SPS COMMERCE INC 10-K

Item 8. Financial Statements and Supplementary Data SPS Commerce, Inc. and Subsidiaries Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm 36 Consolidated Balance Sheets 39 Consolidated Statements of Comprehensive Income 40 Consolidated Statements of Stockholders’ Equity 41 Consolidated Statements of Cash Flows 42 Notes to Consolidated Financial Statements 43 SPS COMMERCE, INC. 35 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors SPS Commerce, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of SPS Commerce, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 19, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 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 $637.6 million and $56.0 million of revenue for the year ended December 31, 2025, 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. The following are the primary procedures we performed to address this critical audit matter. 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 SPS COMMERCE, INC. 36 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents 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. /s/ KPMG LLP We have served as the Company’s auditor since 2013. Minneapolis, Minnesota February 19, 2026 SPS COMMERCE, INC. 37 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors SPS Commerce, Inc.: Opinion on Internal Control Over Financial Reporting We have audited SPS Commerce, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 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, 2025 and 2024, 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, 2025, and the related notes (collectively, the consolidated financial statements), and our report dated February 19, 2026 expressed an unqualified opinion on those consolidated financial statements. The Company acquired Carbon6 Technologies, Inc. during 2025, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, Carbon6 Technologies, Inc.’s internal control over financial reporting associated with less than 5% of consolidated assets and approximately 5% of consolidated revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2025. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Carbon6 Technologies, Inc. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Minneapolis, Minnesota February 19, 2026 SPS COMMERCE, INC. 38 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents SPS COMMERCE, INC. CONSOLIDATED BALANCE SHEETS December 31, (in thousands, except shares) 2025 2024 ASSETS Current assets Cash and cash equivalents $ 151,355 $ 241,017 Accounts receivable 75,295 56,214 Allowance for credit losses ( 7,129 ) ( 4,179 ) Accounts receivable, net 68,166 52,035 Deferred costs 66,693 65,342 Other assets 49,090 23,513 Total current assets 335,304 381,907 Property and equipment, net 43,117 37,547 Operating lease right-of-use assets 5,025 8,192 Goodwill 541,719 399,180 Intangible assets, net 215,815 181,294 Other assets Deferred costs, non-current 20,719 20,572 Deferred income tax assets 493 505 Other assets, non-current 7,667 2,033 Total assets $ 1,169,859 $ 1,031,230 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 13,757 $ 8,577 Accrued compensation 47,577 47,160 Accrued expenses 13,074 12,108 Deferred revenue 75,590 74,256 Operating lease liabilities 4,353 4,583 Total current liabilities 154,351 146,684 Other liabilities Deferred revenue, non-current 5,288 6,189 Operating lease liabilities, non-current 2,839 7,885 Deferred income tax liabilities 33,201 15,541 Other liabilities, non-current 287 241 Total liabilities 195,966 176,540 Commitments and contingencies (Note I) 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; 40,048,410 and 39,590,276 shares issued; and 37,517,239 and 37,661,308 shares outstanding, respectively 40 40 Treasury stock, at cost; 2,531,171 and 1,928,968 shares, respectively ( 177,949 ) ( 99,748 ) Additional paid-in capital 722,737 627,982 Retained earnings 429,438 336,099 Accumulated other comprehensive loss ( 373 ) ( 9,683 ) Total stockholders’ equity 973,893 854,690 Total liabilities and stockholders’ equity $ 1,169,859 $ 1,031,230 See accompanying notes to these consolidated financial statements. SPS COMMERCE, INC. 39 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents SPS COMMERCE, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, (in thousands, except per share amounts) 2025 2024 2023 Revenues $ 751,505 $ 637,765 $ 536,910 Cost of revenues 231,629 210,714 182,069 Gross profit 519,876 427,051 354,841 Operating expenses Sales and marketing 169,130 148,920 122,936 Research and development 68,680 62,809 53,654 General and administrative 126,594 102,929 84,887 Amortization of intangible assets 37,169 23,510 16,116 Total operating expenses 401,573 338,168 277,593 Income from operations 118,303 88,883 77,248 Other income, net 5,532 10,593 8,315 Income before income taxes 123,835 99,476 85,563 Income tax expense 30,496 22,422 19,739 Net income $ 93,339 $ 77,054 $ 65,824 Other comprehensive income (expense) Foreign currency translation adjustments 9,310 ( 9,384 ) 3,393 Unrealized gain on investments, net of tax of $ — , $ 363 , and $ 644 , respectively — 1,089 1,932 Reclassification of gain on investments into earnings, net of tax of $ — , $( 537 ), and $( 564 ), respectively — ( 1,610 ) ( 1,692 ) Total other comprehensive income (expense) 9,310 ( 9,905 ) 3,633 Comprehensive income $ 102,649 $ 67,149 $ 69,457 Net income per share Basic $ 2.46 $ 2.07 $ 1.80 Diluted $ 2.46 $ 2.04 $ 1.76 Weighted average common shares used to compute net income per share Basic 37,881 37,306 36,646 Diluted 37,992 37,856 37,475 See accompanying notes to these consolidated financial statements. SPS COMMERCE, INC. 40 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents SPS COMMERCE, INC. 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) Shares Amount Shares Amount Balances, December 31, 2022 36,158,046 $ 38 2,151,098 $ ( 128,892 ) $ 476,117 $ 193,221 $ ( 3,411 ) $ 537,073 Stock-based compensation — — — — 42,975 — — 42,975 Shares issued pursuant to stock awards 598,361 1 — — 9,855 — — 9,856 Employee stock purchase plan activity 63,641 — — — 8,114 — — 8,114 Net income — — — — — 65,824 — 65,824 Foreign currency translation adjustments — — — — — — 3,393 3,393 Unrealized gain on investments, net of tax — — — — — — 1,932 1,932 Reclassification of gain on investments into earnings, net of tax — — — — — — ( 1,692 ) ( 1,692 ) Balances, December 31, 2023 36,820,048 $ 39 2,151,098 $ ( 128,892 ) $ 537,061 $ 259,045 $ 222 $ 667,475 Stock-based compensation — — — — 51,668 — — 51,668 Shares issued pursuant to stock awards 557,151 1 — — 4,713 — — 4,714 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 Foreign currency translation adjustments — — — — — — ( 9,384 ) ( 9,384 ) Unrealized gain on investments, net of tax — — — — — — 1,089 1,089 Reclassification of gain on investments into earnings, net of tax — — — — — — ( 1,610 ) ( 1,610 ) Balances, December 31, 2024 37,661,308 $ 40 1,928,968 $ ( 99,748 ) $ 627,982 $ 336,099 $ ( 9,683 ) $ 854,690 Stock-based compensation — — — — 50,629 — — 50,629 Shares issued pursuant to stock awards 359,540 — — — 4,600 — — 4,600 Employee stock purchase plan activity 98,594 — — — 9,584 — — 9,584 Shares withheld for net share settlement ( 10,338 ) — 10,338 ( 843 ) — — — ( 843 ) Repurchases of common stock, net of costs ( 969,965 ) — 969,965 ( 115,010 ) — — — ( 115,010 ) Reissuances of treasury stock 378,100 — ( 378,100 ) 37,652 29,942 — — 67,594 Net income — — — — — 93,339 — 93,339 Foreign currency translation adjustments — — — — — — 9,310 9,310 Balances, December 31, 2025 37,517,239 $ 40 2,531,171 $ ( 177,949 ) $ 722,737 $ 429,438 $ ( 373 ) $ 973,893 See accompanying notes to these consolidated financial statements. SPS COMMERCE, INC. 41 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents SPS COMMERCE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (in thousands) 2025 2024 2023 Cash flows from operating activities Net income $ 93,339 $ 77,054 $ 65,824 Reconciliation of net income to net cash provided by operating activities Deferred income taxes 18,909 ( 9,786 ) ( 10,079 ) Depreciation and amortization of property and equipment 21,089 18,721 18,631 Amortization of intangible assets 37,169 23,510 16,116 Provision for credit losses 9,918 7,683 5,707 Stock-based compensation 53,728 54,557 45,508 Other, net ( 1,087 ) 577 2,415 Changes in assets and liabilities, net of effects of acquisitions Accounts receivable ( 20,297 ) ( 9,653 ) ( 11,949 ) Deferred costs 157 ( 3,120 ) ( 10,724 ) Other assets and liabilities ( 28,686 ) ( 7,313 ) 1,834 Accounts payable 4,715 796 ( 3,947 ) Accrued compensation ( 3,721 ) 1,434 7,143 Accrued expenses ( 3,568 ) 4,115 1,302 Deferred revenue ( 787 ) 728 6,464 Operating leases ( 2,088 ) ( 1,905 ) ( 1,947 ) Net cash provided by operating activities 178,790 157,398 132,298 Cash flows from investing activities Purchases of property and equipment ( 26,524 ) ( 20,046 ) ( 19,761 ) Purchases of investments — ( 85,759 ) ( 133,994 ) Maturities of investments — 143,275 131,331 Acquisition of business, net ( 142,628 ) ( 147,924 ) ( 70,218 ) Net cash used in investing activities ( 169,152 ) ( 110,454 ) ( 92,642 ) Cash flows from financing activities Repurchases of common stock ( 114,277 ) ( 37,567 ) — Net proceeds from exercise of options to purchase common stock 3,861 4,714 9,856 Net proceeds from employee stock purchase plan activity 9,584 9,827 8,114 Payments for contingent consideration — — ( 2,000 ) Net cash provided by (used in) financing activities ( 100,832 ) ( 23,026 ) 15,970 Effect of foreign currency exchange rate changes 1,532 ( 1,982 ) 562 Net increase (decrease) in cash and cash equivalents ( 89,662 ) 21,936 56,188 Cash and cash equivalents at beginning of period 241,017 219,081 162,893 Cash and cash equivalents at end of period $ 151,355 $ 241,017 $ 219,081 Supplemental disclosure of cash flow information Cash paid for income taxes $ 28,892 $ 27,097 $ 29,207 See accompanying notes to these consolidated financial statements. SPS COMMERCE, INC. 42 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents SPS COMMERCE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A – General Business Description SPS Commerce is a global supply chain network that connects retailers, brands, distributors, manufacturers, and logistics providers through shared infrastructure built to handle the complexity of modern commerce operations. Our network enables companies to connect once and immediately transact with thousands of trading partners without negotiating standards, building integrations, or maintaining compliance logic. Our network powers our portfolio of solutions that orchestrate the critical processes, protocols, and data exchanges needed to get the right product, in the right place, at the right time, every time. We have embedded deep expertise, proven processes, and compliance logic built from over 20 years of commerce intelligence into every connection, delivering a full-service experience that empowers partners to move forward faster, together. Basis of Presentation The accompanying 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 consolidated financial statements. Foreign Currency Translation The functional currency of our foreign operations is generally the applicable local currency. The functional currency is translated into U.S. dollars for balance sheet accounts using current exchange rates in effect as of the balance sheet date and for revenue and expense accounts using an average exchange rate during the year. The translation adjustments are deferred as a component of other comprehensive income (expense) within the consolidated statements of comprehensive income and the consolidated statements of stockholders' equity. Gains or losses resulting from transactions denominated in foreign currencies are included in other income, net in our consolidated statements of comprehensive income. 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. Business Combinations We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values as of the acquisition date. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. 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 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. The unsettled earn-out liability, if any, is subsequently remeasured at each reporting date at fair value through earnings. While we believe these estimates and assumptions are reasonable, they are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of the assets acquired and the liabilities assumed. Any such adjustments would be recorded as an offset to goodwill or a working capital purchase price adjustment as applicable. Upon the conclusion of the measurement period or final determination of the fair values, whichever comes first, any subsequent adjustments would be recorded in our consolidated statements of comprehensive income. SPS COMMERCE, INC. 43 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Segment Information 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 Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K. Concentration of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents in financial institutions in excess of federally insured limits, accounts receivable, and investments. Cash and cash equivalents are held with financial institutions that we believe are subject to minimal risk. Concentrations of credit risk with respect to accounts receivable are subject to the financial condition of our customers, which are routinely assessed for potential credit losses. We believe that the receivable credit risk exposure is limited. Our investment policy limits the amount of credit exposure with any one financial institution or commercial issuer and sets requirements regarding credit rating and investment maturities to safeguard liquidity and minimize risk. Cash and Cash Equivalents Cash and cash equivalents consist of cash and highly liquid investments with original maturities of less than 90 days. Investments 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, 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. Fair Value Measurements The carrying amounts of our short-term financial instruments, which include cash, cash equivalents, accounts receivable, and accounts payable, approximates fair value due to their short-term nature. Recurring Fair Value Measurements We measure certain financial assets at fair value on a recurring basis based on a fair value hierarchy that requires us to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs that are used to measure fair value are: • 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. SPS COMMERCE, INC. 44 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents • Level 3 – unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. Nonrecurring Fair Value Measurements We measure certain assets and liabilities at fair value on a nonrecurring basis, including long-lived assets, goodwill, and indefinite-lived intangible assets. Accounts Receivable Accounts receivable are initially recorded upon the sale and invoicing of products to customers. Credit is granted in the normal course of business without collateral. Accounts receivable are stated net of allowances for credit losses, which represent estimated losses resulting from customers not making required payments on accounts receivables. When determining the allowance, we pool our outstanding accounts receivable invoices based on the contractual due date of payment. We take several factors into consideration for estimated credit losses by pool, primarily our historical credit losses, with additional adjustments made for current and future macro-economic conditions and retail bankruptcy trends. We write-off accounts receivable when they are determined to be uncollectible. Changes in the allowance are recorded as bad debt expense and are included in general and administrative expense in our consolidated statements of comprehensive income. Property and Equipment Property and equipment, including assets acquired under lease obligations, are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization expense is calculated using the straight-line method over the estimated useful lives, commencing on the earlier date in which the asset is placed in service or ready for its intended use. The estimated useful lives of property and equipment were as follows: Estimated Useful Life Internally developed software 3 years Computer equipment 3 years Office equipment and furniture 5 - 7 years Leasehold improvements Shorter of the useful life of the asset or the remaining term of the lease Significant additions or improvements extending asset lives beyond one year are capitalized, while repairs and maintenance are charged to expense as incurred. 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, 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 is expensed as incurred. Leases We determine if an arrangement is a lease at inception. 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. 45 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents 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. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit interest rate when readily determinable. We estimate the discount rate for a similar collateralized asset by estimating costs of borrowing. The operating lease ROU asset also includes any lease payments made and lease incentives that have been or are deemed probable to be incurred. The options to extend our leases are not recognized as part of our ROU assets and lease liabilities unless it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For all leases, we combine non-lease components with the related lease components and account for it as a single lease component. The ROU assets are subject to the same impairment process as our long-lived assets. Additionally, we review our lease liabilities for remeasurement whenever there is a triggering event or when relevant facts and circumstances change. Variable lease payments primarily consist of common area maintenance charges and real estate taxes, which are based on our pro rata share of actual costs incurred by the landlord. These variable lease payments are excluded from the measurement of our operating lease right-of-use assets and lease liabilities and are recognized as lease cost in the period in which the obligation for those payments is incurred. 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 internally developed software. Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. Goodwill is attributed to a trained workforce and other buyer-specific value resulting from expected synergies, including long-term cost savings, which are not included in the fair values of identifiable assets. We test goodwill for impairment annually at November 30, or more frequently if events or changes in circumstances indicate that the asset might be impaired. 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 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. Intangible Assets Assets acquired in business combinations may include identifiable intangible assets such as customer relationships and developed technology. We recognize the fair value of the identifiable intangible assets acquired separately from goodwill. We have determined the fair value and useful lives of our purchased intangible assets using certain estimates and assumptions that we believe are reasonable. The purchased intangible assets are being amortized on a straight-line basis over their estimated useful lives. The estimated useful lives for intangible assets were as follows: Estimated Useful Life Customer relationships 7 - 10 years Developed technology 5 - 10 years Impairment of Long-Lived Assets We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable if the carrying amount of an asset group exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets at the date it is tested for recoverability, whether in use or under development. An impairment loss is measured and recorded as an expense in the consolidated statements of comprehensive income as the amount by which the carrying amount of a long-lived asset exceeds its fair value. SPS COMMERCE, INC. 46 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Revenue Recognition 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. We determine revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, we satisfy a performance obligation See Note C for further descriptions of our revenue recognition policy. 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, at contract inception. These costs are deferred and amortized over the expected period of benefit which we have determined primarily to be two years . Customer implementation costs are based on actual costs incurred. Related amortization expense is included in cost of revenues in the consolidated statements of comprehensive income. Sales commissions are calculated based on estimated annual recurring revenue to be generated over the customer’s initial contract period. Related amortization expense is included in sales and marketing expenses in the consolidated statements of comprehensive income. Stock-Based Compensation Stock-based compensation includes grants of incentive and nonqualified stock options, performance share units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), deferred stock units (“DSUs”), employee stock purchase plan (“ESPP”) activity, and 401(k) stock match and is used to compensate employees, executive officers, and non-employee directors. We recognize the cost of all stock-based payments based on the grant date fair value of those awards. This cost is recognized over the period for which an 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. For all awards, we recognize forfeitures as they occur. 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. The plan is available to all employees subject to certain eligibility requirements. Participating employees may purchase common stock, on a voluntary after-tax basis, at a price that is the lower of 85 % of the fair market value of our common stock at the beginning or end of each stock purchase period. The plan is a Type B plan, so the number of shares a participants can acquire is variable. Participants purchase more shares as the stock price decreases, up to the total amount originally elected to withhold at the beginning of the offering period. The plan consists of two six-month offering periods, beginning on January 1 and July 1 of each calendar year. The fair value of stock options and ESPP activity is estimated using the Black-Scholes option valuation model. The fair value for RSAs, RSUs, and DSUs is the closing market value of the underlying stock on the date of grant less the purchase price (if any). The fair value of PSUs is estimated using a Monte Carlo simulation. Judgment is required in determining the expected volatility of common stock and the expected term individuals will hold their share-based awards prior to exercising. The expected volatility of the options is based on the historical volatility of our common stock. The expected term of the options is derived from historical data on option holder exercises and post-vesting employment termination behavior. SPS COMMERCE, INC. 47 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents 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. Treasury rates at the date of grant with maturity dates approximately equaling the expected life at the grant date. 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 accounts payable 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. Income Taxes 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 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. We assess our ability to realize our deferred tax assets at the end of each reporting period. Realization of our deferred tax assets is contingent upon future taxable earnings. Accordingly, this assessment requires estimates and judgment. If the estimates of future taxable income vary from actual results, our assessment regarding the realization of these deferred tax assets could change. Future changes in the estimated amount of deferred taxes expected to be realized will be reflected in our consolidated financial statements in the period the estimate is changed, with a corresponding adjustment to our operating results. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would “more likely than not” sustain the position following an audit. 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. 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 Basic net income per share has been computed using the weighted average number of shares of common stock outstanding during each period. Diluted net income per share also includes the impact of our outstanding potential common shares. Potential common shares that are anti-dilutive are excluded from the calculation of diluted net income per share. SPS COMMERCE, INC. 48 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Accounting Pronouncements Recently Adopted Standard Date of Issuance Description Date of 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 prospective adoption resulted in additional disclosure in our Annual Report on Form 10-K for the year ended December 31, 2025. See Note L, Income Taxes, for further discussion on the adoption of the ASU. Accounting Pronouncements Not Yet Adopted Standard Date of Issuance Description Date of Required Adoption Effect on the Financial Statements 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. ASU 2025-05 , Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets July 2025 This amendment allows for entities to elect a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. The practical expedient assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. 2026 (optional) We are currently evaluating the election of the practical expedient, but do not expect a material impact on our financial statements and related disclosures. ASU 2025-06 , Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) September 2025 This amendment modernizes the accounting for software costs under Subtopic 350-40, Intangibles—Goodwill and Other—Internal-Use Software by removing all references to software development project stages. The amendment requires an entity to begin capitalizing software costs when (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. 2028 We are currently evaluating the adoption on our financial statements and related disclosures. ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvement December 2025 The amendments in this update result in a comprehensive list of interim disclosures that are required by GAAP. The objective of the amendments is to provide clarity about the current requirements, rather than evaluate whether to expand or reduce interim disclosure requirements. 2028 We are currently evaluating the adoption on our interim financial statements and related disclosures. SPS COMMERCE, INC. 49 Form 10-K for the Annual Period ended December 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.com, Inc. 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 are as follows: Year Ended December 31, (unaudited, in thousands) 2025 2024 Revenue $ 755,686 $ 680,890 Net income 92,926 72,266 SupplyPike 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 Allocation We accounted for each of the Carbon6 and SupplyPike 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 respective acquisition dates. SPS COMMERCE, INC. 50 Form 10-K for the Annual Period ended December 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 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 8,695 1,712 Intangible assets Customer relationships 44,535 62,967 Developed technology 29,370 21,090 Deferred revenue ( 604 ) ( 2,462 ) Other liabilities, current and non-current ( 10,162 ) ( 2,644 ) Deferred income tax liabilities, net ( 3,753 ) ( 10,705 ) Total fair value of assets and liabilities acquired $ 76,255 $ 78,096 Goodwill $ 136,272 $ 133,829 The following table summarizes the preliminary 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 been finalized as of December 31, 2025; provisional adjustments were primarily related to intangible assets, tax components, and correspondingly, goodwill. (2) The purchase accounting for the SupplyPike acquisition is finalized. Other Acquisition Activity 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. 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. SPS COMMERCE, INC. 51 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Vision33 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. NOTE C – Revenue We derive our revenues from the following revenue streams: Year Ended December 31, (in thousands) 2025 2024 2023 Recurring revenues: Fulfillment $ 637,648 $ 523,704 $ 436,702 Analytics 56,017 55,717 51,703 Other 24,310 20,668 13,608 Recurring revenues 717,975 600,089 502,013 One-time revenues 33,530 37,676 34,897 Total revenue $ 751,505 $ 637,765 $ 536,910 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, 2025 2024 2023 Domestic revenue 84 % 83 % 84 % 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 under which the customer regularly pays 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. SPS COMMERCE, INC. 52 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents 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 fee s. We expect to recognize $ 11.0 million of the balance as of December 31, 2025 as revenue over the next 12 months with the remaining amount recognized thereafter. Year Ended December 31, (in thousands) 2025 2024 Balance, beginning of year $ 16,735 $ 17,603 Invoiced set-up fees 14,486 16,915 Recognized set-up fees ( 16,596 ) ( 17,783 ) Balance, end of year $ 14,625 $ 16,735 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. Deferred Revenue In the year ended December 31, 2025, we recognized revenue of $ 74.3 million from amounts included in deferred revenue at December 31, 2024. NOTE D – Deferred Costs The deferred costs activity was as follows: Year Ended December 31, (in thousands) 2025 2024 Balance, beginning of year $ 85,914 $ 82,750 Incurred deferred costs 94,627 90,482 Amortized deferred costs ( 93,129 ) ( 87,318 ) Balance, end of year $ 87,412 $ 85,914 SPS COMMERCE, INC. 53 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents NOTE E – Fair Value Measurements Cash equivalents and investments, as measured at fair value on a recurring basis, consisted of the following: December 31, 2025 2024 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 $ 117,685 $ — $ 117,685 Level 1 $ 178,417 $ — $ 178,417 NOTE F – Allowance for Credit Losses The allowance for credit losses activity, included in accounts receivable, net, was as follows: Year Ended December 31, (in thousands) 2025 2024 2023 Balance, beginning of year $ 4,179 $ 3,320 $ 3,066 Provision for credit losses 9,918 7,683 5,707 Write-offs, net of recoveries ( 6,968 ) ( 6,824 ) ( 5,453 ) Balance, end of year $ 7,129 $ 4,179 $ 3,320 NOTE G – Property and Equipment, Net Property and equipment, net consisted of the following: December 31, (in thousands) 2025 2024 Internally developed software $ 94,859 $ 73,617 Computer equipment 25,462 27,890 Leasehold improvements 15,044 14,999 Office equipment and furniture 9,159 8,796 Property and equipment, cost 144,524 125,302 Less: accumulated depreciation and amortization ( 101,407 ) ( 87,755 ) Total property and equipment, net $ 43,117 $ 37,547 Depreciation and amortization expense of property and equipment was as follows: Year Ended December 31, (in thousands) 2025 2024 2023 Depreciation and amortization expense $ 21,089 $ 18,721 $ 18,631 Property and equipment, net located at subsidiary and office locations outside of the U.S. was as follows: December 31, 2025 2024 International property and equipment 26 % 18 % SPS COMMERCE, INC. 54 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents NOTE H – Goodwill and Intangible Assets, Net Goodwill The activity in goodwill was as follows: Year Ended December 31, (in thousands) 2025 Balance, beginning of year $ 399,180 Addition from business acquisitions 136,272 Foreign currency translation 6,570 Remeasurement from provisional purchase accounting amount and other (1) ( 303 ) Balance, end of year $ 541,719 (1) Refer to Note B – Business Acquisitions for further information. Intangible Assets Intangible assets, net consisted of the following: December 31, 2025 ($ in thousands) Gross Carrying Amount Accumulated Amortization Foreign Currency Translation Net Weighted Average Remaining Amortization Period Customer relationships $ 214,451 $ ( 70,050 ) $ 2,019 $ 146,420 6.6 years Developed technology 105,599 ( 37,198 ) 994 69,395 6.1 years $ 320,050 $ ( 107,248 ) $ 3,013 $ 215,815 6.4 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 Amortization expense of intangible assets was as follows: Year Ended December 31, (in thousands) 2025 2024 2023 Amortization expense $ 37,169 $ 23,510 $ 16,116 The estimated future annual amortization expense related to intangible assets is as follows: (in thousands) 2026 $ 37,456 2027 36,991 2028 35,654 2029 29,191 2030 26,992 Thereafter 49,531 Total future amortization $ 215,815 SPS COMMERCE, INC. 55 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents NOTE I – Commitments and Contingencies Leases In October 2025, we executed the sixth amendment to our lease agreement (the "Amendment") for our current headquarters located in Minneapolis, Minnesota where we lease approximately 198,000 square feet effective October 1, 2025. The Amendment extends the lease term to end in July 2043 and provides approximately $ 33 million of lease incentives, which were included in the initial measurement of the operating lease right-of-use asset. The Company expects to utilize approximately $ 23 million of these lease incentives during the year ending December 31, 2027, with the remaining balance to be utilized thereafter. The components of lease expense were as follows: Year Ended December 31, (in thousands) 2025 2024 2023 Operating lease cost $ 3,709 $ 3,420 $ 3,123 Variable lease cost 2,767 3,685 3,771 $ 6,476 $ 7,105 $ 6,894 Supplemental cash flow information related to operating leases was as follows: Year Ended December 31, (in thousands) 2025 2024 2023 Cash paid for amounts included in the measurement of lease liabilities Operating cash outflows from operating leases $ 6,555 $ 5,209 $ 5,022 Right-of-use assets obtained in exchange for operating lease liabilities 580 3,158 1,147 Supplemental balance sheet information related to operating leases was as follows: December 31, 2025 December 31, 2024 Weighted-average remaining lease term 11.0 years 2.4 years Weighted-average discount rate 6.0 % 4.3 % Future minimum lease payments under operating leases are presented net of lease incentives deemed payable at lease commencement. At December 31, 2025, our future minimum payments under operating leases were as follows: (in thousands) 2026 4,668 2027 ( 21,307 ) 2028 1,348 2029 2,893 2030 2,951 Thereafter 35,466 Total future gross payments 26,019 Less: imputed interest ( 18,827 ) Total operating lease liabilities 7,192 SPS COMMERCE, INC. 56 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Purchase Commitments We have entered into separate noncancelable agreements with computing infrastructure, productivity software, customer relationship management, and performance and security data analytics vendors for services through 2030. At December 31, 2025, our remaining purchase commitments and estimated purchase timing were as follows: (in thousands) 2026 11,030 2027 3,491 2028 2,288 2029 1,360 2030 92 Total estimated future purchases 18,261 Contingencies We may be involved in various claims and legal actions in the normal course of business. We believe that the outcome of any such claim or legal action is not expected to have a material adverse effect on our financial position or results of operations. 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 December 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 99,990 N/A 10 2025 Program December 2025 December 2027 100,000 15,000 N/A 85,000 Share repurchases are accounted for as the trade date occurs and are reflected in the condensed consolidated financial statements net of the costs incurred to acquire the shares. Share repurchases that have not yet settled in cash are included in accounts payable in the condensed consolidated balance sheet. The share repurchase activity by period was as follows: Year Ended December 31, (in thousands, except shares and per share amounts) 2025 2024 2023 Number of shares repurchased 969,965 205,331 — Total share repurchased cost $ 115,010 $ 37,567 $ — Average total cost per repurchased share $ 118.57 $ 182.96 $ — On February 10, 2026 (announced February 12, 2026), our Board of Directors approved an additional $ 200.0 million in repurchase authority under our previously announced share repurchase program ("2025 Program" within the tables above) that was approved on October 29, 2025 to repurchase up to $ 100.0 million of our common stock, excluding costs to obtain, for a total authorized repurchase amount of $ 300.0 million. Under the program, purchases may be made from time to time in the open market or in privately negotiated purchases, or both. The share repurchase program became effective December 1, 2025 and expires on December 1, 2027. Treasury Stock Reissuances In connection with the acquisitions of Carbon6, Traverse Systems, and SupplyPike, the Company re-issued treasury shares as part of the purchase consideration (see Note B – Business Acquisitions for further information). SPS COMMERCE, INC. 57 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents NOTE K – Stock-Based Compensation Stock-based compensation expense was allocated in the consolidated statements of comprehensive income as follows: Year Ended December 31, (in thousands) 2025 2024 2023 Cost of revenues $ 11,423 $ 11,043 $ 10,169 Operating expenses Sales and marketing 10,943 12,547 9,774 Research and development 8,403 9,094 7,200 General and administrative 22,959 21,873 18,365 $ 53,728 $ 54,557 $ 45,508 Stock-based compensation expense by grant type or plan was as follows: Year Ended December 31, (in thousands) 2025 2024 2023 Stock options $ 1,948 $ 2,059 $ 1,947 PSUs 8,314 8,192 11,886 RSUs & DSUs 37,356 38,064 26,185 RSAs 113 442 472 ESPP 2,953 2,910 2,488 401(k) stock match 3,044 2,890 2,530 $ 53,728 $ 54,557 $ 45,508 As of December 31, 2025, there was $ 85.5 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 2.4 years. At December 31, 2025, there were 11.6 million shares available for grant under approved equity compensation plans. Stock Options Options generally vest over four years and, upon vesting, the holder is given the option to purchase shares of common stock at a specific strike price until expiration, which is generally seven years from the grant date. SPS COMMERCE, INC. 58 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Our stock option activity was as follows: Options (#) Weighted Average Exercise Price ($/share) Outstanding at December 31, 2022 562,697 56.24 Granted 42,215 152.68 Exercised ( 254,353 ) 38.75 Forfeited ( 3,737 ) 129.43 Outstanding at December 31, 2023 346,822 80.02 Granted 38,984 195.76 Exercised ( 94,338 ) 49.91 Forfeited ( 2,094 ) 158.63 Outstanding at December 31, 2024 289,374 104.86 Granted 63,352 139.95 Exercised ( 73,571 ) 62.55 Forfeited ( 17,752 ) 160.86 Outstanding at December 31, 2025 261,403 121.47 Of the total outstanding options at December 31, 2025, 0.2 million were exercisable. The outstanding and exercisable options had a weighted average exercise price of $ 107.94 per share and a weighted average remaining contractual life of 2.6 years. The table below presents additional information related to our stock options: Year Ended December 31, (in thousands, except per share data) 2025 2024 2023 Fair value of options vested $ 1,816 $ 1,982 $ 1,996 Intrinsic value of options exercised 4,438 13,934 31,227 Intrinsic value of options outstanding 2,029 23,387 37,474 Weighted-average fair value per share of options granted 48.55 69.11 56.47 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: Year Ended December 31, 2025 2024 2023 Life (in years) 3.9 4.1 4.1 Volatility 37.1 % 36.6 % 39.3 % Dividend yield — — — Risk-free interest rate 4.2 % 4.3 % 4.0 % SPS COMMERCE, INC. 59 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Performance Share Units, Restricted Stock Units and Awards, and Deferred Stock Units 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. Earned awards vest in the quarter following the conclusion of the performance period. 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. RSUs generally vest over four years and, upon vesting, the holder is entitled to receive shares of our common stock. RSAs vest over one year and, upon vesting, the holder is entitled to receive shares of our common stock. In lieu of RSAs, a participant may elect to receive DSUs with one year vesting, but the participant directs delayed receipt of common shares of up to ten years after the end of service to us. Activity for our PSUs, RSUs, RSAs, and DSUs in aggregate was as follows: # Weighted Average Grant Date Fair Value ($/share) Outstanding at December 31, 2022 712,158 103.93 Granted 416,377 163.55 Vested and common stock issued ( 344,087 ) 77.52 Forfeited ( 11,034 ) 122.97 Outstanding at December 31, 2023 773,414 147.50 Granted 413,619 185.54 Vested and common stock issued ( 462,481 ) 130.03 Forfeited ( 35,030 ) 180.59 Outstanding at December 31, 2024 689,522 180.35 Granted 704,205 123.33 Vested and common stock issued ( 286,554 ) 148.21 Forfeited ( 100,756 ) 169.55 Outstanding at December 31, 2025 1,006,417 150.69 The number of PSUs, RSUs, RSAs, and DSUs outstanding at December 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 agreements. Employee Stock Purchase Plan Our ESPP activity was as follows: Year Ended December 31, (in thousands, except shares) 2025 2024 2023 Amounts for shares purchased $ 9,584 $ 9,827 $ 8,114 Shares purchased 98,594 61,979 63,641 A total of 1.5 million shares of common stock are remaining for issuance under the plan at December 31, 2025. SPS COMMERCE, INC. 60 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents 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: Year Ended December 31, 2025 2024 2023 Life (in years) 0.5 0.5 0.5 Volatility 37.4 % 33.1 % 36.4 % Dividend yield — — — Risk-free interest rate 4.3 % 5.3 % 4.9 % Note L – Income Taxes Our provision (benefit) for income taxes was comprised of the following components: Year Ended December 31, (in thousands) 2025 2024 2023 Current Federal $ 3,370 $ 20,988 $ 20,168 State 6,911 6,147 4,221 Foreign 1,737 3,161 2,103 Deferred Federal 19,091 ( 5,256 ) ( 5,425 ) State 1,859 ( 1,466 ) ( 390 ) Foreign ( 2,472 ) ( 1,152 ) ( 938 ) Total $ 30,496 $ 22,422 $ 19,739 We define domestic and foreign income before income taxes as the consolidated income before income taxes that was attributable to either our subsidiaries based in the U.S. ("domestic"), or attributable to our subsidiaries outside of the U.S. ("foreign"). The percentage of consolidated income before income taxes attributable to our domestic subsidiaries was as follows: Year Ended December 31, 2025 2024 2023 Domestic income before income taxes 98 % 92 % 94 % SPS COMMERCE, INC. 61 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents The following table reconciles the U.S. federal statutory income tax rate with our effective tax rate and includes both the reporting currency amounts and percentages for each category of the reconciliation: Year Ended December 31, 2025 (in thousands) Amount Percent U.S. statutory federal income tax $ 26,005 21.0 % Increase (decrease) resulting from: Tax credits Research and development credit ( 6,921 ) ( 5.6 ) Other ( 140 ) ( 0.1 ) Nontaxable or nondeductible items Nondeductible compensation 3,307 2.7 Other 110 0.1 Uncertain tax positions 1,619 1.3 Effect of cross-border tax laws ( 273 ) ( 0.2 ) U.S. state and local income taxes, net of federal effect (1) 6,391 5.1 Foreign tax effects 398 0.3 Total $ 30,496 24.6 % (1) U.S. state and local income taxes in California, New York, Illinois, Pennsylvania, and Wisconsin make up the majority (greater than 50%) of the tax effect in this category. The following table reconciles the U.S. federal statutory income tax rate with our effective tax rate: Year Ended December 31, 2024 2023 U.S. statutory federal income tax rate 21.0 % 21.0 % Increase (decrease) resulting from: U.S. state income taxes, net of federal tax effect 5.7 5.1 Tax impact of stock activity ( 4.9 ) ( 5.6 ) Nondeductible compensation 3.2 4.7 Research and development credit ( 1.5 ) ( 1.5 ) Foreign derived intangible income ( 1.3 ) ( 1.3 ) Other 0.3 0.7 Effective tax rate 22.5 % 23.1 % SPS COMMERCE, INC. 62 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents The significant components of our deferred income tax assets and liabilities were as follows: Year Ended December 31, (in thousands) 2025 2024 Deferred income tax assets Net operating loss and credit carryforwards $ 15,699 $ 10,722 Stock-based compensation expense 5,766 7,110 Accrued expenses 6,595 6,600 Operating lease liabilities 1,592 2,977 Research and development capitalized 17,686 26,788 Other deferred income tax assets 3,579 3,026 Gross deferred income tax assets 50,917 57,223 Less: valuation allowance ( 4,343 ) ( 2,965 ) Total net deferred income tax assets $ 46,574 $ 54,258 Deferred income tax liabilities Deferred costs $ ( 22,811 ) $ ( 21,537 ) Right-of-use assets ( 1,051 ) ( 1,893 ) Depreciation and amortization ( 53,768 ) ( 44,556 ) Other deferred income tax liabilities ( 1,652 ) ( 1,308 ) Total deferred income tax liabilities ( 79,282 ) ( 69,294 ) Net deferred income tax liabilities $ ( 32,708 ) $ ( 15,036 ) Tax loss carryforwards, net of Section 382 limitations, were as follows: Year Ended December 31, (in millions) 2025 Federal Operating loss carryforwards $ 36.8 Operating loss carryforwards expected to expire unused due to Section 382 limitations 6.1 Federal operating loss carryforwards, net of Section 382 limitations $ 30.7 Other State operating loss carryforwards $ 40.4 Foreign loss carryforwards 14.9 Total loss carryforwards, net of Section 382 limitations $ 86.0 As of December 31, 2025, our federal net operating loss carryforwards, if not used, will begin to expire in 2028. Federal net operating losses generated after December 31, 2018 will carry forward indefinitely. State operating loss carryforwards begin to expire in 2026 and all foreign loss carryforwards are indefinite in expiration. During the year ended December 31, 2025, we recorded an uncertain tax position. The activity for the uncertain tax position was as follows: Year Ended December 31, (in thousands) 2025 Balance, beginning of year $ — Changes from uncertain tax positions taken in current period 1,619 Balance, end of year $ 1,619 SPS COMMERCE, INC. 63 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents Income taxes paid (net of refunds received), by jurisdiction, were as follows: Year Ended December 31, (in thousands) 2025 Federal $ 16,600 State California 1,610 Other 5,070 Foreign Canada 4,919 Other 693 $ 28,892 NOTE M – Other Income and Expense Other income, net included the following: Year Ended December 31, (in thousands) 2025 2024 2023 Investment income $ 4,649 $ 10,582 $ 7,660 Realized gain from investments held and foreign currency impact on cash and investments 388 115 1,726 Other income (expense), net 495 ( 104 ) ( 1,071 ) Total other income, net $ 5,532 $ 10,593 $ 8,315 NOTE N – Net Income Per Share The components and computation of basic and diluted net income per share were as follows: Year Ended December 31, (in thousands, except per share amounts) 2025 2024 2023 Numerator Net income $ 93,339 $ 77,054 $ 65,824 Denominator Weighted average common shares outstanding, basic 37,881 37,306 36,646 Options to purchase common stock and ESPP 61 150 265 PSUs, RSUs, RSAs, and DSUs 50 400 564 Weighted average common shares outstanding, diluted 37,992 37,856 37,475 Net income per share Basic $ 2.46 $ 2.07 $ 1.80 Diluted $ 2.46 $ 2.04 $ 1.76 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: Year Ended December 31, (in thousands) 2025 2024 2023 Anti-dilutive shares 511 55 36 SPS COMMERCE, INC. 64 Form 10-K for the Annual Period ended December 31, 2025 Table of Contents NOTE O – Retirement Contributions We sponsor a 401(k) retirement savings plan for our U.S. employees. Eligible employees can contribute up to 80 % of their compensation, subject to the limits established by law, and we match 50 % of the employee’s contribution up to the first 6 % of pre-tax annual compensation. A portion of our match is in Company stock, which is purchased from the open market by our plan provider and immediately deposited into the employee’s 401(k) account. Additionally, we make statutory contributions to retirement plans as required by local foreign government regulations. Our total contributions were as follows: Year Ended December 31, (in thousands) 2025 2024 2023 Retirement contributions $ 8,518 $ 7,849 $ 6,627 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. The Foundation was formed in 2015 to engage in, advance, support, promote, and administer charitable activities. The directors of the Foundation are also our executive officers. These directors receive no compensation from the Foundation or us for the management services performed for the Foundation. The Foundation is not a subsidiary of ours and the financial results of the Foundation are not consolidated with our financial statements. We have no current legal obligations for future commitments to the Foundation. 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, (in thousands) 2025 2024 2023 Foundation contributions $ 3,000 $ 3,250 $ 2,300 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.