SPS Commerce (SPSC) 8 Feb 242023 Q4 Earnings call transcript

Good afternoon, and welcome to the SPS Commerce Q4 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference call over to Irmina Blaszczyk. Please go ahead.

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

We will efforts these cause this forward-looking of that make to and statements and of involve our as or to our results note our a certain and events actual differ other statements today, obligation as financial traction risks are go-to-market including customers. results, of number Please These strategy a otherwise. future opinions or forward-looking no forward-looking the undertake with of that date update could and revise penetration call, materially. we designed statements only result increase publicly statements, information, expected to reflect to new retailers with any and respect uncertainties and whether

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

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

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

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

to team enabling transition first joining my as remarks like full start leadership good and prepared SPS during us you afternoon, for gratitude today. expressing quarter Irmina, everyone. I'd smooth my CEO. for Thanks, Thank a by to the

best last employees, inherent Having experience positions the come months execution. customer X appreciate the road and drive chain their I has the of customer our over company review uniquely their have supply our to commitment product network SPS to their consistent say SPS deliver operations. map, spent to built Having that retail the expertise, conviction can the to optimize years a I completed with meeting

By harnessing relationships SPS can that data, chain collaborative simplifying make partner trading and become network. we By retail help profitable. the exchange the our their of more world's customers supply data, has

new adjacencies value to leverage defensible explore competitive cases creating we and for undeniable use a we are As trading data, and position everywhere. partners the an proposition strong

QX the company's ability XXXX, to revenue quarter to retail performance and of consecutive an exciting XXnd strong back our to and macro growth Looking evolve. execute finish underscores was strong dynamics year. continue as the to a

year grew XX,XXX. approximately recurring the full $XXX.X XX% For XXXX, fulfillment which Recurring grew analytics, In number revenue XXXX, the million. by XX%. revenue revenue customers growth of to XX% grew XX%, of led and reached

key True their transformation Value with over partnered X,XXX fulfillment vendors. independent to electronic U.S., The largest one the in to order with we a retail, international and SPS and with the suppliers' year, expansion. enabling we worldwide the ongoing omnichannel X,XXX success of network retail as locations company, standardize distributors play Throughout in over in wholesaler a and supply continue improving to retailers' our demonstrated expanding an role efficiencies chain

brands, SPS longtime which Europe. and includes HOKA a from the has grew a a been Toys, amount large customer analytics analytics Deckers, effectively America. manage to SPS' in SPS an Australia data XXXX, the UGG, they since and Moose Teva fulfillment chose footwear toy of manufacturer solution and Pacific, Asia in feeds North partners customer designer many North and vast America as trading their across distributor

both number of retailers network regions. they expanded Europe, a their they As solution vendor Deckers chose can service SPS' ensure to fulfillment to across growing

automate the across is LVMH, need XX over for over retail preferred XXX Starboard across stores for sea. With at Starboard a higher-than-expected share division incentivized as ships to importance Starboard's SPS on supply vendor understood electronic fulfillment. To network. standardize SPS' chain fulfillment partner Services, Commerce underscore this and of analytics, the chose of efficiency adoption order to of by the Cruise which and sales XXX chose Starboard known a cruise their luxury lines, their data solution work to initiative, with using SPS

Our and on network. role over of channel play the the expansion the in a we partnerships the continued years focus strategic our established key

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

the like the to suppliers our deep integration various long-term migrate that in AppSource team's they resellers include win sales trading partners their the to page. partnering subscribed ERP best-in-class Nordstrom. and customers who and and main a to omnichannel SPS who with full-service multi-tenant featured Bloomingdale's, analytics channels their new connections us model sell-through trading with success. priority expertise on as space is after, for technology, focused cloud-based partners fulfillment Automating technologies engage on we Orveon, For Microsoft visibility with a example, Microsoft providers, Orveon, earned allowing business. By network value-added leverage and spot Commerce's and a was are app trying customer. retail Macy's became levels across into and inventory their Shortly when for

our the solutions to best-in-class to acquisitions strengthen we acquisition e-invoicing that of integrate world-class capability ability XXXX, In includes presence. technology to our continued SPS platform. European and expand targeted portfolio our TIE SPS' with extend deliver the with Kinetix

our of to partners trading who acquired suppliers one around the in line enabled their connections Exchange, applications also link The technology Australia to network, SPS' world. through Order of unlocking partners We business

on role a suppliers pivotal their plays and SPS omnichannel retailers journey. supporting in

as retail network. long-term partner map to further to growth connections, technology and be of the opportunities Our includes road our access to network to simplify world's strategy the initiatives execute continued we continue creating build-out trading

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

$XX quarter to million. XXXX. quarter revenue fourth had grew of increase last revenue XXnd EBITDA XX% growth. Chad. our was consecutive $XXX year-over-year. Thanks, QX represented Adjusted quarter Recurring in a of We a and year great million, Revenue XX% this of XX% over increased the quarter

total XX%. We year, to XX% investments to For increased share and XX,XXX. $XXX approximately recurring with wallet year-over-year XX% the X% XX,XXX, total of and revenue million. year number a ended and increased increase, revenue $XXX.X customers million, $XXX.X the approximately million. Adjusted revenue grew to cash was EBITDA of recurring XX% The grew

to turning guidance. Now

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

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

expect $XX.X EBITDA the of to of be first in range quarter the we For adjusted million. million $XX.X XXXX, to

million, For the XX%. to EBITDA the in of growth year, to to adjusted expect XX% range full million $XXX be $XXX representing approximately we of

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

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

diluted approximately For expect shares fully per be the full million XX we year to XXXX, diluted the in weighted $X.XX outstanding with of average earnings range share shares. of $X.XX fully to

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

GAAP For net calculated the effective tax year, on a rate earnings. should you pretax approximately XX% model

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

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

profitable Commerce SPS strong position across summary, We X delivered and year achieved acquisitions ongoing In despite XXXX closed market. full fourth while a addressable to and our continued growth results we macro large strengthen dynamics. quarter competitive

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

from question comes first William Matt Our with Instructions] Pfau [Operator Blair.

to rate. been with analytics the product? analytics half growth on few Great that Very rate product. in ask the Wanted your happen line analytics fulfillment a to you've for in strong months, Chad, in quarter. what company more growth to now about growth get the at needs the view fulfillment, that

which that business all sharing Matt. very key Exchange, get put that willing product, fulfillment of not in Yes. see And is retailers of growth what this our that segments process that really sort this but The various Good important -- view quite a to the share pretty is -- common of Order is which strategy data. Part in that the drives continuing that's to And data to we as much more drive to plays we sales our the hesitancy, of is there's adoption then it's overall retailers analytics to there. place, question, see It's the point-of-sale just there program. suppliers. not retail a programs role is in community more our

connected to is of So on retailers to more overall driving share that strategy data those growth our analytics.

Great. Okay.

follow-up Just on then. that a

product issue it's be So still getting that share versus with retailers sort an it to seems of need data made? adjustments like to of more any

Yes, that's fair I a Matt. characterization, think

Our comes Stifel. Lane Parker next question from with

and contribution expectations your relative guys Can for quarter TIE with XXXX start we the in Exchange? you saw Order what in embedded the and that The is just fourth to inorganic Kinetix

Sure.

announced TIE not we would expectations in of as well had that QX time, So anticipated acquisition at what we when of XXXX. only deliver the we for Kinetix, as but point that

what had are our by now what results, seen we're very previously have does QX of we XXXX. are, and default, the include what expectations consolidated belief was or What to of As disclosed portion business as Kinetix. identified well providing as that we of in TIE our our that similar

it. Got

here term, And get at standpoint? XX% one to adjusted longer sales target and is If Is you. to marketing primary gain that the Kim, there? about. of across what staying there out EBITDA that Anything from to XX% with growth board? of the could other a term? is Is Okay. margin it the lever it then, hear Understanding you purely gains cost look I there structure there great would structural be longer components biggest expenses. Are of the improvements you productivity some your

Sure.

and XXXX, And customer see up is that a gross of for the we a and there. lot do we in when back that of of investment. other when we scaling is see you in capacity was just look in add going that areas, years overall about have in in margin. meet to reflective start what come to we continue, to to actually you're expansion resources guidance XXXX, to took customers' margin that that provided made EBITDA initial slightly But investments where experience. versus our larger you we into at belief of We've the see our point So the we sure that half appropriate margin. some We'll be growing to our our expectation would And make needs. course, over opportunity where opportunity than I think maybe the gross

next Our Scott from Needham. question Berg with comes

have I started been there not there an something have how guess here. impression I Congrats before appreciated may is about you on to company And you XX appreciate that that quarter. the your X later? I Chad, within guess nice have of been the certainly able you days XX first days. you've XX-plus days?

Yes, absolutely. Thanks, Scott.

employees in future the impressive chain and understanding the expertise value Commerce is around really As one confidence with remarks, prepared think I development the gives me have and here engaging the just that capability at in we I a extremely retail SPS domain said the really deep and business. retail of strong the --

low base is the both supplier for very we're relatively for help That's side. as programs lot really their And the on as retailer, go-to-market well and short value fully of to reflected efficiencies also community retailer period I that a supply at these able drive supplier expertise digitalized the beneficial chain. that and cost in think the a of in that a time retailers way in

of for and I programs think I that great level expertise from appreciation and a the community to difficult on detail I'm have into the the was outside, just the appreciate now built inside, that.

then, Kim, forward. of company, intermediate-term you percent opportunity annually growth And the XX-plus Helpful. going here reiterated it. Got the

saw enablement bit. 'XX I campaigns, as fiscal whether all channels, here doing the similar at et how the year what to bodes maybe you you Europe, this the it's year you're it's what in think does a about year in whether of does through entered you enter is thinking we you some maybe 'XX? product, the differ the next and opportunities, well 'XX start playbook But that little that the look very how Or XX a by maybe opportunity you to fiscal cetera, ago? months, see it from

as of say a helping well would be as the similar expect opportunity to I nice at lots very XXXX. omnichannel activities be retailers to in Sure, to pipeline this Scott. playbook look healthy community of similar 'XX. journey. Still is enablement suppliers that We 'XX. We'd to on

the our and understand about the to of then really really And about what understand capability that as it beyond. we to think approach same we'll year I side that of 'XX market we like acquisition, taking that the when relates is When inside be in the and 'XX that 'XX better to market made the take want as inform which think announced we looks there philosophy e-invoicing that time TIE, our for acquisition to European we view opportunity. and

So sort 'XX. say of is to opportunity a for in of long-winded in 'XX, what our lots way us to expectation we similar saw

question next Joe from with Baird. Vruwink Our comes

You and capture. being wallet counts share growth both about normally customer talk a revenue your of combination

intro to therefore of down you getting maybe agree some would that stronger think but guess if might XXXX. a a I did that, bit think math if XXXX from was share. And And the behind my what number, count And a holds, to algorithm positive from the I organic perspective. XXXX the back drivers weighted expect add obviously, this? customer with I be be to net customer I right, was comment, I wallet if all more of

Sure.

sort it being think we So would level we relates related acquisitions. we biggest enablement call characterize customer as prepandemic net the adds activities. of of to XXXX, seeing similar, with call it, so that outside community course, it, driver, as were when The those of really, about level

QX $XXX tends acquisition. about at seasonally the Do for million last when be of reminder, customer look adds holiday in to the sequential that lowest you QX, up a a was net versus keep our you mind we If just season. because QX. QX adjust in just net out added year slightly

between line we revenue. expectation our ARPU. pretty that overall we're 'XX, in Obviously, when a to relates our we in adds of is as should from but customer provided So in well highest for then the what in historically, we our line. And we pretty as pretty higher announce have results, activities as the little you similar, close quantity with give seen coming adds community it view what anticipate bit breakout customer But anticipating our QX.

of that channel organization brings a We scorecard front larger-than-average the but more vibrant the have that also customers, in scorecard. very sales impact the some ARPU us will than of customer

on question that. maybe And my second

of X,XXX sure Value, the network need I'm So end think the up probably bit example you capacity. where those monetize little network of? you're of already the largest True were where of already? you be vendors you're the to I yes, in some on the you in But opportunity there's mean maybe a front customers kind shared, Do adding vendors. a lot in think of but by is far, the front evolving actually I on an who industry more in the opportunity to network

Joe. So one -- question, Great sure.

So it's actually quite retailer. different depending on the

enablement community throughout and do those. So know, between year, we as mix a multiple there's you activities the

it's And to more is, revenue net new, wallet some In more like existing cases, to your skew therefore, adding who new customer. customers. that's in it point, retailer to skew going the our So getting It's existing cases, we're might share. just from customers. on towards an depending to some more

then of with And that there's enablement any with activity, also just community course, test some us.

a in reach to over at our that they're time out but become time. database customer revenue don't recurring So to

to at customers. not of well is all our see as that from saturated of healthy would nice fully So and we adding are revenue our still course, or that we more new belief mix getting expect existing as, customers penetrated a

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

revenue was percent for a couple maybe cleanups. of year, the So Kim, me, a what channel revenue? of for couple

been out. multiple It's been we've probably since we to don't contribution it's new -- we out. remains share -- actually our that shared years component is it that revenue of healthy business. say and What would and a important percentage overall We very

You that it's the will part. versus again really ARPU customer But more see the impact important adds. a

X there. of channel that to the primarily components of sort of by of If X you driven the sales, is to think the stool concept one, legs ARPU, X

it robust So us. and for remains healthy very

of as percent Growing? say Would revenue? a at growing least it's you

that our relationships, in more coming more as more say would we more and the up goes market have so I often. certainly is name expertise each on, have more that and resonating and year we channel --

is might going Sometimes they're system, to a maybe a are where And system. have you're moving they see, they there be however, prospect. deciding to another

might that get couple we sometimes, that through we connected actually sales the get different ways they're channel. And multiple business. into win where cycle that ERPs. We'll sometimes with a prospect ultimately But evaluating through of

one to it's add us, I campaigns. for would like of marketing multiple that

customer to our engage relationship is come community us. for a a the Actually, the traditional the they that channels and a there's coming one So with with us through and channel. through not particular channel responded way right, better marketing campaigns, prospective partner, they the just more program, ideal they're to through, for

of change tested terms in to have coming back tested, And of have ultimately in Great. past might in or be pace the that people timing people the the any that customers?

customer dramatic -- us be wouldn't may ideal those I just time the right No, those no for say targets that are us, there. network. join SPS And with the future test But acquisition. for for not them change obviously, to

Okay. the from a the sort any perspective, just notable quarter speaking, your changes behavior maybe in last, progressed? broadly And of then as macro changes, observations just customer

were meet of be No of notable for technology we with a I out and to participant there our did conference sentiment coming some would changes. a number retail positive the NRF able say seem customers. to where

supply chain healthy have XXXX as a But a macro pace. at of geopolitical technology the being continuing in the see some year, spending election some we the on uncertainty customers think little just with an it I instability. of noted

from Capital question comes with Instructions] Markets. Mark Schappel next [Operator Loop Our

I year be quarter starting here. it's for you. you if year wondering what still that Chad, are top just priorities believe for could coming matter. was job realize and Nice in the through firm early to the you yet. that with on I your going the walk the

for Yes, sure.

So these taking us, same that community enablement execution position, of market with segments offerings I of this think today. market opportunity us within programs, and have our with have of strong in core the front is foremost, product market we nice of in front strong advantage that the the we around strength is and first addressable that priority

us to help long sort chain broader in that could business that And lead their M&A. solutions start of And mid great opportunity the great customers with our said, the of to we to organically out customers scope think new to do of build partnerships those provide that Now I over term, any customer, that offerings, of I solutions there's to product to XX,XXX-plus this customers opportunities we think that expanded given cross-sell those the to. will if targeted those technology. some have or a supply with bring

would M&A of the approach On a front, M&A say very of and I pattern deviating see that disciplined here from pattern. there's reason no

as And investments incremental to of company where to kind make a From earlier year some investment the plan investment-wise, this follow-up Great. an question. standpoint, the does the then business? on

is So to what year. every would say, I is approach there Mark, similar our

win We have a today, value tomorrow. of win

customer looking want to and our Nothing we so we're to Really everything. make forward existing that also sure investing see. the really we for that And always opportunities experience there. different but customers

perspective. from it customer about the Think

So as we How we as us. do get them overall will suppliers them with suppliers do that it sure How an sure and focus retailers we for A we do concepts efficient that as running How of helping their help is helping possible? wants? helping experience, as what those with retailers? an customer of we're and needs, get possible? A make customer quickly be How make remain all do a area we're So their those get the them? up again,

with next Markets. Our Chokshi question Nehal Northland comes from Capital

on What domestically? both a full-time quarter, seeing Chad, great macroeconomically and CEO. Congrats guys as first internationally here you the are

seem the spend, hearing would healthy certainly say, is priority and environment, a supply in. given some uncertainty does Yes. a that say geopolitical there But we're We're I although chain be given that's we're the to from elections, I about seeing, what customers. technology would around our environment XXXX

or better worse quarter? put, September Simply than

Pardon me?

than Simply put, worse the better or quarter? September

I'd say not time to that period between a lot now. of difference

has questions. more Thank you conference no have attending The now concluded. presentation. We today's for

now may disconnect. You