SPS Commerce (SPSC) 27 Jul 232023 Q2 Earnings call transcript

Good day and welcome to the SPS Commerce Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [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.

Drew. you, Thank and Commerce everyone, for us joining Good quarter thank XXXX SPS second conference on afternoon, you call.

designed to-market We that results will our and and full to forward-looking retailers statements uncertainties and involve with including our other differ efforts penetration to strategy customers. with make certain and expected a actual statements financial number could today, risks to cause traction increase materially. are These respect and results, of

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

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

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

with And turn will call Archie. that, I to the over

welcome, Thank you, Irmina, everyone. and

will the of the we Chad to earlier new month. announcement welcome made Collins. of with proceed this to Board mention I'd my role I the October, our I prepared CEO Chair as CEO, like Before remarks, Executive In we transition

and to earnings Chad our industry forward capitalizing he Given introducing innovation, to look call. chapter experience, lead on to growth of I conference qualified on third you believe Chad's through quarter retail omnichannel We its leadership dynamics. next SPS uniquely is and all

quarter Turning performance. to our second

consistent investments They the they grew where organizations Total ongoing retailer suppliers to all XX%. revitalize demand to for purchase from consumer inefficiencies pace see and they are fulfillment million SPS operations analytics across while in to fulfillment in an world, chain. today's Since the In across exposed forcing recurring average grew now experience fueling the XX% quarter, for We pushing want and which what channels. continue retailer’s limits the exactly increased supply a want, embrace of $XXX.X products. expects omnichannel of strategy. to and complexity the looking are of omnichannel retail, revenue pandemic, revenue forcing their suppliers

According to in the plan XXXX report, MHI tools manufacturing over leaders, and XX% respondents network investing a X,XXX survey year. over and chain inventory optimization of annual the next industry of supply on

fulfillment been SPS customer manage inventory, For Australia example, XXXX, large Pacific, across in and planning. their they manufacturer Moose has data an network sell-through a since and retailers To for Asia effectively their from forecasting use America expanding North Toys, Europe.

capitalize SPS' aggregating, partners. from can They world. However, normalizing from around manually, begin their many analytics the to data of extract Toys to had was caused receiving the leverage the vast strategic data and insights feeds their mini now the integrating amount to opportunities trading significant derived growth on which data they different insights. and the right delays in Moose formats it meaningful to were for ability solution the in process

key integration to component As challenges. supply partners drive chain for is automation, another solving trading ERP

integration strong Microsoft to cloud-based these of customers customers and when for the and And SPS VARs to Commerce manufacturing, the has retail, our full-service is Commerce's operations chosen technologies their as automated the to leverage ERP with mutually scalable partnership trying migrating example, featured a has presence factor chain over beneficial deep and their best-of-breed years, Microsoft For with pivotal focused retail distribution allowing been app cloud. to store. highlight on has on migrate model solution Microsoft and Microsoft is multi-tenant win the sellers fully technology, in and been and migrations. recently Microsoft network supply business. their need SPS new

suppliers offerings. in delivering supply efficiencies optimize products already to and capitalizing serve retailers on and new customer our artificial as are intelligence we excellent customers technologies, and driving Just to remains Commerce our organization our investing throughout committed SPS technologies By improve chain, product to are their world-class experience.

connect cloud it and see to SPS of access network, retail us to requirements the to retailers, trading in for reduce intelligence use to is data make our in the the and breadth which, operating the AI partner within of which gives more easier to network, SPS' making much AI and to the world's depth future to necessary suppliers largest opportunities many we leverage increase increasingly implement efficient. will enhance network, the products We turn, connections. as joining

Kinetix. And TIE in we yesterday, e-invoicing growing believe access with the to We acquisition our will while expanding on our also by regulations presented us expand capitalize footprint. e-invoicing our of European network mandatory global capabilities our serve planned announced portfolio to continue to We opportunity international enable Europe, TIE's markets. to and presence

well trading necessary complexity to new of technologies amplify which and our summary, suppliers AI, and for increasing ability relationships faster as and to is more retailers our In partner proving automation supply are optimization easier. in fueling chain retail capitalize network omnichannel to revitalization. and is such bring investment positioned in SPS on

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

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

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

EBITDA impact acquisition pending Kinetix. the of include quarter third following adjusted guidance. to full guidance not and revenue and TIE The year from the XXXX turning does Now

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

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

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

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

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

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

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

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

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

of of expect our noted financial Kinetix impact to revenue deal-related acquired to the release the costs. approximately TIE and As adjusted business negative on expect the contribute to $X Kinetix, approximately EBITDA million we In onetime a million be the $X.X press with of quarter, certain TIE fourth of $XXX,XXX. it in announcing QX we exception approximately have planned results of expect nominal acquisition

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

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

In summary, tremendous the continue investments for opportunities industry ongoing to across retail present SPS.

optimize full-service capitalize on market network as our to a are we only growth. sustained positioned solution, the to multibillion dollar EDI we help deliver With profitable well their customers addressable

With to call the that, I'd like to questions. open

William Matt Blair. first [Operator go question Please from Instructions] comes ahead. The with Pfau

my Thanks questions. for taking Great.

First, the it traction ask us TIE what product than And Kinetix is Can on does this acquisition. you better you currently Europe? understand e-invoicing in brings how the different help just help I more you gain this to table have? to what wanted

Yes. number One, roughly question, company a revenue U.S. and Matt. the XX% of A Thanks XX% European revenue. for the things. is

U.S. far customer The play. that So consistent a acquisition separate et more go-to-market, -- of with and as as much those businesses cetera. are as think business, relatively

So meaningful can our amount in they we've like customers past. have the there, upsell can of platform, put done revenue we more the offerings the so

tax, about et The analytics, the the fulfillment regulatory you a European market market us there. smaller We're not product go it gives government learning where I in in gives One, just basis. us as think business, e-invoicing but -- almost of a of it couple we're in report is to a the a need platform to about think really that much then And compliance much on market in and it's Europe, things. think larger reporting cetera. the after

that. you of in So in the in in just use really the also order have we Mexico, here. past for some We it's and U.S. applicable because Europe, those don't capabilities. not to but Europe utilized It's using it it partnered do business anticipate in in

platform speak. not So do we as have an we e-invoicing

So that's capabilities and customer acquisition.

said guidance that acquisition, guidance? release. is additional that. And in revenue Kim, factored the QX, the the from just is press that But of into updated on one the I the million know you $X in follow-up included The the you quick it -- in earnings expenses provided that

we acquisition that of No. has excludes Kinetix. yet provided for announced reason closed. we And related the not TIE it, to is The guidance announced the but it we anything

separately about numbers be as numbers the on but exclude, all So XXXX. the we as we release believe well press TIE call a they Kinetix this will reiterated earnings in that in have

the really $X not that is Commerce into QX in guidance costs today. of we SPS So provided deal-related million factored

you very it. much. got Okay, Thank

Scott from go question Berg next Needham. The with Please comes ahead.

acquisition, Can going of for this from of of maybe certainly almost trying questions. with There Archie these on for that some a outsized couple lot real-time that Starting here. are I nuances, of through kind drive reporting to more for VAT get to forward, requirements that segment I'm knowing some there. of reporting? growth catalyst are a quarter. vendors. thanks reporting the real-time around a my developing taking a years And Hi, for couple over to with guess I kind be Archie, good the that think countries different Congrats processing Kim. that things next and the familiar straight

really on lot an bit has small, e-invoicing the to an into being it I positive. more to having importantly, of that And learn us, the look 'XX it capabilities fairly will weight by for now, wouldn't to can think be of I a it. it but But pretty has we in grow and 'XX. those at clearly that Right optimistic opportunity future. not we get and a be But as a opportunity. Well, catalyst market put it's a

a us that's think nice and we can firsthand real more really size I puts is deal the So see the opportunity that is. what market, happening in what

like the pandemic, That's customer seasonally years Got just customer during And business trends is roughly acquisition during looks customers, a actually it. through before single new usually period the Helpful. acquisitions. net in that. quarter, not Anything then added XXX company necessarily on the knowing a the on to second quarter quarter on for lighter, it trends? several strong but read snapshot

Sure.

So customers upsell bit that the net when the able towards all new. a We that just It more don't think strong on enablement quarter, to that, mix that a is the existing community quarter it think customers what a was in happened at we new so activity trend. amount But our were saw quarter. about the existing is quite was we versus versus customers. this we more skewed of

again. back Congrats queue. I’ll it, Got helpful. the get in

go The ahead. from next comes Stifel. Parker Please Lane question with

dynamics taking Hi, early to million benefit I for of are questions of to total did for that assumptions relates TIE as to business? $XX give next sense first And Archie. look revenue you XXXX. in about far that any year. what on that noticed growth they a think their million talked 'XX, in you it's But $X talking it 'XX of Can their us I the be better here. I Kim. revenue to Hi, as interesting Thanks forward year. know as Kinetix, your a just about revenue half you Kim,

Sure.

but business, which So -- the later QX. our obviously, close do will in is believe intent, obviously, we acquired our have not yet we that

view... as our a portion expectations mind is of from keep XXXX, mention. that overall, also their business is of rates subject view Europe. our as the in based best Do primarily the our million what the we did it relates of that in there is to fair on see That it's we to It opportunity. $XX well. is But approximately As FX fluctuations for

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been has there me Excuse an interruption.

Thank Just continue. Ms. one please. moment, please you. Nelson,

exactly don't you that. for cut as where I relates were it Apologies our Parker, asking off, expectations XXXX. to I for but know Great.

of put the we acquisition, to model close what where as see Europe. And that believe, of we QX. the together as SaaS is to on well this opportunities As we see company journey in the best our opportunity end that at will that as in at view over point, a moving XXXX we on fulfillment its based

Understood.

XXs And the you've Okay. of things, now. few in then in place. long-term same the talked I side on target business. being margin They're a it's about gross relatively know low been quarters this the

flows achieving doing naturally additional there there? this we up Or just are As march through internally matter to the some actually a business target, is things going XXs and be you're scale to there? low that get towards that of

Sure.

will So is around the really up the lower is it from scaling’s. now that move margin efficiencies biggest primarily where gross XXs way to and that,

conference about similar our revenue we've may margin recall as or experience. perspective been revenue. some with and Thus, you line that have you So years, investments that improvement that in than in made have perspective. a not the investments our larger from calls from overall growth the In gross growth we've a in prior seen those years, talked customer

to to to investments. continues be add grow those we believe that need will able at obviously business to shouldn't level but some have do we our those grow, of As same We'll historically. resources, we the we still continue into

of see and AI. we're capabilities doing things already There's Archie side as success do on but intelligence artificial as we'll we'll leverage many at able be to mentioned, side, on some certainly the out be help the those looking where opportunities also, well, customer we with tools We to efficiency.

for questions again Thanks here. the Understood. taking

Please next Jeff with Hallum. Craig comes Van question ahead. from Rhee The go

Great, questions. taking thanks. the for Thanks

platform, level, just characteristics? a guess, the you've on couple been So not mean, I for high you as I what look are guess, a yet I the the that for at me. Archie, suppliers this at are while.

jumped sort that haven't Just of people the yet talk characteristics. defining about and the

think into Well, two I is areas. segmented different that

assume talking I fulfillment first the we're about product. The

people mail not just more first and to doing have e-mail, are that the The -- just they're things and them haven't not they're manually, just do is force yet. small really it, retailers there

retail pretty rate enablement we that high get those are those So typically through solutions different our success campaigns, there.

become is if might and the in hard Once their legacy changing the guys And retailers' in retailers effectively or move. that's ERPs supply you see working. the change they That legacy moving software. say putting retailers, growing helping those to isn't suppliers. haven't up. acquisitions, I X, other it's is bought on they the more pressure would which dynamic fast They these -- making moved working. their them much, more seeing biggest where environment start they to is they're isn't very or we're business of with bigger the have the XX, XX software. in then them environment simply have some retailers, chains, the work they're in start as spot with get it's It's If where opportunity or their we just

specifically, to Yes. seeing the campaigns, with potentially just respect that of if signing? what are the look the you at versus of And that's seeing along at and What lines size pipeline? enablement then as campaign the are implementing which campaigns, you are enablement testing you different rate enablement the might the be campaigns, people the you're

and depending testing warehouse where is of are what would on I management. say we type the is seeing really the and we just automation versus The of consistent is are mix retailer. signing

notes so with their notice the product programs, being purchased shipped to distribution able received fully ASN to and or ship when Associates and to going advanced trying advanced center you label into ship do is you we're then In So called more know that utilize a order that that be barcode where it's to receive document Manhattan capabilities. scanned. be to receive to if that, a what's more need an seeing you

we're seeing more programs. those of So

change because are it's a couple little a testing But the a be those heavier documents, the of Sometimes retailer. supplier, it's will which adding for massive for complex.

everything, to I inventory that and and inventory, hotter amazing need the we and don't manual too of solid systems which to I it's inventory. visibility because have We organizations see and -- visibility. and The lot continue is hotter that is getting game are the still, about they're part, to seeing into into a management is becoming much notice ship the want that have are, a is most topic need multibillion-dollar -- warehouse for visibility, they advanced the

Yes.

sense. make Okay, so Thanks much.

question with ahead. Capital Northland Markets. Chokshi comes Nehal Please next from The go

on of this strong new Thank SKUs earlier mentioned you you. the upsell expanding some connection? quarter upside the or nice Congrats by that Kim, driven was was here.

This expanding would be connection.

on run that when seeing we impact or that a in to we lower with is the going us to a connection. more see connection that quantity new And from adds, new adding now testers customers will So customers existing existing customers, a this customers, new three are bit did was places. of add happened adding where in really adding would quarter community community quarter, of customers. versus this us Customer We in campaign, skew just be enablement end but you activity. typically the mix what than course, a up bit still, the

Got it.

for relative that typical then this a the that guys of offering? brings given the get maybe product suite What's to to able rest of talk customers size you're talked the of And of about value your ARR Kinetix that also the from to you're or e-invoicing. you one TIE e-invoicing about your unique capabilities your Okay. ASP the is customer relative capability

Yes.

not be not U.S. of it's reporting. that concept the using in compliance first a going So reporting to tax it because off, reporting we're

not really to as it's you really it. it and document It's to to have European we be like It Mexico then applicable play. a more see type, that have have have So in a able to to business. you is well. that It's

our in We have Europe business fulfillment small. done And that partnering. through relatively is

think in attacked fulfillment able to in those more product, the having more products robust analytics which to a As fulfillment have success we've now -- Europe we're with being capability over analytics upsell really have analytics it value. Kinetix it. discussed as TIE the be and with to game, get we to from think just have past, you able have to we've a as add also opposed have product have customers an seeing the time to will But more of the product, into to I an you

for my Great. you question. taking Understood. Thank

The Schappel Capital. next from with question go Loop ahead. comes Mark Please

you question. thank Hi, for my taking

TIE couple they Just they Kinetix, on? have, How such fast follow-up questions how have it employees do many is they growing? target a of industries do certain on that as focus

Sure.

a -- sort when on in They about from plus they So for they a digits employees you're again, European were obviously currency currency. adjusting sort the if a were a about business. of growing, -- have business of U.S. XXX look and growing single things constant at a because constant you perspective for

then percent SPS's sources? focus, remind from Great. just could us given a of what Okay. today revenue of And European comes more have they that you international

Sure.

States. of is of in because Asia heavily there American our look as mind at do keep the the you which company supply paying does approximately North overall show to revenue, as when revenue business, is So that that in our suppliers revenue more it's non-international. support chain it But in of the the United is so U.S. up U.S., our XX% think

That’s Great. for Thank you. all me.

The go Baird. comes Vruwink from next Joe Instructions] question with Please [Operator ahead.

impact a response Was the revenue follow-up of a kind bankruptcies quarter and might any went Maybe on as adds retailer connections number to of the retailer one this account from bankruptcy? on Great. have there customer in and question revenue well. that maybe just away

it No, saw relates the there that was not. we as quarter. There bankruptcies was unusual in the nothing to

I go tidbit wanted you back to beginning. shared at Okay. that And to Archie, the then, very

EDI, base current I'm survey I have whatever electronic customer this that the of wondering compare inventory to of get in number to happens what a of kind either kind solutions. for market levels you a rate be a two? we might just think it adoption growing of networking XX% of and if the Do was planning or fulfillment to point? XX% at be relate sense could -- that to to invest

question what environment been that the in that to their Jeff see And is was broken the to all change the have supplier’s kind it's back Unfortunately, environment the of serve more the the with data software, for not understand. is more tends I an from as I they old out that what change more don't. as we along, same are people -- the sticking far us well. story in earlier

that SPS to changing So on do be are going a side supplier the looking the investing for fact positive is people Commerce. to environments, and

that's fulfillment warehouse for kind much don't know. a of to of how is the point, to I things side, positive if the management, it's all be our be that on those going us. So on know I ERP, But tend

much. you very Thank Okay.

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

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