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SPS Commerce Reports Fourth Quarter and Full Year 2019 Financial Results

Company delivers 76th consecutive quarter of topline growth, with 14% growth in recurring revenue over 2018

MINNEAPOLIS, Feb. 13, 2020 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (SPSC), a leader in retail cloud services, today announced financial results for the fourth quarter and full year ended December 31, 2019.

Revenue was $72.7 million in the fourth quarter of 2019, compared to $65.2 million in the fourth quarter of 2018, reflecting 12% growth in revenue from the fourth quarter of 2018. Recurring revenue grew 13% from the fourth quarter of 2018. 

Net income in the fourth quarter of 2019 was $9.2 million or $0.25 per diluted share, compared to net income of $7.1 million or $0.20 per diluted share, in the fourth quarter of 2018.  Non-GAAP net income per diluted share was $0.35, compared to non-GAAP net income per diluted share of $0.26 in the fourth quarter of 2018. Adjusted EBITDA for the fourth quarter of 2019 increased 35% to $18.9 million compared to the fourth quarter of 2018.

“Our ongoing focus on sustained growth and profitability is inherent in our business model,” said Archie Black, President and CEO of SPS Commerce.  “Our ability to scale is unique as we leverage the lead-generation engine fueled by the power of our vast trading community, which positions SPS Commerce to become the world’s retail network.” 

Revenue for the full year ended December 31, 2019 was $279.1 million compared to $248.2 million for the full year ended December 31, 2018, reflecting 12% growth in revenue.  Recurring revenue grew 14% from the year ended December 31, 2018.

Net income for the year ended December 31, 2019 was $33.7 million or $0.94 per diluted share, compared to net income of $23.9 million or $0.68 per diluted share, for the comparable period in 2018. Non-GAAP net income per diluted share for the year ended December 31, 2019 was $1.28, compared to non-GAAP net income per diluted share of $0.96 for the comparable period in 2018. Adjusted EBITDA for the full year ended December 31, 2019 increased 36% to $69.8 million, compared to the full year ended December 31, 2018.

“SPS Commerce continues to deliver on its financial targets, capitalizing on the evolution of the retail industry and leveraging the power of our network to deliver profitable and sustained growth,” said Kim Nelson, CFO of SPS Commerce. “We serve a large and expanding addressable market and we are confident in our ability to continue to deliver ten percent or greater annual revenue growth and twenty percent annual adjusted EBITDA dollar growth.”

Guidance

First quarter 2020 revenue is expected to be in the range of $73.6 million to $74.2 million.  Full year 2020 revenue is expected to be in the range of $306.5 million to $308.5 million, representing approximately 10% to 11% growth over 2019.

First quarter 2020 net income per diluted share is expected to be in the range of $0.19 to $0.20 with fully diluted weighted average shares outstanding of approximately 36.2 million shares. Full year 2020 net income per diluted share is expected to be in the range of $0.85 to $0.88 with fully diluted weighted average shares outstanding of approximately 36.3 million shares.  

First quarter 2020 non-GAAP net income per diluted share is expected to be in the range of $0.31 to $0.32.  Full year 2020 non-GAAP net income per diluted share is expected to be in the range of $1.34 to $1.37.

First quarter 2020 Adjusted EBITDA is expected to be in the range of $19.2 to $19.8 million. Full year 2020 Adjusted EBITDA is expected to be in the range of $83.0 million to $84.5 million, representing approximately 19% to 21% growth over 2019.

First quarter 2020 non-cash, share-based compensation expense is expected to be approximately $4.6 million.  Depreciation expense is expected to be approximately $3.3 million and amortization expense is expected to be approximately $1.4 million.

Full year 2020 non-cash, share-based compensation expense is expected to be approximately $19.8 million. Depreciation expense is expected to be approximately $13.9 million and amortization expense is expected to be approximately $5.7 million. 

For 2020, we expect an annual effective tax rate of approximately 30%.

Upcoming Conference

SPS Commerce management will present at the JMP Securities Technology Conference in San Francisco, CA on Tuesday, February 25, 2020 at 9:00 AM P.T.

A webcast of the presentation will be available on the company’s investor relations website at http://investors.spscommerce.com/events. 

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 #6593186 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 perfects the power of trading partner relationships with the industry's most broadly adopted, retail cloud services platform. As a leader in cloud-based supply chain management solutions, we provide proven integrations and comprehensive retail performance analytics to thousands of customers worldwide. SPS Commerce has achieved 76 consecutive quarters of revenue growth and is headquartered in Minneapolis. For additional information, please contact SPS Commerce at 866-245-8100 or visit www.spscommerce.com.

SPS COMMERCE, SPS, SPS logo, RETAIL UNIVERSE, 1=INFINITY logo, AS THE NETWORK GROWS, SO DOES YOUR OPPORTUNITY, INFINITE RETAIL POWER, RETAIL UNIVERSE are marks of SPS Commerce, Inc. and Registered in the U.S. Patent and Trademark Office. RSX, 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 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, interest expense, interest income, income tax expense, stock-based compensation expense, the discrete impact from tax law change 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, the discrete impact from tax law change 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 2020, 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, 2018, 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)
                         
  December 31,
 
  2019
  2018  
ASSETS            
CURRENT ASSETS            
Cash and cash equivalents $ 179,252   $ 133,859  
Short-term investments   34,284     44,537  
Accounts receivable, net   31,532     27,488  
Deferred costs   35,274     34,502  
Other current assets   11,279     9,229  
Total current assets   291,621     249,615  
PROPERTY AND EQUIPMENT, net   23,752     20,957  
OPERATING LEASE RIGHT-OF-USE ASSET   15,744      
GOODWILL   76,845     69,658  
INTANGIBLE ASSETS, net   22,668     22,741  
OTHER ASSETS            
Deferred costs   11,667     10,973  
Deferred income tax assets   2,630     10,456  
Other assets   2,513     1,723  
Total assets $ 447,440   $ 386,123  
LIABILITIES AND STOCKHOLDERS’ EQUITY            
CURRENT LIABILITIES            
Accounts payable $ 4,274   $ 4,440  
Accrued compensation   22,303     20,415  
Accrued expenses   6,207     4,558  
Deferred revenue   31,463     25,328  
Deferred rent       1,781  
Operating lease liabilities   5,072      
Total current liabilities   69,319     56,522  
OTHER LIABILITIES            
Deferred revenue   2,851     2,512  
Deferred rent       5,371  
Operating lease liabilities   18,796      
Deferred income tax liability   1,193     1,376  
Other non-current liabilities   405     1,368  
Total liabilities   92,564     67,149  
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; 36,104,619 and 35,515,256 shares issued; and 34,863,271 and 34,691,472 outstanding, respectively   36     36  
Treasury stock, at cost; 1,241,348 and 823,784 shares, respectively   (46,297 )   (25,679 )
Additional paid-in capital   354,115     332,574  
Retained earnings   48,973     15,261  
Accumulated other comprehensive loss   (1,951   (3,218 )
Total stockholders’ equity   354,876     318,974  
Total liabilities and stockholders’ equity $ 447,440   $ 386,123  
             
Shares have been adjusted for all periods presented to reflect a two-for-one stock split effective August 22, 2019.                        
                         
Balance sheet is subject to reclassification                        
SPS COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except share and per share amounts) 
                         
  Three Months Ended   Year Ended
  December 31,   December 31,
 
  2019   2018     2019   2018
 
Revenues $ 72,733   $ 65,189   $ 279,124   248,240  
Cost of revenues   23,909     21,177     92,239     81,748  
Gross profit   48,824     44,012     186,885     166,492  
Operating expenses                        
Sales and marketing   17,736     17,696     70,140     71,719  
Research and development   7,861     6,516     28,305     22,087  
General and administrative   11,045     10,584     44,719     41,862  
Amortization of intangible assets   1,418     1,007     5,315     4,093  
Total operating expenses   38,060     35,803     148,479     139,761  
Income from operations   10,764     8,209     38,406     26,731  
Other income (expense)                        
Interest income, net   714     740     2,947     2,329  
Other income (expense), net   244     (85 )   272     (626 )
Change in earn-out liability   79     (94 )   445     (94 )
Total other income, net   1,037     561     3,664     1,609  
Income before income taxes   11,801     8,770     42,070      28,340  
Income tax expense   2,639     1,629     8,358     4,468  
Net income $ 9,162   $ 7,141   $ 33,712   23,872  
                         
Net income per share                        
Basic $ 0.26   $ 0.21   $ 0.96   0.69   
Diluted $ 0.25   $ 0.20   $ 0.94   0.68   
                         
Weighted average common shares used to compute net income per share                        
Basic   35,029     34,560     35,024     34,392   
Diluted   35,967     35,444     36,002     35,212   
                         
Shares and per share data have been adjusted for all periods presented to reflect a two-for-one stock split effective August 22, 2019.


SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited; in thousands)  
    Year Ended  
    December 31,  
    2019     2018  
Cash flows from operating activities                
Net income   $ 33,712     $ 23,872  
Reconciliation of net income to net cash provided by operating activities                
Deferred income taxes     7,581       2,798  
Change in earn-out liability     (445 )     94  
Depreciation and amortization of property and equipment     11,123       8,593  
Amortization of intangible assets     5,315       4,093  
Provision for doubtful accounts     3,499       2,592  
Stock-based compensation     14,690       12,510  
Other, net     (574 )     (364 )
Changes in assets and liabilities, net of effects of acquisition                
Accounts receivable     (6,771 )     (4,569 )
Deferred costs     (1,441 )     (5,564 )
Other current and non-current assets     (2,768 )     (3,333 )
Accounts payable     (489 )     937  
Accrued compensation     319       3,957  
Accrued expenses     706       (135 )
Deferred revenue     6,366       7,094  
Deferred rent           2,440  
Operating leases     971        
     Net cash provided by operating activities     71,794       55,015  
Cash flows from investing activities                
Purchases of property and equipment     (13,585 )     (13,750 )
Purchases of investments     (73,700 )     (81,666 )
Maturities of investments     84,472       82,224  
Acquisition of business and intangible assets, net     (11,500 )     (27,273 )
Net cash used in investing activities     (14,313 )     (40,465 )
Cash flows from financing activities                
Repurchases of common stock     (20,618 )     (19,864 )
Net proceeds from exercise of options to purchase common stock     6,207       14,344  
Net proceeds from employee stock purchase plan     2,269       1,745  
Net cash used in financing activities     (12,142 )     (3,775 )
Effect of foreign currency exchange rate changes     54       (43 )
Net increase in cash and cash equivalents     45,393       10,732  
Cash and cash equivalents at beginning of year     133,859       123,127  
Cash and cash equivalents at end of year   $ 179,252     $ 133,859  
                 
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,  
    2019     2018     2019     2018  
Net income   $ 9,162     $ 7,141     $ 33,712     $ 23,872  
Depreciation and amortization of property                                
and equipment     2,979       2,285       11,123       8,593  
Amortization of intangible assets     1,418       1,007       5,315       4,093  
Interest income, net     (714 )     (740 )     (2,947 )     (2,329 )
Income tax expense     2,639       1,629       8,358       4,468  
Stock-based compensation expense     3,374       2,532       14,690       12,510  
Other     (5 )     94       (488 )     94  
Adjusted EBITDA   $ 18,853     $ 13,948     $ 69,763     $ 51,301  
                                 
Net income   $ 9,162     $ 7,141     $ 33,712     $ 23,872  
Stock-based compensation expense     3,374       2,532       14,690       12,510  
Amortization of intangible assets     1,418       1,007       5,315       4,093  
Other     (5 )     94       (488 )     94  
Income tax effects of adjustments     (1,332 )     (1,406 )     (7,304 )     (6,594 )
Non-GAAP income   $ 12,617     $ 9,368     $ 45,925     $ 33,975  
                                 
Shares used to compute non-GAAP income per share                                
Basic     35,029       34,560       35,024       34,392  
Diluted     35,967       35,444       36,002       35,212  
                                 
Non-GAAP income per share                                
Basic   $ 0.36     $ 0.27     $ 1.31     $ 0.99  
Diluted   $ 0.35     $ 0.26     $ 1.28     $ 0.96  
                                 
Shares and per share data have been adjusted for all periods presented to reflect a two-for-one stock split effective August 22, 2019.  

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