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SPS Commerce Reports Second Quarter 2022 Financial Results

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SPS Commerce, Inc.
SPS Commerce, Inc.

Company delivers 86th consecutive quarter of topline growth
Revenue growth of 15% year-over-year; Recurring revenue growth of 16% year-over-year
Announces new Share Repurchase Program

MINNEAPOLIS, July 27, 2022 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the second quarter ended June 30, 2022.

Second Quarter 2022 Financial Highlights

  • Revenue was $109.2 million in the second quarter of 2022, compared to $94.5 million in the second quarter of 2021, reflecting 15% growth.

  • Recurring revenue grew 16% from the second quarter of 2021.

  • Net income was $10.8 million or $0.29 per diluted share, compared to net income of $10.2 million or $0.28 per diluted share in the second quarter of 2021.

  • Non-GAAP income per diluted share was $0.53, compared to non-GAAP income per diluted share of $0.46 in the second quarter of 2021.

  • Adjusted EBITDA for the second quarter of 2022 increased 13% to $30.9 million compared to the second quarter of 2021.

“SPS Commerce continues to capitalize on the retail industry’s ongoing investments in supply chain management efficiency, digital transformation, and cloud migration,” said Archie Black, CEO of SPS Commerce. “Retailers and suppliers are more motivated than ever to overhaul their systems to accommodate the demands of omnichannel retail and to address ongoing supply chain disruptions.”

“SPS Commerce is well positioned for long-term growth as macro dynamics and the growing need for trading partner collaboration continue to fuel demand for SPS’ full-service EDI,” said Kim Nelson, CFO of SPS Commerce.

Share Repurchase Program

The Company also announced today that the Board of Directors of SPS Commerce authorized a new program to repurchase up to $50.0 million of common stock. Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both. The timing and number of shares to be purchased will be based on the price of the Company's common stock, general business and market conditions and other investment considerations and factors. The share repurchase program becomes effective on August 26, 2022, and expires on July 26, 2024. The Company’s November 2021 program that previously authorized repurchase of up to $50.0 million will terminate when the new program goes into effect.

The program does not obligate the Company to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice. The Company had 36.0 million shares of outstanding common stock as of June 30, 2022. The Company intends to finance the share repurchase program with cash on hand.

Guidance

Third Quarter 2022 Guidance

  • Revenue is expected to be in the range of $113.4 million to $114.4 million.

  • Net income per diluted share is expected to be in the range of $0.29 to $0.31, with fully diluted weighted average shares outstanding of 37.2 million shares.

  • Non-GAAP income per diluted share is expected to be in the range of $0.51 to $0.52.

  • Adjusted EBITDA is expected to be in the range of $32.0 million to $32.7 million.

  • Non-cash, share-based compensation expense is expected to be $8.5 million, depreciation expense is expected to be $4.5 million, and amortization expense is expected to be $3.0 million.

Full Year 2022 Guidance

  • Revenue is expected to be in the range of $446.4 million to $448.4 million, representing 16% growth over 2021.

  • Net income per diluted share is expected to be in the range of $1.25 to $1.29, with fully diluted weighted average shares outstanding of 37.1 million shares.

  • Non-GAAP income per diluted share is expected to be in the range of $2.13 to $2.15.

  • Adjusted EBITDA is expected to be in the range of $128.2 million to $129.4 million, representing 20% to 21% growth over 2021.

  • Non-cash, share-based compensation expense is expected to be $34.2 million, depreciation expense is expected to be $17.3 million, and amortization expense is expected to be $11.1 million.

Quarterly Conference Call

To access the conference call, please pre-register at:
https://register.vevent.com/register/BIb996f82a68ba4f669fb6d3f83720fe5d. Once registered, participants will receive a dial-in number and PIN to access the call. While not required, it is recommended you join 10 minutes prior to the event start. A live webcast and replay of the call will also be available at http://investors.spscommerce.com under the Events and Presentations menu.

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 105,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 86 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 our 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 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 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.

These non-GAAP 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 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.

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.

SPS Commerce uses Adjusted EBITDA and Adjusted EBITDA Margin as measures of operating performance because they assist the Company in comparing performance on a consistent basis, as they remove from operating results the impact of the Company's capital structure. SPS Commerce believes Adjusted EBITDA and Adjusted EBITDA Margin are useful to an investor in evaluating the Company's operating performance because they are 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 Measure:

Non-GAAP income per share consists of net income plus 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. 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.

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 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 2022, 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, 2021, 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)

 

June 30,
2022

 

December 31,
2021

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

212,725

 

207,552

Short-term investments

 

46,513

 

49,758

Accounts receivable

 

44,559

 

38,811

Allowance for credit losses

 

(4,454)

 

(4,249)

Accounts receivable, net

 

40,105

 

34,562

Deferred costs

 

48,294

 

44,529

Other assets

 

17,912

 

16,042

Total current assets

 

365,549

 

352,443

Property and equipment, net

 

32,000

 

31,901

Operating lease right-of-use assets

 

9,578

 

10,851

Goodwill

 

142,960

 

143,663

Intangible assets, net

 

53,597

 

58,587

Other assets

 

 

 

Deferred costs, non-current

 

16,371

 

15,191

Deferred income tax assets

 

191

 

182

Other assets, non-current

 

2,530

 

3,028

Total assets

$

622,776

 

615,846

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities

 

 

 

Accounts payable

$

4,442

 

8,330

Accrued compensation

 

25,855

 

31,661

Accrued expenses

 

7,508

 

8,345

Deferred revenue

 

59,093

 

50,428

Operating lease liabilities

 

4,341

 

4,108

Total current liabilities

 

101,239

 

102,872

Other liabilities

 

 

 

Deferred revenue, non-current

 

5,281

 

5,144

Operating lease liabilities, non-current

 

14,239

 

16,426

Deferred income tax liabilities

 

4,997

 

7,145

Total liabilities

 

125,756

 

131,587

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; 110,000,000 shares authorized; 38,074,026 and 37,798,610 shares issued; and 36,029,477 and 36,009,257 shares outstanding, respectively

 

38

 

38

Treasury Stock, at cost; 2,044,549 and 1,789,353 shares, respectively

 

(115,900)

 

(85,677)

Additional paid-in capital

 

453,922

 

433,258

Retained earnings

 

161,443

 

138,087

Accumulated other comprehensive loss

 

(2,483)

 

(1,447)

Total stockholders’ equity

 

497,020

 

484,259

Total liabilities and stockholders’ equity

$

622,776

 

615,846



SPS COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share amounts)

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Revenues

$

109,178

 

$

94,539

 

$

214,371

 

$

184,633

Cost of revenues

 

37,530

 

 

31,730

 

 

72,919

 

 

61,700

Gross profit

 

71,648

 

 

62,809

 

 

141,452

 

 

122,933

Operating expenses

 

 

 

 

 

 

 

Sales and marketing

 

24,582

 

 

21,952

 

 

49,237

 

 

43,307

Research and development

 

11,432

 

 

8,899

 

 

22,133

 

 

17,605

General and administrative

 

17,198

 

 

15,758

 

 

32,666

 

 

30,495

Amortization of intangible assets

 

2,468

 

 

2,671

 

 

4,938

 

 

5,335

Total operating expenses

 

55,680

 

 

49,280

 

 

108,974

 

 

96,742

Income from operations

 

15,968

 

 

13,529

 

 

32,478

 

 

26,191

Other expense, net

 

(1,338)

 

 

(383)

 

 

(915)

 

 

(708)

Income before income taxes

 

14,630

 

 

13,146

 

 

31,563

 

 

25,483

Income tax expense

 

3,877

 

 

2,963

 

 

8,207

 

 

5,100

Net income

$

10,753

 

$

10,183

 

$

23,356

 

$

20,383

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

Basic

$

0.30

 

$

0.28

 

$

0.65

 

$

0.57

Diluted

$

0.29

 

$

0.28

 

$

0.63

 

$

0.55

 

 

 

 

 

 

 

 

Weighted average common shares used to compute net income per share

 

 

 

 

 

 

 

Basic

 

36,085

 

 

35,903

 

 

36,110

 

 

35,828

Diluted

 

36,862

 

 

36,753

 

 

36,897

 

 

36,741



SPS COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited; in thousands)

 

Six Months Ended
June 30,

 

 

2022

 

 

2021

Cash flows from operating activities

 

 

 

Net income

$

23,356

 

$

20,383

Reconciliation of net income to net cash provided by operating activities

 

 

 

Deferred income taxes

 

(2,160)

 

 

351

Depreciation and amortization of property and equipment

 

7,814

 

 

7,294

Amortization of intangible assets

 

4,938

 

 

5,335

Provision for credit losses

 

2,634

 

 

2,831

Stock-based compensation

 

17,676

 

 

14,424

Other, net

 

8

 

 

170

Changes in assets and liabilities

 

 

 

Accounts receivable

 

(7,862)

 

 

(6,945)

Deferred costs

 

(5,095)

 

 

(3,338)

Other current and non-current assets

 

(1,423)

 

 

(1,201)

Accounts payable

 

(3,234)

 

 

(147)

Accrued compensation

 

(7,186)

 

 

3,246

Accrued expenses

 

(805)

 

 

(2,087)

Deferred revenue

 

8,802

 

 

12,893

Operating leases

 

(678)

 

 

1,449

Net cash provided by operating activities

 

36,785

 

 

54,658

Cash flows from investing activities

 

 

 

Purchases of property and equipment

 

(8,191)

 

 

(8,738)

Purchases of investments

 

(114,603)

 

 

(44,034)

Maturities of investments

 

117,500

 

 

35,000

Net cash used in investing activities

 

(5,294)

 

 

(17,772)

Cash flows from financing activities

 

 

 

Repurchases of common stock

 

(30,223)

 

 

(6,450)

Net proceeds from exercise of options to purchase common stock

 

690

 

 

4,030

Net proceeds from employee stock purchase plan

 

3,350

 

 

2,186

Payments for contingent consideration

 

 

 

(2,042)

Net cash used in financing activities

 

(26,183)

 

 

(2,276)

Effect of foreign currency exchange rate changes

 

(135)

 

 

65

Net increase in cash and cash equivalents

 

5,173

 

 

34,675

Cash and cash equivalents at beginning of period

 

207,552

 

 

149,692

Cash and cash equivalents at end of period

$

212,725

 

$

184,367


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,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Net income

$

10,753

 

$

10,183

 

$

23,356

 

$

20,383

Income tax expense

 

3,877

 

 

2,963

 

 

8,207

 

 

5,100

Depreciation and amortization of property and equipment

 

3,950

 

 

3,529

 

 

7,814

 

 

7,294

Amortization of intangible assets

 

2,468

 

 

2,671

 

 

4,938

 

 

5,335

Stock-based compensation expense

 

8,661

 

 

7,499

 

 

17,676

 

 

14,424

Realized loss from foreign currency on cash and investments held

 

1,327

 

 

349

 

 

859

 

 

638

Investment income

 

(172)

 

 

(79)

 

 

(220)

 

 

(176)

Other

 

 

 

213

 

 

 

 

(213)

Adjusted EBITDA

$

30,864

 

$

27,328

 

$

62,630

 

$

52,785


Adjusted EBITDA Margin

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenue

$

109,178

 

 

$

94,539

 

 

$

214,371

 

 

$

184,633

 

 

 

 

 

 

 

 

 

Net income

 

10,753

 

 

 

10,183

 

 

 

23,356

 

 

 

20,383

 

Margin

 

10

%

 

 

11

%

 

 

11

%

 

 

11

%

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

30,864

 

 

 

27,328

 

 

 

62,630

 

 

 

52,785

 

Adjusted EBITDA Margin

 

28

%

 

 

29

%

 

 

29

%

 

 

29

%


Non-GAAP Income

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Net income

$

10,753

 

$

10,183

 

$

23,356

 

$

20,383

Stock-based compensation expense

 

8,661

 

 

7,499

 

 

17,676

 

 

14,424

Amortization of intangible assets

 

2,468

 

 

2,671

 

 

4,938

 

 

5,335

Realized loss from foreign currency on cash and investments held

 

1,327

 

 

349

 

 

859

 

 

638

Other

 

 

 

213

 

 

 

 

(213)

Income tax effects of adjustments

 

(3,491)

 

 

(3,999)

 

 

(6,710)

 

 

(7,974)

Non-GAAP income

$

19,718

 

$

16,916

 

$

40,119

 

$

32,593

Shares used to compute non-GAAP income per share

 

 

 

 

 

 

 

Basic

 

36,085

 

 

35,903

 

 

36,110

 

 

35,828

Diluted

 

36,862

 

 

36,753

 

 

36,897

 

 

36,741

Non-GAAP income per share

 

 

 

 

 

 

 

Basic

$

0.55

 

$

0.47

 

$

1.11

 

$

0.91

Diluted

$

0.53

 

$

0.46

 

$

1.09

 

$

0.89