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ChannelAdvisor Reports Record Second Quarter 2021 Results; Revenue and Adjusted EBITDA Exceed Guidance

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 June 30, 2021.

Second Quarter 2021 Highlights
GAAP

  • 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, ChannelAdvisor’s 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 Journal’s 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 2021
Revenue$41.3 - $41.7
Y/Y Growth17% - 18%
Adjusted EBITDA$6.8 - $7.2
As a Percentage of Revenue (at the midpoint)17%
Stock-based Compensation Expense$2.8 - $3.2
Weighted Average Shares Outstanding30.0
  

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 Call
When:Thursday, August 5, 2021
Time:8:00 a.m. ET
Live Call:(855) 638-4821, Passcode 8435457, Toll Free
 (704) 288-0612, Passcode 8435457, Toll
Webcast: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 ChannelAdvisor’s financial condition and results of operations. The company’s management uses these non-GAAP measures to compare the company’s 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 company’s 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 company’s 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 company’s 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 world’s 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 ChannelAdvisor’s control. ChannelAdvisor’s 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 ChannelAdvisor’s Annual Report on Form 10-K for the year ended December 31, 2020 and its Quarterly Report on Form 10-Q that will be filed for the quarter ended June 30, 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 ChannelAdvisor’s 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 ChannelAdvisor’s views as of any date subsequent to the date of this press release.


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

 June 30, 2021 December 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 December 31, 2020, respectively25,261  24,705 
Prepaid expenses and other current assets15,209  13,874 
Total current assets130,821  110,124 
Operating lease right of use assets6,302  8,141 
Property and equipment, net7,898  8,707 
Goodwill30,990  30,990 
Intangible assets, net3,585  4,155 
Deferred contract costs, net of current portion16,291  14,040 
Long-term deferred tax assets, net4,426  3,551 
Other assets886  953 
Total assets$201,199  $180,661 
Liabilities and stockholders' equity   
Current liabilities:   
Accounts payable$818  $158 
Accrued expenses15,837  14,008 
Deferred revenue27,040  22,819 
Other current liabilities5,717  6,029 
Total current liabilities49,412  43,014 
Long-term operating leases, net of current portion2,944  5,394 
Other long-term liabilities1,688  2,162 
Total liabilities54,044  50,570 
Commitments and contingencies   
Stockholders' equity:   
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of June 30, 2021 and December 31, 2020   
Common stock, $0.001 par value, 100,000,000 shares authorized, 29,830,607 and 29,020,424 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively30  29 
Additional paid-in capital295,950  288,842 
Accumulated other comprehensive loss(1,157) (1,095)
Accumulated deficit(147,668) (157,685)
Total stockholders' equity147,155  130,091 
Total liabilities and stockholders' equity$201,199  $180,661 
        

ChannelAdvisor Corporation and Subsidiaries
Unaudited 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 2020
Revenue$41,543  $37,443  $80,709  $69,475 
Cost of revenue (1) (2)9,533  7,053  17,941  14,116 
Gross profit32,010  30,390  62,768  55,359 
Operating expenses (1) (2):       
Sales and marketing15,159  12,619  29,791  24,959 
Research and development5,908  4,543  11,435  9,344 
General and administrative6,835  6,033  11,717  11,768 
Total operating expenses27,902  23,195  52,943  46,071 
Income from operations4,108  7,195  9,825  9,288 
Other (expense) income:       
Interest (expense) income, net(33) 85  (66) 211 
Other (expense) income, net(5) 31  (135) 39 
Total other (expense) income(38) 116  (201) 250 
Income before income taxes4,070  7,311  9,624  9,538 
Income tax (benefit) expense(490) 325  (393) 545 
Net 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 
Weighted average common shares outstanding:       
Basic29,764,013  28,489,086  29,530,369  28,325,426 
Diluted31,402,695  29,700,524  31,269,427  29,362,886 
        
(1) Includes stock-based compensation as follows:       
Cost of revenue$264  $238  $496  $557 
Sales and marketing996  777  1,816  1,517 
Research and development690  543  1,302  1,223 
General and administrative1,626  998  3,010  2,173 
 $3,576  $2,556  $6,624  $5,470 
        
(2) Includes depreciation and amortization as follows:       
Cost of revenue$1,107  $1,029  $2,309  $2,005 
Sales and marketing112  156  271  311 
Research and development44  64  107  134 
General and administrative384  273  792  550 
 $1,647  $1,522  $3,479  $3,000 
                

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

 Six Months Ended June 30,
 2021 2020
Cash 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 amortization3,479  3,000 
Bad debt expense47  504 
Stock-based compensation expense6,624  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 revenue4,448  (1,623)
Cash and cash equivalents provided by operating activities17,586  13,456 
Cash 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 options3,722  2,134 
Payment of statutory tax withholding related to net-share settlement of restricted stock units(342)  
Cash and cash equivalents provided by financing activities3,372  719 
Effect of currency exchange rate changes on cash and cash equivalents(27) (98)
Net increase in cash and cash equivalents18,806  12,090 
Cash and cash equivalents, beginning of period71,545  51,785 
Cash and cash equivalents, end of period$90,351  $63,875 
        


Reconciliation of GAAP Gross Profit and GAAP Gross Margin to
Non-GAAP Gross Profit and Non-GAAP Gross Margin
(unaudited; dollars in thousands)
 Three Months Ended June 30, Six Months Ended June 30,
 2021 2020 2021 2020
Revenue$41,543  $37,443  $80,709  $69,475 
        
Gross profit (GAAP)$32,010  $30,390  $62,768  $55,359 
Plus: Stock-based compensation expense included within cost of revenue264  238  496  557 
Gross profit (Non-GAAP)$32,274  $30,628  $63,264  $55,916 
Gross margin (GAAP)77.1% 81.2% 77.8% 79.7%
Gross margin (Non-GAAP)77.7% 81.8% 78.4% 80.5%
            


Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses
(unaudited; in thousands)
 Three Months Ended June 30, Six Months Ended June 30,
 2021 2020 2021 2020
Operating expenses (GAAP)$27,902  $23,195  $52,943  $46,071 
Less: Stock-based compensation expense included within operating expenses3,312  2,318  6,128  4,913 
Less: Contingent consideration fair value adjustment included within operating expenses    (1,313)  
Less: Transaction costs in connection with acquisition included within operating expenses  265    265 
Operating expenses (Non-GAAP)$24,590  $20,612  $48,128  $40,893 
                


Reconciliation of GAAP Income from Operations and GAAP Operating Margin to
Non-GAAP Income from Operations and Non-GAAP Operating Margin
(unaudited; dollars in thousands)
 Three Months Ended June 30, Six Months Ended June 30,
 2021 2020 2021 2020
Revenue$41,543  $37,443  $80,709  $69,475 
        
Income from operations (GAAP)$4,108  $7,195  $9,825  $9,288 
Plus: Stock-based compensation expense3,576  2,556  6,624  5,470 
Less: Contingent consideration fair value adjustment    (1,313)  
Plus: Transaction costs in connection with acquisition  265    265 
Income from operations (Non-GAAP)$7,684  $10,016  $15,136  $15,023 
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 June 30, Six Months Ended June 30,
 2021 2020 2021 2020
Net income (GAAP)$4,560  $6,986  $10,017  $8,993 
Plus: Stock-based compensation expense3,576  2,556  6,624  5,470 
Less: Contingent consideration fair value adjustment    (1,313)  
Plus: Transaction costs in connection with acquisition  265    265 
Net 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 June 30, Six Months Ended June 30,
 2021 2020 2021 2020
Net income (GAAP)$4,560  $6,986  $10,017  $8,993 
Adjustments:       
Interest expense (income), net33  (85) 66  (211)
Income tax (benefit) expense(490) 325  (393) 545 
Depreciation and amortization expense1,647  1,522  3,479  3,000 
Total adjustments1,190  1,762  3,152  3,334 
EBITDA5,750  8,748  13,169  12,327 
Stock-based compensation expense3,576  2,556  6,624  5,470 
Contingent consideration fair value adjustment    (1,313)  
Transaction costs in connection with acquisition  265    265 
Adjusted 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 2020
Cash and cash equivalents provided by operating activities$17,586  $13,456 
Less: Purchases of property and equipment(494) (580)
Less: Payment of capitalized software development costs(1,631) (1,407)
Free cash flow$15,461  $11,469 
    
Diluted weighted average shares outstanding31,269,427  29,362,886 
Free cash flow per diluted share$0.49  $0.39 
        


Adjusted EBITDA Guidance Reconciliation
(unaudited; in millions)
 Third Quarter 2021
 Low High
Net income (estimate)$1.4  $2.5 
Adjustments (estimates):   
Interest (income) expense, net0.1  0.0 
Income tax expense0.4  0.3 
Depreciation and amortization expense1.7  1.6 
Total adjustments2.2  1.9 
EBITDA3.6  4.4 
Stock-based compensation expense (estimate)3.2  2.8 
Adjusted EBITDA guidance (floor)$6.8  $7.2 

Investor Contact:
Raiford Garrabrant
ChannelAdvisor Corporation
raiford.garrabrant@channeladvisor.com
919-228-4817

Media Contact:
Tamara Gibbs
ChannelAdvisor Corporation
tamara.gibbs@channeladvisor.com
919-249-9798

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