ATER - Earnings call transcript Q1 2024

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Operator

Thank you for standing by. My name is Alex, and I will be your conference operator today. At this time, I would like to welcome everyone to the Aterian Incorporated Q1 earnings report. [Operator Instructions] I would now like to turn the call over to Ilya Grozovsky, Vice President, Investor Relations and Corporate Development. Please go ahead.

Ilya Grozovsky

us discuss joining XXXX First for results. earnings you today Aterian's to Quarter Thank are our Joe Rodriguez, call today's On Risiko, and our co-CEO; CFO. co-CEO Arturo and Relations is A on press of Aterion's release copy the at today's Investor section aterian.io. of website available

the discussion among could materially such be and is for Investor of XX, started, limitation, and quarterly predictions, you of uncertainties, and XXXX, from may including differ our Private actual expectations, get remind risks our discussed These targets to SEC. include, to on with We or Act regarding review substantial at uncertainties, expressed are XXXX and could Securities encourage involve mentioned. the actual differ statements. and this Litigation or anticipated our estimates, plans wanted those remarks business control within the some forward-looking objectives, of financial implied based risks, also by when annual everyone in report which our forward-looking statements that including materially a results management may may the others, results on risks developments to Reform on Form and filings without contain these report XX-Q aterian.io. performance, Form from March available our on those I statements future the XX-K may expectations. on events filings it meaning on and we of Before that outside call of that filed These are current these These cause website the of portion

undue past certain provide ability believe in measures, which generate obligation contain earnings, new as measures today, statements or them the to operating these financial by and reliance GAAP adjusted useful and adjusted as period-to-period and the margin are our place are and of we to any core website also these on assist evaluating non-GAAP Please should most release, These our only may of performance including which facilitate differ is at Reconciliation our no we of for of forward-looking of portion except similarly presented EBITDA for EBITDA call companies. with supplemental definitions Investor are update revise required aterian.io. these undertake information made our and will definition You in our note indicators comparisons statements. by law. This that not consistency available our these measures on from that titled comparability included metrics non-GAAP measures comparable to other results. earnings measures

non-GAAP on reasonably to are provide to forward-looking not to reconciliation the comparable that We impact GAAP directly income over a the Joe. a that, financial of be or and predicted. control company's unable net cannot measures efforts unreasonable will measure With because within items without adjusted call margin, GAAP I financial basis the EBITDA are margin most turn

Joseph A. Risico

Thank you, Ilya, you, joining for us thank today. and everyone,

QX. depth we'll as provide of the and half then outlook XXXX. beyond that as achieving second and simplify foster Artu business I'm to stabilize in profitability for core the inorganic in QX growth and our cover in focus, term organic continue quarter, So and to discuss results mission adjusted for first then and on taking and we to going going our to EBITDA actions discuss we the I'm XXXX more will financial we're of continue our efforts our for our Aterian's results

period. our primer those products Mueller and through accessories on and paper our ore our the of our sell the umbrella through products, Today, the primarily brands, PPD direct and Healing For and U.S., sell overall, iron time, Aterian with are QuadPay we own efforts to our are health categories: in joining including core brands. from product stabilize first we to market or essential paper start for a Solutions. us and of as amazon.com consumer performance, operates quick its you to simplify an Aterian's focus, most and owns We following I'll brands, we products from of With home consumer primarily through brand, and results brand, the seeing products QX products respect PureStem pleased appliance hOmeLabs transfer and the oils photo revenues and our in marketplace. kitchen wellness we earn business.

operational our optimizing course, to and our organized of with a technology for better rationalized revenue and to towards and accounts. of reduced each seller And view scale. profitable our a refine simplified We've and SKU portfolio. As continue infrastructure. growth jettisoned of quick we logistics we've We number we've the and workflows. initiatives, recap, We noncore assess above

to XXXX. percentage I'd our While year. the pressure profitability to remains of remain In to mix, the improved of margin to second due to strong, fluctuate contribution to note and QX in that to product margin pricing QX, continue percentage environment believe position uncertain, for us we product and well the primarily achieve in of adjusted expect we remain rest we half competitive macroeconomic improved we experience and results, last XX% quarter-to-quarter margin highly like pricing versus margin with for we XXXX which in QX which line categories of our operate. we but XX%, the we to and EBITDA contribution both gross to do discretionary gross expect

brands, inorganic we good organic cost Overall, of product structure, we organic had achieve have this fixed position and our us to grow respect also EBITDA hOmeLabs, QX oils for essential pursue our to believe believe goal of Living and continue newer across to our addition, to on revitalize growth seeing to been strategy, Aterian sheet to to and focus we omnichannel primarily strengthen, we geographies our we and and progress, scaling hard continue expanding we opportunities stabilize development a on healthy growth. In continue product stated that our strategies. allow From working on hard together while With channels to QX, we cost we to previously with we of profitability, we and focus brands. launches and new in our number we balance will remain and structure, our both perspective, work can with a each handle and expect strategies, our on relating respect growth our a in are adjusted We've track to business. are launch no portfolio products to an marketplaces. with seeing

are Mercado partnership help and through And not results, products are potentially growth and us disclosed, to through that channel previously them. Libre As our as the we material optimistic preliminary drive this of product will launches. while results our partnership financial we with expanded our new part existing to

Amazon, portfolio sale on for and will marketplace. marketplace of our We continue Amazon's for have we Canada we certain have to expand products our expanded also and products, marketplace, sales of on that our portfolio begun in Wayfair's

progress to strategy. an optimistic strategy, are opportunities. realize respect updates working an to international disciplined increase other these growth coming we in to growth transactions Target respect in are domestic We part will expansion remains our and marketplaces, with will to M&A other quarters. we pursue growth strategy, Plus, saw as QX, focused, from and we XXXX. overall we will Walmart to there of And continuing from we to each assess do meaningful actively to in synergistic also we excited of and remain Mexico, With this we provide for lastly, expand and marketplaces. and be accretive inorganic be including M&A Amazon are Mexico initiatives our and And believe to while and Overall, higher-quality Aterian we important in that opportunities able the

recognize and I team. Lastly importantly, want our to

have and Artu that's of and a of with is done. I this are But very restructuring work Artu. very this along team now we do formidable you it highly of growth, We And given done much. the pass and earlier to year. smaller, from proud that, lean the the is capable people will group being driving gotten that I are believe Thank been

Arturo Rodriguez

Good Joe. Thanks, everyone. evening,

the losses continue to our as and term. shrinking. make metrics results and these progress from are on We're focusing, path our of We starting improving see stabilizing to our are simplifying key missions

Our end at the QX expectations. our of high results were

over focusing SKUs. nonprofitable XX%, CM rationalized as our Our we SKU and is XX% stopped overall by on XX to our portfolio, core gross selling basis essentially points improved SKUs our approaching margin have and

sales our have improve. to core declined, planned, but business As metrics continue the

adjusted continue Our our as first quarter year-over-year, tough net loss improved EBITDA by XX% XX.X% loss by decisions. to make and improved we

go-forward rationalized have As fixed previously focused our and our February, our we company. scale through for size in costs announced

to adjusted balance strengthen more MidCap Finally, our EBITDA with on have We sheet we amendment. do credit still facility continue work path towards our our profitability. to

the right adjusted and to balance to we is performance, QX's sheet working that XXXX and we on the plan second confident EBITDA However, our with these are deliver deliver are profitability results. have strength half path

QX revenue year quarter. Net detailed for in Now of first from moving results. the to the $XX.X declined to million XXXX XX% ago $XX.X million the quarter

SKUs. rationalization continuing $XX.X year, you sustained the pressures as our of sustained a period. or our the into result the other sustained SKU towards continued as of our primarily have and prior Further, in efforts Our revenue and from our efforts comparable expected $XX.X million, year rationalization revenue the Including represented approximately million our by versus focus competitive million $XX.X comparable such, to XX%. as see of XX% prior best revenue of would decreased XX% revenue XX% business impact SKU decreased impacts. total only And can pricing

the expect to of quarter XXXX. primarily efforts, the for from from had to continue inventory the launches. positive new Overall compared period. SKU liquidation driven no margin mix first impact an quarter, planned, the As gross in product was we of product the The launches year in in thoughtful do of on valuations high-cost We XX.X% more to improvement our rationalization XX% ago increased as QX the quarter. the launches and coming timing by we quarter our be increase first lower prior XX.X% in

of contribution XX.X%, cost XXXX by prior compared of earnings pricing margin compared year's compared by the positive Our inventory prior contribution impact in offset The period, competitive lower XXXX which as teratoization to pressures. CM our efforts negative QX's of increase increase to higher overall liquidation was X.X%, was an in defined year-over-year X.X%. improved margin, and our driven QX release, the to

XX.X% versus impact sustained of efforts, pricing focus our in of efforts on XX% CM been still into the contribution year-over-year rationalization profitable in our have impacts. year, prior approximately contribution offset an improvement margin improved and the driven as QX our saw XXXX SKU QX to by other X%. comparable sustained SKUs continuing was pressures increase the would rationalization Our SKU Including by of more the The XXXX. margin part product

be will the to progress pronounced as improvement prior compared we that year. as So more XXXX through

and increase sales to compared year variable Looking deeper mix for our expenses is into to expenses in sales percentage XX.X% margin contribution as increase revenue increased in in product a This and due net an quarter. predominantly as expense. distribution XX.X% marketing XXXX, QX of distribution the ago

Our in operating quarter fixed intangible costs, and improved million by and an period including period, from million improvement costs. loss compared noncash offset the in the in loss driven approximately to no current the first the $XX year in primarily improvement compensation by reduction write-offs ago current and impact the of of of of quarter XX.X% our restructuring $X.X a CM, stock

$X.X XXXX and expense million. costs Our of million compensation restructuring includes loss stock $X.X first quarter of operating noncash

intangibles first of noncash stock and expense loss of million $XX.X our operating quarter of noncash includes a XXXX compensation million. $X.X loss While

impact the for intangible million in reduction from an write-off $X.X loss CM and quarter the driven quarter, year. XX%, in prior in improvement the of Our by loss million of primarily net of year costs $XX.X approximately fixed ago improvement the the of the the a and in improved

our of improved quarter EBITDA the the EBITDA loss costs. Our adjusted driven XXXX, CM in in from defined million earnings an loss the of $X.X as by of primarily reduction of XX.X% improvement by in million $X.X adjusted fixed release, on and first

cash $XX.X predominantly $XX $XX.X of period of Moving the driven as XXXX. loss on in planned compared our the of ago and quarter. million, impacts from on facility, from the $XX.X positive year At net The XX, our million with end the to at the approximately from balance fourth repayments million working March in had cash end we offset XX, $XX.X XX, is of million capital. quarter sheet. credit million December in our at XXXX, down March level and At was by decrease XXXX by down the cash inventory

the approximately prior facility the balance XX% the million $XX.X from in from quarter credit first down at at end fourth quarter of year million was of of XXXX Our million, end $XX.X and the $X.X the of period. XXXX down

of As SKUs. SKUs XX% we year, that prior QX between current from look the Including would XX%. our million, coming Using decrease million. the driven revenue concentration believe only the will SKU expected strategic of towards environment, our $XX and $XX million revenue see approximately to continue see middle an we to last on the we strategic the decrease the at of to from rationalization expect revenue is our consumer reduction continued QX net efforts as impact decrease XXXX, SKU rationalization and quarters be primarily the plan considering SKU comparable this $XX.X we rationalization. increase based into go-forward our improve in And our in by our be forecast, revenue range, by year's challenging

expected is on products. have as continue As revenue decrease focus our discussed, prior go-forward best business we to year net and we our previously brands our in versus

to to EBITDA continues adjust the half today in of focus profitability primary getting XXXX. second Our the

XXXX, $X of For XXXX. loss range an improvement be to of million. a $X XXXX quarter of and our to from million of adjusted QX range expect improvement XX% represents in XX% we compared QX this sequential The to EBITDA the QX middle approximately

can laser-focused be of on of addition. half to realize turning you second of profitable adjusted and hard EBITDA see continuing to continue work results the our QX And XXXX. target the in are with we We our our guide,

without We that our of profitability equity. forecast also on have covenant adjusted additional the goal achieve in believe, to our our of based sufficient we above second XXXX EBITDA half cash raising current

the and balance be pursue financing, we our value. believe and we profitability predominantly are it forward EBITDA turning across it as teams strong shareholder to our In and with with turn if I'll back the confidence with With to growth focus, for continue maximize M&A. cornerstone our open ultimately look that, towards up quarter through will additional simplify our we the operator stated, to we dedicated path stabilize, closing, to and sheet, adjusting previously world hard-working on products, As to the call our questions.

Operator

your Kintslinger Brian Instructions] [Operator Global of with line comes question first the Alliance And from Partners.

Brian Kinstlinger

the by going gross wide The talk for into Italian like and the first range forward? I what margin. into assume we'll as limited looks Can you from was public detail have sustainable margin a as a quarter go gross factors margin company highest liquidation a about contribution a

Arturo Rodriguez

of product and is in also we've lot oils We've There's seen. other and a focused mix. of mix pricing QX better been is that Yes, highest been A very there. it trying better because as pricing of lot a essential models. team to drive

biggest I the think of that do mix, I is However, earlier. impact said as

about, as I doing, we that margin XXs the the work number gross that it bit I as margin XX% think to will humidifiers Joe and bit. his I high you comments don't other is it we've because the because year, in overall. think of and rest obviously, think a be the to in QX, think really be alluded been look all seasonal QX little yes, expect still somewhere XXs that do in target sell the a you will strong. do do low when I I But probably products, especially drop think at

Joseph A. Risico

And maybe would it's marketplace. being to just of I Brian, some dynamic the some on add, just the extent, of

in always lower price. of it fluctuate a raise bit, happen And kind other price dynamics little a just So as appropriate, you've so manage can at it's on bit and hard it competitive, you got And so the everyday on right? up we take to point, right? right, depending the that pricing works think stay of some advantage to right, at down points, the and price little and team a marketplace, will

organically and operate those but case just for dynamic, is that the us brands the marketplace for a it's in again, marketplace. Just

Brian Kinstlinger

are invest of mentioned talked then short long you know Do decreasing And and Or next given months? you inventory to about Do holidays? ahead invest you Can you I your inventory. neutral? of things are and products X your over you've the summer? need that. kind to you inventory highlight that the like plans your now around need

Joseph A. Risico

the levels. So we normalized short. very not manage can you obviously, sure in to long, we're yes, make not against jump too QX, hard go inventory we good in look, sort And right? on sort into season to tried I handle our we've say, we too we of summer plans, And got feel as a what of, we've here, need like know to let's execute

Arturo Rodriguez

Yes.

our little Brian, But now SKUs the going So up bulk expensive them to May. we're think yes, beginning working a on in You into little up a be so go I our focused coming always right? capital bit up to natural Yes, product, season season, [indiscernible] core down. bit. the summer and a and more inventory core flow of have the that unit, to it's much

see little you'll now normalize. than season, of we So bit in June. right are higher But should the kind a be inventory our that's may that within so

I here. So a great think do we've job done

I right? more less inventory. a what It very, we're bit is liquidation inventory. a with in There's But of always little much I think stronger of noise, in normal There's more was XX% Naturally, think still we're we're than tiny. normalized bit space and the tuning right? of seeing very now doing, like you as numbers. little a do saw that

Brian Kinstlinger

it understand down? think based would new take think on the is to And year Is you trying get half that of second a contributions? I Because to the platforms greater the profitability assumptions a the SKUs SKUs? in making new that half while. just the year. we that the second of is I'm profitable, then projection as Is higher and cost revenue? revenue, the about on based if it's to lastly, on And be coming it higher

Joseph A. Risico

the new not know not -- growth -- -- on largely lesser It's doing we and like We're and Maybe and just don't we're we're you then, about a company or channels, delivering this the we're and a to year lot as we looking not for more jump like of I'll heavily core largely business. post-XXXX are start by think positioning the in. Artu, growth. profitability products for driven work on Yes. to new extent

a we're second want [indiscernible], at the that? But I maybe to you half So -- looking is add doing what business. lot of core mean, to so for

Arturo Rodriguez

in prior we business, Brian, the I think even similar are mind, our still I core think very periods. Yes. focused seasonality splits keep still on to

season our the with We the -- see The for from our still is some hits the way see to And then you take going strongest overall. right? in a QX. quarter guidance middle we guidance, higher revenue perspective. we or what you'll human QX upticks, see buyers, than slightly assuming that You're is anticipate, range expect still the naturally, QX delivered

I think quarter. our the probably closer to -- QX looking probably is second strongest

So CN, we've little is see we're the to get bit to I what the and think to revenue, starting a -- uptick that. for seeing get of of some the seeing especially the you're do as CM to we're healthy to been long mission a starting side, a we're time, sustained on performance finally in on on the plus the that

are combinations piece one alluded it. those Joe of think I business all This is to. as core

of cost enter expect look will we done and there, that fixed strengsome -- same we and from of annual of at kind as there QX, a I still -- probably we actually did, we perspective. QX. in really I But predominantly little piece and insurance savings think lot most costs the a too, in some work We're vendors in, other of that QX, of middle and people that's lot as cost be savings that's at a of QX come other time, bit the fixed that then renewals that right that QX and a is of the quarter. there's the did

why combination I So all we confident that feel be is can the profitability we pretty that think that get stating. EBITDA would to X of adjusted

Operator

Fong next question The comes with of the from Marvin line BTIG.

Marvin Fong

and Good everyone, getting far a long in this on congratulations evening, road.

already. on like to you double-click would something I said So

the said for I rationalization think adjusting you down sales are SKU XX%.

what kind a lines? understand better pricing volume? pressure like should question. Is just how And the product any along of second into about that? -- bit year? also Are those the then Is half think seeing have varies quarter-to-quarter, I kind to of one from I'd it of on pricing? is your what you it thoughts other So growth mix of also but And we driving kind that trajectory

Arturo Rodriguez

think of you impact if historically of So company change teams Marvin, look a through lot went duration XXXX, yes, listen, at the I and and restructuring.

right, I gap think at do in going and at look look the see to -- going and XXXX it, the XXXX is when So when that future to shrink. you I you're you quarters, adjust towards that you hinted

these as of way, gap when and we think and it at that So Joe in I is I took QX. in especially a initiatives, some over you look August started that big

last kind we and of the the impacted had and to of progress I I think rest really do good later started your and going think some point, the I SKUs kind on into close QX was that quarter, later to of But it real down. think, gap QX is year.

in the I towards it think hinted already QX guide. I

If is you XX way, the adjust points. almost that difference

of top versus a was that head, drop think like XX% I from the XX% drop. my

almost like it's just already, quarter distance. a XX% X So improvement

So so see a efforts I that to noise. that that focusing doing core is really we're you're business, do the going of lot about think

go and you It's right? still they're if away from products strong and doing talking the That's We we're seasonality that ultra the [doma because business. expensive. just competitive move really to they back we a ACs think did stop making I didn't fires], money. about, weren't

So that I still will historically for split XXXX. do think forward going seasonal apply

you with that as So saw concentrated revenue we're SKUs, can number you margin to we're from it's QX. a it profitable anticipating But see, contribution be much of more just more lower. at is as so the a

Joseph A. Risico

and look extent, by category obviously category. to some just it's I

I pertain as while down, add see appears of and to handicap, consumer right? could it's be resilient to but so to I demand, right? wanted And some extent, that So hard just comment. down, think like it -- we to demand to to some being

to Marvin you, So so back

Marvin Fong

no color. observed, R&D. additional I you Yes. for My there's looks It no mentioned that line other I for launches. product guess, thanks question, like that no, yes, Oh,

So really just cutting on and sort back on of about launches you of are kind talk forward? much your back comment how you going and innovation cutting expectations -- are for product product ability

Arturo Rodriguez

Good was more right? a G&A. third-party restructuring, naturally moved historically bulk this spend from cost developed innovation of kind internally of And naturally and right? after around a model, The bulk So Marvin. that really standard of tech think we've perspective, it's did to the platform we point, any, an from I R&D platform, model than that that of just into moved

I with still focused manufacturers like and things least think in with our our heavily my is changes. right, on on sourcing doing about, and they hey, team, Apple of slight innovation working It's people, more morning. improving, today, improving this does that with from announced not the they're quality iPads I'm product at invest it's and new for our product feature But like And remember that that, we're in all we right? on predominantly China. really engineering which

for a that more is there'll our were and those never yes, become team conversation. And for engineering in brand the R&D. stronger becomes sourcing we As successful the product But over probably opportunity innovation. think strengthening in different by be China, innovation even and were driven costs now, do our in years, I

Operator

closing to Grozovsky our concludes Ilya back now conference remarks. Q&A for over That will session. the I turn

Ilya Grozovsky

participants Question and a ask to Perks products in to questions. possible of retail shareholder part all for product on our of of questions can up investors a Walmart, the I the few as customers et Perks for which customer and Target, might have is products wanted Wayfair, ability that calls. Participants brands good, management Depot, like what for thank earnings better, been Aterian's their private offerings? channel program label best our sign ones program, of the questions who I diversify picked have a their and by and the at As to popular the most segment loyalty, participation is, Home their reminder, small submitted. aterian.io/perks. plan shareholder have want cetera,

Joseph A. Risico

for thank those and jump you, us grateful support you. and I'll are there, Ilya, different the channels, thanks appreciate that and in all Yes. the are that to the follow for and Perks. who in and in the folks we We're all

consider to we those look, company would though would I think, its the going operate opportunities. as right think that Aterian we Artu and I now, that's I, own say brands.

not on It's When not right our think of launching is something the products, it's higher today. the move about list so new for And we same channels. expanding Aterian think priorities. we

Ilya Grozovsky

portion disconnect. the concludes We you the may calls, call, to Q&A This of now look Great. and our this call. ends you on forward speaking with future and

Operator

Ladies Thank you joining. all and concludes gentlemen, today's that call. for

You disconnect. may now

Aterian (ATER) 7 May 242024 Q1 Earnings call transcript