Aterian (ATER) Issues Letter to Shareholders

Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”), a technology-enabled consumer products company, today issued the following letter to shareholders from Arturo Rodriguez, Chief Executive Officer, and the Company’s Board of Directors.

Dear Fellow Shareholders:

While this is our first time writing to you directly, you are always at the forefront of our minds.

Over the past 18 months, our team has undertaken a comprehensive reassessment of nearly every facet of Aterian’s business model as part of our turnaround strategy. This deep evaluation of our brand portfolio, marketing strategies, inventory management, marketplace operations, supply chain, and overall fixed costs laid the foundation for the strategic initiatives we have implemented. By successfully executing these changes, we have focused, simplified, and stabilized the Company, positioning Aterian to drive long-term shareholder value.

Although there is still work to be done, we believe that 2025 marks the start of a new and promising chapter for Aterian as we pivot from stabilizing our operations towards sustainable growth.

2024: A Year of Achievement

2024 was a year of achievement as we delivered on many of our key objectives which we announced in late 2023. We streamlined our product portfolio to six highly regarded foundational brands—Squatty Potty, hOmeLabs, PurSteam, Mueller Living, Photo Paper Direct, and Healing Solutions—that deliver quality, affordable products to consumers. We also simplified our go-to-market and marketing strategies, improved efficiencies in our marketplace account structures and our supply chain and transitioned from an internally developed tech platform to a best-in-class third-party model, thereby increasing our efficiency, nimbleness, and cost savings. Additionally, we improved our working capital profile by completing our inventory rightsizing and renegotiating and extending our credit facility.

In late 2024, we launched several new products under our PurSteam and Mueller Living brands, marking an exciting return to our product development efforts. Organic product launches remain an important component of our growth strategy, and we expect to continue these efforts throughout 2025, with a focus on the second half of the year.

We also continue to deliver on our commitment to implementing an omnichannel sales approach to reach new consumers and remain competitive in the ever-evolving e-commerce landscape. In the fourth quarter of 2024, we began selling products from our hOmeLabs, PurSteam, and Mueller Living brands on Target+, the invitation-only online marketplace of Target Corporation, while expanding product offerings of Squatty Potty on Target+. This complements our established marketplace strength on Amazon.com, Walmart.com, and Mercado Libre in Mexico, as well as our direct-to-consumer websites. We also recently refreshed our PurSteam and Mueller Living websites, modernizing them to match the recent updates of those brands.

Our Efforts are Yielding Tangible Results

Our progress was evident in our third quarter 2024 year to date financial results. When compared to the same nine-month period in 2023, we generated significant improvements in gross margin and contribution margin, and narrowed our net loss by $56.3 million, or 84%.

We also reported positive adjusted EBITDA for both the second and third quarters of 2024.

At September 30, 2024, our cash flow from operations was $2.2 million, a $10.6 million improvement from the same period in 2023, our credit facility balance declined by $4.4 million from December 31, 2023, and we had cash on hand of $16.1 million.

Fourth Quarter 2024 Preliminary Results

This momentum carried into the final quarter of the year. For the fourth quarter of 2024, we now expect to report net revenue between $24.2 million and $25.0 million which is at the higher end of our previous guidance of $22.5 million to $25.5 million. As previously disclosed, we continue to expect that this level of revenue will produce approximately breakeven adjusted EBITDA.

We expect that our cash position at December 31, 2024 will improve to approximately $18 million from $16.1 million at September 30, 2024, while our credit facility balance is expected to increase slightly from $6.7 million at September 30, 2024 to approximately $6.9 million at December 31, 2024.

Full Year 2025: From Stability to Growth

Looking ahead to 2025, we are confident that Aterian will evolve into a growth company, driven by our omnichannel expansion initiatives, organic product launches, and a commitment to prudent capital allocation strategies. In comparison to 2024, we expect to produce higher revenue, along with continuing improvements in operating efficiencies and adjusted EBITDA. More importantly, we believe that our efforts to date have placed us firmly on the path to producing these results on a sustainable basis.

We believe we have taken a conservative approach in our expectations for 2025 by considering both the potential impact of increased tariffs on Chinese imports, and to a lesser extent, those from Canada, as well as the proactive measures we would implement to mitigate their effects. Our primary strategy to offset these tariffs would be price adjustments on select products, supplemented by additional cost-management initiatives, if deemed necessary. As trade policies evolve, we will continue to monitor developments and adjust our responses, as needed.

We are continuing our efforts to identify product sourcing alternatives outside of China, wherever possible, in response to the current uncertainty of U.S. trade policies. As we navigate these challenges, we are fortunate to be supported by a strong balance sheet that provides us with the flexibility to adapt as needed while remaining focused on long-term growth and profitability.

We look forward to providing additional clarity on our plans and outlook for 2025 in connection with our fourth quarter and full year financial results conference call scheduled for mid-March, and keeping you apprised of material developments.

Looking ahead, the strength of our brands, the influence and accessibility provided by our marketplace relationships, and our passionate, talented and tenacious people will allow us to deliver on our mission to position Aterian to deliver sustainable, long-term shareholder value. We remain grateful for the continuing support of our shareholders. We hope this is the beginning of more frequent communications as we share in the excitement of Aterian's bright future.

Best regards,

Arturo Rodriguez
Chief Executive Officer

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