Form 8-K CHANNELADVISOR CORP For: Feb 04

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February 4, 2016 4:22 PM EST



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________________________________________
FORM 8-K
 
____________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 4, 2016

____________________________________________________
CHANNELADVISOR CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________________________

Delaware
 
001-35940
 
56-2257867
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)

3025 Carrington Mill Boulevard
Morrisville, NC 27560
(Address of principal executive offices, including zip code)

(919) 228-4700
(Registrant's telephone number, including area code)

N/A
(Former name or former address, if changed since last report)
____________________________________________________


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02 Results of Operations and Financial Condition.

On February 4, 2016, ChannelAdvisor Corporation (the “Registrant”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2015. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein. 

In accordance with General Instruction B.2. of Form 8-K, the information in this Item 2.02, and Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any of the Registrant's filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any incorporation language in such a filing, except as expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits
Exhibit Number
Exhibit Description
99.1
Press Release, dated February 4, 2016 “ChannelAdvisor Announces Fourth Quarter and Full Year 2015 Financial Results.”





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
CHANNELADVISOR CORPORATION
 
 
 
 
 
 
By:
/s/ Mark E. Cook
Date:
February 4, 2016
 
Mark E. Cook
 
 
 
Chief Financial Officer





EXHIBIT INDEX

Exhibit Number
Exhibit Description
99.1
Press Release, dated February 4, 2016 “ChannelAdvisor Announces Fourth Quarter and Full Year 2015 Financial Results.”



Exhibit 99.1

ChannelAdvisor Announces Fourth Quarter and Full Year 2015 Financial Results
Fourth quarter total revenue of $29.4 million increases 24 percent year-over-year


Research Triangle Park, NC - February 4, 2016 - ChannelAdvisor Corporation (NYSE: ECOM), a leading provider of cloud-based e-commerce solutions that enable retailers and branded manufacturers to increase global sales, today announced its financial results for the fourth quarter and full year ended December 31, 2015.

“We had a very strong finish to the year, as our fourth quarter revenue and adjusted EBITDA were above the high end of our guidance ranges,” said David Spitz, CEO of ChannelAdvisor. “Improvements in pricing, our focus on attracting and retaining larger retailers and branded manufacturers, and our emphasis on customer success helped produce a significant increase in gross merchandise value through our platform in the quarter, as well as continued growth in average revenue per customer. Revenue overperformance came largely from a meaningful increase in variable subscription revenue and enabled us to exceed the $100 million mark in annual revenue for the first time in our company's history. While we continue to invest in long-term growth opportunities, our profitability in the quarter was substantially above our expectations and allowed us to achieve positive adjusted EBITDA for the full year. Our growing and global scale continued to solidify our global leadership position, and we enter 2016 with increased optimism and confidence in our ability to deliver continued growth in the years ahead.”

Fourth Quarter 2015 Financial Results
•
Total revenue of $29.4 million for the fourth quarter of 2015 increased 24 percent compared with total revenue of $23.8 million in the fourth quarter of 2014.
•
GAAP net loss was $(0.7) million compared with net loss of $(6.5) million in the fourth quarter of 2014. GAAP net loss per share was $(0.03), based on 25.2 million weighted average shares outstanding, compared with net loss per share of $(0.26), based on 24.9 million weighted average shares outstanding in the year-ago period.
•
Non-GAAP net income, which excludes non-cash stock-based compensation expense in both 2015 and 2014, costs associated with our headquarters relocation in 2015, one-time severance and related costs in 2015 and acquisition-related costs during 2014, was $3.0 million for the fourth quarter of 2015 compared with non-GAAP net loss of $(3.4) million for the fourth quarter of 2014. Non-GAAP net income per diluted share was $0.11 for the fourth quarter of 2015 compared with non-GAAP net loss per diluted share of $(0.14) for the fourth quarter of 2014.
•
Adjusted EBITDA, a non-GAAP measure, was $5.4 million for the fourth quarter of 2015 compared with $(1.5) million for the fourth quarter of 2014. Adjusted EBITDA excludes depreciation, amortization, income tax expense, interest expense, stock-based compensation expense and the headquarters relocation, severance and acquisition-related costs described above.
•
Cash at quarter end totaled $60.5 million, compared with $59.0 million at the end of the third quarter of 2015.

Full Year 2015 Financial Results
•
Total revenue of $100.6 million for the year increased 18 percent compared with total revenue of $84.9 million in 2014.
•
GAAP net loss was $(21.0) million compared with a net loss of $(34.5) million in 2014. GAAP net loss per share was $(0.84), based on 25.1 million weighted average shares outstanding, compared with a net loss per share of $(1.40), based on 24.6 million weighted average shares outstanding in 2014.
•
Non-GAAP net loss was $(7.3) million compared with a non-GAAP net loss of $(26.0) million in 2014. Non-GAAP net loss per diluted share was $(0.29) for 2015 compared with a non-GAAP net loss per diluted share of $(1.06) for 2014.
•
Adjusted EBITDA was $1.4 million in 2015 compared with $(19.5) million in 2014.

Recent Business Highlights
•
Fixed subscription fees were 69 percent of total revenue and variable subscription fees were 31 percent of total revenue for the fourth quarter of 2015. This compares to 71 percent and 29 percent, respectively, for the fourth quarter of 2014.
•
Fixed subscription fees were 76 percent of total revenue and variable subscription fees were 24 percent of total revenue for 2015. This compares to 74 percent and 26 percent, respectively, for 2014.


Exhibit 99.1

•
Subscription dollar retention rate, the primary metric that we use to measure customer retention, exceeded 100 percent for the quarter, consistent with recent performance.
•
Processed more than a quarter billion dollars in gross merchandise value over the Cyber Five period, a ChannelAdvisor record.
•
Processed $6.8 billion in total gross merchandise value in 2015, an increase of 19 percent from 2014.
•
Total customer count was 2,898 at the end of the fourth quarter, an increase of 2 percent from 2,841 customers at the end of the fourth quarter of 2014.
•
Average revenue per customer, calculated on a trailing twelve-month basis, increased 10 percent to $34,513 at the end of the fourth quarter, compared with $31,400 at the end of the fourth quarter of 2014.
•
Added new top-tier customers including Birchbox, Diageo, Indochino Apparel, Inc., Johnson & Johnson, LuckyVitamin, Maclaren Services, Milestone AV Technologies and PFSweb.
•
Added support for Amazon's Sponsored Products advertising solution.
•
Opened registration for Catalyst Americas 2016 and AutoCommerce 2016.
•
Named Richard Cornetta as Vice President of Finance and Chief Accounting Officer.
•
Named Mark Vandegrift as Vice President, Product Management.

Financial Outlook
Based on information available as of today, ChannelAdvisor is issuing the following guidance for the first quarter and full year of 2016:

First Quarter 2016
•
Total revenue between $24.6 million and $25.0 million.
•
Adjusted EBITDA between $(2.5) million and $(1.5) million.
•
Stock-based compensation expense between $3.4 million and $3.8 million.
•
25.3 million weighted average shares outstanding.

Full Year 2016
•
Total revenue between $111.0 million and $113.0 million.
•
Adjusted EBITDA between $0.0 million and $3.0 million.
•
Stock-based compensation expense between $12.5 million and $14.5 million.
•
25.5 million weighted average shares outstanding.
Conference Call Information
 
What:
ChannelAdvisor Fourth Quarter and Full Year 2015 Financial Results Conference Call
When:
Thursday, February 4, 2016
Time:
4:30 p.m. ET
Live Call:
(855) 638-4821, Passcode 27380984, Domestic
 
(704) 288-0612, Passcode 27380984, International
Webcast:
http://ir.channeladvisor.com (live and replay)
Key Operating Metrics
Number of customers includes all customers who subscribe to at least one of our solutions, but excludes customers who subscribe only to one of our legacy product offerings for lower-volume eBay sellers.
Average revenue per customer is revenue divided by the average monthly number of customers during the period.
Subscription dollar retention rate is calculated for a particular period by establishing the cohort of customers that had active contracts as of the end of the prior period. We then calculate our subscription dollar retention rate by taking the amount of fixed subscription revenue we recognized for the cohort in the period for which we are reporting the rate and dividing it by the fixed subscription revenue we recognized for the same cohort in the prior period. For this purpose, we do not include any variable subscription fees paid by our customers or any implementation fees.


Exhibit 99.1

Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: non-GAAP net loss, non-GAAP net loss per share 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. With respect to our expectations under "Financial Outlook" above, reconciliation of non-GAAP Adjusted EBITDA guidance to the closest corresponding GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from this non-GAAP measure. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.
About ChannelAdvisor
ChannelAdvisor (NYSE: ECOM) is a leading provider of cloud-based e-commerce solutions that enable online retailers and branded 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 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, 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


Exhibit 99.1

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.
###
Media Contact:
Sarah O'Dea
ChannelAdvisor Corporation
919-228-4784
Investor Contact:
Garo Toomajanian
ICR, LLC
919-228-2003




The following financial information is preliminary and subject to change pending the company's filing of its Form 10-K.

ChannelAdvisor Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share data)
 
 
December 31,
 
2015
 
2014
Assets
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
60,474

 
$
68,366

Accounts receivable, net of allowance of $785 and $673 as of December 31, 2015 and 2014, respectively
18,949

 
14,619

Prepaid expenses and other current assets
9,356

 
4,940

Total current assets
88,779

 
87,925

Property and equipment, net
16,696

 
12,603

Goodwill
21,632

 
21,518

Intangible assets, net
3,246

 
4,083

Restricted cash
67

 
633

Other assets
536

 
285

Total assets
$
130,956

 
$
127,047

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
2,435

 
$
564

Accrued expenses
9,908

 
7,292

Deferred revenue
19,835

 
16,840

Other current liabilities
4,188

 
2,563

Total current liabilities
36,366

 
27,259

Long-term capital leases, net of current portion
2,031

 
2,014

Lease incentive obligation
5,084

 
119

Other long-term liabilities
3,551

 
4,007

Total liabilities
47,032

 
33,399

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, 2015 and 2014, respectively
—

 
—

Common stock, $0.001 par value, 100,000,000 shares authorized, 25,230,958 and 24,915,510 shares issued and outstanding as of December 31, 2015 and 2014, respectively
25

 
25

Additional paid-in capital
240,360

 
228,370

Accumulated other comprehensive loss
(893
)
 
(130
)
Accumulated deficit
(155,568
)
 
(134,617
)
Total stockholders’ equity
83,924

 
93,648

Total liabilities and stockholders’ equity
$
130,956

 
$
127,047




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,                    
2015
 
2014
 
2015
 
2014
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
Revenue
$
29,434

 
$
23,827

 
$
100,585


$
84,901

Cost of revenue (excluding depreciation) (1)
5,277

 
5,027

 
20,848


20,713

Depreciation - cost of revenue
1,450

 
1,024

 
4,986

 
3,507

Gross profit
22,707

 
17,776

 
74,751

 
60,681

Operating expenses (1):

 
 
 
 
 
 
Sales and marketing
11,151

 
13,427

 
51,941


54,902

Research and development
4,105

 
3,907

 
16,060


16,215

General and administrative
7,269

 
5,955

 
24,136


20,815

Depreciation and amortization
980

 
847

 
3,807

 
2,757

Total operating expenses
23,505

 
24,136

 
95,944

 
94,689

Loss from operations
(798
)
 
(6,360
)
 
(21,193
)
 
(34,008
)
Other income (expense):

 
 
 
 
 
 
Interest expense, net
(42
)
 
(52
)
 
(184
)

(209
)
Other income (expense), net
101

 
(170
)
 
241


(256
)
Total other income (expense)
59

 
(222
)
 
57

 
(465
)
Loss before income taxes
(739
)
 
(6,582
)
 
(21,136
)
 
(34,473
)
Income tax (benefit) expense
(59
)
 
(46
)
 
(185
)

41

Net loss
$
(680
)
 
$
(6,536
)
 
$
(20,951
)
 
$
(34,514
)
Net loss per share:
 
 
 
 
 
 
 
Basic and diluted
$
(0.03
)
 
$
(0.26
)
 
$
(0.84
)

$
(1.40
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic and diluted
25,188,595

 
24,891,086

 
25,062,610


24,619,714

 
 
 
 
 
 
 
 
(1) Includes stock-based compensation as follows:
 
 
 
 
 
 
 
Cost of revenue (excluding depreciation)
$
215

 
$
160

 
$
992

 
$
533

Sales and marketing
583

 
1,078

 
4,349

 
2,911

Research and development
394

 
280

 
1,689

 
864

General and administrative
1,372

 
1,162

 
4,807

 
3,673

 
$
2,564

 
$
2,680

 
$
11,837

 
$
7,981





ChannelAdvisor Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
 
 
Year Ended December 31,
 
2015
 
2014
 
(unaudited)
 
 
Cash flows from operating activities
 
 
 
Net loss
$
(20,951
)

$
(34,514
)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
 
 
 
Depreciation and amortization
8,793


6,264

Bad debt expense
1,236


1,315

Non-cash stock-based compensation expense
11,837


7,981

Other items, net
(329
)
 
142

Changes in assets and liabilities, net of effects from acquisition:
 
 
 
Accounts receivable
(5,833
)

(1,407
)
Prepaid expenses and other assets
(3,487
)

(1,106
)
Restricted cash
566


52

Accounts payable and accrued expenses
3,608


(2,709
)
Deferred revenue
3,101


2,447

Net cash and cash equivalents used in operating activities
(1,459
)
 
(21,535
)
 
 
 
 
Cash flows from investing activities
 
 
 
Purchases of property and equipment
(4,062
)

(5,971
)
Payment of internal-use software development costs
(190
)

(846
)
Acquisition, net of cash acquired
—

 
(8,034
)
Net cash and cash equivalents used in investing activities
(4,252
)
 
(14,851
)
 
 
 
 
Cash flows from financing activities
 
 
 
Repayment of capital leases
(1,745
)

(1,699
)
Proceeds from exercise of stock options
892


2,060

Payment of statutory tax withholding related to net-share settlement of restricted stock units
(739
)
 
—

Net cash and cash equivalents (used in) provided by financing activities
(1,592
)
 
361

 
 
 
 
Effect of currency exchange rate changes on cash and cash equivalents
(589
)

(15
)
Net decrease in cash and cash equivalents
(7,892
)
 
(36,040
)
 
 
 
 
Cash and cash equivalents, beginning of year
68,366


104,406

Cash and cash equivalents, end of year
$
60,474

 
$
68,366




Reconciliation of GAAP Net Loss to Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per Share
(unaudited; in thousands, except share and per share data)
 
 
 
 

Three Months Ended December 31,

Year Ended December 31,

2015

2014

2015

2014
Net loss (GAAP)
$
(680
)
 
$
(6,536
)
 
$
(20,951
)
 
$
(34,514
)
Plus: stock-based compensation
2,564

 
2,680

 
11,837

 
7,981

Plus: headquarters relocation and related costs
1,109

 
—

 
1,109

 
—

Plus: one-time severance and related costs
—

 
—

 
656

 
—

Plus: acquisition-related costs
—

 
487

 
—

 
487

Net income (loss) (Non-GAAP)
$
2,993

 
$
(3,369
)
 
$
(7,349
)
 
$
(26,046
)


 

 

 

Weighted average common shares outstanding:


 


 


 


Basic
25,188,595

 
24,891,086

 
25,062,610

 
24,619,714

Diluted
26,421,450

 
24,891,086

 
25,062,610

 
24,619,714

Net income (loss) per share:

 

 

 

Basic (non-GAAP)
$
0.12

 
$
(0.14
)
 
$
(0.29
)
 
$
(1.06
)
Diluted (non-GAAP)
$
0.11

 
$
(0.14
)
 
$
(0.29
)
 
$
(1.06
)
Reconciliation of Net Loss to Adjusted EBITDA
(unaudited; in thousands)
 
 
 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Net loss
$
(680
)
 
$
(6,536
)
 
$
(20,951
)
 
$
(34,514
)
  Adjustments:
 
 
 
 
 
 
 
     Interest expense, net
42

 
52

 
184

 
209

     Income tax (benefit) expense
(59
)
 
(46
)
 
(185
)
 
41

     Depreciation and amortization expense
2,430

 
1,871

 
8,793

 
6,264

     Total adjustments
2,413

 
1,877

 
8,792

 
6,514

EBITDA
1,733

 
(4,659
)
 
(12,159
)
 
(28,000
)
     Stock-based compensation expense
2,564

 
2,680

 
11,837

 
7,981

Headquarters relocation and related costs
1,109

 
—

 
1,109

 
—

One-time severance and related costs
—

 
—

 
656

 
—

Acquisition-related costs
—

 
487

 
—

 
487

Adjusted EBITDA
$
5,406

 
$
(1,492
)
 
$
1,443

 
$
(19,532
)
Depreciation and Amortization by Financial Statement Line Item (1)
(unaudited; in thousands)
 
 
 
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Sales and marketing
$
351

 
$
271

 
$
1,264

 
$
927

Research and development
148

 
106

 
506

 
370

General and administrative
481

 
470

 
2,037

 
1,460

Total depreciation and amortization expense attributable to operating expenses
$
980

 
$
847

 
$
3,807

 
$
2,757

 
 
 
 
 
 
 
 
(1) Amounts are excluded from each operating expense line item and presented separately in Depreciation and amortization on the Consolidated Statements of Operations



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