ChannelAdvisor Corporation
Q4 2021 Earnings Call Transcript

Published: 10 Feb 2022

[Operator:]

Good day, ladies and gentlemen. Thank you for standing by. And welcome to the Fourth Quarter 2021 ChannelAdvisor Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker for today, Raiford Garrabrant, Director of Investor Relations. Please go ahead, sir.

[Raiford Garrabrant:]

Thank you, Olivia. And good morning everyone. Welcome to ChannelAdvisor's conference call for the fourth quarter and full-year 2021. With me on the call today are David Spitz, ChannelAdvisor's Chief Executive Officer; Beth Segovia, ChannelAdvisor's Chief Operating Officer; and Rich Cornetta, ChannelAdvisor's 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.channeladvisor.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 maybe 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-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 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.

[David Spitz:]

Thank you, Raiford. Q4 marks an outstanding finish to an amazing year for ChannelAdvisor 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 above $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 revenues 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 GMV growth in the fourth quarter, highlighting strong demand for our products, the durability of e-commerce gains post COVID, 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've 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 fell 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. Taken together, our fantastic sales and revenue retention execution throughout 2021 have us entering 2022 on a 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'll mention that fourth quarter GMV growth continue 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 breadth was part of why we're an industry leader with Digital Commerce 360 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 Beth will discuss in a moment. Fifth, we remain committed to maintaining a disciplined financial profile and capital allocation strategy, biased towards growth and reinvesting in the business. Our 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. Our adjusted EBITDA margin for the full year was 23% and we converted roughly 75% of adjusted EBITDA to free cash flow, increasing our cash balance by over $29 million. With $100 million in cash on hand, no debt, market leadership and a large market opportunity still in front of us, we intend to continue investing with discipline and growth initiatives. Our environment isn't without its challenges, of course. There remain significant macroeconomic uncertainty that makes forecasting more difficult. And we're having 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 I'm excited about our plans we have for the year. And with that, I'll turn it over to Beth.

[Beth Segovia:]

Thank you, David. And morning, everyone. We delivered a great finish to an incredible year. So, let's dig in. First of all, I couldn't be more proud of the tremendous execution from our entire organization. Everyone rose to 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 in achieving record results. Our platform approach is really resonating with brands, which is demonstrated by this strong growth across each of our product lines. Our marketplace business continued to grow nicely, aided by our rapid channel expansion. Beyond marketplaces, we experienced growth in other product areas as well. We offer technology and services to power digital marketing. Our digital marketing revenue grew over 20% in 2021, with bookings growing at a multiple of that. One important component of that business, retail media, drove accelerating growth as advertising on marketplaces like Amazon and Walmart has become an imperative for brands wanting to be seen and to secure the sale. To illustrate this point, we've just released a new customer success story available on our website featuring Sweetwater Sound, who saw an 81% reduction in advertising cost of sales within a one-month period, optimizing their approach and protecting margins by leveraging ChannelAdvisor to help automate Amazon ads. Our Shoppable Media campaigns allow brands to build a bridge from their own promotional efforts to their preferred retailers. As a result of new product capabilities and expanded coverage through a dedicated sales team, our Shoppable Media revenue grew nicely and bookings expanded at a rapid rate. Brand analytics is also hitting its stride, resonating with brand clients and achieving our best bookings quarter to date in Q4, providing us with a well-rounded portfolio that offers multiple dimensions for growth. This success is evidence that our land and expand strategy is working. As David mentioned, ChannelAdvisor received 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 we did 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 focused on giving businesses more control over multi-channel commerce, including where and how brands sell and advertise their products. It starts with channel, and in 2021, we exceeded our goal for the year by adding over 100 channels. As a result, we now have over 300 integrations, significantly expanding our leadership position over the past 12 months as the broadest offering in the market. In addition, we launched Walmart fulfillment services, the Amazon ad console and our commerce network to continue to go deeper in 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. While it's still early, to date, more than a third of both our partners and sellers have published profiles, with more than 1,200 profiles shared in the platform and dozens of matches made. The activity 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 Retail Media, we plan to expand the number of endpoints supported by our common 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. For Shoppable 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 simplifying launching a new channel and reducing the time to launch with more self-guided quick starts, a smart mapper and error resolution guidance. Turning to services. In 2021, we completed the launch of our enterprise level of service, and the return on investment has clearly exceeded the targeted gain, with both improved retention and growth due to expansions with this group of customer. We also implemented additional coverage and leveraged a more intentional approach to provide extra care for first year clients. We expanded support capabilities significantly and materially reduced open 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 bundles, automating more routine tasks, creating efficiency, reducing time to launch and 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 via promotion or taking on a new role. As a result, ChannelAdvisor 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 to surpass their e-commerce goal. With that, I'll pass it to Rich now to provide a more detailed update on our financial performance. Rich?

[Richard Cornetta:]

Thank you, Beth. And good morning, everyone. 2021 saw continued GMB strength, driven by the sustained impact of COVID on consumer shopping habits. But more importantly for ChannelAdvisor, 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 record top line results and robust subscription revenue growth, I'm 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 continue to recognize strong cash generation throughout 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% and subscription revenue from brands grew 47% over 2020. And as 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 brands 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, brands ARR is very close to exceeding our ARR from retail and resellers. In addition, our fastest growing revenue cohort, our enterprise customers with ARR greater than 100k, these customers now represent the majority of our ARR. Given all of these factors, we continue to expect that the 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 and adjusted EBITDA margin was 23%. While still maintaining healthy margins, we remained bias towards growth. And operating expenses have been building steadily over the last year as we make strategic investments in our product and our services organization, as well as incremental investments and sales. 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 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 on to 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 $7.2 million. With respect to subscription revenue, we target continued strength in Q1 and 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 a growth of 43% over Q1 of 2020 and because customers 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 or adjusted EBITDA at this time. However, we remain confident on our long-term financial targets of at least $250 million in revenue and $50 million in 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 ecommerce, ChannelAdvisor leaned forward and made strategic investments in our sales organization, driving solid bookings performance and revenue growth. In 2021, we saw sustained e-commerce 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.

[Operator:]

. And our first question coming from the line of Joshua Reilly with Needham.

[Joshua Reilly:]

On the 3Q 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. But we've heard from the Paypals and the Facebooks of the world that they've 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 months?

[David Spitz:]

I would say that, in Q4, we really didn't see a noticeable impact that we could detect. As we mentioned, we saw continued strength in GMV growth. And my sense is that, to the extent consumers were having difficulty finding the products that they were looking for, they found alternative products or shopped on different channels. As it relates to real time, I would say that our view hasn't really changed on that. Continued to see GMV 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 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.

[Joshua Reilly:]

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 with 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?

[Richard Cornetta:]

There's a few things going on there. So, first, I'll focus on the top line impact on EBITDA. So, we're undergoing a few negotiations with our partner base. And with that, we identified some expected variable revenue that we push to the back half of the year. And being that it is variable, the majority of that does flow to the bottom line. So it's basically a shift of some of that to the back half of the year. As we mentioned, 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's the fact that we have, at this point in time, well over 130 new individuals in the organization. Merit, wage inflation, all that plays a role in – at least our Q1 expectations as far as EBITDA is concerned. So investments continue to be our focus. And takes a little while for that to start paying off on the top line, but expect some more momentum towards the back half of the year.

[Operator:]

Our next question coming from the line on Zach Cummins with B. Riley.

[Zach Cummins:]

Congrats on the strong results and the year. Just keeping on the investment theme. David, I think you mentioned that it's been a pretty challenging environment in terms of finding sales talents. Can you give us any sort of update as to kind of the progress you've made through Q4 and through the first six weeks of this year and where you're at from a sales capacity standpoint versus where you're hoping to get?

[David Spitz:]

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 role 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 you can imagine, that's a good time of year to go find good sales talent who might have been waiting to collect their Q4 bonuses. So, we've come into the year with some pretty good momentum there, but we're playing catch up a little bit right now.

[Zach Cummins:]

Rich, I think you mentioned – and I think that kind of answers a little bit of my question here. With 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. Is part of that due to the partner negotiations that you're seeing more so than any meaningful slowdown in GMV as it sounds like you guys are still growing year-over-year in January?

[Richard Cornetta:]

I'll first reiterate. We tried to focus on the things we can control with 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, we're going to see some shifting there from the first part of the year, probably to the back half of the year. So, that has pretty much a direct impact not only on variable revenue, but also EBITDA. We also see, as we continue to focus on, on brands. They have a higher propensity to have deal terms focus on subscription. We have two of our product offering, Shoppable Media and Brand Analytics, that do not offer a GMV or variable revenue component. So, that's a pretty decent summary of that question.

[David Spitz:]

Zack, 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 and the predictability of that subscription is good. So, while it impacts variable in the near term, we think it's a positive long term trend.

[Richard Cornetta:]

Zach, just one other thing on that. I do anticipate some difficult comps as well in Q2 as it pertains to variable revenue. That revenue is $9.5 million last year, was a very strong quarter for us. So we'll 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.

[Zach Cummins:]

And final question for me is geared towards – with all the new channels that you added this year, I think you added over 100 channels in 2021, I'm 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 is alive? I'm just kind of curious of the payoff that you get from adding these channels right out the gate?

[Beth Segovia:]

It takes a little time once you get the channel launch to go get customers to adopt to those channels, but the process that we use is to really work with our clients to understand what their priorities are and to align with clients, so that, as we launch a channel, we know that there is demand for that channel. We use a beta process, so we have early adopters that make sure we test, obviously, all those information flows and that those channels are up and running quickly. And then we'll 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 seller base are aware that we have new channels and our new commerce network helps us advertise those channels to our sellers, so that we can create that awareness early on. So we did finish the year strong, with adding well over 100 channels, which you'll remember our commit was to do 80 in 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.

[Operator:]

Next question coming from the line of Matt Pfau with William Blair.

[Matthew Pfau:]

On the inflation comment, just wanted to understand, how does that impact ChannelAdvisor's revenue in terms of how your contracts are structured with your customers?

[David Spitz:]

I'll 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 GMV. I'm just remarking on – I think I saw an article this morning that the average American consumer is 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 ChannelAdvisor specific comment. As it relates to customer contracts, we have a portion of our contracts that have annual escalators, typically in the 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. And we may make some changes as we go into Q2. We have, as you know, our principal input costs, our 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, hopefully, that answers your question.

[Matthew Pfau:]

On the customer contracts, if inflation is impacting the price of the goods they're selling, does that have any impact on the sort of minimum commitments that they make to you?

[David Spitz:]

Just to give you a hypothetical, so if a customer is paying us $50,000 a year for a certain amount of monthly GMV, in any given month, they'll either fall below that amount or above that amount. And if they fall above that amount, they'll pay a take rate that's not only higher than their pre-purchase take rate. So, whether their average cost per order or basket size is $50 or $100 or $60, or whatever, doesn't really change anything other than, to the extent that their prices are higher and their units are consistent, they'll drive higher GMV. And so, if they're consistently going above their subscription threshold, 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's really no different than if we were in a Q4 situation where there's higher volume, in this case, just due to higher prices of products as opposed to a higher unit volume. But does that make sense?

[Matthew Pfau:]

It does. Next one to ask about on the IDFA changes? Are you seeing any benefit to your marketing or digital marketing business as a result of that due to people looking for perhaps more effective channels to spend their advertising dollars on?

[David Spitz:]

Yeah, I think we are. Some of our fastest growing product lines are in the retail media space. So, for example, helping brands with Amazon advertising, Walmart media being another example. And what I think you're seeing is, with IDFA, you're sort of breaking up a little bit of the duopoly that used to exist with Google and Facebook. And it's creating a lot more diversification out there in terms of the advertising channels. And 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's increased fragmentation and complexity, ChannelAdvisor can help with that. And ultimately, that's good for our business. So, I would say indirectly, it's probably one of the reasons that retail media is one of our fastest growing areas.

[Matthew Pfau:]

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?

[Beth Segovia:]

Well, it's early yet and we have a long technical roadmap plan to continue to release new capabilities as we go throughout the year, this year and next year. Our intention there is to give 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 launch and 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 partners actually being in our software every day, managing their seller networks. 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 partnership with ChannelAdvisor. So, whether you're 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 GMV growth through additional channels and reaching more consumers and achieving more sales. 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.

[David Spitz:]

Matt, I'll dovetail on that a little bit. What gets me most excited over the long term is this vision – because, historically, we've never had software that are selling channels log into, right? It's always been on the supply side. And so, by giving our selling partners 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 their day logging into ChannelAdvisor 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 suppliers through ChannelAdvisor than through other means. So that's ultimately long term vision, is to create enough value for them to sort of naturally go in that direction.

[Operator:]

Our next question coming from the line of Victoria James with D.A. Davidson.

[Victoria James:]

Last quarter, Amazon and Shopify indicated trending changes in consumer shopping behavior, sort of away from heavy online retail and more into physical retail. What are your thoughts on consumer behavior this last quarter? And what are you anticipating as far as the coming quarters?

[David Spitz:]

We saw continued strength in GMV growth in Q4, double-digit GMV growth, which to me indicates a pretty strong consumer and online spending. What I'll add to that, and I made some of this commentary in my prepared remarks, that long tail of channels that that I spoke about continues to drive outsized growth compared to "the majors." And so, I think part of what we're seeing maybe is a little bit of shift towards more boutique shopping online. So, a lot of the channels that are in that long tail are category specific, maybe they're fashion specific or what have you, or autoparts, as an example. And one way some of these upstarts or smaller marketplaces can compete against the large general merchandise marketplaces like Amazon is by having a more specific user experience tailored to a specific category, right? So, in fashion, you're going to have a lot more around visual imagery, maybe videos, things like that. Autoparts being another example where there's a lot of educational content and how-to kind of knowledge. 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 spending. And you asked me to pontificate a little bit on the future. We've said since COVID started that we didn't expect – we thought shopping habits have changed permanently to a certain extent, and we don't expect GMV to – or ecommerce penetration to go backwards or revert back to pre-pandemic levels. I think a lot of people out there shop more online, continue to see strong convenience, maybe dabbled in some new things like online grocery shopping and realize, like, that's a pretty good value proposition and a time saver. So, they're going to be takes puts and takes in different areas. But I would expect that ecommerce gains are here to stay. And they're certainly going to – not grow as quickly as they did during COVID, but I think ecommerce penetration is going to continue to gain share.

[Victoria James:]

I think you started then to touch on my follow-up question, which was, if you have any more color, anything else to say about the performance of your marketplaces beyond sort of the big guys like Amazon, eBay and Walmart?

[David Spitz:]

I guess consistent with what I said in a moment ago, that long tail, which is characterized by a larger number of smaller marketplaces, in aggregate, has been growing much, much faster than our three largest, being Amazon, eBay and Walmart. And to some extent, I think that's law of large numbers, right? Amazon has such significant penetration into the population that I wouldn't expect them to grow at the same rate as somebody 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 and probably 99 out of 100 Americans never heard of Allegro, right? But if you were in Poland, that's a place to go shopping. So, as we add those types of shopping channels, they may not be the most critical priority for a US-based brand, but if you're a European brand or you want to get access to the Polish market, that becomes a pretty interesting proposition. So, I think it's a combination of region-specific selling channels and category-specific selling channels that are helping drive good volumes for us.

[Operator:]

And I am showing no further questions at this time. I would now like to turn the call back over to Raiford Garrabrant.

[Raiford Garrabrant:]

Thank you, everyone, for joining us today. We look forward to speaking with you again soon.

[Operator:]

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.