GlobeNewswire Inc | May 6, 2021 06:45AM EDT

May 06, 2021

Total revenue growth accelerated to 22% year-over-year

Subscription revenue growth accelerated to 17% year-over-year

Revenue from brands increased 39% year-over-year

RESEARCH TRIANGLE PARK, N.C., May 06, 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 quarter ended March31, 2021.

First Quarter 2021 HighlightsGAAP

-- Total revenue increased 22% year-over-year to $39.2 million -- Subscription revenue growth accelerated to 17% year-over-year -- Brands revenue increased 39% year-over-year -- GAAP net income was $5.5 million, or $0.18 per diluted share based on 31.1 million diluted weighted average shares outstanding -- Operating cash flow increased 46% year-over-year to $8.4 million -- Cash and cash equivalents were $82.4 million, an increase of $26.0 million since March 31, 2020 and an increase of $10.8 million since December 31, 2020 -- Deferred revenue increased by a record amount to $25.4 million, up $6.1 million since March 31, 2020 and up $2.6 million since December 31, 2020

Non-GAAP

-- Adjusted EBITDA increased 41% year-over-year to $9.2 million -- Adjusted EBITDA margin was 23%, up three points year-over-year -- Free cash flow was $7.4 million, or $0.24 per diluted share based on 31.1 million diluted weighted average shares outstanding

Q1 marked another quarter of exceptional financial results and meaningful progress on our brands strategy, underpinned by accelerating momentum across our business, said David Spitz, ChannelAdvisors chief executive officer. Revenue and adjusted EBITDA both significantly exceeded our guidance for the quarter, driven by continued strong execution, product innovation, and robust e-commerce volumes. Our strategy drove success for our customers and rapid revenue growth from brands, with revenue from brands up 39% year over year during the quarter. Continued strength in sales, especially with brands, combined with excellent customer expansion and retention, drove record net bookings and the third consecutive quarter of acceleration in subscription revenue growth. Our strategy of helping accelerate brands' digital transformation has continued to pay off and we remain excited 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:

-- Continued product innovation: To help Walmart sellers save valuable time and resources by managing their advertising campaigns in the same platform as their listings, ChannelAdvisor now offers powerful automation tools for Walmart Connect. ChannelAdvisor also launched Third Party Seller Analysis, a new Brand Analytics premium feature that can help brands increase visibility of third-party sellers on retail sites and marketplaces such as Amazon and Walmart. -- Continued channel expansion: ChannelAdvisor remains laser-focused on global marketplace expansions to help address the evolving business needs of brands and retailers worldwide. This ongoing commitment to marketplace expansion is evident through the broadening of support of Elkjp (FI, SE, and DK) and Lazada (PH, VN, SG, TH, ID, MY) in addition to new marketplace integrations with hlns (SE), Amazon Poland (PL), Back Market (UK), Beyond (US), Exelon (US), Joom (FR), NBCUniversal Checkout (US), PopIn Border (KR), and Zalando (CZ and IE). The company also added support for first-party integrations with AAFES (US), Aldi (DE), Best Buy Canada (Consignment), Hofer (AT), Tractor Supply (US), Wayfair (CA), and Zappos (US). -- Industry leadership: Selected by Google to join its exclusive Google Partners International Growth program, a network of best-in-class providers with a track record in helping brands and retailers expand their reach and capture new audiences globally. With comprehensive insight into expanding abroad, ChannelAdvisor's long-standing alliance with Google can help serve as a key differentiator for brands and retailers seeking a competitive edge. -- New customers: ChannelAdvisor recently added notable new customers including Fitbit, Yamaha Music, Viewsonic, John West Food, Fissler and strategic partner Authentic Brands Group. ChannelAdvisor also expanded its relationship with customers such as Tervis Tumbler, Shiseido, and Gant AB.

Financial Outlook

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

(in millions, except percentages) Q2 2021 Revenue $39.8 - $40.2 Y/Y Growth 6% - 7% Adjusted EBITDA $7.7 - $8.1 As a Percentage of Revenue (at the midpoint) 20% Stock-based Compensation Expense $3.1 - $3.5 Weighted Average Shares Outstanding 30.0

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 First Quarter 2021 Financial Results Conference CallWhen: Thursday, May 6, 2021Time: 8:00 a.m. ETLiveCall: (855) 638-4821, Passcode 1697769, Toll Free (704) 288-0612, Passcode 1697769, 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, and free cash flow and free cash flow per diluted share. We also may provide information regarding non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations and non-GAAP operating margin. Adjusted EBITDA and adjusted EBITDA margin exclude depreciation, amortization, income tax expense, net interest expense, stock-based compensation expense, and for 2021 only, acquisition-related contingent consideration fair value adjustment. Adjusted EBITDA margin is equal to adjusted EBITDA divided by GAAP revenue. 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, non-GAAP gross margin and non-GAAP operating expenses exclude stock-based compensation expense and, as applicable, acquisition-related contingent consideration fair value adjustment. Non-GAAP gross margin is equal to non-GAAP gross profit divided by GAAP revenue. Non-GAAP operating margin is equal to non-GAAP income from operations divided by GAAP revenue.

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 second quarter 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 Form 10-K for the year ended December31, 2020 and its Quarterly Report on Form10-Q that will be filed for the quarter ended March31, 2021, 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.

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

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

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

March 31, December 2021 31, 2020 (unaudited) Assets Current assets: Cash and cash equivalents $ 82,384 $ 71,545 Accounts receivable, net of allowance of $393 and$417 as of March 31, 2021 and December31, 2020, 25,815 24,705 respectivelyPrepaid expenses and other current assets 13,008 13,874 Total current assets 121,207 110,124 Operating lease right of use assets 7,200 8,141 Property and equipment, net 8,103 8,707 Goodwill 30,990 30,990 Intangible assets, net 3,870 4,155 Deferred contract costs, net of current portion 14,700 14,040 Long-term deferred tax assets, net 3,430 3,551 Other assets 888 953 Total assets $ 190,388 $ 180,661 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 375 $ 158 Accrued expenses 13,621 14,008 Deferred revenue 25,417 22,819 Other current liabilities 5,413 6,029 Total current liabilities 44,826 43,014 Long-term operating leases, net of current portion 4,159 5,394 Other long-term liabilities 1,431 2,162 Total liabilities 50,416 50,570 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000 sharesauthorized, no shares issued and outstanding as of ? ? March 31, 2021 and December 31, 2020Common stock, $0.001 par value, 100,000,000 sharesauthorized, 29,732,852 and 29,020,424 shares issued 30 29 and outstanding as of March 31, 2021 and December31,2020, respectivelyAdditional paid-in capital 293,415 288,842 Accumulated other comprehensive loss (1,245 ) (1,095 )Accumulated deficit (152,228 ) (157,685 )Total stockholders' equity 139,972 130,091 Total liabilities and stockholders' equity $ 190,388 $ 180,661

ChannelAdvisor Corporation and SubsidiariesUnaudited Condensed Consolidated Statements of Operations(in thousands, except share and per share data)

Three Months Ended March 31, 2021 2020Revenue $ 39,166 $ 32,032 Cost of revenue (1) (2) 8,408 7,063 Gross profit 30,758 24,969 Operating expenses (1) (2): Sales and marketing 14,632 12,340 Research and development 5,527 4,801 General and administrative 4,882 5,735 Total operating expenses 25,041 22,876 Income from operations 5,717 2,093 Other (expense) income: Interest (expense) income, net (33 ) 126 Other (expense) income, net (130 ) 8 Total other (expense) income (163 ) 134 Income before income taxes 5,554 2,227 Income tax expense 97 220 Net income $ 5,457 $ 2,007 Net income per share: Basic $ 0.19 $ 0.07 Diluted $ 0.18 $ 0.07 Weighted average common shares outstanding: Basic 29,294,130 28,161,765 Diluted 31,138,533 29,047,028 (1) Includes stock-based compensation as follows:Cost of revenue $ 232 $ 319 Sales and marketing 820 740 Research and development 612 680 General and administrative 1,384 1,175 $ 3,048 $ 2,914 (2) Includes depreciation and amortization as follows:Cost of revenue $ 1,202 $ 976 Sales and marketing 159 155 Research and development 63 70 General and administrative 408 277 $ 1,832 $ 1,478

ChannelAdvisor Corporation and SubsidiariesUnaudited Condensed Consolidated Statements of Cash Flows(in thousands)

Three Months Ended March 31, 2021 2020Cash flows from operating activities Net income $ 5,457 $ 2,007 Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:Depreciation and amortization 1,832 1,478 Bad debt (recovery) expense (4 ) 297 Stock-based compensation expense 3,048 2,914 Deferred income taxes 97 220 Other items, net (1,536 ) (213 )Changes in assets and liabilities: Accounts receivable (1,060 ) 291 Prepaid expenses and other assets 1,290 993 Deferred contract costs (1,131 ) (60 )Accounts payable and accrued expenses (2,203 ) (981 )Deferred revenue 2,589 (1,204 )Cash and cash equivalents provided by operating 8,379 5,742 activitiesCash flows from investing activities Purchases of property and equipment (225 ) (344 )Payment of software development costs (749 ) (672 )Cash and cash equivalents used in investing activities (974 ) (1,016 )Cash flows from financing activities Repayment of finance leases (4 ) (7 )Proceeds from exercise of stock options 3,587 87 Payment of statutory tax withholding related to (66 ) ? net-share settlement of restricted stock unitsCash and cash equivalents provided by financing 3,517 80 activitiesEffect of currency exchange rate changes on cash and (83 ) (242 )cash equivalentsNet increase in cash and cash equivalents 10,839 4,564 Cash and cash equivalents, beginning of period 71,545 51,785 Cash and cash equivalents, end of period $ 82,384 $ 56,349

Reconciliation of GAAP Gross Profit and GAAP Gross Margin toNon-GAAP Gross Profit and Non-GAAP Gross Margin(unaudited; dollars in thousands) Three Months Ended March 31, 2021 2020Revenue $ 39,166 $ 32,032 Gross profit (GAAP) $ 30,758 $ 24,969 Plus: Stock-based compensation expense included 232 319 within cost of revenueGross profit (Non-GAAP) $ 30,990 $ 25,288 Gross margin (GAAP) 78.5 % 78.0 %Gross margin (Non-GAAP) 79.1 % 78.9 %

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses(unaudited; in thousands) Three Months Ended March 31, 2021 2020Operating expenses (GAAP) $ 25,041 $ 22,876 Less: Stock-based compensation expense included within 2,816 2,595 operating expensesLess: Contingent consideration fair value adjustment (1,313 ) ? Operating expenses (Non-GAAP) $ 23,538 $ 20,281

Reconciliation of GAAP Income from Operations and GAAP Operating Margin toNon-GAAP Income from Operations and Non-GAAP Operating Margin(unaudited; dollars in thousands) Three Months Ended March 31, 2021 2020Revenue $ 39,166 $ 32,032 Income from operations (GAAP) $ 5,717 $ 2,093 Plus: Stock-based compensation expense 3,048 2,914 Less: Contingent consideration fair value (1,313 ) ? adjustmentIncome from operations (Non-GAAP) $ 7,452 $ 5,007 Operating margin (GAAP) 14.6 % 6.5 %Operating margin (Non-GAAP) 19.0 % 15.6 %

Reconciliation of GAAP Net Income to Non-GAAP Net Income(unaudited; in thousands) Three Months Ended March 31, 2021 2020Net income (GAAP) $ 5,457 $ 2,007 Plus: Stock-based compensation expense 3,048 2,914 Less: Contingent consideration fair value (1,313 ) ? adjustmentNet income (Non-GAAP) $ 7,192 $ 4,921

Reconciliation of GAAP Net Income to Adjusted EBITDA(unaudited; in thousands) Three Months Ended March 31, 2021 2020Net income (GAAP) $ 5,457 $ 2,007 Adjustments: Interest expense (income), net 33 (126 )Income tax expense 97 220 Depreciation and amortization expense 1,832 1,478 Total adjustments 1,962 1,572 EBITDA 7,419 3,579 Stock-based compensation expense 3,048 2,914 Contingent consideration fair value adjustment (1,313 ) ? Adjusted EBITDA $ 9,154 $ 6,493

Free Cash Flow Reconciliation(unaudited; in thousands except share and per share data) Three Months Ended March 31, 2021 2020Cash and cash equivalents provided by operating $ 8,379 $ 5,742 activitiesLess: Purchases of property and equipment (225 ) (344 )Less: Payment of capitalized software (749 ) (672 )development costsFree cash flow $ 7,405 $ 4,726 Diluted weighted average shares outstanding 31,138,533 29,047,028 Free cash flow per diluted share $ 0.24 $ 0.16

Adjusted EBITDA Guidance Reconciliation(unaudited; in millions) Second Quarter 2021 Low HighNet income (estimate) $ 2.1 $ 3.2 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 4.2 5.0 Stock-based compensation expense (estimate) 3.5 3.1 Adjusted EBITDA guidance (floor) $ 7.7 $ 8.1