Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today
announced results for the fourth quarter and full year ended
December 31, 2022.
Fourth Quarter Highlights
- Fourth quarter 2022 net revenue
declined 13.3% to $54.9 million, compared to $63.3 million in the
fourth quarter of 2021.
- Fourth quarter 2022 gross margin
declined to 37.1%, compared to 45.6% in the fourth quarter of 2021,
primarily reflecting the impact of our strategy of liquidating high
cost inventory.
- Fourth quarter 2022 contribution
margin declined to (11.5)% from 7.9% in the fourth quarter of 2021,
primarily reflecting the impact of our strategy of liquidating high
cost inventory.
- Fourth quarter 2022 operating loss
increased to $(22.8) million compared to a loss of $(3.3) million
in the fourth quarter of 2021. Fourth quarter 2022 operating loss
includes a reserve for barter credits of ($1.6) million and ($2.7)
million of non-cash stock compensation, and a non-cash loss on
impairment of goodwill of ($0.5) million, while fourth quarter 2021
operating loss included a net gain of $14.4 million from the net
change in fair value and settlement of earn-out liabilities and
$(7.7)million of non-cash stock compensation.
- Fourth quarter 2022 net loss of
$(20.3) million increased from $(6.6) million in 2021. Fourth
quarter 2022 net loss includes a reserve for barter credits of
($1.6) million, ($2.7) million of non-cash stock compensation, a
non-cash loss on impairment of goodwill of ($0.5) million, and a
gain on fair value of warrant liability of $2.8 million, while
fourth quarter 2021 net loss included a net gain of $14.4 million
from the net change in fair value and settlement of earn-out
liabilities, $(7.7) million of non-cash stock compensation and loss
on extinguishment of debt of $(2.1) million.
- Fourth quarter 2022 adjusted EBITDA
loss increased to $(16.2) million from $(3.0) million in the fourth
quarter of 2021.
- Total cash balance at December 31,
2022 was $43.6 million.
Full Year 2022 Highlights
- Full year 2022 net revenue declined
10.7% year over year to $221.2 million, compared to $247.8 million
in the full year of 2021.
- Full year gross margin declined to
47.7% compared to 49.2% in 2021, primarily reflecting impacts from
global supply chain disruptions and related inflation and our
strategy of liquidating high cost inventory.
- Full year 2022 contribution margin
declined to 1.8% from 10.1% in 2021, primarily reflecting impacts
from global supply chain disruptions and related inflation and our
strategy of liquidating high cost inventory.
- Full year 2022 operating loss of
$(178.2) million increased from $(34.1) million in 2021. Full year
operating loss includes a gain of $5.2 million from the change in
fair value of contingent earn-out liabilities, ($14.6) million of
non-cash stock compensation, a non-cash loss on impairment of
goodwill of ($120.4) million, and a non-cash loss on impairment of
intangibles of ($3.1) million, while full year 2021 operating loss
included a net gain of $26.4 million net change in fair value and
settlement of earn-out liabilities and $(29.0) million of non-cash
stock compensation.
- Full year 2022 net loss of $(196.3)
million improved from $(236.0) million in 2021. Full year net loss
includes a gain of $5.2 million from the change in fair value of
contingent earn-out liabilities, ($14.6) million of non-cash stock
compensation, a non-cash loss on impairment of goodwill of ($120.4)
million, a non-cash loss on impairment of intangibles of ($3.1)
million, a gain on extinguishment of seller note of $2.0 million, a
loss on initial issuance of equity of ($18.7) million and gain of
$0.5 million relating to the change in fair value of warrant
liability, while full year 2021 net loss included change in fair
value of derivative liability of $(3.3) million, loss on
extinguishment of debt of $(138.9) million, change in fair value of
warrant liability of $(26.5) million, loss on initial issuance of
warrant of $(20.1) million, a net gain of $26.4 million net change
in fair value and settlement of earn-out liabilities, and $(29.0)
million of non-cash stock compensation.
- Full year 2022 adjusted EBITDA loss
increased to $(33.5) million from $(7.2) million in 2021.
Yaniv Sarig, Co-Founder and Chief Executive
Officer, commented, “While consumer demand was softer year on year,
we successfully executed on our strategy to cycle through expensive
inventory. Due to the exorbitant shipping costs in bringing in this
inventory, we applied discounts to excess inventory across the
board, including some of our best products, to make room for
inventory at a lower cost basis. This is not due to weakness in our
portfolio but rather with international shipping rates normalizing
we can restock our inventory at a lower cost basis. Combining this
with our portfolio’s strong market share position, we remain on
track to achieve adjusted EBITDA profitability in the second half
of 2023.”
First Quarter 2023 & Second Half of
2023 Outlook
For the first quarter of 2023, taking into
account the current global environment and inflation, we believe
that net revenue will be between $32 million and $36 million. For
the first quarter of 2023, the Company expects Adjusted EBITDA to
remain in the range of $(4.8) million and $(5.8) million.
The Company also is reconfirming its prior
guidance of expecting to be Adjusted EBITDA profitable in the
second half of 2023.
Non-GAAP Financial Measures
For more information on our non-GAAP financial
measures and a reconciliation of GAAP to non-GAAP measures, please
see the “Non-GAAP Financial Measures” section below. The most
directly comparable GAAP financial measure for EBITDA and Adjusted
EBITDA is net loss and we expect to report a net loss for the three
months ending March 31, 2023 and the second half of 2023, due
primarily to interest expense and stock-based compensation
expense.
Webcast and Conference Call
InformationAterian will host a live conference call to
discuss financial results today, March 9, 2023, at 5:00 p.m.
Eastern Time, which will be accessible by telephone and the
internet. To access the call, participants from within the U.S.
should dial (833) 636-1351 and participants from outside the U.S.
should dial (412) 902-4267 and ask to be joined into the Aterian,
Inc. call. Participants may also access the call through a live
webcast at https://ir.aterian.io. The archived online replay will
be available for a limited time after the call in the Investors
Relations section of the Aterian website.
About Aterian, Inc.Aterian,
Inc. (Nasdaq: ATER), is a leading technology-enabled consumer
products 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 our strong market share position, goal to
achieve adjusted EBITDA profitability in the second half of 2023
and international shipping rates normalizing. 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; 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.
ATERIAN,
INC.Consolidated Balance
Sheets(in thousands, except share and per share
data)
|
|
December 31,2021 |
|
|
December 31,2022 |
|
ASSETS |
|
|
|
|
|
|
CURRENT
ASSETS: |
|
|
|
|
|
|
Cash |
|
$ |
30,317 |
|
|
$ |
43,574 |
|
Accounts
receivable—net |
|
|
10,478 |
|
|
|
4,515 |
|
Inventory |
|
|
63,045 |
|
|
|
43,666 |
|
Prepaid
and other current assets |
|
|
21,034 |
|
|
|
8,261 |
|
Total
current assets |
|
|
124,874 |
|
|
|
100,016 |
|
PROPERTY
AND EQUIPMENT—net |
|
|
1,254 |
|
|
|
853 |
|
GOODWILL—net |
|
|
119,941 |
|
|
|
— |
|
OTHER
INTANGIBLES—net |
|
|
64,955 |
|
|
|
54,757 |
|
OTHER
NON-CURRENT ASSETS |
|
|
2,546 |
|
|
|
813 |
|
TOTAL
ASSETS |
|
$ |
313,570 |
|
|
$ |
156,439 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
Credit
facility |
|
$ |
32,845 |
|
|
$ |
21,053 |
|
Accounts
payable |
|
|
21,716 |
|
|
|
16,035 |
|
Seller
notes |
|
|
7,577 |
|
|
|
1,693 |
|
Contingent earn-out liability |
|
|
3,983 |
|
|
|
— |
|
Accrued
and other current liabilities |
|
|
17,621 |
|
|
|
14,254 |
|
Total
current liabilities |
|
|
83,742 |
|
|
|
53,035 |
|
OTHER
LIABILITIES |
|
|
360 |
|
|
|
1,452 |
|
CONTINGENT EARN-OUT LIABILITY |
|
|
5,240 |
|
|
|
— |
|
Total
liabilities |
|
|
89,342 |
|
|
|
54,487 |
|
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 80,752,290 shares outstanding at December 31,
2022 |
|
|
5 |
|
|
|
8 |
|
Additional paid-in capital |
|
|
653,650 |
|
|
|
728,339 |
|
Accumulated deficit |
|
|
(428,959 |
) |
|
|
(625,251 |
) |
Accumulated other comprehensive income |
|
|
(468 |
) |
|
|
(1,144 |
) |
Total
stockholders’ equity |
|
|
224,228 |
|
|
|
101,952 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
313,570 |
|
|
$ |
156,439 |
|
ATERIAN,
INC. Consolidated Statements of
Operations (in thousands, except share and
per share data)
|
|
Three Months Ended December
31, |
|
|
Year-Ended December 31, |
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
NET REVENUE |
|
$ |
63,321 |
|
|
$ |
54,902 |
|
|
|
$ |
247,767 |
|
|
$ |
221,170 |
|
COST OF GOODS SOLD |
|
|
34,440 |
|
|
|
34,534 |
|
|
|
|
125,904 |
|
|
|
115,652 |
|
GROSS PROFIT |
|
|
28,881 |
|
|
|
20,368 |
|
|
|
|
121,863 |
|
|
|
105,518 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and distribution |
|
|
30,653 |
|
|
|
32,507 |
|
|
|
|
127,369 |
|
|
|
121,139 |
|
Research and development |
|
|
2,617 |
|
|
|
1,430 |
|
|
|
|
9,837 |
|
|
|
6,012 |
|
General and
administrative |
|
|
13,292 |
|
|
|
8,758 |
|
|
|
|
45,099 |
|
|
|
38,239 |
|
Impairment loss on
goodwill |
|
|
— |
|
|
|
468 |
|
|
|
|
— |
|
|
|
120,409 |
|
Impairment loss on
intangibles |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
3,118 |
|
Settlement of a contingent
earn-out liability |
|
|
4,164 |
|
|
|
— |
|
|
|
|
4,164 |
|
|
|
— |
|
Change in fair value of
contingent earn-out liabilities |
|
|
(18,580 |
) |
|
|
— |
|
|
|
|
(30,529 |
) |
|
|
(5,240 |
) |
TOTAL OPERATING EXPENSES: |
|
|
32,146 |
|
|
|
43,163 |
|
|
|
|
155,940 |
|
|
|
283,677 |
|
OPERATING LOSS |
|
|
(3,265 |
) |
|
|
(22,795 |
) |
|
|
|
(34,077 |
) |
|
|
(178,159 |
) |
INTEREST EXPENSE—net |
|
|
778 |
|
|
|
560 |
|
|
|
|
12,655 |
|
|
|
2,603 |
|
GAIN ON EXTINGUISHMENT OF
SELLER NOTE |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
(2,012 |
) |
LOSS ON INITIAL ISSUANCE OF
EQUITY |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
18,669 |
|
CHANGE IN FAIR VALUE OF
DERIVATIVE LIABILITY |
|
|
— |
|
|
|
— |
|
|
|
|
3,254 |
|
|
|
— |
|
LOSS ON EXTINGUISHMENT OF
DEBT |
|
|
2,096 |
|
|
|
— |
|
|
|
|
138,859 |
|
|
|
— |
|
CHANGE IN FAIR VALUE OF
WARRANT LIABILITY |
|
|
— |
|
|
|
(2,835 |
) |
|
|
|
26,455 |
|
|
|
(470 |
) |
LOSS ON INITIAL ISSUANCE OF
WARRANTS |
|
|
— |
|
|
|
— |
|
|
|
|
20,147 |
|
|
|
— |
|
OTHER EXPENSE
(INCOME)—net |
|
|
2 |
|
|
|
(83 |
) |
|
|
|
45 |
|
|
|
(281 |
) |
LOSS BEFORE INCOME TAXES |
|
|
(6,141 |
) |
|
|
(20,437 |
) |
|
|
|
(235,492 |
) |
|
|
(196,668 |
) |
PROVISION (BENEFIT) FOR INCOME
TAXES |
|
|
468 |
|
|
|
(133 |
) |
|
|
|
532 |
|
|
|
(376 |
) |
NET LOSS |
|
$ |
(6,609 |
) |
|
$ |
(20,304 |
) |
|
|
$ |
(236,024 |
) |
|
$ |
(196,292 |
) |
Net loss per share, basic and
diluted |
|
$ |
(0.13 |
) |
|
$ |
(0.27 |
) |
|
|
$ |
(6.67 |
) |
|
$ |
(2.95 |
) |
Weighted-average number of
shares outstanding, basic and diluted |
|
|
50,159,967 |
|
|
|
75,824,531 |
|
|
|
|
35,379,005 |
|
|
|
66,529,565 |
|
ATERIAN, INC.
Consolidated Statements of Cash Flows (in
thousands)
|
|
Year-Ended December 31, |
|
|
|
2021 |
|
|
|
2022 |
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net loss |
|
$ |
(236,024 |
) |
|
|
$ |
(196,292 |
) |
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
7,326 |
|
|
|
|
7,521 |
|
Provision for sales returns |
|
|
43 |
|
|
|
|
56 |
|
Amortization of deferred financing cost and debt discounts |
|
|
7,742 |
|
|
|
|
429 |
|
Stock-based compensation |
|
|
28,987 |
|
|
|
|
14,594 |
|
Gain
from increase of contingent earn-out liability fair value |
|
|
(30,529 |
) |
|
|
|
(5,240 |
) |
Loss in
connection with settlement of earn-out |
|
|
4,164 |
|
|
|
— |
|
Loss
(Gain) in connection with the change in warrant fair value |
|
|
26,455 |
|
|
|
|
(470 |
) |
Gain in
connection with settlement of note payable |
|
— |
|
|
|
|
(2,012 |
) |
Loss on
initial issuance of warrants |
|
|
20,147 |
|
|
|
— |
|
Issuance
of common stock |
|
|
— |
|
|
|
|
43 |
|
Loss on
initial issuance of equity |
|
— |
|
|
|
|
18,669 |
|
Loss
from extinguishment of High Trail December 2020 and February 2021
Term Loan |
|
|
28,240 |
|
|
|
— |
|
Loss
from extinguishment of High Trail April 2021 Term Loan |
|
|
106,991 |
|
|
|
— |
|
Loss
from extinguishment of High Trail Term Loan |
|
|
2,096 |
|
|
|
— |
|
Loss
from extinguishment of Credit Facility |
|
|
1,532 |
|
|
|
— |
|
Provision for barter credits |
|
|
1,000 |
|
|
|
|
1,643 |
|
Loss
from derivative liability discount related to term loan |
|
|
3,254 |
|
|
|
— |
|
Impairment loss on goodwill |
|
— |
|
|
|
|
120,409 |
|
Impairment loss on intangibles |
|
— |
|
|
|
|
3,118 |
|
Allowance for doubtful accounts and other |
|
|
4,200 |
|
|
|
|
367 |
|
Changes
in assets and liabilities: |
|
|
|
|
|
|
Accounts
receivable |
|
|
(4,554 |
) |
|
|
|
5,596 |
|
Inventory |
|
|
(19,303 |
) |
|
|
|
19,438 |
|
Prepaid
and other current assets |
|
|
(7,856 |
) |
|
|
|
5,564 |
|
Accounts
payable, accrued and other liabilities |
|
|
14,120 |
|
|
|
|
(10,910 |
) |
Cash
provided (used) by operating activities |
|
|
(41,969 |
) |
|
|
|
(17,477 |
) |
INVESTING ACTIVITIES: |
|
|
|
|
|
|
Purchase
of fixed assets |
|
|
(32 |
) |
|
|
|
(82 |
) |
Purchase
of Healing Solutions assets |
|
|
(15,250 |
) |
|
|
— |
|
Purchase
of Photo Paper Direct, net of cash acquired |
|
|
(10,583 |
) |
|
|
— |
|
Purchase
of Squatty Potty assets |
|
|
(19,040 |
) |
|
|
— |
|
Purchase
of Step and Go assets |
|
— |
|
|
|
|
(595 |
) |
Cash
used in investing activities |
|
|
(44,905 |
) |
|
|
|
(677 |
) |
FINANCING ACTIVITIES: |
|
|
|
|
|
|
Proceeds
from warrant exercise |
|
|
9,085 |
|
|
|
— |
|
Proceeds
from cancellation of warrant |
|
|
16,957 |
|
|
|
— |
|
Proceeds
from issuance of common stock from follow-on public offering, net
of issuance costs |
|
|
36,735 |
|
|
|
— |
|
Proceeds
from equity offering, net of issuance costs |
|
— |
|
|
|
|
46,834 |
|
Proceeds
from exercise of stock options |
|
|
9,033 |
|
|
|
— |
|
Repayments on note payable to Smash |
|
|
(10,495 |
) |
|
|
|
(3,423 |
) |
Payment
of earnout to Squatty Potty |
|
|
(7,971 |
) |
|
|
|
(3,983 |
) |
Borrowings from MidCap credit facilities |
|
|
48,750 |
|
|
|
|
136,687 |
|
Repayments from MidCap credit facilities |
|
|
(28,274 |
) |
|
|
|
(148,907 |
) |
Debt
issuance costs from MidCap credit facility |
|
|
(849 |
) |
|
|
— |
|
Repayments for High Trail April 2021 Note |
|
|
(10,139 |
) |
|
|
— |
|
Repayments for High Trail December 2021 Note |
|
|
(27,500 |
) |
|
|
— |
|
Repayments for High Trail December 2020 Note and February 2021
Note |
|
|
(59,500 |
) |
|
|
— |
|
Borrowings from High Trail February 2021 Note |
|
|
14,025 |
|
|
|
— |
|
Borrowings from High Trail April 2021 Note |
|
|
110,000 |
|
|
|
— |
|
Debt
issuance costs from High Trail February 2021 Note |
|
|
(1,462 |
) |
|
|
— |
|
Debt
issuance costs from High Trail April 2021 Note |
|
|
(2,202 |
) |
|
|
— |
|
Insurance financing proceeds |
|
|
2,424 |
|
|
|
|
2,099 |
|
Insurance obligation payments |
|
|
(3,048 |
) |
|
|
|
(2,311 |
) |
Cash
provided by financing activities |
|
|
95,569 |
|
|
|
|
26,996 |
|
EFFECT
OF EXCHANGE RATE ON CASH |
|
|
(477 |
) |
|
|
|
(528 |
) |
NET
CHANGE IN CASH AND RESTRICTED CASH FOR THE YEAR |
|
|
8,218 |
|
|
|
|
8,314 |
|
CASH AND
RESTRICTED CASH AT BEGINNING OF YEAR |
|
|
30,097 |
|
|
|
|
38,315 |
|
CASH AND
RESTRICTED CASH AT END OF YEAR |
|
|
38,315 |
|
|
|
|
46,629 |
|
RECONCILIATION OF CASH AND RESTRICTED CASH |
|
|
|
|
|
|
CASH |
|
|
30,317 |
|
|
|
|
43,574 |
|
RESTRICTED CASH—Prepaid and other current assets |
|
|
7,849 |
|
|
|
|
2,926 |
|
RESTRICTED CASH—Other non-current assets |
|
|
149 |
|
|
|
|
129 |
|
TOTAL
CASH AND RESTRICTED CASH |
|
$ |
38,315 |
|
|
|
$ |
46,629 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
|
|
|
|
|
|
Cash
paid for interest |
|
$ |
5,611 |
|
|
|
$ |
1,875 |
|
Cash
paid for taxes |
|
$ |
41 |
|
|
|
$ |
100 |
|
Non-cash
consideration paid to contractors |
|
$ |
- |
|
|
|
$ |
1,137 |
|
Modification of warrants between equity and liability |
|
$ |
75,828 |
|
|
|
$ |
— |
|
Non-cash
consideration paid to contractors |
|
$ |
7,289 |
|
|
|
$ |
— |
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
Original
issue discount |
|
$ |
2,475 |
|
|
|
$ |
— |
|
Fair
value of contingent consideration |
|
$ |
20,971 |
|
|
|
$ |
— |
|
Discount
of debt relating to warrants issuance |
|
$ |
51,284 |
|
|
|
$ |
— |
|
Notes
Payable of acquisition |
|
$ |
16,550 |
|
|
|
$ |
— |
|
Issuance
of common stock in connection with Healing Solutions and Photo
Paper Direct acquisitions |
|
$ |
50,529 |
|
|
|
$ |
— |
|
Issuance
of common stock - debt repayment |
|
$ |
125,562 |
|
|
|
$ |
— |
|
Issuance
of common stock - Healing Solutions earnout settlement |
|
$ |
7,914 |
|
|
|
$ |
— |
|
Issuance
of common stock related to exercise of warrants |
|
$ |
— |
|
|
|
$ |
767 |
|
Fair
value of warrants issued in connection with equity offering |
|
$ |
— |
|
|
|
$ |
18,982 |
|
Issuance
of common stock |
|
$ |
— |
|
|
|
$ |
43 |
|
Exercise
of prefunded warrants |
|
$ |
— |
|
|
|
$ |
15,039 |
|
Non-GAAP Financial Measures
We believe that our financial statements and the
other financial data included in this Annual Report have been
prepared in a manner that complies, in all material respects, with
generally accepted accounting principles in the U.S. (“GAAP”).
However, for the reasons discussed below, we have presented certain
non-GAAP measures herein.
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), reserve on barter
credits 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,
settlement of earn-outs, amortization of inventory step-up from
acquisitions (included in cost of goods sold), reserve for barter
credits, profit and loss impacts from the issuance of common stock
and/or warrants, changes in fair-market value of warrant liability,
professional fees and transition costs related to acquisitions,
litigation settlements, impairment on goodwill and intangibles,loss
from extinguishment of debt 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”), and the reserve for barter credits to gross profit 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.
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).
Contribution MarginThe 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 EndedDecember
31, |
|
|
Year-EndedDecember 31, |
|
|
|
2021 |
|
|
2022 |
|
|
|
2021 |
|
|
2022 |
|
|
|
(in thousands, except percentages) |
|
|
(in thousands, except percentages) |
|
Gross Profit |
|
$ |
28,881 |
|
|
$ |
20,368 |
|
|
|
$ |
121,863 |
|
|
$ |
105,518 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of inventory step-up from acquisitions (included in
cost of goods sold) |
|
|
542 |
|
|
|
— |
|
|
|
|
5,458 |
|
|
|
— |
|
Reserve
on barter credits |
|
|
1,000 |
|
|
|
1,643 |
|
|
|
|
1,000 |
|
|
|
1,643 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E-commerce platform commissions, online advertising, selling and
logistics expenses |
|
|
(25,413 |
) |
|
|
(28,331 |
) |
|
|
|
(103,283 |
) |
|
|
(103,258 |
) |
Contribution margin |
|
$ |
5,010 |
|
|
$ |
(6,320 |
) |
|
|
$ |
25,038 |
|
|
$ |
3,903 |
|
Gross
Profit as a percentage of net revenue |
|
|
45.6 |
% |
|
|
37.1 |
% |
|
|
|
49.2 |
% |
|
|
47.7 |
% |
Contribution margin as a percentage of net revenue |
|
|
7.9 |
% |
|
|
(11.5 |
)% |
|
|
|
10.1 |
% |
|
|
1.8 |
% |
Adjusted EBITDA
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 EndedDecember
31, |
|
|
Year-EndedDecember 31, |
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
(in thousands, exceptpercentages) |
|
|
(in thousands, exceptpercentages) |
Net loss |
|
$ |
(6,609 |
) |
|
|
$ |
(20,304 |
) |
|
|
$ |
(236,024 |
) |
|
|
$ |
(196,292 |
) |
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
468 |
|
|
|
(133 |
) |
|
|
532 |
|
|
|
(376 |
) |
Interest expense, net |
|
|
778 |
|
|
|
|
560 |
|
|
|
|
12,655 |
|
|
|
|
2,603 |
|
Depreciation and
amortization |
|
|
2,569 |
|
|
|
|
1,758 |
|
|
|
|
7,326 |
|
|
|
|
7,521 |
|
EBITDA |
|
|
(2,794 |
) |
|
|
|
(18,119 |
) |
|
|
|
(215,511 |
) |
|
|
|
(186,544 |
) |
Other expense (income),
net |
|
|
2 |
|
|
|
|
(83 |
) |
|
|
|
45 |
|
|
|
|
(281 |
) |
Change in fair value of
contingent earn-out liabilities |
|
|
(18,580 |
) |
|
|
|
— |
|
|
|
|
(30,529 |
) |
|
|
|
(5,240 |
) |
Settlement of a contingent
earn-out liability |
|
|
4,164 |
|
|
|
|
— |
|
|
|
|
4,164 |
|
|
|
|
— |
|
Impairment loss on
goodwill |
|
|
— |
|
|
|
|
468 |
|
|
|
|
— |
|
|
|
|
120,409 |
|
Impairment loss on
intangibles |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
3,118 |
|
Gain on extinguishment of
seller note |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(2,012 |
) |
Amortization of inventory
step-up from acquisitions (included in cost of goods sold) |
|
|
542 |
|
|
|
|
— |
|
|
|
|
5,458 |
|
|
|
|
— |
|
Change in fair market value of
warrant liability |
|
|
— |
|
|
|
|
(2,835 |
) |
|
|
|
26,455 |
|
|
|
|
(470 |
) |
Derivative liability discount
related to term loan |
|
|
— |
|
|
|
|
— |
|
|
|
|
3,254 |
|
|
|
|
— |
|
Loss on original issuance of
equity |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
18,669 |
|
Loss on extinguishment of
debt |
|
|
2,096 |
|
|
|
|
— |
|
|
|
|
138,859 |
|
|
|
|
— |
|
Loss on initial issuance of
warrants |
|
|
— |
|
|
|
|
— |
|
|
|
|
20,147 |
|
|
|
|
— |
|
Professional fees related to
acquisitions |
|
|
— |
|
|
|
|
— |
|
|
|
|
1,450 |
|
|
|
|
— |
|
Transition costs from
acquisitions |
|
|
762 |
|
|
|
|
— |
|
|
|
|
2,076 |
|
|
|
|
— |
|
Professional and legal fees
related to Photo Paper Direct acquisition |
|
|
890 |
|
|
|
|
— |
|
|
|
|
1,586 |
|
|
|
|
— |
|
Litigation reserve |
|
|
1,300 |
|
|
|
|
— |
|
|
|
|
1,300 |
|
|
|
|
2,600 |
|
Reserve on dispute with PPE
supplier |
|
|
— |
|
|
|
|
— |
|
|
|
|
4,100 |
|
|
|
|
— |
|
Reserve on barter credits |
|
|
1,000 |
|
|
|
|
1,643 |
|
|
|
|
1,000 |
|
|
|
|
1,643 |
|
Stock-based compensation
expense |
|
|
7,657 |
|
|
|
|
2,740 |
|
|
|
|
28,987 |
|
|
|
|
14,594 |
|
Adjusted EBITDA |
|
$ |
(2,961 |
) |
|
|
$ |
(16,186 |
) |
|
|
$ |
(7,159 |
) |
|
|
$ |
(33,514 |
) |
Net loss as a percentage of
net revenue |
|
|
(10.4 |
)% |
|
|
|
(37.0 |
)% |
|
|
|
(95.3 |
)% |
|
|
|
(88.8 |
)% |
Adjusted EBITDA as a
percentage of net revenue |
|
|
(4.7 |
)% |
|
|
|
(29.5 |
)% |
|
|
|
(2.9 |
)% |
|
|
|
(15.2 |
)% |
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:
i. Launch phase: During this
phase, we leverage our technology to target opportunities
identified using AIMEE (Artificial Intelligence
Marketplace e-Commerce Engine) and other sources. This phase also
includes revenue from new product variations and relaunches. 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.
ii. 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.
Net margin primarily reflects a combination of manual and automated
adjustments in price and marketing spend.
iii. 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. Products can also be liquidated as part of
inventory normalization especially when steep discounts are
required.
The following tables break out our fourth quarter
and full year 2021 and 2022 results of operations by our product
phases (in thousands):
|
|
Three Months Ended December 31, 2021 |
|
|
|
Sustain |
|
|
Launch |
|
Liquidation/Other |
|
Fixed Costs |
|
|
Stock based compensation expense |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REVENUE |
|
$ |
52,669 |
|
|
$ |
2,570 |
|
|
$ |
8,082 |
|
|
$ |
— |
|
|
$ |
— |
|
$ |
63,321 |
|
COST OF
GOODS SOLD |
|
|
24,090 |
|
|
|
2,813 |
|
|
|
7,537 |
|
|
|
— |
|
|
|
— |
|
|
34,440 |
|
GROSS
PROFIT |
|
$ |
28,579 |
|
|
$ |
(243 |
) |
|
$ |
545 |
|
|
$ |
— |
|
|
$ |
— |
|
$ |
28,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and distribution expenses |
|
|
20,117 |
|
|
|
1,623 |
|
|
|
3,673 |
|
|
|
3,399 |
|
|
|
1,841 |
|
|
30,653 |
|
Research
and development |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,158 |
|
|
|
1,459 |
|
|
2,617 |
|
General
and administrative |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,935 |
|
|
|
4,357 |
|
|
13,292 |
|
Settlement of a contingent earn-out liability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,164 |
|
|
|
— |
|
|
4,164 |
|
Change
in earn-out liability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(18,580 |
) |
|
|
— |
|
|
(18,580 |
) |
|
|
|
|
|
|
Three Months Ended December 31, 2022 |
|
|
|
Sustain |
|
|
Launch |
|
Liquidation/Other |
|
Fixed Costs |
|
|
Stock based compensation expense |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
REVENUE |
|
$ |
40,831 |
|
|
$ |
963 |
|
|
$ |
13,108 |
|
|
$ |
— |
|
|
$ |
— |
|
$ |
54,902 |
|
COST OF
GOODS SOLD |
|
|
17,550 |
|
|
|
236 |
|
|
|
16,748 |
|
|
|
— |
|
|
|
— |
|
|
34,534 |
|
GROSS
PROFIT |
|
$ |
23,281 |
|
|
$ |
727 |
|
|
$ |
(3,640 |
) |
|
$ |
— |
|
|
$ |
— |
|
$ |
20,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and distribution expenses |
|
|
19,902 |
|
|
|
316 |
|
|
|
8,113 |
|
|
|
3,390 |
|
|
|
786 |
|
|
32,507 |
|
Research
and development |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
976 |
|
|
|
454 |
|
|
1,430 |
|
General
and administrative |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,258 |
|
|
|
1,500 |
|
|
8,758 |
|
Impairment loss on goodwill |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
468 |
|
|
|
Year-Ended December 31, 2021 |
|
|
|
Sustain |
|
|
Launch |
|
Liquidation/Other |
|
Fixed Costs |
|
|
Stock based compensation expense |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REVENUE |
|
$ |
216,135 |
|
|
$ |
14,862 |
|
|
$ |
16,770 |
|
|
$ |
— |
|
|
$ |
— |
|
$ |
247,767 |
|
COST OF
GOODS SOLD |
|
|
98,263 |
|
|
|
11,004 |
|
|
|
16,637 |
|
|
|
— |
|
|
|
— |
|
|
125,904 |
|
GROSS
PROFIT |
|
$ |
117,872 |
|
|
$ |
3,858 |
|
|
$ |
133 |
|
|
$ |
— |
|
|
$ |
— |
|
$ |
121,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and distribution expenses |
|
|
87,163 |
|
|
|
8,038 |
|
|
|
8,083 |
|
|
|
17,276 |
|
|
|
6,809 |
|
|
127,369 |
|
Research
and development |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,498 |
|
|
|
5,339 |
|
|
9,837 |
|
General
and administrative |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
28,260 |
|
|
|
16,839 |
|
|
45,099 |
|
Settlement of contingent earn-out liability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,164 |
|
|
|
— |
|
|
4,164 |
|
Change in earn-out liability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30,529 |
) |
|
|
— |
|
|
(30,529 |
) |
|
|
Year-Ended December 31, 2022 |
|
|
|
Sustain |
|
|
Launch |
|
|
Liquidation/Other |
|
|
Fixed Costs |
|
|
Stock based compensation expense |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REVENUE |
|
$ |
187,039 |
|
|
$ |
4,766 |
|
|
$ |
29,365 |
|
|
$ |
— |
|
|
$ |
— |
|
$ |
221,170 |
|
COST OF
GOODS SOLD |
|
|
82,909 |
|
|
|
2,332 |
|
|
|
30,411 |
|
|
|
— |
|
|
|
— |
|
|
115,652 |
|
GROSS
PROFIT |
|
$ |
104,130 |
|
|
$ |
2,434 |
|
|
$ |
(1,046 |
) |
|
$ |
— |
|
|
$ |
— |
|
$ |
105,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and distribution expenses |
|
|
83,198 |
|
|
|
2,287 |
|
|
|
17,773 |
|
|
|
12,867 |
|
|
|
5,014 |
|
|
121,139 |
|
Research
and development |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,141 |
|
|
|
1,871 |
|
|
6,012 |
|
General
and administrative |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,530 |
|
|
|
7,709 |
|
|
38,239 |
|
Impairment loss on goodwill |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
120,409 |
|
Impairment loss on intangibles |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
3,118 |
|
Change
in earn-out liability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
(5,240 |
) |
Investor Contact:
Ilya Grozovsky
Director of Investor Relations & Corp. Development
Aterian, Inc.
ilya@aterian.io
917-905-1699
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