New Services Business Customers Expected to Drive Revenue Growth and Adjusted EBITDA
Management Implementing Business Portfolio Optimization and Margin Enhancement Initiatives
Management Commentary
“Our second quarter 2023 results reflect actions taken by our executive management team to build a stronger and more profitable business,” stated
“As we look ahead, we are encouraged by our progress both in our corporate development and financial footprint. Since the beginning of the year, we have booked new business with over a dozen new customers, which we project will generate in excess of
“Early signs indicate that our actions to enhance the value of this business franchise are either meeting or exceeding management’s expectations, and we continue to pursue multiple ways to optimize the business model from top to bottom. We have a strong new business pipeline both from our internal leads and from partners, we are diversifying the customer mix and industry mix, and management is making decisions that we expect will strengthen our business and enable us to sustainably generate cash and profits for our shareholders,” concluded
Second Quarter 2023 Financial Results
Results compare the three months ended
- Net revenue decreased 37.4% to
$12.7 million in the second quarter of 2023 compared to$20.4 million in the second quarter of 2022. The decrease in net revenue was primarily due to planned changes to the business that were implemented to enable the company to realize higher margins by eliminating certain low or negative-margin relationships. - Operating loss increased to
$10.4 million in the second quarter of 2023 compared to an operating loss of$5.8 million in the second quarter of 2022. The increase in operating loss was driven by decreased revenue of$7.6 million and a non-recurring$2.2 million legal expense incurred in the second quarter and included in general and administrative expenses. - Net loss increased 7.3% to
$11.8 million from$11.0 million in the second quarter of 2022. The increase in net loss was primarily due to a year-over-year decline of$7.6 million , offset by the improvement in operating expenses of$3.0 million and changes in fair value of$4.0 million . - Adjusted EBITDA loss improved by
$1.8 million to a loss of$7.5 million in the second quarter of 2023 compared to an Adjusted EBITDA loss of$9.3 million in the second quarter of 2022. The improvement in Adjusted EBITDA was driven in part by our cost optimization initiatives and commercial decisions previously mentioned. During the quarter, we recorded legal expenses in the amount of$2.2 million , against which we incurred cash expense of$200 thousand during the second quarter. We do not intend to make any cash payments in this respect for the remainder of 2023 related to this accrual, and the remainder of the payments are to be made over the majority of 2024.
First Half 2023 Corporate Highlights
- Booked new business with over a dozen new customers, which we project will generate in excess of
$27 million in revenue in aggregate during the first year of each of those new customers coming online. We believe this new business will have a superior margin profile as compared to our current overall business given its concentration on our technology and services offerings, and a smaller component of fulfillment revenue as compared to those aforementioned elements. - Reduced customer concentration and increased diversification to new end markets (including food, consumer electronics and sporting goods, among others).
- Experienced a win rate of 80% on new proposals for CaaS service business.
- Deployed state-of-the art technology that enables increased precision in understanding consumer segments for targeting and retention purposes, as well as tools that will help our clients improve their inventory management efforts to drive higher in-stock rates where demand is proven.
2023 and 2024 Financial Outlook
The Company is providing the following financial outlook for full year 2023 and 2024:
- 2023 net revenue between
$50 and$55 million due to the decision to exit low margin relationships. - 2023 general and administrative expense reductions in the range of
$20-$25 million . - 2024 net revenue expected to increase 40% compared to 2023 net revenue.
- 2024 Adjusted EBITDA margin expected to be in the 10%-15% range.
We believe the impact of the Company’s cost and performance improvement program for the full year 2023 will be greater than the initial range provided on
Conference Call
Nogin’s management team will hold a conference call today,
Registration Link: Click here to register.
Please register online at least 10 minutes prior to the start time. If you have any difficulty with registration or connecting to the conference call, please contact CoreIR at 516-222-2560.
The conference call will be broadcast live and available for replay via the Investor Relations section of Nogin’s website or by clicking here.
About
Non-GAAP Financial Measures
We prepare and present our consolidated financial statements in accordance with
We calculate and define Adjusted EBITDA as net loss, adjusted to exclude: (1) interest expense, (2) income tax expense, (3) depreciation and amortization, (4) severance pay, (5) stock-based compensation, (6) facility consolidation expenses, and (7) restructuring cost.
We calculate and define Adjusted EBITDA margin as Adjusted EBITDA divided by Net Revenue.
Adjusted EBITDA and Adjusted EBITDA margin are financial measures that are not required by or presented in accordance with
Adjusted EBITDA and Adjusted EBITDA margin are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with
In reliance on the exception provided by Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled the forward-looking Adjusted EBITDA or Adjusted EBITDA margin guidance included above to the most directly comparable GAAP measures because the comparable GAAP measures are not accessible on a forward-looking basis and the Company is unable to provide such reconciliations, without unreasonable effort, due to the inherent difficulty in predicting, with reasonable certainty, the future impact of items that are outside the control of the Company or otherwise non-indicative of its ongoing operating performance. Preparation of such reconciliations would require a forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP, and such forward-looking financial statements are unavailable to the Company without unreasonable effort. For the same reasons, the Company is unable to address the probable significance of the unavailable information.
Cautionary Statements Concerning Forward-Looking Statements
This release contains certain forward-looking statements within the meaning of the federal securities laws, including statements regarding the development and adoption of the Company’s platform, revenue anticipated to be generated from new business and cost-reduction and performance improvement measures. These forward-looking statements generally are identified by the words "believe," "project," "expect," "anticipate," "estimate," "intend," "strategy," "future," "opportunity," "plan," "may," "should," "would," "will continue," "will likely result," and similar expressions. Forward-looking statements are predictions, projections, and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Forward-looking information includes, but is not limited to, statements regarding: the Company’s platforms and offerings on such platforms, performance, and operations, and the related benefits to stockholders, and the Company’s strategy. Many factors could cause actual future events to differ materially from the forward-looking statements in this document, including the Company’s ability to implement business plans and cost reduction measures, the Company’s ability to realize the anticipated revenue and other benefits associated with new business and changes and developments in the industry in which the Company competes. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the "Risk Factors" section of our Annual Report on Form 10-K filed with the
Contacts:
Nogin Investor and Media Relations Contact:
CoreIR
516-222-2560
investor@nogin.com
Consolidated Balance Sheets
(in thousands, except share and per share data)
(Unaudited)
2023 | 2022 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 3,143 | $ | 15,385 | ||||
Accounts receivable, net | 1,908 | 1,578 | ||||||
Inventory | 13,146 | 15,726 | ||||||
Prepaid expenses and other current assets | 1,977 | 2,539 | ||||||
Total current assets | 20,174 | 35,228 | ||||||
Property and equipment, net | 1,895 | 1,595 | ||||||
Right-of-use asset, net (Note 19) | 16,272 | 17,391 | ||||||
6,748 | 6,748 | |||||||
Intangible assets, net | 5,384 | 5,493 | ||||||
Investment in unconsolidated affiliates | 6,466 | 7,404 | ||||||
Other non-current asset | 972 | 1,074 | ||||||
Total assets | $ | 57,911 | $ | 74,933 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 13,936 | $ | 19,605 | ||||
Due to clients | 3,609 | 10,891 | ||||||
Related party payables | 869 | 1,033 | ||||||
Loans (Note 7) | 3,155 | — | ||||||
Accrued expenses and other liabilities (Note 6) | 16,281 | 17,826 | ||||||
Lease liabilities, current portion (Note 19) | 4,512 | 4,367 | ||||||
Total current liabilities | 42,362 | 53,722 | ||||||
Long-term note payable, net | 329 | — | ||||||
Convertible notes (Note 7) | 59,134 | 60,852 | ||||||
Deferred tax liabilities | 407 | 394 | ||||||
Lease liabilities, net of current portion (Note 19) | 13,637 | 15,223 | ||||||
Other long-term liabilities (Note 6) | 23,472 | 17,766 | ||||||
Total liabilities | 139,341 | 147,957 | ||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Common stock, as of | 1 | — | ||||||
Additional paid-in capital | 22,596 | 9,270 | ||||||
Accumulated deficit | (104,027 | ) | (82,294 | ) | ||||
Total stockholders’ deficit | (81,430 | ) | (73,024 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 57,911 | $ | 74,933 | ||||
Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Net service revenue | $ | 7,543 | $ | 9,254 | $ | 16,461 | $ | 17,787 | |||||||||
Net product revenue | 4,739 | 7,834 | 11,284 | 20,756 | |||||||||||||
Net revenue from related parties | 460 | 3,262 | 1,674 | 7,005 | |||||||||||||
Total net revenue | 12,742 | 20,350 | 29,419 | 45,548 | |||||||||||||
Operating costs and expenses: | |||||||||||||||||
Cost of services (1) | 3,277 | 5,757 | 8,807 | 11,192 | |||||||||||||
Cost of product revenue (1) | 1,972 | 5,156 | 5,913 | 15,407 | |||||||||||||
Sales and marketing | 715 | 620 | 1,417 | 1,186 | |||||||||||||
Research and development | 1,163 | 1,250 | 2,126 | 2,827 | |||||||||||||
General and administrative | 15,814 | 13,140 | 33,139 | 30,362 | |||||||||||||
Depreciation and amortization | 235 | 219 | 437 | 420 | |||||||||||||
Total operating costs and expenses | 23,176 | 26,142 | 51,839 | 61,394 | |||||||||||||
Operating loss | (10,434 | ) | (5,792 | ) | (22,420 | ) | (15,846 | ) | |||||||||
Interest expense | (2,777 | ) | (1,464 | ) | (4,791 | ) | (2,117 | ) | |||||||||
Change in fair value of promissory notes | (259 | ) | (2,566 | ) | (418 | ) | (2,566 | ) | |||||||||
Change in fair value of derivative instruments | 3,462 | — | 4,309 | — | |||||||||||||
Change in fair value of unconsolidated affiliates | (293 | ) | (949 | ) | (938 | ) | (1,982 | ) | |||||||||
Change in fair value of convertible notes | (1,296 | ) | — | 3,295 | — | ||||||||||||
Other (loss) income, net | (259 | ) | (292 | ) | (818 | ) | 1,661 | ||||||||||
Loss before income taxes | (11,793 | ) | (11,063 | ) | (21,718 | ) | (20,850 | ) | |||||||||
(Benefit) Provision for income taxes | 39 | (93 | ) | 13 | 65 | ||||||||||||
Net loss | $ | (11,832 | ) | $ | (10,970 | ) | $ | (21,732 | ) | $ | (20,915 | ) | |||||
Net loss per common share – basic and diluted | $ | (1.13 | ) | $ | (5.54 | ) | $ | (3.13 | ) | $ | (10.56 | ) | |||||
Weighted average shares outstanding – basic and diluted | 10,506,521 | 1,981,097 | 6,940,429 | 1,981,097 |
(1) Exclusive of depreciation and amortization shown separately.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended | |||||||||
2023 | 2022 | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
Net loss | $ | (21,732 | ) | $ | (20,915 | ) | |||
Adjustments to reconcile net loss to net cash used by operating activities: | |||||||||
Depreciation and amortization | 437 | 420 | |||||||
Amortization of debt issuance costs and discounts | 722 | 802 | |||||||
Debt issuance costs expensed under fair value option | 554 | — | |||||||
Stock-based compensation | 370 | 83 | |||||||
Deferred income taxes | 13 | 65 | |||||||
Change in fair value of unconsolidated affiliates | 938 | 1,982 | |||||||
Change in fair value of warrant liability | (3,739 | ) | 509 | ||||||
Change in fair value of promissory notes | 878 | 2,566 | |||||||
Change in fair value of convertible notes | (3,295 | ) | — | ||||||
Change in fair value of derivatives | (847 | ) | — | ||||||
Settlement of deferred revenue | — | (1,611 | ) | ||||||
Gain on extinguishment of accounts payable liabilities | (63 | ) | — | ||||||
(Gain) loss on disposal of asset | (1 | ) | 82 | ||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | (331 | ) | (546 | ) | |||||
Related party receivables | — | (880 | ) | ||||||
Inventory | 2,580 | 6,392 | |||||||
Prepaid expenses and other current assets | 2,469 | (2,306 | ) | ||||||
Other non-current assets | 85 | — | |||||||
Accounts payable | (3,673 | ) | (12 | ) | |||||
Due to clients | (7,280 | ) | (555 | ) | |||||
Related party payables | (164 | ) | 1,870 | ||||||
Lease assets and liabilities | (323 | ) | — | ||||||
Accrued expenses and other liabilities | 2,187 | (1,139 | ) | ||||||
Net cash used in operating activities | (30,215 | ) | (13,193 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Purchases of property and equipment | (613 | ) | (226 | ) | |||||
Proceeds from sale of property and equipment | 4 | — | |||||||
Net cash used in investing activities | (609 | ) | (226 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Proceeds from issuance of | 22,000 | — | |||||||
Payment of issuance costs for | (1,291 | ) | — | ||||||
Proceeds from short-term loan | 3,275 | — | |||||||
Payment of short-term loan | (1,743 | ) | — | ||||||
Proceeds from promissory notes | — | 5,000 | |||||||
Proceeds from promissory notes – related parties | — | 1,975 | |||||||
Payment of promissory notes | (3,478 | ) | — | ||||||
Payment of promissory notes – related parties | (106 | ) | — | ||||||
Payment of debt issuance costs | (75 | ) | (70 | ) | |||||
Proceeds from line of credit | — | 86,905 | |||||||
Repayments of line of credit | — | (82,255 | ) | ||||||
Net cash provided by financing activities | 18,582 | 11,555 | |||||||
(12,242 | ) | (1,864 | ) | ||||||
Beginning of period | 15,385 | 4,571 | |||||||
End of period | $ | 3,143 | $ | 2,707 | |||||
Reconciliation of Net Loss to Adjusted EBITDA
(in thousands)
(Unaudited)
For the Six Months Ended | Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net Loss | $ | (11,832 | ) | $ | (10,970 | ) | $ | (21,732 | ) | $ | (20,915 | ) | ||||
Interest expense | 2,777 | 1,464 | 4,791 | 2,117 | ||||||||||||
(Benefit) Provision for income taxes | 39 | (93 | ) | 13 | 65 | |||||||||||
Depreciation and amortization | 235 | 219 | 437 | 420 | ||||||||||||
Severance pay | 108 | 105 | 1,548 | 117 | ||||||||||||
Stock based compensation | 117 | 25 | 370 | 83 | ||||||||||||
Facility consolidation expenses | 864 | — | 864 | — | ||||||||||||
Restructuring cost | 163 | — | 163 | — | ||||||||||||
Adjusted EBITDA | $ | (7,529 | ) | $ | (9,250 | ) | $ | (13,546 | ) | $ | (18,113 | ) | ||||
Source:
2023 GlobeNewswire, Inc., source