Good afternoon and welcome to the SPS Commerce Q4 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please press star zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star one. To remove your question, press star two. Please note this event is being recorded. I would now like to turn the conference call over to Irmina Blaszczyk. Please go ahead. Thank you, Naomi. Good afternoon, everyone, and thank you for joining us on SPS Commerce's fourth quarter 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 retention and 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 that 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 the risk factors that may affect our results. These documents are available at our website, spsccommerce.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 Chad. Thanks, Irmina, and good afternoon, everyone. Thank you for joining us today. I'd like to start my prepared remarks by expressing gratitude to the SPS team for enabling a smooth leadership transition during my first full quarter as CEO. Having spent the last four months meeting SPS employees, I have come to appreciate their inherent retail expertise, their drive to deliver the best customer experience, and their commitment to consistent execution. Having completed a review of our product roadmap, I can say with conviction that the network SPS has built over the years uniquely positions the company to optimize our customer supply chain operations. By simplifying the exchange of supply chain data, SPS has become the world's retail network. By harnessing that data, we can help our customers make their trading partner relationships more collaborative and profitable. As we explore new use cases and adjacencies to leverage the data, we are creating a strong, defensible, competitive position, and an undeniable value proposition for trading partners everywhere. Looking back to 2023, the company's strong performance underscores our ability to execute as macro and retail dynamics continue to evolve. Q4 was the 92nd consecutive quarter of revenue growth and a strong finish to an exciting year. For the full year 2023, revenue grew 19% to $536.9 million. Recurring revenue grew 20%, led by fulfillment growth of 20% and analytics, which grew 10%. In 2023, the number of recurring revenue customers reached approximately 44,800. Throughout the year, we demonstrated ongoing success in expanding our network as we continue to play a key role in retailers and suppliers' transformation to omnichannel retail, improving supply chain efficiencies, and enabling international expansion. The True Value Company, a wholesaler with over 4,500 independent retail locations worldwide and one of the largest distributors in the US, partnered with SPS to standardize their electronic order fulfillment with over 1,000 vendors. Moose Toys, a large toy manufacturer in Australia and an SPS fulfillment customer since 2016, chose SPS's analytics solution to effectively manage the vast amount of data feeds from their many trading partners as they grew across Asia-Pacific, North America, and Europe. 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 network to Europe, Deckers chose SPS's fulfillment solution to ensure they can service a growing number of retailers across both regions. 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 using SPS Commerce Analytics, which incentivized a higher-than-expected adoption of SPS's fulfillment solution by Starboard's vendor network. Our continued focus on the channel and the strategic partnerships we established over the years play a key role in the expansion of our network. As trading partners strive for automation, ERP integration is another key component to solving supply chain challenges. For example, our team's expertise in the Microsoft space earned us a spot as the featured app on the main AppSource page. SPS Commerce's deep integration technology, multi-tenant cloud-based retail network, and full-service model is allowing Microsoft and their value-added resellers to leverage best-in-class technologies when trying to migrate customers and win new business. By partnering with ERP providers, we engage with suppliers like Orveon, who are focused on long-term omnichannel success. Automating connections with their trading partners was a priority for Orveon, who became a fulfillment customer. Shortly after, they subscribed to analytics for visibility into inventory levels and sell-through across their various sales channels and trading partners that include Bloomingdale's, Macy's, and Nordstrom. SPS's ability to deliver world-class solutions includes targeted acquisitions that integrate best-in-class technology with the SPS platform. In 2023, we continued to expand our portfolio with the acquisition of TIE Kinetix to strengthen our e-invoicing capability and extend our European presence. We also acquired The Order Exchange, one of our technology partners in Australia, who enabled suppliers to link their line of business applications through SPS's network, unlocking connections to trading partners around the world. SPS plays a pivotal role in supporting retailers and suppliers on their omnichannel journey. Our technology roadmap includes initiatives to further simplify access to the network and continued build-out of trading partner connections, creating long-term growth opportunities as we continue to execute our strategy to be the world's retail network. With that, I'll turn it over to Kim to discuss our financial results. Thanks, Chad. We had a great fourth quarter of 2023. Revenue was $145 million, a 19% increase over Q4 of last year, and represented our 92nd consecutive quarter of revenue growth. Recurring revenue this quarter grew 19% year-over-year. Adjusted EBITDA increased 20% in the quarter to $42 million. For the year, revenue was $536.9 million, a 19% increase, and recurring revenue grew 20%. The total number of recurring revenue customers increased 6% year-over-year to approximately 44,800, and wallet share increased 10% to approximately 11,550. Adjusted EBITDA grew 19% to $157.6 million. We ended the year with total cash and investments of $275 million. Now, turning to guidance. For the first quarter of 2024, we expect revenue to be in the range of $145.9 million-$146.7 million, which represents 16%-17% year-over-year growth. For the full year, we expect revenue to be in the range of $616.5 million-$619 million, representing approximately 15% growth over 2023. For the first quarter of 2024, we expect adjusted EBITDA to be in the range of $42.1 million-$42.7 million. For the full year, we expect adjusted EBITDA to be in the range of $183 million-$185 million, representing growth of approximately 16%-17%. For Q1 2024, we expect fully diluted earnings per share to be in the range of $0.26-$0.27, 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 $0.72-$0.73, with stock-based compensation expense of approximately $20.1 million, depreciation expense of approximately $4.7 million, and amortization expense of approximately $4.7 million. For the full year 2024, we expect fully diluted earnings per share to be in the range of $1.75-$1.78, with fully diluted weighted average shares outstanding of approximately 38 million shares. We expect Non-GAAP diluted income per share to be in the range of $3.11-$3.13, with stock-based compensation expense of approximately $55.7 million, depreciation expense of approximately $19.4 million, and amortization expense for the year of approximately $18.8 million. For the year, you should model approximately a 30% effective tax rate calculated on GAAP pre-tax net earnings. Beyond 2024, we maintain our annual revenue growth expectation of 15% or greater as we expand our network through community enablement campaigns and acquisitions. 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 Commerce achieved strong fourth quarter and full year 2023 results despite ongoing macro dynamics. We delivered profitable growth while we closed two acquisitions and continued to strengthen our competitive position across a large adjustable market. With that, I'd like to open the call to questions. Thank you. We will now begin the question-and-answer session. If you have a question, please press star one. Our first question comes from Matt Pfau with William Blair. Please proceed. Hey, great. Thanks for taking my question and great quarter. Wanted to ask on the analytics product, very strong growth and fulfillment, analytics about half the growth rate. Chad, now that you've been at the company for a few months, what needs to happen in your view to get that analytics growth rate more in line with the fulfillment product? Yeah, good question, Matt. Our view is the analytics plays a pretty key role in sharing this sales data that's very important to the suppliers. Part of the growth strategy there is continuing to get more retailers to drive that adoption of that program. What we see overall is that sort of The Order Exchange, which is really our fulfillment product, is we see retailers much more willing to put that business process in place, which then drives our community programs there. It's not that there's a hesitancy, but it's just not quite as common in all the various segments of retail to share this point of sale data. Driving those retailers to share more of that data is connected to our overall growth strategy on analytics. Okay, great. Just to follow up on that then, so it seems like it's still more of an issue with getting retailers to share data versus any sort of product adjustments that need to be made? Yeah, I think that's a fair characterization, Matt. Okay, great. Thank you. Appreciate it. Our next question comes from Parker Lane with Stifel. Please proceed. Hi, Chad. Hi, Kim. Thanks for taking the questions here. Kim, could we just start with the inorganic contribution that you guys saw in the fourth quarter and what is embedded in your expectations for 2024 relative to TIE Kinetix and The Order Exchange? Sure. So when we announced the acquisition of TIE Kinetix, at that point in time, we had expectations of what we anticipated that would deliver not only for Q4 but as well as 2024. As we're now providing our consolidated results, by default, that does include TIE Kinetix. What we have seen and what our expectations are are very similar to what we had previously identified or disclosed of what our belief was of that portion of the business in Q4 as well as 2024. Got it. Okay. And then, Kim, staying with you, if I look at the 15%-25% Adjusted EBITDA growth target longer term, what is the primary lever to get you there from a margin standpoint, understanding that sales and marketing is one of your biggest expenses? Is it purely productivity gains there? Are there other structural components of the cost structure here that you could gain some improvements out of longer term? Is it across the board? Anything there would be great to hear about. Sure. So when we think about where we see a larger opportunity than maybe in some other areas, I would point you to gross margin. We've made a lot of investments over the years in the overall customer experience. We'll continue, of course, to add resources and make sure we have appropriate capacity to meet our customers' needs. But we do see the opportunity to be scaling and growing into that investment. And when you look at our guidance that we just provided for EBITDA in 2024, we actually slightly took that up versus what our initial expectation was there. And that is reflective of our belief that in the back half of 2024, where you're going to see that margin expansion start to come is in gross margin. Understood. Thanks for the clarification there. Congrats again on the quarter. Our next question comes from Scott Berg with Needham. Please proceed. Hi, Chad and Kim. Congrats on the next quarter, and thanks for taking my questions. I guess I have two here. Chad, you've been there 90 days. I guess how about an impression of your first 90 days? And is there something within the company that you may not have appreciated before you started that you have certainly been able to appreciate 90+ days later? Yeah, absolutely. Thanks, Scott. As I said in the prepared remarks, really engaging with the employees here at SPS Commerce and understanding the really deep domain expertise we have around retail and the retail value chain is, one, extremely impressive, and I think just a strong capability that gives me confidence in the future development of the business. I think that expertise is also reflected in these community go-to-market programs and the way that we're able to help retailers in a very short period of time at a relatively low cost for the retailer, fully digitalize their supplier base, and really drive a lot of value in that supply chain that's beneficial both for the retailer as well as efficiencies on the supplier side. I think just the level of detail and expertise built into the community programs was difficult to appreciate from the outside. Now that I'm on the inside, I have a great appreciation for that. Got it. Helpful. And then, Kim, you reiterated the intermediate-term growth opportunity of the company, 15%+ annually here going forward. I think that bodes well to how we all start thinking about maybe fiscal year 2025 a little bit. But as you enter fiscal 2024 here and you look at the opportunities, whether it's through the enablement campaigns, whether it's through some of the channels, maybe by product, what you're doing in Europe, etc., does the opportunity that you see in the next 12 months, does it differ from what you saw maybe a year ago, or is the playbook this year very similar to how you entered 2023? Sure, Scott. I would say the playbook's very similar to 2023. We look at a nice, healthy pipeline of community enablement activities in 2024. We'd expect that to be similar to 2023. Still lots of opportunity to be helping retailers as well as suppliers on this omnichannel journey. When I think about the European side and we think about the acquisition we made of TIE, our philosophy or approach there is the same as when we announced that acquisition, which we really want to take the year 2024 to really understand that market and better understand the e-invoicing capability inside as it relates to that market opportunity. We'll be taking that time in 2024 to then inform our view of what that looks like for 2025 and beyond. sort of a long-winded way to say our expectation is lots of opportunity for us in 2024, similar to what we saw in 2023. Excellent. Helpful. Congrats again on the next quarter. Our next question comes from Joe Vruwink with Baird. Please proceed. Great. Thank you for taking my questions. You normally talk about your revenue growth being a combination of both customer accounts and Wallet Share capture. I think 2023, it was a bit more weighted to Wallet Share. And if I did my net organic customer add math right, I think that was a positive number, obviously, but down from 2022. I guess getting back to the intro comment, if the algorithm holds, I would expect maybe 2024 to therefore be stronger from a customer account perspective. And if you agree with all of that, what might be some of the drivers behind it? Sure. So when we think about 2023, we would characterize that as sort of similar, call it net customer adds outside of acquisitions, the level we were seeing really, so call it pre-pandemic level as it relates with the biggest driver, of course, being related to those community enablement activities. If you look at Q4, just a reminder, we added about a net 300 in Q4. Do keep in mind that Q4 tends to be our seasonally lowest sequential net customer adds just because of the holiday season. Q4 was up slightly versus last year when you adjust out for the acquisition. So pretty similar, pretty in line with what we have seen historically, a little bit higher but pretty close in line. And as it relates to our view in 2024, we've provided what our overall expectations are for revenue. Obviously, when we announce our results, we then give the breakout between customer adds as well as ARPU. You should anticipate the highest quantity of customer adds coming from our community activities that we're anticipating in Q4. We also have a very vibrant channel sales organization that brings us in front of some of the larger-than-average customers. That will impact more the ARPU scorecard than the customer scorecard. Maybe my second question on that. So I think the example is shared True Value where you end up adding 1,000 vendors. But I'm sure a lot of those vendors were probably already on the network in some capacity. Do you think the opportunity is evolving a little bit where you're kind of in front of who you need to be in front of? I mean, you're the largest network in the industry by far, but there's actually more of an opportunity to maybe monetize the customers on the network already? So sure, great question, Joe. So it's actually quite different depending on the retailer. So as you know, we do multiple community enablement activities throughout the year, and there's a mix between those. So in some cases, depending on who the retailer is, it's going to skew more towards net new customers. In some cases, it might skew more to existing customers. And therefore, to your point, that's adding to our wallet share. It's just more revenue we're getting from an existing customer. And then, of course, with any community enablement activity, there's also some that just test with us. So they're in our database to reach out to over time, but don't become a recurring revenue customer at that time. Our belief is that we are not at all fully penetrated or saturated and that we would expect to still see a nice, healthy mix of adding new customers as well as, of course, getting more revenue from our existing customers. Okay. Great. Thank you very much. Our next question comes from Jeff Van Rhee with Craig-Hallum. Please proceed. Excuse me. Great. Thanks for taking the questions. Hey, guys. So maybe a couple for me, a couple cleanups. Kim, what was channel revenue for the year, percent of revenue? We actually don't share that percentage out. It's probably been a whole it's been multiple years since we've shared that out. What we would say is it remains a very important and healthy component of our overall contribution to revenue and new business. You will see that more again impact the ARPU versus the customer adds. But it's a really important part if you think of sort of the concept of a three legs to the stool to ARPU. That one, primarily driven by channel sales, is one of the three components there. So it remains very healthy and robust for us. Growing? Would you at least say it's growing as a% of revenue? I would say that we have more as each year goes on, we have more and more relationships, more and more expertise in the channel market so that our name certainly is resonating and coming up often. Sometimes where you're going to see, however, is there might be a prospect, and maybe they have a system. They're deciding, are they moving to another system? And sometimes we might get into that sales cycle where they're evaluating a couple different ERPs. We'll ultimately win that business, but we get connected with that prospect actually sometimes through multiple ways through the channel. I would just add that for us, it's one of multiple marketing campaigns. So the ideal way for us to engage with a prospective customer is that they're through a community program, and there's a relationship with a channel partner, and they've responded to our traditional marketing campaigns, right? Not just coming through one particular channel, actually. The more channels they come through, the better for us. Great. In terms of the people that have tested, any change in the pace or timing of people that might have tested in the past coming back to ultimately be customers? No. I wouldn't say no dramatic change there. But obviously, those that test with us, it may just not be the right time for them to join the SPS network. Those are ideal targets for us for future customer acquisition. Okay. And then maybe just last, sort of broadly speaking, observations from a macro perspective, just the changes, any notable changes in your customer behavior as the quarter progressed? No notable changes. I would say there did seem to be some positive sentiment coming out of the NRF conference for retail technology where we were a participant and able to meet with a number of our customers. I think customers have noted just a little uncertainty on the macro in 2024 with it being election year, some of the geopolitical instability. But some of the supply chain technology spending we see as continuing at a healthy pace. Yeah. Okay. Fair enough. Thanks, guys. Appreciate it. Once again, if you have a question, please press star one. Our next question comes from Mark Schappel with Loop Capital Markets. Hi. Thank you for taking my question and a nice job on the quarter and the year for that matter. Chad, starting with you, I realize that it's still early yet, but I was wondering if you could just walk through what you believe are going to be your top priorities for the firm in the coming year here. Yeah, for sure. So I think with this nice, addressable market we have in front of us, our strong market position, the strength of these community enablement programs, first and foremost priority is taking advantage of that market opportunity that is in front of us with strong execution within the same core segments and around the product offerings that we have today. Now, that said, over the sort of mid to long term, I do think that there's some great opportunities in this business to help our customers with a broader scope of their supply chain technology. And if we start with the customer, that could lead us to build out organically of new product offerings, expanded partnerships to bring those solutions to customers, or targeted M&A. And I think that any of those will provide a great opportunity given that we have 40,000+ customers to cross-sell those solutions to. On the M&A front, I would say there's a pattern here of very disciplined M&A approach and see no reason in deviating from that pattern. Great. And then investment-wise, as kind of a follow-up to the earlier question, from an investment standpoint, where does the company plan to make some incremental investments this year on the business? So what I would say, Mark, is our approach there is similar to every year. We have a value of win today, win tomorrow. And so we always want to make sure that we're investing for our existing customers and the customer experience, but also looking forward to opportunities that we see. Nothing really different there. Really, everything, think about it from the customer perspective. So what is it that the customer needs, wants? How do we help them? How do we get them up and running as quickly as possible? How do we make sure we're helping them be as efficient as possible? How do we make sure we're helping those suppliers get an A with their retailers? So all of those concepts of that overall customer experience and, again, helping suppliers get an A with their retailers will remain a focus area for us. Okay. Thank you. That's all from me. Our next question comes from Nehal Chokshi with Northland Capital Markets. Yeah. Thank you for taking my question. Congrats on a great first quarter, Chad, here as a full-time CEO. Where are you guys seeing macroeconomically, both internationally and domestically? Yeah. We're seeing, I'd say, a healthy environment, although there certainly is some uncertainty about 2024 given the elections, given the geopolitical environment that we're in. But I would say supply chain does seem to be a priority around technology spend, and that's what we're hearing from our customers. Simply put, better or worse than September quarter? Pardon me? Simply put, better or worse than the September quarter? I'd say not a lot of difference between that time period to now. Okay. Great. Thank you very much. We have no more questions. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.