Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today
announced that it is resuming its M&A strategy after its
previously announced pause following the disruption of the global
ecosystem due to the COVID-19 pandemic. The Company intends to
purchase the assets of a brand in the health and wellness category.
The Company believes that the acquisition will be accretive;
expanding and securing market share in an existing portfolio
brand’s category. The specific terms of the acquisition will not be
disclosed.
Yaniv Sarig, Co-Founder and Chief Executive
Officer, commented, "We are excited at the prospect of resuming our
acquisition strategy and see many opportunities in the e-commerce
space. This transaction will allow us to gain market share in one
of our existing product categories. Further, there will be no
additional headcount added to our staff.”
Financial Update
Aterian also announced today that the Company’s
third quarter 2022 net revenue is expected to fall in the range of
$62.0 million to $66.0 million.
Mr. Sarig continued, “As we discussed during the
second quarter 2022 earnings call, we focused this quarter on
selling through excess inventory and maintaining our product
rankings in order to protect market share. While this strategy is
at the expense of our expected Adjusted EBITDA loss, we are
optimistic that these moves have helped to strengthen our product
portfolio and will allow us to restock at a lower cost basis due to
declining shipping costs, hopefully leading to future margin
expansion as we enter 2023.”
The most directly comparable GAAP financial
measure for Adjusted EBITDA is net loss and the Company expects to
report a net loss for the three months ending September 30, 2022,
due primarily to the Company's operating loss including stock-based
compensation expense, depreciation and amortization expense and the
non-cash goodwill impairment charge.
Also, the Company has experienced high
volatility in the price of its common stock and a reduction in its
market capitalization over the last three months. This is
considered an interim triggering event for goodwill. As such, the
Company expects to take a non-cash goodwill impairment charge for
the three months ending September 30, 2022, due primarily to the
decrease in its market capitalization. The Company estimates that
the non-cash goodwill impairment charge will be between $24.0
million and $29.0 million. The Company previously recorded a
non-cash goodwill impairment charge in the three months ended March
31, 2022, of approximately $29.0 million due to the decrease in its
market capitalization during the three months ended March 31,
2022.
The preliminary financial information presented
in this press release is based on the Company’s current
expectations and may be adjusted as a result of, among other
things, the completion of customary quarter-end close review
procedures and financial review. The Company will report its
financial results for the period ending September 30, 2022 in its
third quarter 2022 earnings call expected to be held in November
2022.
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 with a focus on 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 Statements
All 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
resumption of our M&A strategy; our proposed acquisition of
assets of a brand in the health and wellness category; the expected
benefits of any such acquisition; our ability to expand and secure
market share; the potential opportunities in the e-commerce space;
our expectations regarding headcount; our expectations regarding
margin expansion; the strength of our product portfolio; expected
changes in the costs of shipping containers; our ability to restock
our inventory; our expectations regarding third quarter 2022 net
revenue; our expected Adjusted EBITDA loss for the three quarters
ending September 30, 2022; and our expectations regarding a
goodwill impairment charge for the three months ending September
30, 2022. 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 completion of
customary quarterly financial statement review procedures, risks in
completing proposed M&A transactions and realizing the
anticipated benefits of such transactions, 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 or have acquired, 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 and the war in the Ukraine,
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 maintain and 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 and
expenses; acquisitions of other companies and technologies and our
ability to successfully 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.
Non-GAAP Financial Measure
The non-GAAP financial measure referenced herein
is a supplement to the corresponding financial measure prepared in
accordance with U.S. GAAP. The non-GAAP financial measure
referenced excludes 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 the
Company’s on-going core operating performance. The non-GAAP
financial measure has certain limitations in that it does not
reflect all of the costs associated with the operations of the
Company’s business as determined in accordance with GAAP.
Therefore, investors should consider the
non-GAAP financial measure 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 measure referenced
by the Company may be different from the non-GAAP financial
measures used by other companies.
The Company has referenced Adjusted EBITDA, a
non-GAAP measure, to assist investors in understanding the
Company’s core net operating results on an on-going basis. This
non-GAAP financial measure may also assist investors in making
comparisons of the Company’s core operating results with those of
other companies.
As used herein, EBITDA represents net loss plus
depreciation and amortization, interest expense, net and income tax
expense. As used herein, Adjusted EBITDA represents EBITDA plus
stock-based compensation expense and other expense, net. 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 reference EBITDA and Adjusted EBITDA 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, provides useful
supplemental information for investors. We use EBITDA and Adjusted
EBITDA, together 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 and Adjusted EBITDA are useful
to investors in assessing the operating performance of our business
without the effect of non-cash items. EBITDA and Adjusted EBITDA
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 nor Adjusted EBITDA should be considered a measure
of discretionary cash available to us to invest in the growth of
our business. Our EBITDA and Adjusted EBITDA may not be comparable
to similar titled measures in other organizations because other
organizations may not calculate EBITDA or Adjusted EBITDA in the
same manner as we do. Reference to 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 both EBITDA and Adjusted
EBITDA have limitations as analytical financial measures. For
example, neither EBITDA nor Adjusted EBITDA reflects:
- our capital
expenditures or future requirements for capital expenditures or
merger 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; or
- changes in cash
requirements for our working capital needs.
Additionally, Adjusted EBITDA excludes non-cash
expense for stock-based compensation, which is and will remain a
key element of our overall long-term incentive compensation
package.
The most directly comparable financial measure
presented in accordance with GAAP to EBITDA and Adjusted EBITDA is
net loss. We are unable to reconcile the forward-looking statements
of EBITDA and Adjusted EBITDA in this press release to their
nearest GAAP measures because the nearest GAAP financial measures
are not accessible on a forward-looking basis and reconciling
information is not available without unreasonable effort.
Investor Contact:
Ilya GrozovskyVice President of Investor
Relations & Corp. DevelopmentAterian,
Inc.ilya@aterian.io917-905-1699
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