SPSC SPS Commerce Inc

SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the fourth quarter and year ended December 31, 2023.

Financial Highlights

Fourth Quarter 2023 Financial Highlights

• Revenue was $145.0 million in the fourth quarter of 2023, compared to $122.0 million in the fourth quarter of 2022, reflecting 19% growth.
• Recurring revenue grew 19% from the fourth quarter of 2022.
• Net income was $19.0 million or $0.51 per diluted share, compared to net income of $15.9 million or $0.43 per diluted share in the fourth 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 fourth quarter of 2022.
• Adjusted EBITDA for the fourth quarter of 2023 increased 20% to $42.0 million compared to the fourth quarter of 2022.

Fiscal Year 2023 Financial Highlights

• Revenue was $536.9 million for the year ended December 31, 2023, compared to $450.9 million for the year ended December 31, 2022, reflecting 19% growth.
• Recurring revenue grew 20% from the year ended December 31, 2022.
• Net income was $65.8 million or $1.76 per diluted share for the year ended December 31, 2023, compared to net income of $55.1 million or $1.49 per diluted share, for the comparable period in 2022, reflecting 19% growth in year-over-year net income.
• Non-GAAP income per diluted share was $2.85, compared to non-GAAP income per diluted share of $2.35 in the year ended December 31, 2022.
• Adjusted EBITDA for the year ended December 31, 2023 increased 19% to $157.6 million compared to the year ended December 31, 2022.

“In 2023, SPS Commerce demonstrated ongoing success in expanding our network as we continued to play a key role in retailers’ and suppliers’ transformation to omnichannel retail, improving supply chain efficiencies, and enabling our customers’ international expansion,” said Chad Collins, CEO of SPS Commerce. “I am excited about our long-term growth opportunities ahead as we execute our strategy to be the world’s retail network.”

“SPS Commerce achieved strong fourth quarter and full year 2023 results, despite ongoing macro dynamics.   We delivered profitable growth while we closed two acquisitions and continued to invest for the future to strengthen our competitive position across a large, addressable market,” said Kim Nelson, CFO of SPS Commerce.

Guidance

First Quarter 2024 Guidance

• Revenue is expected to be in the range of $145.9 million to $146.7 million.
• Net income per diluted share is expected to be in the range of $0.26 to $0.27, 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 $0.72 to $0.73.
• Adjusted EBITDA is expected to be in the range of $42.1 million to $42.7 million.
• Non-cash, share-based compensation expense is expected to be $20.1 million, depreciation expense is expected to be $4.7 million, and amortization expense is expected to be $4.7 million.

Fiscal Year 2024 Guidance

• Revenue is expected to be in the range of $616.5 million to $619.0 million, representing 15% growth over 2022.
• Net income per diluted share is expected to be in the range of $1.75 to $1.78, with fully diluted weighted average shares outstanding of 38.0 million shares.
• Non-GAAP income per diluted share is expected to be in the range of $3.11 to $3.13.
• Adjusted EBITDA is expected to be in the range of $183.0 to $185.0 million, representing 16% to 17% growth over 2022.
• Non-cash, share-based compensation expense is expected to be $55.7 million, depreciation expense is expected to be $19.4 million, and amortization expense is expected to be $18.8 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 Q4 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 120,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 92 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 twelve months ended December 31, 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 twelve months ended December 31, 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 first quarter and full year of 2024, 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. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited; in thousands, except shares)
	December 31,
		2023				2022
ASSETS
Current assets
Cash and cash equivalents	$	219,081			$	162,893
Short-term investments		56,359				51,412
Accounts receivable		50,160				42,501
Allowance for credit losses		(3,320	)			(3,066	)
Accounts receivable, net		46,840				39,435
Deferred costs		62,403				52,755
Other assets		16,758				16,319
Total current assets		401,441				322,814
Property and equipment, net		36,043				35,458
Operating lease right-of-use assets		7,862				9,170
Goodwill		249,176				197,284
Intangible assets, net		107,344				88,352
Other assets
Deferred costs, non-current		20,347				17,424
Deferred income tax assets		505				227
Other assets, non-current		1,126				2,185
Total assets	$	823,844			$	672,914
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	7,420			$	11,256
Accrued compensation		41,588				30,235
Accrued expenses		8,014				7,451
Deferred revenue		69,187				57,423
Operating lease liabilities		4,460				4,277
Total current liabilities		130,669				110,642
Other liabilities
Deferred revenue, non-current		6,930				4,771
Operating lease liabilities, non-current		9,569				13,009
Deferred income tax liabilities		8,972				7,419
Other liabilities, non-current		229				—
Total liabilities		156,369				135,841
Commitments and contingencies
Stockholders' equity
Common stock		39				38
Treasury Stock		(128,892	)			(128,892	)
Additional paid-in capital		537,061				476,117
Retained earnings		259,045				193,221
Accumulated other comprehensive gain (loss)		222				(3,411	)
Total stockholders’ equity		667,475				537,073
Total liabilities and stockholders’ equity	$	823,844			$	672,914

Results presented are unaudited and thus, are subject to adjustment. Audited results will be included within the 10-K filing.

SPS COMMERCE, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Unaudited; in thousands, except per share amounts)
	Three Months EndedDecember 31,						Year EndedDecember 31,
	2023			2022			2023			2022
Revenues	$	144,965		$	122,018		$	536,910		$	450,875
Cost of revenues		49,040			41,541			182,069			153,065
Gross profit		95,925			80,477			354,841			297,810
Operating expenses
Sales and marketing		33,214			27,201			122,936			101,772
Research and development		14,216			12,480			53,654			45,748
General and administrative		20,612			17,950			84,887			67,340
Amortization of intangible assets		4,998			3,832			16,116			11,768
Total operating expenses		73,040			61,463			277,593			226,628
Income from operations		22,885			19,014			77,248			71,182
Other income, net		3,456			1,752			8,315			142
Income before income taxes		26,341			20,766			85,563			71,324
Income tax expense		7,330			4,851			19,739			16,190
Net income	$	19,011		$	15,915		$	65,824		$	55,134
Net income per share
Basic	$	0.52		$	0.44		$	1.80		$	1.53
Diluted	$	0.51		$	0.43		$	1.76		$	1.49
Weighted average common shares used to compute net income per share
Basic		36,831			36,093			36,646			36,117
Diluted		37,640			36,915			37,475			36,953

Results presented are unaudited and thus, are subject to adjustment. Audited results will be included within the 10-K filing.

SPS COMMERCE, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited; in thousands)
	Year EndedDecember 31,
	2023				2022
Cash flows from operating activities
Net income	$	65,824			$	55,134
Reconciliation of net income to net cash provided by operating activities
Deferred income taxes		(10,079	)			(3,732	)
Depreciation and amortization of property and equipment		18,631				16,421
Amortization of intangible assets		16,116				11,768
Provision for credit losses		5,707				3,359
Stock-based compensation		45,508				33,399
Other, net		2,415				220
Changes in assets and liabilities, net of effects of acquisitions
Accounts receivable		(11,949	)			(6,435	)
Deferred costs		(10,724	)			(10,646	)
Other assets and liabilities		1,834				2,632
Accounts payable		(3,947	)			144
Accrued compensation		7,143				(3,786	)
Accrued expenses		1,302				(2,829	)
Deferred revenue		6,464				5,965
Operating leases		(1,947	)			(1,562	)
Net cash provided by operating activities		132,298				100,052
Cash flows from investing activities
Purchases of property and equipment		(19,761	)			(19,880	)
Purchases of investments		(133,994	)			(160,427	)
Maturities of investments		131,331				158,937
Acquisition of business, net		(70,218	)			(91,420	)
Net cash used in investing activities		(92,642	)			(112,790	)
Cash flows from financing activities
Repurchases of common stock		—				(43,215	)
Net proceeds from exercise of options to purchase common stock		9,856				4,908
Net proceeds from employee stock purchase plan activity		8,114				6,676
Payments for contingent consideration		(2,000	)			—
Net cash provided by (used in) financing activities		15,970				(31,631	)
Effect of foreign currency exchange rate changes		562				(290	)
Net increase (decrease) in cash and cash equivalents		56,188				(44,659	)
Cash and cash equivalents at beginning of period		162,893				207,552
Cash and cash equivalents at end of period	$	219,081			$	162,893

Results presented are unaudited and thus, are subject to adjustment. Audited results will be included within the 10-K filing.

SPS COMMERCE, INC. AND SUBSIDIARIESNON-GAAP RECONCILIATION(Unaudited; in thousands, except per share amounts)
Adjusted EBITDA
	Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Net income	$	19,011			$	15,915			$	65,824			$	55,134
Income tax expense		7,330				4,851				19,739				16,190
Depreciation and amortization of property and equipment		4,667				4,438				18,631				16,421
Amortization of intangible assets		4,998				3,832				16,116				11,768
Stock-based compensation expense		9,411				7,763				45,508				33,399
Realized gain from foreign currency on cash and investments held		(1,201	)			(984	)			(1,726	)			1,026
Investment income		(2,288	)			(864	)			(7,660	)			(1,670	)
Other		28				—				1,198				—
Adjusted EBITDA	$	41,956			$	34,951			$	157,630			$	132,268

 

Adjusted EBITDA Margin
	Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Revenue	$	144,965			$	122,018			$	536,910			$	450,875
Net income		19,011				15,915				65,824				55,134
Margin		13	%			13	%			12	%			12	%
Adjusted EBITDA		41,956				34,951				157,630				132,268
Adjusted EBITDA Margin		29	%			29	%			29	%			29	%

 

Non-GAAP Income per Share
	Three Months Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Net income	$	19,011			$	15,915			$	65,824			$	55,134
Stock-based compensation expense		9,411				7,763				45,508				33,399
Amortization of intangible assets		4,998				3,832				16,116				11,768
Realized gain from foreign currency on cash and investments held		(1,201	)			(984	)			(1,726	)			1,026
Other		28				—				1,198				—
Income tax effects of adjustments		(3,906	)			(3,063	)			(19,983	)			(14,639	)
Non-GAAP income	$	28,341			$	23,463			$	106,937			$	86,688
Shares used to compute net income and non-GAAP income per share
Basic		36,831				36,093				36,646				36,117
Diluted		37,640				36,915				37,475				36,953
Net income per share, basic	$	0.52			$	0.44			$	1.80			$	1.53
Non-GAAP adjustments to net income per share, basic		0.25				0.21				1.12				0.87
Non-GAAP income per share, basic	$	0.77			$	0.65			$	2.92			$	2.40
Net income per share, diluted	$	0.51			$	0.43			$	1.76			$	1.49
Non-GAAP adjustments to net income per share, diluted		0.24				0.20				1.09				0.86
Non-GAAP income per share, diluted	$	0.75			$	0.63			$	2.85			$	2.35

Contact:Investor RelationsThe Blueshirt GroupIrmina Blaszczyk & Lisa LaukkanenSPSC@blueshirtgroup.com415-217-4962