CommerceHub
Feb 15, 2017

CommerceHub Announces Fourth Quarter and Full Year 2016 Financial Results

Revenue for the year grows 15% as gross margin and adjusted EBITDA margin expand in seasonally strong fourth quarter

ALBANY, N.Y., Feb. 15, 2017 (GLOBE NEWSWIRE) -- CommerceHub, Inc. (NASDAQ:CHUBA) (NASDAQ:CHUBK) ("CommerceHub," "we," "us," "our" or the "Company"), a leading distributed commerce network for retailers and brands, today announced financial results for the quarter and full year ended December 31, 2016.

"We are pleased with our fourth quarter performance, which was highlighted by the 17% year-over-year growth of our core drop-ship business. The fourth quarter and the holiday season is critically important to the retail industry, and our strong growth demonstrates CommerceHub's important role to play in the success of our customers," said Frank Poore, CommerceHub's Founder, President and CEO. "2016 saw a continuation of the secular shift of retail spending into the ecommerce channel, and we further established ourselves as a long-term strategic partner to the leading retailers that leverage our platform to benefit from the growing importance of ecommerce."

"We generated $6.0 million in net income and $16.8 million in adjusted EBITDA in the quarter," said Mark Greenquist, CommerceHub's CFO. "Usage revenue for the core-drop ship business, which excludes customers acquired through the Mercent acquisition, grew 17% in the quarter. This usage-based model generates very strong incremental margins as volume increases across our platform, which is demonstrated by the 28 percentage point sequential quarterly increase in adjusted EBITDA margins to 51%."

Fourth Quarter 2016 Financial Highlights

Full Year Financial Highlights

An explanation of these non-GAAP financial measures is included below under the heading "Statement Regarding Non-GAAP Financial Measures."  A reconciliation of these non-GAAP financial measures to the closest comparable GAAP financial measures has also been provided in the financial tables included at the end of this press release.

Other Recent Highlights

Conference Call Details
The Company will offer a live conference call, and a live, listen-only Webcast of the call via the CommerceHub Investor Relations Website at 4:30 p.m., E.T., today, Wednesday, February 15, 2017.  See http://ir.commercehub.com/events.cfm, where supporting materials, including a presentation and supplemental financial and operational data, have been posted.

Live Call:U.S./Canada Toll-Free Participants Dial-in Number: (800) 219-6912
International Toll Participants Dial-in Number: (574) 990-1026
Conference ID/Passcode: 64327494
Webcast (live and replay):http://ir.commercehub.com/events.cfm

About CommerceHub:
CommerceHub is a distributed commerce network connecting supply, demand and delivery that helps retailers and brands increase sales by expanding product assortments, promoting products on the channels that perform, and enabling rapid, on-time customer delivery. With its robust platform and proven scalability, CommerceHub helped over 10,000 customers achieve an estimated $13.4 billion in Gross Merchandise Value in 2016. To learn more, visit www.commercehub.com.

Important Information Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about future business strategies, market conditions and potential, future financial prospects, future growth of ecommerce, customer growth, sales channel expansion, future financial expenses, financial performance and other matters that are not historical facts. These statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, market acceptance and performance of our products and services, competitive issues, general market conditions, regulatory matters affecting our business and changes in law. These forward-looking statements speak only as of the date of this presentation, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any such statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. There can be no assurance that any expectation or belief expressed in a forward-looking statement will occur, and you should not place undue reliance on any forward-looking statements. Please refer to our public filings with the Securities and Exchange Commission, including our Registration Statement on Form S-1 (File No. 333-210508), Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, for additional information about us and the risks and uncertainties we face that may affect the forward-looking statements made in this press release.

Statement Regarding Non-GAAP Financial Measures
In addition to reporting financial measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP"), we provide non-GAAP financial measures that management considers in reviewing our financial performance because we feel they are relevant measures of the overall efficiency of our business model. These non-GAAP financial measures are not a substitute for, or superior to, and should be considered only in addition to, financial measures calculated in accordance with GAAP. They are subject to inherent limitations and exclude significant expenses and income that are required by GAAP to be recorded in our financial statements. Certain of these adjustments are based on estimates and assumptions of management and do not purport to reflect actual historical results. In addition, you should be aware that our computation of these non-GAAP financial measures may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate these measures in the same fashion. We define "adjusted gross profit" as gross profit plus share-based compensation and acquisition-related intangible amortization. We define "adjusted gross margin" as adjusted gross profit divided by revenue. We define "adjusted operating expenses" as total operating expenses less share-based compensation and acquisition-related intangible amortization. We define "adjusted EBITDA" as net income or loss plus interest expense, income tax expense, depreciation of property and equipment and amortization of capitalized software costs and intangible assets and share-based compensation, less interest income and income tax benefit.  We define "adjusted net income" as net income or loss plus share-based compensation, acquisition-related intangible amortization and the tax effect of these adjustments. We define "adjusted earnings per diluted share" as earnings per diluted share plus the diluted per share effects of share-based compensation, acquisition-related intangible amortization and the tax effect of these adjustments.  We define "free cash flow" as net cash provided by, or used in, operating activities less purchases of property and equipment and additions to capitalized software. A reconciliation of these non-GAAP financial measures to the closest comparable GAAP financial measures has been provided in the financial tables included at the end of this press release.

 
CommerceHub, Inc.
Consolidated Statement of Operations
(in thousands except per share data)
(unaudited)
         
         
         
  3 months ended: 12 months ended:
  12/31/16 12/31/15 12/31/16 12/31/15
 Revenue$ 32,881  $ 29,271  $ 100,552  $ 87,614 
 Cost of revenue  5,895    6,523    23,057    22,700 
 Gross profit  26,986    22,748    77,495     64,914 
 Gross margin 82 %  78%  77%  74%
         
 Research and development  5,796    5,288    19,187     16,304 
 Sales and marketing  2,310    3,453    11,334    11,287 
 General and administrative  7,075    15,770    30,282    44,271 
 Operating expenses  15,181    24,511    60,803    71,862 
         
 Operating income (loss)  11,805    (1,763)   16,692    (6,948)
         
 Interest (expense) income, net  (302)    168    (434)   600 
         
 Pre-tax income (loss)  11,503    (1,595)   16,258    (6,348)
 Income tax expense (benefit)  5,551    (234)   7,162    (1,881)
         
 Net income (loss)$ 5,952  $ (1,361) $ 9,096  $ (4,467)
         
 Earnings per share:       
 Basic$ 0.14  $ (0.03) $ 0.21  $ (0.10)
 Diluted$ 0.13  $ (0.03) $ 0.21   $ (0.10)
         
 Share count (1):       
 Basic  42,876    42,703    42,831    42,703  
 Diluted  44,408    42,703    44,343    42,703 
         
         
 (1) Share count for pre-spin periods represent the shares issued at spin-off on July 22, 2016.
  


 
CommerceHub, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
     
     
   12/31/16 12/31/15
 Assets   
 Cash and cash equivalents$ 6,471 $ 19,337
 Accounts receivable, net of allowances  18,109   16,472
 Prepaid income taxes  4,311   - 
 Prepaid expenses  1,549   1,048
 Total current assets  30,440   36,857
      
 Note receivable—Parent  -    36,107
 Capitalized software, net  6,716   7,189
 Deferred services costs  4,989   4,956
 Property and equipment, net  7,629   6,706
 Intangibles, net  -    1,750
 Goodwill  21,410   21,410
 Deferred income taxes  7,714   38,825
 Other long-term assets  1,122   - 
     Total assets$ 80,020 $ 153,800
    
 Liabilities and Equity   
 Accounts payable and accrued expenses$ 2,135 $ 3,982
 Accrued payroll and related expenses  7,435   5,538
 Due to Parent   -    9,112
 Income taxes payable  7   - 
 Deferred revenue  5,149   4,490
 Share-based compensation liability  -    94,427
 Total current liabilities  14,726   117,549
 Deferred revenue, long-term  7,581   7,532
 Share-based compensation liability, long-term  -    1,786
 Other long-term liabilities  1,135   - 
 Long-term debt  26,000   - 
 Total liabilities  49,442   126,867
    
 Equity:   
 Total equity  30,578   26,933
     Total liabilities and equity$ 80,020 $ 153,800
       


 
CommerceHub, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
          
         
          
  3 months ended: 12 months ended:
  12/31/16 12/31/15 12/31/16 12/31/15
 Cash flows from operating activities       
 Net income (loss)$ 5,952  $ (1,361) $ 9,096   $ (4,467)
 Adjustments to net income (loss):       
 Depreciation and amortization  2,488    2,079     9,803    7,794 
 Amortization of debt issuance costs  56    -     111    -  
 Share-based compensation expense  2,537    17,818    11,290    42,150 
 Deferred income taxes  4,311    (2,786)   21,326    (12,289)
 Bad debt expense  (66)    241    629    481 
 Accrued interest income  -     (168)   (273)   (600)
 Loss on disposal of long-term assets  19    -     179    -  
 Working capital changes:       
 Accounts receivable  (7,993)   (6,393)    (2,326)   (816)
 Prepaid expenses and other assets   357    227    (599)   (40)
 Prepaid income taxes  (3,361)   -     (4,311)   -  
 Deferred costs  168    (253)   (33)   (1,094)
 Deferred revenue  442     (27)   708    2,031 
 Accounts payable and accrued expenses  (313)   (4)   166    (2,683)
 Accrued payroll and related expenses  1,485    15    1,901    2,097 
 Income taxes payable  (1,753)   -     7    -  
 Share-based compensation liability payments  -     (3,888)   (86,684)   (7,507)
 Parent receivables and payables, net  -     (263)   (9,112)   (523)
 Net cash provided by (used in) operating activities  4,329    5,237    (48,122)   24,534 
         
 Cash flows from investing activities       
  Purchases of property and equipment  (482)   (603)   (4,995)   (4,158)
 Additions to capitalized software   (582)   (2,049)   (4,545)   (6,484)
 Acquisition of business, net of cash acquired  -     -     -     (20,225)
 Collections on note receivable - Parent  -     -     36,380    -  
 Net cash (used in) provided by investing activities  (1,064)   (2,652)   26,840    (30,867)
         
 Cash flows from financing activities       
 Borrowings on revolver  -     -     50,000    -  
 Payments on revolver  (15,000)   -     (24,000)    -  
 Cash paid for debt issuance costs  -     -     (1,100)   -  
 Purchase of treasury stock  -     -      (3,600)   (164)
 Cash received from exercise of stock options  598    7    846    33 
 Borrowings on note payable - Parent  -     -     28,664    -  
 Payments on note payable - Parent  -     -     (28,664)   -  
 Contribution from Liberty  -     -     6,000    -  
 Cash dividends paid  -     (584)   (19,730)   (584)
 Net cash (used in) provided by financing activities  (14,402)   (577)   8,416    (715)
 Currency effect on cash  -     -     -     -  
 Net (decrease) increase in cash and cash equivalents  (11,137)   2,008    (12,866)   (7,048)
         
 Beginning cash and cash equivalents$ 17,608  $ 17,329  $ 19,337  $ 26,385 
 Ending cash and cash equivalents$ 6,471  $ 19,337  $ 6,471  $ 19,337 
                 


 
CommerceHub, Inc.
Supplemental Information
(in thousands)
(unaudited)
             
              
             
  3 months ended: 12 months ended:  
  12/31/16 12/31/15 % Inc
(Dec)
 12/31/16 12/31/15 % Inc
(Dec)
 Revenue by type: (1)           
 Usage   24,661    22,076 12%    69,098     59,585 16%
 Subscription   6,737    5,929 14 %    25,503     23,636 8%
 Set-up and professional services   1,483    1,266 17%    5,951     4,393 35%
     Total revenue    32,881    29,271 12%    100,552     87,614 15%
             
 (1) Year-to-date 2015 amounts incorporate an updated presentation of third quarter revenue between usage, subscription, and set-up and professional services, refer to supplementary earnings materials for updated 2015 quarterly revenue by type.
             
  3 months ended:   12 months ended:  
  12/31/16 12/31/15   12/31/16 12/31/15   
 Share-based compensation expense:           
 Cost of revenue$  105 $  978   $  (102) $  2,361  
 Research and development   564    2,882      2,261     7,229  
 Sales and marketing   130    1,687      834     4,098  
 General and administrative   1,738    12,271      8,297     28,462  
     Total$  2,537 $  17,818   $  11,290  $  42,150  
                  


 
CommerceHub, Inc.
GAAP to Non-GAAP Reconciliations
(in thousands)
(unaudited)
         
         
         
 Reconciliation of GAAP gross profit to adjusted gross profit:       
         
  3 months ended: 12 months ended:
  12/31/16 12/31/15  12/31/16 12/31/15
 Gross profit$ 26,986  $ 22,748  $ 77,495  $ 64,914 
 Share-based compensation  105    978    (102)   2,361 
 Acquisition-related intangible amortization  188    188    750    750 
 Adjusted gross profit$ 27,279  $ 23,914  $ 78,143  $ 68,025 
         
 Adjusted gross margin 83%  82%  78%  78%
         
         
 Reconciliation of GAAP operating expenses to adjusted operating expenses:      
         
  3 months ended: 12 months ended:
  12/31/16 12/31/15 12/31/16 12/31/15
 Operating expenses$ 15,181  $ 24,511  $ 60,803  $ 71,862 
 Share-based compensation  (2,432)   (16,840)   (11,392)   (39,789)
 Acquisition-related intangible amortization  (250)   (250)   (1,000)   (1,000)
 Adjusted operating expenses$ 12,499  $ 7,421  $ 48,411  $ 31,073 
         
         
  Reconciliation of GAAP net income (loss) to adjusted EBITDA:       
         
  3 months ended: 12 months ended:
  12/31/16 12/31/15 12/31/16 12/31/15
 Net income (loss)$ 5,952  $ (1,361) $ 9,096   $ (4,467)
 Interest expense (income), net  302    (168)   434    (600)
 Income tax expense (benefit)   5,551    (234)   7,162    (1,881)
 Depreciation and amortization  2,488     2,079    9,803    7,794 
 Share-based compensation  2,537    17,818     11,290    42,150 
 Adjusted EBITDA$ 16,830  $ 18,134  $ 37,785  $ 42,996 
                 


 
CommerceHub, Inc.
GAAP to Non-GAAP Reconciliations, continued
(in thousands except per share data)
(unaudited)
         
         
         
 Reconciliation of GAAP net income (loss) to adjusted net income:       
         
  3 months ended: 12 months ended:
  12/31/16  12/31/15 12/31/16 12/31/15
 Net income (loss)$ 5,952   $ (1,361) $ 9,096  $ (4,467)
 Share-based compensation  2,537    17,818    11,290    42,150 
 Acquisition-related intangible amortization  438    438    1,750    1,750 
 Tax effect of adjustments (1)  (240)    (6,899)   (4,557)   (16,902 )
 Adjusted net income$ 8,687  $ 9,996  $ 17,579   $ 22,531 
 (1) Adjusted net income assumes a long-term projected tax rate of 40%      
         
 Reconciliation of GAAP earnings per diluted share to adjusted earnings per diluted share:    
         
  3 months ended:  12 months ended:
  12/31/16 12/31/15 12/31/16 12/31/15
 GAAP earnings per diluted share$ 0.13  $ (0.03) $ 0.21  $ (0.10)
 Share-based compensation   0.06    0.42    0.25    0.99 
 Acquisition-related intangible amortization  0.01    0.01    0.04    0.04 
 Tax effect of adjustments (1)  (0.01)   (0.16)    (0.10)   (0.40)
 Adjusted earnings per diluted share$ 0.20  $ 0.23   $ 0.40  $ 0.53 
         
 Diluted share count  44,408    42,703    44,343    42,703 
         
 (1) Adjusted earnings per diluted share assumes a long-term projected tax rate of 40%    
         
 Reconciliation of GAAP net cash provided by (used in) operating activities to free cash flow:    
         
  3 months ended: 12 months ended:
  12/31/16 12/31/15 12/31/16 12/31/15
 Net cash provided by (used in) operating activities$ 4,329  $ 5,237  $ (48,122) $ 24,534 
 Purchases of property and equipment  (482)   (603)   (4,995)   (4,158)
 Additions to capitalized software  (582)   (2,049)   (4,545)    (6,484)
 Free cash flow (1)$ 3,265  $ 2,585  $ (57,662) $ 13,892 
         
 (1) Includes share-based compensation liability payments of:  -     (3,888)   (86,684)   (7,507)
                 

 

CommerceHub Investor Relations Contact

Erik Morton

1-206-971-7712

investor@commercehub.com

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Source: CommerceHub

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