CommerceHub
Aug 2, 2017

CommerceHub Announces Second Quarter 2017 Financial Results

Revenue of $25.2 million increases 9%, $0.05 GAAP EPS, and $0.08 adjusted EPS
Signs Top 10 U.S. Retailer and First U.K. Drop-Ship Retailer

ALBANY, N.Y., Aug. 02, 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 ended June 30, 2017.

"We are pleased with the solid second quarter results we announced today, including continued revenue growth and expanding profitability," said Frank Poore, CommerceHub's Founder, President and CEO. "We are excited to announce the addition of two strategic retailer customer wins during the quarter, making four year-to-date and delivering on the high-end of our goal of 2-4 new retailer customers per year. One is a top 10 U.S. retailer, and the other marks our first retail drop-ship customer in the U.K. The U.S. win demonstrates our market leadership and our ability to deliver high-volume drop-ship fulfillment at scale. The U.K. win establishes a beachhead for our drop-ship offerings and should help to further unlock the U.K. market for CommerceHub."

"In addition to $2.2 million of net income for the quarter, we generated $8.6 million in adjusted EBITDA, representing 34 percent of revenue for the quarter and a 7 percentage point improvement over the same period last year. We also delivered strong free cash flow and continued to pay down debt, strengthening our net cash balance," said Mark Greenquist, CommerceHub's CFO. "We are pleased with our recent customer wins and believe this new U.S. retailer could eventually become a top 10 customer for CommerceHub."

Second Quarter 2017 Financial Highlights

An explanation of the non-GAAP financial measures discussed above 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, August 2, 2017.  See http://ir.commercehub.com/events.cfm, where supporting materials, including a presentation and supplemental financial 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: 55684519
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 retailers, brands, and distributors achieve an estimated $13+ billion in Gross Merchandise Value in 2016.

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, future financial performance, market conditions and potential, future growth of ecommerce, customer growth, sales channel expansion, international expansion 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2016, 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, amortization of capitalized software costs and intangible assets and share-based compensation expense, 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" or "adjusted EPS" 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.


Consolidated Statement of Operations
(in thousands except per share data)
(unaudited)
         
         
  3 months ended: 6 months ended:
  6/30/2017 6/30/2016 6/30/2017 6/30/2016
 Revenue$ 25,208  $ 23,103  $ 49,776  $ 45,193 
 Cost of revenue  5,639    5,320    11,155    11,425 
 Gross profit  19,569    17,783    38,621    33,768  
 Gross margin 78%  77%  78%  75%
         
 Research and development  6,396    3,444    12,311    8,314 
 Sales and marketing  2,387    2,384    4,318    6,001 
 General and administrative  6,945    4,675    13,884    15,199 
 Operating expenses  15,728    10,503    30,513    29,514 
          
 Operating income  3,841     7,280    8,108    4,254 
         
 Interest (expense) income, net  (229)   63    (456)   229 
         
 Pre-tax income  3,612    7,343    7,652    4,483 
 Income tax expense  1,367    2,919    2,948    2,049 
         
 Net income$ 2,245  $ 4,424  $ 4,704  $ 2,434 
         
  Earnings per share:       
 Basic$ 0.05  $ 0.10  $ 0.11  $ 0.06 
 Diluted$ 0.05  $ 0.10  $ 0.10  $ 0.06 
          
 Share count (1):       
 Basic  43,155    42,703    43,068    42,703 
 Diluted  44,957    42,703    44,842    42,703 
         
         
 (1) Share counts for pre-spin periods represent the shares issued at spin-off on July 22, 2016.  
         


CommerceHub, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
     
     
  6/30/2017 12/31/2016
 Assets   
 Cash and cash equivalents$ 6,777 $ 6,471
 Accounts receivable, net of allowances  11,721   18,109
 Prepaid income taxes  3,012   4,311
 Prepaid expenses  1,533    1,549
 Total current assets  23,043   30,440
     
 Capitalized software, net  5,053   6,716
 Deferred services costs  4,837   4,989
 Property and equipment, net  7,283   7,629
 Goodwill  21,410   21,410
 Deferred income taxes  8,639   7,714
 Other long-term assets  1,524   1,122
 Total assets $ 71,789 $ 80,020
    
 Liabilities and Equity   
 Accounts payable and accrued expenses$ 2,223 $ 2,135
 Accrued payroll and related expenses  6,165   7,435
 Income taxes payable  8   7
 Deferred revenue  5,589   5,149
 Total current liabilities  13,985   14,726
 Deferred revenue, long-term  7,965    7,581
 Other long-term liabilities  1,995   1,135
 Long-term debt  6,000   26,000
 Total liabilities  29,945   49,442
    
 Equity:   
 Total equity  41,844   30,578
 Total liabilities and equity$ 71,789  $ 80,020
     


CommerceHub, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
         
         
  3 months ended: 6 months ended:
   6/30/2017 6/30/2016 6/30/2017 6/30/2016
 Cash flows from operating activities       
 Net income$ 2,245  $ 4,424  $ 4,704  $ 2,434 
 Adjustments to net income:       
 Depreciation and amortization  2,182    2,539    4,276    4,862 
 Amortization of debt issuance costs  55    -     111    -  
 Share-based compensation  2,617    (3,477)   4,977    6,560 
 Deferred income taxes  (283)   21,585    (925)   19,214 
 Bad debt expense  187     222    591    255 
 Accrued interest income  -     (107)    -     (273)
 Loss on disposal of long-term assets  17     160    17     160 
 Working capital changes:       
 Accounts receivable  621    1,315    5,796    5,919 
 Prepaid expenses and other assets  (245)   (11)   (488)   (420)
 Income taxes, net  (2,376)   (738 )   1,300    (738)
 Deferred costs  (29)   (103)   152    (295)
 Deferred revenue  490     (249)   824    (31)
 Accounts payable and accrued expenses  256    (1,827)   593    231 
 Accrued payroll and related expenses  1,373    (1,973)   (1,247)   (867)
 Share-based compensation liability payments  -     (78,494)   -     (85,930)
 Parent receivables and payables, net  -     (16,603)   -     (16,346)
 Net cash provided by (used in) operating activities  7,110    (73,337)   20,681    (65,265)
         
 Cash flows from investing activities       
 Purchases of property and equipment  (257)   (1,845)    (949)   (4,136)
 Additions to capitalized software  (353)   (1,321)   (984)   (3,504)
 Collections on note receivable - Parent  -     36,380    -     36,380 
 Net cash (used in) provided by investing activities  (610)   33,214    (1,933)   28,740 
         
  Cash flows from financing activities       
 Borrowings on note payable - Parent  -     28,664    -     28,664 
 Payments on revolver  (4,000)   -     (20,000)   -  
 Cash paid for debt issuance costs  -     (1,000)    -     (1,000)
 Cash received from exercise of stock options  233    21    1,557    73 
 Purchase of treasury stock  -     (3,600)   -     (3,600)
 Net cash (used in) provided by financing activities  (3,767)   24,085    (18,443)   24,137 
 Currency effect on cash  -     -     1    -  
 Net increase (decrease) in cash and cash equivalents  2,733    (16,038)   306    (12,388)
         
  Beginning cash and cash equivalents  4,044    22,987    6,471    19,337 
 Ending cash and cash equivalents$  6,777  $ 6,949  $ 6,777  $ 6,949 
         


CommerceHub, Inc.
Supplemental Information
(in thousands)
(unaudited)
             
             
   3 months ended: 6 months ended:
  6/30/2017 6/30/2016 % Inc (Dec) 6/30/2017 6/30/2016 % Inc (Dec)
 Revenue by type:           
 Usage revenue$ 16,553 $ 15,333  8% $ 32,412 $ 29,875  8%
 Subscription revenues  6,943   6,228  11%   13,840   12,346  12%
 Set-up and professional services  1,712    1,542  11%   3,524   2,972  19%
 Total revenue$ 25,208 $ 23,103  9% $  49,776 $ 45,193  10%
             
             
  3 months ended:   6 months ended:  
  6/30/2017 6/30/2016    6/30/2017 6/30/2016  
 Share-based compensation:           
 Cost of revenue$ 89 $ (662 )   $ 199 $ (158)  
 Research and development  530   (747)     1,101   1,113   
 Sales and marketing  300   (383)     435   601   
 General and administrative  1,698   (1,685)     3,242   5,004   
 Total$ 2,617 $ (3,477)   $ 4,977 $ 6,560   
             
             


CommerceHub, Inc.
GAAP to Non-GAAP Reconciliations
(in thousands)
(unaudited)
         
         
 Reconciliation of GAAP gross profit to adjusted gross profit:    
         
  3 months ended: 6 months ended:
  6/30/2017 6/30/2016 6/30/2017 6/30/2016
 Gross profit$ 19,569  $ 17,783  $ 38,621  $ 33,768 
 Share-based compensation  89    (662)   199    (158)
 Acquisition-related intangible amortization  -     187    -     375 
 Adjusted gross profit$ 19,658  $ 17,308  $ 38,820  $ 33,985 
         
 Adjusted gross margin  78%  75%  78%  75%
         
         
 Reconciliation of GAAP operating expenses to adjusted operating expenses:  
         
  3 months ended: 6 months ended:
  6/30/2017 6/30/2016 6/30/2017 6/30/2016
 Operating expenses$ 15,728  $ 10,503  $ 30,513  $ 29,514 
 Share-based compensation  (2,528)   2,815    (4,778)    (6,718)
 Acquisition-related intangible amortization  -     (250)   -     (500)
 Adjusted operating expenses$ 13,200  $ 13,068  $ 25,735  $ 22,296 
         
         
 Reconciliation of GAAP net income to adjusted EBITDA:    
         
  3 months ended: 6 months ended:
  6/30/2017 6/30/2016 6/30/2017 6/30/2016
 Net income$ 2,245  $ 4,424  $ 4,704  $ 2,434 
 Interest expense (income), net  229     (63)   456    (229)
 Income tax expense  1,367    2,919    2,948    2,049 
 Depreciation and amortization   2,182    2,539    4,276    4,862 
 Share-based compensation  2,617     (3,477)   4,977    6,560 
 Adjusted EBITDA$ 8,640  $ 6,342   $ 17,361  $ 15,676 
         


 
CommerceHub, Inc.
GAAP to Non-GAAP Reconciliations, continued
(in thousands except per share data)
(unaudited)
         
         
 Reconciliation of GAAP net income to adjusted net income:    
         
  3 months ended: 6 months ended:
  6/30/2017 6/30/2016  6/30/2017 6/30/2016
 Net income$ 2,245  $ 4,424  $ 4,704  $ 2,434 
 Share-based compensation  2,617    (3,477)   4,977    6,560 
 Acquisition-related intangible amortization  -     437    -     875 
 Tax effect of adjustments (1)  (1,125)    1,198    (2,104)   (2,718)
 Adjusted net income$ 3,737  $ 2,582  $ 7,577  $ 7,151 
         
 (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: 6 months ended:
  6/30/2017 6/30/2016 6/30/2017 6/30/2016
 GAAP earnings per diluted share$ 0.05  $ 0.10  $ 0.10  $ 0.06 
 Share-based compensation  0.06    (0.08)   0.11     0.15 
 Acquisition-related intangible amortization  -     0.01    -     0.02 
 Tax effect of adjustments (1)  (0.03)   0.03    (0.05)   (0.06)
 Adjusted earnings per diluted share$ 0.08  $ 0.06  $  0.17  $ 0.17 
         
 Diluted share count  44,957    42,703    44,842    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: 6 months ended:
   6/30/2017 6/30/2016 6/30/2017 6/30/2016
 Net cash provided by (used in) operating activities$ 7,110  $ (73,337) $  20,681  $ (65,265)
 Purchases of property and equipment  (257)   (1,845)   (949)   (4,136)
 Additions to capitalized software  (353)   (1,321 )   (984)   (3,504)
 Free cash flow (1)$ 6,500  $ (76,503)  $ 18,748  $ (72,905)
         
 (1) Includes share-based compensation liability payments of:  -     (78,494)   -     (85,930)
         
CommerceHub Investor Relations Contact

Sara Leggat

investor@commercehub.com



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Source: CommerceHub

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