Actuals vs. estimates

EPS — API Ninjas actual matches multiple Quartr EPS bases

Highlights & what matters

• Net sales of $220.3 million beat the API Ninjas estimate of $181.0 million by 21.7%, and adjusted EPS of $0.43 beat the $0.38 estimate by 14.1%.
• Records at every line: gross billings $706.4 million up 40%, net sales $220.3 million up 37%, gross profit $33 million up 28%, adjusted EBITDA $14.7 million up 35%, and GAAP EPS of $0.43 against $0.25 a year earlier.
• Operating leverage was the standout: SG&A fell to 3% of gross billings from 3.2% and to 63.2% of gross profit from 68.5% in the second quarter and 76.7% in the first, lifting effective margin 230 basis points to 44.6%.
• There is no formal guidance; management said October is on the same trajectory as the third quarter and expects a record year, with 19 of the top 20 vendors growing sequentially and only one of 32 new brands evaluated signed.
• The one thing that matters: the growth is real and mostly organic, but it is getting thinner - gross billings rose 40% and net sales 37% while gross profit rose only 28% - and the record 44.6% effective margin leaned on cost actions taken in the quarter, with the full year tracking to the low 40% range.

Guidance & KPIs

No financial guidance change disclosed.

Management commentary

• Management said the majority of the gross billings and gross profit growth came from existing vendor relationships, with Fortinet tracking to internal budget and InterWorks performing on plan.
• On durability, the CEO said matching this growth rate again would be tough but that he sees no slowdown, citing roughly 70% exposure to cybersecurity.
• Effective margin was described as tracking to the historical low 40% range for the full year, with the quarter's 44.6% helped by cost-savings initiatives executed in the period.
• NeoVAD, acquired after quarter end, carries low double-digit gross profit percentages - above the existing European business - on majority-exclusive French vendor relationships; its revenue contribution was not disclosed.
• Describing the vendor pipeline, the CEO relayed a large vendor's position as "we have got $200 million that is unmanaged. We want to run this through distribution."

Quality of earnings

• The growth is organic, not bought. Net sales rose 37% to $220.3 million and management attributed the majority of the gross billings and gross profit increase to existing vendor relationships, with InterWorks performing on plan rather than driving the step-up.
• GAAP earnings have caught up to adjusted. Net income of $7.9 million now sits within $0.1 million of adjusted net income of $8 million, where a year ago GAAP $4.7 million trailed adjusted $6 million - which is why GAAP EPS grew 69% to $0.43 against 34% adjusted growth to the same $0.43.
• The cash build is partly timing. Cash rose to $66.9 million from $36.6 million at year-end, which management attributed primarily to the timing of receivable collections and payables, against no drawings on the $50 million revolver.

Gotchas & watch items

• The record margin is partly a one-quarter effect: effective margin of 44.6% sits above the low 40% range management tracks for the full year, helped by cost-savings initiatives executed in the third quarter that cut SG&A to 63.2% of gross profit from 68.5% in the second.
• Profit is growing slower than volume: gross billings up 40% against gross profit up 28% means each incremental dollar of billings carries less profit, consistent with growth concentrated in larger, thinner vendor lines - a $20 million line is about 1% of a $2.2 billion book.
• The French acquisition cannot be sized yet: NeoVAD closed after quarter end and management declined to give its revenue contribution, having disclosed only an adjusted EBITDA impact at announcement, so its effect on the fourth quarter is not establishable from the call.
• The step-up leans on a handful of lines: management singled out Darktrace at a $100 million run rate as a vendor and Sophos, one of its top three, re-accelerating after integrating Secureworks following a couple of flat years.

Last quarter's watch items: what happened

• No watch items on file from a prior quarter - this is the first tracked quarter for this company.

Next quarter: the 2-3 things that matter

• Effective margin holding above the full-year low 40% range Baseline: Effective margin 44.6% in Q3 2026 against 42.3% a year earlier; management tracks the full year to the low 40% range Confirms: Q4 2026 effective margin at or above 42% with the full year in the low 40s Breaks: Q4 2026 effective margin below 40%, marking Q3 as a one-quarter cost-action benefit Check in: Q4 2026. Source: CFO answer on the Q3 2026 call on full-year effective margin tracking
• Gross profit keeping pace with gross billings growth Baseline: Q3 2026 gross billings up 40% to $706.4 million against gross profit up 28% to $33 million Confirms: Q4 2026 gross profit growth within 5 points of gross billings growth Breaks: The gap widening beyond 12 points, showing mix shifting further to thin large-vendor volume Check in: Q4 2026. Source: CFO prepared remarks on the Q3 2026 call
• NeoVAD contribution being disclosed and holding European margins Baseline: NeoVAD closed after Q3 2026 with no disclosed revenue contribution; only an adjusted EBITDA impact was given at announcement Confirms: Q4 2026 disclosure of NeoVAD revenue with European gross profit percentages still in low double digits Breaks: No disclosure, or European gross profit percentage falling to the mid-single-digit North American level Check in: Q4 2026. Source: CFO answer on the Q3 2026 call declining to give NeoVAD's revenue contribution