Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the SPS Commerce Q4 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [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. ahead. go Please

Irmina Blaszczyk

Good for Sarah. and -- and everyone, year Thank us afternoon on you joining conference quarter SPS thank XXXX you, call. and Commerce fiscal fourth

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

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

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

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

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

Archie Black

welcome, Irmina, everyone. and Thanks,

competitive all revenue of Commerce's which network driven and of expertise XXXX continue fuel and retail quarter culminate execution, QX automation. and The effect, Commerce. supply the XXXX omnichannel need community consecutive and to chain for underscore for our was excellent in SPS another SPS an year go-to-market represented transition strong differentiation. increasing to complexity experience approach, retail customer XX by management our ongoing of growth,

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

chain Commerce trading more solutions and challenges collaborative address SPS relationships profitable. and to offer partner supply make

them and their or management For some API discounted to scale take enables enjoy partners our inventory gaining outsource Amazon and or and fulfillment customers, like EDI to capability as advantage reach, vast faster delivery. their to as well Shopify, of shipping rates Etsy, market of

of help across for chain suppliers solutions, customers omnichannel Other those designed We fulfillment international and which to expansion. suite achieve many brands industries. scale, customers leverage and sizes all full simplify and supply our are of efficiency

Gym+Coffee, prioritized and largest automation locations brands, offer growing one Ireland's order across and to athleisure EDI inventory a delivery efficient global customer and fast active to on all of base. synchronize to fulfillment used and sales based fastest and warehouse channels

Ooni, a North company, across operations America U.K., and oven partners beyond SPS pizza expanded with and Europe. now

across all manufacturer, plan, world's Daikin Industries, drive indoor with EDI their Daikin their comfort HVAC one worldwide. suppliers. sites partnered SPS the compliance support To company the over has largest XX and growth solutions production to number

EDI venture vendors new to achieved joint XX a bring a up compliance Australia, within PetCulture, and hours. between set process on Commerce in PetSure and SPS program, XX% onboarding Woolworths with

remain the consumer and lean EDI retailers and chain, shopping they signing are large remains Most require scale supply common and stay help such for Safeway customers To EDI and Twin like automation suppliers was grocers competitive changing most necessary exchange how across and while new compliance, meet of information as expectations, standardizing to protocols. Target. Cups, many one

greater of sale to vendor also the work EDI. order visibility develop Canada, to analytics of leverages partnerships drive that vendors sharing support inventory and automate XX% leading into supply a success. performance ranch its Industries, closely its Peavey ongoing solution, nearly SPS' for volume farm sales point and SPS Peavey purchase in retailer's position retailer with data through with

as mitigate chain. inventory data profitability across their sell-through visibility, Crocs pressure their Global help to companies are across such leveraging all sales supply predictability to and channels drive

Lastly, better together build network expertise leadership automotive acquired help work as we continually for In known GCommerce, software and trading aftermarket to we strives partners our a provider SPS solution XXXX, position. our expand in on industry. its

Systems and apparel leadership InterTrade acquired across also We merchandise to markets. our general strengthen

the on launched years, sales force, Since a use we network. mission all focus digital products. the executed marketing and to consistently fulfillment solution our has through and new retail trading increased add-on XXXX, our realigned SPS connect easiest-to-join our Over partners end on

omnichannel on These we development acquisitions. strategic network value, experience, laser-focused remain system investments core and solutions also our improving supply as retail build integrations cloud and customer helped with positions today, consistent and win are the us which targeted full-service We chain internal significantly success. for world's tomorrow, enhanced continued win largest through us

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

Kim Nelson

Thanks, Archie.

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

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

of announced And InterTrade approximately of we of of and an the and XXX approximately we reminder, an our October, GCommerce As in addition acquisition X,XXX customers. the July, addition to in customers announced a network. acquisition

XX% grew to million. EBITDA Adjusted $XXX.X

the with total $XX.X of We repurchased and SPS and shares. cash ended of year $XXX investments million million

guidance. to turning Now

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

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

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

million XXXX XX% call, growth million represents XXXX. communicated expect For the million the conference to $XXX previously which XX% adjusted the the than we of to in to $XXX.X QX million, over to be EBITDA higher and range full year, on $XXX.X is $XXX earnings

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

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

For $X.XX the to the diluted full of share year $X.XX. we expect earnings fully range per XXXX, be in to

outstanding We XX.X expect weighted shares shares. million approximately diluted average fully of

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

expense we We expect depreciation and million, for year approximately to $XX.X of amortization expense be expect the $XX.X approximately million.

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

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

results. In summary, SPS Commerce achieved year strong fourth full quarter XXXX and

growth We in to across capitalize market. to new deliver continue future and opportunities on invest the our profitable existing and addressable expanding

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

Operator

Thank you.

Our the with ahead. question from [Operator go We Blair. Matt William Instructions] session. comes question-and-answer Please will Pfau now begin first

Matt Pfau

off the as strong well. about Yes, taking XX% in 'XX? thinking rate see to would the and congrats was it you start are 'XX around growth on saw analytics I there in acceleration? believe to XX% end analytics Wanted for And that? to How great. that Thanks question, and on potential you 'XX. for year. the my what Is drive

Kim Nelson

at to rate when this the we was of year Matt. Longer-term, growth XXXX, fulfillment. XX%, around correct, or we think in XXXX, similar you're you think think from do more in pretty what the that growth think a about we similar year next When -- rate current rate it analytics When about similar should a approximately about this But Sure, a experienced we similar growth we to for expect XXXX. prior probably year. XXXX, similar can analytics of a rate. grow year the

Matt Pfau

flat EBITDA Got the flat year-over-year? I What it. be the 'XX essentially guidance, we that guidance to is Thanks. that's on think for 'XX. about with Kim, should margin driving And think margin

Kim Nelson

think you being Sure. dollars XXXX. really because EBITDA driven strong of When it's the in

Keep to sort range XXXX, in about annual basis. in EBITDA remember was given So, XX% an XX% of year-over-year. on a mind, our XX% of growth we've

the saw that to timing you success year. part driver on and area. sales The a for of with great latter that lighter hires, first that XXXX. lot a do part had real in We're the bit made XXXX customer progress more little the of So, in of of in the and in particularly

year So, resources in full with that we you those all have of expense that XXXX, added. associated

a saw that the look midpoint, in of more more EBITDA XX% -- to 'XX were 'XX it 'XX get but lower growth more at add you're end XX% to expectation closer probably you of together, to XXXX. and the sort higher the in sort and is why our and of to that's a you normalized in going rate, end If lot

Matt Pfau

Perfect. Thank you. it. Appreciate

Operator

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

Scott Berg

pop the and but on a a mind, spending SMB-sized taking segments, that week a report comprises to Hi, with guess on other in up smaller on that I'll seen seeing Kim. of Archie nice any a it's SMB-focused couple are knowing questions. or companies the chunk ask customer over the you at have quarter two software question obligatory macro because starting customers. for I'll of you kind last my And and for of Congrats least your there focus see I on still spin. decent that everyone's thanks because software, ask vendors? We've we're pressure

Archie Black

Typically, is of spend. Scott. we're level Thanks, of not. reason the part the Yes. of And because

and going small you've hard Costco doing or vendor And just spend, Loblaws very it's level do especially you're get or of with of business and a cost product at You're business. a are you part on fulfillment really if worked of to small somebody, the relationship. to that where

less it typically there's $XXX, month. two, things: fee, or $XXX mandatory; it's So, more I small and fairly a think two one, is

Scott Berg

check Helpful. roughly like if that And math this organically, my just I quarter double looks inorganic then, It acquisition. correct. to wanted were the contributions with customer it. is math Kim, added there's from XXX my Got you

all upmarket. And then, wanted They target driving seen several 'XX kind normalized thoughts looks more How which about they we or or the this what bit, to additions yet more for in you've XX%-plus year about, selling customer like year. that It do relative on revenue [custom] are a think success subscription to having that or that next trend and me get to talking of (ph) growth 'XX you maybe you're to opportunity selling mix either reasons. you're spiked two your still recently? little mix in suggests you're products

Kim Nelson

Sure.

really in, was XXXX sort was said top-line that Obviously, a to XX% sort something we about of all growth a So, of customer more view of think that. revenue what you higher our and of, that adds were you maybe of ['XX, number, that closer does or little have anticipating do high to -- going pretty we some did and could greater in forward. that's is goal was maybe, if you call not guess, right? So heightened of your acquisitions want I And that. net an future (ph) also a levels, correct, as it, but back acquisitions. stated sort something see of we revenue we 'XX] are watermark, all-in bit sort to include that pre-pandemic bit

Specific a do to net quarter. be customer that lower tends add QX, in to mind, keep seasonally

do using QX's really number that adjusted So, prior opportunity us, do you line longer us. that, customer with customer however, see for revenue you'll a to see, that in from continued acquisitions, adjust trend a the get the on is we more based was they're that the have if with We how for acquisitions. somewhat

to us So, services. going for products use connections, typically, additional for they're and potentially more

solid So, dollars future, additional once into side typically two, a translate and equation and number. wallet customer per as combined that of customer growth to now but or ARPU really or that future continue share, we be adds well it up them that may that as do think meaningful that acquire that stated XX% customer, be contributors on both also overall in that to of year number. share will both It's the out will why the wallet that really show would more we

Scott Berg

answering my Great. on That's good the quarter. have. Thanks for congrats all and questions, I

Operator

comes with question ahead. next go Joe Our from Baird. Please Vruwink

Joe Vruwink

brick-and-mortar of past, change Archie, everyone. good in any you, you now those pretty high so, ERP one Are for events? neglected being you've circle you. And seeing been events address? more I'm in with think, those supply Hi, footprint years, guess, good have and that where as guess, new channel their at generation. changes there's lead good Do actually going maybe for you in you back, chain for can bit composition Great. they the change discussed a activity think recent upgrading, the the I question, I systems, retailers retailers are there's I over

Archie Black

spot exactly on. you're think I

I demands think the lot the made pandemic. And really and of sure that the they of that they to expectations is met now that work retailers reality now the make a have during consumer profitable. the

that and years and a their business make it they have an operate buzzword. I five now lot omnichannel think a ago, ecom think in -- continue with to efficient. wants of But omnichannel more retailer work it four, game really true much I truly was that's really to game. I way, know more a a is of if to a an brick-and-mortar

Joe Vruwink

you. for Okay. great. That's one then, And Tim,

that that interpretation the higher range your pretty performance by for think, exiting EBITDA much so the the think I is here right XQ here the I year. the overage XXXX, as in in Just moved guidance, about

right So, into the baseline just that those effects in of here, layer you forecast? intend read up on, no a the seeing And is changes shifted the so we're base to and kind the just all things really still bit? invest

Kim Nelson

be would That correct.

EBITDA not that we as up $X.X that position our tomorrow million investments our what for high we were we we of dear in think based for sort guidance be value win appropriate very for the both as in today, long-term are on hold win how made of versus take our to of based to year the ago. we the views But low said changes the to and about the exited end short-term on sort We expectations a us. able on days XX end XXXX and have in well

Joe Vruwink

Okay, it great. Thank I'll leave there. you.

Operator

comes Lee Our Craig-Hallum. question with go Justin ahead. Please next from

Justin Lee

quarter. Great. nice another real Thanks. Hey, guys,

suppliers, that suppliers of terms in you're historical, pain from coming variance platforms if couple the any that size any as signing, on relates of new the on, in of the of suppliers the to the are a customers? are it (ph)? wondering new the [geos] aboard Just they outside Just types versus obviously the points, variance adds acquired there's Maybe -- me. the new namely

Archie Black

omnichannel, around significant have there's Interesting a as when not Yes, change. average. that Obviously, going customers, more we and customers to activity. that we new more our in -- of are our we're moved after

few then are of large have We that to dollars have in see we success thousand continue and customers well three customers, a below those a all we year, and of types customers.

board So, it pretty tends actually. and to diverse be across the

Justin Lee

Got 'XX, curious Just it. if any And, and and typically the adds saw number, maybe back a you what Kim, what you on churn churn as refresh there's different? in you on gross reflect the just you saw see anything net on if variance? numbers,

Kim Nelson

churn at historical. did and different. really Annualized about to that's 'XX see we Sure, was -- not anything XX%, is similar XX% that

Justin Lee

Yes.

on two. you last meeting just GCommerce, then, Any And and the well How obviously, both Okay. characterize observations standing referenced out Are as you expectations? ahead off expectations? jump either one they them would it? of the InterTrade, I'll -- particularly

Archie Black

a Yes, say they're I meeting both couple expectations. One, things. would of

I we've And very customer think talent I teams very both the good the had very, standpoint. think of from reaction those strong. from is then,

so, to thrilled team. them And of have part the

Justin Lee

good stuff. Yeah,

Okay, guys. Thanks.

Operator

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

Matthew Kikkert

the on know the for and Cloud launched on Oracle for Hi. on Matthew Kikkert solution Parker. Thanks my back you quarter. congrats Marketplace. lot questions, taking while a I start, the This a is To fulfillment

the other Oracle market all further expand partnership And are awareness? to that partnerships that looking partnership at secondly, First, traction or how has progressed? expand you in to gain

Archie Black

our of on business. channel our the is Those space. really just a and area Well, the all Yes. NetSuite, Sage, very off, very focus of part the a parts. business are is SAP, space And important robust Microsoft the Oracle, part first and important Intuit

of people continue best we things. best of also fields, are of -- in so, the we leads our sure capabilities Obviously, sure integration. have have but we the of sure capabilities, can we're a are the And couple in people that and we One, last that aware solution. mile aware do those to making marketplace, making make our

have we, the obviously, We biggest network. -- have

different whether of ago best -- are integration think back at away we But from that's years and or the system we the very it's back-end I SAP, thing end clearly is into or Oracle five far integrating one NetSuite system. back-end

So, forward we will to continue to that drive to make the stand and invest our solutions continue in marketplace. out

Matthew Kikkert

kind there margin the to you that that moving on of additional a about you EBITDA move Okay. talked are hear. That's toward target, secondly, forward And stand EBITDA implied that mind on anticipating call margins back as get great any on in in have pulling XXXX. bit flat EBITDA that to beyond leverage? XX% then, But into we levers little order

Kim Nelson

We've components are, about at to is When Sales little well in see already we multiple to percent Sure. XX% you X% When we as then, we there bit, long-term of And R&D XX%, seen that gross where of, range in there gain is marketing, it, expect appropriate and an want a there to could lot think a a side, but on large. relative XX%, in look G&A. as as to there. revenue. sort think of of the range to margin XX%, if currently of there. we too call do sort somewhere be more you efficiencies nothing improvement would

margin you world. G&A future, see gross or So, sort in side more expect the of from come the the to would of the

'XX 'XX. as EBITDA 'XX, margin to adjusted that's and our seen our not expectation there expect in XX%, you be is you well you're seeing expectation in XX% revenue that got, an because that XX% is path XX% on we're future to will years why to the XX% overall to would to improvement in in EBITDA -- years Specific of the obviously where and certainly expansion -- margin. prior see margin you've sort

Matthew Kikkert

very Okay. That's Thank all you from me. much.

Operator

question Our comes go with [Operator Mark Please Loop Schappel Capital. from Instructions] next ahead.

Mark Schappel

Hi. Thank through Archie, nice job and with two firm's top was in or the are coming just three you the my or year? taking you'd believe the walk wondering us you, I the quarter what year. starting for question on and priorities you if your

Archie Black

Yes.

First then, with the get off, expand able us to obviously, for the as And suppliers. some our products long make sure advantage. our of through support to recurring expansion, our add-on continue more competitive that network, of think and I priorities the to what would to we'll think is I margin to building consider, make efficient. be investing look our the the invest is And meet always implementation expand I things opportunity we that back-end market XX,XXX processes and for we to term to acquisitions continue one our then, revenue can integrations in in, teams

Mark Schappel

if Okay, maybe little hiring little of Kim, provide the the could great. you on hiring about bit in And year. just a Thanks. business Maybe parts stands with -- the be company wondering won't where I just what what on where then, to and this respect you'll be? was a side, parts talk color hiring you

Kim Nelson

Sure.

So, -- but largest. largest. able customer technology would certainly customer and we're XXXX being the space, a the we success lot We add of across in to sales great other areas, success in where but a hire talent the the be from a board, in did exited also position being quantity,

different we're we organization, the opportunities to not the When we see to but customers' as think that that invest going meet also areas see. across we existing to needs, organization is continue and appropriate in XXXX, future only the our about across

of where an behind about, So, specifically know to 'XX bit more able that you to catch we're be area typical the little as success maybe typical organization, if one a hiring, throughout thing of to needed highlighted that where we're in in and customer great particular we is up company. do want be on was large not a at 'XX, part year. we it. area sort will resources it, adding there but If we year a call such that a will we the

Mark Schappel

you. Thank Great.

Operator

also now And concludes conference attending you This concluded. session. question-and-answer for our is Thank today's our presentation.

disconnect. now may You

SPS Commerce (SPSC) 9 Feb 232022 Q4 Earnings call transcript