ECOM
$11.10
Channeladvisor
($.10)
(.89%)
Earnings Details
2nd Quarter June 2018
Thursday, August 09, 2018 4:15:00 PM
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Summary

ChannelAdvisor Narrows Guidance

Channeladvisor (ECOM) reported a 2nd Quarter June 2018 loss of $0.10 per share on revenue of $32.7 million. The consensus estimate was a loss of $0.20 per share on revenue of $31.5 million. Revenue grew 8.9% on a year-over-year basis.

The company said it expects third quarter revenue of $31.4 million to $31.8 million. The current consensus revenue estimate is $31.8 million for the quarter ending September 30, 2018. The company also said it now expects 2018 revenue of $130.5 million to $131.5 million. The company's previous guidance was revenue of $129.5 million to $131.5 million and the current consensus estimate is revenue of $130.9 million for the year ending December 31, 2018.

ChannelAdvisor Corp is engaged in providing software-as-a-service solutions that enables retailers and manufacturers to integrate, manage and optimize their merchandise sales across hundreds of online channels.

Results
Reported Earnings
($0.10)
Earnings Whisper
-
Consensus Estimate
($0.20)
Reported Revenue
$32.7 Mil
Revenue Estimate
$31.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

ChannelAdvisor Announces Second Quarter 2018 Financial Results

Revenue of $32.7 million increases 9 percent year-over-year and exceeds guidance

GAAP net loss of $(2.8) million

Adjusted EBITDA of $1.1 million exceeds guidance

RESEARCH TRIANGLE PARK, N.C., Aug. 09, 2018 (GLOBE NEWSWIRE) -- ChannelAdvisor Corporation (NYSE: ECOM), a leading provider of cloud-based e-commerce solutions that enable retailers and brands to increase global sales, today announced its financial results for the quarter ended June 30, 2018.

"We were pleased with our results in the second quarter. We enjoyed continued momentum from expanding strategic partnerships, and improved efficiency allowed us to deliver margin improvement faster than anticipated. Continued strength in GMV makes us optimistic about our outlook for the remainder of the year," said David Spitz, CEO of ChannelAdvisor.

Second Quarter 2018 Financial Results

  • Total revenue was $32.7 million for the second quarter of 2018, an increase of 9 percent compared with total revenue of $30.0 million for the second quarter of 2017.
  • GAAP net loss was $(2.8) million for the second quarter of 2018 compared with GAAP net loss of $(4.0) million for the second quarter of 2017. GAAP net loss per share was $(0.10) for the second quarter of 2018, based on 27.2 million weighted average shares outstanding, compared with GAAP net loss per share of $(0.15) for the year-ago period, based on 26.4 million weighted average shares then outstanding.
  • Non-GAAP net loss, which excludes non-cash stock-based compensation, was $(0.4) million for the second quarter of 2018 compared with a non-GAAP net loss of $(0.6) million for the second quarter of 2017.
  • Adjusted EBITDA, a non-GAAP measure, was $1.1 million for both the second quarters of 2018 and 2017. Adjusted EBITDA for both the second quarters of 2018 and 2017 excludes depreciation, amortization, income tax expense, interest income (expense) and stock-based compensation expense.
  • Cash and cash equivalents as of June 30, 2018 totaled $50.9 million, compared with $53.4 million as of December 31, 2017.

Recent Business Highlights

  • Average revenue per customer, calculated on a trailing twelve-month basis, increased 10 percent to $45,029 for the twelve months ended June 30, 2018, compared with $41,029 for the twelve months ended June 30, 2017. Total customer count was 2,829 at the end of the second quarter of 2018, compared with 2,906 customers at the end of the second quarter of 2017.
  • Fixed subscription fees were 76 percent of total revenue and variable subscription fees were 24 percent of total revenue for the second quarter of 2018. This compares to 75 percent and 25 percent, respectively, for the second quarter of 2017.
  • Added new customers during the second quarter of 2018, including Keurig, Lenovo and Mondelez International and significantly expanded relationship with Xerox.
  • In August, ChannelAdvisor announced an expanded strategic alliance with Google to support its new program, Shopping Actions. With the addition of Shopping Actions support to ChannelAdvisor’s suite of Google retail solutions, brands and retailers can now leverage the ChannelAdvisor platform to list, manage, promote and sell their products across Google’s surfaces.

Financial Outlook

Based on information available as of today, ChannelAdvisor is issuing the following guidance for the third quarter and full year 2018:

Third Quarter 2018

  • Total revenue between $31.4 million and $31.8 million.
  • Adjusted EBITDA between $0.5 million and $0.9 million.
  • Stock-based compensation expense between $3.0 million and $3.4 million.
  • Weighted average shares outstanding of 27.3 million.

Full Year 2018

  • Total revenue between $130.5 million and $131.5 million.
  • Adjusted EBITDA between $7.8 million and $8.8 million.
  • Stock-based compensation expense between $11.1 million and $11.6 million.
  • Weighted average shares outstanding of 27.2 million.

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 2018 Financial Results Conference Call
When:Thursday, August 9, 2018
Time:4:30 p.m. ET
Live Call:(855) 638-4821, Passcode 3092579, Domestic
 (704) 288-0612, Passcode 3092579, International
Webcast:http://ir.channeladvisor.com (live and replay)
  

Key Financial and Operating Metrics

Average revenue per customer is revenue for a particular period divided by the average monthly number of customers during the period, which is calculated by taking the sum of the number of customers at the end of each month in the period and dividing by the number of months in the period.

Number of customers includes all customers who subscribe to at least one of the company's solutions.

Non-GAAP Financial Measures

This press release contains the following non-GAAP financial measures: non-GAAP net loss and adjusted EBITDA.

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 retailers and brands 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 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 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, 2017 and its Quarterly Report on Form 10-Q that will be filed for the quarter ended June 30, 2018, 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: 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 increasing international operations; and 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.

Investor Contact:
Traci Mangini
ChannelAdvisor Corporation
traci.mangini@channeladvisor.com
919-228-4886

Media Contact:
Ashley Yakopec
ChannelAdvisor Corporation
ashley.yakopec@channeladvisor.com
919-249-9848

 
ChannelAdvisor Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
 
 June 30, 2018 December 31, 2017
 (unaudited)  
Assets   
Current assets:   
Cash and cash equivalents$50,912  $53,422 
Accounts receivable, net of allowance of $607 and $609 as of June 30, 2018
and December 31, 2017, respectively
21,210  27,452 
Prepaid expenses and other current assets14,384  16,462 
Total current assets86,506  97,336 
Property and equipment, net12,871  10,877 
Goodwill23,486  23,486 
Intangible assets, net2,198  2,503 
Deferred contract costs, net of current portion 9,235   
Long-term deferred tax assets, net4,792  5,550 
Other assets1,342  759 
Total assets$ 140,430  $140,511 
Liabilities and stockholders' equity   
Current liabilities:   
Accounts payable$4,892  $7,243 
Accrued expenses12,022  12,611 
Deferred revenue26,023  27,143 
Other current liabilities4,410  4,477 
Total current liabilities47,347  51,474 
Long-term capital leases, net of current portion1,555  641 
Lease incentive obligation2,541  3,328 
Other long-term liabilities2,561  3,157 
Total liabilities54,004  58,600 
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, 2018 and December 31, 2017
   
Common stock, $0.001 par value, 100,000,000 shares authorized, 27,278,649
and 26,601,626 shares issued and outstanding as of June 30, 2018 and
December 31, 2017, respectively
27  27 
Additional paid-in capital266,222  262,805 
Accumulated other comprehensive loss(1,271) (789)
Accumulated deficit(178,552) (180,132)
Total stockholders' equity86,426  81,911 
Total liabilities and stockholders' equity$140,430  $140,511 
        

 

 
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,
 2018 2017 2018 2017
Revenue$32,660  $30,004  $64,105  $58,333 
Cost of revenue (1) (2) (3)6,975  7,144  14,328  14,840 
Gross profit25,685  22,860  49,777  43,493 
Operating expenses (1) (2):       
Sales and marketing (3)15,974  15,003  30,864  30,188 
Research and development5,737  5,147  11,639  10,118 
General and administrative6,708  6,678  13,159  15,208 
Total operating expenses28,419  26,828  55,662  55,514 
Loss from operations(2,734) (3,968) (5,885) (12,021)
Other income (expense):       
Interest income (expense), net106  54  231  82 
Other income (expense), net(1) 13  (20) 70 
Total other income (expense)105  67  211  152 
Loss before income taxes(2,629) (3,901) (5,674) (11,869)
Income tax expense135  84  247  172 
Net loss$(2,764) $(3,985) $(5,921) $(12,041)
Net loss per share:       
Basic and diluted$(0.10) $(0.15) $(0.22) $(0.46)
Weighted average common shares outstanding:       
Basic and diluted27,180,435  26,380,031  26,961,102  26,219,348 
        
        
(1) Includes stock-based compensation as follows:       
Cost of revenue (3)$92  $239  $309  $566 
Sales and marketing (3)728  1,172  1,480  1,918 
Research and development355  503  1,004  1,071 
General and administrative1,141  1,454  2,256  2,737 
 $2,316  $3,368  $5,049  $6,292 
        
(2) Includes depreciation and amortization as follows:       
Cost of revenue (3)$875  $1,066  $1,752  $2,150 
Sales and marketing (3)214  256  434  504 
Research and development90  111  188  222 
General and administrative300  270  585  560 
 $1,479  $1,703  $2,959  $3,436 
                
(3) Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no impact on our reported operating loss or net loss for the period.
 



 
ChannelAdvisor Corporation and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
 
 Six Months Ended June 30,
 2018 2017
Cash flows from operating activities   
Net loss$(5,921) $(12,041)
Adjustments to reconcile net loss to cash and cash equivalents
provided by (used in) operating activities:
   
Depreciation and amortization2,959  3,436 
Bad debt expense532  113 
Stock-based compensation expense5,049  6,292 
Deferred income taxes190  155 
Other items, net(390) (434)
Changes in assets and liabilities, net of effects from acquisition:   
Accounts receivable5,550  (2,157)
Prepaid expenses and other assets4,373  1,193 
Deferred contract costs(3,586)  
Accounts payable and accrued expenses(5,398) 276 
Deferred revenue(2,326) 3,070 
Cash and cash equivalents provided by (used in) operating activities1,032  (97)
Cash flows from investing activities   
Purchases of property and equipment(656) (543)
Payment of internal-use software development costs(290) (159)
Acquisition, net of cash acquired  (2,177)
Cash and cash equivalents used in investing activities(946) (2,879)
Cash flows from financing activities   
Repayment of capital leases(1,837) (2,439)
Proceeds from exercise of stock options1,004  339 
Payment of statutory tax withholding related to net-share settlement of
restricted stock units
(1,569) (2,494)
Cash and cash equivalents used in financing activities(2,402) (4,594)
    
Effect of currency exchange rate changes on cash and cash equivalents(194) 29 
Net decrease in cash and cash equivalents(2,510) (7,541)
Cash and cash equivalents, beginning of period53,422  65,420 
Cash and cash equivalents, end of period$50,912  $57,879 
        


 
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,
 2018 2017 2018 2017
Revenue$32,660  $30,004  $64,105  $58,333 
        
Gross profit (GAAP)$25,685  $22,860  $49,777  $43,493 
Plus: Stock-based compensation expense included within cost of revenue92  239  309  566 
Gross profit (Non-GAAP)$25,777  $23,099  $50,086  $44,059 
Gross margin (GAAP)78.6% 76.2% 77.6% 74.6%
Gross margin (Non-GAAP)78.9% 77.0% 78.1% 75.5%
            


 
Reconciliation of GAAP Operating Expenses to Non-GAAP Operating Expenses
(unaudited; in thousands)
    
 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
Operating expenses (GAAP)$28,419  $26,828  $55,662  $55,514 
Less: Stock-based compensation expense included within operating expenses2,224  3,129  4,740  5,726 
Less: One-time charge for VDAs related to sales taxes      2,539 
Operating expenses (Non-GAAP)$26,195  $23,699  $50,922  $47,249 
                


 
Reconciliation of GAAP Loss from Operations and GAAP Operating Margin
to Non-GAAP Loss from Operations and Non-GAAP Operating Margin
(unaudited; dollars in thousands)
    
 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
Revenue$32,660  $30,004  $64,105  $58,333 
        
Loss from operations (GAAP)$(2,734) $(3,968) $(5,885) $(12,021)
Plus: Stock-based compensation expense2,316  3,368  5,049  6,292 
Plus: One-time charge for VDAs related to sales taxes      2,539 
Loss from operations (Non-GAAP)$(418) $(600) $(836) $(3,190)
Operating margin (GAAP)(8.4)% (13.2)% (9.2)% (20.6)%
Operating margin (Non-GAAP)(1.3)% (2.0)% (1.3)% (5.5)%
            


 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss
(unaudited; in thousands)
    
 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
Net loss (GAAP)$(2,764) $(3,985) $(5,921) $(12,041)
Plus: Stock-based compensation expense2,316  3,368  5,049  6,292 
Plus: One-time charge for VDAs related to sales taxes      2,539 
Net loss (Non-GAAP)$(448) $(617) $(872) $(3,210)
                


 
Reconciliation of Net Loss to Adjusted EBITDA
(unaudited; in thousands)
    
 Three Months Ended June 30, Six Months Ended June 30,
 2018 2017 2018 2017
Net loss$(2,764) $(3,985) $(5,921) $(12,041)
  Adjustments:       
Interest (income) expense, net(106) (54) (231) (82)
Income tax expense135  84  247  172 
Depreciation and amortization expense1,479  1,703  2,959  3,436 
Total adjustments1,508  1,733  2,975  3,526 
EBITDA(1,256) (2,252) (2,946) (8,515)
Stock-based compensation expense2,316  3,368  5,049  6,292 
One-time charge for VDAs related to sales taxes      2,539 
Adjusted EBITDA$1,060  $1,116  $2,103  $316 
                


 
Free Cash Flow Reconciliation
(unaudited; in thousands)
  
 Six Months Ended June 30,
 2018 2017
Cash provided by operating activities$1,032  $(97)
Less: Purchases of property and equipment(656) (543)
Free cash flow$376  $(640)
        


 
Adjusted EBITDA Guidance Reconciliation
(unaudited; in millions)
    
 Third Quarter 2018 Full Year 2018
 Low High Low High
Net loss (estimate)$(4.7) $(3.6) $(10.2) $(8.4)
  Adjustments (estimates):       
Interest (income) expense, net0.0  (0.1) (0.3) (0.4)
Income tax (benefit) expense0.2  0.1  0.6  0.5 
Depreciation and amortization expense1.6  1.5  6.1  6.0 
Total adjustments1.8  1.5  6.4  6.1 
EBITDA(2.9) (2.1) (3.8) (2.3)
Stock-based compensation expense (estimate)3.4  3.0  11.6  11.1 
Adjusted EBITDA guidance$0.5  $0.9  $7.8  $8.8 

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Source: ChannelAdvisor Corporation