SPS(SPSC) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $187.4 million, representing a 22% increase year-over-year, marking the 98th consecutive quarter of revenue growth [14] - Recurring revenue grew 24% year-over-year, with approximately 54,500 recurring revenue customers and an average revenue per user (ARPU) of approximately $13,200 [14] - Adjusted EBITDA increased by 27% to $56.1 million compared to $44.2 million in Q2 of the previous year [15] - Total cash and investments at the end of the quarter were $108 million, with $20 million in share repurchases [15] Business Line Data and Key Metrics Changes - The company’s product portfolio supports stronger collaboration between trading partners, which is expected to unlock greater efficiency and cost savings [7] - The revenue recovery solutions acquired are beginning to deliver value to fulfillment customers, with a focus on cross-selling opportunities [11] Market Data and Key Metrics Changes - Demand remains strong on the retail side, driven by retailers realizing the value of digitized connections to suppliers [18] - Supplier dynamics are impacted by heightened spend scrutiny and delayed purchasing decisions, particularly in the U.S. market [19][60] Company Strategy and Development Direction - The company aims to empower participants in the retail network to work better together while building resilience against future challenges [13] - The strategy includes a disciplined M&A approach to enhance growth and strengthen market leadership [19] - The company expects to expand adjusted EBITDA margin by two percentage points annually, driven by improvements in gross margin and operational efficiencies [20] Management's Comments on Operating Environment and Future Outlook - Management noted that the current macro environment has led to increased scrutiny on spending among suppliers, affecting purchasing decisions [28] - The company remains optimistic about returning to normal conditions as global trade dynamics stabilize [28] - Beyond 2025, the company expects revenue growth rates to be at least in the high single digits, excluding future acquisitions [19] Other Important Information - The company is focused on improving customer experience and onboarding efficiency, which is expected to enhance gross margin [52] - The integration of acquired companies is progressing well, with a focus on consolidating go-to-market teams for better market reach [45] Q&A Session Summary Question: What is the expected organic revenue growth rate post-2025? - Management indicated that the high single digits growth rate considers the current product portfolio and community enablement activity [22][23] Question: How has the macro environment affected customer behavior? - Management observed that while retailer activity remains strong, suppliers are focusing on cost-saving measures, leading to slower deal cycles [26][28] Question: Are there differences in behavior between larger and smaller customers? - There is more pressure in the mid-market segment, with larger enterprise customers showing healthier demand [32] Question: What is the outlook for adjusted EBITDA margin? - The expectation is for at least a two percentage point increase annually, excluding acquisitions [61] Question: How is the company addressing the integration of acquired products? - The integration of go-to-market teams from recent acquisitions is ongoing, with a focus on cross-selling opportunities [45] Question: What is the health of the SMB customer base? - Customer churn remains consistent, with no significant increase in cancellations, but there is pressure on existing customers to reduce costs [70]