GlobeNewswire Inc | Feb 11, 2021 06:45AM EST

February 11, 2021

RESEARCH TRIANGLE PARK, N.C., Feb. 11, 2021 (GLOBE NEWSWIRE) -- ChannelAdvisor Corporation (NYSE: ECOM), a leading provider of cloud-based e-commerce solutions that enable brands and retailers to increase global sales, today reported financial results for the fourth quarter and full year ended December31, 2020.

Fourth Quarter 2020 Highlights

GAAP

-- Total revenue increased 16% year-over-year to a record $40.3 million -- Brands revenue increased 27% year-over-year and reached 35% of total revenue, a new high -- Subscription revenue growth accelerated to 8% year-over-year -- GAAP net income was $6.1 million, or $0.20 per diluted share based on 30.6 million diluted weighted average shares outstanding

Non-GAAP

-- Adjusted EBITDA increased 15% year-over-year to $10.8 million -- Adjusted EBITDA margin was 27%, similar to the prior year period

Full Year 2020 Highlights

GAAP

-- Total revenue increased 12% to a record $145.1 million -- Brands revenue increased 25% year-over-year and reached 33% of total revenue, a new fiscal year high -- GAAP net income was $18.8 million, or $0.63 per diluted share based on 30.0 million diluted weighted average shares outstanding, up from $3.5 million and $0.12 per diluted share in 2019 -- Cash and cash equivalents were $71.5 million at year end, an increase of $19.8 million for the year, including the use of cash for the acquisition of BlueBoard in July 2020 -- Operating cash flow of $34.3 million, compared to $13.0 million for the prior year

Non-GAAP

-- Adjusted EBITDA increased 80% to $36.3 million -- Adjusted EBITDA margin of 25% was up 9 points year-over-year -- Free cash flow was $29.6 million, or $0.98 per diluted share based on 30.0 million diluted weighted average shares outstanding, more than triple the prior year free cash flow of $9.3 million

Q4 marked a tremendous finish to a stellar year for ChannelAdvisor, with record revenue and strong adjusted EBITDA, both of which significantly exceeded our guidance for the quarter, said David Spitz, ChannelAdvisors chief executive officer. Continued solid execution and record e-commerce volumes drove success for our customers and rapid growth from brands during the quarter, with brands revenue for the quarter up 27% year over year. Another quarter of robust performance in sales, especially with brands, combined with outstanding revenue retention, drove the second consecutive quarter of acceleration in subscription revenue growth. Our strategy of empowering brands' digital transformation is paying off in a big way and were optimistic about our growth prospects going forward.

Recent Business Highlights

We believe the following highlights are additional indicators of our position as a leading digital distribution platform for brands:

-- Expanded product offering: To help brands amplify their brand presence and drive effective advertising with Amazon, ChannelAdvisor recently launched Managed Services for Amazons demand-side platform. ChannelAdvisor also launched new enhancements to the Channel Health Console to provide brands with a simplified dashboard to monitor the health and performance of their fulfillment channels closely. -- Additional market access: ChannelAdvisor is helping brands reach more consumers by continuing to expand its industry-leading Marketplaces platform with the addition of Amazon Sweden, Back Market (AT, BE, NL, FI and PL), Darty (FR), Paysfer (US), and Spartoo (FR). The company also added first-party dropship integrations with Fantastic Furniture and expanded its existing support for Macys and Walgreens. -- Industry leadership: Named the #1 channel management vendor for the ninth consecutive year, the #3 search engine marketing vendor, and a leading provider of online advertising services in Digital Commerce 360s 2021 Leading Vendors to the Top 1000 retailers. -- New customers: ChannelAdvisor recently added notable new Brands Analytics customers including Chanel and Gibson Guitars. Existing customers including Xerox and Tetra, a division of Spectrum Brands, expanded their relationships with the addition of the Brands Analytics functionality. Additional notable new customers include TCL Electronics, Mabe CA, and Fisher & Paykel Appliances, a division of Haier. ChannelAdvisor also expanded its relationship with customers such as Calzedonia and Defacto, and strategic partner XPO Logistics.

Financial Outlook

Based on the information available as of today, ChannelAdvisor is issuing guidance for its first quarter 2021.

(in millions, except percentages) Q1 2021Revenue $37.3 - $37.7Adjusted EBITDA $6.9 - $7.3 As a Percentage of Revenue (at the midpoints for Q1) 19%Stock-based Compensation Expense $2.9 - $3.3Weighted Average Shares Outstanding 29.2

Refer to the "Adjusted EBITDA Guidance Reconciliation" table included with the financial tables at the end of this release for the reconciliation to the most comparable GAAP financial measure.

Conference Call Information

What: ChannelAdvisor Fourth Quarter and Full Year 2020 Financial Results Conference CallWhen: Thursday, February 11, 2021Time: 8:00 a.m. ETLiveCall: (855) 638-4821, Passcode 6076252, Toll free (704) 288-0612, Passcode 6076252, TollWebcast: http://ir.channeladvisor.com (live and replay)

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: adjusted EBITDA and adjusted EBITDA margin, free cash flow and free cash flow per diluted share, non-GAAP gross profit and non-GAAP gross margin. Adjusted EBITDA and adjusted EBITDA margin exclude depreciation, amortization, income tax expense, net interest expense, stock-based compensation expense, for 2019 only, non-recurring severance and related costs, and for 2020 only, transaction costs associated with our July 2020 acquisition of BlueBoard. Free cash flow is cash flow from operations, reduced by purchases of property and equipment and payment of capitalized software development costs. Non-GAAP gross profit and non-GAAP gross margin exclude stock-based compensation expense and for 2019 only, non-recurring severance and related costs.

ChannelAdvisor believes that these non-GAAP measures of financial results provide useful information to management and investors relating to ChannelAdvisors financial condition and results of operations. The companys management uses these non-GAAP measures to compare the companys performance to that of prior periods for trend analyses, and for budgeting and planning purposes. The company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the companys financial measures with other software companies, many of which present similar non-GAAP financial measures to investors, and that it allows for greater transparency with respect to key metrics used by management in its financial and operational decision-making.

Management of the company does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded in the companys financial statements. In order to compensate for these limitations, management presents non-GAAP financial measures together with GAAP results. Non-GAAP measures should be considered in addition to results and guidance prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release. ChannelAdvisor urges investors to review the reconciliation and not to rely on any single financial measure to evaluate the companys business. In addition, other companies, including companies in our industry, may calculate similarly named non-GAAP measures differently than we do, which limits their usefulness in comparing our financial results with theirs.

About ChannelAdvisor

ChannelAdvisor (NYSE: ECOM) is a leading e-commerce cloud platform whose mission is to connect and optimize the worlds commerce. For nearly two decades, ChannelAdvisor has helped brands and retailers worldwide improve their online performance by expanding sales channels, connecting with consumers around the world, optimizing their operations for peak performance and providing actionable analytics to improve competitiveness. Thousands of customers depend on ChannelAdvisor to securely power their sales and optimize fulfillment on channels such as Amazon, eBay, Facebook, Google, Walmart, and hundreds more.For more information, visit www.channeladvisor.com.

Cautionary Language Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our financial outlook and guidance for the first quarter and full year 2021 and expectations regarding our growth and that of the e-commerce industry. These forward-looking statements are made as of the date of this release and are based on current expectations, estimates, forecasts, and projections, as well as the current beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond ChannelAdvisors control. ChannelAdvisors actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in ChannelAdvisors Annual Report on Form10-K for the year ended December31, 2020, as well as other documents that may be filed by the company from time to time with the Securities and Exchange Commission. These documents are available on the SEC Filings section of the Investor Relations page of our website at http://ir.channeladvisor.com. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the impact of the COVID-19 pandemic on global economic conditions and on our revenues and financial performance; our reliance for a significant portion of our revenue on sales by our customers on the Amazon and eBay marketplaces and through advertisements on Google; our ability to respond to rapid changes in channel technologies or requirements; our ability to compete successfully against current and future competitors, which could include the channels themselves; our reliance in part on a pricing model under which a portion of the subscription fees we receive from customers is variable, based upon the amount of transaction volume that those customers process through our platform; our reliance on non-redundant data centers and cloud computing providers to deliver our SaaS solutions; the potential that the e-commerce market does not grow, or grows more slowly than we expect, particularly on the channels that our solutions support; challenges and risks associated with our international operations; our ability to align our expenses with revenue; and risks related to security or privacy breaches. The forward-looking statements included in this press release represent ChannelAdvisors views as of the date of this press release. ChannelAdvisor undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, these forward-looking statements should not be relied upon as representing ChannelAdvisors views as of any date subsequent to the date of this press release.

ChannelAdvisor Corporation and SubsidiariesConsolidated Balance Sheets(in thousands, except share and per share data)

December31, 2020 2019Assets (unaudited) Current assets: Cash and cash equivalents $ 71,545 $ 51,785 Accounts receivable, net of allowance of $417 and$733 as of December31, 2020 and 2019, 24,705 22,126 respectivelyPrepaid expenses and other current assets 13,874 10,452 Total current assets 110,124 84,363 Operating lease right of use assets 8,141 11,128 Property and equipment, net 8,707 9,597 Goodwill 30,990 23,486 Intangible assets, net 4,155 1,285 Deferred contract costs, net of current portion 14,040 12,810 Long-term deferred tax assets, net 3,551 3,584 Other assets 953 614 Total assets $ 180,661 $ 146,867 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 158 $ 409 Accrued expenses 14,008 8,577 Deferred revenue 22,819 21,000 Other current liabilities 6,029 6,431 Total current liabilities 43,014 36,417 Long-term operating leases, net of current 5,394 9,767 portionLong-term finance leases, net of current portion 8 27 Other long-term liabilities 2,154 1,007 Total liabilities 50,570 47,218 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000shares authorized, no shares issued and ? ? outstanding as of December 31, 2020 and 2019,respectivelyCommon stock, $0.001 par value, 100,000,000shares authorized, 29,020,424 and 28,077,469 29 28 shares issued and outstanding as of December 31,2020 and 2019, respectivelyAdditional paid-in capital 288,842 278,111 Accumulated other comprehensive loss (1,095 ) (1,740 ) Accumulated deficit (157,685 ) (176,750 ) Total stockholders' equity 130,091 99,649 Total liabilities and stockholders' equity $ 180,661 $ 146,867

ChannelAdvisor Corporation and SubsidiariesConsolidated Statements of Operations(in thousands, except share and per share data)

Three Months Ended December 31, YearEndedDecember31, 2020 2019 2020 2019 (unaudited) (unaudited) (unaudited) Revenue $ 40,312 $ 34,775 $ 145,072 $ 129,959 Cost ofrevenue (1) 8,547 7,132 30,354 29,008 (2)Gross profit 31,765 27,643 114,718 100,951 Operatingexpenses (1) (2):Sales and 14,469 12,005 52,905 52,813 marketingResearch and 4,837 4,039 18,990 19,200 developmentGeneral and 5,997 5,864 23,739 25,136 administrativeTotaloperating 25,303 21,908 95,634 97,149 expensesIncome from 6,462 5,735 19,084 3,802 operationsOther income (expense):Interestincome (35 ) 155 175 754 (expense), netOther income (35 ) (353 ) 9 (385 )(expense), netTotal otherincome (70 ) (198 ) 184 369 (expense)Income before 6,392 5,537 19,268 4,171 income taxesIncome tax 272 117 443 689 expenseNet income $ 6,120 $ 5,420 $ 18,825 $ 3,482 Net income per share:Basic $ 0.21 $ 0.19 $ 0.66 $ 0.12 Diluted $ 0.20 $ 0.19 $ 0.63 $ 0.12 Weightedaverage common sharesoutstanding:Basic 29,006,116 28,069,017 28,616,401 27,886,278 Diluted 30,597,322 28,926,527 30,035,261 28,816,977 (1) Includesstock-based compensationas follows:Cost of $ 212 $ 250 $ 972 $ 995 revenueSales and 731 612 2,792 2,385 marketingResearch and 460 202 2,168 1,898 developmentGeneral and 1,065 912 4,268 3,698 administrative $ 2,468 $ 1,976 $ 10,200 $ 8,976 (2) Includesdepreciationand amortizationas follows:Cost of $ 1,144 $ 995 $ 4,211 $ 3,942 revenueSales and 159 168 624 775 marketingResearch and 62 76 257 353 developmentGeneral and 493 291 1,421 1,266 administrative $ 1,858 $ 1,530 $ 6,513 $ 6,336

ChannelAdvisor Corporation and SubsidiariesConsolidated Statements of Cash Flows(in thousands)

Year Ended December 31, 2020 2019 (unaudited) Cash flows from operating activities Net income $ 18,825 $ 3,482 Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:Depreciation and amortization 6,513 6,336 Bad debt expense 525 1,147 Stock-based compensation expense 10,200 8,976 Deferred income taxes (39 ) 531 Other items, net (829 ) 118 Changes in assets and liabilities, net of effects from acquisition:Accounts receivable (2,143 ) 361 Prepaid expenses and other assets (1,728 ) 892 Deferred contract costs (2,572 ) (3,146 )Accounts payable and accrued expenses 4,270 (2,306 )Deferred revenue 1,284 (3,383 )Cash and cash equivalents provided by operating 34,306 13,008 activitiesCash flows from investing activities Acquisition, net of cash acquired (8,467 ) ? Purchases of property and equipment (1,704 ) (986 )Payment of software development costs (3,034 ) (2,721 )Cash and cash equivalents used in investing (13,205 ) (3,707 )activitiesCash flows from financing activities Repayment of finance leases and debt (1,808 ) (2,209 )Proceeds from exercise of stock options 3,825 974 Payment of statutory tax withholding related to (3,294 ) (3,389 )net-share settlement of restricted stock unitsPayment of line of credit financing costs (187 ) ? Cash and cash equivalents used in financing (1,464 ) (4,624 )activitiesEffect of currency exchange rate changes on cash and 123 (77 )cash equivalentsNet increase in cash and cash equivalents 19,760 4,600 Cash and cash equivalents, beginning of year 51,785 47,185 Cash and cash equivalents, end of year $ 71,545 $ 51,785

Reconciliation of GAAP Gross Profit and GAAP Gross Margin to Non-GAAP GrossProfit and Non-GAAP Gross Margin(unaudited; in thousands) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Revenue $ 40,312 $ 34,775 $ 145,072 $ 129,959 Gross profit (GAAP) $ 31,765 $ 27,643 $ 114,718 $ 100,951 Plus: Stock-basedcompensation expense 212 250 972 995 included within cost ofrevenuePlus: Non-recurringseverance and related costs ? ? ? 238 within cost of revenueGross profit (Non-GAAP) $ 31,977 $ 27,893 $ 115,690 $ 102,184 Gross margin (GAAP) 79 % 79 % 79 % 78 %Gross margin (Non-GAAP) 79 % 80 % 80 % 79 %

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses(unaudited; in thousands) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Operating expenses (GAAP) $ 25,303 $ 21,908 $ 95,634 $ 97,149 Less: Stock-basedcompensation expense included 2,256 1,726 9,228 7,981 within operating expensesLess: Transaction costs inconnection with acquisition 45 ? 488 ? included within operatingexpensesLess: Non-recurring severanceand related costs within ? 344 ? 1,071 operating expensesOperating expenses (Non-GAAP) $ 23,002 $ 19,838 $ 85,918 $ 88,097

Reconciliation of GAAP Income from Operations and GAAP Operating Margin toNon-GAAP Income from Operations and Non-GAAP Operating Margin(unaudited; in thousands) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Revenue $ 40,312 $ 34,775 $ 145,072 $ 129,959 Income from operations $ 6,462 $ 5,735 $ 19,084 $ 3,802 (GAAP)Plus: Stock-based 2,468 1,976 10,200 8,976 compensation expensePlus: Transaction costs in 45 ? 488 ? connection with acquisitionPlus: Non-recurring ? 344 ? 1,309 severance and related costsIncome from operations $ 8,975 $ 8,055 $ 29,772 $ 14,087 (Non-GAAP)Operating margin (GAAP) 16 % 16 % 13 % 3 %Operating margin (Non-GAAP) 22 % 23 % 21 % 11 %

Reconciliation of Net Income to Adjusted EBITDA(unaudited; in thousands) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Net income $ 6,120 $ 5,420 $ 18,825 $ 3,482 Adjustments: Interest (income) 35 (155 ) (175 ) (754 ) expense, netIncome tax expense 272 117 443 689 Depreciation and 1,858 1,530 6,513 6,336 amortization expenseTotal adjustments 2,165 1,492 6,781 6,271 EBITDA 8,285 6,912 25,606 9,753 Stock-based 2,468 1,976 10,200 8,976 compensation expenseTransaction costs inconnection with 45 ? 488 ? acquisitionNon-recurringseverance and ? 464 ? 1,429 related costsAdjusted EBITDA $ 10,798 $ 9,352 $ 36,294 $ 20,158

Free Cash Flow Reconciliation(unaudited; in thousands) Three Months Ended December 31, Year Ended December 31, 2020 2019 2020 2019Cash andcashequivalents $ 8,321 $ 5,494 $ 34,306 $ 13,008 provided byoperatingactivitiesLess:Purchasesof property (683 ) (230 ) (1,704 ) (986 ) andequipmentLess:Payment ofcapitalized $ (751 ) $ (749 ) (3,034 ) (2,721 ) softwaredevelopmentcostsFree cash $ 6,887 $ 4,515 $ 29,568 $ 9,301 flow Dilutedweightedaverage 30,597,322 28,926,527 30,035,261 28,816,977 sharesoutstandingFree cashflow per $ 0.23 $ 0.16 $ 0.98 $ 0.32 dilutedshare

Adjusted EBITDA Guidance Reconciliation(unaudited; in millions) First Quarter 2021 Low HighNet income (estimate) $ 1.5 $ 2.6 Adjustments (estimates): Interest (income) expense, net 0.1 0.0 Income tax expense 0.2 0.1 Depreciation and amortization expense 1.8 1.7 Total adjustments 2.1 1.8 EBITDA 3.6 4.4 Stock-based compensation expense (estimate) 3.3 2.9 Adjusted EBITDA guidance $ 6.9 $ 7.3



Investor Contact:Raiford GarrabrantChannelAdvisor Corporationraiford.garrabrant@channeladvisor.com919-228-4817

Media Contact:Tamara GibbsChannelAdvisor Corporationtamara.gibbs@channeladvisor.com919-249-9798