SPS COMMERCE INC Q3 FY2025 earnings

SPS Commerce reported third quarter revenue of $189.9 million, up 16% from the prior-year quarter. It was the 99th consecutive quarter of topline growth, and recurring revenue grew 18% from the third quarter of 2024. Gross profit was $131.97 million, up 17.8%, and gross margin was 69.5%, up 1.0 percentage point. Operating income was $31.19 million, up 22.0%, with an operating margin of 16.4%, up 0.8 percentage point. Net income was $25.57 million, or $0.67 per diluted share, compared with $23.46 million, or $0.62 per diluted share, a year earlier. Through nine months, revenue was $558.85 million, up 19.7%. Year-to-date gross profit was $384.18 million, up 23.2%, year-to-date operating income was $83.62 million, up 30.4%, and year-to-date net income was $67.50 million, or $1.77 per diluted share, compared with $59.50 million, or $1.57 per diluted share.

Non-GAAP measures told a similar story. Non-GAAP income per diluted share was $1.13, compared with $0.92 in the prior-year quarter, and Adjusted EBITDA rose 25% to $60.5 million. Cash generation improved as well. Operating cash flow was $60.61 million for the quarter, up 13.7%, and $132.92 million for the nine months, up 13.8%. Capital expenditures were $6.06 million in the quarter, up 15.6%, and $18.87 million year to date, up 36.4%. One soft spot was current deferred revenue, which came in at $77.57 million, down 1.7% from $78.88 million a year earlier. The 10-Q attributed the increase in operating cash flow mainly to higher net income adjusted for non-cash expenses, partly offset by fluctuations in operating assets and liabilities.

The fourth quarter outlook called for non-GAAP income per diluted share of $0.98 to $1.02 and Adjusted EBITDA of $58.8 million to $60.8 million. Management said fourth quarter growth would run 13% to 14% year over year. For the full fiscal year 2025, non-GAAP income per diluted share is expected to be $4.10 to $4.15, and Adjusted EBITDA is expected to be $229.7 million to $231.7 million, which management described as 23% to 24% growth over 2024. Full-year growth was guided to 18% over 2024. The company also listed expected full-year non-cash share-based compensation expense of $58.3 million, depreciation expense of $21.1 million, and amortization expense of $37.1 million.

Leadership changes and capital returns rounded out the quarter. Eduardo Rosini was named Executive Vice President and Chief Commercial Officer, effective December 1, 2025, replacing Dan Juckniess, the Executive Vice President and Chief Revenue Officer, who retires effective December 31, 2025. The board authorized a new share repurchase program of up to $100.0 million, effective December 1, 2025 and expiring December 1, 2027. SPS Commerce repurchased $30.0 million of stock in the quarter and held 37.7 million shares outstanding as of September 30, 2025. It intends to fund buybacks with cash on hand and ended the quarter with $133.7 million of cash and cash equivalents. The main risks management flagged were ongoing global trade and economic uncertainty and spend scrutiny across some customer groups. Deferred revenue slipped year over year even as revenue grew at a double-digit clip, and the balance sheet shows goodwill and intangibles growing through acquisitions. Management still argued that the retail ecosystem will keep driving demand for supply chain efficiencies.