My name is Dylan Becker. I'm the Research Analyst here at William Blair that covers SPS Commerce. For all the necessary disclosures, you can find those on williamblair.com. We have Chad Collins, the CEO, and Joe Del Preto here, the CFO of SPS. Gentlemen, thank you both for joining us. Chad, maybe as a way to start the conversation, I think there's varying levels of familiarity to the story, but can you give us some background context on the evolution of SPS Commerce, what you guys do, and the problem you solve in the supply chain ecosystem? Yeah, sure. At SPS, we operate a network in the cloud that connects retailers and large distributors to all their suppliers so that they can exchange supply chain information across our network, primarily information related to orders and shipments. This helps them improve collaboration in the supply chain and gain inventory visibility. On our network, we have over 50,000 participants. Of that, about 4,000 are the major buying organizations or retailers or distributors in the business. We more recently have gotten in the area of helping customers deal with chargebacks or supply chain penalties they experience and either fix the root cause problem in their supply chain, or in the case that they're erroneously charged, get their money back. Perfect. A lot has changed over the last five, 10 years, maybe even last few as well, coming out of COVID. Can you give us a sense of where we are in the supply chain digitization journey, and what are some of the factors, maybe from a consumer perspective even, that are pushing for this acceleration and emphasis towards digitization? Yeah, absolutely. I think what we saw certainly in retail during the pandemic was an acceleration of omni-channel initiatives, especially those that related to e-commerce initiatives. A proliferation of drop shipping and big investments in direct-to-consumer fulfillment centers. What we're seeing a little bit more of now is a focus on overall supply chain collaboration. Really, efficiencies in the supply chain, better information exchange in the supply chain, and all this, I think, is going to be fueled even more with the agentification of the supply chain. When you start having agents on both the buyer side and the seller side with requests for more data and information, it really drives the technology solution like a network that can allow them to collaborate on the same data sets with agents on both sides of that. Perfect. You kind of hinted at it, but maybe from a broader macro level, the world getting more complex, it seems to be a tailwind to the business. I guess, driving more documentation, more opportunity for SPS to connect retailers and suppliers across the ecosystem. Yeah, absolutely. Anytime there's changes in sources of supply, you're changing the assortment, which is a constant thing going on in retail right now, especially with the proliferation of some of these direct-to-consumer brands, which are now gaining traction with retailers. It's never been easier to start a brand with social media marketing and Shopify. That brand gets traction. This complexity of retail supply chain compliance, and that's really where we step in. The other big drivers that are pretty important in our business around change dynamics is ERP and supply chain system change-out. The more that customers are adopting new ERP systems or new supply chain systems, that's typically a catalyst for them to also want to change the methods in which they're connecting to all their trading partners. Often they'll move over to a more modern cloud-based approach like SPS offers when they go through that type of ERP or supply chain system change. Joe, maybe from a financial perspective, to bring you in here as well too, could you just give us a quick snapshot on where we are from a business perspective, scale, growth, margins- Yeah. ...just how you guys think about the operations? Yeah, for sure. We recently talked around this year's guidance around $800 million of revenue. On an adjusted EBITDA, we're in that low to mid 30% range as an organization. What we've talked about is we've been adding about 200 basis points a year is our goal that we've talked about. We think we can do better than that. Really focused right now on driving margin in the business. We think there's a huge opportunity with some of the things we're doing internally, to drive more EBITDA in this business. By the same time, obviously not sacrificing our ability to grow the business. Sure. We've talked about our midterm range of growth is the high single-digit growth rate with adding 200 basis points of margin a year, and feel really confident about that trajectory. Perfect. We'll come back to some of the efficiencies there, I'm sure, later as well. Chad, you touched on the foundation of the business is the network. The fact that it's multi-sided, it's been built out over multiple decades. You've got hundreds of thousands of stakeholders now at this point. I guess, could you just give us a sense of the data that's being captured in that network? What's proprietary about it? What's differentiated as you think about delivering more value, and embedding yourself deeper within the ecosystem? Yeah. When we think about the data that's in the network, we're classified in three different ways. Of course, if you're a participant in the network, you have your data on the network. This is primarily going to be information about orders, transportation shipments, all the way down to things like pallet-level inventory detail. All that information that's yours on the network, you have access to. We also have a total view of the network, so the total network data. These are insights that we can glean around trends that are happening in the network. These trends could be certain demand patterns. They could be certain rules or expectations that we're able to see from the major retailers as a result of having that total network view. That total network view we're finding is helpful in certain AI use cases. Then the third, and I think maybe underappreciated aspect, is built into the network itself, is a proprietary database for every major retailer or distributor around what their supply chain expectations are. We built this up over 25 years, around not just what the digital communication requirements are, but all the timing expectations, requirements for which transportation providers you can use, requirements for how you actually need to label your product to go into a retailer. We've built out these databases, that's built into the network as well. There's a certain rule set that's built into the network that just when you join the network, you can ensure compliance. The real power is coming when we're combining these three different data sets that we have in the network with an agentic layer over the top. That allows you then, and the agents to go in and understand your data, that may be a specific task you're trying to do inside our network, with the overall trends in the network, and then also pull in these proprietary supply chain databases of expectations, which allow you to ask questions like, "Hey, how many hours do I have between the time I need to acknowledge an order for Target versus an order for Walmart?" Okay, I need to acknowledge my Target orders faster. Okay, now go find me all the orders that need to be acknowledged for Target, and I can go through those orders. It really drives workflow by pulling those three different data sets together. It sounds like the data is really the moat here, right, to a certain extent. I guess as you layer on more of those data sources, how that has gravity around it, and maybe how you think about layering on that intelligence layer on top, as it relates to, I am sure we will dive into the AI topic as well too, but your positioning in that domain. Yeah, absolutely. We are the pre-eminent supply chain collaboration network. I think the amount of data we'll put into the network going forward will be driven by more and more use cases that our customers have for wanting to facilitate more and more supply chain collaboration. What we're seeing as either customers are using our agent, MAX, or they have agents on either side of our network inside their operation, they're just requesting more and more data that comes from our network. I think that's going to drive a higher level of data exchange expectations to facilitate the supply chain collaboration going forward. Perfect. I do want to come back to the opportunity in MAX and what we've rolled out thus far there. Maybe, Joe, if we think about quantification of where the business is today, what we talked about, what the opportunity is. How do you guys think about the market that's out there, how you grow into that, where that opportunity comes from? Is it adding connections, adding stakeholders, just thinking about drawing down against that TAM, if you will? Yeah. I think in the near term, we think there's a huge advantage going back into our existing customer base and expanding it. I think historically, we've done a good job of that, but probably not been a focus. There's definitely a more internal focus to go inside the 50,000 customers we have and say, "Okay, where are the opportunities?" The biggest lever of that is, to your point, is adding more connections for them, right? How do we go in and make sure we understand who are the other trading partners that we don't have in our network? How do we reach out to them proactively and say, "Hey, by the way, you're using us for Costco, but you're not using us for Walmart," and just trying to expand that. That's been a huge lever for us historically, but it's got to be a bigger focus going forward. You think about layering on some of the products that we have, like Analytics, Revenue Recovery. We think there's a big opportunity across our customer base, especially as we're bringing in much larger suppliers. If you think of the suppliers coming in, we're getting more medium, larger suppliers that are coming in, and guess what? They have larger budgets. Some of these products that we've historically had are probably a better fit for some of these larger folks. I think it's going to be a combination of growing our existing customer base with new products, but also adding on new connections for that. Sure. Which is expansion of the TAM in that direction as well because you're getting them with more retailers. Sure. Those are probably stickier customers as well, too, larger enterprises. Maybe Joe or Chad, the quantification around that, too. I think the average customer today spends something like $13,500. You've talked about the blended norm getting to, I think, somewhere in the $40,000-$45,000-ish type of range. Can you talk about that journey, that evolution of what you've seen that gives you confidence or conviction in that trajectory playing out? Yeah, I think the important thing is that we very much have a land-and-expand model. I think there's a lot of software companies out there where when they make that initial sale, they're probably already 80%, 90% penetrated in what they're going to get out of that account. We have a different model because when we go to market, we work with the retailer to help them digitize all their connections to their suppliers, and we'll get the mandate from the retailer to help all their suppliers get digitally connected. Now, they can do that through the SPS network, or they can go through a testing and certification process, but a lot do join the SPS network. When we land that supplier as part of one of those retail programs, they're typically just adding that one connection for that one retailer, but they're doing business potentially with lots of other retailers. It's the job of our sales team, once we get that one connection, to drive further penetration and go get all the connections within that customer. In the case of the medium and large customers, they're also very addressable for our add-on products, which we have an Analytics product, which helps retailers and suppliers collaborate on point-of-sale data at the specific retail store. We have another product, this Revenue Recovery product that I mentioned earlier, which deals with chargebacks. If you look at all of that, we have this historical pattern of this land and expand, plus these cross-sell products. When you put that together, you have a logical path, and even existing customers that we can point to who have gone through this expansion that have driven that ARPU up over time. Sure. Maybe on that commercial model and how you go to market, could you touch on, that used to be called enablement campaigns, but how you think about that proliferation starting at the retailer mandating down, but just driving that expansion motion? Yeah. It's surprising to a lot of people, but retailers often struggle with ensuring compliance with all these digital supply chain requirements they have. You could just imagine, if you're a buyer, you find a hot product, you want to try it out at one store, you email off your very first purchase order. You don't know if the product's going to do well or not do well. That product takes off, and it goes from one store to 20 stores. Now you've got it nationwide, and you're still emailing all your purchase orders over to that supplier. It's often that we go into a retailer and find that not all of their suppliers are compliant with all the digital expectations for supply chain that that retailer has. That's where we come in. We will run a program and do all the outreach to the suppliers. We'll explain the digital mandate coming from the retailer, and we'll take them through a program that will help onboard them to that retailer's digital requirements. For the retailer, it's great because they get compliance, they get better supply chain visibility, they get better collaboration with their entire supplier community. For SPS, it's great too, because we have built-in lead flow then, and we get to engage with all of those suppliers. That has always been SPS's primary go-to-market motion to add new customers. On top of that, we have other motions that help us expand with customers or help us catch those customers at the point of change of an ERP system or a supply chain system. We put all that together, and that's the overall go-to-market motion that we have. Perfect. Maybe to segue it into the AI opportunity, right? Because you touch these different kind of datasets and different data sources, and you proliferate across a multitude of different workflows. It feels like an area ripe for automation and efficiency. You've rolled out a handful of MAX agents, I guess. Could you just give us an overview on how you're thinking about the agentic opportunity, and maybe we'll touch on the first-party, third-party dynamics of how customers are using those. Sure. First off, not to go too technical here, but rather than just build specific agents for specific use cases, we've actually built a whole agentic layer into that underlying network. Then what that allows us to do is from that underlying agentic layer inside the network, expose certain product features out. We've done all this under the branding of MAX, and the first three MAX features are in our Fulfillment product, which is our main product for suppliers. In there's a chat feature. This chat feature allows you to pull from those various data sources that I mentioned before. Really the power we're seeing or customers are seeing is combining their data on the network with these proprietary databases of supply chain expectations and putting that all together so they can execute effectively. The second capability is MAX Monitor. That is actually evolving pretty rapidly into an agent-building capability. Certain tasks that you might prompt over on the chat side, you may want to build an agent to repeat that on a certain interval. MAX Monitor allows you to have that agent-building capability, again, within our platform. We realize that customers are going to have broader agent strategies across their enterprise, and they'll still want to interact with the SPS network, but they may be executing that from a different agent, an OpenAI or a Claude agent, or whatever's to come next. To facilitate agent-to-agent communication, we have an MCP layer that allows customers then to tap into the SPS network, both their data on the network, but also the supply chain databases that we have and execute agent-to-agent communication. On that point, too, I think this is a common misconception on the story, too, right around the impact of this proliferation of API versus EDI, right? Yeah. I guess. Could you help walk us through the nuances of each and why that's maybe not as much of a threat to the business, and maybe more so even still an opportunity? Yeah. One of the most misunderstood things, I think, from the investment community about the SPS network and how it actually works. To us, whether it's a EDI or API endpoint really doesn't matter. The network supports both. What we tend to see is a lot of the wholesale transactions that happen in retail, so this is where you're going to ship into a distribution center, or ship directly to a store. The fulfillment models that have been around in retail forever, a lot of those tend to be EDI-based transactions just because they have been around forever, and that was the technology at the time all this was adopted. When we look at things that are more modern, so some of the drop shipping stuff, certainly a lot of the marketplaces that we help our customers connect to, things that have been invented in the last 10 years, these tend to be API-based connections. For us, it really doesn't matter on our network. We're really about helping retailers and suppliers collaborate on the supply chain. The endpoint of whatever connection is on the network doesn't really matter to us. Sometimes customers will tell us, "Hey, we're glad you have all this API, because actually the API is a little bit more complex sometimes than the EDI. We see you offering more value when you can handle all these API connections for us as well. Sure- Correct. ...regardless of the mechanism. I guess within that, you're serving the largest retailers, the vast majority, I think 4,000+ retailers. You have almost 50,000+ suppliers across the ecosystem. How do you think about the competitive landscape? If customers aren't using SPS today, where are they coming to you from? I guess, just the competitive question more broadly. Sure. In the enterprise space, we do see some of the legacy providers of the EDI technology still out there, typically with an on-premise product and a do-it-yourself mapping tool. These solutions would come from IBM and their Sterling product line, or OpenText and some of the things that came from the GXS. They have a collection of EDI products that they've assembled over the years, all mainly legacy-based products, and all a do-it-yourself type approach, where if a retailer makes a change, you're going to go into these tools, and you're going to change those maps yourself or with your staff. On the smaller side, we see some other companies that also provide these point-to-point connections or do-it-yourself approaches. We really differentiate ourselves by providing this network approach, and we're by far the largest provider of the network and one of the only ones providing this true network approach. The benefit of the network approach is, if a retailer makes a change, we make that change once in our network, and all 50,000 customers get the benefit of that change. If you're in a do-it-yourself approach, Target makes a change, you got to make a change. Walmart makes a change, you got to make a change. The network approach is a much more efficient approach overall. That's why I think we just continue to see the growth of the network and people moving to the network-based approach. Yeah. Maybe to kind of summarize, too, as that complexity compounds, the opportunity cost of trying to manage it yourself becomes less attractive, right, over time for vendors to try and manage the relationships. Yeah, I think the question that's quite common right now is, "Hey, if the agents can just do all the mapping and coding, are people still going to pay SPS to participate in the SPS network?" Well, I strongly believe that they will, because you got to first contrast this do-it-yourself approach with a network approach, right? Even if the agents can help with the do-it-yourself, you still got to have a team that's going to look after those agents. Those agents also have to be monitoring all the changes and compliance requirements of the retailers to trigger that activity to make those changes. If you're in the SPS network, we'll just take care of all that for you. Oh, by the way, we're using those same agents, and so we're very efficient at it, as well. I just don't see, even with agents and AI, the do-it-yourself ever becoming more efficient than the network-based approach. Perfect. You kind of hinted at this as well, too, as a driver of change, kind of the ERP modernization cycle within a lot of your customers. I guess, to what extent are you kind of seeing an uptick in appetite for kind of digitization and how that's unlocking, "Hey, if I'm going to modernize my ERP, I might as well kind of bring everybody on board to the network"? Yeah. I think 2025 was a bit of a slower year for ERP change-outs, especially in the mid-market. I do think there were some cost pressures on suppliers to retailers resulting from the tariff impact in 2025. That was a headwind to this ERP change-out. We're starting to see some of that dissipate in our interactions with our own customers, and I think that will drive some more ERP adoption. I think the other thing is ERPs are kind of the data backbone for most enterprises, so you want to get that right and get that modern so that you can launch your AI use cases. My prediction, I wouldn't say we're yet seeing a tailwind in this, but I do think we'll see some positive momentum in the ERP change-out, especially in the small and medium-sized businesses, which was a little bit slow last year. Sure. I think you did kind of call out from a broader demand perspective, you've seen some of that cautious sentiment kind of starting to wane as well. I guess, how much would you attribute to customers kind of trying to solve their own AI solution set using SPS to do so, but maybe the ROI component of it, you being able to kind of deliver it more efficiently, onboard them faster, kind of some of the productivity gains in helping customers realize that value earlier and unlocking some of that incremental demand? Yeah, one of the largest challenges we've had historically is that time to value of getting customers on the network, especially in the case where they're going to integrate their ERP system in our network directly. It's just challenging, right? ERP systems are configured differently. Customers have different business processes they're running on top. To get that wiring between the network and the ERP, even though we provide an out-of-the-box adapter, the configuration of that adapter is a complex task. Sometimes we'll have a customer, and it'll take them several months before they're able to get the value out of the network because of that wiring into their ERP. This is an area, this area of agentic onboarding, where we think that there's going to be massive change going forward. All that understanding of the customer-specific requirements, their ERP configuration, this is great work to be done by agents, and we actually believe that we'll have agents be able to go in and handle the vast majority of the configuration required to set up these adapters to connect our customers' ERPs into our network. The result of that will be a few things, the time to value for customers, obviously, dramatically faster. We think there's a positive revenue impact because I explained that land and expand model earlier, so the faster we move them through that land and expand. For our own gross margins, we have a lot of cost in our cost of goods sold attributed to, today, the people who are manually doing this configuration work, and we think that when the agents take care of that, there'll be a positive impact on gross margin, and is on top of a pretty nice improvement we've had in gross margin over the last couple of years already. It's probably a good segue to Joe, kind of thinking about the internal efficiencies and how you're kind of redeploying some of those savings, kind of navigating that balance, if you will. I guess, what are the areas that you're seeing the most efficiency, to Chad's point, kind of gross margin side of the equation, but how you're thinking about it from a financial perspective for the business? Yeah, I think outside of what Chad was talking about, we think there's a real opportunity on the gross margin side with some of the agents on the onboarding side. I think the other two major areas where we're seeing some really early traction with the internal agents that we're building, number one is on the R&D side and the technology team, which I think a lot of companies are seeing on the engineering, be able to just have way more throughput on that team. I will say right now, though, we're probably taking any of those, what I would say, benefits and reinvesting it into that group because we just want to make sure we're moving as fast as we can on the R&D side as it relates to some of the AI stuff we're doing. A lot of that will go back in. I think the other area where we're seeing real opportunity is on the go-to-market side. Using our internal agent we've built to better arm the sales team that can very quickly go across 50,000 customers like I talked about earlier. How do I target which customers are good fits? Which ones we think have opportunities to grow? Maybe which ones that we know they're working with other retailers, and we can now go get all that information. I think internally, we're going to see some real efficiencies on the go-to-market side that not only will drive revenue- Yeah. ...but also allow reps to handle more accounts. I think you're going to see a natural progression on the sales and marketing side. To the top and bottom line then. Yeah. For sure. Yeah. Okay. Maybe You've hinted at it a few times here too, Chad, but kind of the Revenue Recovery piece, right? Yeah. The core Fulfillment business actually seems to be quite solid and quite strong. Maybe give us a sense of, as we think about selling more solutions across the network and expanding the value, why we moved into Revenue Recovery, how to think about that opportunity, and maybe some of the near-term dynamics that we're seeing play out in that business? Let me start with just kind of what are the current business conditions we've had, and we tried to highlight this in our last earnings call to provide a little bit more specificity. What we're seeing right now is some positive dynamics in, call it, our core Fulfillment business. That business really kind of meeting all our expectations that we had for the year. Admittedly, coming off a little bit slower 2025, though, where we did see some pressure on our customers, driven by tariff and certain cost scrutiny that they had on their own business as a result of those tariffs. As we lap that effect, there's a lot of positive momentum in that part of the business. The headwind is really coming specifically from Revenue Recovery, those customers that are specifically trading with Amazon has made certain policy changes, which has just made it more difficult to recover revenue from Amazon. When we had comps where you had a higher level of recovery and now there's a lower level of recovery, that has just created a revenue headwind in that part of the business. The other part of Revenue Recovery, all the other retailers we deal with, Walmart, Target, Lowe's, Home Depot, CVS. Customers doing business with those retailers, that is the fastest part, growing part of our business overall is Revenue Recovery outside of Amazon. Let me just take a step back then, and okay, why did we get into this Revenue Recovery area? We continually had customers coming to us and saying, "Hey, look, if I make a supply chain mistake when I'm dealing with these retailers, it's really a challenge for me because one, they're short paying my invoices. I'm not getting paid, and then I don't really know where the problem is, right? They just give me some very mysterious chargeback code, and I don't really know what I did wrong. Sometimes I know they're charging me back, and I think I did it right. In those cases, I want to get my money back." Through all that, we moved into this area, and so that's really what we're doing, is when you make a mistake in your supply chain and you do get charged back, we help you identify the root cause in your supply chain so that you can correct that. In the case where the retailer made the mistake and they charged you back for something that you shouldn't have been charged back, we have a whole automated dispute process that helps you get your money back. It's really about getting paid when it's the retailer's mistake and getting better when you made the mistake and really understanding where that is. We're seeing significant demand in our core Fulfillment customers for adding this Revenue Recovery solution. I think because we definitely have faced some headwinds in the Amazon section, it's put a little bit of a cloud, quite frankly, over Revenue Recovery overall. I'm hearing great stories every day from customers who've adopted Revenue Recovery, are getting huge benefits out of it, and continue to see big demand for other customers who are likely to adopt this solution going forward. Fantastic. With that, I think we're at time. I know we will carry on the conversation upstairs for those interested in the Burnham A room. Okay. Chad and Joe, thank you guys very much. Appreciate it. All right. Thank you. Thanks, Dylan.