Vertex Announces First Quarter 2021 Financial Results

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King of Prussia, PA

Vertex, Inc. (NASDAQ: VERX) (“Vertex” or the “Company”), a global provider of tax technology solutions, today announced financial results for its first quarter ended March 31, 2021.

“Our strong start to 2021 reflects the trust our customers have in us to help them navigate today’s complex and dynamic commerce landscape. The entire team is laser focused on our mission to enable every business to transact, comply and grow with confidence,” said David DeStefano, Vertex President and Chief Executive Officer. “As tax revenues continue to be a key part of our global economic recovery, the mission-critical role of our solutions to enable growth and reduce tax compliance friction will only continue. The investments we are making in our people and technology keep us well-positioned to seize these opportunities with innovative and differentiated solutions.”

First Quarter 2021 Financial Results

• Total revenues of $98.2 million, up 10.1% year-over-year.
• Software subscription revenues of $83.3 million, up 9.9% year-over-year.
• Annual Recurring Revenue of $320.1 million, up 12.6% year-over-year.
• Operating income of $2.1 million, compared to an operating loss of $(28.2) million for the same period prior year. Non-GAAP operating income of $15.4 million, up 23.6% year-over-year.
• Net income of $2.3 million, compared to a net loss of $(29.1) million for the same period prior year. Non-GAAP net income of $11.0 million, compared to $11.6 million for the same period prior year.
• Net income (loss) per basic Class A and Class B share was $0.02, compared to $0.00 and $(0.24), respectively, for the same period prior year. Net income (loss) per diluted Class A and Class B share was $0.01, compared to $0.00 and $(0.24), respectively, for the same period prior year.
• Non-GAAP diluted EPS was $0.07, compared to $0.09 for the same period prior year.
• Adjusted EBITDA of $18.2 million, up 18.9% year-over-year. Adjusted EBITDA margin of 18.5%, up 140 basis points year-over-year.

Vertex Chief Financial Officer John Schwab said, “We continue to execute and have delivered another strong quarter of performance. We remain confident in the strength of our business model, and plan to continue investing in our sustainable, long-term growth as CFOs and CIOs around the world face increased business and regulatory complexity. We believe the investments we are making to accelerate go-to-market, expand our partnerships, deliver new products, and enable great customer experiences are adding positive momentum to our business.”

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

Recent Business Highlights

• Acquired Taxamo, a cloud-based pioneer in tax and payment automation for global e-commerce and marketplaces on May 12, 2021. The purchase price for Taxamo was approximately $200 million in an all cash transaction.  This acquisition supports and accelerates our growth strategies across ecommerce platforms and marketplaces in the enterprise and mid-market in Europe and North America, and among our existing global customers. The acquisition is a strategic opportunity that we believe will provide accretive revenue growth.
• Acquired the assets of edge-computing startup, Tellutax, on January 25, 2021, enabling the next generation of tax technology solutions to be delivered seamlessly at the point of need with increased scalability and simplified management.
• Announced a partnership with BigCommerce, a proven e-commerce leader, to deliver sales and use tax automation to the BigCommerce Apps Marketplace.
• Introduced the Vertex Indirect Tax Accelerator for Oracle Fusion Cloud Enterprise Resource Planning.
• Net Revenue Retention Rate was 105% in the first quarter of 2021 as compared to 106% in the fourth quarter of 2020.
• Announced the hiring of Yvette Burton as Chief People Innovation Officer, an executive responsible to shape the company’s global strategic workforce planning efforts and lead organizational programs to advance inclusion and diversity.

Financial Outlook

For the second quarter of 2021, the Company currently expects:

• Revenues in the range of $99.0 million to $100.0 million, representing growth of 8.5% to 9.6% from the second quarter of 2020; and
• Adjusted EBITDA in the range of $15.5 million to $16.5 million, representing a decrease of $6.0 million to $5.0 million from the second quarter of 2020.

The Taxamo acquisition closed on May 12, 2021. The above guidance for the second quarter of 2021 includes the impact of the acquisition, which includes a contribution of $0.5 million to revenues and $0.5 million decrease to Adjusted EBITDA.

For the full-year 2021, the Company currently expects:

• Revenues in the range of $410 million to $414 million, representing growth of 9.4% to 10.5% from the full-year 2020; and
• Adjusted EBITDA in the range of $66 million to $70 million, representing a decrease of $12.4 million to $8.4 million from the full-year 2020 due to the acceleration of our growth investments.

The full-year 2021 guidance reflects the impact of the Taxamo acquisition for the remainder of the year, which includes the contribution of $9.0 million to revenues and a $2.0 million decrease to Adjusted EBITDA primarily attributable to integration costs. We expect Taxamo to have a more significant impact on our 2022 revenues due to the timing of the acquisition and the tailwinds from new and pending marketplace facilitator VAT regulations. Notably, such regulations are already effective in the United Kingdom and are scheduled to go into effect throughout the European Union in July 2021.

Certain non-GAAP financial measures included in our financial outlook were not reconciled to the comparable GAAP financial measures because the GAAP financial measures are not accessible on a forward-looking basis. The Company is unable to reconcile these forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures 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 GAAP financial measures for these periods but would not impact the non-GAAP financial measures. Such items may include stock-based compensation charges, depreciation and amortization of capitalized software costs and acquired intangible assets, severance, and other items. The unavailable information could have a significant impact on the Company’s GAAP financial results. 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 historical and forward-looking non-GAAP financial measures to the nearest corresponding GAAP equivalents are provided below under “Use and Reconciliation of Non-GAAP Financial Measures.”

Conference Call and Webcast Information

Vertex will host a conference call to discuss the first quarter 2021 financial results on May 13, 2021 at 8:30 a.m. Eastern Time (“ET”). The conference call can be accessed live over the phone by dialing 1-877-407-4018, or for international callers 1-201-689-8471. A replay will be available from 11:30 a.m. ET on May 13, 2021, through May 27, 2021, by dialing 1-844-512-2921, or for international callers 1-412-317-6671. The replay passcode will be 13718842. 

The call will also be webcast live from Vertex’s investor relations website at https://ir.vertexinc.com. Following the completion of the call, a recorded replay of the webcast will be available on the website.

About Vertex

Vertex, Inc. is a leading global provider of indirect tax software and solutions. The company’s mission is to deliver the most trusted tax technology enabling global businesses to transact, comply and grow with confidence. Vertex provides cloud-based and on-premise solutions that can be tailored to specific industries for major lines of indirect tax, including sales and consumer use, value added and payroll. Headquartered in North America, and with offices in South America and Europe, Vertex employs over 1,200 professionals and serves companies across the globe.

For more information, follow Vertex on Twitter and LinkedIn.

Copyright © 2020 Vertex, Inc. All rights reserved. The information contained in this press release is intended for information purposes only, may change at any time in the future, and is not legal or tax advice. 

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Forward Looking Statements

Any statements made in this press release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. Forward-looking statements are based on Vertex management’s beliefs, as well as assumptions made by, and information currently available to, them. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. Factors which may cause actual results to differ materially from current expectations include, but are not limited to: potential effects on our business of the COVID-19 pandemic; our ability to attract new customers on a cost-effective basis and the extent to which existing customers renew and upgrade their subscriptions; our ability to sustain and expand revenues, maintain profitability, and to effectively manage our anticipated growth; our ability to identify acquisition targets and to successfully integrate and operate acquired businesses; our ability to maintain and expand our strategic relationships with third parties; and the other factors described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities Exchange Commission (“SEC”). Copies of such filing 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.

Company Contact

Marisa Norris
Vertex, Inc.
Director, Corporate Communications
marisa.norris@vertexinc.com

Investor Relations Contact

Ankit Hira or Ed Yuen
Solebury Trout for Vertex, Inc.
ir@vertexinc.com
610.312.2890