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spk07: Thank you for standing by, and welcome to the Channel Advisor Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Rayford Garabrant, Director of Investor Relations. Please go ahead, sir.
spk05: Thank you, Jonathan, and good morning, everyone. Welcome to Channel Advisor's conference call for the third quarter of 2021. With me on the call today are David Spitz, Channel Advisor's Chief Executive Officer, Beth Segovia, Channel Advisor's Chief Operating Officer, and Rich Cornetta, Channel Advisor's Chief Financial Officer. This morning, we issued a press release with details on our third quarter 2021 performance, as well as our outlook for the fourth quarter 2021. This press release can be accessed on the Investor Relations section of our website at ir.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 may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. These risks are summarized in the press release that we issue today. For further discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our most recent Form 10Q, 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 analysts' 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.
spk03: Thank you, Rayford.
spk06: We continue to execute extremely well in Q3, driving strong growth, record revenue, and adjusted EBITDA that exceeded the high end of our guidance range. Total revenue grew 18% year-on-year in Q3, a nice sequential acceleration compared to Q2, while subscription revenue growth accelerated for the fifth consecutive quarter to 26% year-over-year. This is a direct result of our strategy of focusing on brands and the growth investments we've been making. GMV also showed solid trends, growing low double digits in Q3 year-on-year, consistent with Q2, highlighting the durability of e-commerce gains made during COVID-19. At our recent analyst day, we introduced long-term financial targets for revenue of at least $250 million and adjusted EBITDA of at least $50 million by the year 2025. That equates to double-digit revenue growth and at least 20% adjusted EBITDA margins across this timeframe. And now I'll touch on a few of the key highlights that keep us bullish on our business and confident about these long-term targets. First, revenue growth accelerated from Q2 despite another quarter of tough year-on-year comparisons. This impressive performance was fueled by another quarter of strong performance in bookings and revenue retention. The strong growth in subscription revenue and positive trends in net bookings are important leading indicators of our future revenue growth potential. Second, our focus on brands continued to pay off and drive our record revenues. In Q3, subscription revenue growth from brands again exceeded 50% year over year, and brands represented 47% of our subscription revenue, an all-time high. We recently shared some data to help illustrate the benefit of focusing on brands. One of these was subscription dollar net revenue retention presented on a total company basis. This metric improved from under 85% for the 12 months ended June 2017 to over 100% for the 12 months ended June 2021. driven in large part by a rising mix of brands, which, because of their durable business models and larger size, tend to exhibit more favorable revenue retention characteristics than retail customers. We believe that superior unit economics we've seen with brands will continue to positively benefit our long-term financial performance as they grow to represent a larger proportion of our customer base. Third, healthy demand for our products continued in Q3, helping us achieve another quarter of strong bookings. Brands have grown to represent a substantial majority of our bookings, and it has been fairly well balanced between new logo activity and expansions, which is indicative of our land and expand strategy. In addition to solid sales activity, we saw improvements in retention driven by the efforts of our services team and recent platform enhancements. We're continuing to invest in product innovation and customer success initiatives, like our enterprise level of service, which we feel can help us build on these positive trends. Fourth, our rapid pace of channel expansion continued in Q3, pacing ahead of schedule and providing our customers with the reach and flexibility to present their products across a growing array of marketplaces and dropship solutions that consumers are gravitating towards. As you recall, aggressively expanding our supported channels has been one of our growth initiatives in 2021. And why is that? because this long tail of marketplaces comprising channels like Target Plus, Zalando, Shopify, Wayfair, and well over 100 others represents a large and fast-growing pool of GMV. In fact, the long tail grew aggregate GMV at triple the rate of our top three marketplaces for the 12 months ended June 2021, and it continued to outpace in Q3. Also, the long tail was larger than eBay and Walmart for us again in Q3, second only to Amazon in terms of GMV. By offering our customers more ways to connect with consumers, we further extended our lead in the market and helped to diversify our business at the same time. Fifth, our capital allocation strategy begins with reinvesting in our business in a disciplined fashion. That's why, even as we lean in with growth investments across sales, services, and product, our financial model has continued to deliver healthy margins and robust cash flow. Adjusted EBITDA margin for the third quarter was 20%, and we converted nearly 90% of adjusted EBITDA dollars to free cash flow. With nearly $100 million of cash on hand, no debt, market leadership, and a large market opportunity in front of us, we intend to continue investing with discipline in growth initiatives. Now, a lot of people ask me about supply chain disruption, which has been all over the news in recent months, and rightly so. It seems almost every corner of industry has been impacted by factory closures, very high shipping costs, and inventory and labor shortages. Most of the customers I speak with are dealing with some or all of those issues. We believe the consumer remains in solid shape and is likely to maintain strong spending patterns through the holidays, but that we might see those spending patterns shift to favor different channels, brands, and products based on product availability and consumers' confidence in the reliability of shipping speeds. We also believe that these challenges are likely to persist into 2022. While we haven't seen a significant impact to date, like most things related to COVID, it does make forecasting a bit more challenging, and we're taking those risks into account in our near-term outlook. It's worth noting, though, that through October, we saw continued strength in GMV growth, despite the lack of Amazon Prime Day this year in contrast to last year. Finally, we're pleased to welcome Hemantul Pasul to our Board of Directors. Hemantul is President and Chief Technology Officer at Epicor Software. As a technology business leader who's transformed Epicor, a leading ERP provider, into a modern portfolio of fast-growing software-as-a-service industry solutions, Hemantul has the experience, and the expertise to make a significant contribution to our board. His insights will be invaluable, and we're excited to welcome him to Channel Advisor. In closing, I'd like to reiterate why we believe this is our time. First, we have a massive, multibillion-dollar, total addressable market with low penetration. Second, brands, our strategic focus, drive strong unit economics. Third, our value proposition has never been stronger. And fourth, we have an attractive financial model with a combination of double-digit revenue growth and strong profit margins. With that, I'll turn the call over to Beth.
spk00: Thank you, David, and good morning, everyone. Q3 was an awesome quarter for Channel Advisor as we began our third decade in business. By hosting Connect 2021, our annual conference curated to help brands and retailers reach more online shoppers that served 2,500 registrants in more than 70 countries. By hosting a well-attended virtual analyst day that increased awareness in the investment community, and by topping it all off with achieving record revenue. It's been a busy three months. As David mentioned, our team achieved very strong growth bookings again in Q3. We added notable new customers, including Master Lock, Detroit Diesel, Sennheiser, Xiaomi, and Natural Balance Pet Foods. In terms of growing our business with existing customers, our account managers continued to collaborate with our sales team to sign expansions with customers like Asics, Calzedonia, and Geox. With respect to churn, we achieved solid improvement quarter-by-quarter in Q3. Part of this improvement is directly attributable to our enterprise level of service initiative. The rollout was completed in Q3, and the positive impact to date has been better than initially targeted. We're pleased with all of these trends as bookings, expansions, and improved retention are important drivers of sustained growth. And speaking of sustained growth, another reason we're optimistic about the trajectory in our business stems from a recent survey we conducted. We polled over 1,000 U.S. consumers to gain insights into their shopping behaviors, and their results are clear. Consumers aren't buying products and interacting with companies the way they did before 2020. As we head into the holiday season, consumers plan to continue shopping more online than prior to the pandemic, and inventory availability and shipping speed are key factors in making online purchases. The survey also reinforced the need to focus on social media as more consumers research products via those channels. The survey confirms that brands need to reimagine and reinforce their e-commerce strategies to take advantage of these permanent changes, and Channel Advisor is positioned to do just that. Let me now share an innovation update regarding new platform capabilities we've recently released. Enabling brands to accelerate their digital transformation and achieve their e-commerce objectives remains our priority. One of our top innovation priorities is to give our customers more access to reach more consumers by expanding our breadth of supported channels significantly and rapidly. To that end, earlier this year, we committed to adding at least 80 additional integrations by mid-2022 compared to where we were at the end of 2020. With a recent addition of 19 new integrations, ChannelVisor now supports over 200 channels globally. New marketplace integrations include CDON, the leading marketplace in the Nordic region, Ball.com in Belgium and the Netherlands, Rakuten in France, and The Iconic in Australia, and six first-party dropship connections, including Belk, Lord & Taylor, and GameStop. We anticipate that we will achieve the 80-channel goal with our January release, which would be nearly six months early, and we are already actively planning to add more than 80 channels again in 2022. This reach and ability to expand further reinforces our belief that our value proposition has never been stronger. This is also why Tatum, a leading Polish clothing brand, selected ChannelAdvisor to help grow its online presence and accelerate international sales using marketplaces. With support from ChannelAdvisor, the fashion brand launched within weeks on Zalando, reaching new purchase-ready consumers in Belgium, the Czech Republic, Denmark, France, Germany, the Netherlands, and Poland. In their words, We want to go fast, but our resources in IT, marketing, and sales are tight, and we need to reduce the daily workload on our staff to a minimum. Channel Advisors' international network of marketplaces and expertise offers us great opportunities for future growth. This is yet another excellent example of how our unrivaled access to marketplaces is helping brands win. Our product development also is designed to give businesses greater control over the consumer shopping experience, brand product content, and where a brand showcases their products. In order to empower brands to enhance digital marketing campaigns, we have released Channel Advisor A-B testing for product content. With this new capability, customers can increase the likelihood of conversion by identifying the best performing product content to support efforts on Google and Facebook. Additionally, our latest product release includes the newly launched Channel Advisor Commerce Network, an in-platform experience designed specifically for brands and retailers searching for preferred selling channels for their products. This centralized network enables online channels, including marketplaces, web stores, and retail channels, to easily scout, engage, and grow with select brands and retailers looking to diversify in the highly competitive e-commerce landscape. Complementing our 20-plus growing channel reach, the Commerce Network accelerates matching and facilitates workflow to ensure a faster path to integration, adding value to both sides of this network, enabling brands to reach more consumers and enabling channels to expand their product assortment. This represents the first opportunity for our channel partners to access and utilize the Channel Advisor platform every day to expand their reach. In just the first few weeks after launch, 21% of clients and 36% of partners have created high-quality profiles, and we're seeing active sharing of information across the network. We believe the network effect created by this new experience will facilitate e-commerce growth for our brand customers and our channel partners. We also released a major capability in our shoppable media offering called the Self-Service Buy Now Interstitial. This capability enables our brand clients with a self-service experience to build and define powerful social media campaigns that include a path to purchase for their product on preferred retailers. While we already offered the buy now interstitial, this new self-service capability improves time to market, further maximizing traffic they generate for their retail channel partners. These enhancements to our multi-channel commerce platform can help brands outpace the competition and improve performance during the busy upcoming holiday season and beyond. To summarize, in Q3, we continue to build on the progress made in 2020 and the first half of 2021. We remain focused and have numerous initiatives underway across product innovation and customer success aimed at empowering brands to surpass their e-commerce goals. Based on our strong execution combined with the tremendous opportunity in front of us, we believe we are positioned for sustained double-digit revenue growth and strong margins going forward. With that, I'll pass it to Rich now to provide a more detailed update on our financial performance. Rich?
spk03: Thank you, Beth, and good morning, everyone. I want to start by thanking all who attended our recent Analyst Day in September. And for those who couldn't make it, we encourage you to visit our company website to access a recording of the event. We received a significant amount of positive feedback on the operational and financial content we presented, including our capital allocation framework, our approach to M&A, and additional financial metrics to support our long-term financial outlook of sustained double-digit revenue growth and adjusted EBITDA margins of at least 20% through 2025. Following a quarter of record top-line results, I'm pleased to report that momentum continued into Q3, with another quarter of record revenue, and more specifically, record revenue from brands. Even in the face of another quarter of difficult growth comparisons versus a year ago, total company revenue growth for Q3 increased compared to Q2, and subscription revenue for Q3 represented our fifth consecutive quarter of acceleration, as growth increased to 26% year-over-year. The rapid acceleration in subscription revenue growth over the last year, specifically from brands, highlights how well we are executing against our strategic investments and priorities. On top of our solid revenue performance for the third quarter of 2021, adjusted EBITDA exceeded the high end of our guidance range we provided in August, and we continue to recognize strong cash generation throughout our ongoing investment cycle. So let's dig a little deeper into the numbers for Q3. Total revenue reached $41.6 million in the third quarter, up 18% year over year, despite the challenging comps I mentioned earlier, and represents our best quarter ever for revenue. Subscription revenue reached another record at $34.2 million for the third quarter, and variable revenue of $7.3 million was generally in line with our outlook. As for details specific to our brands cohort, we achieved record total revenue of $17.5 million during Q3. We also realized record subscription revenue of $16.1 million during Q3, growing 52% over last year and representing 47% of our total subscription revenue, which is up roughly 800 basis points from the prior year period. Also, over the previous 12 months, we've increased net brand's customer count by almost 30%. And average revenue per brand's customer has remained significantly higher than retail customers. The success we continue to see from our sales organization with acquiring new brands and from our services and support organization on expanding with and retaining existing brand's customers proves that our focus on the strategic cohort is working and is being recognized in our financial results. We continue to remain confident that brands will represent greater than 50% of our total revenue by the end of 2022. Now moving on to adjusted EBITDA. We finished Q3 at $8.2 million, well ahead of the high end of our outlook of $7.2 million, generating an adjusted EBITDA margin of 20%. While still maintaining healthy margins, operating expenses have been building steadily in recent periods. as we've made strategic investments in our product and our services organization, as well as incremental investments in sales. We expect this trend to continue in Q4 and into early 2022, as we reinvest back into our business the incremental revenue growth we generate in 2021, with the goal of accelerating product innovation, further improving customer retention, and supporting our long-term financial model. Now turning to the balance sheet. We had another solid quarter of cash generation during Q3, with cash and cash equivalents reaching $97 million and representing an increase of approximately $7 million sequentially and $31 million year over year. Free cash flow is very healthy again in Q3, bringing the year-to-day total to $22.8 million, a record pace for the first nine months of a fiscal year. We also saw deferred revenue increase again to record levels, up $1.4 million sequentially and up $7.1 million year-over-year, driven by our continued strong bookings performance. So let's discuss our financial outlook. For the fourth quarter of 2021, we are issuing a revenue outlook range of between $43.7 million and $44.7 million, and an adjusted EBITDA range of between $8.6 million and $9.6 million. Keep in mind that this wider revenue and adjusted EBITDA range is consistent with our practice in previous Q4s because the holiday season typically makes forecasting GMB, enhanced variable revenue, a little more challenging. Also, as David mentioned, supply chain constraints are adding another element of uncertainty to financial forecasting. Lastly, it's important to mention that when comparing our Q4 guidance to prior year results, Prime Day occurred in October last year, so we'll now recognize a similar benefit to GMB volumes and variable revenue this year. With respect to subscription revenue, we target continued strong performance in Q4, and our outlook reflects anticipated growth in the upper teens. We also expect OPEX and Q4 to increase at least $4 million over the prior year as we continue to reinvest the incremental revenue growth we have generated in 2021. In closing, we are proud of the successful investments we have made over the last two years, paid for by our financial achievements over this time, and our strategic focus on brands and subscription revenue growth provides us confidence in the sustainability of our financial model. To all of you, thank you for your continued support. And on behalf of David, Beth, myself, and the entire leadership team here at Channel Advisor, we wish you and your families a healthy and happy holiday season. With that, operator, we'd like to now open the call to questions.
spk07: Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Colin Sebastian from Baird. Your question, please.
spk01: Great. Thanks. Good morning, everybody. I guess first off, I mean, you guys have been beating expectations for EBITDA all year, but still talk somewhat, you know, prudently, I guess, about margins with investments in the platform. Can you talk a little about that dynamic? Is this due to the revenue upside or have you sort of pushed out some investments a bit to next year or just not spent as much as you might have expected, you know, at the start of the year or the start of the quarters? And then secondly, just want to quantify the pipeline a bit, especially given the greater urgency among brands and other businesses to shift online. If you could talk about the pipeline and maybe the mix between enterprise-level prospects and smaller companies. Thank you.
spk06: Hey, Colin. Thanks for the question. Yeah, I think on the investments, I would say a couple things. One is that we continue to hire as aggressively as we can. As you know, hiring in this environment has been, I think, challenging for a number of different companies. So there's probably a little bit of a lag effect there in terms of where our initial investments we expected to be in terms of hiring. But Very consistent in terms of the things that we're investing in. We've approved some additional investments in the last quarter that we think will drive continued growth for us next year as well. So every quarter we go through an analysis of various business cases for proposed investments and determine what makes sense and what doesn't. So it's a combination of additional investments that we're making and probably a little bit of a lag effect on hiring. On your second question around pipeline, I would say pipelines remain robust. We don't have a particularly long sales cycle. So, you know, probably half of our deals, roughly half our deals are sourced and closed within a quarter. So we don't have like a nine- or 12-month pipeline that we can look at necessarily that tells us a whole lot. But I would say that we continue to see very strong interest and demand from brands, which, as you know, is our key focus here. I would say it tends to skew a little bit to the larger side, more global, more enterprise-type brands, which is where I think our solution is the best fit.
spk03: Colin, this is Rich. Just one thing to add with regards to your comment on EBITDA margins and further what David was saying as far as hiring. I mentioned in my prepared remarks that we anticipate that hiring trend to continue in Q4, but even more importantly, I focused on the fact that extending that into 2022. So we're not providing detailed outlook information on 2022 at this point, but I do want to focus on the fact that you should expect your investments to continue, our investments to continue into early 2022.
spk01: Understood. All right. Thanks very much, guys.
spk07: Thanks, Colin. Thank you. Our next question comes from the line of Joshua Riley from Needham. Your question, please.
spk08: All right. Thanks, guys. Congrats on the strong quarter. Maybe just starting off, how should we think about the impact to 4Q guidance by having Prime Day in the June quarter this year versus the December quarter last year? And then what are the implications for variable revenue given the comp issue there? And then just generally slowing GMB volume growth year over year at your largest platform.
spk03: Yeah, so happy to give you a little bit more detail on that. So if you look at our outlook for revenue, we have committed to high teen subscription revenue growth. So if you were to, you know, infer that with variable revenue, you're looking at a variable revenue decline in Q4 consistent with what you saw in Q3, around 10% or so. So we are factoring in the fact that Prime Day is not occurring in Q4 this year into our variable estimates. And, you know, we continue to focus on subscription revenue growth and our brands cohort, which, again, has a lesser concentration on variable revenue for a few reasons, one being the fact that two of our products, Shopable Media Product and Bread Analytics, does not have a variable revenue component. And also, as David mentioned during his prepared remarks, Brands just have a stronger financial position, and they tend to buy into a higher subscription revenue tier to start the relationship with us and therefore have less of a variable revenue contribution over their relationship with us.
spk06: One thing I'll add on GMB is it's important to continue to emphasize that long tail. So just to give you an interesting data point, in October, Zalando actually generated more GMB on our platform than Walmart did. So that was a first. And so these long-tail marketplaces are actually becoming, in aggregate, fairly significant in size and influence. So even as the larger marketplaces like Amazon and eBay indicate a little bit more muted growth as we go into Q4, it's really nice to have some of that offsetting higher growth from that long tail. And that's a trend that I would expect to continue as far as I can see at this point.
spk08: Okay, great. And then... Maybe just a follow-up question. You touched on this a bit, but I'm curious to get some more detail. If you look at maintaining that double-digit revenue growth post-pandemic, how should we think about the mix from adding new brand customers versus increasing average revenue per customer in terms of driving growth over the next couple of years? You said it was fairly balanced in the quarter. Is that what you anticipate going forward as well?
spk06: Yes. Yeah, I think so. If we look at our sales activity, obviously it fluctuates one quarter to the next, but roughly half of our brand bookings coming from new logos and half coming from expansions is, at least over the medium term, a pattern that I think is probably fair to expect.
spk08: Okay, great. Thanks, guys.
spk07: Thank you. Thank you. Our next question comes from the line of Matt Fowle from William Blair. Your question, please.
spk09: Hey, guys. Nice results, and thanks for taking my questions. I wanted to first ask on supply chain impact and in terms of how is that impacting your ability to sell to new customers? Is it creating distractions or challenges on that end?
spk06: Hey, Matt. Thank you for the compliment. I haven't seen an effect in terms of pipeline and sales velocity. I mean, when we're selling to customers at this time of year, it's really to prepare for next year, right? So most of the customers that we close in Q4 are likely to go live sometime in Q1, and ultimately, you know, they're looking forward. So I'm sure that some of our customers are somewhat distracted by, you know, the cost of shipping containers and making sure they're getting products to the right places and making sure they've got inventory, but that doesn't stop them from continuing to focus on their strategic investments. So we haven't really seen an impact in that regard.
spk09: Got it, got it. And Also on the supply chain, just wondering if we were to compare what you're expecting this year versus last year where it was a different situation but there were supply chain challenges perhaps on the last mile getting goods to the end consumer, did you see more of a shift to your long tail channels and those had kind of evened out and is that maybe what you would expect this year? How do you think about that impact of people shifting from one marketplace to another due to some of these supply chain issues?
spk06: Yeah, that's a great question. And it's really, my answer is really speculative because so much has been difficult to predict about the last 18 months. I think one big difference this year versus last year, I think, is that Amazon is very, very well prepared from a logistics and fulfillment perspective and even their last mile fulfillment. So while individual sellers and brands may be struggling to get inventory available on different marketplaces, I think the infrastructure that Amazon has built over the last 18 months is really pretty amazing, and I think they'll probably benefit from any kind of shift. Because I think consumers ultimately are going to look for, where can I buy products that I know I can reliably get in time for the holidays? You know, last year we really started remarking on that growth of long tail. A lot of those are outside of the U.S., and so maybe a little bit less seasonal than we maybe see here in the U.S. So I guess my bet is that to the extent there are meaningful supply chain disruptions or shipping disruptions, the benefit probably accrues to larger retailers, larger brands, larger channels who have the capacity and the muscle and the flexibility to, you know, to influence their supply chain.
spk09: Got it. That's it for me. Thanks a lot, guys. Appreciate it.
spk07: Thank you, Matt. Thank you. Our next question comes from the line. It was Zach Cummings from B Reilly.
spk04: Yeah. Hi. Good morning. Congrats on the strong quarter, and thanks for taking my questions. I guess my first one's going to be geared towards Beth. In terms of adding new channels with you pacing ahead of the target that you introduced at the start of the year, I just want to get from your perspective if any of these new channels are really starting to move the needle from a bookings perspective now that you have them up and live and connecting those with some of your brand customers.
spk00: Yeah, so I'd say we're starting to see a lot of activity. So we, you know, it takes a bit of time to get the integrations up and running, tested, and live, which we've been really focused on for the first couple of quarters, obviously, of this year, with some success, right? So we're ahead of pace, which gets us really energized. And we've really launched a focused campaign just in the last month to start driving that adoption across some of those key channels. So we're anticipating that, you know, next year we're going to see a lot of expansion and adoption, right? So for Q4 and holiday, as David mentioned, customers are locked and loaded now and, you know, they're on the channels they're going to be on for the next, you know, eight weeks or so as we get through holiday. And we'll see more of that adoption occur next year. So we're very excited about the prospect.
spk04: Understood. And then my other question is really just around your enterprise level of service for brands. It seems like that's fully rolled out now with the first cohort of brands that you're wanting to launch. What do you anticipate for kind of next steps of that program as you continue to expand it out to more of your brand's customer base?
spk00: So I think our focus right now is delivering on a promise. So we had shared that we have a few new roles that we're offering customers and expanded teams. And so we are demonstrating new interactions with our customers, providing new deliverables. We're assessing their integrations and optimizing those. We're providing cross-channel strategies in a new way. So really going deeper with our customers that are in the program. So that's where we're focused in the moment. We're talking about how we scale it out to reach additional customers, and I would suspect we'll consider doing that as we head into mid-year next year. But in the moment, we're focused on having those teams fully operational and supporting customers in a new way. And the feedback from our customers in that program is really very positive. They're feeling that additional coverage, more resources, more expertise. And so we're focused in the moment on delivering on the promise.
spk04: Understood. Well, thanks for taking my questions, and congrats again on the strong quarter.
spk00: Thank you, Zach.
spk07: Thank you. Our next question comes from the line of Thomas Forte from DA Davidson. Your question, please.
spk02: Great. One question and one follow-up, and also congrats on a very impressive quarter. So Amazon and Shopify suggested that in the third quarter, similar to the second quarter, that many consumers who'd been vaccinated returned to physical stores, and therefore e-commerce, you know, slowed versus last year. I'd appreciate your high-level comments on that. what you thought happened to e-commerce in the third quarter, and how we should think about online penetration in the fourth quarter and into next year.
spk06: Hey, Tom, this is David. Thanks for the comments. You know, we saw fairly consistent growth in the third quarter year over year, as we saw in Q2. Obviously, lower growth than we saw last year when things were just pegging the needle, so to speak. But we felt pretty good about the GMB growth that we saw. And again, I'll emphasize the increasing importance of that long tail of marketplaces beyond Amazon, eBay, and Walmart for us. And so, you know, I expect that dynamic to continue. So from where I sit, you know, a lot of the trends that we saw last year so far look pretty durable. And I don't doubt at all that as people travel more and go out more that they're going to visit, you know, traditional retail stores more than they did during the pandemic, of course. But I don't expect that we'll see some kind of reversal, you know, or decline in e-commerce penetration. I think we achieved a new kind of high watermark last year, and I think we're going to, you know, so far we've seen us continue to exceed that this year. And my anticipation is that that will continue through the fourth quarter.
spk02: Great. And then for my follow-up question, With the sustained strength you've had with brands, what are your thoughts on your opportunity to take price this year and next year?
spk06: You're talking about price of our solution?
spk02: Yes.
spk06: We're always looking at the financial dynamics of our business, right? And a lot of our customers are facing cost pressures in other areas, whether it's shipping costs, labor costs, et cetera. And so we want to be thoughtful. We want to be good partners with our customers. So we haven't announced anything, but I would say that that's always something that we're looking at. And I think our position as a leader in the space gives us some flexibility in that regard, but we also want to make sure that we're being good partners for our customers. Great. Thanks for taking my questions.
spk07: Thank you. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Rayford Garibrand for any further remarks.
spk05: Thank you, everyone, for joining us today.
spk07: We look forward to speaking with you again soon. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
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