Benzinga | May 5, 2021 07:09AM EDT

Aterian Responds To Short Report By Culper, Calls Info 'Inaccurate, Misleading'

Aterian, Inc. (NASDAQ:ATER) ("Aterian" or the "Company") today issued the following statement in response to a report issued on May 4, 2021, by self-proclaimed short seller Culper Research:

A recent report by Culper Research contains numerous false and misleading statements about our company. It seems clear to us that this report is an attempt by a short seller to negatively impact and manipulate Aterian's share price solely for its own benefit. We caution shareholders from making investment decisions based on this report.

We are proud of our track record of building and acquiring brands, our successful M&A strategy, our proprietary AIMEE platform and our financial performance. The report contains many mischaracterizations and factual inaccuracies regarding our Company, including but not limited to those addressed below:

Healing Solutions Revenue. Our investment thesis for the Healing Solutions acquisition excluded revenue from hand sanitizer products, as we had previously announced at closing. Our purchase agreement, which was filed with the SEC and is readily available to all shareholders, stated that hand sanitizers were deemed to be "Excluded SKU Inventory" which we were given the option to purchase. Furthermore hand sanitizer products represented approximately $11 million in net revenue for 2020 for Healing Solutions rather than the $40.2 million claimed by the short seller. We remain excited about and focused on the core opportunity with Healing Solutions moving forward.

Technology. Aterian has developed a leading technology-enabled software platform, AIMEE, that together with the Company's dedicated and talented team, continues to drive strong financial and operational performance for our business. The significant investments that we have made in AIMEE over the past seven years have allowed the Company to reduce its ratio of fixed costs as a percentage of revenue from 44% in 2016 to 12.8% in 2020, and increase its revenue per employee from $0.3 million in 2016 to $1.2 million in 2020.

Business Performance. Over the past seven years, we have established a strong track record of organically launching and scaling brands and products. By relentlessly focusing on growth while improving our products' contribution margin, we achieved a CAGR of 79% since 2016 and delivered positive adjusted EBITDA in the second quarter of 2020 (and for the calendar year 2020). Building on this strong organic track record and proof that we could scale revenue efficiently through our platform, we accelerated our M&A strategy with confidence. To that end, we have acquired over $150 million in revenue since the third quarter of 2020 while absorbing minimal fixed costs from those acquisitions. We continue to reinvest portions of the cash flow generated by new acquisitions into all parts of our business as we believe the opportunity to grow and scale our Company on a global scale is paramount to delivering long-term value to shareholders.

M&A Diligence and Governance. We have a comprehensive approach to M&A and due diligence and stand behind our robust process for our acquisitions, which have continued to perform within our projected financial ranges and metrics. We conduct extensive financial, legal and other due diligence, including background checks, on our targets. Although we identified the historical legal concerns raised in the report, they were unrelated to the acquired businesses. Our focus was and continues to be on acquiring high performing businesses that offer opportunities for growth. In addition, these transactions were structured as asset purchases only and therefore the founders did not become employees of Aterian. To further limit any influence, we entered into voting agreements with the shareholders from the 9830 Macarthur LLC acquisition ("the Smash Acquisition") and the Healing Solutions acquisition, which both require they vote their shares in accordance with the recommendations of the Company's Board of Directors. As part of the Company's IPO, we also entered into a voting agreement with Mr. Yaney. Mr. Yaney is neither an employee nor an affiliate of the Company.

Marketing Practices. Our mission is to create and acquire best-in-class products and brands that are available to customers across the world's largest marketplaces. Similar to other consumer product companies, discounts, rebates, coupons and other promotions are an important part of our marketing strategy but success is predicated on much more. Success on marketplaces requires understanding of the market data, high quality sourcing, agile supply chain, digital marketing expertise and strong customer service. Our investment in technology is designed to streamline each of these moving parts efficiently. Aterian's product launch strategy includes discounts, rebates, sweepstakes and promotions on social media and other channels. Our 2020 spend on promotions and discounts was approximately equal to 3.5% of the Company's net revenue.

Required Audited Financials for the Smash Acquisition. As it relates to the Smash Acquisition, the Company expects to file the audited financial statements and required pro-forma disclosures on Form 8-K/A with the Securities Exchange Commission on or before May 21, 2021. The Company anticipates the audited results to be in line with the previously disclosed financial results for the Smash Acquisition.