SPS Commerce, Inc. Q4 FY2025 earnings call

• Fourth quarter of 2025 marks 100th consecutive quarter of revenue growth. Full year 2025 revenue was $751.5M, up 18%; recurring revenue up 20% with fulfillment growth 22%.
• Acquired Carbon6 in 2025 to extend network reach in revenue recovery solutions. Highlighted customers using Revenue Recovery like Allstar Innovations, CyberPower Systems, etc.
• Introduced MAX agentic AI capabilities embedded in the network, with initial features in fulfillment including chat, monitor, and agent-to-agent communication.
• Highlighted long-standing customer partnerships such as Wolverine Worldwide, Trader Joe's, Gemplers, Petco, etc.

For the full year 2025, revenue grew 18% to $751.5 million. Recurring revenue grew 20%, driven by fulfillment growth of 22% year-over-year. Revenue recovery represents a $750 million addressable market across 1P U.S. sellers and a significant cross-selling opportunity within the network.

• First quarter 2026: Revenue expected $191.6M - $193.6M (6% growth at midpoint), adjusted EBITDA $55.5M - $57.5M, fully diluted earnings per share $0.46 - $0.49, non-GAAP diluted income per share $0.95 - $0.99.
• Full year 2026: Revenue expected $798.5M - $806.9M (7% growth at midpoint), adjusted EBITDA $261M - $265.5M (13-15% growth over 2025), fully diluted earnings per share $2.50 - $2.58, non-GAAP diluted income per share $4.42 - $4.50.

• Macro-economic challenges and tariff-related uncertainty leading to spend scrutiny and delayed purchase decisions.
• Amazon policy changes impacting Revenue Recovery's take rate model expectations.
• Higher churn rate in 3P customer segment compared to 1P.

Q: Thanks for taking my questions. Before I get to those, I guess, Kim, it's been a really fun ride. I don't know why now is the right time. I look forward to catching up on that later. But just know that you will be missed. Getting to the quarter here, Kim, you talked about a challenging macro environment that persisted in the fourth quarter. When we look at the numbers, I think we'd all agree to come in maybe a touch weaker, although within guidance, than what we are used to and accustomed to. What were some of the challenges in the quarter that might have maybe impacted your expectations relative to where the numbers kind of ended up?

A: Sure, Scott. So as we established our expectations for Q4 going back a quarter ago, as you can imagine, there were different scenarios or parameters of how that could play out. To your point, on the top line, we ended up at the lower end of our revenue guidance. We ended up at the higher end of our adjusted EBITDA guidance. So specifically on the revenue side, what we saw in Q4 was a continuation of headwinds that we've spoken about in the past. Some of those headwinds with our existing customers, just more challenging time for them, invoice scrutiny, uncertainty, et cetera. And then specific on the Revenue Recovery side, we actually -- there's nice demand there, so the demand is strong. However, with the take rate model that we have there, we did see more to the lower end of what our expectation would be, along with the Amazon policy changes that have occurred.

Q: Congrats on the retirement, Kim. I guess as we look forward in terms of reviving growth here to maybe levels you're more expecting, what maybe additional resources or investments do you think can be made and drive sort of above-average returns, maybe even pushing beyond some of the community events? Anything that you're already working on and expect to be rolling out here shortly that can help drive the top line performance?

A: Sure. Yes. So we do expect that for increasing customer count over time, our unique go-to-market with the retail enablement programs will continue to drive a lot of that. And we continue to invest in that area and refine those approaches there. In addition to that, you may have noticed that we brought on a new Chief Marketing Officer and we're advancing the maturity of our marketing capabilities as a way to, one, attract new customers in ways outside the retail enablement program. So that would be incremental to what we already get with the retail programs, as well as market back to our existing customers, highlighting the broad product portfolio and the opportunity that we have with existing customers, both for the cross-sell opportunity for Analytics, Revenue Recovery, but also the further penetration within Fulfillment, adding more trading partners. So 2025 was a tough year in our end market. We did see a lot of challenges. And the main driver our customers were telling us about was global trade. So as we sort of lap some of those effects in 2026, have more of the cross-selling momentum from the products going forward, we expect all these will continue to drive long-term growth for SPS.