Earnings call transcript: SPS Commerce Q3 2025 earnings beat EPS forecast

SPS Commerce Inc. (SPSC) reported its third-quarter 2025 earnings, showcasing a solid performance with an earnings per share (EPS) of $1.13, surpassing the forecast of $1.00 by 13%. Despite the EPS beat, the company reported a revenue of $189.9 million, slightly below the expected $192.68 million, resulting in a revenue surprise of -1.44%. Following the earnings release, SPS Commerce’s stock saw a decline of 1.23% in aftermarket trading, closing at $105.18. This continues a challenging trend for the stock, which has declined 42.83% year-to-date according to InvestingPro data.

Key Takeaways

• EPS exceeded expectations by 13%, highlighting strong operational performance.
• Revenue grew 16% year-over-year but missed forecasts by 1.44%.
• Stock price declined 1.23% in aftermarket trading despite EPS beat.
• Recurring revenue increased 18%, with 450 net new customers added.
• Adjusted EBITDA rose 25% to $60.5 million.

Company Performance

SPS Commerce demonstrated robust growth in Q3 2025, marking its 99th consecutive quarter of revenue growth. The company achieved a 16% year-over-year increase in revenue, driven by a strong recurring revenue stream which grew 18%. The company added 450 net new customers, bringing the total to 54,950. Adjusted EBITDA saw a significant rise of 25%, reaching $60.5 million, indicating efficient cost management and operational leverage.

Financial Highlights

• Revenue: $189.9 million, up 16% year-over-year.
• Earnings per share: $1.13, surpassing the forecast by 13%.
• Adjusted EBITDA: $60.5 million, a 25% increase.
• Total cash and investments: $134 million.
• Share repurchase: $30 million.

Earnings vs. Forecast

SPS Commerce reported an EPS of $1.13, exceeding the forecast of $1.00 by 13%. However, revenue came in at $189.9 million, slightly below the anticipated $192.68 million, resulting in a negative revenue surprise of 1.44%. This mixed performance reflects a strong operational quarter but highlights challenges in meeting revenue expectations.

Market Reaction

Following the earnings release, SPS Commerce’s stock price fell 1.23% in aftermarket trading, closing at $105.18. The stock’s movement reflects the market’s mixed reaction to the earnings beat and revenue miss. The company’s stock remains within its 52-week range of $102.05 to $201.06.

Outlook & Guidance

Looking forward, SPS Commerce projects revenue growth of 7-8% for 2026, excluding acquisitions, with an expected adjusted EBITDA margin expansion of 2 percentage points. The company provided Q4 2025 revenue guidance between $192.7 million and $194.7 million and full-year 2025 revenue guidance between $751.6 million and $753.6 million.

Executive Commentary

CEO Chad emphasized, "We are the industry’s most broadly adopted retail cloud services platform and the world’s leading retail network." CFO Kim highlighted financial efficiency, stating, "We continue to expect adjusted EBITDA margin expansion of 2 percentage points." These statements reflect the company’s confidence in its strategic positioning and financial outlook.

Risks and Challenges

• Macroeconomic uncertainties may impact future revenue growth.
• Spend scrutiny is affecting the supplier side, potentially slowing customer acquisition.
• Softness in the mid-market ERP segment could limit growth opportunities.
• Evolving retail ecosystem requires continuous adaptation and innovation.
• Leadership transitions could affect strategic continuity.

Q&A

During the earnings call, analysts focused on revenue recovery challenges and the impact of seasonality on Amazon third-party seller shipments. Discussions also revolved around the potential impact of AI on the business model and strategies for customer acquisition and retention.

Full transcript - SPS Commerce Inc (SPSC) Q3 2025:

Kim, CFO, SPS Commerce: Good day, and welcome to the SPS Commerce Q3 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star and one on a touch-tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Irmina Blaszczyk, Investor Relations for SPS Commerce. Please go ahead.

Irmina Blaszczyk, Investor Relations, SPS Commerce: Thank you, Dave. Good afternoon, everyone, and thank you for joining us on SPS Commerce Third Quarter 2025 conference call. We will make certain statements 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 are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. 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 for a more detailed description of the risk factors that may affect our results.

These documents are available at our website, spscommerce.com, and at the SEC’s website, sec.gov. In addition, we are providing a historical data sheet for easy reference on the Investor Relations section of our website, spscommerce.com. During our call today, we will discuss adjusted EBITDA financial measures and non-GAAP income per share. In our press release and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP financial measures, including reconciliations of these measures with comparable GAAP measures. With that, I will turn the call over to Chad.

Chad, CEO, SPS Commerce: Thanks, Irmina, and good afternoon, everyone. Thank you for joining us today. SPS Commerce delivered solid third-quarter results across our core business despite ongoing macroeconomic uncertainty and continued spend scrutiny. Third-quarter revenue grew 16% to $189.9 million, and recurring revenue grew 18%. Our fulfillment business grew 20% year-over-year. The net increase of 450 customers exceeded our expectations in the quarter, primarily driven by strong retail relationship management programs. I’d like to take a moment to review the key dynamics that impacted our revenue recovery business, which came in approximately $3 million below our expectations in Q3. Firstly, we now recognize that there is more seasonality in this business than we had originally anticipated. In Q2, for example, we benefited from a higher-than-expected volume of shipped products related to Amazon Prime Day.

Due to the seasonality effect in Q2 and the change in Amazon policy related to inventory capacity for third-party sellers, Q3 shipments came in below our expectations, which resulted in lower-than-forecast revenue recovery rates in the quarter. We’ve taken both of these factors into consideration in our updated outlook for that business. Revenue recovery is an important offering within our portfolio. It represents a $750 million addressable market across 1P U.S. sellers and a significant cross-selling opportunity within our network, where we’re making progress and building momentum. In addition, we’re pleased to report we completed our combined go-to-market strategy ahead of schedule, and we are now better positioned to unlock the full potential of this emerging product category. For example, CyberPower Systems, a global manufacturer of power protection and management solutions, has partnered with SPS Commerce to modernize their business systems and processes since 2014.

As a longstanding fulfillment customer, they recently engaged with SPS Commerce to drive further efficiencies across their supply chain, leveraging the revenue recovery solution for some of their key customers, including Amazon, Walmart, and Home Depot. Having realized immediate benefits in ROI, CyberPower Systems is evaluating other revenue recovery opportunities across their retail network. As we discussed in our Investor Day in September, SPS Commerce is well-positioned to capitalize on the long-term growth opportunities driven by an ever-evolving retail ecosystem. Having made strategic acquisitions over the past two years to expand our product portfolio and market reach, we shared updates at Investor Day to address how our product strategy and our reimagined go-to-market motion have evolved to empower the kind of trading partner collaboration that enables supply chains to work like they should.

We also hosted a broad cross-section of customers who provided their perspectives on why they chose to work with SPS Commerce and how we helped them manage supply chain complexity to strengthen their trading partner ecosystems. Most importantly, you heard firsthand accounts of the return on investment that comes from partnering with SPS Commerce, such as driving greater operational efficiency and fueling business growth. An example of a recent partnership is Petco, a pet retailer who operates over 1,500 locations in the U.S., Mexico, and Puerto Rico, providing both in-store and online omnichannel services. Leveraging SPS Commerce’s retailer management solution, Petco transitioned over 700 suppliers to standardized digital supply chain requirements. As a result, the retailer reduced manual data reconciliation across merchandising and supply chain teams, delivered measurable efficiency gains, and improved trading partner performance tracking.

To summarize, despite the spend scrutiny we are experiencing this year across some of our customer groups, we believe the ever-evolving retail ecosystem will continue to drive the need for supply chain efficiencies. With our data-driven solutions, SPS Commerce is competitively positioned to improve collaboration between trading partners. We are the industry’s most broadly adopted retail cloud services platform and the world’s leading retail network. We provide unmatched value in the data that powers AI-driven use cases and a unique network-led growth motion. Before we dive into our financial results, I’d like to take a moment to share an important leadership update. After nearly 10 years with SPS Commerce, Dan Juknis, our Chief Revenue Officer, has decided to retire. He will remain with the company through the end of the year to ensure a smooth transition.

Dan helped shape SPS Commerce’s modern go-to-market organization, growing the sales team in both size and strength. On behalf of SPS Commerce, I wish him all the best in retirement. In addition, I’m excited to share that Eduardo Rossini will be joining the SPS Commerce team as Chief Commercial Officer starting December 1st. In this new role at SPS Commerce, Eduardo will strengthen our commitment to total customer relationship, maximizing the entire customer lifecycle from acquisition to onboarding, retention, and expansion, and ensuring we deliver consistent, intentional, and customer-first experiences around the world. As SPS Commerce continues to scale, this evolution helps us deepen relationships, maximize customer value, and stay aligned with how global customers view their partnerships with one trusted full-service connection.

Eduardo brings more than 30 years of growth, go-to-market, and full customer lifecycle experience across industries and markets, most recently serving as Chief Growth Officer at Sage, VP of Mid-Market and Corporate Sales at Intuit, and in large-scale commercial leadership roles at Microsoft, operating in North America, South America, EMEA, and APAC. His experience leading global organizations, paired with his passion for people and obsession with customers, make him an ideal fit for SPS Commerce’s next phase of growth. I’ll turn it over to Kim to discuss our financial results.

Irmina Blaszczyk, Investor Relations, SPS Commerce: Thanks, Chad. We reported a solid third quarter of 2025. Revenue was $189.9 million, a 16% increase over Q3 of last year, and represented our 99th consecutive quarter of revenue growth. Recurring revenue grew 18% year-over-year. The total number of recurring revenue customers in Q3 was approximately 54,950, an increase of 450 from the prior quarter. ARPU was approximately $13,300. For the quarter, adjusted EBITDA increased 25% to $60.5 million compared to $48.4 million in Q3 of last year. We ended the quarter with total cash and investments of $134 million and repurchased $30 million of SPS Commerce shares. In addition, the Board of Directors has authorized a new program to repurchase up to $100 million of common stock, which becomes effective on December 1, 2025, and is expected to expire on December 1, 2027. We expect to fully utilize the current program before its termination on July 26, 2026.

Before we dive into guidance, I’d like to highlight the factors currently shaping our fourth quarter and 2025 outlook. First, a continued impact to our revenue recovery business resulting from the dynamics Chad laid out in his prepared remarks. Second, ongoing invoice scrutiny and delayed purchases affecting spend across our fulfillment customers. Lastly, across retail relationship management programs, several large enablement campaigns were pushed from Q4 into the first half of 2026. As a result, we expect a decline in one-time revenue from testing and certification fees associated with these programs. Now, turning to guidance. For the fourth quarter of 2025, we expect revenue to be in the range of $192.7 million to $194.7 million, which represents approximately 13% to 14% year-over-year growth. We expect adjusted EBITDA to be in the range of $58.8 million to $60.8 million.

We expect fully diluted earnings per share to be in the range of $0.53 to $0.57, with fully diluted weighted average shares outstanding of approximately 38.3 million shares. We expect non-GAAP diluted income per share to be in the range of $0.98 to $1.02, with stock-based compensation expense of approximately $15 million, depreciation expense of approximately $5.8 million, and amortization expense of approximately $9.5 million. For the full year 2025, we expect revenue to be in the range of $751.6 million to $753.6 million, representing approximately 18% growth over 2024. We expect adjusted EBITDA to be in the range of $229.7 million to $231.7 million. Representing growth of approximately 23% to 24% over 2024. We expect fully diluted earnings per share to be in the range of $2.31 to $2.34, with fully diluted weighted average shares outstanding of approximately 38.1 million shares.

We expect non-GAAP diluted income per share to be in the range of $4.10 to $4.15, with stock-based compensation expense of approximately $58.3 million, depreciation expense of approximately $21.1 million, and amortization expense for the year of approximately $37.1 million. For the remainder of the year, on a quarterly basis, investors should model approximately a 30% effective tax rate calculated on GAAP pre-tax net earnings. Additionally, as a result of the dynamics that are impacting our customers and retail partners this year, we are providing our initial outlook for 2026 and expect to deliver revenue growth without future acquisitions of approximately 7% to 8%. We continue to expect adjusted EBITDA margin expansion of 2 percentage points, driven by continued improvement in gross margin and operating efficiencies.

Longer term, we remain confident in our competitive position and market opportunity and our ability to deliver at least high single-digit annual revenue growth without acquisitions and 2 percentage points in annual adjusted EBITDA margin expansion. I’d like to open the call to questions.

Dave, Conference Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. Our first question comes from Scott Berg with Needham. Please go ahead.

Hi, everyone. Thanks for taking my questions. I’ve got a multi-part revenue recovery question here. I guess we’re all going to have the same questions on this one. Try to help us understand when this became apparent in the quarter that the seasonality was a little bit different than you had expected, Chad. As I think about that business going forward, I thought the seasonality in that business was supposed to be stronger in Q4, but it looks like you’re reducing your fourth quarter revenues by roughly $6 million, likely all attributed to that business. As the natural extension of that, how do we think about that business’s impact on that fiscal 2026 initial guidance Kim just gave? Thank you.

Chad, CEO, SPS Commerce: Yeah, sure. Thanks, Scott. Let me speak maybe to the visibility and how that developed and let Kim speak to the outlook going forward. I’d say late in Q3, we did pick up that the volume of shipments that our customers were sending into Amazon warehouses were a little bit lighter than expected. In many cases, that can be a leading indicator to revenue that will develop, but I would say not necessarily in all cases. Unfortunately, as we closed out the quarter, we did see a correlation in that reduction of shipments into Amazon warehouses from our customers did result in less revenue than expected. The shipment visibility kind of became apparent pretty late in Q3, and we really didn’t understand the full impact of revenue until we closed things out after the quarter ended.

Irmina Blaszczyk, Investor Relations, SPS Commerce: When you think about the expectations that we have for the remainder of the year, when you think about the Q4 guidance that we just provided and the variance from that versus the implied Q4 guidance from a quarter ago, the impact on the revenue recovery in that, you should look at that similar as Q3. There were three sort of dynamics that I highlighted that went into that, one of them being the revenue recovery, and that component was about similar impacting Q3 and Q4. The other two components were a continuation of where we’re seeing some invoice scrutiny and delayed purchase decisions, as well as some of those retailer enablement campaigns or relationship management campaigns we were initially thinking were going to happen in Q4. Now those are happening in 2026.

As such, the impact to the P&L in Q4 would be most notable on that one-time revenue of testing and certification, just because of the timing of how the subscription revenue works. More of that would show up negatively on the testing and certification in the quarter.

All right. Understood. Thank you for all of that. I guess from a follow-up question, saw that Dan is leaving. Good luck, Dan. It’s been fun working with you. New Chief Commercial Officer coming in. I guess the questions there revolve around what would you expect this new individual to do differently, if anything? I see his background has been not at one, but at two ERPs that you all certainly partner with today for customers with tightly, at least, and just trying to help understand what we might see maybe differently going forward, if anything. Thanks.

Chad, CEO, SPS Commerce: Let me start with what I think will stay the same, but continue to improve over time. That’s first, our differentiated go-to-market that we have with retailer relationship management, where we partner with the retailers to help them establish all their digital connections. That, in turn, uncovers suppliers for us and is the largest source of new customers for us. We’ve been refining that approach at SPS Commerce for 20 years, and I expect we’ll continue to refine that approach for the next 20 years. It’ll be great to have Eduardo partner and continue to refine things to that, but I expect that will continue. I also expect that our channel go-to-market, where we work with a lot of mid-market ERPs, will absolutely continue. I’m very excited to what Eduardo can bring to that, which I think will just be a further advancement in that strategy.

Yes, he’s worked with a couple of ERP companies that we do partner with, but his whole career has been utilizing a lot of channel to drive mid-market sales, which very much lines up with our business. I think in terms of what may evolve over time that Eduardo will be able to bring us, we’ll be really maximizing that expansion and cross-sell motion that we have with existing customers and managing that full lifecycle that we have with customers. We’ve been quite clear that we believe as our product portfolio expands, the opportunity to increase ARPU is probably going to be the faster growing in our growth algorithm between net new customers and ARPU increases. Again, Eduardo’s background is really going to help us with that.

As we become a more global organization and continue with our efforts to expand in Europe, Eduardo certainly brings operating experience across multiple cultures and multiple continents and multiple geographies that I think will help us with that continued growth.

Very well, thanks for taking my questions.

Dave, Conference Operator: The next question comes from Chris Quintero with Morgan Stanley. Please go ahead.

Hey, Chad. Hey, Kim. Thanks for taking the questions here. A lot of moving pieces here. We just went over the revenue recovery piece, but maybe on the organic side, you all called out invoice scrutiny and some of those retail go-to-market programs getting pushed into next year. Just to clarify, are those incremental impacts that you’re seeing this quarter versus last quarter? Why are some of those projects getting pushed out into next year?

Irmina Blaszczyk, Investor Relations, SPS Commerce: Sure. Specific in Q3, Q3 hit our expectations on both of those. The color that I was providing was specific to Q4. Two dynamics in there. As it relates to 90 days ago, what we were anticipating for the quantity of retail relationship programs and the timing of those programs, that has changed. Instead of many of those happening in Q4, they’re now happening earlier in 2026. The impact there is on the P&L in 2025. They’re not lost programs. It’s just the timing of when those are going to happen. In some cases, if you think about Q4, it’s a really busy time, holiday season. It’s possible that maybe some of those retailers were a little bit more optimistic of what they thought they would be able to accomplish in Q4.

In those cases, some of those now are just getting moved into 2026, primarily due to the holiday season. The second part of that, as it relates to the invoice scrutiny, delayed purchase decisions. Again, we hit on that expectation in Q3, but we’re starting to see some signs that that’s still continuing on. In light of that, we wanted to also add that continuation at a little bit higher factored into our updated guidance.

Got it. Okay. Some of the retailers maybe got a little bit over their skis on their expectations for Q4, I guess. As my follow-up, maybe on the network-led growth motion, and I know we talked a lot about it at Investor Day, but is there anything you all need to do from an investment standpoint to make that successful? Is there any kind of early evidence that you’re seeing how that’s progressing or any kind of early proof points?

Chad, CEO, SPS Commerce: Yeah. I mean, we are making investments in this area. I wouldn’t describe them as incremental investments to achieve what we want here, more just where we’re focusing our team’s attention. We are having great success. I think a great example of how this is working is in revenue recovery, where we’re able to get, based on the network data, the volume that our customers have trading with certain retail partners where we provide revenue recovery and immediately identify that they are a highly qualified candidate for that revenue recovery solution and automatically serve that up as a leader opportunity to the expansion salesperson that’s responsible for that customer so they can engage with them about the benefits they receive from revenue recovery.

That type of motion and triggering it off the network is sort of up and running, and we look forward to continuing to scale that and using that to drive more cross-selling activity. That’s just one example. There are multiple examples where we can identify opportunities right from the network data for further expansion in our customers.

Understood. Thanks.

Dave, Conference Operator: The next question comes from Matt Van Vliet with Cantor. Please go ahead.

Good afternoon. Thanks for taking the questions. Obviously, across a lot of the software landscape on the application layer, there’s concern that toolkits from various AI tools and LLM providers are enabling more companies to look internally to maybe build functionality that they don’t currently have rather than go out and find a vendor to do that. Is that at all being mentioned by some of your prospects as to something they’re at least exploring and delaying deals? Any other thoughts there that maybe your stronghold on this position in the market could be cracking a little bit as customers see the utility of buying something pre-built isn’t as high as it’s been for some time?

Chad, CEO, SPS Commerce: We are seeing a few headwinds in our demand environment that we mentioned. This AI as a replacement is not one of those things that we’re hearing from prospective customers. I think that’s really for a couple of reasons. One is the breadth of the network itself in terms of the rules that are in there and the way that we have built out the compliance capabilities to so many different retailers to where you can connect once and access those. That’s years and years of that intelligence about retailer requirements being built into the network. Quite frankly, it would be very difficult to replicate with LLM or agentic AI.

The second reason is customers are seeing the power of the data that we have in our network and actually seeing that by participating in our network and having access to that data as they advance their AI strategies, the input mechanisms from that data on our network is going to be very powerful for them to execute on their AI strategy. It’s actually quite complementary there. I think it’s really for those reasons that we’re not seeing that as a disruption with the end customers. I’d say more broadly about our business and business model, unlike some of the other application providers that provide seat-based licensing, if there’s less users and more agents, they’re vulnerable.

Because our pricing model is really based on the connections in the network, we think that that’s going to be a more durable model that we have with our customers as more AI kind of takes over.

All right. Helpful. As you look towards kind of out to next year and the initial guidance you gave, with a little bit of a slowdown, at least relative to where we were expecting, does that change the appetite or the strategy around M&A? Will you potentially look for more tuck-ins that offer a broader set of solutions to appeal to more customers to try to revamp growth or anything on that front that you think will be impacted by what’s going on today and kind of what the expectations are over the next several quarters?

Yeah. I wouldn’t necessarily say it drives a change in philosophy. We have a lot of conviction in our M&A philosophy and continue to be active with our M&A pipeline really across what I’d say is kind of three different areas. One being continued consolidation in the core EDI market. There still are opportunities for further consolidation there. When we’re able to execute on those types of opportunities, it’s just really good for the customers because they’re typically moving from a much smaller network or a point-to-point set of connections, and then they move over to our network and really see the benefit of being on this broader network with lots of connections built in. The second category is more of these solution-expanding or portfolio-expanding type acquisitions, similar to what we’ve done in revenue recovery.

We continue to believe that there’ll be more opportunities where we find a solution that’s very applicable to our 50,000-plus customers already on the network, and therefore will drive cross-selling. A lot of times we find that these solutions actually get improved by connecting to the network and having access to the data on the network. The third category would be geographic expansion. Admittedly, this one’s probably a bit of a lower priority as we continue to drive the execution of our Europe strategy on the back of the TIE Kinetics acquisition. I think as we continue to get traction in geographies outside of the U.S., we’ll be able to use M&A over the long term to continue to build up business and capture more markets outside the U.S.

All right, thank you for taking the questions.

Dave, Conference Operator: The next question comes from George Kurosawa with CITI. Please go ahead.

Hey, thanks for taking the questions here. I wanted to dig in on some of the spend screen you called out. This is something you mentioned last quarter as well. Is it right to think of that as being tariff-driven primarily? If you could just compare what you saw in Q3 versus Q2, at the time it seemed like some of that was sort of ring-fenced within your mid-market customers. Have you seen any? Is it more that that customer cohort has seen incremental weakness, or has it maybe spread a little farther across the customer base, if that makes sense? Thanks.

Chad, CEO, SPS Commerce: Yeah, makes sense. I think if we look at customer sentiment right now, there is some more spend scrutiny coming primarily on the supplier side of our network. I wouldn’t say it’s exclusively tariff-related, but it definitely has a tariff impact. It does seem that many of our suppliers are absorbing incremental costs for the products that they’re selling to retailers and not passing a lot of that on. Therefore, they’re looking for other types of cost savings in their organization. I would say that trend has been consistent. It sort of picked up in Q2 and has carried through Q3. As it relates to Q3 results, I think that was factored into our original thinking about Q3. The variance that came from Q3 was quite specific to revenue recovery and related to some of the shipment volume changes for Amazon third-party customers.

Okay. Great. As a follow-up on that line of thinking in the revenue recovery space, is there any way you can help us think through the performance of maybe the SupplyPike assets versus Carbon6 just to get a better feel for if there’s anything sort of underlying happening in this market or if this is exclusively a function of Amazon-specific dynamics? Thanks.

Yeah. First, I’ll say we have high conviction over the long term in this revenue recovery opportunity. We’re seeing very strong interest in it and demand from our fulfillment customers and have some great early adopter customers on the fulfillment side who have taken it. We also believe in the strategy where we were quick to build out a comprehensive set of solutions that, one, covered a wide set of retailers, and two, offered both models, kind of a SaaS subscription model and take-rate model. We’re also pleased with the work that we’ve done integrating those teams across SupplyPike and Carbon6 now into a common go-to-market team that is offering all retailers and offering both sort of pricing models to customers based on their specific needs. The headwinds that we saw as a result of shipments in Q3 was exclusive to the 3P side of that business.

If you think, all of SupplyPike and the retailers they support are primarily 1P, meaning they’re shipping wholesale or direct-to-store for certain retailers. A good portion of the Carbon6 fits with that because it’s the 1P model in Amazon, and then there’s another portion of Carbon6 that is the 3P. The variability we saw was in the 3P area. We have not seen much disruption in the 1P area. As we think strategically, the 3P part of the business is certainly important to us, and it was a sizable portion of Carbon6, and we will continue with that piece of the business. We really think of the 1P side as a lot more strategic for us because that 1P seller really lines up with our ideal customer profile on fulfillment. Therefore, we think over time we’re likely to have a broader product portfolio for that 1P seller.

The fact that the 1P was the piece that was a little less disrupted is probably a little bit more favorable for us.

Okay. Helpful color. Thanks for taking the questions.

Dave, Conference Operator: The next question comes from Parker Lane with Stifel. Please go ahead.

Hi. Thanks for taking the question this afternoon. Kim, maybe if we look to the 7% to 8% outlook you have for 2026 initially here, can you just go into the assumptions on the macro environment that are embedded in that? Is that assuming any sort of normalization or improvement in the environment that you’re outlining for Q4? Anything you can offer there?

Kim, CFO, SPS Commerce: Yeah. Parker, what I would say is our initial guidance that is on the, call it the lower end of the high single digits, takes into account the dynamics that we’re seeing this year. Obviously, the way recurring revenue works, there’s certain aspects of the dynamic this year that just naturally, right, feeds into next year. I think of it more a mid-ish case, meaning we’re reflecting what’s happened this year, but we also do have optimism as it relates to the business and the opportunity next year. That has been taken into account as well. Taking all of that into account, our best view is, call it that lower end of the high single digit of 7 to 8%.

Got it. Thank you. Chad, you just alluded to the new go-to-market team that’s combined here for revenue recovery. Can you just talk about how quickly you anticipate that you’ll start seeing some of the benefits from that new structure? Is that something that can impact 4Q, or is it more of a couple of quarters for the team to get its feet underneath it and start to execute?

Chad, CEO, SPS Commerce: We are seeing some early success in pipeline development and pipeline management, and moving deals forward with that combined approach. In terms of the Amazon side where we did see this headwind in shipment, actually, some of the new customer acquisition has been tracking ahead of where we expected, which gives us conviction about the total market opportunity. The thing about Q4, I would say, is most of the customers that we sign up in Q4 are not going to have a meaningful impact on revenue in either the subscription or the take-rate model. I think continued benefits from this new go-to-market are more likely to have me show up kind of through the P&L in the second half of 2027 in a more meaningful way, or 2026, excuse me, than in Q4.

Got it. Thank you.

Dave, Conference Operator: The next question comes from Mark Schappel with Loop Capital. Please go ahead.

Hi, this is Tim Grimsong from Mark. I guess I want to ask around, with leveraging your customer change events such as ERP and WMS replacements, could you provide some directional insight on the activity levels you observed there with ERP and WMS replacements? Anything on upgrades over the past quarter or two?

Chad, CEO, SPS Commerce: Yeah. Majority of those change events which lead to new customers for us are on the ERP side. WMS can be one of them, but I’d say the majority of them are on the ERP side. We have seen some softness in the ERP sort of change-out or replacement market, and that has come mostly in the area of what we call the mid-market ERPs. Meaning the very high-end enterprise ERPs, we don’t do a ton of business there, but we have seen those deals go through as expected. The very low-end, the small kind of QuickBooks-type systems, those actually have moved forward. In more of the mid-market ERPs, the Sage, the Microsoft, the NetSuite, in these areas, we have seen some softness in that market, which then kind of slows down the ability to capture new customers via these change events.

Okay, thank you for taking the question.

Dave, Conference Operator: Again, if you have a question, please press star and then one. Our next question comes from Dylan Becker with William Blair. Please go ahead.

Hey, guys. This is Jackson Bogley on for Dylan Becker. I was wondering if you could go into the new logo side of the equation here. We saw a little bit of a step up in the quarter. I was just curious to get your thoughts on how we should think about the new logo momentum going into 2026, despite enablement campaigns getting pushed out, but maybe how you’re feeling about going into 2026 with some new logo momentum behind you.

Kim, CFO, SPS Commerce: Sure, Jackson. Through the first three quarters of this year, we’ve added a net 1,100 customers. To your point, that’s at a much higher clip than last year. That number excludes M&A. Last year, the number excluding M&A was 300 for the year. To your point, we’re at a much accelerated rate, and that’s primarily driven by these retailer relationship management programs. In Q3, we also exceeded that expectation. We had assumed it would end up being, call it a net 350. It ended up closer to a net 450 based on those activities. That’s great momentum. I know you’re asking about next year, but I’m just going to give a little color about Q4. Specific to Q4, because of the comments that I made in the prepared remarks, we have a fair number of those relationship management programs that are pushing from our original expectation of Q4 into 2026.

Super logical reason why with the holiday season, but knowing that that is different than we originally anticipated. Our lens for Q4, when we look at our net customer add perspective, we’re assuming similar churn to what we’ve seen in the last couple of quarters. Since many of those programs have moved out, our expectation for net customer adds in Q4, we expect that number is flat to slightly down potentially in Q4. That’s really timing-driven. When we think about 2026, we really like the pipeline that we’re seeing on relationship management programs.

At this point, similar to what we would have shared at analyst day, when we think of that mix of what gets us to that high single-digit growth rate, the expectation would be that customer adds are certainly a part of it, but a larger portion of that growth would be coming from the ARPU side of the equation. Nothing’s changed there relative to our expectation of the mix being more on the ARPU side and less being on the customer growth side. Both important, but similar comments to analyst day would still remain.

Great. That’s helpful. I want to follow up if I could. We saw continued margin expansion in the quarter. I was curious, we’ve talked about AI a little bit in this call, but what areas are you guys looking to really lean into to drive that further operating leverage, in line with your long-term model, and maybe how that leads to better network monetization and that AI differentiation building that competitive moat that you guys have? Thanks.

Chad, CEO, SPS Commerce: Yeah. Jackson, thanks for picking up on the expanding margins. A lot of that coming from the gross margin. The driver there in the gross margin is primarily the investments that we have made in our customer experience and in particular our customer onboarding to the network. That’s become much more efficient, and that leads to a better customer experience, and that efficiency also has led to some margin improvement. There’s continued improvement that we will drive there, first and foremost to improve that customer experience, and then secondarily to have that efficiency drive better margin for us. Also, I would say on the G&A lines and sales and marketing lines, as we continue to scale the business, we think we will get continued efficiency there over time and work toward the targets that we have in our long-term model. You did mention AI.

I would say we do have internal initiatives now to apply AI technology to continue that efficiency journey and looking first and foremost at our go-to-market team, so combination of marketing and sales and our customer success teams. One, those are probably the most meaningful workflows in terms of they’re all customer-facing workflows. That’s also where a lot of our people are today. We think we continue to drive efficiencies that way as well.

Dave, Conference Operator: The next question comes from Joe Vruwink with Baird. Please go ahead.

Hi, Greg. Thanks for taking my question. Carbon6 and SupplyPike, when they were originally announced, I think they added to $65 million in revenue in fiscal 2025, bringing a faster rate of growth with it. If I annualize this $3 million, so $12 million for a year, it’s taking off a double-digit proportion from those businesses. Is that the right way to think of it? If I do that into next year and I’m subtracting off their elevated or what was an elevated growth rate, can you maybe talk about the embedded assumption for revenue recovery within that 7 to 8%? It maybe seems like that side of the business is in line to below the 7 to 8%, and the SPS Commerce fulfillment business is still kind of above there, but I want to be sure on all that analysis.

Kim, CFO, SPS Commerce: Sure. When we think about that business and we think about it first for the year 2025, we’re in around, call it, within, call it, 10% of what our original expectations were. When we think about what next year that business represents for us, we still do expect that it grows at a faster clip than our core business. Keep in mind the comments that Chad added. When we think about the cross-sell muscle here, now that we have the combined go-to-market strategy and the combined teams in place, we do believe there’s a lot of opportunity for us in 2026 to really flex that cross-sell muscle. We have some at-bats that have worked well for us this year, but it’s still very early on.

The fact that we’re going to have that for all of next year has also been taken into account and leaves us with strong conviction that that business still will grow at a faster clip than the core business next year.

Okay. That’s helpful. Going back to the customer account, if my math is right, it looks like the 3P side of the account is down maybe 500 logos or 5% since the start of the year. One question, how much of that is churn you’re okay with? Going back to Chad’s comments, you’re inheriting a business, but now you’re looking to refine it and optimize it for what’s going to be more enduring for you going forward. The silver lining of this question is that if you add the 500 logos back to this 1,100 number you were talking about earlier at the corporate level, 1,600 added for legacy SPS Commerce is a pretty good number. I wanted to just ask kind of where that’s being driven within the environment of spend scrutiny.

Sure. When you think about the customer count, to your point, we show the number as total customers, but then we do break that out in supplemental in the 10Q. If you think about the 3P side of the business in the quarter in Q3, the 3P customer count declined approximately 150. Just as a reminder, when we acquired the Carbon6 business, that added about 8,500 customers, of which the vast majority were 3P. About 8,200 of that 8,500 were 3P. What we’ve seen in that business is it’s actually specific in Q3 where that is down approximately 150. When I think about the business, one, there tends to just be more churn in that 3P business. It’s also a much smaller ASP per customer. There’s also some, I’d call them, non-strategic ancillary-type products that we offer to 3P customers.

In those areas, we have seen some of that churn off. Our expectation would be in some of those areas, we’d expect to see that 3P customer count decline a little bit. Very immaterial on the overall revenue, but that trend we saw in Q3. We would expect that trend would also continue into Q4 and beyond. When you think about the business overall, there’s the 1P side and the 3P side. The 1P side has much larger revenue per customer or ARPU per customer. The quantity of customers acquired was much skewed to the 3P side. Again, we definitely see a bit more churn there and also the non-strategic part of the business. Where we saw it decline, really, I would characterize that as really starting in Q3 at that sort of net 150 and wouldn’t be imprudent to assume that we’re at that clip going forward as well.

Last thing, to your point, that means the 1P customers actually grew more. The net 450 would actually be a higher number when you’re looking at the 1P customer adds, to your point.

Okay, thank you.

Dave, Conference Operator: This concludes our question and answer session. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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