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SPS Commerce Reports Fourth Quarter and Fiscal Year 2023 Financial Results

Feb 8, 2024

Company delivers 92nd consecutive quarter of topline growth

Fourth quarter 2023 revenue and recurring revenue grew 19% from the fourth quarter of 2022

MINNEAPOLIS, Feb. 08, 2024 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the fourth quarter and year ended December 31, 2023.

Financial Highlights

Fourth Quarter 2023 Financial Highlights

  • Revenue was $145.0 million in the fourth quarter of 2023, compared to $122.0 million in the fourth quarter of 2022, reflecting 19% growth.
  • Recurring revenue grew 19% from the fourth quarter of 2022.
  • Net income was $19.0 million or $0.51 per diluted share, compared to net income of $15.9 million or $0.43 per diluted share in the fourth quarter of 2022.
  • Non-GAAP income per diluted share was $0.75, compared to non-GAAP income per diluted share of $0.63 in the fourth quarter of 2022.
  • Adjusted EBITDA for the fourth quarter of 2023 increased 20% to $42.0 million compared to the fourth quarter of 2022.

Fiscal Year 2023 Financial Highlights

  • Revenue was $536.9 million for the year ended December 31, 2023, compared to $450.9 million for the year ended December 31, 2022, reflecting 19% growth.
  • Recurring revenue grew 20% from the year ended December 31, 2022.
  • Net income was $65.8 million or $1.76 per diluted share for the year ended December 31, 2023, compared to net income of $55.1 million or $1.49 per diluted share, for the comparable period in 2022, reflecting 19% growth in year-over-year net income.
  • Non-GAAP income per diluted share was $2.85, compared to non-GAAP income per diluted share of $2.35 in the year ended December 31, 2022.
  • Adjusted EBITDA for the year ended December 31, 2023 increased 19% to $157.6 million compared to the year ended December 31, 2022.

“In 2023, SPS Commerce demonstrated ongoing success in expanding our network as we continued to play a key role in retailers’ and suppliers’ transformation to omnichannel retail, improving supply chain efficiencies, and enabling our customers’ international expansion,” said Chad Collins, CEO of SPS Commerce. “I am excited about our long-term growth opportunities ahead as we execute our strategy to be the world’s retail network.”

“SPS Commerce achieved strong fourth quarter and full year 2023 results, despite ongoing macro dynamics.   We delivered profitable growth while we closed two acquisitions and continued to invest for the future to strengthen our competitive position across a large, addressable market,” said Kim Nelson, CFO of SPS Commerce.

Guidance

First Quarter 2024 Guidance

  • Revenue is expected to be in the range of $145.9 million to $146.7 million.
  • Net income per diluted share is expected to be in the range of $0.26 to $0.27, with fully diluted weighted average shares outstanding of 37.7 million shares.
  • Non-GAAP income per diluted share is expected to be in the range of $0.72 to $0.73.
  • Adjusted EBITDA is expected to be in the range of $42.1 million to $42.7 million.
  • Non-cash, share-based compensation expense is expected to be $20.1 million, depreciation expense is expected to be $4.7 million, and amortization expense is expected to be $4.7 million.

Fiscal Year 2024 Guidance

  • Revenue is expected to be in the range of $616.5 million to $619.0 million, representing 15% growth over 2022.
  • Net income per diluted share is expected to be in the range of $1.75 to $1.78, with fully diluted weighted average shares outstanding of 38.0 million shares.
  • Non-GAAP income per diluted share is expected to be in the range of $3.11 to $3.13.
  • Adjusted EBITDA is expected to be in the range of $183.0 to $185.0 million, representing 16% to 17% growth over 2022.
  • Non-cash, share-based compensation expense is expected to be $55.7 million, depreciation expense is expected to be $19.4 million, and amortization expense is expected to be $18.8 million.

The forward-looking measures and the underlying assumptions involve significant known and unknown risks and uncertainties, and actual results may vary materially. The Company does not present a reconciliation of the forward-looking non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, and non-GAAP income per share, to the most directly comparable GAAP financial measures because it is impractical to forecast certain items without unreasonable efforts due to the uncertainty and inherent difficulty of predicting, within a reasonable range, the occurrence and financial impact of and the periods in which such items may be recognized.

Quarterly Conference Call

To access the call, please dial 1-833-816-1382, or outside the U.S. 1-412-317-0475 at least 15 minutes prior to the 3:30 p.m. CT start time. Please ask to join the SPS Commerce Q4 2023 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 120,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 92 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 and INFINITE RETAIL POWER are marks of SPS Commerce, Inc. and registered in the U.S. Patent and Trademark Office, along with other SPS marks. Such marks may also be registered or otherwise protected in other countries. 

SPS-F

Use of Non-GAAP Financial Measures

To supplement our consolidated 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 financial 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 financial 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 financial 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 consolidated 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. In the twelve months ended December 31, 2023, other adjustments included the expense impacts from acquisition-related employee severance costs and disposals of certain capitalized internally developed software. Net income is the comparable GAAP measure of financial performance.

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. In the twelve months ended December 31, 2023, other adjustments included the expense impacts from acquisition-related employee severance costs and disposals of certain capitalized internally developed software. Net income per share, the comparable GAAP measure of financial performance, consists of 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 first quarter and full year of 2024, 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, 2022, 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. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except shares)

  December 31,
    2023       2022  
ASSETS      
Current assets      
Cash and cash equivalents $ 219,081     $ 162,893  
Short-term investments   56,359       51,412  
Accounts receivable   50,160       42,501  
Allowance for credit losses   (3,320 )     (3,066 )
Accounts receivable, net   46,840       39,435  
Deferred costs   62,403       52,755  
Other assets   16,758       16,319  
Total current assets   401,441       322,814  
Property and equipment, net   36,043       35,458  
Operating lease right-of-use assets   7,862       9,170  
Goodwill   249,176       197,284  
Intangible assets, net   107,344       88,352  
Other assets      
Deferred costs, non-current   20,347       17,424  
Deferred income tax assets   505       227  
Other assets, non-current   1,126       2,185  
Total assets $ 823,844     $ 672,914  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities      
Accounts payable $ 7,420     $ 11,256  
Accrued compensation   41,588       30,235  
Accrued expenses   8,014       7,451  
Deferred revenue   69,187       57,423  
Operating lease liabilities   4,460       4,277  
Total current liabilities   130,669       110,642  
Other liabilities      
Deferred revenue, non-current   6,930       4,771  
Operating lease liabilities, non-current   9,569       13,009  
Deferred income tax liabilities   8,972       7,419  
Other liabilities, non-current   229        
Total liabilities   156,369       135,841  
Commitments and contingencies      
Stockholders' equity      
Common stock   39       38  
Treasury Stock   (128,892 )     (128,892 )
Additional paid-in capital   537,061       476,117  
Retained earnings   259,045       193,221  
Accumulated other comprehensive gain (loss)   222       (3,411 )
Total stockholders’ equity   667,475       537,073  
Total liabilities and stockholders’ equity $ 823,844     $ 672,914  


Results presented are unaudited and thus, are subject to adjustment. Audited results will be included within the 10-K filing.

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

  Three Months Ended
December 31,
  Year Ended
December 31,
   2023    2022    2023    2022
Revenues $ 144,965   $ 122,018   $ 536,910   $ 450,875
Cost of revenues   49,040     41,541     182,069     153,065
Gross profit   95,925     80,477     354,841     297,810
Operating expenses              
Sales and marketing   33,214     27,201     122,936     101,772
Research and development   14,216     12,480     53,654     45,748
General and administrative   20,612     17,950     84,887     67,340
Amortization of intangible assets   4,998     3,832     16,116     11,768
Total operating expenses   73,040     61,463     277,593     226,628
Income from operations   22,885     19,014     77,248     71,182
Other income, net   3,456     1,752     8,315     142
Income before income taxes   26,341     20,766     85,563     71,324
Income tax expense   7,330     4,851     19,739     16,190
Net income $ 19,011   $ 15,915   $ 65,824   $ 55,134
               
Net income per share              
Basic $ 0.52   $ 0.44   $ 1.80   $ 1.53
Diluted $ 0.51   $ 0.43   $ 1.76   $ 1.49
               
Weighted average common shares used to compute net income per share              
Basic   36,831     36,093     36,646     36,117
Diluted   37,640     36,915     37,475     36,953


Results presented are unaudited and thus, are subject to adjustment. Audited results will be included within the 10-K filing.

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

  Year Ended
December 31,
   2023     2022 
Cash flows from operating activities      
Net income $ 65,824     $ 55,134  
Reconciliation of net income to net cash provided by operating activities      
Deferred income taxes   (10,079 )     (3,732 )
Depreciation and amortization of property and equipment   18,631       16,421  
Amortization of intangible assets   16,116       11,768  
Provision for credit losses   5,707       3,359  
Stock-based compensation   45,508       33,399  
Other, net   2,415       220  
Changes in assets and liabilities, net of effects of acquisitions      
Accounts receivable   (11,949 )     (6,435 )
Deferred costs   (10,724 )     (10,646 )
Other assets and liabilities   1,834       2,632  
Accounts payable   (3,947 )     144  
Accrued compensation   7,143       (3,786 )
Accrued expenses   1,302       (2,829 )
Deferred revenue   6,464       5,965  
Operating leases   (1,947 )     (1,562 )
Net cash provided by operating activities   132,298       100,052  
Cash flows from investing activities      
Purchases of property and equipment   (19,761 )     (19,880 )
Purchases of investments   (133,994 )     (160,427 )
Maturities of investments   131,331       158,937  
Acquisition of business, net   (70,218 )     (91,420 )
Net cash used in investing activities   (92,642 )     (112,790 )
Cash flows from financing activities      
Repurchases of common stock         (43,215 )
Net proceeds from exercise of options to purchase common stock   9,856       4,908  
Net proceeds from employee stock purchase plan activity   8,114       6,676  
Payments for contingent consideration   (2,000 )      
Net cash provided by (used in) financing activities   15,970       (31,631 )
Effect of foreign currency exchange rate changes   562       (290 )
Net increase (decrease) in cash and cash equivalents   56,188       (44,659 )
Cash and cash equivalents at beginning of period   162,893       207,552  
Cash and cash equivalents at end of period $ 219,081     $ 162,893  


Results presented are unaudited and thus, are subject to adjustment. Audited results will be included within the 10-K filing.

SPS COMMERCE, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION
(Unaudited; in thousands, except per share amounts)

Adjusted EBITDA
  Three Months Ended
December 31,
  Year Ended
December 31,
    2023       2022       2023       2022  
Net income $ 19,011     $ 15,915     $ 65,824     $ 55,134  
Income tax expense   7,330       4,851       19,739       16,190  
Depreciation and amortization of property and equipment   4,667       4,438       18,631       16,421  
Amortization of intangible assets   4,998       3,832       16,116       11,768  
Stock-based compensation expense   9,411       7,763       45,508       33,399  
Realized gain from foreign currency on cash and investments held   (1,201 )     (984 )     (1,726 )     1,026  
Investment income   (2,288 )     (864 )     (7,660 )     (1,670 )
Other   28             1,198        
Adjusted EBITDA $ 41,956     $ 34,951     $ 157,630     $ 132,268  

 

Adjusted EBITDA Margin
  Three Months Ended
December 31,
  Year Ended
December 31,
    2023       2022       2023       2022  
Revenue $ 144,965     $ 122,018     $ 536,910     $ 450,875  
               
Net income   19,011       15,915       65,824       55,134  
Margin   13 %     13 %     12 %     12 %
               
Adjusted EBITDA   41,956       34,951       157,630       132,268  
Adjusted EBITDA Margin   29 %     29 %     29 %     29 %

 

Non-GAAP Income per Share
  Three Months Ended
December 31,
  Year Ended
December 31,
    2023       2022       2023       2022  
Net income $ 19,011     $ 15,915     $ 65,824     $ 55,134  
Stock-based compensation expense   9,411       7,763       45,508       33,399  
Amortization of intangible assets   4,998       3,832       16,116       11,768  
Realized gain from foreign currency on cash and investments held   (1,201 )     (984 )     (1,726 )     1,026  
Other   28             1,198        
Income tax effects of adjustments   (3,906 )     (3,063 )     (19,983 )     (14,639 )
Non-GAAP income $ 28,341     $ 23,463     $ 106,937     $ 86,688  
               
Shares used to compute net income and non-GAAP income per share              
Basic   36,831       36,093       36,646       36,117  
Diluted   37,640       36,915       37,475       36,953  
               
Net income per share, basic $ 0.52     $ 0.44     $ 1.80     $ 1.53  
Non-GAAP adjustments to net income per share, basic   0.25       0.21       1.12       0.87  
Non-GAAP income per share, basic $ 0.77     $ 0.65     $ 2.92     $ 2.40  
               
Net income per share, diluted $ 0.51     $ 0.43     $ 1.76     $ 1.49  
Non-GAAP adjustments to net income per share, diluted   0.24       0.20       1.09       0.86  
Non-GAAP income per share, diluted $ 0.75     $ 0.63     $ 2.85     $ 2.35  
               

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


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Source: SPS Commerce, Inc.

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