Aterian, Inc. Q2 FY2025 earnings call

• Fixed cost reduction plan: Targeting $5 million to $6 million in annualized savings, with $5.5 million secured so far, including $3.8 million from head count reductions and $1.7 million from vendor savings. Leveraging AI for productivity enhancements.
• Accelerated resourcing: Shifted dehumidifier manufacturing from 100% China in 2024 to ~65% in 2025, with opportunities to source outside China for products with multiple tariff layers.
• Pausing launches: Paused new category launches from China in Q2, but restarting focused launches in hard electronic goods in H2 2026.
• Inventory and supply chain: Navigated peak tariffs by working with manufacturers and supply chain partners, aiming for diversification long-term.
• Strategic pricing: Implemented price increases to offset tariff costs, expecting market normalization in 2026 to restore competitiveness.
• New product launches: Launched Squatty Potty flushable wipes, with plans to expand into U.S. sourced health and beauty consumables.

Net revenue for Q2 2025 was $19.5 million, a 30.5% decline from $28 million in Q2 2024. Gross margin decreased to 54.3% from 60.4% in Q2 2024. Contribution margin was 7.8% in Q2 2025, down from 7.4% in Q2 2024. Operating loss in Q2 2025 was $4.5 million, up from $3.2 million in Q2 2024. Net loss in Q2 2025 was $4.9 million, an increase from $3.6 million in Q2 2024. Adjusted EBITDA loss was $2.2 million in Q2 2025, compared to a gain of $0.2 million in Q2 2024.

• Expect H2 2025 net revenues between $36 million to $38 million.
• Adjusted EBITDA expected to be breakeven to a loss of $1 million.
• Liquidity position sufficient to support business through tariff environment without raising additional equity capital this year.
• Working capital position expected to improve through remainder of 2025.

• Tariff volatility impacting pricing, sourcing, and consumer demand.
• Consumer spending softness affecting sales volume despite maintaining market share.
• Amazon Marketplace algorithm penalizing price instability, impacting sales velocity.
• Inventory management challenges with higher-than-desired inventory levels.

Q: Other than the flushable wipes, any other consumable products?

A: Focus on health and beauty space under Healing Solutions umbrella, with U.S. sourced products carrying higher contribution margins.

Q: Update on Chinese manufacturing timeline?

A: Reduced dehumidifier manufacturing from 100% China in 2024 to ~65% in 2025, but tariffs at 30% create hurdles for full diversification.

Q: Performance in Latin American markets?

A: Long-term play with Mercado Libre, a strategic move to expand presence in South America.

Q: M&A opportunities?

A: Focus on stabilizing business first, with M&A considered once stability is achieved.

Q: S&D costs?

A: Shift to U.S. sourced consumables like Squatty Potty wipes to improve gross margins and contribution margin.

Q: Social media promotion?

A: Plan to push into social media marketing, starting with Squatty Potty flushable wipes launch in September.

Q: Stock price compliance?

A: Focus on growing business to support long-term shareholder value, optimistic about back half of 2025 and 2026.

Q: Share repurchase plan?

A: Suspended temporarily due to macroeconomic environment, will evaluate quarterly.

Q: Price increase reaction and guidance?

A: Pricing changes impacted Q2, but guidance is based on stable pricing and run rates moving forward.

Q: Marketing spend and hitting guidance?

A: Optimized marketing spend, combined with fixed cost reductions, expected to help hit second half guidance