Financial Data and Key Metrics Changes - Revenue in Q3 2023 was $145 million, up 15% year-over-year [5][40] - Adjusted EBITDA was $26.6 million, a 30% increase compared to the same quarter last year, resulting in an EBITDA margin of 18.4% [5][46] - Average annual revenue per customer (AARPC) increased to nearly $113,000, up 16% year-over-year [6][41] - Non-GAAP gross profit for Q3 was $103.4 million, representing a gross margin of 71.3%, compared to 69.4% in the same period last year [42] Business Line Data and Key Metrics Changes - Subscription revenues increased by 14% to $121.3 million, while services revenues grew by 19.5% to $23.7 million [40] - Cloud revenue was $54.6 million, up 24.8% from the previous year [40] - Annual recurring revenue (ARR) grew by 17.8% year-over-year, with net revenue retention (NRR) at 111% and gross revenue retention (GRR) at 96% [41] Market Data and Key Metrics Changes - The company has seen nearly a five-fold increase in leads from the SAP channel in North America in 2023, indicating strong market traction [19] - The European market has been developed significantly since 2020, with a fully fleshed-out go-to-market team and a notable presence among enterprise customers [27] Company Strategy and Development Direction - Vertex aims to reach $1 billion in revenue by leveraging investments made in R&D and strategic acquisitions [7][8] - The company is focusing on enhancing its go-to-market channels and expanding its capabilities in the SAP ecosystem, which is expected to provide a multiyear tailwind [10][11] - Vertex is also investing in artificial intelligence and generative AI to optimize workflows and improve customer experiences [37][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position, noting that tax compliance is essential for enterprise customers, making Vertex's solutions "must-have" [49] - The company anticipates continued strong performance driven by business model changes, regulatory complexities, and ongoing digital transformations [62] Other Important Information - Vertex has formed a partnership with Shopify, becoming the first global tax technology provider in their Tax Partner program, which is expected to open new market opportunities [34][65] - The company has also announced a partnership with Pagero to enhance its e-invoicing capabilities, addressing a growing need among multinational customers [32][74] Q&A Session Summary Question: What is the contribution of the SAP partnership to new customer additions? - Management indicated that the SAP partnership has been a strong tailwind, improving the pipeline and execution across various ecosystems [52] Question: Is the strong NRR sustainable? - Management noted that the investment in customer success functions and new product suites has positively impacted NRR, although they do not provide specific guidance on it [56] Question: What are the drivers behind customers increasing their entitlements? - Management explained that customers are expanding their use of Vertex solutions across different divisions, leading to increased annual charges as they move through pricing tiers [83][84] Question: How does the Shopify partnership change the customer base strategy? - Management highlighted that the partnership aligns with Shopify's strategy to move upmarket, providing opportunities to serve both mid-market and enterprise customers [65] Question: What is the outlook for cash flow and EBITDA conversion? - Management expects to return to a free cash flow conversion rate of about 70% from EBITDA as they move through investment cycles [75]

% VERTEX® Investor Presentation November 2023 1 Copyright © 2023 Vertex, Inc. All rights reserved. Proprietary and confidential. Disclaimer Forward Looking Statements Any statements made in this presentation 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 b ...

%VERTEX® Investor Presentation August 2023 1 Copyright © 2023 Vertex, Inc. All rights reserved. Proprietary and confidential. Disclaimer Forward Looking Statements Any statements made in this presentation 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 busi ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q | Title of each class | Trading symbol | Name of each exchange on which registered | | --- | --- | --- | | Class A Common Stock, Par Value | VERX | The Nasdaq Stock Market LLC | | $0.001 Per Share | | | (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SEC ...

Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $139.7 million, representing a 17.1% year-over-year increase, exceeding the upper end of guidance by approximately $2.7 million [31] - Subscription revenues increased by 16.6% to $117.8 million, while services revenues grew by 20.2% to $21.9 million [31] - Annual recurring revenue (ARR) reached $467.7 million, up 17.5% year-over-year [31] - Adjusted EBITDA was $22 million, an increase of $4.2 million year-over-year, aligning with the upper end of guidance [38] - Gross profit was $99.1 million with a gross margin of 70.9%, compared to 70.7% in the same period last year [33] Business Line Data and Key Metrics Changes - Cloud revenue was $51.2 million, up 27.3% from the previous year [33] - Average annual revenue per customer (AARPC) increased to $109,170, up from $104,370 in Q1 2023, reflecting a 16% year-over-year growth [32] Market Data and Key Metrics Changes - The customer base with annual revenues greater than $100,000 grew by 15% year-over-year, indicating success in the enterprise market [8] - The company reported several high-profile wins, including contracts with a leading global semiconductor manufacturer and a major manufacturer of private label food products, contributing to significant ARR growth [12][14] Company Strategy and Development Direction - The company is focused on accelerating global commerce by integrating solutions into major platforms and building trusted partner relationships [9] - Vertex has achieved SAP endorsed app status, enhancing collaboration with SAP's sales and marketing teams [11] - The company is investing in AI technologies to optimize workflows and improve customer experience, viewing AI as a strategic component of their commercial strategy [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's trajectory, citing strong revenue acceleration and profitability in Q2 [43] - The company anticipates continued operating leverage and margin improvement in the second half of the year [48] - Management noted a diversified source of demand drivers, including changes in operating business models and regulatory environments, which support strong performance despite broader economic uncertainties [52][99] Other Important Information - The company ended Q2 with over $41.9 million in unrestricted cash and equivalents, and total bank debt was $48 million [39] - Full-year revenue guidance was increased to a range of $556 million to $562 million, reflecting a 14% growth at the midpoint [41] Q&A Session Summary Question: How has the mix of leads shifted with more deals from Salesforce, Workday, and Microsoft Dynamics? - Management noted an increase in leads overall, with strong motions continuing with SAP and Oracle, viewing the shift as additive to their strategy [46] Question: Why was the adjusted EBITDA margin guidance left unchanged despite a strong quarter? - Management indicated that EBITDA margins are projected to increase notably in Q3 and Q4, with operating leverage expected to improve as the year progresses [48] Question: What factors contributed to strong results despite a deceleration in new implementation work? - Management attributed strong results to diversified demand drivers, including changes in operating models and a heated regulatory environment [52] Question: How is the competitive environment perceived? - Management noted that most competition focuses on price, indicating the differentiated value Vertex provides, with Oracle and SAP being primary competitors [65] Question: What is the outlook for cash generation in the back half of the year? - Management expects stronger cash generation in Q4, traditionally the strongest quarter, with cash collections normalizing following billing delays [68]

Financial Data and Key Metrics Changes - Total revenue for Q1 2023 grew 15.5% year-over-year to $132.8 million, reaching the upper end of quarterly guidance [23] - Annual recurring revenue (ARR) was $446.5 million, up 17.3% year-over-year and 14.3% on an annualized sequential basis [24] - Adjusted EBITDA was $20.2 million, an increase of $1.1 million year-over-year [30] - Gross profit for Q1 was $95.3 million with a gross margin of 71.8%, compared to 70.2% in the same period last year [26] Business Line Data and Key Metrics Changes - Subscription revenues increased 14.3% to $111 million, while average services revenues grew 21.8% to $21.7 million [23] - The managed services business generated recurring service revenues of $7.4 million, up from $6 million in the prior year [25] - Cloud revenue was $48.2 million, up 26% from last year [26] Market Data and Key Metrics Changes - The company reported strong performance in the enterprise market, with a focus on partnerships with Microsoft, Workday, and Salesforce [10] - The services business showed steady growth, reflecting ongoing investments in tax technology by businesses [11] Company Strategy and Development Direction - The company is executing a multi-year growth strategy with focused investments in R&D, go-to-market, customer success, and corporate infrastructure [7] - There is optimism about earning leverage in the second half of 2023 as investments begin to taper off [7] - The company is leveraging intelligent automation to monitor tax code changes and streamline workflows [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for tax transformation solutions due to increasing compliance requirements and audit pressures [8] - The regulatory environment is becoming more complex, which aligns with the company's strategy to provide comprehensive tax solutions [60] - The outlook for the remainder of 2023 is positive, with expectations for revenue and earnings growth [35] Other Important Information - The company ended Q1 with over $68.6 million in unrestricted cash and cash equivalents, and total bank debt was $48.6 million [32] - Guidance for Q2 2023 expects total revenue in the range of $135 million to $137 million, representing 14% year-over-year growth at the midpoint [33] Q&A Session Summary Question: Growth in indirect customer base - Management noted that indirect customers are coming through partners, which helps market to mid-market and downsized customers [39] Question: Performance in international markets - Management reported strong performance in Europe, with a record attendance at their European customer conference and confidence in pipeline activity [40] Question: Progress with large technology partners - Management highlighted strong partnerships with Microsoft, Salesforce, and Workday, which are driving competitive differentiation [43] Question: Demand for managed services - Management indicated that demand is driven by the complexity of tax management and the need for efficiency in tax departments [46] Question: European marketplace laws enforcement - Management confirmed a shift in activity due to increased enforcement of marketplace laws, creating incremental opportunities [50] Question: Gross margin outlook - Management expects continued leverage in gross margin as product and cloud opportunities grow [52] Question: Inorganic growth opportunities - Management is exploring opportunities but remains cautious about valuations in the current environment [54] Question: Customers' willingness to undertake ERP projects - Management has not observed a significant change in momentum for ERP projects despite financial sector challenges [72] Question: Pricing dynamics - Management indicated that pricing increases are being implemented to address inflation and are expected to have a modest impact on revenue [78]

Part I - Financial Information [Item 1. Financial Statements](index=5&type=section&id=Item%201%2E%20Financial%20Statements) The company's unaudited statements show total revenues of $132.8 million and a net loss of $18.1 million for Q1 2023 Condensed Consolidated Balance Sheet Highlights (unaudited) | Account | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$725,518** | **$719,192** | | Cash and cash equivalents | $68,643 | $91,803 | | Total current assets | $231,435 | $241,189 | | Goodwill and other intangible assets | $259,303 | $257,023 | | **Total Liabilities** | **$502,043** | **$489,467** | | Deferred revenue, current | $276,004 | $268,847 | | Total current liabilities | $421,949 | $403,209 | | **Total Stockholders' Equity** | **$223,475** | **$229,725** | Condensed Consolidated Statements of Comprehensive Loss (unaudited) | Metric | Three months ended March 31, 2023 (in thousands) | Three months ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total revenues | $132,751 | $114,984 | | Gross profit | $81,004 | $70,118 | | (Loss) income from operations | $(8,929) | $468 | | Net loss | $(18,132) | $(334) | | Net loss per Class A share, basic & diluted | $(0.12) | $(0.00) | Condensed Consolidated Statements of Cash Flows Highlights (unaudited) | Cash Flow Activity | Three months ended March 31, 2023 (in thousands) | Three months ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,755 | $2,595 | | Net cash used in investing activities | $(17,561) | $(17,259) | | Net cash (used in) provided by financing activities | $(1,531) | $39,780 | | Net (decrease) increase in cash | $(12,133) | $25,033 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 2023 revenue grew 15.5% to $132.8 million, but a net loss of $18.1 million resulted from increased operating expenses [Overview](index=26&type=section&id=Overview) Vertex provides indirect tax software, with revenue driven by subscriptions and a growing shift toward cloud solutions - The company's primary revenue source is software subscriptions, offered through both on-premise and cloud-based models, serving a majority of Fortune 500 companies[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - There is a continuing shift towards cloud-based solutions, with cloud subscriptions constituting **43% of software subscription revenue** in Q1 2023, an increase from 39% in Q1 2022[93](index=93&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Revenue increased 15.5% in Q1 2023, but a 29.1% rise in operating expenses led to an $8.9 million operating loss Comparison of Results of Operations (Q1 2023 vs. Q1 2022) | Metric (in thousands) | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$132,751** | **$114,984** | **$17,767** | **15.5%** | | Software subscriptions | $111,014 | $97,131 | $13,883 | 14.3% | | Services | $21,737 | $17,853 | $3,884 | 21.8% | | **Gross Profit** | **$81,004** | **$70,118** | **$10,886** | **15.5%** | | **Total Operating Expenses** | **$89,933** | **$69,650** | **$20,283** | **29.1%** | | (Loss) income from operations | $(8,929) | $468 | $(9,397) | * | | **Net Loss** | **$(18,132)** | **$(334)** | **$(17,798)** | * | - The increase in operating expenses was primarily due to **higher personnel costs**, increased advertising and promotional spending, and strategic investments in IT infrastructure to support future growth[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company holds $68.6 million in cash and has a $200 million undrawn credit line, ensuring sufficient liquidity Summary of Cash Flows (unaudited) | Cash Flow Activity (in thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,755 | $2,595 | | Net cash used in investing activities | $(17,561) | $(17,259) | | Net cash (used in) provided by financing activities | $(1,531) | $39,780 | - The company has a **$250.0 million credit facility**, consisting of a $50.0 million term loan and a $200.0 million line of credit, with no outstanding borrowings on the line of credit[147](index=147&type=chunk)[153](index=153&type=chunk) [Key Business Metrics](index=37&type=section&id=Key%20Business%20Metrics) Key metrics show strong growth with a 17.3% increase in ARR to $446.5 million and a stable 110% NRR Annual Recurring Revenue (ARR) | Metric | As of March 31, 2023 | As of March 31, 2022 | Year-Over-Year Change | | :--- | :--- | :--- | :--- | | ARR (in millions) | $446.5 | $380.6 | 17.3% | | AARPC (in thousands) | $104.37 | $89.70 | - | Revenue Retention Rates | Metric | As of March 31, 2023 | As of March 31, 2022 | | :--- | :--- | :--- | | Net Revenue Retention Rate (NRR) | 110% | 110% | | Gross Revenue Retention Rate (GRR) | 96% | 96% | Adjusted EBITDA Reconciliation (unaudited) | Metric (in thousands) | Three months ended March 31, 2023 | Three months ended March 31, 2022 | | :--- | :--- | :--- | | Net loss | $(18,132) | $(334) | | Adjustments (Interest, Taxes, D&A, Stock Comp, etc.) | $38,334 | $19,470 | | **Adjusted EBITDA** | **$20,202** | **$19,136** | | Total revenues | $132,751 | $114,984 | | **Adjusted EBITDA margin** | **15.2%** | **16.6%** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on its debt and foreign currency exchange rate changes - The company is exposed to interest rate risk on its variable-rate borrowings; a **100 basis point increase** in rates is projected to increase annual interest expense by **$0.5 million**[189](index=189&type=chunk) - Foreign currency exchange risk exists from operations in currencies like the Canadian Dollar, Euro, and Brazilian Real, with **34% of its Brazilian Real exposure hedged**[190](index=190&type=chunk)[191](index=191&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal financial reporting procedures were effective - Management concluded that the company's disclosure controls and procedures were **effective** at a reasonable assurance level as of March 31, 2023[193](index=193&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[194](index=194&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=46&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is in an ongoing lawsuit against competitor Avalara, Inc for unfair competition and trade secret theft - The company is engaged in an ongoing lawsuit against Avalara, Inc, filed in January 2022, with claims of **unfair competition and trade secret misappropriation**[197](index=197&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A%2E%20Risk%20Factors) No material changes to the risk factors disclosed in the company's 2022 Annual Report on Form 10-K have occurred - The company reports **no material changes** to the risk factors discussed in its 2022 Annual Report[199](index=199&type=chunk) [Other Items (Items 2, 3, 4, 5, 6)](index=46&type=section&id=Other%20Items%20(Items%202%2C%203%2C%204%2C%205%2C%206)) This section confirms no unregistered equity sales, defaults, or other material information to report for the quarter - The report indicates **no activity or information to disclose** under Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Commission File Number: 333-239644 VERTEX, INC. (Exact Name of Registrant as Specified in its Charter) FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | Delaware | 23-2081753 | | --- | --- | | ...

Financial Data and Key Metrics Changes - Revenues in Q4 2022 reached a record $131.1 million, up 17.4% from Q4 2021, marking the highest year-over-year revenue growth since going public [7][32] - Adjusted EBITDA for Q4 was $20.8 million, an increase of 8% year-over-year [8][43] - Free cash flow in Q4 was $24 million, contributing to a positive free cash flow of $3.4 million for the full year [9][44] - Annual recurring revenue (ARR) was $431 million, up 16.5% year-over-year [10][33] - Gross profit for Q4 was $94.4 million, with a gross margin of 72%, compared to 70.7% in the same period last year [39] Business Line Data and Key Metrics Changes - Cloud revenue in Q4 was $46.6 million, up 34.4% year-over-year [38] - Managed Services business generated recurring service revenue of over $24.4 million for the full year, compared to $20.8 million in the prior year [35] Market Data and Key Metrics Changes - Customer count increased to 4,559 by the end of Q4, up by 61 from the previous quarter [36] - Scaled customers (those with ARR greater than $100,000) grew 15% year-over-year [36] Company Strategy and Development Direction - The company is focused on expanding its installed base, broadening strategic partnerships, strengthening global presence, and driving new product innovation [10][12] - Investments are being made in emerging technologies and tax content to transform the industry [10][12] - The company aims to penetrate the $22 billion addressable market for tax automation solutions [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to sustain profitable growth despite economic uncertainties [8][51] - The company anticipates continued demand for tax compliance solutions, even during economic downturns [51] - Guidance for Q1 2023 expects total revenue between $131 million to $133 million, representing 15% year-over-year growth [47] Other Important Information - Vertex achieved HDI support center certification, recognizing its commitment to exceptional customer experience [29] - The company is investing in its team, including the addition of a Senior Vice President of Software Engineering from Salesforce [30] Q&A Session Summary Question: Observations on macroeconomic conditions and customer behavior - Management noted no usage concerns and strong price uptake, with customers focused on digital transformations and ERP upgrades [54] Question: Focus on emerging technologies in R&D - The company is expanding its edge solutions and exploring opportunities in data transformation and automation [55] Question: Exposure to in-store retail versus e-commerce - The customer base is balanced across both e-commerce and in-store, benefiting from the edge cloud solution [58][59] Question: Guidance for 2023 and growth expectations - Cloud revenue is expected to grow by approximately 27%, with modest growth in other business areas [64][66] Question: Drivers for customer count increase in Q4 - Growth was driven by investments in Microsoft, Workday, and Salesforce ecosystems [74] Question: Stock-based compensation trends - The decrease in stock-based compensation as a percentage of revenue is attributed to the normalization of grants post-IPO [80]

| --- | --- | --- | --- | --- | --- | |----------------------------------------------------------------------------------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | Investor Presentation November 2022 | | | | | | | Copyright © 2022 Vertex, Inc. All rights reserved. Proprietary and confidential. | | | | | | Disclaimer Forward Looking Statements Any statements made in this presentation that are not statements of historical fact, including statements about our beliefs and expectatio ...