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ChannelAdvisor Announces Second Quarter 2013 Financial Results

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 is a leading provider of cloud-based e-commerce solutions that enable online retailers and manufacturers to integrate, manage and optimize their merchandise sales across hundreds of online channels including Amazon, Google, eBay, Facebook and more. Through automation, analytics and optimization, ChannelAdvisor customers can leverage a single inventory feed to more efficiently list and advertise products online, and connect with shoppers to increase sales. Billions of dollars in merchandise value are driven through ChannelAdvisor’s platform every year, and thousands of customers use ChannelAdvisor’s solutions to help grow their businesses. 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 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 Quarterly Report on Form 10-Q that will be filed for the quarter ended June 30, 2013, 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 two non-redundant data centers 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; and challenges and risks associated with our increasing international operations. 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, 2013

December 31, 2012

Assets (unaudited)
Current assets:
Cash $ 94,049 $ 10,865
Accounts receivable, net of allowance of $192 and $191 as of June 30, 2013 and December 31, 2012, respectively 9,177 9,571
Prepaid expenses and other current assets   2,428   2,589
Total current assets 105,654 23,025
 
Property and equipment, net 5,902 4,315
Goodwill 16,106 16,106
Intangible assets, net 868 1,245
Restricted cash 685 687
Other assets   335   2,644
Total assets $ 129,550 $ 48,022
 
Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)
Current liabilities:
Accounts payable $ 1,168 $ 1,269
Accrued expenses 5,387 4,650
Deferred revenue 12,299 9,750
Current portion of long-term debt 3,316 3,370
Other current liabilities   1,924   979
Total current liabilities 24,094 20,018
 
Long-term debt, net of current portion 7,905 7,603
Series A and Series C warrants liability 3,235
Long-term capital leases, net of current portion 1,800 1,136
Other long-term liabilities   1,837   1,714
Total liabilities 35,636 33,706
 
Commitments and contingencies
 
Redeemable convertible preferred stock:

Convertible Series A preferred stock, $0.001 par value, 0 and 94,069,763 shares authorized, 0 and 93,821,393 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively

18,887

Convertible Series B preferred stock, $0.001 par value, 0 and 40,641,227 shares authorized, issued and outstanding as of June 30, 2013 and December 31, 2012, respectively

18,000

Convertible Series B-1 preferred stock, $0.001 par value, 0 and 5,660,378 shares authorized, issued and outstanding as of June 30, 2013 and December 31, 2012, respectively

3,000

Convertible Series C preferred stock, $0.001 par value, 0 and 80,000,000 shares authorized, 0 and 73,880,351 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively

50,608
Total redeemable convertible preferred stock 90,495
 
Stockholders' equity (deficit):
Common stock, $0.001 par value, 100,000,000 and 303,500,000 shares authorized, 21,637,938 and 1,240,193 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively 21 1
Additional paid-in capital 181,541 3,584
Accumulated other comprehensive loss (447) (289)
Accumulated deficit   (87,201)   (79,475)
Total stockholders’ equity (deficit)   93,914   (76,179)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit) $ 129,550 $ 48,022
 
 
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,
  2013   2012   2013   2012
 
Revenue $ 15,976 $ 12,408 $ 30,898 $ 24,574
Cost of revenue (1)   4,469   3,630   8,415   6,876
Gross profit 11,507 8,778 22,483 17,698
 
Operating expenses (1):
Sales and marketing 9,292 6,616 17,082 12,006
Research and development 2,910 2,523 5,891 5,074
General and administrative   2,801   1,986   5,142   3,774
Total operating expenses   15,003   11,125   28,115   20,854
Loss from operations (3,496) (2,347) (5,632) (3,156)
Other (expense) income:
Interest expense, net (1,489) (399) (2,087) (421)
Other income, net   2   12   14   16
Total other (expense) income   (1,487)   (387)   (2,073)   (405)
Loss before income taxes (4,983) (2,734) (7,705) (3,561)
Income tax expense   14   16   21   40
Net loss $ (4,997) $ (2,750) $ (7,726) $ (3,601)
 
Net loss per share:
Basic and diluted $ (0.56) $ (2.39) $ (1.52) $ (3.13)
 
Weighted average common shares outstanding:
Basic and diluted 8,847,309 1,152,142 5,094,552 1,148,649
 

(1) Includes stock-based compensation as follows:

Cost of revenue

$

71

$

30

$

118

$

34

Sales and marketing

158

51

293

55

Research and development

105

50

175

63

General and administrative

 

196

 

113

 

373

 

140

$

530

$

244

$

959

$

292

 
 
ChannelAdvisor Corporation and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
 
  Six Months Ended June 30,
  2013     2012
Cash flows from operating activities
Net loss $ (7,726) $ (3,601)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 1,733 1,328
Bad debt expense (recovery) 90 (8)
Change in fair value of preferred stock warrants 1,052 (1)
Accretion of debt discount 303 107
Stock-based compensation expense 959 292
Change in lease incentive obligation (10) (10)
Amortization of debt issuance costs 26 10
Change in deferred rent 124 370
Changes in assets and liabilities:
Accounts receivable 111 547
Prepaid expenses and other assets 120 (106)
Restricted cash 155
Accounts payable and accrued expenses 989 327
Deferred revenue   2,836   2,578
Net cash provided by operating activities 607 1,988
 
Cash flows from investing activities
Purchases of property and equipment   (1,426)   (1,417)
Net cash used in investing activities (1,426) (1,417)
 
Cash flows from financing activities
Proceeds from initial public offering, net of underwriting discounts and commissions 86,095
Proceeds from issuance of debt, net of debt issuance costs 4,896
Repayment of debt and capital leases (667) (773)
Payment of deferred offering costs (2,023)
Proceeds from exercise of stock options   804   27
Net cash provided by financing activities 84,209 4,150
 
Effect of currency exchange rate changes on cash   (206)   (43)
Net increase in cash 83,184 4,678
 
Cash, beginning of period   10,865   4,998
Cash, end of period $ 94,049 $ 9,676
 
 
Reconciliation of Core Revenue (Non-GAAP) to Revenue (GAAP)
(unaudited; in thousands)
       
Three Months Ended June 30, Six Months Ended June 30,
  2013   2012   2013   2012
 
Core revenue $ 15,522 $ 11,815 $ 29,923 $ 23,282
Non-core revenue   454   593   975   1,292
Total revenue $ 15,976 $ 12,408 $ 30,898 $ 24,574
 
 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss and Non-GAAP Net Loss Per Share
(unaudited; in thousands, except share and per share data)
       
Three Months Ended June 30, Six Months Ended June 30,
  2013   2012   2013   2012
 
Net loss (GAAP) (4,997) (2,750) (7,726) (3,601)
Plus: stock-based compensation   530   244   959   292
Net loss (Non-GAAP) $ (4,467) $ (2,506) $ (6,767) $ (3,309)
 
Weighted average common shares outstanding, basic and diluted 8,847,309 1,152,142 5,094,552 1,148,649

Additional weighted average shares giving effect to conversion of preferred stock at the beginning of the period

  8,680,175   13,382,695   11,021,115   13,382,401
Shares used in computing non-GAAP net loss per share, basic and diluted   17,527,484   14,534,837   16,115,667   14,531,050
Net loss per share, basic and diluted (Non-GAAP) $ (0.25) $ (0.17) $ (0.42) $ (0.23)
 
 
Reconciliation of Net Loss to Adjusted EBITDA
(unaudited; in thousands)
       
Three Months Ended June 30, Six Months Ended June 30,
  2013   2012   2013   2012
 
Net loss $ (4,997) $ (2,750) $ (7,726) $ (3,601)
Adjustments:
Interest expense, net 1,489 399 2,087 421
Income tax expense 14 16 21 40
Depreciation and amortization expense   933   745   1,733   1,328
Total adjustments   2,436   1,160   3,841   1,789
EBITDA (2,561) (1,590) (3,885) (1,812)
Stock-based compensation expense   530   244   959   292
Adjusted EBITDA $ (2,031) $ (1,346) $ (2,926) $ (1,520)




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