Summary
Vertex posted second quarter 2021 revenue of $104.9 million, up 15.0% year over year. Cloud revenue was $32.1 million, up 59.5%. Gross profit rose 36.4% to $67.6 million, and gross margin was 64.4%, up 10.1 percentage points from the prior-year quarter. The company reported an operating loss of $1.5 million, a sharp improvement from the prior-year quarter, and operating margin was -1.4%, up 30.4 percentage points. Net income was $0.8 million, a swing to profit from the prior-year quarter. On a non-GAAP basis, operating income was $16.3 million, compared with $19.0 million, and adjusted EBITDA was $19.2 million, compared with $21.5 million. Adjusted EBITDA margin was 18.3%, compared with 23.6%.
The mix kept shifting toward recurring and cloud offerings. Annual recurring revenue was $336.2 million, up 14.1%, and ARR per customer was $80,500. Net revenue retention was 106% in the second quarter of 2021, compared with 105% in the first quarter of 2021. At June 30, 2021, NRR was 106%, down from 108% a year earlier. Vertex ended the quarter with over 4,175 customers. The May 12 acquisition of Taxamo added $3.9 million of ARR, 135 customers, and AARPC of approximately $28,900. Excluding Taxamo, AARPC was approximately $82,300. The company introduced Taxamo Assure and expanded integrations with Mirakl, Coupa, and Alfa Start.
Cash generation remained solid. Operating cash flow was $29.4 million in the quarter, up 8.3% year over year. For the first six months, operating cash flow was $26.5 million, up 27.5%. Capital expenditures were $9.7 million in the quarter, up 96.5%, and $15.9 million year to date, up 50.4%. Deferred revenue was $222.6 million, up 12.2% from the prior-year quarter. First half revenue was $203.2 million, up 12.6%, and first half net income was $3.1 million, a swing to profit from the prior-year period. Free cash flow, a non-GAAP measure, was $16.8 million in the quarter, compared with $18.7 million.
Guidance points to slower growth and lower adjusted EBITDA. For the third quarter of 2021, Vertex expects revenue growth of 9.9% to 12.1% from the third quarter of 2020, and adjusted EBITDA of $15 million to $17 million, a decrease of $(5.5) million to $(7.5) million from the third quarter of 2020. For the full-year 2021, the company guides to revenue growth of 10.5% to 11.3%, cloud revenue growth in excess of 40%, and adjusted EBITDA of $68 million to $72 million, a decrease of $6.4 million to $10.4 million from full-year 2020. The full-year adjusted EBITDA decline reflects additional spend in research and development and selling and marketing.
The main risks remain tied to the pandemic and execution. Vertex said COVID-19 had minimal impact on revenue in 2020 and the first six months of 2021, but it warns that the uncertainty could delay billings to new customers and pressure expansion from existing customers. The company has seen some delays in signing deals as prospects adjust to remote work and face economic uncertainty. It also flags possible delays in collections in 2021, although it has not recorded additional credit losses. Significant increases in non-renewals or concessions to renewal customers would hurt revenue and cash flows. Other risks include integration of acquisitions, increased costs as a public company, and limitations on deductions under Internal Revenue Code Section 162(m). The Taxamo deal used $190.2 million of cash at closing and has a preliminary purchase price of $200.7 million, which increases integration and balance sheet risk.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $104.9M | $98.2M | +6.8% | $91.3M | +15.0% |
| Gross profit | $67.6M | $61.3M | +10.2% | $49.5M | +36.4% |
| Gross margin | 64.4% | 62.4% | +2.0 pp | 54.3% | +10.1 pp |
| Research & development | $11.9M | $11.5M | +4.1% | $13.6M | -12.4% |
| Sales & marketing | $24.9M | $20.1M | +23.4% | $24.5M | +1.3% |
| General & administrative | $24.9M | $24.9M | +0.1% | $37.8M | -34.1% |
| Total operating expenses | $69.0M | $59.2M | +16.7% | $78.5M | -12.1% |
| Operating income (loss) | -$1.5M | $2.1M | -168.0% | -$29.0M | +95.0% |
| Operating margin | -1.4% | 2.2% | -3.6 pp | -31.8% | +30.4 pp |
| Net income (loss) | $808.0K | $2.3M | -64.7% | -$29.1M | +102.8% |
| Net margin | 0.8% | 2.3% | -1.6 pp | -31.9% | +32.6 pp |
| Net retention rate | 106.0% | 109.0% | -3.0 pp | — | — |
Risks
COVID-19 pandemic continues to create economic uncertainty; MD&A states some delays in signing deals occurred during 2020 and the six months ended June 30, 2021, and the company may see delays in collections in 2021 as the recent resurgence continues. It also notes elongated customer revenue declines could pressure existing customer revenue growth because pricing is tied to customer revenue bands.
Net Revenue Retention Rate declined 200 basis points to 106% at June 30, 2021 from 108% at June 30, 2020. MD&A attributes the decline primarily to reduced sales growth to existing customers because prospects shifted focus to working remotely and economic uncertainty from COVID-19 delayed deal signings.
The company acquired Taxamo for a preliminary purchase price of $200.7 million, including $190.2 million cash paid at closing. Q2 2021 other operating expense, net increased $4.4 million, or 4,252.4%, to $4.5 million, primarily due to $4.5 million in Taxamo transaction costs. Integration and purchase accounting could add volatility.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA Margin
Free Cash Flow Margin
Free Cash Flow
Total customers
Non-GAAP operating income
Non-GAAP Gross Margin
Net Revenue Retention
ARR
Cloud revenues
Summary, forecast, risks and KPIs are extracted from Vertex, Inc.'s SEC filings for Q2 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.