Good day, and welcome to the SPS Commerce Conference Call. All participants will be in a 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 touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Irmina Blaszczyk, Investor Relations. Please go ahead. Thanks, Nick. Good afternoon, everyone, and thank you for joining us on today's call to discuss SPS Commerce's planned acquisition of Carbon6. Before turning the call over to management, I'll read our Safe Harbor Statement. We will make certain statements today, including with respect to the planned acquisition of Carbon6, expected financial results, go-to-market strategy, and efforts designed to increase our traction 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 most recent annual report on Form 10-K, for a more detailed description of the risk factors that may affect our results. These documents are available at our website, spscommerce.com, and at the SEC's website, sec.gov. During our call today, we will discuss Adjusted EBITDA financial measures. 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 Adjusted EBITDA measures. And with that, I will turn the call over to Kim. Thanks, Irmina, and welcome, everyone. Thank you for joining us on short notice. We're excited to announce the planned acquisition of Carbon6, which builds on SPS's revenue recovery portfolio with increased support for Amazon sellers. Under the terms of the merger agreement, SPS Commerce will acquire Carbon6 for a total purchase price of approximately $210 million, of which approximately 40% will be SPS Commerce stock. The transaction is expected to close during the first quarter of 2025, subject to the satisfaction of customary closing conditions. Based on the current expectations for the timing of the close, we anticipate the acquisition will add approximately $7 million in revenue for the first quarter of 2025 and break even in Adjusted EBITDA. In fiscal year 2025, we expect the acquisition will add approximately $40 million in revenue and $5.5 million in Adjusted EBITDA. We expect recurring revenue customer count to increase by approximately $6,500 and anticipate wallet share to decrease by approximately $1,000 in 2025 due to Carbon6's smaller average customer size. Lastly, we will have an increase in amortization of intangibles. However, that amount will not be finalized until the purchase accounting is complete. We will provide that preliminary figure when we issue our fourth quarter financial results and provide full year 2025 guidance in February. With that, I'll turn it over to Chad to discuss the strategic elements of the deal. Thank you, Kim. We're excited to announce the acquisition of Carbon6, a provider of software tools to Amazon sellers, including specialized offerings for revenue recovery for both first-party and third-party suppliers. SPS is committed to helping our customers operate efficient supply chains with their retail partners. The addition of Carbon6's solutions builds on SPS's acquisition of SupplyPike, expanding our revenue recovery portfolio with increased support for Amazon sellers. Whether selling to Amazon as a first-party seller or through Amazon Marketplace as a third-party seller, there are specific supply chain processes suppliers must adopt to maximize revenue on each order they fulfill through the platform. Carbon6's ChargeGuard solution helps first-party sellers manage invoice deductions by automating the dispute process, and Seller Investigators helps third-party sellers recover lost revenue occurring from fulfillment errors. In addition, this acquisition expands the reach of SPS Commerce's network and strengthens our ability to optimize invoice deduction disputes by leveraging the data from our network. By streamlining access to standard, reliable data, suppliers can reduce resolution time and help prevent invalid deductions from occurring in the first place. In summary, we believe SupplyPike, ChargeGuard, and Seller Investigators products will establish SPS as a leading solution provider in the emerging category of invoice deduction management and revenue recovery, with clear leadership supporting the supplier communities of the two largest retailers in the world. We look forward to welcoming Carbon6 employees and customers to the SPS Commerce community. And 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 touch-tone 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. And your first question today will come from Scott Berg with Needham. Please go ahead. Hi, Chad and Kim. Congrats on the acquisition today, and who would have thought we'd be speaking on January 2nd so quickly here? I guess I've got a couple of questions. Let's start with the strategic rationale for this acquisition, Chad, if you could maybe dive into that a little bit more, and then kind of with that, it's your second acquisition with a similar theme, along with SupplyPike. How do we think about this market opportunity for invoice deduction management? Because I think on the surface, a lot of us would think that it's maybe not that large. Yeah. Thanks, Scott. And we're real excited about getting this agreement complete. And so if we kind of think about the strategic rationale for this one, first, we're very focused on helping the entire retail ecosystem, both the retailers and the suppliers, improve the supply chain processes and collaboration. And as we learned with the SupplyPike acquisition, a key part of that is helping deal with these processes when there are errors in the supply chain process, and that results in invoice deduction or opportunity for the supplier to recover that revenue. So really, this solution, which is more focused on Amazon, kind of fits squarely with that mission to be helping retailers and suppliers run more efficient supply chains. Secondarily, I'd say this one really fits, once again, similar to SupplyPike with the ideal customer profile that we have with our fulfillment product. So we do see quite a bit of overlap in the customers that would purchase this solution from Carbon6 and those that would use our fulfillment product. The other reason is the Amazon Marketplace is such a dominant force in retail today, both from a growth perspective as well as a share of total e-commerce in the United States, and gives us a nice solution and brings over a good number of Amazon third-party or marketplace sellers to SPS. And then finally, I think to your point about just the two acquisitions together in this space, SupplyPike and Carbon6, really clearly establishes a strong leadership position for SPS in this market. You may recall, Scott, that when we did the SupplyPike acquisition, we estimated the invoice deduction market to be a $750 million market in the U.S. A portion of Carbon6's business, specifically the portion that's for the 1P sellers or the wholesale model to Amazon, would fit within that $750 million. But the third-party, the marketplace sellers, actually would be incremental to that. So in combination, we think we've established here a clear leadership position in a market that is large and has lots of opportunity for growth going forward. Understood. Very helpful. Thank you, Chad. And then, Kim, I know you're not guiding to fiscal 25 yet. We're going to get that in a month when you give your fourth quarter results, plus or minus. But the acquisition looks a little dilutive to your adjusted EBITDA margins for the balance of the year, Q2 through Q4. It looks like you're expecting an adjusted EBITDA margin, we'll call it, at 17% roughly. Do you think that hinders your ability to grow your adjusted EBITDA by your kind of stated annual 15-plus% range, even accounting for this? Or is that still a metric that we should expect for the year? Thank you. Great question, Scott. Nothing's changed with our belief of being able to grow our top line at about 15% or greater and the EBITDA, which you were referring to, of that 15%-25%. So we still have that as our stated expectations and goals. Excellent. Nice acquisition. Thank you. Your next question today will come from Jeff Van Rhee with Craig-Hallum Capital Group. Please go ahead. Hey, guys. Yeah, I'll add my congrats to a couple here for me. It looks like from just a quick peruse of the website, they've got four different product categories: reimbursement one, but advertising some other segments. Just roughly, what are the revenue splits? And maybe that'll answer it. But if there's meaningful revenue outside the reimbursements bucket, how do the others fit? Yeah, Jeff, you're right. Let me kind of take the piece that's on the overall kind of product strategy that we have for the business, and Kim could kind of give some a little bit more color on how that revenue breaks out. The key products here for us to execute on our strategy are the revenue recovery products, ChargeGuard, and Seller Investigators, really giving us a stronger foothold on the back of the SupplyPike acquisition here in the Amazon market for both first-party and third-party sellers. Now, what Carbon6 has done a nice job of is using some of these other products, whether they're inventory management or advertising, as a way to bring in some of the third-party sellers. These tend to be a little bit lower price point products. They're a way to bring them in both through marketing campaigns or to get them actually using the product and then be able to upsell them into more of the revenue recovery products. The main strategic focus here was on the revenue recovery products. Then following up on Chad's comments there, when you think about it from a revenue perspective, about 80% of the revenue is the ChargeGuard and Seller Investigators. They certainly do have these ancillary products. Again, great way to bring prospects and customers on board. But from a revenue perspective, the vast majority is the ChargeGuard and Seller Investigators. Yeah. And just practically speaking, would a supplier who's servicing both Amazon and Walmart potentially have SupplyPike and Carbon6 as solutions right now? Yeah, that is potential. And really, because that's about the kind of breadth of the product, the SupplyPike product does go very deep into Walmart. I'll point out it also does support other retailers like Target and Kroger and Home Depot and CVS, plus more we have on the map. And then the ChargeGuard product goes very deep in Amazon. And we do, I will point out, see an opportunity here over time to sort of rationalize that technology stack on the 1P side between SupplyPike and ChargeGuard, really to come kind of best in class for every retailer. But would expect that the marketplace side, the Seller Investigators product, operates a little bit different in that marketplace area, and that one would probably stay a bit separate. That's what I was going to ask. That's helpful. Maybe just one last. Carbon6 looks like they did some acquisitions. If you're able to strip it out roughly, what's been the organic growth over, say, the last two, three years? Just a sense of how that's been growing outside acquisitions. Thanks. Yeah. When we look at Carbon6 and we compare their growth rate to, say, SupplyPike when we were looking to acquire SupplyPike, I'd say they're similar in the fact that they're growing nicely. It's a little bit faster than our growth. But that would be sort of think about if we think about the total business that we acquired, and again, the majority of it being that ChargeGuard and Seller Investigators. Okay. Thank you. Your next question today will come from Dylan Becker with William Blair. Please go ahead. Hey, Kim and Chad. Happy New Year. I guess maybe kind of sticking on the idea here around automation and leveraging kind of the existing data set you have and pairing it with some new sources, is there an opportunity to kind of shift the economic value from a customer perspective here away from pure kind of supplier connections, but to align more with kind of the tangible value that's compounding that you're able to provide off of that network? Yeah. Dylan, I think what we would say is across all the solutions that we have today, whether it's kind of fulfillment or analytics or now in the revenue recovery space, we just try to align the value that the customer is going to receive with the kind of pricing mechanism that we utilize for that. So for fulfillment, that being done on kind of a number of connection standpoints makes sense. The revenue recovery area is kind of using the total GMV as a kind of proxy for how much revenue is potentially to be recovered by retailer is a good way to do it. I think in summary, the way the customers purchase these products needs to be tied to the value. But I think what this does highlight is just the opportunity that we have when you line up a number of different products in the same ideal customer profile for us to be able to continue to expand wallet share with customers over time, both by upselling connections on the fulfillment product, but also adding new solutions like the ones that we plan to bring on here with Carbon6. Okay. That's great. That's helpful. And then maybe two sticking. Given you guys are kind of accomplishing this revenue recovery market in some aspects away from kind of what it historically has been manual-based, how much of kind of the validation of what you've been able to see with SupplyPike in kind of the limited framework of ownership today helps kind of validate that opportunity and the ability to kind of compound that here with the addition of Carb? Yeah. I think what we've seen in the early days of ownership of SupplyPike has given us some conviction in our overall hypothesis that by focusing on this revenue recovery, that it's a way to continue to help customers, that there is demand for this type of solution in the market. And that's one of the reasons why we're able to move rather quickly here with Carbon6 and secure a leader with deep capabilities around Amazon, which is clearly a big player in the retail ecosystem. Okay. Great. Thanks, Chad. Your next question today will come from Quinton Gabrielli with Piper Sandler. Please go ahead. Hey, guys. Thanks for the questions here and echoing the congrats on kind of the acquisition. Maybe touching on an earlier question, thinking about the features and functionalities that Carbon6 adds versus SupplyPike, was there something specific that Amazon Marketplace had that couldn't be built by SupplyPike, or was the idea here that it's a time-to-market, time-to-value kind of acquisition, and it just speeds up that process? Yeah. There were kind of a couple of reasons as we looked at this product category and decided to make an acquisition. It really did come down to the time-to-market around those deep Amazon capabilities, and there is quite a bit of uniqueness in the way that this is done in the marketplace model, and today, the focus is definitely on that Amazon Marketplace, and because the Amazon Marketplace is so dominant in U.S. kind of internet retail, we felt that it was important to get there and have those specialized capabilities for the Amazon Marketplace, and then just the customers that we're able to bring over with Carbon6 as well is another reason that it made sense to do acquisition here. We do think that the typical Carbon6 customer, especially on the 1P side, is also addressable for a fulfillment product, and there should be some kind of cross-selling opportunities there over time as well. So it's really about speed to market as well as lining up just more of those key customers that are in our ideal customer profile. Yeah. That makes sense. And it actually kind of gets to the second question here of it seems like there's a pretty significant cross-sell opportunity for Amazon-specific connected fulfillment customers. Is there any exposure or guidelines you can give us in terms of what% of your fulfillment customers that have Amazon connections are currently using Carbon6, or maybe just broader sense of the percentage of your fulfillment customers that are currently using Amazon connections? Any sort of exposure metrics there? Yeah. I can speak to it at a high level, and then I think Kim can maybe go into the numbers around the customer overlap. So in general, what we find is that the ideal customer profile does overlap. Now, similar to the SupplyPike, we will see kind of the larger end of our fulfillment customers, more kind of the medium to larger end of our fulfillment customers being more addressable for the Carbon6 solutions, usually doing one or two million of GMV before they'd be addressable for a Carbon6 solution. And then a lot of our even classic 1P sellers to other retailers may also be selling 3P on Amazon. So we do think the customer overlap is quite good. In terms of the specific of the counts, I'll let Kim answer that portion. Yeah. So when you think about the customers here, I'd say on the 1P side, that's where you see more of that overlap. Again, not surprising based on what Chad had mentioned. And on the 3P side, there's a lot less from an overlap perspective. So our best estimate at this point is we're probably adding a net 6,500 customers to our network by owning the Carbon6. But the 1P side of it, not surprisingly, we had a fair amount of overlap, and again, much less on the 3P side. So where the opportunity is really going to be is on that 3P side, which tends to skew to the much smaller-sized suppliers for us to look at those customers and say the opportunity to upsell or cross-sell those smaller customers to our fulfillment product. Makes sense. And then last question for me, Kim, maybe sticking with you. Obviously, it's smaller-sized customers, especially on the 3P side. As we think about those 6,500 customers that are coming on, how do you think about the growth potential of those customers? Maybe historically, any kind of change versus your typical fulfillment base? Thanks, guys. Yeah. No, that's a great question. Because it skews to much smaller-sized supplier, the churn rate is a bit higher. So we are anticipating that this business has seen churn rates a bit higher than our business, closer to call it that 15%-20% churn. Again, I think that's pretty typical when the business is targeting very small-sized suppliers. Your next question today will come from Mark Schappell with Loop Capital. Please go ahead. Hi. Thank you for taking my question. With respect to your sales motion, does Carbon6 change the way you go to market, or is it fair to assume the product will be sold alongside SupplyPike? Yeah. Initially, we don't anticipate substantial changes. But I think as we look to have a single product strategy for the 1P market, and then we would support that by a more common go-to-market approach overall for 1P. And the 3P side of the business is a little bit different style of customer and a little bit unique solution. So we'd expect that to be kind of staying to the side. But kind of over the medium term, we'd expect some degree of rationalization as we unify the product strategy on the 1P side between SupplyPike and Carbon6. And along with that, Chad, what are your integration plans with respect to Carbon6? Will it be integrated into the rest of the SPS business immediately, or do you plan to run it as a separate company for like a year or so? Yeah. It's our typical integration playbook. I mean, as typical as integrations can be, right? They need to be tailored to the specific situation. But we generally, for a year, try to focus in on keeping most of the business, commercial, go-to-market operations a bit unique to the company while we focus in on more of the back-office type integration in the first year. In this case, because we do have a little bit of product overlap on this 1P side, we'll keep the focus on rationalizing the product strategy and go-to-market strategy for the 1P side of the business and probably doing more of that in the first year and kind of keeping that focused on integrating in the SupplyPike and Carbon6 business and probably keep it a little bit away from the core SPS fulfillment business during the first year. Great. Thank you. Again, if you have a question, please press star and then one. And your next question today will come from William Jellison with D.A. Davidson. Please go ahead. Hey, good afternoon, and thanks for squeezing me in here. The only question that I have left to ask at this point is just about the origins of the deal. I'd be curious to know how long you were familiar with Carbon6 in the marketplace and whether or not you had any sort of experience partnering with them in the past. Yeah. Well, we were aware of Carbon6 through our due diligence on SupplyPike, and I'd say just generally being in this market, we're aware of some number of the players in the revenue recovery area. Obviously, because of some of the overlap and not much, but a tiny bit of competition with SupplyPike, that made us more aware. Coincidentally, they did run more of a formal process as well over the last several months as part of this transaction. Great. Thank you. Your next question today will come from Nathan Leiphardt with Canaccord Genuity. Please go ahead. Thanks. Just one on the pricing model here. I think SupplyPike was a subscription-based model. Quick Google search seems to suggest this might be commission-based. Just wondering if there's plans to kind of rationalize that over time? Thanks. So their model is more of it's a take-rate model. So you can think of that as a percentage. And as Chad had mentioned, at this point, we're not planning on making any changes relative to the go-to-market strategy at this point in time. Of course, over time, we will evaluate to determine are there changes that make sense. But at this point in time, we plan on sticking with their current model, which is a take-rate model. With that and the kind of $40 million revenue for the year, should we assume that the 4Q would be a bit heavier weighted given the seasonality of Amazon sales and the take-rate model? Yeah. We have not provided any specificity outside of our expectations for Q1 as well as full year at this time. Okay. Thanks. This will conclude our question and answer session as well as conference call. The conference has now concluded. Thank you for attending today's presentation. You may now.