SPS Commerce, Inc.: SPS Commerce Reports First Quarter 2023 Financial Results

Company delivers 89th consecutive quarter of topline growth
Revenue growth of 20% year-over-year; Recurring revenue growth of 20% year-over-year

MINNEAPOLIS, April 26, 2023 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the first quarter ended March 31, 2023.

First Quarter 2023 Financial Highlights

• Revenue was $125.9 million in the first quarter of 2023, compared to $105.2 million in the first quarter of 2022, reflecting 20% growth.
• Recurring revenue grew 20% from the first quarter of 2022.
• Net income was $15.3 million or $0.41 per diluted share, compared to net income of $12.6 million or $0.34 per diluted share in the first quarter of 2022.
• Non-GAAP income per diluted share was $0.67, compared to non-GAAP income per diluted share of $0.55 in the first quarter of 2022.
• Adjusted EBITDA for the first quarter of 2022 increased 16% to $37.0 million compared to the first quarter of 2022.

"The ongoing expansion of our network is a reflection of SPS' ability to help retailers, suppliers and emerging brands successfully and cost effectively adapt to omnichannel retail while they future-proof their investments in supply chain automation," said Archie Black, CEO of SPS Commerce. "I believe our strategy and our people position SPS Commerce for continued success as we capitalize on the growth opportunities ahead of us."

"SPS Commerce's history of strong financial performance and 89 quarters of consecutive revenue growth underscore the stability of our business model and our consistent execution. Despite ongoing macro dynamics, we believe we are better positioned than ever to deliver on our long-term targets and sustained, profitable growth," said Kim Nelson, CFO of SPS Commerce.

Guidance

Second Quarter 2023 Guidance

• Revenue is expected to be in the range of $128.0 million to $128.8 million.
• Net income per diluted share is expected to be in the range of $0.30 to $0.31, 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 $0.62 to $0.63.
• Adjusted EBITDA is expected to be in the range of $36.4 million to $37.0 million.
• Non-cash, share-based compensation expense is expected to be $12.8 million, depreciation expense is expected to be $5.0 million, and amortization expense is expected to be $3.9 million.
  

Full Year 2023 Guidance

• Revenue is expected to be in the range of $525.5 million to $527.6 million, representing 17% growth over 2022.
• Net income per diluted share is expected to be in the range of $1.55 to $1.58, with fully diluted weighted average shares outstanding of 37.4 million shares.
• Non-GAAP income per diluted share is expected to be in the range of $2.67 to $2.70.
• Adjusted EBITDA is expected to be in the range of $154.2 to $155.8 million, representing 17% to 18% growth over 2022.
• Non-cash, share-based compensation expense is expected to be $45.0 million, depreciation expense is expected to be $19.8 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 Q1 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 89 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, 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. These marks may 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.

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.

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 second 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)

	March 31, 2023				December 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	182,304			$	162,893
Short-term investments		51,146				51,412
Accounts receivable		46,654				42,501
Allowance for credit losses		(3,217	)			(3,066	)
Accounts receivable, net		43,437				39,435
Deferred costs		53,844				52,755
Other assets		15,651				16,319
Total current assets		346,382				322,814
Property and equipment, net		35,078				35,458
Operating lease right-of-use assets		8,451				9,170
Goodwill		199,001				197,284
Intangible assets, net		84,536				88,352
Other assets
Deferred costs, non-current		17,965				17,424
Deferred income tax assets		3,365				227
Other assets, non-current		2,149				2,185
Total assets	$	696,927			$	672,914
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	5,339			$	11,256
Accrued compensation		26,431				30,235
Accrued expenses		8,163				7,451
Deferred revenue		62,907				57,423
Operating lease liabilities		4,121				4,277
Total current liabilities		106,961				110,642
Other liabilities
Deferred revenue, non-current		5,105				4,771
Operating lease liabilities, non-current		11,994				13,009
Deferred income tax liabilities		6,977				7,419
Total liabilities		131,037				135,841
Commitments and contingencies
Stockholders' equity
Common stock		39				38
Treasury Stock		(128,892	)			(128,892	)
Additional paid-in capital		489,716				476,117
Retained earnings		208,510				193,221
Accumulated other comprehensive loss		(3,483	)			(3,411	)
Total stockholders' equity		565,890				537,073
Total liabilities and stockholders' equity	$	696,927			$	672,914

SPS COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in thousands, except per share amounts)

	Three Months Ended March 31,
		2023				2022
Revenues	$	125,868			$	105,193
Cost of revenues		42,964				35,389
Gross profit		82,904				69,804
Operating expenses
Sales and marketing		29,083				24,655
Research and development		12,563				10,701
General and administrative		20,677				15,468
Amortization of intangible assets		3,851				2,470
Total operating expenses		66,174				53,294
Income from operations		16,730				16,510
Other income, net		1,276				423
Income before income taxes		18,006				16,933
Income tax expense		2,717				4,330
Net income	$	15,289			$	12,603
Net income per share
Basic	$	0.42			$	0.35
Diluted	$	0.41			$	0.34
Weighted average common shares used to compute net income per share
Basic		36,427				36,136
Diluted		37,155				36,989

SPS COMMERCE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)

	Three Months Ended March 31,
		2023				2022
Cash flows from operating activities
Net income	$	15,289			$	12,603
Reconciliation of net income to net cash provided by operating activities
Deferred income taxes		(5,147	)			(269	)
Depreciation and amortization of property and equipment		4,626				3,864
Amortization of intangible assets		3,851				2,470
Provision for credit losses		1,206				1,144
Stock-based compensation		11,780				9,015
Other, net		502				(7	)
Changes in assets and liabilities
Accounts receivable		(6,220	)			(5,563	)
Deferred costs		(1,679	)			(2,797	)
Other current and non-current assets		602				(6,736	)
Accounts payable		(4,849	)			(3,229	)
Accrued compensation		(4,417	)			(10,495	)
Accrued expenses		721				(1,746	)
Deferred revenue		5,818				6,349
Operating leases		(452	)			(256	)
Net cash provided by operating activities		21,631				4,347
Cash flows from investing activities
Purchases of property and equipment		(5,261	)			(4,355	)
Purchases of investments		(34,329	)			(54,977	)
Maturities of investments		35,000				65,000
Net cash provided by (used in) investing activities		(4,590	)			5,668
Cash flows from financing activities
Repurchases of common stock		-				(15,226	)
Net proceeds from exercise of options to purchase common stock		2,184				504
Net proceeds from employee stock purchase plan activity		241				147
Net cash provided by (used in) financing activities		2,425				(14,575	)
Effect of foreign currency exchange rate changes		(55	)			96
Net increase (decrease) in cash and cash equivalents		19,411				(4,464	)
Cash and cash equivalents at beginning of period		162,893				207,552
Cash and cash equivalents at end of period	$	182,304			$	203,088

SPS COMMERCE, INC.
NON-GAAP RECONCILIATION
(Unaudited; in thousands, except per share amounts)

Adjusted EBITDA
	Three Months Ended March 31,
		2023				2022
Net income	$	15,289			$	12,603
Income tax expense		2,717				4,330
Depreciation and amortization of property and equipment		4,626				3,864
Amortization of intangible assets		3,851				2,470
Stock-based compensation expense		11,780				9,015
Realized gain from foreign currency on cash and investments held		(137	)			(468	)
Investment income		(1,127	)			(48	)
Adjusted EBITDA	$	36,999			$	31,766

Adjusted EBITDA Margin
	Three Months Ended March 31,
		2023				2022
Revenue	$	125,868			$	105,193
Net income		15,289				12,603
Margin		12	%			12	%
Adjusted EBITDA		36,999				31,766
Adjusted EBITDA Margin		29	%			30	%

Non-GAAP Income
	Three Months Ended March 31,
		2023				2022
Net income	$	15,289			$	12,603
Stock-based compensation expense		11,780				9,015
Amortization of intangible assets		3,851				2,470
Realized gain from foreign currency on cash and investments held		(137	)			(468	)
Income tax effects of adjustments		(5,909	)			(3,219	)
Non-GAAP income	$	24,874			$	20,401
Shares used to compute non-GAAP income per share
Basic		36,427				36,136
Diluted		37,155				36,989
Non-GAAP income per share
Basic	$	0.68			$	0.56
Diluted	$	0.67			$	0.55

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Investor Relations
The Blueshirt Group
Irmina Blaszczyk & Lisa Laukkanen
[e-mail]
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