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SPS Commerce Reports Fourth Quarter and Fiscal Year 2023 Financial Results

Company delivers 92nd consecutive quarter of topline growth

Fourth quarter 2023 revenue and recurring revenue grew 19% from the fourth quarter of 2022

MINNEAPOLIS, Feb. 08, 2024 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the fourth quarter and year ended December 31, 2023.

Financial Highlights

Fourth Quarter 2023 Financial Highlights

  • Revenue was $145.0 million in the fourth quarter of 2023, compared to $122.0 million in the fourth quarter of 2022, reflecting 19% growth.
  • Recurring revenue grew 19% from the fourth quarter of 2022.
  • Net income was $19.0 million or $0.51 per diluted share, compared to net income of $15.9 million or $0.43 per diluted share in the fourth 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 fourth quarter of 2022.
  • Adjusted EBITDA for the fourth quarter of 2023 increased 20% to $42.0 million compared to the fourth quarter of 2022.

Fiscal Year 2023 Financial Highlights

  • Revenue was $536.9 million for the year ended December 31, 2023, compared to $450.9 million for the year ended December 31, 2022, reflecting 19% growth.
  • Recurring revenue grew 20% from the year ended December 31, 2022.
  • Net income was $65.8 million or $1.76 per diluted share for the year ended December 31, 2023, compared to net income of $55.1 million or $1.49 per diluted share, for the comparable period in 2022, reflecting 19% growth in year-over-year net income.
  • Non-GAAP income per diluted share was $2.85, compared to non-GAAP income per diluted share of $2.35 in the year ended December 31, 2022.
  • Adjusted EBITDA for the year ended December 31, 2023 increased 19% to $157.6 million compared to the year ended December 31, 2022.

“In 2023, SPS Commerce demonstrated ongoing success in expanding our network as we continued to play a key role in retailers’ and suppliers’ transformation to omnichannel retail, improving supply chain efficiencies, and enabling our customers’ international expansion,” said Chad Collins, CEO of SPS Commerce. “I am excited about our long-term growth opportunities ahead as we execute our strategy to be the world’s retail network.”

“SPS Commerce achieved strong fourth quarter and full year 2023 results, despite ongoing macro dynamics.   We delivered profitable growth while we closed two acquisitions and continued to invest for the future to strengthen our competitive position across a large, addressable market,” said Kim Nelson, CFO of SPS Commerce.

Guidance

First Quarter 2024 Guidance

  • Revenue is expected to be in the range of $145.9 million to $146.7 million.
  • Net income per diluted share is expected to be in the range of $0.26 to $0.27, 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 $0.72 to $0.73.
  • Adjusted EBITDA is expected to be in the range of $42.1 million to $42.7 million.
  • Non-cash, share-based compensation expense is expected to be $20.1 million, depreciation expense is expected to be $4.7 million, and amortization expense is expected to be $4.7 million.

Fiscal Year 2024 Guidance

  • Revenue is expected to be in the range of $616.5 million to $619.0 million, representing 15% growth over 2022.
  • Net income per diluted share is expected to be in the range of $1.75 to $1.78, with fully diluted weighted average shares outstanding of 38.0 million shares.
  • Non-GAAP income per diluted share is expected to be in the range of $3.11 to $3.13.
  • Adjusted EBITDA is expected to be in the range of $183.0 to $185.0 million, representing 16% to 17% growth over 2022.
  • Non-cash, share-based compensation expense is expected to be $55.7 million, depreciation expense is expected to be $19.4 million, and amortization expense is expected to be $18.8 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 Q4 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 120,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 92 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 twelve months ended December 31, 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 twelve months ended December 31, 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 first quarter and full year of 2024, 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. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except shares)

 December 31,
  2023   2022 
ASSETS   
Current assets   
Cash and cash equivalents$219,081  $162,893 
Short-term investments 56,359   51,412 
Accounts receivable 50,160   42,501 
Allowance for credit losses (3,320)  (3,066)
Accounts receivable, net 46,840   39,435 
Deferred costs 62,403   52,755 
Other assets 16,758   16,319 
Total current assets 401,441   322,814 
Property and equipment, net 36,043   35,458 
Operating lease right-of-use assets 7,862   9,170 
Goodwill 249,176   197,284 
Intangible assets, net 107,344   88,352 
Other assets   
Deferred costs, non-current 20,347   17,424 
Deferred income tax assets 505   227 
Other assets, non-current 1,126   2,185 
Total assets$823,844  $672,914 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities   
Accounts payable$7,420  $11,256 
Accrued compensation 41,588   30,235 
Accrued expenses 8,014   7,451 
Deferred revenue 69,187   57,423 
Operating lease liabilities 4,460   4,277 
Total current liabilities 130,669   110,642 
Other liabilities   
Deferred revenue, non-current 6,930   4,771 
Operating lease liabilities, non-current 9,569   13,009 
Deferred income tax liabilities 8,972   7,419 
Other liabilities, non-current 229    
Total liabilities 156,369   135,841 
Commitments and contingencies   
Stockholders' equity   
Common stock 39   38 
Treasury Stock (128,892)  (128,892)
Additional paid-in capital 537,061   476,117 
Retained earnings 259,045   193,221 
Accumulated other comprehensive gain (loss) 222   (3,411)
Total stockholders’ equity 667,475   537,073 
Total liabilities and stockholders’ equity$823,844  $672,914 


Results presented are unaudited and thus, are subject to adjustment. Audited results will be included within the 10-K filing.

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

 Three Months Ended
December 31,
 Year Ended
December 31,
  2023  2022  2023  2022
Revenues$144,965 $122,018 $536,910 $450,875
Cost of revenues 49,040  41,541  182,069  153,065
Gross profit 95,925  80,477  354,841  297,810
Operating expenses       
Sales and marketing 33,214  27,201  122,936  101,772
Research and development 14,216  12,480  53,654  45,748
General and administrative 20,612  17,950  84,887  67,340
Amortization of intangible assets 4,998  3,832  16,116  11,768
Total operating expenses 73,040  61,463  277,593  226,628
Income from operations 22,885  19,014  77,248  71,182
Other income, net 3,456  1,752  8,315  142
Income before income taxes 26,341  20,766  85,563  71,324
Income tax expense 7,330  4,851  19,739  16,190
Net income$19,011 $15,915 $65,824 $55,134
        
Net income per share       
Basic$0.52 $0.44 $1.80 $1.53
Diluted$0.51 $0.43 $1.76 $1.49
        
Weighted average common shares used to compute net income per share       
Basic 36,831  36,093  36,646  36,117
Diluted 37,640  36,915  37,475  36,953


Results presented are unaudited and thus, are subject to adjustment. Audited results will be included within the 10-K filing.

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

 Year Ended
December 31,
  2023   2022 
Cash flows from operating activities   
Net income$65,824  $55,134 
Reconciliation of net income to net cash provided by operating activities   
Deferred income taxes (10,079)  (3,732)
Depreciation and amortization of property and equipment 18,631   16,421 
Amortization of intangible assets 16,116   11,768 
Provision for credit losses 5,707   3,359 
Stock-based compensation 45,508   33,399 
Other, net 2,415   220 
Changes in assets and liabilities, net of effects of acquisitions   
Accounts receivable (11,949)  (6,435)
Deferred costs (10,724)  (10,646)
Other assets and liabilities 1,834   2,632 
Accounts payable (3,947)  144 
Accrued compensation 7,143   (3,786)
Accrued expenses 1,302   (2,829)
Deferred revenue 6,464   5,965 
Operating leases (1,947)  (1,562)
Net cash provided by operating activities 132,298   100,052 
Cash flows from investing activities   
Purchases of property and equipment (19,761)  (19,880)
Purchases of investments (133,994)  (160,427)
Maturities of investments 131,331   158,937 
Acquisition of business, net (70,218)  (91,420)
Net cash used in investing activities (92,642)  (112,790)
Cash flows from financing activities   
Repurchases of common stock    (43,215)
Net proceeds from exercise of options to purchase common stock 9,856   4,908 
Net proceeds from employee stock purchase plan activity 8,114   6,676 
Payments for contingent consideration (2,000)   
Net cash provided by (used in) financing activities 15,970   (31,631)
Effect of foreign currency exchange rate changes 562   (290)
Net increase (decrease) in cash and cash equivalents 56,188   (44,659)
Cash and cash equivalents at beginning of period 162,893   207,552 
Cash and cash equivalents at end of period$219,081  $162,893 


Results presented are unaudited and thus, are subject to adjustment. Audited results will be included within the 10-K filing.

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

Adjusted EBITDA
 Three Months Ended
December 31,
 Year Ended
December 31,
  2023   2022   2023   2022 
Net income$19,011  $15,915  $65,824  $55,134 
Income tax expense 7,330   4,851   19,739   16,190 
Depreciation and amortization of property and equipment 4,667   4,438   18,631   16,421 
Amortization of intangible assets 4,998   3,832   16,116   11,768 
Stock-based compensation expense 9,411   7,763   45,508   33,399 
Realized gain from foreign currency on cash and investments held (1,201)  (984)  (1,726)  1,026 
Investment income (2,288)  (864)  (7,660)  (1,670)
Other 28      1,198    
Adjusted EBITDA$41,956  $34,951  $157,630  $132,268 

 

Adjusted EBITDA Margin
 Three Months Ended
December 31,
 Year Ended
December 31,
  2023   2022   2023   2022 
Revenue$144,965  $122,018  $536,910  $450,875 
        
Net income 19,011   15,915   65,824   55,134 
Margin 13%  13%  12%  12%
        
Adjusted EBITDA 41,956   34,951   157,630   132,268 
Adjusted EBITDA Margin 29%  29%  29%  29%

 

Non-GAAP Income per Share
 Three Months Ended
December 31,
 Year Ended
December 31,
  2023   2022   2023   2022 
Net income$19,011  $15,915  $65,824  $55,134 
Stock-based compensation expense 9,411   7,763   45,508   33,399 
Amortization of intangible assets 4,998   3,832   16,116   11,768 
Realized gain from foreign currency on cash and investments held (1,201)  (984)  (1,726)  1,026 
Other 28      1,198    
Income tax effects of adjustments (3,906)  (3,063)  (19,983)  (14,639)
Non-GAAP income$28,341  $23,463  $106,937  $86,688 
        
Shares used to compute net income and non-GAAP income per share       
Basic 36,831   36,093   36,646   36,117 
Diluted 37,640   36,915   37,475   36,953 
        
Net income per share, basic$0.52  $0.44  $1.80  $1.53 
Non-GAAP adjustments to net income per share, basic 0.25   0.21   1.12   0.87 
Non-GAAP income per share, basic$0.77  $0.65  $2.92  $2.40 
        
Net income per share, diluted$0.51  $0.43  $1.76  $1.49 
Non-GAAP adjustments to net income per share, diluted 0.24   0.20   1.09   0.86 
Non-GAAP income per share, diluted$0.75  $0.63  $2.85  $2.35 
        

Contact:
Investor Relations
The Blueshirt Group
Irmina Blaszczyk & Lisa Laukkanen
SPSC@blueshirtgroup.com
415-217-4962


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