SPS Commerce Reports Third Quarter 2016 Financial Results
MINNEAPOLIS, Oct. 27, 2016 (GLOBE NEWSWIRE) -- SPS Commerce (NASDAQ:SPSC), a leader in retail cloud services, today announced financial results for the third quarter ended September 30, 2016.
Revenue was $49.3 million in the third quarter of 2016, compared to $40.4 million in the third quarter of 2015, reflecting 22% growth in revenue from the third quarter 2015. Recurring revenue grew 22% from the third quarter of 2015.
Net income in the third quarter of 2016 was $2.5 million or $0.14 per diluted share, compared to net income of $1.3 million, or $0.07 per diluted share, in the third quarter of 2015. Non-GAAP net income per diluted share was $0.27, compared to non-GAAP net income per diluted share of $0.22 in the third quarter of 2015. Adjusted EBITDA for the third quarter of 2016 increased 20% to $7.4 million, compared to the third quarter of 2015.
"SPS Commerce had a solid quarter," said Archie Black, President and CEO of SPS Commerce. "Omnichannel retail trends have placed tremendous pressure on the retail ecosystem causing retailers and suppliers to seek solutions that enable them to swiftly optimize inventory across multiple channels. SPS Commerce enables an unparalleled level of supply chain visibility, agility and collaboration and the evolution to omnichannel commerce continues to drive our success."
"We executed well in the third quarter as we continued to add customers and grow wallet share within our network," said Kim Nelson, Chief Financial Officer. "We are excited about our prospects as we go after the multibillion opportunity ahead of us and expand our market leadership."
Guidance
For the fourth quarter of 2016, revenue is expected to be in the range of $50.5 to $51.0 million. Fourth quarter net income per diluted share is expected to be in the range of $0.07 to $0.08 with fully diluted weighted average shares outstanding of approximately 17.4 million shares. Non-GAAP net income per diluted share is expected to be in the range of $0.26 to $0.27. Adjusted EBITDA is expected to be in the range of $6.9 to $7.4 million. Non-cash, share-based compensation expense is expected to be approximately $2.1 million, depreciation expense is expected to be approximately $1.8 million and amortization expense is expected to be approximately $1.2 million.
For the full year of 2016, revenue is expected to be in the range of $192.7 to $193.2 million, representing approximately 22% growth over 2015. Full year net income per diluted share is expected to be in the range of $0.29 to $0.31 with fully diluted weighted average shares outstanding of approximately 17.2 million shares. Non-GAAP net income per diluted share is expected to be in the range of $0.98 to $0.99. Adjusted EBITDA is expected to be in the range of $26.0 to $26.5 million. Non-cash, share-based compensation expense is expected to be approximately $8.1 million, depreciation expense is expected to be approximately $6.7 million, and amortization expense is expected to be approximately $4.8 million. Also for the year, we expect an annual effective tax rate of approximately 40%, with cash taxes for the year to be minimal.
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 #86463013 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 www.investors.spscommerce.com under the Events and Presentations menu. The replay will also be available on our website at www.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 63 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, and RETAIL UNIVERSE are marks of SPS Commerce, Inc. and Registered in the U.S. Patent and Trademark Office. 1=INFINITY logo, AS THE NETWORK GROWS, SO DOES YOUR OPPORTUNITY, INFINITE RETAIL POWER, RETAIL UNIVERSE, RSX, SPS logo, and others are further marks of SPS Commerce, Inc. These marks may be registered or otherwise protected in other countries.
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.
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 net 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 net 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.
Recent 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 discuss companies including an additional adjustment to non-GAAP income to reflect the income tax effects of the adjustments to GAAP net income, as discussed above. In reporting non-GAAP income results for the third quarter of 2016, as well as SPS Commerce's non-GAAP income guidance for the fourth quarter and full year of 2016, SPS Commerce has elected to calculate non-GAAP income consistent with its historical practice, without the tax adjustment discussed in the May C&DI. SPS Commerce believes that maintaining consistency with its historical practice, as well as SPS Commerce's original 2016 financial outlook, better allows SPS Commerce's investors to evaluate financial performance. SPS Commerce is evaluating the best way to revise its disclosure in accordance with the May C&DI while providing consistency to investors by Q1 2017.
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 fourth quarter and full year of 2016, 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, 2015, 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) | ||||||||
| September 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 109,635 | $ | 121,538 | ||||
| Short-term marketable securities | 15,616 | 7,517 | ||||||
| Accounts receivable, less allowance for doubtful accounts of $481 and $446, respectively | 21,361 | 17,615 | ||||||
| Deferred costs | 18,647 | 15,086 | ||||||
| Other current assets | 7,323 | 5,030 | ||||||
| Total current assets | 172,582 | 166,786 | ||||||
| PROPERTY AND EQUIPMENT, net | 14,830 | 13,620 | ||||||
| GOODWILL | 51,005 | 33,848 | ||||||
| INTANGIBLE ASSETS, net | 21,338 | 15,081 | ||||||
| MARKETABLE SECURITIES, non-current | 12,529 | 14,950 | ||||||
| OTHER ASSETS | ||||||||
| Deferred costs, non-current | 5,893 | 5,260 | ||||||
| Deferred income tax asset, non-current | 11,967 | 11,149 | ||||||
| Other non-current assets | 2,130 | 1,037 | ||||||
| Total assets | $ | 292,274 | $ | 261,731 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 2,442 | $ | 2,163 | ||||
| Accrued compensation | 11,796 | 11,150 | ||||||
| Accrued expenses | 2,509 | 1,987 | ||||||
| Deferred revenue | 12,157 | 7,740 | ||||||
| Deferred rent | 1,330 | 1,194 | ||||||
| Total current liabilities | 30,234 | 24,234 | ||||||
| OTHER LIABILITIES | ||||||||
| Deferred revenue, non-current | 10,962 | 11,005 | ||||||
| Deferred rent, non-current | 3,900 | 4,307 | ||||||
| Deferred income tax liability, non-current | 2,368 | - | ||||||
| Total liabilities | 47,464 | 39,546 | ||||||
| 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; 17,039,015 and 16,723,994 shares issued and outstanding, respectively | 17 | 17 | ||||||
| Additional paid-in capital | 281,536 | 265,265 | ||||||
| Accumulated deficit | (35,544 | ) | (39,449 | ) | ||||
| Accumulated other comprehensive loss | (1,199 | ) | (3,648 | ) | ||||
| Total stockholders' equity | 244,810 | 222,185 | ||||||
| Total liabilities and stockholders' equity | $ | 292,274 | $ | 261,731 | ||||
| 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, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues | $ | 49,284 | $ | 40,354 | $ | 142,234 | $ | 116,170 | ||||||||
| Cost of revenues | $ | 16,171 | 12,700 | $ | 47,024 | 36,607 | ||||||||||
| Gross profit | 33,113 | 27,654 | 95,210 | 79,563 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Sales and marketing | 16,526 | 13,795 | 49,092 | 41,640 | ||||||||||||
| Research and development | 5,574 | 4,494 | 16,185 | 13,058 | ||||||||||||
| General and administrative | 7,149 | 6,276 | 21,516 | 18,149 | ||||||||||||
| Amortization of intangible assets | 1,194 | 829 | 3,553 | 2,507 | ||||||||||||
| Total operating expenses | 30,443 | 25,394 | 90,346 | 75,354 | ||||||||||||
| Income from operations | 2,670 | 2,260 | 4,864 | 4,209 | ||||||||||||
| Other income (expense) | ||||||||||||||||
| Interest income, net | 112 | 49 | 408 | 123 | ||||||||||||
| Other expense, net | 947 | (86 | ) | 866 | (255 | ) | ||||||||||
| Total other income (expense), net | 1,059 | (37 | ) | 1,274 | (132 | ) | ||||||||||
| Income before income taxes | 3,729 | 2,223 | 6,138 | 4,077 | ||||||||||||
| Income tax expense | (1,220 | ) | (953 | ) | (2,233 | ) | (1,570 | ) | ||||||||
| Net income | $ | 2,509 | $ | 1,270 | $ | 3,905 | $ | 2,507 | ||||||||
| Net income per share | ||||||||||||||||
| Basic | $ | 0.15 | $ | 0.08 | $ | 0.23 | $ | 0.15 | ||||||||
| Diluted | $ | 0.14 | $ | 0.07 | $ | 0.23 | $ | 0.15 | ||||||||
| Weighted average common shares used to compute net income per share | ||||||||||||||||
| Basic | 17,001 | 16,605 | 16,916 | 16,525 | ||||||||||||
| Diluted | 17,341 | 17,054 | 17,185 | 17,040 | ||||||||||||
| SPS COMMERCE, INC. | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited; in thousands) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2016 | 2015 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 3,905 | $ | 2,507 | ||||
| Reconciliation of net income to net cash provided by operating activities | ||||||||
| Deferred income taxes | (818 | ) | 277 | |||||
| Share based earn-out liability | (1,103 | ) | - | |||||
| Depreciation and amortization of property and equipment | 4,883 | 4,693 | ||||||
| Amortization of intangible assets | 3,553 | 2,507 | ||||||
| Provision for doubtful accounts | 977 | 846 | ||||||
| Stock-based compensation | 6,004 | 4,756 | ||||||
| Changes in assets and liabilities, net of effect of acquisition | ||||||||
| Accounts receivable | (3,879 | ) | (3,427 | ) | ||||
| Deferred costs | (4,194 | ) | (2,904 | ) | ||||
| Other current and non-current assets | (2,840 | ) | (2,056 | ) | ||||
| Accounts payable | (90 | ) | (1,494 | ) | ||||
| Accrued compensation | 173 | 93 | ||||||
| Accrued expenses | 126 | (104 | ) | |||||
| Deferred revenue | 3,927 | 1,615 | ||||||
| Deferred rent | (271 | ) | (431 | ) | ||||
| Net cash provided by operating activities | 10,353 | 6,878 | ||||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (5,972 | ) | (6,504 | ) | ||||
| Purchases of marketable securities | (18,137 | ) | (17,509 | ) | ||||
| Maturities of marketable securities | 12,500 | - | ||||||
| Business acquisition, net of cash acquired | (18,062 | ) | - | |||||
| Net cash used in investing activities | (29,671 | ) | (24,013 | ) | ||||
| Cash flows from financing activities | ||||||||
| Net proceeds from exercise of options to purchase common stock | 3,520 | 3,273 | ||||||
| Excess tax benefit from exercise of options to purchase common stock | 2,710 | 1,179 | ||||||
| Net proceeds from employee stock purchase plan | 786 | 741 | ||||||
| Net cash provided by financing activities | 7,016 | 5,193 | ||||||
| Effect of foreign currency exchange rate changes | 399 | (966 | ) | |||||
| Net decrease in cash and cash equivalents | (11,903 | ) | (12,908 | ) | ||||
| Cash and cash equivalents at beginning of period | 121,538 | 130,795 | ||||||
| Cash and cash equivalents at end of period | $ | 109,635 | $ | 117,887 | ||||
| SPS COMMERCE, INC. | |||||||||||||||||
| NON-GAAP RECONCILIATION | |||||||||||||||||
| (Unaudited; in thousands, except per share amounts) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Net income | $ | 2,509 | $ | 1,270 | $ | 3,905 | $ | 2,507 | |||||||||
| Depreciation and amortization of property | |||||||||||||||||
| and equipment | 1,624 | 1,584 | 4,883 | 4,693 | |||||||||||||
| Amortization of intangible assets | 1,194 | 829 | 3,553 | 2,507 | |||||||||||||
| Interest income, net | (112 | ) | (49 | ) | (408 | ) | (123 | ) | |||||||||
| Income tax expense | 1,220 | 953 | 2,233 | 1,570 | |||||||||||||
| Other | (1,034 | ) | - | (1,106 | ) | - | |||||||||||
| EBITDA | 5,401 | 4,587 | 13,060 | 11,154 | |||||||||||||
| Stock-based compensation expense | 2,012 | 1,610 | 6,004 | 4,756 | |||||||||||||
| Adjusted EBITDA | $ | 7,413 | $ | 6,197 | $ | 19,064 | $ | 15,910 | |||||||||
| Net income | $ | 2,509 | $ | 1,270 | $ | 3,905 | $ | 2,507 | |||||||||
| Stock-based compensation expense | 2,012 | 1,610 | 6,004 | 4,756 | |||||||||||||
| Amortization of intangible assets | 1,194 | 829 | 3,553 | 2,507 | |||||||||||||
| Other | (1,034 | ) | - | (1,106 | ) | - | |||||||||||
| Non-GAAP income | $ | 4,681 | $ | 3,709 | $ | 12,356 | $ | 9,770 | |||||||||
| Shares used to compute non-GAAP income | |||||||||||||||||
| per share | |||||||||||||||||
| Basic | 17,001 | 16,605 | 16,916 | 16,525 | |||||||||||||
| Diluted | 17,341 | 17,054 | 17,185 | 17,040 | |||||||||||||
| Non-GAAP income per share | |||||||||||||||||
| Basic | $ | 0.28 | $ | 0.22 | $ | 0.73 | $ | 0.59 | |||||||||
| Diluted | $ | 0.27 | $ | 0.22 | $ | 0.72 | $ | 0.57 | |||||||||
Contact: Investor Relations The Blueshirt Group Lisa Laukkanen Nicole Gunderson SPSC@blueshirtgroup.com 415-217-7722 Kay Rindels SPS Commerce 866-245-8100 krindels@spscommerce.com