SPS Commerce Reports Third Quarter 2020 Financial Results
Revenue was
Net income in the third quarter of 2020 was
Adjusted EBITDA for the third quarter of 2020 increased 29% to
“Trading partners across the retail supply chain continue to rely on
“Recent trends in retail have accelerated the pace of EDI adoption. We expect this trend to continue as retailers and suppliers adapt and embrace e-commerce, driving demand for our fulfillment solution.” said
Guidance
For the fourth quarter of 2020, revenue is expected to be in the range of
For the full year of 2020, revenue is expected to be in the range of
Quarterly Conference Call
About
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, investment income (interest income/expense, realized investments gain/loss excluding realized gain/loss from foreign currency on investments), income tax expense, stock-based compensation expense, realized gain/loss from foreign currency on cash and investments held, 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, realized loss from foreign currency on cash and investments held, 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 includes an adjustment to non-GAAP income to reflect the income tax effects of the adjustments to GAAP net income. 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. 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
Forward-Looking Statements
This press release contains 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, our positioning for the future, our performance for the fourth quarter and full year of 2020, and any statements about the future effect of the COVID-19 pandemic on our business, customers or the global economy and our business prospects, all of which fall 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, 2019, 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.
Contact:
Investor Relations
SPSC@blueshirtgroup.com
415-217-4962
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Unaudited; in thousands, except shares) | ||||||||
| 2020 | 2019 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 208,930 | $ | 179,252 | ||||
| Short-term investments | 52,300 | 34,284 | ||||||
| Accounts receivable | 34,048 | 33,001 | ||||||
| Allowance for credit losses | (3,759 | ) | (1,469 | ) | ||||
| Accounts receivable, net | 30,289 | 31,532 | ||||||
| Deferred costs | 36,562 | 35,274 | ||||||
| Other assets | 8,927 | 11,279 | ||||||
| Total current assets | 337,008 | 291,621 | ||||||
| PROPERTY AND EQUIPMENT, less accumulated depreciation of |
25,053 | 23,752 | ||||||
| OPERATING LEASE RIGHT-OF-USE ASSETS | 14,092 | 15,744 | ||||||
| 76,543 | 76,845 | |||||||
| INTANGIBLE ASSETS, net | 18,575 | 22,668 | ||||||
| INVESTMENTS | 2,476 | — | ||||||
| OTHER ASSETS | ||||||||
| Deferred costs, non-current | 11,571 | 11,667 | ||||||
| Deferred income tax assets | 140 | 2,630 | ||||||
| Other assets, non-current | 2,228 | 2,513 | ||||||
| Total assets | $ | 487,686 | $ | 447,440 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | 5,036 | $ | 4,274 | ||||
| Accrued compensation | 19,374 | 22,303 | ||||||
| Accrued expenses | 6,042 | 6,207 | ||||||
| Deferred revenue | 35,582 | 31,463 | ||||||
| Operating lease liabilities | 4,355 | 3,783 | ||||||
| Total current liabilities | 70,389 | 68,030 | ||||||
| OTHER LIABILITIES | ||||||||
| Deferred revenue, non-current | 2,693 | 2,851 | ||||||
| Operating lease liabilities, non-current | 16,725 | 20,085 | ||||||
| Deferred income tax liabilities | 2,939 | 1,193 | ||||||
| Other liabilities, non-current | — | 405 | ||||||
| Total liabilities | 92,746 | 92,564 | ||||||
| COMMITMENTS and CONTINGENCIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, |
— | — | ||||||
| Common stock, |
37 | 36 | ||||||
| (65,247 | ) | (46,297 | ) | |||||
| Additional paid-in capital | 382,992 | 354,115 | ||||||
| Retained earnings | 80,020 | 48,973 | ||||||
| Accumulated other comprehensive loss | (2,862 | ) | (1,951 | ) | ||||
| Total stockholders’ equity | 394,940 | 354,876 | ||||||
| Total liabilities and stockholders’ equity | $ | 487,686 | $ | 447,440 | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
| (Unaudited, in thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenues | $ | 79,557 | $ | 70,928 | $ | 229,322 | $ | 206,391 | ||||||||
| Cost of revenues | 25,045 | 23,263 | 72,915 | 68,330 | ||||||||||||
| Gross profit | 54,512 | 47,665 | 156,407 | 138,061 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Sales and marketing | 19,233 | 16,937 | 56,143 | 52,404 | ||||||||||||
| Research and development | 8,053 | 7,743 | 23,087 | 20,444 | ||||||||||||
| General and administrative | 11,939 | 10,725 | 36,591 | 33,674 | ||||||||||||
| Amortization of intangible assets | 1,333 | 1,327 | 3,985 | 3,897 | ||||||||||||
| Total operating expenses | 40,558 | 36,732 | 119,806 | 110,419 | ||||||||||||
| Income from operations | 13,954 | 10,933 | 36,601 | 27,642 | ||||||||||||
| Other income (expense) | ||||||||||||||||
| Interest income, net | 116 | 843 | 982 | 2,233 | ||||||||||||
| Other income (expense), net | 307 | (165 | ) | 308 | 28 | |||||||||||
| Change in earn-out liability | — | 22 | (72 | ) | 366 | |||||||||||
| Total other income, net | 423 | 700 | 1,218 | 2,627 | ||||||||||||
| Income before income taxes | 14,377 | 11,633 | 37,819 | 30,269 | ||||||||||||
| Income tax expense | 2,970 | 2,692 | 5,703 | 5,719 | ||||||||||||
| Net income | $ | 11,407 | $ | 8,941 | $ | 32,116 | $ | 24,550 | ||||||||
| Net income per share | ||||||||||||||||
| Basic | $ | 0.32 | $ | 0.26 | $ | 0.91 | $ | 0.70 | ||||||||
| Diluted | $ | 0.31 | $ | 0.25 | $ | 0.89 | $ | 0.68 | ||||||||
| Weighted average common shares used to compute net income per share | ||||||||||||||||
| Basic | 35,295 | 35,015 | 35,133 | 34,966 | ||||||||||||
| Diluted | 36,366 | 35,932 | 36,137 | 35,952 | ||||||||||||
Per share amounts may not foot due to rounding.
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited; in thousands) | ||||||||
| Nine Months Ended | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 32,116 | $ | 24,550 | ||||
| Reconciliation of net income to net cash provided by operating activities | ||||||||
| Deferred income taxes | 4,324 | 5,360 | ||||||
| Change in earn-out liability | 72 | (366 | ) | |||||
| Depreciation and amortization of property and equipment | 9,474 | 8,143 | ||||||
| Amortization of intangible assets | 3,985 | 3,897 | ||||||
| Provision for credit losses | 4,198 | 2,429 | ||||||
| Stock-based compensation | 14,246 | 11,316 | ||||||
| Other, net | (16 | ) | (551 | ) | ||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | (4,551 | ) | (3,670 | ) | ||||
| Deferred costs | (1,129 | ) | (151 | ) | ||||
| Other current and non-current assets | 2,612 | (820 | ) | |||||
| Accounts payable | 1,357 | 181 | ||||||
| Accrued compensation | (3,989 | ) | (3,716 | ) | ||||
| Accrued expenses | (3 | ) | (84 | ) | ||||
| Deferred revenue | 3,961 | 4,929 | ||||||
| Operating leases | (1,128 | ) | (487 | ) | ||||
| Net cash provided by operating activities | 65,529 | 50,960 | ||||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (11,639 | ) | (8,387 | ) | ||||
| Purchases of investments | (67,636 | ) | (61,967 | ) | ||||
| Maturities of investments | 47,300 | 55,225 | ||||||
| Acquisitions of businesses and intangible assets, net of cash acquired | — | (11,500 | ) | |||||
| Net cash used in investing activities | (31,975 | ) | (26,629 | ) | ||||
| Cash flows from financing activities | ||||||||
| Repurchases of common stock | (18,950 | ) | (14,966 | ) | ||||
| Net proceeds from exercise of options to purchase common stock | 14,143 | 5,273 | ||||||
| Net proceeds from employee stock purchase plan | 1,645 | 1,155 | ||||||
| Payment for earn-out liability | (688 | ) | — | |||||
| Net cash used in financing activities | (3,850 | ) | (8,538 | ) | ||||
| Effect of foreign currency exchange rate changes | (26 | ) | 75 | |||||
| Net increase in cash and cash equivalents | 29,678 | 15,868 | ||||||
| Cash and cash equivalents at beginning of period | 179,252 | 133,859 | ||||||
| Cash and cash equivalents at end of period | $ | 208,930 | $ | 149,727 | ||||
| NON-GAAP RECONCILIATION | ||||||||||||||||
| (Unaudited; in thousands, except per share amounts) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net income | $ | 11,407 | $ | 8,941 | $ | 32,116 | $ | 24,550 | ||||||||
| Depreciation and amortization of property | ||||||||||||||||
| and equipment | 3,198 | 2,819 | 9,474 | 8,143 | ||||||||||||
| Amortization of intangible assets | 1,333 | 1,327 | 3,985 | 3,897 | ||||||||||||
| Investment income, net | (107 | ) | (843 | ) | (1,079 | ) | (2,233 | ) | ||||||||
| Income tax expense | 2,970 | 2,692 | 5,703 | 5,719 | ||||||||||||
| Stock-based compensation expense | 4,893 | 3,147 | 14,246 | 11,316 | ||||||||||||
| Realized gain from foreign currency on cash and investments held | (559 | ) | - | (686 | ) | - | ||||||||||
| Other | 103 | (22 | ) | 257 | (483 | ) | ||||||||||
| Adjusted EBITDA | $ | 23,238 | $ | 18,061 | $ | 64,016 | $ | 50,909 | ||||||||
| Net income | $ | 11,407 | $ | 8,941 | $ | 32,116 | $ | 24,550 | ||||||||
| Stock-based compensation expense | 4,893 | 3,147 | 14,246 | 11,316 | ||||||||||||
| Amortization of intangible assets | 1,333 | 1,327 | 3,985 | 3,897 | ||||||||||||
| Realized gain from foreign currency on cash and investments held | (559 | ) | - | (686 | ) | - | ||||||||||
| Other | 103 | (22 | ) | 257 | (483 | ) | ||||||||||
| Income tax effects of adjustments | (2,929 | ) | (1,606 | ) | (8,841 | ) | (5,972 | ) | ||||||||
| Non-GAAP income | $ | 14,248 | $ | 11,787 | $ | 41,077 | $ | 33,308 | ||||||||
| Shares used to compute non-GAAP income per share | ||||||||||||||||
| Basic | 35,295 | 35,015 | 35,133 | 34,966 | ||||||||||||
| Diluted | 36,366 | 35,932 | 36,137 | 35,952 | ||||||||||||
| Non-GAAP income per share | ||||||||||||||||
| Basic | $ | 0.40 | $ | 0.34 | $ | 1.17 | $ | 0.95 | ||||||||
| Diluted | $ | 0.39 | $ | 0.33 | $ | 1.14 | $ | 0.93 | ||||||||
Per share amounts may not foot due to rounding.
SPS-F
Source: SPS Commerce, Inc.