SPS Commerce, Inc. reported its quarterly financial results for the period ended September 30, 2024. The company’s revenue increased by 12% year-over-year to $143.1 million, driven by growth in its network and platform services. Net income was $14.1 million, or $0.38 per diluted share, compared to net income of $10.3 million, or $0.28 per diluted share, in the same period last year. The company’s gross margin was 74.1%, compared to 73.5% in the same period last year. As of September 30, 2024, the company had cash and cash equivalents of $143.1 million and total debt of $25.1 million. The company’s management believes that its strong financial position and growth momentum position it well for future success.
Strong Revenue and Profit Growth Drives SPS Commerce’s Continued Success
SPS Commerce, a leading provider of cloud-based supply chain management solutions, has reported impressive financial results for the third quarter and first nine months of 2024. The company’s consistent revenue growth, expanding profit margins, and strategic acquisitions have solidified its position as a dominant player in the industry.
Revenue Surge Driven by Increased Wallet Share and Customer Growth
SPS Commerce’s revenues increased by 21% year-over-year to $163.7 million in the third quarter of 2024. This growth was primarily driven by a rise in average recurring revenues per customer, also known as “wallet share,” which increased 18% to approximately $13,700. The number of recurring revenue customers also grew by 2% to around 45,200, aided by recent acquisitions of TIE Kinetix, Traverse Systems, and SupplyPike.
For the first nine months of 2024, revenues increased by 19% to $466.9 million compared to the same period in 2023. Recurring revenues, which accounted for 94% of total revenues, grew by 20% year-over-year, demonstrating the company’s ability to retain and expand its customer base.
Expanding Profit Margins and Adjusted EBITDA
SPS Commerce’s profitability also improved significantly, with net income increasing by 39% to $23.5 million in the third quarter and by 27% to $59.5 million in the first nine months of 2024. The company’s Adjusted EBITDA, a non-GAAP measure that excludes certain expenses, grew by 19% to $48.4 million in the third quarter and by 18% to $137.0 million in the first nine months of the year.
The company’s Adjusted EBITDA margin remained steady at 30% in both the third quarter and first nine months of 2024, reflecting its ability to effectively manage costs while driving revenue growth. The increase in net income and Adjusted EBITDA was primarily due to higher revenues, improved operational efficiency, and disciplined cost management.
Acquisitions Fuel Inorganic Growth
SPS Commerce has been actively pursuing strategic acquisitions to expand its customer base and product offerings. In the third quarter, the company acquired the existing customer bases of Traverse Systems and SupplyPike, adding approximately 250 recurring revenue customers. These acquisitions, along with the previous acquisition of TIE Kinetix in 2023, have contributed to the company’s overall customer growth and revenue expansion.
The integration of these acquired businesses has also led to an increase in amortization of intangible assets, which rose by 71% in the third quarter and 41% in the first nine months of 2024 compared to the same periods in the prior year.
Operational Efficiency and Cost Management
SPS Commerce has demonstrated its ability to effectively manage its costs and maintain operational efficiency. The company’s gross profit margin improved to 68% in the third quarter and 67% in the first nine months of 2024, up from 66% in the same periods of 2023.
The increase in gross profit margin was primarily driven by improved personnel-related costs, which make up the largest component of the company’s cost of revenues. SPS Commerce has also been able to leverage its scale and operational expertise to manage other cost categories, such as sales and marketing, research and development, and general and administrative expenses.
Outlook and Future Growth Strategies
Looking ahead, SPS Commerce remains optimistic about its growth prospects. The company expects to continue expanding its customer base and increasing wallet share through its focus on product innovation, sales and marketing efforts, and strategic acquisitions.
The company’s management believes that the number of recurring revenue customers and wallet share will continue to increase as it executes its growth strategy focused on further penetrating its market. SPS Commerce also plans to invest in research and development to enhance its product offerings and maintain its competitive edge in the industry.
Additionally, the company’s strong financial position, with $205.8 million in cash, cash equivalents, and short-term investments, provides it with the resources to fund future growth initiatives, including potential acquisitions and capital expenditures.
Conclusion
SPS Commerce’s impressive financial performance in the third quarter and first nine months of 2024 demonstrates its ability to consistently deliver strong revenue growth, expand profitability, and execute strategic acquisitions. The company’s focus on operational efficiency, cost management, and product innovation has enabled it to maintain a competitive advantage in the supply chain management software market.
As SPS Commerce continues to execute its growth strategy, investors can expect the company to capitalize on the increasing demand for cloud-based supply chain solutions and further solidify its position as a leading provider in the industry.