SPS Commerce Inc.

10/30/2025 | Press release | Distributed by Public on 10/30/2025 14:40

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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 in conjunction with our condensed consolidated financial statements in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2024. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements regarding us, our business prospects and our results of operations are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. In some cases, you can identify forward-looking statements by the following words: "anticipate," "assume," "believe," "continue," "could," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "should," "will," "would," or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Similarly, statements that describe our future plans, objectives or goals are also forward-looking. Forward-looking statements may also be made from time to time in oral presentations, including telephone conferences and/or webcasts open to the public. Shareholders, potential investors, and others are cautioned that all forward-looking statements involve risks and uncertainties that could cause results in future periods to differ materially from those anticipated by some of the statements made in this report, including the risks and uncertainties described under the heading "Risk Factors" appearing in our Annual Report on Form 10-K for the year ended December 31, 2024, 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 SEC that advise interested parties of the risks and factors that may affect our business.
Overview
SPS Commerce is transforming how our global retail supply chain co-operates by creating a more dynamic, interconnected community where players can more freely connect, collaborate, and prosper together. Our comprehensive suite of cloud-based products and solutions lead the industry in establishing and maintaining stronger collaboration between retailers, grocers, distributors, suppliers, manufacturers, and logistics firms around the globe.
Our products enable customers to enhance how they operate: both within their organizations and with their trading partners, with reduced operational costs and stronger supply chain performance; compete: with order and supply chain visibility, sell-through data, and optimized inventory management, and; adapt: through the limitless access to connect and grow with the world's largest retail network of trading partners that only SPS Commerce can offer.
We plan to continue to grow our business by further penetrating the supply chain management market, increasing revenues from our customers as their businesses grow, expanding our distribution channels, expanding our international presence and, from time to time, developing new products and applications. We also intend to selectively pursue acquisitions that will add customers, allow us to expand into new regions, or allow us to offer new functionalities.
Key Financial Terms, Metrics and Non-GAAP Measures
We have several key financial terms, metrics, and non-GAAP measures as discussed in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC, under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Recurring Revenue -We define recurring revenue as active contracts during the reporting period to regularly pay us fees for subscription-based and reoccurring services. All components of the contracts that are not expected to recur (primarily set ups and professional services) are excluded from recurring revenue.
Recurring Revenue Customers - We define recurring revenue customers as customers with an active recurring revenue contract at the end of the period. A small portion of our recurring revenue customers consist of separate units within a larger organization and are separately invoiced. We treat each of these units, which may include divisions, departments, affiliates and franchises, as distinct recurring revenue customers. We classify the majority of our recurring revenue customers as '1P', with the exception of those recurring revenue customers that only have an online marketplace or e-Commerce connection within our network (which we refer to as '3P').
Annual Revenue Per User ("ARPU") - We calculate the annualized average recurring revenues per recurring revenue customer, which was previously referred to as "wallet share", by dividing the annualized recurring revenues for the period by the average of the beginning and ending number of recurring revenue customers for the period.
SPS COMMERCE, INC.
Form 10-Q for the Quarterly Period ended September 30, 2025
Non-GAAP Financial Measures - To supplement our condensed 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 condensed 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."
SPS COMMERCE, INC.
Form 10-Q for the Quarterly Period ended September 30, 2025
Critical Accounting Policies and Estimates
This discussion of our financial condition and results of operations is based upon our condensed consolidated financial statements, which are prepared in accordance with GAAP and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. The preparation of these condensed 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.
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.
During the nine months ended September 30, 2025, there were no changes in our critical accounting policies or estimates. For additional information regarding our critical accounting policies and estimates, see the discussion under "Critical Accounting Policies and Estimates"in "Management's Discussion and Analysis of Financial Condition and Results of Operations"included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC.
Liquidity and Capital Resources
Sources of Liquidity
As of September 30, 2025, our principal sources of liquidity were cash and cash equivalents of $133.7 million and net accounts receivable of $67.4 million.
Statements of Cash Flows Summary
The summary of activity within the condensed consolidated statements of cash flows was as follows:
Nine Months Ended
September 30,
(in thousands) 2025 2024
Net cash provided by operating activities $ 132,919 $ 116,836
Net cash used in investing activities (161,501) (110,227)
Net cash used in financing activities (80,151) (27,697)
Operating Activities
The increase in cash provided by operating activities from the nine months ended September 30, 2024 to the nine months ended September 30, 2025 was primarily due to an increase in net income as adjusted for non-cash expenses, of $46.0 million,driven by continued growth in revenue, partially offset by cash paid for expenses to operate the growing business. Additionally, fluctuations in operating assets and liabilities resulted in a decrease of $29.9 million in cash provided by operating activities.
Investing Activities
The increase in cash used in investing activities from the nine months ended September 30, 2024 to the nine months ended September 30, 2025 was primarily due to a net cash inflow of $51.0 million from the maturities and purchases of investments during the nine months ended September 30, 2024.
Financing Activities
The increase in cash used in financing activities from the nine months ended September 30, 2024 to the nine months ended September 30, 2025 was primarily due toan increase in cash used for share repurchases of $52.0 millionyear-over-year to continue to deliver shareholder value.
SPS COMMERCE, INC.
Form 10-Q for the Quarterly Period ended September 30, 2025
Contractual and Commercial Commitment Summary
Our contractual obligations and commercial commitments as of September 30, 2025 are summarized below:
Payments Due by Period
(in thousands) Less Than
1 Year 		1-3 Years 3-5 Years More Than
5 Years 		Total
Operating lease obligations, including imputed interest $ 6,226 $ 3,604 $ 153 $ 34 $ 10,017
Purchase commitments 13,354 2,810 1,452 - 17,616
Total $ 19,580 $ 6,414 $ 1,605 $ 34 $ 27,633
In October 2025, we executed the sixth amendment to our lease agreement for our current headquarters located in Minneapolis, Minnesota where we lease approximately 198,000 square feet, effective October 1, 2025. For more information, refer to Note Ito our condensed consolidated financial statements, included in Part I of this Quarterly Report on Form 10-Q.
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, 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 and inflation rate changes, refer to the section entitled "Foreign Currency Exchange Risk," included in Part I, Item 3, "Quantitative and Qualitative Disclosures About Market Risk" of this Quarterly Report on Form 10-Q.
SPS Commerce Inc. published this content on October 30, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 30, 2025 at 20:41 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]