SPS Commerce (SPSC) 28th Annual Needham Growth Conference Virtual summary

Business overview and product strategy

• Operates a cloud-based network connecting retailers and suppliers for digital supply chain collaboration.

• Revenue recovery solutions address supplier penalties from retailers, offering SaaS and managed service models.

• Focuses on cross-selling revenue recovery to medium and large fulfillment customers, especially those trading with major retailers.

• Product strategy is informed by mapping customer business processes and identifying adjacent solution opportunities, pursued via organic development, partnerships, or acquisitions.

• Network supports both EDI and API integrations, enabling flexibility for customers transitioning to modern connectivity.

Revenue recovery business and recent performance

• Revenue recovery business underperformed in Q3 due to seasonality around Amazon Prime Day and a one-time inventory policy change by Amazon affecting 3P suppliers.

• The inventory adjustment impact is expected to work through Q4 and into 2025, with guidance updated to reflect this.

• Most revenue recovery growth opportunity remains with 1P (wholesale) customers, as 3P (marketplace) side faces more headwinds from Amazon policy changes.

• Revenue recovery leverages existing network data to streamline dispute processes, enhancing value for customers.

• Offers both SaaS and take-rate (managed service) pricing models, depending on customer needs.

Growth, M&A, and geographic expansion

• M&A remains a key lever for growth, focusing on EDI market consolidation, new solution areas, and geographic expansion, especially in Europe.

• Near-term focus is on integrating recent acquisitions and stabilizing revenue recovery operations before pursuing further M&A.

• Early traction in Europe with enablement campaigns and e-invoicing solutions, driven by regulatory mandates and digitization trends.

• European market dynamics differ from the U.S., requiring adaptation to local retailer-supplier relationships and business cultures.