News Column

ChannelAdvisor boosts guidance, exceeds expectations in Q2

August 4, 2014

By David Ranii, The News & Observer (Raleigh, N.C.)

Aug. 04--E-commerce technology company ChannelAdvisor upped its guidance for the full year after reporting second-quarter results that bested analysts' expectations.

Investors weren't impressed, however. ChannelAdvisor shares dipped in after-hours trading after the Morrisville company released its latest quarterly earnings.

ChannelAdvisor reported Monday after the markets closed that it generated $20.8 million in revenue in the second quarter, up 30 percent from a year ago. Analysts polled by Thomson Reuters were expecting $20 million in revenue.

ChannelAdvisor reported a net loss of $7.5 million after excluding stock-based compensation, wider than the $4.5 million loss of a year ago but better than Wall Street was expecting. Analysts were projecting, on average, a 31-cent loss per share.

David Spitz, the company's president and chief operating officer, said during a conference call that it was the fourth consecutive quarter "of accelerating core revenue growth."

ChannelAdvisor has been aggressively expanding its sales-and-marketing team, forsaking profits in exchange for accelerated growth.

ChannelAdvisor's cloud-based software enables retailers to integrate and manage online sales across a multitude of sales channels. Customers also use its software to automatically advertise products on search engines such as Google and Yahoo and to promote products on Facebook.

After-hours traders may have been focusing on the customer's new customer numbers.

ChannelAdvisor added a net total of 108 customers in the quarter, giving it a total of 2,673 -- an increase of 25 percent from a year ago. But those gains lagged behind the 142 customers the company added in the fourth quarter of 2013 and the 136 it added in the first quarter.

But Spitz said that during the second quarter the company "lost an increased number of smaller customers and replaced them with larger and, we believe, more profitable customers."

For instance, he said, the company landed a "top 10 retailer" that is expected to generate more than $350,000 in annual revenue -- compared with less than $10,000 that the company reaps from its smallest customers.

In addition, Spitz said, ChannelAdvisor's net customer count was adversely affected by an unusual number of smaller sellers accounting for less than $15,000 each in annual revenue that were suspended by Amazon and eBay. Sellers can be suspended for a variety of reasons, including being behind in their fees or for failing to meet customer-service standards.

"This affects the viability of some of these smaller customers," Spitz said. "So we're not losing these customers to competitors. Rather, they are generally just going out of business or at least leaving the channel."

CEO Scot Wingo said that the second-quarter saw an unusual amount of innovation in the e-commerce sector, including Facebook's launch of the "Facebook buy button" that permits users to purchase products without leaving Facebook.

"Complexity, fragmentation and change in e-commerce creates more demand for our solutions and increases the value of the ChannelAdvisor platform," Wingo said.

The company upped its revenue guidance for the full year to between $86 million and $86.7 million. It previously had projected annual revenue would range between $85 million and $86 million.

Earlier Monday, the company's shares closed at $23.21, up $1.15. ChannelAdvisor shares are down 44 percent for the year but remain well above the $14 per share that they fetched when it went public in May 2013.

Ranii: 919-829-4877


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Source: News & Observer (Raleigh, NC)

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