What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-21 compared with 2023-02-21 · 146 added, 175 removed, 765 unchanged (30% of the section changed)

10 unchanged sentences

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

Table of Con t ents

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

We have audited the accompanying consolidated balance sheets of SPS Commerce, Inc.

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S.

15 unchanged sentences

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the capitalized internal costs for internally developed software

3 unchanged sentences

Subjective auditor judgment was required to assess the stage of software development for new internally developed software or upgrades and enhancements for existing internally developed software, which determines when costs should be capitalized.

SPS COMMERCE, INC.

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

The following are the primary procedures we performed to address this critical audit matter.

2 unchanged sentences

We examined a sample of capitalized internally developed software costs to evaluate costs that were capitalized for new internally developed software or upgrades and enhancements for existing internally developed software.

For each sample, we evaluated the capitalized costs and assessed the stage of software development by inspecting underlying documentation and inquiring of the Company's technology developers performing

SPS COMMERCE, INC.

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

Table of Con t ents

the internally developed software activities regarding the specific nature, stage of completion, and hours incurred on the project.

For each sample, we evaluated the capitalized costs and assessed the stage of software development by inspecting underlying documentation and inquiring of the Company’s technology developers performing the internally developed software activities regarding the specific nature, stage of completion, and hours incurred on the project.

We have served as the Company’s auditor since 2013.

3 unchanged sentences

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

Table of Con t ents

Report of Independent Registered Public Accounting Firm

6 unchanged sentences

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 20, 2024 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired GCommerce, Inc.

and InterTrade Systems Inc.

during 2022, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, GCommerce, Inc.

and InterTrade Systems Inc.’s internal control over financial reporting associated with total assets of 3.7% and total revenues of 1.4% included in the consolidated financial statements of the Company as of and for the year ended December 31, 2022.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of GCommerce, Inc.

and InterTrade Systems Inc.

The Company acquired TIE Kinetix Holding B.V.

during 2023, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023, TIE Kinetix Holding B.V.’s internal control over financial reporting associated with less than 5% of consolidated assets and less than 5% of consolidated revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2023.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of TIE Kinetix Holding B.V.

Basis for Opinion

19 unchanged sentences

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

Table of Con t ents

SPS COMMERCE, INC.

31 unchanged sentences

Deferred income tax liabilities 8,972 7,419

Other liabilities, non-current 229 —

Total liabilities 156,369 135,841

9 unchanged sentences

Treasury Stock, at cost;

2,151,098 and 1,789,353 shares, respectively

2,151,098 shares

( 128,892 ) ( 128,892 )

1 unchanged sentence

Retained earnings 259,045 193,221

Accumulated other comprehensive loss ( 3,411 ) ( 1,447 )

Accumulated other comprehensive gain (loss) 222 ( 3,411 )

Total stockholders’ equity 667,475 537,073

3 unchanged sentences

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

Table of Con t ents

SPS COMMERCE, INC.

34 unchanged sentences

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

Table of Con t ents

SPS COMMERCE, INC.

3 unchanged sentences

Capital Retained

Earnings Accumulated Other Comprehensive Loss Total

Earnings Accumulated Other Comprehensive Gain (Loss) Total

Stockholders'

8 unchanged sentences

Unrealized loss on investments, net of tax — — — — — — ( 102 ) ( 102 )

Reclassification of gain on investments into earnings, net of tax — — — — — — ( 157 ) ( 157 )

Adoption of ASU 2016-13

— — — — — ( 1,069 ) — ( 1,069 )

Reclassification of loss on investments into earnings, net of tax — — — — — — 190 190

Balances, December 31, 2021 36,009,257 $ 38 1,789,353 $ ( 85,677 ) $ 433,258 $ 138,087 $ ( 1,447 ) $ 484,259

5 unchanged sentences

Foreign currency translation adjustments — — — — — — ( 2,240 ) ( 2,240 )

Unrealized loss on investments, net of tax — — — — — — ( 102 ) ( 102 )

Reclassification of loss on investments into earnings, net of tax — — — — — — 190 190

Unrealized gain on investments, net of tax — — — — — — 441 441

Reclassification of gain on investments into earnings, net of tax — — — — — — ( 165 ) ( 165 )

Balances, December 31, 2022 36,158,046 $ 38 2,151,098 $ ( 128,892 ) $ 476,117 $ 193,221 $ ( 3,411 ) $ 537,073

2 unchanged sentences

Employee stock purchase plan activity 63,641 — — — 8,114 — — 8,114

Repurchases of common stock ( 361,745 ) — 361,745 ( 43,215 ) — — — ( 43,215 )

Net income — — — — — 65,824 — 65,824

6 unchanged sentences

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

Table of Con t ents

SPS COMMERCE, INC.

7 unchanged sentences

Deferred income taxes ( 10,079 ) ( 3,732 ) 3,881

Change in earn-out liability — — ( 85 )

Depreciation and amortization of property and equipment 18,631 16,421 14,788

6 unchanged sentences

Deferred costs ( 10,724 ) ( 10,646 ) ( 9,299 )

Other current and non-current assets 2,632 ( 6,181 ) 1,201

Other assets and liabilities 1,834 2,632 ( 6,181 )

Accounts payable ( 3,947 ) 144 2,259

8 unchanged sentences

Maturities of investments 131,331 158,937 111,193

Acquisitions of businesses, net ( 91,420 ) ( 17,066 ) ( 98,666 )

Acquisition of business, net ( 70,218 ) ( 91,420 ) ( 17,066 )

Net cash used in investing activities ( 92,642 ) ( 112,790 ) ( 46,703 )

3 unchanged sentences

Net proceeds from employee stock purchase plan activity 8,114 6,676 4,737

Payment for contingent consideration — ( 2,042 ) ( 688 )

Payments for contingent consideration ( 2,000 ) — ( 2,042 )

Net cash provided by (used in) financing activities 15,970 ( 31,631 ) ( 8,361 )

Effect of foreign currency exchange rate changes on cash and cash equivalents ( 290 ) 31 19

Effect of foreign currency exchange rate changes 562 ( 290 ) 31

Net increase (decrease) in cash and cash equivalents 56,188 ( 44,659 ) 57,860

Cash and cash equivalents at beginning of year 207,552 149,692 179,252

Cash and cash equivalents at end of year $ 162,893 $ 207,552 $ 149,692

Cash and cash equivalents at beginning of period 162,893 207,552 149,692

Cash and cash equivalents at end of period $ 219,081 $ 162,893 $ 207,552

Supplemental disclosure of cash flow information

Cash paid for income taxes $ 29,207 $ 16,076 $ 9,979

Non-cash financing activities:

Non-cash financing activity:

Contingent consideration related to acquisition $ — $ 2,000 $ —

Net purchases of property and equipment on account ( 215 ) ( 683 ) ( 551 )

See accompanying notes to these consolidated financial statements.

1 unchanged sentence

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

Table of Con t ents

SPS COMMERCE, INC.

26 unchanged sentences

We record the acquisition-date fair value of any contingent liabilities, such as earn-out provisions, as part of the consideration transferred, if present.

The unsettled earn-out liability, if any, is subsequently remeasured at each reporting date at fair value.

The unsettled earn-out liability, if any, is subsequently remeasured at each reporting date at fair value through earnings.

While we believe these estimates and assumptions are reasonable, they are inherently uncertain and subject to refinement.

4 unchanged sentences

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

Table of Con t ents

Segment Information

3 unchanged sentences

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents in financial institutions in excess of federally insured limits and accounts receivable.

Cash and cash equivalents are held with financial institutions that we believe are subject to minimal risk.

Concentrations of credit risk with respect to accounts receivable are subject to the financial condition of our customers, which are routinely assessed for potential credit losses.

We believe that the receivable credit risk exposure is limited.

Our investment policy limits the amount of credit exposure with any one financial institution or commercial issuer and sets requirements regarding credit rating and investment maturities to safeguard liquidity and minimize risk.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments with original maturities of less than 90 days.

From time to time, we invest in money market funds, certificates of deposit, and marketable securities such as commercial paper, highly liquid debt instruments of the U.S.

We invest in money market funds, certificates of deposit, and/or marketable securities such as commercial paper, highly liquid debt instruments of the U.S.

government, and U.S.

1 unchanged sentence

Investments with remaining maturities of less than one year from the balance sheet date are classified as short-term investments whereas those with remaining maturities of more than one year from the balance sheet date are classified as investments, non-current.

Securities classified as available for sale are carried at fair value and the unrealized gains and losses on these investments, net of taxes, are included in accumulated other comprehensive loss in the consolidated balance sheets.

Realized gains or losses are included in other income (expense), net in the consolidated statements of comprehensive income.

Certain securities accrue interest that is included in other income (expense), net.

When a determination has been made that the fair value of a marketable security is below its amortized cost basis, the portion of the unrealized loss that corresponds to a credit-related factor is realized through a credit allowance on the marketable security and the equivalent expense is realized in other income (expense), net in the consolidated statements of comprehensive income.

If a determination has been made that the fair value of a marketable security is below its amortized cost basis, the portion of the unrealized loss that corresponds to a credit-related factor is realized through a credit allowance on the marketable security and the equivalent expense is realized in other income (expense), net in the consolidated statements of comprehensive income.

Fair Value Measurements

7 unchanged sentences

• Level 3 – unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

Nonrecurring Fair Value Measurements

We measure certain assets and liabilities at fair value on a nonrecurring basis, including long-lived assets, goodwill, and indefinite-lived intangible assets.

SPS COMMERCE, INC.

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

Table of Con t ents

Nonrecurring Fair Value Measurements

We measure certain assets and liabilities at fair value on a nonrecurring basis, including long-lived assets, goodwill, and indefinite-lived intangible assets.

Accounts Receivable

8 unchanged sentences

Property and equipment, including assets acquired under lease obligations, are stated at cost, net of accumulated depreciation and amortization.

Depreciation and amortization expense is calculated using the straight-line method over the estimated useful lives when placed in service.

We capitalize and amortize eligible costs to acquire or generate internally developed software that are incurred during the application development stage.

Costs incurred during the preliminary project stage and post-implementation stage are expensed as incurred.

Amortization expense for internally developed software is calculated using the straight-line method over the estimated useful life, commencing on the date when the asset is ready for its intended use.

Depreciation and amortization expense is calculated using the straight-line method over the estimated useful lives, commencing on the earlier date in which the asset is placed in service or ready for its intended use.

The estimated useful lives of property and equipment were as follows:

6 unchanged sentences

The assets and related accumulated depreciation and amortization are adjusted for asset retirements and disposals with the resulting gain or loss included in our consolidated statements of comprehensive income.

Maintenance of internally developed software are expensed as incurred.

We capitalize and amortize eligible costs to acquire or generate internally developed software that are incurred during the application development stage.

Costs incurred during the preliminary project stage and post-implementation stage are expensed as incurred.

Additionally, maintenance of internally developed software are expensed as incurred.

The assets and related accumulated amortization are adjusted for abandoned internally developed software with the resulting loss included in our consolidated statements of comprehensive income.

13 unchanged sentences

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

Table of Con t ents

Research and Development

31 unchanged sentences

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

Table of Con t ents

Deferred Costs

Deferred costs are those that are incurred to fulfill or obtain customer contracts and that are considered incremental and recoverable costs.

These consist primarily of customer implementation costs, commissions paid to sales personnel and referral partners, respectively.

These costs are deferred and amortized over the expected period of benefit which we have determined to be two years .

These consist primarily of customer implementation costs and certain commissions paid to sales personnel and referral partners, respectively.

These costs are deferred and amortized over the expected period of benefit which we have determined primarily to be two years .

Customer implementation costs are based on actual costs incurred.

30 unchanged sentences

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

Table of Con t ents

We assess our ability to realize our deferred tax assets at the end of each reporting period.

8 unchanged sentences

Basic net income per share has been computed using the weighted average number of shares of common stock outstanding during each period.

Diluted net income per share also includes the impact of our outstanding potential common shares, including options, RSAs, RSUs, PSUs, and DSUs.

Diluted net income per share also includes the impact of our outstanding potential common shares.

Potential common shares that are anti-dilutive are excluded from the calculation of diluted net income per share.

Accounting Pronouncements Not Yet Adopted

Standard Date of Issuance Description Date of Required Adoption Effect on the Financial Statements

Accounting Pronouncements Recently Adopted

Standard Date of Issuance Description Date of Adoption

Effect on the Financial Statements

ASU 2021-08 , Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

October 2021 This amendment requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, effective for all business combinations in the year of adoption and thereafter.

January 2023 The adoption of this standard may have a material impact on the purchase accounting for business combinations depending on the specific amount of contract assets and liabilities being acquired.

January 2023 The adoption of this standard has not had a material impact on the purchase accounting for business combinations.

Accounting Pronouncements Not Yet Adopted

Standard Date of Issuance Description Date of Required Adoption Effect on the Financial Statements

ASU 2023-09 , Income Taxes (Topic 740) - Improvements to Income Tax Disclosures

December 2023 This amendment requires that an entity disclose specific categories in the effective tax rate reconciliation table as well as provide disclosure of disaggregated information related to income tax expense, income before income taxes, and income taxes paid.

January 2024 We are currently evaluating the adoption on our financial statements and anticipate the impact will result in additional disclosure.

ASU 2023-07 , Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures

November 2023 This amendment requires that an entity disclose significant segment expenses impacting profit and loss that are regularly provided to the chief operating decision maker.

January 2024 We are currently evaluating the adoption on our financial statements and anticipate the impact will result in additional disclosure.

SPS COMMERCE, INC.

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

NOTE B – Business Acquisitions

Effective July 19, 2022, we acquired all of the outstanding equity ownership interests of GCommerce, Inc.

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

Pursuant to the definitive agreement, the purchase price was $ 45.1 million, including post-closing adjustments.

The purchase accounting for the acquisition has not been finalized as of December 31, 2022 due to various items including valuation modeling completion;

Effective September 13, 2023, we acquired all of the outstanding equity ownership interests of 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.

Pursuant to the definitive agreement, the purchase price was € 63.9 million ($ 68.7 million at the September 13, 2023 exchange rate), net of cash acquired.

The purchase accounting for the acquisition has not been finalized as of December 31, 2023;

provisional amounts are primarily related to intangible assets and tax components.

We expect to finalize the allocation of the purchase price within the one-year measurement period following the acquisition.

Effective October 4, 2022, we acquired all of the outstanding equity ownership interests of Canadian based InterTrade Systems Inc.

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

Pursuant to the definitive agreement, the purchase price was $ 49.1 million, including estimated post-closing adjustments.

The purchase accounting for the acquisition has not been finalized as of December 31, 2022 due to various items including valuation modeling completion;

provisional amounts are primarily related to intangible assets, net working capital, and tax components.

We expect to finalize the allocation of the purchase price within the one-year measurement period following the acquisition.

The definitive agreement included the potential for the seller to receive up to $ 2.0 million in cash, contingent upon the completion of a technological infrastructure migration project within a specified time period.

Given the status of the project, at the date of acquisition as well as at December 31, 2022, we expected to pay the full contingent consideration

SPS COMMERCE, INC.

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

Table of Con t ents

balance in 2023.

As such, $ 2.0 million was included in accrued expenses in the consolidated balance sheet at December 31, 2022.

Purchase Price Allocations

We accounted for the acquisitions as business combinations.

We allocated each purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition dates:

2022 Acquisition Activity

GCommerce InterTrade

The goodwill associated with the acquisition is not deductible for income tax purposes.

Purchase Price Allocation

We accounted for the acquisition as a business combination.

We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

(in thousands) Acquisition Date Estimated Fair Value as of

September 30, 2022 Adjustments Acquisition Date Estimated Fair Value as of

December 31, 2022 Acquisition Date Estimated Fair Value as of

September 30, 2023 Adjustment Acquisition Date Estimated Fair Value as of

December 31, 2023

Cash paid at transaction date $ 45,153 $ — $ 45,153 $ 47,165

Contingent consideration — — — 2,000

Post-closing adjustments ( 64 ) — ( 64 ) ( 93 )

Total consideration $ 45,089 $ — $ 45,089 $ 49,072

Cash paid $ 73,558 $ — $ 73,558

Estimated fair value of assets and liabilities acquired:

1 unchanged sentence

Accounts receivable 1,347 ( 80 ) 1,267

Other current assets 288 — 288 1,903

Operating lease right-of-use asset 934 — 934 —

Other assets 2,981 659 3,640

Intangible assets

1 unchanged sentence

Developed technology 12,122 ( 4,279 ) 7,843

Deferred income tax assets 5,291 1,440 6,731 101

Accounts payable ( 266 ) — ( 266 ) ( 2,337 )

Accrued compensation ( 321 ) — ( 321 ) —

Current liabilities ( 3,606 ) ( 232 ) ( 3,838 )

Deferred revenue ( 6,421 ) — ( 6,421 )

Operating lease liability ( 934 ) — ( 934 ) —

Deferred income tax liabilities ( 5,144 ) 537 ( 4,607 ) ( 6,228 )

Deferred income tax liabilities, net ( 6,112 ) ( 1,757 ) ( 7,869 )

Total fair value of assets and liabilities acquired $ 23,353 $ 5,448 $ 28,801

2 unchanged sentences

Estimated Useful Life

GCommerce InterTrade

Subscriber relationships 8.0 years 8.0 years

Developed technology 5.0 years 6.0 years

Subscriber relationships 8.0 years

Developed technology 6.0 years

SPS COMMERCE, INC.

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

Table of Con t ents

Other Acquisition Activity

In the year ended December 31, 2023, we had other acquisition activity resulting in a total purchase price of $ 1.5 million, paid in cash.

Assets acquired were primarily comprised of developed technology and customer relationships, totaling $ 0.9 million of estimated fair value.

The remainder of the consideration transferred, $ 0.6 million, was allocated to goodwill.

Effective October 4, 2022, we acquired all of the outstanding equity ownership interests of Canadian based InterTrade Systems Inc.

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

Pursuant to the definitive agreement, the purchase price was $ 49.1 million, including estimated post-closing adjustments.

In the year ended December 31, 2023, provisional amounts were adjusted by $ 3.1 million, primarily relating to a $ 3.9 million decrease in estimated value of intangible assets and the corresponding $ 1.0 million change to the deferred tax position, with the offsets to goodwill.

The purchase accounting was finalized in the year ended December 31, 2023.

Effective July 19, 2022, we acquired all of the outstanding equity ownership interests of GCommerce, Inc.

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

Pursuant to the definitive agreement, the purchase price was $ 45.1 million, including post-closing adjustments.

In the year ended December 31, 2023, provisional amounts were adjusted by $ 1.6 million, primarily relating to a $ 1.5 million decrease in the estimated value of deferred income tax assets, with the corresponding offset to goodwill.

The purchase accounting was finalized in the year ended December 31, 2023.

NOTE C – Revenue

22 unchanged sentences

Many of our customers have connections with numerous trading partners.

SPS COMMERCE, INC.

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

Set-up fees constitute a material renewal option right that provide customers a significant future incentive that would not be otherwise available to that customer unless they entered into the contract, as the set-up fees will not be incurred again upon contract renewal.

As such, set-up fees and related costs are deferred and recognized ratably over two years which is the estimated period for which a material right is present for our customers.

As such, set-up fees and related costs are deferred and recognized ratably, generally over two years , which is the estimated period for which a material right is present for our customers.

The table below presents the activity of the portion of the deferred revenue liability relating to set-up fees:

7 unchanged sentences

Those that will be recognized within the next year are classified as current, whereas the remainder are classified as non-current.

SPS COMMERCE, INC.

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

Table of Con t ents

Miscellaneous fees

12 unchanged sentences

Balance, end of year $ 82,750 $ 70,179

SPS COMMERCE, INC.

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

NOTE E – Fair Value Measurements

Cash Equivalents and Investments

Cash equivalents and investments, as measured at fair value on a recurring basis, consisted of the following:

December 31, 2022 December 31, 2021

Fair Value Level Amortized Cost Unrealized Gains (Losses), net Fair Value Amortized Cost Unrealized Gains (Losses), net Fair Value

5 unchanged sentences

Commercial paper Level 2 48,860 694 49,554 44,224 375 44,599

treasury securities Level 2 — — — 7,500 ( 1 ) 7,499

$ 216,898 $ 694 $ 217,592 $ 124,405 $ 375 $ 124,780

SPS COMMERCE, INC.

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

Table of Con t ents

NOTE F – Allowance for Credit Losses

6 unchanged sentences

Initial allowance for business combination acquired receivables — — 89

Adoption of ASU 2016-13 — — 1,069

Balance, end of year $ 3,320 $ 3,066 $ 4,249

13 unchanged sentences

Depreciation and amortization expense $ 18,631 $ 16,421 $ 14,788

SPS COMMERCE, INC.

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

NOTE H – Goodwill and Intangible Assets, Net

7 unchanged sentences

Balance, end of year $ 249,176

SPS COMMERCE, INC.

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

Table of Con t ents

Intangible Assets

2 unchanged sentences

($ in thousands) Gross

Net Weighted Average Remaining

Amortization Period

Amount Accumulated

Amortization Foreign

Translation Net Weighted Average Remaining Amortization Period

Subscriber relationships $ 105,228 $ ( 32,097 ) $ 724 $ 73,855 6.6 years

3 unchanged sentences

($ in thousands) Gross

Net Weighted Average Remaining

Amortization Period

Amount Accumulated

Amortization Foreign

Translation Net Weighted Average Remaining Amortization Period

Subscriber relationships $ 80,101 $ ( 22,255 ) $ ( 171 ) $ 57,675 6.8 years

1 unchanged sentence

$ 120,711 $ ( 32,189 ) $ ( 170 ) $ 88,352 6.4 years

Amortization expense of intangible assets was as follows:

Year Ended December 31,

(in thousands) 2023 2022 2021

Amortization expense

$ 16,116 $ 11,768 $ 10,126

The estimated future annual amortization expense related to intangible assets is as follows:

3 unchanged sentences

Total future amortization $ 107,344

SPS COMMERCE, INC.

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

NOTE I – Commitments and Contingencies

9 unchanged sentences

$ 6,894 $ 6,663 $ 6,749

SPS COMMERCE, INC.

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

Table of Con t ents

Supplemental cash flow information related to leases was as follows:

9 unchanged sentences

(in thousands)

Total future payments 18,772

Thereafter 76

Total future gross payments 14,951

imputed interest ( 922 )

1 unchanged sentence

Purchase Commitments

We have entered into separate noncancelable agreements with computing infrastructure, customer relationship management, and performance and security data analytics vendors for services through 2025.

At December 31, 2022, the total remaining purchase commitments were $ 4.9 million.

We have entered into separate noncancelable agreements with computing infrastructure, productivity software, customer relationship management, and performance and security data analytics vendors for services through 2026.

At December 31, 2023, our remaining purchase commitments and estimated purchase timing were as follows:

(in thousands)

2024 $ 14,536

Total remaining purchase commitments $ 35,064

SPS COMMERCE, INC.

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

Contingencies

We may be involved in various claims and legal actions in the normal course of business.

We believe that the outcome of any such claim or legal action is not expected to have a material effect on our financial position, results of operations, or cash flows.

We believe that the outcome of any such claim or legal action is not expected to have a material adverse effect on our financial position or results of operations.

NOTE J – Stockholders’ Equity

6 unchanged sentences

2022 Program August 2022 July 2024 50,000 2,992 N/A $ 47,008

SPS COMMERCE, INC.

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

Table of Con t ents

The share repurchase activity by period was as follows:

19 unchanged sentences

$ 45,508 $ 33,399 $ 27,574

SPS COMMERCE, INC.

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

Stock-based compensation expense by grant type or plan was as follows:

3 unchanged sentences

PSUs 11,886 7,509 6,417

RSUs 19,282 15,388 10,367

RSAs & DSUs 437 434 446

26,185 19,282 15,388

ESPP 2,488 2,144 1,391

4 unchanged sentences

Options generally vest over four years and, upon vesting, the holder is given the option to purchase shares of common stock at a specific strike price until expiration, which is generally seven years from the grant date.

SPS COMMERCE, INC.

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

Table of Con t ents

Our stock option activity was as follows:

(#) Weighted Average

Options (#) Weighted Average

Exercise Price

21 unchanged sentences

Weighted-average fair value per share of options granted 56.47 41.34 31.31

SPS COMMERCE, INC.

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

The fair values of the options granted were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

12 unchanged sentences

RSUs generally vest over four years and, upon vesting, the holder is entitled to receive shares of our common stock.

SPS COMMERCE, INC.

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

Table of Con t ents

RSAs vest over one year and, upon vesting, the holder is entitled to receive shares of our common stock.

1 unchanged sentence

Activity for our PSUs, RSUs, RSAs, and DSUs in aggregate was as follows:

(#) Weighted Average

Grant Date Fair

Value ($/share)

# Weighted Average Grant

Date Fair Value

Outstanding at December 31, 2020 738,422 52.37

12 unchanged sentences

The number of PSUs, RSUs, RSAs, and DSUs outstanding at December 31, 2023 included less than 0.1 million units that have vested, but the shares of common stock have not yet been issued, pursuant to the terms of the agreements.

SPS COMMERCE, INC.

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

Employee Stock Purchase Plan

12 unchanged sentences

Risk-free interest rate 4.92 % 1.27 % 0.07 %

SPS COMMERCE, INC.

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

Table of Con t ents

Note L – Income Taxes

24 unchanged sentences

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

Table of Con t ents

The significant components of our deferred tax assets and liabilities were as follows:

The significant components of our deferred income tax assets and liabilities were as follows:

(in thousands) 2023 2022

Deferred tax assets

Deferred income tax assets

Net operating loss and credit carryforwards $ 10,212 $ 9,970

3 unchanged sentences

Research and development capitalized 17,007 9,591

Other deferred tax assets 2,408 2,778

Gross deferred tax assets 35,906 21,949

Other deferred income tax assets 2,705 2,408

Gross deferred income tax assets 45,765 35,906

valuation allowance ( 2,545 ) ( 1,873 )

Total net deferred tax assets $ 34,033 $ 20,134

Deferred tax liabilities

Total net deferred income tax assets $ 43,220 $ 34,033

Deferred income tax liabilities

Deferred costs $ ( 20,672 ) $ ( 17,696 )

1 unchanged sentence

Depreciation and amortization ( 28,066 ) ( 20,282 )

Other deferred tax liabilities ( 909 ) ( 364 )

Total deferred tax liabilities ( 41,225 ) ( 27,097 )

Net deferred tax liabilities $ ( 7,192 ) $ ( 6,963 )

Amounts for the year ended December 31, 2021 have been reclassified to be consistent with the current classification.

Other deferred income tax liabilities ( 1,065 ) ( 909 )

Total deferred income tax liabilities ( 51,687 ) ( 41,225 )

Net deferred income tax liabilities $ ( 8,467 ) $ ( 7,192 )

As of December 31, 2023, we had net operating loss carryforwards of $ 28.9 million for U.S.

federal tax purposes and $ 4.5 million for state tax purposes.

If not utilized, the loss carryforwards will expire between 2023 and 2036 for federal tax purposes and between 2026 and 2042 for state tax purposes.

federal tax purposes, $ 5.6 million for state tax purposes, and $ 9.8 million for foreign tax purposes.

If not utilized, the loss carryforwards will expire between 2024 and 2036 for federal tax purposes, between 2024 and 2043 for state tax purposes, and will not expire for foreign tax purposes.

Section 382 of the U.S.

Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that might be used to offset taxable income when a corporation has undergone significant changes in stock ownership.

As of December 31, 2022, all $ 40.9 million of our net operating loss carryforwards are subject to Section 382 limitations, of which we believe $ 6.8 million of federal losses will expire unused due to Section 382 limitations.

Accordingly, our deferred tax assets are reported net of the Section 382 limitations.

As of December 31, 2023, all $ 28.9 million of our federal net operating loss carryforwards are subject to Section 382 limitations, of which we believe $ 6.5 million will expire unused due to Section 382 limitations.

Accordingly, our deferred income tax assets are reported net of the Section 382 limitations.

We are subject to income taxes for U.S.

8 unchanged sentences

Realized gain (loss) from foreign currency on cash and investments held 1,726 ( 1,026 ) ( 1,456 )

Change in earn-out liability — — ( 85 )

Other expense, net ( 1,071 ) ( 502 ) ( 366 )

Total other income (expense), net $ 8,315 $ 142 $ ( 1,544 )

Effective January 1, 2021, all realized gains or losses and interest income on our investments are included in investment income.

Previously, realized gains and losses were included in other income (expense), net and interest income was included in interest income, net.

Additionally, realized gains or losses from foreign currency on cash and investments

SPS COMMERCE, INC.

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

Table of Con t ents

held were previously included in other income (expense), net.

Amounts for the year ended December 31, 2020 have been reclassified to be consistent with the current classification.

NOTE N – Net Income Per Share

4 unchanged sentences

Weighted average common shares outstanding, basic 36,646 36,117 35,928

Options to purchase common stock 382 529 611

Options to purchase common stock and ESPP 265 382 529

PSUs, RSUs, RSAs, and DSUs 564 454 505

7 unchanged sentences

Anti-dilutive shares 36 75 31

NOTE O – Retirement Savings Plan

We sponsor a 401(k) retirement savings plan for our employees.

Employees can contribute up to 80 % of their compensation, subject to the limits established by law, and we match 50 % of the employee’s contribution up to the first 6 % of pre-tax annual compensation.

NOTE O – Retirement Contributions

We sponsor a 401(k) retirement savings plan for our U.S.

Eligible employees can contribute up to 80 % of their compensation, subject to the limits established by law, and we match 50 % of the employee’s contribution up to the first 6 % of pre-tax annual compensation.

A portion of our match is in Company stock, which is purchased from the open market by our plan provider and immediately deposited into the employee’s 401(k) account.

Additionally, we make statutory contributions to retirement plans as required by local foreign government regulations.

Our total contributions to the plan were as follows:

Our total contributions were as follows:

Year Ended December 31,

2 unchanged sentences

NOTE P – Geographic Information

The percentage of domestic revenue, which we define as the percentage of consolidated revenue that was attributable to customers based within the U.S., was as follows:

Statements of Comprehensive Income

The percentage of domestic revenue, which we define as consolidated revenue that was attributable to customers based within the U.S., and domestic income before income taxes, which we define as the percentage of consolidated income before income taxes that was attributable to our subsidiaries based in the U.S., were as follows:

Year Ended December 31,

1 unchanged sentence

Domestic revenue 84 % 84 % 84 %

Domestic income before income taxes 94 % 91 % 89 %

No single jurisdiction outside of the U.S.

2 unchanged sentences

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

Table of Con t ents

Property and Equipment

The percentage of property and equipment, net located at subsidiary and office locations outside of the U.S.

Property and equipment, net located at subsidiary and office locations outside of the U.S.

was as follows:

3 unchanged sentences

The Foundation was formed in 2015 to engage in, advance, support, promote and administer charitable activities.

The directors of the Foundation are also our corporate officers.

The directors of the Foundation are also our executive officers.

These directors receive no compensation from the Foundation or us for the management services performed for the Foundation.

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data