SPS Commerce ((SPSC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call of SPS Commerce presented a nuanced sentiment, balancing between positive growth metrics and challenges within the revenue recovery business amidst ongoing market uncertainties. The company showcased solid growth figures, yet expressed caution for the upcoming quarters, highlighting a slower growth trajectory due to several external factors.
Revenue Growth
The third quarter saw SPS Commerce’s revenue grow by 16% to $189.9 million. This growth was bolstered by an 18% increase in recurring revenue and a 20% year-over-year rise in the fulfillment business. These figures underscore the company’s robust performance in its core areas despite broader market challenges.
Customer Growth
SPS Commerce experienced a net increase of 450 customers in the third quarter. This growth was largely driven by strong retail relationship management programs, indicating the company’s effective strategies in expanding its customer base.
Adjusted EBITDA Growth
The company reported a 25% increase in adjusted EBITDA, reaching $60.5 million compared to $48.4 million in the same quarter last year. This significant growth highlights SPS Commerce’s operational efficiency and profitability improvements.
Share Repurchase Program
In a move to enhance shareholder value, SPS Commerce repurchased $30 million of its shares. Additionally, the Board of Directors authorized a new program to repurchase up to $100 million of common stock, reflecting confidence in the company’s financial health.
Leadership Transition
Eduardo Rosini has been appointed as the new Chief Commercial Officer, effective December 1. With over 30 years of experience, Rosini’s leadership is anticipated to steer the company towards further commercial success.
Revenue Recovery Business Shortfall
The revenue recovery business fell short by approximately $3 million in Q3, attributed to unforeseen seasonality and changes in Amazon’s inventory policy. This shortfall highlights the challenges faced in adapting to external market shifts.
Reduced Q4 Revenue Expectations
For the fourth quarter, SPS Commerce has lowered its revenue guidance to between $192.7 million and $194.7 million, representing a 13% to 14% year-over-year growth. This adjustment accounts for continued impacts from the revenue recovery business and delayed retail enablement campaigns.
Market Challenges
The company continues to navigate macroeconomic uncertainties and spend scrutiny affecting its fulfillment customers. These challenges are indicative of the broader economic environment impacting business operations.
3P Customer Decline
There was a decline of approximately 150 in the 3P customer count during Q3, with potential for further declines in nonstrategic ancillary products. This trend reflects shifting customer preferences and market dynamics.
Forward-Looking Guidance
Despite the challenges, SPS Commerce provided a cautiously optimistic outlook for the future. For Q4 2025, the company expects revenue between $192.7 million and $194.7 million, with adjusted EBITDA between $58.8 million and $60.8 million. For the full year, revenue is projected to range from $751.6 million to $753.6 million, with an adjusted EBITDA growth of 23% to 24% over 2024. Looking further ahead, the company anticipates achieving 7% to 8% revenue growth in 2026, factoring in ongoing challenges and delayed retail enablement campaigns.
In summary, SPS Commerce’s earnings call reflected a balanced view of its current performance and future prospects. While the company demonstrated strong growth in key areas, it remains cautious about the future, considering external challenges. Investors and stakeholders will be keenly watching how SPS Commerce navigates these uncertainties in the coming quarters.