GlobeNewswire Inc | Aug 5, 2021 06:45AM EDT

August 05, 2021

Subscription revenue growth accelerates to 25% year-over-year

Revenue from brands increases 39% year-over-year

RESEARCH TRIANGLE PARK, N.C., Aug. 05, 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 June30, 2021.

Second Quarter 2021 HighlightsGAAP

-- Record revenue of $41.5 million, up 11% year-over-year -- Subscription revenue growth accelerated to 25% year-over-year -- Brands revenue increased 39% year-over-year -- Brands subscription revenue growth of 54% year-over-year and represented 44% of total subscription revenue -- Brands customer count increased 45% year-over-year -- Cash and cash equivalents were $90.4 million, an increase of $26.5 million since June 30, 2020 and an increase of $8.0 million since March 31, 2021 -- Operating cash flow increased 19% year-over-year to $9.2 million

Non-GAAP

-- Adjusted EBITDA of $9.3 million and adjusted EBITDA margin of 22% -- Free cash flow for the six months ended June 30, 2021 increased 35% year-over-year to $15.5 million, or $0.49 per diluted share based on 31.3 million diluted weighted average shares outstanding

We enjoyed continued strong momentum in Q2, with record revenue and strong adjusted EBITDA, both of which exceeded our guidance for the quarter, said David Spitz, ChannelAdvisors chief executive officer. Our focus on brands, product innovation, channel expansion, and strong sales and revenue retention drove another quarter of accelerating subscription revenue growth. Demand for our products has remained very strong as brands continue to accelerate their digital transformation strategies.

Recent Business Highlights

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

-- Continued product innovation: To help brands deliver a seamless shopping experience, ChannelAdvisor expanded its Shoppable Media offering. In addition to directing purchase-ready shoppers to authorized stores and retail sites, brands using the new Buy Online feature can display retailers offering curbside pickup or in-store delivery. ChannelAdvisor also launched Product Tags, which provide insights that help brands quickly identify and take action on categories such as Top Sellers and Recently Sold Out products. -- Continued channel expansion: ChannelAdvisor remains laser-focused on global channel expansions to help address the evolving business needs of brands and retailers worldwide. With the recent addition of more than 20 new integrations, ChannelAdvisor now supports over 190 channels. New global integrations include Zalando (EE, HR, LT, LV, SI, SK), Rakuten (JP), MyUS.com (US, UK) and JOOM (US, DE, ES, IT, NL). The company also added support for first-party integrations with Petco (US), Home Depot (CA), Chewy (US), Lowes (CA), Penny (DE) and Myer (AU).

-- New customers: ChannelAdvisor recently added notable new customers including 3M, Kodak, Reckitt Benckiser, Remy Cointreau and Salomon SAS and strategic partner TikTok. ChannelAdvisor also expanded its relationship with customers such as Clorox and SkullCandy. -- Employee Engagement: ChannelAdvisor recently received the Triangle Business Journals 2021 Best Places to Work Award for the seventh time. The annual workplace competition recognizes companies for creating a work environment that employees value. ChannelAdvisor also adopted a flexible work policy, giving employees the freedom to choose to work remotely, in-office, or a mix based on their needs. By allowing employees to decide what works best for them individually, ChannelAdvisor has empowered employees to be their best while also expanding our talent pool globally.

Financial Outlook

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

(in millions, except percentages) Q3 2021Revenue $41.3 - $41.7Y/Y Growth 17% - 18%Adjusted EBITDA $6.8 - $7.2As a Percentage of Revenue (at the midpoint) 17%Stock-based Compensation Expense $2.8 - $3.2Weighted 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 Second Quarter 2021 Financial Results Conference CallWhen: Thursday, August 5, 2021Time: 8:00 a.m. ETLiveCall: (855) 638-4821, Passcode 8435457, Toll Free (704) 288-0612, Passcode 8435457, 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 (benefit) expense, net interest expense, and stock-based compensation expense. For 2021 only, adjusted EBITDA excluded the change in fair value of acquisition-related contingent consideration. For 2020 only, adjusted EBITDA included transaction costs associated with our July 2020 acquisition of BlueBoard. 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, the change in fair value of acquisition-related contingent consideration and transaction costs. 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 over 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 third 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 June30, 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.

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

June 30, December 2021 31, 2020 (unaudited) Assets Current assets: Cash and cash equivalents $ 90,351 $ 71,545 Accounts receivable, net of allowance of $407 and$417 as of June 30, 2021 and December31, 2020, 25,261 24,705 respectivelyPrepaid expenses and other current assets 15,209 13,874 Total current assets 130,821 110,124 Operating lease right of use assets 6,302 8,141 Property and equipment, net 7,898 8,707 Goodwill 30,990 30,990 Intangible assets, net 3,585 4,155 Deferred contract costs, net of current portion 16,291 14,040 Long-term deferred tax assets, net 4,426 3,551 Other assets 886 953 Total assets $ 201,199 $ 180,661 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 818 $ 158 Accrued expenses 15,837 14,008 Deferred revenue 27,040 22,819 Other current liabilities 5,717 6,029 Total current liabilities 49,412 43,014 Long-term operating leases, net of current portion 2,944 5,394 Other long-term liabilities 1,688 2,162 Total liabilities 54,044 50,570 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000 sharesauthorized, no shares issued and outstanding as of ? ? June 30, 2021 and December 31, 2020Common stock, $0.001 par value, 100,000,000 sharesauthorized, 29,830,607 and 29,020,424 shares issued 30 29 and outstanding as of June 30, 2021 and December31,2020, respectivelyAdditional paid-in capital 295,950 288,842 Accumulated other comprehensive loss (1,157 ) (1,095 )Accumulated deficit (147,668 ) (157,685 )Total stockholders' equity 147,155 130,091 Total liabilities and stockholders' equity $ 201,199 $ 180,661

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

Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020Revenue $ 41,543 $ 37,443 $ 80,709 $ 69,475 Cost ofrevenue (1) 9,533 7,053 17,941 14,116 (2)Gross profit 32,010 30,390 62,768 55,359 Operatingexpenses (1) (2):Sales and 15,159 12,619 29,791 24,959 marketingResearch and 5,908 4,543 11,435 9,344 developmentGeneral and 6,835 6,033 11,717 11,768 administrativeTotaloperating 27,902 23,195 52,943 46,071 expensesIncome from 4,108 7,195 9,825 9,288 operationsOther(expense) income:Interest(expense) (33 ) 85 (66 ) 211 income, netOther(expense) (5 ) 31 (135 ) 39 income, netTotal other(expense) (38 ) 116 (201 ) 250 incomeIncome before 4,070 7,311 9,624 9,538 income taxesIncome tax(benefit) (490 ) 325 (393 ) 545 expenseNet income $ 4,560 $ 6,986 $ 10,017 $ 8,993 Net income per share:Basic $ 0.15 $ 0.25 $ 0.34 $ 0.32 Diluted $ 0.15 $ 0.24 $ 0.32 $ 0.31 Weightedaverage common sharesoutstanding:Basic 29,764,013 28,489,086 29,530,369 28,325,426 Diluted 31,402,695 29,700,524 31,269,427 29,362,886 (1) Includesstock-based compensationas follows:Cost of $ 264 $ 238 $ 496 $ 557 revenueSales and 996 777 1,816 1,517 marketingResearch and 690 543 1,302 1,223 developmentGeneral and 1,626 998 3,010 2,173 administrative $ 3,576 $ 2,556 $ 6,624 $ 5,470 (2) Includesdepreciationand amortizationas follows:Cost of $ 1,107 $ 1,029 $ 2,309 $ 2,005 revenueSales and 112 156 271 311 marketingResearch and 44 64 107 134 developmentGeneral and 384 273 792 550 administrative $ 1,647 $ 1,522 $ 3,479 $ 3,000

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

Six Months Ended June 30, 2021 2020Cash flows from operating activities Net income $ 10,017 $ 8,993 Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:Depreciation and amortization 3,479 3,000 Bad debt expense 47 504 Stock-based compensation expense 6,624 5,470 Deferred income taxes (893 ) 532 Other items, net (1,760 ) (420 )Changes in assets and liabilities: Accounts receivable (527 ) (2,426 )Prepaid expenses and other assets (318 ) (850 )Deferred contract costs (3,282 ) (901 )Accounts payable and accrued expenses (249 ) 1,177 Deferred revenue 4,448 (1,623 )Cash and cash equivalents provided by operating 17,586 13,456 activitiesCash flows from investing activities Purchases of property and equipment (494 ) (580 )Payment of software development costs (1,631 ) (1,407 )Cash and cash equivalents used in investing activities (2,125 ) (1,987 )Cash flows from financing activities Repayment of finance leases (8 ) (1,415 )Proceeds from exercise of stock options 3,722 2,134 Payment of statutory tax withholding related to (342 ) ? net-share settlement of restricted stock unitsCash and cash equivalents provided by financing 3,372 719 activitiesEffect of currency exchange rate changes on cash and (27 ) (98 )cash equivalentsNet increase in cash and cash equivalents 18,806 12,090 Cash and cash equivalents, beginning of period 71,545 51,785 Cash and cash equivalents, end of period $ 90,351 $ 63,875

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 June Six Months Ended June 30, 30, 2021 2020 2021 2020Revenue $ 41,543 $ 37,443 $ 80,709 $ 69,475 Gross profit (GAAP) $ 32,010 $ 30,390 $ 62,768 $ 55,359 Plus: Stock-basedcompensation expense 264 238 496 557 included within costof revenueGross profit $ 32,274 $ 30,628 $ 63,264 $ 55,916 (Non-GAAP)Gross margin (GAAP) 77.1 % 81.2 % 77.8 % 79.7 %Gross margin 77.7 % 81.8 % 78.4 % 80.5 %(Non-GAAP)

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses(unaudited; in thousands) Three Months Ended June Six Months Ended June 30, 30, 2021 2020 2021 2020Operating expenses (GAAP) $ 27,902 $ 23,195 $ 52,943 $ 46,071 Less: Stock-basedcompensation expense included 3,312 2,318 6,128 4,913 within operating expensesLess: Contingentconsideration fair value ? ? (1,313 ) ? adjustment included withinoperating expensesLess: Transaction costs inconnection with acquisition ? 265 ? 265 included within operatingexpensesOperating expenses (Non-GAAP) $ 24,590 $ 20,612 $ 48,128 $ 40,893

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 June Six Months Ended June 30, 30, 2021 2020 2021 2020Revenue $ 41,543 $ 37,443 $ 80,709 $ 69,475 Income from operations (GAAP) $ 4,108 $ 7,195 $ 9,825 $ 9,288 Plus: Stock-based 3,576 2,556 6,624 5,470 compensation expenseLess: Contingentconsideration fair value ? ? (1,313 ) ? adjustmentPlus: Transaction costs in ? 265 ? 265 connection with acquisitionIncome from operations $ 7,684 $ 10,016 $ 15,136 $ 15,023 (Non-GAAP)Operating margin (GAAP) 9.9 % 19.2 % 12.2 % 13.4 %Operating margin (Non-GAAP) 18.5 % 26.7 % 18.8 % 21.6 %

Reconciliation of GAAP Net Income to Non-GAAP Net Income(unaudited; in thousands) Three Months Ended Six Months Ended June June 30, 30, 2021 2020 2021 2020Net income (GAAP) $ 4,560 $ 6,986 $ 10,017 $ 8,993 Plus: Stock-based compensation 3,576 2,556 6,624 5,470 expenseLess: Contingent consideration ? ? (1,313 ) ? fair value adjustmentPlus: Transaction costs in ? 265 ? 265 connection with acquisitionNet income (Non-GAAP) $ 8,136 $ 9,807 $ 15,328 $ 14,728

Reconciliation of GAAP Net Income to Adjusted EBITDA(unaudited; in thousands) Three Months Ended Six Months Ended June June 30, 30, 2021 2020 2021 2020Net income (GAAP) $ 4,560 $ 6,986 $ 10,017 $ 8,993 Adjustments: Interest expense (income), net 33 (85 ) 66 (211 )Income tax (benefit) expense (490 ) 325 (393 ) 545 Depreciation and amortization 1,647 1,522 3,479 3,000 expenseTotal adjustments 1,190 1,762 3,152 3,334 EBITDA 5,750 8,748 13,169 12,327 Stock-based compensation expense 3,576 2,556 6,624 5,470 Contingent consideration fair ? ? (1,313 ) ? value adjustmentTransaction costs in connection ? 265 ? 265 with acquisitionAdjusted EBITDA $ 9,326 $ 11,569 $ 18,480 $ 18,062

Free Cash Flow Reconciliation(unaudited; in thousands except share and per share data) Six Months Ended June 30, 2021 2020Cash and cash equivalents provided by operating $ 17,586 $ 13,456 activitiesLess: Purchases of property and equipment (494 ) (580 )Less: Payment of capitalized software (1,631 ) (1,407 )development costsFree cash flow $ 15,461 $ 11,469 Diluted weighted average shares outstanding 31,269,427 29,362,886 Free cash flow per diluted share $ 0.49 $ 0.39

Adjusted EBITDA Guidance Reconciliation(unaudited; in millions) Third Quarter 2021 Low HighNet income (estimate) $ 1.4 $ 2.5 Adjustments (estimates): Interest (income) expense, net 0.1 0.0 Income tax expense 0.4 0.3 Depreciation and amortization expense 1.7 1.6 Total adjustments 2.2 1.9 EBITDA 3.6 4.4 Stock-based compensation expense (estimate) 3.2 2.8 Adjusted EBITDA guidance (floor) $ 6.8 $ 7.2

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

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