SPS Commerce, Inc. (NASDAQ:SPSC) Q3 2023 Earnings Call Transcript

Jeff Van Rhee: Got it. And then I guess just a longer-term question. When you look over the last several years, how is what you’re displacing changing?

Archie Black: I would say it has remained fairly consistent over the last several years. Obviously, if you look at the numbers over the last decade, we’ve clearly moved upstream. We’ve been very effective at doing that. We continue to displace paper and facts from retailers that aren’t automating their supply chains and/or suppliers that have not worked with retailers in an automated way. So we continue to see that in our enablement campaigns where somebody has not been exposed. Obviously, in today’s world, it’s significantly easier to start a brand to start a new supplier Company. So we continue to see that. We continue to see people as — especially as they move ERP systems to move away from legacy software and do it yourself. So that trend continues. So I would say over the last two, three years, not much change over the last decade, clearly moved upstream, which is why — one of the reasons why our ARPU has increased so dramatically over the last decade.

Operator: Next question comes from Mark Schappel with Loop Capital Markets. Please go ahead.

Mark Schappel: Hi, thank you for taking my question. And Archie, again, congrats on your time with SPS, wish you the best. Just wondering if you could start with you, if you could provide maybe some additional details around the order exchange in terms of maybe some market areas that they focus on are very strong in like number of employees, where they’re profitable, things of that nature?

Archie Black: Yes. It’s a very small acquisition about 10 employees. And this Company was really built to help and implement SPS Commerce customers starting in Australia. And where their expertise has been, I would call a long tail or the one-off ERP systems where they’re integrating to them and have built some expertise there. So when you look at the deal, it makes a lot of sense for a couple of reasons. One, well, first off, it’s very small. But what we found is when we make acquisitions of partners like this, obviously significantly smaller than MAPADOC or Data Masons. But we have seen that we end up having a better customer experience, and we end up having a little bit more sales momentum. So one of the things that’s a little bit unique on this deal is, although it was in the other deals as well, is that almost all of the revenue was already flowing through SPS Commerce.

So you’re not seeing a pickup on revenue. But now we control the revenue, we control the proprietary information, and we can more integrate that into our business. So really excited about the team there and the skill sets.

Mark Schappel: Great. And then you mentioned ERP and just to stay on that theme, I was wondering if you could just comment on what you’re seeing with respect to the ERP implementation side of your business. Particularly the supplier community.

Archie Black: Yes. It continues to be, I would say, in the small market, mid-market. It continues to be very strong in the enterprise, it’s a little slower, not substantially, but slightly slower, but people continue to move forward. There are so many challenges that suppliers and retailers have that they don’t — if they don’t fix their base infrastructure, they’re just not going to be able to meet the demands of the customer. So that is what’s driving it. It’s not net new technology. It’s just a fundamentally are not able to meet the demands of their customer unless they really do some upgrading, which obviously includes some of our products as well.

Operator: [Operator Instructions] Our next question comes from Nehal Chokshi with Northland Capital Markets. Please go ahead.

Nehal Chokshi: Yeah, thank you. And congratulations Archie on an incredible career. Chad, we look forward to working with you. You talked about in your introductory remarks, the value of networks, especially for your customers. In the context of the international footprint that SPSC has, what do you think can be done to enhance that value such that it becomes similar to what it is in the United States?