Vertex Announces Fourth Quarter and Full Year 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 fourth quarter and full year ended December 31, 2021.

“We delivered strong performance in 2021, with outstanding execution from our teams around the world,” said David DeStefano, Vertex Chief Executive Officer. “Our revenues continue to accelerate, and the investments we’re making to drive our growth strategy are gaining momentum, resulting in continued market leadership.”

Fourth Quarter 2021 Financial Results

• Total revenues of $111.7 million, up 12.2% year-over-year.
• Software subscription revenues of $93.3 million, up 11.1% year-over-year.
• Cloud revenues of $34.7 million, up 38.9% year-over-year. · Annual Recurring Revenue (“ARR”) of $370.2 million, up 17.0% year-over-year and compared to 15.1% in the third quarter of 2021.
• Average Annual Revenue per customer (“AARPC”) was $86,700 at December 31, 2021, compared to $78,700 at December 31, 2020 and $82,900 at September 30, 2021.
• Net Revenue Retention (“NRR”) rate was 108% in the fourth quarter of 2021, an increase from 106% in both the December 31, 2020 and the September 30, 2021 periods.
• Loss from operations approximated breakeven, compared to income from operations of $2.5 million for the same period prior year. Non-GAAP operating income of $16.4 million, compared to $16.1 million for the same period prior year.
• Net loss of $0.6 million, compared to net income of $0.2 million for the same period prior year.
• Net income per basic and diluted Class A and Class B share of $0.00 for 2021, consistent with the same period prior year.
• Non-GAAP net income of $12.0 million and Non-GAAP diluted EPS of $0.08.
• Adjusted EBITDA of $19.3 million, compared to $19.1 million for the same period prior year. Adjusted EBITDA margin of 17.2%, compared to 19.1% for the same period prior year.
• 4,272 customers at December 31, 2021.

Full-Year 2021 Financial Results

• Total revenues of $425.5 million, up 13.6% year-over-year.
• Software subscription revenues of $358.4 million, up 13.1% year-over-year.
• Cloud revenues of $127.0 million, up 46.0% year-over-year in total, or 43% year-over-year from organic growth.
• Loss from operations of $2.9 million, compared to a loss from operations of $104.8 million for the same period prior year. Non-GAAP operating income of $66.3 million, compared to $67.4 million for the prior year.
• Net loss of $1.5 million, compared to a net loss of $75.1 million for the prior year.
• Net loss per basic and diluted Class A and Class B share was $(0.01), compared to net loss per basic and diluted Class A and Class B of $(0.57) for the prior year.
• Non-GAAP net income of $48.7 million and Non-GAAP diluted EPS of $0.33.
• Adjusted EBITDA of $78.0 million, compared to $78.4 million for the prior year. Adjusted EBITDA margin of 18.3%, compared to 20.9% for the prior year.
• Cash provided by operating activities of $92.0 million, compared to $59.5 million for the prior year. Free cash flow of $46.9 million, compared to $49.6 million for the prior year.

Vertex Chief Financial Officer John Schwab said, “The global Vertex team continued to deliver solid performance this quarter with continued strong growth quarter over quarter and year over year in key metrics including ARR and NRR growth. Following the end of the fourth quarter, we refinanced our credit facility to increase operational flexibility. We are confident we are entering this year on strong footing to support operations, invest in our people and growth strategies, and deliver sustainable growth and value to all stakeholders.”

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.”

Recent Business Highlights

• On March 8, 2022, Vertex amended its existing $100 million credit facility with a $250 million facility consisting of a $50 million term loan and a $200 million line of credit. The proceeds will be used for working capital, capital expenditures, permitted acquisitions and general corporate purposes.
• Received SAP certification for our Vertex® Indirect Tax Chain Flow Accelerator solution for integration with SAP S/4HANA, enabling customers to achieve fully automated and consistent value added tax treatment with their SAP S/4HANA software.
• Launched our Vertex® Indirect Tax O Series® Edge cloud solution which enables global omnichannel retailers to configure, automate and deploy containerized tax engines where transactions are being processed, delivering enhanced performance and scalability for tax automation at the point of need.
• Received SAP certification for our Vertex® Indirect Tax O Series® 9.0 solution built on SAP Business Technology Platform (SAP BTP), SAP’s platform for the Intelligent Enterprise.
• Rolled out Vertex® Cloud Indirect Tax Intelligence solution to empower tax professionals and indirect tax departments to optimize performance and maximize insights to improve tax outcomes and mitigate risks.
• Named a Leader in both the Enterprise and Worldwide Value-Added Tax (VAT) categories of the IDC MarketScape and recognized as a Major Player in the SMB category. Awarded IDC’s 2021 SaaS ERP Customer Satisfaction Award based on the ratings our customers provided during the survey process.

Financial Outlook

For the first quarter of 2022, the Company currently expects:

• Revenues of $112.5 million to $113.5 million, representing growth of 15% to 16% from the first quarter of 2021; and
• Adjusted EBITDA of $16.0 million to $17.0 million, representing a decrease of $1.0 million to $2.0 million from the first quarter of 2021.

For the full-year 2022, the Company currently expects:

• Revenues of $479 million to $483 million, representing growth of 13% to 14% from the full-year 2021;
• Cloud revenue growth of 33% from the full-year 2021; and
• Adjusted EBITDA of $72 million to $75 million, representing a decrease of $3 million to $6 million from the full-year 2021, reflecting additional spend in research and development, as well as selling and marketing expenses to drive growth.

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, 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, March 9, 2022, to discuss its fourth quarter and full year 2021 financial results.

Those wishing to participate via webcast should access the call through the Company’s Investor Relations website at https://ir.vertexinc.com. Those wishing to participate via telephone may dial in at 1-877-407-4018 (USA) or 1-201-689-8471 (International). The conference call replay will be available via webcast through the Company’s Investor Relations website.

The telephone replay will be available from 11:30 a.m. Eastern Time on March 9, 2022, through March 23, 2022, by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International). The replay passcode will be 13727284.

About Vertex

Vertex, Inc. is a leading provider of tax technology and services, enabling companies of all sizes to realize the full strategic potential of the tax function by automating and integrating tax processes, while leveraging advanced and predictive analytics of tax data. Vertex provides cloud-based and on-premise solutions that can be tailored to specific industries for every major line of tax, including income, sales and consumer use, value added and payroll. Headquartered in Pennsylvania, and with offices worldwide, Vertex is a privately held company that employs approximately 1,000 professionals and serves companies across the globe. For more information follow Vertex on Twitter, Facebook 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: 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”), 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.

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Company Contact

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