UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended: June 30, 2014
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to
Commission file number 001-34702
SPS COMMERCE, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 41-2015127 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
333 South Seventh Street, Suite 1000, Minneapolis, MN 55402
(Address of Principal Executive Offices, Including Zip Code)
(612) 435-9400
(Registrants Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | x | Accelerated Filer | ¨ | |||
Non-Accelerated Filer | ¨ (Do not check if a smaller reporting company) | Smaller Reporting Company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares of the registrants common stock, par value $0.001 per share, outstanding at July 24, 2014 was 16,234,758 shares.
SPS COMMERCE, INC.
QUARTERLY REPORT ON FORM 10-Q
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains forward-looking statements regarding us, our business prospects and our results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those described under the heading Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We expressly disclaim any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Commission that advise interested parties of the risks and factors that may affect our business.
2
PART I. FINANCIAL INFORMATION
Item 1. | Financial Statements |
SPS COMMERCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except share amounts)
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
ASSETS | ||||||||
CURRENT ASSETS |
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Cash and cash equivalents |
$ | 136,508 | $ | 131,294 | ||||
Accounts receivable, less allowance for doubtful accounts of $242 and $237, respectively |
13,348 | 11,611 | ||||||
Deferred costs, current |
10,415 | 9,048 | ||||||
Deferred income taxes, current |
1,272 | 1,272 | ||||||
Prepaid expenses and other current assets |
3,346 | 2,850 | ||||||
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Total current assets |
164,889 | 156,075 | ||||||
PROPERTY AND EQUIPMENT, net |
9,036 | 9,922 | ||||||
GOODWILL |
25,487 | 25,487 | ||||||
INTANGIBLE ASSETS, net |
15,683 | 17,082 | ||||||
OTHER ASSETS |
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Deferred costs, net of current portion |
4,578 | 3,684 | ||||||
Deferred income taxes, net of current portion |
10,294 | 10,870 | ||||||
Other non-current assets |
205 | 210 | ||||||
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$ | 230,172 | $ | 223,330 | |||||
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LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
CURRENT LIABILITIES |
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Accounts payable |
$ | 2,999 | $ | 1,798 | ||||
Accrued compensation and benefits |
7,639 | 7,981 | ||||||
Accrued expenses and other current liabilities |
1,805 | 2,801 | ||||||
Deferred revenue, current |
6,912 | 6,335 | ||||||
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Total current liabilities |
19,355 | 18,915 | ||||||
OTHER LIABILITIES |
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Deferred revenue, less current portion |
10,017 | 8,785 | ||||||
Deferred rent |
2,663 | 2,857 | ||||||
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Total liabilities |
32,035 | 30,557 | ||||||
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COMMITMENTS and CONTINGENCIES |
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STOCKHOLDERS EQUITY |
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Preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding |
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Common stock, $0.001 par value; 55,000,000 shares authorized; 16,230,057 and 16,092,121 shares issued and outstanding, respectively |
16 | 16 | ||||||
Additional paid-in capital |
243,901 | 239,549 | ||||||
Accumulated deficit |
(45,780 | ) | (46,792 | ) | ||||
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Total stockholders equity |
198,137 | 192,773 | ||||||
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$ | 230,172 | $ | 223,330 | |||||
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
SPS COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share amounts)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenues |
$ | 31,100 | $ | 25,658 | $ | 60,039 | $ | 49,410 | ||||||||
Cost of revenues |
9,627 | 7,943 | 18,882 | 15,009 | ||||||||||||
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Gross profit |
21,473 | 17,715 | 41,157 | 34,401 | ||||||||||||
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Operating expenses |
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Sales and marketing |
11,570 | 9,647 | 22,454 | 18,872 | ||||||||||||
Research and development |
3,365 | 2,657 | 6,339 | 5,160 | ||||||||||||
General and administrative |
4,842 | 4,211 | 9,353 | 8,258 | ||||||||||||
Amortization of intangible assets |
682 | 717 | 1,399 | 1,434 | ||||||||||||
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Total operating expenses |
20,459 | 17,232 | 39,545 | 33,724 | ||||||||||||
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Income from operations |
1,014 | 483 | 1,612 | 677 | ||||||||||||
Other income (expense) |
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Interest income |
50 | 22 | 99 | 45 | ||||||||||||
Other income (expense), net |
35 | (48 | ) | (21 | ) | (132 | ) | |||||||||
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Total other income (expense), net |
85 | (26 | ) | 78 | (87 | ) | ||||||||||
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Income before income taxes |
1,099 | 457 | 1,690 | 590 | ||||||||||||
Income tax expense |
(460 | ) | (169 | ) | (678 | ) | (103 | ) | ||||||||
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Net income |
$ | 639 | $ | 288 | $ | 1,012 | $ | 487 | ||||||||
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Net income per share |
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Basic |
$ | 0.04 | $ | 0.02 | $ | 0.06 | $ | 0.03 | ||||||||
Diluted |
$ | 0.04 | $ | 0.02 | $ | 0.06 | $ | 0.03 | ||||||||
Weighted average common shares used to compute net income per share |
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Basic |
16,210 | 15,076 | 16,183 | 14,983 | ||||||||||||
Diluted |
16,768 | 15,785 | 16,799 | 15,677 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SPS COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Six Months Ended | ||||||||
June 30, | ||||||||
2014 | 2013 | |||||||
Cash flows from operating activities |
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Net income |
$ | 1,012 | $ | 487 | ||||
Reconciliation of net income to net cash provided by operating activities |
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Deferred income taxes |
576 | 31 | ||||||
Depreciation and amortization of property and equipment |
2,823 | 2,353 | ||||||
Amortization of intangible assets |
1,399 | 1,434 | ||||||
Provision for doubtful accounts |
323 | 185 | ||||||
Stock-based compensation |
2,698 | 2,035 | ||||||
Changes in assets and liabilities |
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Accounts receivable |
(2,060 | ) | (951 | ) | ||||
Deferred costs |
(2,260 | ) | (1,265 | ) | ||||
Prepaid expenses and other current assets |
(491 | ) | 2,512 | |||||
Accounts payable |
1,202 | (207 | ) | |||||
Accrued compensation and benefits |
(342 | ) | 473 | |||||
Accrued expenses and other current liabilities |
421 | 497 | ||||||
Deferred rent |
(170 | ) | | |||||
Deferred revenue |
1,809 | 1,049 | ||||||
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Net cash provided by operating activities |
6,940 | 8,633 | ||||||
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Cash flows from investing activities |
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Purchases of property and equipment |
(3,380 | ) | (1,737 | ) | ||||
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Net cash used in investing activities |
(3,380 | ) | (1,737 | ) | ||||
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Cash flows from financing activities |
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Net proceeds from exercise of options to purchase common stock |
922 | 1,597 | ||||||
Excess tax benefit from exercise of options to purchase common stock |
60 | 40 | ||||||
Net proceeds from employee stock purchase plan |
672 | 551 | ||||||
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Net cash provided by financing activities |
1,654 | 2,188 | ||||||
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Net increase in cash and cash equivalents |
5,214 | 9,084 | ||||||
Cash and cash equivalents at beginning of period |
131,294 | 66,050 | ||||||
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Cash and cash equivalents at end of period |
$ | 136,508 | $ | 75,134 | ||||
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
SPS COMMERCE, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE A General
Business Description
We are a leading provider of cloud-based supply chain management solutions, providing prewired, proven integrations and comprehensive retail performance analytics to thousands of customers worldwide. We provide our solutions through the SPS Commerce platform, a cloud-based software suite that improves the way suppliers, retailers, distributors and other customers manage and fulfill orders. We derive the majority of our revenues from thousands of monthly recurring subscriptions from businesses that utilize our solutions.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of SPS Commerce, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP. We have included all normal recurring adjustments considered necessary to give a fair statement of our financial position, results of operations and cash flows for the interim periods shown. Operating results for these interim periods are not necessarily indicative of the results to be expected for the full year. The December 31, 2013 condensed consolidated balance sheet data was derived from our audited financial statements at that date. For further information, refer to the consolidated financial statements and accompanying notes for the year ended December 31, 2013 included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 20, 2014.
Use of Estimates
Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Significant Accounting Policies
During the six months ended June 30, 2014, there were no material changes in our significant accounting policies. See Note A to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on February 20, 2014, for additional information regarding our significant accounting policies.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued new accounting requirements for the recognition of revenue from contracts with customers. These new requirements are effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. We are currently evaluating the impact of this guidance on our results of operations and financial position.
6
NOTE B Goodwill and Intangible Assets, net
There was no change in our goodwill for the six months ended June 30, 2014.
Intangible assets included the following (in thousands):
June 30, 2014 | December 31, 2013 | |||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||
Amount | Amortization | Net | Amount | Amortization | Net | |||||||||||||||||||
Subscriber relationships |
$ | 23,160 | $ | (7,638 | ) | $ | 15,522 | $ | 23,160 | $ | (6,376 | ) | $ | 16,784 | ||||||||||
Non-competition agreements |
1,710 | (1,549 | ) | 161 | 1,710 | (1,412 | ) | 298 | ||||||||||||||||
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$ | 24,870 | $ | (9,187 | ) | $ | 15,683 | $ | 24,870 | $ | (7,788 | ) | $ | 17,082 | |||||||||||
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Amortization expense for intangible assets was $682,000 and $1.4 million for the three and six months ended June 30, 2014, and $717,000 and $1.4 million for the three and six months ended June 30, 2013, respectively.
At June 30, 2014, future amortization expense for intangible assets was as follows (in thousands):
Remainder of 2014 |
$ | 1,288 | ||
2015 |
2,578 | |||
2016 |
2,578 | |||
2017 |
2,557 | |||
2018 |
2,062 | |||
Thereafter |
4,620 | |||
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$ | 15,683 | |||
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NOTE C Line of Credit
We have a revolving credit agreement with JPMorgan Chase Bank, N.A. which provides for a $20 million revolving credit facility that we may draw upon from time to time, subject to certain terms and conditions, and will mature on September 30, 2016.
There were no borrowings outstanding at June 30, 2014 and we were in compliance with all covenants under the revolving credit agreement as of that date.
NOTE D Stock-Based Compensation
Our equity compensation plans provide for the grant of incentive and nonqualified stock options, as well as other stock-based awards including restricted stock and restricted stock units, to employees, non-employee directors and other consultants who provide services to us. Restricted stock awards result in the issuance of new shares when granted. For other stock-based awards, new shares are issued when the award is exercised, vested or released according to the terms of the agreement. In January 2014, 965,527 additional shares were reserved for future issuance under our 2010 Equity Incentive Plan. At June 30, 2014, there were approximately 2.6 million shares available for grant under approved equity compensation plans.
7
We recorded non-cash stock-based compensation expense of $1.4 million and $2.7 million for the three and six months ended June 30, 2014, and $1.1 million and $2.0 million for the three and six months ended June 30, 2013, respectively. This expense was allocated as follows (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Cost of revenues |
$ | 152 | $ | 122 | $ | 305 | $ | 225 | ||||||||
Operating expenses |
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Sales and marketing |
472 | 386 | 954 | 728 | ||||||||||||
Research and development |
95 | 63 | 188 | 124 | ||||||||||||
General and administrative |
640 | 540 | 1,251 | 958 | ||||||||||||
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Total stock-based compensation expense |
$ | 1,359 | $ | 1,111 | $ | 2,698 | $ | 2,035 | ||||||||
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As of June 30, 2014, there was approximately $10.9 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a straight line basis over a weighted average period of 2.8 years.
Stock Options
Stock options generally vest over four years and have a contractual term of seven to ten years from the date of grant. Our stock option activity was as follows:
Weighted Average | ||||||||
Options | Exercise Price | |||||||
(#) | ($/share) | |||||||
Outstanding at December 31, 2013 |
1,097,223 | $ | 19.62 | |||||
Granted |
143,753 | 63.48 | ||||||
Exercised |
(93,744 | ) | 9.77 | |||||
Forfeited |
(9,883 | ) | 40.50 | |||||
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Outstanding at June 30, 2014 |
1,137,349 | 25.79 | ||||||
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Of the total outstanding options at June 30, 2014, 717,306 were exercisable with a weighted average exercise price of $16.66 per share. The total outstanding options had a weighted average remaining contractual life of 5.7 years.
The weighted average fair value per share of options granted during the first six months of 2014 was $24.69 and this was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
Weighted-average volatility |
43.7 | % | ||
Expected dividend yield |
0 | % | ||
Expected life (in years) |
4.4 | |||
Risk-free interest rate |
1.06-1.55 | % |
Restricted Stock Units and Awards
Restricted stock units vest over four years and, upon vesting, the holder is entitled to receive shares of our common stock. With restricted stock awards, shares of our common stock are issued when the award is granted and the restrictions lapse over one year.
8
Our restricted stock units activity was as follows:
Restricted Stock | Weighted Average | |||||||
Units | Grant Date Fair | |||||||
(#) | Value ($/share) | |||||||
Outstanding at December 31, 2013 |
102,644 | $ | 33.77 | |||||
Granted |
38,420 | 65.88 | ||||||
Vested and common stock issued |
(26,557 | ) | 32.27 | |||||
Forfeited |
(1,145 | ) | 35.42 | |||||
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Outstanding at June 30, 2014 |
113,362 | 44.99 | ||||||
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The number of restricted stock units outstanding at June 30, 2014 included 12,063 units that have vested but for which shares of common stock have not yet been issued pursuant to the terms of the agreement.
Our restricted stock awards activity was as follows:
Restricted Stock | Weighted Average | |||||||
Awards | Grant Date Fair | |||||||
(#) | Value ($/share) | |||||||
Outstanding at December 31, 2013 |
1,422 | $ | 48.66 | |||||
Restricted common stock issued |
5,352 | 51.74 | ||||||
Restrictions lapsed |
(2,523 | ) | 50.29 | |||||
Forfeited |
(237 | ) | 48.66 | |||||
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Outstanding at June 30, 2014 |
4,014 | 51.74 | ||||||
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Employee Stock Purchase Plan
Our employee stock purchase plan allows participating employees to purchase shares of our common stock at a discount through payroll deductions. The plan is available to all employees subject to certain eligibility requirements. Participating employees may purchase common stock, on a voluntary after-tax basis, at a price that is the lower of 85% of the fair market value of one share of common stock at the beginning or end of each stock purchase period. The plan consists of two six-month offering periods, beginning on January 1 and July 1 of each calendar year. A total of 1.2 million shares of common stock are reserved for issuance under the plan.
For the offering period that began on January 1, 2014 and ended June 30, 2014, we withheld approximately $680,000 from employees participating in the plan. On June 30, 2014, approximately $672,000 of these funds was used to purchase 12,520 shares on behalf of the employees participating in the plan. The remaining funds are expected to be refunded to employees pursuant to the requirements of the plan.
For the three and six months ended June 30, 2014, we recorded approximately $95,000 and $201,000, respectively, of stock-based compensation expense associated with the employee stock purchase plan. The fair value was estimated based on the market price of our common stock at the beginning of each offering period and using the Black-Scholes option pricing model with the following assumptions:
Expected volatility |
48.9 | % | ||
Expected dividend yield |
0 | % | ||
Expected life (in years) |
0.50 | |||
Risk-free interest rate |
0.10 | % |
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NOTE E Income Taxes
We record our interim provision for income taxes by applying our estimated annual effective tax rate to our year-to-date pretax income and adjust the provision for discrete tax items recorded in the period. Differences between our effective tax rate and statutory tax rates are primarily due to the impact of meals and entertainment expense, employee stock purchase plan expense, as well as the federal R&D credit.
We recorded income tax expense of $460,000 and $678,000 for the three and six months ended June 30, 2014. We recorded income tax expense of $169,000 and $103,000 for the three and six months ended June 30, 2013. Our provisions for income taxes included current foreign and state income tax expense, as well as deferred tax expense.
We are subject to U.S federal income tax as well as income tax in various state and international jurisdictions. We are generally subject to tax examinations for all prior years due to our net operating loss carryforwards. As of June 30, 2014, we were not under any income tax audits by tax authorities.
As of June 30, 2014 we do not have any unrecognized tax benefits. It is our practice to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We do not expect any material changes in our unrecognized tax positions over the next 12 months.
NOTE F Net Income Per Share
Basic net income per share has been computed using the weighted average number of shares of common stock outstanding during each period. Diluted net income per share also includes the impact of our outstanding potential common shares, including options and restricted stock units. Potential common shares that are anti-dilutive are excluded from the calculation of diluted net income per share.
The following table presents the components of the computation of basic and diluted net income per share for the periods indicated (in thousands, except per share amounts):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator |
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Net income |
$ | 639 | $ | 288 | $ | 1,012 | $ | 487 | ||||||||
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Denominator |
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Weighted average common shares outstanding, basic |
16,210 | 15,076 | 16,183 | 14,983 | ||||||||||||
Options to purchase common stock |
528 | 665 | 572 | 646 | ||||||||||||
Restricted stock units |
30 | 39 | 43 | 45 | ||||||||||||
Employee stock purchase plan |
| 5 | 1 | 3 | ||||||||||||
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Weighted average common shares outstanding, diluted |
16,768 | 15,785 | 16,799 | 15,677 | ||||||||||||
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Net income per share |
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Basic |
$ | 0.04 | $ | 0.02 | $ | 0.06 | $ | 0.03 | ||||||||
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Diluted |
$ | 0.04 | $ | 0.02 | $ | 0.06 | $ | 0.03 | ||||||||
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The effect of approximately 126,000 and 16,000 outstanding potential common shares was excluded from the calculation of diluted net income per share for each of the three and six months ended June 30, 2014 and 2013, respectively, because they were anti-dilutive.
10
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Overview
We are a leading provider of cloud-based supply chain management solutions, providing prewired, proven integrations and comprehensive retail performance analytics to thousands of customers worldwide. We provide our solutions through the SPS Commerce platform, a cloud-based software suite that improves the way suppliers, retailers, distributors and other customers manage and fulfill orders. We derive the majority of our revenues from thousands of monthly recurring subscriptions from businesses that utilize our solutions.
We plan to continue to grow our business by further penetrating the supply chain management market, increasing revenues from our customers as their businesses grow, expanding our distribution channels, expanding our international presence and, from time to time, developing new solutions and applications. We also intend to selectively pursue acquisitions that will add customers, allow us to expand into new regions or allow us to offer new functionalities.
For the three months ended June 30, 2014, our revenues were $31.1 million, an increase of 21% from the comparable period in 2013, and represented our 54th consecutive quarter of increased revenues. Total operating expenses increased 19% and net income increased 122% for the same period in 2014 from 2013. Similar results were experienced for the six months ended June 30, 2014 with increased revenues of 22%, increased operating expenses of 17% and increased net income of 108% compared to the same period in 2013.
Key Financial Terms and Metrics
We have several key financial terms and metrics, including annualized average recurring revenues per recurring revenue customer, which we also refer to as wallet share. During the six months ended June 30, 2014, there were no changes in the definitions of our key financial terms and metrics, which are discussed in more detail under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 20, 2014.
To supplement our financial statements, we also provide investors with Adjusted EBITDA and non-GAAP income per share, both of which are non-GAAP financial measures. We believe that these non-GAAP measures provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare the companys performance to prior periods for trend analyses and planning purposes. Adjusted EBITDA is also used for purposes of determining executive and senior management incentive compensation. These measures are also presented to our board of directors.
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 of America (GAAP). These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in our 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 Managements Discussion and Analysis of Financial Condition and Results of Operations.
11
Critical Accounting Policies and Estimates
This discussion of our financial condition and results of operations is based upon our condensed consolidated financial statements, which are prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
A critical accounting policy is one that is both material to the presentation of our financial statements and requires us to make difficult, subjective or complex judgments for uncertain matters that could have a material effect on our financial condition and results of operations. Accordingly, we believe that our policies for revenue recognition, the allowance for doubtful accounts, income taxes and stock-based compensation are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
During the six months ended June 30, 2014, there were no changes in our significant accounting policies or estimates. See Note A to our consolidated financial statements included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on February 20, 2014, for additional information regarding our accounting policies.
12
Results of Operations
The following table presents our results of operations for the periods indicated (dollars in thousands):
Three Months Ended June 30, | ||||||||||||||||||||||||
2014 | 2013 | Change | ||||||||||||||||||||||
% of revenue | % of revenue | $ | % | |||||||||||||||||||||
Revenues |
$ | 31,100 | 100.0 | % | $ | 25,658 | 100.0 | % | $ | 5,442 | 21.2 | % | ||||||||||||
Cost of revenues |
9,627 | 31.0 | 7,943 | 31.0 | 1,684 | 21.2 | ||||||||||||||||||
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Gross profit |
21,473 | 69.0 | 17,715 | 69.0 | 3,758 | 21.2 | ||||||||||||||||||
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Operating expenses |
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Sales and marketing |
11,570 | 37.2 | 9,647 | 37.6 | 1,923 | 19.9 | ||||||||||||||||||
Research and development |
3,365 | 10.8 | 2,657 | 10.4 | 708 | 26.6 | ||||||||||||||||||
General and administrative |
4,842 | 15.6 | 4,211 | 16.4 | 631 | 15.0 | ||||||||||||||||||
Amortization of intangible assets |
682 | 2.2 | 717 | 2.8 | (35 | ) | (4.9 | ) | ||||||||||||||||
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Total operating expenses |
20,459 | 65.8 | 17,232 | 67.2 | 3,227 | 18.7 | ||||||||||||||||||
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Income from operations |
1,014 | 3.3 | 483 | 1.9 | 531 | 109.9 | ||||||||||||||||||
Other income (expense) |
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Interest income |
50 | 0.2 | 22 | 0.1 | 28 | 127.3 | ||||||||||||||||||
Other income (expense), net |
35 | 0.1 | (48 | ) | (0.2 | ) | 83 | * | ||||||||||||||||
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Total other income (expense), net |
85 | 0.3 | (26 | ) | (0.1 | ) | 111 | * | ||||||||||||||||
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Income before income taxes |
1,099 | 3.5 | 457 | 1.8 | 642 | 140.5 | ||||||||||||||||||
Income tax expense |
(460 | ) | (1.5 | ) | (169 | ) | (0.7 | ) | 291 | 172.2 | ||||||||||||||
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Net income |
$ | 639 | 2.1 | $ | 288 | 1.1 | 351 | 121.9 | ||||||||||||||||
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Six Months Ended June 30, | ||||||||||||||||||||||||
2014 | 2013 | Change | ||||||||||||||||||||||
% of revenue | % of revenue | $ | % | |||||||||||||||||||||
Revenues |
$ | 60,039 | 100.0 | % | $ | 49,410 | 100.0 | % | $ | 10,629 | 21.5 | % | ||||||||||||
Cost of revenues |
18,882 | 31.4 | 15,009 | 30.4 | 3,873 | 25.8 | ||||||||||||||||||
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Gross profit |
41,157 | 68.6 | 34,401 | 69.6 | 6,756 | 19.6 | ||||||||||||||||||
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Operating expenses |
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Sales and marketing |
22,454 | 37.4 | 18,872 | 38.2 | 3,582 | 19.0 | ||||||||||||||||||
Research and development |
6,339 | 10.6 | 5,160 | 10.4 | 1,179 | 22.8 | ||||||||||||||||||
General and administrative |
9,353 | 15.6 | 8,258 | 16.7 | 1,095 | 13.3 | ||||||||||||||||||
Amortization of intangible assets |
1,399 | 2.3 | 1,434 | 2.9 | (35 | ) | (2.4 | ) | ||||||||||||||||
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Total operating expenses |
39,545 | 65.9 | 33,724 | 68.3 | 5,821 | 17.3 | ||||||||||||||||||
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Income from operations |
1,612 | 2.7 | 677 | 1.4 | 935 | 138.1 | ||||||||||||||||||
Other income (expense) |
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Interest income |
99 | 0.2 | 45 | 0.1 | 54 | 120.0 | ||||||||||||||||||
Other expense |
(21 | ) | | (132 | ) | (0.3 | ) | 111 | (84.1 | ) | ||||||||||||||
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Total other income (expense), net |
78 | 0.1 | (87 | ) | (0.2 | ) | 165 | * | ||||||||||||||||
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Income before income taxes |
1,690 | 2.8 | 590 | 1.2 | 1,100 | 186.4 | ||||||||||||||||||
Income tax expense |
(678 | ) | (1.1 | ) | (103 | ) | (0.2 | ) | 575 | 558.3 | ||||||||||||||
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Net income |
$ | 1,012 | 1.7 | $ | 487 | 1.0 | 525 | 107.8 | ||||||||||||||||
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Due to rounding, totals may not equal the sum of the line items in the table above.
* | Percentage is not meaningful. |
13
Three and Six Months Ended June 30, 2014 compared to Three and Six Months Ended June 30, 2013
Revenues. Revenues for the three months ended June 30, 2014 increased $5.4 million, or 21%, to $31.1 million from $25.7 million for the same period in 2013. Revenues for the six months ended June 30, 2014 increased $10.6 million, or 22%, to $60.0 million from $49.4 million for the same period in 2013.
The increase in revenues for both the three and six month periods resulted from two primary factors: the increase in recurring revenue customers and the increase in annualized average recurring revenues per recurring revenue customer, which we also refer to as wallet share.
| The number of recurring revenue customers increased 10% to 20,745 at June 30, 2014 from 18,871 at June 30, 2013. |
| Annualized average recurring revenues per recurring revenue customer, or wallet share, increased 12% to $5,467 for the three months ended June 30, 2014 from $4,869 for the same period in 2013. This increase in wallet share was primarily attributable to increased fees resulting from increased usage of our solutions by our recurring revenue customers and growth in larger customers. |
Recurring revenues from recurring revenue customers accounted for 90% of our total revenues for each of the three and six months ended June 30, 2014, compared to 88% and 89%, respectively, for the same periods in 2013. We anticipate that the number of recurring revenue customers and wallet share will continue to increase as we increase the number of solutions we offer and increase the penetration of those solutions across our customer base.
Cost of Revenues. Cost of revenues for the three months ended June 30, 2014 increased $1.7 million, or 21%, to $9.6 million from $7.9 million for the same period in 2013. Cost of revenues for the six months ended June 30, 2014 increased $3.9 million, or 26%, to $18.9 million from $15.0 million for the same period in 2013. The increase in cost of revenues for the three and six month periods in 2014 was primarily due to increased headcount in 2014 which resulted in higher personnel costs. Also contributing to the increase for both periods were increased expenses for software subscriptions in 2014 as compared to 2013. As a percentage of revenues, cost of revenues was 31% for each of the three months ended June 30, 2014 and 2013, compared to 31% and 30%, respectively, for the same periods in 2013. Going forward, we anticipate that cost of revenues will increase in absolute dollars as we continue to expand our business.
Sales and Marketing Expenses. Sales and marketing expenses for the three months ended June 30, 2014 increased $1.9 million, or 20%, to $11.6 million from $9.6 million for the same period in 2013. Sales and marketing expenses for the six months ended June 30, 2014 increased $3.6 million, or 19%, to $22.5 million from $18.9 million for the same period in 2013. The increase in sales and marketing expenses for the three and six month periods in 2014 was primarily due to increased headcount in 2014, which resulted in higher personnel costs, as well as increased commissions earned by sales personnel from new business. We also had increased promotional, occupancy, depreciation and stock-based compensation expenses in 2014 as compared to 2013. As a percentage of revenues, sales and marketing expenses were 37% for each of the three and six months ended June 30, 2014 compared to 38% for each of the comparable periods in 2013. As we expand our business, we will continue to add resources to our sales and marketing efforts over time, and we expect that these expenses will continue to increase in absolute dollars.
Research and Development Expenses. Research and development expenses for the three months ended June 30, 2014 increased $708,000, or 27%, to $3.4 million from $2.7 million for the same period in 2013. Research and development expenses for the six months ended June 30, 2014 increased $1.2 million, or 23%, to $6.3 million from $5.2 million for the same period in 2013. The increased research and development expenses for the three and six month periods in 2014 were primarily due to increased headcount in 2014, which resulted in higher personnel costs. We also had increased expenses for depreciation in 2014 as compared to 2013. As a percentage of revenues, research and development expenses were 11% for each of the three and six months ended June 30, 2014, compared to 10% for each of the same periods in 2013. As we enhance and expand our solutions and applications, we expect that research and development expenses will continue to increase in absolute dollars.
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General and Administrative Expenses. General and administrative expenses for the three months ended June 30, 2014 increased $631,000, or 15%, to $4.8 million from $4.2 million for the same period in 2013. General and administrative expenses for the six months ended June 30, 2014 increased $1.1 million, or 13%, to $9.4 million from $8.3 million for the same period in 2013. The increase in general and administrative expenses for the three and six month periods in 2014 was primarily due to increased stock-based compensation, legal costs and maintenance expenses for computer software and hardware in 2014 as compared to 2013. As a percentage of revenues, general and administrative expenses were 16% for each of the three months ended June 30, 2014 and 2013, compared to 16% and 17%, respectively, for the same periods in 2013. Going forward, we expect that general and administrative expenses will continue to increase in absolute dollars as we expand our business.
Income Tax Expense. We recorded income tax expense of $460,000 and $678,000 for the three and six months ended June 30, 2014. We recorded income tax expense of $169,000 and $103,000 for the three and six months ended June 30, 2013. Our provisions for income taxes included current foreign and state income tax expense, as well as deferred tax expense. We expect that our annual effective income tax rate will be approximately 40%.
The increase in income tax expense for the three and six months ended June 30, 2014, compared to the same periods in 2013, was primarily due to the increase in pretax book income in 2014. In addition, there was a discrete tax benefit of $117,000 in 2013 for the retroactive benefit of the 2012 federal R&D credit. The American Taxpayer Relief Act of 2012 was enacted on January 2, 2013 and extended the federal R&D credit from January 1, 2012 through December 31, 2013.
Adjusted EBITDA. Adjusted EBITDA, which is a non-GAAP measure of financial performance, consists of net income plus depreciation and amortization, interest expense, interest income, income tax expense, non-cash, stock-based compensation expense and other adjustments as necessary for a fair presentation. For second quarter 2014, other adjustments included the impact of a use tax refund related to items previously expensed. The following table provides a reconciliation of net income to Adjusted EBITDA (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net income |
$ | 639 | $ | 288 | $ | 1,012 | $ | 487 | ||||||||
Depreciation and amortization of property and equipment |
1,519 | 1,182 | 2,823 | 2,353 | ||||||||||||
Amortization of intangible assets |
682 | 717 | 1,399 | 1,434 | ||||||||||||
Interest income |
(50 | ) | (22 | ) | (99 | ) | (45 | ) | ||||||||
Income tax expense |
460 | 169 | 678 | 103 | ||||||||||||
Other |
(69 | ) | | (69 | ) | | ||||||||||
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EBITDA |
3,181 | 2,334 | 5,744 | 4,332 | ||||||||||||
Stock-based compensation expense |
1,359 | 1,111 | 2,698 | 2,035 | ||||||||||||
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Adjusted EBITDA |
$ | 4,540 | $ | 3,445 | $ | 8,442 | $ | 6,367 | ||||||||
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15
Non-GAAP Income Per Share. Non-GAAP income per share, which is also a non-GAAP measure of financial performance, 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. The following table provides a reconciliation of net income to non-GAAP income per share (in thousands, except per share amounts):
Three Months Ended June 30, |
Six Months Ended June 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
Net income |
$ | 639 | $ | 288 | $ | 1,012 | $ | 487 | ||||||||
Stock-based compensation expense |
1,359 | 1,111 | 2,698 | 2,035 | ||||||||||||
Amortization of intangible assets |
682 | 717 | 1,399 | 1,434 | ||||||||||||
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Non-GAAP income |
$ | 2,680 | $ | 2,116 | $ | 5,109 | $ | 3,956 | ||||||||
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Shares used to compute non-GAAP income per share |
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Basic |
16,210 | 15,076 | 16,183 | 14,983 | ||||||||||||
Diluted |
16,768 | 15,785 | 16,799 | 15,677 | ||||||||||||
Non-GAAP income per share |
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Basic |
$ | 0.17 | $ | 0.14 | $ | 0.32 | $ | 0.26 | ||||||||
Diluted |
$ | 0.16 | $ | 0.13 | $ | 0.30 | $ | 0.25 |
Liquidity and Capital Resources
At June 30, 2014, our principal sources of liquidity were cash and cash equivalents of $136.5 million and accounts receivable, net of allowance for doubtful accounts, of $13.3 million. Our working capital at June 30, 2014 was $145.5 million compared to $137.2 million at December 31, 2013. The increase in working capital from December 31, 2013 to June 30, 2014 resulted from the following:
| $5.2 million increase in cash and cash equivalents, due primarily to the $6.9 million of cash provided by operations and the $1.6 million of cash received from the exercise of stock options and proceeds from our employee stock purchase plan, reduced by the $3.4 million of cash used for capital expenditures; |
| $1.7 million increase in net accounts receivable, as new accounts exceeded collections of outstanding balances for the six months ended June 30, 2014; |
| $1.4 million increase in deferred costs, current, for expenses related to increased implementation resources and commission payments for new business; |
| $496,000 increase in prepaid expenses and other current assets due primarily to prepaid service contracts; |
| $1.2 million increase in accounts payable, primarily due to timing of payments; |
| $342,000 decrease in accrued compensation and benefits, due primarily to payroll timing; |
| $996,000 decrease in accrued expenses and other current liabilities due primarily to payments completed under a software licensing agreement; and |
| $577,000 increase in deferred revenue, current, due to new business for the six months ended June 30, 2014. |
16
Net Cash Flows from Operating Activities
Net cash provided by operating activities was $6.9 million for the six months ended June 30, 2014 compared to $8.6 million for the same period in 2013. The increase in net income, the changes in non-cash expenses, including increased depreciation and stock-based compensation, and the changes in our working capital accounts, including those discussed above, resulted in the overall decrease in net cash provided by operations.
Net Cash Flows from Investing Activities
Net cash used in investing activities was $3.4 million and $1.7 million for the six months ended June 30, 2014 and 2013, respectively, all for capital expenditures. Our capital expenditures are for supporting our business growth and existing customer base, as well as for our internal use such as equipment for our employees.
Net Cash Flows from Financing Activities
Net cash provided by financing activities was $1.7 million and $2.2 million for the six months ended June 30, 2014 and 2013, respectively, all related to the exercise of stock options and our employee stock purchase plan.
Credit Facility
We have a revolving credit agreement with JPMorgan Chase Bank, N.A. that will mature on September 30, 2016. The revolving credit agreement provides for a $20 million revolving credit facility that we may draw upon from time to time, subject to certain terms and conditions. There were no borrowings outstanding at June 30, 2014 and we were in compliance with all covenants under the revolving credit agreement as of that date.
Adequacy of Capital Resources
Our future capital requirements may vary significantly from those now planned and will depend on many factors, including the costs to develop and implement new solutions and applications, the sales and marketing resources needed to further penetrate our market and gain acceptance of new solutions and applications we develop, the expansion of our operations in the United States and internationally, the response of competitors to our solutions and applications and our use of capital for acquisitions, if any. Historically, we have experienced increases in our expenditures consistent with the growth in our operations and personnel, and we anticipate that our expenditures will continue to increase as we grow our business.
We believe our cash and cash equivalents and our cash flows from operations will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.
Inflation and changing prices did not have a material effect on our business during the six months ended June 30, 2014. We do not expect that inflation or changing prices will materially affect our business in the foreseeable future.
Our results of operations and cash flows are not materially affected by fluctuations in foreign currency exchange rates.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases.
17
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Interest Rate Sensitivity Risk
For fixed rate debt, interest rate changes affect the fair value of financial instruments but do not impact earnings or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant. The principal objectives of our investment activities are to preserve principal, provide liquidity and maximize income consistent with minimizing risk of material loss. The recorded carrying amounts of cash and cash equivalents approximate fair value due to their short maturities. We did not have any outstanding debt as of June 30, 2014. We therefore do not have any material risk to interest rate fluctuations unless we borrow under our credit facility in the future.
Foreign Currency Exchange Risk
Our results of operations and cash flows are not materially affected by fluctuations in foreign currency exchange rates.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2014.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
18
Item 1. | Legal Proceedings |
We are not currently subject to any material legal proceedings. From time to time, we may be named as a defendant in legal actions or otherwise be subject to claims arising from our normal business activities. Any such actions, even those that lack merit, could result in the expenditure of significant financial and managerial resources. We believe that we have obtained adequate insurance coverage or rights to indemnification in connection with potential legal proceedings that may arise.
Item 1A. | Risk Factors |
There have been no material changes in our risk factors from those disclosed under the heading Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on February 20, 2014.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Not Applicable.
Item 3. | Defaults Upon Senior Securities |
Not Applicable.
Item 4. | Mine Safety Disclosures |
Not Applicable.
Item 5. | Other Information |
Not Applicable.
Item 6. | Exhibits |
The exhibits filed as part of this Quarterly Report on Form 10-Q are listed in the Exhibit Index immediately following the signatures to this report.
19
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: July 31, 2014 | SPS COMMERCE, INC. | |||||
/s/ KIMBERLY K. NELSON | ||||||
Kimberly K. Nelson | ||||||
Executive Vice President and Chief Financial Officer (principal financial and accounting officer) |
20
EXHIBIT INDEX
Exhibit Number |
Description | |
3.1 | Certificate of Incorporation (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-3 (File No. 333-182097) filed with the Commission on June 13, 2012). | |
3.2 | Bylaws (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form S-1/A (File No. 333-163476) filed with the Commission on March 5, 2010). | |
31.1 | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith). | |
31.2 | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith). | |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). | |
101 | Interactive Data Files Pursuant to Rule 405 of Regulation S-T (filed herewith). |
21
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Archie C. Black, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of SPS Commerce, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and |
5. | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting. |
/s/ ARCHIE C. BLACK |
Archie C. Black |
President and Chief Executive Officer |
(principal executive officer) |
July 31, 2014 |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
I, Kimberly K. Nelson, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of SPS Commerce, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
4. | The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the Registrants most recent fiscal quarter (the Registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and |
5. | The Registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting. |
/s/ KIMBERLY K. NELSON |
Kimberly K. Nelson |
Executive Vice President and Chief Financial Officer |
(principal financial and accounting officer) |
July 31, 2014 |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. §1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of SPS Commerce, Inc. (the Company) for the period ended June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, the Chief Executive Officer and the Chief Financial Officer of the Company, hereby certify, pursuant to and for purposes of 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ ARCHIE C. BLACK |
Archie C. Black |
President and Chief Executive Officer |
/s/ KIMBERLY K. NELSON |
Kimberly K. Nelson |
Executive Vice President and Chief Financial Officer |
July 31, 2014