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ChannelAdvisor Reports Record Fourth Quarter and Full Year 2020 Results; Revenue and Adjusted EBITDA Significantly Exceed Guidance

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ChannelAdvisor Corporation
·17 min read
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RESEARCH TRIANGLE PARK, N.C., Feb. 11, 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 fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Highlights

GAAP

  • Total revenue increased 16% year-over-year to a record $40.3 million

  • Brands revenue increased 27% year-over-year and reached 35% of total revenue, a new high

  • Subscription revenue growth accelerated to 8% year-over-year

  • GAAP net income was $6.1 million, or $0.20 per diluted share based on 30.6 million diluted weighted average shares outstanding

Non-GAAP

  • Adjusted EBITDA increased 15% year-over-year to $10.8 million

  • Adjusted EBITDA margin was 27%, similar to the prior year period

Full Year 2020 Highlights

GAAP

  • Total revenue increased 12% to a record $145.1 million

  • Brands revenue increased 25% year-over-year and reached 33% of total revenue, a new fiscal year high

  • GAAP net income was $18.8 million, or $0.63 per diluted share based on 30.0 million diluted weighted average shares outstanding, up from $3.5 million and $0.12 per diluted share in 2019

  • Cash and cash equivalents were $71.5 million at year end, an increase of $19.8 million for the year, including the use of cash for the acquisition of BlueBoard in July 2020

  • Operating cash flow of $34.3 million, compared to $13.0 million for the prior year

Non-GAAP

  • Adjusted EBITDA increased 80% to $36.3 million

  • Adjusted EBITDA margin of 25% was up 9 points year-over-year

  • Free cash flow was $29.6 million, or $0.98 per diluted share based on 30.0 million diluted weighted average shares outstanding, more than triple the prior year free cash flow of $9.3 million

“Q4 marked a tremendous finish to a stellar year for ChannelAdvisor, with record revenue and strong adjusted EBITDA, both of which significantly exceeded our guidance for the quarter,” said David Spitz, ChannelAdvisor’s chief executive officer. “Continued solid execution and record e-commerce volumes drove success for our customers and rapid growth from brands during the quarter, with brands revenue for the quarter up 27% year over year. Another quarter of robust performance in sales, especially with brands, combined with outstanding revenue retention, drove the second consecutive quarter of acceleration in subscription revenue growth. Our strategy of empowering brands' digital transformation is paying off in a big way and we’re optimistic about our growth prospects going forward.”

Recent Business Highlights

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

  • Expanded product offering: To help brands amplify their brand presence and drive effective advertising with Amazon, ChannelAdvisor recently launched Managed Services for Amazon’s demand-side platform. ChannelAdvisor also launched new enhancements to the Channel Health Console to provide brands with a simplified dashboard to monitor the health and performance of their fulfillment channels closely.

  • Additional market access: ChannelAdvisor is helping brands reach more consumers by continuing to expand its industry-leading Marketplaces platform with the addition of Amazon Sweden, Back Market (AT, BE, NL, FI and PL), Darty (FR), Paysfer (US), and Spartoo (FR). The company also added first-party dropship integrations with Fantastic Furniture and expanded its existing support for Macy’s and Walgreens.

  • Industry leadership: Named the #1 channel management vendor for the ninth consecutive year, the #3 search engine marketing vendor, and a leading provider of online advertising services in Digital Commerce 360’s 2021 Leading Vendors to the Top 1000 retailers.

  • New customers: ChannelAdvisor recently added notable new Brands Analytics customers including Chanel and Gibson Guitars. Existing customers including Xerox and Tetra, a division of Spectrum Brands, expanded their relationships with the addition of the Brands Analytics functionality. Additional notable new customers include TCL Electronics, Mabe CA, and Fisher & Paykel Appliances, a division of Haier. ChannelAdvisor also expanded its relationship with customers such as Calzedonia and Defacto, and strategic partner XPO Logistics.

Financial Outlook

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

(in millions, except percentages)

Q1 2021

Revenue

$37.3 - $37.7

Adjusted EBITDA

$6.9 - $7.3

As a Percentage of Revenue (at the midpoints for Q1)

19%

Stock-based Compensation Expense

$2.9 - $3.3

Weighted Average Shares Outstanding

29.2

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 Fourth Quarter and Full Year 2020 Financial Results Conference Call

When:

Thursday, February 11, 2021

Time:

8:00 a.m. ET

Live Call:

(855) 638-4821, Passcode 6076252, Toll free

(704) 288-0612, Passcode 6076252, 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, free cash flow and free cash flow per diluted share, 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, 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 capitalized software development costs. Non-GAAP gross profit and non-GAAP gross margin exclude stock-based compensation expense and for 2019 only, non-recurring severance and related costs.

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 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 first quarter and full year 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, 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
Consolidated Balance Sheets
(in thousands, except share and per share data)

December 31,

2020

2019

Assets

(unaudited)

Current assets:

Cash and cash equivalents

$

71,545

$

51,785

Accounts receivable, net of allowance of $417 and $733 as of December 31, 2020 and 2019, respectively

24,705

22,126

Prepaid expenses and other current assets

13,874

10,452

Total current assets

110,124

84,363

Operating lease right of use assets

8,141

11,128

Property and equipment, net

8,707

9,597

Goodwill

30,990

23,486

Intangible assets, net

4,155

1,285

Deferred contract costs, net of current portion

14,040

12,810

Long-term deferred tax assets, net

3,551

3,584

Other assets

953

614

Total assets

$

180,661

$

146,867

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

158

$

409

Accrued expenses

14,008

8,577

Deferred revenue

22,819

21,000

Other current liabilities

6,029

6,431

Total current liabilities

43,014

36,417

Long-term operating leases, net of current portion

5,394

9,767

Long-term finance leases, net of current portion

8

27

Other long-term liabilities

2,154

1,007

Total liabilities

50,570

47,218

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of December 31, 2020 and 2019, respectively

Common stock, $0.001 par value, 100,000,000 shares authorized, 29,020,424 and 28,077,469 shares issued and outstanding as of December 31, 2020 and 2019, respectively

29

28

Additional paid-in capital

288,842

278,111

Accumulated other comprehensive loss

(1,095

)

(1,740

)

Accumulated deficit

(157,685

)

(176,750

)

Total stockholders' equity

130,091

99,649

Total liabilities and stockholders' equity

$

180,661

$

146,867



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

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

(unaudited)

(unaudited)

(unaudited)

Revenue

$

40,312

$

34,775

$

145,072

$

129,959

Cost of revenue (1) (2)

8,547

7,132

30,354

29,008

Gross profit

31,765

27,643

114,718

100,951

Operating expenses (1) (2):

Sales and marketing

14,469

12,005

52,905

52,813

Research and development

4,837

4,039

18,990

19,200

General and administrative

5,997

5,864

23,739

25,136

Total operating expenses

25,303

21,908

95,634

97,149

Income from operations

6,462

5,735

19,084

3,802

Other income (expense):

Interest income (expense), net

(35

)

155

175

754

Other income (expense), net

(35

)

(353

)

9

(385

)

Total other income (expense)

(70

)

(198

)

184

369

Income before income taxes

6,392

5,537

19,268

4,171

Income tax expense

272

117

443

689

Net income

$

6,120

$

5,420

$

18,825

$

3,482

Net income per share:

Basic

$

0.21

$

0.19

$

0.66

$

0.12

Diluted

$

0.20

$

0.19

$

0.63

$

0.12

Weighted average common shares outstanding:

Basic

29,006,116

28,069,017

28,616,401

27,886,278

Diluted

30,597,322

28,926,527

30,035,261

28,816,977

(1) Includes stock-based compensation as follows:

Cost of revenue

$

212

$

250

$

972

$

995

Sales and marketing

731

612

2,792

2,385

Research and development

460

202

2,168

1,898

General and administrative

1,065

912

4,268

3,698

$

2,468

$

1,976

$

10,200

$

8,976

(2) Includes depreciation and amortization as follows:

Cost of revenue

$

1,144

$

995

$

4,211

$

3,942

Sales and marketing

159

168

624

775

Research and development

62

76

257

353

General and administrative

493

291

1,421

1,266

$

1,858

$

1,530

$

6,513

$

6,336



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

Year Ended December 31,

2020

2019

(unaudited)

Cash flows from operating activities

Net income

$

18,825

$

3,482

Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:

Depreciation and amortization

6,513

6,336

Bad debt expense

525

1,147

Stock-based compensation expense

10,200

8,976

Deferred income taxes

(39

)

531

Other items, net

(829

)

118

Changes in assets and liabilities, net of effects from acquisition:

Accounts receivable

(2,143

)

361

Prepaid expenses and other assets

(1,728

)

892

Deferred contract costs

(2,572

)

(3,146

)

Accounts payable and accrued expenses

4,270

(2,306

)

Deferred revenue

1,284

(3,383

)

Cash and cash equivalents provided by operating activities

34,306

13,008

Cash flows from investing activities

Acquisition, net of cash acquired

(8,467

)

Purchases of property and equipment

(1,704

)

(986

)

Payment of software development costs

(3,034

)

(2,721

)

Cash and cash equivalents used in investing activities

(13,205

)

(3,707

)

Cash flows from financing activities

Repayment of finance leases and debt

(1,808

)

(2,209

)

Proceeds from exercise of stock options

3,825

974

Payment of statutory tax withholding related to net-share settlement of restricted stock units

(3,294

)

(3,389

)

Payment of line of credit financing costs

(187

)

Cash and cash equivalents used in financing activities

(1,464

)

(4,624

)

Effect of currency exchange rate changes on cash and cash equivalents

123

(77

)

Net increase in cash and cash equivalents

19,760

4,600

Cash and cash equivalents, beginning of year

51,785

47,185

Cash and cash equivalents, end of year

$

71,545

$

51,785



Reconciliation of GAAP Gross Profit and GAAP Gross Margin to Non-GAAP Gross Profit and Non-GAAP Gross Margin

(unaudited; in thousands)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Revenue

$

40,312

$

34,775

$

145,072

$

129,959

Gross profit (GAAP)

$

31,765

$

27,643

$

114,718

$

100,951

Plus: Stock-based compensation expense included within cost of revenue

212

250

972

995

Plus: Non-recurring severance and related costs within cost of revenue

238

Gross profit (Non-GAAP)

$

31,977

$

27,893

$

115,690

$

102,184

Gross margin (GAAP)

79

%

79

%

79

%

78

%

Gross margin (Non-GAAP)

79

%

80

%

80

%

79

%


Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses

(unaudited; in thousands)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Operating expenses (GAAP)

$

25,303

$

21,908

$

95,634

$

97,149

Less: Stock-based compensation expense included within operating expenses

2,256

1,726

9,228

7,981

Less: Transaction costs in connection with acquisition included within operating expenses

45

488

Less: Non-recurring severance and related costs within operating expenses

344

1,071

Operating expenses (Non-GAAP)

$

23,002

$

19,838

$

85,918

$

88,097


Reconciliation of GAAP Income from Operations and GAAP Operating Margin to Non-GAAP Income from Operations and Non-GAAP Operating Margin

(unaudited; in thousands)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Revenue

$

40,312

$

34,775

$

145,072

$

129,959

Income from operations (GAAP)

$

6,462

$

5,735

$

19,084

$

3,802

Plus: Stock-based compensation expense

2,468

1,976

10,200

8,976

Plus: Transaction costs in connection with acquisition

45

488

Plus: Non-recurring severance and related costs

344

1,309

Income from operations (Non-GAAP)

$

8,975

$

8,055

$

29,772

$

14,087

Operating margin (GAAP)

16

%

16

%

13

%

3

%

Operating margin (Non-GAAP)

22

%

23

%

21

%

11

%


Reconciliation of Net Income to Adjusted EBITDA

(unaudited; in thousands)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Net income

$

6,120

$

5,420

$

18,825

$

3,482

Adjustments:

Interest (income) expense, net

35

(155

)

(175

)

(754

)

Income tax expense

272

117

443

689

Depreciation and amortization expense

1,858

1,530

6,513

6,336

Total adjustments

2,165

1,492

6,781

6,271

EBITDA

8,285

6,912

25,606

9,753

Stock-based compensation expense

2,468

1,976

10,200

8,976

Transaction costs in connection with acquisition

45

488

Non-recurring severance and related costs

464

1,429

Adjusted EBITDA

$

10,798

$

9,352

$

36,294

$

20,158


Free Cash Flow Reconciliation

(unaudited; in thousands)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Cash and cash equivalents provided by operating activities

$

8,321

$

5,494

$

34,306

$

13,008

Less: Purchases of property and equipment

(683

)

(230

)

(1,704

)

(986

)

Less: Payment of capitalized software development costs

$

(751

)

$

(749

)

(3,034

)

(2,721

)

Free cash flow

$

6,887

$

4,515

$

29,568

$

9,301

Diluted weighted average shares outstanding

30,597,322

28,926,527

30,035,261

28,816,977

Free cash flow per diluted share

$

0.23

$

0.16

$

0.98

$

0.32


Adjusted EBITDA Guidance Reconciliation

(unaudited; in millions)

First Quarter 2021

Low

High

Net income (estimate)

$

1.5

$

2.6

Adjustments (estimates):

Interest (income) expense, net

0.1

0.0

Income tax expense

0.2

0.1

Depreciation and amortization expense

1.8

1.7

Total adjustments

2.1

1.8

EBITDA

3.6

4.4

Stock-based compensation expense (estimate)

3.3

2.9

Adjusted EBITDA guidance

$

6.9

$

7.3


CONTACT: 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