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SPS Commerce Reports Third Quarter 2021 Financial Results

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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.

SPS-F

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


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