SPSC

Image source: The Motley Fool. Thursday, July 30, 2026, at 4:30 p.m. ET Investor Relations - Irmina Blaszczyk Chief Executive Officer - Chad Collins Executive Vice President and Chief Financial Officer - Joseph Del Preto Need a quote from a Motley Fool analyst? Email [email protected] Operator: Good day, and welcome to the SPS Commerce second-quarter 2026 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Irmina Blaszczyk, Investor Relations for SPS Commerce. Please go ahead. Irmina Blaszczyk: Good afternoon, everyone. And thank you for joining us on SPS Commerce second-quarter 2026 conference call. We will make certain statements today, including with respect to our expected financial results, go-to-market strategy and efforts designed to increase our traction and penetration with retailers and other customers. These statements are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of the call, and we undertake no obligation to publicly update and revise any forward-looking statements whether as a result of new information, future events or otherwise. Please refer to our SEC filings, specifically our Form 10-K, as well as our financial results press release for a more detailed description of the risks factors that may affect our results. These documents are available at our website, spscommerce.com, and at the SEC's website, sec.gov. In addition, we are providing a historical data sheet for easy reference on the Investor Relations section of our website, spscommerce.com. During our call today, we will discuss adjusted EBITDA financial measures and non-GAAP income per share. In our press release and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP financial measures, including reconciliations of these measures with comparable GAAP measures. And with that, I will turn the call over to Chad. Chad Collins: Thanks, Irmina, and good afternoon, everyone. Thank you for joining us today. At SPS Commerce, our foundation has always been our cloud-based supply chain network. Today, our network stands as a massive, interconnected retail ecosystem of tens of thousands of suppliers and 3,500 buying organizations. Including all the major retailers and distributors in North America. We work with more than 2,000 logistics providers and over 400 technology partners. Which enables us to integrate our network with all of our customer supply chain and business systems. We are protocol agnostic and enable fulfillment models and channels with grade-A security certifications. That foundation makes everything that follows possible and represents our AI use case on our network. The SPS Commerce network took over 25 years to get to where it is today. Through its network and scale, we are building partnerships, supporting evolving supply chains, helping our customers grow. Having recently divested the 3P revenue recovery business, we have sharpened our focus on strategic relationships with 1P suppliers who operate multi-retailer trading relationships and benefit from our intelligent supply chain and portfolio solutions. As the network expands, we continue to capture proprietary intelligence from trading partner activity. Transaction patterns, digital specifications, and compliance rules. Strengthening the supply chain rules engine that powers MAX, SPS's AI agent. By leveraging SPS's network intelligence, within everyday workflows, Max enables customers to interact with their supply chains in a more intuitive, proactive, and connected way. Users can instantly compare business requirements and business performance between major retailers like Target and Costco. With proactive monitoring, Max serves as a 24/7 extension of a customer's team, detecting anomalies and flagging critical business errors. Max puts the expertise of the SPS network at the customer's fingertips, to instantly diagnose business issues and determine actionable solutions. Shortening the time it takes to address risks in trading partner relationships. For example, Branch Furniture is a fast-growing wholesale brand selling to major retailers like Williams-Sonoma, Lumens, and Office Depot. They rely on SPS Commerce to manage order flows across multiple channels and have already experienced significant efficiencies using MAX to resolve order issues in minutes as opposed to days. For 1 of their key retail partners, Max helped achieve 90% weekly time savings in managing overdue orders. Other customers have recognized tangible results since MAX's beta-phase launch. Max successfully caught a $290,000 invoice failure due to an incorrect UPC code. It identified 100 stalled dropship orders for an outdoor brand. It flagged $70,000 in unacknowledged purchase orders for a food manufacturer. Delivering this immediate ROI, MAX is quickly becoming the default starting point for customers inside the SPS user interface. They trust Max's proprietary supply chain expertise, and they are increasingly allowing it to take automated actions on their behalf. Continually improving operational efficiencies with their trading partners. By pairing SPS' network intelligence with our Agentic capabilities, we completed our first AI-powered customer onboarding, including pre-sale contacts and account provisioning. We are working toward a future where Agentic technology can engage a new customer immediately after a deal closes with more of the onboarding processes shifting to AI as we continue to reduce the time it takes for customers to transact with their trading partners. Agent-assisted customer functions and onboarding as well as the agentification of our internal operations, are the 2 pillars in our agent strategy already in motion at SPS. We are also exploring new AI-powered use cases and products, which we believe will drive ARPU expansion and increase the size of our addressable market. The initial launch of Max to all SPS Fulfillment customers is expected by the end of the summer. And we plan to launch additional products at scale later this year. 1 of the key learnings from our beta program is that users of MAX through the chat interface are more likely to explore advanced MAX features and we expect this usage trend will define the path to monetization of our AI solutions. We are excited about these AI capabilities and the immense value they will bring to our network. And so are our customers. In a recent study of SPS customers, we quantified and validated the value and impact SPS delivers to their business. 83% of customers said that the data in the SPS network improved their AI readiness. 87% cited improved scalability. And 100% of the surveyed customers said that without the SPS network, they would need more headcount, more tools, and more time, or in some cases, simply could not operate at the scale they do today. They see SPS as a strategic partner in navigating increasing supply chain complexity, while they expand their business and trading network. Chosen Foods, a premier food and beverage company, best known as America's No. 1 avocado oil brand, needed a supply chain that could keep pace with growth across their US and Canadian operations. Over their decade-long relationship with SPS Commerce, they have scaled from 1 trading partner to dozens of customers, multiple 3PLs, and a growing supplier network. To prepare for their next phase of growth, Chosen Foods migrated to a new ERP and trusted SPS to manage the transition. Through a fully integrated Acumatica deployment, SPS Commerce delivered a unified approach across their order-to-cash, procure-to-pay, and revenue recovery workflows ahead of schedule and with zero operational downtime. Crucially, with growing deduction complexities across major retailers like Walmart, Amazon, and Target, SPS's automated dispute management successfully recovered approximately 30% of outstanding deductions. Which represents hundreds of thousands of dollars while helping Chosen Foods identify why these deductions occurred and how to prevent them. Other customers realizing real ROI from SPS Revenue Recovery include Owlet, a leader in infant health technology, which recovered $1.4 million within 6 months of using the solution, including 100% recovery on a recent settlement totaling $423,000. Serta Simmons Bedding, one of North America's largest bedding manufacturers, recovered $200,000 by successfully challenging a post audit with a large retailer. Turning to our analytics business. SPS's new analytics solution is now running on a new, enhanced platform that delivers significant gains in both power and scale. This new platform brings an improved user experience, while enabling faster time to insight so customers can move seamlessly from data to decisions. It expands what is possible for customers supporting growing data volumes, broader use cases, and future AI-predictive capabilities. With these platform enhancements, our analytics solution helps customers protect revenue, margin, and shelf space by catching risks early while uncovering new growth opportunities across products, customers, markets, and distribution. It also gives teams the agility and efficiency to act sooner, align inventory, forecasting, and planning while strengthening retailer relationships with a single view of performance. RuffleButts, a children's clothing company based in Texas, is leveraging the platform to gain significantly better sell-through visibility into 1 of the nation's largest retailers. Capturing critical insights from data across more than 400 retail locations and the retailer's e-commerce channel. To sustain this momentum, automated data feeds and scheduled reporting will drive ongoing day-to-day analysis. Early feedback from RuffleButts on the platform's granular product and location insights has been highly positive prompting this supplier to consider adding another major retailer to their reporting. In summary, SPS' customer success stories demonstrate that navigating today's increasingly complex supply chain requires an intelligent network. As businesses continue to expand across technology platforms, and connect with new trading partners, they view SPS Commerce as a vital partner for scaling their operations and improving AI readiness. No other company can match the unique combination of AI capabilities, 25 years of proprietary data, deep domain expertise, and an expansive network access to drive this kind of tangible value and collaboration that SPS offers today. With that, I will turn it over to Joe to discuss our financials. Joseph Del Preto: Thank you, Chad, and welcome, everyone. Joseph Del Preto: We reported a strong second quarter of 2026. SPS Commerce's core business, excluding the divested 3P revenue recovery business, grew in the high single digits. Driven by the acceleration of 1P customer ARPU growth resulting from continued upsell and cross-sell momentum. On June 30, we announced the sale of the 3P revenue recovery business. We believe this divestiture sharpens our focus on the strategic opportunity with 1P suppliers, who operate multi-retailer trading relationships, and are positioned to benefit from our intelligent supply chain network and purchase additional solutions like fulfillment, revenue recovery, and analytics. SPS Commerce received a cash payment of $9.5 million at closing, and we incurred a loss on sale of $23.5 million in Q2 2026 in connection with the transaction. Now let's review our Q2 results. Revenue was $198 million, a 6% increase over Q2 of last year. Recurring revenue grew 6% year-over-year. As a result of the sale of the 3P revenue recovery business, and its approximately 7,300 customers, the total number of recurring revenue customers in Q2 was approximately 46,600 and an average revenue per customer of $15,100. In Q2, ARPU skewed higher due to the divestiture's impact on our ARPU calculation. Which used an average of beginning and end of quarter customer counts. Because the quarter-end divestiture significantly reduced our final customer count, Q2 ARPU reflects full period revenue divided by a lower customer base. Adjusted EBITDA increased to $66.6 million highlighting the health of our business as we scale. Strong operational execution, the realization of past investments and benefits of improving process efficiencies. Turning to liquidity and cash flow. We ended the quarter with total cash and cash equivalents of $173 million. Free cash flow for the quarter was $57.4 million bringing our trailing 12-month free cash flow to $198.7 million up 40% year-over-year. In Q2 2026, we deployed nearly 90% of free cash flow to repurchase $51.2 million of SPS shares. Now turning to guidance. As a reminder, as a result of the divestiture of the 3P revenue recovery business, on June 30, 2026, guidance factors in a reduction of approximately $10.5 million to revenue in the second half of 2026. The divestiture is expected to be neutral to adjusted EBITDA in the second half of 2026. For the third quarter of 2026, expect revenue to be in the range of $196.3 million to $198.3 million. We expect adjusted EBITDA to be in the range of $67.4 million to $69.4 million. We expect fully diluted earnings per share to be in the range of $0.72 to $0.76 with fully diluted weighted-average shares outstanding of approximately 36.8 million. We expect non-GAAP diluted income per share to be in the range of $1.20 to $1.23, with stock-based compensation expense of approximately $16.4 million, depreciation expense of approximately $5.4 million, and amortization expense of approximately $8.5 million. For the full-year 2026, we expect revenue to be in the range of $788 million to $793.4 million, representing approximately 5% growth over 2025 at the midpoint of the guided range. Excluding the impact of the divested business, we expect our core business revenue to grow high single digits. We expect adjusted EBITDA to be in the range of $265 million to $269.1 million, reflecting adjusted EBITDA margin of 34% at the midpoint, an increase of approximately 300 basis points compared to full-year 2025. We expect fully diluted earnings per share to be in the range of $2.24 to $2.33 with fully diluted weighted-average shares outstanding of approximately 36.9 million shares. We expect non-GAAP diluted income per share to be in the range of $4.84 to $4.93, with stock-based compensation expense of approximately $69.8 million, depreciation expense of approximately $23.4 million and amortization expense for the year of approximately $35.6 million. For the remainder of the year, on a quarterly basis, investors should model approximately a 30% effective tax rate calculated on GAAP pre-tax net earnings. In summary, SPS' strong second quarter performance reflects the strength of our core business driven by upsell and cross-sell momentum. We continue to demonstrate operational rigor, exceeding our margin expansion goals while simultaneously rolling out our AI strategy across our network. With that, I would like to open the call to questions. Operator: Thank you. And ladies and gentlemen, we will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press *2. First question today will come from Scott Berg with Needham. Please go ahead. Scott Berg: Hi, Chad. Hi, Joe. Nice quarter here. Got a couple of questions. Chad, first of all, I want to talk about the divestiture of the third-party revenue recovery business. You have been pretty positive on the long-term outlook for revenue recovery in general. And I know that part has been a little bit of a thorn in your side, but why divest it? Why divest it now? Or, obviously, a month ago, Just help us understand the thought process to move on from that side. Chad Collins: Yeah, Scott. So, overall, we remain very confident in revenue recovery We are seeing the cross-selling to our fulfillment customers. Be good and also seeing new business come in as this is kind of a new emerging category of SaaS solutions. Where more of that positivity was, though, is on the 1P supplier side. So those that are selling primarily wholesale to multiple retailers, Amazon being one of those. But the 1P suppliers really can use our whole portfolio revenue solutions across multiple retailers whereas the 3P business was, those were more Amazon sellers. There did not turn out to be a lot of overlap with the other parts of our portfolio for those customers. Think that combined with the take rate revenue model and some of the policy changes in 3P we saw from Amazon all clearly pointed out that the 1P side of this business is much more attractive for us and has much more overlap with our ideal customer profile than the 3P side does. Scott Berg: Got it. Helpful. And then Joe, yeah, I think we kind of probably understand the number of customers that are leaving the platform. Know, with the divestiture. ARPU seems to be moving around. But, yeah, I guess, a couple of questions on the ARPU side is, 1, are you calculating it any differently than how the company has before? And I only ask is, you took a bunch of revenue in the quarter, but obviously lower customer accounts exiting the quarter. And then I guess, secondly, in conjunction with that, how do we think about the impact going into Q3 because of the revenue step down? Joseph Del Preto: Yeah. So we did not calculate it any differently. And I think, you know, because we kept the calculation consistent, it kind of skewed in the quarter. And the reason for that was if you think about the way the calculation works, Scott, it is the average customer count in the beginning and the ending of the period. And so we had those 7,300 3P customers in the beginning customer count, but they were not in the ending customer count. And then that is compared against the revenue in the quarter and the, you know, the full 3P revenue was in the quarter. But not the ending customer count. And so because of that, the ARPU overall skewed higher than it normally would have. And so that is just you know, it is more of the impact in the quarter going forward. If you think about it, we will just have, you know, 1P customers in the beginning and end of the period. And so it will be a little bit more consistent going forward than it has been in than it was in Q2. Scott Berg: Awesome. And if I may, a quick third question here. Sorry. Out of that again, Joe, can you quantify what the third-party revenue recovery revenues were in the second half of 2025? I know you said the business is going to grow high single digits here the rest of the year, kind of excluding that. But any further kind of modification of that number, I think, would be helpful. Thank you. Joseph Del Preto: Yeah, Scott. So the only other color we are providing on the 3P business outside of the fact that, to your point, that outside of the divested business, then we would be growing high single digits. I think the other thing that color on the full year is we pulled out the $10.5 million in the second half of the year. And you can assume the first half of this year was slightly lower than that, you can kind of get a full run rate of the business for 2026. Thank you. Operator: And our next question will come from Dylan Tyler Becker with William Blair. Please go ahead. Jackson Bogli: Hey, guys. This is Jackson Bogli on for Dylan. Maybe sticking on the revenue recovery side, now that the focus is solely on the 1P side of that business, how are you thinking about the level of resources and investment dedicated to that business going forward? Like, is that-- is there more resources being redeployed toward fulfillment and analytics, or does the retained 1P opportunity still warrant the incremental investment from here? Chad Collins: Yeah. So, Jackson, the 1P business, I would say is nearing consistency with our overall margin profiles. And the business overall. It was not that way right out of the gate with the divestiture, with the acquisition of SupplyPike and Carbon6. But as that has gotten more integrated into our overall business, it is more approaching our overall margin, profile. So I would not say it is an area of our business that is sort of receiving, you know, oversized investment at this point in time. And I think the divestiture of the 3P side of that business really helps us. I mean, because there is quite a bit of good customer overlap, product portfolio overlap on the network with the 1P side. And definitely, you know, think that revenue recovery business is definitely in line with the margin profile of our overall business. Jackson Bogli: Got it. Super helpful. And then maybe as a follow-up, with ERP migration still creating a little bit of timing noise, I mean, I would just be curious to get your thoughts if you guys are seeing any change in like, onboarding duration. I know you guys talked about the AI-enabled customer onboarding. So is that changing anything with, like, the customer readiness or attach rates once those projects are complete? Or maybe are there areas where migration delays are building like, pent-up expansion demand that could release once, once these go-lives? Thanks. Chad Collins: Yeah. So we are super excited about the progress around Agentic onboarding. We did have in the prepared remarks that we did the first fully Agentic onboarding. Now, keep in mind, that is with the more kind of simple onboarding, that we have. You know, that is really taking things that would have been previously done in days, getting down to minutes. With the more complex onboarding, which is really where we have all the ERP integrations, we do expect that we will continue to make great progress there. You know, we have been making progress there over the last couple years, speeding that up. that is led to a better customer experience. it is also helped us on the gross margin. And as that was really done all before this Agentic capability was applied. So we do expect to speed up those more complex ERP onboarding as well. there is just still a little bit more work to do there. Once we have that in place, that time to transact on the network can be a barrier for, adopting the SPS network. So we think any efficiencies we gain there will help with customers and speed up that access to the network. I would not necessarily say that there is substantial pent-up demand just kind of waiting for this. Admittedly, the ERP market has been a little bit slower in 2025 and so far this year, especially at that kind of medium to large end of that market. But I do think our speed of onboarding with ERP onboarding, is gonna be a massive differentiator for us and really speed up customer time to value. Operator: And our next question will come from Christopher Quintero with Morgan Stanley. Please go ahead. Christopher Quintero: Hey, Chad. Hey, Joe. Thanks for taking the questions, and congrats on the nice execution here. I want to hear your thoughts on maybe the macro environment and kind of what you are hearing from your customers. You know, we are hearing about, higher fuel costs, higher freight costs, the K-shaped economy. So just curious kind of what you are hearing and seeing high level from your customers from a macro perspective. Chad Collins: Yeah, Christopher. I mean, I would say, no substantial headwinds we are hearing from our customers relative to the macro. We were coming off a tougher 2025, especially on the supplier side of our network where they did cite some headwinds. Related to tariffs and that did cause some contract rightsizing last year. We anticipated that would dissipate this year as we kind of did get those contracts rightsized, and they were one-time, and that is playing out as we had expected. And so I would say, you know, no overwhelming headwind, in the macro. Of course, things like the fuel prices and still a little bit of looming tariff uncertainty things that we continue to monitor, but those things are not coming up in our engagement with customers right now. Christopher Quintero: Got it. And then maybe, Joe, for you, on the 1P customer counts, if I have my math right, it seems like that went down or down around 200 quarter over quarter. Is that right? And if so, curious what you are seeing on the you know? Community enablement side of things and new customer adds. Joseph Del Preto: Yeah. No. that is your calculation there is right. We were down a little over 200 sequentially on customer count. The driver of that was really just the timing effect of some of the retail enablement programs. Keep in mind, you know, those customers that are typically, churning or adding are primarily affecting that customer count tend to be the real low ARPU customers. that is why we are able to still deliver the financial results, even having that customer count there. The overall pipeline for an enablement activity right now is strong. there is programs that we are running now that will contribute in the second half plus the remaining pipeline that is to be closed in the second half. Looks positive. That said, I would expect for the year, we are kind of flat to slightly positive on customer count. But I do expect some of that momentum from the second half enablement programs will carry into early 2027. Christopher Quintero: Excellent. Thank you so much. Operator: And our next question will come from George Kurosawa with Citi. Please go ahead. George Kurosawa: Okay, great. Thanks for taking the questions here. Maybe if I could just ask about the MAX beta. You had some interesting anecdotes of customers saving, in some cases, sounds like hundreds of thousands of dollars. I think you have done some work on market sizing. Maybe you could just share updated thoughts there on how you are thinking about a potential uplift, maybe in a best-case scenario or for a median customer? And then how that maybe has evolved your overall thinking on packaging and pricing as the product portfolio continues to expand? Chad Collins: Yeah. Absolutely. So, yeah, as you noted and was in the script, seeing customers really identify different supply chain anomalies and disruptions using Max, which today is through the chat feature. that is what they have access to in the beta. And using that chat feature, they are able to get to some of those, those problems in the supply chain, get them resolved, and that is resulting in hard ROI savings for them. What we have seen through the good adoption of chat here is that a lot of the things that customers are doing via chat would be possible to automate with an agent. So today, you know, it may take them 20 prompts in the chat to get to the right answer. We are seeing that is something that actually could be automatic, automatically detect, and potentially, in some cases, automatically resolve. Which is, which is great because we are developing those types of agents on top of this max technology now, and we believe that those agents that can do things more autonomously in terms of identifying these anomalies in many cases, resolving them, not only finds the kinda hard ROI and the supply chain savings, but also is gonna be a very favorable kind of headcount and efficiency impact for our customers. So what we are in the process of now is converting the chat piece from the beta into a general availability. All newly deployed customers as of the last month have been onboarded with Max, included. And over the course of the next several weeks here, kind of through the summer, we will be making it available to all our other fulfillment customers. And we will be doing that as part of their standard subscription. But what we believe the major monetization activity will be is when we deliver those agents on top that are more autonomous and self-acting, that customers will be willing to pay for that. And that is really where the monetization would come in. And the way that would work is there would be certain tiering or bundling of the packaging of those autonomous agents running on top, and then we would monetize the customers through subscriptions to those bundles. But what I would say is gives us high confidence in this approach is we are already seeing customers using MAX Chat to get to these benefits in their supply chain and the things that they are finding and doing. We have high confidence we will be able to automate with the Agentic architecture over the top. George Kurosawa: Okay. that is great color. And then one for Joe, if I may. Just looking at the change in guidance for the second half, it looks like from what we can tell, the on the revenue side, it looks like, basically, the Q2 beat flowed through excluding the divestiture impact. On the EBITDA side, looks like the full beat was not flowed through. So wonder if you could just maybe comment if there is any incremental spending, expense timing, conservatism, anything we should keep in mind on the EBITDA line? Joseph Del Preto: Yeah for sure. I think on the EBITDA side, I think there is a couple of things to contemplate. 1, there was some movement of some of the expenses that moved out of Q2 into Q3 and Q4. So that was some of it. I think the other piece is we want to make sure we are being very prudent with the way we are approaching our internal AI cost. As we are building out this stuff for Max, as we are building out our internal agents, on the things we are doing internally, we want to make sure we give ourselves enough room to make those investments and make sure that, you know, we have got enough flexibility in the cost structure And so that is the other part of that and why we did not flow all that through the year. George Kurosawa: Okay. Makes sense. Thanks for taking the question. Operator: And our next question will come from Parker Lane with Stifel. Please go ahead. Parker Lane: Yes. Good afternoon. Thanks for taking the questions here. Chad, you talked about some of the advances you are making on the analytics side of the house. It sounds like there is a new enhanced platform there. So it is good to see that. I think that the revenue side, it was up maybe a percent in the first half of the year. Can you just talk about what you are seeing from a demand perspective around that? I know you had mentioned that historically, it is been seen as maybe more discretionary, and that was an impact to that business last year. But looking to the second half of the year, what are your expectations around analytics? Chad Collins: Yeah. So we are really excited about this new technology revamp. I mean, I do think it will help us on the sales side, some of the previous technology had gotten a little stale, a little dated. Our feedback from customers who are up and running on this new, capability is 1, you know, just the look and feel and ability to use the system and the prebuilt capabilities are much stronger than they were Plus, there is more tooling for customers to kinda do more on their own. And then probably the most important thing in all this is it really changes the underlying data architecture of that which now sets it up for many more AI features that we will be able to add to that over time. So we are optimistic about that outlook for the analytics business. I think the fact that it is a little bit more discretionary is true still, but I think with this replatforming, not only will we be in a maybe a little bit stronger competitive position, but we should also be in a position then to add more AI features, which I believe will be, we will be able to monetize over time. Parker Lane: Got it. And we are, we are coming up on two years of the entry into the first party revenue recovery. Space with the SupplyPike deal? I think at the time, was about 3 customers that overlapped with SPS. How have you, how have attach rates or adoption rates trended at the two-year mark relative to back then? And what are some of the learnings you guys have had on the go-to-market front on how to effectively cross-sell both into the historical SupplyPike base and back into SPS' base. Chad Collins: Yeah. Absolutely. So we have had success in both directions, selling fulfillment to SupplyPike customers. Obviously, that is not as big a population. So it is been a little bit less impactful. But the big win has been selling the SupplyPike and really now the Amazon 1 p that came out of Carbon6, to the fulfillment customers. And, you know, we have kinda hardened that muscle, I would say, cross-selling in the organization. We have done some things organizationally, to have that work a little better. We have done some things with the sales team's incentives. And what I think is really powerful in all this is just the signals we get from the network. So the network actually tells us based on trading volumes and trading partner relationships who are the most likely candidates. In fulfillment for revenue recovery. And using that data, we are able to specifically go and target those customers, in some cases, to them with an estimate even just based on our network data on what the potential is for them to recover. And I think this is this is critical for us going forward. I mean, we have been clear that we expect to drive higher proportion of our growth on the ARPU of course, there is a big opportunity, for more connections for fulfillment customers, but cross-selling our analytics and revenue recovery solutions to those fulfillment customers is key to that ARPU growth as well. Parker Lane: Great. Thanks, Chad. Operator: And our next question will come from Matthew Van Vliet with Cantor. Please go ahead. Matthew VanVliet: Hey. Good afternoon. Thanks for taking the question. I guess, following up on some of your comments, Chad, about the MAX monetization. I guess curious on what you are kind of baking in terms of the cycle for existing customers. And then when do you plan to have some of these bundles in place in. You know, I guess, stage, but what do you expect the uplift if existing customers plan to adopt you know, whether it is a middle or high-tier, what kind of uplift can they get on an annual basis? Chad Collins: Yeah. Yeah. Great question. So in terms of the adoption, I mean, if we are to judge it based on the max Chat adoption, I believe we will have real strong agent adoption because we are already seeing customers sort of if they are onboarded with MAX Chat, it is quickly becoming the main interface point that they use when using any of our applications. They are just starting in MAX Chat. And, you know, through that, then I believe that as some of the things that they are doing in MAX Chat, we are able to automate with agents? There will be strong interest in having that all be automated so they do not even need to interact that much with chat interface. They still can, but some of the things that are happening on a daily basis or weekly basis will just get automated with the agents. In terms of the timing of all that, we expect that we will be in a position to be selling agents kind of by late Q4 of this year. Now obviously, that will take some time to flow through to revenue, but we do think we will be in a position where we are actually monetizing this agent architecture still here this year. Now, the degree to which we are able to do uplift on ARPU, that is some of the details that we are working through right now. I do think the first set of agents that we put out are gonna be probably more addressable for the more highly complex customers with more trading relationships. And over time, we are able to bring that back down to more of our medium and small customers over time. Alright. Matthew VanVliet: Helpful. And then, Joe, you mentioned on some of the cost structure where it sounded like internal AI use maybe just help us with the timeline for when internally you were really pushing that aggressively. For a good portion of the employee base. Just to get a sense for sort of when we might lap that. And when growth, could provide some operating leverage in the model, whether it is you know, later this year, into next year, beyond that? Joseph Del Preto: What I would say there, Matthew, is a lot of the leverage we are seeing out of the business right now is not based on some of the AI internal use cases that we are starting to talk about. I think a lot of the efficiency you have seen in this business have really been driven by economies of scale, just being more operationally efficient over the last 12 months. People looking internally and making sure we are optimizing each of our processes. So feel really good about how we somewhat structurally changed this business going forward without using AI. And if I think of the go-forward and some of the things we have talked about the onboarding process, on the go-to-market side, we believe that those will all be additive to some of the things we have already been able to accomplish without the internal use of AI. So we feel good about the trajectory of the of the margin going forward, not only this year, but going into next year. And as we exit this year, Matthew will have a little bit more color on how we think that, you know, probably impacts more of the longer term focus of the business. Matthew VanVliet: Alright. Great. Thank you. Operator: And our next question will come from Mark Schappel with Loop Capital. Please go ahead. Mark William Schappel: Thank you for taking my question. Chad, you have had a new Chief Commercial Officer on board now for a couple of quarters. Wondering if you could just talk a little bit about maybe some of the changes that have been made or adjustments that have been made to the sales structure, maybe like, customer segmentation or just even the coverage model for that matter? Chad Collins: Yeah. I would say we did evolve certain things in the go-to-market. They were kind of in conjunction--it happened to be in conjunction with Eduardo's arrival, but I think he is all in line with that. You know, some of the things I mentioned earlier around driving a little bit more focus on cross-sell and aligning that as part of our incentive structure. We have also done some things to segment the sales force a little bit more between new and existing customers. That has worked effectively, especially on the on the retail side. And, you know, the other thing I would say is, you know, Eduardo and his team on our customer success are also responsible for all the customer onboarding activity and, that is an area where we have seen quite a bit of success. And are continuing to drive more success as we automate that onboarding process. So very pleased with the way that Eduardo's come in. He has brought some new ideas to the organization, having worked at some previous very scaled software businesses, and just helping us overall mature our capabilities around go-to-market And I will add too. Part of that is marketing. We brought in a new chief marketing officer. She's really helped us on some of the demand generation things. I mean, the company's been kind of in a luxury position to, you know, pretty much solely rely on these retail enablement programs as a source for new customers. We believe that there over time will be an opportunity to drive more new customers through more traditional digital marketing capabilities. And that is something that Maria has brought into our organization. So the combination is working quite well. Thank you. Operator: And our next question will come from Jeff Van Rhee with Craig Hallum. Please go ahead. Jeff Van Rhee: Hey, this is Daniel on for Jeff Van Rhee. On the beat this quarter, the last few quarters have been a little bit more in line. Congrats on this quarter, real nice beat on the top and the bottom. Just what played out in the quarter that drove the more than expected strength here in Q2? Joseph Del Preto: Yeah. I think a couple of things. 1, we talked about coming out of Q1. We are not, you know, we are not seeing the same amount of pressure especially on the down sell and growth retention that we saw throughout 2025. So GRR continues to be a real strength of ours. That continues to grow year-over-year and feel really good about the progress we are making on that front. And then we start to see more momentum within our existing customer base and adding new trading partners. I think we have talked about the land and expand model. Continues to be a big driver of our growth overall. And so I think the combination of our ability to expand training partners within our existing customer base and then, you know, the positive momentum on the GRR side with were the two big drivers on the revenue overperformance. Jeff Van Rhee: Okay. And then on the customer count, obviously, that is skewed by the 3P customers exiting the account. But in terms of just the 1P count being down 52 sequentially, just thoughts on that? Any updated thinking on expectations for customer growth? Any that changed there? Thanks. Joseph Del Preto: Yeah. That was just really due to some timing of the retail enablement programs and how they contributed to customer count in the quarter. I would say overall, the retail programs that are up and running and those are in the pipeline that we have high confidence in for the second half, That all looks pretty positive. So I would expect the second half to contribute sort of a positive customer count. But kind of coming in on the year, probably kinda flat to slightly positive on the customer count. Daniel: Okay. Thanks, Chad. Thanks, Joe. Operator: And our next question will come from Lachlan Brown with Rothschild & Co. Please go ahead. Lachlan Brown: Hi, Chad, Joe. Thanks for the questions. With your max beta customers, just walk us through your confidence in being able to convert them, when you made max generally available at the end of the summer? Could you talk us through the go-to-market playbook that is in place to transition these accounts at launch? And, yeah, I guess any feedback from preliminary customer discussions would be helpful. Thanks. Chad Collins: Yeah. So let me start with the preliminary customer discussions. In this beta, we have been very engaged customers. I think you can see from some of the detailed examples that we shared in the prepared remarks, we are really engaged with customers, understanding the ROI that they are getting out of out of Max. And I would say, you know, this is 1 of the nice things about having a tool like this. I mean, we see all of their interactions They are able to score their interactions. We have a separate agent that on top of their scoring goes in and scores the interaction. So we really can narrow in and see where customers are getting value out of the MAX Chat capability. In terms of kind of then upselling them from MAX Chat, which we are using kind of as a gateway into our overall Max architecture, you know, we are gonna target those probably larger, more complex customers that have high usage of MAX Chat. And, and utilize work with them, to convert some of the things they are doing with MAX Chat into autonomous agents that will just take care of those things, automatically for them. And we think between the ROI that they are driving out of their supply chain, and the efficiencies they get then from converting over from chat into an agent and, an autonomous agent. That gives us pretty high conviction from customers to move over to the more Agentic approach, which will be monetizable. Lachlan Brown: Thanks. And looking at the implied Q4 revenue from the outlook, it suggests a nice step up from Q3. Could you just help us unpack the main building blocks behind that acceleration? For example, are there any specific enablement campaigns scheduled for later in the year that gives you that visibility? Joseph Del Preto: Yeah. I just walked through a couple of things. I know Chad talked about a little bit more on the enablement campaigns. I think a couple of things are going on in the business. 1, I just talked about it a little bit earlier. The momentum we are seeing on the GRR side, so we continue to see improvements across our customer base. And so we are in a much better position, I think, going into Q4 and the momentum we are seeing there than we were a year ago. So I think that is a that is the other big driver. And then the second thing is you know, on the enablement side. We are seeing more of these campaigns come through. We are seeing momentum in the back half of the business. We have a really strong pipeline. And so we believe there is gonna be a solid number of these customers that land in Q4 that is really kind of driving that revenue in the quarter. Chad Collins: Yeah. I mean, I would just add, you know, although we do see we see some positivity there, you know, kind of the big drivers in our revenue performance to finish out the year here are gonna be more probably driven by the strong GRR that Joe mentioned and the ARPU expansion. We do expect to be positive on the customer count, but the customer count that we drive through these retail programs certainly, while important, we wanna get customers. We wanna further penetrate that TAM. Those tend to be very low ARPU customers when they come in the door. So they are meaningful over the long-term, but not as meaningful in the short term to drive revenue. Lachlan Brown: that is clear. And congrats on the quarter, guys. Joseph Del Preto: Thank you. Thanks, Lachlan. Operator: And our next question will come from Nehal Chokshi with Northland Capital Markets. Please go ahead. Pardon me. Your line is open. Nehal Chokshi: Sorry about that. Thank you. Congrats on a good quarter. And congrats on the implicit acceleration in the business as well, that the implicit acceleration in the business in the back half, especially in the 4Q here. And sounds like it is going to be driven by the improving GRR that you are seeing. Is that-- is the driver of improving GRR max or is it something else? Chad Collins: Yeah. I would say it is a combination of, things. I do think a little bit is macro. We did see some headwinds last year in our customer base that drove them to kind of right-size contracts. We are not seeing that this year. The other factor is, I believe, you know, we have made some improvements in our customer treatment strategy. I mentioned that both on onboarding and also the way that we have organized the sales force. To give a little more attention, I would say, to existing customers. And I think the new innovation that, our customers are seeing us with Max, with adding revenue recovery to the product portfolio, with investing in our analytics product, I think these are all things that, show to our customers that they wanna be a long-term partner with SPS Commerce. Nehal Chokshi: Great. Thank you very much. Operator: And once again, if you would like to ask a question, please press *1. Our next question will come from Clark Wright with D.A. Davidson. Please go ahead. Clark Wright: Hi, thank you. If we look at the growth mix after the 3P revenue recovery divestiture, how much of the growth now do you expect to come from ARPU expansion versus customer additions? Joseph Del Preto: Yeah. Clark, what we have said is, you know, kind of in our growth algorithm over the long-term, we expect roughly one-third of the growth to come from the customer count side and two-thirds to come from ARPU. This year, it will obviously probably be slightly more on the ARPU side. And then if you were so if you were to take that to our current, expectation for the business, that leads high single digits sort of that low single digits on the customer count and that kind of mid to high on the ARPU growth. Clark Wright: Got it. that is helpful. And then, can you help me understand in your prepared remarks, you mentioned that SPS Commerce is uniquely positioned to provide agents to automate tasks. Could you could you help me understand why you are uniquely positioned versus other vendors in the market, and what that means going forward as you continue to invest to grow your competitive advantages. Chad Collins: Yeah. Yeah. So, I mean, we made that comment in the context of we are doing in automating collaboration and supply chain transactions between trading partners. And what we found that is really key to that is the data that we have on the network. So, you know, three main components there. 1, of course, the customer's data on the network. Often, we have more of their supply chain data in our network than they have available to them in the ERP. it is just a broader set of data. We also see all the kind of macro transaction patterns, going across our network. So, you know, of course, we cannot let 1 customer look at another customer's discrete data, but what we can do is look at, trading, patterns, especially across the major retailers. So we may see some differences in the way that Walmart or Target are handling some of their suppliers and see that at the macro level and translate that into some changes that the suppliers to those retailers need to make. And then maybe most importantly, you know, over this 25 years of doing this, we have built out very deep proprietary databases of supply chain expectations that the major retailers and distributors in the U.S. have around compliance and supply chain expectations. And a lot of this information we have is stuff that is not going to be available in a downloadable vendor guide that they are gonna provide, and then a lot of them on the network do not even provide these types of vendor guides. And so we are really able to train the agents on this proprietary database, and those agents are really able to guide these suppliers to execute their supply chain. In a way that is gonna be compliant with their retail and distributor customers. Clark Wright: Got it. that is helpful. Thank you. Operator: And I am showing no further questions in the queue. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day. You may now disconnect your lines at this time. Before you buy stock in SPS Commerce, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SPS Commerce wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $395,463!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,268,290!* Now, it’s worth noting Stock Advisor’s total average return is 927% — a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 4, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. SPS Commerce (SPSC) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Find your next quality investment with Simply Wall St's easy and powerful screener, trusted by over 7 million individual investors worldwide. SPS Commerce (SPSC) drew investor attention after reporting second quarter 2026 results, with higher sales and lower net income, alongside fresh guidance for the upcoming quarter and full year. See our latest analysis for SPS Commerce. The earnings update and new guidance helped spark a sharp rebound in SPS Commerce’s share price, with a 1-day share price return of 11.48% and a 7-day share price return of 20.00%. However, this short term momentum contrasts with a weaker backdrop, as the year to date share price return declined 16.52% and the 1-year total shareholder return declined 29.35%, pointing to a stock still working to recover past losses. If this kind of turnaround story has your attention, it can also be useful to broaden your search with other opportunities and check out 18 top founder-led companies Bulls view SPS Commerce’s rebound and AI initiatives as evidence that the stock’s earlier decline was too severe. Bears highlight weaker earnings and a prolonged period of share price declines. Which side does the current valuation appear to favor next? The most followed SPS Commerce narrative pegs fair value at $68.09, which sits below the last close of $73.39. That gap is what investors are now weighing. Read the complete narrative. Want to see what sits behind that gap between today’s price and the $68.09 fair value line? The narrative leans heavily on earnings power, margin progression and a reset valuation multiple that together form a very specific path to that target. Result: Fair Value of $68.09 (OVERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, investors still face clear risks. A slower revenue trajectory or weaker than expected profit margins at SPS Commerce could quickly challenge the current overvaluation narrative. Find out about the key risks to this SPS Commerce narrative. The analyst narrative points to SPS Commerce trading around 7.8% above a fair value of $68.09, using earnings forecasts and a target P/E to frame the stock as overvalued. The preferred multiple view tells a different story. SPSC trades on a P/E of 34.5x, which sits below a peer average of 40.4x but above a fair ratio of 29.3x that the market could move toward. If that gap closes toward peers, current pricing could look more forgiving. If it instead drifts back toward the fair ratio, the current premium to that level could leave less room for error. Which scenario lines up better with your own expectations for SPS Commerce and the wider software group? To see how the numbers stack up in more detail, including how they compare with sector norms, See what the numbers say about this price — find out in our valuation breakdown. With sentiment on SPS Commerce still divided, it helps to move quickly, review the underlying data and test your own thesis. To see why some investors remain optimistic, take a closer look at the 2 key rewards. If SPS Commerce has sharpened your focus, now is the time to broaden your watchlist with fresh stock ideas sourced directly from the Simply Wall St screener. Target potential mispricing and uncover companies that combine quality with attractive pricing using the 55 high quality undervalued stocks. Strengthen the defensive side of your portfolio by focusing on resilient businesses screened through the 81 resilient stocks with low risk scores. Spot early opportunities in under-followed companies that still show strong fundamentals with the screener containing 19 high quality undiscovered gems. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include SPSC. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Interested in SPS Commerce, Inc.? Here are five stocks we like better. SPS Commerce reported solid Q2 results, with revenue up 6% year over year to $197.8 million, adjusted EBITDA of $66.6 million and trailing 12-month free cash flow up 40% to $198.7 million. The company used nearly 90% of quarterly free cash flow for share repurchases. The company completed the sale of its third-party Revenue Recovery business for $9.5 million, recording a $23.5 million loss and removing about 7,300 customers. Management said the divestiture sharpens its focus on first-party suppliers and will reduce second-half 2026 revenue by approximately $10.5 million. AI remains a key growth initiative as SPS plans to roll out its MAX agent to all Fulfillment customers and begin selling autonomous supply-chain agents by late Q4. Full-year 2026 guidance calls for revenue of $788.4 million to $793.4 million and adjusted EBITDA of $264.6 million to $269.1 million. Small-cap surge: Outpacing large caps on hopes for '24 rate cuts SPS Commerce (NASDAQ:SPSC) reported second-quarter 2026 revenue of $197.8 million, up 6% from a year earlier, as the company cited continued upsell and cross-sell momentum among its core customers. The company said its core business, excluding the divested third-party Revenue Recovery operation, grew at a high-single-digit rate. Adjusted EBITDA rose to $66.6 million in the quarter. SPS Commerce ended the period with $173 million in cash and cash equivalents and generated $57.4 million in free cash flow, bringing trailing 12-month free cash flow to $198.7 million, up 40% year over year. The company used $51.2 million, or nearly 90% of quarterly free cash flow, for share repurchases. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now On June 30, SPS Commerce completed the sale of its 3P Revenue Recovery business, which primarily served Amazon Marketplace sellers. The company received $9.5 million in cash at closing and recorded a $23.5 million loss on the sale during the second quarter. CEO Chad Collins said the transaction is intended to concentrate SPS Commerce's efforts on first-party suppliers selling wholesale through multiple retailer relationships. He said those customers have greater overlap with the company’s broader portfolio, including Fulfillment, Revenue Recovery and Analytics offerings. → Microsoft Just Flipped the AI Spending Narrative Overnight “The 1P side of this business is much more attractive for us and has much more overlap with our ideal customer profile than the 3P side does,” Collins said during the call. He also cited the former business’s take-rate model and policy changes affecting third-party sellers on Amazon as factors behind the decision. The divestiture removed approximately 7,300 customers from the company’s recurring-revenue customer base. SPS Commerce reported approximately 46,650 recurring-revenue customers at the end of the second quarter and average revenue per customer of $15,100. → Carrier Earnings Could Send the Stock to a New All-Time High CFO Joe Del Preto said the timing of the sale caused the reported quarterly ARPU figure to skew higher because the company included full-period 3P revenue while the quarter-end customer count no longer included the divested customers. He said the calculation method was unchanged and should normalize going forward. Collins highlighted the company’s MAX artificial intelligence agent, which draws on transaction activity, trading-partner patterns, digital specifications and compliance rules across the SPS network. The company plans to make MAX available to all Fulfillment customers by the end of the summer, after initially offering it through a beta program. According to Collins, MAX can identify supply-chain errors, compare retailer requirements and help customers diagnose operational issues. He said beta users have used the tool to identify a $290,000 invoice failure tied to an incorrect UPC code, 100 stalled drop-ship orders for an outdoor brand, and $70,000 in unacknowledged purchase orders for a food manufacturer. Branch, a wholesale brand serving retailers including Williams-Sonoma, Lumen and Office Depot, used MAX to reduce the weekly time spent managing overdue orders for one key retail partner by 90%, Collins said. SPS Commerce expects MAX Chat, the current conversational interface, to be included in standard customer subscriptions. Collins said the company’s primary AI monetization opportunity is expected to come from autonomous agents that can detect and, in some cases, resolve recurring supply-chain issues. The company expects to be able to sell those agents by late in the fourth quarter. “The first set of agents that we put out are going to be probably more addressable for the more highly complex customers with more trading relationships,” Collins said, adding that the company expects to extend the capabilities to medium and smaller customers over time. The company also said its Analytics product is now operating on an enhanced platform designed to support higher data volumes, broader uses and future AI-based predictive capabilities. Collins said the updated platform improves the user experience and provides customers with more self-service tools and more detailed product- and location-level insights. RuffleButts, a Texas-based children’s clothing company, is using the platform to analyze sell-through data across more than 400 retail locations and an e-commerce channel for one major retailer, according to SPS Commerce. The company said the customer is considering adding another major retailer to its reporting. On Revenue Recovery, Collins said the company is increasingly using network data to identify Fulfillment customers that may be strong candidates for the offering. He said SPS can assess trading volumes and partner relationships to target potential customers and, in some cases, estimate recovery opportunities. The company said its customer count declined by slightly more than 200 sequentially on a first-party basis, primarily because of timing in retail enablement programs. Collins said those customers tend to carry low ARPU and that the company expects customer count to be flat to slightly positive for the full year, with some second-half enablement momentum potentially carrying into early 2027. SPS Commerce said its outlook incorporates an estimated $10.5 million reduction to second-half 2026 revenue from the 3P Revenue Recovery divestiture. The company expects the divestiture to be neutral to adjusted EBITDA during the second half. Third-quarter revenue is projected at $196.3 million to $198.3 million. Third-quarter adjusted EBITDA is projected at $67.4 million to $69.4 million. Third-quarter GAAP diluted earnings per share are expected to be $0.72 to $0.76, while non-GAAP diluted income per share is expected to be $1.20 to $1.23. Full-year revenue is projected at $788.4 million to $793.4 million, representing about 5% growth at the midpoint. Full-year adjusted EBITDA is projected at $264.6 million to $269.1 million, implying a 34% midpoint margin and approximately 300 basis points of expansion from 2025. Excluding the divested business, SPS Commerce expects core revenue growth to remain in the high single digits for 2026. Del Preto attributed the quarter’s revenue outperformance to improved gross retention and expansion among existing customers, including the addition of more trading partners. Management said it was not seeing substantial macroeconomic pressure in customer conversations. Collins noted that supplier customers faced tariff-related headwinds and contract right-sizing in 2025, but said those pressures had dissipated as expected in 2026. The company continues to monitor fuel costs and tariff uncertainty. SPS Commerce, Inc is a leading provider of cloud-based supply chain management solutions that enable seamless collaboration between retailers, suppliers and logistics providers. Through its robust network, SPS Commerce connects trading partners with electronic data interchange (EDI) capabilities, helping businesses automate order processing, inventory management and fulfillment workflows. The company's platform ensures data accuracy, accelerates order-to-cash cycles and reduces manual intervention, supporting a wide range of industries including retail, grocery, consumer goods and automotive. The company offers a suite of services encompassing EDI, retail-ready compliance, order management and data analytics. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "SPS Commerce Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

Image source: The Motley Fool. Thursday, July 30, 2026 at 4:30 p.m. ET Investor Relations - Irmina Blaszczyk Chief Executive Officer - Chad Collins Executive Vice President and Chief Financial Officer - Joseph Del Preto Need a quote from a Motley Fool analyst? Email [email protected] Operator: Good day, and welcome to the SPS Commerce second-quarter 2026 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Irmina Blaszczyk, Investor Relations for SPS Commerce. Please go ahead. Irmina Blaszczyk: Good afternoon, everyone. And thank you for joining us on SPS Commerce second-quarter 2026 conference call. We will make certain statements today, including with respect to our expected financial results, go-to-market strategy and efforts designed to increase our traction and penetration with retailers and other customers. These statements are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of the call, and we undertake no obligation to publicly update and revise any forward-looking statements whether as a result of new information, future events or otherwise. Please refer to our SEC filings, specifically our Form 10-K, as well as our financial results press release for a more detailed description of the risks factors that may affect our results. These documents are available at our website, spscommerce.com, and at the SEC's website, sec.gov. In addition, we are providing a historical data sheet for easy reference on the Investor Relations section of our website, spscommerce.com. During our call today, we will discuss adjusted EBITDA financial measures and non-GAAP income per share. In our press release and our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP financial measures, including reconciliations of these measures with comparable GAAP measures. And with that, I will turn the call over to Chad. Chad Collins: Thanks, Irmina, and good afternoon, everyone. Thank you for joining us today. At SPS Commerce, our foundation has always been our cloud-based supply chain network. Today, our network stands as a massive, interconnected retail ecosystem of tens of thousands of suppliers and 3,500 buying organizations. Including all the major retailers and distributors in North America. We work with more than 2,000 logistics providers and over 400 technology partners. Which enables us to integrate our network with all of our customer supply chain and business systems. We are protocol agnostic and enable fulfillment models and channels with grade-A security certifications. That foundation makes everything that follows possible and represents our AI use case on our network. The SPS Commerce network took over 25 years to get to where it is today. Through its network and scale, we are building partnerships, supporting evolving supply chains, helping our customers grow. Having recently divested the 3P revenue recovery business, we have sharpened our focus on strategic relationships with 1P suppliers who operate multi-retailer trading relationships and benefit from our intelligent supply chain and portfolio solutions. As the network expands, we continue to capture proprietary intelligence from trading partner activity. Transaction patterns, digital specifications, and compliance rules. Strengthening the supply chain rules engine that powers MAX, SPS's AI agent. By leveraging SPS's network intelligence, within everyday workflows, Max enables customers to interact with their supply chains in a more intuitive, proactive, and connected way. Users can instantly compare business requirements and business performance between major retailers like Target and Costco. With proactive monitoring, Max serves as a 24/7 extension of a customer's team, detecting anomalies and flagging critical business errors. Max puts the expertise of the SPS network at the customer's fingertips, to instantly diagnose business issues and determine actionable solutions. Shortening the time it takes to address risks in trading partner relationships. For example, Branch Furniture is a fast-growing wholesale brand selling to major retailers like Williams-Sonoma, Lumens, and Office Depot. They rely on SPS Commerce to manage order flows across multiple channels and have already experienced significant efficiencies using MAX to resolve order issues in minutes as opposed to days. For 1 of their key retail partners, Max helped achieve 90% weekly time savings in managing overdue orders. Other customers have recognized tangible results since MAX's beta-phase launch. Max successfully caught a $290,000 invoice failure due to an incorrect UPC code. It identified 100 stalled dropship orders for an outdoor brand. It flagged $70,000 in unacknowledged purchase orders for a food manufacturer. Delivering this immediate ROI, MAX is quickly becoming the default starting point for customers inside the SPS user interface. They trust Max's proprietary supply chain expertise, and they are increasingly allowing it to take automated actions on their behalf. Continually improving operational efficiencies with their trading partners. By pairing SPS' network intelligence with our Agentic capabilities, we completed our first AI-powered customer onboarding, including pre-sale contacts and account provisioning. We are working toward a future where Agentic technology can engage a new customer immediately after a deal closes with more of the onboarding processes shifting to AI as we continue to reduce the time it takes for customers to transact with their trading partners. Agent-assisted customer functions and onboarding as well as the agentification of our internal operations, are the 2 pillars in our agent strategy already in motion at SPS. We are also exploring new AI-powered use cases and products, which we believe will drive ARPU expansion and increase the size of our addressable market. The initial launch of Max to all SPS Fulfillment customers is expected by the end of the summer. And we plan to launch additional products at scale later this year. 1 of the key learnings from our beta program is that users of MAX through the chat interface are more likely to explore advanced MAX features and we expect this usage trend will define the path to monetization of our AI solutions. We are excited about these AI capabilities and the immense value they will bring to our network. And so are our customers. In a recent study of SPS customers, we quantified and validated the value and impact SPS delivers to their business. 83% of customers said that the data in the SPS network improved their AI readiness. 87% cited improved scalability. And 100% of the surveyed customers said that without the SPS network, they would need more headcount, more tools, and more time, or in some cases, simply could not operate at the scale they do today. They see SPS as a strategic partner in navigating increasing supply chain complexity, while they expand their business and trading network. Chosen Foods, a premier food and beverage company, best known as America's No. 1 avocado oil brand, needed a supply chain that could keep pace with growth across their US and Canadian operations. Over their decade-long relationship with SPS Commerce, they have scaled from 1 trading partner to dozens of customers, multiple 3PLs, and a growing supplier network. To prepare for their next phase of growth, Chosen Foods migrated to a new ERP and trusted SPS to manage the transition. Through a fully integrated Acumatica deployment, SPS Commerce delivered a unified approach across their order-to-cash, procure-to-pay, and revenue recovery workflows ahead of schedule and with zero operational downtime. Crucially, with growing deduction complexities across major retailers like Walmart, Amazon, and Target, SPS's automated dispute management successfully recovered approximately 30% of outstanding deductions. Which represents hundreds of thousands of dollars while helping Chosen Foods identify why these deductions occurred and how to prevent them. Other customers realizing real ROI from SPS Revenue Recovery include Owlet, a leader in infant health technology, which recovered $1.4 million within 6 months of using the solution, including 100% recovery on a recent settlement totaling $423,000. Serta Simmons Bedding, one of North America's largest bedding manufacturers, recovered $200,000 by successfully challenging a post audit with a large retailer. Turning to our analytics business. SPS's new analytics solution is now running on a new, enhanced platform that delivers significant gains in both power and scale. This new platform brings an improved user experience, while enabling faster time to insight so customers can move seamlessly from data to decisions. It expands what is possible for customers supporting growing data volumes, broader use cases, and future AI-predictive capabilities. With these platform enhancements, our analytics solution helps customers protect revenue, margin, and shelf space by catching risks early while uncovering new growth opportunities across products, customers, markets, and distribution. It also gives teams the agility and efficiency to act sooner, align inventory, forecasting, and planning while strengthening retailer relationships with a single view of performance. RuffleButts, a children's clothing company based in Texas, is leveraging the platform to gain significantly better sell-through visibility into 1 of the nation's largest retailers. Capturing critical insights from data across more than 400 retail locations and the retailer's e-commerce channel. To sustain this momentum, automated data feeds and scheduled reporting will drive ongoing day-to-day analysis. Early feedback from RuffleButts on the platform's granular product and location insights has been highly positive prompting this supplier to consider adding another major retailer to their reporting. In summary, SPS' customer success stories demonstrate that navigating today's increasingly complex supply chain requires an intelligent network. As businesses continue to expand across technology platforms, and connect with new trading partners, they view SPS Commerce as a vital partner for scaling their operations and improving AI readiness. No other company can match the unique combination of AI capabilities, 25 years of proprietary data, deep domain expertise, and an expansive network access to drive this kind of tangible value and collaboration that SPS offers today. With that, I will turn it over to Joe to discuss our financials. Joseph Del Preto: Thank you, Chad, and welcome, everyone. Joseph Del Preto: We reported a strong second quarter of 2026. SPS Commerce's core business, excluding the divested 3P revenue recovery business, grew in the high single digits. Driven by the acceleration of 1P customer ARPU growth resulting from continued upsell and cross-sell momentum. On June 30, we announced the sale of the 3P revenue recovery business. We believe this divestiture sharpens our focus on the strategic opportunity with 1P suppliers, who operate multi-retailer trading relationships, and are positioned to benefit from our intelligent supply chain network and purchase additional solutions like fulfillment, revenue recovery, and analytics. SPS Commerce received a cash payment of $9.5 million at closing, and we incurred a loss on sale of $23.5 million in Q2 2026 in connection with the transaction. Now let's review our Q2 results. Revenue was $198 million, a 6% increase over Q2 of last year. Recurring revenue grew 6% year-over-year. As a result of the sale of the 3P revenue recovery business, and its approximately 7,300 customers, the total number of recurring revenue customers in Q2 was approximately 46,600 and an average revenue per customer of $15,100. In Q2, ARPU skewed higher due to the divestiture's impact on our ARPU calculation. Which used an average of beginning and end of quarter customer counts. Because the quarter-end divestiture significantly reduced our final customer count, Q2 ARPU reflects full period revenue divided by a lower customer base. Adjusted EBITDA increased to $66.6 million highlighting the health of our business as we scale. Strong operational execution, the realization of past investments and benefits of improving process efficiencies. Turning to liquidity and cash flow. We ended the quarter with total cash and cash equivalents of $173 million. Free cash flow for the quarter was $57.4 million bringing our trailing 12-month free cash flow to $198.7 million up 40% year-over-year. In Q2 2026, we deployed nearly 90% of free cash flow to repurchase $51.2 million of SPS shares. Now turning to guidance. As a reminder, as a result of the divestiture of the 3P revenue recovery business, on June 30, 2026, guidance factors in a reduction of approximately $10.5 million to revenue in the second half of 2026. The divestiture is expected to be neutral to adjusted EBITDA in the second half of 2026. For the third quarter of 2026, expect revenue to be in the range of $196.3 million to $198.3 million. We expect adjusted EBITDA to be in the range of $67.4 million to $69.4 million. We expect fully diluted earnings per share to be in the range of $0.72 to $0.76 with fully diluted weighted-average shares outstanding of approximately 36.8 million. We expect non-GAAP diluted income per share to be in the range of $1.20 to $1.23, with stock-based compensation expense of approximately $16.4 million, depreciation expense of approximately $5.4 million, and amortization expense of approximately $8.5 million. For the full-year 2026, we expect revenue to be in the range of $788 million to $793.4 million, representing approximately 5% growth over 2025 at the midpoint of the guided range. Excluding the impact of the divested business, we expect our core business revenue to grow high single digits. We expect adjusted EBITDA to be in the range of $265 million to $269.1 million, reflecting adjusted EBITDA margin of 34% at the midpoint, an increase of approximately 300 basis points compared to full-year 2025. We expect fully diluted earnings per share to be in the range of $2.24 to $2.33 with fully diluted weighted-average shares outstanding of approximately 36.9 million shares. We expect non-GAAP diluted income per share to be in the range of $4.84 to $4.93, with stock-based compensation expense of approximately $69.8 million, depreciation expense of approximately $23.4 million and amortization expense for the year of approximately $35.6 million. For the remainder of the year, on a quarterly basis, investors should model approximately a 30% effective tax rate calculated on GAAP pre-tax net earnings. In summary, SPS' strong second quarter performance reflects the strength of our core business driven by upsell and cross-sell momentum. We continue to demonstrate operational rigor, exceeding our margin expansion goals while simultaneously rolling out our AI strategy across our network. With that, I would like to open the call to questions. Operator: Thank you. And ladies and gentlemen, we will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press *2. First question today will come from Scott Berg with Needham. Please go ahead. Scott Berg: Hi, Chad. Hi, Joe. Nice quarter here. Got a couple of questions. Chad, first of all, I want to talk about the divestiture of the third-party revenue recovery business. You have been pretty positive on the long-term outlook for revenue recovery in general. And I know that part has been a little bit of a thorn in your side, but why divest it? Why divest it now? Or, obviously, a month ago, Just help us understand the thought process to move on from that side. Chad Collins: Yeah, Scott. So, overall, we remain very confident in revenue recovery We are seeing the cross-selling to our fulfillment customers. Be good and also seeing new business come in as this is kind of a new emerging category of SaaS solutions. Where more of that positivity was, though, is on the 1P supplier side. So those that are selling primarily wholesale to multiple retailers, Amazon being one of those. But the 1P suppliers really can use our whole portfolio revenue solutions across multiple retailers whereas the 3P business was, those were more Amazon sellers. There did not turn out to be a lot of overlap with the other parts of our portfolio for those customers. Think that combined with the take rate revenue model and some of the policy changes in 3P we saw from Amazon all clearly pointed out that the 1P side of this business is much more attractive for us and has much more overlap with our ideal customer profile than the 3P side does. Scott Berg: Got it. Helpful. And then Joe, yeah, I think we kind of probably understand the number of customers that are leaving the platform. Know, with the divestiture. ARPU seems to be moving around. But, yeah, I guess, a couple of questions on the ARPU side is, 1, are you calculating it any differently than how the company has before? And I only ask is, you took a bunch of revenue in the quarter, but obviously lower customer accounts exiting the quarter. And then I guess, secondly, in conjunction with that, how do we think about the impact going into Q3 because of the revenue step down? Joseph Del Preto: Yeah. So we did not calculate it any differently. And I think, you know, because we kept the calculation consistent, it kind of skewed in the quarter. And the reason for that was if you think about the way the calculation works, Scott, it is the average customer count in the beginning and the ending of the period. And so we had those 7,300 3P customers in the beginning customer count, but they were not in the ending customer count. And then that is compared against the revenue in the quarter and the, you know, the full 3P revenue was in the quarter. But not the ending customer count. And so because of that, the ARPU overall skewed higher than it normally would have. And so that is just you know, it is more of the impact in the quarter going forward. If you think about it, we will just have, you know, 1P customers in the beginning and end of the period. And so it will be a little bit more consistent going forward than it has been in than it was in Q2. Scott Berg: Awesome. And if I may, a quick third question here. Sorry. Out of that again, Joe, can you quantify what the third-party revenue recovery revenues were in the second half of 2025? I know you said the business is going to grow high single digits here the rest of the year, kind of excluding that. But any further kind of modification of that number, I think, would be helpful. Thank you. Joseph Del Preto: Yeah, Scott. So the only other color we are providing on the 3P business outside of the fact that, to your point, that outside of the divested business, then we would be growing high single digits. I think the other thing that color on the full year is we pulled out the $10.5 million in the second half of the year. And you can assume the first half of this year was slightly lower than that, you can kind of get a full run rate of the business for 2026. Thank you. Operator: And our next question will come from Dylan Tyler Becker with William Blair. Please go ahead. Jackson Bogli: Hey, guys. This is Jackson Bogli on for Dylan. Maybe sticking on the revenue recovery side, now that the focus is solely on the 1P side of that business, how are you thinking about the level of resources and investment dedicated to that business going forward? Like, is that-- is there more resources being redeployed toward fulfillment and analytics, or does the retained 1P opportunity still warrant the incremental investment from here? Chad Collins: Yeah. So, Jackson, the 1P business, I would say is nearing consistency with our overall margin profiles. And the business overall. It was not that way right out of the gate with the divestiture, with the acquisition of SupplyPike and Carbon6. But as that has gotten more integrated into our overall business, it is more approaching our overall margin, profile. So I would not say it is an area of our business that is sort of receiving, you know, oversized investment at this point in time. And I think the divestiture of the 3P side of that business really helps us. I mean, because there is quite a bit of good customer overlap, product portfolio overlap on the network with the 1P side. And definitely, you know, think that revenue recovery business is definitely in line with the margin profile of our overall business. Jackson Bogli: Got it. Super helpful. And then maybe as a follow-up, with ERP migration still creating a little bit of timing noise, I mean, I would just be curious to get your thoughts if you guys are seeing any change in like, onboarding duration. I know you guys talked about the AI-enabled customer onboarding. So is that changing anything with, like, the customer readiness or attach rates once those projects are complete? Or maybe are there areas where migration delays are building like, pent-up expansion demand that could release once, once these go-lives? Thanks. Chad Collins: Yeah. So we are super excited about the progress around Agentic onboarding. We did have in the prepared remarks that we did the first fully Agentic onboarding. Now, keep in mind, that is with the more kind of simple onboarding, that we have. You know, that is really taking things that would have been previously done in days, getting down to minutes. With the more complex onboarding, which is really where we have all the ERP integrations, we do expect that we will continue to make great progress there. You know, we have been making progress there over the last couple years, speeding that up. that is led to a better customer experience. it is also helped us on the gross margin. And as that was really done all before this Agentic capability was applied. So we do expect to speed up those more complex ERP onboarding as well. there is just still a little bit more work to do there. Once we have that in place, that time to transact on the network can be a barrier for, adopting the SPS network. So we think any efficiencies we gain there will help with customers and speed up that access to the network. I would not necessarily say that there is substantial pent-up demand just kind of waiting for this. Admittedly, the ERP market has been a little bit slower in 2025 and so far this year, especially at that kind of medium to large end of that market. But I do think our speed of onboarding with ERP onboarding, is gonna be a massive differentiator for us and really speed up customer time to value. Operator: And our next question will come from Christopher Quintero with Morgan Stanley. Please go ahead. Christopher Quintero: Hey, Chad. Hey, Joe. Thanks for taking the questions, and congrats on the nice execution here. I want to hear your thoughts on maybe the macro environment and kind of what you are hearing from your customers. You know, we are hearing about, higher fuel costs, higher freight costs, the K-shaped economy. So just curious kind of what you are hearing and seeing high level from your customers from a macro perspective. Chad Collins: Yeah, Christopher. I mean, I would say, no substantial headwinds we are hearing from our customers relative to the macro. We were coming off a tougher 2025, especially on the supplier side of our network where they did cite some headwinds. Related to tariffs and that did cause some contract rightsizing last year. We anticipated that would dissipate this year as we kind of did get those contracts rightsized, and they were one-time, and that is playing out as we had expected. And so I would say, you know, no overwhelming headwind, in the macro. Of course, things like the fuel prices and still a little bit of looming tariff uncertainty things that we continue to monitor, but those things are not coming up in our engagement with customers right now. Christopher Quintero: Got it. And then maybe, Joe, for you, on the 1P customer counts, if I have my math right, it seems like that went down or down around 200 quarter over quarter. Is that right? And if so, curious what you are seeing on the you know? Community enablement side of things and new customer adds. Joseph Del Preto: Yeah. No. that is your calculation there is right. We were down a little over 200 sequentially on customer count. The driver of that was really just the timing effect of some of the retail enablement programs. Keep in mind, you know, those customers that are typically, churning or adding are primarily affecting that customer count tend to be the real low ARPU customers. that is why we are able to still deliver the financial results, even having that customer count there. The overall pipeline for an enablement activity right now is strong. there is programs that we are running now that will contribute in the second half plus the remaining pipeline that is to be closed in the second half. Looks positive. That said, I would expect for the year, we are kind of flat to slightly positive on customer count. But I do expect some of that momentum from the second half enablement programs will carry into early 2027. Christopher Quintero: Excellent. Thank you so much. Operator: And our next question will come from George Kurosawa with Citi. Please go ahead. George Kurosawa: Okay, great. Thanks for taking the questions here. Maybe if I could just ask about the MAX beta. You had some interesting anecdotes of customers saving, in some cases, sounds like hundreds of thousands of dollars. I think you have done some work on market sizing. Maybe you could just share updated thoughts there on how you are thinking about a potential uplift, maybe in a best-case scenario or for a median customer? And then how that maybe has evolved your overall thinking on packaging and pricing as the product portfolio continues to expand? Chad Collins: Yeah. Absolutely. So, yeah, as you noted and was in the script, seeing customers really identify different supply chain anomalies and disruptions using Max, which today is through the chat feature. that is what they have access to in the beta. And using that chat feature, they are able to get to some of those, those problems in the supply chain, get them resolved, and that is resulting in hard ROI savings for them. What we have seen through the good adoption of chat here is that a lot of the things that customers are doing via chat would be possible to automate with an agent. So today, you know, it may take them 20 prompts in the chat to get to the right answer. We are seeing that is something that actually could be automatic, automatically detect, and potentially, in some cases, automatically resolve. Which is, which is great because we are developing those types of agents on top of this max technology now, and we believe that those agents that can do things more autonomously in terms of identifying these anomalies in many cases, resolving them, not only finds the kinda hard ROI and the supply chain savings, but also is gonna be a very favorable kind of headcount and efficiency impact for our customers. So what we are in the process of now is converting the chat piece from the beta into a general availability. All newly deployed customers as of the last month have been onboarded with Max, included. And over the course of the next several weeks here, kind of through the summer, we will be making it available to all our other fulfillment customers. And we will be doing that as part of their standard subscription. But what we believe the major monetization activity will be is when we deliver those agents on top that are more autonomous and self-acting, that customers will be willing to pay for that. And that is really where the monetization would come in. And the way that would work is there would be certain tiering or bundling of the packaging of those autonomous agents running on top, and then we would monetize the customers through subscriptions to those bundles. But what I would say is gives us high confidence in this approach is we are already seeing customers using MAX Chat to get to these benefits in their supply chain and the things that they are finding and doing. We have high confidence we will be able to automate with the Agentic architecture over the top. George Kurosawa: Okay. that is great color. And then one for Joe, if I may. Just looking at the change in guidance for the second half, it looks like from what we can tell, the on the revenue side, it looks like, basically, the Q2 beat flowed through excluding the divestiture impact. On the EBITDA side, looks like the full beat was not flowed through. So wonder if you could just maybe comment if there is any incremental spending, expense timing, conservatism, anything we should keep in mind on the EBITDA line? Joseph Del Preto: Yeah for sure. I think on the EBITDA side, I think there is a couple of things to contemplate. 1, there was some movement of some of the expenses that moved out of Q2 into Q3 and Q4. So that was some of it. I think the other piece is we want to make sure we are being very prudent with the way we are approaching our internal AI cost. As we are building out this stuff for Max, as we are building out our internal agents, on the things we are doing internally, we want to make sure we give ourselves enough room to make those investments and make sure that, you know, we have got enough flexibility in the cost structure And so that is the other part of that and why we did not flow all that through the year. George Kurosawa: Okay. Makes sense. Thanks for taking the question. Operator: And our next question will come from Parker Lane with Stifel. Please go ahead. Parker Lane: Yes. Good afternoon. Thanks for taking the questions here. Chad, you talked about some of the advances you are making on the analytics side of the house. It sounds like there is a new enhanced platform there. So it is good to see that. I think that the revenue side, it was up maybe a percent in the first half of the year. Can you just talk about what you are seeing from a demand perspective around that? I know you had mentioned that historically, it is been seen as maybe more discretionary, and that was an impact to that business last year. But looking to the second half of the year, what are your expectations around analytics? Chad Collins: Yeah. So we are really excited about this new technology revamp. I mean, I do think it will help us on the sales side, some of the previous technology had gotten a little stale, a little dated. Our feedback from customers who are up and running on this new, capability is 1, you know, just the look and feel and ability to use the system and the prebuilt capabilities are much stronger than they were Plus, there is more tooling for customers to kinda do more on their own. And then probably the most important thing in all this is it really changes the underlying data architecture of that which now sets it up for many more AI features that we will be able to add to that over time. So we are optimistic about that outlook for the analytics business. I think the fact that it is a little bit more discretionary is true still, but I think with this replatforming, not only will we be in a maybe a little bit stronger competitive position, but we should also be in a position then to add more AI features, which I believe will be, we will be able to monetize over time. Parker Lane: Got it. And we are, we are coming up on two years of the entry into the first party revenue recovery. Space with the SupplyPike deal? I think at the time, was about 3 customers that overlapped with SPS. How have you, how have attach rates or adoption rates trended at the two-year mark relative to back then? And what are some of the learnings you guys have had on the go-to-market front on how to effectively cross-sell both into the historical SupplyPike base and back into SPS' base. Chad Collins: Yeah. Absolutely. So we have had success in both directions, selling fulfillment to SupplyPike customers. Obviously, that is not as big a population. So it is been a little bit less impactful. But the big win has been selling the SupplyPike and really now the Amazon 1 p that came out of Carbon6, to the fulfillment customers. And, you know, we have kinda hardened that muscle, I would say, cross-selling in the organization. We have done some things organizationally, to have that work a little better. We have done some things with the sales team's incentives. And what I think is really powerful in all this is just the signals we get from the network. So the network actually tells us based on trading volumes and trading partner relationships who are the most likely candidates. In fulfillment for revenue recovery. And using that data, we are able to specifically go and target those customers, in some cases, to them with an estimate even just based on our network data on what the potential is for them to recover. And I think this is this is critical for us going forward. I mean, we have been clear that we expect to drive higher proportion of our growth on the ARPU of course, there is a big opportunity, for more connections for fulfillment customers, but cross-selling our analytics and revenue recovery solutions to those fulfillment customers is key to that ARPU growth as well. Parker Lane: Great. Thanks, Chad. Operator: And our next question will come from Matthew Van Vliet with Cantor. Please go ahead. Matthew VanVliet: Hey. Good afternoon. Thanks for taking the question. I guess, following up on some of your comments, Chad, about the MAX monetization. I guess curious on what you are kind of baking in terms of the cycle for existing customers. And then when do you plan to have some of these bundles in place in. You know, I guess, stage, but what do you expect the uplift if existing customers plan to adopt you know, whether it is a middle or high-tier, what kind of uplift can they get on an annual basis? Chad Collins: Yeah. Yeah. Great question. So in terms of the adoption, I mean, if we are to judge it based on the max Chat adoption, I believe we will have real strong agent adoption because we are already seeing customers sort of if they are onboarded with MAX Chat, it is quickly becoming the main interface point that they use when using any of our applications. They are just starting in MAX Chat. And, you know, through that, then I believe that as some of the things that they are doing in MAX Chat, we are able to automate with agents? There will be strong interest in having that all be automated so they do not even need to interact that much with chat interface. They still can, but some of the things that are happening on a daily basis or weekly basis will just get automated with the agents. In terms of the timing of all that, we expect that we will be in a position to be selling agents kind of by late Q4 of this year. Now obviously, that will take some time to flow through to revenue, but we do think we will be in a position where we are actually monetizing this agent architecture still here this year. Now, the degree to which we are able to do uplift on ARPU, that is some of the details that we are working through right now. I do think the first set of agents that we put out are gonna be probably more addressable for the more highly complex customers with more trading relationships. And over time, we are able to bring that back down to more of our medium and small customers over time. Alright. Matthew VanVliet: Helpful. And then, Joe, you mentioned on some of the cost structure where it sounded like internal AI use maybe just help us with the timeline for when internally you were really pushing that aggressively. For a good portion of the employee base. Just to get a sense for sort of when we might lap that. And when growth, could provide some operating leverage in the model, whether it is you know, later this year, into next year, beyond that? Joseph Del Preto: What I would say there, Matthew, is a lot of the leverage we are seeing out of the business right now is not based on some of the AI internal use cases that we are starting to talk about. I think a lot of the efficiency you have seen in this business have really been driven by economies of scale, just being more operationally efficient over the last 12 months. People looking internally and making sure we are optimizing each of our processes. So feel really good about how we somewhat structurally changed this business going forward without using AI. And if I think of the go-forward and some of the things we have talked about the onboarding process, on the go-to-market side, we believe that those will all be additive to some of the things we have already been able to accomplish without the internal use of AI. So we feel good about the trajectory of the of the margin going forward, not only this year, but going into next year. And as we exit this year, Matthew will have a little bit more color on how we think that, you know, probably impacts more of the longer term focus of the business. Matthew VanVliet: Alright. Great. Thank you. Operator: And our next question will come from Mark Schappel with Loop Capital. Please go ahead. Mark William Schappel: Thank you for taking my question. Chad, you have had a new Chief Commercial Officer on board now for a couple of quarters. Wondering if you could just talk a little bit about maybe some of the changes that have been made or adjustments that have been made to the sales structure, maybe like, customer segmentation or just even the coverage model for that matter? Chad Collins: Yeah. I would say we did evolve certain things in the go-to-market. They were kind of in conjunction--it happened to be in conjunction with Eduardo's arrival, but I think he is all in line with that. You know, some of the things I mentioned earlier around driving a little bit more focus on cross-sell and aligning that as part of our incentive structure. We have also done some things to segment the sales force a little bit more between new and existing customers. That has worked effectively, especially on the on the retail side. And, you know, the other thing I would say is, you know, Eduardo and his team on our customer success are also responsible for all the customer onboarding activity and, that is an area where we have seen quite a bit of success. And are continuing to drive more success as we automate that onboarding process. So very pleased with the way that Eduardo's come in. He has brought some new ideas to the organization, having worked at some previous very scaled software businesses, and just helping us overall mature our capabilities around go-to-market And I will add too. Part of that is marketing. We brought in a new chief marketing officer. She's really helped us on some of the demand generation things. I mean, the company's been kind of in a luxury position to, you know, pretty much solely rely on these retail enablement programs as a source for new customers. We believe that there over time will be an opportunity to drive more new customers through more traditional digital marketing capabilities. And that is something that Maria has brought into our organization. So the combination is working quite well. Thank you. Operator: And our next question will come from Jeff Van Rhee with Craig Hallum. Please go ahead. Jeff Van Rhee: Hey, this is Daniel on for Jeff Van Rhee. On the beat this quarter, the last few quarters have been a little bit more in line. Congrats on this quarter, real nice beat on the top and the bottom. Just what played out in the quarter that drove the more than expected strength here in Q2? Joseph Del Preto: Yeah. I think a couple of things. 1, we talked about coming out of Q1. We are not, you know, we are not seeing the same amount of pressure especially on the down sell and growth retention that we saw throughout 2025. So GRR continues to be a real strength of ours. That continues to grow year-over-year and feel really good about the progress we are making on that front. And then we start to see more momentum within our existing customer base and adding new trading partners. I think we have talked about the land and expand model. Continues to be a big driver of our growth overall. And so I think the combination of our ability to expand training partners within our existing customer base and then, you know, the positive momentum on the GRR side with were the two big drivers on the revenue overperformance. Jeff Van Rhee: Okay. And then on the customer count, obviously, that is skewed by the 3P customers exiting the account. But in terms of just the 1P count being down 52 sequentially, just thoughts on that? Any updated thinking on expectations for customer growth? Any that changed there? Thanks. Joseph Del Preto: Yeah. That was just really due to some timing of the retail enablement programs and how they contributed to customer count in the quarter. I would say overall, the retail programs that are up and running and those are in the pipeline that we have high confidence in for the second half, That all looks pretty positive. So I would expect the second half to contribute sort of a positive customer count. But kind of coming in on the year, probably kinda flat to slightly positive on the customer count. Daniel: Okay. Thanks, Chad. Thanks, Joe. Operator: And our next question will come from Lachlan Brown with Rothschild & Co. Please go ahead. Lachlan Brown: Hi, Chad, Joe. Thanks for the questions. With your max beta customers, just walk us through your confidence in being able to convert them, when you made max generally available at the end of the summer? Could you talk us through the go-to-market playbook that is in place to transition these accounts at launch? And, yeah, I guess any feedback from preliminary customer discussions would be helpful. Thanks. Chad Collins: Yeah. So let me start with the preliminary customer discussions. In this beta, we have been very engaged customers. I think you can see from some of the detailed examples that we shared in the prepared remarks, we are really engaged with customers, understanding the ROI that they are getting out of out of Max. And I would say, you know, this is 1 of the nice things about having a tool like this. I mean, we see all of their interactions They are able to score their interactions. We have a separate agent that on top of their scoring goes in and scores the interaction. So we really can narrow in and see where customers are getting value out of the MAX Chat capability. In terms of kind of then upselling them from MAX Chat, which we are using kind of as a gateway into our overall Max architecture, you know, we are gonna target those probably larger, more complex customers that have high usage of MAX Chat. And, and utilize work with them, to convert some of the things they are doing with MAX Chat into autonomous agents that will just take care of those things, automatically for them. And we think between the ROI that they are driving out of their supply chain, and the efficiencies they get then from converting over from chat into an agent and, an autonomous agent. That gives us pretty high conviction from customers to move over to the more Agentic approach, which will be monetizable. Lachlan Brown: Thanks. And looking at the implied Q4 revenue from the outlook, it suggests a nice step up from Q3. Could you just help us unpack the main building blocks behind that acceleration? For example, are there any specific enablement campaigns scheduled for later in the year that gives you that visibility? Joseph Del Preto: Yeah. I just walked through a couple of things. I know Chad talked about a little bit more on the enablement campaigns. I think a couple of things are going on in the business. 1, I just talked about it a little bit earlier. The momentum we are seeing on the GRR side, so we continue to see improvements across our customer base. And so we are in a much better position, I think, going into Q4 and the momentum we are seeing there than we were a year ago. So I think that is a that is the other big driver. And then the second thing is you know, on the enablement side. We are seeing more of these campaigns come through. We are seeing momentum in the back half of the business. We have a really strong pipeline. And so we believe there is gonna be a solid number of these customers that land in Q4 that is really kind of driving that revenue in the quarter. Chad Collins: Yeah. I mean, I would just add, you know, although we do see we see some positivity there, you know, kind of the big drivers in our revenue performance to finish out the year here are gonna be more probably driven by the strong GRR that Joe mentioned and the ARPU expansion. We do expect to be positive on the customer count, but the customer count that we drive through these retail programs certainly, while important, we wanna get customers. We wanna further penetrate that TAM. Those tend to be very low ARPU customers when they come in the door. So they are meaningful over the long-term, but not as meaningful in the short term to drive revenue. Lachlan Brown: that is clear. And congrats on the quarter, guys. Joseph Del Preto: Thank you. Thanks, Lachlan. Operator: And our next question will come from Nehal Chokshi with Northland Capital Markets. Please go ahead. Pardon me. Your line is open. Nehal Chokshi: Sorry about that. Thank you. Congrats on a good quarter. And congrats on the implicit acceleration in the business as well, that the implicit acceleration in the business in the back half, especially in the 4Q here. And sounds like it is going to be driven by the improving GRR that you are seeing. Is that-- is the driver of improving GRR max or is it something else? Chad Collins: Yeah. I would say it is a combination of, things. I do think a little bit is macro. We did see some headwinds last year in our customer base that drove them to kind of right-size contracts. We are not seeing that this year. The other factor is, I believe, you know, we have made some improvements in our customer treatment strategy. I mentioned that both on onboarding and also the way that we have organized the sales force. To give a little more attention, I would say, to existing customers. And I think the new innovation that, our customers are seeing us with Max, with adding revenue recovery to the product portfolio, with investing in our analytics product, I think these are all things that, show to our customers that they wanna be a long-term partner with SPS Commerce. Nehal Chokshi: Great. Thank you very much. Operator: And once again, if you would like to ask a question, please press *1. Our next question will come from Clark Wright with D.A. Davidson. Please go ahead. Clark Wright: Hi, thank you. If we look at the growth mix after the 3P revenue recovery divestiture, how much of the growth now do you expect to come from ARPU expansion versus customer additions? Joseph Del Preto: Yeah. Clark, what we have said is, you know, kind of in our growth algorithm over the long-term, we expect roughly one-third of the growth to come from the customer count side and two-thirds to come from ARPU. This year, it will obviously probably be slightly more on the ARPU side. And then if you were so if you were to take that to our current, expectation for the business, that leads high single digits sort of that low single digits on the customer count and that kind of mid to high on the ARPU growth. Clark Wright: Got it. that is helpful. And then, can you help me understand in your prepared remarks, you mentioned that SPS Commerce is uniquely positioned to provide agents to automate tasks. Could you could you help me understand why you are uniquely positioned versus other vendors in the market, and what that means going forward as you continue to invest to grow your competitive advantages. Chad Collins: Yeah. Yeah. So, I mean, we made that comment in the context of we are doing in automating collaboration and supply chain transactions between trading partners. And what we found that is really key to that is the data that we have on the network. So, you know, three main components there. 1, of course, the customer's data on the network. Often, we have more of their supply chain data in our network than they have available to them in the ERP. it is just a broader set of data. We also see all the kind of macro transaction patterns, going across our network. So, you know, of course, we cannot let 1 customer look at another customer's discrete data, but what we can do is look at, trading, patterns, especially across the major retailers. So we may see some differences in the way that Walmart or Target are handling some of their suppliers and see that at the macro level and translate that into some changes that the suppliers to those retailers need to make. And then maybe most importantly, you know, over this 25 years of doing this, we have built out very deep proprietary databases of supply chain expectations that the major retailers and distributors in the U.S. have around compliance and supply chain expectations. And a lot of this information we have is stuff that is not going to be available in a downloadable vendor guide that they are gonna provide, and then a lot of them on the network do not even provide these types of vendor guides. And so we are really able to train the agents on this proprietary database, and those agents are really able to guide these suppliers to execute their supply chain. In a way that is gonna be compliant with their retail and distributor customers. Clark Wright: Got it. that is helpful. Thank you. Operator: And I am showing no further questions in the queue. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and have a wonderful day. You may now disconnect your lines at this time. Before you buy stock in SPS Commerce, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SPS Commerce wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,081!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,166,221!* Now, it’s worth noting Stock Advisor’s total average return is 889% — a market-crushing outperformance compared to 203% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of July 31, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. SPS Commerce (SPSC) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

This article first appeared on GuruFocus. Revenue: $197.8 million, a 6% increase year over year. Recurring Revenue: Grew 6% year over year. Adjusted EBITDA: $66.6 million. Free Cash Flow: $57.4 million for the quarter; trailing twelve-month free cash flow was $198.7 million, up 40% year over year. Cash and Cash Equivalents: $173 million at quarter end. Share Repurchases: $51.2 million of shares repurchased in Q2 2026. Customer Count: Approximately 46,650 recurring revenue customers. Average Revenue per Customer (ARPU): $15,100, skewed higher due to the divestiture's impact on the calculation. Divestiture Impact: Received $9.5 million cash payment from the sale of the 3P revenue recovery business; incurred a loss on sale of $23.5 million in Q2 2026. Q3 2026 Guidance: Revenue expected between $196.3 million and $198.3 million; adjusted EBITDA between $67.4 million and $69.4 million. Full Year 2026 Guidance: Revenue expected between $788.4 million and $793.4 million; adjusted EBITDA between $264.6 million and $269.1 million. Warning! GuruFocus has detected 2 Warning Sign with SPSC. Is SPSC fairly valued? Test your thesis with our free DCF calculator. Release Date: July 30, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. SPS Commerce Inc (NASDAQ:SPSC) reported strong Q2 2026 results with revenue of $197.8 million, a 6% increase year-over-year, and adjusted EBITDA of $66.6 million, highlighting the health of the core business. The divestiture of the 3P revenue recovery business sharpens focus on the more strategic 1P supplier market, which has better overlap with the company's portfolio and is expected to drive higher ARPU growth. The AI agent MAX is delivering tangible ROI for customers, such as catching a $290,000 invoice failure, identifying 100 stalled dropship orders, and flagging $70,000 in unacknowledged purchase orders, with plans to monetize autonomous agents by late Q4 2026. Customer survey results show high satisfaction and strategic value: 83% of customers said SPS data improved their AI readiness, 87% said it improved scalability, and 100% said they would need more resources without the SPS network. The company is achieving significant operational efficiencies, including the first fully AI-powered customer onboarding, which reduces onboarding time from days to minutes, and strong free cash flow of $57.4 million in Q2, up 40% year-over-year on a trailing twelve-month basis. Revenue recovery solutions are delivering strong ROI for customers, such as Chosen Foods recovering ~30% of outstanding deductions, Owlet recovering $1.4 million in six months, and Serta Simmons saving $200,000, driving cross-sell momentum. The new analytics platform enhances power, scale, and user experience, enabling faster time-to-insight and future AI predictive capabilities, with positive early feedback from customers like RuffleButts. Total revenue growth is expected to be only 5% for full-year 2026, down from prior expectations, due to the divestiture of the 3P revenue recovery business, which reduces second-half revenue by approximately $10.5 million. The company incurred a loss on sale of $23.5 million in Q2 2026 related to the divestiture, impacting GAAP results. Customer count declined by over 200 sequentially in Q2 2026, driven by timing effects of retail enablement programs, and the company expects only flat to slightly positive customer count for the year. The ERP migration market remains slow, particularly in the medium-to-large segment, which could delay onboarding and expansion opportunities. The company is not flowing through the full Q2 EBITDA beat to full-year guidance, citing the need to invest in internal AI capabilities and maintain flexibility in cost structure, which may temper near-term margin expansion. Macro uncertainties, including fuel costs and lingering tariff concerns, continue to be monitored, though they have not yet materialized as significant headwinds in customer engagements. The 3P revenue recovery business divestiture resulted in the loss of approximately 7,300 customers, which may reduce the company's total addressable market in the short term. Q: Why did SPS Commerce divest its 3P revenue recovery business, and how does this impact the company's strategic focus? A: CEO Chadwick Collins explained that while the company remains confident in the revenue recovery market, the 3P business, which primarily served Amazon marketplace sellers, had little overlap with the rest of the portfolio. The 1P side, serving wholesale suppliers to multiple retailers, aligns much better with the ideal customer profile and allows for cross-selling the full suite of solutions. The divestiture sharpens focus on strategic relationships with 1P suppliers who benefit from the intelligent supply chain network. Q: How is the MAX AI agent performing in its beta phase, and what is the monetization strategy going forward? A: CEO Chadwick Collins highlighted tangible ROI from beta customers, including catching a $290,000 invoice failure, identifying 100 stalled dropship orders, and flagging $70,000 in unacknowledged purchase orders. The strategy is to use MAX Chat as a gateway, then convert high-usage customers to autonomous agents that can automatically detect and resolve supply chain anomalies. The company expects to begin selling these agentic capabilities by late Q4 2026, with monetization through tiered subscription bundles. Q: What drove the strong Q2 2026 financial results, and how should investors interpret the ARPU increase? A: CFO Joseph Del Preto noted that the core business grew high single-digits, driven by accelerated 1P customer ARPU growth from upsell and cross-sell momentum. The ARPU calculation skewed higher in Q2 due to the divestiture's timingthe 7,300 3P customers were included in the beginning customer count but not the ending count, while their full revenue was in the quarter. Going forward, ARPU calculations will be more consistent with only 1P customers. Q: What is the company's outlook for customer count growth, and what factors are influencing it? A: CEO Chadwick Collins acknowledged a sequential decline of about 200 customers in Q2, driven by timing effects of retail enablement programs. However, the pipeline for enablement activity is strong, with programs running in the second half expected to contribute positively. The company expects to be flat to slightly positive on customer count for the full year, with momentum carrying into early 2027. Q: How is the company addressing the macro environment, particularly regarding tariffs and customer headwinds? A: CEO Chadwick Collins stated there are no substantial macro headwinds currently. While 2025 saw contract rightsizing due to tariff-related pressures, that has dissipated as expected. The company continues to monitor fuel prices and tariff uncertainty but these are not coming up in customer engagements. GRR (Gross Revenue Retention) continues to improve year over year, reflecting a healthier customer base. Q: What progress has been made on the analytics business, and what are the expectations for the second half? A: CEO Chadwick Collins expressed excitement about the new enhanced analytics platform, which delivers significant gains in power and scale with an improved user experience. The replatforming changes the underlying data architecture, setting up the product for future AI capabilities. While analytics remains somewhat discretionary, the company is optimistic about the outlook given the stronger competitive position and potential for AI-driven monetization. Q: How has the cross-selling of revenue recovery solutions to fulfillment customers progressed since the Supply Pike acquisition? A: CEO Chadwick Collins noted success in both directions, but the biggest win has been selling Supply Pike and Carbon 6's Amazon 1P solutions to fulfillment customers. The company has hardened its cross-selling muscle through organizational changes and sales incentives. Critically, network data signals help identify the most likely candidates for revenue recovery, sometimes allowing SPS to come to customers with estimates of potential recoveries based on trading volumes and partner relationships. Q: What changes has the new Chief Commercial Officer implemented in the go-to-market strategy? A: CEO Chadwick Collins highlighted several evolutions, including greater focus on cross-selling aligned with incentive structures, better segmentation between new and existing customers (especially on the retail side), and improved customer onboarding processes. Additionally, a new Chief Marketing Officer has been brought in to develop more traditional digital marketing capabilities, reducing reliance solely on retail enablement programs for new customer acquisition. Q: What drove the Q2 revenue beat, and what are the key drivers for the back-half acceleration? A: CFO Joseph Del Preto attributed the beat to improved GRR momentum and increased trading partner expansion within the existing customer base. For the back half, the company expects continued GRR improvements and strong enablement campaign pipelines driving Q4 revenue. CEO Chadwick Collins added that ARPU expansion and strong GRR will be the primary revenue drivers, with customer count contributions being meaningful long-term but less impactful in the short term. Q: Why is SPS Commerce uniquely positioned to provide AI agents for supply chain automation? A: CEO Chadwick Collins explained that SPS has three key advantages: (1) customers' supply chain data on the network is often broader than what they have in their ERP systems; (2) the company can analyze macro transaction patterns across the network to identify differences in how major retailers handle suppliers; and (3) 25 years of proprietary databases on retailer compliance and supply chain expectations that aren't available in downloadable vendor guides. This proprietary data enables agents to guide suppliers toward compliant execution with their retail and distributor customers. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

SPS Commerce (SPSC) came out with quarterly earnings of $1.27 per share, beating the Zacks Consensus Estimate of $1.08 per share. This compares to earnings of $1 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +17.59%. A quarter ago, it was expected that this provider of supply chain software services to businesses would post earnings of $0.97 per share when it actually produced earnings of $1.1, delivering a surprise of +13.4%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. SPS Commerce, which belongs to the Zacks Business - Services industry, posted revenues of $197.82 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 1.37%. This compares to year-ago revenues of $187.4 million. The company has topped consensus revenue estimates just once over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. SPS Commerce shares have lost about 22.1% since the beginning of the year versus the S&P 500's gain of 6.9%. While SPS Commerce has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for SPS Commerce was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.24 on $201.6 million in revenues for the coming quarter and $4.74 on $796.1 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Business - Services is currently in the bottom 24% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, UL Solutions Inc. (ULS), is yet to report results for the quarter ended June 2026. The results are expected to be released on August 4. This company is expected to post quarterly earnings of $0.56 per share in its upcoming report, which represents a year-over-year change of +7.7%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. UL Solutions Inc.'s revenues are expected to be $811.87 million, up 4.6% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report SPS Commerce, Inc. (SPSC) : Free Stock Analysis Report UL Solutions Inc. (ULS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Second quarter 2026 revenue and Adjusted EBITDA exceed high end of guidance range  Company provides updated full year 2026 guidance following recently completed divestiture MINNEAPOLIS, July 30, 2026 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (NASDAQ: SPSC), the leading intelligent supply chain network, today announced financial results for the second quarter ended June 30, 2026. Financial Highlights Second Quarter 2026 Financial Highlights Revenue was $197.8 million in the second quarter of 2026, compared to $187.4 million in the second quarter of 2025, reflecting 6% growth. Recurring revenue grew 6% from the second quarter of 2025. Net income was $6.9 million or $0.19 per diluted share, compared to net income of $19.7 million or $0.52 per diluted share in the second quarter of 2025. Non-GAAP income was $46.4 million or $1.27 per diluted share, compared to non-GAAP income of $38.0 million or $1.00 per diluted share in the second quarter of 2025. Adjusted EBITDA for the second quarter of 2026 increased 19% to $66.6 million compared to the second quarter of 2025. Share repurchases in the second quarter of 2026 totaled $51.2 million. “SPS Commerce is executing its growth and innovation roadmap. MAX, our agentic capabilities embedded within SPS' supply chain network, has already delivered tangible value to beta users, equating to hundreds of thousands of dollars in savings to individual customers in just a matter of three months. We are excited about MAX’s launch to all SPS Fulfillment customers later this summer,” said Chad Collins, CEO of SPS Commerce. “No other company can match the unique combination of AI capabilities, 25 years of proprietary data, deep domain expertise, and expansive network access to drive this kind of tangible value, collaboration, and operational efficiencies that SPS offers today.” “Solid second-quarter performance reflects up-sell and cross-sell momentum across our core business,” said Joe Del Preto, CFO of SPS Commerce. “We continue to demonstrate operational rigor, exceeding our margin expansion goals while simultaneously rolling out our AI strategy across the SPS network.” Guidance As a result of the divestiture of the 3P Revenue Recovery business on June 30, 2026, guidance factors in a reduction of approximately $10.5 million in revenue to the second half of 2026. The divestiture is expected to be neutral to Adjusted EBITDA in the second half of 2026. Third Quarter 2026 Guidance Revenue is expected to be in the range of $196.3 million to $198.3 million. Net income per diluted share is expected to be in the range of $0.72 to $0.76, with fully diluted weighted average shares outstanding of 36.8 million shares. Non-GAAP income per diluted share is expected to be in the range of $1.20 to $1.23. Adjusted EBITDA is expected to be in the range of $67.4 million to $69.4 million. Non-cash, share-based compensation expense is expected to be $16.4 million, depreciation expense is expected to be $5.4 million, and amortization expense is expected to be $8.5 million. Fiscal Year 2026 Guidance Revenue is expected to be in the range of $788.4 million to $793.4 million, representing 5% to 6% growth over 2025. Net income per diluted share is expected to be in the range of $2.24 to $2.33, with fully diluted weighted average shares outstanding of 36.9 million shares. Non-GAAP income per diluted share is expected to be in the range of $4.84 to $4.93. Adjusted EBITDA is expected to be in the range of $264.6 million to $269.1 million, reflecting an Adjusted EBITDA margin of 34% at the midpoint, an increase of approximately 300 basis points compared to full year 2025. Non-cash, share-based compensation expense is expected to be $69.8 million, depreciation expense is expected to be $23.4 million, and amortization expense is expected to be $35.6 million. The forward-looking measures and the underlying assumptions involve significant known and unknown risks and uncertainties, and actual results may vary materially. The Company does not present a reconciliation of the forward-looking non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, and non-GAAP income per share, to the most directly comparable GAAP financial measures because it is impractical to forecast certain items without unreasonable efforts due to the uncertainty and inherent difficulty of predicting, within a reasonable range, the occurrence and financial impact of and the periods in which such items may be recognized. Quarterly Conference CallTo access the call, please dial 1-833-816-1382, or outside the U.S. 1-412-317-0475 at least 15 minutes prior to the 3:30 p.m. CT start time. Please ask to join the SPS Commerce Q2 2026 conference call. A live webcast of the call will also be available at http://investors.spscommerce.com under the Events and Presentations menu. The replay will also be available on our website at http://investors.spscommerce.com. About SPS CommerceSPS Commerce (NASDAQ: SPSC) is the leading intelligent supply chain network, connecting trading partners around the globe to optimize supply chain operations with all retail partners. Our AI-powered network connects 300,000+ trading relationships worldwide and moves more than 750M transactions and over $650B in gross merchandise value each year. From retailers and brands to manufacturers, distributors, and logistics providers, SPS is trusted by seven of the top ten largest retailers, and over two-thirds of today’s fastest growing brands. Our multi-solution portfolio orchestrates the data, decisions, and relationships that keep the world's supply chains moving forward. With nearly 3,000 employees and global offices, SPS Commerce is headquartered in Minneapolis, Minnesota. For more information, visit spscommerce.com. SPS COMMERCE, SPS, SPS logo and INFINITE RETAIL POWER are marks of SPS Commerce, Inc. and registered in the U.S. Patent and Trademark Office, along with other SPS marks. Such marks may also be registered or otherwise protected in other countries. SPS-F Use of Non-GAAP Financial Measures To supplement our condensed consolidated financial statements, we provide investors with Adjusted EBITDA, Adjusted EBITDA Margin, and non-GAAP income per share, all of which are non-GAAP financial measures. We believe that these non-GAAP financial measures provide useful information to our management, Board of Directors, and investors regarding certain financial and business trends relating to our financial condition and results of operations. Our management uses these non-GAAP financial measures to compare our performance to that of prior periods for trend analyses and planning purposes. Adjusted EBITDA is also used for purposes of determining executive and senior management incentive compensation. We believe these non-GAAP financial measures are useful to an investor as they are widely used in evaluating operating performance. Adjusted EBITDA and Adjusted EBITDA Margin are used to measure operating performance without regard to items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets, and to present a meaningful measure of corporate performance exclusive of capital structure and the method by which assets were acquired. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in our condensed consolidated financial statements and are subject to inherent limitations. Investors should review the reconciliations of non-GAAP financial measures to the comparable GAAP financial measures that are included in this press release. Adjusted EBITDA Measures: Adjusted EBITDA consists of net income adjusted for income tax expense, depreciation and amortization expense, stock-based compensation expense, realized gain from investments and foreign currency transactions, investment income, loss on sale of business, and other adjustments as necessary for a fair presentation. Other adjustments for the three and six months ended June 30, 2026, included the expense impact from disposals of other equipment, remeasurement of an acquired earn-out liability, and one-time divestiture exit and disposal costs. Net income is the most directly comparable GAAP measure of financial performance. Adjusted EBITDA Margin consists of Adjusted EBITDA divided by revenue. Margin, the comparable GAAP measure of financial performance, consists of net income divided by revenue. Non-GAAP Income Per Share Measure: Non-GAAP income per share consists of net income adjusted for stock-based compensation expense, amortization expense related to intangible assets, realized gain from investments and foreign currency transactions, loss on sale of business, and other adjustments as necessary for a fair presentation, including for the three and six months ended June 30, 2026, the expense impact from disposals of other equipment, remeasurement of an acquired earn-out liability, and one-time divestiture exit and disposal costs, and the corresponding tax impacts of the adjustments to net income, divided by the weighted average number of shares of common and diluted stock outstanding during each period. Net income per share, the most directly comparable GAAP measure of financial performance, consists of net income divided by the weighted average number of shares of common and diluted stock outstanding during each period. To quantify the tax effects, we recalculated income tax expense excluding the direct book and tax effects of the specific items constituting the non-GAAP adjustments. The difference between this recalculated income tax expense and GAAP income tax expense is presented as the income tax effect of the non-GAAP adjustments. Forward-Looking Statements This press release may contain forward-looking statements, including information about management's view of SPS Commerce's future expectations, plans and prospects, including our views regarding future execution within our business, the opportunity we see in the retail supply chain world and our performance for the third quarter and full year of 2026, within the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors which may cause the results of SPS Commerce to be materially different than those expressed or implied in such statements. Certain of these risk factors and others are included in documents SPS Commerce files with the Securities and Exchange Commission, including but not limited to, SPS Commerce's Annual Report on Form 10-K for the year ended December 31, 2025, as well as subsequent reports filed with the Securities and Exchange Commission. Other unknown or unpredictable factors also could have material adverse effects on SPS Commerce's future results. The forward-looking statements included in this press release are made only as of the date hereof. SPS Commerce cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, SPS Commerce expressly disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The annual per share amounts may not cross-sum due to rounding. Contact:Investor RelationsThe Blueshirt GroupIrmina Blaszczyk [email protected]

(Bloomberg) -- Apple Inc. reports quarterly earnings after the close on Thursday, but investors will be largely looking past the numbers and seeking clues to incoming Chief Executive Officer John Ternus’ strategic plans. Most Read from Bloomberg US Seeks to Deploy Hypersonic Missile for the First Time Against Iran North Korea Confirms Suicide Rule for Soldiers Ukraine Captures Two NJ Malls Separated by Just Four Miles — and Very Different Fates Junior Bankers Sick of Grunt Work Build $2 Billion AI Tool to Do the Job Meta Shares Plunge on Rising Concern About AI Spending Spree The iPhone maker announced last week that Ternus, its current head of hardware infrastructure, will take over for CEO Tim Cook on Sept. 1. That makes Apple’s fiscal second-quarter earnings report, outlook and conference call the first significant opportunity for Wall Street to get a reading on the new leader’s priorities. It isn’t clear if Ternus will appear on the call, and a company spokesperson declined to comment. “It isn’t really about the numbers,” said Anthony Saglimbene, chief market strategist at Ameriprise. “We want to know what the CEO transition looks like.” Ternus is taking over at a complex time for one of the world’s biggest companies, which is expected to debut a number of major products in upcoming months — notably a foldable iPhone. But while growth trends are improving, Apple has been grappling with skyrocketing costs for key components like memory chips and a volatile macro backdrop driven by the war in Iran and advances in AI that have minted stock market winners and losers. “Investors have reason to be excited about Ternus since he was an overseer of some of Apple’s most successful recent products, but his strategy will be a long-term story,” said David Wagner, portfolio manager at Aptus Capital Advisors, which has about $14 billion in assets and holds Apple in a variety of portfolios. “In the short term, the impact of component costs will be the focal point.” Apple shares are up less than 1% this year after a relatively disappointing 8.6% gain in 2025. By contrast, the technology-heavy Nasdaq 100 Index is up 8.3% in 2026 and the S&P 500 Index has gained 4.9%. Apple’s stock was up 1.2% on Thursday afternoon. While the company is accelerating development of AI-powered hardware devices and features, it has also seen a number of delays with its own artificial intelligence products. However, Apple hasn’t followed its megacap peers in sinking tens of billions of dollars into building out AI infrastructure, which has diminished the stock’s correlation to the rest of the tech industry. Earnings from the four biggest spenders — Alphabet Inc., Amazon.com Inc., Meta Platforms Inc. and Microsoft Corp. — after the bell on Wednesday offered a mixed bag on that theme. For example, Meta shares were punished in extended trading after the Facebook parent raised its expectations for capital expenditures in 2026. Meanwhile Alphabet’s stock jumped as its cloud computing unit reported strong growth, signaling that its AI investments are starting to pay off. Wall Street expects Apple to report 19% earnings growth on a 15% jump in revenue, according to data compiled by Bloomberg. For the fiscal year, which closes at the end of September, analysts anticipate that revenue will climb 12%, nearly twice last year’s 6.4% pace and the fastest rate since 2021. However, that still trails the tech sector, which is expected to post revenue growth of more than 26% in 2026, according to Bloomberg Intelligence data. The relatively slow expansion has made Apple’s stock more expensive. The shares trade at nearly 30 times estimated earnings, a sizable premium to their 10-year average of roughly 23. That gives Apple the second-highest valuation among the Magnificent Seven group of tech giants, trailing only Tesla Inc. and its nosebleed multiple of more than 180 times forward earnings. “Apple is a quality name, which warrants a premium, but it continues to look pretty expensive relative to its growth,” said Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management Company, which manages around $5 billion. This setup could put more pressure on Ternus to chart a path to stronger long-term growth, according to Stucky. “If innovation from the new CEO can provide that, then there’s reason to be optimistic about Apple from here, and that optimism could keep the multiple strong or even push it higher,” he said. “Right now, we don’t know what that growth catalyst could be. If the strategy is more about grinding out market-share gains, keeping products refreshed, that would be good but not game-changing.” The soaring cost of memory chips is one of the biggest factors in the company’s outlook. Memory is a major part of the buildout of artificial intelligence infrastructure, and the aggressive spending on AI has created a supply crunch. An index of spot prices for dynamic random-access memory, or DRAM, chips has risen more than 500% since the end of August. That said, Apple is better positioned to absorb higher costs than many of its rivals due to its size and balance-sheet strength. For example, it recently rolled out a less expensive version of the MacBook designed to improve the company’s market share in lower-end laptops. However, the longer memory prices stay elevated the more the impact is expected to spread, potentially hitting Apple’s bottom line. “The stocks that have been hit the hardest are the ones that show some kind of margin degradation,” Aptus Capital’s Wagner said. “So if the memory headwind sticks around, it will start to become a margin risk for Apple. And given the valuation, there’s more room to the downside.” Tech Chart of the Day Top Tech Stories A frenzied day of earnings reports offered a glimpse at how some of the world’s biggest tech companies are doing in artificial intelligence. The upshot: Alphabet Inc.’s Google is seeing a clear payoff from its AI spending, while Meta Platforms Inc. is lagging behind. Alphabet reported high demand for its cloud and artificial intelligence offerings, boosting shares and giving investors confidence that its unprecedented investments in AI infrastructure will pay off. Meta Chief Executive Officer Mark Zuckerberg reignited fears that the historic levels of investment he’s making to catch up in the artificial intelligence race won’t pay off, a prospect that sent shares sliding after the company raised its spending outlook for the year. Amazon.com Inc. is spending at a rapid rate to expand data center capacity to meet the intense demand for artificial intelligence computing power, fueling the fastest quarterly sales growth for its cloud unit in more than three years. Microsoft Corp. said cloud computing revenue and spending on AI infrastructure will accelerate this year, a bid to convince investors that its huge bets on artificial intelligence are poised to pay off. Qualcomm Inc. rallied in premarket trading after the company said it was making headway in the lucrative data center market and predicted that the China phone industry would bounce back. Anthropic PBC has begun weighing a fresh funding round that would value the artificial intelligence developer at more than $900 billion, according to people familiar with the matter, potentially leapfrogging its longtime rival OpenAI as the world’s most valuable AI startup. OpenAI has met a key milestone for securing AI capacity in the US several years ahead of schedule, boosting the startup’s ambitious plans for data center expansion. Earnings Due Thursday Earnings Premarket: Asure Software Inc. (ASUR US) Bandwidth Inc. (BAND US) Cable One Inc. (CABO US) Diebold Nixdorf Inc. (DBD US) Entegris Inc. (ENTG US) InterDigital Inc. (IDCC US) L3Harris Technologies Inc. (LHX US) Silicom Ltd. (SILC US) Vistance Networks Inc. (VISN US) Earnings Postmarket: Cohu Inc. (COHU US) Apple Inc. (AAPL US) Axt Inc. (AXTI US) Dolby Laboratories Inc. (DLB US) Five9 Inc. (FIVN US) GoDaddy Inc. (GDDY US) Grid Dynamics Holdings Inc. (GDYN US) Monolithic Power Systems Inc. (MPWR US) OneSpan Inc. (OSPN US) Rimini Street Inc. (RMNI US) Riot Platforms Inc. (RIOT US) SPS Commerce Inc. (SPSC US) Twilio Inc. (TWLO US) Universal Display Corp. (OLED US) Western Digital Corp. (WDC US) --With assistance from Subrat Patnaik, Neil Campling and David Watkins. (Updates to afternoon trading.) Most Read from Bloomberg Businessweek ‘I Have Half of MAGA’: The Republican Challenging Trump From Within Running America’s Second-Busiest Airport in Turbulent Times It’s Boating Season, But Only If You Can Afford Fuel United’s CEO Is Here to Buy Your Struggling Airline Outrage Over Pesticides Is Alienating Some Trump Voters ©2026 Bloomberg L.P.