SPS COMMERCE INC

Previous wording

Annual Revenue Per User (ARPU) -We calculate the annualized average recurring revenues per recurring revenue customer, which we refer to as “ARPU” and 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.

Current wording

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.

Previous wording

Revenues - Revenues increased for the 97th consecutive quarter. The increase in revenue period-over-period resulted from an increase in average recurring revenues per recurring revenue customer, which we also refer to as “ARPU” and was previously referred to as “wallet share”, and from an increase in recurring revenue customers that was driven primarily by business acquisitions and continued business growth.

Current wording

Revenues - Revenues increased for the 98th consecutive quarter. The increase in revenue period-over-period resulted from an increase in ARPU and from an increase in recurring revenue customers that was driven primarily by business acquisitions and continued business growth.

Previous wording

•ARPU increased 11% to approximately $13,850 for the three months ended March 31, 2025. This was primarily attributable to increased usage of our products by our recurring revenue customers, partially offset by the addition of 3P recurring revenue customers.

Current wording

•ARPU increased 3% to approximately $13,200 for the three months ended June 30, 2025. This was primarily attributable to increased usage of our products by our recurring revenue customers, partially offset by the addition of 3P recurring revenue customers.

Previous wording

•The number of recurring revenue customers increased 21% to approximately 54,150 at March 31, 2025. Of the total recurring revenue customers, approximately 45,950 are 1P recurring revenue customers and the remainder are 3P recurring revenue customers. The increase in recurring revenue customers is primarily due to recent acquisitions of 3P recurring revenue customers, which have an inconsequential impact on recurring revenue. New recurring revenue customers do not have a meaningful contribution to revenue at the beginning of their tenure as our recurring revenue customer, and therefore a majority of the increased revenue was generated from existing recurring revenue customers.

Current wording

•The number of recurring revenue customers increased 21% to approximately 54,500 at June 30, 2025. Of the total recurring revenue customers, approximately 46,300 are 1P recurring revenue customers and the remainder are 3P recurring revenue customers. The increase in recurring revenue customers is primarily due to recent acquisitions of 3P recurring revenue customers, which have an inconsequential impact on recurring revenue. New recurring revenue customers do not have a meaningful contribution to revenue at the beginning of their tenure, and therefore a majority of the increased revenue was generated from existing recurring revenue customers.

Previous wording

•Approximately 50 recurring revenue customers were added in May 2024 due to the acquisition of the existing customer base of Traverse Systems, and approximately 200 recurring revenue customers were added in July 2024 due to the acquisition of the existing customer base of SupplyPike. Additionally, approximately 8,500 recurring revenue customers were added in February 2025 due to the acquisition of the existing customer base of Carbon6, of which approximately 300 are 1P recurring revenue customers and the remainder are 3P recurring revenue customers.

Current wording

•Approximately 50 1P recurring revenue customers were added in May 2024 due to the acquisition of the existing customer base of Traverse Systems, and approximately 200 1P recurring revenue customers were added in July 2024 due to the acquisition of the existing customer base of SupplyPike. Additionally, approximately 8,500 recurring revenue customers were added in February 2025 due to the acquisition of the existing customer base of Carbon6, of which approximately 300 are 1P recurring revenue customers and the remainder are 3P recurring revenue customers.

Previous wording

Recurring revenues increased 23% to $172.3 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Recurring revenues accounted for 95% and 93% of our total revenues for the three months ended March 31, 2025 and 2024, respectively. We anticipate that the number of recurring revenue customers and ARPU will increase as we execute our growth strategy focused on further penetration of our market.

Current wording

Recurring revenues increased 24% to $179.1 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Recurring revenues accounted for 96% and 94% of our total revenues for the three months ended June 30, 2025 and 2024, respectively. We anticipate that the number of recurring revenue customers and ARPU will increase as we execute our growth strategy focused on further penetration of our market.

Previous wording

Cost of Revenues - The increase in cost of revenues was primarily due to increased headcount, which resulted in an increase of $5.3 million in personnel-related costs.

Current wording

Cost of Revenues - The increase in cost of revenues was primarily due to increased headcount, which resulted in an increase of $3.3 million in personnel-related costs. Additionally, there was an increase in software subscriptions of $2.2 million due to general growth of our business.

Previous wording

Sales and Marketing Expenses - The increase in sales and marketing expense was primarily due to increased headcount, which resulted in an increase of $5.7 million in personnel-related costs.

Current wording

Sales and Marketing Expenses - The increase in sales and marketing expense was primarily due to increased headcount, which resulted in an increase of $4.6 million in personnel-related costs.

Previous wording

Research and Development Expenses - The increase in research and development expense was primarily due to increased headcount, which resulted in an increase of $2.0 million in personnel-related costs.

Current wording

Research and Development Expenses - The increase in research and development expense was primarily due to increased headcount, which resulted in an increase of $1.1 million in personnel-related costs.

Previous wording

General and Administrative Expenses - The increase in general and administrative expense was primarily due to increased headcount, which resulted in an increase of $2.6 million in personnel-related costs.

Current wording

General and Administrative Expenses - The increase in general and administrative expense was primarily due to increased headcount, which resulted in an increase of $2.7 million in personnel-related costs. Additionally, there was an increase in stock-based compensation expense of $1.7 million.

Previous wording

Income Tax Expense - The increase in income tax expense was primarily driven by an increase in pre-tax income, a decrease in the excess tax benefits due to the current period equity award settlements and the change in non-deductible 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.

Current wording

Income Tax Expense - The increase in income tax expense was primarily driven by an increase in pre-tax income, as well as decreases in the excess tax benefits from equity award exercises and settlements, and an increase in nondeductible 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.

Previous wording

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, and other adjustments as necessary for a fair presentation. Other adjustments for the three months ended March 31, 2025 includedthe expense impacts from disposals of certain capitalized internally developed software and one-time acquisition-related insurance costs. Net income is the comparable GAAP measure of financial performance.

Current wording

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 investments held and foreign currency impact on cash and investments, investment income, and other adjustments as necessary for a fair presentation. Other adjustments for the six months ended June 30, 2025 included the expense impacts from disposals of certain capitalized internally developed software and one-time acquisition-related insurance costs. Net income is the comparable GAAP measure of financial performance.

Previous wording

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, including for the three months ended March 31, 2025 the expense impacts from disposals of certain capitalized internally developed software and one-time acquisition-related insurance costs, 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. Net income per share, the comparable GAAP measure of financial performance, consists of net income divided by the weighted average number of shares of common and diluted stock outstanding during each period. 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.

Current wording

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 investments held and foreign currency impact on cash and investments, other adjustments as necessary for a fair presentation, including for the six months ended June 30, 2025 the expense impacts from disposals of certain capitalized internally developed software and one-time acquisition-related insurance costs, 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. Net income per share, the comparable GAAP measure of financial performance, consists of net income divided by the weighted average number of shares of common and diluted stock outstanding during each period. 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.

Previous wording

During the three months ended March 31, 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.

Current wording

During the six months ended June 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.

Previous wording

As of March 31, 2025, our principal sources of liquidity were cash and cash equivalents of $94.9 million and net accounts receivable of $63.4 million.

Current wording

As of June 30, 2025, our principal sources of liquidity were cash and cash equivalents of $107.6 million and net accounts receivable of $67.5 million.

Previous wording

The increase in cash provided by operating activities from the three months ended March 31, 2024 to the three months ended March 31, 2025 was primarily due to an increase in net income as adjusted for non-cash expenses, of $6.2 million, driven by continued growth in revenue, as partially offset by cash paid for expenses to operate the growing business.

Current wording

The increase in cash provided by operating activities from the six months ended June 30, 2024 to the six months ended June 30, 2025 was primarily due to an increase in net income as adjusted for non-cash expenses, of $16.6 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 $7.8 million in cash provided by operating activities.

Previous wording

The increase in cash used in investing activities from the three months ended March 31, 2024 to the three months ended March 31, 2025 was primarily due to an increase in cash used to acquire a business of $141.6 million to further grow our business.

Current wording

The increase in cash used in investing activities from the six months ended June 30, 2024 to the six months ended June 30, 2025 was primarily due to an increase in cash used to acquire a business of $113.3 million to further grow our business.

Previous wording

The increase in cash used in financing activities from the three months ended March 31, 2024 to the three months ended March 31, 2025 was primarily due to an increase in cash used for share repurchases of $23.5 million year-over-year to continue to deliver shareholder value.

Current wording

The increase in cash used in financing activities from the six months ended June 30, 2024 to the six months ended June 30, 2025 was primarily due to an increase in cash used for share repurchases of $22.1 million year-over-year to continue to deliver shareholder value.