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SPS Commerce Reports Fourth Quarter and Full Year 2020 Financial Results

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SPS Commerce, Inc.
·15 min read
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Company delivers 80th consecutive quarter of topline growth, with 15% growth in recurring revenue over fourth quarter 2019

MINNEAPOLIS, Feb. 11, 2021 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the fourth quarter and full year ended December 31, 2020.

Revenue was $83.3 million in the fourth quarter of 2020, compared to $72.7 million in the fourth quarter of 2019, reflecting 15% growth in revenue from the fourth quarter of 2019. Recurring revenue grew 15% from the fourth quarter of 2019.

Net income in the fourth quarter of 2020 was $13.5 million or $0.37 per diluted share, compared to net income of $9.2 million or $0.25 per diluted share, in the fourth quarter of 2019. Non-GAAP net income per diluted share was $0.40, compared to non-GAAP net income per diluted share of $0.35 in the fourth quarter of 2019. Adjusted EBITDA for the fourth quarter of 2020 increased 22% to $23.0 million compared to the fourth quarter of 2019.

“Throughout 2020 SPS Commerce was instrumental in driving efficiency in the retail supply chain,” said Archie Black, President and CEO of SPS Commerce. “During the year, we grew net new customer adds by 27% as our Fulfillment solution gained momentum, and volume of drop ship orders filled through our network more than doubled as compared to pre-pandemic levels. We remain committed to supporting our customers through their digital transformation as we all work together to improve the e-commerce experience for trading partners and consumers.”

Revenue for the full year ended December 31, 2020 was $312.6 million compared to $279.1 million for the full year ended December 31, 2019, reflecting 12% growth. Recurring revenue grew 13% from the year ended December 31, 2019.

Net income for the year ended December 31, 2020 was $45.6 million or $1.26 per diluted share, compared to net income of $33.7 million or $0.94 per diluted share, for the comparable period in 2019. Non-GAAP net income per diluted share for the year ended December 31, 2020 was $1.53, compared to non-GAAP net income per diluted share of $1.28 for the comparable period in 2019. Adjusted EBITDA for the full year ended December 31, 2020 increased 25% to $87.0 million, compared to the full year ended December 31, 2019.

“SPS Commerce delivered strong fourth quarter and full year 2020 results,” said Kim Nelson, CFO of SPS Commerce. “With retail dynamics accelerating the shift to e-commerce and driving increased demand for EDI, we are excited about our growth opportunities across a multibillion-dollar TAM, while we continue to deliver strong operating leverage, targeting a long-term adjusted EBITDA margin of 35%.”

Guidance

First quarter 2021 revenue is expected to be in the range of $86.8 million to $87.8 million. Full year 2021 revenue is expected to be in the range of $363.0 million to $366.0 million, representing approximately 16% to 17% growth over 2020.

First quarter 2021 net income per diluted share is expected to be in the range of $0.18 to $0.19 with fully diluted weighted average shares outstanding of approximately 37.0 million shares. Full year 2021 net income per diluted share is expected to be in the range of $0.87 to $0.91 with fully diluted weighted average shares outstanding of approximately 37.1 million shares.

First quarter 2021 non-GAAP net income per diluted share is expected to be in the range of $0.36 to $0.37. Full year 2021 non-GAAP net income per diluted share is expected to be in the range of $1.58 to $1.62.

First quarter 2021 Adjusted EBITDA is expected to be in the range of $23.3 to $24.0 million. Full year 2021 Adjusted EBITDA is expected to be in the range of $100.0 million to $102.0 million, representing approximately 15% to 17% growth over 2020.

First quarter 2021 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.

Full year 2021 non-cash, share-based compensation expense is expected to be approximately $27.0 million. Depreciation expense is expected to be approximately $16.0 million and amortization expense is expected to be approximately $10.5 million.

For 2021, we expect an annual effective tax rate of approximately 30%.

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 #8957009 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 80 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 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 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. It uses Adjusted EBITDA for purposes of determining executive and senior management incentive compensation. These measures are also presented to the company's board of directors.

Adjusted EBITDA consists of net income adjusted for depreciation and amortization, investment income (interest income/expense, realized investments gain/loss excluding realized gain/loss from foreign currency on investments), income tax expense, stock-based compensation expense, realized gain/loss from foreign currency on cash and investments held, and other adjustments as necessary for a fair presentation. SPS Commerce uses Adjusted EBITDA as a measure of operating performance because it assists the company in comparing performance on a consistent basis, as it removes from operating results the impact of the company's capital structure. SPS Commerce believes Adjusted EBITDA is useful to an investor in evaluating the company's operating performance because it is 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 plus stock-based compensation expense, amortization expense related to intangible assets, realized gain/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.

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.

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.

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 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, 2019, 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.

Contact:

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


SPS COMMERCE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands, except shares)

December 31,

2020

2019

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

149,692

$

179,252

Short-term investments

37,786

34,284

Accounts receivable

37,811

33,001

Allowance for credit losses

(4,233

)

(1,469

)

Accounts receivable, net

33,578

31,532

Deferred costs

37,502

35,274

Other assets

12,312

11,279

Total current assets

270,870

291,621

PROPERTY AND EQUIPMENT, net

26,432

23,752

OPERATING LEASE RIGHT-OF-USE ASSET

15,581

15,744

GOODWILL

135,253

76,845

INTANGIBLE ASSETS, net

59,830

22,668

INVESTMENTS

2,500

OTHER ASSETS

Deferred costs, non-current

12,160

11,667

Deferred income tax assets

194

2,630

Other assets, non-current

2,705

2,513

Total assets

$

525,525

$

447,440

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable

$

5,354

$

4,274

Accrued compensation

21,939

22,303

Accrued expenses

11,161

6,207

Deferred revenue

37,947

31,463

Operating lease liabilities

2,798

3,783

Total current liabilities

79,199

68,030

OTHER LIABILITIES

Deferred revenue, non-current

2,996

2,851

Operating lease liabilities, non-current

19,672

20,085

Deferred income tax liabilities

2,937

1,193

Other liabilities, non-current

405

Total liabilities

104,804

92,564

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; 55,000,000 shares authorized; 37,100,467 and 36,104,619 shares issued; and 35,487,217 and 34,863,271 outstanding, respectively

37

36

Treasury stock, at cost; 1,613,250 and 1,241,348 shares, respectively

(65,247

)

(46,297

)

Additional paid-in capital

393,462

354,115

Retained earnings

93,490

48,973

Accumulated other comprehensive loss

(1,021

)

(1,951

)

Total stockholders’ equity

420,721

354,876

Total liabilities and stockholders’ equity

$

525,525

$

447,440

Balance sheet is subject to reclassification


SPS COMMERCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; in thousands, except per share amounts)

Three Months Ended

Year Ended

December 31,

December 31,

2020

2019

2020

2019

Revenues

$

83,308

$

72,733

$

312,630

$

279,124

Cost of revenues

26,921

23,909

99,836

92,239

Gross profit

56,387

48,824

212,794

186,885

Operating expenses

Sales and marketing

19,812

17,736

75,955

70,140

Research and development

7,937

7,861

31,024

28,305

General and administrative

13,528

11,045

50,119

44,719

Amortization of intangible assets

1,553

1,418

5,538

5,315

Total operating expenses

42,830

38,060

162,636

148,479

Income from operations

13,557

10,764

50,158

38,406

Other income (expense)

Interest income, net

121

714

1,103

2,947

Other income, net

1,026

244

1,334

272

Change in earn-out liability

157

79

85

445

Total other income, net

1,304

1,037

2,522

3,664

Income before income taxes

14,861

11,801

52,680

42,070

Income tax expense

1,391

2,639

7,094

8,358

Net income

$

13,470

$

9,162

$

45,586

$

33,712

Net income per share

Basic

$

0.38

$

0.26

$

1.29

$

0.96

Diluted

$

0.37

$

0.25

$

1.26

$

0.94

Weighted average common shares used to compute net income per share

Basic

35,504

35,029

35,226

35,024

Diluted

36,624

35,967

36,285

36,002

Per share amounts may not foot due to rounding.


SPS COMMERCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

Year Ended

December 31,

2020

2019

Cash flows from operating activities

Net income

$

45,586

$

33,712

Reconciliation of net income to net cash provided by operating activities

Deferred income taxes

4,241

7,581

Change in earn-out liability

(85

)

(445

)

Depreciation and amortization of property and equipment

13,127

11,123

Amortization of intangible assets

5,538

5,315

Provision for credit losses

5,660

3,499

Stock-based compensation

18,936

14,690

Other, net

(24

)

(574

)

Changes in assets and liabilities, net of effects of acquisition

Accounts receivable

(5,922

)

(6,771

)

Deferred costs

(2,481

)

(1,441

)

Other current and non-current assets

1,201

(2,768

)

Accounts payable

1,214

(489

)

Accrued compensation

(2,190

)

319

Accrued expenses

563

706

Deferred revenue

4,432

6,366

Operating leases

(1,234

)

971

Net cash provided by operating activities

88,562

71,794

Cash flows from investing activities

Purchases of property and equipment

(16,467

)

(13,585

)

Purchases of investments

(74,797

)

(73,700

)

Maturities of investments

69,461

84,472

Acquisition of business and intangible assets, net

(98,666

)

(11,500

)

Net cash used in investing activities

(120,469

)

(14,313

)

Cash flows from financing activities

Repurchases of common stock

(18,950

)

(20,618

)

Net proceeds from exercise of options to purchase common stock

18,592

6,207

Net proceeds from employee stock purchase plan

3,374

2,269

Payment for earn-out liability

(688

)

Net cash provided by (used) in financing activities

2,328

(12,142

)

Effect of foreign currency exchange rate changes

19

54

Net increase (decrease) in cash and cash equivalents

(29,560

)

45,393

Cash and cash equivalents at beginning of year

179,252

133,859

Cash and cash equivalents at end of year

$

149,692

$

179,252

Cash flows subject to reclassification


SPS COMMERCE, INC.

NON-GAAP RECONCILIATION

(Unaudited; in thousands, except share and per share amounts)

Three Months Ended

Year Ended

December 31,

December 31,

2020

2019

2020

2019

Net income

$

13,470

$

9,162

$

45,586

$

33,712

Depreciation and amortization of property and equipment

3,653

2,979

13,127

11,123

Amortization of intangible assets

1,553

1,418

5,538

5,315

Investment income, net

(129

)

(714

)

(1,208

)

(2,947

)

Income tax expense

1,391

2,639

7,094

8,358

Stock-based compensation expense

4,690

3,374

18,936

14,690

Realized gain from foreign currency on cash and investments held

(1,067

)

-

(1,753

)

-

Other

(583

)

(5

)

(326

)

(488

)

Adjusted EBITDA

$

22,978

$

18,853

$

86,994

$

69,763

Net income

$

13,470

$

9,162

$

45,586

$

33,712

Stock-based compensation expense

4,690

3,374

18,936

14,690

Amortization of intangible assets

1,553

1,418

5,538

5,315

Realized gain from foreign currency on cash and investments held

(1,067

)

-

(1,753

)

-

Other

(583

)

(5

)

(326

)

(488

)

Income tax effects of adjustments

(3,444

)

(1,332

)

(12,285

)

(7,304

)

Non-GAAP income

$

14,619

$

12,617

$

55,696

$

45,925

Shares used to compute non-GAAP income per share

Basic

35,504

35,029

35,226

35,024

Diluted

36,624

35,967

36,285

36,002

Non-GAAP income per share

Basic

$

0.41

$

0.36

$

1.58

$

1.31

Diluted

$

0.40

$

0.35

$

1.53

$

1.28

Per share amounts may not foot due to rounding.