T O O U R S T O C K H O L D E R S
2022 was another strong year for SPS Commerce. The ongoing transition to omnichannel retail and increasing complexity
in supply chain management continued to fuel the need for automation. The fourth quarter of 2022 represented our
88th consecutive quarter of revenue growth, driven by our network effect, community go-to market approach, retail
expertise and execution, all of which culminate in excellent customer experience and underscore SPS Commerce’s
competitive differentiation.
For the full year 2022, revenue grew 17% to $450.9 million. Recurring revenue grew 18% year-over-year, led by
Fulfillment growth of 19%. Adjusted EBITDA1 grew 24% to $132.3 million, resulting in adjusted EBITDA margin1 of
29%. The total number of recurring revenue customers increased 13% year-over-year, to 42,300 and wallet share,
or average recurring revenue per recurring revenue customer, increased 4% to $10,500.
In addition to our strong financial performance, achievements in 2022 include:
• Continued momentum in Analytics sales with 10% year-over-year growth.
•
The acquisition of GCommerce, a software solution provider known for its expertise in the automotive
aftermarket industry; and, the acquisition of InterTrade Systems, to strengthen our leadership across apparel
and general merchandise markets.
• We repurchased 361,745 SPS Commerce shares in 2022, for a total consideration of $43.2 million.
• We ended the year with total cash and investments of $214.3 million.
Over the years, SPS Commerce has consistently executed on our mission to connect all retail trading partners through
the easiest-to-join and use network. Since 2017, we realigned our sales force, increased our focus on digital marketing,
and launched a new fulfillment solution and add-on products. We also remained laser focused on improving customer
experience as we significantly enhanced full-service, omnichannel supply chain solutions and system integrations through
internal development and targeted acquisitions.
These strategic investments are consistent with our core value — Win Today, Win Tomorrow — which helped us build the
world’s largest cloud retail network and positions us for continued success. Beyond this year, we maintain our annual
revenue growth expectations of 15% or greater, and we continue to expect adjusted EBITDA1 dollar growth of 15% to 25%
as we invest in the business to capitalize on market dynamics and support current and future growth. In the long-term, we
maintain our target model for adjusted EBITDA margin1 of 35%.
In closing, I would like to thank all our employees for their dedication to the company and the success of over 115,000
SPS Commerce customers around the globe to date. We continue to deliver profitable growth and invest in the future to
capitalize on existing and new opportunities across our expanding addressable market.
Sincerely,
Jmun)
Archie Black
CEO
1 Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures of financial performance. We believe that these non-GAAP measures provide useful information to
management, our board of directors, and investors regarding certain financial and business trends relating to its financial condition and results of operations. Our management
uses these non-GAAP measures to compare the company’s 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. A reconciliation of these non-GAAP measures can be found within the ‘Results of
Operations’ section of Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, within the attached Form 10-K.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 2022
or
(cid:134) 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
(State or Other Jurisdiction of
Incorporation or Organization)
41-2015127
(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
Common Stock, par value $0.001 per share
Trading Symbol
SPSC
Name of exchange on which registered
The Nasdaq Stock Market LLC (Nasdaq Global Market)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:95) No (cid:134)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes (cid:134) No (cid:95)
Securities registered pursuant to Section 12(g) of the Act:
None
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 (cid:95) No (cid:1407)
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 (cid:95) No (cid:1407)
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.
Large Accelerated Filer
Non-Accelerated Filer
(cid:95)
(cid:134)
Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
(cid:134)
(cid:134)
(cid:134)
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. (cid:134)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:95)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:1407)(cid:3)No (cid:95)
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. (cid:1407)
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). (cid:1407)
As of June 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of shares of the registrant’s common stock
held by non-affiliates of the registrant (based upon the closing sale price of $113.05 per share on the Nasdaq Global Market on such date) was approximately $4.1 billion.
The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of February 10, 2023 was 36,312,238 shares.
Portions of the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 12, 2023 (the “2023 Proxy Statement”), which is expected to be
filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, are incorporated by reference in Part III of this Annual Report on Form 10-K.
Auditor Firm Id:
185
Auditor Name:
KPMG, LLP
Auditor Location:
Minneapolis, MN
DOCUMENTS INCORPORATED BY REFERENCE
SPS COMMERCE, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Exhibits, Financial Statement Schedules
Form 10-K Summary
SIGNATURES
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Unless the context otherwise requires, for purposes of the Annual Report on Form 10-K, the words “we,” “us,” “our,” the
“Company,” “SPS,” and “SPS Commerce” refer to SPS Commerce, Inc.
SPS COMMERCE, INC.
2
Form 10-K for the Annual Period ended December 31, 2022
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K 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 in Part I, Item IA, “Risk Factors” of this Annual Report on Form 10-K for the year
ended December 31, 2022, as may be updated in our subsequent Quarterly Reports on Form 10-Q or other filings 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 Securities and Exchange Commission (“SEC”)
that advise interested parties of the risks and factors that may affect our business.
SPS COMMERCE, INC.
3
Form 10-K for the Annual Period ended December 31, 2022
PART I
Item 1.
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, grocers, distributors, suppliers, and logistics firms to communicate and
collaborate by simplifying how they manage and share item, inventory, order and sales data across omnichannel retail
channels. We deliver our products using a full-service model, which includes industry-leading technology and a team of
experts that optimize, update, and operate the technology on customers' behalf.
Our products enable customers to increase supply chain performance, optimize inventory levels and sell-through,
reduce operational costs, improve order visibility, and satisfy consumer demands for a seamless omnichannel experience.
As of December 31, 2022, we had 42,300 customers with ongoing contracts to pay us monthly fees, which we refer
to as recurring revenue customers. In addition to our recurring revenue customers, to date we have provided our cloud-
based supply chain management services to 72,700 other organizations, and we refer to the combination as our customers.
Once connected to the SPS Commerce cloud-based retail network, our customers often require additional integrations to
new organizations that represent an expansion of our cloud-based network and new sources of revenues for us.
For the years ended December 31, 2022, 2021, and 2020, we generated revenues of $450.9 million, $385.3 million,
and $312.6 million, respectively. Our quarter ended December 31, 2022 represented our 88th consecutive quarter of
revenue growth. Recurring revenues from recurring revenue customers accounted for 93%, 92%, and 94% of our total
revenues for the years ended December 31, 2022, 2021, and 2020, respectively. Our revenues are not concentrated with any
customer, as our largest customer represented less than 1% of total revenues for the years ended December 31, 2022, 2021,
and 2020.
Increasing Demand for a Retail Network
The retail industry has undergone many changes in recent years, which have accelerated the need for a more
automated supply chain. To navigate disruptions and meet growing consumer demands, companies across the retail
ecosystem need to integrate their operations and communications from wholesale, eCommerce, and marketplace sales
channels into a single omnichannel process. These channels no longer operate independently but instead in an
interconnected fashion as consumers demand more buying and delivery options. The coordination needed to manage
multiple channels adds complexity to supply chains and trading partner relationships.
The SPS Commerce retail network offers a single destination where companies can manage item details, orders,
shipments, invoices, and much more for any customer and any channel. The network provides businesses with a
comprehensive view of retail transactions, enabling them to optimize inventory and fulfill orders efficiently, regardless of
channel. Customers use our retail network to manage all channels in a single system, saving time and reducing errors.
Our Products
SPS Commerce operates one of the largest retail networks in the world to improve the way retailers, grocers,
distributors, suppliers, and logistics firms manage digital item catalogs, fulfill omnichannel orders, optimize sell-through
performance, and automate new trading relationships. To date, 115,000 customers across 85 countries have used SPS
Commerce products to expand and optimize the performance of their trading relationships through the network.
Our products fundamentally change how organizations communicate information to manage their omnichannel,
supply chain, and other business requirements. Our products replace traditional, manual, or disparate approaches (such as
email, phone, and fax), multiple channel-specific solution providers, as well as custom-built, point-to-point integrations by
delivering a single smart connection to the entire SPS Commerce retail network of prebuilt connections to thousands of
global trading partners.
Our products include:
•
Fulfillment - Our Fulfillment product is a full-service electronic data interchange ("EDI") solution that scales
as a business grows. Companies can use a single system to manage orders and logistics from all sales
channels, including wholesale, eCommerce, and marketplaces. Fulfillment is configurable for any trading
partner, document or business system used for order management and offers a full suite of tools to help
businesses efficiently manage their supply chain.
SPS COMMERCE, INC.
4
Form 10-K for the Annual Period ended December 31, 2022
•
Analytics - Our Analytics product enables organizations to improve visibility into how products are selling
through a single connection across all sales channels, including wholesale, eCommerce, and marketplaces.
Analytics improves access and usage of sales and inventory data through a combination of our analytics
applications, network of connections, and industry-leading expertise.
•
Other Products - We provide several complementary products, such as:
(cid:405)
(cid:405)
Assortment - Our Assortment product simplifies the communication of robust, accurate item data by
automatically translating item attributes, and hierarchies through a single connection across all sales
channels.
Community - Our Community product allows organizations to accelerate digitization of their supply
chain and improve collaboration with suppliers through proven change management and onboarding
programs.
In addition to these offerings, we also provide one-time services such as professional services and testing and certification.
Growing Our Network
As one of the largest providers of cloud-based services for retail supply chain management, SPS Commerce enables
trading partner relationships among retailer, grocer, distributor, supplier, and logistics firms that naturally lead to new
customer acquisition opportunities.
“Network Effect”
Once connected to our retail network, trading partners can exchange electronic supply chain information with each
other. The value of our network increases with the number of trading partners connected to it. After joining our retail
network, customers often find that many of their existing or new trading partners are already on the network, allowing for
easy connections. The addition of each new customer enables that new customer to communicate with our existing
customers and permits our existing customers to do business with the new customer. This “network effect” of adding
additional customers to our products’ infrastructure creates a significant opportunity for existing customers to realize
incremental sales by working with our new trading partners and vice versa. As a result of this increased volume of activity
among our network participants, we earn additional revenues from these participants.
Customer Acquisition Sources
Community - As retailers and suppliers reshape how they do business in an omnichannel landscape, they need to
bring new capabilities and services to their trading partner networks. Our Community product is designed to manage this
process and bring suppliers into compliance with new requirements. For instance, a supplier may wish to collaborate with
their retailers around point-of-sale analytics data, or a retailer may decide to change the workflow or protocol by which it
interacts with its suppliers. In each case, the supplier and retailer may engage us to work with their trading partner base to
enable the new capability. Performing these programs on behalf of retailers and suppliers generates supplier sales leads for
us.
Referrals from Our Customers - We also receive sales leads from our customers seeking to communicate
electronically with their trading partners. For example, a supplier may refer a third-party logistics provider or manufacturer,
which is not in our network, to us.
Direct Marketing - We employ various marketing strategies. Our marketing programs include a variety of lead
generating activities including digital marketing, conferences and trade shows, sponsored events, and public relations
activities targeted at key decision makers within our prospective customers.
Channel Partners - In addition to the customer acquisition sources identified above, we market and sell our products
through a variety of channel partners, including software providers, resellers, system integrators, and logistics partners. For
example, software partners such as Microsoft, NetSuite, Oracle, SAP, Sage, and their business partner communities
generate sales for us as part of broader enterprise resource planning, warehouse management system and/or transportation
management system sales efforts. Our logistics partners also drive new sales both by providing leads and by embedding our
products as part of their service offerings.
SPS COMMERCE, INC.
5
Form 10-K for the Annual Period ended December 31, 2022
Our Growth Strategy
Our objective is to be the leading global retail network and provider of supply chain management products. Key
elements of our strategy include:
•
•
•
•
•
•
Further Penetrate Our Current Market - We believe the global supply chain management market is
underpenetrated. As the retail industry continues to respond to the changing requirements of the omnichannel
marketplace, and as the supply chain ecosystem becomes more complex and geographically dispersed, we
believe the demand for supply chain management solutions will increase. We intend to continue leveraging
our relationships with customers and their trading partners to obtain new sales leads.
Increase Revenues from Our Customer Base - We believe our overall customer satisfaction is strong and
will lead our customers to further expand their use of our products they have purchased, as well as purchase
additional products to continue improving the performance of their trading partner relationships, generating
additional revenues for us. We also expect to introduce new products to sell to our customers. We believe our
position as the incumbent supply chain management solution provider to our customers, our integration into
our recurring revenue customers’ business systems, and the modular nature of our cloud-based products are
conducive to deploying additional products with customers.
Expand Our Distribution Channels - We intend to grow our business by expanding our sales capacity to gain
new customers. We also believe there are valuable opportunities to promote and sell our products through
collaboration with other providers.
Expand Our International Presence - We believe our presence in Asia Pacific, as well as in Europe,
represents a significant competitive advantage. We plan to increase our global sales efforts to obtain new
customers around the world. We intend to leverage our current global presence to increase the number of
integrations we have with retailers in foreign markets to make our products more valuable to their trading
partners based overseas.
Enhance and Expand Our Services - We intend to further improve and develop the functionality and features
of our cloud-based products, including, from time to time, developing new offerings and applications.
Selectively Pursue Strategic Acquisitions - The nature of our market provides an opportunity for selective
acquisitions. We plan to continue to evaluate potential acquisitions based on the number of new customers,
revenue, functionality, or geographic reach the acquisition would provide relative to the purchase price, and
our ability to integrate and operate the acquired business. In 2022, we acquired GCommerce, Inc.
("GCommerce"), a leading EDI provider within the automotive aftermarket industry. Also in 2022, we
acquired InterTrade Systems Inc. ("InterTrade"), a leading EDI provider within the apparel and general
merchandising markets. These acquisitions further extend the capabilities of our network and added new
customers and technology.
Our Market Opportunity
We believe we have a significant market opportunity to help organizations accelerate their omnichannel retail
strategies with our retail network and supply chain products.
•
•
•
Omnichannel retail requires new connections/transactions - Each sales channel (wholesale, eCommerce,
and marketplaces) brings new trading partners to the supply chain process. As customers expand their
business, the SPS Commerce retail network is a core part of their omnichannel strategy. Each additional
channel brings more reliance and volume to the network and increases customer revenue.
Retail needs automation - With increased retail store openings and closings, labor shortages, supply chain
disruptions, and new buying patterns, retailers are demanding more from their trading partners as they need to
be agile and transition their businesses as markets change. Businesses using SPS Commerce products to
automate supply chain functions with their trading partners can pivot quickly to new delivery models and
capture market share. The visibility into orders, shipments, and inventory gained by automating trading
relationships on the SPS Commerce retail network is critical to their success and offers a competitive
advantage.
Consumers want new products - Retail assortments are ever-changing with seasonality shifts and new
product introductions from companies of all sizes. Consumers want the latest products and retailers are
continually chasing trends, offering differentiated items, and introducing new products and suppliers to their
supply chains. As retailers evolve, their trading partner relationships must support any new product
SPS COMMERCE, INC.
6
Form 10-K for the Annual Period ended December 31, 2022
introductions or new suppliers to achieve their merchandising goals. The SPS Commerce retail network
automates these relationships to quickly secure product details, initiate orders, and track performance to help
keep operations running smoothly.
Technology, Development and Operations
Technology
SPS Commerce was an early provider of cloud-services to the retail supply chain management industry, launching
the first version of what would become our current services in 1997. We use commercially available hardware and cloud-
services with a combination of proprietary and commercially available software.
Our cloud-service model treats all customers as logically separate tenants within a shared virtual infrastructure. As a
result, we spread the cost of delivering our products across our customer base. Because we do not manage thousands of
distinct applications with their own business logic and database schemes, we can scale our business faster than traditional
software vendors, even those that modified their products to be accessible over the internet.
Development
Our research and development efforts focus on maintaining, improving, and enhancing our existing products, as well
as developing new products and applications. Our multi-tenant products serve all of our customers, which allows us to
maintain relatively low research and development expenses and release software updates more frequently compared to
traditional on-premise licensed software products that support multiple versions. Our development efforts take place at our
U.S. locations in Minnesota and New Jersey, as well as in Melbourne, Australia; Toronto, Canada; and Kyiv, Ukraine.
Operations
We operate our infrastructure in third-party data centers located throughout the United States ("U.S.") and in
Australia, as well as provisioned services with cloud providers. In most cases, infrastructure and services are managed by
us.
We have internal and third-party monitoring software that continually checks our cloud-based network and key
underlying components for continuous availability and performance, helping ensure that the network is always available
and providing desired service levels. We have a technology team that includes system provisioning, management,
maintenance, monitoring, and back-up.
We operate a service architecture using industry best practices to ensure multiple points of redundancy, high
availability, and scale as needed. Our databases are replicated between locations with a defined recovery point objective.
Sales & Marketing
We sell our products through an employed global sales force that focuses on retailers, grocers, distributors, suppliers,
and logistics firms.
Our marketing teams focus on driving awareness and demand for our products through the following activities:
•
•
•
•
Demand Generation - Engages with target audiences using the latest digital marketing strategies to bring
opportunities to our sales teams.
Communications - Manages our brand, public relations, and go-to-market support.
Product Marketing - Equips our sales teams, performs market studies, and promotes the unique capabilities
of each of our products using our go-to-market strategies.
Events - Highlights our presence at industry trade shows and orchestrates virtual and in-person events.
Customer Success
The Customer Success team includes retail and technology experts who implement our products on our customers'
behalf, provide ongoing support, and collaborate with accounts to identify opportunities for added value from their existing
products. This team focuses on delivering services that build customer satisfaction and result in high customer retention
rates.
SPS COMMERCE, INC.
7
Form 10-K for the Annual Period ended December 31, 2022
Competition
Vendors in the supply chain management industry offer products through three delivery methods: traditional on-
premise software, cloud-based managed services, and cloud-based full-service products.
The market for cloud-based supply chain management products is fragmented and rapidly evolving. Cloud-service
vendors compete directly with each other based mainly on the following:
•
•
•
•
•
•
•
•
•
the breadth of pre-built network connections to retailers, third-party logistics providers, and other trading
partners;
a history of establishing and maintaining reliable connections with trading partners;
the reputation of the cloud-service vendor in the supply chain management industry;
price;
specialization in a customer market segment;
speed and quality with which the cloud-service vendor can integrate its customers to their trading partners;
functionality of the cloud-service product, such as the ability to integrate the product with a customer’s
business systems;
breadth of complementary supply chain management products the cloud-service vendor offers; and
training and customer support services provided during and after a customer’s initial integration.
We expect to encounter new and increased competition as this market segment consolidates and matures.
Consolidation among cloud-service vendors could create a direct competitor that can compete with us more effectively
than the numerous, smaller vendors currently offering cloud-service supply chain management products. Increased
competition from cloud-service vendors could reduce our market share, revenues, and operating margins or otherwise
adversely affect our business.
Cloud-service vendors also compete with traditional on-premise software companies. Traditional on-premise
software companies focused on supply chain integration management include IBM Sterling and OpenText. These
companies offer a “do-it-yourself” method in which customers purchase, install, and manage specialized software,
hardware, and value-added networks for their supply chain integration needs. This method requires customers to invest in
staff to operate and maintain the software. Traditional on-premise software companies use a single-tenant approach in
which information maps to retailers are built for and used by one supplier, as compared to cloud-service products that
allow multiple customers to share information maps with a retailer.
Managed service providers focused on the supply chain management market include IBM Sterling, OpenText,
TrueCommerce and many other small providers. These companies offer a cloud-based product in which they develop and
maintain the core technology, while the customer’s internal staff is responsible for the day-to-day customization,
optimization, and operations of the technology.
In contrast, full-service providers, including SPS Commerce, offer cloud-based products and expert resources that
customize, optimize, and operate the technology. This approach offloads the time-intensive process of managing these
products, which is not a core competency for most businesses.
Customers of traditional on-premise software providers must typically make significant upfront investments in the
supply chain management products these competitors provide, which can decrease customers’ willingness to abandon their
investments in favor of a cloud-service product. Cloud-service vendors compete with these traditional software products
based on the total cost of ownership and flexibility.
Intellectual Property and Proprietary Content
SPS Commerce relies on a combination of copyright, trademark, and trade secret laws as well as confidentiality
procedures and contractual provisions to protect our proprietary technology and our brand. We enter into confidentiality
and proprietary rights agreements with our employees, consultants and additional third parties, and control access to
software, documentation, and other proprietary information. We have registered trademarks and pending trademark
applications in the U.S. and certain foreign countries.
Depending on the jurisdiction, trademarks are generally valid as long as they are in use or their registrations are
properly maintained, and they have not been found to have become generic. Registrations of trademarks can also generally
SPS COMMERCE, INC.
8
Form 10-K for the Annual Period ended December 31, 2022
be renewed indefinitely as long as the trademarks are in use. We have one patent we acquired through the acquisition of
GCommerce. Our trade secrets consist primarily of the software we have developed for our SPS Commerce cloud-based
products and network. Our software is also protected under copyright law, but we do not have any registered copyrights.
Human Capital
As of December 31, 2022, our employees worked across the following functional areas:
Cost of revenues
Sales and marketing
Research and development
General and administrative
Total employees
# of Employees
1,122
557
359
177
2,215
Substantially all of our employees are employed on a full-time basis, 84% of which are based in North America. We
also engage independent contractors to support our operations. None of our employees are represented by a labor union.
We believe our employees have and will continue to be a primary reason for our growth and success. SPS values
diversity, equity, and inclusion and believes that our differences make us, our customers, and our communities better. We
strive to create an organization where every employee feels welcomed and is empowered to do their best work. Our core
values drive our culture and are foundational to how we create an engaging workplace, how we train and develop our
teams, and how we identify the right talent for the organization. Our values guide our interactions with our customers,
partners, and one another.
We offer our employees pay and benefits packages that we believe are competitive with others in our industry, as
well as within the local markets in which we operate, and that align individual performance with our success. To foster an
engaged and motivated team we provide training, development, review and feedback programs to develop employees’
expertise and skillsets, as well as strive to provide a safe, harassment-free work environment guided by principles of fair
and equal treatment. As a result, we believe our employees are committed to building strong, innovative, and long-term
relationships with each other and our organization in order to succeed together and with our customers. The health and
wellness of our employees is also very important to us. We have, where possible, offered remote work flexibility, without
significant impacts to productivity.
We support several Employee Resource Groups ("ERGs") to encourage connections across the globe and support a
sense of belonging at SPS. Current ERGs include the Black Business Resource Group, the Diversity & Inclusion Group,
the LGBTQ+ Resource Group, and Women in Tech. These groups provide support for employees and allies, give
employees the chance to build community and connections, develop and grow, as well as further shape our culture to create
a more inclusive workplace.
Company Information
We were originally incorporated as St. Paul Software, Inc., a Minnesota corporation, on January 28, 1987. On May
30, 2001, we reincorporated in Delaware under our current name, SPS Commerce, Inc. Our principal executive offices are
located at the address listed below. Our telephone number is (612) 435-9400 and our website address is
www.spscommerce.com. Information on our website does not constitute part of this Annual Report on Form 10-K or any
other report we file or furnish with the SEC.
SPS Commerce, Inc.
333 South Seventh Street
Suite 1000
Minneapolis, MN 55402
Available Information
We provide free access to various reports that we file with or furnish to the SEC through our website at
www.spscommerce.com, as soon as reasonably practicable after they have been filed or furnished. These reports include,
but are not limited to, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and any amendments to these reports. Our SEC reports can be accessed through the investor relations section of our
@
SPS COMMERCE, INC.
9
Form 10-K for the Annual Period ended December 31, 2022
website or through the SEC’s website at www.sec.gov. Stockholders may also request copies of these documents by writing
to us at the address above, with attention to "Investor Relations".
Item 1A. Risk Factors
Set forth below and elsewhere in this Annual Report on Form 10-K, and in other documents we file with the SEC,
are risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the
forward-looking statements contained in this Annual Report on Form 10-K and in other written and oral communications
from time to time. You should carefully consider all of the following risks and the other information in this Report and our
other filings with the SEC before you decide to invest in our Company or to maintain or increase your investment. Our
business could be harmed by any of these risks. The trading price of our common stock could decline due to any of these
risks. In assessing these risks, you should also refer to the other information contained in this Annual Report on Form 10-
K, including our consolidated financial statements and related notes.
The risks included in this section are not the only ones we face. We operate in a very competitive and rapidly
changing environment. New risk factors emerge from time-to-time, and it is not possible for management to predict all such
risk factors, nor can it assess the potential impact of all such risk factors on our business or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from those in any forward-looking statements. If
any of the following risks actually occur, our business, results of operations, financial condition and future prospects would
likely suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your
investment.
Business
If we are unable to attract new customers, or sell additional products to existing customers, or if our customers do
not increase their use of our products, our revenue growth and profitability will be adversely affected.
To increase our revenue and achieve and maintain profitability, we believe that we must regularly add new
customers, sell additional products to existing customers, and our customers must increase their use of the products for
which they currently subscribe. We intend to grow our business by retaining and attracting talent, developing strategic
relationships with resellers, including resellers that incorporate our applications in their offerings, and increasing our
marketing activities. If we are unable to hire or retain quality personnel, convert companies that have been referred to us by
our existing network into paying customers, ensure the effectiveness of our marketing programs, or if our existing or new
customers do not perceive our products to be of sufficiently high value and quality, we might not be able to increase sales
and our operating results will be adversely affected. If we fail to sell our products to existing or new customers, we will not
generate anticipated revenues from these products, our operating results will suffer, and we will not be able to grow our
revenues or maintain profitability as planned.
We do not have long-term contracts with most of our recurring revenue customers, and therefore a lack of success
in maintaining or improving forecasted renewal rates will have adverse effects on revenue and financial results.
Most of our contracts with our recurring revenue customers allow the customer to cancel the contract for any reason
with 30 to 90 days’ notice. Our continued success therefore depends significantly on our ability to meet or exceed our
recurring revenue customers’ expectations because most recurring revenue customers do not make long-term commitments
to use our products. In addition, if our reputation in the supply chain management industry is harmed or diminished for any
reason, our recurring revenue customers have the ability to terminate their relationship with us on short notice and seek
alternative supply chain management solutions. We may also not be able to accurately predict future trends in customer
renewals, and our customers’ renewal rates may decline or fluctuate because of several factors, including their
dissatisfaction with our services, the cost of our services compared to the cost of services offered by our competitors and
reductions in our customers’ spending levels. If a significant number of recurring revenue customers seek to terminate their
relationship with us, our business, results of operations and financial condition would be adversely affected in a short
period of time.
Economic weakness and uncertainty could adversely affect our revenue, lengthen our sales cycles, and make it more
difficult for us to forecast operating results accurately.
Our revenues depend significantly on general economic conditions and the sustainability and health of retailers.
Economic weakness and constrained retail spending may result in slower growth, or reductions, in revenues and gross
profits in the future. We have experienced, and may experience in the future, reduced spending in our business due to
SPS COMMERCE, INC.
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Form 10-K for the Annual Period ended December 31, 2022
financial turmoil affecting the U.S. and global economy, and other macroeconomic factors affecting spending behavior.
Uncertainty about future economic conditions increases the difficulty of forecasting operating results and making decisions
about future investments. In addition, economic conditions or uncertainty may cause customers and potential customers to
reduce or delay technology purchases, including purchases of our products. Our sales cycles may lengthen if purchasing
decisions are delayed as a result of uncertain technology or development budgets or contract negotiations become more
protracted or difficult as customers institute additional internal approvals for technology purchases. Delays or reductions in
technology spending could have a material adverse effect on demand for our products, and consequently our results of
operations and prospects.
Our continued growth could significantly strain our personnel resources and infrastructure, and if we are unable to
implement appropriate controls and procedures to manage our growth, we may not be able to implement our
business plan successfully.
We have experienced a period of rapid growth in our headcount and operations. To the extent that we are able to
sustain such growth, it might place a significant strain on our management, administrative, operational, and financial
resources, and infrastructure. Our success will depend in part upon the ability of our senior management to manage this
growth effectively. To do so, we must continue to hire, train, and manage new employees as needed. To manage the
expected growth of our operations and personnel, we will need to continue to improve our operational, financial and
management controls and our reporting systems and procedures. If we fail to successfully manage our growth, we will be
unable to execute our business plan as expected.
If we fail to attract, retain, and train members of our senior management team, including our Chief Executive
Officer and other key personnel, our business plan would be impacted, and we might not be able to implement it
successfully.
Given the complex nature of the cloud-based technology through which our business operates and the speed with
which such technology advances, our future success is dependent, in large part, upon our ability to attract, retain and train
highly qualified key executive, managerial, technology, and sales personnel. Competition for talented personnel is intense
and we cannot be certain that we can retain our key personnel or that we can attract, assimilate, or retain such personnel in
the future to adequately scale our business. Additionally, the loss of any key or a significant number of personnel in our
technology, customer success, or sales teams might significantly delay or prevent the achievement of our business
objectives and could materially harm our business, customer relationships, results of operations and financial condition.
If the market for cloud-based supply chain management products declines or does not maintain its historical growth
rates, our revenues may decline or fail to grow, and we may incur operating losses.
We derive, and expect to continue to derive, substantially all of our revenues from providing cloud-based supply
chain management products to retailers, grocers, distributors, suppliers, and logistics firms. The market for these products
has historically experienced growth, but it is uncertain whether these products will continue or sustain growing levels of
demand and market acceptance. Our success will depend on the willingness of retailers and their trading partners to accept
our products as an alternative to traditional licensed hardware and software products.
Some retailers, grocers, distributors, suppliers, or logistics firms may be reluctant or unwilling to use our cloud-
based products for a number of reasons, including their potential significant initial investment to replace existing
investments in supply chain management hardware and licensed software and perceived loss of control over user data with
a cloud-based product. Other factors that may limit market acceptance of our cloud-based supply chain management
products include:
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our ability to maintain high levels of customer satisfaction;
our ability to maintain continuity of service for all users of our cloud-based products;
the price, performance, and availability of competing products, both new and existing; and
our ability to address customers’ confidentiality and security concerns about information stored within our
cloud-based products.
If customers do not perceive the benefits of our cloud-based supply chain management products, or if customers are
unwilling to accept our cloud-based products as an alternative to the on-premise software or other options approach,
demand for our products may not continue to grow or may grow more slowly than we expect, either of which would
adversely affect our revenues, growth prospects, and overall operating results.
SPS COMMERCE, INC.
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Form 10-K for the Annual Period ended December 31, 2022
The markets in which we participate are highly competitive, and our failure to compete successfully would make it
difficult for us to add and retain customers and would reduce or impede the growth of our business.
The markets for supply chain management products are increasingly competitive and global. We expect competition
to increase in the future both from existing competitors and new companies that may enter our markets. We face
competition from:
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cloud-service providers that deliver business-to-business information systems using a multi-tenant approach;
traditional on-premise software providers; and
managed service providers that combine traditional on-premise software with professional technology
services.
Moreover, our industry is highly fragmented, and we believe it is likely that our existing competitors will continue to
consolidate or will be acquired. In addition, some of our competitors may enter into new alliances with each other or may
establish or strengthen cooperative relationships with systems integrators, third-party consulting firms or other parties. New
entrants not currently considered to be competitors may also enter the market through new technology offerings,
acquisitions, partnerships, or other strategic relationships. Any such new offerings, consolidation, acquisition, alliance or
cooperative relationship could lead to pricing pressure, loss of customers and loss of market share, and could result in one
or more competitors with greater financial, technical, marketing, service and other resources, all of which could have a
material adverse effect on our business, operating results and financial condition. Increased competition could reduce our
market share, revenues, and operating margins, increase our costs of operations, and otherwise adversely affect our
business.
To remain competitive, we will need to invest continuously in software development, marketing, customer service
and support, product delivery and other cloud-based network infrastructure. However, we cannot assure you that new or
established competitors will not offer products that are superior to ours or lower in price than ours, or both. We may not
have sufficient resources to continue the investments in all areas of software development, marketing, customer service and
support and infrastructure needed to maintain our competitive position which may diminish our market share and business
prospects.
We may not be able to successfully integrate or otherwise operate newly acquired companies or businesses, which
could adversely affect our financial results.
Acquisitions involve numerous risks including:
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incurring significantly higher than anticipated capital expenditures and operating expenses;
failing to assimilate the operations, customers, and personnel of the acquired company or business;
disrupting our ongoing business;
dissipating or distracting our management resources;
dilution to existing stockholders from the issuance of equity securities;
liabilities or other problems associated with the acquired business;
becoming subject to adverse tax consequences, substantial depreciation, or deferred compensation charges;
improper compliance with laws and regulations and exposure to other contingent liabilities;
failing to maintain uniform standards, controls, and policies; and
impairing relationships with employees and customers as a result of changes in management.
Fully integrating an acquired company or business into our operations may take a significant amount of time and
resources. In addition, we may only be able to conduct limited due diligence on an acquired company’s operations.
Following an acquisition, we may be subject to liabilities arising from an acquired company’s past or present operations,
including liabilities related to data security, encryption and privacy of customer data, and these liabilities may be greater
than the warranty and indemnity limitations that we negotiate. We cannot assure you that we will be successful in
overcoming these risks or any other problems encountered with acquisitions. To the extent we do not successfully avoid or
overcome the risks or problems related to any acquisitions, our results of operations and financial condition could be
adversely affected. Future acquisitions also could impact our financial position and capital needs and could cause
substantial fluctuations in our quarterly and yearly results of operations. We also may not be able to achieve anticipated
SPS COMMERCE, INC.
12
Form 10-K for the Annual Period ended December 31, 2022
synergies or financial results post acquisition, which could negatively impact our operations and financial results.
Acquisitions could include significant goodwill and intangible assets, which may result in future impairment charges that
would reduce our stated earnings.
Because our long-term success depends, in part, on our ability to expand the sales of our products to customers
located outside of the United States and expand operations to support such expansion, our business will be
increasingly susceptible to risks associated with international operations.
Our limited experience in operating our business outside of the United States increases the risk that our current and
any future international expansion efforts will not be successful. Expanding international sales and operations subjects us to
new risks that, generally, we have not faced in the U.S., including:
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misjudging the markets and competitive landscape of foreign jurisdictions;
fluctuations in currency exchange rates;
unexpected changes in foreign regulatory requirements;
longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
difficulties in managing and staffing international operations;
differing technology standards;
potentially adverse tax consequences, including the complexities of foreign value added tax systems and
restrictions on the repatriation of earnings;
localization of our products, including translation into foreign languages and associated expenses;
the burdens of complying with a wide variety of foreign laws and different legal standards, including laws
and regulations related to privacy;
increased financial accounting and reporting burdens and complexities;
political, social, and economic instability abroad, terrorist attacks and security concerns in general;
greater potential for corruption and bribery; and
reduced or varied protection for intellectual property rights in some countries.
The occurrence of any one of these risks could adversely affect our international business and, consequently, our
results of operations generally. Additionally, operating in international markets also requires significant management
attention and financial resources. We cannot be certain that the investment and additional resources required in
establishing, acquiring, or integrating operations in other countries will produce desired levels of revenues or profitability.
In addition, we operate in parts of the world that are recognized as having governmental corruption problems and
where local customs and practices may not foster strict compliance with anti-corruption laws. Our continued operation and
potential expansion outside the U.S. could increase the risk of such violations in the future. Despite our training and
compliance programs, we cannot assure you that our internal control policies and procedures will protect us from
unauthorized, reckless, or criminal acts committed by our employees or agents, including by third parties we utilize in
foreign jurisdictions. In the event that we believe, or have reason to believe, that our employees or agents have or may have
violated applicable anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, we may be required to
investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and require
significant time and attention from senior management. Violations of these laws may result in severe civil and criminal
sanctions and penalties, which could disrupt our business and have a material adverse effect on our reputation, results of
operations or financial condition.
Any unrest, military activities, or sanctions impacting our international operations, should they occur, could disrupt
operations, and have a material adverse effect on our business. Any such disruption to our operations may be prolonged and
require a transition to alternative workforce locations. An alternative workforce location may be more expensive to train,
staff, and operate and may cause delays and shortfalls in programming deliverables and services, thus potentially harming
our business. Given our significant international workforce in Ukraine and the Philippines and the potentially volatile
political and civil unrest situations in both areas, including but not limited to Russian interference and civil unrest with
multiple groups, respectively, we are more susceptible to disruptions there. Those potentially disruptive environments are
out of our control and we cannot predict the outcome of future developments or reactions to such developments by the
U.S., European, Asian, Oceanic, United Nations or other international authorities and organizations.
SPS COMMERCE, INC.
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Form 10-K for the Annual Period ended December 31, 2022
Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new
technologies could reduce our ability to compete successfully and adversely affect our results of operations.
We may need to raise additional capital due to shortfalls in cash flow or for other reasons, and we may not be able to
obtain debt or additional equity financing on favorable terms, if at all. If we raise additional equity financing, our security
holders may experience significant dilution of their ownership interests and the value of shares of our common stock could
decline. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional
indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make
acquisitions. If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other
things:
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develop and enhance our products;
continue to expand our technology development, sales, and marketing organizations;
acquire new or complementary technologies, products, or businesses;
hire, train and retain employees; or
respond to competitive pressures or unanticipated working capital requirements.
Our inability to do any of the foregoing could reduce our ability to compete successfully and adversely affect our
results of operations.
The extent to which public health emergencies such as epidemics, pandemics, or similar outbreaks may adversely
impact our business, results of operations and financial condition will depend on on-going and future developments
and outcomes, which are highly uncertain and cannot be predicted.
Our business operations and financial results may be adversely impacted by public health emergencies, such as
epidemics, pandemics, and similar outbreaks. Despite our efforts to manage these impacts, their ultimate impact also
depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak and actions
taken to contain its spread and mitigate its public health effects.
Public health emergencies could have adverse impacts on our business operations by limiting our employees' ability
to work and travel, disrupting our third-party technology providers, or causing internal operational workflow to change,
among other potentially unforeseen circumstances given the uncertainties related to public health emergencies.
Additionally, public health emergencies may cause significant disruptions and changes in the economic or political
conditions in markets in which we operate. This may cause significant volatility in demand for our services due to, among
other adverse impacts, disruption and downturns in our customers’ businesses and related supply chains, an acceleration of
existing customer bankruptcies, or our customers’ inability to pay for our services when due or in full. Although certain
customers may have a reduced demand for our services, we also may see increased demand by certain customer segments,
potentially offsetting reduced demand.
The COVID-19 pandemic could have adverse impacts on our business, including causing significant volatility in
demand for our services due to disruption and downturns in our customers’ businesses and related supply chains,
disruptions to our third party technology providers, limitations on our employees' ability to work and travel, and significant
changes in the economic or political conditions in markets in which we operate.
Products and Service Offerings
Any new products and changes to existing products we pursue could fail to attract or retain customers or generate
expected revenues.
Our ability to retain, increase, and engage our customers and to increase our revenues depends heavily on our ability
to identify, develop, and launch successful new products. We may introduce significant changes to our existing products or
develop and introduce new and unproven products which include or use technologies with which we have little or no prior
development or operating experience. If new or enhanced products fail to garner expected customer demand in a timely
manner or at all, we may fail to generate sufficient revenues, operating margin, or other value to justify our investments
and our business may be adversely affected.
SPS COMMERCE, INC.
14
Form 10-K for the Annual Period ended December 31, 2022
Our business is dependent on our ability to maintain and scale our technical infrastructure, and any failure to
effectively maintain or scale such infrastructure could damage our reputation, result in a potential loss of revenue,
and adversely affect our financial results.
Our reputation and ability to attract, retain and serve our customers is dependent upon the reliable performance of
our cloud-based products and our underlying technical infrastructure and cloud providers. As our user base and the amount
and types of information shared on our cloud-based network continue to grow, we will need an increasing amount of
technical infrastructure, including network capacity and computing power, to continue to satisfy the needs of our users. It is
possible that we or our cloud providers may fail to effectively maintain and scale our technical infrastructure to
accommodate these increased demands. Any failure to effectively maintain and grow our technical infrastructure could
result in interruptions or delays in service which may damage our reputation, result in a potential loss of customers, and
adversely affect our financial results.
Our inability to adapt to rapid technological change could impair our ability to remain competitive.
The industry in which we compete is characterized by rapid technological change, frequent introductions of new
products and evolving industry standards. Existing products can become obsolete and unmarketable when vendors
introduce products utilizing new technologies or new industry standards emerge, and as a result, it is difficult for us to
predict the life cycles of our products. Our ability to attract new customers and increase revenues from customers will
depend in significant part on our ability to anticipate technological changes, and the corresponding impact on customer
needs, evolving requirements, and future industry standards, and to continue to enhance our existing products or introduce
or acquire new products to keep pace with such technological developments. The success of our enhanced or new products
depend on several factors, including the timely completion, introduction and market acceptance of the enhancement or
product. Any new product we develop or acquire might not be introduced in a timely or cost-effective manner and might
not achieve the broad market acceptance necessary to generate expected revenues. If any of our competitors or new market
entrants implement new technologies or upgrades to existing technologies before we are able to implement them, they may
be able to provide more effective products than ours at lower prices. Any delay or failure in the introduction of new or
enhanced products could adversely affect our business, results of operations and financial condition.
We rely on third-party infrastructure, software and services that could take a significant time, and involve a
complex transition, to replace or upgrade.
We rely on infrastructure, software and services licensed from third parties to offer our cloud-based supply chain
management products. This infrastructure, software, and services, as well as related maintenance and updates, may not
continue to be available to us on commercially reasonable terms, or at all. If we lose the right to use or upgrade any of
these licenses, our customers could experience delays or be unable to access our products until we can obtain and integrate
equivalent technology. There might not always be commercially reasonable alternatives to the third-party infrastructure,
software, and services that we currently license. Any such alternatives could be more difficult or costly to replace than what
we currently license, and integration of the alternatives into our cloud-based products could require significant work and
resources and delays. Any delays or failures associated with our cloud-based products could damage our reputation with
current and potential customers and have an adverse effect on our business.
Interruptions or delays from third-party data centers or to the telecommunications infrastructure we use or rely on
could impair the delivery of our products and our business could suffer.
We use third-party data centers, located in the U.S. and internationally, as well as provision services from cloud
providers, to conduct our operations. Our ability to deliver our services depends on the development and maintenance of
telecommunications infrastructure by third parties. This includes maintenance of a reliable network backbone with the
necessary speed, data capacity, bandwidth capacity, and security. Our operations depend on the protection of the equipment
and information we store in these third-party centers, or utilize from third-party providers, against damage or service
interruptions that may be caused by fire, flood, severe storm, power loss, telecommunications failures, natural disasters,
war, criminal act, military action, terrorist attack, financial failure of the service provider, and other events beyond our
control. In addition, third-party malfeasance, such as intentional misconduct by computer hackers, unauthorized intrusions,
computer viruses, ransomware, or denial of service attacks, may also cause substantial service disruptions. A prolonged
service disruption affecting our products could damage our reputation with potential customers, cause us to lose existing
customers, expose us to liability, or otherwise adversely affect our business. We may also incur significant costs for using
alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the data centers or
SPS COMMERCE, INC.
15
Form 10-K for the Annual Period ended December 31, 2022
infrastructure we use or rely on, including the additional expense of transitioning to substitute facilities or service
providers.
A failure to protect the integrity and security of our customers’ information and prevent cyber-attacks could
materially damage our reputation, expose us to claims and litigation, and lead to service disruptions and harm our
business. Additionally, the growing costs to avoid or reduce the risks of such a failure could adversely affect our
results of operations.
As demonstrated by the frequency and sophistication of material and high-profile data security breaches within the
retail industry; computer malware, viruses, computer hacking, phishing attacks, spamming, ransomware, and other cyber
threats have become more prevalent in our industry. Given the interconnected nature of the retail supply chain, our
significant presence in the retail industry, and the occurrence of cyber-attacks on our system in the past, we believe that we
are an attractive target for such attacks.
Our business involves the collection and use of confidential information of our customers and their trading partners
which sometimes requires our direct access to our customers’ information systems. Our security measures may be breached
as a result of third-party action, including intentional misconduct by computer hackers via cyber-attacks, employee error,
malfeasance, system errors or vulnerabilities, including vulnerabilities of our third-party vendors and customers, and result
in someone obtaining unauthorized access to our customers’ information and information systems. Additionally, third
parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as
usernames, passwords, or other information in order to gain access to our customers’ data or our data or IT systems.
Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not
recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate
preventative measures. Malicious third parties may also conduct attacks designed to temporarily deny customers access to
our services.
Any failure to maintain performance, reliability, security and availability of our cloud-based products to the
satisfaction of our customers, or any unauthorized access to our customers’ information or systems may cause service
disruptions, harm our reputation, impair our ability to retain existing customers and attract new customers and expose us to
legal claims or government action, each of which could have a material adverse impact on our financial condition, results
of operations and growth prospects. Although we are allocating more resources to address cyber threats and safeguard our
products and services, including insurance in the event of a breach, we cannot assure you that these efforts to protect this
confidential information and prevent unauthorized access to such information systems will be successful, and the growing
costs related to these efforts could adversely affect our results of operations. In addition, because of the critical nature of
information security and system access, any actual or perceived failure of our security measures could cause existing or
potential customers not to use our products and harm our reputation.
Businesses in the retail industry have experienced material sales declines after discovering data security breaches,
and our business could be similarly impacted in the event of a breach or other cyber incident. Furthermore, many U.S.
states and international jurisdictions have enacted laws requiring companies to notify consumers of data security breaches
involving their personal data. These mandatory disclosures regarding a data security breach often lead to widespread
negative publicity, which may cause our customers to lose confidence in our products and the effectiveness of our data
security measures.
We may experience service failures or interruptions due to defects in the hardware, software, infrastructure, third-
party components or processes that comprise our existing or new products, any of which could adversely affect our
business.
Technology products like ours may contain undetected defects in the hardware, software, infrastructure, third-party
components or processes that are part of the products we provide. If these defects lead to service failures, we could
experience delays or lost revenues, diversion of technology resources, negative media attention or increased service costs
as a result of performance claims during the period required to correct the cause of the defects. We cannot be certain that
defects will be avoided in our upgraded or new products, resulting in loss of, or delay in, market acceptance, which could
have an adverse effect on our business, results of operations and financial condition.
Because customers use our cloud-based supply chain management products for critical business processes, any
defect in our products, any disruption to our products or any error in execution could cause recurring revenue customers to
cancel their contracts with us, cause potential customers to not join our network and harm our reputation. We could also be
subject to litigation for actual or alleged losses to our customers’ businesses, which may require us to spend significant
time and money in litigation or arbitration or to pay significant settlements or damages. We do not currently maintain any
SPS COMMERCE, INC.
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Form 10-K for the Annual Period ended December 31, 2022
warranty reserves. Moreover, defending a lawsuit, regardless of its merit, could be costly and divert management’s
attention and could cause our business to suffer.
The insurers under our existing liability insurance policy could deny coverage of a future claim that results from an
error or defect in our technology or a resulting disruption in our products, or our existing liability insurance might not be
adequate to cover any or all of the damages and other costs of such a claim. Moreover, we cannot assure you that our
current liability insurance coverage will continue to be available to us on acceptable terms or at all. The successful
assertion against us of one or more large claims that exceeds, or is not insured by, our insurance coverage, or the
occurrence of changes in our liability insurance policy, including an increase in premiums or imposition of large deductible
or co-insurance requirements, could have an adverse effect on our business, financial condition, and operating results.
If open source, or other no-cost products and services, expand into enterprise application and supply chain software
or products, our prices, revenues, and operating results may decline.
The open source community is comprised of many different formal and informal groups of software developers and
individuals who have created a wide variety of software and have made that software available for use, distribution, and
modification, often free of charge. If developers contribute effective and scalable enterprise and supply chain application
software to the open source community, or if competitors make such software or service available at no cost, we may need
to lower our product pricing and alter our distribution strategy to compete successfully, and our revenues and operating
results may decline as a result.
The use of open source software in our products may expose us to additional risks and harm our intellectual
property.
Some of our products use or incorporate software that is subject to one or more open source licenses. Open source
software is typically licensed under terms that require making the software freely accessible, usable, and modifiable.
Failure to comply with these licenses may subject us to onerous requirements, such as offering our products that
incorporate the open source software for no cost or making the source code we create based upon, incorporating, or using
the open source software available for modifications or derivative works. If an author or third-party that distributes such
open source software were to allege that we had not complied with the conditions of one or more of these licenses, we
could be required to incur significant legal expenses defending against such allegations and could be subject to significant
damages, enjoined from the sale of our services that contained the open source software and required to comply with the
foregoing conditions, which could disrupt the distribution and sale of some of our products.
While we monitor the use of a majority of open source software in our products, processes and technology and work
to ensure that open source software is not used in such a way as to require us to disclose the source code to the related
product or products, such use could inadvertently occur. Additionally, if a third-party software provider has incorporated
certain types of open source software into software we license from such third-party for our products, we could, under
certain circumstances, be required to disclose the source code to our products. This could harm our intellectual property
position and have a material adverse effect on our business, results of operations and financial condition.
If we fail to protect our intellectual property and proprietary rights adequately, our business could suffer material
adverse effects.
We believe that proprietary technology is essential to establishing and maintaining our leadership position. We seek
to protect our intellectual property through trade secrets, copyrights, confidentiality, non-compete and nondisclosure
agreements, license agreements, trademarks, domain names and other measures, some of which afford only limited
protection. We do not have any registered copyrights. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy or reverse engineer aspects of our technology or to obtain and use information that we regard
as proprietary. We cannot assure you that our means of protecting our proprietary rights will be adequate or that our
competitors will not independently develop similar or superior technology or design around our intellectual property. In
addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the U.S.
intellectual property protections may also be unavailable, limited or difficult to enforce in some countries, which could
make it easier for competitors to capture market share. Our failure to adequately protect our intellectual property and
proprietary rights could adversely affect our business, financial condition, and results of operations.
In addition, if we resort to legal proceedings to enforce our intellectual property rights or to determine the validity
and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome and
expensive, even if we were to prevail. Any such legal proceedings, including litigation, that are pursued in the future could
SPS COMMERCE, INC.
17
Form 10-K for the Annual Period ended December 31, 2022
result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating
results, or financial condition, regardless of whether we prevail in such proceedings.
An assertion by a third-party that we are infringing its intellectual property, whether or not correct, could subject
us to costly and time-consuming litigation or expensive licenses and our business might be materially harmed.
The supply chain management industry and its enabling technologies are characterized by the existence of a large
number of patents, copyrights, trademarks, and trade secrets and by frequent litigation based on allegations of infringement
or other violations of intellectual property rights. As we seek to extend our products, we could be constrained by the
intellectual property rights of others.
We might not prevail in any intellectual property infringement litigation against us given, among other reasons, the
complex technical issues, and inherent uncertainties in such litigation. Moreover, defending such claims, regardless of their
merit, could be time-consuming and distracting to management, result in costly litigation or settlement, cause development
delays, require us to enter into royalty or licensing agreements or require us to redesign our products to avoid infringement.
If our products violate any third-party proprietary rights, we could be required to withdraw those products from the market,
re-develop those products or seek to obtain licenses from third parties, which might not be available on reasonable terms or
at all. Any efforts to re-develop our products, obtain licenses from third parties on favorable terms or license a substitute
technology might be unsuccessful and, in any case, might substantially increase our costs and harm our business, financial
condition and operating results. We also face risk of infringement or misappropriation claims if we hire an employee or
contractor who possesses third-party proprietary information and who decides to use such information in connection with
our products, services, or business processes without such third-party’s authorization. Regardless of the source of such
misuse of third-party intellectual property, any resulting withdrawal of our products from the market might materially harm
our business, financial condition, and operating results.
In addition, we incorporate open source software into our cloud-based products. Given the nature of open source
software, third parties might assert copyright and other intellectual property infringement claims against us based on our
use of certain open source software programs. The terms of many open source licenses to which we are subject have not
been interpreted by U.S. or foreign courts, and there is a risk that those licenses could be construed in a manner that
imposes unanticipated conditions or restrictions on our ability to commercialize our products. In that event, we could be
required to seek licenses from third parties in order to continue offering our products, to re-develop our products or to
discontinue sales of our products, or to release our proprietary software code under the terms of an open source license, any
of which could have a material adverse effect on our business.
Regulation
Privacy concerns and laws, evolving regulation of the internet and cloud computing, cross-border data transfer
restrictions and other domestic or foreign regulations may limit the use and adoption of our products and adversely
affect our business.
Regulation related to the provision of services on the internet is increasing, as federal, state, and foreign
governments continue to adopt new laws and regulations addressing eCommerce generally, data privacy and the collection,
processing, storage and use of personal information, including but not limited to the European Union's General Data
Protection Regulation. We are particularly sensitive to these risks because the internet and the collection, processing,
storage, and use of personal information are critical components of our cloud-based business model. Further, laws are
increasingly aimed at the use of personal information for marketing purposes, such as the European Union’s e-Privacy
Directive, and the country-specific regulations that implement that directive. Such laws and regulations are subject to
differing interpretations and are inconsistent among jurisdictions. These and other requirements could reduce demand for
our products or restrict our ability to store and process data or, in some cases, impact our ability to offer, or develop new,
services and products in certain locations.
In addition to government activity, privacy advocacy and other industry groups have established or may establish
new self-regulatory standards that may place additional burdens on us. Our customers may expect us to meet voluntary
certification or other standards established by third parties. If we are unable to maintain these certifications or meet these
standards, it could adversely affect our ability to provide our products to certain customers and could harm our business.
The costs of compliance with and other burdens imposed by laws, regulations and standards are significant and may
limit the use and adoption of our services and reduce overall demand for them, or lead to material fines, penalties, or
liabilities for noncompliance.
SPS COMMERCE, INC.
18
Form 10-K for the Annual Period ended December 31, 2022
Furthermore, concerns regarding data privacy may cause our customers’ customers to resist providing the data
necessary to allow our customers to use our service effectively. Even the perception that the privacy of personal
information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales and adoption of our
cloud-based products.
Industry-specific regulation is evolving, and unfavorable or burdensome industry-specific laws, regulations or
interpretive positions could harm our business.
Our customers and potential customers do business in a variety of industries. Regulators in certain industries have
adopted and may in the future adopt regulations or interpretive positions regarding the use of cloud computing and other
outsourced services. The costs of compliance with, and other burdens imposed by, industry-specific laws, regulations and
interpretive positions may limit customers’ use and adoption of our services and reduce overall demand for our services. In
addition, an inability to satisfy the standards of certain voluntary third-party certification bodies that our customers may
expect may have an adverse impact on our business. If in the future we are unable to achieve or maintain these industry-
specific certifications or other requirements or standards relevant to our customers, it may harm our business.
In some cases, industry-specific laws, regulations, or interpretive positions may also apply directly to us as a service
provider. Any failure or perceived failure by us to comply with such requirements could have an adverse impact on our
business.
Ownership of Our Common Stock
Our results of operations may fluctuate in the future, which could result in volatility in our stock price.
Our quarterly revenues and results of operations have varied in the past and may fluctuate in the future. Fluctuations
in our results of operations may be due to a number of factors, including, but not limited to, those listed below and
identified throughout this “Risk Factors” section:
•
•
•
•
•
•
•
•
•
•
•
•
our ability to retain and increase sales to customers and attract new customers, including our ability to
maintain and increase our number of recurring revenue customers;
the timing and success of introductions of new products or upgrades by us or our competitors;
the strength of the U.S. and global economy, in particular, as it affects the U.S. retail sector;
the financial condition of our customers;
changes in our pricing policies or those of our competitors;
competition, including entry into the industry by new competitors;
the amount and timing of our expenses, including stock-based compensation and expenditures related to
expanding our operations, supporting new customers, performing research and development, or introducing
new products;
changes in laws and regulations impacting our business;
regulatory compliance costs and unforeseen legal expenses, including litigation and settlement costs;
the timing, size, integration and operational success of potential future acquisitions;
changes in the payment terms for our products; and
system or service failures, security breaches or network downtime.
Due to the foregoing factors, and other risks, including those identified in this “Risk Factors” section, comparing our
operating results on a period-to-period basis may not be meaningful. You should not rely on these comparisons of our past
results of operations as an indication of our future performance.
Our operating results in one or more future quarters may fluctuate, fall below the expectations of securities analysts
and investors, or be less than any guidance we may provide to the market. If this occurs, the trading price of our common
stock could decline significantly.
SPS COMMERCE, INC.
19
Form 10-K for the Annual Period ended December 31, 2022
Our stock price may be volatile.
Our stock price has fluctuated and may fluctuate in the future, depending on a number of factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
fluctuations in our guidance and quarterly financial results or the guidance or quarterly financial results of
companies perceived to be similar to us;
fluctuations in our recorded revenue, even during periods of significant sales order activity;
fluctuations in stock market volume;
changes in estimates of our financial results or recommendations by securities analysts;
failure of any of our products to achieve or maintain market acceptance;
changes in market valuations of companies perceived to be similar to us;
success of competitive products or services;
changes in our capital structure, such as future issuances of securities or the incurrence of debt;
announcements by us or our competitors of significant products, contracts, acquisitions, or strategic alliances;
legal or regulatory developments in the U.S., foreign countries, or both;
litigation involving our company, our general industry or both;
additions or departures of key personnel;
investors’ general perception of us; and
changes in general economic, industry and market conditions.
In addition, if the market for software or technology stocks or the stock market in general experiences a loss of
investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial
condition, or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us
to class action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
Our charter documents and Delaware law may delay, discourage, or inhibit a takeover that stockholders consider
favorable.
Provisions of our certificate of incorporation and bylaws and applicable provisions of Delaware law may delay,
discourage, or inhibit transactions involving an actual or potential change in our control or change in our management,
including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our
stockholders might otherwise deem to be in their best interests, and may ultimately result in the market price of our
common stock being lower than it would be without these provisions. These provisions:
•
•
•
•
•
permit our board of directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences
and privileges as our board may designate, including the right to approve an acquisition or other change in
our control;
provide that the authorized number of directors may be changed by resolution of the board of directors;
provide that all vacancies, including newly created directorships, may, except as otherwise required by law,
be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate
candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely
manner, and also specify requirements as to the form and content of a stockholder’s notice; and
do not provide for cumulative voting rights.
In addition, Section 203 of the Delaware General Corporation Law generally limits our ability to engage in any
business combination with certain persons who own 15% or more of our outstanding voting stock or any of our associates
or affiliates who at any time in the past three years have owned 15% or more of our outstanding voting stock. These
provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your
shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could
reduce the price of our common stock.
SPS COMMERCE, INC.
20
Form 10-K for the Annual Period ended December 31, 2022
We do not intend to declare dividends on our stock in the foreseeable future.
We currently intend to retain all future earnings for the operation and expansion of our business and, therefore, do
not anticipate declaring or paying cash dividends on our common stock in the foreseeable future. Investors may need to sell
all or part of their holdings of our common stock after price appreciation, which may never occur, as the only way to
realize any future gains on their investment. Any payment of future cash dividends on our common stock will be at the
discretion of our board of directors and will depend upon our results of operations, earnings, capital requirements, financial
condition, future prospects, contractual restrictions, and other factors deemed relevant by our board of directors. Therefore,
you should not expect to receive dividend income from shares of our common stock.
General
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other
tax returns could adversely affect our operating results and financial condition.
We are subject to income taxes in the U.S. and various foreign jurisdictions, and our domestic and international tax
liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be
subject to volatility or adversely affected by a number of factors, including:
•
•
•
•
•
•
•
changes in the valuation of our deferred tax assets and liabilities;
expected timing and amount of the release of tax valuation allowances;
expiration of, or detrimental changes in, research and development tax credit laws;
tax effects of stock-based compensation;
costs related to intercompany restructurings;
changes in tax laws, regulations, accounting principles or interpretations thereof; and
future earnings being lower than anticipated in countries where we have lower statutory tax rates and higher
than anticipated earnings in countries where we have higher statutory tax rates.
In addition, we are subject to audits of our income, sales, and other taxes by the Internal Revenue Service and other
foreign and state tax authorities. Outcomes from these audits could have an adverse effect on our operating results and
financial condition.
Our failure to maintain adequate internal control over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 or to prevent or detect material misstatements in our annual or interim financial
statements in the future could result in inaccurate financial reporting, or could otherwise harm our business and
investor confidence in our financial reporting.
Ensuring that we have internal financial and accounting controls and procedures adequate to produce accurate
financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated periodically. The
Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and
disclosure controls and procedures. In particular, we are required to perform annual system and process evaluation and
testing of our internal control over financial reporting to allow management and our independent registered public
accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of
the Sarbanes-Oxley Act. Furthermore, implementing any appropriate future changes to our internal control over financial
reporting may entail substantial costs in order to modify our existing accounting systems, may take a significant period of
time to complete and may distract our officers, directors, and employees from the operation of our business. If we are not
able to comply with the requirements of Section 404 in the future, or if material weaknesses are identified, our business
could be harmed and investor confidence in our financial reporting diminished.
SPS COMMERCE, INC.
21
Form 10-K for the Annual Period ended December 31, 2022
Item 1B. Unresolved Staff Comments
None.
Item 2.
Properties
Our corporate headquarters, including our principal administrative, marketing, sales, technical support, and research
and development facilities, are located in Minneapolis, Minnesota. This location includes approximately 198,000 square
feet of space and is under lease through 2027. We lease other smaller facilities across the U.S. and international locations.
We believe that our current facilities are suitable and adequate to meet our current needs and that suitable additional or
substitute space will be available as needed to accommodate expansion of our operations. For additional information
regarding obligations under operating leases, see Note I of our consolidated financial statements, included in Part II, Item
8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
Item 3.
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. We believe that we have
obtained adequate insurance coverage and/or rights to indemnification in connection with potential legal proceedings that
may arise.
Item 4.
Mine Safety Disclosures
Not applicable.
SPS COMMERCE, INC.
22
Form 10-K for the Annual Period ended December 31, 2022
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity
Securities
Market Information - Our common stock is and has been traded on the Nasdaq Global Market under the symbol
“SPSC” since April 22, 2010, the date of our initial public offering.
Stockholders of Record - As of February 10, 2023, we had 68 stockholders of record of our common stock,
excluding holders whose stock is held either in nominee name and/or street name brokerage accounts.
Dividends - We have not declared or paid cash dividends on our common stock. We currently intend to retain our
future earnings, if any, to finance the operation and expansion of our business, and, therefore, we do not expect to pay cash
dividends on our common stock in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion
of our board of directors after taking into account various factors, including our financial condition, operating results,
current and anticipated cash needs, outstanding indebtedness and plans for expansion and restrictions imposed by lenders,
if any.
Stock Performance Graph and Cumulative Total Return
Notwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following
information relating to the price performance of our common stock shall not be deemed to be “filed” with the SEC or to be
“soliciting material” under the Securities Exchange Act of 1934, as amended, (“Exchange Act”), and it shall not be
deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (“Securities
Act”), or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing.
The table and graph below compare the cumulative total stockholder return of our common stock with that of the
Nasdaq US Benchmark TR Index and the Nasdaq Computer Index from December 31, 2017 through December 31, 2022,
utilizing the last trading day of each respective year. The return assumes that $100 was invested in shares of our common
stock and the other indexes at the close of market on December 29, 2017, the last trading day of 2017, and that dividends,
if any, were reinvested. The comparisons in this table and graph are based on historical data and are not intended to forecast
or be indicative of future performance of our common stock.
Comparison of Cumulative Total Returns of SPS Commerce, Inc. to Comparable Indexes
Date
12/29/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/30/2022
SPS Commerce
Nasdaq US
Benchmark TR
Index
Nasdaq
Computer Index
$
100.00
$
100.00
$
169.54
228.11
446.96
585.92
528.63
94.56
124.03
150.41
189.36
152.00
100.00
96.32
144.80
217.17
299.39
192.28
Cumulative Total Return
600.00
500.00
400.00
....
"'
0::
300.00
0
0 200.00
100.00
12/29/20 17
12/3 1/2018
12/31 /2019
12/31/2020
12/31 /2021
12/30/2022
-+- SPS Commerce _. Nasdaq US Benchmark TR Index
...,_ Nasdaq Computer Index
SPS COMMERCE, INC.
23
Form 10-K for the Annual Period ended December 31, 2022
Recent Sales of Unregistered Securities; Use of Proceeds from Sales of Registered Securities
Not applicable.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The share repurchase activity for the quarter ended December 31, 2022 was as follows:
Period
October 1 - 31, 2022
November 1 - 30, 2022
December 1 - 31, 2022
Total
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 (1)
1,291 $
3,024
—
4,315 $
120.06
119.05
—
119.35
1,291 $ 47,368,000
47,008,000
3,024
47,008,000
—
4,315 $ 47,008,000
For more information regarding our share repurchase programs, refer to Note J to our consolidated financial statements,
included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.
(1) On July 26, 2022 (announced July 27, 2022), our board of directors authorized a program to repurchase up to $50.0
million of our common stock. Under the program, purchases may be made from time to time in the open market or
in privately negotiated purchases, or both. The new share repurchase program became effective August 26, 2022 and
expires on July 26, 2024.
Item 6.
[Reserved]
@
SPS COMMERCE, INC.
24
Form 10-K for the Annual Period ended December 31, 2022
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together
with our audited consolidated financial statements and related notes which are included in Part II, Item 8, “Financial
Statements and Supplementary Data” of this Annual Report on Form 10-K. Our actual results could differ materially from
those anticipated in the forward-looking statements included in this discussion as a result of certain factors, including, but
not limited to, those discussed in Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K.
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, grocers, distributors, suppliers, and logistics firms to communicate and
collaborate by simplifying how they manage and share item, inventory, order and sales data across omnichannel retail
channels. We deliver our products using a full-service model, which includes industry-leading technology and a team of
experts that optimize, update, and operate the technology on customers' behalf.
Our products enable customers to increase supply chain performance, optimize inventory levels and sell-through,
reduce operational costs, improve order visibility, and satisfy consumer demands for a seamless omnichannel experience.
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 Financial Measures
Sources of Revenues
Fulfillment - Our Fulfillment product is a full-service EDI solution that scales as a business grows. Companies can
use a single system to manage orders and logistics from all sales channels, including wholesale, eCommerce, and
marketplaces. Fulfillment is configurable for any trading partner, document or business system used for order management
and offers a full suite of tools to help businesses efficiently manage their supply chain.
Analytics - Our Analytics product enables organizations to improve visibility into how products are selling through a
single connection across all sales channels, including wholesale, eCommerce, and marketplaces. Analytics improves access
and usage of sales and inventory data through a combination of our analytics applications, network of connections, and
industry-leading expertise.
Other Products - We provide several complementary products, such as:
(cid:405)
(cid:405)
Assortment - Our Assortment product simplifies the communication of robust, accurate item data
by automatically translating item attributes, and hierarchies through a single connection across all
sales channels.
Community - Our Community product allows organizations to accelerate digitization of their
supply chain and improve collaboration with suppliers through proven change management and
onboarding programs.
Cost of Revenues and Operating Expenses
Cost of Revenues - Cost of revenues consist primarily of personnel costs for our customer success and
implementation teams, customer support personnel, and application support personnel, as well as amortization related to
internally developed software.
Sales and Marketing Expenses - Sales and marketing expenses consist primarily of personnel costs for our sales,
marketing, product management teams, and commissions earned by our sales personnel and referral partners.
Research and Development Expenses - Research and development expenses consist primarily of personnel costs and
stock-based compensation expense for development of new and maintenance of existing products, net of amounts
capitalized as developed software.
SPS COMMERCE, INC.
25
Form 10-K for the Annual Period ended December 31, 2022
General and Administrative Expenses - General and administrative expenses consist primarily of personnel costs
and stock-based compensation expense for finance, human resources, and internal technology support, as well as
professional services and other fees, such as bad debt expense and credit card processing fees.
Overhead Allocation - We allocate overhead expenses such as rent, certain employee benefit costs, and depreciation
of general office assets to cost of revenues and operating expenses categories based on expense type using department
headcount or salary.
Amortization of Intangibles Assets - Amortization expense consists of the expense recognition of acquired intangible
assets over their estimated useful lives.
Other Income (Expense), net
Other income (expense) consists primarily of realized gain (loss) from foreign currency on cash and investments
held and investment income.
Income Tax Expense
Income tax expense consists primarily of income taxes for U.S. federal jurisdiction in addition to income taxes for
various state and international jurisdictions.
Metrics and Non-GAAP Financial Measures
Recurring Revenue Customers - As of December 31, 2022, we had 42,300 customers with ongoing contracts to pay
us monthly fees, which we refer to as recurring revenue customers. A small portion of our recurring revenue customers
consist of separate units within a larger organization. We treat each of these units, which may include divisions,
departments, affiliates and franchises, as distinct customers.
Wallet Share - We calculate average recurring revenues per recurring revenue customer, which we also refer to as
wallet share, by dividing the recurring revenues from recurring revenue customers for the period by the average of the
beginning and ending number of recurring revenue customers for the period.
Non-GAAP Financial Measures - To supplement our consolidated 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 financial 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 financial 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. We believe these non-GAAP financial measures are useful to an investor as they are
widely used in evaluating operating performance. Adjusted EBITDA and Adjusted EBITDA Margin are used to measure
operating performance without regard to items such as depreciation and amortization, which can vary depending upon
accounting methods and the book value of assets, and to present a meaningful measure of corporate performance exclusive
of capital structure and the method by which assets were acquired.
These non-GAAP financial 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 consolidated 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.”
Critical Accounting Policies and Estimates
The discussion of our financial condition and results of operations is based upon our consolidated financial
statements, which are prepared in accordance with GAAP. The preparation of these consolidated financial statements
requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues,
expenses, and related disclosures. On an ongoing basis, we evaluate our estimates, judgments, 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.
SPS COMMERCE, INC.
26
Form 10-K for the Annual Period ended December 31, 2022
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, internally developed software, and business combinations are the most critical to fully understand and evaluate
our financial condition and results of operations.
Revenue Recognition
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. 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.
Internally Developed Software
Internally developed software consists of capitalized costs incurred during the application development stage, which
include costs related to the design of the chosen path, coding, installation of the hardware necessary to run the software,
and any testing done before the operational stage. Costs incurred during the preliminary project stage and post-
implementation stage are expensed as incurred. Additionally, maintenance of internally developed software are expensed as
incurred. Internally developed software is amortized over the estimated useful life, three years, commencing on the date
when the asset is ready for its intended use. Amortization is computed using the straight-line method.
Business Combinations
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and
intangible assets acquired based on their estimated fair values as of the acquisition date. The excess of the fair value of
purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such
valuations may require us to make significant estimates and assumptions, especially with respect to intangible assets.
Significant estimates in valuing certain intangible assets may include, but are not limited to, future expected cash
flows from acquired customers and developed technology from a market participant perspective, useful lives, and discount
rates. Significant estimates in valuing liabilities for contingent consideration may include, but are not limited to, discount
rates, projected financial results of the acquired businesses based on our most recent internal forecasts, and factors
indicating the probability of achieving the forecasted results.
Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain
and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is not to
exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with
the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are
recorded to earnings.
SPS COMMERCE, INC.
27
Form 10-K for the Annual Period ended December 31, 2022
Results of Operations
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
The following table presents our results of operations for the periods indicated:
($ in thousands)
Revenues
Cost of revenues
Gross profit
Operating expenses
Sales and marketing
Research and development
General and administrative
Amortization of intangible
Total operating expenses
Income from operations
Other income (expense), net
Income before income taxes
Income tax expense
Net income
Year Ended December 31,
2022
2021
Change
$
$ 450,875
153,065
297,810
101,772
45,748
67,340
11,768
226,628
71,182
142
71,324
16,190
55,134
$
% of
revenue(1)
$
% of
revenue(1)
100.0 % $ 385,276
131,678
33.9
253,598
66.1
22.6
10.1
14.9
2.6
50.3
15.8
—
15.8
3.6
12.2 % $
88,044
39,038
61,305
10,126
198,513
55,085
(1,544)
53,541
8,944
44,597
100.0 % $
34.2
65.8
22.9
10.1
15.9
2.6
51.5
14.3
(0.4)
13.9
2.3
11.6 % $
$
65,599
21,387
44,212
13,728
6,710
6,035
1,642
28,115
16,097
1,686
17,783
7,246
10,537
%
17.0 %
16.2
17.4
15.6
17.2
9.8
16.2
14.2
29.2
(109.2)
33.2
81.0
23.6 %
(1) Amounts in column may not foot due to rounding
Revenues - Revenues increased for the 88th consecutive quarter. The increase in revenues 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 13% to 42,300 at December 31, 2022 from 37,500 at
December 31, 2021 primarily due to sales and marketing efforts to acquire new customers and due to recent
acquisitions.
Wallet share increased 4% to $10,500 at December 31, 2022 from $10,050 at December 31, 2021. This was
primarily attributable to increased usage of our products by our recurring revenue customers.
Recurring revenues increased 18% in 2022, as compared to 2021, and accounted for 93% and 92% of our total
revenues in 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.
Cost of Revenues - The increase in cost of revenues was primarily due to increased headcount which resulted in an
increase of $15.6 million in personnel-related costs and an increase of $1.9 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 $9.4 million in personnel-related costs and an increase of $1.3 million in stock-
based compensation. Additionally, there was an increase of $1.2 million in sales commissions due to increased sales.
Research and Development Expenses - The increase in research and development expense was primarily due to
increased headcount which resulted in increases of personnel costs of $4.4 million and stock-based compensation of $1.3
million.
General and Administrative Expenses - The increase in general and administrative expense was primarily due to
increased headcount which resulted in an increase in personnel-related costs of $1.9 million. There was also an increase of
$1.3 million in stock-based compensation. Additionally, as we continued to support growing operations, there was an
@
SPS COMMERCE, INC.
28
Form 10-K for the Annual Period ended December 31, 2022
increase in professional fees of $1.6 million and an increase of $1.3 million in software subscriptions, partially offset by a
decrease of $1.3 million in bad debt expense.
Amortization of Intangible Assets - The increase in amortization of intangible assets was driven by increased
intangible assets related to recent business acquisitions.
Other Income (Expense) - The change was primarily due to increased investment income and favorable foreign
currency exchange rate changes.
Income Tax Expense - The increase in income tax expense was driven by an increase in pre-tax income and a
decrease in excess tax deductions due to the current period equity award settlements. This was 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 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 year ended December 31, 2021, other adjustments included disposals of cloud hosting arrangement
implementation costs and 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:
(in thousands)
Net income
Income tax expense
Depreciation and amortization of property and equipment
Amortization of intangible assets
Stock-based compensation expense
Realized loss from foreign currency on cash and investments held
Investment income
Other
Adjusted EBITDA
Year Ended December 31,
2021
2022
$
$
55,134 $
16,190
16,421
11,768
33,399
1,026
(1,670)
—
132,268 $
44,597
8,944
14,788
10,126
27,574
1,456
(278)
(192)
107,015
Adjusted EBITDA Margin - Adjusted EBITDA Margin 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:
(in thousands, except Margin and Adjusted EBITDA Margin)
Revenue
Net income
Margin
Adjusted EBITDA
Adjusted EBITDA Margin
Year Ended December 31,
2021
2022
385,276
450,875
$
$
55,134
44,597
12 %
12 %
$
132,268
$
107,015
29 %
28 %
Non-GAAP Income per Share - Non-GAAP income per share consists of net income adjusted for 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.
@
SPS COMMERCE, INC.
29
Form 10-K for the Annual Period ended December 31, 2022
For the year ended December 31, 2021, other adjustments included disposals of cloud hosting arrangement
implementation costs and 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.
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:
(in thousands, except per share amounts)
Net income
Stock-based compensation expense
Amortization of intangible assets
Realized loss from foreign currency on cash and investments held
Other
Income tax effects of adjustments
Non-GAAP income
Shares used to compute non-GAAP income per share
Basic
Diluted
Non-GAAP income per share
Basic
Diluted
Year Ended December 31,
2021
2022
55,134 $
33,399
11,768
1,026
—
(14,639)
86,688 $
36,117
36,953
44,597
27,574
10,126
1,456
(192)
(16,454)
67,107
35,928
36,962
2.40 $
2.35 $
1.87
1.82
$
$
$
$
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
The discussion of our results from operations for the year ended December 31, 2021 compared to the year ended
December 31, 2020 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Liquidity and Capital Resources
At December 31, 2022, our principal sources of liquidity were cash and cash equivalents and short-term investments
totaling $214.3 million, and net accounts receivable of $39.4 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 instruments, primarily money market funds, certificates of deposits, and commercial
paper.
The summary of activity within the consolidated statements of cash flows was as follows:
(in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Net Cash Flows from Operating Activities
$
Twelve Months Ended
December 31,
2022
100,052 $
(112,790)
(31,631)
2021
112,893
(46,703)
(8,361)
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, primarily the change in accrued compensation.
@
SPS COMMERCE, INC.
30
Form 10-K for the Annual Period ended December 31, 2022
Net Cash Flows from Investing Activities
The increase in net cash used in investing activities was primarily due to increased business acquisition activity.
Net Cash Flows from Financing Activities
The increase in net cash used in financing activities was primarily due to the increased repurchases of common
stock.
The discussion of our liquidity and capital resources for the year ended December 31, 2021 compared to the year
ended December 31, 2020 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Contractual and Commercial Commitment Summary
Our contractual obligations and commercial commitments as of December 31, 2022 are summarized below:
(in thousands)
Operating lease obligations, including imputed interest $
Purchase commitments
Total
$
Less Than
1 Year
Payments Due by Period
1-3 Years
3-5 Years
More Than
5 Years
Total
8,854 $
4,889 $
3,126
1,789
8,015 $ 10,643 $
5,029 $
—
5,029 $
— $ 18,772
—
4,915
— $ 23,687
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.
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.
We believe our cash, cash equivalents, investments, and cash flows from our 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 II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of
this Annual Report on Form 10-K.
During the last three years, inflation and changing prices have not had a material effect on our business and we do
not expect that inflation or changing prices will materially affect our business in the foreseeable future.
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SPS COMMERCE, INC.
31
Form 10-K for the Annual Period ended December 31, 2022
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, refer to Note A, General, in our Notes to
Consolidated Financial Statements in the sections entitled “Recently Adopted Accounting Pronouncements” and
“Accounting Pronouncements Not Yet Adopted” as applicable, included in Part II, Item 8, “Financial Instruments and
Supplementary Data” of this Annual Report on Form 10-K.
Item 7A. 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 exposure. We do not enter into investments for trading or speculative purposes.
We did not have any variable interest rate outstanding debt as of December 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 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 December 31, 2022, we maintained 11% 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.
SPS COMMERCE, INC.
32
Form 10-K for the Annual Period ended December 31, 2022
Item 8.
Financial Statements and Supplementary Data
SPS Commerce, Inc. and Subsidiaries Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
34
37
38
39
40
41
SPS COMMERCE, INC.
33
Form 10-K for the Annual Period ended December 31, 2022
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
SPS Commerce, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of SPS Commerce, Inc. and subsidiaries (the Company) as
of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, stockholders’ equity, and
cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission, and our report dated February 21, 2023 expressed an unqualified opinion on the effectiveness
of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of the capitalized internal costs for internally developed software
As discussed in Note A to the consolidated financial statements, the Company capitalizes costs incurred for internally
developed software during the application development stage. Capitalized internally developed software is recorded within
property and equipment and depreciated over the estimated useful life.
We identified the assessment of the capitalized internal costs for internally developed software as a critical audit matter.
Subjective auditor judgment was required to assess the stage of software development for new internally developed
software or upgrades and enhancements for existing internally developed software, which determines when costs should be
capitalized.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and
tested the operating effectiveness of certain internal controls related to the Company's internally developed software
process. This included controls related to the evaluation and approval of new internally developed software projects or
upgrades and enhancements to existing internally developed software projects, monitoring of the software development
stage, and capitalization of internal costs. We examined a sample of capitalized internally developed software costs to
evaluate costs that were capitalized for new internally developed software or upgrades and enhancements for existing
internally developed software. For each sample, we evaluated the capitalized costs and assessed the stage of software
SPS COMMERCE, INC.
34
Form 10-K for the Annual Period ended December 31, 2022
development by inspecting underlying documentation and inquiring of the Company's technology developers performing
the internally developed software activities regarding the specific nature, stage of completion, and hours incurred on the
project.
/s/ KPMG LLP
We have served as the Company’s auditor since 2013.
Minneapolis, Minnesota
February 21, 2023
SPS COMMERCE, INC.
35
Form 10-K for the Annual Period ended December 31, 2022
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
SPS Commerce, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited SPS Commerce, Inc. and subsidiaries' (the Company) internal control over financial reporting as of
December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related
consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-
year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our
report dated February 21, 2023 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired GCommerce, Inc. and InterTrade Systems Inc. during 2022, and management excluded from its
assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022,
GCommerce, Inc. and InterTrade Systems Inc.’s internal control over financial reporting associated with total assets of
3.7% and total revenues of 1.4% included in the consolidated financial statements of the Company as of and for the year
ended December 31, 2022. Our audit of internal control over financial reporting of the Company also excluded an
evaluation of the internal control over financial reporting of GCommerce, Inc. and InterTrade Systems Inc.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Minneapolis, Minnesota
February 21, 2023
/s/ KPMG LLP
SPS COMMERCE, INC.
36
Form 10-K for the Annual Period ended December 31, 2022
SPS COMMERCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
2022
2021
(in thousands, except shares)
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
$
$
$
162,893 $
51,412
42,501
(3,066)
39,435
52,755
16,319
322,814
35,458
9,170
197,284
88,352
17,424
227
2,185
672,914 $
11,256 $
30,235
7,451
57,423
4,277
110,642
4,771
13,009
7,419
135,841
—
38
(128,892)
476,117
193,221
(3,411)
537,073
672,914 $
207,552
49,758
38,811
(4,249)
34,562
44,529
16,042
352,443
31,901
10,851
143,663
58,587
15,191
182
3,028
615,846
8,330
31,661
8,345
50,428
4,108
102,872
5,144
16,426
7,145
131,587
—
38
(85,677)
433,258
138,087
(1,447)
484,259
615,846
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, $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; 38,309,144 and 37,798,610
shares issued; and 36,158,046 and 36,009,257 shares outstanding, respectively
Treasury Stock, at cost; 2,151,098 and 1,789,353 shares, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
See accompanying notes to these consolidated financial statements.
@
SPS COMMERCE, INC.
37
Form 10-K for the Annual Period ended December 31, 2022
SPS COMMERCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts)
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 income (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 $147, ($34), and
($3) respectively
Reclassification of (gain) loss on investments into earnings, net of
tax of ($55), $63, and ($52), respectively
Total other comprehensive income (expense)
Comprehensive income
Net income per share
Basic
Diluted
Year Ended December 31,
2021
385,276 $
131,678
253,598
2022
450,875 $
153,065
297,810
2020
312,630
99,836
212,794
101,772
45,748
67,340
11,768
226,628
71,182
142
71,324
16,190
55,134 $
(2,240)
441
(165)
(1,964)
53,170 $
88,044
39,038
61,305
10,126
198,513
55,085
(1,544)
53,541
8,944
44,597 $
(514)
(102)
190
(426)
44,171 $
75,955
31,024
50,119
5,538
162,636
50,158
2,522
52,680
7,094
45,586
1,097
(10)
(157)
930
46,516
1.53 $
1.49 $
1.24 $
1.21 $
1.29
1.26
$
$
$
$
$
Weighted average common shares used to compute net income per
share
Basic
Diluted
36,117
36,953
35,928
36,962
35,226
36,285
See accompanying notes to these consolidated financial statements.
@
SPS COMMERCE, INC.
38
Form 10-K for the Annual Period ended December 31, 2022
SPS COMMERCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Common Stock
Treasury Stock
(in thousands, except shares)
Balances, December 31, 2019
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
Reclassification of gain on investments
into earnings, net of tax
Adoption of ASU 2016-13
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
Reclassification of loss on investments
into earnings, net of tax
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
t
Reclassification of gain on investments
into earnings, net of tax
Balances, December 31, 2022
Shares
34,863,271 $
—
934,015
61,833
(371,902)
—
—
—
—
—
35,487,217 $
—
642,417
55,726
(176,103)
—
—
—
—
36,009,257 $
—
440,427
70,107
(361,745)
—
—
—
—
36,158,046 $
Amount
36
—
1
—
—
—
—
—
—
—
37
—
1
—
—
—
—
—
—
38
—
—
—
—
—
—
—
—
38
Shares
1,241,348 $
—
—
—
371,902
—
—
—
—
—
1,613,250 $
—
—
—
176,103
—
—
—
—
1,789,353 $
—
—
—
361,745
—
—
—
—
2,151,098 $
Amount
(46,297) $
—
—
—
(18,950)
—
—
—
—
—
(65,247) $
—
—
—
(20,430)
—
—
—
—
(85,677) $
—
—
—
(43,215)
—
—
—
—
(128,892) $
Additional
Paid-in
Capital
354,115 $
17,382
18,591
3,374
—
—
—
—
—
—
393,462 $
25,686
9,373
4,737
—
—
—
—
—
433,258 $
31,275
4,908
6,676
—
—
—
—
—
476,117 $
48,973 $
—
—
—
—
45,586
—
—
—
(1,069)
93,490 $
—
—
—
—
44,597
—
—
—
138,087 $
—
—
—
—
55,134
—
—
—
193,221 $
Total
Stockholders'
Equity
354,876
17,382
18,592
3,374
(18,950)
45,586
1,097
(10)
(157)
(1,069)
420,721
25,686
9,374
4,737
(20,430)
44,597
(514)
(102)
190
484,259
31,275
4,908
6,676
(43,215)
55,134
(2,240)
441
(165)
537,073
(1,951) $
—
—
—
—
—
1,097
(10)
(157)
—
(1,021) $
—
—
—
—
—
(514)
(102)
190
(1,447) $
—
—
—
—
—
(2,240)
441
(165)
(3,411) $
See accompanying notes to these consolidated financial statements.
SPS COMMERCE, INC.
39
Form 10-K for the Annual Period ended December 31, 2022
SPS COMMERCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2021
2022
2020
$
55,134 $
44,597 $
45,586
(in thousands)
Cash flows from operating activities
Net income
Reconciliation of net income to net cash provided by operating
activities
Deferred income taxes
Change in earn-out liability
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 acquisitions
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
Acquisitions of businesses, 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
Payment for contingent consideration
Net cash provided by (used in) financing activities
Effect of foreign currency exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of cash flow information
Cash paid for income taxes
Non-cash financing activities:
$
$
(3,732)
—
16,421
11,768
3,359
33,399
220
(6,435)
(10,646)
2,632
144
(3,786)
(2,829)
5,965
(1,562)
100,052
(19,880)
(160,427)
158,937
(91,420)
(112,790)
(43,215)
4,908
6,676
—
(31,631)
(290)
(44,659)
207,552
162,893 $
3,881
—
14,788
10,126
4,717
27,574
323
(4,959)
(9,299)
(6,181)
2,259
6,775
1,017
14,483
2,792
112,893
(19,588)
(121,242)
111,193
(17,066)
(46,703)
(20,430)
9,374
4,737
(2,042)
(8,361)
31
57,860
149,692
207,552 $
4,241
(85)
13,127
5,538
5,660
18,936
(24)
(5,922)
(3,414)
1,201
1,214
(1,257)
563
4,432
(1,234)
88,562
(16,467)
(74,797)
69,461
(98,666)
(120,469)
(18,950)
18,592
3,374
(688)
2,328
19
(29,560)
179,252
149,692
16,076 $
9,979 $
1,656
Contingent consideration related to acquisition
Net purchases of property and equipment on account
2,000
(215)
—
(683)
—
(551)
See accompanying notes to these consolidated financial statements.
@
SPS COMMERCE, INC.
40
Form 10-K for the Annual Period ended December 31, 2022
SPS COMMERCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, grocers, distributors, suppliers, and logistics firms to communicate and
collaborate by simplifying how they manage and share item, inventory, order and sales data across omnichannel retail
channels. We deliver our products using a full-service model, which includes industry-leading technology and a team of
experts that optimize, update, and operate the technology on customers' behalf.
Our products enable customers to increase supply chain performance, optimize inventory levels and sell-through,
reduce operational costs, improve order visibility, and satisfy consumer demands for a seamless omnichannel experience.
Basis of Presentation
The accompanying 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 consolidated financial statements.
Foreign Currency Translation
The functional currency of our foreign operations is generally the applicable local currency. The functional currency
is translated into U.S. dollars for balance sheet accounts using current exchange rates in effect as of the balance sheet date
and for revenue and expense accounts using an average exchange rate during the year. The translation adjustments are
deferred as a component of other comprehensive income within the consolidated statements of comprehensive income and
the consolidated statements of stockholders' equity. Gains or losses resulting from transactions denominated in foreign
currencies are included in other income (expense), net in our consolidated statements of comprehensive income.
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.
Business Combinations
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and
intangible assets acquired based on their estimated fair values as of the acquisition date. The excess of the fair value of
purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.
Assets acquired include tangible and intangible assets. We use estimates and assumptions that we believe are
reasonable as a part of the purchase price allocation, which includes the process to determine the value and useful lives of
purchased intangible assets and the process to determine the value of any contingent consideration liabilities. We record the
acquisition-date fair value of any contingent liabilities, such as earn-out provisions, as part of the consideration transferred,
if present. The unsettled earn-out liability, if any, is subsequently remeasured at each reporting date at fair value.
While we believe these estimates and assumptions are reasonable, they are inherently uncertain and subject to
refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we may
record adjustments to the fair value of the assets acquired and the liabilities assumed. Any such adjustments would be
recorded as an offset to goodwill or a working capital purchase price adjustment as applicable. Upon the conclusion of the
measurement period or final determination of the fair values, whichever comes first, any subsequent adjustments would be
recorded in our consolidated statements of comprehensive income.
SPS COMMERCE, INC.
41
Form 10-K for the Annual Period ended December 31, 2022
Segment Information
Our Chief Executive Officer acts as the Company’s chief operating decision maker and reviews financial
information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.
There are no segment managers who are held accountable by the chief operating decision maker, or anyone else, for
operations, operating results and planning for levels or components below the consolidated unit level. Accordingly, we
determined we have one operating and reportable segment, which is supply chain management products.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash
equivalents in financial institutions in excess of federally insured limits and accounts receivable. Cash and cash equivalents
are held with financial institutions that we believe are subject to minimal risk.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with original maturities of less than 90 days.
Investments
From time to time, we invest in money market funds, certificates of deposit, and marketable securities such as
commercial paper, highly liquid debt instruments of the U.S. government, and U.S. corporate debt securities. Investments
with remaining maturities of less than one year from the balance sheet date are classified as short-term investments
whereas those with remaining maturities of more than one year from the balance sheet date are classified as investments,
non-current.
Securities classified as available for sale are carried at fair value and the unrealized gains and losses on these
investments, net of taxes, are included in accumulated other comprehensive loss in the consolidated balance sheets.
Realized gains or losses are included in other income (expense), net in the consolidated statements of comprehensive
income. Certain securities accrue interest that is included in other income (expense), net. When a determination has been
made that the fair value of a marketable security is below its amortized cost basis, the portion of the unrealized loss that
corresponds to a credit-related factor is realized through a credit allowance on the marketable security and the equivalent
expense is realized in other income (expense), net in the consolidated statements of comprehensive income.
Fair Value Measurements
The carrying amounts of our short-term financial instruments, which include cash, cash equivalents, accounts
receivable, and accounts payable, approximates fair value due to their short-term nature.
Recurring Fair Value Measurements
We measure certain financial assets at fair value on a recurring basis based on a fair value hierarchy that requires us
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A
financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. The three levels of inputs that are used to measure fair value are:
•
•
•
Level 1 – quoted prices in active markets for identical assets or liabilities.
Level 2 – observable inputs other than Level 1 prices, such as (a) quoted prices for similar assets or liabilities,
(b) quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or (c)
model-derived valuations in which all significant inputs are observable or can be derived principally from or
corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – unobservable inputs to the valuation methodology that are significant to the measurement of fair
value of assets or liabilities.
Nonrecurring Fair Value Measurements
We measure certain assets and liabilities at fair value on a nonrecurring basis, including long-lived assets, goodwill,
and indefinite-lived intangible assets.
SPS COMMERCE, INC.
42
Form 10-K for the Annual Period ended December 31, 2022
Accounts Receivable
Accounts receivable are initially recorded upon the sale and invoicing of products to customers. Credit is granted in
the normal course of business without collateral. Accounts receivable are stated net of allowances for credit losses, which
represent estimated losses resulting from customers not making required payments on accounts receivables. When
determining the allowance, we pool our outstanding accounts receivable invoices based on the contractual due date of
payment. We take several factors into consideration for estimated credit losses by pool, primarily our historical credit
losses, with additional adjustments made for current and future macro-economic conditions and retail bankruptcy trends.
We write-off accounts receivable when they are determined to be uncollectible. Changes in the allowance are recorded as
bad debt expense and are included in general and administrative expense in our consolidated statements of comprehensive
income.
Property and Equipment
Property and equipment, including assets acquired under lease obligations, are stated at cost, net of accumulated
depreciation and amortization. Depreciation and amortization expense is calculated using the straight-line method over the
estimated useful lives when placed in service.
We capitalize and amortize eligible costs to acquire or generate internally developed software that are incurred
during the application development stage. Costs incurred during the preliminary project stage and post-implementation
stage are expensed as incurred. Amortization expense for internally developed software is calculated using the straight-line
method over the estimated useful life, commencing on the date when the asset is ready for its intended use.
The estimated useful lives of property and equipment were as follows:
Internally developed software
Computer equipment
Office equipment and furniture
Leasehold improvements
Estimated Useful Life
3 years
2-3 years
5-7 years
Shorter of the useful life of the asset or the remaining term of the lease
Significant additions or improvements extending asset lives beyond one year are capitalized, while repairs and
maintenance are charged to expense as incurred. The assets and related accumulated depreciation and amortization are
adjusted for asset retirements and disposals with the resulting gain or loss included in our consolidated statements of
comprehensive income.
Maintenance of internally developed software are expensed as incurred. The assets and related accumulated
amortization are adjusted for abandoned internally developed software with the resulting loss included in our consolidated
statements of comprehensive income.
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use
assets, current operating lease liabilities, and non-current operating lease liabilities in our consolidated balance sheets.
Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities
represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are
recognized at commencement date based on the present value of lease payments over the lease term. We use the implicit
interest rate when readily determinable. We estimate the discount rate for a similar collateralized asset by estimating costs
of borrowing. The operating lease ROU asset also includes any lease payments made and lease incentives that have been
incurred. The options to extend our leases are not recognized as part of our ROU assets and lease liabilities unless it is
reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis
over the lease term. For all leases, we combine non-lease components with the related lease components and account for it
as a single lease component. The ROU assets are subject to the same impairment process as our long-lived assets.
Additionally, we review our lease liabilities for remeasurement whenever there is a triggering event or when relevant facts
and circumstances change.
SPS COMMERCE, INC.
43
Form 10-K for the Annual Period ended December 31, 2022
Research and Development
Research and development costs primarily include development, maintenance, and data conversion activities related
to our cloud-based supply chain management products and are expensed as incurred. Research and development costs are
net of amounts capitalized as developed software.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in
business combinations. 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.
We test goodwill for impairment annually at November 30, or more frequently if events or changes in circumstances
indicate that the asset might be impaired. The impairment test is conducted by comparing the fair value of the net assets
with the carrying amount of the reporting unit. We determine the fair value of the reporting unit based on our market
capitalization at the testing date. If the carrying amount exceeds the fair value of the reporting unit, we would recognize an
impairment loss in the consolidated statements of comprehensive income, to the extent that the carrying amount exceeds
fair value.
Intangible Assets
Assets acquired in business combinations may include identifiable intangible assets such as subscriber relationships
and developed technology. We recognize the fair value of the identifiable intangible assets acquired separately from
goodwill. We have determined the fair value and useful lives of our purchased intangible assets using certain estimates and
assumptions that we believe are reasonable.
The purchased intangible assets are being amortized on a straight-line basis over their estimated useful lives.
The estimated useful lives for intangible were as follows:
Subscriber relationships
Developed technology
Impairment of Long-Lived Assets
Estimated Useful Life
7-10 years
3-10 years
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable if the carrying
amount of an asset group exceeds the sum of the undiscounted cash flows expected to result from the use and eventual
disposition of the assets at the date it is tested for recoverability, whether in use or under development. An impairment loss
is measured and recorded as an expense in the consolidated statements of comprehensive income as the amount by which
the carrying amount of a long-lived asset exceeds its fair value.
Revenue Recognition
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.
We determine revenue recognition through the following steps:
•
•
•
•
•
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, we satisfy a performance obligation
See Note C for further descriptions of our revenue recognition policy.
SPS COMMERCE, INC.
44
Form 10-K for the Annual Period ended December 31, 2022
Deferred Costs
Deferred costs are those that are incurred to fulfill or obtain customer contracts and that are considered incremental
and recoverable costs. These consist primarily of customer implementation costs, commissions paid to sales personnel and
referral partners, respectively. These costs are deferred and amortized over the expected period of benefit which we have
determined to be two years.
Customer implementation costs are based on actual costs incurred. Related amortization expense is included in cost
of revenues in the consolidated statements of comprehensive income.
Sales commissions are calculated based on estimated annual recurring revenue to be generated over the customer’s
initial contract period. Related amortization expense is included in sales and marketing expenses in the consolidated
statements of comprehensive income.
Stock-Based Compensation
Stock-based compensation includes grants of incentive and nonqualified stock options, performance share units
(“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), deferred stock units (“DSUs”), employee
stock purchase plan (“ESPP”) activity, and 401(k) stock match and is used to compensate employees, executive officers,
and non-employee directors.
We recognize the cost of all stock-based payments based on the grant date fair value of those awards. This cost is
recognized over the period for which an 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. For all awards, we recognize forfeitures
as they occur.
RSAs result in the issuance of new shares when granted. For other stock-based awards, new shares are issued when
the award is exercised, vested, or released according to the terms of the agreement.
Our ESPP allows participating employees to purchase shares of our common stock at a discount through payroll
deductions. The plan is available to all employees subject to certain eligibility requirements. Participating employees may
purchase common stock, on a voluntary after-tax basis, at a price that is the lower of 85% of the fair market value of our
common stock at the beginning or end of each stock purchase period. The plan is a Type B plan, so the number of shares a
participants can acquire is variable. Participants purchase more shares as the stock price decreases, up to the total amount
originally elected to withhold at the beginning of the offering period. The plan consists of two six-month offering periods,
beginning on January 1 and July 1 of each calendar year.
The fair value of stock options and ESPP activity is estimated using the Black-Scholes option valuation model. The
fair value for RSAs, RSUs, and DSUs is the closing market value of the underlying stock on the date of grant less the
purchase price (if any). The fair value of PSUs is estimated using a Monte Carlo simulation.
Judgment is required in determining the expected volatility of common stock and the expected term individuals will
hold their share-based awards prior to exercising. The expected volatility of the options is based on the historical volatility
of our common stock. The expected term of the options is derived from historical data on option holder exercises and post-
vesting employment termination behavior.
Additional valuation inputs include our expected non-issuance of future common stock dividends and the risk-free
interest rate that is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equaling the
expected life at the grant date. For PSUs, the Monte Carlo simulation utilizes multiple input variables that determine the
probability of satisfying the performance conditions stipulated in the award.
Income Taxes
We account for income taxes using the asset and liability method, which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have been included in the consolidated financial
statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in our judgment, it is
more likely than not that some or all of the deferred tax asset will not be realized. Deferred tax positions are net by
jurisdiction on the consolidated balance sheet.
SPS COMMERCE, INC.
45
Form 10-K for the Annual Period ended December 31, 2022
We assess our ability to realize our deferred tax assets at the end of each reporting period. Realization of our
deferred tax assets is contingent upon future taxable earnings. Accordingly, this assessment requires estimates and
judgment. If the estimates of future taxable income vary from actual results, our assessment regarding the realization of
these deferred tax assets could change. Future changes in the estimated amount of deferred taxes expected to be realized
will be reflected in our consolidated financial statements in the period the estimate is changed, with a corresponding
adjustment to our operating results.
We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority
would “more likely than not” sustain the position following an audit. For tax positions meeting the “more likely than not”
threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement with the relevant tax authority.
It is our practice to recognize interest and penalties accrued on any unrecognized tax benefits as a component of
income tax expense.
Net Income Per Share
Basic net income per share has been computed using the weighted average number of shares of common stock
outstanding during each period. Diluted net income per share also includes the impact of our outstanding potential common
shares, including options, RSAs, RSUs, PSUs, and DSUs. Potential common shares that are anti-dilutive are excluded from
the calculation of diluted net income per share.
Accounting Pronouncements Not Yet Adopted
Standard
ASU 2021-08, Business
Combinations (Topic 805)
- Accounting for Contract
Assets and Contract
Liabilities from Contracts
with Customers
Date of Issuance
October 2021 This amendment requires that
Description
Date of Required
Adoption
January 2023
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.
Effect on the Financial
Statements
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.
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 was $45.1 million, including post-closing adjustments. The purchase accounting for the acquisition has
not been finalized as of December 31, 2022 due to various items including valuation modeling completion; provisional
amounts are primarily related to intangible assets and tax components. We expect to finalize the allocation of the purchase
price within the one-year measurement period following the acquisition.
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 was $49.1 million, including estimated post-closing adjustments.
The purchase accounting for the acquisition has not been finalized as of December 31, 2022 due to various items including
valuation modeling completion; provisional amounts are primarily related to intangible assets, net working capital, and tax
components. We expect to finalize the allocation of the purchase price within the one-year measurement period following
the acquisition.
The definitive agreement included the potential for the seller to receive up to $2.0 million in cash, contingent upon
the completion of a technological infrastructure migration project within a specified time period. Given the status of the
project, at the date of acquisition as well as at December 31, 2022, we expected to pay the full contingent consideration
SPS COMMERCE, INC.
46
Form 10-K for the Annual Period ended December 31, 2022
balance in 2023. As such, $2.0 million was included in accrued expenses in the consolidated balance sheet at December 31,
2022.
Purchase Price Allocations
We accounted for the acquisitions as business combinations. We allocated each 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 following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the
acquisition dates:
(in thousands)
Cash paid at transaction date
Contingent consideration
Post-closing adjustments
Total consideration
Estimated fair value of assets and liabilities
Cash
Accounts receivable
Other current assets
Operating lease right-of-use asset
Intangible assets
Subscriber relationships
Developed technology
Deferred income tax assets
Accounts payable
Accrued compensation
Deferred revenue
Operating lease liability
Deferred income tax liabilities
Total fair value of assets and liabilities acquired
Goodwill
$
$
$
$
$
2022 Acquisition Activity
GCommerce
InterTrade
Acquisition Date
Estimated Fair
Value as of
December 31, 2022
Acquisition Date
Estimated Fair
Value as of
December 31, 2022
Adjustments
Acquisition Date
Estimated Fair
Value as of
September 30,
2022
45,153
$
—
(64)
$
45,089
$
230
467
288
934
18,225
2,025
5,291
(266)
(321)
(262)
(934)
(5,144)
$
20,533
$
$
$
—
—
—
—
—
—
—
—
(925)
275
1,440
—
—
—
—
537
1,327
$
45,153 $
—
(64)
45,089 $
230 $
467
288
934
17,300
2,300
6,731
(266)
(321)
(262)
(934)
(4,607)
21,860 $
47,165
2,000
(93)
49,072
668
1,302
1,903
—
17,640
4,410
101
(2,337)
—
(397)
—
(6,228)
17,062
24,556
$
(1,327) $
23,229 $
32,010
The following table summarizes the estimated useful lives for each acquired intangible asset, each of which are
subject to finalization:
Subscriber relationships
Developed technology
Estimated Useful Life
GCommerce
8.0 years
5.0 years
InterTrade
8.0 years
6.0 years
SPS COMMERCE, INC.
47
Form 10-K for the Annual Period ended December 31, 2022
NOTE C – Revenue
We derive our revenues from the following revenue streams:
(in thousands)
Recurring revenues:
Fulfillment
Analytics
Other
Recurring Revenues
One-time revenues
Total revenue
Year Ended December 31,
2021
2022
2020
$
$
364,148 $
46,894
8,005
419,047
31,828
450,875 $
306,851 $
42,674
5,481
355,006
30,270
385,276 $
251,272
38,824
4,920
295,016
17,614
312,630
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 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:
(in thousands)
Balance, beginning of year
Invoiced set-up fees
Recognized set-up fees
Balance, end of year
Year Ended December 31,
2021
2022
$
$
14,459 $
15,457
(14,917)
14,999 $
11,118
15,931
(12,590)
14,459
SPS COMMERCE, INC.
48
Form 10-K for the Annual Period ended December 31, 2022
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.
Miscellaneous fees
Miscellaneous fees primarily 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.
Deferred Revenue
In the year ended December 31, 2022, we recognized revenue of $50.4 million from amounts included in deferred
revenue at December 31, 2021.
NOTE D – Deferred Costs
The deferred costs activity was as follows:
(in thousands)
Balance, beginning of year
Incurred deferred costs
Amortized deferred costs
Balance, end of year
NOTE E – Fair Value Measurements
Cash Equivalents and Investments
Year Ended December 31,
2021
2022
$
$
59,720 $
72,509
(62,050)
70,179 $
50,595
64,076
(54,951)
59,720
Cash equivalents and investments, as measured at fair value on a recurring basis, consisted of the following:
December 31, 2022
Unrealized
Gains
(Losses), net Fair Value
Amortized
Cost
December 31, 2021
Unrealized
Gains
(Losses), net Fair Value
Amortized
Cost
Fair
Value
Level
(in thousands)
Cash equivalents:
Money market funds
Level 1 $ 73,368 $
— $ 73,368 $ 138,205 $
— $ 138,205
Investments:
Certificates of deposit
Marketable securities:
Commercial paper
U.S. treasury securities
Level 1
6,813
—
6,813
7,268
—
7,268
Level 2
Level 2
44,224
—
$ 124,405 $
375
44,599
34,984
7,500
—
—
375 $ 124,780 $ 187,957 $
34,991
7
7,499
(1)
6 $ 187,963
SPS COMMERCE, INC.
49
Form 10-K for the Annual Period ended December 31, 2022
NOTE F – Allowance for Credit Losses
The allowance for credit losses activity, included in accounts receivable, net, was as follows:
(in thousands)
Balance, beginning of year
Provision for credit losses
Write-offs, net of recoveries
Initial allowance for business combination acquired receivables
Adoption of ASU 2016-13
Balance, end of year
Year Ended December 31,
2021
2022
2020
$
$
4,249 $
3,359
(4,542)
—
—
3,066 $
4,233 $
4,717
(4,790)
89
—
4,249 $
1,469
5,660
(4,319)
354
1,069
4,233
NOTE G – Property and Equipment, net
Property and equipment, net consisted of the following:
(in thousands)
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
Depreciation and amortization expense of property and equipment was as follows:
December 31,
2022
2021
$
$
49,994 $
30,310
16,531
10,981
107,816
(72,358)
35,458 $
44,981
29,329
16,685
10,972
101,967
(70,066)
31,901
(in thousands)
Depreciation and amortization expense
NOTE H – Goodwill and Intangible Assets, net
Goodwill
The activity in goodwill was as follows:
(in thousands)
Balance, beginning of year
Additions from business acquisitions
Foreign currency translation
Remeasurement from provisional purchase accounting amount
Balance, end of year
Year Ended December 31,
2021
2022
2020
$
16,421 $
14,788 $
13,127
Year Ended December 31,
2021
2022
134,853
143,663 $
8,914
56,566
(372)
(1,618)
268
(1,327)
143,663
197,284 $
$
$
SPS COMMERCE, INC.
50
Form 10-K for the Annual Period ended December 31, 2022
Intangible Assets
Intangible assets, net consisted of the following:
($ in thousands)
Subscriber relationships
Developed technology
($ in thousands)
Subscriber relationships
Developed technology
December 31, 2022
Gross
Carrying
Amount
Accumulated
Amortization
Foreign
Currency
Translation
$
80,101 $
40,610
$ 120,711 $
(22,255) $
(9,934)
(32,189) $
(171) $
1
(170) $
December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Foreign
Currency
Translation
$
$
61,270 $
35,316
96,586 $
(29,866) $
(6,738)
(36,604) $
(1,395) $
—
(1,395) $
Weighted
Average
Remaining
Amortization
Period
Net
57,675 6.8 years
30,677 5.4 years
88,352 6.4 years
Weighted
Average
Remaining
Amortization
Period
Net
30,009 6.4 years
28,578 6.8 years
58,587 6.6 years
The estimated future annual amortization expense related to intangible assets is as follows:
(in thousands)
2023
2024
2025
2026
2027
Thereafter
Total future amortization
$
$
15,289
14,098
13,960
12,956
12,493
19,556
88,352
NOTE I – Commitments and Contingencies
Leases
We are engaged in a lease agreement for our current headquarters located in Minneapolis, Minnesota where we lease
approximately 198,000 square feet under an agreement that expires in 2027. The lease also has two options to extend the
term for five years each at a market rate determined in accordance with the lease. We lease other smaller facilities across
the U.S. and international locations.
The components of lease expense were as follows:
(in thousands)
Operating lease cost
Variable lease cost
Year Ended December 31,
2021
2022
2020
$
$
3,087 $
3,576
6,663 $
3,089 $
3,660
6,749 $
2,719
3,578
6,297
SPS COMMERCE, INC.
51
Form 10-K for the Annual Period ended December 31, 2022
Supplemental cash flow information related to leases was as follows:
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for operating lease liabilities
Supplemental balance sheet information related to operating leases was as follows:
Weighted-average remaining lease term
Weighted-average discount rate
December 31,
2022
2021
$
4,639 $
934
3,757
992
December 31,
2022
3.9 years
4.0 %
December 31,
2021
4.8 years
4.0 %
At December 31, 2022, our future minimum payments under operating leases were as follows:
(in thousands)
2023
2024
2025
2026
2027
Total future payments
Less: imputed interest
Total operating lease liabilities
Purchase Commitments
$
$
4,889
4,485
4,369
3,764
1,265
18,772
(1,486)
17,286
We have entered into separate noncancelable agreements with computing infrastructure, customer relationship
management, and performance and security data analytics vendors for services through 2025. At December 31, 2022, the
total remaining purchase commitments were $4.9 million.
Contingencies
We may be involved in various claims and legal actions in the normal course of business. We believe that the
outcome of any such claim or legal action is not expected to have a material effect on our financial position, results of
operations, or cash flows.
NOTE J – Stockholders’ Equity
Share Repurchase Program
Our board of directors has authorized multiple non-concurrent programs to repurchase our common stock. Details of
the programs and activity thereunder through December 31, 2022 were as follows:
(in thousands)
2019 Program
2021 Program
2022 Program
Effective Date
Expiration Date
Share Value
Authorized for
Repurchase
Share Value
Repurchased
Unused &
Expired Share
Repurchase
Value
November 2019 November 2021 $
November 2021 August 2022
August 2022
July 2024
50,000 $
50,000
50,000
29,611 $
49,992
2,992
20,389
8
N/A
$
Share Value
Available for
Future
Repurchase
N/A
N/A
47,008
SPS COMMERCE, INC.
52
Form 10-K for the Annual Period ended December 31, 2022
The share repurchase activity by period was as follows:
(in thousands, except shares and per share amounts)
Number of shares repurchased
Shares repurchased cost
Average price per repurchased share
NOTE K – Stock-Based Compensation
Year Ended December 31,
2021
176,103
20,430 $
116.01 $
2022
361,745
43,215 $
119.46 $
$
$
2020
371,902
18,950
50.95
Our equity compensation plans provide for the grant of incentive and nonqualified stock options, as well as other
stock-based awards including PSUs, RSAs, RSUs, and DSUs, to employees, non-employee directors and other consultants
who provide services to us. We also provide an ESPP and 401(k) stock 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 December 31, 2022 there were 13.2 million
shares available for grant under approved equity compensation plans.
Stock-based compensation expense was allocated in the consolidated statements of comprehensive income as
follows:
(in thousands)
Cost of revenues
Operating expenses
Sales and marketing
Research and development
General and administrative
Year Ended December 31,
2021
2022
2020
$
8,684 $
6,760 $
3,948
7,590
5,634
11,491
33,399 $
6,248
4,384
10,182
27,574 $
4,119
3,626
7,243
18,936
$
Stock-based compensation expense by grant type or plan was as follows:
(in thousands)
Stock options
PSUs
RSUs
RSAs & DSUs
ESPP
401(k) stock match
Year Ended December 31,
2021
2022
2020
$
$
1,903 $
7,509
19,282
437
2,144
2,124
33,399 $
2,057 $
6,417
15,388
434
1,391
1,887
27,574 $
2,232
3,219
10,367
446
1,117
1,555
18,936
As of December 31, 2022, there was $38.6 million of unrecognized stock-based compensation expense under our
equity compensation plans, which is expected to be recognized on a primarily straight-line basis over a weighted-average
period of 2.4 years.
Stock Options
Options generally vest over four years and, upon vesting, the holder is given the option to purchase shares of
common stock at a specific strike price until expiration, which is generally seven years from the grant date.
SPS COMMERCE, INC.
53
Form 10-K for the Annual Period ended December 31, 2022
Our stock option activity was as follows:
Outstanding at December 31, 2019
Granted
Exercised
Forfeited
Outstanding at December 31, 2020
Granted
Exercised
Forfeited
Outstanding at December 31, 2021
Granted
Exercised
Forfeited
Outstanding at December 31, 2022
Options
(#)
1,543,912
127,974
(712,074)
(14,926)
944,886
53,223
(311,378)
(8,081)
678,650
56,430
(164,393)
(7,990)
562,697
Weighted
Average
Exercise Price
($/share)
30.03
59.02
26.11
43.14
36.71
105.53
30.10
68.62
44.76
122.59
29.86
92.48
56.24
Of the total outstanding options at December 31, 2022, 0.5 million were exercisable. The outstanding and
exercisable options had a weighted average exercise price of $47.80 per share and a weighted average remaining
contractual life of 2.9 years.
The table below presents additional information related to our stock options:
(in thousands, except per share data)
Fair value of options vested
Intrinsic value of options exercised
Intrinsic value of options outstanding
Weighted-average fair value per share of options granted
$
Year Ended December 31,
2021
2022
2020
1,996 $
16,705
40,692
41.34
2,509 $
27,713
66,235
31.31
3,000
31,737
67,918
16.18
The fair values of the options granted were estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions:
Life (in years)
Volatility
Dividend yield
Risk-free interest rate
Year Ended December 31,
2021
2020
2022
4.3
38 %
—
2.50 %
4.4
35 %
—
0.59 %
4.0
33 %
—
0.99 %
Performance Share Units, Restricted Stock Units and Awards, and Deferred Stock Units
In 2022, 2021, and 2020 we granted PSU awards with certain target performance levels. 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. Expense is recognized on a straight-line basis over the performance period,
regardless of whether the market condition is satisfied as the likelihood of the market condition being met is included in the
fair-value measurement of the award. In 2022, PSU awards granted in 2019 were earned and vested at the maximum
performance level and less than 0.1 million shares of common stock were issued.
RSUs generally vest over four years and, upon vesting, the holder is entitled to receive shares of our common stock.
SPS COMMERCE, INC.
54
Form 10-K for the Annual Period ended December 31, 2022
RSAs vest over one year and, upon vesting, the holder is entitled to receive shares of our common stock. In lieu of
RSAs, a participant may elect to receive DSUs with one year vesting, but the participant directs delayed receipt of common
shares of up to ten years after the end of service to us.
Activity for our PSUs, RSUs, RSAs, and DSUs in aggregate was as follows:
Outstanding at December 31, 2019
Granted
Vested and common stock issued
Forfeited
Outstanding at December 31, 2020
Granted
Vested and common stock issued
Forfeited
Outstanding at December 31, 2021
Granted
Vested and common stock issued
Forfeited
Outstanding at December 31, 2022
Weighted
Average
Grant Date Fair
Value ($/share)
38.80
62.78
36.06
30.09
52.37
101.85
44.14
66.35
78.03
126.44
64.12
99.37
103.93
(#)
797,546
331,264
(222,606)
(167,782)
738,422
314,290
(331,669)
(18,883)
702,160
312,880
(276,872)
(26,010)
712,158
The number of PSUs, RSUs, RSAs, and DSUs outstanding at December 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 agreements.
Employee Stock Purchase Plan
Our ESPP activity was as follows:
(in thousands, except share data)
Amounts for shares purchased
Shares purchased
Year Ended December 31,
2021
2022
2020
$
6,676 $
70,107
4,737 $
55,726
3,374
61,833
A total of 1.7 million shares of common stock are remaining for issuance under the plan at December 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:
Life (in years)
Volatility
Dividend yield
Risk-free interest rate
Year Ended December 31,
2021
2022
2020
0.5
42 %
—
1.27 %
0.5
32 %
—
0.07 %
0.5
43 %
—
0.96 %
SPS COMMERCE, INC.
55
Form 10-K for the Annual Period ended December 31, 2022
Note L – Income Taxes
Our provision for income taxes was comprised of the following components:
(in thousands)
Current
Federal
State
Foreign
Deferred
Federal
State
Foreign
Year Ended December 31,
2021
2022
2020
$
$
13,881 $
4,149
1,990
(2,530)
(751)
(549)
16,190 $
1,559 $
1,890
1,610
4,294
(88)
(321)
8,944 $
—
1,249
1,608
4,462
244
(469)
7,094
Our income tax expense differed from the amounts computed by applying the U.S. federal income tax rate to pretax
income as a result of the following:
U.S. statutory federal income tax rate
Increase (decrease) resulting from:
U.S. state income taxes, net of federal tax effect
Tax impact of stock activity
Nondeductible compensation
Research and development credit
Foreign derived intangible income
Other
Effective tax rate
Year Ended December 31,
2021
2022
2020
21.0 %
21.0 %
21.0 %
4.6
(4.7)
3.5
(1.5)
(1.4)
1.2
22.7 %
4.5
(12.8)
5.0
(1.1)
(1.3)
1.4
16.7 %
4.5
(12.9)
1.8
(0.6)
(1.3)
1.0
13.5 %
SPS COMMERCE, INC.
56
Form 10-K for the Annual Period ended December 31, 2022
The significant components of our deferred tax assets and liabilities were as follows:
(in thousands)
Deferred tax assets
Net operating loss and credit carryforwards
Stock-based compensation expense
Accrued expenses
Operating lease liabilities
Research and development capitalized
Other deferred tax assets
Gross deferred tax assets
Less: valuation allowance
Total net deferred tax assets
Deferred tax liabilities
Deferred costs
Right-of-use assets
Depreciation and amortization
Other deferred tax liabilities
Total deferred tax liabilities
Net deferred tax liabilities
December 31,
2022
2021
$
$
$
$
9,970 $
5,084
4,469
4,384
9,591
2,408
35,906
(1,873)
34,033 $
(17,696) $
(2,338)
(20,282)
(909)
(41,225)
(7,192) $
4,828
3,934
5,174
5,235
—
2,778
21,949
(1,815)
20,134
(15,126)
(2,787)
(8,820)
(364)
(27,097)
(6,963)
Amounts for the year ended December 31, 2021 have been reclassified to be consistent with the current
classification.
As of December 31, 2022, we had net operating loss carryforwards of $40.9 million for U.S. federal tax purposes
and $4.5 million for state tax purposes. If not utilized, the loss carryforwards will expire between 2023 and 2036 for federal
tax purposes and between 2026 and 2042 for state tax purposes. Section 382 of the U.S. Internal Revenue Code generally
imposes an annual limitation on the amount of net operating loss carryforwards that might be used to offset taxable income
when a corporation has undergone significant changes in stock ownership. As of December 31, 2022, all $40.9 million of
our net operating loss carryforwards are subject to Section 382 limitations, of which we believe $6.8 million of federal
losses will expire unused due to Section 382 limitations. Accordingly, our deferred tax assets are reported net of the Section
382 limitations.
We are subject to income taxes for U.S. federal and various state and international jurisdictions. We are generally
subject to U.S. federal and state tax examinations for most prior tax years due to our net operating loss and R&D credit
carryforwards and the utilization of the carryforwards in years still open under statute.
NOTE M – Other Income and Expense
Other income (expense), net included the following:
(in thousands)
Investment income
Realized gain (loss) from foreign currency on cash and investments
held
Change in earn-out liability
Other expense, net
Total other income (expense), net
$
Year Ended December 31,
2021
2022
2020
$
1,670 $
278 $
(1,026)
—
(502)
142 $
(1,456)
—
(366)
(1,544) $
1,208
1,753
(85)
(354)
2,522
Effective January 1, 2021, all realized gains or losses and interest income on our investments are included in
investment income. Previously, realized gains and losses were included in other income (expense), net and interest income
was included in interest income, net. Additionally, realized gains or losses from foreign currency on cash and investments
SPS COMMERCE, INC.
57
Form 10-K for the Annual Period ended December 31, 2022
held were previously included in other income (expense), net. Amounts for the year ended December 31, 2020 have been
reclassified to be consistent with the current classification.
NOTE N – Net Income Per Share
The components and computation of basic and diluted net income per share were as follows:
(in thousands, except per share amounts)
Numerator
Net income
Denominator
Weighted average common shares outstanding, basic
Options to purchase common stock
PSUs, RSUs, RSAs, and DSUs
Weighted average common shares outstanding, diluted
Net income per share
Basic
Diluted
Year Ended December 31,
2021
2020
2022
$
55,134 $
44,597 $
45,586
36,117
382
454
36,953
35,928
529
505
36,962
$
$
1.53 $
1.49 $
1.24 $
1.21 $
35,226
611
448
36,285
1.29
1.26
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:
(in thousands)
Anti-dilutive shares
NOTE O – Retirement Savings Plan
Year Ended December 31,
2021
2022
2020
75
31
26
We sponsor a 401(k) retirement savings plan for our employees. Employees can contribute up to 80% of their
compensation, subject to the limits established by law, and we match 50% of the employee’s contribution up to the first 6%
of pre-tax annual compensation. A portion of our match is in Company stock, which is purchased from the open market by
our plan provider and immediately deposited into the employee’s 401(k) account. Additionally, we make statutory
contributions to retirement plans as required by local foreign government regulations.
Our total contributions to the plan were as follows:
(in thousands)
Retirement contributions
NOTE P – Geographic Information
Revenue
Year Ended December 31,
2021
2022
2020
$
5,386 $
4,790 $
3,889
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:
Domestic revenue
Year Ended December 31,
2021
2022
2020
84 %
84 %
85 %
No single jurisdiction outside of the U.S. had revenues in excess of 10%.
SPS COMMERCE, INC.
58
Form 10-K for the Annual Period ended December 31, 2022
Property and Equipment
The percentage of property and equipment, net located at subsidiary and office locations outside of the U.S. was as
follows:
International property and equipment
NOTE Q– Related Party Transactions
December 31,
2022
2021
13 %
12 %
The SPS Commerce Foundation (the “Foundation”) is a Minnesota non-profit organization exempt from federal
taxation under Section 501(c)(3) of the Internal Revenue Code. The Foundation was formed in 2015 to engage in, advance,
support, promote and administer charitable activities. The directors of the Foundation are also our corporate officers. These
directors receive no compensation from the Foundation or us for the management services performed for the Foundation.
The Foundation is not a subsidiary of ours and the financial results of the Foundation are not consolidated with our
financial statements. We have no current legal obligations for future commitments to the Foundation. Our contributions to
the Foundation were as follows:
(in thousands)
Foundation contributions
Year Ended December 31,
2021
2022
2020
$
2,750 $
2,400 $
1,800
SPS COMMERCE, INC.
59
Form 10-K for the Annual Period ended December 31, 2022
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Assessment of Disclosure Controls and Procedures
We assessed the effectiveness of the design and operation of our disclosure controls and procedures as of December
31, 2022, the end of the period covered by this Annual Report on Form 10-K. This assessment was done under the
supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”). Disclosure controls and procedures means controls and other procedures that are designed to provide
reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act,
such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and
procedures designed such that information is accumulated and communicated to our management, including our CEO and
CFO, as appropriate to allow timely decisions regarding required disclosure. Based on this assessment, our CEO and CFO
have concluded that as of December 31, 2022, our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process
designed by, or under the supervision of, our principal executive and principal financial officer and effected by our board of
directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of consolidated financial statements for external purposes in accordance with GAAP and includes those
policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on our consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Under the supervision and with the participation of management, including our principal executive and financial
officers, we assessed our internal control over financial reporting as of December 31, 2022, based on criteria for effective
internal control over financial reporting established in the Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Based on this assessment, management concluded that we maintained effective internal control over financial
reporting as of December 31, 2022 based on the specified criteria.
Pursuant to the SEC’s general guidance that the assessment of a recently acquired business' internal control over
financial reporting may be omitted in the year of acquisition, as of December 31, 2022, our scope of the assessment of our
internal control over financial reporting excluded GCommerce and InterTrade, which were acquired in July 2022 and in
October 2022, respectively. Our assessment of the effectiveness of internal control over financial reporting as of December
31, 2023 will include GCommerce and InterTrade.
As of December 31, 2022, excluding net intangible assets and goodwill, GCommerce and InterTrade combined
represented 3.7% of our consolidated assets. For the twelve months ended December 31, 2022, GCommerce and InterTrade
combined represented 1.4% of our consolidated revenues.
The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by
KPMG LLP, our independent registered public accounting firm, as stated in their report, which is included under Item 8 of
this Annual Report on Form 10-K.
SPS COMMERCE, INC.
60
Form 10-K for the Annual Period ended December 31, 2022
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2022
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
The information included in this Item 9B is provided in lieu of filing such information on a Current Report on Form
8-K under Item 5.03 Amendments to Articles of Incorporation or Bylaws; Changes in Fiscal Year.
On February 17, 2023, the Board of Directors of the Company amended and restated the Company’s Amended and
Restated Bylaws (as so amended and restated, the “Bylaws”), primarily to implement certain procedural mechanisms
related to stockholder nominations of directors under Rule 14a-19 (“Rule 14a-19”) under the Securities Exchange Act of
1934, as amended. These amendments took immediate effect. The amendments implement the following changes to the
Bylaws, among other things:
•
•
•
•
•
•
require a stockholder soliciting proxies in support of nominations of persons, other than the Company’s
nominees, for election to the Company’s Board of Directors to certify their compliance with Rule 14a-19 and,
upon request of the Company, to deliver reasonable evidence of such compliance to the Company no later
than five business days prior to the date of the applicable meeting of stockholders;
provide that, unless otherwise required by law, if a stockholder provides notice under Rule 14a-19 and
subsequently: (i) notifies the Company that such stockholder no longer intends to solicit proxies in support of
director nominees other than the Company’s director nominees in accordance with Rule 14a-19; (ii) fails to
comply with the requirements of Rule 14a-19; or (iii) fails to provide reasonable evidence sufficient to satisfy
the Company that the requirements of Rule 14a-19 have been met, then the stockholder’s nominations shall
be deemed null and void and the Company shall disregard any proxies or votes solicited for any nominee
proposed by such stockholder;
establish additional rules governing the conduct of meetings of stockholders;
update references to meetings using remote communication;
reserve white proxy cards for use by the Company’s Board of Directors only; and
incorporate other technical, clarifying and conforming changes.
The foregoing description of the amendments to the Bylaws is qualified in its entirety by reference to the text of the
Bylaws. The Bylaws, along with a copy marked to show changes from the prior version, are included as Exhibits 3.2 and
3.3, respectively, to this Annual Report on Form 10-K and are incorporated herein by reference.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
SPS COMMERCE, INC.
61
Form 10-K for the Annual Period ended December 31, 2022
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this item will be included in the 2023 Proxy Statement under the captions “Election of
Directors,” “Executive Compensation,” and “Information Regarding the Board of Directors and Corporate Governance”
and is incorporated herein by reference.
Item 11.
Executive Compensation
The information required by this item will be included in the 2023 Proxy Statement under the captions “Executive
Compensation,” and "Security Ownership" and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be included in the 2023 Proxy Statement under the caption “Security
Ownership” and is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included in the 2023 Proxy Statement under the captions “Certain
Relationships and Related Transactions,” “Information Regarding the Board of Directors and Corporate Governance,” and
"Election of Directors" and is incorporated herein by the reference.
Item 14.
Principal Accounting Fees and Services
The information required by this item will be included in the 2023 Proxy Statement under the caption “Audit
Committee Report and Payment of Fees to Our Independent Auditor” and is incorporated herein by reference.
PART IV
Item 15.
Exhibits, Financial Statement Schedules
The following documents are filed as a part of this Annual Report on Form 10-K:
(a)
(b)
(c)
Financial Statements: The financial statements filed as a part of this report are listed in Part II, Item 8.
Financial Statement Schedules: The schedules are either not applicable or the required information is
presented in the consolidated financial statements or notes thereto.
Exhibits: The exhibits incorporated by reference or filed as a part of this Annual Report on Form 10-K are
listed in the Exhibit Index prior to the signatures to this report.
SPS COMMERCE, INC.
62
Form 10-K for the Annual Period ended December 31, 2022
Exhibit
Number
Exhibit Description
EXHIBIT INDEX
Incorporated By Reference
Date of
First
Filing
Exhibit
Number
Form
Filed
Herewith
8-K
05/21/2020
3.2
3.1
3.2
3.3
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
21.1
23.1
24.1
31.1
Ninth Amended and Restated Certificate of
Incorporation
Amended and Restated Bylaws, effective as of
February 17, 2023
Amended and Restated Bylaws, marked to show
amendments effective as of February 17, 2023
Description of Capital Stock
2010 Equity Incentive Plan, as amended effective
October 29, 2014**
Form of Incentive Stock Option Agreement under
2010 Equity Incentive Plan**
Form of Non-Statutory Stock Option Agreement
(Employee) under 2010 Equity Incentive Plan**
Form of Non-Statutory Stock Option Agreement
(Director) under 2010 Equity Incentive Plan**
Form of Restricted Stock Unit Award Agreement
under 2010 Equity Incentive Plan**
Form of Restricted Stock Award Agreement under
2010 Equity Incentive Plan**
Form of Performance Stock Unit Agreement under
2010 Equity Incentive Plan**
10-K
2/23/2021
10-K
02/20/2015
4.1
10.6
8-K
02/17/2012
10.2
8-K
02/17/2012
10.4
10-Q
05/08/2012
10.6
Form of Deferred Stock Unit Agreement under 2010
Equity Incentive Plan
10-Q
04/26/2019
10.2
Form of Indemnification Agreement for Independent
Directors**
S-1/A
01/11/2010
10.18
Form of Indemnification Agreement for Archie C.
Black**
S-1/A
01/11/2010
10.19
Management Incentive Plan**
8-K
02/03/2016
10.2
Amended and Restated Executive Severance and
Change in Control Agreement between the Company
and Archie C. Black**
8-K
02/18/2020
10.1
Form of Amended and Restated Executive Severance
and Change in Control Agreement**
8-K
02/18/2020
10.2
Non-Employee Director Compensation Summary**
Subsidiaries of the registrant
Consent of KPMG LLP
Power of Attorney (included on signature page)
Certification of Principal Executive Officer pursuant
to Rules 13a-14(a) under the Securities Exchange Act
of 1934, as amended
X
X
X
X
X
X
X
X
X
X
SPS COMMERCE, INC.
63
Form 10-K for the Annual Period ended December 31, 2022
Exhibit
Number
31.2
32.1
101
104
Exhibit Description
Certification of Principal Financial Officer pursuant
to Rules 13a-14(a) under the Securities Exchange Act
of 1934, as amended
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
Interactive Data Files Pursuant to Rule 405 of
Regulation S-T
The cover page from the Annual Report on Form 10-
K for the year ended December 31, 2022, formatted
in Inline XBRL
Incorporated By Reference
Date of
First
Filing
Exhibit
Number
Form
Filed
Herewith
X
X
X
X
**
Indicates management contract or compensatory plan or arrangement.
Item 16.
Form 10-K Summary
None.
SPS COMMERCE, INC.
64
Form 10-K for the Annual Period ended December 31, 2022
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Dated: February 21, 2023
SPS COMMERCE, INC.
By: /s/ ARCHIE BLACK
Archie Black
Chief Executive Officer
Each of the undersigned hereby appoints Archie Black and Kimberly Nelson, and each of them (with full power to
act alone), as attorneys and agents for the undersigned, with full power of substitution, for and in the name, place and stead
of the undersigned, to sign and file with the Securities and Exchange Commission under the Securities Exchange Act of
1934, any and all amendments and exhibits to this annual report on Form 10-K and any and all applications, instruments,
and other documents to be filed with the Securities and Exchange Commission pertaining to this annual report on Form 10-
K or any amendments thereto, with full power and authority to do and perform any and all acts and things whatsoever
requisite and necessary or desirable. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 21,
2023.
Name and Signature
/s/ ARCHIE BLACK
Archie Black
/s/ KIMBERLY NELSON
Kimberly Nelson
/s/ JAMES RAMSEY
James Ramsey
/s/ MARTY RÉAUME
Marty Réaume
/s/ TAMI RELLER
Tami Reller
/s/ PHILIP SORAN
Philip Soran
/s/ ANNE SEMPOWSKI WARD
Anne Sempowski Ward
/s/ SVEN WEHRWEIN
Sven Wehrwein
Title
Chief Executive Officer and Director
(principal executive officer)
Executive Vice President and Chief Financial Officer
(principal financial and accounting officer)
Director
Director
Director
Director
Director
Director
SPS COMMERCE, INC.
65
Form 10-K for the Annual Period ended December 31, 2022
Executive Officers
Archie Black, Chief Executive Officer
Kim Nelson, Executive Vice President and Chief Financial Officer
Jim Frome, President and Chief Operating Officer
Board of Directors
Archie Black
James Ramsey
Marty Réaume
Tami Reller
Phil Soran
Anne Sempowski Ward
Sven Wehrwein
Corporate Headquarters
333 South Seventh Street, Suite 1000
Minneapolis, MN 55402 USA
Toll-free: (866) 245-8100
Market Listing
Nasdaq Global Market Symbol: SPSC
Annual Meeting
Friday, May 12, 2023
Independent Public Accountants
KPMG LLP
4200 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402 USA
Transfer Agent & Registrar
EQ Shareowner Services
1110 Centre Point Curve, Suite 101
Mendota Heights, MN 55120 USA
(800) 468-9716
shareowneronline.com
Legal Counsel
Faegre Drinker Biddle & Reath, LLP
2200 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402 USA
SPS COMMERCE
CORPORATE HEADQUARTERS
333 South Seventh Street, Suite 1000
Minneapolis, MN 55402 USA
Toll-free: (866) 245-8100
Main: (612) 435-9400
AMSTERDAM: +31 020 8881723
BEIJING: +86 4006 233 251
HONG KONG: +852 5808 6596
KYIV: +3 8044 594 80 89
MELBOURNE: +61 3 9847 7000
SYDNEY: +61 2 8073 8209
TORONTO: 888 550 8665
spscommerce.com