Aterian(US:ATER)2025-05-15 20:04Revenue Performance - Net revenue decreased by $4.9 million, or 24.0%, to $15.4 million for the three months ended March 31, 2025, compared to $20.2 million for the same period in 2024[126] - Direct net revenue fell by $5.1 million, or 25.5%, primarily due to SKU rationalization and changes in Amazon's marketing affiliate program[127] - All product categories experienced a reduction in sales compared to the prior year, primarily due to SKU rationalization and softness in consumer demand[128] Profitability and Expenses - Gross profit decreased from 65.1% in Q1 2024 to 61.4% in Q1 2025, attributed mainly to product mix[130] - Cost of goods sold decreased by $1.1 million, from $7.0 million in Q1 2024 to $5.9 million in Q1 2025, primarily due to reduced sales volumes[129] - Sales and distribution expenses decreased by $3.6 million, or 26.9%, from $13.2 million in Q1 2024 to $9.7 million in Q1 2025[131] - General and administrative expenses decreased by 33.9% to $3.5 million for the three months ended March 31, 2025, from $5.2 million in the prior year, driven by reductions in stock-compensation and headcount expenses[136] Operating Loss and Financial Metrics - Operating loss improved by $1.6 million, or 30.0%, from a loss of $5.3 million in Q1 2024 to a loss of $3.7 million in Q1 2025[126] - Adjusted EBITDA for the three months ended March 31, 2025, was $(2.505) million, with an Adjusted EBITDA margin of (16.3)%, compared to $(2.625) million and (13.0)% for the same period in 2024[177] - For the three months ended March 31, 2025, the Contribution margin was $2.051 million, representing 13.4% of net revenue, compared to $2.848 million and 14.1% for the same period in 2024[176] Interest and Debt Management - Interest expense, net decreased by $148, or 45.8%, from $323 in Q1 2024 to $175 in Q1 2025[126] - Interest expense, net decreased by 45.8% to $175,000 for the three months ended March 31, 2025, from $323,000 in the prior year, due to lower average borrowings[137] - The outstanding balance on the MidCap credit facility increased from $6.9 million as of December 31, 2024, to $7.5 million as of March 31, 2025, with $0.7 million available on the facility[161] Cash Flow and Financial Position - Net cash used in operating activities was $3.9 million for the three months ended March 31, 2025, compared to $6,000 in the same period in 2024, reflecting net cash losses from operations[142] - As of March 31, 2025, the company had unrestricted cash of $14.3 million and an accumulated deficit of $715.6 million[150] Strategic Initiatives and Future Outlook - The company is exploring alternative sourcing outside of China to mitigate the impact of new tariffs on imports[120] - The company is proactively evaluating strategies to manage cost increases and potential impacts on revenue and margins due to tariffs[121] - The company announced a fixed cost reduction plan, including a workforce reduction affecting approximately 20 employees, expected to generate annualized savings of approximately $5 to $6 million[155] - The company expects to continue relying on outside capital for its growth strategy, particularly for potential mergers and acquisitions[149] - The company anticipates improvements in financial performance over time, despite ongoing challenges from macroeconomic factors and inflationary pressures[147] Tariff Impact and Risk Management - The U.S. government announced new tariff policies affecting imports from China, which could materially increase import costs and impact consumer demand[163] - The Company is exploring alternative sourcing outside of China and implementing price increases to mitigate the impact of tariffs on its supply chain and margins[164] - The Company performed a recoverability test for asset groups due to new tariffs and concluded that undiscounted future cash flows exceeded carrying amounts, resulting in no impairment recognized as of March 31, 2025[181] - The Company is closely monitoring actual results versus expectations and may need to record intangible impairment charges if future operating results do not materialize as anticipated[182] Share Repurchase and Credit Facility - The Company entered into Amendment No. 3 to its Credit Agreement, allowing for the repurchase of up to $1.5 million of common stock per year from March 25, 2025, through December 22, 2025, subject to liquidity conditions[160] - The Board of Directors authorized a share repurchase program of up to $3.0 million, which may be suspended or discontinued at any time, with no shares repurchased as of May 1, 2025[162]