SPS Commerce SPSC Q4 2025 Earnings Call Transcript

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Date

Thursday, February 12, 2026 at 4:30 p.m. ET

Call participants

• Chief Executive Officer — Chad Collins
• Chief Financial Officer — Kimberly Nelson
• Director of Investor Relations — Irmina Blaszczyk

Takeaways

• Revenue -- $192.7 million for the quarter, up 13%, and $751.5 million for the year, up 18%.
• Recurring revenue -- Increased 14% for the quarter and 20% for the year.
• Adjusted EBITDA -- $60.5 million for the quarter, a 22% increase, and $231.4 million for the year, up 24%.
• ARPU -- Reached approximately $14,300 for the year.
• Recurring revenue customers -- Totaled 54,600; 1P customer count was flat sequentially, while 3P customers declined by 350.
• Free cash flow deployment -- 76% was used to repurchase $115 million of shares; Board authorized a $200 million increase to the share repurchase program, now totaling $300 million.
• 2026 guidance (Q1, fiscal period ending Dec. 31, 2026) -- Revenue expected between $191.6 million-$193.6 million (approximate 6% growth midpoint); adjusted EBITDA between $55.5 million-$57.5 million; fully diluted EPS $0.46-$0.49; non-GAAP diluted EPS $0.95-$0.99.
• 2026 guidance (full year, fiscal period ending Dec. 31, 2026) -- Revenue guided to $798.5 million-$806.9 million (approximate 7% growth midpoint); adjusted EBITDA expected at $261 million-$265.5 million (13%-15% growth); fully diluted EPS $2.50-$2.58; non-GAAP diluted EPS $4.42-$4.50.
• Adjusted EBITDA margin outlook -- Annual margin improvement of two percentage points targeted through gross margin expansion and operating efficiencies.
• AI capabilities introduction -- Launched MACS, an agentic AI platform with features embedded in Fulfillment, including chat-guided workflows, transaction monitoring, and agent-to-agent communication protocol.
• Acquisitions and integration -- Completed the Carbon6 acquisition following prior integration of SupplyPike; consolidating revenue recovery initiatives with strategic focus on 1P customers.
• Leadership change -- CFO Kimberly Nelson to retire; Joseph DelPretto appointed CFO effective March 16, 2026.
• Board changes and investor relations -- Two new independent directors appointed and cooperation agreement reached with Anson Funds.

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Risks

• Kimberly Nelson said, "we ended up at the lower end of our revenue guidance" due to persistent macroeconomic headwinds and continued spend scrutiny and delayed customer purchase decisions.
• Revenue recovery results landed "more to the lower end of what our expectation would be," impacted by changes in Amazon policy and variability in demand with the take-rate model.
• 3P customer count declined by 350, attributed to "natural churn" and "higher churn rate" among smaller customers, which may persist as strategic focus remains on 1P customers.
• Timing of enablement campaigns and retailer relationship management programs shifted customer growth to later periods, with continuing impact on sequential customer additions.

Summary

SPS Commerce (NASDAQ:SPSC) achieved its 100th consecutive quarter of revenue growth, though macroeconomic challenges and Amazon-related headwinds dampened sequential expansion and pushed key enablement programs into later quarters. Guidance for fiscal 2026 reflects muted revenue growth of 6%-7% and continued focus on profit expansion through operational efficiencies, while sustained customer ARPU growth predominates over net new customer additions. The launch of MACS, SPS's agentic AI capabilities, marks a significant development in the product portfolio, with initial customer beta feedback informing future monetization strategies. Leadership transitions include the retirement of long-serving CFO Kimberly Nelson, appointment of Joseph DelPretto, and the addition of two independent directors following engagement with major investors. Strategic initiatives continue to emphasize targeted investment in the 1P revenue recovery segment, expansion of share repurchase capacity, and leveraging network data to drive further product innovation.

• Effectively 76% of free cash flow was allocated to share repurchases in 2025, while the full Board-approved authorization now stands at $300 million.
• Management explicitly stated expectations for adjusted EBITDA margin to rise by two percentage points annually through cost discipline and previous investment in customer experience.
• Retailer enablement campaigns, a key driver of customer additions, have seen their timing shift, with the most material impact expected in the back half of 2026 as compared to prior guidance.
• Kimberly Nelson clarified that ARPU will remain the primary growth lever, with new customer count growth less material in the near term.
• Chad Collins described cross-selling into existing fulfillment customers, especially for analytics and revenue recovery, as central to near-term growth strategy.
• Sales pipeline effects from regulatory changes and evolving retailer requirements continue to shape product adoption trends, especially among food-related clients.

Industry glossary

• 1P (First Party): Refers to first-party sellers who supply goods directly to a retailer such as Amazon, operating on a wholesale model.
• 3P (Third Party): Denotes third-party sellers on platforms like Amazon Marketplace who sell directly to end customers, typically with higher churn and smaller size.
• EDI (Electronic Data Interchange): Standardized electronic communication method used for transaction data exchange between supply chain partners.
• ARPU (Average Revenue Per User): Metric indicating the average revenue generated per recurring revenue customer within a reporting period.
• MACS: SPS Commerce's agentic AI functionality integrated across the platform, offering network-based workflow automation, monitoring, and agent-to-agent data exchanges.

Full Conference Call Transcript

Irmina Blaszczyk: For joining us on SPS Commerce, Inc. Fourth Quarter and Full Year 2025 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 or 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. 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 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.

Chad Collins: Thank you for joining us today. The 2025 marks SPS Commerce, Inc. 100 consecutive quarter of revenue growth, highlighting the company's pivotal role in driving efficient collaboration among trading partners. As omnichannel retail has evolved, and supply chains have grown increasingly complex, we delivered solid fourth quarter and full year results despite a challenging macroeconomic backdrop and tariff-related uncertainty, which contributed to spend scrutiny and delayed purchase decisions throughout the year and continued to impact our customers in the fourth quarter. For the full year 2025, revenue grew 18% to $751,500,000. Recurring revenue grew 20% driven by fulfillment growth of 22% year over year.

SPS' sustained and profitable growth and ongoing expansion of our network demonstrate our success in delivering the products and services that retailers and suppliers depend on to strengthen their collaboration and drive continuous improvement. In 2025, we acquired Carbon6, to build on the SPS acquisition of SupplyPike in the prior year and extend the reach of our network with clear leadership in revenue recovery solutions. Revenue recovery represents a $750,000,000 addressable market across 1P U.S. sellers and a significant cross-selling opportunity within our network, which we have highlighted throughout the year.

For example, All Star Innovations, which offers turnkey solutions for taking products from concept to consumer, has been an SPS fulfillment customer since 2022 and started using the revenue recovery solution last year for several retailers including Walmart, Target, Home Depot, and Amazon. CyberPower Systems, a global manufacturer of power protection and management solutions, is a longstanding fulfillment customer. To drive further efficiencies across their supply chain, they leverage revenue recovery for some of their key customers, including Amazon, Walmart, and Home Depot, and recently added Amazon Canada.

Other recent examples of customers who are realizing the benefits of revenue recovery include Outdoor Cap, one of the world's leading headwear manufacturing and importing companies; TaylorMade, an American sports equipment manufacturing company; EOS, a beauty and skincare company; and Bunge, a global agribusiness and food company. Over the years, we expanded our portfolio of solutions through acquisitions and product innovation to support the evolving needs of our growing network while strengthening longstanding partnerships, many of which have spanned decades. As we are celebrating 100 consecutive quarters of growth, I wanted to highlight a customer who has partnered with us throughout that journey. Wolverine Worldwide is a global marketer of branded footwear, apparel, and accessories.

They began as a fulfillment customer with a single connection and grew within our network by connecting to additional retailers, and eventually subscribing to analytics. Building on this longstanding relationship, we recently supported Wolverine's expansion into Europe, resulting in a successful go-live on fulfillment with over 300 trading partners. Trader Joe's, a national chain of over 100 neighborhood grocery stores, rolled out EDI requirements across the entire vendor base to reduce manual processes, improve order selection efficiencies, reduce shipping errors, and prepare for future growth. With SPS' fulfillment solution, Trader Joe's is accelerating progress toward 100% vendor compliance.

Gambler's, a trusted retail brand for farm and home supply products, recently switched to SPS Commerce, Inc. in an effort to improve order automation and support omnichannel growth. Gambler's opted for SPS' supply chain performance suite and increased EDI compliance from three to nearly 100 vendors. Petco, a pet retailer who operates in over 1,500 locations in the U.S., Mexico, and Puerto Rico, leveraged SPS' retailer management solution to transition over 700 suppliers to standardized digital supply chain requirements. As a result, the retailer reduced manual data reconciliation, delivered measurable efficiency gains, and improved trading partner performance tracking. SPS is committed to ongoing innovation to support customers on their journey to modernize their supply chains.

We recently introduced our new agentic capabilities embedded into the SPS supply chain network called MACS. Offering new AI functionality, MACS draws on hundreds of thousands of trading connections, decades of expertise, proprietary network intelligence, and billions of transactions to help our customers unlock greater value from AI. Put simply, by leveraging the data across our network, SPS is competitively positioned to deliver more meaningful and scalable AI enhancements across our product portfolio to better address the trends that are shaping the future of supply chain collaboration. With that, I will turn it over to Kim to discuss our financial results.

Kimberly Nelson: Thanks, Chad. We reported a solid 2025. Revenue was $192,700,000, a 13% increase over Q4 of last year and represented our 100th consecutive quarter of revenue growth. Recurring revenue grew 14% year over year. Adjusted EBITDA increased 22% to $60,500,000. For the year, revenue was $751,500,000, an 18% increase, and recurring revenue grew 20%. The total number of recurring revenue customers was approximately 54,600, as the number of 1P customers was flat sequentially while the number of 3P customers declined by 350. ARPU for the year increased to approximately $14,300. Adjusted EBITDA grew 24% to $231,400,000. We ended the year with total cash and cash equivalents of $151,000,000.

In 2025, we deployed 76% of free cash flow to repurchase $115,000,000 of SPS shares. In addition, the Board of Directors approved an increase of $200,000,000 in the current share repurchase program, which came into effect on 12/01/2025.

Kimberly Nelson: For a total authorization of up to $300,000,000. This demonstrates our commitment to effectively deploy and return capital to shareholders while maintaining a flexible capital structure. Now turning to guidance. For the 2026, we expect revenue to be in the range of $191,600,000 to $193,600,000, which represents approximately 6% year-over-year growth at the midpoint of the guided range. We expect adjusted EBITDA to be in the range of $55,500,000 to $57,500,000. We expect fully diluted earnings per share to be in the range of $0.46 to $0.49 with fully diluted weighted average shares outstanding of approximately 38,200,000 shares.

We expect non-GAAP diluted income per share to be in the range of $0.95 to $0.99 with stock-based compensation expense of approximately $17,200,000, depreciation expense of approximately $4,500,000, and amortization expense of approximately $9,600,000. For the full year 2026, we expect revenue to be in the range of $798,500,000 to $806,900,000, representing approximately 7% growth over 2025 at the midpoint of the guided range. We expect adjusted EBITDA to be in the range of $261,000,000 to $265,500,000, representing growth of 13% to 15% over 2025. We expect fully diluted earnings per share to be in the range of $2.50 to $2.58 with fully diluted weighted average shares outstanding of approximately 38,400,000 shares.

We expect non-GAAP diluted income per share to be in the range of $4.42 to $4.50 with stock-based compensation expense of approximately $67,100,000, depreciation expense of approximately $21,600,000, and amortization expense for the year of approximately $38,300,000. For the remainder of the year, on a quarterly basis, investors should model approximately a 30% effective tax rate calculated on GAAP pretax net earnings. I would like to now turn the call over to Chad for closing remarks.

Chad Collins: Thank you, Kim. Before I conclude my prepared remarks, I would like to take a moment to acknowledge the announcement in our earnings release that Kim Nelson, our Chief Financial Officer, intends to retire after nearly twenty years with the company. Kim has been a steady and trusted leader through some of the most defining chapters of SPS Commerce, Inc.'s journey, from the IPO to our evolution into a global organization that just achieved 100 consecutive quarters of growth. On behalf of the entire SPS team, I want to thank Kim for extraordinary contributions and congratulate her on her well-earned retirement. In addition, I am pleased to welcome Joseph DelPretto, who will assume the CFO role as of 03/16/2026.

Joe brings more than twenty years of experience leading finance, accounting, and operational strategy for high-growth publicly traded technology companies, most recently serving as Chief Financial Officer and Treasurer of Sprout Social. With a leadership style that upholds our core values, I am confident Joe will build on the strong foundation Kim created and help guide SPS through our next chapter of growth. Kim will remain at SPS through the transition process to ensure a seamless succession. Today, we also announced the addition of two new independent directors to our board and a cooperation agreement with Anson Funds.

Following extensive engagement with a number of our large investors, including Anson, we are excited to welcome Mike back to the board and appoint Phumbi, who together bring valuable experience that will help us advance our strategy. As I pause to reflect on the company's achievements to date, I would like to take a moment to convey my genuine enthusiasm for the opportunity that lies ahead. We recently wrapped up our annual field kickoff event, and I was encouraged to see the sales team so highly energized by our recent launch of AI-enabled products, which we believe competitively position SPS to deliver unparalleled value to our customers.

In addition, our reimagined retail go-to-market strategy is enabling more strategic conversations with retailers, initiating new engagements and cross-selling opportunities across our expanded product portfolio. Our competitive differentiation and inherent growth levers support our revenue growth expectations of at least high single digits without acquisitions beyond 2026. We expect to increase our adjusted EBITDA margin by two percentage points annually as we remain committed to steady margin expansion and free cash flow generation to support ongoing share repurchases and drive shareholder value. Lastly, I would like to recognize that our success to date and prospects for future growth are a testament to SPS Commerce, Inc. employees worldwide.

Their dedication and commitment to excellence underscores my conviction in our $11,000,000,000 global addressable market and our next chapter of growth. With that, I would like to open the call for questions.

Operator: We will now begin the question and answer session. Please pick up your handset before pressing the keys. At this time, our first question comes from Scott Berg with Needham. Hi, everyone. Thanks for taking my questions. Before I get to those,

Chad Collins: I guess, Kim, it has been a really fun ride. I do not know why now is the right time. I look forward to catching up on that later, but just know that you will be missed. Getting to the quarter here, you talked about a challenging macro environment that persisted in the fourth quarter. When we look at the numbers, I think we would all agree they came in maybe a touch weaker although within guidance than what we are used to and accustomed to. What were some of the challenges in the quarter that might have maybe impacted your expectations relative to where the numbers kind of ended up?

Kimberly Nelson: Sure, Scott. So as we established our expectations for Q4 going back a quarter ago, as you can imagine, there were different scenarios or parameters of how that could play out. To your point, on the top line, we ended up at the lower end of our revenue guidance. We ended up at the higher end of our adjusted EBITDA guidance. So specifically on the revenue side, what we saw in Q4 was a continuation of headwinds that we have spoken about in the past. Some of those headwinds with our existing customers, just more challenging time for them, invoice scrutiny, uncertainty, etcetera.

And then, specific on the revenue recovery side, there is nice demand there, so the demand is strong. However, with the take-rate model that we have there, we did see more to the lower end of what our expectation would be along with the Amazon policy changes that have occurred.

Chad Collins: Got it. Helpful there. And then, I saw the press release on your new MACS agentic AI solutions there. I guess, how do we think about the opportunity there? Is this some functionality that you think you can monetize on an individual SKU basis, or does this just kind of enhance your product platform and your competitive positioning relative to other competitors out there? Yeah. Yeah. So as I mentioned in the prepared remarks, I am super excited about this new capability that we have launched. So it is really an agentic capability that is built right into the network.

So it has access to the network itself plus all our proprietary information about how retailers work and the requirements that retailers have for their supply chain. So we have sort of surfaced that capability up initially, with three new features that are in our Fulfillment product. The first feature is really a chat feature, which allows the user to have guided workflows into how they process transactions back and forth with their trading partners, as well as full inquiry capabilities around retailer requirements, as an example, asking what are the different shipment requirements or acknowledgment requirements that are different between Walmart and Target. The second feature is a monitor capability.

So think of this almost like a dedicated agent for a customer that is monitoring all their transaction activities across our network. If there are any anomalies, like an order did not come as expected or they did not send the invoice out as expected, that monitor capability is going to catch that for customers. And then the final feature is allowing agent-to-agent communication. So we know we have a very rich data source in the SPS network, and it is most likely many of our customers will want to interact with that via agent-to-agent communication. So we have launched a model-to-model protocol interface into the network, and that gives full capability for agent-to-agent communication.

In terms of the monetization, this is initially available to beta customers, and we do have customers that are using it in the beta format with very good feedback. And as we move through that beta, we are going to monitor the customers’ usage of that and help that inform the monetization strategy. I absolutely believe this will be a competitive differentiator that will help us on the competitive side of the business and also help us with retention. But as we get to understand more and more about how customers are using this, I think the monetization opportunities will become clearer as well.

And these first three features are just the first three areas where we are exposing MACS because it is built right into the network itself. We fully expect to be exposing MACS across the entire product portfolio over time. Understood. Thanks. And congratulations on a good quarter.

Operator: Our next question comes from Matthew VanVliet with Cantor. Good afternoon. Thanks for taking the questions.

Chad Collins: Congrats on the retirement, Kim. I guess as we look forward in terms of reviving growth

Timothy Greaves: Here to maybe levels you are more expecting, what maybe additional resources and investments do you think can be made, and drive sort of above-average returns, maybe even pushing beyond some of the community events? Anything that you are already working on and expect to be rolling out here shortly that can help drive the top-line performance.

Chad Collins: Sure. Yeah. So, we do expect that for increasing customer count over time, our unique go-to-market with the retail enablement programs will continue to drive a lot of that, and we continue to invest in that area and refine those approaches there. In addition to that, you may have noticed that we brought on a new Chief Marketing Officer, and we are advancing the maturity of our marketing capabilities as a way to win new customers in ways outside of the retail enablement program.

So that would be incremental to what we already get with the retail programs, as well as market back to our existing customers, highlighting the broad product portfolio and the opportunity that we have with existing customers, both for the cross-sell opportunity for analytics and revenue recovery, but also the further penetration with fulfillment, adding more trading partners. So, 2025 was a tough year in our end market. We did see a lot of challenges, and the main driver our customers were telling us about was global trade.

So as we sort of lap some of those effects in 2026, have more of the cross-selling momentum from the product going forward, we expect all these will continue to drive long-term growth for SPS.

Timothy Greaves: All right. Very helpful. And then given the changes at Amazon in particular, is there a thought of maybe pulling back some of the resources for the revenue recovery, maybe waiting to see how that plays out a little more in the market over the next several quarters and sort of reassess from there? Or what is the approach to thinking about continuing to invest in a business that has been underperforming your expectation?

Chad Collins: Yeah. So, I think what you will see from us with revenue recovery is we do see the strong demand for this product in the market. So in terms of our ability to cross-sell it to our fulfillment customers and especially the demand that we are seeing from the 1P sellers, which the 1P sellers on Amazon line up much more with our ideal customer profile and our typical fulfillment and analytics customer, that is going well. So I think what you will see is us continue to invest in that 1P area of the business where it very much fits our strategy, lines up with our ideal customer profile.

And on the third-party side, not that we will not continue to manage that and there is demand for that product as well, but it probably will not get the same level of total focus as the 1P will. And I think over time, there are probably some opportunities as well in this business to drive the mix a little bit more from take-rate model to the subscription model, but that will come over time. Alright. Great. Thank you.

Operator: Our next question comes from Dylan Becker with William Blair. Hey, Chad. Hey, Kim.

Dylan Becker: Welcome. My congrats on the retirement. I am looking forward to catching up and hearing what is next, maybe for you, and also for Chad as well too. But as we think about kind of the broader demand backdrop and what we have talked about in the past with some of those initial projects that were into 2026, can you give us any update on how those have continued to progress?

And maybe what is implied kind of in the outlook for 2026 as it pertains to your expectations on the mix of the net new customer side of the equation as that had stepped up in 2025, if that continues, as well as some of the cross-selling efforts that have been an area of more resource dedication as well too.

Kimberly Nelson: Sure, Dylan. I will take that last one first, then I will hit your other two. So we would continue to expect that the majority of the revenue growth is coming from that ARPU side of the equation. That does not mean we will not continue to add customers. Retail go-to-market, as Chad talked about, is a great way through those retailer relationship management programs to get us in front of new customers, but the mix between the two will continue to be more heavily skewed on the ARPU side. When we think about some of the dynamics as it relates to the retail relationship campaigns, we still see strong demand for that.

What we are seeing, however, is that is probably going to be a bit more, call it, back half versus front half, just the timing of when those are coming in. So still very strong demand, but a bit more later in the year versus earlier in the year. And then as it relates to just some assumptions in our guidance, you may or may not have picked up if you think about the Q1, sort of the midpoint is 6% on top-line growth. For the full year, the midpoint is about 7% of top-line growth.

We are still lapping some of those headwinds that we have talked about in 2025 across our business, and we really get to a point in the back half of the year where we have lapped those headwinds. So we are still facing some of those, again, it is the headwinds in the year-over-year compares in the front half of the year that we then have lapped in the back half.

Dylan Becker: Very helpful. Thank you, Kim. Then maybe for Chad, kind of sticking with the topic of the idea of AI, MACS is obviously a part of it, but it does feel like there has been more of an emphasis on kind of an accelerated product momentum. And we have talked in the past about how you guys can leverage network to deliver value.

But maybe how you are thinking about that innovation cadence ticking up and how that can contribute to a lot of the parts that maybe you guys kind of touched on, but, obviously, customer retention, potential pricing power, serving as that carrot for incremental customer adoption, but really leaning into more of that AI initiative to help continue to support some of the pipeline momentum that you are seeing. Thank you.

Chad Collins: Yeah. Absolutely, Dylan. So, what we are hearing from our customers is that data is absolutely key to their AI initiatives, and we are a tremendous source of data. So in our network with our fulfillment product, that generates massive amounts of retail and distribution data. Obviously, our analytics business is based on data itself. And so we are just uncovering more and more use cases where we can expose that utilizing agentic capability. So I mentioned a few that are showing up in fulfillment now.

I will also mention that we are doing a major technology re-platforming to our analytics product, which really allows that data that is in that analytics product to fit, just being on some more modern technologies in our customers' AI use cases a lot more effectively. And I do think that you will continue to see innovation from us, but at the heart of that is really the data that is on the network and the insights that customers can get from that. And with the way the agent technology is moving forward, the speed at which that could come, it is really moving quickly.

Very pleased with what the team has done and the time frame they have done it to get MACS in the market.

Dylan Becker: Terrific. Thank you, both.

Operator: Our next question comes from Lachlan Brown with Rothschild and Company Redburn.

Dylan Becker: Hi, Chad, Kim. Congrats on the tenure as CFO.

Lachlan Brown: On M&A, your last transaction was over twelve months ago now. So how is the M&A environment at the moment? Conscious that publicly traded software has materially derated over the last few months, are you seeing this reflected at all in private valuations? And how competitive are the bidding processes at the moment? Are you seeing much private equity?

Chad Collins: Yeah. So we continue to manage an M&A pipeline and stay active in that market. What I would say is we also have work remaining as we integrate the revenue recovery business into everything we are doing at SPS Commerce, Inc., especially on the go-to-market side. And, at this point in time as well, a share repurchase is an attractive use of the capital that we have. So we are just balancing out all of those factors. You will see the board authorized another $200,000,000 of share repurchase, bringing that total to $300,000,000 that they have authorized. And so that can be a definite attractive use of the tremendous free cash flow that this business generates.

Lachlan Brown: That is clear. Thanks. And on MACS Connect, which supports MCP and agent-agent communication, presumably great for supporting the SPS ecosystem and your customers. But given your moat is the retail network data, how do you manage AI ERP peers taking that strategic data out and using it to their benefit? And, also, could you potentially look to price MCP access?

Chad Collins: Yeah. I think we will price the MCP access. At our field kickoff event we had last week, we did a live demo for our sales team of this MCP interface where we were connected to one of our ERP partners and their agent-to-agent communication, and then we utilized, in this case, Claude—it could have been any type of chat-based LLM capability—and actually showing how that Claude was able to connect data out of the SPS network and this particular ERP provider's data and put that together in a way that was very helpful for many customer use cases.

So I think it just exemplifies that we will have use cases that are directly interacting with MACS, our agent, but we will also have many use cases where we are just a participant in the customer's agent-to-agent workflow. And I am confident that the data that we are bringing to that workflow will be valuable enough that we will be able to monetize over time those types of agent-to-agent communications.

Lachlan Brown: Makes sense. Thanks for the questions.

Operator: Our next question comes from George Kurosawa with Citi.

Dylan Becker: Okay, great. Thanks for taking the questions. I want to echo congratulations to Kim. I wanted to follow up on the discussion from last quarter about some enablement campaigns that from a timing perspective pushed out of Q4 and into the first half of 2026. I wanted to just follow up on if you expect to execute on those. Just looking at the guide, it seems like possibly maybe some of those are skewing more towards Q2 than Q1. Just any color on that trend.

Chad Collins: Yes. So those particular ones that did slip here into 2026 are still moving forward, and some of them are actually running at this point in time. What I would say, though, is keep in mind as those programs affect customer count, there can be a little lag in that. So because they actually do not really affect the customer count until we are fully up and running and billing those customers. So those programs are continuing. But I would expect them to drive more customer counts in the latter stages of Q2 and more in Q3 than they will in the first half of the year.

Dylan Becker: Okay. That is helpful color. And then on the 3P customers for Carbon6, I think you had guided to about 150 net declining customers, seems like it came in a little below that. Maybe just any color on your line of sight to maybe those headwinds normalizing and or how long you expect those to persist for? Thanks.

Chad Collins: Yeah. So, we really do think about the 1P customer count and the 3P customer count quite differently given the comments I made earlier about just the strategic focus. So you will see in our results, we are flat from a 1P customer count and then down 350 in the 3P side. As we focus more on the 1P side of revenue recovery, which is really where our ideal customer profile lies. On the 3P side, the dynamics there are our focus is on 1P. We are attracting 1P customers in. Often, 1P customers that we attract are existing customers, because of this ideal customer profile. So they are not going to positively impact the customer count.

Whereas on the 3P side, these are much smaller businesses. They do have a higher churn rate. And so there is going to be just some natural churn based on the size of the customer there. So you kind of have this dynamic with a little bit higher churn in 3P. 1P, which might not always increment up on the customer count side because sometimes these are existing SPS customers just taking on the revenue recovery solution. So, hopefully, that is a little bit more color on those dynamics on customer count between 1P and 3P.

Dylan Becker: Very helpful. Thanks for taking the questions.

Operator: Our next question comes from Christopher Quintero with Morgan Stanley.

Lachlan Brown: Hey, Chad, Kim. Congrats on the deserved retirement here. I wish you all the best. I actually wanted to follow up on the enablement campaign commentary. So last quarter, you talked about those moving into the first half of this year, and now we are talking about most of those moving to the second half of the year. So I guess what gives you the confidence that

Dylan Becker: Those will actually commit in the second half of the year versus potentially pushing out again to 2027?

Chad Collins: Yeah. They are moving forward, Chris. What I was really, when I mentioned maybe pushing out, it was more about just the timing effects of when we start billing those customers. Right? So we kind of need to complete the program. The retailer has to go live, and then we kick in with the invoicing. So, it is not that the programs themselves are directly getting delayed, but just providing a little outlook that the actual customer count impact may come a little bit later.

Lachlan Brown: Got it. That is helpful, Chad. And then I want to ask about

Dylan Becker: The down-sell activity, reducing the number of connections, reducing the number of document volumes, like how far through we are in terms of

Lachlan Brown: How much more downside there is to that, or is this something that is going to continue throughout the rest of the year? What is your best

Dylan Becker: Guess or expectation around the trajectory of those trends?

Kimberly Nelson: Sure. So we started to see some of the down-sell activity in 2025. So the latter part of 2025. So our belief is that we will have lapped the headwinds by the end of 2026, if that makes sense. Because that is basically a full year then of those headwinds. So our belief is in 2026, we have lapped that down-sell and those headwinds that we have experienced. And we have that philosophy, we have that incorporated into our guidance.

Operator: Got it. Thank you, Kim.

Dylan Becker: Our next

Operator: Comes from Parker Lane with Stifel. Hi, this is Jackson Bogli on for Parker. Thank you for taking my questions.

Dylan Becker: Kim, congratulations on the retirement as well. My first question, I am curious, what levers are you targeting to pull to achieve the EBITDA margin expansion in 2026? A little color there would be helpful.

Kimberly Nelson: Yep. Happy to answer that. So a lot of it is really a continuation of some of the dynamics that you have seen in 2025. So when you think about, I will start with gross margin as an example. So you may or may not recall that over a multiyear time period, we have made a lot of investments in the overall customer experience, and all right things to do for customers today and customers in the future. But we got ourselves to a position where we were able to now start seeing some of the benefits of that and drive more of the gross margin and those efficiencies.

Simply stated, we do not necessarily need to add as many folks as we have had to do historically. You started to see that call it very later part of 2024. You saw that through 2025, and that continues into 2026. So gross margin expansion is a meaningful component of that overall anticipated, call it, 2% of EBITDA margin expansion. That being said, we do see opportunities in other line items as well, particularly in the sales and marketing as well as G&A side. R&D, we do think our level of spend as a percent of revenue is appropriate. We are not really looking to get more efficient there in total.

But the larger component in 2026 of the two percentage points of EBITDA margin expansion you would expect to come through gross margin.

Lachlan Brown: Okay.

Chad Collins: And then secondly, looking at the delays in the enablement pipeline,

Jackson Bogli: Are you seeing any bright spots from specific verticals or different size of vendors, or are the delays pretty much across the board?

Chad Collins: I would say that is pretty consistent across all the, you know, we have a pretty broad definition of retail, which includes kind of the mass merchant retail, grocery, distribution. It is a pretty consistent behavior across all those. Things food-related, there have been some favorable dynamics from some of the food safety activities that have been regulations there, but overall, pretty consistent across

Dylan Becker: Okay. Thank you.

Operator: Our next question comes from Jeff Van Rhee with Craig-Hallum.

Jackson Bogli: Great. Thanks for taking the questions. Maybe just a couple left for me. As you look at the overall softness in the outlook for the quarter and in the forward guide, can you quantify it maybe and break it down between two drivers, one just being the macro softening at your customers and the willingness to spend versus the percent that is coming from the revenue recovery dynamics? If you had to allocate the weakness in the guide to those two factors, how would you weight that?

Kimberly Nelson: So, hi, Jeff. What I would say is both of those are important in the numbers. Think of it as how we exited 2025 impacts your starting point then in 2026, and so that has an impact then, obviously, your Q1, your beginning of 2026. And then implied in our guidance, we are lapping those headwinds, and those headwinds actually are both of what you hit upon there, right? It is right-sizing of some contracts as well as some of the dynamics we have seen on the Amazon policy changes. And we do believe that those headwinds, by the second half of the year, we have lapped that.

And so that is implied within our guidance for a slight increase in our overall revenue growth second half of year.

Timothy Greaves: Okay.

Jackson Bogli: And then just maybe secondly, on the pricing front, when you look at individual customers, understanding people maybe downsized the number of connections, but if you look at the pricing and potential pricing pressure on a per-connection basis, is there anything you would call out in terms of the customers maybe getting more price sensitive on a per-connection basis? And kind of along those lines, I remember over the years, periodically, things would pop up about EDI versus more real-time API-based connectivity. Have you seen any shift in the base and thereby pricing pressure accordingly?

Chad Collins: Yeah. No. If you look at it on a per-connection basis, I would say it is consistent. And when customers are typically downsizing, it is because they have lost that business with a particular retailer. Or based on the way their cost of goods have changed, they are deciding not to do business in certain ways with certain retailers. So it tends to be driven more from that. On the API side, in most cases, this is not a choice of how to connect. It tends to be more that the wholesale-type connections tend to be EDI. If it is more modern in a marketplace, it tends to be more API. And our network does both.

So we support both types. And in fact, when it is API connect, a lot of times there is potentially more value in that for a customer because those API connections tend to be a little bit more complex than the EDI connections. Mhmm. Got it. I will leave it there. And, Kim, congrats. It

Jackson Bogli: Has been just a really exceptional tenure. You have been a class act all the way along. So certainly, wish you all the best.

Kimberly Nelson: Thank you.

Operator: Our next question comes from Mark Schappel with Loop Capital.

Timothy Greaves: Hi. This is Tim on for Mark. Thank you for taking my questions. I guess I will ask around the go-to-market strategy. You know, given the new CTO that you onboarded, is there any changes that we should expect or anticipate over the coming year?

Chad Collins: Yeah. We are super excited to have Eduardo on the team. Obviously, he played a pivotal role in our big field kickoff event that we just recently had. I would not say you should expect major changes in the go-to-market, but with this wider product portfolio, the opportunity that we have identified to expand ARPU, definitely more customer practices and things that will help us drive expansion of that ARPU with the customer is a priority in our go-to-market, not an exclusive priority. But driving that ARPU, I think, will be a key component of our strategy and therefore a focus going forward.

Timothy Greaves: Okay. I think that is the only question I have.

Operator: A reminder, if you would like to ask a question, please press star then 1. Our next question comes from Nehal Chokshi with Northland Capital Markets.

Lachlan Brown: Yeah. Thank you.

Jackson Bogli: Couple of questions for me. One is that

Timothy Greaves: I am pretty sure you addressed, but just to be perfectly fair,

Chad Collins: You know, why did the 1P customers be flat quarter to quarter? Because the prior two quarters, you know, that was showing good growth again.

Kimberly Nelson: Hi, Nehal. I can answer that. We mentioned this on last quarter's earnings call as well. This has to do with the timing of some of those relationship management, formerly known as community enablement, programs. So the color we had given a quarter ago was the timing of those, instead of being in Q4, was going to be in 2026. And as such, we signaled that our expectations were that the 1P customer count would be flat sequentially. And that is, basically, we landed right on with what our expectations were.

Chad Collins: Right. Okay. And, do you expect the pace of 1P customer adds to return to what you were seeing in the second quarter and third quarter as we go through calendar 2026?

Kimberly Nelson: Sure. So the biggest driver as it relates to the 1P customer count is related to the relationship management, formerly known as the community enablement, programs. So the timing of those programs will have an impact in the timing of the customer adds. And, so, some of the dialogue we have had here on the call is we have a strong community enablement pipeline. More of that, however, will be in, call it, the Q2 to second half of the year. We still run them throughout the year, but more of those would be later on, closer to the second half of the year.

So at this point in time, we would assume that Q1 2026 would also probably be flat to Q4 2025 due to the timing.

Jackson Bogli: Okay. And then,

Chad Collins: General and administrative,

Jackson Bogli: That was up 29% year over year for calendar 2025,

Chad Collins: Whereas 15%, 16-ish

Kimberly Nelson: Percent of revenue. There are various costs in there that you would expect. There have been investments we have been making in some of our back-end tools and technology from both the tools and technology as well as the team, augmenting the team, etcetera. We do have a stated goal of 10% to 15% for G&A over time.

Operator: Thank you. This concludes our question and answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.

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