RESEARCH TRIANGLE PARK, N.C., Nov. 07, 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 nine months ended September 30, 2022.

Third Quarter 2022 Highlights

GAAP

  • Total revenue was $43.5 million, which was within the guidance range announced in August 2022. However, revenue was negatively impacted by foreign currency exchange rate fluctuations during the quarter and year to date. If exchange rates had remained the same as were in effect for the previous quarter, which was the basis for the August guidance, total revenue would have been $44.2 million, which would have exceeded the high-end of our guidance range. If foreign currency exchange rates had remained the same as were in effect for the third quarter of the prior year, total revenue would have been $45.2 million.
  • Subscription revenue increased 7% year-over-year, and would have been 12% before the impact from year-over-year changes in foreign currency exchange rates.
  • Brands revenue increased 10% year-over-year, and would have been 16% before the impact from year-over-year changes in foreign currency exchange rates.
  • Brands subscription revenue grew 11% year-over-year, and would have been 18% before the impact from year-over-year changes in foreign currency exchange rates, and represented 49% of total subscription revenue.
  • Cash and cash equivalents were $88.1 million, an increase of $3.9 million since June 30, 2022.

Non-GAAP

  • Adjusted EBITDA of $10.1 million and adjusted EBITDA margin of 23% exceeded the high-end of the guidance range.
  • Free cash flow for the nine months ended September 30, 2022 of $16.2 million, or $0.53 per diluted share based on 30.8 million diluted weighted average shares outstanding.

Merger Agreement and Proposed Acquisition by CommerceHub

As announced on September 6, 2022, we have entered into a merger agreement with CommerceHub. Under the terms of the agreement, CommerceHub will acquire all outstanding shares of ChannelAdvisor common stock. ChannelAdvisor stockholders will receive $23.10 per share in cash, representing a premium of approximately 57% over the company's closing stock price on September 2, 2022. We have called a special meeting of our stockholders to be held on November 11, 2022 for the approval of the Merger Agreement. The closing of the merger is subject to approval of our stockholders and the satisfaction or waiver of a number of customary closing conditions.

Due to the company's pending transaction with CommerceHub, we will not be providing guidance for the fourth quarter or full fiscal year 2022. In addition, as is customary during the pendency of an acquisition, we will not be hosting a conference call in conjunction with this earnings release. For further details and discussion of our financial performance please refer to our quarterly report on Form 10-Q for the quarter ended September 30, 2022.

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 merger-related costs, lease abandonment and related costs and headquarters relocation 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 proposed acquisition by CommerceHub. 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, our ability to consummate the proposed transaction with CommerceHub in a timely manner or at all and potential delays in consummating the proposed transaction; the satisfaction or waiver of closing conditions to the consummation of the proposed transaction with CommerceHub, including with respect to the approval of our stockholders; and the other risks detailed in our Quarterly Report on Form 10-Q for the quarter ended September 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)
    
 September 30, 2022 December 31, 2021
 (unaudited)  
Assets   
Current assets:   
Cash and cash equivalents$88,115  $100,567 
Accounts receivable, net of allowance of $241 and $279 as of September 30, 2022 and December 31, 2021, respectively 25,675   28,886 
Prepaid expenses and other current assets 14,823   15,497 
Total current assets 128,613   144,950 
Operating lease right of use assets 5,172   2,856 
Property and equipment, net of accumulated depreciation of $24,096 and $23,096 as of September 30, 2022 and December 31, 2021, respectively 9,212   7,682 
Goodwill 28,209   30,042 
Intangible assets, net 2,292   3,079 
Deferred contract costs, net of current portion 18,648   17,951 
Long-term deferred tax assets, net 28,368   32,616 
Other assets 618   796 
Total assets$221,132  $239,972 
Liabilities and stockholders' equity   
Current liabilities:   
Accounts payable$1,057  $1,457 
Accrued expenses 14,631   12,644 
Deferred revenue 28,727   29,942 
Other current liabilities 1,633   4,831 
Total current liabilities 46,048   48,874 
Long-term operating leases, net of current portion 4,787   1,182 
Other long-term liabilities 1,069   1,718 
Total liabilities 51,904   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 September 30, 2022 and December 31, 2021 —   — 
Common stock, $0.001 par value, 100,000,000 shares authorized, 28,915,564 and 30,188,595 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 29   30 
Additional paid-in capital 282,716   300,875 
Accumulated other comprehensive loss (6,609)  (2,237)
Accumulated deficit (106,908)  (110,470)
Total stockholders' equity 169,228   188,198 
Total liabilities and stockholders' equity$221,132  $239,972 
        


 
ChannelAdvisor Corporation and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
    
 Three Months Ended September 30, Nine Months Ended September 30,
 2022 2021 2022
 2021
Revenue$43,490  $41,575  $128,589  $122,284 
Cost of revenue (1) (2) 10,273   10,100   31,062   28,041 
Gross profit 33,217   31,475   97,527   94,243 
Operating expenses (1) (2):       
Sales and marketing 16,143   15,482   48,245   45,273 
Research and development 5,389   5,364   16,192   16,799 
General and administrative 9,984   7,075   24,654   18,792 
Total operating expenses 31,516   27,921   89,091   80,864 
Income from operations 1,701   3,554   8,436   13,379 
Other income (expense):       
Interest income (expense) 234   (30)  251   (96)
Other income (expense) 5   (29)  5   (164)
Total other income (expense) 239   (59)  256   (260)
Income before income taxes 1,940   3,495   8,692   13,119 
Income tax expense (benefit) 2,039   (34)  5,130   (427)
Net (loss) income$(99) $3,529  $3,562  $13,546 
Net (loss) income per share:       
Basic$—  $0.12  $0.12  $0.46 
Diluted$—  $0.11  $0.12  $0.43 
Weighted average common shares outstanding:       
Basic 28,815,362   29,931,173   29,674,219   29,665,439 
Diluted 29,955,554   31,474,314   30,793,498   31,295,737 
        
(1) Includes stock-based compensation as follows:       
Cost of revenue$252  $169  $748  $665 
Sales and marketing 1,060   928   2,707   2,744 
Research and development 591   567   1,628   1,869 
General and administrative 1,476   1,451   4,902   4,461 
 $3,379  $3,115  $9,985  $9,739 
        
(2) Includes depreciation and amortization as follows:       
Cost of revenue$1,186  $1,100  $3,500  $3,409 
Sales and marketing 76   85   221   356 
Research and development 30   32   93   139 
General and administrative 205   368   647   1,160 
 $1,497  $1,585  $4,461  $5,064 
                


 
ChannelAdvisor Corporation and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
  
 Nine Months Ended September 30,
 2022 2021
Cash flows from operating activities   
Net income$3,562  $13,546 
Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:   
Depreciation and amortization 4,461   5,064 
Bad debt expense (recovery) 260   (99)
Stock-based compensation expense 9,985   9,739 
Deferred income taxes 3,726   (875)
Other items, net (1,229)  (1,982)
Changes in assets and liabilities:   
Accounts receivable 1,510   (583)
Prepaid expenses and other assets 842   79 
Deferred contract costs (2,345)  (4,884)
Accounts payable and accrued expenses 1,152   86 
Deferred revenue 47   6,388 
Cash and cash equivalents provided by operating activities 21,971   26,479 
Cash flows from investing activities   
Purchases of property and equipment (2,871)  (1,125)
Payment of software development costs (2,890)  (2,577)
Cash and cash equivalents used in investing activities (5,761)  (3,702)
Cash flows from financing activities   
Repayment of finance leases (8)  (12)
Proceeds from exercise of stock options 700   4,237 
Repurchase and retirement of common stock (25,000)  — 
Payment of statutory tax withholding related to net-share settlement of restricted stock units (3,392)  (1,363)
Cash and cash equivalents (used in) provided by financing activities (27,700)  2,862 
Effect of currency exchange rate changes on cash and cash equivalents (962)  (165)
Net (decrease) increase in cash and cash equivalents (12,452)  25,474 
Cash and cash equivalents, beginning of period 100,567   71,545 
Cash and cash equivalents, end of period$88,115  $97,019 
        


 
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 September 30, Nine Months Ended September 30,
 2022 2021 2022 2021
Revenue$43,490  $41,575  $128,589  $122,284 
        
Gross profit (GAAP)$33,217  $31,475  $97,527  $94,243 
Plus: Stock-based compensation expense included within cost of revenue 252   169   748   665 
Gross profit (Non-GAAP)$33,469  $31,644  $98,275  $94,908 
Gross margin (GAAP) 76%  76%  76%  77%
Gross margin (Non-GAAP) 77%  76%  76%  78%
                


 
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses
(unaudited; in thousands)
 Three Months Ended September 30, Nine Months Ended September 30,
 2022
 2021
 2022
 2021
Operating expenses (GAAP)$31,516  $27,921  $89,091  $80,864 
Less: Stock-based compensation expense included within operating expenses 3,127   2,946   9,237   9,074 
Less: Transaction costs in connection with CommerceHub merger included within operating expenses 3,249   —   3,249   — 
Less: Lease abandonment and related costs included within operating expenses 179   —   467   — 
Less: Headquarters relocation costs included within operating expenses 76   —   76   — 
Plus: Contingent consideration fair value adjustment included within operating expenses —   —   —   (1,313)
Operating expenses (Non-GAAP)$24,885  $24,975  $76,062  $73,103 
                


 
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 September 30, Nine Months Ended September 30,
 2022 2021 2022 2021
Revenue$43,490  $41,575  $128,589  $122,284 
        
Income from operations (GAAP)$1,701  $3,554  $8,436  $13,379 
Plus: Stock-based compensation expense 3,379   3,115   9,985   9,739 
Plus: Transaction costs in connection with CommerceHub merger 3,249   —   3,249   — 
Plus: Lease abandonment and related costs 179   —   467   — 
Plus: Headquarters relocation costs 76   —   76   — 
Less: Contingent consideration fair value adjustment —   —   —   (1,313)
Income from operations (Non-GAAP)$8,584  $6,669  $22,213  $21,805 
Operating margin (GAAP) 4%  9%  7%  11%
Operating margin (Non-GAAP) 20%  16%  17%  18%
                


 
Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net Income
(unaudited; in thousands)
 Three Months Ended September 30, Nine Months Ended September 30,
 2022 2021
 2022
 2021
Net (loss) income (GAAP)$(99) $3,529  $3,562  $13,546 
Plus: Stock-based compensation expense 3,379   3,115   9,985   9,739 
Plus: Transaction costs in connection with CommerceHub merger 3,249   —   3,249   — 
Plus: Lease abandonment and related costs 179   —   467   — 
Plus: Headquarters relocation costs 76   —   76   — 
Less: Contingent consideration fair value adjustment —   —   —   (1,313)
Net income (Non-GAAP)$6,784  $6,644  $17,339  $21,972 
                


 
Reconciliation of GAAP Net (Loss) Income to Adjusted EBITDA and Adjusted EBITDA Margin
(unaudited; in thousands)
 Three Months Ended September 30, Nine Months Ended September 30,
 2022 2021 2022 2021
Net (loss) income (GAAP)$(99) $3,529  $3,562  $13,546 
Adjustments:       
Interest (income) expense (234)  30   (251)  96 
Income tax expense (benefit) 2,039   (34)  5,130   (427)
Depreciation and amortization expense 1,497   1,585   4,461   5,064 
Total adjustments 3,302   1,581   9,340   4,733 
EBITDA 3,203   5,110   12,902   18,279 
Stock-based compensation expense 3,379   3,115   9,985   9,739 
Transaction costs in connection with CommerceHub merger 3,249   —   3,249   — 
Lease abandonment and related costs 179   —   467   — 
Headquarters relocation costs 76   —   76   — 
Contingent consideration fair value adjustment —   —   —   (1,313)
Adjusted EBITDA (Non-GAAP)$10,086  $8,225  $26,679  $26,705 
        
Revenue (GAAP)$43,490  $41,575  $128,589  $122,284 
Adjusted EBITDA margin (Non-GAAP) 23%  20%  21%  22%
                


 
Free Cash Flow Reconciliation
(unaudited; in thousands except share and per share data)
 Nine Months Ended September 30,
 2022 2021
Cash and cash equivalents provided by operating activities (GAAP)$21,971  $26,479 
Less: Purchases of property and equipment (2,871)  (1,125)
Less: Payment of capitalized software development costs (2,890)  (2,577)
Free cash flow (Non-GAAP)$16,210  $22,777 
    
Diluted weighted average shares outstanding 30,793,498   31,295,737 
Free cash flow per diluted share (Non-GAAP)$0.53  $0.73 
        


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

Media Contact:
Caroline Riddle
ChannelAdvisor Corporation
caroline.riddle@channeladvisor.com
919-439-8026

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Source: ChannelAdvisor Corporation

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