SPSC

• Core Network and Strategic Focus

  • SPS Commerce operates a 25-year-old massive cloud-based interconnected retail supply chain network, including tens of thousands of suppliers, 3,500 buying organizations, over 2,000 logistics providers, and 400+ technology partners across North America
  • The 3P revenue recovery divestiture sharpens focus on 1P suppliers with multi-retailer trading relationships, who have higher overlap with SPS's core product portfolio of fulfillment, 1P revenue recovery, and analytics
  • Proprietary network intelligence from trading activity, transaction patterns, and compliance rules powers SPS's new AI agent, Max

• AI Product Development (Max)

  • Max delivers tangible, immediate ROI for beta customers, including 90% weekly time savings on overdue order management for Branch Furniture, catching a $290,000 invoice failure, identifying 100 stalled dropship orders, and flagging $70,000 in unacknowledged purchase orders
  • The full launch of Max to all SPS fulfillment customers is expected by the end of summer 2026; additional AI products will launch at scale later in 2026
  • Max chat interface usage drives exploration of advanced features, defining the path to future AI monetization; the company's AI strategy is built on two pillars: agent-assisted customer onboarding/functions and agentification of internal operations
  • The first fully AI-powered customer onboarding has been completed, reducing onboarding time from days to minutes for simple use cases; work continues to speed up complex ERP integration onboarding

• Other Core Product Updates

  • Retained 1P revenue recovery has delivered strong customer results: Chosen Foods recovered ~30% of outstanding deductions (hundred of thousands of dollars), Owlette recovered $1.4 million in 6 months, and Serta Simmons Bedding saved $200,000 challenging a post-audit
  • The analytics business has been migrated to a new enhanced platform, offering improved user experience, faster time to insight, support for larger data volumes, and a foundation for future AI predictive capabilities; early customer feedback is positive, driving expansion to additional retail partners

• The 3P divestiture reduces full year 2026 guidance revenue by approximately $10.5 million in the second half of 2026, and is expected to be neutral to adjusted EBITDA for the second half
• Q3 2026 guidance: revenue of $196.3 million to $198.3 million; adjusted EBITDA of $67.4 million to $69.4 million; fully diluted GAAP EPS of $0.72 to $0.76; non-GAAP diluted EPS of $1.20 to $1.23
• Full year 2026 guidance: revenue of $788.4 million to $793.4 million, representing ~5% year-over-year growth at the midpoint. Excluding the divestiture impact, core business revenue is expected to grow high single digits
• Full year 2026 adjusted EBITDA guidance is $264.6 million to $269.1 million, with an adjusted EBITDA margin of 34% at the midpoint, an increase of 300 basis points compared to full year 2025
• Full year 2026 fully diluted GAAP EPS guidance is $2.24 to $2.33; non-GAAP diluted EPS guidance is $4.84 to $4.93
• Management expects revenue acceleration in Q4 2026 driven by improving gross retention rates and momentum from retail enablement programs in the back half

The company completed the sale of its 3P revenue recovery business in Q2 2026, which had approximately 7,300 customers. After divestiture, total recurring revenue customers were approximately 46,650. Total company revenue for Q2 2026 was $197.8 million, a 6% year-over-year increase. Recurring revenue also grew 6% year-over-year. Core business (excluding the divested 3P segment) grew in the high single digits, driven by accelerating 1P customer ARPU growth from upsell and cross-sell momentum. Adjusted EBITDA for the total company increased to $66.6 million. Free cash flow for Q2 2026 was $57.4 million, with trailing 12-month free cash flow reaching $198.7 million, up 40% year-over-year. Retained 1P revenue recovery, fulfillment, and analytics segments make up 100% of current revenue contribution after divestiture.

• Forward-looking statements, including AI product development and financial guidance, are inherently uncertain, and actual results may differ materially due to a range of risk factors outlined in the company's SEC filings
• Tariff uncertainty and rising fuel/freight costs are monitored as potential macro risks, though they are not currently cited as material headwinds by customers
• ERP migration activity has been slower than expected in the medium to large market in 2025 and 2026 to date
• AI development and monetization are still in early stages, with pricing, tiered bundling, and adoption timelines still being finalized
• Customer count is expected to be flat to slightly positive for full year 2026, with sequential decline driven by timing of low-ARPU retail enablement programs

Q: Why did SPS choose to divest the 3P revenue recovery business at this point, given the positive long-term outlook for the overall revenue recovery category? / A: Management remains confident in revenue recovery overall, especially for 1P wholesale suppliers that sell to multiple retailers. The 3P business primarily served Amazon marketplace sellers, with very little customer or product overlap with SPS's core portfolio. Combined with Amazon policy changes for 3P sellers and the 3P business's take-rate revenue model, the 1P segment is far more aligned with SPS's ideal customer profile and strategic focus. (219 character)

Q: What is the strategy for monetizing Max, and when can we expect paid agent bundles to launch? / A: Max Chat will be included in standard fulfillment customer subscriptions as a gateway to the AI platform. Paid monetization will come from tiered bundled subscriptions for autonomous, self-acting agents that automate detection and resolution of supply chain anomalies, a capability customers have already shown demand for through Max Chat usage. Management expects to begin selling these paid agent bundles by late Q4 2026, with revenue beginning to flow this year. Initial agents will target larger, more complex customers, with expansion to smaller customers over time. (342 character)

Q: Why didn't the full Q2 EBITDA beat flow through to full year guidance? What factors are holding back the upward EBITDA revision? / A: Some Q2 expenses shifted into the back half of 2026, creating a natural timing pull. Additionally, management chose to build flexibility into guidance to accommodate planned incremental investment in AI development for Max and internal agent projects, while maintaining operational prudence. Structurally, the business has already delivered meaningful margin expansion from economies of scale and operational efficiency gains, and management expects margin trajectory to remain positive into 2027. (348 character)

Q: Why is SPS uniquely positioned to deliver AI supply chain agents compared to other vendors? / A: SPS's 25-year-old network gives it three unique competitive advantages. First, SPS hosts more aggregated customer supply chain data on its network than many customers hold in their own ERPs. Second, SPS can see anonymized macro trading patterns across all major retailers, to identify broad compliance changes that impact suppliers. Most critically, SPS has a deep proprietary database of retailer and distributor supply chain compliance expectations that is not publicly available, which is required to train accurate, effective supply chain AI agents. (367 character)