SEC Filing | SPS Commerce, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission file number 001-34702

SPS COMMERCE, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

41-2015127

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

333 South Seventh Street, Suite 1000, Minneapolis, MN 55402

(Address of principal executive offices, including Zip Code)

(612) 435-9400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of exchange on which registered
Common Stock, par value $0.001 per share		SPSC		The Nasdaq Stock Market LLC (Nasdaq Global Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding at April 21, 2022 was 36,095,129 shares.

Table of Contents

SPS COMMERCE, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Comprehensive Income	4

	Condensed Consolidated Statements of Stockholders’ Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Mine Safety Disclosures	24

Item 5.	Other Information	24

Item 6.	Exhibits	25

SIGNATURES		26

Unless the context otherwise requires, for purposes of the Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” the “Company,” “SPS,” and “SPS Commerce” refer to SPS Commerce, Inc.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

PART I. – FINANCIAL INFORMATION

Item 1.Financial Statements

SPS COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
(in thousands, except shares)	2022			2021
ASSETS	(unaudited)
Current assets
Cash and cash equivalents	$	203,088		$	207,552
Short-term investments		39,968			49,758
Accounts receivable		43,065			38,811
Allowance for credit losses		(4,287	)		(4,249	)
Accounts receivable, net		38,778			34,562
Deferred costs		46,710			44,529
Other assets		22,923			16,042
Total current assets		351,467			352,443
Property and equipment, net		32,261			31,901
Operating lease right-of-use assets		10,248			10,851
Goodwill		144,162			143,663
Intangible assets, net		56,158			58,587
Other assets
Deferred costs, non-current		15,900			15,191
Deferred income tax assets		199			182
Other assets, non-current		2,913			3,028
Total assets	$	613,308		$	615,846
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	4,731		$	8,330
Accrued compensation		21,930			31,661
Accrued expenses		6,632			8,345
Deferred revenue		56,798			50,428
Operating lease liabilities		4,337			4,108
Total current liabilities		94,428			102,872
Other liabilities
Deferred revenue, non-current		5,123			5,144
Operating lease liabilities, non-current		15,338			16,426
Deferred income tax liabilities		6,898			7,145
Total liabilities		121,787			131,587
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding		—			—
Common stock, $0.001 par value; 110,000,000 shares authorized; 38,031,415 and 37,798,610 shares issued; and 36,120,518 and 36,009,257 shares outstanding, respectively		38			38
Treasury Stock, at cost; 1,910,897 and 1,789,353 shares, respectively		(100,903	)		(85,677	)
Additional paid-in capital		442,405			433,258
Retained earnings		150,690			138,087
Accumulated other comprehensive loss		(709	)		(1,447	)
Total stockholders’ equity		491,521			484,259
Total liabilities and stockholders’ equity	$	613,308		$	615,846

See accompanying notes to these condensed consolidated financial statements.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

SPS COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended
	March 31,
(in thousands, except per share amounts) (unaudited)	2022			2021
Revenues	$	105,193		$	90,094
Cost of revenues		35,389			29,970
Gross profit		69,804			60,124
Operating expenses
Sales and marketing		24,655			21,355
Research and development		10,701			8,706
General and administrative		15,468			14,737
Amortization of intangible assets		2,470			2,664
Total operating expenses		53,294			47,462
Income from operations		16,510			12,662
Other income (expense), net		423			(325	)
Income before income taxes		16,933			12,337
Income tax expense		4,330			2,137
Net income	$	12,603		$	10,200
Other comprehensive income
Foreign currency translation adjustments		730			192
Unrealized loss on investments, net of tax of ($1) and ($15)		(3	)		(45	)
Reclassification of loss on investments into earnings, net of tax of $4 and $19		11			57
Total other comprehensive income		738			204
Comprehensive income	$	13,341		$	10,404

Net income per share
Basic	$	0.35		$	0.29
Diluted	$	0.34		$	0.28

Weighted average common shares used to compute net income per share
Basic		36,136			35,751
Diluted		36,989			36,722

See accompanying notes to these condensed consolidated financial statements.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

SPS COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

															Accumulated
											Additional				Other			Total
	Common Stock					Treasury Stock					Paid-in		Retained		Comprehensive			Stockholders'
(in thousands, except shares) (unaudited)	Shares			Amount		Shares		Amount			Capital		Earnings		Loss			Equity
Balances, December 31, 2020		35,487,217		$	37		1,613,250	$	(65,247	)	$	393,462	$	93,490	$	(1,021	)	$	420,721
Stock-based compensation		—			—		—		—			6,491		—		—			6,491
Shares issued pursuant to stock awards		372,746			—		—		—			2,802		—		—			2,802
Employee stock purchase plan activity		1,621			—		—		—			105		—		—			105
Net income		—			—		—		—			—		10,200		—			10,200
Foreign currency translation adjustments		—			—		—		—			—		—		192			192
Unrealized loss on investments, net of tax		—			—		—		—			—		—		(45	)		(45	)
Reclassification of loss on investments into earnings, net of tax		—			—		—		—			—		—		57			57
Balances, March 31, 2021		35,861,584		$	37		1,613,250	$	(65,247	)	$	402,860	$	103,690	$	(817	)	$	440,523

Balances, December 31, 2021		36,009,257		$	38		1,789,353	$	(85,677	)	$	433,258	$	138,087	$	(1,447	)	$	484,259
Stock-based compensation		—			—		—		—			8,496		—		—			8,496
Shares issued pursuant to stock awards		231,107			—		—		—			504		—		—			504
Employee stock purchase plan activity		1,698			—		—		—			147		—		—			147
Repurchases of common stock		(121,544	)		—		121,544		(15,226	)		—		—		—			(15,226	)
Net income		—			—		—		—			—		12,603		—			12,603
Foreign currency translation adjustments		—			—		—		—			—		—		730			730
Unrealized loss on investments, net of tax		—			—		—		—			—		—		(3	)		(3	)
Reclassification of loss on investments into earnings, net of tax		—			—		—		—			—		—		11			11
Balances, March 31, 2022		36,120,518		$	38		1,910,897	$	(100,903	)	$	442,405	$	150,690	$	(709	)	$	491,521

See accompanying notes to these condensed consolidated financial statements.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

SPS COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31,
(in thousands) (unaudited)	2022			2021
Cash flows from operating activities
Net income	$	12,603		$	10,200
Reconciliation of net income to net cash provided by operating activities
Deferred income taxes		(269	)		163
Depreciation and amortization of property and equipment		3,864			3,765
Amortization of intangible assets		2,470			2,664
Provision for credit losses		1,144			1,205
Stock-based compensation		9,015			6,925
Other, net		(7	)		76
Changes in assets and liabilities
Accounts receivable		(5,563	)		(2,828	)
Deferred costs		(2,797	)		(986	)
Other current and non-current assets		(6,736	)		(2,257	)
Accounts payable		(3,229	)		(828	)
Accrued compensation		(10,495	)		(2,988	)
Accrued expenses		(1,746	)		(1,052	)
Deferred revenue		6,349			7,565
Operating leases		(256	)		(19	)
Net cash provided by operating activities		4,347			21,605
Cash flows from investing activities
Purchases of property and equipment		(4,355	)		(3,263	)
Purchases of investments		(54,977	)		(14,039	)
Maturities of investments		65,000			12,500
Net cash provided by (used in) investing activities		5,668			(4,802	)
Cash flows from financing activities
Repurchases of common stock		(15,226	)		—
Net proceeds from exercise of options to purchase common stock		504			2,802
Net proceeds from employee stock purchase plan activity		147			105
Payment for contingent consideration		—			(164	)
Net cash provided by (used in) financing activities		(14,575	)		2,743
Effect of foreign currency exchange rate changes		96			36
Net increase (decrease) in cash and cash equivalents		(4,464	)		19,582
Cash and cash equivalents at beginning of period		207,552			149,692
Cash and cash equivalents at end of period	$	203,088		$	169,274

See accompanying notes to these condensed consolidated financial statements.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

SPS COMMERCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A – General

Business Description

SPS Commerce is 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 we provide 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, to help ensure that suppliers, grocers, distributors, and logistics firms can satisfy exacting retailer requirements.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of SPS Commerce, Inc. and its subsidiaries. All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

This interim financial information has been prepared under the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”). We have included all normal recurring adjustments considered necessary to provide a fair presentation of our financial position, results of operations, stockholders’ equity, and cash flows for the interim periods presented. Operating results for these interim periods are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Significant Accounting Policies

There were no material changes in our significant accounting policies during the three months ended March 31, 2022. See Note A to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC, for additional information regarding our significant accounting policies.

Accounting Pronouncements Not Yet Adopted

Standard

Date of Issuance

Description

Date of Required

Adoption

Effect on the Financial Statements

ASU 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

October 2021

This amendment requires that an acquirer recognize and

measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, effective for all business combinations in the year of adoption and thereafter.

January 2023

The adoption of this standard may have a material impact on the purchase accounting for business combinations depending on the specific amount of contract assets and liabilities being acquired.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

NOTE B – Revenue

We derive our revenues from the following revenue streams:

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Recurring revenues:
Fulfillment	$	84,731	$	71,404
Analytics		11,296		10,144
Other		1,540		1,253
Recurring revenues		97,567		82,801
One-time revenues		7,626		7,293
Total revenue	$	105,193	$	90,094

Revenues are the amount that reflects the consideration we are contractually and legally entitled to, as well as expect to collect, in exchange for those services.

Recurring Revenues

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

Given that the recurring revenue contracts are for one year or less, we have applied the optional exemption to not disclose information about the remaining performance obligations for recurring revenue contracts.

One-time Revenues

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

Set-up revenues

Set-up fees are specific for each connection a customer has with a trading partner. These nonrefundable fees are necessary for our customers to utilize our services and do not provide any standalone value. Many of our customers have connections with numerous trading partners.

Set-up fees constitute a material renewal option right that provide customers a significant future incentive that would not be otherwise available to that customer unless they entered into the contract, as the set-up fees will not be incurred again upon contract renewal. As such, set-up fees and related costs are deferred and recognized ratably over two years, which is the estimated period for which a material right is present for our customers.

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

	Three Months Ended
	March 31,
(in thousands)	2022			2021
Balance, beginning of period	$	14,459		$	11,118
Invoiced set-up fees		4,003			3,867
Recognized set-up fees		(3,524	)		(2,883	)
Balance, end of period	$	14,938		$	12,102

The entire balance of deferred set-up fees will be recognized within two years. Those that will be recognized within the next year are classified as current, whereas the remainder are classified as non-current.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

Miscellaneous one-time revenues

Miscellaneous one-time fees consist of professional services and testing and certification.

The contract period for these one-time fees is for one year or less and recognized at the time service is provided. We have applied the optional exemption to not disclose information about the remaining performance obligations for miscellaneous one-time fee contracts since they have original durations of one year or less.

NOTE C – Deferred Costs

The deferred costs activity was as follows:

	Three Months Ended
	March 31,
(in thousands)	2022			2021
Balance, beginning of period	$	59,720		$	50,595
Incurred deferred costs		17,781			13,427
Amortized deferred costs		(14,891	)		(12,482	)
Balance, end of period	$	62,610		$	51,540

NOTE D – Financial Instruments

Cash equivalents and investments

Cash equivalents and investments consisted of the following:

	March 31, 2022							December 31, 2021
(in thousands)	Amortized Cost		Unrealized Losses, net			Fair Value		Amortized Cost		Unrealized Gains (Losses), net			Fair Value
Cash equivalents:
Money market funds	$	135,238	$	—		$	135,238	$	138,205	$	—		$	138,205
Certificates of deposit		7,497		—			7,497		7,268		—			7,268
Marketable securities:
Commercial paper		29,976		(3	)		29,973		34,984		7			34,991
U.S. treasury securities		2,500		(2	)		2,498		7,500		(1	)		7,499
	$	175,211	$	(5	)	$	175,206	$	187,957	$	6		$	187,963

Recurring fair value measurements

The following table details the fair value hierarchy of our assets and liabilities measured at a fair value on a recurring basis:

	March 31, 2022								December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	135,238	$	—	$	—	$	135,238	$	138,205	$	—	$	—	$	138,205
Certificates of deposit		7,497		—		—		7,497		7,268		—		—		7,268
Marketable securities:
Commercial paper		—		29,973		—		29,973		—		34,991		—		34,991
U.S. treasury securities		—		2,498		—		2,498		—		7,499		—		7,499
	$	142,735	$	32,471	$	—	$	175,206	$	145,473	$	42,490	$	—	$	187,963

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

See Note E to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC, for additional information regarding the three levels of inputs that may be used to measure fair value.

NOTE E – Allowance for Credit Losses

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

	Three Months Ended
	March 31,
(in thousands)	2022			2021
Balance, beginning of period	$	4,249		$	4,233
Provision for credit losses		1,144			1,205
Write-offs, net of recoveries		(1,106	)		(1,437	)
Balance, end of period	$	4,287		$	4,001

NOTE F – Property and Equipment, Net

Property and equipment, net consisted of the following:

(in thousands)	March 31, 2022			December 31, 2021
Internally developed software	$	48,013		$	44,981
Computer equipment		30,609			29,329
Leasehold improvements		16,693			16,685
Office equipment and furniture		10,963			10,972
Property and equipment, cost		106,278			101,967
Less: accumulated depreciation and amortization		(74,017	)		(70,066	)
Total property and equipment, net	$	32,261		$	31,901

NOTE G – Goodwill and Intangible Assets, Net

Goodwill

The activity in goodwill was as follows:

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Balance, beginning of period	$	143,663	$	134,853
Foreign currency translation		499		142
Remeasurement from provisional purchase accounting amount		—		268
Balance, end of period	$	144,162	$	135,263

Intangible Assets

Intangible assets, net consisted of the following:

	March 31, 2022
										Weighted Average
	Gross					Foreign				Remaining
	Carrying		Accumulated			Currency				Amortization
(in thousands, except weighted average amortization period)	Amount		Amortization			Translation		Net		Period
Subscriber relationships	$	45,162	$	(16,569	)	$	41	$	28,634	6 years
Acquired technology		33,900		(6,376	)		—		27,524	7 years
	$	79,062	$	(22,945	)	$	41	$	56,158	7 years

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

	December 31, 2021
											Weighted Average
	Gross					Foreign					Remaining
	Carrying		Accumulated			Currency					Amortization
(in thousands, except weighted average amortization period)	Amount		Amortization			Translation			Net		Period
Subscriber relationships	$	61,270	$	(29,866	)	$	(1,395	)	$	30,009	6 years
Acquired technology		35,316		(6,738	)		—			28,578	7 years
	$	96,586	$	(36,604	)	$	(1,395	)	$	58,587	7 years

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

(in thousands)
Remainder of 2022	$	7,431
2023		9,831
2024		8,535
2025		8,396
2026		7,392
Thereafter		14,573
Total future amortization	$	56,158

NOTE H – Commitments and Contingencies

Leases

The components of lease expense were as follows:

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Operating lease cost	$	759	$	540
Variable lease cost		793		768
	$	1,552	$	1,308

Supplemental cash flow information related to leases was as follows:

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,095	$	521

Supplemental balance sheet information related to leases was as follows:

	March 31, 2022			December 31, 2021
Weighted-average remaining lease term - operating leases	4.6 years			4.8 years
Weighted-average discount rate - operating leases		4.0	%		4.0	%

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

At March 31, 2022, our future minimum payments under operating leases were as follows:

(in thousands)
Remainder of 2022		3,780
2023		4,698
2024		4,265
2025		3,861
2026		3,774
Thereafter		1,270
Total future gross payments		21,648
Less: imputed interest		(1,973	)
Total operating lease liabilities	$	19,675

Purchase Commitments

We have entered into separate noncancelable agreements with computing infrastructure and customer relationship management vendors for services through 2023. At March 31, 2022, the total remaining purchase commitments were $8.0 million.

NOTE I – Stockholders’ Equity

Stock Repurchase Programs

Our board of directors has authorized multiple non-concurrent programs to repurchase our common stock. Details of the plans and activity thereunder were as follows:

	Effective Date	Expiration Date	Share Value Authorized for Repurchase		Share Value Repurchased		Unused & Expired Share Repurchase Value		Share Value Available for Future Repurchase
2019 Program	November 2019	November 2021	$	50,000,000	$	29,611,000	$	20,389,000	N/A
2021 Program	November 2021	November 2023		50,000,000		24,995,000	N/A		$	25,005,000

The stock repurchase activity by period was as follows:

	Three Months Ended
	March 31,
	2022		2021
Shares repurchased cost	$	15,226,000	$	-
Number of shares repurchased		121,544		-

Average price per repurchased share	$	125.27	$	-

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

NOTE J – Stock-Based Compensation

Our equity compensation plans provide for the grant of incentive and nonqualified stock options, as well as other stock-based awards including performance share units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and deferred stock units (“DSUs”), to employees, non-employee directors and other consultants who provide services to us. We also provide an employee stock purchase plan (“ESPP”) and 401(k) match to eligible participants.

We recognize stock-based compensation expense based on grant date award fair value. This cost is recognized over the period for which the employee is required to provide service in exchange for the award or the award performance period, except for expenses relating to retirement-eligible employees that have not given their required notice, which is recognized on a pro-rata basis over the notice period prior to retirement. At March 31, 2022, there were 13.2 million shares available for grant under approved equity compensation plans.

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

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Cost of revenues	$	2,179	$	1,503
Operating expenses
Sales and marketing		2,032		1,482
Research and development		1,474		911
General and administrative		3,330		3,029
	$	9,015	$	6,925

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

	Three Months Ended
	March 31,
(in thousands)	2022		2021
Stock options	$	477	$	551
PSUs		2,699		2,084
RSUs		4,638		3,423
RSAs & DSUs		108		106
ESPP		574		326
401(k) stock match		519		435
	$	9,015	$	6,925

As of March 31, 2022, there was $50.9 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted average period of 2.8 years.

Stock Options

Our stock option activity was as follows:

	Three Months Ended
	March 31, 2022
				Weighted Average
	Options (#)			Exercise Price ($/share)
Outstanding, beginning of period		678,650		$	44.76
Granted		31,829			130.16
Exercised		(13,320	)		37.86
Forfeited		(2,634	)		84.06
Outstanding, end of period		694,525		$	48.66

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

Of the total outstanding options at March 31, 2022, 0.6 million were exercisable. The outstanding and exercisable options had a weighted average exercise price of $40.46 per share and a weighted average remaining contractual life of 3.2 years.

The weighted average grant date fair value of options granted during the three months ended March 31, 2022 was $41.59 per share. This was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

Volatility	38	%
Dividend yield	—
Life (in years)	4.0
Risk-free interest rate	1.82	%

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

In each of the quarters ended March 31, 2022, 2021, 2020 and 2019 we granted PSU awards with a target performance level. These awards are earned based upon our Company’s total shareholder return as compared to an indexed total shareholder return over the course of a fiscal based three-year performance period, starting in the year of grant. Earned awards vest in the quarter following the conclusion of the performance period. In the three months ended March 31, 2022, PSU awards granted in 2019 vested at the maximum performance level and less than 0.1 million shares of common stock were issued.

Activity for our PSUs, RSUs, RSAs, and DSUs in aggregate was as follows:

	Three Months Ended
	March 31, 2022
				Weighted Average
	(#)			Grant Date Fair Value ($/share)
Outstanding, beginning of period		702,160		$	78.03
Granted		233,255			127.18
Vested and common stock issued		(218,957	)		62.29
Forfeited		(8,239	)		96.74
Outstanding, end of period		708,219		$	98.87

The number of PSUs, RSUs, RSAs, and DSUs outstanding at March 31, 2022 included less than 0.1 million units that have vested, but the shares of common stock have not yet been issued, pursuant to the terms of the underlying agreements.

Employee Stock Purchase Plan

Our ESPP activity was as follows:

	Three Months Ended
	March 31,
(in thousands, except share data)	2022		2021
Amounts for shares purchased	$	147	$	105
Shares purchased		1,698		1,621

A total of 1.8 million shares of common stock are reserved for issuance under the ESPP as of March 31, 2022.

The fair value was estimated based on the market price of our common stock at the beginning of the offering period using the following assumptions:

Volatility	32.3	%
Dividend yield	—
Life (in years)	0.5
Risk-free interest rate	0.05	%

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

NOTE K – Income Taxes

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

NOTE L – Other Income and Expense

Other income (expense), net included the following:

	Three Months Ended
	March 31,
(in thousands)	2022			2021
Investment income	$	48		$	97
Realized gain (loss) from foreign currency on cash and investments held		468			(289	)
Other expense, net		(93	)		(133	)
Total other income (expense), net	$	423		$	(325	)

NOTE M – Net Income Per Share

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

	Three Months Ended
	March 31,
(in thousands, except per share amounts)	2022		2021
Numerator
Net income	$	12,603	$	10,200
Denominator
Weighted average common shares outstanding, basic		36,136		35,751
Options to purchase common stock		419		568
PSUs, RSUs, RSAs, and DSUs		434		403
Weighted average common shares outstanding, diluted		36,989		36,722
Net income per share
Basic	$	0.35	$	0.29
Diluted	$	0.34	$	0.28

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

	Three Months Ended
	March 31,
(in thousands)	2022	2021
Antidilutive shares	151	56

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

NOTE N – Geographic Information

Revenue

The percentage of domestic revenue, which we define as the percentage of consolidated revenue that was attributable to customers based within the U.S., was as follows:

	Three Months Ended
	March 31,
	2022			2021
Domestic revenue		84	%		84	%

No single jurisdiction outside of the U.S. had revenues in excess of 10%.

Property and Equipment

The percentage of property and equipment, net located in subsidiary and office locations outside of the U.S. was as follows:

		March 31, 2022				December 31, 2021
International property and equipment			12	%			12	%

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q 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 report. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Similarly, statements that describe our future plans, objectives or goals are also forward-looking. Forward-looking statements may also be made from time to time in oral presentations, including telephone conferences and/or webcasts open to the public. Shareholders, potential investors and others are cautioned that all forward-looking statements involve risks and uncertainties that could cause results in future periods to differ materially from those anticipated by some of the statements made in this report, including the risks and uncertainties described under the heading “Risk Factors” appearing 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 from time to time. 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 report and in our other reports filed with the SEC that advise interested parties of the risks and factors that may affect our business.

Overview

SPS Commerce is 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.

We plan to continue to grow our business by further penetrating the supply chain management market, increasing revenues from our customers as their businesses grow, expanding our distribution channels, expanding our international presence and, from time to time, developing new products and applications. We also intend to selectively pursue acquisitions that will add customers, allow us to expand into new regions, or allow us to offer new functionalities.

Key Financial Terms, Metrics and Non-GAAP Measures

We have several key financial terms and metrics, as discussed in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

To supplement our financial statements, we provide investors with Adjusted EBITDA, Adjusted EBITDA Margin, and non-GAAP income per share, all of which are non-GAAP financial measures. We believe that these non-GAAP measures provide useful information to our management, board of directors, and investors regarding certain financial and business trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses and planning purposes. Adjusted EBITDA is also used for purposes of determining executive and senior management incentive compensation.

These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in our financial statements and are subject to inherent limitations. Investors should review the reconciliations of non-GAAP financial measures to the comparable GAAP financial measures that are included in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

Critical Accounting Policies and Estimates

This discussion of our financial condition and results of operations is based upon our condensed consolidated financial statements, which are prepared in accordance with GAAP and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable. Our actual results may differ from these estimates under different assumptions or conditions.

A critical accounting policy or estimate is one that is both material to the presentation of our financial statements and requires us to make difficult, subjective, or complex judgments relating to uncertain matters that could have a material effect on our financial condition and results of operations. Accordingly, we believe that our policies for revenue recognition, internal-use software, and business combinations are the most critical to fully understand and evaluate our financial condition and results of operations.

During the three months ended March 31, 2022, there were no changes in our critical accounting policies or estimates. For additional information regarding our critical accounting policies and estimates, see the discussion under “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.

Results of Operations

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

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

	Three Months Ended March 31,
	2022					2021						Change
(dollars in thousands)	$		% of revenue⁽¹⁾			$			% of revenue⁽¹⁾			$			%
Revenues	$	105,193		100.0	%	$	90,094			100.0	%	$	15,099			16.8	%
Cost of revenues		35,389		33.6			29,970			33.3			5,419			18.1
Gross profit		69,804		66.4			60,124			66.7			9,680			16.1
Operating expenses
Sales and marketing		24,655		23.4			21,355			23.7			3,300			15.5
Research and development		10,701		10.2			8,706			9.7			1,995			22.9
General and administrative		15,468		14.7			14,737			16.3			731			5.0
Amortization of intangible assets		2,470		2.3			2,664			2.9			(194	)		(7.3	)
Total operating expenses		53,294		50.7			47,462			52.6			5,832			12.3
Income from operations		16,510		15.7			12,662			14.1			3,848			30.4
Other income (expense), net		423		0.4			(325	)		(0.4	)		748			230.2
Income before income taxes		16,933		16.1			12,337			13.7			4,596			37.3
Income tax expense		4,330		4.1			2,137			2.4			2,193			102.6
Net income	$	12,603		12.0	%	$	10,200			11.3	%	$	2,403			23.6	%

(1)

Amounts in column may not foot due to rounding.

Revenues – Revenues increased for the 85^th consecutive quarter. The increase resulted from two primary factors: the increase in recurring revenue customers, which is driven primarily by continued business growth and by business acquisitions, and the increase in average recurring revenues per recurring revenue customer, which we also refer to as wallet share.

•

The number of recurring revenue customers increased 12% to 37,900 at March 31, 2022 from 33,850 at March 31, 2021 primarily due to sales and marketing efforts to acquire new customers and due to recent acquisitions.

•

Wallet share increased 5% to $10,350 for the three months ended March 31, 2022 from $9,900 for the same period in 2021. This was primarily attributable to increased usage of our products by our recurring revenue customers.

Recurring revenues increased 18% to $97.6 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Recurring revenues from recurring revenue customers accounted for 93% and 92% of our total revenues for the three months ended March 31, 2022 and 2021, respectively. We anticipate that the number of recurring revenue customers and wallet share will continue to increase as we execute our growth strategy focused on further penetrations of our market.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

Cost of Revenues - The increase in cost of revenues was primarily due to increased headcount, which resulted in an increase of $3.8 million in personnel-related costs and an increase of $0.7 million in stock-based compensation.

Sales and Marketing Expenses - The increase in sales and marketing expense was primarily due to increased headcount, which resulted in an increase of $1.8 million in personnel-related costs, an increase of $0.6 million in stock-based compensation, and an increase of $0.6 million in variable compensation earned by sales personnel and referral partners.

Research and Development Expenses - The increase in research and development expense was primarily due to increased headcount, which resulted in an increase of personnel costs of $1.2 million and an increase in stock-based compensation of $0.6 million.

General and Administrative Expenses - The increase in general and administrative expense was primarily related to supporting continued business growth, including an increase in headcount which resulted in an increase in personnel-related costs of $0.8 million.

Amortization of Intangible Assets - The decrease in amortization of intangible assets was driven by the full amortization of previously acquired intangible assets as partially offset by acquired intangible assets related to recent business combinations.

Other Income (Expense), Net - The change was primarily due to favorable foreign currency exchange rate changes.

Income Tax Expense - The increase in income tax expense was driven by a decrease in the excess tax deductions due to the current quarter equity award settlements, partially offset by a decrease in nondeductible executive compensation. Excess tax benefits generated upon the settlement or exercise of stock awards are recognized as a reduction to income tax expense and, as a result, we expect that our annual effective income tax rate will fluctuate.

Adjusted EBITDA - Adjusted EBITDA, which is a non-GAAP measure of financial performance, consists of net income adjusted for income tax expense, depreciation and amortization expense, stock-based compensation expense, realized gain or loss from foreign currency on cash and investments held, investment income or loss, and other adjustments as necessary for a fair presentation. For the three months ended March 31, 2021, other adjustments included accelerated tenant improvement benefit, which was incurred as part of executing a lease agreement. This tenant improvement adjustment was partially offset by accelerated depreciation, which is included within Depreciation and amortization of property and equipment and was also incurred as part of executing a lease agreement. The following table provides a reconciliation of net income to Adjusted EBITDA:

	Three Months Ended
	March 31,
(in thousands)	2022			2021
Net income	$	12,603		$	10,200
Income tax expense		4,330			2,137
Depreciation and amortization of property and equipment		3,864			3,765
Amortization of intangible assets		2,470			2,664
Stock-based compensation expense		9,015			6,925
Realized (gain) loss from foreign currency on cash and investments held		(468	)		289
Investment income		(48	)		(97	)
Other		—			(426	)
Adjusted EBITDA	$	31,766		$	25,457

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

Adjusted EBITDA Margin - Adjusted EBITDA Margin, which is a non-GAAP measure of financial performance, consists of Adjusted EBITDA divided by revenue. Margin, the comparable GAAP measure of financial performance, consists of net income divided by revenue. The following table provides a comparison of Margin to Adjusted EBITDA Margin:

	Three Months Ended
	March 31,
(in thousands, except Margin and Adjusted EBITDA Margin)	2022			2021
Revenue	$	105,193		$	90,094

Net income		12,603			10,200
Margin		12	%		11	%

Adjusted EBITDA		31,766			25,457
Adjusted EBITDA Margin		30	%		28	%

Non-GAAP Income per Share - Non-GAAP income per share, which is a non-GAAP measure of financial performance, consists of net income plus stock-based compensation expense, amortization expense related to intangible assets, realized gain or loss from foreign currency on cash and investments held, other adjustments as necessary for a fair presentation, and the corresponding tax impacts of the adjustments to net income, divided by the weighted average number of shares of common and diluted stock outstanding during each period. For the three months ended March 31, 2021, other adjustments included accelerated tenant improvement benefit, which was incurred as part of executing a lease agreement.

To quantify the tax effects, we recalculated income tax expense excluding the direct book and tax effects of the specific items constituting the non-GAAP adjustments. The difference between this recalculated income tax expense and GAAP income tax expense is presented as the income tax effect of the non-GAAP adjustments.

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

	Three Months Ended
	March 31,
(in thousands, except per share amounts)	2022			2021
Net income	$	12,603		$	10,200
Stock-based compensation expense		9,015			6,925
Amortization of intangible assets		2,470			2,664
Realized (gain) loss from foreign currency on cash and investments held		(468	)		289
Other		—			(426	)
Income tax effects of adjustments		(3,219	)		(3,975	)
Non-GAAP income	$	20,401		$	15,677
Shares used to compute non-GAAP income per share
Basic		36,136			35,751
Diluted		36,989			36,722
Non-GAAP income per share
Basic	$	0.56		$	0.44
Diluted	$	0.55		$	0.43

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

Liquidity and Capital Resources

As of March 31, 2022, our principal sources of liquidity were cash and cash equivalents and short-term investments totaling $243.1 million and net accounts receivable of $38.8 million. Our investments are selected in accordance with our investment policy, with a goal of maintaining liquidity and capital preservation. Our cash equivalents and short-term investments are held in highly liquid money market funds, certificates of deposits, commercial paper, and U.S. treasury securities.

The summary of activity within the condensed consolidated statements of cash flows was as follows:

	Three Months Ended
	March 31,
(in thousands)	2022			2021
Net cash provided by operating activities	$	4,347		$	21,605
Net cash provided by (used in) investing activities		5,668			(4,802	)
Net cash provided by (used in) financing activities		(14,575	)		2,743

Net Cash Flows from Operating Activities

The decrease in cash provided by operating activities was primarily driven by changes in the amount and timing of settlement of operating assets and liabilities.

Net Cash Flows from Investing Activities

The change in net cash flows from investing activities was primarily due to the increased maturities of investments, partially offset by the increased purchases of investments.

Net Cash Flows from Financing Activities

The change in net cash flows from financing activities was primarily due to the increases in cash used for share repurchases and lower net proceeds from stock option exercises.

Contractual and Commercial Commitment Summary

Our contractual obligations and commercial commitments as of March 31, 2022 are summarized below:

	Payments Due by Period
	Less Than						More Than
(in thousands)	1 Year		1-3 Years		3-5 Years		5 Years		Total
Operating lease obligations, including imputed interest	$	5,051	$	8,702	$	7,577	$	318	$	21,648
Purchase commitments		6,512		1,466		—		—		7,978
Total	$	11,563	$	10,168	$	7,577	$	318	$	29,626

Future Capital Requirements

Our future capital requirements may vary significantly from those now planned and will depend on many factors, including:

•

costs to develop and implement new products and applications, if any;

•

sales and marketing resources needed to further penetrate our market and gain acceptance of new products and applications that we may develop;

•

expansion of our operations in the U.S. and internationally;

•

response of competitors to our products and applications; and

•

use of capital for acquisitions, if any.

Historically, we have experienced increases in our expenditures consistent with the growth in our operations and personnel, and we anticipate that our expenditures will continue to increase as we expand our business.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

We believe our cash, cash equivalents, investments and our cash flows from operations will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt. Additionally, we are not a party to any derivative contracts or synthetic leases.

Foreign Currency Exchange and Inflation Rate Changes

For information regarding the effect of foreign currency exchange rate changes, refer to the section entitled “Foreign Currency Exchange Risk,” included in Part I, Item 3, “Quantitative and Qualitative Disclosures About Market Risk” of this Quarterly Report on Form 10-Q.

Inflation and changing prices did not have a material effect on our business during the three months ended March 31, 2022 and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity Risk

The principal objectives of our investment activities are to preserve principal, provide liquidity and maximize income consistent with minimizing risk of material loss. We are exposed to market risk related to changes in interest rates. However, based on the nature and current level of our cash, cash equivalents, and investments, we believe there is no material risk of exposure. We do not enter into investments for trading or speculative purposes.

We did not have any variable interest rate outstanding debt as of March 31, 2022. Therefore, we do not have any material risk to interest rate fluctuations.

Foreign Currency Exchange Risk

Due to international operations, we have revenue, expenses, assets, and liabilities that are denominated in currencies other than the U.S. dollar, primarily the Australian and Canadian dollars. Our condensed consolidated balance sheet, results of operations, and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates.

Our sales are primarily denominated in U.S. dollars. Our expenses are generally denominated in the local currencies in which our operations are located. As of March 31, 2022, we maintained approximately 6% of our total cash and cash equivalents and investments in foreign currencies.

We believe that a hypothetical 10% change in foreign currency exchange rates or an inability to access foreign funds would not materially affect our ability to meet our operational needs, result in a material foreign currency loss or have a material impact on our consolidated financials.

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

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2022.

Changes in Internal Control over Financial Reporting

In November 2021, we acquired the Genius Central business. Pursuant to the SEC’s general guidance that an assessment of a recently acquired business may be omitted from our scope for a period not to exceed one year from the date of acquisition, the scope of our most recent assessment did not include Genius Central. We are currently in the process of incorporating internal controls specific to Genius Central that we believe are appropriate and necessary to consolidate and report upon our financial results. Our assessment of the effectiveness of internal control over financial reporting as of December 31, 2022 will include Genius Central. As of and for the three months ended March 31, 2022, excluding net intangible assets and goodwill, Genius Central represented less than 1% of our consolidated assets and approximately 1% of our consolidated revenues.

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

PART II. – OTHER INFORMATION

Item 1.

Legal Proceedings

We are not currently subject to any material legal proceedings. From time to time, we may be named as a defendant in legal actions or otherwise be subject to claims arising from our normal business activities. Any such actions, even those that lack merit, could result in the expenditure of significant financial and managerial resources. We believe that we have obtained adequate insurance coverage or rights to indemnification in connection with potential legal proceedings that may arise.

Item 1A.

Risk Factors

There have been no material changes in our risk factors from those disclosed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program⁽¹⁾		Approximate Dollar Value of Shares that May Yet be Purchased Under the Program
January 1 - 31, 2022		36,500	$	121.51		36,500	$	35,796,000
February 1 - 28, 2022		38,000		125.24		38,000		31,037,000
March 1 - 31, 2022		47,044		128.22		47,044		25,005,000
Total		121,544	$	125.27		121,544	$	25,005,000

(1)

Under our share repurchase program announced by our board of directors on October 28, 2021, we can repurchase up to $50.0 million of our common stock in the open market or in privately negotiated purchases, or both, through November 28, 2023. Our stock repurchase activity under this program during the three months ended March 31, 2022 is included in this column. Our prior stock repurchase program expired on November 2021. For more information regarding our stock repurchase programs, refer to Note I to our condensed consolidated financial statements, included in Part I of this Quarterly Report on Form 10-Q.

Item 3.

Defaults Upon Senior Securities

Not Applicable.

Item 4.

Mine Safety Disclosures

Not Applicable.

Item 5.

Other Information

Not Applicable.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

Item 6.

Exhibits

Number		Description
3.1		Ninth Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K filed with the SEC on May 21, 2020).

3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on October 17, 2017).

31.1		Certification of Principal Executive Officer pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).

31.2		Certification of Principal Financial Officer pursuant to Rules 13a-14(a) under the Securities Exchange Act of 1934, as amended (filed herewith).

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101		Interactive Data Files Pursuant to Rule 405 of Regulation S-T (filed herewith). The XBRL instance document does not appear in the Interactive Data File because its tags are embedded within the Inline XBRL document.

104		The cover page from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL.

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: April 28, 2022		SPS COMMERCE, INC.

		/s/ KIMBERLY K. NELSON
		Kimberly K. Nelson
		Executive Vice President and Chief Financial Officer
		(principal financial and accounting officer)

SPS COMMERCE, INC.

Form 10-Q for the Quarterly Period ended March 31, 2022

spsc-ex311_8.htm

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Archie C. Black, certify that:

I have reviewed this Quarterly Report on Form 10-Q of SPS Commerce, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/s/ ARCHIE C. BLACK

Archie C. Black

Chief Executive Officer

(principal executive officer)

April 28, 2022

spsc-ex312_7.htm

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Kimberly K. Nelson, certify that:

I have reviewed this Quarterly Report on Form 10-Q of SPS Commerce, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/s/ KIMBERLY K. NELSON

Kimberly K. Nelson

Executive Vice President and Chief Financial Officer

(principal financial and accounting officer)

April 28, 2022

spsc-ex321_6.htm

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of SPS Commerce, Inc. (the “Company”) for the period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chief Executive Officer and the Chief Financial Officer of the Company, hereby certify, pursuant to and for purposes of 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ARCHIE C. BLACK

Archie C. Black

Chief Executive Officer

(principal executive officer)

/s/ KIMBERLY K. NELSON

Kimberly K. Nelson

Executive Vice President and Chief Financial Officer

(principal financial and accounting officer)

April 28, 2022