SPS Commerce, Inc. reports 6,701% Net Income growth in 2018 and 6.0 pp EBITDA Margin growth from 9.9% to 15.9%
02/12/2019 • About SPS Commerce, Inc. (
$SPSC) • By InTwits
SPS Commerce, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- SPS Commerce, Inc. is a fast growth stock: 2018 revenue growth was 12.8%, 5 year revenue CAGR was 18.9% at 2018 ROIC 9.1%
- SPS Commerce, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 is 4.8%. Average EBITDA Margin for the same period was 11.6%. In 2018 SBC/Revenue was even higher: 5.0%
- SPS Commerce, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.9%. At the same time it's in pair with industry average of 3.1%
- CAPEX is quite volatile: $39m in 2018, $21m in 2017, $21m in 2016, $12m in 2015, $3m in 2014
- The company has business model with low profitability: ROIC is 9.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
SPS Commerce, Inc.'s Revenue surged on 12.8%. Revenue growth showed small slowdown in 18Q4 - it was 12.3% YoY. Revenue decline was accelerating on average at -3.0 pp per annum in 2014-2018. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.9 pp from 18.2% to 22.1% in 2018.
Gross Margin increased slightly on 0.52 pp from 66.5% to 67.1% in 2018. During the last 5 years Gross Margin bottomed in 2017 at 66.5%. SG&A as a % of Revenue decreased on 3.6 pp from 49.4% to 45.8% in 2018. SG&A as a % of Revenue stuck to a declining trend at -1.5 pp per annum in 2014-2018. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 0.74 pp from 5.8% to 5.0% in 2018.
Net Income margin increased on 9.5 pp from 0.16% to 9.6% in 2018. The efficient tax rate was 15.8% in 2018 while the average for the last five years was 36.9%.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 5.5% in 2018. SPS Commerce, Inc.'s CAPEX/Revenue showed almost no change from 2015 to 2018. Average CAPEX/Revenue for the last three years was 4.3%. During the last 5 years CAPEX as a % of Revenue bottomed in 2017 at 3.3%.
Accounts receivable as a % of Revenue showed almost no change in 2018. Accounts payable as a % of Revenue decreased slightly on 0.63 pp from 6.1% to 5.4% in 2018.
SPS Commerce, Inc. has spent
$27m on M&A in 2018 which accounts for 11.0% of revenue.
Return on investment
The company operates at low ROIC (9.1%) and ROE (7.9%). ROIC increased on 5.2 pp from 3.9% to 9.1% in 2018. ROE increased on 7.7 pp from 0.13% to 7.9% in 2018.
Leverage (Debt)
The company has no debt. Cash increased on 8.7%.
Valuation and dividends
SPS Commerce, Inc.'s trades at EV/EBITDA 43.6x and P/E 77.7x.
Management team
Archie C Black is a the company's CEO. Archie C Black is a founder and has spent 18 years with the company. CEO total compensation was
$4,520,963 in 2018 which included
$495,000 salary. The company's CFO Kimberly K Nelson has spent 11 years with the company.
Insider ownership is 1.1%. Insider ownership didn't change in 2018.
At the end of financial year the company had 1,231 employees. The number of employees decreased on 7.9%. Average revenue per employee in 2018 was
$201,657 and it jumped on 22.4%.
Financial and operational results
FY ended 12/31/2018
SPS Commerce, Inc. ($SPSC) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 127.9 | 158.5 | 193.3 | 220.1 | 248.2 | 12.8% |
| Gross Profit | 88.0 | 108.5 | 128.9 | 146.5 | 166.5 | 13.7% |
| SG&A | 67.2 | 80.2 | 94.7 | 108.7 | 113.6 | 4.5% |
| EBITDA | 13.0 | 16.6 | 18.9 | 21.8 | 39.4 | 81.1% |
| EBIT | 4.4 | 7.0 | 7.5 | 10.0 | 26.7 | 167.8% |
| Tax | 1.4 | 2.4 | 3.1 | 10.3 | 4.5 | -56.8% |
| Net Income | 2.7 | 4.6 | 5.7 | 0.4 | 23.9 | 6,701.1% |
| Stock Based Compensation | 5.4 | 6.4 | 8.0 | 12.7 | 12.5 | -1.7% |
Balance Sheet
|
|---|
| Cash | 130.8 | 121.5 | 115.9 | 123.1 | 133.9 | 8.7% |
| Accounts Receivable | 15.4 | 17.6 | 20.7 | 24.9 | 27.5 | 10.4% |
| Accounts Payable | 4.0 | 2.2 | 2.3 | 4.5 | 4.4 | -0.5% |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 7.6 | 8.8 | 8.0 | 7.3 | 13.8 | 89.1% |
| Acquisitions | 12.6 | | 18.0 | 0.5 | 27.3 | 5,354.6% |
Ratios
|
|---|
| Revenue growth | 22.6% | 23.9% | 21.9% | 13.9% | 12.8% | |
| EBITDA growth | 31.9% | 28.1% | 13.6% | 15.4% | 81.1% | |
|
|---|
| Gross Margin | 68.7% | 68.4% | 66.7% | 66.5% | 67.1% | 0.5% |
| EBITDA Margin | 10.1% | 10.5% | 9.8% | 9.9% | 15.9% | 6.0% |
| EBIT Margin | 3.4% | 4.4% | 3.9% | 4.5% | 10.8% | 6.2% |
| SG&A, % of revenue | 52.5% | 50.6% | 49.0% | 49.4% | 45.8% | -3.6% |
| SBC, % of revenue | 4.2% | 4.0% | 4.2% | 5.8% | 5.0% | -0.7% |
| Net Income Margin | 2.1% | 2.9% | 3.0% | 0.2% | 9.6% | 9.5% |
| CAPEX, % of revenue | 5.9% | 5.5% | 4.1% | 3.3% | 5.5% | 2.2% |
|
|---|
| ROIC | 2.3% | 3.4% | 3.3% | 3.9% | 9.1% | 5.2% |
| ROE | 1.4% | 2.2% | 2.4% | 0.1% | 7.9% | 7.7% |
| Net Debt/EBITDA | -10.1x | -7.3x | -6.1x | -5.7x | -3.4x | 2.3x |
People
|
|---|
| Insider ownership | 1.1% | 1.1% | 1.1% | 1.1% | 1.1% | 0.0% |
| Employees | 943 | 1,046 | 1,217 | 1,336 | 1,231 | -7.9% |
| Revenue/Employee, th. $ | 136 | 152 | 159 | 165 | 202 | 22.4% |
SPS Commerce, Inc. ($SPSC) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 59 | 61 | 63 | 65 | | 13.9% | 12.9% | 12.2% | 12.3% |
| EBITDA | 8 | 9 | 11 | 12 | | 19.5% | 56.4% | 79.3% | 243.0% |
| Net Income | 3 | 5 | 8 | 7 | | 9.0% | 175.2% | 270.5% | |
Balance Sheet
|
|---|
| Cash | 121 | 125 | 145 | 134 | | -6.3% | -4.8% | 12.2% | 8.7% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 66.6% | 66.6% | 67.5% | 67.5% | | -0.0% | 0.2% | 0.8% | 1.0% |
| EBITDA Margin | 12.7% | 14.9% | 18.0% | 17.6% | | 0.6% | 4.1% | 6.7% | 11.9% |
| Net Income Margin | 5.5% | 8.9% | 12.8% | 11.0% | | -0.2% | 5.2% | 8.9% | 22.6% |
Peers in Application Software
Below we provide SPS Commerce, Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 13.5% | 13.6% | 15.7% | 15.2% |
|---|
| SPS Commerce, Inc. ($SPSC) | | 23.9% | 21.9% | 13.9% | 12.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.7% |
|---|
| SPS Commerce, Inc. ($SPSC) | 68.7% | 68.4% | 66.7% | 66.5% | 67.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (152 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| SPS Commerce, Inc. ($SPSC) | 10.1% | 10.5% | 9.8% | 9.9% | 15.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 2.9% | 2.3% | 2.4% |
|---|
| SPS Commerce, Inc. ($SPSC) | 5.9% | 5.5% | 4.1% | 3.3% | 5.5% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -10.4% |
|---|
| SPS Commerce, Inc. ($SPSC) | 2.3% | 3.4% | 3.3% | 3.9% | 9.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.2x | -0.9x | -0.9x | -0.8x | -0.6x |
|---|
| SPS Commerce, Inc. ($SPSC) | -10.1x | -7.3x | -6.1x | -5.7x | -3.4x |
