RESEARCH TRIANGLE PARK – ChannelAdvisor Corporation (NYSE: ECOM) reported this morning that the RTP-headquartered company achieved a record level of subscription revenue during its earnings report for the second quarter of 2022.
Its overall report on revenues and earnings topped Wall Street expectations with analysis firm Zack’s Research labeling the results “an earnings surprise.”
The company noted in a statement that its brands subscription revenue grew 27% year-over-year, despite unfavorable currency exchange conditions. Nearly half of the company’s total subscription revenue now comes from brands, the company noted.
“Despite the backdrop of slower e-commerce growth, high consumer inflation, and macro uncertainty, we delivered another good quarter in Q2, with solid revenue growth and adjusted EBITDA that again exceeded the high-end of our guidance range,” said David Spitz, ChannelAdvisor’s chief executive officer in a statement. “These results demonstrate the resilience of our subscription-based revenue model and brands-focused strategy.”
Spitz discussed the earnings report just as news was breaking that online shoppers are getting a slight break from inflation. After 25 striaght months of increases, prices fell in July.
The company reported a total revenue in the quarter of $42.8 million, which the statement notes “was above the midpoint of the guidance range.”
And ChannelAdvisor is currently holding cash and cash equivalents of $84.2 million, a decrease year-over-year and in the quarter. But that is reflective of the $25 million used by the company to repurchase about 1.8 million shares of common stock through a buyback program.
The company generated free cash flow of more than $10 million for the first half of the year, noted Spitz.
Another reason the company may be performing well? Spitz noted in a conference calll that the company’s retention has improved lately, with fewer employees leaving the firm as the labor market has, perhaps, cooled for technology firms.
“Hiring and retention environment around employees is significantly better for us than even three or four months ago,” he said.
Inflation changing e-commerce? Not necessarily
“Inflation is on everyone’s mind,” said Spitz during the call Tuesday morning. “Our data suggests that consumers are still spending.”
And that includes spending on non-essential categories, Spitz outlined.
“My expectations,” said Spitz, is that inflation may soften in the back half of the year. He said his “gut sense” was that e-commerce growth rates may tend back toward typical averages in 2023 in answering questions on the earnings call.
Further, Spitz noted that this consumer behavior is actually “consistent with our expectations,” and noted that Amazon Prime Day is just one notable example of where and how U.S. consumers are still spending on consumer discretionary purchases.
“Amazon is a juggernaut and continues to perform well for us,” said Spitz. But it’s not the company’s only channel, as ChannelAdvisor also added 20 new integrated channels, and now offers more than 350 total channels including new ones with Bed, Bath & Beyond in North America and Shopee in portions of the Asia-Pacific region.
Still, the company was named an Amazon Ads Advanced Partner, the company noted on the call and in its statement, which the company said strengthens the “long-standing partnership” with the e-commerce giant.
Why the company did stock buyback
“While near-term macroeconomic factors have created a more challenging environment, we remain optimistic regarding our long-term prospects,” said Spitz. “That’s why we repurchased and retired 1.8 million shares, or approximately 6% of shares outstanding, at an average price of $13.67 during the second quarter.”
A company spokesperson who presented on the call noted that the repurchase price was one at which the company felt confident was a good price.
“With solid profitability, a strong and debt-free balance sheet, market leadership and a large opportunity in front of us, we remain excited about what the future holds for ChannelAdvisor,” said Spitz in the statement. “As long as we execute,” he added on the call.
The company reported record earnings for 2021 in its February earnings call. As of 8:30 a.m. on Tuesday, the company’s stock price had jumped about 2.75% in premarket trading, up from its prior close.