Electronic supply chain firm SPS Commerce Inc. on Wednesday acquired San Diego-based Direct EDI in a $10.9 million cash deal that adds 1,500 customers to SPS. The deal was announced after the market closed.
Like EDI, Minneapolis-based SPS competes in the market for "software as a service." SPS operates a central computerized hub that enables its subscribers -- companies that make retail products -- to connect their electronic supply chains with major retailers such as Target, Wal-Mart, Macy's and Safeway.
The deal was the company's first acquisition since its initial public stock offering in April 2010. Since then, SPS stock has climbed from $12 a share to close at $16.90 Wednesday, up 25 cents or 1.5 percent.
"This continues to accelerate our growth," said Archie Black, CEO of SPS Commerce. "We have a few dozen competitors, but we are far and away the largest." Before the acquisition, SPS had 13,000 customers that paid it monthly for the service, plus others that are more occasional users, he said.
SPS has 350 employees, nearly all of them in the Twin Cities. For the year ended in December, SPS Commerce earned $2.9 million on revenue of $44.6 million revenue. In the first quarter, SPS earned $492,000 on revenue of $12.6 million.
Privately owned Direct EDI has 40 employees, and annual revenue of about $4 million, Black said.
The deal won't add to SPS pretax earnings until the first half of 2012, said Kim Nelson, the chief financial officer. But the acquisition is expected to add $2 million to $2.3 million to SPS' revenue in 2011.
SPS said the acquisition will add $200,000 to $300,000 to its second-quarter revenue, and will reduce second-quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) by $300,000 to $400,000. In light of that, SPS issued new financial guidance, saying it expects second-quarter adjusted EBITDA of $800,000 to $1 million on revenue of $13.1 million to $13.4 million. For the year, SPS said it anticipates adjusted EBITDA of $4.7 million to $5.2 million on revenue of $54.7 million to $55.5 million.
