MWK - Earnings call transcript Q3 2019

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Operator

Good afternoon ladies and gentleman and welcome to the Mohawk Group Holdings Q3 earnings report conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

I would now like to turn the conference over to your host, Mr. Grozovsky. Ilya ahead. go Please

Ilya Grozovsky

A joining Mohawk's results. to Yaniv On and Investor Financial and for is press quarter on at available Sarig, Mohawk's mohawkgp.com. XXXX CEO the Officer. Chief Hamaide, earning today's section Fabrice of us you today's discuss release of today Relations third Co-Founder copy website Thank call are

as these on I should of current and presentation are this reliance will make would like in results judgment on actual to and these expectations Accordingly, undue of Mohawk's remind statements today you affecting forward-looking and may that analysis from you reflect Mohawk's business. place only certain a statements we materially factors statements forward-looking statements. forward-looking not differ number based

associated this statements be in XXXX the is filings For as a more our call thorough conference disclaimer the that well quarter SEC. as discussion refer uncertainties the made regarding to with of you in included webcast, third and the we and statements to with release forward-looking forward-looking earnings our risks

not any of forward-looking result update whether to events statements undertake obligation or a any information, otherwise. alter as future or new do We

In addition, metrics these this the non-GAAP can to the refer of in earlier Explanation earnings may be found filed today. certain metrics release call. on company

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

Yaniv Sarig

our us financial detail. and to items model our then review and results business will followed quarter will a third I results outlook Ilya explanation by for will in Mohawk's growth and few highlights I joining differentiated long-term thanks our of reviewing Fabrice briefly today. by Thanks everyone begin our more the related opportunity. today's call then of discuss further

in performance. million XXXX to from of rapid a revenue our XXXX in third successful direct quarter once with and from portfolio in combined our Strong our increased our second product $XX.X approximately ago. grew fueled $XX.X contributions XX% the We year product topline of launches half growth as channel existing again pace million a at

same million third the cost loss of time, of $X.X primarily in At to of efficient and leverage the by fulfillment. fixed improved product quarter driven loss a a million from XXXX adjusted more EBITDA $X.X significant

for third track We XX new in of a including XXXX. XX impact launch QX XXXX about the into will machine products new and detail XX launched on in the a of dryer. remain and washing total moment. the financial in quarter, the laundry to compared in back During products to more our Fabrice we product of timing go our year launches three half portable

to company the tech-enabled intelligence. building business Mohawk, provide by automation model data, future the are At we driven of artificial CPG and

Our that third results adapt an are purchasing the behavior. industry the quarter in has disrupting been underscore and making changes consumer we progress slow to year-to-date

of For key reviewing elements let a those Mohawk few minutes the me unique new the business. to spend the story, our

analyzes of our identifying product various massive executing Our opportunity, managing call automates software market e-commerce, We amounts sales data and new and marketing proprietary strategies. aspects of and AIMEE. technology namely platform proprietary rapidly fulfillment

that incumbent cycle logistics XX time combined tracking executes a and trend due agile companies, Mohawk approximately an is organizations. What of XX AIMEE's and traditionally in quality opportunity go-to-market third our for to driven sourcing, to data months with CPG capabilities

phase launch succeed through products the do move under of under portfolio owned and brands, what's liquidate. that launch, goes who we dominant to sustain, operated and called not are those our Each phases, of typically products four milk procurement, the

post launch. for transition approximately three is goal every the profitable to phase to launch Our become months product and sustain within we

phase number automation allows of so CPG products costs, company a on having have growing meaningfully the three the last report is without model XX reached that years to happy of launches compared sustained to am in as our on average. based refining to business AIMEE's XX% compelling after to of What product makes that several AIMEE, specifically early months approximately traditional months approximately I manage increase learnings, our over headcount. us

to improve increasing and track SaaS Looking multiple products term, the profitability. believe unit ahead, sustained fourth a optimizing finish of international product include existing our on launch capacity, opportunities with quarter. XX we products course have and Those adding further and new into we acquisition. are marketplaces, busy product new new the to through we pursuing economics portfolio, expanding and categories year to our Long partnerships to drive growth launching on over domestic the opportunistically

with We a been in as product order on and capacity, number have are and provide new to to investing primarily product of procurement seller our [indiscernible]. fronts. we in progress people such made the control have pleased launch resources, in increasing quality we these recent Specific areas

As earlier, XX while this pace double to pathway for are to that are year XXXX products growth launch we and I said in on continuing profitability. optimize and we aiming approximately approximately to to number

We a Health, attractive $X.X In company, portfolio, acquisitions. quality Health Upon further ratings positive the in part of for acquisition, our of the candidate. which our with we financial Aussie product no profile terms and strong the diligence, Aussie of acquisition on Based helped internal Health thresholds is the headcount personal easily with assets and to reviews as advanced approach its tech purchased product could met due M&A, an million. as our AIMEE of consistent that and validate determined wellness Aussie business us added integrate September, it of strategic platform. we was

our capitalize on strong $X.X capabilities well-positioned has in now increase to by e-commerce and proprietary generate as worldwide our Mohawk the profitably believe projected is future to shareholders. trillion for to relationships we continue increased value to trillion technology, fulfillment We prospect supply advanced XXXX, ahead numerous opportunities from $X.X growth our and XXXX With significant. believe

Fabrice. that, will With I it to over hand

Fabrice Hamaide

our Thanks begin reviewing third Yaniv and good of afternoon quarter everyone. I results. by the details will

up sales XX.X%, of to of net third the XX.X% and a in as growth primarily the well revenue volume for direct period. points XXXX, XXXX million was million and to $XX.X $XX.X XXX basis new basis. increased points in late million ago existing or sequential from For launched ago the to increased margin increase Gross year from quarter of XXXX. quarter on products were $XX.X a third year XXX The attributable basis from improved XX.X% products as

we were of lower to in our fulfillment from prices product impacted a is governmental with benefit agency reinvest recall of remainder accrual discontinued due older the quarter certain to new products product benefits margin, for number positively and in by penalty complete, margins effect appliances contribution have price number a allowing and to compared margins associated liquidation program new us materially part non-core the a platform a full environmental Our associated the impacted lower decision XXXX including quarter products number that gross of QX by direct launches factors our which and a reversals accruals we as improved the competitiveness as the of now certain to XXXX, with keeping on our in third charge $XXX,XXX. of that our

items, gross would our as second Excluding XX.X% in the for been compared the XX.X% these have quarter quarter to margin XXXX. one-time of

that related as operating increase during expenses. granted increase was options Turning a to note the in is year-over-year well $X.X to It in a XXXX December driver compensation of non-cash total of XXXX. million large on expense basis expenses as stock-based stock a in the restricted first important and to half

to in X,XXX thanks fixed improvement while points basis as highlights same net revenue year. model. costs operating to essentially compensation, products new keeping XX.X% period stock-based improved percentage The to expense and operating business flat, our non-cash of a the automation grow from in leverage the expenses ability in degree XX.X% of Excluding last significant our launch high revenue

expense my excludes of review compensation remainder The expense. stock-based

third flat. improvement platform the to fixed as the the with margin quarter $X.X providers fulfilled percentage from million logistics is versus keeping sales the the to quarter attributable e-commerce year to million combined a XXXX third sales higher platform For quarter of of of revenue XX.X% net third in in for revenue continued sales The and XXXX, increased growing XX.X% improve the our service of of unit in while the distribution at period. improved prior $X.X second quarter, of Contribution both effect million reflecting to through a $X.X expenses relatively third-party and XXXX and percentage partners decreased economics. compared cost

and other being $X.X to development million the developers expenses of administrative an number to million respect primarily research million expenses a increased increased $X.X due million increase support company. $X.X expenses, to associated and listed general to with $X.X due in costs With to while growth, to publicly

$X.X quarter negative XXXX. third million Net to was and third of in $X.X the negative quarter of loss million million compared for of in the quarter second XXXX $XX.X XXXX

compensation, Excluding quarter non-cash million. net $X.X stock-based loss was XXXX third

quarter's loss of in our loss in XXXX those quarter in gross million in compared in to of a purposes. earlier of million for XXXX while million improved to variable a of loss improved of D&O the the company flat XXXX million for costs period costs loss and full mentioned for This loss of first have $X.X one-time $X.X XXXX quarter million Adjusting sales, for unit $X.X quarter EBITDA economics the $X.X of margin, would earlier loss quarter from been for EBITDA XXXX. line worth quarter of items of $X.X insurance second results public the in growing million Adjusted the lower as with adjusted and of quarters third for the resulting $X.X a model. our the second adjusting first comparability of and a the is fixed costs in a

the balance sheet. Turning to

we $XX.X million of June $XX.X September million cash XX, As XX, XXXX, XXXX. of as of with had compared

We XXXX, million trailing to revenue in purchase. operating the third of On XX, million. $X.X income a the the assets basis, Aussie of as XX-month for promissory we Health acquired million $X.X quarter, a cash used Health fund $X.X September was with of During million. $X.X and Aussie million, note $X.X

headcount no connection in was this noted, Yaniv As acquisition. with added

overall in operating $X.X in used was of of XXXX to the million provided $X.X our activities second Cash the million quarter. to improved to prior $X.X compared third the operating million quarter and quarter cash $X.X in burn million compared by for activities cash

credit the at million $XX.X $XX to is loan. and cash of the working million structure total $X.X and our This the on million consisting XXXX highlights end burning debt compares cash strong allowing quickly grow second September XX, $X.X quarter cash debt revenue term was and cycle of million total while implemented combination the level to our debt of borrowings at million total level. growth of the under strong Our a of capital revolving The spent XXXX. $XX.X facility of acquisition lowering without including used company at despite the

we the of made course ensure to reliability it of to over majority is of and are as of the of paramount. to we of our of competencies in our XX quality track the success believe in XX-plus on we late new that business of confidence respect XXXX high achieve we as we product year, To overseas. the at proposition half launches XXXX move by ratio remainder launches at the bolstered recognition goods continue that second value year, XXXX, in in importing and for during standards, decision product compared to products output ordinary are can new launched our products of the the can the quarter. product we possible new our half is meet to great the revenue QA/QC new Providing to value product double Having provide XXXX. With target we our the subject all continue launches Though course high quality fourth a and our believe back core quality the this quality. with and accelerate will the to delaying best best prioritize will quarter, our model sourcing from our

the nature revenue market significant on front, On not of yet. nascent considering SaaS do we the increase plan segment, that any

I With open it the the questions. for your operator to that back turn to call will

Operator

Instructions]. [Operator

King the Dave from ROTH from Capital. comes question fist Your line of

is open. line Your

Dave King

Good or evening. guys afternoon Thanks.

Thanks. are have So coming sit be QX product sort that off a Is And small we the in many anticipate November that items to X, maybe we given little QX, launched How here of revenues? start then, big-ticket when in ones? these And later first you that should on them planned. a today? bit contributing they timeframe as have or or then, late to going year? you are launches those to the is QX of as of

Yaniv Sarig

you this Fabrice, or I it? to should do take want

Fabrice Hamaide

Sure. Yes.

of of quarter or November $X.X so, about know, roughly launches which less rate the ones will start in or get analyzed late little more launched significant, of In the the as average actually of launched, be are me the you you maybe that try impacted that be sustained December that or rate some we half, not sales products run think, necessarily some them December same lot and sales products. I by December. size sales So are a of as of don't rate for we the the to a course go QX products, you on the in in Christmas highly will in after, run the we launch rest million though have in in actually will to their month actually over total to-date, sales products The the run now They would is and bit gifts. seven were today. towards all impacting Christmas further launch through hit that

which we are hit cycle, launched they end means will is, run temporarily will process. full speed will, may average build they in be their their And our months as that at are the QX. per actually QX. But three for that consumers. the from launch ones December rate So towards the shift otherwise, to that launch on know, you trying That of spending

Dave King

AIMEE XXXX? Okay. And That as then, ability about And should Aussie then done. to level how on more revenue into Aussie products put I the, we on on $X.X yet? progress you for the getting ramp acquisition, think Have think said, that from we congrats Health you million their importantly, helps.

Yaniv Sarig

Go Sure. Yes. ahead.

Fabrice Hamaide

Sure.

have diligence On first the earlier described that's the to the AIMEE add the part, we very Health products excited tech to know, to having integrate right, the was type AIMEE do to as that portfolio want and was into is data potential didn't acquisitions long we it extra are we about typically simple built asset opportunities, we that a to exactly took anyone that the of really see What business and we showed incur platform acquiring Aussie as to our team. it using call, that the the great ability into basically headcount we portfolio from example the when the of then the and the why add part in business comes over the due And where have to of these of you a was business. that term. bring and on fascinating that without

see From it. wanted perspective, from technical purely that perspective, was that we a really as to

mixed, these of portfolio terms is thinking products, about of the In the growth obviously right.

see would have of It's more zero part to that we some a social sustained not long than portfolio products, and these the some is products though, others. overall one very traditional more sustained typical where in I at products well. look having the our as different the there growth when growth say, portfolio, a Some in track than Every that significant mature of growth of kind than we term have sustainability, a the of In terms might the are products general proven apart but the we approach record proof and like more for cases replicable as model, others taking in in like right. others Aussie are them from Health and path. achieve have we SKUs of of getting

Dave King

Okay. Perfect. will questions year. rest for Thanks good Well, back. taking for luck and of step I the the the

Yaniv Sarig

Thank you.

Fabrice Hamaide

Thank you Dave.

Operator

question line the Kinstlinger comes next from of Alliance Partners. from Global Your Brian

open. is line Your

Brian Kinstlinger

revenue break from compared loss SKUs have year selling don't guys. SKUs EBITDA at to new Hi been least a for see a Great have the Can year-over-year you narrowing. that down adjusted comp? the you to

Fabrice Hamaide

products, in success simple. the trailing average that the math many right, some right. some periods So for the four XX that, $X.X rate, launched level of We course, quarters ways, average on months different don't XX% of the year But during all and you we that as at know. account you quite detail, provide is, million launched impact therefore were them products, should the per for the six for and in of revenue those

the full-year just there. basis, get in generate So of four, seasonality would to right, by is launches there or course, so, Q, But course, on level. divide of the Q some a where levels the in you from to that $XX need million

that $XX trailing in and from quarter, four were rest the we the the that launched million products the that came of quarters in million-plus replace approximately And prior revenue revenue am the was the or so generated $X.X that there. had that, that example, the did newer So we the versions, in also are year. products rights I from was products in including for in included actually

Brian Kinstlinger

of where your are then to you be capacity months? terms of XX Got per talk That's can Thank versus now helpful. quarter new And today releasing in is in month goal it's where you. products, it. per right whether or about

Yaniv Sarig

sorry. Can am you I repeat the question?

Fabrice Hamaide

will You okay, right. take it,

Yaniv Sarig

is So new approximately XXXX what second targeting half quarter per the before, we XX are right products to note call the on to seasonality. pace the the of of in always launches now XX to then of it's matter in and XXXX, a we as XX get as in that vary call, launch accelerating quarter. important heard to expecting these And of Eventually, are the to it's again, mentioned, you first really mentioned as Fabrice to the and we are products the right. up timing we can

course, launch have to value we product more possible so As seasonality cheaper do as I that cost bottom the well. XX on be general, quality we best traction as get to products targeting in happen at team delayed everything the provide the and in in manufacturer, part and that. our to to And are products procurement we else, made XXXX aimed But basically products, investments to some and the right. mentioned, the adapt always aim are, quality might gain of a best might of more you if with marketing. of the know, quality importantly the then to of We than therefore, the the the

excited we those So are about events.

Brian Kinstlinger

Can And or a you SKUs opportunity where are products a become And have? Aussie market they to Great. some talk leader? to they are many a then Health leader they the follow-up then saw lagger of the most a feedback on how you the market acquisition. of saw they have? about AIMEE Or in correct the

Yaniv Sarig

Yes.

that. take me Let

or in So to are some can world this right. of really we already efficient, right, what where were type overall automation better leaders we long-term the SKUs manage for market basically business had using in scalability AIMEE, through we case, that create takeover we of excited right, with the and look have be leader that and optimizing market Particualrly, the that drive got that opportunities we about, we terms not, could the quality in the more more of business place to we and the expected, effectively. thought is

business. Some have can market about more in SKUs are potential yet growth we we drive not great of definitely are leaders this and Overall, talking and them there. XX

first a seeing this of are at go about we we so it's are results kind So and far. the excited

Brian Kinstlinger

are on looking on sees tweak or Or market made? Moreover, potential M&A, some Amazon? AIMEE products meaning buy some the you that you are for if say top that see, you leaders, looking products to two change is

Yaniv Sarig

right. That's these is question. for always one us, a value is is And proven, acquisitions in quality answer that the the best the both, that, right. It's already great of

has that have what great the can is and already some reviews. that a but a through this you opportunities the where as market growth be that As have the hands varied be And great a and here. there essential right. might some target it's our the products because on share in there, them be there day, But more great we create will SKUs portfolio is and ability cases customer optimized quality quality in will optimize we might about through the much a AIMEE. the proven company oftentimes, portfolios that lot of those as of best yes, more to quality control money more some see exciting And no at value of also end to that's happen share always driven you be and is get to efficiency market and their for know, and also of model can even growth is not very

Brian Kinstlinger

Amazon need that one-day seeing move Great. the shipping of a I towards more. your if Or does Are certain more two through have any is customer? the your impact towards to so, moving how products to And that is lot margins? one-day products. shipping? passed on

Yaniv Sarig

a question. That's great

products are but Amazon you logistics sold number right. going through own as of our are a some So know, fulfillment, through growing

Amazon will product within So of to when know, which obviously, comes most it have the move the is fulfillment the for a and working to fulfillment to that what actually be create you grow there. we burden us shipping. AIMEE, ability We it logistics, to, Amazon been has on are believe which shipping huge our with we we one-day our in own the run. mile about taken excited right goes up the long last as building platform But positive are own impact through now,

down the of warehouses to cover We more in the bring population XPL shipping warehouses the the are to and of nine total process which cost. XX% bring U.S. adding will

So are that we react because tech-enabled, it about on these a is going advantage excited are see we where able think more gain to as others and and are things where might quickly challenge. I to we

as the a long-term, see very So positive thing. we in it

Brian Kinstlinger

how capital required have that, that to be much follow-up to is going to warehouses a As [indiscernible]? many

Fabrice Hamaide

maybe answer I question, that Yaniv. will

a XPLs. So that remember of use network we

warehouses. own So we We don't warehouses. build don't

that So any a in have the of line our sure our the from and But increase going it's to use because it actually more not of cash that. of again, the should bit to payment warehouse. vendors, each ABL minimum perspective, a build with terms quantities structure It's significant we of and little the order zero. course, make of to in CapEx level, the inventory

Brian Kinstlinger

one then, forgot you prioritize Can you in profitability? expecting profitability reaching to you about point one. at Last revenue just some year? I sorry. are how next talk versus that, achieve still Yes. And the of growth quarters

Fabrice Hamaide

at because moats we building opportunities time as we of are by business, said, the as many managing that we So a can you one of multiple we growth the as product. are know taking

as as which unit right. on of on we ongoing the an but reaching are that aiming economics also of profitability we profitability, of the many Within change means profitability from half products launching the balancing perspective. us can to time in constraint looking same at second for a getting No us basis, early that's level, And still improving and the reaching XXXX. that

Brian Kinstlinger

Yes. Wonderful. Thank you.

Fabrice Hamaide

Thank you.

Operator

So brings to of I the Q&A to remarks. this that us call. now will the the for over end of turn call management session closing

Yaniv Sarig

Thank This everyone is Yaniv. for joining. you

forward looking again to are the speaking in to care. you We next bye. Bye, quarter. Thanks Take everyone.

Operator

Ladies you concludes participating. and gentlemen, this today's call. for conference Thank

You disconnect. may now

Aterian (ATER) 10 Nov 192019 Q3 Earnings call transcript