Summary
SPS Commerce posted another quarter of top-line expansion. Revenue for the second quarter of 2021 ended June 30, 2021 was $94.5 million, up 25.1% from the prior-year quarter. That marked the 82nd consecutive quarter of revenue growth. Recurring revenue grew 22% from the second quarter of 2020. The company ended the quarter with 34,550 recurring revenue customers, up 10% from 31,450 a year earlier. Wallet share, or annualized average recurring revenues per recurring revenue customer, increased 12% to $10,150 for the quarter from $9,100. Recurring revenues accounted for 92% of total revenues in the quarter, down from 94% in the prior-year quarter. Management pointed to omnichannel retail demand and accelerating interest in SPS Fulfillment.
Profitability was mixed. Gross profit was $62.8 million, up 22.6%, while gross margin slipped to 66.4%, down 1.4 percentage points from the prior-year quarter. Operating income rose 21.8% to $13.5 million, but operating margin was 14.3%, down 0.4 percentage points from the prior-year quarter. Net income was $10.2 million, down 9.0% from the prior-year quarter. Diluted EPS was $0.28, down $0.03, or 9.7%. The decline in net income despite higher operating income reflected a swing in other income and expense, which the 10-Q attributed mostly to larger foreign currency exchange losses. Income tax expense also rose on higher nondeductible executive compensation and lower discrete tax benefits from stock activity and research and development credits. Non-GAAP net income per diluted share was $0.46, compared with $0.37 in the prior-year quarter. Adjusted EBITDA increased 34% to $27.3 million, and adjusted EBITDA margin was 29%, up from 27%.
Cost structure showed investment in headcount and platform infrastructure. Cost of revenues and operating expenses rose, driven by higher personnel costs, stock-based compensation, software subscriptions, and depreciation. Amortization of intangible assets increased because of acquired intangible assets from Data Masons, which SPS acquired in December 2020. The company added staff across sales and marketing, research and development, and general and administrative functions. These investments pressured margins even as revenue scaled.
Cash generation remained strong. Operating cash flow for the quarter was $33.1 million, up 49.4% from the prior-year quarter. Year to date, operating cash flow was $54.7 million, up 48.5%. Capital expenditures were $5.5 million in the quarter, up 23.6%, and $8.7 million year to date, up 4.1%. Deferred revenue, current portion, was $48.8 million at June 30, 2021, up 34.7% from a year earlier. The MD&A attributed the increase in operating cash flow primarily to changes in assets and liabilities, principally higher deferred revenue and accrued compensation balances, along with higher depreciation, amortization, and stock-based compensation.
Guidance points to continued growth. For the third quarter of 2021, management guided revenue to a range of $96.7 million to $97.5 million and non-GAAP net income per diluted share to $0.40 to $0.41. Adjusted EBITDA for the third quarter is expected to be $25.3 million to $26.0 million. For the full year 2021, revenue is expected to be $380.6 million to $382.1 million, representing 22% growth over 2020. Non-GAAP income per diluted share is expected to be $1.68 to $1.71. Full year adjusted EBITDA is expected to be $104.0 million to $105.3 million, representing 20% to 21% growth over 2020. Management also forecast non-cash share-based compensation, depreciation, and amortization expenses for both periods.
Risks include the ongoing COVID-19 pandemic, which the filing says may amplify other risk factors, and the company's reliance on forward-looking assumptions that could differ materially. The 10-Q points to risk factors in the 2020 annual report, including competition, costs to develop new solutions, sales and marketing resources, international expansion, and acquisitions. Foreign currency exchange losses hurt other income this quarter, and income tax expense can fluctuate with stock activity and research and development credits. The balance sheet shows commitments, including $24.2 million in operating lease obligations and $13.7 million in purchase commitments. SPS states that inflation and changing prices did not have a material effect on the business during the six months ended June 30, 2021. The company believes its cash, cash equivalents, investments, and operating cash flows will meet working capital and capital expenditure needs for at least the next twelve months.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $94.5M | $90.1M | +4.9% | $75.6M | +25.1% |
| Gross profit | $62.8M | $60.1M | +4.5% | $51.2M | +22.6% |
| Gross margin | 66.4% | 66.7% | -0.3 pp | 67.8% | -1.4 pp |
| Research & development | $8.9M | $8.7M | +2.2% | $7.5M | +19.2% |
| Sales & marketing | $22.0M | $21.4M | +2.8% | $18.6M | +18.0% |
| General & administrative | $15.8M | $14.7M | +6.9% | $12.7M | +23.7% |
| Total operating expenses | $49.3M | $47.5M | +3.8% | $40.1M | +22.8% |
| Operating income (loss) | $13.5M | $12.7M | +6.8% | $11.1M | +21.8% |
| Operating margin | 14.3% | 14.1% | +0.3 pp | 14.7% | -0.4 pp |
| Net income (loss) | $10.2M | $10.2M | -0.2% | $11.2M | -9.0% |
| Net margin | 10.8% | 11.3% | -0.6 pp | 14.8% | -4.0 pp |
| Diluted EPS | $0.28 | $0.28 | ±$0.00 | $0.31 | -$0.03 |
Risks
Other income (expense), net swung from income of $1.5 million in FY2020 Q2 to expense of $0.4 million in FY2021 Q2, and from income of $0.8 million to expense of $0.7 million on a year-to-date basis, primarily due to larger foreign currency exchange losses.
Income tax expense increased 113.9% to $3.0 million in FY2021 Q2 and 86.6% to $5.1 million year to date, driven by nondeductible executive compensation and lower discrete tax benefits from stock activity and R&D credits; management expects the annual effective tax rate to fluctuate.
Gross margin was down 1.4 percentage points to 66.4% in FY2021 Q2 and operating margin was down 0.4 percentage points to 14.3%, while total operating expenses increased 22.8%, reflecting higher headcount and stock-based compensation costs.
SaaS KPIs
All quarters →Adjusted EBITDA Margin
Adjusted EBITDA
Recurring Revenue Customers
Recurring revenue as % of total revenue
Summary, forecast, risks and KPIs are extracted from SPS COMMERCE INC's SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.