SPS COMMERCE INC 10-Q

Item 1. Financial Statements SPS COMMERCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except shares) March 31, 2025 December 31, 2024 ASSETS (unaudited) Current assets Cash and cash equivalents $ 94,921 $ 241,017 Accounts receivable 68,183 56,214 Allowance for credit losses ( 4,793 ) ( 4,179 ) Accounts receivable, net 63,390 52,035 Deferred costs 67,107 65,342 Other assets 26,417 23,513 Total current assets 251,835 381,907 Property and equipment, net 38,687 37,547 Operating lease right-of-use assets 8,424 8,192 Goodwill 533,940 399,180 Intangible assets, net 252,280 181,294 Other assets Deferred costs, non-current 21,416 20,572 Deferred income tax assets 562 505 Other assets, non-current 1,906 2,033 Total assets $ 1,109,050 $ 1,031,230 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 11,255 $ 8,577 Accrued compensation 40,747 47,160 Accrued expenses 16,640 12,108 Deferred revenue 78,620 74,256 Operating lease liabilities 6,162 4,583 Total current liabilities 153,424 146,684 Other liabilities Deferred revenue, non-current 5,748 6,189 Operating lease liabilities, non-current 6,101 7,885 Deferred income tax liabilities 20,298 15,541 Other liabilities, non-current 2,558 241 Total liabilities 188,129 176,540 Commitments and contingencies Stockholders' equity Preferred stock, $ 0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding — — Common stock, $ 0.001 par value; 110,000,000 shares authorized; 39,833,096 and 39,590,276 shares issued; and 38,001,227 and 37,661,308 shares outstanding, respectively 40 40 Treasury stock, at cost; 1,831,869 and 1,928,968 shares, respectively ( 102,096 ) ( 99,748 ) Additional paid-in capital 672,138 627,982 Retained earnings 358,295 336,099 Accumulated other comprehensive loss ( 7,456 ) ( 9,683 ) Total stockholders’ equity 920,921 854,690 Total liabilities and stockholders’ equity $ 1,109,050 $ 1,031,230 See accompanying notes to these condensed consolidated financial statements. SPS COMMERCE, INC. 3 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents SPS COMMERCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended March 31, (in thousands, except per share amounts) (unaudited) 2025 2024 Revenues $ 181,549 $ 149,576 Cost of revenues 56,914 51,487 Gross profit 124,635 98,089 Operating expenses Sales and marketing 41,634 36,432 Research and development 17,439 16,009 General and administrative 31,018 25,907 Amortization of intangible assets 8,588 4,338 Total operating expenses 98,679 82,686 Income from operations 25,956 15,403 Other income, net 2,207 3,132 Income before income taxes 28,163 18,535 Income tax expense 5,967 532 Net income $ 22,196 $ 18,003 Other comprehensive income (expense) Foreign currency translation adjustments 2,227 ( 3,317 ) Unrealized gain on investments, net of tax of $ — and $ 171 , respectively — 513 Reclassification of gain on investments into earnings, net of tax of $ — and $( 215 ), respectively — ( 646 ) Total other comprehensive income (expense) 2,227 ( 3,450 ) Comprehensive income $ 24,423 $ 14,553 Net income per share Basic $ 0.58 $ 0.49 Diluted $ 0.58 $ 0.48 Weighted average common shares used to compute net income per share Basic 37,990 37,049 Diluted 38,163 37,686 See accompanying notes to these condensed consolidated financial statements. SPS COMMERCE, INC. 4 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents SPS COMMERCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Treasury Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Gain (Loss) Total Stockholders' Equity (in thousands, except shares) (unaudited) Shares Amount Shares Amount Balances, December 31, 2023 36,820,048 $ 39 2,151,098 $ ( 128,892 ) $ 537,061 $ 259,045 $ 222 $ 667,475 Stock-based compensation — — — — 19,285 — — 19,285 Shares issued pursuant to stock awards 336,035 — — — 1,261 — — 1,261 Employee stock purchase plan activity 2,398 — — — 391 — — 391 Repurchases of common stock, net of costs ( 109,480 ) — 109,480 ( 20,000 ) — — — ( 20,000 ) Net income — — — — — 18,003 — 18,003 Foreign currency translation adjustments — — — — — — ( 3,317 ) ( 3,317 ) Unrealized gain on investments, net of tax — — — — — — 513 513 Reclassification of gain on investments into earnings, net of tax — — — — — — ( 646 ) ( 646 ) Balances, March 31, 2024 37,049,001 $ 39 2,260,578 $ ( 148,892 ) $ 557,998 $ 277,048 $ ( 3,228 ) $ 682,965 Balances, December 31, 2024 37,661,308 $ 40 1,928,968 $ ( 99,748 ) $ 627,982 $ 336,099 $ ( 9,683 ) $ 854,690 Stock-based compensation — — — — 13,138 — — 13,138 Shares issued pursuant to stock awards 240,190 — — 635 — — 635 Employee stock purchase plan activity 2,630 — — — 411 — — 411 Repurchases of common stock, net of costs ( 281,001 ) — 281,001 ( 40,000 ) — — — ( 40,000 ) Reissuances of treasury stock 378,100 — ( 378,100 ) 37,652 29,972 — — 67,624 Net income — — — — — 22,196 — 22,196 Foreign currency translation adjustments — — — — — — 2,227 2,227 Balances, March 31, 2025 38,001,227 $ 40 1,831,869 $ ( 102,096 ) $ 672,138 $ 358,295 $ ( 7,456 ) $ 920,921 See accompanying notes to these condensed consolidated financial statements. . SPS COMMERCE, INC. 5 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents SPS COMMERCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, (in thousands) (unaudited) 2025 2024 Cash flows from operating activities Net income $ 22,196 $ 18,003 Reconciliation of net income to net cash provided by operating activities Deferred income taxes ( 4,418 ) ( 7,070 ) Depreciation and amortization of property and equipment 4,957 4,694 Amortization of intangible assets 8,588 4,338 Provision for credit losses 1,822 1,408 Stock-based compensation 13,867 20,018 Other, net 168 ( 431 ) Changes in assets and liabilities, net of effects of acquisition Accounts receivable ( 7,443 ) ( 6,759 ) Deferred costs ( 1,247 ) ( 1,651 ) Other assets and liabilities 1,174 3,030 Accounts payable 1,677 5,098 Accrued compensation ( 7,948 ) ( 9,518 ) Accrued expenses 3,868 ( 674 ) Deferred revenue 3,160 4,129 Operating leases ( 438 ) ( 551 ) Net cash provided by operating activities 39,983 34,064 Cash flows from investing activities Purchases of property and equipment ( 6,150 ) ( 3,533 ) Purchases of investments — ( 44,412 ) Maturities of investments — 45,000 Acquisition of business, net ( 141,636 ) — Net cash used in investing activities ( 147,786 ) ( 2,945 ) Cash flows from financing activities Repurchases of common stock ( 40,000 ) ( 16,540 ) Net proceeds from exercise of options to purchase common stock 635 1,260 Net proceeds from employee stock purchase plan activity 411 391 Net cash used in financing activities ( 38,954 ) ( 14,889 ) Effect of foreign currency exchange rate changes 661 ( 674 ) Net increase (decrease) in cash and cash equivalents ( 146,096 ) 15,556 Cash and cash equivalents at beginning of period 241,017 219,081 Cash and cash equivalents at end of period $ 94,921 $ 234,637 See accompanying notes to these condensed consolidated financial statements. SPS COMMERCE, INC. 6 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents SPS COMMERCE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A – General Business Description 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; compete: with order and supply chain visibility, sell-through data, and optimized inventory management, and; adapt: 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 The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of SPS Commerce, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. This interim financial information has been prepared under the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission (“SEC”). We have included all normal recurring adjustments considered necessary to provide a fair presentation of our financial position, results of operations, stockholders’ equity, and cash flows for the interim periods presented. Operating results for these interim periods are not necessarily indicative of the results to be expected for the full year. Use of Estimates Preparing financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant Accounting Policies There were no material changes in our significant accounting policies, nor were there differences in the basis of our segmentation, during the three months ended March 31, 2025 . See Note A to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC. Accounting Pronouncements Not Yet Adopted Standard Date of Issuance Description Year 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. 2025 The adoption will result in additional disclosure in our Annual Report on Form 10-K for the year ending December 31, 2025. 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. SPS COMMERCE, INC. 7 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents NOTE B – Business Acquisitions Carbon6 Technologies, Inc. On December 30, 2024, we entered into a definitive agreement to acquire all of the outstanding equity ownership interests of Carbon6 Technologies, Inc. ("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 $ 209.3 million, net of cash acquired, and subject to customary post-close adjustments. The consideration was comprised of $ 141.6 million paid in cash, net of cash acquired, 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. The purchase accounting for the acquisition has not been finalized as of March 31, 2025; provisional amounts are primarily related to intangible assets and tax components, and correspondingly goodwill. 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. 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 presents the purchase consideration and estimated fair values of acquired assets and liabilities recorded in the Company's condensed consolidated balance sheet as of the acquisition date: (in thousands) Cash paid $ 143,855 Equity consideration 67,672 Total consideration $ 211,527 Estimated fair value of assets and liabilities acquired: Cash $ 2,267 Accounts receivable 5,868 Other assets, current 7,782 Intangible assets Subscriber relationships 58,800 Developed technology 25,200 Other liabilities, current and non-current ( 7,682 ) Deferred income tax liabilities, net ( 10,274 ) Total fair value of assets and liabilities acquired $ 81,961 Goodwill $ 129,566 The following table summarizes the preliminary estimated useful lives for each acquired intangible asset: Useful Life Subscriber relationships 8.0 years Developed technology 9.0 years Unaudited Pro Forma Financial Information The following unaudited pro forma financial information presents the combined results of SPS and Carbon6 assuming the acquisition was completed as of the beginning of the prior fiscal year, January 1, 2024. These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined companies would have been, nor are they indicative of future results of operations. SPS COMMERCE, INC. 8 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents The pro forma results reflect certain adjustments, such as one-time acquisition-related costs, incremental impact for amortization of acquired intangibles, and the elimination of debt extinguishment and interest costs. The adjustments do not reflect synergies or costs that would have been expected to result from the integration of the acquisition. Pro forma consolidated revenue and net income for the three months ended March 31, 2025 and 2024 are as follows: Three Months Ended March 31, (in thousands) 2025 2024 Revenue $ 185,730 $ 158,120 Net income 28,382 13,111 SupplyPike, Inc. Effective July 31, 2024, we acquired SupplyPike, Inc. ("SupplyPike"), an automated invoice deduction management and prevention solution, through the purchase of all of the outstanding equity ownership interests of 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, net of cash acquired, 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. The purchase accounting for the acquisition was finalized in the three months ending March 31, 2025; provisional adjustments were primarily related to intangible assets and tax components, and correspondingly goodwill. 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. SPS COMMERCE, INC. 9 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents The following table presents the purchase consideration and estimated fair values of acquired assets and liabilities recorded in the Company's condensed 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 $ 6,118 Other assets, current and non-current 3,732 Intangible assets Subscriber relationships 62,967 Developed technology 21,090 Deferred revenue ( 2,297 ) Other liabilities, current and non-current ( 2,644 ) Deferred income tax liabilities, net ( 15,098 ) Total fair value of assets and liabilities acquired $ 73,868 Goodwill $ 138,057 The following table summarizes the estimated useful lives for each acquired intangible asset: Useful Life Subscriber relationships 9.0 years Developed technology 8.0 years NOTE C – Revenue Revenue by Product Type We derive our revenues from the following revenue streams: Three Months Ended March 31, (in thousands) 2025 2024 Recurring revenues: Fulfillment $ 152,631 $ 121,853 Analytics 13,702 14,014 Other 5,996 3,817 Recurring revenues 172,329 139,684 One-time revenues 9,220 9,892 Total revenue $ 181,549 $ 149,576 SPS COMMERCE, INC. 10 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents Revenue by Geographic Area Domestic revenue, which we define as revenue that was attributable to customers based within the United States ("U.S."), was as follows: Three Months Ended March 31, 2025 2024 Domestic revenue 85 % 83 % No single jurisdiction outside of the U.S. had revenues in excess of 10%. Recurring Revenues 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 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 One-time revenues consist of set-up fees and miscellaneous fees from customers. Set-up revenues 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. 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. We expect to recognize $ 12.1 million of the balance as of March 31, 2025 as revenue over the next 12 months with the remaining amount recognized thereafter. Three Months Ended March 31, (in thousands) 2025 2024 Balance, beginning of period $ 16,735 $ 17,603 Invoiced set-up fees 3,407 4,167 Recognized set-up fees ( 4,446 ) ( 4,352 ) Balance, end of period $ 15,696 $ 17,418 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. We have applied the optional exemption to not disclose information about the remaining performance obligations for miscellaneous one-time fee contracts since they have original durations of one year or less. SPS COMMERCE, INC. 11 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents Deferred Revenue We recognized revenue of $ 42.8 million and $ 36.6 million in the three months ended March 31, 2025 and 2024, respectively, from amounts included in deferred revenue at the beginning of the period. NOTE D – Deferred Costs The deferred costs activity was as follows: Three Months Ended March 31, (in thousands) 2025 2024 Balance, beginning of period $ 85,914 $ 82,750 Incurred deferred costs 28,618 21,930 Amortized deferred costs ( 26,009 ) ( 20,432 ) Balance, end of period $ 88,523 $ 84,248 NOTE E – Fair Value Measurements Cash equivalents, as measured at fair value on a recurring basis, consisted of the following: March 31, 2025 December 31, 2024 Fair Value Level Amortized Cost Unrealized Gains (Losses), net Fair Value Amortized Cost Unrealized Gains (Losses), net Fair Value (in thousands) Cash equivalents: Money market funds Level 1 $ 70,944 $ — $ 70,944 $ 178,417 $ — $ 178,417 NOTE F – Allowance for Credit Losses The allowance for credit losses activity, included in accounts receivable, net, was as follows: Three Months Ended March 31, (in thousands) 2025 2024 Balance, beginning of period $ 4,179 $ 3,320 Provision for credit losses 1,822 1,408 Write-offs, net of recoveries ( 1,208 ) ( 1,139 ) Balance, end of period $ 4,793 $ 3,589 SPS COMMERCE, INC. 12 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents NOTE G – Property and Equipment, Net Property and equipment, net consisted of the following: (in thousands) March 31, 2025 December 31, 2024 Internally developed software $ 78,558 $ 73,617 Computer equipment 28,357 27,890 Leasehold improvements 15,009 14,999 Office equipment and furniture 8,906 8,796 Property and equipment, cost 130,830 125,302 Less: accumulated depreciation and amortization ( 92,143 ) ( 87,755 ) Total property and equipment, net $ 38,687 $ 37,547 Property and equipment, net located outside of the U.S. was as follows: March 31, 2025 December 31, 2024 International property and equipment 20 % 18 % NOTE H – Goodwill and Intangible Assets, Net Goodwill The activity in goodwill was as follows: (in thousands) Three Months Ended March 31, 2025 Balance, beginning of period $ 399,180 Addition from business acquisitions 129,566 Foreign currency translation 1,273 Remeasurement from provisional purchase accounting amount 3,921 Balance, end of period $ 533,940 Intangible Assets Intangible assets, net consisted of the following: March 31, 2025 ($ in thousands) Gross Carrying Amount Accumulated Amortization Foreign Currency Translation Net Weighted Average Remaining Amortization Period Subscriber relationships $ 228,727 $ ( 51,767 ) $ 539 $ 177,499 7.3 years Developed technology 101,429 ( 26,940 ) 292 74,781 6.6 years $ 330,156 $ ( 78,707 ) $ 831 $ 252,280 7.1 years SPS COMMERCE, INC. 13 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents December 31, 2024 ($ in thousands) Gross Carrying Amount Accumulated Amortization Foreign Currency Translation Net Weighted Average Remaining Amortization Period Subscriber relationships $ 178,147 $ ( 47,432 ) $ ( 1,715 ) $ 129,000 7.3 years Developed technology 77,108 ( 24,111 ) ( 703 ) 52,294 5.7 years $ 255,255 $ ( 71,543 ) $ ( 2,418 ) $ 181,294 6.9 years The estimated future annual amortization expense related to intangible assets is as follows: (in thousands) Remainder of 2025 $ 29,532 2026 38,392 2027 37,918 2028 36,587 2029 30,147 Thereafter 79,704 Total future amortization $ 252,280 NOTE I – Commitments and Contingencies Leases The components of lease expense were as follows: Three Months Ended March 31, (in thousands) 2025 2024 Operating lease cost $ 921 $ 814 Variable lease cost 882 954 $ 1,803 $ 1,768 Supplemental cash flow information related to leases was as follows: Three Months Ended March 31, (in thousands) 2025 2024 Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows from operating leases $ 1,457 $ 1,203 Right-of-use assets obtained in exchange for operating lease liabilities 1,094 — Supplemental balance sheet information related to operating leases was as follows: March 31, 2025 December 31, 2024 Weighted-average remaining lease term 2.1 years 2.4 years Weighted-average discount rate 4.2 % 4.3 % SPS COMMERCE, INC. 14 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents At March 31, 2025, our future minimum payments under operating leases were as follows: (in thousands) Remainder of 2025 $ 5,412 2026 5,194 Thereafter 2,233 Total future gross payments $ 12,839 Less: imputed interest ( 576 ) Total operating lease liabilities $ 12,263 Purchase Commitments We have entered into separate noncancelable agreements with vendors for computing infrastructure, software platforms, and other service arrangements through 2030. At March 31, 2025, our remaining purchase commitments and estimated purchase timing were as follows: (in thousands) Remainder of 2025 $ 11,297 2026 5,180 Thereafter 4,137 Total estimated future purchases $ 20,614 NOTE J – Stockholders’ Equity Share Repurchase Programs Our board of directors has authorized multiple non-concurrent programs to repurchase our common stock. Details of the programs and activity thereunder through March 31, 2025 were as follows: (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 2022 Program August 2022 July 2024 $ 50,000 $ 40,471 $ 9,529 N/A 2024 Program August 2024 July 2026 100,000 39,994 N/A $ 60,006 The share repurchase activity by period was as follows: Three Months Ended March 31, (in thousands, except shares and per share amounts) 2025 2024 Number of shares repurchased 281,001 109,480 Total share repurchased cost $ 40,000 $ 20,000 Average total cost per repurchased share $ 142.35 $ 182.68 Treasury Stock Reissuance In connection with the acquisition of Carbon6 in the three months ended March 31, 2025 , the Company re-issued treasury shares as part of the purchase consideration (see Note B – Business Combinations for further information). SPS COMMERCE, INC. 15 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents NOTE K – Stock-Based Compensation Our equity compensation plans include grants of incentive and nonqualified stock options, performance share units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and deferred stock units (“DSUs”), to employees, executive officers, and non-employee directors. We also provide an employee stock purchase plan (“ESPP”) and 401(k) match to eligible participants. At March 31, 2025, there were 11.9 million shares available for grant under approved equity compensation plans. Stock-based compensation expense was allocated in the condensed consolidated statements of comprehensive income as follows: Three Months Ended March 31, (in thousands) 2025 2024 Cost of revenues $ 3,111 $ 4,082 Operating expenses Sales and marketing 2,427 4,444 Research and development 2,017 3,242 General and administrative 6,312 8,250 $ 13,867 $ 20,018 Stock-based compensation expense by grant type or plan was as follows: Three Months Ended March 31, (in thousands) 2025 2024 Stock options $ 549 $ 497 PSUs 3,007 2,445 RSUs & DSUs 8,633 15,491 RSAs 113 126 ESPP 836 721 401(k) stock match 729 738 $ 13,867 $ 20,018 As of March 31, 2025, there was $ 102.3 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 2.6 years. SPS COMMERCE, INC. 16 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents Stock Options Our stock option activity was as follows: Three Months Ended March 31, 2025 Options (#) Weighted Average Exercise Price ($/share) Outstanding, beginning of period 289,374 $ 104.86 Granted 48,049 146.21 Exercised ( 12,044 ) 52.74 Forfeited ( 4,539 ) 167.94 Outstanding, end of period 320,840 $ 112.12 Of the total outstanding options at March 31, 2025, 0.2 million were exercisable. The outstanding and exercisable options had a weighted average exercise price of $ 94.29 per share and a weighted average remaining contractual life of 2.7 years. The weighted average grant date fair value of options granted during the three months ended March 31, 2025 was $ 50.56 per share. This was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: Life (in years) 3.9 Volatility 36.7 % Dividend yield — Risk-free interest rate 4.3 % Performance Share Units, Restricted Stock Units and Awards, and Deferred Stock Units In each of the quarters ended March 31, 2025, 2024, 2023, and 2022 we granted PSU awards with a target performance level. 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. Earned awards vest in the quarter following the conclusion of the performance period. In the three months ended March 31, 2025, PSU awards granted in 2022 vested at the maximum performance level and 0.1 million shares of common stock were issued. Activity for our PSUs, RSUs, RSAs, and DSUs in aggregate was as follows: Three Months Ended March 31, 2025 # Weighted Average Grant Date Fair Value ($/share) Outstanding, beginning of period 689,522 $ 180.35 Granted 366,299 154.17 Vested and common stock issued ( 228,731 ) 144.82 Forfeited ( 24,818 ) 185.56 Outstanding, end of period 802,272 $ 178.37 The number of PSUs, RSUs, RSAs, and DSUs outstanding at March 31, 2025 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 underlying agreements. SPS COMMERCE, INC. 17 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents Employee Stock Purchase Plan Our ESPP activity was as follows: Three Months Ended March 31, (in thousands, except shares) 2025 2024 Amounts for shares purchased $ 411 $ 391 Shares purchased 2,630 2,398 A total of 1.6 million shares of common stock are reserved for issuance under the ESPP at March 31, 2025. The fair value was estimated based on the market price of our common stock at the beginning of the offering period using the following assumptions: Life (in years) 0.5 Volatility 36.0 % Dividend yield — Risk-free interest rate 5.4 % NOTE L – Income Taxes We record our interim provision for income taxes by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjust the provision for discrete tax items recorded in the period. Our provisions for income taxes includes current federal, state, and foreign income tax expense, as well as deferred tax expense. Differences between our effective tax rate and statutory tax rates are primarily due to the impact of permanently non-deductible expenses partially offset by the federal research and development credits and tax benefits associated with foreign-derived intangible income. Additionally, excess tax benefits generated upon settlement or exercise of stock awards are recognized as a reduction to income tax expense as a discrete tax item in the quarter that the event occurs, creating potentially significant fluctuation in tax expense by quarter and by year. NOTE M – Other Income and Expense Other income, net included the following: Three Months Ended March 31, (in thousands) 2025 2024 Investment income $ 1,849 $ 2,879 Realized gain from investments held and foreign currency impact on cash and investments 366 304 Other expense, net ( 8 ) ( 51 ) Total other income, net $ 2,207 $ 3,132 SPS COMMERCE, INC. 18 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents NOTE N – Net Income Per Share The components and computation of basic and diluted net income per share were as follows: Three Months Ended March 31, (in thousands, except per share amounts) 2025 2024 Numerator Net income $ 22,196 $ 18,003 Denominator Weighted average common shares outstanding, basic 37,990 37,049 Options to purchase common stock and ESPP 101 177 PSUs, RSUs, RSAs, and DSUs 72 460 Weighted average common shares outstanding, diluted 38,163 37,686 Net income per share Basic $ 0.58 $ 0.49 Diluted $ 0.58 $ 0.48 The number of outstanding potential common shares that were excluded from the calculation of diluted net income per share as they were anti-dilutive was as follows: Three Months Ended March 31, (in thousands) 2025 2024 Anti-dilutive shares 290 145 SPS COMMERCE, INC. 19 Form 10-Q for the Quarterly Period ended March 31, 2025 Table of Contents