Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today
announced results for the first quarter ended March 31, 2023.
First Quarter Highlights
- First quarter 2023 net revenue
declined 16.3% to $34.9 million, compared to $41.7 million in the
first quarter of 2022.
- First quarter 2023 gross margin
declined to 54.8%, compared to 56.6% in the first quarter of 2022,
primarily reflecting the impact of our strategy of liquidating
high-cost inventory.
- First quarter 2023 contribution
margin declined to 5.9% from 9.2% in the first quarter of 2022,
primarily reflecting the impact of our strategy of liquidating
high-cost inventory.
- First quarter 2023 operating loss
improved to $(25.0) million compared to a loss of $(36.3) million
in the first quarter of 2022. First quarter 2023 operating loss
includes ($2.3) million of non-cash stock compensation and a
non-cash loss on impairment of intangibles of ($16.7) million,
while first quarter 2022 operating loss included 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.
- First quarter 2023 net loss of
$(25.8) million decreased from $(42.8) million loss in the first
quarter of 2022. First quarter 2023 net loss includes ($2.3)
million of non-cash stock compensation, a non-cash loss on
impairment of intangibles of ($16.7) million, and a gain on fair
value of warrant liability of $0.4 million, while first quarter
2022 net loss included 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, 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.
- First quarter 2023 adjusted EBITDA
loss improved to $(4.3) million from $(4.5) million in the first
quarter of 2022.
- Total cash balance at March 31,
2023 was $33.9 million.
“Despite weakness in consumer demand, we are
continuing to execute on our goal of becoming adjusted EBITDA
profitable in the second half of this year,” commented Yaniv Sarig,
Co-Founder and Chief Executive Officer of Aterian. “To that end
today we announced a headcount reduction that will save an
annualized $6 million toward our target of adjusted EBITDA
profitability. It is a difficult decision but one that will put
Aterian on a better footing with a solid balance sheet. This cost
savings coupled with our portfolio’s market share position will
allow us to build forward with emphasis and focus on both growth
and profitability.”
Headcount Reduction
The Company plans to reduce expenses by
implementing a reduction in its current workforce leading to
approximately $6.0 million of annualized savings. This headcount
reduction will impact approximately 70 employees and 30
contractors, primarily in the Philippines. The reduction in
headcount is part of the Company’s strategy to increase efficiency
and to drive focus as part of its second half 2023 adjusted EBITDA
profitability goal. The Company expects to substantially complete
the reduction in headcount by the end of the second quarter of
2023. The Company expects to recognize restructuring charges in
connection with the headcount reduction plan, primarily from
severance, of between $1.0 million to $1.3 million. The Company
expects the charges will be recognized primarily in the second
quarter of 2023, with the majority of such charges anticipated to
be paid by the end of the third quarter of 2023.
As part of this headcount reduction, our Chief
Supply Chain Officer, Michal Chaouat-Fix, will be transitioning
away from the Company. Arturo Rodriguez, our Chief Financial
Officer, will also assume the additional responsibilities of supply
chain and operations as our Interim Chief Operating Officer. In
addition, Tim Stanton, our Chief E-Commerce Officer, will
transition away from the Company, Phil Lepper, our Senior Vice
President of Revenue will assume Tim’s responsibilities.
Second Quarter 2023 & Second Half of
2023 Outlook
For the second quarter of 2023, taking into
account the current global environment and inflation, we believe
that net revenue will be between $37 million and $44 million. For
the second quarter of 2023, the Company expects an Adjusted EBITDA
loss of between $(5.2) million to $(6.2) million including the
restructuring charges from our headcount reductions.
As a result of the headcount reduction, the
Company 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.
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.
Webcast and Conference Call
Information
Aterian will host a live conference call to
discuss financial results today, May 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 numerous 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 our
goal to achieve adjusted EBITDA profitability in the second half of
2023, our portfolio’s market share position and the Company’s
strategy of increasing efficiency and driving focus. 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 maintain and to grow
market share in existing and new product categories; our ability to
continue to profitably sell the SKUs we operate; 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.io
ATERIAN, INC.Consolidated Balance
Sheets(in thousands, except share and per share
data) |
|
|
December 31,2022 |
|
March 31,2023 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash |
|
$ 43,574 |
|
$ 33,911 |
Accounts receivable, net |
|
4,515 |
|
3,486 |
Inventory |
|
43,666 |
|
40,378 |
Prepaid and other current
assets |
|
8,261 |
|
6,870 |
Total current assets |
|
100,016 |
|
84,645 |
Property and equipment,
net |
|
853 |
|
830 |
Other intangibles, net |
|
54,757 |
|
36,392 |
Other non-current assets |
|
813 |
|
753 |
Total assets |
|
$ 156,439 |
|
$ 122,620 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
Current Liabilities: |
|
|
|
|
Credit facility |
|
$ 21,053 |
|
$ 19,103 |
Accounts payable |
|
16,035 |
|
8,955 |
Seller notes |
|
1,693 |
|
1,303 |
Accrued and other current
liabilities |
|
14,254 |
|
13,045 |
Total current liabilities |
|
53,035 |
|
42,406 |
Other liabilities |
|
1,452 |
|
1,447 |
Total liabilities |
|
54,487 |
|
43,853 |
Commitments and contingencies
(Note 9) |
|
|
|
|
Stockholders' equity: |
|
|
|
|
Common stock, $0.0001 par
value, 500,000,000 shares authorized and 80,752,290 and 81,134,161
shares outstanding at December 31, 2022 and March 31, 2023,
respectively |
|
8 |
|
8 |
Additional paid-in
capital |
|
728,339 |
|
730,825 |
Accumulated deficit |
|
(625,251) |
|
(651,051) |
Accumulated other
comprehensive loss |
|
(1,144) |
|
(1,015) |
Total stockholders’
equity |
|
101,952 |
|
78,767 |
Total liabilities and
stockholders' equity |
|
$ 156,439 |
|
$ 122,620 |
ATERIAN, INC.Consolidated Statements of
Operations(in thousands, except share and per share
data) |
|
|
Three Months Ended March 31, |
|
|
2022 |
|
2023 |
Net revenue |
|
$ 41,673 |
|
$ 34,879 |
Cost of good sold |
|
18,066 |
|
15,782 |
Gross profit |
|
23,607 |
|
19,097 |
Operating expenses: |
|
|
|
|
Sales and distribution |
|
22,974 |
|
20,226 |
Research and development |
|
1,144 |
|
1,247 |
General and
administrative |
|
9,541 |
|
5,959 |
Impairment loss on
goodwill |
|
29,020 |
|
— |
Impairment loss on
intangibles |
|
— |
|
16,660 |
Change in fair value of
contingent earn-out liabilities |
|
(2,775) |
|
— |
Total operating expenses |
|
59,904 |
|
44,092 |
Operating loss |
|
(36,297) |
|
(24,995) |
Interest expense, net |
|
802 |
|
371 |
Gain on extinguishment of
seller note |
|
(2,012) |
|
— |
Loss on initial issuance of
equity |
|
5,835 |
|
— |
Change in fair value of
warrant liability |
|
1,879 |
|
354 |
Other (income) expense,
net |
|
(25) |
|
54 |
Loss before income taxes |
|
(42,776) |
|
(25,774) |
Provision for income
taxes |
|
— |
|
26 |
Net loss |
|
$ (42,776) |
|
$ (25,800) |
Net loss per share, basic and
diluted |
|
$ (0.78) |
|
$ (0.34) |
Weighted-average number of
shares outstanding, basic and diluted |
|
55,141,448 |
|
76,732,539 |
ATERIAN, INC.Consolidated Statements of Cash
Flows(in thousands) |
|
|
Three Months Ended March 31, |
|
|
2022 |
|
2023 |
OPERATING ACTIVITIES: |
|
|
|
|
Net loss |
|
($42,776) |
|
($25,800) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
Depreciation and
amortization |
|
1,846 |
|
1,762 |
Provision for (recovery of)
sales returns |
|
109 |
|
(223) |
Amortization of deferred
financing cost and debt discounts |
|
106 |
|
106 |
Stock-based compensation |
|
2,865 |
|
2,317 |
Gain from decrease of
contingent earn-out liability fair value |
|
(2,775) |
|
— |
Change in inventory
provisions |
|
— |
|
(1,023) |
Loss in connection with the
change in warrant fair value |
|
1,879 |
|
354 |
Gain in connection with
settlement of note payable |
|
(2,012) |
|
— |
Loss on initial issuance of
equity |
|
5,835 |
|
— |
Impairment loss on
goodwill |
|
29,020 |
|
— |
Impairment loss on
intangibles |
|
— |
|
16,660 |
Changes in assets and
liabilities: |
|
|
|
|
Accounts receivable |
|
4,608 |
|
1,028 |
Inventory |
|
(12,380) |
|
4,312 |
Prepaid and other current
assets |
|
410 |
|
751 |
Accounts payable, accrued and
other liabilities |
|
95 |
|
(7,661) |
Cash used in operating
activities |
|
(13,170) |
|
(7,417) |
INVESTING ACTIVITIES: |
|
|
|
|
Purchase of fixed assets |
|
(16) |
|
(33) |
Purchase of Step and Go
assets |
|
— |
|
(125) |
Cash used in investing
activities |
|
(16) |
|
(158) |
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from equity offering,
net of issuance costs |
|
27,007 |
|
— |
Repayments on note payable to
Smash |
|
(1,084) |
|
(398) |
Borrowings from MidCap credit
facilities |
|
30,357 |
|
20,549 |
Repayments for MidCap credit
facilities |
|
(33,845) |
|
(22,602) |
Insurance obligation
payments |
|
(719) |
|
(534) |
Cash provided (used) by
financing activities |
|
21,716 |
|
(2,985) |
Foreign currency effect on
cash, cash equivalents, and restricted cash |
|
(171) |
|
129 |
Net change in cash and
restricted cash for the year |
|
8,359 |
|
(10,431) |
Cash and restricted cash at
beginning of year |
|
38,315 |
|
46,629 |
Cash and restricted cash at
end of year |
|
$ 46,674 |
|
$ 36,198 |
RECONCILIATION OF CASH AND
RESTRICTED CASH: |
|
|
|
|
Cash |
|
44,281 |
|
33,911 |
Restricted Cash—Prepaid and
other current assets |
|
2,264 |
|
2,158 |
Restricted cash—Other
non-current assets |
|
129 |
|
129 |
TOTAL CASH AND RESTRICTED
CASH |
|
$ 46,674 |
|
$ 36,198 |
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION |
|
|
|
|
Cash paid for interest |
|
$ 357 |
|
$ 538 |
NON-CASH INVESTING AND
FINANCING ACTIVITIES: |
|
|
|
|
Non-cash consideration paid to
contractors |
|
$ — |
|
$ 321 |
Fair value of warrants issued
in connection with equity offering |
|
$ 18,982 |
|
$ — |
Issuance of common stock for
settlement of seller note |
|
$ 767 |
|
$ — |
Equity fundraising cost not
paid |
|
$ 166 |
|
$ — |
|
|
|
|
|
Non-GAAP Financial Measures
We believe that our financial statements and the
other financial data included in this Quarterly 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 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, profit and loss impacts from the issuance of common
stock and/or warrants, changes in fair-market value of warrant
liability, litigation settlements, impairment on goodwill and
intangibles, gain 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 Non-GAAP Financial Measure 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 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.
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 Margin
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, |
|
|
2022 |
|
2023 |
|
|
|
|
|
|
|
(in thousands, except percentages) |
Gross Profit |
|
$ 23,607 |
|
$ 19,097 |
Less: |
|
|
|
|
E-commerce platform
commissions, online advertising, selling and logistics
expenses |
|
(19,777) |
|
(17,029) |
Contribution margin |
|
$ 3,830 |
|
$ 2,068 |
Gross Profit as a percentage
of net revenue |
|
56.6% |
|
54.8% |
Contribution margin as a
percentage of net revenue |
|
9.2% |
|
5.9% |
|
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 Ended March 31, |
|
|
2022 |
|
2023 |
Net loss |
|
$ (42,776) |
|
$ (25,800) |
Add: |
|
|
|
|
Provision for income
taxes |
|
— |
|
26 |
Interest expense, net |
|
802 |
|
371 |
Depreciation and
amortization |
|
1,846 |
|
1,762 |
EBITDA |
|
(40,128) |
|
(23,641) |
Other (income) expense,
net |
|
(25) |
|
54 |
Change in fair value of
contingent earn-out liabilities |
|
(2,775) |
|
— |
Impairment loss on
goodwill |
|
29,020 |
|
— |
Impairment loss on
intangibles |
|
— |
|
16,660 |
Gain on extinguishment of
seller note |
|
(2,012) |
|
— |
Change in fair market value of
warrant liability |
|
1,879 |
|
354 |
Loss on original issuance of
equity |
|
5,835 |
|
— |
Litigation reserve |
|
800 |
|
— |
Stock-based compensation
expense |
|
2,865 |
|
2,317 |
Adjusted EBITDA |
|
$ (4,541) |
|
$ (4,256) |
Net loss as a percentage of
net revenue |
|
(102.6)% |
|
(74.0)% |
Adjusted EBITDA as a
percentage of net revenue |
|
(10.9)% |
|
(12.2)% |
|
|
|
|
|
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 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 first quarter
of 2022 and 2023 results of operations by our product phases (in
thousands):
|
|
Three months ended March 31, 2022 |
|
|
Sustain |
|
Launch |
|
Liquidation/Other |
|
Fixed Costs |
|
Stock Based Compensation |
|
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
expenses |
|
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 earn-out
liability |
|
— |
|
— |
|
— |
|
(2,775) |
|
— |
|
(2,775) |
|
|
Three months ended March 31, 2023 |
|
|
Sustain |
|
Launch |
|
Liquidation/Other |
|
Fixed Costs |
|
Stock Based Compensation |
|
Total |
Net revenue |
|
$ 28,631 |
|
$ 158 |
|
$ 6,090 |
|
$ — |
|
$ — |
|
$ 34,879 |
Cost of goods sold |
|
11,678 |
|
92 |
|
4,012 |
|
— |
|
— |
|
15,782 |
Gross profit |
|
16,953 |
|
66 |
|
2,078 |
|
— |
|
— |
|
19,097 |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales and distribution
expenses |
|
13,353 |
|
119 |
|
3,557 |
|
2,526 |
|
671 |
|
20,226 |
Research and development |
|
— |
|
— |
|
— |
|
813 |
|
434 |
|
1,247 |
General and
administrative |
|
— |
|
— |
|
— |
|
4,747 |
|
1,212 |
|
5,959 |
Impairment loss on
intangibles |
|
— |
|
— |
|
— |
|
16,660 |
|
— |
|
16,660 |
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