Aterian, Inc. Earnings Call Highlights Strategic Gains

Aterian, Inc. ((ATER)) has held its Q4 earnings call. Read on for the main highlights of the call.

Despite facing a significant decline in revenue, Aterian, Inc. has shown resilience and strategic foresight during its latest earnings call. The company has made commendable progress in improving its EBITDA and gross margins, signaling a positive outlook. However, challenges such as tariff impacts and dependency on China remain areas of concern.

Significant EBITDA Improvement

Aterian, Inc. has made impressive strides in improving its EBITDA. The company reported a 91% reduction in adjusted EBITDA losses, dropping from $22.3 million in 2023 to just $2.1 million in 2024. This substantial improvement underscores the effectiveness of the company’s strategic execution.

Strong Gross Margin Growth

The company achieved notable growth in its gross margin for Q4 2024, which increased to 63.4% from 51% in the previous year. This improvement is attributed to SKU rationalization and an enhanced product mix, reflecting Aterian’s focus on operational efficiency.

Product and Market Expansion Plans

Looking ahead to 2025, Aterian plans to launch approximately five new product categories and expand into new markets, including the UK, as well as new channels like Target Plus. These initiatives are part of the company’s strategy to diversify its market presence and drive growth.

Share Repurchase Program

In a move that signals confidence in its undervalued stock, Aterian’s board has authorized a two-year share repurchase program of up to $3 million. This decision reflects the company’s belief in its long-term value and commitment to returning value to shareholders.

Revenue Decline

Despite the positive developments, Aterian reported a 25% decline in net revenue for Q4 2024, falling to $24.6 million from $32.8 million in the same quarter the previous year. This decline is primarily due to SKU rationalization, which the company views as a necessary step for future growth.

Tariff Impact

The introduction of new tariffs, including a 20% tariff on China-sourced imports, is expected to impact Aterian’s cost of sales by $3.5 million in 2025. The company plans to mitigate approximately 50% of this impact through price increases, highlighting its proactive approach to managing external challenges.

Continued Dependency on China

Despite efforts to reduce dependency, 75% of Aterian’s net revenues are still sourced from China. The company aims to reduce this dependency by 50% by 2026, indicating a strategic shift towards diversifying its supply chain.

Forward-Looking Guidance

For 2025, Aterian anticipates a net revenue increase of 5% to 7% from the $99 million reported in 2024, with an adjusted performance basis increase of 9% to 12% after accounting for discontinued SKUs. The company aims to achieve essentially break-even adjusted EBITDA, improving from a $2.1 million loss in 2024. These projections consider a $3.5 million tariff impact, with plans to mitigate half through price adjustments. Aterian also expects to expand its market reach through channel and geographical expansions, introducing new products, and exploring further opportunities in brick-and-mortar and international markets.

In summary, Aterian, Inc. has demonstrated strategic agility and resilience in the face of revenue declines and external challenges. The company’s focus on improving EBITDA and gross margins, coupled with its plans for market expansion and share repurchase, paints a picture of a company poised for future growth. However, the impact of tariffs and dependency on China remain critical areas to watch.