SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the third quarter ended September 30, 2021.

Revenue was $97.9 million in the third quarter of 2021, compared to $79.6 million in the third quarter of 2020, reflecting 23% growth in revenue from the third quarter of 2020. Recurring revenue grew 20% from the third quarter of 2020.

Net income in the third quarter of 2021 and the third quarter of 2020 was $11.4 million or $0.31 per diluted share. Non-GAAP net income per diluted share was $0.47 in the third quarter of 2021, compared to non-GAAP net income per diluted share $0.39 in the third quarter of 2020. Adjusted EBITDA for the third quarter of 2021 increased 14% to $26.5 million compared to the third quarter of 2020.

“As the retail landscape continues to evolve, SPS Commerce is expanding its global market leadership in providing the easiest-to-use, full-service solutions that help retailers work efficiently with their suppliers,” said Archie Black, President and CEO of SPS Commerce. “Our network, world class technology, and partnerships continue to deliver and exceed our customers’ expectations as they transition to a true omnichannel fulfillment model.”

“With strong momentum in fulfillment, and large growth opportunities for our analytics solution as retailers and suppliers continue to improve efficiencies across the supply chain, we believe SPS Commerce is well positioned to capitalize on a multi-billion-dollar addressable market in front of us,” said Kim Nelson, CFO of SPS Commerce.

Stock Repurchase Program

The Company also announced today that the Board of Directors of SPS Commerce authorized a new program to repurchase up to $50.0 million of common stock. Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both. The timing and number of shares to be purchased will be based on the price of the Company's common stock, general business and market conditions and other investment considerations and factors. The share repurchase program becomes effective on November 28, 2021 and expires on November 28, 2023. Our current stock repurchase plan expires on November 2, 2021.

The program does not obligate the Company to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice. The Company had 36.0 million shares of outstanding common stock as of September 30, 2021. The Company intends to finance the share repurchase program with cash on hand.

Guidance

Fourth quarter 2021 revenue is expected to be in the range of $99.9 million to $100.5 million. Fourth quarter net income per diluted share is expected to be in the range of $0.24 to $0.25 with fully diluted weighted average shares outstanding of approximately 37.3 million shares. Non-GAAP net income per diluted share is expected to be in the range of $0.41 to $0.42. Adjusted EBITDA is expected to be in the range of $26.3 million to $26.8 million. Non-cash, share-based compensation expense is expected to be approximately $6.5 million, depreciation expense is expected to be approximately $4.1 million and amortization expense is expected to be approximately $2.5 million.

For the full year of 2021, revenue is expected to be in the range of $382.4 million to $383.0 million, representing 22% to 23% growth over 2020. Full year net income per diluted share is expected to be in the range of $1.10 to $1.11, with fully diluted weighted average shares outstanding of approximately 37.0 million shares. Non-GAAP income per diluted share is expected to be in the range of $1.76 to $1.77. Adjusted EBITDA is expected to be in the range of $105.6 to $106.1 million, representing 21% to 22% growth over 2020. Non-cash, share-based compensation expense is expected to be approximately $27.8 million, depreciation expense is expected to be approximately $15.1 million and amortization expense is expected to be approximately $10.2 million.

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 #8133049 at least fifteen 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 83 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. 

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Use of Non-GAAP Financial Measures

To supplement its financial statements, SPS Commerce also provides investors with Adjusted EBITDA, Adjusted EBITDA Margin, 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, our board of directors, 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. Adjusted EBITDA is also used for purposes of determining executive and senior management incentive compensation.

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.

SPS Commerce uses Adjusted EBITDA and Adjusted EBITDA Margin as measures of operating performance because they assist the Company in comparing performance on a consistent basis, as they remove from operating results the impact of the Company's capital structure. SPS Commerce believes Adjusted EBITDA and Adjusted EBITDA Margin are useful to an investor in evaluating the Company's operating performance because they are 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 adjusted for stock-based compensation expense, amortization expense related to intangible assets, realized gain or 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.

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.

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.

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 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, 2020, 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,     December 31,  
    2021     2020  
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 195,803     $ 149,692  
Short-term investments     56,183       37,786  
Accounts receivable     39,934       37,811  
Allowance for credit losses     (4,604 )     (4,233 )
Accounts receivable, net     35,330       33,578  
Deferred costs     41,593       37,988  
Other assets     14,346       12,312  
Total current assets     343,255       271,356  
PROPERTY AND EQUIPMENT, less accumulated depreciation of $70,663 and $59,152, respectively     31,036       26,432  
OPERATING LEASE RIGHT-OF-USE ASSETS     12,665       15,581  
GOODWILL     134,680       134,853  
INTANGIBLE ASSETS, net     52,471       60,230  
INVESTMENTS           2,500  
OTHER ASSETS                
Deferred costs, non-current     14,500       12,607  
Deferred income tax assets     189       194  
Other assets, non-current     2,487       2,705  
    Total assets   $ 591,283     $ 526,458  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES                
Accounts payable   $ 3,752     $ 5,354  
Accrued compensation     30,986       22,872  
Accrued expenses     7,110       11,161  
Deferred revenue     49,185       37,947  
Operating lease liabilities     3,895       2,798  
Total current liabilities     94,928       80,132  
OTHER LIABILITIES                
Deferred revenue, non-current     5,159       2,996  
Operating lease liabilities, non-current     16,697       19,672  
Deferred income tax liabilities     3,971       2,937  
Total liabilities     120,755       105,737  
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; 110,000,000 shares authorized; 37,683,302 and 37,100,467 shares issued; and 35,964,238 and 35,487,217 shares outstanding, respectively     38       37  
Treasury Stock, at cost; 1,719,064 and 1,613,250 shares, respectively     (75,908 )     (65,247 )
Additional paid-in capital     422,670       393,462  
Retained earnings     125,322       93,490  
Accumulated other comprehensive loss     (1,594 )     (1,021 )
Total stockholders’ equity     470,528       420,721  
    Total liabilities and stockholders’ equity   $ 591,283     $ 526,458  
                 
SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
(Unaudited; in thousands, except per share amounts)  
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
Revenues   $ 97,887     $ 79,557     $ 282,520     $ 229,322  
Cost of revenues     34,343       25,045       96,043       72,915  
Gross profit     63,544       54,512       186,477       156,407  
Operating expenses                                
Sales and marketing     22,079       19,233       65,386       56,143  
Research and development     10,854       8,053       28,459       23,087  
General and administrative     14,691       11,939       45,186       36,591  
Amortization of intangible assets     2,399       1,333       7,734       3,985  
Total operating expenses     50,023       40,558       146,765       119,806  
Income from operations     13,521       13,954       39,712       36,601  
Other income (expense), net     (716 )     423       (1,424 )     1,218  
Income before income taxes     12,805       14,377       38,288       37,819  
Income tax expense     1,356       2,970       6,456       5,703  
Net income   $ 11,449     $ 11,407     $ 31,832     $ 32,116  
                                 
Net income per share                                
Basic   $ 0.32     $ 0.32     $ 0.89     $ 0.91  
Diluted   $ 0.31     $ 0.31     $ 0.86     $ 0.89  
                                 
Weighted average common shares used to compute net income per share                                
Basic     35,961       35,295       35,873       35,133  
Diluted     37,015       36,366       36,898       36,137  

Per share amounts may not foot due to rounding.

SPS COMMERCE, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited; in thousands)  
                 
    Nine Months Ended  
    September 30,  
    2021     2020  
Cash flows from operating activities                
Net income   $ 31,832     $ 32,116  
Reconciliation of net income to net cash provided by operating activities                
Deferred income taxes     1,013       4,324  
Change in earn-out liability           72  
Depreciation and amortization of property and equipment     10,989       9,474  
Amortization of intangible assets     7,734       3,985  
Provision for credit losses     4,037       4,198  
Stock-based compensation     21,273       14,246  
Other, net     234       (16 )
Changes in assets and liabilities                
Accounts receivable     (5,327 )     (4,551 )
Deferred costs     (5,686 )     (1,129 )
Other current and non-current assets     (3,893 )     2,612  
Accounts payable     (1,518 )     1,357  
Accrued compensation     6,617       (3,989 )
Accrued expenses     (174 )     (3 )
Deferred revenue     13,401       3,961  
Operating leases     1,036       (1,128 )
    Net cash provided by operating activities     81,568       65,529  
Cash flows from investing activities                
Purchases of property and equipment     (15,567 )     (11,639 )
Purchases of investments     (84,020 )     (67,636 )
Maturities of investments     67,500       47,300  
Net cash used in investing activities     (32,087 )     (31,975 )
Cash flows from financing activities                
Repurchases of common stock     (10,661 )     (18,950 )
Net proceeds from exercise of options to purchase common stock     7,027       14,143  
Net proceeds from employee stock purchase plan     2,316       1,645  
Payments for contingent consideration     (2,042 )     (688 )
Net cash used in financing activities     (3,360 )     (3,850 )
Effect of foreign currency exchange rate changes     (10 )     (26 )
Net increase in cash and cash equivalents     46,111       29,678  
Cash and cash equivalents at beginning of period     149,692       179,252  
Cash and cash equivalents at end of period   $ 195,803     $ 208,930  
                 
SPS COMMERCE, INC.  
NON-GAAP RECONCILIATION  
(Unaudited; in thousands, except per share amounts)  
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
                                 
Adjusted EBITDA  
Net income   $ 11,449     $ 11,407     $ 31,832     $ 32,116  
Income tax expense     1,356       2,970       6,456       5,703  
Depreciation and amortization of property                                
and equipment     3,695       3,198       10,989       9,474  
Amortization of intangible assets     2,399       1,333       7,734       3,985  
Stock-based compensation expense     6,849       4,893       21,273       14,246  
Realized (gain) loss from foreign currency on cash and investments held     854       (559 )     1,492       (686 )
Investment income     (66 )     (107 )     (242 )     (1,079 )
Other     -       103       (213 )     257  
Adjusted EBITDA   $ 26,536     $ 23,238     $ 79,321     $ 64,016  
                                 
Adjusted EBITDA Margin  
Net income   $ 11,449     $ 11,407     $ 31,832     $ 32,116  
Revenue     97,887       79,557       282,520       229,322  
Margin     12 %     14 %     11 %     14 %
                                 
Adjusted EBITDA   $ 26,536     $ 23,238     $ 79,321     $ 64,016  
Revenue     97,887       79,557       282,520       229,322  
Adjusted EBITDA Margin     27 %     29 %     28 %     28 %
                                 
Non-GAAP Income  
Net income   $ 11,449     $ 11,407     $ 31,832     $ 32,116  
Stock-based compensation expense     6,849       4,893       21,273       14,246  
Amortization of intangible assets     2,399       1,333       7,734       3,985  
Realized (gain) loss from foreign currency on cash and investments held     854       (559 )     1,492       (686 )
Other     -       103       (213 )     257  
Income tax effects of adjustments     (4,178 )     (2,929 )     (12,152 )     (8,841 )
Non-GAAP income   $ 17,373     $ 14,248     $ 49,966     $ 41,077  
                                 
Shares used to compute non-GAAP income per share                                
Basic     35,961       35,295       35,873       35,133  
Diluted     37,015       36,366       36,898       36,137  
                                 
Non-GAAP income per share                                
Basic   $ 0.48     $ 0.40     $ 1.39     $ 1.17  
Diluted   $ 0.47     $ 0.39     $ 1.35     $ 1.14  
                                 

Contact:Investor RelationsThe Blueshirt GroupIrmina BlaszczykLisa LaukkanenSPSC@blueshirtgroup.com415-217-4962

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