Phase Space AI

Trade Construction

SPS Commerce [SPSC]

SPS Commerce, Inc. [SPSC] — Trade Construction

This memo issues no position verdict. What follows is the vehicle analysis, sizing input and invalidation work the book needs — not a recommendation.

Spot $70.02 (2026-07-29). 252-day realised vol 49.2% (screen).

1. Liquidity Criteria — equity

Metric Value Source
63-session median $ADV $30.5m Alpaca SIP daily bars
63-session median share volume 522,221 same
Market cap $2,571m 36.7127m × $70.02
Share classes One — common stock, $0.001 par. No dual class, no super-voting. Q1-2026 10-Q
Treasury 3,292,276 shares at $226.9m cost Q1-2026 balance sheet

PASS. $30.5m ADV supports a $5m position at ≤20% participation over ~1 session. Adequate for a mid-cap sleeve; the name is not a liquidity problem.

Note the buyback is running hard — $47.1m repurchased in Q1-2026 alone, and treasury rose from 2,531,171 to 3,292,276 shares in the quarter. Shares outstanding fell 37,517,239 → 36,948,282 over the quarter (−1.5%). Treasury shares are also the acquisition currency — Carbon6 (378,100 shares) and SupplyPike (404,587 shares) were both paid partly out of treasury. The buyback and the M&A programme draw on the same pool.

2. Liquidity Criteria — options. Chain pulled first, per criteria.md. It fails.

Alpaca options snapshots, calls, 2026-11-01 → 2027-03-01, strikes $55–95, retrieved 2026-07-29.

Symbol Expiry Strike Bid Ask Spread % of mid Bid sz / Ask sz Open interest IV
SPSC270115C00055000 2027-01-15 55 17.07 20.28 17.2% 20 / 18 2 0.500
SPSC270115C00060000 2027-01-15 60 13.64 16.62 19.7% 30 / 30 1 0.485
SPSC270115C00065000 2027-01-15 65 10.70 14.17 27.9% 72 / 38 846 0.498
SPSC270115C00070000 2027-01-15 70 8.08 11.52 35.1% 51 / 36 6 0.487
SPSC270115C00075000 2027-01-15 75 5.62 9.53 51.6% 23 / 21 4 0.477
SPSC270115C00080000 2027-01-15 80 4.02 7.57 61.3% 32 / 43 1,049 0.471
SPSC270115C00085000 2027-01-15 85 2.27 5.95 89.5% 38 / 43 none 0.450
SPSC270115C00090000 2027-01-15 90 0.87 4.97 140.2% 29 / 52 none 0.439
SPSC270115C00095000 2027-01-15 95 0.07 3.98 193.1% 25 / 30 none 0.429

FAIL. This is precisely the HCA failure mode criteria.md was written to stop.

Three independent reasons, each sufficient on its own:

  1. Only one expiry exists in a four-month window. The query covered 2026-11-01 through 2027-03-01 and returned nine contracts, all January-2027. There is no November-2026 and no February-2027 listing at any tested strike. A thesis with a Q2/Q3 earnings catalyst has no expiry to express it in.
  2. Open interest is 0–6 contracts at seven of nine strikes. The two exceptions (846 at $65, 1,049 at $80) look like single institutional lines, not a two-sided market.
  3. Bid-ask spreads of 28%, 35%, 52%, 61%. A $80 call quoted 4.02 / 7.57 costs 30% of premium in round-trip friction. A defined-risk spread built from two of these legs would give away most of its payoff before the stock moved.

Vehicle conclusion

Vehicle Verdict
Common stock The only vehicle.
Any single-leg call Rejected — 28–61% spreads on the strikes that have any OI at all.
Any call/put spread Rejected — combining two legs at these spreads is uninvestable at any size.
Any November-2026 or February-2027 structure Does not exist.

Under criteria.md, "a vehicle that cannot be filled is not a vehicle." No options structure is proposed for SPSC, and any proposal of one in a future refresh should be treated as a defect.

3. Position construction (if the book takes it — noting Valuation Criteria FAILs)

The Valuation Criteria returns FAIL on SPSC_Valuation.md, which on the long-only absolute-return strategy is an admission failure. The levels below exist so the name can be monitored and re-underwritten, not to size a position through a failed BINDING test.

Level Price Rationale
12-month target UNIDENTIFIED Multiple anchor spans a regime change; a defensible band runs $63–$124. See SPSC_Valuation.md.
Mechanical carry at unchanged multiple $75.20 (+7.4%) 3.17x EV/Sales on forward TTM revenue of $822m. Pure revenue growth, no re-rating.
Price at which Valuation Criteria would PASS ~$56 Where the required CAGR at today's 20.67x exit falls to ~6.5%, matching the FY2026 guide. −20% from spot.
Downside case (named cause) ~$53 2.25x EV/Sales on flat ~$800m revenue + $154m net cash. Cause: re-rating from "18% compounder" to "6% grower with an M&A habit."
Deep bear ~$42 1.75x sales if organic growth reaches zero.

Volatility sizing input: 49.2% realised vol — mid-range for this book, materially below YOU's 60.9%. This is not a high-volatility name and inverse-vol sizing would therefore give it a larger weight than its fundamentals justify. Flagged: the interim downside control criteria.md relies on (fat-left-tail names are usually high-vol and size down automatically) does not protect here. SPSC's risk is a slow multiple de-rating on a decelerating but profitable, cash-generative business — a low-volatility path to a −25% outcome. This is a live example of the Downside-Criteria-as-MEASURED gap.

4. Invalidation — what would make the FAIL wrong

The Valuation Criteria fails on forward growth. Three specific, checkable facts would overturn it:

  1. Q2-2026 revenue above ~$205m (against guidance of $194.5–196.5m). That would be >+9% YoY and would break the deceleration. The print is imminent — see SPSC_Catalyst_Calendar.md.
  2. The company disclosing organic growth, or a net revenue retention figure, above ~10%. Neither has ever been disclosed (the word "organic" appears once across three 10-Ks). Disclosure alone would be informative; a number above 10% would materially change the analysis.
  3. FY2026 revenue guidance raised above 8% at any point in the year. The current $796–802m implies 6–7%.

And what would confirm it

  1. Another acquisition of ~$200m at ~5x revenue announced to fill the growth gap. That converts cash to goodwill and resets the anniversary clock without changing organic.
  2. Adjusted EBITDA growth (guided +14–16%) continuing to be the headline while GAAP operating income falls, as it did in Q1-2026 (−5.4% YoY).
  3. Recurring revenue customer count growth falling toward the ~1.7% organic rate now that Carbon6's 8,500 are in the base.

5. The relative-value fork — recorded, not acted on

Short Mechanism Criteria is met on both legs, which is unusual and is the reason it is written down here rather than left in the scorecard:

Acted on by nothing on this long-only fork (criteria.md). Recorded for the RV book.

The paired long would be Manhattan Associates (MANH) — same end market, same buyer, no serial-acquisition dependence. The pair is not constructed here: MANH's multiple history was not pulled in this run, so Peer Spread Criteria is incomplete and the spread-versus-own-history test that the fork requires has not been done. Naming the peer without computing the spread would be the half-finished version of this analysis, and it is flagged as incomplete rather than presented as done.