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United States securities and exchange commission logo
May 26, 2020
Bryan Rowland
General Counsel
Vertex, Inc.
2301 Renaissance Blvd.
King of Prussia, PA 19406
Re: Vertex, Inc.
Amendment No. 1 to
Draft Registration
Statement on Form S-1
Submitted May 13,
2020
File No. 377-03104
Dear Mr. Rowland:
We have reviewed your amended draft registration statement and
have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments. Unless otherwise noted, where prior comments are referred to
they refer to our letter
dated April 24, 2020.
Amendment No. 1 to Draft Registration Statement on Form S-1
Summary Consolidated Financial and Operating Information
Non-GAAP Financial Data (unaudited), page 12
1. We note your response
to comment 1 and the related revised disclosure. However, we
cannot locate the
relevant revised disclosures on pages 12 and 13 that present the
comparable GAAP
measures for Adjusted EBITDA margin and free cash flow margin as
you described. Please
advise or revise. In addition, on page 54, please also revise to
include all three major
categories of the statements of cash flows with your presentation of
free cash flow.
Bryan Rowland
FirstName LastNameBryan Rowland
Vertex, Inc.
Comapany NameVertex, Inc.
May 26, 2020
Page 2
May 26, 2020 Page 2
FirstName LastName
2. We note your response to comment 2 and the related revised
disclosures. Please address
the following:
You indicate on page 13 that free cash flow and free cash flow
margin are important
measures of liquidity because you believe that they provide
useful information in
understanding and evaluating our operating results on a
period-over-period basis
without accounting for the impact of certain expenses that do not
directly correlate to
your operating performance and that can vary significantly from
period-to-period.
Please note that understanding and evaluating your operating
results on a period-
over-period basis is not a valid reason to explain why free cash
flow and free cash
flow margin are liquidity measures. Please explain and revise
your disclosure
accordingly.
It does not appear that the revised disclosure of the explanation of
the usefulness of
free cash flow and free cash flow margin on page 54 matches the
explanation of the
usefulness presented on page 13, as indicated in your response.
Consider revising the
explanation on page 13 to correspond to the disclosure on page
54.
Use of Proceeds, page 40
3. You disclose on page F-20 that you will be using the new $175 million
term loan for a
distribution to your shareholders after repaying $61.7 million
outstanding under the prior
credit agreement. You disclose on pages 7 and 40 that you will be
using a portion of the
net proceeds from the offering to repay all outstanding indebtedness
under your new credit
agreement and to pay related fees and expenses. Please revise the
discussion of your use
of proceeds to disclose that the majority of the new credit agreement
was used to pay a
distribution to your shareholders, quantifying the amount of the
distribution paid to your
officers, directors and affiliates. If appropriate, provide Regulation
S-K Item 404
disclosure of this distribution under Certain Relationships and
Related Party Transactions.
Capitalization, page 42
4. In the disclosure following the table, you indicate that the
information presented above
includes certain assumptions. As previously requested in prior comment
3, please clarify
which information in the table gives effect to those assumptions.
Specifically, revise to
indicate if the actual, as adjusted, or pro forma as adjusted
information assumes the
termination of your status as an S Corporation.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Critical Accounting Policies and Estimates
Stock-Based Compensation, page 68
5. We note your revised disclosure in response to prior comment 8
indicating that the effect
of the difference between the fair value-based measure of the SARs and
the intrinsic value
of the SARs could be material. Please explain to us why the fair
value-based measure of
the SARs is not determinable at this time for purposes of estimating
the effect of the
Bryan Rowland
Vertex, Inc.
May 26, 2020
Page 3
change in accounting policy. Specify the inputs to the fair value
measurement that are
indeterminable. In this regard, it would appear that a reasonable
estimate of the fair value
of the SARs could be made as of the most recent reporting date
considering the fair value
of your non-voting common stock is required in assessing the intrinsic
value of your
SARs for purposes of the recognition of stock-based compensation.
Consider providing
an estimate of the impact of the change in accounting policy as if the
change had occurred
as of the most recent reporting date.
Consolidated Balance Sheets, page F-3
6. We note from your disclosure on page F-29 that net proceeds from the New
Term Loan
will be used, in part, for a distribution to the shareholders required to
be made no later
than 90 days after the closing of the New Credit Agreement. In addition,
we note that a
payment of a dividend to your existing stockholders prior to the closing
of this offering
will be reflected in your capitalization on an as adjusted basis and in
pro forma net
tangible book value for purposes of computing dilution. Please revise to
present a pro
forma balance sheet reflecting the accruals for these planned
distributions to owners, but
without giving effect to any offering proceeds, alongside your historical
balance sheet.
Refer to SAB Topic 1.B.3.
Notes to Consolidated Financial Statements
Unaudited Pro Forma Earnings Per Share, page F-19
7. We note your response to comment 14. Your disclosure still states that
pro forma basic
and diluted income per share will give effect to the number of shares of
common stock to
be issued in the initial public offering described in the registration
statement. Please
revise such disclosure accordingly.
You may contact Becky Chow, Staff Accountant, at (202) 551-6524 or
Melissa Walsh,
Staff Accountant, at (202) 551-3224 if you have questions regarding comments on
the financial
statements and related matters. Please contact Michael C. Foland,
Attorney-Advisor, at (202)
551-6711 or Kathleen Krebs, Special Counsel, at (202) 551-3350 with any other
questions.
Sincerely,
FirstName LastNameBryan Rowland
Division of
Corporation Finance
Comapany NameVertex, Inc.
Office of
Technology
May 26, 2020 Page 3
cc: Joel Trotter
FirstName LastName