Good afternoon, everyone, and thank you for joining us on SPS Commerce 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 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 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. And 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 an 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' 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 Holdco brands, has been a long-time SPS analytics customer in North America. As they expanded their vendor network in Europe, Deckers chose SPS' fulfillment solutions 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' 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 Orbeon, who are focused on long-term omnichannel success. Automating connections with their trading partners was a priority for Orbeon, 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' 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' 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. And 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 to $146.7 million, which represents 16% to 17% year-over-year growth. For the full year, we expect revenue to be in the range of $616.5 million to $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 to $42.7 million. For the full year, we expect adjusted EBITDA to be in the range of $183 million to $185 million, representing growth of approximately 16% to 17%. For Q1 2024, we expect fully diluted earnings per share to be in the range of $0.26 to $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 to $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 to $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 to $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% 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, 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 addressable market. And with that, I'd like to open the call to questions.

Hey. Great. Thanks for taking my question and great quarter. Wanted to ask on the analytics product, very strong growth in 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?

Yes. Good question Matt. And 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. And 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 hesitancy, but it's just not quite as common in all the various segments of retail to share this point-of-sale data. So driving those retailers to share more of that data is connected to our overall growth strategy on analytics.

Okay. Great. And just a 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?

Yes, I think that's a fair characterization, Matt.

Yes. 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% to 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.

Hi, Chad and Kim. Congrats on the nice quarter. And thanks for taking my question. 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-plus 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 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. And 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, and 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%-plus 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 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 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 is 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 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, and we'll be taking that time in 2024 to then inform our view of what that looks like for 2025 and beyond. So 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.

Great. Thank you for taking my question. You normally talk about your revenue growth being a combination of both customer counts and wallet share capture. I think 2023 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 count perspective. And if you agree with all of that, what might be some of the drivers behind us?

Sure. So when we think about 2023, we would characterize that as similar net customer adds outside of acquisitions. The level we were seeing is really pre-pandemic level as it relates to those community enablement activities. If you look at Q4, just a reminder, we added about a net $300 million 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 provided what our overall expectation is for revenue. Obviously, when we announce our results, we then give the breakout between customer adds as well as ARPU. But 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.

And maybe my second question on that. So I think the example 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 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?

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 new, like, 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. So 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.

Excuse me. Great. Thanks. Thanks for taking the questions. So maybe a couple for me, a couple of cleanups. Kim what was channel revenue for the year percent of revenue?

We actually – we don't share that percentage out. It's probably been – 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 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 percent 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 of 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 like to add that for us it's one of multiple marketing campaigns. So the ideal way for us to engage with the prospective customer is that they're through a community program, and there's a relationship with the channel partner, and they responded to our traditional marketing campaigns—not just coming through one particular channel. Actually the more channels they come through, the better for us.

Great. And 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 may just not be the right time for them to join the SPS network. And 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; would it be an election year, some of the geopolitical instability. But some of the supply chain technology spending we see is continuing at a healthy pace.

Hi. Thank you for taking my question and nice job on the quarter and the year for that matter. Chad, starting with you, I realize that it's still early yet. 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 the 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-plus 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 to deviate from that pattern.

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 or 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.

Yeah. Thank you for taking my question, and congrats on a great first quarter, Chad, here as the full-time CEO. What are you guys seeing macroeconomically both internationally and domestically?

Yeah. We're seeing, I would 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 the September quarter?

Pardon me?

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.