What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-19 compared with 2024-02-21 · 200 added, 170 removed, 741 unchanged (33% of the section changed)

34 unchanged sentences

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

As discussed in Note A to the consolidated financial statements, the Company capitalizes costs incurred for internally developed software during the application development stage.

Capitalized internally developed software is recorded within property and equipment and depreciated over the estimated useful life.

We identified the assessment of the capitalized internal costs for internally developed software as a critical audit matter.

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.

Evaluation of sufficiency of audit evidence over fulfillment and analytics revenue

As discussed in Note C to the consolidated financial statements, the Company’s revenue is principally derived from recurring subscriptions to the Company’s Fulfillment and Analytics products.

The Company recorded $523.7 million and $55.7 million of revenue for the year ended December 31, 2024, for the Fulfillment and Analytics products, respectively.

The Company’s revenue recognition process is highly automated and is reliant upon information technology (IT) systems customized to recognize and record revenue.

We identified the evaluation of sufficiency of audit evidence over fulfillment and analytics revenue as a critical audit matter.

Subjective auditor judgment was required in determining the nature and extent of procedures to be performed over revenue as well as the need to involve IT professionals with specialized skills and knowledge to assist in the performance of certain procedures.

SPS COMMERCE, INC.

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

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s internally developed software process.

This included controls related to the evaluation and approval of new internally developed software projects or upgrades and enhancements to existing internally developed software projects, monitoring of the software development stage, and capitalization of internal costs.

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

We applied auditor judgment to determine the nature and extent of procedures to be performed over fulfillment and analytics revenue.

We evaluated the design and tested the operating effectiveness of certain internal controls related to revenue recognition.

We involved IT professionals with specialized skills and knowledge, who assisted in testing the general IT and application controls of the systems used in the Company’s revenue recognition process.

We performed a software-assisted data analysis to test relationships among certain revenue transactions.

For a sample of transactions, we compared the amounts recognized by the Company with underlying documentation, including contracts with customers and cash receipts.

Additionally, for the same sample of transactions, we recalculated the amount of revenue recognized in the period based on the terms of the arrangement.

In addition, we evaluated the sufficiency of audit evidence obtained over revenue by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.

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

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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, 2024 and 2023, 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, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 18, 2025 expressed an unqualified opinion on those consolidated financial statements.

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.

The Company acquired SupplyPike during 2024, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, SupplyPike’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, 2024.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of SupplyPike.

Basis for Opinion

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SPS COMMERCE, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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Treasury Stock, at cost;

2,151,098 shares

1,928,968 and 2,151,098 shares, respectively

( 99,748 ) ( 128,892 )

8 unchanged sentences

SPS COMMERCE, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

11 unchanged sentences

Income from operations 88,883 77,248 71,182

Other income (expense), net 8,315 142 ( 1,544 )

Other income, net 10,593 8,315 142

Income before income taxes 99,476 85,563 71,324

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Foreign currency translation adjustments ( 9,384 ) 3,393 ( 2,240 )

Unrealized gain (loss) on investments, net of tax of $ 644 , $ 147 , and $( 34 ), respectively

Unrealized gain on investments, net of tax of $ 363 , $ 644 , and $ 147 , respectively

1,089 1,932 441

Reclassification of (gain) loss on investments into earnings, net of tax of $( 564 ), $( 55 ), and $ 63 , respectively

Reclassification of gain on investments into earnings, net of tax of $( 537 ), $( 564 ), and $( 55 ), respectively

( 1,610 ) ( 1,692 ) ( 165 )

11 unchanged sentences

SPS COMMERCE, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

11 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

Employee stock purchase plan activity 61,979 — — — 9,827 — — 9,827

Repurchases of common stock, net of costs ( 205,331 ) — 205,331 ( 37,567 ) — — — ( 37,567 )

Reissuances of treasury stock 427,461 — ( 427,461 ) 66,711 24,713 — — 91,424

Net income — — — — — 77,054 — 77,054

7 unchanged sentences

SPS COMMERCE, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

24 unchanged sentences

Maturities of investments 143,275 131,331 158,937

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

Acquisition of businesses, net ( 147,924 ) ( 70,218 ) ( 91,420 )

Net cash used in investing activities ( 110,454 ) ( 92,642 ) ( 112,790 )

17 unchanged sentences

SPS COMMERCE, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 unchanged sentence

Business Description

SPS Commerce is a leading provider of cloud-based supply chain management services across our global retail network.

Our products make it easier for retailers, grocers, distributors, suppliers, and logistics firms to communicate and collaborate by simplifying how they manage and share item, inventory, order and sales data across omnichannel retail channels.

We deliver our products using a full-service model, which includes industry-leading technology and a team of experts that optimize, update, and operate the technology on customers' behalf.

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.

SPS Commerce is transforming how our global retail supply chain co-operates by creating a more dynamic, interconnected community where players can more freely connect, collaborate, and prosper together.

Our comprehensive suite of cloud-based products and solutions lead the industry in establishing and maintaining stronger collaboration between retailers, grocers, distributors, suppliers, manufacturers, and logistics firms around the globe.

Our products enable customers to enhance how they operate:

both within their organizations and with their trading partners, with reduced operational costs and stronger supply chain performance;

with order and supply chain visibility, sell-through data, and optimized inventory management, and;

through the limitless access to connect and grow with the world’s largest retail network of trading partners that only SPS Commerce can offer.

Basis of Presentation

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Assets acquired include tangible and intangible assets.

We use estimates and assumptions that we believe are reasonable as a part of the purchase price allocation, which includes the process to determine the value and useful lives of purchased intangible assets and the process to determine the value of any contingent consideration liabilities.

We use estimates and assumptions that we believe are reasonable as a part of the purchase price allocation, which includes the process to determine the fair value of purchased intangible assets and the process to determine the value of any contingent consideration liabilities.

We value identifiable intangible assets using variants of the income approach, such as the relief-from-royalty and multi-period excess earnings methods.

The income approach uses estimates such as future expected cash flows from acquired customers and developed technology from a market participant perspective, useful lives, and discount rates to estimate the fair values of the identifiable intangible assets.

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

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Segment Information

Our Chief Executive Officer acts as the Company’s chief operating decision maker and reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.

There are no segment managers who are held accountable by the chief operating decision maker, or anyone else, for operations, operating results and planning for levels or components below the consolidated unit level.

Accordingly, we determined we have one operating and reportable segment, which is supply chain management products.

The single operating and reporting segment we have is Supply Chain Management Solutions.

This segment derives revenues from customers by providing access to our cloud-based supply chain management services, primarily under subscription-based service arrangements.

Our Chief Executive Officer acts as the Company’s chief operating decision maker (“CODM”).

Our CODM primarily reviews revenue, consolidated net income, and consolidated Adjusted EBITDA for purposes of allocating resources and evaluating financial performance.

These measures are used to monitor budget versus actual results as well as trends versus historical performance, which are the CODM's primary considerations to assess performance.

The CODM does not use an asset measure to allocate resources or evaluate the consolidated performance.

There are no segment managers who are held accountable by the CODM, or anyone else, for operations, operating results and planning for levels or components below the consolidated unit level.

Adjusted EBITDA is a non-GAAP financial measure also reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Concentration of Credit Risk

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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 gain (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.

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

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

Investment income includes interest earned on securities, net of amortization of premiums and accretion of discounts from the purchase of available for sale securities, and interest earned on our cash and cash equivalents.

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.

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• Level 1 – quoted prices in active markets for identical assets or liabilities.

• Level 2 – observable inputs other than Level 1 prices, such as (a) quoted prices for similar assets or liabilities, (b) quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or (c) model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

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

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

• 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

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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.

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

We capitalize and amortize eligible costs to acquire or generate internally developed software that are incurred during the application development stage, which include costs related to the design of the chosen path, coding, installation of the hardware necessary to run the software, and any testing done before the operational 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.

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

We determine if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use assets, current operating lease liabilities, and non-current operating lease liabilities in our consolidated balance sheets.

Operating leases with initial terms longer than 12 months are included in operating lease right-of-use assets, current operating lease liabilities, and non-current operating lease liabilities in our consolidated balance sheets.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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Additionally, we review our lease liabilities for remeasurement whenever there is a triggering event or when relevant facts and circumstances change.

SPS COMMERCE, INC.

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

Research and Development

Research and development costs primarily include development, maintenance, and data conversion activities related to our cloud-based supply chain management products and are expensed as incurred.

Research and development costs are net of amounts capitalized as developed software.

Research and development costs are net of amounts capitalized as internally developed software.

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations.

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The impairment test is conducted by comparing the fair value of the net assets with the carrying amount of the reporting unit.

We determine the fair value of the reporting unit based on our market capitalization at the testing date.

We determine the fair value of our single reporting unit based on our market capitalization at the testing date.

If the carrying amount exceeds the fair value of the reporting unit, we would recognize an impairment loss in the consolidated statements of comprehensive income, to the extent that the carrying amount exceeds fair value.

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The purchased intangible assets are being amortized on a straight-line basis over their estimated useful lives.

The estimated useful lives for intangible were as follows:

The estimated useful lives for intangible assets were as follows:

Estimated Useful Life

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Revenues are the amount that reflects the consideration we are contractually and legally entitled to, as well as the amount we expect to collect, in exchange for those services.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

We determine revenue recognition through the following steps:

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See Note C for further descriptions of our revenue recognition policy.

SPS COMMERCE, INC.

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

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 and certain commissions paid to sales personnel and referral partners, respectively.

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

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

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For all awards, we recognize forfeitures as they occur.

RSAs result in the issuance of new shares when granted.

For other stock-based awards, new shares are issued when the award is exercised, vested, or released according to the terms of the agreement.

RSAs result in the issuance of new shares of common stock when granted.

For other stock-based awards, new shares of common stock are issued when the award is exercised, vested, or released according to the terms of the agreement.

Our ESPP allows participating employees to purchase shares of our common stock at a discount through payroll deductions.

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The expected term of the options is derived from historical data on option holder exercises and post-vesting employment termination behavior.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

Additional valuation inputs include our expected non-issuance of future common stock dividends and the risk-free interest rate that is based on the U.S.

1 unchanged sentence

For PSUs, the Monte Carlo simulation utilizes multiple input variables that determine the probability of satisfying the performance conditions stipulated in the award.

Share Repurchases and Reissuances

Share repurchases, reflected as treasury stock on the consolidated balance sheets, are accounted for as the trade date occurs and are reflected net of the costs incurred to acquire the shares.

Share repurchases that have not yet settled in cash are included in accrued expenses in the consolidated balance sheets.

Treasury stock reissuances are accounted for using the specific identification method, with gains (or losses to the extent of previously recognized gains) recognized in additional paid-in capital and any remaining loss recorded in retained earnings in the consolidated financial statements.

We account for income taxes using the asset and liability method, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements.

Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Deferred tax assets are reduced by a valuation allowance when, in our judgment, it is more likely than not that some or all of the deferred tax asset will not be realized.

Deferred tax positions are reduced by a valuation allowance when, in our judgment, it is more likely than not that some or all of the deferred tax assets will not be realized.

Deferred tax positions are net by jurisdiction on the consolidated balance sheet.

SPS COMMERCE, INC.

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

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

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For tax positions meeting the “more likely than not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

It is our practice to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

We are subject to income taxes for U.S.

federal and various state and international jurisdictions.

We are generally subject to U.S.

federal and state tax examinations for most prior tax years due to our net operating loss and research & development credit carryforwards and the utilization of the carryforwards in years still open under statute.

The deferred tax asset for the federal net operating loss carryforward is reported net of the Section 382 limitations.

When applicable, the Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

Net Income Per Share

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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 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.

2024 The adoption resulted in additional disclosure.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

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

2025 We are currently evaluating the adoption on our financial statements and anticipate the impact will result in additional disclosure.

ASU 2024-03 , Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)

November 2024 This amendment requires that an entity disclose in its notes to financial statements specified information about certain costs and expenses.

2027 We are currently evaluating the adoption on our financial statements and anticipate the impact will result in additional disclosure.

NOTE B – Business Acquisitions

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.

Effective July 31, 2024, we acquired SupplyPike, a revenue recovery solution, through the purchase of all of the outstanding equity ownership interests in SupplyPike.

Pursuant to the definitive agreement and plan of merger, the total consideration transferred at close was $ 205.8 million, net of cash acquired.

The consideration was comprised of $ 118.6 million paid in cash and 404,587 shares of SPS common stock (valued at $ 87.2 million, determined at acquisition close based on the price of SPS common stock).

The shares were issued from SPS treasury shares, see Note J - Stockholders' Equity for further detail on the treasury share reissuance.

The purchase accounting for the acquisition has not been finalized as of December 31, 2024;

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.

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

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

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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, 2023 Adjustment Acquisition Date Estimated Fair Value as of

December 31, 2023

The following table presents the purchase consideration and fair values of acquired assets and liabilities recorded in the Company's consolidated balance sheet as of the acquisition date:

(in thousands)

Cash paid $ 124,769

Equity consideration 87,156

Total consideration $ 211,925

Estimated fair value of assets and liabilities acquired:

Cash $ 4,859 $ — $ 4,859

Accounts receivable 1,347 ( 80 ) 1,267

Other assets 3,732

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Developed technology 21,090

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

Deferred revenue ( 2,297 )

Other liabilities ( 2,644 )

Deferred income tax liabilities, net ( 17,347 )

1 unchanged sentence

Goodwill $ 131,451

The following table summarizes the estimated useful lives for each acquired intangible asset, each of which are subject to finalization:

Estimated Useful Life

Subscriber relationships 8.0 years

Developed technology 6.0 years

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

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.

The following table summarizes the preliminary estimated useful lives for each acquired intangible asset:

Subscriber relationships 9.0 years

Developed technology 8.0 years

Traverse Systems

Effective May 8, 2024, we entered into an asset purchase agreement to acquire certain assets of Traverse Systems, an industry-leading provider in retailer supply chain performance and vendor management.

Total consideration transferred at close was $ 29.4 million, which was comprised of $ 25.0 million paid in cash and 22,874 shares of SPS common stock (valued at $ 4.4 million, determined at acquisition close based on the price of SPS common stock).

The shares were issued from SPS treasury shares, see Note J - Stockholders' Equity for further detail on the treasury share reissuance.

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.

Assets acquired primarily comprised of subscriber relationships and developed technology intangible assets, totaling $ 7.7 million and $ 3.6 million of estimated fair value, respectively, and $ 18.4 million was allocated to goodwill.

The remainder of the consideration transferred was allocated to net assets acquired other than the intangible assets.

The purchase accounting for the acquisition was finalized in the year ended December 31, 2024.

The goodwill associated with the acquisition is deductible for income tax purposes.

Effective April 10, 2024, the Company entered into an asset purchase agreement to acquire Vision33's SAP Business One SPS Integration Technology.

Pursuant to the definitive agreement, the purchase price, denominated in Canadian dollars ("CAD"), was $ 5.8 million CAD ($ 4.3 million U.S.

dollars ("USD") at the agreement date exchange rate), of which $ 4.5 million CAD ($ 3.3 million USD) was paid in cash at close, with the remainder payable in cash within two years , subject to certain closing conditions.

Assets acquired were primarily comprised of developed technology and subscriber relationships, totaling $ 1.7 million USD and $ 0.4 million USD of estimated fair value, respectively.

The remainder of the consideration transferred, $ 2.2 million USD, was allocated to goodwill.

The purchase accounting for the acquisition was finalized in the year ended December 31, 2024.

The goodwill associated with the acquisition is deductible for income tax purposes.

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.

In the year ended December 31, 2024, provisional amounts were adjusted by $ 1.8 million, primarily relating to a $ 2.9 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, 2024.

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.

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

Other Acquisition Activity

On December 30, 2024, we entered into a definitive agreement to acquire all of the outstanding equity ownership interests of Carbon6, a provider of software tools to Amazon sellers, including specialized offerings for revenue recovery for both first-party (1P) and third-party (3P) suppliers.

The acquisition became effective on February 4, 2025 (" Close").

Pursuant to the definitive agreement, the total consideration transferred at Close was $ 209.1 million, net of cash acquired and subject to post-close customary adjustments.

The consideration was comprised of $ 141.4 million paid in cash and 378,100 shares of SPS common stock (valued at $ 67.7 million, determined at acquisition Close based on the price of SPS common stock).

The shares were issued from SPS treasury shares.

Given the timing of the acquisition, the Company is currently in the process of determining the impact on its financial statements.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

NOTE C – Revenue

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Revenues are the amount that reflects the consideration we are contractually and legally entitled to, as well as the amount we expect to collect, in exchange for those services.

Revenue by Geographic Area

Domestic revenue, which we define as revenue that was attributable to customers based within the U.S.

was as follows:

Year Ended December 31,

2024 2023 2022

Domestic revenue 83 % 84 % 84 %

No single jurisdiction outside of the U.S.

had revenues in excess of 10%.

Recurring Revenues

Recurring revenues consist of recurring subscriptions from customers that utilize our Fulfillment, Analytics, and Other supply chain management products.

Revenue for these products is generally recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer.

Our contracts with our recurring revenue customers are recurring in nature, generally ranging from monthly to annual, and generally allow the customer to cancel the contract for any reason with 30 to 90 days’ notice.

We define recurring revenue as active contracts during the reporting period to regularly pay us fees for subscription-based and reoccurring services.

All components of the contracts that are not expected to recur (primarily set ups and professional services) are excluded from recurring revenue.

Revenue for subscription-based services is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer.

Our contracts primarily range from monthly to annual and generally allow the customer to cancel the contract for any reason with 30 to 90 days’ notice.

Timing of billings varies by customer and by contract type and are either in advance or within 30 days of the service being performed.

Given that the recurring revenue contracts are for one year or less, we have applied the optional exemption to not disclose information about the remaining performance obligations for recurring revenue contracts.

Given that the recurring revenue contracts are generally for one year or less, we have applied the optional exemption to not disclose information about the remaining performance obligations for recurring revenue contracts.

One-time Revenues

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Set-up revenues

Set-up fees are specific for each connection a customer has with a trading partner.

Set-up fees, a component of our revenue, are specific for each connection a customer has with a trading partner.

These nonrefundable fees are necessary for our customers to utilize our services and do not provide any standalone value.

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, 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:

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

The table below presents the activity of the portion of the deferred revenue liability relating to set-up fee s.

We expect to recognize $ 12.9 million of the balance as of December 31, 2024 as revenue over the next 12 months with the remaining amount recognized thereafter.

Year Ended December 31,

4 unchanged sentences

Balance, end of year $ 16,735 $ 17,603

The entire balance of deferred set-up fees will be recognized within two years .

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

Miscellaneous fees

Miscellaneous fees primarily consist of professional services and testing and certification.

Miscellaneous one-time revenues

Miscellaneous one-time fees primarily consist of professional services and testing and certification.

The contract period for these one-time fees is for one year or less and recognized at the time service is provided.

10 unchanged sentences

Balance, end of year $ 85,914 $ 82,750

SPS COMMERCE, INC.

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

NOTE E – Fair Value Measurements

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

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

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

(in thousands)

Cash equivalents:

Money market funds Level 1 $ 161,233 $ — $ 161,233 $ 73,368 $ — $ 73,368

Certificates of deposit Level 1 6,805 — 6,805 6,813 — 6,813

Money market funds Level 1 $ 178,417 $ — $ 178,417 Level 1 $ 161,233 $ — $ 161,233

Certificates of deposit Level 2 — — — Level 1 6,805 — 6,805

Marketable securities:

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

Commercial paper Level 2 — — — Level 2 48,860 694 49,554

$ 178,417 $ — $ 178,417 $ 216,898 $ 694 $ 217,592

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

NOTE F – Allowance for Credit Losses

5 unchanged sentences

Write-offs, net of recoveries ( 6,824 ) ( 5,453 ) ( 4,542 )

Initial allowance for business combination acquired receivables — — 89

Balance, end of year $ 4,179 $ 3,320 $ 3,066

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Depreciation and amortization expense $ 18,721 $ 18,631 $ 16,421

SPS COMMERCE, INC.

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

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

was as follows:

International property and equipment 18 % 15 %

NOTE H – Goodwill and Intangible Assets, Net

3 unchanged sentences

Balance, beginning of year $ 249,176

Additions from business acquisitions 45,393

Addition from business acquisitions 154,632

Foreign currency translation ( 6,445 )

1 unchanged sentence

Balance, end of year $ 399,180

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

Intangible Assets

26 unchanged sentences

Total future amortization $ 181,294

SPS COMMERCE, INC.

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

NOTE I – Commitments and Contingencies

3 unchanged sentences

and international locations.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

The components of lease expense were as follows:

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$ 7,105 $ 6,894 $ 6,663

Supplemental cash flow information related to leases was as follows:

Supplemental cash flow information related to operating leases was as follows:

Year Ended December 31,

(in thousands) 2024 2023 2022

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases $ 5,022 $ 4,639

Operating cash outflows from operating leases $ 5,209 $ 5,022 $ 4,639

Right-of-use assets obtained in exchange for operating lease liabilities 3,158 1,147 934

15 unchanged sentences

Total remaining purchase commitments $ 18,347

SPS COMMERCE, INC.

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

Contingencies

1 unchanged sentence

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.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

NOTE J – Stockholders’ Equity

Share Repurchase Program

Share Repurchase Programs

Our board of directors has authorized multiple non-concurrent programs to repurchase our common stock.

1 unchanged sentence

(in thousands) Effective Date Expiration Date Share Value Authorized for Repurchase Share Value Repurchased Unused & Expired Share Repurchase Value Share Value Available for Future Repurchase

2019 Program November 2019 November 2021 $ 50,000 $ 29,611 $ 20,389 N/A

2021 Program November 2021 August 2022 $ 50,000 $ 49,992 $ 8 N/A

2022 Program August 2022 July 2024 50,000 40,471 9,529 N/A

2024 Program August 2024 July 2026 100,000 — N/A $ 100,000

The share repurchase activity by period was as follows:

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Number of shares repurchased 205,331 — 361,745

Shares repurchased cost $ — $ 43,215 $ 20,430

Average price per repurchased share $ — $ 119.46 $ 116.01

Total share repurchased cost $ 37,567 $ — $ 43,215

Average total cost per repurchased share $ 182.96 $ — $ 119.46

Treasury Stock Reissuances

In connection with the acquisitions of Traverse Systems and SupplyPike, the Company re-issued treasury shares as part of the purchase consideration (see Note B – Business Combinations for further information).

NOTE K – Stock-Based Compensation

Our equity compensation plans provide for the grant of incentive and nonqualified stock options, as well as other stock-based awards including PSUs, RSAs, RSUs, and DSUs, to employees, non-employee directors and other consultants who provide services to us.

We also provide an ESPP and 401(k) stock match to eligible participants.

We recognize stock-based compensation expense based on grant date award fair value.

This cost is recognized over the period for which the employee is required to provide service in exchange for the award or the award performance period, except for expenses relating to retirement-eligible employees that have not given their required notice, which is recognized on a pro-rata basis over the notice period prior to retirement.

At December 31, 2023 there were 12.7 million shares available for grant under approved equity compensation plans.

Stock-based compensation expense was allocated in the consolidated statements of comprehensive income as follows:

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$ 54,557 $ 45,508 $ 33,399

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:

8 unchanged sentences

As of December 31, 2024, there was $ 68.2 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a primarily straight-line basis over a weighted-average period of 2.3 years.

At December 31, 2024 there were 12.3 million shares available for grant under approved equity compensation plans.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

Stock Options

25 unchanged sentences

Weighted-average fair value per share of options granted 69.11 56.47 41.34

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:

6 unchanged sentences

Performance Share Units, Restricted Stock Units and Awards, and Deferred Stock Units

In 2023, 2022, and 2021 we granted PSU awards with certain target performance levels.

We grant PSU awards with certain target performance levels.

These awards are earned based upon our Company’s total shareholder return as compared to an indexed total shareholder return over the course of a fiscal based three-year performance period, starting in the year of grant.

1 unchanged sentence

Expense is recognized on a straight-line basis over the performance period, regardless of whether the market condition is satisfied as the likelihood of the market condition being met is included in the fair-value measurement of the award.

In 2023 , PSU awards granted in 2020 were earned and vested at the maximum performance level and less than 0.2 million shares of common stock were issued.

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

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

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The number of PSUs, RSUs, RSAs, and DSUs outstanding at December 31, 2024 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

1 unchanged sentence

Year Ended December 31,

(in thousands, except share data) 2023 2022 2021

(in thousands, except shares) 2024 2023 2022

Amounts for shares purchased $ 9,827 $ 8,114 $ 6,676

8 unchanged sentences

Risk-free interest rate 5.3 % 4.9 % 1.3 %

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

Note L – Income Taxes

9 unchanged sentences

$ 22,422 $ 19,739 $ 16,190

Our income tax expense differed from the amounts computed by applying the U.S.

federal income tax rate to pretax income as a result of the following:

The percentage of 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., was as follows:

Year Ended December 31,

2024 2023 2022

Domestic income before income taxes 92 % 94 % 91 %

The following table reconciles the U.S.

federal statutory income tax rate with our effective tax rate:

Year Ended December 31,

2024 2023 2022

statutory federal income tax rate 21.0 % 21.0 % 21.0 %

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Net deferred income tax liabilities $ ( 15,036 ) $ ( 8,467 )

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

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, 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.

federal and various state and international jurisdictions.

We are generally subject to U.S.

federal and state tax examinations for most prior tax years due to our net operating loss and R&D credit carryforwards and the utilization of the carryforwards in years still open under statute.

As of December 31, 2024, we had the following tax loss carryforwards:

(in millions, except expiration dates) Amount Expiration Dates

Operating loss carryforwards $ 30.2

Operating loss carryforwards expected to expire unused due to Section 382 limitations 6.5

Federal operating loss carryforwards, net of Section 382 limitations $ 23.7 2025 - 2037

State operating loss carryforwards $ 17.0 2025 - 2044

Foreign loss carryforwards 10.0 N/A

Total tax loss carryforwards, net of Section 382 limitations $ 50.7

NOTE M – Other Income and Expense

Other income (expense), net included the following:

Other income, net included the following:

Year Ended December 31,

1 unchanged sentence

Investment income $ 10,582 $ 7,660 $ 1,670

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

Realized gain (loss) from investments held and foreign currency impact on cash and investments 115 1,726 ( 1,026 )

Other expense, net ( 104 ) ( 1,071 ) ( 502 )

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

Total other income, net $ 10,593 $ 8,315 $ 142

SPS COMMERCE, INC.

25 unchanged sentences

Retirement contributions $ 7,849 $ 6,627 $ 5,386

NOTE P – Geographic Information

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,

2023 2022 2021

Domestic revenue 84 % 84 % 84 %

Domestic income before income taxes 94 % 91 % 89 %

No single jurisdiction outside of the U.S.

had revenues in excess of 10%.

SPS COMMERCE, INC.

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

Property and Equipment

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

was as follows:

International property and equipment 15 % 13 %

NOTE Q– Related Party Transactions

NOTE P – Related Party Transactions

The SPS Commerce Foundation (the “Foundation”) is a Minnesota non-profit organization exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code.

4 unchanged sentences

We have no current legal obligations for future commitments to the Foundation.

Our contributions to the Foundation were as follows:

Contributions to the Foundation were recorded in general and administrative expense in our consolidate d statements of comprehensive income.

The activity was as follows:

Year Ended December 31,

2 unchanged sentences

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

SPS COMMERCE, INC.

Form 10-K for the Annual Period ended December 31, 2024

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