SPS Commerce Q2 2026 Earnings Report

SPS Commerce EPS Results

• Actual EPS: $1.27
• Consensus EPS: $1.09
• Beat/Miss: Beat by +$0.18
• One Year Ago EPS: $1.00

SPS Commerce Revenue Results

• Actual Revenue: $197.82 million
• Expected Revenue: $195.46 million
• Beat/Miss: Beat by +$2.36 million
• YoY Revenue Growth: +5.60%

SPS Commerce Announcement Details

• Quarter: Q2 2026
• Date: 7/30/2026
• Time: After Market Closes
• Conference Call Date: Thursday, July 30, 2026
• Conference Call Time: 4:30PM ET

SPS Commerce (NASDAQ:SPSC) 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. SPS Commerce’s Retail Network provides prebuilt integrations to major retail and e-commerce platforms, while its Fulfillment Network streamlines back-end operations for suppliers shipping to multiple retailers. Advanced analytics tools deliver actionable insights on sales performance, inventory levels and trading partner compliance, empowering customers to optimize their supply chain strategies and respond swiftly to market trends.

Founded in 1987 and headquartered in Minneapolis, Minnesota, SPS Commerce completed its initial public offering on the Nasdaq in 2010 under the ticker SPSC. Over the years, it has expanded its global footprint with offices and data centers across North America, Europe and Asia-Pacific, serving more than 120,000 trading partners. Under the leadership of CEO Archie Black, the company continues to invest in research and development, driving innovation in cloud integration and supply chain intelligence.

SPS Commerce Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Core business growth remained healthy: Q2 revenue rose 6% year over year to $197.8 million, while management said the business excluding the divested 3P Revenue Recovery unit grew at a high-single-digit rate, supported by upsell, cross-sell, and improving gross retention.
• Positive Sentiment: SPS reported strong profitability and cash generation, with adjusted EBITDA of $66.6 million and trailing 12-month free cash flow of $198.7 million, up 40% year over year. The company used $51.2 million of quarterly free cash flow to repurchase shares.
• Neutral Sentiment: The company sold its 3P Revenue Recovery business for $9.5 million in cash and recorded a $23.5 million loss on the sale. Management said the divestiture removes a lower-overlap Amazon Marketplace business and sharpens focus on 1P suppliers, but it reduces second-half 2026 revenue by approximately $10.5 million.
• Positive Sentiment: SPS is expanding its AI strategy through MAX, which is detecting supply-chain issues and delivering measurable customer savings. MAX is expected to become generally available to Fulfillment customers by the end of summer, with paid autonomous-agent bundles targeted for launch by late Q4 2026.
• Positive Sentiment: 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, implying roughly 34% adjusted EBITDA margin and about 300 basis points of margin expansion. Management expects core revenue growth in the high-single digits, although total customer counts are projected to be flat to slightly positive.

Presentation

[Operator]

Good day, welcome to the SPS Commerce Second-Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. 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, Investor Relations Representative at SPS Commerce]

Good afternoon, everyone. thank you for joining us on the 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 this 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 risk factors that may affect our results.

[Irmina Blaszczyk, Investor Relations Representative at SPS Commerce]

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. With that, I will turn the call over to Chad.

[Chad Collins, CEO at SPS Commerce]

Thanks, Irmina, 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 chains and business systems. We are protocol-agnostic and enable Fulfillment models and channels with enterprise-grade security certifications. That foundation makes everything that follows possible and represents every AI use case on our network. The SPS Commerce Network took over 25 years to get to where it is today.

[Chad Collins, CEO at SPS Commerce]

Through its effect and scale, we are building partnerships, supporting evolving supply chains, and 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 up 24/7 extension of a customer's team, detecting anomalies and flagging critical business errors.

[Chad Collins, CEO at SPS Commerce]

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 is a fast-growing wholesale brand selling to major retailers like Williams-Sonoma, Lumen, 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 one 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 drop-ship orders for an outdoor brand.

[Chad Collins, CEO at SPS Commerce]

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's network intelligence with our agentic capabilities, we completed our first AI-powered customer onboarding, including pre-sale contacts and account provisioning. We're 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.

[Chad Collins, CEO at SPS Commerce]

Agent-assisted customer functions and onboarding, as well as the agentification of our internal operations, are the two 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 our pool 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. One 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.

[Chad Collins, CEO at SPS Commerce]

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. 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 number one avocado oil brand, needed a supply chain that could keep pace with growth across their U.S. and Canadian operations.

[Chad Collins, CEO at SPS Commerce]

Over their decade-long relationship with SPS Commerce, they have scaled from one 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.

[Chad Collins, CEO at SPS Commerce]

Other customers realizing real ROI from SPS Revenue Recovery include Owlet, a leader in infant health technology, which recovered $1.4 million within six 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, saved $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. Customers can move seamlessly from data to decisions. It expands what's possible for customers, supporting growing data volumes, broader use cases, and future AI predictive capabilities.

[Chad Collins, CEO at SPS Commerce]

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 and 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 one 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.

[Chad Collins, CEO at SPS Commerce]

In summary, SPS's 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'll turn it over to Joe to discuss our financial results.

[Joe Del Preto, CFO at SPS Commerce]

Thank you, Chad. Welcome, everyone. We report a strong second quarter of 2026. SPS Commerce's core business, which excludes 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 30th, 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 the sale of $23.5 million in Q2 2026 in connection with the transaction. Let's review our Q2 results. Revenue was $197.8 million, a 6% increase over Q2 of last year.

[Joe Del Preto, CFO at SPS Commerce]

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 46,650, and an average revenue per customer was $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 the benefits of improving process efficiencies. Turning to liquidity and cash flow, we ended the quarter with total cash and cash equivalents of $173 million.

[Joe Del Preto, CFO at SPS Commerce]

Free cash 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 30th, 2026, guidance factors in a reduction of approximately $10.5 million to revenue to 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, we expect revenue to be in the range of $196.3 million-$198.3 million. We expect Adjusted EBITDA to be in the range of $67.4 million-$69.4 million.

[Joe Del Preto, CFO at SPS Commerce]

We expect fully diluted earnings per share in the range of $0.72-$0.76, with fully weighted average shares outstanding of approximately 36.8 million shares. We expect non-GAAP diluted income per share to be in the range of $1.20-$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 $788.4 million-$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.

[Joe Del Preto, CFO at SPS Commerce]

We expect Adjusted EBITDA to be in the range of $264.6 million-$269.1 million, reflecting Adjusted EBITDA margin of 34% at the midpoint, and 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-$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-$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's strong second quarter performance reflects the strength of our core business, driven by upsell and cross-sell momentum.

[Joe Del Preto, CFO at SPS Commerce]

We continue to demonstrate operational rigor, exceeding our margin expansion goals while simultaneously rolling out our AI strategy across our network. With that, I'd like to open the call to questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're 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 star then two. Our first question today will come from Scott Berg with Needham. Please go ahead.

[Scott Berg, Analyst at Needham]

Hi, Chad. Hi, Joe. Nice quarter here. I got a couple of questions. Chad, first of all, I want to talk about the divestiture of the 3P Revenue Recovery business. You've been pretty positive on the long-term outlook of Revenue Recovery in general, and I know that part's been a little bit of a thorn in your side, but why divest it? Why divest it now? Or, obviously, one month ago. Yeah, just help us understand the thought process to move on from that segment.

[Chad Collins, CEO at SPS Commerce]

Scott, overall, we remain very confident in Revenue Recovery. We're 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-side seller. Those that are selling primarily wholesale, to multiple retailers, Amazon being one of those, but the 1P sellers really can use our whole portfolio of revenue solutions across multiple retailers. Whereas the 3P business was, those were more Amazon Marketplace sellers. There didn't turn out to be a lot of overlap with the other parts of our portfolio for those customers.

[Chad Collins, CEO at SPS Commerce]

I 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, Analyst at Needham]

Got it. Helpful. Joe, I think we kind of probably understand the number of customers that are leaving the platform with the divestiture. ARPU seems to be moving around, but I guess two questions on the ARPU side are, one, are you calculating it any differently than how the company has before? And I only ask because you took a bunch of revenue in the quarter, but obviously there are lower customer counts exiting the quarter. Secondly, and in conjunction with that, how do we think about the impact going into Q3 because of the revenue step down?

[Joe Del Preto, CFO at SPS Commerce]

Yeah. We didn't calculate it any differently, I think because we kept the calculation consistent, it kind of skewed in the quarter. The reason for that was, if you think about the way the calculation works, Scott, it's the average customer count in the beginning and the ending of the period. We had those 7,300 3P customers in the beginning customer count, they weren't in the ending customer count. That's compared against the revenue in the quarter and the full 3P revenue was in the quarter, but not the ending customer count. Because of that, the ARPU overall skewed higher than it normally would have. It's more of the impact in the quarter.

[Joe Del Preto, CFO at SPS Commerce]

Going forward, if you think about it, we'll just have 1P customers in the beginning and end of the period; it'll be a little bit more consistent going forward than it was in Q2.

[Scott Berg, Analyst at Needham]

Awesome. If I may, a quick third question here. Sorry, out of etiquette. 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. I kind of exclude that. any further kind of quantification of that number, I think, would be helpful. Thank you.

[Joe Del Preto, CFO at SPS Commerce]

Yeah, Scott. The only other color we provided on the 3P business is outside of the fact that, to your point, outside of the divested business, we'd be growing high single digits. I think the other thing to call out on the full year is we called out the 10 and a half in the second half of the year; 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.

[Scott Berg, Analyst at Needham]

Thank you.

[Operator]

Our next question will come from Dylan Becker with William Blair. Please go.

[Jackson Bodley, Analyst at William Blair]

Hey, guys. This is Jackson Bodley on for Dylan Becker. 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? 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, CEO at SPS Commerce]

Yeah. Jackson, the 1P business, I would say is nearing consistent with our overall margin profiles in the business overall. It wasn't that way right out of the gate with the acquisition of SupplyPike and Carbon6. As that has gotten more integrated into our overall business, it's more approaching our overall margin profile. I wouldn't say it's an area of our business that is sort of receiving oversized investment at this point in time. I think the divestiture of the 3P side of that business really helps us. I mean, because there's quite a bit of good customer overlap and product portfolio overlap on the network with the 1P side. Definitely think that the Revenue Recovery business is definitely in line with the margin profile of our overall business.

[Jackson Bodley, Analyst at William Blair]

Got it. Super helpful. Maybe as a follow-up, with ERP migration still creating a little bit of timing noise, I would just be curious.

[Jackson Bodley, Analyst at William Blair]

Get your thoughts if you guys are seeing any change in onboarding duration. I know you guys talked about the AI-enabled customer onboarding. Is that changing anything with the customer readiness or attach rates once those projects are complete? Maybe there are areas where migration delays are building pent-up expansion demand that could release once these go live? Thanks.

[Chad Collins, CEO at SPS Commerce]

Yeah. We're super excited about the progress around agentic onboarding. We did have in the prepared remarks that we did the first fully agentic onboarding. Keep in mind that's with the more kind of simple onboarding that we have. That's really taking things that would've been previously done in days and getting them 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. We've been making progress there over the last couple of years, speeding that up. That's led to a better customer experience. It's also helped us on the gross margin. As that was really done all before this, the agentic capability was applied. We do expect to speed up those more complex ERP onboardings as well.

[Chad Collins, CEO at SPS Commerce]

There's just still a little bit more work to do there. Once we have that in place, that speed-to-time on the network can be a barrier for adopting the SPS network. We think any efficiencies we gain there will help with customers and speed up that access to the network. I wouldn't necessarily say that there's 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 the medium- to large-end of that market. I do think our speed of onboarding with agentic ERP onboarding is going to be a massive differentiator for us and really speed up customer time to value.

[Operator]

Our next question will come from Chris Quintero with Morgan Stanley. Please go ahead.

[Chris Quintero, Analyst at Morgan Stanley]

Hey, Chad. Hey, Joe. Thank you for taking the questions, and congrats on the nice executions here. I want to hear your thoughts on maybe the macro environment and kind of what you're hearing from your customers. We're hearing about higher fuel costs, higher freight costs, and the K-shaped economy. Just curious, kind of what you're hearing and seeing high-level from your customers from a macro perspective.

[Chad Collins, CEO at SPS Commerce]

Yeah, Chris. I would say no substantial headwinds we're 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 right-sizing last year. We anticipated that that would dissipate this year, as we kind of did get those contracts right-sized, and they were one-time, and that's playing out as we had expected. I'd say, no overwhelming headwind in the macro. Of course, things like the fuel prices and still a little bit of looming tariff uncertainty are things that we continue to monitor, but those things are not coming up in our engagement with customers right now.

[Chris Quintero, Analyst at Morgan Stanley]

Got it. Then maybe, Joe, for you, just on the 1P customer counts, if I have my math right, it seems like that went down around 200 quarter-over-quarter. Is that right? If so, I'm curious what you're seeing on the community enablement side of things and new customer adds.

[Chad Collins, CEO at SPS Commerce]

No, 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, those customers that are typically churning or adding that are primarily affecting that customer count tend to be the real low-ARPU customers. That's why we're 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 are programs that we're running now that will contribute in the second half, plus the remaining pipeline that's to be closed in the second half looks positive.

[Chad Collins, CEO at SPS Commerce]

That said, I would expect for the year we're kind of flat to slightly positive on customer count, I do expect some of that momentum from the second half enablement programs will carry into early 2027.

[Chris Quintero, Analyst at Morgan Stanley]

Excellent. Thank you so much.

[Operator]

Our next question will come from George Kurosawa with Citi. Please go ahead.

[George Kurosawa, Analyst at Citi]

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, it sounds like hundreds of thousands of dollars. Sounds like you've done some work on market sizing. Maybe you could just share updated thoughts there on how you're 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, CEO at SPS Commerce]

Yeah, absolutely. As you noted and were in the script, we're seeing customers really identify different supply chain anomalies and disruptions using MAX, which today is through the MAX Chat feature. That's what they have access to in the beta. Using that MAX Chat feature, they're able to get to some of those problems in the supply chain and get them resolved, and that's resulting in hard ROI savings for them. What we've seen through the good adoption of MAX Chat here is that a lot of the things that customers are doing via MAX Chat would be possible to automate with an agent. Today, it may take them 20 prompts in the MAX Chat to get to the right answer. We're seeing that that's something that actually could be automatic, automatically detected, and potentially, in some cases, automatically resolved.

[Chad Collins, CEO at SPS Commerce]

We are developing those types of agents on top of this MAX technology now. We believe that those agents that can do things more autonomously in terms of identifying these anomalies, and in many cases resolving them, not only finds the kind of hard ROI in the supply chain savings, but also is going to be a very favorable kind of head count and efficiency impact for our customers. What we're in the process of now is converting the MAX Chat piece from the beta into a general availability. All newly deployed customers as of the last month have been onboarded with MAX included. Over the course of the next several weeks here, kind of through the summer, we'll be making it available to all our other Fulfillment customers. We'll be doing that as part of their standard subscription.

[Chad Collins, CEO at SPS Commerce]

What we believe the major monetization activity will be is when we deliver those agents on top of that who are more autonomous and self-acting, that customers will be willing to pay for that. That's really where the monetization would come in. The way that that would work is there'd be certain tiering or bundling of the packaging of those autonomous agents running on top. We would monetize the customers through subscriptions to those bundles. What I'd say gives us high confidence in this approach is we're already seeing customers using MAX Chat to get to these benefits in their supply chain. The things that they're finding and doing, we have high confidence we'll be able to automate with the agentic architecture over the top.

[George Kurosawa, Analyst at Citi]

Okay. That's great color. 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 on the revenue side, it looks like basically the Q2 beat just flowed through, excluding the divestiture impact. On the EBITDA side, it looks like the full beat was not flowed through. I wonder if you could just maybe comment if there's anything, incremental spend, expense timing, conservatism, or anything we should keep in mind on the EBITDA line.

[Joe Del Preto, CFO at SPS Commerce]

Yeah, for sure. I think on the EBITDA side, I think there are a couple things that we contemplated. One, there was some movement of some of the expenses that moved out of Q2 into Q3 and Q4. That was some of it. I think the other piece is we want to make sure we're being very prudent with the way we're approaching our internal AI costs. As we're building out this stuff for MAX, as we're building out our internal agents on the things we're doing internally, we want to make sure we give ourselves enough room to make those investments and make sure that we've got enough flexibility in the cost structure. That's the other part of that and why we didn't flow all that through the year, George.

[George Kurosawa, Analyst at Citi]

Okay. Makes sense. Thanks for taking the questions.

[Operator]

Our next question will come from Parker Lane with Stifel. Please go ahead.

[Parker Lane, Analyst at Stifel]

Yeah. Hey, guys. Good afternoon. Thanks for taking the questions here. Chad, you talked about some of the advancements you're making on the Analytics side of the house. Sounds like there's a new enhanced platform there. Good to see that. I think the revenue side was up maybe 1% in the first half of the year. Can you just talk about what you're seeing from a demand perspective around that? I know you had mentioned that historically it's been seen as maybe more discretionary, and that was an impact to that business last year. Looking to the second half of the year, what are your expectations around Analytics?

[Chad Collins, CEO at SPS Commerce]

Yeah. We're really excited about this new technology revamp. 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, one, just the look and feel and ability to use the system, and the pre-built capabilities are much stronger than they were before. Plus, there's more tooling for customers to kind of do more on their own. Probably the most important thing in all this is it really changes the underlying data architecture of that product, which now sets it up for many more AI features that we'll be able to add to that over time. We are optimistic about that outlook for the Analytics business.

[Chad Collins, CEO at SPS Commerce]

I think the fact that it is a little bit more discretionary is true still. I think with this re-platforming, 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 we'll be able to monetize over time.

[Parker Lane, Analyst at Stifel]

Got it. We're coming up on two years in the entry into the first-party Revenue Recovery space with the SupplyPike deal. I think at the time, there were about 300 customers that overlapped with SPS. How have attach rates or adoption rates trended at the two-year mark relative to back then? 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's base?

[Chad Collins, CEO at SPS Commerce]

Yeah. Absolutely. We've had success in both directions, selling Fulfillment to SupplyPike customers. Obviously, that's not as big a population, so it's been a little bit less impactful. The big win has been selling the SupplyPike, and really now the Amazon 1P that came out of Carbon6, to the Fulfillment customers. We've kind of hardened that muscle, I'd say, around cross-selling in the organization. We've done some things organizationally to have that work a little better. We've done some things with the sales teams' incentives. What I think is really powerful in all this is just the signals we get from the network, right? The network actually tells us, based on trading volumes and trading partner relationships, who the most likely candidates in Fulfillment for Revenue Recovery are.

[Chad Collins, CEO at SPS Commerce]

Using that data, we're able to specifically go and target those customers, in some cases, come to them with an estimate, even just based on our network data on what the potential is for them to recover. I think this is critical for us going forward. We've been clear that we expect to drive a higher proportion of our growth on the ARPU. Of course, there's a big opportunity for more connections for Fulfillment customers. Cross-selling our Analytics and Revenue Recovery solutions to those Fulfillment customers is key to that ARPU growth as well.

[Parker Lane, Analyst at Stifel]

Great. Thanks, Chad.

[Operator]

Our next question will come from Matt VanVliet with Cantor. Please go ahead.

[Matt VanVliet, Analyst at Cantor]

Yeah, good afternoon. Thanks for taking the questions. I guess following up on some of your comments, Chad, about the MAX monetization. I guess I'm curious on what you're kind of baking in terms of the adoption cycle for existing customers. When do you plan to have some of these bundles in place? I guess early stage, but what are you expecting as sort of the uplift if existing customers plan to adopt whether it's a middle or high tier? How much uplift can they get on an annual basis?

[Chad Collins, CEO at SPS Commerce]

Yeah. Great question. In terms of the adoption, if we're to judge it based on the MAX Chat adoption, I believe we'll have real strong agent adoption because we're already seeing customers sort of, if they're onboarded with MAX Chat, it's quickly becoming the main interface point that they use when using any of our applications. They're just sort of starting in MAX Chat. I believe that as some of the things that they're doing in MAX Chat, we're able to automate with agents. There will be strong interest in having that all be automated, so they don't even need to interact that much with the 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.

[Chad Collins, CEO at SPS Commerce]

In terms of the timing of all that, we expect that we will be in a position to be selling agents by late Q4 of this year. Obviously, that'll take some time to flow through to revenue, but we do think we'll be in a position where we're actually monetizing this agent architecture still here this year. The degree to which we're able to do uplift on ARPU, that's some of the details that we're working through right now. I do think 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. Over time, we'll be able to bring that back down to more of our medium and small customers over time.

[Matt VanVliet, Analyst at Cantor]

All right. Helpful. Joe, you mentioned some of the cost structure; it sounded like internal AI usage. Maybe just help us with the timeline of when internally you were really pushing that aggressively for a good portion of the employee base. Just to get a sense of sort of when we might lapse that and when growth could provide some operating leverage in the model, whether it's later this year, into next year, or beyond that.

[Joe Del Preto, CFO at SPS Commerce]

What I would say there, Matt, is a lot of the leverage we're seeing out of the business right now is not based on some of the AI internal use cases that we're starting to talk about. I think a lot of the efficiencies you've 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're optimizing each of our processes. Feel really good about how we've somewhat structurally changed this business going forward without using AI. If I think of the go forward and some of the things we've 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've already been able to accomplish without the internal use of AI.

[Joe Del Preto, CFO at SPS Commerce]

We feel good about the trajectory of the margin going forward, not only this year but also going into next year. As we exit this year, Matt, we'll have a little bit more color on how we think that probably impacts more of the longer-term focus of the business.

[Matt VanVliet, Analyst at Cantor]

All right. Great. Thank you.

[Operator]

Our next question will come from Mark Schappel with Loop Capital Markets. Please go ahead.

[Mark Schappel, Analyst at Loop Capital Markets]

Thank you for taking my question. Chad, you've 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 customer segmentation, or just even the coverage model for that matter.

[Chad Collins, CEO at SPS Commerce]

I would say, we did evolve certain things in the go-to market. They happened to be in conjunction with Eduardo's arrival; I think he's all in line with that. Some of the things I mentioned earlier are around driving a little bit more focus on cross-sell and aligning that as part of our incentive structure. We've also done some things to segment the sales force a little bit more between new and existing. That has worked effectively, especially on the retail side.

[Chad Collins, CEO at SPS Commerce]

The other thing I would say is, Eduardo and his team on our customer success are also responsible for all the customer onboarding activity, and that's an area where we've seen quite a bit of success and are continuing to drive more success as we agentify that onboarding process. 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, just helping us overall mature our capabilities around go-to-market. 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. The company's been in a luxury position to pretty much solely rely on these retail enablement programs as the source for new customers.

[Chad Collins, CEO at SPS Commerce]

We believe that there, over time, will be an opportunity to drive more new customers through more traditional digital marketing capabilities; that's something that Maria's brought into our organization. The combination is working quite well.

[Mark Schappel, Analyst at Loop Capital Markets]

Thank you.

[Operator]

Our next question will come from Jeff Van Rhee with Craig-Hallum. Please go ahead.

[Analyst at Craig-Hallum]

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?

[Joe Del Preto, CFO at SPS Commerce]

Yeah, I think a couple of things. One, we talked about coming out of Q1. We're not seeing the same amount of pressure, especially on the downsell and gross retention that we saw throughout 2025. GRR continues to be a real strength of ours that continues to grow year-over-year, and we feel really good about the progress we're making on that front. We start to see more momentum within our existing customer base and adding new trading partners. I think we've talked about the land, and the expand model continues to be a big driver of our growth overall. I think the combination of our ability to expand trading partners within our existing customer base and the positive momentum on the GRR side were the two big drivers on the revenue over performance.

[Analyst at Craig-Hallum]

Okay. On the customer count, obviously that's skewed by the 3P customers exiting the count. But in terms of just the 1P count being down 250 sequentially, just thoughts on that? Any updated thinking on expectations for customer growth? Anything that changed there? Thanks.

[Chad Collins, CEO at SPS Commerce]

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 that are in the pipeline that we have high confidence in for the second half all look pretty positive. I would expect the second half to contribute sort of a positive customer count, but it's kind of coming in on the year, probably flat to slightly positive on the customer count.

[Analyst at Craig-Hallum]

Okay. Thanks, Chad. Thanks, Joe.

[Operator]

Our next question will come from Lachlan Brown with Rothschild & Co. Please go ahead.

[Lachlan Brown, Analyst at Rothschild & Co]

Hi, Chad and Joe. Thanks for the questions. With your MAX beta customers, could you just run us through your confidence in being able to convert them when you make MAX generally available at the end of the summer? Could you talk us through the go-to-market playbook that's in place to transition these accounts at launch? I guess any feedback from preliminary customer discussions would be helpful. Thanks.

[Chad Collins, CEO at SPS Commerce]

Yeah. Let me start with the preliminary customer discussions. In this beta, we've been very engaged with customers. I think you can see from some of the detailed examples that we shared in the prepared remarks that we're really engaged with customers understanding the ROI that they're getting out of MAX. I'd say, this is one of the nice things about having a tool like this. We see all of their interactions. They're able to score their interactions. We have a separate agent that, on top of their scoring, goes in and scores the interaction. We really can narrow in and see where customers are getting value out of the MAX Chat capability.

[Chad Collins, CEO at SPS Commerce]

In terms of then upselling them from MAX Chat, which we're using as a gateway into our overall MAX architecture, we're going to target those probably larger, more complex customers that have high usage of MAX Chat and work with them to convert some of the things they're doing with MAX Chat into autonomous agents that will just take care of those things automatically for them. We think between the ROI that they're 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 there'll be pretty high conviction from customers to move over to the more agentic approach, which will be monetizable.

[Lachlan Brown, Analyst at Rothschild & Co]

Thanks. 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 give you that visibility?

[Joe Del Preto, CFO at SPS Commerce]

Yeah. I'll talk through a couple of things, and then I'll have Chad talk about a little bit more on the enablement campaigns. I think a couple of things are going on in the business. One, I talked about it a little bit earlier, the momentum we're seeing on the GRR side. We continue to see improvements across our customer base. We're in a much better position, I think, going into Q4 and the momentum we're seeing there than we were a year ago. I think that's the other big driver. The second thing is on the enablement side. We're seeing more of these campaigns come through. We're seeing momentum in the back half of the business.

[Joe Del Preto, CFO at SPS Commerce]

We have a really strong pipeline; we believe there's going to be a solid number of these customers that land in Q4 that's really kind of driving that revenue in the quarter.

[Chad Collins, CEO at SPS Commerce]

Yeah, I would just add, although we see some positivity there, kind of the big drivers in our revenue performance to finish out the year here are going to 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 is certainly, while important, what we want to get customers; we want to further penetrate that TAM. Those tend to be very low ARPU customers when they come in the door, so they're meaningful over the long term but not as meaningful in the short term to drive revenue.

[Lachlan Brown, Analyst at Rothschild & Co]

That's clear. congrats on the quarter, guys.

[Joe Del Preto, CFO at SPS Commerce]

Thank you.

[Chad Collins, CEO at SPS Commerce]

Thanks, Lachlan.

[Operator]

Our next question will come from Nehal Chokshi with Northland Capital Markets. Please go ahead. Pardon me, your line is open.

[Nehal Chokshi, Analyst at Northland Capital Markets]

Sorry about that. Thank you. Congrats on a good quarter. Congrats as well on the implicit acceleration in the business in the back half, especially in the 4Q here. Sounds like it's going to be driven by the improving GRR that you're seeing. Is the driver of improving GRR MAX, or is it something else?

[Chad Collins, CEO at SPS Commerce]

Yeah, I would say it's 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 some contracts. We're not seeing that this year. The other factor is, I believe, we made some improvements in our customer treatment strategy. I mentioned that both on the onboarding and also the way that we've organized the sales force to have a little bit more attention, I'd say, to existing customers. I think the new innovation is that our customers are seeing us with MAX, with adding Revenue Recovery to the product portfolio, and with investing in our Analytics product. I think these are all things that show to our customers that they want to be a long-term partner with SPS Commerce.

[Nehal Chokshi, Analyst at Northland Capital Markets]

Great. Thank you very much.

[Operator]

Once again, if you would like to ask a question, please press star then one. Our next question will come from Clark Wright with D.A. Davidson. Please go ahead.

[Clark Wright, Analyst at D.A. Davidson]

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?

[Chad Collins, CEO at SPS Commerce]

Yeah, Clark, what we've said is kind of in our growth algorithm over the long term. We expect kind of roughly one-third of the growth to come from the customer count side and two-thirds to come from ARPU. This year, it'll obviously probably be slightly more on the ARPU side than if you were to take that to our current expectation for the business, at least high single digits. We're sort of in that low single digits on the customer count and that kind of mid- to high on the ARPU growth.

[Clark Wright, Analyst at D.A. Davidson]

Got it. That's helpful. Then, can you help me understand, in your prepared remarks, you mentioned that SPS Commerce is uniquely positioned to provide agents to automate tasks. Can you help me understand why you're 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, CEO at SPS Commerce]

We made that comment in the context of what we're doing in automating collaboration and supply chain transactions between trading partners. What we've found that is really key to that is the data that we have on the network. Three main components there. One, of course, is 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's just a broader set of data. We also see all the kinds of macro transaction patterns going across our network. Of course, we can't let one customer look at another customer's discrete data, but what we can do is look at trading patterns, especially across the major retailers.

[Chad Collins, CEO at SPS Commerce]

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. Maybe most importantly is that over these 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. A lot of this information we have is stuff that's not going to be available in a downloadable vendor guide that they're going to provide. A lot of them on the network don't even provide these types of vendor guides.

[Chad Collins, CEO at SPS Commerce]

We're 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's going to be compliant with their retail and distributor customers.

[Clark Wright, Analyst at D.A. Davidson]

Got it. That's helpful. Thank you.

[Operator]

I'm 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.

Participants

Executives

• Irmina Blaszczyk, Investor Relations Representative
• Chad Collins, CEO
• Joe Del Preto, CFO

Analysts

• Scott Berg, Analyst at Needham
• Jackson Bodley, Analyst at William Blair
• Chris Quintero, Analyst at Morgan Stanley
• George Kurosawa, Analyst at Citi
• Parker Lane, Analyst at Stifel
• Matt VanVliet, Analyst at Cantor
• Mark Schappel, Analyst at Loop Capital Markets
• Analyst at Craig-Hallum
• Lachlan Brown, Analyst at Rothschild & Co
• Nehal Chokshi, Analyst at Northland Capital Markets
• Clark Wright, Analyst at D.A. Davidson