SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud
services, today announced financial results for the third quarter
ended September 30, 2023.
Third Quarter 2023 Financial
Highlights
- Revenue was $135.7 million in the
third quarter of 2023, compared to $114.5 million in the third
quarter of 2022, reflecting 18% growth.
- Recurring revenue grew 20% from the
third quarter of 2022.
- Net income was $16.8 million or $0.45
per diluted share, compared to net income of $15.9 million or $0.43
per diluted share in the third quarter of 2022.
- Non-GAAP income per diluted share was
$0.75, compared to non-GAAP income per diluted share of $0.63 in
the third quarter of 2022.
- Adjusted EBITDA for the third quarter
of 2023 increased 17% to $40.5 million compared to the third
quarter of 2022.
“SPS Commerce’s third quarter performance reflects
the ongoing investments in optimization and automation across the
retail industry, and the role we play in helping our customers
achieve operational efficiencies while scaling their businesses,”
said Archie Black, Executive Chair of the Board. “I have had the
privilege to work with and lead an exceptionally talented workforce
and I’m proud that together we built a company that has
consistently delivered exceptional results for our customers and
shareholders, and I am confident SPS is positioned for continued
success with Chad Collins at the helm.”
“I am thrilled to join SPS Commerce at such an
important time for the company and the industry, and I want to
thank the management team and the board for their trust in me to
lead SPS in its next chapter of growth,” said Chad Collins, CEO of
SPS Commerce. “As I engage with customers and spend time with SPS
employees across the globe, I look forward to building
relationships and reinforcing the culture that has established SPS
as a successful organization with a very exciting future.”
“SPS continues to grow its global network,
strengthening our competitive position and expanding our leadership
across various industries,” said Kim Nelson, CFO of SPS Commerce.
“I would like to welcome Chad to the SPS team and look forward to
working together as we execute on SPS’ strategy to be the world’s
retail network, and continue to deliver sustained, profitable
growth.”
Guidance
Fourth Quarter 2023 Guidance
- Revenue is expected to be in the range
of $142.2 million to $143.2 million.
- Net income per diluted share is
expected to be in the range of $0.40 to $0.42, with fully diluted
weighted average shares outstanding of 37.7 million shares.
- Non-GAAP income per diluted share is
expected to be in the range of $0.67 to $0.69.
- Adjusted EBITDA is expected to be in
the range of $40.5 million to $41.3 million.
- Non-cash, share-based compensation
expense is expected to be $10.0 million, depreciation expense is
expected to be $5.1 million, and amortization expense is expected
to be $4.5 million.
Full Year 2023
Guidance
- Revenue is expected to be in the range
of $534.2 million to $535.2 million, representing 18% to 19% growth
over 2022.
- Net income per diluted share is
expected to be in the range of $1.65 to $1.67, with fully diluted
weighted average shares outstanding of 37.5 million shares.
- Non-GAAP income per diluted share is
expected to be in the range of $2.77 to $2.79.
- Adjusted EBITDA is expected to be in
the range of $156.2 to $157.0 million, representing 18% to 19%
growth over 2022.
- Non-cash, share-based compensation
expense is expected to be $46.1 million, depreciation expense is
expected to be $19.0 million, and amortization expense is expected
to be $15.6 million.
The forward-looking measures and the underlying
assumptions involve significant known and unknown risks and
uncertainties, and actual results may vary materially. The Company
does not present a reconciliation of the forward-looking non-GAAP
financial measures, including Adjusted EBITDA, Adjusted EBITDA
margin, and non-GAAP income per share, to the most directly
comparable GAAP financial measures because it is impractical to
forecast certain items without unreasonable efforts due to the
uncertainty and inherent difficulty of predicting, within a
reasonable range, the occurrence and financial impact of and the
periods in which such items may be recognized.
Quarterly Conference Call
To access the call, please dial 1-833-816-1382, or
outside the U.S. 1-412-317-0475 at least 15 minutes prior to the
3:30 p.m. CT start time. Please ask to join the SPS Commerce Q3
2023 conference call. 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 115,000 companies in retail,
distribution, grocery and e-commerce have chosen SPS as their
retail network. SPS has achieved 91 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 and INFINITE RETAIL
POWER are marks of SPS Commerce, Inc. and registered in the U.S.
Patent and Trademark Office, along with other SPS marks. Such marks
may also be registered or otherwise protected in other
countries.
SPS-F
Use of Non-GAAP Financial
Measures
To supplement our consolidated financial
statements, we provide investors with Adjusted EBITDA, Adjusted
EBITDA Margin, and non-GAAP income per share, all of which are
non-GAAP financial measures. We believe that these non-GAAP
financial measures provide useful information to our management,
Board of Directors, and investors regarding certain financial and
business trends relating to our financial condition and results of
operations.
Our management uses these non-GAAP financial
measures to compare our 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. We believe these non-GAAP financial
measures are useful to an investor as they are widely used in
evaluating operating performance. Adjusted EBITDA and Adjusted
EBITDA Margin are used to measure 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 capital structure and the method by which
assets were acquired.
These non-GAAP financial measures should not be
considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP. These non-GAAP financial
measures exclude significant expenses and income that are required
by GAAP to be recorded in our consolidated financial statements and
are subject to inherent limitations. Investors should review the
reconciliations of non-GAAP financial measures to the comparable
GAAP financial measures that are included in this press
release.
Adjusted EBITDA Measures:
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. In the three months ended September 30, 2023,
other adjustments included the expense impact from
acquisition-related employee severance costs. In the nine months
ended September 30, 2023, other adjustments included the expense
impacts from acquisition-related employee severance costs and
disposals of certain capitalized internally developed software. Net
income is the comparable GAAP measure of financial performance.
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.
Non-GAAP Income Per Share
Measure:
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, other adjustments as necessary for a fair presentation, and
the corresponding tax impacts of the adjustments to net income,
divided by the weighted average number of shares of common and
diluted stock outstanding during each period. In the three months
ended September 30, 2023, other adjustments included the expense
impact from acquisition-related employee severance costs. In the
nine months ended September 30, 2023, other adjustments included
the expense impacts from acquisition-related employee severance
costs and disposals of certain capitalized internally developed
software. Net income per share, the comparable GAAP measure of
financial performance, consists of net income divided by the
weighted average number of shares of common and diluted stock
outstanding during each period.
To quantify the tax
effects, we recalculated income tax expense excluding the direct
book and tax effects of the specific items constituting the
non-GAAP adjustments. 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.
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 2023, 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, 2022, 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, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
178,702 |
|
|
$ |
162,893 |
|
Short-term investments |
|
60,628 |
|
|
|
51,412 |
|
Accounts receivable |
|
48,218 |
|
|
|
42,501 |
|
Allowance for credit losses |
|
(3,077 |
) |
|
|
(3,066 |
) |
Accounts receivable, net |
|
45,141 |
|
|
|
39,435 |
|
Deferred costs |
|
59,525 |
|
|
|
52,755 |
|
Other assets |
|
15,743 |
|
|
|
16,319 |
|
Total current assets |
|
359,739 |
|
|
|
322,814 |
|
Property and equipment,
net |
|
36,209 |
|
|
|
35,458 |
|
Operating lease right-of-use
assets |
|
8,315 |
|
|
|
9,170 |
|
Goodwill |
|
252,045 |
|
|
|
197,284 |
|
Intangible assets, net |
|
103,597 |
|
|
|
88,352 |
|
Other assets |
|
|
|
Deferred costs, non-current |
|
19,521 |
|
|
|
17,424 |
|
Deferred income tax assets |
|
6,805 |
|
|
|
227 |
|
Other assets, non-current |
|
1,177 |
|
|
|
2,185 |
|
Total assets |
$ |
787,408 |
|
|
$ |
672,914 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
6,195 |
|
|
$ |
11,256 |
|
Accrued compensation |
|
41,474 |
|
|
|
30,235 |
|
Accrued expenses |
|
8,900 |
|
|
|
7,451 |
|
Deferred revenue |
|
71,853 |
|
|
|
57,423 |
|
Operating lease liabilities |
|
4,449 |
|
|
|
4,277 |
|
Total current liabilities |
|
132,871 |
|
|
|
110,642 |
|
Other liabilities |
|
|
|
Deferred revenue, non-current |
|
6,849 |
|
|
|
4,771 |
|
Operating lease liabilities, non-current |
|
10,563 |
|
|
|
13,009 |
|
Deferred income tax liabilities |
|
10,281 |
|
|
|
7,419 |
|
Total liabilities |
|
160,564 |
|
|
|
135,841 |
|
Commitments and
contingencies |
|
|
|
Stockholders' equity |
|
|
|
Common stock |
|
39 |
|
|
|
38 |
|
Treasury Stock |
|
(128,892 |
) |
|
|
(128,892 |
) |
Additional paid-in capital |
|
520,313 |
|
|
|
476,117 |
|
Retained earnings |
|
240,034 |
|
|
|
193,221 |
|
Accumulated other comprehensive loss |
|
(4,650 |
) |
|
|
(3,411 |
) |
Total stockholders’ equity |
|
626,844 |
|
|
|
537,073 |
|
Total liabilities and stockholders’
equity |
$ |
787,408 |
|
|
$ |
672,914 |
|
|
SPS COMMERCE, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME |
(Unaudited; in thousands, except per share amounts) |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
2022 |
|
Revenues |
$ |
135,661 |
|
$ |
114,486 |
|
|
$ |
391,945 |
|
$ |
328,857 |
|
Cost of revenues |
|
45,521 |
|
|
38,605 |
|
|
|
133,029 |
|
|
111,524 |
|
Gross profit |
|
90,140 |
|
|
75,881 |
|
|
|
258,916 |
|
|
217,333 |
|
Operating expenses |
|
|
|
|
|
|
|
Sales and marketing |
|
30,289 |
|
|
25,334 |
|
|
|
89,722 |
|
|
74,571 |
|
Research and development |
|
13,558 |
|
|
11,135 |
|
|
|
39,438 |
|
|
33,268 |
|
General and administrative |
|
21,906 |
|
|
16,724 |
|
|
|
64,275 |
|
|
49,390 |
|
Amortization of intangible assets |
|
3,788 |
|
|
2,998 |
|
|
|
11,118 |
|
|
7,936 |
|
Total operating expenses |
|
69,541 |
|
|
56,191 |
|
|
|
204,553 |
|
|
165,165 |
|
Income from operations |
|
20,599 |
|
|
19,690 |
|
|
|
54,363 |
|
|
52,168 |
|
Other income (expense),
net |
|
1,702 |
|
|
(695 |
) |
|
|
4,859 |
|
|
(1,610 |
) |
Income before income
taxes |
|
22,301 |
|
|
18,995 |
|
|
|
59,222 |
|
|
50,558 |
|
Income tax expense |
|
5,459 |
|
|
3,132 |
|
|
|
12,409 |
|
|
11,339 |
|
Net income |
$ |
16,842 |
|
$ |
15,863 |
|
|
$ |
46,813 |
|
$ |
39,219 |
|
|
|
|
|
|
|
|
|
Net income per share |
|
|
|
|
|
|
|
Basic |
$ |
0.46 |
|
$ |
0.44 |
|
|
$ |
1.28 |
|
$ |
1.09 |
|
Diluted |
$ |
0.45 |
|
$ |
0.43 |
|
|
$ |
1.25 |
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
Weighted average common shares
used to compute net income per share |
|
|
|
|
|
|
|
Basic |
|
36,728 |
|
|
36,093 |
|
|
|
36,584 |
|
|
36,104 |
|
Diluted |
|
37,584 |
|
|
36,915 |
|
|
|
37,417 |
|
|
36,942 |
|
|
SPS COMMERCE, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Unaudited; in thousands) |
|
|
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
Cash flows from operating
activities |
|
|
|
Net income |
$ |
46,813 |
|
|
$ |
39,219 |
|
Reconciliation of net income to net cash provided by operating
activities |
|
|
|
Deferred income taxes |
|
(11,906 |
) |
|
|
(2,092 |
) |
Depreciation and amortization of property and equipment |
|
13,964 |
|
|
|
11,983 |
|
Amortization of intangible assets |
|
11,118 |
|
|
|
7,936 |
|
Provision for credit losses |
|
4,004 |
|
|
|
2,889 |
|
Stock-based compensation |
|
36,097 |
|
|
|
25,636 |
|
Other, net |
|
1,711 |
|
|
|
43 |
|
Changes in assets and liabilities |
|
|
|
Accounts receivable |
|
(8,800 |
) |
|
|
(3,999 |
) |
Deferred costs |
|
(7,543 |
) |
|
|
(7,174 |
) |
Other current and non-current assets |
|
2,814 |
|
|
|
2,202 |
|
Accounts payable |
|
(5,289 |
) |
|
|
129 |
|
Accrued compensation |
|
8,073 |
|
|
|
(4,388 |
) |
Accrued expenses |
|
(169 |
) |
|
|
(3,035 |
) |
Deferred revenue |
|
10,042 |
|
|
|
8,261 |
|
Operating leases |
|
(1,417 |
) |
|
|
(1,127 |
) |
Net cash provided by operating activities |
|
99,512 |
|
|
|
76,483 |
|
Cash flows from investing
activities |
|
|
|
Purchases of property and equipment |
|
(15,467 |
) |
|
|
(13,894 |
) |
Purchases of investments |
|
(102,763 |
) |
|
|
(134,276 |
) |
Maturities of investments |
|
95,000 |
|
|
|
132,500 |
|
Acquisition of business, net |
|
(70,218 |
) |
|
|
(44,923 |
) |
Net cash used in investing activities |
|
(93,448 |
) |
|
|
(60,593 |
) |
Cash flows from financing
activities |
|
|
|
Repurchases of common stock |
|
— |
|
|
|
(42,700 |
) |
Net proceeds from exercise of options to purchase common stock |
|
5,524 |
|
|
|
2,457 |
|
Net proceeds from employee stock purchase plan activity |
|
4,481 |
|
|
|
3,588 |
|
Net cash provided by (used in) financing activities |
|
10,005 |
|
|
|
(36,655 |
) |
Effect of foreign currency
exchange rate changes |
|
(260 |
) |
|
|
(557 |
) |
Net increase (decrease) in cash and cash equivalents |
|
15,809 |
|
|
|
(21,322 |
) |
Cash and cash equivalents at
beginning of period |
|
162,893 |
|
|
|
207,552 |
|
Cash and cash equivalents at
end of period |
$ |
178,702 |
|
|
$ |
186,230 |
|
|
SPS COMMERCE, INC. |
NON-GAAP RECONCILIATION |
(Unaudited; in thousands, except per share amounts) |
|
Adjusted EBITDA |
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income |
$ |
16,842 |
|
|
$ |
15,863 |
|
|
$ |
46,813 |
|
|
$ |
39,219 |
|
Income tax expense |
|
5,459 |
|
|
|
3,132 |
|
|
|
12,409 |
|
|
|
11,339 |
|
Depreciation and amortization of property and equipment |
|
4,675 |
|
|
|
4,169 |
|
|
|
13,964 |
|
|
|
11,983 |
|
Amortization of intangible assets |
|
3,788 |
|
|
|
2,998 |
|
|
|
11,118 |
|
|
|
7,936 |
|
Stock-based compensation expense |
|
11,436 |
|
|
|
7,960 |
|
|
|
36,097 |
|
|
|
25,636 |
|
Realized (gain) loss from foreign currency on cash and investments
held |
|
(98 |
) |
|
|
1,151 |
|
|
|
(525 |
) |
|
|
2,010 |
|
Investment income |
|
(2,635 |
) |
|
|
(586 |
) |
|
|
(5,372 |
) |
|
|
(806 |
) |
Other |
|
1,036 |
|
|
|
— |
|
|
|
1,170 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
40,503 |
|
|
$ |
34,687 |
|
|
$ |
115,674 |
|
|
$ |
97,317 |
|
Adjusted EBITDA Margin |
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
$ |
135,661 |
|
|
$ |
114,486 |
|
|
$ |
391,945 |
|
|
$ |
328,857 |
|
|
|
|
|
|
|
|
|
Net income |
|
16,842 |
|
|
|
15,863 |
|
|
|
46,813 |
|
|
|
39,219 |
|
Margin |
|
12 |
% |
|
|
14 |
% |
|
|
12 |
% |
|
|
12 |
% |
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
40,503 |
|
|
|
34,687 |
|
|
|
115,674 |
|
|
|
97,317 |
|
Adjusted EBITDA Margin |
|
30 |
% |
|
|
30 |
% |
|
|
30 |
% |
|
|
30 |
% |
Non-GAAP Income per Share |
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income |
$ |
16,842 |
|
|
$ |
15,863 |
|
|
$ |
46,813 |
|
|
$ |
39,219 |
|
Stock-based compensation expense |
|
11,436 |
|
|
|
7,960 |
|
|
|
36,097 |
|
|
|
25,636 |
|
Amortization of intangible assets |
|
3,788 |
|
|
|
2,998 |
|
|
|
11,118 |
|
|
|
7,936 |
|
Realized (gain) loss from foreign currency on cash and investments
held |
|
(98 |
) |
|
|
1,151 |
|
|
|
(525 |
) |
|
|
2,010 |
|
Other |
|
1,036 |
|
|
|
— |
|
|
|
1,170 |
|
|
|
— |
|
Income tax effects of adjustments |
|
(4,981 |
) |
|
|
(4,866 |
) |
|
|
(16,089 |
) |
|
|
(11,576 |
) |
Non-GAAP income |
$ |
28,023 |
|
|
$ |
23,106 |
|
|
$ |
78,584 |
|
|
$ |
63,225 |
|
|
|
|
|
|
|
|
|
Shares used to compute net
income and non-GAAP income per share |
|
|
|
|
|
|
|
Basic |
|
36,728 |
|
|
|
36,093 |
|
|
|
36,584 |
|
|
|
36,104 |
|
Diluted |
|
37,584 |
|
|
|
36,915 |
|
|
|
37,417 |
|
|
|
36,942 |
|
|
|
|
|
|
|
|
|
Net income per share,
basic |
$ |
0.46 |
|
|
$ |
0.44 |
|
|
$ |
1.28 |
|
|
$ |
1.09 |
|
Non-GAAP adjustments to net income per share, basic |
|
0.30 |
|
|
|
0.20 |
|
|
|
0.86 |
|
|
|
0.66 |
|
Non-GAAP income per share,
basic |
$ |
0.76 |
|
|
$ |
0.64 |
|
|
$ |
2.14 |
|
|
$ |
1.75 |
|
|
|
|
|
|
|
|
|
Net income per share,
diluted |
$ |
0.45 |
|
|
$ |
0.43 |
|
|
$ |
1.25 |
|
|
$ |
1.06 |
|
Non-GAAP adjustments to net income per share, diluted |
|
0.30 |
|
|
|
0.20 |
|
|
|
0.86 |
|
|
|
0.66 |
|
Non-GAAP income per share,
diluted |
$ |
0.75 |
|
|
$ |
0.63 |
|
|
$ |
2.11 |
|
|
$ |
1.72 |
|
|
|
|
|
|
|
|
|
Contact:Investor RelationsThe Blueshirt GroupIrmina Blaszczyk
& Lisa LaukkanenSPSC@blueshirtgroup.com415-217-4962
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