Q4 2023 Aterian Inc Earnings Call

Participants

Ilya Grozovsky; VP of IR; Aterian, Inc.

Joseph Risico; Co-CEO; Aterian, Inc.

Arturo Rodriguez; Co-CEO, CFO; Aterian, Inc.

Brian Kinstlinger; Analyst; Alliance Global Partners

Mike Zabran; Analyst; Roth Capital Partners LLC

Marvin Fong; Analyst; BTIG

Presentation

Operator

Good afternoon. I would like to welcome you to the Materion Inc. Q4 earnings report.(Operator Instructions) And I would now like to turn the call over to Ilya Grozovsky, Vice President, Investor Relations and Corporate Development you may begin your conference.

Ilya Grozovsky

Thank you. Thank you for joining us today to discuss materials' Fourth Quarter 2023 earnings results. On today's call are Joseph Risico and Arturo Rodriguez, our co-CEOs. A copy of today's press release is available on the Investor Relations section of Atlassian's website at materion dot IO.
Before we get started, I want to remind everyone that the remarks on the call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on current management expectations.
These may include, without limitation, predictions, expectations, targets or estimates, including regarding our anticipated financial performance, business plans and objectives, future events and developments, and actual results could differ materially from those mentioned these forward-looking statements also involve substantial risks and uncertainties, some of which may be outside of our control, and that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties, among others are discussed in our filings with the SEC.
We encourage you to review these filings for a discussion of these risks, including our annual report Form 10 K filed on March 16, 2023, in our quarterly report on Form 10 Q filed on November 8, 2023, and our upcoming Annual Report on Form 10 K when it is available on the investor portion of our website at materion dot a. u. You should not place undue reliance on these forward-looking statements. These statements are made only as of today, and we undertake no obligation to update or revise them for any new information, except as required by law.
This call will also contain certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA margin, which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and comparability with our past performance and facilitate period-to-period comparisons of our core operating results.
Reconciliation of these non-GAAP measures to the most comparable GAAP measures and definitions of these indicators are included in our earnings release which is available on the investor portion of our website at iteris dot i. l. Please note that our definition of these measures may differ from similarly titled metrics presented by other companies, we are unable to provide a reconciliation of non-GAAP adjusted EBITDA margin to net income margin, the most directly comparable GAAP financial measure on a forward-looking basis without unreasonable efforts because items that impact this GAAP financial measure are not within the company's control and or cannot be reasonably predicted.
With that, I will turn the call over to Joe.

Joseph Risico

Thank you, William and thank you, everyone, for joining us today.
Today I'm going to touch on our 2023 year, including our fourth quarter financial results. And I will also discuss the actions we are taking to foster growth for tier even 2024 and beyond as we remain focused both on achieving adjusted EBITDA profitability in the second half of 2024 and on positioning Materion for substantial growth beyond 2024.
Ari will then cover in more depth our financial results for the fourth quarter and will provide our outlook for Q1 for those of you joining for the first time today, a quick primer on Materion. Materion owns and operates its own brand marketing and selling consumer products in the following categories. Home and kitchen appliances and accessories through our home labs, Mueller and tour, seeing brand health and wellness, primarily through our squad party brands, Iona and transfer paper through our PBT or photo paper direct brand and essential oils to Enbrel of brands, including Healing Solutions. We sell our products primarily in the US. We derive most of our revenues from the Amazon.com marketplace 2023 was a year of change for a period with already.
And I taking the co-CEO role last July, Artie and I have a strong partnership and it's been a pleasure to be sharing the role with them. We set out on a mission to focus, simplify and stabilize the period. And together with our team, we have accomplished quite a bit to reposition the Company for success and growth, and we are excited about the value we believe we can deliver for shareholders.
Some of the things we have accomplished thus far include refocusing Materion as a consumer products company by eliminating non-core initiatives that don't serve our products business shifting away from internal only developed software to a more agile and efficient third party model, eliminating a significant number of noncore skews, further strengthening of our balance sheet through the amendment of our credit facility with our lender restructuring, our people and vendor costs to better align with our newly focused core business, reducing the number of seller accounts from 31 accounts to approximately eight, further streamlining our fulfillment operations and further optimization of the marketing performance aspects of our core SKUs. We are pleased with the results of these actions thus far, and we look forward to growing materially from this baseline.
With respect to the fourth quarter. We are pleased with the trend in our operating results and in particular, the progress that we have made thus far to stabilize our business, notwithstanding pricing pressure across a number of highly competitive categories and a challenging discretionary spending environment.
Our fourth quarter results also reflect the completion of our previously announced sku liquidation program, which we believe has well positioned us for success in 2024 and beyond. We also continued efforts to optimize the marketing and performance of core SKUs. And while this work is never nd, we made progress on that front across each of our categories, and we are seeing early results from these efforts in Q1 of this year.
In 2024, we will continue our strategy to focus and simplify. And to a lesser extent, given the work we've done thus far stabilize how we operate in order to not only position Materion for adjusted EBITDA profitability. We'll also drive top profitable topline and growth, we'll be focused on product development, omnichannel expansion and inorganic growth in new and existing categories with respect to new products in 2024 will largely be focused on our existing portfolio, refreshing a number of existing products and also launching new products that have variations in our existing portfolio that we believe will provide value to a meaningful segment of consumers. For example, as previously announced, we extended ARCs are essential oils portfolio to address consumer needs for healthier chemical-free products, but we have seen promising early results.
The strong we intend to continue to continue to expand this offering throughout the rest of our oils brands. In addition, we are working hard on our squad party brands with a view towards further expansion for its flagship toilet store product and also expanding the product categories under the brand. We will continue to focus on our omnichannel strategy, primarily through expansion to new marketplaces that we believe can drive profitable revenues for our existing product portfolio.
For example, and as previously disclosed, we launched on TikTok with most of our skews results to date have not been material, and we intend to continue to invest in that platform to evolve alongside that platform. Also in the near term, we will be launching a number of our products for sale from Mercado Libre in Mexico based marketplace, one of the leading marketplaces in Latin America, we will also be expanding to Amazon Kendra in the near term. And further, we are actively exploring a number of other marketplaces as we endeavor to position our products everywhere consumers are shopping.
Regarding our inorganic strategy, M&A remains an area of focus. We recently completed a small investment in fourth in heart leading deep water brand in the United States. We believe investing into new high-growth brands have the opportunity to help drive significant value for a period as well as open up new categories. We intend to continue to explore investing in earlier-stage brands. We believe Materion can be a valuable partner before I pass it along to already a few words on the Perion's NASDAQ compliance. With the $1 minimum bid rule, we expect to regain compliance prior to April to the April 22 deadline set out by the NASDAQ through a reverse split. And while today, we are not providing specifics on the reverse split ratio or timing, but I can say is that we are excited to regain compliance, given that we believe we have addressed the most significant underlying operating and other issues that have been affecting our stock's underperformance over these last years.
So with that, I'll pass it along to Artie.
Thank you.

Arturo Rodriguez

Thanks, Joe. It's great to partner with you too. Good evening, everyone. We continue to make progress on our path of focusing, simplifying and stabilizing materials. We continue to see certain results from these missions, especially on our balance sheet as it continues to get stronger with inventory almost at normalized levels.
A great accomplishment considering the levels we were just a year ago. Although our Q4 results are better than anticipated, we still have a long way to go on our path towards adjusted EBITDA profitability with some of our recent moves, such as aligning our fixed cost to our go-forward size and scale of our focused company and our extension, increased flexibility of our credit facility has further strengthened our balance sheet. We continue to grow more confident that we are on the right path to deliver 2024 second half adjusted EBITDA profitability. And we have the balance sheet strength to deliver these results.
Now moving to the Q4 results. Overall, as expected, we saw our revenue decline primarily due to our strategy of discontinuing sales of non-core sales, coupled with challenging consumer discretionary spending and competitive pricing pressures across our portfolio, coupled with our previously action fixed cost savings, we believe we're starting to see our adjusted EBITDA losses narrowing.
Now moving on to the details of the fourth quarter 2023 net revenue net revenue declined 40.3% to $32.8 million from $54.9 million in the year ago quarter $32.8 million. Fourth quarter net revenue by phase as defined in our press release broke down as follows $25.2 million, $0.4 million in launch and $7.2 million in liquidating inventory normalization the year ago quarter net revenue of $54.9 million by phase broke down as follows $40.8 million, sustained $1.0 million in launch and $13.1 million liquidate an inventory normalization.
Our sustained net revenue decrease of $15.6 million is primarily as a result of our SKU rationalization efforts, which have discontinued poorly performing SKUs, coupled with reduced consumer discretionary spending spending and competitive pricing pressures. Our liquidation net revenue decreased by $5.9 million as the efforts of liquidating high-cost inventory has essentially reached its conclusion, eight variations were launched late in the fourth quarter, and we are continue to be thoughtful and the timing of our new product launches through 2024 overall gross margin for the fourth quarter increased to 51.0% from 37.1% in the year ago quarter, an increase from 49.4% in Q3 2023.
The permit was driven by product mix and lower liquidation of higher cost inventory compared to the prior periods. Our overall Q4 2023 contribution margin as defined in our earnings release was negative 0.8%, which improved compared to a prior year's negative of 11.5% and decreased compared to a third quarter of 2023 bcm of 3% year over year increase in contribution margins driven by product mix and the level of liquidation revenue of higher cost inventory compared to the prior period, offset by competitive pricing pressures on our core business, Q4 2023.
So our sustained products contribution margin declined slightly year over year to 6.9% versus 8.3% in Q4 of 2022. The decrease in contribution margins driven by competitive pricing pressures and product mix and the completion of moving certain higher-cost inventory.
Looking deeper into our contribution margin for Q4 2023, our variable sales and distribution expenses as a percentage of net revenue increased to 52.8% as compared to 51.6% in the year ago quarter. The increase in sales and distribution expenses is primarily due to product mix and an increase in fulfillment costs.
Our operating losses of $8.2 million in the fourth quarter improved from a loss of $22.8 million compared to the year ago quarter, an improvement of approximately 63.8%, primarily driven by the improvement in CM and the reduction of fixed costs.
Our fourth quarter 2023 operating loss includes $1.6 million of noncash stock compensation expense, a reserve for barter credits of $0.3 million and the noncash loss on impairment of intangibles of $0.3 million, while our fourth quarter 2022 operating loss includes $2.7 million of non-cash stock compensation expense or reserve a barter credits of $1.6 million and a noncash loss on impairment of goodwill of $0.5 million.
Our net loss for the quarter of $7.7 million improved from a loss of $20.3 million in the year ago quarter, an improvement of approximately 62%, primarily driven by the improvement in CM and the reduction of fixed costs.
Our fourth quarter 2023 net loss includes $1.6 million of non-cash stock compensation expenses, non-cash loss and impairment of intangibles, $0.3 million and a reserve part of credit from $0.3 million. While our fourth quarter 2022 net loss includes $2.7 million of non-cash stock compensation expenses, a reserve for barter credits of $1.6 million, noncash loss on impairment of goodwill of $0.5 million and a gain on fair value of warrant liability of $2.8 million.
Our adjusted EBITDA loss of $5.6 million as defined in our earnings release improved by 65.4% from a loss of $16.2 million in the fourth quarter of 2022, primarily driven by the improvement in CM and the reduction of fixed costs.
Moving onto the balance sheet. At December 31, 2023, we had cash of approximately $20 million compared with $28 million at the end of September 30, 2023. The decrease in cash as expected is primarily driven by our net loss in the period and our decision to build up inventory in advance of the 2024 season to avoid tariff impacts, specifically for a beverage for this higher inventory balance should remain through Q3 of 2024.
At December 31st, our inventory level was at $20.4 million, down from $31.5 million at the end of the third quarter of 2023 and down from $43.7 million in the year-ago quarter. We are happy to report that we believe that our current inventory of $20 million is almost at the appropriate levels. And the high cost inventory normalization that we have been working on for many quarters is now behind us.
As we mentioned, our inventory includes an additional $3 million of beverage coolers purchased in advance to mitigate tariffs. Our credit facility balance at the end of the fourth quarter of 2023 was $11.1 million, down from $14.2 million at the end of the third quarter of 2023 and down almost 50% from $21.1 million in the comparable prior year period. We recently right-sized and extended our credit facility by two years to December 2026 maturity.
Now has access to $17 million in current commitments, which can be increased to $30 million, allowing sufficient flexibility for growth when needed. Also credit facility extension reduces the minimum liquidity financial covenant from a peak of $15 million, down to $6.8 million of cash on hand and or availability providing further flexibility at the Company focuses on adjusted EBITDA, profitability and eventual growth. We believe today, based on our current forecasts, our extended credit facility, coupled with our existing cash, has further strengthened our balance sheet as we continue on our path towards adjusted EBITDA profitability in the second half 2024.
As we look at Q1 2024, considering the continued challenges in the consumer environment, we believe that net revenue will be between $18 million and $21 million dollars is in the middle of the range. This would be approximately 45% decrease from last year's Q1, primarily driven from reduction in SKUs from our strategic SKU rationalization and certain competitive pressures and the 40% decrease in our sequential quarter of Q4 2023, primarily from our seasonality and our strategic skew rationalization.
As a reminder, our first quarter is our lowest lowest quarter, and we expect that Q1 will drive slightly lower seasonal splits than previous years. As we have previously discussed our decrease in net revenues expected as we continue to focus our go-forward business on our best brands and products. Our primary focus today continues to be getting to adjusted EBITDA profitability in the second half of 2024. For Q1 2024, we expect adjusted EBITDA loss to be in the range of $2.5 million to $3.5 million.
The middle of this range represents an improvement of approximately 30% compared to Q1 2023 and a 48% improvement from sequential quarter of Q4 2023. Again, we continue to be laser focused on our target of turning adjusted EBITDA profitability in the second half of 2024.
And with our Q1 guide, you can see, we're starting to realize some of the result of all our hard work and initiative. We also believe based on our forecasts, we have sufficient cash above our covenants to achieve our goal without raising additional equity. As previously stated, if we pursue additional financing, it will be predominantly for growth through M&A.
We do expect a few housekeeping items in the coming weeks, we do expect to refile our S-3 Shelf allows the opportunistically raise capital as part of our M&A strategy over the coming year or two, if we decide to do so and if we decide to acquire any brands, we believe this is good corporate governance.
Finally, as we do annually, we expect to file our FA. shortly after the 10 K in closing, we believe our products, our strong balance sheet and with our cornerstone to focus, simplify and stabilize, we are turning the quarter and look forward with confidence as we continue on our path towards adjusted EBITDA profitability and ultimately to maximize shareholder value.
With that, I'll turn it back to the operator to open the call to questions.

Question and Answer Session

Operator

(Operator Instructions) Brian Kinstlinger, Alliance Global Partners.

Brian Kinstlinger

Great.
Thank you. And I just wanted to start at a high level about the demand trends. The year-over-year decline in the sustained revenue has been consistent for the last three or four quarters, but the pressure appears to be getting worse, at least based on the first quarter guidance. I'm sure there's an inflationary inflationary environment that's not making it any easier and consumers yourself supplier pricing, and you talked about seasonality, but help us understand what you're seeing in terms of this significant downs step down in revenue in the first quarter and sustained, please.

Joseph Risico

On R&D.
Maybe maybe touch on come on this a bit.
And now I'll comment on the backend on CRM done.

Arturo Rodriguez

Okay. And he, Brian, I hope you're doing well. So yes, I mean because we've been working very hard, right? We said previously, we've cut well north of 1,700 skews for some of the decrease you're seeing is the fact that we're really trying to focus this business down to our most profitable and best most profitable products and brands. We do expect this revenue decrease, Tom, there is definitely still environmental pressures out there, right? Consumers spend seems to still be volatile.
But overall, we're very happy to sort of kind of where we're tracking to, again, being our goal being the most important is getting to adjusted EBITDA profitability. The fact that the Q1 guide, as you're in the middle is roughly $20 million or $19.5 million isn't it isn't surprising to us, especially considering the amount of skews we've cut out. I think the seasonality impacts and other other things that we're doing to stabilize the business may have a little bit of the effect in that number where you mentioned it may be lower. But I don't think overall, we think that's a trend that we'll continue to see incentive and overall shrink quarter to quarter that you've seen in the previous year, especially as we've rationalized our SKUs.

Joseph Risico

Yes, that's great. I would just add that, Tom, to some extent we've lost some share. And I believe we talked about this on the last enzyme until in some for some of the SKUs that go forward, which we're again, we're excited about. We've done some some work to regain share there. We have we have sustained some loss of this. I think a little some of it is that and then I would just say overall in our demand in general, I think is on it looks pretty resilient. And I think that the challenge for us is to on it can be read into into wind sales for our products. So and again, you know, we still feel we're feeling pretty good about it about the work we're doing to make sure we can do it again.

Brian Kinstlinger

Two more and I'll do in voting. I'll move on and step-by-step in the back of the queue, why is there any revenue from the skew that you're getting rid of in the fourth quarter, whereas in the first quarter you'll have no revenue. So there is some benefit in that fourth quarter. And that's the first question.
And the second question is with the cost cutting announced a few weeks ago. What's the new quarterly revenue run rate that you believe gets you to it and adjusted EBITDA profit?

Joseph Risico

Ren, you want to you want to go for that?

Arturo Rodriguez

Yes, Brian, if you could repeat that first part of that question.
I got second financial year, the ForEx.

Brian Kinstlinger

Yes, sorry, you were mentioning that in the first quarter there skew is that you're getting rid of has an impact. I'm curious, was there for some from some of the skews you discontinued? Was there revenue in the December quarter, whereas are lumpy in the current March quarter? That's the first question.

Arturo Rodriguez

Yes, so for sure, as you can, and it's not necessarily it's not something we plan to disclose, but you could sort of see the liquidation numbers that you've seen and and in our table that we provide in the press release, when you look at the famous liquidation, like some of that number is it's not be their first part of the part of the drop down on top of the fire.

Brian Kinstlinger

I mean, you're never going to go eat, there's yes. So there's nothing interesting. I mean, there's no revenue from these the SKUs you're getting very little.

Arturo Rodriguez

There's very, very, very yes, forecast.
As to the second part, what do we think the run rate revenue is going to be?
I think, listen, I don't think we're ready to talk about that in kind of full full disclosure. I think we've guided the Q1 number and to be roughly again, I'm speaking to middle range, $20 million. I think in some aspects, the way we look at our path to positive adjusted EBITDA is really about first the focus which are reducing the skews the number to cutting our fixed costs. I think I think when you look at where our key brands and products will shake out towards the second half of the year.
We do think that those products will be back to like a 15% plus type CPM, which would be healthy. I think when you look at the $4 million of savings that we announced in February on top of the savings were announced earlier in 2023. I think those combinations is what's going to get us to that kind of and you know that profitability on top of some other initiatives that Joe mentioned as we continue to simplify and stabilize, I think know because our primary focus is just either we're still working through like kind of that back end of the year.
So I think in theory, I don't think we're ready to actually give that number out today. It will be more in line of sight when we get into into later into the year in Q2. But we do feel that that we have line of sight of getting to that goal, especially with those initiatives that we've kind of achieved so far.

Brian Kinstlinger

Okay thank you.

Operator

(Operator Instructions) Matt Koranda, Roth MKM.

Mike Zabran

As Mike said, even on for Matt, maybe just starting with the new products recently talked about adding beverage cooler products and expanding essential oils, some given the consumer purchasing environment is still relatively new deals sensitive. How are we thinking about balancing these new product introductions with maintaining market share and adhering to a price-sensitive consumer in 2024, I guess, just given we're working towards a higher margin profile in the coming quarters.

Joseph Risico

Yes. It's to your question. I'll grab this one already. Maybe you can chime in on offer shorts, challenge on rate on all the things you ticked off or challenge rates on. But when we think about the portfolio and we did, we think somewhat in terms of good, better best.
I think I think some of our products with the way historically we've gone to market on a number of those products are sort of geared towards on sort of the better, better best kind of version of the product until some of the things that we're doing are aimed at the annuity that getting sort of the good product, right, that more and more value for the price to the consumer through through variation on that, to the extent you're on Amazon, right, that those those variations usually right, not always, but usually show up on the same listing.
And so now if you think about that listing now, it's addressing a broader, a broader market of consumers. And so hopefully, if you did your job well, getting more conversion on that listing, we're getting market share and getting ranking, right, which means you can be more prominent on kind of the more prominent placement until now, where we're not going to go crazy on with with new product launches, right? But there are a number of areas where we think it's appropriate for us to to come to market. And so I'm going to stop there and to close out, does that address your question?

Mike Zabran

Yeah that's clear. On a lesser, I guess last one for me on the profitability target in the second half. There's a lot of moving parts of the business right now. Looks like we're doing the right things to prioritize profitability which is great. I guess what could potentially push this profitability data out are are you factoring in a lower promo environment or any certain pickup in product categories? Maybe just provide more color on if the profitability guide constant, any change in the macro environment? I know we talked about new market expansion earlier in the call. Is that factored in?
Just I'll speak to why we're confident and where the virus.

Joseph Risico

On you want to do you want to take that one?

Arturo Rodriguez

Yes, I think come it's a good question. And I was and we feel very confident right now, right of what we just we just said it for kind of scorecard on our on our earnings, our prepared remarks. We do feel that we're very well situated to continue to make progress and focus in stabilizing some client business. And that should unlock that goal of the second half adjusted EBITDA profitability.
I think specifically on our C side of the house. And Joe said that, and we're doing a lot of great things. We're there's still pressures out there, but we're trying to mitigate that through a lot of the actions and initiatives that you highlighted in his prepared remarks. The nice thing about the SKU rationalization is that we're really putting all our energy and focus around our core SKUs and brands.
So there's a lot more attention that we give today to every single one of the remaining brands and products. And perhaps in the past, the company was doing when it was when it was dealing with 4,000 SKUs across 14 brands. So I do think that allows us to be a little bit more protective and reaction to any type of macro-environment that may happen again in the world. World is very well these days. There's a lot of things years ago, probably don't and we talked about, but certainly I do feel that the way we're currently set up, it does mitigate some of that risk and gives us some some some protections on that said, I think as Joe said, we're very focused on omnichannel expansion, which is important to us because I think the one thing that we feel we are very concentrated as we are still very country known Amazon were almost 85% of our revenue. North of that is there. I think some of the initiatives that the team is doing will hopefully, hopefully help diversify us that over certainly through the second half of the year into next year and in order to mitigate any type of impact you may see from there.

Mike Zabran

And that's clear. I appreciate that just want to nail down on, is there any new market expansion that we called out in the call?
Or is that factored into the guide?

Joseph Risico

No.

Mike Zabran

Okay.
So that would just be icing on top if you're successful in those efforts from?

Joseph Risico

Yes. I mean, I think already, and I think that the term marketplace expansion zone is important, and we're accumulating, I think, has to be people being fair, maybe you are a little bit behind where we should be on the beginning. Just have to keep in mind that the one you don't exactly light up a marketplace and it automatically materializes into results, right? On particularly when you're thinking about a market or a new phenomenon like TikTok, for example, I know we see lots of reports of products that do extremely well seemingly overnight on. I think the rest of the world, it's a little more complicated. So it should be noted. It's important we're going to be in the marketplace. I mentioned they're going to be other ones and then we think of these as longer-term pillars of growth for the company.

Mike Zabran

Got it very clear that and I'll hop back in the queue.
Thanks, guys.

Joseph Risico

Thank you.

Operator

(Operator Instructions) Marvin Fong, BTIG.

Marvin Fong

Your line is open, but thanks for taking my questions and my congratulations on all the progress. I guess I'll ask maybe one of the more obvious questions, but I think a lot of a lot of both of all bankruptcy or draft E.O., which is which was probably or has been ordered for a while, but you know, you guys did announce a small acquisition. So any change in that, you know, the assets that might be for sale on St. Paul. So you know, should we view the way that you sort of use both cash and stock for fourth and hard at sort of a good template for how you might structure any deals for the foreseeable future?

Joseph Risico

Yes, I'll take this and can you can jump in and so on.
Yes, yes, we are we and we saw that ratio bankruptcy. And yes, it's been in the works to our knowledge, we and the way we think about the aggregator space is largely largely, right? They're all under tons and tons of duress. And then it's really not the aggregators at this point. It's largely the lenders that they have. There are a couple of lenders.
They have very significant portfolios of aggregators, which they've loaned money to And so would you say what you're largely seeing in the spaces, the lenders on pushing together their portfolio companies sort of that's sort of the next wave on versus I think throughout the year, which went. We're looking to trying to organize reorganize today, Tom and I think most most or most of the lenders that are we are trying to consolidate the portfolios.
That's the next move. Obviously, all the portfolio companies have significant amounts of debt, but the hope is that by consolidating them together, they will find a way out of this on. And so what that means for us is in a churn, you know, slash medium term, not likely to be opportunities to buy assets from from those from those does adheres not that where we're looking for that right are important hard obviously has nothing to do with aggregators, right? We're kind of looking way beyond that at this point, Marvin, from having said that if there was an opportunity, we would look at it. But it's not it's not something we're really we really think about at this point.

Marvin Fong

Okay.
That's fair. And I guess you mentioned you're bringing in the cooler inventory early to avoid tariffs. I guess sort of a broader topic. I mean, there's some, you know, is if the election goes a certain way, we may see much higher tariffs from product from China Securities kind of law, remind us of your strategy, I think you've read in the past you talked about efforts to kind of diversify your, you know, your supplier base into other countries. And is that is that still the case or have you moved some production outside of China or where do we stand there?
And how do you have a just a general strategy or if in fact there's a write-down

Arturo Rodriguez

You are already on or discuss the excellent progress that Joe Thanks for I guess your political beliefs aside, I think we see some serious large numbers that gets announced by our former President Trump, and it's part of the campaign rhetoric and essentially SKU rationalization as we see that kind of completion completion right now, about 85% of our inventories produced in China with about 15% bottled are assembled in North America, which is important improvement over the last year, especially if there's Congratulations kind of, I think in 2022 or even earlier kind of closer to like 95% or something.
So we have improved on that. That said, a lot of our main categories. It's difficult to move away from China right now, electronic many electronics. We continue to look and see opportunities for that. But it is difficult and outside of buying inventory like we do with beverage coolers and that which we have flexibility to do some of that, if there were tariffs to be implemented.
It's not just to adherence really across the board, so it would hit us and our competitors equally on the other side, too, like we have seen the election is still it seems like very far, whereas though it's always in everyone's from page paper these days, I do think we have some time to continue to think through that. And I do think the other side of that is it's kind of against what the Feds and the public's desire is right now or ever everyone trying to reduce inflation to openings should come down. So I do think if as tariffs were enacted, I do think that they're probably not that these widespread or is largest currently promise during what you're seeing in the current campaigns because I think it's the antithesis of what they're trying to for inflation from an administration perspective, I'd say.

Marvin Fong

Okay, that's all fair. I think for myself, I can keep going.

Operator

Yes, there are no further questions at this time. I will now turn the call back over to Ilya Grozovsky for closing remarks.

Ilya Grozovsky

As part of our shareholder purchase program, which as a reminder, investors can sign up for editorial Data I/O forward slash perks participants have the ability to ask management questions on our earnings call, but I wanted to thank all the shareholder perks participants for their loyalty and their participation in the program and their questions. I've picked a few of the most popular questions that they have submitted the first question, does have any plans to buyback company shares?
Joe ?

Joseph Risico

Yes, I'll grab that just. And so I'm again, just on behalf of myself again, what Julie said, we're grateful for the folks that are in perks on the retail folks that follow us and support us. So I'm in no, in the near term, foreseeable future, the answer is no one cash that we have on hand. We want to, we think on is going to be best deployed by investing into adhering to pursue the strategies we've we've talked about on the call today.

Ilya Grozovsky

And next question is from can the company provide an update on its efforts on TikTok specifically?

Joseph Risico

Yes. So on, as I discussed earlier on, we've got, I believe most of our products there, if not all of our products on the platform front and what we know where the results to date are, again, not material to our results. Having said that, we are spending time on investing leaning in leaning in to that platform to do our best to sort of dial in on a formula a recipe that translates into results again, just a reminder, right, TikTok is a discovery platform by people are buying things seeing content and then making a decision to buy versus versus Amazon, where you know, people are coming to the platform with the product in mind and you're searching for it specifically. So there's an adjustment there. There's a learning curve. We're working hard on it. We'll continue to talk about TikTok. And so again, appreciate the question and that's where we are today.

Ilya Grozovsky

Great. Thank you.
This concludes the Q&A portion of the call. In terms of the upcoming calendar. Turion management will be participating in the 36th Annual ROTH Conference on March 17th to 19th in Laguna Niguel, California. We look forward to speaking with you on future calls, and this ends our call. You may now disconnect.