Vertex, Inc. (NASDAQ: VERX) (“Vertex” or the “Company”), a global
provider of tax technology solutions, today announced financial
results for its third quarter ended September 30, 2021.
“The shift to e-commerce has accelerated,
becoming a preferred method for consumers and a profitable option
for businesses. We are driving our strategy to advance global
commerce by increasing the adoption of our cloud-based solutions
and making key acquisitions that will position us for future
growth,” said David DeStefano, Vertex Chief Executive Officer.
“This quarter we extended our end-to-end solution platform with
advanced capabilities to support the ever-increasing complexity
facing today’s major omnichannel businesses.” Third
Quarter 2021 Financial Results
- Total revenues of $110.7 million, up 17.0% year-over-year.
- Software subscription revenues of $92.3 million, up 15.7%
year-over-year.
- Cloud revenues of $33.3 million, up 45.6% year-over-year.
- Annual Recurring Revenue (“ARR”) of $352.9 million, up 15.1%
year-over-year. Average Annual Revenue per customer (“AARPC”) was
$82,900 at September 30, 2021, compared to $80,500 at June 30,
2021.
- Net Revenue Retention (“NRR”) rate was 106% in the third
quarter of 2021, consistent with the second quarter of 2021.
- Loss from operations of $(3.6) million, compared to a loss from
operations of $(50.0) million for the same period prior year.
Non-GAAP operating income of $18.3 million, compared to $19.8
million for the same period prior year.
- Net loss of $(3.9) million, compared to a net loss of $(21.0)
million for the same period prior year.
- Net loss per basic and diluted Class A and Class B share of
$(0.03), compared to $(0.15) per basic and diluted Class A and
Class B share for the same period prior year.
- Non-GAAP net income of $13.2 million and Non-GAAP diluted EPS
of $0.08.
- Adjusted EBITDA of $21.4 million, compared to $22.5 million for
the same period prior year. Adjusted EBITDA margin of 19.3%,
compared to 23.8% for the same period prior year.
- Over 4,258 customers at September 30, 2021.
Vertex Chief Financial Officer John Schwab said,
“The global Vertex team delivered solid performance this quarter
with continued growth in annual recurring revenues, including a
number of significant expansion opportunities with existing
accounts demonstrating our ability to support customers as their
businesses grow.”
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.”
Recent Business
Highlights
- Acquired LCR-Dixon tools and expertise to extend our end-to-end
global tax management solution
with optimized tax automation and
intelligence solutions for SAP customers.
- Launched the global Vertex Cloud VAT Compliance solution with
advanced features to support the changing tax environment across
Europe and other countries that require the digitalization of
value-added tax (“VAT”) and goods and services tax (“GST”).
- Expanded partnership with Acumatica with the Vertex Cloud
Indirect Tax solution achieving the “Fulfilled by Acumatica”
certification designation.
Financial
Outlook
For the fourth quarter of 2021, the Company
currently expects:
-
Revenues in the range of $108 million to $110 million, representing
growth of 8.5% to 10.6% from the fourth quarter of 2020; and
- Adjusted
EBITDA in the range of $15 million to $17 million, representing a
decrease of $(2.1) million to $(4.1) million from the fourth
quarter of 2020.
For the full-year 2021, the Company currently
expects:
-
Revenues in the range of $422 million to $424 million, representing
growth of 12.6% to 13.2% from the full-year 2020;
-
Organic cloud revenue growth in excess of 40% from the full-year
2020; and
-
Adjusted EBITDA in the range of $74 million to $76 million,
representing a decrease of $(2.4) million to $(4.4) million from
the full-year 2020, reflecting additional spend in research and
development, as well as selling and marketing expenses to drive
growth.
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, 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 release third quarter 2021 earnings
before the market opens on November 10, 2021. A conference call to
discuss its results will follow at 8:30 a.m. Eastern Time that same
day.
Those wishing to participate via webcast should
access the call through the Company’s Investor Relations website at
https://ir.vertexinc.com. Those wishing to participate via
telephone may dial in at 1-877-407-4018 (USA) or 1-201-689-8471
(International). The conference call replay will be available via
webcast through the Company’s Investor Relations website. The
telephone replay will be available from 11:30 a.m. Eastern Time on
November 10, 2021, through November 24, 2021, by dialing
1-844-512-2921 (USA) or 1-412-317-6671 (International). The replay
passcode will be 13723896.
About
Vertex
Vertex, Inc. is a leading global provider of
indirect tax software and 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
cloud-based and on-premise 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 1,200 professionals and serves companies across the
globe. More information can be found at www.vertexinc.com.
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: potential effects on our business of the
COVID-19 pandemic; our ability to attract new customers on a
cost-effective basis and the extent to which existing customers
renew and upgrade their subscriptions; our ability to sustain and
expand revenues, maintain profitability, and to effectively manage
our anticipated growth; our ability to identify acquisition targets
and to successfully integrate and operate acquired businesses; our
ability to maintain and expand our strategic relationships with
third parties; 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, 2020 as 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
customers with MRR at the end of the last month of the measurement
period. AARPC represents average annual revenue per customer and is
calculated by dividing ARR by the number of software subscription
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 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 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 customers or
customers 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.
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”), 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, 2020
and in our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2021 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 and severance expense included in general and
administrative expense for the respective periods.
-
Non-GAAP operating income is determined by adding back to GAAP
income or loss from operations the stock-based compensation
expense, depreciation and amortization of capitalized software and
acquired intangible assets – cost of subscription revenues,
amortization of acquired intangible assets – selling and marketing
expense, severance expense and transaction costs included in GAAP
income or loss 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 – cost of subscription revenues,
amortization of acquired intangible assets – selling and marketing
expense, severance expense and transaction costs included in GAAP
net income or loss for the respective periods to determine non-GAAP
income before income taxes. Non-GAAP income 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.
-
Adjusted EBITDA is determined by adding back to GAAP net income or
loss the net interest income or expense, income taxes, depreciation
and amortization of property and equipment, depreciation and
amortization of capitalized software and acquired intangible assets
– cost of subscription revenues, amortization of acquired
intangible assets – selling and marketing expense, asset
impairments, stock-based compensation expense, severance expense
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 adding back cash used for the
converted stock appreciation rights redeemed in connection with the
initial public offering, and reducing it for 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
SubsidiariesCondensed
Consolidated Balance
Sheets(Unaudited)
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
(In thousands,
except per share data) |
|
2021 |
|
2020 |
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
47,481 |
|
|
$ |
303,051 |
|
Funds held for customers |
|
|
27,860 |
|
|
|
9,222 |
|
Accounts receivable, net of allowance of $8,845, and $8,592,
respectively |
|
|
73,234 |
|
|
|
77,159 |
|
Prepaid expenses and other current assets |
|
|
18,167 |
|
|
|
13,259 |
|
Total current assets |
|
|
166,742 |
|
|
|
402,691 |
|
Property and equipment, net of accumulated depreciation |
|
|
97,869 |
|
|
|
56,557 |
|
Capitalized software, net of accumulated amortization |
|
|
34,018 |
|
|
|
31,989 |
|
Goodwill and other intangible assets |
|
|
277,924 |
|
|
|
18,711 |
|
Deferred commissions |
|
|
12,583 |
|
|
|
11,743 |
|
Deferred income tax asset |
|
|
32,816 |
|
|
|
29,974 |
|
Operating lease right-of-use assets |
|
|
21,137 |
|
|
|
— |
|
Other assets |
|
|
2,755 |
|
|
|
3,263 |
|
Total assets |
|
$ |
645,844 |
|
|
$ |
554,928 |
|
|
|
|
|
|
|
|
Liabilities and stockholders'
equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
10,701 |
|
|
$ |
8,876 |
|
Accrued expenses |
|
|
23,467 |
|
|
|
19,176 |
|
Distributions payable |
|
|
— |
|
|
|
2,700 |
|
Customer funds obligations |
|
|
27,979 |
|
|
|
9,235 |
|
Accrued salaries and benefits |
|
|
26,472 |
|
|
|
17,326 |
|
Accrued and deferred compensation, current |
|
|
23,101 |
|
|
|
24,429 |
|
Deferred revenue |
|
|
211,036 |
|
|
|
207,560 |
|
Current portion of long-term debt |
|
|
— |
|
|
|
882 |
|
Current portion of operating lease liabilities |
|
|
2,480 |
|
|
|
— |
|
Current portion of finance lease liabilities |
|
|
276 |
|
|
|
— |
|
Deferred rent and other |
|
|
— |
|
|
|
939 |
|
Deferred purchase consideration, current |
|
|
19,705 |
|
|
|
— |
|
Purchase commitment and contingent consideration liabilities,
current |
|
|
478 |
|
|
|
845 |
|
Total current liabilities |
|
|
345,695 |
|
|
|
291,968 |
|
Deferred compensation, net of current portion |
|
|
2,786 |
|
|
|
5,010 |
|
Deferred revenue, net of current portion |
|
|
11,544 |
|
|
|
14,702 |
|
Debt, net of current portion |
|
|
— |
|
|
|
225 |
|
Operating lease liabilities, net of current portion |
|
|
26,707 |
|
|
|
— |
|
Finance lease liabilities, net of current portion |
|
|
334 |
|
|
|
— |
|
Deferred purchase consideration, net of current portion |
|
|
19,319 |
|
|
|
— |
|
Purchase commitment and contingent consideration liabilities, net
of current portion |
|
|
11,049 |
|
|
|
8,905 |
|
Deferred other liabilities |
|
|
4,199 |
|
|
|
8,632 |
|
Total liabilities |
|
|
421,633 |
|
|
|
329,442 |
|
Stockholders' equity: |
|
|
|
|
|
|
Preferred shares, $0.001 par value, 30,000 shares authorized; no
shares issued and outstanding |
|
|
— |
|
|
|
— |
|
Class A common stock, $0.001 par value, 300,000 shares authorized;
40,574 and 26,327 shares issued and outstanding, respectively |
|
|
41 |
|
|
|
26 |
|
Class B common stock, $0.001 par value, 150,000 shares authorized;
108,017 and 120,117 shares issued and outstanding,
respectively |
|
|
108 |
|
|
|
120 |
|
Additional paid in capital |
|
|
215,647 |
|
|
|
206,541 |
|
Retained earnings |
|
|
21,582 |
|
|
|
21,926 |
|
Accumulated other comprehensive loss |
|
|
(13,167 |
) |
|
|
(3,127 |
) |
Total stockholders' equity |
|
|
224,211 |
|
|
|
225,486 |
|
Total liabilities and stockholders' equity |
|
$ |
645,844 |
|
|
$ |
554,928 |
|
Vertex, Inc. and
SubsidiariesCondensed
Consolidated Statements of Comprehensive
Loss(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
September 30, |
|
September 30, |
|
(In thousands,
except per share data) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Revenues: |
|
|
|
|
|
Software subscriptions |
|
$ |
92,276 |
|
|
$ |
79,778 |
|
|
$ |
265,160 |
|
|
$ |
232,844 |
|
|
Services |
|
|
18,442 |
|
|
|
14,827 |
|
|
|
48,732 |
|
|
|
42,277 |
|
|
Total revenues |
|
|
110,718 |
|
|
|
94,605 |
|
|
|
313,892 |
|
|
|
275,121 |
|
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Software subscriptions |
|
|
32,000 |
|
|
|
29,161 |
|
|
|
84,419 |
|
|
|
79,846 |
|
|
Services |
|
|
11,938 |
|
|
|
18,807 |
|
|
|
33,831 |
|
|
|
49,329 |
|
|
Total cost of revenues |
|
|
43,938 |
|
|
|
47,968 |
|
|
|
118,250 |
|
|
|
129,175 |
|
|
Gross profit |
|
|
66,780 |
|
|
|
46,637 |
|
|
|
195,642 |
|
|
|
145,946 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
9,879 |
|
|
|
16,501 |
|
|
|
33,264 |
|
|
|
43,197 |
|
|
Selling and marketing |
|
|
25,658 |
|
|
|
29,423 |
|
|
|
70,673 |
|
|
|
78,300 |
|
|
General and administrative |
|
|
31,237 |
|
|
|
48,043 |
|
|
|
80,954 |
|
|
|
123,437 |
|
|
Depreciation and amortization |
|
|
3,082 |
|
|
|
2,735 |
|
|
|
8,787 |
|
|
|
8,109 |
|
|
Other operating expense (income), net |
|
|
538 |
|
|
|
(60 |
) |
|
|
4,892 |
|
|
|
154 |
|
|
Total operating expenses |
|
|
70,394 |
|
|
|
96,642 |
|
|
|
198,570 |
|
|
|
253,197 |
|
|
Loss from operations |
|
|
(3,614 |
) |
|
|
(50,005 |
) |
|
|
(2,928 |
) |
|
|
(107,251 |
) |
|
Interest expense, net |
|
|
521 |
|
|
|
1,796 |
|
|
|
671 |
|
|
|
3,424 |
|
|
Loss before income taxes |
|
|
(4,135 |
) |
|
|
(51,801 |
) |
|
|
(3,599 |
) |
|
|
(110,675 |
) |
|
Income tax benefit |
|
|
(187 |
) |
|
|
(30,773 |
) |
|
|
(2,747 |
) |
|
|
(31,508 |
) |
|
Net loss |
|
|
(3,948 |
) |
|
|
(21,028 |
) |
|
|
(852 |
) |
|
|
(79,167 |
) |
|
Other comprehensive loss from
foreign currency translation adjustments and revaluations, net of
tax |
|
|
5,704 |
|
|
|
238 |
|
|
|
10,040 |
|
|
|
3,512 |
|
|
Total comprehensive loss |
|
$ |
(9,652 |
) |
|
$ |
(21,266 |
) |
|
$ |
(10,892 |
) |
|
$ |
(82,679 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Class
A stockholders |
|
$ |
(1,070 |
) |
|
$ |
(2,751 |
) |
|
$ |
(195 |
) |
|
$ |
(2,427 |
) |
|
Net loss per Class A share,
basic |
|
$ |
(0.03 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.40 |
) |
|
Weighted average Class A
common stock, basic |
|
|
40,141 |
|
|
|
18,124 |
|
|
|
33,775 |
|
|
|
6,129 |
|
|
Net loss attributable to Class
A stockholders, diluted |
|
$ |
(1,070 |
) |
|
$ |
(2,751 |
) |
|
$ |
(195 |
) |
|
$ |
(2,427 |
) |
|
Net loss per Class A share,
diluted |
|
$ |
(0.03 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.40 |
) |
|
Weighted average Class A
common stock, diluted |
|
|
40,141 |
|
|
|
18,124 |
|
|
|
33,775 |
|
|
|
6,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Class
B stockholders |
|
$ |
(2,878 |
) |
|
$ |
(18,277 |
) |
|
$ |
(657 |
) |
|
$ |
(76,740 |
) |
|
Net loss per Class B share,
basic |
|
$ |
(0.03 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.64 |
) |
|
Weighted average Class B
common stock, basic |
|
|
108,017 |
|
|
|
120,417 |
|
|
|
113,646 |
|
|
|
120,417 |
|
|
Net loss attributable to Class
B stockholders, diluted |
|
$ |
(2,878 |
) |
|
$ |
(18,277 |
) |
|
$ |
(657 |
) |
|
$ |
(76,740 |
) |
|
Net loss per Class B share,
diluted |
|
$ |
(0.03 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.64 |
) |
|
Weighted average Class B
common stock, diluted |
|
|
108,017 |
|
|
|
120,417 |
|
|
|
113,646 |
|
|
|
120,417 |
|
|
Vertex, Inc. and
SubsidiariesCondensed
Consolidated Statements of Cash
Flows(Unaudited)
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
September 30, |
(In
thousands) |
|
2021 |
|
|
2020 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(852 |
) |
|
$ |
(79,167 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
31,902 |
|
|
|
23,586 |
|
Provision for subscription cancellations and non-renewals, net of
deferred allowance |
|
|
423 |
|
|
|
52 |
|
Amortization of deferred financing costs |
|
|
159 |
|
|
|
356 |
|
Write-off of deferred financing costs |
|
|
— |
|
|
|
1,351 |
|
Stock-based compensation expense |
|
|
20,250 |
|
|
|
140,890 |
|
Deferred income tax benefit |
|
|
(3,075 |
) |
|
|
(32,004 |
) |
Redemption of Converted SARs |
|
|
— |
|
|
|
(22,889 |
) |
Non-cash operating lease costs |
|
|
2,867 |
|
|
|
— |
|
Other |
|
|
280 |
|
|
|
86 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
12,120 |
|
|
|
4,143 |
|
Prepaid expenses and other current assets |
|
|
(3,669 |
) |
|
|
(4,613 |
) |
Deferred commissions |
|
|
(840 |
) |
|
|
824 |
|
Accounts payable |
|
|
1,529 |
|
|
|
1,193 |
|
Accrued expenses |
|
|
(2,445 |
) |
|
|
1,382 |
|
Accrued and deferred compensation |
|
|
(679 |
) |
|
|
(5,399 |
) |
Deferred revenue |
|
|
(1,971 |
) |
|
|
(8,251 |
) |
Operating lease liabilities |
|
|
(3,685 |
) |
|
|
— |
|
Other |
|
|
354 |
|
|
|
(1,496 |
) |
Net cash provided by operating activities |
|
|
52,668 |
|
|
|
20,044 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
Acquisition of businesses, net of cash acquired |
|
|
(251,412 |
) |
|
|
(12,318 |
) |
Property and equipment additions |
|
|
(23,899 |
) |
|
|
(14,982 |
) |
Capitalized software additions |
|
|
(7,902 |
) |
|
|
(9,246 |
) |
Net cash used in investing activities |
|
|
(283,213 |
) |
|
|
(36,546 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
Net increase in customer funds obligations |
|
|
18,744 |
|
|
|
1,158 |
|
Proceeds from line of credit |
|
|
— |
|
|
|
12,500 |
|
Principal payments on line of credit |
|
|
— |
|
|
|
(12,500 |
) |
Proceeds from long-term debt |
|
|
— |
|
|
|
175,000 |
|
Principal payments on long-term debt |
|
|
— |
|
|
|
(226,029 |
) |
Payments for deferred financing costs, net |
|
|
— |
|
|
|
(2,436 |
) |
Proceeds from purchases of stock under ESPP |
|
|
1,010 |
|
|
|
— |
|
Payments for taxes related to net share settlement of stock-based
awards |
|
|
(12,712 |
) |
|
|
— |
|
Proceeds from exercise of stock options |
|
|
1,212 |
|
|
|
6,023 |
|
Distributions to stockholders |
|
|
— |
|
|
|
(146,084 |
) |
Distributions under Tax Sharing Agreement |
|
|
(2,700 |
) |
|
|
— |
|
Proceeds from issuance of shares in connection with Offering |
|
|
— |
|
|
|
423,024 |
|
Payments for offering costs |
|
|
— |
|
|
|
(6,222 |
) |
Payments for taxes on exercised options |
|
|
— |
|
|
|
(11,999 |
) |
Payments for purchase commitment liabilities |
|
|
(10,822 |
) |
|
|
— |
|
Payments on finance lease liabilities |
|
|
(685 |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
|
(5,953 |
) |
|
|
212,435 |
|
Effect of exchange rate changes on cash, cash equivalents and
restricted cash |
|
|
(434 |
) |
|
|
(412 |
) |
Net (decrease) increase in cash, cash equivalents and restricted
cash |
|
|
(236,932 |
) |
|
|
195,521 |
|
Cash, cash equivalents and
restricted cash, beginning of period |
|
|
312,273 |
|
|
|
83,495 |
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
75,341 |
|
|
$ |
279,016 |
|
Reconciliation of cash, cash
equivalents and restricted cash to the Condensed Consolidated
Balance Sheets, end of period: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
47,481 |
|
|
$ |
270,271 |
|
Restricted cash—funds held for customers |
|
|
27,860 |
|
|
|
8,745 |
|
Total cash, cash equivalents and restricted cash, end of
period |
|
$ |
75,341 |
|
|
$ |
279,016 |
|
Vertex, Inc. and
SubsidiariesSummary of Non-GAAP
Financial
Measures(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
September 30, |
|
September 30, |
|
(Dollars in
thousands, except per share data) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
Non-GAAP cost of revenues,
software subscriptions |
|
$ |
20,595 |
|
$ |
17,512 |
|
$ |
60,060 |
|
$ |
50,495 |
|
Non-GAAP cost of revenues,
services |
|
$ |
11,178 |
|
$ |
9,577 |
|
$ |
31,855 |
|
$ |
28,610 |
|
Non-GAAP gross profit |
|
$ |
78,945 |
|
$ |
67,516 |
|
$ |
221,977 |
|
$ |
196,016 |
|
Non-GAAP gross margin |
|
|
71.3 |
% |
|
71.4 |
% |
|
70.7 |
% |
|
71.2 |
% |
Non-GAAP research and
development expense |
|
$ |
9,003 |
|
$ |
10,161 |
|
$ |
31,256 |
|
$ |
29,197 |
|
Non-GAAP selling and marketing
expense |
|
$ |
23,126 |
|
$ |
16,474 |
|
$ |
65,251 |
|
$ |
50,032 |
|
Non-GAAP general and
administrative expense1 |
|
$ |
24,944 |
|
$ |
18,410 |
|
$ |
66,545 |
|
$ |
57,294 |
|
Non-GAAP operating income |
|
$ |
18,273 |
|
$ |
19,796 |
|
$ |
49,939 |
|
$ |
51,230 |
|
Non-GAAP net income2 |
|
$ |
13,225 |
|
$ |
13,410 |
|
$ |
36,705 |
|
$ |
35,615 |
|
Non-GAAP diluted EPS |
|
$ |
0.08 |
|
$ |
0.09 |
|
$ |
0.23 |
|
$ |
0.27 |
|
Adjusted EBITDA |
|
$ |
21,355 |
|
$ |
22,531 |
|
$ |
58,726 |
|
$ |
59,339 |
|
Adjusted EBITDA margin |
|
|
19.3 |
% |
|
23.8 |
% |
|
18.7 |
% |
|
21.6 |
% |
Free cash flow |
|
$ |
15,415 |
|
$ |
15,778 |
|
$ |
20,867 |
|
$ |
18,705 |
|
Free cash flow margin |
|
|
13.9 |
% |
|
16.7 |
% |
|
6.6 |
% |
|
6.8 |
% |
1 The nine month period ended September 30, 2021
includes $150 of transaction costs previously presented as a
component of general and administrative expenses that was
reclassified to other operating expense, net, in the condensed
consolidated statement of comprehensive loss.
2 2020 Non-GAAP net income presentation adjusted
to conform to 2021 presentation. The presentation was modified in
the fourth quarter 2020 to tax effect, at the statutory income tax
rate, the related non-GAAP adjustments to GAAP net income or loss.
Thus, the income tax benefit for 2020 was removed and a statutory
tax rate applied to Non-GAAP income after the non-GAAP adjustments.
This reduced Non-GAAP net income by $8,229 and $16,565 for the
three and nine months ended September 30, 2020, respectively.
Vertex, Inc. and
SubsidiariesReconciliation of
GAAP to Non-GAAP Financial
Measures(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
September 30, |
|
September 30, |
|
(Dollars in
thousands) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Non-GAAP Cost
of Revenues, Software Subscriptions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues, software subscriptions |
|
$ |
32,000 |
|
|
$ |
29,161 |
|
|
$ |
84,419 |
|
|
$ |
79,846 |
|
|
Stock-based compensation
expense |
|
|
(656 |
) |
|
|
(6,342 |
) |
|
|
(1,788 |
) |
|
|
(14,002 |
) |
|
Depreciation and amortization
of capitalized software and acquired intangible assets – cost of
subscription revenues |
|
|
(10,749 |
) |
|
|
(5,307 |
) |
|
|
(22,571 |
) |
|
|
(15,349 |
) |
|
Non-GAAP cost of revenues,
software subscriptions |
|
$ |
20,595 |
|
|
$ |
17,512 |
|
|
$ |
60,060 |
|
|
$ |
50,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Cost
of Revenues, Services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues,
services |
|
$ |
11,938 |
|
|
$ |
18,807 |
|
|
$ |
33,831 |
|
|
$ |
49,329 |
|
|
Stock-based compensation
expense |
|
|
(760 |
) |
|
|
(9,230 |
) |
|
|
(1,976 |
) |
|
|
(20,719 |
) |
|
Non-GAAP cost of revenues,
services |
|
$ |
11,178 |
|
|
$ |
9,577 |
|
|
$ |
31,855 |
|
|
$ |
28,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Gross
Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
$ |
66,780 |
|
|
$ |
46,637 |
|
|
$ |
195,642 |
|
|
$ |
145,946 |
|
|
Stock-based compensation
expense |
|
|
1,416 |
|
|
|
15,572 |
|
|
|
3,764 |
|
|
|
34,721 |
|
|
Depreciation and amortization
of capitalized software and acquired intangible assets - cost of
subscription revenues |
|
|
10,749 |
|
|
|
5,307 |
|
|
|
22,571 |
|
|
|
15,349 |
|
|
Non-GAAP gross profit |
|
$ |
78,945 |
|
|
$ |
67,516 |
|
|
$ |
221,977 |
|
|
$ |
196,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Gross
Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
110,718 |
|
|
$ |
94,605 |
|
|
$ |
313,892 |
|
|
$ |
275,121 |
|
|
Non-GAAP gross margin |
|
|
71.3 |
|
% |
|
71.4 |
|
% |
|
70.7 |
|
% |
|
71.2 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Research and Development Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
expense |
|
$ |
9,879 |
|
|
$ |
16,501 |
|
|
$ |
33,264 |
|
|
$ |
43,197 |
|
|
Stock-based compensation
expense |
|
|
(876 |
) |
|
|
(6,340 |
) |
|
|
(2,008 |
) |
|
|
(14,000 |
) |
|
Non-GAAP research and
development expense |
|
$ |
9,003 |
|
|
$ |
10,161 |
|
|
$ |
31,256 |
|
|
$ |
29,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Selling and Marketing Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expense |
|
$ |
25,658 |
|
|
$ |
29,423 |
|
|
$ |
70,673 |
|
|
$ |
78,300 |
|
|
Stock-based compensation
expense |
|
|
(2,157 |
) |
|
|
(12,821 |
) |
|
|
(4,877 |
) |
|
|
(28,140 |
) |
|
Amortization of acquired
intangible assets – selling and marketing expense |
|
|
(375 |
) |
|
|
(128 |
) |
|
|
(545 |
) |
|
|
(128 |
) |
|
Non-GAAP selling and marketing
expense |
|
$ |
23,126 |
|
|
$ |
16,474 |
|
|
$ |
65,251 |
|
|
$ |
50,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
General and Administrative
Expense1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
expense |
|
$ |
31,237 |
|
|
$ |
48,043 |
|
|
$ |
80,954 |
|
|
$ |
123,437 |
|
|
Stock-based compensation
expense |
|
|
(2,973 |
) |
|
|
(29,561 |
) |
|
|
(9,601 |
) |
|
|
(64,029 |
) |
|
Severance expense |
|
|
(3,320 |
) |
|
|
(72 |
) |
|
|
(4,808 |
) |
|
|
(2,114 |
) |
|
Non-GAAP general and
administrative expense |
|
$ |
24,944 |
|
|
$ |
18,410 |
|
|
$ |
66,545 |
|
1 |
$ |
57,294 |
|
|
1The nine month period ended September 30, 2021
includes $150 of transaction costs previously presented as a
component of general and administrative expenses that was
reclassified to other operating expense, net, in the condensed
consolidated statement of comprehensive loss.
Vertex, Inc. and
SubsidiariesReconciliation of
GAAP to Non-GAAP Financial Measures
(continued)(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
September 30, |
|
September 30, |
|
(In thousands,
except per share data) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Non-GAAP
Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
$ |
(3,614 |
) |
|
$ |
(50,005 |
) |
|
$ |
(2,928 |
) |
|
$ |
(107,251 |
) |
|
Stock-based compensation
expense |
|
|
7,422 |
|
|
|
64,294 |
|
|
|
20,250 |
|
|
|
140,890 |
|
|
Depreciation and amortization
of capitalized software and acquired intangible assets - cost of
subscription revenues |
|
|
10,749 |
|
|
|
5,307 |
|
|
|
22,571 |
|
|
|
15,349 |
|
|
Amortization of acquired
intangible assets – selling and marketing expense |
|
|
375 |
|
|
|
128 |
|
|
|
545 |
|
|
|
128 |
|
|
Severance expense |
|
|
3,320 |
|
|
|
72 |
|
|
|
4,808 |
|
|
|
2,114 |
|
|
Transaction costs |
|
|
21 |
|
|
|
— |
|
|
|
4,693 |
|
|
|
— |
|
|
Non-GAAP operating income |
|
$ |
18,273 |
|
|
$ |
19,796 |
|
|
$ |
49,939 |
|
|
$ |
51,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net
Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,948 |
) |
|
$ |
(21,028 |
) |
|
$ |
(852 |
) |
|
$ |
(79,167 |
) |
|
Income tax benefit |
|
|
(187 |
) |
|
|
(30,773 |
) |
1 |
|
(2,747 |
) |
|
|
(31,508 |
) |
1 |
Stock-based compensation
expense |
|
|
7,422 |
|
|
|
64,294 |
|
|
|
20,250 |
|
|
|
140,890 |
|
|
Depreciation and amortization
of capitalized software and acquired intangible assets - cost of
subscription revenues |
|
|
10,749 |
|
|
|
5,307 |
|
|
|
22,571 |
|
|
|
15,349 |
|
|
Amortization of acquired
intangible assets – selling and marketing expense |
|
|
375 |
|
|
|
128 |
|
|
|
545 |
|
|
|
128 |
|
|
Severance expense |
|
|
3,320 |
|
|
|
72 |
|
|
|
4,808 |
|
|
|
2,114 |
|
|
Transaction costs |
|
|
21 |
|
|
|
— |
|
|
|
4,693 |
|
|
|
— |
|
|
Non-GAAP income before income
taxes |
|
|
17,752 |
|
|
|
18,000 |
|
|
|
49,268 |
|
|
|
47,806 |
|
|
Income tax adjustment at
statutory rate |
|
|
(4,527 |
) |
|
|
(4,590 |
) |
1 |
|
(12,563 |
) |
|
|
(12,191 |
) |
1 |
Non-GAAP net income |
|
$ |
13,225 |
|
|
$ |
13,410 |
|
1 |
$ |
36,705 |
|
|
$ |
35,615 |
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income |
|
$ |
13,225 |
|
|
$ |
13,410 |
|
|
$ |
36,705 |
|
|
$ |
35,615 |
|
|
Weighted average Class A and B
common stock, diluted |
|
|
157,402 |
|
|
|
148,249 |
|
|
|
157,679 |
|
|
|
132,200 |
|
|
Non-GAAP diluted EPS |
|
$ |
0.08 |
|
|
$ |
0.09 |
|
|
$ |
0.23 |
|
|
$ |
0.27 |
|
|
12020 Non-GAAP net income presentation adjusted
to conform to 2021 presentation. The presentation was modified in
the fourth quarter 2020 to tax effect, at the statutory income tax
rate, the related non-GAAP adjustments to GAAP net income or loss.
Thus, the income tax benefit for 2020 was removed and a statutory
tax rate applied to Non-GAAP income after the non-GAAP adjustments.
This reduced Non-GAAP net income by $8,229 and $16,565 for the
three and nine months ended September 30, 2020, respectively.
Vertex, Inc. and
SubsidiariesReconciliation of
GAAP to Non-GAAP Financial Measures
(continued)(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
September 30, |
|
September 30, |
|
(Dollars in
thousands) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Adjusted
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,948 |
) |
|
$ |
(21,028 |
) |
|
$ |
(852 |
) |
|
$ |
(79,167 |
) |
|
Interest expense, net |
|
|
521 |
|
|
|
1,796 |
|
|
|
671 |
|
|
|
3,424 |
|
|
Income tax benefit |
|
|
(187 |
) |
|
|
(30,773 |
) |
|
|
(2,747 |
) |
|
|
(31,508 |
) |
|
Depreciation and amortization
- property and equipment |
|
|
3,082 |
|
|
|
2,735 |
|
|
|
8,787 |
|
|
|
8,109 |
|
|
Depreciation and amortization
of capitalized software and acquired intangible assets - cost of
subscription revenues |
|
|
10,749 |
|
|
|
5,307 |
|
|
|
22,571 |
|
|
|
15,349 |
|
|
Amortization of acquired
intangible assets - selling and marketing expense |
|
|
375 |
|
|
|
128 |
|
|
|
545 |
|
|
|
128 |
|
|
Stock-based compensation
expense |
|
|
7,422 |
|
|
|
64,294 |
|
|
|
20,250 |
|
|
|
140,890 |
|
|
Severance expense |
|
|
3,320 |
|
|
|
72 |
|
|
|
4,808 |
|
|
|
2,114 |
|
|
Transaction costs |
|
|
21 |
|
|
|
— |
|
|
|
4,693 |
|
|
|
— |
|
|
Adjusted EBITDA |
|
$ |
21,355 |
|
|
$ |
22,531 |
|
|
$ |
58,726 |
|
|
$ |
59,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
110,718 |
|
|
$ |
94,605 |
|
|
$ |
313,892 |
|
|
$ |
275,121 |
|
|
Adjusted EBITDA margin |
|
|
19.3 |
|
% |
|
23.8 |
|
% |
|
18.7 |
|
% |
|
21.6 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
26,203 |
|
|
$ |
(712 |
) |
|
$ |
52,668 |
|
|
$ |
20,044 |
|
|
Property and equipment
additions |
|
|
(8,011 |
) |
|
|
(4,417 |
) |
|
|
(23,899 |
) |
|
|
(14,982 |
) |
|
Capitalized software
additions |
|
|
(2,777 |
) |
|
|
(1,982 |
) |
|
|
(7,902 |
) |
|
|
(9,246 |
) |
|
Redemption of Converted
SARs |
|
|
— |
|
|
|
22,889 |
|
|
|
— |
|
|
|
22,889 |
|
|
Free cash flow |
|
$ |
15,415 |
|
|
$ |
15,778 |
|
|
$ |
20,867 |
|
|
$ |
18,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
110,718 |
|
|
$ |
94,605 |
|
|
$ |
313,892 |
|
|
$ |
275,121 |
|
|
Free cash flow margin |
|
|
13.9 |
|
% |
|
16.7 |
|
% |
|
6.6 |
|
% |
|
6.8 |
|
% |
Investor
Contact: Ankit Hira or Ed Yuen Solebury
Trout for Vertex, Inc. ir@vertexinc.com 610.312.2890
Media
Contact:Tricia
Schafer-PetreczVertex, Inc.tricia.schafer-petrecz@vertexinc.com484.595.6142
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