SPS Commerce
Apr 27, 2017

SPS Commerce Reports First Quarter 2017 Financial Results

Company delivers 15% growth in recurring revenue over 2016

MINNEAPOLIS, April 27, 2017 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq:SPSC), a leader in retail cloud services, today announced financial results for the first quarter ended March 31, 2017.

Revenue was $51.9 million in the first quarter of 2017, compared to $45.6 million in the first quarter of 2016, reflecting 14% growth in revenue from the first quarter of 2016. Recurring revenue grew 15% from the first quarter of 2016.

Net income in the first quarter of 2017 was $3.0 million or $0.17 per diluted share, compared to net income of $1.0 million or $0.06 per diluted share, in the first quarter of 2016. Non-GAAP income per diluted share was $0.25 compared to non-GAAP income per diluted share of $0.16 in the first quarter of 2016. Non-GAAP income per diluted share now reflects an adjustment for the tax effects of the add-back of share-based compensation and the amortization of intangibles to non-GAAP income. Detail on retrospective tax effects on non-GAAP income for historical periods that were originally presented without this adjustment can be found on the financial data sheet posted at investors.spscommerce.com.

Adjusted EBITDA for the first quarter of 2017 increased 43% to $8.5 million compared to the first quarter of 2016.

"We had a strong start to 2017. Our solid first quarter performance was driven by the continued growth of the SPS Commerce network and demand for our comprehensive cloud based platform," said Archie Black, President and CEO of SPS Commerce. "The complexity of retail coupled with constantly evolving consumer demands make it imperative that retailers and suppliers achieve real-time collaboration to stay ahead of the competitive curve. Our technology platform and deep retail expertise enable us to take advantage of this evolution and grow our market leadership." 

"In the first quarter, we continued to expand the network, add customers and grow wallet share," said Kim Nelson, CFO of SPS Commerce.  "Looking to the rest of the year, we will continue to leverage our leadership position in the retail ecosystem to go after the large opportunity in front of us."

Guidance

For the second quarter of 2017, revenue is expected to be in the range of $53.4 million to $53.9 million.  Second quarter net income per diluted share is expected to be in the range of $0.06 to $0.07 with fully diluted weighted average shares outstanding of approximately 17.7 million shares.  Non-GAAP income per diluted share is expected to be in the range of $0.18 to $0.20.  Adjusted EBITDA is expected to be in the range of $7.3 million to $7.8 million.  Non-cash, share-based compensation expense is expected to be approximately $2.5 million, depreciation expense is expected to be approximately $2.0 million and amortization expense is expected to be approximately $1.2 million.

For the full year of 2017, revenue is expected to be in the range of $220 million to $222 million, representing approximately 14% to 15% growth over 2016. Full year net income per diluted share is expected to be in the range of $0.36 to $0.39 with fully diluted weighted average shares outstanding of approximately 17.7 million shares.   Non-GAAP income per diluted share is expected to be in the range of $0.83 to $0.85. Adjusted EBITDA is expected to be in the range of $31.8 to $32.5 million. Non-cash, share-based compensation expense is expected to be approximately $10.1 million, depreciation expense is expected to be approximately $8.3 million and amortization expense is expected to be approximately $4.9 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#    99462980 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 investors.spscommerce.com under the Events and Presentations menu.  The replay will also be available at 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 65 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.

SPS-F

Use of Non-GAAP Financial Measures

To supplement its financial statements, SPS Commerce also provides investors with Adjusted EBITDA and non-GAAP 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.

EBITDA consists of net income plus depreciation and amortization, interest expense, interest income, income tax expense and other adjustments as necessary for a fair presentation. Adjusted EBITDA consists of EBITDA plus non-cash, stock-based compensation expense. 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 non-cash, stock-based compensation expense and amortization expense related to intangible assets 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.

Additionally, pursuant to recent Compliance and Disclosure Interpretations published by the U.S. Securities and Exchange Commission in May 2016 related to the use of non-GAAP financial measures, SPS Commerce now 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, the company recalculates 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. Details of the impact on prior year periods are included in the financial data sheet posted to investors.spscommerce.com.

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 and our performance for the first quarter and full year of 2017, 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, 2016, 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 share amounts)
     
   March 31,   December 31, 
   2017   2016 
     
ASSETS    
     
CURRENT ASSETS    
Cash and cash equivalents $128,707  $115,877 
Short-term marketable securities  25,550   23,076 
Accounts receivable, less allowance for doubtful accounts of $597 and $515, respectively  22,683   20,746 
Deferred costs  20,908   19,224 
Other current assets  6,992   7,010 
Total current assets  204,840   185,933 
     
PROPERTY AND EQUIPMENT, net  15,066   15,314 
GOODWILL  50,289   49,777 
INTANGIBLE ASSETS, net  19,389   19,788 
MARKETABLE SECURITIES, non-current  2,503   7,494 
OTHER ASSETS    
Deferred costs, non-current  6,051   6,086 
Deferred income tax asset, non-current  28,408   12,446 
Other non-current assets  1,372   1,527 
Total assets $327,918  $298,365 
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
CURRENT LIABILITIES    
Accounts payable $3,580  $2,302 
Accrued compensation  12,272   13,740 
Accrued expenses  4,459   3,508 
Deferred revenue  15,803   11,055 
Deferred rent  1,504   1,556 
Total current liabilities  37,618   32,161 
     
OTHER LIABILITIES    
Deferred revenue, non-current  11,087   10,847 
Deferred rent, non-current  3,912   4,179 
Deferred income tax liability, non-current  1,895   1,911 
Total liabilities  54,512   49,098 
     
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; 17,200,526 and 17,081,145 shares issued and outstanding, respectively  17   17 
Additional paid-in capital  289,652   286,315 
Accumulated deficit  (14,490)  (33,739)
Accumulated other comprehensive loss  (1,773)  (3,326)
Total stockholders' equity  273,406   249,267 
Total liabilities and stockholders' equity $327,918  $298,365 
         


SPS COMMERCE, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(Unaudited; in thousands, except per share amounts)
      
   Three Months Ended  
   March 31,  
   2017   2016  
      
Revenues $51,932  $45,599  
Cost of revenues  17,330   14,881  
Gross profit  34,602   30,718  
Operating expenses     
Sales and marketing  17,079   15,889  
Research and development  5,105   5,069  
General and administrative  7,827   7,285  
Amortization of intangible assets  1,215   1,161  
Total operating expenses  31,226   29,404  
Income from operations  3,376   1,314  
Other income (expense)     
Interest income, net  191   145  
Other income (expense), net  (60)  293  
Total other income (expense), net  131   438  
Income before income taxes  3,507   1,752  
Income tax expense  (536)  (708) 
Net income $2,971  $1,044  
      
Net income per share     
Basic $0.17  $0.06  
Diluted $0.17  $0.06  
Weighted average common shares used to compute net income per share     
Basic  17,154   16,783  
Diluted  17,393   17,029  

 

SPS COMMERCE, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Unaudited; in thousands)
     
   Three Months Ended 
   March 31, 
   2017   2016 
     
Cash flows from operating activities    
Net income $2,971  $1,044 
Reconciliation of net income to net cash provided by operating activities    
Deferred income taxes  310   (302)
Share based earn-out liability  -   (365)
Depreciation and amortization of property and equipment  1,691   1,626 
Amortization of intangible assets  1,215   1,161 
Provision for doubtful accounts  332   304 
Stock-based compensation  2,300   1,927 
Other, net  (25)  - 
Changes in assets and liabilities, net of effect of acquisition    
Accounts receivable  (2,201)  (2,189)
Deferred costs  (1,649)  (765)
Other current and non-current assets  180   99 
Accounts payable  1,169   1,694 
Accrued compensation  (1,508)  (319)
Accrued expenses  945   (90)
Deferred revenue  4,988   3,019 
Deferred rent  (319)  67 
Net cash provided by operating activities  10,399   6,911 
Cash flows from investing activities    
Purchases of property and equipment  (1,299)  (2,116)
Purchases of marketable securities  (4,995)  (2,495)
Maturities of marketable securities  7,500   2,500 
Acquisitions of businesses and intangible assets, net of cash acquired  (500)  (17,942)
Net cash provided by (used in) investing activities  706   (20,053)
Cash flows from financing activities    
Net proceeds from exercise of options to purchase common stock  1,037   1,069 
Excess tax benefit from exercise of options to purchase common stock  -   1,021 
Net cash provided by financing activities  1,037   2,090 
Effect of foreign currency exchange rate changes  688   403 
Net increase (decrease) in cash and cash equivalents  12,830   (10,649)
Cash and cash equivalents at beginning of period  115,877   121,538 
Cash and cash equivalents at end of period $128,707  $110,889 
 

 

 SPS COMMERCE, INC. 
 NON-GAAP RECONCILIATION 
(Unaudited; in thousands, except per share amounts)
       
    Three Months Ended  
    March 31,  
    2017   2016  
       
Net income  $2,971  $1,044  
Depreciation and amortization of property     
and equipment 1,691   1,626  
Amortization of intangible assets  1,215   1,161  
Interest income, net  (191)  (145) 
Income tax expense  536   708  
Other  -   (365) 
       
EBITDA   6,222   4,029  
Stock-based compensation expense  2,300   1,927  
       
Adjusted EBITDA
 $8,522  $5,956  
       
Net income  $2,971  $1,044  
Stock-based compensation expense  2,300   1,927  
Amortization of intangible assets  1,215   1,161  
Other  -   (365) 
Income tax effects of adjustments  (2,133)  (1,066) 
       
Non-GAAP income  $4,353  $2,701  
       
Shares used to compute non-GAAP income      
per share     
Basic  17,154   16,783  
Diluted  17,393   17,029  
       
Non-GAAP income per share      
Basic $0.25  $0.16  
Diluted $0.25  $0.16  
          

 

 

Contact:

Investor Relations
The Blueshirt Group
Lisa Laukkanen
Nicole Gunderson
SPSC@blueshirtgroup.com
415-217-7722

Ali Finer			      	
SPS Commerce				
866-245-8100				
abfiner@spscommerce.com