Consistently deliver high-quality, affordable products to consumers. First, we need to explain a little bit about the past. The company was formed in 2014. We IPO'd in 2019. In our initial years, we were very focused on three business models: our organic business, M&A, and our proprietary platform to help partner with other brands needing to grow their e-commerce marketplace. During this time, we invested heavily across all our products, across all our parts of the organization, around the expansion of our proprietary platform and directly related supporting functions such as supply chain. For M&A and our infrastructure expansion, we relied heavily on our equity. In early 2021, in the peak of the e-commerce COVID boom, we took on term debt. As we entered into the summer of 2021, our business started to get impacted by shipping container pricing and related container availability.
As such, this put tremendous pressure on our product margins, but it also forced us to purchase inventory beyond our desired standard levels. During this period, the company also tripped its covenant under its $100 million Term Debt. From the summer of 2021 into the early part of 2023, we spent our time resolving our debt matter, but also resolving our inventory issues, reducing inventory values from a peak of $76 million. Further, during this time, our increased pricing on top of the reduced consumer spend on e-commerce from COVID peak. The company struggled to achieve profitability. As we entered the summer of 2023, though the company substantially improved its balance sheet, its core business continued to produce significant Adjusted EBITDA losses. At this time, the company changed its leadership and launched a multi-year plan to turn around the company.
So the initial part of the plan consisted of three key mantras, which are focus, simplify, and stabilize. Focusing was the first cornerstone in Aterian's journey towards profitability. By narrowing our product portfolio to one of the most profitable and promising products, we anticipated a reduction in revenue over time. However, we believe that this streamlined core product set can unlock a sustainable path to profitability, especially when combined with a consumer-first approach and an omnichannel strategy. Simplification, our second mantra, was about changing every aspect of how we are a company operated. We focused the organization on streamlining all of our daily tasks, focusing our day-to-day around our core and profitable existing business, and also by accepting an outside-in approach, allowing us to do what is best for our business, regardless of the historical internal service requirements.
In particular, this led to our decision to reduce the number of Amazon accounts we used to go to market, allowing us to create improved synergies and efficiencies of our marketing tactics. As part of simplification, we decided to move from an internally developed platform to a best-in-class third-party software platform approach. This not only allowed us to reduce our annual operating spend, but allowed us to use the best-in-class software for our key functions, improving how we operate and allowing us to be more competitive on the e-commerce marketplace, which we saw on. Finally, our third mantra of stabilizing was ultimately our steadfast commitment to reduce our historical substantial Adjusted EBITDA losses and find a path to Adjusted EBITDA profitability. As part of this, we made a difficult decision to reduce our workforce in February 2024, which is expected to save us $4 million annually.
When announced back in late 2023, we believed these three mantras would put us in position to achieve Adjusted EBITDA profitability in the second half of 2024. Fast forward to Q2 2024 earnings results, we did announce our first Adjusted EBITDA profitability results in over 10 quarters. Our second quarter net loss improved by 90% year- over- year when compared to the same period last year. Our Adjusted EBITDA performance improved by over 100%, even on a lower revenue base. So as we focus on finalizing Q3 and Q4 of this year, we expect that we have completed the stabilization of Aterian. As we previously announced during our Q2 2024 earnings call, we expect that in 2025, we will start moving on from stabilization and focusing again on profitable growth. So the results of simplifying and stabilizing and focusing.
So, one, a rationalized SKU portfolio, which allowed us to focus on our best and most profitable brands and SKUs. Simplification of our Amazon account structure and allowing us to increase our focus and simplify how we go to market. Our shift towards best-in-class third-party tools allowing us to be more nimble. Outside-in thinking, which challenged our previous ideology and allowed us to execute on new initiatives in line with today's marketplace tactics and fixed cost rationalization. An always tough decision to align our costs to expected revenue. And the results of these actions we delivered in Q2 of 2024, our first Adjusted EBITDA profitability, again in over 10 quarters. Healthy balance sheet. So as of the end of Q2, we had about $20 million on the balance sheet, a small ABL balance. We have no term debt.
Again, as I said, we've right-sized our inventory and brought it down to the current consumer demand. So as we move into 2025, growth will become one of our primary goals, which will enable us to drive over time a more robust Adjusted EBITDA profitability. We believe this will come from two key pillars. One is omnichannel expansion and two organic product launches. So again, omnichannel expansion. Right now, 95% of our revenues are derived from Amazon.com. We are also on Walmart. But as we go into the end of 2024 and 2025, we are going to expand channels. We announced that we're going on Target Plus. We hope to have that up by Thanksgiving. Then our focus is going to be on brick-and-mortar stores such as Home Depot and Kohl's and others and such. Then two organic product launches.
We believe very opportunistically we can continue to launch new variations to grow our business, but also launch new products in both existing and new categories. We still believe M&A can have an impact on growth for Aterian. However, we believe it will not be the primary driver of our growth strategy. Today, we believe organic will be the primary driver of Aterian's future growth, and we expect to discuss more of our growth strategies when we deliver our Q4 results in March 2025. So we are excited to take the next challenge of profitability, growing Aterian through our omnichannel expansion plans and getting back to our roots of launching new products again. Thank you. Any questions?
What are your cash needs going forward?
Right now, since we're, again, we had $20 million of cash on the balance sheet. Outside of M&A, we don't expect to be raising funds soon because we're turning EBITDA profitable, so we have no need for cash.
It's not to expand or?
M&A, but no, I think it doesn't cost a lot for us to launch new products. There's not a big investment upfront to do that, so we don't need outside capital for that.
Can you go back to the brand slide? And was one of the brands represented a disproportional amount of revenue or?
I mean, our hOmeLabs business, which is our dehumidifier and it's a beverage cooler, I mean, that's probably the biggest of the brands, but they're all within the same range, probably. Yeah.
Can you expand on the process of which you select new products?
Sure. So I mean, we have visibility into Amazon, Amazon's data, and we go in and we find products that we think we could have a competitive advantage because of our existing brand names, because they do have some pull on Amazon. So we're not looking to expand really outside of the categories that we're already in. So for example, Mueller sells kitchen appliances. We want to expand within Mueller and launch kitchen appliances within the Mueller brand. We're not necessarily looking to go outside of the existing brands that we have. And same with M&A. If we see a brand that we like out there and we think it's a good opportunity, we'll do it. But our plan is not to double the amount of brands that we have under the Aterian name.
That's what a lot of Amazon aggregators have done, and it hasn't really worked out for them. So we're looking to expand our brands, maybe adding one or two, but expand the products and go omnichannel. And that's where our growth is going to come from.
What's your price premium versus, let's say, Chinese makers? For the example of Squatty Potty, it looks like it's just a plastic mold. I think Chinese companies do the same thing. Just curious what your premium is, maybe across the brands.
I mean, they could, and there's other variations of Squatty Potty on the site. However, that probably out of our brands that has the biggest brand name and is more well-known than the other brands. So we do have pricing flexibility with that, but there are cheaper stools on Amazon.
So on average, what's your premium versus the house brands specifically?
20%. Yeah.
20%.
Yeah.
So whether it's Mueller or the other brands?
Yeah, similar.
Similar?
Yeah.
You got SG&A trailing 12 months around $89 million. How much of that is actual labor and how much of that is marketing to get placement on Amazon and all these e-commerce sites?
89 million?
Just around it.
Okay.
Just percentage-wise, what do you spend to get placement on Amazon and all these different e-commerce sites? Is that a big part of your expenses or not?
Yeah, it's a big part of our expenses. So the way we look at our P&L is Gross Margin, which includes our product costs, and then the variable costs associated to sell on Amazon, which includes a 15% fee. They take a 15% fee on every sale, plus fulfillment and marketing. So if I add up fulfillment, marketing, and selling expense, it's probably 30%-40%.
Okay, and that's all below the cost of goods?
Below the cost of goods, yeah.
That's not on SG&A?
Yeah.
Oh, even the commission is down in SG&A?
It's in selling and distribution. Yeah, yes.
Okay.
I'm curious about the workforce. How many employees do you have? Are they in the U.S.? Are they in China?
Yeah. So we have about.
Functions?
Yeah, we have about 120 people total, about 30 in the United States. That's mostly leadership and management. We have a big team in the Philippines, which is our marketing and sales support and our back-of-house support as well. So again, 75% of our employees are outside of the United States.
Product design and all that, is that in China, in the Philippines?
It's in China. It's in China. Again, we're not designing. We're working with manufacturers on existing products. We're not designing. We'll get there one day, designing new products. All the products that we sell on Amazon, somebody else sells and other manufacturers produce.
But you said you're trying to bring new products organically. So you must have people designing those or?
We worked with the manufacturers to design them. Yeah.
How crowded is your space?
It depends on the product. Again, it's Amazon. If I look at dehumidifiers, we're the best-selling dehumidifier on Amazon, but there are certainly competitors, and for a while, our manufacturer was one of our competitors on Amazon, as an example.
Do you have an estimate of what your revenues need to be to break even?
That's a good question. Probably in the 110-115 range.
What are you at now?
Estimated forecast, we did about 49 for the first half of the year. While the season you can project out, it's not that seasonal. About 100.
The categories that you're in, what's been the growth rates for those categories? Not you personally, but just overall market?
The categories we're in? So again, I'll use dehumidifiers as an example. The hot weather and hurricanes and all that stuff help our business. So we have seen growth there. We specifically see growth inside of hurricane season and when they hit. And also as it becomes hotter and there's more moisture in the air, there is growth in that area.
Can you give a percent? Is the market that you're in already growing at, let's just say, 5%, and then you can grow your product or your brand a little faster than that, or how?
I think we're relying on our existing portfolio to expand into other channels. Again, somebody's only going to buy a dehumidifier once every five years on Amazon or something like that. So that's why we know to get growth, we're not relying on consumer demand on our existing products. We got to take that product, move it into retail stores, move it into other channels, and then launch new products on Amazon and these other channels. So I don't have an exact percentage, but yes. But to your point, we're not relying on that increase to be very large.
Are you selling mostly in the U.S.? Is there a footprint in Europe or some Mercado Libre up there? So going to South America?
Yep. We launched Mercado Libre six months ago. That's in Mexico. We do sell on Amazon Canada. Our Photo Paper Direct business is based in the U.K. So we have sales in the U.K. and the EU with Photo Paper Direct. And we do have plans to expand our other product portfolio into the U.K. as well as Germany in the near term. And then we have longer-term plans to expand other places.
Are there exchanges between these brands in the sense that they just back up the office and logistics and so on? Or is it something where they're pretty much working silos or?
I mean, to your point, from a logistics perspective, we have third-party warehouses that we bring these products into and then feed it into Amazon's ecosystem in the U.S. So from that perspective, there's synergies. We do work with manufacturers in China that do make a couple of these products. So I think there's synergies there as well. Anything else? Okay. Thank you. Appreciate it.