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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Executive
Archie Black

to suppliers and retailers at a time when e-commerce has become essential to their business.

We recently engaged with US Foods, a leading food service distributor, about leveraging EDI and automating their supply chain. As COVID-19 started to disrupt operations in the food industry, US Foods realized that electronic processes are critical to maintain effective business operations. They identified EDI as a crucial component in this process, requiring all of their suppliers to move to electronic order fulfillment. In a matter of four weeks, SPS Commerce has signed on more suppliers to transact EDI with US Foods than they have on their own over the last 10 years.

US Foods have also formed grocery sector partnerships, enabling it to deliver product directly to a retailer's distribution center or stores. These new partnerships further emphasize the need for supply chain efficiencies to help retailers across the United States maintain inventory and meet increasing consumer demand.

Many of the retailers we work with are expanding on their multichannel sourcing strategy to meet increasing demand. Costco, for example, has regularly been using SPS for same-day vendor setup and has relied on us over the past two -- few weeks to add approximately 200 new vendors to their network and ensure they are up and running to fill Costco's orders within hours. We have also been working with Walgreens, onboarding new critical suppliers of essential products such as face masks. With our full service, same-day onboarding capabilities, SPS was able to increase speed to market for a variety of critical products from new suppliers.

Stay-at-home government directives have also caused an abrupt decline in brick-and-mortar retail sales and a shift to online shopping. E-commerce is now an integral and sometimes necessary part of our lives, prompting retailers to evaluate their operational efficiencies and quickly adapt to stay relevant. As part of SPS Commerce fulfillment, we launched Carrier Service to help suppliers manage drop ship orders, helping them save time with functionality like batch processing and reduce costs with rate shopping capability for all major carriers in the U.S. and Canada. Carrier Service, which was just launched in March, is being used by our customers to fulfill orders for Amazon, Costco, Home Depot, Bed Bath & Beyond and Target.

We are pleased with the product's acceptance to date as we strive to support our trading community in this challenging environment. We expect the current dynamics impacting retailers and suppliers will continue to amplify the need for process automation. And SPS Commerce is committed to support and improve trading partner relationships in every way we can.

We're also mindful of the economic impacts of the COVID-19 pandemic and the uncertainty around its implications across the retail landscape. SPS Commerce has a very large network of trading partners across various industries, and we see retailers and suppliers adapting and implementing e-commerce capabilities to serve rapidly evolving consumer demand. Across our network and diverse end markets, we have seen a steady volume of transactions since March with approximately