SPS Commerce, Inc. (NASDAQ: SPSC), a leader in retail supply chain cloud services, today announced financial results for the third quarter ended September 30, 2024.

Financial Highlights

Third Quarter 2024 Financial Highlights

  • Revenue was $163.7 million in the third quarter of 2024, compared to $135.7 million in the third quarter of 2023, reflecting 21% growth.
  • Recurring revenue grew 21% from the third quarter of 2023.
  • Net income was $23.5 million or $0.62 per diluted share, compared to net income of $16.8 million or $0.45 per diluted share in the third quarter of 2023.
  • Non-GAAP income per diluted share was $0.92, compared to non-GAAP income per diluted share of $0.75 in the third quarter of 2023.
  • Adjusted EBITDA for the third quarter of 2024 increased 19% to $48.4 million compared to the third quarter of 2023.

“The evolving dynamics of the retail industry continue to drive digital transformation. SPS Commerce has been a trusted partner to thousands of retailers, suppliers, logistics providers, and distributors over the years and we remain committed to our vision to be the world’s retail network,” said Chad Collins, CEO of SPS Commerce. “Our customers continue to prioritize supply chain resilience and recognize the value we bring to the table as they strive for efficient collaboration with their trading partners.”

“SPS Commerce delivered strong third quarter performance and the 95th consecutive quarter of revenue growth,” said Kim Nelson, CFO of SPS Commerce. “We remain committed to a balanced growth approach as we continue to support our customers with a comprehensive product portfolio that positions them to successfully navigate evolving omnichannel dynamics and overcome increasing supply chain complexity.”

Guidance

Fourth Quarter 2024 Guidance

  • Revenue is expected to be in the range of $168.5 million to $169.5 million, representing 16% to 17% year-over-year growth.
  • Net income per diluted share is expected to be in the range of $0.46 to $0.47, with fully diluted weighted average shares outstanding of 38.1 million shares.
  • Non-GAAP income per diluted share is expected to be in the range of $0.83 to $0.84.
  • Adjusted EBITDA is expected to be in the range of $48.0 million to $48.7 million.
  • Non-cash, share-based compensation expense is expected to be $12.8 million, depreciation expense is expected to be $5.1 million, and amortization expense is expected to be $7.2 million.

Fiscal Year 2024 Guidance

  • Revenue is expected to be in the range of $635.4 million to $636.4 million, representing 18% to 19% growth over 2023.
  • Net income per diluted share is expected to be in the range of $2.03 to $2.04, with fully diluted weighted average shares outstanding of 37.9 million shares.
  • Non-GAAP income per diluted share is expected to be in the range of $3.41 to $3.42.
  • Adjusted EBITDA is expected to be in the range of $185.0 million to $185.7 million, representing 17% to 18% growth over 2023.
  • Non-cash, share-based compensation expense is expected to be $55.1 million, depreciation expense is expected to be $19.1 million, and amortization expense is expected to be $22.8 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 Q3 2024 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, grocery, distribution, supply, and logistics have chosen SPS as their retail network. SPS has achieved 95 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 condensed 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 condensed 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, and other adjustments as necessary for a fair presentation. Other adjustments for the three and nine months ended September 30, 2024 included the expense impacts from disposals of certain capitalized internally developed software and one-time acquisition-related insurance costs. Other adjustments for the three and nine months ended September 30, 2023 included the expense impact from acquisition-related employee severance costs, and for the nine months ended September 30, 2023, other adjustments also included the expense impact from 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, including for the three and nine months ended September 30, 2024 the expense impacts from disposals of certain capitalized internally developed software and one-time acquisition-related insurance costs, for the three and nine months ended September 30, 2023 the expense impact from acquisition-related employee severance costs, and for the nine months ended September 30, 2023 the expense impact from disposals of certain capitalized internally developed software, 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. 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 fourth 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, 2023, 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(in thousands, except shares)
 
  September 30, 2024   December 31, 2023
ASSETS (unaudited)    
Current assets      
Cash and cash equivalents $ 198,842     $ 219,081  
Short-term investments   6,931       56,359  
Accounts receivable   60,044       50,160  
Allowance for credit losses   (4,474 )     (3,320 )
Accounts receivable, net   55,570       46,840  
Deferred costs   64,665       62,403  
Other assets   18,639       16,758  
Total current assets   344,647       401,441  
Property and equipment, net   36,148       36,043  
Operating lease right-of-use assets   8,412       7,862  
Goodwill   423,508       249,176  
Intangible assets, net   168,131       107,344  
Other assets      
Deferred costs, non-current   20,802       20,347  
Deferred income tax assets   412       505  
Other assets, non-current   1,240       1,126  
Total assets $ 1,003,300     $ 823,844  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities      
Accounts payable $ 8,107     $ 7,420  
Accrued compensation   46,010       41,588  
Accrued expenses   8,968       8,014  
Deferred revenue   78,883       69,187  
Operating lease liabilities   4,363       4,460  
Total current liabilities   146,331       130,669  
Other liabilities      
Deferred revenue, non-current   6,550       6,930  
Operating lease liabilities, non-current   8,807       9,569  
Deferred income tax liabilities   11,607       8,972  
Other liabilities, non-current   640       229  
Total liabilities   173,935       156,369  
Commitments and contingencies      
Stockholders' equity      
Common stock   39       39  
Treasury stock   (99,748 )     (128,892 )
Additional paid-in capital   611,719       537,061  
Retained earnings   318,540       259,045  
Accumulated other comprehensive gain (loss)   (1,185 )     222  
Total stockholders’ equity   829,365       667,475  
   Total liabilities and stockholders’ equity $ 1,003,300     $ 823,844  

SPS COMMERCE, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited; in thousands, except per share amounts)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2024   2023   2024   2023
Revenues $ 163,686   $ 135,661   $ 466,858   $ 391,945
Cost of revenues   51,624     45,521     155,129     133,029
Gross profit   112,062     90,140     311,729     258,916
Operating expenses              
Sales and marketing   37,577     30,289     109,700     89,722
Research and development   15,292     13,558     45,667     39,438
General and administrative   27,152     21,906     76,575     64,275
Amortization of intangible assets   6,470     3,788     15,648     11,118
Total operating expenses   86,491     69,541     247,590     204,553
Income from operations   25,571     20,599     64,139     54,363
Other income, net   3,778     1,702     10,966     4,859
Income before income taxes   29,349     22,301     75,105     59,222
Income tax expense   5,889     5,459     15,610     12,409
Net income $ 23,460   $ 16,842   $ 59,495   $ 46,813
               
Net income per share              
Basic $ 0.63   $ 0.46   $ 1.60   $ 1.28
Diluted $ 0.62   $ 0.45   $ 1.57   $ 1.25
               
Weighted average common shares used to compute net income per share              
Basic   37,447     36,728     37,192     36,584
Diluted   37,996     37,584     37,785     37,417

SPS COMMERCE, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited; in thousands)
 
  Nine Months EndedSeptember 30,
    2024       2023  
Cash flows from operating activities      
Net income $ 59,495     $ 46,813  
Reconciliation of net income to net cash provided by operating activities      
Deferred income taxes   (9,918 )     (11,906 )
Depreciation and amortization of property and equipment   14,010       13,964  
Amortization of intangible assets   15,648       11,118  
Provision for credit losses   6,239       4,004  
Stock-based compensation   42,264       36,097  
Other, net   (925 )     1,711  
Changes in assets and liabilities, net of effects of acquisitions      
Accounts receivable   (11,456 )     (8,800 )
Deferred costs   (2,240 )     (7,543 )
Other assets and liabilities   (2,258 )     2,814  
Accounts payable   665       (5,289 )
Accrued compensation   458       8,073  
Accrued expenses   842       (169 )
Deferred revenue   5,424       10,042  
Operating leases   (1,412 )     (1,417 )
Net cash provided by operating activities   116,836       99,512  
Cash flows from investing activities      
Purchases of property and equipment   (13,832 )     (15,467 )
Purchases of investments   (85,759 )     (102,763 )
Maturities of investments   136,765       95,000  
Acquisition of businesses, net   (147,401 )     (70,218 )
Net cash used in investing activities   (110,227 )     (93,448 )
Cash flows from financing activities      
Repurchases of common stock   (37,567 )      
Net proceeds from exercise of options to purchase common stock   4,198       5,524  
Net proceeds from employee stock purchase plan activity   5,672       4,481  
Net cash provided by (used in) financing activities   (27,697 )     10,005  
Effect of foreign currency exchange rate changes   849       (260 )
Net increase (decrease) in cash and cash equivalents   (20,239 )     15,809  
Cash and cash equivalents at beginning of period   219,081       162,893  
Cash and cash equivalents at end of period $ 198,842     $ 178,702  

SPS COMMERCE, INC.NON-GAAP RECONCILIATION(Unaudited; in thousands, except Margin, Adjusted EBITDA Margin, and per share amounts)
 
Adjusted EBITDA
  Three Months Ended September 30,   Nine Months Ended September 30,
    2024       2023       2024       2023  
Net income $ 23,460     $ 16,842     $ 59,495     $ 46,813  
Income tax expense   5,889       5,459       15,610       12,409  
Depreciation and amortization of property and equipment   4,633       4,675       14,010       13,964  
Amortization of intangible assets   6,470       3,788       15,648       11,118  
Stock-based compensation expense   10,752       11,436       42,264       36,097  
Realized gain from foreign currency on cash and investments held   (1,077 )     (98 )     (2,636 )     (525 )
Investment income   (2,704 )     (2,635 )     (8,377 )     (5,372 )
Other   978       1,036       978       1,170  
Adjusted EBITDA $ 48,401     $ 40,503     $ 136,992     $ 115,674  
Adjusted EBITDA Margin
  Three Months Ended September 30,   Six Months Ended June 30,
    2024       2023       2024       2023  
Revenue $ 163,686     $ 135,661     $ 466,858     $ 391,945  
               
Net income   23,460       16,842       59,495       46,813  
Margin   14 %     12 %     13 %     12 %
               
Adjusted EBITDA   48,401       40,503       136,992       115,674  
Adjusted EBITDA Margin   30 %     30 %     29 %     30 %
Non-GAAP Income per Share
  Three Months Ended September 30,   Nine Months Ended September 30,
    2024       2023       2024       2023  
Net income $ 23,460     $ 16,842     $ 59,495     $ 46,813  
Stock-based compensation expense   10,752       11,436       42,264       36,097  
Amortization of intangible assets   6,470       3,788       15,648       11,118  
Realized gain from foreign currency on cash and investments held   (1,077 )     (98 )     (2,636 )     (525 )
Other   978       1,036       978       1,170  
Income tax effects of adjustments   (5,514 )     (4,981 )     (18,134 )     (16,089 )
Non-GAAP income $ 35,069     $ 28,023     $ 97,615     $ 78,584  
               
Shares used to compute net income and non-GAAP income per share              
Basic   37,447       36,728       37,192       36,584  
Diluted   37,996       37,584       37,785       37,417  
               
Net income per share, basic $ 0.63     $ 0.46     $ 1.60     $ 1.28  
Non-GAAP adjustments to net income per share, basic   0.31       0.30       1.02       0.87  
Non-GAAP income per share, basic $ 0.94     $ 0.76     $ 2.62     $ 2.15  
               
Net income per share, diluted $ 0.62     $ 0.45     $ 1.57     $ 1.25  
Non-GAAP adjustments to net income per share, diluted   0.30       0.30       1.01       0.85  
Non-GAAP income per share, diluted $ 0.92     $ 0.75     $ 2.58     $ 2.10  
 

Contact:Investor RelationsThe Blueshirt GroupIrmina Blaszczyk & Lisa LaukkanenSPSC@blueshirtgroup.com415-217-4962

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