Vertex, Inc.

Previous wording

Vertex is a leading global provider of indirect tax software and solutions. 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, and payroll. Headquartered in North America, and with offices in South America and Europe, Vertex employs over 1,500** **professionals and serves companies across the globe.

Current 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.

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 49% and 45% of software subscription revenue from cloud-based subscriptions during the three months ended September 30, 2024 and 2023, respectively, and 48% and 44% for the nine months ended September 30, 2024 and 2023, respectively. While our on-premise software subscription revenue comprised 51% and 55% of our software subscription revenue during the three months ended September 30, 2024 and 2023, respectively, and 52% and 56% for the nine months ended September 30, 2024 and 2023, 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 53% and 47% of software subscription revenue from cloud-based subscriptions during the three months ended March 31, 2025 and 2024, respectively. While our on-premise software subscription revenue comprised 47% and 53% of our software subscription revenue during the three months ended March 31, 2025 and 2024, respectively, it continues to decrease as a percentage of total software subscriptions revenues as cloud-based subscriptions grow.

Previous 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 (“CRM”), procurement, billing, Point of Sale (“POS”) and e-commerce. These partners include Adobe/Magento, Coupa, Microsoft Dynamics, NetSuite, Oracle, Salesforce, SAP, SAP Ariba, Shopify,

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

Previous wording

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

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.

Previous wording

We believe that global commerce and the compliance environment provides durable and accelerating growth opportunities for our business. We generated revenue of $170.4 million and $145.0 million for the three months ended September 30, 2024 and 2023, respectively, and $488.3 and $417.5 for the nine months ended September 30, 2024 and 2023, respectively. We had net income (loss) of $7.2 million and $(3.4) million for the three months ended September 30, 2024 and 2023, respectively, and $15.1 million and $(28.4) million for the nine months ended September 30, 2024 and 2023, 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 $177.1 million and $156.8 million for the three months ended March 31, 2025 and 2024, respectively. We had net income of $11.1 million and $2.7 million for the three months ended March 31, 2025 and 2024, 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 asset impairments, stock-based compensation expense, amortization of cloud computing arrangement implementation costs, severance expense, acquisition contingent consideration, litigation settlements, and transaction costs.** **Adjusted EBITDA was $38.6 million and $26.6 million for the three months ended September 30, 2024 and 2023, respectively and $113.9 million and $68.8 million for the nine months ended September 30, 2024 and 2023, 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 (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 $37.2 million and $36.7 million for the three months ended March 31, 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.

Previous wording

Licenses for on-premise software subscriptions, which are generally one year, provide the customer with a right to use the software as it exists when made available to the customer. Customers purchase a subscription to these licenses, which includes the related software and tax content updates and product support. The updates and support, which are part of the subscription agreement, are essential to the continued utility of the software; therefore, we have determined the software and the related updates and support to be a single performance obligation. Accordingly, when on-premise software is licensed, the revenue associated with this combined performance obligation is recognized ratably over the license term as these subscriptions are provided for the duration of the license term. Revenue recognition begins on the later of the beginning of the subscription period or the date the software is made available to the customer to download.

Current wording

essential to the continued utility of the software; therefore, we have determined the software and the related updates and support to be a single performance obligation. Accordingly, when on-premise software is licensed, the revenue associated with this combined performance obligation is recognized ratably over the license term as these subscriptions are provided for the duration of the license term. Revenue recognition begins on the later of the beginning of the subscription period or the date the software is made available to the customer to download.

Previous wording

Revenue is impacted by the timing of sales and our customers’ growth or contractions resulting in their need to expand or contract their subscription usage, the purchase of new solutions, or the non-renewal of existing solutions. In addition, revenue will fluctuate with the cessation of extended product support fees charged for older versions of our software subscription solutions when they are retired and these fees are no longer charged. Contracts for on-premise licenses permit cancellations at the end of the license term, which is generally one year. Legacy cloud-based subscription contracts for multi-year periods previously provided customers the right to terminate their contract for services prior to the end of the subscription period at a significant penalty. This penalty requires the payment of a percentage of the remaining months of the then-current contract term. Current cloud-based contracts do not contain such termination rights. Terminations of cloud-based subscriptions prior to the end of the subscription term have occurred infrequently, and the impact has been immaterial. The allowance for subscription and non-renewal cancellations reflects an estimate of the amount of such cancellations and non-renewals based on past experience, current information, and forward-looking economic considerations.

Current wording

Revenue is impacted by the timing of sales and our customers’ growth or contractions resulting in their need to expand or contract their subscription usage, the purchase of new solutions, or the non-renewal of existing solutions. In addition, revenue will fluctuate with the cessation of extended product support fees charged for older versions of our software subscription solutions when they are retired and these fees are no longer charged. Contracts for on-premise licenses permit cancellations at the end of the license term. Legacy cloud-based subscription contracts for multi-year periods previously provided customers the right to terminate their contract for services prior to the end of the subscription period at a significant penalty. This penalty requires the payment of a percentage of the remaining months of the then-current contract term. Current cloud-based contracts do not contain such termination rights. Terminations of cloud-based subscriptions prior to the end of the subscription term have occurred infrequently, and the impact has been immaterial. The allowance for subscription and non-renewal cancellations reflects an estimate of the amount of such cancellations and non-renewals based on past experience, current information, and forward-looking economic considerations.

Previous wording

Cost of software subscriptions revenue consists of costs related to providing and supporting our software subscriptions and includes personnel and related expenses, including salaries, benefits, bonuses, and stock-based compensation. In addition, cost of revenue includes direct costs associated with information technology, such as data center and software hosting costs, and tax content maintenance. Cost of software subscriptions revenue also includes amortization associated with direct labor and related expenses for capitalized internal-use software for cloud-based subscription solutions and software developed for sale for new products and enhancements to existing products, and costs associated with the amortization of certain acquired intangible assets. We plan to continue to significantly expand our infrastructure and personnel to support our future growth and increases in transaction volumes of our cloud-based solutions, including through acquisitions. We expect growth in our business will result in an increase in cost of software subscriptions revenue in absolute dollars.

Current wording

Cost of software subscriptions revenue consists of costs related to providing and supporting our software subscriptions and includes personnel and related expenses, including salaries, benefits, bonuses, and stock-based compensation. In addition, cost of revenue includes direct costs associated with information technology, such as data center and software hosting costs, and tax content maintenance. Cost of software subscriptions revenue also includes amortization associated with capitalized internal-use software for cloud-based subscription solutions and software developed for sale for new products and enhancements to existing products, and costs associated with the amortization of certain acquired intangible assets. We plan to continue to significantly expand our infrastructure and personnel to support our future growth and increases in transaction volumes of our cloud-based solutions, including through acquisitions. We expect growth in our business will result in an increase in cost of software subscriptions revenue in absolute dollars.

Previous wording

Cost of services revenue consists of direct costs of software subscription-related services and our managed services offering. These costs include personnel and related expenses, including salaries, benefits, bonuses, stock-based compensation, and the cost of third-party contractors and other direct expenses. We plan to continue to expand our

Current wording

Cost of services revenue consists of direct costs of software subscription-related services and our managed services offering. These costs include personnel and related expenses, including salaries, benefits, bonuses, stock-based compensation, and the cost of third-party contractors and other direct expenses. We plan to continue to expand our infrastructure and personnel as necessary to support our future growth in our managed service offerings and related increases in our service revenue. We expect growth in our business will result in an increase in the cost of services revenue in absolute dollars.

Previous wording

Selling 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 expense includes 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.

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 related to our ERP modernization initiative, 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.

Previous wording

We expect our general and administrative expenses to increase in absolute dollars as we continue to expand our operations, hire additional personnel, integrate current and future acquisitions, and incur additional costs associated with being a publicly-listed company,** including costs related to compliance with Section 404(b) of the Sarbanes-Oxley Act of 2002 beginning in 2023, **as well as the additional requirements resulting from the Company's loss of emerging growth company status.

Current wording

We expect our general and administrative expenses to increase in absolute dollars as we continue to expand our operations, hire additional personnel, and integrate current and future acquisitions.

Previous wording

Interest expense consists primarily of interest incurred related to borrowings, the Notes, bank credit facility 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 Limited (“Systax”) acquisition, which was fully settled on June 5, 2024.

Current wording

Interest expense consists primarily of interest incurred related to the Notes (as defined below), Term Loan (as defined below), 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 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 $25.4 million, or 17.5%, to $170.4 million for the three months ended September 30, 2024 compared to $145.0 million for the same period in 2023. The increase in software subscriptions revenues of $25.0 million, or 20.6%, 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 6.5% of total software subscriptions revenues in the three months ended September 30, 2024 and 2023, respectively.

Current wording

Revenues increased $20.3 million, or 12.9%, to $177.1 million for the three months ended March 31, 2025 compared to $156.8 million for the same period in 2024. The increase in software subscriptions revenues of $18.9 million, or 14.4%, 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 8.1% and 5.6% of total software subscriptions revenues in the three months ended March 31, 2025 and 2024, respectively.

Previous wording

The $0.4 million increase in services revenues was primarily driven by a $1.9 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. These increases were partially offset by a $1.5 million decrease in service revenues primarily from the impact of our previously discussed effort to steer more implementation opportunities to our channel partners, who are an important referral source for new software opportunities.

Current wording

The $1.4 million increase in services revenues was primarily driven by a $1.7 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. These increases were partially offset by a $0.3 million decrease in service revenues primarily from the impact of our efforts to steer more implementation opportunities to our channel partners, who are an important referral source for new software opportunities.

Previous wording

Cost of software subscriptions revenues increased $2.6 million, or 6.3%, to $43.6 million for the three months ended September 30, 2024 compared to $41.1 million for the same period in 2023. The increase in cost of software subscriptions revenues was primarily driven by 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 decreased $0.9 million, or 2.0%, to $44.2 million for the three months ended March 31, 2025 compared to $45.1 million for the same period in 2024. The decrease in cost of software subscriptions revenues was primarily driven by the timing of costs related to supporting period-over-period growth of sales and customers in the prior year period, which was partially offset by 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 $0.5 million, or 2.9%, to $16.3 million for the three months ended September 30, 2024, compared to $15.8 million for the same period in 2023. The increase in cost of services revenues 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 $4.0 million, or 25.0%, to $19.8 million for the three months ended March 31, 2025, compared to $15.9 million for the same period in 2024. The increase in cost of services revenues 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 decreased $1.2 million, or (6.9)%, to $15.6 million for the three months ended September 30, 2024 compared to $16.8 million for the same period in 2023. The decrease in research and development expenses is due to an increase in capitalized costs over the prior year 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 (“APIs”) to customer ERP and other software platforms.

Current wording

Research and development expenses increased $4.0 million, or 24.0%, to $20.9 million for the three months ended March 31, 2025 compared to $16.8 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.

Previous wording

Selling and marketing expenses increased $8.2 million, or 24.2%, to $42.1 million for the three months ended September 30, 2024 compared to $33.9 million for the same period in 2023. This increase was primarily driven by a $4.6 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 $3.6 million in advertising and promotional spending related to expanded brand awareness efforts.

Current wording

Selling and marketing expenses increased $7.7 million, or 18.9%, to $48.2 million for the three months ended March 31, 2025 compared to $40.5 million for the same period in 2024. This increase was primarily driven by a $4.6 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 $3.1 million in advertising and promotional spending related to expanded brand awareness efforts.

Previous wording

General and administrative expenses increased $6.1 million, or 17.3%, to $41.5 million for the three months ended September 30, 2024 compared to $35.4 million for the same period in 2023, primarily driven by a $5.3 million increase in 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, there was a $0.9 million increase in stock-based compensation expense over the prior year.

Current wording

General and administrative expenses increased $9.5 million, or 26.7%, to $45.0 million for the three months ended March 31, 2025 compared to $35.5 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.

Previous wording

Depreciation and amortization increased $1.4 million, or 37.9%, to $5.2 million for the three months ended September 30, 2024 compared to $3.8 million for the same period in 2023. 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 increased $0.9 million, or 17.5%, to $5.9 million for the three months ended March 31, 2025 compared to $5.0 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.

Previous wording

Other operating expense (income), net increased to expense of $1.2 million, net for the three months ended September 30, 2024 compared to expense of $0.3 million, net for the same period in 2023. The increase in expense was primarily driven by foreign currency transaction losses incurred.

Current wording

Other operating expense (income), net increased to expense of $3.3 million, net for the three months ended March 31, 2025 compared to income of $0.5 million, net for the same period in 2024. The increase in expense was primarily driven by $2.4 million related to legal costs associated with a pending legal claim and foreign currency transaction losses incurred. For further information regarding the referenced pending legal claim, refer to Note 11, “Commitments and Contingencies” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

Interest expense (income), net increased to income of $2.9 million for the three months ended September 30, 2024, compared to an expense of $0.6 million for the same period in 2023. This change was mainly due to several factors: a $3.8 million increase in interest income primarily due to increased dollars invested during the period, a reduction of $0.8 million of interest expense related to the term loan repayment, and $0.2 million related to the valuation of our prior year foreign currency forward contracts due to market fluctuations. These interest income increases were partially offset by $0.7 million of interest expense and a $0.6 million increase in deferred financing costs related to the convertible debt issuance.

Current wording

Interest expense (income), net increased to income of $1.5 million for the three months ended March 31, 2025, compared to an expense of $0.3 million for the same period in 2024. This change was mainly due to several factors: a $2.2 million increase in interest income primarily due to increased dollars invested during the period, a reduction of $0.2 million of interest expense related to the valuation of our prior year foreign currency forward contracts due to market fluctuations, and a $0.7 million decrease in interest costs related to the repayment of our term loan in the aggregate amount of $50,000 (the “Term Loan”), which was fully repaid in the second quarter of 2024. These interest income increases were partially offset by $0.6 million in interest expense and a $0.5 million increase in deferred financing costs related to our Notes (as defined below).

Previous wording

Income tax (benefit) expense was $(1.7) million and $13.3 million for the nine months ended September 30, 2024 and 2023, respectively. The change in tax (benefit) expense was primarily driven by tax benefits on exercises and vesting of stock awards, net of limitations on deductions of certain employees’ compensation, changes in jurisdictional income or loss allocation, fluctuations in valuation allowances on certain foreign deferred tax assets, and changes in benefits of tax credits.

Current wording

Income tax benefit was ($5.1) million and ($4.5) million for the three months ended March 31, 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 three months ended March 31, 2025, as well as tax credits and fluctuations in nondeductible contingent consideration liabilities. These income tax benefit increases were offset by increased limitations on deductions of certain employees’ compensation, fluctuations in valuation allowances on net deferred tax assets established for U.S.

Previous wording

As of September 30, 2024, we had unrestricted cash and cash equivalents of $279.0 million and retained earnings of $14.5 million. In addition, we had $7.5 million in investment securities with a maturity date exceeding three months as of September 30, 2024, not included in unrestricted cash and cash equivalents. 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, 2025, we had unrestricted cash and cash equivalents of $270.4 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

As of September 30, 2024, we had a credit agreement with a banking syndicate (the “Credit Agreement”) that provides a $200.0 million revolving facility (the “Line of Credit”).

Current wording

As of March 31, 2025, we had a credit agreement with a banking syndicate (the “Credit Agreement”) that provides a $300.0 million revolving facility (the “Line of Credit”). There were no outstanding borrowings under the Credit Agreement at March 31, 2025.

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 additional information on the Notes, refer to Note 8, “Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

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 additional information on the Notes, refer to our 2024 Annual Report.

Previous wording

Operating Activities. 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

Operating Activities. 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 and adjustments 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 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 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

Net cash provided by operating activities of $26.7 million for the nine months ended September 30, 2023 consisted of net loss of $28.4 million, adjusted for non-cash charges of $75.0 million and cash outflows of $19.9 million from changes in operating assets and liabilities. The change in operating assets and liabilities was primarily driven by an increase in accounts receivable which was partially offset by increases in accounts payable and accrued expenses. These movements were primarily due to timing of cash collections and payments during the period.

Current wording

Net cash provided by operating activities of $24.6 million for the three months ended March 31, 2024 consisted of net income of $2.7 million, adjusted for non-cash charges of $36.8 million, which was partially offset by cash outflows of $14.9 million from changes in operating assets and liabilities. The change in operating assets and liabilities was primarily driven by decreases in accrued and deferred compensation and accrued expenses, and an increase in prepaid expenses and

Previous wording

Net cash used in investing activities of $46.3 million for the nine months ended September 30, 2023 consisted of investments in property and equipment, and capitalized software of $35.4 million and $14.1 million, respectively, related to infrastructure investments to drive operating leverage and commercial solutions to support our customers. Additionally, we invested $12.9 million in available-for-sale investment securities, which was more than offset by proceeds of $16.0 million received during the period for sales and maturities in our investment securities.

Current wording

Investing Activities. 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

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. For additional information on our acquisitions, refer to Note 3, “Acquisitions” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Current wording

Net cash used in investing activities of $19.5 million for the three months ended March 31, 2024 consisted of investments in property and equipment, and capitalized software of $14.4 million and $5.6 million, respectively, related to investments in infrastructure, new products, and enhancements to existing products. Additionally, we invested $4.3 million in available-for-sale investment securities, which was offset by proceeds of $4.8 million received during the period for sales and maturities in our investment securities.

Previous wording

Financing Activities. 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, as well as 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. 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 $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

Net cash used in financing activities of $6.0 million for the nine months ended September 30, 2023 consisted of a $10.0 million payment for a deferred purchase commitment, $9.2 million in payments for taxes related to the net share settlement of stock-based awards, $6.4 million in payments for purchase commitment and contingent consideration liabilities, and $1.6 million used for principal debt repayments. These transactions were partially offset by a $17.0 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 $3.1 million in proceeds from the exercise of stock options.

Current wording

Net cash used in financing activities of $1.2 million for the three months ended March 31, 2024 consisted of $17.9 million in payments for taxes related to the net share settlement of stock-based awards, and $0.6 million used for principal debt repayments. These transactions were partially offset by a $15.9 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 $1.5 million in proceeds from the exercise of stock options.

Previous wording

Debt. As of September 30, 2024, we had a $200.0 million Line of Credit with no outstanding borrowings in connection with our Credit Agreement. As of September 30, 2024, we had $345.0 million aggregate principal amount of debt outstanding related to our Notes. For additional information on our debt refer to Note 8, “Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Current wording

Debt. As of March 31, 2025, we had a $300.0 million Line of Credit with no outstanding borrowings in connection with our Credit Agreement. As of March 31, 2025, we had $345.0 million aggregate principal amount of debt outstanding related to our Notes. For additional information on our debt obligations refer to Note 7, “Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

Customer funds obligations represent our contractual obligations to remit collected funds to satisfy customer tax payments. Customer funds obligations are reported 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 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

As of September 30, 2024, we have no outstanding borrowings under the term loan or Line of Credit. Our Notes are due in May 2029. We expect to continue to fund debt maturities and interest payments with cash flows generated from operations, existing cash and cash equivalents, or proceeds from additional financing. For additional information on our debt obligations, refer to Note 8, “Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Current wording

As of March 31, 2025, we have no outstanding borrowings under our Line of Credit. Our Notes are due in May 2029. We expect to continue to fund debt maturities and interest payments with cash flows generated from operations, existing cash and cash equivalents, or proceeds from additional financing. For additional information on our debt obligations, refer to Note 7, “Debt” to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Previous wording

There have been no other material updates or changes to our contractual obligations and commitments compared to contractual obligations and commitments described in our 2023 Annual Report, other than those noted above.

Current wording

There have been no material updates or changes to our contractual obligations and commitments compared to contractual obligations and commitments described in our 2024 Annual Report.

Previous wording

ARR increased by $91.9 million, or 19.0%, at September 30, 2024, as compared to September 30, 2023. The increase was primarily driven by $52.6 million of growth in revenues from existing customers through their expanded use of our solutions as well as price increases, and $25.3 million in growth of subscriptions of our solutions to new customers. Addionally, $5.9 million was added to ARR due to the inclusion of Systax’s ARR, which was included as a result of the acquisition of the remaining ownership interests of Systax during the second quarter of 2024, and $8.1 million was added to ARR due to the ecosio acquisition during the third quarter of 2024. Excluding the impact of Systax and ecosio, the ARR growth rate would have been 16.1%.

Current wording

ARR increased by $94.0 million, or 17.9%, at March 31, 2025, as compared to March 31, 2024. The increase was primarily driven by $47.6 million of growth in revenues from existing customers through their expanded use of our solutions as well as price increases, and $31.7 million in growth of subscriptions of our solutions to new customers. Additionally, $6.6 million was added to ARR due to the inclusion of Systax’s ARR, which was included as a result of the acquisition of the remaining ownership interests of Systax during the second quarter of 2024, and $8.1 million was added to ARR due to the ecosio acquisition during the third quarter of 2024. Excluding the impact of Systax and ecosio, the ARR growth rate would have been 15.1%.

Previous wording

We had 4,855 direct customers and AARPC was approximately $118,800 at September 30, 2024. At September 30, 2023, we had 4,303 direct customers and approximately $112,690 of AARPC. The increase in AARPC was primarily due to expansion of usage by existing customers and adding new customers through organic growth. Additionally, the inclusion of Systax and ecosio added 574 customers to the third quarter of 2024.

Current wording

We had 4,888 direct customers and AARPC was approximately $126,534 at March 31, 2025. At March 31, 2024, we had 4,309 direct customers and approximately $121,720 of AARPC. The increase in AARPC was primarily due to expansion of usage by existing customers and adding new customers through organic growth. Additionally, the inclusion of Systax and ecosio added 604 customers to the first quarter of 2025.