Thank you, Chuck. Good afternoon, everyone, and thank you for joining us on the SPS Commerce second quarter 2024 conference call. We will make certain statements today, including with respect to our 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 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 the 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. We delivered a strong second quarter. Revenue grew 18% to $153.6 million. Recurring revenue also grew 18%. SPS delivers mission-critical leading supply chain solutions to an industry that continues to evolve, and we remain committed to helping our growing network of retailers and suppliers improve efficiencies across the retail ecosystem. In May, we completed the acquisition of Traverse Systems and expanded our product portfolio in supply chain performance and optimization, enabling retailers to effectively manage vendor performance, improve collaboration, and meet consumer demand. We're excited to welcome our new employees and customers to SPS Commerce. Today, 21% of retail sales are completed online. By 2026, it's expected that number will increase to 25%. This translates to an ongoing need for automation to execute a successful omnichannel retail strategy, which aims to deliver a consistent consumer experience across multiple sales channels and aligns with their purchase and delivery preferences. For some suppliers, that level of operational efficiency can only be achieved through elevated supply chain visibility. For example, Mattress Firm, the nation's largest omnichannel mattress specialty retailer, strives to provide the product their customers want on the day and time they choose using their preferred delivery method. To enhance supply chain efficiency, Mattress Firm upgraded their ERP solution and began improving their warehouse management system, with supplier collaboration playing a pivotal role in their transformation. Mattress Firm partnered with SPS, relying on the company's ERP integration expertise, supply chain best practices, and established vendor relationships for quick connections to the SPS platform. Since Mattress Firm started working with SPS, their customer satisfaction metrics have improved, leading to increased market share. Mattress Firm now operates at a level of excellence that would not be possible without the enhanced inventory and order visibility enabled by SPS Commerce. As suppliers expand their retail network, manual processes can quickly hinder growth opportunities. The Good Crisp Company in Australia leveraged SPS system automation to integrate fulfillment with an inventory management system to process orders from tens of retailers in half the time. The improvement in efficiency allowed the company to handle increasing order volumes and maintain timely delivery. Partnering with SPS equipped The Good Crisp Company to meet the demands of its expanding customer base and navigate the challenges of growing retail partnerships. Collaboration with suppliers is as critical to retailers as it is to distributors. For example, Performance Food Group is an industry leader and one of the largest food and food service distribution companies in North America and works with thousands of suppliers to serve more than 300,000 customer locations. PFG partnered with SPS Commerce to execute an enterprise-wide EDI initiative across their multiple operating segments. For large organizations such as PFG that operate a diversified business model across a broad geographic reach, standardized fulfillment processes are critical to ensure timely delivery of goods, fast and accurate invoicing, and visibility into inventory movement. Standardization also enables the company to capture critical business information and allows them to quickly respond to changes to maximize long-term success and business efficiency. As the retail industry continues to evolve, SPS is uniquely positioned to help suppliers, large and small, digitize their trading partner connections to achieve efficiencies and scalability. The mission-critical nature of our solutions fuels consistent demand for our product portfolio and we remain confident in the growth opportunity ahead of us as e-commerce and omnichannel retail continue to grow. And with that, I'll turn it over to Kim to discuss our financial results.

Thanks Chad. We had a great second quarter of 2024. Revenue was $153.6 million, an 18% increase over Q2 of last year. Recurring revenue also grew 18% year-over-year. The total number of recurring revenue customers increased 5% year-over-year to approximately 44,950, and wallet share increased 13% to approximately 12,850. For the quarter adjusted EBITDA grew 16% to $44.2 million, compared to $38.2 million in Q2 of last year. We ended the quarter with total cash and investments of $272 million and repurchased approximately $17.5 million of SPS shares. In addition, the board of directors has authorized a new program to repurchase up to $100 million of common stock, which becomes effective on August 23, 2024, and is expected to expire on July 24, 2026. The company's August 2022 program that previously authorized repurchases of up to $50 million terminates on July 26. Now, turning to guidance. For the third quarter of 2024, we expect revenue to be in the range of $157.6 million to $158.6 million, which represents approximately 16% to 17% year-over-year growth. We expect adjusted EBITDA to be in the range of $46.9 million to $47.7 million. We expect fully diluted earnings per share to be in the range of $0.52 to $0.53 with fully diluted weighted average shares outstanding of approximately 37.9 million shares. We expect non-GAAP diluted income per share to be in the range of $0.83 to $0.84 with stock-based compensation expense of approximately $11.6 million, depreciation expense of approximately $4.7 million, and amortization expense of approximately $5 million. For the full year 2024, we expect revenue to be in the range of $624.2 million to $626 million, representing approximately 16% to 17% growth over 2023. We expect adjusted EBITDA to be in the range of $185.5 million to $187 million, representing growth of approximately 18% to 19% over 2023. We expect fully diluted earnings per share to be in the range of $2.03 to $2.05 with fully diluted weighted average shares outstanding of approximately 37.8 million shares. We expect non-GAAP diluted income per share to be in the range of $3.63 to $3.66 with stock-based compensation expense of approximately $55.6 million, depreciation expense of approximately $19.2 million, and amortization expense for the year of approximately $19.2 million. For the remainder of the year on a quarterly basis, investors should model approximately a 30% effective tax rate calculated on GAAP pretax 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 support current and future growth. In the long term, we maintain our target model for adjusted EBITDA margin of 35%. In summary, SPS delivered a strong second quarter performance and the 94th consecutive quarter of revenue growth. Retail dynamics continue to play a key role in the expansion of our addressable markets and we believe our balanced growth approach is the right strategy to consistently deliver on our near-term and long-term financial targets. With that, I'd like to open the call to questions.

We will now begin the question-and-answer session. The first question will come from Scott Berg with Needham. Please go ahead.

Hi Chad and Kim. Nice quarter here and thanks for taking my questions. Chad. I wanted to touch on your acquisition in the quarter, Traverse Systems. The product sells to a slightly different customer than how you monetize the rest of the platform. You're selling this to retailers, trying to monetize some of them. How do we think about what your go-to-market initiatives and investments look like to try to sell into those retailers knowing that the monetization efforts of most of the company is still really focused on the suppliers in your ecosystem?

Yes, good question and thanks Scott. You know, just as a reminder, we completed that acquisition in May. Things are, although early, performing to our expectations, including us now getting into the post-merger integration project, as well as us getting to out to meet with a number of retailers, some of which are Traverse Systems customers. We've also introduced this concept of vendor compliance management to some of the retail customers that we have a long history of running community programs for. And I'd say it's validating our belief that there's strong demand in the market over time for this type of solution. As retailers look to optimize the supply chain performance of their vendors and specifically with the go-to-market, the way that we're thinking about that is we've always had a strong go-to-market to the retailers, retailers and distributors because they're the method for us to initiate the community programs which give us access to the suppliers that we monetize. So those marketing activities and sales motions are very complementary to what we have been doing for years with community. And now we have an opportunity really to solve additional problems for those retailers with a little bit wider product portfolio and the opportunity to monetize them in line with the value that they get from that Traverse platform. So I don't think it's really about a whole new motion just expanding the offering a bit to solve more problems within a motion we've already had.

Understood. Helpful. And then my second question is on customer additions in the quarter. They bounced back and were positive, obviously in this quarter versus flat last quarter. We continue to get lots of questions from investors on what this trajectory looks like. I know, Kim, you mentioned that the large program you were working for in a retailer in Q1 that drove the flat additions bled into the second quarter. Is that largely complete? And should we think about quarterly customer acquisitions that mimic seasonal trends as we look at the back half of the year?

Sure, Scott, so your recollection is correct. The large enablement campaign program that was run in Q1, there was some that bled into Q2, the majority of that in Q1, of course, but yes, there were some in Q2. That program is now complete. So that's really reflected in the financial results for the first half of the year. However, we also have taken the opportunity and looked at our community enablement campaigns. What's in our pipeline for the second half of this year? And we've been able to look at that at a little bit more granular level to say, what do we think that's going to translate to? Overall, we still have those same community enablement campaigns as we were anticipating. A really nice strong pipeline there. However, our belief is that for the latter part of this year, more of that revenue through those future campaigns is going to show up in wallet share. So you can interpret that as more of our existing customers adding additional connections through what we see in the pipeline for the remainder of this year. Now, that comment is specific to this year. Longer term, our belief of continuing to grow at 15% with a healthy mix coming from new customers, which we get primarily through community campaigns, as well as a healthy mix of getting more wallet share, we believe that mix remains in the future, but for the rest of this year, we do believe that more will come in the form of wallet share.

So super helpful, Kim. I guess just one brief follow-up on that. I guess what's kind of driving that this year in this macro, then, is whether it was Q1, and I know it was related to one specific retailer. It sounds like that's at least a little bit of a continuing theme here for the balance of this year, which is different than what we've seen in the past. Is there something driving that in particular or just, I don't know, random luck in terms of what your pipelines look like?

Yes, I don't think it's really related to the macro factor. It really is related to the mix of the type of programs that we have. I think we did explain one of those types of programs in Q1 in quite a bit of detail. And as we look out, what we're finding is programs that are large community programs that are either adding a new supply chain document, like similar to what happened in Q1, or areas where we're expanding within certain divisions of companies or certain industry segments where we're fairly penetrated already in those particular supplier bases, and but continuing to expand for new divisions of companies or within certain industries. So it's really about just the mix and not something related to external macro factors, is our belief. Just the mix.

Hey guys, appreciate the questions here. Maybe, Chad for you. There is a, we've talked in the past about what ERP refresh cycles can look like. There is a large vendor out there kind of forcing that from some of their customers. I wonder what opportunity that might create given that kind of creates a point of data emphasis and increased visibility for you guys, if there is any at all.

Yes, absolutely, Dylan. So in general, yes, ERP change-outs are a good opportunity for prospective customers to look at moving their trading partner connections to a new format. And then often, if they're moving to a cloud-based ERP system, then they're often looking for doing a cloud-based network like what SPS offers. So we do expect, and especially if those are happening at the higher end of the market, which I think is the vendor you're mentioning. That type of churn will create a positive effect in terms of people looking to migrate their trading partner connections from more, say, historic or old-fashioned approaches to the more modern cloud-based approach that we offer. Yes, absolutely. So we really established a beachhead for our fulfillment product in Europe with the acquisition of TIE Kinetix, which was just under a year ago. And when we did that acquisition, our philosophy was to get the benefit of that beachhead to learn more about the market, to actively participate in new opportunities to service existing customers there that all continues, and TIE is performing as expected. And I think some of the early learnings coming out of there is that there does seem to be a sizable market opportunity overall there, and we're optimistic that some of our go-to-market techniques that have worked well in the North American market will be transferable to Europe.

Are there any additional questions?

Yes. I have people on the question queue. It seems that they're not speaking. I'll move on to the next question. Our next question will come from Jeff Van Rhee with Craig-Hallum. Please go ahead.

I'm here. Can you hear me?

Yes. Hi, Jeff.

Great. I have a couple of questions. Let's start with analytics. It declined sequentially, which is not typical. I'm curious about what happened this quarter and your thoughts on the upcoming quarters and years, if anything has changed.

Sure. So when we look at analytics in the quarter, you are correct. The growth rate was down sequentially, still up, but the growth rate was down sequentially and we happened to see in the quarter that there have been some customer consolidations that occurred in the quarter, and as such, that does have an impact on that overall analytics revenue. You may recall when we think about our business, we're really not a bellwether at all for what's happening in the economy, but analytics is an area that can be a little bit more impacted depending on what's happening. So in this case, we did see some customer consolidations. Now we have a very healthy pipeline that we're seeing for the back half of this year. So our expectation is that we'll exit this year, probably, let's call it, high single digits, somewhat similar to where we were from an annual growth rate last year, probably high single digits from what in Q2 year-over-year growth.

Yes. Okay. That's helpful. And then you took a close look at the enablement campaigns in the second half of the year. And obviously, it seems to be a bit more focused on the ARPU expansions. Any other observations, breadth and depth type of campaigns that are going on? I don't know if you took that deep dive; curious if there are any other insights into what those enablement campaigns look like?

Yes. The overall volume of campaigns and also the number of supplier opportunities we expect to get in front of during those campaigns all look positive in terms of the total volume. And then when we kind of just look at what the likely mix is to be inside of that, we do expect to find a little bit higher proportion of existing customers just on this particular set that we're seeing in the second half of 2024. But overall, that total volume of programs and suppliers in those programs looks quite positive.

Hi, thank you for taking my question. Just one, and just building on an earlier question, Chad, other retail-focused software vendors out there have noted a bit more choppiness than usual this quarter. And I was just wondering if you could just comment on that and whether you've seen any change in the demand environment over the last 90 days or so?

Yes. Yes. So just as a reminder, we're really not a bellwether for the total economy nor the total retail environment just based on our business model. In terms of specific retail dynamics, though, we do talk to a lot of retailers and their suppliers. We are hearing that there still is quite a bit of uncertainty there, uncertainty about the macro economy, a little now about the election and how all this is going to affect consumer purchases. The other thing that I would offer based on these conversations as well as there does appear to be some more consolidation occurring and particularly on the supplier side of the retail ecosystem. But we really remain committed to helping those retailers, suppliers, and 3PLs in these times and in the future.

Hi. Thanks for taking the question. Maybe just kind of building on the last question. I totally understood that you guys aren't a bellwether for the economy, but maybe a similar question on kind of SMB health. That's been kind of a focus area for a lot of software businesses. And I just want to confirm that this customer growth dynamic you've been calling out, there's no kind of like a churn element to that? And just any comments on kind of where your SMB supplier base is at.

Sure. So when we look in the quarter, the churn is pretty consistent with where churn has been. So that hasn't been an area that stood out specific in the quarter. Obviously, there is, in general, in the retail environment to Chad's point, there is uncertainty there from both retailers, suppliers, as well as third-party logistics providers. But specific in the quarter, there really wasn't a lot of change in our churn number.

Okay. Perfect. And then a quick follow-up. Kim, I think you talked about expecting to see some gross margin leverage in the second half, is that still kind of in line with your expectations? Maybe if you could help us think about kind of the cadence and magnitude of that move. Thank you.

Sure. So when we think about the comment we made in February on our Q4 earnings call, that remains that our expectation is that we do see the opportunity to grow gross margin over time, primarily for growing into various investments we made, scaling opportunities, etc. And we still do anticipate that you'll begin to see that in the latter half of this year. Q2 was higher than Q1, but still pretty in line with last year. So our expectations remain the same that you'll start to see some of that gross margin improvement starting here in Q3.

Hi. Great, thanks. I wanted to follow up on the net new customer dynamic, and I know I'm repeating myself from our past call, but the lack of net new inbounds in the current year, does that create the potential for air pockets in future periods just around wallet share gains, particularly when next year, you'll be comping against this year and even last year, that was a very strong stretch of wallet share gains in your existing base. I'm just wondering if kind of not replenishing the feeder for that conduit has any ramifications later on.

Yes, Joe, that's a very good and logical question. We feel confident based on our strong history of increasing wallet share. There has been a balance between acquiring new subscribing customers and growing wallet share. While there have been periods where one was stronger than the other, over time they have generally grown proportionally. I expect we will continue to see that pattern of increasing wallet share, and given enough time, it tends to return to a balanced state between the two.

Sure. So, reflecting on our expectations from our February earnings call, we set our EBITDA targets for the year. In our April Q1 earnings call, we raised those expectations based on our performance in Q1. You'll see a similar adjustment for Q2, where we factored in our improvement for that quarter into our overall annual expectations. Essentially, while our EBITDA projections have not changed fundamentally, the timing of our expenditures within the company may not be fully visible to you, as we typically provide annual guidance along with insights for the upcoming quarter. From our viewpoint, there has been no significant deviation from our initial expectations when we outlined our full-year guidance. To put it differently, we've experienced a bit more spending relative to revenue at the start of the year and a bit less as we approach the year's end.

And just on the earnings number, Kim, I think, to get to 365, that's like $1.15 in earnings in Q4. Is there anything below the line?

There really should not be any issues. If you look at the increased EBITDA, it suggests EBITDA will come in for Q4, and we need to understand how that affects our expectations for EPS.

This concludes our question-and-answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.