- Revenue: $153.6 million, an 18% increase year-over-year.
- Recurring Revenue: Grew 18% year-over-year.
- Recurring Revenue Customers: Increased 5% year-over-year to approximately 44,950.
- Wallet Share: Increased 13% to approximately 12,850.
- Adjusted EBITDA: $44.2 million, a 16% increase from $38.2 million in Q2 of last year.
- Total Cash and Investments: $272 million.
- Share Repurchase: Repurchased approximately $17.5 million of SPS shares.
- New Share Repurchase Program: Authorized up to $100 million of common stock, effective August 23, 2024.
- Q3 2024 Revenue Guidance: $157.6 million to $158.6 million, representing 16% to 17% year-over-year growth.
- Q3 2024 Adjusted EBITDA Guidance: $46.9 million to $47.7 million.
- Q3 2024 Fully Diluted EPS Guidance: $0.52 to $0.53.
- Q3 2024 Non-GAAP Diluted Income per Share Guidance: $0.83 to $0.84.
- Full-Year 2024 Revenue Guidance: $624.2 million to $626 million, representing 16% to 17% growth over 2023.
- Full-Year 2024 Adjusted EBITDA Guidance: $185.5 million to $187 million, representing 18% to 19% growth over 2023.
- Full-Year 2024 Fully Diluted EPS Guidance: $2.03 to $2.05.
- Full-Year 2024 Non-GAAP Diluted Income per Share Guidance: $3.63 to $3.66.
- Stock Based Compensation Expense: Approximately $55.6 million for the year.
- Depreciation Expense: Approximately $19.2 million for the year.
- Amortization Expense: Approximately $19.2 million for the year.
- Effective Tax Rate: Approximately 30% on GAAP pre-tax net earnings for the remainder of the year.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue grew 18% year-over-year to $153.6 million.
- Recurring revenue also increased by 18%, indicating strong customer retention.
- The acquisition of Traverse Systems expanded the product portfolio, enhancing supply chain performance and optimization.
- Customer satisfaction metrics improved for clients like Mattress Firm, leading to increased market share.
- The company has a strong cash position with $272 million in total cash and investments.
Negative Points
- Analytics revenue growth was down sequentially due to customer consolidations.
- There is ongoing uncertainty in the retail environment, affecting both retailers and suppliers.
- The company expects more revenue from existing customers rather than new customer acquisitions for the remainder of the year.
- Churn rates remain consistent, indicating no significant improvement in customer retention.
- There is potential for future air pockets in wallet share gains due to the lack of net new customer inbounds this year.
Q & A Highlights
Q: Chad, can you elaborate on the acquisition of Traverse Systems and how it fits into your go-to-market strategy?
A: (Chadwick Collins, Chief Marketing Officer, General Manager) The acquisition of Traverse Systems, completed in May, is performing to expectations. We are integrating post-merger and meeting with retailers, including Traverse customers. This acquisition allows us to offer vendor compliance management, which complements our existing community programs. Our go-to-market strategy remains focused on retailers, leveraging our established relationships to solve additional problems and monetize new solutions.
Q: Can you explain the customer additions in Q2 and the outlook for the rest of the year?
A: (Kimberly Nelson, Chief Financial Officer, Executive Vice President) The large enablement campaign from Q1 bled into Q2 but is now complete. For the rest of the year, we expect more revenue from existing customers adding connections rather than new customer acquisitions. This shift is due to the mix of community enablement campaigns in our pipeline.
Q: How do ERP refresh cycles impact your business, especially with large vendors forcing changes?
A: (Chadwick Collins, Chief Marketing Officer, General Manager) ERP change-outs are opportunities for us as customers often look to migrate their trading partner connections to cloud-based networks like SPS. This churn, especially at the higher end of the market, is expected to positively impact us as customers seek modern solutions.
Q: Can you provide an update on your international segment and the fulfillment opportunity there?
A: (Chadwick Collins, Chief Marketing Officer, General Manager) Our acquisition of TIE Kinetix established a beachhead in Europe. The market opportunity appears sizable, and we are optimistic that our North American go-to-market techniques will be transferable to Europe.
Q: What caused the sequential decline in analytics growth, and what is the outlook for this segment?
A: (Kimberly Nelson, Chief Financial Officer, Executive Vice President) The sequential decline was due to customer consolidations. However, we have a healthy pipeline for the second half of the year and expect to exit the year with high-single-digit growth, similar to last year.
Q: Have you noticed any changes in the demand environment over the last 90 days?
A: (Chadwick Collins, Chief Marketing Officer, General Manager) We are not a bellwether for the total economy, but we hear from retailers and suppliers about uncertainty regarding the macro economy and upcoming elections. There is also some consolidation, particularly on the supplier side.
Q: How is the health of your SMB supplier base, and has there been any change in churn?
A: (Kimberly Nelson, Chief Financial Officer, Executive Vice President) Churn has been consistent with previous quarters. There is general uncertainty in the retail environment, but no significant change in churn specific to the quarter.
Q: Can you explain the expected gross margin leverage in the second half of the year?
A: (Kimberly Nelson, Chief Financial Officer, Executive Vice President) We expect gross margin improvement starting in Q3, primarily from scaling opportunities and growing into investments. Q2 was higher than Q1 but still in line with last year.
Q: Does the lack of net new customer inbounds this year create potential issues for future periods?
A: (Chadwick Collins, Chief Marketing Officer, General Manager) We are confident in our track record of increasing wallet share. Historically, we have balanced new subscribing customers and wallet share, and we expect this pattern to continue, balancing out over time.
Q: What should we consider regarding the updated financial guidance, especially for Q4?
A: (Kimberly Nelson, Chief Financial Officer, Executive Vice President) Our implied expectations for EBITDA have not changed since our initial guidance. The timing of spend relative to revenue is more front-loaded, with less spend expected in Q4, leading to higher EBITDA and adjusted earnings.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
