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    SPS COMMERCE (SPSC)

    SPSC Q2 2024: Q4 EPS seen at $1.15; gross margins to improve in Q3

    Reported on Jun 10, 2025 (After Market Close)
    Pre-Earnings Price$205.62Last close (Jul 25, 2024)
    Post-Earnings Price$210.85Open (Jul 26, 2024)
    Price Change
    $5.23(+2.54%)
    • Acquisition Integration & Expanded Offering: The successful integration of the Traverse Systems acquisition is already delivering results by broadening SPS’s product portfolio and enabling more targeted engagement with retailers, potentially unlocking new revenue streams.
    • Robust Community Enablement Campaigns: The firm’s strong pipeline from community enablement campaigns, resulting in increased wallet share among existing customers, underpins a repeatable growth driver and offers a solid expansion platform for the remainder of the year.
    • Favorable ERP Refresh Cycle Dynamics: Ongoing ERP change-outs present an opportunity for SPS as customers transition to more modern, cloud-based platforms, which aligns well with SPS’s value proposition and may drive additional market adoption.
    • Integration and monetization risk: The acquisition of Traverse Systems introduces a product aimed at a different customer base, which may add execution risk during integration and challenge the company's traditional supplier-focused revenue model.
    • Retail market uncertainty: Investor questions highlighted ongoing uncertainty in the retail environment with supplier consolidations and macroeconomic pressures, which could dampen growth prospects.
    • Weakening analytics revenue growth: The sequential slowdown in analytics revenue, partly due to customer consolidations, raises concerns about the sustainability of diversified revenue growth.
    1. Q4 Earnings
      Q: Earnings acceleration details Q4?
      A: Management expects Q4 EBITDA acceleration with EPS near $1.15, driven by a front-loaded spending approach with no significant below‐the-line adjustments affecting earnings.

    2. Margin Outlook
      Q: When will gross margins improve?
      A: They expect gross margin improvements starting in Q3 as scaling investments and operational efficiencies begin to show, consistent with previous guidance.

    3. Customer Base
      Q: Will lack of new customers hurt growth?
      A: Despite limited net new additions, management is confident that their strong history of increasing wallet share among existing customers will sustain long-term growth.

    4. Acquisition Strategy
      Q: How is Traverse integration progressing?
      A: The new Traverse Systems acquisition is performing to expectations, expanding the go-to-market efforts by leveraging existing channels to address retailers’ needs.

    5. Customer Additions
      Q: What is the trend in customer acquisitions?
      A: A major enablement campaign from Q1 spilled into Q2, and the pipeline for later campaigns is expected to predominantly boost wallet share with existing customers.

    6. ERP Refresh
      Q: What opportunity from ERP refresh cycles exists?
      A: Upcoming ERP change-outs are seen as a chance for customers to switch to modern, cloud-based solutions, aligning well with SPS’s offerings.

    7. International Outlook
      Q: How is European fulfillment performing?
      A: The acquisition of TIE Kinetix has established a strong European beachhead, indicating a sizable market opportunity for fulfillment solutions overseas.

    8. Analytics Revenue
      Q: Why did analytics revenue decline?
      A: The sequential dip in analytics revenue was driven by some customer consolidations, though the future outlook remains positive with a healthy pipeline.

    9. Retail Market
      Q: Is there more choppiness in retail tech?
      A: Management notes that overall retail uncertainty persists, influenced by macroeconomic factors and supplier consolidation trends.

    10. SMB Churn
      Q: How is SMB churn trending?
      A: The churn in the SMB segment remains consistent with historical levels, showing no significant changes this quarter.

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