SPS Commerce (SPSC) Citi's 2024 Global TMT Conference summary

Business overview and market opportunity

• Operates a cloud-based network connecting retailers and suppliers for digital supply chain collaboration.

• Largest market opportunity lies in undigitized supply chain connections, with most current processes still relying on email and PDFs.

• Cloud-based approach offers efficiency and adaptability to changing retailer requirements, unlike legacy on-premise solutions.

• Pricing model based on supplier connections and data flow, making revenue less sensitive to retail market fluctuations.

Growth drivers and customer acquisition

• Growth comes from net new customers (mainly via community enablement campaigns) and expanding wallet share from existing customers.

• Community enablement campaigns, where retailers provide supplier lists, are the primary source of new, typically smaller customers.

• Larger suppliers are acquired through channel sales, often during ERP changes, contributing more to wallet share.

• In 2024, growth is skewed toward wallet share as more enablement campaigns target existing customers.

• Sales incentives focus on maximizing the number of community programs rather than targeting only new customer adds.

Product strategy and cross-sell opportunities

• Recent acquisition of SupplyPike expected to generate $8M revenue in 2024 and $25M in 2025, reaching EBITDA breakeven.

• SupplyPike addresses invoice deduction management, automating dispute and root cause analysis for suppliers.

• Cross-sell strategy leverages existing customer relationships, with account management and product specialists driving adoption of analytics and new products.

• Analytics product monetizes point-of-sale and purchase order data, with plans to expand data-driven offerings.