10-Q 1 verx-20220930x10q.htm 10-Q
0001806837--12-312022Q3false00P2YP2YVertex, Inc.4228600048673000106807000101307000P3YP3YP0YP0YP0YP1YP1YP1Y00018068372021-01-012021-12-310001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-04-012022-06-300001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-04-012021-06-300001806837verx:LcrDixonCorporationMember2022-07-012022-09-300001806837us-gaap:ComputerSoftwareIntangibleAssetMember2022-07-012022-09-300001806837us-gaap:ComputerSoftwareIntangibleAssetMember2022-01-012022-09-300001806837us-gaap:ComputerSoftwareIntangibleAssetMember2021-07-012021-09-300001806837us-gaap:ComputerSoftwareIntangibleAssetMember2021-01-012021-09-300001806837verx:SystaxSistemasFiscaisLtdaMember2021-01-012021-12-310001806837verx:TellutaxMember2021-01-012021-01-310001806837us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-09-300001806837us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001806837us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-09-220001806837verx:LcrDixonCorporationMember2022-09-300001806837verx:LcrDixonCorporationMember2021-12-310001806837verx:SystaxSistemasFiscaisLtdaMember2022-01-012022-09-300001806837verx:LcrDixonCorporationMemberus-gaap:OtherIntangibleAssetsMember2022-07-012022-09-300001806837verx:LcrDixonCorporationMemberus-gaap:OtherIntangibleAssetsMember2022-01-012022-09-300001806837us-gaap:ComputerSoftwareIntangibleAssetMember2021-01-012021-12-310001806837verx:SecondAmendmentToCreditAgreementMember2022-03-082022-03-0800018068372022-03-082022-03-080001806837us-gaap:RetainedEarningsMember2022-09-300001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-09-300001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001806837us-gaap:RetainedEarningsMember2022-06-300001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-06-300001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001806837us-gaap:RetainedEarningsMember2022-03-310001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-03-310001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-3100018068372022-03-310001806837us-gaap:RetainedEarningsMember2021-12-310001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-12-310001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001806837us-gaap:RetainedEarningsMember2021-09-300001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-09-300001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300001806837us-gaap:RetainedEarningsMember2021-06-300001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-06-300001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001806837us-gaap:RetainedEarningsMember2021-03-310001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-03-310001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-3100018068372021-03-310001806837srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2020-12-310001806837us-gaap:RetainedEarningsMember2020-12-310001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2020-12-310001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001806837srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2020-12-310001806837us-gaap:EmployeeStockOptionMemberverx:ExercisePriceRangeOneMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:ExercisePriceRangeOneMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeTenMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeSixMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeSevenMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeNineMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeFourMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeFiveMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeElevenMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeEightMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:ExercisePriceRangeTwoMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:ExercisePriceRangeThreeMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeTenMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeSixMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeSevenMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeNineMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeFourMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeFiveMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeElevenMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:PriceRangeEightMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:ExercisePriceRangeTwoMember2022-09-300001806837us-gaap:EmployeeStockOptionMemberverx:ExercisePriceRangeThreeMember2022-09-300001806837us-gaap:EmployeeStockOptionMember2021-01-012021-12-310001806837us-gaap:EmployeeStockOptionMember2021-12-310001806837us-gaap:EmployeeStockOptionMember2022-09-3000018068372022-11-012022-11-3000018068372021-11-012021-11-300001806837us-gaap:RestrictedStockUnitsRSUMember2021-12-310001806837us-gaap:RestrictedStockMember2021-12-310001806837srt:MinimumMemberus-gaap:EmployeeStockOptionMember2022-01-012022-09-300001806837srt:MaximumMemberus-gaap:EmployeeStockOptionMember2022-01-012022-09-300001806837srt:MinimumMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001806837srt:MinimumMemberus-gaap:RestrictedStockMember2022-01-012022-09-300001806837srt:MaximumMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001806837srt:MaximumMemberus-gaap:RestrictedStockMember2022-01-012022-09-300001806837verx:SoftwareLicensesMember2022-07-012022-09-300001806837verx:CloudSubscriptionsMember2022-07-012022-09-300001806837verx:SoftwareLicensesMember2022-01-012022-09-300001806837verx:CloudSubscriptionsMember2022-01-012022-09-300001806837verx:SoftwareLicensesMember2021-07-012021-09-300001806837verx:CloudSubscriptionsMember2021-07-012021-09-300001806837verx:SoftwareLicensesMember2021-01-012021-09-300001806837verx:CloudSubscriptionsMember2021-01-012021-09-300001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-07-012022-09-300001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-04-012022-06-300001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-01-012022-03-310001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-07-012021-09-300001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-04-012021-06-300001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-01-012021-03-310001806837srt:MinimumMemberverx:SoftwareDevelopedForSaleMember2022-01-012022-09-300001806837srt:MinimumMemberus-gaap:SoftwareDevelopmentMember2022-01-012022-09-300001806837srt:MaximumMemberverx:SoftwareDevelopedForSaleMember2022-01-012022-09-300001806837srt:MaximumMemberus-gaap:SoftwareDevelopmentMember2022-01-012022-09-300001806837us-gaap:NonUsMember2022-09-300001806837us-gaap:NonUsMember2021-12-310001806837verx:SoftwareDevelopmentInternalSystemsAndToolsMember2022-09-300001806837verx:SoftwareDevelopmentCloudBasedServicesMember2022-09-300001806837us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-09-300001806837us-gaap:LeaseholdImprovementsMember2022-09-300001806837us-gaap:FurnitureAndFixturesMember2022-09-300001806837us-gaap:EquipmentMember2022-09-300001806837verx:SoftwareDevelopmentInternalSystemsAndToolsMember2021-12-310001806837verx:SoftwareDevelopmentCloudBasedServicesMember2021-12-310001806837us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-12-310001806837us-gaap:LeaseholdImprovementsMember2021-12-310001806837us-gaap:FurnitureAndFixturesMember2021-12-310001806837us-gaap:EquipmentMember2021-12-310001806837verx:SoftwareDevelopmentCloudBasedServicesMember2022-01-012022-09-300001806837verx:SoftwareDevelopmentCloudBasedServicesMember2021-01-012021-09-300001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300001806837us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001806837us-gaap:RetainedEarningsMember2022-07-012022-09-300001806837us-gaap:RetainedEarningsMember2022-04-012022-06-300001806837us-gaap:RetainedEarningsMember2022-01-012022-03-310001806837us-gaap:RetainedEarningsMember2021-07-012021-09-300001806837us-gaap:RetainedEarningsMember2021-04-012021-06-300001806837us-gaap:RetainedEarningsMember2021-01-012021-03-310001806837verx:SecondAmendmentToCreditAgreementMemberus-gaap:LineOfCreditMember2022-09-300001806837verx:SecondAmendmentToCreditAgreementMemberus-gaap:LineOfCreditMember2022-03-080001806837us-gaap:LineOfCreditMember2022-03-070001806837us-gaap:LineOfCreditMember2022-09-300001806837us-gaap:LineOfCreditMember2021-12-310001806837verx:TellutaxMember2021-01-012021-09-300001806837us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001806837us-gaap:FairValueMeasurementsRecurringMember2021-12-310001806837us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837us-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837verx:LcrDixonCorporationMemberus-gaap:OtherIntangibleAssetsMember2021-12-310001806837us-gaap:OtherIntangibleAssetsMember2022-09-300001806837us-gaap:OtherIntangibleAssetsMember2021-12-310001806837verx:BusinessCombinationContingentConsiderationMember2022-09-300001806837verx:BusinessCombinationContingentConsiderationMember2021-12-310001806837verx:BusinessCombinationContingentConsiderationMember2022-01-012022-09-300001806837us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberverx:SystaxSistemasFiscaisLtdaMember2022-09-300001806837us-gaap:RestrictedStockUnitsRSUMember2022-09-300001806837us-gaap:RestrictedStockMember2022-09-300001806837us-gaap:EmployeeStockMember2022-09-300001806837us-gaap:CommonClassBMember2022-07-012022-09-300001806837us-gaap:CommonClassAMember2022-07-012022-09-300001806837us-gaap:CommonClassBMember2022-01-012022-09-300001806837us-gaap:CommonClassAMember2022-01-012022-09-300001806837us-gaap:CommonClassBMember2021-07-012021-09-300001806837us-gaap:CommonClassAMember2021-07-012021-09-300001806837us-gaap:CommonClassBMember2021-01-012021-09-300001806837us-gaap:CommonClassAMember2021-01-012021-09-300001806837verx:SCorporationMember2022-07-012022-09-300001806837verx:SCorporationMember2022-01-012022-09-300001806837verx:SCorporationMember2021-07-012021-09-300001806837verx:SCorporationMember2021-01-012021-09-300001806837verx:SoftwareDevelopmentInternalSystemsAndToolsMember2022-07-012022-09-300001806837verx:PropertyPlantAndEquipmentExcludingAllInternalUseSoftwareAndCapitalLeasesMember2022-07-012022-09-300001806837us-gaap:SoftwareDevelopmentMember2022-07-012022-09-300001806837verx:SoftwareDevelopmentInternalSystemsAndToolsMember2022-01-012022-09-300001806837verx:PropertyPlantAndEquipmentExcludingAllInternalUseSoftwareAndCapitalLeasesMember2022-01-012022-09-300001806837us-gaap:SoftwareDevelopmentMember2022-01-012022-09-300001806837verx:SoftwareDevelopmentInternalSystemsAndToolsMember2021-07-012021-09-300001806837verx:PropertyPlantAndEquipmentExcludingAllInternalUseSoftwareAndCapitalLeasesMember2021-07-012021-09-300001806837us-gaap:SoftwareDevelopmentMember2021-07-012021-09-300001806837verx:SoftwareDevelopmentInternalSystemsAndToolsMember2021-01-012021-09-300001806837verx:PropertyPlantAndEquipmentExcludingAllInternalUseSoftwareAndCapitalLeasesMember2021-01-012021-09-300001806837us-gaap:SoftwareDevelopmentMember2021-01-012021-09-300001806837verx:SecondAmendmentToCreditAgreementMember2022-03-080001806837us-gaap:AssetPledgedAsCollateralMember2022-09-300001806837verx:TermLoanMember2022-01-012022-09-300001806837verx:TermLoanMember2022-09-300001806837us-gaap:LondonInterbankOfferedRateLiborSwapRateMember2022-09-300001806837us-gaap:BaseRateMember2022-09-300001806837verx:NewTermLoanMember2022-03-080001806837us-gaap:NonUsMemberus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2022-07-012022-09-300001806837us-gaap:NonUsMemberus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-09-300001806837us-gaap:NonUsMemberus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2021-07-012021-09-300001806837us-gaap:NonUsMemberus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2021-01-012021-09-300001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-09-300001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-09-300001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-06-300001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-06-300001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2022-03-310001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2022-03-310001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-12-310001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-12-310001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-09-300001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-09-300001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-06-300001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-06-300001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-03-310001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-03-310001806837us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-12-310001806837us-gaap:CommonClassAMemberus-gaap:CommonStockMember2020-12-310001806837us-gaap:CommonClassBMember2022-09-300001806837us-gaap:CommonClassAMember2022-09-300001806837us-gaap:CommonClassBMember2021-12-310001806837us-gaap:CommonClassAMember2021-12-310001806837us-gaap:AssetUnderConstructionMember2022-09-300001806837us-gaap:AssetUnderConstructionMember2021-12-310001806837verx:LcrDixonCorporationMemberus-gaap:ComputerSoftwareIntangibleAssetMember2022-01-012022-09-300001806837us-gaap:ComputerSoftwareIntangibleAssetMember2022-09-300001806837us-gaap:ComputerSoftwareIntangibleAssetMember2021-12-310001806837verx:LcrDixonCorporationMember2022-01-012022-09-300001806837verx:LcrDixonCorporationMember2021-09-220001806837verx:SystaxSistemasFiscaisLtdaMember2022-09-300001806837verx:TellutaxMemberverx:MeasurementInputRevenueVolatilityMember2022-09-300001806837verx:TellutaxMemberus-gaap:MeasurementInputExpectedTermMember2022-09-300001806837verx:TellutaxMemberus-gaap:MeasurementInputDiscountRateMember2022-09-300001806837verx:TellutaxMemberverx:MeasurementInputRevenueVolatilityMember2021-12-310001806837verx:TellutaxMemberus-gaap:MeasurementInputExpectedTermMember2021-12-310001806837verx:TellutaxMemberus-gaap:MeasurementInputDiscountRateMember2021-12-310001806837verx:TellutaxMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837verx:TellutaxMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837verx:TellutaxMember2022-09-300001806837verx:TellutaxMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001806837verx:TellutaxMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001806837verx:TellutaxMember2021-12-310001806837verx:TellutaxMember2022-07-012022-09-300001806837verx:TellutaxMember2022-01-012022-09-300001806837verx:LcrDixonCorporationMember2021-09-222021-09-220001806837us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-09-222021-09-220001806837us-gaap:CorporateBondSecuritiesMember2022-09-300001806837us-gaap:CommercialPaperMember2022-09-300001806837us-gaap:USTreasurySecuritiesMember2022-09-300001806837us-gaap:USTreasurySecuritiesMember2022-01-012022-09-300001806837us-gaap:CorporateBondSecuritiesMember2022-01-012022-09-300001806837us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001806837us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001806837us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001806837verx:OutOfMoneyOptionsMemberus-gaap:CommonClassAMember2022-07-012022-09-300001806837verx:AmendedPlanMemberus-gaap:CommonClassAMember2022-07-012022-09-300001806837us-gaap:RestrictedStockUnitsRSUMemberus-gaap:CommonClassAMember2022-07-012022-09-300001806837us-gaap:RestrictedStockMemberus-gaap:CommonClassAMember2022-07-012022-09-300001806837us-gaap:EmployeeStockMemberus-gaap:CommonClassAMember2022-07-012022-09-300001806837verx:OutOfMoneyOptionsMemberus-gaap:CommonClassAMember2022-01-012022-09-300001806837verx:AmendedPlanMemberus-gaap:CommonClassAMember2022-01-012022-09-300001806837us-gaap:RestrictedStockUnitsRSUMemberus-gaap:CommonClassAMember2022-01-012022-09-300001806837us-gaap:RestrictedStockMemberus-gaap:CommonClassAMember2022-01-012022-09-300001806837us-gaap:EmployeeStockMemberus-gaap:CommonClassAMember2022-01-012022-09-300001806837verx:OutOfMoneyOptionsMemberus-gaap:CommonClassAMember2021-07-012021-09-300001806837verx:AmendedPlanMemberus-gaap:CommonClassAMember2021-07-012021-09-300001806837us-gaap:RestrictedStockUnitsRSUMemberus-gaap:CommonClassAMember2021-07-012021-09-300001806837us-gaap:RestrictedStockMemberus-gaap:CommonClassAMember2021-07-012021-09-300001806837us-gaap:EmployeeStockMemberus-gaap:CommonClassAMember2021-07-012021-09-300001806837verx:OutOfMoneyOptionsMemberus-gaap:CommonClassAMember2021-01-012021-09-300001806837verx:AmendedPlanMemberus-gaap:CommonClassAMember2021-01-012021-09-300001806837us-gaap:RestrictedStockUnitsRSUMemberus-gaap:CommonClassAMember2021-01-012021-09-300001806837us-gaap:RestrictedStockMemberus-gaap:CommonClassAMember2021-01-012021-09-300001806837us-gaap:EmployeeStockMemberus-gaap:CommonClassAMember2021-01-012021-09-300001806837us-gaap:CostOfSalesMember2022-07-012022-09-300001806837us-gaap:CostOfSalesMember2022-01-012022-09-300001806837us-gaap:CostOfSalesMember2021-07-012021-09-300001806837us-gaap:CostOfSalesMember2021-01-012021-09-300001806837us-gaap:LicenseAndServiceMember2022-09-3000018068372022-06-300001806837us-gaap:LicenseAndServiceMember2021-12-3100018068372021-09-3000018068372021-06-300001806837us-gaap:ServiceOtherMember2022-07-012022-09-300001806837us-gaap:SellingAndMarketingExpenseMember2022-07-012022-09-300001806837us-gaap:RestrictedStockUnitsRSUMember2022-07-012022-09-300001806837us-gaap:RestrictedStockMember2022-07-012022-09-300001806837us-gaap:ResearchAndDevelopmentExpenseMember2022-07-012022-09-300001806837us-gaap:LicenseAndServiceMember2022-07-012022-09-300001806837us-gaap:GeneralAndAdministrativeExpenseMember2022-07-012022-09-300001806837us-gaap:EmployeeStockOptionMember2022-07-012022-09-300001806837us-gaap:EmployeeStockMember2022-07-012022-09-300001806837us-gaap:PhantomShareUnitsPSUsMemberverx:TaxamoMember2022-01-012022-09-300001806837us-gaap:ServiceOtherMember2022-01-012022-09-300001806837us-gaap:SellingAndMarketingExpenseMember2022-01-012022-09-300001806837us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001806837us-gaap:RestrictedStockMember2022-01-012022-09-300001806837us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-09-300001806837us-gaap:LicenseAndServiceMember2022-01-012022-09-300001806837us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-09-300001806837us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001806837us-gaap:EmployeeStockMember2022-01-012022-09-300001806837us-gaap:ServiceOtherMember2021-07-012021-09-300001806837us-gaap:SellingAndMarketingExpenseMember2021-07-012021-09-300001806837us-gaap:RestrictedStockUnitsRSUMember2021-07-012021-09-300001806837us-gaap:RestrictedStockMember2021-07-012021-09-300001806837us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-300001806837us-gaap:LicenseAndServiceMember2021-07-012021-09-300001806837us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-300001806837us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001806837us-gaap:EmployeeStockMember2021-07-012021-09-300001806837us-gaap:ServiceOtherMember2021-01-012021-09-300001806837us-gaap:SellingAndMarketingExpenseMember2021-01-012021-09-300001806837us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001806837us-gaap:RestrictedStockMember2021-01-012021-09-300001806837us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-09-300001806837us-gaap:LicenseAndServiceMember2021-01-012021-09-300001806837us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300001806837us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001806837us-gaap:EmployeeStockMember2021-01-012021-09-3000018068372021-01-012021-09-300001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-07-012022-09-3000018068372022-07-012022-09-300001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-01-012022-03-3100018068372022-01-012022-03-310001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-07-012021-09-3000018068372021-07-012021-09-300001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-01-012021-03-3100018068372021-01-012021-03-310001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2022-04-012022-06-3000018068372022-04-012022-06-300001806837us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember2021-04-012021-06-3000018068372021-04-012021-06-300001806837us-gaap:OtherIntangibleAssetsMember2022-01-012022-09-300001806837verx:GoodwillAndOtherIntangibleAssetsMemberverx:LcrDixonCorporationMemberus-gaap:TradeNamesMember2021-09-222021-09-220001806837verx:GoodwillAndOtherIntangibleAssetsMemberverx:LcrDixonCorporationMemberus-gaap:CustomerRelationshipsMember2021-09-222021-09-220001806837us-gaap:PropertyPlantAndEquipmentMemberverx:LcrDixonCorporationMemberus-gaap:DevelopedTechnologyRightsMember2021-09-222021-09-220001806837us-gaap:OtherIntangibleAssetsMember2021-01-012021-12-310001806837verx:AssetsHeldUnderFinanceLeasesMember2022-09-300001806837us-gaap:SoftwareDevelopmentMember2022-09-300001806837verx:AssetsHeldUnderFinanceLeasesMember2021-12-310001806837us-gaap:SoftwareDevelopmentMember2021-12-3100018068372020-12-3100018068372022-09-3000018068372021-12-310001806837us-gaap:CommonClassBMember2022-11-040001806837us-gaap:CommonClassAMember2022-11-0400018068372022-01-012022-09-30xbrli:sharesiso4217:USDxbrli:pureverx:Yiso4217:USDxbrli:sharesverx:itemverx:segmentverx:payment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

    

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

    

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39413

VERTEX, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

    

 

    

23-2081753

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

2301 Renaissance Blvd
King of Prussia, Pennsylvania

 

19406 

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (800) 355-3500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading symbol

    

Name of each exchange on which registered

Class A Common Stock, Par Value $0.001 Per Share

VERX

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

    

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of November 4, 2022, the registrant had 48,732,884 shares of Class A common stock, $0.001 par value per share, and 101,307,000 shares of Class B common stock, $0.001 par value per share, outstanding.

1

TABLE OF CONTENTS

 

Page

Part I - Financial Information 

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)

5

Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

6

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2022 and 2021 (unaudited)

7

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)

9

Notes to Condensed Consolidated Financial Statements (unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

55

Item 4.

Controls and Procedures

56

Part II - Other Information

57

Item 1.

Legal Proceedings

57

Item 1A.

Risk Factors

57

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

57

Item 3.

Defaults Upon Senior Securities

57

Item 4.

Mine Safety Disclosures

57

Item 5.

Other Information

57

Item 6.

Exhibits

58

Signatures

59

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made in this Quarterly Report on Form 10-Q that are not statements of historical fact, including statements about our beliefs and expectations and regarding future events or our future results of operations, financial condition, business, strategies, financial needs, and the plans and objectives of management, are forward-looking statements and should be evaluated as such. These statements often include words such as “anticipate,” “believe,” “expect,” “suggests,” “plans,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” and other similar expressions or the negatives of those terms. We base these forward-looking statements on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances at such time. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of future performance or results. The forward-looking statements are subject to and involve risks, uncertainties and assumptions, and you should not place undue reliance on these forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. Important factors that may materially affect such forward-looking statements include, but are not limited to:

the potential effects on our business of the continued global existence of the coronavirus disease 2019 (“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;
the timing of our introduction of new solutions or updates to existing solutions;
our ability to successfully diversify our solutions by developing or introducing new solutions or acquiring and integrating additional businesses, products, services or content;
our ability to maintain and expand our strategic relationships with third parties;
risks related to our expanding international operations;
our ability to deliver our solutions to customers without disruption or delay;
our exposure to liability from errors, delays, fraud or system failures, which may not be covered by insurance;
risks related to our determinations of customers’ transaction tax and tax payments;
risks related to changes in tax laws and regulations or their interpretation or enforcement;
our ability to manage cybersecurity and data privacy risks;
risks related to failures in information technology, infrastructure and third-party service providers;
our ability to effectively protect, maintain and enhance our brand;
global economic weakness and uncertainties, and disruption in the capital and credit markets;
business disruptions related to natural disasters, epidemic outbreaks, terrorist acts, political events or other events outside of our control;
our ability to comply with anti-corruption, anti-bribery and similar laws;
changes in interest rates, security ratings and market perceptions of the industry in which we operate, or our ability to obtain capital on commercially reasonable terms or at all;
any statements of belief and any statements of assumptions underlying any of the foregoing; and
other factors beyond our control.

3

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in our Annual Report on Form 10-K for the year ended December 31, 2021, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and in other sections of this Quarterly Report on Form 10-Q, including under Part II, Item 1A, Risk Factors. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for us to identify all such risk factors, nor can we assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on our forward-looking statements, and you should not rely on forward-looking statements as predictions of future events. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date of this report. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

4

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Vertex, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

As of September 30, 2022 and December 31, 2021

(Amounts in thousands, except per share data)

September 30, 

    

December 31, 

2022

2021

    

(unaudited)

    

Assets

Current assets:

 

  

 

  

Cash and cash equivalents

$

72,370

$

73,333

Funds held for customers

 

23,840

 

24,873

Accounts receivable, net of allowance of $9,620 and $9,151, respectively

 

94,529

 

76,929

Prepaid expenses and other current assets

 

22,494

 

20,536

Investment securities available-for-sale, current (amortized cost of $6,163 at September 30, 2022)

6,127

Total current assets

 

219,360

 

195,671

Property and equipment, net of accumulated depreciation

 

109,123

 

98,390

Capitalized software, net of accumulated amortization

 

38,561

 

33,442

Goodwill and other intangible assets

 

245,284

 

272,702

Deferred commissions

 

13,757

 

12,555

Deferred income tax asset

30,716

35,298

Operating lease right-of-use assets

18,089

20,249

Other assets

 

2,422

 

1,900

Total assets

$

677,312

$

670,207

Liabilities and Stockholders' Equity

 

 

Current liabilities:

 

  

 

  

Current portion of long-term debt

$

1,875

$

Accounts payable

13,052

13,000

Accrued expenses

 

28,908

 

22,966

Tax sharing agreement distributions payable

 

 

536

Customer funds obligations

 

20,858

 

23,461

Accrued salaries and benefits

 

14,937

 

16,671

Accrued variable compensation

 

19,585

 

26,462

Deferred compensation, current

 

2,067

 

4,202

Deferred revenue, current

 

242,637

 

237,344

Current portion of operating lease liabilities

4,278

3,933

Current portion of finance lease liabilities

967

284

Deferred purchase consideration, current

19,724

19,805

Purchase commitment and contingent consideration liabilities, current

 

5,082

 

468

Total current liabilities

 

373,970

 

369,132

Deferred compensation, net of current portion

 

 

1,963

Deferred revenue, net of current portion

 

11,098

 

11,666

Debt, net of current portion

47,324

Operating lease liabilities, net of current portion

21,431

24,320

Finance lease liabilities, net of current portion

24

68

Deferred purchase consideration, net of current portion

19,419

Purchase commitment and contingent consideration liabilities, net of current portion

 

8,009

 

10,829

Deferred other liabilities

 

1,416

 

2,726

Total liabilities

 

463,272

 

440,123

Commitments and contingencies (Note 13)

 

  

 

  

 

 

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; 48,673 and 42,286 shares issued and outstanding, respectively

49

42

Class B voting common stock, $0.001 par value, 150,000 shares authorized; 101,307 and 106,807 shares issued and outstanding, respectively

101

107

Additional paid in capital

238,093

222,621

Retained earnings

 

17,816

 

24,811

Accumulated other comprehensive loss

 

(42,019)

 

(17,497)

Total stockholders' equity

 

214,040

 

230,084

Total liabilities and stockholders' equity

$

677,312

$

670,207

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Vertex, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

For the three and nine months ended September 30, 2022 and 2021

(Amounts in thousands, except per share data)

Three months ended September 30, 

Nine months ended September 30, 

2022

2021

2022

2021

(unaudited)

(unaudited)

Revenues:

    

  

    

  

    

Software subscriptions

$

106,368

$

92,276

$

304,587

$

265,160

Services

 

19,870

 

18,442

55,911

48,732

Total revenues

 

126,238

 

110,718

360,498

 

313,892

Cost of revenues:

 

  

 

  

Software subscriptions

 

36,638

 

32,000

105,760

84,419

Services

 

14,020

 

11,938

37,893

33,831

Total cost of revenues

 

50,658

 

43,938

143,653

 

118,250

Gross profit

 

75,580

 

66,780

216,845

 

195,642

Operating expenses:

 

  

 

  

Research and development

 

10,351

 

9,879

30,294

33,264

Selling and marketing

 

30,252

 

25,658

89,683

70,673

General and administrative

 

31,679

 

31,237

90,520

80,954

Depreciation and amortization

 

2,936

 

3,082

9,120

8,787

Other operating expense, net

 

1,233

 

538

1,927

4,892

Total operating expenses

 

76,451

 

70,394

221,544

 

198,570

Loss from operations

 

(871)

 

(3,614)

(4,699)

 

(2,928)

Interest expense, net

 

361

 

521

1,079

671

Loss before income taxes

 

(1,232)

 

(4,135)

(5,778)

 

(3,599)

Income tax expense (benefit)

 

(91)

 

(187)

1,217

(2,747)

Net loss

 

(1,141)

 

(3,948)

(6,995)

 

(852)

Other comprehensive loss:

 

Foreign currency translation adjustments and revaluations, net of tax

 

10,670

 

5,704

24,496

10,040

Unrealized loss on investments, net of tax

28

26

Total other comprehensive loss, net of tax

10,698

5,704

24,522

10,040

Total comprehensive loss

$

(11,839)

$

(9,652)

$

(31,517)

$

(10,892)

Net loss attributable to Class A stockholders, basic

$

(369)

$

(1,070)

$

(2,092)

$

(195)

Net loss per Class A share, basic

$

(0.01)

$

(0.03)

$

(0.05)

$

(0.01)

Weighted average Class A common stock, basic

 

48,488

 

40,141

 

44,708

 

33,775

Net loss attributable to Class A stockholders, diluted

$

(369)

$

(1,070)

$

(2,092)

$

(195)

Net loss per Class A share, diluted

$

(0.01)

$

(0.03)

$

(0.05)

$

(0.01)

Weighted average Class A common stock, diluted

 

48,488

 

40,141

 

44,708

 

33,775

Net loss attributable to Class B stockholders, basic

$

(772)

$

(2,878)

$

(4,903)

$

(657)

Net loss per Class B share, basic

$

(0.01)

$

(0.03)

$

(0.05)

$

(0.01)

Weighted average Class B common stock, basic

 

101,307

 

108,017

 

104,772

 

113,646

Net loss attributable to Class B stockholders, diluted

$

(772)

$

(2,878)

$

(4,903)

$

(657)

Net loss per Class B share, diluted

$

(0.01)

$

(0.03)

$

(0.05)

$

(0.01)

Weighted average Class B common stock, diluted

101,307

108,017

104,772

113,646

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Vertex, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the nine months ended September 30, 2022 (unaudited)

(Amounts in thousands)

Accumulated

Outstanding

Class A

Outstanding

Class B

Additional

  

  

Other 

  

Total

Class A

Common

Class B

Common

Paid In

Retained

Comprehensive 

Stockholders'

  

  

Shares

  

 Stock

  

Shares

  

Stock

  

Capital

  

Earnings

  

Loss

  

Equity

Balance, January 1, 2022

42,286

$

42

106,807

$

107

$

222,621

$

24,811

$

(17,497)

$

230,084

Exercise of stock options, net

 

272

 

 

 

 

278

 

 

 

 

278

Shares issued upon vesting of Restricted Stock Units, net

3

(15)

(15)

Stock-based compensation expense

4,867

4,867

Foreign currency translation adjustments and revaluations, net of tax

 

 

 

 

 

 

 

(2,049)

 

 

(2,049)

Net loss

 

 

 

 

 

 

(334)

 

 

 

(334)

Balance, March 31, 2022

 

42,561

42

 

106,807

107

227,751

24,477

(19,546)

 

232,831

Exercise of stock options, net

93

(34)

(34)

Shares issued upon vesting of Restricted Stock Awards, net

59

Stock-based compensation expense

4,166

4,166

Shares issued in connection with ESPP

103

967

967

Class B shares exchanged for Class A shares

5,500

6

(5,500)

(6)

Foreign currency translation adjustments and revaluations, net of tax

(11,777)

(11,777)

Unrealized gain from available-for-sale investments, net of tax

2

2

Net loss

 

(5,520)

(5,520)

Balance, June 30, 2022

 

48,316

48

101,307

101

232,850

18,957

(31,321)

220,635

Exercise of stock options, net

212

1

387

388

Shares issued upon vesting of Restricted Stock Units, net

31

(176)

(176)

Shares issued upon vesting of Restricted Stock Awards, net

114

(164)

(164)

Stock-based compensation expense

5,196

5,196

Foreign currency translation adjustments and revaluations, net of tax

(10,670)

(10,670)

Unrealized loss from available-for-sale investments, net of tax

(28)

(28)

Net loss

(1,141)

(1,141)

Balance, September 30, 2022

 

48,673

$

49

101,307

$

101

$

238,093

$

17,816

$

(42,019)

$

214,040

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Vertex, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the nine months ended September 30, 2021 (unaudited)

(Amounts in thousands)

Accumulated

Outstanding

Class A

Outstanding

Class B

Additional

  

  

Other 

  

Total

Class A

Common

Class B

Common

Paid In

Retained

Comprehensive 

Stockholders'

  

Shares

  

 Stock

  

Shares

  

Stock

  

Capital

  

Earnings

  

Loss

  

Equity

Balance, January 1, 2021

26,327

$

26

120,117

$

120

$

206,541

$

25,782

$

(3,127)

$

229,342

ASC 842 transition adjustment

 

508

508

Exercise of stock options, net

640

1

(6,998)

(6,997)

Shares issued upon vesting of Restricted Stock Units, net

5

(34)

(34)

Stock-based compensation expense

6,302

6,302

Foreign currency translation adjustments and revaluations, net of tax

(977)

(977)

Net income

 

2,288

2,288

Balance, March 31, 2021

26,972

27

120,117

120

205,811

28,578

(4,104)

230,432

Exercise of stock options, net

462

1

(3,293)

(3,292)

Shares issued upon vesting of Restricted Stock Awards, net

234

Shares issued in connection with ESPP

60

6,101

6,101

Stock-based compensation expense

1,010

1,010

Class B shares exchanged for Class A shares

12,100

12

(12,100)

(12)

Foreign currency translation adjustments and revaluations, net of tax

(3,359)

(3,359)

Net income

808

808

Balance, June 30, 2021

 

39,828

40

108,017

108

209,629

29,386

(7,463)

231,700

Exercise of stock options, net

625

1

(919)

(918)

Shares issued upon vesting of Restricted Stock Units, net

3

(44)

(44)

Shares issued upon vesting of Restricted Stock Awards, net

118

(213)

(213)

Stock-based compensation expense

7,194

7,194

Foreign currency translation adjustments and revaluations, net of tax

(5,704)

(5,704)

Net loss

(3,948)

(3,948)

Balance, September 30, 2021

 

40,574

$

41

108,017

$

108

$

215,647

$

25,438

$

(13,167)

$

228,067

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

Vertex, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2022 and 2021

(Amounts in thousands)

Nine Months Ended September 30, 

    

2022

    

2021

(unaudited)

Cash flows from operating activities:

 

  

 

  

Net loss

$

(6,995)

$

(852)

Adjustments to reconcile net loss to net cash provided by operating activities: