SPS Commerce Reports Second Quarter 2023 Financial Results

Company delivers 90th consecutive quarter of topline growth
Revenue growth of 19% year-over-year; Recurring revenue growth of 20% year-over-year

MINNEAPOLIS, July 27, 2023 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the second quarter ended June 30, 2023.

Second Quarter 2023 Financial Highlights

  • Revenue was $130.4 million in the second quarter of 2023, compared to $109.2 million in the second quarter of 2022, reflecting 19% growth.
  • Recurring revenue grew 20% from the second quarter of 2022.
  • Net income was $14.7 million or $0.39 per diluted share, compared to net income of $10.8 million or $0.29 per diluted share in the second quarter of 2022.
  • Non-GAAP income per diluted share was $0.69, compared to non-GAAP income per diluted share of $0.53 in the second quarter of 2022.
  • Adjusted EBITDA for the second quarter of 2023 increased 24% to $38.2 million compared to the second quarter of 2022.

“Retailers and suppliers are investing in new technologies to revitalize their supply chain and SPS Commerce remains committed to delivering the world-class products and excellent customer experience suppliers have come to expect from us,” said Archie Black, CEO of SPS Commerce.   “SPS is the world’s largest cloud retail network and as we continue to leverage its data and enhance its intelligence, we make joining and operating within the network increasingly more efficient, further expanding our competitive advantage.”

“Ongoing investments across the retail industry continue to present tremendous opportunities for SPS,” said Kim Nelson, CFO of SPS Commerce.   “With the only full-service EDI solution, we are well positioned to help our customers optimize their network as we capitalize on a multi-billion dollar addressable market to deliver sustained, profitable growth.”

Guidance

SPS Commerce third quarter and full year 2023 guidance does not include the pending acquisition of TIE Kinetix, which was announced in a separate press release issued July 26, 2023.

Third Quarter 2023 Guidance

  • Revenue is expected to be in the range of $133.6 million to $134.4 million.
  • Net income per diluted share is expected to be in the range of $0.37 to $0.38, with fully diluted weighted average shares outstanding of 37.6 million shares.
  • Non-GAAP income per diluted share is expected to be in the range of $0.65 to $0.67.
  • Adjusted EBITDA is expected to be in the range of $39.3 million to $40.0 million.
  • Non-cash, share-based compensation expense is expected to be $11.7 million, depreciation expense is expected to be $4.9 million, and amortization expense is expected to be $3.7 million.

Full Year 2023 Guidance

  • Revenue is expected to be in the range of $528.5 million to $530.0 million, representing 17% to 18% growth over 2022.
  • Net income per diluted share is expected to be in the range of $1.60 to $1.63, with fully diluted weighted average shares outstanding of 37.4 million shares.
  • Non-GAAP income per diluted share is expected to be in the range of $2.69 to $2.72.
  • Adjusted EBITDA is expected to be in the range of $155.8 to $156.9 million, representing 18% to 19% growth over 2022.
  • Non-cash, share-based compensation expense is expected to be $46.2 million, depreciation expense is expected to be $19.4 million, and amortization expense is expected to be $14.7 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 Q2 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 90 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. 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. 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 third 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)
 
 June 30,
2023
 December 31,
2022
ASSETS   
Current assets   
Cash and cash equivalents$209,264  $162,893 
Short-term investments 60,914   51,412 
Accounts receivable 48,092   42,501 
Allowance for credit losses (3,100)  (3,066)
Accounts receivable, net 44,992   39,435 
Deferred costs 56,250   52,755 
Other assets 13,556   16,319 
Total current assets 384,976   322,814 
Property and equipment, net 35,211   35,458 
Operating lease right-of-use assets 7,973   9,170 
Goodwill 202,786   197,284 
Intangible assets, net 77,633   88,352 
Other assets   
Deferred costs, non-current 19,005   17,424 
Deferred income tax assets 6,676   227 
Other assets, non-current 1,278   2,185 
Total assets$735,538  $672,914 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities   
Accounts payable$6,163  $11,256 
Accrued compensation 28,637   30,235 
Accrued expenses 6,714   7,451 
Deferred revenue 66,381   57,423 
Operating lease liabilities 4,073   4,277 
Total current liabilities 111,968   110,642 
Other liabilities   
Deferred revenue, non-current 5,724   4,771 
Operating lease liabilities, non-current 11,058   13,009 
Deferred income tax liabilities 5,807   7,419 
Total liabilities 134,557   135,841 
Commitments and contingencies   
Stockholders' equity   
Common stock 39   38 
Treasury Stock (128,892)  (128,892)
Additional paid-in capital 508,484   476,117 
Retained earnings 223,192   193,221 
Accumulated other comprehensive loss (1,842)  (3,411)
Total stockholders’ equity 600,981   537,073 
Total liabilities and stockholders’ equity$735,538  $672,914 
        


SPS COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in thousands, except per share amounts)
 
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 2023 2022 2023 2022
Revenues$130,416 $109,178  $256,284 $214,371 
Cost of revenues 44,544  37,530   87,508  72,919 
Gross profit 85,872  71,648   168,776  141,452 
Operating expenses       
Sales and marketing 30,349  24,582   59,433  49,237 
Research and development 13,318  11,432   25,880  22,133 
General and administrative 21,693  17,198   42,369  32,666 
Amortization of intangible assets 3,479  2,468   7,330  4,938 
Total operating expenses 68,839  55,680   135,012  108,974 
Income from operations 17,033  15,968   33,764  32,478 
Other income (expense), net 1,882  (1,338)  3,157  (915)
Income before income taxes 18,915  14,630   36,921  31,563 
Income tax expense 4,233  3,877   6,950  8,207 
Net income$14,682 $10,753  $29,971 $23,356 
        
Net income per share       
Basic$0.40 $0.30  $0.82 $0.65 
Diluted$0.39 $0.29  $0.80 $0.63 
        
Weighted average common shares used to compute net income per share       
Basic 36,593  36,085   36,511  36,110 
Diluted 37,426  36,862   37,327  36,897 


SPS COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
  
 Six Months Ended
June 30,
  2023   2022 
Cash flows from operating activities   
Net income$29,971  $23,356 
Reconciliation of net income to net cash provided by operating activities   
Deferred income taxes (8,654)  (2,160)
Depreciation and amortization of property and equipment 9,289   7,814 
Amortization of intangible assets 7,330   4,938 
Provision for credit losses 2,491   2,634 
Stock-based compensation 24,661   17,676 
Other, net 1,143   8 
Changes in assets and liabilities   
Accounts receivable (9,937)  (7,862)
Deferred costs (5,136)  (5,095)
Other current and non-current assets 3,612   (1,423)
Accounts payable (4,414)  (3,234)
Accrued compensation (2,910)  (7,186)
Accrued expenses (728)  (805)
Deferred revenue 9,909   8,802 
Operating leases (959)  (678)
Net cash provided by operating activities 55,669   36,785 
Cash flows from investing activities   
Purchases of property and equipment (9,769)  (8,191)
Purchases of investments (68,579)  (114,603)
Maturities of investments 60,000   117,500 
Net cash used in investing activities (18,348)  (5,294)
Cash flows from financing activities   
Repurchases of common stock    (30,223)
Net proceeds from exercise of options to purchase common stock 4,819   690 
Net proceeds from employee stock purchase plan activity 4,136   3,350 
Net cash provided by (used in) financing activities 8,956   (26,183)
Effect of foreign currency exchange rate changes 94   (135)
Net increase in cash and cash equivalents 46,371   5,173 
Cash and cash equivalents at beginning of period 162,893   207,552 
Cash and cash equivalents at end of period$209,264  $212,725 
        

 

SPS COMMERCE, INC.
NON-GAAP RECONCILIATION
(Unaudited; in thousands, except per share amounts)
 
Adjusted EBITDA
 Three Months Ended
June 30,
 Six Months Ended
June 30,
  2023   2022   2023   2022 
Net income$14,682  $10,753  $29,971  $23,356 
Income tax expense 4,233   3,877   6,950   8,207 
Depreciation and amortization of property and equipment 4,663   3,950   9,289   7,814 
Amortization of intangible assets 3,479   2,468   7,330   4,938 
Stock-based compensation expense 12,881   8,661   24,661   17,676 
Realized (gain) loss from foreign currency on cash and investments held (290)  1,327   (427)  859 
Investment income (1,611)  (172)  (2,737)  (220)
Other 134      134    
Adjusted EBITDA$38,171  $30,864  $75,171  $62,630 

 

Adjusted EBITDA Margin
 Three Months Ended
June 30,
 Six Months Ended
June 30,
  2023   2022   2023   2022 
Revenue$130,416  $109,178  $256,284  $214,371 
        
Net income 14,682   10,753   29,971   23,356 
Margin 11%  10%  12%  11%
        
Adjusted EBITDA 38,171   30,864   75,171   62,630 
Adjusted EBITDA Margin 29%  28%  29%  29%

 

Non-GAAP Income per Share
 Three Months Ended
June 30,
 Six Months Ended
June 30,
  2023   2022   2023   2022 
Net income$14,682  $10,753  $29,971  $23,356 
Stock-based compensation expense 12,881   8,661   24,661   17,676 
Amortization of intangible assets 3,479   2,468   7,330   4,938 
Realized (gain) loss from foreign currency on cash and investments held (290)  1,327   (427)  859 
Other 134      134    
Income tax effects of adjustments (5,199)  (3,491)  (11,108)  (6,710)
Non-GAAP income$25,687  $19,718  $50,561  $40,119 
        
Shares used to compute net income and non-GAAP income per share       
Basic 36,593   36,085   36,511   36,110 
Diluted 37,426   36,862   37,327   36,897 
        
Net income per share, basic$0.40  $0.30  $0.82  $0.65 
Non-GAAP adjustments to net income per share, basic 0.30   0.25   0.56   0.46 
Non-GAAP income per share, basic$0.70  $0.55  $1.38  $1.11 
        
Net income per share, diluted$0.39  $0.29  $0.80  $0.63 
Non-GAAP adjustments to net income per share, diluted 0.30   0.24   0.55   0.46 
Non-GAAP income per share, diluted$0.69  $0.53  $1.35  $1.09 
        

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


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