SPS Commerce, Inc. (NASDAQ:SPSC) Q4 2023 Earnings Conference Call February 8, 2024 4:30 PM ET Company Participants Irmina Blaszczyk - Investor Relations Chad Collins - Chief Executive Officer Kim Nelson - Executive Vice President & Chief Financial Officer Conference Call Participants Matt Pfau - William Blair Parker Lane - Stifel Scott Berg - Needham Joe Vruwink - Baird Jeff Van Rhee - Craig-Hallum Mark Schappel - Loop Capital Markets Nehal Chokshi - Northland Capital Markets Operator Good afternoon, and we ...

Financial Data and Key Metrics Changes - Total revenue in Q3 was $135.7 million, which grew 18% year-over-year, while recurring revenue grew 20% [18][40] - Adjusted EBITDA grew 17% to $40.5 million compared to $34.7 million in Q3 of last year [21] - For the full year, revenue is expected to be in the range of $534.2 million to $535.2 million, representing approximately 18% to 19% growth over 2022 [22] - Adjusted EBITDA for the full year is expected to be in the range of $156.2 million to $157 million, representing growth of approximately 18% to 19% [22] - The company expects fully diluted earnings per share to be in the range of $1.65 to $1.67 [22] Business Line Data and Key Metrics Changes - The total number of recurring revenue customers increased 13% year-over-year to approximately 44,500, and wallet share increased 7% to 11,650 [40] - The acquisition of TIE Kinetix added approximately 1,000 customers to the network [21] Market Data and Key Metrics Changes - The company is focusing on geographic expansion, particularly in Europe, following the acquisition of TIE Kinetix [28][100] - The retail enablement campaigns continue to be a significant driver for customer additions, especially in uncertain economic conditions [91] Company Strategy and Development Direction - The company aims to leverage its differentiated network and data to enhance customer offerings and expand into new categories [8] - The strategy includes a focus on omni-channel retail dynamics to capitalize on growth opportunities [17] - The company maintains a target model for adjusted EBITDA margin of 35% in the long term [23] Management's Comments on Operating Environment and Future Outlook - Management noted mixed signals in the retail landscape, with some positive consumer dynamics but overall uncertainty affecting demand [49] - The company expects adjusted EBITDA dollar growth of 15% to 25% beyond 2024 as it invests in the business [23] - Management expressed confidence in the company's ability to navigate the current economic environment and continue delivering growth [49][86] Other Important Information - The company completed the acquisition of the Order Exchange, enhancing its technology capabilities in Australia [39] - The new CEO, Chad Collins, emphasized the importance of networks in unlocking value for trading partners and plans to engage with customers and employees to reinforce company culture [16][35] Q&A Session Summary Question: What is the impact of recent acquisitions on adjusted EBITDA guidance? - Management indicated that the guidance is on the lower end due to investments and the impact of the TIE acquisition, which is expected to be breakeven in EBITDA for 2024 [70][79] Question: How does the company plan to grow internationally? - The company plans to leverage the TIE acquisition as a foundation for expansion into Europe and other markets, focusing on the unique invoicing capabilities [28][100] Question: What are the opportunities for product expansion? - Management highlighted the potential for expanding into logistics and order management, considering both organic development and strategic acquisitions [81][82] Question: How is the demand environment affecting customer growth? - The company noted that community enablement campaigns remain a significant contributor to customer growth, even in uncertain economic conditions [51][91] Question: What is the outlook for the fourth quarter? - The company expects revenue in the range of $142.2 million to $143.2 million, representing approximately 17% year-over-year growth [66]

SPS Commerce Investor Presentation Forward-Looking Statements and Non-GAAP Financial Measures This presentation contains references to historical "Adjusted EBITDA" and "Adjusted EBITDA Margin" which are, in each case, not presented in accordance with generally accepted accounting principles ("GAAP"). Reconciliations to the corresponding GAAP measure is provided in Appendix A of this presentation. Q3'23 expectations, plans and prospects, including our views regarding future execution within our business, the ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: September 30, 2023 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ________ to ________ Commission file number 001-34702 SPS COMMERCE, INC. (Exact Name of Registrant as Specified in its Charter) (State or ...

SPS Commerce, Inc. (NASDAQ:SPSC) Q2 2023 Earnings Conference Call July 27, 2023 4:30 PM ET Company Participants Irmina Blaszczyk - IR Archie Black - CEO Kim Nelson - EVP and CFO Conference Call Participants Matt Pfau - William Blair Scott Berg - Needham & Company Parker Lane - Stifel Jeff Van Rhee - Craig-Hallum Nehal Chokshi - Northland Capital Markets Mark Schappel - Loop Capital Joe Vruwink - Robert W. Baird Operator Good day and welcome to the SPS Commerce Second Quarter 2023 Earnings Conference Call. A ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: June 30, 2023 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ________ to ________ Commission file number 001-34702 SPS COMMERCE, INC. (Exact Name of Registrant as Specified in its Charter) (State or other ...

SPS Commerce, Inc. (NASDAQ:SPSC) Q1 2023 Results Conference Call April 26, 2023 4:30 PM ET Company Participants Irmina Blaszczyk - IR Archie Black - CEO Kim Nelson - CFO Conference Call Participants Scott Berg - Needham & Company Parker Lane - Stifel Jeff Van Rhee - Craig-Hallum Joe Vruwink - Robert W. Baird & Company Operator Good day, and welcome to the SPS Commerce First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: March 31, 2023 o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ________ to ________ Commission file number 001-34702 SPS COMMERCE, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 41-20 ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) SPS Commerce provides cloud-based supply chain management services, achieving 88 consecutive quarters of growth through its full-service model and network effect Financial Performance (2020-2022) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Revenues** | $450.9M | $385.3M | $312.6M | | **Recurring Revenue %** | 93% | 92% | 94% | - As of December 31, 2022, the company had **42,300 recurring revenue customers** and has served a total of 115,000 customers across 85 countries to date[17](index=17&type=chunk)[21](index=21&type=chunk) - The company's core products include Fulfillment (EDI solution), Analytics (sales and inventory data), Assortment (item data management), and Community (supplier onboarding)[23](index=23&type=chunk)[30](index=30&type=chunk) - Growth is driven by a **"network effect,"** where each new trading partner added to the network increases its value for all existing participants, leading to new revenue opportunities[26](index=26&type=chunk) - In 2022, SPS Commerce acquired GCommerce, Inc, an EDI provider for the automotive aftermarket, and InterTrade Systems Inc, an EDI provider for apparel and general merchandising, to extend network capabilities[32](index=32&type=chunk) Employee Distribution by Function (as of Dec 31, 2022) | Functional Area | of Employees | | :--- | :--- | | Cost of revenues | 1,122 | | Sales and marketing | 557 | | Research and development | 359 | | General and administrative | 177 | | **Total employees** | **2,215** | [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business, technology, international, regulatory, and financial risks that could impact its operations and stock performance - **Business Risks:** The company's growth depends on attracting new customers and selling more to existing ones; most customer contracts are short-term (30-90 day notice), making renewal rates critical, while economic downturns, intense competition, and challenges in integrating acquisitions or expanding internationally pose significant threats[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - **Technology & Service Risks:** The business relies on the performance and security of its technical infrastructure, with risks including service interruptions from third-party data centers, failure to protect customer data from cyber-attacks, undetected software defects, and the inability to adapt to rapid technological changes[80](index=80&type=chunk)[81](index=81&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk) - **International Operations Risks:** Expansion outside the U.S. exposes the company to risks such as currency fluctuations, regulatory changes, political instability, and compliance with anti-corruption laws; operations in Ukraine and the Philippines are noted as being in potentially volatile political environments[70](index=70&type=chunk)[73](index=73&type=chunk) - **Regulatory Risks:** Increasing regulation of data privacy (e.g, GDPR), cross-border data transfers, and the internet could limit the adoption of cloud-based products and increase compliance costs[99](index=99&type=chunk) - **Financial & Stock Risks:** Future operating results may fluctuate, potentially causing stock price volatility; the company does not intend to pay dividends in the foreseeable future, and charter provisions could discourage a takeover[105](index=105&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) [Unresolved Staff Comments](index=22&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved comments from SEC staff - None[117](index=117&type=chunk) [Properties](index=22&type=section&id=Item%202.%20Properties) The company's primary corporate headquarters are leased in Minneapolis, Minnesota, with additional facilities in other domestic and international locations - The main corporate headquarters are in Minneapolis, MN, with a lease for **~198,000 sq. ft.** running through 2027[118](index=118&type=chunk) [Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) SPS Commerce is not currently involved in any material legal proceedings - The company is not currently subject to any material legal proceedings[119](index=119&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's business operations - Not applicable[120](index=120&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on Nasdaq (SPSC), with no dividends planned and an active share repurchase program in place - The company's common stock trades on the Nasdaq Global Market under the symbol **"SPSC"**[123](index=123&type=chunk) - SPS Commerce has not declared or paid cash dividends and does not expect to in the foreseeable future, intending to retain earnings for business operations and expansion[124](index=124&type=chunk) Share Repurchase Activity (Q4 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | Oct 1-31, 2022 | 1,291 | $120.06 | $47,368,000 | | Nov 1-30, 2022 | 3,024 | $119.05 | $47,008,000 | | Dec 1-31, 2022 | — | — | $47,008,000 | | **Total** | **4,315** | **$119.35** | **$47,008,000** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 17% to $450.9 million in 2022, driven by customer growth and increased wallet share, resulting in higher net income and strong cash flow Results of Operations (2022 vs. 2021) | Metric ($ in thousands) | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $450,875 | $385,276 | $65,599 | 17.0% | | **Gross Profit** | $297,810 | $253,598 | $44,212 | 17.4% | | **Income from Operations** | $71,182 | $55,085 | $16,097 | 29.2% | | **Net Income** | $55,134 | $44,597 | $10,537 | 23.6% | - Revenue growth was driven by a **13% increase in recurring revenue customers** (to 42,300) and a **4% increase in wallet share** (average recurring revenue per customer) to $10,500[159](index=159&type=chunk) - Operating expenses increased primarily due to higher headcount, leading to increased personnel-related costs in Cost of Revenues ($15.6M), Sales and Marketing ($9.4M), R&D ($4.4M), and G&A ($1.9M)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) Reconciliation of Net Income to Adjusted EBITDA | Metric (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net income | $55,134 | $44,597 | | Income tax expense | $16,190 | $8,944 | | Depreciation and amortization | $28,189 | $24,914 | | Stock-based compensation | $33,399 | $27,574 | | Other adjustments | ($644) | $1,036 | | **Adjusted EBITDA** | **$132,268** | **$107,015** | Reconciliation of Net Income to Non-GAAP Income | Metric (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net income | $55,134 | $44,597 | | Stock-based compensation | $33,399 | $27,574 | | Amortization of intangibles | $11,768 | $10,126 | | Other adjustments | $1,026 | $1,264 | | Income tax effects | ($14,639) | ($16,454) | | **Non-GAAP income** | **$86,688** | **$67,107** | | **Non-GAAP diluted EPS** | **$2.35** | **$1.82** | Summary of Cash Flows (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $100,052 | $112,893 | | Net cash used in investing activities | ($112,790) | ($46,703) | | Net cash used in financing activities | ($31,631) | ($8,361) | [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposure from interest rate and foreign currency fluctuations is considered immaterial - The company's primary market risks are interest rate sensitivity and foreign currency exchange risk[187](index=187&type=chunk)[189](index=189&type=chunk) - Interest rate risk is considered **minimal** as the company does not have variable interest rate debt and its investment objectives prioritize capital preservation[187](index=187&type=chunk)[188](index=188&type=chunk) - Foreign currency risk exists due to operations in currencies like the Australian and Canadian dollars; as of year-end 2022, **11% of cash and investments were in foreign currencies**, and the company believes a 10% change in exchange rates would not have a material impact[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) [Financial Statements and Supplementary Data](index=34&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements and related notes for the fiscal year ended December 31, 2022 [Consolidated Balance Sheets](index=38&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $672.9 million in 2022, driven by acquisitions, while stockholders' equity increased to $537.1 million Consolidated Balance Sheet Highlights (as of Dec 31) | ($ in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $322,814 | $352,443 | | Cash and cash equivalents | $162,893 | $207,552 | | **Goodwill** | $197,284 | $143,663 | | **Intangible assets, net** | $88,352 | $58,587 | | **Total Assets** | **$672,914** | **$615,846** | | **Total Current Liabilities** | $110,642 | $102,872 | | **Total Liabilities** | **$135,841** | **$131,587** | | **Total Stockholders' Equity** | **$537,073** | **$484,259** | [Consolidated Statements of Comprehensive Income](index=39&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The company reported a 17.0% increase in revenue to $450.9 million and a 23.6% rise in net income to $55.1 million for 2022 Income Statement Highlights (Year Ended Dec 31) | ($ in thousands, except per share) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Revenues** | $450,875 | $385,276 | $312,630 | | **Gross Profit** | $297,810 | $253,598 | $212,794 | | **Income from Operations** | $71,182 | $55,085 | $50,158 | | **Net Income** | $55,134 | $44,597 | $45,586 | | **Diluted EPS** | $1.49 | $1.21 | $1.26 | [Notes to Consolidated Financial Statements](index=42&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Key disclosures detail the 2022 acquisitions, revenue recognition policies, goodwill balances, and stock-based compensation expenses - **Business Acquisitions (Note B):** In 2022, the company acquired GCommerce for **$45.1 million** and InterTrade for **$49.1 million**, adding $55.2 million in goodwill and $41.6 million in intangible assets[272](index=272&type=chunk)[273](index=273&type=chunk)[276](index=276&type=chunk) - **Revenue (Note C):** Recurring revenues are recognized ratably over the contract term, while one-time set-up fees are considered a material right and are deferred and recognized over an estimated **two-year benefit period**[278](index=278&type=chunk)[282](index=282&type=chunk) - **Goodwill and Intangibles (Note H):** As of Dec 31, 2022, Goodwill stood at **$197.3 million** and net Intangible Assets were **$88.4 million**, with future amortization expense estimated to be $15.3 million in 2023[290](index=290&type=chunk)[291](index=291&type=chunk) - **Stock-Based Compensation (Note K):** Total stock-based compensation expense was **$33.4 million** in 2022, up from $27.6 million in 2021; $38.6 million of unrecognized expense is expected to be recognized over a weighted-average period of 2.4 years[300](index=300&type=chunk) [Controls and Procedures](index=61&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective as of year-end 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2022[322](index=322&type=chunk) - Management concluded that internal control over financial reporting was **effective** as of December 31, 2022, with the audit performed by KPMG LLP[327](index=327&type=chunk)[330](index=330&type=chunk) - The assessment of internal controls **excluded the recently acquired GCommerce and InterTrade**, which together represented 3.7% of consolidated assets and 1.4% of consolidated revenues for 2022[328](index=328&type=chunk)[329](index=329&type=chunk) [Other Information](index=62&type=section&id=Item%209B.%20Other%20Information) The company amended its bylaws in February 2023 to align with the SEC's new universal proxy rule for director nominations - The company's bylaws were amended on February 17, 2023, to implement procedural mechanisms related to stockholder nominations of directors under **SEC Rule 14a-19**[333](index=333&type=chunk) Part III This part incorporates information by reference from the company's 2023 Proxy Statement regarding governance, compensation, and ownership [Directors, Executive Officers and Corporate Governance](index=64&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement [Executive Compensation](index=64&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=64&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement [Certain Relationships and Related Transactions, and Director Independence](index=64&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement [Principal Accounting Fees and Services](index=64&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information required by this item is incorporated by reference from the company's 2023 Proxy Statement Part IV [Exhibits, Financial Statement Schedules](index=64&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K - This section lists the financial statements and exhibits filed with the Form 10-K[345](index=345&type=chunk) [Form 10-K Summary](index=66&type=section&id=Item%2016.%20Form%2010-K%20Summary) No optional summary is provided under this item - None[348](index=348&type=chunk)

Financial Data and Key Metrics Changes - For the full year 2022, revenue grew 17% to $450.9 million, with recurring revenue increasing 18% [8][16] - Adjusted EBITDA grew 24% to $132.3 million [17] - Q4 2022 revenue was $122 million, a 19% increase year-over-year, with recurring revenue growing 20% [41] - The total number of recurring revenue customers increased 13% year-over-year to approximately 42,300 [16] Business Line Data and Key Metrics Changes - Fulfillment revenue grew 19% and analytics revenue grew 10% in 2022 [8] - Adjusted EBITDA for Q4 2022 increased 26% to $35 million [41] Market Data and Key Metrics Changes - The company reported a total cash and investments of $214 million and repurchased $43.2 million of its shares [43] - The company expects revenue for Q1 2023 to be in the range of $123.3 million to $124.3 million, and for the full year 2023, revenue is expected to be in the range of $523 million to $526 million, representing approximately 16% to 17% growth over 2022 [18] Company Strategy and Development Direction - The company aims to maintain annual revenue growth expectations of 15% or greater and adjusted EBITDA dollar growth of 15% to 25% [20] - The company continues to invest in add-on products through acquisitions to expand market opportunities [87] - The focus remains on improving customer experience and enhancing full-service omnichannel supply chain solutions [39] Management's Comments on Operating Environment and Future Outlook - Management noted that the ongoing transition to omnichannel retail and increasing complexity in supply chain management continue to drive the need for automation [33] - The management expressed confidence in the company's ability to capitalize on existing and new opportunities across its expanding addressable market [46] Other Important Information - The company acquired GCommerce and InterTrade Systems in 2022, adding approximately 3,000 customers to its network [42] - The company maintains a target model for adjusted EBITDA margin of 35% in the long term [20] Q&A Session Summary Question: What are the expectations for analytics growth in 2023? - Management expects analytics growth in 2023 to be similar to the approximately 10% growth rate experienced in 2022 [48] Question: What is driving the flat EBITDA margin guidance for 2023? - The flat EBITDA margin guidance is driven by strong EBITDA dollars in 2022 and the timing of hires in customer success and sales [50] Question: Is there any pressure on spending from SMB-sized customers? - Management acknowledged that retailers are focusing on making their businesses more efficient post-pandemic, which may impact spending [55] Question: How are the acquisitions of GCommerce and InterTrade performing? - Both acquisitions are meeting expectations, with positive reactions from customers and strong talent integration [59] Question: What are the company's top priorities for the coming year? - The top priorities include investing in add-on products through acquisitions, expanding the network, and improving backend integrations for efficiency [87][88]