GlobeNewswire Inc | Nov 5, 2020 06:45AM EST

November 05, 2020

Revenue Growth of 11% on a Y/Y Basis with Record Fixed RevenueBrands Revenue Growth of 29% on a Y/Y Basis to a Record 34% of RevenueNet Bookings Best In More Than Five YearsAdjusted EBITDA Increased 44% on a Y/Y BasisCash at $66 Million with Operating Cash Flow of $26 Million Year-To-Date

RESEARCH TRIANGLE PARK, N.C., Nov. 05, 2020 (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, 2020.

We delivered strong financial results again in the third quarter, with revenue and adjusted EBITDA that both exceeded our guidance for the quarter, said David Spitz, ChannelAdvisors chief executive officer. What excites me even more is the strong performance we had in sales, especially with brands, and overall outstanding revenue retention for the quarter, both of which combined to drive an acceleration in fixed revenue growth. Our strategic shift towards brands has continued to pay off, with revenue growth from brands accelerating to 29% year over year for the quarter, and our solid overall execution in the quarter positions us for continued strong performance as we close out the year.

Third Quarter 2020 Financial Results

-- Revenue: Total revenue was $35.3 million for the third quarter 2020, an increase of 11.4% from the year-ago period. Brands revenue increased 29.3% from the year-ago period and reached a new high of 34.2% of total revenue. Variable revenue was $8.2 million, or 23.2% of total revenue for the third quarter 2020, compared with $5.8 million, or 18.5% of total revenue for the year-ago period. Fixed subscription revenue was $27.1 million, or 76.8% of total revenue for the third quarter 2020, compared with $25.8 million, or 81.5% of total revenue for the year-ago period. -- Gross Profit: GAAP gross profit was $27.6 million, representing a 78.2% gross margin for the third quarter 2020, compared with $24.4 million and 77.1%, respectively, for the year-ago period. Non-GAAP gross profit was $27.8 million, representing a 78.8% non-GAAP gross margin for the third quarter 2020, compared with $24.8 million and 78.4%, respectively, for the year-ago period. For a description of non-GAAP gross profit, non-GAAP gross margin and other non-GAAP measures included in this press release, including their potential limitations, see Non-GAAP Financial Measures below. -- Net Income: GAAP net income was $3.7 million for the third quarter 2020, compared with $1.7 million for the year-ago period. GAAP net income per diluted share was $0.12 based on 30.4 million diluted weighted average shares outstanding for the third quarter 2020, compared with $0.06 per diluted share based on 28.8 million diluted weighted average shares outstanding for the year-ago period. Non-GAAP net income was $6.2 million for the third quarter 2020, compared with $3.5 million for the year-ago period. Non-GAAP net income per diluted share was $0.20 based on 30.4 million diluted weighted average shares outstanding for the third quarter 2020, compared with $0.12 based on 28.8 million diluted weighted average shares outstanding for the year-ago period. -- Adjusted EBITDA: Adjusted EBITDA, a non-GAAP measure, was $7.4 million for the third quarter 2020, compared with $5.2 million for the year-ago period. Adjusted EBITDA margin, which is adjusted EBITDA divided by revenue, was 21.1% for the third quarter 2020, compared with 16.3% for the year-ago period. Adjusted EBITDA for the twelve months ended September30, 2020 totaled $34.8 million. -- Cash: Cash and cash equivalents totaled $66.4 million as of September30, 2020, compared with $51.8 million as of December31, 2019. Cash generated from operations was $26.0 million for the nine months ended September30, 2020, compared with $7.5 million for the year-ago period. Free cash flow, a non-GAAP measure, was $22.7 million for the nine months ended September30, 2020, compared with $4.8 million for the year-ago period.

Recent Business Highlights

-- Launch of Shoppable Media, a Comprehensive Suite of Multi-Channel Solutions for Brands: From inspiration to conversion, brands can ease the path to purchase directly from their websites and across various marketing and advertising channels with ChannelAdvisors Shoppable Media, a product offering that comprises Where to Buy Online, Where to Buy Local, Dynamic Shopping Links, and Buy Now Interstitial, a new dynamic linking feature. -- Search Terms Generator for Amazon: Seller Central merchants advertising and selling on Amazon through ChannelAdvisor can save time and resources with the Search Terms Generator. This new feature automatically generates Search Terms and provides updates based on advertising performance to help improve organic listings. -- New Marketplace Integrations: ChannelAdvisor is committed to helping brands and retailers reach new global audiences through the support of Bunnings Marketlink (AU), Grupo Exito (US CBT to CO), Kroger (US), Love the Sales (UK), Onceit (NZ), and Stockd (US), adding to the global total of more than 100 marketplace integrations. -- New First-Party Retail Dropship Connections: ChannelAdvisor added support for first-party integrations with Bluestem (US), JClub (US), OTTO VAL (DE), and Walgreens (US). -- Enhanced Client Experience to Improve Operational Agility:New Knowledge Center: New services IT infrastructure improves the ability of clients to answer questions, solve problems and learn new features. With improved self-help content that is easier to find, forums to encourage and facilitate client engagement, and a new set of tools to enable team members to better address client questions, ChannelAdvisor continues to invest in making our clients successful.New Order Pipeline Dashboard: With this new analytics tool, ChannelAdvisor continues to help brands and retailers minimize costly order processing delays, especially during peak volume periods with powerful visualization and monitoring of where those delays may be occurring in the processing pipeline.New Channel Health Console: Allows ChannelAdvisor Marketplace users to understand and gauge operational health across all channel integrations, enabling prioritization and focus on the most important areas of the business.Deal Planner: Introduces a new way to manage short-term promotions in dozens of marketplaces. Brands and retailers can create deals for a specified time period and then adjust the price for the deals duration. When the time window expires, the listing returns to the original price. -- ChannelAdvisor Consumer Survey Indicates Significant Shift In Online Shopping Behavior: Results from our recent consumer survey of more than one thousand active shoppers in the US and the UK indicated significant shifts in online shopping behavior among purchase-ready consumers across all age groups and genders during the pandemic. ChannelAdvisor presented the survey findings in a webinar that can be found on our corporate website. -- Customer Details: ChannelAdvisor recently added notable new customers including Epson U.S., Gant, Geox, Omron Healthcare Europe and Universal Music Group Germany, and expanded its relationship with customers such as Brady Corporation and Simone Perele SAS.

Financial Outlook

Based on the information available as of today, ChannelAdvisor is issuing guidance for its fourth quarter 2020.

(in millions) Q4 2020Revenue $37.3 - $38.3Y/Y Growth 7% - 10%Adjusted EBITDA $8.0 - $9.0As a Percentage of Revenue (at the midpoint) 22%Stock-based Compensation Expense $2.1 - $2.5Weighted Average Shares Outstanding 29.0

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 Third Quarter 2020 Financial Results Conference CallWhen: Thursday, November 5, 2020Time: 8:00 a.m. ETLiveCall: (855) 638-4821, Passcode 5252688, Toll Free (704) 288-0612, Passcode 5252688, 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, non-GAAP gross profit and non-GAAP gross margin. Adjusted EBITDA and adjusted EBITDA margin exclude depreciation, amortization, income tax (benefit) 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 software development costs. Non-GAAP gross profit and non-GAAP gross margin exclude stock-based compensation expense.

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 fourth quarter 2020 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, 2019 and its Quarterly Report on Form10-Q that will be filed for the quarter ended September30, 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 SubsidiariesCondensed Consolidated Balance Sheets(in thousands, except share and per share data)

September December 31, 30, 2020 2019 (unaudited) Assets Current assets: Cash and cash equivalents $ 66,357 $ 51,785 Accounts receivable, net of allowance of $410 and$733 as of September 30, 2020 and December31, 21,817 22,126 2019, respectivelyPrepaid expenses and other current assets 12,840 10,452 Total current assets 101,014 84,363 Operating lease right of use assets 8,802 11,128 Property and equipment, net 9,184 9,597 Goodwill 30,990 23,486 Intangible assets, net 4,439 1,285 Deferred contract costs, net of current portion 13,370 12,810 Long-term deferred tax assets, net 3,649 3,584 Other assets 979 614 Total assets $ 172,427 $ 146,867 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 545 $ 409 Accrued expenses 14,892 8,577 Deferred revenue 21,368 21,000 Other current liabilities 6,375 6,431 Total current liabilities 43,180 36,417 Long-term operating leases, net of current portion 6,436 9,767 Long-term finance leases, net of current portion 12 27 Other long-term liabilities 2,170 1,007 Total liabilities 51,798 47,218 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000 sharesauthorized, no shares issued and outstanding as of ? ? September 30, 2020 and December 31, 2019Common stock, $0.001 par value, 100,000,000 sharesauthorized, 28,981,204 and 28,077,469 shares issued 29 28 and outstanding as of September 30, 2020 andDecember31, 2019, respectivelyAdditional paid-in capital 286,208 278,111 Accumulated other comprehensive loss (1,803 ) (1,740 ) Accumulated deficit (163,805 ) (176,750 ) Total stockholders' equity 120,629 99,649 Total liabilities and stockholders' equity $ 172,427 $ 146,867

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

Three Months Ended Nine Months Ended September September 30, 30, 2020 2019 2020 2019Revenue $ 35,285 $ 31,678 $ 104,760 $ 95,184 Cost of revenue (1) 7,691 7,251 21,807 21,876 (2)Gross profit 27,594 24,427 82,953 73,308 Operating expenses (1) (2):Sales and marketing 13,477 12,403 38,436 40,808 Research and 4,809 4,803 14,153 15,161 developmentGeneral and 5,974 5,440 17,742 19,272 administrativeTotal operating 24,260 22,646 70,331 75,241 expensesIncome (loss) from 3,334 1,781 12,622 (1,933 ) operationsOther income: Interest (expense) (1 ) 205 210 599 income, netOther income 5 (44 ) 44 (32 ) (expense), netTotal other income 4 161 254 567 Income (loss) 3,338 1,942 12,876 (1,366 ) before income taxesIncome tax (374 ) 213 171 572 (benefit) expenseNet income (loss) $ 3,712 $ 1,729 $ 12,705 $ (1,938 ) Net income (loss) per share:Basic $ 0.13 $ 0.06 $ 0.45 $ (0.07 ) Diluted $ 0.12 $ 0.06 $ 0.43 $ (0.07 ) Weighted averagecommon shares outstanding:Basic 28,802,310 28,049,199 28,485,547 27,824,696 Diluted 30,436,601 28,754,679 29,815,829 27,824,696 (1) Includesstock-based compensation asfollows:Cost of revenue $ 203 $ 169 $ 760 $ 745 Sales and marketing 544 ? 2,061 1,773 Research and 485 454 1,708 1,696 developmentGeneral and 1,030 178 3,203 2,786 administrative $ 2,262 $ 801 $ 7,732 $ 7,000 (2) Includesdepreciation and amortization asfollows:Cost of revenue $ 1,062 $ 1,046 $ 3,067 $ 2,947 Sales and marketing 154 205 465 607 Research and 61 94 195 277 developmentGeneral and 378 319 928 975 administrative $ 1,655 $ 1,664 $ 4,655 $ 4,806

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

Nine Months Ended September 30, 2020 2019Cash flows from operating activities Net income (loss) $ 12,705 $ (1,938 ) Adjustments to reconcile net income (loss) to cashand cash equivalents provided by operating activities:Depreciation and amortization 4,655 4,806 Bad debt expense 479 911 Stock-based compensation expense 7,732 7,000 Deferred income taxes (61 ) 513 Other items, net (617 ) 43 Changes in assets and liabilities, net of effects from acquisition:Accounts receivable 343 1,007 Prepaid expenses and other assets (917 ) 2,282 Deferred contract costs (1,800 ) (2,661 ) Accounts payable and accrued expenses 3,404 (2,112 ) Deferred revenue 62 (2,337 ) Cash and cash equivalents provided by operating 25,985 7,514 activitiesCash flows from investing activities Acquisition, net of cash acquired (8,787 ) ? Purchases of property and equipment (1,021 ) (755 ) Payment of software development costs (2,283 ) (1,972 ) Cash and cash equivalents used in investing (12,091 ) (2,727 ) activitiesCash flows from financing activities Repayment of finance leases (1,418 ) (2,357 ) Proceeds from exercise of stock options 3,553 968 Payment of statutory tax withholding related to (1,299 ) (2,101 ) net-share settlement of restricted stock unitsPayment of line of credit financing costs (179 ) ? Cash and cash equivalents provided by (used in) 657 (3,490 ) financing activitiesEffect of currency exchange rate changes on cash and 21 (256 ) cash equivalentsNet increase in cash and cash equivalents 14,572 1,041 Cash and cash equivalents, beginning of period 51,785 47,185 Cash and cash equivalents, end of period $ 66,357 $ 48,226

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 30, September 30, 2020 2019 2020 2019Revenue $ 35,285 $ 31,678 $ 104,760 $ 95,184 Gross profit (GAAP) $ 27,594 $ 24,427 $ 82,953 $ 73,308 Plus: Stock-basedcompensation expense 203 169 760 745 included within cost ofrevenuePlus: Non-recurringseverance and related costs ? 238 ? 238 included within cost ofrevenueGross profit (Non-GAAP) $ 27,797 $ 24,834 $ 83,713 $ 74,291 Gross margin (GAAP) 78.2 % 77.1 % 79.2 % 77.0 %Gross margin (Non-GAAP) 78.8 % 78.4 % 79.9 % 78.0 %

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses(unaudited; in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Operating expenses (GAAP) $ 24,260 $ 22,646 $ 70,331 $ 75,241 Less: Stock-basedcompensation expense included 2,059 632 6,972 6,255 within operating expensesLess: Transaction costs inconnection with acquisition 178 ? 443 ? included within operatingexpensesLess: Non-recurring severanceand related costs included ? 727 ? 727 within operating expensesOperating expenses (Non-GAAP) $ 22,023 $ 21,287 $ 62,916 $ 68,259

Reconciliation of GAAP Income (Loss) from Operations and GAAP Operating MargintoNon-GAAP Income from Operations and Non-GAAP Operating Margin(unaudited; dollars in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Revenue $ 35,285 $ 31,678 $ 104,760 $ 95,184 Income (loss) from $ 3,334 $ 1,781 $ 12,622 $ (1,933 ) operations (GAAP)Plus: Stock-based 2,262 801 7,732 7,000 compensation expensePlus: Transaction costs inconnection with 178 ? 443 ? acquisitionPlus: Non-recurringseverance and related ? 965 ? 965 costsIncome from operations $ 5,774 $ 3,547 $ 20,797 $ 6,032 (Non-GAAP)Operating margin (GAAP) 9.4 % 5.6 % 12.0 % (2.0 ) %Operating margin 16.4 % 11.2 % 19.9 % 6.3 % (Non-GAAP)

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income(unaudited; in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Net income (loss) (GAAP) $ 3,712 $ 1,729 $ 12,705 $ (1,938 ) Plus: Stock-based compensation 2,262 801 7,732 7,000 expensePlus: Transaction costs in 178 ? 443 ? connection with acquisitionPlus: Non-recurring severance ? 965 ? 965 and related costsNet income (Non-GAAP) $ 6,152 $ 3,495 $ 20,880 $ 6,027

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA(unaudited; in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Net income (loss) (GAAP) $ 3,712 $ 1,729 $ 12,705 $ (1,938 ) Adjustments: Interest expense (income), net 1 (205 ) (210 ) (599 ) Income tax (benefit) expense (374 ) 213 171 572 Depreciation and amortization 1,655 1,664 4,655 4,806 expenseTotal adjustments 1,282 1,672 4,616 4,779 EBITDA 4,994 3,401 17,321 2,841 Stock-based compensation 2,262 801 7,732 7,000 expenseTransaction costs in 178 ? 443 ? connection with acquisitionNon-recurring severance and ? 965 ? 965 related costsAdjusted EBITDA $ 7,434 $ 5,167 $ 25,496 $ 10,806

Reconciliation of Trailing Twelve Month (TTM) GAAP Net Income to AdjustedEBITDA(unaudited; in thousands) QTD QTD QTD QTD TTM September June 30, March 31, December September 30, 2020 2020 2020 31, 2019 30, 2020Net income (GAAP) $ 3,712 $ 6,986 $ 2,007 $ 5,420 $ 18,125 Adjustments: Interest expense 1 (85 ) (126 ) (155 ) (365 ) (income), netIncome tax (374 ) 325 220 117 288 (benefit) expenseDepreciation andamortization 1,655 1,522 1,478 1,530 6,185 expenseTotal adjustments 1,282 1,762 1,572 1,492 6,108 EBITDA 4,994 8,748 3,579 6,912 24,233 Stock-basedcompensation 2,262 2,556 2,914 1,976 9,708 expenseTransaction costsin connection 178 265 ? ? 443 with acquisitionNon-recurringseverance and ? ? ? 464 464 related costsAdjusted EBITDA $ 7,434 $ 11,569 $ 6,493 $ 9,352 $ 34,848

Free Cash Flow Reconciliation(unaudited; in thousands) Nine Months Ended September 30, 2020 2019Cash and cash equivalents provided by operating $ 25,985 $ 7,514 activitiesLess: Purchases of property and equipment (1,021 ) (755 ) Less: Payment of software development costs (2,283 ) (1,972 ) Free cash flow $ 22,681 $ 4,787

Adjusted EBITDA Guidance Reconciliation(unaudited; in millions) Fourth Quarter 2020 Low HighNet income (estimate) $ 3.5 $ 5.2 Adjustments (estimates): Interest (income) expense, net 0.0 (0.1 ) Income tax (benefit) expense 0.2 0.1 Depreciation and amortization expense 1.8 1.7 Total adjustments 2.0 1.7 EBITDA 5.5 6.9 Stock-based compensation expense (estimate) 2.5 2.1 Adjusted EBITDA guidance (floor) $ 8.0 $ 9.0

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

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