SPS Commerce (SPSC) 26 Oct 232023 Q3 Earnings call transcript

Good day, and welcome to the SPS Commerce Q3 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.

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

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

of this note, revise as date otherwise. Please as forward-looking of obligation new no or our statements any of future information, whether or And only opinions call. to these reflect statements, a update undertake result events we the publicly forward-looking

Please affect our website, well description documents more website, refer Form at detailed our financial our are SEC risk available at and for XX-K, sec.gov. specifically factors that a results. as of to These may as results SEC's the our filings, spscommerce.com, our press release

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

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

Thanks, Irmina, and welcome, everyone.

after proud call as my time. SPS earnings accomplished of CEO pleased my CEO. welcome value during of we of October SPS execution very I retirement. On talented X. an we Commerce March, is in you and partners in my extremely capable retail positioned assumed announced bring call, the This is role my we planned customer last at today's who The and has confident the Chad the I all the be a with that and SPS to in what am hands leave know, am a As world. industry successor. leadership consistent announced world's SPS And years Collins, team across role on I XX legacy success July, exceptional helm. is continued on vision focus around network. the Collins of success result Chad for culture in the of customers extreme of And to I retail trading is am This employees to a at a

businesses. working look on of well has and Chad XX chain with His continue years experience align spent technology, market-leading forward as and to innovation Executive Chad in I culture. SPS' focus industry Board. supply Chair building leadership with the

I review and QX as his initial you new his he into over Before CEO, hand impressions our you give to results, can like opportunity to hear to the settles call what role. all expect about the and I'd

here to Commerce and Thank SPS me company you, the I of to honored for team and Board time trusted such management next succeed want be growth. excited and chapter to industry. its thank Archie. the Archie important to their in lead at I'm for the an the

Since software. chain And I ] time I which which as [ CEO of [ at Hi ], role Chain supply Chain on [ Supply XXXX, of Supply Jump focused XXXX. years rebranded Software. assumed in been XX last Kuber the ] have spent the I CEO Kuber was

leadership executed we During position resulting systems. warehouse buy-and-build CEO, a global as tenure my strategy, management within in a

accuracy SaaS is and operations. chain career inherently improve are I've supply most during supply while learned single enterprise. collaboration in chains a networks only optimize position multi my and This is that why focused lesson is unique SPS like on a participant, to key software A are data

SPS reasons. Commerce join three I main chose to for

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strong corporate a employees and values in own worked partnerships, has is to consistent I lead our found SBS be values mutual through Second, success. with I've SPS culture many well-respected town and a my with employer SPS that in my Minneapolis. to market company with home consistent and

Lastly, fueled believe as position growth go-to-market strategy, chain retail by my I lead and on omnichannel in supply SPS product experience software, opportunities capitalize M&A to dynamics. expansion we global SaaS me

future. strategy building will with organization culture I relationships with dive time road the and Over couple globe first that next you with meantime, forward role. SPS to my the across hope the reinforcing to some earnings next giving meet full has product over in months. established a quarter call update look as a and our after you the the I of begin engage to map, and exciting an into of spend quarters, next our employees customers In the successful very on several I

for to back review of Archie Now call results. a the quarter I'd turn to like third

Chad. Thanks,

quarter in customers globally, million, grew revenue in access SPS to different across and and rely data across streamlined their our efficiencies on looking Our Retailers businesses. the recurring QX $XXX.X revenue was processes suppliers in performance which XX%. investments to XX% grew while centralized operational ongoing SPS quarter, industry the plays helping in The role achieve markets. third optimization fulfillment automation the and . Total retail and expand for reflects scaling the while

North Teva Holdco SPS Deckers, footwear been distributor includes long-time has UGG, and a designer in example, brands, customer a For and analytics the America. which

across growing retailers their of Germany. Europe, acquired an customer a equipment premium in chose Having and American Deckers and been apparel America base Callaway, manufacturer needs Australia, global fulfillment Jack America EDI service their to their North of analytics As to supply Europe. they and outdoor expanded golf Callaway long-standing headquartered a fulfillment ensure to SPS' Wolfskin, chain. chose across brand solutions in a North can centralize and SPS vendor they number

XX of Starboard need real-time increasingly management ships across retailers, for LVMH and chose automate luxury which known Starboard sales cruise important. partner to with To over standardize expectations. on channels multiple share across the retail with significant Starboard's at is stores sales understood XXX for preferred SPS vendors the lines, using and as drove this chain becomes chose the efficiency division underscore their to their expand their Starboard inventory importance fulfillment. the more suppliers sea over Commerce initiative, EDI solution, with As a data to Services order network electronic of across XXX Cruise exceeding and supply adoption analytics SPS work

[ to to capability strengthen and Last acquisition worldwide. and our across customers' European ] our continues To sales support channels presence. invest across month, our TI expand various kinetics in e-invoicing to markets completed growth, the of expansion SPS enable solutions we

will their of We Exchange, enable the business one of in also our supply We're partners with applications line to support over acquired our turn retailer results. employees major network. grow the to the chains. technology would discuss our technology to With to customers believe that, and platform to Order link our that We ability our to I'll and welcome SPS excited best-of-breed suppliers new Kim financial it Australia integrating enhance in SPS Commerce.

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

we in reminder, added closed a customers which to [ our acquisition ] approximately As network. the kinetics, of September, X,XXX Ti

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

guidance. turning Now to

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

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

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

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

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

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

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

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

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

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

deliver But annual in million approximately approximately XX% our QX million provide will XX% purposes, guidance We $XXX on growth. we or to earnings for adjusted call. modeling detailed expect to year-over-year in conference XXXX EBITDA to XXXX $XXX

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

to we together to retail deliver the open growth. With on global to our be the and like industries. to Chad SPS' our continues as sustained I various leadership to SPS summary, In would across welcome profitable to position call execute network, like working to I'd network questions. SPS grow continue forward and to strategy world's that, look strengthening the team its competitive expanding and

We Needham. Our live. your will now Scott begin [Operator now Scott, the line with Instructions] question first from session. question-and-answer is Berg comes

Congrats on a good quarter.

retirement look run like. to XX Before good amazing it's been the an Archie, so I the may what years, plans questions, lock in get all it's

number of your of year. end on with in on of be to an I adjusted to the versus EBITDA the end your on next it But kind XX% maybe annual of Can end upper first XX% guidance wanted the to maybe lower adjusted some of typical basis. acquisition range? the lower side, about of is growth talk question Kim, that mid- the start guiding kind investments to expected impact that all, you EBITDA that's for or on

an line of as business. the at as grow to we your Kinetics, the guidance we EBITDA. [ business do in XX%, year, that we that expected well to is business this be as year that is also XX% closer our anywhere that have at to what announced we're we do top on XXXX, XX% the point, expectation a appropriate invest Ti for which of in mind when Also we basis. into in back Sure. end This keep next think to XX% the that the XXXX, on in portion of middle year to To that time, see between to breakeven in based on ] we lower the going said opportunities annual point, acquisition

you with I working Chad, Got it. then, [ team. a your ask experience on I welcome to look to going question And forward. recent the more But Helpful. ]. to forward from Korber wanted

[ an based Korber international was ] I company Germany, believe. in

extensive supply it than XXX% a that's pretty I experience while the had when international global a operations. having a flavor it's same and has it guess had to software chain I SPS with impact You've on U.S.-centric of not look the more business, historically at something truly basis. U.S.-centric,

internationally, just this new making to how business in about But more growing just United bit portfolio has the you products bringing little probably States. balanced do to footprint a really than that that be outstanding think is international a the a international product

here point. gives will that has than Thanks yes, Ti I little obviously, acquisition we say think, will a looking at different a one America. of last Scott. a Thanks, the been what of Yes. vectors that geographic the of North off And in that noted [ ], in the did quarter, nice bit in is and growth we be obviously, Europe the is welcome. expansion. see invoicing I jumping we us component warm

our And [ into then execution outside Ti expansion other potentially develop will markets that ] I help North think America. Europe continued and so for us on framework

Our next question William with comes Phau Matt Blair. from

on And a you wanted you. question Good great Chad, again. Great. a speak Okay. Archie, to run. congrats, ask to with to And Chad. welcome,

and get fulfillment the that they into SPS as then there you've has at analytics. done opportunities SPS job where perspective, to any From you product As into? are looked started great out company, a a with to stand can obviously, areas expand

SPS suppliers. clearly, position leadership mean network the connects the I a retailers and to absolutely. in established that distributors Yes, has

think chain going is fragmented. well see that innovation of I is think there I quite technologies that we supply a as is me overall landscape confidence bit on if the fairly as in gives fulsome And those way the customer customer be through in needs more requirements it's map, we satisfy our through forefront at a over product our keep product organic development whether of to M&A, able road time. we'll what or

the wanted macro uncertainty it. that then heading in does a products any terms here from what into that ask of impact like. ultimately look is retailers suppliers? the And the lot to Got and your season for to demand going for And have just holiday on environment, of

omnichannel, that of remind outlook bill not performance. in There's general, kind absolutely. out right retail positive better retail certainly talk just Yes, to and consumer lot would I one landscape is tends omnichannel there's when direct on signals SPS, more in SPS those do dynamics a now. on hand, when in SPS have everybody there we some uncertainty to And our driven by some mixed we And customers, retail dynamics. weather seeing we're given changes a the But changes. of

Our next comes from with question Lane Parker Stifel.

Arc. here, Congrats on great a run

growth was [ back revenue ], nice activity? last also up tick quarter. to it it a last customer few out context recurring about from balance here. the about we where on like that if And Anything call share going forward? wallet you environment enablement businesses think out Even over then revenue in versus demand or of customers through that looks acquired of the year should we campaign community Ti jumping to expanded the were a in markets. some new you've Just growth interesting How recurring in and

Parker. Sure. Sure,

relates us new then customer correct, the mentioned we acquisition it are X,XXX. net as customers. Ti So [ adds, about went to it brought had up X,XXX you ] the that kinetics approximately sequentially again, And

contributor are to a little our for typical We was adds. had correct, for quarter a higher you community that it the of still does net nice bit So largest customer that, adds. quarter customer or a and outside than of activity, us driver enablement remain

So I feel really good about that.

it overall will growth adds as the as as believe, between continue we of then important share. mix XX% driver well we that to be overall, of we deliver. to net can sustainably ARPU sort or that wallet And relates both, the believe customer an to

might it years, one Some area be little in other. the more bit a than

have that time. of in when of reminder, customer just number we community a customer smaller to opportunity the first enablement sort then with a of they to typically, the that we a record a back adds sort -- are had of customer XXXX. through campaign, join they customer recall sized grow the going bring may when the be And net You revenue height as us, but pandemic, during over a back we on

growth. should in think the I will key both overall takeaways you that top delivering expect continue important line to XX% be

Got impacts? additional with looking in like for looks investment it. then, sticking some in Appreciate op that. XQ. downtick And putting is Is the primarily slight a Or business from you, implied XQ? there the fourth that acquisition-related the at quarter, you're Kim, margins

primarily going question. be It's Great Sure. to acquisition-related.

exactly at look it's added to in basically same, of provided, the compare you our you that call, our guidance last just that we've If expectation quarter's our to were tie. we the QX implied and from guidance QX conference if except

announced when ] EBITDA Ti and a in $X.X $XXX,XXX it approximately QX. the as in QX said would revenue just [ million reminder, acquisition, in deliver of a contribute we So negative

for the seeing So little most part, or why the contribution reason go down that bit. that's the you're really a

The next Joe from with comes Baird. question Vruwink

a everyone. it year. Great. pretty to is Archie, have going this [ but to me like Marcotte say Congrats this, it ] looks pains Hi, team really good

not to way are relevant kind picked that Core is over here on can SPS? your start up the can customers, you're those about exposure I'll direct for background, ways also we point Chad, with on the tenure about products would . When So have that warehouse of management, would then you one Chad. and think really do, completely, the more management, not management, order adjacencies pop logistics grow question thing but long you that still ultimately up might but to to a at to obviously, up Matt's follow help maybe you Archie way you maybe away time. stepping think network Or most

Yes.

best with given I faster there for jumps already that road looking differentiated from And my our lead start map, differentiated list. have to to strategic likely, say immediately the making those customer. off network we base, that background the be building whether and network we size there's will opportunities, include necessarily customers and solutions help acquisitions. or the can warehouse different network at be categories could And management we the given that of would customer the I have. that better to customer product somehow think the top organic I leveraging we'll how the or the data think to think then keys not do the it we most our by getting determine organic, are lots . But of the the of

That's If revenue about And Kim. it implied it's for might [ your stepping take the Okay. year. why for growth look then down been out all one any reasons in and then guidance rate the relative what year-end? explicit -- XX% XQ I be kind great. forecasted does said back is of just organic like to that Ti ], plus you

our When things our the keep where expectations exactly are overall you're looking starting at just a new have to number. way we acquisition. of for the at about were some at in earnings we acquisitions, last the we basically lap they couple mind a think then Do Sure. it on you're QX look high level, expected QX, But when call. is

the in that front as to us. see it expectations opportunity relates our real of no business change of we So and the

number, and call just how we you up what getting the on EBITDA. you close to guided guidance get the slightly look QX that is if our again, Ti ], implied you gave And we add at to. Technically, earnings there [ guided very I'm into July we

question comes Craig Our Rhee Jeff from next with Hallum. Van

look you exceptional, Chad, getting years to XX our to better forward just and amazing certainly know just run. Archie's

all the So congrats and wish best.

for How behavior of look me. campaigns pipeline of getting enablement a cautious commented within A -- of if behavior on of on you the bit like? is could The couple customers that? target the expand manifesting target customers more questions that more cautious. is the you the What sort

overall. reflects not negative. does The Yes. go guidance pipelines Obviously, that our tend the area to

retail pandemic it beginning In very from move enablement standpoint, seen 'XX retail We've lot retailer of don't whether goes anything, that that times is of the reminder campaigns. a positive, fact, of campaigns, XXXX, economics enablement is over from history, if we a up, it's the the much or community the retailer. take

cautious, about spending, move So what when they're will up call especially we priority the I line.

part tends that so and tends of negative. to analytics the pluses there's up depending minuses, Obviously, business happening what's go down slight a channel in can or to improve. be on And

So of pretty consistent. all. numbers times, takes, tends to in tend lot stay a Underneath part and the the of covers, at these the hurt get not to but retailer world the puts there's

a of it in fact, lot In improves. times,

it. the is displacing just several Got And last longer-term look changing? guess question. how a what years, over When then I you you're

it several say upstream. been last consistent years. at very look doing We've Obviously, at the the the you if we've over has decade, last fairly that. moved would I remained over clearly effective numbers

that with from in and/or their way. paper aren't displace and retailers supply that worked to continue suppliers We automating automated retailers facts an have not chains

easier brand a So where new start in Obviously, continue supplier somebody in see significantly to not exposed. it's to enablement that world, to has we today's start been company. our campaigns a

that. see to continue we So

especially do as software move from -- ERP and see to move systems away yourself. they to continue as We it people legacy

So continues. that trend

the why is dramatically reasons much X, say years, the last so ARPU one I moved which decade, the increased -- over has over our upstream, last would not last why over So the decade. change clearly X of

Mark Loop comes with Markets. Schappel question from Capital Next

the time congrats on with SPS, best. you Archie, And again, wish your

like if where profitable, around very details you they Just you are areas could they're exchange of terms maybe the things wondering on with market if order could focus number in maybe employees, you, strong provide some start that some additional nature? in of of that

starting been, about expertise long small ERP very SPS I implement XX built was And And integrating have there. acquisition to tail one-off and Yes. some or employees. company Commerce built a the where and It's their would in customers systems has help they're Australia. call expertise really where this to a them

experience, sense deal, is you small. partners the well, significantly this, One, having like momentum. when Masons couple make and look we it when we little a reasons. So very doc first Data up end But at than lot sales a a makes bit of of more XQI'mBut found Mapa for acquisitions a up it's what off, of [ we smaller that have or customer end obviously we seen ] having we better

a So in revenue that's was is, one of as almost was that the it of things SPS Commerce. all flowing deals little bit deal is the well, on unique this already other although through the

business. seeing on a control revenue. we you're and information, the integrate can into control not we the more we that But proprietary So pickup revenue, our now

So there team about and really the excited the skill sets.

And theme, ERP the Great. I mentioned to Particularly on what you community. your the supplier with on you're could to and seeing respect if business. of wondering ERP stay was that side just you then implementation comment just

continues -- but It not they I to slightly be, would the it's small a that to base market, slower, enterprise, challenges in fix are able of in continue There that say, going It meet strong people they're move be retailers they little have infrastructure, customer. to don't and their but suppliers be mid-market. so the the not if demands many to very slower, substantially, forward. don't the Yes. to continues just

they that of able products fundamentally not technology. customer unless So do It's the to upgrading, which includes a some it. some net what's meet not well. as of really is demands It's just driving our new obviously are their

Chokshi Capital from comes with Markets. question Nehal [Operator Instructions] Our next Northland

an on you. working incredible career. with we forward look Chad, Archie to Congratulations

in your that to networks, customers. such you is to it footprint remarks, that United the has, enhance do of value similar what done You about . introductory In especially of becomes your in the context what the can talked SPSC States? the that think it international value for be

of a value getting would the think Yes. quite U.S. partners in that their trading in or is view, is customer utilizing the with to able in in network, connecting Australia. more customer's Europe provide Canada, the I value terms frankly, to data, we're or whether say customer similar, our access a that that I from and

dominated sort little do North I mentioned as to think What especially by expand would I bit of a of comments opportunity in With it vary And our some the And invoicing. think Europe, I say America. my of by nice I geography. think into earlier, back the gives on it's capability across as us vector. a and acquisition, is network before that obviously, do particular percentage to I geographic business, there's a on of to ], beachhead [ transactions Ti electronic to approaches respect the Europe. relative specific with the

I to like Archie the our Black question-and-answer session. This turn back closing over remarks. would for to concludes any conference

you, Dave. Thank

years Before dedication company at we unwavering customers my to SPS SPS end XX the for call, all their to a support employees big the the vision. their to thank and team you during our for and management

truly proud I've customers had we shareholders. a has delivered the exceptional and with talented of I'm and and to work exceptionally built results lead consistently that an together, for company our people, that group privilege

also XX IPO excellence like including her And our to and successful acknowledge lastly, reports. earnings throughout Kim commitment I XX-year and Nelson would partnership, to a

the team time the SBS fantastic a ahead. your you thought success all Kim being in wish and continued Chad to addition today. and In strategic I adviser a partner, has trusted Thank for a been a Kim, years confident. CFO,

you Thank attending today's for concluded. now has conference The presentation.

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