SPS Commerce, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the provided filing text does not give a separate set of fourth-quarter financial results. SPS Commerce provides cloud-based supply-chain management services for retailers, suppliers, distributors, grocers and logistics firms. Its recurring-revenue model represented 93% of revenue.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $450.9 million | $385.3 million |
| Gross profit / margin | $297.8 million / 66.1% | $253.6 million / 65.8% |
| Operating income / margin | $71.2 million / 15.8% | $55.1 million / 14.3% |
| Net income / margin | $55.1 million / 12.2% | $44.6 million / 11.6% |
| Diluted GAAP earnings per share | $1.49 | $1.21 |
| Adjusted EBITDA / margin (non-GAAP) | $132.3 million / 29% | $107.0 million / 28% |
| Cash provided by operating activities | $100.1 million | $112.9 million |
- Revenue grew 17%; recurring revenue grew 18%. Recurring customers rose 13% to 42,300, and average recurring revenue per customer (“wallet share”) increased 4% to $10,500.
- Recurring revenue was $419.0 million; one-time revenue was $31.8 million. Fulfillment generated $364.1 million, Analytics $46.9 million and other recurring products $8.0 million.
- At year-end, cash and cash equivalents were $162.9 million and short-term investments were $51.4 million, totaling $214.3 million. Net accounts receivable was $39.4 million. Total liabilities were $135.8 million; the company reported no outstanding debt.
- Investing activities used $112.8 million, including $91.4 million for acquisitions and $19.9 million for property and equipment. Financing activities used $31.6 million, including $43.2 million of share repurchases.
Material changes and notable items
- Revenue, operating income and net income increased year over year; gross, operating and net margins also improved. Operating cash flow declined by $12.8 million, primarily due to changes in the timing of operating asset and liability settlements, particularly accrued compensation.
- The company acquired GCommerce, an automotive-aftermarket EDI provider, for approximately $45.1 million, and InterTrade, serving apparel and general merchandising, for approximately $49.1 million. Purchase accounting remained provisional at year-end. InterTrade also had up to $2.0 million in contingent consideration; the company expected to pay it in 2023.
- Goodwill increased to $197.3 million from $143.7 million, largely reflecting acquisitions. Stock-based compensation expense rose to $33.4 million from $27.6 million.
- The company repurchased $43.2 million of stock in FY2022. At year-end, $47.0 million remained under its $50 million repurchase authorization, which expires in July 2024.
Outlook, risks and contingencies
- No quantified forward financial guidance is provided in the filing text. Management expects recurring customers and wallet share to continue increasing and believes cash, investments and operating cash flow will meet working-capital and capital-expenditure needs for at least the next 12 months.
- Management’s growth strategy includes expanding customer relationships and product offerings, increasing international sales and selectively pursuing acquisitions. It reported 88 consecutive quarters of revenue growth through the quarter ended December 31, 2022.
- Key risks include short customer cancellation notice periods—generally 30 to 90 days—competition and economic weakness affecting retail customers; cyberattacks, data security and service availability; reliance on third-party infrastructure; acquisition integration and purchase-accounting uncertainty; and international operating exposure, including disruption risks in Ukraine and the Philippines.
- The effective tax rate rose to 22.7% from 16.7%, in part due to lower excess tax deductions from equity-award settlements; management notes that the rate may fluctuate. Inflation had not materially affected the business, according to the filing.
- The filing reports no material legal proceedings or off-balance-sheet arrangements. KPMG issued unqualified opinions on the financial statements and internal controls. The 2022 internal-control assessment excluded GCommerce and InterTrade, which together represented 1.4% of consolidated revenue and 3.7% of consolidated assets excluding goodwill and net intangible assets.
Important facts for investors to verify
- Whether recurring-customer growth and higher wallet share continue, and how renewals perform given short cancellation terms.
- Whether GCommerce and InterTrade are integrated as planned, and the final purchase-price allocations, acquired-customer retention and contingent payment.
- Why operating cash flow declined despite higher earnings, and whether working-capital movements normalize.
- The effect of stock-based compensation, acquisition-related amortization and repurchases on per-share results and dilution.
- Whether the acquired businesses’ controls are incorporated into the company’s subsequent internal-control assessment, and how cybersecurity and international workforce risks are managed.