SPS COMMERCE INCSPSC
SPS COMMERCE INC Stock Compensation Disclosure
Stock-Based Compensation
Stock-based compensation expense was allocated in the consolidated statements of comprehensive income as follows:
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Cost of revenues | $ | 11,423 | $ | 11,043 | $ | 10,169 | |||||||||||
| Operating expenses | |||||||||||||||||
| Sales and marketing | 10,943 | 12,547 | 9,774 | ||||||||||||||
| Research and development | 8,403 | 9,094 | 7,200 | ||||||||||||||
| General and administrative | 22,959 | 21,873 | 18,365 | ||||||||||||||
| $ | 53,728 | $ | 54,557 | $ | 45,508 | ||||||||||||
Stock-based compensation expense by grant type or plan was as follows:
| Year Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Stock options | $ | 1,948 | $ | 2,059 | $ | 1,947 | |||||||||||
| PSUs | 8,314 | 8,192 | 11,886 | ||||||||||||||
RSUs & DSUs | 37,356 | 38,064 | 26,185 | ||||||||||||||
RSAs | 113 | 442 | 472 | ||||||||||||||
| ESPP | 2,953 | 2,910 | 2,488 | ||||||||||||||
| 401(k) stock match | 3,044 | 2,890 | 2,530 | ||||||||||||||
| $ | 53,728 | $ | 54,557 | $ | 45,508 | ||||||||||||
As of December 31, 2025, there was $85.5 million of unrecognized stock-based compensation expense under our equity compensation plans, which is expected to be recognized on a primarily straight-line basis over a weighted-average period of 2.4 years. At December 31, 2025, there were 11.6 million shares available for grant under approved equity compensation plans.
Stock Options
Options generally vest over four years and, upon vesting, the holder is given the option to purchase shares of common stock at a specific strike price until expiration, which is generally seven years from the grant date.
Our stock option activity was as follows:
| Options (#) | Weighted Average Exercise Price ($/share) | ||||||||||
| Outstanding at December 31, 2022 | 562,697 | 56.24 | |||||||||
| Granted | 42,215 | 152.68 | |||||||||
| Exercised | (254,353) | 38.75 | |||||||||
| Forfeited | (3,737) | 129.43 | |||||||||
| Outstanding at December 31, 2023 | 346,822 | 80.02 | |||||||||
| Granted | 38,984 | 195.76 | |||||||||
| Exercised | (94,338) | 49.91 | |||||||||
| Forfeited | (2,094) | 158.63 | |||||||||
| Outstanding at December 31, 2024 | 289,374 | 104.86 | |||||||||
| Granted | 63,352 | 139.95 | |||||||||
| Exercised | (73,571) | 62.55 | |||||||||
| Forfeited | (17,752) | 160.86 | |||||||||
| Outstanding at December 31, 2025 | 261,403 | 121.47 | |||||||||
Of the total outstanding options at December 31, 2025, 0.2 million were exercisable. The outstanding and exercisable options had a weighted average exercise price of $107.94 per share and a weighted average remaining contractual life of 2.6 years.
The table below presents additional information related to our stock options:
| Year Ended December 31, | |||||||||||||||||
| (in thousands, except per share data) | 2025 | 2024 | 2023 | ||||||||||||||
| Fair value of options vested | $ | 1,816 | $ | 1,982 | $ | 1,996 | |||||||||||
| Intrinsic value of options exercised | 4,438 | 13,934 | 31,227 | ||||||||||||||
| Intrinsic value of options outstanding | 2,029 | 23,387 | 37,474 | ||||||||||||||
| Weighted-average fair value per share of options granted | 48.55 | 69.11 | 56.47 | ||||||||||||||
The fair values of the options granted were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Life (in years) | 3.9 | 4.1 | 4.1 | ||||||||||||||
| Volatility | 37.1 | % | 36.6 | % | 39.3 | % | |||||||||||
| Dividend yield | — | — | — | ||||||||||||||
| Risk-free interest rate | 4.2 | % | 4.3 | % | 4.0 | % | |||||||||||
Performance Share Units, Restricted Stock Units and Awards, and Deferred Stock Units
We grant PSU awards with certain target performance levels. 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. Expense is recognized on a straight-line basis over the performance period, regardless of whether the market condition is satisfied as the likelihood of the market condition being met is included in the fair-value measurement of the award.
RSUs generally vest over four years and, upon vesting, the holder is entitled to receive shares of our common stock.
RSAs vest over one year and, upon vesting, the holder is entitled to receive shares of our common stock. In lieu of RSAs, a participant may elect to receive DSUs with one year vesting, but the participant directs delayed receipt of common shares of up to ten years after the end of service to us.
Activity for our PSUs, RSUs, RSAs, and DSUs in aggregate was as follows:
| # | Weighted Average Grant Date Fair Value ($/share) | ||||||||||
| Outstanding at December 31, 2022 | 712,158 | 103.93 | |||||||||
| Granted | 416,377 | 163.55 | |||||||||
| Vested and common stock issued | (344,087) | 77.52 | |||||||||
| Forfeited | (11,034) | 122.97 | |||||||||
| Outstanding at December 31, 2023 | 773,414 | 147.50 | |||||||||
| Granted | 413,619 | 185.54 | |||||||||
| Vested and common stock issued | (462,481) | 130.03 | |||||||||
| Forfeited | (35,030) | 180.59 | |||||||||
| Outstanding at December 31, 2024 | 689,522 | 180.35 | |||||||||
| Granted | 704,205 | 123.33 | |||||||||
| Vested and common stock issued | (286,554) | 148.21 | |||||||||
| Forfeited | (100,756) | 169.55 | |||||||||
| Outstanding at December 31, 2025 | 1,006,417 | 150.69 | |||||||||
The number of PSUs, RSUs, RSAs, and DSUs outstanding at December 31, 2025 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 agreements.
Employee Stock Purchase Plan
Our ESPP activity was as follows:
| Year Ended December 31, | |||||||||||||||||
| (in thousands, except shares) | 2025 | 2024 | 2023 | ||||||||||||||
| Amounts for shares purchased | $ | 9,584 | $ | 9,827 | $ | 8,114 | |||||||||||
| Shares purchased | 98,594 | 61,979 | 63,641 | ||||||||||||||
A total of 1.5 million shares of common stock are remaining for issuance under the plan at December 31, 2025.
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:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Life (in years) | 0.5 | 0.5 | 0.5 | ||||||||||||||
| Volatility | 37.4 | % | 33.1 | % | 36.4 | % | |||||||||||
| Dividend yield | — | — | — | ||||||||||||||
| Risk-free interest rate | 4.3 | % | 5.3 | % | 4.9 | % | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2019 | Feb 25, 2020 | |
| 2015 | Feb 24, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.