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CST: 14/12/2019 11:49:07   

SPS Commerce Reports Fourth Quarter and Full Year 2018 Financial Results

304 Days ago

Company delivers 72nd consecutive quarter of topline growth, with 13% growth in recurring revenue over 2017

MINNEAPOLIS, Feb. 12, 2019 (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, 2018.

Revenue was $65.1 million in the fourth quarter of 2018, compared to $58.1 million in the fourth quarter of 2017, reflecting 12% growth in revenue from the fourth quarter of 2017. Recurring revenue grew 13% from the fourth quarter of 2017.  Current and prior period financial results reflect the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606).

Net income in the fourth quarter of 2018 was $7.1 million or $0.40 per diluted share, compared to a net loss of $6.8 million or $0.39 per diluted share, in the fourth quarter of 2017.  Non-GAAP net income per diluted share was $0.53, compared to non-GAAP net income per diluted share of $0.28 in the fourth quarter of 2017. Adjusted EBITDA for the fourth quarter of 2018 increased 50% to $13.9 million compared to the fourth quarter of 2017.

"2018 marks a year of continued execution for SPS Commerce," said Archie Black, President and CEO of SPS Commerce. “We believe that costs of inefficient vendor onboarding will drive demand for efficient and affordable solutions.  Our success is powered by our retail relationships and our deep expertise in trading partner connections with over 80,000 customers worldwide.”

Revenue for the full year ended December 31, 2018 was $248.2 million compared to $220.1 million for the full year ended December 31, 2017, reflecting 13% growth in revenue.  Recurring revenue grew 13% from the year ended December 31, 2017.

Net income for the year ended December 31, 2018 was $23.9 million or $1.36 per diluted share, compared to net income of $0.4 million or $0.02 per diluted share, for the comparable period in 2017. Non-GAAP net income per diluted share for the year ended December 31, 2018 was $1.93, compared to non-GAAP net income per diluted share of $1.02 for the comparable period in 2017. Adjusted EBITDA for the full year ended December 31, 2018 increased 50% to $51.3 million, compared to the full year ended December 31, 2017.

"In an industry that is in transition, SPS Commerce delivered 50% adjusted EBITDA growth in 2018, executed two strategic acquisitions and continued to repurchase shares through our buyback program," said Kim Nelson, CFO of SPS Commerce. "We continue to invest for the future, while delivering on our long-term financial targets."

Guidance

First quarter 2019 revenue is expected to be in the range of $65.8 million to $66.3 million.  Full year 2019 revenue is expected to be in the range of $273.7 million to $275.7 million, representing approximately 10% to 11% growth over 2018.

First quarter 2019 net income per diluted share is expected to be in the range of $0.24 to $0.26 with fully diluted weighted average shares outstanding of approximately 17.8 million shares. Full year 2019 net income per diluted share is expected to be in the range of $1.23 to $1.29 with fully diluted weighted average shares outstanding of approximately 18.0 million shares.  

First quarter 2019 non-GAAP net income per diluted share is expected to be in the range of $0.50 to $0.52.  Full year 2019 non-GAAP net income per diluted share is expected to be in the range of $2.03 to $2.09.

First quarter 2019 Adjusted EBITDA is expected to be in the range of $15.0 to $15.5 million. Full year 2019 Adjusted EBITDA is expected to be in the range of $62.5 million to $64.0 million, representing approximately 22% to 25% growth over 2018.

First quarter 2019 non-cash, share-based compensation expense is expected to be approximately $5.3 million.  Depreciation expense is expected to be approximately $2.5 million and amortization expense is expected to be approximately $1.3 million.

Full year 2019 non-cash, share-based compensation expense is expected to be approximately $15.5 million. Depreciation expense is expected to be approximately $10.8 million and amortization expense is expected to be approximately $5.0 million. 

For 2019, 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 #1386133 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 72 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 2019, 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, 2017, 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,  
    2018     2017  
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 133,859     $ 123,127  
Short-term investments     44,537       40,192  
Accounts receivable, less allowance for doubtful accounts of $1,394 and $763, respectively     27,488       24,897  
Deferred costs     34,502       29,966  
Other current assets     9,229       6,149  
Total current assets     249,615       224,331  
PROPERTY AND EQUIPMENT, net     20,957       16,856  
GOODWILL     69,658       51,613  
INTANGIBLE ASSETS, net     22,741       16,529  
INVESTMENTS           5,206  
OTHER ASSETS                
Deferred costs     10,973       9,967  
Deferred income tax asset     10,456       13,697  
Other assets     1,723       1,539  
Total assets   $ 386,123     $ 339,738  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES                
Accounts payable   $ 4,440     $ 4,463  
Accrued compensation     20,415       15,228  
Accrued expenses     4,558       4,712  
Deferred revenue     25,328       17,863  
Deferred rent     1,781       1,679  
Total current liabilities     56,522       43,945  
OTHER LIABILITIES                
Deferred revenue     2,512       2,731  
Deferred rent     5,371       3,064  
Deferred income tax liability     1,376       1,887  
Other non-current liabilities     1,368        
Total liabilities     67,149       51,627  
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; 17,757,628 and 17,249,153 shares issued; and 17,345,736 and 17,127,006 outstanding, respectively     18       17  
Treasury stock, at cost; 411,892 and 122,147 shares, respectively     (25,679 )     (5,815 )
Additional paid-in capital     332,592       301,863  
Retained earnings (accumulated deficit)     15,261       (8,611 )
Accumulated other comprehensive (loss) income     (3,218 )     657  
Total stockholders’ equity     318,974       288,111  
Total liabilities and stockholders’ equity   $ 386,123     $ 339,738  
                 
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,  
    2018     2017     2018     2017  
Revenues   $ 65,189     $ 58,057     $ 248,240     $ 220,085  
Cost of revenues     21,177       19,459       81,748       73,625  
Gross profit     44,012       38,598       166,492       146,460  
Operating expenses                                
Sales and marketing     17,696       18,280       71,719       71,261  
Research and development     6,516       6,160       22,087       23,183  
General and administrative     10,584       12,752       41,862       37,461  
Amortization of intangible assets     1,007       1,114       4,093       4,574  
Total operating expenses     35,803       38,306       139,761       136,479  
Income from operations     8,209       292       26,731       9,981  
Other income (expense)                                
Interest income, net     740       328       2,329       1,032  
Other income (expense), net     (179 )     36       (720 )     (320 )
Total other income, net     561       364       1,609       712  
Income before income taxes     8,770       656       28,340       10,693  
Income tax expense     1,629       7,434       4,468       10,342  
Net income (loss)   $ 7,141     $ (6,778 )   $ 23,872     $ 351  
                                 
Net income (loss) per share                                
Basic   $ 0.41     $ (0.39 )   $ 1.39     $ 0.02  
Diluted   $ 0.40     $ (0.39 )   $ 1.36     $ 0.02  
                                 
Weighted average common shares used to compute net income (loss) per share                                
Basic     17,280       17,157       17,196       17,183  
Diluted     17,722       17,325       17,606       17,356  


SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited; in thousands)  
    Year Ended  
    December 31,  
    2018     2017  
Cash flows from operating activities                
Net income   $ 23,872     $ 351  
Reconciliation of net income to net cash provided by operating activities                
Deferred income taxes     2,798       9,616  
Earn-out liability     94        
Depreciation and amortization of property and equipment     8,593       7,208  
Amortization of intangible assets     4,093       4,574  
Provision for doubtful accounts     2,592       1,705  
Stock-based compensation     12,510       12,728  
Other, net     (364 )     (15 )
Changes in assets and liabilities, net of effects of acquisition                
Accounts receivable     (4,569 )     (5,586 )
Deferred costs     (5,564 )     (7,813 )
Other current and non-current assets     (3,333 )     393  
Accounts payable     937       832  
Accrued compensation     3,957       1,304  
Accrued expenses     (135 )     1,192  
Deferred revenue     7,094       5,588  
Deferred rent     2,440       (1,027 )
Net cash provided by operating activities     55,015       31,050  
Cash flows from investing activities                
Purchases of property and equipment     (13,750 )     (7,271 )
Purchases of investments     (81,666 )     (47,878 )
Maturities of investments     82,224       33,029  
Acquisition of business and intangible assets, net of cash acquired     (27,273 )     (500 )
Net cash used in investing activities     (40,465 )     (22,620 )
Cash flows from financing activities                
Repurchases of common stock     (19,864 )     (5,815 )
Net proceeds from exercise of options to purchase common stock     14,344       1,410  
Net proceeds from employee stock purchase plan     1,745       1,933  
Net cash used in financing activities     (3,775 )     (2,472 )
Effect of foreign currency exchange rate changes     (43 )     1,292  
Net increase in cash and cash equivalents     10,732       7,250  
Cash and cash equivalents at beginning of year     123,127       115,877  
Cash and cash equivalents at end of year   $ 133,859     $ 123,127  
                 
Subject to reclassification                


SPS COMMERCE, INC.  
NON-GAAP RECONCILIATION  
(Unaudited; in thousands, except per share amounts)  
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2018     2017     2018     2017  
Net income (loss)   $ 7,141     $ (6,778 )   $ 23,872     $ 351  
Depreciation and amortization of property                                
and equipment     2,285       1,947       8,593       7,208  
Amortization of intangible assets     1,007       1,114       4,093       4,574  
Interest income, net     (740 )     (328 )     (2,329 )     (1,032 )
Income tax expense     1,629       636       4,468       3,544  
Discrete impact from tax law change     -       6,798       -       6,798  
Stock-based compensation expense     2,532       5,894       12,510       12,727  
Other     94       -       94       -  
Adjusted EBITDA   $ 13,948     $ 9,283     $ 51,301     $ 34,170  
                                 
Net income (loss)   $ 7,141     $ (6,778 )   $ 23,872     $ 351  
Stock-based compensation expense     2,532       5,894       12,510       12,727  
Amortization of intangible assets     1,007       1,114       4,093       4,574  
Discrete impact from tax law change     -       6,798       -       6,798  
Other     94       -       94       -  
Income tax effects of adjustments     (1,406 )     (2,166 )     (6,594 )     (6,775 )
Non-GAAP income   $ 9,368     $ 4,862     $ 33,975     $ 17,675  
                                 
Shares used to compute non-GAAP income per share                                
Basic     17,280       17,157       17,196       17,183  
Diluted     17,722       17,325       17,606       17,356  
                                 
Non-GAAP income per share                                
Basic   $ 0.54     $ 0.28     $ 1.98     $ 1.03  
Diluted   $ 0.53     $ 0.28     $ 1.93     $ 1.02  

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

 

 

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