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SPS Commerce Reports Third Quarter 2020 Financial Results

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  • SPSC

Company delivers 79th consecutive quarter of topline growth, with 13% growth in recurring revenue over 2019

MINNEAPOLIS, Oct. 28, 2020 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the third quarter ended September 30, 2020.

Revenue was $79.6 million in the third quarter of 2020, compared to $70.9 million in the third quarter of 2019, reflecting 12% growth in revenue from the third quarter of 2019. Recurring revenue grew 13% from the third quarter of 2019.

Net income in the third quarter of 2020 was $11.4 million or $0.31 per diluted share, compared to net income of $8.9 million or $0.25 per diluted share, in the third quarter of 2019. Non-GAAP income per diluted share was $0.39 compared to non-GAAP income per diluted share of $0.33 in the third quarter of 2019.

Adjusted EBITDA for the third quarter of 2020 increased 29% to $23.2 million compared to the third quarter of 2019.

“Trading partners across the retail supply chain continue to rely on SPS Commerce to streamline order fulfillment,” said Archie Black, President and CEO of SPS Commerce. “As consumer preferences for omnichannel shopping accelerate, we are well-positioned to help our customers increase efficiency and automation in a rapidly changing environment.”

“Recent trends in retail have accelerated the pace of EDI adoption. We expect this trend to continue as retailers and suppliers adapt and embrace e-commerce, driving demand for our fulfillment solution.” said Kim Nelson, CFO of SPS Commerce.

Guidance

For the fourth quarter of 2020, revenue is expected to be in the range of $80.0 million to $80.5 million. Fourth quarter net income per diluted share is expected to be in the range of $0.20 to $0.21 with fully diluted weighted average shares outstanding of approximately 36.5 million shares. Non-GAAP income per diluted share is expected to be in the range of $0.33 to $0.34. Adjusted EBITDA is expected to be in the range of $21.0 million to $21.5 million. Non-cash, share-based compensation expense is expected to be approximately $5.1 million, depreciation expense is expected to be approximately $3.5 million and amortization expense is expected to be approximately $1.4 million.

For the full year of 2020, revenue is expected to be in the range of $309.3 million to $309.8 million, representing approximately 11% growth over 2019. Full year net income per diluted share is expected to be in the range of $1.09 to $1.10 with fully diluted weighted average shares outstanding of approximately 36.2 million shares. Non-GAAP income per diluted share is expected to be in the range of $1.48 to $1.49. Adjusted EBITDA is expected to be in the range of $85.0 to $85.5 million, representing approximately 22% to 23% growth over 2019. Non-cash, share-based compensation expense is expected to be approximately $19.3 million, depreciation expense is expected to be approximately $13.0 million and amortization expense is expected to be approximately $5.4 million.

Quarterly Conference Call

SPS Commerce will discuss its quarterly 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 # 3002119 at least 15 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 90,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 79 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, 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.

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 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 includes an adjustment to non-GAAP income to reflect the income tax effects of the adjustments to GAAP net income. 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. 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.

Forward-Looking Statements
This press release contains 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, our positioning for the future, our performance for the fourth quarter and full year of 2020, and any statements about the future effect of the COVID-19 pandemic on our business, customers or the global economy and our business prospects, all of which fall 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)

September 30,

December 31,

2020

2019

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

208,930

$

179,252

Short-term investments

52,300

34,284

Accounts receivable

34,048

33,001

Allowance for credit losses

(3,759

)

(1,469

)

Accounts receivable, net

30,289

31,532

Deferred costs

36,562

35,274

Other assets

8,927

11,279

Total current assets

337,008

291,621

PROPERTY AND EQUIPMENT, less accumulated depreciation of $58,629 and $50,574, respectively

25,053

23,752

OPERATING LEASE RIGHT-OF-USE ASSETS

14,092

15,744

GOODWILL

76,543

76,845

INTANGIBLE ASSETS, net

18,575

22,668

INVESTMENTS

2,476

OTHER ASSETS

Deferred costs, non-current

11,571

11,667

Deferred income tax assets

140

2,630

Other assets, non-current

2,228

2,513

Total assets

$

487,686

$

447,440

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable

$

5,036

$

4,274

Accrued compensation

19,374

22,303

Accrued expenses

6,042

6,207

Deferred revenue

35,582

31,463

Operating lease liabilities

4,355

3,783

Total current liabilities

70,389

68,030

OTHER LIABILITIES

Deferred revenue, non-current

2,693

2,851

Operating lease liabilities, non-current

16,725

20,085

Deferred income tax liabilities

2,939

1,193

Other liabilities, non-current

405

Total liabilities

92,746

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; 110,000,000 and 55,000,000 shares authorized; 36,904,856 and 36,104,619 shares issued; and 35,291,606 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

382,992

354,115

Retained earnings

80,020

48,973

Accumulated other comprehensive loss

(2,862

)

(1,951

)

Total stockholders’ equity

394,940

354,876

Total liabilities and stockholders’ equity

$

487,686

$

447,440


SPS COMMERCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Revenues

$

79,557

$

70,928

$

229,322

$

206,391

Cost of revenues

25,045

23,263

72,915

68,330

Gross profit

54,512

47,665

156,407

138,061

Operating expenses

Sales and marketing

19,233

16,937

56,143

52,404

Research and development

8,053

7,743

23,087

20,444

General and administrative

11,939

10,725

36,591

33,674

Amortization of intangible assets

1,333

1,327

3,985

3,897

Total operating expenses

40,558

36,732

119,806

110,419

Income from operations

13,954

10,933

36,601

27,642

Other income (expense)

Interest income, net

116

843

982

2,233

Other income (expense), net

307

(165

)

308

28

Change in earn-out liability

22

(72

)

366

Total other income, net

423

700

1,218

2,627

Income before income taxes

14,377

11,633

37,819

30,269

Income tax expense

2,970

2,692

5,703

5,719

Net income

$

11,407

$

8,941

$

32,116

$

24,550

Net income per share

Basic

$

0.32

$

0.26

$

0.91

$

0.70

Diluted

$

0.31

$

0.25

$

0.89

$

0.68

Weighted average common shares used to compute net income per share

Basic

35,295

35,015

35,133

34,966

Diluted

36,366

35,932

36,137

35,952

Per share amounts may not foot due to rounding.

SPS COMMERCE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

Nine Months Ended

September 30,

2020

2019

Cash flows from operating activities

Net income

$

32,116

$

24,550

Reconciliation of net income to net cash provided by operating activities

Deferred income taxes

4,324

5,360

Change in earn-out liability

72

(366

)

Depreciation and amortization of property and equipment

9,474

8,143

Amortization of intangible assets

3,985

3,897

Provision for credit losses

4,198

2,429

Stock-based compensation

14,246

11,316

Other, net

(16

)

(551

)

Changes in assets and liabilities

Accounts receivable

(4,551

)

(3,670

)

Deferred costs

(1,129

)

(151

)

Other current and non-current assets

2,612

(820

)

Accounts payable

1,357

181

Accrued compensation

(3,989

)

(3,716

)

Accrued expenses

(3

)

(84

)

Deferred revenue

3,961

4,929

Operating leases

(1,128

)

(487

)

Net cash provided by operating activities

65,529

50,960

Cash flows from investing activities

Purchases of property and equipment

(11,639

)

(8,387

)

Purchases of investments

(67,636

)

(61,967

)

Maturities of investments

47,300

55,225

Acquisitions of businesses and intangible assets, net of cash acquired

(11,500

)

Net cash used in investing activities

(31,975

)

(26,629

)

Cash flows from financing activities

Repurchases of common stock

(18,950

)

(14,966

)

Net proceeds from exercise of options to purchase common stock

14,143

5,273

Net proceeds from employee stock purchase plan

1,645

1,155

Payment for earn-out liability

(688

)

Net cash used in financing activities

(3,850

)

(8,538

)

Effect of foreign currency exchange rate changes

(26

)

75

Net increase in cash and cash equivalents

29,678

15,868

Cash and cash equivalents at beginning of period

179,252

133,859

Cash and cash equivalents at end of period

$

208,930

$

149,727


SPS COMMERCE, INC.

NON-GAAP RECONCILIATION

(Unaudited; in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Net income

$

11,407

$

8,941

$

32,116

$

24,550

Depreciation and amortization of property

and equipment

3,198

2,819

9,474

8,143

Amortization of intangible assets

1,333

1,327

3,985

3,897

Investment income, net

(107

)

(843

)

(1,079

)

(2,233

)

Income tax expense

2,970

2,692

5,703

5,719

Stock-based compensation expense

4,893

3,147

14,246

11,316

Realized gain from foreign currency on cash and investments held

(559

)

-

(686

)

-

Other

103

(22

)

257

(483

)

Adjusted EBITDA

$

23,238

$

18,061

$

64,016

$

50,909

Net income

$

11,407

$

8,941

$

32,116

$

24,550

Stock-based compensation expense

4,893

3,147

14,246

11,316

Amortization of intangible assets

1,333

1,327

3,985

3,897

Realized gain from foreign currency on cash and investments held

(559

)

-

(686

)

-

Other

103

(22

)

257

(483

)

Income tax effects of adjustments

(2,929

)

(1,606

)

(8,841

)

(5,972

)

Non-GAAP income

$

14,248

$

11,787

$

41,077

$

33,308

Shares used to compute non-GAAP income per share

Basic

35,295

35,015

35,133

34,966

Diluted

36,366

35,932

36,137

35,952

Non-GAAP income per share

Basic

$

0.40

$

0.34

$

1.17

$

0.95

Diluted

$

0.39

$

0.33

$

1.14

$

0.93

Per share amounts may not foot due to rounding.


SPS-F