SPS COMMERCE INC (SPSC)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 delivered 21% revenue growth to $181.5M, with non-GAAP diluted EPS of $1.00 and adjusted EBITDA up 22% to $54.4M; recurring revenue grew 23% and marked the company’s 97th consecutive quarter of topline growth .
• Results beat Wall Street: revenue modestly above consensus ($181.5M vs $179.0M*) and EPS materially above ($1.00 vs $0.85*) .
• FY25 guidance was reiterated/raised on profitability (non-GAAP EPS to $3.86–$3.93 and adj. EBITDA to $229.4–$232.9), while revenue stayed at $758.5–$763.0; Q2 guidance calls for $184.5–$186.2M revenue and non-GAAP EPS of $0.87–$0.90 .
• Catalysts: beat/raise dynamic on Q1 and FY profitability, Carbon6 customer base addition (~8,500) enabling cross-sell, and confidence in gross margin expansion; $40M in buybacks in Q1 adds capital return support .

What Went Well and What Went Wrong

• What Went Well

  • Strong execution: revenue +21% YoY to $181.5M, non-GAAP EPS $1.00, adj. EBITDA +22% to $54.4M; 97th consecutive quarter of revenue growth .
  • Strategic M&A momentum: Carbon6 closed in February, adding ~8,500 customers (above initial 6,500 estimate) and validating cross-sell potential between revenue recovery and fulfillment .
  • Confident outlook: FY25 adj. EBITDA growth expected at +23–25% and non-GAAP EPS raised; management highlighted resilience of mission-critical solutions and margin expansion profile .

• What Went Wrong

  • Analytics softness: analytics declined ~2% YoY in Q1 and is expected roughly flat for FY25 given tariff/macro uncertainty; it represents <10% of total revenue but is the most macro-sensitive line .
  • Full-year EPS raise less than Q1 outperformance: management cited timing of spend/hiring as the reason incremental Q1 profit wasn’t fully carried over .
  • Macro/tariff uncertainty remains a watch item: while enablement pipelines are steady, management continues to monitor potential impacts on retention and supplier ERP/WMS project cadence .

Financial Results

KPIs

Estimates vs Actual (Q1 2025)

Note: Values retrieved from S&P Global.*

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO positioning: “SPS Commerce operates a network of over 50,000 suppliers, logistics companies and buying organizations... With an $11 billion total addressable market, we have a tremendous opportunity to transform how trading partners work together...” .
• CFO on growth/margins: “Despite ongoing uncertainty... we remain confident in our full-year 2025 growth outlook and margin expansion profile...” .
• CFO on Carbon6 and KPIs: “We concluded the acquisition added approximately 8,500 customers... Q1 total recurring revenue customers ~54,150 and ARPU ~13,850...” .
• Strategy on cross-sell: “Ideal customer profiles for revenue recovery and fulfillment line up... early indications are positive... leading to cross-selling” .

Q&A Highlights

• Tariffs/macro: Customers are focused on tariff developments; pipelines and enablement program velocity remain steady; management is monitoring supplier retention and ERP/WMS projects for potential macro headwinds .
• Analytics softness: Analytics declined ~2% YoY in Q1 and is expected ~flat for FY25 given macro/tariff dynamics; <10% of revenue reduces overall impact .
• Carbon6 customer base: Post-close validation shows ~8,500 customers vs initial ~6,500; Q1 revenue slightly better than anticipated; churn dynamics typical for 3P marketplace SMBs .
• Spend timing: Q1 EPS beat not fully raised into FY due to timing of investments and hiring ramp through the year .
• Margin drivers: Continued gross margin improvement underpins higher FY25 adj. EBITDA growth vs FY24 .

Estimates Context

• Q1 beat/raise: Revenue beat consensus ($181.5M vs $179.0M*) and EPS beat ($1.00 vs $0.85*), driven by resilient enablement activity, Carbon6 contribution, and operating leverage .
• Q2 setup: Company revenue guidance $184.5–$186.2M brackets Street ($185.8M*), while non-GAAP EPS guidance $0.87–$0.90 is slightly below Street (0.91*)—implies modest EPS conservatism amid spend timing .
• FY25: Revenue guidance ($758.5–$763.0M) sits above Street ($752.4M*), but non-GAAP EPS guidance ($3.86–$3.93) below Street ($4.13*), suggesting models may lift revenue while reassessing margin cadence and spend timing .

Note: Values retrieved from S&P Global.*

Key Takeaways for Investors

• Q1 delivered a clean beat on revenue and EPS with 21% topline growth and 22% adj. EBITDA growth; momentum into Q2 and FY25 is supported by reiterated/raised profit guidance .
• Street alignment: FY25 revenue likely nudged up toward company guide; EPS could remain conservative near-term due to spend timing despite margin expansion plans .
• Cross-sell upside: Carbon6 (~8.5k customers) expands SPS’ addressable base with early signs of cross-selling between revenue recovery and core fulfillment—supports ARPU expansion over time .
• Analytics watch: Expect near-term softness (~flat FY) amid macro/tariff concerns; limited impact given sub-10% revenue mix .
• Margin trajectory: Management targets continued gross margin improvement (Q1 adj. EBITDA margin 30%) and higher FY25 adj. EBITDA growth (+23–25%) .
• Pipeline resilient: Enablement campaigns and supplier onboarding capacity remain intact; organic customer adds ex-Carbon6 (~300) in Q1 signal steady demand .
• Capital allocation: $40M buybacks in Q1 enhance shareholder returns while maintaining balance sheet flexibility .

Appendix: Additional Source Data

• Q4 2024 reported revenue $170.9M; FY24 revenue $637.8M; FY24 non-GAAP diluted EPS $3.48; FY24 adj. EBITDA $186.6M .
• Q3 2024 reported revenue $163.7M; Q3 non-GAAP diluted EPS $0.92; Q3 adj. EBITDA $48.4M .