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SPS COMMERCE INC (SPSC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 delivered mixed results: revenue of $189.9M grew 16% y/y but came in below prior guidance and S&P Global consensus, while non-GAAP EPS of $1.13 beat consensus; Adjusted EBITDA rose 25% y/y to $60.5M with margin expansion to 32% . Revenue miss reflected a ~$3M shortfall in Revenue Recovery tied to weaker Amazon 3P shipment volumes and seasonality; core Fulfillment grew ~20% y/y .
  • FY25 guidance was recalibrated: revenue trimmed to $751.6–$753.6M (from $759–$763M), but non-GAAP EPS raised to $4.10–$4.15 and GAAP EPS to $2.31–$2.34; Q4 guide implies 13–14% y/y growth and in-line non-GAAP EPS .
  • Management flagged ongoing invoice scrutiny/delayed purchases and the push-out of several large enablement programs from Q4 into 1H26 (pressuring one-time testing/certification revenue near-term) .
  • Capital allocation and 2026 outlook are key stock catalysts: $100M new buyback authorized effective Dec 1, 2025; initial 2026 framework calls for 7–8% organic growth (ex-M&A) and +200 bps adjusted EBITDA margin expansion, underscoring durable profitability despite demand headwinds .

What Went Well and What Went Wrong

  • What Went Well

    • Non-GAAP profitability outperformed: non-GAAP EPS of $1.13 and Adjusted EBITDA of $60.5M (+25% y/y) with 32% margin, aided by onboarding efficiency and gross margin improvement .
    • Fulfillment momentum: CEO cited ~20% y/y growth in the Fulfillment business and strong net adds (+450 customers; ~54,950 total) with ARPU ~$13,300 .
    • Strategic positioning and AI leverage: “We provide unmatched value in the data that powers AI-driven use cases, and a unique, network-led growth motion,” noted the CEO, highlighting network data as an AI advantage rather than a threat .

  • What Went Wrong

    • Revenue shortfall vs expectations: Revenue Recovery underperformed by ~$3M due to Amazon 3P shipment weakness and greater-than-expected seasonality after a Q2 Prime Day boost .
    • Demand friction: Ongoing invoice scrutiny and delayed purchases among suppliers, and several retailer enablement programs pushed from Q4 to 1H26 (reducing one-time testing/certification fees in Q4) .
    • FY revenue trim and near-term decel: FY25 revenue guidance reduced to $751.6–$753.6M (from $759–$763M), reflecting the above dynamics despite resilient core profitability .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M)$181.549 $187.400 $189.904
YoY Growth (%)21% 22% 16%
GAAP Diluted EPS ($)$0.58 $0.52 $0.67
Non-GAAP EPS, diluted ($)$1.00 $1.00 $1.13
Adjusted EBITDA ($M)$54.373 $56.052 $60.480
Adjusted EBITDA Margin (%)30% 30% 32%
Net Income Margin (%)12% 11% 13%

Selected KPIs

KPIQ1 2025Q2 2025Q3 2025
Recurring Revenue YoY Growth (%)23% 24% 18%
Net Recurring Customer Adds (Approx.)~300 ~350 ~450
Total Recurring Revenue Customers~54,150 ~54,500 ~54,950
ARPU (Approx., $)~$13,850 ~$13,200 ~$13,300
Share Repurchases ($M)$40.0 $20.0 $30.0
Cash & Equivalents ($M)$94.921 $107.603 $133.725

Results vs S&P Global Consensus (Q3 2025)

MetricActualConsensusSurprise
Revenue ($M)$189.904 $192.677*-$2.773M (~-1.4%)
EPS (non-GAAP, $)$1.13 $1.00*+$0.13 (~+13%)
  • Values retrieved from S&P Global.

Additional Business Color (Q3)

  • Fulfillment revenue grew ~20% y/y; revenue recovery lagged plan by ~$3M due to Amazon 3P shipment dynamics and seasonality .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)FY 2025$759.0–$763.0 $751.6–$753.6 Lowered
GAAP EPS ($)FY 2025$2.17–$2.22 $2.31–$2.34 Raised
Non-GAAP EPS ($)FY 2025$3.99–$4.04 $4.10–$4.15 Raised
Adjusted EBITDA ($M)FY 2025$230.7–$233.7 $229.7–$231.7 Slightly lowered (high end)
SBC ($M)FY 2025$60.9 $58.3 Lowered
Depreciation ($M)FY 2025$21.8 $21.1 Lowered
Amortization ($M)FY 2025$37.1 $37.1 Maintained
Revenue ($M)Q4 2025N/A$192.7–$194.7 New
GAAP EPS ($)Q4 2025N/A$0.53–$0.57 New
Non-GAAP EPS ($)Q4 2025N/A$0.98–$1.02 New
Adjusted EBITDA ($M)Q4 2025N/A$58.8–$60.8 New
Tax Rate (GAAP)Q4/FY 2025~30% modeled quarterly ~30% modeled quarterly Reiterated

Q4 2025 Guidance vs S&P Global Consensus

MetricCompany GuidanceS&P Global ConsensusPositioning
Revenue ($M)$192.7–$194.7 $193.602*In line at midpoint
Non-GAAP EPS ($)$0.98–$1.02 $1.008*In line
  • Values retrieved from S&P Global.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
AI/TechnologyNetwork data advantage; portfolio spans fulfillment, analytics, e-invoicing, performance suite, revenue recovery Unified platform + network data cross-sell potential (SupplyPike/Carbon6) AI complements SPS vs replacing; network data fuels AI; pricing model resilient vs seat-based peers Improving narrative
Macro/TariffsMonitoring trade dynamics; model resilient to macro Heightened supplier spend scrutiny; mid-market ERP delays; tariff uncertainty Spend scrutiny persists; Q4 enablement pushes; one-time fees pressured Deteriorating near-term
Product PerformanceAnalytics ~flat for year; <10% mix Fulfillment strength; integration advances in revenue recovery Fulfillment +20% y/y; revenue recovery ~$3M below plan (Amazon 3P seasonality/policy) Mixed
Go-to-Market/EnablementStrong community programs; capacity to scale Healthy retailer pipeline; mid-market ERP softness Several large programs pushed to 1H26; net adds still exceeded plan Timing headwind
Regional TrendsN/AN/ASpend scrutiny primarily U.S.; less in Europe/Australia Stable
Profitability/CostsEBITDA expansion pace; investments continue 2 pts annual adj. EBITDA margin expansion beyond 2025 Margin tailwind from onboarding efficiency; reiterates +200 bps aim Improving
M&A/IntegrationCarbon6 closed; cross-sell hypothesis validated early Combined RR GTM (SupplyPike/Carbon6); network-led cross-sell RR GTM combined; cross-sell traction; 1P more strategic and stable vs 3P Executing to plan

Management Commentary

  • “We provide unmatched value in the data that powers AI-driven use cases, and a unique, network-led growth motion.” — Chad Collins, CEO .
  • “Adjusted EBITDA margin expansion is driven by improvements in gross margin and operating efficiencies… onboarding to the network has become much more efficient.” — Management .
  • “Several large enablement campaigns were pushed from Q4 into the first half of 2026… we expect a decline in one-time revenue from testing and certification fees.” — CFO .
  • “Revenue recovery… came in approximately $3 million below our expectations in Q3” due to Amazon 3P shipment dynamics and seasonality. — CEO .
  • Initial 2026 outlook: “deliver revenue growth… approximately 7% to 8%,” with “adjusted EBITDA margin expansion of 2 percentage points.” — CFO .

Q&A Highlights

  • Revenue Recovery headwinds: Visibility on Amazon 3P shipment softness came late in Q3; resulted in ~$3M revenue shortfall; Q4 similarly impacted; 1P more stable and more strategic .
  • Demand environment: Continued invoice scrutiny and delayed purchases among suppliers; several retailer programs shifted to 1H26, mainly affecting one-time certification revenue in Q4 .
  • 2026 framework: 7–8% organic revenue growth and +200 bps adjusted EBITDA margin expansion; cross-sell in revenue recovery expected to outgrow core in 2026 .
  • Customer metrics: Net adds of ~450 in Q3; total recurring customers ~54,950; ARPU ~$13,300; 3P customer count down ~150 in Q3; Carbon6 added ~8,500 customers at close .
  • AI and competitive posture: AI not displacing SPS; network breadth and data are difficult to replicate and support customers’ AI strategies; pricing based on connections (not seats) seen as more durable .

Estimates Context

  • Q3 2025 vs S&P Global consensus: Revenue $189.9M vs $192.7M* (miss); non-GAAP EPS $1.13 vs $1.00* (beat) .
  • Q4 2025 guide vs S&P Global consensus: Revenue $192.7–$194.7M vs $193.6M* (in line); non-GAAP EPS $0.98–$1.02 vs $1.008* (in line) .
  • Implications: Expect near-term estimate revisions with lower FY revenue but higher EPS/non-GAAP EPS from operating leverage and lower SBC/depreciation .
  • Values retrieved from S&P Global.

Key Takeaways for Investors

  • The quarter’s narrative: modest top-line miss concentrated in Revenue Recovery (Amazon 3P) but stronger-than-expected margins and non-GAAP EPS driven by efficiency gains; Fulfillment remains robust .
  • FY25 reset: lower revenue but higher non-GAAP and GAAP EPS guidance; Q4 outlook is broadly in line with consensus — reduces downside risk into year-end .
  • Near-term caution: invoice scrutiny and enablement timing shifts weigh on one-time revenue; watch Q4 one-time certification fees and early 2026 ramp .
  • Medium-term durability: initial 2026 guide (7–8% organic growth; +200 bps adj. EBITDA margin) underscores profitability resilience and network-driven cross-sell opportunities (especially 1P) .
  • Structural moat: AI enhances SPS’s value proposition given proprietary network data and connection-based pricing; displacement risk appears low per management/customer signals .
  • Capital returns: $100M buyback authorization gives downside support; company repurchased $30M in Q3 and intends to utilize programs over time .
  • Watch list: trajectory of Revenue Recovery (3P vs 1P mix), mid-market ERP activity (onboarding catalysts), analytics stabilization, and gross margin progression from onboarding efficiency .