Earnings call transcript Q4 2022

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Operator

Greetings. Welcome to Vertex's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

now Investor conference Relations. I'll Crivelli, to time, President, Vice this turn over the Joe At Mr. Crivelli, may you now begin.

Joe Crivelli

December quarter Hello to and Relations. our David full With fourth today the President, CEO; and DeStefano, discuss us I'm Schwab. ended and are Vertex's financial me CFO, Crivelli, thanks results for Investor for Vice XXst, XXXX. joining Vertex's call and Joe on the John President

expected we call may forward-looking future this results. during to reminder, a As statements make related

materially differ uncertainties. may Securities Our our uncertainties projections described and results actual Commission. earnings the risks to from filings These are due and Exchange with and risks release in our and

include Today's also references remarks non-GAAP financial will measures. to

press Additional between our is the financial call financial be release. being information, recorded to and the website. for Relations information on This non-GAAP webcast reconciliation replay via will conference information including GAAP available Investor in is provided

to With call the over that, now I'll David. turn

David DeStefano

with pleased challenges continue immense diversify that's about and accelerate Joe. they today and for face tax speak regulatory you Welcome everyone new into we expand and and financial as Businesses e-commerce offerings, Vertex's value to These complexity. in to why thank see Thank technology indirect tax growing demand. you, growth and results. us. you intensify change joining regions, both I'm today

vision company's more to Our accelerate global been commerce never relevant. has

world. jurisdictions the alike to tax manage around scale businesses over confidence and the solutions mid-market XX,XXX enterprise Our give compliance at in

million, adjusted of from company high a quarter the year. quarter X% the fourth we we is last million, the Against up This with highest XXXX. $XX.X this Revenues of closed backdrop, that Vertex revenue quarter $XXX.X growth in year. and QX a EBITDA from on extremely up executed have the as delivered XX.X% record reached public year-over-year with note finishing well our best XXXX, a in

to environment our an sustain Our base, and uncertain strong of ability of strength economic our customer business, the reinforces financial durability in profitable the performance our growth.

the in while positive flow a which dollar $XX us multimillion cash full year, quarter the was million, helped for making investment. deliver Free flow cash free growth

benefits us the are We addressable for from the helping go-to-market, making These are further seeing are tax strategic investments automation acquisition billion and penetrate targeted ecosystem in investments market $XX solutions. we our expansion. R&D, and

investments high-value go-to-market areas; expanding new in markets. focused Our are success first, customer installed four and our our within through to key logos base drive investment accelerated target

NRR last first year's performance XX% up and with new last $XXX year-over-year. Second, to increased power customer XXX% our and in quarter. technologies GRR last revenue finally, tax key deepening with the was fourth XX.X% per ARR presence $XXX,XXX emerging And strategic all from XXX%, to time customer was the a existing and from we exceeded partnerships; year in million, average performance our up quarter XX% XX%, year. And our investments up indicators fourth for in from and by success and broadening have new customers content on product both our third, strong transform driving seeing our Europe. strengthening global evidenced across for innovation spotlight heavy was history. the slightly adoption are from industry. annual

to continue On solution elasticity. our cloud advance greater front, scale offer the even and to technology next-generation we

the to reducing friction point with accelerating our help commerce of efficiency, tax increase the our edge we technology enabling are computing automation are latest and at and We between compliance. calculation of use transaction customers the intelligent

before. rules. faster operations our adding and more tools more than make continues And most stay our We're with database, and started. automation, rates and compliant planet discerning our XXXX just are significant operational me which the million Vertex to getting and professional's robotic tax to technology dynamic content in analytic and that data and are business intelligent proud performance on tools ever than through confirms driving process automation has tax for also our the in content effective to investments we help we enable businesses efficiencies XXX

market, our me scratched confidence given bottom top take multiple the automation. lines only surface tax This addressable can our gives accelerate. need to trends have for We the as and and these that, triggering continue both the of we hold grow tailwinds

taxes. I'd solutions few quarter, incredible potential significant growth trends. This of this highlights still exists or from address still homegrown within leader. like manual market a where highly clear the these to valued share we are on processes the relies market, addressable of a segment business illustrating markets enterprise to Today, indirect segment the means

grows, need triggering compliance tax complexity becomes a unmanageable, The for change.

maintain to determination customers complex solution deal accuracy cloud the in ability into some jurisdiction, in demonstrated competitive Europe this six-figure one The This in businesses was for tight ability their in-region our to Europe point capabilities Vertex global time in team. in expertise us global tax of support processes allowed automate on to by trading pressure with requirements and is The the their things: three cloud represent record reference of compliance. reporting integration in who technical current the right win achieve to value ability when of that of growth in our our our near platform. real-time XXXX. most the a the and new and every SAP based reached data was to differentiated As business an influential and tipping regulatory manual commodities Europe companies example, tested leading a and

quarter. ARR systems prospective ability is When selected our win were to customers, to led clear we insurance States another single speak the disparate to a for this procurement. significant differentiator. new choice was opportunity automation. This tax in platform logo as tax connect largest We uniquely indirect the with by a company's one driven of This of United Coupa of by provider significant for companies their the six-figure implementation consumer

with modern longer compliance Coupa into it transition ecosystem. could Oracle pace their indirect As in the which was time keep to today's homegrown from integrated infrastructure, system, ideal they their their needs tax no cloud

product ecosystem makes on new Vertex a win in on touched better had our quarter choice space. notable that SAP the continued investment to innovation. technology centers enhancement highlights earlier, the the that that clear portfolio support for of tax how We area Another I

off company, company by After familiar sales solutions, our from previously our well-known products being The experience a to offering. used their was services tax consumer compliance. strength parent solution our manage industry-recognized selected of our with brand was the spun cloud and customer having managed

licensed an gives with differentiated As edge of are complete for strategic automation this launched value engine needed receiving tools the company, an to we LCR-Dixon. connects reflects tax that that tax most they also independent in the plus and XXXX They SAP. the from acquisition with seamlessly deal our This us solution investment and a SAP.

and sales I partner partners across Across differentiate we their Each trusted highlight our engaged our how continue actively us enhance our to the for in strategic and the with create value integrations deals. with competitive quarter, teams. board, joint relationships globally customers ecosystem

Additionally, partners we we our overall a with experience are for share our working better to closely and key differentiation. customers. on focus Together, alliance we ecosystems deliver strength where

customers. deals our we Dynamics motions work the In In mid-market, to drive for the Microsoft integrations had strengthen continue value we able Microsoft quarter, together. to we technical were where multiple closely team go-to-market and with and

XXX. example, tax a billing our US systems an to part and of as premium systems Microsoft in consolidate financial solutions transformation As retailer allowed Dynamics larger the a on

of logo. calculation two was partner the us allowed ability of long-term retailer for accurate a using to into solutions systems highly customer a new now other in tax multiple trusted This is competitive supporting from omnichannel Our to integrate This deal this their our business. unique strategy. that win areas financial has tax was as their competitors

Workday integrations our block the earning looking brought integrator, relationships that their setting chain partner fact processes. named the us how competition environment financial a was for of confidence. apart to Vertex Another Their powerful preferred to are and into national the top example premier and a key we multisystems tax partner ISV their involved restaurant systems streamline opportunity, from their

The strength compliance. tax Vertex them tax the choice of to and industry for content help that manage right the is reinforce beverage food our

highlighted The XXXX investments breadth this example build is our customer tax clear our depth Across value expansion preferred shareholders. database are within delivering quickly Looking advantage wins forward, to the of in quarter, I'm excited tax Workday beyond. and our all content on to and is our us position content and our how making another time and are again. for of we vertical of specific

strengthen of operators. continue Taxamo marketplaces focal its be And Because pace these a are emerging increased e-commerce using seek products we businesses to this, for ensure get integration other rapid with governments point acquisitions growing to this our their with platforms. new fair and of channel. leverage on growth our partnerships at the continue marketplaces regulations creates revenue BXB to of the a our complexity of and marketplace to This share efforts.

was Mirakl, a example We platform the partnership quarter. to and our is customers great with enterprise initially leading our in marketplaces. in strategic A fourth online relationship expanded e-commerce regulations. of we integration emerging powers their comply with XXXX that this with announced SaaS VAT Mirakl help an over XXX how

connector into an America. to Miracle service full for global This North enable enhanced launched quarter, we expansion support

a of as tech the are many is of volumes I our think very They in with enough, industry. partners. Interestingly Mirakl our common in new also well speaks go-to-market customers customer as became about Vertex which partner, which leadership QX,

the relentless certification get team experience. the HDI us deliver something best consistently to commitment customer Help achieved thank I support deeply hard want and value practices recognized on. we an this customer which and recognition is customers worked standard was Vertex differentiate highest Their turn global in quite frankly, Vertex recognized internationally center who I to experience call to Before once entire by point. quarter level John, this of that customer to inflection again Institute. to exceptional the is for for support enterprise And Desk an have

prouder team. and And you the provider with only level I could done industry, the our in the top you are of attract work certification. to tax it not partners best now customers technology of we've also this talent. be earn twice We When

to to we excited of have join in the technical to welcome next to us Brad from our Cameron solutions Engineering. grow and Salesforce more continue and could new advance We team of our innovation. lead our Senior Vertex world-class XXXX, invest continued be the Among generation the team President development in I Software additions have team. not engineering Vice Brad as of to in

content with executing tax have and and acquisitions and of every direct reflecting and team making our is that our business leadership we and laser-focused and increasing targeted in expanding area all public, strategy. our our alignment went we product strategic performance across in monetizing capabilities Since on XXXX well go-to-market our on quarter been of

I John, over details quarterly to hand you results. additional the to on will call provide now the

John Schwab

for XX.X% I'll quarter fourth compared to guidance for In financial everyone. year's provide year detail morning, good And first quarter, by fourth This review $X.X was And quarter. year, up David. and the guidance million. up end $XXX.X the $XXX.X the now revenue both XX.X% our from the XXXX. fourth of was million, and year. exceeded revenue results in last Thanks, million, full total full our high quarter and revenue

of growth. XXX% Net third Annual year-over-year This recurring from at million year, revenue revenue, at up period remained retention, or up was XX.X% the from strong was XXXX the the XXX%. ARR, comparable point quarter. XXX% in $XXX.X NRR, the representing in and end a or

or Revenue Gross strength of with metrics our at XX% These solutions of the as our well demonstrate consistent quarters was within customer quarter Retention of relationships. and stickiness prior XX% continue the to targeted to as our GRR, XX%. range end,

the revenue recurring for of Our comparable million year Services prior over compared full period. $XX.X to returns processing service year million Managed the $XX.X generated for business

over the We on and of tax processed earned our funds. million for payments customers float $XX $X of from cash also billion the over

up count customers, we from in had Customer the At X,XXX of the total XX, X,XXX December by third increased quarter. end at fourth the quarter. XX

to investors with gross previously, is or market enterprise we than space discussed in and our a customers ARR the focus. with than count sales better greater performance where middle gauge we've As scaled upper metric $XXX,XXX customers customer

Accordingly, in basis. and scaled fourth sequential to on the quarter, XX% year an compared annualized the prior customers XX% grew

in fourth quarter, is annual customer or per and based $XXX,XXX direct from increase $XX,XXX in disclosed was count, the AARPC on to that up is average in third the continues press release. quarter. Note the Our customer AARPC steadily the revenue which

in was guidance. quarter, Cloud XXXX. up the up XX% revenue line million third $XX.X and quarter Full fourth million $X.X was the up our from in revenue also of cloud million, year was fourth quarter. the to compared in with year-over-year $XXX.X $XX.X XX.X% This million

For the metrics. discussion, I remainder be of to the income will non-GAAP statement referring

margin was was All of $XX.X the profit for morning. XX.X% and gross metrics million gross margin press are a in results period same $XX quarter the gross release these to our XX%. and year. non-GAAP GAAP was that issued earnings last in fourth Gross with the reconciled This profit this compares million of

third XX.X% and XXXX. third compared subscription Gross fourth of quarter margin XX.X% XX.X% to in fourth year's Gross and on year's software XX.X% the was in on XX.X% services was in compared quarter last the revenues quarter XX.X% XXXX. quarter of to in last and margin

operating last expenses. In research compared year. fourth was $XX $XX.X million to development to Turning expense quarter, and the million

full products the enhancing million. With XX% each our ongoing For existing new capitalized year, for spend in quarter R&D year, reflecting and and was address which investments the included, was development software needs. $XX.X million period, for customer R&D million $XX.X $XX.X for represents full the spend of revenues to fourth product

million, XX% expense was year's $XX.X marketing up quarter. from last Selling fourth and

and $XXX.X of was was of go-to-market our year-over-year quarterly XX% For the in last expansion The million, success the XXXX. marketing up organizations year, expense year. and result increase from a selling and customer

and year. million, $XX.X up $X.X last from administrative general expense million was Our

the million, are million year. general was to For to This support investments full last growth. making and infrastructure administrative long-term our to compared expense the we year, is $XXX.X due $XX.X increase

fourth our adjusted last for in full up year-over-year. the was EBITDA an $XX.X of million the And million, EBITDA $XX increase quarter, from was Adjusted year, $XXX,XXX million year. $X.X

was the free Now accordingly, us in significant cash made our $X.X This flow to positive $XX.X turning fourth flow we enabled cash cash year, the of the full And free flow year, investments quarter. XXXX. flow, million. million a the positive despite to growth for deliver cash we in for free full delivered

We investment with million million Total in bank cash and ended debt million. and equivalents. was $XX.X fourth the $XX.X cash totaled quarter $XX.X unrestricted securities

of our have we line under For additional liquidity, also of $XXX availability million credit. unused

these our demonstrated guidance we throughout to Vertex on and a that promises to as public deliver strive our consistently. has history are approach about company thoughtful

XXXX economic have expectations. our been the uncertainty, we Given current mindful with

represent quarter to $XX total at at million $XXX million, which and growth to adjusted first of $X XXXX, the the the midpoint in which represent of approximately we XX% of the million for the an range midpoint. range expect would Accordingly, million $XXX $XX revenue of in EBITDA million, increase year-over-year would

XXXX, million revenue the range believe increase XXXX. and expect to million, $XX XX.X% approximately million revenue And more will annual $XXX representing in that total million, for the full midpoint. million at to year EBITDA of revenue range in of $XXX an XX% than at of the growth we $XX Adjusted grow we by cloud midpoint the representing of $XX the in

the reflects of This guidance our view of the going in early business XXXX.

base economy As revenue we will believe have if we resilient downward. be mentioned, turn even does Vertex's the

David will Q&A. up before now open make David? some to closing we comments

David DeStefano

the few as performance open attack first, to in and very A made questions, fourth me call front leave before the we significant It's helping John. our whole. us. with XXXX I'm opportunity we've Thanks, in us of for you in investments the a pleased with clear quarter the to are growth points

the profitability and growth, our double-digit This positive is fourth strong cash up in quarter. showing flow in

investment two We to years we expected be our had ago. began strategy where we when are

invest we the In in intentions, and should even to visible will no our we point to back of nearing growth investors. the half be start trends more strategy accelerate while Second, and intending taper growth our these longer the XXXX, continue investments. we're off to to are

as position, XX-year invest our continue will to And prudent take finally, financial we and strengthen wisely history. our throughout steps we to have

on fund During budgets enterprise taxing revenues future. authorities still invest from for to economic customers and heavily downturns, rely indirect the taxes

recessionary grow demand continue This solutions to allows and drives for us even in our times. ongoing to

beyond. and team and we energized about Our well, are executing is XXXX

that, go questions. please ahead. take your With we'll Operator,

Operator

a Instructions] question-and-answer conducting be Thank you. now session. We'll you. [Operator Thank

with of questions. today Stotler Matt coming proceed your Please Blair. William with question the from line is first Our

Matt Stotler

Appreciate Hi, that just obviously particular on macro, of have off observations task you guys of are the the place. any seems you customers business, of structure coping. with kind commentary, start about and taking Maybe on some pricing interesting like it the there's some questions. in on there. double-click one We to guys love stability not usage here. guys put to based and the talked If there's difficulties changes in the seeing obviously, that criticality just within the compliance the seeing are you you're how just

any differences just love double-click on to have seeing your I in cycles, you're would observations there? If deal what you?

David DeStefano

Matt. Sure,

So fundamentally, exceptionally concerns. no is usage sticky. The product

strong to price base, have relative uptake any there pretty We at our GRR our seeing installed and we're not downward that pressure all.

drive The what are on continues digital transformations, show value and prop things transformation, off, deals that our get to software have more the them, customers will think of I solutions and both enterprise efficiency well. We've remain continue drive our see thoughtful. really by think digital a cycle, in other canceling project. not and And we're I to when customers customers push focused do not miss system – expect ERP or experienced yet. month to upgrades and upgrades on versus serve through our this budget their business. to both of this we We material is deal occasional that seen that competitors those us continue we on but of

Matt Stotler

of point? Got of one focused you're the about Emerging it. mentioned R&D Tech And where mean, get kind That's pipeline there. investments capabilities of you helpful. then most there you're tech looking of what I I your this in on emerging view additional and in forward, to love kind on would excited some your in kind of terms maybe and at

David DeStefano

Yeah.

will see always in solutions business and then our looking thinking automation, we opportunities cloud is and for driving ML had continue data that to on we've more we're data, a to I there. in and strength healthy solutions. data number platform. about to continue our close AI we us and differentiator of and about forward, that both our expand edge a edge a staying So intelligence, be some that, discussions and transformation, And think

areas XXXX forward those think that so beyond. And and I are continue push to will in

Matt Stotler

again. Thanks, Great.

David DeStefano

Matt. Thank you,

Operator

is of Our & Company. Please the proceed your with line with from next Needham question. question Joshua Reilly

Joshua Reilly

taking on Hey, here. Nice guys. job the questions. quarter Thanks for my

look have to for you if has exposure or And edge it that's cloud and versus discuss helping think, than which just to be now I a e-commerce? Can expected. you migrate you continued in-store think new think is retail solution, them to customers in people in-store I how either out your customers net retail, at win stronger how been year, what you QX maybe the I roughly the cloud? retain

David DeStefano

Sure. is Josh, base across I think both the great really well-balanced customer news in-store. our e-commerce is and

sort like left We've pocket, it's So, sides. pocket. enjoyed right of on success both

when we saw were we So, e-commerce to and heavily customer running the hit our start omnichannel for base. people pandemic shifting

enjoyed And And uptick it so the in-store there. we seeing we're sort side. now of an on more

I really want enterprise our deployments doing other seeing customer seeing that's benefit across sides, in really with value that they're on And base. It's position getting the We're is there. customers edge we're the where and what to solutions, only but their retail, think containerize not both and uptake we're furthering experience. of really

So, there. uptake good it seeing is -- we're

Joshua Reilly

how around at are revenue normal? bands their expectations helpful. on at as overages item? quick That's for are note look guess, And then QX your buying couple there look if you would the in And Was revenue then quarter it. any there subscription Got of subscription based growth, that line buying in patterns the or the revenue a revenue, cautious people you with being there. say can questions are I XXXX, you customers

John Schwab

Yes, Josh, the thanks for question.

the was what that there First, out quarter in overages, wasn't terms on of normal. call -- to there's notable -- in that if anything above terms of fourth anything was in

opportunities there. band then a kind would about are So, what buying really of level. I And new we people and think say from nothing there's

We're seeing there I us down change. people less that that's anticipation not of wouldn't something normally future. driving there's causing say taking anything would they in the or in buying anything for than

meaningful again, not of trued there. people really are caught buy indicating seeing we're we're yet nothing seeing people so up, numbers pullback in not get up. that So, that a There's stuff gets any it kind does anything really the lower. But

Joshua Reilly

helpful. Super it. Thanks guys. Got

David DeStefano

bet. You

Operator

Jester with BMO your with Our next the question. Please Markets. from is of Capital question line proceed Daniel

Daniel Jester

morning have of for the math If to good Hey, Maybe in right, I off growth rest guidance my question. everyone. XX% on growth business. the the my taking in the cloud. X% first for Thanks implies maybe start XXXX,

What parts So, bit Beyond can little for year? the context different provide a growth business other your you more are expectations just Cloud? the of about this the

John Schwab

out about Thanks for good feel question, it. Much growth, the we to come Yes. Again, we think as about cloud, that's Dan. called appreciate going and where you in. again, pretty

to seen on continue talked there our about, existing customers have as their and as people they be use under on-prem we've some going to activity to as the if well business additional Again, cloud may nice to is on-prem those split But need be it. something that continue that. add that on-prem we've infrastructure it and adding between adding a

of growth a going terms of So, kind year-over-year that's in expectations year to come we're guess over increase be of basis. of XX%-ish My to out that's kind kind to are. what seeing in going a that services modest growth going last kind see that zone some from that. of we're of is little our standpoint, then And bit

break So, that's how kind of out. that we

David DeStefano

because nice the symbiotic organizations Dan versus there's gone always our about really to between mindful and and our with a ecosystem our mindful closely relationship We're growth we theirs, partners there -- work relationships. we

Daniel Jester

helpful a certainly, context. That's And cash then free the Thank big you. on fourth in improvement Got you. flow, quarter. the

thinking that? sorting think investments, the how about nth to to free think your into know we conversion? we're you. later that in XXXX? that's Thank just to up As this into flow I XXXX tighten should cash year a comments how way about we should that Can but out, long be I EBITDA

David DeStefano

Dan. question, great Yes,

investment will wrapping half XXXX. to remarks, thinking as in but be talked and I big bigger of our as of of up of the we do end, some to this correctly, get think the to David through has it I started first we and which projects talked some about kind then anticipate you're prepared some here cycle, in of

in We to the of leverage show little back a through see will the year. start of half bit

improvement And these more that see a investment I think to as start cycles. I again, a really bit thing. don't anticipate past -- more it's of meaningfully towards XXXX move from flow cash I'm I XXXX standpoint, but see a get to free we that we'll looking ourselves

Daniel Jester

very Great. Thank much. you

David DeStefano

You bet.

Operator

of question is your the from next proceed line Andrew with question. Please DeGasperi Our Berenberg. with

Andrew DeGasperi

growth? Thanks in for elaborate taking my of terms a seen Was question direct well drove count could a it relatively obviously, have question. contribution the And I increasing I if QX. relationship, is you one elaborate that's then by guess of terms Maybe in large in SAP, terms the more before? meaningful in amount of can new QX sequentially what them. in that the customer than new as was such Thanks. you've a you little it more what logo from

David DeStefano

Sure, Sure.

a think of there. I couple things So

I new made logo the logo those ecosystems you drive add be well. are well serves And The growth made would wins. saw as investment two Those think, growing is strength Salesforce to Workday. as in referenced. think continued areas we in think the the nicely. would That some first ecosystem we three real which that as to that grow the more new that Microsoft continues activity, and partnership starting Microsoft there and our investments I I and the I we've connectors nice

in and with new driving definitely better sales SAP, is a a their the got and for a team we've I us, experience. experience rhythm relationship seeing think working new with XX-plus customer broader with year -- we're customer SAP, and more value working obviously, that really organization, while relationship the

you SAP tools, you flow depth Plus of think about the our And the to going start in that to robust Chain having meaningful sales really our it way. and able SAP together so tax when a solutions we're you the between most differentiate integration, accelerator, our talking for teams, technology and bring

And our American on both we'll XXXX growth that growth you continue XXXX. and European our some I that think and North so supports saw in in of

John Schwab

lot to, periods, of see perspective, are of that things each there customer there's motions alluding and pushing David logo was drivers growth growth. feel from good continue the we giving and think And about to are I that the we in for a us good a as opportunity there. along again, count

Again, really in activity this that started some those important about we is a along. nice that guys those is deliver did and customers, that we one go of have terms And scaled I out the ARR. mid-market of thinking things again, see looking of that. to QX quarter, over we at of But think that called $XXX,XXX

the numbers I the but when are what the our metric think total there, customer. necessarily playing where do that think are about ones we it's the that's field are that important we that really that's our in and scaled customers, not best

So give continue good of a to to people we're how understanding that kind hopefully, going real And the report are of that. will business drivers moving.

Andrew DeGasperi

That's helpful. And then maybe on the margins.

mean, the should gone a down be have to XXXX we stock-based percent revenue. of aware it seems Just there relative this comp I of? on to movement any wondering, year that as is

Just maybe more on if you that can elaborate that, little would be a helpful?

David DeStefano

IPO to the in at of as caught some some normal the when just it, Andrew, we we granted a Historically, that the take that of best you things get had on really of things overhang that look Yes. we accounting through had had old pace. kind up came

pre-IPO. a bit granting. go We'll terms about we've in So more think now that I of I down goes that has think there's we've stuff that been do continue material little pace we're some stock-based from there seeing change a it's be grants, to don't forward normal any And thoughtful fact bit got And go very away. and the of older but kind to into comp the as the of we that with number our to little what of that the gone of XXXX and call out. level into the XXXX, of

Andrew DeGasperi

Thank it. Got you

John Schwab

bet. You

Operator

proceed your question Please from of next with questions. comes line Jefferies. Samana The with the Samad

Samad Samana

of questions. Hi. XXXX about just first, Thanks should you're three the outlook. unpack attach conversions new taking the customers Good in maybe one we how new versus I Maybe, customer thinking at wanted up versus follow my on and model acquisition for existing that? cloud how revenue drivers of to you morning. as could main cloud John,

John Schwab

of that But, the that going how it a sort Yes. drivers going to cloud I we'll we to guide about kind as That's little of of we not we -- bit. for are unpack be the think, into logos XX%. a here. terms there, total I'll coming be of looking mean, guidance have I thoughtful I’m will that the I think, in new amount it. little I'm straight to -- give think

as continue it's a to kind into the on-prem, on-prem, our they ratio, are other that their addition about additional environment. XX% using in of We buy, see, to cloud to look with cloud and are on-prem, a buying that that existing have creating XX-XX the hybrid XX% customers buying

think continues very to that a So I there. motion be -- strong that's

some again, this to move impact kind the given further forward, look of how going we're people's sure uncertainty as digitization. not exactly we And, of is to

any will, I of haven't that's think We out kind money, to may that use But I think bit seen and on-prem that about about to and the cloud. longer conversion -- for Samad, think hold something as think that about yet, on-prem I on migration, on little they slightly sort stands. perhaps as pipeline as of a spend think there if it impact or you that our -- people so where from I

three think, it's And of guidance susses we'll see each on of be to But, kind kind of certainly see that it's that really whole I lot plays components. going to about our through. But as give hard year but those Thanks. I we're keep going eye something exactly talking the right how now, out on a forward. probably to different, and to guys you don't expect

Samad Samana

then, Very you. follow-up a David, helpful. maybe, for And

ramped, how in well you would all are and as think of just that a say firing partnerships about in how on cylinders? more they sales your Is of we investments the distribution left that, kind perspective the about they've and thinking And the should from own partnerships terms XXXX? marketing in Just could there context of how that ramp? gas

David DeStefano

of of relationship maturity Yes. with I'm think different Obviously, really you go our back generations. them. about pleased stages. with in all SAP, Vodafone the if each they They're

experiences enjoyed there. really we've so And wonderful

their teams. with sales new a to moved working They with level

me great, that us. early have opportunities of uptake the in so getting given the base motion don't that's both because new think moving access days to a there, massive forward, that we And is have the which confidence I still yet. they we're for in installed more that gives

there. I there's think upside considerable So

I'm as of like really some and indirect their give expanding motions Europe, another folks Workday us partnership. which we're will encouraged the Salesforce, Workday is with seeing by there. in partnership expanding they're tax

now up We're also starting motion seeing Microsoft. in good

doing with as great see the that's both think, work some the partner, ecosystem growth in, one both of I a and within I a see most customer I we're them, the where potential opportunity. probably that and the

Samad Samana

helpful. Very Great. Thank you.

Operator

Our the of Stanley. next question from line with Weiss Morgan with your questions. Please proceed Keith

Unidentified Analyst

taking for is This Jonathan Hey, for or Thanks Keith. good morning. my questions.

understand your you've but to degree, think a want macro outlook on I already to a what's macro contemplated touched in perspective? from

David DeStefano

Yes.

and I think be kind built thoughtful with very we've the we're done in of how delivered. we of we've what we've as the done past to kind what guidance, trying

of guidance pace trying thought the about we under-promising we good pretty think and about thought future, a to kind look had we as mind expectations. And we've into terms forward. and that sort we in of as think of I'll I of I over-deliver built of some say

built -- kind in how very standpoint. we've that's how of general so a that's And that

that we concerns started them again, we've to on guidance to feel there's But do marketplace itself good So I said, wanted put we minds. yet now. But mindful not see show think about We've tensions point. to that as at the people's there that be in start could we what for up. manifest some that build we out out some that know there are are

Unidentified Analyst

the mid-market? That's the it. what us incremental in thinking and investments can understand opportunities help around And Got you you're helpful.

David DeStefano

Sure.

force laser-focused of the Workday. We're ecosystems are mid-market in Microsoft great the growing uptake customers. enterprise run on and sales focus. seeing again, That's and in look of and targeted, at a into majority corporate -- the platforms that We our being businesses really we

the where We primary for because connectors. right we cetera. be it I customers a think that's don't really the target platforms, with want strategy that they spread on consolidating as or our up X,XXX peanut is. really see end And focus the whether We Workday, all run Coupa it, to butter et don't

the of our as both base team, suited some for right and are comfortable continue coming content that we well with investments, I Our quality that we think, forward. add now. around use the I to go-to-market new that we just as support customer well offerings that have to

Unidentified Analyst

guys. color, Helpful Thank you.

David DeStefano

Thanks.

Operator

with the Our Steve next Enders question. of line from coming is with your question Citi. Please proceed

Steve Enders

within Great. adoption been as for you've if seeing about new now? want you Thanks the bit ask top that both the or in the any to Okay. a I pipeline about opportunities quarter in there's and kind of of taking what and for new are little funnel the change catalysts been coming question I here. key think guess right

David DeStefano

Sure, sure, Steve.

you're fundamental to hard or a three model growth, acquisitions, disrupting as either you're They department way makes there's of drivers that's adopting going they to keep be for business our pursue transformation, making up. fundamentally are a for something tax omnichannel, business search normal whether operates the it So for which revenue business.

regulatory of Either space, pressure. will either no is come one regulations different in-house hey, to say, in-house to things be something solution again to form longer those we're or have team the attack and of second our new The in in do going an viable. can the audit

large third technology then Remember, their business. the systems, these have billing And part multinationals refresh is systems. ERP of multiple invoicing multiple the

sort change. upgrading one our years will force be an and motion, disruptive acquisition land been over we of be they made can they then our success. which entree has be so again, And had that, of through will that any for an And organization expand, that a the those into our and

really go were hot. the it business two -- I -- so ago in think and in became very years -- we model a you pandemic, back if when couple acquisitions at where omnichannel And and changes look

And a driver. so that was real

regulators revenue. experience They Our fund always more times, are the budgets. for recessionary looking to get in the portion their to their need

audit then enterprise upgrades much very they target are when or on see that -- still focused we'll world. increase continued we are the will complexities really for seeing they'll we're efficiencies. system fortunate so customers we And pressure around And digital transformation and

in having. So still in drivers areas we're really those the seeing we're good dialogues

Steve Enders

Okay.

versus as think you there of past commentary in been any So I about has because impacts the think of coming in the there. lot call come the been in fuel like has there more some top change I maybe a macro a that and there new to beginning pipeline, guess mix on in, this

just how So in, of wondering those…? you're seeing new given opportunities flowing some

David DeStefano

way I material expectations. motions some that's are I giving we're I would to still it their we guidance with think us when think running of feel the still traditional larger able experienced they seeing the any I these their teams up not again, sales I good insights dialogues have in new ERPs, with and say No, And that have the we're our over into of drive add the to where past. we change, And that's in customers. why -- it's very

Steve Enders

there. a That's been perfect. the in context helpful a of guess Okay, think growth has Europe just I bit about footprint point of we geographic, kind dealer good as now. for

to out impacts the wondering how in about region? a there going anything potential just perspective been of So forward in demand Europe there's strength terms macro from call that thinking you're or and

David DeStefano

when very at team I SAP. customer there is for, we Europe largest record over a is again, for XXXX. platform our the you that We Yeah. base last year, and I look have mean, customer year had target well-positioned what in think

business of that customer with Europe depth of has of all us. our and talk reg the emphasize our and We differentiation, favor of this integrations well added, new changes to want to they chain capabilities the further given then real-time have who as differentiated community because as has I the forward most really that the reference-ability, else us they with our when some in small you're near really those enough, a look having we flow, And region, the in things play the and so continue software between to players we've Europe. in can't evolve set largest LCR-Dixon doing working tax I Tools it's PLUS reporting, and that helped look in at a customers now

confident So going continue the execute well. to is I team to remain that

Steve Enders

question. perfect. Okay, hear. to for taking Great the Thanks

Operator

is of Raymond James. the with next Alex question. your line Our proceed from Please question Klar with

Alex Klar

address on you the to businesses how follow-up Steve's wanted you David, terms remarks, question seeing challenges? you outside to US? in I international. the about feel in then compliance in are called of pipeline What of prepared win on makeup a real-time out Thanks. do positioning specifically, from And the real-time of terms Great. overall Thanks. the your

John Schwab

certainly and companies we've on what a focused on, European companies of -- guess vast doing focused I US of on been seeing European some but are the offering. we've Yeah. lot about Europe, in certainly that we're pipeline when clearly, companies focused got business the we think solutions

that's those is called to And requiring its start companies more Europe, it and are David proliferate flow, chain the out I think -- and think coming we're think that get et as cetera. solutions into its automated to Europe evolve, to way I needs largest But down. and continue and the continues I mentioned more seeing through. going follow and to with only needs complexity in

I don't a know that again. lot there's whole

things. we about flow, talked I think chain talked those about he

bit, a little and could sales they're that with start perhaps the can I which and a a things drivers, use, little are US, bit perhaps they different a key in think solve little things. more little type the US-centric bit are more which

that as their the are. to reporting, to we pretty about As work we're the real-time some talking continue advance customers about far and we're what watching being and area, our in of thoughtful doing demands health

We and we product expand area, are in our growing conversation opportunity is pursuing. seeing a something portfolio and actively are to that it

Alex Klar

Okay. Great. you. And then for John, one

pulling the areas kind thinking the about going to on are you're embedded And in around assumptions of growth back how you of year? be back terms for half hiring of XXXX, In investments any broadly? the

John Schwab

on touched a David in remarks. his it No. earlier bit little

As XXXX. we be think certainly hiring about in we anticipate growth, we'll do

and teams our market to new engineering focus on personnel. to We investment those market additional to continue bringing new products and require products in

really I years. they've some think of about other the think last that I over go-to-market important. teams very the think I And couple the seen that's of we as of our about in good mean, the activities positioning terms go-to-market of feel growth we that that,

to we're think the throughout But has go-to-market, there. here. feel just -- going be different I our on at at be I we about to opportunities of looking David growth focus looking pretty that. product, think, feel board discussed again, new we good across kind as continues So But Europe,

internal that of internal are see for do going some on. and outsourced kind the resources Again, lighten that -- doing to of that's so there. So the we're stuff we've doing we're up, there areas year or more projects lean to been start continue but last we to in the

Alex Klar

All you Thank Great. both. right.

John Schwab

Great. Thanks, Alex.

Operator

Hotchkiss of line with Our Goldman comes from your the question Adam with proceed next question. Sachs. Please

Adam Hotchkiss

update of of on and my see Could you out. half the the prior called for the a to some thanks you're the relative of taking about to logos rates how questions. just give quick quarter you're what sort you seeing competitive us Great. on new Great the morning and year? the first success Good front, feeling of win

their more down And of market versus market? way that breaking between some are those folks then the down and enterprise to against sort that are work in up who competing you of trying

David DeStefano

Sure.

in competitive a enjoyed our we've think from dynamics I strengthening side. our

well think in that the I doing that we and focus the is team we on. The focus product area. with into platforms put the portfolio, exceptionally

in remains whatsoever, no market treat a we Thomson, very competitor the and formidable them obviously enterprise competitor. primary as change Our there

remiss that larger get, customer in into our play that database, experience we relationships, differentiate come Adam organization. that. enterprises customer highlight as dynamics about tax the us. Our and I all depth very our the big ERP, customers, the experience for continue they're if of a win I the that, to are and would content to those support discerning leverage success and customer across referenceability, be And Big didn't differentiator X rate of and going

traction our think as EBITDA able to, to intending not there. mid-market, well. spread And starting we're into us. ecosystem We're want far side. looking where move SMB that we're a competitors rate. the and the are model say really growing we're our with win and don't in to We that space the that's we I peanut into be drive that I'd butter As success economic from on, the go to for running that's to focused market again, see solutions the as sustainable

companies served And players well for us the in largest so long-term. very our of focused focused investments we're years, us be evolve are the in XX and the for see to that there. will ecosystems That we number that enterprise

Adam Hotchkiss

growth about logos major for environment? in drivers the in geos that's No, guidance, when Any expansion new particular really And versus new think John, helpful. embedded products, are that Thanks. expectations you drivers this volume out? the Great. are how you net to approaching then, like strength call

John Schwab

Yeah.

earlier, IPO mentioned again, we and the going. as years. of that's last for how I Europe in think since the about the feel built think I we we I guidance, of – thought been – pretty couple We've been what about as good building kind we've for last that

in hone And so getting and skills. now that really kind place, group is getting our with largely of to we're some time everybody

about think I that. good So feel

kind time. of Again, XX% improvement activity. new to focus drive kind We incremental opportunity the going grow to some intend kind But to talked really these is new of in continue and That's is existing why base standpoint, logos new us logo help that there logo some about, the and of partners From we've of seen think and come of over from lean work area to we customer some a that's there. us. opportunity generate But historically that an start opportunities logo we so we'll see to David with always new strong. customers. new for have to of

opportunity I think think area that's there's that for we improvement. an

can't certain a on specifically to anything going percentage I out of a certain change we expect – by we're points. keep say to But to number that that. call focused So

Adam Hotchkiss

David. Thanks, helpful. John. Really Thanks,

John Schwab

Adam. You Thanks, bet.

David DeStefano

Thank you.

Operator

Pat Walravens your JMP with Securities. last Our comes questions. proceed question with Please from

Pat Walravens

Congratulations. you. right, Thank All Great. David.

are this So three summing two or for priorities top what it year? all your up,

David DeStefano

execution Execution, and execution.

customer have just customer to new our that. stay product to marketing think experience Pat, sales I portfolio, want invested team capacity, we our I focused really in and heavily and continue and on see our the success organizations

world, the I the the really execute. think through work partners best us best to with with customers fortunate to the and on in it's world in we're

that number would one. be So

to advance is I talent. continuing think its and two number the Vertex team

we that. and differentiate able years. our been the to the over really We've doing we industry, think, fortunate with to people want the some of in keep best I attract to people

really in investing to so those folks critical And our is success.

Pat Walravens

again. Congratulations right. Thank guys. All you,

David DeStefano

Thank you, Pat.

Operator

Thank you. to call question-and-answer turn remarks. At this the end session. time, closing And Crivelli we've I'll for the of reached Joe our

Joe Crivelli

us Thanks, everybody, for joining today.

if additional have the any at have questions, team, Thanks, day. you'd you great If via e-mail like to and follow-up with time to a out me schedule or reach please ir@vertex.com.

Operator

conference. today's conclude will This

you this at You disconnect time. Thank may your your participation. for lines

Vertex (VERX) 8 Mar 232022 Q4 Earnings call transcript