ChannelAdvisor Corporation
Q4 2014 Earnings Call Transcript

Published: 6 Feb 2015

[Operator:]

Good day ladies and gentlemen. And welcome to the Fourth Quarter 2014 ChannelAdvisor Earnings Conference Call. My name is Denise and I’ll be the operator for today. At this time, all participants are in listen-only mode. Later, we will be conducting a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Mr. John Baule, Chief Financial Officer of ChannelAdvisor. Please proceed sir.

[John Baule:]

Thank you. Good afternoon and welcome to ChannelAdvisor’s conference call for the fourth quarter of 2014. I’m John Baule, Chief Financial Officer of ChannelAdvisor and with me on the call today are Scot Wingo, CEO; and David Spitz, President and COO. After the market closed today, we issued a press release with details on our fourth quarter performance, as well as our outlook for the first quarter and full year 2015. This press release can be accessed on the Investor Relations section of our website. In addition, this call is being recorded and a replay will be available following 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 and Form 10-Q, as well as our other filings which are available on the SEC website. During the course of today’s call, we will refer to certain non-GAAP financial measures including core revenue, which excludes revenue from two small legacy acquisitions that are not a core focus of our business. A reconciliation of all non-GAAP measures to the most comparable GAAP measure is included in our press release. Finally, at times in our prepared comments or responses to your 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. And with that, let me turn the call over to Scot for his prepared remarks.

[Scot Wingo:]

Thanks John. Welcome everyone and thank you for joining our call today. A $23.8 million our fourth quarter revenue was slightly above our updated guidance from a few weeks ago and represented growth of 16% from year ago. With e-commerce growth of 16% in the quarter as reported by comScore, our performance was not upto our expectations or our potential. Several factors led to our underperformance in the fourth quarter. For example, consumer preference for larger retailers which resulted in a GMV shift away from smaller sellers impacted our overall take rates. In addition, we saw significant uptick in customers upgrading the higher committed tiers but at lower take rate than they had previously. We've already started to address the issues with pricing policies and with recalibrated our forecast amounts. We are also evaluating pricing changes and we continue our efforts to move up market to best capitalize on the fastest growing areas of e-commerce. Our ChannelAdvisor for brand initiative is an example of one of those of market opportunities. We believe the fundamental drivers of e-commerce industry continue to be favorable for ChannelAdvisor and we continue to deliver value to our customers. We remain optimistic about our long-term prospects and believe that we can return to year-over-year top line growth of 20% or more overtime. However, we expect growth will be below this level in 2015 as it will take some time for our initiatives to gain traction and the macro trends to be realized. John will provide details in his remarks. Despite these headwinds our commitment to the lowering operating leverage and our model has not changed and we view 2015 as a transition year where our focus from maximizing investments to maintain a healthy sustainable growth rate while improving profitability. The 2015 will be harvesting investments we’ve made in the last 18 months. Looking back on 2014, total revenue for the year was 84.9 million, or 25% increase from a year ago. We ended the year with 2,841 customers, or 17% increase with end of 2013. I wanted to share some of our 2014 highlights that will help drive our future growth. We added integrations with Bigcommerce, Alibaba's Tmall, Yahoo Gemini, Rakuten.de in Germany, MeinPaket, Zalando, Pinterest, One ELO, Polyvore and House. We’ve expanded our support for branded manufacturers by adding aware by product offering. We had significant new functionality and the platform such as a next generation Amazon Repricer, multiple distributions and support, support for product bundles, leading support for dual shopping campaigns and innovations around eBay and social networks. Finally it’s important to note that our platform managed $5.7 billion GMV in 2014, up 30% from 2013’s $4.4 billion. Looking forward we continue to focus on creating increased value for our customers new platform innovations and innovations with key partners. For example already in 2015, we’ve added Jet to ChannelAdvisor platform. Jet is an innovative new membership shopping club and is expected to be launched this spring. These integrations combined with our continued focus on technology enhancement will help fueled the network effect s that can drive both new customers and marketplace partner with us. In fact, at CES this year Newegg recognized ChannelAdvisor their best marketplace platform partners. Also the category of marketplace is outside of eBay and Amazon that we can other third party market places or 3PM, grew 45% year-over-year on a same-store sales basis in fourth quarter. Customers and prospects from all over the world will be convening our Annual Catalyst Conference, the leading event for the e-commerce industry in Las Vegas in less than two months. In summary, while 2014 did not end on a high note, we continue to be optimistic that industry trends as well as our platform GMV growth at 30% 2014 remain solidly in our favor and we believe we’re making afford changes that will improve our revenue predictability as we make progress towards our ultimate goal with the combination of strong growth and increased profitability. I’ll turn the call over David to provide more details.

[David Spitz:]

Thanks, Scott. I’d like to describe what we’re doing to address these specific challenges we faced in fourth quarter and then talk about what’s ahead for us. Although the fourth quarter was disappointing, it’s important to keep in context as we continue to grow at a healthy pace and it highlighted the inherent leverage in our model. The underlying trends driving our business are intact and while the fourth quarter exposed to some challenges we faced in optimally monetizing growing base of GMV as we scale the business and navigate the evolving e-commerce on its state, we believe we can address those challenges overtime. Let me begin to GMV growth and why it outpaced revenue growth in the quarter. First, we saw a pronounced and fairly sub-migration of GMV from small customers to larger customers to enjoy discounts. We believe this trend was consistent with the overall industry, amplified specifically in our case by eBay’s relatively weak performance as a channel whether this shift was a holiday phenomenon or a permanent shift that will be clear for some time, but we’re assuming its permanent and believe we’re well positioned to continue capturing market share of the upper end of the market even if we go through a period where GMV growth may outpace revenue growth. For instance although eBay has been a largest channel by GMV every year since the inception of the business, we believe that will seize to the case in 2015. As other channels overtake eBay it is our largest source of GMV, we may see continue pressure on take rates since customers on those channels tend to incrementally larger than typical eBay sellers, but we believe this transition is overall positive for us as it means our slowest growing major channel is shrinking as a portion of our overall GMV mix and being replaced by significantly faster growing channels. As this transition progresses overtime despite the potentially incremental lower take rates, we expect to benefit from those faster growing channels in the fourth of higher revenue growth and better retention due to improve customer performance even if it means near term headwinds at eBay’s challengers persist and effect some of our customers. Second, we saw a significant uptick in customers trading up to higher committed tier albeit at lower take rates than otherwise it has which had the effective meeting seasonally high variable revenue in the fourth quarter but paid us the benefit of more committed revenue. More rapid GMV growth is a clear demonstration that customers are getting value from our platform and while we’re generally happy to see customers moving up tiers and committing more revenue to us in anticipation of their growth. In retrospect, it is also clear that the volume of these upgrades had a material impact on our revenue in the fourth quarter. We normally see a bigger seasonal uptick in variable revenue thus we have adopted internal policy to discourage such upgrades except from contractually obligated and across the varied customer. We were also evaluating changes to our pricing metrics to narrow the discounted range associated with two upgrades, also providing customers an eccentric to trade out in a way that is mutually beneficial. We also faced higher churn in 2014 than we saw in previous years. Thus while our gross customer adds were strong in 2014 increased churn especially as smaller customers facing significant market pressure led to our net customer count increasing by 17% for the year and as part of the reason we saw a deceleration in fixed revenue in the fourth quarter. In response, we have beefed up our customer success team to focus on improving the on boarding of new customers and we believe this will help improve retention over the next few quarters. In addition, we're evaluating tightening our customer acceptance criteria to discourage the smallest and least qualified customers from adapting our platform until they are ready. Unfortunately, all of these challenges came together in the fourth quarter and when combined yielded a disappointing outcome and will take time for the changes we were implementing to impact our top-line. Last quarter, we provided a forward-looking metric that we called net bookings as a percentage of trailing 12 months revenue. Even with same methodology we previously employed for calculating net bookings, this figure was 25% at the end of the fourth quarter down from 28% at the end of the third quarter reflecting the effects of higher churn for the full year 2014 compared with 2013 as well as approximately flat bookings in the fourth quarter compared to an unusually strong bookings performance in Q4 of 2013. However, after an in depth analysis of the likely impact of tier upgrades we believe it is appropriate to make a one-time adjustment to this methodology to reflect the cumulative effect of tier upgrades. Adjusting net bookings on this basis yielded net bookings result of 22% as of the end of the fourth quarter. It is important to note that this metric is inherently emphasized particularly with regards to tier upgrades as it necessitates subjective estimates of how a customer will perform in the future compared to how they otherwise might have performed under a prior pricing arrangement and accurately projecting future GMV performance of individual customers is difficult. Thus, we view our adjusted net bookings metric of 22% as a broad directional indicator of future performance but it is subject to our performance in the innovating quarters including some of the headwinds we've discussed like eBay weakness and shifts in the GMV mix between larger and smaller customers. It is certainly not a very good outcome and thus should be considered in the context of our guidance which John will detail below. We intend to share this metric with you annually. Because the changes we're implementing won't have an immediate impact and since there is still uncertainty as to what the competition of GMV will look like this with respect to large and small retailers we are moderating our expectations for long-term growth. However, we believe that with a moderated investment strategy during this transition year, we can make progress towards delivering medium-term annual revenue growth of 20% or more while showing significant improvements in profitability. Looking out beyond the next few quarters and into the future, I am very excited to announce the deepening of our strategic relationship with Alibaba through the launch of our integration with AliExpress. The vast majority of our China business, our fast maturing region, has been export oriented by which I mean helping Chinese merchants sell on eBay and Amazon in the U.S and Europe. Many of those merchants also sell on AliExpress a rapidly growing channel and we're now able to offer the unified platform that integrates all three of these major export channels in one place. We continue to refine and enhance our platform to make a localizing to Chinese customers. And I am very bullish on the expanded opportunity we have in the market with the addition of AliExpress and our broadening strategic relationship with Alibaba. Coupled with our recent addition of Jet an exciting new marketplace partner we continue to set the pace of innovation in the industry as we expand and scale our platforms global capabilities. Thus our Q4 was a disappointment and we expect revenue growth to be below our full potential for a few quarters while we work to improve our execution. Our core strategy remains intact we're confident that we will be significantly larger and more profitable company in years to come. I will now hand it over to John to provide additional information about the fourth quarter and our outlook for 2015.

[John Baule:]

Thanks, David. I will provide some details on our financial performance in Q4 and 2014 and then provide our guidance for the first quarter and for 2015 as a whole. Fourth quarter revenue of $23.8 million increased 16% from a year ago and less than 2% of total revenue non-core revenue which was $0.3 million in the fourth quarter is becoming an immaterial component total revenue and we do not plan to break out our core and non-core performance in the future. As we previously discussed, the ongoing shift towards greater fixed revenues accelerated in the fourth quarter as fixed revenues made up 74% of total revenues compared with 65% in the fourth quarter of 2013. This shift in revenue mix was driven in part by a decline in variable revenue attributable to a substantially greater percentage of total GMV flowing to our largest customers, who not only pre-commit to large fixed subscriptions but have more predictable GMV flows allowing them to minimize variable revenue. In addition, we experienced a significant increase in the number of customers renegotiating contracts to take advantage of volume discounts, substituting greater fixed revenues for higher price to variable revenues. While we generally view our progression toward the higher proportion of fixed revenues favorable, as we have implemented measures to ensure that the overall revenue outcome of these renegotiations is more advantageous for the company. And looking at the causes of the revenue shortfall in the fourth quarter, the majority of the shortfall was attributable to the shift in GMV mix with the increase in customer tier upgrades as a secondary factor. These factors both impacted pricing and as a result, our average revenue per core customer a metric calculated on a trailing 12-month basis increased year-on-year by only 2.4% to $31,400. Despite the lower than anticipated revenue, gross margins in the fourth quarter were strong at 75% in line with our performance a year ago. Our adjusted-EBITDA loss in the fourth quarter was $1.5 million compared to a loss of $3.2 million in the year ago quarter. This represented the smallest quarterly loss since our initial public offering. Adjusted-EBITDA margins were negative 6.3% and represented the third sequential quarter of improvement instead of revenues in the fourth quarter that was below our original targets. While revenue was below our expectations, the relatively strong gross margins and adjusted-EBITDA in the fourth quarter reflects the leverage that is inherent in our model. Looking at the year as whole, revenue was $84.9 million an increase of 25% from a year ago. Non-U.S. revenue increased from 21% to 22% of total revenues and fixed revenues increased from 67% of total revenues to 74% of total revenue. Gross margins for the year were 72%, a slight decline of 73% in 2013. As you'll remember from earlier calls, there were some one-time items in Q1 and Q2 of 2014 that resulted in lower than normal gross margins in those quarters. However as anticipated, gross margin levels normalized in Q3 and Q4 regaining much of the lost ground and approaching prior year levels. We expect gross margins to continue to improve in 2015. Adjusted-EBITDA for the year was a loss of $19.5 million compared to a loss of $8.5 million a year ago largely due to incremental growth of investments made earlier in the year. Turning to our balance sheet, we ended the year with $68.3 million in cash and cash equivalents. We believe this provides us with sufficient cash to execute on our long-term plans and maintain an appropriate cash cushion until we are able to reach breakeven cash flow. In addition the fact that we can manage as David discussed both highlighted, there have been several notable macro shifts that potentially impact our 2015 growth. These include the slowing growth in eBay and the shift in GMV mix toward larger retailers. While we wait for these trends to be more fully revealed, we are operating to an expense plan that shows considerable improvements in operating leverage despite lower expected revenue growth in the near term. We are building our 2015 plan based on anticipated revenue of between $94 million to $97 million representing growth of 11% to 14% while delivering approximately 600 basis points of adjusted-EBITDA improvement as the midpoint. Clearly, this rate of revenue growth is below the long-term growth capability of our business. We view 2015 as a year of transition after two years of rapid growth and we remain confident that over the medium term we can resume year-over-year growth rates of 20% or greater while achieving our profitability and cash flows. With that being said, we expect our adjusted-EBITDA loss in 2015 to be in the range of $18 million to $14 million and looking at the first quarter we anticipate revenue in the range of $21.4 million to $21.8 million representing growth of 12% at the midpoint. We expect our adjusted-EBITDA loss to be in the range of $7.5 million to $6.5 million representing an improvement in adjusted-EBITDA margin of approximately 500 basis points from the year ago quarter. I'd also like to remind everyone that the first quarter is usually an EBITDA low point for us because that it's the lowest revenue quarter and it includes the cost of our annual U.S. catalyst conference. In summary, with the shortfall in the fourth quarter, we are looking ahead to 2015 as a transition year with an emphasis on achieving sustainable growth and making significant progress towards profitability. And with that, let me turn the call back over to Scot.

[Scot Wingo:]

Thanks David and John. I know that some of you are disappointed with the lower than anticipated growth that we're anticipating in 2015. And quite frankly, I'm also disappointed. However as most of you know, I've been studying, analyzing and blogging about the e-commerce space for over 14 years. In e-commerce world, we’d like to say the only constant is change and that's exactly what's exciting about e-commerce. As certain as I'm the landscape will continue to change, I'm confident that ChannelAdvisor will continue to adapt, capitalize and thrive on the complexity of this market. The path to success in e-commerce is not always linear, but that creates opportunities. We serve thousands of customers who need a leader to help them navigate, increase complexity and fragmentation. I intend for ChannelAdvisor to remain that leader. Now, we’d be happy to take your questions. Operator? Do you want to queue for questions?

[Operator:]

[Operator Instructions] Our first question comes from Michael Huang with Needham & Company. Please proceed.

[Michael Huang:]

Thank you very much guys, just a couple questions for you. So first of all John, maybe the first one is for you. In terms of revenue guidance for 2015, could you talk about what that implies in terms of GMV growth and then maybe if you can, what are you assuming with respect to variable contribution to the business? I'm assuming that you're assuming less there, but maybe you could bring more around it?

[John Baule:]

I can only say I don't think we don't really disclose our exact GMV, but as David said, we're definitely anticipating that revenue growth will probably lag GMV growth in the short term and as far as six variables again we don’t guide to those specific things obviously we’re looking at the trends that we’re seeing and we’ve considered them in our guidance.

[Michael Huang:]

Maybe switching gears here, so in terms of the customer adds in the quarter, obviously Q4 is one where seasonality isn't too favorable for that metric, but what are you seeing in terms of sales productivity? I know you explained the metric away by talking about churn, but how is sales productivity trending and what are the assumptions that you're seeing? What are the assumptions for this year?

[Dave Spitz:]

Hi, Mike, this is Dave. Good question. I think I was generally pleased with the sales productivity during the year. As you know we invested fairly aggressively towards the beginning of -- while the end of 2013 and beginning 2014 and expanding ourselves sales team and we viewed that would have an effect on sales productivity just because it takes time for sales reps to ramp and when you add a meaningful number of sales reps you’re going to have a diluting effect on the overall members. But we did see improvements in sales productivity towards the back half of the year as we had more tenured reps and so when it comes to the gross add in terms of customers count in the performance of the team, I was generally satisfied. We did have a very strong looking quarter in the fourth quarter of 2013 which sets up for a little bit difficult comp in that regard in terms of booking in Q4 of 2014 where as I mentioned in the call we were simply flat the year before. But we were -- our overall bookings for the year were up significantly year-over-year and I think that reflects improving production capacity of the team. I don’t expect that in 2015, we will growth the sales team at the same rate that we grew in prior years. I think we’d like to see that team expand in terms of their tenured and ultimately I would expect that this year should be characterized by improvements in sales productivity for that reason.

[Operator:]

Our next question comes from Karl Keirstead with Deutsche Bank. Please proceed.

[Karl Keirstead:]

Hi, thanks. Maybe this question is for John. John, the Q1 revenue guidance of 12% and the full year 2015 growth guidance of 11% to 14% are pretty comparable, suggesting there's not really a second half recovery built into your guidance. But I'm wondering why wouldn't there be if you're making a number of pricing matrix and sales changes today, why wouldn't that manifest itself in a pick-up and growth in the second half? Thank you.

[John Baule:]

That’s a question Karl. I mean there is a little bit of acceleration in the second half of the year for our guidance, but the thing we’re looking at here is that there a number of trends, the GMV trend is one, what we’re seeing from our customer base is especially the larger customers and we’re just trying to make sure that we don’t get ahead of our fees in terms of anticipating what those would be, so you’re right we’re not anticipating an acceleration of that, but we’re anticipation is an acceleration in profitability as we see increased productivity from our sales and marketing investments and we’re kind of thinking about it from a combination of that.

[Karl Keirstead:]

Okay, and then my second question, maybe John this is also to you, just on the adjusted EBITDA loss, I appreciate it's improving but after a $19.5 million loss in 2014 your guide at the mid-point is still $16 million. It's still pretty hefty. I'm wondering what other actions you might take and maybe you could comment on your hiring plans for the full year, to come in at an adjusted EBIT loss that might be a little bit more palatable to the investment community?

[John Baule:]

How we try to figure out exactly what is palatable for the investment community, but from our standpoint, we’re definitely expecting to harvest some of the -- we’ve added a lot of sales reps over the last year and a lot of these guys are getting sort of maturity what we expect increased productivity on that front. So there is no doubt that we’ve made some significant investments in areas like account management and inside sales that we think will begin to reach some benefits. There is a lot of leverage in our model and we have a lot of control over what we do with EBITDA and we want to give you a number that we feel comfortable that we can manage too, but obviously we’re going to be watching this each and quarter and managing based on what we see in some of the other revenue trends.

[Operator:]

[Operator Instructions]. Our next question comes from Greg Dunham with Goldman Sachs. Please proceed.

[Greg Dunham:]

Hi yes, thanks for taking my question. First question on the higher churn in 2014. When you reflect back on the churn that you saw this year, what were the three largest impacts and what gives you confidence that as you look out to 2015 that you're not going to face similar dynamics?

[David Spitz:]

Hi, Greg this David, good question. I think one of the characteristics that we saw develop during the year was an increase in churn at the low end of our customer base I think we've been fairly consistent about that. I believe on a prior call I don't remember the exact numbers but a significant proportion of the churn was customers at the very low end of our revenue scale we have talked about that in Q3 and that was a fairly consistent trend. And I think our view is that reading through that we think that some of the challenges that eBay in particular is going through and many of those customers by the way tend to cluster around eBay given that it's an open marketplace unlike some of the other marketplaces that have a higher they are dated or have -- that need you have to be approved to be seller on those marketplaces. So we believe that there is a fairly strong correlation between eBay's relatively weak performance and increased pressure on customers in that particular segment. So going forward I think from a guidance perspective I don't think we are necessarily making assumptions that will get better from this year? We are certainly making and have made some investments starting really in Q4 and our customer success being to make sure that we focus on successfully on-boarding customers across that spectrum. And I think that something else that we're evaluating is what is the appropriate pricing at that level and as I said in my prepared remarks do we need to increase the hurdle for sellers of that size in terms of their ability to get on to our platform and those are things we're evaluating. So I believe that between the customer success team that we've got which is something we've seen success with in prior years and reconstituted this year. And potentially raising the bar for becoming a customer on the ChannelAdvisor platform we should have an impact on unit churn.

[Greg Dunham:]

T Okay, great and maybe one for you, John. In terms of those customer success resources, should I assume that those go and more in the sales and marketing line from an expense perspective? And when you think about the EBITDA margin expansion that you're going to show, how does that split up between different lines? Because when I think about gross margins and pricing coming down and adding potentially more customer support, I don't, how would that gross margin really improve?

[John Baule:]

So first of all sales -- going into the sales and marketing line. And second what we expect to see is leverage on every part of the P&L. I am not going to break it down exactly which ones -- we have given the indicators with some of the different lines but we expect leverage on line. And the one thing I want to note is on the G&A line there will be some we will probably breakout the amortization and depreciation or at least give you some color on that because at these levels some of the amortization will make G&A look higher until we pull that out of the EBITDA line. And I am just pass it over to David to make couple of additional comments.

[David Spitz:]

Just to give you little more color on customer success. So that's a little bit distinct from our implementation team which works with our COGS line. Customer success staff our part of our account management team and as a result they aren't specifically responsible for launching them and training the customer and implementing the customer for say but what they are responsible for is evaluating a customer's progress against specific milestone within their first year. We see that a majority of our churn occurs within the first year, right so we sign a customer especially small customer who maybe had some data quality issues, has some challenges as it relates to pricing on a particular marketplace would have it and we see a strong correlation -- if a customer can get through certain milestones with a certain velocity the odds that they will then renew for a second year and then become a long-term are very good. Conversely if they don’t get through certain milestones at a certain velocity the odds of them renewing into the second year are significantly diminished. So what we found is that by having a team focused on identifying the specific markers of risk if you will for those accounts and then going in and specifically addressing those particular risks with individual customers and that might mean putting them back into the implementation queue or additional training or [what have you]. In that what we've seen is that when we touch customers at that level that tends to increase the odds that they sufficient success to get over that transition. This was a structure that we had in place a few years ago it worked fairly well for us, candidly we moved away from it in 2014 and I think that's part of what contributed to the churn that we saw in addition to some of these external factors this was a team that was reconstitute here in Q4 and is now full response for in Q1.

[Greg Dunham:]

And then maybe one quick one for Scot, what was the acquisition in the quarter and maybe the strategic rational and thoughts there?

[Scot Wingo:]

We acquired a small company out of UK, it's called E-Tale and what we're seeing is in the last 12 months, we got a lot of these branding manufactures coming to us and to hear about ChannelAdvisor because we're associated with Amazon and other e-commerce channels. And the challenge they face is they're seeing kind of collapse of some of the offline partners that they have. So imagine RadioShack is a big channel for you or something like that. And that's all scary to have some of those store closings. So more of these brands are trying to figure out how do they go direct and they are calling us to just kind of understand that with the ultimate goal of selling direct on a marketplace like eBay or Amazon. What we found is the close rate on there was not as higher as we'd like because they are at zero and they want to go 100 miles, it's hard to kind of grow to go that fast so this deflation is called where to buy what this does is allows the branded manufacturer to put on their Web site weaker than essentially less than point that a consumer to the authorized retailer that that have that product available in the stock. So that's a really nice intermediate question and it's been very early and we're having more conversations with brands that we never had before is what I'd say and started learning a lot about that segment and that's kind of a really interesting segment thus longer-term because we do see that some of these new innovative marketplaces are really kind of creating the fund that roll the retailer in aggregating brands and helping them to go direct. And more and more brands are able to do things like ship product directly and handle customer call center questions and things like that. So that's a long-term trend that we felt like we weren’t as exposed as we wanted to and that gives us more exposure there.

[Operator:]

We have no further questions. I will now turn the call back over to Management for any closing remarks. Please proceed.

[Scot Wingo:]

Thanks for joining us today. We'll be at the Stifel and Goldman Conferences here shortly and look forward to seeing anyone that is able to make it to catalyst at the end of March.

[Operator:]

This concludes today's conference. You may now disconnect. Have a great day everyone.