SPSC Q3 2024: 21% Revenue Growth, Acquisitions Strengthen Outlook
- Solid Recurring Revenue Growth & Expanding Customer Base: The discussion highlights 21% year-over-year revenue and recurring revenue growth along with an increase in recurring revenue customers to approximately 45,200. This strong performance, coupled with a robust pipeline from community enablement programs, underpins an optimistic view for continued growth.
- Successful Acquisition Integration Boosting Product Portfolio: The effective integration of acquisitions like SupplyPike, TIE Kinetix, and Traverse adds key capabilities (e‑invoicing, invoice deduction management, and advanced analytics) that enhance cross‐sell potential and overall product value, supporting higher wallet share and long-term expansion.
- Robust Channel Sales & Digital Enablement Programs: The Q&A emphasized a healthy channel sales program and effective digital enablement campaigns that attract new logos and continuously update supplier connections, even amid macro uncertainties. This consistent lead generation is a key driver for future revenue growth.
- Dependence on Existing Customers: A significant portion of community enablement campaigns are driven by existing customers, which may limit the organic growth of new customer additions. This could constrain revenue expansion if the mix of campaigns doesn't shift to target new logos effectively.
- International Expansion Risks: The application of the North American go-to-market strategy in Europe faces uncertainties. European retailers are more regional and less dominant than their U.S. counterparts, which may make execution more complex and slower to drive customer adoption.
- Acquisition Integration and Adoption Challenges: While recent acquisitions like SupplyPike have improved offerings, there is potential risk around realizing full synergy. Larger customers with legacy on-premise systems transition to cloud-based solutions at a slower pace, which could delay revenue gains from these integrations.
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Acquisition Strategy
Q: How did recent acquisitions perform?
A: Management explained that the SupplyPike and Traverse acquisitions performed slightly better than expected, enhancing SPS’s multiproduct platform and supporting long‐term growth. -
Pricing Strategy
Q: Update on pricing/packaging approach?
A: They are still working through post‐merger integration details, aiming to offer bundled products at pricing that drives higher customer penetration. -
Acquisition Outlook
Q: Did acquisitions meet revenue/EBITDA targets?
A: Management confirmed that while performance was a bit ahead of expectations, they remain committed to the initial outlook for topline and EBITDA targets. -
Market Demand
Q: How is net new business evolving?
A: The pipeline remains strong, though recent community enablement programs have shown a higher mix of existing customers rather than fresh additions. -
Investment Cadence
Q: Any change in 2025 investment cadence?
A: They will continue balanced investments in product and sales, with more comprehensive guidance to be provided in the next earnings call. -
European Market
Q: How has European go-to-market evolved?
A: Integration of TIE Kinetix has enabled bundling e-invoicing with fulfillment, though management notes the European market poses unique regional challenges. -
GTM Risks Europe
Q: What risks in applying US GTM to Europe?
A: They cited differences in retailer scale, regional focus, and language as factors that add nuance to replicating US strategies in Europe. -
Addressable Market Update
Q: Any updated view on addressable market?
A: Management is re-evaluating the earlier addressable market framework to better reflect their expanded product portfolio, with more details expected in 2025. -
Analytics Growth
Q: Is current analytics growth normal?
A: Analytics has been growing at about 6% lately, with potential for high single-digit or even double-digit rates over the midterm, despite its discretionary nature. -
Channel Sales Funnel
Q: How are channel sales performing for new logos?
A: The channel program is generating healthy lead volumes, particularly in the SMB segment, supporting new logo acquisitions steadily. -
System Integrators
Q: Any issues with system integrators amid SAP work?
A: No direct connection to SAP migration issues has been observed; most channel partners focus on the SMB market, ensuring steady system integration. -
Customer Growth Trends
Q: Does 150 organic new customer result signal IT shifts?
A: Management attributes the organic growth to a mix in the community campaigns rather than a macro or shifting IT priorities among customers. -
Addressable Opportunity
Q: How will remaining TAM be captured?
A: They plan to target retail enablement campaigns to areas with lower existing penetration, potentially refocusing the sales efforts if needed. -
SupplyPike Fulfillment
Q: Observations on non-SPSC SupplyPike fulfillment usage?
A: Larger SupplyPike customers, traditionally on on-premise systems, are gradually transitioning to cloud-based managed networks, though adoption is slower. -
Community Durability
Q: Are digital supplier connections enduring?
A: Once digital connections are established, they remain robust; however, continual updates are needed as retailers’ assortments change. -
TAM Geography
Q: What percent of TAM is North America based?
A: Initially, 50% of the TAM was set in the U.S., though stronger domestic results hint the U.S. opportunity could be even larger.
Research analysts covering SPS COMMERCE.