ChannelAdvisor Corporation (ECOM)

ECOM 
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ChannelAdvisor Corporation (ECOM)

Q3 2013 Earnings Conference Call

October 28, 2013 4:30 PM ET

Executives

John Baule - CFO

Scot Wingo - CEO and Chairman

David Spitz - President and COO

Analysts

Greg Dunham - Goldman Sachs

Michael Huang - Needham & Company

Terry Tillman - Raymond James

Brad Reback - Stifel

Chad Bartley - Pacific Crest

Presentation

Operator

Good day ladies and gentlemen and welcome to 2013 Third Quarter ChannelAdvisor Earnings Conference Call. My name is Derick and I will be your operator for today. At this time, all participants are in a listen-only mode. We shall facilitate a question-and-answer session at the end of the conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. John Baule, Chief Financial Officer. Please proceed.

John Baule

Good afternoon and welcome to ChannelAdvisor's conference call for the third quarter of 2013. I am John Baule, Chief Financial Officer of ChannelAdvisor. And with me on the call today are Scot Wingo, CEO and Chairman, and David Spitz, President and COO. After the market closed today, we issued a press release with details on our third quarter performance. This 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 following 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 issued 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 the final perspectives for our IPO as well as our other filings which are available on the SEC website at www.sec.gov. During the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release. And finally at times in our prepared comments or responses to your 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.

And with that let me turn the call over to Scot for his prepared remarks.

Scot Wingo

Thanks John and welcome everyone to ChannelAdvisor's conference call for the third quarter of 2013. We are excited to report today that we had a strong third quarter. Revenue came in at $16.6 million and core revenue grew 30% year-over-year more than twice the rate of growth of e-commerce as reported by comScore. As we headed into the critical seasonal holiday period for e-commerce and end of the year I wanted to update you on some industry trends that we monitor closely. There are five trends that we call the five ways of innovation that we see driving continuing growth in e-commerce. First is the Amazon effect. I would like to say you can't talk about e-commerce without first talking about Amazon. Amazon recently announced 26% year-over-year revenue growth which is twice the rate of e-commerce. One driver of Amazon's success is the third party marketplace. 40% of Amazon's unit sales are from the third party marketplace and we estimate that the gross merchandized value from the Amazon third party marketplace is now around $60 billion globally, second only to eBay and closing quickly. Another key driver is their investment fulfillments and capabilities married with the prime program that offers free two day shipping for $80 a year. We believe the Amazon now has over 105 fulfillment facilities and 70 million square feet of fulfillment center space. [Inaudible] investment Amazon now has over 224 million active buyers and accelerating revenue growth in many of their categories.

In the third quarter, we announced support for Amazon China and Amazon Japan bringing us to support for nine of their global sites. Also we continue to enhance our Amazon solution with innovations around FBA which is Fulfillment by Amazon and re-pricing. In reaction to Amazon success we are seeing two ripples in the world of e-commerce. First is an explosion of third party marketplaces, retailers like Best Buy, Sears, Tesco and Wal-Mart are adding market places. Plus there are exciting new takes on market places such as Groupon Goods for deep discounted items, OneStopPlus for plus size apparels and Wanelo which is a mobile oriented social market place. We recently announced support for Best Buy and Tesco in the U.K. In fact, we now support over 35 market places globally.

Also we are seeing many of our other channel partners innovate around delivery. For example, this quarter eBay announced two programs. The first is in the U.K. and is called Click and Collect. It allows consumers to choose have their packaged delivered to a local pickup store provided by Argos, a leading general goods retailer in the U.K. This program is initially in 50 stores and plans to expand to all 740 Argos stores if successful.

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