Table of the subscription fees we receive from customers is based upon the amount of GMV or advertising spend that those customers process through our platform, and any change in the attractiveness of that model or any decline in our customers’ sales could adversely affect our financial results.Contents

~~We have adopted a pricing model under which a portion of the subscription fees we receive from most of our customers is variable, based on the amount of our customers’ GMV or advertising spend~~processed through our platform that exceeds a specified amount established by contract, which we refer to as variable subscription fees. Most of our customer contracts include this variable subscription fee component. If sales or advertising spend by our customers processed through our platform were to decline, or if more of our customers require fully fixed pricing terms that do not provide for any variability based on their GMV or advertising spend processed through our platform, our revenue and margins could decline.

Our quarterly operating results have fluctuated in the past and may do so in the future, which could cause our stock price to decline.

Our operating results have historically fluctuated due to changes in our business, and our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. You should not rely on period-to-period comparisons of our operating results as an indication of our future performance. Factors that may cause fluctuations in our quarterly operating results include, but are not limited to, the following:

•the potential and evolving impact of the COVID-19 pandemic on our business and that of our customers;

•seasonal patterns in consumer spending;

•the addition of new customers or the loss of existing customers;

•changes in demand for our software;

•the timing and amount of sales and marketing expenses;

•changes in the prospects of the economy generally, which could alter current or prospective ~~customers’~~customers' spending priorities, or could increase the time it takes us to close sales;

•changes in our pricing policies or the pricing policies of our competitors;

•costs necessary to improve and maintain our software platform; and

•costs related to acquisitions of other businesses.

Our operating results may fall below the expectations of market analysts and investors in some future periods, which could cause the market price of our common stock to decline substantially.

Evolving domestic and international data privacy regulations may restrict our ability, and that of our customers, to solicit, collect, process, disclose and use personal information or may increase the costs of doing so, which could harm our business.

Federal, state and foreign governments and supervising authorities have enacted, and may in the future enact, laws and regulations concerning the solicitation, collection, processing, disclosure or use of consumers' personal information. Evolving regulations regarding personal data and personal information, in the European Union and elsewhere, especially relating to classification of IP addresses, machine identification, household data, location data and other information, may limit or inhibit our ability to operate or expand our business.

Such laws and regulations require or may in the future require us or our customers to implement privacy and security policies and practices; permit individuals to access, correct or delete personal information stored or maintained by us or our customers; inform individuals of security incidents that affect their personal information; and, in some cases, obtain consent to use personal information for specified purposes. Other proposed legislation could, if enacted, impose additional requirements and prohibit the use of specific technologies, such as those that track individuals' activities on web pages or record when individuals click on a link contained in an email message. Such laws and regulations could restrict our customers' ability to collect and use web browsing data and personal information, which may reduce our customers' demand for our solutions.

The laws in this area are complex and developing rapidly. In the United States, many state legislatures have adopted legislation that regulates how businesses operate online, including measures relating to privacy, data security and data breaches. Laws in all states require businesses to provide notice to customers whose personally identifiable information has been disclosed as a result of a data breach. The laws are not consistent, and compliance in the event of a widespread data breach is costly. Further, states are constantly adopting new laws or amending existing laws, requiring attention to frequently changing regulatory requirements. For example, California enacted the California Consumer Privacy Act, or the CCPA, on June 28, 2018, which went into effect on January 1, 2020 and has been dubbed the first "GDPR-like" law in the United States (referring to the EU's General Data Protection Regulation, described below). The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used by requiring covered companies to provide new disclosures to California consumers (as that term is broadly defined) and provide such consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Additionally, a new privacy law, the California Privacy Rights Act, or CPRA, was approved by California voters in the November 3, 2020

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election. The CPRA will create additional obligations relating to consumer data beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023. Aspects of the CCPA and the CPRA, and their interpretation and enforcement, remain uncertain. We cannot fully predict the impact of the CCPA or the CPRA on our business or operations, but they may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States. Other states are beginning to pass similar laws.

The General Data Protection Regulation, or GDPR, went into effect in the European Union in May 2018, with the intent of unifying data protection within the European Union under a single law. The GDPR has resulted in significantly greater compliance burdens and costs for companies with customers or operations in the European Union. The GDPR creates a range of new compliance obligations and increases financial penalties for non-compliance, and extends the scope of the European Union data protection law to all companies processing personal data of European Union data subjects, regardless of the company's location. These laws apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information.

Further, the United Kingdom's vote in favor of exiting the European Union, often referred to as Brexit, and ongoing developments in the United Kingdom have created uncertainty with regard to data protection regulation in the United Kingdom. Following the United Kingdom's withdrawal from the European Union on January 31, 2020, pursuant to the transitional arrangements agreed to between the United Kingdom and European Union, the GDPR continued to have effect in law in the United Kingdom, and continued to do so until December 31, 2020 as if the United Kingdom remained a Member State of the European Union for such purposes. Following December 31, 2020, and the expiry of those transitional arrangements, the data protection obligations of the GDPR continue to apply to United Kingdom related to processing of personal data in substantially unvaried form and fashion under the UK GDPR. However, going forward, there will be increasing scope for divergence in application, interpretation and enforcement of the data protection law as between the United Kingdom and EEA. Furthermore, the relationship between the United Kingdom and the EEA in relation to certain aspects of data protection law remains unclear. For example, it is still unclear whether transfers of data from the EEA to the United Kingdom will take place on the basis of an adequacy decision or whether we will need to implement appropriate safeguards as required by the GDPR. For the meantime, under the post-Brexit Trade and Cooperation Agreement, or the Trade and Cooperation Agreement, between the European Union and the United Kingdom, it has been agreed that transfers of personal data to the United Kingdom from European Union Member States will not be treated as "restricted transfers" to a non-EEA country for a period of up to six months from January 1, 2021. This will also apply to transfers to the United Kingdom from EEA Member States, assuming those Member States accede to the relevant provision of the Trade and Cooperation Agreement. Although the current maximum duration of the extended adequacy assessment period is six months it may end sooner, for example, in the event that the European Commission adopts an adequacy decision in respect of the United Kingdom, or the United Kingdom amends the UK GDPR and/or makes certain changes regarding data transfers under the UK GDPR/ Data Protection Act 2018 without the consent of the European Union (unless those amendments or decisions are made simply to keep relevant United Kingdom laws aligned with the European Union's data protection regime). Unless the European Commission adopts an adequacy decision in respect of the United Kingdom prior to the expiry of the extended adequacy assessment period, from that point onwards the United Kingdom will be an 'inadequate third country' under the GDPR and transfers of data from the EEA to the United Kingdom will require a 'transfer mechanism,' such as the standard contractual clauses. Additionally, as noted above, the United Kingdom has transposed the GDPR into United Kingdom domestic law by way of the UK GDPR with effect from in January 2021, which could expose us to two parallel regimes, each of which potentially authorizes similar fines and other potentially divergent enforcement actions for certain violations.

We will continue to follow developments and work to maintain conforming means of transferring data from Europe, but despite our efforts to address the changes, we may be unsuccessful in establishing conforming means of transferring data from Europe. For example, the European Court of Justice recently invalidated the use of the E.U.-U.S. Privacy Shield, which had enabled the transfer of personal data from the European Union to the United States for companies like us that were self-certified under the Privacy Shield. Alternative data transfer mechanisms, including the Standard Contractual Clauses may still be available while the authorities interpret the decisions and scope of the invalidated Privacy Shield and the alternative permitted data transfer mechanisms. The Standard Contractual Clauses, though approved by the European Commission as a suitable alternative, have faced challenges in European courts, and may be further challenged, suspended or invalidated. At present, there are few if any viable alternatives to the Privacy Shield and the Standard Contractual Clauses, so such developments may require us to implement costly substitutions for the data transfers we undertake in order to perform our services, or prevent such transfers entirely. If we are unable to efficiently process personal data from the European Union, or such transfers are prevented entirely, our ability to acquire customers could be negatively impacted.

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There is also significant uncertainty related to the manner in which data protection authorities will seek to enforce compliance with GDPR. For example, it is not clear if the authorities will conduct random audits of companies doing business in the European Union, or if the authorities will just continue to wait for complaints to be filed by individuals who claim their rights have been violated. Enforcement uncertainty and the costs associated with ensuring GDPR compliance could be onerous and adversely affect our business, financial condition, results of operations and prospects. While we do not currently believe that our compliance with the GDPR will have a material effect on our business, we will continue to monitor regulation and enforcement under this new law.

Changing industry standards and industry self-regulation regarding the collection, use and disclosure of data may have similar effects. Existing and future privacy and data protection laws and increasing sensitivity of consumers to unauthorized disclosures and use of personal information may also negatively affect the public's perception of our customers' sales practices. If our solutions are perceived to cause, or are otherwise unfavorably associated with, insecurity of personal information, whether or not illegal, we or our customers may be subject to public criticism. Public concerns regarding data collection, privacy and security may also cause some consumers to be less likely to visit our customers' websites or otherwise interact with our customers, which could limit the demand for our solutions and inhibit the growth of our business.

Any failure on our part to comply with applicable privacy and data protection laws, regulations, policies and standards or any inability to adequately address privacy or security concerns associated with our solutions, even if unfounded, could subject us to liability, damage our reputation, impair our sales and harm our business. Furthermore, the costs to our customers of compliance with, and other burdens imposed by, such laws, regulations, policies and standards may limit adoption of and demand for our solutions.

Cybersecurity incidents could harm our business and negatively impact our financial results.

Cybersecurity incidents could endanger the confidentiality, integrity and availability of our information resources and the information we collect, use, store and disclose. These incidents may be an intentional attack or an unintentional event, targeted at us or our third-party contractors or consultants, and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential or personal information, corrupting data or causing operational disruption. Such disruptions may be caused by events such as computer hacking, phishing attacks, ransomware, dissemination of computer viruses, worms and other destructive or disruptive software, denial of service attacks, exploits by trusted insiders and other malicious activity, as well as power outages, natural disasters (including extreme weather), terrorist attacks, user error or other similar events. The possibility of such events may be increased in the current environment in which all of our employees and the employees of our customers are working remotely. We believe that we take reasonable steps that are designed to protect the security, integrity and confidentiality of the information we collect, use, store, and disclose, but there is no guarantee that inadvertent or unauthorized data access will not occur despite our efforts. For example, our system redundancy may be ineffective or inadequate, or we could be impacted by software bugs or other technical malfunctions, as well as error or malfeasance by anyone with access to our data. In addition, while we believe we have adequate insurance coverage to compensate for any losses associated with such events, the coverage may in fact not be adequate to cover all potential losses. The development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated. Any unauthorized access or use of information, virus or similar breach or disruption to our, our customers', or our partners' systems and security measures could result in disrupted operations, loss of information, damage to our reputation and customer relationships, early termination of our contracts and other business losses, indemnification of our customers, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, financial penalties, litigation, regulatory investigations, and other significant liabilities, any of which could materially harm our business.

Activities of our customers or the content of their websites could subject us to liability.

Existing laws relating to the liability of providers of online products and services for activities of their users are in flux both within the United States and internationally. Our customer contracts require that our customers are only permitted to use our products in accordance with applicable law. However, if our customers were to use our products in violation of applicable law, we may become subject to lawsuits and liability arising from their conduct. Additionally, the conduct of our customers may subject us to regulatory enforcement actions or liability.

Although we do not have significant opportunities for users of our service to publish user-defined content, we have certain protections against copyright infringement or defamatory content. Specifically, the Digital Millennium Copyright Act, or DMCA, contains provisions that limit liability for some user-generated materials that infringe copyrights. In addition, Section 230 of the Communications Decency Act, or CDA, provides immunity from liability for providers of an interactive computer service who publish defamatory information provided by users of the service. Immunity under the DMCA and the

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CDA has been well-established through case law. On a regular basis, however, challenges to both laws seek to limit immunity. For example, a recent executive order and a letter from several senators to the U.S. Federal Communications Commission have renewed calls for the protections of Section 230 to be scaled back. Any such changes could affect our ability to claim protection under the CDA.

Although these and other similar legal provisions, such as the European Union e-Commerce Directive, provide limited protections from liability for providers like us, those protections may not be interpreted in a way that applies to us, may be amended in the future, or may not provide us with complete protection from liability claims. If we are found not to be protected by the safe harbor provisions of the DMCA, CDA or other similar laws, or if we are deemed subject to laws in other countries that may not have the same protections or that may impose more onerous obligations on us, we may owe substantial damages and our brand, reputation and financial results may be harmed.

The seasonality of our business creates significant variance in our quarterly revenue, which makes it difficult to compare our financial results on a sequential quarterly basis.

Our customers are ~~retailers~~brands and ~~branded manufacturers~~retailers that typically realize a significant portion of their online sales in the fourth quarter of each year during the holiday season. As a result of this seasonal variation, our ~~subscription~~ revenue fluctuates, with the variable portion of our ~~subscription~~ fees being higher in the fourth quarter than in other quarters and with revenue generally declining in the first quarter sequentially from the fourth quarter. Our business is therefore not necessarily comparable on a sequential quarter-over-quarter basis and you should not rely solely on quarterly comparisons to analyze our growth.

Failure to adequately manage our growth could impair our ability to deliver high-quality solutions to our customers, hurt our reputation and compromise our ability to ~~become profitable.~~maintain profitability.

We have experienced, and may ~~continue to~~ experience in the future, significant growth in our business. If we do not effectively manage our growth, the quality of service of our solutions may suffer, which could negatively affect our reputation and demand for our solutions. Our growth has placed, and ~~is expected to continue to~~may place in the future, a significant strain on our managerial, operational and financial resources and our infrastructure. Our future success will depend, in part, upon the ability of our senior management to manage growth effectively. This will require us to, among other things:

•hire additional personnel, both domestically and internationally;

•implement additional information management ~~information~~ systems;

•maintain close coordination among our engineering, operations, legal, finance, sales and marketing and client service and support organizations; and

•further develop our operating, administrative, legal, financial and accounting systems and controls.

Moreover, if our sales ~~continue to~~ increase, we may be required to concurrently deploy our hosting infrastructure at multiple additional locations or provide increased levels of customer service. Failure to accomplish any of these requirements could impair our ability to continue to deliver our solutions in a timely fashion, fulfill existing customer commitments or attract and retain new customers.

If we do not retain our senior management team and key employees, or if we fail to attract and retain additional highly skilled sales talent, we may not be able to sustain our growth or achieve our business objectives.

Our future success is substantially dependent on the continued service of our senior management team. Our future success also depends on our ability to continue to attract, retain, integrate and motivate highly skilled technical, sales and administrative employees. Competition for these employees in our industry is intense. As a result, we may be unable to attract or retain these management and other key personnel that are critical to our success, resulting in harm to our key client relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs. The loss of the services of our senior management or other key employees could make it more difficult to successfully operate our business and pursue our business goals.

Our business and growth objectives also may be hindered if our efforts to expand our sales team do not generate a corresponding increase in revenue. In particular, if we are unable to hire, develop and retain talented sales personnel or if our new sales personnel are unable to achieve expected productivity levels in a reasonable period of time, we may not be able to significantly increase our revenue and grow our business.

~~Our strategy~~

Table of ~~pursuing opportunistic acquisitions or investments may be unsuccessful and may divert our management’s attention and consume significant resources.~~Contents

A part of our growth strategy is to opportunistically pursue acquisitions of, or investments in, other complementary businesses or individual technologies. Any acquisition or investment may require us to use significant amounts of cash, issue potentially dilutive equity securities or incur debt. In addition, acquisitions involve numerous risks, any of which could harm our business, including:

difficulties in integrating the operations, technologies, services and personnel of acquired businesses, especially if those businesses operate outside of our core competency of providing e-commerce software solutions;

~~cultural challenges associated with integrating employees from acquired businesses into our organization;~~

~~ineffectiveness or incompatibility of acquired technologies or services;~~

~~failure to successfully further develop the acquired technology in order to recoup our investment;~~

~~potential loss of key employees of acquired businesses;~~

~~inability to maintain the key business relationships and the reputations of acquired businesses;~~

~~diversion of management’s attention from other business concerns;~~

~~litigation for activities of acquired businesses, including claims from terminated employees, customers, former stockholders or other third parties;~~

in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;

~~costs necessary to establish and maintain effective internal controls for acquired businesses; and~~

~~increased fixed costs.~~

If current efforts to allow states to require online retailers to collect sales tax on their behalf are successful, e-commerce in general could decline, our solutions could become less attractive and the amount of GMV processed through our platform, and our related revenue, could decline.

Although current U.S. Supreme Court decisions restrict the imposition of obligations to collect state and local sales taxes with respect to remote sales, an increasing number of states have considered or adopted laws that attempt to require out-of-state retailers to collect sales taxes on their behalf. The U.S. Supreme Court recently agreed to hear a case challenging a South Dakota law that permits the state to tax online sales where a remote seller has sales above an economic threshold in the state. In addition, the U.S. Senate and the U.S. House of Representatives are currently considering a variety of legislation, most notably the Marketplace Fairness Act, which would override the Supreme Court rulings and enable states to require that online retailers collect sales tax from the states’ residents. Some larger online retailers, including Amazon, have announced their support for legislation along these lines. This is a rapidly evolving area and we cannot predict whether this or other similar legislation will ultimately be adopted or what form it might take if adopted. For example, the current Senate and House legislation includes an exception for small retailers, although there can be no assurance that any legislation ultimately adopted would include such an exception. If the states or Congress are successful in these attempts to require online retailers to collect state or local sales taxes on out-of-state purchases, buying online would lose some of its current advantage over traditional retail models and could become less attractive to consumers. This could cause e-commerce to decline, which would, in turn, hurt the business of our customers, potentially make our products less attractive and cause the amount of GMV processed through our platform, and ultimately our revenue, to decline. In addition, it is possible that one or more states or the federal government or foreign countries may seek to impose a tax collection, reporting or record-keeping obligation on companies like us that facilitate e-commerce, even though we are not an online retailer. Similar issues exist outside of the United States, where the application of value-added tax or other indirect taxes on online retailers and companies like us that facilitate e-commerce is uncertain and evolving.

We may be subject to additional obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability for past sales, which could harm our business.

State, local and foreign jurisdictions have differing rules and regulations governing sales, use, value added and other taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, the applicability of such taxes to our platform in various jurisdictions is unclear. Further, these ~~jurisdictions’~~jurisdictions' rules regarding tax nexus are complex and vary significantly. In 2018, the U.S. Supreme Court reversed its prior decision that prohibited states from requiring online retailers without a physical presence to collect and remit sales tax. In its decision, the Supreme Court upheld a South Dakota statute that imposed a sales tax collection obligation on remote sellers with sales exceeding specified thresholds. In addition, it is possible that one or more states or the federal government or foreign countries may seek to impose a tax collection, reporting or record-keeping obligation on companies like us that facilitate e-commerce, even though we are not an online retailer. This is a rapidly evolving area and we cannot predict what legislative or enforcement action might be taken by the states of the federal government or foreign countries.

As a result, we could face the possibility of tax assessments and audits, and our liability for these taxes and associated penalties could exceed our original estimates. As further described in this Annual Report on Form 10-K, we have entered into voluntary disclosure agreements, or VDAs, with certain jurisdictions and recorded a $2.5 million one-time charge in general and administrative expense for the year ended December 31, 2017. If the VDAsWe do not ~~resolve all potential unpaid~~currently have any ongoing sales tax obligations, then it is possible that the actual aggregate unpaid sales tax liability may be higher than our estimate. Through December 31, 2017, we have paid approximately $1.5 million under terms of the VDAs that we have completed with certain jurisdictions. During the third quarter of 2017, one jurisdiction rejected our VDA application and will conduct a sales tax audit. We believe the scope of the audit will be limited and similar in principle to the VDA program. Anyaudits, though any successful assertion that we should be collecting additional sales, use, value added or other taxes in those jurisdictions where we have not historically done so and do not accrue for such taxes could result in substantial tax liabilities and related penalties for past sales. The imposition of a tax collection, reporting or record-keeping obligation in a jurisdiction where we do not currently have such an obligation could also create additional administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on our competitors and decrease our future sales, ~~discourage customers from purchasing our application or otherwise harm~~which could have a material adverse impact on our business and operating results.

~~The recently passed comprehensive~~Our effective tax ~~reform bill~~rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.

We are subject to taxation in numerous countries, states and local tax jurisdictions. As a result, our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each jurisdiction. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including passage of new federal income tax laws, changes in the mix of our profitability from jurisdiction to jurisdiction, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws. Any of these factors could ~~adversely affect~~cause us to experience an effective tax rate significantly different from previous periods or our ~~business~~current expectations and may result in tax obligations in excess of amounts accrued in our financial ~~condition.~~statements.

~~On December 22,~~For example, in 2017, ~~new legislation~~the Tax Cuts and Jobs Act, or the Tax Act, went into effect ~~that~~ significantly ~~revises~~revising the Internal Revenue Code of 1986, as amended. The ~~newly enacted federal income tax law,~~Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstanding the reduction in the corporate income tax rate, the overall impact of the ~~new federal tax law~~Tax Act is uncertain and our business and financial condition could be adversely affected. In addition, it is uncertain if and to what extent various states will conform to the ~~newly enacted federal tax law.~~Tax Act. The impact of this tax reform on holders of our common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.

Our ~~effective~~ability to use our net operating loss carryforwards and certain other tax ~~rate~~attributes may ~~fluctuate,~~be limited.

As of December 31, 2020, we had $110.3 million of U.S. federal and ~~we may incur obligations~~$136.5 million of state net operating loss carryforwards available to reduce future taxable income, which will begin to expire in 2026 for federal and 2021 for state tax ~~jurisdictions in excess of accrued amounts.~~

~~We are subject to taxation in numerous countries, states and local tax jurisdictions. As a result, our effective tax rate~~purposes. It is ~~derived from a combination of applicable tax rates in the various places~~possible that we ~~operate. In preparing our financial statements, we estimate the amount of tax that~~ will ~~become payable~~not generate taxable income in ~~each of such places. Nevertheless, our effective tax rate may be different than experienced~~time to use these net operating loss carryforwards before their expiration or at all. Under legislative changes made in ~~the past due to numerous factors, including passage of the newly enacted~~December 2017, as modified by federal ~~income~~ tax law changes enacted in March 2020, U.S. federal net operating losses incurred in tax years beginning after December 31, 2017 and in future years may be carried forward indefinitely, but, for tax years beginning after December 31, 2020, the deductibility of such net operating losses is limited. In addition, the federal and state net operating loss carryforwards and certain tax credits may be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, or the Code, respectively, and similar provisions of state law. Under those sections of the Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as

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research tax credits, to offset its post-change income or tax may be limited. In general, an "ownership change" will occur if there is a cumulative change in our ownership by "5-percent shareholders" that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. We have completed a Section 382 review and have determined that, excluding a de minimis amount of acquired net operating losses, none of the operating losses will expire solely due to Section 382 limitation(s). However, we may experience ownership changes in the ~~mix~~future as a result of future shifts in our stock ownership, some of which may be outside of our ~~profitability from jurisdiction~~control. If an ownership change occurs and our ability to ~~jurisdiction, the results of examinations~~use our net operating loss carryforwards and ~~audits~~tax credits is materially limited, it would harm our business by effectively increasing our future tax obligations.

We recorded a valuation allowance against all of our U.S. federal and state deferred tax ~~filings, our inability~~assets as of December 31, 2020. We intend to ~~secure~~continue maintaining a full valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or ~~sustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws. Any~~some portion of these ~~factors could cause us to experience an effective tax rate significantly different from previous periods or~~allowances. However, given our current ~~expectations~~earnings and anticipated future earnings, we believe that there is a reasonable possibility that in the foreseeable future, sufficient positive evidence may become available to reach a conclusion that a portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax ~~obligations~~assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are still unknown and will be based on a number of factors, including the level of profitability that we are able to actually achieve.

We have incurred significant net losses since inception, and even though we achieved net income for the most recent and prior year periods, it is possible that our operating expenses will increase in ~~excess~~the future and impact our level of ~~amounts accrued~~profitability.

We had an accumulated deficit of $157.7 million as of December 31, 2020 due to net losses incurred in periods prior to 2019. Although we achieved net income of $18.8 million and $3.5 million for the years ended December 31, 2020 and 2019, respectively, it is possible that our ~~financial statements.~~

~~Evolving domestic and international data privacy regulations may restrict~~operating expenses will increase in the future, which could negatively impact our ~~ability, and that~~prospects for maintaining profitability in future periods. If we are not able to maintain profitability, the value of our company and our common stock could decline significantly.

If the e-commerce market does not grow, or grows more slowly than we expect, particularly on the channels that our solutions support, demand for our online channel management solutions could be adversely affected.

For our existing customers and potential customers to ~~solicit, collect, process, disclose~~be willing to subscribe to our solutions, the internet must continue to be accepted and widely used for selling merchandise. As e-commerce continues to evolve, regulation by federal, state or foreign agencies may increase. Any regulation imposing greater fees for internet use ~~personal~~or restricting information ~~or may increase~~exchanged over the ~~costs~~internet could result in a decline in the use of ~~doing so,~~the internet, which could harm our business.

Federal, state and foreign governments and supervising authorities have enacted, and may in the future enact, laws and regulations concerning the solicitation, collection, processing, disclosure or useIn addition, if consumer utilization of consumers’ personal information. Evolving regulations regarding personal data and personal information, in the European Union and elsewhere, especially relating to classification of IP addresses, machine identification, location data and other information, may limit or inhibit our ~~ability to operate or expand our business.~~

Such laws and regulations require or may require us or our customers to implement privacy and security policies, permit consumers to access, correct or delete personal information stored or maintained by us or our customers, inform individuals of security incidents that affect their personal information, and, in some cases, obtain consent to use personal information for specified purposes. Other proposed legislation could, if enacted, impose additional requirements and prohibit the use of specific technologies,primary e-commerce channels, such as ~~those that track individuals’ activities on web pages~~Amazon, eBay and Google, does not grow or ~~record when individuals click on a link contained~~

in an email message. Such laws and regulations could restrict our customers’ ability to collect and use web browsing data and personal information, which may reduce our customers’ demand for our solutions.

In April 2016, the European Union adopted a new General Data Protection Regulation (the "GDPR") to unify data protection within the European Union under a single law, which may result in significantly greater compliance burdens and costs for companies with customers and operations in the European Union. The GDPR creates a range of new compliance obligations and increases financial penalties for non-compliance, and extends the scope of the European Union data protection law to all companies processing data of European Union residents, regardless of the company’s location. The GDPR will go into effect on May 25, 2018. We have not yet assessed the full effect of the GDPR on our business and operations.

Changing industry standards and industry self-regulation regarding the collection, use and disclosure of data may have similar effects. Existing and future privacy and data protection laws and increasing sensitivity of consumers to unauthorized disclosures and use of personal information may also negatively affect the public’s perception of our customers’ sales practices. If our solutions are perceived to cause, or are otherwise unfavorably associated with, invasions of privacy, whether or not illegal,grows more slowly than we or our customers may be subject to public criticism. Public concerns regarding data collection, privacy and security may also cause some consumers to be less likely to visit our customers’ websites or otherwise interact with our customers, which could limit theexpect, demand for our solutions would be adversely affected, our revenue would be negatively impacted and ~~inhibit the~~our ability to pursue our growth ~~of our business.~~

~~Any failure on our part to comply with applicable privacy~~strategy and data protection laws, regulations, policies and standards or any inability to adequately address privacy concerns associated with our solutions, even if unfounded, could subject us to liability, damage our reputation, impair our sales and harm our business. Furthermore, the costs to our customers of compliance with, and other burdens imposed by, such laws, regulations, policies and standards may limit adoption of and demand for our solutions.

~~Cybersecurity incidents could harm our business and negatively impact our financial results.~~

~~Cybersecurity incidents could endanger the confidentiality, integrity and availability of our information resources and the information we collect, use, store and disclose. These incidents may~~become profitable would be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. We believe that we take reasonable steps to protect the security, integrity and confidentiality of the information we collect, use, store, and disclose, but there is no guarantee that inadvertent or unauthorized data access will not occur despite our efforts. For example, we could be impacted by software bugs or other technical malfunctions, as well as employee error or malfeasance. Any unauthorized access or use of information, virus or similar breach or disruption to our, our customers’, or our partners’ systems and security measures could result in disrupted operations, loss of information, damage to our reputation and customer relationships, early termination of our contracts and other business losses, indemnification of our customers, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, financial penalties, litigation, regulatory investigations, and other significant liabilities, any of which could materially harm our business.compromised.

RISKS RELATED TO THE SOFTWARE-AS-A-SERVICE (SAAS) MODEL

If we fail to manage and increase the capacity of our hosted infrastructure, our customers may be unable to process transactions through our platform, which could harm our reputation and demand for our solutions.

We have experienced significant growth in the number of users, transactions and data that our hosting infrastructure supports. We seek to maintain sufficient excess capacity in our hosted infrastructure to be sufficiently flexible and scalable to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments and to handle spikes in usage. However, the provision of new hosting infrastructure requires significant lead time. If we do not accurately predict our infrastructure capacity requirements, particularly in the fourth quarter when we typically experience significant increases in the volume of customer transactions processed through our platform, our customers could experience service outages that may subject us to financial penalties or other liabilities, result in customer losses, harm our reputation and adversely affect our ability to grow our revenue.

We derive most of our revenue from annual subscription agreements, as a result of which a significant downturn in our business may not be immediately reflected in our operating results.

We derive most of our revenue from subscription agreements, which are typically one year in length. As a result, a significant portion of the revenue we report in each quarter is generated from customer agreements entered into during previous periods. Consequently, a decline in new or renewed subscriptions in any one quarter may not be reflected in our financial performance in that quarter but might negatively affect our revenue in future quarters. Accordingly, the effect of significant

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declines in sales and market acceptance of our solutions, including as a result of the COVID-19 pandemic, may not be reflected in our short-term results of operations.

Our business is substantially dependent upon the continued growth of the market for on-demand SaaS solutions. If this market does not continue to grow, demand for our solutions could decline, which in turn could cause our revenues to decline and impair our ability to become profitable.

We derive, and expect to continue to derive, substantially all of our revenue from the sale of our solutions, which are delivered under a SaaS model. As a result, widespread use and acceptance of this business model is critical to our future growth and success. Under the more traditional license model for software procurement, users of the software typically run the applications in-house on their own hardware. Because many companies are generally predisposed to maintaining control of their information technology systems and infrastructure, there may be resistance to the concept of accessing software functionality as a service provided by a third party. In addition, the market for SaaS solutions is still evolving, and existing and new market participants may introduce new types of solutions and different approaches to enable organizations to address their needs. If the market for SaaS solutions fails to grow or grows more slowly than we currently anticipate, demand for our solutions and our revenue, gross margin and other operating results could be negatively impacted.

RISKS RELATED TO OUR INTERNATIONAL OPERATIONS

Our ~~increasing~~ international operations subject us to increased challenges and risks. If we do not successfully manage the risks associated with international operations, we could experience a variety of costs and liabilities and the attention of our management could be diverted.

We have ~~expanded,~~international operations and ~~expect to~~may further expand ~~our operations~~ internationally by opening offices in new countries and regions worldwide. However, our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, taxation systems, alternative dispute systems, regulatory systems and commercial infrastructures. International expansion will require us to invest significant funds and other resources. Expanding internationally may subject us to new risks that we have not faced before or increase risks that we currently face, including risks associated with:

•recruiting and retaining employees in foreign countries;

•increased competition from local providers;

•compliance with applicable foreign laws and regulations;

•compliance with changing foreign privacy, data protection and information security laws and regulations and the risks and costs of noncompliance;

•cross-border data transfers among us, our subsidiaries, and our customers, vendors, and business partners;

•longer sales or collection cycles in some countries;

•credit risk and higher levels of payment fraud;

•compliance with anti-bribery laws, such as the Foreign Corrupt Practices Act;

•currency exchange rate fluctuations;

•tariffs, customs, trade sanctions, trade embargoes and other barriers to importing or exporting materials and products in a cost-effective and timely manner, or changes in applicable tariffs or customs rules;

•foreign exchange controls that might prevent us from repatriating cash earned outside the United States;

•economic and political instability in some countries, including terrorist attacks and civil unrest;

•less protective intellectual property laws;

•compliance with the laws of numerous foreign taxing jurisdictions in which we conduct business, potential double taxation of our international earnings and potentially adverse tax consequences due to changes in applicable U.S. and foreign tax laws;

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•increased costs to establish and maintain effective controls at foreign locations; and

•overall higher costs of doing business internationally.

If our revenue from our international operations does not exceed the expense of establishing and maintaining these operations, our business and operating results will ~~suffer.~~suffer and we may decide to make changes to our business in an effort to mitigate losses. For example, in the third quarter of 2019, as part of a strategic initiative to reduce our expenses and align our operations with evolving business needs, we discontinued our physical operations in China.

We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in full compliance with applicable laws.

Our solutions are subject to export controls, including the Commerce ~~Department’s~~Department's Export Administration Regulations and various economic and trade sanctions regulations established by the Treasury ~~Department’s~~Department's Office of Foreign Assets Controls, and exports of our solutions must be made in compliance with these laws. If we fail to comply with these U.S. export control laws and import laws, including U.S. Customs regulations, we could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, fines, which may be imposed on us and responsible employees or managers, and, in extreme cases, the incarceration of responsible employees or managers. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities.

Furthermore, the U.S. export control laws and economic sanctions laws prohibit the shipment or export of specified products and services to U.S. embargoed or sanctioned countries, governments and persons. Even though we take precautions to prevent our solutions from impermissibly being provided to U.S. sanctions targets, if our solutions and services were to impermissibly be exported to those prohibited countries despite such precautions, we could be subject to government investigations, penalties, reputational harm or other negative consequences.

Any change in export or import regulations, economic sanctions or related laws, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our solutions, or in our decreased ability to export or sell our solutions to existing or potential customers with international operations. Additionally, changes in our solutions may be required in response to changes in export and import regulations, which could lead to delays in the introduction and sale of our solutions in international markets, prevent our customers with international operations from deploying our solutions or, in some cases, prevent the export or import of our solutions to some countries, governments or persons altogether. Any decreased use of our solutions or limitation on our ability to export our solutions or sell them in international markets would hurt our revenue and compromise our ability to pursue our growth strategy.

RISKS RELATED TO INTELLECTUAL PROPERTY

We operate in an industry with extensive intellectual property litigation. Claims of infringement against us may hurt our business.

Our success depends, in part, upon non-infringement of intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures or adverse consequences. The internet-related software field generally is characterized by extensive intellectual property litigation. Although our industry is rapidly evolving, many companies that own, or claim to own, intellectual property have aggressively asserted their rights. From time to time, we have been subject to legal proceedings and claims relating to the intellectual property rights of others, and we expect that third parties will continue to assert intellectual property claims against us, particularly as we expand the complexity and scope of our business. In addition, most of our subscription agreements require us to indemnify our customers and business partners against claims that our solutions infringe the intellectual property rights of third parties.

Future litigation may be necessary to defend ourselves or our customers and business partners by determining the scope, enforceability, and validity of third-party proprietary rights or to establish our proprietary rights. Some of our competitors have substantially greater resources than we do and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend and could:

•hurt our reputation;

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•adversely affect our relationships with our current or future customers;

•cause delays or stoppages in providing our services;

•divert ~~management’s~~management's attention and resources;

•require technology changes to our software that would cause us to incur substantial cost;

•subject us to significant liabilities; and

•require us to cease some or all of our activities.

In addition to liability for monetary damages against us, which may be tripled and may include ~~attorneys’~~attorneys' fees under certain statutes, or, in some circumstances, damages against our customers, we may be prohibited from developing, commercializing or continuing to provide some or all of our software solutions unless we obtain licenses from, and pay royalties to, the holders of the patents or other intellectual property rights, or license or develop substitute solutions, which may not be available on commercially favorable terms, or at all.

Our failure to protect our intellectual property rights could diminish the value of our services, weaken our competitive position and reduce our revenue.

We regard the protection of our intellectual property, which includes trade secrets, copyrights, trademarks, domain names and patent applications, as critical to our success. We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others.

We have received patent protection for some of our technologies and are seeking patent protection for other of our technologies but there can be no assurance that any patents will ultimately be issued. We have registered domain names, trademarks and service marks in the United States and in jurisdictions outside the United States and are also pursuing additional ~~registrations both in and outside the United States.~~registrations. Effective trade secret, copyright, trademark, domain name and patent protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. We may be required to protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or which we may not pursue in every location. We may, over time, increase our investment in protecting our intellectual property through additional patent filings that could be expensive and time-consuming.

We have licensed in the past, and expect to license in the future, some of our proprietary rights, such as trademarks or copyrighted material, to third parties. These licensees may take actions that diminish the value of our proprietary rights or harm our reputation.

Monitoring unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. Further, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Our competitors may also independently develop similar technology. In addition, the laws of many countries, such as China and India, do not protect our proprietary rights to as great an extent as do the laws of European countries and the United States. Further, the laws in the United States and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property. Our failure to meaningfully protect our intellectual property could result in competitors offering services that incorporate our most technologically advanced features, which could seriously reduce demand for our software solutions. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination that is unfavorable to us. In addition, litigation is inherently uncertain, and thus we may not be able to stop our competitors from infringing upon our intellectual property rights.

Our use of "open source" software could negatively affect our ability to sell our solutions and subject us to possible litigation.

A portion of our technology platform and our solutions incorporates so-called "open source" software, and we may incorporate additional open source software in the future. Open source software is generally licensed by its authors or other third parties under open source licenses. If we fail to comply with these licenses, we may be subject to specified conditions,

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including requirements that we offer our solutions that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of the particular open source license. If an author or other third party that distributes open source software we use were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, including being enjoined from the sale of our solutions that contained the open source software and required to comply with the foregoing conditions, which could disrupt the sale of the affected solutions. In

addition, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition and require us to devote additional research and development resources to change our products.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

An active trading market for our common stock may not continue to develop or be sustained.

Although our common stock is listed on the New York Stock Exchange, or NYSE, we cannot assure you that an active trading market for our shares will continue to develop or be sustained. If an active market for our common stock does not continue to develop or is not sustained, it may be difficult for investors in our common stock to sell shares without depressing the market price for the shares or to sell the shares at all.

The trading price of the shares of our common stock has been and is likely to continue to be volatile.

Our stock price has been volatile. The stock market in general and the market for technology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including:

•actual or anticipated variations in our operating results;

•changes in financial estimates by us or by any securities analysts who might cover our stock;

•conditions or trends in our industry;

•stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the software industry;

•announcements by us or our competitors of new product or service offerings, significant acquisitions, strategic partnerships or divestitures;

•announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;

•capital commitments;

~~investors’~~•investors' general perception of our company and our business;

•recruitment or departure of key personnel; and

•sales of our common stock, including sales by our directors and officers or specific stockholders.

~~In addition, in the past, stockholders have initiated~~Stockholders may initiate class action lawsuits against ~~technology companies~~us following periods of volatility in the market prices of ~~these companies’~~our common stock. InFor example, in 2015, two purported class action complaints were filed against us, alleging violations of the federal securities ~~laws against a group of defendants including us and certain of our executive officers.~~laws. The ~~consolidated case was~~cases were later dismissed ~~in April 2016, and the dismissal was affirmed~~ by ~~the U.S. Court of Appeals for the Fourth Circuit in November 2016.~~federal courts without any liability to us. New litigation, if instituted against us, could cause us to incur substantial costs and divert ~~management’s~~management's attention and resources from our business.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that equity research analysts publish about us and our ~~business. As a newly public company,~~business, and we have ~~only~~ limited research coverage by equity research analysts. Equity research analysts may elect not to initiate or continue to provide research coverage of our common stock, and such lack of research coverage may adversely affect the market price of our common stock. Even if we have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our stock could decline if one or

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more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline.

The issuance of additional stock in connection with financings, acquisitions, investments, our stock incentive plans or otherwise will dilute all other stockholders.

Our certificate of incorporation authorizes us to issue up to 100,000,000 shares of common stock and up to 5,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Subject to compliance with applicable rules and regulations, we may issue our shares of common stock or securities convertible into our common stock from time to time in connection with a financing, acquisition, investment, our stock incentive plans or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the trading price of our common stock to decline.

Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management and hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.

There are provisions in our certificate of incorporation and bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control was considered favorable by some or all of our stockholders. For example, our board of directors has the authority to issue up to 5,000,000 shares of preferred stock. The board of directors can fix the price, rights, preferences, privileges and restrictions of the preferred stock without any further vote or action by our stockholders. The issuance of shares of preferred stock may delay or prevent a change in control transaction. As a result, the market price of our common stock and the voting and other rights of our stockholders may be adversely affected. An issuance of shares of preferred stock may result in the loss of voting control to other stockholders.

Our charter documents also contain other provisions that could have an anti-takeover effect, including:

•only one of our three classes of directors is elected each year;

•stockholders are not entitled to remove directors other than by a 66 2/3% vote and only for cause;

•stockholders are not permitted to take actions by written consent;

•stockholders cannot call a special meeting of stockholders; and

•stockholders must give advance notice to nominate directors or submit proposals for consideration at stockholder meetings.

In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which regulates corporate acquisitions by prohibiting Delaware corporations from engaging in specified business combinations with particular stockholders of those companies. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

~~We are an "emerging growth company" and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.~~

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We expect to remain an emerging growth company until December 31, 2018.

Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

We are subject to the reporting requirements of the ~~Securities~~ Exchange Act, ~~of 1934,~~ the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the rules and regulations of the NYSE. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal ~~controls~~control over financial reporting and perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting. This requires that we incur substantial professional fees and internal costs to ~~expand our~~maintain appropriate and necessary accounting and finance functions and that we expend significant management efforts.

We may discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements, and we may in the future discover additional weaknesses that require improvement. In addition, our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control ~~system’s~~system's objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide

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absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by the NYSE, the SEC or other regulatory authorities.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future and our stock may not appreciate in value.

We have not declared or paid cash dividends on our common stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any existing or future debt agreements may preclude us from paying dividends. There is no guarantee that shares of our common stock will appreciate in value or that the price at which our stockholders have purchased their shares will be able to be maintained.

We ~~incur significant costs and demands upon management as a result of being a public company.~~

As a public company listed in the United States, we incur significant additional legal, accounting and other costs, which we expect to increase, particularly after we cease to be an "emerging growth company" under the JOBS Act. These additional costs could negatively affect our financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and stock exchanges, may increase legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.

We may need additional capital in the future to meet our financial obligations and to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to meet our financial obligations and grow our business.

While we anticipate that our existing cash, together with our cash flow from operations, will be sufficient to fund our operations for at least the next 12twelve months, we may need to raise additional capital to fund operations in the future or to meet various objectives, including developing future technologies and services, increasing working capital, acquiring businesses and responding to competitive pressures. If we seek to raise additional capital, it may not be available on favorable terms or may not be available at all. Lack of sufficient capital resources could significantly limit our ability to manage our business and to take advantage of business and strategic opportunities. Any additional capital raised through the sale of equity or debt securities

with an equity component would dilute our stock ownership. If adequate additional funds are not available, we may be required to delay, reduce the scope of or eliminate material parts of our business strategy, including potential additional acquisitions or development of new technologies.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal offices occupy approximately ~~130,000~~110,000 square feet of leased office space in Morrisville, North Carolina pursuant to a lease agreement that expires in October 2022.

We also maintain sales, service, support and research and development offices in various domestic and international locations. Please refer to our website www.channeladvisor.com for a complete list of our domestic and international office locations.

We believe that our current facilities are suitable and adequate to meet our current needs. We ~~intend to~~may add new facilities or expand existing facilities as we add employees, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.

ITEM 3. LEGAL PROCEEDINGS

The information required by this item is set forth under Note 6, "Commitments and Contingencies," in our consolidated financial statements included in Item 8 of this Annual Report, and is incorporated herein by reference.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR ~~REGISTRANT’S~~REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION FOR COMMON STOCK

Our common stock is listed on the NYSE under the symbol "ECOM." ~~The following table sets forth, for the periods indicated, the high and low reported sales prices of our common stock as reported on the NYSE:~~

2017 2016
High Low High Low
First quarter $ 15.00
$ 10.35
$ 14.30
$ 10.28
Second quarter $ 12.20
$ 10.90
$ 15.00
$ 11.03
Third quarter $ 11.75
$ 9.85
$ 15.91
$ 11.61
Fourth quarter $ 12.50
$ 8.40
$ 15.85
$ 10.50

STOCK PERFORMANCE GRAPH

The graph set forth below compares the cumulative total stockholder return on an initial investment of $100 in our common stock ~~between May 23, 2013, the date on which our common stock began trading on the NYSE, and~~from December 31, ~~2017,~~2015 through December 31, 2020, with the comparative cumulative total return of such amount on (i) the Dow Jones Industrial Average Total Return and (ii) the ~~NASDAQ~~Nasdaq Computer Index over the same period. We have not paid any cash dividends and, therefore, the cumulative total return calculation for us is based solely upon our stock price appreciation or depreciation and does not include any reinvestment of cash dividends. ~~The graph assumes our closing sales price on May 23, 2013 of $18.44 per share as the initial value of our common stock.~~

The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.

The information presented above in the stock performance graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C, except to the extent that we subsequently specifically request that

such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act ~~of 1933, as amended,~~ or a filing under the ~~Securities~~ Exchange ~~Act of 1934, as amended.~~

~~DIVIDEND POLICY~~

We have never declared or paid any dividends on our common stock. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future.Act.

STOCKHOLDERS

As of February 1, ~~2018,~~2021, there were 7760 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in

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street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

RECENT SALES OF UNREGISTERED SECURITIES

None.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PARTIES

None.

ITEM 6. SELECTED FINANCIAL DATA

~~The following selected consolidated financial data as~~Not applicable.

Table of and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 is derived from our audited consolidated financial statements. Our historical results are not necessarily indicative of the results to be expected in the future. The selected consolidated financial data should be read together with Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in conjunction with the consolidated financial statements, related notes, and other financial information included elsewhere in this Annual Report.

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Year Ended December 31,
2017 2016 2015 2014 2013
(in thousands, except share and per share data)
Consolidated statements of operations data:
Revenue $ 122,535
$ 113,200
$ 100,585
$ 84,901
$ 68,004
Gross profit 96,585
85,580
74,751
60,681
49,916
Loss from operations (16,578 ) (13,837 ) (21,193 ) (34,008 ) (14,365 )
Other income (expense) 305
172
57
(465 ) (6,060 )
Net loss $ (16,557 ) $ (8,007 ) $ (20,951 ) $ (34,514 ) $ (20,628 )
Net loss per share—basic and diluted $ (0.63 ) $ (0.31 ) $ (0.84 ) $ (1.40 ) $ (1.51 )
Weighted average shares of common stock outstanding used in computing net loss per share—basic and diluted 26,366,748
25,604,893
25,062,610
24,619,714
13,695,804
Other financial data:
Adjusted EBITDA (1) $ 4,569
$ 7,436
$ 1,443
$ (19,532 ) $ (8,532 )

~~____________________________~~

~~(1)~~

We define adjusted EBITDA as net loss plus or (minus): income tax expense (benefit), interest expense, net, depreciation and amortization, stock-based compensation, one-time charge for VDAs related to sales taxes in 2017, ~~headquarters relocation and related costs~~ in 2015, one-time severance and related costs in 2015, acquisition-related costs in 2014 and loss on extinguishment of debt in 2013. Please see "—Adjusted EBITDA" below for more information and for a reconciliation of adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States, or GAAP.

As of December 31,
2017 2016 2015 2014 2013
(in thousands)
Consolidated balance sheets data:
Cash and cash equivalents $ 53,422
$ 65,420
$ 60,474
$ 68,366
$ 104,406
Accounts receivable, net 27,452
19,445
18,949
14,619
13,951
Total assets 140,511
139,158
130,956
127,047
148,786
Total liabilities 58,600
52,161
47,032
33,399
31,006
Additional paid-in capital 262,805
252,158
240,360
228,370
218,330
Total stockholders’ equity 81,911
86,997
83,924
93,648
117,780

~~ADJUSTED EBITDA~~

To provide investors with additional information regarding our financial results, we have provided within this Annual Report adjusted EBITDA, a non-GAAP financial measure. We have provided a reconciliation below of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.

We have included adjusted EBITDA in this Annual Report because it is a key measure used by our management and board of directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of some expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business. Accordingly, we believe that adjusted EBITDA provides useful information to investors in understanding and evaluating our operating results.

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 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 income (loss) and our other GAAP results. The following table presents a reconciliation of net loss to adjusted EBITDA for each of the periods indicated:

Year Ended December 31,
2017 2016 2015 2014 2013
(in thousands)
Net loss $ (16,557 ) $ (8,007 ) $ (20,951 ) $ (34,514 ) $ (20,628 )
Adjustments:

Interest (income) expense, net (222 ) 1
184
209
2,960
Income tax expense (benefit) 284
(5,658 ) (185 ) 41
203
Depreciation and amortization expense 6,578
7,838
8,793
6,264
3,722
Total adjustments, net 6,640
2,181
8,792
6,514
6,885
EBITDA (9,917 ) (5,826 ) (12,159 ) (28,000 ) (13,743 )
Stock-based compensation expense 11,947
13,262
11,837
7,981
2,099
One-time charge for VDAs related to sales taxes 2,539
—
—
—
—
Headquarters relocation and related costs —
—
1,109
—
—
One-time severance and related costs —
—
656
—
—
Acquisition-related costs —
—
—
487
—
Loss on extinguishment of debt —
—
—
—
3,112
Adjusted EBITDA $ 4,569
$ 7,436
$ 1,443
$ (19,532 ) $ (8,532 )

ITEM 7. ~~MANAGEMENT’S~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review Item 1A. "Risk Factors" and "Special Note Regarding Forward-Looking Statements" in this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

EXECUTIVE OVERVIEW

FINANCIAL ~~RESULTS~~HIGHLIGHTS

•Total revenue of ~~$122.5~~$145.1 million for the year ended December 31, ~~2017~~2020 increased ~~8.2% year over~~11.6% from the prior year;

~~Average~~•Revenue was comprised of 73.9% subscription revenue ~~per customer of $42,693~~and 26.1% variable revenue for the year ended December 31, ~~2017 increased 8.5%~~2020 compared ~~to $39,339~~with 79.6% subscription revenue and 20.4% variable revenue for the prior year;

•Revenue ~~was comprised~~from our brands customers represented 33.1% of ~~76.3% and 23.7% fixed and variable subscription fees, respectively,~~total revenue for the year ended December 31, ~~2017 compared to fixed and variable subscription fees of 76.0% and 24.0%, respectively,~~2020, up from 29.6% for the ~~year ended December 31, 2016;~~prior year;

•Revenue derived from customers located outside of the United States as a percentage of total revenue was ~~21.9%~~25.2% for the year ended December 31, ~~2017~~2020 compared ~~to 21.7%~~with 25.3% for the prior year;

•Gross margin of ~~78.8%~~79.1% for the year ended December 31, ~~2017~~2020 improved by ~~320~~140 basis points compared towith gross margin of ~~75.6%~~77.7% for the prior year;

•Operating margin of ~~(13.5)%~~ ~~for the year ended~~ ~~December 31, 2017~~ ~~declined~~ ~~130~~ ~~basis points compared to operating margin of~~ ~~(12.2)%~~ ~~for the prior year;~~

~~Net loss~~13.2% for the year ended December 31, ~~2017 was $16.6 million~~2020 improved 1,030 basis points compared ~~to net loss~~with operating margin of ~~$8.0 million~~2.9% for the prior year;

~~Adjusted EBITDA of $4.6~~•Net income was $18.8 million for the year ended December 31, ~~2017 decreased 38.6%~~2020 compared ~~to adjusted EBITDA of $7.4~~with $3.5 million for the prior year;

~~Cash and cash equivalents was $53.4 million at December 31, 2017 compared to $65.4 million at December 31, 2016; and~~

~~Operating cash flow was $(3.0)~~•Adjusted EBITDA, a non-GAAP measure, of $36.3 million for the year ended December 31, ~~2017~~2020 increased 80.0% compared ~~to $11.6~~with adjusted EBITDA of $20.2 million for the prior year;

•Cash and cash equivalents were $71.5 million at December 31, 2020 compared with $51.8 million at December 31, 2019;

•Operating cash flow was $34.3 million for the year ended December 31, 2020 compared with $13.0 million for the prior year; and

•Free cash flow, a non-GAAP measure, was $29.6 million for the year ended December 31, 2020 compared with $9.3 million for the prior year.

EFFECTS OF COVID-19 ON OUR BUSINESS

In late February 2020, in response to the rapidly-evolving COVID-19 pandemic, we activated our business continuity program led by our business continuity team, to help us manage the situation. In early March, we implemented a COVID-19 work-from-home policy for our various global offices. The transition to a COVID-19 work-from-home model went smoothly because our employees already had the equipment necessary to do their jobs remotely (including laptops and video conferencing systems), our back-office systems were already cloud-based, and because our interactions with customers, prospects, and business partners do not require in-person interaction. Accordingly, our business has not been dependent on our physical office locations nor on travel. We have conducted surveys of our employees and the vast majority have responded that they felt as (or more) productive working remotely and that they had what they needed to do their jobs. We believe we will be able to continue to operate effectively under this model for the foreseeable future.

COVID-19 has affected e-commerce in different ways. In general, the closing of many physical retail stores and the stay-at-home orders issued by many jurisdictions have driven a substantial shift in commerce to online channels like Amazon and Walmart. Beginning in March, we saw a significant increase in gross merchandise value, or GMV, processed through our platform, which benefited our variable revenue. At the same time, in March and early in the second quarter of 2020, sellers of certain categories of products, like apparel, were impacted by reduced demand while concurrently dealing with store closures and, in some cases, disruptions to supply chains or fulfillment operations. We proactively adjusted contract and/or payment

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terms for some customers who were facing financial or operational distress in an effort to help them get through this period and to maintain long-term client relationships.

COVID-19 presents our business with both opportunities and risks. Our business has been positively affected by a substantial increase in e-commerce volumes, which drove an increase in GMV and variable revenue compared to the prior years. How long, and to what extent, this level of higher GMV can continue is very difficult to forecast. We believe that the heightened GMV levels we have seen are likely to dissipate somewhat over time as retail stores reopen and stay-at-home orders ease, but we also believe it is possible that some level of increased e-commerce may become permanent as customers become more regular online shoppers.

Lastly, we cannot ignore that tens of millions of people around the world have lost their jobs due to COVID-19 and that the global economy has experienced, and may continue to experience, economic distress. Governments around the world, including the U.S. Federal government and European Union, have enacted historic fiscal and monetary stimulus programs in an effort to mitigate the economic impact of COVID-19, and we believe these programs have helped support consumer spending. Whether and when, and to what extent, future stimulus programs are enacted is difficult to predict. Therefore, the risk of continued global economic distress remains high and may impact consumer demand and, hence, e-commerce volumes. How long this economic climate lasts, and whether or not the impact on consumer demand is more than offset by the shift to online shopping that we have seen since March 2020 is not knowable at this point.

For all of these reasons, it has remained difficult to forecast our revenue and profitability for future periods, especially as continued outbreaks of COVID-19 could disrupt our operations and/or those of our customers. However, we believe we currently have sufficient liquidity and that our business model, which is substantially based on subscription revenues, positions us to continue to manage through the challenges presented by COVID-19.

TRENDS IN OUR BUSINESS

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

•Growth in Online Shopping. Consumers continue to move more of their ~~retail~~ spending from offline to ~~online retail.~~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.

•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 ~~expansion may result in additional research~~includes support for advertising, advanced algorithmic repricing, machine learning-based demand forecasting, improving our analytics capabilities, most recently with our acquisition of Blueboard, a private limited company organized under the laws of France, or BlueBoard, fulfillment features and ~~development investment.~~

user experience.

•Growth in Mobile Usage. We believe the shift toward mobile commerce will increasingly favor aggregators such as Amazon, eBay, Google and ~~Google Shopping,~~Walmart, all of which are focal points of our platform. ~~The~~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. ~~The~~We believe that the growth in mobile commerce may result in increased revenue for us.

~~Shift to Larger Customers.~~ ~~We believe that the growth in online shopping increasingly favors larger enterprises. This move impacts our business both in longer sales cycles as well as increased average revenue per customer.~~

•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. ~~We believe our 2017 acquisition of a fulfillment platform will further enhance our fulfillment offering and strategy.~~

•Focus on Employees. ~~None of our success would be possible without our team.~~ We strive to provide ~~our employees~~ competitive compensation and benefits programs to help ~~drive~~attract and retain employees who are focused on facilitating the success of our customers. We ~~increased headcount by 5.7% from December 31, 2016 to December 31, 2017~~implemented a COVID-19 global work-from-home policy beginning in March 2020 to help ~~drive revenue growth~~protect our employees and support our ~~overall operations.~~communities' efforts

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~~Shifts in Foreign Currency.~~ ~~Our operations in~~to slow the ~~United Kingdom were impacted by~~transmission of COVID-19. This transition went smoothly, as our workforce is globally distributed and employees have the ~~4.5% decline in the average exchange rate of the British Pound Sterling against the U.S. Dollar~~equipment they need to work from home, including global video communications systems. We are not substantially dependent on our physical office locations or travel for our business operations. In response to recent external events, we formed a Diversity, Equity and Inclusion (DE&I) task force tasked with five key DE&I objectives for the ~~year ended December 31, 2017 as compared~~company: driving awareness, accelerating opportunity, improving access, advocacy, and accountability. We are proud of our long history of inclusion and our merit-based culture, but also believe there is more work to ~~the prior year. The decline~~do to promote DE&I internally and externally. We conduct periodic surveys to assess employee engagement and our surveys reflect a high level of ~~the British Pound Sterling against the U.S. Dollar resulted in a $0.7 million decrease in revenue for the year ended December 31, 2017 as compared to the year ended December 31, 2016.~~

employee engagement.

•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’~~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 ~~subscription~~ fees.

Since the second quarter of 2020, we have seen an increase in GMV processed through our platform, which does not follow the typical seasonal variations in our business, and resulted in higher than normal variable revenue throughout most of 2020. Refer to "Revenue" below for additional information.

OPPORTUNITIES AND RISKS

•Brands.As the e-commerce landscape evolves to increasingly favor brands, 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 force, modified our sales compensation plans and allocated resources focused on growing our customer base of brands. These investments have also contributed to expanding the relationships we already have with our current brands customers.

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

•Strategic Partnerships. Our business development team's mission is to expand our sales and ~~we will need to effectively manage our growth, especially related to our international expansion.~~

~~Retailers and Branded Manufacturers~~. ~~As consumer preferences potentially shift from smaller retailers, we need~~market opportunities through strategic partner relationships. We plan to continue to ~~add large retailers~~invest in initiatives to expand our strategic partnership base to further enhance our offerings for customers and ~~branded manufacturers as profitable customers. These customers generally pay a lower percentage~~to help support our indirect sales channel efforts. The goal of ~~GMV as fees~~these strategic partnerships is to ~~us based on~~further improve the ~~relatively higher volume~~value of ~~their GMV processed through~~ our platform. To help drive our future growth, we have made significant investments in our sales force and allocated resources focused on growing our customer base of large retailers and branded manufacturers. We continue to focus our efforts on increasing valueplatform for our customers ~~to support higher rates.~~

and, when possible, provide us opportunities for incremental revenue streams.

•Increasing Complexity ~~and Fragmentation~~ of E-commerce. Although e-commerce continues to expand as ~~retailers~~brands and ~~branded manufacturers~~retailers continue to increase their online sales, it is also becoming more complex ~~and fragmented~~ due to the hundreds of channels available to ~~retailers~~brands and ~~branded manufacturers~~retailers and the rapid pace of change and innovation across those channels. In order to gain ~~consumers’~~consumers' attention in a more crowded and competitive online marketplace, ~~many retailers and~~ an increasing number of ~~branded manufacturers~~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 and branded manufacturers, and as~~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. ~~As of December 31, 2017, we supported 89 marketplaces, up from over 70 at December 31, 2016.~~

•Global Growth in E-commerce. We believe the growth in e-commerce globally presents an opportunity for ~~retailers~~brands and ~~branded manufacturers~~retailers to engage in international sales. However, country-specific marketplaces are often ~~the~~a market share ~~leaders~~leader in their regions, as is the case for ~~Alibaba~~Zalando in ~~Asia.~~Europe, for example. In order to help our customers capitalize on this potential market opportunity, and to address our ~~customers’~~customers' needs with respect to cross-border trade, we intend to continue to invest in our international ~~operations, specifically in the Asia Pacific region.~~operations. Doing business overseas involves substantial challenges, including management attention and resources needed to adapt to multiple languages, cultures, laws and commercial infrastructure, as further described in this report under the caption "Risks Related to our International Operations."

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. We cannot, however, assure you that we will be successful in addressing and managing the many challenges and risks that we face.

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~~KEY FINANCIAL AND OPERATING METRICS~~

RESULTS OF OPERATIONS

The average revenue generated by our customers is a primary determinant of our revenue. We calculate this metric by dividing our revenue for a particular period by the average monthly number of customers during the period, which is calculated by taking the sum of the number of customers at the end of each month in the period and dividing by the number of months in the period. We typically calculate average revenue per customer in absolute dollars on a rolling twelve-month basis, but we may also calculate percentage changes in average revenue per customer on a quarterly basis in order to help us evaluate our period-over-period performance. For purposes of this metric and the number of customers metric described below, we include all customers who subscribe to at least one of our solutions, excluding the approximately 50 net new customers acquired from our 2017 acquisition of HubLogix Commerce Corp., or HubLogix (renamed ChannelAdvisor Fulfillment, Inc.), and customers subscribing only to certain legacy product offerings that are no longer part of our strategic focus.

The number of customers decreased slightly in 2017. We continue our focus on obtaining large retailer and branded manufacturer customers, which may represent a smaller number of customers, but a potentially larger source of predictable or sustaining recurring revenue.

Adjusted EBITDA represents our earnings before interest expense, income tax expense (benefit) and depreciation and amortization, adjusted to eliminate stock-based compensation expense, which is a non-cash item, a one-time charge of $2.5 million in 2017 for VDAs related to sales taxes, headquarters relocation and related costs in 2015 and one-time severance and related costs in 2015 (refer to Note 6 to our consolidated financial statements included elsewhere in this Annual Report for additional information regarding the one-time charge for VDAs related to sales taxes in 2017). Accordingly, 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. Please refer to Item 6. "Selected Financial Data—Adjusted EBITDA" in this Annual Report for a discussion of the limitations of adjusted EBITDA and a reconciliation of adjusted EBITDA to net loss, the most comparable GAAP measurement.

~~RESULTS OF OPERATIONS~~

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


	Year Ended December 31,									Period-to-Period Change											Year Ended December 31,						Period-to-Period Change
	2017			2016			2015			2017 to 2016					2016 to 2015						2020		2019		2018		2020 to 2019				2019 to 2018
(dollars in thousands)																				(dollars in thousands)
Revenue	$	122,535		$	113,200		$	100,585		$	9,335		8.2	%	$	12,615		12.5	%	Revenue	$	145,072	$	129,959	$	131,218	$	15,113	11.6	%	$	(1,259)	(1.0)	%
Cost of revenue	25,950			27,620			25,834			(1,670		)	(6.0	)	1,786			6.9		Cost of revenue	30,354		29,008		29,501		1,346		4.6		(493)		(1.7)
Gross profit	96,585			85,580			74,751			11,005			12.9		10,829			14.5		Gross profit	114,718		100,951		101,717		13,767		13.6		(766)		(0.8)
Operating expenses:																				Operating expenses:
Sales and marketing	63,495			56,602			53,770			6,893			12.2		2,832			5.3		Sales and marketing	52,905		52,813		60,080		92		0.2		(7,267)		(12.1)
Research and development	21,868			17,736			16,566			4,132			23.3		1,170			7.1		Research and development	18,990		19,200		22,359		(210)		(1.1)		(3,159)		(14.1)
General and administrative	27,800			25,079			25,608			2,721			10.8		(529		)	(2.1	)	General and administrative	23,739		25,136		26,784		(1,397)		(5.6)		(1,648)		(6.2)
Total operating expenses	113,163			99,417			95,944			13,746			13.8		3,473			3.6		Total operating expenses	95,634		97,149		109,223		(1,515)		(1.6)		(12,074)		(11.1)
Loss from operations	(16,578		)	(13,837		)	(21,193		)	(2,741		)	19.8		7,356			(34.7	)
Income (loss) from operations																				Income (loss) from operations	19,084		3,802		(7,506)		15,282				11,308
Other income (expense):																				Other income (expense):
Interest income (expense), net	222			(1		)	(184		)	223			*		183			(99.5	)	Interest income (expense), net	175		754		510		(579)		(76.8)		244		47.8
Other income (expense), net	83			173			241			(90		)	(52.0	)	(68		)	(28.2	)	Other income (expense), net	9		(385)		9		394		*		(394)		*
Total other income (expense)	305			172			57			133			77.3		115			201.8		Total other income (expense)	184		369		519		(185)		(50.1)		(150)		(28.9)
Loss before income taxes	(16,273		)	(13,665		)	(21,136		)	(2,608		)	19.1		7,471			(35.3	)
Income tax expense (benefit)	284			(5,658		)	(185		)	5,942			(105.0	)	(5,473		)	*
Net loss	$	(16,557	)	$	(8,007	)	$	(20,951	)	$	(8,550	)	106.8		$	12,944		(61.8	)
Income (loss) before income taxes																				Income (loss) before income taxes	19,268		4,171		(6,987)		15,097				11,158
Income tax expense																				Income tax expense	443		689		614		(246)		(35.7)		75		12.2
Net income (loss)																				Net income (loss)	$	18,825	$	3,482	$	(7,601)	$	15,343			$	11,083

* Not meaningful.


	Year Ended December 31,
	2020		2019		2018
	(as a percentage of revenue)


















Revenue	100.0	%	100.0	%	100.0	%
Cost of revenue	20.9		22.3		22.5
Gross profit	79.1		77.7		77.5
Operating expenses:
Sales and marketing	36.5		40.6		45.8
Research and development	13.1		14.8		17.0
General and administrative	16.4		19.3		20.4
Total operating expenses	65.9		74.8		83.2
Income (loss) from operations	13.2		2.9		(5.7)
Other income (expense):
Interest income (expense), net	0.1		0.6		0.4
Other income (expense), net	—		(0.3)		—
Total other income (expense)	0.1		0.3		0.4
Income (loss) before income taxes	13.3		3.2		(5.3)
Income tax expense	0.3		0.5		0.5
Net income (loss)	13.0		2.7		(5.8)

Year Ended December 31,
2017
2016
2015

(as a percentage of revenue)

Revenue 100.0 % 100.0 % 100.0 %
Cost of revenue 21.2
24.4
25.7
Gross profit 78.8
75.6
74.3
Operating expenses:

Sales and marketing 51.8
50.0
53.5
Research and development 17.8
15.7
16.5
General and administrative 22.7
22.2
25.5
Total operating expenses 92.4
87.8
95.4
Loss from operations (13.5 ) (12.2 ) (21.1 )
Other income (expense):

Interest expense, net 0.2
—
(0.2 )
Other income (expense), net 0.1
0.2
0.2
Total other income (expense) 0.2
0.2
0.1
Loss before income taxes (13.3 ) (12.1 ) (21.0 )
Income tax expense (benefit) 0.2
(5.0 ) (0.2 )
Net loss (13.5 ) (7.1 ) (20.8 )

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~~Reclassification~~ADJUSTED EBITDA

To provide investors with additional information regarding our financial results, we have provided within this Annual Report adjusted EBITDA, a non-GAAP financial measure, which is defined as net income (loss) plus (or minus): income tax expense (benefit); interest (income) expense, net; depreciation and amortization; and stock-based compensation. For some periods, we have also excluded non-recurring costs, such as severance and related costs or transaction costs in connection with acquisitions. We have provided a reconciliation below of adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, for the years ended December 31, 2020, 2019 and 2018.

We have included adjusted EBITDA in this Annual Report because it is a key measure used by our management and board of directors to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In ~~2015~~particular, the exclusion of some income and ~~prior,~~expenses in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our business. Accordingly, we ~~presented~~believe that adjusted EBITDA provides useful information to investors in understanding and evaluating our operating results.

•although depreciation and amortization ~~expense~~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 ~~separate component, both~~comparative measure.

Because of ~~cost~~these and other limitations, you should consider adjusted EBITDA together with other GAAP-based financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP results.


	Year Ended December 31,
	2020		2019		2018
	(in thousands)
Net income (loss)	$	18,825	$	3,482	$	(7,601)
Adjustments:
Interest (income) expense, net	(175)		(754)		(510)
Income tax expense	443		689		614
Depreciation and amortization expense	6,513		6,336		6,094
Total adjustments, net	6,781		6,271		6,198
EBITDA	25,606		9,753		(1,403)
Stock-based compensation expense	10,200		8,976		10,598
Transaction costs in connection with acquisition	488		—		—
Non-recurring severance and related costs	—		1,429		587
Adjusted EBITDA	$	36,294	$	20,158	$	9,782

Table of ~~revenue and of operating expenses, in our consolidated statements of operations. Beginning with the first quarter of 2016, we include~~Contents

depreciation and amortization expense in cost of revenue and the applicable line items of operating expenses. Since the first quarter of 2016, we have also disclosed the depreciation and amortization expense amounts included in each financial statement line item in the notes to our consolidated financial statements. In addition, we revised the classification of certain operating expenses to better align the income statement line items with how operations are managed. The financial results for the year ended December 31, 2015 shown in this management’s discussion and analysis reflect the reclassification of relevant items to conform to the new presentation, and the specific reclassifications are shown in Note 2 to our audited consolidated financial statements included elsewhere in this report. All reclassifications had no effect on our reported gross profit or net loss for the year ended December 31, 2015.

REVENUE

We derive the majority of our revenue from subscription fees paid to us by our customers for access to and usage of our SaaS solutions for a specified contract term, which is ~~usually~~typically one year. A ~~portion of the~~customer typically pays a recurring subscription fee ~~is typically fixed and~~ based on a specified minimum amount of GMV or advertising spend that athe 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 ~~the subscription~~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~~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 ~~portion of the subscription~~fee is based is fixed and does not vary depending on the amount of the excess. ~~We also receive implementation fees, which may include fees for providing launch assistance and training.~~

Because our customer contracts generally contain both ~~fixed~~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 ~~fixed~~ 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 ~~fixed,~~ 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 ~~fixed~~ subscription fees and implementation fees ratably over the contract period ~~once four conditions have been satisfied:~~

~~The contract has been signed by both parties;~~

~~The~~beginning on the date the customer has access to ~~our platform~~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 ~~transactions can be processed;~~

~~The fees are fixed or determinable; and~~

~~Collection is reasonably assured.~~•Recognize revenue as we satisfy each performance obligation.

~~The primary products we offer are:~~

~~Marketplaces. Our Marketplaces module connects customers to third-party marketplaces such as Amazon, eBay, Jet.com, La Redoute, Newegg, Sears, Tesco, TradeMe, Walmart and Zalando.~~Table of Contents

~~Digital Marketing~~. Our Digital Marketing module connects customers to search engines and comparison shopping websites, such as Google, Microsoft's Bing and Shopzilla, and social channels, such as Facebook, Instagram and Pinterest.

Our customers are categorized as follows:

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

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

•Other. Other is primarily comprised of strategic partnerships.

(1) Certain prior period amounts have been reclassified to conform to current period

presentation. These reclassifications had no impact on the reported total revenue is derived from our Where to Buy and Product Intelligence solutions, as well as from channel integration agreements. Our Where to Buy solution allows branded manufacturers to provide their web visitors or customers of their digital marketing initiatives with up-to-date information about for

the authorized resellers that carry their products and the availability of those products. Our Product Intelligence solution provides branded manufacturers with insights about online assortment, product coverage gaps, pricing trends, and adherence by their retailers to content guidelines. We also enter into integration agreements with certain marketplaces or channels under which the partner engages us to integrate our platform with their marketplace or channel.period.

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

WeIn general, we invoice and recognize revenue from the variable portion of ~~subscription~~ fees in the period in which the related GMV or advertising spend is ~~processed, assuming that the four conditions specified above have been met.~~processed.

Comparison of ~~2017~~2020 to ~~2016~~2019

Revenue increased by ~~8.2%~~11.6%, or ~~$9.3~~$15.1 million, to ~~$122.5~~$145.1 million for the year ended December 31, ~~2017~~2020 compared with $130.0 million for the prior year. The change was primarily due to an $11.3 million increase in variable revenue, primarily driven by sustained and broad-based growth in GMV processed on our platform as e-commerce spending remained elevated for most of the ~~average~~year, consistent with broader e-commerce trends as the COVID-19 pandemic caused a shift in consumer buying behavior. Subscription revenue ~~per customer.~~

~~On a trailing twelve-month basis, average~~increased $3.8 million compared to the prior year, driven by strong net bookings, particularly from brands customers. Revenue from our brands customers increased 24.8%, or $9.5 million, compared to the prior year, driven by an increase in new customers, expansions with existing customers and improved customer retention, as well as an increase in transaction volume and variable revenue ~~per customer increased 8.5%, to $42,693 for~~during the period as mentioned above. For the year ended December 31, ~~2017 as~~2020, brands customers represented approximately 33% of our total revenue compared to ~~$39,339~~approximately 30% for the ~~year ended December 31, 2016. The increase in the average revenue per customer was primarily driven by revenue growth of 8.3%~~prior year. Revenue from our ~~marketplaces solution. The~~strategic partnerships also increased $2.2 million compared to the prior year, driven primarily by growth ~~of our marketplaces solution was largely attributable to an overall increase~~ in ~~transaction volume and, to~~GMV as mentioned above as well as a ~~lesser extent, to modest overall increases in the percentage fees assessed~~continued focus on the fixed and variable portions of GMV under our contractual arrangements with some of our customers during the period. Because we generally enter into annual contracts with our customers, we may renegotiate either or both of the fixed and variable components of the pricing structure of a customer’s contract each year. In addition, the increase in average revenue per customer was due in part to our established customers who have increased their revenue over time on our platform. In general, as customers mature they generate a higher amount of GMV from which we derive revenue and in some cases they may subscribe to additional modules on our platform, thereby increasing our subscription revenue.

strategic partnerships.

Comparison of ~~2016~~2019 to ~~2015~~2018

Revenue ~~increased~~decreased by ~~12.5%~~1.0%, or ~~$12.6~~$1.3 million, to ~~$113.2~~$130.0 million for the year ended December 31, ~~2016~~2019 compared with $131.2 million for the prior year. The change was primarily due to ana $4.5 million decline in variable revenue, primarily due to a shift in our revenue mix from variable to subscription resulting from more customers moving to higher subscription fee tiers and some of our strategic partner agreements evolving to incorporate more subscription fees instead of purely variable revenues. This decrease was partially offset by a $3.3 million increase in subscription revenue primarily attributable to growth in our international operations, as well as continued revenue growth from our brands customers. For the ~~average~~year ended December 31, 2019, brands customers represented approximately 30% of our total revenue ~~per customer.~~

~~On a trailing twelve-month basis, average revenue per customer increased 14.0%~~compared to ~~$39,339~~approximately 25% for the year ended December 31, ~~2016 as compared to $34,513 for the year ended December 31, 2015. The increase in the average revenue per customer was primarily driven by revenue growth~~2018.

Table of ~~16.3% from our marketplaces solution from 2015 to 2016.~~Contents

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’~~customers' payments to us.

Comparison of ~~2017~~2020 to ~~2016~~2019

Cost of revenue ~~decreased~~increased by ~~6.0%~~4.6%, or ~~$1.7~~$1.3 million, to ~~$26.0~~$30.4 million for the year ended December 31, ~~2017,~~2020 compared with $29.0 million for the prior year. The change ~~being~~was comprised primarily of ~~decreases~~compensation and employee-related costs due to an increase in quarterly bonuses earned from strong net bookings performance, as well as an increase in headcount, with the prior year being impacted by our implementation of a plan to reduce expenses and align our operations with evolving business needs in the third quarter of 2019, or the 2019 Actions.

Comparison of 2019 to 2018

Cost of revenue decreased by 1.7%, or $0.5 million, to $29.0 million for the year ended December 31, 2019 compared with $29.5 million for the prior year. The change was comprised primarily of (decreases) increases of:

•$~~1.1~~(0.6) million in compensation and employee-related costs due to reductions in headcount, primarily as a result of the 2019 Actions; partially offset by

•$0.2 million in non-recurring severance and related costs in connection with the 2019 Actions.

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 2020 to 2019

Sales and marketing expense increased by 0.2%, or $0.1 million, to $52.9 million for the year ended December 31, 2020 compared with $52.8 million for the prior year. The change was comprised primarily of increases (decreases) of:

•$2.5 million in compensation and employee-related costs, including stock-based compensation, due to an increase in amortization of deferred contract costs, as well as an increase in headcount, with the prior year being impacted by the 2019 Actions; partially offset by

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•$(1.9) million in our promotional event programs and travel, primarily due to travel and gathering restrictions as a response to the COVID-19 pandemic; and

•$(0.5) million in allocated expenses, driven by certain office closures, including our operations in China.

Comparison of 2019 to 2018

Sales and marketing expense decreased by 12.1%, or $7.3 million, to $52.8 million for the year ended December 31, 2019 compared with $60.1 million for the prior year. The change was comprised primarily of (decreases) increases of:

•$(5.5) million in compensation and employee-related costs, including stock-based compensation expense, due to ~~changes~~reductions in ~~headcount;~~headcount, primarily as a result of the 2019 Actions; and

•$~~0.5~~(1.6) million in ~~co-location~~promotional event programs, marketing, advertising and ~~infrastructure maintenance~~travel, primarily due to reductions in costs ~~primarily~~ associated with ~~closing a data center and retiring servers used to support legacy product offerings that are no longer part of~~ our ~~strategic focus.~~annual e-commerce conference; partially offset by

~~Comparison of 2016 to 2015~~

~~Cost of revenue increased by 6.9%, or $1.8 million, to $27.6 million for the year ended December 31, 2016, with the change being comprised of increases (decreases) of:~~

~~$1.7 million in compensation and employee-related costs mainly due to additional headcount to support our customers;~~

•$0.4 million in ~~contractor~~non-recurring severance and related costs ~~primarily to support our international services team; and~~

~~$0.2 million~~ in ~~rent and facilities costs due to the relocation of our corporate headquarters in the fourth quarter of 2015; partially offset by~~

~~$0.4 million reduction in hosting, co-location and infrastructure maintenance costs primarily due to our migration to a public cloud infrastructure.~~

~~OPERATING EXPENSES~~

~~SALES AND MARKETING EXPENSE~~

~~Sales and marketing expense consists primarily of:~~

~~Salaries and personnel-related costs for our sales and marketing and customer support employees, including benefits, bonuses, stock-based compensation and commissions;~~

~~Marketing, advertising and promotional event programs; and~~

~~Corporate communications.~~

~~Comparison of 2017 to 2016~~

~~Sales and marketing expense increased by 12.2%, or $6.9 million, to $63.5 million for the year ended December 31, 2017~~connection with the ~~change being comprised primarily of increases of:~~2019 Actions.

~~$4.5 million in compensation and employee-related costs, mainly due to additional headcount in our sales organization; and~~

~~$2.1 million in marketing and advertising expenses, promotional event programs and travel costs to support expanding marketing activities to continue to grow our business.~~

~~Comparison of 2016 to 2015~~

~~Sales and marketing expense increased by 5.3%, or $2.8 million, to $56.6 million for the year ended December 31, 2016 with the change being comprised of increases of:~~

~~$2.5 million in compensation and employee-related costs, mainly due to additional headcount in our sales organization, stock-based compensation and the payment of increased sales commissions; and~~

~~$0.3 million in recruiting fees, namely for expanding our international sales personnel, and consulting fees.~~

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

•Consulting expenses.

Comparison of ~~2017~~2020 to ~~2016~~2019

Research and development expense ~~increased~~decreased by ~~23.3%~~1.1%, or ~~$4.1~~$0.2 million, to ~~$21.9~~$19.0 million for the year ended December 31, ~~2017,~~2020 compared with $19.2 million for the prior year. The change ~~being~~was comprised primarily of (decreases) increases of:

•$~~3.4~~(0.4) million in compensation and employee-related costs due to an increase in capitalized employee-related costs attributable to software development to support the enhancement of our product offerings; and

•$(0.3) million in allocated expenses, driven by certain office closures, including our operations in China; partially offset by

•$0.6 million in compensation and employee-related costs due to an increase in quarterly bonuses earned from strong net bookings performance, as well as an increase in headcount driven by our acquisition of BlueBoard in July 2020.

Comparison of 2019 to 2018

Research and development expense decreased by 14.1%, or $3.2 million, to $19.2 million for the year ended December 31, 2019 compared with $22.4 million for the prior year. The change was comprised primarily of (decreases) of:

•$(2.0) million in compensation and employee-related costs, mainly due to ~~additional headcount from our acquisition of HubLogix and the expansion of our R&D footprint with the opening of our engineering office~~an increase in ~~Madrid, Spain~~capitalized employee-related costs attributable to software development to support ~~our growth and~~ the enhancement of our product offerings; and

•$~~0.5 million in software, hosting and travel costs to further support our growth and investment in research and development.~~

~~Comparison of 2016 to 2015~~

~~Research and development expense increased by 7.1%, or $1.2 million, to $17.7 million for the year ended December 31, 2016, with the change driven primarily by an increase of $1.0~~(0.7) million in compensation and employee-related costs ~~mainly~~ due to ~~additional headcount~~shifting certain research and ~~stock-based compensation.~~development to lower cost office locations, which did not impact our product innovation.

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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.~~companies; and

•Transaction related costs.

Comparison of ~~2017~~2020 to ~~2016~~2019

General and administrative expense ~~increased~~decreased by ~~10.8%~~5.6%, or ~~$2.7~~$1.4 million, to ~~$27.8~~$23.7 million for the year ended December 31, ~~2017,~~2020 compared with $25.1 million for the prior year. The change ~~being~~was comprised primarily of (decreases) increases of:

~~a $2.5~~•$(1.1) million ~~one-time charge~~ in ~~connection with entering into VDAs related~~allocated expenses driven by certain office closures, including our operations in China;

•$(0.6) million in bad debt expense due to ~~sales taxes with certain jurisdictions;~~improved cash collections; and

~~increases of $0.2~~•$(0.4) million in compensation and employee-related costs ~~mainly~~ due to ~~additional headcount.~~reductions in headcount, primarily as a result of the 2019 Actions; partially offset by

•$0.8 million in transaction and subsequent general and administrative costs associated with our July 2020 acquisition of BlueBoard.

Comparison of ~~2016~~2019 to ~~2015~~2018

General and administrative expense decreased by ~~2.1%~~6.2%, or ~~$0.5~~$1.6 million, to $25.1 million for the year ended December 31, ~~2016~~2019 compared with $26.8 million for the prior year. The change ~~being~~was comprised primarily of (decreases) increases of:

•$~~(1.1) million due to headquarters relocation and related expenses charged in the fourth quarter of 2015;~~

$(0.7) million due to one-time severance and related costs charged in the second quarter of 2015 to support our strategic effort to strengthen margins in our business and identify operating efficiencies;

~~$(0.7) million in bad debt expense driven by lower bad debt write-offs and reductions to our allowance for doubtful accounts based on collections activities; and~~

~~$(0.6) million due to indirect taxes charged in the fourth quarter of 2015; partially offset by~~

~~$2.7~~(1.2) million in compensation and employee-related costs, ~~mainly~~including stock-based compensation expense, due to ~~additional~~reductions in headcount, ~~incentive bonuses~~primarily as a result of the 2019 Actions and ~~stock-based compensation, all to support growth~~changes in management; and

•$(0.8) million in professional fees in connection with the assessment by our ~~business.~~independent auditors of the effectiveness of our internal control over financial reporting, which was required for the first time as part of our Annual Report on Form 10-K for fiscal 2018, and our implementation of the new revenue recognition standard in 2018; partially offset by

•$0.7 million in severance and related costs in connection with the 2019 Actions and changes in management.

GROSS AND OPERATING MARGINS

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Comparison of ~~2017~~2020 to ~~2016~~2019

Gross marginimproved by ~~320~~140 basis points to ~~78.8%~~79.1% during the year ended December 31, ~~2017~~2020 compared with 77.7% for the prior year as a result of the 11.6% increase in revenue ~~and decrease~~which exceeded the 4.6% increase in cost of revenue noted above. ~~Our improved gross margin is a result of our continuing strategic efforts to achieve increasing scale in our business operations.~~

Operating margin ~~declined~~improved by ~~130~~1,030 basis points to ~~(13.5)%~~13.2% during the year ended December 31, ~~2017 due to~~2020 compared with 2.9% for the prior year. Our improved operating margin was a ~~13.8% growth~~result of the 11.6% increase in revenue and 1.6% decrease in operating expenses ~~which includes~~driven by the ~~$2.5 million one-time charge for VDAs~~2019 Actions, cost savings attributable to the COVID-19 pandemic, primarily related to ~~sales taxes described above~~travel and ~~an increase in compensation~~promotional event program cancellations, and ~~employee-related costs driven by additional headcount as we invest in resources~~our continuing strategic efforts to ~~support the growth of~~scale our ~~business. These operating expenses exceeded the 8.2% year-over-year increase in our revenue and 6.0% decrease in our cost of revenue.~~business operations while managing costs.

Comparison of ~~2016~~2019 to ~~2015~~2018

Gross margin improved by ~~130~~20 basis points to ~~75.6%~~77.7% during the year ended December 31, ~~2016 as~~2019 compared with 77.5% for the prior year, primarily due to a ~~result of the increase in revenue, only partially offset by a slower rate of growth~~decrease in cost of revenue resulting from our 2019 Actions, which exceeded the decrease in revenue, noted above. ~~Our improved gross margin is a result of our strategic efforts to achieve increasing scale in our business operations.~~

Operating margin improved by ~~890~~860 basis points to ~~(12.2)%~~2.9% during the year ended December 31, ~~2016~~2019 compared with (5.7)% for the prior year due to ~~our 12.5% increase~~decreases in ~~revenue, which exceeded the increases in our~~operating expenses and cost of revenue of 11.1% and 1.7%, respectively. Our improved operating ~~expenses of 6.9% and 3.6%, respectively, as~~margin was a result of athe 2019 Actions and our continuing strategic ~~effort~~efforts to ~~strengthen margins in~~scale our ~~business.~~business operations while managing costs.

TOTAL OTHER INCOME (EXPENSE)

Other income (expense) consists primarily of:

•Interest received on our cash and cash equivalents;

•Interest expense on our ~~capital~~finance leases;

•Other gains and losses; and

•The net effect of foreign currency revaluation gains and losses.

Comparison of ~~2017~~2020 to ~~2016~~2019

Other income (expense) ~~increased~~decreased by ~~$0.1 million to $0.3 million for the year ended December 31, 2017 primarily due to interest income on our cash and cash equivalents.~~

~~Comparison of 2016 to 2015~~

~~Other income (expense) increased by $0.1~~$0.2 million to $0.2 million for the year ended December 31, ~~2016~~2020 compared with $0.4 million for the prior year. The change was primarily due to a $0.6 million decrease in interest income driven by lower interest earned on our cash and cash equivalents due to overall market conditions, partially offset by a $0.4 million loss recorded in the prior year due to the closing of our China operations.

Comparison of 2019 to 2018

Other income (expense) decreased by $0.2 million to $0.4 million for the year ended December 31, 2019 compared with $0.5 million for the prior year. The change was primarily due to a $0.4 million loss recorded due the closing of our China operations, partially offset by a $0.2 million increase in interest income driven by higher interest earned on our cash and cash equivalents.

INCOME TAX EXPENSE ~~(BENEFIT)~~

Our provision for income taxes consists of provisions for federal, state, and foreign income taxes. We operate in an international environment with operations in various locations outside of the United States. Accordingly, our combined income tax rate is a composite rate reflecting our operating results in various locations and the applicable rates.

Comparison of ~~2017~~2020 to ~~2016~~2019

Income tax expense was ~~$0.3~~$0.4 million for the year ended December 31, ~~2017~~2020 compared with $0.7 million for the prior year. The change was primarily due to the recognition of tax benefits in 2020, driven by an increase in the UK corporate income tax rate resulting in an increase to the UK deferred tax assets, the acquisition of BlueBoard and the ability to recognize the tax benefit on BlueBoard's 2020 operating losses and the completion of ~~$5.7~~an R&D credit project in Spain. This was partially offset by an increase in current U.S. state tax expense due to being in a taxable income position in the current year, as well as California suspending the ability to carry forward net operating losses (NOLs) from previous years in 2020.

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Comparison of 2019 to 2018

Income tax expense was $0.7 million for the year ended December 31, ~~2016.~~2019 compared with $0.6 million for the prior year. The change was primarily due to ~~the release of~~ a ~~valuation allowance~~nonrecurring deferred tax benefit recorded in the ~~fourth quarter of 2016 on deferred tax assets~~United States in several of our foreign jurisdictions totaling $5.3 million. The release of the valuation allowance was the result of our evaluation of the likelihood of potential tax benefits related to our foreign subsidiaries' most recent three years of operating results and projections of future profitability, which primarily resulted from a change in our global transfer pricing methodology.

~~Comparison of 2016 to 2015~~

~~Income tax benefit was $5.7 million for~~ the year ended December 31, ~~2016 compared to an income tax benefit of $0.2 million for the year ended December 31, 2015 primarily due~~2018 attributable to the ~~release~~enactment of ~~a valuation allowance in~~ the ~~fourth quarter of 2016 on deferred tax assets in several of our foreign jurisdictions totaling $5.3 million noted above.~~Tax Act.

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 12 months. During this period, we expect our capital expenditure requirements to approximate a range of ~~$2.0~~$4.0 million to ~~$4.0~~$5.0 million, which will primarily consist of computer hardware and purchased software.

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 we entered into in August 2020 and which is described in more detail below.

Our principal future commitments consist of non-cancelable leases for our office space and computer equipment, totaling $10.1 million as of December 31, 2020. We believe our future cash flows from operating activities and existing cash balances are sufficient to meet these commitments.

WORKING CAPITAL

The following table summarizes our cash and cash equivalents, accounts receivable and working capital as of the end of each of the last three years:


	December 31,							December 31,
	2017		2016		2015			2020		2019		2018
	(in thousands)							(in thousands)
Cash and cash equivalents	$	53,422	$	65,420	$	60,474	Cash and cash equivalents	$	71,545	$	51,785	$	47,185
Accounts receivable, net of allowance	27,452		19,445		18,949		Accounts receivable, net of allowance	24,705		22,126		23,436
Working capital	45,862		52,137		52,413		Working capital	67,110		47,946		41,139

Our cash at December 31, ~~2017~~2020 was held for working capital purposes. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide on-demand immediate liquidity. Accordingly, our cash is invested primarily in demand deposit accounts and short-term money market accounts.

Of our total cash and cash equivalents, approximately ~~10%~~13.1% was held outside of the United States at December 31, ~~2017.~~2020. Our international operations primarily consist of selling and marketing and research and development functions supported by our U.S. operations, and we are dependent on our U.S. operations for ~~our~~ international working capital needs. If our cash and cash equivalents held outside of the United States were ever needed for our operations inside the United States, we could be required to accrue and pay ~~U.S.~~income and withholding taxes to repatriate these funds. We currently intend to permanently reinvest these foreign amounts outside the United States, and based on our current plans we do not ~~demonstrate a~~believe we will need to repatriate the foreign amounts to fund our U.S. operations.

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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 ~~(used in)~~ provided by operating activities, the most directly comparable GAAP measure, to free cash flow for each of the periods indicated:


											Year Ended December 31,
	Year Ended December 31,										2020		2019		2018
	2017			2016			2015				(in thousands)
	(in thousands)
Cash (used in) provided by operating activities	$	(2,996	)	$	11,571		$	(1,459	)
Cash and cash equivalents provided by operating activities										Cash and cash equivalents provided by operating activities	$	34,306	$	13,008	$	1,230
Less: Purchases of property and equipment	(2,790		)	(1,755		)	(4,062		)	Less: Purchases of property and equipment	(1,704)		(986)		(2,045)
Less: Payment of capitalized software development costs										Less: Payment of capitalized software development costs	(3,034)		(2,721)		(894)
Free cash flow	$	(5,786	)	$	9,816		$	(5,521	)	Free cash flow	$	29,568	$	9,301	$	(1,709)

Free cash flow ~~decreased~~increased by ~~$15.6~~$20.3 million to ~~$(5.8)~~$29.6 million for the year ended December 31, ~~2017~~2020 and increased ~~$15.3~~$11.0 million to ~~$9.8~~$9.3 million for the year ended December 31, ~~2016.~~2019. The ~~decrease~~increase in free cash flow for the year ended December 31, ~~2017 is~~2020 was primarily a result of ~~a $(4.9) million change~~revenue growth during the year, as well as lower operating expenses, primarily related to the 2019 Actions, cost savings in 2020 attributable to the COVID-19 pandemic, improved cash collections and changes in assets and liabilities, ~~net of acquisition, combined with our strategic investment~~which are further described below. The increase in additional headcount and territorial expansion for our sales and marketing and research and development functions to support the growth of our business. Further analysis on the increases (decreases) in the components of free cash flow ~~is provided~~for the year ended December 31, 2019 was a result of lower operating expenses, primarily related to the 2019 Actions, improved cash collections 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;

•In 2019, the amount paid in non-recurring severance and

~~In 2017, the amounts paid~~ related costs in connection with ~~entering into VDAs~~the 2019 Actions and non-recurring severance and related costs due to our reorganization of our China operations in 2018; and

•In 2018, the amount we paid to settle a sales ~~taxes.~~tax audit.

Investing activities cash flows are largely driven by:

•Acquisitions, net of cash acquired;

~~Purchases of property and equipment to support the expansion of our infrastructure and acquisitions; and~~

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

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

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Financing activities cash flows are largely driven by:

•Proceeds from the exercises of stock options;

•Payments on ~~capital~~finance lease ~~obligations;~~obligations and debt;

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

~~In 2016, acquisition-related contingent consideration.~~•Payment of line of credit financing costs.

~~2017~~2020

Operating Activities

Our cash ~~used in~~provided by operating activities consisted of a net ~~loss~~income of ~~$(16.6)~~$18.8 million adjusted for certain non-cash items totaling ~~$18.5~~$16.4 million, which consisted of stock-based compensation expense, depreciation and amortization expense, bad debt expense and other non-cash items, ~~principally the amortization~~and cash decreases of ~~a lease incentive obligation related to our corporate headquarters.~~$0.9 million from changes in assets and liabilities.

The net decrease in cash resulting from changes in assets and liabilities ~~net~~ of ~~acquisition, of $(4.9)~~$0.9 million primarily consisted of:

•a ~~$8.3~~$2.6 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;

•a $2.1 million increase in accounts receivable ~~as a result of increased billings, primarily~~ driven by strong net bookings performance and an increase in ~~average contract size as well as more semi-annual~~variable revenue during the period; and ~~annual contracts being invoiced; and~~

•a ~~$5.5~~$1.7 million increase in prepaid expenses and other assets ~~primarily related~~driven by the timing of payments to ~~certain customer arrangements for which we collect and remit monthly activity-based fees incurred for specific channels on behalf of~~ our ~~customers (we record~~vendors during the ~~amounts due from customers as a result of these arrangements as other receivables).~~period. These decreases in cash were partially offset by increases in cash due toto:

•a ~~$5.2~~$4.3 million increase in accrued expenses and accounts payable primarily due to an increase in quarterly bonuses earned and ~~accrued expenses, primarily driven by timing~~the deferral of ~~payments to our vendors~~payroll taxes associated with COVID-19 pandemic relief; and

•a ~~one-time charge in connection with our decision to enter into VDAs related to our potential unpaid sales tax obligations; and~~

a ~~$3.6~~$1.3 million increase in deferred revenue as a result of an ~~increased number of customers prepaying for subscription services invoiced on a semi-annual and annual basis.~~

increase in net bookings during the period.

Investing Activities

Our cash used in investing activities consisted of:

•$~~2.8~~8.5 million for the acquisition of BlueBoard, net of cash acquired;

•$3.0 million of capitalized software development costs; and

•$1.7 million of capital expenditures primarily related to the purchase of computer ~~equipment;~~

~~$2.2 million for the acquisition of HubLogix, net of cash acquired; and~~

~~$0.3 million of internal-use software development costs.~~equipment.

Financing Activities

Our cash used in financing activities consisted of:

•$~~2.8 million used for the repayment of capital leases;~~

~~$2.7~~3.3 million used for the payment of taxes related to the net-share settlement of restricted stock units;

•$1.8 million used for the repayment of finance leases and debt; and

•$0.2 million used for the payment of line of credit financing costs in connection with entering into our Credit Facility as described below; partially offset by

•$~~1.4~~3.8 million in cash received upon the exercise of stock options.

~~2016~~2019

Operating Activities

Our cash provided by operating activities consisted of a net loss of ~~$(8.0)~~$3.5 million adjusted for certain non-cash items totaling ~~$15.1~~$17.1 million, which consisted of stock-based compensation expense, depreciation and amortization expense, bad debt expense and other non-cash items, ~~principally the amortization~~and cash decreases of ~~a lease incentive obligation related to our new corporate headquarters.~~$7.6 million from changes in assets and liabilities.

The net ~~increase~~decrease in cash resulting from changes in assets and liabilities of ~~$4.5~~$7.6 million primarily consisted of:

•a ~~$4.7~~$3.4 million ~~increase~~decrease in deferred revenue as a result of ~~an increased number~~the timing of ~~customers prepaying~~revenue recognition for ~~subscription services invoiced on~~ managed-service contracts;

•a ~~semi-annual and annual basis; and~~

~~a $3.7~~$3.1 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 $2.3 million decrease in accounts payable and accrued expenses, ~~primarily related~~driven by the timing of payments to ~~activity-based fees incurred for specific channels on behalf of~~ our ~~customers.~~vendors during the period. These ~~increases~~decreases in cash were partially offset by ~~decreases~~increases in cash due toto:

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•a ~~$2.0~~$0.9 million ~~increase~~decrease in prepaid expenses and other assets, primarily related to ~~certain customer arrangements for which we collect and remit monthly activity-based fees incurred for specific channels on behalf~~agency of ~~our customers~~record receipts (we record the amounts due from customers as a result of these arrangements as other receivables)~~. The increase is partially offset by the receipt of cash for~~ ; and

•a ~~lease incentive related to our new corporate headquarters; and~~

~~a $1.9~~$0.4 million ~~increase~~decrease in accounts receivable as a result of increased ~~billings, primarily driven by an increase in average contract size as well as more semi-annual and annual contracts being invoiced.~~

cash collections during the period.

Investing Activities

Our cash used in investing activities consisted of:

•$~~1.8~~2.7 million of capitalized software development costs; and

•$1.0 million of capital expenditures primarily related to the purchase of computer ~~equipment; and~~

~~$0.2 million for the payment of internal-use software development costs.~~equipment.

Financing Activities

Our cash used in financing activities consisted of:

•$~~2.4~~3.4 million used for the payment of taxes related to the net-share settlement of restricted stock units; and

•$~~2.1~~2.2 million used for the repayment of ~~capital~~finance leases;

~~$0.3 million used for the payment of our acquisition-related contingent consideration;~~ partially offset by

•$~~0.9~~1.0 million in cash received upon the exercise of stock options.

CREDIT FACILITY

~~CONTRACTUAL OBLIGATIONS~~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.

Each of our existing and future material domestic subsidiaries must guarantee all of our obligations under the Credit Facility, and, in addition, our immaterial domestic subsidiaries may guarantee our obligations. As of the date of this report, we do not have any material domestic subsidiaries, but all of our obligations are guaranteed by our wholly-owned subsidiary CA Washington, LLC. Our obligations under the Credit Facility are secured by first priority liens on substantially all of our assets and those of our subsidiary CA Washington, LLC.

The credit agreement for the Credit Facility, or the Credit Agreement, contains affirmative and negative covenants, including covenants that, without consent of HSBC, limit our ability to, or to permit our subsidiaries to, (a) incur indebtedness, with exceptions permitting, among others, earnouts and other indebtedness incurred in an acquisition; (b) grant or incur liens; (c) make loans and investments, with exceptions permitting, among others, specified acquisitions of up to an aggregate amount of $30 million, subject to satisfaction of a pro forma consolidated leverage ratio; (d) enter into mergers; (e) dispose of assets; (f) pay dividends on our equity and complete distributions, redemptions and equity repurchases; (g) transact with affiliates; and (h) make capital expenditures in excess of $10 million during any fiscal year.

In addition, under the Credit Agreement, 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.

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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OFF-BALANCE SHEET ARRANGEMENTS

Our principal commitments consist of non-cancelable leases for our office space and computer equipment and purchase commitments for our co-location and other support services, as well as commitments related to our annual marketing events. The following table summarizes these contractual obligations at December 31, 2017. Future events could cause actual payments to differ from these estimates.

Payment due by period
Total
Less than 1
year
1-3 years 3-5 years
More than 5
years
(in thousands)
Operating lease obligations $ 25,511
$ 5,893
$ 9,816
$ 8,806
$ 996
Capital lease obligations 1,679
1,027
652
—
—
Purchase commitments 4,422
2,909
1,513
—
—
Total $ 31,612
$ 9,829
$ 11,981
$ 8,806
$ 996

Operating lease obligations reflected above exclude future sublease income from certain spaces that we have subleased to third parties. We anticipate receiving $0.5 million, based on the exchange rate as of December 31, 2017, and $0.2 million in annual rental payments during the terms of the sublease agreements, which are through December 2018 and August 2022, respectively.

~~Off-Balance Sheet Arrangements~~

As of December 31, ~~2017,~~2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.

CRITICAL ACCOUNTING POLICIES

Our ~~management’s~~management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these 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 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.

While our significant accounting policies are more fully described in Note 2, "Significant Accounting Policies," to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our consolidated financial statements.

Revenue Recognition and Deferred Revenue

The following discussion of our revenue recognition and deferred revenue accounting policies is based on the accounting principles that were used to prepare the audited consolidated financial statements included in this Annual Report on Form 10-K. On January 1, 2018, we adopted Accounting Standards Update ("ASU") No. 2014-09, ~~Revenue from Contracts with Customers (Topic 606)~~ ("ASU 2014-09"). This standard replaces existing revenue recognition rules with a comprehensive revenue measurement and recognition standard and expanded disclosure requirements. Refer to Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report for a discussion of ASU 2014-09 and other recently issued accounting pronouncements.

We derive the majority of our revenue from subscription fees paid to us by our customers for access to and usage of our SaaS ~~platform~~solutions for a specified contract term, which is typically one year. A ~~portion of the~~customer typically pays a recurring subscription fee ~~is typically fixed and is~~ based on a specified minimum amount of GMV or advertising spend that athe customer expects to process through our ~~platform over the contract term.~~platform. Subscription fees may also include implementation fees such as launch assistance and training fees. The remaining portion of ~~the subscription~~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~~customer's specified minimum GMV or advertising spend amount. ~~We also receive implementation fees,~~In most cases, the specified percentage of excess GMV or advertising spend on which ~~may include fees for providing launch assistance and training. We recognize revenue when there is persuasive evidence of an arrangement,~~ the ~~service has been provided to the customer, the collection of the~~variable fee is ~~reasonably assured~~based is fixed and does not vary depending on the amount of the ~~fee to be paid by the customer is fixed or determinable. Our contractual arrangements include performance, termination and cancellation provisions, but do not provide for refunds.~~excess. Customers do not have the contractual right to take possession of our software at any time.

We ~~generally~~ recognize ~~the fixed portion of~~ subscription fees and implementation fees ratably over the contract ~~term. Recognition begins when~~period beginning on the date the customer has access to the ~~Company's platform or to its solutions for branded manufacturers~~software. In general, we invoice and ~~transactions can be processed, provided all other~~recognize revenue recognition criteria has been met. For customers that elect a managed-service solution, customer transactions cannot be processed through our platform until the completion of implementation services. As such, revenue is contingent upon our completion of the implementation services and recognition commences when transactions can be processed on our platform, provided all other revenue recognition criteria have been met. At that time, we recognize a pro-rata portion of the fees earned since the inception of the arrangement. The balance of the fees is recognized ratably over the remaining contract term.

~~We recognize~~from the variable portion of ~~subscription fee revenue~~fees in the period in which the related GMV or advertising spend is ~~processed,~~processed.

Customers may elect to purchase a subscription to multiple modules, multiple modules with multiple service levels, or, for certain of our solutions, multiple brands or geographies. We evaluate such contracts to determine whether the services to be provided ~~all other revenue recognition criteria have~~are distinct and accordingly should be accounted for as separate performance obligations. If we determine 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. We estimate standalone selling price based on observable prices in past transactions for which the product offering subject to the performance obligation has been ~~met.~~sold separately.

Deferred revenue typically represents the unearned portion of ~~fixed~~ subscription ~~fees and implementation~~ fees. Deferred amounts are generally recognized within one year. Amounts that are expected to be recognized ~~in greater than~~beyond one year are recorded in other long-term liabilities.

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Accounts Receivable and ~~Allowances~~Allowance for ~~Doubtful Accounts~~Credit Losses

We extend credit to customers without requiring collateral. Accounts receivable are stated at ~~realizable value,~~amortized cost, net of an allowance for ~~doubtful~~credit losses. We record an allowance for credit losses at the time that accounts ~~that we maintain for estimated losses expected to result from~~receivable are initially recorded based on our consideration of the ~~inability~~current economic environment, expectations of ~~some customers to make payments as they become due. Our estimate is based on~~future economic conditions, our historical collection experience and a ~~review of~~loss-rate approach whereby impairment is calculated by multiplying an estimated loss rate by the ~~current status of accounts receivable. Historically, our actual collection experience has~~asset's amortized cost at the balance sheet date. We reassess the allowance at each reporting date. When it becomes apparent, based on age or customer circumstances, that such amounts will not ~~varied significantly from our estimates, due primarily~~be collected, they are charged to ~~our collection policies~~the allowance. Payments subsequently received are credited to the credit loss expense account included within general and administrative expense in the ~~financial strength of our customers. However, adverse changes in general economic conditions could affect our allowance estimates, collectability of accounts receivable, cash flows and results~~consolidated statements of operations. At December 31, ~~2017,~~2020, our allowance for ~~doubtful accounts~~credit losses was ~~2.2%~~1.7% of our gross accounts receivable. A hypothetical 1% increase or decrease in the value of our allowance for doubtful accounts receivable as of December 31, 2017 would have resulted in an increase or decrease of $0.3 million to our pre-tax net loss for the year ended December 31, 2017.

Goodwill

Goodwill arises from business combinations and is measured as the excess of the cost of the business acquired over the sum of the acquisition-date fair value of tangible and identifiable intangible assets acquired, less any liabilities assumed. ~~In connection with the acquisition of HubLogix in May 2017, we recorded a $1.9 million increase in goodwill.~~

We test goodwill for impairment annually on October 1 or more frequently if events or changes in business circumstances indicate the asset might be impaired. During 2016, we changed the date of our annual impairment testing from December 31 to October 1. Refer to Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report for information regarding our voluntary change in the date of our annual goodwill impairment testing.

To perform our impairment testing, we first assess qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount. The qualitative factors we consider include, but are not limited to, macroeconomic conditions, industry and market conditions, company-specific events, changes in circumstances and after-tax cash flows. If the qualitative factors indicate that the fair value of the reporting unit is greater than the carrying value of the net assets assigned to the reporting unit, then we do not consider the assigned goodwill to be impaired. We are only required to perform the two-step impairment test if the qualitative factors indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. We may elect to perform the two-step impairment test without considering such qualitative factors. As of December 31, ~~2017~~2020 and ~~2016,~~2019, we concluded there was no impairment of goodwill.

In connection with our acquisition of BlueBoard in July 2020, we recorded a $7.5 million increase in goodwill. Refer to Note 4, "Business Combination, Goodwill and Intangible Assets," to our consolidated financial statements appearing elsewhere in this Annual Report for additional information regarding the purchase price allocation and recording of goodwill in connection with this acquisition.

Stock-Based Compensation

Stock-based compensation awards, which include stock options, ~~and~~time-based restricted stock units, or RSUs, and performance-based vesting restricted stock units, or PSUs, are measured at fair value at each grant date. We recognize 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. Options ~~generally vest either quarterly or annually over a four-year period.~~and RSUs generally vest annually over a ~~four year~~four-year period. PSUs are eligible for vesting only if we achieve pre-defined targets set by the Compensation Committee for our combined year-over-year revenue growth and adjusted earnings before interest, tax, depreciation and amortization, or EBITDA, margin over a multi-year measurement period (a two-year measurement period for fiscal 2020 grants), subject to continued service with us. Refer to Note 10, "Equity Incentive Plans and Stock-Based Compensation," to our consolidated financial statements appearing elsewhere in this Annual Report for additional information regarding PSU grants and vesting.

The determination of the fair value of stock options is affected by a number of variables, including estimates of the fair value of our common stock, expected stock price volatility, risk-free interest rate and the expected life of the award. We value stock options using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options that are fully transferable and have no vesting restrictions. Black-Scholes and other option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Refer to Note 810, "Equity Incentive Plans and Stock-Based Compensation," to our consolidated financial statements appearing elsewhere in this Annual Report for the assumptions used for estimating the fair value of stock options granted to employees.

We have assumed no dividend yield because we do not expect to pay dividends in the future, which is consistent with our history of not paying dividends. The risk-free interest rate assumption is based on observed interest rates for constant maturity U.S. Treasury securities consistent with the expected life of our employee stock options. The expected life represents the period of time the stock options are expected to be outstanding and is based on the simplified method. Under the simplified method, the expected life of an option is presumed to be the midpoint between the vesting date and the end of the contractual term. We used the simplified method due to the lack of sufficient historical exercise data to provide a reasonable basis upon

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which to otherwise estimate the expected life of the stock options. Expected volatility is estimated based on the historical volatility of our stock. ~~Prior to the fourth quarter of 2017, expected volatility was estimated based on volatilities of publicly traded stock for comparable companies over the estimated expected life of the stock options.~~

The fair value of our common stock, for purposes of determining the grant date fair value of option, RSU and ~~RSU~~PSU awards, has been determined by using the closing market price per share of our common stock as quoted on the New York Stock Exchange on the date of grant.

Our estimate of pre-vesting forfeitures, or forfeiture rate, is based on our historical experience and is reviewed on an annual basis, at a minimum. The estimated forfeiture rate is applied to the total estimated fair value of the awards to compute the stock-based compensation expense, net of pre-vesting forfeitures, to be recognized in our consolidated statements of operations. A hypothetical increase of 1% in our forfeiture rate assumption would have resulted in a $0.5 million decrease in stock-based compensation expense for the year ended December 31, 2017. A hypothetical decrease of 1% in our forfeiture rate assumption would have resulted in a $0.5 million increase in stock-based compensation expense for the year ended December 31, 2017.

Stock-based compensation expense is expected to increase in 2018 compared to 2017 as a result of our existing unrecognized stock-based compensation and as we issue additional stock-based awards to continue to attract and retain employees.

Income Taxes

We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. We measure deferred tax

assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect of a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the enactment date. We reduce the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not that we will not realize some or all of the deferred tax asset.

We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more likely than not that the position will be sustained upon examination. We recognize potential accrued interest and penalties associated with unrecognized tax positions within our global operations in income tax expense.

Significant judgment is required in determining our worldwide income tax provision. In the ordinary course of a global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Our judgments, assumptions and estimates relative to the provision for income taxes take into account current tax laws, our interpretation of current tax laws, and possible outcomes of future audits conducted by foreign and domestic tax authorities. Although we believe that our estimates are reasonable, the final tax outcome of matters could be different from that which is reflected in our historical income tax provision and accruals. Such differences, if identified in future periods, could have a material effect on the amounts recorded in our consolidated financial statements.

The Tax Cuts and Jobs Act of 2017 ("Tax Act"), which went into effect on December 22, 2017, significantly revises the Internal Revenue Code of 1986, as amended ("IRC"). The Tax Act contains, among other things, significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time and modifying or repealing many business deductions and credits. The Tax Act is complex and it will take time to assess the implications thoroughly. Please refer to Note 7 to our consolidated financial statements appearing elsewhere in this Annual Report for additional information regarding the recently enacted Tax Act and its expected impact on our financial results as of and for the year ended December 31, 2017.

Recent Accounting Pronouncements

Refer to Note 2, "Significant Accounting Policies," to our consolidated financial statements appearing elsewhere in this Annual Report for a full description of recent accounting pronouncements.

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ITEM 7A. 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 interest rates and foreign currency exchange 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 the risks described below.

FOREIGN CURRENCY EXCHANGE RISK

With international operations, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve, and if our exposure increases, adverse movement in foreign currency exchange rates could have a material adverse impact on our financial results. Our primary exposures are related to non-U.S. dollar denominated revenue and operating expenses transacted in British ~~Pounds Sterling, Euros,~~pounds sterling, euros and Australian ~~dollars, Brazilian reals, Chinese yuan renminbi and Hong Kong~~ dollars. As a result, we would experience increased revenue and operating expenses at our non-U.S. operations if there were a decline in the value of the U.S. dollar relative to these foreign currencies. Conversely, we would experience decreased revenue and operating expenses at our non-U.S. operations if there were an increase in the value of the U.S. dollar relative to these foreign currencies. However, based on the size of our international operations and the amount of our revenue and expenses denominated in foreign currencies, a 10% change in foreign exchange rates would not have had a material impact on our results of operations for the year ended December 31, ~~2017.~~

2020.

INTEREST RATE RISK

We are only marginally exposed to interest rate risk through our portfolio of cash and cash equivalents. Interest rates that may affect these items in the future will depend on market conditions and may differ from the rates we have experienced in the past. 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.

INFLATION RISK

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



~~Report~~Reports of Independent Registered Public Accounting Firm			5156
Consolidated Balance Sheets as of December 31, ~~2017~~2020 and ~~2016~~2019			5259
Consolidated Statements of Operations for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			5360
Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			5461
Consolidated Statements of Changes in ~~Stockholders’~~Stockholders' Equity for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			5562
Consolidated Statements of Cash Flows for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018			5663
Notes to Consolidated Financial Statements			5764

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Report of Independent Registered Public Accounting Firm

To the ~~Shareholders~~Stockholders and the Board of Directors of ChannelAdvisor Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ChannelAdvisor Corporation and Subsidiaries (the ~~“Company“)~~Company) as of December 31, ~~2017~~2020 and ~~2016,~~2019, the related consolidated statements of operations, comprehensive ~~loss,~~income (loss), changes in ~~stockholders‘~~stockholders' equity and cash flows for each of the three years in the period ended December 31, ~~2017,~~2020, and the related notes (collectively referred to as the ~~“consolidated~~"consolidated financial ~~statements“~~statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the ~~consolidated~~ financial position of the Company ~~as of~~at December 31, ~~2017~~2020 and ~~2016,~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2020, in conformity with USU.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 11, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the ~~Company‘s~~Company's management. Our responsibility is to express an opinion on the ~~Company‘s~~Company's financial statements based on our audits. We are a public accounting firm registered with the ~~Public Company Accounting Oversight Board (United States) (“PCAOB“)~~PCAOB and are required to be independent with respect to the Company in accordance with the USU.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we were required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures ~~include~~included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.


						Revenue Recognition

Description of the Matter						As described in Note 8 to the consolidated financial statements, the Company recognizes revenue when a customer obtains control of promised services, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. Contracts with customers may include multiple services, modules, brands, and/or geographies. The Company evaluates such contracts to determine whether the services to be provided are distinct and accordingly accounted for as separate performance obligations. If a contract has multiple performance obligations, the transaction price is allocated to each performance obligation based on a relative standalone selling price method. The audit effort in evaluating the Company's accounting for revenue recognition was extensive and required auditor judgment for certain customer contracts to evaluate the terms and conditions and to identify distinct performance obligations.

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How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company's revenue recognition process, including management’s review of terms and conditions and identification of distinct performance obligations in customer contracts. To test the Company's accounting for revenue recognition, our audit procedures included, among others, selecting a sample of revenue transactions covering each of the significant service offerings for which we evaluated the terms and conditions and reperformed management’s assessment of distinct performance obligations within the arrangement, as well as tested the application of the revenue recognition accounting requirements, including reperforming calculations of revenue recognized to test the mathematical accuracy and the underlying data used in the calculations. We also assessed the appropriateness of the related disclosures in the consolidated financial statements.

						Accounting for Acquisitions

Description of the Matter						As disclosed in Note 4 to the consolidated financial statements, the Company completed its acquisition of Blueboard SAS ("BlueBoard") for a cash purchase price of $9.0 million. The transaction was accounted for as a business combination. Auditing the Company's accounting for its acquisition of BlueBoard was complex due to the estimation utilized in the Company's determination of the fair value of the contingent consideration and acquired developed technology of $1.5 million and $3.3 million, respectively. The significant estimation was primarily due to the complexity of the valuation models used by management to measure the fair value of the contingent consideration and acquired developed technology and the sensitivity of the respective fair values to the significant underlying assumptions. The Company utilized Black Scholes models to measure the fair value of the contingent consideration and the significant assumptions used in the models were forecasted revenues, among other assumptions. The Company used an income approach (discounted cash flow model) to measure the fair value of the acquired developed technology and the significant assumptions used in the model were the discount rate as well as the significant assumptions that form the basis of the forecasted results (e.g., forecasted revenue, EBITDA and the obsolescence rate of the technology). The assumptions utilized in the models are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company's accounting for acquisitions including management’s review of the valuation models and underlying assumptions used to develop the estimated fair values of the contingent consideration and acquired developed technology. To test the estimated fair values of the contingent consideration and acquired developed technology, we performed audit procedures that included, among others, evaluating the methodologies and significant assumptions used in the models, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. For example, we evaluated significant forecast assumptions used in the models considering historical results as well as third-party industry projections for the e-commerce industry. We involved our valuation specialists to assist with our evaluation of the methodologies and significant assumptions used as well as to independently calculate fair value estimates for contingent consideration and acquired developed technology to compare to the Company's recorded amounts.

/s/ Ernst & Young LLP

We have served as the ~~Company‘s~~Company’s auditor since 2001.

Raleigh, North Carolina

February ~~13, 2018~~11, 2021

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of ChannelAdvisor Corporation and Subsidiaries

Opinion on Internal Control Over Financial Reporting

We have audited ChannelAdvisor Corporation and Subsidiaries' internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, ChannelAdvisor Corporation and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and our report dated February 11, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Raleigh, North Carolina

February 11, 2021

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CHANNELADVISOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	December 31,							December 31,
	2017			2016				2020		2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	53,422		$	65,420		Cash and cash equivalents	$	71,545	$	51,785
Accounts receivable, net of allowance of $609 and $594 as of December 31, 2017 and 2016, respectively	27,452			19,445
Accounts receivable, net of allowance of $417 and $733 as of December 31, 2020 and 2019, respectively							Accounts receivable, net of allowance of $417 and $733 as of December 31, 2020 and 2019, respectively	24,705		22,126
Prepaid expenses and other current assets	16,462			10,972			Prepaid expenses and other current assets	13,874		10,452
Total current assets	97,336			95,837			Total current assets	110,124		84,363
Operating lease right of use assets							Operating lease right of use assets	8,141		11,128
Property and equipment, net	10,877			13,252			Property and equipment, net	8,707		9,597
Goodwill	23,486			21,632			Goodwill	30,990		23,486
Intangible assets, net	2,503			2,660			Intangible assets, net	4,155		1,285
Deferred contract costs, net of current portion							Deferred contract costs, net of current portion	14,040		12,810
Long-term deferred tax assets, net	5,550			5,244			Long-term deferred tax assets, net	3,551		3,584
Other assets	759			533			Other assets	953		614
Total assets	$	140,511		$	139,158		Total assets	$	180,661	$	146,867
Liabilities and stockholders’ equity
Liabilities and stockholders' equity							Liabilities and stockholders' equity
Current liabilities:							Current liabilities:
Accounts payable	$	7,243		$	4,709		Accounts payable	$	158	$	409
Accrued expenses	12,611			11,067			Accrued expenses	14,008		8,577
Deferred revenue	27,143			23,474			Deferred revenue	22,819		21,000

Other current liabilities	4,477			4,450			Other current liabilities	6,029		6,431
Total current liabilities	51,474			43,700			Total current liabilities	43,014		36,417
Long-term capital leases, net of current portion	641			1,262
Lease incentive obligation	3,328			4,206
Long-term operating leases, net of current portion							Long-term operating leases, net of current portion	5,394		9,767
Long-term finance leases, net of current portion							Long-term finance leases, net of current portion	8		27
Other long-term liabilities	3,157			2,993			Other long-term liabilities	2,154		1,007
Total liabilities	58,600			52,161			Total liabilities	50,570		47,218
Commitments and contingencies (Note 6)							Commitments and contingencies (Note 6)	0		0
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of December 31, 2017 and 2016, respectively	—			—
Common stock, $0.001 par value, 100,000,000 shares authorized, 26,601,626 and 25,955,759 shares issued and outstanding as of December 31, 2017 and 2016, respectively	27			26
Stockholders' equity:							Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2020 and 2019, respectively							Preferred stock, $0.001 par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2020 and 2019, respectively	0		0
Common stock, $0.001 par value, 100,000,000 shares authorized, 29,020,424 and 28,077,469 shares issued and outstanding as of December 31, 2020 and 2019, respectively							Common stock, $0.001 par value, 100,000,000 shares authorized, 29,020,424 and 28,077,469 shares issued and outstanding as of December 31, 2020 and 2019, respectively	29		28
Additional paid-in capital	262,805			252,158			Additional paid-in capital	288,842		278,111
Accumulated other comprehensive loss	(789		)	(1,612		)	Accumulated other comprehensive loss	(1,095)		(1,740)
Accumulated deficit	(180,132		)	(163,575		)	Accumulated deficit	(157,685)		(176,750)
Total stockholders’ equity	81,911			86,997
Total liabilities and stockholders’ equity	$	140,511		$	139,158
Total stockholders' equity							Total stockholders' equity	130,091		99,649
Total liabilities and stockholders' equity							Total liabilities and stockholders' equity	$	180,661	$	146,867

The accompanying notes are an integral part of these consolidated financial statements.

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CHANNELADVISOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)


	Year Ended December 31,										Year Ended December 31,
	2017			2016			2015				2020		2019		2018
Revenue	$	122,535		$	113,200		$	100,585		Revenue	$	145,072	$	129,959	$	131,218
Cost of revenue	25,950			27,620			25,834			Cost of revenue	30,354		29,008		29,501
Gross profit	96,585			85,580			74,751			Gross profit	114,718		100,951		101,717
Operating expenses:										Operating expenses:
Sales and marketing	63,495			56,602			53,770			Sales and marketing	52,905		52,813		60,080
Research and development	21,868			17,736			16,566			Research and development	18,990		19,200		22,359
General and administrative	27,800			25,079			25,608			General and administrative	23,739		25,136		26,784
Total operating expenses	113,163			99,417			95,944			Total operating expenses	95,634		97,149		109,223
Loss from operations	(16,578		)	(13,837		)	(21,193		)
Income (loss) from operations										Income (loss) from operations	19,084		3,802		(7,506)
Other income (expense):										Other income (expense):
Interest income (expense), net	222			(1		)	(184		)	Interest income (expense), net	175		754		510
Other income (expense), net	83			173			241			Other income (expense), net	9		(385)		9
Total other income (expense)	305			172			57			Total other income (expense)	184		369		519
Loss before income taxes	(16,273		)	(13,665		)	(21,136		)
Income tax expense (benefit)	284			(5,658		)	(185		)
Net loss	$	(16,557	)	$	(8,007	)	$	(20,951	)
Net loss per share:
Basic and diluted	$	(0.63	)	$	(0.31	)	$	(0.84	)
Income (loss) before income taxes										Income (loss) before income taxes	19,268		4,171		(6,987)
Income tax expense										Income tax expense	443		689		614
Net income (loss)										Net income (loss)	$	18,825	$	3,482	$	(7,601)
Net income (loss) per share:										Net income (loss) per share:
Basic										Basic	$	0.66	$	0.12	$	(0.28)
Diluted										Diluted	$	0.63	$	0.12	$	(0.28)
Weighted average common shares outstanding:										Weighted average common shares outstanding:
Basic and diluted	26,366,748			25,604,893			25,062,610
Basic										Basic	28,616,401		27,886,278		27,138,274
Diluted										Diluted	30,035,261		28,816,977		27,138,274


		Intangibles:
~~Accounting Standards Update ("ASU") 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ASU 2018-15, Intangibles -Goodwill and Other - Internal-Use Software (Subtopic 350-40) Effective date: January 1, 2020			~~The~~This standard ~~will replace existing revenue recognition standards and provides that an entity should recognize revenue to depict~~aligns the ~~transfer of promised goods or services to customers~~requirements for capitalizing implementation costs incurred in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenuea hosting arrangement that is ~~recognized. Entities have~~a service contract with the ~~option of using either a full retrospective~~requirements for capitalizing implementation costs incurred to develop or ~~modified retrospective approach for the adoption of the standard.~~obtain internal-use software.	The Company formed a project team to evaluate and direct the implementation of the new revenue recognition standard and related amendments. The project team developed an implementation plan centered around specific functional areas expected to be impacted by the standard and its amendments, including accounting and reporting, information technology ("IT"), internal audit and contracts and legal, among others. As part of the adoption process, findings and progress of the implementation plan have been reported to management and to the Audit Committee on a frequent basis over the last two years. The Company adopted this standard effective January 1, 2018 using the modified retrospective transition method. The most significant impacts of the new standard upon adoption relate to the timing of revenue recognition of fixed fees for the Company’s contracts, as well as the accounting for costs to obtain contracts. Under the new standard, for managed-service contracts, revenue recognition for the managed-service subscription and implementation fees will begin on the launch date and will be recognized over time through the contract end date. The Company currently defers revenue until the completion of the implementation services, at which point the Company recognizes a cumulative catch-up adjustment equal to the revenue earned during the implementation period but previously deferred. The remaining balance of these fixed fees is recognized ratably over the remaining term of the contract. Additionally, under the new standard, the Company will defer and amortize sales commissions and a portion of other incentive compensation. The Company currently expenses these contract costs as incurred. 2020. The adoption of the standard as of January 1, 2018 will result in an adjustment to accumulated deficit of between $8.0 million and $9.0 million related to the deferral of contract costs and an adjustment to accumulated deficit of less than $1.0 million related to the timing of revenue recognition. ~~For the year ending December 31, 2018, the Company expects~~did not have a ~~net benefit to operating income~~material impact on its consolidated ~~statement of operations of between $5.0 million~~financial statements.
Income Taxes:
ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes Effective date: January 1, 2020			This standard amends the approaches and ~~$7.0 million related~~methodologies in accounting for income taxes during interim periods and makes changes to ~~deferring contract costs and a net benefit of less than $1.0 million related~~certain income tax classifications. The new standard allows exceptions to the ~~timing~~use of ~~revenue recognition resulting~~the incremental approach for intra-period tax allocation, when there is a loss from continuing operations and income or a gain from other items, and to the general methodology for calculating income taxes in an interim period, when a year-to-date loss exceeds the anticipated loss for the year. The standard also requires franchise or similar taxes partially based on income to be reported as income tax and the effects of enacted changes in tax laws or rates to be included in the annual effective tax rate computation from the ~~adoption~~date of enactment. Lastly, the Company would be required to evaluate when the step-up in the tax basis of goodwill is part of the ~~standard.~~
business combination and when it should be considered a separate transaction. ASU ~~2016-08,~~ ~~Principal Versus Agent Considerations (Reporting Revenue Gross Versus Net)~~ 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.	The Company early adopted this standard ~~clarifies implementation guidance~~effective January 1, 2020. The early adoption did not have a material impact on ~~principal versus agent considerations in ASU 2014-09.~~
~~ASU 2016-10,~~ ~~Identifying Performance Obligations and Licensing~~	~~The standard clarifies implementation guidance on the identification of performance obligations and the licensing implementation guidance in ASU 2014-09.~~
~~ASU 2016-12,~~ ~~Narrow-Scope Improvements and Practical Expedients~~	~~The standard clarifies the guidance on assessing collectability, presentation of sales taxes, noncash consideration and completed contracts and contract modifications at transition.~~
~~ASU 2016-20,~~ ~~Technical Corrections and Improvements to Topic 606~~	~~The standard clarifies certain narrow aspects of ASU 2014-09.~~its consolidated financial statements or related disclosures.

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The Company has reviewed other new accounting pronouncements that were issued as of December 31, ~~2017~~2020 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.

The Securities and Exchange Commission, or SEC, issued a final rule on November 19, 2020, adopting amendments to Regulation S-K to modernize, simplify and enhance certain disclosure requirements. The amendments reflect a principles-based, registrant-specific approach to disclosure intended to enhance the focus of financial disclosures on material information for the benefit of investors, while simplifying compliance efforts for registrants. Registrants are required to comply with the rule beginning with the first fiscal year ending on or after August 9, 2021, or the mandatory compliance date. Although registrants are not required to apply the amended rules until the mandatory compliance date, they may comply with the final amendments any time after the effective date, so long as disclosure responsive to an amended item is provided in its entirety. The Company early adopted these amendments, effective for this Annual Report.

Use of Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles, ("or U.S. ~~GAAP")~~GAAP, requires management to make estimates and assumptions that affect the amounts reported in the 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, ~~and~~ 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. Estimates and assumptions are also required to value assets acquired and liabilities assumed as well as contingent consideration, where applicable, in conjunction with business combinations. 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.

Cash and Cash Equivalents

The Company considers all highly liquid investments ~~maturing within~~with an original maturity of ninety days or less at the time of purchase to be cash equivalents. Cash and cash equivalents are comprised of cash and money market funds. Due to the short-term nature and liquidity of these financial instruments, the carrying value of these assets approximates fair value.

Revenue Recognition ~~and Deferred Revenue~~

~~The majority of the Company’s revenue~~Revenue is derived from subscription fees paid by customers for access to and usage of the Company’s cloud-based SaaS platform for a specified period of time, which is typically one year. A portion of the subscription fee is typically fixed and is based on a specified minimum amount of gross merchandise value ("GMV") or advertising spend thatrecognized when a customer obtains control of promised services, in an amount that reflects the consideration the Company expects to process through the Company’s platform over the contract term. The remaining portion of the subscription fee is variable and is based on a specified percentage of GMV or advertising spend processed through the Company’s platformbe entitled to receive in ~~excess of the customer’s specified minimum amount.~~exchange for those services. In addition, other sources of revenue consist primarily of implementation fees, which may include fees for providing launch assistance and training. Implementation services are provided at the customer's option and are not essential to the functionality of the Company's platform, nor is the customer required to purchase these services in order to access the Company's platform. The Company also generates revenue from its solutions that allow branded manufacturers to direct potential consumers from their websites and digital marketing campaigns to authorized resellers. These contracts are generally one year in duration. The Company recognizes revenue when there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fee is reasonably assured anddetermining the amount of the fee to be paid by the customer is fixed or determinable. 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.

The Company’s arrangements generally contain multiple elements comprised of subscription and implementation services. The Company evaluates each element in an arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within the Company’s control. The Company’s implementation services are not sold separately from the subscription and there is no alternative use for them. As such, the Company has determined the implementation services do not have standalone value. Accordingly, subscription and implementation services are combined and recognized as a single unit of accounting.

The Company generally recognizes the fixed portion of subscription fees and implementation fees ratably over the contract term. Recognition begins when the customer has access to the Company’s platform or to its solutions for branded manufacturers and transactions can be processed, provided all other revenue recognition criteria have been met. Some customers elect a managed-service solution and contract with the Company to manage some or all aspects of the Company’s SaaS solutions on the customer’s behalf for a specified period of time, which is typically one year. Under these managed-service arrangements, customer transactions cannot be processed through the Company’s platform until the completion of the implementation services. As such, revenue is contingent upon the Company’s completion of the implementation services and recognition commences when transactions can be processed on the Company’s platform, provided all other revenue recognition criteria have been satisfied. At that time, the Company recognizes a pro-rata portion of the fees earned since the inception of the arrangement. The balance of the fees is recognized ratably over the remaining contract term.

~~The Company recognizes the variable portion of subscription fee revenue in the period in which the related GMV is processed, provided all other revenue recognition criteria have been met.~~

~~Sales taxes collected from customers and remitted to government authorities are excluded from revenue.~~

~~Deferred revenue represents the unearned portion of fixed subscription fees and implementation fees. Deferred amounts are generally recognized within one year. Those amounts that are expected~~ to be recognized, ~~in greater than one year are recorded in Other long-term liabilities~~the Company performs the following steps: (i) identification of the contract with a customer; (ii) identification of the promised services in the ~~accompanying condensed consolidated balance sheets.~~

~~Sales Commissions~~

~~Sales commissions~~contract and determination of whether the promised services are ~~expensed~~performance obligations, including whether they are distinct in the context of the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. Refer to Note 8, "Revenue from Contracts with Customers" for a detailed discussion of accounting policies related ~~subscription agreement is executed by the customer.~~to revenue recognition, including deferred revenue and sales commissions.

Cost of Revenue

Cost of revenue primarily consists of personnel and related costs, including salaries, bonuses, payroll taxes and stock-based compensation, co-location facility costs for the ~~Company’s~~Company's data centers, depreciation expense for computer equipment and amortization of capitalized software directly associated with generating revenue, credit card transaction fees and infrastructure maintenance costs. In addition, the Company allocates a portion of overhead, such as rent, additional depreciation and amortization and employee benefits costs, to cost of revenue based on headcount.

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Fair Value of Financial Instruments

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:

•Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

•Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

•Level 3. Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions.

The carrying amounts of certain of the ~~Company’s~~Company's financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their respective fair values due to their short-term nature.

In 2014, the Company, through its wholly owned subsidiary ChannelAdvisor UK Limited ("ChannelAdvisor UK"), acquired the issued and outstanding shares of E-Tale Holdings Limited ("E-Tale"), renamed ChannelAdvisor Brands UK Limited. The acquisition of ~~E-Tale included~~Blueboard, a private limited company organized under the laws of France ("BlueBoard") on July 23, 2020 includes a contingent consideration arrangement, ~~that allowed for adjustment of payments based upon achievement of specified quarterly revenue targets through June 2017.~~as described in Note 4 below. Contingent consideration was measured at fair value at the acquisition date and ~~was~~is remeasured toat fair value at each reporting date until the contingency ~~was~~is resolved.

The fair value ~~is reported within Other current liabilities~~of the contingent consideration related to the BlueBoard acquisition was estimated utilizing Black-Scholes option pricing models in which various scenarios for achievement of the financial targets and ~~Other long-term liabilities on~~resulting payouts are then discounted to determine the ~~consolidated balance sheets at December 31, 2016.~~present value of the resulting liability. Key assumptions used in the measurement of fair value of contingent consideration include the forecasted revenue growth, revenue volatility and discount rates among other assumptions. Changes in any valuation inputs in isolation may result in a significantly lower or higher fair value measurement in the future. Subsequent changes in the fair value of contingent consideration ~~have been~~are recognized within general and administrative expenses in the Company’s consolidated statements of operations.

~~The fair value of contingent consideration related to the E-Tale acquisition was based on projected quarterly revenue targets for E-Tale through June 2017.~~ As of December 31, ~~2016,~~2020, the fair value of the contingent consideration was $1.3 million, of which $0.6 million is recorded in "Other current liabilities" and $0.7 million is recorded in "Other long-term liabilities."

The following table presents the changes to the Company's liability for acquisition-related contingent consideration ~~was $0.2 million. The contingent consideration arrangement concluded in June 2017.~~for the year ended December 31, 2020 (in thousands):


Balance as of December 31, 2019	$	0
Acquisition	1,516
Change in fair value	(186)
Balance as of December 31, 2020	$	1,330

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. All of the ~~Company’s~~Company's cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The ~~Company’s~~Company's cash and cash equivalents accounts exceed federally insured limits. The Company has not experienced any losses on its cash and cash equivalents accounts to date. To manage accounts receivable risk, the Company maintains an allowance for ~~doubtful accounts.~~credit losses.

The Company did not have any customers that individually comprised a significant concentration of its accounts receivable as of December 31, ~~2017~~2020 and ~~2016,~~2019, or a significant concentration of its revenue for the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015.~~

2018.

Accounts Receivable and Allowance for ~~Doubtful Accounts~~Credit Losses

The Company extends credit to customers without requiring collateral. Accounts receivable are stated at ~~realizable value,~~amortized cost, net of an allowance for ~~doubtful accounts.~~credit losses. The Company ~~utilizes~~records an allowance for credit losses at the ~~allowance method to provide for doubtful~~time that accounts receivable are initially recorded based on ~~management’s evaluation~~its consideration of the ~~collectability~~current economic environment, expectations of ~~amounts due. The Company’s estimate is based on~~future economic conditions, the Company's historical collection experience and a ~~review~~loss-rate approach whereby impairment is calculated

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by multiplying an estimated loss rate by the ~~current status~~asset's amortized cost at the balance sheet date. The Company reassesses the allowance at each reporting date. When it becomes apparent, based on age or customer circumstances, that such amounts will not be collected, they are charged to the allowance. Payments subsequently received are credited to the credit loss expense account included within general and administrative expense in the consolidated statements of ~~accounts receivable. Historically, actual write-offs for uncollectible accounts have not significantly differed from the Company’s estimates.~~operations.

The following table presents the changes in the ~~Company’s~~Company's allowance for ~~doubtful accounts~~credit losses during the ~~years~~year ended December 31, ~~2017, 2016 and 2015~~2020 (in thousands):

Balance at
Beginning
of Period

Additions
Charged To
Expense/
Against
Revenue
Deductions
Balance at
End of
Period
Allowance for doubtful accounts:
Year ended December 31, 2017 $ 594
727
(712 ) $ 609
Year ended December 31, 2016 $ 785
528
(719 ) $ 594
Year ended December 31, 2015 $ 673
1,236
(1,124 ) $ 785


	Balance, beginning of period		Provision for credit losses (1)	Write-offs, net of recoveries	Balance, end of period
Allowance for credit losses:
Year ended December 31, 2020	$	733	525	(841)	$	417

~~Other Receivables~~

Under certain customer arrangements, the Company collects and remits monthly activity-based fees incurred on specific channels on the customers’ behalf. The Company records the amounts due from customers(1) Includes adjustment recorded at January 1, 2020 as a result of ~~these arrangements as other receivables.~~

~~Other receivables~~the Company's adoption of ~~$10.6 million and $7.6 million are included in Prepaid expenses and other current assets on the consolidated balance sheets as of December 31, 2017 and 2016, respectively.~~Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326).

Property and Equipment

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized. Depreciation and amortization is provided over the estimated useful lives of the related assets using the straight-line method.

The estimated useful lives for significant property and equipment categories are generally as follows:



Purchased software, including ~~internal-use~~capitalized software development costs			3 years
Computer hardware			3 years
Furniture and office equipment			3 to 5 years
Leasehold improvements			Lesser of remaining lease term or useful life

Repairs and maintenance costs are expensed as incurred.

Software Development Costs

The Company capitalizes certain internal-use software development costs, consisting primarily of direct labor associated with creating the internally developed software and third-party consulting fees associated with implementing software purchased for internal use. Software development projects generally include three stages: the preliminary project stage (in which all costs are expensed as incurred), the application development stage (in which certain costs are capitalized) and the post-implementation/operation stage (in which all costs are expensed as incurred). The costs incurred during the application development stage primarily include the costs of designing the application, coding and testing of the system. Capitalized costs are amortized using the straight-line method over the estimated useful life of the software once it is ready for its intended use.

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 consolidated balance sheets. The Company capitalized software development costs of $3.1 million and $3.0 million during the years ended December 31, 2020 and 2019, respectively. Amortization expense related to capitalized internally developed software was $1.8 million, $0.8 million and $0.3 million for the years ended December 31, 2020, 2019 and 2018, respectively, and is included in cost of revenue or general and administrative expense in the accompanying consolidated statements of operations, depending upon the nature of the software development project. The net book value of capitalized internally developed software was $4.2 million and $2.9 million at December 31, 2020 and 2019, respectively.

Identifiable Intangible Assets

The Company 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:

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			Estimated Useful Lives	Amortization Methodology
Customer relationships			7 years	Straight-line
Acquired technology			7 years	Straight-line
~~Trade names~~	~~3 years~~	~~Straight-line~~

Impairment of Long-Lived Assets

The Company reviews long-lived ~~assets and definite-lived intangible~~ assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is

measured by a comparison of the carrying amount of the asset or asset group to future undiscounted net cash flows expected to be generated by the asset or asset group. If such assets are not recoverable, the impairment to be recognized, if any, is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets or asset group. Assets held for sale are reported at the lower of the carrying amount or fair value, less costs to sell. As of December 31, ~~2017~~2020 and ~~2016,~~2019, management does ~~not~~0t believe any long-lived assets are impaired and has not identified any assets as being held for sale.

Goodwill

Goodwill represents the excess of the aggregate of the fair value of consideration transferred in a business combination over the fair value of assets acquired, net of liabilities assumed. The Company recorded goodwill in connection with its business acquisitions. ~~See~~Refer to Note 34 below for information regarding goodwill recorded in connection with the acquisition of ~~HubLogix.~~BlueBoard. Goodwill is not amortized, but is subject to an annual impairment test, as described below.

The Company has determined that it has a single, entity-wide reporting unit. The Company first assessed qualitative factors to determine whether it was more likely than not that the fair value of its single reporting unit was less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test under ASU No. 2011-08, Goodwill and Other (Topic 350): Testing Goodwill for Impairment. If the qualitative factors had indicated that it was more likely than not that the fair value of the reporting unit was less than its carrying amount, the Company would have tested goodwill for impairment at the reporting unit level using a two-step approach. The first step is to compare the fair value of the reporting unit to the carrying value of the net assets assigned to the reporting unit. If the fair value of the reporting unit is greater than the carrying value of the net assets assigned to the reporting unit, the assigned goodwill is not considered impaired. If the fair value is less than the reporting ~~unit’s~~unit's carrying value, step two is performed to measure the amount of the impairment, if any. In the second step, the fair value of goodwill is determined by deducting the fair value of the reporting ~~unit’s~~unit's identifiable assets and liabilities from the fair value of the reporting unit as a whole, as if the reporting unit had just been acquired and the fair value was being initially allocated. If the carrying value of goodwill exceeds the implied fair value, an impairment charge would be recorded in the period the determination is made.

~~During the fourth quarter of 2016, the~~The Company ~~voluntarily changed the date of~~performs its annual goodwill impairment ~~testing from December 31, the last day~~analysis as of ~~the fiscal year, to~~ October 1, the first day of the fourth quarter. This change provides the Company with additional time to complete its annual goodwill impairment testing in advance of its year-end reporting and results in better alignment with the Company’s strategic planning and forecasting process. The voluntary change in accounting principle related to the annual testing date will not delay, accelerate or avoid an impairment charge. This change is not being applied retrospectively, as it would require application of significant estimates and assumptions with the use of hindsight. Accordingly, the change will be applied prospectively.

As a result of the ~~Company’s~~Company's annual impairment ~~tests~~analysis as of October 1, ~~2017~~2020 and ~~2016,~~2019, goodwill was not considered impaired and, as such, no0 impairment charges were recorded.

Advertising Costs

The Company expenses advertising costs as incurred. The amount expensed during the years ended December 31, ~~2017, 2016~~2020, 2019 and ~~2015~~2018 was ~~$5.3~~$3.5 million, ~~$4.1~~$4.2 million and ~~$4.3~~$5.7 million, respectively.

Income Taxes

Income taxes are accounted for under the asset and liability method of accounting. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company applies the accounting guidance for uncertainties in income taxes, which prescribes a recognition threshold and measurement process for recording uncertain tax positions taken, or expected to be taken, in a tax return in the financial statements. Additionally, the guidance also prescribes the treatment for the derecognition, classification, accounting in

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interim periods and disclosure requirements for uncertain tax positions. The Company accrues for the estimated amount of taxes for uncertain tax positions if it is more likely than not that the Company would be required to pay such additional taxes.

An uncertain tax position will be recognized if it is more likely than not to be sustained. ~~The~~As of December 31, 2020, the Company recorded a nominal amount of accrued interest and penalties associated with unrecognized tax positions. As of December 31, 2019, the Company did ~~not~~0t have any accrued interest or penalties associated with unrecognized tax ~~positions~~positions. The Company's policy for recording interest and penalties is to record them as a component of ~~December 31, 2017 and 2016.~~provision for income taxes.

Foreign Currency Translation

The functional currency of the ~~Company’s~~Company's non-U.S. operations is the local currency. Monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars at exchange rates prevailing at the balance sheet dates. Non-monetary assets and liabilities are translated at the historical rates in effect when the assets were acquired or obligations incurred. Revenue and expenses are translated into U.S. dollars using the average rates of exchange prevailing during the period. Translation gains or losses are included as a component of accumulated other comprehensive loss in ~~stockholders’~~stockholders' equity. Gains and losses resulting from foreign currency transactions are recognized as other income (expense) ~~income.~~.

Stock-Based Compensation

The Company accounts for stock-based compensation awards, which include stock options, ~~and~~time-based restricted stock units, ~~("RSUs"),~~or RSUs, and performance-based vesting restricted stock units, or PSUs, based on the fair value of the award as of the grant date. 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.

The Company uses the Black-Scholes option pricing model for estimating the fair value of stock options. The use of the option valuation model requires the input of the Company's stock price, as well as highly subjective assumptions, including the expected life of the option and the expected stock price volatility, which is estimated based on ~~peer companies.~~the historical volatility of the Company's stock. Additionally, the recognition of expense requires the estimation of the number of awards that will ultimately vest and the number of awards that will ultimately be forfeited. The fair value of the Company's common stock, for purposes of determining the grant date fair value of option, RSU and ~~RSU~~PSU awards, has been determined by using the closing market price per share of common stock as quoted on the New York Stock Exchange on the date of grant.

Basic and Diluted ~~Loss~~Income (Loss) per Common Share

~~Diluted loss~~Basic net income (loss) per share is calculated by dividing net income (loss) by the ~~same as basic loss~~weighted-average number of shares of common stock outstanding for the period. Diluted net income (loss) per share ~~for~~is calculated giving effect to all ~~periods presented because the effects of~~ potentially dilutive ~~items were anti-dilutive given~~shares of common stock, including stock options, RSUs and PSUs. The dilutive effect of outstanding awards is reflected in diluted earnings per share by application of the ~~Company’s net loss.~~treasury stock method.

3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of December 31, 2020 and 2019 (in thousands):


	2020		2019
Purchased software, including capitalized software development costs	$	17,303	$	13,965
Computer hardware	9,541		8,975
Furniture and office equipment	2,388		2,369
Leasehold improvements	7,368		7,244
Construction in process	48		46
	36,648		32,599
Less: accumulated depreciation	(27,941)		(23,002)
Property and equipment, net	$	8,707	$	9,597

Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $5.7 million, $5.7 million and $5.5 million, respectively. During the year ended December 31, 2020, the Company disposed of purchased software, including capitalized software development costs, computer hardware, furniture and office equipment with a cost of $0.8 million and

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accumulated depreciation of $0.8 million. During the year ended December 31, 2019, the Company disposed of purchased software, including capitalized software development costs, computer hardware, furniture and office equipment and leasehold improvements with a cost of $10.0 million and accumulated depreciation of $9.6 million resulting in a $0.4 million loss in the consolidated statements of operations for the year ended December 31, 2019 related to these disposals. During the year ended December 31, 2018, the Company disposed of computer hardware, furniture and office equipment and leasehold improvements with a cost of $4.9 million and accumulated depreciation of $4.9 million. As a result of an amendment to the Company's corporate headquarters lease agreement during the year ended December 31, 2018, the Company disposed of leasehold improvements with a cost of $0.8 million and accumulated depreciation of $0.3 million and recorded a $0.5 million reduction to its lease incentive obligation.

4. BUSINESS COMBINATION, GOODWILL AND INTANGIBLE ASSETS

~~HubLogix~~Business Combination

On ~~May 26, 2017,~~July 23, 2020, the Company entered into ana Share Purchase Agreement ~~and Plan of Merger~~ (the ~~"Merger~~"Purchase Agreement") pursuant to which ~~the Company~~it acquired all of the issued and outstanding shares of ~~HubLogix Commerce Corp.~~Blueboard, a private limited company organized under the laws of France ("~~HubLogix"~~BlueBoard") ~~(renamed ChannelAdvisor Fulfillment, Inc.),~~. BlueBoard is headquartered in Paris, France and is a ~~fulfillment and logistics platform that automates order management by connecting online storefronts~~leader in e-commerce analytics. The acquisition of BlueBoard adds analytic capabilities, including actionable insights into how products are performing across thousands of retailer websites and marketplaces, to ~~distribution and fulfillment centers. The Company acquired HubLogix to further enhance its fulfillment network offering and capabilities.~~the Company's existing cloud-based e-commerce solutions.

Under the ~~Merger~~Purchase Agreement, the Company paid ~~an aggregate~~to the shareholders of BlueBoard a cash purchase price of ~~$2.3~~$9.0 million, ~~for HubLogix, all of~~ which ~~was paid in cash, which amount was~~is subject to adjustment as set forth in the ~~Merger~~Purchase Agreement. ~~The~~A portion of the purchase price ~~includes $0.4 million that~~ has been placed into escrow to secure the indemnification obligations of ~~HubLogix stockholders~~BlueBoard's shareholders until ~~November 26, 2018.~~July 22, 2021. In addition to the purchase price paid at the closing, the Company may be obligated to pay up to $3.0 million to the BlueBoard shareholders upon the achievement of specified annual revenue targets through July 2023, as set forth in the Purchase Agreement. Pursuant to ASC Topic 805, Business Combinations, or ASC 805, this contingent consideration is deemed to be part of the purchase price and is recorded as a liability based on the estimated fair value of the consideration the Company expects to pay as of the acquisition date. As of December 31, 2020, $1.3 million of contingent consideration was recorded as a liability on the Company's condensed consolidated balance sheet.

The acquisition has been accounted for under the acquisition method of accounting in accordance with ~~Accounting Standards Codification Topic 805,~~ ~~Business Combinations~~ ("ASC ~~805").~~805. Under the acquisition method of accounting, the Company allocated the purchase price to the identifiable assets acquired and liabilities assumed based on their estimated acquisition-date fair ~~value.~~values. The ~~difference between the acquisition-date~~ fair ~~value~~values of the ~~consideration and~~identifiable intangible assets were determined based on income approaches utilizing forecasted earnings assumptions. The excess of the ~~estimated fair value of~~purchase price over the net assets acquired is recorded as goodwill. ~~Goodwill~~

Based on management's provisional assessment of the acquisition-date fair value of the assets acquired and liabilities assumed, the aggregate purchase price of $10.5 million, which is comprised of $9.0 million of cash and $1.5 million for contingent consideration noted above, has been allocated to the Company's assets and liabilities on a preliminary basis as follows: $7.5 million to goodwill, $3.7 million to identifiable intangible assets, including acquired technology of $3.3 million and customer relationships of $0.4 million, $0.6 million to long-term deferred tax liabilities and $0.1 million to working capital as a net current liability. The purchase price allocation in conjunction with the acquisition of BlueBoard is subject to change as additional information becomes available. Any adjustments will be made as soon as practicable, but not later than one year from the acquisition date.

The goodwill arising from the acquisition of BlueBoard represents the future economic benefits expected to arise from other intangible assets ~~acquired~~ that do not qualify for separate recognition, including acquired workforce, as well as expected future synergies.

Based on management's assessment of the acquisition-date fair value of the assets acquired and liabilities assumed, the purchase price of $2.3 million was allocated to the Company’s assets and liabilities as follows: $1.9 million to goodwill, $0.5 million to identifiable intangible assets and $0.1 million to working capital as a net current liability.

The goodwill of $1.9 million arising from the acquisition of HubLogix consists largely of the acquired workforce, the expected company-specific synergies and the opportunity to expand the Company’s product offerings to customers. The goodwill recognized is not deductible for income tax purposes.

The Company incurred transaction costs in connection with the acquisition of ~~$0.3~~$0.5 million for the year ended December 31, 2020, which are included in ~~General~~general and administrative expense in the accompanying consolidated statements of ~~operations for the year ended December 31, 2017.~~operations.

Comparative pro forma financial information for this acquisition has not been presented because the acquisition is not material to the ~~Company’s~~Company's consolidated results of operations.

~~4. PROPERTY AND EQUIPMENT~~

~~Property and equipment consisted~~

Table of ~~the following as of December 31, 2017 and 2016 (in thousands):~~

Contents

2017 2016
Purchased software, including internal-use software $ 14,813
$ 13,821
Computer hardware 12,129
11,608
Furniture and office equipment 2,583
2,767
Leasehold improvements 7,819
7,642
Construction in process 221
149

37,565
35,987
Less: accumulated depreciation (26,688 ) (22,735 )
Property and equipment, net $ 10,877
$ 13,252
Goodwill and Intangible Assets

Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $6.0 million, $7.3 million and $7.9 million, respectively. During the year ended December 31, 2015, the Company recorded $0.7 million of accelerated depreciation expense as a result of relocating the Company's corporate headquarters to a new facility.

~~5. GOODWILL AND INTANGIBLE ASSETS~~

The following table shows the changes in the carrying amount of goodwill for the year ended December 31, ~~2017~~2020 (in thousands):

Balance as of December 31, 2016 $ 21,632
Goodwill attributable to the HubLogix acquisition 1,854
Balance as of December 31, 2017 $ 23,486


Balance as of December 31, 2019	$	23,486
Goodwill attributable to the BlueBoard acquisition	7,504
Balance as of December 31, 2020	$	30,990

There were no0 changes to the Company's goodwill during the year ended December 31, ~~2016.~~2019.

Intangible assets consisted of the following as of December 31, 2020 and 2019 (in thousands):


	December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life (in years)
Customer relationships	$	2,603	$	(1,940)	$	663	7.0
Acquired technology	5,367		(1,875)		3,492		7.0
Total	$	7,970	$	(3,815)	$	4,155	7.0

December 31, 2017

Gross Carrying
Amount

Accumulated
Amortization

Net Carrying
Amount

Weighted Average
Useful Life (in years)
Customer relationships $ 2,230

$ (961 )
$ 1,269
7.0
Acquired technology 2,030

(796 )
1,234
7.0
Total $ 4,260

$ (1,757 )
$ 2,503
7.0


	December 31, 2016									December 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Useful Life (in years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Useful Life (in years)
Customer relationships	$	2,100	$	(650	)	$	1,450	7.0	Customer relationships	$	2,230	$	(1,598)	$	632	7.0
Acquired technology	1,700		(526		)	1,174		7.0	Acquired technology	2,030		(1,377)		653		7.0
Trade names	130		(94		)	36		3.0
Total	$	3,930	$	(1,270	)	$	2,660	6.9	Total	$	4,260	$	(2,975)	$	1,285	7.0

Amortization expense was $0.8 million for the year ended December 31, 2020 and $0.6 million for each of the years ended December 31, ~~2017, 2016~~2019 and ~~2015 was $0.6 million, $0.6 million and $0.9 million, respectively.~~2018. As of December 31, ~~2017,~~2020, expected amortization expense over the remaining intangible asset lives is as follows (in thousands):


Year Ending December 31,
2021	$	1,048
2022	596
2023	596
2024	557
2025	530
Thereafter	828
Total	$	4,155



Delaware						56-2257867
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

3025 Carrington Mill Boulevard Morrisville, NC						27560
(Address of principal executive offices)						(Zip Code)



Title of Each ~~Class:~~Class	Trading Symbol	Name of Each Exchange on which Registered
Common Stock, $0.001 par value	ECOM	New York Stock Exchange


					Page
			PART I
Item 1.			Business		3
Item 1A.			Risk Factors		16
Item 1B.			Unresolved Staff Comments		33
Item 2.			Properties		33
Item 3.			Legal Proceedings		33
Item 4.			Mine Safety Disclosures		33

				~~Page~~
	PART III
~~Item 1.~~			~~Business~~	3
~~Item 1A.~~	~~Risk Factors~~	13
~~Item 1B.~~	~~Unresolved Staff Comments~~	27
~~Item 2.~~	~~Properties~~	27
~~Item 3.~~	~~Legal Proceedings~~	27
~~Item 4.~~	~~Mine Safety Disclosures~~	27

	~~PART II~~
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			2834
Item 6.			Selected Financial Data		3040
Item 7.			Management's Discussion and Analysis of Financial Condition and Results of Operations		3236
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk		4854
Item 8.			Financial Statements and Supplementary Data		5055
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		7584
Item 9A.			Controls and Procedures		7584
Item 9B.			Other Information		7684

			PART III
Item 10.			Directors, Executive Officers and Corporate Governance		7685
Item 11.			Executive Compensation		7685
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		7685
Item 13.			Certain Relationships and Related Transactions, and Director Independence		7685
Item 14.			Principal Accounting Fees and Services		7785

			PART IV
Item 15.			Exhibits, ~~and~~ Financial Statement Schedules		7785
Item 16.			Form 10-K Summary		7988
			Signatures		8089


	Year Ended December 31,
	2020		2019		2018
Cash flows from operating activities
Net income (loss)	$	18,825	$	3,482	$	(7,601)
Adjustments to reconcile net income (loss) to cash and cash equivalents provided by operating activities:
Depreciation and amortization	6,513		6,336		6,094
Bad debt expense	525		1,147		991
Stock-based compensation expense	10,200		8,976		10,598
Deferred income taxes	(39)		531		493
Other items, net	(829)		118		(851)
Changes in assets and liabilities, net of effects from acquisition:
Accounts receivable	(2,143)		361		2,634
Prepaid expenses and other assets	(1,728)		892		10,303
Deferred contract costs	(2,572)		(3,146)		(6,730)
Accounts payable and accrued expenses	4,270		(2,306)		(10,936)
Deferred revenue	1,284		(3,383)		(3,765)
Cash and cash equivalents provided by operating activities	34,306		13,008		1,230
Cash flows from investing activities
Acquisition, net of cash acquired	(8,467)		0		0
Purchases of property and equipment	(1,704)		(986)		(2,045)
Payment of software development costs	(3,034)		(2,721)		(894)
Cash and cash equivalents used in investing activities	(13,205)		(3,707)		(2,939)
Cash flows from financing activities
Repayment of finance leases and debt	(1,808)		(2,209)		(2,241)
Proceeds from exercise of stock options	3,825		974		1,106
Payment of statutory tax withholding related to net-share settlement of restricted stock units	(3,294)		(3,389)		(2,959)
Payment of line of credit financing costs	(187)		0		0
Cash and cash equivalents used in financing activities	(1,464)		(4,624)		(4,094)
Effect of currency exchange rate changes on cash and cash equivalents	123		(77)		(434)
Net increase (decrease) in cash and cash equivalents	19,760		4,600		(6,237)
Cash and cash equivalents, beginning of year	51,785		47,185		53,422
Cash and cash equivalents, end of year	$	71,545	$	51,785	$	47,185
Supplemental disclosure of cash flow information
Cash paid for interest	$	160	$	215	$	30
Cash paid for income taxes, net	$	462	$	62	$	113
Supplemental disclosure of noncash investing and financing activities
Accrued capital expenditures	$	32	$	15	$	68
Finance lease obligations entered into for the purchase of fixed assets	$	0	$	46	$	4,217



	Year Ended December 31,
	2017			2016			2015
Cash flows from operating activities
Net loss	$	(16,557	)	$	(8,007	)	$	(20,951	)
Adjustments to reconcile net loss to net cash and cash equivalents (used in) provided by operating activities:
Depreciation and amortization	6,578			7,838			8,793
Bad debt expense	727			528			1,236
Stock-based compensation expense	11,947			13,262			11,837
Deferred income taxes	130			(5,649		)	(244		)
Other items, net	(869		)	(875		)	(85		)
Changes in assets and liabilities, net of effects from acquisition:
Accounts receivable	(8,261		)	(1,885		)	(5,833		)
Prepaid expenses and other assets	(5,514		)	(2,014		)	(2,921		)
Accounts payable and accrued expenses	5,242			3,697			3,608
Deferred revenue	3,581			4,676			3,101
Net cash and cash equivalents (used in) provided by operating activities	(2,996		)	11,571			(1,459		)

Cash flows from investing activities
Purchases of property and equipment	(2,790		)	(1,755		)	(4,062		)
Payment of internal-use software development costs	(293		)	(208		)	(190		)
Acquisition, net of cash acquired	(2,177		)	—			—
Net cash and cash equivalents used in investing activities	(5,260		)	(1,963		)	(4,252		)

Cash flows from financing activities
Repayment of capital leases	(2,840		)	(2,096		)	(1,745		)
Proceeds from exercise of stock options	1,428			930			892
Payment of contingent consideration	—			(338		)	—
Payment of statutory tax withholding related to net-share settlement of restricted stock units	(2,727		)	(2,394		)	(739		)
Net cash and cash equivalents used in financing activities	(4,139		)	(3,898		)	(1,592		)

Effect of currency exchange rate changes on cash and cash equivalents	397			(764		)	(589		)
Net (decrease) increase in cash and cash equivalents	(11,998		)	4,946			(7,892		)
Cash and cash equivalents, beginning of year	65,420			60,474			68,366
Cash and cash equivalents, end of year	$	53,422		$	65,420		$	60,474

Supplemental disclosure of cash flow information
Cash paid for interest	$	111		$	127		$	155
Cash paid for income taxes, net	$	196		$	115		$	170
Supplemental disclosure of non-cash investing and financing activities
Accrued capital expenditures	$	80		$	233		$	563
Capital lease obligations entered into for the purchase of fixed assets	$	567		$	1,771		$	2,207
Non-cash leasehold improvements	$	—		$	—		$	5,263



x☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, ~~2017~~2020



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____



	2017				2016
	High		Low		High		Low
First quarter	$	15.00	$	10.35	$	14.30	$	10.28
Second quarter	$	12.20	$	10.90	$	15.00	$	11.03
Third quarter	$	11.75	$	9.85	$	15.91	$	11.61
Fourth quarter	$	12.50	$	8.40	$	15.85	$	10.50



	As of December 31,
	2017		2016		2015		2014		2013
	(in thousands)
Consolidated balance sheets data:
Cash and cash equivalents	$	53,422	$	65,420	$	60,474	$	68,366	$	104,406
Accounts receivable, net	27,452		19,445		18,949		14,619		13,951
Total assets	140,511		139,158		130,956		127,047		148,786
Total liabilities	58,600		52,161		47,032		33,399		31,006
Additional paid-in capital	262,805		252,158		240,360		228,370		218,330
Total stockholders’ equity	81,911		86,997		83,924		93,648		117,780



	Payment due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Operating lease obligations	$	25,511	$	5,893	$	9,816	$	8,806	$	996
Capital lease obligations	1,679		1,027		652		—		—
Purchase commitments	4,422		2,909		1,513		—		—
Total	$	31,612	$	9,829	$	11,981	$	8,806	$	996


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance, December 31, 2017	26,601,626	$	27	$	262,805	$	(789)	$	(180,132)	$	81,911
Cumulative effect of accounting change (1)	—	—		—		—		7,501		7,501
Exercise of stock options and vesting of restricted stock units	1,034,146	0		1,106		—		—		1,106
Stock-based compensation expense	—	—		10,598		—		—		10,598
Statutory tax withholding related to net-share settlement of restricted stock units	(288,657)	—		(2,959)		—		—		(2,959)
Net loss	—	—		—		—		(7,601)		(7,601)
Foreign currency translation adjustments	—	—		—		(918)		—		(918)
Balance, December 31, 2018	27,347,115	27		271,550		(1,707)		(180,232)		89,638
Exercise of stock options and vesting of restricted stock units	1,021,730	1		974		—		—		975
Stock-based compensation expense	—	—		8,976		—		—		8,976
Statutory tax withholding related to net-share settlement of restricted stock units	(291,376)	—		(3,389)		—		—		(3,389)
Net income	—	—		—		—		3,482		3,482
Foreign currency translation adjustments	—	—		—		(33)		—		(33)
Balance, December 31, 2019	28,077,469	28		278,111		(1,740)		(176,750)		99,649
Cumulative effect of accounting change (2)	—	—		—		—		240		240
Exercise of stock options and vesting of restricted stock units	1,183,904	1		3,825		—		—		3,826
Stock-based compensation expense	—	—		10,200		—		—		10,200
Statutory tax withholding related to net-share settlement of restricted stock units	(240,949)	—		(3,294)		—		—		(3,294)
Net income	—	—		—		—		18,825		18,825
Foreign currency translation adjustments	—	—		—		645		—		645
Balance, December 31, 2020	29,020,424	$	29	$	288,842	$	(1,095)	$	(157,685)	$	130,091



	Year Ended December 31, 2015
	As Previously Reported		Reclassification			As Reclassified
Cost of revenue	$	20,848	$	4,986		$	25,834
Depreciation - Cost of revenue	4,986		(4,986		)	—
Sales and marketing	51,941		1,829			53,770
Research and development	16,060		506			16,566
General and administrative	24,136		1,472			25,608
Depreciation and amortization	3,807		(3,807		)	—



Standard			Description		Effect on the Financial Statements or Other Significant Matters
Standards that ~~are not yet~~the Company adopted effective January 1, 2020
~~Leases:~~Financial Instruments:
~~ASU 2016-02,~~ ~~Leases (Topic 842)~~ ~~Effective date: January 1, 2019~~			The standard requires that lessees recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position. The standard also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases.	The Company has formed a project team to prepare for the adoption of the standard by its effective date. The project team has identified a preliminary population of leases and is evaluating the impact that adjustments to them under ASU 2016-02 will have to its consolidated financial statements.
~~Financial Instruments:~~
Accounting Standards Update, or ASU, 2016-13, Financial Instruments - Credit Losses (Topic 326) Effective date: January 1, 2020	The standard replaces the incurred loss impairment methodology in current U.S. GAAP (defined below) with a methodology that reflects expected credit losses. The update is intended to provide financial statement users with more useful information about expected credit losses.			~~The Company is currently evaluating the impact the adoption of the standard will have on its consolidated financial statements.~~
~~Standards adopted effective January 1, 2017~~
~~Stock-Based Compensation:~~
~~ASU 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting (Topic 718)~~	The standard is intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.	The Company adopted the standard effective January 1, 2017. As a result of this adoption, the Company recognized $8.2 million of deferred tax assets attributable to accumulated excess tax benefits that under the previous guidance could not be recognized until the benefits were realized through a reduction in income taxes payable. This adjustment was applied using a modified retrospective method with a cumulative-effect adjustment to the accumulated deficit for the excess tax benefits not previously recognized. However, given the full valuation allowance of $8.2 million placed on the additional deferred tax assets, the recognition upon adoption had no impact on the Company's accumulated deficit as of January 1, 2017. Further, the Company has elected to continue to estimate forfeitures to determine the amount of compensation cost to be recognized in each period.
~~Standards adopted effective January 1, 2018~~
~~Cash Flow:~~



~~ASU 2016-18,~~ ~~Restricted Cash~~	The standard requires that entities show the changes in the total of cash, cash equivalents and restricted cash in the statement of cash flows. Transfers between cash, cash equivalents and restricted cash should not be presented as cash flow activities on the statement of cash flows.	The Company adopted this standard effective January 1, ~~2018.~~2020. The adoption did not have a material impact on its consolidated financial statements.
~~Revenue Recognition:~~



	Balance at Beginning of Period		Additions Charged To Expense/ Against Revenue	Deductions		Balance at End of Period
Allowance for doubtful accounts:
Year ended December 31, 2017	$	594	727	(712	)	$	609
Year ended December 31, 2016	$	785	528	(719	)	$	594
Year ended December 31, 2015	$	673	1,236	(1,124	)	$	785



	2017			2016
Purchased software, including internal-use software	$	14,813		$	13,821
Computer hardware	12,129			11,608
Furniture and office equipment	2,583			2,767
Leasehold improvements	7,819			7,642
Construction in process	221			149
	37,565			35,987
Less: accumulated depreciation	(26,688		)	(22,735		)
Property and equipment, net	$	10,877		$	13,252



Balance as of December 31, 2016	$	21,632
Goodwill attributable to the HubLogix acquisition	1,854
Balance as of December 31, 2017	$	23,486



	December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Useful Life (in years)
Customer relationships	$	2,230	$	(961	)	$	1,269	7.0
Acquired technology	2,030		(796		)	1,234		7.0
Total	$	4,260	$	(1,757	)	$	2,503	7.0



	Operating Leases		Capital Leases
Year Ending December 31,
2018	$	5,893	$	1,027
2019	4,779		652
2020	5,037		—
2021	4,773		—
2022	4,033		—
Thereafter	996		—
Total minimum lease payments	$	25,511	1,679
Less: imputed interest			(45		)
Less: current portion			(993		)
Capital lease obligations, net of current portion			$	641


	2020		2019
Operating lease cost, included in General and administrative expense (1)	$	4,093	$	4,808
Finance lease cost:
Amortization of leased assets, included in General and administrative expense	1,421		2,041
Interest on lease liabilities, included in Other income (expense), net	35		140
Less: sublease income, reducing rent expense in General and administrative expense (2)	(167)		(168)
Net lease cost	$	5,382	$	6,821


	2020			2019
Supplemental cash flows information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	4,501		$	4,852
Operating cash outflows from finance leases	105			216
Financing cash outflows from finance leases	1,422			2,209
Weighted-average remaining lease term (years)
Operating leases	2.22			3.20
Finance leases	0.41			1.37
Weighted-average discount rate
Operating leases	5.48		%	5.50		%
Finance leases	7.12		%	7.28		%


	Balance, beginning of period		Net additions	Revenue recognized from deferred revenue	Balance, end of period
Deferred revenue	$	21,459	109,045	(107,203)	$	23,301


	Balance, beginning of period		Additions	Amortized costs (1)	Balance, end of period
Deferred contract costs	$	18,414	8,963	(6,044)	$	21,333



	2017			2016
Deferred tax assets:
Domestic tax loss carryforwards	$	28,403		$	32,539
Foreign tax loss carryforwards	6,849			5,455
Stock-based compensation	3,750			4,864
Tax credits	2,231			1,624
Lease incentive obligation	1,119			1,978
Other assets	2,232			2,248
Valuation allowance	(38,054		)	(41,926		)
Total deferred tax assets	6,530			6,782
Deferred tax liabilities:
Fixed assets	645			1,328
Intangible assets	604			566
Total deferred tax liabilities	1,249			1,894
Net deferred tax asset	$	5,281		$	4,888


	2019	2018
Risk-free interest rate	1.8% - 2.5%	2.7% - 2.9%
Expected term (years)	6.25	6.25
Expected volatility	37% - 41%	43%
Dividend yield	0%	0%


									Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value						(in years)	(in thousands)
					(in years)	(in thousands)
Outstanding balance at December 31, 2016	1,686,095		$	9.78
Outstanding balance at December 31, 2019								Outstanding balance at December 31, 2019	2,196,766	$	10.47
Granted	674,245		10.26					Granted	0	0
Exercised	(172,690	)	8.29					Exercised	(440,174)	8.69
Forfeited	(59,590	)	11.90					Forfeited	(5,355)	11.60
Expired	(19,668	)	23.60					Expired	(47,992)	12.38
Outstanding balance at December 31, 2017	2,108,392		$	9.87	7.26	$	1,685
Exercisable at December 31, 2017	940,485		$	9.02	5.49	$	1,662
Vested and expected to vest at December 31, 2017	1,924,479		$	9.80	7.13	$	1,682
Outstanding balance at December 31, 2020								Outstanding balance at December 31, 2020	1,703,245	$	10.87	5.69	$	9,160
Exercisable at December 31, 2020								Exercisable at December 31, 2020	1,189,509	$	10.38	4.80	$	7,122
Vested and expected to vest at December 31, 2020								Vested and expected to vest at December 31, 2020	1,594,971	$	10.80	5.55	$	8,727


						Number of RSUs	Weighted Average Grant-Date Fair Value		Number of PSUs	Weighted Average Grant-Date Fair Value
	Number of RSUs		Weighted Average Grant-Date Fair Value
Unvested RSUs as of December 31, 2016	2,151,658		$	12.54
Unvested as of December 31, 2019					Unvested as of December 31, 2019	2,086,646	$	10.93	0	$	0
Granted	1,378,259		10.37		Granted	958,055	11.32		142,317	9.27
Vested	(721,495	)	13.43		Vested	(743,730)	11.21		0	0
Forfeited	(327,385	)	12.08		Forfeited	(240,143)	10.36		0	0
Unvested RSUs as of December 31, 2017	2,481,037		$	11.14
Unvested as of December 31, 2020					Unvested as of December 31, 2020	2,060,828	$	11.08	142,317	$	9.27



	Three Months Ended,
	March 31, 2017			June 30, 2017			September 30, 2017			December 31, 2017
	(in thousands, except per share amounts)
Revenue	$	28,329		$	30,004		$	30,097		$	34,105
Gross profit	21,487			23,484			23,548			28,066
Loss from operations	(8,053		)	(3,968		)	(4,121		)	(436		)
Net loss	(8,056		)	(3,985		)	(4,055		)	(461		)
Net loss per share:
Basic and diluted	$	(0.31	)	$	(0.15	)	$	(0.15	)	$	(0.02	)



	Three Months Ended,
	March 31, 2016			June 30, 2016			September 30, 2016			December 31, 2016
	(in thousands, except per share amounts)
Revenue	$	26,347		$	27,098		$	27,992		$	31,763
Gross profit	19,434			20,235			21,181			24,730
(Loss) income from operations	(4,639		)	(6,740		)	(2,680		)	222
Net (loss) income	(4,563		)	(6,727		)	(2,552		)	5,835
Net (loss) income per share:
Basic	(0.18		)	(0.26		)	(0.10		)	0.23
Diluted	(0.18		)	(0.26		)	(0.10		)	0.21


Exhibit Number		Description of Document

~~Exhibit~~ ~~Number~~3.1		~~Description of Document~~

~~3.1~~	Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Registrant'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 (incorporated herein by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K (File No. 001-35940), filed with the Securities and Exchange Commission on May 29, 2013).

4.1		Specimen stock certificate evidencing shares of Common Stock (incorporated herein by reference to Exhibit 4.2 to Amendment No. 2 to the ~~Registrant’s~~Registrant's Registration Statement on Form S-1 (File No. 333-187865), filed with the Securities and Exchange Commission on May 9, 2013).

4.2		Description of Certain of Registrant's Securities (incorporated herein by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K (File No. 001-35940), filed with the Securities and Exchange Commission on February 12, 2020).


10.1+			2001 Stock Plan, as amended (incorporated herein by reference to Exhibit 10.12 to the ~~Registrant’s~~Registrant's Registration Statement on Form S-1 (File No. 333-187865), filed with the Securities and Exchange Commission on April 11, 2013).

10.2+			Form of Incentive Stock Option Agreement under 2001 Stock Plan (incorporated herein by reference to Exhibit 10.13 to the ~~Registrant’s~~Registrant's Registration Statement on Form S-1 (File No. 333-187865), filed with the Securities and Exchange Commission on April 11, 2013).

10.3+			2013 Equity Incentive Plan (incorporated herein by reference to Exhibit 4.6 to the ~~Registrant’s~~Registrant's Registration Statement on Form S-8 (File No. 333-188988), filed with the Securities and Exchange Commission on May 31, 2013).

10.4+			Form of Stock Option Grant Notice and Stock Option Agreement under 2013 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.15 to Amendment No. 1 to the ~~Registrant’s~~Registrant's Registration Statement on Form S-1 (File No. 333-187865), filed with the Securities and Exchange Commission on April 26, 2013).

10.5+			Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit ~~Award~~ Agreement under 2013 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.17 to Amendment No. 1 to the ~~Registrant’s~~Registrant's Registration Statement on Form S-1 (File No. 333-187865), filed with the Securities and Exchange Commission on April 26, 2013).

10.6+			Form of Indemnification Agreement with non-employee directors (incorporated herein by reference to Exhibit 10.19 to the ~~Registrant’s~~Registrant's Registration Statement on Form S-1 (File No. 333-187865), filed with the Securities and Exchange Commission on April 11, 2013).

10.7+			Amended and Restated Executive Severance and Change in Control Letter Agreement, dated as of December 17, 2014, by and between the Registrant and David J. Spitz (incorporated herein by reference to Exhibit 10.17 to the ~~Registrant’s~~Registrant's Annual Report on Form 10-K (File No. 001-35940), filed with the Securities and Exchange Commission on February 26, 2015).

10.8+			Schedule of Compensation for Non-Employee Directors, adopted effective as of ~~February 22, 2017~~January 21, 2020 (incorporated herein by reference to Exhibit ~~10.1~~10.8 to the ~~Registrant’s Quarterly~~Registrant's Annual Report on Form ~~10-Q~~10-K (File No. 001-35940), filed with the Securities and Exchange Commission on ~~May 4, 2017)~~February 12, 2020).



10.9			Office ~~lease,~~Lease, dated as of August 15, 2014, by and between the Registrant and ~~SVT Perimeter Four, LP.~~Raleigh 1 LP (as successor in interest to Duke Realty Limited Partnership) (incorporated herein by reference to Exhibit 10.2 to the ~~Registrant’s~~Registrant's Quarterly Report on Form 10-Q (File No. 001-35940), filed with the Securities and Exchange Commission on November 6, 2014).

10.10+			Executive Severance and Change in Control Letter Agreement, dated as of December 17, 2014, by and between the Registrant and Diana S. Allen (incorporated herein by reference to Exhibit 10.24 to the ~~Registrant’s~~Registrant's Annual Report on Form 10-K (File No. 001-35940), filed with the Securities and Exchange Commission on February 26, 2015).

10.11			First Amendment to Office Lease, dated as of December 10, 2015, by and between the Registrant and ~~SVT Perimeter Four, LP.~~Raleigh 1 LP (as successor in interest to Duke Realty Limited Partnership) (incorporated herein by reference to Exhibit 10.22 to the ~~Registrant’s~~Registrant's Annual ~~Report on Form~~ Report on Form 10-K (File No. 001-35940), filed with the SEC on February 25, 2016).

~~10.12+~~10.12			Second Amendment to Office Lease, dated as of August 25, 2017, by and between the Registrant and Raleigh 1 LP (as successor in interest to Duke Realty Limited Partnership) (incorporated herein by reference to Exhibit 10.13 to the Registrant's Annual Report on Form 10-K (File No. 001-35940), filed with the SEC on February 13, 2018).

10.13			Third Amendment to Office Lease, dated as of April 5, 2018, by and between the Registrant and Raleigh 1 LP (as successor in interest to Duke Realty Limited Partnership). (incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File No. 001-35940), filed with the Securities and Exchange Commission on August 9, 2018).

10.14+			Amendment to Executive Severance and Change in Control Letter Agreement, dated as of December 31, 2018, by and between the Registrant and David J. Spitz. (incorporated herein by reference to Exhibit 10.15 to the Registrant's Annual Report on Form 10-K (File No. 001-35940), filed with the Securities and Exchange Commission on February 13, 2019).

10.15+			Amendment to Executive Severance and Change in Control Letter Agreement, dated as of December 31, 2018, by and between the Registrant and Diana S. Allen. (incorporated herein by reference to Exhibit 10.17 to the Registrant's Annual Report on Form 10-K (File No. 001-35940), filed with the Securities and Exchange Commission on February 13, 2019).


10.16+		Executive Severance and Change in Control Letter Agreement, dated as of November 5, 2015, by and between the Registrant and Richard Cornetta, as amended on December 31, 2018 (incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File No. 001-35940), filed with the Securities and Exchange Commission on November 7, 2019).

10.17+		Amended and Restated Executive Severance and Change in Control Letter Agreement, dated as of August ~~31, 2015,~~8, 2019, by and between the Registrant and ~~Mark E. Cook~~Elizabeth Segovia (incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 001-35940), filed with the Securities and Exchange Commission on November 7, 2019).

10.18+		Second Amendment to Executive Severance and Change in Control Letter Agreement, dated as of November 11, 2019, by and between the Registrant and David J. Spitz (incorporated herein by reference to Exhibit 10.18 to the Registrant's Annual Report on Form 10-K (File No. 001-35940), filed with the Securities and Exchange Commission on February 12, 2020).

10.19+		Form of Performance Stock Unit Grant Notice and Performance Stock Unit Agreement under 2013 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the ~~Registrant’s~~Registrant's Quarterly Report on Form 10-Q (File No. 001-35940), filed with the Securities and Exchange Commission on May 7, 2020).

10.20		Credit Agreement, dated as of August 5, 2020, by and between the Registrant, as Borrower, and HSBC Bank USA, N.A., as Lender (incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File No. 001-35940), filed with the Securities and Exchange Commission on November 5, ~~2015)~~2020).

~~10.13~~21.1*		~~Second Amendment to Office Lease, dated as of August 25, 2017, by and between the Registrant and SVT Perimeter Four, LP. (as successor in interest to Duke Realty Limited Partnership).~~

~~21.1~~	Subsidiaries of the ~~Registrant~~Registrant.

~~23.1~~23.1*		Consent of Ernst & Young LLP, independent registered public accounting firm.

~~24.1~~24.1*		Power of Attorney (contained on signature page hereto).

~~31.1~~31.1*		Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act.

~~31.2~~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~~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~~101.SCH*		Inline XBRL Taxonomy Extension Schema Document

~~101.CAL~~101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF~~101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB~~101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

~~101.PRE~~101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document



^104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


^			These certifications are being furnished solely to accompany this Annual 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.