SPS Commerce shares fall after revenue forecast signals slower growth

Shares in SPS Commerce Inc. fell 19 percent Wednesday after the Minneapolis software company signaled a slowing of its speedy growth.

In its fourth-quarter results statement issued after the market closed Tuesday, SPS forecast sales growth of 14 percent to 15 percent in 2017, down from the 22 percent growth it experienced in 2016.

In discussing the report in a conference call Tuesday afternoon, executives for the company, a provider of cloud-based technologies and services to retailers and their supporters, remained enthusiastic about their growth potential.

Archie Black, the company's chief executive, said a recent reconfiguration to its sales force should help.

"We feel very optimistic about the long-term opportunity, and the changes we made in the sales organization really allows the salespeople to focus, and I think it simplified some of their world," Black said on the call.

The company said it expects first-quarter revenue to be in the range of $51.5 million to $52 million, which would be up 14 percent from $45.6 million a year earlier.

During the last three months of 2016, the company's revenue was $51.1 million, up 21 percent from $42.3 million in the fourth quarter of 2015.

Kim Nelson, the chief financial officer, said during the call that SPS hopes to get back to a 20 percent revenue growth "sometime in the latter half of 2018."

The company reported a 17 percent drop in fourth-quarter net income to $1.8 million, or 10 cents a share.

Adjusted for expenses, such as stock-based compensation, and other items, the company earned 29 cents a share, slightly better than the 27 cents expected by analysts surveyed by Thomson Reuters.

Shares of SPS closed on Wednesday at $53.81, the lowest level since May, after several analysts lowered their outlooks for the company's financial performance and its stock price.

Canaccord Genuity software analyst David Hynes cut his price target on SPS stock to $65 from $82 and his rating from buy to hold. He cited the effect of the company's sales reorganization along with a generally sluggish retail environment.

"The fact is that it's going to take at least a few quarters before we get a clear sense as to whether this business can again be a 20 percent-plus organic grower or if midteens is the new norm," Hyne said in a research note.

A company spokeswoman declined to comment on the stock-price movement.

Alex Van Abbema is a University of Minnesota student on assignment for the Star Tribune.