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Vertex Announces First Quarter 2023 Financial Results

KING OF PRUSSIA, Pa., May 10, 2023 (GLOBE NEWSWIRE) -- 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, 2023.

David DeStefano, President, Chief Executive Officer, and Chairperson of the Board stated “Companies all around the world are struggling with the complexity of indirect taxes, and Vertex continues to differentiate itself as the provider of choice in the tax automation space, especially with large enterprises. In the first quarter we delivered solid revenue growth and profitability, but we also saw very strong momentum on the go-to-market front and landed several large new deals with high profile customers. As a result, we are pleased with the first quarter results, and we are very excited about our opportunity for continued revenue growth and improving earnings leverage through the balance of 2023.”

First Quarter 2023 Financial Results

  • Total revenues of $132.8 million, up 15.5% year-over-year.
  • Software subscription revenues of $111.0 million, up 14.3% year-over-year.
  • Cloud revenues of $48.2 million, up 25.9% year-over-year.
  • Annual Recurring Revenue (“ARR”) was $446.5 million, up 17.3% year-over-year.
  • Average Annual Revenue per direct customer (“AARPC”) was $104,370 at March 31, 2023, compared to $89,700 at March 31, 2022 and $100,500 at December 31, 2022.
  • Net Revenue Retention (“NRR”) was 110%, consistent with March 31, 2022, and the fourth quarter of 2022.
  • Gross Revenue Retention (“GRR”) was 96%, consistent with March 31, 2022, and the fourth quarter of 2022.
  • Loss from operations of $(8.9) million, compared to income from operations of $0.5 million for the same period prior year. Non-GAAP operating income of $16.5 million, compared to $16.2 million for the same period prior year.
  • Net loss of $(18.1) million, compared to net loss of $(0.3) million for the same period prior year.
  • Net loss per basic and diluted Class A and Class B shares of $(0.12) for 2023, compared to net loss of $(0.00) for the same period prior year.
  • Non-GAAP net income of $12.5 million and Non-GAAP diluted EPS of $0.08.
  • Adjusted EBITDA of $20.2 million, compared to $19.1 million for the same period prior year. Adjusted EBITDA margin of 15.2%, compared to 16.6% for the same period prior year.

John Schwab, Chief Financial Officer, stated, “Our key performance indicators all showed continued strength in the first quarter. GRR and NRR remained at industry-leading levels, and we delivered strong high-teens growth in ARR and a continued steady increase in AARPC. We believe our business is built to deliver sustained growth across economic cycles, and we remain optimistic about our outlook in 2023 and beyond.”

Definitions of certain key business metrics and the non-GAAP financial measures used in this press release and reconciliations of such measures to the most directly comparable GAAP financial measures are included below under the headings “Definitions of Certain Key Business Metrics” and “Use and Reconciliation of Non-GAAP Financial Measures.”

Financial Outlook

For the second quarter of 2023, the Company currently expects:

  • Revenues of $135 million to $137 million; and
  • Adjusted EBITDA of $21 million to $22 million.

For the full-year 2023, the Company currently expects:

  • Revenues of $550 to $556 million;
  • Cloud revenue growth of 27%; and
  • Adjusted EBITDA of $92 to $96 million.

The Company is unable to reconcile forward-looking Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, without unreasonable efforts because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact net income (loss) for these periods but would not impact Adjusted EBITDA. Such items may include stock-based compensation expense, depreciation and amortization of capitalized software costs and acquired intangible assets, severance expense, acquisition contingent consideration, litigation settlements, transaction costs, and other items. The unavailable information could have a significant impact on the Company’s net income (loss). The foregoing forward-looking statements reflect the Company’s expectations as of today's date. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. The Company does not intend to update its financial outlook until its next quarterly results announcement.

Important disclosures in this earnings release about and reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided below under “Use and Reconciliation of Non-GAAP Financial Measures.”

Conference Call and Webcast Information

Vertex will host a conference call at 8:30 a.m. Eastern Time today, May 10, 2023, to discuss its first quarter 2023 financial results.

Those wishing to participate may do so by dialing 1-412-317-0494 approximately ten minutes prior to start time. A listen-only webcast of the call will also be available through the Company’s Investor Relations website at https://ir.vertexinc.com.

A conference call replay will be available approximately one hour after the call by dialing 1-412-317-6671 and referencing passcode 10177800, or via the Company’s Investor Relations website. The replay will expire on May 24, 2023 at 11:59 p.m. Eastern Time.

About Vertex

Vertex, Inc. is a leading global provider of indirect tax solutions. The Company’s mission is to deliver the most trusted tax technology enabling global businesses to transact, comply and grow with confidence. Vertex provides solutions that can be tailored to specific industries for major lines of indirect tax, including sales and consumer use, value added and payroll. Headquartered in North America, and with offices in South America and Europe, Vertex employs over 1,400 professionals and serves companies across the globe.

For more information, visit www.vertexinc.com or follow on Twitter and LinkedIn.

Forward Looking Statements

Any statements made in this press release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. Forward-looking statements are based on Vertex management’s beliefs, as well as assumptions made by, and information currently available to, them. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Factors which may cause actual results to differ materially from current expectations include, but are not limited to: our ability to 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; the potential effects on our business from the existence of a global endemic or pandemic; 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, 2022 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 direct customers with MRR at the end of the last month of the measurement period. AARPC represents average annual revenue per direct customer and is calculated by dividing ARR by the number of software subscription direct customers at the end of the respective period.

Net Revenue Retention Rate (“NRR”)

We believe that our NRR provides insight into our ability to retain and grow revenues from our direct customers, as well as their potential long-term value to us. We also believe it demonstrates to investors our ability to expand existing customer revenues, which is one of our key growth strategies. Our NRR refers to the ARR expansion during the 12 months of a reporting period for all direct customers who were part of our customer base at the beginning of the reporting period. Our NRR calculation takes into account any revenues lost from departing direct customers or those who have downgraded or reduced usage, as well as any revenue expansion from migrations, new licenses for additional products or contractual and usage-based price changes.

Gross Revenue Retention Rate (“GRR”)

We believe our GRR provides insight into and demonstrates to investors our ability to retain revenues from our existing direct customers. Our GRR refers to how much of our MRR we retain each month after reduction for the effects of revenues lost from departing direct customers or those who have downgraded or reduced usage. GRR does not take into account revenue expansion from migrations, new licenses for additional products or contractual and usage-based price changes. GRR does not include revenue reductions resulting from cancellations of customer subscriptions that are replaced by new subscriptions associated with customer migrations to a newer version of the related software solution.

Customer Count

The following table shows Vertex’s direct customers, as well as indirect small business customers sold and serviced through the company’s one-to-many channel strategy:

CustomersQ1 2022Q2 2022Q3 2022Q4 2022Q1 2023
Direct4,2424,2424,2304,2894,278
Indirect239266268270291
  Total4,4814,5084,4984,5594,569

 

Use and Reconciliation of Non-GAAP Financial Measures

In addition to our results determined in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and key business metrics described above, we have calculated non-GAAP cost of revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expense, non-GAAP selling and marketing expense, non-GAAP general and administrative expense, non-GAAP operating income, non-GAAP net income, non-GAAP diluted EPS, Adjusted EBITDA, Adjusted EBITDA margin, free cash flow and free cash flow margin, which are each non-GAAP financial measures. We have provided tabular reconciliations of each of these non-GAAP financial measures to its most directly comparable GAAP financial measure.

Management uses these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, and to evaluate financial performance and liquidity. Our non-GAAP financial measures are presented as supplemental disclosure as we believe they provide useful information to investors and others in understanding and evaluating our results, prospects, and liquidity period-over-period without the impact of certain items that do not directly correlate to our operating performance and that may vary significantly from period to period for reasons unrelated to our operating performance, as well as comparing our financial results to those of other companies. Our definitions of these non-GAAP financial measures may differ from similarly titled measures presented by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, the financial information prepared in accordance with GAAP, and should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, 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 loss or income from operations the stock-based compensation expense, depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, severance expense, acquisition contingent consideration, litigation settlements, and transaction costs (which includes offering costs related to the sale of shares of certain of our Class B shareholders which are not representative of normal business operations), included in GAAP loss or income from operations for the respective periods.
  • Non-GAAP net income is determined by adding back to GAAP net loss or income the income tax benefit or expense, stock-based compensation expense, depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, severance expense, acquisition contingent consideration, litigation settlements and transaction costs (which includes offering costs related to the sale of shares of certain of our Class B shareholders which are not representative of normal business operations), included in GAAP net loss or income for the respective periods to determine non-GAAP loss or income before income taxes. Non-GAAP loss or 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 included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, asset impairments, stock-based compensation expense, severance expense, acquisition contingent consideration, litigation settlements, and transaction costs (which includes offering costs related to the sale of shares of certain of our Class B shareholders which are not representative of normal business operations), included in GAAP net income or loss for the respective periods.
  • Adjusted EBITDA margin is determined by dividing Adjusted EBITDA by total revenues for the respective periods.
  • Free cash flow is determined by adjusting net cash provided by (used in) operating activities by purchases of property and equipment and capitalized software additions for the respective periods.
  • Free cash flow margin is determined by dividing free cash flow by total revenues for the respective periods.

We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view these non-GAAP financial measures in conjunction with the related GAAP financial measures.

Vertex, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
       
       
  As of March 31,  December 31, 
(In thousands, except per share data) 2023  2022 
     (unaudited)      
Assets       
Current assets:       
Cash and cash equivalents $68,643  $91,803 
Funds held for customers  25,972   14,945 
Accounts receivable, net of allowance of $10,641 and $9,554, respectively  102,760   102,885 
Prepaid expenses and other current assets  22,536   20,383 
Investment securities available-for-sale, current, at fair value (amortized cost of $11,552 and $11,220, respectively)  11,524   11,173 
Total current assets  231,435   241,189 
Property and equipment, net of accumulated depreciation  117,444   115,768 
Capitalized software, net of accumulated amortization  38,790   39,012 
Goodwill and other intangible assets  259,303   257,023 
Deferred commissions  15,921   15,463 
Deferred income tax asset  43,542   30,938 
Operating lease right-of-use assets  16,462   17,187 
Other assets  2,621   2,612 
Total assets $725,518  $719,192 
Liabilities and Stockholders' Equity      
Current liabilities:        
Current portion of long-term debt $2,500  $2,188 
Accounts payable  17,420   14,329 
Accrued expenses  55,896   38,234 
Customer funds obligations  23,110   12,121 
Accrued salaries and benefits  15,142   10,790 
Accrued variable compensation  8,045   23,729 
Deferred compensation, current  2,352   2,809 
Deferred revenue, current  276,004   268,847 
Current portion of operating lease liabilities  3,141   4,086 
Current portion of finance lease liabilities  75   103 
Deferred purchase consideration, current  9,924   19,824 
Purchase commitment and contingent consideration liabilities, current  8,340   6,149 
Total current liabilities  421,949   403,209 
Deferred revenue, net of current portion  7,112   10,289 
Debt, net of current portion  46,093   46,709 
Operating lease liabilities, net of current portion  20,057   20,421 
Finance lease liabilities, net of current portion     10 
Purchase commitment and contingent consideration liabilities, net of current portion  6,813   8,412 
Deferred other liabilities  19   417 
Total liabilities  502,043   489,467 
Commitments and contingencies       
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; 53,586 and 50,014 shares issued and outstanding, respectively  53   50 
Class B voting common stock, $0.001 par value, 150,000 shares authorized; 97,718 and 100,307 shares issued and outstanding, respectively  98   100 
Additional paid in capital  253,566   244,820 
(Accumulated deficit) retained earnings  (5,625)  12,507 
Accumulated other comprehensive loss  (24,617)  (27,752)
Total stockholders' equity  223,475   229,725 
Total liabilities and stockholders' equity $725,518  $719,192 
 


 Vertex, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Loss
(Unaudited)
      
 Three Months Ended
 March 31, 
(In thousands, except per share data)2023  2022 
 (unaudited)
Revenues: 
Software subscriptions$111,014  $97,131 
Services 21,737   17,853 
Total revenues 132,751   114,984 
Cost of revenues:       
Software subscriptions 37,403   32,913 
Services 14,344   11,953 
Total cost of revenues 51,747   44,866 
Gross profit 81,004   70,118 
Operating expenses:       
Research and development 15,862   9,633 
Selling and marketing 35,736   27,452 
General and administrative 34,310   28,757 
Depreciation and amortization 3,741   2,960 
Other operating expense, net 284   848 
Total operating expenses 89,933   69,650 
(Loss) income from operations (8,929)  468 
Interest expense, net (350)  (6)
(Loss) income before income taxes (8,579)  474 
Income tax expense 9,553   808 
Net loss (18,132)  (334)
Other comprehensive (income) loss:     
Foreign currency translation adjustments and revaluations, net of tax (3,122)  2,049 
Unrealized gain on investments, net of tax (13)   
Total other comprehensive (income) loss, net of tax (3,135)  2,049 
Total comprehensive loss$(14,997) $(2,383)
      
Net loss attributable to Class A stockholders, basic$(6,072) $(95)
Net loss per Class A share, basic$(0.12) $(0.00)
Weighted average Class A common stock, basic 50,456   42,349 
Net loss attributable to Class A stockholders, diluted$(6,072) $(95)
Net loss per Class A share, diluted$(0.12) $(0.00)
Weighted average Class A common stock, diluted 50,456   42,349 
      
Net loss attributable to Class B stockholders, basic$(12,060) $(239)
Net loss per Class B share, basic$(0.12) $(0.00)
Weighted average Class B common stock, basic 100,221   106,807 
Net loss attributable to Class B stockholders, diluted$(12,060) $(239)
Net loss per Class B share, diluted$(0.12) $(0.00)
Weighted average Class B common stock, diluted 100,221   106,807 
      


Vertex, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
        
   Three months ended
   March 31, 
(In thousands)     2023  2022 
   (unaudited)
Cash flows from operating activities:         
Net loss  $(18,132) $(334)
Adjustments to reconcile net loss to net cash provided by operating activities:         
Depreciation and amortization   16,942   12,906 
Provision for subscription cancellations and non-renewals, net of deferred allowance   697   (279)
Amortization of deferred financing costs   63   53 
Change in fair value of contingent consideration liability   200   700 
Write-off of deferred financing costs      372 
Stock-based compensation expense   11,434   4,933 
Deferred income tax (benefit) expense   (12,984)  62 
Non-cash operating lease costs   726   622 
Other   (4)  412 
Changes in operating assets and liabilities:       
Accounts receivable   (795)  2,688 
Prepaid expenses and other current assets   (2,109)  (1,091)
Deferred commissions   (459)  875 
Accounts payable   3,065   1,555 
Accrued expenses   17,578   3,806 
Accrued and deferred compensation   (12,452)  (19,254)
Deferred revenue   4,352   (3,718)
Operating lease liabilities   (1,309)  (763)
Other   (58)  (950)
Net cash provided by operating activities   6,755   2,595 
Cash flows from investing activities:         
Acquisition of business, net of cash acquired      (474)
Property and equipment additions   (13,313)  (13,873)
Capitalized software additions   (4,007)  (2,912)
Purchase of investment securities, available-for-sale   (3,491)   
Proceeds from maturities of investment securities, available-for-sale   3,250    
Net cash used in investing activities   (17,561)  (17,259)
Cash flows from financing activities:        
Net increase in customer funds obligations   10,989   1,046 
Proceeds from term loan      50,000 
Principal payments on long-term debt   (313)   
Payments for deferred financing costs      (993)
Payments for taxes related to net share settlement of stock-based awards   (3,681)  (337)
Proceeds from exercise of stock options   1,490   600 
Distributions under Tax Sharing Agreement      (536)
Payments of finance lease liabilities   (16)   
Payments for deferred purchase commitments   (10,000)  (10,000)
Net cash (used in) provided by financing activities   (1,531)  39,780 
Effect of exchange rate changes on cash, cash equivalents and restricted cash   204   (83)
Net (decrease) increase in cash, cash equivalents and restricted cash   (12,133)  25,033 
Cash, cash equivalents and restricted cash, beginning of period   106,748   98,206 
Cash, cash equivalents and restricted cash, end of period  $94,615  $123,239 
Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets, end of period:         
Cash and cash equivalents  $68,643  $97,340 
Restricted cash—funds held for customers   25,972   25,899 
Total cash, cash equivalents and restricted cash, end of period  $94,615  $123,239 
        


Summary of Non-GAAP Financial Measures
(Unaudited)
       
 Three months ended  
 March 31,  
(Dollars in thousands, except per share data)2023  2022  
Non-GAAP cost of revenues, software subscriptions$23,972     $22,770     
Non-GAAP cost of revenues, services$13,508  $11,547  
Non-GAAP gross profit$95,271  $80,667  
Non-GAAP gross margin 71.8 %   70.2 %  
Non-GAAP research and development expense$13,628  $9,519  
Non-GAAP selling and marketing expense$32,072  $25,631  
Non-GAAP general and administrative expense$29,285  $26,233  
Non-GAAP operating income$16,461  $16,176  
Non-GAAP net income$12,524  $12,056  
Non-GAAP diluted EPS$0.08  $0.08  
Adjusted EBITDA$20,202  $19,136  
Adjusted EBITDA margin 15.2 %   16.6 %  
Free cash flow$(10,565) $(14,190) 
Free cash flow margin (8.0)%   (12.3)%  
       


Vertex, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
       
 Three months ended  
 March 31,  
(Dollars in thousands)2023  2022  
Non-GAAP Cost of Revenues, Software Subscriptions:           
Cost of revenues, software subscriptions$37,403  $32,913  
Stock-based compensation expense (996)  (446) 
Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues (12,435)  (9,697) 
Non-GAAP cost of revenues, software subscriptions$23,972  $22,770  
       
Non-GAAP Cost of Revenues, Services:      
Cost of revenues, services$14,344  $11,953  
Stock-based compensation expense (836)  (406) 
Non-GAAP cost of revenues, services$13,508  $11,547  
       
Non-GAAP Gross Profit:        
Gross profit$81,004  $70,118  
Stock-based compensation expense 1,832   852  
Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues 12,435   9,697  
Non-GAAP gross profit$95,271  $80,667  
       
Non-GAAP Gross Margin:        
Total Revenues$132,751  $114,984  
Non-GAAP gross margin 71.8 %   70.2 %
       
Non-GAAP Research and Development Expense:        
Research and development expense$15,862  $9,633  
Stock-based compensation expense (2,234)  (114) 
Non-GAAP research and development expense$13,628  $9,519  
       
Non-GAAP Selling and Marketing Expense:        
Selling and marketing expense$35,736  $27,452  
Stock-based compensation expense (2,898)  (1,572) 
Amortization of acquired intangible assets – selling and marketing expense (766)  (249) 
Non-GAAP selling and marketing expense$32,072  $25,631  
       
Non-GAAP General and Administrative Expense:        
General and administrative expense$34,310  $28,757  
Stock-based compensation expense (4,470)  (2,395) 
Severance expense (555)  (122) 
Transaction costs    (7) 
Non-GAAP general and administrative expense$29,285  $26,233  


Vertex, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures (continued)
(Unaudited)
       
  Three Months Ended
  March 31, 
(In thousands, except per share data) 2023  2022 
Non-GAAP Operating Income:      
Loss (income) from operations $(8,929) $468 
Stock-based compensation expense  11,434   4,933 
Depreciation and amortization of capitalized software and acquired intangible assets - cost of subscription revenues  12,435   9,697 
Amortization of acquired intangible assets – selling and marketing expense  766   249 
Severance expense  555   122 
Acquisition contingent consideration  200   700 
Transaction costs     7 
Non-GAAP operating income $16,461  $16,176 
       
       
Non-GAAP Net Income:      
Net loss $(18,132) $(334)
Income tax expense  9,553   808 
Stock-based compensation expense  11,434   4,933 
Depreciation and amortization of capitalized software and acquired intangible assets - cost of subscription revenues  12,435   9,697 
Amortization of acquired intangible assets – selling and marketing expense  766   249 
Severance expense  555   122 
Acquisition contingent consideration  200   700 
Transaction costs     7 
Non-GAAP income before income taxes  16,811   16,182 
Income tax adjustment at statutory rate  (4,287)  (4,126)
Non-GAAP net income  $12,524  $12,056 
       
Non-GAAP Diluted EPS:      
Non-GAAP net income $12,524  $12,056 
Weighted average Class A and B common stock, diluted  158,881   158,117 
Non-GAAP diluted EPS $0.08  $0.08 
       


Vertex, Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Financial Measures (continued)
(Unaudited)
       
  Three Months Ended 
  March 31, 
(Dollars in thousands)2023   2022  
Adjusted EBITDA:      
Net loss$(18,132) $(334) 
Interest expense (income), net (350)  (6) 
Income tax expense 9,553   808  
Depreciation and amortization - property and equipment 3,741   2,960  
Depreciation and amortization of capitalized software and acquired intangible assets - cost of subscription revenues 12,435   9,697  
Amortization of acquired intangible assets - selling and marketing expense 766   249  
Stock-based compensation expense 11,434   4,933  
Severance expense 555   122  
Acquisition contingent consideration 200   700  
Transaction costs    7  
Adjusted EBITDA$20,202  $19,136  
       
Adjusted EBITDA Margin:        
Total revenues$132,751  $114,984  
Adjusted EBITDA margin 15.2 %   16.6 %
       


 Three Months Ended  
 March 31,  
(Dollars in thousands)2023  2022  
Free Cash Flow:      
Cash provided by operating activities$6,755  $2,595  
Property and equipment additions (13,313)  (13,873) 
Capitalized software additions (4,007)  (2,912) 
Free cash flow$(10,565) $(14,190) 
       
Free Cash Flow Margin:      
Total revenues$132,751  $114,984  
Free cash flow margin (8.0)%   (12.3)%  
       

Investor Relations Contact:
Joe Crivelli
Vertex, Inc.
ir@vertexinc.com

Media Contact:

Rachel Litcofsky
Vertex, Inc.
mediainquiries@vertexinc.com


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