Core Thesis - SPS Commerce, Inc. is experiencing a reassessment of its value following a significant stock decline of approximately 60%, raising questions about its structural integrity versus being out of favor [2] Company Overview - SPS Commerce, Inc. provides cloud-based supply chain management solutions in the United States, connecting retailers, suppliers, and logistics providers through standardized document exchange [2][3] - The company has historically been viewed as a small-cap compounder with consistent revenue growth, margin expansion, and high customer retention, justifying a premium valuation often exceeding 40x EBITDA [2] Business Model - SPS operates a cloud-based retail supply chain platform that facilitates automated document exchange, maintaining a subscription-based model with low churn and recurring revenue [3] - The company remains protocol-agnostic, embedding itself into established workflows to meet the demands of retailers and suppliers [3] Recent Developments - A strategic misstep occurred with the acquisition of Carbon6, aimed at entering the Amazon seller ecosystem, which has raised concerns about management judgment due to subsequent unfavorable changes in Amazon's marketplace rules [4] - Despite the acquisition not threatening the balance sheet, it highlights a dependency on Amazon's stability, which could impact future performance [4] Financial Performance - SPS has delivered a 19% revenue CAGR over the past five years, with modest margin expansion and a clean balance sheet featuring net cash [5] - The company's valuation has compressed sharply to around 12x EV/EBITDA, contrasting with its previous premium multiples [5] Investor Sentiment - The involvement of activist investor Anson, advocating for a sale to unlock value, introduces uncertainty for long-term investors who previously viewed SPS as a durable growth compounder [5]