false000175771500017577152022-11-082022-11-08

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 8, 2022

 

Aterian, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware		001-38937		83-1739858
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

Aterian, Inc.
37 East 18th Street, 7th Floor

New York, NY 10003

(Address of Principal Executive Offices)(Zip Code)

(347) 676-1681
(Registrant’s telephone number, including area code)

N/A

(Former Name, or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities Registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.0001 par value		ATER		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02. Results of Operations and Financial Condition.

On November 8, 2022, Aterian, Inc. (the “Company”) issued a press release announcing its financial results for the three months ended September 30, 2022. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Item 2.02, including the press release attached hereto as Exhibit 99.1, is intended to be furnished under Item 2.02 and Item 9.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

Number	Description
99.1	Press Release issued by Aterian, Inc., dated November 8, 2022
104	Cover Page Interactive Data File (embedded within the Inline XBRL)

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	ATERIAN, INC.
Date: November 8, 2022	By:	/s/ Yaniv Sarig
		Name: Yaniv Sarig
		Title: President and Chief Executive Officer

 

 

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Exhibit 99.1

 

 

Aterian Reports Third Quarter 2022 Results

 

Reports Third Quarter 2022 Net Revenue of $66.3 Million

 

Targeting Adjusted EBITDA Profitability in the Second Half of 2023 Driven Primarily by Improving International Shipping Rates and Cost Reductions

 

 

NEW YORK, November 8, 2022 – Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today announced results for the third quarter ended September 30, 2022.

 

Third Quarter 2022 Highlights

 

 

 

 

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“Shipping costs have cast a cloud over ecommerce for an extended period, but last week we loaded containers from China at approximately a 90 percent discount to the costs we incurred in the second half of 2021,” commented Yaniv Sarig, CEO of Aterian. "With these costs continuing to normalize, we can begin transitioning from defense to offense. We plan to close the year by continuing what we did in this past quarter: aggressively liquidating higher cost inventory, extending market share of our leading products, and charting a path to sustainable contribution margins and positive Adjusted EBITDA. The austere operating conditions arising out of the pandemic have increased the universe of potential M&A targets, and we continue to evaluate attractively valued opportunities.”

 

Fourth Quarter 2022 Outlook

For the fourth quarter of 2022, taking into account the current global environment and rising inflation, we believe that net revenue will be between $45 million and $55 million.

 

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 and Reconciliations” section below. 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.

 

Webcast and Conference Call Information

Aterian will host a conference call to discuss financial results today, November 8, 2022, 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 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 its many 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 about our expected net revenue for the fourth quarter of 2022; regarding our target of achieving adjusted EBITDA profitability in the second half of 2023; our ability to extend market share and reduce costs; expected changes in the cost of shipping containers and shipping rates; our expectations regarding the transition of our business strategy from offense to defense; our expectations regarding contribution margin and adjusted EBITDA; our ability to manage our inventory, including through liquidation of inventory; and our expectations around our M&A opportunities. 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

 

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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 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, the war in the Ukraine, the rising tensions between China and Taiwan and other macroeconomic factors, including their 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.

 

 

 

 

Investor Contact:

 

Ilya Grozovsky

Vice President of Investor Relations & Corp. Development

Aterian, Inc.

ilya@aterian.io

917-905-1699

 

 

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ATERIAN, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)

 

 

		December 31, 2021				September 30, 2022
ASSETS
CURRENT ASSETS:
Cash		$	30,317			$	25,997
Accounts receivable—net			10,478				4,933
Inventory			63,045				60,457
Prepaid and other current assets			21,034				10,459
Total current assets			124,874				101,846
PROPERTY AND EQUIPMENT—net			1,254				856
GOODWILL—net			119,941				—
OTHER INTANGIBLES—net			64,955				56,265
OTHER NON-CURRENT ASSETS			2,546				2,564
TOTAL ASSETS		$	313,570			$	161,531
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Credit facility		$	32,845			$	23,919
Accounts payable			21,716				13,491
Seller notes			7,577				2,326
Contingent earn-out liability			3,983				—
Warrant liability			—				6,308
Accrued and other current liabilities			17,621				14,533
Total current liabilities			83,742				60,577
OTHER LIABILITIES			360				1,673
CONTINGENT EARN-OUT LIABILITY			5,240				—
Total liabilities			89,342				62,250
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 69,540,749 shares outstanding at September 30, 2022			5				7
Additional paid-in capital			653,650				705,775
Accumulated deficit			(428,959	)			(604,946	)
Accumulated other comprehensive loss			(468	)			(1,555	)
Total stockholders’ equity			224,228				99,281
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	313,570			$	161,531

 

See notes to condensed consolidated financial statements.

 

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ATERIAN, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)

 

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2022				2021				2022
NET REVENUE		$	68,121			$	66,326			$	184,446			$	166,268
COST OF GOODS SOLD			33,946				36,135				91,464				81,118
GROSS PROFIT			34,175				30,191				92,982				85,150
OPERATING EXPENSES:
Sales and distribution			32,337				33,792				96,716				88,632
Research and development			2,767				1,706				7,220				4,582
General and administrative			10,843				10,369				31,807				29,481
Impairment loss on goodwill			—				90,921				—				119,941
Impairment loss on intangibles			—				3,118				—				3,118
Change in fair value of contingent earn-out liabilities			(4,245	)			(774	)			(11,949	)			(5,240	)
TOTAL OPERATING EXPENSES:			41,702				139,132				123,794				240,514
OPERATING LOSS			(7,527	)			(108,941	)			(30,812	)			(155,364	)
INTEREST EXPENSE—net			2,786				904				11,877				2,043
GAIN ON EXTINGUISHMENT OF SELLER NOTE			—				—				—				(2,012	)
LOSS ON INITIAL ISSUANCE OF EQUITY			—				12,834				—				18,669
CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITY			1,360				—				3,254				—
LOSS ON EXTINGUISHMENT OF DEBT			106,991				—				136,763				—
CHANGE IN FAIR VALUE OF WARRANT LIABILITY			(8,134	)			(5,528	)			26,455				2,365
LOSS ON INITIAL ISSUANCE OF WARRANT			—				—				20,147				—
OTHER EXPENSE (INCOME)			5				(174	)			43				(199	)
LOSS BEFORE INCOME TAXES			(110,535	)			(116,977	)			(229,351	)			(176,230	)
PROVISION FOR (BENEFIT FROM) INCOME TAXES			21				(75	)			64				(243	)
NET LOSS		$	(110,556	)		$	(116,902	)		$	(229,415	)		$	(175,987	)
Net loss per share, basic and diluted		$	(3.13	)		$	(1.81	)		$	(7.55	)		$	(2.78	)
Weighted-average number of shares outstanding, basic and diluted			35,359,999				64,648,650				30,383,375				63,397,196

 

See notes to condensed consolidated financial statements.

 

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ATERIAN, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

		Nine Months Ended September 30,
		2021				2022
OPERATING ACTIVITIES:
Net loss		$	(229,415	)		$	(175,987	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			4,757				5,763
Provision for sales returns			398				134
Amortization of deferred financing costs and debt discounts			7,730				321
Issuance of common stock			—				43
Stock-based compensation			21,330				11,854
Gain from increase of contingent earn-out liability fair value			(11,949	)			(5,240	)
Loss in connection with the change in warrant fair value			26,455				2,365
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 embedded derivative related to term loan			3,254				—
Loss from extinguishment of Credit Facility			1,532				—
Loss on initial issuance of warrant			20,147				—
Gain in connection with settlement of note payable			—				(2,012	)
Loss on initial issuance of equity			—				18,669
Impairment loss on goodwill			—				119,941
Impairment loss on intangibles							3,118
Allowance for doubtful accounts and other			4,597				219
Changes in assets and liabilities:
Accounts receivable			(3,765	)			5,326
Inventory			(27,531	)			2,588
Prepaid and other current assets			(7,219	)			3,351
Accounts payable, accrued and other liabilities			13,999				(9,994	)
Cash used in operating activities			(40,449	)			(19,541	)
INVESTING ACTIVITIES:
Purchase of fixed assets			(14	)			(29	)
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	)			—
Cash used in investing activities			(44,887	)			(29	)
FINANCING ACTIVITIES:
Proceeds from warrant exercise			9,051				—
Proceeds from cancellation of warrant			16,957				—
Proceeds from equity offering, net of issuance costs			36,735				—
Proceeds from equity offering			8,749				27,007
Repayments on note payable to Smash			(9,254	)			(2,868	)
Borrowings from MidCap credit facility			14,630				107,678
Repayments for MidCap credit facility			(28,274	)			(116,924	)
Deferred financing costs from MidCap credit facility			(151	)			—
Repayments for High Trail December 2020 Note and February 2021 Note			(59,500	)			—
Borrowings from High Trail February 2021 Note and warrants			14,025				—
Repayments for High Trail April 2021 Note			(10,139	)			—
Borrowings from High Trail April 2021 Note and warrants			110,000
Debt issuance costs from High Trail February 2021 Note			(1,462	)			—
Debt issuance costs from High Trail April 2021 Note			(2,202	)			—
Payment for squatty earn-out			(3,988	)			(3,983	)
Insurance obligation payments			(2,329	)			(1,778	)
Insurance financing proceeds			2,424				2,099
Cash provided by financing activities			95,272				11,231
EFFECT OF EXCHANGE RATE ON CASH			(434	)			(936	)
NET CHANGE IN CASH AND RESTRICTED CASH FOR PERIOD			9,502				(9,275	)
CASH AND RESTRICTED CASH AT BEGINNING OF PERIOD			30,097				38,315
CASH AND RESTRICTED CASH AT END OF PERIOD		$	39,599			$	29,040
RECONCILIATION OF CASH AND RESTRICTED CASH
CASH		$	37,470			$	25,997
RESTRICTED CASH—Prepaid and other assets			2,000				2,914
RESTRICTED CASH—Other non-current assets			129				129
TOTAL CASH AND RESTRICTED CASH		$	39,599			$	29,040

 

 

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ATERIAN, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest		$	4,989			$	1,409
Cash paid for taxes		$	41			$	58
Non-cash consideration paid to contractors		$	4,032			$	1,137
Modification of warrants between equity and liability		$	75,826			$	—
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		$	50,695			$	—
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 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

 

See notes to condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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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

 

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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 similarly 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:

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:

 

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:

 

 

 

 

 

 

 

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		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2022				2021				2022
		(in thousands, except percentages)
Net loss		$	(110,556	)		$	(116,902	)		$	(229,415	)		$	(175,987	)
Add:
Provision for (benefit from) income taxes			21				(75	)			64				(243	)
Interest expense, net			2,786				904				11,877				2,043
Depreciation and amortization			1,872				1,869				4,757				5,763
EBITDA			(105,877	)			(114,204	)			(212,717	)			(168,424	)
Other expense (income), net			5				(174	)			43				(199	)
Impairment loss on goodwill			—				90,921				—				119,941
Impairment loss on intangibles			—				3,118				—				3,118
Change in fair value of contingent earn-out liabilities			(4,245	)			(774	)			(11,949	)			(5,240	)
Amortization of inventory step-up from acquisitions (included in cost of goods sold)			875				—				4,916				—
Gain on extinguishment of seller note			—				—				—				(2,012	)
Loss on initial issuance of equity			—				12,834				—				18,669
Change in fair value of derivative liability			1,360				—				3,254				—
Loss on extinguishment of debt			106,991				—				136,763				—
Change in fair market value of warrant liability			(8,134	)			(5,528	)			26,455				2,365
Loss on initial issuance of warrant			—				—				20,147				—
Professional fees related to acquisitions			53				—				1,450				—
Litigation reserve			—				1,800				—				2,600
Transition cost from acquisitions			130				—				1,314				—
Transition cost from Photo Paper Direct acquisition			—				—				696				—
Reserve on dispute with PPE supplier			—				—				4,100				—
Stock-based compensation expense			9,570				2,943				21,330				11,854
Adjusted EBITDA		$	728			$	(9,064	)		$	(4,198	)		$	(17,328	)
Net loss as a percentage of net revenue			(162.3	)%			(176.3	)%			(124.4	)%			(105.8	)%
Adjusted EBITDA as a percentage of net revenue			1.1	%			(13.7	)%			(2.3	)%			(10.4	)%

Contribution Margin

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). 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 September 30,								Nine Months Ended September 30,
		2021				2022				2021				2022
		(in thousands, except percentages)
Gross Profit		$	34,175			$	30,191			$	92,982			$	85,150
Add:
Amortization of inventory step-up from acquisitions (included in cost of goods sold)			875				—				4,916				—
Less:
E-commerce platform commissions, online advertising, selling and logistics expenses			(26,818	)			(29,448	)			(77,870	)			(74,927	)
Contribution margin		$	8,232			$	743			$	20,028			$	10,223
Gross Profit as a percentage of net revenue			50.2	%			45.5	%			50.4	%			51.2	%
Contribution margin as a percentage of net revenue			12.1	%			1.1	%			10.9	%			6.1	%

 

 

 

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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:

The following tables break out our third quarter 2021 and 2022 results of operations by our product phases:

 

 

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		Three months ended September 30, 2021 (in thousands) (unaudited)
		Sustain				Launch				Liquidate/ Other				Fixed Costs				Stock-based compensation expense				Total
NET REVENUE		$	59,754			$	5,336			$	3,031			$	—			$	—			$	68,121
COST OF GOODS SOLD			28,313				3,275				2,358				—				—				33,946
GROSS PROFIT			31,441				2,061				673				—				—				34,175
OPERATING EXPENSES:
Sales and distribution			22,818				2,887				1,113				3,075				2,444				32,337
Research and development			—				—				—				991				1,776				2,767
General and administrative			—				—				—				5,493				5,350				10,843
Change in fair value of contingent earn-out liabilities			—				—				—				(4,245)				—				(4,245)
		Three months ended September 30, 2022 (in thousands) (unaudited)
		Sustain				Launch				Liquidate/ Other				Fixed Costs				Stock-based compensation expense				Total
NET REVENUE		$	54,164			$	1,625			$	10,537			$	—			$	—			$	66,326
COST OF GOODS SOLD			25,350				943				9,841				—				—				36,135
GROSS PROFIT			28,813				682				696				—				—				30,191
OPERATING EXPENSES:
Sales and distribution			23,181				803				5,463				3,345				999				33,792
Research and development			—				—				—				1,195				511				1,706
General and administrative			—				—				—				8,937				1,433				10,370
Impairment loss on goodwill			—				—				—				90,921				—				90,921
Impairment loss on intangibles			—				—				—				3,118				—				3,118
Change in fair value of contingent earn-out liabilities			—				—				—				(774)				—				(774)
		Nine months ended September 30, 2021 (in thousands) (unaudited)
		Sustain				Launch				Liquidate/ Other				Fixed Costs				Stock-based compensation expense				Total
NET REVENUE		$	163,466			$	12,292			$	8,688			$	—			$	—			$	184,446
COST OF GOODS SOLD			74,173				8,191				9,100				—				—				91,464
GROSS PROFIT			89,293				4,101				(412)				—				—				92,982
OPERATING EXPENSES:
Sales and distribution			67,046				6,415				43,963				13,891				4,968				96,716
Research and development			—				—				—				3,340				3,880				7,220
General and administrative			—				—				—				19,325				12,482				31,807
Change in fair value of contingent earn-out liabilities			—				—				—				(11,949	)			—				(11,949	)
		Nine months ended September 30, 2022 (in thousands) (unaudited)
		Sustain				Launch				Liquidate/ Other				Fixed Costs				Stock-based compensation expense				Total
NET REVENUE		$	146,207			$	3,804			$	16,257			$	—			$	—			$	166,268
COST OF GOODS SOLD			65,358				2,096				13,663				—				—				81,118
GROSS PROFIT			80,849				1,707				2,593				—				—				85,150
OPERATING EXPENSES:
Sales and distribution			63,295				1,971				9,661				9,477				4,228				88,632
Research and development			—				—				—				3,164				1,418				4,582
General and administrative			—				—				—				23,272				6,210				29,482
Impairment loss on goodwill			—				—				—				119,941				—				119,941
Impairment loss on intangibles			—				—				—				3,118				—				3,118
Change in fair value of contingent earn-out liabilities			—				—				—				(5,240)				—				(5,240)

 

 

 

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