SPS Commerce Pays $10.9M for CA Firm

The acquisition is the company's first since it went public in April 2010-and it will boost clients, support, and research and development efforts.

SPS Commerce said Wednesday that it paid $10.9 million in an all-cash deal to acquire Direct EDI-a San Diego-based provider of cloud-based integration solutions.

The acquisition is Minneapolis-based SPS Commerce's first since it went public in April 2010. It will add 2,000 customers to the company's 38,000-client base-which includes those who use its services on a monthly basis and occasional users.

SPS Commerce provides on-demand supply-chain management solutions. It delivers its solutions over the Internet using a Software-as-a-Service (SaaS) model to improve the way that suppliers, retailers, distributors, and other customers manage and fulfill orders.

SPS Commerce said that the acquisition of Direct EDI will expand its operations to support e-commerce and traditional retail supply chains-and boost its research and development via a Direct EDI service center in Ukraine.

“As the marketplace for cloud solutions evolves, SPS is among the leading organizations that are growing organically and through acquisition to better serve their customers,” SPS Commerce President and CEO Archie Black said in a statement. “With SPS, Direct EDI's customers will benefit from excellent customer service, a much larger retail trading community, and access to additional supply chain services and trading partner connections.”

SPS Commerce anticipates that the acquisition will add between $200,000 and $300,000 of revenue during the second quarter of 2011-bringing its total sales to between $13.1 million and $13.4 million. However, the deal will reduce second-quarter adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) by $300,000 to $400,000, thus bringing it between $800,000 and $1 million.

For the full year, SPS Commerce expects revenues of between $54.7 million and $55.5 million-representing a 23 to 24 percent increase from 2010. Adjusted EBITDA is expected to range between $4.7 million and $5.2 million.

The fourth quarter of 2010 marked SPS Commerce's 40th consecutive quarter of increased revenues. Its 2010 revenue totaled $44.6 million, making it one of Minnesota's 100-largest public companies-and as of December 31, it employed 353 people.

According to SPS Commerce, Direct EDI has 40 employees and annual revenue of about $4 million.