Summary
SPS Commerce closed fiscal 2023 with its 92nd consecutive quarter of topline growth. Fourth quarter revenue rose 18.8% to $144.96 million. Full-year revenue rose 19.1% to $536.91 million. Recurring revenue grew 19% from the fourth quarter of 2022 and 20% for the full year. Net income was $19.01 million in the quarter, up 19.5%, and $65.82 million for the year, up 19.4%. Diluted earnings per share for the full year were $1.76, up 18.1% from the prior year. Gross profit rose 19.2% to $95.92 million in the quarter and 19.2% to $354.84 million for the year. Operating income rose 20.4% to $22.88 million in the quarter and 8.5% to $77.25 million for the year.
Profitability ratios were mixed. Fourth quarter gross margin was 66.2%, up 0.2 percentage points from the prior-year quarter. Full-year gross margin was 66.1%, flat with the prior year. Operating margin was 15.8% in the fourth quarter, up 0.2 percentage points. For the full year, operating margin was 14.4%, down 1.4 percentage points. Full-year operating income growth of 8.5% trailed full-year revenue growth of 19.1%.
Cash generation improved. Operating cash flow was $32.79 million in the fourth quarter, up 39.1%, and $132.30 million for the full year, up 32.2%. Capital expenditures were $4.29 million in the quarter, down 28.3%, and $19.76 million for the year, down 0.6%. Deferred revenue, current portion, was $69.19 million at December 31, 2023, up 20.5% from the prior-year quarter. On a non-GAAP basis, fourth quarter Adjusted EBITDA rose 20% to $42.0 million, and full-year Adjusted EBITDA rose 19% to $157.6 million. Non-GAAP income per diluted share was $0.75 in the fourth quarter, compared with $0.63 in the fourth quarter of 2022, and $2.85 for the full year, compared with $2.35 in 2022.
Operational metrics showed steady expansion. The company ended 2023 with approximately 44,800 recurring revenue customers, up 6% from approximately 42,300 at the end of 2022. Wallet share, or average recurring revenue per customer, rose 10% to approximately $11,550 from approximately $10,500. Recurring revenue grew 20% for the full year and accounted for 94% of total revenues, compared with 93% in 2022. CEO Chad Collins pointed to the company's network expansion and its role in the shift to omnichannel retail, supply chain efficiencies, and international expansion. CFO Kim Nelson said the company delivered profitable growth while closing two acquisitions and investing for the future despite ongoing macro dynamics.
Guidance points to continued growth. For the first quarter of 2024, SPS Commerce guided revenue to $145.9 million to $146.7 million. Non-GAAP income per diluted share is expected to be $0.72 to $0.73, and Adjusted EBITDA is expected to be $42.1 million to $42.7 million. For the full year 2024, revenue guidance is $616.5 million to $619.0 million. Non-GAAP income per diluted share is expected to be $3.11 to $3.13, and Adjusted EBITDA is expected to be $183.0 million to $185.0 million. The company expects fully diluted weighted average shares outstanding of 38.0 million for the full year. Risks include ongoing macro dynamics, the forward-looking nature of these projections, and swings in the effective income tax rate. The annual report points investors to its risk factors and states that acquisition valuations rely on estimates that may differ from actual results. SPS Commerce believes its cash, cash equivalents, investments, and cash flows from operations will be sufficient for at least the next twelve months.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $145.0M | $135.7M | +6.9% | $122.0M | +18.8% |
| Gross profit | $95.9M | $90.1M | +6.4% | $80.5M | +19.2% |
| Gross margin | 66.2% | 66.5% | -0.3 pp | 66.0% | +0.2 pp |
| Research & development | $14.2M | $13.6M | +4.9% | $12.5M | +13.9% |
| Sales & marketing | $33.2M | $30.3M | +9.7% | $27.2M | +22.1% |
| General & administrative | $20.6M | $21.9M | -5.9% | $17.9M | +14.8% |
| Total operating expenses | $73.0M | $69.5M | +5.0% | $61.5M | +18.8% |
| Operating income (loss) | $22.9M | $20.6M | +11.1% | $19.0M | +20.4% |
| Operating margin | 15.8% | 15.2% | +0.6 pp | 15.6% | +0.2 pp |
| Net income (loss) | $19.0M | $16.8M | +12.9% | $15.9M | +19.5% |
| Net margin | 13.1% | 12.4% | +0.7 pp | 13.0% | +0.1 pp |
| Diluted EPS | $0.51 | $0.45 | +$0.06 | $0.43 | +$0.08 |
| Customers | 44,800 | — | — | 42,300 | +5.9% |
Risks
Most recurring revenue contracts allow customers to cancel with 30 to 90 days' notice, and recurring revenue was 94% of total revenues in 2023. Renewal declines could quickly reduce revenue, especially given the company added recurring revenue customers up 6% to approximately 44,800 at December 31, 2023.
The company believes it is a target for cyber-attacks due to its significant presence in the retail supply chain and past cyber-attacks on its system. A breach could cause service disruptions, litigation, customer loss, and increased costs under SEC cybersecurity disclosure rules.
The company has a significant international workforce in Ukraine and the Philippines, exposing operations to political and civil unrest, including Russian interference in Ukraine. Disruptions could require transition to alternative workforce locations and delay programming deliverables.
Former CEO Archie Black retired effective October 2, 2023, and President and COO James Frome is planned to retire effective December 31, 2024. Leadership transitions may cause uncertainty or disruption, and competition for key executive, technology, and sales personnel is intense.
Operating margin declined 1.4 percentage points year to date even as revenue rose 19.1%, as general and administrative expense increased 26.1% and amortization of intangible assets increased 36.9% year to date. The increases were driven by stock-based compensation, headcount, bad debt expense, and recent acquisitions.
Rapid technological change, including advancements in artificial intelligence, could make existing products obsolete. Competitors may implement new technologies before the company and offer more effective or lower-priced products.
Economic weakness and uncertainty could cause customers to delay or reduce technology purchases and lengthen sales cycles, making operating results harder to forecast. The filing cites dependence on general economic conditions and the health of retailers.
The supply chain management market is highly competitive and fragmented, with competition from cloud service providers, traditional on-premise software providers, and managed service providers. Consolidation or new alliances could lead to pricing pressure, customer loss, and reduced market share.
The company selectively pursues acquisitions, and integration may fail to achieve anticipated synergies or financial results. Acquisitions could result in significant goodwill and intangible assets and future impairment charges; amortization of intangible assets increased 36.9% year to date, driven by recent business acquisitions.
Increasing privacy and data protection laws, including GDPR and the e-Privacy Directive, plus cross-border data transfer restrictions and industry-specific regulations, may limit adoption and increase compliance costs. Noncompliance could lead to fines, penalties, or liabilities.
SaaS KPIs
All quarters →Adjusted EBITDA Margin
Adjusted EBITDA
Recurring Revenue Customers
Wallet Share
Non-GAAP Income Per Diluted Share
Recurring Revenue Growth
Summary, forecast, risks and KPIs are extracted from SPS COMMERCE INC's SEC filings for Q4 FY2023 (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.