ChannelAdvisor Corporation
Q4 2020 Earnings Call Transcript

Published: 11 Feb 2021

[Operator:]

Ladies and gentlemen, welcome to the Q4 2020 ChannelAdvisor Earnings Conference Call. At this time, all participants are in a listen-only mode. I would now like to turn the conference over to your host, Mr. Raiford Garrabrant, Director of Investor Relations. Sir, please go ahead.

[Raiford Garrabrant:]

Thank you, Ludy and good morning. Welcome to ChannelAdvisor’s conference call for the fourth quarter and full year 2020. 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.

[David Spitz:]

Thank you, Raiford. What a year, we delivered record fourth quarter and full year results as continued strong execution, are expanding business with brands and record e-commerce volumes drove success for our customers and another quarter of double-digit growth for us. As a result, revenue and adjusted EBITDA both significantly exceeded our guidance for the quarter.

[Beth Segovia:]

Thank you, David and good morning, everyone. I’m thrilled to be able to share with you today that Q4 marked a strong finish to an excellent year as we achieved continued progress on our commitment to enable customer success. Last quarter, we mentioned that churn measured in dollars, had been reduced to the best levels and almost seven years, and we improved upon that in Q4. Expansions with existing customers, skewed heavily towards our brand clients showed continued strong commitment to our platform and again, increased significantly year-over-year. This is a testament to the numerous ways, in which ChannelAdvisor is helping customers achieve their online commerce goals, expansions and reduced churn are important drivers of sustained growth, and it’s encouraging to see the trends moving in such a positive direction. This improvement is rooted in actions we’ve taken to improve the customer experience. We have focused on client specific account planning and goal achievement, delivering a more intentional and improved first year experience for our new clients, launching an all-new knowledge center and improved in-app guidance to help clients make critical decisions and adopt key features, and providing thought leadership through a steady flow of webinars, blog posts, and white papers to provide clarity amidst the chaos.

[Rich Cornetta:]

Thank you, Beth, and good morning, everyone. Well, it’s certainly exciting to use the terms record-breaking and historic so many times. To highlight the operational and financial success we achieve; in a year, we can all agree was on like any other in our lifetime. We have made significant progress as a company in terms of strategic investments and overall execution to support our increased brand’s customer base, not only through the pandemic, but for the future, where we expect to see continued dependency on e-commerce and our platform to support the shift in consumer shopping habits. Following a strong third quarter, where we saw exceptional net bookings performance and a return to subscription revenue growth. The fourth quarter produced even more impressive results driven by Prime Day in October and the holiday season surge. As David mentioned earlier, both revenue and adjusted EBITDA meaningfully exceeded the guidance we provided in November, culminating with record revenue, exceptional full-year adjusted EBITDA results and historic operating and free cash flow. Now, let’s take a closer look at the numbers. Total revenue reached a record $40.3 million in the fourth quarter, up 16% year-over-year, driven by an acceleration of subscription revenue growth and strong e-commerce volumes. Subscription revenue reached another record at $28.6 million for the fourth quarter, representing an increase of 6% sequentially and 8% year-over-year. Valuable revenue during the quarter totaled $11.7 million, representing an increase of 40% from the year-ago period. This was once again, driven by broad-based year-on-year growth in GMV, as e-commerce spending showed continued strength on top of the holiday season boost. Looking at revenue on an annual basis, total revenue was $145.1 million returning to year-over-year double-digit growth of 12%. David provided some financial details earlier specific to our brands customers. What really stands out to me is the strong growth we have seen in subscription revenue from brands reaching 41% of our total subscription revenue for Q4, up 600 basis points from the prior-year period. I’d like to point out a few additional metrics as they pertain to brands. During 2020, we increased our net brand’s customer count by 37% and average revenue for brands customer is now approximately $70,000. So as you can see, brands have continued to become a more significant piece of our business and we believe that all of this progress along with the strategic investments planned for 2021 Beth spoke up earlier, provide line of sight to achieving our stated goal of greater than 50% of our revenue coming from brands by the end of 2022. Moving on to profitability performance, adjusted EBITDA increased 15 year-over-year to $10.8 million for the quarter generating an adjusted EBITDA margin of 27% for Q4. For the full year 2020, adjusted EBITDA was a record $36.3 million and adjusted EBITDA margin improved over 900 basis points for the prior year. It is important to remind everyone that some of our improved profitability is a result of expense savings from the pandemic of approximately $4 million in 2020; for example, from travel and conference savings that would not – that we would not expect to continue under a normal operating environment. As we have shown in 2020, even with meaningful investments in the sales organization, we have successfully managed our expense profile and achieved profitable growth. As I’ll expand upon a few moments after a record breaking year across many financial metrics, we believe it is advantageous to continue our investment cycle into 2021 with the goal of further improving customer attention and service, and supporting top-line growth. Now, turning to the balance sheet, consistent with our strong P&L performance, cash and cash equivalents finished at $71.5 million representing cash generation of $5.2 million during the quarter and we achieved this despite some large cash outlays in the quarter associated with our connect conference, as well as larger vendor contracts that have annual payment terms. For the full year 2020, cash was up $19.8 million over 2019. And remember this includes the BlueBoard acquisition. We also saw deferred revenue increase for the second quarter in a row, up $1.5 million for Q4 and driven by the strong net bookings performance we achieved in the back half of 2020. As David mentioned earlier, we are confident that now is the time to lean in and pursue top-line growth opportunities by investing in our product, our services organization, as well as some incremental investment in sales. We expect to invest at least $6 million in 2021 on the initiatives Beth mentioned earlier. Also, the full year impact of the sales investments we made in the first half of 2020, plus the incremental investments we plan on making in 2021, we’ll add at least another $5 million of expense during 2021. Now, for our financial outlook. Our overall GMV levels remained elevated. It remains difficult to forecast GMV and variable revenue with any real precision for the full year. Therefore, we are not providing a financial outlook beyond Q1. So, for the first quarter of 2021, we are issuing a revenue outlook range of between $37.3 million and $37.7 million, representing year-over-year growth of 17% at the midpoint and an adjusted EBITDA our range of in $6.9 million and $7.3 million. It is important to note that our Q1 outlook reflects low double-digit subscription revenue growth over the prior year, as well as the incremental investments in OpEx, I spoke of earlier of approximately $4 million for the quarter. In addition, as David mentioned, we expect low double-digit subscription revenue growth to continue throughout the year. Finally, at the beginning of last year, we issued a long-term goal of a combined year-over-year revenue growth rate and adjusted EBITDA margin of 25% to 30% by 2022. Given the success we achieved in 2020, as well as the strategic initiatives we have planned in 2021 and our improved revenue growth outlook, we are raising this range to 28% to 32% by the end of 2022. In closing, 2020 was a historic year for ChannelAdvisor, which we believe will help transition us to the next phase in our company’s history. With a focus on sustained revenue growth to improve shareholder value while still maintaining healthy margins and strong cash flow. I will now pass the call back to David for some final remarks.

[David Spitz:]

Thanks, Rich. As we enter our third decade, we’re proud of what we’ve built, but we’re also just beginning, e-commerce is a massive market. And coming off a record year, we believe we’re better positioned than ever to drive continued growth and industry leadership. And with that, operator, we’ll go ahead and open the call to questions.

[Operator:]

And our first question comes from the line of Thomas Forte from D.A. Davidson. Your line is open.

[Thomas Forte:]

Great. So, congrats on the quarter. And the question I had, David, is that there’s a lot of capital raising going on specifically aimed at selling on Amazon. So, if you look last year, we saw that there was $660 million raised by companies that are buying essentially fulfillment by Amazon sellers. And then this year, Thrasio alone raised $1.25 billion toward the same end. So, I wanted to know what you thought that meant industry-wide and then what the specific implications were for ChannelAdvisor. Because I think that’s essentially a different way of leveraging Amazon and leveraging Amazon is one of your greatest core competencies in my opinion. Thanks.

[David Spitz:]

Thanks, Tom. Yes. I think the investments in the space just overall validate the opportunity that’s out there. We’re tracking about 40 of these. So, there’s quite a lot as you point out, there’s quite a lot of investment going on several billion dollars worth. You could argue it’s, maybe, a little bit of a crowded trade, then maybe eventually, there’ll be some consolidation. I think there’s a couple of interesting things to watch for. It’ll be interesting to see how these companies navigate the Amazon concentration risk. Over time, I expect a number of them will want to go multichannel, which I think creates an opportunity for us and how – ultimately, how these companies generate consistent – what I call it alpha over Amazon. So, does it become a product or brand-picking skill to how much proprietary data do these companies have, what’s their sustainable competitive position? So, I do think, there are some potential longer-term questions to be answered. but overall, I think, it just – it helps accelerate the transition to digital for everyone in this space. And I think it’ll help draw our target market, which are larger brands, global brands to realize that they need to continue to invest aggressively in this space. So – and I also expect that several of these consolidators will end up being customers of ours, particularly as they seek to go multichannel. So, I see it as a bullet signal.

[Thomas Forte:]

Excellent. And then for my follow-up question, I want to talk about something that’s complimentary. So, the last three quarters, if not longer, you’ve been giving what is my favorite statistic, which I think you referred to today as the long tail of marketplaces and how that’s essentially, your second biggest marketplace and growing at a fastest rate. So, do you see that as just other companies starting to warmly embrace the marketplace model, a general acceptance by consumers of shopping in that manner? So, why do you think this trend is so significant and then is the margin profile for ChannelAdvisor any different for the long tail of brands – or sorry, long tail of sellers versus Amazon?

[David Spitz:]

Yes, it’s a great question. And it’s probably, to me, one of the most interesting developments last year, particularly towards the end of the year, when – as you pointed out, it became our second largest aggregate marketplace or set of channels. I think it represents a few things. I think, it shows that we’ve had some good success helping our customers expand to new channels. individually, these aren’t necessarily huge, right. They don’t – they’re not obviously as big as Amazon or Walmart or others. but collectively, they’re quite large. And the easier we make it for someone to add a third, fourth, fifth, or eighth or tenth or fifteenth channel. the easier it is for our customers to just add incremental exposure to consumers, who shop there, right. So, what you find is that, that long tail tends to be that where you see the most success is on the long tail you see regional specific marketplaces, like for example Allegro in Poland, or Zalando in Germany and Zalando is a good example of somebody, who dominates in particular category. So, primarily, a fashion. So, I think what it goes to show you is there’s a really, really vibrant opportunity out there for people to build alternatives to Amazon whether it be category specific or maybe region or country specific. the more our brands get in and see the success that they have with marketplaces. As I mentioned earlier in my remarks, the more they want to add additional ones. I mean, there are hundreds and hundreds, if not thousands of marketplaces around the world. And they’re different in the Philippines versus South Korea versus India versus South America. And so you have this really, really vibrant ecosystem out there and you add them up and they’re pretty significant. So, I think it’s just this general recognition from customers that this is a great way to just continue to broaden their exposure to more and more consumers worldwide. And that’s why we plan to add 80 additional ones this year, which was a substantial increase from where we are today. We have a lot of customers telling us they want to put everything on ChannelAdvisor, but we need to add these five marketplaces in APAC, for example for them to be able to do that. As far as your margin profile question, I don’t know that I would say that there’s a dramatically different margin profile, many of these marketplaces connect to us through our access program. So, they build the connections to us. And in some cases, we do have economic arrangements with the marketplaces depending on what they’re trying to achieve. But I don’t see it as a negative margin impact for us at all. In fact, I like the idea that it continues to diversify our GMV base and ultimately, it gives our customers more and more ways to reach consumers.

[Thomas Forte:]

Excellent. Thanks for taking my question.

[David Spitz:]

Thanks, Tom.

[Operator:]

And our next question comes from the line of Colin Sebastian from Baird. Your line is open.

[Colin Sebastian:]

Thanks and good morning, everyone. Maybe, a couple of questions from me. David, I wanted to follow up on your comments regarding the long tail, it’s kind of a follow-up question. But we’re clearly, seeing a proliferation of transactional e-commerce capabilities within social platforms. And I know you have some integrations already, but is that a potential additional leg of opportunity for channel management as brands and merchants start to sell more aggressively through apps like Instagram or Pinterest or TikTok et cetera. And then maybe, on the acceleration in growth in Q1 and over the course of the year, I realize subscription – the subscription offering is performing very well right now. But I also wonder how much of a role the added stimulus checks in the U.S. or the ongoing lockdowns in certain regions maybe contributing on the volume side of the business near-term. Thank you very much.

[David Spitz:]

Thanks, Colin. So, on the long tail question, yes, I absolutely believe that social represents a really, really interesting opportunity, especially in certain categories, like beauty being an example, where we see some good traction. if I’ve learned one thing over the many years of being an e-commerce is that you can never fully predict what the next trend or the – where the next big thing is going to come from. And so that’s part of our value to customers is we worry that and we keep up with things, and we stay nimble. And we’re always working with these partners in anticipation of what’s coming down their roadmaps, so that our customers don’t have to worry about being caught flat-footed. So, I do think there’s an opportunity there. I think a lot of that historically, has been a little bit more focused on smaller merchants, just because of it’s a little bit easier for them to get going on something like Facebook marketplace as an example. but for sure, especially, like I said, for certain categories, I think it’s – I think it represents a significant opportunity. to your question about how much of a benefit are we seeing from stimulus, obviously it’s a little bit speculative on our part. I can’t imagine that it hurts to have more cash going into consumer’s pocket books. We certainly saw that last April when the first round of stimulus checks went out, I mean, we just saw GMV levels kind of peg to holiday levels almost to the day that most of those checks were landing in people’s accounts. So, I think that probably does contribute to some of the GMV tailwinds. I think the reason we’re pointing to subscription revenue is we know that for the next few quarters, as we lap last Q2 that we obviously don’t expect to see the same step function increase in GMV next quarter that we saw last quarter. And so there’s probably going to be a little bit of noise in GMV levels and variable revenue and it’s a little bit hard to call and that’s why we’re not guiding to the full year. But we are pointing to that subscription revenue growth, because at the end of the day, that really points to more durable, sustainable longer-term growth. And it indicates the demand for our platform in the form of increased sales and improved retention. So that is a more durable phenomenon. And especially, over the next few quarters, as we go through some of the noise of the comparables, I think that’ll be an important metric for us to continue to share.

[Colin Sebastian:]

All right. Makes sense. Thanks, David.

[David Spitz:]

Thanks, Colin.

[Operator:]

And our next question comes from the line of Ryan MacDonald of needham. Your line is open.

[Ryan MacDonald:]

Yes. Good morning, everyone. Thanks for taking my questions, and again, congrats on an excellent year. David, I guess the first one for you; I was really impressed by the comments about the expectation for low double-digit subscription revenue growth throughout fiscal 2021. Can you just talk about the visibility you have into that number and when you think about the mix of what would be driving out of the parts that are driving that what are you seeing in terms of sort of new customer pipeline versus expansion into new marketplaces or cross sell of BlueBoard? I’d love to hear some more commentary on that. Thanks.

[David Spitz:]

Yes. Thanks, Ryan. I think, I think we have a decent visibility and it really pegs to some of the recent performance we’ve seen in sales and in our revenue retention. Obviously, we need to continue to execute at comparable levels to deliver on that expectation. But I feel really good about our pipeline. When we look at, for example, our bookings with brands, about half of those are expansion bookings, roughly speaking. So, the fact that we’ve increased our brand customer count 37% last year is pretty bullish to me. So that customer count growth on brands actually grew faster than revenue. And so the fact that we’re driving more new logos into the business that will generate opportunities for us to further expand with them leaves me pretty bullish. So, as far as expanded, GMV and marketplaces and things like that, I don’t think we really factored that into our revenue opportunity, because we’re obviously going to be building out a number of those connections over the course of the next year to 18 months. I expect there probably will be some revenue benefits from that just given some of the eagerness of some of our customers to attach to those marketplaces. But that’s a little bit harder for us to predict. So, we’re not really factoring that in at this point. So for me, it’s just looking at the basic blocking and tackling of our sales team, our expanded sales capacity, the quota coverage we have coming into this year being strong and above where our targets are. It feels like we’ve been executing really well. Obviously, we have to continue to execute, but I think the results we’ve had in the last couple of quarters give us that confidence.

[Ryan MacDonald:]

Got it. And I guess a follow-up on the GMV trends. obviously, we’re still early and not quite seeing like what the impact of stimulus will be. but I’m curious to know, as you look through the month of January, where you have you been starting to get a sense of what perhaps a new normal or more normalized environment looks like sort of post-COVID and post a very strong year of growth?

[David Spitz:]

Yes. January GMV growth was pretty strong. There was a significant step-up from December. It wasn’t quite that November levels that we saw, but it was pretty close. And in fact, we saw a bit of an acceleration towards the end of January. So that seems pretty bullish to me. And to go back to kind of Colin’s point about stimulus, right. It’s always hard to know how much of that is influencing things, but so far through the – through January of this quarter; it looks like GMV levels have remained pretty strong. And of course, the stimulus being discussed now that may pass in some form in the next few weeks, probably comes with a fairly significant additional amount of money that flows directly to consumers. So, when that happens and how much it is, and whether that finds its way to e-commerce or Robinhood or other places, that’s hard to predict. but it’s – it seems more likely than not that there’ll be some additional stimulus flowing in the not distant future.

[Ryan MacDonald:]

Excellent. Thanks very much.

[David Spitz:]

Absolutely. Thanks, Ryan.

[Operator:]

And our next question comes from the line at Matt Pfau of William Blair. Your line is open.

[Matt Pfau:]

Congrats on the strong results.

[David Spitz:]

Hey Matt, your audio is – can’t quite hear you.

[Matt Pfau:]

Can you hear me now?

[David Spitz:]

Yes. That’s great.

[Matt Pfau:]

Sorry about that, guys. Can you hear me?

[David Spitz:]

Yes.

[Matt Pfau:]

Okay. Yes. So, I wanted to ask on the marketplaces you’re adding for 2021 obviously, a big number there. When you think about adding those, maybe just give us an idea of what’s involved there, how difficult it is? And I guess I’m trying to get at is the competitive differentiation there and how it – how difficult it is for platforms you may be competing against it to add marketplaces at the rate you are?

[David Spitz:]

Yes. Thanks, Matt. I think it’s one of our strongest differentiators today just the breadth of marketplaces that we support around the world. And so I think when I talk about expanding our lead, this is an example of what I’m talking about. And so a number of marketplaces connect to us directly, in which case the effort on our part is not huge. But what those marketplaces want is access to a really high-quality seller base to provide a great consumer experience. And so for a lot of the ones that we support today, they have connected to us through our API, through our access program and we manage them through our partner ecosystem. In the case of the 80 that we plan to add, I suspect it will be some of that, I also suspect there’ll be some integrations that we build. For example, we are seeing heavy demand for marketplace expansions in Asia Pacific and because we don’t have as many customers in APAC, a number of those marketplaces wouldn’t necessarily come to us to say, hey, how do we connect to you, because we don’t have those local suppliers. So, what we do have is these global brands that want to go in and sell on these marketplaces. And so I expected for some of these, we’ll actually build the infrastructure ourselves. I mean, we’ve been doing this for a long time. And so I think we’re pretty good at it, but it does represent a few million dollars of investment on our part really to try to accelerate how do we get as many of these onboarded as quickly as possible. Because again, when we look at the opportunity, both in terms of GMV and just the customer demand we have, we think that’s an investment that will pay off multiple times over in the years to come. So, I think, we already have a pretty good differentiated position when it comes to the breadth of marketplace that we support and the fact that we’re going from well over a 100 and adding 80 more, I think just extends our lead in that front.

[Matt Pfau:]

Got it. And then for the investments for 2021 in terms of headcount, it seems like the primary focus is around your service and support, and customer success organization. What about in terms of sales headcount? Where are you at in terms of sales coverage heading into 2021 and any details around hiring in that area?

[David Spitz:]

Yes. I think, I think we’re pleased with where we are at the beginning of the year, in terms of sales – we’ll call quota capacity or sales coverage. We do expect to invest incrementally because obviously, the – we already have our eyes towards 2022 and a lot of what we do this year; we’ll set the stage for 2022. So, I do expect some incremental investment on the sales capacity side, just to continue to drive the momentum that we’re seeing. But not to the same extent that we did a year ago when we were really trying to close the gap on sales capacity. And then beyond there – beyond that obviously, investments in R&D like I’ve spoken about, we think there’s some significant opportunities on the innovation side to extend our lead. And then on the services side and Beth may have a comment on this, but what’s interesting is when we work with brands, we typically initially work with just a portion of that brand. Maybe, they’ve got a portfolio of brands, maybe, we’re working with them and in one country, but they operate in 20 countries. There’s – or maybe, we’re working with them in our Shoppable Media product. But they don’t use us for analytics or marketplaces or whatever mix they’re using. We just think that and we’ve seen this already that the opportunity to get in more closely and more strategically with the brand and help them navigate their digital transformation. We think we’re probably maybe low double-digits penetrated just on our existing customer base. So, we think the investment here is really focused on how do we make sure that we are really becoming strategic to our customers? How do we become familiar with their organization from top to bottom? And really, give them what I would call the service coverage if last year was the focus on sales coverage this year is the focus on service coverage to really make sure they see success and we understand how to help them strategically, because we do think the opportunity to expand with them is pretty substantial. So, I don’t know if Beth, you want to add anything to that, but that’s our focus on that front.

[Beth Segovia:]

Yes. Nothing to add. We’re just going deeper, so we can learn more about their business and find all the ways that they can leverage our capabilities to continue to accelerate their transformation.

[Operator:]

Our next question comes from the line of Zach Cummins of B. Riley Securities. Your line is open.

[Zach Cummins:]

Yes. Thanks. Good morning. Thank you for taking my questions and congrats on the strong end of the year. Rich, I just wanted to ask you around the GMV assumptions that you’re making for Q1 guidance. I know there’s still a few factors up in the air such as potential stimulus, but we know low double-digit subscription revenue, but kind of how are you anticipating GMV is going to be playing out for the rest of the quarter?

[Rich Cornetta:]

Yes, yes. It’s a great question and good morning. So, we mentioned in our prepared remarks that we are estimating low double-digit growth for the quarter with subscription revenue. So, if you were to assume, say 11% year-over-year growth, that would probably put variable revenue in a range of $8.8 million, something to that effect would – which would assume roughly, the same growth rate we saw in Q4, in Q3 of last year, around roughly 40%, 41%, 42% growth in variable revenue. So that’s how I’ve modeled out Q1 for our financial outlook.

[Zach Cummins:]

Got it. I understand. And then I know a lot of the focus has been on the brand customers and the acceleration there. But David, I wanted to ask you around your retail customers kind of, how do you expect that to really play out over the next couple of years, especially with you accelerating your focus on these brand customers?

[David Spitz:]

Yes, Zach. I think, look, that’s an important part of our business. I think the way I would characterize it is, it’s a more mature part of our business, right. So, I don’t necessarily expect the retail piece of our business to be the driver of significant growth for us. It obviously provides us with a lot of non-dilutive funding to invest in the areas that we that we’ve talked about today that we’re investing in. So, it’s a good business, it’s mature. But again, if I fast forward five years, 10 years, and I think about what is the commerce landscape look like? And I think COVID has only amplified this it being a middleman and selling other people’s stuff, it is harder and harder, right? Like giving your – it’s very, very hard to differentiate. And in particular, when you lose the benefit of having physical stores, the stores of that almost become a liability for a number of these as opposed to an asset when everything else is one click away. So, when I just look forward to five or 10 years, I think it’s harder to be sort of a non-differentiated middleman, who sells other people’s things. We think that the ones, who are stronger ultimately, are the ones, who sell proprietary products, products where they own the brand, they own the – all of the attributes associated with the brand et cetera. So that’s why we’re focusing there and we think that longer-term for us is the stronger growth engine.

[Zach Cummins:]

Understood. And just the final question for me is the other revenue category; saw some really strong growth there in Q4. I was wondering if you could give a little insight into what drove that strong growth within the other revenue category and some of your opportunities on the partnership side as we start to think about 2021 and 2022.

[David Spitz:]

Yes. So other, as you probably know, includes our partnership revenue, right. So, and as I mentioned earlier, we have economic arrangements with a number of our marketplace partners, because they want to work with us to, for example, make sure that we adopt certain elements of their roadmap, or their technology platform, or help them onboard, more brands onto their marketplace. So, when you see strong GMV performance, not only is that an indicator that our customers are doing well, but because of those economic arrangements, they also flow partly into our partnership revenue as well. So, I think that’s a pretty big piece of what you’re seeing there. but more strategically, we identified a couple of years ago that expanding our indirect sales efforts and our partnerships was really important for us and it continues to be important for us. And so that’s an area of continued investment and continued focus for us going forward. We don’t want to just completely rely on our direct sales force, which is still relatively small, compared to the size of the opportunity. We want to drive more revenue and more opportunity generation through our network of partners. The expansion with XPO Logistics is a good example, right. So, like many logistics companies, they’re looking for ways to add value-added services for their customers and ultimately help their customers ship more, right. And so we’re a perfect partner for someone like them.

[Zach Cummins:]

Got it.

[David Spitz:]

Thank you, Zach.

[Operator:]

And there are no further questions at this time. I would now like to turn the call over Mr. Raiford Garrabrant for closing remarks.

[Raiford Garrabrant:]

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

[Operator:]

Thank you, ladies and gentlemen. this concludes today’s conference call. Thank you for participating. You may now disconnect.