are putting us on our path towards profitability. This is evident as we reduced the year-over-year Q3 adjusted EBITDA loss by 51%. And our net loss improved by over 94%. Further, we continue to strengthen our balance sheet, reducing our cash burn, normalizing our inventory and reducing the balance of our credit facility. We still have a lot of work in front of us. Joe and I and the rest of the team at Aterian are very motivated to take that on. We're also very pleased with our progress on focusing, simplifying and stabilizing Aterian and we continue to be optimistic on our goals of achieving adjusted EBITDA profitability in the summer of 2024. Now moving on to revenue details for the third quarter of 2023. Net revenue declined 40.2% to $39.7 million from $66.3 million in the year ago quarter, primarily due to reduced consumer discretionary spending and competitive pricing pressures across our portfolio. Our $39.7 million third quarter net revenue by phase, as defined in our press release, broke down as follows: $32.3 million in sustain, $0.4 million in launch and $7.0 million in liquidate and inventory normalization. The year ago quarter net revenues of $66.3 million by phase broke down as follows: $54.2 million in sustain, $1.6 million in launch and $10.5 million in liquidate and inventory normalization. Our sustain net revenue decrease of $21.9 million is from reduced consumer discretionary spending and competitive pressures across the portfolio but in particular, our dehumidifier air conditioning product line. Our liquidation net revenue decreased by $3.5 million as we continue to sell off higher priced inventory to normalize inventory levels, but in reduced volumes than last year as we enter, but we hope, are the final phases of this strategic initiative. Fixed variations were launched late in the third quarter. We are continuing to be thoughtful in the timing of our new product launches. Overall gross margin for the third quarter increased to 49.4% from 45.5% in the year-ago quarter, and increased from 42.2% in Q2 of 2023. The improvement was driven by product mix and better pricing on liquidation sales. Our overall Q3 2023 contribution margin, as defined in our earnings release, was 3%, which increased compared to prior years 1.1% and increased compared to second quarter 2023 CM of negative 3.6%. The increase in contribution margin was driven by product mix, improved pricing on inventory liquidation offset by competitive pricing pressures on our core business. Q3 2023 saw a sustained product contribution margin decline slightly year-over-year to 9% versus 10% in Q3 2022. The decrease in contribution margin was driven by competitive pricing pressures and product mix and certain initiatives to normalize end of the season inventory. Looking deeper into our contribution margin for Q3 of 2023, our variable sales and distribution expenses as a percentage of net revenue increased to 46.3% as compared to 44.4% in the year ago quarter. This increase in sales and distribution expense is predominantly due to product mix and an increase in online advertising costs. Our operating loss of $6.5 million in the third quarter improved from $108.9 million compared to the year-ago quarter in an improvement of approximately 94%, driven by the normalization and improvement of our balance sheet and the reduction of fixed costs offset by our continued strategic initiatives to sell off higher-priced inventory. Our third quarter 2023 operating loss includes $1.2 million of non-cash stock compensation expense and restructuring costs of $0.4 million. While our third quarter 2022 operating loss included a gain of $0.8 million from the change in fair value of earn-out liabilities, a non-cash loss of $90.9 million from the impairment on goodwill, a non-cash loss of $3.1 million on the impairment of intangibles and $2.9 million on non-cash stock compensation. Our net loss of the quarter of $6.3 million improved from a loss of $116.9 million in the year-ago quarter, an improvement of approximately 95%, driven by the normalization and improvement of our balance sheet and the reduction of fixed costs offset by our continued strategic initiative to sell off higher priced inventory. Our third quarter 2023 net loss includes the impacts of our operating loss as described earlier plus a change in fair value of warrant liability of $0.6 million. While our third quarter 2022 net loss includes the impacts of our operating losses described earlier, plus a change in fair value of warrant liability of $0.6 million. Our adjusted EBITDA loss of $4.4 million as defined in our earnings release improved by 51% from a loss of $9.1 million in the third quarter of 2022. Now going to the balance sheet. At September 30, we had cash of approximately $28 million compared to $28.9 million at the end of June 30, 2023. The decrease in cash, as expected, is predominantly driven by our net loss in the period and the repayments approximately $1.7 million on a credit facility, offset by $5.2 million of net inflows from working capital. At September 30, our inventory level was at $31.5 million, down from $36.7 million at the end of the second quarter of 2023, and down from $60.5 million in the year-ago quarter. We continue to make strong progress normalizing the high-cost non-core inventory so given the weakness in consumer demand has taken us longer than originally anticipated. However, we do believe, based on our current forecast, we expect to be substantially completed by the end of the fourth quarter of 2023. Further, we've elected to purchase inventory in advance for the 2024 season to avoid expected tariff impact in early 2024, primarily around our beverage cooler products, which will lead to higher inventory balance than normal through Q2 of 2024. Our credit facility at the end of the third quarter of 2023 was $14.2 million, down from $15.7 million at the end of the second quarter of 2023. As we close 2023, we do expect our cash balance at the end of the fourth quarter will decrease to the low to mid $20 million range as we are paying for inventory purchases and receiving goods in advance in order to ensure the avoidance of expected tariff impact in early 2024. As we look at Q4 2023, considering the impact of inflation and reduction in consumer spending, we believe that net revenues will be between $28 million and $32 million. This represents a decrease from the same quarter last year of approximately 45% using the middle of the range. For Q4 2023, we expect adjusted EBITDA loss to be in the range of $6.5 million to $7.5 million. The middle of this range represents an improvement of approximately 44% compared to last year's fourth quarter. As compared to the third quarter 2023, this includes an estimated incremental $2 million negative impact from anticipated fourth quarter pricing initiatives for higher-priced inventory in relation to Black Friday and Cyber Monday sales program. We continue to be optimistic on our goal and continue to target adjusted EBITDA profitability in the summer of 2024. We also believe, based on our current forecast, we have sufficient cash above our covenant to achieve this goal without raising additional equity. As we previously stated, if we pursue additional equity or financing, it will be predominantly for growth through M&A. In closing, our shared vision of focusing, simplifying and stabilizing Aterian towards profitability continues to be priority number one. We continue to make progress on this goal, but it will take time and tremendous effort, which continues to excite and motivate us and our dedicated workforce across the globe. We believe our solid balance sheet led by our cash balance, normalizing inventory levels and continued access to our credit facility with Mid-Cap will allow us to be laser-focused on driving our core business towards adjusted EBITDA profitability. With that, I'll turn it back to the operator to open the call up to questions.

The floor is now open for your questions. Your first question comes from the line of Mike Zabran with ROTH MKM. Your line is open.

Hey, guys. It's Mike Zabran on for Matt. Maybe just starting on the 2024 adjusted EBITDA profitability target. Just help us understand to what degree the new target relies on a more optimized inventory balance versus maybe overall demand normalization versus new product growth driving demand?

Arty, you want to take that one?

Sure. I believe that by concentrating on our portfolio, we will achieve significant efficiencies and enhance our contribution margin as we transition away from less profitable products. We expect our contribution margin to return to over 30%, and ultimately reach our target of 15%, which will help us attain adjusted EBITDA profitability. As you mentioned, we're confident that inventory pricing will normalize by early 2024, especially with container costs returning to 2019 levels. Additionally, we are implementing various FOB initiatives, particularly in oil, which should boost our contribution margin by summer 2024. Furthermore, as Joe pointed out, our focus on core SKUs will enable more effective strategies across product listings, leading to improved contribution margin. We also have several other initiatives that we will discuss later, aimed at enhancing efficiency in product development and supply chain. We see a clear path ahead. While we have much work to do, we remain optimistic about the goals we established back in August and believe we are on the right track.

Ari, if it's alright to add, Matt, I completely agree with everything Arty mentioned, and we're focusing on the core Aterian business as we consider profitability for next year.

Got it. That makes sense. And maybe on the initiative of moving from 31 to Amazon accounts, just could just – can you provide us a little bit more color on what does this process consist of? Are we incurring any one-time costs as a result? How long will it take? And then where should we look to in the coming quarters to start to see the benefits of this initiative?

Ari, you make that or?

Yes. A significant aspect relates to Joe's earlier point. Historically, many Amazon businesses operated through multiple accounts, largely due to Amazon's considerable influence over any single business. If your account were to be suspended, it would have a significant impact. However, as the platform has evolved, managing multiple accounts has become more acceptable. We believe that consolidating to one account per brand will lead to greater efficiencies and improved profitability. This focus allows the team to concentrate solely on that one account and its products, reducing repetitive tasks that arose when we managed nearly 30 accounts. While this change won't immediately enhance contribution margin by simply reducing the number of accounts to eight, it will foster greater focus and efficiency across the organization, paving the way for better contribution margins, improved marketing programs, and the success of other initiatives on individual accounts. It’s challenging to quantify precisely, but it is an integral part of our overall plan for achieving profitability.

Yes, I would just add that it's important to understand that even when selling on one platform, it feels like you're selling on multiple platforms when using different seller accounts. From a planning perspective, when you have inventory, you're not just sending it to Amazon; you're essentially distributing it across several channels, whether that's one account, two accounts, or thirty accounts. This approach leads to significant efficiencies by consolidating accounts. While this is a strong strategic move for us, it's not something that can be immediately measured, as Arty pointed out. I hope that clarifies things.

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

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

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

Yes. I'll take this one, Arty, and you can jump in. Overall, we're seeing that search on platforms is down across the categories we operate in. However, demand is still present; consumers are still buying in the categories we're involved in. While demand has decreased, it has not disappeared. We've faced some challenges in the home appliance sector, particularly with our dehumidifiers and air conditioners, which have been under pressure. Some of our kitchen appliances have also experienced pressure, but our Squatty Potty brand remains strong. I believe we've gained market share in our oil business, and that category has started to improve. This summarizes the demand analysis across our business.

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

You're welcome.

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

Thank you. You mentioned losing some market share in your response and in your prepared remarks. I'm curious if there have been any changes in product reviews that may have affected this, or if the advertising might not be as effective in a declining demand environment. There are several categories you've mentioned, so I'm trying to understand what you believe is driving this situation. Is it increased competition?

Yes, no worries. So Brian, regarding the dehumidifiers, I mentioned this during the last earnings call. We were the top-selling dehumidifier for a while, but then we lost that title, which has an immediate effect on demand. We believe we can regain that status, but losing it does impact us right away. The competition in marketplaces is incredibly fierce. Even if you have a best-selling product, it makes you a target for competitors. For instance, I looked up toilet stools and found thousands of results in that category. The competition is quite intense, and new entrants are constantly appearing, often making aggressive pricing moves. It's a highly competitive landscape. Additionally, from a social proof standpoint, there are areas where we can improve to ensure we're receiving positive feedback. Some products need enhancements, and we're actively working on that. This is part of our strategy to develop better products to replace existing ones and to implement a varied product approach with good, better, and best options to meet diverse consumer needs. It's a challenge, but we believe it's manageable.

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

I would say that the dehumidifier is not the only category where we compete for the best seller tag. We have similar issues in a few other categories. I'm sorry, I missed the rest of the question.

I was going to add to that Joe. Brian, I don't think it's because of lack of inventory or anything like that. I think we've always been conservative when it comes to inventory. I know in the past, we used to disclose inventory shorts, but obviously, with the loan on inventory it would normalize. And so it's out of an inventory. I think it's particularly right to what Joe's point is, it's more the competitive pressures that you're seeing is why we lost a ton and inventory-related thing in general.

Great. For my last question regarding 2024, I understand you're not providing guidance, and I don’t expect you to. With the high-priced inventory that required discounts, are the challenges mostly behind you? Are you hoping to achieve profitability with reduced revenue due to fewer SKUs, or do you believe that with your current SKUs, you can compensate for the revenue loss from the SKUs you are planning to discontinue?

Arty, why don't you take that one?

Yeah. Brian, yes, I think we do expect with the improvement in CM that we anticipate by being very focused and some of the initiatives that Joe has highlighted that on lower revenue, we can get to profitability. We were still working through. And, obviously, we'll probably be able to report more details when we go to Q4 because we're still highlighting a lot of the efforts that Joe talked about. But yeah, theoretically, even though it will be a little bit lower revenue, we do anticipate that the increased CM should still get us profitable.

Okay. Thanks guys.

There are no further questions at this time. Mr. Grozovsky, I’ll turn the call back over to you.

Thank you. As part of our shareholder perks program, which as a reminder, investors can sign up for at aterian.io/perks. Participants have the ability to ask management questions on our earnings calls. I wanted to thank all of the shareholder perks participants for their loyalty, their participation in the program, and their questions. I have picked a few of the most popular questions that they have submitted. First question is, would Aterian consider adding any subscription-based products.

Thank you for the question. We're grateful for the retail crowd and appreciate their support. While we cannot comment on specific groups, we do keep track of them. In terms of subscription-based products, our essential oils business shows promise for this model. Currently, that is the only category we believe has potential for subscriptions. We're also considering acquiring businesses or launching products that could fit this model as we think about subscription-based offerings.

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

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

This concludes the Q&A portion of the call. In terms of the upcoming calendar, Aterian management will be participating in the Craig-Hallum 14th Annual Alpha Select Conference on November 16 in New York. We look forward to speaking with you on future calls. This ends our call. You may now disconnect. Thank you.