Core Viewpoint - SPS Commerce, Inc. will release its financial results for Q2 2025 on July 30, 2025, and will host a conference call to discuss these results [1] Group 1: Financial Results Announcement - The financial results for the second quarter ended June 30, 2025, will be issued after market close on July 30, 2025 [1] - A conference call to discuss the results is scheduled for 3:30 p.m. Central Time on the same day [1] Group 2: Accessing the Conference Call - Participants can join the call by dialing 1-833-816-1382 or 1-412-317-0475 for international calls, at least 15 minutes prior to the start time [2] - A live webcast of the call will be available on the SPS Commerce investor relations website [2] Group 3: Company Overview - SPS Commerce is a leader in retail supply chain cloud services, connecting trading partners globally to optimize supply chain operations [3] - The company supports over 50,000 recurring revenue customers across various sectors including retail, grocery, distribution, and logistics [3] - SPS Commerce has achieved 97 consecutive quarters of revenue growth and is headquartered in Minneapolis [3]

Summary of SPS Commerce (SPSC) FY Conference Call - June 10, 2025 Company Overview - SPS Commerce operates a cloud-based network connecting retailers and suppliers for efficient supply chain information exchange, primarily focused on the ordering process [4][5] - The company has the largest EDI (Electronic Data Interchange) network in North America, emphasizing community enablement to connect suppliers digitally to retailers [6][10] Key Points Industry and Market Position - SPS Commerce's total addressable market (TAM) is now estimated at $11 billion, up from a previous estimate of $5 billion, reflecting growth in the EDI market [14][15] - The U.S. accounts for approximately $6.5 billion of the TAM, with a potential global supplier base of about 275,000, including 147,000 in the U.S. [15] Revenue Growth and Customer Acquisition - The company reported 300 net new customers in Q1, indicating a reacceleration in network expansion, driven by community enablement programs [10][12] - Revenue growth can come from new customer acquisition or increasing average revenue per customer, influenced by the nature of community enablement programs [11][12] Pricing Model - The core EDI pricing model is based on the number of connections suppliers have within the network, with a fixed fee per connection making up about 80% of revenue [21][23] - A small variable component is based on the number of documents exchanged, which remains stable despite fluctuations in consumer spending [21][23] Research and Development (R&D) - R&D spending has been consistent at about 10% of sales, focusing on enhancing existing products and internal tools, with a growing emphasis on AI and machine learning [24][26] - The company is also developing rule books to help retailers manage their supply chain processes more effectively [26] New Product Development - SPS recently launched a manufacturing supply chain performance suite aimed at co-packers and manufacturers, addressing upstream supply chain needs [28][29] - The company has also acquired revenue recovery software to help suppliers manage chargebacks and deductions from retailers, presenting a significant cross-selling opportunity [32][36] Financial Metrics and Goals - SPS aims for adjusted EBITDA margins of at least 35%, with current margins in the upper twenties [47] - The company targets gross margins in the low to mid-seventies, with ongoing investments in customer experience expected to drive improvements [48][45] International Growth - Currently, 17% of sales are international, with growth ambitions focused on expanding direct sales and community enablement in Europe following the acquisition of Thai Kinetics [51][52] Data Monetization Opportunities - SPS is exploring ways to monetize the data generated from transactions on its network, potentially offering insights for demand planning and forecasting [73] Additional Insights - The company has a strong focus on community enablement programs, which not only drive supplier connections but also enhance revenue opportunities through existing customer relationships [56] - The integration of recent acquisitions is ongoing, with efforts to standardize pricing and service delivery models [40][41] This summary encapsulates the key points discussed during the SPS Commerce FY Conference Call, highlighting the company's strategic initiatives, market position, and financial outlook.

Company Overview - SPS Commerce, Inc. is a leader in retail supply chain cloud services, connecting trading partners globally to optimize supply chain operations for retail partners [2] - The company supports over 50,000 recurring revenue customers across various sectors including retail, grocery, distribution, supply, manufacturing, and logistics [2] - SPS Commerce has achieved 97 consecutive quarters of revenue growth, indicating strong financial performance [2] Upcoming Events - Management will present at the 1st Annual D.A. Davidson Technology & Consumer Conference on June 10, 2025, at 2:40 PM C.T. [1] - A webcast of the presentation will be available on the company's investor relations website [1]

Financial Data and Key Metrics Changes - First quarter revenue grew 21% to $181.5 million, marking the 97th consecutive quarter of revenue growth [8][16] - Recurring revenue increased by 23% year-over-year, with approximately 54,150 recurring revenue customers and an average revenue per user (ARPU) of approximately $13,850 [16] - Adjusted EBITDA rose 22% to $54.4 million compared to $44.4 million in Q1 of the previous year [17] - Total cash and investments at the end of the quarter were $95 million, with approximately $40 million of SPS shares repurchased [18] Business Line Data and Key Metrics Changes - The analytics segment experienced a slight decline of approximately 2% year-over-year, which is expected to remain flat for the year [30][31] - The acquisition of CarbonSix added approximately 8,500 customers, exceeding initial estimates [17][94] Market Data and Key Metrics Changes - SPS Commerce operates a network of over 50,000 suppliers, logistics companies, and buying organizations across various sectors, including retail and manufacturing [15] - The total addressable market for SPS Commerce is estimated at $11 billion [15] Company Strategy and Development Direction - The company is focused on enhancing trading partner relationships through a diverse product portfolio, including fulfillment, analytics, e-invoicing, and revenue recovery [9][10] - SPS Commerce is committed to supporting automation and operational efficiencies in supply chains, which are seen as critical for customer growth and profitability [14][19] Management's Comments on Operating Environment and Future Outlook - Management is closely monitoring trade dynamics and their impact on the retail industry, emphasizing the importance of automation and operational efficiencies [19][21] - Despite macroeconomic uncertainties, the company maintains its full-year revenue growth outlook of 19% to 20% [20][21] Other Important Information - The company expects Q2 2025 revenue to be in the range of $184.5 million to $186.2 million, with adjusted EBITDA expected between $53 million and $54.5 million [18] - Stock-based compensation expense is anticipated to be approximately $15.5 million for the year [19] Q&A Session Summary Question: Insights on cross-sell potential from recent acquisitions - Management noted that the ideal customer profiles for revenue recovery and fulfillment align well, indicating potential for cross-selling opportunities [26][28] Question: Performance of the analytics business - The analytics segment saw a slight decline, attributed to economic conditions, with expectations for it to remain flat for the year [30][31] Question: Impact of tariffs on enablement campaigns - Management confirmed that while tariffs are a concern, there has not yet been a decline in the volume of enablement programs [37][38] Question: Customer growth from CarbonSix acquisition - The acquisition added more customers than initially expected, with a rigorous review process revealing a higher customer count [94][95] Question: Organic customer growth expectations - Management indicated that organic customer growth is expected to remain stable, with strong community enablement activity anticipated [99] Question: Broader economic indicators being monitored - Key indicators include the pipeline of community enablement campaigns and the health of the supplier base [112][113]

Financial Data and Key Metrics Changes - First quarter revenue grew 21% to $181.5 million, marking the 97th consecutive quarter of revenue growth [8][16] - Recurring revenue increased by 23% year-over-year, with approximately 54,150 recurring revenue customers and an average revenue per user (ARPU) of approximately $13,850 [16] - Adjusted EBITDA rose 22% to $54.4 million compared to $44.4 million in Q1 of the previous year [17] - The company ended the quarter with total cash and investments of $95 million and repurchased approximately $40 million of its shares [18] Business Line Data and Key Metrics Changes - The analytics segment experienced a slight decline of approximately 2% year-over-year, which is attributed to economic conditions and tariff uncertainties [30][32] - The acquisition of CarbonSix added approximately 8,500 customers, exceeding initial estimates, and is expected to impact ARPU in the following quarter [17][94] Market Data and Key Metrics Changes - SPS Commerce operates a network of over 50,000 suppliers, logistics companies, and buying organizations across various sectors, including retail and manufacturing, within an $11 billion total addressable market [15] - The company is closely monitoring how current trade dynamics are impacting the retail sector amid economic uncertainties [14][19] Company Strategy and Development Direction - SPS Commerce aims to enhance trading partner relationships through a diverse product portfolio, including fulfillment, analytics, e-invoicing, and supply chain performance solutions [9][10] - The company is focused on automation and operational efficiencies as priorities for trading partners, which are expected to drive future growth [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the full-year 2025 growth outlook despite ongoing macroeconomic uncertainties, emphasizing the resilience of their business model [21] - The company is not currently seeing a decline in the volume of enablement programs, indicating a stable demand environment [37] Other Important Information - The company expects revenue for Q2 2025 to be in the range of $184.5 million to $186.2 million, representing approximately 20% to 21% year-over-year growth [18] - For the full year 2025, revenue is expected to be between $758.5 million and $763 million, reflecting a growth rate of 19% to 20% over 2024 [20] Q&A Session Summary Question: Insights on cross-sell potential from recent acquisitions - Management noted that the ideal customer profiles for revenue recovery and fulfillment products align well, indicating potential for cross-selling opportunities [26][28] Question: Performance of the analytics business - The analytics segment saw a slight decline, attributed to economic conditions, with expectations for it to remain flat for the year [30][31] Question: Impact of tariffs on enablement campaigns - Management confirmed that while tariffs are a concern, they have not yet seen a decline in the pipeline for enablement programs [37][38] Question: Customer growth from CarbonSix acquisition - The acquisition added more customers than initially expected, with a rigorous review process revealing approximately 8,500 customers [94][95] Question: Organic customer growth expectations - Management indicated that organic customer growth is expected to remain stable, with strong community enablement activity anticipated for the year [99] Question: Broader economic indicators being monitored - Key indicators include the pipeline of community enablement campaigns and the health of the supplier base, with no current signs of slowdown in ERP and WMS projects [112][116]

Core Insights - SPS Commerce reported quarterly earnings of $1 per share, exceeding the Zacks Consensus Estimate of $0.84 per share, and compared to earnings of $0.86 per share a year ago [1] - The company achieved a revenue of $181.55 million for the quarter, surpassing the Zacks Consensus Estimate by 1.12%, and up from $149.58 million year-over-year [3] Earnings Performance - The earnings surprise for the quarter was 19.05%, with the company having surpassed consensus EPS estimates in all four of the last quarters [2] - The company also delivered a surprise of 2.30% in the previous quarter, with actual earnings of $0.89 compared to an expected $0.87 [2] Future Outlook - Current consensus EPS estimate for the upcoming quarter is $0.92 on revenues of $185.7 million, and for the current fiscal year, it is $3.83 on revenues of $761.07 million [8] - The estimate revisions trend for SPS Commerce is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [7] Industry Context - The Business - Services industry, to which SPS Commerce belongs, is currently in the top 34% of Zacks industries, suggesting a favorable outlook compared to the bottom 50% [9] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [6]

Financial Data and Key Metrics Changes - First quarter revenue grew 21% to $181.5 million, marking the 97th consecutive quarter of revenue growth [6][13] - Recurring revenue increased by 23% year over year [6][13] - Adjusted EBITDA rose 22% to $54.4 million compared to $44.4 million in Q1 of the previous year [14] - Total cash and investments at the end of the quarter were $95 million, with approximately $40 million of shares repurchased [14] Business Line Data and Key Metrics Changes - The total number of recurring revenue customers in Q1 was approximately 54,150, with an average revenue per user (ARPU) of approximately $13,850 [13] - The analytics business slightly declined year over year by approximately 2%, which is expected to remain flat for the year [22][24] Market Data and Key Metrics Changes - The company operates a network of over 50,000 suppliers, logistics companies, and buying organizations across various sectors [11] - The total addressable market is estimated at $11 billion, indicating significant growth potential [12] Company Strategy and Development Direction - The company is focused on enhancing automation and operational efficiencies across supply chains, which are seen as critical for trading partners [16][18] - The acquisition of CarbonSix is expected to enhance the company's portfolio and position in the revenue recovery category [8][14] - The company is closely monitoring trade dynamics and their impact on the retail industry, while remaining committed to supporting partners through challenging macro environments [11][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the full-year 2025 growth outlook despite ongoing macroeconomic uncertainties [17][18] - The company anticipates revenue growth in the range of $758.5 million to $763 million for the full year, representing approximately 19% to 20% growth over 2024 [17] - Management noted that the demand for mission-critical services remains strong, with automation being a priority for trading partners [16][18] Other Important Information - The company expects adjusted EBITDA for the full year to be in the range of $229.4 million to $232.9 million, reflecting growth of approximately 23% to 25% over 2024 [17] - Stock-based compensation expense is anticipated to be approximately $61.4 million for the year [17] Q&A Session Summary Question: Insights on cross-sell potential from recent acquisitions - Management indicated that the ideal customer profiles for revenue recovery and fulfillment products align well, suggesting positive cross-sell opportunities [20][21] Question: Decline in analytics business - The analytics segment saw a slight decline due to economic conditions, with expectations for it to remain flat for the year [22][24] Question: Impact of tariffs on enablement campaigns - Management noted that while tariffs are a concern, there has not been a decline in the volume of enablement programs or the speed of moving opportunities through the pipeline [28] Question: Organic customer growth and enablement campaigns - The company reported a net addition of 300 organic customers, driven by strong community enablement programs [34][70] Question: Future growth expectations excluding acquisitions - Management reiterated confidence in achieving the stated growth targets for 2025, but did not provide specific guidance for 2026 at this time [58][59]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's total assets increased to $1.11 billion, primarily driven by acquisitions which boosted goodwill and intangible assets. Revenue for the first quarter of 2025 grew 21% year-over-year to $181.5 million, resulting in a net income of $22.2 million. Cash flow from operations was strong at $40.0 million, though overall cash decreased due to significant investment in business acquisitions and share repurchases [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $1.11 billion, an increase from $1.03 billion at year-end 2024. This growth was primarily fueled by a significant rise in goodwill to $533.9 million and net intangible assets to $252.3 million, resulting from recent acquisitions. Cash and cash equivalents decreased substantially from $241.0 million to $94.9 million, reflecting cash used for investing and financing activities. Total liabilities increased slightly to $188.1 million, while total stockholders' equity grew to $920.9 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $94,921 | $241,017 | | Accounts receivable, net | $63,390 | $52,035 | | Goodwill | $533,940 | $399,180 | | Intangible assets, net | $252,280 | $181,294 | | **Total assets** | **$1,109,050** | **$1,031,230** | | Total current liabilities | $153,424 | $146,684 | | **Total liabilities** | **$188,129** | **$176,540** | | **Total stockholders' equity** | **$920,921** | **$854,690** | [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) For the three months ended March 31, 2025, revenues increased by 21.4% to $181.5 million compared to the same period in 2024. Gross profit rose 27.1% to $124.6 million. Net income grew 23.3% to $22.2 million, with diluted earnings per share (EPS) increasing to $0.58 from $0.48 year-over-year Q1 2025 vs. Q1 2024 Performance (in thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $181,549 | $149,576 | +21.4% | | Gross Profit | $124,635 | $98,089 | +27.1% | | Income from operations | $25,956 | $15,403 | +68.5% | | Net income | $22,196 | $18,003 | +23.3% | | Diluted EPS | $0.58 | $0.48 | +20.8% | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity increased from $854.7 million at the end of 2024 to $920.9 million as of March 31, 2025. The increase was primarily driven by $22.2 million in net income and $13.1 million in stock-based compensation. This was partially offset by $40.0 million in common stock repurchases. Additionally, treasury stock was used as part of an acquisition consideration - Key activities impacting stockholders' equity in Q1 2025 included net income of **$22.2 million**, stock repurchases of **$40.0 million**, and the reissuance of treasury stock valued at **$37.7 million** for an acquisition[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2025, net cash provided by operating activities was $40.0 million, an increase from $34.1 million in Q1 2024. Investing activities used $147.8 million, primarily due to a $141.6 million business acquisition. Financing activities used $39.0 million, largely for $40.0 million in stock repurchases. These activities resulted in a net decrease in cash and cash equivalents of $146.1 million, ending the period with $94.9 million Summary of Cash Flows (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $39,983 | $34,064 | | Net cash used in investing activities | ($147,786) | ($2,945) | | Net cash used in financing activities | ($38,954) | ($14,889) | | **Net decrease in cash** | **($146,096)** | **$15,556** | | **Cash at end of period** | **$94,921** | **$234,637** | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant financial events, including two major business acquisitions (Carbon6 and SupplyPike) that substantially increased goodwill and intangible assets. Revenue is primarily recurring (95%) and domestic (85%). The company actively repurchased shares and managed its stock-based compensation plans. EPS calculations and other financial details are also elaborated [Note B – Business Acquisitions](index=8&type=section&id=Note%20B%20%E2%80%93%20Business%20Acquisitions) SPS Commerce acquired Carbon6 Technologies, Inc. in February 2025 for a total consideration of $209.3 million, comprising $141.6 million in cash and $67.7 million in stock. This acquisition added approximately $129.6 million to goodwill. The company also finalized the purchase accounting for the July 2024 acquisition of SupplyPike, which had a total consideration of $205.8 million and added $138.1 million to goodwill - On February 4, 2025, the company acquired Carbon6 for **$209.3 million**, consisting of **$141.6 million** in cash and **378,100 shares** of SPS common stock valued at **$67.7 million**[30](index=30&type=chunk) - The acquisition of SupplyPike in July 2024 for **$205.8 million** was finalized, with goodwill determined to be **$138.1 million**[35](index=35&type=chunk)[38](index=38&type=chunk) Unaudited Pro Forma Financial Information (in thousands) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $185,730 | $158,120 | | Net income | $28,382 | $13,111 | [Note C – Revenue](index=11&type=section&id=Note%20C%20%E2%80%93%20Revenue) Total revenue for Q1 2025 was $181.5 million. Recurring revenues accounted for 95% of the total at $172.3 million, a 23% increase from Q1 2024. Fulfillment services remain the largest revenue stream at $152.6 million. Geographically, 85% of revenue was generated from customers within the United States Revenue by Product Type (in thousands) | Revenue Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Recurring revenues:** | | | | Fulfillment | $152,631 | $121,853 | | Analytics | $13,702 | $14,014 | | Other | $5,996 | $3,817 | | **Total Recurring** | **$172,329** | **$139,684** | | One-time revenues | $9,220 | $9,892 | | **Total revenue** | **$181,549** | **$149,576** | - Domestic revenue (U.S.) constituted **85%** of total revenue in Q1 2025, up from **83%** in Q1 2024[40](index=40&type=chunk) [Note H – Goodwill and Intangible Assets, Net](index=14&type=section&id=Note%20H%20%E2%80%93%20Goodwill%20and%20Intangible%20Assets%2C%20Net) Goodwill increased to $533.9 million as of March 31, 2025, from $399.2 million at year-end 2024. The increase is primarily due to a $129.6 million addition from a business acquisition and a $3.9 million remeasurement from a prior acquisition. Net intangible assets, mainly subscriber relationships and developed technology, grew to $252.3 million with a weighted average remaining amortization period of 7.1 years - Goodwill increased by **$134.8 million** during the quarter, primarily from business acquisitions[56](index=56&type=chunk) - Net intangible assets increased to **$252.3 million** from **$181.3 million** at the end of 2024, with future amortization expense for the remainder of 2025 estimated at **$29.5 million**[57](index=57&type=chunk)[58](index=58&type=chunk) [Note J – Stockholders' Equity](index=16&type=section&id=Note%20J%20%E2%80%93%20Stockholders%27%20Equity) The company continued its share repurchase activity, buying back 281,001 shares for $40.0 million in Q1 2025 under its 2024 program. As of March 31, 2025, $60.0 million remained available for future repurchases under this program, which expires in July 2026. Additionally, 378,100 treasury shares were re-issued as part of the Carbon6 acquisition Share Repurchase Activity - Q1 2025 | Metric | Value | | :--- | :--- | | Number of shares repurchased | 281,001 | | Total share repurchased cost | $40.0 million | | Average cost per share | $142.35 | - As of March 31, 2025, **$60.0 million** was available for future repurchases under the 2024 program[62](index=62&type=chunk) [Note K – Stock-Based Compensation](index=17&type=section&id=Note%20K%20%E2%80%93%20Stock-Based%20Compensation) Stock-based compensation expense for Q1 2025 was $13.9 million, a decrease from $20.0 million in Q1 2024. The expense was allocated across cost of revenues and operating expenses. As of March 31, 2025, there was $102.3 million of unrecognized stock-based compensation expense, expected to be recognized over a weighted average period of 2.6 years Stock-Based Compensation Expense (in thousands) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cost of revenues | $3,111 | $4,082 | | Sales and marketing | $2,427 | $4,444 | | Research and development | $2,017 | $3,242 | | General and administrative | $6,312 | $8,250 | | **Total** | **$13,867** | **$20,018** | - Unrecognized stock-based compensation expense totaled **$102.3 million** as of March 31, 2025, to be recognized over a weighted average of **2.6 years**[65](index=65&type=chunk) [Note N – Net Income Per Share](index=20&type=section&id=Note%20N%20%E2%80%93%20Net%20Income%20Per%20Share) For the first quarter of 2025, both basic and diluted net income per share were $0.58. This was calculated using a net income of $22.2 million and weighted average basic shares of 38.0 million and diluted shares of 38.2 million. This is an increase from Q1 2024, which had a basic EPS of $0.49 and diluted EPS of $0.48 Net Income Per Share Calculation | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (in thousands) | $22,196 | $18,003 | | Weighted average shares, basic (in thousands) | 37,990 | 37,049 | | Weighted average shares, diluted (in thousands) | 38,163 | 37,686 | | **Basic EPS** | **$0.58** | **$0.49** | | **Diluted EPS** | **$0.58** | **$0.48** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 21% revenue growth to increases in both the number of recurring revenue customers, largely from acquisitions, and the average revenue per user (ARPU). Operating expenses increased across the board due to higher headcount, while amortization expense nearly doubled due to recent acquisitions. Adjusted EBITDA margin remained stable at 30%. The company's liquidity position remains strong, though cash decreased significantly due to the cash outlay for the Carbon6 acquisition and share repurchases [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Revenues grew 21% YoY, driven by an 11% increase in ARPU to approximately $13,850 and a 21% increase in recurring revenue customers to 54,150, with recent acquisitions being a primary driver of customer growth. Operating income increased 69% to $26.0 million. Adjusted EBITDA grew 22.5% to $54.4 million, with the margin holding steady at 30%. Non-GAAP diluted income per share increased to $1.00 from $0.86 in the prior-year period - Revenue growth was driven by an **11% increase** in ARPU to **~$13,850** and a **21% increase** in recurring revenue customers to **~54,150**[88](index=88&type=chunk) - The number of recurring revenue customers increased significantly due to acquisitions, including **~50** from Traverse Systems, **~200** from SupplyPike, and **~8,500** from Carbon6[88](index=88&type=chunk) Non-GAAP Financial Measures Reconciliation (in thousands) | Measure | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $22,196 | $18,003 | | Adjusted EBITDA | $54,373 | $44,402 | | **Adjusted EBITDA Margin** | **30%** | **30%** | | Non-GAAP Income | $38,013 | $32,501 | | **Non-GAAP Income per Share, diluted** | **$1.00** | **$0.86** | [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the company's main liquidity sources were $94.9 million in cash and cash equivalents and $63.4 million in net accounts receivable. Cash from operations increased to $40.0 million in Q1 2025. However, cash used in investing activities surged to $147.8 million due to a business acquisition, and cash used in financing increased to $39.0 million from higher share repurchases. The company believes existing cash and operational cash flow are sufficient to meet capital needs for the next twelve months - Principal sources of liquidity as of March 31, 2025, were cash and cash equivalents of **$94.9 million** and net accounts receivable of **$63.4 million**[102](index=102&type=chunk) - The increase in cash used in investing activities was primarily due to **$141.6 million** used for a business acquisition[105](index=105&type=chunk) - The increase in cash used in financing activities was primarily due to a **$23.5 million** year-over-year increase in share repurchases[106](index=106&type=chunk) [Critical Accounting Policies and Estimates](index=26&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There were no changes to the company's critical accounting policies or estimates during the first quarter of 2025. The most critical policies relate to revenue recognition, internally developed software, and business combinations - No changes were made to critical accounting policies or estimates in Q1 2025. Key policies include revenue recognition, internally developed software, and business combinations[100](index=100&type=chunk)[101](index=101&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate and foreign currency exchange risks. A hypothetical 50-basis point change in interest rates would have a $0.1 million impact on investment income. Due to international operations, the company holds assets and incurs expenses in foreign currencies, primarily the Australian dollar, Canadian dollar, and Euro. A hypothetical 10% unfavorable change in all foreign currency exchange rates would result in a $1.1 million impact on cash and cash equivalents held in those currencies - A hypothetical **50-basis point** change in interest rates would impact investment income by **$0.1 million**[112](index=112&type=chunk) - A hypothetical **10%** unfavorable change in foreign currency exchange rates would impact cash and cash equivalents by **$1.1 million**[115](index=115&type=chunk) - The company has not used forward contracts or currency borrowings to hedge foreign currency risk but may do so in the future[116](index=116&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025. There were no material changes to internal control over financial reporting during the quarter. The recently acquired Carbon6 business is currently being integrated and is excluded from the assessment of internal controls, as permitted by SEC guidance - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[117](index=117&type=chunk) - The internal controls of the newly acquired Carbon6 business are being incorporated and are currently excluded from the internal control assessment[119](index=119&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any legal claims or actions that would have a material adverse effect on its business, financial condition, or results of operations - There are no current legal proceedings expected to have a material adverse effect on the company[122](index=122&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes in the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors have occurred since the last Annual Report on Form 10-K[123](index=123&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On February 4, 2025, the company issued 378,100 shares of common stock as partial consideration for the Carbon6 acquisition, exempt from registration under the Securities Act. During the quarter, the company also repurchased 281,001 shares for approximately $40.0 million, leaving $60.0 million available under the current repurchase program - On February 4, 2025, **378,100 shares** of common stock were issued to the sellers of Carbon6 as part of the acquisition consideration[124](index=124&type=chunk) Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Value Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 1-31 | — | — | $100,000,000 | | Feb 1-28 | 243,556 | $143.68 | $65,005,000 | | Mar 1-31 | 37,445 | $133.50 | $60,006,000 | | **Total** | **281,001** | **$142.33** | **$60,006,000** | [Item 5. Other Information](index=30&type=section&id=Item%205.%20Other%20Information) During the first quarter of 2025, none of the company's directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans during Q1 2025[129](index=129&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, agreements, officer certifications, and interactive data files - A list of exhibits filed with the report is provided, including certifications and interactive data files[130](index=130&type=chunk)

[Financial Performance and Outlook](index=1&type=section&id=Financial%20Performance%20and%20Outlook) SPS Commerce reported strong Q1 2025 financial results and provided forward-looking guidance for the upcoming quarter and full fiscal year [First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) SPS Commerce achieved its 97th consecutive quarter of revenue growth in Q1 2025, with revenue up 21% and strong profit gains - This marks the company's 97th consecutive quarter of revenue growth, underscoring the resilience of its business model and the mission-critical nature of its solutions[1](index=1&type=chunk)[3](index=3&type=chunk) Q1 2025 Key Financial Metrics (YoY) | Metric | Q1 2025 | Q1 2024 | Growth | | :--- | :--- | :--- | :--- | | Revenue | $181.5M | $149.6M | 21% | | Recurring Revenue Growth | 23% | N/A | N/A | | Net Income | $22.2M | $18.0M | 23% | | Diluted EPS | $0.58 | $0.48 | 21% | | Non-GAAP Diluted EPS | $1.00 | $0.86 | 16% | | Adjusted EBITDA | $54.4M | $44.4M | 22% | - The company repurchased **$40.0 million** of its common stock during the first quarter of 2025[4](index=4&type=chunk) - Management highlighted a large total addressable market of **$11 billion**, positioning the company to support trading relationships across retail, distribution, grocery, and manufacturing[3](index=3&type=chunk) [Business Outlook](index=2&type=section&id=Business%20Outlook) The company provided Q2 and full fiscal year 2025 guidance, projecting continued strong growth in revenue and Adjusted EBITDA Second Quarter 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $184.5M - $186.2M (20%-21% YoY Growth) | | Net Income per Diluted Share | $0.41 - $0.44 | | Non-GAAP Income per Diluted Share | $0.87 - $0.90 | | Adjusted EBITDA | $53.0M - $54.5M | Fiscal Year 2025 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenue | $758.5M - $763.0M (19%-20% YoY Growth) | | Net Income per Diluted Share | $2.06 - $2.13 | | Non-GAAP Income per Diluted Share | $3.86 - $3.93 | | Adjusted EBITDA | $229.4M - $232.9M (23%-25% YoY Growth) | - The company does not provide a reconciliation for forward-looking non-GAAP financial measures to the most comparable GAAP measures, citing the impracticality of forecasting certain items without unreasonable effort[7](index=7&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's condensed consolidated balance sheets, income statements, and cash flow statements for the reported periods [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $1.11 billion as of March 31, 2025, with cash decreasing due to acquisitions and share repurchases Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $94,921 | $241,017 | | Total current assets | $251,835 | $381,907 | | Goodwill | $533,940 | $399,180 | | Intangible assets, net | $252,280 | $181,294 | | **Total assets** | **$1,109,050** | **$1,031,230** | | Total current liabilities | $153,424 | $146,684 | | **Total liabilities** | **$188,129** | **$176,540** | | **Total stockholders' equity** | **$920,921** | **$854,690** | [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) SPS Commerce reported Q1 2025 revenues of $181.5 million, up 21.4%, with significant increases in gross profit and net income Income Statement Summary for Q1 (in thousands) | Account | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Revenues | $181,549 | $149,576 | | Gross profit | $124,635 | $98,089 | | Income from operations | $25,956 | $15,403 | | **Net income** | **$22,196** | **$18,003** | | Diluted EPS | $0.58 | $0.48 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, operating cash flow increased, but overall cash decreased due to significant outflows from investing activities and share repurchases Cash Flow Summary for Q1 (in thousands) | Activity | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $39,983 | $34,064 | | Net cash used in investing activities | ($147,786) | ($2,945) | | Net cash used in financing activities | ($38,954) | ($14,889) | | **Net (decrease) increase in cash** | **($146,096)** | **$15,556** | | Cash at end of period | $94,921 | $234,637 | [Non-GAAP Financial Measures and Reconciliations](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section explains the company's use of non-GAAP financial measures and provides detailed reconciliations to their most comparable GAAP equivalents [Use and Definition of Non-GAAP Financial Measures](index=3&type=section&id=Use%20and%20Definition%20of%20Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted EBITDA and non-GAAP income per share for financial analysis, excluding non-cash and non-recurring items - Management uses non-GAAP measures like Adjusted EBITDA for comparing performance across periods, for planning, and for determining executive and senior management incentive compensation[13](index=13&type=chunk) - Adjusted EBITDA is defined as net income adjusted for income tax, depreciation, amortization, stock-based compensation, investment gains/losses, and other specific items[15](index=15&type=chunk) - Non-GAAP income per share adjusts net income for stock-based compensation, amortization of intangibles, and other items, along with their corresponding tax impacts[17](index=17&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=10&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) For Q1 2025, GAAP Net Income was reconciled to Non-GAAP Adjusted EBITDA and Non-GAAP Income, primarily adjusting for stock-based compensation and amortization Reconciliation of Net Income to Adjusted EBITDA for Q1 2025 (in thousands) | Description | Amount | | :--- | :--- | | **Net income (GAAP)** | **$22,196** | | Income tax expense | $5,967 | | Depreciation and amortization | $4,957 | | Amortization of intangible assets | $8,588 | | Stock-based compensation expense | $13,867 | | Other adjustments | ($1,199) | | **Adjusted EBITDA (Non-GAAP)** | **$54,373** | Reconciliation of Net Income to Non-GAAP Income for Q1 2025 (in thousands) | Description | Amount | | :--- | :--- | | **Net income (GAAP)** | **$22,196** | | Stock-based compensation expense | $13,867 | | Amortization of intangible assets | $8,588 | | Other adjustments | $647 | | Income tax effects of adjustments | ($7,285) | | **Non-GAAP income** | **$38,013** | | **Non-GAAP income per share, diluted** | **$1.00** |

Core Insights - SPS Commerce reported a 21% increase in revenue for Q1 2025, reaching $181.5 million compared to $149.6 million in Q1 2024, marking the 97th consecutive quarter of revenue growth [1][6][10] - Recurring revenue grew by 23% year-over-year, indicating strong demand for the company's cloud services in retail supply chain management [1][6] - The company maintains a positive outlook for the full year 2025, expecting revenue growth of 19% to 20% compared to 2024, with projected revenue between $758.5 million and $763.0 million [7][10] Financial Performance - Net income for Q1 2025 was $22.2 million, or $0.58 per diluted share, up from $18.0 million, or $0.48 per diluted share in Q1 2024 [6][23] - Non-GAAP income per diluted share increased to $1.00 from $0.86 in the same period last year [6][29] - Adjusted EBITDA rose by 22% to $54.4 million, reflecting strong operational performance [6][28] Market Position - SPS Commerce operates a network of over 50,000 suppliers and logistics companies, positioning itself uniquely in a total addressable market of $11 billion [3][10] - The company's solutions are designed to enhance collaboration across the global retail supply chain, underscoring the critical nature of its services [3][10] Guidance - For Q2 2025, revenue is expected to be between $184.5 million and $186.2 million, representing a year-over-year growth of 20% to 21% [7] - Full-year guidance includes a net income per diluted share forecast of $2.06 to $2.13, with non-GAAP income per diluted share expected to be between $3.86 and $3.93 [7]