ChannelAdvisor Reports Record Fourth Quarter and Full Year 2021 Results

Rhea-AI Summary

ChannelAdvisor Corporation (NYSE: ECOM) reported a strong Q4 2021 with total revenue of $45.4 million, a 13% year-over-year increase. Subscription revenue rose by 22%, while brands subscription revenue surged by 42%, accounting for 48% of total subscription revenue. The company achieved a net income of $33.7 million, aided by a tax benefit. Operating cash flow for 2021 reached $34.3 million, with a cash balance of $100.6 million at year-end. The company anticipates Q1 2022 revenue between $41.9 - $42.3 million.

Positive

• Total revenue of $45.4 million in Q4 2021, up 13% year-over-year.
• Record subscription revenue growth of 22% year-over-year.
• Brands subscription revenue increased 42%, representing 48% of total subscription revenue.
• Net income of $33.7 million, benefiting from a $28.7 million tax benefit.
• Operating cash flow of $34.3 million and year-end cash balance of $100.6 million.

Negative

• None.

Q4 brands subscription revenue increased 42% year-over-year, a new record, representing 48% of total quarterly subscription revenue

Q4 total revenue of $45.4 million, a new record, up 13% year-over-year

Q4 subscription revenue increased 22% year-over-year

2021 operating cash flow of $34.3 million

RESEARCH TRIANGLE PARK, N.C., Feb. 10, 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 fourth quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Highlights
GAAP

• Record total revenue of $45.4 million, up 13% year-over-year
• Subscription revenue increased 22% year-over-year
• Brands revenue increased 34% year-over-year
• Brands subscription revenue grew 42% year-over-year and represented 48% of total quarterly subscription revenue
• Net income of $33.7 million includes a tax benefit of $28.7 million driven primarily by a $29.4 million release of the valuation allowance recorded against deferred tax assets
  

Non-GAAP

• Adjusted EBITDA of $11.2 million
• Adjusted EBITDA margin of 25%

Full Year 2021 Highlights
GAAP

• Record total revenue of $167.7 million, up 16% year-over-year
• Subscription revenue increased 23% year-over-year
• Brands revenue increased 39% year-over-year and reached 40% of total revenue, a new fiscal year high
• Brands subscription revenue growth of 47% year-over-year and represented 45% of total subscription revenue for the year
• Cash and cash equivalents of $100.6 million at year end, an increase of $29.0 million for the year
• Operating cash flow of $34.3 million

Non-GAAP

• Adjusted EBITDA of $37.9 million
• Adjusted EBITDA margin of 23%
• Free cash flow of $29.2 million, or $0.93 per diluted share based on 31.5 million diluted weighted average shares outstanding

“Q4 marked an outstanding finish to an amazing year for ChannelAdvisor,” said David Spitz, ChannelAdvisor’s chief executive officer. “Our strategic focus on brands continued to drive solid results, with record revenue, adjusted EBITDA that significantly exceeded the high end of our guidance, and strong free cash flow that pushed our cash balance above $100 million. Our land and expand strategy with brands fueled these results, as we saw a strong increase in brands customer count and continued growth in average revenue per customer and annual recurring revenue during the year. We have a large, unpenetrated market opportunity, and believe with our continued focus on product innovation, channel expansion, strong sales and revenue retention, as well as a debt free balance sheet, that we’re well positioned to drive sustainable revenue growth and strong margins in 2022 and beyond.”

Recent Business Highlights

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

• Continued Product Innovation: ChannelAdvisor introduced new interactive analytics in its Advertising Console to help brands quickly discover trending information on all retail media campaigns. ChannelAdvisor also launched new options for advertisers with native integration for TikTok feeds and additional support for Walmart Sponsored Products Campaigns through Item BuyBox and Carousel Placements. For its recently launched Commerce Network, an in-platform experience that enables online channels to easily scout, engage and grow with brands and retailers, ChannelAdvisor launched enhancements including Multiple Seller Profiles which enables sellers to differentiate how their brands, verticals, and business units are discovered by and promoted to different channels.
  
  
• Continued Channel Expansion: ChannelAdvisor remains laser-focused on global channel expansions to help address the evolving business needs of brands and retailers worldwide. With the recent addition of many new integrations, ChannelAdvisor now supports over 300 channels. New global integrations include AliExpress in China, Brazil, France, Italy, Spain and Turkey; Back Market in Germany, Spain, Greece, Ireland, Italy, Portugal, Sweden and Slovakia; Hudson Bay in Canada and the U.S.; and Idealo and Limango in Germany. The company also added support for first-party integrations with Amazon across 17 countries, and in the U.S. with DSW, Journey’s, Martha Stewart and Urban Outfitters.
  
  
• Industry leadership: Named the #1 channel management vendor for the 10^th consecutive year in Digital Commerce 360’s ‘Leading Vendors to the Top 1000 Retailers’ report. ChannelAdvisor is also ranked as the fourth-leading search engine marketing vendor, and a leading provider of online advertising services.
  
  
• New customers: ChannelAdvisor recently added notable new customers including Reynolds Consumer Products, Crown Pet Foods, Arnott’s Biscuits and De Longhi. ChannelAdvisor also expanded its relationship with customers such as Viewsonic, Sennheiser and Clorox.
  

Financial Outlook

Based on the information available as of today, ChannelAdvisor is issuing guidance for its first quarter 2022.

(in millions, except percentages)	Q1 2022
Revenue	$41.9 - $42.3
Adjusted EBITDA	$6.8 - $7.2
As a Percentage of Revenue (at the midpoint for Q1)	17%
Stock-based Compensation Expense	$3.0 - $3.4
Diluted Weighted Average Shares Outstanding	32.2

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 2021 Financial Results Conference Call
When:	Thursday, February 10, 2022
Time:	8:00 a.m. ET
Live Call:	(855) 638-4821, Passcode 9283479, Toll free
	(704) 288-0612, Passcode 9283479, Toll
Webcast:	http://ir.channeladvisor.com (live and replay)

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: adjusted EBITDA and adjusted EBITDA margin and free cash flow and free cash flow per diluted share. We also may provide information regarding non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations and non-GAAP operating margin. Adjusted EBITDA and adjusted EBITDA margin exclude depreciation, amortization, income tax (benefit) expense, net interest expense, and stock-based compensation expense. For 2021 only, adjusted EBITDA excludes the change in fair value of acquisition-related contingent consideration (which increased GAAP operating income), and also excludes lease abandonment and related costs and subsidiary liquidation costs. For 2020 only, adjusted EBITDA excludes transaction costs associated with our July 2020 acquisition of BlueBoard. Adjusted EBITDA margin is equal to adjusted EBITDA divided by GAAP revenue. Free cash flow is cash flow from operations, reduced by purchases of property and equipment and payment of capitalized software development costs. Non-GAAP gross profit, non-GAAP gross margin and non-GAAP operating expenses exclude stock-based compensation expense and 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 first quarter 2022 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, 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,
		2021				2020
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	100,567			$	71,545
Accounts receivable, net of allowance of $279 and $417 as of December 31, 2021 and 2020, respectively		28,886				24,705
Prepaid expenses and other current assets		15,497				13,874
Total current assets		144,950				110,124
Operating lease right of use assets		2,856				8,141
Property and equipment, net		7,682				8,707
Goodwill		30,042				30,990
Intangible assets, net		3,079				4,155
Deferred contract costs, net of current portion		17,951				14,040
Long-term deferred tax assets, net		32,616				3,551
Other assets		796				953
Total assets	$	239,972			$	180,661
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,457			$	158
Accrued expenses		12,644				14,008
Deferred revenue		29,942				22,819
Other current liabilities		4,831				6,029
Total current liabilities		48,874				43,014
Operating lease liabilities, net of current portion		1,182				5,394
Other long-term liabilities		1,718				2,162
Total liabilities		51,774				50,570
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021 and 2020, respectively		—				—
Common stock, $0.001 par value, 100,000,000 shares authorized, 30,188,595 and 29,020,424 shares issued and outstanding as of December 31, 2021 and 2020, respectively		30				29
Additional paid-in capital		300,875				288,842
Accumulated other comprehensive loss		(2,237	)			(1,095	)
Accumulated deficit		(110,470	)			(157,685	)
Total stockholders' equity		188,198				130,091
Total liabilities and stockholders' equity	$	239,972			$	180,661

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,
		2021				2020				2021				2020
	(unaudited)				(unaudited)				(unaudited)
Revenue	$	45,445			$	40,312			$	167,729			$	145,072
Cost of revenue (1) (2)		10,191				8,547				38,232				30,354
Gross profit		35,254				31,765				129,497				114,718
Operating expenses (1) (2):
Sales and marketing		15,482				14,469				60,755				52,905
Research and development		5,583				4,837				22,382				18,990
General and administrative		8,640				5,997				27,432				23,739
Total operating expenses		29,705				25,303				110,569				95,634
Income from operations		5,549				6,462				18,928				19,084
Other (expense) income:
Interest (expense) income, net		(31	)			(35	)			(127	)			175
Other (expense) income, net		(572	)			(35	)			(736	)			9
Total other (expense) income		(603	)			(70	)			(863	)			184
Income before income taxes		4,946				6,392				18,065				19,268
Income tax (benefit) expense		(28,723	)			272				(29,150	)			443
Net income	$	33,669			$	6,120			$	47,215			$	18,825
Net income per share:
Basic	$	1.12			$	0.21			$	1.59			$	0.66
Diluted	$	1.06			$	0.20			$	1.50			$	0.63
Weighted average common shares outstanding:
Basic		30,096,827				29,006,116				29,774,172				28,616,401
Diluted		31,748,091				30,597,322				31,506,080				30,035,261
(1) Includes stock-based compensation as follows:
Cost of revenue	$	71			$	212			$	736			$	972
Sales and marketing		679				731				3,423				2,792
Research and development		376				460				2,245				2,168
General and administrative		1,169				1,065				5,630				4,268
	$	2,295			$	2,468			$	12,034			$	10,200
(2) Includes depreciation and amortization as follows:
Cost of revenue	$	1,125			$	1,144			$	4,534			$	4,211
Sales and marketing		76				159				432				624
Research and development		29				62				168				257
General and administrative		273				493				1,433				1,421
	$	1,503			$	1,858			$	6,567			$	6,513

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

	Year Ended December 31,
		2021				2020
	(unaudited)
Cash flows from operating activities
Net income	$	47,215			$	18,825
Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:
Depreciation and amortization		6,567				6,513
Bad debt expense		59				525
Stock-based compensation expense		12,034				10,200
Deferred income taxes		(29,477	)			(39	)
Other items, net		200				(829	)
Changes in assets and liabilities, net of effects from acquisition:
Accounts receivable		(4,358	)			(2,143	)
Prepaid expenses and other assets		110				(1,728	)
Deferred contract costs		(5,875	)			(2,572	)
Accounts payable and accrued expenses		76				4,270
Deferred revenue		7,701				1,284
Cash and cash equivalents provided by operating activities		34,252				34,306
Cash flows from investing activities
Acquisition, net of cash acquired		—				(8,467	)
Purchases of property and equipment		(1,609	)			(1,704	)
Payment of software development costs		(3,395	)			(3,034	)
Cash and cash equivalents used in investing activities		(5,004	)			(13,205	)
Cash flows from financing activities
Repayment of finance leases and debt		(15	)			(1,808	)
Proceeds from exercise of stock options		5,742				3,825
Payment of statutory tax withholding related to net-share settlement of restricted stock units		(5,743	)			(3,294	)
Payment of line of credit financing costs		—				(187	)
Cash and cash equivalents used in financing activities		(16	)			(1,464	)
Effect of currency exchange rate changes on cash and cash equivalents		(210	)			123
Net increase in cash and cash equivalents		29,022				19,760
Cash and cash equivalents, beginning of year		71,545				51,785
Cash and cash equivalents, end of year	$	100,567			$	71,545

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 December 31,								Year Ended December 31,
		2021				2020				2021				2020
Revenue	$	45,445			$	40,312			$	167,729			$	145,072
Gross profit (GAAP)	$	35,254			$	31,765			$	129,497			$	114,718
Plus: Stock-based compensation expense included within cost of revenue		71				212				736				972
Gross profit (Non-GAAP)	$	35,325			$	31,977			$	130,233			$	115,690
Gross margin (GAAP)		78	%			79	%			77	%			79	%
Gross margin (Non-GAAP)		78	%			79	%			78	%			80	%

Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses
(unaudited; in thousands)
	Three Months Ended December 31,						Year Ended December 31,
		2021			2020			2021				2020
Operating expenses (GAAP)	$	29,705		$	25,303		$	110,569			$	95,634
Less: Stock-based compensation expense included within operating expenses		2,224			2,256			11,298				9,228
Plus: Contingent consideration fair value adjustment included within operating expenses		—			—			(1,313	)			—
Less: Lease abandonment costs included within operating expenses		1,457			—			1,457				—
Less: Subsidiary liquidation costs included within operating expenses		455			—			455				—
Less: Transaction costs in connection with acquisition included within operating expenses		—			45			—				488
Operating expenses (Non-GAAP)	$	25,569		$	23,002		$	98,672			$	85,918

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 December 31,								Year Ended December 31,
		2021				2020				2021				2020
Revenue	$	45,445			$	40,312			$	167,729			$	145,072
Income from operations (GAAP)	$	5,549			$	6,462			$	18,928			$	19,084
Plus: Stock-based compensation expense		2,295				2,468				12,034				10,200
Less: Contingent consideration fair value adjustment		—				—				(1,313	)			—
Plus: Lease abandonment costs		1,457				—				1,457				—
Plus: Subsidiary liquidation costs		455				—				455				—
Plus: Transaction costs in connection with acquisition		—				45				—				488
Income from operations (Non-GAAP)	$	9,756			$	8,975			$	31,561			$	29,772
Operating margin (GAAP)		12	%			16	%			11	%			13	%
Operating margin (Non-GAAP)		21	%			22	%			19	%			21	%

Reconciliation of Net Income to Adjusted EBITDA
(unaudited; in thousands)
	Three Months Ended December 31,							Year Ended December 31,
		2021				2020			2021				2020
Net income	$	33,669			$	6,120		$	47,215			$	18,825
Adjustments:
Interest (income) expense, net		31				35			127				(175	)
Income tax (benefit) expense		(28,723	)			272			(29,150	)			443
Depreciation and amortization expense		1,503				1,858			6,567				6,513
Total adjustments		(27,189	)			2,165			(22,456	)			6,781
EBITDA		6,480				8,285			24,759				25,606
Stock-based compensation expense		2,295				2,468			12,034				10,200
Contingent consideration fair value adjustment		—				—			(1,313	)			—
Lease abandonment and related costs		1,941				—			1,941				—
Subsidiary liquidation costs		455				—			455				—
Transaction costs in connection with acquisition		—				45			—				488
Adjusted EBITDA	$	11,171			$	10,798		$	37,876			$	36,294

Free Cash Flow Reconciliation
(unaudited; in thousands, except share and per share data)
	Three Months Ended December 31,								Year Ended December 31,
		2021				2020				2021				2020
Cash and cash equivalents provided by operating activities	$	7,773			$	8,321			$	34,252			$	34,306
Less: Purchases of property and equipment		(484	)			(683	)			(1,609	)			(1,704	)
Less: Payment of capitalized software development costs	$	(818	)		$	(751	)			(3,395	)			(3,034	)
Free cash flow	$	6,471			$	6,887			$	29,248			$	29,568
Diluted weighted average shares outstanding		31,748,091				30,597,322				31,506,080				30,035,261
Free cash flow per diluted share	$	0.20			$	0.23			$	0.93			$	0.98

Adjusted EBITDA Guidance Reconciliation
(unaudited; in millions)
	First Quarter 2022
	Low			High
Net income (estimate)	$	0.9		$	2.0
Adjustments (estimates):
Interest expense (income), net		0.1			0.0
Income tax expense		0.9			0.8
Depreciation and amortization expense		1.5			1.4
Total adjustments		2.5			2.2
EBITDA		3.4			4.2
Stock-based compensation expense (estimate)		3.4			3.0
Adjusted EBITDA guidance	$	6.8		$	7.2

FAQ

What were ChannelAdvisor's Q4 2021 revenue figures?

ChannelAdvisor reported Q4 2021 total revenue of $45.4 million, a 13% increase year-over-year.

How much did subscription revenue increase in Q4 2021 for ECOM?

In Q4 2021, ChannelAdvisor's subscription revenue increased by 22% year-over-year.

What is the brands subscription revenue growth for ChannelAdvisor in Q4 2021?

Brands subscription revenue grew by 42% year-over-year in Q4 2021.

What was the net income for ChannelAdvisor in Q4 2021?

ChannelAdvisor reported a net income of $33.7 million in Q4 2021.

What is the 2022 revenue guidance for ChannelAdvisor?

ChannelAdvisor projects Q1 2022 revenue between $41.9 million and $42.3 million.