GlobeNewswire Inc | Oct 28, 2020 04:08PM EDT

October 28, 2020

MINNEAPOLIS, Oct. 28, 2020 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the third quarter ended September 30, 2020.

Revenue was $79.6 million in the third quarter of 2020, compared to $70.9 million in the third quarter of 2019, reflecting 12% growth in revenue from the third quarter of 2019. Recurring revenue grew 13% from the third quarter of 2019.

Net income in the third quarter of 2020 was $11.4 million or $0.31 per diluted share, compared to net income of $8.9 million or $0.25 per diluted share, in the third quarter of 2019. Non-GAAP income per diluted share was $0.39 compared to non-GAAP income per diluted share of $0.33 in the third quarter of 2019.

Adjusted EBITDA for the third quarter of 2020 increased 29% to $23.2 million compared to the third quarter of 2019.

Trading partners across the retail supply chain continue to rely on SPS Commerce to streamline order fulfillment, said Archie Black, President and CEO of SPS Commerce. As consumer preferences for omnichannel shopping accelerate, we are well-positioned to help our customers increase efficiency and automation in a rapidly changing environment.

Recent trends in retail have accelerated the pace of EDI adoption. We expect this trend to continue as retailers and suppliers adapt and embrace e-commerce, driving demand for our fulfillment solution. said Kim Nelson, CFO of SPS Commerce.

Guidance

For the fourth quarter of 2020, revenue is expected to be in the range of $80.0 million to $80.5 million. Fourth quarter net income per diluted share is expected to be in the range of $0.20 to $0.21 with fully diluted weighted average shares outstanding of approximately 36.5 million shares. Non-GAAP income per diluted share is expected to be in the range of $0.33 to $0.34. Adjusted EBITDA is expected to be in the range of $21.0 million to $21.5 million. Non-cash, share-based compensation expense is expected to be approximately $5.1 million, depreciation expense is expected to be approximately $3.5 million and amortization expense is expected to be approximately $1.4 million.

For the full year of 2020, revenue is expected to be in the range of $309.3 million to $309.8 million, representing approximately 11% growth over 2019. Full year net income per diluted share is expected to be in the range of $1.09 to $1.10 with fully diluted weighted average shares outstanding of approximately 36.2 million shares. Non-GAAP income per diluted share is expected to be in the range of $1.48 to $1.49. Adjusted EBITDA is expected to be in the range of $85.0 to $85.5 million, representing approximately 22% to 23% growth over 2019. Non-cash, share-based compensation expense is expected to be approximately $19.3 million, depreciation expense is expected to be approximately $13.0 million and amortization expense is expected to be approximately $5.4 million.

Quarterly Conference Call

SPS Commerce will discuss its quarterly 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 # 3002119 at least 15 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 worlds 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 90,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 79 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, RETAIL UNIVERSE, 1=INFINITY logo, AS THE NETWORK GROWS, SO DOES YOUR OPPORTUNITY, INFINITE RETAIL POWER, RETAIL UNIVERSE are marks of SPS Commerce, Inc. and Registered in the U.S. Patent and Trademark Office. RSX, IN:FLUENCE, and others are further marks of SPS Commerce, Inc. These marks may be registered or otherwise protected in other countries.

Use of Non-GAAP Financial MeasuresTo supplement its financial statements,SPS Commercealso provides investors with Adjusted EBITDA and non-GAAP net income per share, which are non-GAAP financial measures.SPS Commercebelieves 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'smanagement 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 Commerceuses 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 Commercebelieves 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 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 Commerceincludes an adjustment to non-GAAP income to reflect the income tax effects of the adjustments to GAAP net income.To quantify these tax effects,SPS Commercerecalculates 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. SPS Commercebelieves 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 inthe 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 Commerceurges investors to review the reconciliation of its non-GAAP financial measures to the comparable GAAP financial measures that are included in this press release.

Forward-Looking StatementsThis press release contains forward-looking statements, including information about management's view ofSPS Commerce'sfuture expectations, plans and prospects, including our views regarding future execution within our business, the opportunity we see in the retail supply chain world, our positioning for the future, our performance for the fourth quarter and full year of 2020, and any statements about the future effect of the COVID-19 pandemic on our business, customers or the global economy and our business prospects, all of which fall 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 ofSPS Commerceto be materially different than those expressed or implied in such statements. Certain of these risk factors and others are included in documentsSPS Commercefiles with theSecurities and Exchange Commission, including but not limited to,SPS Commerce'sAnnual Report on Form 10-K for the year endedDecember 31, 2019, as well as subsequent reports filed with theSecurities and Exchange Commission. Other unknown or unpredictable factors also could have material adverse effects onSPS Commerce'sfuture results. The forward-looking statements included in this press release are made only as of the date hereof.SPS Commercecannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally,SPS Commerceexpressly 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 RelationsThe Blueshirt GroupIrmina BlaszczykLisa LaukkanenSPSC@blueshirtgroup.com415-217-4962

SPS COMMERCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; in thousands, except shares) September30, December31, 2020 2019 ASSETS 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 accumulateddepreciation of $58,629 and $50,574, 25,053 23,752 respectivelyOPERATING 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; 5,000,000shares authorized; 0 shares issued and ? ? outstandingCommon stock, $0.001 par value; 110,000,000and 55,000,000 shares authorized; 36,904,856 37 36 and 36,104,619 shares issued; and 35,291,606and 34,863,271 outstanding, respectivelyTreasury stock, at cost; 1,613,250 and (65,247 ) (46,297 )1,241,348 shares, respectivelyAdditional 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

SPS COMMERCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited, in thousands, except per share amounts) Three Months Ended Nine Months Ended September30, September30, 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 11,939 10,725 36,591 33,674 administrativeAmortization of 1,333 1,327 3,985 3,897 intangible assetsTotal 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), 307 (165 ) 308 28 netChange in earn-out ? 22 (72 ) 366 liabilityTotal other income, net 423 700 1,218 2,627 Income before income 14,377 11,633 37,819 30,269 taxesIncome tax expense 2,970 2,692 5,703 5,719 Net income $ 11,407 $ 8,941 $ 32,116 $ 24,550 Net income per share Basic $ 0.32 $ 0.26 $ 0.91 $ 0.70 Diluted $ 0.31 $ 0.25 $ 0.89 $ 0.68 Weighted average commonshares used to compute net income per shareBasic 35,295 35,015 35,133 34,966 Diluted 36,366 35,932 36,137 35,952

Per share amounts may not foot due to rounding.



SPS COMMERCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in thousands) Nine Months Ended September30, 2020 2019 Cash flows from operating activities Net income $ 32,116 $ 24,550 Reconciliation of net income to net cash provided by operating activitiesDeferred income taxes 4,324 5,360 Change in earn-out liability 72 (366 )Depreciation and amortization of property and 9,474 8,143 equipmentAmortization of intangible assets 3,985 3,897 Provision for credit losses 4,198 2,429 Stock-based compensation 14,246 11,316 Other, net (16 ) (551 )Changes in assets and liabilities Accounts receivable (4,551 ) (3,670 ) Deferred costs (1,129 ) (151 ) Other current and non-current assets 2,612 (820 ) Accounts payable 1,357 181 Accrued compensation (3,989 ) (3,716 ) Accrued expenses (3 ) (84 ) Deferred revenue 3,961 4,929 Operating leases (1,128 ) (487 ) Net cash provided by operating activities 65,529 50,960 Cash flows from investing activities Purchases of property and equipment (11,639 ) (8,387 )Purchases of investments (67,636 ) (61,967 )Maturities of investments 47,300 55,225 Acquisitions of businesses and intangible assets, net ? (11,500 )of cash acquiredNet cash used in investing activities (31,975 ) (26,629 )Cash flows from financing activities Repurchases of common stock (18,950 ) (14,966 )Net proceeds from exercise of options to purchase 14,143 5,273 common stockNet proceeds from employee stock purchase plan 1,645 1,155 Payment for earn-out liability (688 ) ? Net cash used in financing activities (3,850 ) (8,538 )Effect of foreign currency exchange rate changes (26 ) 75 Net increase in cash and cash equivalents 29,678 15,868 Cash and cash equivalents at beginning of period 179,252 133,859 Cash and cash equivalents at end of period $ 208,930 $ 149,727

SPS COMMERCE, INC. NON-GAAP RECONCILIATION (Unaudited; in thousands, except per share amounts) Three Months Ended Nine Months Ended September30, September30, 2020 2019 2020 2019 Net income $ 11,407 $ 8,941 $ 32,116 $ 24,550 Depreciationand amortization ofpropertyand equipment 3,198 2,819 9,474 8,143 Amortization ofintangible 1,333 1,327 3,985 3,897 assetsInvestment (107 ) (843 ) (1,079 ) (2,233 )income, netIncome tax 2,970 2,692 5,703 5,719 expenseStock-basedcompensation 4,893 3,147 14,246 11,316 expenseRealized gainfrom foreigncurrency on (559 ) - (686 ) - cash andinvestmentsheldOther 103 (22 ) 257 (483 )Adjusted EBITDA $ 23,238 $ 18,061 $ 64,016 $ 50,909 Net income $ 11,407 $ 8,941 $ 32,116 $ 24,550 Stock-basedcompensation 4,893 3,147 14,246 11,316 expenseAmortization ofintangible 1,333 1,327 3,985 3,897 assetsRealized gainfrom foreigncurrency on (559 ) - (686 ) - cash andinvestmentsheldOther 103 (22 ) 257 (483 )Income taxeffects of (2,929 ) (1,606 ) (8,841 ) (5,972 )adjustmentsNon-GAAP income $ 14,248 $ 11,787 $ 41,077 $ 33,308 Shares used tocompute non-GAAP incomeper shareBasic 35,295 35,015 35,133 34,966 Diluted 36,366 35,932 36,137 35,952 Non-GAAP income per shareBasic $ 0.40 $ 0.34 $ 1.17 $ 0.95 Diluted $ 0.39 $ 0.33 $ 1.14 $ 0.93

Per share amounts may not foot due to rounding.

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