GlobeNewswire Inc | Aug 6, 2020 06:45AM EDT

August 06, 2020

Revenue Growth of 17% on a Y/Y Basis Best Since Fourth Quarter 2015Variable Revenue Increased 89% on a Y/Y BasisAdjusted EBITDA Margin More than Tripled on a Y/Y Basis to 31%Cash Increased $8 Million Sequentially to $64 Million

RESEARCH TRIANGLE PARK, N.C., Aug. 06, 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 June30, 2020.

"Our second quarter results were exceptional, with record revenues and record adjusted EBITDA both substantially exceeding our original guidance for the quarter," said David Spitz, ChannelAdvisors chief executive officer. "Strong revenues were driven by sustained and broad-based growth in GMV as e-commerce spending remained elevated throughout the quarter, consistent with broader e-commerce trends as the COVID-19 pandemic caused a shift in consumer buying behavior. Continued expense discipline and the scalability of our business model contributed to a significant improvement in profitability and cash flow as well. Although it remains difficult to forecast near-term GMV and variable revenues, we believe e-commerce trends are likely to remain strong and that we are well positioned to benefit from these trends."

Second Quarter 2020 Financial Results

-- Revenue: Total revenue was $37.4 million for the second quarter 2020, an increase of 17.3% from the year-ago period. On a trailing twelve month basis, brands revenue continued to expand for the second quarter 2020 to a new high of 31.1% of total revenue. Variable revenues were $11.7 million, or 31.4% of total revenue for the second quarter 2020, compared with $6.2 million, or 19.5% of total revenue for the year-ago period. Fixed subscription revenues were $25.7 million, or 68.6% of total revenue for the second quarter 2020, compared with $25.7 million, or 80.5% of total revenue for the year-ago period. -- Gross Profit: GAAP gross profit was $30.4 million, representing a 81.2% gross margin for the second quarter 2020, compared with $24.8 million and 77.8%, respectively, for the year-ago period. Non-GAAP gross profit was $30.6 million, representing a 81.8% non-GAAP gross margin for the second quarter 2020, compared with $25.0 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 (Loss): GAAP net income was $7.0 million for the second quarter 2020, compared with GAAP net loss of $(1.3) million for the year-ago period. GAAP net income per diluted share was $0.24 based on 29.7 million diluted weighted average shares outstanding for the second quarter 2020, compared with GAAP net loss of $(0.05) per diluted share based on 27.9 million diluted weighted average shares outstanding for the year-ago period. Non-GAAP net income was $9.8 million for the second quarter 2020, compared with non-GAAP net income of $1.5 million for the year-ago period. Non-GAAP net income per diluted share was $0.33 based on 29.7 million diluted weighted average shares outstanding for the second quarter 2020, compared with non-GAAP net income per diluted share of $0.05 based on 27.9 million diluted weighted average shares outstanding for the year-ago period. -- Adjusted EBITDA: Adjusted EBITDA, a non-GAAP measure, was $11.6 million for the second quarter 2020, compared with $3.0 million for the year-ago period. Adjusted EBITDA margin, which is adjusted EBITDA divided by revenue, was 30.9% for the second quarter 2020, compared with 9.4% for the year-ago period. Adjusted EBITDA for the twelve months ended June 30, 2020 totaled $32.6 million. -- Cash: Cash and cash equivalents totaled $63.9 million as of June30, 2020, compared with $51.8 million as of December31, 2019. Cash generated from operations was $13.5 million for the six months ended June30, 2020, compared with $4.5 million for the year-ago period. Free cash flow, a non-GAAP measure, was $11.5 million for the six months ended June30, 2020, compared with $3.0 million for the year-ago period.

Recent Business Highlights

-- Acquisition of BlueBoard: Acquired BlueBoard, a leading e-commerce analytics company. Headquartered in Paris, France, BlueBoard helps leading global brands such as LOreal, Clarins, and Logitech gain a competitive advantage on their e-commerce channels with actionable insights into how their products are performing across thousands of retailer websites and marketplaces. By acquiring BlueBoard, ChannelAdvisor continues to enhance its capabilities for brands seeking to accelerate e-commerce growth. -- Revolving Credit Facility: Established a $25.0 million revolving credit facility that is available until August 5, 2023 for general corporate purposes and strategic initiatives. Additionally, the company may request increases to the facility provided that the aggregate amount of such increases during the term does not exceed $10.0 million. -- Diversity, Equity & Inclusion: In response to recent external events, ChannelAdvisor has formed a Diversity, Equity and Inclusion (DE&I) task force tasked with five key DE&I objectives for the company: driving awareness, accelerating opportunity, improving access, advocacy, and accountability. We are proud of our long history of inclusion and our merit-based culture, but also believe there is more work to do to promote DE&I internally and externally. -- ChannelAdvisor Starter Edition General Availability: Made ChannelAdvisor Starter Edition generally available with our strategic launch partner, ShipStation. ChannelAdvisor Starter Edition is a solution designed to help small-to-medium-sized merchants streamline their marketplace operations and expand to new channels. -- Support for New Selling Channels: Added to its leading network of marketplaces by expanding support for Afound (AT/DE) in addition to offering new integrations with Atlas for Men (UK), ComEd (US), Galaxus (CH), OfferUp (US), and Shop Premium Outlet (US). -- New Dropship Integrations: For US-based sellers that need help streamlining their dropship operations, ChannelAdvisor now offers support for first-party integrations with Boscov (US), Dollar General (US), Nautica (US), Kohls (US) and Staples (US). -- Enhanced Advertising Support: Brands and retailers that advertise on Amazon can now easily evaluate and eliminate low-performing sponsored campaigns with ChannelAdvisors new Ad Performance Rules for Amazon Advertising. Advertisers can set custom parameters for each campaign, allowing them to pause underperforming ads automatically. This additional layer of automation helps drive ad spend efficiency and saves time for advertisers. -- Customer Details: ChannelAdvisor recently added notable new customers including Tempur-Sealy, HUGO BOSS and Bushnell, and expanded its relationship with ASICS.

Financial Outlook

Based on the information available as of today, ChannelAdvisor is issuing guidance for its third quarter 2020 but is not issuing guidance for the full year 2020.

(in millions) Q3 2020Revenue $34.0 (floor)Adjusted EBITDA $6.5 (floor)Stock-based Compensation Expense $2.5Weighted Average Shares Outstanding 28.9

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 2020 Financial Results Conference CallWhen: Thursday, August 6, 2020Time: 8:00 a.m. ETLiveCall: (855) 638-4821, Passcode 2685276, Toll free (704) 288-0612, Passcode 2685276, 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 expense, net interest expense, stock-based compensation expense and for 2020 only, acquisition costs for the 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 third 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 June30, 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)

June 30, 2020 December 31, 2019 (unaudited) Assets Current assets: Cash and cash equivalents $ 63,875 $ 51,785 Accounts receivable, net of allowance of $468and $733 as of June 30, 2020 and December31, 23,864 22,126 2019, respectivelyPrepaid expenses and other current assets 11,772 10,452 Total current assets 99,511 84,363 Operating lease right of use assets 9,474 11,128 Property and equipment, net 9,066 9,597 Goodwill 23,486 23,486 Intangible assets, net 981 1,285 Deferred contract costs, net of current portion 12,797 12,810 Long-term deferred tax assets, net 2,908 3,584 Other assets 764 614 Total assets $ 158,987 $ 146,867 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 401 $ 409 Accrued expenses 11,608 8,577 Deferred revenue 19,264 21,000 Other current liabilities 5,088 6,431 Total current liabilities 36,361 36,417 Long-term operating leases, net of current 7,450 9,767 portionLong-term finance leases, net of current 15 27 portionOther long-term liabilities 815 1,007 Total liabilities 44,641 47,218 Commitments and contingencies Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000shares authorized, no shares ? ? issued and outstanding as of June 30, 2020 andDecember 31, 2019Common stock, $0.001 par value, 100,000,000shares authorized, 28,647,086and 28,077,469 shares issued and outstanding as 29 28 of June 30, 2020 andDecember31, 2019, respectivelyAdditional paid-in capital 284,075 278,111 Accumulated other comprehensive loss (2,241) (1,740) Accumulated deficit (167,517) (176,750) Total stockholders' equity 114,346 99,649 Total liabilities and stockholders' equity $ 158,987 $ 146,867

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, 2020 2019 2020 2019Revenue $ 37,443 $ 31,932 $ 69,475 $ 63,506 Cost ofrevenue (1) 7,053 7,096 14,116 14,625 (2)Gross profit 30,390 24,836 55,359 48,881 Operatingexpenses (1) (2):Sales and 12,619 14,092 24,959 28,405 marketingResearch and 4,543 5,025 9,344 10,358 developmentGeneral and 6,033 7,133 11,768 13,832 administrativeTotaloperating 23,195 26,250 46,071 52,595 expensesIncome (loss)from 7,195 (1,414) 9,288 (3,714) operationsOther income: Interest 85 211 211 394 income, netOther income, 31 32 39 12 netTotal other 116 243 250 406 incomeIncome (loss)before income 7,311 (1,171) 9,538 (3,308) taxesIncome tax 325 167 545 359 expenseNet income $ 6,986 $ (1,338) $ 8,993 $ (3,667) (loss)Net income(loss) per share:Basic $ 0.25 $ (0.05) $ 0.32 $ (0.13) Diluted $ 0.24 $ (0.05) $ 0.31 $ (0.13) Weightedaverage common sharesoutstanding:Basic 28,489,086 27,925,728 28,325,426 27,710,584 Diluted 29,700,524 27,925,728 29,362,886 27,710,584 (1) Includesstock-based compensationas follows:Cost of $ 238 $ 191 $ 557 $ 576 revenueSales and 777 737 1,517 1,773 marketingResearch and 543 512 1,223 1,242 developmentGeneral and 998 1,361 2,173 2,608 administrative $ 2,556 $ 2,801 $ 5,470 $ 6,199 (2) Includesdepreciationand amortizationas follows:Cost of $ 1,029 $ 978 $ 2,005 $ 1,901 revenueSales and 156 196 311 402 marketingResearch and 64 93 134 183 developmentGeneral and 273 329 550 656 administrative $ 1,522 $ 1,596 $ 3,000 $ 3,142

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

Six Months Ended June 30, 2020 2019Cash flows from operating activities Net income (loss) $ 8,993 $ (3,667) Adjustments to reconcile net income (loss) tocash and cash equivalents provided by operating activities:Depreciation and amortization 3,000 3,142 Bad debt expense 504 434 Stock-based compensation expense 5,470 6,199 Deferred income taxes 532 352 Other items, net (420) 192 Changes in assets and liabilities: Accounts receivable (2,426) 344 Prepaid expenses and other assets (850) 1,609 Deferred contract costs (901) (1,836) Accounts payable and accrued expenses 1,177 (1,157) Deferred revenue (1,623) (1,082) Cash and cash equivalents provided by operating 13,456 4,530 activitiesCash flows from investing activities Purchases of property and equipment (580) (249) Payment of software development costs (1,407) (1,293) Cash and cash equivalents used in investing (1,987) (1,542) activitiesCash flows from financing activities Repayment of finance leases (1,415) (1,902) Proceeds from exercise of stock options 2,134 951 Payment of statutory tax withholding related to ? (169) net-share settlement of restricted stock unitsCash and cash equivalents provided by (used in) 719 (1,120) financing activitiesEffect of currency exchange rate changes on cash (98) (28) and cash equivalentsNet increase in cash and cash equivalents 12,090 1,840 Cash and cash equivalents, beginning of period 51,785 47,185 Cash and cash equivalents, end of period $ 63,875 $ 49,025

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 30, Six Months Ended June 30, 2020 2019 2020 2019Revenue $ 37,443 $ 31,932 $ 69,475 $ 63,506 Gross profit $ 30,390 $ 24,836 $ 55,359 $ 48,881 (GAAP)Plus:Stock-basedcompensationexpense 238 191 557 576 includedwithin costof revenueGross profit $ 30,628 $ 25,027 $ 55,916 $ 49,457 (Non-GAAP)Gross margin 81.2 % 77.8 % 79.7 % 77.0 % (GAAP)Gross margin 81.8 % 78.4 % 80.5 % 77.9 % (Non-GAAP)

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses(unaudited; in thousands) Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019Operatingexpenses $ 23,195 $ 26,250 $ 46,071 $ 52,595 (GAAP)Less:Stock-basedcompensationexpense 2,318 2,610 4,913 5,623 includedwithinoperatingexpensesLess:Acquisitioncostsincluded 265 ? 265 ? withinoperatingexpensesOperatingexpenses $ 20,612 $ 23,640 $ 40,893 $ 46,972 (Non-GAAP)

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 June 30, Six Months Ended June 30, 2020 2019 2020 2019Revenue $ 37,443 $ 31,932 $ 69,475 $ 63,506 Income(loss) from $ 7,195 $ (1,414) $ 9,288 $ (3,714) operations(GAAP)Plus:Stock-based 2,556 2,801 5,470 6,199 compensationexpensePlus:Acquisition 265 ? 265 ? costsIncome fromoperations $ 10,016 $ 1,387 $ 15,023 $ 2,485 (Non-GAAP)Operatingmargin 19.2 % (4.4) % 13.4 % (5.8) % (GAAP)Operatingmargin 26.7 % 4.3 % 21.6 % 3.9 % (Non-GAAP)

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income(unaudited; in thousands) Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019Net income(loss) $ 6,986 $ (1,338) $ 8,993 $ (3,667) (GAAP)Plus:Stock-based 2,556 2,801 5,470 6,199 compensationexpensePlus:Acquisition 265 ? 265 ? costsNet income $ 9,807 $ 1,463 $ 14,728 $ 2,532 (Non-GAAP)

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA(unaudited; in thousands) Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019Net income(loss) $ 6,986 $ (1,338 ) $ 8,993 $ (3,667) (GAAP) Adjustments:Interest(income) (85) (211) (211) (394) expense, netIncome tax 325 167 545 359 expenseDepreciationand 1,522 1,596 3,000 3,142 amortizationexpense Total 1,762 1,552 3,334 3,107 adjustmentsEBITDA 8,748 214 12,327 (560) Stock-basedcompensation 2,556 2,801 5,470 6,199 expenseAcquisition 265 ? 265 ? costsAdjusted $ 11,569 $ 3,015 $ 18,062 $ 5,639 EBITDA



Free Cash Flow Reconciliation(unaudited; in thousands) Six Months Ended June 30, 2020 2019 Cash and cash equivalents provided by $ 13,456 $ 4,530 operating activitiesLess: Purchases of property and equipment (580) (249) Less: Payment of software development costs (1,407) (1,293) Free cash flow $ 11,469 $ 2,988



Adjusted EBITDA Guidance Reconciliation(unaudited; in millions) Third Quarter 2020 Floor Net income (estimate) $ 2.0 Adjustments (estimates): Interest (income) expense, net (0.1) Income tax expense 0.1 Depreciation and amortization expense 1.6 Total adjustments 1.6 EBITDA 3.6 Stock-based compensation expense (estimate) 2.5 Acquisition costs (estimate) 0.4 Adjusted EBITDA guidance (floor) $ 6.5



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

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