Artificial Intelligence
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, Nov. 08, 2022 (GLOBE NEWSWIRE) — Aterian, Inc. (Nasdaq: ATER) (“Aterian” or the “Company”) today announced results for the third quarter ended September 30, 2022.
Third Quarter 2022 Highlights
- Third quarter 2022 net revenue declined 2.6% to $66.3 million, compared to $68.1 million in the third quarter of 2021.
- Third quarter 2022 gross margin declined to 45.5%, compared to 50.2% in the third quarter of 2021, primarily due to the liquidation of high priced excess inventory.
- Third quarter 2022 contribution margin declined to 1.1% from 12.1% in the third quarter of 2021, primarily due to the liquidation of high priced excess inventory.
- Third quarter 2022 operating loss of $(108.9) million increased, compared to a loss of $(7.5) million in the third quarter of 2021. Third quarter 2022 operating loss includes a gain of $0.8 million from the change in fair value of earn-out liabilities, a non-cash loss of $(90.9) million from the impairment on goodwill, a non-cash loss of $(3.1) million on the impairment on intangibles and $(2.9) million of non-cash stock compensation while third quarter 2021 operating loss included a gain of $4.2 million from the change in fair value of earn-out liabilities and $(9.6) million of non-cash stock compensation.
- Third quarter 2022 net loss of $(116.9) million increased from $(110.6) million in the third quarter of 2021. Third quarter 2022 net loss includes a gain of $5.5 million in net charges from the changes in fair value of warrants, a loss of $(12.8) million from the derivative related to offering of common stock, $(2.9) million of non-cash stock compensation, a gain of $0.8 million from the change in fair value of earn-out liabilities, a non-cash loss of $(90.9) million from the impairment on goodwill, and a non-cash loss of $(3.1) million on the impairment on intangibles, while third quarter 2021 included a loss of $(107.0) million from extinguishment of debt, a gain of $8.1 million from the change in fair value of warrants, and a gain of $1.4 million associated with a derivative liability from our term loan, a gain of $4.2 million from the change in fair value of earn-out liabilities and $(9.6) million of non-cash stock compensation.
- Third quarter 2022 adjusted EBITDA of $(9.1) million declined as compared to $0.7 million in the third quarter of 2021.
- Launched one new product in the third quarter of 2022 compared with zero new products launched in the third quarter of 2021.
- Total cash balance at September 30, 2022 was $26.0 million.
“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 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.
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.
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.
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 | ||||
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.
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 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:
- 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 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:
| 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 | % | ||||||||
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:
- Launch phase: During this phase, we leverage our technology to target opportunities identified using AIMEE (Artificial Intelligence Marketplace e-Commerce Engine) and other sources. This phase also includes revenue from new product variations and relaunches. During this period of time, due to the combination of discounts and investment in marketing, our net margin for a product could be as low as approximately negative 35%. Net margin is calculated by taking net revenue less the cost of goods sold, less fulfillment, online advertising and selling expenses. These costs primarily reflect the estimated variable costs related to the sale of a product.
- Sustain phase: Our goal is for every product we launch to enter the sustain phase and become profitable, with a target average of positive 15% net margin, within approximately three months of launch on average. Net margin primarily reflects a combination of manual and automated adjustments in price and marketing spend.
- 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 third quarter 2021 and 2022 results of operations by our product phases:
| 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 | ) | |||||||||||||
Artificial Intelligence
Cayman Enterprise City Publishes Socio-Economic Impact Assessment by Economist and Leading Advisor on the Caribbean, Marla Dukharan
The Impact of Cayman Enterprise City’s Socio-Economic Development Project Nears USD $1 Billion
GRAND CAYMAN, Cayman Islands, May 16, 2024 /PRNewswire/ — Cayman Enterprise City (CEC) has released a Socio-Economic Impact Assessment by Marla Dukharan. The report illustrates that CEC is increasing its impact by supporting higher earnings for Caymanians and is driving a shift towards a knowledge-based economy by focusing on high productivity sectors. The release by Dukharan reads, “Caymanian resourcefulness and private sector-led innovation have been the driving force behind the islands’ outstanding socio-economic success. Cayman Enterprise City underpins the next generation of Cayman innovation and dynamism.”
With an economic impact of USD $130 million in 2023, contributing just under USD $1 billion to the local economic activity in 12 years since inception, “CEC is helping the nation to diversify economically, in terms of sectors and jobs, ensuring locals have economic and employment opportunities that match the nation’s progress,” the report reads.
The CEC socio-economic development project is now home to 352 Special Economic Zones Companies (SEZCos), many of which are globally recognised institutions led by top executives and industry experts. “CEC member companies are providing high-value employment with salaries exceeding those typically found outside of the special economic zone,” said Charlie Kirkconnell, Chief Executive Officer at CEC. “The CEC community is fully invested in Cayman and the report illustrates that the CEC socio-economic development project is making a very significant impact on Cayman’s economy and community.”
“As CEC continues to grow, it continues to create significant employment and entrepreneurial opportunities for Caymanians and we encourage anyone that might be interested in finding out how they might get involved, whether as a member of the community and/or as a volunteer in our Enterprise Cayman non-profit organisation (NPO).”
77% of Caymanian-held jobs at CEC member companies, are in sectors with high social returns and increasing global demand. “By putting skills first and prioritizing learning, CEC is enabling new industries to take root,” the release by Dukharan reads.
CEC, through its Enterprise Cayman NPO, is a first-mover in private sector-facilitated education and training in the Caribbean, making it a leading force to boost youth participation in the economy. By offering training in specialised skills, Enterprise Cayman is helping to close the gap in higher education and earnings for Caymanians. “Through Enterprise Cayman we’ve set out to strategically support meaningful employment and entrepreneurial opportunities for Caymanians, by providing internship and mentorship opportunities, by hosting skill-building and career focused training, and by providing invaluable networking and community engagement opportunities,” said Kirkconnell.
In 2023 individuals took advantage of 4,226 opportunities to participate in education, training, and career development events and, since launching entrepreneurial programming in 2021, Enterprise Cayman has worked with 41 new Cayman-born business ventures. “We’re helping to develop a local talent pool that meets the demand of Cayman’s growing digital innovation and technology sectors while, in parallel, offering exciting opportunities for individuals to launch new business ventures within an innovative business environment,” said Kirkconnell.
With CEC’s new campus and state-of-the-art facilities, Signal House, the project “holds the promise of deep, continued economic impact,” the report concludes.
To access CEC’s economic impact assessments and Enterprise Cayman’s annual reports please visit https://www.enterprisecayman.ky/reports. For more information on how to get involved and for upcoming programmes and events visit www.enterprisecayman.ky.
Website: www.caymanenterprisecity.com LinkedIn: @CaymanEnterpriseCityTwitter: @CEC_CaymanInstagram: @CaymanEnterpriseCityFacebook: @CaymanEnterpriseCityYouTube: @ceccayman
About Cayman Enterprise City
Cayman Enterprise City (CEC) is an award-winning development project which consists of three special economic zones (SEZs) focused on attracting knowledge-based and specialised-services businesses to set up a genuine physical presence in the Cayman Islands. The zones included within CEC are Cayman Tech City, Cayman Commodities & Derivatives Centre, and Cayman Maritime & Aviation City. With a dedicated Government Authority, licensing fee concessions and guaranteed fast-track processes, CEC enables international companies to quickly and efficiently establish a Cayman Islands office, which in turn enables them to generate active business income within a tax neutral environment.
About Enterprise Cayman
Enterprise Cayman is a non-profit organisation (NPO) powered by Cayman Enterprise City in partnership with Cayman Islands’ special economic zone companies (SEZCos). The organisation, which applies the Theory of Change (TOC) methodology, provides Caymanians and residents with access to high-quality learning experiences and opportunities to develop and launch new business ventures, to pursue careers within the technology and innovation sectors, and to join a dynamic network of industry professionals. Let’s grow the next generation of Caymanian innovators and entrepreneurs with Enterprise Cayman!
Logo: https://mma.prnewswire.com/media/1317764/2860789/Cayman_Enterprise_City_Logo.jpg
FOR MORE INFORMATION:Contact: Kaitlyn Elphinstone Email: [email protected]
View original content:https://www.prnewswire.co.uk/news-releases/cayman-enterprise-city-publishes-socio-economic-impact-assessment-by-economist-and-leading-advisor-on-the-caribbean-marla-dukharan-302148206.html
Artificial Intelligence
Strava Unveils New Chapter of Accelerated Product Development at Brand’s Flagship Event
The Company introduces increased product velocity, leveraging advancements in Artificial Intelligence, in service of its vision of a world connected through movement
LOS ANGELES, May 16, 2024 /PRNewswire/ — Strava, the leading digital community for active people with more than 125 million athletes, today showcased its latest initiatives and product developments at its annual event, Camp Strava. With the theme of Progress, Together company leaders announced how the platform will empower its global community to make progress in the way they explore, move, and connect on Strava.
“Strava is gaining momentum to realize our vision of a world connected through movement,” said Michael Martin, chief executive officer of Strava. “We are focused on two fundamental shifts to accelerate how we deliver value to 125 million people globally– building for women and leveraging Artificial Intelligence – which will unlock new community-and-partner-powered experiences across the platform.”
A New Era of Product VelocityStrava, with new leaders at the helm, is ushering in its next era of product velocity. The company listened closely to feedback from its global community and announced three of the most requested features coming to the platform by the end of the year.
The first of these updates, AI-enabled Leaderboard Integrity, will harness machine learning to automatically flag irregular, improbable, or impossible activities recorded to the platform. Trained by millions of activities, this feature allows all users on Strava to play fair and have more fun.
Additionally, the company announced a new Family Plan Subscription, the sister of the company’s Student Plan. With Family Plan, it’s easier to make a fitness commitment with your community by sharing an annual subscription with up to three other people – friends, family, or fitness family. Launching in select countries this summer, with plans to roll out globally by the end of the year, Strava’s newest annual subscription option offers the best value for groups (up to four), with a discount off the regular subscription price for each member.
Strava also implemented an updated design system, an initiative that is integral in driving a heightened pace of product innovation at the company. Through this work, Strava announced the launch of one of the company’s most requested features, Dark mode. Dark mode will improve the in-app experience for all users, reducing eye strain and improving accessibility while they record activity or scroll through the feed. Athletes can expect a rollout later this summer with options to keep their mobile settings always dark, always light, or match their device settings.
Company leaders highlighted several other features and updates to current products like Flyover, with its next iteration offering an overlay with activity stats and off-platform sharing capabilities. The overlay is available today for Strava subscribers and an off-platform sharing option will be released later this year.
Build for Her, Build for ManyStudies show that women of all ages participate in sports at a far lower rate than men, and overall, despite wanting to be active, find less time to dedicate to an active lifestyle. As the company continues on its mission to motivate people to live their best active lives, building for women on the platform will ultimately serve everyone in the Strava community. Several new features and initiatives were announced as a part of this strategic focus, which includes:
Night Heatmaps: Night Heatmaps show only activities between sundown and sunrise – so athletes can get an idea of which roads, trails, and paths are well-trafficked after hours. Since Night Heatmaps filter for after-hours routes, it can be a helpful tool for female athletes training before sunrise and after sunset.Quick Edit: For active women, having control over what is shared with the Strava community that cheers them on – like what time a run is logged – is important. Quick Edit makes it easier to make the most common edits – like activity name, and privacy settings so you can hide your start time, your map, or other workout stats.Strive for More®: The company announced a new phase of its Strive for More® initiative, created in 2022 to promote and support women in movement and sport. Today, Strava unveiled an official partnership with media company TOGETHXR to encourage more women to watch – and play – women’s sports. As part of the partnership, Strava will also donate $100,000 to the Alex Morgan Foundation, started by co-founder of TOGETHXR, Alex Morgan, to support their mission to help girls and women find confident paths forward in sports and life.Athlete IntelligenceToday, Strava announced the start of an accelerated product roadmap, outlining how Strava will implement the latest technological enhancements in AI and machine learning, to transform the athlete experience.
One key advancement to the platform includes the company’s latest development, Athlete Intelligence. Strava is introducing its beta AI-powered feature which turns each subscriber’s training data into an easily digestible summary that contextualizes their accomplishments and fitness goals. Unlike other AI-powered training services, Strava connects with thousands of devices, wearables, and fitness apps, so an athlete’s insights can consider their entire fitness story across multiple sports and modalities.
The features shared at Camp Strava will be released on a rolling basis through the end of the year. To view the full list of product releases and further details, visit www.press.strava.com.
For more information on Strava, to create a free account, or to start a free subscription trial visit www.strava.com.
About Strava Strava is the leading digital community for active people with more than 125 million athletes, in more than 190 countries. The platform offers a holistic view of your active lifestyle, no matter where you live, which sport you love and/or what device you use. Everyone belongs on Strava when they are pursuing an active life. Join the community, find motivation and discover new experiences with a Strava subscription.
Visit www.strava.com for more information and connect with Strava on Instagram, Twitter, Facebook, YouTube and LinkedIn.
Media Contact: [email protected]
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View original content:https://www.prnewswire.co.uk/news-releases/strava-unveils-new-chapter-of-accelerated-product-development-at-brands-flagship-event-302147068.html
Artificial Intelligence
Japan Data Center Market Investment to Reach $14.48 Billion by 2028 – Watch Out Exclusive Insight on Japan & Hong Kong Data Center Market – Arizton
CHICAGO, May 16, 2024 /PRNewswire/ — Arizton publishes the latest research report on the Japan data center market and Hong Kong data center market.
The Japan Data Center Market to Witness Investments of $14.48 Billion by 2029.
Get Insights on 107 Existing Data Centers and 41 Upcoming Facilities across Japan.
The data center market in Japan is experiencing the emergence of self-built hyperscale data center facilities by major operators such as Google, Microsoft, and Amazon Web Services (AWS). This development is expected to impact the colocation market in Japan. Since these hyperscale operators store workloads in their own data center facilities, it may reduce the source of revenue generation for colocation operators.
Japan is a well-established data center market in the APAC region. The country supports investments with its macroeconomic policies and other incentives for investors. The market is witnessing several investments from local and global data center operators, further expanding its presence. Tokyo and Osaka are Japan’s major destinations for data center development, accounting for over 90% of the existing data center facilities. The government announced the offer of subsidies in Hokkaido and Kyushu for data center development and decentralize data centers from Tokyo and Osaka.
Investment Opportunities
In October 2023, SoftBank and its subsidiary, IDC Frontier, announced the plan to develop a new data center facility in Tomakomai City, Hokkaido. The company invested around $420 million toward the project, for which it received subsidies worth $190 million from the Ministry of Economy, Trade, and Industry. In July 2023, Internet Initiative Japan (IIJ) launched its second data center building at the Shiroi data center campus in Chiba Prefecture, Greater Tokyo. Once fully built, the campus will house four data center buildings. Furthermore, the company is involved in a third expansion initiative in its Matsue City campus (which will likely go live in 2025).In June 2023, Digital Edge, in partnership with Hulic, a real estate developer, announced the start of the construction of a new data center facility, TY07, in Tokyo. The facility is expected to go online by 2025.In April 2024, GDS Services partnered with Gaw Capital to develop a new data center campus in Fuchu City, Tokyo. Both companies will jointly invest toward developing a new data center facility, with the first phase slated to go online by 2026.To Buy this Research Now, Click: https://www.arizton.com/market-reports/japan-data-center-market-investment-analysis
Existing Vs. Upcoming Data Centers
Existing Facilities in the Region (Area and Power Capacity)TokyoOsakaOther CitiesList of Upcoming Facilities in the Region (Area and Power Capacity)TokyoOsakaOther CitiesVendor Analysis
IT Infrastructure Providers: Arista Networks, Atos, Broadcom, Cisco Systems, Dell Technologies, Fujitsu, Hewlett Packard Enterprise (HPE), Hitachi Vantara, Huawei Technologies, IBM, Inspur, Lenovo, NEC, NetApp, and Oracle.
Data Center Construction Contractors & Sub-Contractors: Arup, AECOM, Daiwa House Industry, Fuji Furukawa Engineering & Construction, Hibiya Engineering, ISG, Kajima Corporation, Keihanshin Building, Linesight, MARCAI DESIGN, Meiho Facility Works, Nikken Sekkei, NTT FACILITIES, Obayashi Corporation, SHINRYO Corporation, TAISEI Corporation.
Support Infrastructure Providers: 3M, ABB, Alfa Laval, Caterpillar, Cummins, Delta Electronics, Eaton, Fuji Electric, HITEC Power Protection, Johnson Controls, Kawasaki Heavy Industries, KOHLSER-SDMO, Legrand, Mitsubishi Electric, Rittal, Rolls-Royce, Schneider Electric, STULZ, Siemens, Vertiv.
Data Center Investors: AirTrunk, Alibaba Cloud, Amazon Web Services, AT TOKYO, Colt Data Centre Services, Digital Edge, Equinix, Fujitsu, Goodman, Google, IDC Frontier, Internet Initiative Japan (IIJ), MC Digital Realty, Microsoft, NTT Communications, SCSK Corporation (NETXDC), Telehouse, Tencent Cloud, TIS INTEC Group.
New Entrants: Ada Infrastructure, Edge Centres, CyrusOne, ESR, GDS Services, Keppel Data Centres, NEXTDC, Princeton Digital Group (PDG), SC Zeus Data Center, STACK Infrastructure, ST Telemedia Global Data Centres, Vantage Data Centers, Yondr.
The Hong Kong Data Center Market will Witness Investments of $4.80 Billion by 2029.
Get Insights on 54 Existing Data Centers and 12 Upcoming Facilities across Hong Kong.
The Hong Kong data center market is booming, driven by the increasing demand for digital services. The data center investments in Hong Kong over the next two to three years are expected to remain high due to the surge in demand and the significant boost due to the advancements in AI technologies. Investors are actively investing in this market.
Hong Kong is a mature and thriving market for data center development in the APAC region. Investors find it an attractive market owing to the high internet and social media usage levels, a robust business ecosystem, and excellent connectivity through both inland and submarine cables. Additionally, the deployment of 5G technology further enhances its appeal.
Hong Kong stands out globally for the incredibly high rates of cell phone and home broadband service usage. With around 300 licensed internet service providers, there is robust competition, providing data center operators with a wide range of choices.
Hong Kong is considered an attractive destination for businesses due to various reasons. Its proximity to mainland China and its import-export relations with major markets, such as China and the US, make it easier for businesses to operate. Additionally, the market has experienced significant growth in Foreign Direct Investment (FDI), ranking after countries like the UK, the US, and China.
Investment Opportunities
In December 2023, the company completed the core and shell construction of phase-1 of the MEGA IDC data center campus. The facility has already signed lease agreements with cloud service providers and international banks for its available space. The company plans to expand the campus through phase-2 during the forecast period.In March 2023, the company launched its seventh data center facility, MEGA Gateway, in Tsuen Wan. The facility is part of its connected MEGA campus.Goodman is among the major investors in the Hong Kong market, and it is continuously expanding its data center presence. In March 2024, the company announced the construction of the new Texaco data center facility in Tsuen Wan. The facility is a brownfield construction that involved the conversion of an industrial building into a data center facility. The facility is likely to go online by 2026.Over 60% Of Future Demand to Come from Cloud Service Providers
The Hong Kong data center market has the presence of on-premises data centers operated by educational institutions, the government, and financial services such as HSBC Bank. A significant decline in on-premises data centers will occur in the next three to five years owing to the increase in digitalizing initiatives across sectors and the strong growth in demand for colocation and cloud services. In addition, most existing service providers offer managed solutions to enterprise customers, which will likely grow in the market from 2024-2029.
The market has the presence of all global cloud operators, such as Amazon Web Services (AWS), Google, Microsoft, Alibaba Cloud, Huawei Cloud, and Tencent Cloud. This will propel the demand for wholesale colocation services through these service providers’ continuous expansion initiatives. The cloud segments will likely dominate capacity take-up over the next five years. In addition, the market will witness the entry of multiple global organizations to service customers through a local presence.
To Buy this Research Now, Click: https://www.arizton.com/market-reports/hong-kong-data-center-market-size-analysis
Existing VS. Upcoming Data Centers
Existing Facilities in the Region (Area and Power Capacity)Tseung Kwan OKwai ChungTsuen WanFanlingFo TanChai WanTai PoOther LocationList of Upcoming Facilities in the Region (Area and Power Capacity)Tseung Kwan OKwai ChungTsuen WanFanlingFo TanChai WanTai PoOther LocationVendor Analysis
IT Infrastructure Providers: Arista Network, Atos, Cisco Systems, Dell Technologies, Fujitsu, Hewlett Packard Enterprise (HPE), Huawei Technologies, IBM, Inspur, Lenovo, NetApp.
Data Center Construction Contractors & Sub-Contractors: Arup, AtkinsRéalis, Aurecon, BYME Engineering, Chung Hing Engineers Group, Cundall, DSCO Group, Gammon Construction, ISG, Studio One Design.
Support Infrastructure Providers: ABB, Airedale, Caterpillar, Cummins, Delta Electronics, Eaton, Fuji Electric, KOHLER, Legrand, Mitsubishi Electric, Piller Power Systems, Rittal, Schneider Electric, Siemens, STULZ, Sumber, Vertiv.
Data Center Investors: AirTrunk, BDx, CITIC Telcom International, China Mobile International (CMI), China Unicom, Digital Realty, Equinix, ESR, GDS Services, Global Switch, Goodman, iTech Towers Data Centre Services, NTT DATA, SUNeVision Holdings (iAdvantage), Telehouse, Towngas Telecom (TGT), Vantage Data Centers.
New Entrants: Angelo Gordon and Mapletree Investments
Japan & Hong Kong Data Center Market Segmentation
IT Infrastructure
Servers
Storage Systems
Network Infrastructure
Electrical Infrastructure
UPS Systems
Generators
Transfer Switches & Switchgears
PDUs
Other Electrical Infrastructure
Mechanical Infrastructure
Cooling Systems
Rack Cabinets
Other Mechanical Infrastructure
Cooling Systems
CRAC & CRAH Units
Chiller Units
Cooling Towers, Condensers & Dry Coolers
Economizers & Evaporative Coolers
Other Cooling Units
General Construction
Core & Shell Development
Installation & Commissioning Services
Engineering & Building Design
Fire Detection & Suppression Systems
Physical Security
DCIM
Tier Standard
Tier I & Tier II
Tier III
Tier IV
Check Out Some of the Top Selling Research Reports:
Malaysia Data Center Market – Investment Analysis & Growth Opportunities 2024-2029https://www.arizton.com/market-reports/malaysia-data-center-market-size-analysis
Singapore Data Center Market – Investment Analysis & Growth Opportunities 2024-2029https://www.arizton.com/market-reports/singapore-data-center-market-size-analysis
Southeast Asia Data Center Construction Market – Industry Outlook & Forecast 2024-2029https://www.arizton.com/market-reports/southeast-asia-data-center-construction-market
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