SPSC - Earnings call transcript Q2 2021

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Operator

Hello. Thank you for standing by and welcome to the SPS Commerce Q2 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded. now today hand Irmina would to conference I speaker your Blaszczyk. Instructions] like the to over [Operator Please go ahead.

Irmina Blaszczyk

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

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

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

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

Archie Black

everyone. welcome, and Irmina Thanks,

as digital to continues acceleration to revenue the solution. drive customer $XX.X million another Total the XX%. XX% omnichannel have recurring demand are to conform SPS' e-commerce by We and strong in to since suppliers and pandemic retailers driven the outstanding The began transformation for experience. quarter report grew we pleased fulfillment grew revenue witnessed

to the enterprises continue Adjusted which by Unit, initiative. of We to EBITDA a Economist XX% study strong the see in EDI XX% significantly of $XX.X grew digital Intelligence transformation year-over-year. million. accelerated recent digital their is of grew integral fulfillment, and have In transformation an pace part XX% momentum

significant Our retailers, and adapt growing suppliers, retail to and surface e-commerce SPS' largest network SAP services partners. the EDI of are Osborn to trading industry-leading EDI businesses distributors provider system. several finishing EDI vendors IT or world's requirements leveraging SAP and demands challenges omnichannel solutions solution of their the faced meet Many from its teams add with treatment to require ongoing to EDI maintenance

SPS able the Some operations, costly. order improve difficult deployed resources up was require making avoid on and to SAP be company's Osborn freed can for system hiring and their and fulfillment to strategic to staff to SAP which changes itself, focus the initiatives. fulfillment support EDI performance

including retail suppliers wholesalers, stores marketplaces distributors Our e-commerce also manage Shopify. orders solutions help and channels, like all full-service from retailers,

instead online for the our the XX% to electronic suppliers products chain quickly goods on SPS XX continues market. that, reduction time, retail Omnichannel received e-commerce for for automation vendors purchase hours. demand from their across a relationships of brings in very and stores over ready exciting win-win With with new are onboard This EDI most industries. to SPS of manage boosted electronically the it and growing today largest a capabilities makes to potential Shopify fuel platform. capitalize SPS within results. both with for platform to integration been Scheels, companies to a order Scheels from hours automate EDI orders strategic its the a on it's of in us for of their Solutions, that proven the have platform. supply to digital floor trading in while stores fulfillment we SPS and our weeks any EDI Shopify in and tool and using XXX,XXX via are one is can long-time vendors. orders our power within of X,XXX despite have receive And a unlocks merchants delivery their Shopify our requirement hours. Kim partner partner at of fast, Working labor all making simplicity fulfillment, the businesses recently for given integration trading turn stacked software brands investments example, retailers With Scheels are present is For to over financial their a their transformation sporting America fulfillment. around opportunities SPS first approximately partners all their using world. affordable. addressable well made existing Commerce. to SPS and Shopify the order XX The people SPS retailers leverage easy positioned It to thousands This and store discuss time I'll with

Kim Nelson

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

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

guidance. to turning Now

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

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

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

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

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

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

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

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

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

dynamics fulfillment we XXXX, e-commerce in that Beyond Archie the the foreseeable will for future. strong momentum expect fuel described

to our are we result, growth XX% a greater. As increasing annual or expectations revenue

of dollar the to continue to XX%, for as business market model XX% in we we our accelerating margin norms target by demand to to and and In I'd the retailers support expect on we results as EBITDA consumer to XX%. call and to summary, open growth future adjusted of adjusted addition, that, new our driven questions. Commerce the like EBITDA maintain fulfillment suppliers With solutions In long-term, shopping dynamics of SPS to current deliver growth. for invest In continues capitalize strong adapt preferences.

Operator

from question Our Needham Instructions] Scott Company. & first with [Operator Berg comes you. Thank

your with question. proceed may You

Scott Berg

sales rates that trends. what's call then Kim's fantastic Hi, start I'd to there two, And years? I that to And a last I one, three about growth that couple you've stepped then XX% stepping quarter. obviously here? to what what's to kind the the greater bit two that driving metric guess, expectations them of and acquisition changes Archie on around after this that the sustainable Kim, acquisition in of driving two-part the increased spoke and of a comments I the I customer up little e-commerce kind quarters Archie lower teens about is or last reported with first confidence thought in Maybe in one some up of a is the above about quarter that meaningfully is your your congrats that confidence? general environment. in you made versus and in you've know customer it growth that process question us kind guess, we last like last talk historical

Archie Black

Yes.

room. non things the couple think that the ways win momentum continue are EDI, we're And growth the that because TAM all you've no We're our add-on mostly to things expanding to really a more. just have are think And confidence. not different those the after effects longer through growth. We our fruits the run us to of we've we on seeing that. done, we think have base. but the accelerate, are think more labor we products think in seen we're add more, One, And of claim in of revenue a of thereof. we'll not that state I is by customer keep that to I accounts allowing only lot the value but really acceleration to pandemic as effects significant going ready we we that our or

a published billion we it's work we'll above substantially We that So $X do think that. some on and TAM.

force, As think in to in I any got that always made but retail XXXX. the continue significant focused our far changes since accelerate really very of moves, made on team. The we making performance different haven't sales you're significant the team as any Obviously, changes. XXXX the But we -- on changes segments. just

allowed them that think the customers. work with better I to

messaging, much targeted gave go-to-market stronger. have talking is them clear a points. And also think it they've I really, and really strategy which

success more customer the think So side, on drive ultimately which is to retail have adds. us that will I allowing

Scott Berg

hear comments analytics the lot into I in it. didn't you the Got I here? parse Helpful. analytics. profile through or How organic anything EDI, opportunity spoke growth Archie does guess, prescriptive and about there XX% there about figure fulfillment comments, I this if a but your

Archie Black

Yes.

now huge fulfillment. it's opportunity a by analytics. we Again, with see continue right think I led to being

increased see so still It's We growth by being starting trailing the fulfillment, it's driven fulfillment. are in analytics. to still

of we're a just had I'm long-term is you aspects comments, confident is. a we've quarters a little good, but upon fulfillment. What very really of And And not quarters, we've always with the about in feel have struggled you rebound and analytics, timing but what the timing analytics. predicting the the good feel with great of in we when number couple is. So skeptical in if big a reliant when growth

starts just giving that confidence. So more lot you a

Scott Berg

or pull into only I excuse Excellent. by -- of raised going outperformed versus quarter back the them consensus, you hiring by you in your sneak some trying a least me, the two. here. And Just delta at you then year? the side year to in of forward $X.XX maybe those one on right $X.XX. earnings your them the -- half the guess, -- expenses, between Kim, other earnings some just Did push full I'm push third pull the understand to

Kim Nelson

Sure.

performance our hiring does well to account, on the as the are So our we've doing side going sales date, seen success take forward. for on already as we second expectations and half both into side the expectations EBITDA customer based

it be front to would than the the think in is half. year, So correct of the the that spend higher half back

naturally Some is right just just of timing hires when occur. of that

Scott Berg

jump I’ll great the queue. and Congrats in Thanks quarter. another

Operator

Thank you.

Our next Markets. Jason Capital question from with Celino KeyBanc comes

may You your proceed with question.

Devin Au

taking on for Archie. is Hi, Jason Kim. our This actually Thanks questions. for Hi, tonight. Devin

I Just the our strong lot past have additions in momentum first and the slight quarters. is a which in building quarter, encouraging acceleration at one adds your few of is sort of of last looking customer off

can Just wondering of just Any where terms kind out that provide that coming and anything in versus partners would profile you size customers details these of seeing? of any sort the could you're if like helpful. on of details ordinary direct you're be you their from the they're provide winning of new

Kim Nelson

Devin. Sure

us. than relates historically to a that A of the we as point relates that a customers we it And multiple last community the that the similar quarters those is have had size to those community of going enablement campaigns. that added quarter. to on customers we where primarily quantity those in number net amount it And net over customer quarter net now been. as XXX didn't driven quarter, reminder, smaller-sized vary relates related the to where and grow adds can come are customer with As your the with with not skew to adds -- enablement also that for the we've higher good then call to say lot That's some a adds run. of our or it the seen tend to to but relationship about customer of be larger The it have value is just although time to do they campaigns I'll the is of we majority activity we a going to from have. customers the customers, normal community as quantity it to

Devin Au

being been companies guess it. of remarks Has in mentioned for high of of there question was And of reshuffle among the of then and wondering priority? your EDI is what them. have IT end, projects? Got Got it. I on their digital That's you prepared have reopens, transformation investment priority customers accelerated hearing in as offices XX% their kind one Archie helpful. economy terms I retail more you your But me. and in the been still priorities EDI of from EDI some their sort broader or one

Archie Black

more -- From the and it's driven expecting. look and of brick-and-mortar is importantly think right? seeing retail our to uniquely handle that delivery, do space coming side, store And really experience customers thinking at stores, strong by just Yeah. our from think we're omnichannel e-commerce You're are omnichannel. market I to And really the more And competitors, to more we're new when seeing demand. store everywhere, just I it's pickup. e-commerce, handle to situated we're you

demand see retailers So, foreseeable we continue to very anticipate here the for and future. that's from strong the

Devin Au

so Thanks much. Great.

Operator

Thank you.

Our next Matt William Blair. from with question Pfau comes

with may proceed your question. You

Matt Pfau

Hey expectation to sized on term. EBITDA wanted for that you guys range ask adjusted I longer growth guys. taking Decent great quarter. provided questions and Thanks my the there.

you of know one, end want I And that then of two, to sort the So, to being range? leverage from? or expect drives do where end what lower upper the at you come

Kim Nelson

Sure.

And dollar that point, So, any earnings to had can XX% we're said needs. we year. make the And a call, needs top customer back average well deliver are growth your that around of XX% takes into on that the for as sure account now in business investing current foreseeable a range -- future. prior have the to to we given to we future acceleration range have this EBITDA as that the XX% in we some that in as we want line, for company

that to for the So that some having call little a down of bit -- additional and the investment allows I'll of larger putting sort explain for to -- the range it range XX%. that

relates the opportunity our certainly still to model SaaS it us As with expand business the margin. side to for to we a on lots XX%, other of are

belief We in into at account is room not investing a that about there's well. margin. EBITDA takes that based we're so currently And compared with our still to where And XX% as that Longer term, -- likely the areas are the tech adjusted as with percentage caveat think company, the most a as XX%, of there's a appropriately we still of each of in R&D. revenue. on

improvement over spend to So, margin well. a you'll time as as in is G&A of percent than years see And in and longer percent ago, smaller revenue. marketing it room, as the few albeit that a expansion of as relates some still revenue term gross a there's sales

Matt Pfau

expectations? me of investment to just Got out XXX one advantage for it. and And on your take last cycle relative is to your Dynamics playing that Data that. Microsoft upgrade Masons How with

Archie Black

account everything every at say is expectations. I on would or above

extremely strong. the The environment a The is fantastic Dynamics team done executing Microsoft think team is job. extremely well. has I

is seeing two service larger Microsoft And larger think more So itself a after large effectively things: to to more and we're our larger factor well. Microsoft's ability and deals deals The is go deals. one executing accounts. the and larger of customers two ability I

this mean, was I have perfect I to acquisition say. timing perfect So,

Matt Pfau

Appreciate guys. Thanks, it. great. Sounds

Operator

Thank you.

Stifel. with Lane Parker from comes question next Our

with proceed may You your question.

Parker Lane

if trading to partner a which those an SBS? much Yeah. some go SBS' environment Archie. the trading more you last add you use the how about of that maybe customers Is relationships at acceleration Thanks really with an how that about platform. long-term of taking is number easier of took or I talk beginning efficiency my had SBS trading year partners think back something through Hi, much in platform is point such it or those it the the accelerated Can for made question. place, through in of on of partners Kim just they that and expansion the is managing disruptive place? the you wanted to to you Archie, were about

Archie Black

Parker. Thanks,

time have e-commerce that one do when Because for the And about we time. increases about we over you can does market. if the relationships. trading business, to partner addressable trading the industry is over think in a their general, number land total think decreased. ultimately, customer, retailers of it's it of that And opposed partner increased have as relationships our both. we that grow I Clearly, of most customer to number continue seen it's things

So that continue expand does -- expand the opportunity. to

much if I so just of retailer a coupled think of solution that anybody relationships working have get and services having the the differentiation because added a the just us that layer than those it's better better then the competitive fact that can in with between were we with adds fact value the to And given so we suppliers we else and think onboard I win-win-win. and to landscape. that faster much we're deep now can retailers it and it another suppliers, marketplace,

Parker Lane

enough activity just impact these potential as offset a as transformative of sector whole? of the bit past about sense. Yeah. a stores you and annual out with that's growth That there, thinking for that if been targets brick-and-mortar about and a the omnichannel drop forward, in some think instances shipping Do retail put then bankruptcy think there that such some think model. history of we SPS, little have that you the caused have any of the environment And in way we're the to that disruption back gone in approaches sort thank to you makes of we there's the and more going in of

Kim Nelson

Sure.

we from space companies are there. don't lens, So be there the that but acceleration going think not always to seen we some retail make when an it, bankruptcy's have the in about it

is really much there's belief to our change omnichannel. so So due happening

So suppliers retailers of lot work and on different what's lots or think for bankruptcies. what growth with There's we change have in uptick this And earlier lots an of of we're I momentum to events that's Archie in a of a and an call. fulfillment lot driving increase discussed not in really this opportunities seeing happening ways. really seen

Parker Lane

Thanks, Very helpful. it. Got again.

Operator

you. Thank

with question comes Company. Mark from Schappel next Our Benchmark The

You with question. proceed your may

Joe Brunetto

actually Mark taking Hi, and guys. question for a This you Brunetto my for on quarter. Joe Schappel. congrats on is great Thank

did line Data to that per the Data track to per was expected Masons, million contribution the $X with begin Data in year -- contribute -- Just with Masons revenue Masons quarter in it respect when you revenue quarter acquired?

Kim Nelson

it Joe, that, pretty ahead we what of was about to trending XX% saw similar in QX. also

Joe Brunetto

respect Awesome. of with your Thank to part of ERP you could accelerating? you. what part your And comment business on migration? seeing to then, Is business you're the this Archie, tied system

Archie Black

say ERP before. I be similar very be don't and continue and steady. see, you business would very but continues new Yeah, system see that, to the would in to acceleration would it say I to strong upgrades, movements, that, I an quarter

Joe Brunetto

it is higher that leverage other was EBITDA Great. margin to I question. have And or But drive bit actually this margins sneak is with expected touched there Kim, that initiatives driver for said in, one Is Thank you. respect more you earlier just an in scale the may could if gross places past, What one on the in margin a you've just works? the gross line. to the the cost further in margins? you from

Kim Nelson

Sure.

XXs. we of driver we've an it margins longer So get is revenue leveraging how we made. there have have a with The low we of to higher in over opportunity the time, biggest believe that really investments lot term, gross

add to continue scaling course, model some of over the but in do resources, time. get you we'll So

seeing when resources area period longer-term we're view mind customer obvious the happening is are gross we're to on a a successes that, in end an top acceleration keep as relates that it some sort Currently, going where to adding do in line, time we Now, margins. there. be of

what our all to long-term again, in about to relative gross And of it this taken gets pressure does our the to term margin that into and view, for changed EBITDA put that remainder been us long-term shorter to it nothing's has view that so year. as But account really relates relates as is scaling. guidance the

Joe Brunetto

Thank going to Awesome. That's so you guys all much. me. be from

Operator

Thank you.

comes Our Joe with next Baird. from Vruwink question

your with proceed may question. You

Joe Vruwink

Quick everyone. to the Hi, any does start, Great. acquisition one contributions? assume XX%

Kim Nelson

sometimes sort or XX% you say sometimes we be were and Joe, sort we can believe statement now of grow we number greater. our that as But without, that When to the XX% or comment think greater, making may of that with greater. we've to that we or XX% saying ability don't. grow And So, we increased this, it we would we're think company prior We're confident to or do of about both. recall we're that it's you same a acquisitions, greater. company, can a XX% in with or because acquisitions, the

Joe Vruwink

stronger I'm Okay. bit curious maybe terms been? even but growth of for Great. peers be the think do scale also a expressing might is see than where kind the that are update seeing both And point, seeing, do competitive you that means case solution different to be think stronger at customers in just your what opportunity does advantages it's for in just this that's also your seeing or on get of has a then imperative you in wondering, it And the now has an you peers demand broader category you're overall network you, I'd a this SPS landscape. and you than

Archie Black

of our and think different continues to definitely competitive a has fronts. we that grow competitors continue been advantage to our we The and Yeah, number on always outpace solutions a in strengthen. network our significant network

first So that's the part.

our I really to better. has mature, second part get continued is, just solution think to continued the

Data gave development space. net you acquisition, bought the that our solution which to have suite last that investments Masons solution in allowing space, over in we two, MAPADOC, the As marketplace. clear That brand technology and a a just Admin, our the EDI out in three and Microsoft Sage, in in the really us then, better own four a fulfillment acquisitions back, years, you recall, take is three, the we years rolled us new leadership

be work, the customers, is services to leader value-added to we now ourselves do easier part reason, SPS it stay to consider efficient So yet reason more it adding and makes think it, another in We that SPS Commerce. ultimately with makes their the space. for also And supplier Commerce. make and last sales just work with just that a process then, work to another our a

So we we continue outperform we'll making landscape, our in think those and differentiated a competitors. even two, continue year competitive I'll further it's from hopefully, the to say and or investments,

Joe Vruwink

That's great. And growth then the have had might maybe and just one not more the potential from impact that. me, the obviously, that things thinking year a of to about rates some at of start the seeing you're

fulfillment to I these forward? things maybe store even just see the you, think what views of maybe do potential as of of bankruptcies potential from choose supplier at some normalization What like and about going ship growth addressed retailers and of ship you some influence relative and more for into or the things and year start the a you modes your changes drop getting already. in to

Archie Black

I omnichannel partner. they and and is the do truly our well to just Commerce the a to a think, the deliver and mortar pure is highlighted solution we Yeah, e-commerce, since again where Commerce they and coming retailers to fact very suited need stores, deliver that we're from truly are differentiated And that's play. on omnichannel brick on in think key SPS one pandemic that's deliver of on things I

-- shift environment. have Commerce think have an we in we because what SPS is, a there's regardless pain they change, advantage direction that's it that's so shift for when can somebody's solve the of there's a And pain. pain, that When they and anytime change

we think we shifts us. of we are to accelerates each more drop for or is every one and SPS positive do in-store those a delivery ship positive whether net any And So think Commerce.

it's then Some might they're SPS just and the during -- Commerce. one competitive only pocket like for period in if landscape an they have really into deceleration. out which a world one we're feel we if of -- figuring acceleration of it's But have going they time

Joe Vruwink

great. much you That’s very Thank

Operator

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

You may proceed question. your with

Nehal Chokshi

driven see results. in on of the Definitely part to is it customers that. pandemic suggest And module? have of fulfillment. is Yes, the like percent thank Could what great you you more much and strong momentum now think the congrats very it's that I this the say fulfillment here looks

Kim Nelson

vast customers. that The our percentage use fulfillment us fulfillment. of There's our the analytics, customers customers majority majority are just use for but of a small

Nehal Chokshi

it. Got

So of now? does ARR what fulfillment represent percent

Kim Nelson

So of if revenue XX% -- of our or amount looking revenue sort the over fulfillment at you're you subscription revenue when recurring recurring at look is of revenue. revenue on our

Nehal Chokshi

Got it.

And then traction? an give international on update us any can Understood. Okay. you

Archie Black

of couple of A Yes. us. to are areas that focus

First off the the is North chain. America that Asian marketplace really consider we part supply of

we important North those have offices extremely so, And supply supporting primarily and an chain support the part the it's supply of to American North America chain.

some tougher very without American to I we're strong think XXXX. it North little a XXXX supply a would the it. seeing momentum, be Australia very, nice very support actually challenging to chain off

a nice as there. Europe seeing seeing then by led there we're off some well. our momentum And momentum So base. we're very, primarily analytics small solution been very and has That's

the on As discussed analytics and some of not Again, see starting area a we're going with pandemic very enough a momentum points really that the data are there. pretty we to yet of had in of optimistic. nice -- at were into momentum to was stake and pause. kind to off we seeing claim highlighted But into we've but that some on you going lean that had we base. invest area XXXX pandemic the again end small of an And recall analytics obviously in

Nehal Chokshi

Got it.

Okay. more And if one sneak can in. I

per low. off you lever terms average XX,XXX customer Which target You of think mentioned way revenue XXX,XXX that in revenue that then? maybe the $X billion target the customers and is long-term likely too

Archie Black

think I both.

look and are consumer. I a selling the marketplace they XXX,XXX Those Shopify at every think to don't you have has customer, just if right? product a all customers

can But them our way opportunity they of opportunity. to support we Commerce. trading be are the partners one have that's wallet and positive say else all to EDI And we're your as that or we SPS consequently lean and revenue in add then is. not a not So going customers share. increase in value second whether ultimately how our going work with

opportunity So on there's we think continue up. to to move both sides

Nehal Chokshi

Great. Thank much. you very

Operator

time. Thank any further showing you. questions conference And not today's This this Thank concludes you at I'm for call. participating.

disconnect. may now You

SPS Commerce (SPSC) 1 Aug 212021 Q2 Earnings call transcript