King of Prussia, PA – August 9, 2022
Vertex, Inc. (NASDAQ: VERX) (“Vertex” or the “Company”), a leading global provider of indirect tax solutions, today announced financial results for its second quarter ended June 30, 2022.
“I’m incredibly proud of the entire global Vertex team for delivering another quarter of strong performance and topline growth,” said David DeStefano, Vertex Chief Executive Officer. “Our results reflect our commitment to helping customers around the world accelerate commerce and business growth.”
Second Quarter 2022 Financial Results
- Total revenues of $119.3 million, up 13.7% year-over-year.
- Software subscription revenues of $101.1 million, up 12.8% year-over-year.
- Cloud revenues of $40.2 million, up 25.4% year-over-year.
- Annual Recurring Revenue (“ARR”) was $398.1 million in the second quarter, up 18.4% year-over-year. On a sequential basis, the ARR growth rate decreased slightly from 18.9% in the first quarter of 2022, as we have now lapped the acquisition of Taxamo in last year’s second quarter. Accordingly, on an organic basis, ARR in the second quarter was up 18.0% year-over-year, an increase from 17.2% growth in the first quarter.
- Average Annual Revenue per direct customer (“AARPC”) was $93,850 at June 30, 2022, compared to $80,500 at June 30, 2021 and $89,700 at March 31, 2022.
- Net Revenue Retention (“NRR”) was 110% in the second quarter of 2022, an increase from 106% for the quarter ended June 30, 2021 and in line with the first quarter of 2022.
- Gross Revenue Retention (“GRR”) was 96% in the second quarter of 2022. This is consistent with prior performance which has averaged 94 to 96%.
- Loss from operations of $(4.3) million, compared to a loss of $(1.5) million for the same period prior year. Non-GAAP operating income of $14.6 million, compared to $16.3 million for the same period prior year.
- Net loss of $(5.5) million, compared to net income of $0.8 million for the same period prior year.
- Net loss per basic and diluted Class A and Class B share of $(0.04) for 2022 compared to net income of $0.01 for the same period prior year.
- Non-GAAP net income of $10.3 million and Non-GAAP diluted EPS of $0.06.
- Adjusted EBITDA of $17.8 million, compared to $19.2 million for the same period prior year. Adjusted EBITDA margin of 14.9%, compared to 18.3% for the same period prior year.
- Direct customers at June 30, 2022 were 4,242, which was consistent with March 31, 2022. We use channel partners to sell and service small business customers through our one-to-many channel strategy. These indirect customers would increase our total customer count by 266 at June 30, 2022 and 239 at March 31, 2022.
John Schwab, Chief Financial Officer, stated, “Second quarter financial metrics demonstrated strong progress with continued healthy revenue growth, increased net revenue retention, and higher average annual revenue per direct customer. We are also reinvesting in our business by building our research and development capabilities, expanding our go-to-market organization, and upgrading our corporate infrastructure. These investments are well underway and expected to help us capitalize on future growth opportunities and drive additional operating leverage.”
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 June 9, 2022, Vertex won the 2021 Oracle Change Agent Award – Visionary Award for ERP ISV Partner of the Year, recognizing Vertex’s leadership and innovation in tax technology for the Oracle Ecosystem for its excellence in helping customers meet their critical business objectives.
- On May 23, 2022, Vertex was named a finalist for 2022 SAP Pinnacle Award in the SAP store category, acknowledging Vertex for its contributions as a leading SAP partner that has excelled in developing and growing the partnership and helping customers meet their goals.
For the third quarter of 2022, the Company currently expects:
- Revenues of $121.5 million to $124.0 million, representing growth of 10% to 12% from the third quarter of 2021; and
- Adjusted EBITDA of $16.5 million to $18.5 million, representing a decrease of $3.4 million to $5.4 million from the third quarter of 2021.
- For the full-year 2022, the Company currently expects:
- Revenues of $480 million to $484 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 ongoing investments in research and development and selling and marketing expenses to drive growth, as well as investments in internal infrastructure to drive future operating leverage.
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, acquisition contingent consideration, 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, August 9, 2022, to discuss its second quarter 2022 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 August 9, 2022, through August 23, 2022, by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International). The replay passcode will be 13731062.
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 1,300 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: 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, 2021 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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