ChannelAdvisor Corporation

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the fourth quarter 2021 General Advisor Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press the star, then the one key on your touch-tone telephone. If you recall all of your assistance at any time, please press star, then zero. I would now like to end the conference over to your speaker host today, Rayford Garabin, Director of Investor Relations. Please go ahead.

Thank you, Livia, and good morning, everyone. Welcome to Channel Advisor's conference call for the fourth quarter and full year 2021. With me on the call today are David Spitz, Channel Advisor's Chief Executive Officer, Beth Segovia, Channel Advisor's Chief Operating Officer, and Rich Cornetta, Channel Advisor's Chief Financial Officer. This morning, we issued a press release with details on our fourth quarter and full year 2021 performance, as well as our outlook for the first quarter 2022. This press release can be accessed on the investor relations section of our website at ir.channeladvisor.com. In addition, this call is being recorded, and a replay will be available after the conclusion of the call. During today's call, we will make statements related to our business that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. These risks are summarized in the press release that we issue today. For a further discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our most recent form, MK, as well as our other filings, which are available on the SEC website at sec.gov. During the course of today's call, we will refer to certain non-GAAP financial measures, all of which are reconciled in the press release that we issue today. We also provide a GAAP to non-GAAP reconciliation schedule and our supplemental financial presentation posted on the Investor Relations section of our website. Finally, at times in our prepared comments or responses to analysts' questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future. With that, let me turn the call over to David. Thank you, Rayford.

Q4 marked an outstanding finish to an amazing year for Channel Advisor as our strategic focus on brands continued to drive solid results. We capped off our 20th year in business with record revenue, our fastest year-on-year growth since 2015, adjusted EBITDA that significantly exceeded the high end of our guidance, and and strong cash flow that pushed our cash balance above $100 million as of the end of the year. I'd like to touch on a few highlights that keep us bullish on our long-term outlook. First, the momentum in our business remained strong, with fourth-quarter revenue that exceeded the high end of our guidance range. This was driven by subscription revenue growth that again exceeded 20% and sequential growth in variable revenue that was in line with historical Q4 seasonality. Our revenue strength was fueled by the outstanding results achieved in bookings and revenue retention throughout the year, coupled with continued double-digit GMV growth in the fourth quarter, highlighting strong demand for our products, the durability of e-commerce gains post-COVID, and a testament to the value our platform brings to our customers. Second, our focus on brands continued to pay off and drive our record revenues. In Q4, subscription revenue growth from brands exceeded 40% year-on-year, and brands represented 48% of our subscription revenue, another all-time high and fast approaching a majority of our subscription revenue. Because brands are generally stickier and offer greater potential for expansion, we believe the superior unit economics we've enjoyed with brands will continue to benefit our results as they grow to represent a higher percentage of our business. Third, demand for our products continued to be strong in Q4, capping off a great year for our sales team, who grew bookings 36% year-over-year compared to 2020. And despite our 16% increase in revenue for the year, churn actually fell more than 8% compared to 2020 in real dollars, and even more as a percentage of total revenue, reflecting our investments in product innovation and enhancing our services. Taken together, our fantastic sales and revenue retention execution throughout 2021 have us entering 2022 on strong footing and with good momentum. Fourth, speaking of product innovation, our rapid pace of channel expansion continued in Q4, and we finished the year with over 300 supported channels, well over what we initially targeted at the beginning of 2021. I mentioned that fourth quarter GMV growth continued to be strong. And much of that was driven by continued fast growth of this long tail of channels, which in aggregate is now larger than eBay and Walmart for us, second only to Amazon, and growing much faster than all three. This breadth is part of why we're an industry leader, with Digital Commerce 360 recently naming us the top channel management platform for the 10th year in a row. But we're not resting. Innovation continues to be an area of significant investment for us, as Beth will discuss in a moment. Fifth, we remain committed to maintaining a disciplined financial profile and capital allocation strategy, bias towards growth, and reinvesting in the business. Our rigorous focus on generating returns on invested capital above our cost of capital have allowed us to make significant investments while still delivering strong profitability and robust cash flows. Adjusted EBITDA margin for the full year was 23%, and we converted roughly 75% of adjusted EBITDA dollars to free cash flow, increasing our cash balance by over $29 million. With $100 million in cash on hand, no debt, market leadership, and a large market opportunity still in front of us, we intend to continue investing with discipline in growth initiatives. Our environment isn't without its challenges, of course. There remains significant macroeconomic uncertainty that makes forecasting more difficult, and we're having to work doubly hard to ensure we're achieving our desired staffing levels, particularly in sales where the competition for talent is as strong as I've seen in my career. Nonetheless, as we turn the page to 2022, I'm confident we'll rise to the occasion, as we always have, and I'm excited about our plans we have for the year. And with that, I'll turn it over to Beth.