Financial Performance - Third quarter 2024 net revenue declined 34.0% to $26.2 million, down from $39.7 million in the same quarter of 2023[2] - Adjusted EBITDA for Q3 2024 was $0.5 million, a significant improvement of 111.0% from a loss of $4.4 million in Q3 2023[2] - Net loss for Q3 2024 was $1.8 million, an improvement of 71.7% from a loss of $6.3 million in Q3 2023[2] - Operating loss for Q3 2024 was $1.7 million, improving 73.4% from a loss of $6.5 million in Q3 2023[2] - Net loss for the nine months ended September 30, 2023, was $66,857 thousand, compared to a net loss of $10,564 thousand for the same period in 2024[12] - The net loss as a percentage of net revenue decreased from (60.9)% in the nine months ended September 30, 2023, to (14.2)% in the same period in 2024[23] Revenue and Profitability - Contribution margin for the three months ended September 30, 2023, was $1,204 thousand, representing 3.0% of net revenue, compared to $4,464 thousand or 17.0% for the same period in 2024[22] - Contribution margin as a percentage of net revenue for the nine months ended September 30, 2023, was 1.8%, compared to 16.4% for the same period in 2024[22] - Gross profit for the nine months ended September 30, 2023, was $53,575 thousand, while for the same period in 2024, it was $45,888 thousand[22] - For the three months ended September 30, 2023, the gross profit was $19,583 thousand, while for the same period in 2024, it increased to $15,828 thousand[26][27] Cash Flow and Assets - Total cash balance as of September 30, 2024, was $16.1 million[2] - Cash used in operating activities for the nine months ended September 30, 2023, was $(8,458) thousand, compared to cash provided of $2,174 thousand for the same period in 2024[12] - Total cash and restricted cash at the end of the year was $30,501 thousand, compared to $18,719 thousand at the end of the previous year[12] - Cash paid for interest during the nine months ended September 30, 2023, was $1,457 thousand, compared to $966 thousand for the same period in 2024[12] - Aterian's total assets decreased from $61.9 million at the end of 2023 to $52.1 million by September 30, 2024[10] - Stockholders' equity declined from $36.0 million at the end of 2023 to $30.6 million by September 30, 2024[10] Future Projections - For Q4 2024, management projects net revenue between $22.5 million and $25.5 million, with adjusted EBITDA expected to be approximately break-even[3] - The company aims for a positive 15% net margin for most products within approximately three months of launch[24] Operational Focus - The company is focused on expanding its e-commerce brands across major online marketplaces, including Amazon and Walmart[6] - The company is focusing on leveraging technology to identify opportunities and improve product margins during the launch phase[23] - The net margin during the launch phase can be as low as approximately negative 35% due to discounts and marketing investments[23] Impairment and Inventory - Impairment loss on intangibles for the nine months ended September 30, 2023, was $39,445 thousand, with no such loss reported for the same period in 2024[12] - The company reported a change in inventory provisions of $213 thousand for the nine months ended September 30, 2023, while it was $(1,653) thousand for the same period in 2024[12] - Borrowings from MidCap credit facilities amounted to $63,978 thousand for the nine months ended September 30, 2023, compared to $44,386 thousand for the same period in 2024[12]

Financial Data and Key Metrics Changes - Net revenue for Q3 2024 declined 34% to $26.2 million from $39.7 million in the year-ago quarter, primarily driven by dehumidifier stockouts and seasonal weather patterns [32] - Adjusted EBITDA improved by 111% to a gain of $0.5 million from an adjusted EBITDA loss of $4.4 million in Q3 2023 [37] - Gross margin for Q3 2024 increased to 60.3% from 49.4% in the year-ago quarter, driven by SKU rationalization and product mix [34] Business Line Data and Key Metrics Changes - Dehumidifier sales in Q3 were slightly short of expectations due to stockouts and weather, but overall performance during the summer season showed a 10% increase compared to the same period last year when adjusted for SKU rationalization [12][32] - Strong performance was noted in the Pursteam brand, particularly from steam mops and steam irons, with marketing efficiencies improving [15] Market Data and Key Metrics Changes - The company continues to derive most of its revenues from Amazon, with a focus on improving product listings and driving outside traffic to Amazon [10][16] - The competitive landscape is expected to be challenging in Q4, with consumers being price-sensitive due to the current inflationary environment [19][20] Company Strategy and Development Direction - The company aims to transition from stabilization to growth in 2025, focusing on omnichannel expansion and organic product launches [21][27] - Aterian plans to leverage its existing brands and explore new product categories while maintaining a cautious approach to avoid overextending [47][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving adjusted EBITDA profitability for the second half of 2024, despite challenges such as higher shipping container costs [20][40] - The company anticipates robust consumer buying during the holiday period but expects consumers to be deal shopping [19][60] Other Important Information - The company has successfully implemented cost-cutting measures, resulting in a significant reduction in operating loss from $6.5 million in Q3 2023 to $1.7 million in Q3 2024 [36] - Cash reserves at the end of Q3 2024 were approximately $16.1 million, down from $20.3 million at the end of Q2 2024, primarily due to payments on the credit facility [38] Q&A Session Summary Question: Confidence in being live on Target ahead of Black Friday - Management indicated minimal obstacles and expects to list at least six SKUs during the holiday period [43] Question: Timeline for additional SKUs on Target and Walmart - Management emphasized a cautious approach to expanding the product portfolio on new channels, focusing on marquee SKUs initially [45] Question: Outlook for next year and potential growth drivers - Management expressed confidence in all core brands, particularly hOmeLabs and Pursteam, as key growth drivers [51] Question: Consumer behavior during the holiday shopping season - Management noted robust sales activity in October and expressed optimism for Black Friday and Cyber Monday [60] Question: Container shipping rates and future cost expectations - Management expects container costs to remain higher than normalized prices through early 2025, impacting margins [64] Question: Fixed cost structure and cost efficiency - Management indicated that the full impact of restructuring will be realized in 2025, leading to a decrease in fixed costs [67] Question: Use of excess capital and M&A priorities - Management stated that M&A would be strategic, focusing on enhancing the product portfolio, while also needing cash for working capital and marketing new products [72]

Core Insights - Aterian, Inc. reported a significant improvement in its financial performance for the third quarter of 2024, with a net loss reduction of 71.7% year-over-year and an adjusted EBITDA profit for the second consecutive quarter, marking a $4.9 million improvement year-over-year [1][2]. Financial Performance - Third quarter 2024 net revenue decreased by 34.0% to $26.2 million, down from $39.7 million in the same quarter of 2023, primarily due to a reduced product portfolio from SKU rationalization efforts [2]. - Gross margin for the third quarter of 2024 improved to 60.3%, compared to 49.4% in the third quarter of 2023, attributed to SKU rationalization and reduced liquidation of high-cost inventory [2]. - Contribution margin increased to 17.0% from 3.0% year-over-year, reflecting the positive impact of SKU rationalization [2]. - Operating loss for the third quarter of 2024 was ($1.7) million, an improvement from a loss of ($6.5) million in the same quarter of 2023, representing a 73.4% improvement [2]. - The net loss for the third quarter of 2024 was ($1.8) million, improved from a ($6.3) million loss in the third quarter of 2023 [2]. - Adjusted EBITDA for the third quarter of 2024 improved to $0.5 million from a loss of ($4.4) million in the third quarter of 2023, reflecting an improvement of 111.0% [2]. Cash Position - As of September 30, 2024, Aterian had a total cash balance of $16.1 million [2]. Fourth Quarter Outlook - Management projects fourth quarter 2024 net revenue to be between $22.5 million and $25.5 million, with adjusted EBITDA expected to be approximately break-even [3]. Company Overview - Aterian, Inc. is a technology-enabled consumer products company focused on building and acquiring leading e-commerce brands across various categories, including home and kitchen appliances, health and wellness, and air quality devices [6].

Company Overview - Aterian, Inc. is a technology-enabled consumer products company that builds and acquires leading e-commerce brands across multiple categories, including home and kitchen appliances, health and wellness, and air quality devices [3] - The company primarily sells through major online marketplaces, focusing on Amazon and Walmart in the U.S., as well as its own direct-to-consumer websites [3] - Key brands under Aterian include Squatty Potty, hOmeLabs, Mueller Living, Pursteam, Healing Solutions, and Photo Paper Direct [3] Upcoming Financial Results - Aterian plans to report its third quarter 2024 financial results after the market close on November 11, 2024 [1] - A conference call for investors and interested parties is scheduled for 5:00 p.m. ET on the same day [1] - The conference call will be accessible via telephone and the internet, with specific dial-in numbers provided for U.S. and international participants [2]

Financial Performance - Net revenue decreased by $7.3 million, or 20.6%, to $27.98 million for the three months ended June 30, 2024, compared to $35.26 million for the same period in 2023[162] - Total net revenue for the three months ended June 30, 2024, was $27.98 million, a decrease of 21.9% from $35.26 million in the same period in 2023[164] - Net revenue decreased by $21.9 million, or 31.3%, to $48.2 million for the six months ended June 30, 2024, compared to $70.1 million for the same period in 2023[183] - Direct net revenue fell by $6.6 million, or 19.3%, primarily due to a reduction in product offerings resulting from SKU rationalization[162] - Direct net revenue declined by $19.9 million, or 29.4%, primarily due to SKU rationalization and competitive pricing pressures[183] Profitability - Gross profit increased by $1.995 million, or 13.4%, to $16.89 million in Q2 2024, compared to $14.90 million in Q2 2023[158] - Gross profit margin improved from 42.2% in Q2 2023 to 60.4% in Q2 2024, attributed to a favorable product mix and reduced liquidation of excess inventory[166] - Gross profit margin increased from 48.5% for the six months ended June 30, 2023, to 62.4% for the same period in 2024, attributed to a favorable product mix[186] - Contribution margin for the same period was $4,867 thousand, with a contribution margin as a percentage of net revenue of 17.4%[232] Operating Expenses - Total operating expenses decreased by $31.236 million, or 60.9%, to $20.096 million in Q2 2024, down from $51.332 million in Q2 2023[158] - Sales and distribution expenses decreased by $5.395 million, or 26.2%, to $15.162 million in Q2 2024, compared to $20.557 million in Q2 2023[158] - General and administrative expenses fell to $4.93 million in Q2 2024, a decrease of 21.4% from $6.28 million in Q2 2023, driven by lower depreciation and headcount expenses[171] - Sales and distribution expenses decreased to $15.2 million in Q2 2024, down 26.2% from $20.6 million in Q2 2023, mainly due to lower product sales volume[167] - General and administrative expenses decreased by $2.1 million, or 16.9%, to $10.2 million for the six months ended June 30, 2024, primarily due to lower depreciation and headcount expenses[190] Losses - Operating loss improved by $33.231 million, or 91.2%, to a loss of $3.205 million in Q2 2024, compared to a loss of $36.436 million in Q2 2023[158] - The company reported a net loss of $3.629 million in Q2 2024, a decrease of $31.158 million, or 89.6%, from a net loss of $34.787 million in Q2 2023[158] - Net loss for the six months ended June 30, 2024, was $8.79 million, a significant improvement from a net loss of $60.59 million in the same period in 2023[178] - The company reported a net loss of $86.4 million, or 18.2%, for the six months ended June 30, 2024, compared to a net loss of $86.3 million, or 100%, for the same period in 2023[184] - For the six months ended June 30, 2024, the company incurred a net loss of $8.8 million and generated net cash flows from operations of $2.9 million[203] Cash Flow and Liquidity - Net cash generated by operating activities was $2.9 million for the six months ended June 30, 2024, compared to a cash outflow of $8.9 million in the prior year[197] - As of June 30, 2024, the company had unrestricted cash and cash equivalents of $20.3 million and an accumulated deficit of $708.6 million[203] - The outstanding balance on the MidCap credit facility was $9.6 million as of June 30, 2024, with $1.1 million available[220] Restructuring and Strategic Changes - The company has initiated two restructuring programs, resulting in a reduction of approximately 67 employees and contractors over the last 15 months[216] - Research and development expenses were eliminated in Q2 2024, reflecting a strategic shift in technology platform management[154] - Research and development expenses dropped to $0 for the six months ended June 30, 2024, from $2.96 million in the prior year, as the company shifted to an integrated third-party model[189] - The company plans to focus on a limited number of profitable products and has reduced its SKU count[206] - The company has experienced declining revenues due to macroeconomic factors, including increased interest rates and reduced consumer discretionary spending[201] Accounting and Compliance - The company dismissed Deloitte & Touche LLP as its independent registered public accounting firm and engaged UHY LLP on June 26, 2024[244] - Deloitte's report on the Company's consolidated financial statements for the fiscal years ended December 31, 2023, and 2022, included an unqualified opinion but raised substantial doubt about the Company's ability to continue as a going concern[245] - The Company has not experienced any changes in internal control over financial reporting that materially affected its controls during the six months ended June 30, 2024[248] - Management concluded that the disclosure controls and procedures were effective as of June 30, 2024[243] - The Audit Committee assessed several accounting firms before appointing UHY LLP, indicating a thorough review process[247] Impairment and Valuation - There was no impairment loss on intangibles in Q2 2024, compared to an impairment loss of $22.8 million in Q2 2023[172] - The company recorded an intangible impairment charge of $22.8 million for the Paper and Kitchen appliance business during the three months ending June 30, 2023[238] - An intangible impairment charge of $16.7 million was recorded for the essential oil business during the three months ending March 31, 2023[237] - The change in fair market value of warrant liability improved by $1.3 million, or 69.1%, for the six months ended June 30, 2024, compared to the prior year[193] Risk Management - The Company maintains adequate insurance coverage to mitigate risks from various legal proceedings but cannot guarantee sufficiency[251] - Management recognizes that controls and procedures can only provide reasonable assurance of achieving desired control objectives due to resource constraints[249] - The Company believes its estimates regarding asset recoverability are appropriate, though they are subject to uncertainty[241]

Financial Data and Key Metrics Changes - Aterian reported a net revenue decline of 20.6% to $28 million from $35.3 million year-over-year, but adjusted EBITDA profitability was achieved for the first time in 10 quarters, with an adjusted EBITDA gain of $0.2 million compared to a loss of $8 million in Q2 2023 [21][25][12] - Gross margin improved year-over-year by over 18 basis points to 60.4%, while contribution margin increased to 17.4% from a negative 3.6% in the prior year [20][23] - The net loss for Q2 2024 was $3.6 million, improving by 89.6% from a loss of $34.8 million in the same quarter last year [25] Business Line Data and Key Metrics Changes - The company focused on SKU rationalization, which impacted top-line revenue but significantly improved core business metrics, with sustained product contribution margin improving to 19.8% from 2.1% year-over-year [22][23] - Launch revenue for Q2 2024 was $0.5 million, compared to $42,000 in Q2 2023, with no new product category launches planned for the quarter [22] Market Data and Key Metrics Changes - Aterian's sales performance benefited from seasonal weather conditions, particularly in dehumidifiers, which were a primary driver of success during the quarter [12][13] - The company expects net revenue for Q3 2024 to be between $25 million and $27 million, representing a 35% decrease from Q3 2023, primarily due to SKU rationalization [27] Company Strategy and Development Direction - The company aims to transition from stabilization to growth in 2025, focusing on omnichannel expansion and organic product launches [16][17] - Aterian plans to continue exploring M&A opportunities but emphasizes that organic growth will be the primary driver of future growth [17][36] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer spending remains cautious due to inflation, and they expect container costs to be higher compared to the previous year [15] - The company is optimistic about achieving adjusted EBITDA profitability in the second half of 2024, despite challenges such as inventory shortages and delivery issues [15][28] Other Important Information - Aterian's cash position improved to approximately $20.3 million as of June 30, 2024, compared to $17.5 million at the end of Q1 2024 [26] - The company has no plans to raise additional equity financing unless for accretive M&A opportunities [28] Q&A Session Summary Question: How many new SKUs were introduced during the first half of the year? - The company introduced no new product categories, only variations of existing categories, totaling about 20 [31] Question: How should seasonality be considered for the second half of the year? - Historically, Q3 has been a higher sales quarter than Q4, and this trend is expected to continue [33] Question: Which brands have the most potential for growth over the next couple of years? - All six brands are seen as having growth potential, with specific opportunities in new categories for brands like Pursteam and hOmeLabs [36] Question: What role does M&A play in the growth strategy? - M&A will be opportunistic and not the primary driver of growth, with a focus on organic growth requiring less investment [37]

[Executive Summary](index=1&type=section&id=Executive%20Summary) [Second Quarter 2024 Highlights](index=1&type=section&id=Second%20Quarter%20Highlights) Net revenue declined 20.6% to $28.0 million, but gross margin improved to 60.4%, and Adjusted EBITDA became profitable at $0.2 million **Second Quarter 2024 Financial Highlights (YoY Change):** | Metric | Q2 2024 | Q2 2023 | Change (%) | | :----------------------- | :------ | :------ | :--------- | | Net Revenue | $28.0M | $35.3M | -20.6% | | Gross Margin | 60.4% | 42.2% | +18.2 pp | | Contribution Margin | 17.4% | (3.6)% | +21.0 pp | | Operating Loss | ($3.2M) | ($36.4M) | +91.2% | | Net Loss | ($3.6M) | ($34.8M) | +89.6% | | Adjusted EBITDA | $0.2M | ($8.0M) | +102.0% | | Total Cash (June 30, 2024) | $20.3M | N/A | N/A | - The primary drivers for improved **gross margin** and **contribution margin** were SKU rationalization efforts and less liquidation of high-cost inventory[2](index=2&type=chunk) [Third Quarter 2024 Outlook](index=2&type=section&id=Third%20Quarter%20Outlook) Management projects Q3 2024 net revenue between $25.0 million and $27.0 million, with Adjusted EBITDA from $0.0 million to $0.6 million, anticipating H2 2024 Adjusted EBITDA profitability **Third Quarter 2024 Outlook:** | Metric | Guidance Range | | :---------------- | :------------- | | Net Revenue | $25.0M - $27.0M | | Adjusted EBITDA | $0.0M - $0.6M | - Management anticipates **Adjusted EBITDA profitability** for the second half of 2024[3](index=3&type=chunk) [Company Overview](index=2&type=section&id=Company%20Overview) [About Aterian, Inc.](index=2&type=section&id=About%20Aterian%2C%20Inc.) Aterian is a technology-enabled consumer products company building and acquiring e-commerce brands across various categories, primarily selling on Amazon and Walmart - **Aterian, Inc.** is a **technology-enabled consumer products company** that builds and acquires leading e-commerce brands[6](index=6&type=chunk) - The Company primarily sells on **Amazon** and **Walmart** in the U.S. and through its direct-to-consumer websites[6](index=6&type=chunk) - Primary brands include **Squatty Potty**, **hOmeLabs**, **Mueller Living**, **Pursteam**, **Healing Solutions**, and **Photo Paper Direct**[6](index=6&type=chunk) [Webcast and Conference Call Information](index=2&type=section&id=Webcast%20and%20Conference%20Call%20Information) Aterian hosted a live conference call on August 8, 2024, at 5:00 p.m. ET to discuss financial results, with an archived replay available online - Aterian hosted a live conference call on **August 8, 2024**, at **5:00 p.m. Eastern Time** to discuss financial results[5](index=5&type=chunk) - The call was accessible by telephone and through a live webcast, with an **archived replay available online** at https://ir.aterian.io[5](index=5&type=chunk) [Forward-Looking Statements and Disclaimers](index=3&type=section&id=Forward-Looking%20Statements%20and%20Disclaimers) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements on Q3 revenue, Adjusted EBITDA, and H2 profitability, subject to various risks, with no obligation to update - All statements addressing future activities, events, or developments are **forward-looking statements**, including **Q3 net revenue** and **Adjusted EBITDA projections**, and **H2 2024 Adjusted EBITDA profitability** guidance[7](index=7&type=chunk) - These statements are subject to various **risks and uncertainties**, including the ability to continue as a **going concern**, meet **financial covenants**, maintain **market share**, manage **supply chain**, and access **capital**[7](index=7&type=chunk) - The company cautions against undue reliance on these **forward-looking statements** and does not undertake any obligation to update, amend, or clarify them, except as required by applicable securities laws[8](index=8&type=chunk) [Investor Contact](index=3&type=section&id=Investor%20Contact) Investor inquiries should be directed to Ilya Grozovsky, VP, Investor Relations & Corporate Development at Aterian, Inc - Investor Contact: **Ilya Grozovsky**, Vice President, Investor Relations & Corporate Development, Aterian, Inc. (ilya@aterian.io, 917-905-1699)[8](index=8&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $59.85 million, while total liabilities increased to $28.97 million, leading to a decrease in total stockholders' equity to $30.89 million **Consolidated Balance Sheets (in thousands):** | Metric | June 30, 2024 | December 31, 2023 | | :-------------------------------- | :------------ | :---------------- | | **ASSETS** | | | | Cash | $20,328 | $20,023 | | Inventory | $18,378 | $20,390 | | Total Current Assets | $48,189 | $49,636 | | Total Assets | $59,852 | $61,869 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Credit Facility | $9,590 | $11,098 | | Accounts Payable | $8,811 | $4,190 | | Total Current Liabilities | $28,688 | $25,447 | | Total Liabilities | $28,965 | $25,838 | | Total Stockholders' Equity | $30,887 | $36,031 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Q2 2024 net revenue declined 20.6% to $28.0 million, but gross profit increased, and operating loss improved 91.2% to ($3.2) million, with net loss improving to ($3.6) million **Consolidated Statements of Operations (in thousands) - Three Months Ended June 30:** | Metric | 2024 | 2023 | | :----------------------------------- | :----- | :----- | | Net Revenue | $27,984 | $35,264 | | Cost of Goods Sold | $11,093 | $20,368 | | Gross Profit | $16,891 | $14,896 | | Total Operating Expenses | $20,096 | $51,332 | | Operating Loss | ($3,205) | ($36,436) | | Net Loss | ($3,629) | ($34,787) | | Net Loss Per Share (Basic & Diluted) | ($0.52) | ($5.37) | **Consolidated Statements of Operations (in thousands) - Six Months Ended June 30:** | Metric | 2024 | 2023 | | :----------------------------------- | :----- | :----- | | Net Revenue | $48,199 | $70,143 | | Cost of Goods Sold | $18,139 | $36,151 | | Gross Profit | $30,060 | $33,992 | | Total Operating Expenses | $38,542 | $95,424 | | Operating Loss | ($8,482) | ($61,432) | | Net Loss | ($8,791) | ($60,587) | | Net Loss Per Share (Basic & Diluted) | ($1.28) | ($9.41) | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2024 net cash from operating activities was $2.90 million, a significant improvement, with ending cash and restricted cash at $22.48 million **Consolidated Statements of Cash Flows (in thousands) - Six Months Ended June 30:** | Activity | 2024 | 2023 | | :------------------------------------------ | :----- | :------ | | Net Cash (Used in) Provided by Operating Activities | $2,896 | ($8,857) | | Cash Used in Investing Activities | ($242) | ($191) | | Cash Used in Financing Activities | ($2,336) | ($6,547) | | Net Change in Cash and Restricted Cash | $289 | ($15,340) | | Cash and Restricted Cash at End of Year | $22,484 | $31,289 | [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) [Introduction and Definitions](index=7&type=section&id=Introduction%20and%20Definitions) Non-GAAP measures like Contribution Margin, EBITDA, and Adjusted EBITDA are presented to clarify core operating results and facilitate comparisons, with specific definitions provided - **Non-GAAP measures** are presented to assist investors in understanding **core net operating results** and making comparisons[15](index=15&type=chunk) - **Contribution margin** represents **gross profit** less e-commerce platform commissions, online advertising, selling, and logistics expenses[16](index=16&type=chunk) - **Adjusted EBITDA** represents **EBITDA** plus stock-based compensation expense, changes in fair-market value of warrant liability, impairment on intangibles, restructuring expenses, and other expenses, net[16](index=16&type=chunk) [Limitations of Non-GAAP Measures](index=8&type=section&id=Limitations%20of%20Non-GAAP%20Measures) Non-GAAP measures like EBITDA, Adjusted EBITDA, and Contribution Margin have limitations, not reflecting capital expenditures, interest, depreciation, working capital, or stock-based compensation - **EBITDA** and **Adjusted EBITDA** do not reflect **capital expenditures**, **interest expense**, **depreciation and amortization**, changes in cash requirements for **working capital**, or changes in **warrant liabilities**[21](index=21&type=chunk) - **Adjusted EBITDA** excludes non-cash **stock-based compensation expense**, a key element of the long-term incentive compensation package[21](index=21&type=chunk) - **Contribution margin** does not reflect **general and administrative expense**, **research and development expenses**, fixed sales and distribution expenses, or changes in **warrant liabilities**[22](index=22&type=chunk) [Contribution Margin Reconciliation](index=9&type=section&id=Contribution%20Margin%20Reconciliation) Q2 2024 Contribution Margin significantly improved to $4.87 million (17.4% of net revenue) from a negative ($1.27) million in Q2 2023 **Contribution Margin Reconciliation (in thousands) - Three Months Ended June 30:** | Metric | 2024 | 2023 | | :---------------------------------------------------------------- | :----- | :------- | | Gross Profit | $16,891 | $14,896 | | Less: E-commerce platform commissions, online advertising, selling and logistics expenses | ($12,024) | ($16,164) | | Contribution Margin | $4,867 | ($1,268) | | Gross Profit as a percentage of net revenue | 60.4% | 42.2% | | Contribution margin as a percentage of net revenue | 17.4% | (3.6)% | **Contribution Margin Reconciliation (in thousands) - Six Months Ended June 30:** | Metric | 2024 | 2023 | | :---------------------------------------------------------------- | :----- | :------- | | Gross Profit | $30,060 | $33,992 | | Less: E-commerce platform commissions, online advertising, selling and logistics expenses | ($22,345) | ($33,193) | | Contribution Margin | $7,715 | $799 | | Gross Profit as a percentage of net revenue | 62.4% | 48.5% | | Contribution margin as a percentage of net revenue | 16.0% | 1.1% | [Adjusted EBITDA Reconciliation](index=9&type=section&id=Adjusted%20EBITDA%20Reconciliation) Q2 2024 Adjusted EBITDA reached profitability of $0.16 million (0.6% of net revenue), a significant improvement from a ($8.01) million loss in Q2 2023 **Adjusted EBITDA Reconciliation (in thousands) - Three Months Ended June 30:** | Metric | 2024 | 2023 | | :----------------------------------- | :----- | :------- | | Net Loss | ($3,629) | ($34,787) | | Add: Provision for income taxes | $205 | $26 | | Add: Interest expense, net | $228 | $346 | | Add: Depreciation and amortization | $430 | $1,202 | | EBITDA | ($2,766) | ($33,213) | | Add: Impairment loss on intangibles | — | $22,785 | | Add: Stock-based compensation expense | $2,921 | $3,223 | | Adjusted EBITDA | $163 | ($8,010) | | Adjusted EBITDA as a percentage of net revenue | 0.6% | (22.7)% | **Adjusted EBITDA Reconciliation (in thousands) - Six Months Ended June 30:** | Metric | 2024 | 2023 | | :----------------------------------- | :----- | :------- | | Net Loss | ($8,791) | ($60,587) | | Add: Provision for income taxes | $276 | $52 | | Add: Interest expense, net | $552 | $717 | | Add: Depreciation and amortization | $858 | $2,964 | | EBITDA | ($7,105) | ($56,854) | | Add: Impairment loss on intangibles | — | $39,445 | | Add: Stock-based compensation expense | $4,588 | $5,539 | | Adjusted EBITDA | ($2,461) | ($12,268) | | Adjusted EBITDA as a percentage of net revenue | (5.1)% | (17.5)% | [Product Strategy and Performance](index=9&type=section&id=Product%20Strategy%20and%20Performance) [Product Phase Definitions](index=9&type=section&id=Product%20Phase%20Definitions) Products are categorized into Launch (low/negative margins), Sustain (target 15% net margin), and Liquidate (selling remaining inventory, often with discounts) - **Launch phase** leverages **AIMEE technology** for new product variations and relaunches, often resulting in **negative net margins** due to discounts and marketing investment[26](index=26&type=chunk) - **Sustain phase** aims for products to become **profitable** with a target of **positive 15% net margin** within approximately three months of launch, through price and marketing adjustments[27](index=27&type=chunk) - **Liquidate phase** is for products that do not enter the sustain phase or have unsatisfactory customer satisfaction, involving selling remaining inventory, potentially with **steep discounts**[27](index=27&type=chunk) [Product Phase Results](index=10&type=section&id=Product%20Phase%20Results) In Q2 2024, the Sustain phase generated $26.29 million in net revenue and $16.20 million in gross profit, reflecting SKU rationalization efforts **Net Revenue and Gross Profit by Product Phase (in thousands) - Three Months Ended June 30:** | Phase | Q2 2024 Net Revenue | Q2 2024 Gross Profit | Q2 2023 Net Revenue | Q2 2023 Gross Profit | | :------------------- | :------------------ | :------------------- | :------------------ | :------------------- | | Sustain | $26,292 | $16,200 | $30,985 | $14,480 | | Launch | $485 | $258 | $42 | $22 | | Liquidation/Other | $1,207 | $433 | $4,237 | $394 | | **Total** | **$27,984** | **$16,891** | **$35,264** | **$14,896** | **Net Revenue and Gross Profit by Product Phase (in thousands) - Six Months Ended June 30:** | Phase | H1 2024 Net Revenue | H1 2024 Gross Profit | H1 2023 Net Revenue | H1 2023 Gross Profit | | :------------------- | :------------------ | :------------------- | :------------------ | :------------------- | | Sustain | $44,494 | $27,954 | $59,616 | $31,433 | | Launch | $892 | $539 | $200 | $89 | | Liquidation/Other | $2,813 | $1,567 | $10,327 | $2,470 | | **Total** | **$48,199** | **$30,060** | **$70,143** | **$33,992** |

Company Overview - Aterian, Inc. is a technology-enabled consumer products company that builds and acquires leading e-commerce brands with top-selling consumer products across multiple categories, including home and kitchen appliances, health and wellness, and air quality devices [2] - The company sells its products across the world's largest online marketplaces, focusing on Amazon and Walmart in the U.S., as well as its own direct-to-consumer websites [2] Upcoming Financial Results - Aterian plans to report its second quarter 2024 financial results after the market close on Thursday, August 8, 2024 [1] - A conference call for investors and interested parties is scheduled for 5:00 p.m. ET on the same day, which will be accessible via telephone and the internet [1] - Participants can join the call by dialing specific numbers based on their location or through a live webcast [1]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 26, 2024 ATERIAN, INC. (Exact Name of Registrant as Specified in its Charter) | --- | --- | --- | |-------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------- ...

Management Changes - Arturo Rodriguez has been appointed as the new Chief Executive Officer, previously serving as Co-CEO and CFO [1][2] - Josh Feldman has been appointed as Chief Financial Officer, previously the Senior Vice President of Finance [1][2] - Joe Risico has resigned as Co-CEO and from the Board of Directors, transitioning to a consulting role for three months [1][2] Financial Performance Update - The company has improved its second quarter 2024 net revenue guidance to a range of $23 million to $26 million, up from the previous range of $20 million to $23 million [3] - Adjusted EBITDA loss for the second quarter 2024 is now expected to be between a loss of $1.0 million to breakeven, an improvement from the prior loss range of $2.0 million to $1.0 million [3] - The expected cash balance as of June 30, 2024, is projected to be between $17 million and $18 million, with approximately $10 million in borrowing under its credit facility [4] Company Overview - Aterian, Inc. is a technology-enabled consumer products company focused on building and acquiring leading e-commerce brands across various categories, including home and kitchen appliances, health and wellness, and air quality devices [8] - The company primarily sells through major online marketplaces, with a focus on Amazon and Walmart in the U.S. and its own direct-to-consumer websites [8]