UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ |
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2020
OR
☐ |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 333-239644
VERTEX, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
|
|
| 23-2081753 |
(State or other jurisdiction of incorporation or organization) | |
| | (I.R.S. Employer Identification No.) |
| |
| |
|
2301 Renaissance Blvd | |
| | 19406 |
(Address of principal executive offices) | |
| | (Zip Code) |
Registrant’s telephone number, including area code: (800) 355-3500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading symbol |
| Name of each exchange on which registered |
Class A Common Stock, Par Value $0.001 Per Share | | VERX | | NASDAQ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ||||
Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
Non-accelerated filer | ☒ | | Small reporting company | ☐ |
| | | Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 10, 2020, the registrant had 25,687,503 shares of Class A common stock, $0.001 par value per share, and 120,417,000 shares of Class B common stock, $0.001 par value per share, outstanding.
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| Page |
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| | ||
| | Condensed Consolidated Balance Sheets as of December 31, 2019 and September 30, 2020 (unaudited) | 5 |
| | 6 | |
| | 7 | |
| | 9 | |
| | Notes to Condensed Consolidated Financial Statements (unaudited) | 10 |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | 45 | |
| 67 | ||
| 68 | ||
| 70 | ||
| 70 | ||
| 70 | ||
| 70 | ||
| 70 | ||
| 70 | ||
| 70 | ||
| 71 | ||
| 72 |
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), that involve substantial risks and uncertainties. All statements made in this Quarterly Report on Form 10-Q that are not statements of historical fact, including statements about our beliefs and expectations and regarding future events or our future results of operations, financial condition, business, strategies, financial needs, and the plans and objectives of management, are forward-looking statements and should be evaluated as such. These statements often include words such as “anticipate,” “believe,” “expect,” “suggests,” “plan,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast” and other similar expressions or the negatives of those terms. We base these forward-looking statements on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances at such time. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of future performance or results. The forward-looking statements are subject to and involve risks, uncertainties and assumptions, and you should not place undue reliance on these forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. Important factors that may materially affect such forward-looking statements include, but are not limited to:
You should not place undue reliance on our forward-looking statements and you should not rely on forward-looking statements as predictions of future events. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date of this report. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
PART I - FINANCIAL INFORMATION
Vertex, Inc.
Condensed Consolidated Balance Sheets
As of December 31, 2019 and September 30, 2020 (unaudited)
(Amounts in thousands)
| | | | | | |
| | September 30, |
| December 31, | ||
| | 2020 | | 2019 | ||
|
| (unaudited) |
| | | |
Assets |
| |
|
| |
|
Current assets: |
| |
|
| |
|
Cash and cash equivalents | | $ | 270,271 | | $ | 75,903 |
Funds held for customers | |
| 8,745 | |
| 7,592 |
Accounts receivable, net of allowance of $7,567 (unaudited), and $7,515, respectively | |
| 66,789 | |
| 70,367 |
Advances to stockholders | |
| 2 | |
| 283 |
Prepaid expenses and other current assets | |
| 16,001 | |
| 11,412 |
Total current assets | |
| 361,808 | |
| 165,557 |
Property and equipment, net of accumulated depreciation | |
| 55,935 | |
| 54,727 |
Capitalized software, net of accumulated amortization | |
| 32,619 | |
| 32,075 |
Goodwill | |
| 18,667 | |
| — |
Deferred commissions | |
| 10,372 | |
| 11,196 |
Deferred income tax asset | | | 32,440 | | | 219 |
Deposits and other assets | |
| 3,093 | |
| 849 |
Total assets | | $ | 514,934 | | $ | 264,623 |
| |
| | |
| |
Liabilities and Equity | |
|
| |
|
|
Current liabilities: | |
|
| |
|
|
Current portion of long-term debt | | $ | 1,179 | | $ | 50,804 |
Accounts payable | |
| 11,828 | |
| 10,729 |
Accrued expenses | |
| 15,014 | |
| 13,308 |
Distributions payable | |
| — | |
| 13,183 |
Customer funds obligations | |
| 8,711 | |
| 7,553 |
Accrued salaries and benefits | |
| 20,276 | |
| 15,195 |
Accrued variable compensation | |
| 16,154 | |
| 22,237 |
Deferred compensation, current | |
| 3,220 | |
| 8,935 |
Deferred revenue | |
| 185,445 | |
| 191,745 |
Deferred rent and other | |
| 908 | |
| 840 |
Future acquisition commitment, current | |
| 780 | |
| — |
Total current liabilities | |
| 263,515 | |
| 334,529 |
Deferred compensation, net of current portion | |
| 2,156 | |
| 18,530 |
Deferred revenue, net of current portion | |
| 12,095 | |
| 14,046 |
Long-term debt, net of current portion | |
| 329 | |
| 682 |
Future acquisition commitment, net of current portion | |
| 9,485 | |
| — |
Deferred other liabilities | |
| 8,793 | |
| 9,268 |
Total liabilities | |
| 296,373 | |
| 377,055 |
Commitments and contingencies (Note 11) | |
|
| |
|
|
Options for redeemable shares | |
| — | |
| 17,344 |
Stockholders' equity (deficit): | |
|
| |
|
|
Preferred shares, $0.001 par value, 30,000 and 0 shares authorized, respectively; 0 and 0 shares issued and outstanding, respectively | | | — | |
| — |
Class A voting common stock, $0.001 par value, 0 and 600 shares authorized, respectively; 0 and 300 shares issued, respectively; 0 and 147 shares outstanding, respectively | |
| — | |
| — |
Class B non-voting common stock, $0.001 par value, 0 and 299,400 shares authorized, respectively; 0 and 162,297 shares issued, respectively; 0 and 120,270 shares outstanding, respectively | |
| — | |
| 54 |
Class A voting common stock, $0.001 par value, 300,000 and 0 shares authorized, respectively; 25,688 and 0 shares issued and outstanding, respectively | | | 26 | | | — |
Class B voting common stock, $0.001 par value, 150,000 and 0 shares authorized, respectively; 120,417 and 0 shares issued and outstanding, respectively | | | 120 | | | — |
Additional paid in capital | | | 200,722 | | | — |
Retained earnings (accumulated deficit) | |
| 21,696 | |
| (90,701) |
Accumulated other comprehensive loss | |
| (4,003) | |
| (491) |
Treasury stock | |
| — | |
| (38,638) |
Total stockholders' equity (deficit) | |
| 218,561 | |
| (129,776) |
Total liabilities and equity | | $ | 514,934 | | $ | 264,623 |
The accompanying notes are an integral part of these consolidated financial statements.
-5-
Vertex, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
For the three and nine months ended September 30, 2019 and 2020 (unaudited)
(Amounts in thousands, except per share data)
| | | | | | | | | | | | |
| | Three months ended | | Nine months ended | ||||||||
| | September 30, | | September 30, | ||||||||
| | 2020 | | 2019 | | 2020 | | 2019 | ||||
| | (unaudited) | | (unaudited) | ||||||||
Revenues: |
| |
|
| |
|
| |
|
| |
|
Software subscriptions | | $ | 79,778 | | $ | 71,041 | | $ | 232,844 | | $ | 202,692 |
Services | |
| 14,827 | |
| 11,398 | |
| 42,277 | |
| 32,736 |
Total revenues | |
| 94,605 | |
| 82,439 | |
| 275,121 | |
| 235,428 |
Cost of revenues: | |
|
| |
|
| |
|
| |
|
|
Software subscriptions | |
| 29,161 | |
| 18,647 | |
| 79,846 | |
| 56,490 |
Services | |
| 18,807 | |
| 8,786 | |
| 49,329 | |
| 23,616 |
Total cost of revenues | |
| 47,968 | |
| 27,433 | |
| 129,175 | |
| 80,106 |
Gross profit | |
| 46,637 | |
| 55,006 | |
| 145,946 | |
| 155,322 |
Operating expenses: | |
|
| |
|
| |
|
| |
|
|
Research and development | |
| 16,501 | |
| 7,271 | |
| 43,197 | |
| 22,049 |
Selling and marketing | |
| 29,423 | |
| 15,830 | |
| 78,300 | |
| 49,164 |
General and administrative | |
| 48,043 | |
| 17,263 | |
| 123,437 | |
| 49,358 |
Depreciation and amortization | |
| 2,735 | |
| 2,311 | |
| 8,109 | |
| 6,528 |
Other operating (income) expense, net | |
| (60) | |
| 4 | |
| 154 | |
| 472 |
Total operating expenses | |
| 96,642 | |
| 42,679 | |
| 253,197 | |
| 127,571 |
Income (loss) from operations | |
| (50,005) | |
| 12,327 | |
| (107,251) | |
| 27,751 |
Other (income) expense: | |
|
| |
|
| |
|
| |
|
|
Interest income | |
| (79) | |
| (251) | |
| (535) | |
| (775) |
Interest expense | |
| 1,875 | |
| 503 | |
| 3,959 | |
| 1,579 |
Total other expense, net | |
| 1,796 | |
| 252 | |
| 3,424 | |
| 804 |
Income (loss) before income taxes | |
| (51,801) | |
| 12,075 | |
| (110,675) | |
| 26,947 |
Income tax (benefit) expense | |
| (30,773) | |
| 175 | |
| (31,508) | |
| 600 |
Net (loss) income | |
| (21,028) | |
| 11,900 | |
| (79,167) | |
| 26,347 |
Other comprehensive loss from foreign currency translation adjustments and revaluations, net of tax | |
| 238 | |
| 174 | |
| 3,512 | |
| 176 |
Total comprehensive income (loss) | | $ | (21,266) | | $ | 11,726 | | $ | (82,679) | | $ | 26,171 |
Net (loss) income attributable to Class A stockholders, basic | | $ | (2,751) | | $ | 22 | | $ | (2,427) | | $ | 21 |
Net (loss) income per Class A share, basic | | $ | (0.15) | | $ | 0.10 | | $ | (0.40) | | $ | 0.16 |
Weighted average Class A common stock, basic | |
| 18,124 | |
| 225 | |
| 6,129 | |
| 134 |
Net (loss) income attributable to Class A stockholders, diluted | | $ | (2,751) | | $ | 373 | | $ | (2,427) | | $ | 826 |
Net (loss) income per Class A share, diluted | | $ | (0.15) | | $ | 0.10 | | $ | (0.40) | | $ | 0.21 |
Weighted average common Class A stock, diluted | |
| 18,124 | |
| 3,893 | |
| 6,129 | |
| 3,898 |
Net (loss) income attributable to Class B stockholders, basic | | $ | (18,277) | | $ | 11,878 | | $ | (76,740) | | $ | 26,326 |
Net (loss) income per Class B share, basic | | $ | (0.15) | | $ | 0.10 | | $ | (0.64) | | $ | 0.22 |
Weighted average common Class B stock, basic | |
| 120,417 | |
| 120,417 | |
| 120,417 | |
| 120,417 |
Net (loss) income attributable to Class B stockholders, diluted | | $ | (18,277) | | $ | 11,527 | | $ | (76,740) | | $ | 25,521 |
Net (loss) income per Class B share, diluted | | $ | (0.15) | | $ | 0.10 | | $ | (0.64) | | $ | 0.21 |
Weighted average common Class B stock, diluted | | | 120,417 | | | 120,417 | | | 120,417 | | | 120,417 |
Loss before income taxes | | $ | (51,801) | | | | | $ | (110,675) | | | |
Pro forma provision for income tax benefit | | | (13,106) | | | | | | (28,001) | | | |
Pro forma net loss | | $ | (38,695) | | | | | $ | (82,674) | | | |
Pro forma net loss attributable to Class A stockholders | | $ | (5,062) | | | | | $ | (4,004) | | | |
Weighted average Class A common stock, basic and diluted | | | 18,124 | | | | | | 6,129 | | | |
Pro forma net loss per Class A share, basic and diluted | | $ | (0.28) | | | | | $ | (0.65) | | | |
Pro forma net loss attributable to Class B stockholders | | $ | (33,633) | | | | | $ | (78,670) | | | |
Weighted average Class B common stock, basic and diluted | | | 120,417 | | | | | | 120,417 | | | |
Pro forma net loss per Class B share, basic and diluted | | $ | (0.28) | | | | | $ | (0.65) | | | |
The accompanying notes are an integral part of these consolidated financial statements.
-6-
Vertex, Inc. |
Condensed Consolidated Statements of Changes in Equity (Deficit) |
For the nine months ended September 30, 2019 (unaudited) |
(Amounts in thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Before Recapitalization | | After Recapitalization | | | | Retained | | Accumulated | | | | | | | Total | | | | ||||||||||||||||||||
| | Outstanding |
| Class A | | Outstanding |
| Class B | | Outstanding |
| Class A |
| Outstanding |
| Class B | | Additional | | Earnings | | Other | | Treasury |
| | |
| Stockholders' |
| Options for | |||||||||
| | Class A | | Common | | Class B | | Common | | Class A | | Common | | Class B | | Common | | Paid-in | | (Accumulated | | Comprehensive | | Shares | | Treasury | | Equity | | Redeemable | ||||||||||
|
| Shares |
| Stock |
| Shares |
| Stock | | Shares |
| Stock |
| Shares |
| Stock |
| Capital |
| Deficit) |
| Loss |
| Issued |
| Stock |
| (Deficit) |
| Shares | ||||||||||
Balance, January 1, 2019 |
| 147 | | $ | — |
| 120,270 | | $ | 54 | | — | | $ | — |
| — | | $ | — | | $ | — | | $ | (88,038) | | $ | (496) |
| 41,685 | | $ | (37,797) | | $ | (126,277) | | $ | 14,581 |
Remeasurement of options for redeemable shares |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (607) | |
| — |
| — | |
| — | |
| (607) | |
| 607 |
Distributions declared |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (5,255) | |
| — |
| — | |
| — | |
| (5,255) | |
| — |
Foreign currency translation adjustments and revaluations |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| — | |
| 21 |
| — | |
| — | |
| 21 | |
| — |
Net income |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| 7,325 | |
| — |
| — | |
| — | |
| 7,325 | |
| — |
Balance, March 31, 2019 |
| 147 | |
| — |
| 120,270 | |
| 54 | | — | |
| — |
| — | |
| — | |
| — | |
| (86,575) | | | (475) |
| 41,685 | |
| (37,797) | |
| (124,793) | |
| 15,188 |
Remeasurement of options for redeemable shares |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| 424 | |
| — |
| — | |
| — | |
| 424 | |
| (424) |
Exercise of stock options, net |
| — | |
| — |
| 225 | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (116) | |
| — |
| — | |
| — | |
| (116) | |
| — |
Distributions declared |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (6,105) | |
| — |
| — | |
| — | |
| (6,105) | |
| — |
Foreign currency translation adjustments and revaluations |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| — | |
| (23) |
| — | |
| — | |
| (23) | |
| — |
Net income |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| 7,122 | |
| — |
| — | |
| — | |
| 7,122 | |
| — |
Balance, June 30, 2019 |
| 147 | |
| — |
| 120,495 | |
| 54 | | — | |
| — |
| — | |
| — | |
| — | |
| (85,250) | | | (498) |
| 41,685 | |
| (37,797) | |
| (123,491) | |
| 14,764 |
Remeasurement of options for redeemable shares |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (579) | |
| — |
| — | |
| — | |
| (579) | |
| 579 |
Foreign currency translation adjustments and revaluations |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| — | |
| (174) |
| — | |
| — | |
| (174) | |
| — |
Net income |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| 11,900 | |
| — |
| — | |
| — | |
| 11,900 | |
| — |
Balance, September 30, 2019 |
| 147 | | $ | — |
| 120,495 | | $ | 54 | | — | | $ | — |
| — | | $ | — | | $ | — | | $ | (73,929) | | $ | (672) |
| 41,685 | | $ | (37,797) | | $ | (112,344) | | $ | 15,343 |
The accompanying notes are an integral part of these consolidated financial statements.
-7-
Vertex, Inc. |
Condensed Consolidated Statements of Changes in Equity (Deficit) (Continued) |
For the nine months ended September 30, 2020 (unaudited) |
(Amounts in thousands) |
| | Before Recapitalization | | After Recapitalization | | | | Retained | | Accumulated | | | | | | | Total | | | | ||||||||||||||||||||
| | Outstanding |
| Class A |
| Outstanding |
| Class B | | Outstanding | | Class A | | Outstanding | | Class B | | Additional |
| Earnings |
| Other |
| Treasury |
| | |
| Stockholders' |
| Options for | |||||||||
| | Class A | | Common | | Class B | | Common | | Class A | | Common | | Class B | | Common | | Paid-in | | (Accumulated | | Comprehensive | | Shares | | Treasury | | Equity | | Redeemable | ||||||||||
|
| Shares |
| Stock |
| Shares |
| Stock |
| Shares |
| Stock |
| Shares |
| Stock |
| Capital |
| Deficit) |
| Loss |
| Issued |
| Stock |
| (Deficit) |
| Shares | ||||||||||
Balance, January 1, 2020 |
| 147 | | $ | — |
| 120,270 | | $ | 54 | | — | | $ | — |
| — | | $ | — | | $ | — | | $ | (90,701) | | $ | (491) | | 41,910 | | $ | (38,638) | | $ | (129,776) | | $ | 17,344 |
Remeasurement of options for redeemable shares |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (15,242) | |
| — | | — | |
| — | |
| (15,242) | |
| 15,242 |
Distributions declared |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (4,010) | |
| — | | — | |
| — | |
| (4,010) | |
| — |
Foreign currency translation adjustments and revaluations |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| — | |
| (2,998) | | — | |
| — | |
| (2,998) | |
| — |
Net loss |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (29,064) | |
| — | | — | |
| — | |
| (29,064) | |
| — |
Balance, March 31, 2020 |
| 147 | |
| — |
| 120,270 | |
| 54 | | — | |
| — |
| — | |
| — | |
| — | |
| (139,017) | |
| (3,489) | | 41,910 | |
| (38,638) | |
| (181,090) | |
| 32,586 |
Remeasurement of options for redeemable shares |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (14,637) | |
| — | | — | |
| — | |
| (14,637) | |
| 14,637 |
Exercise of stock options, net |
| — | |
| — |
| 173 | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| 53 | |
| — | | — | |
| — | |
| 53 | |
| — |
Distributions declared |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (123,185) | |
| — | | — | |
| — | |
| (123,185) | |
| — |
Foreign currency translation adjustments and revaluations |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| — | |
| (276) | | — | |
| — | |
| (276) | |
| — |
Net loss |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| — | |
| (29,075) | |
| — | | — | |
| — | |
| (29,075) | |
| — |
Balance, June 30, 2020 |
| 147 | |
| — |
| 120,443 | |
| 54 | | — | |
| — |
| — | |
| — | |
| — | |
| (305,861) | |
| (3,765) | | 41,910 | |
| (38,638) | |
| (348,210) | |
| 47,223 |
Distributions declared |
| — | |
| — |
| — | |
| — | | — | | | — | | — | | | — | | | — | |
| (5,706) | |
| — | | — | |
| — | |
| (5,706) | |
| — |
Reclassification of accumulated S Corporation earnings | | — | |
| — |
| — | |
| — | | — | | | — | | — | | | — | | | (354,291) | |
| 354,291 | |
| — | | — | |
| — | |
| — | | | — |
Remeasurement of options for redeemable shares |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | |
| (21,954) | |
| — | |
| — | | — | |
| — | |
| (21,954) | |
| 21,954 |
Reclassification of options for redeemable shares |
| — | |
| — |
| — | |
| — | | — | |
| — |
| — | |
| — | | | 69,177 | |
| — | |
| — | | — | |
| — | |
| 69,177 | |
| (69,177) |
Recapitalization prior to Offering | | (147) | | | — | | (120,443) | | | (54) | | 173 | | | — | | 120,417 | | | 120 | | | (38,704) | | | — | | | — | | (41,910) | | | 38,638 | | | — | | | — |
Reclassification of SAR liability to equity in connection with Offering | | — | | | — | | — | | | — | | — | | | — | | — | | | — | | | 143,519 | | | — | | | — | | — | | | — | | | 143,519 | | | — |
Auto-exercised options in connection with Offering | | — | | | — | | — | | | — | | 564 | | | 1 | | — | | | — | | | (13,809) | | | — | | | — | | — | | | — | | | (13,808) | | | — |
Shares issued in connection with Offering, net of Offering costs |
| — | |
| — |
| — | |
| — | | 23,812 | | | 24 | | — | | | — | | | 416,778 | |
| — | |
| — | | — | |
| — | |
| 416,802 | |
| — |
Exercise of stock options in connection with the Offering | | — | | | — | | — | | | — | | 510 | | | — | | — | | | — | | | (7,023) | | | — | | | — | | — | | | — | | | (7,023) | | | — |
Vested restricted stock issued in connection with Offering | | — | | | — | | — | | | — | | 19 | | | — | | — | | | — | | | 361 | | | — | | | — | | — | | | — | | | 361 | | | — |
Exercise of stock options, net | | — | | | — | | — | | | — | | 610 | | | 1 | | — | | | — | | | 1,007 | | | — | | | — | | — | | | — | | | 1,008 | | | — |
Stock-based compensation expense | | — | | | — | | — | | | — | | — | | | — | | — | | | — | | | 5,661 | | | — | | | — | | — | | | — | | | 5,661 | | | — |
Foreign currency translation adjustments and revaluations |
| — | |
| — |
| — | |
| — | | — | | | — | | — | | | — | | | — | |
| — | |
| (238) | | — | |
| — | |
| (238) | |
| — |
Net loss |
| — | |
| — |
| — | |
| — | | — | | | — | | — | | | — | | | — | |
| (21,028) | |
| — | | — | |
| — | |
| (21,028) | |
| — |
Balance, September 30, 2020 |
| — | | $ | — |
| — | | $ | — | | 25,688 | | $ | 26 |
| 120,417 | | $ | 120 | | $ | 200,722 | | $ | 21,696 | | $ | (4,003) | | — | | $ | — | | $ | 218,561 | | $ | — |
The accompanying notes are an integral part of these consolidated financial statements.
-8-
Vertex, Inc. |
For the nine months ended September 30, 2019 and 2020 (unaudited) |
(Amounts in thousands) |
| | | | | | |
| | Nine Months Ended | ||||
| | September 30, | ||||
|
| 2020 |
| 2019 | ||
| | (unaudited) | ||||
Cash flows from operating activities: |
| |
|
| |
|
Net (loss) income | | $ | (79,167) | | $ | 26,347 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |
|
| |
|
|
Depreciation and amortization | |
| 23,586 | |
| 18,152 |
Provision for subscription cancellations and non-renewals | |
| 52 | |
| (27) |
Amortization of deferred financing costs | |
| 356 | |
| 199 |
Write-off of deferred financing costs | | | 1,351 | | | — |
Stock-based compensation expense | |
| 140,890 | |
| 3,930 |
Deferred income taxes | | | (32,004) | | | — |
Redemption of Converted SARs | | | (22,889) | | | — |
Other | |
| 86 | |
| 51 |
Changes in operating assets and liabilities: | |
|
| |
|
|
Accounts receivable | |
| 4,143 | |
| 3,010 |
Advances to stockholders | |
| 281 | |
| 115 |
Prepaid expenses and other current assets | |
| (4,613) | |
| (1,379) |
Deferred commissions | |
| 824 | |
| (253) |
Accounts payable | |
| 1,193 | |
| 128 |
Accrued expenses | |
| 1,382 | |
| (1,767) |
Accrued and deferred compensation | |
| (5,399) | |
| (4,197) |
Deferred revenue | |
| (8,251) | |
| 1,053 |
Other | |
| (1,777) | |
| 437 |
Net cash provided by operating activities | |
| 20,044 | |
| 45,799 |
Cash flows from investing activities: | |
|
| |
|
|
Acquisition of business, net of cash acquired | |
| (12,318) | |
| — |
Property and equipment additions | |
| (14,982) | |
| (13,315) |
Capitalized software additions | |
| (9,246) | |
| (12,345) |
Net cash used in investing activities | |
| (36,546) | |
| (25,660) |
Cash flows from financing activities: | |
|
| |
|
|
Net increase in customer funds obligations | |
| 1,158 | |
| 1,223 |
Proceeds from line of credit | |
| 12,500 | |
| — |
Principal payments on line of credit | | | (12,500) | | | — |
Proceeds from long-term debt | |
| 175,000 | |
| — |
Principal payments on long-term debt | |
| (226,029) | |
| (4,339) |
Payments for deferred financing costs, net | |
| (2,436) | |
| — |
Proceeds from issuance of shares in connection with Offering | | | 423,024 | | | — |
Payments for offering costs | | | (6,222) | | | — |
Payments for taxes on exercised options | | | (11,999) | | | (184) |
Proceeds from exercise of stock options | |
| 6,023 | |
| 68 |
Distributions to stockholders | |
| (146,084) | |
| (22,252) |
Net cash provided by (used in) financing activities | |
| 212,435 | |
| (25,484) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | |
| (412) | |
| (176) |
Net increase (decrease) in cash, cash equivalents and restricted cash | | | 195,521 | | | (5,521) |
Cash, cash equivalents and restricted cash, beginning of period | |
| 83,495 | |
| 59,174 |
Cash, cash equivalents and restricted cash, end of period | | $ | 279,016 | | $ | 53,653 |
Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets, end of period: | |
|
| |
|
|
Cash and cash equivalents | | $ | 270,271 | | $ | 49,094 |
Restricted cash—funds held for customers | |
| 8,745 |