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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, 2021

 

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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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 21, 2021 was 35,964,238 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

 

18

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

26

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

27

 

 

 

 

 

Item 1A.

 

Risk Factors

 

27

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

27

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

27

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

27

 

 

 

 

 

Item 5.

 

Other Information

 

27

 

 

 

 

 

Item 6.

 

Exhibits

 

28

 

 

 

 

 

Signatures

 

29

 

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.

2

Form 10-Q for the Quarterly Period ended September 30, 2021

 


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)

 

2021

 

 

2020

 

ASSETS

 

(unaudited)

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

195,803

 

 

$

149,692

 

Short-term investments

 

 

56,183

 

 

 

37,786

 

Accounts receivable

 

 

39,934

 

 

 

37,811

 

Allowance for credit losses

 

 

(4,604

)

 

 

(4,233

)

Accounts receivable, net

 

 

35,330

 

 

 

33,578

 

Deferred costs

 

 

41,593

 

 

 

37,988

 

Other assets

 

 

14,346

 

 

 

12,312

 

Total current assets

 

 

343,255

 

 

 

271,356

 

PROPERTY AND EQUIPMENT, less accumulated depreciation of $70,663 and $59,152, respectively

 

 

31,036

 

 

 

26,432

 

OPERATING LEASE RIGHT-OF-USE ASSETS

 

 

12,665

 

 

 

15,581

 

GOODWILL

 

 

134,680

 

 

 

134,853

 

INTANGIBLE ASSETS, net

 

 

52,471

 

 

 

60,230

 

INVESTMENTS

 

 

 

 

 

2,500

 

OTHER ASSETS

 

 

 

 

 

 

 

 

Deferred costs, non-current

 

 

14,500

 

 

 

12,607

 

Deferred income tax assets

 

 

189

 

 

 

194

 

Other assets, non-current

 

 

2,487

 

 

 

2,705

 

Total assets

 

$

591,283

 

 

$

526,458

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,752

 

 

$

5,354

 

Accrued compensation

 

 

30,986

 

 

 

22,872

 

Accrued expenses

 

 

7,110

 

 

 

11,161

 

Deferred revenue

 

 

49,185

 

 

 

37,947

 

Operating lease liabilities

 

 

3,895

 

 

 

2,798

 

Total current liabilities

 

 

94,928

 

 

 

80,132

 

OTHER LIABILITIES

 

 

 

 

 

 

 

 

Deferred revenue, non-current

 

 

5,159

 

 

 

2,996

 

Operating lease liabilities, non-current

 

 

16,697

 

 

 

19,672

 

Deferred income tax liabilities

 

 

3,971

 

 

 

2,937

 

Total liabilities

 

 

120,755

 

 

 

105,737

 

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 shares authorized; 37,683,302 and 37,100,467 shares issued; and 35,964,238 and 35,487,217 shares outstanding, respectively

 

 

38

 

 

 

37

 

Treasury Stock, at cost; 1,719,064 and 1,613,250 shares, respectively

 

 

(75,908

)

 

 

(65,247

)

Additional paid-in capital

 

 

422,670

 

 

 

393,462

 

Retained earnings

 

 

125,322

 

 

 

93,490

 

Accumulated other comprehensive loss

 

 

(1,594

)

 

 

(1,021

)

Total stockholders’ equity

 

 

470,528

 

 

 

420,721

 

Total liabilities and stockholders’ equity

 

$

591,283

 

 

$

526,458

 

See accompanying notes to these condensed consolidated financial statements.

 

    SPS COMMERCE, INC.

3

Form 10-Q for the Quarterly Period ended September 30, 2021

 


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)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

$

97,887

 

 

$

79,557

 

 

$

282,520

 

 

$

229,322

 

Cost of revenues

 

 

34,343

 

 

 

25,045

 

 

 

96,043

 

 

 

72,915

 

Gross profit

 

 

63,544

 

 

 

54,512

 

 

 

186,477

 

 

 

156,407

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

22,079

 

 

 

19,233

 

 

 

65,386

 

 

 

56,143

 

Research and development

 

 

10,854

 

 

 

8,053

 

 

 

28,459

 

 

 

23,087

 

General and administrative

 

 

14,691

 

 

 

11,939

 

 

 

45,186

 

 

 

36,591

 

Amortization of intangible assets

 

 

2,399

 

 

 

1,333

 

 

 

7,734

 

 

 

3,985

 

Total operating expenses

 

 

50,023

 

 

 

40,558

 

 

 

146,765

 

 

 

119,806

 

Income from operations

 

 

13,521

 

 

 

13,954

 

 

 

39,712

 

 

 

36,601

 

Other income (expense), net

 

 

(716

)

 

 

423

 

 

 

(1,424

)

 

 

1,218

 

Income before income taxes

 

 

12,805

 

 

 

14,377

 

 

 

38,288

 

 

 

37,819

 

Income tax expense

 

 

1,356

 

 

 

2,970

 

 

 

6,456

 

 

 

5,703

 

Net income

 

$

11,449

 

 

$

11,407

 

 

$

31,832

 

 

$

32,116

 

Other comprehensive income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(968

)

 

 

969

 

 

 

(604

)

 

 

(779

)

Unrealized gain (loss) on investments, net of tax of ($9), ($21), ($36) and $6, respectively

 

 

(27

)

 

 

(59

)

 

 

(107

)

 

 

19

 

Reclassification of (gain) loss on investments into earnings, net of tax of $16, $2, $46 and ($51), respectively

 

 

48

 

 

 

7

 

 

 

138

 

 

 

(151

)

Total other comprehensive income (expense)

 

 

(947

)

 

 

917

 

 

 

(573

)

 

 

(911

)

Comprehensive income

 

$

10,502

 

 

$

12,324

 

 

$

31,259

 

 

$

31,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.32

 

 

$

0.32

 

 

$

0.89

 

 

$

0.91

 

Diluted

 

$

0.31

 

 

$

0.31

 

 

$

0.86

 

 

$

0.89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares used to compute net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,961

 

 

 

35,295

 

 

 

35,873

 

 

 

35,133

 

Diluted

 

 

37,015

 

 

 

36,366

 

 

 

36,898

 

 

 

36,137

 

 

 See accompanying notes to these condensed consolidated financial statements.

 

    SPS COMMERCE, INC.

4

Form 10-Q for the Quarterly Period ended September 30, 2021

 


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, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, June 30, 2021

 

 

35,859,353

 

 

$

38

 

 

 

1,676,765

 

 

$

(71,697

)

 

$

413,182

 

 

$

113,873

 

 

$

(647

)

 

$

454,749

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,361

 

 

 

 

 

 

 

 

 

6,361

 

Exercise of stock options and issuance of restricted stock

 

 

145,658

 

 

 

 

 

 

 

 

 

 

 

 

2,997

 

 

 

 

 

 

 

 

 

2,997

 

Employee stock purchase plan

 

 

1,526

 

 

 

 

 

 

 

 

 

 

 

 

130

 

 

 

 

 

 

 

 

 

130

 

Repurchases of common stock

 

 

(42,299

)

 

 

 

 

 

42,299

 

 

 

(4,211

)

 

 

 

 

 

 

 

 

 

 

 

(4,211

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,449

 

 

 

 

 

 

11,449

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(968

)

 

 

(968

)

Unrealized loss on investments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27

)

 

 

(27

)

Reclassification of loss on investments into earnings, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48

 

 

 

48

 

Balances, September 30, 2021

 

 

35,964,238

 

 

$

38

 

 

 

1,719,064

 

 

$

(75,908

)

 

$

422,670

 

 

$

125,322

 

 

$

(1,594

)

 

$

470,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Equity

 

Balances, December 31, 2019

 

 

34,863,271

 

 

$

36

 

 

 

1,241,348

 

 

$

(46,297

)

 

$

354,115

 

 

$

48,973

 

 

$

(1,951

)

 

$

354,876

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,090

 

 

 

 

 

 

 

 

 

13,090

 

Exercise of stock options and issuance of restricted stock

 

 

765,144

 

 

 

1