Core Insights - Aterian, Inc. has been awarded the Orchestrators Innovation Award by Genesys for its commitment to innovation in customer experience and technology [1][2] - The company has successfully transformed its customer experience (CX) foundation through collaboration with Genesys and Amplix, leading to significant operational improvements [2] Company Overview - Aterian, Inc. is a consumer products company that builds and acquires e-commerce brands across various categories, including home and kitchen appliances, health and wellness, and air quality devices [3] - The company operates on major online marketplaces such as Amazon, Walmart, and Target, as well as its own direct-to-consumer websites [3] Customer Experience Transformation - Aterian's CX transformation resulted in a 65% reduction in total cost of ownership and a 30% improvement in service level agreement (SLA) performance during peak seasons [2] - The company achieved a 5-20% improvement in talk time across its brands, while email handle times decreased despite the launch of voice support without increasing headcount [2] - Agents are now able to manage more complex interactions across new voice and chat channels, enhancing efficiency and productivity [2] Leadership Perspective - Roi Zahut, Aterian's Chief Technology Officer, emphasized the importance of customer perception, stating that customers value feeling heard and appreciated, regardless of whether their issues are addressed by humans or AI [3]

Core Insights - Aterian, Inc. has launched Squatty Potty Wipes, marking its entry into the consumable products market, available on Amazon and its website [2][4] - The wipes are designed to be pH balanced, alcohol-free, and made from 100% plant-based fibers, catering to sensitive skin [3][7] - The CEO of Aterian emphasized that these wipes will contribute a higher margin compared to their hard goods and electronic products, aiming for long-term growth in the consumables sector [4] Product Details - Squatty Potty Wipes are available in 3- or 6-packs, with counts of 18 and 50, starting at an MSRP of $9.99 [4] - The wipes are flushable and septic safe, designed for convenience with an On-The-Go travel pouch [3][4] - The product is infused with natural ingredients like aloe, chamomile, green tea, and cucumber extract, and is certified by the Forest Sustainability Council [7] Company Strategy - The launch of Squatty Potty Wipes is part of Aterian's strategy to expand into the consumables market, particularly in health and beauty under the Healing Solutions brand [4] - Aterian focuses on building and acquiring e-commerce brands across various categories, including health and wellness [5] - The company aims to leverage its existing brand equity to foster customer loyalty and repeat purchases [4]

Core Insights - Aterian, Inc. has launched several new products across multiple brands on BestBuy.com, effective August 19, 2025, enhancing its e-commerce presence [1][2] - The launch is part of Aterian's omnichannel growth strategy aimed at reaching new audiences and broadening consumer access to its products [2] Product Offerings - hOmeLabs offers high-performance appliances designed for healthier and more efficient living, including dehumidifiers and trash cans [2] - Squatty Potty provides patented toilet stools that promote a natural squat posture for improved digestive health [3] - PurSteam specializes in home-care solutions such as steam irons and mops that simplify chores while protecting fabrics [3] - Mueller Living manufactures small kitchen appliances that combine elegant design with functionality, including steam kettles and blenders [4] - Photo Paper Direct offers professional-quality printable media for craft and photo enthusiasts, ensuring vibrant and fade-resistant results [4] Company Overview - Aterian, Inc. is a consumer products company that builds and acquires leading e-commerce brands across various categories, including home and kitchen appliances, health and wellness, and air quality devices [5] - The company sells products on major online marketplaces like Amazon, Walmart, and Target, as well as through its own direct-to-consumer websites [5]

Financial Data and Key Metrics Changes - Net revenue for Q2 2025 was $19.5 million, down from $28 million in Q2 2024, reflecting a decline driven by strategic price increases, a delayed summer season, and general consumer spending softness [8][9][30] - Adjusted EBITDA showed a loss of $2.2 million compared to a gain of $200,000 in the prior year, primarily due to lower revenue and increased marketing spend [9][33] - Gross margin decreased to 54.3% from 60.4% year-over-year, attributed to product mix and an obsolescence charge on long inventory [31] - Operating loss increased to $4.5 million from a loss of $3.2 million in the previous year, driven by reduced sales volume [33] Business Line Data and Key Metrics Changes - The company experienced a decline in sales velocity on Amazon due to price adjustments made to offset rising costs, which negatively impacted revenue [10][28] - Promotional efforts led to increased advertising spend, resulting in inefficiencies and additional one-time advertising costs of $900,000 [12] - The contribution margin for Q2 2025 was 7.8%, down from 7.4% in Q2 2024, primarily due to reduced gross margin and increased marketing costs [32] Market Data and Key Metrics Changes - The company noted broader consumer softness, with total sales volume at best seller ranks down year-over-year, indicating weaker overall consumer demand [13] - The competitive landscape in the dehumidifier space was highlighted, with Amazon 1P maintaining lower prices, making the company's products appear more expensive [11][20] Company Strategy and Development Direction - The company is focusing on a strategic pivot to consumables, with plans to launch products in the health and beauty space, leveraging existing brands [22][42] - A fixed cost reduction plan targeting $5 million to $6 million in annualized savings has been implemented, with approximately $5.5 million already identified [14][29] - The company is actively diversifying manufacturing away from China, reducing the percentage of products sourced from China from 100% to approximately 65% [16][46] Management's Comments on Operating Environment and Future Outlook - Management believes the worst of the tariff impacts is behind them and expects improved performance in the second half of 2025 [7][24] - The company anticipates net revenue for the second half of 2025 to be between $36 million and $38 million, with adjusted EBITDA expected to be breakeven to a loss of $1 million [37] - Management expressed confidence in the company's liquidity position to navigate the current environment without raising additional equity capital [37] Other Important Information - The company is leveraging AI to enhance productivity and improve customer service efficiency [15] - The launch of Squatty Potty flushable wipes is highlighted as a significant new product initiative, expected to contribute positively to the company's portfolio [22][38] Q&A Session Summary Question: Can you talk about expansion into other consumable products? - Management indicated a focus on health and beauty products, leveraging existing essential oil brands, with further announcements expected in October 2025 [41][42] Question: Are there updates on reducing Chinese-based manufacturing? - Management clarified that they aim to reduce Chinese manufacturing by approximately 40%, with a current shift to 65% sourced from China [44][46] Question: How is the performance in Latin American markets? - Management views the expansion into Latin America as a long-term play, expecting growth over the next two to three years [50][52] Question: What steps are being taken to ensure stock price compliance? - Management emphasized focusing on business growth as the best way to support long-term shareholder value, expressing optimism for the second half of the year [62] Question: What is the status of the share repurchase plan? - The share repurchase plan was suspended due to the macroeconomic environment, with a focus on preserving liquidity [64] Question: How have price increases impacted revenue? - Management noted that pricing volatility has made navigation difficult, but they expect stabilization and improved performance in the second half [66][69] Question: Will there be a scaling back in marketing spend to meet adjusted EBITDA guidance? - Management confirmed that marketing spend has been adjusted to be more focused and efficient, which should help reduce losses in the second half [71]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) [Registrant Information](index=1&type=section&id=Registrant%20Information) This section details Aterian, Inc.'s registrant information for its 10-Q report, including company specifics, stock ticker, and exchange, confirming compliance with reporting requirements - Company Name: **Aterian, Inc.**[2](index=2&type=chunk) - Jurisdiction of Incorporation: **Delaware**[2](index=2&type=chunk) Key Registrant Details | Metric | Detail | | :--- | :--- | | Ticker Symbol | ATER | | Registered Exchange | The Nasdaq Stock Market LLC | - The company is designated as a **non-accelerated filer** and a **smaller reporting company**[4](index=4&type=chunk) - As of August 12, 2025, **9,985,104 shares of common stock** were outstanding[5](index=5&type=chunk) [Table of Contents](index=3&type=section&id=Table%20of%20Contents) [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section warns investors that the quarterly report contains forward-looking statements whose actual results may differ materially, advising review of the "Risk Factors" section - This report contains "forward-looking statements," and actual results may differ significantly from these statements[8](index=8&type=chunk) - The company does not undertake any obligation to publicly revise these forward-looking statements, unless required by law[9](index=9&type=chunk) - Investors should carefully consider the factors discussed in the "Risk Factors" section[8](index=8&type=chunk) [PART I—FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements.](index=5&type=section&id=Item%201.%20Financial%20Statements.) This section presents Aterian, Inc.'s unaudited condensed consolidated financial statements and notes, covering financial position and operating results for periods ending June 30, 2025 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets decreased to **$45.421 million** from **$49.542 million**, while total liabilities increased and stockholders' equity decreased Condensed Consolidated Balance Sheets (Thousand Dollars) | Metric (Thousand Dollars) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | 10,495 | 17,998 | | Inventory | 18,496 | 13,749 | | Total Assets | 45,421 | 49,542 | | Credit Facility | 7,248 | 6,948 | | Accounts Payable | 6,124 | 3,080 | | Total Liabilities | 21,128 | 19,525 | | Total Stockholders' Equity | 24,293 | 30,017 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net revenue for the three months ended June 30, 2025, decreased **30.5%** to **$19.462 million**, with net loss increasing to **$4.860 million** and diluted loss per share to **$0.63** Condensed Consolidated Statements of Operations (Thousand Dollars) | Metric (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | 19,462 | 27,984 | 34,822 | 48,199 | | Cost of Goods Sold | 8,896 | 11,093 | 14,832 | 18,139 | | Gross Profit | 10,566 | 16,891 | 19,990 | 30,060 | | Operating Loss | (4,505) | (3,205) | (8,201) | (8,482) | | Net Loss | (4,860) | (3,629) | (8,756) | (8,791) | | Basic and Diluted Net Loss Per Share | (0.63) | (0.52) | (1.16) | (1.28) | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss for the three months ended June 30, 2025, increased to **$4.512 million**, while for six months, it decreased to **$8.273 million**, mainly due to foreign currency translation adjustments Condensed Consolidated Statements of Comprehensive Loss (Thousand Dollars) | Metric (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | (4,860) | (3,629) | (8,756) | (8,791) | | Foreign Currency Translation Adjustment | 348 | 20 | 483 | (29) | | Comprehensive Loss | (4,512) | (3,609) | (8,273) | (8,820) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased to **$24.293 million** by June 30, 2025, primarily due to a **$8.756 million** net loss, partially offset by stock-based compensation and other comprehensive income Condensed Consolidated Stockholders' Equity (Thousand Dollars) | Metric (Thousand Dollars) | January 1, 2025 | June 30, 2025 | | :--- | :--- | :--- | | Total Stockholders' Equity | 30,017 | 24,293 | | Net Loss | - | (8,756) | | Stock-Based Compensation Expense | - | 2,549 | | Other Comprehensive Income | - | 483 | Condensed Consolidated Stockholders' Equity (Thousand Dollars) | Metric (Thousand Dollars) | January 1, 2024 | June 30, 2024 | | :--- | :--- | :--- | | Total Stockholders' Equity | 36,031 | 30,887 | | Net Loss | - | (8,791) | | Stock-Based Compensation Expense | - | 3,006 | | Other Comprehensive Loss | - | (29) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, operating activities used **$8.287 million** cash, investing activities used **$6 thousand**, and financing activities provided **$388 thousand** Condensed Consolidated Statements of Cash Flows (Thousand Dollars) | Metric (Thousand Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | (8,287) | 2,896 | | Net Cash Used in Investing Activities | (6) | (242) | | Net Cash Provided by (Used in) Financing Activities | 388 | (2,336) | | Effect of Foreign Currency on Cash and Restricted Cash | 448 | (29) | | Net Change in Cash and Restricted Cash During Period | (7,457) | 289 | | Cash and Restricted Cash, End of Period | 11,686 | 22,484 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited condensed consolidated financial statements, covering company overview, accounting policies, asset/liability composition, credit, equity, and subsequent events [1. COMPANY OVERVIEW](index=11&type=section&id=1.%20COMPANY%20OVERVIEW) Aterian, Inc. is a consumer products company operating primarily through online retail channels like Amazon, Walmart, and Target, as well as its direct-to-consumer websites - The company primarily sells consumer products through online retail channels (e.g., Amazon, Walmart, Target) and its direct-to-consumer websites[29](index=29&type=chunk) - Key brands include Squatty Potty, HomeLabs, Mueller Living, PurSteam, Healing Solutions, and Photo Paper Direct (PPD)[30](index=30&type=chunk) - The company is headquartered in New Jersey, with offices in China, the Philippines, and the United Kingdom[31](index=31&type=chunk) - The company has incurred continuous losses and negative operating cash flows since inception, expecting continued losses and negative cash flows in the near term, but anticipates gradual profitability improvement with scale[32](index=32&type=chunk) [Liquidity and Going Concern](index=11&type=section&id=Liquidity%20and%20Going%20Concern) The company faces significant going concern doubts due to continuous losses, negative operating cash flow, accumulated deficit, and reliance on external capital, exacerbated by new tariffs - The company has incurred continuous losses since inception, with a net loss of **$8.8 million** for the six months ended June 30, 2025, operating cash outflow of **$8.3 million**, and an accumulated deficit of **$720.4 million**[35](index=35&type=chunk) - Changes in U.S. trade policy, particularly tariffs on Chinese imports, have significantly increased the company's cost of goods sold, pressuring profit margins[33](index=33&type=chunk) - The company announced a fixed cost reduction plan on May 14, 2025, including approximately **20 employee** layoffs, expected to save **$5 million to $6 million** annually[39](index=39&type=chunk) - The company currently has no firm commitments for additional external capital, and if unable to generate cash from operations or obtain external capital, it may not meet its obligations over the next 12 months[38](index=38&type=chunk) - Despite progress in reducing operating losses and strengthening the balance sheet, uncertainties in business operations and forecasts raise **substantial doubt about the company's ability to continue as a going concern**[41](index=41&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the significant accounting policies used in preparing the condensed consolidated financial statements, including presentation basis, estimates, consolidation, and revenue recognition [Basis of Presentation](index=13&type=section&id=Basis%20of%20Presentation) The condensed consolidated financial statements and notes are prepared in accordance with U.S. GAAP - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP[43](index=43&type=chunk) [Unaudited Interim Financial Information](index=13&type=section&id=Unaudited%20Interim%20Financial%20Information) Interim condensed consolidated financial statements are unaudited, include management's necessary adjustments, and do not necessarily indicate future performance - The interim condensed consolidated financial statements are unaudited and include normal recurring adjustments deemed necessary by management[44](index=44&type=chunk)[46](index=46&type=chunk) - Results for the three and six months ended June 30, 2025, are not necessarily indicative of results for the year ended December 31, 2025, or any future period[44](index=44&type=chunk) [Use of Estimates](index=13&type=section&id=Use%20of%20Estimates) Financial statement preparation requires management estimates and assumptions affecting reported amounts, which are continuously evaluated, but actual results may differ - Financial statement preparation requires management to make estimates and assumptions affecting reported amounts[47](index=47&type=chunk) - Management continuously evaluates estimates and assumptions, but actual results may differ from estimates[47](index=47&type=chunk) [Principles of Consolidation](index=13&type=section&id=Principles%20of%20Consolidation) The condensed consolidated financial statements include the accounts of the company and its wholly-owned subsidiaries, with all intercompany balances and transactions eliminated - The condensed consolidated financial statements include the accounts of the company and its wholly-owned subsidiaries, with all intercompany balances and transactions eliminated[48](index=48&type=chunk) [Restricted Cash](index=13&type=section&id=Restricted%20Cash) As of June 30, 2025, restricted cash includes **$0.1 million** related to Chinese subsidiaries and **$1.1 million** for letters of credit and the Midcap credit facility cash sweep account Restricted Cash Categories (Million Dollars) | Restricted Cash Category (Million Dollars) | June 30, 2025 | | :--- | :--- | | Related to Chinese Subsidiaries | 0.1 | | Related to Letters of Credit | 1.0 | | Related to Midcap Credit Facility Cash Sweep Account | 0.1 | | **Total** | **1.2** | Restricted Cash Categories (Million Dollars) | Restricted Cash Category (Million Dollars) | December 31, 2024 | | :--- | :--- | | Related to Chinese Subsidiaries | 0.1 | | Related to Letters of Credit | 1.0 | | **Total** | **1.1** | [Inventory and Cost of Goods Sold](index=13&type=section&id=Inventory%20and%20Cost%20of%20Goods%20Sold) Company inventory, primarily finished goods, is valued at the lower of FIFO or net realizable value; cost of goods sold includes manufacturing, duties, and freight - The company's inventory consists almost entirely of finished goods, valued at the lower of FIFO or net realizable value[51](index=51&type=chunk) - Cost of goods sold includes product manufacturing costs, duties, shipping, and freight[51](index=51&type=chunk) - Inventory valuation requires management judgment based on historical data and market conditions, and future changes in assumptions could lead to additional inventory write-downs[51](index=51&type=chunk) [Accounts Receivable](index=14&type=section&id=Accounts%20Receivable) Accounts receivable are presented at historical cost less an allowance for credit losses; as of June 30, 2025, the company had **no allowance for credit losses**, compared to **$147 thousand** as of December 31, 2024 - Accounts receivable are presented at historical cost less an allowance for credit losses[53](index=53&type=chunk) Allowance for Credit Losses (Thousand Dollars) | Metric (Thousand Dollars) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Allowance for Credit Losses | — | (147) | [Revenue Recognition](index=14&type=section&id=Revenue%20Recognition) Revenue is recognized under ASC Topic 606 from consumer product sales when control transfers to the customer, typically upon shipment - The company recognizes revenue under ASC Topic 606, primarily from consumer product sales[54](index=54&type=chunk) - Revenue is recognized when control of the product transfers to the customer, typically on the shipment date[56](index=56&type=chunk) - Platform fees are recorded in sales and distribution expenses, not as a reduction of revenue, because the company owns and controls all goods before transfer to customers[58](index=58&type=chunk) Sales Return Refund Liability (Million Dollars) | Metric (Million Dollars) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Sales Return Refund Liability | 0.2 | 0.3 | [Net Revenue by Category](index=15&type=section&id=Net%20Revenue%20by%20Category) For the three months ended June 30, 2025, net revenue was **$19.462 million**, with North America contributing **$18.198 million** and direct sales remaining the primary source Net Revenue by Category (Thousand Dollars) | Category (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | North America Direct Sales | 16,581 | 26,300 | | North America Wholesale/Other | 1,617 | 155 | | Other Regions Direct Sales | 1,264 | 1,529 | | **Total Net Revenue** | **19,462** | **27,984** | Net Revenue by Category (Thousand Dollars) | Category (Thousand Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | North America Direct Sales | 30,168 | 45,020 | | North America Wholesale/Other | 2,023 | 300 | | Other Regions Direct Sales | 2,631 | 2,879 | | **Total Net Revenue** | **34,822** | **48,199** | [Net Revenue by Product Categories](index=16&type=section&id=Net%20Revenue%20by%20Product%20Categories) For the three months ended June 30, 2025, net revenue was **$19.462 million**, with heating, cooling, and air quality products contributing **$4.836 million** Net Revenue by Product Category (Thousand Dollars) | Product Category (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Heating, Cooling, and Air Quality | 4,836 | 10,396 | | Kitchen Appliances | 3,288 | 2,111 | | Health & Beauty | 1,898 | 3,431 | | Cookware, Kitchen Tools & Gadgets | 421 | 1,294 | | Home Office | 1,690 | 2,310 | | Home Goods | 3,892 | 5,046 | | Essential Oils & Related Accessories | 3,431 | 3,236 | | Other | 6 | 160 | | **Total Net Revenue** | **19,462** | **27,984** | Net Revenue by Product Category (Thousand Dollars) | Product Category (Thousand Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Heating, Cooling, and Air Quality | 6,175 | 13,600 | | Kitchen Appliances | 5,080 | 4,032 | | Health & Beauty | 4,952 | 6,744 | | Cookware, Kitchen Tools & Gadgets | 1,321 | 2,690 | | Home Office | 3,274 | 4,341 | | Home Goods | 7,847 | 9,932 | | Essential Oils & Related Accessories | 6,164 | 6,443 | | Other | 9 | 417 | | **Total Net Revenue** | **34,822** | **48,199** | [Intangibles](index=17&type=section&id=Intangibles) The company reviews long-lived assets for impairment when events indicate carrying value may not be recoverable, performing recoverability tests due to new tariffs without recognizing impairment - The company reviews long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable[62](index=62&type=chunk) - As of June 30, 2025, due to concerns about revenue and profitability from new tariffs, the company performed a recoverability test but did not recognize an impairment loss[64](index=64&type=chunk) - For the three and six months ended June 30, 2024, no triggering events required testing for intangible asset impairment losses[65](index=65&type=chunk) [Fair Value of Financial Instruments](index=17&type=section&id=Fair%20Value%20of%20Financial%20Instruments) Financial instruments are recorded at historical cost, with warrant liabilities measured at fair value, decreasing to **$19 thousand** as of June 30, 2025 - The company's financial instruments (including net accounts receivable, accounts payable, and accrued and other current liabilities) are recorded at historical cost, with their carrying values approximating fair values[67](index=67&type=chunk) - Warrant liabilities related to the March 2022 common stock offering are measured at fair value using the Black-Scholes model[68](index=68&type=chunk) Fair Value of Warrant Liabilities (Thousand Dollars) | Metric (Thousand Dollars) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Fair Value of Warrant Liabilities | 19 | 109 | [Recent Accounting Pronouncements](index=18&type=section&id=Recent%20Accounting%20Pronouncements) The company is evaluating recent accounting pronouncements, including ASU 2023-09 (income taxes) and ASU 2024-03 (expense disaggregation), for future adoption and disclosure - FASB issued ASU 2023-09 in August 2023, requiring enhanced income tax disclosure transparency, which the company will adopt in its annual report for the year ended December 31, 2025[71](index=71&type=chunk) - FASB issued ASU 2024-03 in November 2024, requiring disaggregation of income statement expense information, which the company is evaluating and will adopt for fiscal years beginning after December 15, 2026[72](index=72&type=chunk) [3. ACCOUNTS RECEIVABLE](index=19&type=section&id=3.%20ACCOUNTS%20RECEIVABLE) Net accounts receivable decreased to **$3.032 million** as of June 30, 2025, from **$3.782 million**, with no allowance for credit losses recorded at the current period end Accounts Receivable (Thousand Dollars) | Metric (Thousand Dollars) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Trade Accounts Receivable | 3,032 | 3,929 | | Allowance for Credit Losses | — | (147) | | **Net Accounts Receivable** | **3,032** | **3,782** | [4. INVENTORY](index=19&type=section&id=4.%20INVENTORY) Total inventory increased to **$18.496 million** as of June 30, 2025, from **$13.749 million**, comprising **$14.617 million** on-hand and **$3.879 million** in-transit Inventory (Thousand Dollars) | Metric (Thousand Dollars) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | On-Hand Inventory | 14,617 | 12,484 | | In-Transit Inventory | 3,879 | 1,265 | | **Total Inventory** | **18,496** | **13,749** | - As of June 30, 2025, the company held approximately **$4.0 million** in on-hand inventory at Amazon, compared to **$3.5 million** as of December 31, 2024[76](index=76&type=chunk) [5. PREPAID EXPENSES AND OTHER CURRENT ASSETS](index=19&type=section&id=5.%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) Total prepaid expenses and other current assets slightly increased to **$3.287 million** as of June 30, 2025, including **$1.061 million** in restricted cash and **$905 thousand** in prepaid insurance Prepaid Expenses and Other Current Assets (Thousand Dollars) | Metric (Thousand Dollars) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Prepaid Inventory | 477 | 904 | | Restricted Cash | 1,061 | 1,015 | | Prepaid Software | 444 | 456 | | Prepaid Insurance | 905 | 528 | | Prepaid Freight Forwarder | 147 | 145 | | Other | 253 | 142 | | **Total Prepaid and Current Assets** | **3,287** | **3,190** | [6. ACCRUED AND OTHER CURRENT LIABILITIES](index=19&type=section&id=6.%20ACCRUED%20AND%20OTHER%20CURRENT%20LIABILITIES) Total accrued and other current liabilities decreased to **$7.149 million** as of June 30, 2025, with accrued compensation significantly reduced and new accrued restructuring costs Accrued and Other Current Liabilities (Thousand Dollars) | Metric (Thousand Dollars) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued Compensation Costs | 14 | 2,500 | | Accrued Restructuring Costs | 1,432 | — | | Accrued Professional and Consulting Fees | 177 | 235 | | Sales Return Reserve | 694 | 989 | | Accrued Insurance Premium Financing | 602 | 305 | | Warrant Liabilities | 19 | 109 | | **Total Accrued and Current Liabilities** | **7,149** | **8,804** | [7. CREDIT FACILITY AND WARRANTS](index=21&type=section&id=7.%20CREDIT%20FACILITY%20AND%20WARRANTS) This section details the company's credit and security agreement with MidCap Funding IV Trust, including terms, amendments, financial covenants, and related warrants [MidCap Credit Facility](index=21&type=section&id=MidCap%20Credit%20Facility) The MidCap credit facility, amended in February 2024 to extend its term and reduce minimum liquidity covenants, had a balance of **$7.248 million** as of June 30, 2025, with the company in compliance - The company entered into a credit agreement with MidCap on December 22, 2021, for a revolving credit facility of up to **$40.0 million**[79](index=79&type=chunk) - The credit facility was amended on February 23, 2024, extending the term to **December 2026** and reducing the minimum liquidity financial covenant from **$15.0 million** to **$6.8 million**[83](index=83&type=chunk) - As of June 30, 2025, the company was in compliance with the financial covenants in the credit agreement[85](index=85&type=chunk) MidCap Credit Facility (Thousand Dollars) | Metric (Thousand Dollars) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total MidCap Credit Facility | 7,248 | 6,948 | [Interest Expense, Net](index=21&type=section&id=Interest%20Expense,%20Net) Net interest expense for the three months ended June 30, 2025, was **$222 thousand**, remaining flat, while for six months, it decreased to **$397 thousand** Net Interest Expense (Thousand Dollars) | Metric (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Interest Expense | 253 | 296 | 474 | 689 | | Interest Income | (31) | (68) | (77) | (137) | | **Net Interest Expense** | **222** | **228** | **397** | **552** | [Securities Purchase Agreement and Warrants](index=22&type=section&id=Securities%20Purchase%20Agreement%20and%20Warrants) In March 2022, the company raised **$27.5 million** through a private placement of common stock and warrants, with **$19 thousand** in unexercised warrant liabilities as of June 30, 2025 - The company raised approximately **$27.5 million** in March 2022 through a private placement of common stock and warrants[89](index=89&type=chunk) - As of June 30, 2025, **590,637 common stock warrants** remain unexercised and are recorded as a **$19 thousand** liability on the company's condensed consolidated balance sheets[89](index=89&type=chunk) [8. STOCK-BASED COMPENSATION](index=23&type=section&id=8.%20STOCK-BASED%20COMPENSATION) The company operates multiple equity incentive plans, with **841,603** shares available for future grants under the 2018 plan and **$3.2 million** in unrecognized stock-based compensation expense - The company maintains the 2014 Amended and Restated Equity Incentive Plan, the 2018 Equity Incentive Plan, and the 2022 Inducement Equity Incentive Plan[90](index=90&type=chunk)[91](index=91&type=chunk)[93](index=93&type=chunk) Shares Available for Future Grant | Plan Name | Shares Available for Future Grant as of June 30, 2025 | | :--- | :--- | | 2018 Equity Incentive Plan | 841,603 | | 2022 Inducement Equity Incentive Plan | 193,476 | - As of June 30, 2025, total unrecognized compensation expense related to unvested restricted common stock was **$3.2 million**, expected to be recognized over a weighted-average period of **1.85 years**[98](index=98&type=chunk) Stock-Based Compensation Expense (Thousand Dollars) | Metric (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales and Distribution Expenses | 125 | 946 | 317 | 1,245 | | General and Administrative Expenses | (3) | 1,975 | 588 | 3,343 | | **Total Stock-Based Compensation Expense** | **122** | **2,921** | **905** | **4,588** | [9. NET LOSS PER SHARE](index=26&type=section&id=9.%20NET%20LOSS%20PER%20SHARE) Basic and diluted net loss per share are calculated by dividing net loss by weighted-average common shares outstanding, with both being equal due to the company's net loss position - Basic and diluted net loss per share are calculated by dividing net loss by the weighted-average number of common shares outstanding during the period[100](index=100&type=chunk) - Since the company is in a net loss position, all common stock purchase options are considered anti-dilutive, resulting in equal basic and diluted net loss per share[100](index=100&type=chunk) Net Loss Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Loss (Thousand Dollars) | (4,860) | (3,629) | (8,756) | (8,791) | | Weighted-Average Shares Outstanding (Thousands) | 7,674,910 | 6,973,218 | 7,564,523 | 6,881,648 | | **Basic and Diluted Net Loss Per Share** | **(0.63)** | **(0.52)** | **(1.16)** | **(1.28)** | [10. COMMITMENTS AND CONTINGENCIES](index=26&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) This section discloses potential sales tax liabilities of approximately **$0.7 million** and legal proceedings, with the company maintaining sufficient insurance coverage to mitigate risks [Sales or Other Similar Taxes](index=26&type=section&id=Sales%20or%20Other%20Similar%20Taxes) The company estimates potential sales tax liabilities of approximately **$0.7 million** due to past sales in certain states before establishing nexus, recorded in accrued liabilities - The company estimates potential sales tax liabilities (including current sales tax payable) of approximately **$0.7 million**, recorded in accrued and other current liabilities[103](index=103&type=chunk) [Legal Proceedings](index=26&type=section&id=Legal%20Proceedings) The company is involved in various legal proceedings and claims, but believes their ultimate outcome will not materially adversely affect its financial position or operating results - The company is subject to various legal proceedings and claims from time to time, but believes the ultimate outcome will not materially adversely affect its financial position or operating results[104](index=104&type=chunk) - The company maintains adequate insurance coverage to further mitigate risks[104](index=104&type=chunk) [11. INTANGIBLES](index=27&type=section&id=11.%20INTANGIBLES) Net book value of intangible assets decreased to **$8.975 million** as of June 30, 2025, primarily comprising trademarks and customer relationships, with **$8.975 million** in total expected future amortization Intangible Assets (Thousand Dollars) | Intangible Asset Category (Thousand Dollars) | Net Book Value as of June 30, 2025 | Net Book Value as of December 31, 2024 | | :--- | :--- | :--- | | Trademarks | 5,628 | 6,119 | | Customer Relationships | 3,325 | 3,610 | | Software | 22 | 28 | | **Total Intangible Assets** | **8,975** | **9,757** | Estimated Amortization Expense (Thousand Dollars) | Amortization Year | Estimated Amortization (Thousand Dollars) | | :--- | :--- | | Remaining 2025 | 782 | | 2026 | 1,564 | | 2027 | 1,554 | | 2028 | 1,551 | | 2029 | 1,551 | | 2030 | 1,529 | | Thereafter | 444 | | **Total** | **8,975** | [12. RESTRUCTURING](index=28&type=section&id=12.%20RESTRUCTURING) The company announced a fixed cost reduction plan on May 14, 2025, including approximately **20 employee** layoffs, incurring **$1.8 million** in restructuring charges and expecting **$5 million to $6 million** in annual savings - The company announced a fixed cost reduction plan on May 14, 2025, including approximately **20 employee** layoffs, expected to be completed by the end of Q3 2025[106](index=106&type=chunk) - For the three and six months ended June 30, 2025, the company recognized approximately **$1.8 million** in restructuring charges, primarily related to severance[106](index=106&type=chunk)[110](index=110&type=chunk) - The plan is expected to result in annual savings of approximately **$5 million to $6 million**[106](index=106&type=chunk) Restructuring Costs (Thousand Dollars) | Restructuring Cost Category (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Employee Severance | 1,795 | 132 | 1,795 | 683 | | Other Restructuring Costs | — | (115) | — | (108) | | **Total Restructuring Costs** | **1,795** | **17** | **1,795** | **575** | - As of June 30, 2025, the company's restructuring liability was **$1.4 million**, recorded in accrued expenses and other current liabilities[111](index=111&type=chunk) [13. SEGMENT INFORMATION](index=29&type=section&id=13.%20SEGMENT%20INFORMATION) Aterian, Inc. operates as a single operating segment, with the CEO evaluating financial performance and allocating resources based on consolidated operating margin and net income - The company is identified as a **single operating segment**[113](index=113&type=chunk) - The Chief Operating Decision Maker (CEO) evaluates financial performance and allocates resources based on consolidated operating margin and net income[113](index=113&type=chunk) Segment Information (Thousand Dollars) | Metric (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | 19,462 | 27,984 | 34,822 | 48,199 | | Cost of Goods Sold | 8,896 | 11,093 | 14,832 | 18,139 | | Variable Cost of Goods Sold | 9,048 | 12,024 | 16,421 | 22,345 | | Other Vendor and Compensation Expenses | 5,497 | 4,721 | 10,053 | 10,751 | | Net Loss | (4,860) | (3,629) | (8,756) | (8,791) | [14. SUBSEQUENT EVENTS](index=29&type=section&id=14.%20SUBSEQUENT%20EVENTS) On July 4, 2025, the U.S. enacted the OBBBA, extending tax provisions and modifying international tax frameworks, which the company is currently assessing for financial statement impact - On July 4, 2025, the U.S. enacted the Omnibus Budget Reconciliation Act (OBBBA), which includes permanently extending certain expiring provisions of the Tax Cuts and Jobs Act, modifying international tax frameworks, and reinstating preferential tax treatment for certain business provisions[117](index=117&type=chunk) - The company is currently evaluating the impact of this act on its consolidated financial statements[117](index=117&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's discussion and analysis of the company's financial condition and operating results, highlighting macroeconomic factors, tariffs, and restructuring impacts [Overview](index=30&type=section&id=Overview) Aterian is a consumer products company selling proprietary brands across various categories through online retail channels and its direct-to-consumer websites - The company primarily sells consumer products through online retail channels (e.g., Amazon, Walmart, Target) and its direct-to-consumer websites[120](index=120&type=chunk) - Key brands include Squatty Potty, HomeLabs, Mueller Living, PurSteam, Healing Solutions, and Photo Paper Direct (PPD)[121](index=121&type=chunk) [Seasonality of Business and Product Mix](index=30&type=section&id=Seasonality%20of%20Business%20and%20Product%20Mix) Product sales are seasonal, with environmental appliances peaking in summer and other categories in Q4, while global supply chain costs and geopolitical events impact margins - Environmental appliance products experience significantly higher sales during the summer months[122](index=122&type=chunk) - Essential oils, small kitchen appliances, and accessories typically see higher sales in the fourth quarter, including Thanksgiving and Christmas[122](index=122&type=chunk) - Global supply chain costs, lead times, delays, and global and geopolitical events directly impact the company's profit margins[123](index=123&type=chunk) [Financial Operations Overview](index=30&type=section&id=Financial%20Operations%20Overview) This section outlines key financial operations, including net revenue sources, cost of goods sold impacted by tariffs, and the composition of sales, general, and administrative expenses [Net Revenue](index=30&type=section&id=Net%20Revenue) Company revenue primarily stems from U.S. consumer product sales via online retail and direct-to-consumer channels, recognized when product control transfers to the customer - The company's revenue primarily derives from selling consumer products in the U.S. through online retail channels and its direct-to-consumer websites[124](index=124&type=chunk) - Revenue is recognized when control of the product transfers to the customer, typically on the shipment date[124](index=124&type=chunk) [Cost of Goods Sold](index=30&type=section&id=Cost%20of%20Goods%20Sold) Cost of goods sold includes inventory book value, manufacturing costs, duties, and freight, increasing in Q1 and Q2 2025 due to new U.S. tariffs on Chinese imports - Cost of goods sold includes the book value of inventory, encompassing manufacturer product costs, duties, and shipping and freight[125](index=125&type=chunk) - In Q1 and Q2 2025, new tariffs imposed by the U.S. government on Chinese imports led to increased cost of goods sold[126](index=126&type=chunk) - The company partially offset increased costs through price increases, which resulted in lower sales volume[126](index=126&type=chunk) [Expenses](index=32&type=section&id=Expenses) This section details the company's expenses, including sales and distribution, general and administrative, and net interest expense, outlining their components and influencing factors [Sales and Distribution Expenses](index=32&type=section&id=Sales%20and%20Distribution%20Expenses) Sales and distribution expenses encompass online advertising, marketing, platform commissions, fulfillment, and warehousing costs, fluctuating with sales volume, product mix, and fulfillment methods - Sales and distribution expenses include online advertising, marketing, and promotional costs, sales and e-commerce platform commissions, fulfillment (including shipping and handling), and warehousing costs[128](index=128&type=chunk) - These expenses fluctuate with sales volume, product mix, and fulfillment methods (FBM or FBA/WFS)[128](index=128&type=chunk) [General and Administrative Expenses](index=32&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses include executive, finance, legal, and HR compensation, facilities, insurance, travel, professional services, and public company costs - General and administrative expenses include cash and stock-based compensation and employee benefits for executive management, financial administration, legal, and human resources departments[129](index=129&type=chunk) - They also include facility costs, insurance, travel, professional services, and other general administrative expenses, including costs incurred as a public company[129](index=129&type=chunk) [Interest Expense, Net](index=32&type=section&id=Interest%20Expense,%20Net) Net interest expense includes interest costs from the credit facility and amortization of deferred financing costs and debt discounts - Net interest expense includes interest costs from the credit facility, as well as amortization of deferred financing costs and debt discounts related to the credit facility[130](index=130&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) This section compares operating results for the three and six months ended June 30, 2025 and 2024, showing declines in net revenue and gross profit due to macroeconomic factors and tariffs [Comparison of the Three Months Ended June 30, 2025 and 2024](index=33&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) For the three months ended June 30, 2025, net revenue decreased **30.5%** to **$19.5 million**, gross profit fell **37.4%**, and net loss increased to **$4.9 million** Operating Results Comparison (Thousand Dollars) | Metric (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | 19,462 | 27,984 | (8,522) | (30.5)% | | Cost of Goods Sold | 8,896 | 11,093 | (2,197) | (19.8)% | | Gross Profit | 10,566 | 16,891 | (6,325) | (37.4)% | | Operating Loss | (4,505) | (3,205) | (1,300) | (40.6)% | | Net Loss | (4,860) | (3,629) | (1,231) | (33.9)% | Operating Results as Percentage of Net Revenue | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Revenue Percentage | 100.0% | 100.0% | | Cost of Goods Sold Percentage | 45.7% | 39.6% | | Gross Profit Percentage | 54.3% | 60.4% | | Sales and Distribution Expenses Percentage | 63.5% | 54.2% | | General and Administrative Expenses Percentage | 13.9% | 17.6% | | Operating Loss Percentage | (23.1)% | (11.5)% | | Net Loss Percentage | (25.0)% | (13.0)% | [Net Revenue](index=34&type=section&id=Net%20Revenue) Net revenue for the three months ended June 30, 2025, decreased **30.5%** to **$19.5 million**, primarily due to a **$10.0 million** decline in direct net revenue from tariffs and macroeconomic challenges - For the three months ended June 30, 2025, net revenue decreased **30.5%** to **$19.5 million** year-over-year[134](index=134&type=chunk) - Direct net revenue decreased by **$10.0 million (35.9%)**, primarily due to increased sales costs from new tariffs, price increases to mitigate impact, and challenging macroeconomic conditions leading to lower sales volume[134](index=134&type=chunk) - Sales across all product categories, except kitchen appliances, decreased compared to the prior year period, mainly due to the macroeconomic environment and price increases from tariffs[134](index=134&type=chunk) [Cost of Goods Sold and Gross Profit](index=34&type=section&id=Cost%20of%20Goods%20Sold%20and%20Gross%20Profit) For the three months ended June 30, 2025, cost of goods sold decreased **19.8%** to **$8.9 million**, while gross profit margin declined to **54.3%** due to product mix and tariffs - For the three months ended June 30, 2025, cost of goods sold decreased **19.8%** to **$8.9 million** year-over-year, primarily due to lower sales volume[135](index=135&type=chunk) - Gross profit margin decreased from **60.4%** to **54.3%**, primarily due to product mix changes, increased sales costs from new tariffs, and price increases partially offsetting costs[136](index=136&type=chunk) [Sales and Distribution Expenses](index=34&type=section&id=Sales%20and%20Distribution%20Expenses) Sales and distribution expenses decreased **18.5%** to **$12.4 million** for the three months ended June 30, 2025, but increased as a percentage of net revenue to **63.3%** - For the three months ended June 30, 2025, sales and distribution expenses decreased **18.5%** to **$12.4 million** year-over-year, primarily due to lower variable sales and distribution expenses from reduced product volume[138](index=138&type=chunk) - Fixed sales and distribution costs (including stock-based compensation) increased from **$3.1 million** to **$3.3 million**, primarily due to increased restructuring costs, partially offset by lower stock-based compensation and miscellaneous office expenses[139](index=139&type=chunk) - As a percentage of net revenue, sales and distribution expenses increased from **54.2%** to **63.3%**, primarily due to product mix and increased marketing costs[140](index=140&type=chunk) [General and Administrative Expenses](index=36&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses decreased **45.0%** for the three months ended June 30, 2025, primarily due to reduced stock-based compensation and headcount costs - For the three months ended June 30, 2025, general and administrative expenses decreased **45.0%** year-over-year[142](index=142&type=chunk) - This was primarily due to a **$2.0 million** decrease in stock-based compensation, a **$0.4 million** reduction in employee headcount expenses, and a **$0.5 million** decrease in miscellaneous costs, partially offset by a **$0.7 million** increase in restructuring costs[142](index=142&type=chunk) [Interest expense, net](index=36&type=section&id=Interest%20expense,%20net) Net interest expense for the three months ended June 30, 2025, was **$222 thousand**, remaining relatively flat compared to the prior year period - For the three months ended June 30, 2025, net interest expense was **$222 thousand**, relatively flat compared to **$228 thousand** in the prior year period[143](index=143&type=chunk) [Change in fair market value of warrant liabilities](index=36&type=section&id=Change%20in%20fair%20market%20value%20of%20warrant%20liabilities) The change in fair market value of warrant liabilities for the three months ended June 30, 2025, was a **negative $35 thousand**, an improvement linked to a decrease in period-end stock price - The change in fair market value of warrant liabilities for the three months ended June 30, 2025, was a **negative $35 thousand**, an improvement from **negative $52 thousand** in the prior year period, primarily due to a decrease in period-end stock price[144](index=144&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=37&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) For the six months ended June 30, 2025, net revenue decreased **27.8%** to **$34.8 million**, gross profit fell **33.5%**, and net loss remained flat at **$8.8 million** Operating Results Comparison (Thousand Dollars) | Metric (Thousand Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | 34,822 | 48,199 | (13,377) | (27.8)% | | Cost of Goods Sold | 14,832 | 18,139 | (3,307) | (18.2)% | | Gross Profit | 19,990 | 30,060 | (10,070) | (33.5)% | | Operating Loss | (8,201) | (8,482) | 281 | 3.3% | | Net Loss | (8,756) | (8,791) | 35 | 0.4% | Operating Results as Percentage of Net Revenue | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Revenue Percentage | 100.0% | 100.0% | | Cost of Goods Sold Percentage | 42.6% | 37.6% | | Gross Profit Percentage | 57.4% | 62.4% | | Sales and Distribution Expenses Percentage | 63.3% | 58.9% | | General and Administrative Expenses Percentage | 17.7% | 21.1% | | Operating Loss Percentage | (23.6)% | (17.6)% | | Net Loss Percentage | (25.1)% | (18.2)% | [Net Revenue](index=38&type=section&id=Net%20Revenue) Net revenue for the six months ended June 30, 2025, decreased **27.8%** to **$34.9 million**, driven by a **$15.1 million** decline in direct net revenue due to program changes and tariffs - For the six months ended June 30, 2025, net revenue decreased **27.8%** to **$34.9 million** year-over-year[147](index=147&type=chunk) - Direct net revenue decreased by **$15.1 million (31.5%)**, linked to changes in Amazon's marketing affiliate program, price increases due to new tariffs, and weaker consumer demand in the macroeconomic environment[147](index=147&type=chunk) - Sales across all product categories, except kitchen appliances, decreased compared to the prior year period, mainly due to the macroeconomic environment and price increases from tariffs[148](index=148&type=chunk) [Cost of Goods Sold and Gross Profit](index=38&type=section&id=Cost%20of%20Goods%20Sold%20and%20Gross%20Profit) For the six months ended June 30, 2025, cost of goods sold decreased **18.2%** to **$14.8 million**, while gross profit margin declined to **57.4%** due to product mix and tariffs - For the six months ended June 30, 2025, cost of goods sold decreased **18.2%** to **$14.8 million** year-over-year, primarily due to lower sales volume[149](index=149&type=chunk) - Gross profit margin decreased from **62.4%** to **57.4%**, primarily due to product mix changes, increased sales costs from new tariffs, and price increases partially offsetting costs[150](index=150&type=chunk) [Sales and Distribution Expenses](index=38&type=section&id=Sales%20and%20Distribution%20Expenses) Sales and distribution expenses decreased **22.4%** to **$22.0 million** for the six months ended June 30, 2025, but increased as a percentage of net revenue to **63.1%** - For the six months ended June 30, 2025, sales and distribution expenses decreased **22.4%** to **$22.0 million** year-over-year, primarily due to lower variable sales and distribution expenses from reduced product volume[152](index=152&type=chunk) - Fixed sales and distribution costs (including stock-based compensation) decreased from **$6.0 million** to **$5.6 million**, primarily due to lower stock-based compensation, employee headcount expenses, and miscellaneous office expenses, partially offset by increased restructuring costs[153](index=153&type=chunk) - As a percentage of net revenue, sales and distribution expenses increased from **58.9%** to **63.1%**, primarily due to product mix and increased marketing costs[154](index=154&type=chunk) [General and Administrative Expenses](index=40&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses decreased **39.3%** for the six months ended June 30, 2025, primarily due to reduced stock-based compensation and headcount costs - For the six months ended June 30, 2025, general and administrative expenses decreased **39.3%** year-over-year[156](index=156&type=chunk) - This was primarily due to a **$2.8 million** decrease in stock-based compensation, a **$0.8 million** reduction in employee headcount expenses, and a **$0.8 million** decrease in miscellaneous costs, partially offset by a **$0.4 million** increase in restructuring costs[156](index=156&type=chunk) [Interest expense, net](index=40&type=section&id=Interest%20expense,%20net) Net interest expense for the six months ended June 30, 2025, decreased **28.1%** to **$397 thousand**, mainly due to lower average borrowings and reduced interest income - For the six months ended June 30, 2025, net interest expense decreased **28.1%** to **$397 thousand** year-over-year, primarily due to a **$0.2 million** decrease in interest expense from lower average borrowings and a **$0.1 million** decrease in interest income[157](index=157&type=chunk) [Change in fair market value of warrant liabilities](index=40&type=section&id=Change%20in%20fair%20market%20value%20of%20warrant%20liabilities) The change in fair market value of warrant liabilities for the six months ended June 30, 2025, was a **negative $90 thousand**, an improvement linked to a decrease in period-end stock price - The change in fair market value of warrant liabilities for the six months ended June 30, 2025, was a **negative $90 thousand**, an improvement from **negative $569 thousand** in the prior year period, primarily due to a decrease in period-end stock price[158](index=158&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flow, liquidity, and going concern status, highlighting continuous losses, negative operating cash flow, and the impact of tariffs [Cash Flows for the Six Months Ended June 30, 2025 and 2024](index=41&type=section&id=Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) For the six months ended June 30, 2025, operating activities used **$8.3 million** cash, investing activities used **$6 thousand**, and financing activities provided **$0.4 million** Cash Flows (Thousand Dollars) | Cash Flow Category (Thousand Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | (8,287) | 2,896 | | Net Cash Used in Investing Activities | (6) | (242) | | Net Cash Provided by (Used in) Financing Activities | 388 | (2,336) | | Effect of Exchange Rates on Cash | 448 | (29) | | **Net Change in Cash and Restricted Cash During Period** | **(7,457)** | **289** | [Net Cash (Used in) Provided by Operating Activities](index=41&type=section&id=Net%20Cash%20(Used%20in)%20Provided%20by%20Operating%20Activities) Net cash used in operating activities for the six months ended June 30, 2025, was **$8.3 million**, driven by net cash operating loss and working capital outflows for inventory - Net cash used in operating activities for the six months ended June 30, 2025, was **$8.3 million**, primarily due to a net cash operating loss of **$6.7 million** and working capital outflows of **$1.6 million**, linked to summer air quality product procurement and inventory accumulation to avoid high tariffs[161](index=161&type=chunk) - For the six months ended June 30, 2024, net cash provided by operating activities was **$2.9 million**, primarily due to working capital inflows of **$7.9 million**, related to seasonal air quality product payment timing[162](index=162&type=chunk) [Net Cash Used in Investing Activities](index=41&type=section&id=Net%20Cash%20Used%20in%20Investing%20Activities) Net cash used in investing activities for the six months ended June 30, 2025, was **$6 thousand**, primarily for property and equipment purchases - Net cash used in investing activities for the six months ended June 30, 2025, was **$6 thousand**, primarily for property and equipment purchases[163](index=163&type=chunk) - For the six months ended June 30, 2024, net cash used in investing activities was **$0.2 million**, primarily for minority equity investments[163](index=163&type=chunk) [Net Cash Provided by (Used in) Financing Activities](index=41&type=section&id=Net%20Cash%20Provided%20by%20(Used%20in)%20Financing%20Activities) Net cash provided by financing activities for the six months ended June 30, 2025, was **$0.4 million**, mainly from MidCap credit facility borrowings and insurance financing - Net cash provided by financing activities for the six months ended June 30, 2025, was **$0.4 million**, primarily from net borrowings on the MidCap Credit Facility and net proceeds from insurance financing, partially offset by seller note repayments[164](index=164&type=chunk) - For the six months ended June 30, 2024, net cash used in financing activities was **$2.3 million**, primarily for net repayments on the MidCap Credit Facility and payments for insurance obligations[165](index=165&type=chunk) [Liquidity and Going Concern](index=42&type=section&id=Liquidity%20and%20Going%20Concern) The company faces significant going concern doubts due to continuous losses, negative operating cash flow, accumulated deficit, and reliance on external capital, exacerbated by new tariffs - The company has incurred continuous losses since inception, with a net loss of **$8.8 million** for the six months ended June 30, 2025, operating cash outflow of **$8.3 million**, and an accumulated deficit of **$720.4 million**[169](index=169&type=chunk) - Changes in U.S. trade policy, particularly tariffs on Chinese imports, have significantly increased the company's cost of goods sold, pressuring profit margins[167](index=167&type=chunk) - The company announced a fixed cost reduction plan on May 14, 2025, including approximately **20 employee** layoffs, expected to save **$5 million to $6 million** annually[172](index=172&type=chunk)[173](index=173&type=chunk) - The company currently has no firm commitments for additional external capital, and if unable to generate cash from operations or obtain external capital, it may not meet its obligations over the next 12 months[171](index=171&type=chunk) - Despite progress in reducing operating losses and strengthening the balance sheet, uncertainties in business operations and forecasts raise **substantial doubt about the company's ability to continue as a going concern**[175](index=175&type=chunk) [MidCap Credit Facility](index=43&type=section&id=MidCap%20Credit%20Facility) The MidCap credit facility, amended in February 2024 to extend its term and reduce minimum liquidity covenants, had a balance of **$7.2 million** as of June 30, 2025, with the company in compliance - The company's credit facility with MidCap was amended on February 23, 2024, extending the term to **December 2026**[178](index=178&type=chunk) - The minimum liquidity financial covenant was reduced from **$15.0 million** to **$6.8 million**[178](index=178&type=chunk) - As of June 30, 2025, the MidCap Credit Facility had an outstanding balance of **$7.2 million**, and the company was in compliance with all financial covenants[180](index=180&type=chunk) [Share Repurchase](index=43&type=section&id=Share%20Repurchase) The board authorized a **$3.0 million** share repurchase program in March 2025, but it was temporarily suspended in May 2025, with no repurchases made as of August 12, 2025 - The board of directors authorized a share repurchase program on March 14, 2025, to repurchase up to **$3.0 million** of common stock[181](index=181&type=chunk) - The company temporarily suspended the share repurchase program on May 2, 2025[181](index=181&type=chunk) - As of August 12, 2025, the company had not made any share repurchases[181](index=181&type=chunk) [Trade Policy](index=43&type=section&id=Trade%20Policy) New U.S. tariffs on Chinese imports in Q1 2025 are expected to increase product costs and reduce consumer demand, with the company evaluating mitigation strategies - In Q1 2025, the U.S. government announced a series of new tariff policies, particularly targeting Chinese imports[182](index=182&type=chunk) - These tariffs could significantly increase the company's import costs and potentially lead to higher prices, thereby reducing consumer demand[183](index=183&type=chunk) - The company is evaluating mitigation strategies, including exploring alternative sourcing, working with suppliers to manage cost increases, and implementing price increases[183](index=183&type=chunk) [Non-GAAP Financial Measures](index=45&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP financial measures like Contribution Margin and Adjusted EBITDA to help investors understand core operating performance, not as GAAP substitutes - The company uses non-GAAP measures such as Contribution Margin, Contribution Margin as a percentage of net revenue, EBITDA, and Adjusted EBITDA to assess core operating performance[185](index=185&type=chunk) - Contribution Margin is defined as gross profit less e-commerce platform commissions, online advertising, sales, and fulfillment expenses[186](index=186&type=chunk) - Adjusted EBITDA is defined as EBITDA adjusted for stock-based compensation expense, change in fair market value of warrant liabilities, restructuring charges, and other net expenses[186](index=186&type=chunk) - These non-GAAP measures should not be considered as substitutes for operating loss or net loss under GAAP and may not be comparable to similarly titled measures used by other companies[190](index=190&type=chunk) [Contribution Margin](index=47&type=section&id=Contribution%20Margin) Contribution Margin for the three months ended June 30, 2025, significantly decreased to **$1.518 million** (**7.8%**), and for six months, it also declined to **$3.569 million** (**10.2%**) Contribution Margin (Thousand Dollars) | Metric (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | 10,566 | 16,891 | 19,990 | 30,060 | | Less: E-commerce Platform Commissions, Online Advertising, Sales, and Fulfillment Expenses | (9,048) | (12,024) | (16,421) | (22,345) | | **Contribution Margin** | **1,518** | **4,867** | **3,569** | **7,715** | | Gross Profit as a Percentage of Net Revenue | 54.3% | 60.4% | 57.4% | 62.4% | | **Contribution Margin as a Percentage of Net Revenue** | **7.8%** | **17.4%** | **10.2%** | **16.0%** | [Adjusted EBITDA](index=47&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA for the three months ended June 30, 2025, worsened to **negative $2.184 million**, and for six months, to **negative $4.689 million**, with negative percentages of net revenue Adjusted EBITDA (Thousand Dollars) | Metric (Thousand Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | (4,860) | (3,629) | (8,756) | (8,791) | | EBITDA | (4,223) | (2,766) | (7,516) | (7,105) | | Other Net Expenses | 157 | 43 | 217 | 50 | | Change in Fair Market Value of Warrant Liabilities | (35) | (52) | (90) | (569) | | Restructuring Charges | 1,795 | 17 | 1,795 | 575 | | Stock-Based Compensation Expense | 122 | 2,921 | 905 | 4,588 | | **Adjusted EBITDA** | **(2,184)** | **163** | **(4,689)** | **(2,461)** | | Net Loss as a Percentage of Net Revenue | (25.0)% | (13.0)% | (25.1)% | (18.2)% | | **Adjusted EBITDA as a Percentage of Net Revenue** | **(11.2)%** | **0.6%** | **(13.5)%** | **(5.1)%** | [Critical Accounting Policies and Use of Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) This section reiterates critical accounting policies and estimates, including revenue recognition and intangible asset impairment, with no significant changes since December 31, 2024 [Intangible asset valuation](index=48&type=section&id=Intangible%20asset%20valuation) The company reviews long-lived assets for impairment when events indicate carrying value may not be recoverable, performing recoverability tests due to new tariffs without recognizing impairment - The company reviews long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable[197](index=197&type=chunk) - As of June 30, 2025, due to concerns about revenue and profitability from new tariffs, the company performed a recoverability test but did not recognize an impairment loss[198](index=198&type=chunk) - Intangible asset valuation involves judgments and estimates regarding market growth rates, sales price and volume growth, foreign exchange rate fluctuations, raw material prices and availability, and future operating efficiencies[201](index=201&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section states that quantitative and qualitative disclosures about market risk are not applicable to the company's business - This section is not applicable for quantitative and qualitative disclosures about market risk[203](index=203&type=chunk) [Item 4. Controls and Procedures.](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures.) This section discusses the effectiveness of disclosure controls and procedures and changes in internal control over financial reporting, which management deemed effective with no material changes [Evaluation of Disclosure Controls and Procedures](index=49&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, with CEO and CFO involvement, assessed the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were effective - The company's management assessed the effectiveness of its disclosure controls and procedures as of June 30, 2025, concluding they were effective[205](index=205&type=chunk) [Changes in Internal Control over Financial Reporting](index=49&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) There were no material changes in the company's internal control over financial reporting during the six months ended June 30, 2025 - There were no material changes in the company's internal control over financial reporting during the six months ended June 30, 2025[206](index=206&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=49&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) Management acknowledges that controls provide only reasonable assurance of achieving objectives, requiring judgment in evaluating benefits versus costs - Any control and procedure, no matter how well designed and operated, can only provide reasonable assurance of achieving its control objectives[207](index=207&type=chunk) - Management must exercise judgment in evaluating the benefits of controls against their costs[207](index=207&type=chunk) [PART II—OTHER INFORMATION](index=50&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings.](index=50&type=section&id=Item%201.%20Legal%20Proceedings.) The company is involved in various legal proceedings and claims, but believes their ultimate outcome will not materially adversely affect its financial position or operating results - The company is subject to various legal proceedings and claims from time to time, but believes the ultimate outcome will not materially adversely affect its financial position or operating results[209](index=209&type=chunk) - The company maintains adequate insurance coverage to further mitigate risks[209](index=209&type=chunk) [Item 1A. Risk Factors.](index=50&type=section&id=Item%201A.%20Risk%20Factors.) This section details various risks, including business operations (e.g., continuous losses, going concern doubts, growth strategy challenges), litigation, government regulation, and common stock ownership risks [Risks Relating to Our Business](index=50&type=section&id=Risks%20Relating%20to%20Our%20Business) The company faces risks from continuous losses, negative operating cash flow, and going concern doubts, alongside challenges in growth strategies and retaining key personnel - The company has a history of losses and may not achieve or maintain profitability or positive cash flow, with its independent registered public accounting firm raising **substantial doubt about its ability to continue as a going concern**[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk) - The company's growth strategies, including new product, market, and geographic expansion

[Executive Summary & Outlook](index=1&type=section&id=1.%20Executive%20Summary%20%26%20Outlook) Aterian addresses Q2 2025 challenges with strategic cost optimization, supply chain improvements, and new product launches, projecting improved financial performance for H2 2025 [Management Commentary](index=1&type=section&id=1.1.%20Management%20Commentary) CEO and CFO discuss Q2 2025 tariff challenges, strategic responses including cost optimization, new product launches, and workforce reductions, expecting H2 2025 performance improvement - CEO Arturo Rodriguez stated that the team responded to significant tariff volatility with swift actions, believing the most disruptive impacts are now behind them[2](index=2&type=chunk) - The company is on track for new product introductions, including the September 2025 full launch of Squatty Potty flushable wipes, marking a strategic expansion into the higher-margin consumables market[2](index=2&type=chunk) - CFO Josh Feldman announced that previously implemented workforce reductions and vendor savings initiatives are expected to generate approximately **$5.5 million in annual pre-tax savings**, with initial benefits in H2 2025 and full effect in 2026[2](index=2&type=chunk) - The company incurred the majority of the estimated **$2.3 million in restructuring costs** related to the plan in Q2 2025 and remains focused on preserving its balance sheet and liquidity[2](index=2&type=chunk) [Financial Guidance for Second Half 2025](index=1&type=section&id=1.2.%20Financial%20Guidance%20for%20Second%20Half%202025) Aterian provided guidance for the six months ending December 31, 2025, projecting net revenue between $36 million and $38 million and Adjusted EBITDA ranging from $0 to a loss of $(1.0) million, indicating an expected improvement compared to the first half of 2025 H2 2025 Financial Guidance | Metric | H2 2025 Guidance | H1 2025 Actual | | :----- | :--------------- | :------------- | | Net Revenue | $36M - $38M | $34.8M | | Adjusted EBITDA | $0 - $(1.0)M loss | $(4.7)M loss | [Second Quarter 2025 Highlights](index=1&type=section&id=2.%20Second%20Quarter%202025%20Highlights) Aterian's Q2 2025 financial performance saw revenue and margin declines, while operational efforts focused on market expansion, product launches, and supply chain diversification [Financial Performance Highlights](index=1&type=section&id=2.1.%20Financial%20Performance%20Highlights) Q2 2025 saw a decline in net revenue and gross margin compared to Q2 2024, primarily due to macroeconomic conditions and tariff-related price increases, leading to widened losses Q2 2025 Financial Performance | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change (YoY) | | :----- | :-------------------- | :-------------------- | :----------- | | Net Revenue | $19.5 | $28.0 | -30.4% | | Gross Margin | 54.3% | 60.4% | -6.1 pp | | Contribution Margin | 7.8% | 17.4% | -9.6 pp | | Total Operating Expenses | $15.1 | $20.1 | -24.9% | | Operating Loss | $(4.5) | $(3.2) | Widened | | Net Loss | $(4.9) | $(3.6) | Widened | | Adjusted EBITDA Loss | $(2.2) | $0.2 | Widened | - Net revenue decreased primarily due to the overall macroeconomic environment and lower unit volume on certain products due to price increases related to tariffs[6](index=6&type=chunk) - Gross margin decline reflected a change in product mix and the impact of tariffs on pricing and cost of goods sold[6](index=6&type=chunk) - Total cash balance at June 30, 2025, was **$10.5 million**, down from **$18.0 million** at December 31, 2024[6](index=6&type=chunk) [Operational and Strategic Highlights](index=1&type=section&id=2.2.%20Operational%20and%20Strategic%20Highlights) Aterian focused on market expansion, new product launches, and supply chain diversification in Q2 2025, alongside implementing AI in customer service - Launched PurSteam Steam Station Max and Mueller Living Cordless Portable Vacuum Sealer into Walmart locations[6](index=6&type=chunk) - Launched select products from flagship brands (Squatty Potty, hOmeLabs, Healing Solutions, Mueller Living, PurSteam) on Temu[6](index=6&type=chunk) - Expanded presence on Mercado Libre in Chile, Colombia, and Argentina with products from PurSteam, Mueller, and Squatty Potty[6](index=6&type=chunk) - Advanced product resourcing and diversification initiatives away from high-tariff regions, with approximately **65% of dehumidifiers sourced from China in 2025**, down from **100% in 2024**, and manufacturing dehumidifiers in Indonesia[6](index=6&type=chunk) - Collaborated with Chinese manufacturers to import the majority of goods in Q2 2025 at an average incremental 2025 tariff of **30%**, largely avoiding peak tariffs of **145%**[8](index=8&type=chunk) - Commenced AI implementation in customer service operations, leading to improved service quality metrics and efficiencies[8](index=8&type=chunk) [Company Information & Disclosures](index=2&type=section&id=3.%20Company%20Information%20%26%20Disclosures) This section provides essential company details, investor communication channels, and important disclaimers regarding forward-looking statements [About Aterian, Inc.](index=3&type=section&id=3.1.%20About%20Aterian%2C%20Inc.) Aterian, Inc. (Nasdaq: ATER) is a consumer products company building and acquiring e-commerce brands across home, health, and air quality categories - Aterian, Inc. (Nasdaq: ATER) is a consumer products company focused on building and acquiring leading e-commerce brands[10](index=10&type=chunk) - The company's product categories include home and kitchen appliances, health and wellness, and air quality devices, sold on platforms like Amazon, Walmart, Target, and direct-to-consumer websites[10](index=10&type=chunk) - Primary brands include Squatty Potty, hOmeLabs, Mueller Living, PurSteam, Healing Solutions, and Photo Paper Direct[10](index=10&type=chunk) [Webcast and Conference Call Information](index=2&type=section&id=3.2.%20Webcast%20and%20Conference%20Call%20Information) Aterian hosted a live conference call on August 13, 2025, to discuss financial results, with an archived replay available on their investor website - A live conference call was held on August 13, 2025, at 5:00 p.m. ET to discuss financial results[7](index=7&type=chunk) - The call was accessible via telephone (Domestic: (800) 715-9871, International: (646) 307-1963, Passcode: 6644814) and a live webcast at https://ir.aterian.io[7](index=7&type=chunk)[8](index=8&type=chunk) [Investor Contact](index=3&type=section&id=3.3.%20Investor%20Contact) Investor inquiries are handled by The Equity Group, with Devin Sullivan and Conor Rodriguez as primary contacts - Investor contact information is provided for The Equity Group, with Devin Sullivan (Managing Director) and Conor Rodriguez (Associate) as points of contact[13](index=13&type=chunk) [Forward-Looking Statements](index=3&type=section&id=3.4.%20Forward-Looking%20Statements) The report contains forward-looking statements regarding future activities and financial benefits, subject to various risks and uncertainties, and the company does not undertake to update them - The press release includes forward-looking statements about future activities, events, or developments, such as the ability to implement tariff mitigation and cost optimization plans and realize anticipated financial benefits[11](index=11&type=chunk) - These statements are subject to numerous risks and uncertainties, including the ability to continue as a going concern, the effect of tariffs, workforce reductions, meeting financial covenants, maintaining market share, supply chain issues, and access to capital[11](index=11&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the company does not undertake to update them, except as required by applicable securities laws[12](index=12&type=chunk) [Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=4.%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) Aterian's unaudited financial statements for Q2 and H1 2025 reveal declines in revenue and gross profit, widened losses, and a decrease in cash balances [Condensed Consolidated Balance Sheets](index=4&type=section&id=4.1.%20Condensed%20Consolidated%20Balance%20Sheets) Aterian's balance sheet shows decreased total assets and stockholders' equity from December 2024 to June 2025, primarily due to reduced cash, while current liabilities increased ASSETS | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Cash | $10,495 | $17,998 | $(7,503) | | Inventory | $18,496 | $13,749 | $4,747 | | Total current assets | $35,310 | $38,719 | $(3,409) | | Total assets | $45,421 | $49,542 | $(4,121) | LIABILITIES & EQUITY | LIABILITIES & EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Credit facility | $7,248 | $6,948 | $300 | | Accounts payable | $6,124 | $3,080 | $3,044 | | Total current liabilities | $20,886 | $19,298 | $1,588 | | Total liabilities | $21,128 | $19,525 | $1,603 | | Total stockholders' equity | $24,293 | $30,017 | $(5,724) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=4.2.%20Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 and H1 2025, Aterian reported significant declines in net revenue and gross profit, leading to widened operating and net losses compared to prior year periods Consolidated Statements of Operations | Metric (in thousands) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :-------------------- | :------ | :------ | :------------ | :------------ | | Net revenue | $19,462 | $27,984 | $34,822 | $48,199 | | Cost of goods sold | $8,896 | $11,093 | $14,832 | $18,139 | | Gross profit | $10,566 | $16,891 | $19,990 | $30,060 | | Total operating expenses | $15,071 | $20,096 | $28,191 | $38,542 | | Operating loss | $(4,505) | $(3,205) | $(8,201) | $(8,482) | | Net loss | $(4,860) | $(3,629) | $(8,756) | $(8,791) | | Net loss per share, basic and diluted | $(0.63) | $(0.52) | $(1.16) | $(1.28) | [Condensed Consolidated Statement of Cash Flows](index=6&type=section&id=4.3.%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For H1 2025, Aterian experienced a net cash outflow from operating activities and a significant net decrease in cash and restricted cash for the period Consolidated Statement of Cash Flows | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash (used in) provided by operating activities | $(8,287) | $2,896 | | Cash used in investing activities | $(6) | $(242) | | Cash provided by (used in) financing activities | $388 | $(2,336) | | Net change in cash and restricted cash for the period | $(7,457) | $289 | | Cash and restricted cash at end of period | $11,686 | $22,484 | - Significant changes in operating activities include a **$5,322 thousand increase in inventory** (cash outflow) in H1 2025, compared to a **$3,313 thousand decrease** (cash inflow) in H1 2024[19](index=19&type=chunk) - Stock-based compensation, a non-cash adjustment, decreased significantly from **$4,588 thousand in H1 2024** to **$905 thousand in H1 2025**[19](index=19&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=5.%20Non-GAAP%20Financial%20Measures) Aterian presents non-GAAP financial measures to offer clearer insights into core operating performance, providing reconciliations for Contribution Margin and Adjusted EBITDA [Introduction, Definitions, and Rationale](index=3&type=section&id=5.1.%20Introduction%2C%20Definitions%2C%20and%20Rationale) Aterian presents non-GAAP measures like Contribution Margin, EBITDA, and Adjusted EBITDA to clarify core operating results and facilitate comparisons, acknowledging their inherent limitations - Non-GAAP measures presented include Contribution Margin, EBITDA, and Adjusted EBITDA, used to assist investors in understanding core net operating results and for comparisons[21](index=21&type=chunk) - Contribution margin is defined as gross profit less amortization of inventory step-up, e-commerce platform commissions, online advertising, selling, and logistics expenses[22](index=22&type=chunk) - Adjusted EBITDA is defined as EBITDA plus stock-based compensation expense, changes in fair-market value of warrant liability, restructuring expenses, and other expenses, net[22](index=22&type=chunk) - These non-GAAP measures are considered useful for assessing operating performance without the effect of non-cash items but have limitations, such as not reflecting capital expenditures, interest expense, or cash requirements for asset replacement[25](index=25&type=chunk)[27](index=27&type=chunk) [Contribution Margin Reconciliation](index=9&type=section&id=5.2.%20Contribution%20Margin%20Reconciliation) Contribution Margin significantly decreased in Q2 and H1 2025, both in absolute terms and as a percentage of net revenue, primarily due to higher selling and logistics expenses Contribution Margin Reconciliation | Metric (in thousands, except percentages) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :---------------------------------------- | :------ | :------ | :------------ | :------------ | | Gross Profit | $10,566 | $16,891 | $19,990 | $30,060 | | Less: E-commerce platform commissions, online advertising, selling and logistics expenses | $(9,048) | $(12,024) | $(16,421) | $(22,345) | | Contribution margin | $1,518 | $4,867 | $3,569 | $7,715 | | Gross Profit as a percentage of net revenue | 54.3% | 60.4% | 57.4% | 62.4% | | Contribution margin as a percentage of net revenue | 7.8% | 17.4% | 10.2% | 16.0% | [Adjusted EBITDA Reconciliation](index=9&type=section&id=5.3.%20Adjusted%20EBITDA%20Reconciliation) Aterian's Adjusted EBITDA showed a widened loss in Q2 and H1 2025 compared to the prior year, despite decreased stock-based compensation, primarily due to increased restructuring expenses Adjusted EBITDA Reconciliation | Metric (in thousands, except percentages) | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :---------------------------------------- | :------ | :------ | :------------ | :------------ | | Net loss | $(4,860) | $(3,629) | $(8,756) | $(8,791) | | EBITDA | $(4,223) | $(2,766) | $(7,516) | $(7,105) | | Restructuring expense | $1,795 | $17 | $1,795 | $575 | | Stock-based compensation expense | $122 | $2,921 | $905 | $4,588 | | Adjusted EBITDA | $(2,184) | $163 | $(4,689) | $(2,461) | | Adjusted EBITDA as a percentage of net revenue | (11.2)% | 0.6% | (13.5)% | (5.1)% | - Restructuring expenses increased significantly to **$1,795 thousand in Q2 2025 and H1 2025**, compared to **$17 thousand and $575 thousand** in the respective prior year periods, primarily due to employee severance costs[31](index=31&type=chunk) [Product Performance by Phase](index=10&type=section&id=6.%20Product%20Performance%20by%20Phase) Aterian categorizes products into Launch, Sustain, and Liquidate phases, with the Sustain phase remaining the primary revenue driver despite overall declines in Q2 and H1 2025 [Product Lifecycle Phases Overview](index=10&type=section&id=6.1.%20Product%20Lifecycle%20Phases%20Overview) Aterian categorizes products into Launch, Sustain, and Liquidate phases, each with distinct margin targets and strategic approaches for pricing and marketing - Products typically go through Launch, Sustain, and Liquidate phases[32](index=32&type=chunk) - The Launch phase involves discounts and marketing, with net margins potentially as low as approximately **negative 35%**[32](index=32&type=chunk) - The Sustain phase targets a **positive 15% net margin** for most products within approximately three months of launch, achieved through price and marketing adjustments[33](index=33&type=chunk) - The Liquidate phase is for selling remaining inventory of underperforming products or for inventory normalization, often requiring steep discounts[34](index=34&type=chunk) [Results of Operations by Product Phase](index=10&type=section&id=6.2.%20Results%20of%20Operations%20by%20Product%20Phase) The Sustain phase remained the primary revenue and gross profit driver in Q2 and H1 2025, though both declined, while fixed costs significantly impacted overall operating expenses Sustain Phase Performance | Metric (in thousands) | Q2 2025 Sustain | Q2 2024 Sustain | 6 Months 2025 Sustain | 6 Months 2024 Sustain | | :-------------------- | :-------------- | :-------------- | :-------------------- | :-------------------- | | Net revenue | $19,043 | $26,292 | $33,681 | $44,494 | | Gross profit | $10,631 | $16,200 | $19,770 | $27,954 | Launch Phase Performance | Metric (in thousands) | Q2 2025 Launch | Q2 2024 Launch | 6 Months 2025 Launch | 6 Months 2024 Launch | | :-------------------- | :------------- | :------------- | :------------------- | :------------------- | | Net revenue | $334 | $485 | $720 | $892 | | Gross profit | $(136) | $258 | $9 | $539 | - Fixed costs for sales and distribution were **$3,185 thousand in Q2 2025** and **$5,181 thousand for the six months ended June 30, 2025**[35](index=35&type=chunk)[36](index=36&type=chunk) - General and administrative expenses, primarily fixed costs, were **$2,717 thousand in Q2 2025** and **$5,585 thousand for the six months ended June 30, 2025**[35](index=35&type=chunk)[36](index=36&type=chunk)

Core Insights - Aterian, Inc. reported financial results for Q2 2025, highlighting challenges due to tariff volatility and a strategic focus on cost optimization and new product launches [1][2]. Financial Performance - Net revenue for Q2 2025 was $19.5 million, down from $28.0 million in Q2 2024, primarily due to macroeconomic conditions and lower unit volumes from price increases related to tariffs [6]. - Gross margin decreased to 54.3% from 60.4%, attributed to changes in product mix and tariff impacts on pricing and cost of goods sold [6]. - Adjusted EBITDA loss for Q2 2025 was $(2.2) million compared to an Adjusted EBITDA of $0.2 million in Q2 2024 [6][33]. Cost Management and Strategic Initiatives - The company expects annual pre-tax savings of approximately $5.5 million from workforce reductions and vendor savings initiatives, with initial benefits anticipated in the second half of 2025 [2]. - Aterian is diversifying its manufacturing footprint, reducing reliance on high-tariff regions, and has sourced approximately 65% of its dehumidifiers from China in 2025, down from 100% in 2024 [11] [2]. Future Guidance - Aterian anticipates net revenue for the six months ending December 31, 2025, to be between $36 million and $38 million, with Adjusted EBITDA expected to range from a loss of $(1.0) million to break-even [3]. - The company aims to launch new products, including the Squatty Potty flushable wipes, in September 2025, marking its entry into the consumables market [2]. Operational Highlights - Total operating expenses decreased to $15.1 million in Q2 2025 from $20.1 million in Q2 2024, with restructuring costs of $1.8 million included in the Q2 2025 expenses [6]. - The total cash balance at June 30, 2025, was $10.5 million, down from $18.0 million at December 31, 2024 [6].

Group 1 - Aterian, Inc. will release its financial results for Q2 2025 on August 13, 2025, after market close [1] - A conference call to discuss the results will be held at 5:00 p.m. ET on the same day [1] - Investors can participate in the call via phone or through a live webcast [1] Group 2 - Aterian, Inc. is a consumer products company focused on building and acquiring e-commerce brands across various categories [2] - The company sells products on major online marketplaces such as Amazon, Walmart, and Target, as well as through its own direct-to-consumer websites [2] - Aterian's brand portfolio includes Mueller Living, PurSteam, hOmeLabs, Squatty Potty, Healing Solutions, and Photo Paper Direct [2]

Core Insights - Aterian, Inc. has launched its Prime Day lineup featuring discounts of up to 36% on products from six e-commerce brands [1][2] - The Prime Day deals will be available from July 8th to July 11th, while supplies last [2] Product Offerings - Featured brands include hOmeLabs, Squatty Potty, PurSteam, Mueller Living, Healing Solutions, and Photo Paper Direct, offering a range of home and wellness products [1][12] - hOmeLabs offers smart dehumidifiers with discounts of 21% and 15% on models originally priced at $269.99 and $179.99 respectively [7] - Squatty Potty features a Simple Stool at 32% off, originally priced at $24.99, now available for $16.99 [4] - PurSteam provides steam cleaning solutions with discounts on products like the 1750W Steam Iron and Therma Pro Steam Mop [8][5] - Mueller Living showcases kitchen appliances, including a Hand Blender at 32% off, originally priced at $34.99, now $23.73 [9] - Healing Solutions offers essential oils, with a 20% discount on a 16 oz Eucalyptus Essential Oil, originally $26.99, now $21.59 [10] - Photo Paper Direct features printable fabric sheets at 26% off, originally priced at $14.99, now $11.04 [11] Company Overview - Aterian, Inc. is a consumer products company that builds and acquires leading e-commerce brands across various categories, including home and kitchen appliances, health and wellness, and air quality devices [12] - The company sells products through major online marketplaces such as Amazon, Walmart, and Target, as well as its own direct-to-consumer websites [12]

Company Expansion - Aterian, Inc. has expanded its product offerings on Mercado Libre, Latin America's leading e-commerce platform, to include brands such as PurSteam, Mueller, and Squatty Potty in Chile, Colombia, and Argentina [1][2] - This expansion follows Aterian's initial launch on Mercado Libre's Mexico marketplace in 2024, indicating a strategic focus on home, kitchen, and wellness categories [1][2] Strategic Vision - The CEO of Aterian emphasized that the partnership with Mercado Libre aligns with the company's long-term vision to scale its e-commerce presence beyond the U.S. and tap into emerging markets [2] - The company is committed to building a durable brand ecosystem in Latin America, approaching this opportunity with focus and discipline [2] Company Overview - Aterian, Inc. is a consumer products company that builds and acquires leading e-commerce brands across various categories, including home and kitchen appliances, health and wellness, and air quality devices [3] - The company sells products on major online marketplaces such as Amazon, Walmart, and Target, as well as through its own direct-to-consumer websites [3]