What changed in this filing

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Item 1. Business

2024-02-21 compared with 2023-02-21 · 98 added, 61 removed, 150 unchanged (51% of the section changed)

3 unchanged sentences

Our products enable customers to increase supply chain performance, optimize inventory levels and sell-through, reduce operational costs, improve order visibility, and satisfy consumer demands for a seamless omnichannel experience.

As of December 31, 2022, we had 42,300 customers with ongoing contracts to pay us monthly fees, which we refer to as recurring revenue customers.

In addition to our recurring revenue customers, to date we have provided our cloud-based supply chain management services to 72,700 other organizations, and we refer to the combination as our customers.

As of December 31, 2023, we had approximately 44,800 customers with ongoing contracts to pay us monthly fees, which we refer to as recurring revenue customers.

In addition to our recurring revenue customers, to date we have provided our cloud-based supply chain management services to approximately 75,200 other organizations, and we refer to the combination as our customers.

Once connected to the SPS Commerce cloud-based retail network, our customers often require additional integrations to new organizations that represent an expansion of our cloud-based network and new sources of revenues for us.

For the years ended December 31, 2023, 2022, and 2021, we generated revenues of $536.9 million, $450.9 million, and $385.3 million, respectively.

Our quarter ended December 31, 2022 represented our 88th consecutive quarter of revenue growth.

Our quarter ended December 31, 2023 represented our 92nd consecutive quarter of revenue growth.

Recurring revenues from recurring revenue customers accounted for 94%, 93%, and 92% of our total revenues for the years ended December 31, 2023, 2022, and 2021, respectively.

9 unchanged sentences

SPS Commerce operates one of the largest retail networks in the world to improve the way retailers, grocers, distributors, suppliers, and logistics firms manage digital item catalogs, fulfill omnichannel orders, optimize sell-through performance, and automate new trading relationships.

To date, 115,000 customers across 85 countries have used SPS Comm erce products to expand and optimize the performance of their trading relationships through the network.

To date , 120,000 customers across approximately 85 countries have used SPS Comm erce products to expand and optimize the performance of their trading relationships through the network.

Our products fundamentally change how organizations communicate information to manage their omnichannel, supply chain, and other business requirements.

Our products replace traditional, manual, or disparate approaches (such as email, phone, and fax), multiple channel-specific solution providers, as well as custom-built, point-to-point integrations by delivering a single smart connection to the entire SPS Commerce retail network of prebuilt connections to thousands of global trading partners.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2023

Our products include:

2 unchanged sentences

Fulfillment is configurable for any trading partner, document or business system used for order management and offers a full suite of tools to help businesses efficiently manage their supply chain.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2022

Table of Con t ents

• Analytics - Our Analytics product enables organizations to improve visibility into how products are selling through a single connection across all sales channels, including wholesale, eCommerce, and marketplaces.

23 unchanged sentences

Our marketing programs include a variety of lead generating activities including digital marketing, conferences and trade shows, sponsored events, and public relations activities targeted at key decision makers within our prospective customers.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2023

Channel Partners - In addition to the customer acquisition sources identified above, we market and sell our products through a variety of channel partners, including software providers, resellers, system integrators, and logistics partners.

1 unchanged sentence

Our logistics partners also drive new sales both by providing leads and by embedding our products as part of their service offerings .

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2022

Table of Con t ents

Our Growth Strategy

15 unchanged sentences

We plan to continue to evaluate potential acquisitions based on the number of new customers, revenue, functionality, or geographic reach the acquisition would provide relative to the purchase price, and our ability to integrate and operate the acquired business.

In 2022, we acquired GCommerce, Inc.

("GCommerce"), a leading EDI provider within the automotive aftermarket industry.

Also in 2022, we acquired InterTrade Systems Inc.

("InterTrade"), a leading EDI provider within the apparel and general merchandising markets.

These acquisitions further extend the capabilities of our network and added new customers and technology.

In 2023, we acquired TIE Kinetix Holding B.V.

("TIE Kinetix"), a leading provider of supply chain digitalization including EDI and e-invoicing in Europe and the United States.

This acquisition further extends the capabilities of our network and added new customers and technology.

Our Market Opportunity

3 unchanged sentences

Each additional channel brings more reliance and volume to the network and increases customer revenue.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2023

• Retail needs automation - With increased retail store openings and closings, labor shortages, supply chain disruptions, and new buying patterns, retailers are demanding more from their trading partners as they need to be agile and transition their businesses as markets change.

2 unchanged sentences

• Consumers want new products - Retail assortments are ever-changing with seasonality shifts and new product introductions from companies of all sizes.

Consumers want the latest products and retailers are continually chasing trends, offering differentiated items, and introducing new products and suppliers to their

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2022

Table of Con t ents

supply chains.

Consumers want the latest products and retailers are continually chasing trends, offering differentiated items, and introducing new products and suppliers to their supply chains.

As retailers evolve, their trading partner relationships must support any new product introductions or new suppliers to achieve their merchandising goals.

8 unchanged sentences

Our multi-tenant products serve all of our customers, which allows us to maintain relatively low research and development expenses and release software updates more frequently compared to traditional on-premise licensed software products that support multiple versions.

Our development efforts take place at our U.S.

locations in Minnesota and New Jersey, as well as in Melbourne, Australia;

Our development efforts take place at our United States ("U.S.") locations in Minnesota and New Jersey, as well as in Melbourne, Australia;

Toronto, Canada;

and Kyiv, Ukraine.

We operate our infrastructure in third-party data centers located throughout the United States ("U.S.") and in Australia, as well as provisioned services with cloud providers.

We operate our infrastructure in third-party data centers located throughout North America, Europe, and Australia, as well as provisioned services with cloud providers.

In most cases, infrastructure and services are managed by us.

We have internal and third-party monitoring software that continually checks our cloud-based network and key underlying components for continuous availability and performance, helping ensure that the network is always available and providing desired service levels.

We have internal and third-party monitoring software that continually checks the status of services and underlying infrastructure for availability and performance, helping ensure that the network is always available and providing desired service levels.

We have a technology team that includes system provisioning, management, maintenance, monitoring, and back-up.

5 unchanged sentences

• Demand Generation - Engages with target audiences using the latest digital marketing strategies to bring opportunities to our sales teams.

• Communications - Manages our brand, public relations, and go-to-market support.

• Communications - Manages our brand and public relations, as well as provides go-to-market support.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2023

• Product Marketing - Equips our sales teams, performs market studies, and promotes the unique capabilities of each of our products using our go-to-market strategies.

3 unchanged sentences

This team focuses on delivering services that build customer satisfaction and result in high customer retention rates.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2022

Table of Con t ents

Vendors in the supply chain management industry offer products through three delivery methods:

10 unchanged sentences

• training and customer support services provided during and after a customer’s initial integration.

We expect to encounter new and increased competition as this market segment consolidates and matures.

Consolidation among cloud-service vendors could create a direct competitor that can compete with us more effectively than the numerous, smaller vendors currently offering cloud-service supply chain management products.

Increased competition from cloud-service vendors could reduce our market share, revenues, and operating margins or otherwise adversely affect our business.

Cloud-service vendors also compete with traditional on-premise software companies.

9 unchanged sentences

Cloud-service vendors compete with these traditional software products based on the total cost of ownership and flexibility.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2023

Intellectual Property and Proprietary Content

SPS Commerce relies on a combination of copyright, trademark, and trade secret laws as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand.

SPS Commerce relies on a combination of copyright, trademark, patent, and trade secret laws as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand.

We enter into confidentiality and proprietary rights agreements with our employees, consultants and additional third parties, and control access to software, documentation, and other proprietary information.

3 unchanged sentences

Registrations of trademarks can also generally be renewed indefinitely as long as the trademarks are in use.

We have one patent we acquired through the acquisition of

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2022

Table of Con t ents

We have one patent we acquired through the acquisition of GCommerce.

Our trade secrets consist primarily of the software we have developed for our SPS Commerce cloud-based products and network.

1 unchanged sentence

Human Capital

As of December 31, 2022, our employees worked across the following functional areas:

# of Employees

Cost of revenues 1,122

Sales and marketing 557

Research and development 359

General and administrative 177

Total employees 2,215

Substantially all of our employees are employed on a full-time basis, 84% of which are based in North America.

We also engage independent contractors to support our operations.

None of our employees are represented by a labor union.

We believe our employees have and will continue to be a primary reason for our growth and success.

SPS values diversity, equity, and inclusion and believes that our differences make us, our customers, and our communities better.

We strive to create an organization where every employee feels welcomed and is empowered to do their best work.

Our core values drive our culture and are foundational to how we create an engaging workplace, how we train and develop our teams, and how we identify the right talent for the organization.

At SPS, we believe our employees have and will continue to be a primary reason for our growth and success.

Our core values drive our culture and are foundational to how we create an engaging workplace, identify the right talent, and train and develop our teams.

Our values guide our interactions with our customers, partners, and one another.

We offer our employees pay and benefits packages that we believe are competitive with others in our industry, as well as within the local markets in which we operate, and that align individual performance with our success.

To foster an engaged and motivated team we provide training, development, review and feedback programs to develop employees’ expertise and skillsets, as well as strive to provide a safe, harassment-free work environment guided by principles of fair and equal treatment.

As a result, we believe our employees are committed to building strong, innovative, and long-term relationships with each other and our organization in order to succeed together and with our customers.

The health and wellness of our employees is also very important to us.

W e have, where possible, offered remote work flexibility, without significant impacts to productivity.

We support several Employee Resource Groups ("ERGs") to encourage connections across the globe and support a sense of belonging at SPS.

Current ERGs include the Black Business Resource Group, the Diversity & Inclusion Group, the LGBTQ+ Resource Group, and Women in Tech.

These groups provide support for employees and allies, give employees the chance to build community and connections, develop and grow, as well as further shape our culture to create a more inclusive workplace.

We attract, retain, and reward exceptional talent by cultivating an inclusive, high-performing culture and engaging employees with meaningful work and opportunities to grow and develop.

Oversight and Governance

Our board of directors and Compensation and Talent Committee have oversight of our human capital management and diversity, equity, and inclusion efforts.

They receive regular updates from our Chief Human Resources Officer on key strategic initiatives and other relevant matters related to human resources including, but not limited to, hiring, development, retention, employee engagement, succession planning, compensation and benefits, and human resources-related risks.

As of December 31, 2023, we had a total of 2,489 employees worldwide, including 1,238 in cost of revenues, 644 in sales and marketing, 402 in research and development, and 205 in general and administrative.

81% are based in North America with the remaining in Europe and Asia Pacific.

Substantially all our employees are employed on a full-time basis.

We also engage third-party agencies for staff augmentation to support our operations.

Although we have statutory employee representation obligations in certain countries, none of our U.S.

employees are represented by a labor union.

36% of our global workforce identify as female and 2% did not specify their gender.

Within the U.S.

18% of our employees self-identified as being a member of an underrepresented group.

Our executive team is comprised of 10 individuals, of which 40% are women.

Diversity, Equity, and Inclusion

We value diversity, equity, and inclusion and believe our differences make us, our customers, and our communities better.

We strive to create an organization where every employee feels welcomed and is empowered to do their best work.

We make our commitment to diversity, equity, and inclusion a reality by incorporating it into our human resource core processes and our talent strategies.

Our Employee Resource Groups ("ERGs") foster employee connections across the globe, provide learning, engagement, and networking opportunities, as well as provide important insights in support of advancing equity company-wide.

These employee-led resource groups create community and focus across several dimensions including gender, race and ethnicity, gender identity, sexual orientation, ability/disability, military service and more.

All employees are welcome and encouraged to participate in one or more of our ERGs, which include the Black Business Resource Group, the Diversity and Inclusion Group, the LGBTQ+ Group, and Women in Tech.

Since 2021, all new hires participate in an interactive diversity, equity, and inclusion curriculum focused on the History of Racism, Implicit Bias, and Allyship.

Additionally, we provide our managers with resources to support building inclusive teams and being an inclusive leader.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2023

For well over a decade, SPS has invested in and supported the communities in which we live and work, focused on efforts that expand our future talent pipeline by helping to develop the workforce of tomorrow.

Over the years we have invested in student programs focused on creating opportunities for high school and college students who are part of underrepresented populations including women, genderqueer and non-binary individuals, and racial minorities.

These opportunities build experiences through job shadowing, work-study, mentoring, and professional development in areas of Science, Technology, Engineering and Math ("STEM"), supply-chain, analytics, and customer success.

Established in 2020, the SPS Diverse Scholar Program supports diverse first-generation college students pursuing a career in technology.

In addition to receiving funding for their education, our diverse scholars participate in our internship program, have access to mentors, are offered part-time work during the school year, and are connected to a wide range of business professionals.

Additionally, as a federal contractor we comply with federal contractor affirmative action requirements to employ and promote women, minorities, individuals with disabilities, and protected veterans.

Talent Acquisition, Engagement, and Retention

We work diligently to attract the best talent from a variety of sources to meet current and future business needs.

We have cultivated relationships with many colleges and universities, including Historically Black Colleges and Universities ("HBCUs"), industry groups, professional associations, and other student programs focused on hiring women, non-binary and genderqueer, minorities, and individuals with disabilities.

Our campus program focuses on bringing in talent with experience from schools that are leaders in technology, supply chain, engineering, and business.

41% of our hires from our most recent campus cohort identify as underrepresented minorities.

We regularly survey our employees to better understand their perspectives and where we can focus to improve their experience.

Our 2023 employee engagement survey indicated a positive engagement score of 71%, which is higher than the benchmark provided by our survey vendor both globally and for North American companies of similar size or within our sector.

Additionally, feedback on diversity and inclusion continues to score higher than benchmarks with an 81% positive perception score.

Our 2023 employee retention rate of 92% improved compared to 88% in 2022.

We believe our strong company culture and focus on providing meaningful work, professional development, flexible work options, competitive pay and benefits, as well as our commitment to diversity, equity, and inclusion contribute to our high employee retention.

Growth and Development

Development of our employees and leaders results in high performing teams who are empowered to grow their careers and deliver exceptional results, and it begins on the first day of employment with SPS.

When new employees join SPS, they attend a robust new hire onboarding program that focuses on the skills necessary to become productive employees, including training on company technology, collaboration tools, our company culture, values, and a comprehensive diversity, equity, and inclusion learning experience.

Onboarding is followed by on-the-job training and regular performance and development discussions between employees and their managers.

We provide ongoing opportunities for our employees to build new skills, develop in their current role, and prepare for future roles.

All employees have access to an online learning platform that supports their development as well as opportunities to participate in programs such as AccelerateMe and Exploring Leadership.

Annually we host SPS Professional Development Week ("PDW"), a collection of learning and development opportunities designed to help employees develop skills for continued growth.

In 2023, the PDW employee track focused on how to effectively receive feedback and owning your SPS career.

The PDW manager track focused on change management, what it means to be an inclusive leader, and building Crucial Conversation skills.

Our talent strategy prioritizes growing and developing our own leaders.

In 2023, we refreshed our Leadership Model by introducing competencies for each of our four leadership pillars:

People Developer, Culture Champion, Strategist, and Results Enabler.

These competencies will help frame our leadership development programs as we continue to build tools and resources to advance our leaders’ capabilities to grow and scale their teams.

Additionally, we assess our leadership talent across the organization through our talent review process, which allows us to differentiate talent based on performance and potential.

This process is the basis for succession planning for critical roles in the organization.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2023

Total Rewards and Employee Well-being

At SPS, our total rewards strategies support the financial, physical, and mental well-being of our employees and their families and incorporate market competitive pay and comprehensive benefits programs for all global employees.

We offer compelling and competitive packages designed to attract, retain, and motivate our employees.

Our benefit programs align to our geographies and provide a comprehensive healthcare offering and other programs, including an employee stock purchase plan in most jurisdictions.

We believe in paying team members equitably, regardless of gender, race, or ethnicity, and we regularly review the pay data of U.S.

and other geographies to ensure fairness.

The well-being of our workforce is particularly important to us.

In addition to our traditional employee benefits, we offer several supplemental benefits to support the physical, mental, and financial health of all our employees.

We have partnered with a global employee assistance program ("EAP") vendor that provides curated webinars in support of mental health and well-being, and offers all employees and their dependents access to mental health providers and free sessions with a licensed provider.

healthcare platform offers virtual mental health solutions, including tools focused on mindfulness, meditation, and wellness.

In 2023, we launched our Wellbeing at SPS intranet site providing greater access to all our programs and resources.

At SPS, we believe generosity and caring make a difference.

We actively contribute to our communities and encourage volunteerism and philanthropy among our employees.

The Team SPS Gives Back Matching program amplifies SPS employees’ charitable contributions or volunteer hours with matching donations, furthering their support to the organizations they believe in and care about.

What changed 10-K

Item 1. Business