SPS Commerce, Inc.

Good day and welcome to the SPS Commerce Q1 2026 Earnings Conference Call. All participants will be in 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 a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the call over to Irmina Blaszczyk. Please go ahead.

Thank you. Good afternoon everyone and thank you for joining us on SPS Commerce first 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 attraction 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 investor relations section of our website, spscommerce.com. During the 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.

Thanks, Armina, and good afternoon, everyone. Thank you for joining us today. SPS Commerce delivered a solid first quarter. Q1 revenue grew 6% to $192.1 million. Recurring revenue grew 7%, driven by fulfillment growth of 8%. Amid rapidly evolving global supply networks, SPS innovations are critical in addressing trading partner needs across the supply chains of manufacturers, retailers, logistics providers, and brands. Tariffs, geopolitics, and risk mitigation are fundamentally restructuring global trade. In this environment, supply chain partners need real-time coordination to respond to disruptions, demand shifts, and capacity constraints. And SPS is uniquely positioned to deliver the AI optimized automation trading partners need at scale. Before I provide an update on how customers are leveraging our AI enabled solutions, all review current business dynamics across our product portfolio. First, with respect to our revenue recovery business, we continue to manage the headwinds from Amazon's policy changes. For example, to better align pricing with the value we deliver, we are introducing a subscription platform fee to our 3P take rate customers. Joe will be providing further detail. Second, We are pleased with our cross-selling momentum among 1P customers, and I'll share some examples of that shortly. And third, our business without revenue recovery is performing in line with our expectations, with early indications that the invoice scrutiny we observed last year as a result of tariff and macro headwinds is subsiding. We continue to expect these transitory headwinds will be largely behind us by the end of the second quarter as we remain focused on delivering the solutions our customers need to succeed in a dynamic trade environment. A great example of how suppliers are realizing value from the SPS portfolio is Siete Foods, a customer since 2018. Over the past year, Siete made the transition from a high-growth emerging brand into an enterprise-scale operation. driven by their acquisition by PepsiCo and rapid expansion across mass retailers like Walmart, Target, Whole Foods, and Costco. As their scale increased, so did the complexity of their supply chain. We worked closely with CSA to modernize their operations and support their goal of full supplier compliance, while integrating tightly with their ERP to ensure they're able to handle higher volumes and evolving retail requirements with greater data consistency across orders, shipments, and invoicing workflows. Recently, CSA became an early adopter of MAX, SPS's AI agent, embedding our proprietary network intelligence directly into day-to-day operations. Their team is using MAX to quickly diagnose issues that previously required manual investigation, such as identifying why shipments failed or invoices were rejected, before those issues impact their retail partners. MAX is also helping CTA surface broader operational patterns across thousands of transactions to address root cause of inefficiencies, enabling them to scale and handle greater order volume with stronger compliance without adding operational overhead. This customer engagement demonstrates how a SPS partnership evolves beyond trading partner connectivity and compliance to become a core intelligence layer within our customer supply chains. Siete Foods is one of many brands participating in the MAX beta release, providing valuable insight into how agentic capabilities are being applied and where customers are realizing value across their workflows. For Siete, by catching undetected inventory failures, MAX is projected to protect up to 8% of revenue that would otherwise be lost to stock outs. Based on feedback from more than 400 Max beta customers, the biggest impact AI can have on trading partner collaboration is identifying issues early before they cause disruptions. Max is already demonstrating its ability to do exactly that. SPS is also leveraging agents to improve operational efficiency. Early applications within our agentic network are already driving measurable gains in customer treatment strategies, reinforcing our competitive mode through proprietary network data and intelligence, and reducing onboarding and setup time from weeks to days. In parallel, product engineering has advanced significantly, with much of our software development now agent-driven, accelerating innovation cycles and improving productivity. In sales, our data-powered growth strategy is using demand signals from customer activity across our network to identify upsell and cross-sell opportunities. As we continue to advance our network-led go-to-market motion, cross-selling momentum continues to build across our customer base. For example, fulfillment customers are expanding into revenue recovery, while revenue recovery customers are adopting fulfillment, reinforcing the strength of our network and the value of our integrated solutions. Explore Scientific, a precision optics company that designs and manufactures telescopes, binoculars, and other scientific instruments, was a supply pike revenue recovery customer. After spending over a year with a different EDI provider during their NetSuite ERP implementation, they faced ongoing usability challenges, unreliable workflows, and incomplete automation, at times requiring manual order processing just to keep pace. More importantly, these inefficiencies created downstream financial impact with inconsistent data and limited visibility leading to shipment failures, invoice rejections, delayed payments, and revenue loss through deductions and write-offs. By transitioning to SPS, Explore Scientific reestablished a reliable operational foundation with a fully functioning ERP integration and standardized workflows across orders, shipments, and invoices, they gained consistent, accurate data flowing across their business. This shift enabled their team to move from reactive problem solving to proactive management, identifying issues earlier, understanding root causes, and preventing disruptions before they impact financial outcomes. As their operations stabilized, Explore Scientific expanded their use of SPS solutions. adding analytics and system automation to operate with greater confidence and control. What began as a need to fix operational gaps has evolved into a broader transformation, positioning Explore Scientific not just to process transactions more efficiently, but to actively protect and recover revenue. Explore Scientific's experience highlights how customers are realizing meaningful value on the SPS network by restoring operational stability and visibility. In addition to cross-selling our products, we are unlocking incremental growth opportunities by unifying them. For example, Walmart suppliers using SPS fulfillment can now recover overages directly in the SPS solution. This underscores the value of the platform approach and enables trading partners to collaborate better along the entire value chain. In closing, SPS is well-positioned to capitalize on significant growth opportunities ahead. our product portfolio continues to advance with AI-driven solutions for both suppliers and retailers, powered by proprietary data that improves efficiency and unlock meaningful value across supply chains. As a result, SPS is the leading intelligent supply chain network, embedded in the daily flow of commerce, driving automation, insights, and increasingly AI-powered optimization. Lastly, Over the past 16 months, we have added seasoned SaaS leaders to the SPS team who bring the operational rigor necessary to scale our product and go-to-market strategy. And today, I am pleased to formally introduce Joe DelPretto as our new CFO. Joe joined us on March 16th, and we're excited to have his expertise on board as we enter this next phase of our journey. Welcome, Joe.