0001564590-21-052660 | 10-Q | XBRL Viewer

Revenue

NOTE B – Revenue

We derive our revenues from the following revenue streams:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Recurring revenues:
Fulfillment	$	78,106	$	64,115	$	224,738	$	183,963
Analytics		10,858		9,826		31,383		28,809
Other		1,435		1,244		4,019		3,664
Recurring Revenues		90,399		75,185		260,140		216,436
One-time revenues		7,488		4,372		22,380		12,886
	$	97,887	$	79,557	$	282,520	$	229,322

Revenues are recognized when our services are made available to our customers, in an amount that reflects the consideration we are contractually and legally entitled to in exchange for those services.

We determine revenue recognition through the following steps:

Identification of the contract, or contracts, with a customer

Identification of the performance obligations in the contract

Determination of the transaction price

Allocation of the transaction price to the performance obligations in the contract

Recognition of revenue when, or as, we satisfy a performance obligation

Recurring Revenues

Recurring revenues consist of recurring subscriptions from customers that utilize our Fulfillment, Analytics, and Other cloud-based supply chain management solutions. Revenue for these solutions is generally recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Our contracts with our recurring revenue customers are recurring in nature, ranging from monthly to annual, and generally allow the customer to cancel the contract for any reason with 30 to 90 days’ notice. Timing of billings varies by customer and by contract type and are either in advance or within 30 days of the service being performed.

The deferred revenue liability for recurring revenue contracts are for one year or less and recognized on a ratable basis over the contract term. We have applied the optional exemption to not disclose information about the remaining performance obligations for contracts which have original durations of one year or less.

One-time Revenues

One-time revenues consist of set-up fees from customers and miscellaneous one-time fees.

Set-up fees are specific for each connection a customer has with a trading partner and many of our customers have connections with numerous trading partners. Set-up fees related to our cloud-based supply chain management solutions are nonrefundable upfront fees that are necessary for our customers to utilize our cloud-based services. These set-up fees do not provide any standalone value to our customers.

Certain contracts contain set-up fees that constitute a material renewal option right. This material right provides customers a significant future incentive that would not otherwise be available to them unless they entered into the contract, as the set-up fees will not be incurred again upon contract renewal.

For our Fulfillment solution, we have determined that the set-up fees and related costs represent a material renewal option right to our customers as they will not be incurred again upon renewal. These set-up fees and related costs are deferred and recognized ratably over two years, which is the estimated period for which a material right is present for our customers.

For our Analytics solution, we have determined that the set-up fees do not represent a material customer renewal right and, as such, are deferred and recognized ratably over the estimated initial contract term, which is generally one year.

The table below presents the activity of the portion of the deferred revenue liability relating to set-up fees:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2021			2020			2021			2020
Balance, beginning of period	$	13,344		$	10,633		$	11,118		$	10,518
Invoiced set-up fees		3,622			2,757			11,832			8,224
Amortized set-up fees		(3,245	)		(2,698	)		(9,229	)		(8,050	)
Balance, end of period	$	13,721		$	10,692		$	13,721		$	10,692

The entire balance of set-up fees will be recognized within two years and, as such, current amounts will be recognized in the next 1-12 months and long-term amounts will be recognized in the next 13-24 months.

Miscellaneous one-time fees consist of professional services and testing and certification. The deferred revenue liability for these one-time fees are for one year or less and recognized at the time service is provided. We have applied the optional exemption to not disclose information about the remaining performance obligations for contracts which have original durations of one year or less.

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Disclosure Text Block Supplement [Abstract]

Deferred Costs

9 Months Ended

Sep. 30, 2021

Deferred Costs [Abstract]

Deferred Costs

NOTE C – Deferred Costs

The deferred costs and amortization of deferred costs activity was as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2021			2020			2021			2020
Balance, beginning of period	$	53,841		$	46,649		$	50,595		$	46,941
Incurred deferred costs		16,459			14,258			45,922			39,329
Amortized deferred costs		(14,207	)		(12,774	)		(40,424	)		(38,137	)
Balance, end of period	$	56,093		$	48,133		$	56,093		$	48,133

Financial Instruments

9 Months Ended

Sep. 30, 2021

Financial Instruments

NOTE D – Financial Instruments

We invest primarily in money market funds, certificates of deposit, highly liquid debt instruments of the United States (“U.S.”) government and U.S. corporate debt securities. All investments with remaining maturities of less than one year from the balance sheet date are classified as short-term investments. Investments with remaining maturities of more than one year from the balance sheet date are classified as long-term investments. Our short-term marketable securities are classified as available-for-sale. We intend to hold marketable securities until maturity; however, we may sell these securities at any time for use in current operations or for other purposes.

Our marketable securities are carried at fair value and unrealized gains and losses on these investments, net of taxes, are included in accumulated other comprehensive loss in the condensed consolidated balance sheets. Realized gains or losses are included in other income (expense), net in the condensed consolidated statements of comprehensive income. Certain securities accrue interest that is included in other income (expense), net. The unrealized gains (losses) noted below are exclusive of previously recognized interest income. When a determination has been made that the fair value of a marketable security is below its amortized cost basis, the portion of the unrealized loss that corresponds to a credit-related factor is realized through a credit allowance on the marketable security and the equivalent expense is realized in other income (expense), net in the condensed consolidated statements of comprehensive income.

Cash equivalents and investments consisted of the following:

	September 30, 2021							December 31, 2020
(in thousands)	Amortized Cost		Unrealized Gains (Losses), net			Fair Value		Amortized Cost		Unrealized Losses, net			Fair Value
Cash equivalents:
Money market funds	$	151,661	$	—		$	151,661	$	112,907	$	—		$	112,907
Certificates of deposit		7,229		—			7,229		7,708		—			7,708
Marketable securities:
U.S. corporate bonds		4,996		4			5,000		5,069		(29	)		5,040
Commercial paper		32,485		1			32,486		7,569		(55	)		7,514
U.S. treasury securities		11,543		(75	)		11,468		20,051		(27	)		20,024
	$	207,914	$	(70	)	$	207,844	$	153,304	$	(111	)	$	153,193
Maturing within one year						$	207,844						$	150,693
Maturing within one to two years							—							2,500
Total						$	207,844						$	153,193

Recurring Fair Value Measurements

The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value:

	September 30, 2021								December 31, 2020
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	151,661	$	—	$	—	$	151,661	$	112,907	$	—	$	—	$	112,907
Certificates of deposit		7,229		—		—		7,229		7,708		—		—		7,708
Marketable securities:
U.S. corporate bonds		—		5,000		—		5,000		—		5,040		—		5,040
Commercial paper		—		32,486		—		32,486		—		7,514		—		7,514
U.S. treasury securities		—		11,468		—		11,468		—		20,024		—		20,024
	$	158,890	$	48,954	$	—	$	207,844	$	120,615	$	32,578	$	—	$	153,193

Liabilities:
Contingent consideration	$	—	$	—	$	—	$	—	$	—	$	—	$	1,878	$	1,878
	$	—	$	—	$	—	$	—	$	—	$	—	$	1,878	$	1,878

See Note E to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC, for additional information regarding the three levels of inputs that may be used to measure fair value.

For the contingent consideration liability, related to the Data Masons acquisition, we were required to pay the former owners of Data Masons $1.9 million in the event the Paycheck Protection Program Loan (“PPP Loan”) acquired in the acquisition was forgiven in full. In the three months ended June 30, 2021, the Small Business Administration approved the full forgiveness of the PPP Loan and, accordingly, the payment of the $1.9 million contingent liability was made.

Allowance for Credit Losses

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

Allowance for Credit Losses

NOTE E – Allowance for Credit Losses

The allowance for credit losses activity, included in accounts receivable, net, was as follows:

	Nine Months Ended
	September 30,
(in thousands)	2021			2020
Balance, beginning of period	$	4,233		$	1,469
Adoption of ASU 2016-13		—			1,069
Provision for credit losses		4,037			4,198
Write-offs, net of recoveries		(3,666	)		(2,977	)
Balance, end of period	$	4,604		$	3,759

Goodwill and Intangible Assets, net

9 Months Ended

Sep. 30, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, net

NOTE F – Goodwill and Intangible Assets, net

Goodwill

The changes in the net carrying amount of goodwill were as follows:

	Nine Months Ended
	September 30,
(in thousands)	2021			2020
Balance, beginning of period	$	134,853		$	76,845
Remeasurement from provisional purchase accounting amount		268			—
Foreign currency translation adjustments		(441	)		(302	)
Balance, end of period	$	134,680		$	76,543

Intangible Assets

Intangible assets subject to amortization are amortized over their respective useful lives (ranging from three to ten years). Intangible assets, net included the following:

	September 30, 2021
	Gross					Foreign
	Carrying		Accumulated			Currency
(in thousands)	Amount		Amortization			Translation			Net
Subscriber relationships	$	54,870	$	(28,851	)	$	(1,062	)	$	24,957
Non-competition agreements		708		(708	)		—		$	—
Acquired technology		33,216		(5,702	)		—			27,514
	$	88,794	$	(35,261	)	$	(1,062	)	$	52,471

	December 31, 2020
	Gross					Foreign
	Carrying		Accumulated			Currency
(in thousands)	Amount		Amortization			Translation			Net
Subscriber relationships	$	54,447	$	(24,792	)	$	101		$	29,756
Non-competition agreements		698		(691	)		(4	)		3
Acquired technology		33,195		(2,724	)		—			30,471
	$	88,340	$	(28,207	)	$	97		$	60,230

The estimated future annual amortization expense related to intangible assets subject to amortization is as follows:

(in thousands)
Remainder of 2021	$	2,214
2022		8,822
2023		8,746
2024		7,476
2025		7,337
Thereafter		17,876
Total future amortization	$	52,471

Other Assets

9 Months Ended

Sep. 30, 2021

Other Assets [Abstract]

Other Assets

NOTE G – Other Assets

The changes in the net amount of capitalized implementation costs for software hosting arrangements was as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2021			2020			2021			2020
Balance, beginning of period	$	943		$	1,188		$	1,181		$	1,166
Capitalized implementation fees		32			7			130			87
Amortization of implementation fees		(172	)		(65	)		(508	)		(123	)
Balance, end of period	$	803		$	1,130		$	803		$	1,130

Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE H – Commitments and Contingencies

Leases

We are obligated under non-cancellable operating leases, primarily for office space, as follows:

	September 30, 2021				December 31, 2020
(in thousands, except remaining term)	Remaining Term (years)		Right-of-Use Asset		Remaining Term (years)		Right-of-Use Asset
Minneapolis, MN lease		6	$	9,268		6	$	10,992
Kyiv, Ukraine lease		4		1,632		4		1,930
Other leases	<1 - 4			1,765	<1 - 5			2,659
			$	12,665			$	15,581

The components of lease expense were as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Operating lease cost	$	873	$	857	$	2,309	$	2,225
Variable lease cost		976		886		2,694		2,687
	$	1,849	$	1,743	$	5,003	$	4,912

Supplemental cash flow information related to leases was as follows:

	Nine Months Ended
	September 30,
(in thousands)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,488	$	3,190
Right-of-use assets obtained in exchange for operating lease liabilities		—		342

Supplemental balance sheet information related to leases was as follows:

	September 30, 2021			December 31, 2020
Weighted-average remaining lease term - operating leases	5.1 years			5.6 years
Weighted-average discount rate - operating leases		4.1	%		4.1	%

At September 30, 2021, our future minimum payments under operating leases were as follows:

(in thousands)
Remainder of 2021	$	1,175
2022		4,676
2023		4,412
2024		4,057
2025		3,715
Thereafter		4,850
Total future gross payments		22,885
Less: imputed interest		(2,293	)
Total operating lease liabilities	$	20,592

Purchase Commitments

We have entered into separate noncancelable agreements with computing infrastructure and customer relationship management vendors for services through 2023. At September 30, 2021, the total remaining purchase commitments were $11.9 million.

Stockholders' Equity

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Stockholders' Equity

NOTE I – Stockholders’ Equity

Stock Repurchase Program

On November 2, 2019, our board of directors authorized a program to repurchase up to $50.0 million of common stock. Under the program, purchases may be made from time to time in the open market or in privately negotiated purchases, or both over two years. For the three months ended September 30, 2021, we repurchased 42,299 shares at a cost of $4.2 million. As of September 30, 2021, $20.4 million of the share repurchase program was available for future share repurchases.

In October 2021, our board of directors authorized a new program to repurchase up to $50.0 million of our common stock. Under the program, purchases may be made from time to time in the open market or in privately negotiated purchases, or both. The new share repurchase program becomes effective on November 28, 2021 and expires on November 28, 2023.

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

9 Months Ended

Sep. 30, 2021

Stock-Based Compensation

NOTE J – Stock-Based Compensation

Our equity compensation plans provide for the grant of incentive and nonqualified stock options, as well as other stock-based awards including performance share units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and deferred stock units (“DSUs”). We also have an employee stock purchase plan (“ESPP”). We recognize stock-based compensation expense based on grant date award fair value. This cost is recognized over the period for which the employee is required to provide service in exchange for the award or the award performance period, except for expense relating to retirement-eligible employees that have not given their required notice, which is recognized on a pro-rata basis over the notice period prior to retirement. At September 30, 2021, there were 13.5 million shares available for grant under approved equity compensation plans.

Stock-based compensation expense was allocated in the condensed consolidated statements of comprehensive income as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Cost of revenues	$	1,696	$	1,003	$	4,945	$	2,767
Operating expenses
Sales and marketing		1,634		1,123		4,854		2,979
Research and development		1,195		983		3,212		2,789
General and administrative		2,324		1,784		8,262		5,711
	$	6,849	$	4,893	$	21,273	$	14,246

Stock-based compensation expense by plan or award type was as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Stock options	$	496	$	541	$	1,569	$	1,675
PSUs		1,342		804		5,357		2,596
RSUs		4,039		2,729		11,577		7,730
RSAs & DSUs		109		106		325		340
ESPP		376		314		1,038		749
401(k) stock match		487		399		1,407		1,156
	$	6,849	$	4,893	$	21,273	$	14,246

As of September 30, 2021, there was $35.7 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted average period of 2.5 years.

Stock Options

Our stock option activity was as follows:

	Nine Months Ended September 30, 2021
				Weighted Average
	Options (#)			Exercise Price (per share)
Outstanding, beginning of period		944,886		$	36.71
Granted		52,184			104.81
Exercised		(231,590	)		30.34
Forfeited		(4,902	)		64.81
Outstanding, end of period		760,578			43.14

Of the total outstanding options at September 30, 2021, 0.6 million were exercisable. The outstanding and exercisable options had a weighted average exercise price of $36.83 per share and a weighted average remaining contractual life of 3.3 years.

The weighted average grant date fair value of options granted during the nine months ended September 30, 2021 was $30.98 per share. This was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

Volatility	35.4	%
Dividend yield	0	%
Life (in years)	4.4
Risk-free interest rate	0.6	%

Performance Share Units, Restricted Stock Units and Awards, and Deferred Stock Units

In each of the quarters ended March 31, 2021, 2020, 2019, and 2018 we granted PSU awards with a target performance level. These awards are earned based upon our company’s total shareholder return as compared to an indexed total shareholder return over the course of a fiscal based three-year performance period, starting in the year of grant. Awards vest in the quarter following the conclusion of the performance period. In the three months ended March 31, 2021, PSU awards granted in 2018 vested at the maximum performance level and 0.1 million shares of common stock were issued.

Our PSU, RSU, RSA, and DSU activity was as follows:

	Nine Months Ended September 30, 2021
				Weighted Average Grant
	#			Date Fair Value (per unit)
Outstanding, beginning of period		738,422		$	52.37
Granted		310,984			101.36
Vested and common stock issued		(323,030	)		42.67
Forfeited		(14,867	)		64.15
Outstanding, end of period		711,509			77.94

Employee Stock Purchase Plan

Our ESPP activity was as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except share data)	2021		2020		2021		2020
Amounts for shares purchased	$	130	$	95	$	2,316	$	1,645
Shares purchased		1,526		2,010		27,675		35,093

A total of 1.8 million shares of common stock are reserved for issuance under the ESPP as of September 30, 2021.

The fair value was estimated based on the market price of our common stock at the beginning of the offering period using the Black-Scholes option pricing model with the following assumptions:

Volatility	31.6	%
Dividend yield	0	%
Life (in years)	0.5
Risk-free interest rate	0.1	%

Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

NOTE K – Income Taxes

We record our interim provision for income taxes by applying our estimated annual effective tax rate to our year-to-date pretax income and adjust the provision for discrete tax items recorded in the period. Differences between our effective tax rate and statutory tax rates are primarily due to the impact of permanently non-deductible expenses partially offset by the federal research and development credits and tax benefits associated with foreign-derived intangible income. Additionally, excess tax benefits generated upon settlement or exercise of stock awards are recognized as a reduction to income tax expense as a discrete tax item in the quarter that the event occurs, creating potentially significant fluctuation in tax expense by quarter and by year. Our provisions for income taxes includes current federal, state, and foreign income tax expense, as well as deferred tax expense.

As of September 30, 2021, we did not have any unrecognized tax benefits, accrued interest, or tax penalties.

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Other Income And Expenses [Abstract]

Other Income and Expense

9 Months Ended

Sep. 30, 2021

Other Income and Expense

NOTE L – Other Income and Expense

Other income (expense), net included the following:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2021			2020			2021			2020
Investment income	$	66		$	107		$	242		$	1,079
Realized gain (loss) from foreign currency on cash and investments held		(854	)		559			(1,492	)		686
Other income (expense), net		72			(243	)		(174	)		(475	)
Change in earn-out liability		—			—			—			(72	)
	$	(716	)	$	423		$	(1,424	)	$	1,218

Effective January 1, 2021, all realized gains or losses and interest income on our investments are included in investment income. Previously, realized gains and losses were included in other income (expense), net and interest income was included in interest income, net. Additionally, realized gains or losses from foreign currency on cash and investments held were previously included in other income (expense), net. Amounts for the three and nine months ended September 30, 2020 have been reclassified to be consistent with the classifications for the three and nine months ended September 30, 2021.

Net Income Per Share

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Net Income Per Share

NOTE M – Net Income Per Share

Basic net income per share has been computed using the weighted average number of shares of common stock outstanding during each period. Diluted net income per share also includes the impact of our outstanding potential common shares, including options, PSUs, RSUs, RSAs, and DSUs. Potential common shares that are anti-dilutive are excluded from the calculation of diluted net income per share.

The components and computation of basic and diluted net income per share were as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2021		2020		2021		2020
Numerator
Net income	$	11,449	$	11,407	$	31,832	$	32,116
Denominator
Weighted average common shares outstanding, basic		35,961		35,295		35,873		35,133
Options to purchase common stock		520		578		533		596
PSUs, RSUs, RSAs, and DSUs		534		493		492		408
Weighted average common shares outstanding, diluted		37,015		36,366		36,898		36,137
Net income per share
Basic	$	0.32	$	0.32	$	0.89	$	0.91
Diluted	$	0.31	$	0.31	$	0.86	$	0.89

The following table presents the number of outstanding potential common shares that were excluded from the calculation of diluted net income per share as they were anti-dilutive:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(in thousands)	2021	2020	2021	2020
Antidilutive shares	34	8	46	203

Geographic Information

9 Months Ended

Sep. 30, 2021

Geographic Information

NOTE N – Geographic Information

The following table presents domestic revenue, which we define as the percentage of revenue that was attributable to customers based within the U.S. No single jurisdiction outside of the U.S. had revenues in excess of 10%.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Domestic revenue		84	%		85	%		84	%		85	%

At September 30, 2021 and December 31, 2020, 13% and 15%, respectively, of property and equipment, net was located at subsidiary and office locations outside of the U.S.

General (Policies)	9 Months Ended
General (Policies)	Sep. 30, 2021
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Business Description	Business Description SPS Commerce is a leading provider of cloud-based supply chain management solutions that make it easier for retailers, suppliers, grocers, distributors, and logistics firms to orchestrate the management of item data, order fulfillment, inventory control and sales analytics across all channels. For many businesses, implementing and maintaining a suite of supply chain management capabilities is resource-intensive and not a core competency. The solutions offered by SPS Commerce eliminate the need for on-premise software and support staff by taking on that capability on the customer’s behalf. These solutions also enable our customers to increase their supply cycle agility, optimize their inventory levels and sell-through, reduce operational costs and gain increased visibility into customer orders, helping ensure that suppliers, grocers, distributors, and logistics firms can satisfy retailer requirements.
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of SPS Commerce, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. This interim financial information has been prepared under the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP. We have included all normal recurring adjustments considered necessary to provide a fair presentation of our financial position, results of operations, stockholders’ equity, and cash flows for the interim periods shown. Operating results for these interim periods are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”).
Business Combinations	Business Combinations In December 2020, we acquired all of the outstanding equity ownership interests of D Masons Software, LLC (“Data Masons”). As of December 31, 2020, the purchase accounting for the acquisition was not finalized. During the three months ended March 31, 2021, the only change in the purchase accounting was a $0.3 million reduction of amounts due from the seller as part of the initial net working capital adjustment and a corresponding increase to goodwill. As of September 30, 2021, the purchase accounting for the acquisition was finalized, without any change from that recorded at March 31, 2021.
Use of Estimates	Use of Estimates Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Recently Issued and Adopted Accounting Pronouncements	Recently Issued and Adopted Accounting Pronouncements For the nine months ended September 30, 2021, there were no newly adopted accounting pronouncements. As of September 30, 2021, there are no recently issued but not yet adopted accounting pronouncements that are expected to materially impact our consolidated financial statements.
Significant Accounting Policies	Significant Accounting Policies There were no material changes in our significant accounting policies during the nine months ended September 30, 2021. See Note A to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC, for additional information regarding our significant accounting policies.

Revenue (Tables)

9 Months Ended

Sep. 30, 2021

Summary of Revenues by Revenue Stream

We derive our revenues from the following revenue streams:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Recurring revenues:
Fulfillment	$	78,106	$	64,115	$	224,738	$	183,963
Analytics		10,858		9,826		31,383		28,809
Other		1,435		1,244		4,019		3,664
Recurring Revenues		90,399		75,185		260,140		216,436
One-time revenues		7,488		4,372		22,380		12,886
	$	97,887	$	79,557	$	282,520	$	229,322

Summary of Deferred Revenue Liability Relating to Set-Up Fees

The table below presents the activity of the portion of the deferred revenue liability relating to set-up fees:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2021			2020			2021			2020
Balance, beginning of period	$	13,344		$	10,633		$	11,118		$	10,518
Invoiced set-up fees		3,622			2,757			11,832			8,224
Amortized set-up fees		(3,245	)		(2,698	)		(9,229	)		(8,050	)
Balance, end of period	$	13,721		$	10,692		$	13,721		$	10,692

Deferred Costs (Tables)

9 Months Ended

Sep. 30, 2021

Deferred Costs [Abstract]

Summary of Deferred Costs and Amortization of Deferred Costs

NOTE C – Deferred Costs

The deferred costs and amortization of deferred costs activity was as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2021			2020			2021			2020
Balance, beginning of period	$	53,841		$	46,649		$	50,595		$	46,941
Incurred deferred costs		16,459			14,258			45,922			39,329
Amortized deferred costs		(14,207	)		(12,774	)		(40,424	)		(38,137	)
Balance, end of period	$	56,093		$	48,133		$	56,093		$	48,133

Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2021

Financial Instruments Owned At Fair Value [Abstract]

Summary of Cash Equivalents and Investments

Cash equivalents and investments consisted of the following:

	September 30, 2021							December 31, 2020
(in thousands)	Amortized Cost		Unrealized Gains (Losses), net			Fair Value		Amortized Cost		Unrealized Losses, net			Fair Value
Cash equivalents:
Money market funds	$	151,661	$	—		$	151,661	$	112,907	$	—		$	112,907
Certificates of deposit		7,229		—			7,229		7,708		—			7,708
Marketable securities:
U.S. corporate bonds		4,996		4			5,000		5,069		(29	)		5,040
Commercial paper		32,485		1			32,486		7,569		(55	)		7,514
U.S. treasury securities		11,543		(75	)		11,468		20,051		(27	)		20,024
	$	207,914	$	(70	)	$	207,844	$	153,304	$	(111	)	$	153,193
Maturing within one year						$	207,844						$	150,693
Maturing within one to two years							—							2,500
Total						$	207,844						$	153,193

Summary of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

	September 30, 2021								December 31, 2020
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	151,661	$	—	$	—	$	151,661	$	112,907	$	—	$	—	$	112,907
Certificates of deposit		7,229		—		—		7,229		7,708		—		—		7,708
Marketable securities:
U.S. corporate bonds		—		5,000		—		5,000		—		5,040		—		5,040
Commercial paper		—		32,486		—		32,486		—		7,514		—		7,514
U.S. treasury securities		—		11,468		—		11,468		—		20,024		—		20,024
	$	158,890	$	48,954	$	—	$	207,844	$	120,615	$	32,578	$	—	$	153,193

Liabilities:
Contingent consideration	$	—	$	—	$	—	$	—	$	—	$	—	$	1,878	$	1,878
	$	—	$	—	$	—	$	—	$	—	$	—	$	1,878	$	1,878

Allowance for Credit Losses (Tables)

9 Months Ended

Sep. 30, 2021

Receivables [Abstract]

Schedule of Allowance for Credit Losses Activity Included in Accounts Receivable Net

The allowance for credit losses activity, included in accounts receivable, net, was as follows:

	Nine Months Ended
	September 30,
(in thousands)	2021			2020
Balance, beginning of period	$	4,233		$	1,469
Adoption of ASU 2016-13		—			1,069
Provision for credit losses		4,037			4,198
Write-offs, net of recoveries		(3,666	)		(2,977	)
Balance, end of period	$	4,604		$	3,759

Goodwill and Intangible Assets, net (Tables)

9 Months Ended

Sep. 30, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Changes in Net Carrying Amount of Goodwill

Goodwill

The changes in the net carrying amount of goodwill were as follows:

	Nine Months Ended
	September 30,
(in thousands)	2021			2020
Balance, beginning of period	$	134,853		$	76,845
Remeasurement from provisional purchase accounting amount		268			—
Foreign currency translation adjustments		(441	)		(302	)
Balance, end of period	$	134,680		$	76,543

Intangible Assets

Intangible assets subject to amortization are amortized over their respective useful lives (ranging from three to ten years). Intangible assets, net included the following:

	September 30, 2021
	Gross					Foreign
	Carrying		Accumulated			Currency
(in thousands)	Amount		Amortization			Translation			Net
Subscriber relationships	$	54,870	$	(28,851	)	$	(1,062	)	$	24,957
Non-competition agreements		708		(708	)		—		$	—
Acquired technology		33,216		(5,702	)		—			27,514
	$	88,794	$	(35,261	)	$	(1,062	)	$	52,471

	December 31, 2020
	Gross					Foreign
	Carrying		Accumulated			Currency
(in thousands)	Amount		Amortization			Translation			Net
Subscriber relationships	$	54,447	$	(24,792	)	$	101		$	29,756
Non-competition agreements		698		(691	)		(4	)		3
Acquired technology		33,195		(2,724	)		—			30,471
	$	88,340	$	(28,207	)	$	97		$	60,230

Estimated Future Annual Amortization Expense Related to Intangible Assets Subject to Amortization

The estimated future annual amortization expense related to intangible assets subject to amortization is as follows:

(in thousands)
Remainder of 2021	$	2,214
2022		8,822
2023		8,746
2024		7,476
2025		7,337
Thereafter		17,876
Total future amortization	$	52,471

Other Assets (Tables)

9 Months Ended

Sep. 30, 2021

Other Assets [Abstract]

Summary of Changes in Net Amount of Capitalized Implementation Costs for Software Hosting Arrangements

The changes in the net amount of capitalized implementation costs for software hosting arrangements was as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2021			2020			2021			2020
Balance, beginning of period	$	943		$	1,188		$	1,181		$	1,166
Capitalized implementation fees		32			7			130			87
Amortization of implementation fees		(172	)		(65	)		(508	)		(123	)
Balance, end of period	$	803		$	1,130		$	803		$	1,130

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2021

Commitments And Contingencies Disclosure [Abstract]

Summary of Non-Cancellable Operating Leases, Primarily for Office Space

We are obligated under non-cancellable operating leases, primarily for office space, as follows:

	September 30, 2021				December 31, 2020
(in thousands, except remaining term)	Remaining Term (years)		Right-of-Use Asset		Remaining Term (years)		Right-of-Use Asset
Minneapolis, MN lease		6	$	9,268		6	$	10,992
Kyiv, Ukraine lease		4		1,632		4		1,930
Other leases	<1 - 4			1,765	<1 - 5			2,659
			$	12,665			$	15,581

Components of Lease Expense

The components of lease expense were as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Operating lease cost	$	873	$	857	$	2,309	$	2,225
Variable lease cost		976		886		2,694		2,687
	$	1,849	$	1,743	$	5,003	$	4,912

Schedule of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases was as follows:

	Nine Months Ended
	September 30,
(in thousands)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,488	$	3,190
Right-of-use assets obtained in exchange for operating lease liabilities		—		342

Schedule of Supplemental Balance Sheet Information Related to Leases

Supplemental balance sheet information related to leases was as follows:

	September 30, 2021			December 31, 2020
Weighted-average remaining lease term - operating leases	5.1 years			5.6 years
Weighted-average discount rate - operating leases		4.1	%		4.1	%

Schedule of Future Minimum Payments Under Operating Leases

At September 30, 2021, our future minimum payments under operating leases were as follows:

(in thousands)
Remainder of 2021	$	1,175
2022		4,676
2023		4,412
2024		4,057
2025		3,715
Thereafter		4,850
Total future gross payments		22,885
Less: imputed interest		(2,293	)
Total operating lease liabilities	$	20,592

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2021

Stock-Based Compensation Expense

Stock-based compensation expense was allocated in the condensed consolidated statements of comprehensive income as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Cost of revenues	$	1,696	$	1,003	$	4,945	$	2,767
Operating expenses
Sales and marketing		1,634		1,123		4,854		2,979
Research and development		1,195		983		3,212		2,789
General and administrative		2,324		1,784		8,262		5,711
	$	6,849	$	4,893	$	21,273	$	14,246

Stock-based compensation expense by plan or award type was as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Stock options	$	496	$	541	$	1,569	$	1,675
PSUs		1,342		804		5,357		2,596
RSUs		4,039		2,729		11,577		7,730
RSAs & DSUs		109		106		325		340
ESPP		376		314		1,038		749
401(k) stock match		487		399		1,407		1,156
	$	6,849	$	4,893	$	21,273	$	14,246

Stock Option Activity

Our stock option activity was as follows:

	Nine Months Ended September 30, 2021
				Weighted Average
	Options (#)			Exercise Price (per share)
Outstanding, beginning of period		944,886		$	36.71
Granted		52,184			104.81
Exercised		(231,590	)		30.34
Forfeited		(4,902	)		64.81
Outstanding, end of period		760,578			43.14

Weighted Average Grant Date Fair Value of Options Granted, Assumptions

Volatility	35.4	%
Dividend yield	0	%
Life (in years)	4.4
Risk-free interest rate	0.6	%

Summary of ESPP Activity

Our ESPP activity was as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except share data)	2021		2020		2021		2020
Amounts for shares purchased	$	130	$	95	$	2,316	$	1,645
Shares purchased		1,526		2,010		27,675		35,093

Fair Value Estimation of Common Stock Using Black-Scholes Option Pricing Model, Assumptions

The fair value was estimated based on the market price of our common stock at the beginning of the offering period using the Black-Scholes option pricing model with the following assumptions:

Volatility	31.6	%
Dividend yield	0	%
Life (in years)	0.5
Risk-free interest rate	0.1	%

PSU, RSU, RSA, and DSU [Member]

PSU, RSU, RSA, and DSU

Our PSU, RSU, RSA, and DSU activity was as follows:

	Nine Months Ended September 30, 2021
				Weighted Average Grant
	#			Date Fair Value (per unit)
Outstanding, beginning of period		738,422		$	52.37
Granted		310,984			101.36
Vested and common stock issued		(323,030	)		42.67
Forfeited		(14,867	)		64.15
Outstanding, end of period		711,509			77.94

Other Income and Expense (Tables)

9 Months Ended

Sep. 30, 2021

Other Income And Expenses [Abstract]

Summary of Other Income (Expense), Net

Other income (expense), net included the following:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands)	2021			2020			2021			2020
Investment income	$	66		$	107		$	242		$	1,079
Realized gain (loss) from foreign currency on cash and investments held		(854	)		559			(1,492	)		686
Other income (expense), net		72			(243	)		(174	)		(475	)
Change in earn-out liability		—			—			—			(72	)
	$	(716	)	$	423		$	(1,424	)	$	1,218

Net Income Per Share (Tables)

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Components and Computation of Basic and Diluted Net Income Per Share

The components and computation of basic and diluted net income per share were as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2021		2020		2021		2020
Numerator
Net income	$	11,449	$	11,407	$	31,832	$	32,116
Denominator
Weighted average common shares outstanding, basic		35,961		35,295		35,873		35,133
Options to purchase common stock		520		578		533		596
PSUs, RSUs, RSAs, and DSUs		534		493		492		408
Weighted average common shares outstanding, diluted		37,015		36,366		36,898		36,137
Net income per share
Basic	$	0.32	$	0.32	$	0.89	$	0.91
Diluted	$	0.31	$	0.31	$	0.86	$	0.89

Schedule of Anti-dilutive Common Shares Excluded from Calculation of Diluted Net Income Per Share

The following table presents the number of outstanding potential common shares that were excluded from the calculation of diluted net income per share as they were anti-dilutive:

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(in thousands)	2021	2020	2021	2020
Antidilutive shares	34	8	46	203

Geographic Information (Tables)

9 Months Ended

Sep. 30, 2021

Summary of Domestic Revenue

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Domestic revenue		84	%		85	%		84	%		85	%

General - Additional Information (Detail) $ in Millions	Mar. 31, 2021 USD ($)
Data Masons [Member]
Schedule Of Accounting Policies [Line Items]
Business combination due from sellers related within initial net working capital adjustment	$ 0.3

Revenue - Summary of Revenues by Revenue Stream (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenue Recognition [Line Items]
Revenues	$ 97,887	$ 79,557	$ 282,520	$ 229,322
Recurring Revenues [Member]
Revenue Recognition [Line Items]
Revenues	90,399	75,185	260,140	216,436
One-time Revenues [Member]
Revenue Recognition [Line Items]
Revenues	7,488	4,372	22,380	12,886
Fulfillment [Member] \| Recurring Revenues [Member]
Revenue Recognition [Line Items]
Revenues	78,106	64,115	224,738	183,963
Analytics [Member] \| Recurring Revenues [Member]
Revenue Recognition [Line Items]
Revenues	10,858	9,826	31,383	28,809
Other [Member] \| Recurring Revenues [Member]
Revenue Recognition [Line Items]
Revenues	$ 1,435	$ 1,244	$ 4,019	$ 3,664

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

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