SPS Commerce, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with the three months ended March 31, 2021 unless noted. SPS Commerce provides cloud-based supply-chain management services to retailers, suppliers, grocers, distributors and logistics firms, delivered through a full-service model.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $105.2 million | $90.1 million | +16.8% |
| Recurring revenue | $97.6 million | $82.8 million | +18% |
| Gross profit / margin | $69.8 million / 66.4% | $60.1 million / 66.7% | Margin down 0.3 percentage points |
| Operating income / margin | $16.5 million / 15.7% | $12.7 million / 14.1% | Income +30.4% |
| Net income / diluted EPS | $12.6 million / $0.34 | $10.2 million / $0.28 | Net income +23.6% |
| Adjusted EBITDA / margin (non-GAAP) | $31.8 million / 30% | $25.5 million / 28% | Margin up 2 percentage points |
| Net cash from operating activities | $4.3 million | $21.6 million | Down $17.3 million |
Revenue growth reflected a 12% increase in recurring-revenue customers to 37,900 and a 5% increase in average recurring revenue per customer (“wallet share”) to $10,350. Recurring revenue was 93% of total revenue, versus 92% a year earlier. Management attributed expense increases mainly to higher headcount and related personnel costs; stock-based compensation also increased. The effective tax burden was higher, with income-tax expense rising to $4.3 million from $2.1 million.
Balance sheet, liquidity and cash flow
- At March 31, 2022, cash and cash equivalents were $203.1 million and short-term investments were $40.0 million, totaling $243.1 million; net accounts receivable was $38.8 million.
- Total assets were $613.3 million; total liabilities were $121.8 million; stockholders’ equity was $491.5 million. The filing reports no outstanding debt or variable-rate debt.
- Operating cash flow declined primarily because of the timing and settlement of operating assets and liabilities, including accounts receivable, other assets and accrued compensation. Investing cash flow was positive $5.7 million, including net investment maturities; financing cash flow was negative $14.6 million, mainly reflecting share repurchases.
- The company repurchased 121,544 shares for $15.2 million at an average $125.27 per share in Q1; $25.0 million remained available under its $50 million program.
- Operating lease obligations were $21.6 million including imputed interest, and remaining purchase commitments were approximately $8.0 million. Management said available liquidity and operating cash flows should cover working-capital and capital-expenditure needs for at least the next 12 months.
Outlook, risks and notable items
- No specific quarterly or full-year financial guidance was provided in the supplied filing text. Management expects recurring customers and wallet share to continue increasing and plans to pursue market penetration, product and channel expansion, international growth and selective acquisitions.
- Management expects expenditures to increase as the business and workforce expand. It said inflation and changing prices had no material effect in Q1 and were not expected to have a material effect in the foreseeable future.
- Foreign-currency movements may affect results; about 6% of cash, cash equivalents and investments were held in foreign currencies, and the company had not used currency hedges. Management considered a hypothetical 10% exchange-rate change not material to operational needs or consolidated financials.
- There were no material changes to the risk factors disclosed in the 2021 Form 10-K and no material legal proceedings reported. The company stated disclosure controls were effective. Its internal-control assessment had not yet included Genius Central, acquired in November 2021; excluding goodwill and intangible assets, that business represented less than 1% of consolidated assets and about 1% of revenue for the period.
- Stock-based compensation was $9.0 million, up from $6.9 million. It is excluded from the company’s Adjusted EBITDA and non-GAAP EPS measures; assess these measures alongside GAAP results.
Most important facts for investors to verify
- How much of customer and revenue growth reflects organic expansion versus acquisitions, and whether the gains in customer count and wallet share persist.
- Whether operating cash flow rebounds after the Q1 working-capital outflows, particularly the changes in accrued compensation and other assets.
- The durability of margin improvement given higher staffing and stock-based compensation costs, and the reconciliation of non-GAAP measures to GAAP results.
- Future capital allocation, including additional buybacks, acquisition spending and remaining commitments.
- Integration and internal-control progress for Genius Central, and developments in foreign-exchange exposure and other disclosed risks.