Aterian, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. This is an annual filing, and the provided text does not give a clear standalone fourth-quarter income statement. Aterian sells consumer products through online channels, primarily Amazon, and operates 15 brands.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Net revenue | $221.2 million | $247.8 million |
| Gross profit / margin | $105.5 million / 47.7% | $121.9 million / 49.2% |
| Operating loss | $(178.2) million | $(34.1) million |
| Net loss | $(196.3) million | $(236.0) million |
| Net loss per share, basic and diluted | $(2.95) | $(6.67) |
| Adjusted EBITDA (non-GAAP) | $(33.5) million | $(7.2) million |
| Cash used in operating activities | $(17.5) million | $(42.0) million |
| Cash used in investing activities | $(0.7) million | $(44.9) million |
| Cash provided by financing activities | $27.0 million | $95.6 million |
At December 31, 2022, cash was $43.6 million, inventory $43.7 million, total assets $156.4 million, total liabilities $54.5 million, and stockholders’ equity $102.0 million. The MidCap credit facility carried $21.1 million of borrowings, with only $0.3 million of availability. Seller notes were $1.7 million. Cash plus restricted cash totaled $46.6 million; restricted cash was $3.1 million.
Changes versus 2021
- Revenue fell 10.7%, primarily from softer consumer demand and lower wholesale sales, including reduced PPE sales. Direct revenue declined 9.2%; wholesale revenue declined 41.4%.
- Reported organic revenue rose to $201.9 million from $118.4 million, while revenue attributed to M&A businesses fell to $11.5 million from $120.9 million, as acquired-business revenue moves into organic results after one year.
- Gross margin declined 1.5 percentage points. Management cited higher supply-chain costs and liquidation of higher-cost excess inventory.
- Sales and distribution costs declined in dollars but rose to 54.8% of revenue from 51.4%; variable platform, advertising, selling and logistics costs remained about $103.3 million.
- Operating loss widened substantially, including $120.4 million of goodwill impairment and $3.1 million of intangible impairment. Net loss narrowed partly because 2021 included large debt-extinguishment and warrant-related charges. Adjusted EBITDA worsened to $(33.5) million from $(7.2) million.
- Inventory declined to $43.7 million from $63.0 million. Shares outstanding at year-end rose to 80.8 million from 55.1 million, following equity issuances and other share activity.
Outlook, risks and unusual items
- Going concern: Management and the auditor state that substantial doubt exists about Aterian’s ability to continue as a going concern. Aterian reported recurring losses and negative operating cash flow, had no firm commitments for additional capital as of the financial-statement issuance date, and may be unable to meet obligations over the next 12 months without operating cash inflows or new financing. The statements assume continued operation and include no adjustments for a potential failure to do so.
- Liquidity and covenants: Aterian reported compliance with MidCap’s minimum liquidity covenant at year-end and expected compliance through at least March 31, 2024, but gave no assurance it could maintain compliance. Covenant thresholds are $12.5 million during February–May and $15.0 million at other times. A breach without waiver or forbearance could allow acceleration of debt or enforcement against collateral.
- Management plans: The company intends to monitor forecasts, seek outside capital and continue its M&A strategy. If plans fail, it may delay spending, cut product and software investment or distribution infrastructure, sell assets or product lines, curtail operations, or pursue a sale of the business. No quantified revenue or earnings guidance is provided. Management expected high-cost inventory liquidation to pressure gross margin in the first half of 2023, partly offset by improved container rates.
- Concentration and operations: Amazon accounted for 89% of 2022 revenue. Products are largely sourced from China, and the company relies on third-party manufacturers and logistics providers; certain key products have single-source supply. Competition, platform policy or fee changes, tariffs, freight costs, seasonality, weather, and consumer demand are material risks.
- Financing and dilution: The March and October 2022 equity raises generated $46.8 million in net proceeds. The October offering issued approximately 10.6 million shares with accompanying warrants and included a $18.7 million accounting loss on initial issuance of equity. The company also cited possible future financing needs and dilution.
- Legal and other contingencies: The filing describes disputes involving Photo Paper Direct earn-out calculations and alleged patent infringement concerning transfer-paper products; a Mueller product-marketing matter with a proposed settlement; and supplier litigation over an unfulfilled settlement. A securities class action was settled, and a derivative action settlement involving governance reforms and $0.3 million of plaintiffs’ fees awaited final court approval. Management said it did not believe pending matters would have a material effect, while noting outcomes are uncertain.
- Other notable items: Aterian recognized a $2.6 million investor-contract settlement expense and $1.7 million of inventory donations. Sales tax exposure of approximately $0.7 million was accrued. A 2022 UK website payment-processor security incident was described as non-material. The company reported effective disclosure controls and internal control over financial reporting under management’s assessment; the auditor did not attest to internal control effectiveness.
Most important facts for investors to verify
- Cash runway, cash availability after restrictions, current borrowing availability, and ongoing compliance with MidCap covenants.
- Whether Aterian can reduce cash burn and improve Adjusted EBITDA and contribution margin, while distinguishing non-GAAP results from GAAP losses.
- Inventory quality, liquidation progress, write-down risk, and the timing and economics of supply-chain and freight-cost changes.
- Amazon concentration and exposure to supplier, tariff, platform-fee, fulfillment, and single-source manufacturing risks.
- Potential dilution from outstanding warrants, equity awards, and future financing; compare the year-end share count with subsequent share counts.
- Developments in the Photo Paper Direct earn-out, patent, supplier, product-marketing, and other legal matters, and any resulting cash obligations.