Aterian Reports Fourth Quarter & Full Year 2021 Results
Aterian, Inc. (Nasdaq: ATER) announced its Q4 and full-year 2021 results, showcasing a 52.6% year-over-year increase in net revenue to $63.3 million for Q4 and a 33.4% increase to $247.8 million for the full year. Gross margins improved to 45.6% for Q4 and 49.2% for the full year. Despite these gains, the company faced challenges with a decline in contribution margin to 7.9% from 11.2% and a net loss of $(234.7) million for the year. No new products were launched in Q4 due to supply chain concerns.
- Q4 net revenue rose 52.6% year-over-year to $63.3 million.
- Full-year net revenue grew 33.4% to $247.8 million.
- Gross margin improved to 49.2% for the full year from 45.6% in 2020.
- Operating loss decreased to $(32.8) million from $(34.8) million in 2020.
- 40 new products launched in 2021, up from 37 in 2020.
- Contribution margin declined to 10.1% for the full year from 13.5% in 2020.
- Net loss for the full year increased to $(234.7) million from $(63.1) million in 2020.
- Adjusted EBITDA declined to $(7.2) million from $2.5 million in 2020.
- No new products launched in Q4 2021 due to supply chain issues.
Quarterly Net Revenue Grew 52.6% Year-Over-Year to
Full Year Net Revenue Grew
NEW YORK, March 08, 2022 (GLOBE NEWSWIRE) -- Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today announced results for the fourth quarter and full year ended December 31, 2021.
Fourth Quarter Highlights
- Fourth quarter 2021 net revenue grew
52.6% to$63.3 million , compared to$41.5 million in the fourth quarter of 2020. - Fourth quarter 2021 gross margin improved to
45.6% , compared to45.2% in the fourth quarter of 2020. - Fourth quarter 2021 contribution margin declined to
7.9% from11.2% in the fourth quarter of 2020, reflecting impacts from global supply chain disruptions and related inflation. - Fourth quarter 2021 operating loss improved to
$(2.0) million compared to a loss of$(19.1) million in the fourth quarter of 2020. Fourth quarter 2021 operating loss includes 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 2021 net loss of
$(5.3) million improved from$(44.3) million in 2020. Fourth quarter 2021 net loss includes 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 2021 adjusted EBITDA declined to
$(3.0) million from$0.5 million in 2020. - As planned, due to supply chain concerns, 0 new products were launched in the fourth quarter 2021 compared with 5 in the fourth quarter of 2020.
- Total cash balance at December 31, 2021 was
$30.3 million .
Full Year 2021 Highlights
- Full year 2021 net revenue grew
33.4% year over year to$247.8 million , compared to$185.7 million in the full year of 2020. - Full year gross margin improved to
49.2% compared to45.6% in 2020. - Full year 2021 contribution margin declined to
10.1% from13.5% in 2020, reflecting impacts from global supply chain disruptions and related inflation. - Full year 2021 operating loss of
$(32.8) million declined from$(34.8) million in 2020. Full year operating loss includes 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 2021 net loss of
$(234.7) million increased from$(63.1) million in 2020. Full year net loss includes 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 2021 adjusted EBITDA declined to
$(7.2) million from$2.5 million in 2020. - For the full year 2021, 40 new products were launched compared to 37 in the full year 2020.
Yaniv Sarig, Co-Founder and Chief Executive Officer, commented, “I am proud of our whole team’s efforts through a challenging 2021. Despite the continuous unpredictable macroenvironment, we believe that our improved balance sheet will allow us to weather the ongoing storm. As supply chain constraints ease in the future, we will be well positioned to drive growth organically and through our accretive M&A strategy.”
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.
Webcast and Conference Call Information
Aterian will host a live conference call to discuss financial results today, March 8, 2022, at 5:00 p.m. Eastern Time. To access the call, participants from within the U.S. should dial (877) 295-1077 and participants from outside the U.S. should dial (470) 495-9485 and provide the conference ID: 8791175. Participants may also access the call through a live webcast at https://ir.aterian.io/investor-relations. Please visit the website at least 15 minutes prior to the start of the call to register and download any necessary software. The archived online replay will be available for a limited time after the call in the Investor Relations section of the Aterian website.
About Aterian, Inc.
Aterian, Inc. (Nasdaq: ATER), is a leading technology-enabled consumer 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 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 global supply chain disruptions and any easing of constraints thereon; our expectations around organic growth and our M&A strategy; and the global macroenvironment. These forward-looking statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties and other factors, all of which are difficult to predict and many of which are beyond our control and could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those related to the global shipping disruptions, our ability to continue as a going concern, our ability to meet financial covenants with our lenders, our ability to create operating leverage and efficiency when integrating companies that we acquire, including through the use of our team’s expertise, the economies of scale of our supply chain and automation driven by our platform; those related to our ability to grow internationally and through the launch of products under our brands and the acquisition of additional brands; those related to the impact of COVID-19, including its impact on consumer demand, our cash flows, financial condition, forecasting and revenue growth rate; our supply chain including sourcing, manufacturing, warehousing and fulfillment; our ability to manage expenses, working capital and capital expenditures efficiently; our business model and our technology platform; our ability to disrupt the consumer products industry; our ability to grow market share in existing and new product categories; our ability to generate profitability and stockholder value; international tariffs and trade measures; inventory management, product liability claims, recalls or other safety and regulatory concerns; reliance on third party online marketplaces; seasonal and quarterly variations in our revenue; acquisitions of other companies and technologies and our ability to integrate such companies and technologies with our business; our ability to continue to access debt and equity capital (including on terms advantageous to the Company) and the extent of our leverage; and other factors discussed in the “Risk Factors” section of our most recent periodic reports filed with the Securities and Exchange Commission (“SEC”), all of which you may obtain for free on the SEC’s website at www.sec.gov.
Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, even if subsequently made available by us on our website or otherwise. We do not undertake any obligation to update, amend or clarify these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Investor Contact:
Ilya Grozovsky
Director of Investor Relations & Corp. Development
Aterian, Inc.
ilya@aterian.io
917-905-1699
ATERIAN, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
| December 31, 2020 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 26,718 | $ | 30,317 | ||||
| Accounts receivable—net | 5,747 | 10,478 | ||||||
| Inventory | 31,582 | 63,045 | ||||||
| Prepaid and other current assets | 11,111 | 21,034 | ||||||
| Total current assets | 75,158 | 124,874 | ||||||
| PROPERTY AND EQUIPMENT—net | 169 | 1,254 | ||||||
| GOODWILL—net | 47,318 | 118,460 | ||||||
| OTHER INTANGIBLES—net | 31,460 | 64,955 | ||||||
| OTHER NON-CURRENT ASSETS | 3,349 | 2,546 | ||||||
| TOTAL ASSETS | $ | 157,454 | $ | 312,089 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Credit facility | $ | 12,190 | $ | 32,845 | ||||
| Accounts payable | 14,856 | 21,716 | ||||||
| Term loan | 21,600 | — | ||||||
| Seller notes | 16,231 | 7,577 | ||||||
| Contingent earn-out liability | 1,515 | 3,983 | ||||||
| Accrued and other current liabilities | 8,340 | 14,840 | ||||||
| Total current liabilities | 74,732 | 80,961 | ||||||
| OTHER LIABILITIES | 1,841 | 360 | ||||||
| CONTINGENT EARN-OUT LIABILITY | 21,016 | 5,240 | ||||||
| TERM LOANS | 36,483 | — | ||||||
| Total liabilities | 134,072 | 86,561 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Common stock, par value | 3 | 5 | ||||||
| Additional paid-in capital | 216,305 | 653,650 | ||||||
| Accumulated deficit | (192,935 | ) | (427,659 | ) | ||||
| Accumulated other comprehensive income | 9 | (468 | ) | |||||
| Total stockholders’ equity | 23,382 | 225,528 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 157,454 | $ | 312,089 | ||||
See notes to consolidated financial statements.
ATERIAN, INC.
Consolidated Statements of Operations
(in thousands, except share and per share data)
| Three months ended December 31, | Year-Ended December 31, | |||||||||||||||
| 2020 | 2021 | 2020 | 2021 | |||||||||||||
| NET REVENUE | $ | 41,492 | $ | 63,322 | $ | 185,704 | $ | 247,767 | ||||||||
| COST OF GOODS SOLD | 22,740 | 34,440 | 100,958 | 125,904 | ||||||||||||
| GROSS PROFIT | 18,752 | 28,882 | 84,746 | 121,863 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Sales and distribution | 16,533 | 30,653 | 68,005 | 127,369 | ||||||||||||
| Research and development | 1,551 | 2,622 | 8,130 | 9,837 | ||||||||||||
| General and administrative | 7,078 | 11,990 | 30,631 | 43,799 | ||||||||||||
| Settlement of a contingent earnout liability | — | 4,164 | — | 4,164 | ||||||||||||
| Change in fair value of contingent earn-out liabilities | 12,731 | (18,580 | ) | 12,731 | (30,529 | ) | ||||||||||
| TOTAL OPERATING EXPENSES: | 37,893 | 30,849 | 119,497 | 154,640 | ||||||||||||
| OPERATING LOSS | (19,141 | ) | (1,967 | ) | (34,751 | ) | (32,777 | ) | ||||||||
| INTEREST EXPENSE—net | 1,841 | 774 | 4,979 | 12,655 | ||||||||||||
| CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITY | — | — | 3,254 | |||||||||||||
| LOSS ON EXTINGUISHMENT OF DEBT | 2,037 | 2,096 | 2,037 | 138,859 | ||||||||||||
| CHANGE IN FAIR VALUE OF WARRANT LIABILITY | 21,338 | — | 21,338 | 26,455 | ||||||||||||
| LOSS ON INITIAL ISSUANCE OF WARRANTS | — | — | — | 20,147 | ||||||||||||
| OTHER EXPENSE (INCOME)—net | (23 | ) | 2 | (27 | ) | 45 | ||||||||||
| LOSS BEFORE INCOME TAXES | (44,334 | ) | (4,839 | ) | (63,078 | ) | (234,192 | ) | ||||||||
| PROVISION FOR INCOME TAXES | 2 | 470 | 48 | 532 | ||||||||||||
| NET LOSS | $ | (44,336 | ) | $ | (5,309 | ) | $ | (63,126 | ) | $ | (234,724 | ) | ||||
| Net loss per share, basic and diluted | $ | (2.12 | ) | $ | (0.11 | ) | $ | (3.68 | ) | $ | (6.63 | ) | ||||
| Weighted-average number of shares outstanding, basic and diluted | 20,888,137 | 50,159,967 | 17,167,999 | 35,379,005 | ||||||||||||
See notes to consolidated financial statements.
ATERIAN, INC.
Consolidated Statements of Cash Flows
(in thousands)
| Year-Ended December 31, | ||||||||
| 2020 | 2021 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (63,126 | ) | $ | (234,724 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | 552 | 7,326 | ||||||
| Provision for sales returns | 92 | 43 | ||||||
| Amortization of deferred financing cost and debt discounts | 2,245 | 7,742 | ||||||
| Stock-based compensation | 22,716 | 28,987 | ||||||
| Loss (Gain) from increase of contingent earn-out liability fair value | 12,731 | (30,529 | ) | |||||
| Loss in connection with settlement of earnout | — | 4,164 | ||||||
| Loss in connection with the change in warrant fair value | 21,338 | 26,455 | ||||||
| Loss on initial issuance of warrants | — | 20,147 | ||||||
| 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 | ||||||
| Loss from extinguishment of Horizon term loan | 1,065 | — | ||||||
| Provision for barter credits | — | 1,000 | ||||||
| Loss from derivative liability discount related to term loan | — | 3,254 | ||||||
| Allowance for doubtful accounts and other | — | 4,200 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (4,703 | ) | (4,554 | ) | ||||
| Inventory | 18,659 | (19,303 | ) | |||||
| Prepaid and other current assets | 1,513 | (7,856 | ) | |||||
| Accounts payable, accrued and other liabilities | (6,991 | ) | 12,820 | |||||
| Cash provided (used) by operating activities | 6,091 | (41,969 | ) | |||||
| INVESTING ACTIVITIES: | ||||||||
| Purchase of fixed assets | (89 | ) | (32 | ) | ||||
| Purchase of Truweo assets | (13,965 | ) | — | |||||
| Purchase of Smash assets | (25,000 | ) | — | |||||
| 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 | (39,054 | ) | (44,905 | ) | ||||
| 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 | 23,416 | 36,735 | ||||||
| Proceeds from exercise of stock options | — | 9,033 | ||||||
| Repayments on note payable to Aussie Health Co. | (207 | ) | — | |||||
| Repayments on note payable to Smash | — | (10,495 | ) | |||||
| Payment of earnout to Squatty Potty | — | (7,971 | ) | |||||
| Proceeds from exercise of stock options | 44 | — | ||||||
| Tax paid in connection with RSAs | (150 | ) | — | |||||
| Borrowings from MidCap credit facilities | 123,633 | 48,750 | ||||||
| Repayments from MidCap credit facilities | (133,782 | ) | (28,274 | ) | ||||
| Debt issuance costs from MidCap credit facility | — | (849 | ) | |||||
| Repayments for Horizon term loan | (15,990 | ) | — | |||||
| Borrowings from High Trail term loan | 38,000 | — | ||||||
| Debt issuance costs High Trail term loan | (2,207 | ) | — | |||||
| Repayments for High Trail December 2020 Note and February 2021 Note | — | (59,500 | ) | |||||
| Repayments for High Trail April 2021 Note | — | (10,139 | ) | |||||
| Repayments for High Trail December 2021 Note | — | (27,500 | ) | |||||
| 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 | 2,660 | 2,424 | ||||||
| Insurance obligation payments | (3,066 | ) | (3,048 | ) | ||||
| Capital lease obligation payments | (32 | ) | — | |||||
| Cash provided by financing activities | 32,319 | 95,569 | ||||||
| EFFECT OF EXCHANGE RATE ON CASH | (48 | ) | (477 | ) | ||||
| NET CHANGE IN CASH AND RESTRICTED CASH FOR THE YEAR | (692 | ) | 8,198 | |||||
| CASH AND RESTRICTED CASH AT BEGINNING OF YEAR | 30,789 | 30,097 | ||||||
| CASH AND RESTRICTED CASH AT END OF YEAR | $ | 30,097 | $ | 38,315 | ||||
| RECONCILIATION OF CASH AND RESTRICTED CASH | ||||||||
| CASH | $ | 26,718 | $ | 30,317 | ||||
| RESTRICTED CASH—Prepaid and other current assets | 3,250 | 7,849 | ||||||
| RESTRICTED CASH—Other non-current assets | 129 | 149 | ||||||
| TOTAL CASH AND RESTRICTED CASH | $ | 30,097 | $ | 38,315 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | 2,787 | 5,611 | |||||
| Cash paid for taxes | $ | 46 | 41 | |||||
| Non-cash barter exchange of inventory for advertising/logistics credits | $ | 3,352 | — | |||||
| Modification of warrants between equity and liability | $ | — | 75,826 | |||||
| Non-cash consideration paid to contractors | $ | 1,672 | 7,289 | |||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Debt issuance costs not paid | $ | 142 | $ | — | ||||
| Original issue discount | $ | 5,000 | $ | 2,475 | ||||
| Discount of debt relating to warrants issuance | $ | 10,483 | $ | — | ||||
| Notes payable related to acquisitions | $ | 18,073 | $ | — | ||||
| Issuance of common stock in connection with acquisition | $ | 29,075 | $ | — | ||||
| Fair value of contingent consideration | $ | 9,800 | $ | 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 | ||||
See notes to consolidated financial statements.
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 related to acquisitions, 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”), 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 overtime.
We present EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue because we believe each of these measures provides an additional metric to evaluate our operations and, when considered with both our GAAP results and the reconciliation to net loss, provide useful supplemental information for investors. We use these measures with financial measures prepared in accordance with GAAP, such as sales and gross margins, to assess our historical and prospective operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our operating performance and to compare our performance to that of our peers and competitors. We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue are useful to investors in assessing the operating performance of our business without the effect of non-cash items.
Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue should not be considered in isolation or as alternatives to net loss, loss from operations or any other measure of financial performance calculated and prescribed in accordance with GAAP. Neither EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue should be considered a measure of discretionary cash available to us to invest in the growth of our business. Our Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue may not be comparable to similar titled measures in other organizations because other organizations may not calculate Contribution margin, Contribution margin as a percentage of net revenue, EBITDA, Adjusted EBITDA or Adjusted EBITDA as a percentage of net revenue in the same manner as we do. Our presentation of Contribution margin and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from such terms or by unusual or non-recurring items.
We recognize that EBITDA, Adjusted EBITDA and Adjusted EBITDA as a percentage of net revenue, have limitations as analytical financial measures. For example, neither EBITDA nor Adjusted EBITDA reflects:
- our capital expenditures or future requirements for capital expenditures or mergers and acquisitions;
- the interest expense or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness;
- depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, or any cash requirements for the replacement of assets;
- changes in cash requirements for our working capital needs; or
- changes in fair value of contingent earn-out liabilities, warrant liabilities, and amortization of inventory step-up from acquisitions (included in cost of goods sold).
Additionally, Adjusted EBITDA excludes non-cash expense for stock-based compensation, which is and is expected to remain a key element of our overall long-term incentive compensation package.
We also recognize that Contribution margin and Contribution margin as a percentage of net revenue have limitations as analytical financial measures. For example, Contribution margin does not reflect:
- general and administrative expense necessary to operate our business;
- research and development expenses necessary for the development, operation and support of our software platform;
- the fixed costs portion of our sales and distribution expenses including stock-based compensation expense; or
- changes in fair value of contingent earn-out liabilities, warrant liabilities, and amortization of inventory step-up from acquisitions (included in cost of goods sold).
Adjusted EBITDA
EBITDA represents net loss plus depreciation and amortization, interest expense, net and provision for income taxes. Adjusted EBITDA represents EBITDA plus stock-based compensation expense, changes in fair-market value of earn-outs, amortization of inventory step-up from acquisitions (included in cost of goods sold), change in fair-market value of warrant liability, professional fees related to acquisitions, 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.
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 December 31, | Year-Ended December 31, | |||||||||||||||
| 2020 | 2021 | 2020 | 2021 | |||||||||||||
| (in thousands, except percentages) | (in thousands, except percentages) | |||||||||||||||
| Net loss | $ | (44,336 | ) | $ | (5,309 | ) | $ | (63,126 | ) | $ | (234,724 | ) | ||||
| Add: | ||||||||||||||||
| Provision for income taxes | 2 | 470 | 48 | 532 | ||||||||||||
| Interest expense, net | 1,841 | 774 | 4,979 | 12,655 | ||||||||||||
| Depreciation and amortization | 373 | 2,569 | 552 | 7,326 | ||||||||||||
| EBITDA | (42,120 | ) | (1,496 | ) | (57,547 | ) | (214,211 | ) | ||||||||
| Other expense (income), net | (23 | ) | 2 | (27 | ) | 45 | ||||||||||
| Change in fair value of contingent earn-out liabilities | 12,731 | (18,580 | ) | 12,731 | (30,529 | ) | ||||||||||
| Settlement of a contingent earnout liability | — | 4,164 | — | 4,164 | ||||||||||||
| Amortization of inventory step-up from acquisitions (included in cost of goods sold) | 583 | 542 | 583 | 5,458 | ||||||||||||
| Change in fair market value of warrant liability | 21,338 | — | 21,338 | 26,455 | ||||||||||||
| Derivative liability discount related to term loan | — | — | — | 3,254 | ||||||||||||
| Loss on extinguishment of debt | 2,037 | 2,096 | 2,037 | 138,859 | ||||||||||||
| Loss on initial issuance of warrants | — | — | — | 20,147 | ||||||||||||
| Professional fees related to acquisitions | 663 | — | 663 | 1,450 | ||||||||||||
| Transition costs from acquisitions | — | 762 | — | 2,076 | ||||||||||||
| Professional and legal fees related to Photo Paper Direct acquisition | — | 890 | — | 1,586 | ||||||||||||
| Reserve on dispute with PPE supplier | — | — | — | 4,100 | ||||||||||||
| Reserve on barter credits | — | 1,000 | — | 1,000 | ||||||||||||
| Stock-based compensation expense | 5,244 | 7,657 | 22,716 | 28,987 | ||||||||||||
| Adjusted EBITDA | $ | 453 | $ | (2,963 | ) | $ | 2,494 | $ | (7,159 | ) | ||||||
| Net loss as a percentage of net revenue | (106.9 | )% | (8.4 | )% | (34.0 | )% | (94.7 | )% | ||||||||
| Adjusted EBITDA as a percentage of net revenue | 1.1 | % | (4.7 | )% | 1.3 | % | (2.9 | )% | ||||||||
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 December 31, | Year-Ended December 31, | |||||||||||||||
| 2020 | 2021 | 2020 | 2021 | |||||||||||||
| (in thousands, except percentages) | (in thousands, except percentages) | |||||||||||||||
| Gross Profit | $ | 18,752 | $ | 28,882 | $ | 84,746 | $ | 121,863 | ||||||||
| Add: | ||||||||||||||||
| Amortization of inventory step-up from acquisitions (included in cost of goods sold) | 583 | 542 | 583 | 5,458 | ||||||||||||
| Reserve on barter credits | — | 1,000 | — | 1,000 | ||||||||||||
| Less: | ||||||||||||||||
| E-commerce platform commissions, online advertising, selling and logistics expenses | (14,703 | ) | (25,413 | ) | (60,206 | ) | (103,283 | ) | ||||||||
| Contribution margin | $ | 4,632 | $ | 5,011 | $ | 25,123 | $ | 25,038 | ||||||||
| Gross Profit as a percentage of net revenue | 45.2 | % | 45.6 | % | 45.6 | % | 49.2 | % | ||||||||
| Contribution margin as a percentage of net revenue | 11.2 | % | 7.9 | % | 13.5 | % | 10.1 | % | ||||||||
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. 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
ii. Sustain phase: Our goal is for every product we launch to enter the sustain phase and become profitable, with a target of positive
iii. Milk phase or Liquidate phase: If a product does not enter the sustain phase or if the customer satisfaction of the product (i.e., ratings) is not satisfactory, then it will go to the liquidate phase and we will sell through the remaining inventory. In order to enter the milk phase, a product must be well received and become a strong leader in its category in both customer satisfaction and volume sold as compared to its competition. Products in the milk phase that have achieved profitability should benefit from pricing power and we expect their profitability to increase accordingly. To date, none of our products have achieved the milk phase and we can provide no assurance that any of our products will do so in the future.
The following tables break out our fourth quarter and full year 2020 and 2021 results of operations by our product phases including our PaaS business line (in thousands):
| Three Months Ended December 31, 2020 | ||||||||||||||||||||||||||||
| Sustain | Launch | PaaS | Liquidation/ Other | Fixed Costs | Stock based compensation expense | Total | ||||||||||||||||||||||
| NET REVENUE | $ | 34,749 | $ | 1,754 | $ | 292 | $ | 4,697 | $ | — | $ | — | $ | 41,492 | ||||||||||||||
| COST OF GOODS SOLD (1) | 17,034 | 1,113 | — | 4,593 | — | — | 22,740 | |||||||||||||||||||||
| GROSS PROFIT | $ | 17,715 | $ | 641 | $ | 292 | $ | 104 | $ | — | $ | — | $ | 18,752 | ||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||||||||||
| Sales and distribution expenses (2) | 12,436 | 971 | 196 | 1,096 | 1,062 | 772 | 16,533 | |||||||||||||||||||||
| Research and development | — | — | — | — | 817 | 734 | 1,551 | |||||||||||||||||||||
| General and administrative (3) | — | — | — | — | 3,340 | 3,738 | 7,078 | |||||||||||||||||||||
| Change in earn-out liability | — | — | — | — | 12,731 | — | 12,731 | |||||||||||||||||||||
(1) Sustain cost of goods sold includes
(2) Sales and distributions expenses fixed cost includes
(3) General and administrative fixed costs includes
| Three Months Ended December 31, 2021 | ||||||||||||||||||||||||||||
| Sustain | Launch | PaaS | Liquidation/ Other | Fixed Costs | Stock based compensation expense | Total | ||||||||||||||||||||||
| NET REVENUE | $ | 52,669 | $ | 2,570 | $ | 66 | $ | 8,017 | $ | — | $ | — | $ | 63,322 | ||||||||||||||
| COST OF GOODS SOLD (1) | 24,090 | 2,813 | — | 7,537 | — | — | 34,440 | |||||||||||||||||||||
| GROSS PROFIT | $ | 28,579 | $ | (243 | ) | $ | 66 | $ | 480 | $ | — | $ | — | $ | 28,882 | |||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||||||||||
| Sales and distribution expenses (2) | 20,117 | 1,623 | — | 3,687 | 3,385 | 1,841 | 30,653 | |||||||||||||||||||||
| Research and development | — | — | — | — | 1,163 | 1,459 | 2,622 | |||||||||||||||||||||
| General and administrative (3) | — | — | — | — | 7,633 | 4,357 | 11,990 | |||||||||||||||||||||
| Settlement of a contingent earn-out liability | — | — | — | — | 4,164 | — | 4,164 | |||||||||||||||||||||
| Change in earn-out liability | — | — | — | — | (18,580 | ) | — | (18,580 | ) | |||||||||||||||||||
(1) Sustain cost of goods sold includes
(2) Sales and distributions expenses fixed cost includes
(3) General and administrative fixed costs includes
| Year Ended December 31, 2020 | ||||||||||||||||||||||||||||
| Sustain | Launch | PaaS | Liquidation/ Other | Fixed Costs | Stock based compensation expense | Total | ||||||||||||||||||||||
| NET REVENUE | $ | 137,299 | $ | 18,592 | $ | 1,338 | $ | 28,475 | $ | — | $ | — | $ | 185,704 | ||||||||||||||
| COST OF GOODS SOLD (1) | 69,692 | 10,505 | — | 20,761 | — | — | 100,958 | |||||||||||||||||||||
| GROSS PROFIT | $ | 67,607 | $ | 8,087 | $ | 1,338 | $ | 7,714 | $ | — | $ | — | $ | 84,746 | ||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||||||||||
| Sales and distribution expenses (2) | 42,614 | 8,473 | 461 | 8,658 | 5,266 | 2,533 | 68,005 | |||||||||||||||||||||
| Research and development | — | — | — | — | 4,165 | 3,965 | 8,130 | |||||||||||||||||||||
| General and administrative (3) | — | — | — | — | 14,413 | 16,218 | 30,631 | |||||||||||||||||||||
| Change in earn-out liability | — | — | — | — | 12,731 | — | 12,731 | |||||||||||||||||||||
(1) Sustain cost of goods sold includes
(2) Sales and distributions expenses fixed cost includes
(3) General and administrative fixed costs includes
| Year Ended December 31, 2021 | ||||||||||||||||||||||||||||
| Sustain | Launch | PaaS | Liquidation/ Other | Fixed Costs | Stock based compensation expense | Total | ||||||||||||||||||||||
| NET REVENUE | $ | 216,135 | $ | 14,862 | $ | 406 | $ | 16,364 | $ | — | $ | — | $ | 247,767 | ||||||||||||||
| COST OF GOODS SOLD (1) | 98,263 | 11,004 | — | 16,637 | — | — | 125,904 | |||||||||||||||||||||
| GROSS PROFIT | $ | 117,872 | $ | 3,858 | $ | 406 | $ | (273 | ) | $ | — | $ | — | $ | 121,863 | |||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||||||||||||||
| Sales and distribution expenses (2) | 87,163 | 8,038 | 37 | 8,046 | 17,276 | 6,809 | 127,369 | |||||||||||||||||||||
| Research and development | — | — | — | — | 4,498 | 5,339 | 9,837 | |||||||||||||||||||||
| General and administrative (3) | — | — | — | — | 26,960 | 16,839 | 43,799 | |||||||||||||||||||||
| Settlement of a contingent earn-out liability | — | — | — | — | 4,164 | — | 4,164 | |||||||||||||||||||||
| Change in earn-out liability | — | — | — | — | (30,529 | ) | — | (30,529 | ) | |||||||||||||||||||
(1) Sustain cost of goods sold includes
(2) Sales and distributions expenses fixed costs include
(3) General and administrative fixed costs include
FAQ
What was Aterian's Q4 2021 net revenue growth rate?
What were the full-year results for Aterian in 2021?
How did Aterian's gross margin change in 2021?
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How did the contribution margin of Aterian change in Q4 2021?
