SPS Commerce's Q3 2025: Contradictions Emerge on Mid-Market ERP, Revenue Recovery Growth and Seasonality, and Retail Go-To-Market Programs

Date of Call: October 30, 2025

Financials Results

• Revenue: $189.9M, up 16% YOY

Guidance:

• Q4 2025 revenue expected $192.7M–$194.7M (~13%–14% YOY); adjusted EBITDA $58.8M–$60.8M; GAAP diluted EPS $0.53–$0.57; non‑GAAP diluted EPS $0.98–$1.02.
• Full‑year 2025 revenue $751.6M–$753.6M (~18% YOY); adjusted EBITDA $229.7M–$231.7M (~23%–24% YOY); non‑GAAP diluted EPS $4.10–$4.15.
• Initial 2026 outlook: organic revenue growth ~7%–8% (no acquisitions); adjusted EBITDA margin expansion of ~2 percentage points; long‑term aim remains high single‑digit organic growth and 2pp annual EBITDA margin expansion.
• Model ~30% effective tax rate on GAAP pretax earnings for remaining quarters; new $100M share repurchase authorization effective Dec 1.

Business Commentary:

* Revenue and Recurring Revenue Growth: - SPS Commerce reported a 16% increase in revenue to $189.9 million and a 18% growth in recurring revenue for Q3 2025. - The growth was attributed to strong performance in the fulfillment business, which grew 20% year-over-year, and increased net customer additions due to successful retail relationship management programs.

• Revenue Recovery Challenges:
• The revenue recovery business came in approximately $3 million below expectations in Q3.

• This was due to seasonality in the business, where Q2 benefited from higher-than-expected product shipment volumes related to Amazon Prime Day, and changes in Amazon's inventory capacity policy impacting shipments in Q3.

• Customer Growth and ARPU:

• SPS Commerce added 450 net new customers in Q3, contributing to a total of approximately 54,950 recurring revenue customers.

• The increase in customers was driven primarily by strong retail relationship management programs, with a focus on expanding ARPU through cross-selling opportunities.

• Leadership Changes and Strategic Direction:

• The company announced the retirement of its Chief Revenue Officer, Dan Juckniess, and the appointment of Eduardo Rosini as Chief Commercial Officer.

• This change aims to strengthen customer relationships, maximize customer life cycles, and align with global expansion efforts, with Eduardo's extensive experience in growth and global markets.

• Financial Guidance and Macro Environment:

• For the full year 2025, SPS Commerce expects revenue of $751.6 million to $753.6 million, representing 18% growth over 2024.
• Initial outlook for 2026 projects 7% to 8% revenue growth without future acquisitions, taking into account ongoing macroeconomic uncertainties impacting customer spending.

Sentiment Analysis:

Overall Tone: Neutral

• Management said 'SPS Commerce delivered solid third quarter results... revenue grew 16% to $189.9 million' while also noting 'revenue recovery came in approximately $3 million below our expectations.' They provided full‑year guidance and an initial 2026 outlook of ~7%–8% organic growth, balancing confidence with acknowledged near‑term headwinds.

Q&A:

• Question from Scott Berg (Needham & Company): So I've got a multipart revenue recovery question here. I guess we're all going to have the same questions on this one is, try to help us understand, I guess, when this became apparent in the quarter that the seasonality was a little bit different than you had expected Chad. And as I think about that business going forward, I thought the seasonality in that business was supposed to be stronger in Q4, but it looks like you're reducing your fourth quarter revenues by roughly $6 million, likely all attributed to that business. And then as the natural extension of that is how do we think about that business as impact on that fiscal '26 initial guidance Kim just gave?
  Response: Visibility into lighter Amazon 3P shipments emerged late in Q3, causing a revenue‑recovery shortfall realized after quarter close; management baked a similar impact into Q4 guidance.

• Question from Scott Berg (Needham & Company): All right. Understood. I guess from a follow-up question, I saw that Dan is leaving. Good luck, Dan. It's been fun working with you, is new Chief Commercial Officer coming in. I guess questions there revolve around what would you expect this new individual to do differently, if anything?
  Response: The new CCO will focus on maximizing the full customer lifecycle to drive ARPU/expansion, advance channel/mid‑market strategies and support global growth.

• Question from Christopher Quintero (Morgan Stanley): A lot of moving pieces here. We just went over the revenue recovery piece. But maybe on the organic side, you all called out invoice scrutiny and some of those retail go-to-market programs getting pushed into next year. So just to clarify, are those incremental impacts that you're seeing this quarter versus the last quarter? And why are some of those projects getting pushed out into next year?
  Response: Those are timing shifts—not cancellations—many retail enablement programs moved from Q4 into early 2026 due to holiday timing; invoice scrutiny persists and has been factored into the updated guidance.

• Question from Christopher Quintero (Morgan Stanley): Got it. Okay. So some of the retailers maybe got a little bit over their skis on their expectations for Q4, I guess. As my follow-up, maybe on the network-led growth motion. I know we talked a lot about it at Investor Day, but is there anything you all need to do from an investment standpoint to make that successful? And is there any kind of early evidence that you're seeing how that's progressing or any kind of early proof points?
  Response: No material incremental spend—focused attention and existing investments enabled network‑triggered cross‑sell (e.g., identifying revenue‑recovery candidates), with early pipeline/proof points showing success.

• Question from Matthew VanVliet (Cantor Fitzgerald): Obviously, across a lot of the software landscape on the application layer, there's a concern that toolkits from various AI tools and LLM providers are enabling more companies to look internally to maybe build functionality that they don't currently have rather than go out and find a vendor to do that. Is that at all being mentioned by some of your prospects as to something they're at least exploring and delaying deals? Or any other thoughts there that maybe your stronghold on this position in the market could be cracking a little bit as customers see the -- I guess, the utility of buying something prebuilt isn't as high as it's been for some time?
  Response: Customers are not signaling AI will replace SPS—network rules, retailer requirements and proprietary data are hard to replicate, and SPS's connection‑based pricing is durable and complementary to customer AI plans.

• Question from Matthew VanVliet (Cantor Fitzgerald): All right. Helpful. And then I guess as you look towards kind of out to next year and the initial guidance you gave with a little bit of a slowdown, at least relative to where we were expecting, does that change the appetite or the strategy around M&A? And will you potentially look for more tuck-ins that offer a broader set of solutions to appeal to more customers to try to revamp growth? Or anything on that front that you think will be impacted by what's going on today and kind of what the expectations are over the next several quarters?
  Response: M&A philosophy unchanged—remain active across EDI consolidation, portfolio/solution‑expanding tuck‑ins and selective geographic deals (with geographic expansion a lower near‑term priority).

• Question from George Kurosawa (Citigroup): I wanted to dig in on some of the spend scrutiny you called out. This is something you mentioned last quarter as well. Is it right to think of that as being tariff-driven primarily? And then if you could just compare what you saw in Q3 versus Q2. At the time, it seemed like some of that was sort of ring-fenced within your mid-market customers. Have you seen any -- is it more that, that's customer cohort has seen incremental weakness? Or has it maybe spread a little further across the customer base, if that makes sense?
  Response: Spend scrutiny is mostly on the supplier side (tariffs contribute but aren't the sole cause); suppliers absorbing costs seek internal savings—trend picked up in Q2 and continued into Q3.

• Question from George Kurosawa (Citigroup): Okay. Great. And then as a follow-up on that line of thinking in the revenue recovery space, is there any way you can help us think through the performance of maybe the SupplyPike assets versus Carbon6, just to get a better feel for if there's anything sort of underlying happening in this market or if this is just exclusively a function of Amazon-specific dynamics?
  Response: Q3 headwinds were concentrated in Carbon6's 3P segment tied to Amazon shipment variability; 1P performance (and SupplyPike exposure) remains stable—combined GTM and dual pricing models support cross‑sell.

• Question from J. Lane (Stifel): Kim, maybe if we look to the 7% to 8% outlook you have for '26 initially here, can you just go into the assumptions on the macro environment that are embedded in that? Is that assuming any sort of normalization or improvement in the environment that you're outlining for 4Q? Anything you can offer there?
  Response: The 7%–8% 2026 outlook is a mid‑case that incorporates 2025 dynamics (timing shifts and invoice scrutiny) while reflecting optimism; it's an organic growth estimate without acquisitions.

• Question from J. Lane (Stifel): Got it. And Chad, you just alluded to the new go-to-market team that's combined here for revenue recovery. Can you just talk about how quickly you anticipate that you'll start seeing some of the benefits from that new structure? Is that something that can impact 4Q? Or is it more of a couple of quarters for the team to get its feet underneath it and start to execute?
  Response: Combined GTM shows early pipeline and customer‑acquisition traction, but revenue impacts will be limited in Q4; meaningful benefits are expected to materialize through 2026.

• Question from Timothy Greaves (Loop Capital): This is Tim Greaves on for Mark. I guess I want to ask around -- with leveraging your customer change events such as ERP and WMS replacements. Could you provide some directional insight on activity levels you observed there with ERP and WMS replacements, like anything upgrades over the past quarter or two?
  Response: Change‑event new customers are mostly ERP‑driven; we are seeing softness in mid‑market ERP replacements (Sage, Microsoft, NetSuite), which slows new‑logo conversion from those events.

• Question from Jackson Bogli (William Blair): This is Jackson Bogli on for Dylan Becker. I was wondering if you could go into the new logo side of the equation here. We saw a little bit of a step-up in the quarter. I was just curious to get your thoughts on how we should think about the new logo momentum going into 2026 despite enablement campaigns getting pushed out, but maybe how you're feeling about going into 2026 with some new logo momentum behind you?
  Response: Customer adds YTD accelerated (1,100 ex‑M&A through Q3 vs 300 last year ex‑M&A); Q4 net adds likely flat/slightly down due to timing; 2026 growth will be driven more by ARPU expansion than new‑logo growth.

• Question from Jackson Bogli (William Blair): Great. That's helpful. And then one follow-up, if I could. We saw continued margin expansion in the quarter. And I was curious, we've talked about AI a little bit in this call, but what areas are you guys looking to really lean into to drive that further operating leverage in line with your long-term model and maybe how that leads to better network monetization and that AI differentiation building that competitive moat that you guys have?
  Response: Margin expansion has been driven by onboarding efficiencies improving gross margin; further leverage will come from scaling S&M/G&A efficiency and applying AI to sales/marketing/customer‑success workflows.

• Question from Joseph Vruwink (Baird): Carbon6 and SupplyPike, when they were originally announced, I think they added to $65 million in revenue in fiscal 2025, bringing a faster rate of growth with it. If I annualize this $3 million to $12 million for a year, it's taking off a double-digit proportion from those businesses. Is that the right way to think of it? And then if I do that into next year, and I'm subtracting off their elevated or what was an elevated growth rate, can you maybe talk about the embedded assumption for revenue recovery within that 7% to 8%? It maybe seems like that side of the business is in line to below the 7% to 8% and the SBS fulfillment business is still kind of above there, but I want to be sure on all that analysis.
  Response: Revenue recovery finished ~10% below original 2025 expectations; management still expects revenue‑recovery to grow faster than core in 2026 as combined GTM enables cross‑sell.

• Question from Joseph Vruwink (Baird): Okay. That's helpful. And then going back to the customer count, if my math is right, it looks like the 3P side of the count is down maybe 500 logos or 5% since the start of the year. One question, how much of that is churn that you're okay with going back to Chad's comments of you're inheriting a business, but now you're looking to refine it and optimize it for what's going to be more enduring for you going forward? And then the silver lining of this question is that if you add the 500 logos back to those 1,100 number you were talking about earlier at the corporate level, 1,600 added for legacy SPS Commerce is a pretty good number. And I wanted to just ask kind of where that's being driven within the environment of spend through the need.
  Response: Q3 saw ~150 3P customer decline (Carbon6 added ~8,500 3P historically); 3P has higher churn and lower ARPU and some nonstrategic offerings are being trimmed—expect modest ongoing 3P declines while 1P customer adds remain stronger.

Contradiction Point 1

Mid-Market ERP Change Events and New Customer Acquisition

It reflects differing perspectives on the impact of mid-market ERP change events and new customer acquisition, which are crucial for revenue growth and market share.

Is spending scrutiny primarily driven by tariffs? Is it more prominent among mid-market customers? - George Kurosawa (Citigroup Inc., Research Division)

2025Q3: Mid-market ERP purchases are delayed, affecting new customer acquisition. - Chad Collins(CEO)

Are there behavioral differences among upmarket, mid-market, and SMB suppliers? Are sales cycles affected? - George Michael Kurosawa (Citigroup Inc., Research Division)

2025Q2: Mid-market ERP purchases are delayed, affecting new customer acquisition. - Chadwick Collins(CEO)

Contradiction Point 2

Revenue Recovery Growth Expectations

It involves differing expectations for the growth rate of the revenue recovery business, which plays a significant role in overall company growth.

What are the revenue recovery assumptions in the 7-8% growth outlook? - Joseph Vruwink (Robert W. Baird & Co. Incorporated, Research Division)

2025Q3: Revenue recovery growth expected faster than core business next year. - Kimberly Nelson(CFO)

How do you evaluate growth potential in product areas like fulfillment and analytics, and what steps are needed to achieve high single-digit growth? - Scott Randolph Berg (Needham & Company, LLC)

2025Q2: Revenue recovery has opportunities for cross-selling and increased adoption. - Kimberly K. Nelson(CFO)

Contradiction Point 3

Revenue Recovery Business Seasonality

It highlights changes in the expected revenue recovery business seasonality, which could impact financial forecasts and investor expectations.

Could you clarify when seasonality in the revenue recovery business became evident and how this affects Q4 revenue and Fiscal '26 initial guidance? - Scott Berg (Needham & Company, LLC, Research Division)

2025Q3: Late in Q3, we noted reduced shipments to Amazon warehouses, which correlated to lower-than-expected revenue. The shipment visibility became apparent late in Q3. - Chad Collins(CEO)

Are customer conversations and go-to-market efforts for this new business segment providing confidence or clarity regarding cross-sell potential for these solutions moving forward? - Parker Lane (Stifel)

2025Q1: We've talked about growing the revenue recovery business. It's a growing revenue stream for us. Revenue recovery revenue in Q1 was $9.1 million, up 38% year-over-year. This is part of the shift in the mix in our business. - Chad Collins(CEO)

Contradiction Point 4

Invoice Scrutiny and Retail Go-to-Market Programs

It involves changes in expectations regarding invoice scrutiny and retail go-to-market programs, which could impact customer acquisition and revenue growth.

Are the impacts from invoice scrutiny and retail go-to-market programs incremental to last quarter? Why are some projects being pushed to next year? - Christopher Quintero (Morgan Stanley, Research Division)

2025Q3: We are experiencing continued pushback from our retailers due to invoice scrutiny and delayed purchases, which is impacting both our retailer relationship management programs and -- and our go-to-market efforts. - Kimberly Nelson(CFO)

What is the embedded assumption for revenue recovery in the 7% to 8% growth outlook? - Joe Vruwink (Robert W. Baird & Co. Incorporated, Research Division)

2025Q1: We expect this revenue recovery business to be a significant driver of customer acquisition growth in the quarters ahead and will be especially important in the second half of the year as we expand the scope of our go-to-market efforts. - Kimberly Nelson(CFO)