10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 001-35940

____________________________________________________

CHANNELADVISOR CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________________________ 

Delaware	56-2257867
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
3025 Carrington Mill Boulevard, Morrisville, NC	27560
(Address of principal executive offices)	(Zip Code)

(919) 228-4700

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former

fiscal year, if changed since last report)

____________________________________________________ 

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	ECOM	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No   ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Securities Exchange Act of 1934.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  ☐    No  ☒

The number of outstanding shares of the registrant's common stock, par value $0.001 per share, as of the close of business on October 31, 2022 was 28,916,493.

TABLE OF CONTENTS

	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	2
Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	3
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2022 and 2021	4
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	5
Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
Item 4. Controls and Procedures	31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	32
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3. Defaults Upon Senior Securities	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	36
Signatures	37

1

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CHANNELADVISOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	September 30, 2022		December 31, 2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	88,115	$	100,567
Accounts receivable, net of allowance of $241 and $279 as of September 30, 2022 and December 31, 2021, respectively	25,675		28,886
Prepaid expenses and other current assets	14,823		15,497
Total current assets	128,613		144,950
Operating lease right of use assets	5,172		2,856
Property and equipment, net of accumulated depreciation of $24,096 and $23,096 as of September 30, 2022 and December 31, 2021, respectively	9,212		7,682
Goodwill	28,209		30,042
Intangible assets, net	2,292		3,079
Deferred contract costs, net of current portion	18,648		17,951
Long-term deferred tax assets, net	28,368		32,616
Other assets	618		796
Total assets	$	221,132	$	239,972
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,057	$	1,457
Accrued expenses	14,631		12,644
Deferred revenue	28,727		29,942
Other current liabilities	1,633		4,831
Total current liabilities	46,048		48,874
Long-term operating leases, net of current portion	4,787		1,182
Other long-term liabilities	1,069		1,718
Total liabilities	51,904		51,774
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021	—		—
Common stock, $0.001 par value, 100,000,000 shares authorized, 28,915,564 and 30,188,595 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	29		30
Additional paid-in capital	282,716		300,875
Accumulated other comprehensive loss	(6,609)		(2,237)
Accumulated deficit	(106,908)		(110,470)
Total stockholders' equity	169,228		188,198
Total liabilities and stockholders' equity	$	221,132	$	239,972

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

2

CHANNELADVISOR CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	$	43,490	$	41,575	$	128,589	$	122,284
Cost of revenue	10,273		10,100		31,062		28,041
Gross profit	33,217		31,475		97,527		94,243
Operating expenses:
Sales and marketing	16,143		15,482		48,245		45,273
Research and development	5,389		5,364		16,192		16,799
General and administrative	9,984		7,075		24,654		18,792
Total operating expenses	31,516		27,921		89,091		80,864
Income from operations	1,701		3,554		8,436		13,379
Other income (expense):
Interest income (expense)	234		(30)		251		(96)
Other income (expense)	5		(29)		5		(164)
Total other income (expense)	239		(59)		256		(260)
Income before income taxes	1,940		3,495		8,692		13,119
Income tax expense (benefit)	2,039		(34)		5,130		(427)
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546
Net (loss) income per share:
Basic	$	—	$	0.12	$	0.12	$	0.46
Diluted	$	—	$	0.11	$	0.12	$	0.43
Weighted average common shares outstanding:
Basic	28,815,362		29,931,173		29,674,219		29,665,439
Diluted	29,955,554		31,474,314		30,793,498		31,295,737

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

3

CHANNELADVISOR CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546
Other comprehensive (loss) income:
Foreign currency translation adjustments	(1,961)		(1,157)		(4,372)		(1,219)
Total comprehensive (loss) income	$	(2,060)	$	2,372	$	(810)	$	12,327

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

4

CHANNELADVISOR CORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities
Net income	$	3,562	$	13,546
Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:
Depreciation and amortization	4,461		5,064
Bad debt expense (recovery)	260		(99)
Stock-based compensation expense	9,985		9,739
Deferred income taxes	3,726		(875)
Other items, net	(1,229)		(1,982)
Changes in assets and liabilities:
Accounts receivable	1,510		(583)
Prepaid expenses and other assets	842		79
Deferred contract costs	(2,345)		(4,884)
Accounts payable and accrued expenses	1,152		86
Deferred revenue	47		6,388
Cash and cash equivalents provided by operating activities	21,971		26,479
Cash flows from investing activities
Purchases of property and equipment	(2,871)		(1,125)
Payment of software development costs	(2,890)		(2,577)
Cash and cash equivalents used in investing activities	(5,761)		(3,702)
Cash flows from financing activities
Repayment of finance leases	(8)		(12)
Proceeds from exercise of stock options	700		4,237
Repurchase and retirement of common stock	(25,000)		—
Payment of statutory tax withholding related to net-share settlement of restricted stock units	(3,392)		(1,363)
Cash and cash equivalents (used in) provided by financing activities	(27,700)		2,862
Effect of currency exchange rate changes on cash and cash equivalents	(962)		(165)
Net (decrease) increase in cash and cash equivalents	(12,452)		25,474
Cash and cash equivalents, beginning of period	100,567		71,545
Cash and cash equivalents, end of period	$	88,115	$	97,019
Supplemental disclosure of cash flow information
Cash paid for interest	$	96	$	69
Cash paid for income taxes, net	$	898	$	456
Supplemental disclosure of noncash investing and financing activities
Accrued statutory tax withholding related to net-share settlement of restricted stock units	$	453	$	4,204
Accrued capital expenditures	$	30	$	45

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

5

CHANNELADVISOR CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE BUSINESS

ChannelAdvisor Corporation ("ChannelAdvisor" or the "Company") was incorporated in the state of Delaware and capitalized in June 2001. The Company began operations in July 2001. ChannelAdvisor is a leading provider of cloud-based e-commerce solutions whose mission is to connect and optimize the world's commerce. For over two decades, ChannelAdvisor has helped brands and retailers worldwide to streamline their e-commerce operations, expand to new channels and grow sales. Thousands of customers depend on ChannelAdvisor to securely power their e-commerce operations on hundreds of channels, including Amazon, eBay, Facebook, Google, Shopify, Walmart and Zalando. The Company is headquartered in Morrisville, North Carolina and maintains sales, service, support and research and development offices in various domestic and international locations.

Merger Agreement and Proposed Acquisition by CommerceHub

On September 4, 2022, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with CommerceHub, Inc., a Delaware corporation ("CommerceHub"), and CH Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of CommerceHub (the "Merger Sub"), providing for the merger of Merger Sub with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of CommerceHub.

Under the terms of the Merger Agreement, CommerceHub will acquire all outstanding shares of the Company's common stock in exchange for consideration of $23.10 per share in cash. The Merger Agreement contains representations and warranties customary for transactions of this type. The closing of the Merger is subject to approval of the Company's stockholders and the satisfaction or waiver of a number of customary closing conditions. The Merger Agreement provides CommerceHub and the Company with certain termination rights and, under certain circumstances, may require that CommerceHub or the Company pay a termination fee. During the three and nine months ended September 30, 2022, the Company incurred $3.2 million in costs associated with the negotiation and execution of the Merger Agreement, which are included in general and administrative expense in the accompanying condensed consolidated statements of operations.

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, as contained in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of financial position, the results of operations, comprehensive (loss) income and cash flows. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results for the full year or the results for any future periods, especially in light of the ongoing impacts, and potential future effects of, the COVID-19 pandemic and other macroeconomic and geopolitical factors on the Company’s business, operations and financial performance. These unaudited interim financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2021, or fiscal 2021, which are included in the Company's Annual Report on Form 10-K for fiscal 2021. There have been no material changes to the Company's significant accounting policies from those described in the footnotes to the audited financial statements contained in the Company's Annual Report on Form 10-K for fiscal 2021. 

Recent Accounting Pronouncements

The Company has reviewed new accounting pronouncements that were issued during the nine months ended September 30, 2022 and does not believe that these pronouncements are applicable to the Company, or that they will have a material impact on its financial position or results of operations.

6

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable allowance, the useful lives of long-lived assets and other intangible assets, income taxes, assumptions used for purposes of determining stock-based compensation, leases, including estimating lease terms and extensions, and revenue recognition, including standalone selling prices for contracts with multiple performance obligations and the expected period of benefit for deferred contract costs, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities.

3. STOCKHOLDERS' EQUITY

The following tables summarize quarterly stockholders' equity activity for the three and nine months ended September 30, 2022 and 2021 (in thousands, except number of shares):

	Quarterly Activity For The Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2021	30,188,595	$	30	$	300,875	$	(2,237)	$	(110,470)	$	188,198
Exercise of stock options and vesting of restricted stock units	388,551	—		362		—		—		362
Stock-based compensation expense	—	—		3,132		—		—		3,132
Statutory tax withholding related to net-share settlement of restricted stock units	(101,316)	—		(1,818)		—		—		(1,818)
Net income	—	—		—		—		1,824		1,824
Foreign currency translation adjustments	—	—		—		(416)		—		(416)
Balance, March 31, 2022	30,475,830	30		302,551		(2,653)		(108,646)		191,282
Exercise of stock options and vesting of restricted stock units	123,990	—		13		—		—		13
Stock-based compensation expense	—	—		3,474		—		—		3,474
Statutory tax withholding related to net-share settlement of restricted stock units	(44,201)	—		(620)		—		—		(620)
Repurchase and retirement of common stock	(1,828,604)	(1)		(24,999)		—		—		(25,000)
Net income	—	—		—		—		1,837		1,837
Foreign currency translation adjustments	—	—		—		(1,995)		—		(1,995)
Balance, June 30, 2022	28,727,015	29		280,419		(4,648)		(106,809)		168,991
Exercise of stock options and vesting of restricted stock units	272,620	—		325		—		—		325
Stock-based compensation expense	—	—		3,379		—		—		3,379
Statutory tax withholding related to net-share settlement of restricted stock units	(84,071)	—		(1,407)		—		—		(1,407)
Net loss	—	—		—		—		(99)		(99)
Foreign currency translation adjustments	—	—		—		(1,961)		—		(1,961)
Balance, September 30, 2022	28,915,564	$	29	$	282,716	$	(6,609)	$	(106,908)	$	169,228

7

	Quarterly Activity For The Nine Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2020	29,020,424	$	29	$	288,842	$	(1,095)	$	(157,685)	$	130,091
Exercise of stock options and vesting of restricted stock units	802,270	1		3,586		—		—		3,587
Stock-based compensation expense	—	—		3,048		—		—		3,048
Statutory tax withholding related to net-share settlement of restricted stock units	(89,842)	—		(2,061)		—		—		(2,061)
Net income	—	—		—		—		5,457		5,457
Foreign currency translation adjustments	—	—		—		(150)		—		(150)
Balance, March 31, 2021	29,732,852	30		293,415		(1,245)		(152,228)		139,972
Exercise of stock options and vesting of restricted stock units	146,164	—		136		—		—		136
Stock-based compensation expense	—	—		3,576		—		—		3,576
Statutory tax withholding related to net-share settlement of restricted stock units	(48,409)	—		(1,177)		—		—		(1,177)
Net income	—	—		—		—		4,560		4,560
Foreign currency translation adjustments	—	—		—		88		—		88
Balance, June 30, 2021	29,830,607	30		295,950		(1,157)		(147,668)		147,155
Exercise of stock options and vesting of restricted stock units	314,529	—		515		—		—		515
Stock-based compensation expense	—	—		3,115		—		—		3,115
Statutory tax withholding related to net-share settlement of restricted stock units	(96,188)	—		(2,329)		—		—		(2,329)
Net income	—	—		—		—		3,529		3,529
Foreign currency translation adjustments	—	—		—		(1,157)		—		(1,157)
Balance, September 30, 2021	30,048,948	$	30	$	297,251	$	(2,314)	$	(144,139)	$	150,828

Share Repurchase Program

In August 2021, the Company's Board of Directors approved a share repurchase program authorizing the repurchase of up to $25.0 million of the Company's common stock through August 10, 2022. During the nine months ended September 30, 2022, 1,828,604 shares were repurchased and retired under the repurchase program at an average price of $13.67 per share for an aggregate total price of $25.0 million, which completed the share repurchase program authorized in August 2021.

In June 2022, the Company's Board of Directors authorized an additional share repurchase program of up to $25.0 million of the Company's common stock through June 30, 2023. The Company had not repurchased any shares under the June 2022 authorization as of September 30, 2022. Repurchases may be made from time to time on the open market at prevailing prices, including pursuant to Rule 10b5-1 trading plans, or in negotiated transactions off the market. The share repurchase program does not obligate the Company to repurchase any particular amount of its shares. In light of the pending Merger (see Note 1), the Company does not have any current plans to effect share repurchases under the June 2022 authorization.

4. GOODWILL AND INTANGIBLE ASSETS

The Company has acquired intangible assets in connection with its business acquisitions. These assets were recorded at their estimated fair values at the acquisition date and are being amortized over their respective estimated useful lives using the straight-line method. The estimated useful lives and amortization methodology used in computing amortization are as follows:

8

	Estimated Useful Life	Amortization Methodology
Customer relationships	7 years	Straight-line
Acquired technology	7 years	Straight-line

Amortization expense associated with the Company's intangible assets was $0.1 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively, and $0.4 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively.

The following table summarizes the changes in the carrying amount of goodwill during the nine months ended September 30, 2022 (in thousands):

Balance, December 31, 2021	$	30,042
Effects of foreign currency translation	(1,833)
Balance, September 30, 2022	$	28,209

5. CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Capitalized software development costs related to creating internally developed software and implementing software purchased for internal use are included in property and equipment in the accompanying condensed consolidated balance sheets. The Company capitalized software development costs of $0.9 million for both the three months ended September 30, 2022 and 2021, and $2.8 million and $2.6 million during the nine months ended September 30, 2022 and 2021, respectively. Amortization expense related to capitalized internally developed software was $0.8 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $2.4 million and $2.0 million for the nine months ended September 30, 2022 and 2021, respectively, and is included in cost of revenue or general and administrative expense in the accompanying condensed consolidated statements of operations, depending upon the nature of the software development project. The net book value of capitalized internally developed software was $5.2 million and $4.8 million at September 30, 2022 and December 31, 2021, respectively.

6. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition and Disaggregation of Revenue

The Company derives the majority of its revenue from subscription fees paid for access to and usage of its software solutions for a specified contract term. A customer typically pays a recurring subscription fee based on a specified minimum amount of gross merchandise value, or GMV, or advertising spend that the customer expects to process through the Company's platform. Subscription fees may also include implementation fees such as launch assistance and training fees. The remaining portion of a customer's fee is variable and is based on a specified percentage of GMV or advertising spend processed through the Company's platform in excess of the customer's specified minimum GMV or advertising spend amount. In most cases, the specified percentage of excess GMV or advertising spend on which the variable fee is based is fixed and does not vary depending on the amount of the excess. Subscription fees are billed in advance of the subscription term and are due in accordance with contract terms, which generally provide for payment within 30 days. Variable fees are subject to the same payment terms, although they are generally billed at the end of the period in which they are incurred. The Company also generates revenue from its solutions that allow brands to direct potential consumers from their websites and digital marketing campaigns to authorized resellers. The majority of the Company's contracts have a one year term. The Company's contractual arrangements include performance, termination and cancellation provisions, but do not provide for refunds. Customers do not have the contractual right to take possession of the Company's software at any time. Sales taxes collected from customers and remitted to government authorities are excluded from revenue.

The Company's customers are categorized as follows:

Brands. The Company generally categorizes a customer as a brand if it primarily focuses on selling its own proprietary products.

Retailers. The Company generally categorizes a customer as a retailer if it primarily focuses on selling third-party products.

Other. Other is primarily comprised of strategic partnerships.

9

The following table summarizes revenue disaggregation by customer type for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022		Percentage of Total		2021		Percentage of Total		2022		Percentage of Total		2021		Percentage of Total
Brands	$	19,184	44	%	$	17,470	42	%	$	57,130	44	%	$	47,675	39	%
Retailers	21,463		49	%	21,737		52	%	$	64,299	50	%	$	66,030	54	%
Other	2,843		7	%	2,368		6	%	7,160		6	%	8,579		7	%
	$	43,490			$	41,575			$	128,589			$	122,284

Contracts with Multiple Performance Obligations

Customers may elect to purchase a subscription to multiple modules, multiple modules with multiple service levels, or, for certain of the Company's solutions, multiple brands or geographies. The Company evaluates such contracts to determine whether the services to be provided are distinct and accordingly should be accounted for as separate performance obligations. If the Company determines that a contract has multiple performance obligations, the transaction price, which is the total price of the contract, is allocated to each performance obligation based on a relative standalone selling price method. The Company estimates standalone selling price based on observable prices in past transactions for which the product offering subject to the performance obligation has been sold separately. As the performance obligations are satisfied, revenue is recognized as discussed above.

Transaction Price Allocated to Future Performance Obligations

As the Company typically enters into contracts with customers for a twelve-month subscription term, a substantial majority of its performance obligations that have not yet been satisfied as of September 30, 2022 are part of a contract that has an original expected duration of one year or less. For contracts with an original expected duration of greater than one year, the aggregate transaction price allocated to the unsatisfied performance obligations was $43.1 million as of September 30, 2022, of which $23.8 million is expected to be recognized as revenue over the next twelve months.

Deferred Revenue

Deferred revenue generally represents the unearned portion of subscription fees. Deferred revenue is recorded when fees are invoiced in advance of performance. Deferred amounts are generally recognized within one year. Deferred revenue is included in the accompanying condensed consolidated balance sheets under "Total current liabilities," net of any long-term portion that is included in "Other long-term liabilities." The following table summarizes deferred revenue activity for the nine months ended September 30, 2022 (in thousands):

	Balance, beginning of period		Net additions	Revenue recognized from deferred revenue	Balance, end of period
Deferred revenue	$	30,868	106,861	(108,395)	$	29,334

Of the $128.6 million of revenue recognized in the nine months ended September 30, 2022, $28.5 million was included in deferred revenue at January 1, 2022.

Costs to Obtain Contracts

The Company capitalizes sales commissions and a portion of other incentive compensation costs that are directly related to obtaining customer contracts and that would not have been incurred if the contract had not been obtained. These costs are included in the accompanying condensed consolidated balance sheets and are classified as "Prepaid expenses and other current assets," net of any long-term portion that is included in "Deferred contract costs, net of current portion." As of September 30, 2022, $9.3 million was included in "Prepaid expenses and other current assets." Deferred contract costs are amortized to sales and marketing expense over the expected period of benefit, which the Company has determined to be five years based on the estimated customer relationship period. The following table summarizes deferred contract cost activity for the nine months ended September 30, 2022 (in thousands):

10

	Balance, beginning of period		Additions	Amortized costs (1)	Balance, end of period
Deferred contract costs	$	26,959	9,979	(9,051)	$	27,887

(1) Includes contract costs amortized to sales and marketing expense during the period and the impact from foreign currency exchange rate fluctuations.

7. STOCK-BASED COMPENSATION

The Company recognizes stock-based compensation expense using the accelerated attribution method, net of estimated forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the service inception date to the vesting date for that tranche.

Stock-based compensation expense is included in the following line items in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of revenue	$	252	$	169	$	748	$	665
Sales and marketing	1,060		928		2,707		2,744
Research and development	591		567		1,628		1,869
General and administrative	1,476		1,451		4,902		4,461
Total stock-based compensation expense	$	3,379	$	3,115	$	9,985	$	9,739

During the nine months ended September 30, 2022, the Company granted the following share-based awards:

	Number of Shares Underlying Grant	Weighted Average Grant Date Fair Value
Service-based restricted stock units	721,062	$	17.69
Performance-based restricted stock units	185,154	$	17.78
Total share-based awards	906,216

8. NET (LOSS) INCOME PER SHARE

Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted-average number of shares of common stock outstanding for the period. Diluted net (loss) income per share is calculated giving effect to all potentially dilutive shares of common stock, including stock options and restricted stock units. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the treasury stock method.

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The following table summarizes the calculation of basic and diluted net (loss) income per share (in thousands, except share and per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Basic:
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546
Weighted average common shares outstanding, basic	28,815,362		29,931,173		29,674,219		29,665,439
Basic net (loss) income per share	$	—	$	0.12	$	0.12	$	0.46
Diluted:
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546
Weighted average common shares outstanding, basic	28,815,362		29,931,173		29,674,219		29,665,439
Dilutive effect of:
Stock options	339,592		575,293		328,731		595,938
Unvested service-based restricted stock units	717,659		967,848		689,401		1,034,360
Unvested performance-based restricted stock units	82,941		—		101,147		—
Weighted average common shares outstanding, diluted	29,955,554		31,474,314		30,793,498		31,295,737
Diluted net (loss) income per share	$	—	$	0.11	$	0.12	$	0.43

The following equity instruments have been excluded from the calculation of diluted net (loss) income per share because the effect is anti-dilutive:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Stock options	22,448	21,632	22,655	22,235
Restricted stock units	12,144	5,291	381,175	231,680

9. INCOME TAXES

At the end of each interim reporting period, the Company estimates its effective income tax rate expected to be applicable for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.

The Company's effective tax rate was 105.1% and (1.0)% for the three months ended September 30, 2022 and 2021, respectively, and 59.0% and (3.3)% for the nine months ended September 30, 2022 and 2021, respectively. The tax expense and benefit for each of the periods was based on U.S. federal, state, local and foreign income taxes. The Company’s effective tax rate for the three and nine months ended September 30, 2022 was higher than the U.S. federal statutory rate of 21% primarily due to the generation of foreign operating losses which are subject to a valuation allowance as the related loss carryforwards are not yet deemed realizable, nondeductible Merger expenses and the U.S. federal and state requirement to capitalize research and development expenditures, effective for years beginning after December 31, 2021, as discussed below. The Company’s effective tax rate for the three and nine months ended September 30, 2021 was lower than the U.S. federal statutory rate of 21% primarily due to the utilization of U.S. federal and state operating loss carryforwards which had previously been subject to a valuation allowance. As a result of uncertainties relating to the timing and sufficiency of future taxable income in certain tax jurisdictions in which the Company operates, the Company could not recognize the tax benefit of operating loss carryforwards generated in those jurisdictions until the operating loss carryforwards were utilized. The effective tax rate for the three and nine months ended September 30, 2022 was higher than the effective tax rate for the three and nine months ended September 30, 2021 primarily due to the tax benefit recorded from the utilization of U.S. federal and state operating loss carryforwards which had been previously subject to a valuation allowance during the three and nine months ended September 30, 2021 and the U.S. federal and state requirement to capitalize research and development expenditures, effective for years beginning after December 31, 2021, as discussed below. The Company reversed most of the valuation allowance recorded against its U.S. federal and state operating loss carryforwards as of December 31, 2021. Therefore, the Company did not record a similar tax benefit from the utilization of U.S. federal and state operating loss carryforwards during the three and nine months ended September 30, 2022.

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Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five years for research performed in the United States and 15 years for research performed outside the United States, pursuant to Section 174 of the Internal Revenue Code. This change has had a material impact on the expected utilization of the Company's U.S. federal and state operating loss carryforwards and resulted in an increase in its effective tax rate for the three and nine months ended September 30, 2022. Although Congress is considering legislation that would repeal or defer the capitalization and amortization requirement to later years, it is not certain that the provision will be repealed or otherwise modified. If the requirement is repealed or modified during a subsequent period, it could result in a decrease to the effective tax rate. The actual impact will depend on if and when this requirement is repealed or modified by Congress, including if retroactively to January 1, 2022, and the amount of research and development expenditures incurred in 2022.

10. SEGMENT AND GEOGRAPHIC INFORMATION

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker, or CODM, for purposes of allocating resources and evaluating financial performance. The Company's CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. As such, the Company's operations constitute a single operating segment and one reportable segment.

Substantially all assets were held in the United States during the nine months ended September 30, 2022 and the year ended December 31, 2021. The Company categorizes domestic and international revenue from customers based on their billing address. The following table summarizes revenue by geography for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Domestic	$	31,034	$	29,199	$	90,970	$	87,181
International	12,456		12,376		37,619		35,103
Total revenue	$	43,490	$	41,575	$	128,589	$	122,284

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases "would be," "will allow," "intends to," "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," or similar expressions, or the negative of such words or phrases, are intended to identify "forward-looking statements." We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.

These forward-looking statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Factors that could cause or contribute to these differences include those below and elsewhere in this Quarterly Report on Form 10-Q, particularly in Part II – Item 1A, "Risk Factors," and our other filings with the Securities and Exchange Commission.

This Quarterly Report on Form 10-Q includes forward-looking statements about the occurrence of events, changes or other circumstances that could delay or prevent the closing of our proposed merger with CommerceHub or could give rise to the termination of the Merger Agreement. The forward-looking statements contained herein do not assume the consummation of the proposed transaction with CommerceHub unless specifically stated otherwise.

Statements made herein are as of the date of the filing of this Form 10-Q with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes for the year ended December 31, 2021, which are included in our Annual Report on Form 10-K for fiscal 2021.

We are a leading provider of cloud-based e-commerce solutions whose mission is to connect and optimize the world's commerce. For over two decades, we have helped brands and retailers worldwide to streamline their e-commerce operations, expand to new channels and grow their sales. Our multichannel commerce platform allows our customers to connect to hundreds of global channels, market to consumers on those channels, sell products, manage fulfillment processes, and analyze and optimize channel performance. Thousands of customers depend on us to securely power their e-commerce operations on channels such as Amazon, eBay, Facebook, Google, Shopify, Walmart and Zalando. Our platform helps global brands gain a competitive advantage with actionable insights into digital shelf performance across thousands of retailer websites and marketplaces and helps make digital campaigns shoppable. Overall, our platform provides the breadth, scalability and flexibility to facilitate billions of dollars in e-commerce transactions annually across the globe.

We serve customers across a wide range of industries and geographies. Our customers include the online businesses of brands and retailers, as well as agencies that use our solutions on behalf of their clients.

Merger Agreement and Proposed Acquisition by CommerceHub

On September 4, 2022, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with CommerceHub, Inc., a Delaware corporation, or CommerceHub, CH Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of CommerceHub, providing for the merger of CH Merger Sub, Inc. with and into the Company, with us surviving the merger as a wholly owned subsidiary of CommerceHub. We have called a special meeting of our stockholders to be held on November 11, 2022 for the approval of the Merger Agreement.

Under the terms of the Merger Agreement, CommerceHub will acquire all outstanding shares of our common stock in exchange for consideration of $23.10 per share in cash. The Merger Agreement contains representations and warranties customary for transactions of this type. The closing of the merger is subject to approval of our stockholders and the satisfaction or waiver of a number of customary closing conditions. The Merger Agreement provides CommerceHub and us with certain termination rights and, under certain circumstances, may require that we or CommerceHub pay a termination fee.

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See the section titled "Risk Factors—Risks Related to our Proposed Transaction with CommerceHub" included under Part II, Item 1A of this Quarterly Report on Form 10-Q for more information regarding the risks associated with the proposed merger.

EXECUTIVE OVERVIEW

FINANCIAL HIGHLIGHTS

•Total revenue of $43.5 million and $128.6 million for the three and nine months ended September 30, 2022 increased 4.6% and 5.2%, respectively, from the comparable prior year periods;

•Revenue was comprised of 84.6% subscription revenue and 15.4% variable revenue for the three months ended September 30, 2022 compared with 82.3% subscription revenue and 17.7% variable revenue for the comparable prior year period;

•Revenue was comprised of 84.3% subscription revenue and 15.7% variable revenue for the nine months ended September 30, 2022 compared with 78.9% subscription revenue and 21.1% variable revenue for the comparable prior year period;

•Revenue from our brands customers represented 44.1% and 44.4% of total revenue for the three and nine months ended September 30, 2022, respectively, up from 42.0% and 39.0% of total revenue for the comparable prior year periods;

•Revenue derived from customers located outside of the United States as a percentage of total revenue was 28.6% and 29.3% for the three and nine months ended September 30, 2022, respectively, compared with 29.8% and 28.7% for the comparable prior year periods;

•Gross margin was 76.4% and 75.8% for the three and nine months ended September 30, 2022, respectively, compared with 75.7% and 77.1% for the comparable prior year periods;

•Operating margin was 3.9% and 6.6% for the three and nine months ended September 30, 2022, respectively, compared with 8.5% and 10.9% for the comparable prior year periods;

•Net (loss) income was $(0.1) million and $3.6 million for the three and nine months ended September 30, 2022, respectively, compared with $3.5 million and $13.5 million for the comparable prior year periods;

•Adjusted EBITDA, a non-GAAP measure, was $10.1 million and $26.7 million for the three and nine months ended September 30, 2022, respectively, compared with $8.2 million and $26.7 million for the comparable prior year periods;

•Cash and cash equivalents were $88.1 million at September 30, 2022 compared with $100.6 million at December 31, 2021;

•Operating cash flow was $22.0 million for the nine months ended September 30, 2022 compared with $26.5 million for the comparable prior year period; and

•Free cash flow, a non-GAAP measure, was $16.2 million for the nine months ended September 30, 2022 compared with $22.8 million for the comparable prior year period.

TRENDS IN OUR BUSINESS

The following trends have contributed to the results of our consolidated operations, and we anticipate that they will continue to affect our future results:

•Growth in Online Shopping. Consumers continue to move more of their spending from offline to online. The continuing shift to online shopping and overall growth has contributed to our historical growth and we expect that this online shift will continue to benefit our business. Global efforts to implement social distancing, including stay-at-home orders and similar mobility and gathering restrictions, due to the COVID-19 pandemic, have increased e-commerce as consumers have increasingly turned to online purchasing for many products they would have purchased at brick and mortar stores. However, it is unclear to what degree this recent shift in favor of e-commerce will continue once the public health impacts of the COVID-19 pandemic have begun to subside or as a result of other macroeconomic or geopolitical factors beyond our control. For example, we have begun to see moderation of gross merchandise value, or GMV, and variable revenue performance compared to the prior year resulting from factors beyond COVID and government stimulus-generated tailwinds, such as the effects of inflation on consumer shopping habits.

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•Product Offering Expansion. As online shopping evolves, we continue to expand our product offerings to reflect the needs of companies seeking to attract consumers. We continue to enhance our product offerings by increasing online shopping channel integrations, including marketplace and first-party retail programs, and providing capabilities that allow brands and retailers to be more competitive. This includes support for advertising, advanced algorithmic repricing, machine learning-based demand forecasting, analytics capabilities, fulfillment features and user experience. Product expansion and enhancement has been key to our strategic focus and success with brands.

•Channel Expansion. We have experienced substantial growth in GMV on our platform from large channels like Zalando, Target Plus and Shopify, as well as numerous smaller marketplaces that we refer to collectively as our long tail of marketplaces. Many of our brands customers see a significant opportunity in expanding their reach to more consumers via global channel expansion. We implemented a strategic plan at the beginning of 2021 to add at least 80 additional channel connections across the globe over an 18-month period to help our customers with this opportunity. We exceeded this goal by adding over 100 new channels by the end of the first quarter of 2022. We intend to continue to add new channel connections over the remainder of 2022.

•Growth in Mobile Usage. We believe the shift toward mobile commerce will increasingly favor aggregators such as Amazon, eBay, Google and Walmart, all of which are focal points of our platform. These systems understand the identity of the buyer, helping to reduce friction in the mobile commerce process, while offering a wide selection of merchandise in a single location. We believe that the growth in mobile commerce may result in increased revenue for us.

•Evolving Fulfillment Landscape. Consumers have been conditioned to expect fast, efficient delivery of products. We believe that determining and executing on a strategy to more expeditiously receive, process and deliver online orders, which we refer to collectively as fulfillment, is critical to success for online sellers. Therefore, it will be increasingly important for us to facilitate and optimize fulfillment services on behalf of our customers, which in turn may result in additional research and development investment.

•Focus on Employees. We strive to provide competitive compensation and benefits programs to help attract and retain employees who are focused on facilitating the success of our customers. We believe the human capital programs we have in place are market competitive and recognized by our employees, as evidenced by our having been recognized by Triangle Business Journal as a member of the 2022 class of "Best Places to Work" in the Triangle region of North Carolina, the eighth time we have won this recognition. We have implemented a formal global flexible work policy that provides many of our employees the ability to determine whether they will continue to work from home or from the office, even as our offices around the world reopen following closures during the COVID-19 pandemic. We are not dependent on our physical office locations or travel for our business operations. Refer to "Employees and Human Capital Resources" included in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information on employees and human capital resources.

•Seasonality. Our revenue fluctuates as a result of seasonal variations in our business, principally due to the peak consumer demand and related increased volume of our customers' GMV during the year-end holiday season. As a result, we have historically had higher revenue in our fourth quarter than other quarters due to increased GMV processed through our platform, resulting in higher variable fees.

OPPORTUNITIES AND RISKS

•Brands. We believe the digital transformation to e-commerce has changed the way brands interact with their customers, which is why we have identified that growing our brands business represents a significant strategic opportunity for us. We generally categorize a customer as a brand if it primarily focuses on selling its own proprietary products. Brands tend to have longer customer life cycles, stronger financial stability and overall better unit economics than retailers, which we consider to be companies focused primarily on selling third-party products. Brands also offer increased expansion opportunities to grow their e-commerce business through our platform; however they tend to have longer sales cycles. To help drive our future growth, we have made significant investments in our sales capacity and incentives to focus on acquiring new, and then expanding business with, brands customers. In addition, we have invested in our services organization to establish a higher level of service for our brands customers and we have prioritized our R&D resources to focus on innovations that enable the success of our brands clients. We believe these investments will improve client results, growing revenue through attracting new prospects and improved retention and expansion with existing customers.

•Dynamic E-commerce Landscape. We need to continue to innovate in the face of a rapidly changing e-commerce landscape if we are to remain competitive.

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•Strategic Partnerships. Our business development team's mission is to expand our sales and market opportunities through strategic partner relationships. We plan to continue to invest in initiatives to expand our strategic partnership base to further enhance our offerings for customers and to help support our indirect sales channel efforts. The goal of these strategic partnerships is to further improve the value of our platform for our customers and, when possible, provide us opportunities for incremental revenue streams.

•Increasing Complexity of E-commerce. Although e-commerce continues to expand as brands and retailers continue to increase their online sales, it is also becoming more complex due to the hundreds of channels available to brands and retailers and the rapid pace of change and innovation across those channels. In order to gain consumers' attention in a more crowded and competitive online marketplace, an increasing number of brands and retailers sell their merchandise through multiple online channels, each with its own rules, requirements and specifications. In particular, third-party marketplaces are an increasingly important driver of growth for a number of brands and large online retailers. As a result, we need to continue to support multiple channels in a variety of geographies in order to support our targeted revenue growth, and we intend to continue making strategic investments focused on channel expansion.

•Global Growth in E-commerce. We believe the growth in e-commerce globally presents an opportunity for brands and retailers to engage in international sales. However, country-specific marketplaces are often a market share leader in their regions, as is the case for Zalando in Europe, for example. In order to help our customers capitalize on this potential market opportunity, and to address our customers' needs with respect to cross-border trade, we intend to continue to invest in our international operations. However, doing business overseas involves substantial challenges, including management attention and resources needed to adapt to multiple languages, cultures, laws and commercial infrastructure.

Our senior management continuously focuses on these and other trends and challenges, and we believe that our culture of innovation and our history of growth and expansion will contribute to the success of our business.

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RESULTS OF OPERATIONS

The following tables set forth our condensed consolidated statement of operations data and such data expressed as a percentage of revenues for each of the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,				Period-to-Period Change				Period-to-Period Change
	2022		2021		2022		2021		Q3 2022 to Q3 2021				YTD 2022 to YTD 2021
(dollars in thousands)
Revenue	$	43,490	$	41,575	$	128,589	$	122,284	$	1,915	4.6	%	$	6,305	5.2	%
Cost of revenue	10,273		10,100		31,062		28,041		173		1.7		3,021		10.8
Gross profit	33,217		31,475		97,527		94,243		1,742		5.5		3,284		3.5
Operating expenses:
Sales and marketing	16,143		15,482		48,245		45,273		661		4.3		2,972		6.6
Research and development	5,389		5,364		16,192		16,799		25		0.5		(607)		(3.6)
General and administrative	9,984		7,075		24,654		18,792		2,909		41.1		5,862		31.2
Total operating expenses	31,516		27,921		89,091		80,864		3,595		12.9		8,227		10.2
Income from operations	1,701		3,554		8,436		13,379		(1,853)		(52.1)		(4,943)		(36.9)
Other income (expense):
Interest income (expense)	234		(30)		251		(96)		264		*		347		*
Other income (expense)	5		(29)		5		(164)		34		*		169		*
Total other income (expense)	239		(59)		256		(260)		298		*		516		*
Income before income taxes	1,940		3,495		8,692		13,119		(1,555)		(44.5)		(4,427)		(33.7)
Income tax expense (benefit)	2,039		(34)		5,130		(427)		2,073		*		5,557		*
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546	$	(3,628)	(102.8)	%	$	(9,984)	(73.7)	%

* Not meaningful

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(as a percentage of revenue)				(as a percentage of revenue)
Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenue	23.6		24.3		24.2		22.9
Gross profit	76.4		75.7		75.8		77.1
Operating expenses:
Sales and marketing	37.1		37.2		37.5		37.0
Research and development	12.4		12.9		12.6		13.7
General and administrative	23.0		17.0		19.2		15.4
Total operating expenses	72.5		67.2		69.3		66.1
Income from operations	3.9		8.5		6.6		10.9
Other income (expense):
Interest income (expense)	0.5		(0.1)		0.2		(0.1)
Other income (expense)	0.0		0.0		0.0		(0.1)
Total other income (expense)	0.5		(0.1)		0.2		(0.2)
Income before income taxes	4.5		8.4		6.8		10.7
Income tax expense (benefit)	4.7		(0.1)		4.0		(0.3)
Net (loss) income	(0.2)	%	8.5	%	2.8	%	11.1	%

Depreciation and Amortization

Depreciation and amortization expense is included in the following line items in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of revenue	$	1,186	$	1,100	$	3,500	$	3,409
Sales and marketing	76		85		221		356
Research and development	30		32		93		139
General and administrative	205		368		647		1,160
Total depreciation and amortization expense	$	1,497	$	1,585	$	4,461	$	5,064

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REVENUE

We derive the majority of our revenue from subscription fees paid to us by our customers for access to and usage of our software solutions for a specified contract term, which is typically one year. A customer typically pays a recurring subscription fee based on a specified minimum amount of GMV or advertising spend that the customer expects to process through our platform. Subscription fees may also include implementation fees such as launch assistance and training fees. The remaining portion of a customer's fee is variable and is based on a specified percentage of GMV or advertising spend processed through our platform in excess of the customer's specified minimum GMV or advertising spend amount. In most cases, the specified percentage of excess GMV or advertising spend on which the variable fee is based is fixed and does not vary depending on the amount of the excess.

Because our customer contracts generally contain both subscription and variable pricing components, changes in GMV between periods do not translate directly or linearly into changes in our revenue. We use customized pricing structures for each of our customers depending upon the individual situation of the customer. For example, some customers may commit to a higher specified minimum GMV amount per month in exchange for a lower percentage fee on that committed GMV. In addition, the percentage fee assessed on the variable GMV in excess of the committed minimum for each customer is typically higher than the fee on the committed portion. As a result, our overall revenue could increase or decrease even without any change in overall GMV between periods, depending on which customers generated the GMV. In addition, changes in GMV from month to month for any individual customer that are below the specified minimum amount would have no effect on our revenue from that customer, and each customer may alternate between being over the committed amount or under it from month to month. For these reasons, while GMV is an important qualitative and long-term directional indicator, we do not regard it as a useful quantitative measurement of our historic revenues or as a predictor of future revenues.

We recognize subscription fees and implementation fees ratably over the contract period beginning on the date the customer has access to the software. In determining the amount of revenue to be recognized, we apply the following steps:

•Identify the promised services in the contract;

•Determine whether the promised services are performance obligations, including whether they are distinct in the context of the contract;

•Determine the transaction price;

•Allocate the transaction price to the performance obligations based on estimated selling prices; and

•Recognize revenue as we satisfy each performance obligation.

We generally invoice our customers for subscription fees in advance, in monthly, quarterly, semi-annual or annual installments. We generally also invoice our customers for any implementation fees at the inception of the arrangement. Fees that have been invoiced in advance are initially recorded as deferred revenue and are generally recognized ratably over the contract term.

In general, we invoice and recognize variable revenue in the period in which the related GMV or advertising spend is processed.

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Our customers are categorized as follows:

•Brands. We generally categorize a customer as a brand if it primarily focuses on selling its own proprietary products.

•Retailers. We generally categorize a customer as a retailer if it primarily focuses on selling third-party products.

•Other. Other is primarily comprised of strategic partnerships.

Comparison of Q3 2022 to Q3 2021

Revenue increased by 4.6%, or $1.9 million, to $43.5 million for the three months ended September 30, 2022 compared with $41.6 million for the prior year period. The change was primarily due to a $2.6 million increase in subscription revenue compared to the prior year period, driven by positive net bookings, particularly from brands customers. Revenue from our brands customers increased 9.8%, or $1.7 million, compared to the prior year period, driven by an increase in new customers and expansions with existing customers. For the three months ended September 30, 2022, brands customers represented approximately 44% of our total revenue and 49% of total subscription revenue compared to approximately 42% and 47%, respectively, for the prior year period. Variable revenue decreased $0.7 million compared to the prior year period due to customers converting their variable fees to subscription fees upon their annual renewal.

Comparison of YTD 2022 to YTD 2021

Revenue increased by 5.2%, or $6.3 million, to $128.6 million for the nine months ended September 30, 2022 compared with $122.3 million for the prior year period. The change was primarily due to a $11.9 million increase in subscription revenue compared to the prior year period, driven by positive net bookings, particularly from brands customers. Revenue from our brands customers increased 19.8%, or $9.5 million, compared to the prior period, driven by an increase in new customers and expansions with existing customers. For the nine months ended September 30, 2022, brands customers represented approximately 44% of our total revenue and 49% of total subscription revenue compared to approximately 39% and 44%, respectively, for the prior year period. Variable revenue decreased $5.6 million compared to the prior year period due to customers converting their variable fees to subscription fees upon their annual renewal, as well as moderation in GMV driven by factors such as federal stimulus occurring in the prior year.

COST OF REVENUE

Cost of revenue primarily consists of:

•Salaries and personnel-related costs for employees providing services to our customers and supporting our platform infrastructure, including benefits, bonuses and stock-based compensation;

•Co-location facility costs for our data centers;

•Infrastructure maintenance costs; and

•Fees we pay to credit card vendors in connection with our customers' payments to us.

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Comparison of Q3 2022 to Q3 2021

Cost of revenue increased by 1.7%, or $0.2 million, to $10.3 million for the three months ended September 30, 2022 compared with $10.1 million for the prior year period. The change was comprised primarily of compensation and employee-related costs due to an increase in headcount to support the growth of our business and a higher level of service for brands.

Comparison of YTD 2022 to YTD 2021

Cost of revenue increased by 10.8%, or $3.0 million, to $31.1 million for the nine months ended September 30, 2022 compared with $28.0 million for the prior year period. The change was comprised primarily of:

•$2.1 million in compensation and employee-related costs due to an increase in headcount to support the growth of our business and a higher level of service for brands;

•$0.6 million in contractor costs primarily to support data scraping and our client services team; and

•$0.3 million in software and website maintenance costs to support the growth of our business.

OPERATING EXPENSES

SALES AND MARKETING EXPENSE

Sales and marketing expense consists primarily of:

•Salaries and personnel-related costs for our sales and marketing employees, including benefits, bonuses and stock-based compensation;

•Amortization of capitalized sales commissions and related incentive payments over their expected term of benefit;

•Marketing, advertising and promotional event programs; and

•Corporate communications.

Comparison of Q3 2022 to Q3 2021

Sales and marketing expense increased by 4.3%, or $0.7 million, to $16.1 million for the three months ended September 30, 2022 compared with $15.5 million for the prior year period. The change was comprised primarily of:

• $1.2 million in compensation and employee-related costs due to an increase in headcount, as we continued to invest in resources to support the growth of our business; partially offset by

•$(0.5) million in marketing and advertising driven by the timing of our promotional event programs.

Comparison of YTD 2022 to YTD 2021

Sales and marketing expense increased by 6.6%, or $3.0 million, to $48.2 million for the nine months ended September 30, 2022 compared with $45.3 million for the prior year period. The change was comprised primarily of:

• $3.3 million in compensation and employee-related costs due to an increase in headcount, as we continued to invest in resources to support the growth of our business; partially offset by

•$(0.4) million in marketing and advertising driven by the timing of our promotional event programs.

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RESEARCH AND DEVELOPMENT EXPENSE

Research and development expense consists primarily of:

•Salaries and personnel-related costs for our research and development employees, including benefits, bonuses and stock-based compensation;

•Costs related to the development, quality assurance and testing of new technology and enhancement of our existing platform technology; and

•Infrastructure and cloud computing expenses to support our platform.

Comparison of Q3 2022 to Q3 2021

Research and development expense was $5.4 million for each of the three months ended September 30, 2022 and 2021, with no significant changes as compared to the prior year period.

Comparison of YTD 2022 to YTD 2021

Research and development expense decreased by 3.6%, or $0.6 million, to $16.2 million for the nine months ended September 30, 2022 compared with $16.8 million for the prior year period. The change was comprised primarily of compensation and employee-related costs, driven by a larger proportion of our research and development resources being staffed in lower cost locations.

GENERAL AND ADMINISTRATIVE EXPENSE

General and administrative expense consists primarily of:

•Salaries and personnel-related costs for administrative, finance and accounting, information systems, legal and human resource employees, including benefits, bonuses and stock-based compensation;

•Consulting and professional fees;

•Insurance;

•Bad debt expense; and

•Costs associated with SEC compliance, including with the Sarbanes-Oxley Act and other regulations governing public companies.

Comparison of Q3 2022 to Q3 2021

General and administrative expense increased by 41.1%, or $2.9 million, to $10.0 million for the three months ended September 30, 2022 compared with $7.1 million for the prior year period. The change was comprised primarily of:

•$3.2 million in general and administrative costs associated with the negotiation and execution of the Merger Agreement with CommerceHub and the transactions contemplated by the Merger Agreement; and

•$0.2 million in lease abandonment costs related to right of use lease assets, driven by a reduction in our leased office space; partially offset by

•$(0.3) million in compensation and employee related costs driven by lower variable compensation; and

•$(0.2) million in amortization of intangible assets driven by certain intangible assets becoming fully amortized in the prior year.

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Comparison of YTD 2022 to YTD 2021

General and administrative expense increased by 31.2%, or $5.9 million, to $24.7 million for the nine months ended September 30, 2022 compared with $18.8 million for the prior year period. The change was comprised primarily of:

•$3.2 million in general and administrative costs associated with the negotiation and execution of the Merger Agreement with CommerceHub and the transactions contemplated by the Merger Agreement;

•$1.3 million in general and administrative costs driven by the prior year benefit from the decrease in the fair value of acquisition-related contingent consideration;

•$0.8 million in compensation and employee related costs, including stock-based compensation, due to an increase in headcount to support the growth of our business; and

•$0.5 million in lease abandonment costs related to right of use lease assets, driven by a reduction in our leased office space.

ADJUSTED EBITDA

Adjusted EBITDA represents our earnings before interest income (expense), income tax expense (benefit) and depreciation and amortization, adjusted to eliminate stock-based compensation expense, which is a non-cash item. For some periods, we have also adjusted for non-recurring costs, such as merger-related costs, lease abandonment and related costs, headquarters relocation costs and the change in fair value of acquisition-related contingent consideration.

We believe that adjusted EBITDA provides useful information to management and others in understanding and evaluating our operating results. However, adjusted EBITDA is not a measure calculated in accordance with GAAP and should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with GAAP. In addition, adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate adjusted EBITDA in the same manner that we do.

Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation;

•adjusted EBITDA does not reflect interest or income tax payments that may represent a reduction in cash available to us; and

•other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these and other limitations, you should consider adjusted EBITDA together with other GAAP-based financial performance measures, including various cash flow metrics, net (loss) income and our other GAAP results. The following table presents a reconciliation of net (loss) income to adjusted EBITDA for each of the periods indicated (in thousands):

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546
Adjustments:
Interest (income) expense	(234)		30		(251)		96
Income tax expense (benefit)	2,039		(34)		5,130		(427)
Depreciation and amortization expense	1,497		1,585		4,461		5,064
Total adjustments	3,302		1,581		9,340		4,733
EBITDA	3,203		5,110		12,902		18,279
Stock-based compensation expense	3,379		3,115		9,985		9,739
Transaction costs in connection with CommerceHub merger	3,249		—		3,249		—
Lease abandonment and related costs	179		—		467		—
Headquarters relocation costs	76		—		76		—
Contingent consideration fair value adjustment	—		—		—		(1,313)
Adjusted EBITDA	$	10,086	$	8,225	$	26,679	$	26,705

GROSS AND OPERATING MARGINS

    

Comparison of Q3 2022 to Q3 2021

Gross margin improved by 70 basis points to 76.4% during the three months ended September 30, 2022 compared with 75.7% for the prior year period as a result of the increase in revenue of 4.6% noted above, which exceeded the 1.7% increase in cost of revenue.

Operating margin declined by 460 basis points to 3.9% during the three months ended September 30, 2022 compared with 8.5% for the prior year period due to increases in operating expenses of 12.9%, primarily as a result of costs associated with the negotiation and execution of the Merger Agreement with CommerceHub and an increase in compensation and employee-related costs driven by additional headcount as we invest in resources to support the growth of our business.

Comparison of YTD 2022 to YTD 2021

Gross margin declined by 130 basis points to 75.8% during the nine months ended September 30, 2022 compared with 77.1% for the prior year period as a result of the increase in cost of revenue of 10.8% noted above, which exceeded the 5.2% increase in revenue.

Operating margin declined by 430 basis points to 6.6% during the nine months ended September 30, 2022 compared with 10.9% for the prior year period due to increases in operating expenses and cost of revenue of 10.2% and 10.8%, respectively, primarily as a result of costs associated with the negotiation and execution of the Merger Agreement with CommerceHub and an increase in compensation and employee-related costs driven by additional headcount as we invest in resources to support the growth of our business.

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INCOME TAX EXPENSE

At the end of each interim reporting period, we estimate our effective income tax rate expected to be applicable for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.

Comparison of Q3 2022 to Q3 2021

Income tax expense was $2.0 million for the three months ended September 30, 2022 compared with income tax benefit of $(0.03) million for the prior year period. Refer to Note 9, "Income Taxes," to our condensed consolidated financial statements included in this report for additional information regarding income tax expense.

Comparison of YTD 2022 to YTD 2021

Income tax expense was $5.1 million for the nine months ended September 30, 2022 compared with income tax benefit of $(0.4) million for the prior year period. Refer to Note 9, "Income Taxes," to our condensed consolidated financial statements included in this report for additional information regarding income tax expense.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, and to the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. There were no material changes to our critical accounting policies and estimates, which are disclosed in our audited consolidated financial statements for the year ended December 31, 2021 included in our Annual Report on Form 10-K for fiscal 2021.

Recent Accounting Pronouncements

Refer to Note 2, "Significant Accounting Policies," to our condensed consolidated financial statements included in this report for information regarding recent accounting pronouncements.

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LIQUIDITY AND CAPITAL RESOURCES

We derive our liquidity and operating capital primarily from cash flows from operations. Based on our current level of operations and anticipated growth, we believe our future cash flows from operating activities and our existing cash balances will be sufficient to meet our cash requirements for at least the next twelve months.

The foregoing estimate does not give effect to any potential amounts that we may draw under our credit facility, or Credit Facility, with HSBC Bank, or HSBC, that is described in more detail below.

Our principal future commitments consist of non-cancelable leases for our current and future office space and computer equipment, totaling $10.7 million as of September 30, 2022. We believe our future cash flows from operating activities and existing cash balances, together with amounts available under the Credit Facility, will be sufficient to meet these commitments.

CASH FLOWS

Free Cash Flow

We view free cash flow as an important financial metric as it demonstrates our ability to generate cash and can allow us to pursue opportunities that enhance shareholder value. Free cash flow is a non-GAAP financial measure that should be considered in addition to, not as a substitute for, measures of our financial performance prepared in accordance with GAAP. The following table presents a reconciliation of cash provided by operating activities, the most directly comparable GAAP measure, to free cash flow for each of the periods indicated (in thousands):

	Nine Months Ended September 30,
	2022		2021
Cash and cash equivalents provided by operating activities	$	21,971	$	26,479
Less: Purchases of property and equipment	(2,871)		(1,125)
Less: Payment of capitalized software development costs	(2,890)		(2,577)
Free cash flow	$	16,210	$	22,777

Free cash flow decreased by $6.6 million to $16.2 million for the nine months ended September 30, 2022 compared with $22.8 million for the prior year period. The decrease in free cash flow was primarily a result of an increase in operating expenses to support the growth of our business, costs associated with the negotiation and execution of the Merger Agreement with CommerceHub and changes in assets and liabilities, which are further described below.

Operating activities cash flows are largely driven by:

•The amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business;

•The amount and timing of customer payments;

•The seasonality of our business, as noted above, which results in variations in the timing of invoicing and the receipt of payments from our customers; and

•The costs associated with the negotiation and execution of the Merger Agreement with CommerceHub.

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Investing activities cash flows are largely driven by:

•Capitalized expenditures to create internally developed software and implement software purchased for internal use; and

•Purchases of property and equipment to support the expansion of our infrastructure.

Financing activities cash flows are largely driven by:

•Proceeds from the exercises of stock options;

•Tax withholdings related to the net-share settlement of restricted stock units;

•Repurchases of our common stock;

•Payments on finance lease obligations; and

•Payment of financing costs.

YTD 2022

Operating Activities

Our cash provided by operating activities of $22.0 million consisted of net income of $3.6 million adjusted for non-cash items totaling $17.2 million, which consisted of stock-based compensation expense, depreciation and amortization expense, bad debt expense and other non-cash items, including lease abandonment costs, and cash increases of $1.2 million from changes in assets and liabilities.

The net increase in cash of $1.2 million resulting from changes in assets and liabilities primarily consisted of:

•a $1.5 million decrease in accounts receivable driven by strong cash collections during the period;

•a $1.2 million increase in accrued expenses and accounts payable driven by the timing of payments to our vendors during the period; and

•a $0.8 million decrease in prepaid expenses and other assets driven by the timing of payments to our vendors during the period. These increases in cash were partially offset by decreases in cash due to:

•a $2.3 million increase in deferred contract costs consisting of sales commissions and a portion of other incentive compensation driven by net bookings performance. These contract costs are deferred and amortized to expense over the expected period of benefit.

Investing Activities

Our cash used in investing activities of $5.8 million consisted of:

•$2.9 million of capitalized software development costs; and

•$2.9 million of capital expenditures primarily related to the purchase of computer equipment.

Financing Activities

Our cash used in financing activities of $27.7 million consisted of:

•$25.0 million in cash used for the repurchase of our common stock; and

•$3.4 million used for the payment of taxes related to the net-share settlement of restricted stock units; partially offset by

•$0.7 million in cash received upon the exercise of stock options.

YTD 2021

Operating Activities

Our cash provided by operating activities of $26.5 million consisted of net income of $13.5 million adjusted for non-cash items totaling $11.8 million, which consisted of stock-based compensation expense, depreciation and amortization expense, bad debt recovery and other non-cash items, including the contingent consideration fair value adjustment, and cash increases of $1.1 million from changes in assets and liabilities.

The net increase in cash of $1.1 million resulting from changes in assets and liabilities primarily consisted of:

•a $6.4 million increase in deferred revenue as a result of an increase in net bookings during the period;

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•a $0.1 million decrease in prepaid expenses and other assets driven by the timing of payments to our vendors during the period; and

•a $0.1 million increase in accrued expenses and accounts payable driven by the timing of payments to our vendors during the period. These increases in cash were partially offset by decreases in cash due to:

•a $4.9 million increase in deferred contract costs consisting of sales commissions and a portion of other incentive compensation that is deferred and amortized to expense over the expected period of benefit; and

•a $0.6 million increase in accounts receivable driven by strong net bookings performance during the period.

Investing Activities

Our cash used in investing activities of $3.7 million consisted of:

•$2.6 million of capitalized software development costs; and

•$1.1 million of capital expenditures primarily related to the purchase of computer equipment.

Financing Activities

Our cash provided by financing activities of $2.9 million consisted of:

•$4.2 million in cash received upon the exercise of stock options; partially offset by

•$1.4 million used for the payment of taxes related to the net-share settlement of restricted stock units.

SHARE REPURCHASE PROGRAM

In August 2021, our Board of Directors approved a share repurchase program authorizing the repurchase of up to $25.0 million of our common stock through August 10, 2022. During the nine months ended September 30, 2022, 1,828,604 shares were repurchased and retired under the repurchase program at an average price of $13.67 per share for an aggregate total price of $25.0 million, which completed the share repurchase program authorized in August 2021. There were no repurchases during the three months ended September 30, 2022.

In June 2022, our Board of Directors authorized an additional share repurchase program of up to $25.0 million of our common stock through June 30, 2023. We had not repurchased any shares under the June 2022 authorization as of September 30, 2022. Repurchases may be made from time to time on the open market at prevailing prices, including pursuant to Rule 10b5-1 trading plans, or in negotiated transactions off the market. The share repurchase program does not obligate us to repurchase any particular amount of our shares. In light of our pending merger with CommerceHub, we do not have any current plans to effect share repurchases under the June 2022 authorization.

CREDIT FACILITY

On August 5, 2020, we established the Credit Facility with HSBC under which we may borrow up to $25 million. We may use proceeds from borrowings under the Credit Facility for working capital and general corporate purposes, including acquisitions, and up to $10 million is available for letters of credit. We may also request increases in the amount of the Credit Facility, with such increases not to exceed $10 million in the aggregate, subject to HSBC’s consent. As of the date of this report, we have not drawn on, or issued any letters of credit under, the Credit Facility. The Credit Facility matures in August 2023.

Any borrowings under the Credit Facility will bear interest at a per annum interest rate based on a base rate plus 2.25% or LIBOR plus 3.25%. The base rate will equal the highest of (a) the prime rate as publicly announced by HSBC, (b) the sum of (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System plus (ii) 0.50%, and (c) the LIBOR rate plus 1.00% per annum, with a floor of 1.50%. The LIBOR rate will be based on London interbank offered rates published by ICE Benchmark Administration Limited for the applicable interest period, with a floor of 0.50%. We will pay a fee on all outstanding letters of credit at a rate of 3.25% per annum. We will pay HSBC a commitment fee on the undrawn portion of the facility at a rate per annum equal to 0.50%. We may terminate the Credit Facility, or prepay any borrowings, at any time in our discretion without premium or penalty.

The credit agreement for the Credit Facility, or the Credit Agreement, contains affirmative and negative covenants. For example, we may not permit the ratio of our outstanding indebtedness to consolidated EBITDA to exceed 2.50 to 1.00 as of the last day of any fiscal quarter. We also may not permit the ratio of our consolidated EBITDA (minus maintenance-related capital expenditures paid in cash and minus dividends, distributions and stock repurchases paid in cash) to consolidated interest expense to be less than 3.00 to 1.00 for any period of four consecutive fiscal quarters.

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The Credit Agreement contains customary events of default. Upon the occurrence and during the continuance of an event of default, HSBC may terminate the commitments under the Credit Facility and declare the outstanding advances and all other obligations under the Credit Facility immediately due and payable.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss to future earnings, values or future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. We are exposed to market risk related to changes in foreign currency exchange rates. Although we have not drawn on our Credit Facility, we may do so in the future which may subject us to risks from changing interest rates. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we may enter into exchange rate hedging arrangements to manage foreign currency exchange risk. During the nine months ended September 30, 2022, there were no material changes to our market risks from those disclosed in our Annual Report on Form 10-K for fiscal 2021.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2022, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such date at the reasonable assurance level.

(b) Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting during our fiscal quarter ended September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are subject to litigation and claims arising in the ordinary course of business. Except as set forth below, we are not currently a party to any material legal proceedings and are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.

As of November 7, 2022, five complaints were filed in federal court by purported ChannelAdvisor stockholders regarding the Merger. The first complaint was filed on September 28, 2022, in the United States District Court for the Southern District of New York and is captioned Stein v. ChannelAdvisor Corporation, Case No. 1:22-cv-08282. The second complaint was filed on September 29, 2022, in the United States District Court for the Southern District of New York and is captioned O'Dell v. ChannelAdvisor Corporation, Case No. 1:22-cv-08334. The third complaint was filed on October 25, 2022, in the United States District Court for the Southern District of New York and is captioned Weiss v. ChannelAdvisor Corporation, Case No. 1:22-cv-09129. The fourth complaint was filed on October 26, 2022, in the United States District Court for the District of Delaware and is captioned Ballard v. ChannelAdvisor Corporation, Case No. 1:22-cv-01416-UNA. The fifth complaint was filed on October 28, 2022, in the United States District Court for the Southern District of New York and is captioned Riley v. ChannelAdvisor Corporation, Case No. 1:22-cv-09257. The aforementioned five complaints are collectively referred to as the "Complaints." The Complaints name as defendants ChannelAdvisor and each member of the Board, collectively referred to as the "ChannelAdvisor Defendants." The Complaints allege violations of Section 14(a) of the Exchange Act against all ChannelAdvisor Defendants and allege violations of Section 20(a) of the Exchange Act against the members of the Board in connection with disclosures made by the ChannelAdvisor Defendants related to the Merger. The Complaints seek, among other relief, (i) injunctive relief preventing the consummation of the Merger unless the ChannelAdvisor Defendants disclose certain information requested by the plaintiffs, (ii) rescission and/or rescissory damages in the event the Merger is consummated, and (iii) an award of plaintiffs' expenses and attorneys' fees. The ChannelAdvisor Defendants believe the claims in the Complaints are without merit and intend to vigorously defend the actions.

ITEM 1A. RISK FACTORS

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 10, 2022, for a detailed discussion of risk factors affecting us. Except for the risks related to our proposed acquisition by CommerceHub set forth below, our risk factors as of the date of this report have not changed materially from those disclosed in our Annual Report on Form 10-K.

Risks Related to Our Proposed Transaction with CommerceHub

Failure to complete, or delays in completing, the proposed transaction with CommerceHub announced on September 6, 2022 could materially and adversely affect our results of operations and our stock price.

On September 4, 2022, we entered into the Merger Agreement with CommerceHub and CH Merger Sub, Inc., a Delaware corporation ("Merger Sub"), pursuant to which, subject to the terms and conditions of the Merger Agreement, if all of the conditions to closing are satisfied or waived, Merger Sub will be merged with and into our company with our company surviving as a wholly owned subsidiary of CommerceHub (the "Merger"). However, the consummation of the Merger is subject to certain closing conditions, some of which are not within our control and may prevent, delay, or otherwise materially adversely affect the completion of the Merger. We cannot predict with certainty whether and when any of the required closing conditions will be satisfied or if additional uncertainties may arise and cannot assure you that we will be able to successfully consummate the proposed Merger as currently contemplated under the Merger Agreement or at all. Risks related to the failure of the proposed Merger with CommerceHub to be consummated include, but are not limited to, the following:

•under some circumstances, we may be required to pay a termination fee to CommerceHub of $23 million;

•we have incurred, and will continue to incur, significant transaction costs, including legal, accounting, financial advisory and other transaction costs in connection with the Merger, and many of these fees and costs are payable by us regardless of whether the Merger is consummated;

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•we may experience negative reactions from financial markets or the trading price of our common stock may decline to the extent that the current market price for our stock reflects a market assumption that the Merger will be completed;

•the possibility of disruption to our business, including diversion of management time and resources that could otherwise have been devoted to other opportunities that may have been beneficial to us, regardless of whether the Merger is consummated;

•the pendency and outcome of the legal proceedings that have been or may be instituted against us, our directors, executive officers and others relating to the transactions contemplated by the Merger Agreement; and

•under the Merger Agreement, we are generally required to conduct our business in the ordinary course, which could adversely impact our business, operating results and our stock price and our perceived acquisition value, regardless of whether the Merger is completed.

The occurrence of any of these events individually or in combination could materially and adversely affect our business, results of operations, financial condition, and our stock price. There can be no assurance that these risks will not materialize and will not materially adversely affect our stock price, business, financial conditions, results of operations or cash flows and if certain events occur, such as payment of the termination fee to CommerceHub or an increase in significant transaction costs in connection with the proposed Merger, our cash balances could be materially and adversely impacted and our options for sources of financing or refinancing could be more limited than if we had not pursued the proposed Merger.

Uncertainty about the Merger or negative publicity related to the Merger may adversely affect relationships with our customers, suppliers and employees, whether or not the merger is completed.

In response to the announcement of the Merger, our existing or prospective customers, vendors, suppliers, landlords and other business partners may:

•delay, defer, or cease their agreements or arrangements with, or providing products or services to us;

•delay or defer other decisions concerning us; or

•seek alternative relationships with third parties or otherwise seek to change the terms on which they do business with us.

Potential adverse effects on our relationships with our current customers, suppliers and other business partners, or those with which we are seeking to establish business relationships, due to uncertainties about the Merger could materially harm our business.

In addition, as a result of the Merger, there may be potential adverse effects on our ability to attract, recruit, retain, and motivate current and prospective employees who may be uncertain about their future roles and relationships with us following the completion of the Merger, and the possibility that our employees could lose productivity as a result of uncertainty regarding their employment following the Merger. Key employees may depart because of issues relating to such uncertainty or a desire not to remain with CommerceHub following the completion of the Merger.

The pendency of the Merger may result in negative publicity and other adverse public statements about us and the Merger. Such negative publicity or adverse public statements, may also result in investigations by regulatory authorities, legislators and law enforcement officials or in legal claims. Addressing any adverse publicity, governmental scrutiny, investigation or enforcement or other legal proceedings is time consuming and expensive and can divert the time and attention of our senior management from the day-to-day operation of our business and execution of our other strategic initiatives. Further, regardless of the factual basis for the assertions being made or the ultimate outcome of any investigation or proceeding, any negative publicity can have an adverse impact on our reputation and on the morale and performance of our employees and on our relationships with regulatory authorities. It may also have an adverse impact on our ability to take timely advantage of various business and market opportunities. The direct and indirect effects of negative publicity, and the demands of responding to and addressing it, may have a material adverse effect on our business, financial condition, and results of operations.

Losses of customers or other important strategic relationships from any of the events described above could have a material adverse effect on our business, results of operations, and financial condition. Such adverse effects could also be exacerbated by a delay in the completion of the Merger for any reason, including delays associated with obtaining requisite regulatory approvals or the approval of our stockholders.

33

The Merger Agreement contains provisions that could discourage or deter a potential competing acquirer that might be willing to pay more to effect a business combination with us.

The Merger Agreement contains provisions that, subject to certain exceptions, limit our ability to solicit, initiate, or knowingly facilitate, or knowingly encourage any proposal or offer that constitutes, or would reasonably be expected to lead to, an alternative transaction or engage in, continue or otherwise participate in any negotiations or discussions regarding, or furnish information in response to inquiries with respect to, an alternative transaction. It is possible that these or other provisions in the Merger Agreement might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of our outstanding common stock from considering or proposing an acquisition.

Lawsuits have been, and may continue to be, filed against us and the members of our board of directors arising out of the proposed Merger, which may delay or prevent the proposed Merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints may be filed against us, our board of directors, CommerceHub, CommerceHub's board of directors, and others in connection with the transactions contemplated by the Merger Agreement. As of November 7, 2022, five complaints were filed in federal court by purported ChannelAdvisor stockholders regarding the Merger. The first complaint was filed on September 28, 2022, in the United States District Court for the Southern District of New York and is captioned Stein v. ChannelAdvisor Corporation, Case No. 1:22-cv-08282. The second complaint was filed on September 29, 2022, in the United States District Court for the Southern District of New York and is captioned O'Dell v. ChannelAdvisor Corporation, Case No. 1:22-cv-08334. The third complaint was filed on October 25, 2022, in the United States District Court for the Southern District of New York and is captioned Weiss v. ChannelAdvisor Corporation, Case No. 1:22-cv-09129. The fourth complaint was filed on October 26, 2022, in the United States District Court for the District of Delaware and is captioned Ballard v. ChannelAdvisor Corporation, Case No. 1:22-cv-01416-UNA. The fifth complaint was filed on October 28, 2022, in the United States District Court for the Southern District of New York and is captioned Riley v. ChannelAdvisor Corporation, Case No. 1:22-cv-09257. The aforementioned five complaints are collectively referred to as the "Complaints." The Complaints name as defendants ChannelAdvisor and each member of the Board, collectively referred to as the "ChannelAdvisor Defendants." The Complaints allege violations of Section 14(a) of the Exchange Act against all ChannelAdvisor Defendants and allege violations of Section 20(a) of the Exchange Act against the members of the Board in connection with disclosures made by the ChannelAdvisor Defendants related to the Merger. The Complaints seek, among other relief, (i) injunctive relief preventing the consummation of the Merger unless the ChannelAdvisor Defendants disclose certain information requested by the plaintiffs, (ii) rescission and/or rescissory damages in the event the Merger is consummated, and (iii) an award of plaintiffs' expenses and attorneys' fees. The ChannelAdvisor Defendants believe the claims in the Complaints are without merit and intend to vigorously defend the actions.

The outcome of litigation is uncertain, and we may not be successful in defending against the current claims or any such future claims. Lawsuits that have been or may be filed against us, our board of directors, CommerceHub, or CommerceHub’s board of directors could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business, result in substantial costs to us, and otherwise adversely affect our business, results of operations and financial condition.

The ability to complete the Merger is subject to the receipt of consents and approvals from government entities and other potential challenges, that may result in a delay, prohibition or abandonment of the Merger.

Completion of the Merger is conditioned upon, among other things, the expiration or termination of the required waiting periods (and any extension thereof) applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder, or the HSR Act, and the absence of a Legal Restraint that has the effect of enjoining or prohibiting the Merger. In deciding whether to grant antitrust approvals, the United States Federal Trade Commission, or the FTC, or the Department of Justice Antitrust Division, or DOJ, and other regulatory agencies will consider the effect of the Merger on competition. The FTC, DOJ, or other regulatory agencies may condition their approval of the Merger on CommerceHub's or our agreement to various requirements, limitations, or costs, or require divestitures or place restrictions on the conduct of CommerceHub's business following the Merger. We cannot provide any assurance that we or CommerceHub will obtain the necessary approvals and that no Legal Restraint will be imposed. In addition, these requirements, limitations, costs, divestitures, or restrictions may result in the delay or abandonment of the Merger.

As previously disclosed in a Form 8-K filed October 20, 2022, at 11:59 p.m., Eastern Time, on October 19, 2022, the waiting period applicable to the Merger under the HSR Act expired. Accordingly, the portion of the conditions to the Merger relating to the expiration or termination of the waiting period under the HSR Act has been satisfied. The Merger continues to be subject to the remaining conditions set forth in the Merger Agreement.

34

At any time before or after consummation of the Merger, notwithstanding the termination or expiration of the waiting period under the HSR Act, the FTC, DOJ, or state or foreign entities could take such action under the antitrust or competition laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of one or both of the parties, requiring the parties to license or hold separate assets or terminate existing relationships and contractual rights, or requiring the parties to agree to other remedies. Private parties may also seek to take legal action under the antitrust laws under certain circumstances, including by seeking to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals, or otherwise result in a delay or the Merger being prohibited. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, we will prevail.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

35

ITEM 6. EXHIBITS

Exhibit Number		Description of Document
2.1	^	Agreement and Plan of Merger, dated as of September 4, 2022, by and among CommerceHub, Inc., a Delaware corporation, and CH Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of CommerceHub, Inc., and the Registrant (incorporated herein by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K (File No. 001-35940), filed with the Securities and Exchange Commission on September 6, 2022).
3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K (File No. 001-35940), filed with the Securities and Exchange Commission on May 29, 2013).
3.2		Amended and Restated Bylaws of the Registrant (incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K (File No. 001-35940), filed with the Securities and Exchange Commission on February 22, 2021).
4.1		Specimen stock certificate evidencing shares of Common Stock (incorporated herein by reference to Exhibit 4.2 of the Company's Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-187865), filed with the Securities and Exchange Commission on May 9, 2013).
31.1	*	Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act.
31.2	*	Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act.
32.1	**	Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act.
101.INS	*	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH	*	Inline XBRL Taxonomy Extension Schema Document
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

^    Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally to the SEC a copy of any omitted exhibits or schedules upon request.

*    Filed herewith.

+    Indicates management contract or compensatory plan.

**    These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

36

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CHANNELADVISOR CORPORATION
Date:	November 7, 2022	By:	/s/ Richard F. Cornetta
			Richard F. Cornetta
			Chief Financial Officer
			(On behalf of the Registrant and as Principal Financial Officer)

37

EX-31.1

Exhibit 31.1

CERTIFICATION

I, David J. Spitz, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of ChannelAdvisor Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 7, 2022	By:	/s/ David J. Spitz
			David J. Spitz
			Chief Executive Officer
			(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Richard F. Cornetta, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of ChannelAdvisor Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 7, 2022	By:	/s/ Richard F. Cornetta
			Richard F. Cornetta
			Chief Financial Officer
			(principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of ChannelAdvisor Corporation (the "Company”) for the quarterly period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers hereby certifies, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to such officer’s knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition of the Company as of the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.

/s/ David J. Spitz	/s/ Richard F. Cornetta
David J. Spitz	Richard F. Cornetta
Chief Executive Officer	Chief Financial Officer
November 7, 2022	November 7, 2022

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, is not being “filed” by the Company as part of the Report or as a separate disclosure document and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

XML

Cover - shares	9 Months Ended
	Sep. 30, 2022	Oct. 31, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	001-35940
Entity Registrant Name	CHANNELADVISOR CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	56-2257867
Entity Address, Address Line One	3025 Carrington Mill Boulevard
Entity Address, City or Town	Morrisville
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	27560
City Area Code	919
Local Phone Number	228-4700
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	ECOM
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		28,916,493
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001169652
Current Fiscal Year End Date	--12-31

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 88,115	$ 100,567
Accounts receivable, net of allowance of $241 and $279 as of September 30, 2022 and December 31, 2021, respectively	25,675	28,886
Prepaid expenses and other current assets	14,823	15,497
Total current assets	128,613	144,950
Operating lease right of use assets	5,172	2,856
Property and equipment, net of accumulated depreciation of $24,096 and $23,096 as of September 30, 2022 and December 31, 2021, respectively	9,212	7,682
Goodwill	28,209	30,042
Intangible assets, net	2,292	3,079
Deferred contract costs, net of current portion	18,648	17,951
Long-term deferred tax assets, net	28,368	32,616
Other assets	618	796
Total assets	221,132	239,972
Current liabilities:
Accounts payable	1,057	1,457
Accrued expenses	14,631	12,644
Deferred revenue	28,727	29,942
Other current liabilities	1,633	4,831
Total current liabilities	46,048	48,874
Long-term operating leases, net of current portion	4,787	1,182
Other long-term liabilities	1,069	1,718
Total liabilities	51,904	51,774
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021	0	0
Common stock, $0.001 par value, 100,000,000 shares authorized, 28,915,564 and 30,188,595 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	29	30
Additional paid-in capital	282,716	300,875
Accumulated other comprehensive loss	(6,609)	(2,237)
Accumulated deficit	(106,908)	(110,470)
Total stockholders' equity	169,228	188,198
Total liabilities and stockholders' equity	$ 221,132	$ 239,972

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Allowance for doubtful accounts receivable, current	$ 241	$ 279
Property and equipment, accumulated depreciation	$ 24,096	$ 23,096
Stockholders' equity:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	28,915,564	30,188,595
Common stock, shares outstanding (in shares)	28,915,564	30,188,595

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Revenue	$ 43,490	$ 41,575	$ 128,589	$ 122,284
Cost of revenue	10,273	10,100	31,062	28,041
Gross profit	33,217	31,475	97,527	94,243
Operating expenses:
Sales and marketing	16,143	15,482	48,245	45,273
Research and development	5,389	5,364	16,192	16,799
General and administrative	9,984	7,075	24,654	18,792
Total operating expenses	31,516	27,921	89,091	80,864
Income from operations	1,701	3,554	8,436	13,379
Other income (expense):
Interest income (expense)	234	(30)	251	(96)
Other income (expense)	5	(29)	5	(164)
Total other income (expense)	239	(59)	256	(260)
Income before income taxes	1,940	3,495	8,692	13,119
Income tax expense (benefit)	2,039	(34)	5,130	(427)
Net (loss) income	$ (99)	$ 3,529	$ 3,562	$ 13,546
Net (loss) income per share:
Basic (in dollars per share)	$ 0	$ 0.12	$ 0.12	$ 0.46
Diluted (in dollars per share)	$ 0	$ 0.11	$ 0.12	$ 0.43
Weighted average common shares outstanding:
Basic	28,815,362	29,931,173	29,674,219	29,665,439
Diluted	29,955,554	31,474,314	30,793,498	31,295,737

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (99)	$ 3,529	$ 3,562	$ 13,546
Other comprehensive (loss) income:
Foreign currency translation adjustments	(1,961)	(1,157)	(4,372)	(1,219)
Total comprehensive (loss) income	$ (2,060)	$ 2,372	$ (810)	$ 12,327

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities
Net (loss) income	$ 3,562	$ 13,546
Adjustments to reconcile net income to cash and cash equivalents provided by operating activities:
Depreciation and amortization	4,461	5,064
Bad debt expense (recovery)	260	(99)
Stock-based compensation expense	9,985	9,739
Deferred income taxes	3,726	(875)
Other items, net	(1,229)	(1,982)
Changes in assets and liabilities:
Accounts receivable	1,510	(583)
Prepaid expenses and other assets	842	79
Deferred contract costs	(2,345)	(4,884)
Accounts payable and accrued expenses	1,152	86
Deferred revenue	47	6,388
Cash and cash equivalents provided by operating activities	21,971	26,479
Cash flows from investing activities
Purchases of property and equipment	(2,871)	(1,125)
Payment of software development costs	(2,890)	(2,577)
Cash and cash equivalents used in investing activities	(5,761)	(3,702)
Cash flows from financing activities
Repayment of finance leases	(8)	(12)
Proceeds from exercise of stock options	700	4,237
Repurchase and retirement of common stock	(25,000)	0
Payment of statutory tax withholding related to net-share settlement of restricted stock units	(3,392)	(1,363)
Cash and cash equivalents (used in) provided by financing activities	(27,700)	2,862
Effect of currency exchange rate changes on cash and cash equivalents	(962)	(165)
Net (decrease) increase in cash and cash equivalents	(12,452)	25,474
Cash and cash equivalents, beginning of period	100,567	71,545
Cash and cash equivalents, end of period	88,115	97,019
Supplemental disclosure of cash flow information
Cash paid for interest	96	69
Cash paid for income taxes, net	898	456
Supplemental disclosure of noncash investing and financing activities
Accrued statutory tax withholding related to net-share settlement of restricted stock units	453	4,204
Accrued capital expenditures	$ 30	$ 45

XML

Description of the Business

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF THE BUSINESS

DESCRIPTION OF THE BUSINESS

ChannelAdvisor Corporation ("ChannelAdvisor" or the "Company") was incorporated in the state of Delaware and capitalized in June 2001. The Company began operations in July 2001. ChannelAdvisor is a leading provider of cloud-based e-commerce solutions whose mission is to connect and optimize the world's commerce. For over two decades, ChannelAdvisor has helped brands and retailers worldwide to streamline their e-commerce operations, expand to new channels and grow sales. Thousands of customers depend on ChannelAdvisor to securely power their e-commerce operations on hundreds of channels, including Amazon, eBay, Facebook, Google, Shopify, Walmart and Zalando. The Company is headquartered in Morrisville, North Carolina and maintains sales, service, support and research and development offices in various domestic and international locations.

Merger Agreement and Proposed Acquisition by CommerceHub

On September 4, 2022, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with CommerceHub, Inc., a Delaware corporation ("CommerceHub"), and CH Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of CommerceHub (the "Merger Sub"), providing for the merger of Merger Sub with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of CommerceHub.

Under the terms of the Merger Agreement, CommerceHub will acquire all outstanding shares of the Company's common stock in exchange for consideration of $23.10 per share in cash. The Merger Agreement contains representations and warranties customary for transactions of this type. The closing of the Merger is subject to approval of the Company's stockholders and the satisfaction or waiver of a number of customary closing conditions. The Merger Agreement provides CommerceHub and the Company with certain termination rights and, under certain circumstances, may require that CommerceHub or the Company pay a termination fee. During the three and nine months ended September 30, 2022, the Company incurred $3.2 million in costs associated with the negotiation and execution of the Merger Agreement, which are included in general and administrative expense in the accompanying condensed consolidated statements of operations.

XML

Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, as contained in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of financial position, the results of operations, comprehensive (loss) income and cash flows. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results for the full year or the results for any future periods, especially in light of the ongoing impacts, and potential future effects of, the COVID-19 pandemic and other macroeconomic and geopolitical factors on the Company’s business, operations and financial performance. These unaudited interim financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2021, or fiscal 2021, which are included in the Company's Annual Report on Form 10-K for fiscal 2021. There have been no material changes to the Company's significant accounting policies from those described in the footnotes to the audited financial statements contained in the Company's Annual Report on Form 10-K for fiscal 2021. 

Recent Accounting Pronouncements

The Company has reviewed new accounting pronouncements that were issued during the nine months ended September 30, 2022 and does not believe that these pronouncements are applicable to the Company, or that they will have a material impact on its financial position or results of operations.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable allowance, the useful lives of long-lived assets and other intangible assets, income taxes, assumptions used for purposes of determining stock-based compensation, leases, including estimating lease terms and extensions, and revenue recognition, including standalone selling prices for contracts with multiple performance obligations and the expected period of benefit for deferred contract costs, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Stockholders' Equity Attributable to Parent [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

The following tables summarize quarterly stockholders' equity activity for the three and nine months ended September 30, 2022 and 2021 (in thousands, except number of shares):

	Quarterly Activity For The Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2021	30,188,595	$	30	$	300,875	$	(2,237)	$	(110,470)	$	188,198
Exercise of stock options and vesting of restricted stock units	388,551	—		362		—		—		362
Stock-based compensation expense	—	—		3,132		—		—		3,132
Statutory tax withholding related to net-share settlement of restricted stock units	(101,316)	—		(1,818)		—		—		(1,818)
Net income	—	—		—		—		1,824		1,824
Foreign currency translation adjustments	—	—		—		(416)		—		(416)
Balance, March 31, 2022	30,475,830	30		302,551		(2,653)		(108,646)		191,282
Exercise of stock options and vesting of restricted stock units	123,990	—		13		—		—		13
Stock-based compensation expense	—	—		3,474		—		—		3,474
Statutory tax withholding related to net-share settlement of restricted stock units	(44,201)	—		(620)		—		—		(620)
Repurchase and retirement of common stock	(1,828,604)	(1)		(24,999)		—		—		(25,000)
Net income	—	—		—		—		1,837		1,837
Foreign currency translation adjustments	—	—		—		(1,995)		—		(1,995)
Balance, June 30, 2022	28,727,015	29		280,419		(4,648)		(106,809)		168,991
Exercise of stock options and vesting of restricted stock units	272,620	—		325		—		—		325
Stock-based compensation expense	—	—		3,379		—		—		3,379
Statutory tax withholding related to net-share settlement of restricted stock units	(84,071)	—		(1,407)		—		—		(1,407)
Net loss	—	—		—		—		(99)		(99)
Foreign currency translation adjustments	—	—		—		(1,961)		—		(1,961)
Balance, September 30, 2022	28,915,564	$	29	$	282,716	$	(6,609)	$	(106,908)	$	169,228

	Quarterly Activity For The Nine Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2020	29,020,424	$	29	$	288,842	$	(1,095)	$	(157,685)	$	130,091
Exercise of stock options and vesting of restricted stock units	802,270	1		3,586		—		—		3,587
Stock-based compensation expense	—	—		3,048		—		—		3,048
Statutory tax withholding related to net-share settlement of restricted stock units	(89,842)	—		(2,061)		—		—		(2,061)
Net income	—	—		—		—		5,457		5,457
Foreign currency translation adjustments	—	—		—		(150)		—		(150)
Balance, March 31, 2021	29,732,852	30		293,415		(1,245)		(152,228)		139,972
Exercise of stock options and vesting of restricted stock units	146,164	—		136		—		—		136
Stock-based compensation expense	—	—		3,576		—		—		3,576
Statutory tax withholding related to net-share settlement of restricted stock units	(48,409)	—		(1,177)		—		—		(1,177)
Net income	—	—		—		—		4,560		4,560
Foreign currency translation adjustments	—	—		—		88		—		88
Balance, June 30, 2021	29,830,607	30		295,950		(1,157)		(147,668)		147,155
Exercise of stock options and vesting of restricted stock units	314,529	—		515		—		—		515
Stock-based compensation expense	—	—		3,115		—		—		3,115
Statutory tax withholding related to net-share settlement of restricted stock units	(96,188)	—		(2,329)		—		—		(2,329)
Net income	—	—		—		—		3,529		3,529
Foreign currency translation adjustments	—	—		—		(1,157)		—		(1,157)
Balance, September 30, 2021	30,048,948	$	30	$	297,251	$	(2,314)	$	(144,139)	$	150,828

Share Repurchase Program

In August 2021, the Company's Board of Directors approved a share repurchase program authorizing the repurchase of up to $25.0 million of the Company's common stock through August 10, 2022. During the nine months ended September 30, 2022, 1,828,604 shares were repurchased and retired under the repurchase program at an average price of $13.67 per share for an aggregate total price of $25.0 million, which completed the share repurchase program authorized in August 2021.

In June 2022, the Company's Board of Directors authorized an additional share repurchase program of up to $25.0 million of the Company's common stock through June 30, 2023. The Company had not repurchased any shares under the June 2022 authorization as of September 30, 2022. Repurchases may be made from time to time on the open market at prevailing prices, including pursuant to Rule 10b5-1 trading plans, or in negotiated transactions off the market. The share repurchase program does not obligate the Company to repurchase any particular amount of its shares. In light of the pending Merger (see Note 1), the Company does not have any current plans to effect share repurchases under the June 2022 authorization.

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

GOODWILL AND INTANGIBLE ASSETSThe Company has acquired intangible assets in connection with its business acquisitions. These assets were recorded at their estimated fair values at the acquisition date and are being amortized over their respective estimated useful lives using the straight-line method. The estimated useful lives and amortization methodology used in computing amortization are as follows:

	Estimated Useful Life	Amortization Methodology
Customer relationships	7 years	Straight-line
Acquired technology	7 years	Straight-line

Amortization expense associated with the Company's intangible assets was $0.1 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively, and $0.4 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively.

The following table summarizes the changes in the carrying amount of goodwill during the nine months ended September 30, 2022 (in thousands):

Balance, December 31, 2021	$	30,042
Effects of foreign currency translation	(1,833)
Balance, September 30, 2022	$	28,209

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Capitalized Software Development Costs	9 Months Ended
	Sep. 30, 2022
Property, Plant and Equipment [Abstract]
CAPITALIZED SOFTWARE DEVELOPMENT COSTS	CAPITALIZED SOFTWARE DEVELOPMENT COSTSCapitalized software development costs related to creating internally developed software and implementing software purchased for internal use are included in property and equipment in the accompanying condensed consolidated balance sheets. The Company capitalized software development costs of $0.9 million for both the three months ended September 30, 2022 and 2021, and $2.8 million and $2.6 million during the nine months ended September 30, 2022 and 2021, respectively. Amortization expense related to capitalized internally developed software was $0.8 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $2.4 million and $2.0 million for the nine months ended September 30, 2022 and 2021, respectively, and is included in cost of revenue or general and administrative expense in the accompanying condensed consolidated statements of operations, depending upon the nature of the software development project. The net book value of capitalized internally developed software was $5.2 million and $4.8 million at September 30, 2022 and December 31, 2021, respectively.

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Revenue from Contracts with Customers

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

REVENUE FROM CONTRACTS WITH CUSTOMERS

REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue Recognition and Disaggregation of Revenue

The Company derives the majority of its revenue from subscription fees paid for access to and usage of its software solutions for a specified contract term. A customer typically pays a recurring subscription fee based on a specified minimum amount of gross merchandise value, or GMV, or advertising spend that the customer expects to process through the Company's platform. Subscription fees may also include implementation fees such as launch assistance and training fees. The remaining portion of a customer's fee is variable and is based on a specified percentage of GMV or advertising spend processed through the Company's platform in excess of the customer's specified minimum GMV or advertising spend amount. In most cases, the specified percentage of excess GMV or advertising spend on which the variable fee is based is fixed and does not vary depending on the amount of the excess. Subscription fees are billed in advance of the subscription term and are due in accordance with contract terms, which generally provide for payment within 30 days. Variable fees are subject to the same payment terms, although they are generally billed at the end of the period in which they are incurred. The Company also generates revenue from its solutions that allow brands to direct potential consumers from their websites and digital marketing campaigns to authorized resellers. The majority of the Company's contracts have a one year term. The Company's contractual arrangements include performance, termination and cancellation provisions, but do not provide for refunds. Customers do not have the contractual right to take possession of the Company's software at any time. Sales taxes collected from customers and remitted to government authorities are excluded from revenue.

The Company's customers are categorized as follows:

Brands. The Company generally categorizes a customer as a brand if it primarily focuses on selling its own proprietary products.

Retailers. The Company generally categorizes a customer as a retailer if it primarily focuses on selling third-party products.

Other. Other is primarily comprised of strategic partnerships.

The following table summarizes revenue disaggregation by customer type for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022		Percentage of Total		2021		Percentage of Total		2022		Percentage of Total		2021		Percentage of Total
Brands	$	19,184	44	%	$	17,470	42	%	$	57,130	44	%	$	47,675	39	%
Retailers	21,463		49	%	21,737		52	%	$	64,299	50	%	$	66,030	54	%
Other	2,843		7	%	2,368		6	%	7,160		6	%	8,579		7	%
	$	43,490			$	41,575			$	128,589			$	122,284

Contracts with Multiple Performance Obligations

Customers may elect to purchase a subscription to multiple modules, multiple modules with multiple service levels, or, for certain of the Company's solutions, multiple brands or geographies. The Company evaluates such contracts to determine whether the services to be provided are distinct and accordingly should be accounted for as separate performance obligations. If the Company determines that a contract has multiple performance obligations, the transaction price, which is the total price of the contract, is allocated to each performance obligation based on a relative standalone selling price method. The Company estimates standalone selling price based on observable prices in past transactions for which the product offering subject to the performance obligation has been sold separately. As the performance obligations are satisfied, revenue is recognized as discussed above.

Transaction Price Allocated to Future Performance Obligations

As the Company typically enters into contracts with customers for a twelve-month subscription term, a substantial majority of its performance obligations that have not yet been satisfied as of September 30, 2022 are part of a contract that has an original expected duration of one year or less. For contracts with an original expected duration of greater than one year, the aggregate transaction price allocated to the unsatisfied performance obligations was $43.1 million as of September 30, 2022, of which $23.8 million is expected to be recognized as revenue over the next twelve months.

Deferred Revenue

Deferred revenue generally represents the unearned portion of subscription fees. Deferred revenue is recorded when fees are invoiced in advance of performance. Deferred amounts are generally recognized within one year. Deferred revenue is included in the accompanying condensed consolidated balance sheets under "Total current liabilities," net of any long-term portion that is included in "Other long-term liabilities." The following table summarizes deferred revenue activity for the nine months ended September 30, 2022 (in thousands):

	Balance, beginning of period		Net additions	Revenue recognized from deferred revenue	Balance, end of period
Deferred revenue	$	30,868	106,861	(108,395)	$	29,334

Of the $128.6 million of revenue recognized in the nine months ended September 30, 2022, $28.5 million was included in deferred revenue at January 1, 2022.

Costs to Obtain Contracts

The Company capitalizes sales commissions and a portion of other incentive compensation costs that are directly related to obtaining customer contracts and that would not have been incurred if the contract had not been obtained. These costs are included in the accompanying condensed consolidated balance sheets and are classified as "Prepaid expenses and other current assets," net of any long-term portion that is included in "Deferred contract costs, net of current portion." As of September 30, 2022, $9.3 million was included in "Prepaid expenses and other current assets." Deferred contract costs are amortized to sales and marketing expense over the expected period of benefit, which the Company has determined to be five years based on the estimated customer relationship period. The following table summarizes deferred contract cost activity for the nine months ended September 30, 2022 (in thousands):

	Balance, beginning of period		Additions	Amortized costs (1)	Balance, end of period
Deferred contract costs	$	26,959	9,979	(9,051)	$	27,887

(1) Includes contract costs amortized to sales and marketing expense during the period and the impact from foreign currency exchange rate fluctuations.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

The Company recognizes stock-based compensation expense using the accelerated attribution method, net of estimated forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the service inception date to the vesting date for that tranche.

Stock-based compensation expense is included in the following line items in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of revenue	$	252	$	169	$	748	$	665
Sales and marketing	1,060		928		2,707		2,744
Research and development	591		567		1,628		1,869
General and administrative	1,476		1,451		4,902		4,461
Total stock-based compensation expense	$	3,379	$	3,115	$	9,985	$	9,739

During the nine months ended September 30, 2022, the Company granted the following share-based awards:

	Number of Shares Underlying Grant	Weighted Average Grant Date Fair Value
Service-based restricted stock units	721,062	$	17.69
Performance-based restricted stock units	185,154	$	17.78
Total share-based awards	906,216

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Net Income Per Share

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

NET LOSS PER SHARE

NET (LOSS) INCOME PER SHAREBasic net (loss) income per share is calculated by dividing net (loss) income by the weighted-average number of shares of common stock outstanding for the period. Diluted net (loss) income per share is calculated giving effect to all potentially dilutive shares of common stock, including stock options and restricted stock units. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the treasury stock method.

The following table summarizes the calculation of basic and diluted net (loss) income per share (in thousands, except share and per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Basic:
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546
Weighted average common shares outstanding, basic	28,815,362		29,931,173		29,674,219		29,665,439
Basic net (loss) income per share	$	—	$	0.12	$	0.12	$	0.46
Diluted:
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546
Weighted average common shares outstanding, basic	28,815,362		29,931,173		29,674,219		29,665,439
Dilutive effect of:
Stock options	339,592		575,293		328,731		595,938
Unvested service-based restricted stock units	717,659		967,848		689,401		1,034,360
Unvested performance-based restricted stock units	82,941		—		101,147		—
Weighted average common shares outstanding, diluted	29,955,554		31,474,314		30,793,498		31,295,737
Diluted net (loss) income per share	$	—	$	0.11	$	0.12	$	0.43

The following equity instruments have been excluded from the calculation of diluted net (loss) income per share because the effect is anti-dilutive:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Stock options	22,448	21,632	22,655	22,235
Restricted stock units	12,144	5,291	381,175	231,680

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Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

At the end of each interim reporting period, the Company estimates its effective income tax rate expected to be applicable for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.

The Company's effective tax rate was 105.1% and (1.0)% for the three months ended September 30, 2022 and 2021, respectively, and 59.0% and (3.3)% for the nine months ended September 30, 2022 and 2021, respectively. The tax expense and benefit for each of the periods was based on U.S. federal, state, local and foreign income taxes. The Company’s effective tax rate for the three and nine months ended September 30, 2022 was higher than the U.S. federal statutory rate of 21% primarily due to the generation of foreign operating losses which are subject to a valuation allowance as the related loss carryforwards are not yet deemed realizable, nondeductible Merger expenses and the U.S. federal and state requirement to capitalize research and development expenditures, effective for years beginning after December 31, 2021, as discussed below. The Company’s effective tax rate for the three and nine months ended September 30, 2021 was lower than the U.S. federal statutory rate of 21% primarily due to the utilization of U.S. federal and state operating loss carryforwards which had previously been subject to a valuation allowance. As a result of uncertainties relating to the timing and sufficiency of future taxable income in certain tax jurisdictions in which the Company operates, the Company could not recognize the tax benefit of operating loss carryforwards generated in those jurisdictions until the operating loss carryforwards were utilized. The effective tax rate for the three and nine months ended September 30, 2022 was higher than the effective tax rate for the three and nine months ended September 30, 2021 primarily due to the tax benefit recorded from the utilization of U.S. federal and state operating loss carryforwards which had been previously subject to a valuation allowance during the three and nine months ended September 30, 2021 and the U.S. federal and state requirement to capitalize research and development expenditures, effective for years beginning after December 31, 2021, as discussed below. The Company reversed most of the valuation allowance recorded against its U.S. federal and state operating loss carryforwards as of December 31, 2021. Therefore, the Company did not record a similar tax benefit from the utilization of U.S. federal and state operating loss carryforwards during the three and nine months ended September 30, 2022.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five years for research performed in the United States and 15 years for research performed outside the United States, pursuant to Section 174 of the Internal Revenue Code. This change has had a material impact on the expected utilization of the Company's U.S. federal and state operating loss carryforwards and resulted in an increase in its effective tax rate for the three and nine months ended September 30, 2022. Although Congress is considering legislation that would repeal or defer the capitalization and amortization requirement to later years, it is not certain that the provision will be repealed or otherwise modified. If the requirement is repealed or modified during a subsequent period, it could result in a decrease to the effective tax rate. The actual impact will depend on if and when this requirement is repealed or modified by Congress, including if retroactively to January 1, 2022, and the amount of research and development expenditures incurred in 2022.

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Segment and Geographic Information

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

SEGMENT AND GEOGRAPHIC INFORMATION

SEGMENT AND GEOGRAPHIC INFORMATION

Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker, or CODM, for purposes of allocating resources and evaluating financial performance. The Company's CODM reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. As such, the Company's operations constitute a single operating segment and one reportable segment.

Substantially all assets were held in the United States during the nine months ended September 30, 2022 and the year ended December 31, 2021. The Company categorizes domestic and international revenue from customers based on their billing address. The following table summarizes revenue by geography for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Domestic	$	31,034	$	29,199	$	90,970	$	87,181
International	12,456		12,376		37,619		35,103
Total revenue	$	43,490	$	41,575	$	128,589	$	122,284

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, as contained in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of financial position, the results of operations, comprehensive (loss) income and cash flows. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results for the full year or the results for any future periods, especially in light of the ongoing impacts, and potential future effects of, the COVID-19 pandemic and other macroeconomic and geopolitical factors on the Company’s business, operations and financial performance. These unaudited interim financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2021, or fiscal 2021, which are included in the Company's Annual Report on Form 10-K for fiscal 2021. There have been no material changes to the Company's significant accounting policies from those described in the footnotes to the audited financial statements contained in the Company's Annual Report on Form 10-K for fiscal 2021.

Recent Accounting Pronouncements

The Company has reviewed new accounting pronouncements that were issued during the nine months ended September 30, 2022 and does not believe that these pronouncements are applicable to the Company, or that they will have a material impact on its financial position or results of operations.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

On an ongoing basis, the Company evaluates its estimates, including those related to the accounts receivable allowance, the useful lives of long-lived assets and other intangible assets, income taxes, assumptions used for purposes of determining stock-based compensation, leases, including estimating lease terms and extensions, and revenue recognition, including standalone selling prices for contracts with multiple performance obligations and the expected period of benefit for deferred contract costs, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities.

Deferred Revenue

Deferred revenue generally represents the unearned portion of subscription fees. Deferred revenue is recorded when fees are invoiced in advance of performance. Deferred amounts are generally recognized within one year. Deferred revenue is included in the accompanying condensed consolidated balance sheets under "Total current liabilities," net of any long-term portion that is included in "Other long-term liabilities."

Costs to Obtain Contracts

The Company capitalizes sales commissions and a portion of other incentive compensation costs that are directly related to obtaining customer contracts and that would not have been incurred if the contract had not been obtained. These costs are included in the accompanying condensed consolidated balance sheets and are classified as "Prepaid expenses and other current assets," net of any long-term portion that is included in "Deferred contract costs, net of current portion." As of September 30, 2022, $9.3 million was included in "Prepaid expenses and other current assets." Deferred contract costs are amortized to sales and marketing expense over the expected period of benefit, which the Company has determined to be five years based on the estimated customer relationship period.

Stock-Based Compensation

The Company recognizes stock-based compensation expense using the accelerated attribution method, net of estimated forfeitures, in which compensation cost for each vesting tranche in an award is recognized ratably from the service inception date to the vesting date for that tranche.

Earnings Per Share

Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted-average number of shares of common stock outstanding for the period. Diluted net (loss) income per share is calculated giving effect to all potentially dilutive shares of common stock, including stock options and restricted stock units. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the treasury stock method.

Income Taxes

At the end of each interim reporting period, the Company estimates its effective income tax rate expected to be applicable for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2022

Stockholders' Equity Attributable to Parent [Abstract]

Schedule of Stockholders Equity

The following tables summarize quarterly stockholders' equity activity for the three and nine months ended September 30, 2022 and 2021 (in thousands, except number of shares):

	Quarterly Activity For The Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2021	30,188,595	$	30	$	300,875	$	(2,237)	$	(110,470)	$	188,198
Exercise of stock options and vesting of restricted stock units	388,551	—		362		—		—		362
Stock-based compensation expense	—	—		3,132		—		—		3,132
Statutory tax withholding related to net-share settlement of restricted stock units	(101,316)	—		(1,818)		—		—		(1,818)
Net income	—	—		—		—		1,824		1,824
Foreign currency translation adjustments	—	—		—		(416)		—		(416)
Balance, March 31, 2022	30,475,830	30		302,551		(2,653)		(108,646)		191,282
Exercise of stock options and vesting of restricted stock units	123,990	—		13		—		—		13
Stock-based compensation expense	—	—		3,474		—		—		3,474
Statutory tax withholding related to net-share settlement of restricted stock units	(44,201)	—		(620)		—		—		(620)
Repurchase and retirement of common stock	(1,828,604)	(1)		(24,999)		—		—		(25,000)
Net income	—	—		—		—		1,837		1,837
Foreign currency translation adjustments	—	—		—		(1,995)		—		(1,995)
Balance, June 30, 2022	28,727,015	29		280,419		(4,648)		(106,809)		168,991
Exercise of stock options and vesting of restricted stock units	272,620	—		325		—		—		325
Stock-based compensation expense	—	—		3,379		—		—		3,379
Statutory tax withholding related to net-share settlement of restricted stock units	(84,071)	—		(1,407)		—		—		(1,407)
Net loss	—	—		—		—		(99)		(99)
Foreign currency translation adjustments	—	—		—		(1,961)		—		(1,961)
Balance, September 30, 2022	28,915,564	$	29	$	282,716	$	(6,609)	$	(106,908)	$	169,228

	Quarterly Activity For The Nine Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2020	29,020,424	$	29	$	288,842	$	(1,095)	$	(157,685)	$	130,091
Exercise of stock options and vesting of restricted stock units	802,270	1		3,586		—		—		3,587
Stock-based compensation expense	—	—		3,048		—		—		3,048
Statutory tax withholding related to net-share settlement of restricted stock units	(89,842)	—		(2,061)		—		—		(2,061)
Net income	—	—		—		—		5,457		5,457
Foreign currency translation adjustments	—	—		—		(150)		—		(150)
Balance, March 31, 2021	29,732,852	30		293,415		(1,245)		(152,228)		139,972
Exercise of stock options and vesting of restricted stock units	146,164	—		136		—		—		136
Stock-based compensation expense	—	—		3,576		—		—		3,576
Statutory tax withholding related to net-share settlement of restricted stock units	(48,409)	—		(1,177)		—		—		(1,177)
Net income	—	—		—		—		4,560		4,560
Foreign currency translation adjustments	—	—		—		88		—		88
Balance, June 30, 2021	29,830,607	30		295,950		(1,157)		(147,668)		147,155
Exercise of stock options and vesting of restricted stock units	314,529	—		515		—		—		515
Stock-based compensation expense	—	—		3,115		—		—		3,115
Statutory tax withholding related to net-share settlement of restricted stock units	(96,188)	—		(2,329)		—		—		(2,329)
Net income	—	—		—		—		3,529		3,529
Foreign currency translation adjustments	—	—		—		(1,157)		—		(1,157)
Balance, September 30, 2021	30,048,948	$	30	$	297,251	$	(2,314)	$	(144,139)	$	150,828

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets

The estimated useful lives and amortization methodology used in computing amortization are as follows:

	Estimated Useful Life	Amortization Methodology
Customer relationships	7 years	Straight-line
Acquired technology	7 years	Straight-line

Schedule of Goodwill

The following table summarizes the changes in the carrying amount of goodwill during the nine months ended September 30, 2022 (in thousands):

Balance, December 31, 2021	$	30,042
Effects of foreign currency translation	(1,833)
Balance, September 30, 2022	$	28,209

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Revenue from Contracts with Customers (Tables)

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table summarizes revenue disaggregation by customer type for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022		Percentage of Total		2021		Percentage of Total		2022		Percentage of Total		2021		Percentage of Total
Brands	$	19,184	44	%	$	17,470	42	%	$	57,130	44	%	$	47,675	39	%
Retailers	21,463		49	%	21,737		52	%	$	64,299	50	%	$	66,030	54	%
Other	2,843		7	%	2,368		6	%	7,160		6	%	8,579		7	%
	$	43,490			$	41,575			$	128,589			$	122,284

Deferred Revenue

The following table summarizes deferred revenue activity for the nine months ended September 30, 2022 (in thousands):

	Balance, beginning of period		Net additions	Revenue recognized from deferred revenue	Balance, end of period
Deferred revenue	$	30,868	106,861	(108,395)	$	29,334

Deferred Contract Costs

The following table summarizes deferred contract cost activity for the nine months ended September 30, 2022 (in thousands):

	Balance, beginning of period		Additions	Amortized costs (1)	Balance, end of period
Deferred contract costs	$	26,959	9,979	(9,051)	$	27,887

(1) Includes contract costs amortized to sales and marketing expense during the period and the impact from foreign currency exchange rate fluctuations.

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Summary of Stock-Based Compensation Expense

Stock-based compensation expense is included in the following line items in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of revenue	$	252	$	169	$	748	$	665
Sales and marketing	1,060		928		2,707		2,744
Research and development	591		567		1,628		1,869
General and administrative	1,476		1,451		4,902		4,461
Total stock-based compensation expense	$	3,379	$	3,115	$	9,985	$	9,739

Summary of Awards Granted in Period

During the nine months ended September 30, 2022, the Company granted the following share-based awards:

	Number of Shares Underlying Grant	Weighted Average Grant Date Fair Value
Service-based restricted stock units	721,062	$	17.69
Performance-based restricted stock units	185,154	$	17.78
Total share-based awards	906,216

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Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following table summarizes the calculation of basic and diluted net (loss) income per share (in thousands, except share and per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Basic:
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546
Weighted average common shares outstanding, basic	28,815,362		29,931,173		29,674,219		29,665,439
Basic net (loss) income per share	$	—	$	0.12	$	0.12	$	0.46
Diluted:
Net (loss) income	$	(99)	$	3,529	$	3,562	$	13,546
Weighted average common shares outstanding, basic	28,815,362		29,931,173		29,674,219		29,665,439
Dilutive effect of:
Stock options	339,592		575,293		328,731		595,938
Unvested service-based restricted stock units	717,659		967,848		689,401		1,034,360
Unvested performance-based restricted stock units	82,941		—		101,147		—
Weighted average common shares outstanding, diluted	29,955,554		31,474,314		30,793,498		31,295,737
Diluted net (loss) income per share	$	—	$	0.11	$	0.12	$	0.43

Schedule of Securities Excluded from Calculation of Weighted Average Common Shares Outstanding

The following equity instruments have been excluded from the calculation of diluted net (loss) income per share because the effect is anti-dilutive:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Stock options	22,448	21,632	22,655	22,235
Restricted stock units	12,144	5,291	381,175	231,680

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Segment and Geographic Information (Tables)

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Summary of Revenue by Geography

The following table summarizes revenue by geography for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Domestic	$	31,034	$	29,199	$	90,970	$	87,181
International	12,456		12,376		37,619		35,103
Total revenue	$	43,490	$	41,575	$	128,589	$	122,284

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Description of the Business (Detail) $ in Millions	9 Months Ended
	Sep. 30, 2022 USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Merger-related costs	$ 3.2

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Stockholders' Equity (Detail) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	$ 168,991	$ 191,282	$ 188,198	$ 147,155	$ 139,972	$ 130,091	$ 188,198	$ 130,091
Exercise of stock options and vesting of restricted stock units	325	13	362	515	136	3,587
Stock-based compensation expense	3,379	3,474	3,132	3,115	3,576	3,048
Statutory tax withholding related to net-share settlement of restricted stock units	(1,407)	$ (620)	(1,818)	(2,329)	(1,177)	(2,061)
Repurchase and retirement of common stock, in shares		(1,828,604)
Repurchase and retirement of common stock		$ (25,000)
Net (loss) income	(99)	1,837	1,824	3,529	4,560	5,457	3,562	13,546
Foreign currency translation adjustments	(1,961)	(1,995)	(416)	(1,157)	88	(150)	(4,372)	(1,219)
Ending balance	169,228	$ 168,991	$ 191,282	$ 150,828	$ 147,155	$ 139,972	169,228	$ 150,828
Accumulated deficit	$ (106,908)						$ (106,908)		$ (110,470)
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance (in shares)	28,727,015	30,475,830	30,188,595	29,830,607	29,732,852	29,020,424	30,188,595	29,020,424
Beginning balance	$ 29	$ 30	$ 30	$ 30	$ 30	$ 29	$ 30	$ 29
Exercise of stock options and vesting of restricted stock units (in shares)	272,620	123,990	388,551	314,529	146,164	802,270
Exercise of stock options and vesting of restricted stock units		$ 0	$ 0	$ 0	$ 0	$ 1
Statutory tax withholding related to net-share settlement of restricted stock units (in shares)	(84,071)	(44,201)	(101,316)	(96,188)	(48,409)	(89,842)
Repurchase and retirement of common stock, in shares		(1,828,604)
Repurchase and retirement of common stock		$ (1)
Ending balance (in shares)	28,915,564	28,727,015	30,475,830	30,048,948	29,830,607	29,732,852	28,915,564	30,048,948	30,188,595
Ending balance	$ 29	$ 29	$ 30	$ 30	$ 30	$ 30	$ 29	$ 30
Additional Paid-in Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	280,419	302,551	300,875	295,950	293,415	288,842	300,875	288,842
Exercise of stock options and vesting of restricted stock units	325	13	362	515	136	3,586
Stock-based compensation expense	3,379	3,474	3,132	3,115	3,576	3,048
Statutory tax withholding related to net-share settlement of restricted stock units	(1,407)	(620)	(1,818)	(2,329)	(1,177)	(2,061)
Repurchase and retirement of common stock		(24,999)
Ending balance	282,716	280,419	302,551	297,251	295,950	293,415	282,716	297,251
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	(4,648)	(2,653)	(2,237)	(1,157)	(1,245)	(1,095)	(2,237)	(1,095)
Foreign currency translation adjustments	(1,961)	(1,995)	(416)	(1,157)	88	(150)
Ending balance	(6,609)	(4,648)	(2,653)	(2,314)	(1,157)	(1,245)	(6,609)	(2,314)
Accumulated Deficit
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance	(106,809)	(108,646)	(110,470)	(147,668)	(152,228)	(157,685)	(110,470)	(157,685)
Net (loss) income	(99)	1,837	1,824	3,529	4,560	5,457
Ending balance	$ (106,908)	$ (106,809)	$ (108,646)	$ (144,139)	$ (147,668)	$ (152,228)	$ (106,908)	$ (144,139)

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Stockholders' Equity Narrative (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Jun. 30, 2022	Aug. 10, 2021
Equity [Abstract]
Authorized repurchase amount under share repurchase program	$ 25,000	$ 25,000
Repurchase and retirement of common stock, in shares	1,828,604
Average price per share	$ 13.67
Repurchase and retirement of common stock	$ 25,000

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Goodwill and Intangible Assets - Estimated Useful Lives and Amortization Methodology (Detail)	9 Months Ended
	Sep. 30, 2022
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Estimated useful life of intangible asset (in years)	7 years
Acquired technology
Finite-Lived Intangible Assets [Line Items]
Estimated useful life of intangible asset (in years)	7 years

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Goodwill and Intangible Assets - Goodwill and Intangible Assets Narrative (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 100	$ 300	$ 400	$ 800
Goodwill [Roll Forward]
Goodwill	$ 28,209		28,209		$ 30,042
Change in goodwill			$ (1,833)

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Capitalized Software Development Costs - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Property, Plant and Equipment [Abstract]
Capitalized software development costs	$ 900,000	$ 900,000	$ 2,800,000	$ 2,600,000
Capitalized software development costs, amortization	800,000	$ 700,000	2,400,000	$ 2,000,000
Capitalized software development costs, net	$ 5,200,000		$ 5,200,000		$ 4,800,000

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Revenue from Contracts with Customers - Disaggregation of Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation of Revenue [Line Items]
Revenue	$ 43,490	$ 41,575	$ 128,589	$ 122,284
Brands
Disaggregation of Revenue [Line Items]
Revenue	$ 19,184	$ 17,470	$ 57,130	$ 47,675
Revenue, percent of total	44.00%	42.00%	44.00%	39.00%
Retailers
Disaggregation of Revenue [Line Items]
Revenue	$ 21,463	$ 21,737	$ 64,299	$ 66,030
Revenue, percent of total	49.00%	52.00%	50.00%	54.00%
Other
Disaggregation of Revenue [Line Items]
Revenue	$ 2,843	$ 2,368	$ 7,160	$ 8,579
Revenue, percent of total	7.00%	6.00%	6.00%	7.00%

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Revenue from Contracts with Customers - Transaction Price Allocated to Future Performance Obligations (Detail) $ in Millions	Sep. 30, 2022 USD ($)
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 43.1
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 23.8
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Performance obligation period	12 months

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Revenue from Contracts with Customers - Additional Information (Detail) $ in Millions	9 Months Ended
	Sep. 30, 2022 USD ($)
Revenue from Contract with Customer [Line Items]
Capitalized contract cost, amortization period	5 years
Recognized previously deferred revenue	$ 28.5
Deferred contract costs, current	9.3
Revenue	$ 128.6
Payment period	30 days
Contract period	1 year
BrandsRetailersOther
Revenue from Contract with Customer [Line Items]
Contract period	12 months

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Revenue from Contracts with Customers - Deferred Revenue (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Deferred revenue
Balance, beginning of period	$ 30,868
Net additions	106,861
Revenue recognized from deferred revenue	(108,395)
Balance, end of period	$ 29,334

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Revenue from Contracts with Customers - Costs to Obtain Contracts (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)
Deferred contract costs
Balance, beginning of period	$ 26,959
Additions	9,979
Amortized costs	(9,051)
Balance, end of period	$ 27,887

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Stock-Based Compensation - Summary of Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Stock-Based Compensation [Line Items]
Stock-based compensation expense	$ 3,379	$ 3,115	$ 9,985	$ 9,739
Cost of revenue
Stock-Based Compensation [Line Items]
Stock-based compensation expense	252	169	748	665
Sales and marketing
Stock-Based Compensation [Line Items]
Stock-based compensation expense	1,060	928	2,707	2,744
Research and development
Stock-Based Compensation [Line Items]
Stock-based compensation expense	591	567	1,628	1,869
General and administrative
Stock-Based Compensation [Line Items]
Stock-based compensation expense	$ 1,476	$ 1,451	$ 4,902	$ 4,461

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Stock-Based Compensation - Grants in Period (Detail)	9 Months Ended
	Sep. 30, 2022 $ / shares shares
Number of Shares Underlying Grant
Restricted stock units (RSUs) (in shares)	906,216
Service-based restricted stock units
Number of Shares Underlying Grant
Restricted stock units (RSUs) (in shares)	721,062
Weighted Average Grant Date Fair Value
Restricted stock units (RSUs) (in dollars per share) | $ / shares	$ 17.69
Performance-based restricted stock units
Number of Shares Underlying Grant
Restricted stock units (RSUs) (in shares)	185,154
Weighted Average Grant Date Fair Value
Restricted stock units (RSUs) (in dollars per share) | $ / shares	$ 17.78

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Net Income Per Share - Calculation of Basic and Diluted Net Income (Loss) per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net (loss) income	$ (99)	$ 1,837	$ 1,824	$ 3,529	$ 4,560	$ 5,457	$ 3,562	$ 13,546
Weighted average common shares outstanding, basic	28,815,362			29,931,173			29,674,219	29,665,439
Basic net income (loss) per share (in dollars per share)	$ 0			$ 0.12			$ 0.12	$ 0.46
Weighted average common shares outstanding, diluted (in shares)	29,955,554			31,474,314			30,793,498	31,295,737
Diluted net income (loss) per share (in dollars per share)	$ 0			$ 0.11			$ 0.12	$ 0.43
Stock options
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Dilutive effect (in shares)	339,592			575,293			328,731	595,938
Service-based restricted stock units
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Dilutive effect (in shares)	717,659			967,848			689,401	1,034,360
Performance-based restricted stock units
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Dilutive effect (in shares)	82,941			0			101,147	0

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Net Income Per Share - Antidilutive Equity Instruments (Detail) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculation of weighted average common shares outstanding (in shares)	22,448	21,632	22,655	22,235
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from calculation of weighted average common shares outstanding (in shares)	12,144	5,291	381,175	231,680

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Income Taxes - Narrative (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Tax Disclosure [Abstract]
Effective tax rate	105.10%	(1.00%)	59.00%	(3.30%)
U.S. taxing authority [Member]
Statutory Tax Rate [Line Items]
Statutory tax rate	21.00%	21.00%	21.00%	21.00%

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Segment and Geographic Information - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2022 segment
Segment Reporting [Abstract]
Number of reportable segment	1
Number of operating segment	1

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Segment and Geographic Information - Summary of Revenue by Geography (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Segment Reporting Information [Line Items]
Revenue	$ 43,490	$ 41,575	$ 128,589	$ 122,284
Domestic
Segment Reporting Information [Line Items]
Revenue	31,034	29,199	90,970	87,181
International
Segment Reporting Information [Line Items]
Revenue	$ 12,456	$ 12,376	$ 37,619	$ 35,103