SPS Commerce (SPSC) Q2 2019 Earnings Call Transcript

SPS Commerce (SPSC 0.67%)
Q2 2019 Earnings Call
Jul 25, 2019, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and welcome to the SPS Commerce Q2 2019 earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Irmina Blaszczyk.

You may begin the conference, ma'am.

Irmina Blaszczyk -- Investor Relations

Thank you, Resty. Good afternoon, everyone, and thank you for joining us on SPS Commerce second-quarter 2019 conference call. We will make certain statements today including with respect our expected financial results, go-to market strategy and efforts designed to increase our traction and penetration with retailers and other customers. These statements are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially.

Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to our SEC filings, specifically our Form 10-K, as well as our financial results press release for a more detailed description of the risk factors that may affect our results. These documents are available at our website, spscommerce.com, and at the SEC's website, sec.gov. In addition, we are providing a historical data sheet for easy reference on our Investor Relations section of our website, spscommerce.com.

During our call today, we will discuss adjusted EBITDA financial measures and non-GAAP earnings per share. In our press release and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP and adjusted EBITDA measures, including reconciliations of these measures with comparable GAAP measures. And with that, I will turn the call over to Archie.

Archie Black -- Chief Executive Officer

Thanks, Irmina, and welcome, everyone. In the second quarter of 2019, we continued to deliver strong performance ahead of our financial targets. For the second quarter, revenue grew 12% to $68.5 million. Recurring revenue grew 14%, and adjusted EBITDA grew 36% to $16.4 million.

In a recent report by Capterra, a Gartner company, SPS Commerce was again ranked the most popular EDI software, a position SPS has held every year since the report launched. Capterra ranks technology providers based on the company's customers, reviews and social presence. The insights we gain from customer reviews fuel innovation and help shape the product road map that earns SPS Commerce's full service EDI the highest popularity rating year after year. I'd like to thank our technology and customer success teams for their dedication to building world-class products and providing an unrivaled customer experience.

SPS' full service approach and our partnerships are integral for the success of our growing network and our business model. We value the many ERP system providers that choose to work with SPS and we are honored when our partners recognize us for our ability to service their users. For example, Acumatica is a fast-growing cloud ERP company. At its recent summit, Acumatica named SPS Commerce its ISP partner of the year in 2018 for the excellent services we have been providing to Acumatica ERP customers.

We also collaborate with partners and customers at retail industry events, and recently at IRCE, we found that the key themes this year were again dominated by Amazon and the expectations it sets for retailers, digital marketplaces and delivery time lines, including drop-ship. According to statistics provided by the IRCE 2019 guidebook, sales growth for online marketplaces reached 24% in 2018, outpacing all industry growth by more than 10 points. That's a clear indication that omni-channel continues to dominate the discussion as retailers evaluate options to improve their fulfillment strategy and offer faster delivery. Drop-ship continues to be top-of-mind for many of our customers and partners, and SPS has decades of experience working with retailers and suppliers at expanding direct-to-consumer operations.

For example, Walmart engaged with SPS Commerce several years ago as they were rapidly expanding their e-commerce business. Since 2015, Walmart.com has relied on SPS to programmatically onboard drop-ship vendors to an ongoing community enablement campaign. To date, SPS has enabled to help several thousand Walmart vendors across all Walmart business units, including drop-ship vendors for Walmart.com. We're also excited to announce a new addition to the SPS Commerce analytics retail network.

REI, an American retail and outdoor recreation services corporation, recently completed an analytics community enablement program. Covering over 80% of their vendor network, REI is successfully leveraging SPS's leading collaboration analytics product to provide suppliers visibility in the key sales and inventory data metrics, enabling them to easily identify important insights that improve seasonal planning, sell-through and help manage inventory levels more effectively. In summary, I would like to congratulate all SPS Commerce employees on our significant accomplishments in the quarter. With decades of experience working with retailers and suppliers at all stages of their e-commerce journey, SPS Commerce continues to empower its customers to capitalize on e-commerce trends that are revolutionizing the retail landscape.

With that, I'll turn it over to Kim to discuss our financial results.

Kim Nelson -- Chief Financial Officer and Executive Vice President

Thanks, Archie. We had a great second quarter of 2019. Revenue was $68.5 million, a 12% increase over Q2 of last year, and represented our 74th consecutive quarter of revenue growth. Recurring revenue this quarter grew 14% year over year.

The total number of recurring revenue customers increased 14% year over year to approximately 29,900. For Q2, wallet share was flat year over year at approximately $8,700. For the quarter, adjusted EBITDA was $16.4 million, compared to $12.1 million in Q2 of last year. We ended the quarter with total cash and marketable securities of approximately $199 million.

We also repurchased 6 million of SPS shares in the quarter. Before turning to guidance, I'd like to mention the stock split we announced today, which reflects the company's strong performance to date. We believe the stock split will provide greater liquidity and allow the stock to be more acceptable to a broad range of investors. The additional shares are expected to be distributed on August 22 and trading is expected to begin on a split-adjusted basis on August 23.

Now turning to guidance. For the third quarter of 2019, we expect revenue to be in the range of $69.7 million to $70.2 million. We expect adjusted EBITDA to be in the range of $16.9 million to $17.4 million. We expect fully diluted earnings per share to be approximately $0.37 to $0.39 with fully diluted weighted average shares outstanding of approximately 18.1 million shares or $0.19 to $0.20 on a split-adjusted basis with fully diluted weighted average shares outstanding of approximately 36.2 million shares.

We expect non-GAAP diluted earnings per share to be approximately $0.55 to $0.56 or $0.27 to $0.28 on a split-adjusted basis. We expect stock-based compensation expense of approximately $3.2 million, depreciation expense of approximately $2.9 million and amortization expense of approximately $1.3 million. For the full year, we expect revenue to be in the range of $276.6 million to $277.7 million, representing approximately 12% growth over 2018. We expect adjusted EBITDA to be in the range of $67.2 million to $68.3 million, representing 31% to 33% growth over 2018.

We expect fully diluted earnings per share to be approximately $1.62 to $1.67 with fully diluted weighted average shares outstanding of approximately 18.1 million shares or $0.81 to $0.84 on a split-adjusted basis with fully diluted weighted average shares outstanding of approximately 36.2 million shares. We expect non-GAAP diluted earnings per share to be approximately $2.30 to $2.35 or $1.15 to $1.18 on a split-adjusted basis. We expect stock-based compensation expense of approximately $14.7 million, depreciation expense of approximately $11.2 million and amortization expense for the year of approximately $5.2 million. For the remainder of the year, on a quarterly basis, investors should model approximately a 30% effective tax rate calculated on GAAP pre-tax net earnings.

We are pleased with our second-quarter performance and we'd like to congratulate all employees for helping SPS execute on its financial targets and earning recognition from customers and industry peers for our leading products and solutions. With that, I'd like to open the call to questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from of the line of Scott Berg from Needham.

Scott Berg -- Needham and Company -- Analyst

Congrats on a very good quarter. I guess I have two. Kim, let's start off on the stock split. I guess why now? Why's stock split? Maybe help us understand I guess why you're undertaking this now versus maybe a prior period?

Kim Nelson -- Chief Financial Officer and Executive Vice President

All right. Sure. So the two-for-one stock split is in recognition of our strong financial performance that we've had to date. We also do believe that it will provide greater liquidity and really allowing the stock to be more accessible to a broader range of investors.

On top of that, when we compared how we were compared to some other SaaS companies with similar market caps, we realized there was a bit of a difference between the number of shares relative to that stock price, so this puts us more in line with other SaaS peers as well.

Scott Berg -- Needham and Company -- Analyst

Got it. That's helpful. And then from a follow-up perspective, Archie, the REI example that you brought up I thought was interesting with the company bringing on some new opportunity in the analytic space and your enablement campaign there. I guess, what drove REI today to bring this or to undertake this initiative? And given that analytics or at least growth in that space has been a little bit slow for the company recently, is this maybe a new opportunity to help reaccelerate growth in the analytics space for you?

Archie Black -- Chief Executive Officer

Yes. Let me take that on the -- why companies buy collaboration analytics. I think it really is to truly partner with their suppliers, allow them to make product recommendations, help manage inventory levels. So I think as we talk to retailers, we think there's an incredibly large total addressable market.

In the case of REI, now this has become top-of-mind for them. So in my mind, there's REIs to be had out there. It's just a matter of when it becomes a priority. So that's why we believe in the long-term total addressable market and analytics.

And I think REI is going to see a significant benefit from this. As far as the overall market, we really see -- if I were to characterize it, I would say that retail is clearly stabilized, and so we feel much better about the environment. I don't know if I'm ready to project anything else beyond that. And I think on the analytics, I still think while there's a long-term huge opportunity, I still think it's going to warm up, down.

Operator

Our next question comes from the line of Koji Ikeda from Oppenheimer.

Koji Ikeda -- Oppenheimer and Company Inc. -- Analyst

Congrats on the quarter. Yes. I just wanted to dig in at a little bit more on the REI analytics new customer win. Just thinking about the sales cycle, was this -- was REI looking at analytics for a while and maybe the time was finally right for REI to go ahead with purchasing analytics? Or was there any sort of technology enhancement to analytics that helped push them to the finish line? Or was it really just a new sales cycle for REI altogether? That will be helpful.

Archie Black -- Chief Executive Officer

Yes. We have a relationship with REI in fulfillment, and we've -- as I've mentioned in the past, whenever we're talking about road maps for retailers, we're talking about our full suite of offerings and we do think that winning the fulfillment, having this extremely retail-focused set of solutions was a positive. It's hard to explain, but when we talk to retailers, they do embrace the thought of it. As I've mentioned, it's just they have an awful lot on their plate.

So it's a matter of when they feel like -- it's the priority level and if they feel like they can do it. In the case of REI, us being in there, they've been thinking about it, but us being in there and being a strong partner of theirs, that gives us a competitive advantage. And that, coupled with we do have the best solution, and I think that helps, too.

Koji Ikeda -- Oppenheimer and Company Inc. -- Analyst

Got it. That's super helpful. And then just a quick question here on the net new recurring revenue customers. It looks like there was a pretty healthy 400-plus in the quarter.

Is that really attributable to the REI side? Or was there something else going on there? I mean how are you guys feeling about community enablement programs overall in the second quarter?

Kim Nelson -- Chief Financial Officer and Executive Vice President

Sure. So we had a nice quarter as it relates to community enablement campaigns. To your point, Koji, either crack the sequential add was a little bit over 400. That's a bit higher than what you've seen in some of our other quarters.

That's primarily due to the community enablement campaign activities in the quarter. It would be incorrect to assume a large portion of that was specific to REI. As Archie mentioned, we already have a relationship with a lot of the -- with REI as well as REI customers. Certainly, some came from that, but it's more reflective of the overall community enablement campaign activity in the quarter.

Operator

Our next question comes from the line of David Hynes from Canaccord.

David Hynes -- Canaccord Genuity -- Analyst

So Archie, you talked a bit more about drop-ship in the prepared remarks than you have in the past. Just is there any way qualitatively you can help us understand kind of how prevalent that is in your network? I mean I assume it's a different rule book that the retailers had to set up for the supplier customers. How many of these retail partners are you set up to do drop-ship for? And how many of your suppliers have done drop-ship with you? Just any kind of sense of how often it's being utilized across the base.

Archie Black -- Chief Executive Officer

Yes. So it's -- I think we talked about a number a while back.

Kim Nelson -- Chief Financial Officer and Executive Vice President

There's hundreds of retailers.

Archie Black -- Chief Executive Officer

Hundreds of retailers, I think, it's north of 300 and there's of thousands of suppliers using it, and it is a different rule book. I think more and more what we're learning as we're going into community enablement campaigns and talking with retailers, although we do believe it's a suite of solutions, they're very focused on the drop-ship portion so we're more or less selling that more independently because that is such a big focus. If you think long term where drop-ship fits, in my opinion, it's going to be about -- at a mature retailer, about 20% of their sales are going to be drop-ship. And that's going to represent 80% of their SKUs, because what's going to happen in retail is a supplier will drop-ship a product, but when that product has high sales velocity, the retailer is going to start putting it in their stores and distribution centers.

So long term, we believe it's 20% of the retail sales from e-commerce will be drop-ship.

David Hynes -- Canaccord Genuity -- Analyst

Yes, and you have the virtual inventory, right?

Archie Black -- Chief Executive Officer

Yes. But I think more importantly, it is a driving case for us to really build a relationship with a retailer and then we're set up to be able to take over all of their rule books, if you will.

David Hynes -- Canaccord Genuity -- Analyst

Yes, right. No, that makes sense. And then Kim, a follow-up for you. Just gross margins in the quarter, a little bit of pressure there.

Any color, and how we should think about it going forward?

Kim Nelson -- Chief Financial Officer and Executive Vice President

Sure. So when you think about gross margin, really looking at things on an annual basis with our business is more indicative than looking at it on a particular quarter. Q1, you had a bit higher gross margin this quarter, to your point, it was a little bit lower. So a way to think about it, maybe the second half of the year, it's more probably reflective of sort of the first-half average of the gross margin.

So Q1, pretty high, Q2 is a little bit lower. Part of the reason is just timing. So what's going to be in there are going to be two things, right? Personnel-related, so as we continue to add resources to make sure we have a great overall customer experience; and so there was a bit of more of that in Q2 than in Q1 as an example. Also specific in Q2, we did have some consulting-related spend.

We already have a world-class customer experience but we want to make sure we're always focused on even bettering and furthering ourselves so we did have some more sort of onetime in nature spend really focused on enhancing the overall end-to-end customer experience in the future.

Operator

Our next question comes from the line of Jason Celino from KeyBanc Capital.

Unknown speaker

This is actually Devon, on for Jason. And I just have a couple of questions, if I may. The first question is regarding guidance. It seems like you have raised the full-year '19 revenue and EBITDA guidance.

And I'm just wondering if you can provide any color to that. Anything would be helpful.

Kim Nelson -- Chief Financial Officer and Executive Vice President

Sure. As it relates to the guidance, you're correct, we did take up the annual guidance. Part of that was based on what we saw in the quarter. So we beat the high end of our guidance in the quarter by about 300 from a revenue perspective, about 100 from an EBITDA perspective.

So part of that carries forward. The other part is I'll go back to a comment that Archie had made is we're really beginning to see the retail space stabilize a little bit. So that gives us a bit more comfort and confidence in the trends that we're seeing. That will help address sort of the top line.

When you then take that down to EBITDA, the EBITDA is going to be -- the EBITDA raise is a combination of the increase from a revenue perspective and the amount that sort of falls to the bottom line. Also, as we look at our business, we feel, when we think about the spend in sort of supporting the day to day as well as the spend and investments we're making in the future, we have the ability based on how we've been performing to even demonstrate a bit more efficiencies this year. And you see that -- you're seeing that flow through as well.

Operator

Our next question comes from the line of Jeff Van Rhee from Craig-Hallum.

Jeff Van Rhee -- Craig-Hallum Capital Group LP -- Analyst

A couple for me. Maybe first just talk about the overall environment with respect to change events at both the retailers and the suppliers. I know those -- what they're undertaking within their tech stacks has direct applications for the ability to tend to be interested in buying your solutions. So can you talk about each of those, just kind of what qualitatively might be changing within the suppliers, and the frequency and drivers of their change events, and the same on the retail side?

Archie Black -- Chief Executive Officer

Yes. I mean if I were to qualitatively say, it was -- you go back a couple of years and a lot of uncertainty and -- around the retail environment and we were looking not real certain where it was going. And I would say now we're in an environment where we feel it's stabilized and we feel a little more comfortable with where we're going. I think we've gone through a lot of a -- a heavier consternation, if you will.

And so I think we're in a, in my believe, a more normal period of time.

Jeff Van Rhee -- Craig-Hallum Capital Group LP -- Analyst

OK. And then with respect to cohort analysis and the pace at which existing customers come on to the network and then expand, can you just talk maybe qualitatively for a minute on what you've observed there in terms of variation to historical norms? Just as -- again, as it relates to cohort analysis, how many connections they're potentially bringing on features, capabilities, any observations?

Archie Black -- Chief Executive Officer

Yes. I wouldn't say it's a significant change. I think over the last nine years as a public company, one of the things as we'd have more larger and larger customers, they're still midsize customers. They're still, on a relative basis, small.

And typically, a larger supplier that's coming in through channel sales might have dozens or even hundreds of retail trading partners, whereas a program brought in from a retail enablement campaign, it might be one to start with and it might grow to three, four, five. So the great thing about our business is we have a big segment of customers that are on the very low end and we have a segment of customers right around our average customer, then we have a significant number of customers that pay us $20,000 and up to hundreds of thousands. We've always had a very strong land and expand mindset. We do believe that if we can land customers, we can expand them, and that's the confidence in our ability to execute.

And we've have that both from a retailer standpoint, to land a retailer on a smaller enablement campaign, and also on a supplier standpoint.

Jeff Van Rhee -- Craig-Hallum Capital Group LP -- Analyst

OK. And then I guess with respect to the sales organization, how is it different? How is the go-to-market different now than a year ago? Maybe just what has changed within that duration?

Archie Black -- Chief Executive Officer

I think first off, we made a lot of changes. It's significantly more stable. So some of the changes we made from '18 and '17 are, I would call, our -- business as normal. So I feel like we just have more at bats at that.

That said, the only thing that's probably different is we rolled out two and a half years ago, two years ago, a new fulfillment product. And that has just made life easier. I mean we have a significantly better product. We're clearly the best product in the industry.

We do a lot more demos. We can have -- we have the ability to have faster sales cycles because of that, and people can see it and use it pretty easily.

Jeff Van Rhee -- Craig-Hallum Capital Group LP -- Analyst

Maybe one last, if I can sneak it in, competitive landscape, OpenText, GXS and potential Sterling and others. Any one you would call out as changes in behavior, either frequency of seeing them, win rates, etc.?

Archie Black -- Chief Executive Officer

No. I think it's still the same and we feel very good. We've built a retail network. If you're an on-prem software player or really just a point-to-point solution, you really don't have a network.

So we feel very good about the network and we feel good about our ability to execute so much more quickly than they can on the supplier standpoint. And then the retailer enablement campaign, that just gives us a huge competitor advantage. We get the first at bat by solving a pretty significant problem for the retailer.

Operator

Our next question comes from the line of Tom Roderick from Stifel.

Jeffrey Lane -- Stifel Financial Corp. -- Analyst

Jeffrey Lane, in for Tom. Archie, I wanted to go back to the comment you made earlier about analytics. You mentioned that a lot of the conversations for your sales team tend to include analytics. It's just a matter of timing for whether or not they adopt it.

I was wondering if you could talk about what they may be doing internally as far as Collaboration Analytics is concerned if they're not using your product? And just how important that is to them if they think about the relationship between the supplier and the retailer.

Archie Black -- Chief Executive Officer

Well, frankly, a lot of them just aren't sharing the data. So what the supplier has at their hands is what the customers or what the retailers ordered. And they're managing the out of stocks. Obviously, they have all the data.

The retailer has all the data, so they can manage the out of stocks. And some of them will do some forecasting for the supplier segment. Here's our forecast on what we think we're going to order. The reality is what most retailers, if you actually ask them, they talk about, well, we do forecasting instead of giving them point of sale data.

Most of them will tell you they're not that good at forecasting because you need to spend a lot of time on each individual SKU because there's nuances in each SKU. So a lot of time, it's a new concept of truly sharing good quality data and having the same format. There are times when they will be faxing and emailing different reports that they get from their system, but that's not a dynamic live interaction. It's a fax and it's an email and it's some pretty rudimentary data.

Jeffrey Lane -- Stifel Financial Corp. -- Analyst

And then as we think about the CovalentWorks acquisition, how has the integration process been of that business? And have you had any success so far in sort of upselling those customers? If I'm not mistaken, I think they are more of a $2,000 ASP versus your own business. So have you seen any pull up in your own ability to grow those customers?

Archie Black -- Chief Executive Officer

We have had some offers up on the migration. The migration work where the majority done, it's gone extremely well. The feedback in general from the customers is very glad they're on the SPS product because it's such a strong product and they're very pleased that they have a quality product. So that part has gone extremely well.

Hats off to the team in Houston. They've done a great job with the migration. The team in Minneapolis as well supporting them. So I think that's gone extremely well.

We have had up-sell. That has really not been our -- a hard push. If you think about the life cycle of the customer, we owe it to these customers. We have an obligation to get them moved over, trained and having a positive experience with SPS, and then the up-selling will come.

I think a lot of that will come naturally because if they're using somebody else well or thinking about new connections, I think now that they're on our product, those will come more naturally. That they'll say, "Well, why wouldn't I use SPS Commerce?"

Operator

Our next question comes from the line of Mark Schappel from Benchmark.

Mark Schappel -- Benchmark -- Analyst

Nice job on the quarter. Just a couple of questions. Archie, I have question on the Walmart.com customer reference in your prepared remarks, I believe Walmart.com has been a long time customer for you. But did they expand their relationship in the quarter? Is that why you called it out?

Archie Black -- Chief Executive Officer

No. Just another example. I mean we work with them for several years, and we like to give customer examples. But it's an ongoing -- we got to leads from Walmart each and every day.

And that's the power of -- another illustration of the power of our business, but also that it is very drop-ship focused, which we think is an exciting way to get into these retail accounts.

Mark Schappel -- Benchmark -- Analyst

OK. Great. That's helpful. And then with respect to CovalentWorks, just a follow-up to an earlier question.

About what percentage of your customers have been moved over to your SPS -- your core SPS platform?

Archie Black -- Chief Executive Officer

It's the majority and we'll be -- we're on the very tail end, so it's the majority plus and we're -- and then there'll be a small, small tail that has some unique situation that will stay on the CovalentWorks platform, but we expect the vast majority to be moved over and we expect that to be -- will be concluding in Q3.

Operator

Our next question comes from the line of David Gearhart from First Analysis.

David Gearhart -- First Analysis -- Analyst

First question is housekeeping. Can you give us the revenue contribution in the quarter from CovalentWorks and EDI Admin or at least the organic growth figure?

Kim Nelson -- Chief Financial Officer and Executive Vice President

Yes. David, we provide everything on a total. At the time we had announced those acquisitions, so back in sort of the Q4 time period, we had mentioned that CovalentWorks would represent about $4.5 million of revenue for the year. That's a very small amount of our overall business, obviously.

So our results just incorporate -- it's just the total. So your data point you're looking for is probably back from when we announced the acquisition of about $4.5 million for the year.

David Gearhart -- First Analysis -- Analyst

Got it. And then it's been a while since we've heard an update on the churn metrics, either on a customer basis or on a dollar basis. I just wondered if you could update us on that.

Kim Nelson -- Chief Financial Officer and Executive Vice President

Sure. That's remained very consistent. The customer churns between sort of that 12% to 13%, that's consistently where it's been. And then the dollar churn is a little less than half of that.

So about 7% from a dollar churn perspective. Again, consistent with prior quarters and prior years.

David Gearhart -- First Analysis -- Analyst

Perfect. And then, you were talking a bit, Archie, about Walmart.com. And I had been hearing a little bit more about marketplace environments at IRCE and other events, more specifically around first party with the marketplace is taking in inventory from suppliers and EDI becoming more to the fore in lieu of manual processes, especially at scale, as requirements are rising in terms of volume or dollar commitments. Just wondering, is there a way that SPS targets marketplace-specific entities that sell on marketplaces that need to use EDI? I know you guys go to market a lot with community enablement programs, but are you built to go after individual relationships that you want in marketplaces? Or do those come in by like a Target plus or what-not saying we have these suppliers, please connect to SPS.

Can you give us some sense of how you can capture those relationships?

Archie Black -- Chief Executive Officer

Well, if it's a marketplace, marketplace has a little bit different dynamics because a retailer doesn't necessarily decide to start to buy from the marketplace. You get your operations set up and then you can connect to the marketplace. So it's a much more of a supplier-driven sale is how we're doing it. And frankly, what's interesting is a lot of the marketplace, it's just existing customers that then are going for marketplaces, and we can do that either directly or we also, very small customers want to just work with, let's say, Amazon, and they bought Shopify for their storefront.

We will integrate and link it to the API at Shopify. So Shopify, we'll work with that and we look at Shopify as almost a retail connection because somebody is doing e-commerce, brick and mortar and then marketplaces, probably wants one integration back into the ERP system. So that's how we work with those suppliers. But it's a much more supplier-driven sale as opposed to a retail-driven sale.

David Gearhart -- First Analysis -- Analyst

And with that, I mean, do you have dedicated resources on the sales side attacking this particular opportunity?

Archie Black -- Chief Executive Officer

They don't just sell to marketplaces because most of the suppliers, they're going to sell to marketplaces and brick-and-mortar and e-commerce. So there are supplier sales people. Now there can be within their territory customers that are just selling to marketplaces and they're set up to do that.

Operator

[Operator instructions] Next question comes from the line of Pat Walravens from JMP Securities.

Unknown speaker

This is Matt for Pat. I have a question for Kim. I was wondering because you raised the full-year guidance this quarter and in terms of 2020, how should we think about that and even so, maybe adjusted EBITDA and margin there?

Kim Nelson -- Chief Financial Officer and Executive Vice President

Sure. So we did raise for the year the expectations from both revenue as well as EBITDA. Some color that I previously provided as it relates to the drivers of that revenue partly driven by what we saw in the quarter, also driven by some -- somewhat -- some sort of retail stability that we've seen. That then translates partially to an increase in EBITDA as some of those margins flow down.

But that still allows us, of course, to be investing in both the short term as well as the long term. So a way to think about it is just because we took up the expectations from a revenue and an EBITDA perspective, that does not necessarily translate into radical differences line by line from a margin perspective.

Operator

[Operator signoff]

Duration: 39 minutes

Call participants:

Irmina Blaszczyk -- Investor Relations

Archie Black -- Chief Executive Officer

Kim Nelson -- Chief Financial Officer and Executive Vice President

Scott Berg -- Needham and Company -- Analyst

Koji Ikeda -- Oppenheimer and Company Inc. -- Analyst

David Hynes -- Canaccord Genuity -- Analyst

Unknown speaker

Jeff Van Rhee -- Craig-Hallum Capital Group LP -- Analyst

Jeffrey Lane -- Stifel Financial Corp. -- Analyst

Mark Schappel -- Benchmark -- Analyst

David Gearhart -- First Analysis -- Analyst

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