Q3 2021 ChannelAdvisor Corp Earnings Call
Only mode. After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone as a reminder, today's program may be recorded I would now like to introduce your host for today's program Raiford Garrabrant director of Investor Relations. Please go ahead Sir.
Thank you Jonathan and good morning, everyone. Welcome to Channel Advisors Conference call for the third quarter of 2021.
With me on the call today are David Spitz Channel Advisors, Chief Executive Officer, Beth Segovia Channel advisor, Chief operating Officer, and Rich Cornetto Channel Advisors, Chief Financial Officer.
Good morning, we issued a press release with details of our third quarter 2021 performance as well as our outlook for the fourth quarter 2021.
This press release can be accessed on the Investor Relations section of our website at IR Dot channel advisor Dot com.
In addition, this call is being recorded and a replay will be available after the conclusion of the call.
During today's call, we will make statements related to our business that may be considered forward looking under federal securities laws.
These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date.
We disclaim any obligation to update any forward looking statements or outlook.
These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.
These risks are summarized in the press release that we issued today.
For a further discussion of the material risks and other important factors that could affect our actual results. Please refer to those contained in our most recent Form 10-Q as well as our other filings which are available on the SEC website at SEC Gov.
During the course of today's call, we will refer to certain non-GAAP financial measures all of which are reconciled in the press release that we issued today.
We also provide a GAAP to non-GAAP reconciliation schedule in our supplemental financial presentation posted on the Investor Relations section of our website.
Finally at times in our prepared comments or responses to analyst questions. We may offer metrics that are incremental to our usual presentation to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that we may or may not continue to provide this additional detail in the future with that let me turn the call over to David.
Thank you Raiford, we continued to execute extremely well in Q3, driving strong growth record revenue and adjusted EBITDA that exceeded the high end of our guidance range total revenue grew 18% year on year in Q3, a nice sequential acceleration compared to Q2, while subscription revenue growth accelerated for the fifth consecutive quarter to 26.
<unk> percent year over year.
This is a direct result of our strategy of focusing on brands and the growth investments we've been making.
<unk> also showed solid trends growing low double digits in Q3 year on year consistent with Q2, highlighting the durability of ecommerce gains made during COVID-19.
At our recent analyst day, we introduced long term financial targets for revenue of at least $250 million and adjusted EBITDA of at least $50 million by the year 2025.
That equates to double digit revenue growth and at least 20% adjusted EBITDA margins across this timeframe and now I'll touch on a few of the key highlights that keeps us bullish on our business and confident about these long term targets.
First revenue growth accelerated from Q2, despite another quarter of tough year on year comparisons. This impressive performance was fueled by another quarter of strong performance in bookings and revenue retention.
The strong growth in subscription revenue and positive trends in net bookings are important leading indicators of our future revenue growth potential.
Second our focus on brands continues to pay off and drive our record revenues in Q3 subscription revenue growth from brands again exceeded 50% year over year and brands represented 47% of our subscription revenue an all time high.
We recently shared some data to help illustrate the benefit of focusing on brands. One of these where subscription dollar net revenue retention presented on a total company basis. This metric improved from under 85% for the 12 months ended June 2017 to over 100% for the 12 months ended June 2021 drew.
Even in large part by a rising mix of brands, which because of their durable business models in larger size tend to exhibit more favourable revenue retention characteristics than retail customers.
We believe that superior unit economics, we've seen with joint with brands will continue to positively benefit our long term financial performance as they grow to represent a larger proportion of our customer base.
Third healthy demand for our products continued in Q3, helping us achieve another quarter of strong bookings brands have grown to represent a substantial majority of our bookings and it has been fairly well balanced between new logo activity in expansions, which is indicative of our land and expand strategy and.
In addition to solid sales activity, we saw improvements in retention driven by the efforts of our services team and recent platform enhancements, we're continuing to invest in product innovation and customer success initiatives like our enterprise level of service, which we feel can help us build on these positive trends.
Fourth our rapid pace of channel expansion continued in Q3 pacing ahead of schedule and providing our customers with the reach and flexibility to present their products across a growing array of marketplaces and drop ship solutions that consumers are gravitating gravitating towards as you recall aggressively expanding our supported channels has been one of our growth.
Initiatives in 2021, and why is that because this long tail of marketplaces, comprising channels like target plus the Lando Shopify way fair and well over 100, others represents a large and fast growing pool of DMV.
In fact, the long tail grew aggregate GMB at Triple the rate of our top three marketplaces for the 12 months ended June 2021, and it continued to outpace in Q3.
Also the long tail was larger than ebay and Walmart for US again in Q3 second only to Amazon in terms of GMP by offering our customers more ways to connect with consumers. We further extended our lead in the market and help to diversify our business at the same time.
Fifth our capital allocation strategy begins with reinvesting in our business in a disciplined fashion.
Why even as we lean in with growth investments across sales services and product. Our financial model has continued to deliver healthy margins and robust cash flow adjusted EBITDA margin for the third quarter was 20% and we converted nearly 90% of adjusted EBITDA dollars to free cash flow with nearly $100 million of cash on hand, no debt market leadership and a <unk>.
Large market opportunity in front of us, we intend to continue investing with discipline and growth initiatives.
Now a lot of people ask me about supply chain disruption, which has been all of the news in recent months and rightly. So it seems almost every corner of industry has been impacted by factory closures very high shipping costs and inventory and labor shortages.
Are the customers I speak with are dealing with some or all of those issues. We believe the consumer remains in solid shape and is it likely to maintain strong spending patterns through the holidays, but we might see those spending patterns shift to favor different channels brands and products based on product availability and consumers' confidence in the reliability of shipping speeds.
So believe that these challenges are likely to persist into 2022, while we haven't seen a significant impact to date like most things related to COVID-19. It does make forecasting a bit more challenging and we're taking those risks into account in our near term outlook.
Worth, noting though that through October we saw continued strength in <unk> growth. Despite the lack of Amazon Prime day. This year in contrast to last year.
Finally, we're pleased to welcome the financial <unk> to our board of Directors and management is President and Chief Technology Officer at Evercore software as a technology business leader, who has transformed at the core our leading ERP provider into a modern portfolio of fast growing software as a service industry solutions and Andrew has the experience and the expertise.
To make a significant contribution to our board.
His insights will be invaluable and are excited to welcome him to channel advisor.
And in closing I'd like to reiterate why we believe this is our time.
We have a massive multibillion dollar total addressable market with low penetration second brands, our strategic focus to drive strong unit economics third our value proposition has never been stronger and fourth we have an attractive financial model with the combination of double digit revenue growth and strong profit margins with that I'll turn the call over to Beth.
Thank you David and good morning, everyone Q3 was an awesome quarter per channel advisor as we began our third decade in business by hosting connect 2021, our annual conference curated to help brands and retailers reach more online shoppers, that's helped to 2500 registrants and more than 70 countries.
Hosting a well attended virtual analyst day, the increase awareness in the investment community and by having it all off with achieving record revenue it's been a busy three months.
As David mentioned, our team achieved very strong growth bookings again in Q3, we added notable new customers, including Master lock Detroit diesel Sennheiser, Xiaomi and natural balance that fit in terms of growing our business with existing customers. Our account managers continue to collaborate with our sales team to sign expansions with cut.
Tumors like apex, chalcedony NGF with.
With respect to churn, we achieved solid improvement quarter over quarter in Q3 part of this improvement is directly attributable to our enterprise level of service initiative. The rollout was completed in Q3 and the positive impact to date has been better than initially targeted.
We're pleased with all of these trends as bookings expansions and improved retention are important drivers of sustained growth.
And speaking of sustained growth. Another reason, we're optimistic about the trajectory in our business stems from a recent survey we conducted we pulled over 1000 U S consumers to gain insight into their shopping behaviors and their results are clear consumers aren't buying products and interacting with companies the way they did before 2020.
As we head into the holiday season consumers plan to continue shopping more online than prior to the pandemic and inventory availability and shipping speed are key factors in making online purchases.
Survey also reinforced the need to focus on social media as more consumers research product via this channel. This survey confirmed that brands need to re imagine and reinforce their e-commerce strategies to take advantage of these permanent change it and channel by there is positioned to do just that.
Let me now share an innovation update regarding new platform capabilities. We've recently released enabling brands to accelerate our digital transformation and achieved their ecommerce objective remains our priority.
One of our top innovation priorities is to give our customers more access to reach more consumers by expanding our breath of supported channels significantly and rapidly.
To that end earlier this year, we committed to adding at least 80 additional integrations by mid 2022 compared to where we were at the end of 2020.
With the recent addition of 19, new integration channel advisor now supports over 200 channels globally, new marketplace integrations include <unk>, the leading marketplace in the Nordic region, both dot com, and Belgium, and the Netherlands, Rocketing in France, and the iconic in Australia.
And fifth third party drop ship connections, including belt, Martin Taylor and Gamestop, we anticipate that we will achieve the 80 channel call with our January release.
Which would be nearly six months early and we are already actively planning to add more than 80 channels again in 2022.
This reach and ability to expand further reinforces our belief that our value proposition has never been stronger.
This is also why tattoos, a leading Polish clothing brand selected channel advisor to help grow with online presence and accelerate international sales using marketplaces.
With support from channel advisor that fashion brand launch within weeks on the Lando, reaching new purchase ready consumers in Belgium, Czech Republic, Denmark, France, Germany, the Netherlands, and Poland in their words, we want to go fast, but our resources in marketing and sales are tight and we need to reduce the daily workload on our staff.
To a minimum channel advisors International network of marketplaces, and expertise offers us great opportunities for future growth. This is yet another excellent example of how our unrivaled access to marketplaces is helping brands win.
Our product development also designed to give businesses greater control over the consumer shopping experience brand product content, and where our brand showcase their products.
In order to empower brands to enhanced digital marketing campaigns, we've released channel advisor AB testing for product content with this new capability customers can increase the likelihood of conversion by identifying the best performing product content to support effort on Google and Facebook.
Additionally, our latest product release includes the newly launched channel advisor Commerce network and platform experience designed specifically for brands and retailers searching for preferred selling channels for their products.
Centralized network enables online channel.
<unk> marketplaces web stores and retail channels to easily scout and gauge and grow with select brands and retailers looking to diversify in the highly competitive e-commerce landscape.
Complementing our 20, plus growing channel reach the commerce network accelerates matching and facilitates workflow to ensure a faster path to integration, adding value to both sides of this network, enabling brands to reach more consumers and enabling channel to expand their product assortment.
This represents the first opportunity for our channel partners to access and utilize the channel advisor platform every day to expand their reach and just the first few weeks after lines, 21% of clients and 36% of partners have created high quality profile and we are seeing active sharing of information across the network.
We believe the network effect created by this new experience will facilitate ecommerce growth for our brand customers and our channel partners.
We also released a major capability in our shack local media offering called the self service by now interstitial.
This capability enables our brand clients with the self service experience to build and defined powerful social media campaigns that include a path to purchase for their product on preferred retailer, while we already offered to buy now interstitial. This new self service capability improved time to market further maximizing traffic they generate for their retail channel.
Partner.
These enhancements to our multichannel commerce platform can help brands outpaced the competition and improved performance during the busy upcoming holiday season and beyond.
To summarize in Q3, we continued to build on the progress made in 2020 in the first half of 2021, we remain focused and have numerous initiatives underway across product innovation and customer success aimed at empowering brand to surpass our ecommerce call based on our strong execution combined with a tremendous opportunity in front of us we.
Believe we are positioned for sustained double digit revenue growth and strong margins going forward with that I'll pass it to rich now to provide a more detailed update on our financial performance rich.
Thank you Beth and good morning, everyone I wanted to walk by thanking all who attended our recent analyst day in September and for those who couldn't make it we encourage you to visit our company website to access a recording of the event.
We received a significant amount of positive feedback on the operational and financial content, we presented including our capital allocation framework, our approach to M&A and additional financial metrics to support our long term financial outlook of sustained double digit revenue growth and adjusted EBITDA margins of at least 20% through 2000.
25.
Following another quarter of record topline results I am pleased to report that momentum continued into Q3 with another quarter of record revenue and more specifically record revenue from brands.
Even in the face of another quarter of difficult growth comparisons versus a year ago total company revenue growth for Q3 increased compared to Q2 and subscription revenue for Q3 represented our fifth consecutive quarter of acceleration as growth increased to 26% year over year.
The rapid acceleration in subscription revenue growth over the last year, specifically from brands highlights how well we are executing against our strategic investments and priorities.
On top of our solid revenue performance for the third quarter of 2021, adjusted EBITDA exceeded the high end of our guidance range. We provided in August and we continued to recognize strong cash generation throughout our ongoing investment cycle.
So, let's dig a little deeper into the numbers for Q3.
Total revenue reached $41 6 million in the third quarter up 18% year over year. Despite the challenging comps I mentioned earlier and represents our best quarter ever for revenue.
Subscription revenue reached another record of $34 2 million for the third quarter.
Variable revenue of $7 $3 million was generally in line with our outlook.
As for detailed specific to our brands cohort, we achieved record total revenue of $17 5 million during Q3.
We also realized record subscription revenue of $16 1 million during Q3 growing 52% over last year, and representing 47% of our total subscription revenue, which was up roughly 800 basis points from the prior year period.
Also over the previous 12 months, we've increased net brands customer count by almost 30% and average revenue per brand customer has remained significantly higher than retail customers to.
The success, we continue to see from our sales organization with acquiring new brands and from our services and support organization on expanding with and retaining existing brands customers proves that our focus on the strategic cohort is working and is being recognized in our financial results. We continue to remain confident that brands will represent.
Greater than 50% of our total revenue by the end of 2022.
Now moving on to adjusted EBITDA.
We finished Q3 at $8 2 million well ahead of the high end of our outlook of $7 2 million generating an adjusted EBITDA margin of 20%.
While still maintaining healthy margins operating expenses had been building steadily in recent periods as.
As we've made strategic investments in our product and our services organization as well as incremental investments in sales weeks.
We expect this trend to continue in Q4 and into early 2022, as we reinvest back into our business the incremental revenue growth. We generated in 2021 with the goal of accelerating product innovation further improving customer retention and supporting our long term financial model.
Now turning to the balance sheet.
We had another solid quarter cash generation during Q3 with cash and cash equivalents, reaching $97 million and representing an increase of approximately $7 million sequentially and $31 million year over year.
Free cash flow is very healthy again in Q3, bringing the year to date total to $22 8 million.
A record pace for the first nine months of this fiscal year.
We also saw deferred revenue increased again to record levels up $1 4 million sequentially and up $7 $1 million year over year, driven by a continued strong bookings performance.
So, let's discuss our financial outlook for.
For the fourth quarter of 2021, we are issuing a revenue outlook range of between $43 7 million and $44 7 million and an adjusted EBITDA range of between $8 6 million and $9 6 million.
Keep in mind that this wider revenue and adjusted EBITDA range is consistent with our practice in previous Q4s because of the holiday season, typically makes forecasting GMB and hence variable revenue a little more challenging.
Also as David mentioned supply chain constraints are adding another element of uncertainty to financial forecasting.
Lastly, it's important to mention that when comparing our Q4 guidance to prior year results Prime day occurred in October last year. So we will not recognize a similar benefit to Jimmy volumes and variable revenue this year.
With respect to subscription revenue, we target continued strong performance in Q4, and our outlook reflects anticipated growth in the upper teens.
We also expect Opex in Q4 to increase at least $4 million over the prior year as we continue to reinvest the incremental revenue growth we have generated in 2021.
In closing we're proud of the successful investments we have made over the last two years paid for by our financial achievements over this time and our strategic focus on brands and subscription revenue growth provides us confidence in the sustainability of our financial model.
To all of you. Thank you for your continued support and on behalf of David that myself and the entire leadership team here channel advisor, we wish you and your families are healthy and happy holiday season.
With that operator, we'd like to now open the call to questions.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue. Please press the pound key.
First question comes from the line of Colin Sebastian from Baird. Your question. Please.
Great. Thanks, good morning, everybody.
I guess first off I mean, you guys have been beating expectations for EBITDA all year.
But still talk somewhat prudently I guess about margins with investments in the platform.
Can you talk a little about that dynamic is this due to the revenue upside or have you sort of pushed out some investments a bit the next year or we're just not spend as much as you might have expected at.
The start of the year has started the quarters.
Then secondly.
Just wanted to quantify the pipeline a bit, especially given the greater urgency among brands and other businesses to shift online.
If you could talk about the pipeline and maybe the mix between enterprise level prospects and smaller companies. Thank you.
Hey, Colin Thanks for the question, Yes, I think on the investments.
I would say a couple of things one is that.
We continue to hire as aggressively as we can as you know hiring in this environment has been challenging for a number of different companies. So.
So theres, probably a little bit of a lag effect there in terms of where where our initial investments we expect it to be in terms of hiring but very consistent in terms of the things that we're investing in we have approved some additional investments in the last quarter that we think will drive continued growth for us next year as well. So every quarter. We go through an analysis of various business cases.
For proposed investments and determined.
What makes sense and what doesn't and so so it's a combination of additional investments that we're making in probably a little bit of a lag effect on hiring.
On your second question around pipeline I would say pipelines remain robust.
We don't have a particularly long sales cycle. So.
Probably half of our deals roughly half our deals are sourced and closed within a quarter. So.
We don't we don't have like a nine or 12 month pipeline that we can that we can look at necessarily the <unk>.
As a whole lot.
But I would say that we continue to see very strong interest and demand from from brands, which as you know is our is our key focus.
I would say it tends to skew a little bit to the larger size or more global more enterprise type type brands, which is where I think our solution is the best fit.
Colin This is rich just one thing to add with regards to your comment on EBITDA margins.
Further what David was saying as far as hiring I mentioned in my prepared remarks that we anticipate that hiring trend to continue in Q4, but even more importantly, I focused on the fax is extending that into 2000 22022.
So we're not providing detailed.
Outlook information on 2022 at this point, but I do want to focus on the fact that you should expect.
Investments to continue our investments to continue into early 2022.
Understood Alright, thanks, very much guys.
Thanks, Paul.
Thank you. Our next question comes from the line of Joshua Ryan Lee from Needham Your question. Please.
Alright, thanks, guys congrats on the strong quarter.
Just starting off how should we think about the impact to <unk> guidance by having prime day in the June quarter. This year versus the December quarter last year, and then what are the implications for variable revenue given the comp issue. There and then just generally swelling GMB volume growth year over year at your largest largest platform.
Yeah, So happy to give you a little bit more detail on that so if you look at our outlook for revenue we have.
<unk> to high teens subscription revenue growth. So if you were to.
Infer that with variable revenue youre looking at a variable revenue decline in Q4.
Consistent with what you saw in Q3 around around 10% or so.
So we are factoring in the fact that Prime day is not occurring in Q4 of this year into our value variable estimates and.
We continue to focus on subscription revenue growth and our brands cohort, which again has a lesser concentration on variable revenue for a few reasons.
One being the fact that two of our products shopper media product in brain analytics does not have a variable revenue component and also as David mentioned it.
His prepared remarks branches have a stronger financial position and they tend to buy into a higher subscription revenue tier two.
To start the relationship with us and therefore, having a less of a variable revenue contribution over their relationship with us.
The thing I'll add on GMB is it's important to continue to emphasize that long tail. So just to give you an interesting data point in October.
Lando actually generated more <unk> on our platform than Walmart did.
So that was a first and so these long tail marketplaces are actually becoming.
In aggregate fairly significant in size and influence so even as the larger marketplaces like Amazon and ebay.
Indicate a little bit more muted growth as we go into Q4.
It's really nice to have some of that offsetting higher growth from that from that long tail and that's a trend that I would expect to continue.
As far as I can see at this point.
Okay, Great and then maybe just a follow up question you touched on this a bit but I'm curious to get some more detail.
Look at maintaining that double digit revenue growth post pandemic, how should we think about the mix.
<unk>.
Adding new brand customers versus increasing average revenue per customer in terms of driving growth over the next couple of years. You said it was fairly balanced in the quarter that would you anticipate going forward as well.
Yes, yes, yes, I think so if we look at our sales activity, obviously, it fluctuates from one quarter to the next but.
Roughly half of our of our brand bookings coming from new logos and half coming from expansions is at least over the medium term of a pattern that I think is probably.
Fair to expect.
Okay, great. Thanks, guys.
Thank you.
Thank you. Our next question comes from the line of Matt Pfau from William Blair. Your question. Please.
Yes.
Hey, guys nice results and thanks for taking my questions wanted to first ask on supply chain impact and in terms of how is that impacting your ability to sell to new customers is it creating distractions or challenges on that end.
Hey, Matt.
Thanks for the compliment I think.
I haven't seen an effect in terms of pipeline and sales velocity I mean, when we're when we're selling to customers at this time of year, it's really to prepare for next year right. So most of most of the customers that we that we closed in Q4.
Are likely to go live sometime in Q1 and ultimately they're looking forward. So.
So I'm sure that some of our customers are somewhat distracted by the cost of shipping containers, and making sure they're getting products to the right places and making sure they've got inventory but.
But that doesn't stop them from continuing to focus on their strategic investments. So we haven't I haven't really seen an impact in that regard.
Got it got it.
Also on the supply chain just wondering if we were to.
Compare what youre expecting this year versus last year, where it was a different situation, but there were supply chain challenges, perhaps on the last mile of getting goods to to the end.
Sumer did you see more of a shift to your long tail channels and also kind of evened out and is that maybe what you would expect this year. How do you think about that impact of people shifting from one marketplace to another due to some of the supply chain issues.
Yes, that's a great question and it's really my answer is really speculative because so much has been difficult to predict about the last 18 months.
I think I think one big difference this year versus last year. I think is that Amazon is very very well prepared from a logistics and fulfillment perspective and.
And even their last mile fulfillment so.
While individual sellers and brands may be struggling to get inventory available on different marketplaces, I think the infrastructure that Amazon has built over the last 18 months.
Is it is really pretty amazing and I think that will probably benefit from any kind of shift because I think consumers ultimately youre going to look for where can I, where can I buy products that I know I can reliably get in time for the in time for the holidays.
Last year, we really started marketing on that growth of long tail a lot of those are outside of the U S and so maybe a little bit less seasonal than we than we maybe see here in the U S. So I guess I guess my bet is that.
To the extent there are meaningful supply chain disruptions or shipping disruptions.
But the benefit probably accrues to larger retailers larger brands larger channels, who have the capacity in the muscle and the flexibility too.
Sure.
To influence their supply chain.
Got it.
Is it for me Thanks, a lot guys I appreciate it.
Thank you Matt.
Thank you. Our next question comes from the line or is that coming from B Riley.
Yes, hi, good morning, Congrats on the strong quarter and thanks for taking my questions.
My first one is going to be geared towards that in terms of adding new channels with your pacing.
Out of the target that you're introducing that started the year I just wanted to get from your perspective, if any of these new channels are really starting to move the needle from a bookings perspective, now that you have them up and live and connecting those would listen to your brand customers.
Yeah.
I would say, we're starting to see a lot of activity.
<unk>.
It takes a bit of time to get the integration up and running tests in live which we've been really focused on for that first couple of quarters. Obviously of this year with some success rates that we're ahead of pace, which gets us really energized and we've really lines to focused campaign just in the last month to start driving that adoption.
Ross.
That was a key channel.
We're anticipating that next year, we're going to see a lot of expansion and adoption rates for Q4 and holiday as David mentioned customers are locked and loaded now and their omnichannel is there going to be on for the next eight weeks or so as we get through holiday and we will see more of that adoption occur next year.
Very excited about the prospect.
Understood and then my other question is really just around your enterprise level of service rebrand it seems like that fully rolled out now with the first cohort.
But you were wanting to launch.
What do you anticipate for kind of next steps for that program as you continue to expand it out to more of your brands customer base.
So I think our focus right now is delivering on our promise. So we had shared that we have a few new roles that we're offering customers an expanded team and so we are demonstrating new interactions with our customers providing you.
Deliverables, we're assessing their integrations and optimizing those we're providing cross channel strategies in a new way, so really going deeper with our customers that are in the program. So that's where we're focused in a moment, we're talking about how we scale it out to reach additional customers and I would suspect we'll consider doing that as we.
Get into mid year next year, but in the moment, we're focused on having those teams fully operational and supporting customers in the UAE and the feedback from our customers in that program, it's really very positive they're feeling that additional coverage more resources more expertise and so our focus in the moment on delivering.
On the primary.
Understood well, thanks for taking my questions and congrats again on the strong quarter.
Thank you Sir.
Thank you. Our next question comes from the line of Thomas Forte from D. A Davidson your question. Please.
Great One question and one follow up and also congrats on a very impressive quarter.
Amazon and Shopify suggested that in the third quarter similar to the second quarter that many consumers who have been vaccinated returned to physical stores and therefore e-commerce.
Slowed versus last year.
I appreciate your high level comments on what you thought happened e-commerce in the third quarter and how we should think about online penetration in the fourth quarter and into next year.
Hey, John This is David Thanks for the comments.
We saw fairly consistent growth in the third quarter year over year as we saw in Q2, obviously lower growth than we saw last year. When things were just pegging pegging the needle so to speak so, but we felt pretty good about the GMB growth that we saw and again I'll emphasize.
Increasing importance of that long tail of marketplaces beyond the Amazon ebay and Walmart for us.
And so I expect that dynamic to continue.
So from where I sit it's a lot of the trends that we saw last year, so far look pretty durable and I don't doubt at all that.
Travel more and go out more that theyre going to visit.
Traditional retail.
Stores more than they did during the pandemic of course, but I don't I don't expect that we will see some kind of reversal.
Our decline in E Commerce penetration I think we achieved a new kind of high watermark last year and I think we're going to so far we've seen us continue to exceed that this year and my anticipation is that that will continue through the fourth quarter.
Great and then for my follow up question with the sustained strength you've had with brands.
Your thoughts on your opportunity to take price.
This year and next year.
You're talking about price of our solution.
Yes.
Yes.
No.
He is looking at the financial dynamics of our of our business right and a lot of our customers are facing cost pressures in other areas, whether it's shipping costs labor costs et cetera.
And so we want to be thoughtful we want to be good partners with our with our customers.
So we haven't announced anything but I would say that thats always something that we're looking at and I think our position as a leader in the space gives us some flexibility in that regard, but we also want to make sure that we're being good partners for our customers.
Great. Thanks for taking my questions.
Thanks, Tom.
Thank you.
Does conclude the question and answer session of today's program I'd like to hand, the program back to wait for Gary Brown for any further remarks.
Thank you everyone for joining us today, we look forward to speaking with you again soon.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Okay.
Yes.
Yes.
Yes.
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