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

Financial Release

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

02/11/21

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  

 


Investor Contact:
Raiford GarrabrantChannelAdvisor Corporationraiford.garrabrant@channeladvisor.com
919-228-4817

Media Contact:
Tamara GibbsChannelAdvisor Corporationtamara.gibbs@channeladvisor.com
919-249-9798

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Source: ChannelAdvisor Corporation

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