Aterian, Inc. (ATER) on Q3 2021 Results - Earnings Call Transcript
Operator: Good day. Thank you for standing by, and welcome to the Aterian Inc. Q3 Earnings Report Conference Call. At this time, all participants are in a listen-only mode. After this speakers' presentation, there will be a question-and-answer session. Thank you. I would like to hand the conference over to your speaker today, Mr. Ilya Grozovsky, Director of Investor Relations and Corporate Development. The floor is yours.
Ilya Grozovsky: Thank you for joining us today to discuss Aterian's third quarter 2021 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 the 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 third quarter earnings release as well as our filings with the SEC. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, the Company may refer to certain non-GAAP metrics on this call. Explanation of these metrics can be found in the earnings release filed earlier today. With that, I will turn the call over to Yaniv.
Yaniv Sarig: Thank you, Ilya. And thank you, everyone, for joining us today. Our third quarter was marked by continued global supply chain disruption and pressure on our business due to soaring cost of everything from raw material to international shipping rates. At Aterian, we take on many challenges daily, including supply chain infrastructure, product and brand launches, M&A integration, global expansion and software development. But above all the things we build, we cultivate a relentless culture of growth and adaptability that -- becomes obstacles and views failures as stepping stones on our path to building a leading consumer product platform. We welcome challenges as opportunities to strengthen our business and adapt ourselves to reap the benefits often left in the wake of a crisis. In this past quarter, it brought an opportunity to improve our supply chain resilience by adapting how we move shipping containers from our manufacturers to our fulfillment centers. I want to thank our logistics teams for their perseverance, their ability to create strategic relationships with our logistics partners. I'm glad to share that we've specifically seen Amazon stepping in to assist us in its ecosystem of third-party sellers in general, and we're very grateful for their help to term. Thanks to various programs provided to us by Amazon Global Logistics, we've been able to secure very competitive shipping rates for approximately 50% of our projected revenue in the next 12 months. We also secured reduced rates with Flex Board and XPO to other partners on the logistics side as well as some other manufacturing partners in China, which have helped us leverage their relationships with Chinese shipping companies. In addition to securing better rates for shipping, we ran an intense three months process to rebuild our internal plan around an optimized manufacturing and shipping strategy designed to mitigate additional disruptions going into next year. In parallel, we reached an agreement with our lender to reduce our debt facility from $92 million to $25 million. This important process is directly by myself under an all-hands-on-deck mentality and overseen by the Board of Directors. I want to take the opportunity to thank our entire team for all the hard work that went into mitigating the impact of the global supply chain disruptions on our company. We presented to our Board a strong, yet conservative, base internal plan that we feel can drive sustainable growth for the Company. It's important to emphasize that while some aspects of the plan are still being worked on and not yet finalized, we believe that the most challenging products are behind us. We're closely following the impact of the supply chain crisis on our competitors. While we consider ourselves to have a high degree of sportsmanship, and we wish many of our competitors a lot of success with not again the current shipping crisis, we're also excited by our belief that there will be ample consolidation opportunities on the other side of this crisis. We believe that excluding any kind of black swan events we can't foresee, we should soon be in a strong position to reignite our M&A strategy. As of today, approximately $10 billion in total have been invested into aggregators looking to build a leading e-commerce platform for consumer brands on marketplaces. In the third quarter alone, aggregators raised approximately $1.2 billion. We're really excited to see that the investment community is paying attention to our vision we pioneered in 2014. And we continue to believe that our years of investment in infrastructure, technology and expertise put us ahead of the pack with regards to execution. Most of our competitors are financially engineered access to abundant low-cost capital but have not treated the efficiency required for long-term sustainable execution on scale. One data point that investors should pay close attention to when evaluating the execution of companies in the space is revenue per employee. Aterian's revenue per employee is approximately based on our current TTM results. And that is a direct result of our investment in our software platform and agile supply chain infrastructure. In the long term, we believe that proprietary technology that automates the tedious manual processes performed by target SMB brands being aggregated is critical for the model to succeed. As the macro environment around supply chain normalizes and the dust settles, it will become important for us to continue to push our M&A strategy forward in '22 and beyond. We'll speak in more detail about our strategy for 2022, and we'll have some exciting new initiatives to share with our shareholders in the next few months. Directionally, our priorities include diversifying our own and operated brand by looking at launching more products and leveraging supply chains based in the U.S., South America and Eastern Europe. We're also going to put a lot of focus on organic growth through additional channels, direct-to-consumer sales through our website and international expansion. We've heard concerns from certain investors regarding the organic growth of our core business. It's important to remind those who started to follow us more recently that before we started investing in our M&A strategy, we grew the business organically through launching products at a CAGR of 50% between 2017 and 2020. Like many other e-commerce companies, our sales were boosted in 2020 by the COVID-19 pandemic. Likewise, we've suffered from a decline in the growth of our organic business in 2021 as compared to 2020. Amazon itself saw a similar disappointing effect this year as the combination of reopening the traditional brick-and-mortar retail, increasing shipping costs, inflation and tapering of government assistance, created a perfect storm for e-commerce when comparing year-over-year results. It's been very challenging to generate growth organically in 2021, especially when compared to the previous year and the dramatic shift in the macro level environment. At the same time, it's important to realize that most of our competitors are dealing with similar issues. Although our core organic businesses are uniquely impacted because it is led by several oversized items who have been more adversely impacted by the shipping cost and smaller products, in the long term, we strongly believe that our investment in our proprietary fulfillment network gives us a strategic advantage in categories dominated by oversized goods. Our organic business as well as our recent acquisitions have a strong base on our products that will allow us to continue to build and grow our brand over many years through continuous investment in channel expansion and additional products. This past quarter, we also made a decision to open to the seller community, our internal affiliate platform called DealMojo. In the past two years, we've seen web publishers take a bigger role in the e-commerce ecosystem as we invest in content designed to promote products and channels such as Amazon and Walmart. Typically, these publishers benefit from affiliate marketing revenue paid by the online retail platforms directly. As a large seller ourselves, we felt that streamlining collaboration with publishers around discovering opportunities to promote product was an important part of our listed e-commerce strategy. DealMojo was designed to allow us to promote our products to publishers and offer them potentially additional revenue share for creating content that drives sales for our products. Today, we're already working through the platform with several publishers with a total aggregate monthly traffic of more than 300 million monthly visits. We believe that making the platform available to other third-party sellers will allow us to further scale the number of publishers and influencers using it and benefit our sales while generating additional revenue stream for us. In the short term, most of the revenue driven by DealMojo will be reflected in the sales of our own products. Aterian continues to push forward our ambitious vision, and we have a lot more work to do. This is a marathon, not a sprint, and we believe we're turning another corner on our way to become the leading consumer product platform in e-commerce. With that, I'll pass it on to Arty to walk you through the financial results of the quarter.
Arturo Rodriguez: Thanks, Yaniv, and good day, everyone. Here are the financial performance details of our third quarter. For the third quarter of 2021, net revenue increased 16% to $68.1 million from $58.8 million in the year ago quarter from an increase in net revenue from our acquisitions, offset primarily by a decrease in our organic business, net revenue reduction in wholesale net revenue. The current quarter net revenue of $68.1 million is comprised of $35.4 million of our organic business, which is the revenue from our built brands and acquired brands after one year purchase; $30.7 million of net revenues from our mergers and acquisitions; wholesale of $1.9 million; and $0.1 million of our past business. The year ago quarter net revenue of $58.8 million was comprised of $46.9 million of organic business; $1.4 million of net revenue from our mergers and acquisitions; $10 million of wholesale, which was predominantly PPE; and $0.3 million of pass. As a reminder, our first material acquisition happened in the third quarter of 2020. The decrease in our organic business of $11.5 million is related to a decrease in our sustained phase products of approximately $11.1 million to $29.1 million from $40.2 million when excluding M&A revenue; due to an increased pricing of our products affected by global supply chain disruptions, which has led to reduced sales velocity, the opening of retail and changing and consumer habits in the initial phase of COVID-19's reopening; and impacts from products which sold well during the initial COVID-19 phase last year but did not have the same repeat performance due to demand on pricing, which represents approximately $5 million of the $11.5 million decrease. Our organic business also saw a slight increase in launch phase revenue of $0.3 million to $5.3 million. We launched zero products in this quarter versus eight in the last year's quarter. Year-to-date, we have launched 40 products versus 32 the same prior year-to-date period. Even though the rate of year-to-date product launches grew, we did not have the same success as market conditions and our need to raise pricing due to supply chain disruptions has led to a decrease in demand and performance of certain of our recently introduced products. This has also led our products staying longer in their launch phase than originally planned. As Yaniv mentioned previously, we have decided to pause the launching of our products for the time being until supply chain normalizes. Our M&A revenue of $30.7 million is in line with expectations for Smash and PPD and Squatty Potty outside of the seasonality and the timing of the closing of those acquisitions. As previously mentioned, Healing Solutions is off our expectations due to supply chain difficulties in our shift from sellers' manufacturers capabilities to new third-party vendors as previously planned. That said, we are still pleased with Healing Solutions acquisition and the long-term strength of its branded product. We still believe the upfront purchase price falls within an accessible acquisition purchase multiple. Finally, on net revenue, we suffered from inventory shorts in the quarter, which we estimate to be an impact of approximately $3 million in the current period as compared to inventory shorts of approximately $7 million in the prior year ago period. Overall, gross margin for the third quarter increased to 50.2% from 47.8% in the year ago quarter, an increase from 48.0% in Q2 2021. The quarter over sequential quarter increase in gross margin is primarily due to product mix and pricing. Our gross margin improvement versus last year is predominantly in the favorable product mix from the inclusion of our acquired brands pursuant to M&A. We believe the increased cost of shipping containers impacted our gross margin by approximately 1.5% in the third quarter alone. We expect to see a slightly larger impact in Q4. Our overall Q3 2021 contribution margin is 12.1% when excluding noncash charges from inventory step-up impacts from our acquisitions, which decreased compared to prior year's CM of 19.1%. Within CM, our sales and distribution costs were negatively impacted by global supply chain disruptions, which drove higher cost than last-minute mile fulfillment given the carrier tightness in the quarter. Our Q3 variable sales and distribution expenses as a percentage of net revenue increased to 39.4% as compared to 28.7% in the year ago quarter. We expect to see these impacts continue in the current quarter. Q3 2021 saw our sustained products contribution margin decrease to 15.9% versus 23.6% in Q3 2020. Outside of the action items discussed, we believe we'll continue to see CM pressures for the remainder of 2021 due to the global supply chain disruptions and increased last mile cost. Adjusted EBITDA as defined in our earnings release for the third quarter of 2021 was $0.7 million compared to $5.1 million in the third quarter of 2020. Our operating loss for the quarter includes $9.6 million of stock-based compensation expense and also includes income from change in fair value contingent liabilities of $4.3 million, which is primarily related to a decrease in the share price at September 30 versus June 30, 2021. Our net loss for the quarter has been impacted by our equitization of the majority of the High Trail debt, leading to a distinguishment loss of $107 million, offset by income from our change in warrant valuations due to stock price fluctuations of $8.1 million. Turning to the balance sheet. As of September 30, we had cash of $37.5 million compared to $61.9 million at the end of June 30. The decrease in cash is predominantly driven by previously reported $10 million cash payment to our lender, cash net loss and working capital. As we previously disclosed, in order to navigate through the global supply chain disruption, we will need to increase our inventory on hand and purchase inventory earlier than initially anticipated. This will put pressure on our minimum liquidity requirements during the early part of 2022 as we build for our summer 2022 seasonal products such as ACs and humidifiers. As previously mentioned, we equitized the majority of our High Trail debt by issuing approximately 9.3 million shares on September 23 under the terms of the loan of the agreement, leaving $25 million in loan debt with a bullet maturity in April 2023. We are in compliance with all our covenants as of September 30. We continue to be impacted by COVID-19 and the global supply chain disruptions, and we believe that these issues are temporary, they caused us to have diminished visibility and our ability to forecast our results. We will resume giving guidance as soon as the visibility improves. Having said that, our fourth quarter is our third strongest quarter, and we believe the fourth quarter will have revenues closer to $60 million. In closing, our business has been impacted by the global supply chain disruptions, and our year-over-year figures are against very difficult COVID-19 comparables in a uniquely difficult environment. As previously stated, our organic products continue to be some of the bestsellers in Amazon. We have a very strong organic brand and product portfolio. Overall, our acquired brands and products have performed well, and we remain confident in their future successes. We believe the current pressure on the profitability is acutely related to the global supply chain disruption. The actions we have taken and continue to progress are key for us to help navigate through this different environment and will help us direct us back towards profitability. For example, assuming 2020 normative contribution margins, which we still believe to be achieved in the future and with our typical disclosed adjustments, the Company believes its Q3 2021 adjusted EBITDA would be similar, if not better, than the prior year's figure. Although we have been impacted by the COVID-19 pandemic and the related global supply chain disruptions, we continue to be very confident and proud of our business, one, that we've built; we're proud of our products, both organic and acquired; our technology, our logistics network; and most importantly, our dedicated and hard-working 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 to the operator to open the call to questions.
Operator: Your first question comes from the line of Brian Nagel from Oppenheimer.
Brian Nagel: So a couple of questions here. I mean, look, a nice rebound or the beginning of a rebound the business here in the third quarter versus Q2. So the first question I have, and recognizing you're not giving official guidance. But given the trajectory we've seen here, I mean how should we think about just the continued rebound on the heels of a lot of the internal actions you've taken to stabilize the business over the last few months, even several weeks into year-end?
Yaniv Sarig: Yes. Brian, thanks for the question. I'll speak a little bit of it and I'll kind of probably revert to Arty also. But in general, look, I mean, this quarter was all about stabilization and bringing back the business to as healthy as it can possibly be while the storm still ranges, right? The storm is not completely gone, right? I think everyone is holding their breath a little bit to understand what -- is there going to be another COVID wave, another impact coming. And we've taken every possible measure that I think we could have, where we can control to get through that, I believe, as well as possible. Again, unbeknownst to me any type of other black swan events that could still happen, but we really think that we've done everything in our power and worked extremely hard in the last months to get to a place that we're happy with and is stable, right? So in general, I think we're being cost just until the storm completely passes, we're convinced that well, right? We're convinced that it's just a matter of time before the last potential wave here and other, that there's a stabilization that will happen to the supply chains over time. And so that's -- we approached this with a lot of caution and just ping up the ground for future growth, right? Arty, do you want to add more to this?
Arturo Rodriguez: Yes. And I think, Brian, I mentioned in -- what I said there is I think Q4 is typically our third strongest quarter. So you always see a little bit of a step-down from Q3. So I think, in some aspects, lower range revenue in the 60s, what kind of we pointed to. And listen, I think from a timing of how we ingested our goods and containers, you'll see a little bit maybe of a softer CM than we saw in this previous quarter just because of timing. But that said, we're still very excited in the sense of what Q4 has in front of us. It's our first Christmas season with -- sorry, holiday season with Smash and Healing Solutions, a few others. So we're still very optimistic that it's still going to be a good season even though we're going through the storm.
Brian Nagel: Okay, that's helpful. And then just a follow-up question. I mean also kind of generally bigger picture in nature. But we're talking mostly about the supply chain issues and the shipping costs and how you more successfully or lately navigated through those. What are you seeing from a demand perspective? As we look across consumer, as you're pulling away from the COVID crisis, at least here in the United States, there has been this trend, or at least some type of trend, where consumers are returning to stores. That's impacting some of the online-only players. So what are you seeing -- behind all the supply chain, what are you seeing from a demand perspective?
Yaniv Sarig: Brian, thank you for the question. I think in general, there's a lot of factors here that are not always easy to take into account, right? Obviously, at the macro level, between government subsidizing, a lot of the buying power that we've seen, I think, in 2020 plus the reopening, not just of stores but also of travel, there are a lot of factors at play here. Overall, we're very convinced that e-commerce is just starting, right, and it's not going to stop growing any time sooner. If we look at the scope of the marathon that we're on right, nothing has changed from our perspective. And there's maybe some waves and currents that are changing direction recently, but from our broad perspective, they look at a blip on the radar, right? In the long term, we believe e-commerce is going to continue to see acceleration in terms of adoption and growth and that we're extremely well positioned to benefit from that in the long term, right? And so what happens with demand in the short term, it's complicated because it's across different categories. You'll see different behaviors that can probably be explained by again a lot of the macro level events. But we're focusing, I guess, on the longer term, right, and how do we set ourselves up for success in 2022 and beyond. And I think that's the work that we've been doing in the last few months. Arty, I don't know if you want to add anything on that, but I think it's the best I can do in terms of like the immediate.
Operator: Your next question comes from the line of Matt Koranda from ROTH Capital.
Mike Zabran: This is Mike Zabran on for Matt Koranda. So in terms of pending shipping costs on a go-forward basis, last quarter, you guys had an average cost per container peaking out about 20,000. And now you're highlighting having secured competitive shipping rates. Could you help us try to quantify what exactly those competitive rates are and how to think about those in terms of gross margin?
Yaniv Sarig: Yes. So although we talk about certain partners on the logistics side that have been quite helpful, and I'm sure they've been helped with a lot of other companies, it's tough for us to share exactly what price we pay for competitive reasons. But we're very, very happy given the macro level environment on how competitive the rates are. And again, we believe that the relationship we built with these companies over time has been an incredibly important piece of getting this done right in this quarter. And so again, tough for us to really share the numbers because of competitive reasons, but we're very satisfied given all the macro level events that are surrounding us with, with the recent prices we've been paying, I would say.
Mike Zabran: Got it. Yes, that's fair. Could you guys also talk about your sort of plan of attack and how you're thinking about FDA aggregation and the restart there given your amount of cash on hand and what you anticipate being the source of funds for M&A activity on a go-forward basis?
Yaniv Sarig: Sure. So yes, so look, I mean, I think as I said earlier, right, we think the storm has not completely passed, but we, again, want to believe pending any type of black swan event we can foresee, right, that the worst is behind us, and we've taken the right step to prepare the Company to go back on the, I'd say, on its growth path on the M&A side. I think that also on the other side of the storm, as I mentioned also in my remarks earlier, I think there will be a lot of opportunities because, obviously, a lot of other companies have been affected by this, I believe there's opportunities to consolidate a lot of the industry. And we're just setting ourselves up again in the context of the marathon, right, for that to be something that we will pounce on as soon as the stability of the supply chain is restored. What's top for us to do is to go out there and try to execute on this before we have good clarity on the stability of that supply chain. Otherwise, those deals can also burden further, right? And then in terms of the sources of capital, again, obviously, when it comes to M&A, if it comes to M&A, right, we'll definitely need additional capital to do that, right? There's no doubt. But I think that overall, if you look at the industry and if you look at the amount of interest and the amount of excitement that there is in the investment community for the aggregator business model, I believe that once the supply chain crisis has passed us, a lot of investors, I hope, will realize that we are one of the best companies to execute on this. And I think that it gives us a lot of opportunity, hopefully, to pursue those type of deals.
Operator: Your next question comes from the line of Brian Kinstlinger from Alliance Global Partners.
Brian Kinstlinger: Great to see profitability return quicker than we all thought. First, can you maybe talk about in terms of the shipping containers that you're getting through partners like Amazon? Was there a benefit to the margin profile in the third quarter? And will it be much more of a benefit down the road as some of that inventory turns? Is it turning quickly? Just trying to get a sense for how much of the better-than-expected bottom line results was because of that or if it's a much bigger impact in quarters in the future.
Yaniv Sarig: Yes. Arty, do you want to address that?
Arturo Rodriguez: Yes, Yaniv, I can address that. I would say that the rates that we've been able to achieve and the deals that we've gotten with these partners who've been great, I think that's kind of a bigger impact as we approach 2022. And just to the timing of containers, keep in mind, it's taking like over 90 days in. So the reality is from booking container today, the goods aren't coming in until January, right? Rough math, right, something like that. So definitely, the things and the impacts that we've secured is more of a focus towards 2022. I hope that answers your question.
Brian Kinstlinger: Of course, yes. That's great. It means that you did better without that benefit really yet. And then I'm curious, as you were able to secure these lower-priced shipping containers, I mean, it opens up so much for you. So I'm curious how that changes in management's timing and strategy on new SKU launches. Do you think three to six months from now, that might be the timing if things hold or stabilize? Or is it a longer time frame to think about SKU launches again in the context of the economics being better on shipping containers?
Yaniv Sarig: That's a great question. And the important thing to remember is having a stable price that you can plan correctly, the P&L of your product and the amount of marketing dollars that are going to go into launching it and all these other factors is critical to the business model, right? But it's not just about the price, right? It's not just about getting the P&L, the timing is also very important, right? There's still a lot of delays, right, and complexities around getting goods on time. And that can have a pretty meaningful effect. Especially when a launch does well, you need to have continuity to preserve the success that it had. And so as you mentioned, it will take some time before we feel comfortable to be in a place to launch a lot of products. There's exceptions here and there, where we're looking at the beginning, as I said also in my previous remarks, right, there's other potential tests that we can do with supply chains coming from other geographies. But at a high level, I'd say that we should expect to see us going back to launching products in a meaningful way once the stability comes back because, before that, it's just too risky to go and invest in something that doesn't really materialize as you expect, right? Does that make sense?
Brian Kinstlinger: Yes, absolutely. One more, and then I'll get back in the queue. I'm not sure I wrote down the numbers fast enough. I think you've touched on it. But can you talk about the pricing trends? In the past, you and others have talked about not being able to increase as fast as either components inquiries or containers are increasing the prices because you don't want to get too far ahead of the market to price yourself out. So a, Talk about the pricing increases you've been able to achieve maybe over the last three to six months and how do you see that going forward.
Yaniv Sarig: Yes. And I think it's another good question. It's a very delicate part of the business, right? As we explained, I think, in previous calls as well, right, we can obviously -- we need to obviously increase our prices, and we've done that. But the sensitivity around it is you can outprice just out of the market if other competitors, for example, might have longer inventory at a lower cost basis and really hurt your long-term market share and performance in the marketplace, which is very important in our model. The good news, as we mentioned also in the past, is that we believe that overall, we've been able to kind of find that middle ground between increasing pricing too much and losing too much market share, which is obviously a dangerous thing, versus finding kind of that sweet spot where you're getting not the margin you wanted but enough margin to sustain the business without losing market share. And I think overall, we've done quite well, nothing getting through the storm around that. We're also seeing a little bit of starting to see upward pressure on competitors here and there, and it's very difficult to say exactly what's going to happen. We can't predict that. So we're taking a conservative view on things. But overall, I think that we've done somewhat quite well all things considered in terms of navigating that out.
Operator: Your next question comes from the line of Victoria James from D.A. Davidson.
Victoria James: So my question is, what are your current thoughts on your capital structure? And are we past the point of needing to issue additional shares to pay down debt?
Yaniv Sarig: Yes. So Arty, I'll let you take that, and maybe I'll add a few more thoughts on the end. But Arty, why don't you give us your thoughts on this?
Arturo Rodriguez: Thanks, Yaniv. Yes, listen, we see a lot of work. We're down to $25 million in debt, and we're in compliance with our covenant. I think at these levels of debt, we've made significant progress on debt leverage and the equitization is behind us. That said, I think we're working and we continue to work on ways to improve our debt profile over time. That's been the plan and continues to be the long-term plan. And I think we'll continue to move forward on that. And if something moves on that, we'll update accordingly.
Operator: We'll proceed to the next question with the line of Marvin Fong from BTIG.
Marvin Fong: I apologize. I only hopped on the call a few minutes ago. Just curious, Yaniv, you've mentioned it already, perhaps you could expand on just the M&A side of the business. We've seen more capital raising from some of the big players. Just your thoughts about that side of the business and how active you might be in terms of pipeline. And a second part to that question, I saw that there was an earn-out earned by Squatty Potty. Maybe you could update us on how that transaction has been doing and any of the other recent transactions.
Yaniv Sarig: Yes. Thanks. Yes, so Marvin, as we mentioned, also earlier, right, right now, M&A is on pause until the supply chain crisis passes by, the storm passes by and we see stability again. Otherwise, there's definitely a chance of encumbering the Company even further with M&A that is not performing as we expect, given the pressure of the supply chain costs, right? So for now that's on pause. As I said earlier as well, we're very excited about being on the other side of the storm because we think the opportunities are going to be immense. And I think, as you mentioned, in the private equity world, a lot of capital has been raised, I believe, by other companies in the same mindset, right, to go after additional M&A acquisitions. And again, I think that the market itself will probably create better opportunities for us to do so as well as the risk of the supply chain crisis is removed and Aterian, is again, in a great position to go and execute because going back again to what you said, right, a lot of these companies out there, raising a lot of money, are very early-stage companies. And I think they're all benefiting from a lot of the excitement that's going on. At the end of the day, I continue to believe that we're the best at executing on this vision. And we have more experience, we're more battle-tested and have more infrastructure and have taken a different approach that I think is going to be, in the long term, the winning approach. And so time will tell if we're right. But we're very, very excited on what's on the other side of this and reigniting the M&A strategy as soon as market conditions permit, right? And sorry, you had a second piece of your question on Squatty Potty, right? That was the second piece. So yes, Squatty Potty is doing really well from our perspective, and we'll continue to invest and continue to think about how to continue to scale and grow it. But we're happy with the acquisition. Again, overall, given all the different factors, right, Smash, Squatty Potty, PPD are doing quite well. Healing Solutions, as Arty mentioned, a little bit hindered also by some supply chain issues. But overall, we're really happy with the base and think it has enormous potential. And as we mentioned earlier, True really is the one acquisition that has gone not the way we wanted, obviously, for reasons that we explained with issues there that we're still trying to solve. But overall, again, when I look at all the conditions and all the different macro level things that affect the brands that we acquired were quite happy with the performance and believe there's enormous opportunity in the long term for these brands.
Marvin Fong: Great. I'll take the rest of my questions off-line.
Operator:
Ilya Grozovsky: It looks like we have no further questions on the line. So as part of our recently launched shareholder perks program, which investors can sign up for at aterian.io/perks, participants have the option to ask management questions on our earnings call. I wanted to thank all of the shareholder perks participants for their loyalty and their questions. I have picked a few relevant questions that they have asked. This one looks like it's for you, Yaniv. Please update us on your Platform-as-a-Service efforts.
Yaniv Sarig: Thanks, Ilya. Yes, so as we said also in earlier calls, we recently have been focusing our Platform as a Service solution around brand carrying oversized products, specifically larger brands that are looking to potentially transition from a vendor to seller. And as I mentioned earlier, so far, it's doing a lot of promise. And I think the few clients that we have are overall quite happy with it. We definitely are going to want to continue to invest in it. At this point, the resources are still limited but very promising results at this point there. And again, in the longer term, definitely, we'll look to continue to invest in that side of the business.
Ilya Grozovsky: Thanks. Another question that came in was, what is the outlook for international sales? And what regions do you find most interesting?
Yaniv Sarig: Yes. So we've started expanding into Europe, but also those efforts have been somewhat put on hold because of the supply chain crisis affecting that region of the world as well, potentially even more than the U.S. But in general, I think with the amount of work we've already done, Europe is probably the top priority for us. And it's definitely something that we'd like to see continue to accelerate in 2022 as the supply chain crisis unfolds, hopefully. But in general, there is opportunity around the world beyond Europe. I believe that in China, India, Japan, are big e-commerce markets that have a lot of potential where we can replicate our strategy. So in the long term, we will look at these as well. But for now, the focus is on Europe.
Ilya Grozovsky: Great. And then last question from the perks program, do you need the share price to be at a certain level to resume M&A?
Yaniv Sarig: Yes. On the M&A side, in general, large deals, of course, we're going to be holding off and really be opportunistic, right? We've previously seen that if smaller companies are excited about potentially leveraging our shares, right? That's something that we could potentially look at. But at this point, again, we're taking this approach cautiously, and we're going to continue the M&A when other conditions arise.
Ilya Grozovsky: Great. That's it from the perks side. And thank you to all the participants for joining us on the call today. In terms of the upcoming calendar, Aterian management will be participating in the 10th Annual ROTH Technology Conference on November 17 and 18 and the 10th Annual ROTH Deer Valley Conference, December 8 to 11. We look forward to speaking with you on future calls. This ends our call. You may now disconnect. Thank you.
Operator: That concludes this conference call. Thank you all for participating. You may now disconnect.
