Rogers-based SupplyPike acquired in a $206 million cash, stock deal

SupplyPike CEO Dan Sanker has sold the Northwest Arkansas startup he founded in December 2017 to Minneapolis-based SPS Commerce for $119 million in cash and $87 million in stock.

SupplyPike, a software as a service company, was originally part of Fayetteville-based CaseStack a logistics and consolidation provider based in Fayetteville that Sanker founded in 1999 and sold to HUB Group in 2018 in a $255 million cash deal.

Sanker spun off SupplyPike into a separate company in 2018 and over the past six years has grown the business to more than 500 retail suppliers who use the company’s automated software service that provides ongoing monitoring and management of invoice deductions with retailers to recover lost revenue.

“The interdependent nature of the retail supply chain necessitates close collaboration between trading partners,” said Chad Collins, CEO of SPS Commerce. “With the acquisition of SupplyPike, SPS Commerce now offers an additional way for suppliers to understand and improve their ability to meet their retail customers’ expectations, with automated process monitoring, education, and improvement, and dispute resolution capabilities.”

In a conference call with investors, Collins said SupplyPike services align with his company’s other cloud-based supply chain services. He said SupplyPike core customers are mid-size suppliers and that base is growing.

“We used a competitive process in looking for the right partner and we found SupplyPike was the right fit as we have already have about 200 overlapping customers, with the potential to grow revenue by $25 million next year,” he added.

Collins said invoice deductions by retailers are a huge problem for suppliers that can take time and lots of money to resolve. He said between 8% and 10% of deductions are erroneous and can be successfully disputed to help suppliers recover revenue.

He also welcomed around 100 employees of SupplyPike to SPS Commerce. The two companies will initially service their customers independently but Collins said there will be more synergies in how the services are marketed. No local jobs are expected to be impacted by this acquisition.

“We believe by combining SupplyPike with SPS Commerce, we are providing an industry-leading knowledge base of resources to reduce supply chain missteps and strengthen suppliers’ relationships with their customers,” Sanker said.

Tim McFarland, CEO of Peer Advisory Group, and a consultant to owners of small to midsize companies, said Sanker’s companies have added stable jobs to the region, including an estimated 200 at CaseStack, and around 100 at SupplyPike. He said the SPS deal is great because there is no overlap in services, no need for cost-cutting synergies, and what looks like a pure growth play.

“It’s a big deal any way you cut it,” McFarland said.

For fiscal year 2024, SPS estimates the deal will add $8 million in revenue, with EBITDA (earnings before interest, taxes, depreciation and amortization) to be a loss of $1.5 million. In fiscal year 2025, the company estimates the SupplyPike deal will add $25 million in revenue with a breakeven in EBITDA.

Shares of SPS Commerce (NASDAQ: SPSC) traded lower early Thursday at $211.58, down $3.84 from the opening price.