SPS Commerce, Inc. (NASDAQ:SPSC) Q1 2020 Earnings Conference Call - Final Transcript

Apr 30, 2020 • 04:30 pm ET

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SPS Commerce, Inc. (NASDAQ:SPSC) Q1 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] Your first question comes from the line of Matt Pfau from William Blair.

Analyst
Matt Pfau

Hey guys, thanks for taking my questions, and hope you're all doing well. Wanted to ask on the new product you introduced on the carrier service. Maybe you can just tell us about the -- how the monetization model for that works and is there an opportunity to expand that to more retailers?

Executive
Archie Black

Yes, so the product is an add-on product for fulfillment. And it's a modest monthly fee and it does two things, one, it greatly simplifies the whole process of tying your ASN to your shipping documents and also rate shopping. So it just simplifies that process and decreases amount of manual effort which is of great value.

So I think there's two big parts of it, one, it's a potential add-on for our customers so we can have -- get more money, but it's also a retention tool in the fact that, obviously, the more value we can generate for our suppliers, the more likely they are to stay with us and makes it very difficult for them to go somewhere else. And yes, we continue to build out the network and we're building out the network as fast as people need the solution. Again, it's a new solution and we expect to have it to basically in our entire retail network.

Analyst
Matt Pfau

Right. And then, I guess just generally, there is going to be a lot of supply chain related changes coming out of the pandemic. So how do you think about that in terms of creating additional opportunities for more products to be created for your portfolio?

Executive
Archie Black

Well, I think a lot of it we are set up extremely well with the product. Obviously, as you more usage, you see more opportunities, but I think we're seeing drop-ship activities kind of double, triple overall. Now for some retailers are up 200%, for some retailers are up 1,000%. So we're seeing significantly more -- obviously more drop-ship opportunities of the 350 or so retailers that use us for drop shipping or the suppliers that use us for drop-shipping, so we're seeing more opportunity there.

We're seeing -- one of the dynamics that happened in 2009 -- remember 2009 was a very challenging retail environment and our community product actually had increased sales and we went public off our 2009 numbers. So, we're seeing that the whole need for an efficient supply chain -- an electronic supply chain.

Simple things like going into the office to get mail or not wanting to have a packing slip on the box that comes in the distribution center because you don't want somebody to touch it. So the efficiencies, we're very optimistic on that front. And I think we'll continue to evolve and -- but I think we're very well-positioned right now.

Analyst
Matt Pfau

Great. Thanks for taking my questions, guys.

Operator
Operator

Your next question comes from the line of Scott Berg from Needham.

Analyst
Scott Berg

Hi, Archie and Kim. Congrats on