Aterian Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2023

There are 7 speakers on the call.

Operator

Afternoon, and welcome to the Atyrian, Inc. First Quarter Earnings Report Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Ilya Grozovsky, Vice President of Investor Relations and Corporate Development.

Operator

Please go ahead.

Speaker 1

Thank you for joining us today to discuss Atterion's Q1 2023 earnings results. On today's call are Yannick 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 Itterion's website at itterion. 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 Atterion's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Atrient's business.

Speaker 1

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 to be made in this conference call and webcast, We refer you to the disclaimer regarding forward looking statements that is included in our Q1 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 can be found in the earnings release filed earlier today.

Speaker 1

With that, I will turn the call over to Andy.

Speaker 2

Thank you, Aaliyah, and thanks everyone for the call. Today on the call, I'm going to go over the following topics. I'll explain the restructuring we announced today. I'll go over a few takeaways from the Q1 of this year. And finally, I'll discuss the strategic considerations we're focused on as we chart a path forward for Athyrian in a rapidly changing e commerce environment.

Speaker 2

Today, Assiern is making a very difficult decision to undergo a significant restructuring with over 70 of our employees and 30 of our contractors departing the company. My heart goes out to the employees affected. I'm deeply grateful for everyone's contribution and dedication through all the trial and tribulation we've faced along the way. We all worked hard during the last few years to overcome incredible challenges and we should all be very proud of the resilience and hard we put into getting the company through them. As a leadership team, we always hope that we would not have to reduce our headcount and we work very hard to look for a path forward that would keep us all together.

Speaker 2

Unfortunately, we're continuing to face headwinds and we have to make the required changes to reach profitability. During the pandemic, we experienced rapid e commerce growth And executed on aggressive M and A strategy that we believe would be accretive to Atirion. We believe that the trend would continue Our current team was correctly sized to support Atirent's expected trajectory. Unfortunately, like many other retailers and e commerce companies, we were wrong. We underestimated the economic impact of an overheating economy as a result of COVID-nineteen.

Speaker 2

As I mentioned, we fought hard to keep our team together for the last 2 years through many obstacles, including severe supply chain disruptions, Since the beginning of the year, everyone in the team worked tirelessly to fix those issues, while we were looking for additional M and A deal flow that would allow us to increase our contribution margin, We'd hope to jump start the company's path to profitability and restart the growth flywheel. Despite our efforts and exploration of several opportunities, we cannot get comfortable with executing on our transaction that would get us the sustainability and ultimately decided it would make more sense to cut fixed costs to achieve adjusted EBITDA profitability starting in the second half of this year. It's very important to clarify that we continue to be very optimistic about our M and And we believe we continue to be in a very position to execute it at scale. Unfortunately, just like us, many of the targets we're considering These deals are dealing with similar challenges to ours and the timing of the discussion has not been ideal. As normalization continues to happen in our industry, we believe that we will be in a better position to evaluate the acquisitions on some of these businesses in a much more stable environment.

Speaker 2

While we continue to work towards these goals, today we're becoming a more efficient company and adjusting to a world where growth without profitability is no longer valued. We'll focus 100% on getting to that goal first and working on a long term plan where growth and profitability go hand in hand. It might take us longer to get what we hope to get, but we're patient and committed to our mission. With regards to quarter results, we continue to be pleased with our efforts to normalize our inventory levels and costs. Our inventory levels and cost basis entering the second half are normalized versus where they were last year.

Speaker 2

As a reminder, due to the shipping container costs skyrocketing in 2021 2022, Consumer brands across our industry were forced to ship goods at an average cost of $17,000 per container to stay in business. These additional costs that we incurred as well forced us to increase our product prices by an average of 20% only to generate an average of 8% contribution margin with some of our products being as low as 6% contribution margin versus a target of a 15% Centimeters and a normalized price. As we enter the second half of the year, Our inventory cost base has improved substantially as our average cost per shipping container has dropped to pre pandemic levels. We remain optimistic that the lower cost of goods combined with our fixed cost cutting efforts, we will be able to deliver on our promise to be profitable at the adjusted EBITDA level in the second half of twenty twenty I'd like now to speak a bit about the long term strategy for Ateria and give our view of where we believe the industry is going. We'll continue to look for accretive M and A opportunities and have discussions with companies in our industry who are facing similar challenges as us.

Speaker 2

There are several active consolidations efforts that we're aware of within our key group in the private markets and we'll continue to follow those. We're also very carefully studying the new AI revolution led by breakthroughs in large language models. We believe that the exponential progress achieved in this field in the last 6 months will have a massive impact on our industry and the world in general. As we look forward to the next 5 plus years, we believe that we need to take steps now to adjust to these changes as they will arrive faster than anyone expects. We're especially focused on what we believe will happen to the consumer journey of the future.

Speaker 2

Specifically, we believe that conversational product recommendation agents We'll play a very big role and potentially in the long term replace the way search consumer search for products today. This is very meaningful for Artirion given that our approach to launching consumer products has always been driven by the analytics and predictions related to consumer demand. While COVID and the ensuing economic woes have disrupted our business, we believe that over the next 5 years, our current position puts the TRiD in a more favorable spot to make the changes that will give us an advantage in the industry. Strangely, had these events of last 2 years not occurred and had our business thrive today, It might have even been more difficult to make the adjustments needed to adapt to a future that is barreling towards every company today at an incredible speed. It's a bit early to share what the changes we're working on mean for Aterion and our focus is 1st and foremost on making our core business profitable.

Speaker 2

One aspect that we can speak about today is our belief that we should further balance our efforts with regards to brand versus performance marketing. For those of us familiar with the distinction, performance marketing often refers to a more transactional marketing approach, where we look to convert consumers who are in the market For a product that will solve a problem for them regardless of a particular brand name. Brand marketing refers to the effort of making people think about our brand When they encounter a similar problem as opposed to searching for the best possible product. Historically, Atiran has evolved a very performance oriented consumer platform. Most of our brands are not well known, but they perform well through our expertise in analytics and performance marketing for specific products.

Speaker 2

Going forward, we will balance this effort and build more brand awareness for several of our portfolio assets. Before my remarks on this call, this is a difficult day for our company, but also a step in the necessary direction to pursue our mission. Despite the challenges we have and are facing, we believe that the efforts we're making will pay off in the long run and we look forward to

Speaker 3

Thanks, Yaniv, and good day, everyone. Here are the financial performance details of our Q1. For the Q1 of 2023, net revenues declined 16.3 percent to $34,900,000 from $41,700,000 in the year ago quarter, primarily due to reduced consumer demand, offset by our strategic initiatives to sell off higher priced inventory and normalized inventory levels. Looking at our Q1 net revenue by phase, the $34,900,000 broke down as follows: $28,600,000 sustained, dollars 200,000 in launch And $6,100,000 in liquidate and inventory normalization. The year ago quarter net revenue of $41,700,000 by phase broke down as follows: 38 point $1,000,000 in sustained, dollars 800,000 in launch and $2,900,000 in liquidate and inventory normalization.

Speaker 3

Our sustained net revenues decrease of $9,400,000 relates to some revenue shifting into liquidation phase and general consumer softness. Our liquidation net revenue increased by 3 point the revenues attributed to new variations of existing products. We are planning new product introductions in 2023, though the timing will be opportunistic. Overall gross margin for the Q1 declined to 54.8% from 56.6% in the year ago quarter, but increased from 37.1 percent in Q4 2022. Our decrease in margins in the quarter versus year ago quarter is primarily attributed to our Our overall Q1 contribution margin as defined in our earnings release was 5.9%, which decreased compared to prior year Centimeters of 9.2%, but increased compared to Q4 2022 of a negative 11.5%.

Speaker 3

The year over year decline is primarily attributable to higher liquidation revenue from our strategic initiatives to sell off higher priced inventory and normalized inventory levels. Our Q1 2023 saw our sustained product contribution margin essentially unchanged year over year at 12.6% versus 12.5% in Q1 2022. We expect our sustained contribution margin improved sequentially as we progress in the second half of twenty twenty three. Looking deeper into our contribution margin for Q1 2023, our variable sales and distribution expense as a percentage of net revenues increased to 48.8% as compared to 47.5% in the year ago quarter. This increase in sales and distribution expenses is predominantly due to the product mix, An increase in e commerce platform service provider fulfillment fees and an increase in the last mile shipping costs specifically for oversized goods.

Speaker 3

We do expect our sales and distribution expenses as a percentage of net revenues to improve as we progress in the second half of twenty twenty three. Our operating loss for quarter of $25,000,000 improved by 30 percent from $36,200,000 in the year ago quarter as we continue to normalize our business from the impact of supply chain and strengthen our balance sheet. Our Q1 2023 operating loss includes $2,300,000 of non cash stock compensation and non cash loss of intangibles of $16,700,000 Our Q1 2022 operating loss includes $2,800,000 of non cash stock compensation, a non cash loss and goodwill of 29,000,000 And a positive change in fair value of contingent earn out liability of $2,800,000 Our net loss for the quarter of $25,800,000 improved by 39% from $42,800,000 in the year ago quarter as we continue to normalize our business from the impact of supply chain strengthen our balance sheet. Our Q1 2023 net loss includes $2,300,000 of non cash compensation, a non cash loss from intangible of $16,700,000 and a gain of $400,000 of the fair value of warrant liabilities. Our Q1 2022 net loss includes a non cash loss of goodwill of $29,000,000 $2,300,000 non cash stock compensation expense, Impacts related to the equity issuance and warrants of $7,600,000 $2,000,000 from the gain in settlement of the selling note and $2,800,000 gain on a change in the fair value of the earn out.

Speaker 3

Adjusted EBITDA loss of $4,300,000 as defined in our earnings release improved from a loss of $4,500,000 in the Q1 of 2022. Our strategic decision of liquidating higher cost inventory and normalizing our inventory levels impacted adjusted EBITDA in the period. However, this is very important effort puts us on path to get back to stronger contribution margins and adjusted EBITDA profitability in the second half of twenty twenty three and strengthens our balance sheet. Going to the balance sheet, at March 31, we had cash for approximately $33,900,000 compared to $43,600,000 at the end of December 31, 2022. This decrease in cash as expected is predominantly driven by our net loss in the period, dollars 1,600,000 net flows outflows from working capital and repayments of approximately $2,100,000 of our credit We continue to normalize inventory levels in the Q1 of 2023 by liquidating our higher cost inventory and are on track to completing this effort in the 2nd quarter.

Speaker 3

At March 31, our inventory level was $40,400,000 down from $43,700,000 at the end of the Q4 of 2022 and down from $75,400,000 a year ago quarter. Our credit facility balance at the end of the Q1 of 2023 was $19,100,000 down from $21,100,000 at the end of the Q4 of 2022. As we look at Q2 2023, taking down the impacts on inflation and reduction in consumer spend, we believe net revenues will be between $37,000,000 $44,000,000 This represents a decrease in the same quarter last year of approximately 30% using the middle of the range. We expect to continue to see similar softness in the remainder of the year. For Q2 2023, we expect adjusted EBITDA loss to be in the range of $5,200,000 to $6,200,000 including the estimated restructuring impact of $1,000,000 From our workforce reduction, with our announced annualized savings of $6,000,000 from our workforce reduction offsetting our continued expectation of softness in consumer spend, We continue to be on the path to reach our target of adjusted EBITDA profitability in the second half of twenty twenty three.

Speaker 3

In closing, we announced difficult decisions which will impact our workforce. Though we will be saying goodbye to many colleagues, these impacts will ultimately make our tiering stronger. With our continued focus on efficiency, we continue to progress on our path towards adjusted EBITDA profitability in the second half Past 12 months, we spent a great amount of time focusing on strengthening our balance sheet to ensure we can navigate the uncertainties ahead. We believe we've accomplished this and today our balance sheet is strong. With our cash balance, our normalized inventory levels and continued access to our credit facility with MidCap, we believe we have the flexibility to navigate the current macroeconomic environment it continues to unfold and further allows us to be laser focused on driving our core business.

Speaker 3

With that, I'll turn it back to the operator to open the call up to questions.

Operator

We will now begin the question and answer session. At this time, we will pause momentarily to assemble the roster. Our first question will come from Matt Koranda of ROTH MKM. Please go ahead.

Speaker 4

Hey, guys. It's Mike Zabrin on for Matt. Maybe just start by speaking to the overall demand environment that we're seeing. Are there Certain product categories requiring deeper discounting than others, have we noticed any price sensitivity on previously resilient products? And So maybe just elaborate on any new or persistent trends we're noticing from the end consumer?

Speaker 2

Hey there, Yaniv here. Thanks for the question. Interestingly, the weakness of consumer seems to be across the board. We don't have any particular category that we believe is down because of consumer issues. So really, Can you look across the board and you see overall less traffic to some of the biggest websites like the big channels that we sell on.

Speaker 2

So overall consumer demand seems to be weak across the board.

Speaker 4

Got it. Makes sense. And great to see margins recovering and coming in a bit better than expected. Help us understand to what degree does the adjusted EBITDA give it a profitability target rely on less inventory liquidation versus overall demand normalization versus maybe New products driving incremental demand?

Speaker 2

Arty, you want to answer that?

Speaker 3

Yes. Thanks, Yaniv. Yes, so I

Speaker 1

think Listen, we said for

Speaker 3

the last few quarters that normalizing the inventory levels and clearing out much more expensive inventory was very Key in us getting back to the adjusted EBITDA profitability targets that we've mentioned. I think we're saying that we believe we're on track to get to I think by the end of Q2. In fairness, we're always going to have inventory, lowness and normalization. It's just it was Considering the supply chain issues that we ran into in 2021, it was just an exorbitant amount that was not accustomed to normal business. So now that we're Getting back to normal business, that's like step 1 in it, so getting back to inventory levels.

Speaker 3

I think when we naturally do that, considering containers are back down to, I would say 2019 pricing, we do expect in the second half of this year that our contribution margins will improve to get back closer to normal. I think those combinations are really the key drivers for us to get the profitability. And lastly, that last part of that question was just consumer demand. Listen, We made these fixed cost cuts. They were very difficult decisions.

Speaker 3

It does bring our fixed cost down by $6,000,000 annualized on an annualized basis. Including that, assuming that we continue to see some of the softness consumer demand that we mentioned, I think those three things are really why we can get back to that adjusted EBITDA profitability

Speaker 4

Makes sense. That's helpful. Last one for me. Obviously, Bottom line, still constricted a bit by selling and distro expenses. Maybe just elaborate on what exactly needs to happen for us to see selling the distribution leverage In the back half of the year and is 2021 a good proxy to use?

Speaker 4

I think we are floating around the 46% to 48% of sales range, whereas for past couple of quarters, we've been kind of mid to high 50s. So is 2021 a good proxy to use? And what exactly needs to happen See meaningful leverage in the back half of the year?

Speaker 2

Arty, you want to take that as well?

Speaker 3

Yes. Thanks, Yaniv. No, I wouldn't necessarily say 2021 is a good proxy. I think those numbers that You mentioned there, we do see that getting below 50 ish percent, right? I we just did this past quarter 48.8% that we just mentioned, gets us very close.

Speaker 3

I think the other side is, as you mentioned in the past, the normalization Of container rates will allow our gross margin to pick up a couple of points, allow us to get back to normalized pricing, which allows to increase the velocity. All these things play into that. But I don't know if we'll get back to like sub-forty 6 percent that you're quoting. I think high 40s is probably the right number, just like we did this quarter. Maybe you'll see that improve a point or 2 Over the coming quarters, but certainly that's kind of the target we're going to be.

Speaker 3

I think you're right, in Q4 and Q3, we saw those numbers be as high as 50% or

Speaker 4

Thanks guys. That's all for me.

Operator

The next question comes from Brian Kinstlinger of Alliance Global Partners. Please go ahead.

Speaker 5

Great. Thanks for taking my questions. Revenue from sustained was down about 25% year over year in the Q1. And based on 2Q guidance, it appears a year over year decline, although you don't give guidance in each of the line items, It's going to accelerate by a meaningful percentage. First of all, is that a sign that you think the economy is getting weaker And traffic is

Speaker 3

going to get weaker. And then on

Speaker 5

the other hand, is that the kind of baseline we should think about for the next few quarters is A little more accelerated than the Q1 or so.

Speaker 2

Adi, I think good one for you to take as well.

Speaker 3

Yes. Thanks, Yaniv. Good question, Ryan, and good to hear you. Listen, it's As you need said, it's been we've seen general softness across the board. Search volumes are down on some key sites that we sell on.

Speaker 3

I think if you go across Other news announcements from other companies, you've seen that it's been very difficult and volatile to predict. I do think We are guiding and as we said, at the middle of the range, as I quoted 30% would be the drop off. I think as you get into Q3 and Q4, though, we're not guiding at this point. I would assume that we would see something similar, maybe a little bit less 30%, maybe it's like 25%, 28%, but certainly that's kind of what we're looking at right now. Obviously, the other side to be very careful about Q2 and Q3 is always a very, just driven by heat and summer and seasonality and we feel a lot of humidifiers in these seasonal periods.

Speaker 3

So depending on how that how the Kind of summer unfolds, sometimes it unfolds later and you have a little bit more a little bit less numbers in Q2, a little bit more in Q3. And I think right now weather has been a little bit unpredictable. I think in the sense that we've seen a lot of fluctuation there and across the country in general. We're not getting into reasons why we think that, that's for another time. But Certainly, I think it does make that bit difficult, but I think if you're looking at that similar number going forward, I think that would be conservative.

Speaker 5

Great. Follow-up, clearly you've announced the difficult enacting of headcount reductions given the demand trends. Those cuts obviously implied some level needed to get to profitability of revenue. What is that new revenue Target that gets you roughly to a breakeven on adjusted EBITDA on an annual or quarterly basis?

Speaker 2

Well, I guess this is not really a guidance question you're asking for a number. Arty, any thoughts on how to answer The best way?

Speaker 3

Yes. I think Brian, good question. Listen, I think a lot of it depends on how Our Centimeters unfold. We've always had a target model Centimeters of 15%, right? And that's something we've talked about publicly and it's in a lot of our investor presentations.

Speaker 3

I don't think we get there this year, but certainly I think we're heading in that right direction. So a lot of it's really going to be a blend like and again I'm making up numbers, But if you look if you run rate at our fixed costs from the last couple of years, you're kind of in those 30 numbers. We just announced we're saving Fixed or you're doing $24,000,000 of fixed costs or something like that, right? So I think in some aspects, if you look at 100 and $60,000,000 $170,000,000 depending on the Centimeters, you can probably get to something that's above adjusted EBITDA, right? Profitability, right?

Speaker 3

If you go a little bit lower, you're probably at a breakeven. So I think We're not guiding to that right now because I think things are a bit volatile and we're still working on a lot of different things. We're launching some products that Yaniv mentioned. So I think we're still focused on a lot of things, but In that, that could change the numbers to the positive, but I certainly think that it's going to be a little bit of a split In a sense how you actually get to that. I think we're not necessarily targeting what that breakeven point is from a number perspective.

Speaker 3

We're just really focused Getting through this restructuring that we've announced, getting to cleaning up the inventory, we're finalizing in Q2 and I think hopefully the season goes as we expect and we'll be able to give a little bit better information on those numbers as we progress into August.

Speaker 5

Great. Thanks. And then the last question I have, based on your comments on the M and A environment and being able to Complete some of the acquisitions you may have looked at. Should we expect until the market is on stronger footing and the economy is on stronger footing M and A is on hold for now. Is that what I'm reading into those comments?

Speaker 2

Sorry, can you just repeat the last piece of this on there? Should we expect Yes.

Speaker 5

I'm just sorry. I'm just wondering is M and A essentially what you want to communicate is on hold right now until the economy is on stronger

Speaker 2

No, I would not say that. I think we're very actively looking at things. It's more that The same challenges we have are affecting others. And there's still I think a lot of I think on every side, I think a little bit of wanting to understand what stability is and price discovery around what these assets are looking forward. And we just like Again, as we continue to be very active in this environment, we believe there's still a lot of opportunity and believe that, again, in the long term, it's still a very part of our strategy.

Speaker 2

There's just too much noise for us in some of these situations right now to pull the trigger. That being said, Everything is dynamic, right? Just like we are dynamically moving and adjusting, these other Companies and assets that we're looking at are also quickly adjusting. And so I wouldn't say that we would have to wait for any type of normalization. It's more that We're going to continue to follow these opportunities very closely.

Speaker 2

And if the opportunity comes because of the stress or Any other momentum thing that's happening in other company, we might still do something earlier if we can, right? But we just need to get comfortable That's what we're looking at is in a position that we can take it on, right? So Yes. Great.

Speaker 5

Thank you.

Operator

And our next question will come from Alex Fuhrman of Craig Hallum, Capital Group. Please go ahead.

Speaker 6

Hey guys, thanks for taking my question. I wanted to ask about the Headcount reduction initiative, can you give us a sense of what most of the eliminated positions are And your plan to absorb those responsibilities across the rest of the organization. And then it looks like you had 2 Pretty senior positions eliminated as part of this restructuring. Are there going to need to be any hires kind of around the edges to Replace

Speaker 2

some of

Speaker 6

what you've lost? Or is the thinking that your existing organization minus the 70 employees and 30 contractors can handle pretty much everything you're talking about now on the current revenue base.

Speaker 2

Great question. I'll start with the end of it, which is in terms of hiring and plans, right? Like right now, there is no plan to hire any significant role or replace, we believe that the current organization is capable of getting us where we need to get profitability side, as I mentioned in my remarks, right, the organization was sized and built and designed Rapidly scale to much larger numbers based on the trends that we were seeing back in 2020. And Really, what's going to happen really is that, the team that's left is just going to have have to work harder for sure. It's going to benefit from a lot of things tools and infrastructure that we build to automate a lot of things.

Speaker 2

And how do we grown at the speed at which we expected? I think the team that was Before we had to unfortunately cut our headcounts, that team would have been in a good Starting position to scale very, very quickly, right? For the current team today, if all of a sudden we have the opportunity to scale at a Hyperscale, right, which obviously the environment that we live in today doesn't allow for it, right? It will be much harder. Whereas the team that was here before was able to do that and To very quickly adapt to ingest more companies that we would buy, assimilate them and then run them As well as we can going forward, right?

Speaker 2

The difference is just we just cannot we will not be able to go as fast if we had the opportunity to, but I just don't believe that the opportunity To move as fast as we thought we could back probably not too long ago, right? That doesn't seem to be there anymore, right? So again, bottom line The team that is today is sized correctly for where we're trying to get to profitability. And from there, we expect to build and grow with profitability and growth kind of going hand in hand, right, until the environment Right now, we believe this is a better size theme for the environment we're in and to get us to our goals of profitability. Ari, I don't know if you want to add anything?

Speaker 3

Yes. No, great answer, Yeev. Yes. Listen, we've made difficult decisions. We still feel comfortable that this is a good Size organization to do what we need to do and to provide growth.

Speaker 3

Maybe Tieni is pointing out at the same speed And rigor that we were initially anticipating early in the year, but certainly we feel we have the talent and the dedication and the wherewithal to Manage the business and grow the business with this team. Yes, we're all taking on additional responsibilities. I think that's Kind of in our DNA, we kind of believe we can all do better and be more efficient and we're going to try that and we're all up for the challenge. We're kind of excited by this, though it's Sad to see colleagues go. I think we got a lot of work to do and I think we're going to be able to do some exciting things with this team.

Speaker 6

Okay. That's really helpful. Thank you both.

Speaker 2

Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Ilya Grozovsky for any closing remarks.

Speaker 1

Thank you. As part of our shareholder perks program, which as a reminder, investors can sign up for at attarian. Ioperks, Participants have the ability to ask management questions on our earnings call. I wanted to thank all the shareholder Perks participants for their loyalty, their I have picked a few of the most popular questions that they have submitted. First question is, please update us on the European expansion.

Speaker 1

Yanit?

Speaker 2

Yes. Thanks, Ilya. Yes, so the good news on that is we continue to add products and we see a lot of opportunity for growth. As we mentioned in previous calls, right, That effort is going to take time just because of the nature of our business and the time that it takes to bring the products from a regulatory perspective to be compliant with European standards to manufacture them to ship them there. So Europe is again a very important opportunity for growth for us.

Speaker 2

It's just going to take time as we continue to add more and more products there, and we look forward to update everyone on future calls on the progress that we're making there.

Speaker 1

Thanks. Next question is, is Ittarian going bankrupt? Aarti or Yaniv? Yes.

Speaker 2

Let me take that and Arty, you can add also. The answer is categorically no. We are in a very strong cash position. We have minimal debt With only an ABL and we're very far from any of the debt covenants, we don't believe that we have any reason to worry about anything close to bankruptcy at this point. We just are adapting to the environment and we're adapting to an environment that Favor is profitability and making some tough calls along the way, but really that's it.

Speaker 2

Adi, I don't know if you want to add anything.

Speaker 3

No, you mean well said. I mean, listen, we have a great partner with MidCap in our credit facility. We have access to Increase that credit facility up to $40,000,000 as needed. I think we have very light covenants on that. As Nee mentioned, I think we're in good shape.

Speaker 3

We said, we spent the last 12 months really trying to clean up our balance sheet and strengthening. I think we've done a great job there. We got a good cash balance. We have good access to our Good working capital access through our ABL with MidCap and then ultimately we worked hard to normalize this inventory balance, which is going to put us in a good position to continue to run the business Be nimble and flexible as the current environment unfolds.

Speaker 1

Okay. Thank you. Next question is, is Atyrian going to do a reverse split

Speaker 5

Anybody?

Speaker 2

Yes. Let me take it. And Hardi, you can add. I mean, so to remind everyone, we have 180 days to regain compliance with NASDAQ, then we will probably likely be granted another 180 days. We're not going to comment Further on the stock price and again the focus is really on just getting us to second half adjusted EBITDA profitability at this point.

Speaker 2

Arty, I don't know if you want to add anything to that?

Speaker 3

No. I think that's well said, Yaniv. Thanks.

Speaker 1

Great. This concludes the Q and A portion of the call. In terms of the upcoming calendar, the Tyrian management will be participating In the Sidoti MicroCap Conference, May 10 through 11, which will be held virtually and the Oppenheimer Consumer Growth and E Commerce Conference, which will be held virtually June 12 to 14. We look forward to speaking with you on future calls. And this ends our call.

Speaker 1

You may now disconnect.

Powered by Quartr
Earnings Conference Call
Aterian Q1 2023
00:00 / 00:00