SEC Filing | SPS Commerce, Inc.

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spsc-10q_20200930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: September 30, 2020

☐	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

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of exchange on which registered
Common Stock, par value $0.001 per share		SPSC		The Nasdaq Stock Market LLC (Nasdaq Global Market)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding at October 23, 2020 was 35,308,834 shares.

Table of Contents

SPS COMMERCE, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Comprehensive Income	4

	Condensed Consolidated Statements of Stockholders’ Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

Signatures		31

Unless the context otherwise requires, for purposes of the Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” the “Company,” “SPS,” and “SPS Commerce” refer to SPS Commerce, Inc.

SPS COMMERCE, INC.

Form 10-Q for the quarterly period ended September 30, 2020

Table of Contents

PART I. – FINANCIAL INFORMATION

Item 1.Financial Statements

SPS COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
(In thousands, except shares)	2020			2019
ASSETS	(unaudited)
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 $58,629 and $50,574, respectively		25,053			23,752
OPERATING LEASE RIGHT-OF-USE ASSETS		14,092			15,744
GOODWILL		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, $0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding		—			—
Common stock, $0.001 par value; 110,000,000 and 55,000,000 shares authorized; 36,904,856 and 36,104,619 shares issued; and 35,291,606 and 34,863,271 outstanding, respectively		37			36
Treasury stock, at cost; 1,613,250 and 1,241,348 shares, respectively		(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

See accompanying notes to these condensed consolidated financial statements.

SPS COMMERCE, INC.

Form 10-Q for the quarterly period ended September 30, 2020

Table of Contents

SPS COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands, except per share amounts) (Unaudited)	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
Other comprehensive income (expense)
Foreign currency translation adjustments		969			(958	)		(779	)		73
Unrealized gain (loss) on investments, net of tax of ($21), $38, $6 and $105		(59	)		115			19			315
Reclassification of (gain) loss on investments into earnings, net of tax of $2, ($49), ($51) and ($109)		7			(145	)		(151	)		(326	)
Total other comprehensive income (expense)		917			(988	)		(911	)		62
Comprehensive income	$	12,324		$	7,953		$	31,205		$	24,612

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

See accompanying notes to these condensed consolidated financial statements.

SPS COMMERCE, INC.

Form 10-Q for the quarterly period ended September 30, 2020

Table of Contents

SPS COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

															Accumulated
											Additional				Other			Total
	Common Stock					Treasury Stock					Paid-in		Retained		Comprehensive			Stockholders'
(In thousands, except shares) (Unaudited)	Shares			Amount		Shares		Amount			Capital		Earnings		Loss			Equity
Balances, June 30, 2019		34,936,212		$	36		1,007,478	$	(34,645	)	$	344,232	$	30,870	$	(2,160	)	$	338,333
Stock-based compensation		—			—		—		—			2,804		—		—			2,804
Exercise of stock options and issuance of restricted stock		80,350			—		—		—			1,902		—		—			1,902
Employee stock purchase plan		2,178			—		—		—			76		—		—			76
Repurchases of common stock		(116,856	)		—		116,856		(6,000	)		—		—		—			(6,000	)
Net income		—			—		—		—			—		8,941		—			8,941
Foreign currency translation adjustments		—			—		—		—			—		—		(958	)		(958	)
Unrealized gain on investments, net of tax		—			—		—		—			—		—		115			115
Reclassification of gain on investments into earnings, net of tax		—			—		—		—			—		—		(145	)		(145	)
Balances, September 30, 2019		34,901,884		$	36		1,124,334	$	(40,645	)	$	349,014	$	39,811	$	(3,148	)	$	345,068

Balances, June 30, 2020		35,126,118		$	37		1,613,250	$	(65,247	)	$	373,686	$	68,613	$	(3,779	)	$	373,310
Stock-based compensation		—			—		—		—			4,494		—		—			4,494
Exercise of stock options and issuance of restricted stock		163,478			—		—		—			4,717		—		—			4,717
Employee stock purchase plan		2,010			—		—		—			95		—		—			95
Net income		—			—		—		—			—		11,407		—			11,407
Foreign currency translation adjustments		—			—		—		—			—		—		969			969
Unrealized loss on investments, net of tax		—			—		—		—			—		—		(59	)		(59	)
Reclassification of loss on investments into earnings, net of tax		—			—		—		—			—		—		7			7
Balances, September 30, 2020		35,291,606		$	37		1,613,250	$	(65,247	)	$	382,992	$	80,020	$	(2,862	)	$	394,940

														Accumulated
										Additional				Other			Total
	Common Stock				Treasury Stock					Paid-in		Retained		Comprehensive			Stockholders'
(In thousands, except shares) (Unaudited)	Shares		Amount		Shares		Amount			Capital		Earnings		Loss			Equity
Balances, December 31, 2018		34,691,472	$	36		823,784	$	(25,679	)	$	332,574	$	15,261	$	(3,218	)	$	318,974
Stock-based compensation