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SPS Commerce Reports Fourth Quarter and Full Year 2017 Financial Results

Feb 6, 2018
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Company delivers 15% growth in recurring revenue over 2016

MINNEAPOLIS, Feb. 06, 2018 (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, 2017.

Revenue was $58.2 million in the fourth quarter of 2017, compared to $51.1 million in the fourth quarter of 2016, reflecting 14% growth in revenue from the fourth quarter of 2016. Recurring revenue grew 15% from the fourth quarter of 2016.

Net loss in the fourth quarter of 2017 was $9.1 million or $0.53 per diluted share, compared to net income of $1.8 million or $0.10 per diluted share, in the fourth quarter of 2016.  The company’s Q4 2017 earnings were impacted by several elements of the Tax Cuts and Jobs Act, which resulted in a discrete tax expense of approximately $8.6 million.  The primary driver of this expense was a decrease in our deferred tax assets resulting from a lower corporate federal tax rate of 21%.

Non-GAAP net income per diluted share was $0.25, compared to non-GAAP net income per diluted share of $0.20 in the fourth quarter of 2016. Adjusted EBITDA for the fourth quarter of 2017 increased 14% to $8.5 million compared to the fourth quarter of 2016.

“2017 was a year of strong execution for SPS Commerce, in a retail market undergoing a significant transition,” said Archie Black, President and CEO of SPS Commerce. “We bolstered our leadership position by growing our customer base and increasing wallet share.  SPS powers the largest retail network that enables fully orchestrated retailing across all channels and is architected for today’s complex omnichannel environment.  We are excited about the multibillion dollar global market opportunity in front of us.”

Revenue for the full year ended December 31, 2017 was $220.6 million compared to $193.3 million for the full year ended December 31, 2016, reflecting 14% growth in revenue.  Recurring revenue grew 15% from the year ended December 31, 2016.

Net loss for the year ended December 31, 2017 was $2.4 million or $0.14 per diluted share, compared to net income of $5.7 million or $0.33 per diluted share, for the comparable period in 2016. Non-GAAP net income per diluted share for the year ended December 31, 2017 was $0.96, compared to non-GAAP net income per diluted share of $0.72 for the comparable period in 2016. Adjusted EBITDA for the full year ended December 31, 2017 increased 23% to $32.6 million, compared to the full year ended December 31, 2016.

“In 2017, we achieved year-over-year recurring revenue growth of 15%, customer growth of 4% and wallet share growth of 10%,” said Kim Nelson, CFO of SPS Commerce. “We delivered strong revenue and adjusted EBITDA growth in 2017 as we continued to invest for the future.  We believe SPS is well positioned to expand its market leadership.”

Guidance

First quarter 2018 revenue is expected to be in the range of $57.4 million to $58.1 million.  Full year 2018 revenue is expected to be in the range of $241 million to $244 million, representing approximately 10% to 11% growth over 2017.

First quarter 2018 net income per diluted share is expected to be in the range of $0.14 to $0.16 with fully diluted weighted average shares outstanding of approximately 17.4 million shares. Full year 2018 net income per diluted share is expected to be in the range of $0.67 to $0.71 with fully diluted weighted average shares outstanding of approximately 17.5 million shares.  

First quarter 2018 non-GAAP net income per diluted share is expected to be in the range of $0.30 to $0.32.  Full year 2018 non-GAAP net income per diluted share is expected to be in the range of $1.32 to $1.36.

First quarter 2018 Adjusted EBITDA is expected to be in the range of $9.5 to $10.0 million. Full year 2018 Adjusted EBITDA is expected to be in the range of $42.0 million to $43.5 million, representing approximately 23% to 27% growth over 2017.

First quarter 2018 non-cash, share-based compensation expense is expected to be approximately $2.9 million.  Depreciation expense is expected to be approximately $2.1 million and amortization expense is expected to be approximately $1.1 million.

Full year 2018 non-cash, share-based compensation expense is expected to be approximately $11.9 million. Depreciation expense is expected to be approximately $9.9 million and amortization expense is expected to be approximately $4.4 million. 

For 2018, we expect an annual effective tax rate of approximately 30%, with cash taxes for the year to be minimal.

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 # 4459198 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 68 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.

Pursuant to Compliance and Disclosure Interpretations published by the U.S. Securities and Exchange Commission in May 2016 (the “May C&DI”) 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, 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 2018, 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 shares)
         
    December 31,
      2017       2016  
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents   $   123,127     $   115,877  
Short-term investments       40,192         23,076  
Accounts receivable, net       24,897         20,746  
Deferred costs       25,091         19,224  
Other current assets       6,149         7,010  
Total current assets       219,456         185,933  
PROPERTY AND EQUIPMENT, net       16,856         15,314  
GOODWILL       51,613         49,777  
INTANGIBLE ASSETS, net       16,529         19,788  
INVESTMENTS       5,206         7,494  
OTHER ASSETS        
Deferred costs       6,770         6,086  
Deferred income tax asset       17,551         12,446  
Other assets       1,539         1,527  
Total assets   $   335,520     $   298,365  
LIABILITIES AND STOCKHOLDERS’ EQUITY        
CURRENT LIABILITIES        
Accounts payable   $   4,463     $   2,302  
Accrued compensation       15,886         13,740  
Accrued expenses       4,712         3,508  
Deferred revenue       16,407         11,055  
Deferred rent       1,679         1,556  
Total current liabilities       43,147         32,161  
OTHER LIABILITIES        
Deferred revenue       10,602         10,847  
Deferred rent       3,064         4,179  
Deferred income tax liability       1,887         1,911  
Total liabilities       58,700         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; 17,249,153 and
  17,081,145 shares issued; and 17,127,006 and 17,081,145 outstanding, respectively		       17         17  
Treasury stock, at cost; 122,147 and 0 shares, respectively       (5,815 )       —  
Additional paid-in capital       301,863         286,315  
Accumulated deficit       (19,902 )       (33,739 )
Accumulated other comprehensive income (loss)       657         (3,326 )
Total stockholders’ equity       276,820         249,267  
Total liabilities and stockholders’ equity   $   335,520     $   298,365  
         
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,
      2017       2016       2017       2016
Revenues   $   58,200     $   51,061     $   220,566     $   193,295
Cost of revenues       19,459         17,322         73,625         64,346
Gross profit       38,741         33,739         146,941         128,949
Operating expenses                
Sales and marketing       19,236         16,794         73,295         65,886
Research and development       6,160         5,796         23,183         21,981
General and administrative       12,752         7,311         37,461         28,827
Amortization of intangible assets       1,114         1,185         4,574         4,738
Total operating expenses       39,262         31,086         138,513         121,432
(Loss) income from operations       (521 )       2,653         8,428         7,517
Other income (expense)                
Interest income, net       328         193         1,032         601
Other income (expense), net       36         (134 )       (320 )       732
Total other income, net       364         59         712         1,333
(Loss) income before income taxes       (157 )       2,712         9,140         8,850
Income tax expense       8,944         907         11,580         3,140
Net (loss) income   $   (9,101 )   $   1,805     $   (2,440 )   $   5,710
                 
Net (loss) income per share                
Basic   $   (0.53 )   $   0.11     $   (0.14 )   $   0.34
Diluted   $   (0.53 )   $   0.10     $   (0.14 )   $   0.33
                 
Weighted average common shares used to compute net income (loss) per share                
Basic       17,157         17,050         17,183         16,947
Diluted       17,325         17,366         17,356         17,241
                 

 

SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited; in thousands)  
    Year Ended  
    December 31,  
      2017       2016    
Cash flows from operating activities          
Net (loss) income   $   (2,440 )   $   5,710    
Reconciliation of net (loss) income to net cash provided by operating activities          
Deferred income taxes       10,854         (1,698 )  
Share-based earn-out liability       —         (1,103 )  
Depreciation and amortization of property and equipment       7,208         6,598    
Amortization of intangible assets       4,574         4,738    
Provision for doubtful accounts       1,705         1,375    
Stock-based compensation       12,728         8,023    
Other, net       (15 )       —    
Changes in assets and liabilities, net of effects of acquisition          
Accounts receivable       (5,586 )       (3,735 )  
Deferred costs       (6,548 )       (4,964 )  
Other current and non-current assets       393         (1,911 )  
Accounts payable       832         (382 )  
Accrued compensation       2,073         2,180    
Accrued expenses       1,192         990    
Deferred revenue       5,107         2,710    
Deferred rent       (1,027 )       234    
Net cash provided by operating activities       31,050         18,765    
Cash flows from investing activities          
Purchases of property and equipment       (7,271 )       (8,008 )  
Purchases of investments       (47,878 )       (23,135 )  
Maturities of investments       33,029         15,018    
Acquisition of business and intangible assets, net of cash acquired       (500 )       (18,032 )  
Net cash used in investing activities       (22,620 )       (34,157 )  
Cash flows from financing activities          
Repurchases of common stock       (5,815 )       —    
Net proceeds from exercise of options to purchase common stock       1,410         4,303    
Excess tax benefit from exercise of options to purchase common stock       —         4,070    
Net proceeds from employee stock purchase plan       1,933         1,732    
Net cash (used in) provided by financing activities       (2,472 )       10,105    
Effect of foreign currency exchange rate changes       1,292         (374 )  
Net increase (decrease) in cash and cash equivalents       7,250         (5,661 )  
Cash and cash equivalents at beginning of period       115,877         121,538    
Cash and cash equivalents at end of period   $   123,127     $   115,877    
           
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,
      2017       2016       2017       2016  
Net (loss) income   $   (9,101 )   $   1,805     $   (2,440 )   $   5,710  
Depreciation and amortization of property                
  and equipment       1,947         1,715         7,208         6,598  
Amortization of intangible assets       1,114         1,185         4,574         4,738  
Interest income, net       (328 )       (193 )       (1,032 )       (601 )
Income tax expense       331         907         2,967         3,140  
Discrete impact from tax law change       8,613         -         8,613         -  
Stock-based compensation expense       5,894         2,019         12,727         8,023  
Other       -         -         -         (1,106 )
Adjusted EBITDA   $   8,470     $   7,438     $   32,617     $   26,502  
                 
Net (loss) income   $   (9,101 )   $   1,805     $   (2,440 )   $   5,710  
Stock-based compensation expense       5,894         2,019         12,727         8,023  
Amortization of intangible assets       1,114         1,185         4,574         4,738  
Discrete impact from tax law change       8,613         -         8,613         -  
Other       -         -         -         (1,106 )
Income tax effects of adjustments       (2,171 )       (1,526 )       (6,774 )       (4,925 )
Non-GAAP income   $   4,349     $   3,483     $   16,700     $   12,440  
                 
Shares used to compute non-GAAP income per share                
Basic       17,157         17,050         17,183         16,947  
Diluted       17,325         17,366         17,356         17,241  
Non-GAAP income per share                
Basic   $   0.25     $   0.20     $   0.97     $   0.73  
Diluted   $   0.25     $   0.20     $   0.96     $   0.72  
                 


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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