Summary
SPS Commerce closed fiscal 2021 with fourth quarter revenue of $102.76 million, up 23.3% from the prior-year quarter. Full year revenue reached $385.28 million, up 23.2% from the prior year. The company said the quarter marked its 84th consecutive quarter of revenue growth. Recurring revenue grew 21% in the fourth quarter and 20% for the full year. The customer base expanded to approximately 37,500 recurring revenue customers at December 31, 2021, up 13% from a year earlier, while wallet share rose 9% to $10,050.
Profitability was mixed. Fourth quarter gross profit rose 19.0% to $67.12 million, and operating income increased 13.4% to $15.37 million. Full year gross profit was $253.60 million, up 19.2%, and operating income was $55.08 million, up 9.8%. Those gains trailed revenue growth, so margins narrowed. Fourth quarter gross margin was 65.3%, down 2.4 percentage points from the prior-year quarter. Operating margin was 15.0%, down 1.3 percentage points. The company pointed to higher headcount, stock-based compensation, and infrastructure spending as drivers of cost growth.
Net income moved in the opposite direction. Fourth quarter net income was $12.76 million, down 5.2% from the prior-year quarter. Full year net income was $44.60 million, down 2.2%. Full year diluted EPS was $1.21, down 4.0% from the prior year. The net income decline came even as operating income rose. Management cited unfavorable foreign currency exchange rate changes and lower investment income in the other income line, along with higher income tax expense tied to nondeductible executive compensation and higher pretax income.
Cash generation remained a bright spot. Fourth quarter operating cash flow was $31.32 million, up 36.0% from the prior-year quarter. Full year operating cash flow was $112.89 million, up 27.5%. Capital expenditures were $4.02 million in the fourth quarter, down 16.7%, and $19.59 million for the full year, up 19.0%. Deferred revenue stood at $50.40 million at December 31, 2021.
Management issued guidance for the first quarter of 2022 and the full year 2022. First quarter revenue is expected to be $103.8 million to $104.8 million. Full year revenue is expected to be $442.5 million to $445.5 million, which represents approximately 15% to 16% growth over 2021. First quarter net income per diluted share is guided to $0.24 to $0.25, while full year net income per diluted share is guided to $1.15 to $1.18. Non-GAAP net income per diluted share is guided to $0.46 to $0.47 for the first quarter and $1.99 to $2.02 for the full year. Adjusted EBITDA guidance is $28.8 million to $29.3 million for the first quarter and $125.0 million to $126.5 million for the full year, representing approximately 17% to 18% growth over 2021. The company expects an annual effective tax rate of approximately 30% and forecasts non-cash share-based compensation expense of approximately $35.0 million for the full year, with depreciation of approximately $18.1 million and amortization of approximately $10.0 million.
The filings flag several risks. SPS Commerce notes that forward-looking statements involve known and unknown risks, and it directs investors to the risk factors in its annual report. The company operates in a competitive retail supply chain market and depends on continued demand for EDI and fulfillment automation. Foreign currency exchange rate changes already hurt other income in 2021, and management expects the effective tax rate to fluctuate. Acquisitions are part of the growth strategy, and integrating those businesses carries execution risk. The company also expects capital requirements to vary and expenditures to increase as it expands. Inflation has not had a material effect on the business in the last three years, according to the filing.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $102.8M | $97.9M | +5.0% | $83.3M | +23.3% |
| Gross profit | $67.1M | $63.5M | +5.6% | $56.4M | +19.0% |
| Gross margin | 65.3% | 64.9% | +0.4 pp | 67.7% | -2.4 pp |
| Research & development | $10.6M | $10.9M | -2.5% | $7.9M | +33.3% |
| Sales & marketing | $22.7M | $22.1M | +2.6% | $19.8M | +14.4% |
| General & administrative | $16.1M | $14.7M | +9.7% | $13.5M | +19.2% |
| Total operating expenses | $51.7M | $50.0M | +3.4% | $42.8M | +20.8% |
| Operating income (loss) | $15.4M | $13.5M | +13.7% | $13.6M | +13.4% |
| Operating margin | 15.0% | 13.8% | +1.2 pp | 16.3% | -1.3 pp |
| Net income (loss) | $12.8M | $11.4M | +11.5% | $13.5M | -5.2% |
| Net margin | 12.4% | 11.7% | +0.7 pp | 16.2% | -3.8 pp |
| Diluted EPS | $0.35 | $0.31 | +$0.04 | $0.37 | -$0.02 |
| Customers | 37,500 | — | — | 33,000 | +13.6% |
Risks
Most recurring revenue customers can cancel their contracts for any reason with 30 to 90 days notice, and recurring revenues were 92% of total revenues for FY2021. A decline in renewal rates could adversely affect revenue and financial results in a short period.
The company has a significant international workforce in Ukraine and the Philippines, regions it describes as having potentially volatile political and civil unrest, including Russian interference. Disruption could require costly transition to alternative workforce locations and delay programming deliverables.
The company believes it is a particularly attractive target because of its retail supply chain presence and past cyber-attacks on its system. A breach could cause service disruptions, legal claims, customer loss, and growing security costs.
Future success depends on attracting, retaining, and training highly qualified executive, managerial, engineering, and sales personnel, and competition for such talent is intense. MD&A ties increases in cost of revenues, sales and marketing, research and development, and general and administrative expenses partly to increased headcount and stock-based compensation.
Rapid growth in headcount and operations could strain management, administrative, operational, and financial resources if controls do not scale. FY2021 year-to-date operating expenses rose 22.1%, and operating margin declined 1.7 percentage points, while net income declined 2.2%.
The company intends to selectively pursue acquisitions, which involve risks such as higher-than-anticipated capital expenditures and operating expenses, management distraction, dilution, liabilities, and impairment charges. MD&A reports amortization of intangible assets increased 82.8% for FY2021 YTD due to recent business combinations.
Revenue depends significantly on general economic conditions and the health of retailers; economic weakness may cause customers to reduce or delay technology purchases and lengthen sales cycles. Uncertainty increases difficulty forecasting operating results and making investment decisions.
Increasing data privacy and cross-border data transfer laws, such as the EU General Data Protection Regulation and e-Privacy Directive, may reduce demand or restrict the company's ability to store and process data. Compliance costs and self-regulatory standards could limit product adoption.
The supply chain management market is highly competitive and fragmented, with potential consolidation, alliances, and new entrants. Increased competition could lead to pricing pressure, loss of customers, and reduced market share or operating margins.
SaaS KPIs
All quarters →Adjusted EBITDA
Recurring Revenue Customers
Wallet Share
Recurring Revenue Growth
Summary, forecast, risks and KPIs are extracted from SPS COMMERCE INC's SEC filings for Q4 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.