Summary
Vertex posted double-digit revenue growth in the first quarter of 2021. Revenue rose 10.1% to $98.2 million. Gross profit increased 23.1% to $61.3 million. Gross margin climbed to 62.4%, up 6.6 percentage points from the prior-year quarter. Operating income swung to a profit of $2.1 million from a loss in the prior-year quarter, an improvement of 107.6%. Operating margin was 2.2%, up 33.8 percentage points. Net income was $2.3 million, up 107.9% and also swung to a profit. Deferred revenue was $218.1 million, up 8.3%.
Cash flow was still negative. Operating cash flow was negative $2.96 million, up 53.8% from the prior-year quarter. Capital expenditures were $6.2 million, up 10.0%. Free cash flow was negative $11.4 million, an increase of $4.4 million from negative $15.8 million. On a non-GAAP basis, operating income was $15.4 million, up 23.6%. Non-GAAP net income was $11.0 million, compared with $11.6 million. Adjusted EBITDA was $18.2 million, up 18.9%, and Adjusted EBITDA margin was 18.5%, up 140 basis points. Non-GAAP diluted EPS was $0.07, compared with $0.09.
Operational metrics were mixed. Annual recurring revenue was $320.1 million, up 12.6% year-over-year. The increase included $14.7 million from existing customers and $21.2 million from new customers. Net revenue retention was 105%, down from 106% in the fourth quarter of 2020 and 109% in the prior-year quarter, a 400 basis point decline. Cloud-based subscriptions accounted for 32.3% of software subscription revenue, up from 25.1%, and on-premise made up 67.7%. Vertex acquired Taxamo on May 12, 2021 for approximately $200 million in cash. It also acquired Tellutax assets on January 25, 2021. The company announced a partnership with BigCommerce and introduced an accelerator for Oracle Fusion Cloud Enterprise Resource Planning. It hired Yvette Burton as Chief People Innovation Officer.
Guidance points to lower Adjusted EBITDA as investments accelerate. For the second quarter of 2021, Vertex expects revenue of $99.0 million to $100.0 million, growth of 8.5% to 9.6% from the second quarter of 2020, and Adjusted EBITDA of $15.5 million to $16.5 million, a decrease of $6.0 million to $5.0 million from the second quarter of 2020. The Taxamo acquisition is included and adds a contribution of $0.5 million to revenues and reduces Adjusted EBITDA by $0.5 million. For full-year 2021, revenue is guided to $410 million to $414 million, growth of 9.4% to 10.5% from full-year 2020, and Adjusted EBITDA to $66 million to $70 million, a decrease of $12.4 million to $8.4 million from full-year 2020 due to growth investments. Full-year guidance reflects Taxamo for the remainder of the year, which includes a contribution of $9.0 million to revenues and a $2.0 million decrease to Adjusted EBITDA, mostly integration costs. Management expects Taxamo to have a more significant impact on 2022 revenues because of timing and marketplace facilitator VAT regulations that are effective in the United Kingdom and scheduled for the European Union in July 2021.
Risks remain tied to the pandemic and execution. COVID-19 could continue to create economic uncertainty, delay deal signings, and slow collections in 2021. Elongated declines in customers' revenues could limit growth from existing customers. Significant increases in non-renewals or concessions would hurt revenue and cash flow. Vertex also faces risks in integrating Taxamo and other acquisitions, attracting new customers, sustaining profitability, managing growth, and maintaining strategic relationships. Increased public company costs and travel restrictions are additional pressures. The company's outlook reflects a deliberate step-up in spending, so the trade-off between growth and margin will be a key focus in coming quarters.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $98.2M | $99.5M | -1.3% | — | — |
| Gross profit | $61.3M | $63.3M | -3.2% | — | — |
| Gross margin | 62.4% | 63.6% | -1.2 pp | — | — |
| Research & development | $11.5M | $11.1M | +2.8% | — | — |
| Sales & marketing | $20.1M | $21.1M | -4.6% | — | — |
| General & administrative | $24.9M | $25.6M | -3.0% | — | — |
| Total operating expenses | $59.2M | $60.8M | -2.8% | — | — |
| Operating income (loss) | $2.1M | $2.5M | -14.0% | — | — |
| Operating margin | 2.2% | 2.5% | -0.3 pp | — | — |
| Net income (loss) | $2.3M | $230.0K | +894.8% | — | — |
| Net margin | 2.3% | 0.2% | +2.1 pp | — | — |
| Net retention rate | 109.0% | 106.0% | +3.0 pp | — | — |
Risks
Net Revenue Retention Rate declined 400 basis points from 109% for the three months ended March 31, 2020 to 105% for the three months ended March 31, 2021. Management attributed the decline primarily to a reduction in sales growth to existing customers from delays in signing deals as prospects shifted to working remotely and economic uncertainty tied to COVID-19.
Vertex prices solutions based on a customer's revenue base, so elongated declines in existing customers' revenues may limit growth in existing customer revenues. Significant increases in non-renewals or concessions to renewal customers would have a material impact on revenues and cash flows.
COVID-19 related economic uncertainty may continue to delay new customer billings beyond 2020 and negatively affect efforts to maintain or expand revenues from existing customers as they evaluate long-term projects and budget constraints. The company also may see delays in cash collections in 2021 as the pandemic continues.
On May 12, 2021, Vertex acquired Taxamo for approximately $200.0 million in cash on hand, using a significant portion of its cash resources to support ecommerce and marketplace growth strategies. The acquisition introduces integration and execution risk as the company seeks to realize the expected benefits.
Effective July 27, 2020, Vertex converted to a C-Corporation and now is subject to U.S. federal and state corporate income taxes, which has increased its provision for income taxes. The company also faces limitations on deductions for certain employee compensation under Internal Revenue Code Section 162(m).
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA Margin
Free Cash Flow Margin
Free Cash Flow
Non-GAAP operating income
Annual Recurring Revenue (ARR)
Non-GAAP Gross Margin
Summary, forecast, risks and KPIs are extracted from Vertex, Inc.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.