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What changed in Vertex, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Vertex, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+327 added−298 removedSource: 10-K (2026-02-24) vs 10-K (2025-02-27)

Top changes in Vertex, Inc.'s 2025 10-K

327 paragraphs added · 298 removed · 226 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe support e-filing and print formats for returns, schedules, worksheets, tax reports and payment requests, and provide archiving and retrieval of all filings. ● Tax Data Management. Our tax data management tools enable enterprises to unify transaction data from multiple business applications and sources.
Biggest changeOur solutions also include workflow management tools, such as calendar and document management, and role-based security and event logging, which supports our customers’ internal control over financial reporting and compliance with the Sarbanes-Oxley Act of 2002. We support e-filing and print formats for returns, schedules, worksheets, tax reports and payment requests, and provide archiving and retrieval of all filings.
Our trusted brand reputation has allowed us to be the leading SAP and Oracle tax technology provider, with a relationship spanning many years with these vendors. Our technology software and solutions and highly scalable transaction volume throughput has earned the trust of world-class online marketplaces.
Our trusted brand reputation has allowed us to be a leading SAP and Oracle tax technology provider, with a relationship spanning many years with these vendors. Our technology software and solutions and highly scalable transaction volume throughput has earned the trust of world-class online marketplaces.
Businesses employ a mix of approaches to address their indirect tax obligations, including: ● in-house practices and spreadsheets that result in custom transaction-specific research, manual determination, static tax tables, or rate calculator services, as well as manual filing and remittance activities; ● businesses utilizing native ERP capabilities with rudimentary tax determination capabilities, which are typically not designed for complex tax support and lack tax rates, rules and complex calculation functionality, and require the user to manually track, input, maintain, and update all tax law changes that occur; 7 Table of Contents ● outsourced transaction tax compliance services offered by accounting and specialized consulting firms; and ● tax-specific solutions from other vendors.
Businesses employ a mix of approaches to address their indirect tax obligations, including: ● in-house practices and spreadsheets that result in custom transaction-specific research, manual determination, static tax tables, or rate calculator services, as well as manual filing and remittance activities; ● businesses utilizing native ERP capabilities with rudimentary tax determination capabilities, which are typically not designed for complex tax support and lack tax rates, rules and complex calculation functionality, and require the user to manually track, input, maintain, and update all tax law changes that occur; ● outsourced transaction tax compliance services offered by accounting and specialized consulting firms; and ● tax-specific solutions from other vendors.
Our communications solution supports the determination of taxes, surcharges, and fees affecting U.S. providers of communication services, including wireless, voice-over-IP, satellite, internet, and video and audio streaming services. We have pre-built integrations specific to the leading providers of business applications used by these industries. ● Technology Specific Solutions – Chain Flow Accelerator, SAP-specific tools .
Our communications solution supports the determination of taxes, surcharges, and fees affecting U.S. providers of communication services, including wireless, voice-over-IP, satellite, internet, and video and audio streaming services. We have pre-built integrations specific to the leading providers of business applications used in these industries. Technology Specific Solutions – Chain Flow Accelerator, SAP-specific tools.
We continue to invest in our research and development capabilities with significant focus on emerging technologies such as edge computing, artificial intelligence/machine learning, data fabric/mesh platforms, blockchain, application programming interface/microservices, and containerization to extend our solutions further into the cloud and partner ecosystems to continuously deliver more value. Competition Our industry is highly competitive and fragmented.
We continue to invest in our research and development capabilities with significant focus on emerging technologies such as edge computing, artificial intelligence/machine learning, data 8 Table of Contents fabric/mesh platforms, blockchain, application programming interface/microservices, and containerization to extend our solutions further into the cloud and partner ecosystems to continuously deliver more value. Competition Our industry is highly competitive and fragmented.
The information found on our website is not part of this or any other report filed with or furnished to the SEC. ​ ​ ​ ​ 9 Table of Contents
The information found on our website is not part of this or any other report filed with or furnished to the SEC. ​ ​ ​ ​ 10 Table of Contents
Our flexible, tiered revenue-based pricing model also results in our customers growing their spend with us as they grow and continue to use our solutions. ● Acquire new customers. We believe the market for our software and solutions is large and underpenetrated, both in the U.S. and globally.
Our flexible, tiered revenue-based pricing model also results in our customers growing their spend with us as they grow and continue to use our solutions. 6 Table of Contents ● Acquire new customers. We believe the market for our software and solutions is large and underpenetrated, both in the U.S. and globally.
Of these employees, 76% were based in the U.S., 14% based in Europe and 10% in other countries. We believe we have a strong relationship with our employees, and we have not experienced any work stoppages. Available Information We file annual, quarterly, and current reports and other information with the Securities and Exchange Commission (“SEC”).
Of these employees, 73% were based in the U.S., 17% based in Europe and 10% in other countries. We believe we have a strong relationship with our employees, and we have not experienced any work stoppages. Available Information We file annual, quarterly, and current reports and other information with the Securities and Exchange Commission (“SEC”).
We plan to continue to invest in our direct sales, indirect sales, and partnership marketing teams, and our solution development to capture this demand increase and acquire new customers. 5 Table of Contents ● Broaden and deepen our partner ecosystem.
We plan to continue to invest in our direct sales, indirect sales, and partnership marketing teams, and our solution development to capture this demand increase and acquire new customers. ● Broaden and deepen our partner ecosystem.
The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other 8 Table of Contents information regarding registrants that file electronically with the SEC, including us.
The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC, including us.
While we include these marketplaces and service providers in our customer counts, the tens of thousands of their end-user customers are not included in our customer counts. As of December 31, 2024, we had 4,915 direct customers and our Annual Recurring Revenue (“ARR”) per customer was $122,706.
While we include these marketplaces and service providers in our customer counts, the tens of thousands of their end-user customers are not included in our customer counts. ​ As of December 31, 2025, we had 4,867 direct customers and our Annual Recurring Revenue (“ARR”) per customer was $137,867.
We believe customers consider the following factors when selecting indirect tax technologies: ● ability to minimize compliance risk exposure associated with inaccurate and/or inconsistent determination and remittance of taxes; ● ability to deliver real time tax determinations; ● ease of deployment and use; ● ease of integration with the customer’s business applications, across multiple systems; ● ability to address multiple transaction tax compliance functions, from initial taxability and tax rate determination through compliance and remittance of funds; ● lower total cost of ownership; and ● continuously updated tax content applicable to the customer’s business.
We believe customers consider the following factors when selecting indirect tax technologies: ● ability to minimize compliance risk exposure associated with inaccurate and/or inconsistent determination and remittance of taxes; ● the growing regulatory complexity, which may require the need for more robust or proven tax solutions; ● ability to deliver real time tax determinations; ● ease of deployment and use; ● ease of integration with the customer’s business applications, across multiple systems; ● ability to address multiple transaction tax compliance functions, from initial taxability and tax rate determination through compliance and remittance of funds; ● lower total cost of ownership; and ● continuously updated tax content applicable to the customer’s business.
The breadth of our solutions allows us to continually meet our customer needs, even as their needs expand in scope. For example, customers initially investing in sales tax determination may need support for other tax types, jurisdictions, and capabilities to manage their indirect tax lifecycle over time.
Our growth strategies include: ● Retention and expansion of revenues from existing customers. The breadth of our solutions allows us to continually meet our customer needs, even as their needs expand in scope. For example, customers initially investing in sales tax determination may need support for other tax types, jurisdictions, and capabilities to manage their indirect tax lifecycle over time.
In addition, we offer an SAP specific tool set that provides customers the ability to maintain, analyze, and validate tax data in procure-to-pay as well as sales and billing systems that enhance its usefulness for indirect taxes as well as other business applications. ● Implementation Services.
In addition, we offer an SAP specific tool set that provides customers the ability to maintain, analyze, and validate tax data in procure-to-pay as well as sales and billing systems that enhance its usefulness for indirect taxes as well as other business applications. 3 Table of Contents Document Management.
Our Technology Our software and solutions are built upon a robust set of technology capabilities designed for the flexibility, configurability, speed, and scale to handle complex tax scenarios and processing volumes, and interoperability across core business applications. ● Real-Time Engine.
Our Technology Our software and solutions are built upon a robust set of technology capabilities designed for the flexibility, configurability, speed, and scale to handle complex tax scenarios and processing volumes, and interoperability across core business applications. ● Platform Approach To Cloud Solution.
We leverage our relationships with professional services firms such as Deloitte, PwC, Ernst and Young, and KPMG to drive tax software adoption in partnership with their tax advisory and tax technology practices. We also utilize indirect sales to efficiently grow and scale our revenues.
We leverage our relationships with professional services firms such as Deloitte, PwC, Ernst and Young, and KPMG, as well 7 Table of Contents as over 45 other accounting and professional services firms to drive tax software adoption in partnership with their tax advisory and tax technology practices. We also utilize indirect sales to efficiently grow and scale our revenues.
We create and nurture an engaging work environment that embodies our core values of collaboration, performance, integrity, innovation, and fun, and we actively support our employees' participation in Business Resource Groups (“BRGs”), community service, and philanthropy. As of December 31, 2024, we had over 1,900 full-time employees.
We create and nurture an engaging work environment that embodies our core values of collaboration, performance, integrity, innovation, and fun, and we actively support our employees' participation in Employee Resource Groups (“ERGs”), community service, and philanthropy. As of December 31, 2025, we had over 2,100 full-time employees.
We generate sales leads through online and offline marketing channels, including search engine marketing, outbound lead generation, technology events and conferences, and digital marketing programs. Word-of-mouth referrals from our customers, technology partners and consulting firms further scale our market reach.
We generate sales leads through online and offline marketing channels, including search engine marketing, outbound lead generation, technology events and conferences, and digital marketing programs. Word-of-mouth referrals from our customers, technology partners and consulting firms further scale our market reach. We engage and grow our customer revenues through hosted events, customer advisory boards and user groups, and digital seminars.
Our document management solutions automate the validation and storage of, and tax audit support for, sales tax exemptions and reseller certificates, enabling enterprises to manage large quantities of documents, such as tax exemption certificates. ● Analytics and Insights .
Our document management solutions automate the validation and storage of, and tax audit support for, sales tax exemptions and reseller certificates, enabling enterprises to manage large quantities of documents, such as tax exemption certificates, to ensure accurate tax determination. Compliance and Reporting Solutions Returns and Filings.
While most of our revenue is currently generated by customers domiciled in the U.S., many of our customers are multinational organizations with global business operations. We also provide tax software solutions outside the U.S., primarily in Canada and Europe. For both the years ended December 31, 2024 and 2023, approximately 8% of our revenue was generated outside of the U.S.
While most of our revenue is currently generated by customers domiciled in the U.S., many of our customers are multinational organizations with global business operations. We also provide tax software solutions outside the U.S., primarily in Canada and Europe.
These solutions enable tax teams to view detailed transaction-level tax data, identify anomalies or errors, and establish necessary rules to address gaps in data and audit logs for any adjustments or corrections that have been made. ● Document Management.
Our tax data management tools enable enterprises to unify transaction data from multiple business applications and sources. These solutions enable tax teams to view detailed transaction-level tax data, identify anomalies or errors, and establish necessary rules to address gaps in data and audit logs for any adjustments or corrections that have been made. Analytics and Insights .
Our continued success is enabled by our seamless integration into customers’ business applications, gathering high-quality new customer leads, and collaborating with professional service providers to help our customers solve their specific tax needs.
Our partner ecosystem consists of multiple types of partners that provide us access to their customers and clients. Our continued success is enabled by our seamless integration into customers’ business applications, gathering high-quality new customer leads, and collaborating with professional service providers to help our customers solve their specific tax needs.
This solution includes a powerful indirect tax calculation 2 Table of Contents engine that applies rules-based logic from our proprietary content database to determine taxability, identify precise taxing jurisdictions, and consistently apply the appropriate amount of tax to each transaction in real-time.
Our tax determination solutions enable real-time calculation of indirect taxes and applicable fees for sale and purchase transactions. Our solution includes a powerful indirect tax calculation engine that applies rules-based logic from our proprietary content database to determine taxability, identify precise taxing jurisdictions, and consistently apply the appropriate amount of tax to each transaction in real-time.
Our content quality and accuracy are critical to the longevity of our customer relationships. On a monthly basis, our content team combines legislative research, analysis, technical logic, and automation to embed updated rules into our software.
On a monthly basis, our content team combines legislative research, analysis, technical logic, and automation to embed updated rules into our software.
These customers support tens of thousands of merchants who rely on their platform for their eCommerce transaction processing. We also support service providers such as outsourcing and accounting firms who use our technology to calculate tax and file tax returns for their end-customers.
We also support service providers such as outsourcing and accounting firms who use our technology to calculate tax and file tax returns for their end-customers.
Additionally, no single customer represented more than 10% of our total revenue for the years ended December 31, 2024 or 2023. Our Growth Strategies We believe today’s global commerce environment provides durable growth opportunities for our business. Our growth strategies include: ● Retention and expansion of revenues from existing customers.
For the years ended December 31, 2025 and 2024, approximately 10% and 8%, respectively, of our revenue was generated outside of the U.S. Additionally, no single customer represented more than 10% of our total revenue for the years ended December 31, 2025 or 2024. Our Growth Strategies We believe today’s global commerce environment provides durable growth opportunities for our business.
We recognize the value of our intellectual property in the marketplace and vigorously identify, create, and protect it. We believe the innovation of our employees and our continued enhancement of the features and functionality of our solutions is the keystone of our success.
We recognize the value of our intellectual property in the marketplace and vigorously identify, create, and protect it.
Due to the ubiquitous nature of our software in our customers' technology environments, we also offer implementation services to enable our customers to realize the full benefit of our solution at initial deployment. These software implementation services include configuration, data migration and implementation, and premium support and training. 3 Table of Contents ● Managed Services .
Our analytics and insights tools improve data quality and provide data intelligence to optimize the end-to-end tax process and improve business outcomes. Services Solutions Implementation Services. Due to the ubiquitous nature of our software in our customers' technology environments, we also offer implementation services to enable our customers to realize the full benefit of our solution at initial deployment.
Our Tax Content All our software and solutions are underpinned by our proprietary content database, which currently supports over 900 million effective tax rules. Our content quality and accuracy are key components of our software subscriptions revenue and customer value and are supported by over 40 years of tax knowledge and experience.
Our content quality and accuracy are key components of our software subscriptions revenue and customer value and are supported by over 45 years of tax knowledge and experience. Our content quality and accuracy are critical to the longevity of our customer relationships.
We will also be launching a product that leverages generative AI to deliver accurate and timely product and tax category mapping. Sales and Marketing We license our software and solutions primarily through our direct and indirect sales organization, with a focus on enterprise and midmarket businesses that have complex tax operations.
Over time, we expect such investment will bring additional value to existing customers and help us acquire new customers. Sales and Marketing We license our software and solutions primarily through our direct and indirect sales organization, with a focus on enterprise and midmarket businesses that have complex tax operations.
Our customers include the majority of the Fortune 500, as well as a majority of the top 10 companies by revenue in industries such as retail, technology, and manufacturing, in addition to leading digital marketplaces. We have significant expansion opportunities with these customers driven by our growing product portfolio and geographic coverage.
Our customers include the majority of the Fortune 500, as well as a majority of the top 10 companies by revenue in industries such as retail, technology, and manufacturing, in addition to leading digital marketplaces. Our customer base also includes many of Europe’s largest companies in the industrial and chemical manufacturing, pharmaceutical, medical device and metals and mining industries.
We believe expanding our strategic alliances with emerging participants who are fueling global commerce, such as payment and digital commerce platforms, will create new value for our customers and new sources of revenue. ● Extend global footprint . We have a significant opportunity to further expand internationally, in terms of our regional operations, content depth, and go-to-market coverage.
We believe expanding our strategic alliances with emerging participants who are fueling global commerce, such as payment and digital commerce platforms, will create new value for our customers and new sources of revenue. In 2025, we partnered with Kintsugi AI, Inc. (“Kintsugi”), an AI-native startup, to launch Kintsugi powered by Vertex.
Customers can also license indirect tax returns outsourcing as a managed service for compliance in the U.S. and Canada. These managed services include indirect tax return preparation, filing and tax payment, and notice management. ● E-invoicing. We offer a global solution for the end-to-end e-invoicing process.
These software implementation services include configuration, data migration and implementation, and premium support and training. Managed Services . Customers can also license indirect tax returns outsourcing as a managed service for compliance in the U.S. and Canada.
All data centers are operated by leading vendors providing physical security, internet access, environmental controls, and data retention services. Our Customers Today, we serve a large, diverse, and growing global customer base. Our market leadership in key industries can be demonstrated by our relationships with many of the largest and most well-known companies in retail trade, wholesale trade, and manufacturing.
Our market leadership in key industries can be demonstrated by our relationships with many of the largest and most well-known companies in retail trade, wholesale trade, and manufacturing.
This technology is highly relevant to emerging economic shifts, such as the sharing economy, where the physical nexus of transactions is unclear, such as ride-sharing services. ● Security. Our application security framework allows our customers to define how users can interact with sensitive enterprise data and how they are authorized to use certain aspects of our software.
This technology is highly relevant to emerging economic shifts, such as the sharing economy, where the physical nexus of transactions is unclear, such as ride-sharing services. 5 Table of Contents ● Security.
We engage and grow our customer revenues through hosted events, customer advisory boards and user groups, and digital 6 Table of Contents seminars. We extend brand awareness through advertising, press coverage and social media, as well as through sponsorships of industry associations such as Tax Executive Institute, Council on State Taxation, and CPA.com.
We extend brand awareness through advertising, press coverage and social media, as well as through sponsorships of industry associations such as Tax Executive Institute, Council on State Taxation, and CPA.com. Partners We believe the scale and quality of our ecosystem is unparalleled in the industry, and we are committed to growing it even further.
Human Capital Our culture is the foundation of everything we do, guided by a common purpose to build trusted relationships at work, in business and in our communities. We strive to be a values-driven employer of choice who attracts, retains, and inspires talented professionals to achieve their full potential.
We believe the innovation of our employees and our continued enhancement of the features and functionality of our solutions is the keystone of our success. 9 Table of Contents Human Capital Our culture is the foundation of everything we do, guided by a common purpose to build trusted relationships at work, in business and in our communities.
Companies use these solutions to leverage tax data files imported from Vertex or third-party applications to establish visible audit trails of tax determinations and user-made adjustments. Our solutions also include workflow management tools, such as calendar and document management, and role-based security and event logging, which supports our customers’ internal control over financial reporting and compliance with the Sarbanes-Oxley Act.
Our global compliance and reporting solutions enable the automation of signature-ready returns and remittance of indirect tax to appropriate jurisdictions. Companies use these solutions to leverage tax data files imported from Vertex or third-party applications to establish visible audit trails of tax determinations and user-made adjustments.
Users are mapped to a set of predefined roles, and we provide our customers with the ability to create user-defined roles. User-defined role-based access can be defined on a screen-by-screen level and further refined with read and/or write privileges. 4 Table of Contents ● Cloud Solutions .
User-defined role-based access can be defined on a screen-by-screen level and further refined with read and/or write privileges. ● Cloud Solutions . We provide cloud services from six geographically separate data centers located on two continents: North America and Europe.
Our solution supports determination for sales tax, consumer and seller use tax, VAT, communications tax, leasing tax, payroll tax, and lodging and occupancy tax. ● Compliance and Reporting. Our compliance and reporting solutions enable the automation of signature-ready returns and remittance of indirect tax to appropriate jurisdictions.
Our solution supports determination for sales tax, consumer and seller use tax, VAT, communications tax, leasing tax, payroll tax, and lodging and occupancy tax, as well as a growing set of transaction-based fees imposed by various jurisdictions.
Vertex received recognition in 2024 as a “Best Place to Work” from Built In , reflecting the value we place on our people and environment.
We strive to be a values-driven employer of choice who attracts, retains, and inspires talented professionals to achieve their full potential. Vertex received recognition in 2025 as a “ Best Place to Work ” from Built In, reflecting the value we place on our people and environment.
We provide cloud services from six geographically separate data centers located on two continents: North America and Europe. The data centers are paired for failover of operations to an alternate, geographically separate production facility in case any single data center becomes unavailable.
The data centers are paired for failover of operations to an alternate, geographically separate production facility in case any single data center becomes unavailable. All data centers are operated by leading vendors providing physical security, internet access, environmental controls, and data retention services. Our Customers Today, we serve a large, diverse, and growing global customer base.
A distinct and growing subset of our customer base includes digital marketplaces and various professional service providers, including accounting firms and outsourcing firms. Our robust technology and deep tax content differentiate us in our ability to serve the indirect tax needs of 7 of the top 10 digital marketplace providers in North America by revenue.
We have significant expansion opportunities with our customers, driven by our growing product portfolio and geographic coverage. ​ A distinct and growing subset of our customer base includes digital marketplaces and various professional service providers, including accounting firms and outsourcing firms.
Our Solutions Our Vertex solutions can automate the end-to-end indirect tax processes for all companies with complex tax operations and audit risk. Our software includes tax determination, compliance and reporting, tax data management and document management tools, analytics and insights, as well as pre-built integrations to major business applications.
Our platform supports the full lifecycle of indirect tax obligations, including transaction determination, digital invoicing and reporting requirements, compliance and returns, tax data and document management, and analytics and insights, all supported by pre-built integrations to leading enterprise business applications.
Today, we have over 4,900 direct customers, including the majority of the Fortune 500, and provide our customers with tax support in over 195 countries and territories.
These dynamics demand intelligent, scalable solutions that allow businesses to satisfy regulatory obligations while continuing to innovate and grow. Vertex has pioneered tax and compliance technology for more than 45 years. Today, we serve over 4,800 direct customers, including the majority of the Fortune 500, and support compliance operations in more than 195 countries and territories.
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Item 1. Business Overview Vertex is a leading provider of enterprise tax technology solutions. Our software, content, and services help customers stay in compliance with indirect taxes that occur in taxing jurisdictions all over the world. Collectively, indirect taxes refer to taxes that are collected and remitted to the government by an entity other than the one being taxed.
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Item 1. Business Overview Vertex is a leading provider of enterprise compliance technology for global commerce. Our software, data, and services help businesses operate with confidence by automating and governing transaction-based compliance obligations that arise wherever they buy, sell, and move goods and services around the world.
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As an example, sales tax is paid by a person or entity that is purchasing a product or service, but it is collected and remitted by the company or entity selling that product or service. This contrasts with direct taxes, such as income tax, which are paid directly by the entity being taxed.
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At the core of global commerce are transaction-based regulatory requirements that must be calculated, documented, reported, and, in many cases, digitally transmitted to tax authorities in real time. Indirect taxes—such as sales tax, use tax, and value-added tax (“VAT”)—represent a significant portion of these obligations.
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Indirect taxes, such as sales tax, use tax, and value-added tax (“VAT”) are complex. In the United States (“U.S.”) alone, Vertex tax content addresses indirect taxes for over 20,000 unique taxing jurisdictions. Compounding the complexity, rules, regulations, and indirect tax rates are constantly changing.
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Unlike direct taxes, which are paid directly by the entity being taxed, indirect taxes are collected from a purchaser and remitted to taxing authorities by the seller or service provider as part of each transaction. These obligations are inherently complex and pervasive.
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For a company doing business in multiple jurisdictions, compliance with these taxes is a significant challenge and one they encounter in literally every sale or purchase transaction they execute on a daily basis. Vertex helps companies with complex tax operations to automate their indirect tax processes.
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In the United States alone, indirect tax rules vary across more than 20,000 unique taxing jurisdictions, each with its own rates, rules, and reporting requirements. Globally, the complexity is compounded by continuously changing regulations, increasing enforcement, and the growing adoption of digital and real-time compliance mandates.
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Our software, content, and services address the increasing complexities of global commerce and compliance by reducing friction, enhancing transparency, and enabling greater confidence in meeting indirect tax obligations.
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For companies operating across multiple jurisdictions, compliance is not an isolated, periodic activity—it is a requirement embedded in virtually every sale or purchase transaction they execute each day. Vertex helps enterprises manage this complexity by embedding compliance automation directly into the systems and workflows that drive global commerce.
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As a result, our software is ubiquitous within our customers' business systems, touching nearly every line item of every transaction that an enterprise can conduct and enabling greater confidence in meeting indirect tax obligations by helping to mitigate the risk of non-compliance.
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Our platform enables customers to determine transaction-level obligations, manage compliance data, support invoicing and reporting requirements, and maintain audit-ready records across jurisdictions. By reducing friction, enhancing transparency, and improving control, Vertex helps customers mitigate the risk of non-compliance while supporting business growth and operational scalability. The pace of change in global business, technology, and regulatory environments continues to increase.
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The rapid changes taking place in today's global business, technology, and regulatory environments are having a compounding effect on the complexity of indirect tax management. As companies expand their business models by entering new geographies, enhancing their distribution channels, adding eCommerce capabilities, or transforming their digital footprint, they increase their exposure to indirect tax obligations.
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As companies expand into new geographies, adopt new distribution and eCommerce models, introduce digital products and services, and modernize their technology stacks, their exposure to transaction-based compliance obligations grows significantly. At the same time, governments are increasingly implementing new tax rules and digital reporting requirements to improve transparency and enforcement.
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Additionally, as they expand their core offerings to incorporate new digital products and services, they are increasingly impacted by new tax regulations being pursued by jurisdictions. This complexity demands intelligent solutions that enable businesses to satisfy tax obligations and support growth opportunities. We have pioneered tax technology for over 40 years.
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Our software delivers capabilities across transaction determination, compliance and reporting, tax data and document management, and analytics and insights, supported by deep integrations with the core enterprise applications that power global commerce. Our platform is fueled by more than one billion data-driven tax rates and rules and supports compliance across more than 20,000 jurisdictions worldwide.
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Our software enables tax determination, compliance and reporting, tax data management and document management, and analytics and insights with powerful pre-built integrations to core business applications used by most companies, particularly those applications that have a significant impact on global commerce transactions.
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Vertex solutions can be deployed in cloud and hybrid environments, with implementation and professional services available to support our customers’ unique business and operational requirements. Our Solutions Vertex’s solutions help enterprises automate and govern transaction-based compliance across global commerce.
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Our software is fueled by over 900 million data-driven effective tax rules and supports indirect tax compliance in more than 20,000 jurisdictions worldwide. Our solutions can be deployed in the cloud, on-premise environments, or at the network edge, all with implementation services available to enable optimal customer outcomes and satisfy unique business requirements.
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Customers can deploy these capabilities individually or as an integrated suite on the Vertex cloud platform, or select deployment models that align with their broader enterprise technology environments. 2 Table of Contents Tax Determination Solutions Tax Calculation. The increasing complexity of global regulations, cross-border trade, and jurisdictional differences has made accurate tax determination a cornerstone of compliance.
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Customers can utilize these solutions individually or as part of a broader suite and can choose the delivery model that best aligns to their enterprise technology environments. ● Tax Determination. Our tax determination solutions enable real-time calculation of indirect taxes and applicable fees for sale and purchase transactions.
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With local rules and logic to ensure compliance globally, our tax engine is built to handle thousands of product stock keeping units (“SKUs”) and services across a wide range of industries and business models. Vertex AI. Vertex AI powers intelligence across the Vertex platform to help customers operate more efficiently, reduce risk, and improve decision-making across the compliance lifecycle.
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Our analytics and insights tools improve data quality and provide data intelligence to optimize the end-to-end tax process and improve business outcomes. ● Pre-Built Integrations .
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Embedded directly into transaction, configuration, and compliance workflows, Vertex AI is designed to automate routine work, surface relevant insights earlier, and guide users toward better outcomes with less manual effort.
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Our solution enables organizations to optimize their real-time VAT reporting and e-invoicing processes for multiple countries to enhance continuous transaction controls and support direct reporting requirements. Our solution provides a single integrated platform to streamline the creation, submission, clearance, and e-archiving of e-invoices in compliance with jurisdictional mandates.
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By learning from patterns across tax data, content changes, and customer activity, Vertex AI helps tax teams scale their operations, respond more quickly to regulatory change, and focus their expertise where it matters most. ​ Vertex AI operates across the full compliance lifecycle, supporting activities such as transaction determination, tax content interpretation, configuration management, and ongoing monitoring.
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Over time, we expect such investment will bring additional value to existing customers and help us acquire new customers. Recently, we entered into an asset purchase agreement to acquire tax-specific artificial intelligence (“AI”) capabilities to more effectively manage the complexity of tax mapping.
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Rather than requiring customers to adopt separate tools or processes, Vertex AI is integrated into the Vertex cloud platform to enhance existing workflows—automating tasks, identifying potential risks or changes that may impact tax outcomes, and delivering recommendations tailored to specific roles, tasks, or business contexts. ​ Vertex’s AI capabilities include intelligent assistance for tax professionals, automated analysis of tax content changes to identify potential impacts to product taxability or configuration, and natural-language driven tools that simplify the creation and management of tax rules.
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Partners We believe the scale and quality of our ecosystem is unparalleled in the industry, and we are committed to growing it even further. Our partner ecosystem consists of multiple types of partners that provide us access to their customers and clients.
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Together, these capabilities are designed to reduce manual effort, improve consistency, and help customers maintain compliance in an environment of constantly changing regulations. ​ In addition to platform-embedded AI capabilities, in 2025, Vertex launched Smart Categorization, an AI-powered solution designed to reduce the manual effort required to map product SKUs to the correct tax categories across jurisdictions.
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Smart Categorization helps retail tax teams improve accuracy and efficiency by learning from historical classification patterns and applying them consistently at scale, reducing the time and resources required to maintain product taxability mappings as catalogs and regulations change. ​ Pre-Built Integrations.
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Our returns automation solution for sales and use tax, VAT, and goods and services tax simplify recurring compliance requirements, reducing manual effort and ensuring accurate filings and remittance across geographies. These solutions also enable a unified view of real-time reporting and periodic returns for one-click reconciliation across every country where business is transacted. E-invoicing.
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As governments accelerate digitization, compliance is increasingly shifting from periodic reporting toward structured, transaction-level oversight.
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We offer a global solution which delivers a unified foundation for e-invoicing and digital compliance that continuously evolves alongside regulatory changes, positioning enterprises to scale confidently as enforcement models advance enterprises to operationalize e-invoicing at global scale while strengthening control over structured transaction data across regulatory and business ecosystems.
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Our platform supports the end-to-end lifecycle of compliant electronic invoices from creation and data enrichment through validation, submission, and clearance, where required, in accordance with jurisdictional mandates.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe have a dynamic organization and routinely implement changes to our priorities and workforce in order to keep up with the constantly evolving market in which we operate. We expect these types of changes to continue for the foreseeable future. Our success is dependent on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business.
Biggest changeOur success is dependent on identifying, developing and retaining key employees to provide uninterrupted leadership and direction for our business. We have recently experienced workplace changes, including a new Chief Executive Officer, and we expect changes to continue for the foreseeable future.
Factors that might cause quarterly or annual fluctuations in our results of operations include, but are not limited to: ● our ability to attract new customers and retain and grow revenue from existing customers; 13 Table of Contents ● our ability to maintain, expand, train and achieve an acceptable level of production from our sales and marketing teams; ● our ability to find and nurture successful sales opportunities; ● the timing of our introduction of new solutions or updates to existing solutions; ● our ability to grow and maintain our relationships with our ecosystem of third-party partners, including integration partners and referral partners; ● the success of our customers' businesses; ● the timing of large subscriptions and customer renewal rates; ● new government regulations; ● changes in our pricing policies or those of our competitors; ● the amount and timing of our expenses related to the expansion of our business, operations and infrastructure; ● any impairment of our intangible assets, capitalized software, long-lived assets and goodwill; ● any seasonality in connection with new customer agreements, as well as renewal and upgrade agreements, each of which have historically occurred at a higher rate in the fourth quarter of each year; ● future costs related to acquisitions of content, technologies or businesses and their integration; and ● general economic conditions.
Factors that might cause quarterly or annual fluctuations in our results of operations include, but are not limited to: ● our ability to attract new customers and retain and grow revenue from existing customers; ● our ability to maintain, expand, train and achieve an acceptable level of production from our sales and marketing teams; ● our ability to find and nurture successful sales opportunities; ● the timing of our introduction of new solutions or updates to existing solutions; ● our ability to grow and maintain our relationships with our ecosystem of third-party partners, including integration partners and referral partners; ● the success of our customers' businesses; ● the timing of large subscriptions and customer renewal rates; ● new government regulations; ● changes in our pricing policies or those of our competitors; ● the amount and timing of our expenses related to the expansion of our business, operations and infrastructure; ● any impairment of our intangible assets, capitalized software, long-lived assets and goodwill; ● any seasonality in connection with new customer agreements, as well as renewal and upgrade agreements, each of which have historically occurred at a higher rate in the fourth quarter of each year; 15 Table of Contents ● future costs related to acquisitions of content, technologies or businesses and their integration; and ● general economic conditions.
Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under our indebtedness. ​ In April 2024, we incurred $345.0 million aggregate principal amount of indebtedness as a result of the issuance of the Company’s 0.750% Convertible Senior Notes due 2029 (the “Notes”).
Risks Related to Our Indebtedness Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under our indebtedness. ​ In April 2024, we incurred $345.0 million aggregate principal amount of indebtedness as a result of the issuance of the Company’s 0.750% Convertible Senior Notes due 2029 (the “Notes”).
In addition, we are subject to a variety of risks inherent in doing business internationally, including: ● political, social and economic instability; ● risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, localization and content laws as well as unexpected changes in laws, regulatory requirements and enforcement due to the wide discretion given to some local lawmakers and regulators regarding the enactment, interpretation and implementation of local regulations; ● potential damage to our brand and reputation due to compliance with local laws, including potential censorship and requirements to provide user information to local authorities; ● fluctuations in currency exchange rates; ● higher levels of credit risk and payment fraud; 14 Table of Contents ● complying with the tax laws and regulations of multiple tax jurisdictions; ● enhanced difficulties of integrating any foreign acquisitions; ● complying with a variety of foreign laws, including certain employment laws requiring national collective bargaining agreements that set minimum salaries, benefits, working conditions and termination requirements; ● reduced protection for intellectual property rights in some countries; ● difficulties in staffing and managing global operations and the increased travel, infrastructure and compliance costs associated with multiple international locations; ● regulations that might add difficulties in repatriating cash earned outside our core markets and otherwise prevent us from freely moving cash; ● import and export restrictions and changes in trade regulation; ● complying with statutory equity requirements; ● complying with the U.S.
In addition, we are subject to a variety of risks inherent in doing business internationally, including: ● political, social and economic instability; ● risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, localization and content laws as well as unexpected changes in laws, regulatory requirements and enforcement due to the wide discretion given to some local lawmakers and regulators regarding the enactment, interpretation and implementation of local regulations; ● potential damage to our brand and reputation due to compliance with local laws, including potential censorship and requirements to provide user information to local authorities; ● fluctuations in currency exchange rates; ● higher levels of credit risk and payment fraud; ● complying with the tax laws and regulations of multiple tax jurisdictions; ● enhanced difficulties of integrating any foreign acquisitions; ● complying with a variety of foreign laws, including certain employment laws requiring national collective bargaining agreements that set minimum salaries, benefits, working conditions and termination requirements; ● reduced protection for intellectual property rights in some countries; ● difficulties in staffing and managing global operations and the increased travel, infrastructure and compliance costs associated with multiple international locations; ● regulations that might add difficulties in repatriating cash earned outside our core markets and otherwise prevent us from freely moving cash; ● import and export restrictions and changes in trade regulation; ● complying with statutory equity requirements; ● complying with the U.S.
This may take time and divert management's attention from our day-to-day operations, which could negatively impact our business, results of operations, financial condition and cash flows. Our quarterly and annual results of operations will fluctuate in future periods.
This may take time and divert management's attention from our day-to-day operations, which could negatively impact our business, results of operations, financial condition and cash flows. Our quarterly and annual results of operations may fluctuate in future periods.
Each of our Line of Credit and Term Loan restricts our ability to incur additional indebtedness, including secured indebtedness, but if the respective facility matures or is repaid, we may not be subject to such restrictions under the terms of any subsequent indebtedness. ​ We may be unable to raise the funds necessary to repurchase the Notes for cash following a “fundamental change,” or to pay any cash amounts due upon conversion, and applicable law, regulatory authorities and our other indebtedness may limit our ability to repurchase the Notes or pay cash upon their conversion . ​ Noteholders may, subject to a limited exception, require us to repurchase their Notes following a “fundamental change” (as described in the Indenture governing the Notes) at a cash repurchase price generally equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
Our Line of Credit restricts our ability to incur additional indebtedness, including secured indebtedness, but if the respective facility matures or is repaid, we may not be subject to such restrictions under the terms of any subsequent indebtedness. ​ We may be unable to raise the funds necessary to repurchase the Notes for cash following a “fundamental change,” or to pay any cash amounts due upon conversion, and applicable law, regulatory authorities and our other indebtedness may limit our ability to repurchase the Notes or pay cash upon their conversion . ​ Noteholders may, subject to a limited exception, require us to repurchase their Notes following a “fundamental change” (as described in the Indenture governing the Notes) at a cash repurchase price generally equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
The market price of our Class A common stock is likely to be volatile and could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including: ● actual or anticipated fluctuations in our results of operations and financial condition; ● variance in our financial performance from expectations of securities analysts; ● changes in our software subscription revenue; ● changes in our projected operating and financial results; ● changes in tax laws or regulations; ● announcements by us or our competitors of significant business developments, acquisitions or new offerings; 22 Table of Contents ● our involvement in any litigation; ● our sale of our Class A common stock or other securities in the future; ● changes in senior management or key personnel; ● the trading volume of our Class A common stock; ● changes in the anticipated future size and growth rate of our market; and ● general economic, regulatory and market conditions.
The market price of our Class A common stock is likely to be volatile and could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including: ● actual or anticipated fluctuations in our results of operations and financial condition; ● variance in our financial performance from expectations of securities analysts; ● changes in our software subscription revenue; ● changes in our projected operating and financial results; ● changes in tax laws or regulations; ● announcements by us or our competitors of significant business developments, acquisitions or new offerings; ● our involvement in any litigation; ● our sale of our Class A common stock or other securities in the future; ● changes in senior management or key personnel; ● the trading volume of our Class A common stock; ● changes in the anticipated future size and growth rate of our market; and ● general economic, regulatory and market conditions.
The Capped Call Transactions are expected generally to reduce the potential dilution upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap. ​ The Option Counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions from time to time prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of Notes).
The Capped Call Transactions are expected generally to reduce the potential dilution upon any conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap. ​ The Option Counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A common stock and/or purchasing or selling our Class A common 28 Table of Contents stock or other securities of ours in secondary market transactions from time to time prior to the maturity of the Notes (and are likely to do so during any observation period related to a conversion of Notes).
However, if federal or state regulators were to apply these laws and regulations to this business activity, whether through expansion of enforcement activities, new interpretations of the scope of certain of these laws or regulations or of available exemptions, or if our activities are held by a court to be covered by such laws or regulations, we could be required to expend time, money and other resources to deal with enforcement actions and any penalties that might be asserted, to institute and maintain a compliance program specific to money transmission laws, and 19 Table of Contents possibly to change aspects of how we conduct our business to achieve compliance or minimize regulation.
However, if federal or state regulators were to apply these laws and regulations to this business activity, whether through expansion of enforcement activities, new interpretations of the scope of certain of these laws or regulations or of available exemptions, or if our activities are held by a court to be covered by such laws or regulations, we could be required to expend time, money and other resources to deal with enforcement actions and any penalties that might be asserted, to institute and maintain a compliance program specific to money transmission laws, and possibly to change aspects of how we conduct our business to achieve compliance or minimize regulation.
Also, as we continue to expand our customer base, any failure by us to 11 Table of Contents properly provide training and support will likely result in lost opportunities for additional subscriptions for our solutions. In addition, the upfront costs of our solutions can limit our sales to businesses using manual processes.
Also, as we continue to expand our customer base, any failure by us to 22 Table of Contents properly provide training and support will likely result in lost opportunities for additional subscriptions for our solutions. In addition, the upfront costs of our solutions can limit our sales to businesses using manual processes.
Our business and success depend in part on our strategic relationships with third parties, including our partner ecosystem, and our business would be harmed if we fail to maintain or expand these relationships. We depend in part on and anticipate that we will continue to depend in part on, various third-party relationships to sustain and grow our business.
Our business an d success depend in part on our strategic relationships with third parties, including our partner ecosystem, and our business would be harmed if we fail to maintain or expand these relationships. We depend in part on and anticipate that we will continue to depend in part on various third-party relationships to sustain and grow our business.
We will experience quarterly or annual fluctuations in our results of operations due to a number of factors, many of which are outside of our control. This makes our future results difficult to predict and could cause our results of operations to fall below expectations or our predictions.
We may experience quarterly or annual fluctuations in our results of operations due to a number of factors, many of which are outside of our control. This makes our future results difficult to predict and could cause our results of operations to fall below expectations or our predictions.
A number of states have considered or adopted laws that attempt to require out-of-state retailers to collect sales taxes on their behalf or to provide the jurisdiction with information enabling it to more easily collect use tax. On June 21, 2018, the U.S. Supreme Court issued its opinion in South Dakota v.
A number of states have considered or adopted laws that attempt to require out-of-state retailers to collect sales taxes on their behalf or to provide the jurisdiction with information enabling it to more easily collect use tax. On June 21, 2018, 23 Table of Contents the U.S. Supreme Court issued its opinion in South Dakota v.
We intend to continue to make investments to support our business growth and may require additional funds, beyond those generated by our initial public offering or available under our existing credit facility, to respond to business challenges, including to better support and serve our customers, develop new software or enhance our existing solutions, expand our tax content, improve our operating and technology infrastructure or acquire complementary businesses and technologies.
We intend to continue to make investments to support our business growth and may require additional funds, beyond those generated by our initial public offering or available under our existing credit facility, to respond to business challenges, including to better support and serve our customers, develop new software or enhance our existing solutions, expand our tax content, improve our operating and technology infrastructure or acquire complementary businesses and 17 Table of Contents technologies.
The success of any enhancements or improvements to our software solutions or any new solutions and services depends on several factors, including timely completion, competitive pricing, adequate quality testing, integration with existing technologies, and our platform and overall market acceptance.
The success of any enhancements or improvements to our software solutions 18 Table of Contents or any new solutions and services depends on several factors, including timely completion, competitive pricing, adequate quality testing, integration with existing technologies, and our platform and overall market acceptance.
Our data center providers have no obligations to renew their agreements with us on commercially reasonable terms, or at all, and it is possible that we will not be able to switch our operations to 18 Table of Contents another provider in a timely and cost-effective manner should the need arise.
Our data center providers have no obligations to renew their agreements with us on commercially reasonable terms, or at all, and it is possible that we will not be able to switch our operations to another provider in a timely and cost-effective manner should the need arise.
To improve the scalability, security, and efficiency of our solutions, and to support the expansion of our software into other tax types, we will need to continue making significant capital expenditures and also invest in additional software and infrastructure development.
To improve the scalability, security, and efficiency of our solutions, and to support the expansion of our software into other tax types, we will need to continue making significant capital expenditures and also invest in additional software and infrastructure development, including investments in AI solutions.
We have experienced these errors, bugs or defects in the past in connection with new software and software upgrades and we expect that errors, bugs or defects may be found from time to time in the future in new or enhanced software after their commercial release.
Our software may contain undetected errors, bugs or defects. We have experienced these errors, bugs or defects in the past in connection with new software and software upgrades and we expect that errors, bugs or defects may be found from time to time in the future in new or enhanced software after their commercial release.
If the content, analyses, or recommendations that our product leveraging generative AI assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, operations, or financial condition may be adversely and materially affected. The use of AI applications have resulted in cybersecurity incidents that implicate the personal data of end users of such applications.
In addition, if the content, analyses, or recommendations that our product leveraging generative AI assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, operations, or financial condition may be adversely and materially affected. The use of AI applications has resulted in cybersecurity incidents that involve the personal data of end users of such applications.
Our response to any type of disaster may not be successful in preventing the loss of customer data, service interruptions, disruptions to our operations or damage to our important facilities.
Our response to any 21 Table of Contents type of disaster may not be successful in preventing the loss of customer data, service interruptions, disruptions to our operations or damage to our important facilities.
Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act and similar laws in other jurisdictions; and ● complying with export controls and economic sanctions administered by the relevant local authorities, including in the U.S. and European Union, in our international business.
Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act and similar laws in other jurisdictions; and 16 Table of Contents ● complying with export controls and economic sanctions administered by the relevant local authorities, including in the U.S. and European Union, in our international business.
Any significant data breach could result in the loss of business, litigation and regulatory investigations, loss of customers and fines and penalties that could damage our reputation and brand and adversely affect the growth of our business.
A significant cyberattack or data breach could result in the loss of business, litigation and regulatory investigations, loss of customers and fines and penalties that could damage our reputation and brand and adversely affect the growth of our business.
Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our Class A common stock. We can provide no assurances as to the financial stability or viability of the Option Counterparties. ​ 25 Table of Contents Item 1B.
Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our Class A common stock. We can provide no assurances as to the financial stability or viability of the Option Counterparties. ​ Item 1B. Unresolved Staff Comments Not applicable. ​
Numerous federal, state and local laws and regulations govern the collection, dissemination, use and safeguarding of personal information and other data, the scope of which is changing, subject to differing interpretations, and which may be costly to comply with, inconsistent between jurisdictions or conflicting with other rules. We may be subject to these laws in certain circumstances.
Numerous 24 Table of Contents federal, state and local laws and regulations govern the collection, dissemination, use and safeguarding of personal information and other data, the scope of which is changing, subject to differing interpretations, and which may be costly to comply with, inconsistent between jurisdictions or conflicting with other rules.
Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: ​ ● increasing our vulnerability to adverse economic and industry conditions; ● limiting our ability to obtain additional financing; ● requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; ● limiting our flexibility to plan for, or react to, changes in our business; 23 Table of Contents ● diluting the interests of our existing stockholders as a result of issuing shares of our Class A common stock upon conversion of the Notes; and ● placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things: ​ ● increasing our vulnerability to adverse economic and industry conditions; ● limiting our ability to obtain additional financing; ● requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; ● limiting our flexibility to plan for, or react to, changes in our business; ● diluting the interests of our existing stockholders as a result of issuing shares of our Class A common stock upon conversion of the Notes; and ● placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital. 27 Table of Contents Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the Notes, and our cash needs may increase in the future.
As of December 31, 2024, we had approximately $923.4 million of indebtedness, excluding indebtedness of our subsidiaries and intercompany liabilities. We may also incur additional indebtedness to meet future financing needs.
As of December 31, 2025, we had approximately $957.7 million of indebtedness, excluding indebtedness of our subsidiaries and intercompany liabilities. We may also incur additional indebtedness to meet future financing needs.
Our customers provide us with information that our solutions store, some of which may be confidential information about them or their financial transactions. In addition, we store personal information about our employees and, to a lesser extent, those who purchase products or services from our customers.
In the ordinary course of business, customers provide us with information that our solutions store, some of which include confidential information about them or their financial transactions. We also store personal information about our employees and, to a lesser extent, those who purchase products or services from our customers.
Accordingly, we may need to engage in public or private equity, equity-linked or debt financings to secure additional funds.
Accordingly, we have in the past and may in the future need to engage in public or private equity, equity-linked or debt financings to secure additional funds.
Most states have also adopted laws that require notice be given to affected consumers in the event of a security breach. In the event of a security breach, our compliance with these laws may subject us to costs associated with notice and remediation, as well as potential investigations from federal regulatory agencies and state attorneys general.
In the event of a security breach, our compliance with these laws may subject us to costs associated with notice and remediation, as well as potential investigations from federal regulatory agencies and state attorneys general.
Changes in the application, scope, interpretation or enforcement of laws and regulations pertaining to our operations may harm our business or results of operations, subject us to liabilities and require us to implement new compliance programs or business methods.
If we fail to establish appropriate reserves, our business could be negatively impacted. Changes in the application, scope, interpretation or enforcement of laws and regulations pertaining to our operations may harm our business or results of operations, subject us to liabilities and require us to implement new compliance programs or business methods.
As a leader in our industry for over 40 years, our brand is one of our most valuable assets, and any failure to protect our brand could cause our business to suffer.
If we fail to effectively protect, maintain and enhance our brand, our business may suffer. As a leader in our industry for over 45 years, our brand is one of our most valuable assets, and any failure to protect our brand could cause our business to suffer.
We are subject to requirements under the U.S. Treasury Department's Office of Foreign Assets Control, anti-corruption, anti-bribery and similar laws, such as the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K.
Treasury Department's Office of Foreign Assets Control, anti-corruption, anti-bribery and similar laws, such as the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010, and other anti-corruption, anti-bribery and anti-money laundering laws in countries in which we conduct activities.
Any adverse determination related 21 Table of Contents to intellectual property claims or other litigation could prevent us from offering our solutions to others, could be material to our financial condition or cash flows, or both, or could otherwise harm our results of operations. Our ability to obtain additional capital on commercially reasonable terms may be limited.
Any adverse determination related to intellectual property claims or other litigation could prevent us from offering our solutions to others, could be material to our financial condition or cash flows, or both, or could otherwise harm our results of operations.
We will be launching a product leveraging generative AI and may incorporate other AI solutions into our platform, offerings, and/or services, and these solutions may grow over time and become significant in our operations.
We have launched a product leveraging generative AI and expect to incorporate other AI solutions into our platform, offerings, and/or services, and these solutions may grow over time and become significant in our operations. We expect to incur significant costs related to our investment in AI solutions.
Any violation of economic and trade sanction laws, export and import laws, the FCPA or other applicable anti-corruption laws or anti-money laundering laws could also result in whistleblower complaints, adverse media coverage, investigations and severe criminal or civil sanctions, any of which could have a materially adverse effect on our reputation, business, results of operations and prospects.
Any violation of economic and trade sanction laws, export and import laws, the FCPA or other applicable anti-corruption laws or anti-money laundering laws could also result in whistleblower complaints, adverse media coverage, investigations and severe criminal or civil sanctions, any of which could have a materially adverse effect on our reputation, business, results of operations and prospects. 25 Table of Contents Risks Related to Ownership of Our Class A Common Stock The price of our Class A common stock may fluctuate significantly, and you could lose all or part of your investment.
If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by NASDAQ, the SEC, or other regulatory authorities, which could require additional financial and management resources. ​ The price of our Class A common stock may fluctuate significantly, and you could lose all or part of your investment.
If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by NASDAQ, the SEC, or other regulatory authorities, which could require additional financial and management resources. ​ Risks Related to Technology and Intellectual Property If we are unable to adapt to technological change by successfully introducing new and enhanced solutions and services, our business, results of operations, financial condition, and cash flows would be adversely affected.
If we fail to effectively manage our growth, our business, results of operations, financial condition, and cash flows will be harmed. We have experienced, and may continue to experience, growth in our headcount and operations, both domestically and internationally, which has placed, and may continue to place, significant demands on our management and our administrative, operational, and financial reporting resources.
We have experienced, and may continue to experience, growth in our headcount and operations, both domestically and internationally, which has placed, and may continue to place, significant demands on our management and our 14 Table of Contents administrative, operational, and financial reporting resources.
In addition, if we fail to anticipate technological changes that our customers and partners may look to adopt, our solutions may be perceived as being less effective or obsolete.
In addition, if we fail to anticipate technological changes that our customers and partners may look to adopt, our solutions may be perceived as being less effective or obsolete. Any of these changes could have a material adverse effect on our results of operations and financial condition.
Any such cybersecurity incidents related to our use of AI applications could adversely affect our reputation and operations. The legal and regulatory environment governing AI is evolving and creates uncertainty and new laws may cause us to modify our AI strategy or implementation of technology leveraging AI functionality.
The legal and regulatory environment governing AI is evolving, and new laws may cause us to modify our AI strategy or implementation of technology leveraging AI functionality.
Any of these outcomes could lead customers to switch to our competitors or avoid using our solutions, which would negatively impact our revenue and harm our opportunities for growth .
Disruptions to our software could cause customers to lose sensitive or confidential information and could also lead to our or our customers' inability to timely remit taxes to the appropriate authorities. Any of these outcomes could lead customers to switch to our competitors or avoid using our solutions, which would negatively impact our revenue and harm our opportunities for growth.
We have internal controls designed to prevent cyber-related frauds related to authorizing the transfer of funds, but such internal controls may not be adequate. With the increasing frequency of cyber-related frauds to obtain inappropriate payments and other threats related to cyber-attacks, we may find it necessary to expend resources to remediate cyber-related incidents or to enhance and strengthen our cybersecurity.
With the increasing frequency of cyber-related frauds to obtain inappropriate payments and other threats related to cyber-attacks, we may find it necessary to expend resources to remediate cyber-related incidents or to enhance and strengthen our cybersecurity. Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service.
If we are unable to expand internationally and manage the complexity of our global operations successfully, our business could be seriously harmed. We hold significant amounts of money that we remit to taxing authorities on behalf of our customers, and this may expose us to liability from errors, delays, fraud or system failures, which may not be covered by insurance.
We hold significant amounts of money that we remit to taxing authorities on behalf of our customers, and this may expose us to liability from errors, delays, fraud or system failures, which may not be covered by insurance. We handle significant amounts of our customers' money so that we can remit those amounts to various taxing jurisdictions on their behalf.
The financial and reputational costs associated with any erroneous tax determinations may be substantial and could harm our results of operations. Changes in tax laws and regulations, or their interpretation or enforcement, may cause us to invest substantial amounts to modify our software, cause us to change our business model or draw new competitors to the market.
Risks Related to Our Tax, Legal, and Regulatory Environment Changes in tax laws and regulations, or their interpretation or enforcement, may cause us to invest substantial amounts to modify our software, cause us to change our business model or draw new competitors to the market.
We handle significant amounts of our customers' money so that we can remit those amounts to various taxing jurisdictions on their behalf. If we make mistakes in the determination or remittance of tax payments to the appropriate jurisdictions, our reputation and results of operations could suffer.
If we make mistakes in the determination or remittance of tax payments to the appropriate jurisdictions, our reputation and results of operations could suffer.
The increase in remote working arrangements by our employees, vendors, and other third parties also increases the risk of a data security compromise and the possible attack surfaces. Although we conduct training as part of our information security, cybersecurity, and data privacy efforts, that training cannot be completely effective in preventing those attacks from being successful.
Although we conduct training as part of our information security, cybersecurity, and data privacy efforts, that training cannot be completely effective in preventing those attacks from being successful.
Any of these events would negatively impact our liquidity, results of operations and our reputation. If we are unable to successfully adapt to organizational changes and effectively implement strategic initiatives, our reputation and results of operations could be impacted.
If we are unable to expand internationally and manage the complexity of our global operations successfully, our business could be seriously harmed. If we are unable to successfully adapt to organizational changes and effectively implement strategic initiatives, our reputation and results of operations could be impacted.
This reclassification could be required even if no holders of the Notes convert their Notes and could materially reduce our reported working capital. ​ The Capped Call Transactions may affect the value of our Class A common stock. ​ In connection with the pricing of the Notes, we entered into Capped Call Transactions (as defined in Note 10, “Debt” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K) with certain Option Counterparties (also defined in Note 10, “Debt”).
In either case, and in other cases, our obligations under the Notes and the Indenture could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders of our Class A common stock may view as favorable. ​ The Capped Call Transactions may affect the value of our Class A common stock. ​ In connection with the pricing of the Notes, we entered into Capped Call Transactions (as defined in Note 10, “Debt” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K) with certain Option Counterparties (also defined in Note 10, “Debt”).
There are a number of competing tax-specific software vendors, and technologies, some of which have substantially greater revenue, personnel, and other resources than we do. Corporate competitors, as well as the state and local tax services offered by accounting firms, have historically targeted our customer base of large enterprise companies.
Corporate competitors, as well as the state and local tax services offered by accounting firms, have historically targeted our customer base of large enterprise companies.
This includes developing organizational capabilities in key growth markets where the depth of skilled employees is limited and competition for these resources is intense.
This includes developing organizational capabilities in key growth markets where the depth of skilled employees is limited and competition for these resources is intense. Failure to manage this transition could lead to a loss of institutional knowledge, declining employee morale, and a weakened competitive position against digital-first entrants.
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls, or procedures, will be fully implemented, complied with or effective in protecting our systems and information. ​ We may become involved in material legal proceedings and audits, the outcomes which could adversely affect our business, results of operations, financial condition and cash flows.
There can be no assurance that our cybersecurity risk management program and processes, including our 20 Table of Contents policies, controls, or procedures, will be fully implemented, complied with or effective in protecting our systems and information. ​ Undetected errors, bugs or defects in our software could harm our reputation or decrease market acceptance of our software, which would harm our business and results of operations.
We have security systems and information technology infrastructure designed to protect against unauthorized access to such information. The security systems and infrastructure we maintain may not be successful in protecting against all security breaches and cyber-attacks, social-engineering attacks, computer break-ins, theft and other improper activity.
The security systems and infrastructure we maintain and use cannot guarantee protection against all security breaches and cyber-attacks, social-engineering attacks, computer break-ins, theft and other improper activity.
AI also presents emerging ethical issues and if our use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability. Incorrect or improper implementation, integration, or use of our solutions could result in customer dissatisfaction and negatively affect our business, results of operations, financial condition, and cash flows.
Risks Related to Our Customers Incorrect or improper implementation, integration, or use of our solutions could result in customer dissatisfaction and negatively affect our business, results of operations, financial condition, and cash flows.
If any of the foregoing risks were to be realized, it could have a material adverse effect on our business, financial performance and results of operations. 20 Table of Contents We are subject to anti-corruption, anti-bribery and similar laws and noncompliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.
We are subject to anti-corruption, anti-bribery and similar laws and noncompliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation. We are subject to requirements under the U.S.
If we are unable to respond to these changes or failures in a cost-effective manner, our solutions may become less marketable, less competitive or obsolete, and our results of operations may be negatively impacted. 10 Table of Contents If we are unable to adapt to technological change by successfully introducing new and enhanced solutions and services, our business, results of operations, financial condition, and cash flows would be adversely affected.
If we are unable to respond to these changes or failures in a cost-effective manner, our solutions may become less marketable, less competitive or obsolete, and our results of operations may be negatively impacted. 13 Table of Contents We face competitive pressures from other tax software and services providers, as well as the challenge of convincing businesses using native ERP functions to switch to our software.
We may incur significant costs to comply with these mandatory privacy and security standards. If economic conditions worsen, it may negatively affect our business and financial performance. Our financial performance depends, in part, on the state of the economy, both in the U.S. and globally.
Further, business and organizational changes may result in more reliance on third parties for various services, and that reliance may increase reputational, operational and compliance risks. If economic conditions worsen, it may negatively affect our business and financial performance. Our financial performance depends, in part, on the state of the economy, both in the U.S. and globally.
We face risks of cyber-attacks, computer hacks, theft, viruses, malicious software, phishing, employee error, denial-of-service attacks and other security breaches that could jeopardize the performance of our software and expose us to financial and reputational harm. Any of these occurrences could create liability for us, put our reputation in jeopardy and harm our business.
We face the risk of increasingly sophisticated cyber-attacks (including those that leverage AI), computer hacks, theft, viruses, malicious software (such as ransomware), phishing, employee error, denial-of-service attacks, known and unknown vulnerabilities in software and other security breaches that threaten our IT systems and confidential information (including personal data), as well as the performance of our software and expose us to potentially material financial and reputational harm.
Any of these changes could have a material adverse effect on our results of operations and financial condition. 12 Table of Contents We need to continue making significant investments in software development and equipment to improve our business.
We need to continue making significant investments in software development and equipment to improve our business.
Further, business and organizational changes may result in more reliance on third parties for various services, and that reliance may increase reputational, operational and compliance risks. 15 Table of Contents Errors in our customers' transaction tax determinations and reporting functions, or delays in the remittance of their tax payments, could harm our reputation, results of operations and growth prospects.
Any of these events would negatively impact our liquidity, results of operations and our reputation. Errors in our customers' transaction tax determinations and reporting functions, or delays in the remittance of their tax payments, could harm our reputation, results of operations and growth prospects.
We face competitive pressures from other tax software and services providers, as well as the challenge of convincing businesses using native ERP functions to switch to our software. We face significant competitive challenges from other tax-specific software vendors and from outsourced transaction tax compliance services offered by accounting and specialized consulting firms.
We face significant competitive challenges from other tax-specific software vendors and from outsourced transaction tax compliance services offered by accounting and specialized consulting firms. There are a number of competing tax-specific software vendors, and technologies, some of which have substantially greater revenue, personnel, and other resources than we do.
These third parties, including vendors that provide products and services for our operations, could also be a source of security risk to us in the event of a failure or a security incident affecting their own 16 Table of Contents security systems and infrastructure.
These third parties, including vendors that provide products and services for our operations area source of potentially significant security risk to our operations and business. Our network of ecosystem partners are also a source of risk to the extent their applications interface with ours and contain vulnerabilities.
Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we or these third parties may be unable to anticipate these techniques or to implement adequate preventative measures.
Because the techniques used to obtain unauthorized access to data or to sabotage IT systems are increasingly sophisticated and leverage tools, such as artificial intelligence, we and our third party providers are unable to anticipate all techniques or to implement comprehensive preventative measures.
A large portion of our revenue depends on maintaining and growing our revenue from existing customers and adding new customers , and if we fail to add new customers, retain our customers, or expand their usage of our solutions, our business, results of operations, financial condition, and cash flows would be harmed.
If we fail to effectively manage our growth, our business, results of operations, financial condition, and cash flows will be harmed.
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Disruptions to our software could cause customers to lose sensitive or confidential information and could also lead to our or our customers' inability to timely remit taxes to the appropriate authorities.
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Summary of Risk Factors We are providing the following summary of the risk factors contained in this Form 10-K to enhance the readability and accessibility of our risk factor disclosures.
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We are exposed to cybersecurity and data privacy risks that, if realized, could expose us to legal liability, damage our reputation and harm our business.
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We encourage our shareholders to carefully review the full risk factors contained in this Form 10-K in their entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially from recent results or from our anticipated future results.
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Such harm could be in the form of theft of our or our customers' confidential information, the inability of our customers to access our systems or the improper re-routing of customer funds through fraudulent transactions or other frauds perpetrated to obtain inappropriate payments.
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Risks Related to Our Business and Industry ● If we fail to add new customers, retain our customers, or expand their usage of our solutions, our business, results of operations, financial condition, and cash flows would be harmed. ● Our business would be harmed if we fail to maintain or expand our strategic relationships with third parties. ● We face competitive pressures from other tax software and services providers, as well as the challenge of convincing businesses using native ERP functions to switch to our software. ● Our recent success may not be indicative of our future results of operations. ● Changes to customers’ and partners’ software systems may impact our ability to offer a specific software deployment method to existing customers. ● We need to continue making significant investments in software development and equipment to improve our business. ● If we fail to effectively manage our growth, our business, results of operations, financial condition, and cash flows will be harmed. ● Future acquisitions of, and investments in, other businesses, software, tax content or technologies may not yield expected benefits. ● Our quarterly and annual results of operations may fluctuate in future periods. ● Operating globally involves challenges that may adversely affect our ability to grow. ● If we are unable to successfully adapt to organizational changes and effectively implement strategic initiatives, our reputation and results of operations could be impacted. ● If economic conditions worsen, it may negatively affect our business and financial performance. ● Natural disasters, epidemic or pandemic outbreaks, terrorist acts and political events could disrupt business and result in lower sales. ● Our ability to obtain additional capital on commercially reasonable terms may be limited. ● If we fail to attract and retain qualified technical and tax-content personnel, our business could be harmed. ● If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements could be impaired. ​ Risks Related to Technology and Intellectual Property ● If we are unable to adapt to technological changes, our business, results of operations, financial condition, and cash flows would be adversely affected. ● Any failures in information technology or infrastructure could lead to disruptions of our software, loss of customer data or untimely remittance of taxes. ● If we fail to effectively protect, maintain and enhance our brand, our business may suffer. ● We may face challenges in using and properly managing use of Artificial Intelligence (“AI”) in our business. 11 Table of Contents ● Expansion into e-invoicing services increases our dependency on government infrastructure and exposes us to operational disruptions. ● We are exposed to cybersecurity and data privacy risks that, if realized, could materially impact our reputation and business. ● Undetected errors, bugs or defects in our software could harm our reputation or decrease market acceptance of our software. ● Our software utilizes open-source software, and any defects or security vulnerabilities in the open-source software could negatively affect our business. ● Interruptions or performance problems with third-party data centers, systems and technologies providers that we rely on may adversely affect our business and results of operations. ● Our ability to protect our intellectual property is limited, and we may be subject to claims of infringement by third parties. ​ Risks Related to Our Customers ● Incorrect or improper implementation, integration, or use of our solutions could result in customer dissatisfaction and negatively affect our business, results of operations, financial condition, and cash flows. ● We hold significant amounts of money that we remit to taxing authorities on behalf of our customers, and this may expose us to liability from errors, delays, fraud or system failures, which may not be covered by insurance. ● Errors in our customers' transaction tax determinations and reporting functions, or delays in the remittance of their tax payments, could harm our reputation, results of operations and growth prospects. ​ Risks Related to Our Tax, Legal, and Regulatory Environment ● Changes in tax laws and regulations, or their interpretation or enforcement, may cause us to invest substantial amounts to modify our software, cause us to change our business model or draw new competitors to the market. ● We may become involved in material legal proceedings and audits. ● Changes in the application, scope, interpretation or enforcement of laws and regulations pertaining to our operations may harm our business or results of operations, subject us to liabilities and require us to implement new compliance programs or business methods. ● Noncompliance with anti-corruption, anti-bribery and similar laws can subject us to criminal penalties or significant fines and harm our business and reputation. ​ Risks Related to Ownership of Our Class A Common Stock ● The price of our Class A common stock may fluctuate significantly. ● Our share repurchase program may increase the volatility of the market price of our stock and adversely affect our liquidity.
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In some cases, we rely on the safeguards put in place by third parties to protect against security threats.
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Further, we may not realize the anticipated long-term stockholder value of our share repurchase program. ● If securities or industry analysts do not publish, or publish negative, research or reports about our business, or if they adversely change their recommendations regarding our Class A common stock, the market price of our Class A common stock and trading volume could decline. ● We intend to rely on “controlled company” exemptions from certain corporate governance requirements.
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Our network of ecosystem partners could also be a source of vulnerability to the extent their applications interface with ours, whether unintentionally or through a malicious backdoor. We do not review the software code included in third-party integrations in all instances.
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You will not have the same protections afforded to stockholders of other companies. ​ Risks Related to Our Indebtedness ● Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks and impair our ability to sati sfy our obligations under our indebtedness. ● We may incur substantially more debt or take other actions which would further intensify the risks associated with our indebtedness. ● We may be unable to raise the funds necessary to repurchase the Notes (as defined below) for cash following a “fundamental change,” or to pay any cash amounts due upon conversion, and our ability to repurchase the Notes or pay cash upon their conversion may be limited. 12 Table of Contents ● Provisions in the Indenture (as defined below) could delay or prevent an otherwise beneficial takeover of us. ● The Capped Call Transactions (as defined below) may affect the value of our Class A common stock. ​ Risks Related to Our Business and Industry ​ A large portion of our revenue depends on maintaining and growing our revenue from existing customers and adding new customers , and if we fail to add new customers, retain our customers, or expand their usage of our solutions, our business, results of operations, financial condition, and cash flows would be harmed.
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Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service.
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Unplanned departures or the failure to develop a robust leadership pipeline could upend our annual goals and erode investor confidence. We must aggressively recruit experts in all fields, particularly in the fields of AI and e-invoicing platforms, while retraining our existing workforce to adapt to automated, hybrid decision-making processes.
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Threats to our information technology security can take various forms, including viruses, worms and other malicious software programs that attempt to attack our solutions or platform or to gain access to the data of our customers or their customers. Like other companies, we have on occasion and will continue to experience threats to our data and systems.
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If any of the foregoing risks were to be realized, it could have a material adverse effect on our business, financial performance and results of operations. Our ability to obtain additional capital on commercially reasonable terms may be limited.
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If we fail to establish appropriate reserves, our business could be negatively impacted. 17 Table of Contents Undetected errors, bugs or defects in our software could harm our reputation or decrease market acceptance of our software, which would harm our business and results of operations. Our software may contain undetected errors, bugs or defects.
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However, if we are not effective in developing these solutions, or if we fail to generate sufficient usage of our products and services, we may not grow revenue in line with our investment in AI.
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Our business is dependent upon the proper functioning of our business processes and information systems, and modification or interruption of such systems may disrupt our business, processes and internal controls.
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Any such cybersecurity incidents related to our use of AI applications could adversely affect our reputation and operations. Regulatory and investor scrutiny regarding hyperbolic or unsubstantiated claims about AI integration has increased, resulting in enforcement actions and litigation against companies who engage in this practice.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. ​ Our cybersecurity risk management initiative is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. ​ Our cybersecurity risk management initiative includes: ​ ● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; ● a risk management team responsible for managing our cybersecurity risk assessment processes and acts as a check and balance on our information security team which is responsible for maintaining, monitoring, and updating our security controls as well as managing our response to cybersecurity incidents; ● the use of external service providers , where appropriate, to assess, test or otherwise assist with aspects of our security controls; ● cybersecurity awareness training of our employees, incident response personnel, and senior management; ● a cybersecurity incident response plan and playbook that includes procedures for responding to cybersecurity incidents; and ● a third-party risk management process for service providers, suppliers, and vendors . ​ We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
Biggest changeThis does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. ​ Our cybersecurity risk management initiative is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. ​ Our cybersecurity risk management initiative includes: ​ ● risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our enterprise IT environment; ● an Information Security governance, risk and compliance team that is responsible for managing our cybersecurity risk assessment processes and acts as a check and balance on our cybersecurity team which is responsible for maintaining, monitoring, and updating our security controls as well as managing our response to cybersecurity incidents; ● the use of external service providers , where appropriate, to assess, test or otherwise assist with aspects of our security controls; ● cybersecurity awareness training of our employees, incident response personnel, and senior management; ● A I security risk management: risk-based practices intended to address cybersecurity risks arising from AI-enabled threats and the use of AI technologies in our operations or products; ● application of risk-based cybersecurity practices within our product development lifecycle; 29 Table of Contents ● a cybersecurity incident response plan and playbook that includes procedures for responding to cybersecurity incidents; and ● a third-party risk management process for service providers that is calibrated based on our assessment of each provider’s operational criticality and risk profile.
See Item 1A.“Risk Factors – We are exposed to cybersecurity and data privacy risks that, if realized, could expose us to legal liability, damage our reputation, and harm our business.” ​ Cybersecurity Governance ​ Our Board of Directors (the “Board”) considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the “Committee”) oversight of cybersecurity and other information technology risks.
See Item 1A.“Risk Factors – We are exposed to cybersecurity and data privacy risks that, if realized, could expose us to legal liability, damage our reputation, and harm our business.” ​ Cybersecurity Governance ​ Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (the “Committee”) oversight of cybersecurity and other information technology risks.
The Committee oversees management’s implementation of our cybersecurity risk management program. ​ The Committee receives quarterly reports from management on our cybersecurity risks. In addition, management updates the Committee, as necessary, regarding any cybersecurity incidents. ​ 26 Table of Contents The Committee reports to the full Board regarding its activities, including those related to cybersecurity.
The Committee oversees management’s implementation of our cybersecurity risk management program. ​ The Committee receives quarterly reports from management on our cybersecurity risks. In addition, management updates the Committee, as necessary, regarding any cybersecurity incidents. ​ The Committee reports to the full Board regarding its activities, including those related to cybersecurity.
The full Board also receives briefings from management on our cybersecurity risk management program. Board members receive presentations on cybersecurity topics from our General Counsel, internal security staff, or external experts as part of the Board’s continuing education on topics that impact public companies. ​ Our Chief Operating Officer and General Counsel manage the cybersecurity risk management program.
The full Board also receives briefings from management on our cybersecurity risk management program. Board members receive presentations on cybersecurity topics from our SVP of Information Security, internal security staff, or external experts as part of the Board’s continuing education on topics that impact public companies. ​ Our SVP of Information Security manages our cybersecurity risk management program.
Our Chief Operating Officer has over twenty-five years of leadership experience in global business operations, including information security and compliance. Our General Counsel has overall management responsibility of cybersecurity risks.
Our Chief Technology Officer has over thirty-five years of leadership experience in global business operations, including information security and compliance, and reports to our Chief Executive Officer.
Our General Counsel’s experience includes over twenty years in positions of leadership in global organizations supervising compliance and risk professionals . ​ Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment. ​ ​
Our SVP of Information Security, Chief Technology Officer and/or Chief Digital Officer work closely with the Vertex Executive Leadership Team to support their oversight responsibilities in relation to the overall cybersecurity risk management program. ​ Our management team stays informed about significant cybersecurity risks, risk management processes and incidents through regular briefings with the SVP of Information Security, Chief Technology Officer and/or Chief Digital Officer, who in turn supervise and monitor efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from security operations personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed including both customer facing and in our internal environment. ​
Item 1C. Cybersecurity Disclosures Cybersecurity Risk Management and Strategy ​ Our cybersecurity risk management initiative is a cornerstone of our information security program, which includes a cross-functional management team with representatives from Legal, Enterprise Risk Management, Information Security, Information Technology, and Engineering.
Item 1C. Cybersecurity Disclosures Cybersecurity Risk Management and Strategy ​ Our cybersecurity risk management initiative is a cornerstone of our information security program, led by our Senior Vice President (“SVP”) of Information Security who reports to our Chief Technology Officer.
Our information security program includes a cybersecurity incident response plan and playbook. ​ We have designed and assessed our program based on the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”).
We maintain the cybersecurity risk program with defined processes for risk identification, detection, response, and recovery, including regular testing and third-party assessments that are intended to protect the confidentiality, integrity, and availability of our critical systems and information. ​ We have designed and assessed our program based on the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”).
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The cybersecurity risk management work is directed by the Enterprise Risk Management Team in collaboration with the Information Security Team and is intended to protect the confidentiality, integrity, and availability of our critical systems and information.
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We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition.
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The Vertex Executive Leadership Team has oversight over their management and the program. Our Chief Operating Officer is responsible for managing and mitigating our material risks from cybersecurity threats. His team of information security professionals manage our internal cybersecurity personnel and our retained external cybersecurity consultants.
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Our SVP of Information Security has over twenty years of cybersecurity, compliance and leadership experience, has worked at both large enterprises and medium-sized companies, and reports to our Chief Technology Officer. Our Chief Technology Officer and our Chief Digital Officer are primarily responsible for assessing and managing our cyber risks.
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His team of attorneys and certified risk professional assess cybersecurity risks, assist the information security team with mitigating identified risks, and aligns the management of cybersecurity risks with the management of enterprise risks.
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Our Chief Digital Officer has more than twenty-five years of consulting and organizational management experience with small to large enterprise-sized clients in a variety of leading industries, primarily involving business innovation, strategy, and large-scale technology enablement, and reports to our Chief Financial Officer.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters, which includes our operations and development teams, is located in King of Prussia, Pennsylvania, and consists of approximately 189,500 square feet of space under a lease that expires on September 30, 2028. We also lease offices in Naperville, Illinois; Frankfurt, Germany; Sao Paulo, Brazil; Chennai, India; Killorglin, Ireland; Cork, Ireland; and Vienna, Austria.
Biggest changeItem 2. Properties Our corporate headquarters, which includes our operations and development teams, is located in King of Prussia, Pennsylvania, and consists of approximately 189,500 square feet of space under a lease that expires on September 30, 2028.
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We believe our facilities are adequate for our current and presently foreseeable needs. ​
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We also lease offices in Naperville, Illinois; Frankfurt, Germany; Sao Paulo, Brazil; Chennai, India; Killorglin, Ireland; Cork, Ireland; Dublin, Ireland; and Vienna, Austria. We believe our facilities are adequate for our current and presently foreseeable needs. ​ 30 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not presently a party to any litigation the outcome of which we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition. ​ Item 4. Mine Safety Disclosures Not applicable. ​ ​ 27 Table of Contents PART II
Biggest changeWe are not presently a party to any litigation the outcome of which we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition. ​ Item 4. Mine Safety Disclosures Not applicable. ​ ​ 31 Table of Contents PART II
As of December 31, 2024, the matter remains before the Court and is proceeding through the discovery process. We believe the allegations in the complaint, once proven, are sufficient to prevail in this matter.
As of December 31, 2025, the matter remains before the Court and is proceeding through the discovery process. We believe the allegations in the complaint, once proven, are sufficient to prevail in this matter.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors may deem relevant. ​ 28 Table of Contents Stock Performance Graph The graph below (1) compares the cumulative total return on our Class A common stock with that of the S&P 500 Index (2) and the NASDAQ U.S.
Biggest changeAny future determination to declare dividends will be made at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our Board may deem relevant.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our Class A common stock has been listed on the NASDAQ Global Market exchange, under the symbol “VERX” since July 28, 2020. Prior to that date, there was no public trading market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock has been listed on the NASDAQ Global Market exchange, under the symbol “VERX” since July 28, 2020. Prior to that date, there was no public trading market for our common stock.
Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders. As of December 31, 2024, there were 22 stockholders of record of our Class B common stock.
Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders. As of December 31, 2025, there were 20 stockholders of record of our Class B common stock.
Benchmark Software TR Index (3) . The period shown commences on July 28, 2020, and ends on December 31, 2024, the end of our most recent fiscal year. The graph assumes an investment of $100 in each of the aforementioned on the close of market on July 28, 2020.
Benchmark Software TR Index (3) . The period shown commences on December 31, 2020, and ends on December 31, 2025, the end of our most recent fiscal year. The graph assumes an investment of $100 in each of the aforementioned on the close of market on December 31, 2020.
Our Class B common stock is not listed on any stock exchange nor traded on any public market. Holders As of December 31, 2024, we had 6 holders of record of our Class A common stock.
Our Class B common stock is not listed on any stock exchange nor traded on any public market. Holders As of December 31, 2025, we had 5 holders of record of our Class A common stock.
The stock price performance graph is not necessarily indicative of future price performance. 1 Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2025. 2 S&P 500 Index Data: Copyright Standard and Poor’s, Inc. Used with permission. All rights reserved. 3 NASDAQ Index Data: Copyright NASDAQ OMX, Inc. Used with permission.
The stock price performance graph is not necessarily indicative of future price performance. The information in this paragraph and the following performance graph are deemed to be furnished, not filed. 1 Prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright 1980-2026. 2 S&P 500 Index Data: Copyright Standard and Poor’s, Inc. Used with permission.
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All rights reserved. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Base Date ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company / Index 7/28/20 12/31/20 6/30/21 12/31/21 6/30/22 12/31/22 ​ 6/30/23 ​ 12/31/23 ​ 6/30/24 12/31/24 Vertex, Inc. ​ $ 100.00 ​ $ 145.62 ​ $ 91.67 ​ $ 66.31 ​ $ 47.33 ​ $ 60.62 ​ $ 81.46 ​ $ 112.53 ​ $ 150.57 ​ $ 222.82 S&P 500 ​ $ 100.00 ​ $ 116.12 ​ $ 133.83 ​ $ 149.46 ​ $ 119.63 ​ $ 122.39 ​ $ 143.07 ​ $ 154.56 ​ $ 178.20 ​ $ 193.23 NASDAQ U.S.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers The table below presents information with respect to our Class A common stock purchases made during the three months ended December 31, 2025 by us or any "affiliated purchaser", as defined in Rule 10b-18(a)(3) under the Exchange Act: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period (1) ​ Total Number of Shares Purchased ​ ​ Average Price Paid per Share ​ Total Number of Shares Purchased as Part of Publicly Announced Program ​ ​ Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans at Period End ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( in thousands) October 1-31 ​ — ​ $ — ​ — ​ $ 150,000 November 1-30 ​ — ​ ​ — ​ — ​ ​ 150,000 December 1-31 ​ 503,890 ​ ​ 20.00 ​ 503,890 ​ ​ 139,921 Total ​ 503,890 ​ $ 20.00 ​ 503,890 ​ $ 139,921 (1) On October 30, 2025, the Board authorized a stock repurchase program for up to $150.0 million of the Company's outstanding shares of Class A common stock.
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Benchmark Software TR ​ $ 100.00 ​ $ 114.08 ​ $ 132.90 ​ $ 149.28 ​ $ 106.79 ​ $ 100.01 ​ $ 140.52 ​ $ 159.09 ​ $ 180.49 ​ $ 187.69 ​ ​ ​ Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ​ ​
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The stock repurchase program has no termination date and may be modified, suspended or discontinued at any time. ​ Shares purchased under the repurchase plan do not include shares withheld to satisfy withholding tax obligations. 32 Table of Contents Stock Performance Graph The graph below (1) compares the cumulative total return on our Class A common stock with that of the S&P 500 Index (2) and the NASDAQ U.S.
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All rights reserved. 3 NASDAQ Index Data: Copyright NASDAQ OMX, Inc. Used with permission.
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All rights reserved. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Company / Index ​ 12/31/2020 ​ 12/31/2021 ​ 12/31/2022 ​ 12/31/2023 ​ 12/31/2024 ​ 12/31/2025 Vertex, Inc. ​ $ 100.00 ​ $ 45.53 ​ $ 41.63 ​ $ 77.27 ​ $ 153.01 ​ $ 57.27 S&P 500 ​ $ 100.00 ​ $ 128.71 ​ $ 105.40 ​ $ 133.10 ​ $ 166.40 ​ $ 196.16 NASDAQ U.S.
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Benchmark Software TR ​ $ 100.00 ​ $ 130.86 ​ $ 87.67 ​ $ 139.46 ​ $ 164.53 ​ $ 183.21 ​ ​ ​ Recent Sales of Unregistered Securities None. ​ ​ Item 6. [Reserved] ​ ​ 33 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

102 edited+25 added−31 removed108 unchanged
Biggest changeNon-GAAP income or loss before income taxes is then adjusted for income taxes calculated using the respective statutory tax rates for applicable jurisdictions, which for purposes of this determination were assumed to be 25.5%. ​ We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view these non-GAAP financial measures in conjunction with the related GAAP financial measures. ​ The following schedules reflect our additional non-GAAP financial measures and reconciles our additional non-GAAP financial measures to the related GAAP financial measures. ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ December 31, ​ ​ ​ 2024 ​ ​ 2023 ​ (Dollars in thousands) ​ ​ ​ ​ ​ ​ Non-GAAP cost of revenues, software subscriptions $ 111,929 ​ $ 106,038 Non-GAAP cost of revenues, services $ 62,303 ​ $ 59,042 ​ Non-GAAP gross profit $ 492,544 ​ $ 407,307 ​ Non-GAAP gross margin 73.9 % 71.2 % Non-GAAP research and development expense $ 56,395 ​ $ 52,218 ​ Non-GAAP selling and marketing expense $ 154,892 ​ $ 129,216 ​ Non-GAAP general and administrative expense $ 128,224 ​ $ 124,925 ​ Non-GAAP operating income $ 130,989 ​ $ 85,646 ​ Non-GAAP net income $ 100,984 ​ $ 63,699 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ December 31, ​ (Dollars in thousands) ​ 2024 ​ 2023 ​ Non-GAAP Cost of Revenues, Software Subscriptions: ​ ​ Cost of revenues, software subscriptions ​ $ 175,580 ​ $ 162,920 ​ Stock-based compensation expense ​ (4,349) ​ (2,834) ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues ​ (59,302) ​ (54,048) ​ Non-GAAP cost of revenues, software subscriptions ​ $ 111,929 ​ $ 106,038 ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Cost of Revenues, Services: ​ ​ ​ ​ ​ ​ ​ Cost of revenues, services ​ $ 65,071 ​ $ 60,888 ​ Stock-based compensation expense ​ (2,768) ​ (1,846) ​ Non-GAAP cost of revenues, services ​ $ 62,303 ​ $ 59,042 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 50 Table of Contents ​ ​ For the year ended ​ ​ ​ December 31, ​ (Dollars in thousands) ​ 2024 ​ 2023 ​ Non-GAAP Gross Profit: ​ ​ ​ ​ ​ Gross profit ​ $ 426,125 ​ $ 348,579 ​ Stock-based compensation expense ​ 7,117 ​ 4,680 ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues ​ 59,302 ​ 54,048 ​ Non-GAAP gross profit ​ $ 492,544 ​ $ 407,307 ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Gross Margin: ​ ​ ​ ​ ​ Total revenues ​ $ 666,776 ​ $ 572,387 ​ Non-GAAP gross margin ​ 73.9 % 71.2 % ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Research and Development Expense: ​ ​ ​ ​ ​ Research and development expense ​ $ 66,666 ​ $ 58,212 ​ Stock-based compensation expense ​ (9,548) ​ (5,994) ​ Transaction costs ​ ​ (723) ​ ​ — ​ Non-GAAP research and development expense ​ $ 56,395 ​ $ 52,218 ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Selling and Marketing Expense: ​ ​ ​ ​ ​ Selling and marketing expense ​ $ 170,574 ​ $ 140,237 ​ Stock-based compensation expense ​ (13,204) ​ (8,380) ​ Amortization of acquired intangible assets – selling and marketing expense ​ ​ (2,478) ​ ​ (2,641) ​ Non-GAAP selling and marketing expense ​ $ 154,892 ​ $ 129,216 ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP General and Administrative Expense: ​ ​ ​ ​ ​ General and administrative expense ​ $ 152,835 ​ $ 145,936 ​ Stock-based compensation expense ​ (17,556) ​ (14,865) ​ Severance expense ​ ​ (3,048) ​ (3,576) ​ Amortization of cloud computing implementation costs – general and administrative ​ ​ (4,007) ​ ​ (2,570) ​ Non-GAAP general and administrative expense ​ $ 128,224 ​ $ 124,925 ​ ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Operating Income: ​ ​ ​ ​ ​ Loss from operations ​ $ (2,228) ​ $ (17,510) ​ Stock-based compensation expense ​ 47,425 ​ 33,919 ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues ​ 59,302 ​ 54,048 ​ Amortization of acquired intangible assets – selling and marketing expense ​ ​ 2,478 ​ ​ 2,641 ​ Amortization of cloud computing implementation costs – general and administrative ​ ​ 4,007 ​ ​ 2,570 ​ Severance expense ​ ​ 3,048 ​ ​ 3,576 ​ Acquisition contingent consideration ​ ​ (2,575) ​ ​ 1,549 ​ Change in fair value of acquisition contingent earn-outs ​ ​ 17,500 ​ ​ — ​ Transaction costs ​ 2,032 ​ 4,853 ​ Non-GAAP operating income ​ $ 130,989 ​ $ 85,646 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 51 Table of Contents ​ ​ For the year ended ​ ​ ​ December 31, ​ (Dollars in thousands) ​ 2024 ​ 2023 ​ Non-GAAP Net Income: ​ ​ ​ ​ ​ Net loss ​ $ (52,729) ​ $ (13,093) ​ Income tax expense (benefit) ​ ​ 54,638 ​ ​ (8,581) ​ Stock-based compensation expense ​ 47,425 ​ 33,919 ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues ​ ​ 59,302 ​ ​ 54,048 ​ Amortization of acquired intangible assets – selling and marketing expense ​ ​ 2,478 ​ ​ 2,641 ​ Amortization of cloud computing implementation costs – general and administrative ​ ​ 4,007 ​ ​ 2,570 ​ Severance expense ​ 3,048 ​ 3,576 ​ Acquisition contingent consideration ​ ​ (2,575) ​ ​ 1,549 ​ Change in fair value of acquisition contingent earn-outs ​ ​ 17,500 ​ ​ — ​ Transaction costs (1) ​ ​ 2,032 ​ 4,853 ​ Change in settlement value of deferred purchase commitment liability – interest expense ​ ​ 423 ​ ​ 4,020 ​ Non-GAAP income before income taxes ​ ​ 135,549 ​ ​ 85,502 ​ Income tax adjustment at statutory rate (2) ​ (34,565) ​ (21,803) ​ Non-GAAP net income ​ $ 100,984 ​ $ 63,699 ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) The year ended December 31, 2023 includes costs associated with a public tender offer, which was withdrawn by the Company in January 2024.
Biggest changeNon-GAAP income or loss before income taxes is then adjusted for income taxes calculated using the respective statutory tax rates for applicable jurisdictions, which for purposes of this determination were assumed to be 25.5%. ​ We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view these non-GAAP financial measures in conjunction with the related GAAP financial measures. ​ 53 Table of Contents The following schedules reflect our additional non-GAAP financial measures and reconciles our additional non-GAAP financial measures to the related GAAP financial measures. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ December 31, ​ ​ ​ 2025 ​ ​ 2024 ​ (Dollars in thousands) ​ ​ ​ ​ ​ ​ Non-GAAP cost of revenues, software subscriptions $ 112,145 ​ $ 111,929 ​ ​ ​ Non-GAAP cost of revenues, services $ 73,965 ​ $ 62,303 ​ Non-GAAP gross profit $ 562,334 ​ $ 492,544 ​ Non-GAAP gross margin 75.1 % 73.9 % Non-GAAP research and development expense $ 71,273 ​ $ 56,395 ​ Non-GAAP selling and marketing expense $ 178,595 ​ $ 154,892 ​ Non-GAAP general and administrative expense $ 149,310 ​ $ 128,224 ​ Non-GAAP operating income $ 136,728 ​ $ 130,989 ​ Non-GAAP net income $ 105,772 ​ $ 100,984 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ (Dollars in thousands) 2025 ​ 2024 ​ Non-GAAP Cost of Revenues, Software Subscriptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of revenues, software subscriptions $ 187,816 ​ $ 175,580 ​ Stock-based compensation expense (5,829) ​ (4,349) ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues (69,842) ​ (59,302) ​ Non-GAAP cost of revenues, software subscriptions $ 112,145 ​ $ 111,929 ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Cost of Revenues, Services: ​ ​ ​ ​ ​ ​ Cost of revenues, services $ 79,027 ​ $ 65,071 ​ Stock-based compensation expense (5,062) ​ (2,768) ​ Non-GAAP cost of revenues, services $ 73,965 ​ $ 62,303 ​ Non-GAAP Gross Profit: ​ ​ ​ ​ Gross profit $ 481,601 ​ $ 426,125 ​ Stock-based compensation expense 10,891 ​ 7,117 ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues 69,842 ​ 59,302 ​ Non-GAAP gross profit $ 562,334 ​ $ 492,544 ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Gross Margin: ​ ​ ​ ​ Total revenues $ 748,444 ​ $ 666,776 ​ Non-GAAP gross margin 75.1 % 73.9 % ​ ​ ​ ​ ​ ​ ​ Non-GAAP Research and Development Expense: ​ ​ ​ ​ Research and development expense $ 83,715 ​ $ 66,666 ​ Stock-based compensation expense (12,442) ​ (9,548) ​ Transaction costs ​ — ​ ​ (723) ​ Non-GAAP research and development expense $ 71,273 ​ $ 56,395 ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Selling and Marketing Expense: ​ ​ ​ ​ Selling and marketing expense $ 196,488 ​ $ 170,574 ​ Stock-based compensation expense (15,616) ​ (13,204) ​ Amortization of acquired intangible assets – selling and marketing expense ​ (2,277) ​ ​ (2,478) ​ Non-GAAP selling and marketing expense $ 178,595 ​ $ 154,892 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 54 Table of Contents ​ For the year ended ​ ​ December 31, ​ (Dollars in thousands) 2025 ​ 2024 ​ Non-GAAP General and Administrative Expense: ​ ​ ​ ​ General and administrative expense $ 178,685 ​ $ 152,835 ​ Stock-based compensation expense (18,814) ​ (17,556) ​ Severance expense ​ (6,823) ​ (3,048) ​ Amortization of cloud computing implementation costs – general and administrative expense ​ (3,738) ​ ​ (4,007) ​ Non-GAAP general and administrative expense $ 149,310 ​ $ 128,224 ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Operating Income: ​ ​ ​ ​ Income (loss) from operations $ 2,331 ​ $ (2,228) ​ Stock-based compensation expense 57,763 ​ 47,425 ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues 69,842 ​ 59,302 ​ Amortization of acquired intangible assets – selling and marketing expense ​ 2,277 ​ ​ 2,478 ​ Amortization of cloud computing implementation costs – general and administrative expense ​ 3,738 ​ ​ 4,007 ​ Severance expense ​ 6,823 ​ ​ 3,048 ​ Acquisition contingent consideration ​ 200 ​ ​ (2,575) ​ Change in fair value of acquisition contingent earn-outs ​ (17,000) ​ ​ 17,500 ​ Transaction costs (1) 10,754 ​ 2,032 ​ Non-GAAP operating income $ 136,728 ​ $ 130,989 ​ ​ ​ ​ ​ ​ ​ ​ Non-GAAP Net Income: ​ ​ ​ ​ Net income (loss) $ 7,211 ​ $ (52,729) ​ Income tax expense ​ 368 ​ ​ 54,638 ​ Stock-based compensation expense 57,763 ​ 47,425 ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues ​ 69,842 ​ ​ 59,302 ​ Amortization of acquired intangible assets – selling and marketing expense ​ 2,277 ​ ​ 2,478 ​ Amortization of cloud computing implementation costs – general and administrative expense ​ 3,738 ​ ​ 4,007 ​ Severance expense 6,823 ​ 3,048 ​ Acquisition contingent consideration ​ 200 ​ ​ (2,575) ​ Change in fair value of acquisition contingent earn-outs ​ (17,000) ​ ​ 17,500 ​ Transaction costs (1) ​ 10,754 ​ 2,032 ​ Change in settlement value of deferred purchase commitment liability – interest expense ​ — ​ ​ 423 ​ Non-GAAP income before income taxes ​ 141,976 ​ ​ 135,549 ​ Income tax adjustment at statutory rate (2) (36,204) ​ (34,565) ​ Non-GAAP net income $ 105,772 ​ $ 100,984 ​ (1) The year ended December 31, 2025 includes legal expenses associated with pending litigation related to claims we have made against a competitor.
Additional Non-GAAP Financial Measures In addition to Adjusted EBITDA, Adjusted EBITDA margin, free cash flow, and free cash flow margin calculated and discussed in “Key Business Metrics,” the following additional non-GAAP financial measures are calculated and presented further below: ​ ● Non-GAAP cost of revenues, software subscriptions is determined by adding back to GAAP cost of revenues, software subscriptions, the stock-based compensation expense, and depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues for the respective periods. ​ ● Non-GAAP cost of revenues, services is determined by adding back to GAAP cost of revenues, services, the stock-based compensation expense included in cost of revenues, services for the respective periods. ​ ● Non-GAAP gross profit is determined by adding back to GAAP gross profit the stock-based compensation expense, and depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues for the respective periods. ​ ● Non-GAAP gross margin is determined by dividing non-GAAP gross profit by total revenues for the respective periods. ​ ● Non-GAAP research and development expense is determined by adding back to GAAP research and development expense the stock-based compensation expense, and transaction costs related to acquired technology included in research and development expense for the respective periods. ​ ● Non-GAAP selling and marketing expense is determined by adding back to GAAP selling and marketing expense the stock-based compensation expense and the amortization of acquired intangible assets included in selling and marketing expense for the respective periods. ​ ● Non-GAAP general and administrative expense is determined by adding back to GAAP general and administrative expense the stock-based compensation expense, amortization of cloud computing implementation costs and severance expense included in general and administrative expense for the respective periods. ​ ● Non-GAAP operating income is determined by adding back to GAAP loss or income from operations the stock-based compensation expense, depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, amortization of cloud computing implementation costs in general and administrative expense, severance expense, acquisition contingent consideration, changes in the fair 49 Table of Contents value of acquisition contingent earn-outs , and transaction costs , included in GAAP loss or income from operations for the respective periods. ​ ● N on-GAAP net income is determined by adding back to GAAP net income or loss the income tax benefit or expense, stock-based compensation expense, depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, amortization of cloud computing implementation costs in general and administrative expense, severance expense, acquisition contingent consideration, changes in the fair value of acquisition contingent earn-outs , adjustments to the settlement value of deferred purchase commitment liabilities recorded as interest expense, and transaction costs , included in GAAP net income or loss for the respective periods to determine non-GAAP loss or income before income taxes.
Additional Non-GAAP Financial Measures In addition to Adjusted EBITDA, Adjusted EBITDA margin, free cash flow, and free cash flow margin calculated and discussed in “Key Business Metrics,” the following additional non-GAAP financial measures are calculated and presented further below: ​ ● Non-GAAP cost of revenues, software subscriptions is determined by adding back to GAAP cost of revenues, software subscriptions, the stock-based compensation expense, and depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues for the respective periods. ​ ● Non-GAAP cost of revenues, services is determined by adding back to GAAP cost of revenues, services, the stock-based compensation expense included in cost of revenues, services for the respective periods. ​ 52 Table of Contents ● Non-GAAP gross profit is determined by adding back to GAAP gross profit the stock-based compensation expense, and depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues for the respective periods. ​ ● Non-GAAP gross margin is determined by dividing non-GAAP gross profit by total revenues for the respective periods. ​ ● Non-GAAP research and development expense is determined by adding back to GAAP research and development expense the stock-based compensation expense, and transaction costs related to acquired technology included in research and development expense for the respective periods. ​ ● Non-GAAP selling and marketing expense is determined by adding back to GAAP selling and marketing expense the stock-based compensation expense and the amortization of acquired intangible assets included in selling and marketing expense for the respective periods. ​ ● Non-GAAP general and administrative expense is determined by adding back to GAAP general and administrative expense the stock-based compensation expense, amortization of cloud computing implementation costs and severance expense included in general and administrative expense for the respective periods. ​ ● Non-GAAP operating income is determined by adding back to GAAP loss or income from operations the stock-based compensation expense, depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, amortization of cloud computing implementation costs in general and administrative expense, severance expense, acquisition contingent consideration, changes in the fair value of acquisition contingent earn-outs , and transaction costs , included in GAAP loss or income from operations for the respective periods. ​ ● N on-GAAP net income is determined by adding back to GAAP net income or loss the income tax benefit or expense, stock-based compensation expense, depreciation and amortization of capitalized software and acquired intangible assets included in cost of subscription revenues, amortization of acquired intangible assets included in selling and marketing expense, amortization of cloud computing implementation costs in general and administrative expense, severance expense, acquisition contingent consideration, changes in the fair value of acquisition contingent earn-outs , adjustments to the settlement value of deferred purchase commitment liabilities recorded as interest expense, and transaction costs , included in GAAP net income or loss for the respective periods to determine non-GAAP loss or income before income taxes.
Any investments we make in our research and development and our sales and marketing organization will occur in advance of experiencing the benefits from such investments; therefore, it may be difficult for us to determine if we are efficiently allocating resources in those areas. The company may pursue acquisitions or partner arrangements to accelerate its growth initiatives.
Any investments we make in our research and development and our sales and marketing organization will occur in advance of experiencing the benefits from such investments; therefore, it may be difficult for us to determine if we are efficiently allocating resources in those areas. We may pursue acquisitions or partner arrangements to accelerate its growth initiatives.
We continue to collect information and reevaluate these estimates and assumptions periodically and record any adjustments to preliminary estimates to goodwill, provided we are within the Measurement Period, with any adjustments to amortization of new or previously recorded assets and identifiable intangibles being recorded to the consolidated statements of comprehensive loss in the period in which they arise.
We continue to collect information and reevaluate these estimates and assumptions periodically and record any adjustments to preliminary estimates to goodwill, provided we are within the Measurement Period, with any adjustments to amortization of new or previously recorded assets and identifiable intangibles being recorded to the consolidated statements of comprehensive income (loss) in the period in which they arise.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” T his section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.” T his section of this Annual Report on Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
For further information, refer to Note 3, “Acquisitions” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K. As of December 31, 2024, we have no outstanding borrowings under the Line of Credit. The Notes are due in May 2029.
For further information, refer to Note 3, “Acquisitions” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K. As of December 31, 2025, we have no outstanding borrowings under the Line of Credit. The Notes are due in May 2029.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this Annual Report on Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 are not included in this Annual Report on Form 10-K, and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
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. Depreciation and Amortization Depreciation and amortization expense consists of the allocation of purchased and developed asset costs over the future periods benefitted by the use of these assets.
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. Depreciation and Amortization Depreciation and amortization expense consists of the allocation of purchased and developed asset costs over the future periods benefited by the use of these assets.
This could result in increased costs or an impairment of capitalized development costs with no resulting future revenue benefit. 35 Table of Contents Selling and Marketing Expenses 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.
This could result in increased costs or an impairment of capitalized development costs with no resulting future revenue benefit. 38 Table of Contents Selling and Marketing Expenses 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.
We generated 49% and 45% of software subscription revenues from cloud-based subscriptions in 2024 and 2023, respectively. While our on-premise software subscription revenues comprised 51% and 55% of our software subscription revenues for 2024 and 2023, respectively, they continue to decrease as a percentage of total software subscriptions revenues as cloud-based subscriptions grow.
We generated 55% and 49% of software subscription revenues from cloud-based subscriptions in 2025 and 2024, respectively. While our on-premise software subscription revenues comprised 45% and 51% of our software subscription revenues for 2025 and 2024, respectively, they continue to decrease as a percentage of total software subscriptions revenues as cloud-based subscriptions grow.
As of December 31, 2024, all of the Capped Call Transactions remained outstanding. For further information, refer to Note 10, “Debt” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K.
As of December 31, 2025, all of the Capped Call Transactions remained outstanding. For further information, refer to Note 10, “Debt” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K.
We account for income taxes using the asset and liability method resulting in the recognition of deferred tax assets and liabilities for future tax consequences of events that have been previously recognized in the Company’s consolidated financial statements or tax returns.
We account for income taxes using the asset and liability method resulting in the recognition of deferred tax assets and liabilities for future tax consequences of events that have been previously recognized in our consolidated financial statements or tax returns.
There were no outstanding borrowings under the Line of Credit at December 31, 2024 or 2023. ​ Foreign Currency Exchange Rate Risk Our revenues and expenses are primarily denominated in U.S. dollars.
There were no outstanding borrowings under the Line of Credit at December 31, 2025 or 2024. ​ Foreign Currency Exchange Rate Risk Our revenues and expenses are primarily denominated in U.S. dollars.
Sources of Credit As of December 31, 2024, we had a credit agreement with a banking syndicate (the “Credit Agreement”) that provides a $300.0 million revolving facility (the “Line of Credit”). ​ The Line of Credit expires in March 2029.
Sources of Credit As of December 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”). ​ The Line of Credit expires in March 2029.
Specific risks for these critical accounting estimates are described in the following sections. For all of these estimates, we caution that future events rarely develop exactly as forecast, and such estimates routinely require adjustment. We have reviewed these critical accounting estimates and related disclosures with our Audit Committee.
Specific risks for these critical accounting estimates are described in the following sections. For all of these estimates, we caution 55 Table of Contents that future events rarely develop exactly as forecast, and such estimates routinely require adjustment. We have reviewed these critical accounting estimates and related disclosures with our Audit Committee.
We record interest related to underpayment of income taxes as interest expense and penalties as other operating expenses in the consolidated statements of comprehensive loss. ​ We assess our income tax positions and record tax benefits or expense based upon our evaluation of the facts, circumstances, and information available at the reporting date.
We record interest related to underpayment of income taxes as interest expense and penalties as other operating expenses in the consolidated statements of comprehensive income (loss). ​ 56 Table of Contents We assess our income tax positions and record tax benefits or expense based upon our evaluation of the facts, circumstances, and information available at the reporting date.
We have an extensive network of partners that spans ERP, CRM, procurement, billing, POS, and eCommerce platforms. Our partners enhance the coverage and adoption of our solutions and promote our thought leadership. We leverage our partnerships to maximize the benefits of our solutions for our customers and to identify new customer opportunities.
We have an extensive network of partners that spans ERP, CRM, procurement, billing, POS, and eCommerce platforms. Our partners enhance the coverage and adoption of our solutions and promote our thought leadership. We leverage our partnerships to maximize the benefits of our solutions for our 35 Table of Contents customers and to identify new customer opportunities.
By forming additional strategic alliances with participants in the global digital transformation, such as payments and eCommerce platforms, we can continue to expand our exposure to all transactions, business-to-consumer, business-to-business, and business-to-government. 31 Table of Contents Continued innovation of our software.
By forming additional strategic alliances with participants in the global digital transformation, such as payments and eCommerce platforms, we can continue to expand our exposure to all transactions, business-to-consumer, business-to-business, and business-to-government. Continued innovation of our software.
Over recent years, cloud sales to new customers have grown at a faster rate than sales of on-premise solutions, which is a trend that we expect to continue over time. We generated 49% and 45% of software subscription revenues from cloud-based subscriptions in 2024 and 2023, respectively. We host our cloud-based subscriptions.
Over recent years, cloud sales to new customers have grown at a faster rate than sales of on-premise solutions, which is a trend that we expect to continue over time. We generated 55% and 49% of software subscription revenues from cloud-based subscriptions in 2025 and 2024, respectively. We host our cloud-based subscriptions.
For further information on our debt obligations, refer to Note 10, “Debt” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K. 45 Table of Contents ​ In connection with the pricing of the Notes on April 23, 2024, the Company entered into Capped Call Transactions.
For further information on our debt obligations, refer to Note 10, “Debt” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K. ​ 48 Table of Contents In connection with the pricing of the Notes on April 23, 2024, we entered into Capped Call Transactions.
Despite positive evidence of projected future business profitability in our U.S. entity, management determined that this did not outweigh the negative evidence to allow us to conclude it was more likely than not the deferred tax assets would be realized and therefore we recorded a full valuation allowance against these U.S. deferred tax assets as of December 31, 2024.
Despite positive evidence of projected future business profitability in our U.S. entity, management determined that this did not outweigh the negative evidence to allow us to conclude it was more likely than not the deferred tax assets would be realized and therefore we recorded a full valuation allowance against these U.S. deferred tax assets as of December 31, 2024, which we have maintained through December 31, 2025.
We carry the Notes at principal value less unamortized issuance costs on our consolidated balance sheets, and we present fair value for required disclosure purposes only. ​ Borrowings under our Credit Agreement will bear interest, at our option, at either the New Base Rate Option or the SOFR Option.
We carry the Notes at principal value less unamortized issuance costs on our consolidated balance sheets, and we present fair value for required disclosure purposes only. ​ 57 Table of Contents Borrowings under our Credit Agreement will bear interest, at our option, at either the New Base Rate Option or the SOFR Option.
We monitor our net revenue retention rate (“NRR”) in order to understand our ability to retain and grow revenues from our customers. Our NRR was 109% and 113% in 2024 and 2023, respectively. We believe our gross revenue retention rate (“GRR”) provides insight into and demonstrates to investors our ability to retain revenues from our existing customers.
We monitor our net revenue retention rate (“NRR”) in order to understand our ability to retain and grow revenues from our customers. Our NRR was 105% and 109% in 2025 and 2024, respectively. We believe our gross revenue retention rate (“GRR”) provides insight into and demonstrates to investors our ability to retain revenues from our existing customers.
At December 31, 2024, we had 4,915 direct customers and approximately $122,706 of AARPC. At December 31, 2023, we had 4,310 direct customers and approximately $118,910 of AARPC. The increase in AARPC was primarily due to expansion of usage by existing customers and adding new customers through organic growth.
At December 31, 2024, we had 4,915 direct customers and approximately $122,706 of AARPC. The increase in AARPC was primarily due to expansion of usage by existing customers and adding new customers through organic growth.
We have historically recognized immaterial 54 Table of Contents amounts of foreign currency gains and losses in each of the periods presented. We may in the future hedge selected significant transactions denominated in currencies other than the U.S. dollar as we expand our international operations and our risk grows.
We have historically recognized immaterial amounts of foreign currency gains and losses in each of the periods presented. We may in the future hedge selected significant transactions denominated in currencies other than the U.S. dollar as we expand our international operations and our risk grows. Item 8.
Future interest payments related to the Notes of $11.2 million are included in the table. For further information, refer to Note 10, “Debt” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K. (2) The Company has contingent consideration liabilities for Cash Earn-outs and Stock Earn-outs related to the 2024 acquisition of ecosio.
Future interest payments related to the Notes of $8.6 million are included in the table. For further information, refer to Note 10, “Debt” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K. (2) We have contingent consideration liabilities for Cash Earn-outs and Stock Earn-outs related to the 2024 acquisition of ecosio.
In addition, if outside of the Measurement Period, any 53 Table of Contents subsequent adjustments to the acquisition date fair values are reflected in the consolidated statements of comprehensive loss in the period in which they arise.
In addition, if outside of the Measurement Period, any subsequent adjustments to the acquisition date fair values are reflected in the consolidated statements of comprehensive income (loss) in the period in which they arise.
Our GRR was 95% in both 2024 and 2023. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations– Key Business Metrics– Net Revenue Retention Rate and Gross Revenue Retention Rate” and for further discussion. Acquire new customers.
Our GRR was 94% and 95% in 2025 and 2024, respectively. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations– Key Business Metrics– Net Revenue Retention Rate and Gross Revenue Retention Rate” and for further discussion. Acquire new customers.
Material Future Cash Obligations and Commercial Commitments Cash Requirements. We believe that our existing cash resources and our Line of Credit will be sufficient to meet our capital requirements and fund our operations for the next 12 months as well as our longer-term liquidity needs.
We believe that our existing cash resources and our Line of Credit will be sufficient to meet our capital requirements and fund our operations for the next 12 months as well as our longer-term liquidity needs.
Significant judgment is required in determining our worldwide income tax provision. Vertex and its subsidiaries are generally taxed at the corporate level, and the income tax provision or benefit is based on income or loss sourced to the U.S. federal and state jurisdictions as well as foreign jurisdictions at the tax rates applicable in those jurisdictions.
Vertex and its subsidiaries are generally taxed at the corporate level, and the income tax provision or benefit is based on income or loss sourced to the U.S. federal and state jurisdictions as well as foreign jurisdictions at the tax rates applicable in those jurisdictions.
Adjusted EBITDA was $151.9 million and $100.8 million in 2024 and 2023, respectively. Adjusted EBITDA is a non-GAAP financial measure. Refer to “Key Business Metrics” and “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.
Adjusted EBITDA was $161.5 million and $151.9 million in 2025 and 2024, respectively. Adjusted EBITDA is a non-GAAP financial measure. Refer to “Key Business Metrics” and “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.
Adjusted EBITDA margin represents Adjusted EBITDA divided by total revenues for the same period. For purposes of comparison, our net loss was $(52.7) million and $(13.1) million in 2024 and 2023, respectively, while our net loss margin was (7.9)% and (2.3)% over the same periods, respectively.
Adjusted EBITDA margin represents Adjusted EBITDA divided by total revenues for the same period. For purposes of comparison, our net income (loss) was $7.2 million and $(52.7) million in 2025 and 2024, respectively, while our net income (loss) margin was 1.0% and (7.9)% over the same periods, respectively.
For the years ended December 31, 2024, 2023, and 2022, approximately 4%, 4%, and 3% of our revenues were generated in currencies other than U.S. dollars in each respective period.
For the years ended December 31, 2025, 2024, and 2023, approximately 5%, 4%, and 4%, respectively, of our revenues were generated in currencies other than U.S. dollars in each respective period.
At December 31, 2024, the New Base Rate Option and SOFR Option applicable to the Line of Credit borrowings were 8.00% and 5.99%, respectively. Because the interest rates applicable to borrowings under the Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of borrowing.
At December 31, 2025, the New Base Rate Option and SOFR Option applicable to the Line of Credit borrowings were 7.25% and 5.37%, respectively. Because the interest rates applicable to borrowings under the Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of borrowing.
Free cash flow margin increased in 2024 to 11.7% compared to 1.1% in 2023. ​ Use and Reconciliation of Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, we have calculated Adjusted EBITDA, Adjusted EBITDA margin, free cash flow, free cash flow margin, non-GAAP cost of revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expense, non-GAAP selling and marketing expense, non-GAAP general and administrative expense, non-GAAP operating income, and non-GAAP net income, which are each non-GAAP 48 Table of Contents financial measures.
Free cash flow margin decreased in 2025 to 6.4% compared to 11.7% in 2024. ​ Use and Reconciliation of Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, we have calculated Adjusted EBITDA, Adjusted EBITDA margin, free cash flow, free cash flow margin, non-GAAP cost of revenues, non-GAAP gross profit, non-GAAP gross margin, non-GAAP research and development expense, non-GAAP selling and marketing expense, non-GAAP general and administrative expense, non-GAAP operating income, and non-GAAP net income, which are each non-GAAP financial measures.
Net cash provided by financing activities of $231.3 million for the twelve months ended December 31, 2024 consisted of $345.0 million in gross proceeds from our Notes, a $9.7 million increase in customer funds obligations, primarily due to timing differences between receipt of funds from customers and taxing jurisdiction withdrawals of these funds, $8.5 million in proceeds from the exercise of stock options, and $3.0 million in proceeds from the purchase of stock under our ESPP.
These outflows were partly offset by $7.7 million in proceeds from the exercise of stock options and $4.2 million in proceeds from the purchase of stock under our employee stock purchase plan (“ESPP”). 46 Table of Contents Net cash provided by financing activities of $231.3 million for the twelve months ended December 31, 2024 consisted of $345.0 million in gross proceeds from our Notes, a $9.7 million increase in customer funds obligations, primarily due to timing differences between receipt of funds from customers and taxing jurisdiction withdrawals of these funds, $8.5 million in proceeds from the exercise of stock options, and $3.0 million in proceeds from the purchase of stock under our ESPP.
Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk We had unrestricted cash and cash equivalents of $296.1 million and $68.2 million as of December 31, 2024 and 2023, respectively, and investments of $9.2 million and $9.5 million as of December 31, 2024 and 2023, respectively.
Quantitative and Qualitative Disclosures about Market Risk Interest Rate Risk We had unrestricted cash and cash equivalents of $314.0 million and $296.1 million as of December 31, 2025, and 2024, respectively. We had investments of $9.2 million as of December 31, 2024.
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 acquisition, which was fully settled on June 5, 2024. 36 Table of Contents Interest income reflects earnings on investments of our cash on hand and our investment securities.
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 39 Table of Contents future payment obligation for the Systax Sistemas Fiscais LTDA (“Systax”) acquisition, which was fully settled on June 5, 2024.
For further information, refer to Note 3, “Acquisitions” to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K.
For further information, refer to Note 14, “Commitments and Contingencies” to our consolidated financial statements, beginning on page F-1 of this Annual Report on Form 10-K.
We define free cash flow margin as free cash flow divided by total revenues for the same period. Our net cash provided by operating activities was $164.8 million and $74.3 million in 2024 and 2023, respectively, while our operating cash flow margin was 24.7% and 13.0% over the same periods, respectively.
We define free cash flow margin as free cash flow divided by total revenues for the same period. Our net cash provided by operating activities was $165.5 million and $164.8 million in 2025 and 2024, respectively, while our operating cash flow margin was 22.1% and 24.7% over the same periods, respectively.
We had net losses of $(52.7) million and $(13.1) million in 2024 and 2023, respectively. These amounts are presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”).
We had net income (loss) of $7.2 million and $(52.7) million in 2025 and 2024, respectively. These amounts are presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”).
We also collaborate with numerous accounting firms who have built implementation practices around our software to serve their customer base. 30 Table of Contents We believe that global commerce and the compliance environment provides durable and accelerating growth opportunities for our business. We generated revenues of $666.8 million and $572.4 million in 2024 and 2023, respectively.
We also collaborate with over 45 accounting and professional services firms who have built implementation practices around our software to serve their customer base. We believe that global commerce and the compliance environment provide durable and accelerating growth opportunities for our business. We generated revenues of $748.4 million and $666.8 million in 2025 and 2024, respectively.
In addition, we experienced an increase in depreciation and amortization of capitalized software and acquired intangible assets of $5.3 million associated with our ongoing investments in internal-use software for cloud-based subscription solutions, software developed for sale for new products and enhancements to existing products, and costs associated with the amortization of acquired intangible assets.
The increase was primarily driven by a $10.5 million increase in depreciation and amortization of capitalized software and acquired intangible assets associated with our ongoing investments in internal-use software for cloud-based subscription solutions, software developed for sale for new products and enhancements to existing products, and costs associated with the increased amortization of acquired intangible assets.
This increase was primarily due to a $4.9 million 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 (“APIs”) to customer enterprise resource planning (“ERP”) and other software platforms.
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.
Other operating expense (income), net for the year ended December 31, 2024 was primarily comprised of a $2.5 million decrease in the contingent consideration liability associated with our 2021 acquisition of Tellutax, LLC (“Tellutax”), which was partially offset by $1.2 million of transaction costs associated with our recent acquisitions, and 41 Table of Contents $1.1 million in foreign currency losses.
Other operating expense (income), net for the year ended December 31, 2024 was primarily comprised of a $2.5 million decrease in the contingent consideration liability associated with our 2021 acquisition of Tellutax, LLC (“Tellutax”), which was partially offset by $1.2 million of transaction costs associated with our recent acquisitions, and $1.1 million in foreign currency losses. ​ Interest Expense (Income), Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ ​ ​ 2025 ​ 2024 ​ Year-Over-Year Change Interest income, net ​ ​ ​ $ (5,248) ​ $ (4,137) ​ $ (1,111) 26.9 % ​ Interest income, net was $5.2 million for 2025, compared to $4.1 million in 2024.
These amounts will fluctuate as a result of ongoing merger and acquisition activities and for changes in foreign currency rates. Interest Expense (Income), net Interest expense (income), net reflects the net amount of interest expense and interest income over the same period. Interest expense consists primarily of interest incurred related to the Notes, Term Loan, Credit Agreement, and leases.
These amounts will fluctuate as a result of ongoing merger and acquisition activities and for changes in foreign currency rates. Interest Expense (Income), net Interest expense (income), net reflects the net amount of interest expense and interest income over the same period.
AARPC represents average annual revenue per customer and is calculated by dividing ARR by the number of software subscription customers at the end of the respective period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ (Dollars in millions) ​ 2024 ​ 2023 ​ Year-Over-Year Change Annual Recurring Revenue ​ $ 603.1 ​ $ 512.5 ​ $ 90.6 17.7 % ​ ARR increased by $90.6 million, or 17.7%, at December 31, 2024, as compared to December 31, 2023.
AARPC represents average annual revenue per customer and is calculated by dividing ARR by the number of software subscription customers at the end of the respective period: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ ​ (Dollars in millions) ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ Year-Over-Year Change ​ Annual Recurring Revenue ​ $ 671.0 ​ $ 603.1 ​ $ 67.9 11.3 % ​ ARR increased by $67.9 million, or 11.3%, at December 31, 2025, as compared to December 31, 2024.
Cost of Software Subscriptions Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ (Dollars in thousands) 2024 2023 Year-Over-Year Change Cost of software subscriptions revenues $ 175,580 ​ $ 162,920 ​ $ 12,660 7.8 % ​ Cost of software subscriptions revenues increased $12.7 million, or 7.8%, to $175.6 million in 2024 compared to $162.9 million in 2023.
Cost of Software Subscriptions Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ ​ Year-Over-Year Change ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of software subscriptions revenues ​ $ 187,816 ​ $ 175,580 ​ $ 12,236 7.0 % ​ Cost of software subscriptions revenues increased $12.2 million, or 7.0%, to $187.8 million in 2025 compared to $175.6 million in 2024.
Other Operating Expense (Income), net Other operating expense (income), net consists primarily of transactions costs associated with merger and acquisition activities, periodic remeasurement of contingent consideration associated with completed acquisitions, realized gains and losses on foreign currency fluctuations, and other operating gains and losses.
The Earn-outs will be revalued and adjusted quarterly until the end of the Earn-out periods. Other Operating Expense (Income), net Other operating expense (income), net consists primarily of transactions costs associated with merger and acquisition activities, periodic remeasurement of contingent consideration associated with completed acquisitions, realized gains and losses on foreign currency fluctuations, and other operating gains and losses.
As such, certain periods may be less comparable due to the timing of our customers purchase patterns. Quarterly fluctuations in our costs and expenses overall primarily reflect changes in our headcount, infrastructure, and sales and marketing investments, and other costs related to certain technology development projects and the development and scaling of our cloud solutions.
Quarterly fluctuations in our costs and expenses overall primarily reflect changes in our headcount, infrastructure, and sales and marketing investments, and other costs related to certain technology development projects and the development and scaling of our cloud solutions.
The change in operating assets and liabilities was primarily driven by increases in accounts receivable, as a result of the timing of cash collections during the year, partially offset by increases in deferred revenue, accounts payable and accrued expenses, as a result of customer growth during the period and the timing of cash disbursements. Investing Activities .
The change in operating assets and liabilities was primarily driven by an increase in deferred revenue due to customer growth during the period, which was partially offset by increases in accounts receivable, as well as prepaid expenses and other current assets, as a result of the timing of cash collections and payments. Investing Activities .
Revenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration expected to be received in exchange for those products or services.
Revenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration expected to be received in exchange for those products or services. Our most critical judgments required in applying ASC 606 relate to the identification of performance obligations.
This increase was primarily driven by a $5.9 million increase in costs of personnel supporting period-over-period growth of sales and customers, and ongoing hosting and infrastructure investments to support expansion of customer transaction volumes for our cloud-based subscription customers.
Additionally, there was a $1.7 million increase in costs of personnel supporting period-over-period growth of sales and customers, ongoing infrastructure investments and support costs to enable the continued expansion of customer transaction volumes for our cloud-based subscription customers.
We derive the majority of our revenue from software subscriptions. These subscriptions include use of our software and ongoing monthly content updates. Our software is offered on a subscription basis to our customers, regardless of their deployment preferences. On-premise subscriptions and cloud-based subscriptions are typically sold through one- to three-year contracts.
Our software is offered on a subscription basis to our customers, regardless of their deployment preferences. On-premise subscriptions and cloud-based subscriptions are typically sold through one- to three-year contracts. We bill the majority of our customers annually in advance of the subscription period.
The $8.1 million increase in services revenues was primarily driven by an increase of $2.7 million in software subscription-related services associated with the growth in subscription revenues, which includes new customers 39 Table of Contents implementing our solutions and upgrading existing customers to newer versions of our solutions.
Additionally, there was a $1.5 million increase in software subscription-related services associated with the growth in subscription revenues, which includes new customers implementing our solutions and existing customers upgrading to newer versions of our solutions.
Our quarterly revenues have generally increased over the last two years primarily due to new sales to existing customers and sales to new customers. However, the pace of our revenue growth has not been consistent.
Our quarterly revenues have generally increased over the last two years primarily due to new sales to existing customers and sales to new customers. However, the pace of our revenue growth has not been consistent. Many of our customers are enterprise and large corporations and their purchase patterns can be sensitive to timing of budget decisions.
General and Administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ (Dollars in thousands) 2024 ​ 2023 ​ Year-Over-Year Change General and administrative $ 152,835 ​ $ 145,936 ​ $ 6,899 4.7 % ​ General and administrative expenses increased $6.9 million, or 4.7%, to $152.8 million in 2024 compared to $145.9 million in 2023, primarily driven by an increase of $2.8 million associated with planned strategic investments in information technology infrastructure, business process re-engineering, and other initiatives to drive future operating leverage.
General and Administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ ​ ​ 2025 ​ 2024 ​ Year-Over-Year Change General and administrative ​ $ 178,685 ​ $ 152,835 ​ $ 25,850 16.9 % ​ General and administrative expenses increased $25.9 million, or 16.9%, to $178.7 million in 2025 compared to $152.8 million 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.
Cost of Services Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ (Dollars in thousands) 2024 ​ 2023 ​ Year-Over-Year Change Cost of services revenues $ 65,071 ​ $ 60,888 ​ $ 4,183 6.9 % ​ Cost of services revenues increased $4.2 million, or 6.9%, to $65.1 million in 2024 compared to $60.9 million in 2023.
Cost of Services Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ (Dollars in thousands) ​ ​ ​ 2025 ​ 2024 ​ Year-Over-Year Change Cost of services revenues ​ $ 79,027 ​ $ 65,071 ​ $ 13,956 21.4 % ​ Cost of services revenues increased $14.0 million, or 21.4%, to $79.0 million in 2025, compared to $65.1 million in 2024.
Many of our customers are enterprise and large corporations and their purchase patterns can be sensitive to timing of budget decisions. 42 Table of Contents Depending on such timing, these decisions can create volatility in the amount of business transacted by our sales team and the amount of revenues recorded in each quarter.
Depending on such timing, these decisions can create volatility in the amount of business transacted by our sales team and the amount of revenues recorded in each quarter. As such, certain periods may be less comparable due to the timing of our customers purchase patterns.
The updates and support, which are part of the subscription agreement, are essential to the continued utility of the software. Therefore, we have determined that the software, updates, and support should be combined into a single performance obligation. Income Taxes We estimate our income taxes based on the various jurisdictions where we conduct business.
Software subscriptions include the related software, consisting of both on-premise and cloud-based software, 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 that the software, updates, and support should be combined into a single performance obligation.
In addition, our managed services offering has continued to experience increased revenues associated with returns processing volume increases attributable to regulatory changes, as customers expanded their tax filings into more jurisdictions. 34 Table of Contents Cost of Revenue Software Subscriptions 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, our managed services offering has continued to experience increased revenues 37 Table of Contents associated with returns processing volume increases attributable to regulatory changes, as customers expanded their tax filings into more jurisdictions.
This change was primarily driven by changes in valuation allowances on net deferred tax assets established for U.S. and certain foreign jurisdictions, nondeductible purchase commitment and contingent consideration liabilities, and pre-tax income, partially offset by the favorable impact of tax benefits on exercises and vesting of stock awards, net of limitations on deductions of certain employees’ compensation under Internal Revenue Code (“IRC”) Section 162(m).
The decrease in tax expense was primarily driven by reduced increases in valuation allowances on net deferred tax assets established for U.S. and certain foreign jurisdictions, favorable adjustments for nondeductible purchase commitment and contingent consideration liabilities, partially offset by increased pre-tax income and reduced favorable impact of tax benefits on exercises vesting of stock awards, net of increased limitations on deductions of certain employees’ compensation under Internal Revenue Code (“IRC”) Section 162(m). 44 Table of Contents During the fourth quarter of 2024, we established a valuation allowance against our U.S. deferred tax assets as it was determined to be more likely than not that these assets will not be realized.
We also believe it demonstrates to investors our ability to expand existing customer revenues, which is one of our key growth strategies. Our NRR refers to the ARR expansion during the 12 months of a reporting period for all customers who were part of our customer base at the beginning of the reporting period.
Our NRR refers to the ARR expansion during the 12 months of a reporting period for all customers who were part of our customer base at the beginning of the reporting period.
The increase was primarily driven by $47.3 million of growth in revenues from existing customers through their expanded use of our solutions as well as price increases, and $29.5 million in growth of subscriptions of our solutions to new customers.
The increase was primarily driven by $31.8 million of growth in revenues from existing customers through their expanded use of our solutions as well as price increases, and $36.1 million in growth of subscriptions of our solutions to new customers. At December 31, 2025, we had 4,867 direct customers and approximately $137,867 of AARPC.
We bill the majority of our customers annually in advance of the subscription period. Our customers include a majority of the Fortune 500, as well as a majority of the top 10 companies by revenue in multiple industries such as retail, technology, and manufacturing, in addition to leading marketplaces.
Our customers include a majority of the Fortune 500, as well as a majority of the top 10 companies by revenue in multiple industries such as retail, technology, and manufacturing, in addition to leading marketplaces. Our customer base also includes many of Europe’s largest companies in the industrial and chemical manufacturing, pharmaceutical, medical device and metals and mining industries.
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 Revenue Software Subscriptions 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.
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. Income Tax Expense (Benefit) Income tax expense (benefit) consists primarily of federal, foreign, state, and local taxes on our loss or income.
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.
The following schedules reconcile Adjusted EBITDA and Adjusted EBITDA margin to net loss, the most closely directly comparable GAAP financial measure. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ December 31, ​ (Dollars in thousands) 2024 2023 Adjusted EBITDA: ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ (52,729) ​ $ (13,093) ​ Interest expense (income), net (1) ​ (4,137) ​ 4,164 ​ Income tax expense (benefit) ​ 54,638 ​ (8,581) ​ Depreciation and amortization – property and equipment ​ 20,953 ​ 15,202 ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues ​ 59,302 ​ 54,048 ​ Amortization of acquired intangible assets – selling and marketing expense ​ ​ 2,478 ​ ​ 2,641 ​ Amortization of cloud computing implementation costs – general and administrative ​ ​ 4,007 ​ ​ 2,570 ​ Stock-based compensation expense ​ 47,425 ​ 33,919 ​ Severance expense ​ ​ 3,048 ​ 3,576 ​ Acquisition contingent consideration ​ ​ (2,575) ​ ​ 1,549 ​ Change in fair value of acquisition contingent earn-outs ​ ​ 17,500 ​ ​ — ​ Transaction costs (2) ​ 2,032 ​ 4,853 ​ Adjusted EBITDA ​ $ 151,942 ​ $ 100,848 ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA Margin: ​ ​ ​ Total revenues ​ $ 666,776 ​ $ 572,387 ​ Adjusted EBITDA margin ​ 22.8 % 17.6 % (1) The years ended December 31, 2024 and 2023 include $423 and $4,020, respectively, for the change in the settlement value of a deferred purchase commitment liability recorded as interest expense. ​ (2) The year ended December 31, 2023 includes costs associated with a public tender offer, which was withdrawn by the Company in January 2024. ​ ​ ​ 47 Table of Contents The increase in Adjusted EBITDA of $51.1 million in 2024, as compared to 2023, was primarily driven by an increase of $85.2 million in non-GAAP gross profit, which was partially offset by a $25.7 million increase in non-GAAP selling and marketing expense, a $4.2 million increase in non-GAAP research and development expense, and a $3.3 million increase in non-GAAP general and administrative expense.
The following schedules reconcile Adjusted EBITDA and Adjusted EBITDA margin to net loss, the most closely directly comparable GAAP financial measure. 50 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ (Dollars in thousands) 2025 ​ ​ ​ 2024 ​ ​ ​ Adjusted EBITDA: ​ ​ ​ ​ ​ ​ Net income (loss) $ 7,211 ​ $ (52,729) ​ Interest expense (income), net (1) (5,248) ​ (4,137) ​ Income tax expense 368 ​ 54,638 ​ Depreciation and amortization – property and equipment 24,812 ​ 20,953 ​ Depreciation and amortization of capitalized software and acquired intangible assets – cost of subscription revenues 69,842 ​ 59,302 ​ Amortization of acquired intangible assets – selling and marketing expense ​ 2,277 ​ ​ 2,478 ​ Amortization of cloud computing implementation costs – general and administrative expense ​ 3,738 ​ ​ 4,007 ​ Stock-based compensation expense 57,763 ​ 47,425 ​ Severance expense ​ 6,823 ​ 3,048 ​ Acquisition contingent consideration ​ 200 ​ ​ (2,575) ​ Change in fair value of acquisition contingent earn-outs ​ (17,000) ​ ​ 17,500 ​ Transaction costs (2) 10,754 ​ 2,032 ​ Adjusted EBITDA $ 161,540 ​ $ 151,942 ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA Margin: ​ ​ ​ ​ Total revenues $ 748,444 ​ $ 666,776 ​ Adjusted EBITDA margin 21.6 % 22.8 % (1) The year ended December 31, 2024 includes $423 for the change in the settlement value of a deferred purchase commitment liability recorded as interest expense. ​ (2) The year ended December 31, 2025 includes legal expenses associated with pending litigation related to claims we have made against a competitor.
Our GRR refers to how much of our MRR we retain each month after reduction for the effects of revenues lost from departing customers or those who have downgraded or reduced usage. GRR does not take into account revenue expansion from migrations, new licenses for additional products or contractual and usage-based price changes.
Gross Revenue Retention Rate (“GRR”). ​ We believe our GRR provides insight into and demonstrates to investors our ability to retain revenues from our existing customers. Our GRR refers to how much of our MRR we retain each month after reduction for the effects of revenues lost from departing customers or those who have downgraded or reduced usage.
The increase in software subscriptions revenues of $86.3 million, or 17.9%, was primarily driven by an increase of $80.5 million from cross selling new products to existing customers, increases from expanded use of our products and services, and price increases.
The increase in software subscriptions revenues of $72.5 million, or 12.8%, 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 7.1% and 6.3% of total software subscriptions revenues in 2025 and 2024, respectively.
Additionally, the inclusion of Systax and ecosio added 597 customers in 2024. Net Revenue Retention Rate (“NRR”). ​ We believe that our NRR provides insight into our ability to retain and grow revenue from our customers, as well as their potential long-term value to us.
Net Revenue Retention Rate (“NRR”). ​ We believe that our NRR provides insight into our ability to retain and grow revenue from our customers, as well as their potential long-term value to us. We also believe it demonstrates to investors our ability to expand existing customer revenues, which is one of our key growth strategies.
Change in Fair Value of Acquisition Contingent Earn-Outs The change in fair value of acquisition contingent earn-outs consists of fair value adjustments to our Cash Earn-outs and Stock Earn-outs related to our 2024 acquisition of ecosio. The Earn-outs will be revalued and adjusted quarterly until the end of the Earn-out periods.
Change in Fair Value of Acquisition Contingent Earn-Outs The change in fair value of acquisition contingent earn-outs consists of fair value adjustments to our Cash Earn-outs (as defined below) and Stock Earn-outs (as defined below) (collectively with the Cash Earn-outs, the “Earn-outs”) related to our 2024 acquisition of ecosio.
The change in operating assets and liabilities was primarily driven by an increase in deferred revenue due to customer growth during the period, which was partially offset by increases in accounts receivable, as well as prepaid expenses and other current assets, as a result of the timing of cash collections and payments. 43 Table of Contents Net cash provided by operating activities of $74.3 million for the twelve months ended December 31, 2023 consisted of a net loss of $13.1 million adjusted for non-cash charges of $107.1 million, and cash outflows of $19.7 million from changes in operating assets and liabilities.
The change in operating assets and liabilities was primarily driven by an increase in deferred revenue due to customer growth during the period, which was partially offset by increases in accounts receivable, prepaid expenses and other current assets, as well as decreases in accrued and deferred compensation as a result of the timing of cash collections and payments.
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.
Interest expense will vary as a result of fluctuations in the level of debt outstanding as well as interest rates on such debt.
At December 31, 2024, the New Base Rate Option and the SOFR Option applicable to the Line of Credit were 8.00% and 5.99%, respectively. There were no outstanding borrowings under the Line of Credit at December 31, 2024.
At December 31, 2025, the New Base Rate Option and the SOFR Option applicable to the Line of Credit were 7.25% and 5.37%, respectively. There were no outstanding borrowings under the Line of Credit at December 31, 2025 or 2024. Outstanding borrowings under the Credit Agreement are collateralized by nearly all of our assets and contain financial and operating covenants.
The following schedule reconciles free cash flow and free cash flow margin to net cash provided by operating activities, the most closely directly comparable GAAP financial measure. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ December 31, ​ (Dollars in thousands) 2024 2023 Free Cash Flow: ​ ​ ​ ​ ​ ​ ​ Cash provided by operating activities ​ $ 164,821 ​ $ 74,332 ​ Property and equipment additions ​ ​ (65,769) ​ ​ (49,261) ​ Capitalized software additions ​ ​ (21,344) ​ ​ (18,972) ​ Free cash flow ​ $ 77,708 ​ $ 6,099 ​ ​ ​ ​ ​ ​ ​ ​ ​ Free Cash Flow Margin: ​ ​ ​ ​ ​ ​ ​ Total revenues ​ $ 666,776 ​ $ 572,387 ​ Free cash flow margin ​ 11.7 % 1.1 % ​ Free cash flow increased by $71.6 million in 2024 compared to 2023, driven primarily by a net increase of $90.5 million in cash provided by operating activities, partially offset by a year-over-year increase in investments in commercial solutions supporting our customers and infrastructure investments to drive operating leverage.
The following schedule reconciles free cash flow and free cash flow margin to net cash provided by operating activities, the most closely directly comparable GAAP financial measure. 51 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ ​ December 31, ​ (Dollars in thousands) ​ ​ ​ 2025 ​ ​ ​ 2024 Free Cash Flow: ​ ​ ​ ​ ​ ​ ​ Cash provided by operating activities ​ $ 165,543 ​ $ 164,821 ​ Property and equipment additions ​ ​ (96,236) ​ ​ (65,769) ​ Capitalized software additions ​ ​ (21,718) ​ ​ (21,344) ​ Free cash flow ​ $ 47,589 ​ $ 77,708 ​ ​ ​ ​ ​ ​ ​ ​ ​ Free Cash Flow Margin: ​ ​ ​ ​ ​ ​ ​ Total revenues ​ $ 748,444 ​ $ 666,776 ​ Free cash flow margin ​ 6.4 % 11.7 % ​ Free cash flow decreased by $30.1 million in 2025 compared to 2024.
Our NRR calculation takes into account any revenue lost from departing customers or customers who have downgraded or reduced usage, as well as any revenue expansion from migrations, new licenses for additional products or contractual and usage-based price changes. ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2024 2023 ​ Net Revenue Retention Rate 109 % 113 % ​ The 400 basis point decrease in NRR to 109% at December 31, 2024 from 113% for the same period in 2023 was primarily attributed to a decrease in customer cross-sell and additional entitlements. 46 Table of Contents Gross Revenue Retention Rate (“GRR”). ​ We believe our GRR provides insight into and demonstrates to investors our ability to retain revenues from our existing customers.
Our NRR calculation takes into account any revenue lost from departing customers or customers who have downgraded or reduced usage, as well as any revenue expansion from migrations, new licenses for additional products or contractual and usage-based price changes. ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ ​ ​ ​ 2025 ​ ​ ​ 2024 ​ Net Revenue Retention Rate 105 % 109 % ​ NRR decreased by 400 basis points at December 31, 2025 as compared to December 31, 2024.
Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Software subscriptions include the related software, consisting of both on-premise and cloud-based software, tax content updates, and product support.
Identification of the Performance Obligations We enter into contracts with customers that may include promises to transfer various combinations of software subscriptions and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Vertex provides cloud-based and on-premise solutions that can be tailored to specific industries for every major line of indirect tax, including sales and consumer use, value added (including e-invoicing), and payroll. Headquartered in North America, and with offices in South America and Europe, Vertex employs over 1,900 professionals and serves companies across the globe.
Our mission is to deliver the most trusted tax technology enabling global businesses to transact, comply, and grow with confidence. Vertex provides cloud-based and on-premise solutions that can be tailored to specific industries for every major line of indirect tax, including sales and consumer use, value added (including e-invoicing), and payroll.
To date, we do not believe that inflation has had a material effect on our business, financial condition, or results of operations. ​ Item 8. Financial Statements and Supplementary Data The information required by this item is presented at the end of this report beginning on page F-1. ​
Financial Statements and Supplementary Data The information required by this item is presented at the end of this report beginning on page F-1. ​

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