Vertex, Inc. (NASDAQ:VERX), a leading global technology provider of
indirect tax solutions, today announced preliminary financial
results for the period ended March 31, 2024.
“Vertex’s first quarter financial results were strong across our
business,” noted David DeStefano, President, Chief Executive
Officer, and Chairperson of the Board. “We look forward to
providing investors with full details when we announce our full
first quarter financial results in early May.”
Revenues for the three months ended March 31, 2024 are expected
to be between $155.5 million and $157.5 million, compared to $132.8
million for the three months ended March 31, 2023, representing an
increase of approximately 17% to 19%.
Annual Recurring Revenue at March 31, 2024 is expected to be
between $523.5 million to $525.5 million, compared to $446.5
million for the three months ended March 31, 2023, representing an
increase of approximately 17% to 18%.
Net revenue retention at March 31, 2024 is expected to be
between 111% and 113%, as compared to 110% at March 31, 2023.
Gross Revenue Retention at March 31, 2024 is expected to be
between 94% and 96%, as compared to 96% at March 31, 2023.
Net Income for the three months ended March 31, 2024 is expected
to be between $2.4 million and $3.1 million, compared to a net loss
of $18.1 million for the three months ended March 31, 2023.
Adjusted EBITDA for the three months ended March 31, 2024 is
expected to be between $35.5 million and $37.5 million, compared to
$20.2 million for the three months ended March 31, 2023,
representing an increase of approximately 76% to 86%.
Approximately $2 million of the expected Adjusted EBITDA
outperformance was driven by expenses that were delayed from the
first quarter to future quarters in 2024; and another $2 million
was driven by a higher percentage of capitalized R&D costs
compared to expensed R&D costs in the first quarter.
First Quarter Earnings Announcement and Conference
Call
Vertex will release full first quarter 2024 financial results
before the market opens on Wednesday, May 8, 2024. A conference
call to discuss the results will be held at 8:30 a.m. Eastern Time
that same day.
Those wishing to participate may do so by dialing 1-412-317-6026
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 10187911, or via the Company’s Investor Relations website.
The replay will expire on May 22, 2024 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.
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, among
other statements, information concerning our preliminary results of
operations. 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, 2023 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.
Our unaudited financial information for the three months ended
March 31, 2024 presented above are preliminary, based upon our good
faith estimates and subject to completion of our financial closing
procedures. This summary is not a comprehensive statement of our
financial results for the quarterly period. We have provided ranges
for our expectations described above because our fiscal quarter
closing procedures are not yet complete. While we expect that our
final financial results for the quarterly period ended March 31,
2024, following the completion of our financial closing procedures,
will be within the ranges described above, our actual results may
differ materially from these estimates as a result of the
completion of our financial closing procedures as well as final
adjustments and other developments that may arise between now and
the time that our financial results for this quarterly period are
finalized. All of the data presented above has been prepared by and
is the responsibility of management. No independent registered
public accounting firm has audited, reviewed or compiled, examined
or performed any procedures with respect to these preliminary
results, nor have they expressed any opinion or any other form of
assurance on these preliminary estimated results.
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, except as required by applicable
law.
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.
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 Adjusted
EBITDA, which is a non-GAAP financial measures. We have provided
tabular reconciliations of this non-GAAP financial measure to its
most directly comparable GAAP financial measure.
Management uses 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, 2023, filed with the SEC on February 29, 2024.
We calculate this non-GAAP financial measure as follows:
- Adjusted EBITDA is determined by adding back to GAAP net income
or loss the net interest income or expense (including adjustments
to the settlement value of deferred purchase commitment
liabilities), 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, amortization of
cloud computing implementation costs in general and administrative
expense, asset impairments, stock-based compensation expense,
severance expense, acquisition contingent consideration, changes in
the settlement value of deferred purchase commitment liabilities
recorded as interest expense, litigation settlements, and
transaction costs, included in GAAP net income or loss for the
respective periods.
The table below provides a reconciliation of preliminary
Adjusted EBITDA to the closest comparable U.S. GAAP financial
measure, net income, for the three months ended March 31, 2024.
Dollars in thousands |
(Unaudited) |
|
|
Three Months Ended March
31, 2024 |
|
Three Months Ended March
31, 2023 |
|
|
|
|
|
|
Low |
High |
|
|
Actual |
Net income (loss) |
|
$ |
2,400 |
|
|
$ |
3,050 |
|
|
$ |
(18,132 |
) |
Interest expense (income), net |
|
|
250 |
|
|
|
300 |
|
|
|
(350 |
) |
Income tax expense (benefit) |
|
|
(4,650 |
) |
|
|
(4,350 |
) |
|
|
9,553 |
|
Depreciation and amortization |
|
|
21,500 |
|
|
|
22,000 |
|
|
|
16,942 |
|
Stock-based compensation expense |
|
|
16,000 |
|
|
|
16,500 |
|
|
|
11,434 |
|
Severance expense |
|
|
500 |
|
|
|
1,000 |
|
|
|
555 |
|
Acquisition contingent consideration |
|
|
(500 |
) |
|
|
(1,000 |
) |
|
|
200 |
|
Adjusted EBITDA |
|
$ |
35,500 |
|
|
$ |
37,500 |
|
|
$ |
20,202 |
|
|
|
|
|
|
|
|
|
|
|
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.
Investor Relations contact: Joe CrivelliVertex,
Inc.investors@vertexinc.com
Media Relations contact: Rachel
LitcofskyVertex, Inc.mediainquiries@vertexinc.com
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