SPSC Q1 2025 21% revenue gain to $181.5M, 300 net adds
- Consistent and Strong Revenue Growth: Q1 2025 revenue grew 21% to $181.5 million and marked the 97th consecutive quarter of revenue growth, which indicates robust market traction and resiliency even amid macro uncertainties.
- Expanding Customer Base and Cross-Sell Opportunities: The company delivered net organic customer additions (approximately 300 customers) alongside a stronger-than-expected Carbon6 acquisition that added 8,500 customers. This expansion supports increased cross-selling potential between their fulfillment and revenue recovery segments.
- Operational Efficiency and Scalability: Management highlighted significant investments in automation—including leveraging AI—and cost efficiencies that enhance operational scalability and margin expansion, positioning the company for sustainable profitability.
- Tariff and macroeconomic uncertainty: Concerns that heightened tariff pressures and broader economic uncertainty may dampen the pace of enablement campaigns and put pressure on supplier retention, potentially impacting revenue growth.
- Weakness in the analytics segment: A 2% decline in analytics revenue in Q1 highlights vulnerability in this discretionary area, which could be indicative of broader margin pressures if economic conditions worsen.
- Acquisition integration risks: The integration of Carbon6, which added 8,500 customers but reflected a net-zero customer change from acquisition to post-close, introduces risks related to maintaining sustainable organic growth.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | 21% increase | Total Revenue increased by 21% YoY to $181.55 million, driven by strong growth in recurring revenues through enhanced usage and increased ARPU, as well as strategic acquisitions that built on the growth momentum observed in Q1 2024. |
Recurring Revenues | 23% increase | Recurring Revenues reached $172.33 million, up 23% YoY from $139.7 million, mainly due to increased wallet share and a higher number of recurring revenue customers, supported by acquisitions and organic usage growth from the previous period. |
One-Time Revenues | 6.6% decline | One-Time Revenues declined by roughly 6.6% YoY from $9.876 million to $9.22 million, reflecting lower volumes in setup and miscellaneous fees, which often fluctuate compared to recurring revenue streams as seen in the prior period. |
Domestic Revenue | 24% increase | Domestic Revenue grew to $154.317 million, a 24% YoY increase from $124.15 million, driven by robust performance in the domestic market, increased recurring revenue contributions, and focused sales efforts that continue the upward trends from Q1 2024. |
International Revenue | 7% increase | International Revenue increased modestly by about 7%, rising from $25.43 million to $27.232 million YoY, indicating gradual market expansion and the impact of currency effects, in contrast to the stronger domestic growth observed in previous periods. |
Operating Income | 68% increase | Operating Income surged by 68% YoY to $25,956 thousand from $15,403 thousand, primarily due to operational leverage and improved margins from strong revenue growth, reflecting enhanced efficiency over the previous period. |
Net Income | 23% increase | Net Income increased by approximately 23% YoY to $22,196 thousand from $18,003 thousand, driven by overall higher revenues and operational improvements that built on the past period’s performance, contributing to better profitability. |
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Margin Timing
Q: Why did Q1 EPS beat not carry forward?
A: Management explained that the strong Q1 EPS partly resulted from the timing of increased spend and investments, so not all of that performance carries into the full year. -
Organic Growth
Q: Confirm 300 organic new customers added?
A: Management confirmed that, excluding acquisitions, Q1 delivered a net 300 organic customer addition, reflecting robust results from community enablement programs. -
Acquisition Impact
Q: How did Carbon6 add differ from expectations?
A: Management noted that the Carbon6 acquisition delivered 8,500 customers—exceeding the preliminary estimate of 6,500—demonstrating a favorable acquisition outcome. -
Macro Environment
Q: What macro indicators are you monitoring?
A: Management highlighted that they focus on the volume and speed of the enablement campaign pipeline, along with supplier retention, to gauge economic uncertainty and market conditions. -
Tariff Effects
Q: Do tariffs delay enablement campaigns?
A: Management indicated that while tariffs remain top-of-mind and generate some uncertainty, they have not yet caused any slowdown in the overall volume or pace of enablement campaigns. -
Cross-Sell Potential
Q: Is cross-selling showing promise?
A: Early indications are positive, with clear alignment between revenue recovery and fulfillment efforts generating cross-sell opportunities that support long-term growth. -
Analytics Performance
Q: Why did analytics decline in Q1?
A: Management reported a ~2% decline in analytics performance, attributing the dip to economic dynamics, while expecting flat performance over the full year. -
Supply Chain Shift
Q: Will supply chain shifts benefit SPS?
A: Management expects that diversification in supply chains and reorientation efforts could serve as a tailwind, as greater digital onboarding helps retailers achieve agility. -
ERP/WMS Projects
Q: Are ERP/WMS projects slowing due to uncertainty?
A: Management observed no current slowdown in ERP or WMS projects, although they continue to monitor these initiatives closely amid ongoing macro challenges. -
Enablement Bias
Q: Why target enablement for existing retailers?
A: Management explained that enablement campaigns often focus on retailers they’ve previously engaged with, which then uncover additional new subscribing customers when extending campaigns. -
De Minimis Impact
Q: Impact from de minimis exemption expiry?
A: Management does not expect a significant impact on Amazon sellers since most sellers import in bulk and rely on local fulfillment, keeping their operations largely unaffected. -
Carbon6 Growth Rate
Q: How fast are Carbon6 customers growing?
A: Post-acquisition, Carbon6’s customer base has remained stable—with gains balanced by some churn over a short period—indicating steady performance. -
New Retailer Impact
Q: Did any new retailer drive organic growth?
A: Management noted that campaigns with new retailers uncovered additional customers, highlighting a favorable mix that boosted organic growth this quarter.