Thank you, Josh. Good afternoon, everyone, and thank you for joining us on SPS Commerce First Quarter 2022 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 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, 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, 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 earnings 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. And with that, I will turn the call over to Archie.

Thanks, Irmina, and welcome, everyone. Before I start with our Q1 business overview, I want to recognize that our thoughts are with the people in Ukraine. As we continue to monitor the ongoing crisis, our priority is our employees and their safety. We are doing what we can to support our team in Kyiv and their families, while other SPS teams remain focused on business continuity and delivering to our customers. Turning to first quarter 2022 results. Our strong performance points to an ongoing evolution in retail. Omnichannel dynamics are creating growth opportunities for suppliers, driving the need for efficiency and continuity across the supply chain. Since 2020, we observed how the pandemic impacted the retail industry and consumer shopping habits, which in turn compelled trading partners to evaluate their infrastructure and supply chain processes. These dynamics emphasize the need for automation, agility, and demand planning, all of which accelerate EDI adoption. Over the last year, we've seen a significant increase in the volume of electronic purchase orders, advance ship notices, and electronic invoices. In the first quarter of 2022, we continued to see strong momentum in fulfillment, which grew 19% year-over-year. Analytics had another strong quarter and grew 11%. Total revenue grew 17% to $105.2 million, and recurring revenue grew 18%. Adjusted EBITDA grew 25% to $31.8 million. Automation is essential to achieve agility and efficiency in a dynamic omnichannel environment. The capability to scale depends on a supplier's capacity to fulfill as many orders as possible without being hampered by retailers' technical requirements. Brands like HidrateSpark partnered with SPS Commerce to automate fulfillment and expand their business across online sites, marketplaces, and retail stores. Automation provided HidrateSpark the agility to leverage omnichannel and grow their business nationwide. To reduce the risk of delays along the supply chain, demand planning is critical. Predicting the level of stock to satisfy customer needs at any given time results in higher sales and increased profitability. Big data analytics not only has the potential to improve the operating margins of companies by 60% but also revolutionize all areas of retail. For example, as a result of collaboration between Pantene, The Weather Channel, and Walgreens, Pantene saw its sales increase over 10% in Walgreens' stores through its data-driven haircast project. Amazon is so successful in using big data marketing and sales tactics that 35% of its sales are generated from its customer recommendations algorithm. Walmart is developing the world's largest private cloud with algorithms built to track data on inventory, transactions, and competitor activity. This allows them to respond to market changes almost instantly. At SPS, our retail analytics software is the key to gaining efficient demand planning and gives decision-makers the overview of trends and patterns needed to make macroscale decisions and react to microscale trends and unexpected challenges. Therabody, a pioneer in the wellness technology space, has been an SPS fulfillment customer since 2019. They experienced high growth in recent years and became an analytics customer. Leveraging global point-of-sale data, Therabody is able to optimize inventory management to increase sales and continue to add more retailers to the network in North America, Europe, and Australia. In summary, SPS continues to be a valuable partner to retailers and suppliers as they navigate ongoing challenges and seize opportunities to evolve their omnichannel strategies. Our comprehensive suite of solutions includes all the elements that trading partners need to communicate inventory, order, delivery, and status information. One connection to SPS Commerce provides instant access to the largest network of up-to-date, mapped, EDI connections and more than 105,000 players in the retail space. With that, I'll turn it over to Kim to discuss our financial results.

Thanks, Archie. We had a great first quarter of 2022. Revenue was $105.2 million, a 17% increase over Q1 of last year, and represented our 85th consecutive quarter of revenue growth. Recurring revenue this quarter grew 18% year-over-year. The total number of recurring revenue customers increased 12% year-over-year to approximately $37,900, and wallet share increased 5% to $10,350. For the quarter, adjusted EBITDA grew 25% to $31.8 million compared to $25.5 million in Q1 of last year. We ended the quarter with total cash and investments of approximately $243 million and repurchased approximately $15 million of SPS shares. Now turning to guidance. For the second quarter of 2022, we expect revenue to be in the range of $108.3 million to $109.3 million. We expect adjusted EBITDA to be in the range of $30 million to $30.5 million. We expect fully diluted earnings per share to be in the range of $0.25 to $0.26, with fully diluted weighted average shares outstanding of approximately 37.3 million shares. We expect non-GAAP diluted earnings per share to be in the range of $0.48 to $0.49 with stock-based compensation expense of approximately $9.4 million, depreciation expense of approximately $4.2 million, and amortization expense of approximately $2.5 million. For the full year, we expect revenue to be in the range of $443.4 million to $445.9 million, representing approximately 15% to 16% growth over 2021. We expect adjusted EBITDA to be in the range of $126.7 million to $128 million, representing 18% to 20% growth over 2021. We expect fully diluted earnings per share to be in the range of $1.22 to $1.24 with fully diluted weighted average shares outstanding of approximately 37.3 million shares. We expect non-GAAP diluted earnings per share to be in the range of $2.07 to $2.09 with stock-based compensation expense of approximately $34.9 million, depreciation expense of approximately $18 million, and amortization expense for the year of approximately $10 million. For the remainder of the year, on a quarterly basis, investors should model a 30% effective tax rate calculated on GAAP pretax net earnings. Beyond 2022, we maintain our annual revenue growth expectations of 15% or greater. And we continue to expect adjusted EBITDA dollar growth of 15% to 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, ongoing evolution in retail and the need for supply chain efficiency is fueling the need for automation, driving EDI adoption, and underscoring the growing market opportunity in front of us. With that, I'd like to open the call to questions.

Our first question comes from Matt Pfau with William Blair.

Wanted to ask, with inflation increasing here and impacting some of the retailers and suppliers that you do business with, does that have any impact on demand for your product as companies look to perhaps optimize their operations and reduce costs?

Technically, it would have a slight positive effect, but we haven't observed any changes regarding inflation. There is a lot of discussion about how to pass on costs. One positive aspect is that it encourages people to make other parts of their operations more efficient, which could be a slight advantage. However, any correlation we are seeing would be very challenging for me to confirm that it has had any real impact.

Got it. And just last one for me on the Data Masons acquisition. I think the part of the thesis behind that was Dynamics 365 replacement cycle. Are you guys seeing that play out as you expected?

Yes. We've seen that play out extremely well, and Microsoft continues to execute along that. And then obviously, new customers and new logos moving to Microsoft as we're now in a position where we not only have far and away the largest network, which has always been our biggest competitive advantage. But now we clearly have the best integration solution as well into Microsoft. So we're seeing incredible momentum in the Microsoft space.

Our next question comes from Parker Lane with Stifel.

Wanted to talk about wallet share for a second. If you look at the last couple of years, it's bounced around a little bit. Obviously, you made a few acquisitions here. It's been a pretty dynamic environment for your customers to operate in. Kim, in the context of your 15%-plus growth outlook, how should we think about the wallet share component? Is this 5% sort of mid-single digits the right level going forward? Or will it continue to bounce around quarter-to-quarter?

Sure. It's great to hear from you, Parker. Generally speaking, when we consider the possibility of achieving 15% or greater revenue growth, you can anticipate a healthy contribution from both new customer additions and wallet share. It's important to note that the 5% growth we experienced this quarter is influenced by our acquisition of a company called Genius Central in mid-Q4 last year. Through this acquisition, we gained approximately 1,800 new customers, but their average revenue per recurring customer is significantly lower than ours—around $2,000 compared to our $10,000. As a result, this contribution negatively impacts our overall wallet share by about $350. While we still see a 5% year-over-year increase, without this acquisition, our wallet share would have actually shown a higher single-digit increase.

Yes. Very, very helpful. Makes a lot of sense. And then, Archie, your comments on the analytics business, the demand planning components that your customers are dealing with here, do you have more visibility, you'd say, into analytics growth for the remainder of the year than you did 90 days ago? How is that pipeline looking today for analytics?

The pipeline continues to strengthen. And I mean we feel optimistic about it. We've always felt optimistic. But it feels like a couple of quarters ago, we started to have the growth up. And the question was, is it sustainable? I believe the current levels are sustainable, bouncing around points or two, so I consider that the same. But we view it as we're now in a new era on the analytics product and feel very good about that.

Our next question comes from Scott Berg with Needham.

Archie and Kim, congrats on a good quarter. I guess I have two. Archie, I wanted to unpack your comments a little bit on significant growth in EDI. How should we think about that growth usage of your platform if we break it down a little bit? Is it maybe selling into larger customers that just are having more volumes that's contributing to that growth? Is it something around maybe drop shipments? I didn't know if there's anything under the covers there that might be helpful to unpack.

Thank you, Scott. There are several factors at play here. We are noticing strong momentum with our larger customers, particularly due to our acquisitions related to adapters and last-mile integration, which have benefited us across various areas. This trend is reinforced by upgrades and platform changes in that segment, which is promising for us. We are also seeing positive momentum among smaller and mid-sized customers. The drop ship feature continues to enable retailers to broaden their supplier networks. When considering our total addressable market, it really hinges on the total relationships with trading partners, and we have observed consistent progress in that area. Overall, Scott, we are feeling optimistic about all aspects of the business right now, especially with analytics starting to take effect.

I understand. From a follow-up perspective, one thing I have been monitoring over the last six to eight quarters is the ERP replacement cycle more generally. This relates to Matt's question from a few minutes ago. I’m interested in what you are observing among your channel partners within various ERP segments. It appears that the demand environment is strengthening, possibly due to pent-up demand or transactions that were delayed during the early stages of the pandemic. Are you experiencing benefits from this in your business, or do you have expectations of increased deal flow that could positively impact you in the short term?

We're seeing it more constant. It's the one thing that I was actually surprised at the beginning of the pandemic, how strong it did stay. I mean I anticipate 2020 to have significantly less contribution from channel, and that actually didn't happen. So we just continue to see it strong. The one thing that we do continue to see, and each environment is a little bit different, is the continued migration to the cloud. And the segments that have done that well, they're going to have outsized win rates. So we continue to see that continue to happen.

Your next question comes from Joe Vruwink with Baird.

I maybe wanted to start just on the customer adds in the quarter there. Hard to keep up the torrid rate you've been running at, but it was, I suppose, a bit less here in 1Q. Is that according to plan? Or maybe just a little more detail of the growth contributors this quarter.

Sure. So to your point, Joe, in the quarter, we added a net, approximately 400 customers. That is lower than that really heightened or high rate from 2021. But it's back closer to pre-pandemic levels, although it's still higher. If you were to look at full year 2019 and you average across all those quarters, we're averaging about 300 a quarter. So this quarter, we're at 400. So a bit higher than pre-pandemic levels but lower than last year, which was very high as you know. As far as relative to our expectations, right in line with our expectations. Our overall results, we actually delivered slightly higher on overall revenue really across the board based on solid performance. As it relates to community activities and net customer adds, very much in line with our expectations.

Okay. Just looking at your guidance for the year and taking kind of midpoint to midpoint, I think if I threw things up for the upside in 1Q, the full year view is basically moving up by the 1Q beat and maybe down a little bit if I take the EBITDA midpoint. Is that maybe just a function of your investment outlook and having expenses more weighted to future quarters? Or any additional detail that you can give there?

Sure. So when you look at it from an annual and you say, how does our current guidance compare to 90 days ago, to your point, our revenue has increased the high end by a few hundred thousand dollars, reflective of the beat from our high end in Q1. Our EBITDA, we're actually taking up about $1.5 million from 90 days ago. Now when you look at our results in Q1, we did significantly beat on the EBITDA side. That's primarily more timing of our hires. So our guidance that we have for Q2 and the remainder of the year does take into account our expectation that we will be continuing to add those resources, particularly in the customer success area and also somewhat in the sales area, which was our plan all along. It just is happening a little bit later. It didn't get quite as many in Q1 as we had anticipated. But that's to meet the needs of our existing customers as well as the future opportunity we see in front of us.

Our next question comes from Jason Celino with KeyBanc.

Perfect. I wanted to ask about Carrier Service. It's been a couple of quarters since we've seen it. I want to know how it's going. And then, more broadly speaking, the effort to expand the product portfolio.

Yes, we are still experiencing momentum and increased adoption among both existing and new customers. As we introduce new products, we believe this contributes to customer retention, improves our win rates, and naturally enhances our average revenue per user. We are actively exploring new opportunities for product expansion, whether through internal development, partnerships, or acquisitions.

Okay. Great. And then more of a housekeeping question. Genius Central, how did it perform in the quarter? Anything anecdotal would be helpful.

Sure. So Genius Central, we acquired that company in sort of mid-Q4. Love the portfolio that that brought to us as well as a great team as well. And it is performing right in line with what our expectations were for the quarter. We feel really good about it.

Our next question comes from Mark Schappel with Loop Capital.

Archie, a question for you on staffing. We're hearing several company managements discuss the challenging labor market for IT talent more and more these days. I was wondering if you could just give us a sense if you're running on plan, maybe a little bit behind plan with respect to hiring. And also, too, could you maybe just address whether you're having to raise comp a little bit more just to stay competitive?

Yes, I think there are a couple of points to consider. First, the job market has consistently been tight. If you look back to before the pandemic, it seems fairly aligned with that, perhaps even slightly easier. However, we experienced a year or two where companies had minimal turnover and few changes, making the current situation tougher by comparison. But in relation to the pre-pandemic era, I would say the market is more stable. We've always aimed to stay competitive in terms of compensation and will continue to focus on that.

Okay. Great. As a follow-up to your earlier question about our analytics solution, you mentioned that we're entering a new era with the product. I'm curious if this new era is due to enhancements made to the solution in the past year or two, or if it's primarily because customers have become more aware of it and have a greater demand for it.

If we reflect on the history of analytics, just before the pandemic, we were experiencing significant momentum. We discussed the opening of our office in Europe, and overall, things were looking positive. However, when the pandemic arrived, everything came to a near halt for several reasons. First, it was not the highest priority, and initially, it was considered discretionary spending, particularly with store closures. As a result, people were cautious and started cutting costs, including reducing their use of various services. Now, as we look ahead and people regain confidence in their long-term prospects, we're starting to return to the previous levels of momentum. Additionally, since early 2020, the role of stores in e-commerce has grown considerably. For the first time, retailers are leveraging their physical locations as a competitive edge, either through shipping from stores or offering in-store pickup. This development is also driving analytics, which we believe will continue to grow. Overall, I think we have moved past the pandemic phase.

Our next question comes from Nehal Chokshi with Northland Capital.

Congrats on a solid quarter, especially what seems to be remaining a very tough e-commerce market. Really shows that you guys are very omnichannel-driven. Real quickly, you probably covered this in the script, but what was organic revenue growth rate for the quarter?

So we provide just the reported numbers. And then just keep in mind the Genius Central, we said for the year that that would give about $3 million of revenue. So if you do the reverse math off of that, you'll get yourself the organic growth rate is just slightly below what the reported is.

Got it. Understood. Okay. And then my favorite quarterly question: you guys raised your long-term growth rate from 10-plus percent to 15-plus percent I think almost a year ago, maybe nine months ago. And part of that was an assertion that the opportunity that you're skating to is a lot larger than the $5 billion that is framed by 200,000 target customers at a $25,000 ARPU. You got any updates on those parameters that would help to better frame what the actual number is that you're skating to then?

We believe the opportunity exceeds $5 billion and is actually much larger. Initially, that figure was based on our core fulfillment and analytics product. However, we've started to offer new revenue sources, like Carrier Service, which we discussed earlier. We expect to continue introducing more of these product or revenue add-ons over the years, each of which will enhance that opportunity significantly. We haven't revised the $5 billion estimate yet as it's already a substantial opportunity relative to our current position, but it suggests that the total could be much higher. At some point in the future, we'll update that number, but we see significant potential in the overall addressable market and believe our leadership position makes us well-equipped to capture it.

Got it. And then with respect to transportation services, I think when you guys first introduced it and talked about it in April 2020, you were talking about being more of like a nominal fee. What is actually that nominal fee level? Is it sort of like basically $1,000 a year? And do you see that increasing?

Sure. When considering add-on products in general, for an individual customer, this could change the amount they pay us. We anticipate an uplift of about 10% to 20%, depending on the customer.

Our next question comes from Joe Goodwin with JMP Securities.

I know Europe is not a huge percentage of your total business, but just curious what you're seeing out there with everything going on. If you've seen any softness in the business?

We have not observed any weakness; our European business is primarily centered around analytics. We are experiencing good momentum there, consistent with our overall analytics performance, as customers increasingly commit to allowing us to assist in driving their revenue growth. Therefore, we are seeing strong performance, particularly in analytics in Europe. While we do have a solid fulfillment business, our growth is primarily coming from analytics.

Understood. And then just a quick follow-up regarding M&A. Given that valuations have come down, have you seen an influx in maybe inbound opportunities? Or if you could just talk about your M&A pipeline and how you're feeling about M&A generally in the current environment.

Yes. It's interesting because over the last 10 years, activity has not shown significant fluctuations despite the changes in valuations. It actually becomes easier during an upward trend. We are increasingly acquiring private companies owned by individuals, and many of those owners have specific timelines for selling. This seems to be a more significant factor for us. If valuations drop, it might make it a bit more challenging since owners are less inclined to sell during such times. However, our pipeline remains consistent with past levels.

Thank you. And that concludes our Q&A session. This concludes today's conference call. Thank you for participating. You may now disconnect.