Ladies and gentlemen, thank you for standing by and welcome to the SPS Commerce Q1 2020 Earnings Call. At this time, all participant lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to hand the conference over to your speaker today, Irmina Blaszczyk. You may begin..

Thank you, Blue [ph]. Good afternoon everyone and thank you for joining us on SPS Commerce First Quarter 2020 Conference Call.

We will make certain statements and projections today, including with respect to our expected financial results, go-to-market strategy and efforts designed to increase our traction and penetration with retailers and other customers.

These statements and projections are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. We know in particular that uncertainty regarding the impact of COVID-19 pandemic on our performance could cause actual results to differ materially from our projections.

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 we furnished Form 8-K to the SEC earlier today for a more detailed description of the risk factors that may affect our results. These documents are available on our website spscommerce.com and at the SEC's website SEC.GOV.

In addition, we are providing a historical datasheet 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, we 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..

Thanks, Irmina, and welcome everyone. First and foremost, we hope you're all staying safe and well and our thoughts are with everyone affected by the coronavirus pandemic.

The health and safety of our employees, customers and partners is a top priority and we remain fully committed to support the suppliers and retailers that serve our communities in these challenging times. SPS Commerce Services are absolutely critical to our customers to ensure they are able to deliver the day to day essentials we all need.

We are cloud-native company and the investments we have made over the years, and our tools systems and processes enable us to deliver uninterrupted and secure service anywhere in the world often with nothing more than a web browser.

Due to the nature of the SaaS business model, we are able to operate remotely providing a full-service experience to existing customers and promptly onboarding new suppliers as needed. For the first quarter, revenue grew 11% to $74.2 million. Recurring revenue grew 12% and adjusted EBITDA grew 24% to $20.4 million.

SPS Commerce provides a mission-critical service to suppliers and retailers at a time when e-commerce has become a central to their business. We recently engaged with US Foods, a leading foodservice 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 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 our retailers' 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 multi-channel 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 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 sale -- 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 US and Canada.

Carrier service, which was just launched in March is being used by our customers to fill -- 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 an suppliers will continue to amplify the need for process automation. And SPS Commerce has committed to support and improve trading partner relationships in every way we can.

We are 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 transaction since March, with approximately half of our network seeing increased volume, while some have experienced a decline. The dynamics of the situation continue to evolve.

At this time, we are seeing increased demand for automation from retailers embracing e-commerce and implementing drop-ship capabilities. Our exposure to the grocery supply chain has resulted in an increase in onboarding of new suppliers for retailers as well as foodservice and grocery distributors.

These are the dynamics that drive demand for SPS Commerce Solutions, and we are optimistic about the long-term opportunities as we continue to support our growing network of over 31,000 trading partners.

As we look at the rest of 2020, this uncertainty around the duration and the magnitude of the pandemic and its growing impact on the economy, we are factoring in the possibility of continued pressure on retailers, a decline in demand for our solutions such as analytics and a push-out in enterprise ERP implementations.

All of which would negatively impact our business. These are dynamics we cannot protect -- predict or control, but with our cloud-native operational model we are well-positioned to provide support to our customers, partners and our community. In summary, SPS continues to be a mission-critical aspect of the global supply chain.

Our vision to be the world's retail network is being realized. Our retail supply chain solutions are keeping trading partners connected, especially now during this time of crisis and disruption.

The work we do is vital and I would like to thank all of our employees for the ongoing commitment to supporting our customers and ensuring business and supply continuity for our communities.

We achieved our 10th year as a public company in April, and based on our history of consistent execution and ongoing focus on our customers' needs, we believe SPS Commerce will emerge from this crisis stronger than ever. With that, I'll turn it over to Kim, to discuss our financial results..

Thanks, Archie we delivered a solid first quarter of 2020. Revenue was $74.2 million, a 11% increase over Q1 of last year and represented our 77th consecutive quarter of revenue growth. Recurring revenue this quarter grew 12% year-over-year. The total number of recurring revenue customers increased 5% year-over-year to approximately 31,000.

For Q1, wallet share was up 6% year-over-year at approximately 9,100. For the quarter, adjusted EBITDA was $20.4 million compared to $16.5 million in Q1 of last year. We ended the quarter with total cash and marketable securities of approximately $215 million. We also repurchased $12 million of SPS shares in the quarter. Now turning to guidance.

For the second quarter of 2020, we expect revenue to be in the range of $73.8 million to $74.8 million. We expect adjusted EBITDA to be in the range of $19 million to $20 million. We expect fully diluted earnings per share to be approximately $0.17 to $0.19 with fully diluted weighted average shares outstanding of approximately $36.2 million shares.

We expect non-GAAP diluted earnings per share to be approximately $0.29 to $0.31 with a stock-based compensation expense of approximately $5.1 million, depreciation expense of approximately $3.5 million and amortization expense of approximately $1.4 million.

As a result of the government-mandated office closures and reduced travel, we are recognizing savings and we'll continue to manage discretionary spending accordingly, given ongoing uncertainties resulting from the pandemic.

However, we're in a unique position to expand our market presence, and we will continue to invest in product innovation to advance our technology leadership and continue to deliver the best customer experience.

We are withdrawing 2020 annual guidance due to uncertainty related to the macroeconomic impact of the pandemic and the lack of visibility into the magnitude of the impact on our retail network.

Dynamics that may negatively impact our business include prolonged store closures, bankruptcies, reduced demand for our analytics product and potential push out in ERP migration.

Dynamics that may positively impact our business include increased enablement campaign activity driven by current e-commerce trends including demand for our drop-ship product. We will continue to monitor the macroeconomic impact on retail dynamics and reassess our visibility for the full year at the end of the second quarter.

However, given our history of strong operating leverage and the resilience of our SaaS business model, we remain confident in our ability to expand adjusted EBITDA margin in 2020 and achieve our long-term adjusted EBITDA margin target of 35%.

Although we are withdrawing guidance for the year, we are providing the following information for modeling purpose. We expect stock-based compensation expense for the year of approximately $19.7 million, depreciation expense of approximately $13.8 million and amortization expense of approximately $5.6 million.

Also, for the remainder of the year on a quarterly basis, Investors should model a 30% effective tax rate calculated on GAAP pre-tax net earnings. In summary, we expect that the current supply chain dynamics will amplify the need for e-commerce and EDI solutions in the long-term.

And we believe SPS Commerce is uniquely positioned to capitalize on that opportunity. We are pleased with our ability to continue to provide mission-critical solutions to retailers and suppliers and we'd like to thank all our employees for their unyielding effort and dedication to support the SPS Commerce network in these challenging times.

With that, I'd like to open the call to questions..

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

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?.

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..

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?.

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..

Great. Thanks for taking my questions, guys..

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

Hi, Archie and Kim. Congrats on a good quarter, and thanks for taking my questions. I guess a couple here, Archie. You started touching on it in the last question a little bit, some differences between the great recession and the current environment that we're in.

What else is different for the business today? Obviously, you are in a more of a hyper-growth mode than still very early in the fulfillment as the cloud kind of stage. Today, 12 years later, certainly more mature, you have a much different position in the ecosystem.

Yes, what are the, maybe, puts and pulls that are kind of different or other positives that you're looking at today?.

one in 2008-2009 there was no health crisis, it wasn't an emotional time, it wasn't time for -- as much of a time for empathy, so that's completely different. And then we had everybody in the office and so we didn't have 1,500 people working remotely across the globe.

And there are some positives and some negatives with that, so those are the -- and like 2008, 2009, we didn't know how -- we didn't know how long the economics were going to last, we again don't know how this is going to play out either. Is this a V, is it a W? Is it -- how long does it take? I don't know. Our business is very different.

In 2009, we only had very small suppliers and we only had community. And the dynamic there we saw was that -- we saw community need - and we were a little flat-footed - increase pretty drastically. And we saw bankruptcies tick up a point or two, that costs us a point or two on revenue. But 2009 actually was a year of accelerating growth.

What we didn't have, we also didn't have analytics and we didn't have any enterprise accounts tied to ERP system. So that business just didn't exist for us. So we don't really have a track record of knowing what's going to happen there. Pipelines look reasonable, they look good, but I don't know how they're going to behave.

Are the pipelines going to behave in a normal way or when we come to quarter-end, are things going to get pushed? That's the biggest unknown for us, and then bankruptcies and when are stores going to open, obviously, is a big deal for us as well..

Got it, very helpful. And you just kind of touch on pipelines right now and how they behave. I know, second quarter is seasonally a very important quarter in terms of enablement campaigns to customer additions, obviously, as retailers and suppliers try to ramp for the holiday season in the second half.

I assume that's what you're commenting on specifically on enablement campaigns and if not, is there may be anything different in the comment?.

I think it's more around -- the entire pipeline is around analytics and around the deals tied with channel sales and ERP systems and more enterprise deals. Remember that the retail community programs, one of the strong parts of our business model is the community, I don't know that could accelerate, it could decelerate.

The good news is about a meaningful part of our enablement campaigns are just day to day supplier ads for Costco, and Grainger and Loblaw and people are on different sectors. So it's -- I'm probably less certain around the enterprise and analytics, just don't know how that's going to behave through this, especially with store closings..

Great. That's all I have. I'll jump in the queue. Congrats again..

Thanks..

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

Hey, Archie. Hi, Kim. I guess I'll start by saying congratulations on a full 10 years as a public company. It's been a pretty wild ride coming out of the 2009 recession and now doing your 41st call, our 41st quarter and under the circumstances we're in so I'm glad you're safe and healthy and hopefully staying reasonably sane.

I'd love to chat a little bit about just some of the state as you look at your customers and how they're weathering the storm.

As we look at our average recurring revenue, at kind of $8500, between $8,000 and $9,000 per customer per year, that sort of -- hence the nature of a lot of small and mid-sized suppliers, yet your churn rate has always been quite low.

So I guess it's an opportunity for you to perhaps reflect on what you saw happen with the churn rate in 2009 and how you think about it in the context of today where some of those suppliers might be getting choked off by supply chain challenges or some of the stores they're servicing are having challenges.

Take us through how you think about the health of the installed base and how you're kind of stress testing the thoughts about churn right now?.

Sure. So we have around 31,000 recurring revenue customers, so we have a lot of sort of -- joint in that depth and breadth throughout our network, broad penetration in virtually all the areas of retail with no customer being a significant portion of the revenue, so that's one thing to keep in mind that's a positive.

The other thing that I would say is if you think about our fulfillment product, what we are doing for our suppliers is mission-critical. So what that means is, if you're a supplier and let's say that more of the sales had gone to bricks and mortar, but in light of the pandemic, more sales are going online.

Well, they still need our products and services and we're there to make sure we can help and support them. So in that case, there -- because we are that mission critical product, they're still utilizing the fulfillment product.

They just may be utilizing it in this time slightly different, meaning more of the business -- to state the obvious, it's skewed more online than to stores, where many stores, as we know, are certainly closed temporarily. So, I think that that's one thing to keep in mind that that product that we have.

It's very, again, mission-critical, very sticky product and it's just how they're using us that is changing. The unknowns are really for how long are stores going to be closed. And another unknown associated with that is as it impacts us from a bankruptcy perspective. So as Archie mentioned in 2008-2009, we did see an increase in bankruptcies.

Thus far we have not seen an uptick in bankruptcies or churn. In Q1, we're still at sort of that annualized 13% customer churn. So we have not yet seen that, but we don't know what that's -- that -- what that's going to look like going forward. And again, I think that that's partially going to be driven by -- dependent on how long stores are closed.

But hopefully, that helps provide, when we think about sort of that stickiness of that fulfillment product and the importance that that product still is offering and delivering to our end customers..

Yes, that's great. And, Archie, just one more question for you on the go to market, and you guys have always done a really nice job with the low touch sales model and embracing inside sales and converting customers very quickly.

That is a channel that some -- is a channel that every company has now tried to raise for given the nature of how employees have to sell from home and sell over the web.

Is that channel is getting more crowded? Is that a tougher way to breakthrough? Any ways that you're side -- sort of moderating or managing the go to market now in light of the fact that everyone is chasing after the model, you guys have really perfected over the years?.

Well, I think one drastic thing about -- difference about our model is when our supplier sales rep are calling a supplier to try to sell them on our product. I have a big retailer behind the scenes with a hat of merchandising telling them they need to return our calls.

And threatening to perhaps stop doing business with them if they don't return our calls. So that field isn't very crowded. Again, our close rates are anywhere between 65% and 95% on those community deals. Not always recurring revenue but either a testing contract or recurring revenue.

Most companies are looking to get from an inside sales team a 1% to 2% close rate. That would be a home run. So yes and no. I mean, the fact is our salespeople are truly salespeople, they're not cold calling. So, working from home has been -- our sales team, hats off to them.

They have stayed incredibly focused and have really done a great job because remember, some of these Costco suppliers, they are looking to on-board them like seven minutes ago and we're onboarding -- literally onboarding suppliers within hours, sometimes less than an hour, when the industry norm is weeks if not months..

Yes, got it. Fantastic. I'll jump back in the queue, but again, nice job and look forward to you all. Take care..

Your next question comes from the line of Joe Vruwink from Baird..

Great. Hello, everyone. You've kind of been touching on this, but I was wondering if you could characterize maybe where EDI is falling in the pecking order of broader retail IT projects. You know, when I think of why you provide, it's a lot of value for a fairly low price point.

So I would imagine that's the type of thing that might actually have more interest in this type of environment, but I'd be curious for your thoughts..

Yes, thank you. First off, we're fairly new -- we are fairly new in the pandemic world, right? I mean, it's really been about six weeks. So we have six weeks of data in what are typically longer sales cycles.

Early signs are positive and what we found, again, trying to relate it back to 2009, and your guess is as good as mine whether we're going to see a similar pattern. But one of the things that happened in 2009 is retailers didn't have massive capital spend projects. They weren't building new distribution centers. They weren't doing new ERP systems.

Our product sale to a retailer, we need commitment from the retailer, but not dollars. So we moved up the priority rank for a retailer, and that's what we're hoping to see here. And it is a found -- it's a very foundational nature.

Frankly, the stay at home for retailers for their back office, being at home, all of a sudden the pain of manual processes is really, really felt. The time and effort and everything else, and distribution centers needing spacing, you need to be more efficient and more automated there.

So I think that part of the business, I'm extremely optimistic and that's a part of the business we'll lean into and rely on. And that, frankly, if you look at the rest of our competitors, that is the go-to-market strategy they don't have.

So from a market share standpoint, we think we're extremely set up well over the next year or decade -- years to have a go-to-market strategy that's been extremely successful that frankly, our competitors don't have..

That's great, then. And speaking of pain points, there is a lot of anecdotes right now in listening to some of your supplier customers and how they just like more visibility on sell-through or how tight is inventory getting at the point of final demand.

And that specifically seems to be happening in the US so that begs the question on the analytics product, and I understand why as a category that might be something that it makes sense to be a little more cautious on just given the environment.

But when you think about, again, the pay endpoint and what suppliers are now asking for, could that actually see a bit of benefits? One, let's say conditions return to normal and you get a shot, maybe make the analytics pitch again?.

Yes, I think once we get back to call "normal," then yes. Right now, we're concerned with store closings because you're getting point of sales data by store and if stores are closed that is not real interesting to know what's moving at a store that's closed. So that puts pressure on it.

The other thing that can put pressure on it is that it is a "discretionary" spend as opposed to our fulfillment. If somebody wants to cancel our service -- our Fulfillment Service with Costco, that means they have to just stop getting their purchase orders from Costco or hire somebody else.

They're not going to go without -- so it's a little more discretionary spend. But the value to the suppliers and the retailers is tremendous. So we -- and I think it will become more tremendous.

It's just a matter of just being cautious and understanding in the short-term, stores are closed and people are looking for cost savings and to a spend dollar to save $2 in the future right now is a tougher sell..

Great, thank you very much..

Your next question comes from the line of Patrick Walravens from JMP..

Great, thank you. And I also want to congratulate you guys on your 10-year public company anniversary. Incredibly my model actually seems to go back to 2008. So I know -- I know scary right. So here's what it looks like, and hopefully if it's wrong, Kim, you tell me, but so in Q2 of '08 recurring revenue grew 27% and then it decelerated for 5 quarters.

So it went 27%, 25%, 20%, 19%, 17%, 16%, and then in Q4 of '09, popped up to 21% and you were off to the races. And just as a reminder for everyone, the low point from an economic growth perspective was Q4 of '08 when it was down about 8%.

So tough question I know, but five quarters of deceleration, is that a reasonable assumption for us to use?.

So as it relates to there may have been an acquisition there lapping, in fact, in the 2008 but to answer your broader question, we have visibility into Q2 and we provided our view as it relates to Q2.

As it relates to the remainder of the year, we did withdraw our annual guidance just because there is a lot of uncertainty there relative to a lot of the dynamics that we've talked about. Right, so there is some things that put pressure on it as it relates to timing of store closures, bankruptcies, analytics, potential of some of the enterprise ERP.

There is also positive as it relates to community, and so because of a lot of uncertainty and the fact that we pulled our view at this point, hopefully, next quarter, we'll be in a position to be able to provide more visibility. That would be really difficult to provide a view of what that may look like. So again, you have the data point in Q2.

Q2, our guidance is to revenue below Q1 from a growth rate perspective -- not -- but that would be really difficult to answer for how long and what that actually looks like. I do think that it will be somewhat correlated relating to how long stores are closed..

Okay, thank you..

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

Archie, Kim, thanks for taking my question. Really just one, kind of housekeeping type question. You've given the examples of kind of the grocery store businesses and the suppliers tied to that segment.

But can you help us quantify how much of your business is that segment or how to think about it?.

I think the best way to think about it is we're in grocery, e-commerce, brick and mortar industrial distribution, and we're probably not that far off from the general retail segment in North America as a whole.

So obviously Grocery is a meaningful part and grocery can be Costco, right? Costco has got a meaningful grocery business, so we would, I would think it's fairly -- when we look at it, it'd be fairly along the lines of the overall retail market with some segments being smaller.

We would just have a smaller part of our business but we're across all segments and pretty equally distributed I mean anywhere from grocery to e-commerce to pet supplies, and each one has its own dynamics..

Okay, great. Thank you..

Your next question comes from the line of Tyler Wood from Northland Securities..

Hey, thanks for taking our question. Just, just one for me.

On the suppliers on the network, could you kind of give us a sense of the share of those that are kind of just tied to one retailer and could potentially leave the network if retail bankruptcy were to occur? And then sort of, how are you preparing for that possibility when it comes to ensuring that suppliers don't churn in that scenario? Thanks..

Yes. So here's the way I'll talk about it. We have -- the average is $9100 but we really have three meaningful -- we're not, we don't give exact percentage, but three meaningful types of customers. Obviously there's a bell curve around that $9100 and then there is a meaningful number of customers.

For customer count, it's the highest number, but from a dollar standpoint an equal weighting or an important weighting of customers who use us for one or two retailers and then we have a meaningful -- 1500 to 1800 customers that passed 20,000 to multiple hundreds of thousands.

The number one thing is, if they only use us for once or one connection, that is our where we lose them, most customers far and away that they stopped doing business with the one retailer.

And our strategy is the same as it's always been, we try to get them using our product and to the extent they have another retailer that perhaps pushing them, but will allow them to do EDI that they see the value in SPS and attempt to use us for more than one. But that's, that's always the case, and they tend to be the smallest customers..

It's helpful. Thank you..

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

Hey, thanks for taking my question. It's Chad [ph] on for Mark. With respect to M&A, there are several private EDI vendors in the marketplace today. Many of them are in the $5 million to $20 million range, and many of them are either breakeven or marginally profitable.

Given the recent retail disruptions, do you see more of these vendors looking for an exit strategy through M&A..

This is pure speculation, because again we're only 6 weeks into this. So there's not an immediate reaction. And I think the answer -- I think the answer could be yes. If they can survive they might want to think that the value is going to come back, so you're always going to fight that and I would guess that's the same in every M&A category.

But the question is for many of these EDI -- smaller EDI suppliers is can they weather the storm economically? Do they have a true cloud-based infrastructure that it is reliable that they can -- they can handle the loads and do the work and what does their sales process look like? So we think that many of our competitors are going to have a tough time through this and are not set up the way SPS Commerce is both from technology and financially.

So yes, we're trying to make sure that we're there and that they're aware of us and that we're building the relationships and hopefully we can buy them. It can be a little more challenging right now, because your exposure to different industries would be very important right now in an M&A discussion.

Obviously if you're grocery, we feel pretty good about it, at least today. And if you're all high, high-priced fashion, it's pretty challenging right now. So there's probably a little extra layer of due diligence in an M&A deal. But I think there could be an opportunity going forward there..

Okay, great. That's all I got..

[Operator Instructions] Your next question comes from the line of Jeff Van Rhee from Craig-Hallum Capital Group..

Hey guys, this is Rudy [ph] on for Jeff. With the June guide, I mean, surely you guys took some caution on it.

Which we're the first areas you sort of haircut a little based on what you're seeing and then what do you think you will see throughout the rest of the quarter?.

So, as it relates to the Q2 revenue guidance that we gave that was based on what we're seeing thus far in the quarter as well as the pipeline. So we'll look at our sort of existing customers as well as upsell opportunities and new customers and a lot of the new -- comes as we look at that community enablement activity in the quarter.

So, we take all of that into account and then we provide what we believe is appropriate guidance based on what we see in the pipeline as well as with our existing customers..

Got it. And if you could just think back to 2008-2009, I know currently the customer churns about 12% to 13%.

If you look back 2008-2009, what -- do you guys have any details on what percentage of your customers maybe went bankrupt or what the customer churn increased to?.

Yes, it was a couple of percent on the customer churn at about 1% on the dollar -- higher back then..

Got it. Great, very helpful. Okay, great. Thank you..

I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating and have a wonderful day. You may all disconnect..