SPS Commerce Beats Q2 Estimates, But Revenue Growth Is A Concern

Company Overview - SPS Commerce, Inc. (NASDAQ:SPSC) reported Q2 2024 financial results, surpassing revenue and earnings consensus estimates [2] - The company operates in the supply chain software market, focusing on the supply chain process for retailers [3] - SPS Commerce's primary revenue source is its fulfillment software system [3] Financial Performance - Over the trailing twelve months, free cash flow was $121.5 million, with capital expenditures at $18.6 million [16] - The company ended the quarter with $271.8 million in cash and equivalents, and no debt [29] - Earnings per share (diluted) have trended higher in recent quarters due to improving revenue growth [27] Market Insights - The supply chain management software market was valued at $27.2 billion in 2022 and is projected to reach $85.3 billion by 2033, representing a CAGR of 11.1% [4] - The growth is driven by the need for higher supply chain visibility, exacerbated by disruptions from the COVID-19 pandemic and geopolitical events [4] Competitive Landscape - Major competitors in the industry include Manhattan Associates, Epicor Software, and JDA Software Group [10] - Compared to Manhattan Associates, SPS Commerce shows a lower forward EV/Sales multiple of 12.0x against a median of 15.1x for its peers [17] Investment Outlook - The company announced a $100 million stock repurchase program, effective August 23, 2024, indicating confidence in its cash flow [18] - Despite showing revenue growth strength, concerns exist regarding the valuation of SPSC, especially as its revenue growth appears to be declining [35] - The market is valuing SPSC at a forward EV/Sales multiple of approximately 12.0x, with an estimated NTM revenue growth rate of 16.7% [18]