Q4 2021 ChannelAdvisor Corp Earnings Call
Good day, ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2021 General Partners Earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press. The Star then the one key on your Touchtone telephone.
If you recall all please this is there any time. Please press Star then zero I would now like to turn the conference over to your speaker host today.
Thanks, Brett <unk> director of Investor Relations. Please go ahead.
Thank you Olivia and good morning, everyone.
Welcome to channel Advisors conference call for the fourth quarter and full year 2021.
With me on the call today are David Spitz Channel Advisors, Chief Executive Officer, Beth Segovia Channel Advisors, Chief operating officer, and Rich Cornett Channel Advisors, Chief Financial Officer.
This morning, we issued a press release with details on our fourth quarter and full year 2021 performance as well as our outlook for the first quarter 2022.
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.
We disclaim any obligation to update any forward looking statements or outlook.
These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. These risks are summarized in the press release that we issued today.
For further discussion of the material risks and other important factors that could affect our actual results. Please refer to those contained in our most recent Form 10-K 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.
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.
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.
Q4 marks an outstanding finish to an amazing year for channel advisor as our strategic focus on brands continued to drive solid results.
We capped off our 20th year in business with record revenue our fastest year on year growth since 2015, adjusted EBITDA that significantly exceeded the high end of our guidance and strong cash flow that pushed our cash balance about $100 million as of the end of the year.
I'd like to touch on a few highlights that keep us bullish on our long term outlook.
First the momentum in our business remained strong with fourth quarter revenue that exceeded the high end of our guidance range. This was driven by subscription revenue growth that again exceeded 20% and sequential growth in variable revenue that was in line with historical Q4 seasonality.
Our revenue strength was fueled by the outstanding results achieved in bookings and revenue retention throughout the year, coupled with continued double digit GNP growth in the fourth quarter, highlighting strong demand for our products. The durability of ecommerce gains post COVID-19 and a testament to the value our platform brings to our customers.
Second our focus on brands continued to pay off and drive our record revenues in Q4 subscription revenue growth from brands exceeded 40% year on year and brands represented 48% of our subscription revenue. Another all time high and fast approaching a majority of our subscription revenue.
Because brands are generally stickier and offer greater potential for expansion. We believe the superior unit economics, we have enjoyed with brands will continue to benefit our results as they grow to represent a higher percentage of our business.
Third demand for our products continued to be strong in Q4 capping off a great year for our sales team, who grew bookings 36% year over year compared to 2020.
And despite our 16% increase in revenue for the year churn actually sell more than 8% compared to 2020 in real dollars and even more as a percentage of total revenue, reflecting our investments in product innovation and enhancing our services take.
Taken together, our fantastic sales and revenue retention execution throughout 2021 have us entering 2022 on strong footing and with good momentum.
Fourth speaking of product innovation, our rapid pace of channel expansion continued in Q4, and we finished the year with over 300 supported channels well over what we initially targeted at the beginning of 2021 I've.
I mentioned that fourth quarter GMB continued growth continued to be strong and much of that was driven by continued fast growth of this long tail of channels, which in aggregate is now larger than ebay and Walmart for us second only to Amazon and growing much faster than all three.
This is Brett was part of why we're an industry leader with digital Commerce 360 recently naming us the top channel management platform for the 10th year in a row.
But we're not resting innovation continues to be an area of significant investment for us as best as Beth will discuss in a moment.
Fifth we remain committed to maintaining a disciplined financial profile and capital allocation strategy bias towards growth and reinvesting in the business a rigorous focus on generating returns on invested capital above our cost of capital have allowed us to make significant investments, while still delivering strong profitability and robust cash flows.
Adjusted EBITDA margin for the full year was 23% and we converted roughly 75% of adjusted EBITDA dollars to free cash flow, increasing our cash balance by over $29 million with a $100 million in cash on hand, no debt market leadership in a large market opportunity still in front of us we intend to continue investing with discipline in <unk>.
Both initiatives.
Our environment isn't without its challenges of course that remains significant macroeconomic uncertainty that makes forecasting more difficult and we're having to work doubly hard to ensure we're achieving our desired staffing levels, particularly in sales where the competition for talent is as strong as I've seen in my career.
Nonetheless, as we turn the page to 2022, I'm confident we'll rise to the occasion as we always have and Im excited about our plans we have for the year and with that I'll turn it over to Beth.
Thank you David and good morning, everyone.
We can have a great finish to an incredible year, so lets begin.
First of all I couldnt be more proud of the tremendous execution from our entire organization everyone ready for the challenge of adding hundreds of customers well over 100 channels and many new product capabilities, while growing our team substantially around the world all without missing a beat and achieving record results.
Our platform approach, it's really resonating with brands, which is demonstrated by the strong growth across each of our product line.
Our marketplace business continued to grow nicely aided by our rapid channel expansion.
Marketplaces, we experienced growth in other product areas as well.
Offer technology and services to power digital marketing or digital marketing revenues grew over 20% in 2021 with bookings growing at a multiple of that one important component of that business retail media growth accelerating growth.
Advertising on marketplaces, like Amazon and Walmart has become an imperative for brands wanting to be seen and to secure the sale.
Illustrate this point, we've just released a new customer success story available on our website featuring Sweetwater sound based on 81% reduction in advertising cost of sales within a one month period, optimizing our approach and protecting margin by leveraging channel advisor to help automate Amazon ads.
Our chaparral media campaigns allow brands to build a branch from their own promotional efforts to their preferred retailer as a result of new product capabilities and expanded coverage through a dedicated sales team our shack local media revenue grew nicely and bookings expanded at a rapid rate.
<unk> analytics is also hitting its stride resonating with bank clients and achieving our best bookings quarter to date in Q4, providing us with a well rounded portfolio that offers multiple dimensions for growth.
As evidenced that our land and expand strategy is working.
As David mentioned camera advisor receive continued validation of our leadership in ecommerce by being named the number one channel management platform for the 10th consecutive year.
Now I'd like to share a little bit about what began in 2021 to affirm our leadership position and what we're planning for in 2022 to stay there.
On the product side of things recent releases focus on giving businesses more control over our multichannel commerce, including where and how brands sell and advertise their products.
It starts with channel and then 2021, we exceeded our goal for the year by adding over 100 channel as a result, we now have over 300 integration integration significantly expanding our leadership position over the past 12 months, the broadest offering in the market.
In addition, we launched Walmart fulfillment services, Amazon add console and our Commerce network to continue to go deeper and enabling specific channel performance and expanding the overall breadth of our platform.
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 channels to expand their product assortment.
It's still early to date more than a third at both our partners and sellers have published profiles with more than 500 profile shared in the platform and thousands of matches made.
<unk> is encouraging as we continue to nurture adoption, we expect to continue to iterate and expand capability over the next several years to add value to this platform facilitating connections along the way.
As we move into 2022, we are focused on a number of product initiatives that are exciting and I'll share just a few now for our retail media we plan to expand the number of end points supported by our accounting toolkit of campaign management keyword automation and reporting this will expand our customers' ability to meet consumers, where they shop and optimize return on ad spend.
First half of our media, we intend to enable marketers to drive more conversion by implementing expanded brand and campaign differentiation, including more design elements and customization.
And of course with marketplaces, we plan to continue to add channels at a similar rate to last year as well as simplify and launching a new channel and reducing the time from launch with more self guided quick starts that smart mapper and error resolution guidance.
Turning to services in 2021, we completed the launch of our enterprise level of care and the return on investment has clearly exceeded the targeted gains with both improved retention and growth due to expansion that this group of customers.
We also implemented additional coverage and leverage to more intentional approach to provide extra care for first year client.
We expanded support capability significantly and materially reduced openings support cases for 2022, we see the opportunity to make further improvements to improve retention, we plan to launch more service offerings, including industry specific channel bundles and marketplace plus advertising bundle automating more routine tasks, creating.
ANSI, reducing time to launch an improving support response and resolution time.
Finally, as we close out 2021, I'd like to call out just how proud I am of the investments we made in our people.
Employee satisfaction measured by regular engagement surveys increased again in 2021 remaining well above industry benchmarks and over 20% of our employees grew their careers by a promotion or taking on a new well.
As a result channel advisor was recognized as one of the 2021 best places to work by the Triangle business Journal a distinction based on employee survey feedback.
We've shared our initiatives related to diversity equity and inclusion with you before and I'm Super proud that we published our first annual diversity report, which describes in detail our efforts and accomplishments and can be found on our website.
To summarize in 2021, we continue to build momentum with strong accomplishments across product innovation, our client services and by investing in our people.
As we enter 2022, we have numerous initiatives underway aimed at continuing to empower brands just passed their ecommerce call.
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.
'twenty one saw continued GMB strength, driven by the sustained impact of Covid on consumer shopping habits.
But more importantly for channel advisor the successful execution of our investments in sales services and product to support our brand strategy.
All of this leading to record bookings and revenue retention subscription revenue total revenue adjusted EBITDA and cash results.
Following a very strong Q3, which saw a record top line results and robust subscription revenue growth I am pleased to report that momentum continued into Q4 as both revenue and adjusted EBITDA exceeded the high end of the guidance range. We provided in November and we continued to recognize strong cash generation through.
Our ongoing investment cycle.
So let's get into the details for Q4.
Total revenue reached a record $45 4 million in the fourth quarter up 13% over Q4 of last year and up 9% over our previous record last quarter.
Subscription revenue reached another record at $34 8 million for the fourth quarter up 22% and this compares to 8% growth in Q4 of 2020.
Variable revenue increased 44% sequentially to $10 6 million as our customers successfully navigated the well publicized supply chain disruptions.
For the full year 2021 total subscription revenue grew 23%.
Subscription revenue from brands grew 47% over 2020.
I'd ask for additional details on our brands cohort, we achieved total revenue of $18 9 million. During Q4 more importantly, we realized record subscription revenue of $16 7 million during Q4 growing 42% over last year and representing 48% of total.
Subscription revenue this is up roughly 700 basis points from the prior year period.
Brands customer count and average revenue per brand customer continued to increase throughout the quarter and our strong revenue retention is driven by the strategic cohort of customers.
As we approach nearly $140 million in total annual recurring revenue.
Brand is very close to exceeding our IRR from retail and resellers. In addition.
<unk> is growing revenue cohort are enterprise customers with <unk> greater than 100 K.
These customers now represent the majority of our IRR.
Given all of these factors we continue to expect that a majority of our revenue will come from brands by the end of 2022.
Now moving on to adjusted EBITDA.
We finished Q4 at $11 2 million.
Well ahead of the high end of our outlook of $9 6 million generating an adjusted EBITDA margin of 25%.
For the full year 2021, adjusted EBITDA finished at a record $37 9 million.
Adjusted EBITDA margin was 23%.
While still maintaining healthy margins, we remain bias towards growth and operating expenses have been building steadily over the last year as we made strategic investments in our product and our services organization as well as incremental investments and sales we.
We expect this trend to continue into 2022 with a focus on accelerating product innovation further improving customer retention and supporting our long term financial objectives.
Alright, let's switch to the balance sheet.
We had another solid quarter of cash generation during Q4 with cash and cash equivalents, reaching $100 6 million and representing an increase of approximately $4 million sequentially and $29 million year over year.
We have more than doubled our cash balance.
Since mid 2019 free.
Free cash flow was very healthy again in Q4, bringing the full year total to $29 2 million.
We also saw deferred revenue increase again during Q4 to record levels up $7 6 million year over year, driven by our strong bookings performance.
Now onto our financial outlook.
For the first quarter of 2022, we are providing a revenue outlook range of between $41 9 million and $42 3 million and an adjusted EBITDA range of between $6 8 million and $77 $2 million.
With respect to subscription revenue, we target continued strength in Q1, and our outlook reflects anticipated growth in the mid teens, we expect variable revenue to decline year over year due to the tough comps against Q1, 2021, which saw growth of 43% over Q1 of 2020 and because customers are.
Have been trading up to higher tiers over the course of the last year, which benefits our subscription revenue.
We also expect Opex in Q1 to increase at least $4 million over the prior year given the full period impact of the investments made in 2021 as well as planned incremental investments in the first quarter.
Consistent with recent practice, we will not be providing full year guidance for total revenue adjusted EBITDA. At this time. However, we remain confident in our long term financial targets of at least $250 million in revenue and $50 million and adjusted EBITDA in 2025.
So in closing the Covid pandemic has had and continues to have a meaningful impact on consumer shopping habits across the globe throughout most of 2020, when the world dependent on E. Commerce channel advisor leaned forward and made strategic investments in our sales organization driving solid bookings performance and revenue.
Growth in 2021, we saw sustained ecommerce demand and we continued investing back into our business focused on customer expansion and retention and product development, leading to record results across nearly every financial metric.
Now in 2022, despite more difficult comps to measure against we believe the investments we have made along with our strategic focus on brands position us well for continued success.
With that operator, we'd now like to open the call to questions.
Ladies and gentlemen to ask a question at this time, you will need to price the spot in the one key on your touch upon telephone.
Im showing a question you may press the pound key.
First question coming from the line of Joshua <unk> with Needham Your line is open.
Yes, thanks, guys for taking my questions here.
So on the <unk> call you guys mentioned that you might be somewhat insulated from the supply chain issues due to your focus on enterprise brands, which your results kind of show that here.
We've heard from Paypal and the Facebooks of the World.
<unk> been discussing a greater impact maybe than was expected on supply chain. During the holidays curious what are you guys seeing here now today in real time regarding the supply chain issues over the last couple of months.
Hey, Josh This is David I would I would say that in Q4, we really didnt see a noticeable impact that we could detect as we mentioned we saw continued strength in GMB growth.
My sense is that to the extent consumers were having difficulty finding the products that they were looking for.
Found alternative products are shopped on different different channels.
As it relates to real time.
I would say that our view hasnt really changed on that.
<unk> continued to see <unk> growth in the month of January .
If I had to guess anything right now I'd say, probably inflation might be a bigger impact on consumers than supply chain just in terms of spending power but.
But I don't I don't think we're seeing any clear evidence that supply chain is having a meaningful effect at least on our customer base and our channels.
Okay got it that's super helpful. And then when you look at the Q1 EBITDA guidance of $7 million.
It's a little bit below consensus.
You mentioned the ramping investments, but maybe can you help us understand there was a little bit more color. What's going on are you guys ramping your customer service your enterprise service level.
Down market more or maybe just get some more detail on where those investments are going.
Good morning, Josh This is rich great question. So there's a few things going on there. So first I'll focus on the top line impact on EBITDA. So.
We are undergoing a few negotiations with our partner.
Base and with that we identified some expected variable revenue that we pushed to the back half of the year and being that it is variable and majority of that does flow to the bottom line.
It's basically a shift of some of that to the back half of the year.
As we mentioned our Opex is targeted to increase year over year, mostly driven by the full year impact of our 2021 investments as well as some incremental investments in 2022.
But then there is the.
The fact that we have at this point in time, well over 130, new individuals in the organization.
Merit wage inflation all of that plays a role.
In.
At least our Q1 expectations as far as EBITDA is concerned so.
Investments continue to be our focus.
It takes a little while for that to start paying off on the topline, but expect some some more momentum towards the back half of the year.
Got it that color is super helpful. Thanks, guys I'll pass it along.
Thanks, Josh.
Our next question coming from the line of Zach Cummins with B Riley Your line is open.
Yes, hi, good morning, Thanks for taking my questions and congrats on the strong results in the year.
Just just keeping on the investment team.
David I think you mentioned that it's been a pretty challenging environment in terms of finding sales talent can.
Can you give us any sort of update us kind of the progress you've made through Q4 and through the first six weeks of this year.
Where youre at from a sales capacity.
Standpoint versus where you were hoping to get.
Yeah, Hey, Zack I appreciate the.
Remarks on Q4, yet.
We're a bit behind where I'd like to be on sales capacity.
I think it's well understood out there that there's a pretty strong word for talent in the tech realm, and I've seen that particularly in the sales side.
And so as we've continued to invest and grow the team.
That's become incrementally harder just in terms of.
The competition out there for talent, so I would say, we're modestly behind where we'd like to be like to be a little bit further along we've doubled down on it and had some pretty good success here at the beginning of this year as.
As you can imagine that's a.
Good time of year to go find good.
Good sales talent, who might've been waiting to collect their Q4 bonuses. So.
So we've come into the year with some some pretty good momentum there, but we're playing catch up a little bit right now.
Understood that's helpful and rich I think you mentioned.
I think thats kind of answers a little bit of the my question here, what's the implied revenue guidance in Q1, it seems to be an even steeper decline than what we've seen with the tougher year over year comparisons here in the back half of the year for variable revenue.
As part of that due to the partner negotiations that you are seeing more so than any meaningful slowdown in <unk>. It sounds like you guys are still grow year over year January .
Yes, obviously first reiterate we try to focus on the <unk>.
Things, we can control, which is our subscription revenue and.
You mentioned the tougher comps, we had 17% growth in subscription revenue in Q1 of last year.
So for us to commit to mid teens growth in Q1 of this year I'm pretty proud of that commit.
Variable revenue as I mentioned earlier and as you acknowledged.
See some shifting there from the from the first part of the year tied to the back half of the year. So that is pretty much a direct impact not only on variable revenue, but also EBITDA.
We also see as we continue to focus on brands.
<unk>.
We have a higher propensity to have deal terms focus on subscription.
We have two of our product offering shuffle medium brand analytics that do not offer a GMT our variable revenue component.
So.
That's a pretty sudden.
A summary of pretty decent summary of that.
The other question Zach one thing I'll add is that as customers continue to see elevated volumes. They also have a tendency to trade up their subscription tier.
And so to some extent what you see is a shift of variable dollars into subscription dollars essentially getting a volume discount.
And that has a near term impact because it will reduce variable a little bit more than it'll increase subscription but of course, we believe the subscription long term value of the predictability of that subscription is good. So so while it impacts variable in the near term we think it is.
Positive long term trend.
Yes, exactly just one other thing on that I do anticipate some difficult comps as well in Q2 as it pertains to variable revenue that revenue was $9 $5 million last year. It was a very strong quarter for us so.
We will continue to see some difficult comps in the first half of this year and maybe see some progression on that front in the back half.
Understood that's helpful.
And final question for me is geared towards that.
All the new channels that you added this year I mean, you added over 100 channels in 2021.
Just kind of curious of the uptake that you've seen of those channels right out. The gate do you typically have brand customers that are ready to go as soon as that channel was alive Im just kind of curious some of the payoffs that you get from adding these channels right out the gate.
Sure. So it takes a little time once you get the channel launch to get customers to adopt to those channels, but the process that we use it's Tim.
We work with our clients to understand what their priorities are and to align with clients. So that you know as we launch a channel. We know that there is demand for that channel. We use the data processing, we have early adopters.
That makes sure we test obviously all those information flows in those channels, they're up and running quickly and then we will see adoption steadily over the couple of quarters that follow us.
Launching a new channel.
And we also tend to drive campaigns to make sure that our salaries are aware that we have new channels and our new Commerce network helps us advertising channel to ourselves. So that we can create that awareness early on so we did finish the year strong with adding well over 100 <unk>.
Remember our commitment to do 80% 18 months. So we're incredibly proud of that acceleration, but we do expect it will take multiple quarters and the whole year to get people adopting across that channel base, we're super excited about that opportunity.
Understood well, thanks for taking my questions and best of luck here in the coming quarter.
Thank you.
Our next question coming from the line of Matt <unk> with William Blair. Your line is now open.
Okay, great. Thanks for taking my question.
Great results guys. So on the inflation comment just wanted to understand how does that impact channel advisors revenue in terms of how your contracts are structured with your customers.
Hey, Matt This is David.
So ill make a couple of different comments. The reason I made that comment is not necessarily because we see any specific.
Trend or pattern in our <unk> I am just remarking on them I think I saw an article this morning that the average American consumers paying something like $250 more per month.
In aggregate just due to inflation. So in my view that has to have some kind of dampening effect on the consumer, but it's not really a channel buys or specific comment.
As it relates to customer contracts.
We have a portion of our contracts that have annual escalators.
Typically in the low low single digit percentages and.
We have customers that do not I can tell you that we are going through a pricing analysis here in Q1.
It makes it may we may make some changes as we as we go into Q2, we have as you know our principal input costs are people and wages.
And we want to continue to make sure that we're competitive and we're evaluating what may or may not make sense from a pricing perspective. So.
So hopefully that answers your question.
Yes, so on the customer contracts.
Does.
If inflation is impacting the price of the goods that are selling does that have any impact on the sort of commitments at the minimum commitments that they make to you.
No. So just to give you a hypothetical so if a customer is paying us $50000 a year for a certain amount of.
Monthly GMB.
In any given month, so either fall below that amount or above that amount and if they fall above that amount they'll pay a take rate that's nominally higher than they are than they are pre purchase take rate. So whether their average cost per order or basket size is $50 or 100 or $60 or whatever it doesn't really change anything other than to the.
Extent that their prices are higher and their units are consistent they'll drive higher DMV and so if they are consistently growing above their subscription thresholds they'll pay more variable.
Or potentially as I mentioned on an earlier answer.
Customer may say, hey, I'd like to trade up to a higher subscription tier.
But it.
It's really it's really no different than.
If we were in a Q4 situation, where there is higher volume in this case.
Due to higher prices of products.
As opposed to a higher unit volume, but.
So does that make sense.
It does thanks.
I just wanted to ask about on the <unk>.
If any changes are you seeing any.
Benefit to your marketing our digital marketing business as a result of that due to.
People looking for perhaps more effective.
<unk> spend their advertising dollars on.
Yes, I think we are.
Some of our fastest growing product lines are and the retail media space. So for example, helping brands with Amazon advertising Walt.
Walmart media being another example.
What I think youre seeing us with idea far youre sort of.
Breaking up a little bit of a duopoly.
Used to exist with Google and Facebook and it's creating a lot more diversification out there in terms of the advertising channels. So.
And that was that was already happening with the rise of retail media, but I think it's as Facebook has commented some of their returns on AD spend have been impacted by this so it's causing customers to look for other areas, where they can potentially get a better return on investment so.
As you know when there is increased fragmentation and complexity channel advisor can help with that and ultimately that's good for our business. So.
So I would say indirectly, it's probably one of the reasons that retail media is one of our fastest growing areas.
Great last one for me on the Commerce network, which seems fairly exciting in terms of its long term potential how are you thinking about that from a long term perspective and its potential contribution.
Well, it's early yet and we have.
<unk> technical roadmap plans to continue to release new capabilities as we go throughout the year. This year and next year. Our intention there is to get both sellers and our partners the opportunity to not only find each other but then facilitate workflows in a more automated fashion so that we can.
Facilitate launching connection much faster so it's early and right now we're ensuring our clients are discovering that capability and beginning to network using that capability and over time as the tool itself becomes more robust we can envision.
Our partner is actually being in our software every day managing their seller network, that's kind of the vision for where we're headed at the moment and I think the question that normally follows that is what's the monetization look like and at the moment. It's part of your partners have led channels either so whether you are a seller with a contract or a partner.
With an existing arrangement with US you can use that capability as part of the platform that you subscribe to and we see that as connections are made additional subscription fees are potentially paid or additional variable revenue is realized as a result of GMB growth through additional channels and reaching more consumers and achieving.
<unk>. So we may and we don't know what will happen next but we have really.
Strong intention that this is going to become a critical feature for both sides of our network and we're excited about that and Matt I'll dovetail on that a little bit what gets me most excited over the long term as this division because historically, we've never add software that are that are selling channels log into right. It's always been on the supply side and so by giving our selling <unk>.
There's something to log into and begin using our technology longer term, what I'd love to see is we're creating so much value for them in terms of their workflows that they prefer to just start today logging. The channel buys are just like our customers do so.
That I think will continue to strengthen our two sided network and hopefully cause our selling channels to realize that.
As many of them do today that it's easier to integrate and suppliers through channel advisor then through other means so thats ultimately long term vision is to create enough value for them.
Sort of naturally go in that direction.
Great. Thanks, guys I appreciate it.
Thanks, Bob.
Our next question coming from the line of Victoria James.
Davidson Your line is open.
Alright, Thank you for taking my question.
So last quarter, Amazon and Shopify indicated trending changes in consumer shopping behavior.
A away from heavy online retail and more into physical retail what are your thoughts on consumer behavior of this last quarter and what are you anticipating as far as the coming quarters.
Hey, Victoria This is David.
We saw continued strength in <unk> in Q4 double digit GMB growth, which to me indicates a pretty strong consumer.
And online spending.
What I'll add to that and I made some commentary in my prepared remarks.
That long tail of channels that I spoke about continues to drive outsized growth compared to conclude the majors.
And so I think part of what we're seeing maybe is a little bit of a shift towards more boutique shopping online. So a lot of a lot of the channels that are in that long tail or a category specific maybe their fashion specific or what have you.
Our auto parts as an example in one way some of these upstart sort of smaller marketplaces can compete against the large general merchandize marketplaces like Amazon is by having a more specific user experience tailored to a specific category right. So in fashion youre going to have a lot more around.
Visual imagery, maybe videos things like that auto parts being another example, where there's a lot of educational content and how to kind of knowledge. So so.
So potentially that's one thing that we're seeing is people seeking out experiences that are a little bit more specific to the category of products that they're looking for.
But overall, we saw what I would characterize as continued robust online online spending and you asked me to pontificate, a little bit on the future.
I think we've said since Covid started.
We didn't expect.
Shopping habits have changed permanently to certain extent and we don't expect <unk> to <unk>.
E Commerce penetration to go backwards or revert back to.
Pre pandemic levels I think a lot of people out there shopping more online continued to see strong convenience, maybe dabbled in some new things like online grocery shopping and realize like Thats, a pretty good value proposition at a time saver. So.
They're going to be takes puts and takes in different areas, but I would expect that E. Commerce gains are here to stay and they are certainly going to not grow as quickly as they did during during COVID-19 , but.
But I think e-commerce penetration is going to continue to gain share.
Thank you I think you started to touch on my follow up question, which was.
If you have any more color or anything else to say about the performance of your marketplaces beyond sort of the big guys like Amazon ebay and Walmart.
Yes so.
I guess consistent with what I said.
A moment ago.
That long tail, which is characterized by a larger number of smaller marketplaces.
Aggregate has been growing much much faster than our three largest being Amazon ebay and Walmart.
To some extent I think thats law of large numbers right I mean, Amazon has such significant penetration.
And to the population that I wouldn't expect them to grow at the same rate as some of these smaller but.
There's a lot of innovation going on around that user experience category specific things.
The other trend that we see in the long tail is that often they are country specific right. So.
Allegro in Poland is one of the most popular shopping sites.
Probably 99 out of 100 Americans never heard of Allegro right, but if you're in Poland.
It's a place to go shop, and so as we add those types of shopping channels.
It may not be the most critical priority for our U S based brands, but if you're a European brand or you won't get access to the Polish market that becomes a pretty interesting proposition. So I think it's a combination of.
Our region specific.
Selling channels and category specific selling channels that are helping drive.
Good volumes for us.
Lovely. Thank you thank.
Thanks, Victoria.
And I am showing no further questions at this time I would now like to turn the call back over to Rick.
Thank you everyone for joining us today, we look forward to speaking with you again soon.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.
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