SPS Commerce Reports Third Quarter 2021 Financial Results


Company delivers 83rd consecutive quarter of topline growth with 23% growth in revenue and 20% growth in recurring revenue over third quarter 2020

Announces new Stock Repurchase Program

MINNEAPOLIS, Oct. 28, 2021 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the third quarter ended September 30, 2021.

Revenue was $97.9 million in the third quarter of 2021, compared to $79.6 million in the third quarter of 2020, reflecting 23% growth in revenue from the third quarter of 2020. Recurring revenue grew 20% from the third quarter of 2020.

Net income in the third quarter of 2021 and the third quarter of 2020 was $11.4 million or $0.31 per diluted share. Non-GAAP net income per diluted share was $0.47 in the third quarter of 2021, compared to non-GAAP net income per diluted share $0.39 in the third quarter of 2020. Adjusted EBITDA for the third quarter of 2021 increased 14% to $26.5 million compared to the third quarter of 2020.

“As the retail landscape continues to evolve, SPS Commerce is expanding its global market leadership in providing the easiest-to-use, full-service solutions that help retailers work efficiently with their suppliers,” said Archie Black, President and CEO of SPS Commerce. “Our network, world class technology, and partnerships continue to deliver and exceed our customers’ expectations as they transition to a true omnichannel fulfillment model.”

“With strong momentum in fulfillment, and large growth opportunities for our analytics solution as retailers and suppliers continue to improve efficiencies across the supply chain, we believe SPS Commerce is well positioned to capitalize on a multi-billion-dollar addressable market in front of us,” said Kim Nelson, CFO of SPS Commerce.

Stock Repurchase Program

The Company also announced today that the Board of Directors of SPS Commerce authorized a new program to repurchase up to $50.0 million of common stock. Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both. The timing and number of shares to be purchased will be based on the price of the Company's common stock, general business and market conditions and other investment considerations and factors. The share repurchase program becomes effective on November 28, 2021 and expires on November 28, 2023. Our current stock repurchase plan expires on November 2, 2021.

The program does not obligate the Company to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice. The Company had 36.0 million shares of outstanding common stock as of September 30, 2021. The Company intends to finance the share repurchase program with cash on hand.

Guidance

Fourth quarter 2021 revenue is expected to be in the range of $99.9 million to $100.5 million. Fourth quarter net income per diluted share is expected to be in the range of $0.24 to $0.25 with fully diluted weighted average shares outstanding of approximately 37.3 million shares. Non-GAAP net income per diluted share is expected to be in the range of $0.41 to $0.42. Adjusted EBITDA is expected to be in the range of $26.3 million to $26.8 million. Non-cash, share-based compensation expense is expected to be approximately $6.5 million, depreciation expense is expected to be approximately $4.1 million and amortization expense is expected to be approximately $2.5 million.

For the full year of 2021, revenue is expected to be in the range of $382.4 million to $383.0 million, representing 22% to 23% growth over 2020. Full year net income per diluted share is expected to be in the range of $1.10 to $1.11, with fully diluted weighted average shares outstanding of approximately 37.0 million shares. Non-GAAP income per diluted share is expected to be in the range of $1.76 to $1.77. Adjusted EBITDA is expected to be in the range of $105.6 to $106.1 million, representing 21% to 22% growth over 2020. Non-cash, share-based compensation expense is expected to be approximately $27.8 million, depreciation expense is expected to be approximately $15.1 million and amortization expense is expected to be approximately $10.2 million.

Quarterly Conference Call

SPS Commerce will discuss its quarterly and annual results today via teleconference at 3:30 p.m. CT (4:30 p.m. ET). To access the call, please dial (877) 312-7508, or outside the U.S. (253) 237-1184, with Conference ID #8133049 at least fifteen minutes prior to the 3:30 p.m. CT start time. A live webcast of the call will also be available at http://investors.spscommerce.com under the Events and Presentations menu. The replay will also be available on our website at http://investors.spscommerce.com.

About SPS Commerce

SPS Commerce is the world’s leading retail network, connecting trading partners around the globe to optimize supply chain operations for all retail partners. We support data-driven partnerships with innovative cloud technology, customer-obsessed service and accessible experts so our customers can focus on what they do best. To date, more than 95,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 83 consecutive quarters of revenue growth and is headquartered in Minneapolis. For additional information, contact SPS at 866-245-8100 or visit www.spscommerce.com.

SPS COMMERCE, SPS, SPS logo, 1=INFINITY logo, AS THE NETWORK GROWS, SO DOES YOUR OPPORTUNITY, INFINITE RETAIL POWER, MASTERING THE RETAIL GAME and RSX are marks of SPS Commerce, Inc. and Registered in the U.S. Patent and Trademark Office. IN:FLUENCE, and others are further marks of SPS Commerce, Inc. These marks may be registered or otherwise protected in other countries. 

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Use of Non-GAAP Financial Measures

To supplement its financial statements, SPS Commerce also provides investors with Adjusted EBITDA, Adjusted EBITDA Margin, and non-GAAP net income per share, which are non-GAAP financial measures. SPS Commerce believes that these non-GAAP measures provide useful information to management, our board of directors, and investors regarding certain financial and business trends relating to its financial condition and results of operations. SPS Commerce's management uses these non-GAAP measures to compare the Company's performance to that of prior periods for trend analyses and planning purposes. Adjusted EBITDA is also used for purposes of determining executive and senior management incentive compensation.

Adjusted EBITDA consists of net income adjusted for income tax expense, depreciation and amortization expense, stock-based compensation expense, realized gain or loss from foreign currency on cash and investments held, investment income or loss, and other adjustments as necessary for a fair presentation. 

Adjusted EBITDA Margin consists of Adjusted EBITDA divided by revenue. Margin, the comparable GAAP measure of financial performance, consists of net income divided by revenue.

SPS Commerce uses Adjusted EBITDA and Adjusted EBITDA Margin as measures of operating performance because they assist the Company in comparing performance on a consistent basis, as they remove from operating results the impact of the Company's capital structure. SPS Commerce believes Adjusted EBITDA and Adjusted EBITDA Margin are useful to an investor in evaluating the Company's operating performance because they are widely used to measure a company's operating performance without regard to items such as depreciation and amortization, which can vary depending upon accounting methods and the book value of assets, and to present a meaningful measure of corporate performance exclusive of the Company's capital structure and the method by which assets were acquired.

Non-GAAP income per share consists of net income adjusted for stock-based compensation expense, amortization expense related to intangible assets, realized gain or loss from foreign currency on cash and investments held, and other adjustments as necessary for a fair presentation, divided by the weighted average number of shares of common stock outstanding during each period. SPS Commerce believes non-GAAP income per share is useful to an investor because it is widely used to measure a company's operating performance.

SPS Commerce includes an adjustment to non-GAAP income to reflect the income tax effects of the adjustments to GAAP net income, as discussed above. To quantify these tax effects, SPS Commerce recalculates income tax expense excluding the direct book and tax effects of the specific items constituting the non-GAAP adjustments (e.g., stock-based compensation expense). The difference between this recalculated income tax expense and GAAP income tax expense is presented as the income tax effect of the non-GAAP adjustments.

These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with generally accepted accounting principles in the United States. These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in the Company's financial statements and are subject to inherent limitations. SPS Commerce urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures that are included in this press release.

Forward-Looking Statements

This press release may contain forward-looking statements, including information about management's view of SPS Commerce's future expectations, plans and prospects, including our views regarding future execution within our business, the opportunity we see in the retail supply chain world and our performance for the fourth quarter and full year of 2021, within the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors which may cause the results of SPS Commerce to be materially different than those expressed or implied in such statements. Certain of these risk factors and others are included in documents SPS Commerce files with the Securities and Exchange Commission, including but not limited to, SPS Commerce's Annual Report on Form 10-K for the year ended December 31, 2020, as well as subsequent reports filed with the Securities and Exchange Commission. Other unknown or unpredictable factors also could have material adverse effects on SPS Commerce's future results. The forward-looking statements included in this press release are made only as of the date hereof. SPS Commerce cannot guarantee future results, levels of activity, performance, or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, SPS Commerce expressly disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.


SPS COMMERCE, INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(Unaudited; in thousands, except shares) 
         
  September 30,  December 31, 
  2021  2020 
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents $195,803  $149,692 
Short-term investments  56,183   37,786 
Accounts receivable  39,934   37,811 
Allowance for credit losses  (4,604)  (4,233)
Accounts receivable, net  35,330   33,578 
Deferred costs  41,593   37,988 
Other assets  14,346   12,312 
Total current assets  343,255   271,356 
PROPERTY AND EQUIPMENT, less accumulated depreciation of $70,663 and $59,152, respectively  31,036   26,432 
OPERATING LEASE RIGHT-OF-USE ASSETS  12,665   15,581 
GOODWILL  134,680   134,853 
INTANGIBLE ASSETS, net  52,471   60,230 
INVESTMENTS     2,500 
OTHER ASSETS        
Deferred costs, non-current  14,500   12,607 
Deferred income tax assets  189   194 
Other assets, non-current  2,487   2,705 
    Total assets $591,283  $526,458 
LIABILITIES AND STOCKHOLDERS’ EQUITY        
CURRENT LIABILITIES        
Accounts payable $3,752  $5,354 
Accrued compensation  30,986   22,872 
Accrued expenses  7,110   11,161 
Deferred revenue  49,185   37,947 
Operating lease liabilities  3,895   2,798 
Total current liabilities  94,928   80,132 
OTHER LIABILITIES        
Deferred revenue, non-current  5,159   2,996 
Operating lease liabilities, non-current  16,697   19,672 
Deferred income tax liabilities  3,971   2,937 
Total liabilities  120,755   105,737 
COMMITMENTS and CONTINGENCIES        
STOCKHOLDERS’ EQUITY        
Preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding      
Common stock, $0.001 par value; 110,000,000 shares authorized; 37,683,302 and 37,100,467 shares issued; and 35,964,238 and 35,487,217 shares outstanding, respectively  38   37 
Treasury Stock, at cost; 1,719,064 and 1,613,250 shares, respectively  (75,908)  (65,247)
Additional paid-in capital  422,670   393,462 
Retained earnings  125,322   93,490 
Accumulated other comprehensive loss  (1,594)  (1,021)
Total stockholders’ equity  470,528   420,721 
    Total liabilities and stockholders’ equity $591,283  $526,458 
         


SPS COMMERCE, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(Unaudited; in thousands, except per share amounts) 
                 
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2021  2020  2021  2020 
Revenues $97,887  $79,557  $282,520  $229,322 
Cost of revenues  34,343   25,045   96,043   72,915 
Gross profit  63,544   54,512   186,477   156,407 
Operating expenses                
Sales and marketing  22,079   19,233   65,386   56,143 
Research and development  10,854   8,053   28,459   23,087 
General and administrative  14,691   11,939   45,186   36,591 
Amortization of intangible assets  2,399   1,333   7,734   3,985 
Total operating expenses  50,023   40,558   146,765   119,806 
Income from operations  13,521   13,954   39,712   36,601 
Other income (expense), net  (716)  423   (1,424)  1,218 
Income before income taxes  12,805   14,377   38,288   37,819 
Income tax expense  1,356   2,970   6,456   5,703 
Net income $11,449  $11,407  $31,832  $32,116 
                 
Net income per share                
Basic $0.32  $0.32  $0.89  $0.91 
Diluted $0.31  $0.31  $0.86  $0.89 
                 
Weighted average common shares used to compute net income per share                
Basic  35,961   35,295   35,873   35,133 
Diluted  37,015   36,366   36,898   36,137 

Per share amounts may not foot due to rounding.


SPS COMMERCE, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Unaudited; in thousands) 
         
  Nine Months Ended 
  September 30, 
  2021  2020 
Cash flows from operating activities        
Net income $31,832  $32,116 
Reconciliation of net income to net cash provided by operating activities        
Deferred income taxes  1,013   4,324 
Change in earn-out liability     72 
Depreciation and amortization of property and equipment  10,989   9,474 
Amortization of intangible assets  7,734   3,985 
Provision for credit losses  4,037   4,198 
Stock-based compensation  21,273   14,246 
Other, net  234   (16)
Changes in assets and liabilities        
Accounts receivable  (5,327)  (4,551)
Deferred costs  (5,686)  (1,129)
Other current and non-current assets  (3,893)  2,612 
Accounts payable  (1,518)  1,357 
Accrued compensation  6,617   (3,989)
Accrued expenses  (174)  (3)
Deferred revenue  13,401   3,961 
Operating leases  1,036   (1,128)
    Net cash provided by operating activities  81,568   65,529 
Cash flows from investing activities        
Purchases of property and equipment  (15,567)  (11,639)
Purchases of investments  (84,020)  (67,636)
Maturities of investments  67,500   47,300 
Net cash used in investing activities  (32,087)  (31,975)
Cash flows from financing activities        
Repurchases of common stock  (10,661)  (18,950)
Net proceeds from exercise of options to purchase common stock  7,027   14,143 
Net proceeds from employee stock purchase plan  2,316   1,645 
Payments for contingent consideration  (2,042)  (688)
Net cash used in financing activities  (3,360)  (3,850)
Effect of foreign currency exchange rate changes  (10)  (26)
Net increase in cash and cash equivalents  46,111   29,678 
Cash and cash equivalents at beginning of period  149,692   179,252 
Cash and cash equivalents at end of period $195,803  $208,930 
         


SPS COMMERCE, INC. 
NON-GAAP RECONCILIATION 
(Unaudited; in thousands, except per share amounts) 
                 
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2021  2020  2021  2020 
                 
Adjusted EBITDA 
Net income $11,449  $11,407  $31,832  $32,116 
Income tax expense  1,356   2,970   6,456   5,703 
Depreciation and amortization of property                
and equipment  3,695   3,198   10,989   9,474 
Amortization of intangible assets  2,399   1,333   7,734   3,985 
Stock-based compensation expense  6,849   4,893   21,273   14,246 
Realized (gain) loss from foreign currency on cash and investments held  854   (559)  1,492   (686)
Investment income  (66)  (107)  (242)  (1,079)
Other  -   103   (213)  257 
Adjusted EBITDA $26,536  $23,238  $79,321  $64,016 
                 
Adjusted EBITDA Margin 
Net income $11,449  $11,407  $31,832  $32,116 
Revenue  97,887   79,557   282,520   229,322 
Margin  12%  14%  11%  14%
                 
Adjusted EBITDA $26,536  $23,238  $79,321  $64,016 
Revenue  97,887   79,557   282,520   229,322 
Adjusted EBITDA Margin  27%  29%  28%  28%
                 
Non-GAAP Income 
Net income $11,449  $11,407  $31,832  $32,116 
Stock-based compensation expense  6,849   4,893   21,273   14,246 
Amortization of intangible assets  2,399   1,333   7,734   3,985 
Realized (gain) loss from foreign currency on cash and investments held  854   (559)  1,492   (686)
Other  -   103   (213)  257 
Income tax effects of adjustments  (4,178)  (2,929)  (12,152)  (8,841)
Non-GAAP income $17,373  $14,248  $49,966  $41,077 
                 
Shares used to compute non-GAAP income per share                
Basic  35,961   35,295   35,873   35,133 
Diluted  37,015   36,366   36,898   36,137 
                 
Non-GAAP income per share                
Basic $0.48  $0.40  $1.39  $1.17 
Diluted $0.47  $0.39  $1.35  $1.14 
                 

Contact:
Investor Relations
The Blueshirt Group
Irmina Blaszczyk
Lisa Laukkanen
SPSC@blueshirtgroup.com
415-217-4962