ChannelAdvisor files for an $86 million IPO

The provider of technology for selling through e-marketplaces wants to fund global growth.

Paul Demery

ChannelAdvisor Corp., a provider of e-commerce technology and services that help nearly 2,000 retailers worldwide sell through eBay.com, Amazon.com and other e-marketplaces and comparison shopping engines, is seeking to raise up to $86.25 million through an initial public offering of stock, according to its filing yesterday with the Securities and Exchange Commission.

The company, which helps its clients feed their product data and images to e-marketplaces, comparison shopping engines and Internet search engines, is ranked No. 1 among providers of e-marketplace management services in Internet Retailer’s Leading Vendors to the Top 1000 E-Retailers. It says in its SEC S-1 filing that rapid growth in e-commerce, while creating great growth opportunities for retailers and manufacturers selling on the web, is also creating a more complex technology environment that ChannelAdvisor wants to serve on a larger scale.

“Retailers and manufacturers seeking new avenues to expand their online sales must manage product data and transactions across hundreds of highly fragmented online channels where data attributes vary, requirements change frequently and the pace of innovation is rapid and increasing,” ChannelAdvisor says in the filing. The company, which hosts and manages its technology for clients who pay a periodic fee for those services online, says it plans to use the proceeds of the IPO to expand its market through increased domestic and international sales and marketing efforts and for potential acquisitions of “complementary businesses, technologies or other assets,” though it has no plans for acquisitions yet.

ChannelAdvisor, based in Morrisville, NC, is planning its IPO as the company is dealing with steep net losses of income amid consistent growth in annual revenue, according to its S-1 filing. For the year ended Dec. 31, 2012, it reported a 23% rise in total revenue, to $53.59 million from $43.57 million a year earlier, as its net loss widened to $4.93 million from $3.86 million. Contributing to its net loss was a 24% increase in operating expenses to $42.69 million in 2012, from $34.50 million in 2011. That increase included a 27% rise in sales and marketing expenses, to $24.33 million from $19.11 million, and a 14% rise in research and development costs, to $10.11 million from $8.84 million.

As of the end of last year, ChannelAdvisor had more than 1,900 clients worldwide, including retail chains, online retailers, brand manufacturers and advertising agencies that use its technology on behalf of their retailer clients, according to the S-1 filing. The company has 78 clients listed in the Internet Retailer Top 500 Guide and 38 in the Internet Retailer Second 500 Guide. Amazon.com Inc. is No. 1 in the Top 500.

ChannelAdvisor says in its S-1 filing that its average revenue per “core” customer last year was $28,050, up from $24,240 in 2011. It defines core customers, who make up 96% of its revenue, as all clients that subscribe to its SaaS applications, which ChannelAdvisor hosts, excluding clients of e-commerce technology that ChannelAdvisor acquired prior to 2008 for small sellers on eBay.com. Its clients processed a total of $3.5 billion in gross merchandise sales through ChannelAdvisor’s e-commerce technology, the company says. 

Investors in ChannelAdvisor as listed on the company's web site include eBay Inc., New Enterprise Associates, Kodiak Venture Partners, Southern Capital Ventures and Advanced Technology Ventures. Kodiak Venture Partners, New Enterprise Associates and Advanced Technololgy Ventures are also listed in the S-1 filing as principal shareholders. The IPO is being offered through Goldman, Sachs & Co.; Stifel, Nicolaus &N Co. Inc.; Pacific Crest Securities LLC, BMO Capital Markets, Needham & Co. LLC and Raymond James & Assoc. Inc. 

One of ChannelAdvisor’s chief rivals, Mercent Corp., issued a statement saying it welcomed news of the IPO. “In our view this is positive news and validation of the strength in the e-commerce, retail and online digital advertising markets,” Mercent said. A spokeswoman for privately-held Mercent says the company has nothing to say about a possible stock offering of its own.


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