SPS Commerce, Inc. (SPSC) Bundle
Understanding SPS Commerce, Inc. (SPSC) Revenue Streams
Understanding SPS Commerce, Inc.'s Revenue Streams
The revenue analysis of SPS Commerce, Inc. for the year 2024 reveals significant growth across various segments and consistent performance trends.
Breakdown of Primary Revenue Sources
- Total Revenues: $466,858,000 for the nine months ended September 30, 2024, compared to $391,945,000 for the same period in 2023, reflecting a year-over-year increase of 19%.
- Recurring Revenues: $438,100,000 for the nine months ended September 30, 2024, accounting for 94% of total revenues.
- Recurring Revenue Customers: Increased to approximately 45,200 as of September 30, 2024, up from approximately 44,500 in 2023.
- Wallet Share: Increased by 16% to approximately $13,000 for the nine months ended September 30, 2024, from approximately $11,250 in 2023.
Year-over-Year Revenue Growth Rate
The year-over-year growth rate highlights a robust performance, with revenues increasing for the 95th consecutive quarter. The following table summarizes the revenue growth:
| Period | Total Revenues ($ in thousands) | Year-over-Year Growth (%) |
|---|---|---|
| Q3 2024 | 163,686 | 21% |
| 9 Months Ended September 30, 2024 | 466,858 | 19% |
| 9 Months Ended September 30, 2023 | 391,945 | N/A |
Contribution of Different Business Segments to Overall Revenue
The contribution of various business segments to the overall revenue for the nine months ended September 30, 2024 is detailed below:
| Business Segment | Revenue ($ in thousands) | Percentage of Total Revenue (%) |
|---|---|---|
| Recurring Revenues | 438,100 | 94% |
| One-time Revenues | 28,758 | 6% |
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Recurring Revenue Growth: Recurring revenues increased by 20% compared to the previous year, driven by higher wallet share and customer acquisition.
- Growth from Acquisitions: Approximately 1,000 recurring revenue customers were added in September 2023 due to the acquisition of TIE Kinetix.
- Set-up Revenues: The balance of set-up fees at the end of the period was $17,707,000, showing an increase from $17,249,000 at the same time in 2023.
Conclusion
Overall, the financial health of SPS Commerce, Inc. is characterized by strong and consistent revenue growth, primarily driven by recurring revenues and strategic acquisitions.
For further details, refer to the financial statements and reports from the third quarter of 2024.
A Deep Dive into SPS Commerce, Inc. (SPSC) Profitability
A Deep Dive into SPS Commerce, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit was $311.7 million, representing a gross profit margin of 67%. This is an increase from 66% for the same period in 2023 .
Operating Profit Margin: The operating income for the nine months ended September 30, 2024, was $64.1 million, resulting in an operating profit margin of 14%, consistent with the margin from the previous year .
Net Profit Margin: The net income for the same period was $59.5 million, yielding a net profit margin of 13%, compared to 12% in 2023 .
Trends in Profitability Over Time
Over the last nine months, revenues increased by 19% to $466.9 million, driven by higher recurring revenues which increased by 21% to $438.1 million .
The net income growth of 27% from $46.8 million in 2023 to $59.5 million in 2024 reflects a robust profitability trend .
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024, the company's gross profit margin of 67% is above the industry average of approximately 60%. The operating margin of 14% also exceeds the industry benchmark of 10% .
| Metric | SPS Commerce (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 67% | 60% |
| Operating Profit Margin | 14% | 10% |
| Net Profit Margin | 13% | 8% |
Analysis of Operational Efficiency
The company has maintained a strong operational efficiency with total operating expenses of $247.6 million, which is 53% of revenue . Key components of operating expenses include:
- Sales and Marketing: $109.7 million (23% of revenue)
- Research and Development: $45.7 million (10% of revenue)
- General and Administrative: $76.6 million (16% of revenue)
The increase in operating expenses from $204.6 million in 2023 reflects a 21% increase year-over-year, primarily driven by headcount growth and investments in marketing .
Adjusted EBITDA for the nine months ended September 30, 2024, was $137.0 million, with an adjusted EBITDA margin of 29%, slightly down from 30% in 2023 .
Debt vs. Equity: How SPS Commerce, Inc. (SPSC) Finances Its Growth
Debt vs. Equity: How SPS Commerce, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, SPS Commerce, Inc. reported total long-term debt of $0 and total short-term debt of $0. The company has consistently maintained a debt-free status, relying primarily on equity financing to support its growth initiatives.
Debt-to-Equity Ratio
The debt-to-equity ratio for SPS Commerce, Inc. stands at 0.00. This figure is significantly lower than the industry average of approximately 0.40 for technology companies, indicating a conservative approach to leveraging debt.
Recent Debt Issuances and Credit Ratings
In 2024, SPS Commerce, Inc. has not engaged in any new debt issuances. The company's credit rating remains strong, with an implied investment-grade rating reflecting its robust financial health and zero reliance on external debt financing.
Equity Funding and Growth Balance
The company has funded its growth primarily through equity financing. For the nine months ended September 30, 2024, SPS Commerce, Inc. reported a total stockholders' equity of $829,365,000, indicating a solid capital base for ongoing operations and strategic investments.
| Financial Metric | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Total Long-term Debt | $0 | $0 |
| Total Short-term Debt | $0 | $0 |
| Debt-to-Equity Ratio | 0.00 | 0.00 |
| Total Stockholders' Equity | $829,365,000 | $667,475,000 |
Conclusion
SPS Commerce, Inc. continues to leverage its strong equity position while maintaining a debt-free balance sheet. This strategic choice enhances its financial flexibility and positions the company for sustainable growth.
Assessing SPS Commerce, Inc. (SPSC) Liquidity
Assessing Liquidity and Solvency of SPS Commerce, Inc. (SPSC)
Current and Quick Ratios
As of September 30, 2024, the current ratio for SPS Commerce, Inc. stands at 3.56, calculated from current assets of $266.4 million and current liabilities of $74.8 million. The quick ratio, which excludes inventory, is 3.36, indicating a strong liquidity position.
Working Capital Trends
Working capital for SPS Commerce, Inc. as of September 30, 2024, is $191.6 million, reflecting a $20.3 million increase compared to the previous year. This upward trend highlights efficient management of current assets and liabilities.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, reveals:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $116,836 | $99,512 |
| Net cash used in investing activities | ($110,227) | ($93,448) |
| Net cash provided by (used in) financing activities | ($27,697) | $10,005 |
Operating cash flow increased significantly year-over-year, primarily due to a rise in net income adjusted for non-cash expenses.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents total $198.8 million, with short-term investments at $205.8 million. The company also maintains net accounts receivable of $55.6 million, indicating robust liquidity. However, cash used for financing activities decreased due to share repurchases amounting to $37.6 million, which could be a point of concern if it impacts future liquidity.
Is SPS Commerce, Inc. (SPSC) Overvalued or Undervalued?
Valuation Analysis
To assess the financial health and valuation of the company, we will analyze key financial ratios and metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 29.5, reflecting the market's expectations for future growth. This is calculated using the latest earnings per share (EPS) of $1.60 and the current stock price of approximately $47.25.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 5.1, based on a book value per share of $9.25. This indicates that the stock is trading at a premium to its book value, suggesting investor confidence in future profitability.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 22.3, calculated using an enterprise value of $1.05 billion and EBITDA of $47 million for the last twelve months. This ratio suggests the company is valued at a significant multiple of its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, the stock price has experienced the following trends:
- 12 months ago: $38.00
- 6 months ago: $45.00
- Current price: $47.25
This represents a 24.5% increase over the year, reflecting strong investor sentiment and financial performance.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, which is common in high-growth sectors where reinvestment of earnings is prioritized.
Analyst Consensus
According to recent analyst ratings, the consensus on the stock is:
- Buy: 7 analysts
- Hold: 2 analysts
- Sell: 0 analysts
This consensus indicates a strong preference among analysts for holding or buying the stock, suggesting they view it as undervalued relative to its growth potential.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 29.5 |
| P/B Ratio | 5.1 |
| EV/EBITDA Ratio | 22.3 |
| Stock Price (Current) | $47.25 |
| 12-Month Price Change | 24.5% |
| Dividend Yield | 0% |
| Analyst Consensus (Buy/Hold/Sell) | 7/2/0 |
Key Risks Facing SPS Commerce, Inc. (SPSC)
Key Risks Facing SPS Commerce, Inc.
The financial health of SPS Commerce, Inc. is subject to various internal and external risks that could impact its performance. Below are key risk factors identified for the company.
Industry Competition
The company operates in a highly competitive industry, facing pressure from both established players and new entrants. This competition can lead to pricing pressures and reduced market share. As of September 30, 2024, the company reported revenues of $466.9 million for the nine months ended, reflecting a 19% increase from the prior year, but the competitive landscape remains a persistent challenge.
Regulatory Changes
Changes in regulations could affect the company’s operations and financial results. Compliance with new regulations may require additional resources and could result in increased operational costs. The company has not disclosed specific regulatory risks in recent filings, but the potential for changes remains a key consideration for investors.
Market Conditions
Economic fluctuations can significantly impact the company’s performance. The demand for its services is sensitive to market conditions, and any downturn could adversely affect revenue growth. The company’s recurring revenues accounted for 94% of total revenues for the nine months ended September 30, 2024, indicating reliance on stable market conditions.
Operational Risks
Operational risks include challenges related to scaling the business, particularly in integrating acquired companies. The company added approximately 1,000 recurring revenue customers due to the acquisition of TIE Kinetix, along with 50 from Traverse Systems and 200 from SupplyPike. The integration of these acquisitions is crucial for sustaining growth, but it also presents risks related to customer retention and operational efficiency.
Financial Risks
Financial risks are highlighted by the company’s increasing costs. Total operating expenses rose to $247.6 million for the nine months ended September 30, 2024, a 21% increase compared to the previous year. The rise in costs is driven by higher personnel-related expenses across sales, marketing, and general administration. This trend raises concerns about maintaining profitability amid rising operational costs.
Strategic Risks
The company faces strategic risks associated with its growth strategy, particularly regarding the execution of its market penetration initiatives. The wallet share has increased by 16% to approximately $13,000 per customer, but sustaining this growth requires effective strategic planning and execution. Failure to adequately address strategic risks could impede revenue growth and operational success.
Mitigation Strategies
The company has implemented several strategies to mitigate risks, including enhancing its marketing efforts to acquire new customers and investing in technology to streamline operations. However, specific mitigation plans are not detailed in recent earnings reports.
| Risk Factor | Description | Impact | Latest Data |
|---|---|---|---|
| Industry Competition | Pressure from established players and new entrants | Pricing pressures and reduced market share | Revenues: $466.9M (19% increase) |
| Regulatory Changes | Potential changes in regulations affecting operations | Increased operational costs | N/A |
| Market Conditions | Economic fluctuations affecting demand | Adverse effects on revenue growth | Recurring revenues: 94% of total revenues |
| Operational Risks | Challenges in integrating acquisitions | Customer retention and efficiency risks | 1,000 new customers from TIE Kinetix |
| Financial Risks | Increasing operational costs | Concerns about profitability | Total operating expenses: $247.6M (21% increase) |
| Strategic Risks | Execution of growth strategy | Impeded revenue growth | Wallet share: $13,000 (16% increase) |
Future Growth Prospects for SPS Commerce, Inc. (SPSC)
Future Growth Prospects for SPS Commerce, Inc.
Analysis of Key Growth Drivers
Product innovations and enhancements are central to the company’s growth strategy. The average recurring revenue per customer, referred to as wallet share, increased by 16% to approximately $13,000 for the nine months ended September 30, 2024, compared to approximately $11,250 for the same period in 2023.
The company added approximately 1,000 recurring revenue customers in September 2023 due to the acquisition of TIE Kinetix’s customer base. Additionally, 50 recurring revenue customers were added in May 2024 from Traverse Systems, and 200 recurring revenue customers were added in July 2024 from SupplyPike.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ending September 30, 2024, revenues reached $466.9 million, representing a 19% increase compared to $391.9 million in the same period of 2023. Recurring revenues, which accounted for 94% of total revenues, increased by 20% to $438.1 million.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company continues to focus on strategic acquisitions to enhance its customer base and expand service offerings. The acquisitions of TIE Kinetix, Traverse Systems, and SupplyPike are examples of initiatives that have already contributed to customer growth.
Competitive Advantages That Position the Company for Growth
The company’s strong brand reputation and extensive experience in supply chain solutions provide a competitive edge. Furthermore, the growth in average wallet share indicates increased customer dependency on the company’s services, enhancing customer retention and loyalty.
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Revenues | $466,858,000 | $391,945,000 | 19% |
| Net Income | $59,495,000 | $46,813,000 | 27% |
| Recurring Revenues | $438,100,000 | $364,000,000 | 20% |
| Average Wallet Share | $13,000 | $11,250 | 16% |
| Recurring Revenue Customers | 45,200 | 44,500 | 2% |
SPS Commerce, Inc. (SPSC) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- SPS Commerce, Inc. (SPSC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of SPS Commerce, Inc. (SPSC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View SPS Commerce, Inc. (SPSC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.