Vertex Announces First Quarter 2025 Financial Results

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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 March 31, As of December 31,(In thousands, except per share data) 2025 2024     (unaudited)  Assets      Current assets:      Cash and cash equivalents $270,395  $296,051 Funds held for customers  33,287   30,015 Accounts receivable, net of allowance of $17,566 and $16,838, respectively  152,338   164,432 Prepaid expenses and other current assets  48,942   36,678 Investment securities available-for-sale, at fair value (amortized cost of $0 and $9,147, respectively)  —   9,157 Total current assets  504,962   536,333 Property and equipment, net of accumulated depreciation  185,557   177,559 Capitalized software, net of accumulated amortization  36,219   36,350 Goodwill and other intangible assets  374,312   363,021 Deferred commissions  27,535   27,480 Deferred income tax asset  19   19 Operating lease right-of-use assets  11,189   11,956 Other assets  14,351   14,073 Total assets $1,154,144  $1,166,791 Liabilities and Stockholders' Equity      Current liabilities:      Accounts payable $24,979  $36,215 Accrued expenses  38,114   35,169 Customer funds obligations  30,632   27,406 Accrued salaries and benefits  21,768   14,581 Accrued variable compensation  14,144   45,507 Deferred revenue, current  349,757   339,326 Current portion of operating lease liabilities  4,043   3,995 Current portion of finance lease liabilities  77   77 Purchase commitment and contingent consideration liabilities, current  29,600   35,100 Total current liabilities  513,114   537,376 Deferred revenue, net of current portion  5,140   4,840 Debt, net of current portion  335,784   335,220 Operating lease liabilities, net of current portion  11,461   12,585 Finance lease liabilities, net of current portion  —   10 Purchase commitment and contingent consideration liabilities, net of current portion  78,200   87,400 Deferred income tax liabilities  9,369   9,918 Deferred other liabilities  586   90 Total liabilities  953,654   987,439 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; 71,907 and 70,670 shares issued and outstanding, respectively  72   71 Class B voting common stock, $0.001 par value, 150,000 shares authorized; 86,481 and 86,481 shares issued and outstanding, respectively  86   86 Additional paid in capital  273,300   278,389 Accumulated deficit  (42,185)  (53,315)Accumulated other comprehensive loss  (30,783)  (45,879)Total stockholders' equity  200,490   179,352 Total liabilities and stockholders' equity $1,154,144  $1,166,791          Vertex, Inc.and SubsidiariesConsolidated Statements of Comprehensive Income (Loss)(Unaudited)          Three months ended   March 31, (In thousands, except per share data) 2025 2024  (unaudited)Revenues:      Software subscriptions $150,761  $131,830 Services  26,301   24,951 Total revenues  177,062   156,781 Cost of revenues:      Software subscriptions  44,245   45,128 Services  19,823   15,861 Total cost of revenues  64,068   60,989 Gross profit  112,994   95,792 Operating expenses:      Research and development  20,886   16,845 Selling and marketing  48,155   40,491 General and administrative  45,028   35,542 Depreciation and amortization  5,880   5,006 Change in fair value of acquisition contingent earn-outs  (14,700)  — Other operating expense (income), net  3,259   (527)Total operating expenses  108,508   97,357 Income (loss) from operations  4,486   (1,565)Interest expense (income), net  (1,539)  286 Income (loss) before income taxes  6,025   (1,851)Income tax benefit  (5,105)  (4,535)Net income  11,130   2,684 Other comprehensive (income) loss:      Foreign currency translation adjustments, net of tax  (15,105)  4,011 Unrealized loss on investments, net of tax  9   17 Total other comprehensive (income) loss, net of tax  (15,096)  4,028 Total comprehensive income (loss) $26,226  $(1,344)       Net income per share of Class A and Class B, basic $0.07  $0.02 Net income per share of Class A and Class B, dilutive $0.07  $0.02          Vertex, Inc.and SubsidiariesConsolidated Statements of Cash Flows (Unaudited)            Three months ended    March 31, (In thousands)     2025 2024   (unaudited)Cash flows from operating activities:       Net income  $11,130  $2,684 Adjustments to reconcile net income to net cash provided by operating activities:       Depreciation and amortization   22,266   20,948 Amortization of cloud computing implementation costs   1,006   994 Provision for subscription cancellations and non-renewals   192   1,082 Amortization of deferred financing costs   680   146 Change in fair value of contingent consideration liabilities   (14,700)  (800)Stock-based compensation expense   21,044   16,324 Deferred income taxes   (929)  (2,588)Non-cash operating lease costs   779   828 Other   (7)  (106)Changes in operating assets and liabilities:       Accounts receivable   11,772   4,478 Prepaid expenses and other current assets   (13,169)  (7,335)Deferred commissions   (56)  (64)Accounts payable   (11,279)  (1,153)Accrued expenses   2,956   (8,486)Accrued and deferred compensation   (26,785)  (14,515)Deferred revenue   11,156   11,177 Operating lease liabilities   (1,068)  (1,125)Other   (183)  2,077 Net cash provided by operating activities   14,805   24,566 Cash flows from investing activities:       Property and equipment additions   (21,394)  (14,449)Capitalized software additions   (5,661)  (5,615)Purchase of investment securities, available-for-sale   (2,398)  (4,271)Proceeds from sales and maturities of investment securities, available-for-sale   11,607   4,800 Net cash used in investing activities   (17,846)  (19,535)Cash flows from financing activities:       Net increase in customer funds obligations   3,227   15,939 Principal payments on long-term debt   —   (625)Payments for deferred financing costs   —   (89)Payments for taxes related to net share settlement of stock-based awards   (25,034)  (17,862)Proceeds from exercise of stock options   1,166   1,510 Payments of finance lease liabilities   (12)  (26)Net cash used in financing activities   (20,653)  (1,153)Effect of exchange rate changes on cash, cash equivalents and restricted cash   1,310   (349)Net increase (decrease) in cash, cash equivalents and restricted cash   (22,384)  3,529 Cash, cash equivalents and restricted cash, beginning of period   326,066   89,151 Cash, cash equivalents and restricted cash, end of period  $303,682  $92,680 Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets, end of period:       Cash and cash equivalents  $270,395  $56,134 Restricted cash—funds held for customers   33,287   36,546 Total cash, cash equivalents and restricted cash, end of period  $303,682  $92,680           Summary of Non-GAAP Financial Measures(Unaudited)              Three months ended     March 31,  (Dollars in thousands, except per share data)  2025  2024 Non-GAAP cost of revenues, software subscriptions  $26,163   $28,191 Non-GAAP cost of revenues, services  $18,127   $14,855 Non-GAAP gross profit  $132,772   $113,735 Non-GAAP gross margin   75.0 %  72.5%Non-GAAP research and development expense  $16,534   $13,472 Non-GAAP selling and marketing expense  $41,818   $35,674 Non-GAAP general and administrative expense  $36,602   $27,573 Non-GAAP operating income  $31,339   $31,737 Non-GAAP net income  $24,494   $23,431 Non-GAAP diluted EPS  $0.15   $0.15 Adjusted EBITDA  $37,219   $36,743 Adjusted EBITDA margin   21.0 %  23.4%Free cash flow  $(12,250)  $4,502 Free cash flow margin   (6.9)%  2.9%   Vertex, Inc.and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures(Unaudited)          Three months ended     March 31,   (Dollars in thousands)  2025  2024 Non-GAAP Cost of Revenues, Software Subscriptions:       Cost of revenues, software subscriptions $44,245  $45,128  Stock-based compensation expense  (2,227)  (1,590) Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  (15,855)  (15,347) Non-GAAP cost of revenues, software subscriptions $26,163  $28,191          Non-GAAP Cost of Revenues, Services:       Cost of revenues, services $19,823  $15,861  Stock-based compensation expense  (1,696)  (1,006) Non-GAAP cost of revenues, services $18,127  $14,855          Non-GAAP Gross Profit:       Gross profit $112,994  $95,792  Stock-based compensation expense  3,923   2,596  Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  15,855   15,347  Non-GAAP gross profit $132,772  $113,735          Non-GAAP Gross Margin:       Total Revenues $177,062  $156,781  Non-GAAP gross margin  75.0 % 72.5 %        Non-GAAP Research and Development Expense:       Research and development expense $20,886  $16,845  Stock-based compensation expense  (4,352)  (3,373) Non-GAAP research and development expense $16,534  $13,472          Non-GAAP Selling and Marketing Expense:       Selling and marketing expense $48,155  $40,491  Stock-based compensation expense  (5,806)  (4,222) Amortization of acquired intangible assets – selling and marketing expense  (531)  (595) Non-GAAP selling and marketing expense $41,818  $35,674          Non-GAAP General and Administrative Expense:       General and administrative expense $45,028  $35,542  Stock-based compensation expense  (6,963)  (6,133) Severance expense  (457)  (842) Amortization of cloud computing implementation costs – general and administrative  (1,006)  (994) Non-GAAP general and administrative expense $36,602  $27,573     Vertex, Inc.and SubsidiariesReconciliation of GAAP to Non-GAAP Financial Measures (continued)(Unaudited)           Three months ended    March 31,  (In thousands, except per share data) 2025 2024 Non-GAAP Operating Income:       Income (loss) from operations $4,486  $(1,565) Stock-based compensation expense  21,044   16,324  Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  15,855   15,347  Amortization of acquired intangible assets – selling and marketing expense  531   595  Amortization of cloud computing implementation costs – general and administrative  1,006   994  Severance expense  457   842  Acquisition contingent consideration  —   (800) Change in fair value of acquisition contingent earn-outs  (14,700)  —  Transaction costs  2,660   —  Non-GAAP operating income $31,339  $31,737                  Non-GAAP Net Income:       Net income $11,130  $2,684  Income tax benefit  (5,105)  (4,535) Stock-based compensation expense  21,044   16,324  Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  15,855   15,347  Amortization of acquired intangible assets – selling and marketing expense  531   595  Amortization of cloud computing implementation costs – general and administrative  1,006   994  Severance expense  457   842  Acquisition contingent consideration  —   (800) Change in fair value of acquisition contingent earn-outs  (14,700)  —  Transaction costs  2,660   —  Non-GAAP income before income taxes  32,878   31,451  Income tax adjustment at statutory rate (1)  (8,384)  (8,020) Non-GAAP net income  $24,494  $23,431          Non-GAAP Diluted EPS:       Non-GAAP net income $24,494  $23,431  Interest expense (net of tax), convertible senior notes (2)  903   —  Non-GAAP net income used in dilutive per share computation $25,397  $23,431          Weighted average Class A and B common stock, diluted  162,724   160,582  Dilutive effect of convertible senior notes (2)  9,498   —  Total average Class A and B shares used in dilutive per share computation  172,222   160,582  Non-GAAP diluted EPS $0.15  $0.15          (1) 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%.(2) We use the if-converted method to compute diluted earnings per share with respect to our convertible senior notes.

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    March 31,  (Dollars in thousands)    2025 2024 Adjusted EBITDA:       Net income $11,130  $2,684  Interest expense (income), net  (1,539)  286  Income tax benefit  (5,105)  (4,535) Depreciation and amortization – property and equipment  5,880   5,006  Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues  15,855   15,347  Amortization of acquired intangible assets – selling and marketing expense  531   595  Amortization of cloud computing implementation costs – general and administrative  1,006   994  Stock-based compensation expense  21,044   16,324  Severance expense  457   842  Acquisition contingent consideration  —   (800) Change in fair value of acquisition contingent earn-outs  (14,700)  —  Transaction costs  2,660   —  Adjusted EBITDA $37,219  $36,743          Adjusted EBITDA Margin:       Total revenues $177,062  $156,781  Adjusted EBITDA margin  21.0 % 23.4 %                   Three months ended    March 31,  (Dollars in thousands)    2025 2024 Free Cash Flow:       Cash provided by operating activities $14,805  $24,566  Property and equipment additions  (21,394)  (14,449) Capitalized software additions  (5,661)  (5,615) Free cash flow $(12,250) $4,502          Free Cash Flow Margin:       Total revenues $177,062  $156,781  Free cash flow margin  (6.9)% 2.9 %  Investor Relations Contact:Joe CrivelliVertex, Inc.investors@vertexinc.com Media Contact: Rachel LitcofskyVertex, Inc.mediainquiries@vertexinc.

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 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, including the economic uncertainty created by the changing legal, regulatory, or taxation landscape in the United States, 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, filed with the Securities Exchange Commission ("SEC”), on February 27, 2025 and may be subsequently updated by our other SEC filings.

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Author / Journalist: Vertex Inc.

Category: Technology

Markets: ChinaUnited States

Topics: US92538J1060 Nasdaq:VERX

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Published On: 2025-05-07 @ 11:05:00 (1 days ago)

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