SPS Commerce, Inc. (SPSC) Earnings Call Transcript & Summary

Good day, and welcome to the SPS Commerce Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Irmina Blaszczyk, Investor Relations for SPS Commerce. Please go ahead.

Thank you, Megan. Good morning, everyone, and thank you for joining us on today's call to discuss SPS Commerce acquisition of Traverse Systems. Before turning the call over to management, I will read our safe harbor statement. We will make certain statements today, including with respect to the acquisition of Traverse Systems, expected financial results, go-to-market strategy, and efforts that designed to increase our traction and penetration with retailers and other customers. These statements are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note, these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to our SEC filings 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. During our call today, we will discuss adjusted EBITDA financial measures. 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 adjusted EBITDA measures. And with that, I will turn the call over to Kim.

Thanks, Irmina, and welcome, everyone. Thank you for joining us on short notice. We're excited to announce the acquisition of Traverse Systems, which expands the SPS product portfolio and supply chain performance and optimization. SPS acquired Traverse Systems for approximately $25 million in cash and $4.3 million in stock. The transaction closed yesterday and will be reflected in our Q2 2024 financial statements. For the second quarter of 2024, we expect the acquisition will add approximately $600,000 in revenue and negatively impact adjusted EBITDA by approximately $200,000. For fiscal 2024, we expect the acquisition will add approximately $2.9 million in revenue and breakeven in adjusted EBITDA. For fiscal 2025, we anticipate the acquisition will add approximately $5 million in revenue and approximately $1.5 million in adjusted EBITDA. We expect customer count to increase by approximately 50 and anticipated impact to wallet share of less than $100. Lastly, we will have an increase in amortization of intangibles. However, that amount will not be finalized until the acquisition accounting is complete. We will provide those details when we issue our second quarter financial results and provide updated full year 2024 guidance for the combined company in July. And with that, I'll turn it over to Chad to discuss the strategic elements of the deal.

Thank you, Kim. We're excited to announce the acquisition of Traverse Systems, an industry-leading SaaS platform that provides retailers and their merchandise suppliers with a unified view of supply chain performance to improve collaboration and enhance the consumer experience. SPS Commerce is well positioned to help trading partners enhance their supply chain performance, which we believe requires effective communication and exchange of information. While retailers meticulously measure the performance of their products with consumers against their goals, they often have limited ability to measure their suppliers' performance in support of those goals. Traverse Systems' vendor scorecarding platform provides great visibility into common performance metrics, such as inbound shipments, real-time disruption management, and invoice accuracy, enabling trading partners to drive out inefficiencies from the supply chain to optimize inventory management and maximize profitability. Traverse Systems has a proven track record of helping retailers to improve vendor performance, and we're excited to join forces with the team of experts who share our passion for delivering solutions that modernize the retail supply chain. The combination of Traverse Systems' unique capabilities and SPS' network of retailers, suppliers, 3PLs, and manufacturers, provides our customers with a consolidated offering that not only enables them to better manage their supply chain, but also empowers them to transform it into a competitive advantage. We'd like to welcome Traverse Systems' employees and customers to the SPS Commerce community. We believe we have a large global opportunity in front of us, and this acquisition furthers our commitment to delivering leading supply chain solutions to the retail sector. And with that, I'd like to open the call for questions.

[Operator Instructions] Our first question comes from Parker Lane with Stifel.