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Aterian Reports First Quarter 2024 Results

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Aterian, Inc. (Nasdaq: ATER) reported first quarter 2024 results, showing an 80.0% improvement in net loss year over year and a 38.4% improvement in adjusted EBITDA loss. Despite a 42.0% decline in net revenue to $20.2 million, there were positive changes in gross margin, contribution margin, and operating loss. The company remains optimistic about achieving profitability on an adjusted EBITDA basis in the second half of 2024.

Positive
  • Improvement in net loss by 80.0% year over year.

  • Adjusted EBITDA loss improved by 38.4%.

  • Gross margin improved to 65.1% from 54.8%.

  • Contribution margin increased to 14.1% from 5.9%.

  • Operating loss improved by 78.9%.

  • Optimistic outlook for achieving profitability on an adjusted EBITDA basis in the second half of 2024.

Negative
  • Net revenue declined by 42.0% to $20.2 million.

  • Operating loss of ($5.3) million in the first quarter of 2024.

  • Adjusted EBITDA loss of ($2.6) million in the first quarter of 2024.

  • Forecasted adjusted EBITDA loss for the second quarter 2024.

Aterian's reported financials show a mixed picture. The drastic reduction in net loss by 80% and an improved adjusted EBITDA loss by 38.4% indicate that the company is moving in the right direction in terms of cost control and potentially better operational efficiency. These improvements are particularly noteworthy given that they were achieved despite a significant 42% decline in net revenue. The enhanced gross margin to 65.1% points to successful SKU rationalization efforts and reduced inventory liquidation. However, investors should be cautious of the revenue decline, as it could signal a reduction in market demand or competitive pressures. While the company aims for profitability in the second half of 2024, the short-term outlook suggests continued losses. The cash balance of $17.5 million as of March 31, 2024, will be important in sustaining operations until the projected improvement in profitability.

When analyzing Aterian's performance, it's essential to consider the broader market context. The company's revenue downturn could be a reflection of macroeconomic headwinds such as the current global environment and inflation, which are affecting consumer spending patterns. Aterian's focus on SKU rationalization—a strategy to streamline product offerings—may improve operational efficiency and cost structure, but could also limit revenue potential if not executed with market demand in mind. Investors should track Aterian's progress against its profitability target for the second half of 2024 closely, as it will be a critical measure of the company's ability to adapt and succeed in a challenging economic climate.

From an investment perspective, Aterian's Q1 2024 results present a complex scenario. The improvement in margins and cost metrics highlights effective internal management strategies, even as top-line growth falters. The reduction in operating loss is a positive signal, but investors must weigh this against the significant revenue decline and the need for future profitability. The cash balance is adequate but not overly robust, which warrants monitoring given the forecasted losses in Q2 2024. The forward-looking statements by the company about reaching EBITDA profitability in the latter half of the year are promising, yet they largely depend on external economic factors beyond the company's control. Investors would be well advised to maintain vigilance over Aterian's performance metrics, especially revenue trends, in relation to the overall market conditions.

First Quarter Net Loss Improved by 80.0% Year Over Year and Adjusted EBITDA Loss Improved by 38.4%

Affirms Second Half 2024 Adjusted EBITDA Profitability Target

NEW YORK, May 07, 2024 (GLOBE NEWSWIRE) -- Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today announced results for the first quarter ended March 31, 2024. 

First Quarter Highlights

  • First quarter 2024 net revenue declined 42.0% to $20.2 million, compared to $34.9 million in the first  quarter of 2023.
  • First quarter 2024 gross margin improved to 65.1%, compared to 54.8% in the first quarter of 2023, primarily reflecting the positive impact of our SKU rationalization efforts and less liquidation of high cost inventory compared to the prior period.
  • First quarter 2024 contribution margin improved to 14.1% from 5.9% in the first quarter of 2023, primarily reflecting the positive impact of our SKU rationalization efforts and less liquidation of high cost inventory compared to the prior period.
  • First quarter 2024 operating loss of ($5.3) million improved compared to a loss of ($25.0) million in the first quarter of 2023, an improvement of 78.9%. First quarter 2024 operating loss includes ($1.7) million of non-cash stock compensation, and restructuring costs of ($0.6) million, while first quarter 2023 operating loss includes a non-cash loss of ($16.7) million from the impairment on intangibles, and ($2.3) million of non-cash stock compensation.
  • First quarter 2024 net loss of ($5.2) million improved from a ($25.8) million loss in the first quarter of 2023, an improvement of 80.0%.
  • First quarter 2024 adjusted EBITDA loss of ($2.6) million improved from a ($4.3) million loss in the first quarter of 2023, an improvement of 38.4%.
  • Total cash balance at March 31, 2024 was $17.5 million.

Second Quarter and Second Half 2024 Outlook
For the second quarter 2024, taking into account the current global environment and inflation, we believe that net revenue will be between $20.0 million and $23.0 million and that adjusted EBITDA loss will be between ($1.0) million to ($2.0) million.   

For the second half of 2024, taking into account the current global environment and inflation, we believe that the  Company will be profitable on an Adjusted EBITDA basis.

Non-GAAP Financial Measures

For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the “Non-GAAP Financial Measures” section below. The most directly comparable GAAP financial measure for EBITDA and adjusted EBITDA is net loss and we expect to report a net loss for the three months ending June 30, 2024, due primarily to our operating losses, which includes stock-based compensation expense, change in fair value of warrant liability, and interest expense. We are unable to reconcile the forward-looking statements of EBITDA and adjusted EBITDA in this press release to their nearest GAAP measures because the nearest GAAP financial measures are not accessible on a forward-looking basis and reconciling information is not available without unreasonable effort.

Webcast and Conference Call Information

Aterian will host a live conference call to discuss financial results today, May 7, 2024, at 5:00 p.m. Eastern Time, which will be accessible by telephone and the internet. To access the call, participants from within the U.S. should dial (800) 715-9871  and participants from outside the U.S. should dial (646) 307-1963 and ask to be joined into the Aterian, Inc. call or use conference ID 2677840. Participants may also access the call through a live webcast at https://ir.aterian.io. The archived online replay will be available for a limited time after the call in the Investors Relations section of the Aterian website.

About Aterian, Inc.

Aterian, Inc. (Nasdaq: ATER) is a technology-enabled consumer products company that builds and acquires leading e-commerce brands with top selling consumer products, in multiple categories, including home and kitchen appliances, health and wellness and air quality devices. The Company sells across the world's largest online marketplaces with a focus on Amazon and Walmart in the U.S. and on its own direct to consumer websites.

Forward Looking Statements

All statements other than statements of historical facts included in this press release that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements regarding our projected second quarter net revenue and adjusted EBITDA, our guidance to achieve adjusted EBITDA profitability in the second half of 2024 and the current global environment and inflation. These forward-looking statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties and other factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to our ability to continue as a going concern, our ability to meet financial covenants with our lenders, our ability to maintain and to grow market share in existing and new product categories; our ability to continue to profitably sell the SKUs we operate; our ability to maintain Amazon’s Prime badge on our seller accounts or reinstate the Prime badge in the event of any removal of such badge by Amazon; our ability to create operating leverage and efficiency when integrating companies that we acquire, including through the use of our team’s expertise, the economies of scale of our supply chain and automation driven by our platform; those related to our ability to grow internationally and through the launch of products under our brands and the acquisition of additional brands; those related to consumer demand, our cash flows, financial condition, forecasting and revenue growth rate; our supply chain including sourcing, manufacturing, warehousing and fulfillment; our ability to manage expenses, working capital and capital expenditures efficiently; our business model and our technology platform; our ability to disrupt the consumer products industry; our ability to generate profitability and stockholder value; international tariffs and trade measures; inventory management, product liability claims, recalls or other safety and regulatory concerns; reliance on third party online marketplaces; seasonal and quarterly variations in our revenue; acquisitions of other companies and technologies and our ability to integrate such companies and technologies with our business; our ability to continue to access debt and equity capital (including on terms advantageous to the Company) and the extent of our leverage; and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), all of which you may obtain for free on the SEC’s website at www.sec.gov.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.


ATERIAN, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
  December 31,
2023
 March 31,
2024
ASSETS    
Current assets:    
Cash $20,023  $17,545 
Accounts receivable, net  4,225   2,382 
Inventory  20,390   18,520 
Prepaid and other current assets  4,998   5,138 
Total current assets  49,636   43,585 
Property and equipment, net  775   748 
Other intangibles, net  11,320   10,955 
Other non-current assets  138   386 
Total assets $61,869  $55,674 
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current Liabilities:    
Credit facility $11,098  $9,396 
Accounts payable  4,190   4,058 
Seller notes  1,049   903 
Accrued and other current liabilities  9,110   7,989 
Total current liabilities  25,447   22,346 
Other liabilities  391   378 
Total liabilities  25,838   22,724 
Commitments and contingencies    
Stockholders' equity:    
Common stock, $0.0001 par value, 500,000,000 shares authorized and 7,508,246 and 7,656,044 shares outstanding at December 31, 2023 and March 31, 2024, respectively (*)  9   9 
Additional paid-in capital  736,675   738,805 
Accumulated deficit  (699,815)  (704,977)
Accumulated other comprehensive loss  (838)  (887)
Total stockholders’ equity  36,031   32,950 
Total liabilities and stockholders' equity $61,869  $55,674 

(*) The number of shares and per share amounts have been retroactively restated to reflect the one for twelve (1 for 12) reverse stock split, which was effective on March 22, 2024. 



ATERIAN, INC.
Consolidated Statements of Operations
(in thousands, except share and per share data)
  Three Months Ended March 31,
   2023   2024 
Net revenue $                      34,879  $                 20,214 
Cost of good sold    15,782     7,046 
Gross profit    19,097     13,168 
Operating expenses:    
Sales and distribution    20,226     13,214 
Research and development    1,247     — 
General and administrative    5,959     5,232 
Impairment loss on intangibles    16,660     — 
Total operating expenses    44,092     18,446 
Operating loss    (24,995)    (5,278)
Interest expense, net    371     323 
Change in fair value of warrant liability    354     (517)
Other (income) expense, net    54     7 
Loss before income taxes    (25,774)    (5,091)
Provision (benefit) for income taxes    26     71 
Net loss $                   (25,800) $                (5,162)
Net loss per share, basic and diluted $                   (4.03) $                  (0.76)
Weighted-average number of shares outstanding, basic and diluted (*)                6,394,905                 6,789,955 

(*) The number of shares and per share amounts have been retroactively restated to reflect the one for twelve (1 for 12) reverse stock split, which was effective on March 22, 2024. 



ATERIAN, INC.
Consolidated Statements of Cash Flows
(in thousands)
  Three Months Ended March 31,
   2023   2024 
OPERATING ACTIVITIES:    
Net loss $           (25,800) $            (5,162)
Adjustments to reconcile net loss to net cash used by operating activities:    
Depreciation and amortization  1,762     428 
Provision for sales returns    (223)    64 
Amortization of deferred financing cost and debt discounts    106     83 
Stock-based compensation    2,317     1,667 
Change in deferred tax balance   —     (5)
Change in inventory provisions    (1,023)    (976)
Loss (gain) in connection with the change in warrant fair value    354     (517)
Impairment loss on intangibles    16,660    — 
Changes in assets and liabilities:    
Accounts receivable    1,028     1,844 
Inventory    4,312     2,846 
Prepaid and other assets  751     249 
Accounts payable, accrued and other liabilities    (7,661)    (527)
Cash used in operating activities    (7,417)    (6)
INVESTING ACTIVITIES:    
Purchase of intangibles and fixed assets    (33)    (36)
Purchase of Step and Go assets    (125)    — 
Purchase of minority equity investment    —     (200)
Cash used in investing activities    (158)    (236)
FINANCING ACTIVITIES:    
Repayments on note payable to Smash    (398)    (153)
Borrowings from MidCap credit facilities    20,549     11,453 
Repayments for MidCap credit facilities    (22,602)    (13,244)
Insurance obligation payments    (534)    (254)
Cash provided (used) by financing activities    (2,985)    (2,198)
Foreign currency effect on cash, cash equivalents, and restricted cash    129     (49)
Net change in cash and restricted cash for the year    (10,431)    (2,489)
Cash and restricted cash at beginning of year    46,629     22,195 
Cash and restricted cash at end of year $            36,198  $            19,706 
RECONCILIATION OF CASH AND RESTRICTED CASH:    
Cash    33,911     17,545 
Restricted Cash—Prepaid and other current assets    2,158     2,032 
Restricted cash—Other non-current assets    129     129 
TOTAL CASH AND RESTRICTED CASH $            36,198  $            19,706 
     
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION    
Cash paid for interest $                 538  $                 402 
Cash paid for taxes $                   —  $                     3 
NON-CASH INVESTING AND FINANCING ACTIVITIES:    
Non-cash consideration paid to contractors $                 321  $                 620 
Non-cash minority equity investment $                   —  $                    50 

Non-GAAP Financial Measures

We believe that our financial statements and the other financial data included in this press release have been prepared in a manner that complies, in all material respects, with generally accepted accounting principles in the U.S. (“GAAP”). However, for the reasons discussed below, we have presented certain non-GAAP measures herein.

We have presented the following non-GAAP measures to assist investors in understanding our core net operating results on an on-going basis: (i) Contribution Margin; (ii) Contribution margin as a percentage of net revenue; (iii) EBITDA (iv) Adjusted EBITDA; and (v) Adjusted EBITDA as a percentage of net revenue. These non-GAAP financial measures may also assist investors in making comparisons of our core operating results with those of other companies.

As used herein, Contribution margin represents gross profit less e-commerce platform commissions, online advertising, selling and logistics expenses (included in sales and distribution expenses). As used herein, Contribution margin as a percentage of net revenue represents Contribution margin divided by net revenue. As used herein, EBITDA represents net loss plus depreciation and amortization, interest expense, net and provision for income taxes. As used herein, Adjusted EBITDA represents EBITDA plus stock-based compensation expense, changes in fair-market value of warrant liability, impairment on intangibles, restructuring expenses and other expenses, net. As used herein, Adjusted EBITDA as a percentage of net revenue represents Adjusted EBITDA divided by net revenue. Contribution margin, EBITDA and Adjusted EBITDA do not represent and should not be considered as alternatives to loss from operations or net loss, as determined under GAAP.

We present Contribution margin and Contribution margin as a percentage of net revenue, as we believe each of these measures provides an additional metric to evaluate our operations and, when considered with both our GAAP results and the reconciliation to gross profit, provides useful supplemental information for investors. Specifically, Contribution margin and Contribution margin as a Non-GAAP Financial Measure percentage of net revenue are two of our key metrics in running our business. All product decisions made by us, from the approval of launching a new product and to the liquidation of a product at the end of its life cycle, are measured primarily from Contribution margin and/or Contribution margin as a percentage of net revenue. Further, we believe these measures provide improved transparency to our stockholders to determine the performance of our products prior to fixed costs as opposed to referencing gross profit alone.

In the reconciliation to calculate contribution margin, we add e-commerce platform commissions, online advertising, selling and logistics expenses (“sales and distribution variable expense”) to gross profit to inform users of our financial statements of what our product profitability is at each period prior to fixed costs (such as sales and distribution expenses such as salaries as well as research and development expenses and general administrative expenses). By excluding these fixed costs, we believe this allows users of our financial statements to understand our products performance and allows them to measure our products performance over time.

We present EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue because we believe each of these measures provides an additional metric to evaluate our operations and, when considered with both our GAAP results and the reconciliation to net loss, provide useful supplemental information for investors. We use these measures with financial measures prepared in accordance with GAAP, such as sales and gross margins, to assess our historical and prospective operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our operating performance and to compare our performance to that of our peers and competitors. We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue are useful to investors in assessing the operating performance of our business without the effect of non-cash items.

Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue should not be considered in isolation or as alternatives to net loss, loss from operations or any other measure of financial performance calculated and prescribed in accordance with GAAP. Neither EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue should be considered a measure of discretionary cash available to us to invest in the growth of our business. Our Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue may not be comparable to similar titled measures in other organizations because other organizations may not calculate Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue in the same manner as we do. Our presentation of Contribution margin and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from such terms or by unusual or non-recurring items.

We recognize that EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue, have limitations as analytical financial measures. For example, neither EBITDA nor Adjusted EBITDA reflects:

  • our capital expenditures or future requirements for capital expenditures or mergers and acquisitions;
  • the interest expense or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness;
  • depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, or any cash requirements for the replacement of assets;
  • changes in cash requirements for our working capital needs; or
  • changes in fair value of contingent earn-out liabilities, warrant liabilities, and amortization of inventory step-up from acquisitions (included in cost of goods sold).

Additionally, Adjusted EBITDA excludes non-cash stock-based compensation expense, which is and is expected to remain a key element of our overall long-term incentive compensation package.

We also recognize that Contribution margin and Contribution margin as a percentage of net revenue have limitations as analytical financial measures. For example, Contribution margin does not reflect:

  • general and administrative expense necessary to operate our business;
  • research and development expenses necessary for the development, operation and support of our software platform;
  • the fixed costs portion of our sales and distribution expenses including stock-based compensation expense; or
  • changes in fair value of contingent earn-out liabilities, warrant liabilities, and amortization of inventory step-up from acquisitions (included in cost of goods sold).

Contribution Margin

The following table provides a reconciliation of Contribution margin to gross profit and Contribution margin as a percentage of net revenue to gross profit as a percentage of net revenue, which are the most directly comparable financial measures presented in accordance with GAAP:

 Three Months Ended
March 31,
 
  2023   2024  
 (in thousands, except percentages)
Gross Profit$19,097  $13,168  
Less:    
E-commerce platform commissions, online advertising, selling and logistics expenses (17,029)  (10,320) 
Contribution margin$2,068  $2,848  
Gross Profit as a percentage of net revenue 54.8%  65.1% 
Contribution margin as a percentage of net revenue 5.9%  14.1% 


Adjusted EBITDA

The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net loss, which is the most directly comparable financial measure presented in accordance with GAAP:

 Three Months Ended March 31, 
  2023   2024  
 (in thousands, except percentages) 
Net loss$                 (25,800) $                (5,162) 
Add:    
Provision (benefit) for income taxes   26     71  
Interest expense, net   371     323  
Depreciation and amortization   1,762     428  
EBITDA   (23,641)    (4,340) 
Other (income) expense, net   54     7  
Impairment loss on intangibles   16,660     —  
Change in fair market value of warrant liability   354     (517) 
Restructuring expense   —     558  
Stock-based compensation expense   2,317     1,667  
Adjusted EBITDA$                 (4,256) $                (2,625) 
Net loss as a percentage of net revenue                        (74.0)%                     (25.5)% 
Adjusted EBITDA as a percentage of net revenue                    (12.2)%                      (13.0)% 

Each of our products typically goes through the Launch phase and depending on its level of success is moved to one of the other phases as further described below:

  1. Launch phase: During this phase, we leverage our technology to target opportunities identified using AIMEE (Artificial Intelligence Marketplace e-Commerce Engine) and other sources. This phase also includes revenue from new product variations and relaunches. During this period of time, due to the combination of discounts and investment in marketing, our net margin for a product could be as low as approximately negative 35%. Net margin is calculated by taking net revenue less the cost of goods sold, less fulfillment, online advertising and selling expenses. These primarily reflect the estimated variable costs related to the sale of a product.
  2. Sustain phase: Our goal is for every product we launch to enter the sustain phase and become profitable, with a target of positive 15% net margin for most products, within approximately three months of launch on average. Net margin primarily reflects a combination of manual and automated adjustments in price and marketing spend.
  3. Liquidate phase: If a product does not enter the sustain phase or if the customer satisfaction of the product (i.e., ratings) is not satisfactory, then it will go to the liquidate phase and we will sell through the remaining inventory. Products can also be liquidated as part of inventory normalization especially when steep discounts are required.

The following tables break out our first quarter of 2023 and 2024 results of operations by our product phases (in thousands):

  Three months ended March 31, 2023
  Sustain Launch Liquidation/ Other Fixed Costs Stock Based Compensation Total
Net revenue $28,631 $158 $6,090 $ $ $34,879
Cost of goods sold  11,678  92  4,012      15,782
Gross profit  16,953  66  2,078      19,097
Operating expenses:            
Sales and distribution expenses  13,353  119  3,557  2,526  671  20,226
Research and development        813  434  1,247
General and administrative        4,747  1,212  5,959
Impairment loss on intangibles        16,660    16,660
             
  Three months ended March 31, 2024
  Sustain Launch Liquidation/ Other Fixed Costs Stock Based Compensation Total
Net revenue $18,200 $408 $1,606 $ $ $20,214
Cost of goods sold  6,449  125  472      7,046
Gross profit  11,751  283  1,134      13,168
Operating expenses:            
Sales and distribution expenses  8,833  232  1,255  2,595  299  13,214
General and administrative        3,864  1,368  5,232


FAQ

What was the first quarter 2024 net revenue for Aterian (ATER)?

The first quarter 2024 net revenue for Aterian was $20.2 million.

How did the first quarter 2024 gross margin compare to the first quarter of 2023 for Aterian (ATER)?

The first quarter 2024 gross margin improved to 65.1% from 54.8% in the first quarter of 2023.

Did Aterian (ATER) report an operating loss or gain in the first quarter of 2024?

Aterian reported an operating loss of ($5.3) million in the first quarter of 2024.

What is the outlook for Aterian's (ATER) adjusted EBITDA in the second half of 2024?

Aterian believes that the Company will be profitable on an adjusted EBITDA basis in the second half of 2024.

What was the total cash balance at March 31, 2024 for Aterian (ATER)?

The total cash balance at March 31, 2024, was $17.5 million for Aterian.

Aterian, Inc.

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Heating Equipment (except Warm Air Furnaces) Manufacturing
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