Aterian(ATER) - 2024 Q3 - Quarterly Report

Revenue Performance - Net revenue decreased by $13.4 million, or 33.9$26.2 million for the three months ended September 30, 2024, compared to $39.7 million for the same period in 2023[145]. - Net revenue decreased by$35.4 million, or 32.2%, during the nine months ended September 30, 2024, to $74.4 million, compared to$109.8 million for the same period in 2023[162]. - Total net revenue for the nine months ended September 30, 2024, was $74.4 million, a decrease from$109.8 million in the prior year, reflecting a reduction in sales across all business categories due to SKU rationalization and soft consumer demand[163]. Cost and Profitability - Gross profit margin improved to 60.3% in September 2024 from 49.4% in September 2023, despite a decrease in net revenue[143]. - Gross profit increased from 49.4% for the three months ended September 30, 2023, to 60.3% for the three months ended September 30, 2024, driven by a change in product mix and reduced liquidation of high-priced excess inventory[148]. - Gross profit margin increased from 48.8% for the nine months ended September 30, 2023, to 61.6% for the same period in 2024, attributed to a favorable product mix and reduced liquidation of high-priced excess inventory[165]. Operating Expenses - Total operating expenses decreased by $8.5 million, or 32.7$17.6 million for the three months ended September 30, 2024[141]. - Sales and distribution expenses decreased to $13.9 million for the three months ended September 30, 2024, from$20.9 million for the same period in 2023, a reduction of 33.5%[149]. - Sales and distribution expenses decreased by 31.5%, from $61.7 million in the nine months ended September 30, 2023, to$42.3 million in 2024, mainly due to lower product sales volume[166]. - General and administrative expenses decreased from $4.3 million for the three months ended September 30, 2023, to$3.6 million for the same period in 2024, a reduction of $0.7 million[154]. - General and administrative expenses decreased by 16.6$16.6 million for the nine months ended September 30, 2023, to $13.8 million in 2024, driven by reductions in depreciation, insurance, and professional fees[171]. Operating Loss - Operating loss increased to$1.7 million for the three months ended September 30, 2024, compared to a loss of $6.5 million in the same period in 2023, reflecting a 73.4$10.2 million for the nine months ended September 30, 2024, compared to an operating loss of $67.9 million for the same period in 2023, an improvement of 85.0$852,000 in September 2023, indicating a strategic shift in technology development[141]. - The company has shifted its technology platform to an integrated third-party model, resulting in a 100% reduction in research and development expenses for the nine months ended September 30, 2024[170]. Cash Flow and Financial Position - Net cash provided by operating activities was $2.2 million for the nine months ended September 30, 2024, a significant improvement from a cash outflow of$8.5 million in the prior year[176][177]. - As of September 30, 2024, the company had unrestricted cash and cash equivalents of $16.1 million and an accumulated deficit of$710.4 million[184]. - The company expects to continue incurring losses and negative cash flows until achieving a scale of profitability, influenced by macroeconomic factors and reduced consumer spending[182][183]. Debt and Credit Facilities - As of September 30, 2024, the outstanding balance on the MidCap credit facility was $6.7 million, with$1.3 million available[202]. - The Company amended its credit facility with MidCap, extending the term to December 2026 and reducing the minimum liquidity financial covenant from $15.0 million to$6.8 million[201]. - The Company extended its credit facility with MidCap, which allows access to $17 million in current commitments, potentially increasing to$30 million[201]. Restructuring and Strategic Changes - The Company recognized restructuring charges of $1.6 million for the year ended December 31, 2023, and$0.6 million for the nine months ended September 30, 2024[196][197]. - The Company completed two restructuring programs in the last 18 months to reduce operating costs and align workforce with streamlined operations[188]. - The Company plans to reduce the number of SKUs sold, focusing on profitable products core to its strategy[187]. Going Concern and Future Outlook - The Company has uncertainties regarding its ability to continue as a going concern, which raises substantial doubt about its operations[190]. - The Company has no firm commitments to secure additional outside capital, which may impact its ability to meet obligations over the next twelve months[186]. Impairment Charges - The company recorded an intangible impairment charge of $16.7 million for the essential oil business during the three months ending March 31, 2023[219]. - An additional intangible impairment charge of$22.8 million was recorded for the Paper and Kitchen appliance businesses during the three months ending June 30, 2023[220]. - For the three months ended December 31, 2023, the company recorded an intangible impairment charge of $0.3 million for the Paper business[221]. - There was no impairment loss on intangibles for the nine months ended September 30, 2024, compared to an impairment loss of$39.4 million in the prior year[172]. - The company continues to monitor actual results versus expectations to assess the need for potential future impairment charges[223].