Vertex Announces Fourth Quarter and Full Year 2024 Financial Results

KING OF PRUSSIA, Pa., Feb. 27, 2025 (GLOBE NEWSWIRE) -- Vertex, Inc. (NASDAQ: VERX) (“Vertex” or the “Company”), a leading global provider of indirect tax solutions, today announced financial results for its fourth quarter and full year ended December 31, 2024. “Vertex’s 2024 financial results demonstrated the power of our business and financial model, which is built to deliver consistent and durable mid-to-high teens revenue growth with strong earnings leverage and cash flow,” stated David DeStefano, Vertex’s President, Chief Executive Officer and Chairperson of the Board. “We believe the secular tailwinds that enable our performance will accelerate in the coming years as indirect taxes continue to grow in complexity, and enterprise technology continues to evolve and move to the cloud.” Fourth Quarter 2024 Financial Results Total revenues of $178.5 million, up 15.2% year-over-year.Software subscription revenues of $152.6 million, up 16.8% year-over-year.Cloud revenues of $76.9 million, up 27.0% year-over-year.Annual Recurring Revenue (“ARR”) was $603.1 million, up 17.7% year-over-year. This included $5.9 million added to ARR due to the inclusion of Systax’s ARR, as a result of the acquisition of the remaining ownership interests of Systax during the second quarter of 2024, and $7.9 million added to ARR due to the ecosio acquisition during the third quarter of 2024. Excluding the impact of both Systax and ecosio, ARR growth was 15.0%.Average Annual Revenue per direct customer (“AARPC”) was $122,706 at December 31, 2024, compared to $118,910 at December 31, 2023, and $118,800 at September 30, 2024.Net Revenue Retention (“NRR”) was 109%, compared to 113% at December 31, 2023, and 111% at September 30, 2024.Gross Revenue Retention (“GRR”) was 95%, consistent with both December 31, 2023, and September 30, 2024.Loss from operations of $(13.1) million, compared to loss of $(2.5) million for the same period in the prior year.Non-GAAP operating income of $32.5 million, compared to $28.2 million for the same period in the prior year.Net loss of $(67.8) million, compared to net income of $15.3 million for the same period in the prior year.Net loss per basic and diluted Class A and Class B shares of $(0.43), compared to net income per basic Class A and Class B shares of $0.10, and net income per diluted Class A and Class B shares of $0.09, for the same period in the prior year.Non-GAAP net income of $25.5 million and Non-GAAP diluted earnings per share (“EPS”) of $0.15.Adjusted EBITDA of $38.1 million, compared to $32.0 million for the same period in the prior year. Adjusted EBITDA margin of 21.3%, compared to 20.7% for the same period in the prior year. Full-Year 2024 Financial Results Total revenues of $666.8 million, up 16.5% year-over-year.Software subscription revenues of $567.1 million, up 17.9% year-over-year.Cloud revenues of $276.0 million, up 28.6% year-over-year.Loss from operations of $(2.2) million compared to loss of $(17.5) million for the same period prior year.Non-GAAP operating income of $131.0 million, compared to $85.6 million for the prior year.Net loss of $(52.7) million, compared to a net loss of $(13.1) million for the prior year.Net loss per basic and diluted Class A and Class B share was $(0.34) compared to net loss per basic and diluted Class A and Class B of $(0.09) for the prior year.Non-GAAP net income of $101.0 million and Non-GAAP diluted EPS of $0.61.Adjusted EBITDA of $151.9 million, compared to $100.8 million for the prior year. Adjusted EBITDA margin of 22.8%, compared to 17.6% for the prior year.Cash provided by operating activities of $164.8 million, compared to $74.3 million for the prior year. Free cash flow of $77.7 million, compared to $6.1 million for 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 first quarter of 2025, the Company currently expects: Revenues of $175 million to $178 million; andAdjusted EBITDA of $33 million to $36 million. For the full-year 2025, the Company currently expects: Revenues of $760 million to $768 million;Cloud revenue growth of 28%; andAdjusted EBITDA of $161 million to $165 million. John Schwab, Chief Financial Officer added, “Our Adjusted EBITDA guidance for 2025 includes additional research and development investments to capitalize on the significant growth opportunities in front of us. These include an additional $4 million investment in ecosio to accelerate coverage across countries that have either launched or are launching e-invoicing initiatives in the coming years. In addition, we are investing approximately $10 to $12 million across research and development for the commercialization of our AI-based Smart Categorization product, other AI-related internal tools and new product initiatives, and other emerging technologies. We believe these strategic investments will result in continued momentum for the business over the long-term.” 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, changes in the fair value of acquisition contingent earn-outs, amortization of cloud computing implementation costs in general and administrative expense, adjustments to the settlement value of deferred purchase commitment liabilities, 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, February 27, 2025, to discuss its fourth quarter and full year 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 10195788 or via the Company’s Investor Relations website. The replay will expire on March 13, 2025 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 empowers the world’s leading brands to simplify the complexity of continuous compliance. 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; our ability to successfully integrate acquired businesses and to realize the anticipated benefits of such acquisitions; 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, 2024, to be filed with the Securities Exchange Commission (“SEC”), 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. CustomersQ4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Direct4,310 4,309 4,438 4,855 4,915 Indirect404 433 460 448 464 Total4,714 4,742 4,898 5,303 5,379 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 on February 29, 2024, and our Annual Report on Form 10-K for the year ended December 31, 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 and transaction costs related to acquired technology 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, changes in the fair value of acquisition contingent earn-outs, 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, changes in the fair value of acquisition contingent earn-outs, adjustments to the settlement value of deferred purchase commitment liabilities recorded as interest expense, 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 tax expense or benefit, 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, stock-based compensation expense, severance expense, acquisition contingent consideration, changes in the fair value of acquisition contingent earn-outs, 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 SubsidiariesConsolidated Balance Sheets(Unaudited) As of December 31, (In thousands, except per share data) 2024 2023 Assets Current assets: Cash and cash equivalents $296,051 $68,175 Funds held for customers 30,015 20,976 Accounts receivable, net of allowance of $16,838 and $16,272, respectively 164,432 141,752 Prepaid expenses and other current assets 36,678 26,173 Investment securities available-for-sale, at fair value (amortized cost of $9,147 and $9,550, respectively) 9,157 9,545 Total current assets 536,333 266,621 Property and equipment, net of accumulated depreciation 177,559 100,734 Capitalized software, net of accumulated amortization 36,350 38,771 Goodwill and other intangible assets 363,021 260,238 Deferred commissions 27,480 21,237 Deferred income tax asset 19 41,708 Operating lease right-of-use assets 11,956 14,605 Other assets 14,073 16,013 Total assets $1,166,791 $759,927 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $— $2,500 Accounts payable 36,215 23,596 Accrued expenses 35,169 44,735 Customer funds obligations 27,406 17,731 Accrued salaries and benefits 14,581 12,277 Accrued variable compensation 45,507 34,105 Deferred revenue, current 339,326 290,143 Current portion of operating lease liabilities 3,995 3,717 Current portion of finance lease liabilities 77 74 Purchase commitment and contingent consideration liabilities, current 35,100 11,901 Total current liabilities 537,376 440,779 Deferred revenue, net of current portion 4,840 2,577 Debt, net of current portion 335,220 44,059 Operating lease liabilities, net of current portion 12,585 16,567 Finance lease liabilities, net of current portion 10 51 Purchase commitment and contingent consideration liabilities, net of current portion 87,400 2,600 Deferred income tax liabilities 9,918 — Deferred other liabilities 90 313 Total liabilities 987,439 506,946 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; 70,670 and 60,989 shares issued and outstanding, respectively 71 61 Class B voting common stock, $0.001 par value, 150,000 shares authorized; 86,481 and 92,661 shares issued and outstanding, respectively 86 93 Additional paid in capital 278,389 275,155 Accumulated deficit (53,315) (586)Accumulated other comprehensive loss (45,879) (21,742)Total stockholders' equity 179,352 252,981 Total liabilities and stockholders' equity $1,166,791 $759,927 Vertex, Inc. and SubsidiariesConsolidated Statements of Comprehensive Income (Loss)(Unaudited) Three months ended Year ended December 31, December 31, (In thousands, except per share data) 2024 2023 2024 2023 Revenues: Software subscriptions $152,597 $130,695 $567,124 $480,830 Services 25,859 24,219 99,652 91,557 Total revenues 178,456 154,914 666,776 572,387 Cost of revenues: Software subscriptions 44,550 45,946 175,580 162,920 Services 16,785 15,365 65,071 60,888 Total cost of revenues 61,335 61,311 240,651 223,808 Gross profit 117,121 93,603 426,125 348,579 Operating expenses: Research and development 19,586 12,898 66,666 58,212 Selling and marketing 47,431 37,041 170,574 140,237 General and administrative 39,920 36,865 152,835 145,936 Depreciation and amortization 5,521 3,801 20,953 15,202 Change in fair value of acquisition contingent earn-outs 17,500 — 17,500 — Other operating expense (income), net 267 5,489 (175) 6,502 Total operating expenses 130,225 96,094 428,353 366,089 Loss from operations (13,104) (2,491) (2,228) (17,510)Interest expense (income), net (1,666) 4,022 (4,137) 4,164 Income (loss) before income taxes (11,438) (6,513) 1,909 (21,674)Income tax expense (benefit) 56,360 (21,847) 54,638 (8,581)Net income (loss) (67,798) 15,334 (52,729) (13,093)Other comprehensive (income) loss: Foreign currency translation adjustments, net of tax 25,759 (7,558) 24,150 (5,978)Unrealized (gain) loss on investments, net of tax 13 (12) (13) (32)Total other comprehensive (income) loss, net of tax 25,772 (7,570) 24,137 (6,010)Total comprehensive income (loss) $(93,570) $22,904 $(76,866) $(7,083) Net income (loss) per share of Class A and Class B, basic $(0.43) $0.10 $(0.34) $(0.09)Net income (loss) per share of Class A and Class B, dilutive $(0.43) $0.09 $(0.34) $(0.09) Vertex, Inc. and SubsidiariesConsolidated Statements of Cash Flows(Unaudited) Year ended December 31, (In thousands) 2024 2023 Cash flows from operating activities: Net loss $(52,729) $(13,093)Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 82,733 71,891 Amortization of cloud computing implementation costs 4,007 2,570 Provision for subscription cancellations and non-renewals 199 2,083 Amortization of deferred financing costs 2,033 266 Change in fair value of contingent consideration liabilities 14,925 — Change in settlement value of deferred purchase commitment liability 423 — Write-off of deferred financing costs 276 — Stock-based compensation expense 47,425 33,919 Deferred income taxes 51,068 (11,574)Non-cash operating lease costs 2,857 2,587 Other (203) 5,335 Changes in operating assets and liabilities: Accounts receivable (22,076) (45,222)Prepaid expenses and other current assets (14,207) (6,354)Deferred commissions (6,242) (5,774)Accounts payable 11,615 9,241 Accrued expenses (12,323) 5,837 Accrued and deferred compensation 9,232 7,516 Deferred revenue 51,096 18,172 Operating lease liabilities (3,999) (4,224)Payments for purchase commitment and contingent consideration liabilities in excess of initial fair value (4,367) — Other 3,078 1,156 Net cash provided by operating activities 164,821 74,332 Cash flows from investing activities: Acquisition of businesses and assets, net of cash acquired (71,755) — Property and equipment additions (65,769) (49,261)Capitalized software additions (21,344) (18,972)Purchase of investment securities, available-for-sale (15,993) (16,328)Proceeds from sales and maturities of investment securities, available-for-sale 16,710 18,390 Net cash used in investing activities (158,151) (66,171)Cash flows from financing activities: Net increase in customer funds obligations 9,675 5,610 Proceeds from convertible senior notes 345,000 — Principal payments on long-term debt (46,875) (2,188)Payments on third-party debt (3,904) — Payment for purchase of capped calls (42,366) — Payments for deferred financing costs (12,541) (1,001)Proceeds from purchases of stock under ESPP 2,998 2,486 Payments for taxes related to net share settlement of stock-based awards (21,516) (9,701)Proceeds from exercise of stock options 8,459 4,839 Payments for purchase commitment and contingent consideration liabilities (7,580) (6,424)Payments of finance lease liabilities (93) (103)Payments for deferred purchase commitments — (20,000)Net cash provided by (used in) financing activities 231,257 (26,482)Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,012) 724 Net increase (decrease) in cash, cash equivalents and restricted cash 236,915 (17,597)Cash, cash equivalents and restricted cash, beginning of period 89,151 106,748 Cash, cash equivalents and restricted cash, end of period $326,066 $89,151 Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets, end of period: Cash and cash equivalents $296,051 $68,175 Restricted cash—funds held for customers 30,015 20,976 Total cash, cash equivalents and restricted cash, end of period $326,066 $89,151 Summary of Non-GAAP Financial Measures(Unaudited) Three months ended Year ended December 31, December 31, (Dollars in thousands, except per share data) 2024 2023 2024 2023 Non-GAAP cost of revenues, software subscriptions $28,459 $30,357 $111,929 $106,038 Non-GAAP cost of revenues, services $16,146 $14,973 $62,303 $59,042 Non-GAAP gross profit $133,851 $109,584 $492,544 $407,307 Non-GAAP gross margin 75.0% 70.7% 73.9% 71.2%Non-GAAP research and development expense $17,334 $11,311 $56,395 $52,218 Non-GAAP selling and marketing expense $43,743 $34,371 $154,892 $129,216 Non-GAAP general and administrative expense $34,187 $31,426 $128,224 $124,925 Non-GAAP operating income $32,540 $28,239 $130,989 $85,646 Non-GAAP net income $25,483 $21,037 $100,984 $63,699 Non-GAAP diluted EPS $0.15 $0.13 $0.61 $0.39 Adjusted EBITDA $38,061 $32,040 $151,942 $100,848 Adjusted EBITDA margin 21.3% 20.7% 22.8% 17.6%Free cash flow $17,897 $28,843 $77,708 $6,099 Free cash flow margin 10.0% 18.6% 11.7% 1.1% Vertex, Inc. and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures(Unaudited) Three months ended Year ended December 31, December 31, (Dollars in thousands) 2024 2023 2024 2023 Non-GAAP Cost of Revenues, Software Subscriptions: Cost of revenues, software subscriptions $44,550 $45,946 $175,580 $162,920 Stock-based compensation expense (912) (691) (4,349) (2,834) Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues (15,179) (14,898) (59,302) (54,048) Non-GAAP cost of revenues, software subscriptions $28,459 $30,357 $111,929 $106,038 Non-GAAP Cost of Revenues, Services: Cost of revenues, services $16,785 $15,365 $65,071 $60,888 Stock-based compensation expense (639) (392) (2,768) (1,846) Non-GAAP cost of revenues, services $16,146 $14,973 $62,303 $59,042 Non-GAAP Gross Profit: Gross profit $117,121 $93,603 $426,125 $348,579 Stock-based compensation expense 1,551 1,083 7,117 4,680 Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues 15,179 14,898 59,302 54,048 Non-GAAP gross profit $133,851 $109,584 $492,544 $407,307 Non-GAAP Gross Margin: Total Revenues $178,456 $154,914 $666,776 $572,387 Non-GAAP gross margin 75.0 % 70.7 % 73.9 % 71.2 % Non-GAAP Research and Development Expense: Research and development expense $19,586 $12,898 $66,666 $58,212 Stock-based compensation expense (2,252) (1,587) (9,548) (5,994) Transaction costs — — (723) — Non-GAAP research and development expense $17,334 $11,311 $56,395 $52,218 Non-GAAP Selling and Marketing Expense: Selling and marketing expense $47,431 $37,041 $170,574 $140,237 Stock-based compensation expense (3,103) (2,075) (13,204) (8,380) Amortization of acquired intangible assets – selling and marketing expense (585) (595) (2,478) (2,641) Non-GAAP selling and marketing expense $43,743 $34,371 $154,892 $129,216 Non-GAAP General and Administrative Expense: General and administrative expense $39,920 $36,865 $152,835 $145,936 Stock-based compensation expense (4,060) (2,946) (17,556) (14,865) Severance expense (660) (1,473) (3,048) (3,576) Amortization of cloud computing implementation costs – general and administrative (1,013) (1,020) (4,007) (2,570) Non-GAAP general and administrative expense $34,187 $31,426 $128,224 $124,925 Vertex, Inc. and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures (continued)(Unaudited) Three months ended Year ended December 31, December 31, (In thousands, except per share data) 2024 2023 2024 2023 Non-GAAP Operating Income: Loss from operations $(13,104) $(2,491) $(2,228) $(17,510) Stock-based compensation expense 10,966 7,691 47,425 33,919 Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues 15,179 14,898 59,302 54,048 Amortization of acquired intangible assets – selling and marketing expense 585 595 2,478 2,641 Amortization of cloud computing implementation costs – general and administrative 1,013 1,020 4,007 2,570 Severance expense 660 1,473 3,048 3,576 Acquisition contingent consideration (300) 200 (2,575) 1,549 Change in fair value of acquisition contingent earn-outs 17,500 — 17,500 — Transaction costs 41 4,853 2,032 4,853 Non-GAAP operating income $32,540 $28,239 $130,989 $85,646 Non-GAAP Net Income: Net income (loss) $(67,798) $15,334 $(52,729) $(13,093) Income tax expense (benefit) 56,360 (21,847) 54,638 (8,581) Stock-based compensation expense 10,966 7,691 47,425 33,919 Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues 15,179 14,898 59,302 54,048 Amortization of acquired intangible assets – selling and marketing expense 585 595 2,478 2,641 Amortization of cloud computing implementation costs – general and administrative 1,013 1,020 4,007 2,570 Severance expense 660 1,473 3,048 3,576 Acquisition contingent consideration (300) 200 (2,575) 1,549 Change in fair value of acquisition contingent earn-outs 17,500 — 17,500 — Transaction costs (1) 41 4,853 2,032 4,853 Change in settlement value of deferred purchase commitment liability – interest expense — 4,020 423 4,020 Non-GAAP income before income taxes 34,206 28,237 135,549 85,502 Income tax adjustment at statutory rate (2) (8,723) (7,200) (34,565) (21,803) Non-GAAP net income $25,483 $21,037 $100,984 $63,699 Non-GAAP Diluted EPS: Non-GAAP net income $25,483 $21,037 $100,984 $63,699 Interest expense (net of tax), convertible senior notes (3) 911 — 2,435 — Non-GAAP net income used in dilutive per share computation $26,394 $21,037 $103,419 $63,699 Weighted average Class A and B common stock, diluted 162,939 162,369 161,774 161,761 Dilutive effect of convertible senior notes (3) 9,498 — 6,480 — Total average Class A and B shares used in dilutive per share computation 172,437 162,369 168,254 161,761 Non-GAAP diluted EPS $0.15 $0.13 $0.61 $0.39 (1) The transaction costs for both the three months and year ended December 31, 2023 periods reflect costs associated with a public tender offer, which was withdrawn by the Company in January 2024. (2) Non-GAAP income 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%. (3) We use the if-converted method to compute diluted earnings per share with respect to our convertible senior notes. Interest expense and additional dilutive shares related to the notes are added back to the calculation when their impact is dilutive. In periods when the impact is anti-dilutive there is no add-back of interest expense or additional dilutive shares related to the notes. Vertex, Inc. and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures (continued)(Unaudited) Three months ended Year ended December 31, December 31, (Dollars in thousands) 2024 2023 2024 2023 Adjusted EBITDA: Net income (loss) $(67,798) $15,334 $(52,729) $(13,093) Interest expense (income), net (1) (1,666) 4,022 (4,137) 4,164 Income tax expense (benefit) 56,360 (21,847) 54,638 (8,581) Depreciation and amortization – property and equipment 5,521 3,801 20,953 15,202 Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues 15,179 14,898 59,302 54,048 Amortization of acquired intangible assets – selling and marketing expense 585 595 2,478 2,641 Amortization of cloud computing implementation costs – general and administrative 1,013 1,020 4,007 2,570 Stock-based compensation expense 10,966 7,691 47,425 33,919 Severance expense 660 1,473 3,048 3,576 Acquisition contingent consideration (300) 200 (2,575) 1,549 Change in fair value of acquisition contingent earn-outs 17,500 — 17,500 — Transaction costs (2) 41 4,853 2,032 4,853 Adjusted EBITDA $38,061 $32,040 $151,942 $100,848 Adjusted EBITDA Margin: Total revenues $178,456 $154,914 $666,776 $572,387 Adjusted EBITDA margin 21.3 % 20.7 % 22.8 % 17.6 % (1) The year ended December 31, 2024 period includes $423 for the change in the settlement value of a deferred purchase commitment liability recorded as interest expense. The three months and year ended December 31, 2023 periods include $4,020 for the change in the settlement value of a deferred purchase commitment liability recorded as interest expense.(2) The transaction costs for both the three months and year ended December 31, 2023 periods reflect costs associated with a public tender offer, which was withdrawn by the Company in January 2024. Three months ended Year ended December 31, December 31, (Dollars in thousands) 2024 2023 2024 2023 Free Cash Flow: Cash provided by operating activities $41,133 $47,636 $164,821 $74,332 Property and equipment additions (18,249) (13,904) (65,769) (49,261) Capitalized software additions (4,987) (4,889) (21,344) (18,972) Free cash flow $17,897 $28,843 $77,708 $6,099 Free Cash Flow Margin: Total revenues $178,456 $154,914 $666,776 $572,387 Free cash flow margin 10.0 % 18.6 % 11.7 % 1.1 % Investor Relations Contact:Joe CrivelliVertex, Inc.investors@vertexinc.com Media Contact:Rachel LitcofskyVertex, Inc.mediainquiries@vertexinc.com

Vertex Announces Fourth Quarter and Full Year 2024 Financial Results

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