CommerceHub Inc.

The stable outlook reflects our expectation that favorable e-commerce growth will support continued demand, a growing customer base, and higher transaction volumes that lead to low-single-digit percent revenue growth. We could lower the rating if a deterioration in operating performance or unforeseen liquidity pressures lead to negative free operating cash flow (FOCF) or an unsustainable capital structure. In our downside scenario, we also contemplate that revenue contributions from new customers will be less than the company expects while the company also loses existing customers—perhaps from bankruptcy—as a recession takes hold. We are unlikely to consider an upgrade given our expectation that the company's tolerance for high debt levels will result in leverage exceeding 6x. However, we could raise our ratings

...The loss or poor performance of any of the company's largest customers could have a major financial impact CommerceHub Inc. depends on its five largest customers for about 45% of its revenues. However, CommerceHub has been able to integrate its platform with its customers' systems, enabling them to communicate with their partners on a single, centralized platform. This has allowed CommerceHub to maintain its customer base, as it can take a large retail client up to a year to find another provider--and switching costs can be high. We expect to see lower revenues and notable profit swings when the economy falters. Despite the strong growth of e-commerce in recent years, retailing remains sensitive to general economic conditions and consumer discretionary spending. S&P Global Ratings has raised the chance of a recession in the next 12 months to 30%-35% from 25%-30%. In addition, our forecast for U.S. GDP growth in 2020 is 1.7%, down from our expectations of 2.3% in 2019. Despite the company's...

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