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SPS Commerce Reports Second Quarter 2021 Financial Results


MINNEAPOLIS, July 29, 2021 (GLOBE NEWSWIRE) — SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the second quarter ended June 30, 2021.

Revenue was $94.5 million in the second quarter of 2021, compared to $75.6 million in the second quarter of 2020, reflecting 25% growth in revenue from the second quarter of 2020. Recurring revenue grew 22% from the second quarter of 2020.

Net income in the second quarter of 2021 was $10.2 million or $0.28 per diluted share, compared to net income of $11.2 million or $0.31 per diluted share, in the second quarter of 2020. Non-GAAP net income per diluted share was $0.46, compared to non-GAAP net income per diluted share of $0.37 in the second quarter of 2020. Adjusted EBITDA for the second quarter of 2021 increased 34% to $27.3 million compared to the second quarter of 2020.

“SPS Fulfillment is a proven tool that unlocks digital transformation potential for trading partners across all industries,” said Archie Black, President and CEO of SPS Commerce. “Omnichannel retail continues to fuel demand for SPS’ solutions, while growing our addressable market. This is a very exciting time for SPS Commerce.”  

“SPS Commerce continues to deliver strong results driven by accelerating demand for our fulfillment solution, as retailers and suppliers adapt to new norms of consumers’ shopping preferences,” said Kim Nelson, CFO of SPS Commerce.

Guidance

Third quarter 2021 revenue is expected to be in the range of $96.7 million to $97.5 million. Third quarter net income per diluted share is expected to be in the range of $0.21 to $0.23 with fully diluted weighted average shares outstanding of approximately 37.0 million shares. Non-GAAP net income per diluted share is expected to be in the range of $0.40 to $0.41. Adjusted EBITDA is expected to be in the range of $25.3 million to $26.0 million. Non-cash, share-based compensation expense is expected to be approximately $7.0 million, depreciation expense is expected to be approximately $4.0 million and amortization expense is expected to be approximately $2.7 million.

For the full year of 2021, revenue is expected to be in the range of $380.6 million to $382.1 million, representing 22% growth over 2020. Full year net income per diluted share is expected to be in the range of $1.01 to $1.03, with fully diluted weighted average shares outstanding of approximately 36.9 million shares. Non-GAAP income per diluted share is expected to be in the range of $1.68 to $1.71. Adjusted EBITDA is expected to be in the range of $104.0 to $105.3 million, representing 20% to 21% growth over 2020. Non-cash, share-based compensation expense is expected to be approximately $27.6 million, depreciation expense is expected to be approximately $15.6 million and amortization expense is expected to be approximately $10.5 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 #7578057 at least five 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 82 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 depreciation and amortization expense, investment income or loss, realized gain or loss from foreign currency on cash and investments held, income tax expense, stock-based compensation expense, 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 third 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)  
                 
    June 30,     December 31,  
    2021     2020  
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 184,367     $ 149,692  
Short-term investments     48,999       37,786  
Accounts receivable     42,191       37,811  
Allowance for credit losses     (4,255 )     (4,233 )
Accounts receivable, net     37,936       33,578  
Deferred costs     40,149       37,988  
Other assets     11,711       12,312  
Total current assets     323,162       271,356  
PROPERTY AND EQUIPMENT, less accumulated depreciation of $67,074 and $59,152, respectively     29,046       26,432  
OPERATING LEASE RIGHT-OF-USE ASSETS     13,352       15,581  
GOODWILL     135,354       134,853  
INTANGIBLE ASSETS, net     54,950       60,230  
INVESTMENTS           2,500  
OTHER ASSETS                
Deferred costs, non-current     13,692       12,607  
Deferred income tax assets     246       194  
Other assets, non-current     2,476       2,705  
Total assets   $ 572,278     $ 526,458  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES                
Accounts payable   $ 5,942     $ 5,354  
Accrued compensation     27,469       22,872  
Accrued expenses     5,221       11,161  
Deferred revenue     48,845       37,947  
Operating lease liabilities     3,960       2,798  
Total current liabilities     91,437       80,132  
OTHER LIABILITIES                
Deferred revenue, non-current     4,991       2,996  
Operating lease liabilities, non-current     17,733       19,672  
Deferred income tax liabilities     3,368       2,937  
Total liabilities     117,529       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; 37,536,118 and 37,100,467 shares issued; and 35,859,353 and 35,487,217 outstanding, respectively     38       37  
Treasury stock, at cost; 1,676,765 and 1,613,250 shares, respectively     (71,697 )     (65,247 )
Additional paid-in capital     413,182       393,462  
Retained earnings     113,873       93,490  
Accumulated other comprehensive loss     (647 )     (1,021 )
Total stockholders’ equity     454,749       420,721  
Total liabilities and stockholders’ equity   $ 572,278     $ 526,458  
                 
SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited; in thousands, except per share amounts)  
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2021     2020     2021     2020  
Revenues   $ 94,539     $ 75,573     $ 184,633     $ 149,765  
Cost of revenues     31,730       24,326       61,700       47,870  
Gross profit     62,809       51,247       122,933       101,895  
Operating expenses                                
Sales and marketing     21,952       18,611       43,307       36,910  
Research and development     8,899       7,466       17,605       15,034  
General and administrative     15,758       12,743       30,495       24,652  
Amortization of intangible assets     2,671       1,316       5,335       2,652  
Total operating expenses     49,280       40,136       96,742       79,248  
Income from operations     13,529       11,111       26,191       22,647  
Other income (expense), net     (383 )     1,468       (708 )     795  
Income before income taxes     13,146       12,579       25,483       23,442  
Income tax expense     2,963       1,385       5,100       2,733  
Net income   $ 10,183     $ 11,194     $ 20,383     $ 20,709  
                                 
Net income per share                                
Basic   $ 0.28     $ 0.32     $ 0.57     $ 0.59  
Diluted   $ 0.28     $ 0.31     $ 0.55     $ 0.58  
                                 
Weighted average common shares used to compute net income per share                                
Basic     35,903       35,030       35,828       35,051  
Diluted     36,753       36,016       36,741       35,995  

Per share amounts may not foot due to rounding.        

SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited; in thousands)  
                 
    Six Months Ended  
    June 30,  
    2021     2020  
Cash flows from operating activities                
Net income   $ 20,383     $ 20,709  
Reconciliation of net income to net cash provided by operating activities                
Deferred income taxes     351       1,443  
Change in earn-out liability           72  
Depreciation and amortization of property and equipment     7,294       6,276  
Amortization of intangible assets     5,335       2,652  
Provision for credit losses     2,831       3,020  
Stock-based compensation     14,424       9,353  
Other, net     170       (129 )
Changes in assets and liabilities                
Accounts receivable     (6,945 )     (7,071 )
Deferred costs     (3,338 )     275  
Other current and non-current assets     (1,201 )     3,141  
Accounts payable     (147 )     321  
Accrued compensation     3,246       (6,166 )
Accrued expenses     (2,087 )     (964 )
Deferred revenue     12,893       4,705  
Operating leases     1,449       (842 )
Net cash provided by operating activities     54,658       36,795  
Cash flows from investing activities                
Purchases of property and equipment     (8,738 )     (8,396 )
Purchases of investments     (44,034 )     (55,144 )
Maturities of investments     35,000       31,050  
Net cash used in investing activities     (17,772 )     (32,490 )
Cash flows from financing activities                
Repurchases of common stock     (6,450 )     (18,950 )
Net proceeds from exercise of options to purchase common stock     4,030       9,426  
Net proceeds from employee stock purchase plan     2,186       1,550  
Payments for contingent consideration     (2,042 )     (688 )
Net cash used in financing activities     (2,276 )     (8,662 )
Effect of foreign currency exchange rate changes     65       (45 )
Net increase (decrease) in cash and cash equivalents     34,675       (4,402 )
Cash and cash equivalents at beginning of period     149,692       179,252  
Cash and cash equivalents at end of period   $ 184,367     $ 174,850  
                 
                 
SPS COMMERCE, INC.  
NON-GAAP RECONCILIATION  
(Unaudited; in thousands, except per share amounts)  
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2021     2020     2021     2020  
                                 
Adjusted EBITDA  
Net income   $ 10,183     $ 11,194     $ 20,383     $ 20,709  
Depreciation and amortization of property                                
and equipment     3,529       3,138       7,294       6,276  
Amortization of intangible assets     2,671       1,316       5,335       2,652  
Interest income     (79 )     (332 )     (176 )     (972 )
Realized (gain) loss from foreign currency on cash and investments held     349       (1,370 )     638       (127 )
Income tax expense     2,963       1,385       5,100       2,733  
Stock-based compensation expense     7,499       5,009       14,424       9,353  
Other     213       82       (213 )     154  
Adjusted EBITDA   $ 27,328     $ 20,422     $ 52,785     $ 40,778  
                                 
Adjusted EBITDA Margin  
Net income   $ 10,183     $ 11,194     $ 20,383     $ 20,709  
Revenue     94,539       75,573       184,633       149,765  
Margin     11 %     15 %     11 %     14 %
                                 
Adjusted EBITDA   $ 27,328     $ 20,422     $ 52,785     $ 40,778  
Revenue     94,539       75,573       184,633       149,765  
Adjusted EBITDA Margin     29 %     27 %     29 %     27 %
                                 
Non-GAAP Income  
Net income   $ 10,183     $ 11,194     $ 20,383     $ 20,709  
Stock-based compensation expense     7,499       5,009       14,424       9,353  
Amortization of intangible assets     2,671       1,316       5,335       2,652  
Realized (gain) loss from foreign currency on cash and investments held     349       (1,370 )     638       (127 )
Other     213       82       (213 )     154  
Income tax effects of adjustments     (3,999 )     (2,886 )     (7,974 )     (5,912 )
Non-GAAP income   $ 16,916     $ 13,345     $ 32,593     $ 26,829  
                                 
Shares used to compute non-GAAP income per share                                
Basic     35,903       35,030       35,828       35,051  
Diluted     36,753       36,016       36,741       35,995  
                                 
Non-GAAP income per share                                
Basic   $ 0.47     $ 0.38     $ 0.91     $ 0.77  
Diluted   $ 0.46     $ 0.37     $ 0.89     $ 0.75  

Per share amounts may not foot due to rounding.   

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

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