Good day, and welcome to the SPS Commerce Q3 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Irmina Blaszczyk, Investor Relations for SPS Commerce. Please go ahead. Thank you, Dave. Good afternoon, everyone, and thank you for joining us on the SPS Commerce Q3 2023 conference call. We will make certain statements today, including with respect to our expected financial results, go-to-market strategy, and efforts designed to increase our penetration with retailers and other customers. These statements are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Please refer to our SEC filings, specifically our Form 10-K, as well as our financial results press release for a more detailed description of risk factors that may affect our results. These documents are available at our website, spscommerce.com, and at the SEC's website, sec.gov. In addition, we are providing a historical data sheet for easy reference on our investor relations section of our website, spscommerce.com. During our call today, we will discuss adjusted EBITDA financial measures and non-GAAP income per share. In our press release and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP financial measures, including reconciliations of these measures with comparable GAAP measures. With that, I will turn the call over to Archie. Thanks, Irmina, and welcome, everyone. As you all know, in March, we announced my planned retirement, and in July, we announced my successor. On today's call, I am pleased to welcome Chad Collins, who assumed the role of CEO of SPS Commerce on October 2. This earnings call is my last at SPS after 22 years in my role as CEO. I am extremely proud of what SPS has accomplished during that time. The value we bring to customers and trading partners across the retail industry is a result of extreme focus on customer success, a culture of consistent execution, and a vision to be the world's retail network. This is a legacy I leave in the very capable hands of an exceptional leadership team and talented employees around the world, and I am confident SPS is positioned for continued success with Chad Collins at the helm. Chad has spent 25 years in supply chain technology, building market-leading businesses. His leadership and industry experience and focus on innovation align well with SPS's culture. I look forward to continuing working with Chad as executive chair of the board. Before I review Q3 results, I'd like to hand the call over to our new CEO and give you all the opportunity to hear about his initial impressions and what you can expect as he settles into his role. Thank you, Archie. I'm excited to be here and honored to succeed Archie at such an important time for the company and the industry. I want to thank the management team and the board for their trust in me to lead SPS Commerce in its next chapter of growth. I spent the last 25 years focused on supply chain software. Since 2017, I have been CEO of HighJump, which was rebranded Körber Supply Chain in 2020, at which time I assumed the role of CEO of Körber Supply Chain Software. During my tenure as CEO, we executed a buy and build strategy, resulting in a global leadership position within warehouse management systems. A key lesson I've learned during my career is that while supply chains are inherently multi-participant, most software is focused only on a single enterprise. This is why SaaS networks like SPS are in a unique position to improve collaboration and data accuracy and optimize supply chain operations. I chose to join SPS Commerce for three main reasons. First, as a long-time supply chain technologist, I believe in the power of networks to unlock value for trading partners. This is demonstrated through the company's success, and I'm highly confident its differentiated network approach will provide long-term value and an ongoing opportunity for growth. Second, SPS has a strong corporate culture and is a well-respected employer in my hometown of Minneapolis. I've worked with many SPS employees through our mutual partnerships, and I found SPS company values to be consistent with my own and consistent with values that lead to market success. Lastly, I believe my experience in supply chain software, SaaS product strategy, global go-to-market expansion, and M&A position me to lead SPS as we capitalize on growth opportunities fueled by omnichannel retail dynamics. Over the next couple of quarters, I will dive into our product strategy and roadmap, engage with customers, and spend time with employees across the globe to begin building relationships and reinforcing the culture that has established SPS as a successful organization with a very exciting future. I look forward to giving you an update on our next earning, earnings call after my first full quarter in the role. In the meantime, I hope to meet some of you over the next several months. Now, I'd like to turn the call back to Archie for a review of Q3 results. Thanks, Chad. Our Q3 performance reflects the ongoing investments in optimization and automation across the retail industry, and the role SPS plays in helping our customers achieve operational efficiencies while scaling their businesses. Total revenue in Q3 was $135.7 million, which grew 18% in the quarter, while recurring revenue grew 20%. Retailers and suppliers looking to expand globally rely on SPS for access to centralized data and streamlined fulfillment processes across different markets. For example, Deckers, a footwear designer and distributor, which includes the UGG, Teva, and HOKA brands, has been a longtime SPS Analytics customer in North America. As they expanded their vendor base to Europe, Deckers chose SPS's fulfillment solution to ensure they can serve a growing number of retailers across North America and Europe. Callaway, an American manufacturer of golf equipment and apparel, acquired Jack Wolfskin, a premium outdoor brand headquartered in Germany. Having been a long-standing fulfillment and analytics customer in North America and Australia, Callaway chose SPS to centralize their EDI needs across their global supply chain. As suppliers expand their network across multiple sales channels and retailers, real-time inventory management becomes increasingly more important. Starboard Cruise Services, a division of LVMH, is known as the preferred partner for luxury retail at sea. With over 700 stores on over 100 ships across 15 cruise lines, Starboard understood the need for efficiency across their supply chain and chose to work with SPS to standardize and automate their electronic order fulfillment. To underscore the importance of this initiative, Starboard chose to share sales data with their vendors using SPS Commerce Analytics solution, which drove significant EDI adoption, exceeding Starboard's expectations. To support our customers' growth, SPS continues to invest in solutions to enable expansion across various sales channels and across markets worldwide. Last month, we completed the acquisition of TIE Kinetix, to strengthen our e-invoicing capability and expand our European presence. We also acquired The Order Exchange, one of our technology partners in Australia, who enable suppliers to link their line of business applications into major retailer supply chains. We believe that integrating best-of-breed technology with the SPS platform will enhance our ability to support and grow our network. We're excited to welcome our new employees and customers to SPS Commerce. With that, I'll turn it over to Kim to discuss our financial results. Thanks, Archie. We had a great Q3 of 2023. Revenue was $135.7 million, an 18% increase over Q3 of last year, and represented our 91st consecutive quarter of revenue growth. Recurring revenue this quarter grew 20% year-over-year. The total number of recurring revenue customers increased 13% year-over-year to approximately 44,500, and wallet share increased 7% to 11,650. As a reminder, in September, we closed the acquisition of TIE Kinetix, which added approximately 1,000 customers to our network. For the quarter, adjusted EBITDA grew 17% to $40.5 million, compared to $34.7 million in Q3 of last year. We ended the quarter with total cash and investments of $239 million. Now, turning to guidance. For the Q4 of 2023, we expect revenue to be in the range of $142.2 million-$143.2 million, which represents approximately 17% year-over-year growth. We expect adjusted EBITDA to be in the range of $40.5 million-$41.3 million. We expect fully diluted earnings per share to be in the range of $0.40-$0.42, with fully diluted weighted average shares outstanding of approximately 37.7 million shares. We expect non-GAAP diluted income per share to be in the range of $0.67-$0.69, with stock-based compensation expense of approximately $10 million, depreciation expense of approximately $5.1 million, and amortization expense of approximately $4.5 million. For the full year, we expect revenue to be in the range of $534.2 million-$535.2 million, representing approximately 18%-19% growth over 2022. We expect adjusted EBITDA to be in the range of $156.2 million-$157 million, representing growth of approximately 18%-19%. We expect fully diluted earnings per share to be in the range of $1.65-$1.67, with fully diluted weighted average shares outstanding of approximately 37.5 million shares. We expect non-GAAP diluted earnings per share to be in the range of $2.77-$2.79, with stock-based compensation expense of approximately $46.1 million, depreciation expense of approximately $19 million, and amortization expense for the year of approximately $15.6 million. For the remainder of the year, on a quarterly basis, investors should model approximately a 30% effective tax rate calculated on GAAP pre-tax net earnings. Beyond 2023, we maintain our annual revenue growth expectation of 15% or greater as we expand our network through community enablement campaigns and acquisitions. We will provide detailed 2024 guidance on our Q4 earnings conference call. But for modeling purposes, we expect to deliver approximately $181 million-$184 million in annual adjusted EBITDA in 2024, or approximately 15%-17% year-over-year growth. Beyond 2024, we continue to expect adjusted EBITDA dollar growth of 15%-25% as we invest in the business to capitalize on market dynamics and support current and future growth. In the long term, we maintain our target model for adjusted EBITDA margin of 35%. In summary, SPS continues to grow its global network, strengthening our competitive position and expanding our leadership across various industries. I would like to welcome Chad to the SPS team and look forward to working together as we execute on SPS's strategy to be the world's retail network and continue to deliver sustained, profitable growth. With that, I'd like to open the call to questions. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Our first question comes from Scott Berg with Needham. Please go ahead. Hi, Scott, your line is now live. Hi, everyone. Congrats on the good quarter, and thanks for taking my questions here. Before I get to the questions, though, Archie, it's 13 years. It's been an amazing run. Good luck in what all the retirement plans may look like. But on the question side, first of all, Kim, wanted to start with your adjusted EBITDA guidance for next year. It is on the lower end of your typical kind of 15%-25%, you know, expected growth in adjusted EBITDA on an annual basis. Can you talk about maybe some of the investments or acquisition impact that's, you know, guiding that number to maybe be on the lower end versus in the kind of mid to upper end of that range? Sure. To your point, we do have a guidance of anywhere between 15%-25% on an annual basis. This year, our expectation is closer to that middle. Next year, going into the year at this point, we're on the lower end, so that 15%-17%, which we think is appropriate based on what we see as opportunities for the business to grow top line as well as invest back in the business. Also, do keep in mind that in 2024, when we announced the acquisition of TIE Kinetix, at that time, we also said that in 2024, we expected that portion of the business to be break even in EBITDA. Got it. Helpful. And then, Chad, welcome to the team. I look forward to working with you more going forward. But I wanted to ask a question on your recent experience from Körber. Körber was an international company based in Germany, I believe. You've had a pretty extensive experience historically with international supply chain software and operations. I guess when I look at the SPS business, while it's not 100% U.S.-centric, it has had more of a U.S.-centric flavor to it than something that's truly, you know, having the same impact on a global basis. But how do you think about growing internationally, bringing new products to the international product portfolio, you know, to you know, making this be a business that has a, you know, just a really outstanding international footprint that, you know, is probably a little bit more balanced than just in the United States? Thank you. Yeah, thanks, Scott. Thanks for the warm welcome. And yes, obviously, one of the growth vectors that we will be looking at is geographic expansion. I will say that the acquisition that we did of TIE, I think, gives us a nice jumping-off point, and has been noted in the last quarter. Obviously, the component of e-invoicing is a little bit different in Europe than what we see here in North America. And so I think that, you know, continued execution on TIE will help us develop our framework for expansion into Europe and then potentially other markets outside North America. Great. That's all I have. Congrats on the good quarter again. Thank you. Our next question comes from Matt Pfau with William Blair. Please go ahead. Hey, great. Thanks for taking my questions, and congrats, Archie, on a great run. And welcome, Chad, good to speak with you again. Wanted to ask, Chad, a question to you. As you've looked at the company, obviously SPS has done a great job with fulfillment, and then, you know, they've started to get into analytics. From a product perspective, are there any areas that stand out to you as opportunities where SPS can expand into? Yeah, absolutely. I mean, clearly, SPS has established a leadership position in the network that connects retailers and distributors to the suppliers. You know, I think what we see in supply chain technologies overall is there is quite a bit of innovation going on, as well as the landscape is fairly fragmented. And I think that gives me confidence that if we keep the customer needs at our forefront of our product roadmap, whether it's through organic product development or through M&A, we'll be able to satisfy those customer requirements in a more fulsome way over time. Got it. And then just wanted to ask on the macro environment, you know, a lot of uncertainty here heading into the holiday season for retailers and what that is ultimately going to look like. And does that have any impact in terms of, you know, demand for your products from the suppliers? Thanks. Yeah, absolutely. There's certainly some mixed signals out there. On one hand, we're seeing some consumer and retail positive dynamics, but when we talk to our customers, there's a lot of uncertainty in the retail landscape right now. And I would just remind everybody that, you know, kind of retail outlook is not a direct bellwether on SPS performance. And in general, you know, SPS, when we have more changes in dynamics driven by omnichannel, SPS tends to do better given those omnichannel changes. Great. Thank you. Our next question comes from Parker Lane with Stifel. Please go ahead. Yeah. Hi, thanks for taking the question, and congrats on a great run here, Archie. Just jumping in on the recurring revenue customer growth here. Even if you back out TIE, it looks like it was a nice tick up from where we were last quarter. Anything to call out about, demand environment or community enablement campaign activity? And then, you know, you've also acquired a few businesses over the last year, and expanded into some interesting new markets. How should we think about, that balance of recurring revenue growth, through customers versus wallet share in the context of that going forward? Sure, Parker. So as it relates to the customer adds, you are correct, it sequentially went up about 1,500, and then again, we had mentioned that the TIE Kinetix acquisition brought us approximately 1,000 net new customers. So outside of that, you are correct. It was a little bit higher than a typical quarter for us for our customer adds. We had a nice quarter of community enablement activity, and that still does remain the largest contributor or driver to our net customer adds, so feel, feel really good about that. And then as it relates to the mix between sort of, net customer adds as well as the ARPU or wallet share, you know, overall, both, we believe, will continue to be an important driver to that overall growth of 15% that we believe we can sustainably deliver. Some years it might be a little bit more in one area than the other. You may recall back at the sort of the height of during the pandemic, we had sort of a record number of net customer adds back in 2021. And And just as a reminder, when we bring on a customer through a community enablement campaign, typically, they're gonna be a smaller size customer when they first join us, but then we have the opportunity to grow that revenue with that customer over time. I think the key takeaways you should expect both will continue to be important in delivering that overall 15% top-line growth. Got it. Appreciate that. And then, Kim, sticking with you, looking at the implied op margins for the Q4, looks like a slight downtick from 3Q. Is that primarily acquisition-related impacts, or is there some additional investment you're putting in the business in 4Q? Sure, great question. It's, it's primarily going to be acquisition-related. If you look at our Q4 guidance that we just provided, and if you were to compare that to the Q4 implied guidance from our last quarter's conference call, it's basically exactly the same, except we've added in our expectation of TIE. So just as a reminder, when we announced the TIE acquisition, we said it would deliver approximately $3.9 million of revenue in Q4 and contribute a negative $500,000 in EBITDA in Q4. So for the most part, that's really the contribution or the reason why you're seeing that go down a little bit. Understood. Appreciate the feedback. Thanks again. The next question comes from Joe Vruwink with Baird. Please go ahead. Great. Hi, everyone. Big congrats to Archie. It really pains me to say this, but it looks like Marquette's gonna have a pretty good team this year, so at least you'll have one thing to do. Not that you're stepping away completely, but maybe I'll follow up on Matt's question for Archie and Chad. When you think about more ways you can ultimately help customers, would you maybe start to point Chad to your background? Obviously, a long tenure with warehouse management, but then Körber, you know, picked up exposure to logistics management, order management. Are those kind of the relevant adjacencies that might also pop up here at SPS, or is that really not the most direct way you would think about way products on the network can grow over time? Yeah, I think the keys to our product roadmap, whether it be organic or inorganic, will be looking at, you know, how we can best help the customer, and most likely, that will include somehow leveraging the differentiated network and the data from the network that we already have. You know, I think that could lead to different categories. I would not necessarily say warehouse management, given my background, immediately jumps to the top of the list. But I do think there's lots of opportunities, given the size of the customer base, the differentiated network we have, to start with the customer and then determine, are we better off building those solutions for our customers, or getting there faster by making strategic acquisitions. Okay, that, that's great. And then one for Kim. If I take your 4Q revenue guidance and then just back out what you said about TIE, it does look like the implied organic growth rate is stepping down relative to, you know, it's been 16%+ all year. Any kind of explicit reasons for why that might be forecasted into year-end? Sure. When we think about Q4, just a couple of things when you're looking at the overall expected number, do keep in mind you're starting to lap some acquisitions, then we have the new acquisition. At a high level, the way we look at it is our expectations for Q4 are basically exactly where they were on our last earnings call. No real change as it relates to our expectations of the business and the opportunity that we see in front of us. Again, how I'm getting there is if you look at the implied Q4 guidance we gave on our July earnings call, and you add in, into that number, TIE, you get very close to what we just guided to. Technically, we guided up slightly the EBITDA. Okay, thank you very much. Our next question comes from Jeff Van Rhee with Craig-Hallum. Please go ahead. Great. Thanks for taking the questions, Chad. Look forward to getting to know you better and, certainly our 22 years, just, exceptional, just amazing run. So congrats and wish you all the best. A couple of questions for me. The, you commented on the, the behavior of the, you know, the target customers getting a bit more cautious. What does the pipeline of enablement campaigns look like? How is that more cautious behavior within the target customers sort of manifesting, if you could expand on that? Yeah, obviously, the guidance reflects our pipelines overall. And, you know, the area that does not tend to go negative, in fact, a lot of times it goes positive, is the retail enablement campaigns. We've seen over history, whether it's 2008, 2009, or beginning of the pandemic, is that the retail community enablement campaigns, if anything, move up. Reminder that from a retailer standpoint, we don't take very much of the economics from the retailer. So when they're cautious, especially about spending, we will move up what I call the priority line, and so that part of the business tends to improve. Obviously, there's pluses and minuses. Channel can go up or down, depending on what's happening, and analytics tends to be a slight negative. So, you know, in these times, the numbers tend to stay pretty consistent. Underneath the covers, there's a lot of puts and takes, but the retailer part of the world tends to not get hurt at all. In fact, in a lot of times it improves. Got it. And then, I guess just a longer-term question. When you look over the last several years, how is what you're displacing changing? I would say it has remained fairly consistent, you know, over the last several years. Obviously, if you look at the numbers over the last decade, we've clearly moved upstream. We've been very effective at doing that. You know, we continue to displace paper and faxes from retailers that aren't automating their supply chains and/or suppliers that have not worked with retailers in an automated way. So we continue to see that in our enablement campaigns, where somebody has not been exposed. Obviously, in today's world, it's significantly easier to start a brand, to start a new supplier company. So we continue to see that. We continue to see people as, especially as they move ERP systems, to move away from legacy software and do it yourself. So that trend continues. So I would say over the last two-three years, not much change. Over the last decade, clearly moved upstream, you know, which is why one of the reasons why our ARPU has increased so dramatically over the last decade. Yeah, makes sense. I'll leave it there. Thank you. Next question comes from Mark Schappel with Loop Capital Markets. Please go ahead. Hi, thank you for taking my question, and, Archie, again, congrats on, on your time, with SPS, and wish you the best. I was wondering if, if you could start with you, if you could provide maybe some additional details around the Order Exchange in terms of maybe some market areas that they focus on or, or, or very strong in, like number of employees, you know, were they profitable, things of that nature. Yeah, that, it's, it's a very small acquisition, about 10 employees, and this company was really built to help and implement SPS Commerce customers, starting in Australia. And where their expertise has been is, I would call the long tail or the one-off ERP systems, where they're integrating to them and have built some expertise there. So when you look at the deal, it makes a lot of sense for a couple reasons. One, well, first off, it's very small, but what we found is when we make acquisitions of partners like this, obviously significantly smaller than MAPADOC or Data Masons, but we have seen that we end up having a better customer experience, and we end up having a little bit more sales momentum. So one of the things that's a little bit unique on, on this deal is, although it was in the other deals as well, is that almost all of their revenue was already flowing through SPS Commerce, so you're not seeing a pickup on revenue, but now we control the revenue, we control the proprietary information, and we can more integrate that into our business. So really excited about the team there and, the skill sets. Great, thanks. Then, you mentioned ERP, and just to stay on that theme, I was wondering if you could just comment on what you're seeing with respect to the ERP implementation side of your business, particularly- Yeah. within the, you know, the supplier community. Yeah. Go ahead. Yeah, it continues to be, I would say in the small market, mid-market, it continues to be very strong. In the enterprise, it's a little slower, not substantially, but slightly slower. But people continue to move forward. There's so many challenges that suppliers and retailers have, that they don't if they don't fix their base, you know, infrastructure, they're just not going to be able to meet the demands of the customer. So that is what's driving it. It's not new technology. It's just they fundamentally are not able to meet the demands of their customer unless they really do some upgrading, which obviously includes some of our products as well. Great. Thank you. That's all. That's all. Again, if you have a question, please press star then one. Our next question comes from Nehal Chokshi with Northland Capital Markets. Please go ahead. Yeah, thank you, and congratulations, Archie, on an incredible career. Chad, look forward to working with you. You talked about in your introductory remarks, the value of networks, especially for your customers. In the context of the international footprint that SPSC has, what do you think can be done to enhance that value such that it becomes similar to the, what it is in the United States? Yeah, I would say that from a customer's view, I think the value is quite similar, frankly, in terms of the value that we're able to provide a customer in connecting with their trading partners and getting access to more data, utilizing our network, whether that customer is in the U.S. or Canada, in Europe or in Australia. I think sort of as a percentage of our business, obviously, it's dominated by North America. As I mentioned earlier, I do think there's opportunity to expand on the geographic vector. What I would say is some of the transactions and approaches across the network do vary a little bit by geography. You know, back to my comments before on TIE, I think particularly with respect to Europe, it gives us a nice beachhead into Europe, with that acquisition, especially relative to the specific electronic capability of e-invoicing. Thank you very much. This concludes our question and answer session. I would like to turn the conference back over to Archie Black for any closing remarks. Thank you, Dave. Before we end the call, a big thank you to the management team and SPS Commerce customers for their support during my 22 years at the company, and to all SPS employees for their unwavering dedication to our vision. I've truly had the privilege to work with and lead an exceptionally talented group of people, and I'm proud that together, we built a company that has consistently delivered exceptional results for our customers and shareholders. Lastly, I would like to also acknowledge Kim Nelson and her commitment to excellence throughout our 16-year partnership, including a successful IPO and 55 earnings reports. In addition to being a fantastic CFO, Kim has been a thought partner, a strategic advisor, and a trusted confidant. I wish Kim, Chad, and the SPS team continued success in the years ahead. Thank you all for your time today. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.