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: September 30, 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
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(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 | ||||||||||||
The Nasdaq Stock Market LLC ( | ||||||||||||||
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 x No o
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 x No o
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.
| x | Accelerated filer | o | |||||||||
| Non-accelerated filer | o | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding at October 20, 2022 was 36,041,714 shares.
SPS COMMERCE, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| Page | ||||||||
Item 1. | ||||||||
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. | 2 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
PART I. – FINANCIAL INFORMATION
Item 1. Financial Statements
SPS COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| (in thousands, except shares) | September 30, 2022 | December 31, 2021 | |||||||||
| ASSETS | (unaudited) | ||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
| Accounts receivable | |||||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Accounts receivable, net | |||||||||||
| Deferred costs | |||||||||||
| Other assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Deferred costs, non-current | |||||||||||
| Deferred income tax assets | |||||||||||
| Other assets, non-current | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued compensation | |||||||||||
| Accrued expenses | |||||||||||
| Deferred revenue | |||||||||||
| Operating lease liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Other liabilities | |||||||||||
| Deferred revenue, non-current | |||||||||||
| Operating lease liabilities, non-current | |||||||||||
| Deferred income tax liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders' equity | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Treasury Stock, at cost; | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to these condensed consolidated financial statements.
| SPS COMMERCE, INC. | 3 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
SPS COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands, except per share amounts) (unaudited) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Other expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (expense) | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ( | |||||||||||||||||||
Unrealized gain (loss) on investments, net of tax of $ | ( | ( | |||||||||||||||||||||
Reclassification of (gain) loss on investments into earnings, net of tax of ($ | ( | ( | |||||||||||||||||||||
| Total other comprehensive expense | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
| Net income per share | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted average common shares used to compute net income per share | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See accompanying notes to these condensed consolidated financial statements.
| SPS COMMERCE, INC. | 4 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
SPS COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except shares) (unaudited) | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2021 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to stock awards | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchase plan activity | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Unrealized loss on investments, net of tax | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Reclassification of loss on investments into earnings, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balances, September 30, 2021 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2022 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to stock awards | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchase plan activity | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Unrealized gain on investments, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Reclassification of gain on investments into earnings, net of tax | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balances, September 30, 2022 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2020 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to stock awards | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchase plan activity | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Unrealized loss on investments, net of tax | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Reclassification of loss on investments into earnings, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balances, September 30, 2021 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2021 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to stock awards | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchase plan activity | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Unrealized gain on investments, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Reclassification of gain on investments into earnings, net of tax | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Balances, September 30, 2022 | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
See accompanying notes to these condensed consolidated financial statements..
| SPS COMMERCE, INC. | 5 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
SPS COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, | |||||||||||
| (in thousands) (unaudited) | 2022 | 2021 | |||||||||
| Cash flows from operating activities | |||||||||||
| Net income | $ | $ | |||||||||
| Reconciliation of net income to net cash provided by operating activities | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Depreciation and amortization of property and equipment | |||||||||||
| Amortization of intangible assets | |||||||||||
| Provision for credit losses | |||||||||||
| Stock-based compensation | |||||||||||
| Other, net | |||||||||||
| Changes in assets and liabilities, net of effects of acquisition | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Deferred costs | ( | ( | |||||||||
| Other current and non-current assets | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Accrued compensation | ( | ||||||||||
| Accrued expenses | ( | ( | |||||||||
| Deferred revenue | |||||||||||
| Operating leases | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Purchases of investments | ( | ( | |||||||||
| Maturities of investments | |||||||||||
| Acquisition of business, net | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
| Repurchases of common stock | ( | ( | |||||||||
| Net proceeds from exercise of options to purchase common stock | |||||||||||
| Net proceeds from employee stock purchase plan activity | |||||||||||
| Payments for contingent consideration | ( | ||||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of foreign currency exchange rate changes | ( | ( | |||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
See accompanying notes to these condensed consolidated financial statements.
| SPS COMMERCE, INC. | 6 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
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, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Significant Accounting Policies
There were no material changes in our significant accounting policies during the nine months ended September 30, 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.
| 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. | 7 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
NOTE B – Business Acquisitions
GCommerce
Effective July 19, 2022, we acquired all of the outstanding equity ownership interests of GCommerce, Inc. ("GCommerce"), a leading EDI provider within the automotive aftermarket industry. Pursuant to the definitive agreement, the purchase price of $45 million was paid in cash at closing, and is subject to customary post-closing adjustments. The purchase accounting for the acquisition has not been finalized as of September 30, 2022. Provisional amounts are primarily related to intangible assets, net working capital, and tax positions. We expect to finalize the allocation of the purchase price within the one-year measurement period following the acquisition.
Purchase Price Allocation
We accounted for the acquisition as a business combination. We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. Goodwill is attributed to a trained workforce and other buyer-specific value resulting from expected synergies, including long-term cost savings, which are not included in the fair values of identifiable assets.
| (in thousands) | Estimated Fair Value | ||||
| Cash | $ | ||||
| Accounts receivable | |||||
| Other current assets | |||||
| Operating lease right-of-use asset | |||||
| Goodwill | |||||
| Intangible assets | |||||
| Deferred income tax assets | |||||
| Accounts payable | ( | ||||
| Accrued compensation | ( | ||||
| Deferred revenue | ( | ||||
| Operating lease liability | ( | ||||
| Deferred income tax liabilities | ( | ||||
| $ | |||||
Purchased Intangible Assets
| ($ in thousands) | Estimated Fair Value | Weighted Average Estimated Useful Life | ||||||||||||
| Subscriber relationships | $ | |||||||||||||
| Acquired technology | ||||||||||||||
| Total | $ | |||||||||||||
InterTrade
Effective October 4, 2022, we acquired all of the outstanding equity ownership interests of Canadian based InterTrade Systems Inc. ("InterTrade"), a leading EDI provider within the apparel and general merchandising markets. Pursuant to the definitive agreement, the purchase price of $49 million was paid in cash at closing, and is subject to customary post-closing adjustments.
| SPS COMMERCE, INC. | 8 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
NOTE C – Revenue
We derive our revenues from the following revenue streams:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Recurring revenues: | |||||||||||||||||||||||
| Fulfillment | $ | $ | $ | $ | |||||||||||||||||||
| Analytics | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Recurring revenues | |||||||||||||||||||||||
| One-time revenues | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
Revenues are the amount that reflects the consideration we are contractually and legally entitled to, as well as the amount we expect to collect, in exchange for those services.
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Invoiced set-up fees | |||||||||||||||||||||||
| Recognized set-up fees | ( | ( | ( | ( | |||||||||||||||||||
| Balance, end of period | $ | $ | $ | $ | |||||||||||||||||||
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. | 9 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
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 D – Deferred Costs
The deferred costs activity was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Incurred deferred costs | |||||||||||||||||||||||
| Amortized deferred costs | ( | ( | ( | ( | |||||||||||||||||||
| Balance, end of period | $ | $ | $ | $ | |||||||||||||||||||
NOTE E – Financial Instruments
Cash Equivalents and Investments
Cash equivalents and investments consisted of the following:
| September 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
| (in thousands) | Amortized Cost | Unrealized Gains, net | Fair Value | Amortized Cost | Unrealized Gains (Losses), net | Fair Value | |||||||||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||||||||||||||
| U.S. treasury securities | ( | ||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| SPS COMMERCE, INC. | 10 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
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:
| September 30, 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 | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||||||||||||||||||||||||||
| Marketable securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||||||||||||||||||||||||||
| U.S. treasury securities | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
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 F – Allowance for Credit Losses
The allowance for credit losses activity, included in accounts receivable, net, was as follows:
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2022 | 2021 | |||||||||
| Balance, beginning of period | $ | $ | |||||||||
| Provision for credit losses | |||||||||||
| Write-offs, net of recoveries | ( | ( | |||||||||
| Balance, end of period | $ | $ | |||||||||
NOTE G – Property and Equipment, Net
| (in thousands) | September 30, 2022 | December 31, 2021 | ||||||||||||
| Internally developed software | $ | $ | ||||||||||||
| Computer equipment | ||||||||||||||
| Leasehold improvements | ||||||||||||||
| Office equipment and furniture | ||||||||||||||
| Property and equipment, cost | ||||||||||||||
| Less: accumulated depreciation and amortization | ( | ( | ||||||||||||
| Total property and equipment, net | $ | $ | ||||||||||||
| SPS COMMERCE, INC. | 11 | Form 10-Q for the Quarterly Period ended September 30, 2022 | ||||||
NOTE H – Goodwill and Intangible Assets, Net
Goodwill
The activity in goodwill was as follows:
| Nine Months Ended September 30, | |||||||||||
| (in thousands) | 2022 | 2021 | |||||||||
| Balance, beginning of period | $ | $ | |||||||||
| Addition from business acquisition | |||||||||||
| Foreign currency translation | ( | ( | |||||||||
| Remeasurement from provisional purchase accounting amount | |||||||||||
| Balance, end of period | $ | $ | |||||||||
Intangible Assets
Intangible assets, net consisted of the following: