Financial Data and Key Metrics Changes - Total revenue for Q3 2022 was $114.5 million, representing a 17% increase year-over-year, marking the 87th consecutive quarter of revenue growth [16] - Recurring revenue grew 18% year-over-year, with the total number of recurring revenue customers increasing by 12% to approximately 39,550 [16] - Adjusted EBITDA increased by 31% to $34.7 million compared to $26.5 million in Q3 of the previous year [17] - The company ended the quarter with total cash and investments of approximately $237 million and repurchased approximately $12 million of shares [17] Business Line Data and Key Metrics Changes - The fulfillment and analytics segments experienced double-digit revenue growth, contributing to the overall revenue increase [7] - The wallet share increased by 5% to $10,900, indicating improved customer engagement and spending [16] Market Data and Key Metrics Changes - The company noted that 42% of consumers expect two-day shipping, while 61% prefer next-day delivery, highlighting the growing demand for efficient supply chain solutions [10] - The acquisition of InterTrade expanded the company's network and capabilities in product information and transaction data exchange [13] Company Strategy and Development Direction - The company aims to strengthen its competitive advantage by expanding its network across various industries and enhancing automation solutions [14] - Future growth is expected to be driven by community enablement campaigns and acquisitions, with a long-term target for adjusted EBITDA margin of 35% [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged potential impacts from inflationary pressures and uncertainties in the global economy but maintained that the operating model and growth expectations remain unchanged [18] - For Q4 2022, the company expects revenue in the range of $120 million to $121 million, representing approximately 17% to 18% year-over-year growth [19] Other Important Information - The company expects annual revenue growth of 15% or greater beyond 2022, with adjusted EBITDA projected to be approximately $151 million to $153 million in 2023 [23] - The company has a disciplined approach to acquisitions, with a significant cash balance available for strategic opportunities [31] Q&A Session Summary Question: Impact of macroeconomic conditions on new customer acquisition - Management noted that during challenging times, community enablement campaigns tend to increase as retailers seek efficiency, and they do not monetize retailers, making it cost-effective for them to add efficiency [27] Question: Changes in global supply chains and their effect on business - Management indicated that while shipping rates are decreasing, it does not significantly impact customer acquisition as the need for trading partners remains [35] Question: Insights on recent acquisitions and their integration - Management stated that acquisitions are part of a long-term strategy, and they are actively seeking opportunities while remaining disciplined [31] Question: Observations on transaction volumes in the current retail environment - Management confirmed that transaction volumes have seen some decline in drop-ship as e-commerce growth slows, but they remain optimistic about their omnichannel capabilities [48] Question: Customer cohort observations and economic potential - Management indicated that new customer cohorts continue to show strong potential for upselling, and the average supplier payment remains consistent [62] Question: Guidance on adjusted EBITDA and investment priorities for 2023 - Management highlighted that the pace of hiring and investments will impact EBITDA growth, but they expect to be well-positioned for 2023 [46]

Financial Data and Key Metrics Changes - Total revenue grew 15% year-over-year to $109.2 million, marking the 86th consecutive quarter of revenue growth [20][24] - Recurring revenue increased by 16% year-over-year, with the total number of recurring revenue customers rising 12% to approximately 38,650 [20][24] - Adjusted EBITDA grew 13% to $30.9 million compared to $27.3 million in Q2 of the previous year [21][24] Business Line Data and Key Metrics Changes - Demand for fulfillment services grew 17% year-over-year, while analytics services saw a 12% increase [9] - The company reported a 4% increase in wallet share, reaching $10,550 [20][24] Market Data and Key Metrics Changes - The company continues to capitalize on the retail industry's investments in supply chain management efficiency and digital transformation [10][18] - The international business, particularly in Europe and Australia, is performing well, with no signs of slowdown despite macroeconomic challenges [51] Company Strategy and Development Direction - The company is focused on supporting trading partners with full-service EDI to enhance collaboration and efficiency in supply chain management [12][18] - The acquisition of GCommerce aims to strengthen the company's position in the automotive aftermarket and expand its customer base [17][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledges inflationary pressures and uncertainties in the global economy but maintains that the operating model and growth expectations remain unchanged [22][24] - The company expects revenue for Q3 2022 to be in the range of $113.4 million to $114.4 million, representing approximately 16% growth year-over-year [24][25] Other Important Information - The company ended the quarter with approximately $259 million in cash and investments and repurchased about $15 million of its shares [21] - A new stock repurchase program of up to $50 million has been authorized, effective August 26, 2022 [21] Q&A Session Summary Question: Impact of volume changes on pricing model - Management indicated that their revenue is primarily derived from trading partner relationships rather than transaction volumes, which tend to remain stable even during economic downturns [31] Question: Customer churn during difficult economic times - Churn has remained constant at around 12% annually, with historical increases of about 1% during tougher economic periods, but no current signs of increased churn [33] Question: Delayed ERP decisions and their impact - Management has not observed any slowdown in their business model despite broader economic concerns, as retailers continue to invest in supply chain efficiencies [37][38] Question: GCommerce acquisition details - The acquisition added approximately 500 customers with an average revenue per user (ARPU) of around $12,000, slightly above the company's average ARPU [39][40] Question: Strength in specific vertical markets - The company has seen consistent performance across various verticals, with slightly more momentum in the distribution area [50] Question: International business performance - The analytics product in Europe is experiencing strong momentum, unaffected by economic challenges, while Australia also shows positive performance [51] Question: Pipeline for Carrier Service solution - The Carrier Service solution is contributing modestly, with growing momentum and a developing sales pipeline [52] Question: Investment strategy for the remainder of the year - The company plans to continue investing in hiring, particularly in customer success and sales, to meet existing and future growth opportunities [74]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: June 30, 2022 o 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) (State or other ...

SPS Commerce, Inc. (NASDAQ:SPSC) Q1 2022 Results Conference Call April 28, 2022 4:30 PM ET Company Participants Irmina Blaszczyk - Investor Relations Archie Black - Chief Executive Officer Kim Nelson - Executive Vice President & Chief Financial Officer Conference Call Participants Jeff Martin - ROTH Capital Partners Parker Lane - Stifel Scott Berg - Needham Joe Vruwink - Baird Jason Celino - KeyBanc Mark Schappel - Loop Capital Nehal Chokshi - Northland Capital Joe Goodwin - JMP Securities Operator Hello. T ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: March 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission file number 001-34702 SPS COMMERCE, INC. (Exact Name of Registrant as Specified in its Charter) (State or other jurisdiction of incorporation or o ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) SPS Commerce is a leading cloud-based supply chain management provider, achieving **$385.3 million** in 2021 revenues with **92%** recurring, serving **105,000** customers globally Financial Performance (2019-2021) | Year | Revenues (in millions) | Recurring Revenue % | | :--- | :--- | :--- | | 2021 | $385.3 | 92% | | 2020 | $312.6 | 94% | | 2019 | $279.1 | 94% | - As of December 31, 2021, SPS Commerce had approximately **37,500 recurring revenue customers** and a total of **105,000 customers** across its network[16](index=16&type=chunk)[20](index=20&type=chunk) - The company's core products include: **Fulfillment**, **Analytics**, and **Other Products** for supply chain management[28](index=28&type=chunk) - Key growth strategies include market penetration, increasing existing customer revenues, international expansion, and strategic acquisitions like **Genius Central in 2021** and **Data Masons in 2020**[30](index=30&type=chunk) Employee Headcount by Function (as of Dec 31, 2021) | Functional Area | of Employees | | :--- | :--- | | Cost of revenues | 959 | | Sales and marketing | 460 | | Research and development | 332 | | General and administrative | 150 | | **Total employees** | **1,901** | [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business, product, technology, international, and regulatory risks, including customer retention, cybersecurity threats, and geopolitical instability - **Business Risks:** Inability to attract new customers or retain existing ones with short-term contracts, alongside economic weakness in the retail sector, could adversely affect revenue growth[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - **Product and Technology Risks:** Dependency on maintaining and scaling technical infrastructure, significant cybersecurity threats, and reliance on third-party data centers pose risks of service interruptions and reputational damage[70](index=70&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) - **International Risks:** Expansion outside the U.S. exposes the company to currency fluctuations, regulatory changes, and political instability, particularly impacting its workforce in Ukraine and the Philippines[65](index=65&type=chunk)[68](index=68&type=chunk) - **Regulatory and Legal Risks:** Evolving data privacy laws and internet regulations may increase compliance costs, while reliance on trade secrets and copyrights for intellectual property offers limited protection[85](index=85&type=chunk)[90](index=90&type=chunk) [Unresolved Staff Comments](index=21&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[118](index=118&type=chunk) [Properties](index=21&type=section&id=Item%202.%20Properties) SPS Commerce's headquarters are in a leased **198,000 sq ft** facility in Minneapolis, with additional leased offices internationally in Ukraine, Canada, Australia, China, and the Netherlands - The company's principal administrative, marketing, sales, and R&D facilities are at its corporate headquarters in Minneapolis, Minnesota[119](index=119&type=chunk) - Additional office spaces are leased in Little Falls, New Jersey; Kyiv, Ukraine; Toronto, Canada; Melbourne and Sydney, Australia; Beijing, China; and Amsterdam, Netherlands[119](index=119&type=chunk) [Legal Proceedings](index=21&type=section&id=Item%203.%20Legal%20Proceedings) The company states that it is not currently subject to any material legal proceedings - The company is not currently a party to any material legal proceedings and believes it has adequate insurance coverage for potential claims arising from normal business activities[120](index=120&type=chunk) [Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[121](index=121&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=22&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "SPSC", has not paid cash dividends, and has an active **$50.0 million** stock repurchase program authorized in October 2021 - The company's common stock has traded on the Nasdaq Global Market under the symbol "SPSC" since its IPO on April 22, 2010[122](index=122&type=chunk) - The company has never paid cash dividends and intends to retain future earnings to finance business operations and expansion[123](index=123&type=chunk) Stock Repurchase Activity (Q4 2021) | Period | Total Shares Purchased | Average Price Paid per Share | Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Oct 1-31, 2021 | - | $- | $20,389,000 | | Nov 1-30, 2021 | 4,287 | $141.36 | $49,394,000 | | Dec 1-31, 2021 | 66,002 | $138.83 | $40,231,000 | | **Total** | **70,289** | **$138.98** | **$40,231,000** | - On October 28, 2021, the board authorized a new **$50.0 million** stock repurchase program, effective November 28, 2021, and expiring in two years[130](index=130&type=chunk) [[Reserved]](index=23&type=section&id=Item%206.%20%5BReserved%5D) This section is not applicable - Not applicable[132](index=132&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial results, noting a **23.2%** revenue increase to **$385.3 million** in 2021, driven by customer growth and wallet share, alongside increased operating expenses and strong liquidity [Results of Operations](index=26&type=section&id=Results%20of%20Operations) In 2021, revenues grew **23.2%** to **$385.3 million**, driven by a **13%** increase in recurring revenue customers and **9%** wallet share growth, while net income slightly decreased due to rising operating expenses Comparison of Operations (2021 vs. 2020) | (in thousands) | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $385,276 | $312,630 | 23.2% | | Gross Profit | $253,598 | $212,794 | 19.2% | | Income from Operations | $55,085 | $50,158 | 9.8% | | Net Income | $44,597 | $45,586 | (2.2)% | - Revenue growth was primarily driven by a **13%** increase in recurring revenue customers (from **33,150** to **37,500**) and a **9%** increase in wallet share (average recurring revenue per customer) from **$9,250** to **$10,050**[159](index=159&type=chunk) - Increases in operating expenses were mainly due to higher headcount, leading to increased personnel-related costs and stock-based compensation across Cost of Revenues, Sales & Marketing, R&D, and G&A[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [Non-GAAP Financial Measures](index=27&type=section&id=Non-GAAP%20Financial%20Measures) The company's non-GAAP results show **Adjusted EBITDA** increased to **$107.0 million** in 2021, with a flat **28%** margin, and non-GAAP diluted income per share rose to **$1.82** Reconciliation of Net Income to Adjusted EBITDA | (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net income | $44,597 | $45,586 | | Adjustments | $62,418 | $41,408 | | **Adjusted EBITDA** | **$107,015** | **$86,994** | Adjusted EBITDA Margin | (in thousands, except Margin) | 2021 | 2020 | | :--- | :--- | :--- | | Revenue | $385,276 | $312,630 | | Adjusted EBITDA | $107,015 | $86,994 | | **Adjusted EBITDA Margin** | **28%** | **28%** | Non-GAAP Income Per Share | (per share amounts) | 2021 | 2020 | | :--- | :--- | :--- | | Non-GAAP income (in thousands) | $67,107 | $55,696 | | Diluted shares (in thousands) | 36,962 | 36,285 | | **Non-GAAP income per share (Diluted)** | **$1.82** | **$1.53** | [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, the company had **$257.3 million** in cash and investments, with net cash from operating activities increasing to **$112.9 million**, ensuring sufficient liquidity for the next twelve months - At December 31, 2021, principal sources of liquidity included cash and cash equivalents of **$207.6 million** and short-term investments of **$49.8 million**[172](index=172&type=chunk)[216](index=216&type=chunk) Summary of Cash Flows | (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $112,893 | $88,562 | | Net cash used in investing activities | $(46,703) | $(120,469) | | Net cash (used in) provided by financing activities | $(8,361) | $2,328 | - The decrease in cash used for investing activities was primarily due to lower cash used for acquisitions in 2021 compared to 2020[176](index=176&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate and foreign currency fluctuations, but management believes neither poses a material threat, with only **8%** of cash held in foreign currencies - The company believes there is no material risk exposure to changes in interest rates based on its current portfolio of cash, cash equivalents, and investments[187](index=187&type=chunk) - Due to international operations, the company has exposure to foreign currency exchange risk, primarily in Australian and Canadian dollars, with approximately **8%** of total cash and investments held in foreign currencies as of December 31, 2021[189](index=189&type=chunk)[190](index=190&type=chunk) - Management does not believe a hypothetical **10%** change in foreign currency exchange rates would materially affect its financial position[191](index=191&type=chunk) [Financial Statements and Supplementary Data](index=32&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2019-2021, including the independent auditor's report, offering a comprehensive overview of financial position and performance [Consolidated Financial Statements](index=37&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for 2021 show total assets of **$615.8 million**, total liabilities of **$131.6 million**, revenues of **$385.3 million**, and net income of **$44.6 million** Consolidated Balance Sheet Highlights | (in thousands) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total current assets | $352,443 | $271,356 | | Total assets | $615,846 | $526,458 | | Total current liabilities | $102,872 | $80,132 | | Total liabilities | $131,587 | $105,737 | | Total stockholders' equity | $484,259 | $420,721 | Consolidated Income Statement Highlights | (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Revenues | $385,276 | $312,630 | $279,124 | | Gross profit | $253,598 | $212,794 | $186,885 | | Income from operations | $55,085 | $50,158 | $38,406 | | Net income | $44,597 | $45,586 | $33,712 | [Notes to Consolidated Financial Statements](index=41&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including the **$17.4 million** acquisition of Genius Central in 2021, revenue stream breakdown with **Fulfillment** as the largest, and **$27.6 million** in stock-based compensation - On November 3, 2021, the company acquired Genius Central Systems Inc. for a total transaction price of **$17.4 million**, resulting in **$8.9 million** of goodwill and **$8.5 million** of intangible assets[275](index=275&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) Revenue by Stream (2019-2021) | (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Fulfillment | $306,851 | $251,272 | $219,297 | | Analytics | $42,674 | $38,824 | $37,038 | | Other Recurring | $5,481 | $4,920 | $5,671 | | One-time revenues | $30,270 | $17,614 | $17,118 | | **Total revenue** | **$385,276** | **$312,630** | **$279,124** | Stock-Based Compensation Expense | (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Expense | $27,574 | $18,936 | $14,690 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=60&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[331](index=331&type=chunk) [Controls and Procedures](index=60&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, excluding the recently acquired Genius Central business - The CEO and CFO concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective[332](index=332&type=chunk) - Management concluded that the company maintained effective internal control over financial reporting as of December 31, 2021[336](index=336&type=chunk) - The assessment of internal control over financial reporting excluded the Genius Central business, which was acquired on November 3, 2021[337](index=337&type=chunk) [Other Information](index=61&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[340](index=340&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=61&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This section is not applicable to the company - Not Applicable[341](index=341&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=62&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item will be included in the 2022 Proxy Statement and is incorporated by reference[344](index=344&type=chunk) [Executive Compensation](index=62&type=section&id=Item%2011.%20Executive%20Compensation) The information regarding executive compensation is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item will be included in the 2022 Proxy Statement and is incorporated by reference[346](index=346&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=62&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information is incorporated from the 2022 Proxy Statement, detailing **1,542,378** shares for outstanding equity awards and **15,336,955** shares available for future issuance - Information on security ownership is incorporated by reference from the 2022 Proxy Statement[347](index=347&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2021) | Plan Category | Shares to be issued upon exercise | Weighted-average exercise price | Shares remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by stockholders | 1,542,378 | $44.76 | 15,336,955 | [Certain Relationships and Related Transactions, and Director Independence](index=62&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information regarding related party transactions and director independence is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item will be included in the 2022 Proxy Statement and is incorporated by reference[350](index=350&type=chunk) [Principal Accounting Fees and Services](index=62&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information regarding principal accounting fees and services is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item will be included in the 2022 Proxy Statement and is incorporated by reference[351](index=351&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=63&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and various exhibits filed as part of the Annual Report on Form 10-K - This item lists the financial statements, financial statement schedules, and exhibits filed as part of the report[353](index=353&type=chunk) [Form 10-K Summary](index=63&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for this item - None[353](index=353&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q4 2021 was $102.8 million, a 23% increase year-over-year, marking the 84th consecutive quarter of revenue growth [15] - For the full year, revenue grew 23% to $385.3 million, with recurring revenue increasing by 20% [15][19] - Adjusted EBITDA for Q4 2021 increased 21% to $27.7 million, while for the full year, it grew 23% to $107 million [15][19] - The total number of recurring revenue customers rose 13% year-over-year to approximately 37,500, with wallet share increasing by 9% to 10,050 [15] Business Line Data and Key Metrics Changes - Recurring revenue growth was led by fulfillment, which grew 22% year-over-year, while analytics grew 10% in 2021 [8][15] - Net new customer additions increased by 40% in 2021, excluding the Genius Central acquisition [9][15] Market Data and Key Metrics Changes - The company noted ongoing disruptions in the global supply chain, which intensified demand for supply chain automation and EDI solutions [7][8] - The retail dynamics have shifted towards omnichannel strategies, with increased emphasis on fulfillment automation [7][8] Company Strategy and Development Direction - SPS Commerce aims to capitalize on the growing demand for supply chain automation and fulfillment solutions, expanding its addressable market through strategic initiatives and acquisitions [7][13] - The acquisition of Genius Central is expected to strengthen the company's position in food retail and distribution [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of growth driven by strategic investments made in previous years, alongside the benefits from the pandemic [25] - The company anticipates continued annual revenue growth expectations of 15% or greater beyond 2022, with adjusted EBITDA dollar growth of 15% to 25% [18] Other Important Information - The company ended the year with total cash and investments of $257 million and repurchased approximately $20 million of its shares [15] - For Q1 2022, revenue is expected to be in the range of $103.8 million to $104.8 million, with full-year revenue guidance of $442.5 million to $445.5 million [16] Q&A Session Summary Question: Sustainability of pandemic-driven growth - Management indicated that while there were benefits from the pandemic, the acceleration in omnichannel strategies is primarily driven by strategic investments made in previous years [25] Question: Growth rate for analytics - Management expressed confidence that analytics could grow consistently with fulfillment, estimating a growth rate around 10% for the near term [27] Question: Recovery in lagging industries - Management noted that differentiation among industries is less pronounced now, with a return to a more normalized growth rate in e-commerce [31] Question: Integration of Genius Central - The integration of Genius Central into the company's go-to-market strategy is progressing well, with expectations for retail sales to benefit from the acquisition [34] Question: Competitive environment - Management observed that SPS Commerce has seen further differentiation from peers, particularly due to its extensive network and relationships with retailers [44] Question: Sales capacity additions for 2022 - The company plans to continue adding resources based on opportunities, with a focus on increasing sales capacity [48] Question: International segment performance - Management highlighted strong performance in the Australian market and ongoing opportunities in Asia and Europe [71] Question: Hiring and retention dynamics - The company has not faced difficulties in hiring, maintaining a strong reputation and effective training programs [78]

SPS Commerce Investor Presentation Q3'21 GAAP measure is provided in Appendix A of this presentation. | --- | --- | --- | --- | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------|-------|-------| | Forward-Looking Statements and Non-GAAP Financial Measures | | | | | This presentation contains forward-looking stateme ...

Financial Data and Key Metrics Changes - Total revenue grew 23% year-over-year to $97.9 million, marking the 83rd consecutive quarter of revenue growth [16] - Recurring revenue increased by 20% year-over-year, with the total number of recurring revenue customers rising 10% to approximately 35,400 [16] - Adjusted EBITDA grew 14% to $26.5 million compared to $23.2 million in Q3 of the previous year [17] - The company ended the quarter with total cash and investments of approximately $252 million [17] Business Line Data and Key Metrics Changes - The company is experiencing strong momentum in e-commerce fulfillment, which is driving demand for its solutions [6] - The partnership with Ruby Has has proven valuable for brands, enhancing order flow and inventory management [9] - The transition of brands like Hello Bello to cloud ERP solutions is impacting EDI operations positively [10][11] Market Data and Key Metrics Changes - The retail landscape is evolving towards a true omnichannel fulfillment model, with SPS Commerce positioned to support this transition [14] - The company is expanding its global market leadership by providing full-service solutions that help retailers work efficiently with suppliers [14] Company Strategy and Development Direction - SPS Commerce aims to capitalize on the multi-billion-dollar addressable market by enhancing its analytics solutions and fulfillment capabilities [24] - The company plans to maintain annual revenue growth expectations of 15% or greater beyond 2021 [22] - The strategic focus includes investing in customer experience and sales resources to support future growth [43][64] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing shift towards omnichannel retailing, which integrates e-commerce and brick-and-mortar operations [33] - The company expects to see continued strong momentum in fulfillment driven by e-commerce dynamics [22] - Management is cautious about potential headwinds and tailwinds affecting deal closures due to inventory and labor challenges [49] Other Important Information - A new stock buyback program has been authorized to repurchase up to $50 million of common stock, effective November 28, 2021 [17] - The company expects to deliver $124 million to $126 million in annual adjusted EBITDA in 2022 [22] Q&A Session Summary Question: Is there an uptick in ERP replacement, particularly with Microsoft Cloud Dynamics? - Management confirmed a slight uptick in the movement to cloud ERPs, particularly benefiting the Data Masons business [27][28] Question: How is the improved e-commerce environment from the pandemic affecting overall business? - Management believes the retail world is moving towards a true omnichannel experience, which positions the company well regardless of shifts between online and offline sales [33][34] Question: What is the outlook for gross margins? - Management indicated that investments in customer experience and sales resources may impact gross margins in the short term, but they expect margins to stabilize in the low 70s long term [44] Question: How is the uptake on the carrier services product? - Management expressed optimism about the carrier services product and its partnership with C.H. Robinson, which is expected to accelerate growth [47] Question: What is the impact of logistical challenges on the pipeline? - Management noted that logistical challenges can have both positive and negative effects on deal closures, depending on inventory availability and labor resources [49] Question: How is the competitive environment for drop shipping evolving? - Management highlighted the company's strong retail network and easy-to-use technology as key competitive advantages in the drop shipping space [52][54] Question: What is the status of the Data Masons business post-acquisition? - Management reported that the Data Masons business is trending about 10% greater than original expectations, with successful conversions from nonrecurring to recurring revenue [74][76]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended: September 30, 2021 (Registrant's telephone number, including area code) ☐ 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 Ch ...