Financial Data and Key Metrics Changes - Total revenue for Q1 2024 was $156.8 million, an increase of 18.1% year-over-year, exceeding the upper end of guidance [27] - Adjusted EBITDA was $36.7 million, up 82% from the previous year, representing 23.3% of revenue [9][33] - Annual recurring revenue (ARR) reached $524.5 million, a 17.5% increase year-over-year [28] - Free cash flow was positive at $4.5 million, a significant improvement from a negative $10.6 million in the previous year [34] Business Line Data and Key Metrics Changes - Software subscription revenue grew by 18.8% to $131.8 million [27] - Services revenue increased by 14.8% to $25 million [27] - Cloud revenue was $61.8 million, reflecting a 28.3% year-over-year growth [27] - Average annual revenue per customer rose to $121,720, a 17% increase year-over-year [11][28] Market Data and Key Metrics Changes - Net revenue retention (NRR) was 112%, up 2 percentage points from the previous year [10][28] - Gross revenue retention (GRR) was 95%, within the targeted range of 94% to 96% [11][28] Company Strategy and Development Direction - The company aims to accelerate global commerce by providing end-to-end capabilities for indirect tax, focusing on seamless integration and compliance [7][8] - Strategic investments in partnerships, particularly with SAP, are expected to drive growth as companies migrate to new ERP systems [14][15] - The company is exploring inorganic growth opportunities, particularly in e-invoicing, while maintaining a disciplined approach to capital allocation [52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong pipeline and market opportunities, particularly in the SAP and Microsoft ecosystems [50] - The company anticipates continued revenue growth driven by regulatory changes and digital transformation trends [88][89] - Management highlighted the importance of customer success and product innovation in driving net revenue retention and customer growth [59] Other Important Information - The company raised $345 million in convertible debt to support growth initiatives and enhance financial flexibility [12] - The first quarter marked the 14th time the company exceeded the high end of revenue guidance since going public [41] Q&A Session Summary Question: Pipeline conversion rates within the SAP channel - Management noted that larger companies are migrating first, with a potential flood of activity expected as smaller companies follow [45] Question: Free cash flow conversion expectations - Management indicated that they expect to return to a cash flow conversion rate of 65% to 70% over time, with positive cash flow trends observed [46] Question: Comparison of pipeline visibility to previous periods - Management confirmed that the pipeline remains solid, with strong traction in various markets including Microsoft and SAP [50] Question: Inorganic opportunities and strategic focus - Management is strategically evaluating opportunities in e-invoicing and has seen positive developments in partnership discussions [52] Question: Impact of new products on customer growth - Management stated that new product rollouts are showing positive results, contributing to net revenue retention growth [59] Question: Support for on-prem customers - Management emphasized their commitment to on-prem solutions while leading with cloud offerings [64] Question: International momentum and pipeline mix - Management highlighted growing international opportunities, particularly in Europe, and the potential for e-invoicing to drive future growth [82] Question: Regulatory tailwinds in different regions - Management noted significant regulatory changes in the U.S. and Europe, with a focus on e-invoicing as a key area for growth [88]

Financial Performance - Vertex's TTM Q1 2024 revenue reached $596 million[8] - The company's TTM Q1 2024 Adjusted EBITDA was $117 million[8] - Subscription revenues accounted for 84% of the company's total revenue[9] - In Q1 2024, Vertex achieved total revenue of $157 million, representing an 18% year-over-year growth[29] - The ARR reached $525 million in Q1 2024[29] - Q1 2024 Adjusted EBITDA increased by more than 80% compared to Q1 2023[29] Market Position and Growth - Over 60% of the Fortune 500 are Vertex customers[8, 19] - Vertex supports customers in over 190 countries[8] - The company estimates a $22 billion total addressable market (TAM) with less than 10% software adoption[12] - The Net Revenue Retention Rate (NRR) was 112%[25, 32] - Gross Revenue Retention (GRR) was 95%[9, 32] Strategic Focus - Vertex is focused on extending its leadership in indirect tax content[26]

Exhibit 99.1 Vertex Announces First Quarter 2024 Financial Results KING OF PRUSSIA, PA – May 8, 2024: Vertex, Inc. (NASDAQ: VERX) ("Vertex" or the "Company"), a leading global provider of indirect tax solutions, today announced financial results for its first quarter ended March 31, 2024. "The year is off to a solid start, and I am very pleased with our financial performance in the first quarter," stated David DeStefano, Vertex's President, Chief Executive Officer and Chairperson of the Board. "Revenue trac ...

Part I [Business Overview](index=4&type=section&id=Item%201.%20Business) Vertex, Inc. is a leading provider of enterprise tax technology solutions, specializing in indirect taxes for over 4,300 global customers - Vertex is a leading provider of enterprise tax technology solutions, specializing in indirect taxes for over **19,000 unique taxing jurisdictions** in the U.S. alone[21](index=21&type=chunk)[23](index=23&type=chunk) - The company serves over **4,300 customers**, including the majority of the Fortune 500, with tax support in over **190 countries**. As of December 31, 2023, the **Annual Recurring Revenue (ARR) per customer was $118,910**[26](index=26&type=chunk)[35](index=35&type=chunk)[37](index=37&type=chunk) - Core solutions include tax determination, compliance and reporting, tax data management, document management, and pre-built integrations with major ERP, CRM, and eCommerce platforms like SAP, Oracle, and Salesforce[27](index=27&type=chunk)[29](index=29&type=chunk) - Key growth strategies include retaining and expanding revenue from existing customers, acquiring new customers, broadening the partner ecosystem, and investing in new product innovation, particularly in international markets like Latin America and Europe[38](index=38&type=chunk)[46](index=46&type=chunk) - As of December 31, 2023, Vertex had over **1,500 full-time employees**, with **88% based in the U.S.**[57](index=57&type=chunk) [Risk Factors](index=19&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to customer retention, partner relationships, technological change, cybersecurity, and its controlled company status - A substantial portion of revenue depends on maintaining and growing business with existing customers and adding new ones. Failure to do so would harm financial results[64](index=64&type=chunk) - The business depends on strategic relationships with third parties, including its partner ecosystem. Failure to maintain or expand these relationships could harm the business[67](index=67&type=chunk) - The market is characterized by rapid technological change. Failure to introduce new and enhanced solutions, including those incorporating AI, could adversely affect the business[70](index=70&type=chunk)[72](index=72&type=chunk) - The company faces significant competition from other tax software vendors, outsourced compliance services, and native ERP functions[76](index=76&type=chunk) - Cybersecurity and data privacy risks, including those from cyber-attacks, data breaches, and remote work arrangements, could expose the company to legal liability and reputational damage[103](index=103&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - Changes in tax laws and regulations, such as the evolution of economic nexus laws following the *South Dakota v. Wayfair, Inc.* decision, may require substantial investment to modify software and could alter the competitive landscape[101](index=101&type=chunk)[102](index=102&type=chunk) - As a "controlled company," Vertex is exempt from certain NASDAQ corporate governance requirements, including having a majority of independent directors, which may result in fewer protections for stockholders[142](index=142&type=chunk)[143](index=143&type=chunk) [Unresolved Staff Comments](index=47&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments - Not applicable[149](index=149&type=chunk) [Cybersecurity Disclosures](index=47&type=section&id=Item%201C.%20Cybersecurity%20Disclosures) Vertex outlines its cybersecurity risk management program, integrated into enterprise risk management and overseen by the Board's Audit Committee - The company's cybersecurity risk management program is based on the **National Institute of Standards and Technology Cybersecurity Framework (NIST CSF)**[151](index=151&type=chunk) - The Board of Directors has delegated oversight of cybersecurity risk to the Audit Committee, which receives quarterly reports from management[156](index=156&type=chunk)[157](index=157&type=chunk) - The General Counsel is responsible for assessing and managing the company's material risks from cybersecurity threats[159](index=159&type=chunk) - The company has not identified any risks from known cybersecurity threats or prior incidents that have materially affected its operations, business strategy, or financial condition[153](index=153&type=chunk) [Properties](index=49&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters in King of Prussia, Pennsylvania, and maintains additional offices domestically and internationally - The corporate headquarters is located in King of Prussia, Pennsylvania, under a lease expiring in September 2028[161](index=161&type=chunk) - Additional leased offices are located in Naperville, Illinois; Frankfurt, Germany; Sao Paulo, Brazil; Chennai, India; and Killorglin and Cork, Ireland[161](index=161&type=chunk) [Legal Proceedings](index=49&type=section&id=Item%203.%20Legal%20Proceedings) Vertex has filed a complaint against Avalara, Inc. alleging unfair competition and trade secret misappropriation, seeking injunction and monetary damages - On January 25, 2022, Vertex filed a complaint against Avalara, Inc. in the U.S. District Court for the Eastern District of Pennsylvania[163](index=163&type=chunk) - The complaint alleges unfair competition, intentional interference with contractual relations, and trade secret misappropriation. Vertex is seeking an injunction and monetary damages[163](index=163&type=chunk) [Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[166](index=166&type=chunk) Part II [Market for Common Equity and Related Matters](index=52&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Vertex's Class A common stock trades on NASDAQ, while Class B is not public; the company does not anticipate paying dividends, retaining earnings for operations - Class A common stock trades on the **NASDAQ Global Market** under the symbol "VERX". Class B common stock is not publicly traded[169](index=169&type=chunk)[170](index=170&type=chunk) - The company intends to retain all available funds for business operations and does not anticipate paying dividends on its common stock in the foreseeable future[173](index=173&type=chunk) Stock Performance Comparison (from 7/28/20 to 12/31/23) | Company / Index | 7/28/20 | 12/31/23 | |---|---|---| | Vertex, Inc. | $100.00 | $112.55 | | S&P 500 | $100.00 | $154.56 | | NASDAQ U.S. Benchmark Software TR | $100.00 | $159.09 | [[Reserved]](index=53&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved [Management's Discussion and Analysis (MD&A)](index=55&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Vertex achieved significant revenue growth in 2023, driven by software subscriptions and cloud adoption, while increasing investments led to a wider net loss Financial Performance Summary (2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | % Change | |---|---|---|---| | Total Revenues | $572,387 | $491,624 | 16.4% | | Software Subscriptions Revenue | $480,830 | $415,473 | 15.7% | | Gross Profit | $348,579 | $298,492 | 16.8% | | Loss from Operations | ($17,510) | ($8,082) | 116.7% | | Net Loss | ($13,093) | ($12,304) | 6.4% | - Cloud-based subscriptions accounted for **45% of software subscription revenues** in 2023, up from **41% in 2022**, indicating a continued shift to cloud solutions[186](index=186&type=chunk)[199](index=199&type=chunk) Key Business Metrics (as of Dec 31) | Metric | 2023 | 2022 | |---|---|---| | Annual Recurring Revenue (ARR) | $512.5 million | $431.1 million | | Net Revenue Retention Rate (NRR) | 113% | 110% | | Gross Revenue Retention Rate (GRR) | 95% | 96% | | Number of Customers | 4,310 | 4,289 | | Avg. Annual Revenue Per Customer (AARPC) | $118,910 | $100,500 | Non-GAAP Financial Measures (2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | |---|---|---| | Adjusted EBITDA | $100,848 | $78,673 | | Adjusted EBITDA Margin | 17.6% | 16.0% | | Free Cash Flow | $6,099 | $3,428 | - Operating expenses increased significantly, with **R&D up 39.0%** and **G&A up 20.0%**, reflecting strategic investments in technology, business process re-engineering, and resources to support growth[240](index=240&type=chunk)[245](index=245&type=chunk) - The company has a **$200 million line of credit** and a **$50 million term loan**. As of December 31, 2023, **$46.9 million was outstanding** on the term loan and there were no borrowings under the line of credit[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=94&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk on variable-rate debt and foreign currency risk from international operations, while inflation has not had a material effect - The company is exposed to interest rate risk on its variable-rate debt. A **100 basis point increase** in rates is projected to increase annual interest expense by **$0.5 million**[315](index=315&type=chunk) - Foreign currency risk exists as approximately **4% of 2023 revenues** were generated in currencies other than the U.S. dollar. The company specifically hedges a portion of its exposure to the Brazilian Real[316](index=316&type=chunk)[317](index=317&type=chunk) - Inflation is not considered to have had a material effect on the business, as the company generally offsets cost increases through price adjustments[318](index=318&type=chunk) [Financial Statements and Supplementary Data](index=94&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section indicates that the required financial statements and supplementary data are presented at the end of the report, beginning on page F-1 - The required information for this item is presented at the end of this report beginning on page F-1[319](index=319&type=chunk) [Changes in and Disagreements with Accountants](index=94&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[321](index=321&type=chunk) [Controls and Procedures](index=96&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with an unqualified audit opinion - Management concluded that as of December 31, 2023, the company's disclosure controls and procedures were **effective** at a reasonable assurance level[326](index=326&type=chunk) - Management concluded that as of December 31, 2023, the company's internal control over financial reporting was **effective**, based on the COSO framework[329](index=329&type=chunk) - The independent registered public accounting firm, Crowe LLP, issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2023[332](index=332&type=chunk) [Other Information](index=100&type=section&id=Item%209B.%20Other%20Information) The company reports no changes to Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or officers in Q4 2023 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended December 31, 2023[339](index=339&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=100&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[340](index=340&type=chunk) Part III [Directors, Compensation, Security Ownership, and Accountant Fees](index=101&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10 through 14 is incorporated by reference from the company's definitive Proxy Statement for its 2024 Annual Meeting of Shareholders - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[343](index=343&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=102&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section states that consolidated financial statements are filed, while all financial statement schedules are omitted or included elsewhere - The financial statements are filed with the report, while all financial statement schedules are omitted[350](index=350&type=chunk) [Form 10-K Summary](index=102&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports that there is no Form 10-K summary - None[351](index=351&type=chunk) Financial Statements and Supplementary Data [Report of Independent Registered Public Accounting Firm](index=110&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Crowe LLP issued unqualified opinions on Vertex, Inc.'s consolidated financial statements and internal control over financial reporting for 2023, with no critical audit matters - Crowe LLP issued an **unqualified opinion** on the consolidated financial statements for the three years ended December 31, 2023[369](index=369&type=chunk) - The firm also issued an **unqualified opinion** on the effectiveness of the Company's internal control over financial reporting as of December 31, 2023[370](index=370&type=chunk) - The audit determined there were **no critical audit matters**[373](index=373&type=chunk) [Consolidated Financial Statements](index=112&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present the company's financial position, results of operations, changes in equity, and cash flows, reporting a **$13.1 million** net loss on **$572.4 million** revenues in 2023 Consolidated Balance Sheet Highlights (as of Dec 31) | (in thousands) | 2023 | 2022 | |---|---|---| | Cash and cash equivalents | $68,175 | $91,803 | | Goodwill and other intangible assets | $260,238 | $257,023 | | Total Assets | $759,927 | $719,192 | | Deferred revenue, current | $290,143 | $268,847 | | Total Liabilities | $506,946 | $489,467 | | Total Stockholders' Equity | $252,981 | $229,725 | Consolidated Statement of Comprehensive Loss Highlights (Year Ended Dec 31) | (in thousands) | 2023 | 2022 | 2021 | |---|---|---|---| | Total Revenues | $572,387 | $491,624 | $425,548 | | Gross Profit | $348,579 | $298,492 | $263,656 | | Loss from Operations | ($17,510) | ($8,082) | ($2,942) | | Net Loss | ($13,093) | ($12,304) | ($1,479) | Consolidated Statement of Cash Flows Highlights (Year Ended Dec 31) | (in thousands) | 2023 | 2022 | |---|---|---| | Net cash provided by operating activities | $74,332 | $63,848 | | Net cash used in investing activities | ($66,171) | ($72,048) | | Net cash (used in) provided by financing activities | ($26,482) | $17,094 | [Notes to Consolidated Financial Statements](index=117&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed financial disclosures, including revenue recognition, business combinations, debt, stock-based compensation, and income tax calculations, with a revision for cloud computing arrangement costs - Previously issued financial statements were revised to correct an immaterial error in the presentation of capitalized Cloud Computing Arrangement (CCA) implementation costs, which were incorrectly shown as property and equipment instead of other assets[391](index=391&type=chunk)[392](index=392&type=chunk) Disaggregation of Revenue (Year Ended Dec 31) | Revenue Source (in thousands) | 2023 | 2022 | |---|---|---| | Software licenses | $266,213 | $246,577 | | Cloud subscriptions | $214,617 | $168,896 | | **Total Software Subscriptions** | **$480,830** | **$415,473** | | Services | $91,557 | $76,151 | | **Total Revenues** | **$572,387** | **$491,624** | - The company details several business combinations, including the 2021 acquisitions of **LCR-Dixon ($99.1 million purchase price)** and **Taxamo ($200.7 million purchase price)**, and the 2021 acquisition of Tellutax, which includes contingent consideration[484](index=484&type=chunk)[491](index=491&type=chunk)[497](index=497&type=chunk) - As of December 31, 2023, the company had **$46.9 million in outstanding borrowings** under its Term Loan and no outstanding borrowings under its **$200 million Line of Credit**[554](index=554&type=chunk)[555](index=555&type=chunk) - Total stock-based compensation expense was **$33.9 million in 2023**, a significant increase from **$19.7 million in 2022**, primarily driven by RSU expense[591](index=591&type=chunk) - The company's effective tax rate was **39.6% in 2023**, resulting in an income tax benefit of **$8.6 million** on a pre-tax loss of **$21.7 million**. This was a significant shift from the **(21.5)% effective rate** (a tax expense) in 2022[599](index=599&type=chunk)

Financial Data and Key Metrics Changes - Revenue in Q4 2023 was $154.9 million, an increase of 18.1% year-over-year, exceeding guidance by $7.9 million [6][28] - Adjusted EBITDA was $32 million, up over 52% compared to Q4 2022, with an EBITDA margin of 20.7%, the highest in over three years [6][34] - Annual Recurring Revenue (ARR) exceeded $500 million for the first time, growing nearly 19% to $512.5 million [6][30] - Net Revenue Retention (NRR) reached a record 113%, up from 110% in the previous year [6][30] - Average Annual Revenue per Customer (AARPC) increased 19% year-over-year to nearly $119,000 [6][30] Business Line Data and Key Metrics Changes - Subscription revenue in Q4 increased 17.9% year-over-year to $130.7 million, while full-year subscription revenue was $480.8 million, up 15.7% [29] - Services revenue grew 19.7% year-over-year to $24.2 million in Q4, with full-year services revenue at $91.6 million, up 20.2% [29] - Cloud revenue was $60.6 million in Q4, up 29.9% year-over-year, with full-year cloud revenue at $214.6 million, up 27.1% [29] Market Data and Key Metrics Changes - Growth in scaled customer count was 13% year-over-year, indicating success in the enterprise market [7] - Gross Revenue Retention (GRR) was 95% in Q4, within the target range of 94% to 96% [7][30] - The company noted a record high in U.S. sales tax rate changes in 2023, indicating a complex regulatory environment [21] Company Strategy and Development Direction - The company launched a strategic investment program in 2020 aimed at accelerating global commerce and targeting $1 billion in revenue [8] - Continued focus on enhancing partnerships with major players like Oracle, SAP, Microsoft, and Salesforce to drive growth [8][19] - The company is confident in the growth potential driven by ongoing digital transformations and regulatory pressures [12][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for consistent execution in the coming years, citing strong performance in 2023 [13][28] - The company anticipates continued growth driven by regulatory pressures and digital transformation initiatives [12][25] - Management highlighted the importance of customer success teams and strategic partnerships in driving revenue growth [9][19] Other Important Information - The company completed several technology and tax content-focused acquisitions to support growth [9] - Free cash flow for the full year was $6.1 million, compared to $3.4 million in the previous year [35] - The company ended Q4 with over $68.2 million in unrestricted cash and cash equivalents [35] Q&A Session Summary Question: Key needle movers from the investment cycle - Management identified investments in the partner ecosystem and customer success function as key drivers of growth [41] Question: Confidence in cloud growth guidance - Management cited regulatory pressure and ongoing digital transformations as reasons for confidence in the 28% cloud growth guidance [42][43] Question: E-invoicing and Pagero partnership - Management confirmed that there are other potential partnerships and acquisition options beyond Pagero [45][46] Question: Future appetite for M&A - Management indicated a willingness to pursue M&A opportunities that align with long-term strategy and customer needs [75][77] Question: Impact of true-ups on ARR - Management explained that true-ups impact revenue for prior periods but typically lead to higher future ARR due to customer renewals at higher tiers [78] Question: Cloud business impact on gross margin - Management noted that while cloud margins are currently lower than on-prem margins, they expect margins to improve as cloud adoption increases [80]

Financial Performance - Total revenues for Q4 2023 were $154.9 million, representing an 18.1% year-over-year increase[5] - Software subscription revenues reached $130.7 million, up 17.9% year-over-year[5] - Cloud revenues grew to $60.6 million, marking a 29.9% year-over-year increase[5] - Annual Recurring Revenue (ARR) was $512.5 million, reflecting an 18.9% year-over-year growth[5] - Net income for Q4 2023 was $15.3 million, compared to a net loss of $(5.3) million in Q4 2022[5] - Non-GAAP operating income for Q4 2023 was $28.2 million, up from $17.7 million in the same period last year[5] - Adjusted EBITDA for Q4 2023 was $32.0 million, compared to $21.0 million for the same period prior year[5] - Total revenues for Q4 2023 reached $154.9 million, a 17.5% increase from $131.1 million in Q4 2022[30] - Software subscription revenues increased to $130.7 million, up 17.9% from $110.9 million year-over-year[30] - The company reported a net income of $15.3 million for Q4 2023, compared to a net loss of $5.3 million in Q4 2022[30] - Non-GAAP net income for Q4 2023 was $21,037,000, compared to $12,473,000 in Q4 2022, representing a 68.5% year-over-year increase[42] - Adjusted EBITDA for Q4 2023 was $32,040,000, up from $21,031,000 in Q4 2022, reflecting a 52.4% increase[43] - The company reported a net income (loss) of $15,334,000 for Q4 2023, compared to a loss of $5,309,000 in Q4 2022[43] Revenue Projections - The company expects full-year 2024 revenues to be between $650 million and $660 million, with cloud revenue growth projected at 28%[10] Customer Metrics - Net Revenue Retention (NRR) was 113%, up from 110% at December 31, 2022[5] - Average Annual Revenue per direct customer (AARPC) increased to $118,910 from $100,500 at December 31, 2022[5] Expenses - Research and development expenses for Q4 2023 were $12.9 million, compared to $11.6 million in Q4 2022, reflecting a 11.4% increase[30] - Selling and marketing expenses rose to $37.0 million in Q4 2023, up from $35.7 million in the same quarter last year[30] - General and administrative expenses increased to $36.9 million in Q4 2023, compared to $31.1 million in Q4 2022[30] - Research and development expenses increased to $52,218,000 for the year, up from $40,079,000 in 2022, representing a rise of 30.2%[39] - The company’s stock-based compensation expense for the year was $33,919,000, compared to $19,729,000 in 2022, reflecting an increase of 71.7%[39] - Stock-based compensation expense increased to $7,691,000 in Q4 2023 from $5,346,000 in Q4 2022[43] - The company incurred transaction costs of $4,853,000 in Q4 2023 related to a public tender offer[44] Cash Flow and Assets - Free cash flow for the year was $6,099,000, a significant increase from $3,428,000 in 2022, representing an 78.1% growth[37] - Free cash flow for Q4 2023 was $28,843,000, compared to $23,663,000 in Q4 2022, indicating a 21.5% increase[45] - The company experienced a net cash provided by operating activities of $74,332,000, an increase from $63,848,000 in 2022, indicating a growth of 16.4%[34] - The company’s cash and cash equivalents at the end of the period were $68,175,000, down from $91,803,000 at the beginning of the period[34] - Total assets as of December 31, 2023, were $759.9 million, an increase from $719.2 million at the end of 2022[27] Profitability Metrics - Gross profit for the year was $348.6 million, representing a gross margin of approximately 60.9%[30] - Non-GAAP gross profit for the year was $407,307,000, up from $346,949,000 in 2022, reflecting a growth of approximately 17.3%[37] - Non-GAAP gross margin for the year was 71.2%, compared to 70.6% in the previous year, showing an improvement of 0.6 percentage points[37] - Adjusted EBITDA margin improved to 20.7% in Q4 2023 from 16.0% in Q4 2022[43] - Free cash flow margin for Q4 2023 was 18.6%, slightly up from 18.0% in Q4 2022[45] Yearly Overview - The company’s total revenues for the year were $572,387,000, up from $491,624,000 in 2022, marking an increase of approximately 16.4%[39] - Non-GAAP operating income for the year was $85,646,000, compared to $66,233,000 in 2022, reflecting a growth of 29.5%[41] - The company reported a net loss of $13,093,000 for the year ended December 31, 2023, compared to a net loss of $12,304,000 in 2022, indicating a slight increase in losses[34]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-39413 VERTEX, INC. (Exact Name of Registrant as Specified in its Charter) | Delaware | 23-2081753 | | --- | --- | | (State or other jurisdiction of | (I.R.S. Employer | | incorporation or organizat ...

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 ...