Financial Analysis

3. ACQUISITIONS ecosio GmbH On August 30, 2024 (the Acquisition Date), the Company purchased 100% of the share interests in ecosio, a limited liability company incorporated under the laws of Austria and a provider of electronic data interchange (EDI) and e-invoicing services. The acquisition was completed with the goal of integrating ecosios cloud-based, scalable global network with the Companys indirect tax solutions to enable customers to facilitate the creation, exchange, and clearance of jurisdictionally compliant e-invoices and seamlessly reconcile these invoices with their periodic filing requirements. Ecosios operations and offerings were integrated into the Companys one operating segment. The acquisition was accounted for as a business combination. Upon its acquisition, ecosio became a wholly owned subsidiary of the Company, and its operations have been included in the Companys consolidated financial statements commencing on the Acquisition Date. Total Purchase Consideration Total purchase consideration for the ecosio acquisition was $169,041, net of $788 cash acquired, which was comprised of the following: August 30, 2024 Upfront cash consideration $ 64,829 Cash and Stock Earn-outs, at fair value 105,000 Total $ 169,829 The initial cash consideration was $65,000, adjusted for certain closing adjustments and transaction costs paid on behalf of ecosio. The cash consideration was paid with existing cash on hand. The contingent consideration liabilities included in the c …

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14. COMMITMENTS AND CONTINGENCIES In January 2022, the Company filed a complaint against a competitor alleging claims of unfair competition, intentional interference with contractual relations, and trade secret misappropriation. The outcome of the case is subject to a number of uncertainties; therefore, the Company has not recognized any potential impact to the consolidated financial statements related to the outcome of the case. During the year ended December 31, 2025, the Company recognized $10,283, for legal expenses associated with the case within the other operating expense, net line of the consolidated statements of income (loss). No such legal expenses were recorded during the years ended December 31, 2024 or 2023. The Company may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Companys business. The Company is not aware of any such legal proceedings or claims that management believes will have a material adverse effect on its business, financial condition, or operating results. Purchase Obligations In the ordinary course of business, the Company enters into non-cancellable agreements with third-party providers, primarily for IT contractor services, subscriptions, and the use of cloud services. Future minimum payments as of December 31, 2025 are summarized in t …

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10. DEBT Credit Agreement On March 31, 2020, the Company entered into a credit agreement (the Previous Credit Agreement) with a bank consisting of a $175,000 term loan (the Previous Term Loan) and a $100,000 committed line of credit (the Previous Line of Credit). On March 8, 2022, the Company entered into the Second Amendment to Credit Agreement (the Second Amendment), with a banking syndicate, which amended the Previous Credit Agreement, providing for, among other modifications, (i) a new term loan in the aggregate amount of $50,000 (the Term Loan); (ii) an extension of the maturity date of the revolving facility (the Line of Credit) from March 2025 to March 2027; (iii) an increase in the Line of Credit commitment from $100,000 to $200,000; (iv) the Companys option to select an applicable interest rate at either the bank base rate plus an applicable margin (the New Base Rate Option) or Secured Overnight Financing Rate (SOFR) plus an applicable margin (the SOFR Option); (v) modifications to the financial covenant performance levels which determine applicable margins; and (vi) modifications to certain covenants and events of default. Net proceeds from the Term Loan were used to fund ongoing working capital, capital expenditures, permitted distributions, permitted acquisitions, and general corporate purposes of the Company and its subsidiaries. The Company paid $983 in financing costs in connection with the Second Amendment during 2022, which are amortizing over the remaining t …

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For the year ended December 31, 2025 2024 2023 Software subscriptions: Software licenses $ 286,711 $ 291,081 $ 266,213 Cloud subscriptions 352,943 276,043 214,617 Software subscriptions 639,654 567,124 480,830 Services 108,790 99,652 91,557 Total revenues $ 748,444 $ 666,776 $ 572,387 …

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5. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table summarizes the Companys fair value for its financial assets and liabilities measured at fair value on a recurring basis: Fair Value Measurements Using As of December 31, 2025 Fair Value Prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Money Market Funds $ 266,892 $ 266,892 $ $ ecosio Cash Earn-outs 86,600 86,600 ecosio Stock Earn-outs 18,900 18,900 Long-Term Investment (See Note 4) 15,000 15,000 Fair Value Measurements Using As of December 31, 2024 Fair Value Prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Money Market Funds $ 276,374 $ 276,374 $ $ Commercial Paper 4,920 4,920 Corporate Bonds 250 250 U.S. Treasury Securities 5,983 5,983 ecosio Cash Earn-outs 74,400 74,400 ecosio Stock Earn-outs 48,100 48,100 The Company has investments in Money Market Funds, which are included in cash and cash equivalents on the consolidated balance sheets. Fair value inputs for these investments are considered Level 1 measurements within the Fair Value Hierarchy since Money Market Fund fair values are known and observable through daily published floating net asset values. Securities classified as available-for-sale are reported at fair value using Level 2 inputs. For …

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16. INCOME TAXES The components of net income (loss) before income taxes, by geography, are as follows: For the year ended December 31, 2025 2024 2023 U.S. $ 30,742 $ 9,174 $ (3,126) Foreign (23,163) (7,265) (18,548) Net income (loss) before income taxes $ 7,579 $ 1,909 $ (21,674) Income tax expense (benefit) consists of the following: For the year ended December 31, 2025 2024 2023 Current income taxes: Federal $ 3,416 $ 1,448 $ (279) State and local 2,712 855 1,568 Foreign 1,828 2,204 1,347 Total current 7,956 4,507 2,636 Deferred income taxes: Federal (1,740) 42,346 (9,224) State and local (359) 9,111 (1,552) Foreign (5,489) (1,326) (441) Total deferred (7,588) 50,131 (11,217) Income tax expense (benefit) $ 368 $ 54,638 $ (8,581) During the year ended December 31, 2025, the Company recognized a $70 income tax expense in accumulated other comprehensive loss relating to unrealized gains (losses) from foreign currency translation adjustments and revaluations, and available-for-sale securities, and in stockholder's equity related to increases in contributed capital. During the year ended December 31, 2024, the Company recognized a $37 income tax benefit in accumulated other comprehensive loss relating to unrealized gains (losses) from foreign currency translation adjustments and revaluations, and available-for-sale securities, and in stockholder's equity related to increases in contributed capital. The reconciliation of the effective tax rate to tax at the statutory rates for t …

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Recently Adopted Accounting Pronouncements Income Tax Disclosures In December 2023, the Financial Accounting Standards Board (the FASB) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . Entities will be required to disclose additional information in specified categories in the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes. The standard also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold and eliminates certain existing disclosures. In addition to new disclosures associated with the rate reconciliation, the standard requires information pertaining to taxes paid (net of refunds received) to be disaggregated for federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. The Company adopted the standard on a retrospective basis effective for its annual period ending December 31, 2025. The adoption of the standard only impacted disclosures. See Note 16 Income Taxes. Recently Issued Accounting Pronouncements Interim Reporting (Topic 270): Narrow-Scope Improvements In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The standard provides clarifications intended to improve the consistency and usability of interim disclosure requirement …

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13 . EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS The Company maintains a 401(k) plan that covers eligible employees. The Company matches up to 6% of eligible compensation during the period in which an eligible participant contributes to the plan. Matching 401(k) contributions were $14,713, $12,641, and $11,285 for the years ended December 31, 2025, 2024, and 2023, respectively. Stock-Based Award Plans The 2020 Incentive Award Plan (the 2020 Plan) provides the ability to grant cash and equity-based incentive awards to eligible employees, directors and service providers in order to attract, retain, and motivate those that make important contributions to the Company. The 2020 Plan provides for the award of stock options, RSAs, RSUs, PSUs, and other cash compensation. The ESPP provides eligible employees with rights during each six-month ESPP offering period to purchase shares of the Companys Class A common stock at the ESPP discount through payroll deductions. Amounts withheld or received from participants are included in accrued salaries and benefits in the consolidated balance sheets until such shares are purchased. Amounts withheld from participants for the offering periods ending May 31, 2026 and 2025 aggregated $573 and $496 as of December 31, 2025 and 2024, respectively. 2020 Plan Upon commencement of the 2020 Plan, an aggregate of 16,500 shares of the Companys Class A common stock were available for issuance. The number of shares available for issuance are increased …

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2. REVENUE RECOGNITION Disaggregation of revenue The table reflects revenue by major source for the following periods: For the year ended December 31, 2025 2024 2023 Software subscriptions: Software licenses $ 286,711 $ 291,081 $ 266,213 Cloud subscriptions 352,943 276,043 214,617 Software subscriptions 639,654 567,124 480,830 Services 108,790 99,652 91,557 Total revenues $ 748,444 $ 666,776 $ 572,387 Contract balances Timing of revenue recognition may differ from the timing of invoicing customers. A receivable is recorded in the consolidated balance sheets when customers are billed related to revenue to be collected and recognized for subscription agreements as there is an unconditional right to invoice and receive payment in the future related to these subscriptions. A receivable and related revenue may also be recorded in advance of billings to the extent services have been performed and the Company has a right under the contract to bill and collect for such performance. Subscription-based customers are generally invoiced annually at the beginning of each annual subscription period. The Companys payment terms typically range from 30-60 days. Accounts receivable is presented net of an allowance for potentially uncollectible accounts and estimated cancellations of software license and cloud-based subscriptions (the allowance) of $11,466 and $16,838 at December 31, 2025 and 2024, respectively. The allowance is adjusted for expected credit losses based on managements assessmen …

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15. SEGMENT DISCLOSURES The Company operates its business as one operating segment. Operating segments are defined as components of an enterprise in which separate financial information is evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and assess performance. The Companys CODM, the Chief Executive Officer, reviews financial information regularly at the consolidated level. Net income (loss) and adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA), a non-GAAP measure, are both used as metrics to evaluate performance of the business in deciding whether to reinvest profits into software development, acquisitions or into other areas of the Company. The Company believes that Adjusted EBITDA is a useful supplemental measure to evaluate overall operating performance as it measures business performance by focusing on cash related results and it is an important metric to lenders under the Companys Credit Agreement. The most directly comparable GAAP measure to Adjusted EBITDA is net income (loss). The CODM monitors consolidated forecasted versus actual net income (loss) and Adjusted EBITDA results for the purpose of determining the general health of the Company and assessing the performance of the Company as compared to managements expectations. The following significant expense categories and measures of segment income (loss) are regularly reported to the CODM for the Companys single segment: …

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Vertex, Inc. (Vertex) and its consolidated subsidiaries (collectively, the Company) operate as solutions providers of state, local and value added tax calculation, compliance, and analytics, offering software products that are sold through software license and software as a service (cloud) subscriptions. The Company also provides implementation and training services in connection with its software license and cloud subscriptions, transaction tax returns outsourcing, and other tax-related services. The Company sells to customers located throughout the United States of America (U.S.) and internationally. Basis of Consolidation The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) and include the accounts of the Company. All intercompany transactions have been eliminated in consolidation. On August 30, 2024, the Company completed its acquisition of ecosio GmbH (ecosio). Upon its acquisition, ecosio became a wholly owned subsidiary of the Company, and its operations have been included in the Companys consolidated financial statements commencing on the acquisition date. Prior to June 5, 2024, the Company owned an 80% controlling equity interest in Systax Sistemas Fiscais LTD (Systax), a provider of Brazilian transaction tax content and software. Systax was determined to be a variable interest entity, and the accounts were included in the …

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11. STOCKHOLDERS EQUITY Common Stock During 2025, the Company issued 1,252 shares of Class A common stock related to the exercise of options, net of 18 shares returned to the Company in lieu of payment of the exercise price and taxes due on these exercises. The Company issued 1,061 shares of Class A common stock in 2025 in connection with the vesting of RSUs, net of 651 shares returned to the Company in lieu of payment of taxes due on the vesting of these awards. The Company issued 35 shares of Class A common stock in 2025 in connection with the vesting of PSUs, net of 36 shares returned to the Company in lieu of payment of taxes due on the vesting of these awards. The Company issued 34 shares of Class A common stock in 2025 in connection with the vesting of RSAs. The Company also issued 203 shares in connection with the ESPP Plan in 2025. During 2025, stockholders exchanged 4,325 shares of Class B common stock for an equivalent number of shares of Class A common stock. During 2024, the Company issued 2,455 shares of Class A common stock related to the exercise of options, net of 267 shares returned to the Company in lieu of payment of the exercise price and taxes due on these exercises. The Company issued 846 shares of Class A common stock in 2024 in connection with the vesting of RSUs, net of 499 shares returned to the Company in lieu of payment of taxes due on the vesting of these awards. The Company issued 84 shares of Class A common stock in 2024 in connection with the v …

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