Vertex, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 27, 2025 (the “2024 Annual Report”). In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the section titled “Special Note Regarding Forward-Looking Statements” above, and in Part I, Item 1A of the 2024 Annual Report and as may be subsequently updated by our other SEC filings.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2026 (the “2025 Annual Report”). In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the section titled “Special Note Regarding Forward-Looking Statements” above, and in Part I, Item 1A of the 2025 Annual Report and as may be subsequently updated by our other SEC filings.

Previous wording

Vertex is a leading global provider of indirect tax solutions. Our 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 empowers the world’s leading brands to simplify the complexity of continuous compliance. Vertex employs over 1,900 professionals and serves companies across the globe.

Current wording

Vertex is a leading provider of enterprise compliance technology for global commerce. Our software, data, and services help businesses operate with confidence by automating and governing transaction-based compliance obligations that arise wherever they buy, sell, and move goods and services around the world. Our 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 every major line of indirect tax, including sales and consumer use, value added (including e-invoicing), and payroll. Headquartered in North America, and with offices in South America and Europe, Vertex employs over 2,100 professionals and serves companies across the globe.

Previous wording

We derive the majority of our revenue from software subscriptions. These subscriptions include use of our software and ongoing monthly content updates. Our software is offered on a subscription basis to our customers, regardless of their deployment preferences. On-premise subscriptions are typically sold through one-year contracts, and cloud-based subscriptions are typically sold through one- to three-year contracts. We bill the majority of our customers annually in advance of the subscription period.

Current wording

We derive the majority of our revenue from software subscriptions. These subscriptions include use of our software and ongoing monthly content updates. Our software is offered on a subscription basis to our customers, regardless of their deployment preferences. On-premise subscriptions and cloud-based subscriptions are typically sold through one- to three-year contracts. We bill the majority of our customers annually in advance of the subscription period.

Previous wording

Our customers include a majority of the Fortune 500, as well as a majority of the top 10 companies by revenue in multiple industries such as retail, technology, and manufacturing, in addition to leading marketplaces. As our customers expand geographically and pursue omnichannel business models, their tax determination and compliance requirements increase and become more complex, providing sustainable organic growth opportunities for our business. Our flexible, tiered transaction-based pricing model also results in our customers growing their spend with us as they grow and continue to use our solutions. We principally price our solutions based on a customer’s revenue base, in addition to a number of other factors.

Current wording

Our customers include the majority of the Fortune 500, as well as a majority of the top 10 companies by revenue in multiple industries such as retail, technology, and manufacturing, in addition to leading marketplaces. Our customer base also includes many of Europe’s largest companies in the industrial and chemical manufacturing, pharmaceutical, medical device and metals and mining industries. As our customers expand geographically and pursue omnichannel business models, their tax determination and compliance requirements increase and become more complex, providing sustainable organic growth opportunities for our business. Our flexible, tiered transaction-based pricing model also results in our customers growing their spend with us as they grow and continue to use our solutions. We principally price our solutions based on a customer’s revenue base, in addition to a number of other factors.

Previous wording

We employ a hybrid deployment model to align to our customers’ technology preferences for their core financial management software across on-premise, cloud deployments or any combination of these models. Over time, we expect both existing and newly acquired customers to continue to shift towards cloud deployment models. Cloud-based subscription sales to new customers have grown at a faster rate than on-premise software subscription sales, which is a trend that we expect to continue over time. We generated 56% and 49% of software subscription revenue from cloud-based subscriptions during the three months ended September 30, 2025 and 2024, respectively, and 55% and 48% for the nine months ended September 30, 2025 and 2024, respectively. While our on-premise software subscription revenue comprised 44% and 51% of our software subscription revenue during the three months ended September 30, 2025 and 2024, respectively, and 45% and 52% during the nine months ended September 30, 2025 and 2024, respectively, it continues to decrease as a percentage of total software subscriptions revenues as cloud-based subscriptions grow.

Current wording

We employ a hybrid deployment model to align to our customers’ technology preferences for their core financial management software across on-premise, cloud deployments or any combination of these models. Over time, we expect both existing and newly acquired customers to continue to shift towards cloud deployment models. Cloud-based subscription sales to new customers have grown at a faster rate than on-premise software subscription sales, which is a trend that we expect to continue over time. We generated 58% and 53% of software subscription revenue from cloud-based subscriptions during the three months ended March 31, 2026 and 2025, respectively. While our on-premise software subscription revenue comprised 42% and 47% of our software subscription revenue during the three months ended March 31, 2026 and 2025, respectively, it continues to decrease as a percentage of total software subscriptions revenues as cloud-based subscriptions grow.

Previous wording

Customer Relationship Management, procurement, billing, Point of Sale and e-commerce. These partners include Adobe/Magento, Coupa, Microsoft Dynamics, NetSuite, Oracle, Salesforce, SAP, SAP Ariba, Shopify, Workday and Zuora. We also collaborate with numerous accounting firms who have built implementation practices around our software to serve their customer base.

Current wording

Our partner ecosystem is a differentiating, competitive strength in both our software development and our sales and marketing activities. We integrate with key technology partners that span Enterprise Resource Planning (“ERP”), Customer Relationship Management, procurement, billing, Point of Sale and e-commerce. These partners include Adobe/Magento, Coupa, Kintsugi AI, Inc., Microsoft Dynamics, NetSuite, Oracle, Salesforce, SAP, SAP Ariba, Shopify, Workday and Zuora. We also collaborate with numerous accounting firms who have built implementation practices around our software to serve their customer base.

Previous wording

We believe that global commerce and the compliance environment provides durable and accelerating growth opportunities for our business. We generated revenue of $192.1 million and $170.4 million for the three months ended September 30, 2025 and 2024, respectively, and $553.7 million and $488.3 million for the nine months ended September 30, 2025 and 2024, respectively. We had net income of $4.0 million and $7.2 million for the three months ended September 30, 2025 and 2024, respectively, and $14.2 million and $15.1 million for the nine months ended September 30, 2025 and 2024, respectively. These amounts are presented in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”).

Current wording

We believe that global commerce and the compliance environment provides durable and accelerating growth opportunities for our business. We generated revenue of $196.6 million and $177.1 million for the three months ended March 31, 2026 and 2025, respectively. We had net income (loss) of $(2.5) million and $11.1 million for the three months ended March 31, 2026 and 2025, respectively. These amounts are presented in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”).

Previous wording

We define Adjusted EBITDA as net loss or income before interest (including adjustments to the settlement value of deferred purchase commitment liabilities), taxes, depreciation, and amortization, as adjusted to exclude charges for stock-based compensation expense, amortization of cloud computing arrangement implementation costs, severance expense, acquisition contingent consideration, changes in the fair value of acquisition contingent earn-outs, changes in the settlement value of deferred purchase commitment liabilities recorded as interest expense, and transaction costs. Adjusted EBITDA was $43.5 million and $38.6 million for the three months ended September 30, 2025 and 2024, respectively, and $119.1 million and $113.9 million for the nine months ended September 30, 2025 and 2024, respectively. Adjusted EBITDA is a non-GAAP financial measure. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Use and Reconciliation of Non-GAAP Financial Measures” for further discussion of key business metrics and non-GAAP financial measures and their comparison to GAAP financial measures.

Current wording

We define Adjusted EBITDA as net loss or income before interest, taxes, depreciation, and amortization, as adjusted to exclude charges for stock-based compensation expense, amortization of cloud computing arrangement implementation costs, severance expense, acquisition contingent consideration, changes in the fair value of acquisition contingent earn-outs, acquisition-related retained employee compensation, and transaction costs. Adjusted EBITDA was $44.1 million and $37.2 million for the three months ended March 31, 2026 and 2025, respectively. Adjusted EBITDA is a non-GAAP financial measure. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Use and Reconciliation of Non-GAAP Financial Measures” for further discussion of key business metrics and non-GAAP financial measures and their comparison to GAAP financial measures.

Previous wording

We generate services revenue primarily in support of our customers’ needs associated with our software and to enable them to realize the full benefit of our solutions. These software subscription-related services include configuration, data migration and implementation, and premium support and training. In addition, we generate services revenue through our managed services offering which allows customers to outsource all or a portion of their indirect tax operations to us. These services include indirect tax return preparation, filing and tax payment, and notice management. We generally bill for services on a per-transaction or time and materials basis, and we recognize revenue from deliverable-based professional services as services are performed.

Current wording

We generate services revenue primarily in support of our customers’ needs associated with our software and to enable them to realize the full benefit of our solutions. These software subscription-related services include configuration, data migration and implementation, and premium support and training. In addition, we generate services revenue through our managed services offering which allows customers to outsource all or a portion of their indirect tax operations to us. These services include indirect tax return preparation, filing and tax payment, and notice management. We generally bill for

Previous wording

services of approximately 60%. In addition, our managed services offering has continued to experience increased revenues associated with returns processing volume increases attributable to regulatory changes, as customers expanded their tax filings into more jurisdictions.

Current wording

Fluctuations in services revenue are directly correlated to fluctuations in our subscription revenues with respect to implementation and training services as we have historically experienced an attachment rate to subscription sales for these services of approximately 60%. In addition, our managed services offering has continued to experience increased revenues associated with returns processing volume increases attributable to regulatory changes, as customers expanded their tax filings into more jurisdictions.

Previous wording

Selling and marketing expenses consist primarily of personnel and related expenses in support of sales and marketing efforts. These costs include salaries, benefits, bonuses and stock-based compensation. In addition, selling and marketing expenses include costs related to advertising and promotion efforts, branding costs, partner-based commissions, costs associated with our annual customer conferences and amortization of certain acquired intangible assets. We intend to continue to invest in our sales and marketing capabilities in the future to continue to increase our brand awareness and expect these costs to increase on an absolute dollar basis as we grow our business and continue to expand our market and

Current wording

Selling and marketing expenses consist primarily of personnel and related expenses in support of sales and marketing efforts. These costs include salaries, benefits, bonuses and stock-based compensation. In addition, selling and marketing expenses include costs related to advertising and promotion efforts, branding costs, partner-based commissions, costs associated with our annual customer conferences and amortization of certain acquired intangible assets. We intend to continue to invest in our sales and marketing capabilities in the future to continue to increase our brand awareness and expect these costs to increase on an absolute dollar basis as we grow our business and continue to expand our market and partner ecosystem penetration. Sales and marketing expense in absolute dollars and as a percentage of total revenue may fluctuate from period-to-period based on total revenue levels and the timing of our investments in our sales and marketing functions, as these investments will occur in advance of experiencing the benefits from such investments and may vary in scope and scale over future periods.

Previous wording

General and administrative expenses consist primarily of personnel and related expenses for administrative, finance, information technology, legal, risk management, facilities, and human resources staffing, including salaries, benefits, bonuses, severance, stock-based compensation, professional fees, insurance premiums, facility costs, amortization of cloud computing arrangement implementation costs, and other internal support and infrastructure costs.

Current wording

General and administrative expenses consist primarily of personnel and related expenses for administrative, finance, information technology, legal, risk management, facilities, and human resources staffing, including salaries, benefits, bonuses, severance, stock-based compensation, professional fees, insurance premiums, facility costs, amortization of cloud computing arrangement implementation costs, and other internal support and infrastructure costs. Additionally, the three months ended March 31, 2026 period includes severance costs related to the Plan. For further information refer to Note 15, “Restructuring” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

Depreciation and amortization expense consists of the allocation of purchased and developed asset costs over the future periods benefitted by the use of these assets. These assets include leasehold improvements for our facilities, computers and equipment needed to support our customers and our internal infrastructure and capitalized internal-use software associated with our internal tools. Depreciation and amortization will fluctuate in correlation with our ongoing investment in internal infrastructure costs to support our growth.

Current wording

Depreciation and amortization expense consists of the allocation of purchased and developed asset costs over the future periods benefited by the use of these assets. These assets include leasehold improvements for our facilities, computers and equipment needed to support our customers and our internal infrastructure and capitalized internal-use software associated with our internal tools. Depreciation and amortization will fluctuate in correlation with our ongoing investment in internal infrastructure costs to support our growth.

Previous wording

In connection with our acquisition of ecosio GmbH (“ecosio”) in August 2024, the sellers are entitled to three annual earn-outs in the form of cash, with an aggregate value of up to $94.4 million (the “Cash Earn-outs”), and stock, with an aggregate value of up to $35.0 million (the “Stock Earn-outs,” and together with the Cash Earn-outs, the “Earn-outs”), assuming maximum payouts. The Earn-outs are based on ecosio’s achievement of certain monthly software revenue targets over a three-year period, measured over an aggregate of 12 months and paid within 90 days after the relevant measurement period. The change in fair value of acquisition contingent earn-outs consists of fair value adjustments to our Earn-outs, which will be revalued and adjusted quarterly until the end of the Earn-out periods.

Current wording

The change in fair value of acquisition contingent earn-outs consists of fair value adjustments to our Cash Earn-outs (as defined below) and Stock Earn-outs (as defined below) (collectively with the Cash Earn-outs, the “Earn-outs”) related to our 2024 acquisition of ecosio GmbH (“ecosio”). The Earn-outs will be revalued and adjusted quarterly until the end of the Earn-out periods.

Previous wording

Interest expense consists primarily of interest incurred related to the Notes (as defined below), a term loan in the aggregate amount of $50.0 million (the “Term Loan”), Credit Agreement (as defined below), and leases. Interest expense includes amortization of deferred financing fees over the term of the credit facility or write-downs of such costs upon redemption of debt. Interest expense will vary as a result of fluctuations in the level of debt outstanding as well as interest rates on such debt. In addition, interest expense will include adjustments to the fair value of contracts that may be entered into to hedge risks associated with currency fluctuations for cash receipts or cash payments denominated in currencies other than U.S. dollars and which do not qualify for hedge accounting, as well as changes in the settlement value of the future payment obligation for the Systax Sistemas Fiscais LTDA (“Systax”) acquisition, which was fully settled on June 5, 2024. Interest income reflects earnings on investments of our cash on hand and our investment securities. Interest income

Current wording

Interest expense consists primarily of interest incurred related to the Notes (as defined below), a Credit Agreement (as defined below), and leases. Interest expense includes amortization of deferred financing fees over the term of the credit facility or write-downs of such costs upon redemption of debt. Interest expense will vary as a result of fluctuations in the level of debt outstanding as well as interest rates on such debt.

Previous wording

will vary as a result of fluctuations in the future level of funds available for investment and the rate of return available in the market on such funds.

Current wording

Interest income reflects earnings on investments of our cash on hand and our investment securities. Interest income will vary as a result of fluctuations in the future level of funds available for investment and the rate of return available in the market on such funds.

Previous wording

Revenues increased $21.7 million, or 12.7%, to $192.1 million for the three months ended September 30, 2025 compared to $170.4 million for the same period in 2024. The increase in software subscriptions revenues of $18.6 million, or 12.7%, was primarily driven by increases from our existing customers through cross-selling new products, and to a lesser extent, increases due to expanded use and price increases. Software subscriptions revenues derived from new customers averaged 5.9% and 6.0% of total software subscriptions revenues in the three months ended September 30, 2025 and 2024, respectively.

Current wording

Revenues increased $19.6 million, or 11.1%, to $196.6 million for the three months ended March 31, 2026 compared to $177.1 million for the same period in 2025. The increase in software subscriptions revenues of $16.4 million, or 10.9%, was primarily driven by increases from our existing customers through cross-selling new products, and to a lesser extent, increases due to expanded use and price increases. Software subscriptions revenues derived from new customers averaged 6.0% and 8.1% of total software subscriptions revenues in the three months ended March 31, 2026 and 2025, respectively.

Previous wording

The $3.1 million increase in services revenues was primarily driven by a $1.8 million increase in recurring services revenues due to returns processing volume increases related to customer business growth and regulatory changes as customers expanded their tax filings into more jurisdictions, as well as an increase in interest received from our funds held for customers. Additionally, our managed services offering experienced a $1.3 million increase in service revenues associated with the growth in subscription revenues, which includes new customers implementing our solutions and existing customers upgrading to newer versions of our solutions.

Current wording

The $3.2 million increase in services revenues was primarily driven by a $1.5 million increase in recurring services revenues due to returns processing volume increases related to customer business growth and regulatory changes as customers expanded their tax filings into more jurisdictions, as well as an increase in interest received from our funds held for customers. Additionally, our managed services offering experienced a $1.7 million increase in service revenues associated with the growth in subscription revenues, which includes new customers implementing our solutions and existing customers upgrading to newer versions of our solutions.

Previous wording

Cost of software subscriptions revenues increased $6.4 million, or 14.6%, to $50.0 million for the three months ended September 30, 2025 compared to $43.6 million for the same period in 2024. The increase was primarily driven by a $3.9 million increase in depreciation and amortization of capitalized software and acquired intangible assets associated with our ongoing investments in internal-use software for cloud-based subscription solutions, software developed for sale for new products and enhancements to existing products, and costs associated with the increased amortization of acquired intangible assets. Additionally, there was a $2.4 million increase in costs of personnel supporting period-over-period growth of sales and customers, ongoing infrastructure investments and support costs to enable the continued expansion of customer transaction volumes for our cloud-based subscription customers.

Current wording

Cost of software subscriptions revenues increased $6.9 million, or 15.7%, to $51.2 million for the three months ended March 31, 2026 compared to $44.2 million for the same period in 2025. The increase was primarily driven by a $4.2 million increase in depreciation and amortization of capitalized software and acquired intangible assets associated with our ongoing investments in internal-use software for cloud-based subscription solutions, software developed for sale for new products and enhancements to existing products, and costs associated with the increased amortization of acquired intangible assets. Additionally, there was a $2.7 million increase in costs of personnel supporting period-over-period growth of sales and customers, ongoing infrastructure investments and support costs to enable the continued expansion of customer transaction volumes for our cloud-based subscription customers.

Previous wording

Cost of services revenues increased $4.5 million, or 27.6%, to $20.8 million for the three months ended September 30, 2025, compared to $16.3 million for the same period in 2024. The increase was primarily due to an increase in costs of service delivery personnel to support revenue growth in software subscription-related services and our managed services offering.

Current wording

Cost of services revenues increased $0.8 million, or 3.9%, to $20.6 million for the three months ended March 31, 2026, compared to $19.8 million for the same period in 2025. The increase was primarily due to an increase in costs of service delivery personnel to support revenue growth in software subscription-related services and our managed services offering.

Previous wording

Research and development expenses increased $4.3 million, or 27.6%, to $19.9 million for the three months ended September 30, 2025 compared to $15.6 million for the same period in 2024. This increase in research and development expenses was primarily due to an increase in personnel costs related to development work associated with new solutions to address end-to-end data analysis and compliance needs of our customers, and continued expansion of connectors and application program interfaces to customer ERP and other software platforms. Additionally, this increase reflects additional research and development investments related to the commercialization of our AI-based Smart Categorization product, other AI-related internal tools and new product initiatives, and other emerging technologies.

Current wording

Research and development expenses increased $3.7 million, or 17.5%, to $24.6 million for the three months ended March 31, 2026 compared to $20.9 million for the same period in 2025. This increase in research and development expenses was primarily due to an increase in personnel costs related to development work associated with new solutions to address end-to-end data analysis and compliance needs of our customers, and continued expansion of connectors and application program interfaces to customer ERP and other software platforms. Additionally, this increase reflects additional research and development investments related to the commercialization of our AI-based Smart Categorization product, other AI-related internal tools and new product initiatives, and other emerging technologies.

Previous wording

Selling and marketing expenses increased $5.3 million, or 12.5%, to $47.4 million for the three months ended September 30, 2025 compared to $42.1 million for the same period in 2024. This increase was primarily driven by a $4.2 million increase in payroll and related expenses associated with the growth in period-over-period subscription sales and services revenues and expansion of our partner and channel management programs. Additionally, there was an increase of $1.1 million in advertising and promotional spending related to expanded brand awareness efforts.

Current wording

Selling and marketing expenses increased $4.5 million, or 9.3%, to $52.6 million for the three months ended March 31, 2026 compared to $48.2 million for the same period in 2025. This increase was primarily driven by a $2.9 million increase in payroll and related expenses associated with the growth in period-over-period subscription sales and services revenues and expansion of our partner and channel management programs. Additionally, there was an increase of $1.5 million in advertising and promotional spending related to expanded brand awareness efforts.

Previous wording

General and administrative expenses increased $3.1 million, or 7.5%, to $44.6 million for the three months ended September 30, 2025 compared to $41.5 million for the same period in 2024, primarily driven by planned strategic investments in information technology infrastructure, business process re-engineering and other initiatives to drive future operating leverage, as well as investments in employees, systems and other resources in support of our growth.

Current wording

General and administrative expenses increased $9.3 million, or 20.7%, to $54.3 million for the three months ended March 31, 2026 compared to $45.0 million for the same period in 2025, primarily driven by planned strategic investments in information technology infrastructure, business process re-engineering and other initiatives to drive future operating leverage, as well as investments in employees, systems and other resources in support of our growth. Additionally, $6.2 million of severance expense and $2.6 million of execution costs related to our Value Creation Plan were recorded in the first three months ended March 31, 2026. For further information refer to Note 15, “Restructuring” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

Depreciation and amortization expenses increased $1.2 million, or 22.2%, to $6.4 million for the three months ended September 30, 2025 compared to $5.2 million for the same period in 2024. The increase was primarily due to the impact of infrastructure and technology purchases and other capitalized costs to support our growth.

Current wording

Depreciation and amortization expenses increased $0.6 million, or 9.6%, to $6.4 million for the three months ended March 31, 2026 compared to $5.9 million for the same period in 2025. The increase was primarily due to the impact of infrastructure and technology purchases and other capitalized costs to support our growth.

Previous wording

Change in fair value of acquisition contingent earn-outs was $(4.0) million for the three months ended September 30, 2025 due entirely to adjustments to the fair values of our ecosio acquisition contingent Cash Earn-outs and Stock Earn-outs of $5.1 million and $(9.1) million, respectively. For further information, refer to Note 4, “Financial Instruments and Fair Value Measurements” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Current wording

Change in fair value of acquisition contingent earn-outs was $(5.7) million for the three months ended March 31, 2026 due to adjustments to the fair values of our ecosio acquisition contingent Cash Earn-outs and Stock Earn-outs of $(0.3) million and $(5.4) million, respectively. Change in fair value of acquisition contingent earn-outs was $(14.7) million for the three months ended March 31, 2025 due to adjustments to the fair values of our ecosio acquisition contingent Cash Earn-outs and Stock Earn-outs of $1.7 million and $(16.4) million, respectively. For further information, refer to Note 4, “Financial Instruments and Fair Value Measurements” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

Other operating expense, net was $2.7 million for the three months ended September 30, 2025 compared to $1.2 million for the same period in 2024. This change was primarily driven by $2.8 million related to legal costs associated with a pending legal claim. For further information regarding the referenced pending legal claim, refer to Note 12, “Commitments and Contingencies” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Current wording

Other operating expense, net was $3.2 million for the three months ended March 31, 2026 compared to $3.3 million for the same period in 2025. Legal costs associated with a pending legal claim were $2.7 million and $2.4 million in the first three months ended March 31, 2026 and 2025, respectively. For further information, refer to Note 12, “Commitments and Contingencies” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Additionally, foreign currency transaction gains (losses) were $(0.2) million and $0.6 million for the first three months ended March 31, 2026 and 2025, respectively.

Previous wording

Interest income, net was $1.2 million for the three months ended September 30, 2025 compared to $2.9 million for the same period in 2024. This change was mainly due to a $1.6 million decrease in interest income due to decreased dollars invested and lower interest rates during the period.

Current wording

Interest income, net was $1.0 million for the three months ended March 31, 2026 compared to $1.5 million for the same period in 2025. This change was mainly due to a $0.6 million decrease in interest income, driven by lower dollars invested and lower interest rates during the period.

Previous wording

Income tax benefit was $5.3 million and $1.7 million for the nine months ended September 30, 2025 and 2024, respectively. The change in tax benefit was primarily driven by higher tax benefits on exercises and vesting of stock awards recognized during the nine months ended September 30, 2025, as well as fluctuations in nondeductible contingent consideration liabilities and lower taxes in profitable jurisdictions. These income tax benefit increases were partially offset by fluctuations in valuation allowances on net deferred tax assets established for U.S. and certain foreign jurisdictions and increased limitations on deductions of certain employees’ compensation.

Current wording

Income tax benefit was $7.1 million and $5.1 million for the three months ended March 31, 2026 and 2025, respectively. The period-over-period change was primarily driven by increased tax benefits from fluctuations in valuation allowances on net deferred tax assets established for U.S. and certain foreign jurisdictions, as well the impact from the estimated annual effective tax rate applied to pre-tax loss for the three months ended March 31, 2026. These income tax benefit increases were offset partially by a decreased tax benefit on exercises and vesting of stock awards recognized, net of limitations on deductions of certain employees’ compensation, fluctuations in nondeductible contingent consideration liabilities as well as fluctuations in tax credits.

Previous wording

As of September 30, 2025, we had unrestricted cash and cash equivalents of $313.5 million. Our primary sources of capital include sales of our solutions, proceeds from bank lending facilities, and the offering of existing or future classes of stock.

Current wording

As of March 31, 2026, we had unrestricted cash and cash equivalents of $252.5 million. Our primary sources of capital include sales of our solutions, proceeds from bank lending facilities, and the offering of existing or future classes of stock.

Previous wording

On April 26, 2024, we closed a private offering of $345.0 million aggregate principal amount of 0.750% Convertible Senior Notes due in 2029 (the “Notes”). The net proceeds from the offering of the Notes were $333.7 million, after deducting the initial purchasers’ discount and commissions, and other transaction and offering expenses. For further information on the Notes, refer to our 2024 Annual Report.

Current wording

On April 26, 2024, we closed a private offering of $345.0 million aggregate principal amount of 0.750% Convertible Senior Notes due in 2029 (the “Notes”). The net proceeds from the offering of the Notes were $333.7 million, after deducting the initial purchasers’ discount and commissions, and other transaction and offering expenses. For further information on the Notes, refer to our 2025 Annual Report on Form 10-K.

Previous wording

Operating Activities. Net cash provided by operating activities of $123.3 million for the nine months ended September 30, 2025 consisted of net income of $14.2 million, adjusted for non-cash charges of $104.6 million, and cash inflows of $4.6 million related to changes in operating assets and liabilities, which were partially offset by $0.2 million in payments for purchase commitment and contingent consideration liabilities in excess of their initial fair value. The change in operating assets and liabilities was primarily driven by a decrease in accounts receivable due to the timing of cash collections during the period. This change was partially offset by an increase in prepaid expenses and other current assets, a decrease in accrued and deferred compensation and a decrease in deferred revenue.

Current wording

Operating Activities. Net cash provided by operating activities of $38.0 million for the three months ended March 31, 2026 consisted of net loss of $(2.5) million, adjusted for non-cash charges of $46.1 million, and cash outflows of $(5.6) million related to changes in operating assets and liabilities. The change in operating assets and liabilities was primarily driven by a decrease in accrued and deferred compensation and accrued expenses, and an increase in prepaid expenses and other current assets due to the timing of cash payments during the period. These changes were partially offset by a decrease

Previous wording

Net cash provided by operating activities of $123.7 million for the nine months ended September 30, 2024 consisted of net income of $15.1 million, adjusted for non-cash charges of $93.5 million, and cash inflows of $19.5 million from changes in operating assets and liabilities, which were partially offset by $4.4 million in payments for purchase commitment and contingent consideration liabilities in excess of their initial fair value. The change in operating assets and liabilities was primarily driven by a decrease in accounts receivable and an increase in deferred revenue, primarily due to cash collections and customer growth during the period. These changes were partially offset by an increase in prepaid expenses and other current assets. These movements were primarily due to the timing of cash payments.

Current wording

Net cash provided by operating activities of $14.8 million for the three months ended March 31, 2025 consisted of net income of $11.1 million, adjusted for non-cash charges of $30.3 million, which were partly offset by cash outflows of $(26.7) million related to changes in operating assets and liabilities. The change in operating assets and liabilities was primarily driven by a decrease in accrued and deferred compensation, and an increase in prepaid expenses and other current assets due to the timing of cash payments during the period. These changes were partially offset by an increase in deferred revenue and a decrease in accounts receivable, primarily due to customer growth and the timing of cash collections during the period.

Previous wording

Investing Activities. Net cash used in investing activities of $91.6 million for the nine months ended September 30, 2025 consisted of investments in property and equipment, and capitalized software of $69.3 million and $16.4 million, respectively, related to investments in infrastructure, new products, and enhancements to existing products. During the second quarter of 2025, we invested $15.0 million in the Kintsugi Investment. Additionally, we invested $2.4 million in available-for-sale investment securities, which was more than offset by proceeds of $11.6 million received during the period for sales and maturities in our investment securities. For further information on the Kintsugi Investment, refer to Note 3, “Investments” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Current wording

Investing Activities. Net cash used in investing activities of $52.3 million for the three months ended March 31, 2026 consisted of investments in property and equipment, and capitalized software of $24.7 million and $5.7 million, respectively, related to investments in infrastructure, new products, and enhancements to existing products. Additionally, we paid $22.0 million for our acquisition of Brinta. For further information on the Acquisition, refer to Note 3, “Acquisitions” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

Net cash used in investing activities of $133.3 million for the nine months ended September 30, 2024 consisted of investments in property and equipment, and capitalized software of $47.5 million and $16.4 million, respectively, related to investments in infrastructure, new products, and enhancements to existing products. Additionally, we paid $71.8 million related to acquisitions completed during the second and third quarters of 2024. Finally, we invested $12.2 million in available-for-sale investment securities, which was more than offset by proceeds of $14.6 million received during the period for sales and maturities in our investment securities.

Current wording

Net cash used in investing activities of $17.8 million for the three months ended March 31, 2025 consisted of investments in property and equipment, and capitalized software of $21.4 million and $5.7 million, respectively, related to investments in infrastructure, new products, and enhancements to existing products. Additionally, we invested $2.4 million in available-for-sale investment securities, which was more than offset by proceeds of $11.6 million received during the period for sales and maturities in our investment securities.

Previous wording

Net cash provided by financing activities of $225.0 million for the nine months ended September 30, 2024 consisted of $345.0 million in gross proceeds from our Notes, a $6.0 million increase in customer funds obligations, primarily due to timing differences between receipt of funds from customers and taxing jurisdiction withdrawals of these funds, and $1.4 million in proceeds from the purchase of stock under our ESPP. These transactions were partly offset by $46.9 million for the repayment of our Term Loan, $42.4 million for the purchase of the Capped Call Transactions, $3.9 million in payments of third-party debt, $20.0 million in payments for taxes related to the net share settlement of stock-based awards, $11.4 million for payments related to deferred financing costs and $7.6 million for payments on purchase commitment and contingent consideration liabilities.

Current wording

Financing Activities. Net cash used in financing activities of $53.3 million for the three months ended March 31, 2026 consisted of $20.0 million in payments for the repurchases of our Class A common stock under our Repurchase Program, $19.6 million in payments related to our ecosio Cash Earn-out, $7.1 million in payments for taxes related to the net share settlement of stock-based awards, and a $6.6 million decrease in customer funds obligations, primarily due to timing differences between receipt of funds from customers and taxing jurisdiction withdrawals of these funds. For further information on the Cash Earn-outs, refer to Note 4, “Financial Instruments and Fair Value Measurements” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

Financing Activities. Net cash used in financing activities of $22.2 million for the nine months ended September 30, 2025 consisted of $27.2 million in payments for taxes related to the net share settlement of stock-based awards as well as a $4.5 million decrease in customer funds obligations, primarily due to timing differences between receipt of funds from customers and taxing jurisdiction withdrawals of these funds, partly offset by $7.7 million in proceeds from the exercise of stock options and $1.8 million in proceeds from the purchase of stock under our employee stock purchase plan (“ESPP”).

Current wording

Net cash used in financing activities of $20.7 million for the three months ended March 31, 2025 consisted of $25.0 million in payments for taxes related to the net share settlement of stock-based awards, which were partially offset by a $3.2 million increase in customer funds obligations, primarily due to timing differences between receipt of funds from customers and taxing jurisdiction withdrawals of these funds, and $1.2 million in proceeds from the exercise of stock options.

Previous wording

On October 30, 2025, the Board authorized a stock repurchase program for up to $150.0 million of our outstanding shares of Class A common stock (the “Repurchase Program”). Under the Repurchase Program, share repurchases may be made from time to time in one or more open market or privately negotiated transactions, and/or through other legally permissible means in accordance with applicable rules and regulations promulgated under the Exchange Act. The timing and amount of any shares repurchased will be determined by management based on evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when we might otherwise be precluded from doing so under insider trading laws. Any repurchased shares will be available for use in connection with our stock plans and for other corporate purposes. The Repurchase Program has no termination date and may be modified, suspended or discontinued at any time.

Current wording

The timing and actual number of shares repurchased under the Repurchase Program depend on a variety of factors, including price, general business and market conditions, and other investment opportunities. Shares may be repurchased through open market purchases or privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act. Our Repurchase Program has no termination date and may be suspended, delayed, discontinued, or accelerated at any time. Any repurchased shares will be available for use in connection with our stock plans and for other corporate purposes. For further information on our Repurchase Program,

Previous wording

Customer funds obligations represent our contractual obligations to remit collected funds to satisfy customer tax payments. Customer funds obligations are included as a current liability on our consolidated balance sheets as the obligations are expected to be settled within one year. Cash flows related to changes in customer funds obligations liability are presented as cash flows from financing activities.

Current wording

Customer funds obligations represent our contractual obligations to remit collected funds to satisfy customer tax payments. Customer funds obligations are included as a current liability on our condensed consolidated balance sheets as the obligations are expected to be settled within one year. Cash flows related to changes in customer funds obligations liability are presented as cash flows from financing activities.

Previous wording

ARR increased by $71.4 million, or 12.4%, at September 30, 2025, as compared to September 30, 2024. The increase was primarily driven by $37.1 million of growth in revenues from existing customers through their expanded use of our solutions as well as price increases, and $34.3 million in growth of subscriptions of our solutions to new customers.

Current wording

ARR increased by $69.1 million, or 11.2%, at March 31, 2026, as compared to March 31, 2025. The increase was primarily driven by $32.9 million of growth in revenues from existing customers through their expanded use of our solutions as well as price increases, and $36.2 million in growth of subscriptions of our solutions to new customers.

Previous wording

We had 4,856 direct customers and AARPC was approximately $133,484 at September 30, 2025. At September 30, 2024, we had 4,855 direct customers and approximately $118,800 of AARPC. The increase in AARPC was primarily due to expansion of usage by existing customers and adding new customers through organic growth.

Current wording

We had 4,895 direct customers and AARPC was approximately $140,464 at March 31, 2026. At March 31, 2025, we had 4,888 direct customers and approximately $126,534 of AARPC. The increase in AARPC was primarily due to expansion of usage by existing customers and adding new scaled customers through organic growth.