Aterian(US:ATER)2024-08-09 20:30Financial 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]