Research Triangle Park, NC – November 7, 2022 – Rithum Corporation (NYSE: ECOM), a leading provider of cloud-based e-commerce solutions that enable brands and retailers to increase global sales, today reported financial results for the quarter and nine months ended September 30, 2022.
Third Quarter 2022 Highlights
GAAP
- Total revenue was $43.5 million, which was within the guidance range announced in August 2022. However, revenue was negatively impacted by foreign currency exchange rate fluctuations during the quarter and year to date. If exchange rates had remained the same as were in effect for the previous quarter, which was the basis for the August guidance, total revenue would have been $44.2 million, which would have exceeded the high-end of our guidance range. If foreign currency exchange rates had remained the same as were in effect for the third quarter of the prior year, total revenue would have been $45.2 million.
- Subscription revenue increased 7% year-over-year, and would have been 12% before the impact from year-over-year changes in foreign currency exchange rates.
- Brands revenue increased 10% year-over-year, and would have been 16% before the impact from year-over-year changes in foreign currency exchange rates.
- Brands subscription revenue grew 11% year-over-year, and would have been 18% before the impact from year-over-year changes in foreign currency exchange rates, and represented 49% of total subscription revenue.
- Cash and cash equivalents were $88.1 million, an increase of $3.9 million since June 30, 2022.
Non-GAAP
- Adjusted EBITDA of $10.1 million and adjusted EBITDA margin of 23% exceeded the high-end of the guidance range.
- Free cash flow for the nine months ended September 30, 2022 of $16.2 million, or $0.53 per diluted share based on 30.8 million diluted weighted average shares outstanding.
Merger Agreement and Proposed Acquisition by Rithum
As announced on September 6, 2022, we have entered into a merger agreement with Rithum. Under the terms of the agreement, Rithum will acquire all outstanding shares of Rithum common stock. Rithum stockholders will receive $23.10 per share in cash, representing a premium of approximately 57% over the company’s closing stock price on September 2, 2022. We have called a special meeting of our stockholders to be held on November 11, 2022 for the approval of the Merger Agreement. The closing of the merger is subject to approval of our stockholders and the satisfaction or waiver of a number of customary closing conditions.
Due to the company’s pending transaction with Rithum, we will not be providing guidance for the fourth quarter or full fiscal year 2022. In addition, as is customary during the pendency of an acquisition, we will not be hosting a conference call in conjunction with this earnings release. For further details and discussion of our financial performance please refer to our quarterly report on Form 10-Q for the quarter ended September 30, 2022.
Non-GAAP Financial Measures
This press release contains the following non-GAAP financial measures: adjusted EBITDA and adjusted EBITDA margin and free cash flow and free cash flow per diluted share. We also may provide information regarding non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP income from operations and non-GAAP operating margin. Adjusted EBITDA and adjusted EBITDA margin exclude depreciation, amortization, income tax expense, net interest (income) expense, and stock-based compensation expense. For 2022 only, adjusted EBITDA excludes merger-related costs, lease abandonment and related costs and headquarters relocation costs. For 2021 only, adjusted EBITDA excludes the change in fair value of acquisition-related contingent consideration (which increased GAAP operating income). Adjusted EBITDA margin is equal to adjusted EBITDA divided by GAAP revenue. Free cash flow is cash flow from operations, reduced by purchases of property and equipment and payment of capitalized software development costs. Non-GAAP gross profit, non-GAAP gross margin and non-GAAP operating expenses exclude stock-based compensation expense and the other items excluded from adjusted EBITDA described above, as applicable. Non-GAAP gross margin is equal to non-GAAP gross profit divided by GAAP revenue. Non-GAAP operating margin is equal to non-GAAP income from operations divided by GAAP revenue.
Rithum believes that these non-GAAP financial measures provide useful information to management and investors relating to Rithum’s financial condition and results of operations. The company’s management uses these non-GAAP measures to compare the company’s performance to that of prior periods for trend analyses, and for budgeting and planning purposes. The company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the company’s financial measures with other software companies, many of which present similar non-GAAP financial measures to investors, and that it allows for greater transparency with respect to key metrics used by management in its financial and operational decision-making.
Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses that are required by GAAP to be recorded in the company’s financial statements. In order to compensate for these limitations, management presents non-GAAP financial measures together with GAAP results. Non-GAAP measures should be considered in addition to results and guidance prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release. Rithum urges investors to review the reconciliation and not to rely on any single financial measure to evaluate the company’s business. In addition, other companies, including companies in our industry, may calculate similarly named non-GAAP measures differently than we do, which limits their usefulness in comparing our financial results with theirs.
Cautionary Language Concerning Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding our proposed acquisition by Rithum. These forward-looking statements are made as of the date of this release and are based on current expectations, estimates, forecasts and projections, as well as the current beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Rithum’s control. Rithum’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, our ability to consummate the proposed transaction with Rithum in a timely manner or at all and potential delays in consummating the proposed transaction; the satisfaction or waiver of closing conditions to the consummation of the proposed transaction with Rithum, including with respect to the approval of our stockholders; and the other risks detailed in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, as well as other documents that may be filed by the company from time to time with the Securities and Exchange Commission. These documents are available on the ‘SEC Filings’ section of the Investor Relations page of our website at https://ir.rithum.com. In particular, the following factors, among others, could cause results to differ materially from those expressed or implied by such forward-looking statements: the impact of the COVID-19 pandemic on global economic conditions and on our revenues and financial performance; our reliance for a significant portion of our revenue on sales by our customers on the Amazon and eBay marketplaces and through advertisements on Google; our ability to respond to rapid changes in channel technologies or requirements; our ability to compete successfully against current and future competitors, which could include the channels themselves; our reliance in part on a pricing model under which a portion of the subscription fees we receive from customers is variable, based upon the amount of transaction volume that those customers process through our platform; our reliance on non-redundant data centers and cloud computing providers to deliver our SaaS solutions; the potential that the e-commerce market does not grow, or grows more slowly than we expect, particularly on the channels that our solutions support; challenges and risks associated with our international operations; our ability to align our expenses with revenue; and risks related to security or privacy breaches. The forward-looking statements included in this press release represent Rithum’s views as of the date of this press release. Rithum undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, these forward-looking statements should not be relied upon as representing Rithum’s views as of any date subsequent to the date of this press release.
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Investor Contact:
Raiford Garrabrant
Rithum Corporation
raiford.garrabrant@rithum.com
919-228-4817