Aterian(ATER) - 2025 Q2 - Quarterly Results

Executive Summary & Outlook 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 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] - 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] - 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] - 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] Financial Guidance for Second Half 2025 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 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 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] - Gross margin decline reflected a change in product mix and the impact of tariffs on pricing and cost of goods sold[6] - Total cash balance at June 30, 2025, was $10.5 million, down from $18.0 million at December 31, 2024[6] Operational and Strategic Highlights 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] - Launched select products from flagship brands (Squatty Potty, hOmeLabs, Healing Solutions, Mueller Living, PurSteam) on Temu[6] - Expanded presence on Mercado Libre in Chile, Colombia, and Argentina with products from PurSteam, Mueller, and Squatty Potty[6] - 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] - 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] - Commenced AI implementation in customer service operations, leading to improved service quality metrics and efficiencies[8] Company Information & Disclosures This section provides essential company details, investor communication channels, and important disclaimers regarding forward-looking statements About Aterian, Inc. 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] - 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] - Primary brands include Squatty Potty, hOmeLabs, Mueller Living, PurSteam, Healing Solutions, and Photo Paper Direct[10] Webcast and Conference Call Information 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] - 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] Investor Contact 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] Forward-Looking Statements 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] - 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] - 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] Condensed Consolidated Financial Statements (Unaudited) 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 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 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 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] - Stock-based compensation, a non-cash adjustment, decreased significantly from $4,588 thousand in H1 2024 to $905 thousand in H1 2025[19] Non-GAAP Financial Measures 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 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] - Contribution margin is defined as gross profit less amortization of inventory step-up, e-commerce platform commissions, online advertising, selling, and logistics expenses[22] - 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] - 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][27] Contribution Margin Reconciliation 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 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] Product Performance by Phase 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 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] - The Launch phase involves discounts and marketing, with net margins potentially as low as approximately negative 35%[32] - 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] - The Liquidate phase is for selling remaining inventory of underperforming products or for inventory normalization, often requiring steep discounts[34] Results of Operations by Product Phase 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][36] - 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][36]