SPSC - Earnings call transcript Q1 2018

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Operator

Good day ladies and gentlemen and welcome to the SPS Commerce Q1 2018 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

As a reminder, this conference may be recorded. to host like Ms. today's now would introduce for your conference, I Blaszczyk. Irmina Ma'am, you may begin.

Irmina Blaszczyk

Good and conference afternoon joining Daniel. you Thank everyone SPS first us thank Commerce quarter XXXX call. on for you

or statements obligation today, as go-to-market to and our otherwise. statements results, and no efforts to penetration our we as statements whether at update SEC We will retailers for and number filings cause make including respect financial forward-looking Please a other description expected a strategy as or our to documents involve undertake this increase risk of our to forward-looking factors are new more revise and results. with designed website, well of actual may SEC's with financial our of statements, note, sec.gov. our traction These events are to Please the certain and any result spscommerce.com refer publicly uncertainties of could risks the detailed future as These forward-looking that results only affect materially. at results differ these website, our release that available a date of customers. press and reflect opinions and information, the call

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

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

Archie Black

and everyone. to a retailers in welcome posted large and continues strategic XXXX of first the as Irmina network key partner of be SPS suppliers. a Commerce performance to quarter strong Thanks We

largely shopping $XX.X and to XX% adjusted first the of XX% adapt evolving their million, grew habits revenue have the weigh from hundreds factors to Retail quarter, like retail on giants million. EBITDA continually distributors logistics buying For $XX.X impacting firms and the an which Retailers Research, omnichaneel consumers, by consumer's today's to of recurring biggest Walmart. and grew been retailers, annual and In revenue are in anticipate influenced suppliers, expectations strategies survey grew Systems Amazon decisions. XX% and

platform leading presents campaigns working and the partnership. with of SPS our community for vendors theme trading SPS five and of Commerce and some enables for the retailing relationships. one automated endures setting has and thousands across our continue efficient, our in for We which will has the for Commerce ahead year-over-year. it Commerce enabling SPS course accurate, years, delivering years, Costco, its platform retailers. over trend the managed retailing coming accelerate are and in those For dollar retailing expectations in a in high partner expectations of anticipate this years onboarding Consumers opportunity which and while channels. of on and expanding TAM largest us underscores world's requires the example, all row, streamlined that multibillion leading tremendous XX been belief

Over the SPS partnered XXX% nearly for automation. years, vendor onboarding Costco achieving has with

of a choice, platform partner which to our Costco SPS growth fuels onboards monthly new continually the Commerce the network. of turn retail strategic a vendors on in As basis

to supply chain investments. execution, As SPS retailers turn their invest in new optimize Commerce they technologies to to improve

exceptional SPS trading e-commerce to and there launched and to a experience a Costco efficient of and a order solutions turn the program suppliers WESCO WESCO: complex vendors. vast by engaged a companies supply transitioning partners collaboration world-class industry's is results. and basic enablement number provider a such and SPS We a them customer some with order community number retail strategy the chain among distributor have two of retailers examples recently the is management systems Commerce only fulfillment progression will system. solutions months, of of financial services are electronic a onboarded new omnichannel aging retailers largest and I it But have a trends retail who of omnichannel validate dropship. process connect chain March help over industry's to chain to omnichannel who In lagging significant comprehensive highlight recognize most well-positioned platform. global and cloud experience e-commerce. and need to adopted to portfolio that out matter the at in retail adapting our supply create for offer to leading Commerce need making abilities took who Increasing their different come integration between to that many stages the are with and we inventory e-commerce agile Conference integration Ecommerce suppliers which Retail to Reports discuss supply Kim of are With as most broadly this supplier imperative believe to to in These and in of achieve of on place expect. the deploy point solutions optimize the an and retailers more there the Shoptalk efficiencies. XXXX & the for customers yet investments benefits of from that, network to infrastructure,

Kim Nelson

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

XX% For QX, to year-over-year share approximately $X,XXX. increased wallet

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

SPS quarter. We also shares of $X.X repurchased million the in

guidance. Now turning to

expect million. $XX.X For of $XX be to to revenue the second we the in quarter XXXX, million of range

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

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

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

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

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

We diluted $X.XX. expect fully be earnings $X.XX to to per range the of share in

approximately We diluted and $X.X to amortization with expense to fully million, based approximately expect million of $X.XX And expense of XX.X share stock earnings of to million. per for the $XX.X expect shares non-GAAP the $X.XX compensation million of weighted average diluted range outstanding approximately approximately we be expense depreciation $X.X shares. year

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

and million As on we to reach adjusted EBITDA least an percent $XX EBITDA a quarter introduced least XXXX low-XXs. to factoring updated the margin call, long-term Specific XXXX conference model. target at in current we goal, fourth of our goal and the at reminder, industry expect earnings the dynamics, adjusted in

run excess We expect in XXXX. rate revenue exiting $XXX million a of comfortably

we margin EBITDA XXXX, a expansion expect continued to target adjusted Beyond with see long-term XX%. margin model of for

grow profile and the open we like long-term. questions. margin of way the adjusted achieving targets XXXX our the call to feel in progress goal in confident well year, are in ability EBITDA maybe we to that, Given With the our to our to towards on the I first our quarter our have would

Operator

Instructions]. [Operator

Roderick from comes Tom Our with Stifel. first question

open. Your line is now

Tom Roderick

question ask the Hi chance guys. to Thanks for a here.

first just and this is So about thinking Archie, my growth one mix margin for you, of expansion.

thoughts quarter committed projects? one, one Wondering, to there seen on but into partners will later, guys break logjam I they that only have chance have you we associated So as for your with the certainly their you I thinking that plans getting you than growth it same a is in are You front? to how environment expansion And some moving their know stronger seen? about of to follow-up. a have big the it's I us forward is start year, outperforming. talk margin got then Or with any have growth, update as any but retail the is if transformational

Archie Black

I unchanged there say, some are to struggling, in by that transforming. the you retailer I that the are of Tom, process it up it's Obviously retailer question. moving from by the when add is are all And status, would that say some would a some continues forward, greatly retailer past. Yes. retailer be

the So be, I to four-plus it quarters. over say, continues last would seen consistent what we have with

Tom Roderick

Fair enough.

about then Archie, term shareholder shareholders sort expansion? think this to some about added you Board And about members XX% interests or in in You conversations few any talk perhaps. commitment now. company, a its changes have brought it's margin talking the longer terms stronger the your But Okay. way whether guys with there are what of perhaps you guys some of can a of quarter sort reflecting out maybe you concerns and

as any it sort on you Just shareholders might have but relates picture what to suggesting are of thoughts curious, to long-term you?

Archie Black

No.

the laid you. and as the in we beginning long course out the strong thank it, our Board strategy. is we as stay the as think, extent year, I strategy strategy business, Tom, December we a for are what which we we do of good to on we strategy to the is a tend on the XXXX have to tend at are as a on think executing it, executing We meeting

that we we are but plan we out December continuing have in a obviously, execute we set towards strategy shareholders, think plan. out that So talking to and set to on we our

Tom Roderick

last Okay. Good. for quick one Kim, you.

the But to the on you have leverage the update resources? thinking gains to extent added sales think year, to drive about from, to you the need do if some had commitment model. are all in about bit come places EBITDA curious those How a the from redeploying the you that you you numbers? expansion are to little sales free As to that and headcount model? particularly in guys. could in Where added the Thanks of up at just backfilling undoubtedly you extent guys leverage us some this here, resources

Kim Nelson

Sure.

felt call, appropriate us mentioned resource XXXX. position have for were we So conference on we exiting as great expectations we for the in XXXX and that the last we our deliver actually capacity on sales to like a

been in we spot opinion in us the our than we have capacity had puts hit to expectations to No XXXX. historically. change that appropriate that our a So relative different sales

Tom Roderick

guys. you Thank Perfect.

Operator

from Thank our you. comes Blair. Pfau with Matt question next And William

is line Your open. now

Matt Pfau

Thanks for guys. taking Hi questions. my

any in rate Kim, nice I the to the as year, a rest there. the first on growth topline the of reason the look First quarter I flow And why the guess to growth. sort at deceleration wanted the and through year? the implies wouldn't in quarter of we throughout outperformance the performance then hit guidance

any So that reason be? why would

Kim Nelson

Sure.

revenue. one-time community the increased associated timing both with by were the but we well it the that. about results full-year quarter, $X.X was year, of our into enablement QX, revenue uncertainty into both we as take by as translated as account done retail well campaigns, recurring to the as outperformance what there is really that of expectations retail the which our those driven it the space of have outperformance our is for That So we and When revenue. on also a expectations the million, primarily quantity still as to think the full the and in relates into annual fact lot midpoint takes environment our account for reflected have

Matt Pfau

had Got I makes of Authority to going there follow-up And a those back liquidate liquidating liquidating. out the in X% And it growth. either sense. sort it. if Sports along That of I are revenue when with or headwind to your that liquidated, recall process few negative lines, are or wanted to about retailers there then

guidance? potentially are or for that in so, retailers that you to about if in And been any of liquidating? has are the accounted thinking exposed current the of process the So

Kim Nelson

Sure.

space, say, occurring. is consolidations retail I in there always or that would So bankruptcies the are some

For XXXX, to of the latter by to, to of most the in It impacting minimal you part, pretty have are that a on a occurred XXXX we us about that. retailers. What about back X%. tend into referring handful impact based was part

So in overall have general, results. there our but limited are bankruptcies somewhat to impact occur in they tend and consolidations that

transition are in retail our Our in reflects and the expectations as XXXX. about environment we guidance thinking retail

Matt Pfau

my And guys. question. it. for Thanks nice Got taking quarter,

Operator

from KeyBanc. with Garg Thank our comes question you. Monika next And

Your line is now open.

Monika Garg

taking for Thanks Hi. question. my

historically question, for Just X%-ish to Generally, QX if with Q-over-Q. Any up is that? are follow like you particular almost I X% up looked, the Q-over-Q. we guiding to mean QX last reasons revenue flattish

Kim Nelson

some go the probably to the had of is part of previous I timing, outperformance do campaigns. which in specific would community to I enablement A our quarter. made, with comment Sure. big back

that still account, taken it's of both the going guidance. as So has that's again as the guidance. been it also the lot transition as a year QX well well retail taken both there relates QX space guidance full full have to into the as account is through year been certainly And as in into and

Monika Garg

the growth Thanks. that now right how big percentage And is revenue? right. as All of expectation your what business from year? analytics is And a this

Kim Nelson

Sure.

for as on an about we for But analytics recurring that and XXXX, of for about the a thought was So XX% just about that's we quarterly year full revenue. quarter was point talk on that helpful and and revenue total We to a talk last haven't investors we provided last total a was give we a did X%. that revenue year our metric remind information, growing annual business, about recurring data basis basis.

Monika Garg

X%, in this similar X% So X% business? year is a to analytics expectation the growth the

Kim Nelson

by expectations have We provided product. not

mentioned from there impacted call total expectations provided revenue by and We revenue. customer customer for are was we X% earnings an have consolidation analytics that did We on last about is customer. of however, that company that the

Monika Garg

for about revenue the last up here, one talked up churn the color. previously Thanks X%. you it. churn about customer The had Got XX%,

what seeing are that so markets, Given much. in these any Thank we same? churn Have seen it? still you rates in you are changes the retail the

Kim Nelson

Sure.

dollar had talked about, about was similar X% which are with and consistent churn. So what churn and annual XX% numbers quarter, last customer we the about

Monika Garg

Thanks again.

Operator

Thank you. Canaccord. Hynes question comes from And next David our with

open. is now line Your

David Hynes

Hi. Thanks guys.

hold nicely. So to wallet growth really up share continues

you just larger about the maybe are color within channel could there a there. plays in So you the you would it's supplier latter, Any color base? it Obviously Is talk growth seeing continued landing the maybe with are analytics If that, better helpful. seeing be what role just within suppliers? partners? but some base,

Kim Nelson

Sure.

recurring revenue revenue per from that to of So customer benefit customer. continues size

larger campaigns enablement us had, end customers. larger of customers. existing we the related customers existing a quarter had percentage more So it mix interesting versus we of as that customers that impact from that revenue up and community thing our was impacting in to enablement more One that newer as as well of campaigns this actually mix community with

And so revenue on that that impact also has positive a customer. per

David Hynes

as investors of about expansion one metric watching. be the then historically, obviously it. margin to Archie, that is interim expansion the will Got I margin barriers been And has I be key Okay. think And think targets, M&A. going the to

targets? So versus advantage of help with interesting commitment Obviously, interim do curious to think M&A about you to you see an about these kind think how if you of how opportunity, targets to abilities but balancing me against risk have these take you deliver interim that that, and balance that?

Archie Black

very have Yes. feel same to which to going these a have a I mean commitment as we interim targets we of and M&A, obviously lens. confident at look are we we

see that any and keep in of costs to be think any commitments I is in move these not would on does probably sure what you make mind in more it aggressive direction. wrong acquisition us the us

David Hynes

Perfect. Okay.

Good Thanks. guys. Okay quarter.

Operator

Oppenheimer. Thank Ikeda you. with from question And our Koji next comes

line Your open. now is

Koji Ikeda

taking Congrats to on thank questions. you year a for nice and start the my

think you the quarter, in is adds have net community customer recurring big added like that here, that right program. on was that I commentary the a it pretty the my quarter, quarter or in about calculated is sounds but you so XXX on given so far question math it First the enablement the and I

So and is takes the add timing there that helpful. puts be Any would net color related? just on

Kim Nelson

Koji. Sure

relates it an existing up a customer this that enablement correlated customer. the new in In of of right. the of community customer you in quarter, quantity is the are was as interesting quantity to occur community is the that of more translating upsell campaigns What adds. enablement of quantity an into mix of So more ended versus campaigns general, the quarter

in a example. dynamic compared this different quarter an last to that as we quarter saw it's So slightly just

Koji Ikeda

forward? believe for Great. to product I ask then would is are a on that mean connections on I quick past multi-products. be the and strategy a about can I that, what's too. I the you strategy the question over there the levers a changes? of lever same? the on And three question guys the any Any that the growth think way pricing Kim. Thanks here still year. and wanted to just color the Are was there guess I talk But the for even Thanks. size color about definitely pricing and pricing going pricing not ARPU. know best focus customer But more help really

Archie Black

of and Yes. I we same. wouldn't landing change. more I should expect expect Obviously, a be major new there's from spot pricing continue you customers. out pressures And to standpoint, the always the that think

Koji Ikeda

Okay. Great. color to congrats Thanks the for year. again to the start nice and the

Operator

comes Jeff you. from Thank question Craig-Hallum. our Van Rhee with And next

open. Your now line is

Jeff Van Rhee

on couple A referring you schedule are or on campaign you suppliers campaigns. you wanted enablement expand see I to maybe a me. quarter was last that this from just it was to the touched a Thanks. kicking When the that that? timing you think you again similar quarter. the you Kim, shorter? that their little and cycle to referenced the timing, Can had Great. just then you of that Just off onboard get clarification? was they shorter comment

Kim Nelson

Sure.

correct. specific beginning campaigns, engaged know that the we and in do are we have at we that good we what But that in of more of are provided are a the customer in little quarter have adds than similar actually retailers pretty a to typically quarter, we In a commentary quarters in you view expectations that with revenue what we where net reflected forecasting two QX. we are it this in either you we and the when last will for certainly bit in the a saw that reflect the A conversations you drives quarter, and quarter. case, saw So of see timing QX translate what customer. the per higher in think

between however, be different that timing quarters. times slightly may some And

when in engage have of have may period you So the rolling those you happen a of webcast than community the campaigns, enablement completed completed when faster with retailer a you some and the time a to conversation originally out anticipated. at

so saw what And we QX. in that's

QX happen you can we of as to therefore you initially QX. in some just it seeing earlier in think anticipated results that So it are had occur and the

Jeff Van Rhee

services? saying, timing around just by it's of training in pull more move Or a being this it, let's if demand? is function let's let's that you say would driven that You the that more will, delivery that forward, your up, is do this get retailer turning quicker done, of And being more you yes, go? let's are

Kim Nelson

the It's latter, really.

On community of the campaigns, really pace timing by are and the timing the retailer they enablement solely driven that the wants.

Jeff Van Rhee

Yes.

Okay. That's great.

And Okay. suppliers, the to as impact should were percent testing the themselves, you versus a you suppliers see, meaningful respect reaching any enablement then, change have percent start to as those customers? let's with of you the out I or full-blown sign-on of that suppliers seen campaigns say those what

Archie Black

relatively Obviously, the bounces it's over on and No. it the years. Jeff, whatnot, that program consistent. it's type of I but to consistent relatively say, would program depending customers and have from they

Jeff Van Rhee

Got it.

you. Thank Great. Okay.

Operator

And Thank question next Walravens from with Pat JMP you. our Securities. comes

now Your line open. is

Matt Spencer

you Spencer, Thank is XXXX? taking for retail my Matt guidance This on for Hi. bankruptcies many can Pat. absorb question. for How big your

Kim Nelson

look put seen the When we we have our a of factors. We into together account year, at we take lot historically. expectations what for

our for is guidance. the We our expectations at reflected up in also look what all And year. of that ends are into what

our because in in that light deliver for in to retailers factors me multiple expectations on environment in comfortable feel there the for revenue number ability of hard year a we it's there of go the to transition. with our particular for So answer is but

Matt Spencer

them? acquisition then with at of you could have And Got remind CommerceHub how it. announced the impacted all? And Thanks. us compete you business

Archie Black

the component on access any same retain, of the as It's the public of dropship compete went financial to kind their retailer say, will they a zero I with retailer basis more the now biggest flip. went be doesn't or them in first else what the and specific e-commerce going got have and is of and They question to least when by an capital over are provider an have and structure business haven't business. for what what a We they the Obviously At is, people capital normal. asked quarter their your seen continues change We impact. Yes. happen behaviors doesn't private competition major a impact dropship. the will they to that are public same. I as would They two. there have that everything impact. have, Usually impact. they

will take attitude a We at that. wait-and-see

Matt Spencer

you very Thank Great. much.

Operator

Mark from Thank you. Benchmark. And our next Schappel question comes with

is line open. now Your

Mark Schappel

Hi. seeing are this question. taking Thank could retail I my bit any touched little you you not address in seeing macro a you anyways, think respect a retail With prior to Archie, to changes even respect But the environment, question. or on for Kim, you buying if a behavior? just with

Archie Black

product and standpoint last quarters. side, six by four, on somewhat our it's our relatively From a Again, it's consistent basis. the five, retailer Yes. over retailer

a little But generalization. you So be careful we have got of investment by to lot a technology. in are seeing

that us the in Sometimes good timing. for is

over We consistent not it's good. our Sometimes from to last the less initiatives, behind or standpoint quarters. more sit six different but four pretty

Mark Schappel

you. then your talked importance quarters, prior a Thank have channel follow-up, in your And Archie, the in partners about Okay. you of business. increasing as

XX% you have just try channel this to the Anyways, I initiatives of you that of year grow if about wondering your you think it could as ecosystem? build discuss new business some just last was and year.

Archie Black

Yes.

and making always or it partners channel with to us. do been business about to easier do for Our business us strategy has partners easier with

bigger partners. side on then, the people, global of new technology large So the probably change partners, and equation. I deepen that's the over going been relationship. always would And small biggest process the add and say, the and after few both of more both then is years last the both And

Mark Schappel

you. you. Instructions]. [Operator Thank Thank Operator

question & with Needham Berg comes Company. Scott next from Our

Your open. now line is

Peter Levine

on And a the Levine, prior Scott. guys. is Peter good again piggyback Thanks Great. off To quarter. This question. in of for congrats

curious And on little retailers for Maybe of through first to penetration highlight technology Archie, flow or product? but give year see last bit for dropship think about us suppliers your this quarter? know, that And highlighted a struggling kind did whole continually talked market the the dropship I for checks expectations position right. any technology enablement hear curious are to of I still to our you your quarter retailers, the the this because tailwind then, you most I you take of rate get was community from know dropship. among

Archie Black

the is Well, complicated supply for a dropship of it a trading And retailers. lot their and chain and retailer takes partners. their between coordination

to see continue driver, e-commerce to studies, dropship it tends total We to of everybody retailers. Again between for to a XX% management remind that as agent And change that retail. in last would a is say XX% about XX% of I be general, XX%.

and it's a but still which think, change small a a of tailwind. it's driver retail, So I very believe, it's is, growing, part of we rapidly

Peter Levine

Great. of answered my questions Then most are here.

a It's could or that been since into new force you So over question I have at on guess if sales place. strategies least put I a your efficiency. year you sales productivity ask restructured org,

more in here level leverage to and in the you to get if year could are we improvements terms senior coming of idea at they tenure in the today, or reps, from where quotas? what changes increasing targeting in expect exceeding or for see that greatest do you And made, the are of Just then, rep gains an the productivity? Is look meeting you share rep marketing? you sales expectations? where If you the

Archie Black

Yes.

for and I but up think side, they on somewhat retail back, on I are challenging an well-trained. crisp feel that's setting talking reps nice on, we sales think sure to focusing a chain are to I talking really efficiencies the our and just are can lot is continue term. done the making Obviously leadership as basics long Looking our good environment of has about into the message there of the us focus our the as a retailers, and job we that supply

Peter Levine

Thank you again. Great.

Operator

wonderful participating showing Thank have conclude Everyone, disconnect. time. program gentlemen, all conference. for thank this today's further may and This a does not any questions I And in today's you. and am Ladies you day. you at

SPS Commerce (SPSC) 26 Apr 182018 Q1 Earnings call transcript