What changed in this filing

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

2025-10-30 compared with 2025-07-30 · 209 added, 6 removed, 17 unchanged (93% of the section changed)

4 unchanged sentences

We may choose based on our investment strategy to hold cash, cash equivalents, and investments in interest-bearing or non-interest-bearing accounts.

Based upon a sensitivity model, an immediate hypothetical 50-basis point change in interest rates at June 30, 2025, based upon interest-bearing balances at June 30, 2025, would have resulted in a $0.1 million impact on our investment income included in net income for the three months ended June 30, 2025.

Based upon a sensitivity model, an immediate hypothetical 50-basis point change in interest rates at September 30, 2025, based upon interest-bearing balances at September 30, 2025, would have resulted in a $0.1 million impact on our investment income included in net income for the three months ended September 30, 2025.

We do not enter into investments for trading or speculative purposes.

We did not have any variable interest rate outstanding debt as of June 30, 2025.

We did not have any variable interest rate outstanding debt as of September 30, 2025.

Results of Operations

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended June 30, 2025

Form 10-Q for the Quarterly Period ended September 30, 2025

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

The following table presents our results of operations for the periods indicated:

Three Months Ended September 30,

2025 2024 Change

($ in thousands) $ % of revenue (1)

$ % of revenue (1)

Revenues $ 189,904 100 % $ 163,686 100 % $ 26,218 16 %

Cost of revenues 57,932 31 51,624 32 6,308 12

Gross profit 131,972 69 112,062 68 19,910 18

Operating expenses

Sales and marketing 42,322 22 37,577 23 4,745 13

Research and development 17,276 9 15,292 9 1,984 13

General and administrative 31,690 17 27,152 17 4,538 17

Amortization of intangible assets 9,493 5 6,470 4 3,023 47

Total operating expenses 100,781 53 86,491 53 14,290 17

Income from operations 31,191 16 25,571 16 5,620 22

Other income, net 1,260 1 3,778 2 (2,518) (67)

Income before income taxes 32,451 17 29,349 18 3,102 11

Income tax expense 6,882 4 5,889 4 993 17

Net income $ 25,569 13 % $ 23,460 14 % $ 2,109 9 %

(1) Amounts in column may not foot due to rounding

Revenues - Revenues increased for the 99th consecutive quarter.

The increase in revenue period-over-period resulted from an increase in recurring revenue customers that was driven primarily by business acquisitions and continued business growth.

• ARP U decreased 3% to approximately $13,300 for the three months ended September 30, 2025.

This was primarily attributable to the addition of 3P r ecurring revenue customers, partially offset by the increased usage of our products by our 1P recurring revenue customers.

• The number of recurring revenue customers increased 22% to approximately 54,950 at September 30, 2025.

Of the total recurring revenue customers, a pproximately 46,900 are 1P recurring revenue customers and the remainder are 3P recurring revenue customers.

The increase in recurring revenue customers is primarily due to recent acquisitions of 3P recurring revenue customers, which have an inconsequential impact on recurring revenue.

New recurring revenue customers do not have a meaningful contribution to revenue at the beginning of their tenure, and therefore a majority of the increased revenue was generated from existing recurring revenue customers.

• Approximately 200 1P recurring revenue customers were added in July 2024 due to the acquisition of the existing customer base of SupplyPike .

Additionally, approximately 8,500 recurring revenue customers were added in February 2025 due to the acquisition of the existing customer base of Carbon6 , of which approximately 300 are 1P recurring revenue customers and the remainder are 3P recurring revenue customers.

Recurring revenues increased 18% to $182.0 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 .

Recurring revenues accounted for 96% and 94% of our total revenues for the three months ended September 30, 2025 and 2024, respectively.

We anticipate that the number of recurring revenue customers and ARPU will increase as we execute our growth strategy focused on further penetration of our market.

Cost of Revenues - The increase in cost of revenues was primarily due to increased headcount, which resulted in an increase of $2.3 million in personnel-related costs and an increase in software subscriptions of $1.0 million due to general growth of our business.

Additionally, there was a $1.8 million increase in stock-based compensation.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended September 30, 2025

Sales and Marketing Expenses - The increase in sales and marketing expense was primarily due to increased headcount, which resulted in an increase of $2.5 million in personnel-related costs.

Additionally, partner and reseller fees increased by $1.1 million, primarily driven by the acquisition of Carbon6.

Research and Development Expenses - The increase in research and development expense was primarily due to increased headcount, which resulted in an increase of $1.2 million in personnel-related costs.

General and Administrative Expenses - The increase in general and administrative expense was primarily due to increased headcount and third-party personnel, which resulted in an increase of $3.6 million in personnel-related costs.

Additionally, there was an increase in stock-based compensation expense of $0.9 million.

Amortization of Intangible Assets - The increase in amortization of intangible assets was driven by acquired intangible assets related to recent business combinations.

Other Income, Net - The decrease in other income, net was primarily due to a decrease in investment income.

Income Tax Expense - The increase in income tax expense was primarily driven by the increase in pre-tax book income and reduction in tax benefits recognized from equity award exercise and settlement activity due to the fluctuations in share price.

The increase was partially offset with increased benefit for Research & Development tax credits.

Adjusted EBITDA - Adjusted EBITDA consists of net income adjusted for income tax expense, depreciation and amortization expense, stock-based compensation expense, realized gain or loss from investments held and foreign currency impact on cash and investments, investment income, and other adjustments as necessary for a fair presentation.

Other adjustments for the three months ended September 30, 2025 included the expense impact from disposals of other equipment .

Net income is the comparable GAAP measure of financial performance.

The following table provides a reconciliation of net income to Adjusted EBITDA:

Three Months Ended

September 30,

(in thousands) 2025 2024

Net income $ 25,569 $ 23,460

Income tax expense 6,882 5,889

Depreciation and amortization of property and equipment 5,354 4,633

Amortization of intangible assets 9,493 6,470

Stock-based compensation expense 14,453 10,752

Realized gain from investments held and foreign currency impact on cash and investments (205) (1,077)

Investment income (1,076) (2,704)

Adjusted EBITDA $ 60,480 $ 48,401

Adjusted EBITDA Margin - Adjusted EBITDA Margin consists of Adjusted EBITDA divided by revenue.

Margin, the comparable GAAP measure of financial performance, consists of net income divided by revenue.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended September 30, 2025

The following table provides a comparison of Margin to Adjusted EBITDA Margin:

Three Months Ended

September 30,

(in thousands, except Margin and Adjusted EBITDA Margin) 2025 2024

Revenue $ 189,904 $ 163,686

Net income 25,569 23,460

Margin 13 % 14 %

Adjusted EBITDA 60,480 48,401

Adjusted EBITDA Margin 32 % 30 %

Non-GAAP Income per Share - Non-GAAP income per share consists of net income adjusted for stock-based compensation expense, amortization expense related to intangible assets, realized gain or loss from investments held and foreign currency impact on cash and investments, other adjustments as necessary for a fair presentation, including for the three months ended September 30, 2025 the expense impact from disposals of other equipment, and the corresponding tax impacts of the adjustments to net income, divided by the weighted average number of shares of common and diluted stock outstanding during each period.

Net income per share, the comparable GAAP measure of financial performance, consists of net income divided by the weighted average number of shares of common and diluted stock outstanding during each period.

To quantify the tax effects, we recalculated income tax expense excluding the direct book and tax effects of the specific items constituting the non-GAAP adjustments.

The difference between this recalculated income tax expense and GAAP income tax expense is presented as the income tax effect of the non-GAAP adjustments.

The following table provides a reconciliation of net income per share to non-GAAP income per share:

Three Months Ended

September 30,

(in thousands, except per share amounts) 2025 2024

Net income $ 25,569 $ 23,460

Stock-based compensation expense 14,453 10,752

Amortization of intangible assets 9,493 6,470

Realized gain from investments held and foreign currency impact on cash and investments (205) (1,077)

Income tax effects of adjustments (6,365) (5,514)

Non-GAAP income $ 42,955 $ 35,069

Shares used to compute net income and non-GAAP income per share

Basic 37,895 37,447

Diluted 37,993 37,996

Net income per share, basic $ 0.67 $ 0.63

Non-GAAP adjustments to net income per share, basic 0.46 0.31

Non-GAAP income per share, basic $ 1.13 $ 0.94

Net income per share, diluted $ 0.67 $ 0.62

Non-GAAP adjustments to net income per share, diluted 0.46 0.30

Non-GAAP income per share, diluted $ 1.13 $ 0.92

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended September 30, 2025

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

The following table presents our results of operations for the periods indicated:

Nine Months Ended September 30,

2025 2024 Change

($ in thousands) $ % of revenue (1)

$ % of revenue (1)

Revenues $ 558,853 100 % $ 466,858 100 % $ 91,995 20 %

Cost of revenues 174,672 31 155,129 33 19,543 13

Gross profit 384,181 69 311,729 67 72,452 23

Operating expenses

Sales and marketing 127,390 23 109,700 23 17,690 16

Research and development 51,986 9 45,667 10 6,319 14

General and administrative 93,598 17 76,575 16 17,023 22

Amortization of intangible assets 27,590 5 15,648 3 11,942 76

Total operating expenses 300,564 54 247,590 53 52,974 21

Income from operations 83,617 15 64,139 14 19,478 30

Other income, net 4,240 1 10,966 2 (6,726) (61)

Income before income taxes 87,857 16 75,105 16 12,752 17

Income tax expense 20,359 4 15,610 3 4,749 30

Net income $ 67,498 12 % $ 59,495 13 % $ 8,003 13 %

(1) Amounts in column may not foot due to rounding

Revenues - Revenues increased for the 99th consecutive quarter.

The increase in revenue period-over-period resulted from an increase in recurring revenue customers that was driven primarily by business acquisitions and continued business growth.

• ARPU increas ed 9% to approximately $14,200 for the nine months ended September 30, 2025.

This was primarily attributable to increased usage of our products by our 1P recurring revenue customers, partially offset by the addition of 3P recurring revenue customers.

• The number of recurring revenue customers increased 22% to approximately 54,950 at September 30, 2025.

Of the total recurring revenue customers, approximately 46,900 are 1P recurring revenue customers and the remainder are 3P recurring revenue customers.

The increase in recurring revenue customers is primarily due to recent acquisitions of 3P recurring revenue customers, which have an inconsequential impact on recurring revenue.

• Approximately 200 1P recurring revenue customers were added in July 2024 due to the acquisition of the existing customer base of SupplyPike .

Recurring revenues increased 22% to $533.4 million for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 .

Recurring revenues accounted for 95% and 94% of our total revenues for the nine months ended September 30, 2025 and 2024, respectively.

We anticipate that the number of recurring revenue customers and ARPU will increase as we execute our growth strategy focused on further penetration of our market.

Cost of Revenues - The increase in cost of revenues was primarily due to increased headcount, which resulted in an increase of $10.9 million in personnel-related costs and an increase in software subscriptions of $4.8 million due to general growth of our business.

Additionally, there was a $1.4 million increase in stock-based compensation.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended September 30, 2025

Sales and Marketing Expenses - The increase in sales and marketing expense was primarily due to increased headcount, which resulted in an increase of $12.9 million in personnel-related costs.

Additionally, partner and reseller fees increased by $3.1 million, primarily driven by the acquisition of Carbon6.

Research and Development Expenses - The increase in research and development expense was primarily due to increased headcount and third-party personnel, which resulted in an increase of $9.6 million in personnel-related costs, partially offset by a decrease of $4.5 million related to capitalized software development.

Additionally, other items contributing to the increase related to costs for continued support of our growing operations including the closing and on-going integration of acquisitions.

Amortization of Intangible Assets - The increase in amortization of intangible assets was driven by acquired intangible assets related to recent business combinations.

Other Income, Net - The decrease in other income, net was primarily due to a decrease in investment income.

Income Tax Expense - The increase in income tax expense was primarily driven by the increase in pre-tax book income and reduction in tax benefits re cognized from equity award exercise and settlement activity due to the fluctuations in share price.

The increase was partially offset with increased benefit for Research & Development tax credits.

Other adjustments for the nine months ended September 30, 2025 included the expense impacts from disposals of certain capitalized internally developed software, disposals of other equipment, and one-time acquisition-related insurance costs.

Net income is the comparable GAAP measure of financial performance.

The following table provides a reconciliation of net income to Adjusted EBITDA:

Nine Months Ended

September 30,

(in thousands) 2025 2024

Net income $ 67,498 $ 59,495

Income tax expense 20,359 15,610

Depreciation and amortization of property and equipment 15,302 14,010

Amortization of intangible assets 27,590 15,648

Stock-based compensation expense 43,318 42,264

Realized gain from investments held and foreign currency impact on cash and investments (678) (2,636)

Investment income (3,613) (8,377)

Other 1,129 978

Adjusted EBITDA $ 170,905 $ 136,992

Adjusted EBITDA Margin - Adjusted EBITDA Margin consists of Adjusted EBITDA divided by revenue.

Margin, the comparable GAAP measure of financial performance, consists of net income divided by revenue.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended September 30, 2025

The following table provides a comparison of Margin to Adjusted EBITDA Margin:

Nine Months Ended

September 30,

(in thousands, except Margin and Adjusted EBITDA Margin) 2025 2024

Revenue $ 558,853 $ 466,858

Net income 67,498 59,495

Margin 12 % 13 %

Adjusted EBITDA 170,905 136,992

Adjusted EBITDA Margin 31 % 29 %

Non-GAAP Income per Share - Non-GAAP income per share consists of net income adjusted for stock-based compensation expense, amortization expense related to intangible assets, realized gain or loss from investments held and foreign currency impact on cash and investments, other adjustments as necessary for a fair presentation, including for the nine months ended September 30, 2025 the expense impacts from disposals of certain capitalized internally developed software, disposals of other equipment, and one-time acquisition-related insurance costs, and the corresponding tax impacts of the adjustments to net income, divided by the weighted average number of shares of common and diluted stock outstanding during each period.

To quantify the tax effects, we recalculated income tax expense excluding the direct book and tax effects of the specific items constituting the non-GAAP adjustments.

The difference between this recalculated income tax expense and GAAP income tax expense is presented as the income tax effect of the non-GAAP adjustments.

The following table provides a reconciliation of net income per share to non-GAAP income per share:

Nine Months Ended

September 30,

(in thousands, except per share amounts) 2025 2024

Net income $ 67,498 $ 59,495

Stock-based compensation expense 43,318 42,264

Amortization of intangible assets 27,590 15,648

Realized gain from investments held and foreign currency impact on cash and investments (678) (2,636)

Other 1,129 978

Income tax effects of adjustments (19,935) (18,134)

Non-GAAP income $ 118,922 $ 97,615

Shares used to compute net income and non-GAAP income per share

Basic 37,939 37,192

Diluted 38,070 37,785

Net income per share, basic $ 1.78 $ 1.60

Non-GAAP adjustments to net income per share, basic 1.35 1.02

Non-GAAP income per share, basic $ 3.13 $ 2.62

Net income per share, diluted $ 1.77 $ 1.57

Non-GAAP adjustments to net income per share, diluted 1.35 1.01

Non-GAAP income per share, diluted $ 3.12 $ 2.58

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended September 30, 2025

Foreign Currency Exchange Risk

6 unchanged sentences

Our expenses are generally denominated in the local currencies in which our operations are located.

As of June 30, 2025, we maintained 14% of our total cash and cash equivalents in foreign currencies.

As of September 30, 2025, we maintained 13% of our total cash and cash equivalents in foreign currencies.

Based upon a sensitivity model, an immediate hypothetical 10% unfavorable change in all foreign currency exchange rates would have resulted in a $1.7 million impact on our cash and cash equivalents held in currencies other than the U.S.

dollar as of June 30, 2025.

dollar as of September 30, 2025.

We have not used any forward contracts or currency borrowings to hedge our exposure to foreign currency exchange risk, although we may do so in the future.

During the three and six months ended June 30, 2025, inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.

During the three and nine months ended September 30, 2025, inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.

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-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk