GlobeNewswire Inc | Nov 9, 2021 06:45AM EST

November 09, 2021

Subscription revenue growth accelerates to 26% year-over-year

Record revenue from brands increases 45% year-over-year

RESEARCH TRIANGLE PARK, N.C., Nov. 09, 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 September30, 2021.

Third Quarter 2021 HighlightsGAAP

-- Record revenue of $41.6 million, up 18% year-over-year -- Subscription revenue growth accelerated for the 5th consecutive quarter to 26% year-over-year -- Record brands revenue increased 45% year-over-year -- Brands subscription revenue growth of 52% year-over-year and represented 47% of total subscription revenue -- Brands customer count increased 29% year-over-year -- Cash and cash equivalents were $97.0 million, an increase of $30.7 million since September 30, 2020 and an increase of $6.7 million since June 30, 2021

Non-GAAP

-- Adjusted EBITDA of $8.2 million and adjusted EBITDA margin of 20% -- Free cash flow for the nine months ended September 30, 2021 of $22.8 million, or $0.73 per diluted share based on 31.3 million diluted weighted average shares outstanding

We continued to execute extremely well in Q3, driving strong growth, record revenue, and adjusted EBITDA that exceeded the high-end of our guidance range for the quarter, said David Spitz, ChannelAdvisors chief executive officer. This growth is especially impressive considering its on top of last years elevated e-commerce volumes. The strength in our business is a direct result of our brands strategy and the growth investments weve been making to empower their digital transformations.We believe our focus on product innovation, channel expansion, strong sales and revenue retention positions us well to drive sustainable double-digit revenue growth and adjusted EBITDA margin of at least 20%, consistent with the long-term financial targets we provided at our recent analyst day.

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: ChannelAdvisor recently released A/B Testing for Product Content in order to empower brands to increase the likelihood of conversion by identifying the best performing product content to support efforts on Google and Facebook. ChannelAdvisor also launched Commerce Network, an in-platform experience that enables online channels to easily scout, engage and grow with brands and retailers looking to diversify in the highly competitive e-commerce landscape. ChannelAdvisor also released Self-Service Buy Now Interstitial, a major new Shoppable Media capability that allows self-service clients to build powerful social media campaigns that include a path to purchase on preferred retailers. -- 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 many new integrations, ChannelAdvisor now supports over 200 channels. New global integrations include CDON, the leading marketplace in the Nordic region, in Sweden, Norway, Denmark and Finland; Bol.com in Belgium and the Netherlands; Rakuten in France; and The Iconic in Australia. The company also added support for first-party integrations in the U.S. with Ashley Furniture, Belk, Gamestop, Lord & Taylor, Orange Theory and Tanguay. -- Industry leadership: Named a Google Premier Partner Awards finalist in two categories for effective campaigns that drove online sales. ChannelAdvisor is recognized in the Online Sales and Account Team categories, highlighting companies that drive online sales in moments of shopper deliberation and discovery and teams that deliver advertiser growth through best-in-class digital campaigns. -- New customers: ChannelAdvisor recently added notable new customers including Master Lock, Detroit Diesel, Sennheiser, Xiaomi and Natural Balance Pet Foods. ChannelAdvisor also expanded its relationship with customers such as ASICS, Calzedonia and Geox.

Financial Outlook

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

(in millions, except percentages) Q4 2021Revenue $43.7 - $44.7Y/Y Growth 8% - 11%Adjusted EBITDA $8.6 - $9.6As a Percentage of Revenue (at the midpoint) 21%Stock-based Compensation Expense $2.2 - $2.6Weighted Average Shares Outstanding 30.1

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: Tuesday, November 9, 2021Time: 8:00 a.m. ETLiveCall: (855) 638-4821, Passcode 6647429, Toll Free (704) 288-0612, Passcode 6647429, 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 multichannel commerce 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 across the entire buying cycle, optimizing their operations for peak performance, and providing actionable analytics to improve competitiveness. Thousands of customers depend on ChannelAdvisor to securely power their e-commerce operations 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 fourth 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 September30, 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)

September December 30, 2021 31, 2020 (unaudited) Assets Current assets: Cash and cash equivalents $ 97,019 $ 71,545 Accounts receivable, net of allowance of $250 and$417 as of September 30, 2021 and December31, 2020, 25,240 24,705 respectivelyPrepaid expenses and other current assets 15,226 13,874 Total current assets 137,485 110,124 Operating lease right of use assets 5,284 8,141 Property and equipment, net 8,188 8,707 Goodwill 30,186 30,990 Intangible assets, net 3,331 4,155 Deferred contract costs, net of current portion 17,274 14,040 Long-term deferred tax assets, net 4,304 3,551 Other assets 826 953 Total assets $ 206,878 $ 180,661 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 613 $ 158 Accrued expenses 17,612 14,008 Deferred revenue 28,425 22,819 Other current liabilities 5,682 6,029 Total current liabilities 52,332 43,014 Long-term operating leases, net of current portion 1,689 5,394 Other long-term liabilities 2,029 2,162 Total liabilities 56,050 50,570 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000 sharesauthorized, no shares issued and outstanding as of ? ? September 30, 2021 and December 31, 2020Common stock, $0.001 par value, 100,000,000 sharesauthorized, 30,048,948 and 29,020,424 shares issued 30 29 and outstanding as of September 30, 2021 andDecember31, 2020, respectivelyAdditional paid-in capital 297,251 288,842 Accumulated other comprehensive loss (2,314 ) (1,095 )Accumulated deficit (144,139 ) (157,685 )Total stockholders' equity 150,828 130,091 Total liabilities and stockholders' equity $ 206,878 $ 180,661

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

Three Months Ended September Nine Months Ended September 30, 30, 2021 2020 2021 2020Revenue $ 41,575 $ 35,285 $ 122,284 $ 104,760 Cost ofrevenue (1) 10,100 7,691 28,041 21,807 (2)Gross profit 31,475 27,594 94,243 82,953 Operatingexpenses (1) (2):Sales and 15,482 13,477 45,273 38,436 marketingResearch and 5,364 4,809 16,799 14,153 developmentGeneral and 7,075 5,974 18,792 17,742 administrativeTotaloperating 27,921 24,260 80,864 70,331 expensesIncome from 3,554 3,334 13,379 12,622 operationsOther(expense) income:Interest(expense) (30 ) (1 ) (96 ) 210 income, netOther(expense) (29 ) 5 (164 ) 44 income, netTotal other(expense) (59 ) 4 (260 ) 254 incomeIncome before 3,495 3,338 13,119 12,876 income taxesIncome tax(benefit) (34 ) (374 ) (427 ) 171 expenseNet income $ 3,529 $ 3,712 $ 13,546 $ 12,705 Net income per share:Basic $ 0.12 $ 0.13 $ 0.46 $ 0.45 Diluted $ 0.11 $ 0.12 $ 0.43 $ 0.43 Weightedaverage common sharesoutstanding:Basic 29,931,173 28,802,310 29,665,439 28,485,547 Diluted 31,474,314 30,436,601 31,295,737 29,815,829 (1) Includesstock-based compensationas follows:Cost of $ 169 $ 203 $ 665 $ 760 revenueSales and 928 544 2,744 2,061 marketingResearch and 567 485 1,869 1,708 developmentGeneral and 1,451 1,030 4,461 3,203 administrative $ 3,115 $ 2,262 $ 9,739 $ 7,732 (2) Includesdepreciationand amortizationas follows:Cost of $ 1,100 $ 1,062 $ 3,409 $ 3,067 revenueSales and 85 154 356 465 marketingResearch and 32 61 139 195 developmentGeneral and 368 378 1,160 928 administrative $ 1,585 $ 1,655 $ 5,064 $ 4,655

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

Nine Months Ended September 30, 2021 2020Cash flows from operating activities Net income $ 13,546 $ 12,705 Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:Depreciation and amortization 5,064 4,655 Bad debt (recovery) expense (99 ) 479 Stock-based compensation expense 9,739 7,732 Deferred income taxes (875 ) (61 )Other items, net (1,982 ) (617 )Changes in assets and liabilities: Accounts receivable (583 ) 343 Prepaid expenses and other assets 79 (917 )Deferred contract costs (4,884 ) (1,800 )Accounts payable and accrued expenses 86 3,404 Deferred revenue 6,388 62 Cash and cash equivalents provided by operating 26,479 25,985 activitiesCash flows from investing activities Acquisition, net of cash acquired ? (8,787 )Purchases of property and equipment (1,125 ) (1,021 )Payment of software development costs (2,577 ) (2,283 )Cash and cash equivalents used in investing activities (3,702 ) (12,091 )Cash flows from financing activities Repayment of finance leases (12 ) (1,418 )Proceeds from exercise of stock options 4,237 3,553 Payment of statutory tax withholding related to net-share (1,363 ) (1,299 )settlement of restricted stock unitsPayment of line of credit financing costs ? (179 )Cash and cash equivalents provided by financing 2,862 657 activitiesEffect of currency exchange rate changes on cash and cash (165 ) 21 equivalentsNet increase in cash and cash equivalents 25,474 14,572 Cash and cash equivalents, beginning of period 71,545 51,785 Cash and cash equivalents, end of period $ 97,019 $ 66,357

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 Nine Months Ended September September 30, 30, 2021 2020 2021 2020Revenue $ 41,575 $ 35,285 $ 122,284 $ 104,760 Gross profit (GAAP) $ 31,475 $ 27,594 $ 94,243 $ 82,953 Plus: Stock-basedcompensation expense 169 203 665 760 included within costof revenueGross profit $ 31,644 $ 27,797 $ 94,908 $ 83,713 (Non-GAAP)Gross margin (GAAP) 75.7 % 78.2 % 77.1 % 79.2 %Gross margin 76.1 % 78.8 % 77.6 % 79.9 %(Non-GAAP)

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses(unaudited; in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020Operating expenses (GAAP) $ 27,921 $ 24,260 $ 80,864 $ 70,331 Less: Stock-basedcompensation expense 2,946 2,059 9,074 6,972 included within operatingexpensesLess: Contingentconsideration fair value ? ? (1,313 ) ? adjustment includedwithin operating expensesLess: Transaction costsin connection with ? 178 ? 443 acquisition includedwithin operating expensesOperating expenses $ 24,975 $ 22,023 $ 73,103 $ 62,916 (Non-GAAP)

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 Nine Months Ended September September 30, 30, 2021 2020 2021 2020Revenue $ 41,575 $ 35,285 $ 122,284 $ 104,760 Income from operations $ 3,554 $ 3,334 $ 13,379 $ 12,622 (GAAP)Plus: Stock-based 3,115 2,262 9,739 7,732 compensation expenseLess: Contingentconsideration fair value ? ? (1,313 ) ? adjustmentPlus: Transaction costsin connection with ? 178 ? 443 acquisitionIncome from operations $ 6,669 $ 5,774 $ 21,805 $ 20,797 (Non-GAAP)Operating margin (GAAP) 8.5 % 9.4 % 10.9 % 12.0 %Operating margin 16.0 % 16.4 % 17.8 % 19.9 %(Non-GAAP)

Reconciliation of GAAP Net Income to Non-GAAP Net Income(unaudited; in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020Net income (GAAP) $ 3,529 $ 3,712 $ 13,546 $ 12,705 Plus: Stock-based compensation 3,115 2,262 9,739 7,732 expenseLess: Contingent consideration ? ? (1,313 ) ? fair value adjustmentPlus: Transaction costs in ? 178 ? 443 connection with acquisitionNet income (Non-GAAP) $ 6,644 $ 6,152 $ 21,972 $ 20,880

Reconciliation of GAAP Net Income to Adjusted EBITDA(unaudited; in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020Net income (GAAP) $ 3,529 $ 3,712 $ 13,546 $ 12,705 Adjustments: Interest expense (income), net 30 1 96 (210 )Income tax (benefit) expense (34 ) (374 ) (427 ) 171 Depreciation and amortization 1,585 1,655 5,064 4,655 expenseTotal adjustments 1,581 1,282 4,733 4,616 EBITDA 5,110 4,994 18,279 17,321 Stock-based compensation 3,115 2,262 9,739 7,732 expenseContingent consideration fair ? ? (1,313 ) ? value adjustmentTransaction costs in ? 178 ? 443 connection with acquisitionAdjusted EBITDA $ 8,225 $ 7,434 $ 26,705 $ 25,496

Free Cash Flow Reconciliation(unaudited; in thousands except share and per share data) Nine Months Ended September 30, 2021 2020Cash and cash equivalents provided by operating $ 26,479 $ 25,985 activitiesLess: Purchases of property and equipment (1,125 ) (1,021 )Less: Payment of capitalized software (2,577 ) (2,283 )development costsFree cash flow $ 22,777 $ 22,681 Diluted weighted average shares outstanding 31,295,737 29,815,829 Free cash flow per diluted share $ 0.73 $ 0.76

Adjusted EBITDA Guidance Reconciliation(unaudited; in millions) Fourth Quarter 2021 Low HighNet income (estimate) $ 4.0 $ 5.7 Adjustments (estimates): Interest (income) expense, net 0.1 0.0 Income tax expense 0.2 0.1 Depreciation and amortization expense 1.7 1.6 Total adjustments 2.0 1.7 EBITDA 6.0 7.4 Stock-based compensation expense (estimate) 2.6 2.2 Adjusted EBITDA guidance (floor) $ 8.6 $ 9.6