Thank you, Lara. Good morning, and welcome to ChannelAdvisor's conference call for the third quarter 2020.

With me on the call today are David Spitz, ChannelAdvisor's Chief Executive Officer; Beth Segovia, ChannelAdvisor's Chief Operating Officer; and Rich Cornetta, ChannelAdvisor's Chief Financial Officer. This morning, we issued a press release with details on our third quarter 2020 performance as well as our outlook for the fourth quarter and fiscal year 2020.

This press release can be accessed on the Investor Relations section of our website at ir.channeladvisor.com. In addition, this call is being recorded, and a replay will be available after the conclusion of the call.

During today's call, we will make statements related to our business that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date.

We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

These risks are summarized in the press release that we issued today. For further discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our most recent Form 10-K and 10-Q as well as our other filings, which are available on the SEC website at sec.gov.

During the course of today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA, which excludes depreciation, amortization, income tax expense, interest and stock-based compensation. For the current year, adjusted EBITDA also excludes transaction costs for our acquisition of BlueBoard in the third quarter, while for the prior year it also excludes nonrecurring severance and related costs in connection with our corporate reorganization.

We also refer to the related measure, adjusted EBITDA margin, which is calculated as adjusted EBITDA divided by our revenue. Our press release that we issued today includes GAAP to non-GAAP reconciliations for gross profit, gross margin, operating expenses, operating income, operating margin, adjusted EBITDA, non-GAAP net income and free cash flow.

We also provide a GAAP to non-GAAP reconciliation schedule in our supplemental financial presentation posted on the Investor Relations section of our website. Finally, at times in our prepared comments or responses to analyst questions, we may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results.

Please be advised that we may or may not continue to provide this additional detail in the future. With that, let me turn the call over to David.

Thank you, Raiford, and good morning, everyone. We continued to deliver strong financial results in the third quarter as solid execution and heavy e-commerce volumes drove success for our customers and double-digit revenue growth for us, exceeding our guidance for the quarter.

Revenue from brands was particularly strong, up 29% year-on-year in the quarter. I was also pleased to see solid cash generation, even accounting for our acquisition of BlueBoard, which I think will turn into one of the best acquisitions we've done as a company.

What I'm most excited about, however, isn't the numbers presented in our financials as good as they were. It's the outstanding performance we had in sales execution and revenue retention during the quarter, which should position us for improved fixed subscription revenue growth going forward.

Coming off what was [Technical Difficulty] performance in the second quarter, our team, again, grew bookings significantly year-over-year and sequentially to one of our best quarters ever, and about two-thirds of that year-over-year bookings increase was from brands, including Epson U.S., Gant, Geox, Omron and Universal Music Group. Compounding the success, we also enjoyed better revenue retention than we've had in many years.

Net bookings, which we calculate as the sum of all bookings, minus churn and down sales, were the strongest we've had in six years. Combined, this led to a solid acceleration in year-over-year fixed revenue growth and an increase in deferred revenue as well as a double-digit increase in customer count, even without including the customers we gained through our acquisition of BlueBoard.

I attribute these strong results to improved sales and services execution, expanded sales capacity and increased mix of brand customers and revenue and the acceleration in e-commerce, driving demand for our solutions, especially from brands. In short, our execution was exceptional in the third quarter, and we believe this momentum will continue as we close out the year as our pipeline has continued to grow.

It is gratifying to see the hard work of the last few years begin to pay off in the form of improved fixed subscription revenue growth and the underlying strong unit economics we've seen. We're often asked how much of the recent surge in e-commerce will stick.

And that's obviously hard to say. And we did see GMV levels moderate somewhat in the third quarter compared to the second quarter, although GMV levels have remained stable and well above pre-COVID levels thus far, including through the month of October.

We conducted a survey of 1,000 consumers in the third quarter, the results of which suggest that much of this shift in consumer behavior is permanent as a majority of respondents said they expect to shop online more than before the pandemic. Indeed, we saw record GMV during Amazon Prime Day in mid-October, exceeding even the level of daily GMV we had mid-April at the height of lockdowns and U.S.

federal stimulus programs. Even though it's possible that some of the Prime Day GMV represents demand that has been effectively pulled forward from November and December, the biggest concern in the industry this holiday season is that the shipping industry won't be able to keep up with e-commerce volumes.

So we expect volumes to remain strong through the holidays. Ultimately, we think most of these new habits will stick, which should drive continued strong demand for our solutions.

Speaking of trends, our long tail of Marketplaces has continued to perform very well in terms of aggregate GMV growth. Comprising channels like Target Plus, Zalando, Shopify, Bigcommerce and over 100 other channels, the aggregate GMV of these channels is approaching what we see on eBay and has continued to grow at triple-digits year-on-year growth rates.

In fact, if third quarter growth rates hold steady, the GMV on our long tail of Marketplaces could exceed the GMV we see on eBay within the next year. Regardless, this channel diversity highlights the breadth and depth of our portfolio and why brands who are serious about digital transformation turn to ChannelAdvisor as their trusted global strategic partner.

E-commerce adoption has accelerated and demands for our solution has increased. Our focus on brands is resonating in the market and has continued to yield the desired benefits and improved unit economics, in particular net revenue retention and revenue growth.

Furthermore, our strong financial position has continued to give us the flexibility to invest in long-term sustainable revenue growth. We intend to continue making these investments across the board from product to increased sales capacity and services to continue delivering industry-leading capabilities and quality to our customers.

We believe this is our time, and we're leaning in to capture the opportunity in front of us. We are pumped and excited to finish out a record year with increased momentum.

And with that, I'll turn it over to Beth.

Thank you, David, and good morning, everyone. I'm delighted to be able to share with you today that in addition to the strong financial results reported for Q3, our organization has made significant progress towards the goal of increasing retention and expanding with existing clients by improving the customer experience.

We were able to reduce churn, measured in dollars, to levels not seen in almost seven years when ChannelAdvisor was about half this size, despite the challenges of the current environment and its impact on certain retailers. Expansions with existing customers dominated by our brand clients also showed their strong commitment to our platform and increased significantly year-over-year.

This is a testament to the numerous ways in which ChannelAdvisor can help customers with their digital journey. Expansions and reduced churn are important drivers of sustained growth, and it's encouraging to see the trends have moved in such a positive direction.

The improvement in churn and significant growth in expansions is the result of hard work and specific actions we've taken over the past year to elevate service levels and improve customer satisfaction. Some examples include creating client-specific account plans with clear objectives and quarterly alignment or adjustments to help ensure goals are achieved; and improved focus on new clients and ensuring the key milestones of success in their first year are delineated and tracked in a shared vision with the clients; demonstrating flexibility during the COVID-19 pandemic to help clients weather the storm; and finally, aligning more resources to provide technical and strategic guidance to our smaller clients to enable growth of their e-commerce businesses.

In addition to improving first year client success and client achievement of goals, we have spent the last six months planning and have now deployed a new services IT infrastructure to enable clients to improve their ability to successfully answer questions, solve problems and learn new features. We've launched an entirely new knowledge center with improved self-help content that is easier to find and scored to promote the most effective content as well as a new set of forums to encourage and facilitate client engagement.

In addition, we've deployed a new set of tools to enable our support technicians to quickly and accurately answer client questions as well as identify trends in those inquiries to enable new content to be developed to support self-help. This has been a major IT transformation, and we believe this sets us up nicely to be able to support our clients through the Q4 holiday period and into 2021.

All this, while employees continue to work from home. I couldn't be prouder of the passion, stamina and dedication of our team.

Now that we've covered our strong financial results and progress around enabling customer success, let me turn to sharing a few product highlights from the past quarter. We recently expanded our capabilities to enable brands with the launch of Shoppable Media, a comprehensive suite of multichannel solutions designed to help businesses reach purchase-ready consumers more efficiently.

By adding features such as Dynamic Shopping Links to our Where To Buy capabilities, we're helping customers like O'Cedar, a leader in household cleaning products, connect to consumers with more online purchase options. O'Cedar noted that our new Shoppable Media tools provide a vital connection from their brand site to retail partners so that consumers can find their products on their own terms and are a natural step for them to help make life a little easier for consumers as they research and purchase O'Cedar home cleaning products online.

On the digital marketing front, we introduced Search Terms Generator for Amazon, an offering that enables sellers to save time and resources by automatically generating and updating search terms based on advertising performance to help improve organic listings. With respect to support for new Marketplace and drop ship integrations, we continue to expand our reach.

In Q3, we added to our global total of more than 100 Marketplace integrations by introducing support for 6 new Marketplaces, including Kroger in the U.S. and Bunnings Marketlink in Australia.

We also added support for first-party retail drop ship connections with Walgreens, Bluestem and JClub at the U.S. as well as OTTO VAL in Germany.

In our ongoing effort to enhance the client experience to improve operational agility, we introduced a new order pipeline dashboard, which helps brands and retailers minimize costly order processing delays; a new channel health console, which allows users to assess operational health across all channel integrations; and a deal planner, which offers a new way to manage short-term promotions. The progress we've been making was highlighted at our recent ChannelAdvisor Connect 2020 virtual event hosted in October for 2,600 registrants in over 66 countries where a number of clients spoke to how we've helped them navigate their digital journeys in the turbulence of the post COVID world.

One testimonial that was particularly enlightening was from PepsiCo, the global food and beverage company that most people wouldn't necessarily associate with selling directly to consumers online. During the state of e-commerce keynote hosted by David, PepsiCo noted that by working with ChannelAdvisor in multiple capacities, they've been able to push the envelope with their digital strategies.

Whether it be helping them stand up Marketplace brand stores or their own web stores, using our fulfillment services platform to establish shipping locations quickly or using our 1P platform to backstop inventory, they said they're excited by the breadth and capability that we've been building. Given the investments we've made in our technology platform and our service delivery capabilities, we believe we remain well positioned to support our customers during a holiday shopping season that we expect to drive historic levels of e-commerce.

To summarize, I am super proud of how we've engaged as a company to continue operations and support our clients given the challenges of the current environment and so pleased that our customers have responded in kind by renewing and expanding their relationships with us. It's exciting to see the results driven by investments in our capabilities that go beyond those driven by just the pandemic related surge in e-commerce.

The challenges of the day reinforce the need for our products, and we see promising indications that the company's specific actions we've undertaken have helped to position us for sustained growth. With that, I'll pass it to Rich now to provide a more detailed update on our financial performance.

Rich?

Thank you, Beth, and good morning, everyone. Following a second quarter of historic proportion from a financial performance perspective, there was much uncertainty about the sustainability of e-commerce demand and how that would translate into GMV and top line performance in Q3.

As we noted on our last earnings call, July GMV results were strong, and that momentum continued throughout the quarter, albeit at a moderately lower levels than what we saw in Q2 as we anticipated. Revenue and adjusted EBITDA meaningfully exceeded the guidance we provided in August and were complemented by exceptional operating cash flow during the quarter.

Revenue grew 11% and adjusted EBITDA increased 44% versus the prior year quarter, a clear indication of the scalability of our business model and benefit of our shared success pricing model. Although variable revenue was a meaningful driver of our year-over-year revenue growth, fixed revenue growth exceeded expectations during the quarter, driven by our investment in sales headcount over the last few quarters and our strategic focus on brands customers.

Taking a closer look at these results, total revenue was $35.3 million for the third quarter, up over 11% year-over-year. Variable revenue during the quarter totaled $8.2 million, representing an increase of 40% from the year ago period.

This was once again driven by broad-based year-on-year growth in GMV as e-commerce spending continued to be strong during the quarter. As I mentioned earlier, we are thrilled to report that fixed subscription revenue reached record levels at $27.1 million for the third quarter, an increase of 5% sequentially and year-on-year.

Coupled with our strong variable revenue results and record fixed subscription revenue, we are also encouraged by the significant improvement we saw in net bookings performance during the quarter as the investments we're making to drive sustainable growth has started to bear fruit. Looking at revenue by customer type, brands revenue for the quarter increased 29% year-over-year and brands fixed revenue grew even more than that.

Revenue from our brands customers represented 34% of total revenue for the third quarter, up from 29% for the prior year period. We remain very pleased with this continued shift towards brands.

And as this pandemic has illustrated, brands are generally more resilient and better positioned than retailers when it comes to the shift to digital channels. Our strategic focus on brands was a driving force behind our acquisition of BlueBoard in July.

And the investments we have made in our platform to support our brands customers have been paying off during this crucial time of e-commerce demand. From a geographic perspective, revenue from the U.S.

increased approximately 12% in the quarter, representing the third consecutive quarter of revenue growth. This growth is primarily a result of strong variable revenue performance.

And as I mentioned above, the investments we've made to drive sustained growth have started to contribute to better fixed subscription revenue growth as well. International revenue increased 10% for the third quarter, also driven by strong variable revenue results.

Moving on to profitability performance. Adjusted EBITDA increased 44% to $7.4 million for the quarter compared to $5.2 million in the prior year period, generating an adjusted EBITDA margin of 21%, up almost 400 basis points year-on-year.

These results include improvements across all reported expense line items as a percentage of sales. It is important to note that our adjusted EBITDA results for the second quarter were strengthened by approximately $1.7 million of expense savings related to the COVID-19 pandemic.

Our annual Connect 2020 event moving to a virtual format in Q4, the elimination of business travel and a reduction in facilities costs were the main drivers of these expense savings. So some of our improved profitability is attributable to factors we would not expect to continue under a more normal operating environment.

In the trailing 12-month period ended September 30, adjusted EBITDA totaled $34.8 million, highlighting our continued commitment and ability to manage expenses and drive profitable growth. Turning to the balance sheet.

Consistent with our strong P&L performance, cash and cash equivalents were $66.4 million, up from $63.9 million in Q2, representing cash generation of $2.5 million during the quarter. Even after dispersing over $9 million for the BlueBoard acquisition, net cash from operating activities was $12.5 million, and free cash flow was $11.2 million for the quarter, again, marking substantial improvement of approximately $9.5 million and $9.4 million, respectively, from the prior year period.

Year-to-date, net cash from operating activities was $26 million, free cash flow was $22.7 million, and cash was up $14.6 million from the start of the year, again, factoring in the BlueBoard acquisition. Despite the current economic environment, I'm pleased to report that cash collections remain strong and AR quality actually improved in the third quarter.

An additional balance sheet item I'm especially pleased to talk about for Q3 is deferred revenue. Based on the strong net bookings performance I mentioned earlier, deferred revenue increased $2.1 million from the end of June, representing the first quarter-over-quarter increase in deferred revenue since Q4 of '17.

Furthermore, the quarter-over-quarter increase was on par with the largest sequential increase we've ever recorded for deferred revenue. Now let's discuss our financial outlook.

As we enter Q4, visibility into GMV performance and the shape of this holiday season remains limited. Although as David said, we anticipate overall GMV levels to remain elevated.

Despite this continued uncertainty driven by COVID, we now have two quarters of data that we can use to provide a little more detail on our Q4 outlook. As such, we have decided to provide a range for both revenue and adjusted EBITDA.

So for the fourth quarter, we are issuing a revenue outlook range of between $37.3 million and $38.3 million and an adjusted EBITDA range of between $8 million and $9 million. It is important to note that our Q4 outlook reflects accelerated year-over-year fixed revenue growth as well as incremental investments in OpEx, which, as David mentioned earlier, we believe will enhance our long-term growth profile.

For the fiscal year 2020, we are issuing a revenue outlook range of between $142.1 million and $143.1 million and an adjusted EBITDA range of between $33.5 million and $34.5 million. Now at the end of every e-mail David sends to our employees, he notes the hash tag, this is our time.

As one team, we have been living and breathing this motto since the start of the pandemic for our customers, for our strategic partners, for our fellow employees and for our shareholders. We believe we are well positioned to capitalize on the e-commerce opportunity to achieve sustained growth in Q4, into 2021 and beyond.

I will now pass the call back to David for some final remarks.

Thank you, Rich. I'd like to close by thanking Marc Huffman, a Director of the company since 2016.

We announced this morning that Marc will not be standing for reelection when his term expires at our Annual Meeting next May, owing to the recent announcement of his promotion to CEO of BlackLine and his need to focus his time and attention on that role. Marc has been exceptionally helpful to us over the last few years as we've shaped and executed our strategy, and I speak for the entire Board and company when I say thank you, Marc, for your contributions.

Our team continues to amaze me with their resilience and focus on our customers, and I'd like to thank all of them for our strong performance in the third quarter and this year. We're excited to see how the holidays play out as we begin looking toward 2021 and beyond.

And with that, operator, we'd like to now open the call to questions.

Curious if you could expand on the variable revenue in the quarter. Growth slightly decelerated sequentially.

Wondering if that was a factor of the Prime Day shift into Q4? Or any other color you can provide there?

I think as you've seen with some of the other larger channels that have reported like Amazon and eBay, I think, generally, what you've seen in the industry is a little bit of a deceleration from Q2, which was historic by really any measure. So we, on our last call, anticipated that there might be some deceleration as stores reopened and some of the lockdowns situation relaxed a little bit.

So we did see some level of modulation in GMV. But as I noted in my comments, we still saw stable, sustained GMV rates that were well above pre-COVID levels.

So I think that was just, Q2 was really, I think, quite exceptional, and we didn't expect, nor did we see Q3 coming at quite the same level. Having said that, of course, variable revenue still grew quite well.

And I think it was 40%. So we're pleased with that performance.

And the only thing that I would add here is that it's important to note that GMV results don't consistently correlate to variable revenue results. It really depends on the mix of customers, where the tiers in which the customers have signed up for and when, and the timing of when they're exceeding those tiers.

So the GMV performance quarter-over-quarter may not be consistent with the revenue performance quarter-over-quarter.

I wanted to ask on the bookings performance that you had in the third quarter and then also the strong bookings in the second quarter. How should we think about those in terms of when they will start to impact the financials and the fixed revenue?

And then is that entire bookings performance sort of captured in the deferred revenue? Or does that take a while to be captured?

Matt, what we've said historically, and I think it's still reasonable to look at it this way, it's typically three to six month lag from bookings in a particular quarter to work their way, I would say, into our financials. I think the uptick that we've seen in fixed revenue in Q3 probably partially reflected some of what we saw in Q2 and probably not a whole lot of impact from the bookings we did in Q3.

So that's what gives us confidence that our performance in Q3 will drive some good results going forward. As it relates to deferred revenue, no, it would not capture the totality.

We have a mix of payment terms with customers that range from monthly, quarterly, semiannual, annual and only a proportion, a certain proportion of our customers prepay annually. So I would say that the deferred revenue change was only a partial reflection of our success with bookings and revenue retention in the quarter.

And just as a follow-up in terms of the sales team in the U.S. and the investments you've made there.

Where are they at in terms of ramping up to productivity and sales coverage?

Yes. I think we are well on our way through the ramping process.

As you know, we grew capacity significantly towards the end of last year and through the first half or so of this year. And obviously, we're thrilled with the performance of the team.

So I think we do see continued opportunity to increase capacity as we go into 2021. So at some level, we're always adding some people to the team that are going to ramp.

But I would say that the team last quarter and this quarter has been firing on all cylinders. And we're really pleased with where our pipeline sits and the productivity of the team.

So I'd say we're in really good shape from a sales perspective.

Congrats on an excellent quarter and especially on the fixed revenue component. That's excellent.

I would love to get more color on the expansion activity you're seeing. Is this really customers adding new Marketplaces or additional functionality?

What are you seeing, I guess, more of the uplift there?

Beth, do you want to take this one?

So I think we've seen a number of different things. We certainly see customers continue to expand their channels, so whether it's Marketplaces or into 1P drop ship channel.

So channel expansion is always a method for growing their businesses. But in addition, we've seen a lot of crossover additions of new capabilities.

So we have seen clients start to pick up on our new Brand Analytics offering through the BlueBoard acquisition that we purchased in July. In addition, we're seeing pickup on Amazon Advertising services as well as other digital marketing capabilities.

So we're really seeing them think broadly about their digital strategies and think about how ChannelAdvisor can help them expand their reach, and we've seen them consistently add not only channels, but other product capabilities.

And as a follow-up and maybe for you, Beth. Can you give us an update on how the adoption of Starter Edition is progressing and your expectations or thoughts as we start to think about fiscal '21 and when that could be a material revenue contributor?

Sure. I'll take that.

And David, you can add on comments, if you'd like. So Starter Edition, we continue to partner strongly with our go-to-market partnership station.

We're releasing capability for two additional connections through the product. So we've released Walmart and now Bigcommerce to our trial users through the platform hoping to see additional adoption as a result of that activity.

And there's new campaigns going on this week as a result of those new additions to the product. So we're continuing to see nice adoption and nice feedback from those customers.

Then we're doing 2021 planning in a moment. So what you expect in next year is still an open question for us.

Hi, good morning. Congrats on the strong quarter and the strong bookings performance.

Just a question around Q4 guidance. I mean what sort of GMV assumptions are you making for this Q4 guidance?

With regards to our guidance projections with regards to GMV and variable performance, it's the holiday season, right? And we're, obviously, this quarter, have a tougher comp versus last year.

We are anticipated -- anticipating, obviously, growth over pre-COVID levels, certainly growth over Q3. Could it be a quarter like Q2?

Certainly possible. Right now, we have built in our model more focused on fixed revenue growth, and that's kind of where our focus is more longer term.

So GMV levels will continue to be strong. Right now, October results are starting to come in.

And we've seen some nice performance there. How much that pulled forward any November or December activity transactional volume is still uncertain at this time.

But we do anticipate the Q4 results from a GMV performance and variable revenue performance to be strong once again.

Zach, this is David. One thing I'll add is, as you've probably seen, there's some concerns in the industry about just shipping capacity and when the cutoff might be.

Typically in the holidays, we see last sort of shipping day cutoff around December 20th or 21st to hit Christmas. And I've seen some estimates that it could get shortened or expanded by maybe a week or 1.5 weeks.

So as Rich said, we expect strong GMV performance this holiday season, but this is 2020. So there are certainly some questions.

And the shape of the holiday, I think, is the real interesting question with Amazon Prime Day in October and, as Rich said, how much of that represents pull forward demand versus just incremental demand on top of the holidays. So it's a year and a quarter unlike we've seen before.

And so I think we're just being -- trying to be a bit thoughtful about that.

And then in terms of the shift towards fixed GMV or fixed subscription revenue, I'm just curious. In terms of your conversations with existing customers that have maybe continuously exceeded their monthly GMV rates in recent months.

How are they thinking about this moving forward? Are you able to upsell them into a higher fixed amount moving forward?

Or what's really the approach for some of these customers as they think about their e-commerce strategy in FY '21 and beyond?

I'll touch on that. And Beth, if you have anything to add, feel free.

But yes, there's certainly that situation, and that does happen, and we're happy to see that happen. I mean customers are seeing good success, and they want to trade up.

But I would say, by far, the significant driver of improvement in fixed and the bookings activity that we're seeing is really around new customer acquisition, which we think is exciting because what we've seen, particularly with brands, is that we typically start with a particular solution set or a smaller number of channels at the beginning, and then the opportunity to expand is pretty significant for a typical brand. So those initial engagements are usually a good indicator of what we can do with those customers going forward.

And that's really the primary driver of what we're seeing. But Beth, do you have anything to add as it relates to how we help customers when they're looking to step up their volume levels?

Yes. I think the only thing that I would add is, as we negotiate renewals with clients, we're always looking to assess whether they're not, they're in the right tier, whether the tier matches their outlook and does it, their contract terms, sort of, suit the balance between fixed and variable fees.

And certainly, in the last two quarters. We've seen clients who are very successful want to negotiate their tiers up.

And so, of course, we've done that. But I would agree with David that the primary driver has been the new bookings.

Thank you, everyone, for joining us today. We look forward to speaking with you again soon.

Thank you.