Q4 2024 SPS Commerce Inc Earnings Call

Speaker Change: Good day, and welcome to the SPS Commerce Q4 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.

Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. And to withdraw your question, please press star and then 2. Please note that this event is being recorded. I would now like to turn the conference over to Irmina Blaszczyk. Please go ahead.

Irmina Blaszczyk: Thank you, Nick. Good afternoon, everyone, and thank you for joining us on SPS Commerce Corps' quarter- and full-year 2024 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.

Irmina Blaszczyk: These statements are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially.

Irmina Blaszczyk: 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.

Irmina Blaszczyk: specifically our Form 10-K, as well as our financial resource press release for 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.

Irmina Blaszczyk: In addition, we are providing a historical data sheet for easy reference on the investor relations section of our website, SPSCommerce.com.

Irmina Blaszczyk: During our call today, we will discuss adjusted EBITDA financial measures.

and NOMDAP Income-Per-Share.

Irmina Blaszczyk: In our press release and our filings with the FCC, 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.

Chad: Thanks Irmina and good afternoon everyone. Thank you for joining us today. SPS Commerce continues to execute its mission to provide the retail industry with solutions to optimize treating partner relationships.

Chad: We delivered a strong fourth quarter and another year of solid performance.

Chad: For the full year 2024, revenue grew 19% to $637.8 million. Recurring revenue grew 20% with fulfillment growth of 20% and analytics growth of 8%.

Chad: In 2024, we added valuable products to our portfolio with the acquisitions of Vision 33's SAP Business One Integration Technology, Traverse Systems, and SupplyPike.

Chad: And on February 7th, we announced the closing of our acquisition of Carbon 6, which builds on SPS's acquisition of SupplyPike to extend the reach of our network.

Chad: and positions us with clear leadership in revenue recovery solutions, supporting the supplier communities of the two largest global retailers, including the rapidly growing Amazon marketplace.

Chad: By powering highly collaborative supply chains, SPS builds longstanding partnerships with retailers like Canadian Tire, the number one retail brand in Canada.

Chad: They engaged with SPS in 2001, driven by the need to support various omni-channel fulfillment models across their network.

Chad: With more than 20 years in partnership supporting a significant growth trajectory, Canadian Tire trusts SPS's retail expertise to help them make the right decisions as they strive for supply chain resilience among evolving retail dynamics.

GNC is the world's largest global...

Chad: specialty health wellness products retailer, and one of SBS's longtime customers.

Chad: Operating as both a retailer and supplier, GNC partnered with SPS to automate data exchange across their entire supply chain, improving collaboration with over a thousand vendors and more than 30 retailers and grocers.

Chad: In addition, using SPS's analytics solution, GNC shares point-of-sale data to enable its vendors to optimize inventory management and sales strategies.

Chad: GNC was also a Traverse Systems customer prior to our acquisition and leveraged the platform to gain complete visibility into every part of the purchase order lifecycle.

Chad: They were able to isolate the root causes of problematic shipments and worked with vendors to raise the advanced shipping notice compliance rate from 76% to 92%.

Chad: This resulted in better visibility into inbound shipments, allowing GNC to improve time-to-value of its inventory.

Speaker Change: Bissell, a leading manufacturer of home cleaning solutions, uses SupplyPike's automated revenue recovery solutions to consolidate data from retailer portals into a single user-friendly platform.

Speaker Change: This gave Bizzle the visibility they needed to save millions in disputed deductions across multiple retailers.

Speaker Change: Having access to the data on one platform also helped Bissell gain actionable insights into deduction trends across retailers, identify areas for improvement, and optimize revenue recovery strategies.

Speaker Change: Canadian Tire, GNC, and Bissell are great examples that demonstrate the possibility of wallet share expansion across SPS's supplier network.

Speaker Change: I would now like to spend a couple minutes on our growth opportunity. Last year we committed to providing an updated view of our addressable market.

Speaker Change: Over the last several months, we worked with a third-party strategy consulting firm to evaluate the size of SPS's market opportunity, taking into consideration our current product portfolio.

Speaker Change: We identified the applicable industries, determined potential customer count, and potential wallet share, and we currently estimate our addressable market to be $11.1 billion globally, including $6.5 billion in the U.S.

The $11.1 billion TAM equates to 275,000 recurring revenue customers.

Speaker Change: We have included several slides in our investor presentation to demonstrate this updated view of our addressable market. Our expectation is that going forward, we will continue to report the global number of recurring revenue customers.

Speaker Change: and ARPU on a quarterly basis, and provide information related to the penetration levels across our customer categories on an annual basis.

Speaker Change: To summarize, we are pleased with what we have accomplished in 2024, and I'd like to congratulate the SPS Commerce employees for their unwavering commitment to excellence and exceptional understanding of the retail supply chain.

Speaker Change: With the depth and breadth of solutions we offer today, we are uniquely positioned to support all trading relationships and continue growing our network to move the world of commerce forward. With that, I'll turn it over to Kim to discuss our financial results.

Kim: Thanks, Chad. We had a great fourth quarter of 2024. Revenue was $170.9 million, an 18% increase over Q4 of last year.

recurring revenue grew 19% year-over-year.

Adjusted EBITDA increased 18% to $49.6 million.

Kim: For the year, revenue was $637.8 million, a 19% increase, and recurring revenue grew 20%. The total number of recurring revenue customers increased to approximately 45,350, and wallet share increased to approximately 13,300.

Adjusted EBITDA grew 18% to $186.6 million.

Kim: We ended the year with total cash and investments of $241 million.

Now, turning to guidance.

Kim: For the first quarter of 2025, we expect revenue to be in the range of $178.5 million to $180 million, which represents approximately 19 to 20 percent year-over-year growth.

Kim: We expect Adjusted EBITDA to be in the range of $49.5 million to $50.5 million. We expect Fully Diluted Earnings Per Share to be in the range of $0.39 to $0.41, with Fully Diluted Weighted Average Shares Outstanding of approximately 38.7 million shares.

Kim: We expect non-GAAP diluted income per share to be in the range of $0.82 to $0.84, with stock-based compensation expense of approximately $15 million, depreciation expense of approximately $5.4 million, and amortization expense of approximately $9.2 million.

Kim: For the full year 2025, we expect revenue to be in the range of $758 million to $763 million, representing approximately 19 to 20 percent growth over 2024.

Kim: We expect adjusted EBITDA to be in the range of $227.5 million to $231 million, representing growth of approximately 22 to 24 percent over 2024.

Kim: We expect fully diluted earnings per share to be in the range of $1.93 to $1.99, with fully diluted weighted average shares outstanding of approximately 38.9 million shares.

Kim: We expect non-GAAP diluted income per share to be in the range of $3.78 to $3.84 with stock-based compensation expense of approximately $63 million, depreciation expense of approximately $23.5 million, and amortization expense for the year of approximately $39.8 million.

Kim: For the year, you should model approximately a 30% effective tax rate calculated on GAAP pre-tax net earnings.

Kim: In summary, SPS Commerce delivered strong fourth quarter and full year 2024 performance.

Kim: We believe that SPS's leading retail network and competitive product portfolio position us well to consistently deliver on our target revenue growth and adjusted EBITDA profile, which remain unchanged. With that, I'd like to open the call to questions.

Kim: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone.

Kim: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Speaker Change: And your first question today will come from George Kurosawa with Citi. Please go ahead.

George Kurosawa: Hi Chad, Kim, thanks for taking the questions here. Maybe just to start on this new TAM analysis you guys have rolled out here.

It seems like relative to kind of the prior analysis,

Speaker Change: The big needle mover here was quite a quite a significant step up in wallet share I'm curious if you could just talk us through what kind of underpins this new view I mean obviously has expanded the products, but just kind of any color on how you guys came up with this this number

Speaker Change: Yeah, sure George. So we did a quite extensive set of work over the last several months. You'll recall our last earnings call we made a commitment to deliver an updated view on the opportunity sometime in 2025 and so I'm pleased that we're able to do that here on this call. And so working with this top-tier strategy consulting firm in partnership, we really identified all the industries which were applicable for suppliers on our network.

Speaker Change: and identified the total population of potential customers in there and then applied what I think is some pretty reasonable addressability factors to bring those numbers down. Then what we did is we looked at our product portfolio and the distribution of our customers in kind of three size buckets, small, medium, and large, and assess what the potential

Speaker Change: average revenue per customer was there based on current spending levels with certain customers and how addressable the product portfolio is into each one of those sizes.

Speaker Change: potential customer account, and as you noted, a pretty sizable step up in the potential wallet share with each of the customers.

Speaker Change: I think that wallet share, in particular, is something that we validated quite closely, and I will point out that in each of these small, medium, and large buckets, we already have existing customers that are in excess of our target wallet share, so that does give us confidence that we can bring some of our existing customers up to the target over time and take advantage of this market opportunity.

Okay, really interesting. I appreciate the color.

I wanted to ask about your pipeline of enablement campaigns.

Speaker Change: You know, I know you guys have done some work on improving your visibility into what that pipeline looks like. If you could just talk about how we're set up today and if there's any kind of color you can give on what that pipeline looks like in terms of how it informs the mix of Net New logos versus Reswell Chair for 2025. Thank you.

Speaker Change: Sure, George. When we're looking at 2025, we feel really good about the opportunity we see with our community enablement campaigns.

Speaker Change: We do see that that customer count versus wallet share, it'll probably be similar customer count to what we experienced in Q4.

Speaker Change: So, still see a lot of opportunity to grow both customer count as well as wallet share like the pipeline we see in community. But the mix from customer versus wallet share, again, we do expect early on that it's probably closer to what we experienced in Q4.

Okay, great. Thanks for taking the questions.

Speaker Change: Your next question today will come from Dylan Becker with William Blair. Please go ahead.

Dylan Becker: Hey Chad, hey Kim. Maybe, and I appreciate the TAM analysis here, maybe kind of double-clicking on that one too. It does sound like there's ample room across both again, logos and wallets.

Speaker Change: within those scales, to your point, Chad, of larger consumers with a greater propensity to spend versus maybe a greater mix of smaller logos that have the potential for a few number of attached products.

Speaker Change: and we do find, especially on the small side, that it's often their first entrance into these types of digital connections, so a little bit more green field on the small side. On the large side, you know, obviously a smaller number of total potential customers there versus the small, but a higher wallet share potential there. And on the large side, we find that those typical are more on a replacement cycle,

Speaker Change: whether those are on-premise in-house managed software that would be the predominant way. And that's really where our channel go to market really fits in because the channel go to market allows us to gain access when there's ERP or supply chain system changes which is a very logical time to move from those older, historic on-premise approaches to a cloud-based network approach like we offer in those replacement projects at the large end of the market.

Dylan Becker: Got it. That's very helpful. Maybe, Chad, sticking with you, too, when we were out at NRF, kind of obviously there's been more of this emphasis on traceability, at least in

Speaker Change: the grocery segment to some extent, but maybe that proliferates to other end markets as well. How should we think about traceability mandates impacting fulfillment and tracking, the focus on inventory management, layering into the fold of some of these supplier networks? Thanks.

Speaker Change: Yeah, sure. So anytime that there's a government-mandated traceability requirement, we typically see an increased requirement for collaboration between supplying organizations and buying organizations. In particular, we've seen in the last call year to 18 months increased

Speaker Change: focus on traceability for food safety and that has driven incremental interest I'd say in connecting the traceability dots from the suppliers into the buying organizations.

For more information visit www.fema.gov

Great, thank you.

Speaker Change: And your next question today will come from Lakeland Brown with Redburn Atlantic. Please go ahead.

Thank you for joining us. Thank you.

Speaker Change: Hi Chad, Kim, Irmina, thanks for the question. Given the fluidity of Paris announcements over the last few weeks, but also given the uncertainty leading into it, what are you seeing in terms of your customer base?

Speaker Change: And does this drive the need for your customers to set up more digital connections with SPS?

Speaker Change: and also do you see much risk of your customers dropping connections that have better international exposure?

Speaker Change: Yeah, so I think what we typically see is in any time period of Uncertainty That there's an increased need for collaboration between Suppliers and retailers to avoid any potential supply chain disruptions

Speaker Change: And so I'd say the general theme is kind of supply chain uncertainty can be a benefit to these types of investments.

Speaker Change: And then when the uncertainty has to do with kind of the spending levels or potential demand environment, I'd say we're a little bit isolated from what can happen in some of those bigger ticket purchases in the supply chain where uncertainty may have a little bit more negative effect.

Speaker Change: Because we're so mission critical in what we do, really enabling the supplier to get their orders from the retailer and a relatively smaller ticket price for our solution versus many other supply chain applications out there, we don't tend to have some sort of some of the macro headwinds that could exist from uncertainty that maybe other supply chain applications do.

Thank you.

Thanks, that's very clear

Speaker Change: With Amazon being one of your larger retail partners, the announcement that UPS is significantly cutting back its Amazon package delivery by mid-2026, are you expecting any impact and does this change anything on the Carbon 6 strategy?

Speaker Change: We don't expect any impact there. The majority of the third-party Amazon fulfillment from the Amazon marketplace is, there appears to be sufficient capacity in the Amazon parcel network and they're fulfilled by Amazon service, which the majority of our third-party sellers utilize that service, so we don't anticipate any disruption there.

That's very clear. Thanks, Jeff.

Speaker Change: And your next question today will come from Parker Lane with Stiefel. Please go ahead.

Parker Lane: Thanks for taking the question. Chad, after doing this new TAM analysis and getting more granular to the view of small, medium, and large potential targets for the business, is that changing any of the philosophy around go-to-market or informing the way you're allocating resources there this year?

Parker Lane: I'm confident having done this analysis that the overall go-to-market motions are the right ones to go out and tackle this opportunity.

Parker Lane: Got it. And obviously, we're still pretty early here with SupplyPike and Carbon 6 just closed. But when you think about the addition of new retailers to those networks versus just, you know, leaning in on what you have there today, how much of a priority is that here in 2025 as you hit the ground running?

Parker Lane: Applicable for our fulfillment and potentially our analytics product as well And we think that then getting those cross selling Motions in place can just help us expand the wallet share with customers one coming from the SPS side But also the acquired customers coming in from supply pike and carbon six

Got it. Appreciate the feedback.

Speaker Change: And your next question today will come from Joe Vrewink with Barrett. Please go ahead.

Great, thanks for taking my question.

Speaker Change: If I strip out carbon six from the guidance, it looks like the implied organic revenue growth rate is maybe approaching 10 or 11 percent for 2025. Just wondering if you can help reconcile some of the year-over-year moderation, how much might simply just be a function.

Speaker Change: of the new customer acquisition that, you know, already took place in 2024, but obviously that has a bearing on 2025 results.

Speaker Change: Maybe any conservatism on retail macro, I know you just addressed that, but maybe any additional hedging there, or I guess other things you would call out in kind of your planning approach?

Speaker Change: as it relates to how we determine or come up with the numbers, we do look and have a view of saying, okay, what do we think?

Speaker Change: will occur in 2025. We take into account what we see for our existing customers, opportunities with them. We look obviously at our community enablement pipeline. We do look overall to say hey what's happening in the retail environment.

Speaker Change: Now again we tend not to be a great bellwether for that but we certainly do take a look at that and the impact that may or may not have on our products fulfillment and analytics as an example.

Speaker Change: And then overall, I'd say our approach to how we determine that annual guidance and how we did that this year is very similar to how we've done it in prior years.

Thank you for watching!

Speaker Change: Okay, thanks, Kim. On the wallet share, moving from the old $25,000 to the new $41,000, almost $41,000.

Is a lot of that up left?

Speaker Change: How much would, I guess, the WalletShare number have gone up if you just kind of appreciate what the business has ended up seeing since the TAM definition was created and just fulfillment being so much more applicable in the supply base?

Speaker Change: Yeah, so the largest driver for the wallet share increase across all three of the segments

would be the opportunity to increase trading partner connections.

for the fulfillment product.

Speaker Change: And that, you know, we can look at our existing customers where we do have good penetration in each of the three size categories of trading partner connections and show how that does push the average revenue per customer up quite a bit.

Speaker Change: analytics, the adding on the revenue recovery piece of fulfillment, those would contribute but you'd see those contributing more in medium and large but for sure the largest factor is the opportunity we have to drive more trading partner connections per customer.

Great, thank you very much.

Speaker Change: Your next question today will come from William Jellison with DA Davidson. Please go ahead.

William Jellison: Hey, good afternoon and thanks for taking the question. I have two that I'd like to ask. The first for Chad and the second for Kim.

Speaker Change: Chad, to start out with you, I'm curious, with the customer portion of the new TAM, what impact did adding European geographies after establishing the beachhead with Thai Kinetics have on the way you sized the total customer opportunity?

potential customer count.

Speaker Change: around the total customer population in each one of these small, medium, and large. It wasn't really driven by us now having a presence and go-to-market in Europe. That's always been sort of part of our view on TAM. It's always been sort of a global TAM view.

Great. Thanks for clarifying.

Speaker Change: you closed most recently and last year were most likely EBITDA margin dilutive in 2025. And so I'm wondering from you if there's any details you can give on the core SPS business with what you think will drive either nice expense leverage or any cost savings this year.

in 2024.

Speaker Change: over time saying that we do see an opportunity to scale and grow into various investments we've made there. You started to see a little of it come through in 24, our expectation is

Speaker Change: you'll see more come through in 2025 as well as in future years. So that doesn't mean there isn't opportunities to continue to scale in each of the line items, but gross margin is one area that we would point investors to that we expect to see continued improvement in overall gross margin.

Great. Thank you both.

Speaker Change: And your next question today will come from Jeff Van Ree with Craig Hallam. Please go ahead.

Speaker Change: Sub-segments of retail where you don't have a big footprint now.

Speaker Change: and took that total population of all those applicable industries, mainly on the supplier-to-retailer side. And then those were some pretty big numbers, and so we worked through those and applied certain addressability factors on top of those industries to get to our target customers.

Speaker Change: So, I'd say the majority of these industries are represented in our customer base today, but there could be varying levels of penetration inside each one of those NICS codes.

Speaker Change: Yeah, okay. All right, and then Kim, on carbon-6, it's not that long since we had the initial acquisition call, but just curious if anything has changed in terms of revenue, any of the expectations for the fiscal year? And then more specifically, I know when you bought it, you had a little more discovery to do, but any more thoughts on how the $40 million is spread through the year, and in particular, seasonality, maybe putting a Q4 a little more back-end loaded in the year into Q4?

Speaker Change: Sure, so to your point, we just closed that acquisition last week, so the information that we provided at the time we announced our intent to acquire, which was $40 million of revenue for the year, approximately $5.5 million.

Speaker Change: There's so many, I mean there's thousands of customers within Carbon 6.

Speaker Change: And so at any point of the year, there's different types of, you know, third parties and first parties that are selling with Amazon.

Speaker Change: So, there really isn't a seasonality, per se, to provide to you. We provide it, again, at time of announcing our intent to acquire, our best view of what we're anticipating the revenue to be, as well as the profit.

Okay, got it. Thank you

Speaker Change: Your next question today will come from Quintin Gabrielli with Piper Sandler. Please go ahead.

Quintin Gabrielli: Hey guys, thanks for the questions here. Chad, maybe for you, you've outlined the international expansion as a key driver for SPS to capture more of this pan that we just got the outline of.

Quintin Gabrielli: obviously there's going to be organic and inorganic investment but can you remind us the mix right now of enablement campaign contribution for international customers today versus channel and then kind of how you think about that moving forward you know is there opportunity to accelerate or add more enablement campaigns specifically for the international market

Quintin Gabrielli: When you kind of think about our approach for Europe in particular, I'd say still a large source of customers for us is US retailers.

Quintin Gabrielli: running enablement campaigns where the suppliers are in Europe. And we've had this for years, the ability to add them to our network.

Quintin Gabrielli: The second piece would be our move to run community enablement programs in Europe.

Quintin Gabrielli: something that we intended to launch in Europe here in 2025.

Quintin Gabrielli: and then the channel would be kind of a third leg to that and probably something we'd be able to focus on more after we kind of put the second leg in place of getting the community enablement programs going in Europe.

Speaker Change: Got it, that's helpful. Camden, and maybe for you, you know, gross margins were fairly resilient here in Q4. Is there anything with product mix or anything one time here that we wouldn't be able to expect kind of this level of gross margin to continue in the fiscal 25? Thanks.

Speaker Change: Sure, so gross margin is one that's probably best to look at on an annual basis. There is some, you know, noise when you're looking at it on a specific quarter sometimes. However, I take you back to our overall statement that we believe there's opportunity to continue to show gross margin improvement. You started to see that in the

Speaker Change: in the latter half of 2024 and we have expectations in 2025 based on our implied guidance of EBITDA that we'll continue to see some improvement on gross margin.

For more information visit www.FEMA.gov

Speaker Change: Thank you for taking my question. Chad, could you just talk about the key priorities for investments in the coming year?

Speaker Change: to talk about some of the innovations we did in 2024 and take advantage of all the cross-selling potential that is

Speaker Change: you know, continuing and taking advantage of that cross-selling opportunity for the long term. And then we're always looking at aligning our sales and marketing capabilities in the best way to meet the global market opportunity, whether that's

As I mentioned earlier, getting the traction

Speaker Change: with the new go-to-market in Europe or driving additional trading partner connections through cross-selling and up-selling existing customers, but always kind of continually with that sales and marketing investment that we do make, making sure it's aligned to take advantage of the market opportunity.

Speaker Change: Thank you. And then on the analytics front, the 8% analytics growth this year, it's down from about 10% during the past two years, 10% growth over the past two years. Can you discuss just some of the puts and takes around analytics growth this year that you would expect and maybe what we should expect?

Speaker Change: So analytics of 8% for the year, you're correct, that compares to 10% from the prior year.

Speaker Change: Again, depending on what's happening in uncertainty in retail, macro environment, et cetera, that one is a little bit more susceptible.

to customer buying behavior.

Speaker Change: So, our expectation for 2025 is somewhat similar to what we've seen in 2024. We still see great long-term opportunity for the products, but again, that is a portion, that is the one part of our portfolio that is a little bit more susceptible depending on what's happening in the macro environment.

That's helpful. Thank you. That's all

Speaker Change: Your next question today will come from Ian Black with Needham and Company. Please go ahead.

Speaker Change: Hi, this is Ian Black on for Scott Berg. With the addition of Carbon 6's marketplace solution, should we be expecting higher customer ads in 2025, even with a similar fulfillment mix on campaigns?

Speaker Change: Hi, Ian. For the Carbon 6 acquisition, at the time we announced our intent to acquire, we had said we anticipated it would add about 6,500 customers, so that's a much larger quantity of customers than you would typically see from us, and the majority, large part of that number, it really has to do with the third-party marketplace side of the Amazon sellers.

Speaker Change: So that would be, now that the acquisition is closed in Q1, all it's being equal, that's what you would expect to see for the net customer ads in Q1. Now do keep in mind that they do have a smaller price point.

Speaker Change: uptick in a large quantity but the amount of revenue per customer is lower. So that's what you'd expect now that we've closed that acquisition and then we'll continue to obviously

Speaker Change: By owning the Carbon 6 product, we'll continue to make sure that we are selling that product to existing and future customers as well.

Speaker Change: Given the company's current growth rate, should we be seeing an additional three to four customer ads in Q2-4 from Carbon 6 on top of that?

Speaker Change: So probably premature as far as what you'd expect for a customer ads for Carbon 6.

Speaker Change: We, again, we, since we just closed the transaction, it is probably a little premature to give that specificity. As far as our expectations of what the overall revenue will be, that has been taken into account.

Speaker Change: in our guidance, and then obviously every quarter we'll provide all in what our customer count as well as wallet share is.

Okay, thank you for taking my question.

Speaker Change: Again, if you have a question, please press star and then 1.

Speaker Change: And your next question today will come from Nihal Chokshi with Northland Capital Markets. Please go ahead.

Nihal Chokshi: Yeah, thank you. And I see the updated slide deck, really nice detail on the new TAM breakup. I do have a question on that, but first I wanted to ask, how big is the Amazon-only supplier community in terms of your potential customer count?

Speaker Change: So in our updated number of the approximately 275,000, that takes into account the first-party side, not the third-party side.

And how big is that first party site?

Speaker Change: That would be captured in our overall view of what that product offering or revenue recovery is. So at the time we announced the supply pike

acquisition, we have provided a view of what we

The

Speaker Change: First-party revenue recovery is included in this TAM analysis. When we started the TAM analysis

Speaker Change: We did own SupplyPike and so we included that portion of the market. Therefore, the one-party side of Carbon 6 would be included in those figures that Kim just stated.

Speaker Change: If we did a refresh in the future, we'd probably include that.

Speaker Change: 200,000 Amazon third-party sellers doing at least a million of GMV on Amazon Marketplace.

Speaker Change: That would give a sense for how many are out there.

Speaker Change: Okay, so that that could be potentially a significant incremental TAM there.

Speaker Change: Yes, however, the average revenue per customer on that third-party seller is quite a bit lower than what we would find as a potential average revenue for a one-party seller where we might have fulfillment in analytics and revenue recovery all addressable to that one-party

as well as many more connections per customer.

Correct, correct.

Yep.

Speaker Change: Yeah, so the best way to probably take a look at that is to look at slides.

Speaker Change: 13 and 15 together and slide 13 there is footnoted that this distribution of customers really fits for

Speaker Change: each of the size groups, small, medium, and large. So you could take the small size information on slide 15 and sort of overlay this distribution that you find on 13 because that distribution fits for each of the three size groups.

Speaker Change: Okay, so I mean approximately it looks like small represents 90% of the customer opportunity, maybe 85% of the customer opportunity, and so therefore of these customers that are at the $40,500

Almost 85% would be small customers.

Is that correct?

The way you should interpret the...

Slide 13.

Speaker Change: That's showing overall across all of our customers and then where they are relative to that wallet sharer ARPU, where we're at as of the end of 24, which is at $13,300, and then the stated opportunity of the $40,500. So to your point,

Speaker Change: We're illustrating that there's Up to or a little less than 10% of customers already at that amount then to Chad's point yet

Speaker Change: The footnote talks about, if you were to look at this chart, which we're showing this in total, we're not showing it by small, medium, and large, but if you were to look at it by small, medium, and large, you would see somewhat of a similar

Speaker Change: underlying distribution, not the exact numbers, but underlying. So that point was made to show that there's a similar concept when you're looking at small, medium, and large as it relates to customers in each of those buckets, that some are below, some are at, and some are above.

Okay.

Okay, I think I understand. Thank you.

Speaker Change: This will conclude today's question and answer session as well as conference call. Thank you for attending today's presentation. You may now disconnect your lines and have a great day.

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