8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

October 28, 2020

Date of report (Date of earliest event reported)

SPS COMMERCE, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	001-34702	41-2015127
(State of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
333 South Seventh Street, Suite 1000<br><br>Minneapolis, Minnesota	55402
---	---
(Address of Principal Executive Offices)	(Zip Code)

(612) 435-9400

(Registrant's Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.001 per share	SPSC	The Nasdaq Stock Market LLC<br>(Nasdaq Global Market)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

☐

Item 2.02. Results of Operations and Financial Condition. On October 28, 2020, we issued a press release disclosing our results of operations and financial condition for our three and nine months ended September 30, 2020. In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in that filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

99.1	Press Release dated October 28, 2020
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SPS COMMERCE, INC.
Date: October 28, 2020	By:	/s/ KIMBERLY K. NELSON
		Kimberly K. Nelson
		Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

No.	Description	Manner of Filing
99.1	Press Release dated October 28, 2020	Filed Electronically
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)	Filed Electronically

EdgarFiling EXHIBIT 99.1

SPS Commerce Reports Third Quarter 2020 Financial Results

Company delivers 79th consecutive quarter of topline growth, with 13% growth in recurring revenue over 2019

MINNEAPOLIS, Oct. 28, 2020 (GLOBE NEWSWIRE) -- SPS Commerce, Inc. (Nasdaq: SPSC), a leader in retail cloud services, today announced financial results for the third quarter ended September 30, 2020.

Revenue was $79.6 million in the third quarter of 2020, compared to $70.9 million in the third quarter of 2019, reflecting 12% growth in revenue from the third quarter of 2019. Recurring revenue grew 13% from the third quarter of 2019.

Net income in the third quarter of 2020 was $11.4 million or $0.31 per diluted share, compared to net income of $8.9 million or $0.25 per diluted share, in the third quarter of 2019. Non-GAAP income per diluted share was $0.39 compared to non-GAAP income per diluted share of $0.33 in the third quarter of 2019.

Adjusted EBITDA for the third quarter of 2020 increased 29% to $23.2 million compared to the third quarter of 2019.

“Trading partners across the retail supply chain continue to rely on SPS Commerce to streamline order fulfillment,” said Archie Black, President and CEO of SPS Commerce. “As consumer preferences for omnichannel shopping accelerate, we are well-positioned to help our customers increase efficiency and automation in a rapidly changing environment.”

“Recent trends in retail have accelerated the pace of EDI adoption. We expect this trend to continue as retailers and suppliers adapt and embrace e-commerce, driving demand for our fulfillment solution.” said Kim Nelson, CFO of SPS Commerce.

Guidance

For the fourth quarter of 2020, revenue is expected to be in the range of $80.0 million to $80.5 million. Fourth quarter net income per diluted share is expected to be in the range of $0.20 to $0.21 with fully diluted weighted average shares outstanding of approximately 36.5 million shares. Non-GAAP income per diluted share is expected to be in the range of $0.33 to $0.34. Adjusted EBITDA is expected to be in the range of $21.0 million to $21.5 million. Non-cash, share-based compensation expense is expected to be approximately $5.1 million, depreciation expense is expected to be approximately $3.5 million and amortization expense is expected to be approximately $1.4 million.

For the full year of 2020, revenue is expected to be in the range of $309.3 million to $309.8 million, representing approximately 11% growth over 2019. Full year net income per diluted share is expected to be in the range of $1.09 to $1.10 with fully diluted weighted average shares outstanding of approximately 36.2 million shares. Non-GAAP income per diluted share is expected to be in the range of $1.48 to $1.49. Adjusted EBITDA is expected to be in the range of $85.0 to $85.5 million, representing approximately 22% to 23% growth over 2019. Non-cash, share-based compensation expense is expected to be approximately $19.3 million, depreciation expense is expected to be approximately $13.0 million and amortization expense is expected to be approximately $5.4 million.

Quarterly Conference Call

SPS Commerce will discuss its quarterly 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 # 3002119 at least 15 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 90,000 companies in retail, distribution, grocery and e-commerce have chosen SPS as their retail network. SPS has achieved 79 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, RETAIL UNIVERSE, 1=INFINITY logo, AS THE NETWORK GROWS, SO DOES YOUR OPPORTUNITY, INFINITE RETAIL POWER, RETAIL UNIVERSE are marks of SPS Commerce, Inc. and Registered in the U.S. Patent and Trademark Office. RSX, IN:FLUENCE, and others are further marks of SPS Commerce, Inc. These marks may be registered or otherwise protected in other countries.

Use of Non-GAAP Financial Measures To supplement its financial statements, SPS Commerce also provides investors with Adjusted EBITDA 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 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. It uses Adjusted EBITDA for purposes of determining executive and senior management incentive compensation. These measures are also presented to the company's board of directors.

Adjusted EBITDA consists of net income adjusted for depreciation and amortization, investment income (interest income/expense, realized investments gain/loss excluding realized gain/loss from foreign currency on investments), income tax expense, stock-based compensation expense, realized gain/loss from foreign currency on cash and investments held, and other adjustments as necessary for a fair presentation. SPS Commerce uses Adjusted EBITDA as a measure of operating performance because it assists the company in comparing performance on a consistent basis, as it removes from operating results the impact of the company's capital structure. SPS Commerce believes Adjusted EBITDA is useful to an investor in evaluating the company's operating performance because it is 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 plus stock-based compensation expense, amortization expense related to intangible assets, realized 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 includes an adjustment to non-GAAP income to reflect the income tax effects of the adjustments to GAAP net income. 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. 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.  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 contains 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, our positioning for the future, our performance for the fourth quarter and full year of 2020, and any statements about the future effect of the COVID-19 pandemic on our business, customers or the global economy and our business prospects, all of which fall 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, 2019, 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.

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

SPS COMMERCE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except shares)
			December 31,
			2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	208,930		$	179,252
Short-term investments	52,300			34,284
Accounts receivable	34,048			33,001
Allowance for credit losses	(3,759	)		(1,469	)
Accounts receivable, net	30,289			31,532
Deferred costs	36,562			35,274
Other assets	8,927			11,279
Total current assets	337,008			291,621
PROPERTY AND EQUIPMENT, less accumulated depreciation of 58,629 and 50,574, respectively	25,053			23,752
OPERATING LEASE RIGHT-OF-USE ASSETS	14,092			15,744
GOODWILL	76,543			76,845
INTANGIBLE ASSETS, net	18,575			22,668
INVESTMENTS	2,476			—
OTHER ASSETS
Deferred costs, non-current	11,571			11,667
Deferred income tax assets	140			2,630
Other assets, non-current	2,228			2,513
Total assets	487,686		$	447,440
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	5,036		$	4,274
Accrued compensation	19,374			22,303
Accrued expenses	6,042			6,207
Deferred revenue	35,582			31,463
Operating lease liabilities	4,355			3,783
Total current liabilities	70,389			68,030
OTHER LIABILITIES
Deferred revenue, non-current	2,693			2,851
Operating lease liabilities, non-current	16,725			20,085
Deferred income tax liabilities	2,939			1,193
Other liabilities, non-current	—			405
Total liabilities	92,746			92,564
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 and 55,000,000 shares authorized; 36,904,856 and 36,104,619 shares issued; and 35,291,606 and 34,863,271 outstanding, respectively	37			36
Treasury stock, at cost; 1,613,250 and 1,241,348 shares, respectively	(65,247	)		(46,297	)
Additional paid-in capital	382,992			354,115
Retained earnings	80,020			48,973
Accumulated other comprehensive loss	(2,862	)		(1,951	)
Total stockholders’ equity	394,940			354,876
Total liabilities and stockholders’ equity	487,686		$	447,440

All values are in US Dollars.

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,
	2020		2019			2020			2019
Revenues	$	79,557	$	70,928		$	229,322		$	206,391
Cost of revenues		25,045		23,263			72,915			68,330
Gross profit		54,512		47,665			156,407			138,061
Operating expenses
Sales and marketing		19,233		16,937			56,143			52,404
Research and development		8,053		7,743			23,087			20,444
General and administrative		11,939		10,725			36,591			33,674
Amortization of intangible assets		1,333		1,327			3,985			3,897
Total operating expenses		40,558		36,732			119,806			110,419
Income from operations		13,954		10,933			36,601			27,642
Other income (expense)
Interest income, net		116		843			982			2,233
Other income (expense), net		307		(165	)		308			28
Change in earn-out liability		—		22			(72	)		366
Total other income, net		423		700			1,218			2,627
Income before income taxes		14,377		11,633			37,819			30,269
Income tax expense		2,970		2,692			5,703			5,719
Net income	$	11,407	$	8,941		$	32,116		$	24,550
Net income per share
Basic	$	0.32	$	0.26		$	0.91		$	0.70
Diluted	$	0.31	$	0.25		$	0.89		$	0.68
Weighted average common shares used to compute net income per share
Basic		35,295		35,015			35,133			34,966
Diluted		36,366		35,932			36,137			35,952

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,
	2020			2019
Cash flows from operating activities
Net income	$	32,116		$	24,550
Reconciliation of net income to net cash provided by operating activities
Deferred income taxes		4,324			5,360
Change in earn-out liability		72			(366	)
Depreciation and amortization of property and equipment		9,474			8,143
Amortization of intangible assets		3,985			3,897
Provision for credit losses		4,198			2,429
Stock-based compensation		14,246			11,316
Other, net		(16	)		(551	)
Changes in assets and liabilities
Accounts receivable		(4,551	)		(3,670	)
Deferred costs		(1,129	)		(151	)
Other current and non-current assets		2,612			(820	)
Accounts payable		1,357			181
Accrued compensation		(3,989	)		(3,716	)
Accrued expenses		(3	)		(84	)
Deferred revenue		3,961			4,929
Operating leases		(1,128	)		(487	)
Net cash provided by operating activities		65,529			50,960
Cash flows from investing activities
Purchases of property and equipment		(11,639	)		(8,387	)
Purchases of investments		(67,636	)		(61,967	)
Maturities of investments		47,300			55,225
Acquisitions of businesses and intangible assets, net of cash acquired		—			(11,500	)
Net cash used in investing activities		(31,975	)		(26,629	)
Cash flows from financing activities
Repurchases of common stock		(18,950	)		(14,966	)
Net proceeds from exercise of options to purchase common stock		14,143			5,273
Net proceeds from employee stock purchase plan		1,645			1,155
Payment for earn-out liability		(688	)		—
Net cash used in financing activities		(3,850	)		(8,538	)
Effect of foreign currency exchange rate changes		(26	)		75
Net increase in cash and cash equivalents		29,678			15,868
Cash and cash equivalents at beginning of period		179,252			133,859
Cash and cash equivalents at end of period	$	208,930		$	149,727
SPS COMMERCE, INC.
---	---	---	---	---	---	---	---	---	---	---	---	---
NON-GAAP RECONCILIATION
(Unaudited; in thousands, except per share amounts)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Net income	$	11,407		$	8,941		$	32,116		$	24,550
Depreciation and amortization of property
and equipment		3,198			2,819			9,474			8,143
Amortization of intangible assets		1,333			1,327			3,985			3,897
Investment income, net		(107	)		(843	)		(1,079	)		(2,233	)
Income tax expense		2,970			2,692			5,703			5,719
Stock-based compensation expense		4,893			3,147			14,246			11,316
Realized gain from foreign currency on cash and investments held		(559	)		-			(686	)		-
Other		103			(22	)		257			(483	)
Adjusted EBITDA	$	23,238		$	18,061		$	64,016		$	50,909
Net income	$	11,407		$	8,941		$	32,116		$	24,550
Stock-based compensation expense		4,893			3,147			14,246			11,316
Amortization of intangible assets		1,333			1,327			3,985			3,897
Realized gain from foreign currency on cash and investments held		(559	)		-			(686	)		-
Other		103			(22	)		257			(483	)
Income tax effects of adjustments		(2,929	)		(1,606	)		(8,841	)		(5,972	)
Non-GAAP income	$	14,248		$	11,787		$	41,077		$	33,308
Shares used to compute non-GAAP income per share
Basic		35,295			35,015			35,133			34,966
Diluted		36,366			35,932			36,137			35,952
Non-GAAP income per share
Basic	$	0.40		$	0.34		$	1.17		$	0.95
Diluted	$	0.39		$	0.33		$	1.14		$	0.93

Per share amounts may not foot due to rounding.

SPS-F