Vertex, Inc.

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 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.

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 55% and 49% of software subscription revenue from cloud-based subscriptions during the three months ended June 30, 2025 and 2024, respectively, and 54% and 48% for the six months ended June 30, 2025 and 2024, respectively. While our on-premise software subscription revenue comprised 45% and 51% of our software subscription revenue during the three months ended June 30, 2025 and 2024, respectively, and 46% and 52% during the six months ended June 30, 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, procurement, billing, Point of Sale and e-commerce. These partners include

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”),

Previous 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.

Current 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.

Previous 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”).

Current wording

We believe that global commerce and the compliance environment provides durable and accelerating growth opportunities for our business. We generated revenue of $184.6 million and $161.1 million for the three months ended June 30, 2025 and 2024, respectively, and $361.6 million and $317.9 million for the six months ended June 30, 2025 and 2024, respectively. We had net income (loss) of $(1.0) million and $5.2 million for the three months ended June 30, 2025 and 2024, respectively, and $10.2 million and $7.8 million for the six months ended June 30, 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 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.

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 $38.4 million and $38.5 million for the three months ended June 30, 2025 and 2024, respectively, and $75.6 million and $75.3 million for the six months ended June 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.

Previous wording

On April 30, 2025, we announced the completion of a strategic investment in Kintsugi AI, Inc. (“Kintsugi”), a San Francisco-based, AI startup focused on automating sales tax compliance for ​​small and mid-size businesses. ​​​​Terms of the agreement include a $15.0 million minority investment representing a 10% ownership interest, as well as an intellectual property sharing and commercial arrangement. Additionally, the Company has designated one member to Kintsugi’s board of directors. Our investment in Kintsugi is separate from the $10.0 to $12.0 million of investments that we previously announced we would spend in AI technologies during 2025. We plan to leverage Kintsugi’s intellectual property to advance these initiatives.

Current wording

During the second quarter of 2025, we completed our strategic investment in Kintsugi AI, Inc. (“Kintsugi”), a San Francisco-based, AI startup focused on automating sales tax compliance for ​​small and mid-size businesses (the “Kintsugi Investment”). ​​​​Terms of the agreement included a $15.0 million minority investment representing a 10% ownership interest, as well as an intellectual property sharing and commercial arrangement. Additionally, we have designated one member to Kintsugi’s board of directors. 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.

Previous wording

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration expected to be received in exchange for those products or services. We enter into contracts that include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowance for subscription and non-renewal cancellations and any taxes collected from customers that are subsequently remitted to governmental authorities.

Current wording

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration expected to be received in exchange for those products or services. We enter into contracts that include various combinations of products and services, which are generally capable of being distinct and accounted for as separate

Previous 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.

Current wording

Licenses for on-premise software subscriptions 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.

Previous 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.

Current wording

Revenues increased $23.5 million, or 14.6%, to $184.6 million for the three months ended June 30, 2025 compared to $161.1 million for the same period in 2024. The increase in software subscriptions revenues of $21.4 million, or 15.7%, 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 8.4% and 5.8% of total software subscriptions revenues in the three months ended June 30, 2025 and 2024, respectively.

Previous 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.

Current wording

The $2.1 million increase in services revenues was primarily driven by a $2.5 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. These increases were partially offset by a $0.4 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 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.

Current wording

Cost of services revenues increased $2.7 million, or 17.0%, to $18.9 million for the three months ended June 30, 2025, compared to $16.2 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.

Previous 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.

Current wording

Research and development expenses increased $6.0 million, or 40.8%, to $20.6 million for the three months ended June 30, 2025 compared to $14.6 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.

Previous 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.

Current wording

Selling and marketing expenses increased $7.9 million, or 19.5%, to $48.5 million for the three months ended June 30, 2025 compared to $40.5 million for the same period in 2024. This increase was primarily driven by a $4.3 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.

Previous 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.

Current wording

General and administrative expenses increased $7.5 million, or 21.0%, to $43.4 million for the three months ended June 30, 2025 compared to $35.9 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 $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.

Current wording

Depreciation and amortization expenses increased $1.0 million, or 18.7%, to $6.2 million for the three months ended June 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.

Previous wording

Change in fair value of acquisition contingent earn-outs changed $14.7 million from the prior year due entirely 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, recorded during the three months ended March 31, 2025. For further information, refer to Note 3, “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 $2.3 million for the three months ended June 30, 2025 due entirely to adjustments to the fair values of our ecosio acquisition contingent Cash Earn-outs and Stock Earn-outs of $1.8 million and $0.5 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 (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.

Current wording

Other operating expense (income), net was $4.1 million of other operating expense, net for the three months ended June 30, 2025 compared to $1.1 million of other operating income, net for the same period in 2024. This change was primarily driven by $2.9 million related to legal costs associated with a pending legal claim and $1.0 million of foreign currency transaction losses incurred. 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. Additionally, in the prior year period, we recorded a fair value adjustment of $(1.6) million to the contingent consideration liability for the acquisition of Tellutax, LLC in 2021. For further information regarding the Tellutax, LLC contingent consideration liability, 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

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.

Current wording

Income tax expense (benefit) was $(1.7) million and $2.2 million for the three months ended June 30, 2025 and 2024, respectively. This change was primarily driven by higher tax benefits on exercises and vesting of stock awards recognized during the three months ended June 30, 2025, as well as income tax from fluctuations in income (loss). 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 a decrease in the impact of tax credits compared to the three months ended June 30, 2024.

Previous 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).

Current wording

Interest expense (income), net was $2.8 million of interest income, net for the six months ended June 30, 2025, compared to $0.5 million of interest expense, net for the same period in 2024. This change was mainly due to several factors: a $3.0 million increase in interest income primarily due to increased dollars invested during the period, a reduction of $0.3 million of interest expense related to the valuation of our prior year foreign currency forward contracts due to market fluctuations, and a $1.0 million decrease in interest costs related to the repayment of our Term Loan, which was fully repaid in the second quarter of 2024. These interest income increases were partially offset by $0.7 million in interest expense and a $0.4 million increase in deferred financing costs related to our Notes (as defined below).

Previous 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.

Current wording

As of June 30, 2025, we had unrestricted cash and cash equivalents of $284.4 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

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.

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 2024 Annual Report.

Previous 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.

Current wording

Operating Activities. Net cash provided by operating activities of $60.8 million for the six months ended June 30, 2025 consisted of net income of $10.2 million and adjustments for non-cash charges of $69.7 million, which were partly offset by cash outflows of $19.0 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 a decrease in accounts receivable due to the timing of cash collections during the period.

Previous 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

Current wording

Net cash provided by operating activities of $82.3 million for the six months ended June 30, 2024 consisted of net income of $7.8 million, adjusted for non-cash charges of $60.7 million and cash inflows of $18.1 million from changes in operating assets and liabilities, which were partially offset by $4.7 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

Previous wording

other current assets. These movements were primarily due to the timing of cash payments. These changes were partially offset by an increase in deferred revenue and a decrease in accounts receivable, primarily due to customer growth and cash collections during the period.

Current wording

and customer growth during the period. These changes were partially offset by decreases in accrued and deferred compensation and accrued expenses. These movements were primarily due to the timing of cash payments.

Previous 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.

Current wording

Investing Activities. Net cash used in investing activities of $59.3 million for the six months ended June 30, 2025 consisted of investments in property and equipment, and capitalized software of $42.9 million and $10.6 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.

Previous 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.

Current wording

Net cash used in investing activities of $47.8 million for the six months ended June 30, 2024 consisted of investments in property and equipment, and capitalized software of $29.7 million and $11.1 million, respectively, related to investments in infrastructure, new products, and enhancements to existing products. Additionally, we invested $7.8 million in available-for-sale investment securities, which was more than offset by proceeds of $8.9 million received during the period for sales and maturities in our investment securities.** **Finally, we paid $6.1 million related to an asset acquisition completed during the second quarter of 2024.

Previous 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.

Current wording

Financing Activities. Net cash used in financing activities of $20.2 million for the six months ended June 30, 2025 consisted of $26.1 million in payments for taxes related to the net share settlement of stock-based awards as well as a $3.5 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”).

Previous 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.

Current wording

Net cash provided by financing activities of $238.1 million for the six months ended June 30, 2024 consisted of $345.0 million in gross proceeds from our Notes, as well as a $15.0 million increase in customer funds obligations, primarily due to timing differences between receipt of funds from customers and taxing jurisdiction withdrawals of these funds, $3.3 million in proceeds from the exercise of stock options, 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, $18.3 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.

Previous 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.

Current wording

Debt. As of June 30, 2025, we had a $300.0 million Line of Credit with no outstanding borrowings in connection with our Credit Agreement. As of June 30, 2025, we had $345.0 million aggregate principal amount of debt outstanding related to our Notes. For further 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.

Previous 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.

Current wording

As of June 30, 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 further 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.

Previous 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%.

Current wording

ARR increased by $88.2 million, or 16.1%, at June 30, 2025, as compared to June 30, 2024. The increase was primarily driven by $43.7 million of growth in revenues from existing customers through their expanded use of our solutions as well as price increases, and $33.7 million in growth of subscriptions of our solutions to new customers. Additionally, $10.8 million was added to ARR due to the ecosio acquisition during the third quarter of 2024. Excluding the impact of ecosio, the ARR growth rate would have been 14.1%.

Previous 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.

Current wording

We had 4,862 direct customers and AARPC was approximately $130,934 at June 30, 2025. At June 30, 2024, we had 4,438 direct customers and approximately $123,570 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 ecosio added 473 customers to the second quarter of 2025.

Previous wording

We believe that Adjusted EBITDA is a measure widely used by securities analysts and investors to evaluate the financial performance of our company and other companies. We believe that Adjusted EBITDA and Adjusted EBITDA margin are useful as supplemental measures to evaluate our overall operating performance as they measure business performance focusing on cash related charges and because they are important metrics to lenders under our credit agreement. 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 margin represents Adjusted EBITDA divided by total revenues for the same period. For purposes of comparison,

Current wording

We believe that Adjusted EBITDA is a measure widely used by securities analysts and investors to evaluate the financial performance of our company and other companies. We believe that Adjusted EBITDA and Adjusted EBITDA margin are useful as supplemental measures to evaluate our overall operating performance as they measure business performance focusing on cash related charges and because they are important metrics to lenders under our Credit Agreement. 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 margin represents Adjusted EBITDA divided by total revenues for the same period. For purposes of comparison, our net income (loss) was $(1.0) million and $5.2 million for the three months ended June 30, 2025 and 2024, respectively, while our net income (loss) margin was (0.5)% and 3.2% over the same periods, respectively. Additionally, our net income

Previous wording

our net income was $11.1 million and $2.7 million for the three months ended March 31, 2025 and 2024, respectively, while our net income margin was 6.3% and 1.7% over the same periods, respectively.

Current wording

was $10.2 million and $7.8 million for the six months ended June 30, 2025 and 2024, respectively, while our net income margin was 2.8% and 2.5% over the same periods, respectively.

Previous wording

increases of $9.0 million in non-GAAP general and administrative expense, $6.1 million in non-GAAP selling and marketing expense, and $3.1 million in non-GAAP research and development expense. Adjusted EBITDA margin decreased to 21.0% for the three months ended March 31, 2025, compared to 23.4% for the comparable period in 2024, primarily due to strategic investments into information technology infrastructure, business and re-engineering processes and other initiatives related to our 2024 acquisitions.

Current wording

The decrease in Adjusted EBITDA for the three months ended June 30, 2025 of $0.1 million over the comparable period in 2024 was primarily driven by increases of $7.6 million in non-GAAP selling and marketing expense, $7.4 million in non-GAAP general and administrative expense, and $5.4 million in non-GAAP research and development expense, which were offset by a $21.3 million increase in non-GAAP gross profit. Adjusted EBITDA margin decreased to 20.8% for the three months ended June 30, 2025 compared to 23.9% for the comparable period in 2024, primarily due to strategic investments into information technology infrastructure, business and re-engineering processes and other continuing initiatives related to our 2024 acquisitions.

Previous wording

We use free cash flow as a critical measure in the evaluation of liquidity in conjunction with related GAAP amounts. We also use this measure when considering available cash, including for decision-making purposes related to dividends and discretionary investments. We consider free cash flow to be an important measure for investors because it measures the amount of cash we generate from our operations after our capital expenditures and capitalization of software development costs. In addition, we base certain of our forward-looking estimates and budgets on free cash flow and free cash flow margin. We define free cash flow as the total of net cash provided by operating activities less purchases of

Current wording

We use free cash flow as a critical measure in the evaluation of liquidity in conjunction with related GAAP amounts. We also use this measure when considering available cash, including for decision-making purposes related to dividends and discretionary investments. We consider free cash flow to be an important measure for investors because it measures the amount of cash we generate from our operations after our capital expenditures and capitalization of software

Previous wording

Free cash flow decreased by $16.8 million for the three months ended March 31, 2025, as compared to the same period in 2024. This decrease was primarily driven by a decrease in net cash provided by operating activities of $9.8 million, primarily attributable to the timing of cash payments during the period, as well as $7.0 million in additional investments in property and equipment, and capitalized software related to investments in infrastructure, new products, and enhancements to existing products. Free cash flow margin decreased to (6.9)% for the three months ended March 31, 2025, compared to 2.9% for the same period in 2024.

Current wording

Free cash flow decreased by $17.4 million for the three months ended June 30, 2025, as compared to the same period in 2024. This decrease was primarily driven by a decrease in net cash provided by operating activities of $11.7 million, primarily attributable to the timing of cash payments during the period, as well as $5.6 million in additional investments in property and equipment, and capitalized software related to investments in infrastructure, new products, and enhancements to existing products. Free cash flow margin decreased to 10.6% for the three months ended June 30, 2025 compared to 22.9% for the same period in 2024.

Previous wording

We use these non-GAAP financial measures to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, and to evaluate financial performance. We use non-GAAP financial measures of free cash flow and free cash flow margin to evaluate liquidity. Our non-GAAP financial measures are presented as supplemental disclosure as we believe they provide useful information to investors and others in understanding and evaluating our results, prospects, and liquidity period-over-period without the impact of certain items that do not directly correlate to our operating performance and that may vary significantly from period to period for reasons unrelated to our operating performance, as well as comparing our financial results to those of other companies. Our definitions of these non-GAAP financial measures may differ from similarly titled measures presented by other companies, and therefore, comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, the financial information prepared in accordance with GAAP financial measures, and should be read in conjunction with the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Current wording

that do not directly correlate to our operating performance and that may vary significantly from period to period for reasons unrelated to our operating performance, as well as comparing our financial results to those of other companies. Our definitions of these non-GAAP financial measures may differ from similarly titled measures presented by other companies, and therefore, comparability may be limited. In addition, other companies may not publish these or similar metrics. Thus, our non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from, the financial information prepared in accordance with GAAP financial measures, and should be read in conjunction with the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.