SPS COMMERCE INC

(UNAUDITED)

NOTE A –General

Business Description

SPS Commerce is the leading intelligent supply chain network that connects retailers, brands, distributors, manufacturers, and logistics providers through shared infrastructure built to handle the complexity of modern commerce operations. Our network enables companies to connect once and immediately transact with thousands of trading partners without negotiating standards, building integrations, or maintaining compliance logic.

Our network powers our portfolio of solutions that orchestrate the critical processes, protocols, and data exchanges needed to get the right product, in the right place, at the right time, every time. We have embedded deep expertise, proven processes, and compliance logic built from over 20 years of commerce intelligence into every connection, delivering a full-service experience that empowers partners to move forward faster, together.

Basis of Presentation

The accompanying unaudited condensed 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 condensed consolidated financial statements.

This interim financial information has been prepared under the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission (“SEC”). We have included all normal recurring adjustments which are, in the opinion of management, considered necessary to provide a fair presentation of our financial position, results of operations, stockholders’ equity, and cash flows for the interim periods presented. Operating results for these interim periods are not necessarily indicative of the results to be expected for the full year.

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.

Significant Accounting Policies

There were no material changes in our significant accounting policies, nor were there differences in the basis of our segmentation, during thenine months ended September 30, 2026. See Note A to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC.

Accounting Pronouncements Recently Adopted

Accounting Pronouncements Not Yet Adopted

NOTE B –Business Acquisitions and Other Transactions

Divestiture of 3P Revenue Recovery Business

On June 30, 2026, we completed our sale of the third-party ("3P") portion of the revenue recovery business and received $8.8 million in cash, net of cash transferred. The transaction enables us to focus on first-party ("1P") suppliers whose retail trading relationships are better aligned with our core solutions.

The assets and liabilities transferred in the transaction primarily consisted of intangible assets as well as goodwill and working capital balances associated with the divested business. The divested business represented an immaterial portion of our consolidated operations and financial position.

In connection with the sale, we recognized a loss of approximately $23.5 million, which is included in operating income in the accompanying condensed consolidated statements of comprehensive income. The transaction did not qualify for discontinued operations presentation and does not represent a strategic shift nor is it expected to have a material impact on the Company's future consolidated results of operations, financial position, or cash flows.

Carbon6 Technologies, Inc.

On December 30, 2024, we entered into a definitive agreement to acquire all of the outstanding equity ownership interests of Carbon6 Technologies, Inc. ("Carbon6"), a provider of software tools to Amazon sellers, including specialized offerings for revenue recovery for both 1P and 3P suppliers. The acquisition became effective on February 4, 2025 ("Close"). Pursuant to the definitive agreement, the total consideration transferred was $210.2 million, net of cash acquired. The consideration was comprised of $142.5 million paid in cash, net of cash acquired, and 378,100 shares of SPS common stock (valued at $67.7 million, determined at acquisition Close based on the price of SPS common stock). The shares were issued from SPS treasury shares. The purchase accounting for the acquisition is final. The goodwill associated with the acquisition is not deductible for income tax purposes.

Purchase Price Allocations

We accounted for the acquisition as a business combination. We allocated the 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 presents the purchase consideration and estimated fair values of acquired assets and liabilities recorded in the Company's condensed consolidated balance sheet as of the acquisition date:

The following table summarizes the estimated useful lives for each acquired intangible asset:

NOTE C –Revenue

Revenue by Product Type

We derive our revenues from the following revenue streams:

(1)Formerly known as Analytics.

Revenue by Geographic Area

Domestic revenue, which we define as revenue that was attributable to customers based within the United States ("U.S."), was as follows:

No single jurisdiction outside of the U.S. had revenues in excess of 10%.

Recurring Revenues

We define recurring revenue as active contracts during the reporting period under which the customer regularly pays 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.

Revenue for subscription-based services is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Our contracts primarily range 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 generally forone year or less, we have applied the practical expedient 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, a component of our revenue, 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 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, generally overtwo 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. We expect to recognize $10.3 million of the balance as of September 30, 2026 as revenue over the next 12 months with the remaining amount recognized thereafter.

Miscellaneous one-time revenues

Miscellaneous one-time fees primarily consist of professional services and testing and certification.

The contract period for these one-time fees isone year or less and recognized at the time service is provided. We have applied the practical expedient 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

We recognized revenue of $10.5 million and $9.9 million in the three months ended September 30, 2026 and 2025, respectively, and $70.1 million and $68.3 million in the nine months ended September 30, 2026 and 2025, respectively, from amounts included in deferred revenue at the beginning of the period.

NOTE D –Deferred Costs

The deferred costs activity was as follows:

NOTE E –Fair Value Measurements

Cash equivalents and investments, as measured at fair value on a recurring basis, consisted of the following:

NOTE F –Allowance for Credit Losses

The allowance for credit losses activity, included in accounts receivable, net, was as follows:

NOTE G –Property and Equipment, Net

Property and equipment, net consisted of the following:

Property and equipment, net located outside of the U.S. was as follows:

NOTE H –Goodwill and Intangible Assets, Net

Goodwill

The activity in goodwill was as follows:

Intangible Assets

Effective September 1, 2026, we revised the estimated remaining useful life of certain developed technology intangible assets acquired in the Carbon6 acquisition and related internally developed software. In connection with the planned consolidation of our revenue recovery offerings onto a single platform, we expect the acquired technology to cease being used in mid-2027 and revised its remaining useful life accordingly. The revision was accounted for prospectively as a change in accounting estimate and increased amortization of intangible assets and internally developed software by $1.3 million for the three and nine months ended September 30, 2026, decreasing net income by $0.9 million, or $0.03 per basic and diluted share. We expect the revision to increase amortization of intangible assets and internally developed software by approximately $4.0 million in the fourth quarter of 2026 and $6.9 million in 2027.

Intangible assets, net consisted of the following:

The estimated future annual amortization expense related to intangible assets is as follows:

NOTE I –Commitments and Contingencies

Leases

Effective October 01, 2025, we executed the sixth amendment to our lease agreement (the "Amendment") for our current headquarters located in Minneapolis, Minnesota where we lease approximately 198,000 square feet. The Amendment extends the lease term to end in July 2043 and provides approximately $33 million of lease incentives, which were included in the initial measurement of the operating lease right-of-use asset. The Company expects to utilize approximately $14 million of these lease incentives during the year ending December 31, 2027, with the remaining balance to be utilized thereafter.

The components of lease expense were as follows:

Supplemental cash flow information related to leases was as follows:

Supplemental balance sheet information related to operating leases was as follows:

Future minimum lease payments under operating leases are presented net of lease incentives deemed payable at lease commencement. At September 30, 2026, our future minimum payments under operating leases were as follows:

During the fourth quarter of 2025, we entered into an operating lease agreement for new office space in Rogers, Arkansas. The lease has not yet commenced and therefore the operating lease right-of-use asset and operating lease liability are not recorded on our unaudited condensed consolidated balance sheets as of September 30, 2026. This operating lease is expected to commence during the first quarter of 2027, with a lease term of approximately 10.75 years (129 months) and total estimated undiscounted lease payments of approximately $13.9 million.

Purchase Commitments

We have entered into separate noncancelable agreements with computing infrastructure, productivity software, customer relationship management, and performance and security data analytics vendors for services through 2030. At September 30, 2026, our remaining purchase commitments and estimated purchase timing were as follows:

NOTE J –Stockholders’ Equity

Share Repurchase Programs

Our Board of Directors has authorized multiple non-concurrent programs to repurchase our common stock. On February 10, 2026 (announced February 12, 2026), our Board of Directors approved an additional $200.0 million in repurchase authority under our previously announced share repurchase program ("2025 Program") that was approved on October 29, 2025 to repurchase up to $100.0 million of our common stock, excluding costs to obtain, for a total authorized repurchase amount of $300.0 million. Under the program, purchases may be made from time to time in the open market or in privately negotiated purchases, or both. The share repurchase program became effective December 1, 2025 and expires on December 1, 2027.

Details of the programs and activity thereunder through September 30, 2026 were as follows:

Share repurchases are accounted for as the trade date occurs and are reflected in the condensed consolidated financial statements at cost, including the costs incurred to acquire the shares and accrued excise taxes. Share repurchases that have not yet settled in cash are included in accounts payable in the condensed consolidated balance sheet.

The share repurchase activity by period was as follows:

Treasury Stock Reissuance

In connection with the acquisition of Carbon6, the Company re-issued treasury shares as part of the purchase consideration (see Note B – Business Acquisitions and Other Transactions for further information).

NOTE K –Stock-Based Compensation

Our equity compensation plans include grants of incentive and nonqualified stock options, performance share units (“PSUs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and deferred stock units (“DSUs”), to employees, executive officers, and non-employee directors. We also provide an employee stock purchase plan (“ESPP”) and 401(k) match to eligible participants. At September 30, 2026, there were 10.3 million shares available for grant under approved equity compensation plans.

Stock-based compensation expense was allocated in the condensed consolidated statements of comprehensive income as follows:

Stock-based compensation expense by grant type or plan was as follows:

As of September 30, 2026, there was $115.1 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 2.6 years.

Stock Options

Our stock option activity was as follows:

Of the total outstanding options at September 30, 2026,0.2 million were exercisable. The outstanding and exercisable options had a weighted average exercise price of $120.51 per share and a weighted average remaining contractual life of 2.5 years.

The weighted average grant date fair value of options granted during the nine months ended September 30, 2026, was $20.85 per share. This wasestimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

Performance Share Units, Restricted Stock Units and Awards, and Deferred Stock Units

In each of the quarters ended March 31, 2026, 2025, 2024, and 2023, we granted PSU awards with a target performance level. 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. During the three months ended March 31, 2026, PSU awards granted in 2023 vested without achievement of the minimum threshold of performance level and therefore no shares of common stock were issued.

Activity for our PSUs, RSUs, RSAs, and DSUs in aggregate was as follows:

The number of PSUs, RSUs, RSAs, and DSUs outstanding at September 30, 2026 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 underlying agreements.

Employee Stock Purchase Plan

Our ESPP activity was as follows:

A total of 1.4 million shares of common stock are reserved for issuance under the ESPP at September 30, 2026.

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:

NOTE L –Income Taxes

We record our interim provision for income taxes by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjust the provision for discrete tax items recorded in the period. Our provision for income taxes includes current federal, state, and foreign income tax expense, as well as deferred tax expense.

Differences between our effective tax rate and statutory tax rates are primarily due to the impact of permanently non-deductible expenses partially offset by the federal research and development credits and tax benefits associated with foreign-derived deduction-eligible income. Additionally, excess tax benefits generated upon settlement or exercise of stock awards are recognized as a reduction to income tax expense as a discrete tax item in the quarter that the event occurs, creating potentially significant fluctuation in tax expense by quarter and by year.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law in the U.S., making permanent most of the expiring key provisions of the 2017 Tax Cuts and Jobs Act, including, but not limited to, U.S. corporate international tax provisions, federal bonus depreciation, and deductions for domestic research and development expenditures. We evaluated the OBBBA and estimate the 2026 impact to be primarily a reduction in cash taxes due to the accelerated deduction of previously capitalized research and experimental expenditures and the state level impact of conformity legislation passed to date. The remaining provisions of the OBBBA are not expected to have a material impact.

NOTE M –Other Income and Expense

Other income, net included the following:

NOTE N –Net Income Per Share

The components and computation of basic and diluted net income per share were as follows:

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: