SPS COMMERCE INC 10-Q

Item 1. Financial Statements SPS COMMERCE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except shares) June 30, 2025 December 31, 2024 ASSETS (unaudited) Current assets Cash and cash equivalents $ 107,603 $ 241,017 Accounts receivable 72,798 56,214 Allowance for credit losses ( 5,286 ) ( 4,179 ) Accounts receivable, net 67,512 52,035 Deferred costs 66,809 65,342 Other assets 27,453 23,513 Total current assets 269,377 381,907 Property and equipment, net 40,150 37,547 Operating lease right-of-use assets 7,395 8,192 Goodwill 543,514 399,180 Intangible assets, net 237,105 181,294 Other assets Deferred costs, non-current 21,095 20,572 Deferred income tax assets 645 505 Other assets, non-current 1,823 2,033 Total assets $ 1,121,104 $ 1,031,230 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 11,604 $ 8,577 Accrued compensation 38,708 47,160 Accrued expenses 12,710 12,108 Deferred revenue 79,198 74,256 Operating lease liabilities 5,749 4,583 Total current liabilities 147,969 146,684 Other liabilities Deferred revenue, non-current 5,477 6,189 Operating lease liabilities, non-current 5,049 7,885 Deferred income tax liabilities 12,533 15,541 Other liabilities, non-current 296 241 Total liabilities 171,324 176,540 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; 39,904,087 and 39,590,276 shares issued; and 37,927,432 and 37,661,308 shares outstanding, respectively 40 40 Treasury stock, at cost; 1,976,655 and 1,928,968 shares, respectively ( 122,096 ) ( 99,748 ) Additional paid-in capital 693,113 627,982 Retained earnings 378,028 336,099 Accumulated other comprehensive gain (loss) 695 ( 9,683 ) Total stockholders’ equity 949,780 854,690 Total liabilities and stockholders’ equity $ 1,121,104 $ 1,031,230 See accompanying notes to these condensed consolidated financial statements. SPS COMMERCE, INC. 3 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents SPS COMMERCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share amounts) (unaudited) 2025 2024 2025 2024 Revenues $ 187,400 $ 153,596 $ 368,949 $ 303,172 Cost of revenues 59,826 52,018 116,740 103,505 Gross profit 127,574 101,578 252,209 199,667 Operating expenses Sales and marketing 43,434 35,691 85,068 72,123 Research and development 17,271 14,366 34,710 30,375 General and administrative 30,890 23,516 61,908 49,423 Amortization of intangible assets 9,509 4,840 18,097 9,178 Total operating expenses 101,104 78,413 199,783 161,099 Income from operations 26,470 23,165 52,426 38,568 Other income, net 773 4,056 2,980 7,188 Income before income taxes 27,243 27,221 55,406 45,756 Income tax expense 7,510 9,189 13,477 9,721 Net income $ 19,733 $ 18,032 $ 41,929 $ 36,035 Other comprehensive income (expense) Foreign currency translation adjustments 8,151 ( 901 ) 10,378 ( 4,218 ) Unrealized gain on investments, net of tax of $ — , $ 164 , $ — , and $ 335 , respectively — 491 — 1,004 Reclassification of gain on investments into earnings, net of tax of $ — , $( 238 ), $ — , and $( 454 ), respectively — ( 715 ) — ( 1,361 ) Total other comprehensive income (expense) 8,151 ( 1,125 ) 10,378 ( 4,575 ) Comprehensive income $ 27,884 $ 16,907 $ 52,307 $ 31,460 Net income per share Basic $ 0.52 $ 0.49 $ 1.10 $ 0.97 Diluted $ 0.52 $ 0.48 $ 1.10 $ 0.96 Weighted average common shares used to compute net income per share Basic 37,965 37,078 37,978 37,063 Diluted 38,099 37,683 38,132 37,690 See accompanying notes to these condensed consolidated financial statements. SPS COMMERCE, INC. 4 Form 10-Q for the Quarterly Period ended June 30, 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, March 31, 2024 37,049,001 $ 39 2,260,578 $ ( 148,892 ) $ 557,998 $ 277,048 $ ( 3,228 ) $ 682,965 Stock-based compensation — — — — 10,793 — — 10,793 Shares issued pursuant to stock awards 79,962 — — — 1,054 — — 1,054 Employee stock purchase plan activity 30,185 — — — 4,828 — — 4,828 Repurchases of common stock, net of costs ( 95,395 ) — 95,395 ( 17,483 ) — — — ( 17,483 ) Reissuances of treasury stock 22,874 — ( 22,874 ) 4,188 169 — — 4,357 Net income — — — — — 18,032 — 18,032 Foreign currency translation adjustments — — — — — — ( 901 ) ( 901 ) Unrealized gain on investments, net of tax — — — — — — 491 491 Reclassification of gain on investments into earnings, net of tax — — — — — — ( 715 ) ( 715 ) Balances, June 30, 2024 37,086,627 $ 39 2,333,099 $ ( 162,187 ) $ 574,842 $ 295,080 $ ( 4,353 ) $ 703,421 Balances, March 31, 2025 38,001,227 $ 40 1,831,869 $ ( 102,096 ) $ 672,138 $ 358,295 $ ( 7,456 ) $ 920,921 Stock-based compensation — — — — 14,219 — — 14,219 Shares issued pursuant to stock awards 27,642 — — 1,741 — — 1,741 Employee stock purchase plan activity 43,349 — — — 5,015 — — 5,015 Repurchases of common stock, net of costs ( 144,786 ) — 144,786 ( 20,000 ) — — — ( 20,000 ) Reissuances of treasury stock — — — — — — — — Net income — — — — — 19,733 — 19,733 Foreign currency translation adjustments — — — — — — 8,151 8,151 Balances, June 30, 2025 37,927,432 $ 40 1,976,655 $ ( 122,096 ) $ 693,113 $ 378,028 $ 695 $ 949,780 SPS COMMERCE, INC. 5 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents 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 — — — — 30,078 — — 30,078 Shares issued pursuant to stock awards 415,997 — — — 2,315 — — 2,315 Employee stock purchase plan activity 32,583 — — — 5,219 — — 5,219 Repurchases of common stock, net of costs ( 204,875 ) — 204,875 ( 37,483 ) — — — ( 37,483 ) Reissuances of treasury stock 22,874 — ( 22,874 ) 4,188 169 — — 4,357 Net income — — — — — 36,035 — 36,035 Foreign currency translation adjustments — — — — — — ( 4,218 ) ( 4,218 ) Unrealized gain on investments, net of tax — — — — — — 1,004 1,004 Reclassification of gain on investments into earnings, net of tax — — — — — — ( 1,361 ) ( 1,361 ) Balances, June 30, 2024 37,086,627 $ 39 2,333,099 $ ( 162,187 ) $ 574,842 $ 295,080 $ ( 4,353 ) $ 703,421 Balances, December 31, 2024 37,661,308 $ 40 1,928,968 $ ( 99,748 ) $ 627,982 $ 336,099 $ ( 9,683 ) $ 854,690 Stock-based compensation — — — — 27,357 — — 27,357 Shares issued pursuant to stock awards 267,832 — — 2,406 — — 2,406 Employee stock purchase plan activity 45,979 — — — 5,426 — — 5,426 Repurchases of common stock, net of costs ( 425,787 ) — 425,787 ( 60,000 ) — — — ( 60,000 ) Reissuances of treasury stock 378,100 — ( 378,100 ) 37,652 29,942 — — 67,594 Net income — — — — — 41,929 — 41,929 Foreign currency translation adjustments — — — — — — 10,378 10,378 Balances, June 30, 2025 37,927,432 $ 40 1,976,655 $ ( 122,096 ) $ 693,113 $ 378,028 $ 695 $ 949,780 See accompanying notes to these condensed consolidated financial statements. SPS COMMERCE, INC. 6 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents SPS COMMERCE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, (in thousands) (unaudited) 2025 2024 Cash flows from operating activities Net income $ 41,929 $ 36,035 Reconciliation of net income to net cash provided by operating activities Deferred income taxes ( 5,914 ) ( 8,172 ) Depreciation and amortization of property and equipment 9,948 9,377 Amortization of intangible assets 18,097 9,178 Provision for credit losses 4,111 3,646 Stock-based compensation 28,865 31,512 Other, net 274 ( 907 ) Changes in assets and liabilities, net of effects of acquisitions Accounts receivable ( 13,713 ) ( 11,407 ) Deferred costs ( 412 ) ( 1,996 ) Other assets and liabilities ( 2,258 ) 1,899 Accounts payable 2,082 ( 1,450 ) Accrued compensation ( 11,006 ) ( 10,763 ) Accrued expenses ( 1,833 ) 1,489 Deferred revenue 3,012 5,965 Operating leases ( 876 ) ( 900 ) Net cash provided by operating activities 72,306 63,506 Cash flows from investing activities Purchases of property and equipment ( 12,815 ) ( 8,592 ) Purchases of investments — ( 78,994 ) Maturities of investments — 105,000 Acquisition of business, net ( 142,628 ) ( 29,343 ) Net cash used in investing activities ( 155,443 ) ( 11,929 ) Cash flows from financing activities Repurchases of common stock ( 59,558 ) ( 37,483 ) Net proceeds from exercise of options to purchase common stock 2,406 2,314 Net proceeds from employee stock purchase plan activity 5,426 5,219 Net cash used in financing activities ( 51,726 ) ( 29,950 ) Effect of foreign currency exchange rate changes 1,449 ( 476 ) Net increase (decrease) in cash and cash equivalents ( 133,414 ) 21,151 Cash and cash equivalents at beginning of period 241,017 219,081 Cash and cash equivalents at end of period $ 107,603 $ 240,232 See accompanying notes to these condensed consolidated financial statements. SPS COMMERCE, INC. 7 Form 10-Q for the Quarterly Period ended June 30, 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 six months ended June 30, 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. 8 Form 10-Q for the Quarterly Period ended June 30, 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 was $ 210.2 million, net of cash acquired. The consideration was comprised of $ 142.5 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 goodwill associated with the acquisition is not deductible for income tax purposes. 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. 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 and six months ended June 30, 2025 and 2024 are as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Revenue $ 187,400 $ 163,936 $ 373,130 $ 322,056 Net income 19,733 17,092 41,516 30,203 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 goodwill associated with the acquisition is not deductible for income tax purposes. Purchase Price Allocations We accounted for the acquisitions 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 dates. SPS COMMERCE, INC. 9 Form 10-Q for the Quarterly Period ended June 30, 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 dates: (in thousands) Carbon6 (1) SupplyPike (2) Cash paid $ 144,855 $ 124,769 Equity consideration 67,672 87,156 Total consideration $ 212,527 $ 211,925 Estimated fair value of assets and liabilities acquired: Cash $ 2,306 $ 6,118 Accounts receivable 5,868 2,020 Other assets, current and non-current 7,554 1,712 Intangible assets Customer relationships 46,704 62,967 Developed technology 29,370 21,090 Deferred revenue ( 604 ) ( 2,462 ) Other liabilities, current and non-current ( 8,709 ) ( 2,644 ) Deferred income tax liabilities, net ( 7,826 ) ( 10,705 ) Total fair value of assets and liabilities acquired $ 74,663 $ 78,096 Goodwill $ 137,864 $ 133,829 The following table summarizes the estimated useful lives for each acquired intangible asset: Carbon6 (1) SupplyPike (2) Customer relationships 8.0 years 9.0 years Developed technology 9.0 years 8.0 years (1) The purchase accounting for the Carbon6 acquisition has not been finalized as of June 30, 2025; provisional amounts are primarily related to intangible assets, tax components, and correspondingly goodwill. We will finalize the allocation of the purchase price within the one-year measurement period following the acquisition. (2) The purchase accounting for the SupplyPike acquisition is finalized. NOTE C – Revenue Revenue by Product Type We derive our revenues from the following revenue streams: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Recurring revenues: Fulfillment $ 158,991 $ 125,512 $ 311,622 $ 247,365 Analytics 13,944 13,510 27,646 27,524 Other 6,186 4,959 12,182 8,776 Recurring revenues 179,121 143,981 351,450 283,665 One-time revenues 8,279 9,615 17,499 19,507 Total revenue $ 187,400 $ 153,596 $ 368,949 $ 303,172 SPS COMMERCE, INC. 10 Form 10-Q for the Quarterly Period ended June 30, 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 June 30, Six Months Ended June 30, 2025 2024 2025 2024 Domestic revenue 85 % 83 % 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 $ 11.6 million of the balance as of June 30, 2025 as revenue over the next 12 months with the remaining amount recognized thereafter. Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Balance, beginning of period $ 15,696 $ 17,418 $ 16,735 $ 17,603 Invoiced set-up fees 3,542 5,353 6,949 9,520 Recognized set-up fees ( 4,231 ) ( 4,411 ) ( 8,677 ) ( 8,763 ) Balance, end of period $ 15,007 $ 18,360 $ 15,007 $ 18,360 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 June 30, 2025 Table of Contents Deferred Revenue We recognized revenue of $ 58.4 million and $ 51.6 million in the six months ended June 30, 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 June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Balance, beginning of period $ 88,523 $ 84,248 $ 85,914 $ 82,750 Incurred deferred costs 24,112 23,022 52,730 44,952 Amortized deferred costs ( 24,731 ) ( 22,342 ) ( 50,740 ) ( 42,774 ) Balance, end of period $ 87,904 $ 84,928 $ 87,904 $ 84,928 NOTE E – Fair Value Measurements Cash equivalents, as measured at fair value on a recurring basis, consisted of the following: June 30, 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 $ 85,631 $ — $ 85,631 $ 178,417 $ — $ 178,417 NOTE F – Allowance for Credit Losses The allowance for credit losses activity, included in accounts receivable, net, was as follows: Six Months Ended June 30, (in thousands) 2025 2024 Balance, beginning of period $ 4,179 $ 3,320 Provision for credit losses 4,111 3,646 Write-offs, net of recoveries ( 3,004 ) ( 3,008 ) Balance, end of period $ 5,286 $ 3,958 SPS COMMERCE, INC. 12 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents NOTE G – Property and Equipment, Net Property and equipment, net consisted of the following: (in thousands) June 30, 2025 December 31, 2024 Internally developed software $ 84,651 $ 73,617 Computer equipment 26,693 27,890 Leasehold improvements 15,058 14,999 Office equipment and furniture 8,984 8,796 Property and equipment, cost 135,386 125,302 Less: accumulated depreciation and amortization ( 95,236 ) ( 87,755 ) Total property and equipment, net $ 40,150 $ 37,547 Property and equipment, net located outside of the U.S. was as follows: June 30, 2025 December 31, 2024 International property and equipment 23 % 18 % NOTE H – Goodwill and Intangible Assets, Net Goodwill The activity in goodwill was as follows: (in thousands) Six Months Ended June 30, 2025 Balance, beginning of period $ 399,180 Addition from business acquisitions 129,566 Foreign currency translation 6,773 Remeasurement from provisional purchase accounting amount and other 7,995 Balance, end of period $ 543,514 Intangible Assets Intangible assets, net consisted of the following: June 30, 2025 ($ in thousands) Gross Carrying Amount Accumulated Amortization Foreign Currency Translation Net Weighted Average Remaining Amortization Period Customer relationships $ 216,631 $ ( 57,778 ) $ 2,057 $ 160,910 7.0 years Developed technology 105,599 ( 30,405 ) 1,001 76,195 6.5 years $ 322,230 $ ( 88,183 ) $ 3,058 $ 237,105 6.9 years December 31, 2024 ($ in thousands) Gross Carrying Amount Accumulated Amortization Foreign Currency Translation Net Weighted Average Remaining Amortization Period Customer 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 SPS COMMERCE, INC. 13 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents The estimated future annual amortization expense related to intangible assets is as follows: (in thousands) Remainder of 2025 $ 19,337 2026 37,741 2027 37,267 2028 35,929 2029 29,464 Thereafter 77,367 Total future amortization $ 237,105 NOTE I – Commitments and Contingencies Leases The components of lease expense were as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Operating lease cost $ 1,294 $ 798 $ 2,215 $ 1,612 Variable lease cost 934 965 1,816 1,919 $ 2,228 $ 1,763 $ 4,031 $ 3,531 Supplemental cash flow information related to leases was as follows: Six Months Ended June 30, (in thousands) 2025 2024 Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows from operating leases $ 3,124 $ 2,423 Right-of-use assets obtained in exchange for operating lease liabilities 1,092 533 Supplemental balance sheet information related to operating leases was as follows: June 30, 2025 December 31, 2024 Weighted-average remaining lease term 1.9 years 2.4 years Weighted-average discount rate 4.2 % 4.3 % At June 30, 2025, our future minimum payments under operating leases were as follows: (in thousands) Remainder of 2025 $ 3,637 2026 5,361 Thereafter 2,286 Total future gross payments $ 11,284 Less: imputed interest ( 486 ) Total operating lease liabilities $ 10,798 SPS COMMERCE, INC. 14 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents Purchase Commitments We have entered into separate noncancelable agreements with vendors for computing infrastructure, software platforms, and other service arrangements through 2030. At June 30, 2025, our remaining purchase commitments and estimated purchase timing were as follows: (in thousands) Remainder of 2025 $ 8,864 2026 9,153 Thereafter 4,137 Total estimated future purchases $ 22,154 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 June 30, 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 59,991 N/A $ 40,009 The share repurchase activity by period was as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands, except shares and per share amounts) 2025 2024 2025 2024 Number of shares repurchased 144,786 95,395 425,787 204,875 Total share repurchased cost $ 20,000 $ 17,483 $ 60,000 $ 37,483 Average total cost per repurchased share $ 138.13 $ 183.27 $ 140.92 $ 182.96 Treasury Stock Reissuance In connection with the acquisition of Carbon6 in the six months ended June 30, 2025 , 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 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 June 30, 2025, there were 11.9 million shares available for grant under approved equity compensation plans. SPS COMMERCE, INC. 15 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents Stock-based compensation expense was allocated in the condensed consolidated statements of comprehensive income as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Cost of revenues $ 3,328 $ 2,730 $ 6,439 $ 6,812 Operating expenses Sales and marketing 3,357 2,512 5,784 6,956 Research and development 2,135 1,820 4,152 5,062 General and administrative 6,178 4,432 12,490 12,682 $ 14,998 $ 11,494 $ 28,865 $ 31,512 Stock-based compensation expense by grant type or plan was as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Stock options $ 472 $ 506 $ 1,021 $ 1,003 PSUs 3,127 2,445 6,134 4,890 RSUs & DSUs 9,837 6,952 18,470 22,443 RSAs — 89 113 215 ESPP 783 802 1,619 1,523 401(k) stock match 779 700 1,508 1,438 $ 14,998 $ 11,494 $ 28,865 $ 31,512 As of June 30, 2025, there was $ 91.1 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 2.5 years. Stock Options Our stock option activity was as follows: Six Months Ended June 30, 2025 Options (#) Weighted Average Exercise Price ($/share) Outstanding, beginning of period 289,374 $ 104.86 Granted 55,302 145.67 Exercised ( 37,301 ) 64.54 Forfeited ( 8,988 ) 163.64 Outstanding, end of period 298,387 $ 115.70 Of the total outstanding options at June 30, 2025, 0.2 million were exercisable. The outstanding and exercisable options had a weighted average exercise price of $ 98.32 per share and a weighted average remaining contractual life of 2.7 years. SPS COMMERCE, INC. 16 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents The weighted average grant date fair value of options granted during the six months ended June 30, 2025 was $ 50.38 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 4.2 % 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: Six Months Ended June 30, 2025 # Weighted Average Grant Date Fair Value ($/share) Outstanding, beginning of period 689,522 $ 180.35 Granted 387,559 153.72 Vested and common stock issued ( 231,116 ) 144.97 Forfeited ( 33,989 ) 178.37 Outstanding, end of period 811,976 $ 177.80 The number of PSUs, RSUs, RSAs, and DSUs outstanding at June 30, 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. Employee Stock Purchase Plan Our ESPP activity was as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands, except shares) 2025 2024 2025 2024 Amounts for shares purchased $ 5,015 $ 4,828 $ 5,426 $ 5,219 Shares purchased 43,349 30,185 45,979 32,583 A total of 1.6 million shares of common stock are reserved for issuance under the ESPP at June 30, 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 33.7 % Dividend yield — Risk-free interest rate 4.3 % SPS COMMERCE, INC. 17 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents 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. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law in the U.S., making permanent most of the expiring key provisions of the 2017 Tax Cuts and Jobs Act, including, but not limited to, U.S. corporate international tax provisions, federal bonus depreciation and deductions for domestic research and development expenditures. We are currently evaluating the impact of OBBBA on our financial condition and results of operations. NOTE M – Other Income and Expense Other income, net included the following: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Investment income $ 688 $ 2,794 $ 2,537 $ 5,673 Realized gain from investments held and foreign currency impact on cash and investments 107 1,255 473 1,559 Other income (expense), net ( 22 ) 7 ( 30 ) ( 44 ) Total other income, net $ 773 $ 4,056 $ 2,980 $ 7,188 NOTE N – Net Income Per Share The components and computation of basic and diluted net income per share were as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands, except per share amounts) 2025 2024 2025 2024 Numerator Net income $ 19,733 $ 18,032 $ 41,929 $ 36,035 Denominator Weighted average common shares outstanding, basic 37,965 37,078 37,978 37,063 Options to purchase common stock and ESPP 73 157 86 167 PSUs, RSUs, RSAs, and DSUs 61 448 68 460 Weighted average common shares outstanding, diluted 38,099 37,683 38,132 37,690 Net income per share Basic $ 0.52 $ 0.49 $ 1.10 $ 0.97 Diluted $ 0.52 $ 0.48 $ 1.10 $ 0.96 SPS COMMERCE, INC. 18 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents 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 June 30, Six Months Ended June 30, (in thousands) 2025 2024 2025 2024 Anti-dilutive shares 307 276 319 227 SPS COMMERCE, INC. 19 Form 10-Q for the Quarterly Period ended June 30, 2025 Table of Contents