SPS COMMERCE INC

Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025

The following table presents our results of operations for the periods indicated:

Revenues - The increase in revenue period-over-period resulted from an increase in recurring revenue customers that was driven primarily by business acquisitions and continued business growth.

•ARPU decreased 2% to approximately $13,550 for the three months ended March 31, 2026. The decrease was driven by the addition of 3P recurring revenue customers, which have much lower ARPU, partially offset by the increased usage of our products by our 1P recurring revenue customers.

•The number of recurring revenue customers increased 0.1% to approximately 54,200 at March 31, 2026. Of the total recurring revenue customers, approximately 46,900 are 1P recurring revenue customers and the remainder are 3P recurring revenue customers. 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.

•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.

Recurring revenues increased 7% to $184.5 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Recurring revenues accounted for 96% and 94% of our total revenues for the three months ended March 31, 2026 and 2025, 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.

Cost of Revenues - The increase in cost of revenues was primarily driven by $1.0 million of lower capitalization of deferred costs due to slowed hiring, as well as $0.7 million of expenses associated with an all-company meeting held in the current quarter, previously held in the fourth quarter of the calendar year.

Sales and Marketing Expenses - The increase in sales and marketing expense was primarily driven by a $1.8 million increase in stock-based compensation related to leadership transitions.

Research and Development Expenses - The increase in research and development expense was primarily due to higher stock-based compensation expense and increased software subscription costs. The rise in software subscription costs was further attributable to expanded investment in our artificial intelligence strategy.

General and Administrative Expenses - The increase in general and administrative expense was primarily driven by a $2.8 million increase in total compensation and personnel-related costs related to non-capitalizable activities supporting enterprise system implementations. Additionally, stock-based compensation expense increased by $2.1 million, partially attributable to $1.1 million of expense recognized from the contractual acceleration of equity-related awards upon executive retirement.

Amortization of Intangible Assets -The increase in amortization of intangible assets was driven by acquired intangible assets related to recent business combinations.

Other Income, Net - The decrease in other income, net was primarily due to a decrease in investment income.

Income Tax Expense -The increase in income tax expense was primarily driven by the reduction in tax benefits recognized from equity award exercise and settlement activity due to the fluctuations in share price. The increase was partially offset by the decrease in pre-tax book income and increased benefit for research & development tax credits.

Adjusted EBITDA -Adjusted EBITDA consists of net income adjusted for income tax expense, depreciation and amortization expense, stock-based compensation expense, realized gain from investments and foreign currency transactions, investment income, and other adjustments as necessary for a fair presentation. Other adjustments for the three months ended March 31, 2026, included the expense impact from disposals of other equipment. Net income is the most directly comparable GAAP measure of financial performance.

The following table provides a reconciliation of net income to Adjusted EBITDA:

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:

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 from investments and foreign currency transactions, other adjustments as necessary for a fair presentation, including for the three months ended March 31, 2026, the expense impact from disposals of other equipment, 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 most directly 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.

The following table provides a reconciliation of net income per share to non-GAAP income per share:

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 dollar, Canadian dollar, and Euro. 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 predominate exposure to foreign currency exchange rates are due to non-monetary assets held in currencies other than the U.S. dollar, and thus fluctuations in foreign currencies primarily result in comprehensive income (loss), not net income (loss).

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 March 31, 2026, we maintained 9% of our total cash and cash equivalents in foreign currencies. Based upon a sensitivity model, an immediate hypothetical 10% unfavorable change in all foreign currency exchange rates would have resulted in a $1.5 million impact on our cash and cash equivalents held in currencies other than the U.S. dollar as of March 31, 2026.

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.

During the three months ended March 31, 2026, 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.