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Aterian, Inc. (ATER)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 net revenue was $19.46M versus $27.98M in Q2 2024, as tariff-driven price increases, softer consumer demand, and a late seasonal start weighed on volumes; Adjusted EBITDA was a loss of $2.18M versus a $0.16M gain in Q2 2024 .
  • Management issued H2 2025 guidance: net revenue $36–$38M and Adjusted EBITDA breakeven to a loss of $1.0M, an improvement versus H1 2025 Adjusted EBITDA loss of $4.69M, driven by cost savings ($5.5M annualized), pricing stabilization, and consumables launches .
  • Consensus for Q2 2025 (S&P Global): revenue $20.37M*, EPS -$0.54*, EBITDA -$1.16M*; actuals missed: revenue $19.46M, EPS -$0.63, EBITDA (S&P) -$4.10M* .
  • Strategic catalysts: cost optimization (majority of $2.3M restructuring incurred in Q2), AI-enabled customer service efficiencies, Indonesia resourcing for dehumidifiers, and September launch of Squatty Potty flushable wipes (entry into higher-margin consumables) .

What Went Well and What Went Wrong

What Went Well

  • Cost actions tracking: workforce and vendor savings expected to deliver ~$5.5M annual pre-tax savings, with initial H2 benefits and full effect in 2026 .
  • Tariff mitigation and supply chain progress: diversified manufacturing (dehumidifiers now ~65% from China vs 100% in 2024) and imported most Q2 goods at ~30% incremental tariffs, avoiding the 145% peak .
  • Consumables pivot: full launch of Squatty Potty flushable wipes in September (UK next week; US right after Labor Day) to drive higher-margin, largely US-sourced offerings; “first major step” into consumables .

What Went Wrong

  • Pricing volatility and Amazon algorithm headwinds: price hikes to offset tariffs reduced sales velocity in May/June; Amazon 1P largely did not raise prices in key categories, depressing competitiveness .
  • Marketing inefficiency and inventory reserves: one-time $0.9M extra advertising and $0.7M inventory reserve; inventory ~$3M above desired levels, expected to unwind over coming quarters .
  • Margin compression and losses: gross margin fell to 54.3% (60.4% prior-year), contribution margin to 7.8% (17.4% prior-year), operating loss widened to $4.51M and net loss to $4.86M .

Financial Results

Quarterly performance (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$24.607 $15.360 $19.462
Net Loss per Share (EPS, $USD)$(0.18) $(0.52) $(0.63)
Gross Margin %63.4% 61.4% 54.3%
Contribution Margin %19.4% 13.4% 7.8%
Operating Loss ($USD Millions)$(1.612) $(3.696) $(4.505)
Adjusted EBITDA ($USD Millions)$(0.086) $(2.505) $(2.184)

Year-over-year comparison

MetricQ2 2024Q2 2025
Net Revenue ($USD Millions)$27.984 $19.462
Gross Margin %60.4% 54.3%
Contribution Margin %17.4% 7.8%
Operating Loss ($USD Millions)$(3.205) $(4.505)
Net Loss ($USD Millions)$(3.629) $(4.860)
Adjusted EBITDA ($USD Millions)$0.163 $(2.184)

Estimates vs actuals (Q2 2025)

MetricConsensus EstimateActual
Revenue ($USD Millions)$20.369*$19.462
Primary EPS ($USD)-$0.54*-$0.63
EBITDA ($USD Millions)-$1.16*-$4.101*
Primary EPS - # of Estimates1*—
Revenue - # of Estimates1*—

Values retrieved from S&P Global.*

Product phase/KPI breakdown

MetricQ2 2024Q2 2025
Net Revenue – Sustain (1) ($USD Millions)$26.292 $19.043
Net Revenue – Sustain (2) ($USD Millions)$0.485 $0.334
Net Revenue – Launch ($USD Millions)$1.207 $0.085
Contribution Margin ($USD Millions)$4.867 $1.518
Contribution Margin % of Net Revenue17.4% 7.8%
E-comm commissions/ads/selling/logistics ($USD Millions)$12.024 $9.048

Liquidity and operating KPIs (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Cash and Equivalents ($USD Millions)$18.000 $14.337 $10.495
Inventory ($USD Millions)$13.749 $18.144 $18.496
Credit Facility Balance ($USD Millions)$6.948 $7.511 $7.248
Total Operating Expenses ($USD Millions)$17.219 $13.120 $15.071

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net RevenueFY 2025$104–$106M (3/18/25) Guidance withdrawn (5/14/25) Withdrawn
Adjusted EBITDAFY 2025Essentially break-even (3/18/25) Guidance withdrawn (5/14/25) Withdrawn
Net RevenueH2 2025N/A$36–$38M (8/13/25) New
Adjusted EBITDAH2 2025N/A$0 to $(1.0)M (8/13/25) New
Annual Pre-tax Cost SavingsFY 2026 run-rateTarget $5–$6M (5/14/25) ~$5.5M secured; initial H2 2025, full effect 2026 (8/13/25) Refined/updated
Restructuring CostsFY 2025~$2.3M estimate (5/14/25) Majority incurred in Q2 2025; $1.795M in Q2 Progressed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Tariffs/MacroFY25 guide issued (then withdrawn in May) amid tariff uncertainty; cost focus Pricing raised to offset tariffs; sales velocity fell; most goods imported at ~30% incremental tariffs; avoided 145% peak Persistent pressure; mitigation improving
Supply Chain ResourcingGoal to reduce China exposure faster; diversification initiatives underway Dehumidifiers: China exposure reduced to ~65% (from 100%); exploring Indonesia and routing to UK/EU where tariffs lower Progressing
Pricing vs Amazon 1PN/AAmazon 1P largely kept prices flat in key categories; Aterian’s higher pricing hindered competitiveness Competitive headwind
AI/TechnologyAIMEE referenced historically; cost optimization pace AI implemented in customer service; improved service quality/efficiency; more AI updates planned Early wins, expanding
Product Strategy (Consumables)Emphasis on core brands; SKU rationalization; consumables exploration Squatty Potty flushable wipes launching; broader US-sourced consumables planned (Healing Solutions) Pivot accelerating
Channel ExpansionAmazon/Walmart focus; ongoing DTC Walmart launches (PurSteam/Mueller); Temu and Mercado Libre expansion in LatAm Omnichannel broadening
Capital AllocationShare repurchase announced in March Buyback paused to preserve liquidity; no equity raise expected in 2025 Defensive posture

Management Commentary

  • CEO: “The second quarter tested our resilience against significant tariff volatility… We believe the most disruptive impacts are now behind us.”
  • CEO: “This will be the first major step in our strategic expansion toward the higher margin consumables market.” (Squatty Potty wipes)
  • CFO: “Workforce reductions and vendor savings initiatives are expected to generate annual pre-tax savings of approximately $5.5 million… initial benefits realized in the second half of this year and the full effect taking hold in 2026.”
  • CFO: “We believe we are well positioned to navigate the current environment without raising additional equity capital this year.”
  • CEO on competition: Amazon 1P did not raise prices “significantly if at all” in dehumidifiers/steam mop categories, pressuring Aterian’s comparative pricing .

Q&A Highlights

  • Consumables pipeline: Focused expansion in health and beauty under Healing Solutions; announcements expected in October; all US-sourced, higher contribution margins .
  • China diversification timeline: Reduced reliance via Indonesia manufacturing for dehumidifiers; broader geographic routing (UK/EU) to optimize tariff exposure; 30% tariff level makes diversification harder but still viable .
  • LatAm/Temu: Mercado Libre and Temu are long-term plays; small near-term but expected to grow over 2–3 years with platform evolution .
  • Social commerce and marketing: Stepping up Instagram/TikTok/social campaigns tied to consumables; content rollouts for wipes in Sept/Oct .
  • Capital return: Share repurchase program suspended to preserve liquidity; reassess quarterly .
  • Guidance drivers: Marketing spend now optimized; pricing stabilized; combined with fixed cost reductions to reduce losses in H2 .

Estimates Context

  • For Q2 2025, S&P Global consensus had revenue at $20.37M*, EPS at -$0.54*, and EBITDA at -$1.16M*; actuals came in lower on revenue ($19.46M), EPS (-$0.63), and EBITDA (S&P) (-$4.10M*), reflecting price-driven volume declines, elevated variable costs, and inventory reserves .
  • Coverage breadth was limited (one estimate each for EPS and revenue), suggesting consensus may not fully capture tariff dynamics or intra-quarter pricing changes. Values retrieved from S&P Global.

Key Takeaways for Investors

  • H2 setup improving: New guidance implies sequential revenue lift and materially narrower Adjusted EBITDA losses vs H1 ($34.8M revenue; $4.69M Adjusted EBITDA loss) as pricing stabilizes and cost actions flow .
  • Consumables launch is a near-term catalyst: Squatty Potty flushable wipes (Sept) inaugurate a pivot to higher-margin, largely US-sourced consumables; broader Healing Solutions updates expected in October .
  • Tariff mitigation is working: Most Q2 imports cleared at ~30% incremental tariffs (not the 145% peak); dehumidifier resourcing to Indonesia reduced China exposure, with further geographic optimization planned .
  • Competitive dynamic to watch: Amazon 1P’s restrained pricing in key categories challenged Aterian’s price hikes; relative pricing normalization could take until 2026 .
  • Liquidity preservation and capital discipline: Cash $10.5M at 6/30; buyback paused; management expects no equity raise needed in 2025 .
  • Operating leverage pathway: ~$5.5M annual savings identified, AI-enabled customer service efficiencies, and focused marketing expected to support a substantial decline in H2 Adjusted EBITDA loss .
  • Omnichannel expansion: Walmart store placements, Temu, and Mercado Libre (Chile/Colombia/Argentina) broaden reach, offering multi-year growth optionality .