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CURRENT REPORT
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☐
On October 26, 2023, we issued a press release disclosing our results of operations and financial condition for our three and nine months ended September 30, 2023. In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in that filing.
(d) Exhibits
| Exhibit No. | Exhibit | |
| 99 | Press Release dated October 26, 2023 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
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 hereunto duly authorized.
| SPS COMMERCE, INC. | ||
| Date: October 26, 2023 | By: | /s/ KIMBERLY NELSON |
| Kimberly Nelson | ||
| Executive Vice President and Chief Financial Officer | ||
EXHIBIT 99
SPS Commerce Reports Third Quarter 2023 Financial Results
Company delivers 91st consecutive quarter of topline growth
Revenue growth of 18% year-over-year; Recurring revenue growth of 20% year-over-year
MINNEAPOLIS, Oct. 26, 2023 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the third quarter ended September 30, 2023.
Third Quarter 2023 Financial Highlights
- Revenue was $135.7 million in the third quarter of 2023, compared to $114.5 million in the third quarter of 2022, reflecting 18% growth.
- Recurring revenue grew 20% from the third quarter of 2022.
- Net income was $16.8 million or $0.45 per diluted share, compared to net income of $15.9 million or $0.43 per diluted share in the third quarter of 2022.
- Non-GAAP income per diluted share was $0.75, compared to non-GAAP income per diluted share of $0.63 in the third quarter of 2022.
- Adjusted EBITDA for the third quarter of 2023 increased 17% to $40.5 million compared to the third quarter of 2022.
“SPS Commerce’s third quarter performance reflects the ongoing investments in optimization and automation across the retail industry, and the role we play in helping our customers achieve operational efficiencies while scaling their businesses,” said Archie Black, Executive Chair of the Board. “I have had the privilege to work with and lead an exceptionally talented workforce and I’m proud that together we built a company that has consistently delivered exceptional results for our customers and shareholders, and I am confident SPS is positioned for continued success with Chad Collins at the helm.”
“I am thrilled to join SPS Commerce at such an important time for the company and the industry, and I want to thank the management team and the board for their trust in me to lead SPS in its next chapter of growth,” said Chad Collins, CEO of SPS Commerce. “As I engage with customers and spend time with SPS employees across the globe, I look forward to building relationships and reinforcing the culture that has established SPS as a successful organization with a very exciting future.”
“SPS continues to grow its global network, strengthening our competitive position and expanding our leadership across various industries,” said Kim Nelson, CFO of SPS Commerce. “I would like to welcome Chad to the SPS team and look forward to working together as we execute on SPS’ strategy to be the world’s retail network, and continue to deliver sustained, profitable growth.”
Guidance
Fourth Quarter 2023 Guidance
- Revenue is expected to be in the range of $142.2 million to $143.2 million.
- Net income per diluted share is expected to be in the range of $0.40 to $0.42, with fully diluted weighted average shares outstanding of 37.7 million shares.
- Non-GAAP income per diluted share is expected to be in the range of $0.67 to $0.69.
- Adjusted EBITDA is expected to be in the range of $40.5 million to $41.3 million.
- Non-cash, share-based compensation expense is expected to be $10.0 million, depreciation expense is expected to be $5.1 million, and amortization expense is expected to be $4.5 million.
Full Year 2023 Guidance
- Revenue is expected to be in the range of $534.2 million to $535.2 million, representing 18% to 19% growth over 2022.
- Net income per diluted share is expected to be in the range of $1.65 to $1.67, with fully diluted weighted average shares outstanding of 37.5 million shares.
- Non-GAAP income per diluted share is expected to be in the range of $2.77 to $2.79.
- Adjusted EBITDA is expected to be in the range of $156.2 to $157.0 million, representing 18% to 19% growth over 2022.
- Non-cash, share-based compensation expense is expected to be $46.1 million, depreciation expense is expected to be $19.0 million, and amortization expense is expected to be $15.6 million.
The forward-looking measures and the underlying assumptions involve significant known and unknown risks and uncertainties, and actual results may vary materially. The Company does not present a reconciliation of the forward-looking non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, and non-GAAP income per share, to the most directly comparable GAAP financial measures because it is impractical to forecast certain items without unreasonable efforts due to the uncertainty and inherent difficulty of predicting, within a reasonable range, the occurrence and financial impact of and the periods in which such items may be recognized.
Quarterly Conference Call
To access the call, please dial 1-833-816-1382, or outside the U.S. 1-412-317-0475 at least 15 minutes prior to the 3:30 p.m. CT start time. Please ask to join the SPS Commerce Q3 2023 conference call. A live webcast of the call will also be available at http://investors.spscommerce.com under the Events and Presentations menu. The replay will also be available on our website at http://investors.spscommerce.com.
About SPS Commerce
SPS Commerce is the world’s leading retail network, connecting trading partners around the globe to optimize supply chain operations for all retail partners. We support data-driven partnerships with innovative cloud technology, customer-obsessed service and accessible experts so our customers can focus on what they do best. To date, more than 115,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 91 consecutive quarters of revenue growth and is headquartered in Minneapolis. For additional information, contact SPS at 866-245-8100 or visit www.spscommerce.com.
SPS COMMERCE, SPS, SPS logo and INFINITE RETAIL POWER are marks of SPS Commerce, Inc. and registered in the U.S. Patent and Trademark Office, along with other SPS marks. Such marks may also be registered or otherwise protected in other countries.
SPS-F
Use of Non-GAAP Financial Measures
To supplement our consolidated financial statements, we provide investors with Adjusted EBITDA, Adjusted EBITDA Margin, and non-GAAP income per share, all of which are non-GAAP financial measures. We believe that these non-GAAP financial measures provide useful information to our management, Board of Directors, and investors regarding certain financial and business trends relating to our financial condition and results of operations.
Our management uses these non-GAAP financial measures to compare our performance to that of prior periods for trend analyses and planning purposes. Adjusted EBITDA is also used for purposes of determining executive and senior management incentive compensation. We believe these non-GAAP financial measures are useful to an investor as they are widely used in evaluating operating performance. Adjusted EBITDA and Adjusted EBITDA Margin are used to measure 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 capital structure and the method by which assets were acquired.
These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in our consolidated 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 press release.
Adjusted EBITDA Measures:
Adjusted EBITDA consists of net income adjusted for income tax expense, depreciation and amortization expense, stock-based compensation expense, realized gain or loss from foreign currency on cash and investments held, investment income or loss, and other adjustments as necessary for a fair presentation. In the three months ended September 30, 2023, other adjustments included the expense impact from acquisition-related employee severance costs. In the nine months ended September 30, 2023, other adjustments included the expense impacts from acquisition-related employee severance costs and disposals of certain capitalized internally developed software. Net income is the comparable GAAP measure of financial performance.
Adjusted EBITDA Margin consists of Adjusted EBITDA divided by revenue. Margin, the comparable GAAP measure of financial performance, consists of net income divided by revenue.
Non-GAAP Income Per Share Measure:
Non-GAAP income per share consists of net income adjusted for stock-based compensation expense, amortization expense related to intangible assets, realized gain or loss from foreign currency on cash and investments held, other adjustments as necessary for a fair presentation, and the corresponding tax impacts of the adjustments to net income, divided by the weighted average number of shares of common and diluted stock outstanding during each period. In the three months ended September 30, 2023, other adjustments included the expense impact from acquisition-related employee severance costs. In the nine months ended September 30, 2023, other adjustments included the expense impacts from acquisition-related employee severance costs and disposals of certain capitalized internally developed software. Net income per share, the comparable GAAP measure of financial performance, consists of net income divided by the weighted average number of shares of common and diluted stock outstanding during each period.
To quantify the tax effects, we recalculated income tax expense excluding the direct book and tax effects of the specific items constituting the non-GAAP adjustments. 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.
Forward-Looking Statements
This press release may contain forward-looking statements, including information about management's view of SPS Commerce's future expectations, plans and prospects, including our views regarding future execution within our business, the opportunity we see in the retail supply chain world and our performance for the fourth quarter and full year of 2023, 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, 2022, as well as subsequent reports filed with the Securities and Exchange Commission. Other unknown or unpredictable factors also could have material adverse effects on SPS Commerce's future results. The forward-looking statements included in this press release are made only as of the date hereof. SPS Commerce cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, SPS Commerce expressly disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
| SPS COMMERCE, INC. | |||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| (Unaudited; in thousands, except shares) | |||||||
| September 30, 2023 | December 31, 2022 | ||||||
| ASSETS | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 178,702 | $ | 162,893 | |||
| Short-term investments | 60,628 | 51,412 | |||||
| Accounts receivable | 48,218 | 42,501 | |||||
| Allowance for credit losses | (3,077 | ) | (3,066 | ) | |||
| Accounts receivable, net | 45,141 | 39,435 | |||||
| Deferred costs | 59,525 | 52,755 | |||||
| Other assets | 15,743 | 16,319 | |||||
| Total current assets | 359,739 | 322,814 | |||||
| Property and equipment, net | 36,209 | 35,458 | |||||
| Operating lease right-of-use assets | 8,315 | 9,170 | |||||
| Goodwill | 252,045 | 197,284 | |||||
| Intangible assets, net | 103,597 | 88,352 | |||||
| Other assets | |||||||
| Deferred costs, non-current | 19,521 | 17,424 | |||||
| Deferred income tax assets | 6,805 | 227 | |||||
| Other assets, non-current | 1,177 | 2,185 | |||||
| Total assets | $ | 787,408 | $ | 672,914 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 6,195 | $ | 11,256 | |||
| Accrued compensation | 41,474 | 30,235 | |||||
| Accrued expenses | 8,900 | 7,451 | |||||
| Deferred revenue | 71,853 | 57,423 | |||||
| Operating lease liabilities | 4,449 | 4,277 | |||||
| Total current liabilities | 132,871 | 110,642 | |||||
| Other liabilities | |||||||
| Deferred revenue, non-current | 6,849 | 4,771 | |||||
| Operating lease liabilities, non-current | 10,563 | 13,009 | |||||
| Deferred income tax liabilities | 10,281 | 7,419 | |||||
| Total liabilities | 160,564 | 135,841 | |||||
| Commitments and contingencies | |||||||
| Stockholders' equity | |||||||
| Common stock | 39 | 38 | |||||
| Treasury Stock | (128,892 | ) | (128,892 | ) | |||
| Additional paid-in capital | 520,313 | 476,117 | |||||
| Retained earnings | 240,034 | 193,221 | |||||
| Accumulated other comprehensive loss | (4,650 | ) | (3,411 | ) | |||
| Total stockholders’ equity | 626,844 | 537,073 | |||||
| Total liabilities and stockholders’ equity | $ | 787,408 | $ | 672,914 | |||
| SPS COMMERCE, INC. | |||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||||
| (Unaudited; in thousands, except per share amounts) | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Revenues | $ | 135,661 | $ | 114,486 | $ | 391,945 | $ | 328,857 | |||||
| Cost of revenues | 45,521 | 38,605 | 133,029 | 111,524 | |||||||||
| Gross profit | 90,140 | 75,881 | 258,916 | 217,333 | |||||||||
| Operating expenses | |||||||||||||
| Sales and marketing | 30,289 | 25,334 | 89,722 | 74,571 | |||||||||
| Research and development | 13,558 | 11,135 | 39,438 | 33,268 | |||||||||
| General and administrative | 21,906 | 16,724 | 64,275 | 49,390 | |||||||||
| Amortization of intangible assets | 3,788 | 2,998 | 11,118 | 7,936 | |||||||||
| Total operating expenses | 69,541 | 56,191 | 204,553 | 165,165 | |||||||||
| Income from operations | 20,599 | 19,690 | 54,363 | 52,168 | |||||||||
| Other income (expense), net | 1,702 | (695 | ) | 4,859 | (1,610 | ) | |||||||
| Income before income taxes | 22,301 | 18,995 | 59,222 | 50,558 | |||||||||
| Income tax expense | 5,459 | 3,132 | 12,409 | 11,339 | |||||||||
| Net income | $ | 16,842 | $ | 15,863 | $ | 46,813 | $ | 39,219 | |||||
| Net income per share | |||||||||||||
| Basic | $ | 0.46 | $ | 0.44 | $ | 1.28 | $ | 1.09 | |||||
| Diluted | $ | 0.45 | $ | 0.43 | $ | 1.25 | $ | 1.06 | |||||
| Weighted average common shares used to compute net income per share | |||||||||||||
| Basic | 36,728 | 36,093 | 36,584 | 36,104 | |||||||||
| Diluted | 37,584 | 36,915 | 37,417 | 36,942 | |||||||||
| SPS COMMERCE, INC. | |||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (Unaudited; in thousands) | |||||||
| Nine Months Ended September 30, | |||||||
| 2023 | 2022 | ||||||
| Cash flows from operating activities | |||||||
| Net income | $ | 46,813 | $ | 39,219 | |||
| Reconciliation of net income to net cash provided by operating activities | |||||||
| Deferred income taxes | (11,906 | ) | (2,092 | ) | |||
| Depreciation and amortization of property and equipment | 13,964 | 11,983 | |||||
| Amortization of intangible assets | 11,118 | 7,936 | |||||
| Provision for credit losses | 4,004 | 2,889 | |||||
| Stock-based compensation | 36,097 | 25,636 | |||||
| Other, net | 1,711 | 43 | |||||
| Changes in assets and liabilities | |||||||
| Accounts receivable | (8,800 | ) | (3,999 | ) | |||
| Deferred costs | (7,543 | ) | (7,174 | ) | |||
| Other current and non-current assets | 2,814 | 2,202 | |||||
| Accounts payable | (5,289 | ) | 129 | ||||
| Accrued compensation | 8,073 | (4,388 | ) | ||||
| Accrued expenses | (169 | ) | (3,035 | ) | |||
| Deferred revenue | 10,042 | 8,261 | |||||
| Operating leases | (1,417 | ) | (1,127 | ) | |||
| Net cash provided by operating activities | 99,512 | 76,483 | |||||
| Cash flows from investing activities | |||||||
| Purchases of property and equipment | (15,467 | ) | (13,894 | ) | |||
| Purchases of investments | (102,763 | ) | (134,276 | ) | |||
| Maturities of investments | 95,000 | 132,500 | |||||
| Acquisition of business, net | (70,218 | ) | (44,923 | ) | |||
| Net cash used in investing activities | (93,448 | ) | (60,593 | ) | |||
| Cash flows from financing activities | |||||||
| Repurchases of common stock | — | (42,700 | ) | ||||
| Net proceeds from exercise of options to purchase common stock | 5,524 | 2,457 | |||||
| Net proceeds from employee stock purchase plan activity | 4,481 | 3,588 | |||||
| Net cash provided by (used in) financing activities | 10,005 | (36,655 | ) | ||||
| Effect of foreign currency exchange rate changes | (260 | ) | (557 | ) | |||
| Net increase (decrease) in cash and cash equivalents | 15,809 | (21,322 | ) | ||||
| Cash and cash equivalents at beginning of period | 162,893 | 207,552 | |||||
| Cash and cash equivalents at end of period | $ | 178,702 | $ | 186,230 | |||
| SPS COMMERCE, INC. | |||||||||||||||
| NON-GAAP RECONCILIATION | |||||||||||||||
| (Unaudited; in thousands, except per share amounts) | |||||||||||||||
| Adjusted EBITDA | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net income | $ | 16,842 | $ | 15,863 | $ | 46,813 | $ | 39,219 | |||||||
| Income tax expense | 5,459 | 3,132 | 12,409 | 11,339 | |||||||||||
| Depreciation and amortization of property and equipment | 4,675 | 4,169 | 13,964 | 11,983 | |||||||||||
| Amortization of intangible assets | 3,788 | 2,998 | 11,118 | 7,936 | |||||||||||
| Stock-based compensation expense | 11,436 | 7,960 | 36,097 | 25,636 | |||||||||||
| Realized (gain) loss from foreign currency on cash and investments held | (98 | ) | 1,151 | (525 | ) | 2,010 | |||||||||
| Investment income | (2,635 | ) | (586 | ) | (5,372 | ) | (806 | ) | |||||||
| Other | 1,036 | — | 1,170 | — | |||||||||||
| Adjusted EBITDA | $ | 40,503 | $ | 34,687 | $ | 115,674 | $ | 97,317 | |||||||
| Adjusted EBITDA Margin | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenue | $ | 135,661 | $ | 114,486 | $ | 391,945 | $ | 328,857 | |||||||
| Net income | 16,842 | 15,863 | 46,813 | 39,219 | |||||||||||
| Margin | 12 | % | 14 | % | 12 | % | 12 | % | |||||||
| Adjusted EBITDA | 40,503 | 34,687 | 115,674 | 97,317 | |||||||||||
| Adjusted EBITDA Margin | 30 | % | 30 | % | 30 | % | 30 | % | |||||||
| Non-GAAP Income per Share | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net income | $ | 16,842 | $ | 15,863 | $ | 46,813 | $ | 39,219 | |||||||
| Stock-based compensation expense | 11,436 | 7,960 | 36,097 | 25,636 | |||||||||||
| Amortization of intangible assets | 3,788 | 2,998 | 11,118 | 7,936 | |||||||||||
| Realized (gain) loss from foreign currency on cash and investments held | (98 | ) | 1,151 | (525 | ) | 2,010 | |||||||||
| Other | 1,036 | — | 1,170 | — | |||||||||||
| Income tax effects of adjustments | (4,981 | ) | (4,866 | ) | (16,089 | ) | (11,576 | ) | |||||||
| Non-GAAP income | $ | 28,023 | $ | 23,106 | $ | 78,584 | $ | 63,225 | |||||||
| Shares used to compute net income and non-GAAP income per share | |||||||||||||||
| Basic | 36,728 | 36,093 | 36,584 | 36,104 | |||||||||||
| Diluted | 37,584 | 36,915 | 37,417 | 36,942 | |||||||||||
| Net income per share, basic | $ | 0.46 | $ | 0.44 | $ | 1.28 | $ | 1.09 | |||||||
| Non-GAAP adjustments to net income per share, basic | 0.30 | 0.20 | 0.86 | 0.66 | |||||||||||
| Non-GAAP income per share, basic | $ | 0.76 | $ | 0.64 | $ | 2.14 | $ | 1.75 | |||||||
| Net income per share, diluted | $ | 0.45 | $ | 0.43 | $ | 1.25 | $ | 1.06 | |||||||
| Non-GAAP adjustments to net income per share, diluted | 0.30 | 0.20 | 0.86 | 0.66 | |||||||||||
| Non-GAAP income per share, diluted | $ | 0.75 | $ | 0.63 | $ | 2.11 | $ | 1.72 | |||||||
Contact:
Investor Relations
The Blueshirt Group
Irmina Blaszczyk & Lisa Laukkanen
SPSC@blueshirtgroup.com
415-217-4962