spsc-def14a_20200518.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.   )

Filed by the Registrant                                     Filed by a Party other than the Registrant  

Check the appropriate box:

 

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12

SPS COMMERCE, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

(3)

Filing Party:

 

 

(4)

Date Filed:

 

 

 

 

 


 

 

 

333 South Seventh Street, Suite 1000

Minneapolis, Minnesota 55402

(612) 435-9400

April 6, 2020

Dear Stockholders:

You are cordially invited to join us for our 2020 annual meeting of stockholders, which will be held on Monday, May 18, 2020, at 1:00 p.m., Central Time, at SPS Tower, 333 South Seventh Street, Suite 1000, Minneapolis, Minnesota 55402. The notice of annual meeting of stockholders and the proxy statement that follow describe the business to be conducted at the meeting. Whether or not you plan to attend the meeting, your vote is important and we encourage you to vote your shares promptly. You may vote your shares using a toll-free telephone number, using the internet or you may sign, date and mail a proxy card which can be requested and mailed to you free of charge. Instructions regarding the three methods of voting are contained in the proxy materials.

We are pleased to take advantage of Securities and Exchange Commission (“SEC”) rules that allow companies to furnish their proxy materials over the internet. We are mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of our proxy materials and our 2019 Annual Report to Stockholders (the “Annual Report”). The Notice contains instructions on how to access those documents and to cast your vote via the internet. The Notice also contains instructions on how to request a paper copy of our proxy materials and our Annual Report. All stockholders who do not receive a Notice will receive a paper copy of the proxy materials and the Annual Report by mail. This process allows us to provide our stockholders with the information they need on a more timely basis, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. Please note that the date, time and physical location of the 2020 annual meeting of stockholders have been changed since the proxy card and Notice were printed so please rely on the information in the accompanying Notice of 2020 Annual Meeting of Stockholders and in the “How to Vote” section of the proxy statement regarding the meeting date, time and location and voting deadlines. The proxy card included with the proxy materials may continue to be used to vote your shares in connection with the annual meeting.

We look forward to seeing you at the annual meeting.

Sincerely,

 

Archie C. Black

President and Chief Executive Officer

 

 

 

 


 

 

 

SPS Commerce, Inc.

333 South Seventh Street

Minneapolis, Minnesota 55402

 

Notice of 2020 Annual Meeting of Stockholders

 

 Time and Date

1:00 p.m., Central Daylight Time

Monday, May 18, 2020

 

Place

SPS Tower

333 South Seventh Street, Suite 1000

Minneapolis, MN 55402

 

Items of Business

1.

Election of the seven directors identified in the Proxy Statement, each for a one-year term.

2.

Ratification of the selection of KPMG LLP as independent auditor of SPS Commerce, Inc. for the fiscal year ending December 31, 2020.

3.

An advisory vote to approve the compensation of our named executive officers as disclosed in the attached proxy statement.

4.

Approval of an amendment to our Eighth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock.

5.

Any other business that may properly be considered at the meeting or any adjournment or postponement of the meeting.

Record Date – You may vote at the meeting if you were a stockholder of record at the close of business on March 25, 2020.

Voting by Proxy – Whether or not you plan to attend the annual meeting, please vote your shares by proxy to ensure they are represented at the meeting. To submit your proxy vote, you may follow the instructions for voting via telephone or the internet as described in the Notice of Internet Availability of Proxy Materials and the following proxy statement. If you received a paper copy of the proxy card by mail, you may sign, date and mail the proxy card in the envelope provided. Our vote tabulator is Broadridge Financial Solutions, Inc., and no postage is required if the request for a paper copy of the proxy materials is mailed in the United States.

Note – The date, time and physical location of the 2020 Annual Meeting of Stockholders have been updated since the proxy card and Notice of Internet Availability of Proxy Materials were printed so please rely on the information in this Notice of 2020 Annual Meeting of Stockholders and in the “How to Vote” section of the proxy statement regarding the meeting date, time and location and voting deadlines. The proxy card included with the proxy materials may continue to be used to vote your shares in connection with the annual meeting.  As noted above, we intend to hold our annual meeting in person. However, we are actively monitoring the coronavirus (COVID-19); we are sensitive to the public health and travel concerns our stockholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our annual meeting in person or at the scheduled location, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Please monitor https://investors.spscommerce.com/ for updated information. If you are planning to attend our meeting, please check the website one week prior to the meeting date. As always, we encourage you to vote your shares prior to the annual meeting.


 

 


 

By Order of the Board of Directors,

Archie C. Black

President and Chief Executive Officer

 

Important Notice regarding the availability of proxy materials for the Annual Meeting of Stockholders to be held on May 18, 2020:

The Notice of Annual Meeting, Proxy Statement, and 2019 Annual Report are available at www.proxyvote.com.

 

 

 


 

How to Vote

Whether or not you plan to attend the meeting, please provide your proxy by either using the Internet or telephone as further explained in this proxy statement or filling in, signing, dating, and promptly mailing a proxy card.

 

 

BY TELEPHONE

 

 

You will need to use a control number that was provided to you by our vote tabulator, Broadridge Financial Solutions.

 

Call the toll-free number on your Notice or proxy card, 24 hours a day, seven days a week, through 11:59 p.m. (ET) on May 17, 2020 for shares held directly, and through 11:59 p.m. (ET) on May 13, 2020 for shares held in a Plan.

 

Please have your Notice or proxy card available and follow the additional steps when prompted.

 

 

BY INTERNET

 

 

Go to the web site at www.proxyvote.com, 24 hours a day, seven days a week, through 11:59 p.m. (ET) on May 17, 2020 for shares held directly, and through 11:59 p.m. (ET) on May 13, 2020 for shares held in a Plan.

 

Please have your Notice or proxy card available and follow the instructions provided to obtain your records and to create an electronic voting instruction form.

 

 

BY MAIL

 

 

If you received a Notice, first request a paper copy of the proxy materials as directed in the Notice on or before May 4, 2020 to facilitate timely delivery.

 

Mark, sign and date your proxy card.

 

Return it in the postage-paid envelope provided.

If your shares are held in an account at a brokerage firm, bank or similar organization, you will receive voting instructions from the organization holding your account and you must follow those instructions to vote your shares. You will receive a Notice Regarding the Availability of Proxy Materials that will tell you how to access our proxy materials on the Internet and vote your shares over the Internet. It will also tell you how to request a paper or e-mail copy of our proxy materials.

YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.

 

 

 

 


 

 

PROXY STATEMENT

TABLE OF CONTENTS

 

 

 

PROXY SUMMARY

 

2

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

 

4

Purpose of the Annual Meeting

 

4

Annual Meeting Voting Rights and Attendance

 

4

Information about the Notice and Proxy Materials

 

5

Voting

 

6

ITEM 1 – ELECTION OF DIRECTORS

 

8

Nominees for Director

 

8

INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

13

Director Independence

 

13

Board Leadership Structure

 

13

Board Involvement in Risk Oversight

 

13

Board Committees

 

14

Meeting Attendance

 

15

Procedures for Contacting the Board of Directors

 

15

Procedures for Selecting and Nominating Director Candidates

 

15

Hedging, Pledging and Other Restricted Transactions

 

16

Director Compensation

 

16

EXECUTIVE COMPENSATION

 

19

Compensation Discussion and Analysis

 

19

Compensation Committee Report

 

25

2019 Summary Compensation Table

 

26

2019 Grants of Plan-Based Awards Table

 

27

Outstanding Equity Awards at Fiscal Year-End Table

 

28

2019 Options Exercised and Stock Vested Table

 

29

Pension Benefits

 

29

Non-Qualified Deferred Compensation

 

29

Employment Agreements

 

29

Potential Payments Upon Termination or Change-in-Control

 

30

CEO Pay Ratio

 

34

AUDIT COMMITTEE REPORT AND PAYMENT OF FEES TO OUR INDEPENDENT AUDITOR

 

35

Audit Committee Report

 

35

Auditor Fees

 

35

Auditor Services Pre-Approval Policy

 

36

ITEM 2 — RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR

 

37

ITEM 3 — Advisory vote TO approvE the compensation of the company’s named executive officers

 

38

ITEM 4 — Approval of an amendment to Our eighth amended and restated certificate of incorporation to increase the number of authorized shares of common stock

 

39

SECURITY OWNERSHIP

 

41

Beneficial Ownership of Directors, Nominees, Executive Officers and Beneficial Owners of More than Five Percent of Our Common Stock

 

41

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

43

Transactions with Related Persons

 

43

Policy for Approval of Related Person Transactions

 

43

OTHER INFORMATION

 

44

Delinquent Section 16(a) Reports

 

44

Stockholder Proposals for the 2021 Annual Meeting

 

44

Householding of Proxy Materials

 

44

Other Matters

 

44

Location of SPS Commerce, Inc. Annual Meeting of Stockholders

 

45

APPENDIX A - Reconciliation of Non-GAAP Financial Measures

 

A-1

APPENDIX B – proposed amendment to Section 4.1 of our eighth amended and restated certificate of incorporation

 

B-1

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proxy summary

This summary highlights information contained elsewhere in this proxy statement. We encourage you to review the entire proxy statement. This proxy statement and our Annual Report for the year ended December 31, 2019 are first being mailed to our shareholders on or about April 6, 2020. Website addresses included throughout this proxy statement are for reference only. The information contained on our website is not incorporated by reference into this proxy statement.

Business Results

We are a technology company with revenue of $279.1 million in 2019. We are a leading provider of cloud-based supply chain management solutions, providing network-proven integrations and comprehensive retail performance analytics to tens of thousands of customers worldwide.

2019 was a year of continued execution for SPS Commerce, in an industry that is in transition. We achieved year-over-year recurring revenue growth, customer growth and wallet share growth and delivered strong revenue and adjusted EBITDA growth in 2019. We also executed one strategic acquisition, effected a two-for-one stock split of our common stock, authorized a new stock repurchase program to repurchase up to $50 million of common stock, and continued to repurchase shares through our buyback program. Additional information regarding our performance in 2019 follows.

 

We had sequential revenue growth for all four quarters of 2019 and now have 76 consecutive quarters of sequential revenue growth.

 

Our revenues of $279.1 million for 2019, compared to $248.2 million for 2018, reflect 12% growth from 2018. Recurring revenue grew 14% from 2018.

 

Our average recurring revenue per recurring revenue customer increased 4% from 2018, and the number of recurring revenue customers grew 5% from 2018.

 

We achieved improvements in operational efficiency that produced Adjusted EBITDA of $69.8 million, compared to $51.3 million in 2018, and non-GAAP net income per diluted share of $1.28 in 2019 compared to split adjusted $0.96 in 2018.1

 

1 Adjusted EBITDA, Non-GAAP income and non-GAAP income per diluted share are non-GAAP financial measures. Refer to Appendix A in this proxy statement for a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures.

 

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Voting Matters and Voting Recommendations

The following proposals are included in this proxy statement and are scheduled to be voted on at the meeting. Our board of directors recommends that you vote your shares as indicated below.

 

PROPOSALS:

     

THE BOARD OF DIRECTOR’S

VOTING RECOMMENDATIONS:

     

RATIONALE FOR SUPPORT:

     

FOR FURTHER
DETAILS:

1.       

Election of the seven directors identified in this Proxy Statement, each for a term of one year.

 

“FOR” each nominee to the Board

 

Our nominees are distinguished leaders who bring a mix of skills and qualifications to our board of directors and can represent the interests of all stockholders.

 

Page 8

2.       

Ratification of the selection of KPMG LLP (“KPMG“) as independent auditor of SPS Commerce, Inc. for the fiscal year ending December 31, 2020.

 

“FOR”

 

Based on its assessment of the qualifications and performance of KPMG, the Audit Committee believes that it is in the best interests of the company and its stockholders to retain KPMG.

 

Page 37

3.       

An advisory vote to approve the compensation of our named executive officers.

 

“FOR”

 

Our executive compensation program is designed to attract and retain talented and highly experienced executives and to motivate our executives to achieve the goals that are important to the company’s growth and shareholder value.

 

Page 38

4.       

Approval of an amendment to our Eighth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock.

 

“FOR”

 

Our board of directors believes that the amendment is necessary to maintain flexibility to issue shares of common stock for future corporate needs.

 

Page 39

 

Other than the proposals described in this proxy statement, the board is not aware of any other matters to be presented for a vote at the annual meeting. If you grant a proxy by telephone, internet, or by signing and returning your proxy card, any of the persons appointed by the board as proxy holders will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If any of our nominees is unavailable as a candidate for director, the above-named proxy holders will vote your proxy for another candidate or candidates as may be nominated by the board of directors.

 

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Questions and Answers about the Annual meeting and Voting

The board of directors of SPS Commerce, Inc. is soliciting proxies for use at the annual meeting of stockholders to be held on May 18, 2020, and at any adjournment or postponement of the meeting.

 

Purpose of the Annual Meeting

At our annual meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders, and management will report on matters of current interest to our stockholders and respond to questions from our stockholders. The matters outlined in the notice include the election of directors, the ratification of the selection of our independent auditor for 2020, an advisory vote to approve the compensation of our named executive officers, and the approval of an amendment to our Eighth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock.

 

Annual Meeting Voting Rights and Attendance

Who is entitled to vote at the meeting?

The board of directors has set March 25, 2020 as the record date for the annual meeting. If you were a stockholder of record at the close of business on March 25, 2020, you are entitled to vote at the meeting. As of the record date, 35,019,093 shares of common stock, representing all of our voting stock, were issued and outstanding and, therefore, eligible to vote at the meeting.

What are my voting rights?

Holders of our common stock are entitled to one vote per share. Therefore, a total of 35,019,093 votes are entitled to be cast at the meeting. There is no cumulative voting.

How many shares must be present to hold the meeting?

In accordance with our bylaws, shares equal to a majority of the voting power of the outstanding shares of common stock entitled to vote generally in the election of directors as of the record date must be present at the annual meeting in order to hold the meeting and conduct business. This is called a quorum. Shares are counted as present at the meeting if:

 

you are present and vote in person at the meeting; or

 

you have properly and timely submitted your proxy as described below under “How do I submit my proxy?”

What is the difference between a stockholder of record and a “street name” holder?

If your shares are registered directly in your name, you are considered the stockholder of record with respect to those shares. If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares, while you are considered the beneficial owner of those shares. In that case, your shares are said to be held in “street name.” Street name holders generally cannot vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares using the method described below under “How do I submit my proxy?”

How can I attend the meeting?

All of our stockholders are invited to attend the annual meeting. You may be asked to present valid photo identification, such as a driver’s license or passport, before being admitted to the meeting. If you hold your shares in

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street name, you also may be asked to present proof of ownership to be admitted to the meeting. A brokerage statement or letter from your broker, bank, trust or other nominee are examples of proof of ownership.

 

Information about the Notice and Proxy Materials

What is a proxy?

It is your designation of another person to vote stock you own. That other person is called a proxy. If you designate someone as your proxy in a written document, that document also is called a proxy or a proxy card. When you designate a proxy, you also may direct the proxy how to vote your shares. We refer to this as your “proxy vote.” Two executive officers have been designated as proxies for our 2020 annual meeting of stockholders. These executive officers are Archie C. Black and Kimberly K. Nelson.

If I received a one-page Notice of Internet Availability of Proxy Materials, how can I receive a full set of printed proxy materials?

As permitted by SEC rules, we have elected to provide access to our proxy materials over the Internet to record owners and any beneficial owners of our stock who have not previously requested printed proxy materials, which reduces our costs and the environmental impact of our annual meeting. The Notice of Availability contains instructions on how to request a printed set of proxy materials, which we will provide to stockholders upon request at no cost to the requesting stockholder within three business days after receiving the request. If you would like to request a printed set of proxy materials, please make your request on or before May 4, 2020 to facilitate timely delivery.

How do I submit my proxy?

If you are a stockholder of record, you can submit a proxy to be voted at the meeting in any of the following ways:

 

over the internet using www.proxyvote.com,

 

over the telephone by calling a toll-free number; or

 

signing, dating and mailing the proxy card in the envelope provided.

To vote by telephone or the internet, you will need to use a control number that was provided to you by our vote tabulator, Broadridge Financial Solutions, and then follow the additional steps when prompted. The steps have been designed to authenticate your identity, allow you to give voting instructions, and confirm that those instructions have been recorded properly. If you hold your shares in street name, you must vote your shares in the manner prescribed by your broker, bank, trust or other nominee, which is similar to the voting procedures for stockholders of record. If you request the proxy materials by mail after receiving a Notice of Internet Availability of Proxy Material, you will receive a voting instruction form (not a proxy card) to use in directing the broker, bank, trust or other nominee how to vote your shares.

What does it mean if I receive more than one printed set of proxy materials?

If you receive more than one Notice of Internet Availability of Proxy Materials or printed set of proxy materials, it means that you hold shares registered in more than one account. To ensure that all of your shares are voted, vote once for each control number you receive as described above under “How do I submit my proxy?”

Who pays for the cost of proxy preparation and solicitation?

SPS Commerce pays for the cost of proxy preparation and solicitation, including the reasonable charges and expenses of brokerage firms, banks, trusts or other nominees for forwarding proxy materials to street name holders. We are soliciting proxies by mail. In addition, our directors, officers and regular employees may solicit proxies

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personally, telephonically, electronically or by other means of communication. Our directors, officers and regular employees will receive no additional compensation for their services other than their regular compensation.

 

Voting

How does the board of directors recommend that I vote?

The board of directors recommends a vote:

 

FOR the election of each of the nominees for director;

 

FOR the ratification of the selection of KPMG as the independent auditor of SPS Commerce, Inc. for the year ending December 31, 2020;

 

FOR advisory approval of the compensation of our named executive officers; and

 

FOR approval of the amendment to our Eighth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock.

What if I do not specify how I want my shares voted?

If you are a stockholder of record and submit a signed proxy card or submit your proxy by internet or telephone but do not specify how you want to vote your shares on a particular matter, we will vote your shares as follows:

 

FOR the election of each of the nominees for director;

 

FOR the ratification of the selection of KPMG as the independent auditor of SPS Commerce, Inc. for the year ending December 31, 2020;

 

FOR advisory approval of the compensation of our named executive officers; and

 

FOR approval of the amendment to our Eighth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock.

Your vote is important. We urge you to vote, or to instruct your broker, bank, trust or other nominee how to vote, on all matters before the annual meeting. If you are a street name holder and fail to instruct the stockholder of record how you want to vote your shares on a particular matter, those shares are considered to be “uninstructed.” New York Stock Exchange rules determine the circumstances under which member brokers of the New York Stock Exchange may exercise discretion to vote “uninstructed” shares held by them on behalf of their clients who are street name holders. Other than the ratification of the selection of KPMG as our independent auditor for the year ending December 31, 2020 and the approval of the amendment to our Eighth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock, the rules do not permit member brokers to exercise voting discretion as to the uninstructed shares on any matter included in the notice of meeting. With respect to the ratification of the selection of KPMG as our independent auditor for the year ending December 31, 2020 and the approval of the amendment to our Eighth Amended and Restated Certificate of Incorporation, the rules permit member brokers to exercise voting discretion as to the uninstructed shares. For matters with respect to which the broker, bank or other nominee does not have voting discretion or has, but does not exercise, voting discretion, the uninstructed shares will be referred to as a “broker non-vote.” For more information regarding the effect of broker non-votes on the outcome of the vote, see below under “How are votes counted?”

Can I change my vote after submitting my proxy?

Yes. You may revoke your proxy and change your vote at any time before your proxy is voted at the annual meeting, in any of the following ways:

 

by submitting a later-dated proxy by telephone or the internet before 11:59 p.m. Eastern Time on May 17, 2020 for shares held directly and before 11:59 p.m. Eastern Time on May 13, 2020 for shares held in a Plan;

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by submitting a later-dated proxy to the Chief Financial Officer of SPS Commerce, Inc., which must be received by us before the time of the annual meeting;

 

by sending a written notice of revocation to the Chief Financial Officer of SPS Commerce, Inc., which must be received by us before the time of the annual meeting; or

 

by voting in person at the meeting.

Can I vote my shares in person at the meeting?

If you are a stockholder of record, you may vote your shares in person at the meeting by completing a ballot at the meeting. Even if you currently plan to attend the meeting, we recommend that you submit your proxy as described above so your vote will be counted if you later decide not to attend the meeting. If you submit your vote by proxy and later decide to vote in person at the annual meeting, the vote you submit at the meeting will override your proxy vote.

If you are a street name holder, you may vote your shares in person at the meeting only if you obtain and bring to the meeting a signed letter or other form of proxy from your broker, bank, trust or other nominee giving you the right to vote the shares at the meeting.

What vote is required to approve each item of business included in the notice of meeting?

A director nominee will be elected if the number of votes cast “FOR” the nominee exceeds the number of votes cast “AGAINST” the nominee. Any incumbent director who does not receive a greater number of votes “FOR” than “AGAINST” his or her reelection in an uncontested election shall tender his or her resignation to the board of directors, subject to acceptance by the board of directors. The board of directors will determine whether to accept or reject the offer to resign within 90 days of certification of the stockholder vote.

The affirmative vote of the holders of a majority of the outstanding shares of common stock present in person or represented by proxy and entitled to vote at the annual meeting is required to ratify the selection of our independent auditor and to approve the amendment to our Eighth Amended and Restated Certificate of Incorporation.

For the advisory vote to approve the executive compensation of our named executive officers, there is no minimum approval necessary for the proposal since it is an advisory vote; however, the board of directors will consider the results of the advisory vote when considering future decisions related to such proposals.

How are votes counted?

You may vote “FOR,” “AGAINST” OR “ABSTAIN” for each director nominee and on the other proposals. If you properly submit your proxy but abstain from voting for a director nominee or on these other proposals, your shares will be counted as present at the meeting for the purpose of determining a quorum and for the purpose of calculating the vote on the particular matter(s) with respect to which you abstained from voting. If you do not submit your proxy or voting instructions and also do not vote by ballot at the annual meeting, your shares will not be counted as present at the meeting for the purpose of determining a quorum unless you hold your shares in street name and the broker, bank, trust or other nominee has discretion to vote your shares and does so. For more information regarding discretionary voting, see the information above under “What if I do not specify how I want my shares voted?”

If you abstain from voting for one or more of the director nominees or you do not vote your shares on this matter (whether by broker non-vote or otherwise), this will have no effect on the outcome of the vote. With respect to the proposal to ratify the selection of KPMG as our independent auditor and the proposal to approve an amendment to our Eighth Amended and Restated Certificate of Incorporation, if you abstain from voting, doing so will have the same effect as a vote against the proposal, but if you do not vote your shares (or, for shares held in street name, if you do not submit voting instructions and your broker, bank, trust or other nominee does not or may not vote your shares), this will have no effect on the outcome of the vote. Abstentions and broker non-votes will have no effect on the advisory vote to approve the compensation of our named executive officers.

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ITEM 1 – ELECTION OF DIRECTORS

Our Amended and Restated Bylaws provide that each member of our board of directors is elected annually by a majority of votes cast if the election is uncontested. The number of directors currently serving on our board of directors is seven. Upon recommendation of the governance and nominating committee, the board has nominated the seven directors set forth below for election at our annual meeting, and all have agreed to serve as directors if elected. All of the director nominees were elected by our stockholders at our 2019 annual meeting of stockholders.

If, for any reason, any nominee becomes unable to serve before the annual meeting occurs, the persons named as proxies may vote your shares for a substitute nominee selected by our board of directors. The director nominees, if reelected, will serve until our 2021 annual meeting of stockholders or until their successors are elected and qualified.

The board of directors recommends a vote FOR the election of each of the seven director nominees. Proxies will be voted FOR the election of each of the nominees unless otherwise specified.

Set forth below is biographical information for each of the director nominees. The following includes certain information regarding our directors’ individual experience, qualifications, attributes and skills that led the board of directors to conclude that they should serve as directors.

Nominees for Director

Archie C. Black

President, Chief Executive Officer of SPS Commerce, Inc.

 

Age

 

58

Director since

     

2001

SPS Board committee

 

Ex-officio member of Finance and Strategy

Independent

 

No

 

Professional Highlights

Mr. Black has served as President and Chief Executive Officer of SPS Commerce, Inc. since 2001. Mr. Black joined us in 1998 as our Senior Vice President and Chief Financial Officer and served in those capacities until becoming our President and Chief Executive Officer. Prior to joining us, Mr. Black was a Senior Vice President and Chief Financial Officer at Investment Advisors, Inc. in Minneapolis, Minnesota, where he directed both the Minneapolis and London organizations. Prior to Investment Advisors, he spent three years at Price Waterhouse. Mr. Black serves on the board of directors of Proto Labs, Inc., a publicly traded internet-enabled manufacturer of custom parts.

Nominee Qualifications

Mr. Black’s qualifications to serve on our board of directors include, among other skills and qualifications, his extensive management, financial, and operational experience as well as his experience with our company.

 


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Martin J. Leestma

Chairman of the board of directors of Forthright Solutions

 

Age

 

61

Director since

     

2006

SPS Board committees

 

Audit; Finance and Strategy

Independent

 

Yes

 

Professional Highlights

Mr. Leestma has served as Chairman of the board of directors for Forthright Solutions, a solution provider for regulatory and legal compliance programs, since 2008. He served as Chief Executive Officer of Forthright from 2011 to 2014. Prior to Forthright, Mr. Leestma served as the President, Chief Executive Officer, and a member of the board of directors for Retek Information Systems, a software company, from 2003 to 2005, during which time Retek was a publicly traded company. Prior to joining Retek, Mr. Leestma was Global Managing Partner of Retail Technology at Accenture from 1996 to 1999 and Managing Partner of North American Consumer Goods & Services from 1999 to 2002. He became Global Industry Managing Partner — Retail & CG&S Industries in 2002 and served in this role until his departure in 2003. From 2005 to 2008, he served as an independent business consultant. Mr. Leestma also serves on the board of directors for Kipsu, a private texting and digital messaging company, and Xsell Technologies, a private digital dialogue company. Mr. Leestma was Chairman of the board of directors of SPS Commerce from 2011 to 2014.

Nominee Qualifications

Mr. Leestma’s qualifications to serve on our board of directors include, among other skills and qualifications, his general business experience due to his work as an independent business consultant and his experience with public companies as the Chief Executive Officer of Retek Information Systems from 2003 to 2005.

James B. Ramsey

Co-founder and Board member, Vlocity Inc

 

Age

 

47

Director since

     

2014

SPS Board committees

 

Compensation; Governance and Nominating

Independent

 

Yes

 

Professional Highlights

Mr. Ramsey co-founded and serves as board member of Vlocity Inc., a provider of industry-specific cloud CRM applications, since 2014. Mr. Ramsey also serves on the boards of Ambra Health (formerly DicomGrid), a privately-held medical software company. Previously he served on the board of Flipgrid, Inc., a privately-held education technology software company, until its sale to Microsoft in 2018. Previously, Mr. Ramsey served as the Executive Vice President of Worldwide Sales and Distribution at NetSuite Inc., a publicly traded provider of cloud-based business management software, from 2011 to 2013. Prior to his position as Executive Vice President, Mr. Ramsey held several senior executive roles at NetSuite, including Vice President of the Americas and Senior Vice President of Worldwide Sales and Distribution. Prior to NetSuite Inc., Mr. Ramsey served in various sales management roles at Oracle Corporation.

Nominee Qualifications

Mr. Ramsey’s qualifications to serve on our board of directors include, among other skills and qualifications, his experience in software sales and in rapidly scaling sales organizations with NetSuite Inc. and Oracle Corporation.

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Marty M. Reaume

Chief People Officer, Lightspeed POS Inc.

 

Age

 

54

Director since

     

2018

SPS Board committee

 

Compensation; Governance and Nominating

Independent

 

Yes

 

Professional Highlights

Ms. Reaume has served as the Chief People Officer at Lightspeed POS Inc., a cloud based provider of point of sale systems and e-commerce software, since February 2020. Additionally, Ms. Reaume serves on the board of Ambra Health (formerly DicomGrid), a privately-held medical software company and is on the advisory board for OpenClassrooms, a privately held online education platform. From 2017 to August 2019, Ms. Reaume served as Chief People Officer of Twilio Inc., a publicly traded developer and provider of a cloud-based platform enabling organizations to integrate voice, messaging and video communications capabilities into their software applications. From 2015 to 2017, she served as Chief People Officer of Fitbit, Inc., a publicly traded technology company focused on delivering health solutions that impact health outcomes. Ms. Reaume served as Chief People Officer of NetSuite, Inc., a publicly traded provider of cloud-based business management software, from 2009 to 2014, and served as its head of human resources from 2006 to 2009. From 2001 to 2005, Ms. Reaume served as director of human resources at Royal & Sunalliance, a multinational insurance company.

Nominee Qualifications

Ms. Reaume’s qualifications to serve on our board of directors include, among other skills and qualifications, her strong human resources, talent acquisition and talent development expertise.

Tami L. Reller

Executive Vice President and Chief Marketing and Experience Officer at UnitedHealthcare, a division of UnitedHealth Group

 

Age

 

55

Director since

     

2016

SPS Board committee

 

Finance and Strategy

Independent

 

Yes

 

Professional Highlights

Ms. Reller has served as Executive Vice President and Chief Marketing and Experience Officer of UnitedHealthcare, the health benefits platform of UnitedHealth Group, since November 2017. Additionally, Ms. Reller serves on the board of Avalara, a public automated tax compliance software company. From April 2017 to November 2017, Ms. Reller served as Chief Growth Officer of Optum, the health service platform of UnitedHealth Group, and from 2016 to April 2017 she served as Chief Financial Officer of Optum. From 2001 to 2014, Ms. Reller served in several executive roles with Microsoft Corporation including Executive Vice President of Marketing, Windows Chief Financial Officer and Chief Marketing Officer, Divisional Chief Financial Officer and Corporate Vice President of Dynamics. She was also the Chief Financial Officer of Great Plains Software from 1999 to 2001, until the company was acquired by Microsoft Corporation. Since 2018, Ms. Reller has served as Chairwoman of our board of directors.

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Nominee Qualifications

Ms. Reller’s qualifications to serve on our board of directors include, among other skills and qualifications, her extensive experience steering and managing software companies, her capabilities in financial understanding and auditing review, and her general business knowledge.

Philip E. Soran

Lead Director, Piper Sandler Companies; Director, Foodsby; Director, Spineology; Director, Claros Technologies

 

Age

 

63

Director since

     

2010

SPS Board committees

 

Audit; Compensation; Finance and Strategy

Independent

 

Yes

 

Professional Highlights

Mr. Soran serves as Lead Director on the board of directors of Piper Sandler Companies (Piper Jaffray Companies merged with Sandler O’Neill + Partners, L.P. in January 2020), a publicly traded investment bank and asset management firm, on the board of directors for Foodsby, a privately-held food delivery service, on the board of directors of Spineology, a private medical technology company, and on the board of Claros Technologies, Inc., a private advanced materials and environmental company. Mr. Soran was the Executive Chairman and co-founder of Flipgrid, Inc., a privately-held education technology software company, from 2015 until its sale to Microsoft in 2018. Mr. Soran served as President, Chief Executive Officer, and a director of Compellent Technologies, Inc., a publicly traded software company which he co-founded in 2002, until its acquisition by Dell Inc. in 2011, after which he served as the President of Dell Compellent from 2011 to 2012. He previously served on the board of directors of Help Systems, LLC, a privately-held software company, from 2012 until its sale in 2018. From 1995 to 2001, Mr. Soran served as President, Chief Executive Officer and a member of the board of directors of Xiotech, which Mr. Soran co-founded in 1995. Xiotech was acquired by Seagate in 2000. From 1993 to 1995, Mr. Soran served as Executive Vice President of Prodea Software Corporation, a data warehousing software company. Mr. Soran also held a variety of management, sales, marketing, and technical positions with IBM, and served on the board of directors of Hutchinson Technology Incorporated, a public manufacturing company, from 2011 until its acquisition by TDK Corporation in 2016. Mr. Soran served as Chairman of our board of directors from 2014 to 2017.

Nominee Qualifications

Mr. Soran’s qualifications to serve on our board of directors include, among other skills and qualifications, his experience as a chief executive officer of a publicly traded company, service on a variety of public and private technology-related company boards, and his experience in founding and building technology companies as well as his corporate vision and operational knowledge, which provide strategic guidance to the board.

Sven A. Wehrwein

Independent financial consultant to emerging companies

 

Age

 

69

Director since

     

2008

SPS Board committees

 

Audit; Governance and Nominating

Independent

 

Yes

 

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Professional Highlights

Mr. Wehrwein has been an independent financial consultant to emerging companies since 1999. During his over 35 years in accounting and finance, Mr. Wehrwein has experience as a certified public accountant (inactive), investment banker to emerging growth companies, chief financial officer, and audit committee chair. He currently serves on the board of directors of Atricure, Inc., a publicly traded medical device company, and Proto Labs, Inc., a publicly traded internet-enabled manufacturer of custom parts. Mr. Wehrwein also served on the board of directors of Compellent Technologies, Inc. from 2007 until its acquisition by Dell Inc. in 2011, on the board of Vital Images, Inc. from 1997 until its acquisition by Toshiba Medical in 2011, on the board of Synovis Life Technologies, Inc. from 2004 until its acquisition by Baxter International, Inc. in 2012, on the board of Cogentix Medical, Inc. from 2006 to 2016, and on the board of Image Sensing Systems, Inc. from 2006 to 2012, all of which were publicly traded companies.

Nominee Qualifications

Mr. Wehrwein’s qualifications to serve on our board of directors include, among other skills and qualifications, his capabilities in financial understanding, strategic planning, and auditing expertise, given his experiences in investment banking and in financial leadership positions. As chairman of the audit committee, Mr. Wehrwein also keeps the board abreast of current audit issues and collaborates with our independent auditors and senior management team.

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INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

The board of directors conducts its business through meetings of the board and the following standing committees: audit, compensation, governance and nominating, and finance and strategy. Each of the standing committees has adopted and operates under a written charter, all of which are available on our website at www.spscommerce.com. We have adopted a code of business conduct and ethics relating to the conduct of our business by our directors, officers and employees, which is posted on our website at www.spscommerce.com. Our Corporate Governance Guidelines are also available on our website.

Director Independence

As required under the Nasdaq Global Market rules and regulations, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board. The board of directors consults with our counsel to ensure that the board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of the Nasdaq Global Market, as in effect from time to time.

Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his or her family members, and our Company, our management and our independent registered public accounting firm, the board of directors has affirmatively determined that all of our Company’s directors are independent directors within the meaning of the applicable listing standards of the Nasdaq Global Market, except for Mr. Black, our current President and Chief Executive Officer.

As required under the Nasdaq Global Market rules and regulations, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present. All of the committees of our board of directors are comprised entirely of directors determined by the board to be independent within the meaning of the Nasdaq Global Market rules and regulations.

Board Leadership Structure

Tami Reller, a non-employee independent director, has served as chair of our board of directors since May 2018, while Mr. Black serves as our President and Chief Executive Officer. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the chair of the board to lead the board in its fundamental role of providing advice to, and independent oversight of, management. The board of directors recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our board chair. Our Corporate Governance Guidelines require our board chair and Chief Executive Officer positions to be separate because the board of directors believes that having separate positions and having an independent director serve as chair of the board is the appropriate leadership structure for us and demonstrates our commitment to good corporate governance.

Board Involvement in Risk Oversight

Our management is responsible for identifying the various risks facing us, formulating risk management policies and procedures, and managing our risk exposures on a day-to-day basis. The board of directors’ responsibility is to monitor our risk management processes by informing itself concerning our material risks and evaluating whether management has reasonable controls in place to address the material risks; the board is not responsible, however, for identifying or managing our various risks. The audit committee is primarily responsible for monitoring management’s responsibility in the area of financial risk oversight and the board of directors is primarily responsible for monitoring management’s responsibility in our other areas of risk management. Accordingly, management regularly reported to the audit committee and the board of directors on risk management during 2019. The audit committee, in turn, reports on the matters discussed at the committee level to the full board. The audit committee and the full board focus on the material risks facing us, including financial, operational, market, credit, liquidity, legal and regulatory risks, to assess whether management has reasonable controls in place

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to address these risks. In addition, the compensation committee is charged with reviewing and discussing with management whether our compensation arrangements are administered consistent with effective internal controls and sound risk management. The board of directors believes this division of responsibilities provides an effective and efficient approach for addressing risk management.

Board Committees

The board of directors has established an audit committee, a compensation committee, a governance and nominating committee and a finance and strategy committee. The following sets forth the membership of each of our committees as of March 25, 2020.

 

DIRECTOR

COMMITTEES

Audit

Compensation

Governance and Nominating

Finance and
Strategy

Archie C. Black

 

 

 

 

 

*

Martin J. Leestma

 

 

 

 

James B. Ramsey

 

 

 

 

Marty M. Reaume

 

 

 

 

Tami L. Reller

 

 

 

 

 

Philip E. Soran

 

 

 

Sven A. Wehrwein

 

 

 

 

Chair     Member  

 

 

 

*

Mr. Black is an ex-officio member of the Finance Committee. As an ex-officio member, Mr. Black has a standing invitation to attend each committee meeting but does not count for quorum purposes or vote on committee matters.

The primary responsibilities of each board committee are discussed in turn below.

Audit Committee

Among other matters, our audit committee:

 

evaluates the qualifications, performance and independence of our independent auditor and reviews and approves both audit and non-audit services to be provided by the independent auditor;

 

discusses with management and our independent auditors any major issues as to the adequacy of our internal controls, any actions to be taken in light of significant or material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting;

 

establishes procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, including the confidential, anonymous submission by employees of concerns regarding accounting or auditing matters;

 

oversees our investment policy; and

 

prepares the audit committee report that SEC rules require to be included in our annual proxy statement.

Each of the members of our audit committee meets the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq Global Market. Our board of directors has determined that Mr. Wehrwein is an audit committee financial expert, as defined under the applicable rules of the SEC. Each member of our audit committee satisfies the Nasdaq Global Market independence standards and the independence standards of Rule 10A-3(b)(1) of the Securities Exchange Act.

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Compensation Committee

Our compensation committee reviews and approves, on an annual basis, the goals and objectives relevant to our Chief Executive Officer’s compensation. Our compensation committee refers to the annual performance reviews of our Chief Executive Officer and other executive officers to assess and approve their annual compensation, including salary, bonus, incentive and equity-based compensation. Our compensation committee administers the issuance of stock options and other awards under our 2010 Equity Incentive Plan. Our compensation committee also periodically reviews the compensation paid to our non-employee directors and recommends any adjustments in director compensation to our board of directors.

Governance and Nominating Committee

Our governance and nominating committee identifies individuals qualified to become members of the board of directors, recommends individuals to the board for nomination as members of the board and board committees and oversees the evaluation of our board of directors.

Finance and Strategy Committee

Our finance committee was formed in August 2018 to assist the board of directors in matters involving certain finance and strategic matters, including reviewing and monitoring the management of capital, reviewing dividend and share repurchase policies and practices, and reviewing proposed merger, recapitalization, financing and other similar transactions.

Meeting Attendance

Our Corporate Governance Guidelines provide that our directors are expected to attend meetings of the board of directors and of the committees on which they serve, as well as our annual meeting of stockholders. Our board of directors held ten meetings during 2019. Our audit committee met nine times, our compensation committee met nine times, our governance and nominating committee met seven times, and our finance and strategy committee met six times. Each of our directors attended at least 75% of the meetings of the board of directors and the committees on which he or she served during 2019, and each of our directors whose service would be continuing after the meeting, attended our 2019 annual meeting.  

Procedures for Contacting the Board of Directors

Stockholders who wish to communicate with the board of directors may do so by writing to the board or a particular director in care of the Secretary of the company. Communications should be addressed to SPS Commerce, Inc., Attention: Secretary, 333 South Seventh Street, Suite 1000, Minneapolis, Minnesota 55402. All communications will initially be received and processed by the Secretary of the company, who will then refer the communication to the appropriate board member (either the director named in the communication, the chairperson of the board committee having authority over the matter raised in the communication, or the chairperson of the board in all other cases). The director to whom a communication is referred will determine, in consultation with our counsel, whether a copy or summary of the communication will be provided to the other directors. The board of directors will respond to communications if and as appropriate.

Procedures for Selecting and Nominating Director Candidates

Stockholders may directly nominate a person for election to our board of directors by complying with the procedures set forth in Article II, Section 2.4(a)(2) of our bylaws, and with the rules and regulations of the SEC. Under our bylaws, only persons nominated in accordance with the procedures set forth in the bylaws will be eligible to serve as directors. In order to nominate a candidate for service as a director, you must be a stockholder at the time you give the board notice of your nomination, and you must be entitled to vote for the election of directors at the meeting at which your nominee will be considered. In accordance with our bylaws, director nominations generally must be made pursuant to notice delivered to, or mailed and received at, our principal executive offices at the address above, not later than the 90th day (February 17, 2021), nor earlier than the 120th day (January 18, 2021), prior to the first anniversary of the prior year’s annual meeting of stockholders. Your notice must set forth all

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information relating to the nominee that is required to be disclosed in solicitations of proxies for the election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including the nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected).

Your notice also must set forth the following information for you and any beneficial owner on whose behalf you make a nomination: (i) the name and address of the stockholder, as they appear on our books; (ii) the class and number of shares of our capital stock which are owned beneficially and of record, as well as a description of all securities or contracts, with a value derived in whole or in part from the value of any shares of our capital stock, held by you and such beneficial owner or to which either is a party; (iii) a description of all arrangements or understandings between you and any such beneficial owner and any other person or persons (including their names) regarding the nomination; (iv) a representation that you intend to appear in person or by proxy at the meeting to nominate the persons named in your notice; and (v) a description of any other information relating to you and any such beneficial owner that would be required to be disclosed in a proxy statement or other filing required to be made in connection with the solicitation of proxies pursuant to Regulation 14A under the Securities Exchange Act of 1934.

As required by our Corporate Governance Guidelines, when evaluating the appropriate characteristics of candidates for service as a director, the governance and nominating committee takes into account many factors. The board of directors selects and recommends to stockholders qualified individuals who, if added to the board, would provide the mix of director characteristics and diverse experiences, perspectives and skills appropriate for us. Board candidates are considered based on various criteria, including breadth and depth of relevant business and board skills and experiences, judgment and integrity, reputation in their profession, diversity of background, education, leadership ability, concern for the interests of stockholders and relevant regulatory guidelines. These considerations are made in the context of an assessment of the perceived needs of the board of directors at the particular point in time. We do not have a formal policy with respect to diversity, however, the board of directors seeks to have a board that represents diversity as to gender, race, ethnicity and background experiences. We are committed to inclusiveness and as such, when searching for director nominees, the governance and nominating committee endeavors to include highly qualified diverse candidates (including gender, race and ethnicity) in the pool from which nominees are chosen. Directors must be willing and able to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serving on the board for an extended period of time.

The governance and nominating committee will consider director candidates recommended by stockholders in the same manner that it considers all director candidates. Stockholders who wish to suggest qualified candidates should write to SPS Commerce, Inc., 333 South Seventh Street, Suite 1000, Minneapolis, Minnesota 55402, Attention: Chief Financial Officer, stating in detail the characteristics that make the candidate a suitable person to serve on our board of directors in light of our Corporate Governance Guidelines.

Hedging, Pledging and Other Restricted Transactions

Our employees, including directors and Section 16 officers, are prohibited from engaging in the following transactions with respect to our securities:

 

Purchasing our securities on margin, or otherwise pledging our securities;

 

Short sales of our securities (selling securities not owned at the time of sale);

 

Buying or selling put or call options or other derivative securities based on our securities;

 

Purchasing any financial instruments (including prepaid variable forward contracts, equity swaps, zero cost collars and exchange funds) that are designed to hedge or offset any decrease in the market value of our securities; and

 

Engaging in limit orders or other pre-arranged transactions that execute automatically, except for “same-day” limit orders and approved 10b5-1 plans.

Director Compensation

Our director compensation program is designed to compensate our non-employee directors fairly for work required for a company of our size and scope and to align their interests with the long-term interests of our stockholders. Director compensation reflects our desire to attract, retain and use the expertise of highly qualified individuals serving on our board of directors. The compensation committee periodically reviews the compensation

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arrangements for our non-employee directors and makes recommendations to our board of directors. In May 2019, the compensation committee, with the advice of its compensation consultant, conducted a review of our director compensation program. This review analyzed the structure and the overall level and mix of compensation delivered by our director compensation program as compared to our peer group. Following this review, the compensation committee recommended, and the Board approved, changes to our director compensation program as described below.

For 2019, our director compensation program provided that each non-employee director receive a stock option to purchase up to $85,000 of shares of our common stock on the date of the annual meeting of stockholders at which the director was elected to the board, calculated as the grant date fair value of the option computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation (“ASC Topic 718”). These awards vest in four equal installments on the last day of each fiscal quarter with the first vesting date occurring on June 30, 2019, provided the recipient remains a member of the board as of the vesting date, and have an exercise price equal to the fair market value of our common stock on the date of grant in accordance with our 2010 Equity Incentive Plan. The $85,000 option grant in 2019 reflects an increase over the $68,000 option granted awarded to non-employee directors during 2018. Prior to December 2019, each non-employee director also received an initial stock option grant to purchase up to $111,000 of shares of our common stock in connection with initial appointment to the board.

Our director compensation program for 2019 also provided that each non-employee director receive an award of up to $85,000 in restricted stock or deferred stock units (or some combination of two), at the director’s election, on the date of the annual meeting of stockholders at which the director was elected to the board, calculated as the grant date fair value of the award computed in accordance with FASB ASC Topic 718. These awards vest in four equal installments on the last day of each fiscal quarter with the first vesting date occurring on June 30, 2019, provided the recipient remains a member of the board as of the vesting date. The deferred stock units must be retained until completion of the director’s service on the board, and upon completion of such service, convert into an equal number of shares of our common stock. A director may defer receipt of the shares for up to ten years after completion of service. The $85,000 award of restricted stock and/or deferred stock units in 2019 reflects an increase over the $68,000 restricted stock award granted to non-employee directors during 2018.

Non-employee directors receive cash fees in addition to the equity awards described above. In 2019, each non-employee director received an annual cash retainer of $31,000 (no change from 2018) and the chair of our board of directors received an annual cash retainer of $53,500 ($5,500 increase from 2018). In addition, the annual cash fee paid to the chair of each committee was as follows: 

 

Committee Chair

 

Annual Cash Fee Effective
May 14, 2019

 

Annual Cash Fee Prior to
May 14, 2019

 

Audit

$

20,000

 

$

18,500

 

Compensation

$

12,000

 

$

10,000

 

Governance and Nominating

$

7,500

 

$

7,000

 

Finance and Strategy

$

10,000

 

$

10,000

 

 

The annual cash fee for each committee member, other than the chair, was as follows:

 

Non-Chair Committee Members

 

Annual Cash Fee
Effective
May 14, 2019

 

Annual Cash Fee
Prior to

May 14, 2019

 

Audit

 

$

8,000

 

$

7,000

 

Compensation

 

$

5,000

 

$

5,000

 

Governance and Nominating

 

$

4,000

 

$

3,000

 

Finance and Strategy

 

$

5,000

 

$

5,000

 

 

We also reimbursed our non-employee directors for out-of-pocket expenses incurred in connection with attending our board and committee meetings.

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Beginning in 2020, the chair of our board of directors annual retainer amount will increase to $61,000.

Under our stock ownership guidelines adopted in February 2019, we require our non-employee directors to achieve ownership of shares of our common stock (excluding unvested equity awards but including vested in-the-money options and vested restricted stock units) having a fair market value equal to five times the directors’ annual base cash retainer. Non-employee directors must comply with the stock ownership guidelines within five years of their appointment to the board of directors. Until a non-employee director has achieved compliance with the ownership guidelines, the director must retain 50% of the net shares acquired upon exercise, vesting or settlement of any equity award. As of March 25, 2020, all of our non-employee directors had met the stock ownership requirement or had served as a director for less than five years since the ownership guidelines took effect.

The table below sets forth the compensation provided to our non-employee directors during 2019. Mr. Black’s compensation is set forth under “2019 Summary Compensation Table” because he served as our President and Chief Executive Officer during that year. Mr. Black did not receive any separate compensation for his service as a director.

2019 Director Compensation Table

 

Name(1)

 

Fees Earned or

Paid in Cash

($)

 

 

Stock Awards

($)(2)

 

 

Option Awards

($)(2)

 

 

Total

($)

 

Melvin L. Keating(3)

 

 

13,300

 

 

 

 

 

 

 

 

 

13,300

 

Martin J. Leestma

 

 

48,630

 

 

 

84,952

 

 

 

84,975

 

 

 

218,557

 

Michael J. McConnell(3)

 

 

13,300

 

 

 

 

 

 

 

 

 

13,300

 

James B. Ramsey

 

 

43,315

 

 

 

84,952

 

 

 

84,975

 

 

 

213,242

 

Marty M. Reaume

 

 

39,630

 

 

 

84,952

 

 

 

84,975

 

 

 

209,557

 

Tami L. Reller

 

 

56,921

 

 

 

84,952

 

 

 

84,975

 

 

 

226,848

 

Philip E. Soran

 

 

54,891

 

 

 

84,952

 

 

 

84,975

 

 

 

224,818

 

Sven A. Wehrwein

 

 

54,076

 

 

 

84,952

 

 

 

84,975

 

 

 

224,003

 

 

(1)

As of December 31, 2019, the directors held shares of unvested restricted stock, options to purchase shares of our common stock, and exercisable options as follows (shares have been adjusted to reflect a two-for-one stock split effective August 22, 2019):

 

 

 

 

 

Options

 

Name

 

Unvested

Restricted

Stock (#)

 

Total Outstanding (#)

 

 

Number of

Outstanding that

Were Exercisable

(#)

 

Martin J. Leestma

 

410

 

 

45,952

 

 

 

44,518

 

James B. Ramsey

 

410

 

 

47,074

 

 

 

45,640

 

Marty M. Reaume

 

410

 

 

22,124

 

 

 

16,050

 

Tami L. Reller

 

410

 

 

38,288

 

 

 

36,854

 

Philip E. Soran

 

410

 

 

61,992

 

 

 

60,558

 

Sven A. Wehrwein

 

410

 

 

51,462

 

 

 

50,028

 

 

(2)

Represents the grant date fair value of the stock and option awards granted during the year computed in accordance with ASC Topic 718. For a discussion of the relevant assumptions used to determine the valuation of our option awards for financial reporting purposes, refer to Note M to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on February 25, 2020.

(3)

Messrs. Keating and McConnell ceased serving as directors on our board as of May 14, 2019 and had no shares of unvested restricted stock or options outstanding as of December 31, 2019.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following is a discussion and analysis of compensation arrangements of our named executive officers for 2019. Our named executive officers for 2019 were:

 

Archie C. Black, our President and Chief Executive Officer,

 

Kimberly K. Nelson, our Executive Vice President and Chief Financial Officer, and

 

James J. Frome, our Executive Vice President and Chief Operating Officer.

Executive Summary

As reflected in our compensation philosophy, we set the compensation of our executive officers, including our named executive officers, based on their ability to create sustainable long-term stockholder value in a cost-effective manner. Our executive compensation philosophy is to align executive compensation decisions with our desired business direction, strategy and performance. The primary objectives and priorities of our executive compensation program are the following:

 

Pay for Performance: Emphasize variable compensation that is tied to our financial and stock price performance in an effort to generate and reward superior individual and collective performance;

 

Stockholder Alignment: Link our executives’ incentive goals with the interests of our stockholders, provide equity-based forms of compensation and establish specific stock ownership guidelines for employees in key management positions throughout our Company;

 

Long-Term Success: Support and reward our executives for consistent performance over time and achievement of our long-term strategic goals; and

 

Attraction and Retention: Attract and retain highly qualified executives whose abilities are critical to our success and competitive advantage.

To achieve these objectives, we have designed an executive compensation program that is significantly weighted towards long-term goals. This approach aids us in the retention of executive officers and assures that the interests of our executive officers and stockholders are aligned. While our program emphasizes performance-based and equity-based compensation as a percentage of total direct compensation (base salary and annual and long-term incentives), we do not have specific policies governing the allocation of the target total direct compensation opportunity among its various components.

Each of the primary elements of our executive compensation program is discussed in more detail below. While we have identified particular compensation objectives that each element of executive compensation serves, our compensation program is designed to be flexible and complementary and to collectively serve all of the executive compensation objectives described above. Accordingly, whether or not specifically mentioned below, we believe that, as a part of our overall executive compensation policy, each individual element, to a greater or lesser extent, serves each of our objectives.

Our compensation committee considers the results of the stockholders’ advisory vote on the compensation of our named executive officers. At our 2019 Annual Meeting of Stockholders, our say-on-pay proposal received “for” votes that represented approximately 90.5% of the shares voted on this proposal. The compensation committee considered the results of the say-on-pay vote when evaluating our compensation practices and policies in 2019 and when setting the compensation of our named executive officers for 2020 and decided not to make any significant changes to our executive compensation program. The compensation committee believes that the significant support for the 2019 say-on-pay proposal demonstrates stockholders’ support of our compensation program, policies and practices.

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In 2019, the compensation committee took the following actions with respect to the compensation of our named executive officers:

 

Awarded formula-based bonuses at 122% of the target bonus opportunity established at the beginning of the year;

 

approved stock option and restricted stock unit (“RSUs”) awards to satisfy competitive market concerns, satisfy our retention objectives and reward individual performance for 2019;

 

approved performance stock unit awards (“PSUs”) to further our retention objectives and our focus on rewarding performance; and

 

adopted a clawback policy requiring reimbursement or forfeiture of all or a portion of any incentive compensation awarded to an executive when (i) the company is required to prepare an accounting restatement due to material noncompliance with financial reporting requirements and the executive’s award, vesting, or payment of an award would have been smaller given the restated financial information or (ii) there is misconduct resulting in either a violation of the law or of company policy that has caused significant financial or reputational harm to the company and either the executive committed the misconduct directly or failed in his or her responsibility to manage or monitor the applicable conduct or controls.

In addition to the compensation actions and decisions noted above, we maintained the following compensation policies and practices in 2019:

 

No Tax Gross-Up Provisions. Our named executive officers are not entitled to any tax gross-up treatment on any severance or change in control benefits.

 

Compensation Programs Create No Excessive Risk. Our compensation programs are reviewed regularly by our compensation committee, which has determined that our compensation programs do not create inappropriate or excessive risk that is likely to have a material adverse effect on our Company.

 

Independent Compensation Consultant Engaged. Our compensation committee engaged an independent compensation consultant, Compensia, to assist the committee with determining compensation for our named executive officers as well as provide the committee with market data and guidance on best practices.

 

Hedging Transactions Prohibited. Our insider trading policy prohibits our employees, including directors and executive officers, from participating in the following with respect to our securities: purchasing on margin, pledging or hedging, short sales, buying or selling put or call options or other derivative securities, purchasing financial instruments that are designed to hedge or offset any decrease in market value or engage in limit orders or other pre-arranged transactions that execute automatically except for ‘same-day’ limit orders and approved 10b5-1 plans.

 

Compensation is Performance-Based. Our executive compensation program is designed so that a significant portion of compensation is “at risk” based on corporate performance, as well as equity-based, to align the interest of our named executive officers and our stockholders.

 

Multi-year Performance Periods for Equity Awards. The annual equity awards granted to our named executive officers vest or are earned over a multi-year period, consistent with market practice and our retention objectives.

 

Stock Ownership Guidelines. We maintain stock ownership guidelines which require our chief executive officer to beneficially own shares of our common stock with a value equal to at least three times his base salary and our other executive officers to beneficially own shares of our common stock with a value equal to at least one times his or her base salary.

 

No Perquisites. We do not provide perquisites or other personal benefits to our named executive officers beyond what is provided to our other employees.

Compensation Objectives and Process

We have designed the compensation arrangements for our named executive officers to provide compensation in overall amounts and in forms that attract and retain talented and experienced individuals and motivate our

20

 

 


 

executives to achieve the goals that are important to our growth. We typically provide compensation to our named executive officers through a combination of base salary, annual cash bonuses and equity awards, which help align the incentives of our named executive officers with the interests of our stockholders. During 2019, our compensation primarily consisted of base salary, annual cash incentive awards, and under the 2010 Equity Incentive Plan, stock option grants, RSUs and PSUs.

Historically, our compensation committee has determined all elements of compensation for our named executive officers. Generally, prior to making its compensation determinations, our Chief Executive Officer provides his review of our other named executive officers to the compensation committee. Our compensation committee engages Compensia, Inc., a national independent compensation consultant, to help evaluate our compensation philosophy and provide guidance in administering our compensation program. Our compensation committee has determined that Compensia is independent and the services provided by Compensia currently do not and during 2019 did not raise any conflict of interests.

Our compensation committee determines executive compensation, in part, by reference to the compensation information for the executives of a peer group of comparable companies. For 2019, our compensation committee reviewed an updated version of the formal compensation study and executive compensation market assessment prepared in 2018 by Compensia. The competitive market data used in the Compensia study was gathered from our compensation peer group, which consisted in 2019 of the following US-based technology companies of similar size:  

 

       8x8

       Model N

       Apptio

       Monotype Imaging Holdings

       Benefitfocus

       Paylocity Holding

       Carbonite

       PROS Holdings

       Five9

       Q2 Holdings

       HealthStream

       Qualys

       Imperva

       Rapid7

       LivePerson

       Varonis Systems

       MINDBODY

       Workiva

 

In comparison to the prior year peers, we removed five companies and added three. Of the five companies removed, two, Broadsoft and Callidus Software, were removed because they had been acquired. The three other companies removed, 2U, Hubspot and Stamps.com, were removed because their market capitalization exceeded our selection range, which, at the time had a maximum of $3.3 billion (3.0x our market capitalization at the time of the analysis in May 2018). The three peer companies added were 8x8, Model N and PROS Holdings. These three companies were added because they met our selection criteria, including being software companies with trailing four quarter revenue between 50% and 200% of our trailing four quarter revenue (which was $221 million at the time of the review in May 2018) and the market capitalization range of between 33% and 300% of our then current market capitalization.

 

Data from the compensation peer group is valuable to the compensation committee because it provides insight into competitive pay practices for each of the elements of total compensation as well as confirms the reasonableness of its compensation decisions.

Factors Considered in Compensation Deliberations

The Compensation Committee does not use a single method or measure in setting or approving the target total direct compensation opportunities or each individual compensation element for our named executive officers, nor is the weighting of any one factor on the determination of pay components and levels quantifiable in comparison to the other factors. The factors below, which the Compensation Committee considers when selecting and setting the amount of each compensation element for our named executive officers provide a framework for its compensation decision-making:

our executive compensation program objectives;

our performance against the financial and operational goals and objectives established by the compensation committee and our board of directors;

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each named executive officer’s qualifications, knowledge, skills, experience and tenure relative to other similarly-situated executives at the companies in our compensation peer group;

the scope of each executive officer’s role and responsibilities compared to other similarly situated executives at the companies in our compensation peer group;

the prior performance of each named executive officer, based on an assessment of his or her contributions to our overall performance and ability to lead his or her business unit or function and work as part of a team;

the potential of each named executive officer to contribute to our long-term financial, operational and strategic objectives;

the CEO’s compensation relative to that of our other executive officers, and compensation parity among our executive officers;

our financial performance relative to our peers;

the compensation practices of our compensation peer group and the positioning of each executive officer’s compensation in a ranking of peer company compensation levels based on an analysis of competitive market data;

in the case of long-term incentive compensation, the value of any outstanding vested and unvested equity awards held by each of our executive officers, including the equity awards and other long-term compensation opportunities granted to each executive officer in prior years; and

the recommendations provided by our CEO regarding the compensation of our executive officers, as described above.

These factors provide the framework for decision-making by the compensation committee with respect to the compensation of each of our named executive officers.

Base Salary

Base salaries are used to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our named executive officers. Base salaries for each of our named executive officers are established based on arm’s-length negotiations between us and the executive. Our compensation committee reviews the base salaries of our named executive officers annually at the beginning of each year. When negotiating or reviewing base salaries, the compensation committee considers market competitiveness based on their experience, the executive’s expected future contribution to our success and the relative base salaries and responsibilities of our other executives. Our named executive officers received no base salary increases in 2019.

Annual Cash Bonus – 2019 Management Incentive Plan

Our named executive officers participate in our management incentive plan, which provides them with an opportunity to receive a formula-based cash bonus. The formula-based bonus is intended to motivate our executives to achieve specific financial goals that will drive the growth and success of our business.

The formula-based bonus is based on a target bonus opportunity for each named executive officer established by the compensation committee at the beginning of each year. The compensation committee established the target bonus opportunity at an amount it believes is necessary to provide a competitive overall compensation package in light of each named executive officer’s base salary and to motivate our executives to achieve an aggressive level of growth. The target bonus opportunity was set at $445,000 for Mr. Black, $260,000 for Ms. Nelson and $270,000 for Mr. Frome. The amount of the formula-based bonus, if any, actually paid to executives after the end of the year is determined by a matrix approved by the compensation committee that takes into account our revenues and earnings before interest, taxes, depreciation and amortization and stock-based compensation, and other adjustments (“Adjusted EBITDA”).1

 

1 Adjusted EBITDA is a non-GAAP financial measure. Refer to Appendix A in this proxy statement for a reconciliation of this non-GAAP financial measure to the corresponding GAAP measure.


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The formula-based bonus is based in part on revenues because, given the scalability of our current core business, the compensation committee believes our financial results are driven most significantly by the revenues we generate. The compensation committee also believes formula-based bonuses should be based in part on Adjusted EBITDA because Adjusted EBITDA is a useful measure of our operating performance.

The matrix approved for 2019 provided that each executive would receive a percentage of his or her target formula-based bonus, between 60% and 190%, based on our actual revenues and Adjusted EBITDA performance for the year, with the potential for no payout if performance fell below the threshold levels. For example, to be paid out at the maximum 190% bonus level, we needed to generate $283.65 million in revenue and at least $72.06 million of Adjusted EBITDA. For our named executive officers to earn their target bonuses for 2019, we needed to generate revenues of approximately $278.85 million and Adjusted EBITDA of approximately $66.06 million. If we failed to achieve both threshold levels of revenues of approximately $274.05 million and Adjusted EBITDA of approximately $66.06 million, our named executive officers would not receive a formula-based bonus for the year.

The compensation committee had the discretion to adjust the pre-established target levels for revenues and Adjusted EBITDA in the event we completed one or more acquisitions during the year. The compensation committee exercised such discretion for 2019 and increased the target levels for revenues and Adjusted EBITDA to take into account the impact of the MAPADOC acquisition during 2019.

The compensation committee established the intervals for the matrix with the intent that achieving 100% of an executive’s target bonus will be a difficult but achievable goal in light of the prior year’s results of operations and anticipated growth for 2019. For 2019, we delivered $279.1 million in revenues and $69.8 million of Adjusted EBITDA and therefore exceeded the target levels set under the management incentive plan for revenues and Adjusted EBITDA. As a result, the formula-based bonus for each named executive officer was determined to be 122% of the target amount, resulting in the following payouts:

 

Mr. Black — $542,900

 

Ms. Nelson — $317,200

 

Mr. Frome — $329,400

Equity Awards

Historically, we have granted our named executive officers stock options and RSUs. In 2017, we also began granting our named executive officers PSUs. We believe equity awards are an important element of compensation because they provide our executives a potential ownership interest in our company, which helps align their interests with those of other stockholders. When determining the size of the equity award for our named executive officers, our compensation committee considers the executive’s position and responsibilities, the equity holdings of our other executives, competitive market data, CEO recommendations, and the anticipated future contribution the executive will make to our success.

We believe stock options further align the interest of our executives and stockholders because the executives profit from stock options only if our stock price increases relative to the option’s exercise price as our policy is to grant annual stock options with an exercise price equal to the fair market value of our common stock on the date of grant. We believe stock options also help retain our executives because the awards vest over a specific period of time, and vesting depends on the executive’s continued employment with us, or until meeting the requirements for retirement eligible individuals.

RSUs vest over several years and have immediate value to the executives upon vesting, while requiring the executives to maintain continuous employment with us in order for the awards to vest. Typically, our stock options and RSUs vest over a period of four years. The vesting of the stock options and RSUs in the event of a termination or change in control is described in more detail below under “Potential Payments Upon Termination or Change in Control.”

PSUs are earned over a specified performance period depending on the company’s performance during such performance period and the award recipient’s continued employment. We believe PSUs further align our executives’ interests with those of our stockholders because the executives profit from PSUs only if certain performance goals

23

 

 


 

are achieved. Consequently, we believe PSUs also help retain our executives. The PSUs awarded in 2017 are earned contingent upon successful attainment of pre-determined revenue goals over the course of a three-year performance period and the award recipient’s continued employment. The PSUs awarded in 2018 and 2019 are earned contingent upon successful attainment of pre-determined total shareholder return (“TSR”) targets, relative to Russell 2000 companies (the Index) over the course of a three-year performance period and the award recipient’s continued employment. The Index was selected because it is a major, broad index of stocks, many of which are similar in size to SPS. The three year period was designed to provide long term performance periods to align management compensation with long term shareholder returns. The following table sets forth the TSR targets for PSUs granted to our named executive officers in 2019:

 

Company TSR as Compared to Index TSR

 

Percentage of Target PSUs Earned

Company TSR is more than 10% less than Index TSR

 

0%

Company TSR is 10% less than Index TSR

 

40%

Company TSR is equal to Index TSR

 

80%

Company TSR is 5% greater than Index TSR

 

100% (target)

Company TSR is 30% greater than Index TSR(a)

 

200% (maximum)

If the company’s TSR is greater than the Index TSR but is negative, the percentage of PSUs earned is capped at 100%. If the comparison of the company’s TSR against Index TSR falls between the levels specified in the above table, the corresponding PSUs earned will be determined by a linear interpolation. The vesting of the PSUs in the event of a termination or change in control is described in more detail below under “Potential Payments Upon Termination or Change in Control.”

At the beginning of each year, our compensation committee grants annual equity awards to our named executive officers. These equity awards to our named executive officers reflect the pay levels our compensation committee believed were appropriate relative to the market data, each executive’s individual performance, and maintaining an overall competitive compensation package. The following table sets forth certain information regarding grants of equity based awards to our named executive officers in 2019:

 

Name

 

Stock Options

 

RSUs

 

PSUs(1)

Archie C. Black

 

34,482

 

22,004

 

11,002

Kimberly K. Nelson

 

17,600

 

11,230

 

5,614

James J. Frome

 

20,114

 

12,834

 

6,416

 

(1)

Amount presented is the target number of PSUs granted. The threshold and maximum number of PSUs is set forth in the Grants of Plan-Based Awards Table on page 27.

In 2019, the mix of equity awards granted was similar to the mix granted in 2018. In the future, we anticipate that equity compensation, whether in the form of restricted stock, stock options, RSUs, PSUs or other stock-based awards, will remain a significant part of our executive compensation program and will continue to be granted on an annual basis to ensure a continued unvested equity component to the executive compensation package.

Stock Ownership Guidelines

Under our stock ownership guidelines, our chief executive officer is required to beneficially own shares of our common stock with a value equal to at least three times his annual base salary, and our other executive officers are required to beneficially own shares of our common stock with a value equal to at least one times his or her annual base salary. An executive officer has five years from the date he or she becomes subject to the ownership guidelines to achieve compliance with the guidelines. Until an executive officer has achieved compliance with the ownership guidelines, the executive must retain 50% of the net shares acquired upon exercise, vesting or settlement of any equity award. Each of our executive officers were in compliance with our stock ownership guidelines as of March 25, 2020.

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Other Compensation

Perquisites are not a material aspect of our executive compensation program. All of our full-time employees, including our named executive officers, are eligible to participate in our 401(k) plan. Pursuant to our 401(k) plan, employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit and to have the amount of this reduction contributed to our 401(k) plan. In 2019, our 401(k) plan provided that we would match eligible employees’ 401(k) contributions equal to 50% of the employee’s elective deferrals, up to the first 6% of the employee’s pre-tax compensation for each pay period, payable half in cash and half in shares of our common stock.

Severance and Change in Control Benefits

We have entered into employment agreements with each of our named executive officers that require us to provide certain payments and benefits to them in the event of a termination of employment and/or a change in control of the company. We believe that these payments and benefits are necessary to attract our executives to join our company and that they are in the best interests of the company and our stockholders because they help assure us that we will have the continued dedication and objectivity of our executives, notwithstanding the possibility or occurrence of a change in control.

Tax Implications

Section 162(m) of the Internal Revenue Code (the “Code”) as in effect prior to the enactment of the Tax Cuts and Jobs Act of 2017 (“Tax Reform Act”) in December 2017 generally disallowed a tax deduction to public companies for compensation of more than $1 million paid in any taxable year to each “covered employee,” consisting of the chief executive officer and the three other highest paid executive officers employed at the end of the year (other than the chief financial officer). “Performance-based compensation” was exempt from this deduction limitation if the company met specified requirements set forth in the Code and applicable treasury regulations.

The Tax Reform Act retained the $1 million deduction limit, but repealed the “performance-based compensation” exemption from the deduction limit and expanded the definition of “covered employees,” effective for taxable years beginning after December 31, 2017. Consequently, compensation paid in 2018 and later years to our named executive officers in excess of $1 million is not deductible unless it qualifies for transitional relief applicable to certain binding, written performance-based compensation arrangements that were in place as of November 2, 2017. The compensation committee intends to continue to comply with the requirements of Section 162(m) as it existed prior to the Tax Reform Act with respect to performance-based compensation in excess of $1 million payable under outstanding awards granted before November 2, 2017 under the 2010 Equity Incentive Plan in order to qualify them for the transitional relief.

The compensation committee believes that stockholder interests are best served if its discretion and flexibility in structuring and awarding compensation is not restricted, even though some compensation awards result in non-deductible compensation expenses to the company. Also, our compensation committee takes into account whether components of our compensation program may be subject to the penalty tax associated with Section 409A of the Code, and aims to structure the elements of compensation to be compliant with or exempt from Section 409A to avoid such potential adverse tax consequences.

Compensation Committee Report

The committee has reviewed and discussed the Compensation Discussion and Analysis with management and has recommended to the board of directors the inclusion of the Compensation Discussion and Analysis in the company’s definitive proxy statement and incorporated by reference in the company’s Annual Report on Form   10-K.

Compensation Committee of the Board of Directors of SPS Commerce, Inc.

Philip E. Soran, Chair

James B. Ramsey
Marty M. Reaume

 

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2019 Summary Compensation Table*

The following table provides information regarding the compensation paid to and earned by our named executive officers in 2019, 2018 and 2017:

 

Name and Principal

Position

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards

($)(1)

 

 

Option

Awards

($)(1)

 

 

Non-Equity

Incentive Plan

Compensation

($)

 

 

All Other

Compensation

($)(2)

 

 

Total

($)

 

Archie C. Black

 

2019

 

 

495,000

 

 

 

 

 

 

2,015,896

 

 

 

600,024

 

 

 

542,900

 

 

 

8,400

 

 

 

3,662,220

 

Chief Executive

 

2018

 

 

495,000

 

 

 

 

 

 

2,527,729

 

 

 

599,984

 

 

 

890,000

 

 

 

8,250

 

 

 

4,520,963

 

Officer and

President

 

2017

 

 

495,000

 

 

 

 

 

 

3,749,891

 

 

 

749,996

 

 

 

289,250

 

 

 

4,050

 

 

 

5,288,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kimberly K. Nelson

 

2019

 

 

345,000

 

 

 

 

 

 

1,028,762

 

 

 

306,259

 

 

 

317,200

 

 

 

8,400

 

 

 

2,005,621

 

Executive Vice

 

2018

 

 

345,000

 

 

 

 

 

 

1,007,943

 

 

 

306,245

 

 

 

520,000

 

 

 

7,060

 

 

 

2,186,248

 

President and Chief

Financial Officer

 

2017

 

 

345,000

 

 

 

 

 

 

1,531,193

 

 

 

306,247

 

 

 

169,000

 

 

 

3,405

 

 

 

2,354,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James J. Frome

 

2019

 

 

360,000

 

 

 

 

 

 

1,175,712

 

 

 

350,005

 

 

 

329,400

 

 

 

8,400

 

 

 

2,223,517

 

Executive Vice

 

2018

 

 

360,000

 

 

 

 

 

 

1,151,927

 

 

 

349,981

 

 

 

540,000

 

 

 

8,250

 

 

 

2,410,158

 

President and Chief

Operating Officer

 

2017

 

 

360,000

 

 

 

 

 

 

1,556,147

 

 

 

311,242

 

 

 

175,500

 

 

 

4,050

 

 

 

2,406,939

 

 

(1)

Represents the grant date fair value of the stock-based awards granted during the year computed in accordance with ASC Topic 718. For a discussion of the relevant assumptions used to determine the valuation of our stock option awards for financial reporting purposes, refer to Note M to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filed on February 25, 2020. The grant date fair value of the RSUs and PSUs granted in each year if target performance and maximum performance is achieved are as follows:

 

 

 

2019

 

2018

 

2017

Name

 

RSUs ($)

 

PSU   Target ($)

 

PSU Maximum ($)

 

RSUs ($)

 

PSU   Target ($)

 

PSU Maximum ($)

 

RSUs ($)

 

PSU   Target ($)

 

PSU Maximum ($)

Archie C. Black

 

1,200,098

 

815,798

 

1,199,988

 

1,752,887

 

774,843

 

1,199,898

 

1,499,945

 

2,249,946

 

3,374,917

Kimberly K. Nelson

 

612,484

 

416,278

 

612,319

 

612,471

 

395.472

 

612,416

 

612,477

 

918,716

 

1,378,074

James J. Frome

 

699,966

 

475,746

 

699,793

 

699,959

 

451,968

 

699,904

 

622,448

 

933,699

 

1,400,576

 

(2)

Represents matching contributions under our 401(k) plan.

*

See the “Compensation Discussion and Analysis” above for a description of our executive compensation criteria necessary for an understanding of the information disclosed in this table.

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2019 Grants of Plan-Based Awards Table

The following table sets forth certain information regarding grants of plan-based awards to our named executive officers in 2019. The unit, share, and per share amounts included in the table reflect our two-for-one stock split effective August 22, 2019.

 

 

 

 

 

 

 

 

 

Estimated Future Payouts

Under Non-Equity Incentive

Plan Awards

 

 

Estimated Future Payouts

Under Equity Incentive

Plan Awards

 

 

All

Other

Stock

Awards:

Number

of Shares

of Stock

 

 

All

Other

Option

Awards:

Number of

Securities

Underlying

 

 

Exercise

or Base

Price

of Option

 

Grant Date

Fair Value

of Stock

and Option

 

Name

 

Grant

Date(1)

 

 

Approval

Date(1)

 

Threshold

($)

 

 

Target

($)

 

 

Maximum

($)

 

 

Threshold

(#)

 

 

Target

(#)

 

 

Maximum

(#)

 

 

or Units

(#)

 

 

Options

(#)

 

 

Awards

($/Sh)

 

Awards

($)(2)

 

Archie C. Black

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Cash Bonus (3)

 

 

 

 

1/22/2019

 

 

267,000

 

 

 

445,000

 

 

 

845,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PSU Award (4)

 

2/19/2019

 

 

1/22/2019

 

 

 

 

 

 

 

 

 

 

 

4,401

 

 

 

11,002

 

 

 

22,004

 

 

 

 

 

 

 

 

 

 

 

815,798

 

RSU Award (5)

 

2/19/2019

 

 

1/22/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,004

 

 

 

 

 

 

 

 

1,200,098

 

Stock Option Award (5)

 

2/19/2019

 

 

1/22/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,482

 

 

 

54.54

 

 

600,024

 

Kimberly K. Nelson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Cash Bonus (3)

 

 

 

 

1/22/2019

 

 

156,000

 

 

 

260,000

 

 

 

494,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PSU Award(4)

 

2/19/2019

 

 

1/22/2019

 

 

 

 

 

 

 

 

 

 

 

2,246

 

 

 

5,614

 

 

 

11,228

 

 

 

 

 

 

 

 

 

 

 

416,278

 

RSU Award(5)

 

2/19/2019

 

 

1/22/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,230

 

 

 

 

 

 

 

 

612,484

 

Stock Option Award(5)

 

2/19/2019

 

 

1/22/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,600

 

 

 

54.54

 

 

306,259

 

James J. Frome

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Cash Bonus(3)

 

 

 

 

1/22/2019

 

 

162,000

 

 

 

270,000

 

 

 

513,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PSU Award(4)

 

2/19/2019

 

 

1/22/2019

 

 

 

 

 

 

 

 

 

 

 

2,566

 

 

 

6,416

 

 

 

12,832

 

 

 

 

 

 

 

 

 

 

 

475,746

 

RSU Award(5)

 

2/19/2019

 

 

1/22/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,834

 

 

 

 

 

 

 

 

699,966

 

Stock Option Award(5)

 

2/19/2019

 

 

1/22/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,114

 

 

 

54.54

 

 

350,005

 

 

(1)

All equity awards granted in 2019 were granted under our 2010 Equity Incentive Plan.

(2)

The grant date fair value of each RSU award was computed in accordance with ASC Topic 718 based on the closing stock price on the grant date. For a discussion of the relevant assumptions used to determine the valuation of our option awards and PSU awards for financial reporting purposes, refer to Note M to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on February 25, 2020.

(3)

Amounts represent estimated payouts of annual case incentives granted under our 2019 Management Incentive Plan. The amount each executive will receive is based on actual revenues and Adjusted EBITDA for the year. The actual cash incentive bonus earned in connection with the 2019 awards are reported in the 2019 Summary Compensation Table.

(4)

Amounts represent the number of PSUs that may be earned under our 2010 Equity Incentive Plan at threshold, target and maximum levels. The PSUs will be paid out in shares of our common stock. The number of PSUs that the executive officer will receive will be determined at the conclusion of the 2019-2021 performance period and will be dependent upon the company’s achievement of TSR targets.

(5)

The units (RSU) or shares (stock options) vested as to one-fourth of the underlying units/shares on February 13, 2020, with the remaining underlying units/shares vesting in 36 equal monthly installments on the 13th day of each month thereafter beginning March 13, 2020.

27

 

 


 

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth certain information regarding the outstanding equity awards held by our named executive officers as of December 31, 2019. The unit, share, and per share amounts included in the table reflect our two-for-one stock split effective August 22, 2019.

 

 

 

Option Awards

 

 

Stock Awards

 

Name

 

Grant

Date

 

 

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

(1)

 

 

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable

(1)

Option

Exercise

Price

($/Sh)

 

 

Option

Expiration Date

 

 

Grant

Date

 

Number of

Shares or

Units

of Stock That

Have Not

Vested

(#)(2)

 

Market Value of

Shares or

Units

of Stock that

Have Not

Vested

($)(3)

 

 

Equity Incentive

Plan Awards:

Number

of Unearned

Shares or Units