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SPS Commerce Reports Third Quarter 2022 Financial Results

Company delivers 87th consecutive quarter of topline growth

Revenue growth of 17% year-over-year; Recurring revenue growth of 18% year-over-year

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

Third Quarter 2022 Financial Highlights

  • Revenue was $114.5 million in the third quarter of 2022, compared to $97.9 million in the third quarter of 2021, reflecting 17% growth.
  • Recurring revenue grew 18% from the third quarter of 2021.
  • Net income was $15.9 million or $0.43 per diluted share, compared to net income of $11.4 million or $0.31 per diluted share in the third quarter of 2021.
  • Non-GAAP income per diluted share was $0.63, compared to non-GAAP income per diluted share of $0.47 in the third quarter of 2021.
  • Adjusted EBITDA for the third quarter of 2022 increased 31% to $34.7 million compared to the third quarter of 2021.

“For suppliers and retailers alike, automation is key to improving efficiency. SPS Commerce facilitates automation, enables integration with a range of e-commerce platforms, and future proofs against new process and technology requirements,” said Archie Black, CEO of SPS Commerce. “We continue to believe that increasing complexity in omnichannel retail will continue to fuel the need for automation between trading partners and throughout the supply chain.”

“SPS Commerce’s leading solutions and our growing network of trading partners across various industries continue to solidify our competitive position, strengthening our ability to capitalize on our large and expanding market opportunity, and deliver consistent and profitable growth,” said Kim Nelson, CFO of SPS Commerce.

Guidance

Fourth Quarter 2022 Guidance

  • Revenue is expected to be in the range of $120.0 million to $121.0 million.
  • Net income per diluted share is expected to be in the range of $0.29 to $0.30, 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 $0.52 to $0.53.
  • Adjusted EBITDA is expected to be in the range of $32.8 million to $33.5 million.
  • Non-cash, share-based compensation expense is expected to be $8.3 million, depreciation expense is expected to be $4.8 million, and amortization expense is expected to be $3.8 million.

Full Year 2022 Guidance

  • Revenue is expected to be in the range of $448.9 million to $449.9 million, representing 17% growth over 2021.
  • Net income per diluted share is expected to be in the range of $1.35 to $1.36, with fully diluted weighted average shares outstanding of 37.0 million shares.
  • Non-GAAP income per diluted share is expected to be in the range of $2.23 to $2.24.
  • Adjusted EBITDA is expected to be in the range of $130.1 to $130.8 million, representing 22% growth over 2021.
  • Non-cash, share-based compensation expense is expected to be $33.9 million, depreciation expense is expected to be $16.8 million, and amortization expense is expected to be $11.7 million.

Quarterly Conference Call

To access the call, please dial 1-866-652-5200, or outside the U.S. 1-412-317-6060 at least 15 minutes prior to the 3:30 p.m. CT start time. Please ask to be joined into the SPS Commerce Q3 2022 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 105,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 87 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. 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 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.

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.

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 fourth 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.

SPS COMMERCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except shares)

 September 30,
2022
 December 31,
2021
ASSETS   
Current assets   
Cash and cash equivalents$                  186,230  $                207,552
Short-term investments                       50,928                      49,758
Accounts receivable                       40,445                      38,811
Allowance for credit losses                       (3,658)                      (4,249)
Accounts receivable, net                       36,787                      34,562
Deferred costs                       50,082                      44,529
Other assets                       15,246                      16,042
Total current assets                     339,273                    352,443
Property and equipment, net                       32,923                      31,901
Operating lease right-of-use assets                         9,760                      10,851
Goodwill                     165,908                    143,663
Intangible assets, net                       70,742                      58,587
Other assets   
Deferred costs, non-current                       16,474                      15,191
Deferred income tax assets                            223                            182
Other assets, non-current                         1,787                        3,028
Total assets$                  637,090  $                615,846
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities   
Accounts payable$                       8,200  $                    8,330
Accrued compensation                       28,779                      31,661
Accrued expenses                         5,202                        8,345
Deferred revenue                       58,949                      50,428
Operating lease liabilities                         4,336                        4,108
Total current liabilities                     105,466                    102,872
Other liabilities   
Deferred revenue, non-current                         5,146                        5,144
Operating lease liabilities, non-current                       13,974                      16,426
Deferred income tax liabilities                         4,841                        7,145
Total liabilities                     129,427                    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, $0.001 par value; 110,000,000 shares authorized; 38,184,747 and 37,798,610 shares issued; and 36,037,964 and 36,009,257 shares outstanding, respectively                              38                              38
Treasury Stock, at cost; 2,146,783 and 1,789,353 shares, respectively                   (128,377)                   (85,677)
Additional paid-in capital                     463,356                    433,258
Retained earnings                     177,306                    138,087
Accumulated other comprehensive loss                       (4,660)                      (1,447)
Total stockholders’ equity                     507,663                    484,259
Total liabilities and stockholders’ equity$                  637,090  $                615,846


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

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2022 2021 2022 2021
Revenues$       114,486  $         97,887  $        328,857  $       282,520
Cost of revenues           38,605             34,343            111,524             96,043
Gross profit           75,881             63,544            217,333           186,477
Operating expenses       
Sales and marketing           25,334             22,079              74,571             65,386
Research and development           11,135             10,854              33,268             28,459
General and administrative           16,724             14,691              49,390             45,186
Amortization of intangible assets             2,998               2,399                7,936               7,734
Total operating expenses           56,191             50,023            165,165           146,765
Income from operations           19,690             13,521              52,168             39,712
Other expense, net               (695)                (716)             (1,610)            (1,424)
Income before income taxes           18,995             12,805              50,558             38,288
Income tax expense             3,132               1,356              11,339               6,456
Net income$         15,863  $         11,449  $          39,219  $         31,832
        
Net income per share       
Basic$             0.44  $             0.32  $              1.09  $             0.89
Diluted$             0.43  $             0.31  $              1.06  $             0.86
        
Weighted average common shares used to compute net income per share       
Basic           36,093             35,961              36,104             35,873
Diluted           36,915             37,015              36,942             36,898


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

 Nine Months Ended
September 30,
 2022 2021
Cash flows from operating activities   
Net income$            39,219  $            31,832
Reconciliation of net income to net cash provided by operating activities   
Deferred income taxes               (2,092)                 1,013
Depreciation and amortization of property and equipment              11,983                10,989
Amortization of intangible assets                7,936                  7,734
Provision for credit losses                2,889                  4,037
Stock-based compensation              25,636                21,273
Other, net                     43                     234
Changes in assets and liabilities, net of effects of acquisition   
Accounts receivable               (3,999)                (5,327)
Deferred costs               (7,174)                (5,686)
Other current and non-current assets                2,202                 (3,893)
Accounts payable                   129                 (1,518)
Accrued compensation               (4,388)                 6,617
Accrued expenses               (3,035)                   (174)
Deferred revenue                8,261                13,401
Operating leases               (1,127)                 1,036
Net cash provided by operating activities              76,483                81,568
Cash flows from investing activities   
Purchases of property and equipment             (13,894)              (15,567)
Purchases of investments           (134,276)              (84,020)
Maturities of investments            132,500                67,500
Acquisition of business, net             (44,923)                       —
Net cash used in investing activities             (60,593)              (32,087)
Cash flows from financing activities   
Repurchases of common stock             (42,700)              (10,661)
Net proceeds from exercise of options to purchase common stock                2,457                  7,027
Net proceeds from employee stock purchase plan activity                3,588                  2,316
Payments for contingent consideration                      —                 (2,042)
Net cash used in financing activities             (36,655)                (3,360)
Effect of foreign currency exchange rate changes                  (557)                     (10)
Net increase (decrease) in cash and cash equivalents             (21,322)               46,111
Cash and cash equivalents at beginning of period            207,552              149,692
Cash and cash equivalents at end of period$          186,230  $          195,803


SPS COMMERCE, INC.

NON-GAAP RECONCILIATION
(Unaudited; in thousands, except per share amounts)

Adjusted EBITDA
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2022 2021 2022 2021
Net income$          15,863  $          11,449  $          39,219  $          31,832
Income tax expense              3,132                1,356              11,339                6,456
Depreciation and amortization of property and equipment              4,169                3,695              11,983              10,989
Amortization of intangible assets              2,998                2,399                7,936                7,734
Stock-based compensation expense              7,960                6,849              25,636              21,273
Realized loss from foreign currency on cash and investments held              1,151                    854                2,010                1,492
Investment income                (586)                   (66)                 (806)                 (242)
Other                    —                      —                      —                  (213)
Adjusted EBITDA$          34,687  $          26,536  $          97,317  $          79,321


Adjusted EBITDA Margin
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2022 2021 2022 2021
Revenue$       114,486 $         97,887 $       328,857 $       282,520
        
Net income           15,863            11,449            39,219            31,832
Margin 14 %  12 %  12 %  11 %
        
Adjusted EBITDA           34,687            26,536            97,317            79,321
Adjusted EBITDA Margin 30 %  27 %  30 %  28 %


Non-GAAP Income
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2022 2021 2022 2021
Net income$          15,863  $          11,449  $          39,219  $          31,832
Stock-based compensation expense              7,960                6,849              25,636              21,273
Amortization of intangible assets              2,998                2,399                7,936                7,734
Realized loss from foreign currency on cash and investments held              1,151                   854                2,010                1,492
Other                   —                     —                     —                 (213)
Income tax effects of adjustments            (4,866)             (4,178)           (11,576)           (12,152)
Non-GAAP income$          23,106  $          17,373  $          63,225  $          49,966
Shares used to compute non-GAAP income per share       
Basic            36,093              35,961              36,104              35,873
Diluted            36,915              37,015              36,942              36,898
Non-GAAP income per share       
Basic$              0.64  $              0.48  $              1.75  $              1.39
Diluted$              0.63  $              0.47  $              1.71  $              1.35

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


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