KING OF PRUSSIA, Pa., Aug. 07, 2024 (GLOBE NEWSWIRE) — Vertex, Inc. (NASDAQ: VERX) (“Vertex” or the “Company”), a leading global provider of indirect tax solutions, today announced financial results for its second quarter ended June 30, 2024.
“The second quarter financial results demonstrate the true earnings power of the Vertex business model,” stated David DeStefano, Vertex’s President, Chief Executive Officer and Chairperson of the Board. “We were GAAP earnings positive for the third quarter in a row, generated the highest level of quarterly cash provided by operating activities and free cash flow in our 46-year history and delivered our highest Adjusted EBITDA margin since we became a public company over four years ago.”
DeStefano continued, “These are strong financial results, but we are just getting started. Several strategic initiatives completed to date in 2024 have positioned us well for continued profitable growth. Early in the second quarter we completed a $345 million convertible debt offering to bolster our balance sheet and further support organic and inorganic investments in our business. In June, we acquired tax-specific AI technology designed to more effectively manage the complexity of tax mapping. And this morning we announced our intent to acquire ecosio GmbH (“ecosio”), an Austrian company that is a provider of electronic data interchange and e-invoicing services. With ecosio, we strengthen our e-invoicing capabilities to seamlessly support customers in the rapidly changing regulatory compliance landscape. This acquisition is a significant step in accelerating our mission to deliver the world’s most trusted end-to-end solutions for global businesses to transact, comply and grow with confidence.”
Second Quarter 2024 Financial Results
Total revenues of $161.1 million, up 15.3% year-over-year.Software subscription revenues of $136.4 million, up 15.8% year-over-year.Cloud revenues of $66.3 million, up 29.6% year-over-year.Annual Recurring Revenue (“ARR”) was $548.4 million, up 17.3% year-over-year. This included $6.1 million due to the inclusion of Systax’s ARR, which was included as a result of the acquisition of the remaining ownership interests of Systax, which occurred during the second quarter of 2024. Excluding Systax, the ARR growth rate would have been 16.0%.Average Annual Revenue per direct customer (“AARPC”) was $123,570 at June 30, 2024, compared to $109,170 at June 30, 2023 and $121,720 at March 31, 2024. Excluding Systax, AARPC would have been $126,400 at June 30, 2024.Net Revenue Retention (“NRR”) was 110%, compared to 111% at June 30, 2023, and 112% at March 31, 2024.Gross Revenue Retention (“GRR”) was 95%, compared to 96% at June 30, 2023, and 95% at March 31, 2024.Income (loss) from operations of $7.5 million, compared to $(4.1) million for the same period in the prior year.Non-GAAP operating income of $33.3 million, compared to $18.1 million for the same period in the prior year.Net income of $5.2 million, compared to net loss of $(6.9) million for the same period in the prior year.Net income per basic and diluted Class A and Class B shares of $0.03, compared to net loss per basic and diluted Class A and Class B of $(0.05) for the same period in the prior year.Non-GAAP net income of $25.0 million and Non-GAAP diluted earnings per share (“EPS”) of $0.15.Adjusted EBITDA of $38.5 million, compared to $22.0 million for the same period in the prior year. Adjusted EBITDA margin of 23.9%, compared to 15.7% for the same period in the prior year.
Definitions of certain key business metrics and the non-GAAP financial measures used in this press release and reconciliations of such measures to the most directly comparable GAAP financial measures are included below under the headings “Definitions of Certain Key Business Metrics” and “Use and Reconciliation of Non-GAAP Financial Measures.”
Financial Outlook
For the third quarter of 2024, the Company currently expects:
Revenues of $164 million to $167 million; andAdjusted EBITDA of $33 million to $35 million.
For the full-year 2024, the Company currently expects:
Revenues of $654 million to $660 million;Cloud revenue growth of 28%; andAdjusted EBITDA of $139 million to $145 million.
John Schwab, Chief Financial Officer added, “We remain confident in our outlook for the second half of 2024. Accordingly, we are narrowing our full year revenue guidance to the upper end of the range, and we are significantly increasing our full year Adjusted EBITDA guidance.”
The Company is unable to reconcile forward-looking Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, without unreasonable efforts because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact net income (loss) for these periods but would not impact Adjusted EBITDA. Such items may include stock-based compensation expense, depreciation and amortization of capitalized software costs and acquired intangible assets, severance expense, acquisition contingent consideration, amortization of cloud computing implementation costs in general and administrative expense, adjustments to the settlement value of deferred purchase commitment liabilities, litigation settlements, transaction costs, and other items. The unavailable information could have a significant impact on the Company’s net income (loss). The foregoing forward-looking statements reflect the Company’s expectations as of today’s date. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. The Company does not intend to update its financial outlook until its next quarterly results announcement.
Important disclosures in this earnings release about and reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided below under “Use and Reconciliation of Non-GAAP Financial Measures.”
Conference Call and Webcast Information
Vertex will host a conference call at 8:30 a.m. Eastern Time today, August 7, 2024, to discuss its second quarter 2024 financial results.
Those wishing to participate may do so by dialing 1-412-317-6026 approximately ten minutes prior to start time. A listen-only webcast of the call will also be available through the Company’s Investor Relations website at https://ir.vertexinc.com.
A conference call replay will be available approximately one hour after the call by dialing 1-412-317-6671 and referencing passcode 10190684 or via the Company’s Investor Relations website. The replay will expire on August 21, 2024 at 11:59 p.m. Eastern Time.
About Vertex
Vertex, Inc. is a leading global provider of indirect tax solutions. The Company’s mission is to deliver the most trusted tax technology enabling global businesses to transact, comply and grow with confidence. Vertex provides solutions that can be tailored to specific industries for major lines of indirect tax, including sales and consumer use, value added and payroll. Headquartered in North America, and with offices in South America and Europe, Vertex employs over 1,500 professionals and serves companies across the globe.
For more information, visit www.vertexinc.com or follow on Twitter and LinkedIn.
Forward Looking Statements
Any statements made in this press release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. Forward-looking statements are based on Vertex management’s beliefs, as well as assumptions made by, and information currently available to, them. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Factors which may cause actual results to differ materially from current expectations include, but are not limited to: our ability to maintain and grow revenue from existing customers and new customers, and expand their usage of our solutions; our ability to maintain and expand our strategic relationships with third parties; our ability to adapt to technological change and successfully introduce new solutions or provide updates to existing solutions; risks related to failures in information technology or infrastructure; challenges in using and managing use of Artificial Intelligence in our business; incorrect or improper implementation, integration or use of our solutions; failure to attract and retain qualified technical and tax-content personnel; competitive pressures from other tax software and service providers and challenges of convincing businesses using native enterprise resource planning (“ERP”) functions to switch to our software; our ability to accurately forecast our revenue and other future results of operations based on recent success; our ability to offer specific software deployment methods based on changes to customers’ and partners’ software systems; our ability to continue making significant investments in software development and equipment; our ability to sustain and expand revenues, maintain profitability, and to effectively manage our anticipated growth; our ability to successfully diversify our solutions by developing or introducing new solutions or acquiring and integrating additional businesses, products, services, or content; risks related to the fluctuations in our results of operations; risks related to our expanding international operations; our exposure to liability from errors, delays, fraud or system failures, which may not be covered by insurance; our ability to adapt to organizational changes and effectively implement strategic initiatives; risks related to our determinations of customers’ transaction tax and tax payments; risks related to changes in tax laws and regulations or their interpretation or enforcement; our ability to manage cybersecurity and data privacy risks; our involvement in material legal proceedings and audits; risks related to undetected errors, bugs or defects in our software; risks related to utilization of open-source software, business processes and information systems; risks related to failures in information technology, infrastructure, and third-party service providers; our ability to effectively protect, maintain, and enhance our brand; changes in application, scope, interpretation or enforcement of laws and regulations; global economic weakness and uncertainties, and disruption in the capital and credit markets; business disruptions related to natural disasters, epidemic outbreaks, including a global endemic or pandemic, terrorist acts, political events, or other events outside of our control; our ability to comply with anti-corruption, anti-bribery, and similar laws; our ability to protect our intellectual property; changes in interest rates, security ratings and market perceptions of the industry in which we operate, or our ability to obtain capital on commercially reasonable terms or at all; our ability to maintain an effective system of disclosure controls and internal control over financial reporting, or ability to remediate any material weakness in our internal controls; risks related to our Class A common stock and controlled company status; risks related to our indebtedness and adherence to the covenants under our debt instruments; our expectations regarding the effects of the Capped Call Transactions and regarding actions of the Option Counterparties and/or their respective affiliates; and the other factors described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities Exchange Commission (“SEC”), and as supplemented by the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, as filed with the SEC, and as may be subsequently updated by our other SEC filings. Copies of such filings may be obtained from the Company or the SEC.
All forward-looking statements reflect our beliefs and assumptions only as of the date of this press release. We undertake no obligation to update forward-looking statements to reflect future events or circumstances.
Definitions of Certain Key Business Metrics
Annual Recurring Revenue (“ARR”)
We derive the vast majority of our revenues from recurring software subscriptions. We believe ARR provides us with visibility to our projected software subscription revenues in order to evaluate the health of our business. Because we recognize subscription revenues ratably, we believe investors can use ARR to measure our expansion of existing customer revenues, new customer activity, and as an indicator of future software subscription revenues. ARR is based on monthly recurring revenues (“MRR”) from software subscriptions for the most recent month at period end, multiplied by twelve. MRR is calculated by dividing the software subscription price, inclusive of discounts, by the number of subscription covered months. MRR only includes direct customers with MRR at the end of the last month of the measurement period. AARPC represents average annual revenue per direct customer and is calculated by dividing ARR by the number of software subscription direct customers at the end of the respective period.
Net Revenue Retention Rate (“NRR”)
We believe that our NRR provides insight into our ability to retain and grow revenues from our direct customers, as well as their potential long-term value to us. We also believe it demonstrates to investors our ability to expand existing customer revenues, which is one of our key growth strategies. Our NRR refers to the ARR expansion during the 12 months of a reporting period for all direct customers who were part of our customer base at the beginning of the reporting period. Our NRR calculation takes into account any revenues lost from departing direct customers or those who have downgraded or reduced usage, as well as any revenue expansion from migrations, new licenses for additional products or contractual and usage-based price changes.
Gross Revenue Retention Rate (“GRR”)
We believe our GRR provides insight into and demonstrates to investors our ability to retain revenues from our existing direct customers. Our GRR refers to how much of our MRR we retain each month after reduction for the effects of revenues lost from departing direct customers or those who have downgraded or reduced usage. GRR does not take into account revenue expansion from migrations, new licenses for additional products or contractual and usage-based price changes. GRR does not include revenue reductions resulting from cancellations of customer subscriptions that are replaced by new subscriptions associated with customer migrations to a newer version of the related software solution.
Customer Count
The following table shows Vertex’s direct customers, as well as indirect small business customers sold and serviced through the company’s one-to-many channel strategy. Systax added 150 customers to the second quarter direct customer count.
CustomersQ2 2023Q3 2023Q4 2023Q1 2024Q2 2024Direct4,284 4,303 4,310 4,309 4,438 Indirect329 373 404 433 460 Total4,613 4,676 4,714 4,742 4,898
Use and Reconciliation of Non-GAAP Financial Measures
In addition to our results determined in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and key business metrics described above, we have calculated non-GAAP cost of revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expense, non-GAAP selling and marketing expense, non-GAAP general and administrative expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted EPS, Adjusted EBITDA, Adjusted EBITDA margin, free cash flow and free cash flow margin, which are each non-GAAP financial measures. We have provided tabular reconciliations of each of these non-GAAP financial measures to its most directly comparable GAAP financial measure.
Management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, and to evaluate financial performance and liquidity. Our non-GAAP financial measures are presented as supplemental disclosure as we believe they provide useful information to investors and others in understanding and evaluating our results, prospects, and liquidity period-over-period without the impact of certain items that do not directly correlate to our operating performance and that may vary significantly from period to period for reasons unrelated to our operating performance, as well as comparing our financial results to those of other companies. Our definitions of these non-GAAP financial measures may differ from similarly titled measures presented by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, the financial information prepared in accordance with GAAP, and should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, to be filed with the SEC.
We calculate these non-GAAP financial measures as follows:
Non-GAAP cost of revenues, software subscriptions is determined by adding back to GAAP cost of revenues, software subscriptions, the stock-based compensation expense, and depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues for the respective periods.Non-GAAP cost of revenues, services is determined by adding back to GAAP cost of revenues, services, the stock-based compensation expense included in cost of revenues, services for the respective periods.Non-GAAP gross profit is determined by adding back to GAAP gross profit the stock-based compensation expense, and depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues for the respective periods.Non-GAAP gross margin is determined by dividing non-GAAP gross profit by total revenues for the respective periods.Non-GAAP research and development expense is determined by adding back to GAAP research and development expense the stock-based compensation expense included in research and development expense for the respective periods.Non-GAAP selling and marketing expense is determined by adding back to GAAP selling and marketing expense the stock-based compensation expense and the amortization of acquired intangible assets included in selling and marketing expense for the respective periods.Non-GAAP general and administrative expense is determined by adding back to GAAP general and administrative expense the stock-based compensation expense, amortization of cloud computing implementation costs and severance expense included in general and administrative expense for the respective periods.Non-GAAP operating income is determined by adding back to GAAP loss or income from operations the stock-based compensation expense, depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, amortization of cloud computing implementation costs in general and administrative expense, severance expense, acquisition contingent consideration, litigation settlements, and transaction costs, included in GAAP loss or income from operations for the respective periods. Non-GAAP net income is determined by adding back to GAAP net income or loss the income tax benefit or expense, stock-based compensation expense, depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, amortization of cloud computing implementation costs in general and administrative expense, severance expense, acquisition contingent consideration, adjustments to the settlement value of deferred purchase commitment liabilities recorded as interest expense, litigation settlements, and transaction costs, included in GAAP net income or loss for the respective periods to determine non-GAAP income or loss before income taxes. Non-GAAP income or loss before income taxes is then adjusted for income taxes calculated using the respective statutory tax rates for applicable jurisdictions, which for purposes of this determination were assumed to be 25.5%. Non-GAAP net income per diluted share of Class A and Class B common stock (“Non-GAAP diluted EPS”) is determined by dividing non-GAAP net income by the weighted average shares outstanding of all classes of common stock, inclusive of the impact of dilutive common stock equivalents to purchase such common stock, including stock options, restricted stock awards, restricted stock units and employee stock purchase plan shares. Additionally, the dilutive effect of shares issuable upon conversion of the senior convertible notes is included in the calculation of Non-GAAP diluted EPS by application of the if-converted method.
Adjusted EBITDA is determined by adding back to GAAP net income or loss the net interest income or expense (including adjustments to the settlement value of deferred purchase commitment liabilities), income taxes, depreciation and amortization of property and equipment, depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, amortization of cloud computing implementation costs in general and administrative expense, asset impairments, stock-based compensation expense, severance expense, acquisition contingent consideration, litigation settlements, and transaction costs, included in GAAP net income or loss for the respective periods.Adjusted EBITDA margin is determined by dividing Adjusted EBITDA by total revenues for the respective periods.Free cash flow is determined by adjusting net cash provided by (used in) operating activities by purchases of property and equipment and capitalized software additions for the respective periods.Free cash flow margin is determined by dividing free cash flow by total revenues for the respective periods.
We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view these non-GAAP financial measures in conjunction with the related GAAP financial measures.
Vertex, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited) As of June 30,
As of December 31,
(In thousands, except per share data)2024 2023 (unaudited)
Assets Current assets: Cash and cash equivalents$325,535 $68,175 Funds held for customers 35,408 20,976 Accounts receivable, net of allowance of $17,704 and $16,272, respectively 120,082 141,752 Prepaid expenses and other current assets 25,134 26,173 Investment securities available-for-sale, at fair value (amortized cost of $8,407 and $9,550,
respectively) 8,650 9,545 Total current assets 514,809 266,621 Property and equipment, net of accumulated depreciation 108,407 100,734 Capitalized software, net of accumulated amortization 37,840 38,771 Goodwill and other intangible assets 252,183 260,238 Deferred commissions 21,862 21,237 Deferred income tax asset 61,897 41,708 Operating lease right-of-use assets 13,060 14,605 Other assets 13,772 16,013 Total assets$1,023,830 $759,927 Liabilities and Stockholders’ Equity Current liabilities: Current portion of long-term debt$— $2,500 Accounts payable 24,220 23,596 Accrued expenses 41,767 44,735 Customer funds obligations 32,710 17,731 Accrued salaries and benefits 13,251 12,277 Accrued variable compensation 25,727 34,105 Deferred revenue, current 297,305 290,143 Current portion of operating lease liabilities 3,799 3,717 Current portion of finance lease liabilities 90 74 Purchase commitment and contingent consideration liabilities, current 200 11,901 Total current liabilities 439,069 440,779 Deferred revenue, net of current portion 2,436 2,577 Debt, net of current portion 334,092 44,059 Operating lease liabilities, net of current portion 14,397 16,567 Finance lease liabilities, net of current portion 36 51 Purchase commitment and contingent consideration liabilities, net of current portion — 2,600 Deferred other liabilities 670 313 Total liabilities 790,700 506,946 Stockholders’ equity: Preferred shares, $0.001 par value, 30,000 shares authorized; no shares issued and
outstanding — — Class A voting common stock, $0.001 par value, 300,000 shares authorized; 65,165 and
60,989 shares issued and outstanding, respectively 65 61 Class B voting common stock, $0.001 par value, 150,000 shares authorized; 90,161 and
92,661 shares issued and outstanding, respectively 90 93 Additional paid in capital 254,799 275,155 Retained earnings (Accumulated deficit) 7,262 (586) Accumulated other comprehensive loss (29,086) (21,742) Total stockholders’ equity 233,130 252,981 Total liabilities and stockholders’ equity$1,023,830 $759,927
Vertex, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited) Three months ended
June 30, Six months ended
June 30,
(In thousands, except per share data)2024 2023 2024 2023 (unaudited) (unaudited)
Revenues: Software subscriptions$136,443 $117,836 $268,273 $228,850 Services 24,661 21,859 49,612 43,596 Total revenues 161,104 139,695 317,885 272,446 Cost of revenues: Software subscriptions 42,261 38,516 87,389 75,919 Services 16,155 15,363 32,016 29,707 Total cost of revenues 58,416 53,879 119,405 105,626 Gross profit 102,688 85,816 198,480 166,820 Operating expenses: Research and development 14,614 12,680 31,459 28,542 Selling and marketing 40,541 33,541 81,032 69,277 General and administrative 35,874 39,376 71,416 73,686 Depreciation and amortization 5,212 3,878 10,218 7,619 Other operating expense (income), net (1,098) 413 (1,625) 697 Total operating expenses 95,143 89,888 192,500 179,821 Income (loss) from operations 7,545 (4,072) 5,980 (13,001) Interest expense (income), net 181 (105) 467 (455) Income (loss) before income taxes 7,364 (3,967) 5,513 (12,546) Income tax (benefit) expense 2,200 2,929 (2,335) 12,482 Net income (loss) 5,164 (6,896) 7,848 (25,028) Other comprehensive (income) loss: Foreign currency translation adjustments, net of tax 3,335 (609) 7,346 (3,731) Unrealized (gain) loss on investments, net of tax (19) 3 (2) (10) Total other comprehensive (income) loss, net of tax 3,316 (606) 7,344 (3,741) Total comprehensive income (loss)$1,848 $(6,290) $504 $(21,287) Net income (loss) per share of Class A and Class B, basic$0.03 $(0.05) $0.05 $(0.17) Net income (loss) per share of Class A and Class B, dilutive$0.03 $(0.05) $0.05 $(0.17)
Vertex, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited) Six months ended
June 30,
(In thousands)2024 2023 (unaudited)
Cash flows from operating activities: Net income (loss)$7,848 $(25,028) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 41,330 34,190 Amortization of cloud computing implementation costs 1,989 631 Provision for subscription cancellations and non-renewals 451 1,374 Amortization of deferred financing costs 660 126 Change in fair value of contingent consideration liabilities (2,375) 449 Change in settlement value of deferred purchase commitment liability 423 — Write-off of deferred financing costs 276 — Stock-based compensation expense 26,324 18,456 Deferred income tax benefit (9,702) (12,331) Non-cash operating lease costs 1,536 625 Other (165) (67) Changes in operating assets and liabilities: Accounts receivable 19,730 (30,512) Prepaid expenses and other current assets 969 355 Deferred commissions (625) (1,263) Accounts payable 665 7,655 Accrued expenses (3,021) 17,407 Accrued and deferred compensation (8,660) (10,705) Deferred revenue 8,051 1,179 Operating lease liabilities (2,081) (1,722) Payments for purchase commitment and contingent consideration liabilities in excess of initial fair value (4,367) — Other 3,036 (1,717) Net cash provided by (used in) operating activities 82,292 (898) Cash flows from investing activities: Acquisition of assets, net of cash acquired (6,075) — Property and equipment additions (29,749) (21,859) Capitalized software additions (11,097) (9,042) Purchase of investment securities, available-for-sale (7,776) (8,427) Proceeds from sales and maturities of investment securities, available-for-sale 8,860 8,600 Other (2,000) — Net cash used in investing activities (47,837) (30,728) Cash flows from financing activities: Net increase in customer funds obligations 14,979 14,473 Proceeds from convertible senior notes 345,000 — Principal payments on long-term debt (46,875) (938) Payment for purchase of capped calls (42,366) — Payments for deferred financing costs (11,374) — Proceeds from purchases of stock under ESPP 1,443 1,178 Payments for taxes related to net share settlement of stock-based awards (18,324) (3,986) Proceeds from exercise of stock options 3,274 2,243 Payments for purchase commitment and contingent consideration liabilities (7,580) (6,424) Payments of finance lease liabilities (51) (27) Payments for deferred purchase commitments — (10,000) Net cash provided by (used in) financing activities 238,126 (3,481) Effect of exchange rate changes on cash, cash equivalents and restricted cash (789) 380 Net increase (decrease) in cash, cash equivalents and restricted cash 271,792 (34,727) Cash, cash equivalents and restricted cash, beginning of period 89,151 106,748 Cash, cash equivalents and restricted cash, end of period$360,943 $72,021 Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets,
end of period: Cash and cash equivalents$325,535 $41,865 Restricted cash—funds held for customers 35,408 30,156 Total cash, cash equivalents and restricted cash, end of period$360,943 $72,021
Summary of Non-GAAP Financial Measures
(Unaudited)
Three months ended
June 30,
Six months ended
June 30, (Dollars in thousands, except per share data)2024
2023
2024 2023
Non-GAAP cost of revenues, software subscriptions$26,730 $25,411 $54,921 $49,383 Non-GAAP cost of revenues, services$15,590 $15,197 $30,445 $28,705 Non-GAAP gross profit$118,784 $99,087 $232,519 $194,358 Non-GAAP gross margin 73.7 % 70.9 % 73.1 % 71.3 % Non-GAAP research and development expense$12,692 $11,905 $26,164 $25,533 Non-GAAP selling and marketing expense$37,021 $31,775 $72,695 $63,847 Non-GAAP general and administrative expense$30,627 $33,259 $58,200 $62,544 Non-GAAP operating income$33,303 $18,105 $65,040 $34,566 Non-GAAP net income$24,991 $13,566 $48,422 $26,091 Non-GAAP diluted EPS$0.15 $0.08 $0.30 $0.16 Adjusted EBITDA$38,515 $21,983 $75,258 $42,185 Adjusted EBITDA margin 23.9 % 15.7 % 23.7 % 15.5 % Free cash flow$36,944 $(21,234) $41,446 $(31,799) Free cash flow margin 22.9 % (15.2)% 13.0 % (11.7)%
Vertex, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited) Three months ended
June 30, Six months ended
June 30, (Dollars in thousands)2024
2023
2024
2023
Non-GAAP Cost of Revenues, Software Subscriptions: Cost of revenues, software subscriptions$42,261 $38,516 $87,389 $75,919 Stock-based compensation expense (953) (419) (2,543) (1,415) Depreciation and amortization of capitalized software and
acquired intangible assets – cost of subscription revenues (14,578) (12,686) (29,925) (25,121) Non-GAAP cost of revenues, software subscriptions$26,730 $25,411 $54,921 $49,383 Non-GAAP Cost of Revenues, Services: Cost of revenues, services$16,155 $15,363 $32,016 $29,707 Stock-based compensation expense (565) (166) (1,571) (1,002) Non-GAAP cost of revenues, services$15,590 $15,197 $30,445 $28,705 Non-GAAP Gross Profit: Gross profit$102,688 $85,816 $198,480 $166,820 Stock-based compensation expense 1,518 585 4,114 2,417 Depreciation and amortization of capitalized software and
acquired intangible assets – cost of subscription revenues 14,578 12,686 29,925 25,121 Non-GAAP gross profit$118,784 $99,087 $232,519 $194,358 Non-GAAP Gross Margin: Total Revenues$161,104 $139,695 $317,885 $272,446 Non-GAAP gross margin 73.7 % 70.9 % 73.1 % 71.3 % Non-GAAP Research and Development Expense: Research and development expense$14,614 $12,680 $31,459 $28,542 Stock-based compensation expense (1,922) (775) (5,295) (3,009) Non-GAAP research and development expense$12,692 $11,905 $26,164 $25,533 Non-GAAP Selling and Marketing Expense: Selling and marketing expense$40,541 $33,541 $81,032 $69,277 Stock-based compensation expense (2,928) (1,082) (7,150) (3,980) Amortization of acquired intangible assets – selling and
marketing expense (592) (684) (1,187) (1,450) Non-GAAP selling and marketing expense$37,021 $31,775 $72,695 $63,847 Non-GAAP General and Administrative Expense: General and administrative expense$35,874 $39,376 $71,416 $73,686 Stock-based compensation expense (3,633) (4,581) (9,766) (9,051) Severance expense (619) (905) (1,461) (1,460) Amortization of cloud computing implementation costs –
general and administrative (995) (631) (1,989) (631) Non-GAAP general and administrative expense$30,627 $33,259 $58,200 $62,544
Vertex, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures (continued)
(Unaudited) Three months ended
June 30, Six months ended
June 30, (In thousands, except per share data)2024 2023 2024 2023
Non-GAAP Operating Income: Income (loss) from operations$7,545 $(4,072) $5,980 $(13,001) Stock-based compensation expense 10,001 7,022 26,325 18,456 Depreciation and amortization of capitalized software and acquired
intangible assets – cost of subscription revenues 14,578 12,686 29,925 25,121 Amortization of acquired intangible assets – selling and marketing
expense 592 684 1,187 1,450 Amortization of cloud computing implementation costs – general
and administrative 995 631 1,989 631 Severance expense 619 905 1,461 1,460 Acquisition contingent consideration (1,575) 249 (2,375) 449 Transaction costs 548 — 548 — Non-GAAP operating income$33,303 $18,105 $65,040 $34,566 Non-GAAP Net Income: Net income (loss)$5,164 $(6,896) $7,848 $(25,028) Income tax (benefit) expense 2,200 2,929 (2,335) 12,482 Stock-based compensation expense 10,001 7,022 26,325 18,456 Depreciation and amortization of capitalized software and acquired
intangible assets – cost of subscription revenues 14,578 12,686 29,925 25,121 Amortization of acquired intangible assets – selling and marketing
expense 592 684 1,187 1,450 Amortization of cloud computing implementation costs – general
and administrative 995 631 1,989 631 Severance expense 619 905 1,461 1,460 Acquisition contingent consideration (1,575) 249 (2,375) 449 Transaction costs 548 — 548 — Change in settlement value of deferred purchase commitment
liability – interest expense 423 — 423 — Non-GAAP income before income taxes 33,545 18,210 64,996 35,021 Income tax adjustment at statutory rate (1) (8,554) (4,644) (16,574) (8,930) Non-GAAP net income $24,991 $13,566 $48,422 $26,091 Non-GAAP Diluted EPS: Non-GAAP net income$24,991 $13,566 $48,422 $26,091 Total average Class A and B shares used in dilutive per share
computation 161,440 162,128 161,011 161,247 Non-GAAP diluted EPS$0.15 $0.08 $0.30 $0.16 (1) Non-GAAP income (loss) before income taxes is adjusted for income taxes using the respective statutory tax rates for applicable jurisdictions, which for purposes of this determination were assumed to be 25.5%.
Vertex, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures (continued)
(Unaudited) Three months ended
June 30, Six months ended
June 30, (Dollars in thousands)2024 2023 2024 2023 Adjusted EBITDA: Net income (loss)$5,164 $(6,896) $7,848 $(25,028) Interest expense (income), net 181 (105) 467 (455) Income tax (benefit) expense 2,200 2,929 (2,335) 12,482 Depreciation and amortization – property and
equipment 5,212 3,878 10,218 7,619 Depreciation and amortization of capitalized software
and acquired intangible assets – cost of subscription
revenues 14,578 12,686 29,925 25,121 Amortization of acquired intangible assets – selling
and marketing expense 592 684 1,187 1,450 Amortization of cloud computing implementation
costs – general and administrative 995 631 1,989 631 Stock-based compensation expense 10,001 7,022 26,325 18,456 Severance expense 619 905 1,461 1,460 Acquisition contingent consideration (1,575) 249 (2,375) 449 Transaction costs 548 — 548 — Adjusted EBITDA$38,515 $21,983 $75,258 $42,185 Adjusted EBITDA Margin: Total revenues$161,104 $139,695 $317,885 $272,446 Adjusted EBITDA margin 23.9 % 15.7 % 23.7 % 15.5 %
Three months ended
June 30, Six months ended
June 30, (Dollars in thousands)2024 2023 2024 2023 Free Cash Flow: Cash provided by (used in) operating activities$57,726 $(4,389) $82,292 $(898) Property and equipment additions (15,300) (11,810) (29,749) (21,859) Capitalized software additions (5,482) (5,035) (11,097) (9,042) Free cash flow$36,944 $(21,234) $41,446 $(31,799) Free Cash Flow Margin: Total revenues$161,104 $139,695 $317,885 $272,446 Free cash flow margin 22.9 % (15.2)% 13.0 % (11.7)%
Investor Relations Contact:
Joe Crivelli
Vertex, Inc.
ir@vertexinc.com
Media Contact:
Rachel Litcofsky
Vertex, Inc.
mediainquiries@vertexinc.com