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

Good morning, everyone. I think we're at time. So we'll go ahead and get started. Welcome to the SPS Commerce 2025 Investor Day. We appreciate you all joining us here in-person, and thank you to all those on the webcast. Today's agenda includes presentations from the SPS leadership team, a moderated customer panel discussion. And at the end of the program, we'll open it up for questions. Before we begin, we will look at our forward-looking statement. I'd like to remind everyone that our presentation contains forward-looking statements, which are subject to risks and uncertainties as outlined in our SEC filings. We'll also be discussing non-GAAP measures. Reconciliations to comparable GAAP measures can be found at the end of the Investor Day presentation, which will be posted on our Investor Relations website and on our SEC filings page. To that, we are ready to start. And I'll introduce Chad Collins, CEO of SPS Commerce, to discuss our growth strategy.

Thanks Irmina. Well, a very warm welcome from me, especially for those of you who came to my hometown for the last 25 years, Minneapolis and also our headquarters location and home of about half of our 3,000 employees, about half of them are based in the Minneapolis-St. Paul area. So thanks for joining. So for those of you who are a little maybe less familiar with the story, SPS Commerce, we operate a network in the cloud. And that network connects retailers to all of their suppliers to exchange supply chain information and facilitate collaboration for efficient supply chain processes. We are really servicing three main end-market groups. First, retailers, and I'll point out that, of course, that includes the retailers you traditionally think of like Target right down the street here, we have a pretty broad definition of retail. So also included in there are grocers. And also included there are distributors. And within distribution, that could be industrial distribution, food service distribution, medical supply distribution, really large buying organizations that are purchasing finished goods and then reselling them fit into our definition of retailers. And of course, we all have all the vendors or suppliers to those organizations and then also the third-party logistics providers that often sit in the middle of those transactions between retailers and their suppliers. And by using our network, then these three market segments really get the benefit of improved speed to market. They can improve their sales growth and the margin on those sales and lots of benefits both on the retail side and the supplier side for reduced operating costs for using our network. So our purpose statement here at SPS is really to power the connections that move the world of commerce forward. And kind of the heart of that is really this idea of connections based on our network. And the power of the network and the connections that we make on that network and also the connections we make with customers and one another really powers everything that we do here at SPS and is frankly, quite motivating for our employees. In fact, I joined SPS just about 2 years ago, and I've worked in supply chain software my whole career first as a consultant putting in systems and then as a leader of other software companies. And all those years I've worked in supply chain software, I've seen all this investment that organizations make, whether it's warehouse management or transportation management or planning in the four walls of their operation. But I've always felt like supply chain was really inherently multiparticipant and the right types of technology to solve that multiparticipant problem is really a network technology. So after working in this industry for years, I always saw the power of the network, and that was one of the things that really drew me to SPS because when you can put multiple participants on the network, then that really facilitates the collaboration. I always say, no matter how good your systems are inside the four walls, if you can't get the right product at the right place, at the right time from your suppliers, nothing else downstream from that really matters. And we'll talk today a lot about the network. And Mike, our Chief Product Officer, who's up next, will walk you through all the applications on the network. But I think that is an important thing for you to understand is that although we sell and have a price list of applications, they're all powered by the network. And everything we do is connected to that network. So both the things of products we've had like fulfillment for a very long time, but now even the newly acquired products like revenue recovery are getting lots of value by being connected to this network. So think of a set of value-added applications that are all benefiting and contributing to that underlying network. Jamie will walk you through -- Jamie is our Chief Technology Officer. He'll walk you through a few details on that network. But one of the important things that he'll highlight is this idea of being protocol agnostic. So certainly, we do a lot of EDI transactions on the network, but we also do have a lot of endpoints that are API. And in some cases, for less sophisticated users of the network, they can be file-based. So for us, how customers connect to the network is a lot less important than getting them connected to the network. And consistently, we're chosen over our competition for a few reasons. One is our deep expertise in retail and distribution supply chains. So we really have a great understanding and a lot of domain expertise around the expectations that retailers and suppliers have -- retailers and distributors have on their supplier organizations and oftentimes the complex rule sets that are involved in that. We've then developed internal processes especially you'll hear today about our retail go-to-market, where we've perfected this process of helping retailers do the outreach and digitally onboard their suppliers, and we've been very unique in that internal process. And then, of course, our technology platforms. And then what we're seeing increasingly now is customers choosing us because of the actual data inside of that network. So there's been a definite view of having more data can help with supply chain decisions and having more data can help power AI decision-making. And so increasingly, customers are coming to us because not only they see the business processes that can run on our network, but they see the power of the data that's in our network. So we've had many waves in the retail industry or retail ecosystem that SPS has grown through. In the early days, there was this effort to fully digitize in the development of e-commerce. We saw that e-commerce then shift into omnichannel fulfillment, really more advances in e-commerce, the idea that you could use a store as a site of replenishment for e-commerce orders that also brought in the advancements of buy online, pick up in store. And then what we saw during the pandemic was really all these retailers had road maps for what they were doing in e-commerce. And once the brick-and-mortar stores had to close or were substantially impacted by the pandemic, we saw a big acceleration of the omnichannel initiatives throughout the pandemic. And one of the big accelerations that was there was the rise of drop ship e-commerce. So that rise of drop ship e-commerce really did create an opportunity for SPS to help facilitate the connecting of lots of suppliers to retailers to facilitate that drop ship e-commerce. And so through these waves, they've certainly seen different trends and how they've impacted our business, especially in terms of how we've been able to add customers and increase average revenue per customer through those time periods. So in that sort of 2010 through 2016 time period, where we have the digitization and the rise of e-commerce, keep in mind here during the same time period, you have an early penetration of the TAM, right? So SPS has always been a leader in getting the long tail of the suppliers digitized. So you saw healthy growth rates, both in terms of our ability to add customers on a percentage basis as well as increase the ARPU. Then as we sort of saw these early omnichannel initiatives, us penetrate the TAM a little bit more in that 2017 through 2019 period, a bit of a flattening of some of those growth dynamics. And then when we had this pull forward in the pandemic, a very large acceleration in the customer count driven not exclusively, but very substantially by the rise in the drop ship e-commerce that I spoke of earlier. If you look at where we're at right now, we're seeing a bit of a normalization on the omnichannel initiatives of retailers. They pulled certain things forward. These omnichannel initiatives continue, and we will be the benefit, but we certainly did see some pull forward. And now in this period 2023 through 2024, we have more of a stabilization of the deployment of those omnichannel initiatives from retailers and quite frankly, we have pretty widespread uncertainty related to the current global trade environment. How this has impacted us is we have seen steady growth in our average revenue per customer, but a bit of a slowing on the customer count, especially in the year 2024. And Kim will walk you through a little bit more on the dynamics of customer increases over the years and what we're going to see going forward. So a question we often get is, especially in light of our new long-term expectation on the top line of high single digits, hey, what are the some of the factors that went into this high single-digit expectation that you're setting with us now? So certainly, there was a bit of a pandemic pull-in of demand. And you might say, hey, the pandemic was a long time ago. Why was that affecting you? Why didn't we see that sooner? Well, because of our land and expand model, that did sort of carry all the way through into 2023 time period. We've also been impacted by the lower net customer adds in 2024. Now while this was primarily driven through the 2024 programs focused on retailers we've historically worked with more, which did increase the revenue of the suppliers that were connected to those retailers, but didn't have as much impact on the customer adds. And then finally, there's certainly macro uncertainty and global trade uncertainty, which is impacting the entire retail ecosystem at the moment. But on the more positive side about the dynamics, I'd say there are some new retail dynamics that are macro factors and longer-term tailwinds for our business, which I'll explain. We do have a large and lots of room to penetrate the total addressable market. And I think the more uncertainty we see in the supply chain, once things stabilize, that typically drives an increased need for supply chain collaboration as a result of that uncertainty and that need for collaboration typically drives supply chain technology and software investments. So if you look at some of the dynamics that is happening in retail right now, you have a rapid emergence of new brands. And so the barriers to entry for new consumer brands have probably never been lower. So brands can access consumers directly through Shopify or Amazon Marketplace, and they can promote their brands in unique ways, primarily through social media marketing and gain access to consumers. And so we're seeing an increase in the total number of brands in the retail ecosystem. And often when these brands gain traction on the Amazon Marketplace or via Shopify, they then get contracts with traditional brick-and-mortar retailers, which introduces all the new requirements to do business and operate the supply chain in the way that the retailers are expecting. We also see quite a bit of expansion into new marketplaces on the retailer side. So we're seeing retailers expand their business from the buying and selling goods of just moving into this marketplace model, and that creates new opportunities for us in the retail ecosystem. And we think longer term, once there's more certainty in the global trade environment, we'll see some degree of supplier rebalancing based on geographies and no one is better positioned to help onboard new suppliers than SPS Commerce and our differentiated approach of helping retailers onboard their suppliers. So on the TAM, just under a year ago, we refreshed our total addressable market. We did a complete bottoms-up analysis using specific companies and specific SIC codes in the U.S. and expanding and extrapolating that to the global TAM. And we identified that there's a $6.5 billion opportunity for us in the U.S., and that's just over $11 billion on a global basis. And the way that works and kind of I think -- a simple way to think about our business is we're adding new customers, and we're increasing the average revenue of those customers that are in our network. So we believe through this TAM analysis that there's an opportunity to increase from just over the 50,000 customers we have today to 275,000 customers globally on our network and increase that average revenue per customer from just over $13,000 to over $40,000, primarily driven by increasing their use of the network with new connections and then secondarily by adding and cross-selling products to those customers to increase the revenue. We'll -- I'll talk quite a bit about our go-to-market strategies, but we really organize our go-to-market strategies in two categories. One is landing new customers, so increasing the number of customers on the network and then expanding the use of those customers. And so we'll dive into each of these go-to-market strategies in the go-to-market section. And so I want to introduce you to the team. A lot of you get to only see Kim and I, but there's a great team supporting the whole company here. So next up will be Mike Svatek. He's our Chief Product Officer. Mike, you want to wave your hand in the back there. Mike joined us about 8 months ago. He's got a deep background in retail technology and supply chain technology, typically focused on launching innovative new products and managing a portfolio of products. Jamie Thingelstad has been at SPS for quite a while as our Chief Technology Officer. You're going to hear from him today about the power of the network itself and lots of examples of AI use cases that we have in our organization. Many of you will know Kim, our CFO. She'll walk us through the numbers. Also joining us today is Erica Koenig, our Head of HR; and our new Chief Marketing Officer, Maria Pergolino, who has a deep background in leading the marketing organizations of multiple SaaS companies. Not able to be with us here today because he's got a customer commitment is Dan Juckniess, our Chief Revenue Officer. So I just want to leave you with one idea and one maybe theme of the day, and you're going to hear this kind of throughout the various presentations. SPS has had a nice growth over the years in what I would describe as a sales-led growth model, meaning we have lots of salespeople. They're out there running relationship management programs to gain new customers. They're dealing with customers to upsell and cross-sell those customers, I'd say much more of a traditional manual prospecting and selling approach. And we will certainly continue that going forward. But to augment that approach, you'll hear a lot today about a concept that we have called network-led growth. And this is actually where we're getting demand signals about our customers from their activities on the network itself, and that becomes a signal to us for upsell and cross-sell opportunities. We can also use the network data itself to prospect new customers. And so this is very unique in a SaaS model to have these types of insights about the market and about your customers from the data that you have on the network itself. And we'll walk you through a few of these examples, but I think this is really a powerful -- think of it as kind of next chapter of growth opportunity for SPS to actually use our network to identify needs that our customers have. And then although today, it's mostly requiring salespeople to intervene with that, over the longer term, we strongly believe there's going to be opportunities to pick up those signals and actually convert customers directly in the product and so that they can increase their usage of SPS directly through the product and without actually interacting with the salesperson. But what you'll hear a lot about today is this concept of network-led growth. And with that, I think I'll hand it back to Irmina.

Thank you, Chad. So what we heard Chad just talk about is obviously product strategy, network-led growth and how important that network is to SPS' differentiation in the market. I'll let Mike come up and dive deeper into the product strategy and the contribution that network has to that.

All right. Good morning, everybody. Good to see everybody here in person and for those who are online, thanks for following along. My name is Mike Svatek. I'm our Chief Product Officer. And I'm going to take you through our general thoughts on product strategy and also dive a little bit into some detail around the new products that we've launched, our new retail go-to-market motion as well as talking about sort of our traditional, if you will, supplier products. But without further ado, we'll jump in. If you think about SPS over the long haul, really we've been focused on the perfect order. Think about supply chain excellence and what that means. So it means a retailer putting in an order, it means that supplier receiving that order, acknowledging it, packing it, getting it shipped either directly or through a 3PL, carrier hands it off. It's received hopefully, right, at a retailer. It is then inbounded right into that dock. But it's also when it's received, everything shows up, right? So it's at the right location, it's on time and it's in full. That's what essentially the SPS network and our fulfillment products have been built around. A lot of the concepts in that revolve around timeliness of data and automation, right? Automation is absolutely key and core to what we do at SPS, and we continue to invest in there. But one of the things I want to land with you today is the critical nature of collaboration in the supply chain and how we're drawing a string through every product and every piece of innovation that we're developing now and for the future to make sure we're bringing forth collaboration in the supply chain. So why does collaboration matter? Well, when you look at the various roles of different actors in the supply chain, whether you're a 3PL, a retailer or a supplier, or other forms of actors as well, what you have is a complex, highly interdependent value chain, not only within your own business, where the current step depends heavily on the prior step and influences the future step. You also have a situation where we're repeating this process daily, weekly, monthly, sometimes by the dozens, sometimes by the millions, high-velocity value chain and one that's interconnected with your trading partners. And so the opportunity here to automate clearly has been big, and it's what's been driving our business. The opportunity to collaborate, we think, is even greater. In an era where supply chains are being disrupted, in an area where there is a requirement just for more agility, not only because of the disruption, but also because of the opportunities we're seeing in the market, that drives collaboration. The other thing that's driving collaboration is we're now in an era where data is much more available than it's ever been. Back to what Chad said earlier, the power and the value that we see in the data and the network itself is not only encouraging, it's also enabling our customers to collaborate better to create those kinds of efficiencies they're looking for in their supply chain. So we're focused both on collaboration critically, but also critically automation moving ahead. Now when you look at the various value chains in our customer base, there's a broad spectrum of places we're already adding value, whether you're a 3PL, a retailer, or a supplier. And our customers have enjoyed those benefits, but they're asking more from us. We're having conversations. My team certainly, our sales team, our services team, our executive team are in constant contact with our customers and our partners, looking for where are those next opportunities for us to advance our innovation to provide even more value to them. As we look at those opportunities, we're following build, buy, and partner strategies. Let me kind of unpack why we would approach each and give you an example of each. So on the build side, we're looking for those opportunities in the market and our customer base where we can extend our core. So from our core, we look at the ability to take native organic development to extend that, not only leveraging the applications we have today, but critically the data and the network that we have today to bring to market something new. A good example of this would be our solution for manufacturing, which we launched earlier this year. If you think about what manufacturing is, if you're a supplier that's on our network today, you're likely trading with a retailer, that's the distribution chain. Well, now we can take our capabilities that were organically built over many years, improve now with manufacturing capabilities and invert that. So that same supplier can now deploy SPS into their supply chain so that they're getting raw materials delivered or potentially finished goods or co-man materials sort of delivered in where they can then act in the traditional supplier fashion. So not only on the distribution chain, but now also on the supply chain for the same customer in the same network. That's a great expansion of our organic capabilities through a build motion. Now on the buy side, we're constantly looking for the highest value opportunities within our customer base to add value, which are highly complementary to our core and are also proven. So examples here are our recent acquisitions of Carbon6 and SupplyPike, where as we looked across our supply base, we saw a significant opportunity to help them accelerate their ability to recover revenue. In the case of a deduction that was perhaps erroneous, the opportunity to identify that in an automated way and then go through the correct dispute processes with those retailers to recover that revenue. And in other cases, going through that process and discovering that the deduction was true and fair and giving them an opportunity to get better as well. So this is -- was a great opportunity for us to acquire two of the best platforms in the market, assimilate that into the SPS portfolio and then connect it to our network to start getting disproportionate value. The last area is partner, and there's a wide range of places where we may partner. What guides our philosophy here, again, is critically always focusing on the needs of the market and the customer to identify an area where we can add a new capability or potentially a new product line to the mix. One area that -- and typically, we would do this in an area where the nature of the engineering or the technical work to be done isn't core to us, right? There may be this problem has been solved in a different industry or maybe there's a horizontal software platform that provides this. We would then adopt that and then apply that in a vertical software motion for our particular industry and then bring that to market. So an example here would be a capability that we have launched over the summer, which allows us to extend the range of order channels to the e-mail inbox. So if you think about a vast array of suppliers that we have in our network today, you'd be surprised by the number of retailers or the suppliers rather that are still receiving orders via their inbox, and now we can immediately and instantly in real time attach to that and pull that information right into our network, just like we do with all their other orders. So let's talk about that network. As we're pulling orders in, what's unique about our network? Why are we able to do what we do so well? Well, there's two sort of concepts I want to land real quickly about the network. First of all, our network enjoys classic network effects, meaning that by adding an incremental participant to the network, whatever that participant's role may be, 3PL supplier retailer, it adds value to the other participants in the network, classic network effect. There's also a secondary effect here as well. meaning that as we add new applications or an existing participant in the network launches new capabilities in the network through our application, it creates additional value for the participants as well. So we have a double network effect happening today. Let me give you an example of the second one. If you're a retailer who's leveraging SPS to manage your supply chain, you have brought on potentially through our retail go-to-market motion, many of your suppliers into the network. And you're having a very healthy, very productive trading relationship with them through our network. Now as a retailer, you decide, I'm going to go ahead and unlock my point of sale or my sell-through data into that same network to benefit my supplier base. Why would I want to do that? Well, through that motion, the suppliers now have access to point-of-sale data. They have access to basically sale velocity. They can see inventory positions. And what that retailer has done is they've unlocked collaboration. They've allowed that supplier to have access to the information that they see. Therefore, that supplier is spending their energy, their time, their efforts, making sure that their distribution chain, the retailer in this case, has an accurate inventory position. They're not going to sell out. They're not going to stock out, so they're never going to miss a sale. And so that form of collaboration emerged because we -- because that retailer decided to unlock that point-of-sale data on the network. So that's a form of collaboration. So a couple of takeaways really, I think, at least at this point in the presentation around the network, so -- and the applications. One is that the applications are fundamentally data-powered. What do we mean by that? Well, we're not the type of application that you have -- where it's a productivity application where you log in, do your work, log out and it sits there dormant until you get back into it and use it again, right? Our applications are deeply and fundamentally connected to the network. They are working for our customers 24 hours a day, 365 days a year to basically progress all of those supply chain use cases that our customers rely on us for. Secondly, they're able to detect within the network signals that are an opportunity for them to improve their business. So that may be a signal that allows better sell-through. That may be a signal that allows them to recover revenue. It may be a signal that allows them to work with a supplier or in reverse, the supplier work with the retailer to tune their performance in the network to make sure that we're getting stuff delivered on time and in full. So those signals emerge in our network and our applications today and increasingly so in the future, we'll be aware of those signals and be able to act on those. Secondly, all of our applications are system integrated. What that means is the network fundamentally, as it's been built out over decades and an increasing rate is connected into primary core systems of record at our customers. This is a really important point. We're directly connected to ERPs. We're directly connected to WMSs, TMSs, IMSs, OMSs as well as e-commerce platforms. And so the fundamental motion in our customers' businesses is directed into our networks and our applications have access to that. So the last part I'll sort of leave you with on the network is that the way that we deliver value through the network is expert-led, again, based on decades of experience and increasingly with the data aperture that we have and our ability to process that data, we land a customer experience through the deployment of our products, through best practices and prescriptive techniques that ensure that when -- whether you're a supplier 3PL or a retailer, you're not struggling to understand how to get value through our network. We're going to land it with prescriptive recommendations, then we're going to follow that all the way through implementation. And importantly, we're going to continue to monitor and assess the health of that relationship throughout the tenure that they have with SPS. So it really is expert-led and expert managed. Most of the way -- so the primary way to date that we've gotten customers into the network is through our retail go-to-market. And so for those who have been following SPS for a while, you'll recognize the term community. And so community has been that very powerful motion where we have a retailer collaborate with us to unlock their supplier base and bring them into the network. And that motion certainly continues and it continues to be core to what we do. One of the exciting things we've been able to achieve in the last year is with the notion of collaboration, we saw an opportunity in our customer base to make that not only just bring them into the network to build the network itself to enable collaboration or to enable trading. But when you think about -- once you have that, you want to squeeze every ounce of value out of that relationship you can for both parties. And so through that, that rationale led us to acquire Traverse. So Traverse is the platform today that's known as SPS Performance Management. So performance management is the platform where retailers and suppliers can collaborate at a forensic level and discover areas for improvement, whether that be by SKU, whether that be by product category, whether it be by location, whether it be something specific to an order or shipping process, et cetera. Traverse launched us into sort of the collaboration space for the retailer. We call that performance management. We then took our -- what traditionally was known as community and up-leveled and sort of reimagined that entire motion as well. So together with Traverse and what used to be community, we've reimagined this entire portfolio as essentially a retail supply chain performance and essentially with relationship management have gone through the process of identifying the nature of the relationship itself is what's core. Again, back to collaboration, it's one thing to get someone into the network, but it's the ongoing persistent relationship management that lands the best practices and the outcomes that network is looking for. So this is a suite. Our performance suite works together, and it works together really well. Why? Because the supply chain performance suite essentially can be bought separately or together. So what do I mean by that? On the relationship management side, our retailers are already enjoying the benefit of bringing their suppliers into the network. As they have been in our network, our traditional retailers, they can now expand very easily and very quickly by adding performance management to that. Now conversely, as we land new retailers into our network, they may choose to start with performance management because there may be a set number, a small number of relationships where they feel like there's an opportunity to tune the performance. So they'll land there, tune that performance with this application. And now once they have those -- that rhythm down and they've got that relationship established in an optimized way, they now want to extend that to the rest of their supply chain and therefore, would take advantage of our relationship management offering. So it's through these two that are complementary that work together as a suite where we're enabling retailers to get the right items at the right price. We're keeping the right margin intact and ultimately, the right inventory position because we never want to miss a sale. There's one last leg of the stool on our retail go-to-market, and that's bringing our expertise to bear. So you might be surprised that a lot of retailers struggle with priorities. They do struggle with execution. They sometimes struggle with alignment on strategy internally and what to do in terms of when it comes to their supply chain. If you think about how cross-functional supply chain is, you've got merchants involved, you've got your buyers involved, you've got your operations involved. Oftentimes, when you identify an opportunity to improve your supply chain, it is a cross-functional effort to get people agree. Sometimes you also don't have the data there. Sometimes you don't know what the sequence of steps that there are -- you should be taking to unlock that value. That's where we've come forth with our expertise and launched a new service offering that we call supply chain health assessment. So the health assessment allows us, whether it be an existing customer or a new customer, to go -- to physically go into their office, to work with their executive team, to work with the leadership team across supply chain operations as well to understand day-to-day, month-to-month, quarter-to-quarter, what are their processes. We also get access to all of their data, so we can quantitatively analyze the data ourselves. And through really a consultative approach, we then deliver to that relevant set of leaders within that retailer, a prescriptive set of recommendations to improve the performance of their supply chain. Now unsurprisingly, as you might imagine, some of those -- many of those recommendations do revolve around the types of problems we can solve with our relationship management, our performance management offering. Also, in the spirit of being a trusted partner, some of those recommendations are recommendations we can't solve directly. So we'll bring a partner in to help there. And sometimes those recommendations are simple tweaks to how the retailer runs their business or thinks about their business, and those are problems they can correct on their own with our recommendation. So we're very excited about this offering because it really does allow us to be in that position where we can bring our expertise to bear and be a trusted partner to our retailers. And if you're a retailer, whether you're large, medium or small or whether you're unsophisticated or very sophisticated, we've tuned both the service offering as well as the suite itself to be able to accommodate wherever you are in your maturity cycle. So we'll meet our retailers where they are and continue to look for those opportunities to advance it one opportunity at a time. So I've talked a lot so far about the network. We've also talked about our new retail go-to-market. I want to spend kind of the last part of the presentation here talking about our supplier products. So we continue to invest significant dollars and significant resources into ensuring that we're world-class in terms of our capabilities there. And importantly, our technology remains on the leading edge. To kind of refresh a little bit for those who haven't had an opportunity potentially to understand how these products lay out, our fulfillment product is probably what we're best known for. It's where we got our start. We continue to invest there. We've got some very, very exciting, I think, innovations coming up that Jamie will touch on a little bit later in his technology session. But just know that we continue to plan to be a winner in this space, and we're very excited about the AI potential that's going to drive this through our network. On the assortment side, the assortment continues to be a very important and critical process and product for us that takes that item data from suppliers. It normalizes it, it harmonizes it, and then it allows that data to be distributed through the supply chain, not only to enable supply chain processes, but importantly, for the marketing and the sales of those products through other channel, whether it be a brick-and-mortar channel, whether it be online, whether it be a marketplace or social. Analytics is an area that I am very excited about. If you think about the applications of AI, if you think about the applications of large-scale compute, with point-of-sale data married with retail supply chain data, there are a significant number of new insights and capabilities we see coming over time with analytics. Today, you see a product that is really well-regarded in our supplier base, and it's helping them make those critical decisions around inventory, not only production planning for suppliers themselves, but also helping them stay on top of inventory position through the retail supply chain channel and also allowing them to see and forecast their own demand because they have access to that retail shopping behavior. And you'll hear a little bit later on from our panelists on kind of their use of the analytics and how it's helping their businesses. Lastly, an area that I think we're all very excited about is our new revenue recovery offering. And again, this is the combination of SupplyPike and Carbon6, those two products have been integrated and folded in both organizationally and technologically into the SPS fold. They have access to our network at this point. And so as you see the acceleration through many of the macros that Chad pointed out earlier, we're also seeing great opportunity there for those brands to jump into that platform, to jump into that offering, tied to our network to look for those opportunities to not only get paid when they need to, but also get better in terms of their operational execution. So I couldn't be more excited about the position that we're in. We have a broad product suite at this point, spanning everything from retail to supplier to 3PL to distribution, to carrier and so forth. There's quite a few actors in the supply chain that we've got a great offering for. Each of the areas that you see on here continue to get incremental investment every year and every quarter. We have significant road maps ahead. And the key on the road map, I just want to land with you is that they're focused on these three areas. So the road maps will include collaboration as a core thread that we're pulling through all of these products. They'll continue to ensure that the products themselves are tightly integrated into the network so that they can be network-driven applications that are running 365, 24/7, and also being able to pick out those signals from the network to act on behalf of the customers. And lastly, we'll deliver those products with the expertise and prescriptive recommendations that our customers expect and that we know will lead to great value for them. So as we execute that product strategy and that development, our goal is to ensure that the supply chain is not just working, but it's working as it should through those capabilities. And with that, I would like to -- if I can... [Presentation]

What we just saw in the video was how SPS products come to life. And Mike also talked about how those products help trading partners collaborate better along the value chain, how the SPS network powers products and solutions. And he also introduced the new reimagined go-to-market strategy. And I'd like to ask Chad to come up and do a deeper dive on that for us.

All right. So we talked about all those great products in the network. So what are we doing to get them in the hands of more customers. So we have a proven go-to-market that, quite frankly, has been differentiated for many years that I want to hit on first. And this is the way that we work with retailers. So retailers typically have change events in their supply chain. Maybe they're opening a new fulfillment model, maybe they want more information about particular shipments. Maybe they need to be compliant with the new food safety regulation and therefore, get new information from their suppliers. All these are change events that happen on the retail side. And then SPS will come in and work with that retailer to facilitate communicating the new requirements to the suppliers and then onboarding the suppliers to those new requirements. So think of this as a mix of people, process and technology to get that done. But by far, a very differentiated lead source for us. And these programs are the way that SPS gets the vast majority, not exclusively, but the vast majority of our customers through these retail programs. And I will enforce that our win rates remain extremely high. So this is a snapshot of win rates in the first half of this year. But these trends within 0.5%, I'd say, or so, have been consistent over the years. You'll see that we are winning 70% of the opportunities. And the most common when we have an opportunity that's a lost opportunity is that the prospective customer or customer decides not to do anything. You can see a very small portion of those opportunities are lost to competition. And these rates, in the first half of this year have been, as I mentioned, consistent over many years before that. So let's dive into some of the specific ways our go-to-market works. So first, on the land new customers, we have three mechanisms there, retail programs, channel partners, and global expansion, and then I'll go into how we're expanding with our customers and some of the details of that as well. But first, let's get into these retail programs. So this is what I mentioned. This is the most differentiated go-to-market motion that SPS has had. It's never been replicated by one of our competitors. And over 20 years, we've advanced this go-to-market motion and really perfected the way that we work with retailers. So we're really enabling critical data exchange for those retailers and that's facilitated by getting a commitment from the suppliers for new and existing suppliers to that retailer's requirement. That really drives the ability of the retailer then to monitor the supply chain performance of their suppliers and get needed information they need in their supply chain to operate the downstream processes. And I want to highlight in that blue box there, just a few of the elements that are really core to this methodology. First, we work with the retailer and have clear vision lock on what the value of this program will mean to the retailer. We drive solid executive alignment between SPS and the executives on the retailer side because this does tend to be a pretty big change management activity inside the retailer and also with their suppliers. We're committed to getting quality supplier information. And you might be surprised here, but often when we run these programs, there's not good list of suppliers within the retailers. There's certainly not good contact information for the right people inside the suppliers. So we really hone in on getting that supplier data really solid at the retailer. And then an important element is either the merchandising organization or the buyer organization and a distributor, we really get locked in from them in the support of that organization. So it's viewed much more as a business project than it is an IT project, and that's critical because if you're going to go out to your vendors or suppliers, they need to know that the buyers that they're working with are in support of this program that's going forward. And then there's quite a bit of collaboration that happens between the SPS team and the retailer team around all of this. And this is a proven methodology. It's been refined over the last 20 years. And everything from the communications that go out to how we handle escalations from vendors, all that's been perfected. And often, the processes are enabled by underlying technology in our platform. And so these retail relationship management programs are really critical to what we do. And I just want to point out that when we get a new retail program, that can really result in three ways that the supplier will interact with SPS. So the first way is maybe that supplier has never had a digital requirement overall from any of their customers. This is the first time they're getting a digital requirement. So that might be common in like some of those Shopify brands I mentioned. Now they get an agreement with Target or Walmart. They have to do these digital messages. That's very common then for that customer to join the SPS network for the first time that they're going to need to meet that digital requirement. The second scenario is we could have an existing SPS customer. And now that we've driven demand through a particular retailer's requirement, they don't yet have that connection for that retailer, and they will add the connection for that retailer on top of their existing SPS connections. Now finally, there may be situations where that supplier has some other technological way to meet the requirement. They could have old sort of on-premise software that they're managing themselves. They could be using a smaller competitor. And if that's the case, what will happen is that supplier has the option to go through a testing and certification process with SPS. So we are ensuring that they are compliant with the retailer, but they don't join the SPS network at that point in time. But what do we do with all those testing and certification customers? We put them into our CRM, we market to them. We put them into our sales territories. And we believe over time, all those testing and certification customers will convert to at the SPS network because we're the leader in the market and have the broadest network. So let's look at an example of how we've worked with a retailer. This is Williams-Sonoma. Many of you may know them, the home furnishings. They operate under multiple brands, Williams-Sonoma, Pottery Barn, others. So we first started working with them in 2018. They came to us for support of their drop-ship e-commerce program across multiple brands. And so we ran a program to enable all their drop ship e-commerce vendors. Then we ran another program working with the Pottery Barn brand. And they wanted to get more digital connections for their ship to distribution center customers. Then they have another brand in their portfolio called Rejuvenation. We then added a bunch of suppliers through a program for ship to distribution center for that rejuvenation brand. And then what we've achieved now with the Pottery Barn brands is the sort of ideal state that we can work with the retailers, and that's what we call ongoing supplier onboarding. And that is just where we are baked into the retailers' vendor onboarding process. Every time they onboard a new vendor, they notify SPS Commerce, and then we take them through a process of either being compliant with them by joining our network or taking them through a testing and certification process. So you can see that based on our relationship here, we have constant lead flow coming from Pottery Barn about potential suppliers to add to our network. And now we've also identified an opportunity with them, for them to share point-of-sale data with their suppliers and are working on with them to do that across our network. So just a great example of how we get into a retailer, we're successful with one program, and then we can expand that and then move that into the desired state of this ongoing supplier onboarding, which is sort of evergreen lead generation for SPS Commerce. The other piece of our go-to-market where we win new customers is through what we call our channels go-to-market. And typically, a big change event that drives adoption of the SPS network is the change out of an ERP system or a supply chain system. So in this go-to-market, we work with the systems providers themselves and also all the consultants and VARs that are around these ecosystems. And we're identifying when they move ERP systems, and that would be most typically moving from an on-premise system to a cloud-based system, that's a very logical time for them to move all their digital connections with their customers at that same time. So the nice thing about these opportunities that are driven through the channel's go-to-market strategy is they tend to be a little bit larger deals for us because if you're going to move all your trading partners at one time, it does tend to be a bigger opportunity. Whereas in the retail relationship management, we may get one connection and then need to expand with that customer. Typically, on the opportunities coming from channel, they tend to be a little bit larger. And then the new opportunity for us is this global expansion, and we've been particularly focused on Europe for the last couple of years on the back of our TIE Kinetix acquisition, which really gave us a beachhead into Europe. Now keep in mind, SPS has had customers in Europe for many years, thousands of customers, frankly. And -- but most of those have been driven from retail relationship programs for U.S. retailers where the supplier happened to be in Europe, and we just sold and serviced them from the U.S. Now we have more focus in on expansion in Europe. We have decided that the SPS fulfillment product and network will be our lead products in Europe. We've retrained the sales force in Europe to lead with those products. And we've also embarked on selling relationship management programs to retailers in Europe and proud to report that we have won our first retail relationship management program in Europe, and we'll be executing on that in the coming months. So those are the ways that we gain new customers and add them to the network. And then there's lots of opportunities to grow the customers that we already have. So the first area is expanding with the customer. And quite frankly, this tends to be a little bit more customer-driven than it tends to be driven through our sales force. And so some examples of that is that if we have a supplier on our network and they win new business with a new retailer, typically, they will contact us and add the connections for that retailer, and that often comes to with increased volume on our network, and they'd be likely to increase the data plan they have on our network. Also, as suppliers grow, they may increase the use of third-party logistics providers. Those are additional connections that we can monetize on our network. And now we're seeing increased use of suppliers wanting to sell on multiple marketplaces, and that has been a driver of growth and expanded use of the network. So what we see is that as the customer gets on our network and they grow their business, they increase the use of the network. And certainly, we need to process these transactions and things, but I'd describe this much more of a hand-raising motion from our customers than a direct selling motion from our customers. There's other situations where we're actually able to use the signals on our network and drive a selling motion into the customer based on activities that happen in our network. So this can happen for upselling new trading partner connections. One example is we can see sometimes from our analytics point-of-sale data that a supplier is doing business with a retailer, but they don't yet have that connection for fulfillment. So that based on that data in the network creates an opportunity for us to put in the system and create a lead for a salesperson to then go sell them fulfillment because they know -- we know they're doing business with that retailer. So a similar example is if we see increased document volume happening across the network, there's a signal to our sales force that then they can go out and sell an increased document plan to that customer. So lots of upselling opportunities driven through the sales force and oftentimes signaled from the network itself. We can also see opportunities for cross-selling from the network data and have the sales force incented to drive the cross-selling as well. So what we can see is if a customer has, as an example, fulfillment, and we know we have point-of-sale data in our network for the retailers that they're connected to for fulfillment, we can upsell them analytics and highlight the benefit that having that point-of-sale data for those retailers and what that would mean to those suppliers. Similarly, we can look at the trading volume that suppliers have with the retailers that we support for revenue recovery and oftentimes make a pretty solid prediction based on that volume of what the revenue recovery opportunity would be for that particular customer, and that will help drive the cross-selling of revenue recovery to that customer. So let's take a great example here of how some of those existing customer expansion motions work with a specific customer example. So this is a really cool story. I don't know if you guys have heard of Audien Hearing. They are the first FDA-certified over-the-counter hearing aid company. And they're doing extremely well, as you see here, but they got their first agreement with CVS to sell their hearing aids at CVS. And so they contacted SPS because they knew they needed to do business with CVS and have a compliant digital connection with CVS. As their business grew, they got a large agreement with Walmart, a nationwide agreement with Walmart. They also expanded their connection then to Walmart. Because their distribution volume was growing, they put on their first third-party logistics provider and did that together with SPS. And then as their business grew and they needed better financial systems, they implemented a QuickBooks ERP system for all their financials. and purchased our QuickBooks Adapter so that they could directly connect the network into their QuickBooks system, so their orders would automatically flow into their financial system. They also added another third-party logistics provider. And then across all the retailers that they were supporting, we were able to identify that we had analytics or point-of-sale data from many of the retailers that they were working with. We were able to upsell them the analytics product. And now most recently, we saw that their volume with Walmart has achieved a certain threshold that there is a good return on investment for revenue recovery for them and have upsold them -- cross-sold them the revenue recovery product. So just an example of how we can land with one retailer with a customer as their business grows, they come to us for additional growth, but then we use that network data to identify additional sales opportunities for things like analytics and revenue recovery. So just to recap, if you think simply about our business and our strategy, we're really trying to do a couple of things. We're trying to get more customers on the network, and we're trying to increase the revenue of each customer that's on the network. And so the strategies that we have to get new customers are the very differentiated retail relationship management programs, our channel go-to-market, which gives us access to the supplier change events. We're growing globally and very excited about the opportunity in front of us with Europe, especially if we can execute on retail relationship management programs in Europe. And then within the existing customer, we can ride some of the natural growth that comes from our customers, but we can also utilize our network to help our sales team prospect and identify opportunities for upselling and cross-selling our customers.

So we have, at this point, heard from both Chad and Mike about SPS' unique, proven, and optimized go-to-market strategy. The company has multiple inherent growth levers to land and expand its customer base and how we use network-led growth as a driver to upsell and cross-sell growth opportunities. I think this is a good time for a break. We will reconvene at 10:00 a.m., and we will, after the break, start with our customer panel. Thank you. [Break]

Welcome back, everybody. Thank you to the customer panel for joining us today. Mike Svatek will moderate the discussion with the customer panel. And I think Mike, we'll just go ahead and get started.

Yes. You bet. All right. Welcome, everybody back. I'm very honored and very happy to have our set of customers up here this morning. So thank you all for joining us. I know you took some time out of your schedule to be here. So important for us and hopefully helpful for everyone else online and here in the room. the panel today is really interesting. I think what you have today is a cross-section of different types of trading partners in the SPS network. So you've got 3PL, you've got retailer, you've got supplier, you've got very large established brands. You've got upstart hyperscale growth brands brand, if you will. We've also got partners that are trading with one another, not just the types, but the fact that there's interdependent relationships here. So we're going to have a really fun time. There's a lot of questions we'll get through. And hopefully, we'll be able to explore some of the dynamics that you guys are seeing and kind of the strategies you're implementing. So just quickly, we've got Adam from BRUNT. BRUNT is a super interesting newish brand, right, D2C, and I won't take only steal your thunder, but super exciting high-growth brand. We've got Ken Ratterree, who is from KEEN, CFO, probably a well-known brand that you guys know and just really enjoyed learning about the business last night, so we're doing some interesting stuff. Deb Conklin, who's the CEO of KeHE. You probably know KeHE, but a global -- or sorry, a national distributor of foods here, very sophisticated, very large operation. So we learn a lot from her as a client. SCHEELS, we've got Tony Duerr, who runs operations for SCHEELS, fascinating business. If you've not had an opportunity to be in a SCHEELS store, it is -- if you don't mind, it's part of amusement park and it's part of amazing sports retailer and outdoor, and you name it, right? So -- it's a really, really interesting customer experience there, and I'm excited that there's 10 minutes from my home that's going up right now being constructed. And last but not least, certainly, we have Aaron Rubin, who is joining us from a 3PL partner as well as also a customer in ShipHero. So he's got kind of a dual hat that he wears. So anyway -- but let me take -- we'll take just a moment and allow each of our panelists to kind of go through -- give a more thorough introduction, if you like. And then I would love to hear kind of in your own words, a little bit about your business, more so than I instructed. And then also just is there -- I'm not going to say something that keeps you up at night necessarily, but like what's the 1 or 2 things that you're thinking about that's always in the forefront of your mind -- so kick it off on, Adam?

Yes. So I -- can you guys hear me okay? I'm Adam Schuman, Director of Operations at BRUNT Workwear, where I oversee our supply chain. BRUNT, we're a 5-year-old company. This will be our fifth full year in business, but we're a modern workwear brand. We make boots and apparel for the hard-working men and women in the trades who wake up every day to, I guess, literally build this country that we live in. Something keeps me up at night. It's probably just making sure we have the latest and greatest tech or AI that's going to help us make sure the right products at the right place at the right time to meet customers in both channels as we get into wholesale. So...

All right. So I'm Ken Ratterree. I'm the CFO of KEEN. We're a global footwear brand based in Portland, Oregon. We've been around about 22 years. We've been working with SPS for, I think, about 14. I probably have 20-plus years of experience across 4 brands with SPS. So a bunch of footwear knowledge there. And we -- yes, I mean, I guess what keeps me up is going to be a shocker to you all. I'm sure it's not on any of your minds, but it's the current situation we're in right now. Footwear is one of the highest tariff industries. So really, my job as the CFO is really to try to figure out how to balance everything. So we're really looking for all of the efficiencies. I mean a lot of the stuff that Adam was talking about, how do we become more efficient? How do we do more with less? And how do we lean on some of our partners. So that's really, I'd say, main right now and just maintaining the momentum that we have. So -- and competing with BRUNT. We compete with BRUNT.

For sure.

Good morning. My name is Deb Conklin. I'm the CEO of KeHE Distributors. We are one of the nation's largest distributors of natural organic specialty and fresh products and very complex business, about 85% of natural and organic brands fell within the first 2 years of coming to market. And so that creates a crazy amount of churn in our business. And I would tell you that we are actually a curator of brands who happens to distribute, and that's really what differentiates us compared to a lot of our competition. We're also an ESOP, and that puts us in a position where we really can drive major transformation in an industry that's growing, and we get our employees who show up with employee owner on their shirt to do deliveries. They just behave differently. I think the thing that keeps me awake now more than ever is how AI is going to be used for nefarious behaviors around cybersecurity. I think we've all felt like no matter how hard we work on cybersecurity that there's always something that we're missing. And now I worry about the iteration that happens even faster as AI gets involved in breaking down the doors when nobody is looking. So that keeps me awake at night.

Thank you, Deb. Tony Duerr with SCHEELS. I lead our supply chain operations for SCHEELS. We are a retail sporting goods retailer. Obviously, two great brands that we sell at our stores. So a little bit about our stores. We're 34 stores throughout the Greater Midwest. When I say that, also preference a little bit, our average store footprint side is about 240,000 square feet. So not a small retail footprint by any means when we say that. We are a collection of our brands, and we are an employee-owned company as well, which is great from an employee ownership side. With that, as I say, our portfolio of our brands that we do sell, we have probably 3,000 active brands. And over a given calendar year, we will manage over 1 million unique SKUs through our supply chain. So a very diverse from a retail vendor relationship side to keep all that active within our system as well. As far as -- to echo what these guys said, it's the same things that keep us up at night is how can we connect to our suppliers, have the product at the right time, our customers demand that product and then just the ever-changing landscape of the supply chain. I mean it doesn't feel like there's been a normal year, and I think that's just what the normal is. It's -- you're always going to be adjusting to something that's happening within the supply chain.

Good morning, everyone. Glad to be here talking about supply chain. So my name is Aaron Rubin. I am the Founder and CEO of ShipHero. Our primary business is warehouse management software. So we provide the software to brands and third-party logistics companies that serve those brands. We have about 10,000 brands that use us, many of which are very small, all the way up to some public companies. And we also have a captive third-party logistics company that we use primarily for testing and R&D, but does operate about 1 million square feet of warehouses across the U.S. and Canada. What keeps me awake is certainly cybersecurity is insane these days. The other thing, I think, is going faster. So our industry logistics tends to move slowly and that adoption of just cloud SaaS from on-prem and homegrown is still way behind basically the rest of the entire economy. So trying to get things to go a little bit quicker is probably what I think about the most.

Great. Yes, lots of things popping out. So I'm going to -- I'll give you the softball question first and just send this to a few folks. And I think maybe, Tony, we'll start with you. So everyone here has got a relationship with SPS, and we certainly appreciate that. Tony, you've had a relationship for a long time. And so as you guys have continued to scale and grow, what is it about your relationship with SPS that's worked really well and what's kept the relationship so strong?

Yes. And I'll kind of speak to a little bit. So we've started down the journey with SPS about 14 years ago in 2011. So it was really driven by some of our vendor partners, some of our larger vendor partners at that time had really kind of started and pushed us along that pathway. And we sought out SPS at that time just very similar to what Chad had said earlier with just the network, the expertise and that background because we just were looking for that because it was all new to us. I mean we were still a -- we felt a small entity at that point, and we're just needing some expertise in that area as we grew into that, that could work from anybody from a very small, as I call, mom-and-pop vendor because we're very regionalized with our locations to a larger entity like a Nike, a KEEN that are really driving ahead of where we were at that point in time with that EDI journey. I think the benefit is we've been with SPS for 14 years. We've just been able to grow with them, and it's been a very give-and-take relationship, partnership, and we're very big from a partnership side in our business model. I mean we look at -- we want to drive things through a partnership than through anything else. We are not a -- I always say not a chargeback company. We will work directly with our vendor partners to provide and solve problems and drive solutions and SPS is willing to work with us in that unique model and help us along that journey. And again, I think the strength in that is it's just been very consistent throughout those 14 years. I mean we've done several different smaller enablements as we've driven technology changes with them. But at the same time, it's a very consistent, I call it, user experience from a vendor partner side as we can continue to grow. On average, we still bring in about anywhere from -- I always say brands, but we add about 500 new brands to our portfolio every year. You give and take some every year, but to have somebody that has that expertise that you know as an extension of your business and the partnerships you want to create with the vendors is very important to us. So to have them be that extension and treat our partners like we want them to be treated is very important. And that's helped maintain that relationship through the 14 years to where we're at today.

That's super. Really a theme of that relationship management sort of pulling through not just an offering, but how we think about partnering together on that. And the collaboration aspects are just phenomenal. So yes. Over to you, Ken. Question about -- in particular, actually, what I really find interesting about Ken's background is Ken has worked in footwear for a while, has been at some really impressive brands, including the one he's at today. And you've picked SPS or work with SPS at each of these. And so I'm curious, as you've had an opportunity to go somewhere else and look at the options, what keeps bringing you back to SPS?

That's a great question. I mean I'd echo a lot of what Tony said. A lot of it's about the partnership and just the network. And the other thing, I mean, SPS owns the EDI space, if you just look at EDI or at least that's what they've convinced me of. So a good job. But let's believe it because really, there's an economy of scale, right? Because I think a lot of it's partnership, it's also the economy of scale that SPS brings because it's impossible for a brand like us to manage all the different connections and all the different work on our own, whether it's working with our own 3PLs or working with transportation suppliers. Globally, it's been a huge thing. The other piece I really appreciate about SPS is their kind of the proactivity and the ability to problem solve. Tony mentioned that a little bit, too, but we've worked on global implementations and even expanding business into new regions together as partners. So I used to work with Adidas or Adidas, and that was one of the big things we did there was really expanding into Europe and getting Europe -- the European retailers more on kind of the analytics side of the house and just really kind of going in and trying to win together has been a huge thing. I mean your team was visiting me last week, and the conversation is incredible because they come in and say, "Hey, what are you worried about?" And it wasn't just about the momentum comment I made earlier, but it's -- again, it's about efficiency and just different creative ways and solutions. I mean SPS is always willing to partner and I think outside the box. We have a saying within KEEN that are kind of a motto we live by. It's called truth, trust, and transparency, and that's really the way we work. I mean Tony is the same way, right? We love to work with our retail partners that way, all of our partners, and I really think SPS lives those values along with us.

Yes. Great. Super happy to have you guys in the fold, and we learned a lot from you guys as well. So it's good stuff. Yes. Well, Aaron, how about a different perspective? So we've got a great retail perspective, great brand perspective. How about from a software partner perspective and if maybe from a 3PL perspective as well since that's part of the business?

Yes, sure. So I got to meet Deb as part of this. So I'm going to use a mutual customer as an example. So anyone here eat at a restaurant called Momofuku or order their food? I got a couple of people nodding. Okay. So that's a mutual customer of ours. So Momofuku was a chain of restaurants that went into CPG, created 20 or 30 SKUs of noodles. And their Chili Crunches, one of the things they're famous for, started selling on Shopify Plus, used us. We're the largest WMS partner in the Shopify ecosystem. So we were working with them. And then they had big exciting news one day. They signed their first national distributor, which was Deb's company. And they're like, what do we do now? And like we integrate with Shopify and Amazon and their other partners and they're like, "Hey, do we integrate with KeHE?" And I was like, "No, we use EDI." And I know it's like going to be obvious to everyone in the room, but like it's not obvious to a lot of these brands. Chad spoke about these Shopify brands that grow really quickly on Meta and TikTok these days. And they don't know the trading world, right? They know e-commerce. And then after a couple of years, it's time for them to work with national distributors or retailers. So the conversation is, "Hey, we need to trade with this partner, what do we do?" And now EDI is like it's a standard, right? You don't have to use SPS, even though -- KeHE uses SPS. You can use another provider, but it's way easier to just work with the same provider. The compliance will be faster, certification will be faster. And these are very large POs for small companies, and it's a really scary process starting with EDI. So you want to go with the vendor you trust that's already working with the retailer. So we say, "Hey, this is -- SPS is the partner we recommend." And they always say, "Well, we're actually trying to also sell to three or four other ones later this year or next year." We're like, "Well, SPS probably works with them directly. And if not, they work with everyone, because EDI is a platform that allows them to work with everyone." And that's 95% probably of our customers end up using SPS just because of those reasons.

Yes, phenomenal. Yes, just the power of the network, keeping trading partners connected, keeping it fresh, making sure the connections are established and maintained and it goes a long way. Yes, certainly. Okay. Let's change gears a little bit to -- let's just talk about the complexity in supply chain for a moment. And as I think about everyone up here, I know everyone's got different aspects of complexity. They're managing different scales of complexity, different nature of complexity. Deb, I've got to imagine you're probably at the top of that list in terms of complexity. I mean, big operations, you've got inbound, you've got outbound, you're sitting right in the middle as a distributor of all the supply chain goodness. And so what -- take me through a little bit of like how you're thinking about complexity, what you're doing to manage that complexity and to the extent that SPS is part of that.

I think about our product line models for start-ups, folks that are just figuring out a new formulation to crack a code and functional beverage, mushroom beverages and like all the crazy things that you can think of. And what that means is not only do they not understand the process of going into distribution, there's also a ton of churn. We have over 80,000 SKUs in each of our DCs -- 18 DCs across the United States and Canada. And so a lot of churn, a lot of complexity, and the consumer changes their mind tomorrow. So what you think might be hitting is now no longer the coolest thing on the block and you're -- you've got the next innovation cycle. On top of it, natural and organic hasn't been in the forefront of technology. Things that I would tell you that I was doing in the '90s out of college were things that KeHE hadn't even started to think about doing. And so having SPS as our digital commerce trading partner, the ability for 6,500 suppliers and 80,000 SKUs with 20,000 new ones coming in and out every year allowed us to standardize the playbook instead of every different flavor of ice cream. It allowed us to have a playbook that was repeatable. And so that, as you can imagine, that drives efficiencies, that drives scale. It also becomes that one way of working in a way that -- so when a new product comes out through a new supplier, it's easier to onboard. Massive improvements in our -- both throughput and efficiency. But one of our most important parts of our strategy is what we call partner success, easy to do business with and for. And that was never in this industry was important. And this has truly allowed us to have a playbook that allows us to get to market faster. I would tell you the other thing that was resonated with me a lot with the SPS model is we had mapped all of the gaps in our process. And then we sat with the SPS team and they mapped all the different tools and systems they could bring to bear for us. And it was amazing the overlap that they already had a solution available or in flight that we could put to work quicker. KeHE wanted to build everything from scratch and the ability to partner with somebody who's the expert. We're the curator of brands. They're the digital commerce experts for our supply base, and that has us each in our own proper wheelhouse moving faster and adding a ton of value. I honestly do believe we couldn't do it the way we do it without our partnership with SPS.

Great. Thank you for that. And it's that type of insight that we get when we do customer visits, when we understand and try to become really a partner in a true sense of understanding the business and how to move the needle. It provides great feedback for us from a product road map and a strategy perspective. And so good stuff. You've got an interesting story. So from a complexity perspective, you started pure digital online, what you moved to wholesale and now even more is happening. So how are you dealing with all the complexity and...

Yes, yes. So not nearly as complex as Deb and her business, but we were, again, like I said, 5-year-old company, it is our fifth full year in business. First 3 years, we were exclusively direct-to-consumer. One set of requirements, it was nice. Overnight, about 18 months ago, when we decided to get into wholesale, we got a dozen-plus different requirements from our retailers. And now all of a sudden, we're trying to take their systems and process, our systems and process and work together. And SPS does that by standardizing everything. They're able to reduce or simplify that complexity so that we're really able to then get off the ground running and go into wholesale with a lean team. I had one dedicated headcount when we launched that wholesale. But they're centralizing our EDI connections, they're integrating into our ERP system. So instead of having to hire a whole slew of people to manually enter orders, it's in our system. We have fields in our ERP that's account-specific that drive all those different nuances that are automated, ASN generation, invoice creation, really our end-to-end entire fulfillment process is streamlined. So we don't have to think about that, and we can do the fun stuff like being good partners to our partners and growing the business so that one day when we are as complex and big as these guys, we're good to go. But yes, echo the sentiment that without SPS, we wouldn't have been able to get off the ground running and move as quickly as we've been moving.

There was one other thing you shared with me last night at dinner. Do you want to talk about that at all? Or are we keeping that in the pocket about your -- you've got a location coming up? You've got a physical -- you're going into physical retailer?

Yes, we are. Yes, we are going into -- I got a lot of stuff going on. Yes, some possibility of going to our own and operated retail, exploring that.

Exploring that. Just to add a little more complexity to the plate because you're not full yet. That's good. Cool. And then maybe, Aaron, I know a great answer to the earlier question. Every time I talk to you, I learn more. Is there any -- are there any like gaps that you're seeing in your customer base where SPS is really coming in to fill that gap? Just from a complexity perspective, I mean, you're -- like Deb, you're seeing it on all sides of the complexity, right, being in a 3PL and also as the WMS itself, which is managing inventory, no doubt and fulfilling those processes. Where is that complexity -- where are you gapped out on that complexity? And what holes are we plugging for you?

Yes. So we're a technology company, right? We build a lot of software. We connect with platforms, shippers, ERPs, all that stuff, right? So like we're not afraid of building. But I was talking earlier about the speed and trying to make things go faster and the days of like, "Hey, yes, we're going to onboard someone and go live in 6 months." Like that just -- you can't do that. I still hear it. Like there are people still doing that, but like we want to be live in 2 weeks with a new connection. And our team puts live dozens every week of new connections of retailer and suppliers. And the ability for us to build all that quickly is impossible. So by having a partner who -- it's not like there's just one connection, and it's just like you build it once and it's going to work for everything. Of course, there's work to do, and we have a team that manages as we keep adding people on both sides of the equation, but it's 10x, 100x faster working with a partner that knows what they're doing and has the technology. So it's all about speed and the quantity we can put live that we just -- we can never do anywhere close to that pace on our own.

Yes, maximizing speed, minimizing complexity, if you will, just move faster, basically. Just move faster. Cool. Well, let's -- we're going to pivot to another kind of conversation topic here, which is all of you -- as a trading partner of one or many other partners, you're working to collaborate and be a better trading partner to them. And so curious from a SCHEELS' perspective, you mentioned a little bit earlier in your earlier statement, but what is -- how is SPS enabling you to be a better trading partner to your suppliers?

Yes. I think there's a couple of different ways. I'd say one is -- and I will go back to it's just consistency. I mean, when you have so many systems that are tied in from the EDI and from the vendor side, there is a lot of complexity there, but it is very simple from that standpoint. And I say consistency because if you don't have consistency in that data and a platform that can handle the amount of data flow, it would be very challenging for us to be able to maintain our efficiencies on a day-in and day-out basis. I think the second part, kind of going to a little bit of the collaboration piece would be some of the analytics. We are a private company, so we don't share a lot of analytics. Some of it is on purpose. And then -- but we do, do that strategically with partners through SPS. And that helps streamline, they are able to use that on their end to provide insights. Because when you're analyzing millions of dollars and thousands of brands, sometimes it's easy to miss, whether it be BRUNT coming into the workplace and disrupting what's going on or consistency with KEEN from a partnership that have always performed well, that sometimes you miss some of those nuances unless you have a second set of eyes that are equally invested in our performance from a vendor side because they want to see their brand perform well and we want to see that brand perform well. And I think that's where the analytics side is kind of that two-way street in all of this by leveraging some of that point-of-sale data where they may see things that in all honesty, sometimes we gloss over because of the complexity of the business. So I think those are probably the two biggest things that we notice on a day-in and day-out basis would be that consistency and then that two-way partnership back and forth.

Yes, great. It's remarkable to hear from our retailers how often -- just how diverse the set of activities they're taking on are, they can't pay attention to every single SKU and every single product category that they have. And so getting that support from the supplier to really have who's got eyes on that has really helps drive sell-through. So well, actually, just on the other side of that coin, you're -- let's hear about your experience of working with SCHEELS, how is SPS helping with that? And to the extent you can talk about analytics or other forms of your relationship?

Yes. Well, Tony told us that KEEN and BRUNT are the two favorite vendors of SCHEELS. Out of the 3,000, we've made the Top 2. But no, as being the new guy in the space, SPS, like from the start, gave us that credibility that we could execute operationally. So people might go into the store and ask SHEELS to carry BRUNT because they saw the product, saw the marketing. But we have to then be able to execute operationally or it's going to be a short-lived thought into -- going into wholesale. So being on the SPS network removes all of those friction points in our end-to-end order fulfillment process so that we're able to fulfill SHEELS' orders with speed, with accuracy, doing it compliantly so that they then place those reorders and just a nice little cycle. It really truly allows us to collaborate much more efficiently. And the advantage it gives like it's a good example where we start out in a few doors and we expanded to 100% of their doors in a very short period of time. And even if the demand was there, we probably wouldn't have been able to answer that request without being on SPS because they're able to standardize and have our two ways of working connect with each other. And then on the analytics side of things, it's super helpful for us because we had 3 years' worth of data from the direct-to-consumer side of the business. But it's a different channel, and we've gotten a lot of learnings on size curve differences, color preferences, a mix in our toe type or work boots, whether it's soft toe or comp toe. So it allows us to get ahead of things and see how things are selling so we can have the right product for them to reorder and for expansion, so.

The visibility is key.

Yes, it's everything.

Yes. Great. Maybe, Deb, to you. So you're onboarding tons of new SKUs. Certainly, new items, new suppliers as well. I imagine the grocers themselves are pulling on you for new assortments and you've got to go out and source and sort of -- so you're in this constant process of onboarding. How do you do it? And what role are we able to help you play in that?

There is no doubt that, that is the life we live. We are truly a curator of brands. It's the ability to understand what need state each different customer has for the specific natural organic product that we're talking about. We see over 120,000 new SKUs a year, and we onboard somewhere in the neighborhood of 20,000 a year. One of the things that has been very differentiated for us is the fact that some of these come in ebbs and flows. And the ability to have a standard process that's automated that gives us flex capacity has been phenomenal for us because you talk about it, it used to be we're going to go live with this in 6 months. No, no, no, we want it tomorrow. And so you've got to figure out how to accelerate from a thumbs up to an on-shelf experience in weeks. And if not, you could miss the trend. And having that flex capacity, that partner that we can look to that helps us automate it, even if you think about it, we do -- just wrap your head around hundreds of thousands of transactions a month because we serve 30,000 customer doors with 80,000 SKUs. So just you start to think about those numbers. And then you think about the innovation that -- on top of that, we used to do that all by keystroke. So just a mathematical error of no matter how good you are, you're not going to be perfect. And that being automated is a game changer from an accuracy standpoint from us. There are other next-generation things that we're now doing as well, which I can't believe in 2025, I'm saying that KeHE never accepted advanced shipping notices, but we did not accept advanced shipping notices. And now that's a requirement. So with one scan, we can receive a load as opposed to having to manually check the difference between salted peanuts and unsalted peanuts on a case that looks exactly the like. And so there's a lot of progress that is really helping KeHE move a lot faster in an industry that has evolution of change that is at light speed.

Yes. Great. I love the peanut example. I mean it really kind of grounds it, like this is what -- this is operations, right? This is what we -- this is what folks have to deal with. That's great. You've got a huge retail channel. You've got a lot of retailers you're working with. So over 100 plus?

Yes, I'd say thousands globally.

Thousands globally, right? And so each of those retailers have a different flavor of what they want from you, different requirements. How are you able to keep up with all of that? And how are you able to be a good supplier and a good trading partner with literally thousands of retailers?

It sounds like a rhetorical question. No, I think it's -- I mean that's -- you've heard it, right? I mean that's where SPS comes in because there are a lot of brands, not on the EDI side, but even if you think about analytics, I think they can do it on their own, right? And anybody that tries to manage that amount of information on their own, it's literally impossible. And so similar to what we're hearing here, we kind of let the experts do their thing. But SPS really helps everything run, right? I mean, Tony mentioned kind of just the reliability and all of that scalability. So for us, EDI is not a -- I think I'm allowed to say this, EDI is not sexy at all. It's kind of one of the things that you want -- sorry. It's one of the things that you want it to work, right? And it's an amazing technology, but it's one of the things that when you're not complaining about it and it just happens and you can get quick connections and have everything set up and it works smoothly. It allows us to focus on running the business, right? So that's a huge thing. And on the analytics side, I mean, we -- I think taking SCHEELS, for example. I mean, we obviously want to sell product to Tony, right? We want to sell product to SCHEELS, but that's not the end goal. The end goal is to get more shoes on people's feet. We really care about sales to the end consumer through whichever channel that happens and being able to read trends, being able to make sure that happens helps make SCHEELS happy, makes us happy when we get it right. But also being able to kind of make sure we know where inventory is, and it comes back to what we heard about earlier about the whole product price place promotion. That really helps us manage inventory and manage a lot of our other strategies around it. So whether it's product launches, all of those things really help us -- the data that we receive from SPS really helps us out.

No doubt. Yes, I don't know how you do it without the automation. It just -- it's not possible.

No, it's not really.

Yes, it really isn't. Well, let's talk -- let's kind of pivot to kind of our last topic for the day, which is really like super exciting, ROI. Now we all are here because you've invested in technology and people and process, right, to drive business outcomes. So at the end of the day, it's about the return. And so maybe, Tony, if you want to give us a thought on how do you think about return on investment in terms of not only SPS investment, but kind of the processes that were associated with. Easy question.

Easy question. Well, one, I don't like to think about it because it just happens. But no, it's -- there's a lot of different -- again, if we didn't have the technology in place, I mean, there would be significant labor hours that have to be invested everywhere. I mean, from our end, it is integral to what we do from a business side of things. So one of the unique models is we're not 100% of a DC company. So we do a lot of ship to store. With that, that obviously adds complexity to our vendor partners, but it also adds additional documents and all the different things that happen. So I mean, you can start from purchase order error rates that add return investment because you're going to have people keying all those in from a vendor side of things to same things from a receiving side. I mean we're able to receive large amounts in our store through the same 856 advanced ship notice process that we don't have to touch every single item that comes into the back of our door. So you just think of our speed to the floor within our stores is most things that come in our back door now can be sales floor ready within 24 hours, which is huge for our stores. So you can meet the customer needs, and we can be very lean in our assortment and our inventory levels. To then the last part of that automation that from a return on investment, it's the invoicing side, whether you want to -- the vast majority of our invoicing does not even get touched from a reconciliation side of things through the EDI, the cross-referencing. I mean, we're able to do all of that with the complexity of the amount of purchase orders, the amount of vendors that it just flows through our system right into the back into the ERP. So I mean, there is so much efficiency within the operational side that, that's all the given ROI. And then you continue to look and say, where can you build upon that, whether it be additional automation, different processes that SPS is bringing to us. So I mean it's exciting to see we're going to go through a lot of some -- more automation processes with receiving even yet further on our side, which is exciting that, again, without the technology and the consistency in the data flow, you just won't even consider because you're managing other problems instead of being forward thinking.

Yes. Great point. Well, it's a financial question. I've got to go to our resident Financial Officer over here. So Ken, how do you think about ROI for KEEN? And again, put your big CFO hat on, like you're looking across the entire organization. How do you think about it?

Yes. I mean, Tony mentioned part of it. We're on the other side of that PO invoice thing, just the lack of issues there and the fluidity with which SPS helps us manage that is a big one. I love the analytics side. And another exam -- I mentioned that in my last comment, but another example is it helps us manage our marketing investments, right? So we can actually see what's selling through, where, when, which colors, which SKUs across multiple retail partners. Or if we do a product launch, we've used SPS' data in the past to say, "Hey, we're coming out with this new product. How do we judge if it's successful or not, right? How do we know if we're winning or we're losing or where we're winning and losing." So we'll take products that we have data on from the past and kind of model against those using SPS' sell-through data. So I mean, I think that's a phenomenal kind of maybe a little bit more outside the box use of the data, but it's really just taking advantage of -- I don't know, I think of SPS is almost the connective tissue amongst all of us. I mean it really links everything. And if you look at it the right way, there are so many use cases in there that are really interesting. And the investment -- kind of measuring investments from a different way is super important. If you ever ask anybody to measure a marketing ROI, yes, it's tough, it's really hard, right? But this data helps us do that. So one example.

Yes, super. I guess on the BRUNT side, how do you think about it? And I'm really curious, do you using this data for production scheduling and sort of demand forecasting and things like that. I know you have a ton of e-com data to go off of, but how do you think about ROI?

And that's actually -- we just internally, we were discussing this, and we broke it out into four different groups. I'll fly it through. I know we're running out of time. But first one is cost savings. So we're able to not have to automate -- I mean, sorry, we're able to automate, and we're not -- we don't have to do all these manual orders. We don't have to -- we can aggressively grow wholesale without having to scale our headcount at the same rate. We have efficiencies. So we're reducing that complexity. We're getting cleaner data, which allows us to create orders faster. On the scalability side, we're able to onboard partners. We've had numerous onboard partners we've onboarded in 7 to 10 days when people tell us months. And then visibility -- on the visibility side, like it's huge. I mean, we also do the same thing with marketing launches. And I think one of the bigger pieces that's a little tougher to put a dollar against to like exactly know your ROI, but we've talked a lot about -- or everyone has on the network and the systems and the tech, but the people side of SPS, like truly mean it when I say their people are just as good, if not better, than their tech side of things. So the support we get on our daily questions, the chat feature is awesome. That's huge. We want to align ourselves with someone who's going to help us grow as much as we want to grow. Yes.

Super. We've got about a minute left. Who's got an exciting ROI story?

I just want to point out that Tony is the only one to mention a document number so far all day. So congratulations on that.

Deb, any kind of last thoughts there?

For me, this was just a cost of doing business, we had to do it. But the good news is there are plenty of ROIs. We've reduced our time from thumbs up to shelf by 25% just by what we've talked about. And I could list you 30 more. But I'm an engineer by trade, so it's absolutely in my DNA to worry about the measurables, but we just couldn't have run our business and grown it if we didn't have our partnership.

And I think a lot of it, too, just in closing, it's about opportunity cost and what we would have -- what we wouldn't have if we didn't have a partner and great people that help us bring it all together. So yes, that's it, I guess.

Yes. Limited time, we got to pick our projects, right, for sure.

Real quick as I say. So 25% of our customers are on EDI. Those 25% over the last 18 months has scaled to represent 65% of our total doors because it's significantly easier to grow when we're utilizing SPS' network. Otherwise, it's just we have to kind of pick and choose where we grow, and it's SPS accounts.

Yes. Good. We're kind of picking up a vibe of infrastructure. It's commerce infrastructure to help you guys scale, grow, automate, reduce error, be predictive, give you the data you need to draw your own predictions from. So all those things. But anyway, I want to thank you guys each for being a great partner, great customers for us. I hope that everyone here has got some great takeaways. I certainly have got some great takeaways. I know you can spend your time in lots of ways. We just appreciate you making the trip and sharing your insights. So give our panelists a round of applause, please.

All right. Wonderful panel, a lot of insightful commentary about SPS products, how SPS contributes to the infrastructure these customers are building. So I think this is a great time to have Jamie Thingelstad come up and talk about network strategy and how that further puts SPS in a great position to help its customers.

Thank you, Irmina. Such a great session. It's always amazing to hear how our customers benefit from being part of the retail network. As you've heard throughout the morning today, really at the core of SPS is the world's retail network. For the last 25 years, we've been building that network retailer by retailer, supplier by supplier, partner by partner and creating this ecosystem that allows people to dynamically connect with each other with agility and flexibility. That network gains power every single time that we add another member to it. And that scalable, global and secure network is the foundation of everything that we build on here at SPS. So let's talk about some numbers. First, in that network, we have over 300,000 trading partner relationships. Across those 300,000 trading partner relationships, we have over $650 billion of transaction volume. And in the last 12 months alone, we've seen over 33 million product SKUs and processed over 780 million documents or messages between those members of the retail network. Now there are many features of the network that make the network so powerful, but I want to highlight three of them for you today. First is this idea of protocol agnostic. You heard many people talk about EDI, and EDI is a great place to start, but it's not enough. We also have data that arrives via XML or JSON or CSV or many proprietary formats that have been built in-house. That data moves between trading partners in the network in a variety of different ways. Some customers may use things like managed file transfer. Others may use APIs. And by the way, inside of those protocols, those protocols do different things. So for example, some of those protocols are very opinionated about the transactions that they include. Other protocols are unopinionated and leave it up to the author to decide how they want to represent that information. It's the job of the network to connect all that together. So we may have partners on one end using a JSON API and partners on another end using EDI and managed file transport, but we make that all smooth and seamless and bridge those gaps inside of the retail network. It's one of the key capabilities that we have. Additionally, the network is AI-enabled. So we already are able to use AI to add members into the network easier and be able to test and validate that information is flowing between those networks faster than we could otherwise. We can also look at an entire industry and analyze what that industry is doing to understand better, for example, in a category, what's typical. Or for example, we could even look at a single retailer and work with that retailer who might want to change a business process and help them understand how complicated that will be for their suppliers to meet. Lastly is the scale and security. Retail is dynamic. We heard that just today -- just right now in the panel, and so is the network. As we enter the holiday period, many retailers are preparing for orders of magnitude change in their volume. It's critical that the network be able to adapt and scale along with them, and it does. That security is also more critical than it's ever been in retail and making sure that we meet those security requirements of retail is absolutely key. So how do we prove that security and that reliability? First is our trust center, where we share with prospects and customers all of the details of our security program, including our security certifications, most recent audits, et cetera, so that they know that the way that we handle their data will meet their requirements as well. We also were the first in our industry to make our real-time status available for all of our products and network capabilities and still are the only provider that provides real-time insight into our network performance. So using that, our customers and members of the network can at any time know that the network is performing and meeting what their needs are. And all of that is possible with just one secure connection to the world's retail network. Now there are many things that the network gives us, but I want to highlight three of them for you today. First is data as a differentiator. Secondly, how we achieve faster time to value for our customers. And third, how we can use the network for network-led growth opportunities. Let's start first with data. Now retailers publish rule books that are the foundation for how their suppliers can connect with them. But those retail rule books don't have everything that you need to know. They often lack some of the business processes or the other requirements that retailer may have. So for example, what is the retailer's expected turnaround time for an order? Or when they do request an order, how should that order be shipped to them? What carriers should be used? If a pallet is required, do they have specific requirements about how the contents are placed on the pallet? And by the way, make sure that you get that advanced ship notice to them before the package arrives. So retail rule books are a great place to start. Sometimes there's also a vendor guide, but not often. But you always have to wonder as a supplier, is this accurate? Is it up to date? As you heard, retail changes frequently. And all of this is very difficult for retailers and suppliers to keep up to date with. This is where we can use the network to do this differently. By using data in the network, we're able to see what retailers do in addition to what they say. So for example, we may be able to look at a retailer and see that, that retailer typically receives an acknowledgment of their orders within an hour. We can then understand that pattern and using AI, build that pattern into our network. The ultimate result of that is that members of the retail network gain a deeper understanding of the retailers' goals and what their expectations are and as a result, have more successful trading partner connections. Now to build that capability, we provide -- we use three different things. First, the information contained in those retailer rule books, which helps us understand the structure of the data. Then we look at the network data itself, which allows us to understand what's actually happening between those different trading partners. And then as you heard reference, we bring our retail expertise to that, bringing all those together in combination with AI allow us to bring a number of different use cases to retail members and into our products. Let me talk next about how we achieve faster time to value. So as we bring new customers onto the network, we use a prescriptive process to bring them on using that -- those rulebooks that we have built into the retail network. First, we start with a discovery process that allows us to understand what are the trading partners that this supplier is going to work with, what are the fulfillment models that they have, what business systems are involved and what are the problems that they're seeking to solve. We then build a prescription that we can then show, we'll solve all of the specific things that they're looking for by looking at our overall product capabilities. And when we get to the point of configuring that solution, we don't do that point-to-point in the network. We do that by each solution. So we bring them online and then ultimately validate those solutions to make sure that they meet the requirements of all the trading partners. By doing that, we provide a very fast and easy way to bring new members into the network. Now excitedly, all of that is well designed for us to then bring agentic extensions to that onboarding process. So for example, in Discovery, we can use AI to create a unique discovery process for each individual customer, looking at their specific requirements and only asking the things that are critical to their business process. We can also then validate that, that prescription covers all of the necessary things that they're looking to do. In configure, we can use an agent that can work alongside a number of other agents to help team SPS get that customer set up faster, and then ultimately using our testing agent that can work along with the information that we have in the retailer rule books and network data to even, for example, generate its own test data so that we're never blocking on any part of a trading partner connection to provide us information to move forward with them. This is incredible power that only comes when you have a retail network. And last, let me talk about network-led growth opportunities that we have. We've talked about some of the signals that are in the network. And we listen to those signals to identify a number of opportunities for us. So for example, we may say a supplier who's had a recent uptick in their trading activity with Walmart. We know then that there's probably an opportunity to work with them with revenue recovery to help them gain improvements in that connection. We may have a fulfillment customer that's working with a retailer, but isn't then getting the analytics information from that retailer or the vice versa, getting analytics information, but not actually using the network to trade their -- to use fulfillment. Or we may have somebody who tested with a retailer, but isn't actually using the world's retail network to actually do their fulfillment with them. Using those signals, we can drive opportunities into our sales organization, into the -- to then reach out to those customers and add more value for them. But those same signals can also be used by network agents that are working with customers to answer questions about the network itself. For example, you can prompt in plain English to understand what's happening in the retail network for you, what information do you need on which orders and what exceptions may you need to deal with. You could actually have that same agent identify reports and analysis that can help you drive business decisions. And then ultimately, exposing that agent via protocols like MCP will allow us to extend that agent capability right into our advanced customers who are already using agent technology in their trading partner ecosystem. So a vast number of benefits that we get from the retail network and all that we're doing with it. But we also have identified a number of internal efficiencies that we believe are possible with AI along with the data that we have. Earlier, I talked about the customer onboarding use cases. But in addition to that, we also see an ability to use Agentic engineering capabilities to explore, prototype and build faster to just get more capability to our customers. We also see an opportunity to use agents along with network data and CRM activity to help us engage prospects and work with new customers in a more efficient manner. And in fact, we've already started doing much of that. We have our own internal agent platform that's already connected up to many of these different systems. So for example, we have access to our CRM data or access to conversational data that we're having with our customers. And these internal agents can connect that all together to deliver more value for our team. That combination of internal data along with commercial information and then also what the network knows about those trading partner relationships is incredibly powerful. So in closing for all of you, I've actually been at SPS for over a decade, and I've always been incredibly excited about the opportunity to build the world's retail network. But I am incredibly excited about what we can do with Agentic technology on top of that to create even more value for our customers. It's a really incredible time. So with that, I'm going to hand it back to Irmina.

Thank you, Jamie. All right. So we have established sort of network is important. Data is important. And ultimately, it is protocol-agnostic, AI-enabled, scalable and secure. All right. With that, I will invite Kim to provide the financial review and the final presentation for the day.

Okay. Thank you, Irmina. Great to see so many people here in the audience. Some folks have been investors for over a decade. Some are newer investors or just taking the opportunity to get a refreshed look at SPS. So I really appreciate everybody here today and really appreciate everybody online as well. So I'm Kim Nelson, I think most of you have had an opportunity to connect with me. But again, really appreciate the opportunity that you're taking to get just a better understanding of our story. So I've really 3 key messages for you to walk away with. First, that strong foundation of durable growth; second, that huge opportunity to go after a very large total addressable market based on our go-to-market strategies that we have; and then third, our conviction as it relates to sustained and profitable growth. So we'll spend a few minutes going through each of these. First, our durable growth. So what you'll see here is we have a very long track record, many years of being able to deliver nice top line growth as well as nice bottom line growth or adjusted EBITDA dollar growth. What you'll also see here during that time period with that balanced growth, we've also been able to drive a lot of efficiencies in margin expansion that you also see on the bottom here with that EBITDA margin over this time period. Over this basically decade time frame, you'll see we've delivered about 17% top line growth and 27% EBITDA dollar growth, which also helps to drive that EBITDA margin expansion as well. Now as Chad talked about in his section, we have had different dynamics that have happened in the retail space during this time period. So the next slide is just going to overlay some of the expectations that we've had during that time period. So what you'll notice on the box on the left here is that was during a time period where there was some change happening in the retail space. And at that point in time, we had a stated expectation of approximately 10% top line growth and delivering approximately 20% adjusted EBITDA dollar growth. You'll also notice that during that pandemic time period, as Chad talked about, there was really a pull forward. There was a lot of momentum, a lot of activity happening in the retail space and that drove a great tailwind for us as a business. So during that time period, we took the opportunity to update our expectations over a multiyear time period to 15% or greater top line, including M&A. And we slightly expanded the expectation on the EBITDA side. So from just approximately 20% EBITDA growth to approximately 15% to 25% EBITDA growth. And what you'll see throughout all of these time periods, if we've successfully executed and delivered in helping our retailers, our suppliers, our third-party logistics providers and delivering on this balanced growth. Now the two components that ultimately drive that revenue, it's how many customers do we have and what do those customers pay us or what we refer to as the ARPU. And what you'll see is during that same time period, both have been very important contributors to that overall revenue growth. There's certainly some time periods where one may grow a bit faster than the other, but the combination of the two are really what's driving that top line growth. Now next, I want to take a moment, and I just want to double-click down on the customer side. So in this case, what this is showing is what has happened to our customer adds over various time periods. And this chart excludes M&A so that you can get a sense of what are the drivers of customer adds, excluding M&A. And what you'll notice here is there's really 3 time periods that we have highlighted. We have pre-pandemic, pandemic and post-pandemic. So your takeaway here is, we had a very consistent engine in how we get the majority of our new customers, and that is through that relationship management program. And what you'll see is pre-pandemic, that averaged on an annual basis, approximately 1,300 new customers joining the SPS Commerce network. Then you'll notice pretty obviously here is during the pandemic, you saw that, that number increased significantly. And during the pandemic time period, the customer adds, excluding M&A, was approximately 2,100. Now for those of you that have followed the SPS story for quite some time, you do know that acceleration. We've talked about that pretty consistently that occurred during that pandemic. Great for us as a business, but quite a bit of an outlier during that time period of that acceleration. Next, you'll see in the latter third of the chart, post-pandemic. And what you'll notice during that time period, there has been a little bit different in some of the years, how many customers we've added. But if you look at roughly 1,000 is the average post-pandemic of a net customer adds. Now there is a caveat on this slide as it relates to you'll see that little orange bar on the far right. Since we only have information through the first half of the year that's been provided, the orange line is simply extrapolating forward if the second half of '25 ends up being the same as the first half of '25, that is where that line would end up. And so what you'll see is that, that is trending closer to where we were from a net customer adds of approximately 1,300 pre-pandemic. You'll also notice on here that '24, and Chad did speak to that, but that was a pretty low customer add year for us. And again, overall, we're trending a little bit closer to where we were pre-pandemic. Next, huge total addressable market. We have over $11 billion opportunity in front of us. We're going to spend a little bit of time now to double-click in this area as well. So first, this slide you saw from Chad earlier today. This shows where we're currently at through the first half of the year versus this very large opportunity we have in front of us. What I'm now going to do is go a little bit deeper on the U.S. side of that opportunity. So that's that $6.5 billion total addressable market. What this slide does is not only does it show the total U.S. opportunity, but it actually breaks it into different size customers. So as you probably know by now, we are able to service all size customers, but there are different dynamics depending on what size you are. So what this chart shows is for the small customers, the medium customers as well as the large customers. What do we see as the opportunity for both how many customers and how much that average revenue per customer will be. Those are those circles. And then you'll see the little darker shade colors in each of those areas. That represents through the end of '24, how much of this opportunity do we already have. And so you can sort of look at it and say pretty much between, call it, like 1/4 or 1/3 in general that already exists today for us. So sometimes we have investors that ask questions about, but how does it look overall between our customer size. So this is just a simple depiction of the total addressable market and how we believe that will look like by the quantity of customers and then the revenue from those customer size as well. So again, this is specific on the $6.5 billion total addressable market we see in the U.S. and this represents approximately 146,000 of the customers and approximately $45,000 of the ARPU or average revenue per customer. So what you'll notice, not surprising, the biggest quantity of our customers we see will be small. And you can see that depicted on the left side of this chart with 87% of the quantity of customers being small. And then you'll see our expectation of what that looks like for medium and large. If you look on the right-hand side of the chart here, you'll see the revenue. And really, your takeaway here is there's meaningful revenue opportunity we see from each size of customers, not surprising, a smaller quantity we anticipate of large suppliers, but much more meaningful revenue for those large suppliers. So on the right, you'll see, again, approximately 64% of the revenue coming from small, but then pretty equal about 18% each of what those medium and large customers will equal over time. Next, we're going to do a double-click down as it relates to each of these customer size. And I wanted to provide a perspective of why we have the conviction we do of why there's still such this meaningful large opportunity. So hopefully, from the prior slide, you see based on the circle charts or the pie charts, there's still a lot of opportunity in each of these areas. But what gives us a lot of conviction is not only the TAM analysis we did, but also what we have already actually done in getting those customers and getting those -- getting that ARPU. So in this case, we're going to show you from the last 5 years, we'll start with small. So in the time period from 2019 to 2024, how many additional customers have we added that are small during that time period. And what you'll notice here is we've added approximately 40% more. So we have 40% more customers in '24 than 2019 that are small. Interestingly on the bottom, that's the ARPU or that average revenue per those customers. And what you'll see here, there's been an 87% increase over that time period. If you move forward to the medium, you're going to see we've added a healthy amount of customers, 26% and interestingly, a pretty similar amount of an increase in that ARPU of approximately 85%. So if you think back to what you've heard today on sort of the land and expand, this is showing what we've been able to do in landing customers, but meaningfully expanding, why we have that strong conviction in the very large ARPU. And it's accentuated a little bit more in this next group, which is large. So on the large side, we've added approximately 9% more customers over that 5-year time period, but you can see that meaningful increase or acceleration in that average revenue per customer. Overall, this translated to very healthy growth in both customers as well as ARPU over this time period, adding approximately 37% more customers and about 90% more of that ARPU. So I wanted to take the opportunity to provide this view so that hopefully, you walk away with that same level of conviction that we have internally of what we've actually demonstrated and already done and the meaningful opportunity that's still in front of us to continue to land more customers and expand our relationship with those customers. Next, sometimes investors will ask us about customer cohorts. What's happening with your customer mix and what does that look like over time? So what this slide is showing is the first year where you see a different color. That's the first year that, that group or those customers joined us. And then what you'll see is in future years, how much revenue have we gotten from those cohorts. So in 2018, that's the blue line on the bottom, and you'll see from 2018 to 2024, what has happened to that revenue over that time period. And you'll see that for each of these time periods here. So in general, what we've seen is when customers join us, we get at least 2x to 3x more revenue from that same cohort over time. Now do keep in mind, we do have churn. It's been a pretty consistent amount of customer churn, but there's certainly that does happen, the part of sort of cost of doing business in the retail space. So your takeaway here is, I'll just go to the example of the 2018 book of customers that joined us in 2018. When you look to the far right in 2024, there's fewer customers remaining that joined us in 2018. But of those remaining customers, this represents their revenue that we are getting and helping to support them. So for those remaining customers over that time period, that their ARPU is obviously much higher. So your takeaway is over time period, when we land a customer, there's meaningful opportunity to expand those customers even despite the fact that there is some just natural churn that happens as part of in the retail space. Finally, why do we have the conviction we do in the sustained and profitable growth or what I like to refer to as balanced growth. So the left-hand side talks to our latest expectations that we have provided on our last earnings call. And that expectation is that we believe we can grow at that high single digits or greater. Now what makes that up? Sometimes investors want to understand you have customers and you have ARPU. And we've really demonstrated that both are meaningful in the overall contribution, but sometimes investors want to understand how should they think about what that mix should be. So what you'll see here our expectations of what's going to make up that, at least high single-digit growth, is we expect low single-digit growth coming in the form of customer adds and mid- to large single-digit growth coming in the form of ARPU. Now there's really a couple of reasons for that. One is simply the large numbers. So the more customers you have over time, when you're adding additional customers, by default, the percentage of that or the growth of that will be smaller. Think back to that chart that I showed of what we have trended in net customer adds on an annual basis, excluding M&A. So think back to that chart of that 1,300, it was up higher over 2,000, and then we've been trending at about that 1,000. So when you think about just that math, that naturally would get you to a low single-digit growth. And then if you think back to the presentations that you've heard today, we have ways to land customers, meaningful ways to expand that relationship with customers over time. And that ARPU side then our expectation is, again, that mid- to high single digits. It also fits in very nicely when you think back to the total addressable market and the update that we provided there, meaningful opportunity, continue to grow what that average revenue per customer will be. Now all of that stated expectation excludes acquisitions. And we have been acquisitive in the past. And should we continue to be acquisitive in the future, this is the lens of how we think about acquisitions, and that would be additive to the top line growth. Now Mike, in his presentation, spent a little time on how we think of the build, the buy and the partner. To the extent buying makes sense, we'll continue down the path that we have done historically, where M&A has been a great way to expand or enhance our product offerings, geographic expansion as well as consolidation. Think of that as just more of that pure customer acquisition. All of those that we've demonstrated our ability to do those effectively and well. Okay. Now on the EBITDA margin. So we have demonstrated and proven our ability to drive significant improvement in that adjusted EBITDA margin. What this chart is showing is from, call it, the mid-teens, 20-teens to more recent time. We got ourselves from mid-teens to high 20s from an EBITDA margin perspective. And we have a stated goal of getting to at least mid-30s or 35%. Now a big driver of how we've gotten to where we are, has been through our sales and marketing efficiencies. We've spent a lot of time there in being able to do things in a more cost-effective way that has extracted or driven again those sales and marketing efficiencies. That does not mean we haven't gotten efficient in other areas of the business as well. But what really stands out has been that sales and marketing side. When we think about the next leg of our growth to our margin expansion. Again, there's going to be opportunities across the company, but we're really pointing investors to the gross margin area to be a significant driver in that next leg of growth. Now part of that is based on various investments we've made historically that we're able to grow into. And my next slide, I'll go a little bit deeper in each of those components. So what you'll see here is our stated goal on the bottom of getting to at least 35% adjusted EBITDA margin. And you'll see we have ranges of where we think each line item could land on that journey to at least 35% adjusted EBITDA. The revenue growth I've already talked through our view of how we believe we will get to that high single digits and the makeup of that between how much comes from customer growth and how much comes from ARPU. You'll see on the right-hand side some additional commentary that we provided for each line item, how to think about what's going to drive us there. So as I started to mention on the prior slide for gross margin, we have made a lot of investments over a multiyear time period to reinvest back in that customer experience. And we're now at a point where we're starting to deliver and show some of those efficiencies. Think of it simplistically, we're able to grow into some various investments we've previously made. And as an investor, if you look at our financial statements, you saw that starting in the back half of '24. And you've also seen that in the front half of '25. We've also appointed investors for full year '25, the margin expansion to be primarily from the gross margin side. Now on top of that, we'll continue to get more efficient in what we're doing. You heard a lot from Jamie today on things we're doing on the AI side. AI, very naturally will be a way for us to continue to drive efficiencies and ultimately delight our customers and getting them onboarded faster and helping them to ultimately do their business better and effectively. When you look at the other line items here, R&D, we've been at a range of, call it, 9% to 12% historically. We do want to make sure that we are investing back in our existing products as well as an opportunity to invest in future products. However, we think we can do that while getting more efficient in areas like AI to drive underlying inherent efficiencies that will allow us to still keep at that pretty, I'd call it, low but tight range of that 9% to 12% from an R&D perspective. Sales and marketing. Again, we've driven a lot of efficiencies here. We'll continue. Again, AI -- you're going to hear this AI theme. AI will help us drive efficiencies here, but we want to make sure that we are appropriately reinvesting back in the business based on the opportunity that we see. And then G&A, a variety of areas of how we can improve margins here. One, just as the top line grows, there's fixed costs that naturally are going to scale. And then AI, there's certainly a lot of use cases here where AI can help HR, finance, legal, be more efficient and effective at what we're doing. Overall, while we're growing at that high single digits, we expect we can drive and extract approximately 2% or 200 basis points of EBITDA margin on an annual basis. Capital allocation. This is a question that comes up frequently with investors. I think we have been very effective and prudent stewards with our capital. We are cash flow positive. As CFO, a fabulous place to be in, to be cash flow positive. We, of course, will reinvest back in the business to help drive this meaningful opportunity ahead of us. But even after doing that, we still do drive cash. And so what have we done with our cash. From an investor perspective, you've seen us deploy capital in a couple of ways: one, in share buybacks; two on M&A. We don't look at this as an either/or. We look at this as an opportunity we have to do both. On the capital allocation for the stock buyback side, what you'll see here is in the last 6 quarters, so '24 through first half of '25 about 50% of our free cash flow that generated has been deployed in stock buyback. And if you look at the first half of 2025, almost 100% of our free cash flow generated has been deployed in stock repurchases. From an M&A perspective, we have capital to deploy if it makes both business and financial sense. And again, the bottom under by shows those opportunities that we have seen in the past and opportunities we may see in the future to be able to deploy capital for M&A. Okay. So in summary, hopefully, there's three key takeaways you walked away from with my section: First as it relates to that strong foundation of durable growth; two, the very, very large total addressable market that we have in front of us and also what we've done and demonstrated and delivered on that path to -- for that large total addressable market; And then finally, really, our conviction and again, what I refer to as balanced growth but sustained top line growth as well as profitability. So with that, we are going to move into a panel so that you will have the opportunity to ask questions to the executive team, and I will turn it over to Irmina.

Thank you, Kim. So just a quick reminder for those of you in the room, [Operator Instructions].

All right. Scott Berg from Needham. Thanks for hosting the day. I appreciate the update as always. I guess I've got two questions. I'll start with the one to ask the follow-up. Second is, Jamie, you talked about Agentic use in the product. I looked at most of the functionality that you talked about was really around onboarding of customers, making the whole product easier for customers to use. But how do you think about leveraging some of those technologies in a commercial aspect of actually developing product. And it's probably a question for both of you and the ability to maybe monetize some of those efforts?

Yes. So I mentioned how those network data signals are, we're able to feed that into the system. So as you said, we'll use many of those things to power our own onboarding and make it more efficient for us to add new customers. But we do see also adding that in so that the customer is directly engaging, probably first focusing on really exposing data that they send through the network with their trading partners and building capability on top of that and then branching out from that over time.

Yes. And just to add a bit more color as well from the product perspective. AI is going to permeate every bit of our road maps. And so I think that probably most people would agree that early AI is in the early innings of its development from a commercialization perspective across the industry, across all software. And so what we know is that AI will be powerful, and it will be a part of our offering. What we're not yet, I would say, convinced by yet is the specific SKU, the specific new product, the specific offering what we would take that would be a stand-alone AI capability. But instead, we see it infused in all of our products because we're seeing significant potential advantages at each part of the supply chain through our existing products. And so certainly, one way that, as Jamie mentioned, you'd see it exposed there. But certainly, you think about our data that we have, which was a theme that came out today as being sort of the oil, if you will, that's going to power AI, especially to the extent that, that data is not accessible to public search engines and other access points. And also the network, the fact that we're connected into those systems of record within our customers' operating rhythm. We have an opportunity then to think about the next generation of sort of Agentic use cases that is implied by system connectivity and frankly, data that's very interesting. So that's sort of a stay tuned answer on that front.

Great. And then for my follow-up, Kim, on your graphic around the 3 different customer sizes. The large customer segment stood up for 2 reasons. One, the ARPU growth was obviously substantially larger. But the customer count growth was slower than I would have expected because I know you've had a lot better success upmarket. But as I start to think about that from the history of the company is when I go back to the acquisition of Edifice, a lot of those customers around analytics tended to be larger customers in general. And we know analytics is not really growing today, right? The last couple of years, it's been, we'll call it, in the flattish to 10% range annually. So it's been a little bit slower to the overall business. But if we exclude customers that are maybe only analytics customers upmarket, how do we think about the growth of those customers with respect to the rest of the portfolio? Because I think that's probably more interesting because that's really driving that 100, and I think it was 67% ARPU growth. If analytics is growing, isn't growing, it has to be those other products. But how do we think about the growth of those large non-analytics customers.

Yes. So if you think back to our go-to-market strategy, particularly on our fulfillment or core fulfillment product. So if you think about the relationship management, that drives the largest quantity of net new customers into our network, and those tend to be skewed to the smaller size. So when you're looking at that growth rate, you saw the highest growth rate coming in, in the small. That is really contributing or attributable to that relationship management. When you're a supplier that's larger, medium or large and in particular, the large size, you've already had to figure out how to do fulfillment. It's not like you are doing everything in a manual way with retailers. So in that case, the way we win that business is usually when there's a change event. So that goes back in Chad's section where we was talking about the channel, sales channel partners. So a lot of that really depends on we have to make sure we're getting in front of those larger suppliers. At that time, they have a meaningful change event. And typically, that meaningful change event is going to be an ERP change. So there's a smaller quantity in total that we think are there. And it's also because it's more dependent or historically has been more dependent on that type of change event. That's why you haven't seen as many, I guess, percentage-wise, in ads there. But what you are seeing is that meaningful increase that we -- once we land that supplier, how we're able to meaningfully increase their revenue from both the fulfillment side but also other product offerings.

Matt VanVliet from Cantor. I guess you mentioned the product-led growth as sort of a new engine that you're going to explore a little more of. But what are you doing today already on that front. Maybe what's holding you back from doing or executing the plan that you want to have ahead? And how do you fill that gap in between?

Yes. So there's very little product-led growth in the company. So even these -- when we add a new customer through a relationship management program that does require a salesperson and the sales transaction. It's a fairly junior salesperson that can handle that, and they can handle a lot of volume. So it is efficient. But unlike some other SaaS companies that can actually convert product or customers automatically using the product, we're not at that stage. And as we've looked at this and formed the product strategy, we feel the biggest opportunity is actually to leverage these signals that are coming from the network first, and then we can automate that and serve that to salespeople. That would be sort of stage 1 and a lot of what we talked about here. But over time, there should be ways that, that can automatically happen in the product. So we're getting those same signals and the conversion opportunity for a customer is right in the product. So imagine logging into our fulfillment portal and it says we see that you're trading with Home Depot. We know that 90% of our Home Depot suppliers also trade with Lowe's. Would you like to sign it for the Lowe's service. And so -- but we think the fastest path to opportunity is actually getting those signals to our existing salespeople and then moving forward to the product-led growth.

And then maybe just one more on the M&A strategy. How have the priorities changed between the three drivers you mentioned maybe for the next several years versus what's gotten the company here to this point? Are you more focused on expanding the product and that ARPU opportunity, the geographic side or are you at a scale now that maybe just buying the market consolidation players is the most efficient?

Yes. So of those 3 categories of M&A that we think about: one is sort of this market consolidation, other EDI providers, the second product line expansion on products like what we did with revenue recovery where we know it was a strong fit for our ideal customer profile and the third being the geographic expansion. To the extent there is further consolidation opportunities, we like those types of acquisitions. And what we find is that customers get a huge benefit for that because they're able to then join the world's largest retail network and get all the benefits of the network. What I'd say is the industry is less fragmented because of some of the consolidation that's happened in the industry. So there still are opportunities out there. They just might not be as plentiful as they once were. And we also like the opportunities around the product line extensions. And I think the work that we've done in revenue recovery is a good example of that. And I'm confident that the work that Mike and his team is doing, really focusing on the details of each of those 3 market segments we serve will uncover new opportunities. I'd say on the geographic expansion at this point in time, we have a lot on our plate right now with Europe, right? So we've integrated [ Tai ] into our business, but we have relaunched a whole new product portfolio in Europe and our early days in these relationship management programs in Europe. So I think if we get traction there, I could see further geographic build-out in Europe as a means to get there quickly. But what I'd say right now is we really kind of have a lot on our plate right now with the things that we are doing with Europe, early positive signs, but a lot to do with what we have there.

Dylan Becker with William Blair. Maybe for Mike or Jamie, we spent a lot of time kind of talking about the value of the network and we don't know what AI monetization is directly going to look like. But how are you guys thinking about kind of the compounding value of that ecosystem in embedding intelligence in the existing processes, how that can maybe fuel greater supplier connectivity, incremental adoption, you can solve kind of more pain points? I'm sure there's a stickiness and a retention dynamic there, too. But the network today is valuable. It reads as if it's only going to become increasingly more valuable with your position and I would love your thoughts there.

Yes. I mean I'd start with saying one of the unique things about the retail network. I mentioned that we have 300,000 trading partner connections. Every single one of those trading partner connections has going to be unique signature. They all are very specific to between those different entities. And that's an area, for example, we're using AI, we can put an incredible more kind of insight into each one of those to gain network led growth signals to come back to the customers with like new opportunities or even just understand their business context better. And so there's significant potential that we see and be able to pull more out of those signals that are in the network.

Yes. And maybe just to add a little bit more. If you think about all of the -- the way I think about it is what are -- what is the sum total of all manual decisions that need to be made in the supply chain. And then we ask ourselves the question, could you apply either deterministic or predictive models to those series of events. If you go back to maybe the [ Chevron ] slide, it's going to be one of the earlier slides in my presentation. Each of those -- each step in the value chain, there are one or many human decisions that are made throughout that supply chain. And we're asking ourselves, okay, given the network that we have, given the data that we have, and then in a determination, do we want a rule-driven predictive -- or sorry, rule-driven deterministic approach to solve that? Or is prediction good enough? So imagine like if you're in [ martech ] or something like that, where you don't have to be 100% accurate, better is better. Sometimes in supply chain, different is worse. So you've got to be careful with predictive models, but I think that there's a tremendous amount of opportunity. So I would say, directionally, we're thinking about how to create automation at every human step in the supply chain across all participants for which we have visibility, and we're sort of going to score that, and we're going to start kind of working down the list of where we deliver the greatest value. So you can kind of imagine where that leads to.

Great. And then maybe one for Kim too. The customer cohort analysis, very helpful in kind of the segmentation. As you think about kind of the delineation between yes, a small customer, large customer and the debate between customer count and ARPU expansion. It's very clear that Enterprise has a couple of benefits to it. Is it maybe make the conversation around pure net logo adds less relevance going forward when an enterprise customer could be indicative of 10 SMBs in the future, and they have a higher propensity to buy more across the platform. I would just love your perspective there.

Yes. No, that's a great question. As we want to make sure we're servicing suppliers of any size. And historically, that focus has really been more on the small. And then as we've grown and evolved, we've got from small to medium to large. So to your point, Dylan, they're not equal in what they can contribute. If you think back to that pie chart, about 18% of our revenue, we think, will come from large as well as medium even though the percentage of that customer count is much smaller. So what we wanted to do by providing that level between small, medium and largest is to really help investors understand there are some differences there. We do have traction in each of them. But the way that's going to end up resulting in our overall mix of revenue or contributor of revenue there, it is different there. So that is one thing that we have -- we'll continue to evaluate if sharing a total customer number is the most appropriate and relevant for the next decade plus or not.

This is [ Pala ] for George Kurosawa from Citi. First is on go-to-market. So should we think of relationship management programs as an evolution to community enablement or is this a whole new sales motion? What is fundamentally different? Where do you see the revenue opportunity from this motion?

Yes. So you should think of the relationship management as the same motion that we've had as community but augmented by the things we can do for retailers as a result of having the performance management product that we acquired from Traverse. So what we've done with the sales team is, historically, they've just gone in with a value proposition around the community and the value in getting the digital connection to the suppliers established. Now when we go in and engage with a retailer, we're able to talk to them about the overall performance of the supply chain of their inbound supply chain and how their suppliers are performing, including the scorecarding capabilities that exist with performance management. And then, of course, one of the best ways to drive better performance of your suppliers is to have them digitally connected so you can effectively communicate and collaborate with them. So really, the core offering on relationship management is the same as you've known from community. And -- but now what we're able to do is when we bundle it together with that performance management, have a much more meaningful discussion with the retailer about their overall supply chain performance. And what we found is we're able to open a lot more doors frankly, with this whole broader message about supply chain performance and not just about the digital enablement that's historically come through community, which is now relationship management.

Perfect. So then my second was that one of the barriers to collaboration vision was the willingness of to share data with other players. So have you seen any improvement on that front as you're better able to convey the value proposition for collaboration?

Yes. So in some areas, especially the more transactional areas like this order and shipment and item exchange, we see a high degree of willingness to collaborate. I would say where people tend to be a little bit more guarded with their data is around point-of-sale data and driving more of that point-of-sale data from retailers into our network for our analytics solution. We've been very successful doing that in certain industries like footwear, apparel, sporting goods. In some other areas, we've been less successful getting the retailer to share the data across our network.

Chris Quintero from Morgan Stanley. I want to hit on the customer cohort breakout. Chad, I think you mentioned like during the pandemic, obviously, a lot of drop shipping and you saw that in the small customer count growth. But as we look forward, how should we think about where the growth comes between all the different cohorts should be more balanced? Is there one that you think is going to drive more of the growth? How should we think about that?

Sure. So I think as you think about -- I'll take it back a step and just look at the total market opportunity because I would say if you look at that market opportunity, relatively equally penetrated in small and medium and maybe a little underpenetrated in the large compared to the other two, but not substantially. I mean, for the most part, it's fairly equal. I think the nice thing about our business is we're uniquely positioned to get to the small with the retail relationship programs. And there's still remaining opportunity in the large on the enterprise replacement cycle that Kim mentioned, but has not historically been the focus of the company, right? So if you look at the evolution of the company, it very much started in the small and having the unique sort of Internet portal way approach to get to the long tail. We were then able to move more into the medium as we build out our product portfolio around the ERP adapters and the ERP connectors that really unlocked the more of the medium for us. And I'd say, although we've had some success in the large, we haven't had a dedicated go-to-market strategy per se to really tackle that replacement market. And so we do see still some more legacy approaches, more do-it-yourself approaches in that enterprise area. And it remains a nice part of the market remaining for us to focus on in the future.

Got it. That's super helpful. And kind of as a follow-up, I don't know if Maria is in the room too, but just -- we heard a lot about the sales side. How do we think about the marketing side? Historically, you haven't been in that large side, but you also have all the new brands on the smaller side. So how do you think about the marketing for those two segments?

Yes, great question. And if Maria had a microphone, I think she'd be all over it. But let me give a little context of, one, first, having Maria in the business and then what I think is possible on the marketing side. So SPS unlike a lot of SaaS software companies hasn't had to heavily utilize traditional digital marketing strategies, and that's really come from the strength of these retail relationship programs and the strength of the channel go-to-market. And quite frankly, one of the observations that I had when I came in is that if we can move more to best-in-class digital marketing strategies, that would present another great lead source for the company. And we went out and found a best-in-class SaaS marketing expert. I'd say we're early on this journey. But I think especially as you think about the things that we can do with these network signals and how do we convert those then into digital marketing campaigns and digital engagement approaches with customers and prospective customers. I think that there's a big lever to be pulled in digital marketing and doing all that without sacrificing any things that we're doing on the relationship management side or the channel go-to-market side.

Nehal Chokshi from Northland Capital Markets. A couple of quick questions. Within the small customer cohort, has the land size been increasing over that time frame that you showed that the ARPU was also increasing?

Has the what size?

The land size. So as you onboarded new customers in that small cohort, has the land size been increasing as well? Or has it been landing at the original size and you're just simply expanding even faster?

Yes. So meaning, is our view of how many potential customers there are, has that changed in the small size. If I think about -- so if we look at our TAM that we refreshed earlier this year, prior to that, we had a TAM view albeit it was a bit dated. And when we look at the older TAM, that basically had we thought about, call it, 100,000 potential customers in the U.S. The refresh TAM shows that, that number is 146,000. And because the biggest quantity of the opportunity and the biggest quantity of our customers are small, it is safe to assume that, that land size of what that opportunity looks like, is greater than what we initially thought. Part of that, I think, also is if you think about the retail space, there's so much change that's happening there. You heard from the customer panel. There's different brands coming in, they're looking at different selection of products to bring onboard. So that opportunity of how many potential prospects for customers for SPS is larger than what we initially thought.

Okay. What I really want to get at is the ARPU of a new small customer. Has that gone up over that 5-year period that you've shown that the ARPU of the overall small customer has gone up as well?

Yes. And that would be -- it would be the case there as well. I'd bring you back to the TAM if you think about what the opportunity is on our prior version, we thought the overall average ARPU was around 25,000 in the refreshed version. The overall is 40,500 specific within the U.S. It's approximately 45,000. Now of course, that does have medium and large in it. But even if you look at that small component, the ARPU opportunity is greater than what we initially thought.

And that was driven by the additional SKUs?

If -- we have a couple of things. One, the broadest, I would say, is just as things have changed in the retail space and the quantity of SKUs that retailers are now looking to source product from. The second is our -- the way we came up with it, the second time around, we actually leveraged some external data as well as just looking at our internal data. But overall, that opportunity is larger than we originally thought.

And the other question I have here for Jamie, it was great to see how you talked about the various examples on how you're going to bring Agentic AI into the SPS platform. It seems like you are implementing this not from a ground-up basis but plugging it in, in areas where you can find leverage. Why not actually look at Agentic AI from a ground-up basis instead of plugging it in where it could -- where you could get leverage from?

Well, I mean, I would say that we're doing both actually. I mean, I'd say we showed examples of where we're able to bring AI capability alongside our existing products to make that customer experience better. But we also then are internally looking at different business processes or different ways that the network operates in order to figure out how we can pull in and do that kind of a ground-up basis. So I'd say that we're doing both. How that shows up to our customer and the market, we'll see over the course of the next product delivery.

Parker Lane at Stifel. Chad, you talked about different expansion drivers to the business, cross-sell, upsell as well as the supplier-driven expansion activities. Just wondering if you square on that part, the supplier-driven activities. The predictability of that and the trends you're seeing there? Like how sensitive is that relative to the cross-sell and upsell piece in light of the macro trends you talked about in the last earnings call?

Yes. I mean I think this is one of the unique dynamics that we have in the retail ecosystem is that there's constant share exchange going on within our customers. And so there certainly are opportunities to expand with brands as they open up more channels. And it's certainly a tailwind that we have the overall increase in brands in the retail ecosystem based on the lower barriers. But I think the one thing to keep in mind with our business is sometimes that share increase of a customer is coming at a share decrease of another customer, right? So overall, we're optimistic about the more brands and the more opportunities and the large TAM. But if you look at it at a micro level, there can be situations where some customers increase means another customer's loss of share, yes.

Right. So I think we're out of time for Q&A. Thank you very much for your questions. Thank you, everyone, on the webcast for participating. And thank you to our speakers.