Financial Data and Key Metrics Changes - Net revenue for Q2 2025 was $19.5 million, down from $28 million in Q2 2024, reflecting a decline driven by strategic price increases, a delayed summer season, and general consumer spending softness [8][9][30] - Adjusted EBITDA showed a loss of $2.2 million compared to a gain of $200,000 in the prior year, primarily due to lower revenue and increased marketing spend [9][33] - Gross margin decreased to 54.3% from 60.4% year-over-year, attributed to product mix and an obsolescence charge on long inventory [31] - Operating loss increased to $4.5 million from a loss of $3.2 million in the previous year, driven by reduced sales volume [33] Business Line Data and Key Metrics Changes - The company experienced a decline in sales velocity on Amazon due to price adjustments made to offset rising costs, which negatively impacted revenue [10][28] - Promotional efforts led to increased advertising spend, resulting in inefficiencies and additional one-time advertising costs of $900,000 [12] - The contribution margin for Q2 2025 was 7.8%, down from 7.4% in Q2 2024, primarily due to reduced gross margin and increased marketing costs [32] Market Data and Key Metrics Changes - The company noted broader consumer softness, with total sales volume at best seller ranks down year-over-year, indicating weaker overall consumer demand [13] - The competitive landscape in the dehumidifier space was highlighted, with Amazon 1P maintaining lower prices, making the company's products appear more expensive [11][20] Company Strategy and Development Direction - The company is focusing on a strategic pivot to consumables, with plans to launch products in the health and beauty space, leveraging existing brands [22][42] - A fixed cost reduction plan targeting $5 million to $6 million in annualized savings has been implemented, with approximately $5.5 million already identified [14][29] - The company is actively diversifying manufacturing away from China, reducing the percentage of products sourced from China from 100% to approximately 65% [16][46] Management's Comments on Operating Environment and Future Outlook - Management believes the worst of the tariff impacts is behind them and expects improved performance in the second half of 2025 [7][24] - The company anticipates net revenue for the second half of 2025 to be between $36 million and $38 million, with adjusted EBITDA expected to be breakeven to a loss of $1 million [37] - Management expressed confidence in the company's liquidity position to navigate the current environment without raising additional equity capital [37] Other Important Information - The company is leveraging AI to enhance productivity and improve customer service efficiency [15] - The launch of Squatty Potty flushable wipes is highlighted as a significant new product initiative, expected to contribute positively to the company's portfolio [22][38] Q&A Session Summary Question: Can you talk about expansion into other consumable products? - Management indicated a focus on health and beauty products, leveraging existing essential oil brands, with further announcements expected in October 2025 [41][42] Question: Are there updates on reducing Chinese-based manufacturing? - Management clarified that they aim to reduce Chinese manufacturing by approximately 40%, with a current shift to 65% sourced from China [44][46] Question: How is the performance in Latin American markets? - Management views the expansion into Latin America as a long-term play, expecting growth over the next two to three years [50][52] Question: What steps are being taken to ensure stock price compliance? - Management emphasized focusing on business growth as the best way to support long-term shareholder value, expressing optimism for the second half of the year [62] Question: What is the status of the share repurchase plan? - The share repurchase plan was suspended due to the macroeconomic environment, with a focus on preserving liquidity [64] Question: How have price increases impacted revenue? - Management noted that pricing volatility has made navigation difficult, but they expect stabilization and improved performance in the second half [66][69] Question: Will there be a scaling back in marketing spend to meet adjusted EBITDA guidance? - Management confirmed that marketing spend has been adjusted to be more focused and efficient, which should help reduce losses in the second half [71]

Core Insights - Aterian, Inc. reported financial results for Q2 2025, highlighting challenges due to tariff volatility and a strategic focus on cost optimization and new product launches [1][2]. Financial Performance - Net revenue for Q2 2025 was $19.5 million, down from $28.0 million in Q2 2024, primarily due to macroeconomic conditions and lower unit volumes from price increases related to tariffs [6]. - Gross margin decreased to 54.3% from 60.4%, attributed to changes in product mix and tariff impacts on pricing and cost of goods sold [6]. - Adjusted EBITDA loss for Q2 2025 was $(2.2) million compared to an Adjusted EBITDA of $0.2 million in Q2 2024 [6][33]. Cost Management and Strategic Initiatives - The company expects annual pre-tax savings of approximately $5.5 million from workforce reductions and vendor savings initiatives, with initial benefits anticipated in the second half of 2025 [2]. - Aterian is diversifying its manufacturing footprint, reducing reliance on high-tariff regions, and has sourced approximately 65% of its dehumidifiers from China in 2025, down from 100% in 2024 [11] [2]. Future Guidance - Aterian anticipates net revenue for the six months ending December 31, 2025, to be between $36 million and $38 million, with Adjusted EBITDA expected to range from a loss of $(1.0) million to break-even [3]. - The company aims to launch new products, including the Squatty Potty flushable wipes, in September 2025, marking its entry into the consumables market [2]. Operational Highlights - Total operating expenses decreased to $15.1 million in Q2 2025 from $20.1 million in Q2 2024, with restructuring costs of $1.8 million included in the Q2 2025 expenses [6]. - The total cash balance at June 30, 2025, was $10.5 million, down from $18.0 million at December 31, 2024 [6].

Financial Data and Key Metrics Changes - For Q1 2025, net revenue was $15.4 million, down from $20.2 million in Q1 2024, reflecting a 24% decline primarily due to SKU rationalization and reduced consumer demand [7][26] - Adjusted EBITDA loss improved slightly to $2.5 million from $2.6 million year-over-year, indicating a focus on profitability despite revenue decline [7][29] - Operating loss narrowed to $3.7 million from $5.3 million in the previous year, an improvement of approximately 30% driven by cost-cutting initiatives [28][29] Business Line Data and Key Metrics Changes - The overall gross margin for Q1 decreased to 61.4% from 65.1% year-over-year, primarily due to product mix changes [27] - Contribution margin for Q1 was 13.4%, down from 14.1% in the previous year, reflecting the reduction in gross margin [28] - Launch revenue for Q1 was $400,000, consistent with the previous year, indicating stability in new product introductions despite broader challenges [26] Market Data and Key Metrics Changes - The company experienced softness in consumer demand, particularly in the latter part of the quarter, which may have impacted sales velocity [7][26] - Inventory levels increased to $18.1 million from $13.7 million at the end of Q4 2024, reflecting preparations for anticipated demand trends [30] Company Strategy and Development Direction - The company is focusing on four strategic initiatives: diversifying manufacturing, expanding into consumables, raising prices, and reducing fixed costs [9][21] - A new goal is to manufacture no more than 30% of goods in China by the end of 2025, accelerating previous targets [11] - The company has paused new product launches from Asia, particularly hard electronic goods, until clarity on the trade environment is achieved [14] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current macroeconomic environment and emphasized the importance of agility and resilience [8][20] - The company has withdrawn its 2025 guidance due to current volatility but believes actions taken will position it for growth and profitability beyond 2025 [19][31] - Management remains committed to preserving capital and does not foresee raising equity capital in 2025 [18][32] Other Important Information - The share repurchase program has been paused due to the current environment, but management believes the stock is undervalued [18][50] - The company is targeting $5 million to $6 million in annualized savings from fixed cost reductions, with a significant portion coming from headcount reductions [15][25] Q&A Session Summary Question: Can you talk about your inventory plans in the near and medium term given the China tariffs? - Management indicated that they have been proactive in managing inventory and are well-positioned to produce necessary products for 2025 despite tariff uncertainties [36][37] Question: How have consumers reacted to the pricing changes? - Management noted mixed results in consumer response to price increases, with some products maintaining strong rankings despite price adjustments [42][44] Question: Is there a way to speed up the diversification strategy in manufacturing? - Management committed to accelerating the diversification strategy while ensuring product quality, focusing on consumables and other regions [46]