Aterian(US:ATER)2023-05-09 16:00Financial Performance - Net revenue decreased by $6.8 million, or 16.3%, to $34.9 million for the three months ended March 31, 2023, compared to $41.7 million for the same period in 2022[144]. - Direct net revenue fell by $6.7 million, or 16.7%, primarily due to decreased consumer demand amid the current macroeconomic environment[144]. - Gross profit for the three months ended March 31, 2023, was $23.6 million, a decrease of $4.5 million, or 19.1%, from $19.1 million in the same period of 2022[140]. - Total net revenue decreased by $6.8 million, or 16.3%, to $34.9 million for the three months ended March 31, 2023, down from $41.7 million in the prior year[147]. - Contribution margin for the three months ended March 31, 2023, was $2,068,000, representing 5.9% of net revenue, compared to $3,830,000 and 9.2% for the same period in 2022[195]. - Adjusted EBITDA for the three months ended March 31, 2023, was $(4,256,000), compared to $(4,541,000) for the same period in 2022, with net loss as a percentage of net revenue improving from (102.6%) to (74.0%)[198]. Operating Expenses - Total operating expenses increased by $15.8 million, or 26.4%, to $59.9 million for the three months ended March 31, 2023, compared to $44.1 million in the prior year[140]. - General and administrative expenses rose by $3.6 million, or 37.5%, to $9.5 million for the three months ended March 31, 2023, compared to $6.0 million in the prior year[140]. - Research and development expenses decreased by $0.1 million, or 9.0%, to $1.1 million for the three months ended March 31, 2023[140]. - Sales and distribution expenses decreased by $2.7 million, or 12.0%, to $20.2 million for the three months ended March 31, 2023[149]. - Research and development expenses increased by $0.1 million, or 9.0%, to $1.2 million for the three months ended March 31, 2023[153]. - General and administrative expenses decreased by $3.6 million, or 37.5%, to $6.0 million for the three months ended March 31, 2023[154]. Losses and Impairments - Operating loss for the three months ended March 31, 2023, was $36.3 million, an increase of $11.3 million, or 31.1%, from a loss of $25.0 million in the same period of 2022[140]. - The company reported an impairment loss on goodwill of $29.0 million for the three months ended March 31, 2023, compared to no such loss in the prior year[140]. - Impairment loss on intangibles was recorded at $16.7 million for the three months ended March 31, 2023, due to changes in strategy in the essential oil business[155]. - The company recorded an intangible impairment charge of $16.7 million for the three months ended March 31, 2023, due to the impairment of certain trademark intangible assets[203]. Cash Flow and Financing - Net cash used in operating activities was $7.4 million for the three months ended March 31, 2023, compared to $13.2 million in the same period of 2022[164]. - Cash used by financing activities for the three months ended March 31, 2023, was $3.0 million, primarily from net repayments for the MidCap credit facility of $2.1 million[166]. - The outstanding balance on the MidCap credit facility decreased from $21.1 million as of December 31, 2022, to $19.1 million as of March 31, 2023[184]. - As of March 31, 2023, the company had unrestricted cash and cash equivalents of $33.9 million and an accumulated deficit of $651.1 million[170]. - The company has incurred significant losses and negative cash flows since inception and expects to continue this trend until achieving profitability[169]. - The financial covenants of the MidCap Credit Facility require maintaining a minimum liquidity of $12.5 million during specific periods and $15.0 million at all other times[171]. Strategic Initiatives - The company is focused on leveraging data science to enhance product development and marketing strategies across its brands[131]. - The company plans to implement a workforce reduction leading to approximately $6.0 million of annualized savings, impacting about 70 employees and 30 contractors[178]. - The company is exploring additional outside capital to fund its M&A strategy, with no firm commitments secured as of the issuance date[172]. - The company made leadership changes in its essential oil business, resulting in a change in strategy and a reduced portfolio offering, which is expected to impact future revenues and profitability[203]. Market and Economic Conditions - The company has faced substantial increases in supply chain costs due to COVID-19 and related disruptions, impacting working capital[179]. - The company received a notice from Nasdaq regarding non-compliance with the minimum bid price requirement of $1.00 per share[175]. - The company does not currently engage in hedging transactions to manage exposure to foreign currency exchange rate risk, as it does not believe the exposure is material[208]. - The company does not believe that inflation had a direct material effect on its labor or overhead costs for the three months ended March 31, 2022, or March 31, 2023[209]. - The company will continue to monitor actual results versus expectations and may be required to record additional intangible impairment charges if future operating results do not materialize as expected[204].