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SPS Commerce Reports Fourth Quarter and Full Year 2020 Financial Results

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MINNEAPOLIS, Feb. 11, 2021 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (NASDAQ:SPSC), a leader in retail cloud services, today announced financial results for the fourth quarter and full year ended December 31, 2020.

Revenue was $83.3 million in the fourth quarter of 2020, compared to $72.7 million in the fourth quarter of 2019, reflecting 15% growth in revenue from the fourth quarter of 2019. Recurring revenue grew 15% from the fourth quarter of 2019.

Net income in the fourth quarter of 2020 was $13.5 million or $0.37 per diluted share, compared to net income of $9.2 million or $0.25 per diluted share, in the fourth quarter of 2019. Non-GAAP net income per diluted share was $0.40, compared to non-GAAP net income per diluted share of $0.35 in the fourth quarter of 2019. Adjusted EBITDA for the fourth quarter of 2020 increased 22% to $23.0 million compared to the fourth quarter of 2019.

"Throughout 2020 SPS Commerce was instrumental in driving efficiency in the retail supply chain," said Archie Black, President and CEO of SPS Commerce. "During the year, we grew net new customer adds by 27% as our Fulfillment solution gained momentum, and volume of drop ship orders filled through our network more than doubled as compared to pre-pandemic levels. We remain committed to supporting our customers through their digital transformation as we all work together to improve the e-commerce experience for trading partners and consumers."  

Revenue for the full year ended December 31, 2020 was $312.6 million compared to $279.1 million for the full year ended December 31, 2019, reflecting 12% growth. Recurring revenue grew 13% from the year ended December 31, 2019.

Net income for the year ended December 31, 2020 was $45.6 million or $1.26 per diluted share, compared to net income of $33.7 million or $0.94 per diluted share, for the comparable period in 2019. Non-GAAP net income per diluted share for the year ended December 31, 2020 was $1.53, compared to non-GAAP net income per diluted share of $1.28 for the comparable period in 2019. Adjusted EBITDA for the full year ended December 31, 2020 increased 25% to $87.0 million, compared to the full year ended December 31, 2019.

"SPS Commerce delivered strong fourth quarter and full year 2020 results," said Kim Nelson, CFO of SPS Commerce. "With retail dynamics accelerating the shift to e-commerce and driving increased demand for EDI, we are excited about our growth opportunities across a multibillion-dollar TAM, while we continue to deliver strong operating leverage, targeting a long-term adjusted EBITDA margin of 35%."

Guidance

First quarter 2021 revenue is expected to be in the range of $86.8 million to $87.8 million. Full year 2021 revenue is expected to be in the range of $363.0 million to $366.0 million, representing approximately 16% to 17% growth over 2020.

First quarter 2021 net income per diluted share is expected to be in the range of $0.18 to $0.19 with fully diluted weighted average shares outstanding of approximately 37.0 million shares. Full year 2021 net income per diluted share is expected to be in the range of $0.87 to $0.91 with fully diluted weighted average shares outstanding of approximately 37.1 million shares.

First quarter 2021 non-GAAP net income per diluted share is expected to be in the range of $0.36 to $0.37. Full year 2021 non-GAAP net income per diluted share is expected to be in the range of $1.58 to $1.62.

First quarter 2021 Adjusted EBITDA is expected to be in the range of $23.3 to $24.0 million. Full year 2021 Adjusted EBITDA is expected to be in the range of $100.0 million to $102.0 million, representing approximately 15% to 17% growth over 2020.

First quarter 2021 non-cash, share-based compensation expense is expected to be approximately $7.0 million. Depreciation expense is expected to be approximately $4.0 million and amortization expense is expected to be approximately $2.7 million.

Full year 2021 non-cash, share-based compensation expense is expected to be approximately $27.0 million. Depreciation expense is expected to be approximately $16.0 million and amortization expense is expected to be approximately $10.5 million.  

For 2021, we expect an annual effective tax rate of approximately 30%.

Quarterly Conference Call

SPS Commerce will discuss its quarterly and annual results today via teleconference at 3:30 p.m. CT (4:30 p.m. ET). To access the call, please dial (877) 312-7508, or outside the U.S. (253) 237-1184, with Conference ID #8957009 at least five minutes prior to the 3:30 p.m. CT start time. 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 95,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 80 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, 1=INFINITY logo, AS THE NETWORK GROWS, SO DOES YOUR OPPORTUNITY, INFINITE RETAIL POWER, MASTERING THE RETAIL GAME and RSX are marks of SPS Commerce, Inc. and Registered in the U.S. Patent and Trademark Office. IN:FLUENCE, and others are further marks of SPS Commerce, Inc. These marks may be registered or otherwise protected in other countries. 

SPS-F

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 gain/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 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 United States. These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in the company's financial statements and are subject to inherent limitations. SPS Commerce urges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures that are included in this press release.

SPS Commerce includes an adjustment to non-GAAP income to reflect the income tax effects of the adjustments to GAAP net income, as discussed above. 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.

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 first quarter and full year of 2021, 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
The Blueshirt Group
Irmina Blaszczyk
Lisa Laukkanen
SPSC@blueshirtgroup.com 
415-217-4962     


SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(Unaudited; in thousands, except shares)  
                 
    December 31,  
    2020     2019  
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 149,692     $ 179,252  
Short-term investments     37,786       34,284  
Accounts receivable     37,811       33,001  
Allowance for credit losses     (4,233 )     (1,469 )
Accounts receivable, net     33,578       31,532  
Deferred costs     37,502       35,274  
Other assets     12,312       11,279  
Total current assets     270,870       291,621  
PROPERTY AND EQUIPMENT, net     26,432       23,752  
OPERATING LEASE RIGHT-OF-USE ASSET     15,581       15,744  
GOODWILL     135,253       76,845  
INTANGIBLE ASSETS, net     59,830       22,668  
INVESTMENTS     2,500        
OTHER ASSETS                
Deferred costs, non-current     12,160       11,667  
Deferred income tax assets     194       2,630  
Other assets, non-current     2,705       2,513  
Total assets   $ 525,525     $ 447,440  
LIABILITIES AND STOCKHOLDERS' EQUITY                
CURRENT LIABILITIES                
Accounts payable   $ 5,354     $ 4,274  
Accrued compensation     21,939       22,303  
Accrued expenses     11,161       6,207  
Deferred revenue     37,947       31,463  
Operating lease liabilities     2,798       3,783  
Total current liabilities     79,199       68,030  
OTHER LIABILITIES                
Deferred revenue, non-current     2,996       2,851  
Operating lease liabilities, non-current     19,672       20,085  
Deferred income tax liabilities     2,937       1,193  
Other liabilities, non-current           405  
Total liabilities     104,804       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; 55,000,000 shares authorized; 37,100,467 and 36,104,619 shares issued; and 35,487,217 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     393,462       354,115  
Retained earnings     93,490       48,973  
Accumulated other comprehensive loss     (1,021 )     (1,951 )
Total stockholders' equity     420,721       354,876  
Total liabilities and stockholders' equity   $ 525,525     $ 447,440  
                 
Balance sheet is subject to reclassification                


SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited; in thousands, except per share amounts)  
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2020     2019     2020     2019  
Revenues   $ 83,308     $ 72,733     $ 312,630     $ 279,124  
Cost of revenues     26,921       23,909       99,836       92,239  
Gross profit     56,387       48,824       212,794       186,885  
Operating expenses                                
Sales and marketing     19,812       17,736       75,955       70,140  
Research and development     7,937       7,861       31,024       28,305  
General and administrative     13,528       11,045       50,119       44,719  
Amortization of intangible assets     1,553       1,418       5,538       5,315  
Total operating expenses     42,830       38,060       162,636       148,479  
Income from operations     13,557       10,764       50,158       38,406  
Other income (expense)                                
Interest income, net     121       714       1,103       2,947  
Other income, net     1,026       244       1,334       272  
Change in earn-out liability     157       79       85       445  
Total other income, net     1,304       1,037       2,522       3,664  
Income before income taxes     14,861       11,801       52,680       42,070  
Income tax expense     1,391       2,639       7,094       8,358  
Net income   $ 13,470     $ 9,162     $ 45,586     $ 33,712  
                                 
Net income per share                                
Basic   $ 0.38     $ 0.26     $ 1.29     $ 0.96  
Diluted   $ 0.37     $ 0.25     $ 1.26     $ 0.94  
                                 
Weighted average common shares used to compute net income per share                                
Basic     35,504       35,029       35,226       35,024  
Diluted     36,624       35,967       36,285       36,002  

Per share amounts may not foot due to rounding.        


SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited; in thousands)  
    Year Ended  
    December 31,  
    2020     2019  
Cash flows from operating activities                
Net income   $ 45,586     $ 33,712  
Reconciliation of net income to net cash provided by operating activities                
Deferred income taxes     4,241       7,581  
Change in earn-out liability     (85 )     (445 )
Depreciation and amortization of property and equipment     13,127       11,123  
Amortization of intangible assets     5,538       5,315  
Provision for credit losses     5,660       3,499  
Stock-based compensation     18,936       14,690  
Other, net     (24 )     (574 )
Changes in assets and liabilities, net of effects of acquisition                
Accounts receivable     (5,922 )     (6,771 )
Deferred costs     (2,481 )     (1,441 )
Other current and non-current assets     1,201       (2,768 )
Accounts payable     1,214       (489 )
Accrued compensation     (2,190 )     319  
Accrued expenses     563       706  
Deferred revenue     4,432       6,366  
Operating leases     (1,234 )     971  
Net cash provided by operating activities     88,562       71,794  
Cash flows from investing activities                
Purchases of property and equipment     (16,467 )     (13,585 )
Purchases of investments     (74,797 )     (73,700 )
Maturities of investments     69,461       84,472  
Acquisition of business and intangible assets, net     (98,666 )     (11,500 )
Net cash used in investing activities     (120,469 )     (14,313 )
Cash flows from financing activities                
Repurchases of common stock     (18,950 )     (20,618 )
Net proceeds from exercise of options to purchase common stock     18,592       6,207  
Net proceeds from employee stock purchase plan     3,374       2,269  
Payment for earn-out liability     (688 )      
Net cash provided by (used) in financing activities     2,328       (12,142 )
Effect of foreign currency exchange rate changes     19       54  
Net increase (decrease) in cash and cash equivalents     (29,560 )     45,393  
Cash and cash equivalents at beginning of year     179,252       133,859  
Cash and cash equivalents at end of year   $ 149,692     $ 179,252  
                 
Cash flows subject to reclassification                


SPS COMMERCE, INC.  
NON-GAAP RECONCILIATION  
(Unaudited; in thousands, except share and per share amounts)  
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2020     2019     2020     2019  
Net income   $ 13,470     $ 9,162     $ 45,586     $ 33,712  
Depreciation and amortization of property and equipment     3,653       2,979       13,127       11,123  
Amortization of intangible assets     1,553       1,418       5,538       5,315  
Investment income, net     (129 )     (714 )     (1,208 )     (2,947 )
Income tax expense     1,391       2,639       7,094       8,358  
Stock-based compensation expense     4,690       3,374       18,936       14,690  
Realized gain from foreign currency on cash and investments held     (1,067 )     -       (1,753 )     -  
Other     (583 )     (5 )     (326 )     (488 )
Adjusted EBITDA   $ 22,978     $ 18,853     $ 86,994     $ 69,763  
                                 
Net income   $ 13,470     $ 9,162     $ 45,586     $ 33,712  
Stock-based compensation expense     4,690       3,374       18,936       14,690  
Amortization of intangible assets     1,553       1,418       5,538       5,315  
Realized gain from foreign currency on cash and investments held     (1,067 )     -       (1,753 )     -  
Other     (583 )     (5 )     (326 )     (488 )
Income tax effects of adjustments     (3,444 )     (1,332 )     (12,285 )     (7,304 )
Non-GAAP income   $ 14,619     $ 12,617     $ 55,696     $ 45,925  
                                 
Shares used to compute non-GAAP income per share                                
Basic     35,504       35,029       35,226       35,024  
Diluted     36,624       35,967       36,285       36,002  
                                 
Non-GAAP income per share                                
Basic   $ 0.41     $ 0.36     $ 1.58     $ 1.31  
Diluted   $ 0.40     $ 0.35     $ 1.53     $ 1.28  

Per share amounts may not foot due to rounding.        


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