Summary
Vertex reported first quarter fiscal 2022 revenue of $114.98 million, up 17.0% from $98.24 million in the prior-year quarter. Software subscription revenue reached $97.1 million, up 16.6% year over year, and cloud revenue of $38.3 million climbed 42.1%. Cloud subscriptions supplied 39% of software subscription revenue in the quarter, against 32% a year earlier. Annual Recurring Revenue was $380.6 million, up 18.9%, compared with 17.0% growth in the fourth quarter of 2021. Net Revenue Retention rose to 110%, from 105% a year earlier and 108% in the fourth quarter. The customer count stood at 4,242, up from 4,021. ARR growth broke into $30.7 million from existing customers and $29.8 million from new customers.
Profitability moved the other way. Gross profit rose 14.4% to $70.12 million, yet gross margin slipped to 61.0% from 62.4%. Operating income fell 78.2% to $0.47 million, and operating margin narrowed to 0.4% from 2.2%. Net income swung to a loss of $0.33 million from $2.29 million of income a year earlier. Expense growth explains most of that. Selling and marketing rose 36.2% to $27.5 million. General and administrative rose 15.7% to $28.8 million. Research and development fell 15.9% to $9.6 million because more development work was capitalized. Cost of software subscription revenue rose 28.6% and reached 33.9% of subscription revenue, up from 30.7%. Non-GAAP operating income was $16.2 million, non-GAAP net income was $12.1 million, or $0.08 per diluted share, and Adjusted EBITDA was $19.1 million. Adjusted EBITDA margin fell to 16.6% from 18.5%.
Cash generation was mixed. Operating cash flow was $2.60 million, up from a use of $2.96 million in the prior-year quarter. Capital expenditures were $13.87 million, up from $6.20 million. Free cash flow was negative $14.19 million, compared with negative $11.38 million a year earlier. Deferred revenue was $245.72 million, up 12.6% from $218.13 million. The company held $97.3 million of cash and cash equivalents and $24.5 million of retained earnings at March 31, 2022. In March it amended its credit agreement, turning a $100 million facility into a $250 million facility with a $50 million term loan and a $200 million line of credit. Bank debt outstanding was $50.0 million, and the line was undrawn.
Guidance points to slower near-term growth. For the second quarter of 2022, Vertex expects revenue of $116.0 million to $117.5 million, growth of 11% to 12% from the second quarter of 2021, and Adjusted EBITDA of $16.0 million to $18.0 million. For the full year 2022, it expects revenue of $479 million to $483 million, growth of 13% to 14%, cloud revenue growth of 33%, and Adjusted EBITDA of $72 million to $75 million, which is $3 million to $6 million below the full year 2021. The company ties that decline to ongoing investment in research and development and in selling and marketing. Named risks include the COVID-19 pandemic, the ability to attract new customers cost effectively, renewal and upgrade rates, the ability to sustain revenue and maintain profitability, integration of acquired businesses, and reliance on third-party strategic relationships. Vertex states it cannot reconcile forward-looking Adjusted EBITDA to net income without unreasonable effort.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $115.0M | $111.7M | +3.0% | $98.2M | +17.0% |
| Gross profit | $70.1M | $68.0M | +3.1% | $61.3M | +14.4% |
| Gross margin | 61.0% | 60.9% | +0.1 pp | 62.4% | -1.4 pp |
| Research & development | $9.6M | $10.8M | -10.4% | $11.5M | -15.9% |
| Sales & marketing | $27.5M | $28.3M | -3.1% | $20.1M | +36.2% |
| General & administrative | $28.8M | $26.1M | +10.4% | $24.9M | +15.7% |
| Total operating expenses | $69.7M | $68.0M | +2.4% | $59.2M | +17.7% |
| Operating income (loss) | $468.0K | -$14.0K | +3442.9% | $2.1M | -78.2% |
| Operating margin | 0.4% | -0.0% | +0.4 pp | 2.2% | -1.8 pp |
| Net income (loss) | -$334.0K | -$627.0K | +46.7% | $2.3M | -114.6% |
| Net margin | -0.3% | -0.6% | +0.3 pp | 2.3% | -2.6 pp |
| Net retention rate | 110.0% | 108.0% | +2.0 pp | 109.0% | +1.0 pp |
Risks
The filing identifies a new risk related to the implementation of a new ERP system spanning multiple business areas; issues, problems, or errors with the ERP implementation or operation could impact operations or timely and accurate financial reporting. It notes material weaknesses or significant deficiencies may be identified and could affect effectiveness of internal control over financial reporting.
MD&A states COVID-19 had minimal impact on Q1 2022 revenues and results, but ongoing uncertainty, possible recession, high inflation, and financial market instability could adversely impact customer spending on technology, billings to new customers, existing customer revenue expansion, and customers' ability to pay.
Because Vertex prices solutions principally based on customers' revenue base, elongated declines in existing customers' revenues may limit growth in existing customer revenues. The MD&A notes significant increases in non-renewals or concessions to renewal customers would have a material impact on revenues and cash flows.
For Q1 2022, operating income decreased 78.2% to $0.5 million and net income decreased 114.6%, swinging to a net loss of $(0.3) million. Gross margin declined 1.4 pp to 61.0%, operating margin declined 1.8 pp to 0.4%, and Adjusted EBITDA margin decreased to 16.6% from 18.5%, while selling and marketing expense increased 36.2% and capital expenditures increased 123.9%.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA Margin
Free Cash Flow Margin
Free Cash Flow
Total customers
Non-GAAP operating income
Annual Recurring Revenue (ARR)
Net Revenue Retention (NRR)
Non-GAAP Gross Margin
Average Annual Revenue Per Customer (AARPC)
Summary, forecast, risks and KPIs are extracted from Vertex, Inc.'s SEC filings for Q1 FY2022 (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.