ChannelAdvisor Reports Second Quarter 2022 Results; Achieves Record Subscription Revenue

Financial Release

ChannelAdvisor Reports Second Quarter 2022 Results; Achieves Record Subscription Revenue

08/09/22

Brands revenue increased 20% year-over-year

Brands subscription revenue increased 27% year-over-year

Adjusted EBITDA exceeds guidance

Repurchased $25 million of common stock

RESEARCH TRIANGLE PARK, N.C., Aug. 09, 2022 (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 and six months ended June 30, 2022.

Second Quarter 2022 Highlights
GAAP

  • Total revenue of $42.8 million was above the midpoint of the guidance range
  • Subscription revenue increased 13% year-over-year, or 16% excluding the unfavorable impact from year-over-year changes in foreign currency exchange rates
  • Brands revenue increased 20% year-over-year, or 25% excluding the unfavorable impact from year-over-year changes in foreign currency exchange rates
  • Brands subscription revenue grew 27% year-over-year, or 32% excluding the unfavorable impact from year-over-year changes in foreign currency exchange rates, and represented 49% of total subscription revenue
  • Cash and cash equivalents were $84.2 million, a decrease of $6.1 million since June 30, 2021 and a decrease of $22.7 million since March 31, 2022. The decrease reflects the cash use of $25.0 million for the repurchase of 1.8 million shares of common stock during the quarter under the previously announced stock repurchase program.

Non-GAAP

  • Adjusted EBITDA of $8.4 million and adjusted EBITDA margin of 20% exceeded the high-end of the guidance range
  • Free cash flow for the six months ended June 30, 2022 of $10.6 million, or $0.34 per diluted share based on 31.3 million diluted weighted average shares outstanding

“Despite the backdrop of slower e-commerce growth, high consumer inflation, and macro uncertainty, we delivered another good quarter in Q2, with solid revenue growth and adjusted EBITDA that again exceeded the high-end of our guidance range," said David Spitz, ChannelAdvisor's chief executive officer. "These results demonstrate the resilience of our subscription-based revenue model and brands-focused strategy. While near-term macroeconomic factors have created a more challenging environment, we remain optimistic regarding our long-term prospects. That's why we repurchased and retired 1.8 million shares, or approximately 6% of shares outstanding, at an average price of $13.67 during the second quarter. With solid profitability, a strong and debt-free balance sheet, market leadership and a large opportunity in front of us, we remain excited about what the future holds for ChannelAdvisor."

Recent Business Highlights

The Company enhanced its position as a leading multi-channel commerce platform for brands through:

  • Continued product innovation: ChannelAdvisor’s strategy is to go deep on key channels and enable clients to leverage native capabilities such as fulfillment and advertising. With the latest product release, ChannelAdvisor expands advertising reach through Criteo. With over five years' experience in retail media, Criteo has established itself as a critical platform for brands seeking to expand advertising efforts across the same retail sites where they list their products. By integrating with the Criteo Retail Media API, ChannelAdvisor can empower brand advertisers with more choices for how they manage and optimize their retail media campaigns with leading retailers, while expanding their advertising to reach high-intent shoppers in new cookie-less channels. This product release also delivers enhancements to the way brands can integrate with ChannelAdvisor at scale by helping automate key processes, including Automated Export for Listing Views and Support for Webhooks.

  • Continued channel expansion: ChannelAdvisor continues to reinforce its commitment to channel diversification to help brands and retailers reach more consumers worldwide. Adding over 20 new integrations, ChannelAdvisor now supports well over 350 channels. New channels added include Bed, Bath & Beyond in the U.S. and Canada, Poshmark in the U.S., Trendyol in Germany and Shopee in Indonesia, Malaysia, the Philippines, Singapore, Thailand, Taiwan and Vietnam. The company also added two new first-party integrations with Douglas in the Netherlands and Rue Gilt Groupe in the U.S.

  • Industry leadership: ChannelAdvisor was named an Amazon Ads Advanced Partner, reinforcing its commitment to advertising and strengthening its long-standing partnership with Amazon. Advanced Partner status is granted to partners that have demonstrated expertise across the breadth of Amazon Ads capabilities and delivered results for advertisers. Advanced Partners are in the top 5% of partner-led investments by country for sponsored ads. This achievement qualifies companies for added benefits, including access to select beta programs, tailored training on campaign strategies and new product releases.

  • Employee Engagement: ChannelAdvisor recently received the Triangle Business Journal’s 2022 Best Places to Work Award for the eighth time. The annual workplace competition recognizes companies for creating a work environment that employees value.

  • New customers: ChannelAdvisor recently added notable new customers Brown Forman, John Paul Mitchell Systems, and McCormick Foods (U.K.) Limited. In terms of growing our business with existing customers, our account managers collaborated with our sales team to sign expansions with customers like Chanel, Hugo Boss and Bushnell.

Financial Outlook

Based on the information available as of today, ChannelAdvisor is issuing guidance for its third quarter and full year 2022.

(in millions, except percentages) Q3 2022   FY 2022
Revenue $43.4 - $43.8   $177.0 - $179.0
Y/Y Growth 4% - 5%   6% - 7%
Adjusted EBITDA $8.1 - $8.5   $37.0 - $39.0
As a Percentage of Revenue (at the midpoint) 19%   21%
Stock-based Compensation Expense $3.1 - $3.5   $12.8 - $13.2
Weighted Average Shares Outstanding 29.8   30.8

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 2022 Financial Results Conference Call
When: Tuesday, August 9, 2022
Time: 8:00 a.m. ET
Live Call: Please register for the call here. Registrants will receive the dial-in number and a unique PIN allowing for seamless access to the call.  
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 expense, net interest (income) expense, and stock-based compensation expense. For 2022 only, adjusted EBITDA excludes lease abandonment and related costs. For 2021 only, adjusted EBITDA excludes the change in fair value of acquisition-related contingent consideration (which increased GAAP operating income). 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 the other items excluded from adjusted EBITDA described above, as applicable. 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 financial measures 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 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 multichannel commerce 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 across the entire buying cycle, optimizing their operations for peak performance, and providing actionable analytics to improve competitiveness. Thousands of customers depend on ChannelAdvisor to securely power their e-commerce operations 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 and full year 2022, expectations regarding availability of product enhancements, 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, 2021 and its Quarterly Report on Form 10-Q that will be filed for the quarter ended June 30, 2022, 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, 2022   December 31, 2021
  (unaudited)    
Assets      
Current assets:      
Cash and cash equivalents $ 84,243     $ 100,567  
Accounts receivable, net of allowance of $215 and $279 as of June 30, 2022 and December 31, 2021, respectively   26,143       28,886  
Prepaid expenses and other current assets   15,865       15,497  
Total current assets   126,251       144,950  
Operating lease right of use assets   6,006       2,856  
Property and equipment, net of accumulated depreciation of $24,731 and $23,096 as of June 30, 2022 and December 31, 2021, respectively   7,953       7,682  
Goodwill   28,986       30,042  
Intangible assets, net   2,575       3,079  
Deferred contract costs, net of current portion   18,645       17,951  
Long-term deferred tax assets, net   30,210       32,616  
Other assets   622       796  
Total assets $ 221,248     $ 239,972  
Liabilities and stockholders' equity      
Current liabilities:      
Accounts payable $ 883     $ 1,457  
Accrued expenses   10,797       12,644  
Deferred revenue   31,437       29,942  
Other current liabilities   2,706       4,831  
Total current liabilities   45,823       48,874  
Long-term operating leases, net of current portion   5,063       1,182  
Other long-term liabilities   1,371       1,718  
Total liabilities   52,257       51,774  
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, 2022 and December 31, 2021          
Common stock, $0.001 par value, 100,000,000 shares authorized, 28,727,015 and 30,188,595 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively   29       30  
Additional paid-in capital   280,419       300,875  
Accumulated other comprehensive loss   (4,648 )     (2,237 )
Accumulated deficit   (106,809 )     (110,470 )
Total stockholders' equity   168,991       188,198  
Total liabilities and stockholders' equity $ 221,248     $ 239,972  
               

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,
  2022   2021   2022   2021
Revenue $ 42,802   $ 41,543     $ 85,099   $ 80,709  
Cost of revenue (1) (2)   10,407     9,533       20,789     17,941  
Gross profit   32,395     32,010       64,310     62,768  
Operating expenses (1) (2):              
Sales and marketing   16,156     15,159       32,102     29,791  
Research and development   5,380     5,908       10,803     11,435  
General and administrative   7,448     6,835       14,670     11,717  
Total operating expenses   28,984     27,902       57,575     52,943  
Income from operations   3,411     4,108       6,735     9,825  
Other income (expense):              
Interest income (expense)   45     (33 )     17     (66 )
Other income (expense)   35     (5 )         (135 )
Total other income (expense)   80     (38 )     17     (201 )
Income before income taxes   3,491     4,070       6,752     9,624  
Income tax expense (benefit)   1,654     (490 )     3,091     (393 )
Net income $ 1,837   $ 4,560     $ 3,661   $ 10,017  
Net income per share:              
Basic $ 0.06   $ 0.15     $ 0.12   $ 0.34  
Diluted $ 0.06   $ 0.15     $ 0.12   $ 0.32  
Weighted average common shares outstanding:              
Basic   29,949,978     29,764,013       30,110,764     29,530,369  
Diluted   30,911,784     31,402,695       31,290,204     31,269,427  
               
(1) Includes stock-based compensation as follows:              
Cost of revenue $ 337   $ 264     $ 496   $ 496  
Sales and marketing   825     996       1,647     1,816  
Research and development   620     690       1,037     1,302  
General and administrative   1,692     1,626       3,426     3,010  
  $ 3,474   $ 3,576     $ 6,606   $ 6,624  
               
(2) Includes depreciation and amortization as follows:              
Cost of revenue $ 1,171   $ 1,107     $ 2,314   $ 2,309  
Sales and marketing   74     112       145     271  
Research and development   32     44       63     107  
General and administrative   217     384       442     792  
  $ 1,494   $ 1,647     $ 2,964   $ 3,479  
                           

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

  Six Months Ended June 30,
  2022   2021
Cash flows from operating activities      
Net income $ 3,661     $ 10,017  
Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:      
Depreciation and amortization   2,964       3,479  
Bad debt expense   100       47  
Stock-based compensation expense   6,606       6,624  
Deferred income taxes   2,114       (893 )
Other items, net   (929 )     (1,760 )
Changes in assets and liabilities:      
Accounts receivable   1,825       (527 )
Prepaid expenses and other assets   (71 )     (318 )
Deferred contract costs   (1,741 )     (3,282 )
Accounts payable and accrued expenses   (2,859 )     (249 )
Deferred revenue   2,057       4,448  
Cash and cash equivalents provided by operating activities   13,727       17,586  
Cash flows from investing activities      
Purchases of property and equipment   (1,138 )     (494 )
Payment of software development costs   (1,955 )     (1,631 )
Cash and cash equivalents used in investing activities   (3,093 )     (2,125 )
Cash flows from financing activities      
Repayment of finance leases   (8 )     (8 )
Proceeds from exercise of stock options   375       3,722  
Repurchase and retirement of common stock   (25,000 )      
Payment of statutory tax withholding related to net-share settlement of restricted stock units   (1,875 )     (342 )
Cash and cash equivalents (used in) provided by financing activities   (26,508 )     3,372  
Effect of currency exchange rate changes on cash and cash equivalents   (450 )     (27 )
Net (decrease) increase in cash and cash equivalents   (16,324 )     18,806  
Cash and cash equivalents, beginning of period   100,567       71,545  
Cash and cash equivalents, end of period $ 84,243     $ 90,351  
               


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,
  2022   2021   2022   2021
Revenue $ 42,802     $ 41,543     $ 85,099     $ 80,709  
               
Gross profit (GAAP) $ 32,395     $ 32,010     $ 64,310     $ 62,768  
Plus: Stock-based compensation expense included within cost of revenue   337       264       496       496  
Gross profit (Non-GAAP) $ 32,732     $ 32,274     $ 64,806     $ 63,264  
Gross margin (GAAP)   75.7 %     77.1 %     75.6 %     77.8 %
Gross margin (Non-GAAP)   76.5 %     77.7 %     76.2 %     78.4 %
                               


Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses
(unaudited; in thousands)
  Three Months Ended June 30,   Six Months Ended June 30,
  2022   2021   2022   2021
Operating expenses (GAAP) $ 28,984   $ 27,902   $ 57,575   $ 52,943  
Less: Stock-based compensation expense included within operating expenses   3,137     3,312     6,110     6,128  
Less: Lease abandonment and related costs included within operating expenses           288      
Plus: Contingent consideration fair value adjustment included within operating expenses               (1,313 )
Operating expenses (Non-GAAP) $ 25,847   $ 24,590   $ 51,177   $ 48,128  
                         


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,
  2022   2021   2022   2021
Revenue $ 42,802     $ 41,543     $ 85,099     $ 80,709  
               
Income from operations (GAAP) $ 3,411     $ 4,108     $ 6,735     $ 9,825  
Plus: Stock-based compensation expense   3,474       3,576       6,606       6,624  
Plus: Lease abandonment and related costs               288        
Less: Contingent consideration fair value adjustment                     (1,313 )
Income from operations (Non-GAAP) $ 6,885     $ 7,684     $ 13,629     $ 15,136  
Operating margin (GAAP)   8.0 %     9.9 %     7.9 %     12.2 %
Operating margin (Non-GAAP)   16.1 %     18.5 %     16.0 %     18.8 %
                               


Reconciliation of GAAP Net Income to Non-GAAP Net Income
(unaudited; in thousands)
  Three Months Ended June 30,   Six Months Ended June 30,
  2022   2021   2022   2021
Net income (GAAP) $ 1,837   $ 4,560   $ 3,661   $ 10,017  
Plus: Stock-based compensation expense   3,474     3,576     6,606     6,624  
Plus: Lease abandonment and related costs           288      
Less: Contingent consideration fair value adjustment               (1,313 )
Net income (Non-GAAP) $ 5,311   $ 8,136   $ 10,555   $ 15,328  
                         


Reconciliation of GAAP Net Income to Adjusted EBITDA
(unaudited; in thousands)
  Three Months Ended June 30,   Six Months Ended June 30,
  2022   2021   2022   2021
Net income (GAAP) $ 1,837     $ 4,560     $ 3,661     $ 10,017  
Adjustments:              
Interest (income) expense   (45 )     33       (17 )     66  
Income tax expense (benefit)   1,654       (490 )     3,091       (393 )
Depreciation and amortization expense   1,494       1,647       2,964       3,479  
Total adjustments   3,103       1,190       6,038       3,152  
EBITDA   4,940       5,750       9,699       13,169  
Stock-based compensation expense   3,474       3,576       6,606       6,624  
Lease abandonment and related costs               288        
Contingent consideration fair value adjustment                     (1,313 )
Adjusted EBITDA $ 8,414     $ 9,326     $ 16,593     $ 18,480  
                               


Free Cash Flow Reconciliation
(unaudited; in thousands except share and per share data)
  Six Months Ended June 30,
    2022       2021  
Cash and cash equivalents provided by operating activities $ 13,727     $ 17,586  
Less: Purchases of property and equipment   (1,138 )     (494 )
Less: Payment of capitalized software development costs   (1,955 )     (1,631 )
Free cash flow $ 10,634     $ 15,461  
       
Diluted weighted average shares outstanding   31,290,204       31,269,427  
Free cash flow per diluted share $ 0.34     $ 0.49  
               


Adjusted EBITDA Guidance Reconciliation
(unaudited; in millions)
  Third Quarter 2022   Full Year 2022
  Low   High   Low   High
Net income (estimate) $ 1.3     $ 2.4     $ 11.2     $ 13.9  
Adjustments (estimates):              
Interest (income) expense   (0.2 )     (0.3 )     (0.5 )     (0.6 )
Income tax expense   1.9       1.8       6.9       6.8  
Depreciation and amortization expense   1.6       1.5       6.2       6.1  
Total adjustments   3.3       3.0       12.6       12.3  
EBITDA   4.6       5.4       23.8       26.2  
Stock-based compensation expense (estimate)   3.5       3.1       13.2       12.8  
Adjusted EBITDA guidance $ 8.1     $ 8.5     $ 37.0     $ 39.0  


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

Media Contact:
Caroline RiddleChannelAdvisor Corporationcaroline.riddle@channeladvisor.com
919-439-8026

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Source: ChannelAdvisor Corporation

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