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CST: 22/11/2019 03:53:47   

SPS Commerce Reports Third Quarter 2019 Financial Results

28 Days ago

Company delivers 75th consecutive quarter of topline growth, with 13% growth in recurring revenue over 2018; Announces increase and extension of Stock Repurchase Program

MINNEAPOLIS, Oct. 24, 2019 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC) (the "Company"), a leader in retail cloud services, today announced financial results for the third quarter ended September 30, 2019.

Revenue was $70.9 million in the third quarter of 2019, compared to $62.9 million in the third quarter of 2018, reflecting 13% growth in revenue from the third quarter of 2018. Recurring revenue grew 13% from the third quarter of 2018. 

Net income in the third quarter of 2019 was $8.9 million or $0.25 per diluted share, compared to net income of $8.1 million or $0.23 per diluted share, in the third quarter of 2018. Non-GAAP income per diluted share was $0.33 compared to non-GAAP income per diluted share of $0.26 in the third quarter of 2018.

Adjusted EBITDA for the third quarter of 2019 increased 26% to $18.1 million compared to the third quarter of 2018.

“Retailers and suppliers continue to embrace the evolution of e-commerce and omnichannel retail,” said Archie Black, President and CEO of SPS Commerce.  “SPS Commerce is well positioned to address the needs of trading partners around the globe with the world’s largest cloud-based retail network, best-in-class technology and full service experience.”

“SPS Commerce continues to execute on its targets, leveraging our growing network of strategic relationships, retailers and suppliers to address the multi-billion dollar market opportunity ahead of us,” said Kim Nelson, CFO of SPS Commerce.

Stock Repurchase Program

The Company also announced today that its Board of Directors (the "Board") of SPS Commerce authorized an increase and extension of its previously announced stock repurchase program pursuant to which the Company may, from time to time, purchase shares of its outstanding common stock. The stock repurchase program originally authorized the Company to purchase up to $50.0 million of its outstanding common stock and that amount has been increased by the Board to $100.0 million. The Board also authorized an extension of the original expiration date of the stock repurchase program from November 2, 2019 to November 2, 2021.  The number of shares to be purchased and the timing of purchases will be based on the price of the Company's common stock, general business and market conditions and other investment considerations and factors.

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 34.9 million shares of outstanding common stock as of September 30, 2019.  The Company intends to finance the share repurchase program with cash on hand. 

Guidance

For the fourth quarter of 2019, revenue is expected to be in the range of $72.2 million to $72.8 million.  Fourth quarter 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.  Non-GAAP income per diluted share is expected to be in the range of $0.29 to $0.30.  Adjusted EBITDA is expected to be in the range of $17.9 million to $18.4 million.  Non-cash, share-based compensation expense is expected to be approximately $3.4 million, depreciation expense is expected to be approximately $3.1 million and amortization expense is expected to be approximately $1.6 million.

For the full year of 2019, revenue is expected to be in the range of $278.6 million to $279.2 million, representing approximately 12% growth over 2018. Full year net income per diluted share is expected to be in the range of $0.87 to $0.89 with fully diluted weighted average shares outstanding of approximately 36.0 million shares.  Non-GAAP income per diluted share is expected to be in the range of $1.21 to $1.23.  Adjusted EBITDA is expected to be in the range of $68.8 to $69.3 million, representing approximately 34% to 35% growth over 2018. Non-cash, share-based compensation expense is expected to be approximately $14.7 million, depreciation expense is expected to be approximately $11.2 million and amortization expense is expected to be approximately $5.5 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 #1797029 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 75 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.

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, 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, 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 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, our positioning for the future and our performance for the fourth 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, 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-F


SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Unaudited; in thousands, except per share amounts)  
                 
    September 30,     December 31,  
    2019     2018  
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 149,727     $ 133,859  
Short-term investments     51,446       44,537  
Accounts receivable, less allowance for doubtful accounts of $1,500 and $1,392, respectively     29,383       27,488  
Deferred costs     34,583       34,502  
Other current assets     8,385       9,229  
Total current assets     273,524       249,615  
PROPERTY AND EQUIPMENT, less accumulated depreciation of $49,168 and $41,175, respectively     20,757       20,957  
OPERATING LEASE RIGHT-OF-USE ASSET     13,648        
GOODWILL     76,366       69,658  
INTANGIBLE ASSETS, net     23,844       22,741  
OTHER ASSETS                
Deferred costs     10,998       10,973  
Deferred income tax asset     4,839       10,456  
Other assets     2,621       1,723  
Total assets   $ 426,597     $ 386,123  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES                
Accounts payable   $ 4,367     $ 4,440  
Accrued compensation     17,660       20,415  
Accrued expenses     4,874       4,558  
Deferred revenue     30,351       25,328  
Deferred rent           1,781  
Operating lease liabilities     3,281        
Total current liabilities     60,533       56,522  
OTHER LIABILITIES                
Deferred revenue     2,601       2,512  
Deferred rent           5,371  
Operating lease liabilities     16,224        
Deferred income tax liability     1,169       1,376  
Other non-current liabilities     1,002       1,368  
Total liabilities     81,529       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; 36,026,218 and 35,515,256 shares issued; and 34,901,884 and 34,691,472 outstanding, respectively     36       36  
Treasury stock, at cost; 1,124,334 and 823,784 shares, respectively     (40,645 )     (25,679 )
Additional paid-in capital     349,014       332,574  
Retained earnings     39,811       15,261  
Accumulated other comprehensive loss     (3,148 )     (3,218 )
Total stockholders’ equity     345,068       318,974  
Total liabilities and stockholders’ equity   $ 426,597     $ 386,123  
                 
Shares and per share data 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 per share amounts)  
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2019     2018     2019     2018  
Revenues   $ 70,928     $ 62,868     $ 206,391     $ 183,051  
Cost of revenues     23,263       20,411       68,330       60,571  
Gross profit     47,665       42,457       138,061       122,480  
Operating expenses                                
Sales and marketing     16,937       16,952       52,404       54,023  
Research and development     7,743       5,146       20,444       15,571  
General and administrative     10,725       11,174       33,674       31,278  
Amortization of intangible assets     1,327       928       3,897       3,086  
Total operating expenses     36,732       34,200       110,419       103,958  
Income from operations     10,933       8,257       27,642       18,522  
Other income (expense)                                
Interest income, net     843       628       2,233       1,589  
Other income (expense), net     (165 )     (219 )     28       (541 )
Change in earn-out liability     22             366        
Total other income, net     700       409       2,627       1,048  
Income before income taxes     11,633       8,666       30,269       19,570  
Income tax expense     2,692       605       5,719       2,839  
Net income   $ 8,941     $ 8,061     $ 24,550     $ 16,731  
                                 
Net income per share                                
Basic   $ 0.26     $ 0.23     $ 0.70     $ 0.49  
Diluted   $ 0.25     $ 0.23     $ 0.68     $ 0.48  
                                 
Weighted average common shares used to compute net income per share (in thousands)                                
Basic     35,015       34,438       34,966       34,334  
Diluted     35,932       35,482       35,952       35,114  


SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited; in thousands)  
    Nine Months Ended  
    September 30,  
    2019     2018  
Cash flows from operating activities                
Net income   $ 24,550     $ 16,731  
Reconciliation of net income to net cash provided by operating activities                
Deferred income taxes     5,360       1,934  
Change in earn-out liability     (366 )      
Depreciation and amortization of property and equipment     8,143       6,308  
Amortization of intangible assets     3,897       3,086  
Provision for doubtful accounts     2,429       1,780  
Stock-based compensation     11,316       9,978  
Other, net     (551 )     (255 )
Changes in assets and liabilities                
Accounts receivable     (3,670 )     (4,279 )
Deferred costs     (151 )     (3,813 )
Other current and non-current assets     (820 )     (681 )
Accounts payable     181       382  
Accrued compensation     (3,716 )     (592 )
Accrued expenses     (84 )     (718 )
Deferred revenue     4,929       7,039  
Deferred rent           647  
Operating leases     (487 )      
Net cash provided by operating activities     50,960       37,547  
Cash flows from investing activities                
Purchases of property and equipment     (8,387 )     (9,875 )
Purchases of investments     (61,967 )     (64,434 )
Maturities of investments     55,225       60,000  
Acquisitions of businesses and intangible assets, net of cash acquired     (11,500 )     (381 )
Net cash used in investing activities     (26,629 )     (14,690 )
Cash flows from financing activities                
Repurchases of common stock     (14,966 )     (13,867 )
Net proceeds from exercise of options to purchase common stock     5,273       11,800  
Net proceeds from employee stock purchase plan     1,155       836  
Net cash used in financing activities     (8,538 )     (1,231 )
Effect of foreign currency exchange rate changes     75       (5 )
Net increase in cash and cash equivalents     15,868       21,621  
Cash and cash equivalents at beginning of period     133,859       123,127  
Cash and cash equivalents at end of period   $ 149,727     $ 144,748  
                 
Cash flows subject to reclassification                


SPS COMMERCE, INC.  
NON-GAAP RECONCILIATION  
(Unaudited; in thousands, except per share amounts)  
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2019     2018     2019     2018  
Net income   $ 8,941     $ 8,061     $ 24,550     $ 16,731  
Depreciation and amortization of property                                
and equipment     2,819       2,132       8,143       6,308  
Amortization of intangible assets     1,327       928       3,897       3,086  
Interest income, net     (843 )     (628 )     (2,233 )     (1,589 )
Income tax expense     2,692       605       5,719       2,839  
Stock-based compensation expense     3,147       3,266       11,316       9,978  
Other     (22 )     -       (483 )     -  
Adjusted EBITDA   $ 18,061     $ 14,364     $ 50,909     $ 37,353  
                                 
Net income   $ 8,941     $ 8,061     $ 24,550     $ 16,731  
Stock-based compensation expense     3,147       3,266       11,316       9,978  
Amortization of intangible assets     1,327       928       3,897       3,086  
Income tax effects of adjustments     (1,606 )     (3,008 )     (5,972 )     (5,188 )
Other     (22 )     -       (483 )     -  
Non-GAAP income   $ 11,787     $ 9,247     $ 33,308     $ 24,607  
                                 
Shares used to compute non-GAAP income per share                                
Basic     35,015       34,438       34,966       34,334  
Diluted     35,932       35,482       35,952       35,114  
                                 
Non-GAAP income per share                                
Basic   $ 0.34     $ 0.27     $ 0.95     $ 0.72  
Diluted   $ 0.33     $ 0.26     $ 0.93     $ 0.70  

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

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