SPS COMMERCE INC Q3 FY2024 earnings call

Chad Collins highlighted a strong third quarter with revenue and recurring revenue both up 21%. The acquisition of TIE Kinetix a year ago has been progressing well, adding e-invoicing capability and strengthening presence in Europe and the U.S. The acquisition of SupplyPike in August is expected to add customers and increase wallet share. Examples of customer benefits include GNC improving shipping notice compliance with Traverse, BISSELL reducing invoice deductions with SupplyPike, and Bunzl automating supply chain processes with SPS.

Revenue grew 21% to $163.7 million in the third quarter of 2024. Recurring revenue also grew 21%. The total number of recurring revenue customers increased 2% year-over-year to approximately 45,200, and wallet share rose 18% to around 13,700.

For the fourth quarter of 2024, revenue is expected to be in the range of $168.5 million to $169.5 million, with adjusted EBITDA between $48 million and $48.7 million. For the full year 2024, revenue is projected to be $635.4 million to $636.4 million, and adjusted EBITDA $185 million to $185.7 million. 2025 guidance will be provided in the Q4 earnings call. Long-term, annual revenue growth of 15% or greater is maintained, with adjusted EBITDA growth expected to be between 15% and 25% and a target adjusted EBITDA margin of 35%.

Forward-looking statements involve risks and uncertainties. Investors are referred to the company's SEC filings for a detailed description of risk factors that may affect results.

Q: Scott Berg asked about the demand environment and net new business opportunity.

A: Chad Collins stated that the demand environment looks positive, with a strong pipeline of community programs continuing, and growth seen in wallet share as the product portfolio expands.

Q: George Kurosawa inquired about the synergy between Traverse and SupplyPike.

A: Chad Collins mentioned that Traverse helps with supply chain visibility, which then leads to better utilization of SupplyPike for invoice deduction management.

Q: Dylan Becker asked about enablement campaigns and expansion.

A: Chad Collins said that it's a continuous process as suppliers change, creating a continuous flow of leads for digital connections.

Q: Parker Lane asked about the European market post-TIE Kinetix acquisition.

A: Chad Collins noted that e-invoicing is bundled with fulfillment, and go-to-market techniques from North America are transferable to Europe.

Q: Joe Vruwink asked about the growth focus.

A: Chad Collins and Kim Nelson said that wallet share expansion with a broader product portfolio is a key lever, maintaining a balanced growth approach.

Q: Jeff Van Rhee asked about the TAM and SupplyPike customers.

A: Chad Collins said that SupplyPike customers are larger, with slower adoption as they transition to cloud-based solutions.

Q: Mark Schappel asked about analytics growth.

A: Chad Collins said that analytics growth is currently mid-single-digit but expected to be double-digit in the long term.

Q: Nehal Chokshi asked about the North America percentage of the target addressable market.

A: Kim Nelson said the initial TAM was half in the U.S. and half outside, with more opportunity seen in the U.S. going forward.