Q3 2024 SPS Commerce Inc Earnings Call
Speaker Change: Good afternoon and welcome to the SPS Commerce, 3rd quarter of 2024 earnings conference call. Our participants will be in a listen-only mode. Should you need assistance? Please signal conference specialist by pressing the star key followed by zero. After today's remarks, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then one in your touch turn phone. To wish you all the question, please press star then two. Please note this event is being recorded. I would now like to turn the call over to your meetup Blastczyk, and if that's the relations for SPS Commerce, please go ahead.
Blastczyk: Thank you Cole, good afternoon everyone and thank you for joining us on S.B.S. Commerce, third quarter 2024 conference call.
Speaker Change: 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.
Speaker Change: These statements are forward looking and involve a number of risks and uncertainties that could cause actual results to differ materially.
Speaker Change: Please note that the before-looking statements reflect our opinions only as of the date of the 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.
Speaker Change: Please refer to our SEC filings specifically our form 10K, as well as our financial results press release for a more detailed description of the risk factors than may affect the results.
Speaker Change: The documents are available at our website, sbscommer.com and not the SEC's website, scc.gov In addition, we are providing a historical data sheet for easy reference on the Investor Relations section of our website, sbscommer.com
Speaker Change: During our call today, we will discuss adjusted evidence financial measures and non-gap income for share.
Speaker Change: and our press release and our final links with the SEC, each of which is posted on our website. You will find additional disclosures regarding these non-gap financial measures, including reconciliation of these measures with comparable gap measures. And with that, I will turn the color over to Chad.
Chad: Thanks for being up and good afternoon everyone. Thank you for joining us today. We delivered a strong third quarter, revenue grew 21% to $163.7 million, recurring revenue also grew 21%.
Speaker Change: It's been a year since I joined SPS Commerce. I've now come to fully appreciate the power of SPS's Go to Market Strategy Network Effect, and unique ability to improve collaboration and deity accuracy to optimize supply chain operations.
Speaker Change: As the retail industry continues to increase in complexity, naturally, as this is role in automating training partner relationships continues to evolve.
Speaker Change: We are in the process of evaluating the expanded opportunity ahead of us and we look forward to sharing our updated view of our dressable markets.
Speaker Change: The acquisitions we have completed in the past year exemplified SPS's growing term and are commitment to delivering a comprehensive suite of solutions to help retailers and suppliers improve collaboration.
Speaker Change: Last month marked the one year anniversary of closing the Thai kinetic acquisition.
Speaker Change: We are pleased with our progress with the post-mortrait integration and remain enthusiastic about the long-term potential.
Speaker Change: As a reminder, we acquired TIE Kinetics to add e-invoicing capability to our product portfolio. Establish a go-to-market beachhead in Europe for a fulfillment product.
Speaker Change: and strengthen our position in the U.S. market by adding the U.S. portion of the Thai
Speaker Change: E-envoicing capability is a frequent requirement for customers implementing fulfillment outside the US and countries where there is an E-envoicing mandate.
Speaker Change: With this capability integrated into our fulfillment product.
Speaker Change: We can now address the needs of these customers.
Speaker Change: We appreciate the differences between North America and European retail markets, but when the access to the experience and knowledge of the Thai kinetic team, we are optimistic about the success and long-term potential of our opportunity in Europe.
Speaker Change: This year we continue to be a quidative and in Q3 we require supply pike and expanded our portfolio with automated invoice deduction management and prevention. Workside the welcome our new employees and customers to ask for your commerce.
Speaker Change: Much like the acquisition of Traverse Systems in May this year, we strive to offer our customers and the broader market the resources needed to reduce supply chain missteps and strengthen supplier's relationships with green tailors.
Speaker Change: We are pleased to see our customers benefiting from these offerings.
Speaker Change: For example, GNC is the world's largest global specialty health, wellness and performance retailer and one of SPS's longtime customers.
Speaker Change: The World to a Traverse Systems Over the Years and Leverse the platform to gain complete visibility into every part of the purchase order lifecycle.
Speaker Change: They were able to isolate the root causes of problematic shipments and work with vendors to raise the advanced shipping notice compliance rate from 76% to 92%. This resulted in better visibility in the imbountrements, allowing GNC to improve time-divallure of its inventory.
Speaker Change: Vittal, a leading manufacturer of home cleaning solutions, was challenged with significant invoice deductions in our order fulfillment process because the recovery process was too cumbersome and time consuming.
Speaker Change: Using supply pipes automated invoice deduction management and prevention solution to consolidate data from retailer portals into a single user friendly platform gave BISIL the visibility they needed to save millions in disputed deductions across multiple retailers.
Speaker Change: Having access to data on one platform also help this will gain actionable insights into deduction trends across retailers, identify areas for improvement and optimize deduction recovery strategies.
Speaker Change: Automation and Optimization remains a priority across retail and distribution businesses.
Speaker Change: For example, Bundle retail services offers a complete line of retail products and supplies with more than 83,000 SKUs and operate seven distribution centers across U.S. and Canada and six more internationally.
Speaker Change: Bunzel recognized that in order to run the business more efficiently to support their growth, they had to optimize data by minimizing manual intervention and improve order visibility.
Speaker Change: To support their goal to digitize their supply chain, they recently partnered with SPS Commerce to automate ordering, receiving, and invoicing processes with over 1,000 vendors.
Speaker Change: The Evolving Dynamics of the Retail Industry Continued a Drive Digital Transformation. SPS has been trusted partner to thousands of retailers, suppliers, logistics providers, and distributors over the years, and we remain committed to our vision to be the world's retail network.
Speaker Change: Our customers continue to prioritize supply chain resilience and recognize the value we bring to the table as they strive for a fishing collaboration with their trading partners.
Speaker Change: with that, I'll turn it over to Kim to discuss our financial results. Thanks, Chad. We had a great third quarter of 2024, revenue with $163.7 million, a 21% increase over two, three of last year. Recrearing revenue also grew 21% year over year.
Speaker Change: The total number of recurring revenue customers increased 2% you are re-eridote approximately 45,200 and while it sharing increased 18% to approximately 13,700.
Speaker Change: As a reminder, in August, we closed the acquisition of supply pipe. At which time we said we expect the acquisition to add approximately 200 customers to our network and increase while it shared by approximately 350.
Speaker Change: For the quarter, adjusted to the dock from 19% to $48.4 million, compared to $40.5 million in Q3 of last year.
Speaker Change: We ended the quarter with total cash and investments of $266 million.
Speaker Change: Now, Turning to Guyms.
Speaker Change: For the fourth quarter of 2024, we expect revenue to be in the range of $168.5 million to $169.5 million, which represents approximately 16-17% year-of-year growth.
Speaker Change: We expected Justin Ibadot to be the range of 48 million to 48.7 million.
Speaker Change: Weekspect fully diluted earnings per share to be in the range of 46 to 47 cents, with fully diluted weighted average shares outstanding of approximately 38.1 million shares.
Speaker Change: We expect non-GAAP diluted income for share to be in the range of 83-84 cents with stock-based compensation expense of approximately $12.8 million to appreciation expense of approximately $5.1 million, any $7.2 million.
Speaker Change: For the full year 2024, we expect revenue to be in the range of $635.4 million to $636.4 million, representing approximately 18 to 19 percent growth over 2023.
Speaker Change: We expect adjusted EBITDA to be in the range of $185 million to $185.7 million, representing growth of approximately 17 to 18 percent over 2023.
Speaker Change: We expect fully diluted earnings per share to be in the range of $2.03 to $2.04 with fully diluted weighted average shares outstanding of approximately 37.9 million shares.
Speaker Change: We expect non-GAAP diluted income per share to be in the range of $3.41 to $3.42, with stock-based compensation expense of approximately $55.1 million, depreciation expense of approximately $19.1 million, and amortization expense for the year of approximately $22.8 million.
Speaker Change: For the remainder of the year, on a quarterly basis, investors should model approximately a 30% effective tax rate calculated on GAAP pre-tax net earnings.
Speaker Change: In terms of 2025 guidance, we will provide revenue, adjusted EBITDA, and other measures on our Q4 earnings conference call.
Speaker Change: Long-term, we maintain our annual revenue growth expectation of 15% or greater as we expand our network through community enablement campaigns and acquisitions, and we continue to expect adjusted EBITDA dollar growth of 15 to 25% as we invest in the business to support current and future growth.
Speaker Change: Our target model for adjusted EBITDA margin remains 35%.
Speaker Change: In summary, SPS Commerce delivered strong third quarter performance and the 95th consecutive quarter of revenue growth.
Speaker Change: We remain committed to a balanced growth approach as we continue to support our customers with a comprehensive product portfolio that positions them to successfully navigate evolving omni-channel dynamics and overcome increasing supply chain complexity.
Speaker Change: And with that, I'd like to open the call to questions.
Speaker Change: Thank you, and we will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. And at this time, we will pause momentarily for the first question.
Speaker Change: And our first question today will come from Scott Berg with Needham. Please go ahead.
Scott Berg: Hi Chad and Kimberly, nice quarter here. Chad, I wanted to ask about the kind of demand environment that you're seeing out there and how that maybe the quarter progressed versus your expectations. I know this has been a big year of selling back.
Scott Berg: in enabling existing customers with regards to some, you know, retailer needs out there. But how are you thinking about the net new business opportunity out there and how that will evolve maybe over the next couple of quarters as you start moving on from those kind of internally focused enablement items that you've been working on? Thank you.
Speaker Change: Yeah, thanks, Scott. Yeah, as you mentioned and as we discussed quite a bit in the last earnings call, although all year long we've seen a very healthy pipeline in terms of our community enablement programs, both in terms of the number of programs as well as the number of suppliers are in those programs,
Speaker Change: One dynamic that we did see in the programs in the first half of the year and we expected to see a little bit in the second half as well is that a higher proportion of those programs were areas where we expected to find existing customers, usually driven by a very healthy and strategic relationship with the retailer that just over time has led to a high penetration within those particular customers.
Speaker Change: As we look out now to the fourth quarter, and we have some pipeline visibility even into a little bit of 2025, that trend of strong pipeline of community programs continues, both in terms of number of programs and suppliers in those programs.
Speaker Change: Maybe what we see a little less of is the higher concentration of existing customers within those programs.
Speaker Change: And that comment is probably a little bit more for...
Speaker Change: the
Speaker Change: We are, of course, a little subject to the mix of existing customers within those programs, but overall, I would say the health of the programs continues.
Speaker Change: that we will see a lot of the growth coming in on WalletShare which is just natural as the product portfolio expands and we have more to cross sell and upsell.
Scott Berg: Got it. Very helpful. And then, Kim, you mentioned not giving 25 guidance until the fourth quarter call.
Scott Berg: I understand a lot of moving parts around, you know, some of the recent acquisitions and whatnot. But as you're starting to think about calendar 25, should we think about any of your investments, whether it's in product or sales and marketing, you know, in that cadence differing than maybe what we've seen over the last couple of years or the philosophy there would probably be relatively the same.
Speaker Change: Sure, so we're going to continue to invest in both the short-term mediums and long-term as we see appropriate for our existing customers and the opportunity ahead of us.
Speaker Change: That being said, we have reiterated our view of
Speaker Change: Even though growth anywhere between some of that 15 to 25 percent
Speaker Change: What I would say is the primary reason why we made that comment about 2025 guidance providing it in our next earnings call, Q4, is we do think that it actually is more comprehensive and better to investors when we can provide our information on revenue as well as EBITDA and the other metrics.
Speaker Change: Over the last few years we've given purely an EBITDA number and so our practice going forward is to be more comprehensive and provide the full spectrum of the guidance to investors which naturally then leads to the Q4 earnings call.
Speaker Change: Got it. Helpful. Congrats on a good quarter. Thanks for taking the questions.
Speaker Change: And our next question will come from George Kurosawa with Citi. Please go ahead.
George Kurosawa: Thanks for taking the questions. I wanted to ask about the recent acquisition of SupplyPike and Traverse. I mean, thinking in particular about Traverse, it seems like maybe there's some opportunity to synergize with some of these other add-ons. I think about, you know,
George Kurosawa: Scorecarding visibility, you know, helping as kind of a carrot for analytics adoption, or maybe helping identify underperforming suppliers, you can then go help with something like a supply pike for invoice deduction management.
George Kurosawa: Maybe if you could just talk about kind of the strategy as you start to become like a true multi-product platform, you know, how you see some of these products playing with each other.
Speaker Change: Yeah, yeah, absolutely, George. So, we're real excited about Traverse. One, just in terms of the way we're executing on the integration of it into our business, but also the reception that we've had as we've had the opportunity to be with more Traverse customers and help them understand what we do to
Speaker Change: Digitize their suppliers using our community enablement program and then also the inverse of that where We've introduced the Traverse platform to some of our long-term and strategic SPS retail customers
Speaker Change: And, you know, I think here, really what we're doing is really trying to help retailers and suppliers be more efficient overall in their supply chain. And a lot of times, the reasons for those inefficiencies are lack of visibility or lack of performance measurements. And that's really what Traverse gets to in that you can pull a lot of supply chain data in and produce this scorecard for your suppliers and help improve that.
Speaker Change: And then that does lead, obviously, to more ways that we can work with suppliers then to help them with their performance.
Speaker Change: The key to a lot of this is having the digital connection between the retailer and the supplier, and that's obviously our core offering that has been for years. But then when that supply chain performance isn't there, that can come across in the form of a penalty or an invoice deduction levied by the retailer. And we can then help with the technology we got from SupplyPipe, help on the supplier side, those suppliers deal with those, either dispute them because they're incorrect or probably more important to this whole ecosystem, help those suppliers identify the root cause of those supply chain problems that led to the deduction in the first place, and get those issues resolved so we can take overall friction out of this supply chain between
Speaker Change: and the retailer and the supplier.
Speaker Change: It's super interesting and then I did want to kind of a follow-up to that you know with more of a multi-product story a growing portfolio any updated thoughts on pricing and packaging approach?
Speaker Change: Yeah, we are still working through the details of that as we work through the post-merger integration of these projects. But, you know, obviously it's our objective to have a higher penetration of these products in our customers and to the extent that those customers can get that in a single package that's priced right and makes it easy for them to adopt, we would, of course, implement those strategies.
Speaker Change: Thanks for tuning in. We'll see you next time.
Speaker Change: Got it. And then if I could sneak in one follow-up for Kim. You know, you gave some target numbers for SupplyPike and Traverse in terms of revenue and EBITDA. How did those come in in the quarter and any change to the outlook for 25?
Speaker Change: Sure, so when we announced both of those acquisitions at that point in time, we gave a view of what our expectations were for top line as well as bottom line for this year as well as next year.
Speaker Change: In the quarter, they performed a little bit better than expectations, but we stand by what we have as our expectations at the time we announce those acquisitions.
Speaker Change: Great. Thanks for taking the questions.
Speaker Change: And our next question will come from Dylan Becker with William Blair. Please go ahead.
Dylan Becker: Hey Chad, hey Tim, nice job here. I guess maybe sticking with the idea of the enablement campaigns, when you guys, and I understand the platform continues to evolve and expand and we'll have more to sell,
Dylan Becker: But as you guys go in with a retailer, with those initiatives, are the connections you're selling to suppliers, is that landing?
Dylan Becker: Wall-to-wall or is there kind of incremental opportunities to go back with those retailers over time and sell more touch points? I guess the question is kind of how should we think about the durability of the expansion motion and the momentum we've seen Even if we move more to that kind of balanced mix of net new and expansion if that makes sense
Speaker Change: Yeah, yeah, that's a good point Dylan You know, it doesn't it is not a very binary activity. So when we work with the retailer to digitize their suppliers
Speaker Change: You know, that's really at a point in time and we're extremely effective.
Speaker Change: at getting almost all their order volume digitally connected at that point in time. But as you know, in retail, the merchandise assortment is always changing, suppliers are always changing. And what typically happens with retailers is maybe the work we did got it to 98%, but then that assortment changes, and the suppliers change, and their internal vendor management capability isn't able to stay on top of that. And we will go back then and work with other retailers.
Speaker Change: to sort of do a catch-up and re-catch-up to make sure that that same high percentage of the order volume is digitally connected.
Speaker Change: So we have a couple of modes of doing that. We can do those catch-up programs in some of the more strategic relationships we have. We're actually built into the vendor management and vendor onboarding process of the retailer, and we kind of catch those new suppliers as they come in. But it is a pretty fluid environment as suppliers come and go, and I think in the end that creates sort of a continuous flow of leads into our organization through those community programs that then we can go out and...
Speaker Change: and capture and establish those digital connections as those suppliers join our network.
Speaker Change: Okay, great. Yeah, that makes sense. That's really helpful. Maybe as we think about to the network here, obviously, we've had a handful of somewhat larger transactions, if you will, but thinking about that network dynamic and how that plays into your buy-and-build effort, you obviously get a lot of access to data. You see a lot of incremental processes that I'm sure you'd like to.
Speaker Change: to expand the network off of. How do you think about kind of that roadmap from a buy versus build perspective and organic versus organic, et cetera? Thank you.
Speaker Change: And then exactly like you mentioned, understanding where we can solve the problem with maybe data we have in the network, maybe we need to build a solution that leverages data in the network.
Speaker Change: Traverse and SupplyPike as we integrate those products in, we're finding quite a bit of benefit by being able to feed those application platforms with data and the network and get that more integrated into the network.
Speaker Change: So the power of the data that we have in the network, we expect to be very applicable and additive to future acquisitions or new products that we launch as well.
Speaker Change: Great. Thanks, Chad. Appreciate it.
Speaker Change: And our next question will come from Lachlan Brown with Redburn Atlantic. Please go ahead.
Lachlan Brown: Thank you.
Lachlan Brown: Hi. Hi, Chad, Kim, Irmina. Thanks for taking my questions.
Lachlan Brown: Just interested in what you're seeing in terms of the channel sales funnel, I mean obviously the community enablement campaigns have been largely focused on the existing customer base, but what have the channel sales been seeing in terms of the sales environment for new logos?
Speaker Change: Yeah, great question and our channel sales program is a great contributor of leads for us.
Speaker Change: And these also do tend to be more kind of full replacement cycles. So typically when somebody's implementing a new ERP system, especially when they're going with a cloud-based ERP system, it's a good time for them to change out the whole infrastructure they have for all their digital connections.
Speaker Change: More of that though I would say coming more in more of the smaller side of this you know most of this happens for us in the SMB area. I'd say that we've been really healthy in the small side maybe at the kind of more mid market or the higher end of SMB maybe a little bit slower just to see some of these ERP changeouts.
Speaker Change: But when you put those two together, sort of total volume of leads coming from channels has been quite healthy for us this year.
Speaker Change: Okay, thanks, that makes sense. I mean that's interesting in terms of the, you know, the smaller side of things.
Speaker Change: Thank you.
Speaker Change: Given the channel is focused on medium to large enterprises, we've heard that there's been some level of difficulty getting availability with system integrators at the moment, given they're quite tied up with the SAP migration. Have you seen this play out at all?
Speaker Change: Yeah, we have not seen that connection directly to SAP. A lot of the value-added resellers that we're working with tend to focus on the SMB area. I would just say maybe some of the uncertainty in the environment overall with interest rates, consumer spending, the election in the U.S.
Speaker Change: may have kind of slowed down a little bit of this ERP expenditure kind of at the higher end of the of the mid market.
Speaker Change: Now, I know there's a lot of information out there that would lead people to believe that there's going to be a big replacement cycle in, say, sort of the higher end of the enterprise. We would expect to get some benefit from that, but probably a little bit measured for us since we're more in the S&B side of the ERP market, which is a big lead channel driver for us.
Speaker Change: That's very clear. Thanks for your time.
Speaker Change: And our next question will come from Parker Lane with Stiefel. Please go ahead.
Parker Lane: Hey Chad, hey Kim, thanks for taking the questions here, and congrats on the quarter. Chad, you mentioned it, but it's been about a year since the Thai Kinetics deal. It'd be great to get your assessment of how the go-to-market landscape for you all has changed, the European market in particular, and other than having, you know, more of a physical presence there, what are some of the initiatives you put in place to, you know, promote better efficiencies there and drive better performance?
Parker Lane: Yeah
Speaker Change: So, a couple of points just to remind everybody about the TIConnectics acquisition. You know, kind of three main things there. One, the e-invoicing capability that TIConnectics had that we didn't have, we felt was going to be a key product capability that we needed for our international expansion. Then we wanted that – we were selling our analytics product with an active go-to-market in Europe, but we didn't really have an active go-to-market.
Speaker Change: for fulfillment in Europe, so we thought it could be a foundation for that. And then there was some U.S. business as well that we now integrated into our U.S. operations.
Speaker Change: The second piece would be a lot of the network itself and the network technology can be used in Europe, and we sort of proved that out with the product strategy. And then we have early signals that a lot of the go-to-market techniques that we've used quite well in North America.
Speaker Change: Specifically, the channel relationships and the community go-to-market should be applicable in Europe.
Speaker Change: Now, all that said, I think we're early innings, if you will, on building out that go-to-market for Europe.
Speaker Change: And I think there are a few unique challenges in Europe around the regional nature of the way that business is done there. I think the power balance is a little bit different between the retailers and suppliers. You tend to have a lot of region specific.
Speaker Change: or even country-specific retailers.
Speaker Change: where, you know, in the US you have country-specific retailers but it's a lot bigger market for them so they control a lot more power over their suppliers. So those types of dynamics we'll need to work through but we're pretty optimistic that some of these things from a product strategy standpoint as well as a go-to-market approach that have worked quite well for us in North America are transferable to Europe.
Speaker Change: Got it. Very helpful. And then you mentioned doing an evaluation to get an updated view on the addressable market The messaging has been very stable on the addressable market in this business's history Is that assessment purely a reflection of all the additional product you've bought to market recently or is there anything else we should read into there?
Speaker Change: Yeah, so I'd say the work we previously shared with you on Addressable Market is a bit dated at this point, and the product portfolio, as you mentioned, has expanded. So we are doing some work internally to just refresh that a bit to account for kind of the current look at the market, as well as incorporate some of the product line expansions. And we're optimistic that we'll be able to share some of that in more detail here in 2025.
Speaker Change: Great, congrats again on the quarter. Thank you.
Speaker Change: And our next question will come from Joe Verwink with Baird. Please go ahead.
Joe Verwink: Hi, great. Hi everyone.
Joe Verwink: Yeah, I know you're still talking about a balanced growth algorithm, but just given the sources of growth year-to-date and the focus of recent acquisitions
Speaker Change: Do you think there could come a time in the near future where you find yourself maybe just updating your Sense of how you grow going forward and I certainly don't ask the question Meaning to say that logo count stops growing
Speaker Change: It does seem to be the case that just monetizing those relationships is a pretty credible path to growing for a long time. And does that just become more of your focus as opposed to kind of the balanced algo that you've been running up into this point?
Speaker Change: how much we're penetrated in that today, that certainly new customers is going to be a continued element in our growth algorithm. Now that said, you know, now that we have over 45,000 customers and a broader product portfolio and some things that most likely we will do over time in terms of expanding that product portfolio both organically and through M&A, I think it is logical to conclude that expanding the wallet share on those customers with a broader product portfolio will also be a lever and you know, I think it's a little difficult to predict
Speaker Change: Historically in the business, those have grown fairly linearly. I think as the product portfolio gets bigger and there's a bigger base of customers to cross-sell, it might be logical to conclude that that wallet share might start growing at a little bit faster rate than the...
Speaker Change: the specific customer account.
Speaker Change: And that would be, I would say, on the revenue side that Chad's referring to. And I think your question was on revenue, but I just want to clarify. We also talk about balance. We talk about balance, meaning we have the ability to grow the top line nicely. We also have the ability
Speaker Change: to drive the bottom line nicely, as well as margin expansion over time. So that balanced approach between sort of top line and bottom line, we believe, based on our business model, we have the opportunity to continue to deliver on that. That's on the overall financial picture.
Speaker Change: Specific on the revenue side, Chad certainly did answer that, but there's different sort of metrics that ultimately drive to that top-line growth and those components in there as our product portfolio.
Speaker Change: expand certainly gives reason of why that wallet share component may continue to be strong going forward but I just wanted to clarify in the balance there's also our view of sort of top line and bottom line.
Speaker Change: Yeah, thanks Tim, that makes sense.
Speaker Change: Just on the customer trends and obviously it's been well covered what's been happening with the enablement campaigns.
Speaker Change: Do you self-audit that result and come away with a view that ultimately it might be reflecting maybe a tougher retail macro or...
Speaker Change: As you think about your customers, they've shifted their IT priorities, so it's maybe systems that could eventually lead to setting up the connection, but that follows maybe the area of focus that's happening for customers.
Speaker Change: This year, just trying to get a sense if that number stands out, because certainly enablement campaigns, while they're a big feeder of your customer growth, they're not the only feeder of your customer growth.
Speaker Change: Yeah, no, Joe, we don't hold that view that it's sort of driven by the macro environment or kind of a change in the need for our types of solutions.
Speaker Change: The mix of types of community programs that we've run this year, the overall number of programs and the suppliers in those programs has been quite strong, as we mentioned earlier in the call to pipeline going forward for that looks quite strong. It is really just the mix where we've run some campaigns this year with retailers we have.
Speaker Change: been quite successful historically and therefore finding a higher percentage of existing SPS customers within those campaigns.
Speaker Change: Williams.
Speaker Change: Okay, great, thank you.
Speaker Change: And our next question will come from Jeff Fannery with Craig Hellam.
Speaker Change: Please go ahead.
Jeff Fannery: Great. Hey guys, thanks. Nice quarter. Just to follow on to that last question, kind of a variation of that because we think about the TAM, you've got 45,200 recurring customers and I know you've talked about 200,000 in the TAM and with a lot of the enablement campaigns being with people that are already with you, is there something, do you consider with respect to the go-to-market that you pursue enablement campaigns potentially with retailers of a type that don't have supplier bases, you know, suppliers that are already in your customer account? I mean, how would you get at the remaining 150 of 200,000 potential recurring customers?
Speaker Change: Yeah, yeah, Jeff, good question, you know, and I've mentioned on previous calls, I believe that, you know, historically, and even currently, you know, our focus with that retail sales force is to get as many of these enablement programs.
Speaker Change: with as many suppliers as we can sort of through the door and that has worked quite well and I would point out even these campaigns that we have run and encountered a higher proportion of existing customers have been quite successful both for the customer and and for us in terms of monetizing those
Speaker Change: existing SPS customers may be a tactic that we'll have to use in terms of pointing that retail sales force in some some different directions. Historically we have not had to be too discriminating in where we pointed that that team and it's led to lots of success.
Speaker Change: but as things play out in the future we may need to focus them and and we certainly have an eye on that and if that was what was required we find ways to do that.
Speaker Change: Fair enough. Just one last for me. As you look at the SupplyPike customer base, obviously we've got some nice overlap and obvious synergies there. In the SupplyPike base that is not using SPSC, any observations on who they were using and any surprises in that respect?
Speaker Change: I'm talking about for fulfillment.
Speaker Change: Yeah, so the SupplyPipe customer base does tend to skew a little bit larger. So there is really good overlap and a very similar ideal customer profile. But I'd say the SupplyPipe customer tends to be kind of at the larger end of where the historic fulfillment customer is. And what we still do find in that larger end of the consumer products companies is they invested in on-premise software and their own staff.
Speaker Change: to manage these types of digital connections way back before there were SaaS platforms to do this for them. And so that changeover cycle is a little bit slower in those larger customers.
Speaker Change: and so we've got to wait for the right point in time. It typically comes as those companies move to kind of full on into the cloud and really want a cloud-based approach, or as they come to some conclusion that it really does make sense to go forward with a managed network rather than having their own staff that needs to go manage all these connections point to point. So we're confident in the long term that these are great customers that are likely to come over to SPS because there are already SPS customers via SupplyPike. It's just the adoption may take some time.
Speaker Change: Sounds good. Thanks for taking my questions.
Speaker Change: And our next question will come from Mark Chappell with Loop Capital Markets. Please go ahead.
Mark Chappell: Thank you for taking my question. Chad, analytics growth appears to have settled in the mid single-digit range over the past few quarters. Should we think of this as the new normal for analytics growth or do you expect this solution to get back up to more of a low kind of double-digit growth rate?
Speaker Change: Yeah, so we have had a couple quarters now of analytics growth coming in, sort of right about 6%.
Speaker Change: We would expect for the year analytics growth to probably come in maybe not quite double digits but certainly the high single digits.
Speaker Change: and say over the midterm we would expect to get double-digit growth out of the analytics product.
Speaker Change: I would just point out that the analytics product
Speaker Change: a couple things. It's not quite as addressable in our customer base as fulfillment.
Speaker Change: We do tend to do well in certain sort of sub-segments of retail or product categories. We're much stronger in analytics.
Speaker Change: and the other point I would make on analytics is unlike...
Speaker Change: Fulfillment where it's very sticky, very mission critical, the analytics can tend to be a little bit more discretionary.
Speaker Change: And so what we can see is if a particular set of suppliers is feeling maybe a little bit more cost pressure, it's a little easier for them to turn on or off the analytics piece versus the fulfillment piece.
Speaker Change: But overall, I know this quarter was a little bit lower growth. We do think that analytics can be a double-digit grower for us.
Speaker Change: Thank you.
Speaker Change: And once again, if you would like to ask a question, please press star then 1. Our next question will come from Nihal Chosky with Northland Capital Markets. Please go ahead.
Nihal Chosky: Oh yeah, thank you. I know we've talked about this before, but I think it's worthwhile to refresh. You know, of the 200,000 Target customers that make up their $5 billion opportunity, what percent do you guys believe that is North America-based?
Speaker Change: For more information, visit www.fema.gov
Speaker Change: So, what I would say is when we initially put that information together, and granted it's quite dated, which is why we're in the process of updating and we'll be in a position to provide that update at some point in 2025.
Speaker Change: But going back to when we initially put that together, that expectation was about, you know, call it half U.S. and then half outside of the U.S.
Speaker Change: I would say, since we put that together, we obviously have even stronger results in the United States than we probably envisioned we would have had at that point in time. So again, at that point in time, U.S. was half, everything outside of U.S. was the other half. But I would say...
Speaker Change: We see more opportunity in the U.S. probably than we thought when we initially put that together. Again, at some point in 2025, we expect to be able to provide a more comprehensive update to our view of TAM.
Speaker Change: Great. And then, Chad, you mentioned that go-to-market techniques in North America should be applicable in Europe. What are the risks that make you say should instead of will?
Speaker Change: you know the other dynamic is when we execute
Speaker Change: We are doing a community enablement program. We are doing all of that with our sales team located in Minneapolis. We can reach the world's largest economy in one language, all from one location. There will certainly be regional differences.
Speaker Change: that can add a little bit of complexity to running a program like that in Europe. So those would be the factors that I think we're optimistic that we can execute these programs there, but it may be a little bit more nuanced than how we've done it in the North American market.
Speaker Change: Great, thank you.
Speaker Change: And this will conclude our question and answer session, also concluding today's call. We'd like to thank you for attending today's presentation, and at this time you may now disconnect your lines. Thank you.