Vertex, Inc.

Greetings. Welcome to Vertex's fourth quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. Any question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll now turn the conference over to Joe Gravelli, Vice President of Investor Relations. Mr. Gravelli, you may now begin.

Hello, and thanks for joining us to discuss Vertex's financial results for the fourth quarter and year ended December 31st, 2022. I'm Joe Crivelli, Vice President, Investor Relations. With me on the call today are David DiStefano, Vertex's President and CEO, and our CFO, John Schwab. As a reminder, during this call, we may make forward-looking statements related to expected future results. Our actual results may differ materially from our projections due to risks and uncertainties. These risks and uncertainties are described in our earnings release and filings with the Securities and Exchange Commission. Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to the GAAP financial information, is provided in the press release. This conference call is being recorded and will be available for replay via webcast on our investor relations website. With that, I'll now turn the call over to David.

Thanks, Joe. Welcome, everyone, and thank you for joining us. I'm pleased to speak with you today about Vertex's financial results. Businesses today face immense regulatory change and indirect tax complexity. These challenges intensify as they expand into new regions, diversify offerings, and accelerate e-commerce growth. And that's why we continue to see tax technology growing in both value and demand. Our company's vision to accelerate global commerce has never been more relevant. Our solutions give enterprise and mid-market businesses alike the confidence to manage tax compliance at scale in over 20,000 jurisdictions around the world. Against this backdrop, Vertex executed extremely well in 2022, finishing on a high note with our best quarter of the year. Revenues in the quarter reached a record $131.1 million. up 17.4% from Q4 2021. This is the highest year-over-year revenue growth that we have delivered as a public company, and we closed the fourth quarter with adjusted EBITDA of $20.8 million, up 8% from last year. Our strong performance in an uncertain economic environment reinforces the durability of our business, the financial strength of our customer base, and our ability to sustain profitable growth. Free cash flow in the quarter was $24 million, which helped us deliver positive free cash flow for the full year while making a multi-million dollar growth investment. We are seeing benefits from our strategic acquisition and the targeted investments we are making in R&D, go-to-market, and ecosystem expansion. These investments are helping us further penetrate the $22 billion addressable market for tax automation solutions. Our investments are focused in four key areas. First, expanding our install base through accelerated go-to-market investment to drive customer success and high-value new logos within our target markets. Second, broadening and deepening our strategic partnerships. Third, strengthening our global presence with a spotlight on Europe. And finally, driving new product innovation with heavy investment in emerging technologies and tax content to have the power to transform our industry. And we are seeing adoption from both new and existing customers, evidenced by strong performance across all our key performance indicators for customer success in the fourth quarter. ARR was $431 million, up 16.5% year over year. NRR was 110%. up from 108% last year. GR was 96%, up slightly from 95% last year. And average annual revenue per customer increased 16% from last year's fourth quarter and exceeded $100,000 for the first time in our history. On the technology front, we continue to advance our next generation cloud solution to offer even greater scale and elasticity. We are enabling tax calculation at the point of transaction with the latest edge computing technology, and we are accelerating our use of intelligent automation to help our customers increase efficiency, reducing the friction between commerce and compliance. Vertex also continues to make significant investments in our tools and technology to enable our tax professionals business operations. Through intelligent automation, Data and analytic tools and robotic process automation, we are driving operational efficiencies and adding more content faster than ever before. We're proud to help the most dynamic and discerning businesses on the planet stay compliant with our tax content database, which has more than 700 million effective rates and rules. And our performance in 2022 confirms for me that we are just getting started. we've only scratched the surface of our addressable market, given the multiple trends triggering the need for tax automation. This gives me confidence that we can continue to grow both our top and bottom lines as these tailwinds take hold and accelerate. I'd like to share a few business highlights from the quarter illustrating these trends. Today, a significant segment of enterprise markets still relies on homegrown solutions or manual processes to address indirect taxes. This means incredible growth potential still exists within this highly valued segment of the addressable market, where we are the clear market leader. As tax complexity grows, compliance becomes unmanageable, triggering a need for change. As an example, one of the leading global commodities trading companies in Europe reached a tipping point when new regulatory requirements for near and real-time reporting pressure tested manual processes and their ability to maintain compliance. The timeless right to automate tax determination in the cloud and our ability to win this competitive six-figure deal was based on three things. The technical capabilities of our cloud solution to support data accuracy in every global jurisdiction with tight integration into their SAP platform. The referenceability of current customers who represent some of the most influential and complex businesses in Europe. and the expertise demonstrated by our in-region Vertex team. This is a differentiated value that allowed us to achieve record growth in our business in Europe in 2022. When we speak with prospective customers, our ability to uniquely connect disparate systems to a single tax platform is another clear differentiator. This led to a significant six-figure ARR win this quarter. We were selected by one of the largest consumer insurance companies in the United States as their provider of choice for indirect tax automation. This significant new logo opportunity was driven by the company's implementation of Coupa for procurement. As they integrated Coupa into their Oracle infrastructure, it was the ideal time to transition from their homegrown indirect tax system, which could no longer keep pace with their compliance needs in today's modern cloud ecosystem. Another area of investment that I touched on earlier centers on new product innovation. We had a notable win in the quarter that highlights how our continued portfolio enhancement to better support the SAP ecosystem makes Vertex the clear choice for tax technology in that space. After being spun off from their parent company, our cloud solution was selected by a well-known consumer products brand to manage sales tax compliance. The company was familiar with our industry recognized customer experience and the strength of our solutions, having previously used our managed services offering. As an independent company, they needed a tax engine that connects seamlessly to SAP. They also licensed our plus tools that launched in 2022 with the acquisition of LCR Dixon. This deal reflects the value we are receiving from this strategic investment and gives us an edge with the most complete and differentiated tax automation solution for SAP. Each quarter, I highlight how trusted relationships across the partner ecosystem create value for our joint customers and differentiate us in competitive deals. Across the board, we continue to enhance our integrations globally with our strategic partners and actively engage with their sales teams. Additionally, we are working closely with our alliance partners to focus on key ecosystems where we share strengths and differentiation. Together, we deliver a better overall experience for our customers. In the mid-market, we continue to work closely with Microsoft Dynamics team and strengthen our technical integrations and go-to-market motions together. In the quarter, we had multiple deals where we were able to drive value for Microsoft customers. As an example, our solutions allowed a premium retailer in the US to consolidate tax and billing systems as part of a larger financial systems transformation on Microsoft Dynamics 365. Our unique ability to integrate into multiple financial systems for accurate tax calculation allowed us to win this new logo. This retailer now has a trusted tax partner that is supporting their long-term omnichannel strategy. This was a highly competitive deal as the customer was using solutions from two of our competitors in other areas of their business. Another powerful example of how our multi-systems integrations and partner relationships are setting Vertex apart from the competition involved a national restaurant chain looking to streamline their tax processes. Their systems integrator, Top Block, brought us into the opportunity. The fact that we were named a preferred ISV and premier partner for their workday financials environment was key to earning their confidence. The strength of our tax content for the food and beverage industry reinforced at Vertex is the right choice to help them manage tax compliance. Looking forward, I'm excited to build on our preferred position within Workday in 2023 and beyond. Across all our highlighted wins this quarter, the breadth and depth of our tax content database is a clear advantage for us time and again. The expansion of our vertical specific tax content It is another example of how investments we are making are quickly delivering value to our customer and shareholders. B2B marketplaces are growing at a rapid pace and emerging regulations seek to ensure governments get their fair share of the revenue on these new platforms. This creates increased complexity for businesses using this e-commerce channel. Because of this, marketplaces continue to be a focal point of our growth efforts. and we continue to leverage the acquisitions of Taximo and its integration with our other products to strengthen our partnerships with marketplace operators. A great example of this was how we expanded our relationship with Miracle in the fourth quarter. Miracle is a leading enterprise SaaS platform that powers over 300 online marketplaces. We initially announced our strategic partnership in 2021, with an integration to help their customers comply with emerging VAT e-commerce regulations. This quarter, we launched an enhanced connector to enable full-service global support for Miracle expansion into North America. Interestingly enough, Miracle also became a new customer of Vertex in Q4, which is very common with many of our tech partners. They are customers as well as go-to-market partner. which I think speaks volumes about our leadership in the industry. Before I turn the call to John, I want to thank the entire global Vertex team who have worked hard to get us to this inflection point. Their relentless commitment to deliver an exceptional customer experience was once again recognized this quarter by Helpdesk Institute. Vertex achieved HDI Support Center certification, which is an internationally recognized standard for best practices in customer support, and the highest level of recognition for customer experience. And quite frankly, that is something enterprise customers deeply value and we consistently differentiate on. We are the only tax technology provider to earn this level of certification. And we've now done it twice. I could not be prouder of our team. When you work with the best customers and partners in the industry, you also attract top talent. We have continued to invest in and grow the Vertex team. Among the new additions to our team in 2022, we welcome Brad Cameron, a senior vice president of software engineering. I could not be more excited to have Brad join us from Salesforce to lead our world-class engineering team in the development of our next generation of solutions and continue to advance technical innovation. Since we were in public, we have been laser focused on increasing our product and tax content leadership. expanding our go-to-market capabilities, and making and monetizing targeted strategic acquisitions. And reflecting on our performance in quarter and all of 2022, our team is executing well across every area of our business in direct alignment with that strategy. John, I will now hand the call over to you to provide additional details on the quarterly results.