spsc-def14a_20220517.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 under §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 all boxes that apply):

 

No fee required

Fee paid previously with preliminary materials

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

    SPS COMMERCE, INC

 


 

 

 

333 South Seventh Street, Suite 1000

Minneapolis, Minnesota 55402

(612) 435-9400

April 4, 2022

Dear Stockholders:

You are cordially invited to join us for our 2022 annual meeting of stockholders, which will be held on Tuesday, May 17, 2022, at 8:00 a.m., Central Time. The meeting will be virtual and can be accessed by visiting the following website and entering your control number: www.virtualshareholdermeeting.com/SPSC2022. Stockholders will have the same opportunities to participate in the meeting as you would at an in-person meeting, including having the opportunity to vote and to submit a question during the meeting using the directions on the meeting website. You will not be able to attend the annual meeting physically in person.

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 virtual meeting, your vote is important and we encourage you to submit your proxy to vote your shares promptly. You may vote your shares by proxy by using a toll-free telephone number, the internet, or mail, free of charge. Instructions regarding these 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 2021 Annual Report on Form 10-K (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 more promptly, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials.

We look forward to having you attend the annual meeting.

Sincerely,

 

Archie Black

Chief Executive Officer

 

 

    SPS COMMERCE, INC

 


 

 

 

SPS Commerce, Inc.

333 South Seventh Street

Minneapolis, Minnesota 55402

 

Notice of 2022 Annual Meeting of Stockholders

 

 Time and Date

8:00 a.m., Central Time

Tuesday, May 17, 2022

 

Access

The meeting is virtual only. Join us via:

www.virtualshareholdermeeting.com/SPSC2022

 

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, 2022.

3.

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

4.

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 21, 2022.

Voting by Proxy – Whether or not you plan to attend the annual meeting virtually, 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 the internet as described in the Notice of Internet Availability of Proxy Materials and the proxy card. 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, or you may vote via telephone as described in the proxy card. 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.

 

By Order of the Board of Directors,

Archie Black

Chief Executive Officer

 

Important Notice regarding the availability of proxy materials for the Annual Meeting of Stockholders to be held on May 17, 2022:

The Notice of Annual Meeting, 2022 Proxy Statement, and 2021 Annual Report are available at www.proxyvote.com.

 

    SPS COMMERCE, INC

 


 

How to Vote

Whether or not you plan to attend the meeting virtually, 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.

All references to the “Plan” are in reference to the SPS Commerce, Inc. 401(k) Retirement Savings Plan.

 

 

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 proxy card, 24 hours a day, seven days a week, through 11:59 p.m. Eastern Time (“ET”) on May 16, 2022 for shares held directly, and through 11:59 p.m. ET on May 13, 2022 for shares held in the Plan.

 

Please have your 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 16, 2022 for shares held directly, and through 11:59 p.m. ET on May 13, 2022 for shares held in the 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 3, 2022 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.

    SPS COMMERCE, INC

 


Forward-Looking Statements

This proxy statement contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements regarding us, our business prospects and our results of operations are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement. Risks and uncertainties that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021, as may be updated in our subsequent Quarterly Reports on Form 10-Q. We expressly disclaim any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are urged to carefully review and consider the various disclosures made by us in this proxy statement and in our other filings with the SEC that advise interested parties of the risks and factors that may affect our business.

 

    SPS COMMERCE, INC

 


 

 

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

 

9

Nominees for Director

 

11

 

INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

 

15

Board Leadership Structure

 

15

Board Committees

 

15

Meeting Attendance

 

17

Board Involvement in Risk Oversight

 

17

Procedures for Contacting the Company, including the Board of Directors

 

17

Director Independence

 

18

Hedging, Pledging and Other Restricted Transactions

 

18

Procedures for Selecting and Nominating Director Candidates

 

18

Board Diversity

 

19

Director Compensation

 

20

 

EXECUTIVE COMPENSATION

 

22

Compensation Discussion and Analysis

 

22

Compensation & Talent Committee Report

 

29

2021 Summary Compensation Table

 

30

2021 Grants of Plan-Based Awards Table

 

31

Outstanding Equity Awards at Fiscal Year-End Table

 

32

2021 Options Exercised and Stock Vested Table

 

33

Pension Benefits

 

33

Non-Qualified Deferred Compensation

 

33

Employment Agreements

 

33

Potential Payments Upon Termination or Change-in-Control

 

34

CEO Pay Ratio

 

38

 

 

AUDIT COMMITTEE REPORT AND PAYMENT OF FEES TO OUR INDEPENDENT AUDITOR

 

39

Audit Committee Report

 

39

Auditor Fees

 

39

Auditor Services Pre-Approval Policy

 

40

 

ITEM 2 — RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR

 

41

 

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

 

42

 

SECURITY OWNERSHIP

 

43

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

 

43

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

45

Transactions with Related Persons

 

45

Policy for Approval of Related Person Transactions

 

45

 

OTHER INFORMATION

 

46

Delinquent Section 16(a) Reports

 

46

Stockholder Proposals for the 2023 Annual Meeting

 

46

Householding of Proxy Materials

 

46

Other Matters

 

46

 

APPENDIX A - Reconciliation of Non-GAAP Financial Measures

 

A-1

 

 

 

 

 

 

Unless the context otherwise requires, the words “we,” “us,” “our,” the “Company,” “SPS,” and “SPS Commerce” refer to SPS Commerce, Inc.

 

 

 

    SPS COMMERCE, INC.

1

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

proxy summary

This summary highlights our business overview, financial results and 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, 2021 are first being mailed to our stockholders on or about April 4, 2022. 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 Overview

We are a leading provider of cloud-based supply chain management services across our global retail network. Our products 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 omnichannel retail channels. SPS Commerce delivers our products using a full-service model whereby our internal experts monitor, update, and boost network performance on our customers’ behalf.

The services offered by SPS Commerce eliminate the need for on-premise software and support staff by taking on that capability on the customer’s behalf. The services SPS Commerce provides 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, ensuring that suppliers, grocers, distributors, and logistics firms can satisfy exacting retailer requirements.

Financial Results

2021 marked another year of strong execution and profitable growth for SPS Commerce, as retail dynamics continue to emphasize the need for fulfillment automation and supply chain efficiency. Once again, we achieved growth in recurring revenue, recurring revenue customers and wallet share while delivering strong revenue and Adjusted EBITDA increases. In 2021, we also achieved two major milestones, our first $100 million revenue quarter and the generation of over $100 million in Adjusted EBITDA for the year. Additional information regarding our performance is as follows.

 

Our revenues grew 23% from 2020, to $385.3 million for 2021. Recurring revenue grew 20% from 2020.

 

We had sequential revenue growth for all four quarters of 2021 and now have 84 consecutive quarters of sequential revenue growth.

 

Our wallet share (average recurring revenue per recurring revenue customer) increased 9% from 2020, and the number of recurring revenue customers grew 13% from December 31, 2020 to December 31, 2021.

 

We delivered Adjusted EBITDA of $107.0 million, compared to $87.0 million in 2020, and non-GAAP income per diluted share of $1.82 compared to $1.53 in 2020. Adjusted EBITDA margin was 28% in 2021, consistent with 2020.1

 

Our largest acquisition to date (Data Masons, December 2020) was successfully integrated into our business and we executed an additional strategic acquisition (Genius Central, November 2021).

 

We repurchased $20.4 million of our common shares in 2021.

 

1 Adjusted EBITDA, Adjusted EBITDA margin, 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.

 

    SPS COMMERCE, INC.

2

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

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 9

2.       

Ratification of the selection of KPMG LLP (“KPMG“) as independent auditor of SPS Commerce, Inc. for the fiscal year ending December 31, 2022.

 

“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 41

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 stockholder value.

 

Page 42

 

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 named proxy holders will vote your proxy for another candidate or candidates as may be nominated by the board of directors.

 

    SPS COMMERCE, INC.

3

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

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 17, 2022, 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 following:

 

1.

Election of directors;

 

2.

Ratification of the selection of our independent auditor for 2022; and

 

3.

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

 

Annual Meeting Voting Rights and Attendance

Who is entitled to vote at the meeting?

The board of directors has set March 21, 2022 as the record date for the annual meeting. If you were a stockholder of record at the close of business on March 21, 2022, you are entitled to vote at the meeting. As of the record date, 36,134,861 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 36,134,861 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 (virtually) and vote 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 virtually. The meeting is not being held in person due to public health and travel impacts of the coronavirus (COVID-19) pandemic. In addition, we believe

    SPS COMMERCE, INC.

4

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


that hosting the meeting online enables increased attendance and participation from locations around the world. The meeting has been designed to provide the same rights to participate as you would have at an in-person meeting.

What do I need to attend the meeting?

We will be hosting our meeting via live webcast. Stockholders can attend the meeting online at: www.virtualshareholdermeeting.com/SPSC2022. The webcast will begin at 8:00 a.m., Central Time. We encourage you to access the meeting prior to the start time. In order to participate in the meeting, you will need the 16-digit control number located on your Notice, on your proxy card or on the instructions that accompanied your proxy materials. A replay of the meeting will be publicly available on the Investor Relations page of our website for at least 30 days after the meeting.

How can I submit a question at the meeting?

If you would like to submit a question at the meeting, you may type your question into the dialog box provided at any point during the virtual meeting (until the floor is closed to questions). In order to allow us to answer questions from as many stockholders as possible, we limit each stockholder to one question. Questions and answers may be grouped by topic and substantially similar questions may be answered at once. If we do not have time to answer all the appropriate questions that have been submitted, we expect to post any additional questions and our answers on the Investor Relations page of our website promptly following the meeting and retain them for 30 days after the meeting.

What if I have technical difficulties or trouble accessing the meeting?

If you encounter any technical difficulties with accessing the virtual meeting, please call the technical support number that will be posted on the meeting website log-in page.

 

Information about the Notice and Proxy Materials

What is a proxy?

A proxy is a designation for 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 is called a form of 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, Archie Black and Kimberly Nelson, have been designated as proxies for our 2022 annual meeting of stockholders.

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 3, 2022 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

    SPS COMMERCE, INC.

5

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

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 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 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 do I vote?

See the “How to Vote” section earlier in this document for instructions on the different options on how to vote.

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, 2022; and

 

FOR advisory approval of the compensation of our named executive officers.

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, 2022; and

 

FOR advisory approval of the compensation of our named executive officers.

    SPS COMMERCE, INC.

6

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

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, 2022, 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, 2022, 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. ET on May 16, 2022 for shares held directly and before 11:59 p.m. ET on May 13, 2022 for shares held in a Plan;

 

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

 

by voting at the virtual meeting.

Can I vote my shares at the meeting?

If you are a stockholder of record or beneficial owner of common stock as of the close of business on the record date, you may vote your shares during the virtual meeting by using the 16-digit control number on your Notice, your proxy card, or your voting instruction form, as applicable, on www.virtualshareholdermeeting.com/SPSC2022. 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 at the annual meeting, the vote you submit at the meeting will override your proxy vote.

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 at the meeting or represented by proxy and entitled to vote at the annual meeting is required to ratify the selection of our independent auditor.

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.

 

    SPS COMMERCE, INC.

7

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

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, 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.

    SPS COMMERCE, INC.

8

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

ITEM 1 – ELECTION OF DIRECTORS

The board of directors currently consists of seven directors and the board has set the number of directors that will constitute the board as of the annual meeting at seven. Our Amended and Restated Bylaws provide that each member of our board is elected annually by a majority of votes cast if the election is uncontested. All of our directors were elected by our stockholders at our 2021 annual meeting of stockholders.

The following are directors who currently serve on our board of directors and those directors nominated for election.

Name

 

Age(1)

 

 

Position

 

Director Since

 

Independent

 

Nominated for Election(2)

Archie Black

 

 

60

 

 

Chief Executive Officer

 

2001

 

No

 

Yes

James Ramsey

 

 

49

 

 

Director

 

2014

 

Yes

 

Yes

Marty Reaume

 

 

56

 

 

Director

 

2018

 

Yes

 

Yes

Tami Reller

 

 

57

 

 

Chair of the Board(3)

 

2016

 

Yes

 

Yes

Philip Soran

 

 

65

 

 

Director(3)

 

2010

 

Yes

 

Yes

Anne Sempowski Ward

 

 

50

 

 

Director

 

2020

 

Yes

 

Yes

Sven Wehrwein

 

 

71

 

 

Director

 

2008

 

Yes

 

Yes

 

(1)

Age as of April 4, 2022

 

(2)

Nominated for election at the 2022 annual meeting for continued service on the board upon the recommendation of the Governance & Nominating Committee

 

(3)

Assuming he is re-elected for continued service on the board, effective at the annual meeting, Philip Soran will replace Tami Reller as the chair of the board

All nominated board members have agreed to serve as directors if elected. 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 2023 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 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 current and nominated directors. 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.

    SPS COMMERCE, INC.

9

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

 

Director Skills, Experience and Diversity

 

The Board strives for well-qualified directors, with the diversity, experience and background to be effective and to provide strong oversight and thought leadership to management and exercise oversight responsibilities on behalf of SPS shareholders. Each director brings experience and skills that complement those of the other directors. The Board believes that all the directors nominated for election are highly qualified, and have the attributes, skills and experience required for service on the board of directors.

 

 

Core skills, experiences, and statistics for each of our current directors are included in the summary graphics below. The lack of a skill or experience noted below does not mean the director does not possess that qualification but rather a noted skill or experience indicates a specific area of focus or expertise on which the Board relies most heavily.

 

 

Financial Literacy

Experience in overseeing and understanding financial statements, capital structure, and internal controls

  

SaaS

Experience in the Software-as-a-Service (SaaS) business model

  

Technology

Experience in managing and developing technology, including cybersecurity

  

Retail Market

Experience in our primary customer market, retailers

 

Senior Leadership / Corporate Governance

Experience in senior leadership or the direct management of corporate governance to assist in our organizational and operating structures, including risk management

      

Talent Management / Human Resources

Experience in the direct management of retaining and compensating people

    

Sales / Customer Engagement

Experience in the direct management of the sales or customer success organizational functions

    

Mergers & Acquisitions

Experience in the various phases of M&A work including target identification, due diligence, agreement negotiation and review, and integration

    

International Operations

Experience in the complex landscape of existing and growth into multi-national operations

 

The following charts provide self-identified information about our director nominees’ personal characteristics, including race/ethnicity, gender, and age, as well as tenure and independence, to illustrate the diversity of perspectives of our director nominees. More detailed information is provided in each director nominee’s biography beginning on the following page.

 

 

Average Age

58

 

Average Tenure*

7.7 years

 

*excludes non-independent director

 

 

    SPS COMMERCE, INC.

10

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

Nominees for Directors

 

Archie Black

Director since 2001

Chief Executive Officer, SPS Commerce, Inc.

 

 

 

 

Professional Highlights

 

Skills and Experiences

o     SPS Commerce, Inc., Chief Executive Officer, 2001 – present, President, 2001 – 2022, Senior Vice President and Chief Financial Officer, 1998 – 2001

o     Director, Proto Labs, Inc.

Publicly traded internet-enabled manufacturer of custom parts; Chairman since 2020

o     Investment Advisors, Inc., Senior Vice President and Chief Financial Officer, 1987 – 1998

International asset management firm

o     Price Waterhouse, Auditor, 1984 – 1987

International audit, tax, and consulting firm

o     Director on the Minnesota Business Partnership

Group of over 100 senior executives of Minnesota’s largest employers that works on a range of Minnesota based policy issues

 

 

 

 

 

     Financial Literacy

     SaaS

     Technology

     Retail Market

     Senior Leadership / Corporate Governance

     Talent Management / Human Resources

     Sales / Customer Engagement

     Mergers & Acquisitions

     International Operations

 

Primary Nominee Qualifications

Extensive management, financial, and operational experience as well as his experience with our Company.

 

James Ramsey

Director since 2014

 

 

 

 

Professional Highlights

 

Skills and Experiences

o     Director

    Informed IQ, a banking technology company

    Wisdom Labs, a workplace wellbeing technology company

    Ambra Health (formerly DicomGrid), a medical data and image management cloud software company

o     Vlocity Inc., Director, 2014 – 2020

Co-founder of the industry-specific cloud CRM application provider

o     NetSuite Inc., 2003 – 2013, Executive Vice President of Worldwide Sales and Distribution

Publicly traded provider of cloud-based business management software

o     Oracle Corporation, Various sales management roles, 1995 – 2003

Publicly traded software and technology provider

o     Flipgrid, Inc., Director, 2014 - 2019

Education technology software company

 

 

 

     SaaS

     Senior Leadership / Corporate Governance

     Talent Management / Human Resources

     Sales / Customer Engagement

     Mergers & Acquisitions

     International Operations

 

Primary Nominee Qualifications

Experience in software sales and in rapidly scaling sales organizations.

 

    SPS COMMERCE, INC.

11

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

 

Nominees for Directors

 

Marty Reaume

Director since 2018

 

 

 

 

Professional Highlights

 

Skills and Experiences

o    SemperVirens Venture Capital, HR Venture Advisor, 2020 – present

Early stage venture capital fund

o    Director

Wisdom Labs, a workplace wellbeing technology company

Ambra Health (formerly DicomGrid), a medical data and image management cloud software company

o    Twilio Inc., Chief People Officer, 2017 – 2019

Publicly traded developer and provider of a communication cloud-based platform

o    Fitbit, Inc., Chief People Officer, 2015 – 2017

Publicly traded health solution technology provider

o    NetSuite, Inc., Chief People Officer, 2009 – 2014; Head of Human Resources, 2006 – 2009

Publicly traded provider of cloud-based business management software

 

 

    SaaS

    Senior Leadership / Corporate Governance

    Talent Management / Human Resources

    Mergers & Acquisitions

    International Operations

 

Primary Nominee Qualifications

Strong human resources, talent acquisition and talent development expertise.

 

Tami Reller

Director since 2016

Chair of the board since 2018*

 

 

 

 

Professional Highlights

 

Skills and Experiences

o   Duly Health and Care, President, 2021 – present

Multi-specialty health care group

o    Director

    Avalara, a publicly traded automated tax compliance software company

o    UnitedHealth Group, Executive Vice President and Chief Marketing and Experience Officer, 2017 – 2021

Publicly traded health benefits and service platform

o    Optum, Chief Growth Officer, Chief Financial Officer, 2016 – 2017; Chief Marketing Officer, 2014 – 2016

Part of UnitedHealth Group, pharmacy benefit manager

o    Microsoft Corporation, 2001 – 2014, several executive roles including Executive Vice President of Marketing, Divisional Chief Financial Officer and Divisional Chief Marketing Officer

Publicly traded software and technology company

o    Great Plains Software, Chief Financial Officer, 1999 – 2001

Publicly traded accounting and ERP software provider

 

 

  

    Financial Literacy

    Technology

    Senior Leadership / Corporate Governance

    Mergers & Acquisitions

    International Operations

 

Primary Nominee Qualifications

Extensive experience managing software companies, financial understanding and auditing review, and general business knowledge.

* Assuming Philip Soran is re-elected for continued service on the board, effective at the annual meeting, Philip Soran will replace Tami Reller as the chair of the board

    SPS COMMERCE, INC.

12

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

Nominees for Directors

 

Philip Soran

Director since 2010

Former chair of the board, 2014 – 2017*

 

 

 

 

Professional Highlights

 

Skills and Experiences

o    Director

   Piper Sandler Companies, a publicly traded investment bank and asset management firm; Lead director since 2018

   Foodsby, a food delivery service

   Spineology Inc., a medical technology company

o    Flipgrid, Inc., Executive Chairman, 2015 – 2018

Co-founded education technology software company

o    Compellent Technologies, Inc., President/Chief Executive Officer, Director, 2002 – 2012

Co-founded publicly traded software company

o    Xiotech, President/Chief Executive Officer, 1995 – 2001

Co-founded network storage business

o    Claros Technologies, Inc., Director, 2020 – 2021

Advanced materials and environmental company

 

    Financial Literacy

    SaaS

    Technology

    Senior Leadership / Corporate Governance

    Talent Management / Human Resources

    Sales / Customer Engagement

    Mergers & Acquisitions

 

Primary Nominee Qualifications

Experience as a chief executive officer of a publicly traded company, service on a variety of public and private technology-related company boards, and experience in founding and building technology companies as well as corporate vision and operational knowledge.

* Assuming Philip Soran is re-elected for continued service on the board, effective at the annual meeting, Philip Soran will replace Tami Reller as the chair of the board

 

 

Anne Sempowski Ward

Director since 2020

 

 

 

 

Professional Highlights

 

Skills and Experiences

o     CURiO Brands, Chief Executive Officer and Chair, 2012 – present

Consumer goods provider

o     Director

   Vanda Pharmaceuticals, publicly traded biopharma company

o     The FORWARD Group, Chief Executive Officer, 2010 – 2012

Co-founded business consulting group

o     Johnson Publishing Company, President & Chief Operating Officer, 2007 – 2010

Media and beauty company

o     The Coca-Cola Company, Assistant Vice President, 2006 – 2007

Publicly traded multinational consumer goods provider

o     Procter & Gamble, Associate Marking Director, 1994 – 2006

Publicly traded multinational consumer goods provider

o     Spectrum Brands, Director, 2021

Publicly traded consumer goods provider

 

 

 

     Financial Literacy

     Retail Market

     Senior Leadership / Corporate Governance

     Talent Management / Human Resources

     Sales / Customer Engagement

     Mergers & Acquisitions

 

Primary Nominee Qualifications

Experience as a chief executive officer and brand builder in the high-growth consumer and retail environment, executive experience with consumer goods companies and extensive marketing, brand management, and operational leadership for companies across multiple sectors.

 

    SPS COMMERCE, INC.

13

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

Nominees for Directors

 

Sven Wehrwein

Director since 2008

 

 

 

 

Professional Highlights

 

Skills and Experiences

o     Independent financial consultant to emerging companies, 1999 – present

o     Over 35 years in accounting and finance roles as a certified public accountant (inactive), investment banker to emerging growth companies, chief financial officer, and audit committee chair

o     Director

   Atricure, Inc., publicly traded medical device company

   Proto Labs, Inc., publicly traded internet-enabled manufacturer of custom parts

o     Served as a director of the following publicly traded companies:

   Cogentix Medical, Inc., 2006 – 2016

   Compellent Technologies, Inc., 2007 – 2011

   Image Sensing Systems, Inc., 2006 – 2012

   Synovis Life Technologies, Inc., 2004 – 2012

   Vital Images, Inc., 1997 – 2011

 

 

 

     Financial Literacy

     SaaS

     Technology

     Senior Leadership / Corporate Governance

     Mergers & Acquisitions

 

Primary Nominee Qualifications

Capabilities in financial understanding, strategic planning, and auditing expertise, given his experiences in investment banking and in financial leadership positions.

 

 

 

    SPS COMMERCE, INC.

14

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

The board of directors conducts its business through meetings of the board established standing committees. Each of the standing committees has adopted and operates under a written charter, all of which are available within our corporate governance section of our investor relations portion of 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, that can also be found in the same section on our website. Additionally, our Corporate Governance Guidelines are also available in the same section on our website.

Board Leadership Structure

Archie Black serves as our Chief Executive Officer and our chair of the board is a non-employee independent director. 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.

Our current chair of the board is Tami Reller, who has served in that position since 2018. Effective at the annual meeting, assuming he is re-elected as a director, Philip Soran will replace Ms. Reller as our chair of the board. Mr. Soran previously served as our chair of the board from 2014 to 2017.

Board Committees

The board of directors has established an Audit Committee, a Compensation & Talent Committee, a Governance & Nominating Committee and a Finance & Strategy Committee. The following sets forth the membership of each of our committees as of March 21, 2022.

 

DIRECTOR

COMMITTEES

Audit

Compensation & Talent

Governance & Nominating

Finance &
Strategy

Archie Black

 

 

 

 

 

(1)

James Ramsey

 

 

 

 

Marty Reaume

 

 

 

 

Tami Reller

 

 

 

 

 

Philip Soran

 

 

 

Anne Sempowski Ward

 

 

 

 

Sven Wehrwein

 

 

 

 

Chair     Member  

 

 

 

 

(1)

Mr. Black is an ex-officio member of the Finance & Strategy 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.

 


    SPS COMMERCE, INC.

15

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

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

Audit Committee

Among other matters, our Audit Committee:

 

assesses management's processes for ensuring the quality and integrity of the Company's financial statements through oversight of the accounting and financial reporting process and audits of the financial statements;

 

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;

 

oversees our legal and regulatory compliance process;

 

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 and cash management policies; 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 of 1934.

Compensation & Talent Committee

Among other matters, our Compensation & Talent Committee:

 

reviews and approves, on an annual basis, the goals, and objectives relevant to our executive officer’s compensation;

 

assess and approves our Chief Executive Officer and other executive officers’ annual compensation, including salary, bonus, incentive and equity-based compensation, based on a review of executive officer performance evaluations, a review of peer company compensation programs, and external consultations;

 

administers the issuance of awards under our 2010 Equity Incentive Plan;

 

periodically reviews the compensation paid to our non-employee directors and recommends any adjustments in director compensation to our board of directors; and

 

reviews and provides guidance to management with respect to our human capital management policies, programs and strategies, including but not limited to those regarding talent recruitment, development and retention, health and safety, organizational culture, diversity, equity and inclusion, and compensation and benefits.

Governance & Nominating Committee

Among other matters, our Governance & 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;

 

oversees the evaluation of our board of directors;

 

reviews and recommends any modifications to our Corporate Governance Guidelines;

    SPS COMMERCE, INC.

16

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

 

recommends to the board succession plans for our Chief Executive Officer and other critical, senior management positions; and

 

discusses with management the Company’s objectives, policies, and efforts related to corporate responsibility matters (including sustainability, environmental, corporate citizenship, social, political, and public policy matters).

Finance & Strategy Committee

Our Finance & Strategy Committee assists the board of directors in matters involving certain finance and strategic matters, including, but not limited to, 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 the following meetings during 2021.

Committee

 

Meetings (#)

 

Audit

 

 

6

 

Compensation & Talent

 

 

6

 

Governance & Nominating

 

 

5

 

Finance & Strategy

 

 

2

 

Full Board of Directors

 

 

5

 

Each of our directors attended at least 75% of the meetings of the board of directors and the committees on which they served during 2021, and each of our directors attended our 2021 annual meeting.  

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 2021. 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, geographic, liquidity, legal and regulatory risks, to assess whether management has reasonable controls in place to address these risks. In addition, the Compensation & Talent Committee is charged with overseeing risks associated with our variable compensation policies and practices and annually reviews whether risks arising from our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on SPS. The board of directors believes this division of responsibilities provides an effective and efficient approach for addressing risk management.

Procedures for Contacting the Company, including the Board of Directors

Throughout this proxy statement, we identify reasons stockholders may need or wish to contact the Company.  All of those communications should be directed to the title of the person indicated at the address below.

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 delivered to the address below, with attention to “Secretary”.

    SPS COMMERCE, INC.

17

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

SPS Commerce, Inc.

333 South Seventh Street, Suite 1000

Minneapolis, Minnesota 55402

All communications addressed to the board 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.

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 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.

Hedging, Pledging and Other Restricted Transactions

Our directors, consistent with all of our employees and executives, 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.

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 16, 2023), nor earlier than the 120th day (January 17, 2023), prior to the first anniversary of the prior year’s annual meeting of stockholders. Your notice must set forth all information relating to the nominee that is required to be disclosed in solicitations of proxies for the election of

    SPS COMMERCE, INC.

18

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

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 at the meeting, or by proxy thereto, 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 & 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 & 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 & 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 the Company at the address listed above, to the attention of our 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.

Board Diversity

As of April 4, 2022, the diversity of our board was as follows:

Board Diversity Matrix

 

Total number of directors

7

 

 

 

 

 

 

 

Part I: Gender Identity

Female

 

Male

 

Directors

3

 

4

 

 

 

 

 

 

 

Part II: Demographic Background

 

 

 

 

 

African American or Black

1

 

 

-

 

White

2

 

4

 

    SPS COMMERCE, INC.

19

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

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 & Talent Committee periodically reviews the compensation arrangements for our non-employee directors and makes recommendations to our board of directors. In October 2020, the Compensation & Talent Committee, with the advice of its independent, external 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 & Talent Committee recommended, and the board approved, the components of our director compensation program as described below.

Equity Awards

For 2021, our director compensation program provided that each non-employee director receives a total grant of $175,000, compared to $170,000 in 2020. The compensation is split equally ($87,500) between stock options and the director’s election for restricted stock, deferred stock units or a combination thereof. The components are granted on the date of the annual meeting of stockholders, 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”). All grants vest in four equal installments on the last day of each fiscal quarter with the first vesting date occurring on June 30, 2021, provided the recipient remains a member of the board as of each of the vesting dates. Stock options have an exercise price equal to the fair market value of our common stock on the date of grant. 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.

Additionally, each new non-employee director also receives an initial stock option grant to purchase up to $175,000 of shares of our common stock in connection with initial appointment to the board, to be granted following the release of earnings for the quarter in which appointment occurs.

Cash Compensation

Non-employee directors receive cash fees in addition to the equity awards described above. In 2021, each non-employee director was paid the following cash retainers for roles served:

Membership

 

Chairperson

Annual Cash Fee

($)(1)

 

 

Non-Chair Member Annual Cash Fee

($)(1)

 

Board of Directors

 

 

61,000

 

 

 

31,000

 

Audit Committee

 

 

20,000

 

 

 

8,000

 

Compensation & Talent Committee

 

 

12,000

 

 

 

5,000

 

Finance & Strategy Committee

 

 

10,000

 

 

 

5,000

 

Governance & Nominating Committee

 

 

7,500

 

 

 

4,000

 

 

(1)

Directors receive pro-rata cash compensation for partial year membership(s)

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

    SPS COMMERCE, INC.

20

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

The table below sets forth the compensation provided to our non-employee directors during 2021.

2021 Director Compensation Table

 

 

 

Fees Earned or Paid in Cash

 

 

Stock Awards

 

 

Option Awards

 

 

Total

 

Name(1)

 

($)

 

 

($)(2)

 

 

($)(2)

 

 

($)

 

James Ramsey

 

 

43,500

 

 

 

87,422

 

 

 

87,479

 

 

 

218,401

 

Marty Reaume

 

 

47,000

 

 

 

87,422

 

 

 

87,479

 

 

 

221,901

 

Tami Reller

 

 

66,000

 

 

 

87,422

 

 

 

87,479

 

 

 

240,901

 

Philip Soran

 

 

52,084

 

 

 

87,422

 

 

 

87,479

 

 

 

226,985

 

Anne Sempowski Ward

 

 

38,400

 

 

 

87,422

 

 

 

257,456

 

 

 

383,278

 

Sven Wehrwein

 

 

55,616

 

 

 

87,422

 

 

 

87,479

 

 

 

230,517

 

Martin Leestma(3)

 

 

18,783

 

 

 

-

 

 

 

-

 

 

 

18,783

 

 

 

(1)

Mr. Black did not receive any separate compensation for his service as a director. His compensation for serving as our President and Chief Executive Officer is set forth under the “2021 Summary Compensation Table.”

 

(2)

Represents the grant date fair value of the stock and option awards granted during the year determined in accordance with ASC Topic 718. For a discussion of the relevant assumptions used to determine the valuation of our equity awards for financial reporting purposes, refer to Note A and Note L to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC on February 22, 2022.

 

(3)

Martin Leestma was a member of the board until the 2021 Annual Meeting of Stockholders in May 2021, upon which he resigned from the board.

Under our stock ownership guidelines, we require our non-employee directors to own shares of our common stock having a fair market value equal to five times the directors’ annual base cash retainer ($155,000 for 2021). 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. Currently, vested in-the-money options and vested restricted stock units count toward the ownership level, but effective January 1, 2027, unexercised stock options will not count toward the ownership level. As of March 21, 2022, 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.

As of December 31, 2021, the directors held shares of unvested restricted stock, options to purchase shares of our common stock, and vested options as follows:

 

 

 

 

 

 

Options

 

 

 

Unvested Restricted Stock

 

 

Total Outstanding

 

 

Number of Outstanding Options that Were Exercisable

 

Name

 

(#)

 

 

(#)

 

 

(#)

 

James Ramsey

 

 

234

 

 

 

37,048

 

 

 

36,333

 

Marty Reaume

 

 

234

 

 

 

29,520

 

 

 

28,805

 

Tami Reller

 

 

234

 

 

 

45,684

 

 

 

44,969

 

Philip Soran

 

 

234

 

 

 

32,542

 

 

 

31,827

 

Anne Sempowski Ward

 

 

234

 

 

 

8,093

 

 

 

4,035

 

Sven Wehrwein

 

 

234

 

 

 

11,128

 

 

 

10,413

 

 

    SPS COMMERCE, INC.

21

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Named Executive Officers

Our named executive officers for 2021 were the following (unchanged from 2020), who constitute all of our executive officers:

 

Archie Black

Kimberly Nelson

James Frome

President and

Chief Executive Officer(1)

Executive Vice President and

Chief Financial Officer

Executive Vice President and

Chief Operating Officer(1)

Executive since 1998

Executive since 2007

Executive since 2001

Age 59(2)

Age 54(2)

Age 57(2)

 

 

(1)

Effective January 2022, Mr. Frome was appointed our President and remains our Chief Operating Officer; Mr. Black remains our Chief Executive Officer.

 

(2)

Age as of December 31, 2021

Executive Summary

In 2021, the Compensation & Talent Committee took the following actions with respect to the compensation of our named executive officers:

 

increased base salary by an average of 3% in comparison to 2020;

 

increased the formula-based target incentive plan bonus opportunity by an average of 3% in comparison to 2020; and

 

approved equity award packages comprised of the following components:

 

o

performance stock unit awards (“PSUs”) that are earned and vest over a three-year period based on a comparison of our stock performance relative to that of the Russell 2000; and

 

o

restricted stock units (“RSUs”) that generally vest over a four-year period.

Each of the primary elements of our executive compensation program is discussed in more detail below. See the chart below for the proportion of fixed and at-risk components of named executive officer compensation during 2021, including a further breakout of what components made up at-risk compensation.

 

 

    SPS COMMERCE, INC.

22

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

Compensation Objectives and Process

Historically and in 2021, our Compensation & Talent Committee (referred to in this Compensation Discussion and Analysis section as the “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 Committee. Our Committee engages Compensia, Inc. (“Compensia”), a national independent compensation consultant, to help evaluate our compensation philosophy and provide guidance in administering our compensation program. Our Committee has determined that Compensia is independent and the services provided by Compensia do not raise any conflict of interests.

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 at-risk (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. We provide compensation to our named executive officers through a combination of base salary, incentive compensation, and equity awards (RSUs and PSUs under our 2010 Equity Incentive Plan). While our program emphasizes at-risk, performance, and equity-based compensation as compared to fixed compensation (base salary), we do not have specific policies governing the allocation of the target total direct compensation opportunity among its various components or overall amounts.

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, 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.

Say-on-Pay

Our Committee considers the results of the stockholders’ advisory vote on the compensation of our named executive officers. At our 2021 Annual Meeting of Stockholders, our say-on-pay proposal received “FOR” votes that represented approximately 96.5% of the shares voted on this proposal. The Committee considered the results of the say-on-pay vote when evaluating our compensation practices and policies and when setting the compensation of our named executive officers for 2021 and decided not to make any significant changes to our executive compensation program. The Committee believes that the significant support for the prior year say-on-pay proposal demonstrates stockholders’ support of our compensation program, policies, and practices.

Policies and Practices

We maintained the following compensation policies and practices in 2021:

 

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 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.

    SPS COMMERCE, INC.

23

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

 

Independent Compensation Consultant Engaged. Our 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 executive officers, and directors 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 three to four year periods, 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.

 

Clawback Policy. We require 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.

Peer Group

Our Committee determines executive compensation, in part, by reference to the compensation information for the executives of a peer group of comparable companies. For purposes of 2021 compensation, our Committee reviewed an updated version of the formal compensation study and executive compensation market assessment prepared in 2020 by Compensia. The competitive market data used in the Compensia study was gathered from our compensation peer group, which consisted of the following US-based technology companies of similar size:  

 

2U

Q2 Holdings

8x8

Qualys

Appian

Rapid7

Five9

SailPoint Technologies Holdings

HealthStream

Talend S.A.

LivePerson

Upland Software

Model N

Varonis Systems

Paylocity Holdings

Workiva

PROS Holdings

Zuora

 

In comparison to the prior year peers, we replaced four companies. We removed Benefitfocus since that company has a market capitalization value significantly below our comparison range. We also removed Carbonite, Instructure, and Monotype Holdings, because they had been acquired and are no longer publicly traded. We added Sailpoint Technologies, Talend S.A, Upland Software, and Zuora because they met our selection criteria, including being software companies with trailing four quarter revenue between 50% and 200% of our trailing four quarter

    SPS COMMERCE, INC.

24

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

revenue and with a market capitalization range of between 30% and 300% of our market capitalization at the time of review.

 

Data from the compensation peer group is valuable to the 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 Committee does not use a single method or measure in setting or approving the target total direct compensation opportunities for 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 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 Committee and our board of directors;

 

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 their contributions to our overall performance and ability to lead their 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 Chief Executive Officer’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 Chief Executive Officer regarding the compensation of our other executive officers, as described above.

These factors provide the framework for decision-making by the 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. Initially at the time of their hire, base salaries for each of our named executive officers were established based on arm’s-length negotiations between us and the executive. Our Committee reviews the base salaries of our named executive officers annually at the beginning of each year. When negotiating or reviewing base salaries, the 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. Based on such factors, the Committee set base salaries for our named executive officers as follows:

 

Name

 

2021 Base Salary ($)

 

 

2020 Base Salary ($)

 

 

Increase

 

Archie Black

 

 

523,000

 

 

 

523,000

 

 

 

-

 

Kimberly Nelson

 

 

385,000

 

 

 

374,000

 

 

 

3

%

James Frome

 

 

400,000

 

 

 

374,000

 

 

 

7

%

    SPS COMMERCE, INC.

25

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

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 Committee at the beginning of each year. The 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 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 Committee that takes into account our revenues and earnings before interest, taxes, depreciation and amortization and stock-based compensation, and other adjustments (“Adjusted EBITDA”).{A}

The formula-based bonus is based in part on revenues because, given the scalability of our current core business, the Committee believes revenue growth has the most significant impact on our financial results. The 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 2021 provided that each executive would receive a percentage of his or her target formula-based bonus, between zero and 190%, based on our actual revenues and Adjusted EBITDA performance for the year.

The Committee had the discretion to adjust the pre-established thresholds for revenues and Adjusted EBITDA in the event we completed any acquisitions during the year. The Committee exercised such discretion for 2021 and adjusted thresholds for both revenue and Adjusted EBITDA to account for the impact of the Genius Central Systems Inc. acquisition.

The Committee approved 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 2021. As a result of 2021 operating results, the formula-based bonus for each named executive officer was determined to be earned at 176% of the target amount. See below for the summary of the incentive factor thresholds, actual results, and corresponding earned incentive for 2021, paid in 2022:

 

Incentive Factors

 

Minimum Incentive Threshold (1)

 

 

Target Incentive Threshold

 

 

Maximum Incentive Threshold

 

 

Actual Results

 

Revenue

 

$

363,100,000

 

 

$

368,700,000

 

 

$

374,300,000

 

 

$

385,276,000

 

Adjusted EBITDA{A}

 

$

101,200,000

 

 

$

101,200,000

 

 

$

108,200,000

 

 

$

107,015,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Party

 

Minimum Incentive (1)

 

 

Target Incentive

 

 

Maximum Incentive

 

 

Earned Incentive

 

Archie Black

 

$

313,800

 

 

$

523,000

 

 

$

993,700

 

 

$

920,480

 

Kimberly Nelson

 

$

173,250

 

 

$

288,750

 

 

$

548,625

 

 

$

508,200

 

James Frome

 

$

240,000

 

 

$

400,000

 

 

$

760,000

 

 

$

704,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021 Proportion of Target

 

 

60

%

 

100%

 

 

 

190

%

 

 

176

%

 

 

(1)

If either the minimum revenue or Adjusted EBITDA threshold was not achieved, zero incentive would have been earned.

 

{A} 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.

 


    SPS COMMERCE, INC.

26

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

Equity Awards

The equity awards granted to our named executive officers reflect the pay levels our Committee believes are appropriate relative to the market data, each executive’s individual performance, and maintaining an overall competitive compensation package. We believe equity awards are an important element of compensation because they provide our executives an ownership interest in our Company, which helps align their interests with those of other stockholders. In the future, we anticipate that equity compensation 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. When determining the size of the equity award for our named executive officers, our Committee considers the executive’s position and responsibilities, the equity holdings of our other executives, competitive market data, Chief Executive Officer recommendations for the other executives, and the anticipated future contribution the executive will make to our success. See below for the mix of equity awards types granted to our named executive officers.

 

Equity Award Type

 

2021 Average Equity Award Package Proportion

 

 

2020 Average Equity Award Package Proportion

 

 

Change

 

RSUs

 

 

46

%

 

 

44

%

 

 

2

%

PSUs

 

 

54

%

 

 

56

%

 

 

-2

%

The vesting of granted equity awards 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.”

RSUs

RSUs generally vest over four years and provide a strong retention component to the compensation program as they require the executives to maintain continuous employment with us in order for the awards to vest.

PSUs

PSUs are earned over a three-year 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 are achieved.

The granted PSUs 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 the applicable performance period. The Index was selected because it is a major, broad index of stocks of which we are a component and many members are similar in size to SPS. The three-year period was designed to provide a long term performance period to align management compensation with long term stockholder returns. The following table sets forth the TSR targets for PSUs granted to our named executive officers in 2019 – 2021:

 

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% (threshold)

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

 

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.

 

    SPS COMMERCE, INC.

27

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

In early 2022, the Committee certified results for the 2019 – 2021 performance period for PSUs granted in 2019. Based on the Company’s TSR achieved relative to the Index TSR, the maximum threshold was achieved and the maximum shares vested in 2022. See below for the calculation of the earned PSUs.

Performance Period: 2019 – 2021

 

Company TSR

 

242

%

Index TSR

 

58

%

Company TSR in excess of Index TSR

 

184

%

Percent of Target PSUs Earned

(maximum) 200

%

The earned but unvested shares are included in the “Outstanding Equity Awards at Fiscal Year-End” Table.

Stock Ownership Guidelines

Under our stock ownership guidelines, our named executive officers are required to beneficially own the following shares of common stock relative to their annual base salary:

Name

 

Common Stock Ownership Requirement Relative to Base Salary

Chief Executive Officer

 

3x

Other Executive Officers

 

1x

A named executive officer has five years from the date they become subject to the ownership guidelines to achieve compliance with the guidelines. Until a named executive officer has achieved compliance with the ownership guidelines, the individual must retain 50% of the net shares acquired upon exercise, vesting or settlement of any equity award. Each of our named executive officers was in compliance with our stock ownership guidelines as of March 21, 2022.

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. Participants can contribute up to 80% of their compensation, subject to the limits established by law, and we match 50% of the participants’ contribution up to the first 6% of pre-tax annual compensation. A portion of our match is in Company stock, which is purchased in the open market by our plan administrator and immediately deposited into the participants’ 401(k) account.

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 and retain 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

Under Section 162(m) of the Internal Revenue Code (the “Code”), compensation paid to our named executive officers in excess of $1 million is not deductible. The 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 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.

    SPS COMMERCE, INC.

28

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

Compensation & Talent Committee Report

We have reviewed and discussed the Compensation Discussion and Analysis with management. We have 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 & Talent Committee of the Board of Directors of SPS Commerce, Inc.

Marty Reaume, Chair

Philip Soran

James Ramsey

 

    SPS COMMERCE, INC.

29

Proxy Statement for the 2022 Annual Meeting of Stockholders

 


 

 

2021 Summary Compensation Table*

The following table provides information regarding the compensation paid to and earned by our named executive officers in 2021, 2020, and 2019:

Name and Principal Position

 

Year

 

Salary ($)

 

 

Bonus ($)

 

Stock Awards ($)(1)

 

 

Option Awards ($)(1)

 

 

Non-Equity Incentive Plan Compensation ($)

 

 

All Other Compensation ($)(2)

 

 

Total ($)

 

Archie Black

 

2021

 

 

523,000

 

 

 

 

5,241,434

 

 

 

 

 

920,480

 

 

 

8,550

 

 

 

6,693,464

 

Chief Executive Officer and

 

2020

 

 

523,000

 

 

 

 

3,892,234

 

 

 

 

 

387,020

 

 

 

8,550

 

 

 

4,810,804

 

President(3)

 

2019

 

 

495,000

 

 

 

 

2,015,896

 

 

 

600,024

 

 

 

542,900

 

 

 

8,400

 

 

 

3,662,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kimberly Nelson

 

2021

 

 

385,000

 

 

 

 

2,821,974

 

 

 

 

 

508,200

 

 

 

8,700

 

 

 

3,723,874

 

Executive Vice President and

 

2020

 

 

374,000

 

 

 

 

1,658,387

 

 

 

 

 

207,940

 

 

 

8,550

 

 

 

2,248,877

 

Chief Financial Officer

 

2019

 

 

345,000

 

 

 

 

1,028,762

 

 

 

306,259

 

 

 

317,200

 

 

 

8,400

 

 

 

2,005,621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James Frome

 

2021

 

 

400,000

 

 

 

 

2,821,974

 

 

 

 

 

704,000

 

 

 

8,700

 

 

 

3,934,674

 

Executive Vice President and

 

2020

 

 

374,000

 

 

 

 

1,658,387

 

 

 

 

 

276,760

 

 

 

8,550

 

 

 

2,317,697

 

Chief Operating Officer(3)

 

2019

 

 

360,000

 

 

 

 

1,175,712

 

 

 

350,005

 

 

 

329,400

 

 

 

8,400

 

 

 

2,223,517

 

 

(1)

Represents the grant date fair value of the stock and option awards granted during the year determined in accordance with ASC Topic 718. For a discussion of the relevant assumptions used to determine the valuation for our equity awards for financial reporting purposes, refer to Note A and Note L to the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K filed on February 22, 2022. The grant date fair value of the stock-based awards granted in 2021 are as follows:

 

Name

 

RSUs ($)

 

 

PSUs ($){A}

 

 

Total ($)

 

Archie Black

 

 

2,388,495

 

 

 

2,852,939

 

 

 

5,241,434

 

Kimberly Nelson

 

 

1,285,951

 

 

 

1,536,023

 

 

 

2,821,974

 

James Frome

 

 

1,285,951

 

 

 

1,536,023

 

 

 

2,821,974

 

 

{A} Represents the value of PSUs granted in 2021 at the target level. The maximum value of PSUs granted in 2021 for each named executive officer is as follows:

Name

 

Maximum PSUs ($)

 

Archie Black

 

 

5,705,878

 

Kimberly Nelson

 

 

3,072,045

 

James Frome

 

 

3,072,045

 

 

(2)

Represents matching contributions under our 401(k) plan.

(3)

Effective January 2022, Mr. Frome was appointed our President and remains our Chief Operating Officer; Mr. Black remains our Chief Executive Officer.

*

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.


    SPS COMMERCE, INC.

30

Proxy Statement for the 2022 Annual Meeti