Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today
announced results for the first quarter ended March 31, 2022.
First Quarter 2022
Highlights
- First quarter 2022 net revenue
declined 13.3% to $41.7 million, compared to $48.1 million in the
first quarter of 2021.
- First quarter 2022 gross margin
improved to 56.6%, compared to 54.1% in the first quarter of
2021.
- First quarter 2022 contribution
margin declined to 9.2% from 12.7% in the first quarter of 2021,
primarily due to global supply chain disruptions and
inflation.
- First quarter 2022 operating loss
of $(36.3) million declined, compared to a loss of $(27.8) million
in the first quarter of 2021. First quarter 2022 operating loss
includes a gain of $2.8 million from the net change in fair value
and settlement of earn-out liabilities, $29.0 million of impairment
loss on goodwill, and $2.9 million of non-cash stock compensation
while first quarter 2021 included a $15.6 million charge from the
change in fair-value of earn out liabilities and $6.9 million of
non-cash stock compensation expense.
- First quarter 2022 net loss of
$(42.8) million improved from $(82.6) million in the first quarter
of 2021. First quarter 2022 net loss includes a gain on
extinguishment of debt of $2.0 million and $7.7 million in net
charges from the changes in fair-value of warrants and initial
issuance of equity, while first quarter 2021 included $50.3 million
of net charges from the changes in fair-value of warrants and
cancellation of warrants.
- First quarter 2022 adjusted EBITDA
decreased to $(4.5) million from $(1.2) million in the first
quarter of 2021.
- As planned, due to supply chain
concerns, no new products were launched in the first quarter of
2022 compared with 21 in the first quarter of 2021.
- Total cash balance at March 31,
2022 was $44.3 million.
Yaniv Sarig, Co-Founder and Chief Executive
Officer, commented, “We enter the second quarter of 2022 with a
strong balance sheet and a focus on retaining market share across
our portfolio of brands despite the challenging macroeconomic
conditions. Our efforts to optimize our financial strength and our
investments in our team and infrastructure should allow us to
weather the unpredictable environment and position us to drive
growth both organically and through our accretive M&A strategy
as the global supply chain stabilizes.”
Non-GAAP Financial MeasuresFor
more information on our non-GAAP financial measures and a
reconciliation of GAAP to non-GAAP measures, please see the
“Non-GAAP Financial Measures and Reconciliations” section
below.
Webcast and Conference Call
InformationAterian will host a live conference call to
discuss financial results today, May 9, 2022, at 5:00 p.m. Eastern
Time. To access the call, participants from within the U.S. should
dial (877) 295-1077 and participants from outside the U.S. should
dial (470) 495-9485 and provide the conference ID: 8791175.
Participants may also access the call through a live webcast at
https://ir.aterian.io/investor-relations. Please visit the website
at least 15 minutes prior to the start of the call to register and
download any necessary software. The archived online replay will be
available for a limited time after the call in the Investor
Relations section of the Aterian website.
About Aterian, Inc.Aterian,
Inc. (Nasdaq: ATER) is a leading technology-enabled consumer
product platform that builds, acquires, and partners with
best-in-class e-commerce brands by harnessing proprietary software
and an agile supply chain to create top selling consumer products.
The Company’s cloud-based platform, Artificial Intelligence
Marketplace Ecommerce Engine (AIMEE™), leverages machine learning,
natural language processing and data analytics to streamline the
management of products at scale across the world’s largest online
marketplaces, including Amazon, Shopify and Walmart. Aterian has
thousands of SKUs across 14 owned and operated brands and sells
products in multiple categories, including home and kitchen
appliances, health and wellness, beauty and consumer
electronics.
Forward Looking StatementsAll
statements other than statements of historical facts included in
this press release that address activities, events or developments
that we expect, believe or anticipate will or may occur in the
future are forward-looking statements including, in particular, the
statements regarding the strength of our balance sheet; our ability
to retain market share; our ability to optimize our financial
strength; our ability to weather the current environment; global
supply chain disruptions and any easing of constraints thereon or
any stabilization thereof; our expectations around organic growth
and our M&A strategy; and the global macroenvironment. These
forward-looking statements are based on management’s current
expectations and beliefs and are subject to a number of risks and
uncertainties and other factors, all of which are difficult to
predict and many of which are beyond our control and could cause
actual results to differ materially and adversely from those
described in the forward-looking statements. These risks include,
but are not limited to, those related to the global shipping
disruptions, our ability to continue as a going concern, our
ability to meet financial covenants with our lenders, our ability
to create operating leverage and efficiency when integrating
companies that we acquire, including through the use of our team’s
expertise, the economies of scale of our supply chain and
automation driven by our platform; those related to our ability to
grow internationally and through the launch of products under our
brands and the acquisition of additional brands; those related to
the impact of COVID-19, including its impact on consumer demand,
our cash flows, financial condition, forecasting and revenue growth
rate; our supply chain including sourcing, manufacturing,
warehousing and fulfillment; our ability to manage expenses,
working capital and capital expenditures efficiently; our business
model and our technology platform; the impact of intangible assets
such as goodwill, and other impairments; disruptions to the
Company's information technology systems, including but not limited
to potential or actual security breaches of systems protecting
consumer and employee information or other types of cybercrimes or
cybersecurity attacks; our ability to disrupt the consumer products
industry; our ability to grow market share in existing and new
product categories; our ability to generate profitability and
stockholder value; international tariffs and trade measures;
inventory management, product liability claims, recalls or other
safety and regulatory concerns; reliance on third party online
marketplaces; seasonal and quarterly variations in our revenue;
acquisitions of other companies and technologies and our ability to
integrate such companies and technologies with our business; our
ability to continue to access debt and equity capital (including on
terms advantageous to the Company) and the extent of our leverage;
and other factors discussed in the “Risk Factors” section of our
most recent periodic reports filed with the Securities and Exchange
Commission (“SEC”), all of which you may obtain for free on the
SEC’s website at www.sec.gov.
Although we believe that the expectations
reflected in our forward-looking statements are reasonable, we do
not know whether our expectations will prove correct. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof, even if
subsequently made available by us on our website or otherwise. We
do not undertake any obligation to update, amend or clarify these
forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required under
applicable securities laws.
Investor Contact:
Ilya Grozovsky Director of Investor Relations
& Corp. DevelopmentAterian, Inc.ilya@aterian.io917-905-1699
ATERIAN, INC.Condensed
Consolidated Balance
Sheets(Unaudited)(in thousands,
except share and per share data)
|
|
|
|
|
|
|
December 31, 2021 |
|
|
March 31, 2022 |
|
ASSETS |
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
Cash |
$ |
30,317 |
|
|
$ |
44,281 |
|
Accounts receivable—net |
|
10,478 |
|
|
|
5,870 |
|
Inventory |
|
63,045 |
|
|
|
75,425 |
|
Prepaid and other current assets |
|
21,034 |
|
|
|
13,440 |
|
Total current assets |
|
124,874 |
|
|
|
139,016 |
|
PROPERTY AND EQUIPMENT—net |
|
1,254 |
|
|
|
1,146 |
|
GOODWILL—net |
|
119,941 |
|
|
|
90,921 |
|
OTHER INTANGIBLES—net |
|
64,955 |
|
|
|
63,211 |
|
OTHER NON-CURRENT ASSETS |
|
2,546 |
|
|
|
2,726 |
|
TOTAL ASSETS |
$ |
313,570 |
|
|
$ |
297,020 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
Credit facility |
$ |
32,845 |
|
|
$ |
29,463 |
|
Accounts payable |
|
21,716 |
|
|
|
22,894 |
|
Seller notes |
|
7,577 |
|
|
|
4,081 |
|
Contingent earn-out liability |
|
3,983 |
|
|
|
6,448 |
|
Warrant liability |
|
— |
|
|
|
20,861 |
|
Accrued and other current liabilities |
|
17,621 |
|
|
|
15,412 |
|
Total current liabilities |
|
83,742 |
|
|
|
99,159 |
|
OTHER LIABILITIES |
|
360 |
|
|
|
509 |
|
CONTINGENT EARN-OUT
LIABILITY |
|
5,240 |
|
|
|
— |
|
Total liabilities |
|
89,342 |
|
|
|
99,668 |
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
|
Common stock, par value $0.0001
per share—500,000,000 shares authorized and 55,090,237 shares
outstanding at December 31, 2021; 500,000,000 shares authorized and
62,348,318 shares outstanding at March 31, 2022 |
|
5 |
|
|
|
6 |
|
Additional paid-in capital |
|
653,650 |
|
|
|
669,720 |
|
Accumulated deficit |
|
(428,959 |
) |
|
|
(471,735 |
) |
Accumulated other comprehensive loss |
|
(468 |
) |
|
|
(639 |
) |
Total stockholders’ equity |
|
224,228 |
|
|
|
197,352 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY |
$ |
313,570 |
|
|
$ |
297,020 |
|
See notes to condensed consolidated financial
statements.
ATERIAN, INC. Condensed
Consolidated Statements of Operations
(Unaudited) (in thousands, except share
and per share data)
|
|
|
|
Three Months Ended March 31, |
|
|
2021 |
|
|
2022 |
|
NET REVENUE |
$ |
48,136 |
|
|
$ |
41,673 |
|
COST OF GOODS SOLD |
|
22,073 |
|
|
|
18,066 |
|
GROSS PROFIT |
|
26,063 |
|
|
|
23,607 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
Sales and distribution |
|
25,069 |
|
|
|
22,974 |
|
Research and development |
|
2,124 |
|
|
|
1,144 |
|
General and administrative |
|
10,976 |
|
|
|
9,541 |
|
Impairment loss on goodwill |
|
— |
|
|
|
29,020 |
|
Change in fair value of
contingent earn-out liabilities |
|
15,645 |
|
|
|
(2,775 |
) |
TOTAL OPERATING EXPENSES: |
|
53,814 |
|
|
|
59,904 |
|
OPERATING LOSS |
|
(27,751 |
) |
|
|
(36,297 |
) |
INTEREST EXPENSE—net |
|
4,420 |
|
|
|
802 |
|
GAIN ON EXTINGUISHMENT OF SELLER
NOTE |
|
— |
|
|
|
(2,012 |
) |
LOSS ON INITIAL ISSUANCE OF
EQUITY |
|
— |
|
|
|
5,835 |
|
CHANGE IN FAIR VALUE OF WARRANT
LIABILITY |
|
30,202 |
|
|
|
1,879 |
|
LOSS ON INITIAL ISSUANCE OF
WARRANT |
|
20,147 |
|
|
|
— |
|
OTHER EXPENSE |
|
33 |
|
|
|
(25 |
) |
LOSS BEFORE INCOME TAXES |
|
(82,553 |
) |
|
|
(42,776 |
) |
PROVISION FOR INCOME TAXES |
|
— |
|
|
|
— |
|
NET LOSS |
$ |
(82,553 |
) |
|
$ |
(42,776 |
) |
Net loss per share, basic and
diluted |
$ |
(3.15 |
) |
|
$ |
(0.78 |
) |
Weighted-average number of shares
outstanding, basic and diluted |
|
26,225,383 |
|
|
|
55,141,448 |
|
See notes to condensed consolidated financial
statements.
ATERIAN, INC. Condensed
Consolidated Statements of Cash Flows
(Unaudited) (in thousands)
|
|
|
|
Three Months Ended March 31, |
|
|
2021 |
|
|
2022 |
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net loss |
$ |
(82,553 |
) |
|
$ |
(42,776 |
) |
Adjustments to reconcile net loss
to net cash used in operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
1,204 |
|
|
|
1,846 |
|
Provision for sales returns |
|
(100 |
) |
|
|
109 |
|
Amortization of deferred financing costs and debt discounts |
|
3,963 |
|
|
|
106 |
|
Change in fair value of warrants |
|
— |
|
|
|
1,879 |
|
Stock-based compensation |
|
6,899 |
|
|
|
2,865 |
|
Loss (Gain) from change in contingent liabilities fair value |
|
15,645 |
|
|
|
(2,775 |
) |
Loss in connection with warrant fair value |
|
30,202 |
|
|
|
— |
|
Loss on initial issuance of warrant |
|
20,147 |
|
|
|
— |
|
Gain in connection with settlement of note payable |
|
— |
|
|
|
(2,012 |
) |
Loss on initial issuance of equity |
|
— |
|
|
|
5,835 |
|
Impairment loss on goodwill |
|
— |
|
|
|
29,020 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(1,445 |
) |
|
|
4,608 |
|
Inventory |
|
(15,355 |
) |
|
|
(12,380 |
) |
Prepaid and other current assets |
|
(4,675 |
) |
|
|
410 |
|
Accounts payable, accrued and other liabilities |
|
17,573 |
|
|
|
95 |
|
Cash used in operating activities |
|
(8,495 |
) |
|
|
(13,170 |
) |
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Purchase of fixed assets |
|
(20 |
) |
|
|
(16 |
|
Purchase of Healing Solutions assets |
|
(15,280 |
) |
|
|
— |
|
Cash used in investing activities |
|
(15,300 |
) |
|
|
(16 |
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Proceeds from warrant exercise |
|
8,939 |
|
|
|
— |
|
Proceeds from cancellation of warrant |
|
16,957 |
|
|
|
— |
|
Proceeds from exercise of stock options |
|
8,749 |
|
|
|
— |
|
Proceeds from equity offering, net of issuance costs |
|
— |
|
|
|
27,007 |
|
Repayments on note payable to Smash |
|
(4,737 |
) |
|
|
(1,084 |
) |
Borrowings from MidCap credit facility |
|
14,531 |
|
|
|
30,357 |
|
Repayments for MidCap credit facility |
|
(12,325 |
) |
|
|
(33,845 |
) |
Deferred financing costs from MidCap credit facility |
|
(151 |
) |
|
|
— |
|
Repayments for High Trail term loan |
|
(5,400 |
) |
|
|
— |
|
Borrowings from High Trail term loan note 2 |
|
14,025 |
|
|
|
— |
|
Debt issuance costs from High Trail Term Loan |
|
(1,136 |
) |
|
|
— |
|
Insurance obligation payments |
|
(951 |
) |
|
|
(719 |
) |
Cash provided by financing activities |
|
38,501 |
|
|
|
21,716 |
|
EFFECT OF EXCHANGE RATE ON
CASH |
|
(99 |
) |
|
|
(171 |
) |
NET CHANGE IN CASH AND RESTRICTED
CASH FOR PERIOD |
|
14,607 |
|
|
|
8,359 |
|
CASH AND RESTRICTED CASH AT
BEGINNING OF PERIOD |
|
30,097 |
|
|
|
38,315 |
|
CASH AND RESTRICTED CASH AT END
OF PERIOD |
$ |
44,704 |
|
|
$ |
46,674 |
|
RECONCILIATION OF CASH AND
RESTRICTED CASH |
|
|
|
|
|
|
|
CASH |
$ |
34,995 |
|
|
$ |
44,281 |
|
RESTRICTED CASH—Prepaid and other
assets |
|
9,580 |
|
|
|
2,264 |
|
RESTRICTED CASH—Other non-current
assets |
|
129 |
|
|
|
129 |
|
TOTAL CASH AND RESTRICTED
CASH |
$ |
44,704 |
|
|
$ |
46,674 |
|
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION |
|
|
|
|
|
|
|
Cash paid for interest |
$ |
252 |
|
|
$ |
357 |
|
Non-cash consideration paid to
contractors |
$ |
3,427 |
|
|
$ |
— |
|
NON-CASH INVESTING AND FINANCING
ACTIVITIES: |
|
|
|
|
|
|
|
Debt issuance costs not paid |
$ |
246 |
|
|
$ |
— |
|
Original issue discount |
$ |
2,475 |
|
|
$ |
— |
|
Fair value of contingent
consideration liability |
$ |
16,557 |
|
|
$ |
— |
|
Discount of debt relating to
warrants issuance |
$ |
7,740 |
|
|
$ |
— |
|
Issuance of common stock in
connection with acquisition |
$ |
39,454 |
|
|
$ |
— |
|
Issuance of common stock for
settlement of seller note |
$ |
— |
|
|
$ |
767 |
|
Fair value of warrants issued in
connection with equity offering |
$ |
— |
|
|
$ |
18,982 |
|
Equity fundraising costs not
paid |
$ |
— |
|
|
$ |
166 |
|
Common stock issued for
warrants |
$ |
1,125 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
In addition to disclosing financial measures
prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”), this press release and accompanying tables
include certain non-GAAP financial measures. The non-GAAP financial
measures contained herein are a supplement to the corresponding
financial measures prepared in accordance with U.S. GAAP. The
non-GAAP financial measures presented exclude the items described
below. Management believes that adjustments for these items assist
investors in making comparisons of period-to-period operating
results. Furthermore, management also believes that these items are
not indicative of our on-going core operating performance. These
non-GAAP financial measures have certain limitations in that they
do not reflect all of the costs associated with the operations of
our business as determined in accordance with GAAP.
Therefore, investors should consider non-GAAP
financial measures in addition to, and not as a substitute for, or
as superior to, measures of financial performance prepared in
accordance with GAAP. The non-GAAP financial measures presented by
us may be different from the non-GAAP financial measures used by
other companies.
We have presented the following non-GAAP
measures to assist investors in understanding our core net
operating results on an on-going basis: (i) Contribution Margin;
(ii) Contribution margin as a percentage of net revenue; (iii)
EBITDA (iv) Adjusted EBITDA; and (v) Adjusted EBITDA as a
percentage of net revenue. These non-GAAP financial measures may
also assist investors in making comparisons of our core operating
results with those of other companies.
As used herein, Contribution margin represents
gross profit less amortization of inventory step-up from
acquisitions (included in cost of goods sold) and e-commerce
platform commissions, online advertising, selling and logistics
expenses (included in sales and distribution expenses). As
used herein, Contribution margin as a percentage of net revenue
represents Contribution margin divided by net revenue. As used
herein, EBITDA represents net loss plus depreciation and
amortization, interest expense, net and provision for income taxes.
As used herein, Adjusted EBITDA represents EBITDA plus stock-based
compensation expense, changes in fair-market value of earn-outs,
amortization of inventory step-up from acquisitions (included in
cost of goods sold), changes in fair-market value of warrant
liability, professional fees and transition costs related to
acquisitions, loss from extinguishment of debt, impairment of
goodwill, loss on initial issuance of equity, litigation reserve
and other expenses, net. As used herein, Adjusted EBITDA as a
percentage of net revenue represents Adjusted EBITDA divided by net
revenue. Contribution margin, EBITDA and Adjusted EBITDA do not
represent and should not be considered as alternatives to loss from
operations or net loss, as determined under GAAP.
We present Contribution margin and Contribution
margin as a percentage of net revenue, as we believe each of these
measures provides an additional metric to evaluate our operations
and, when considered with both our GAAP results and the
reconciliation to gross profit, provides useful supplemental
information for investors. Specifically, Contribution margin and
Contribution margin as a percentage of net revenue are two
of our key metrics in running our business. All product
decisions made by us, from the approval of launching a new product
and to the liquidation of a product at the end of its life cycle,
are measured primarily from Contribution margin and/or Contribution
margin as a percentage of net revenue. Further, we believe
these measures provide improved transparency to our stockholders to
determine the performance of our products prior to fixed costs as
opposed to referencing gross profit alone.
In the reconciliation to calculate contribution
margin, we add e-commerce platform commissions, online advertising,
selling and logistics expenses (“sales and distribution variable
expense”), to gross margin to inform users of our financial
statements of what our product profitability is at each period
prior to fixed costs (such as sales and distribution expenses such
as salaries as well as research and development expenses and
general administrative expenses). By excluding these fixed costs,
we believe this allows users of our financial statements to
understand our products performance and allows them to measure our
products performance over time.
We present EBITDA, Adjusted EBITDA and Adjusted
EBITDA as a percentage of net revenue because we believe each of
these measures provides an additional metric to evaluate our
operations and, when considered with both our GAAP results and the
reconciliation to net loss, provide useful supplemental information
for investors. We use these measures with financial measures
prepared in accordance with GAAP, such as sales and gross margins,
to assess our historical and prospective operating performance, to
provide meaningful comparisons of operating performance across
periods, to enhance our understanding of our operating performance
and to compare our performance to that of our peers and
competitors. We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA
as a percentage of net revenue are useful to investors in assessing
the operating performance of our business without the effect
of non-cash items.
Contribution margin, Contribution margin as a
percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted
EBITDA as a percentage of net revenue should not be considered in
isolation or as alternatives to net loss, loss from operations or
any other measure of financial performance calculated and
prescribed in accordance with GAAP. Neither EBITDA, Adjusted EBITDA
or Adjusted EBITDA as a percentage of net revenue should be
considered a measure of discretionary cash available to us to
invest in the growth of our business. Our Contribution margin,
Contribution margin as a percentage of net revenue, EBITDA,
Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue
may not be comparable to similar titled measures in other
organizations because other organizations may not calculate
Contribution margin, Contribution margin as a percentage of net
revenue, EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage
of net revenue in the same manner as we do. Our presentation of
Contribution margin and Adjusted EBITDA should not be construed as
an inference that our future results will be unaffected by the
expenses that are excluded from such terms or by unusual
or non-recurring items.
We recognize that EBITDA, Adjusted EBITDA and
Adjusted EBITDA as a percentage of net revenue, have limitations as
analytical financial measures. For example, neither EBITDA nor
Adjusted EBITDA reflects:
- our capital expenditures or future
requirements for capital expenditures or mergers and
acquisitions;
- the interest expense or the cash requirements necessary to
service interest expense or principal payments, associated with
indebtedness;
- depreciation and amortization, which
are non-cash charges, although the assets being
depreciated and amortized will likely have to be replaced in the
future, or any cash requirements for the replacement of
assets;
- changes in cash requirements for our working capital needs;
or
- changes in fair value of contingent earn-out liabilities,
warrant liabilities, and amortization of inventory step-up from
acquisitions (included in cost of goods sold).
Additionally, Adjusted EBITDA
excludes non-cash expense for stock-based compensation,
which is and is expected to remain a key element of our overall
long-term incentive compensation package.We also recognize that
Contribution margin and Contribution margin as a percentage of net
revenue have limitations as analytical financial measures. For
example, Contribution margin does not reflect:
- general and administrative expense
necessary to operate our business;
- research and development expenses necessary for the
development, operation and support of our software platform;
- the fixed costs portion of our sales and distribution expenses
including stock-based compensation expense; or
- changes in fair value of contingent earn-out liabilities,
warrant liabilities, and amortization of inventory step-up from
acquisitions (included in cost of goods sold).
Adjusted EBITDA
EBITDA represents net loss plus depreciation and
amortization, interest expense, net and provision for income
taxes. Adjusted EBITDA represents EBITDA plus
stock-based compensation expense, changes in fair-market value of
earn-outs, amortization of inventory step-up from acquisitions
(included in cost of goods sold), change in fair-market value of
warrant liability, professional fees and transition costs related
to acquisitions, loss from extinguishment of debt, impairment of
goodwill, loss on initial issuance of equity, litigation reserve
and other expenses, net. As used herein, Adjusted EBITDA
as a percentage of net revenue represents Adjusted EBITDA divided
by net revenue.
The following table provides a reconciliation of
EBITDA and Adjusted EBITDA to net loss, which is the most directly
comparable financial measure presented in accordance with GAAP:
|
|
|
|
Three Months Ended March 31, |
|
|
2021 |
|
|
2022 |
|
|
(in thousands, except percentages) |
|
Net loss |
$ |
(82,553 |
) |
|
$ |
(42,776 |
) |
Add: |
|
|
|
|
|
|
|
Interest expense, net |
|
4,420 |
|
|
|
802 |
|
Depreciation and
amortization |
|
1,204 |
|
|
|
1,846 |
|
EBITDA |
|
(76,929 |
) |
|
|
(40,128 |
) |
Other expense (income), net |
|
33 |
|
|
|
(25 |
) |
Impairment loss on goodwill |
|
— |
|
|
|
29,020 |
|
Change in fair value of
contingent earn-out liabilities |
|
15,645 |
|
|
|
(2,775 |
) |
Amortization of inventory step-up
from acquisitions (included in cost of goods sold) |
|
1,808 |
|
|
|
— |
|
Gain on extinguishment of seller
note |
|
— |
|
|
|
(2,012 |
) |
Loss on initial issuance of
equity |
|
— |
|
|
|
5,835 |
|
Change in fair market value of
warrant liability |
|
30,202 |
|
|
|
1,879 |
|
Loss on initial issuance of
warrant |
|
20,147 |
|
|
|
— |
|
Professional fees related to
acquisitions |
|
449 |
|
|
|
— |
|
Litigation reserve |
|
— |
|
|
|
800 |
|
Transition cost from
acquisitions |
|
552 |
|
|
|
— |
|
Stock-based compensation
expense |
|
6,899 |
|
|
|
2,865 |
|
Adjusted EBITDA |
$ |
(1,194 |
) |
|
$ |
(4,541 |
) |
Net loss as a percentage of net
revenue |
|
(171.5 |
)% |
|
|
(102.6 |
)% |
Adjusted EBITDA as a percentage
of net revenue |
|
(2.5 |
)% |
|
|
(10.9 |
)% |
|
|
|
|
|
|
|
|
Contribution MarginContribution margin
represents gross profit less amortization of inventory step-up from
acquisitions (included in cost of goods sold) and e-commerce
platform commissions, online advertising, selling and logistics
expenses (included in sales and distribution expenses).
Contribution margin as a percentage of net revenue represents
Contribution margin divided by net revenue. The following table
provides a reconciliation of Contribution margin to gross profit
and Contribution margin as a percentage of net revenue to gross
profit as a percentage of net revenue, which are the most directly
comparable financial measures presented in accordance with
GAAP.
|
|
|
|
Three Months Ended March 31, |
|
|
2021 |
|
|
2022 |
|
|
(in thousands, except percentages) |
|
Gross Profit |
$ |
26,063 |
|
|
$ |
23,607 |
|
Add: |
|
|
|
|
|
|
|
Amortization of inventory step-up
from acquisitions (included in cost of goods sold) |
|
1,808 |
|
|
|
— |
|
Less: |
|
|
|
|
|
|
|
E-commerce platform commissions,
online advertising, selling and logistics expenses |
|
(21,737 |
) |
|
|
(19,777 |
) |
Contribution margin |
$ |
6,134 |
|
|
$ |
3,830 |
|
Gross Profit as a percentage of
net revenue |
|
54.1 |
% |
|
|
56.6 |
% |
Contribution margin as a
percentage of net revenue |
|
12.7 |
% |
|
|
9.2 |
% |
|
|
|
|
|
|
|
|
Each of our products typically goes through the
Launch phase and depending on its level of success is moved to one
of the other phases as further described below:
- Launch phase: During this phase, we
leverage our technology to target opportunities identified using
AIMEE (Artificial Intelligence Marketplace e-Commerce Engine) and
other sources. During this period of time, due to the combination
of discounts and investment in marketing, our net margin for a
product could be as low as approximately negative 35%. Net margin
is calculated by taking net revenue less the cost of goods sold,
less fulfillment, online advertising and selling expenses. These
costs primarily reflect the estimated variable costs related to the
sale of a product.
- Sustain phase: Our goal is for
every product we launch to enter the sustain phase and become
profitable, with a target of positive 15% net margin for most
products, within approximately three months of launch on average.
Over time, our products benefit from economies of scale stemming
from purchasing power both with manufacturers and with fulfillment
providers.
- Milk phase or Liquidate phase: If a
product does not enter the sustain phase or if the customer
satisfaction of the product (i.e., ratings) is not satisfactory,
then it will go to the liquidate phase and we will sell through the
remaining inventory. In order to enter the milk phase, a product
must be well received and become a strong leader in its category in
both customer satisfaction and volume sold as compared to its
competition. Products in the milk phase that have achieved
profitability should benefit from pricing power and we expect their
profitability to increase accordingly. To date, none of our
products have achieved the milk phase and we can provide no
assurance that any of our products will do so in the future.
The following tables break out our first quarter
2021 and 2022 results of operations by our product phases (in
thousands):
|
Three months ended March 31, 2021 (in thousands)
(unaudited) |
|
Sustain |
|
Launch |
|
Liquidate/Other |
|
Fixed Costs |
|
Stock-based compensation expense |
|
Total |
NET REVENUE |
$ |
41,994 |
|
$ |
2,599 |
|
$ |
3,543 |
|
$ |
— |
|
$ |
— |
|
$ |
48,136 |
COST OF GOODS SOLD |
|
17,298 |
|
|
1,452 |
|
|
3,323 |
|
|
— |
|
|
— |
|
|
22,073 |
GROSS PROFIT |
|
24,696 |
|
|
1,147 |
|
|
220 |
|
|
— |
|
|
— |
|
|
26,063 |
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and distribution |
|
18,816 |
|
|
1,397 |
|
|
1,518 |
|
|
2,383 |
|
|
955 |
|
|
25,069 |
Research and development |
|
— |
|
|
— |
|
|
— |
|
|
1,241 |
|
|
883 |
|
|
2,124 |
General and administrative |
|
— |
|
|
— |
|
|
— |
|
|
5,915 |
|
|
5,061 |
|
|
10,976 |
Change in fair value of
contingent earn-out liabilities |
|
— |
|
|
— |
|
|
— |
|
|
15,645 |
|
|
— |
|
|
15,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2022 (in thousands)
(unaudited) |
|
|
Sustain |
|
Launch |
|
|
Liquidate/Other |
|
Fixed Costs |
|
|
Stock-based compensation expense |
|
Total |
|
NET REVENUE |
$ |
37,964 |
|
$ |
837 |
|
|
$ |
2,872 |
|
$ |
— |
|
|
$ |
— |
|
$ |
41,673 |
|
COST OF GOODS SOLD |
|
15,749 |
|
|
411 |
|
|
|
1,906 |
|
|
— |
|
|
|
— |
|
|
18,066 |
|
GROSS PROFIT |
|
22,215 |
|
|
426 |
|
|
|
966 |
|
|
— |
|
|
|
— |
|
|
23,607 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and distribution |
|
17,479 |
|
|
535 |
|
|
|
1,762 |
|
|
2,851 |
|
|
|
347 |
|
|
22,974 |
|
Research and development |
|
— |
|
|
— |
|
|
|
— |
|
|
870 |
|
|
|
274 |
|
|
1,144 |
|
General and administrative |
|
— |
|
|
— |
|
|
|
— |
|
|
7,217 |
|
|
|
2,324 |
|
|
9,541 |
|
Impairment loss on goodwill |
|
— |
|
|
— |
|
|
|
— |
|
|
29,020 |
|
|
|
— |
|
|
29,020 |
|
Change in fair value of
contingent earn-out liabilities |
|
— |
|
|
— |
|
|
|
— |
|
|
(2,775 |
) |
|
|
— |
|
|
(2,775 |
) |
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