SPS Commerce (SPSC) 26 Apr 232023 Q1 Earnings call transcript

Good day, and welcome to the SPS Commerce First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Irmina Blaszczyk, Investor Relations for SPS Commerce. Please go ahead.

Thank you, Andrew. thank XXXX joining Conference and Commerce on everyone, Quarter First Call. afternoon, you us for SPS Good

We will efforts make and to our our certain and other statements today, financial traction go-to-market including customers. results, strategy with and penetration designed increase expected to retailers with respect

new call, that Please opinions These are this note result update obligation date forward-looking reflect our uncertainties that as no involve actual of results of of risks a forward-looking these we statements cause number to only to the reverse and or a and of SEC’s are a available statements, description our forward-looking undertake could and and of differ materially. XX-K, events statements as whether publicly any Form as documents refer Please well that spscommerce.com, at results. the the as These risk more to detailed factors sec.gov. results otherwise. may for our information, our affect at filings, release our future SEC website, specifically financial website, our or press

are we data of reference our providing historical addition, In easy section website, spscommerce.com. Investor our sheet on Relations for a

we turn is call press filings find will will release the website, the our measures including reconciliations call with these to adjusted of our of will additional measures I non-GAAP over you and EBITDA today, non-GAAP these In with income and our During And comparable with each SEC, our regarding posted disclosures financial on per which share. financial that, measures, GAAP Archie. measures. discuss

everyone. welcome, and Irmina, Thanks,

for the industry. dynamics the as of The macro marks to across and XXXX omnichannel retail need to the first continue year a start strong drive quarter efficiency

of total and total grew revenue recurring million. fulfillment and We continue to Both strong see analytics $XXX.X and XX%. revenue achieved in revenue momentum

a about strategy execute I’d planned conducting continue like I to the to for the world’s March retail in the continue The we announcement acknowledge to my our prepared network. we made meantime, process and retirement. Board in of early search in successor remarks, the is my my Before be with

partners improve worldwide adviser and efficiency from The knowledge to gained and business us expertise potential positions we are existing uniquely over trading customers looking who and productivity. as XXX,XXX a working with to

X past growth retailers on with trading volatility sizes. retail strain substantial face supply partners on and the sales the in ongoing behavior, changing in industry Coupled channels has consumer all chain. macroeconomic the among Over suppliers covering years, uncertainty, and of the inefficiencies been

businesses SPS Commerce to is with embrace and different retailers proud them success. position suppliers growing industries, and work across for helping automation

with locations for We recently community worldwide wholesaler X,XXX independent Value U.S. the distributors a largest a launched and retail campaign one company, over the of the True in

partner by standardize EDI to ability initial and adoption SPS Our decided to Having vendor full to engagement community, of address with their X,XXX electronic our True to business a Value improve assessment fulfillment order the SPS. led within specific quality inefficiencies EDI to over recognized with vendors.

will partner better order to improved fill this and management, in key and lines and inventory believe customer result We deliver as such performance savings across rates time a metrics experience. ship cost trading

of analytics priority, during solutions suite and success sell-through our long-term levels omnichannel the key private Orveon fulfillment our in introduced advantage. implementation. a inventory collaboration, on are competitive into they and gain our optimize to was EDI was various premium brands experience, their sales channels. an Making SPS And to Orveon, an to of SPS a across ERP to effort became EDI omnichannel customer. collective expertise Commerce’s visibility a subscribe and model, network differentiators partner cosmetic and focused channel underscore equity-backed

and include analytics solutions Bloomingdale’s, trading to example journey, that Orveon a fulfillment is a navigating prime with partners customer who leveraging Nordstrom’s. SPS’ Macy’s is omnichannel of successfully the work and

to ahead SPS and opportunities of emerging people and I for omnichannel network believe ability retail position investments us. to cost-effectively summary, they adapt strategy proof automation. capitalize help while our of reflection successfully a the our In of suppliers is our Commerce future chain the growth expansion success retailers, in continued SPS’ and their ongoing on we supply brands as

With that, Kim our it over to to financial turn discuss I’ll results.

Revenue wallet a had We X% great total Archie. to our revenue year-over-year. first quarter customers year quarter year-over-year XX,XXX. of last QX XX,XXX, increase Thanks, of over grew XX% XX% million, The Recurring and revenue $XXX.X was increased recurring this of number share XXXX. also represented increased consecutive to quarter XXth and of XX% growth. a revenue

with We For to the compared approximately cash XX% to million of the million. and adjusted quarter total investments $XX million of quarter, ended year. EBITDA $XX.X $XXX QX last grew in

guidance. to turning Now

For the second million, $XXX be quarter to million which represents of growth. range year-over-year XX% the in of approximately $XXX.X to XXXX, we XX% expect revenue to

adjusted the $XX of be expect to range EBITDA to $XX.X We in million. million

We average diluted weighted diluted outstanding in earnings to be expect to share $X.XX shares range of approximately fully $X.XX per with fully XX.X million the shares. of

in expense depreciation $X.XX range compensation $X.XX and the stock-based We million to of approximately million. expense of per $X $X.X income be to approximately $XX.X of expect of with approximately non-GAAP amortization diluted million, expense share

we to in growth XX% million, the of be range year, approximately $XXX.X expect over XXXX. the representing For $XXX.X revenue million to

over EBITDA We million representing XXXX. to approximately be of the XX% expect $XXX.X XX% adjusted to $XXX.X in to range million, growth

approximately fully $X.XX in diluted XX.X diluted per $X.XX of of be shares. the average fully range shares weighted outstanding to expect earnings million We with to share

$XX share to with diluted expense of million $X.XX, per non-GAAP $XX.X approximately amortization compensation year and for approximately be expense of approximately stock-based expect in We of of the million, range to $XX.X million. depreciation the expense income $X.XX

rate XX% should model For the a of effective year, the remainder net basis, on GAAP quarterly earnings. a tax pretax calculated on investors approximately

network XX% maintain revenue we of community enablement and greater campaigns annual acquisitions. as our or through growth our expectations we XXXX, expand Beyond

as XX%. market of adjusted dynamics model business term, to EBITDA target expect the growth of continue growth. We In on the in and long EBITDA we support XX% maintain adjusted to XX% dollar to and capitalize current we future for our margin invest

and XX Despite and execution. And dynamics, quarters sustained profitable like positioned than ongoing to deliver the on and better consecutive our open stability performance financial that, of to questions. our revenue strong business consistent the underscore macro we of history growth. are call we our targets I’d our summary, to long-term growth, In believe with ever model of

The Scott from question & comes Berg Instructions] Needham with first Company. [Operator

on Congrats quarter. X. I got I the guess, great

maybe I a a of, given guidance in the than revenue this with quarter. was double roughly case went the a guess, of macro start outperformance better was Or was like. bit the is this conservative just guidance little on or you year Let’s backdrop more What in It philosophy ago. quarter expected? more you’re a year, your what QX in change it the in maybe what

that Scott, one. I’ll take

the relates was across it really board. the it outperformance, to As

So we on well as product. had the solid execution fulfillment analytics as our

is activity have in quarter, really a mix little onetime not of community of also, revenue We the did or -- something this bit than that anticipate would as would you of would continue That anticipate well. some typical That and we other onetime going was higher forward. a revenue.

U.S. Asia expectations about X Pac, and X region than Got of if noteworthy that it, anything helpful. bit, but of obviously, ago? might with XX I had where out then we’ve that discuss or your it’s your as a or know to months are by the on think you there are, over this, to a macro presences your Australia, And X think changes seeing geographic Europe. kind any we be maybe chance Are down I the you last quarters, break lot little a foothold different

up and ‘XX, compare to Scott, we’re besides catch question. you -- forecast not omnichannel the you ‘XX. their major is, No, against aren’t is it’s trying mean, comparables. retail seeing to Yes, last I in suppliers thanks and the retailers expectations business really it for with there any for theme against really because mean movements. challenging compare I QX, biggest consumer

got just are years. that multiple years You’ve one-off all

continues just that be So biggest the thing. to

Australia but really And still they’re different the all all see momentum really about We so an ecosystem. is cautious, strong there. obviously, regions. Europe entire take is analytics.

We’re seeing a And not North frankly, I seeing supply customers. strong And Asia, of we’re chains then there momentum significance we, supporting aren’t of mean, chain lot last anyway. America really which is there. either.

I China necessarily. opened than does kind I follow-up of that. to up quick travel the perspective loosening on a their that for guess, at a supply of borders, tailwind from kind more But over Archie, you perspective just that minor the for days some XX and of a last does non-event all create maybe business? all? restrictions, know a you really a chain it XXX has an opportunity as of of is Or

manufacturing it’s comes of non-event. It typically, suppliers. in to Frankly, the is it’s China. the a really And down somewhat

for affect manufacturing takes place. really really it a end So create or opportunity doesn’t us us. and where At day, of the an that doesn’t threat the

Stifel. The next from Lane question with comes Parker

into dive the it’s of share terribly wallet that And give new additions algorithm touch quarter. I you Congrats expect that then a share the that? could a if decline. balance the was on noticed net not quarter-over-quarter. down dynamics on reminder customer this and the Wondering growth you us know Kim, in large a year. just wallet of I

Parker. Sure,

QX in point, a So from we your sequential acquisition there look InterTrade. a absolute to QX slight grew at about if from X%. of QX, you driven it But an to the year-over-year decline. perspective, made dollars, was That’s

when ours, per customers. X,XXX reminder, their would roughly made is than But X,XXX. that said we much around As revenue we about smaller add acquisition, a average customer that

revenue. decline where first because we all is that the that that so InterTrade And have quarter see sequential of why you QX full is

note, Also, in just well. has that occurred as of acquisitions other some

if were ‘XX, of an a dynamic. made ‘XX So to ‘XX to you similar in based QX on acquisition you at saw QX we look compared QX type back

gross expect have in that model this the that And that. recent you front? about term of appreciate on shake the margins I gross had the it. you Got leverage just talk little acquisitions model long-term margin where some to a bit longer can on impact out and

Sure.

to margin little scaling. you above to that XXs of from into sold a lot grow we’re XXs if area driver experience. a think overall able where those be we’ve is we XXs. really term, the customer made Longer over us to time, to get an low investments. change a a be of in over gross believe we’ll about low the goods of it, of can mid-ish be going from the is lot investments margin, at to mid-ish perspective. time The how primarily will a around that gross at, maybe believe sort we that in biggest we’re So of call bit in, Cost And

made the than we’ve gross there them that not acquisitions do acquired margins has time. For that over make would we nothing we believe is gross any do, asset that lower margins our we’ve where equal

from at, from would margins that sort it, align mid-XXs perspective. So margin in with belief our adjusted call of the of to and we’re the XXs future low in EBITDA has ability changed the have nothing that gross when an

The comes next Craig-Hallum. from Van question Jeff with Rhee

quarter. great another on Congrats

hear to find the have you True just now? displacing? of bit love maybe I’d questions. do How are they -- they of on they do What study, how you? using? a more a couple here. in a What terms So a as more are little backdrop Just got Value case opportunity about you what

Yes.

retailer. processes, a across a, the really are it’s So not not and of what -- a typically board. documents, but A the lot we in lot automated, -- not but see documents of manual the either, all some it’s

a type are and So this far between retailers. They sit of company, fairway And of really say as of They little processes. manual much the different straight I pretty distributor. campaign. a them down but is the type lot enablement a would as

where we certify is do competitor and the those will and/or will which enable either webcast, solution suppliers. with we have with do a team, opportunity record and So a solution test their we our use calling, we campaign, work suppliers them. a to We’ll their buy typical

the top True -- at at So be and Value. we’ll aligned

they’re a obviously, a the the decent retailer is feel the feels So distributor an independent day, but down of middle like type retailer, of it suppliers, end just actual than there’s of pretty because we they’re of number pretty this stores. at more

pricing, that just On it’s sort update you’re expectations looking of pricing deals the how acquisition at front, or pipeline from on future any of changing? sellers, potential

it pay mean, last valuations have real be least. have the Yes. lot outdated times expectations, we months as raised were today. years, ridiculous and but if continue companies X challenge we’re normal are a valuation is would expect, a you XX in mean active. just to going at And to I of that If ago, they -- they’ve raised I very funds not

don’t create know, does of times do check. lot some but I become they that a time, over in So more, have headwind, more

us cash, in of and problems other so are profitability, think which burning I if they is these, lot do some for creates a by lot of not the of thing funded we’re some a that. move investors we’d them seeing were a towards rather

houses them of some their So are order. getting in

to there. be stay be continue we continue out aggressive, disciplined. we’re But to to we going So

which of the to give or might any me, call with for recent about the the pace number last at differently about cohort connections, to Any come suppliers they that most the it, core cohort of in coming notable size on respect that to they this recent, connection, frequency start or take, Last months, add differences terms XX out. most how be of new network, stands behaving a observations in. the the

over those That’s the tends pretty they particular. takes the time, typical. it question. have with to we pretty suppliers, but a -- time, committee we Over last at enablement It’s regularly. do campaign, something it nothing good time, in months be great it’s look especially -- about opportunity XX over And upsell unique with

from comes Joe question Robert with & Vruwink W. Baird Company. next The

similar with like Is how bankruptcy are and -- now sometimes there kind in network question, just that? that guess it on can opportunities a suppliers of use to bankruptcy where I the currently particular information connection, maybe macro as that just there reengaging immediacy any what to change Like away? reeducate a connection of goes platform a the news. absorb on certain last similar event on the Yes, bring. just retailer the Or actually topic in the there kind is

would of days? And that so end you approach losing don’t kind business. these a of up lot How proposition you

Yes.

retailer. supplier only So for there’s think that that really, for when supplier, SPS that about -- you the suppliers use

that retail assume what at losing I strong case, those which risk doing referring that. supplier. we’re in you’re Bed we of you’re to, we Bath our In be when other numbers have relationship. highest to And a words, that’s & don’t the tend Beyond So have onboarding,

have So suppliers boat. very many that in we don’t

guys along X, different SPS Then they’re they kind have use partners trading XX, to may might bigger partners XX, part business XX mean, these for is XXX they stay our they retail you particular, and and X of adding have add in typical subtracting might of or suppliers they training XX they that and for XX. suppliers, from retailers, the way. at XX but I go subtract

kind it’s of typical. So

Obviously, model. it’s I lose of It’s to marketing don’t we that from suppliers. we business. going impact like staff kind significant of to continually team think is the business? way, So sales us. proof not to any standpoint, our to to And have any of engaging Would our business our like job with a and those lose along our be all of

Commerce. fully they’re can aware use So SPS how else they

obviously, what’s Bath little in processes. a But a look Beyond. bit retail." So of escalation a a little something a to I bit of Beyond retailers, you seeing as frankly, & than talk those have "wow! is Bed Bath we’re Bed happening one-off When to & more an like

investments supply there sinking benefit, seems lagged of stores Is based a retailers is point rejuvenated taking your those be the inventory of in in like Okay. night, something That’s when kind hear to not relationship you the it just on peers may after category into brick-and-mortar analytics Could investment but effect of that’s be helpful. all there it place. And a had product management. last is commitments? may at say or your then Or all? like one things chain sale benefits ultimately about what stores,

things. they’re the assume ‘XX, the the of we’re surprised of demand And trying to And you’re One, the couple in ‘XX. back-end not by Yes, one themes a systems. last Manhattan. the met I retail just night. really get consumer results they big I think now in is that to seeing to all referring

for there different effects us. So lag are

their automating barcode with receiving so and For instance, there. a partnership a start That lead center, distribution to have product going they’re And upon is implementation campaign. we typically, enablement label. will to if potential a retailer a

So like that’s to need positive. send they positive, If be indicators overblow in. leading be to campaign get enable a enablement come different label it, a we to that send those suppliers, we again, retailer where notice, or there buying and for Associates, want for a advanced need can are can those is They lagging don’t do ship a an need to barcode documents. behave Manhattan us their suppliers they an We differently. but if to they

profitably. real and So those met have a are from most they part, needs of investment or the because lot the it retailers things of positive not effectively we are seeing they’re but the necessarily consumer, efficiently, doing for

a So there’s big push.

I inventory think have a just demand? supplier, kind with along? that of final placement relationship the like accurate visibility point-of-sale, And activity? store wanting hold you’re Does of of have into does to follow if you more kind that

It sales store is at for the centers. for valuable stores most store either we’re does. becoming seeing are trends the is the the Obviously, activity, store also or the the one point of distribution buying of consumer

having So on the at selling. hand inventory what’s stores,

those are to So they want positives us. for I positives don’t Again, for overblow, us. but are

[Operator Instructions] Markets. question Northland [indiscernible] with comes The next from Capital

quarter. on Congrats the

you the channel little from still Just activity to levels? And about contributions level from XXXX there talk Are could changes more wondering you’re a of are about seeing any them? bit that you maybe to relative seeing strong if that partners.

Sure.

very us. generation quite sales still channel positive and but ERP robust remains lead quite system, for There and So nuances are depending that that still remains in which on engine some robust. important

may in ‘XX. the I bit slight believe that the baked thinking or little trajectory into cautiousness half saw you’re Was there? the forward that there? about maybe guidance first through more a be us on there you Got how full it. Can second there some pull just guidance you QX and the the Very for embedded of helpful. a provided is revenue deceleration walk And then for year, half

Sure.

couple lack latter that one, of made that things a you ‘XX we point I of in the latter in we to part couple of there acquisitions of a part is, can ‘XX. was So the

that we the So at ago. midpoint than reflected Also, just guidance been a is that a expectations anticipated what as the revenue for just guidance just million days provided the has XX itself. year into higher $X our for we reminder, had about

it. Got

of Analytics then part quarter? did perform? me question this final be the Did guys for piece the the business of And How you on that Okay. acceleration any there. would see business

Sure.

XX% percentage about Analytics to of couple that Analytics So to our be would number. expectation would XX% see grew expect year-over-year. grow a within that similar we points And

or plus minus at So XX% stay or X% X%. or basically

further no your Thank today’s a for and day. questions queue. showing you conference I’m participation, have concludes wonderful in this and Ladies gentlemen, call. the

You may now disconnect.