Vertex Announces Fourth Quarter and Full Year 2022 Financial Results

Vertex

KING OF PRUSSIA, PA — Vertex, Inc. (NASDAQ: VERX) this week announced financial results for its fourth quarter and full year ended December 31, 2022.

David DeStefano, Chief Executive Officer, stated “The fourth quarter wrapped up a very strong year for Vertex. Revenue growth accelerated, profitability was strong, and we delivered positive free cash flow. It’s clear the investments we are making in strategic acquisitions, new product development and expansion of our go-to-market and customer success organizations are helping us attack our significant growth opportunity. The Vertex team is executing well, and we are optimistic about 2023 and beyond.”

Fourth Quarter 2022 Financial Results

  • Total revenues of $131.1 million, up 17.4% year-over-year.
  • Software subscription revenues of $110.9 million, up 18.9% year-over-year.
  • Cloud revenues of $46.6 million, up 34.4% year-over-year.
  • Annual Recurring Revenue (“ARR”) was $431.1 million, up 16.5% year-over-year.
  • Average Annual Revenue per direct customer (“AARPC”) was $100,500 at December 31, 2022, compared to $86,700 at December 31, 2021, and $97,300 on September 30, 2022.
  • Net Revenue Retention (“NRR”) was 110%, an increase from 108% at December 31, 2021, and 109% at the end of the third quarter of 2022.
  • Gross Revenue Retention (“GRR”) was 96%, an increase from 95% at December 31, 2021, and consistent with the third quarter of 2022.
  • Loss from operations of $3.4 million. Prior year loss from operations approximated breakeven. Non-GAAP operating income of $17.7 million, compared to $16.4 million for the same period prior year.
  • Net loss of $5.3 million, compared to net loss of $0.6 million for the same period prior year.
  • Net loss per basic and diluted Class A and Class B shares of $(0.04) for 2022 compared to net loss of $(0.00) for the same period prior year.
  • Non-GAAP net income of $12.5 million and Non-GAAP diluted EPS of $0.08.
  • Adjusted EBITDA of $21.0 million, compared to $19.3 million for the same period prior year. Adjusted EBITDA margin of 16.0%, compared to 17.2% for the same period prior year.
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Full-Year 2022 Financial Results

  • Total revenues of $491.6 million, up 15.5% year-over-year.
  • Software subscription revenues of $415.5 million, up 15.9% year-over-year.
  • Cloud revenues of $168.9 million, up 32.9% year-over-year.
  • Loss from operations of $8.1 million, compared to a loss from operations of $2.9 million for the same period prior year. Non-GAAP operating income of $66.2 million, compared to $66.3 million for the prior year.
  • Net loss of $12.3 million, compared to a net loss of $1.5 million for the prior year.
  • Net loss per basic and diluted Class A and Class B share was $(0.08) compared to net loss per basic and diluted Class A and Class B of $(0.01) for the prior year.
  • Non-GAAP net income of $47.8 million and Non-GAAP diluted EPS of $0.30.
  • Adjusted EBITDA of $78.7 million, compared to $78.0 million for the prior year. Adjusted EBITDA margin of 16.0%, compared to 18.3% for the prior year.
  • Cash provided by operating activities of $76.8 million, compared to $92.0 million for the prior year. Free cash flow of $3.4 million, compared to $46.9 million for the prior year.

Definitions of certain key business metrics and the non-GAAP financial measures used in this press release and reconciliations of such measures to the most directly comparable GAAP financial measures are included in the Company’s original financial release announcement under the headings “Definitions of Certain Key Business Metrics” and “Use and Reconciliation of Non-GAAP Financial Measures.”

Financial Outlook

For the first quarter of 2023, the Company currently expects:

  • Revenues of $131 million to $133 million; and
  • Adjusted EBITDA of $19 million to $21 million.
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For the full-year 2023, the Company currently expects:

  • Revenues of $550 million to $556 million;
  • Cloud revenue growth of 27%; and
  • Adjusted EBITDA of $92 million to $96 million.

John Schwab, Chief Financial Officer, stated, “Our guidance for 2023, which indicates continued double-digit revenue growth and strengthening profitability, reflects confidence in our business. Indirect tax automation is a must-have, not a nice-to-have, in today’s complex business environment and we see strong sales pipelines and little impact of a weakening economy on our business so far this year.”

The Company is unable to reconcile forward-looking Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, without unreasonable efforts because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact net income (loss) for these periods but would not impact Adjusted EBITDA. Such items may include stock-based compensation expense, depreciation and amortization of capitalized software costs and acquired intangible assets, severance expense, acquisition contingent consideration, litigation settlements, transaction costs which includes offering costs related to the sale of shares of certain of the Company’s Class B shareholders which are not representative of normal business operations, and other items. The unavailable information could have a significant impact on the Company’s net income (loss). The foregoing forward-looking statements reflect the Company’s expectations as of today’s date. Given the number of risk factors, uncertainties and assumptions discussed in the Company’s original financial release announcement, actual results may differ materially. The Company does not intend to update its financial outlook until its next quarterly results announcement.

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Important disclosures in this earnings release about and reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the Company’s original financial release under “Use and Reconciliation of Non-GAAP Financial Measures.”

For more information and additional details, visit the Company’s Investor Relations website at https://ir.vertexinc.com.

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