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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-39413

VERTEX, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware				23-2081753
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

2301 Renaissance Blvd King of Prussia, Pennsylvania				19406
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: (800) 355-3500

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
Class A Common Stock, Par Value $0.001 Per Share	VERX	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 30, 2025, the registrant had 77,372,323 shares of Class A common stock, $0.001 par value per share, and 82,155,641 shares of Class B common stock, $0.001 par value per share, outstanding.

Table of Contents

TABLE OF CONTENTS

		Page
	Part I - Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024	5
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (unaudited)	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	59
	Part II - Other Information	60
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
	Signatures	62

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made in this Quarterly Report on Form 10-Q that are not statements of historical fact, including statements about our beliefs and expectations and regarding future events or our future results of operations, financial condition, business, strategies, financial needs, the plans and objectives of management, and our stock repurchase program are forward-looking statements and should be evaluated as such. These statements often include words such as “anticipate,” “believe,” “expect,” “suggests,” “plans,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” and other similar expressions or the negatives of those terms. We base these forward-looking statements on our current expectations, plans, and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances at such time. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of future performance or results. The forward-looking statements are subject to and involve risks, uncertainties and assumptions, and you should not place undue reliance on these forward-looking statements. Although we believe that these forward-looking statements are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements. Important factors that may materially affect such forward-looking statements include, but are not limited to:

●

our ability to maintain and grow revenue from existing customers and new customers, and expand their usage of our solutions;

●

our ability to maintain and expand our strategic relationships with third parties;

●

our ability to adapt to technological change and successfully introduce new solutions or provide updates to existing solutions;

●

risks related to failures in information technology or infrastructure;

●

challenges in using and managing use of Artificial Intelligence (“AI”) in our business;

●

incorrect or improper implementation, integration or use of our solutions;

●

failure to attract and retain qualified technical and tax-content personnel;

●

competitive pressures from other tax software and service providers and challenges of convincing businesses using native enterprise resource planning functions to switch to our software;

●

our ability to accurately forecast our revenue and other future results of operations based on recent success;

●

our ability to offer specific software deployment methods based on changes to customers’ and partners’ software systems;

●

our ability to continue making significant investments in software development and equipment;

●

our ability to sustain and expand revenues, maintain profitability, and to effectively manage our anticipated growth;

●

our ability to successfully diversify our solutions by developing or introducing new solutions or acquiring and integrating additional businesses, products, services, or content;

●

our ability to successfully integrate acquired businesses and to realize the anticipated benefits of such acquisitions;

●

risks related to the fluctuations in our results of operations;

●

risks related to our expanding international operations;

●

our exposure to liability from errors, delays, fraud or system failures, which may not be covered by insurance;

●

our ability to adapt to organizational changes and effectively implement strategic initiatives;

Table of Contents

●

risks related to our determinations of customers’ transaction tax and tax payments;

●

risks related to changes in tax laws and regulations or their interpretation or enforcement;

●

our ability to manage cybersecurity and data privacy risks;

●

our involvement in material legal proceedings and audits;

●

risks related to undetected errors, bugs or defects in our software;

●

risks related to utilization of open-source software, business processes and information systems;

●

risks related to failures in information technology, infrastructure, and third-party service providers;

●

our ability to effectively protect, maintain, and enhance our brand;

●

changes in application, scope, interpretation or enforcement of laws and regulations;

●

global economic weakness and uncertainties, including the economic uncertainty created by the changing legal, regulatory, or taxation landscape in the United States, and disruption in the capital and credit markets;

●

business disruptions related to natural disasters, epidemic outbreaks, including a global endemic or pandemic, terrorist acts, political events, or other events outside of our control;

●

our ability to comply with anti-corruption, anti-bribery, and similar laws;

●

our ability to protect our intellectual property;

●

changes in interest rates, security ratings and market perceptions of the industry in which we operate, or our ability to obtain capital on commercially reasonable terms or at all;

●

our ability to maintain an effective system of disclosure controls and internal control over financial reporting, or ability to remediate any material weakness in our internal controls;

●

risks related to our Class A common stock and controlled company status;

●

risks related to our indebtedness and adherence to the covenants under our debt instruments;

●

the effects of the Capped Call Transactions (as defined in the notes to the financial statements) and the actions of the Option Counterparties (as defined in the notes to the financial statements) and/or their respective affiliates;

●

any statements of belief and any statements of assumptions underlying any of the foregoing; and

●

other factors beyond our control.

The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2025 (the “2024 Annual Report”). Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for us to identify all such risk factors, nor can we assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you should not place undue reliance on our forward-looking statements, and you should not rely on forward-looking statements as predictions of future events. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements. The forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date of this report. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Vertex, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

As of September 30, 2025 and December 31, 2024

(Amounts in thousands, except per share data)


	September 30,		December 31,
	2025		2024
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	313,506	$	296,051
Funds held for customers		25,287		30,015
Accounts receivable, net of allowance of $15,069 and $16,838, respectively		131,502		164,432
Prepaid expenses and other current assets		48,532		36,678
Investment securities available-for-sale, at fair value (amortized cost of $0 and $9,147, respectively)		—		9,157
Total current assets		518,827		536,333
Property and equipment, net of accumulated depreciation		202,655		177,559
Capitalized software, net of accumulated amortization		35,917		36,350
Goodwill and other intangible assets		396,997		363,021
Deferred commissions		28,812		27,480
Deferred income tax asset		22		19
Operating lease right-of-use assets		10,496		11,956
Long-term investment		15,000		—
Other assets		13,132		14,073
Total assets	$	1,221,858	$	1,166,791
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	35,374	$	36,215
Accrued expenses		39,788		35,169
Customer funds obligations		22,904		27,406
Accrued salaries and benefits		23,729		14,581
Accrued variable compensation		29,101		45,507
Deferred revenue, current		333,636		339,326
Current portion of operating lease liabilities		4,236		3,995
Current portion of finance lease liabilities		71		77
Purchase commitment and contingent consideration liabilities, current		27,100		35,100
Total current liabilities		515,939		537,376
Deferred revenue, net of current portion		5,407		4,840
Debt, net of current portion		336,913		335,220
Operating lease liabilities, net of current portion		10,093		12,585
Finance lease liabilities, net of current portion		61		10
Purchase commitment and contingent consideration liabilities, net of current portion		79,000		87,400
Deferred income tax liabilities		7,950		9,918
Deferred other liabilities		2,023		90
Total liabilities		957,386		987,439
Commitments and contingencies (Note 12)
Stockholders' equity:
Preferred shares, $0.001 par value, 30,000 shares authorized; no shares issued and outstanding		—		—
Class A voting common stock, $0.001 par value, 300,000 shares authorized; 77,315 and 70,670 shares issued and outstanding, respectively		77		71
Class B voting common stock, $0.001 par value, 150,000 shares authorized; 82,156 and 86,481 shares issued and outstanding, respectively		82		86
Additional paid in capital		304,177		278,389
Accumulated deficit		(39,101)		(53,315)
Accumulated other comprehensive loss		(763)		(45,879)
Total stockholders' equity		264,472		179,352
Total liabilities and stockholders' equity	$	1,221,858	$	1,166,791

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Vertex, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

For the three and nine months ended September 30, 2025 and 2024 (unaudited)

(Amounts in thousands, except per share data)


	Three months ended September 30,				Nine months ended September 30,
	2025		2024		2025		2024

	(unaudited)				(unaudited)
Revenues:
Software subscriptions	$	164,824	$	146,254	$	473,429	$	414,527
Services		27,288		24,181		80,304		73,793
Total revenues		192,112		170,435		553,733		488,320
Cost of revenues:
Software subscriptions		50,034		43,641		138,738		131,030
Services		20,762		16,270		59,485		48,286
Total cost of revenues		70,796		59,911		198,223		179,316
Gross profit		121,316		110,524		355,510		309,004
Operating expenses:
Research and development		19,929		15,621		61,397		47,080
Selling and marketing		47,385		42,111		143,994		123,143
General and administrative		44,609		41,499		133,029		112,915
Depreciation and amortization		6,372		5,214		18,439		15,432
Change in fair value of acquisition contingent earn-outs		(4,000)		—		(16,400)		—
Other operating expense (income), net		2,701		1,183		10,109		(442)
Total operating expenses		116,996		105,628		350,568		298,128
Income from operations		4,320		4,896		4,942		10,876
Interest income, net		(1,245)		(2,938)		(4,012)		(2,471)
Income before income taxes		5,565		7,834		8,954		13,347
Income tax expense (benefit)		1,520		613		(5,260)		(1,722)
Net income		4,045		7,221		14,214		15,069
Other comprehensive (income) loss:
Foreign currency translation adjustments, net of tax		(286)		(8,955)		(45,125)		(1,609)
Unrealized loss (gain) on investments, net of tax		—		(24)		9		(26)
Total other comprehensive income, net of tax		(286)		(8,979)		(45,116)		(1,635)
Total comprehensive income	$	4,331	$	16,200	$	59,330	$	16,704

Net income per share of Class A and Class B, basic	$	0.03	$	0.05	$	0.09	$	0.10
Net income per share of Class A and Class B, dilutive	$	0.02	$	0.04	$	0.09	$	0.09

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Vertex, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and nine months ended September 30, 2025 and 2024 (unaudited)

(Amounts in thousands)



									Retained		Accumulated
	Outstanding	Class A		Outstanding	Class B		Additional		Earnings		Other		Total
	Class A	Common		Class B	Common		Paid In		(Accumulated		Comprehensive		Stockholders'
	Shares	Stock		Shares	Stock		Capital		Deficit)		Loss		Equity
Balance, January 1, 2025	70,670	$	71	86,481	$	86	$	278,389	$	(53,315)	$	(45,879)	$	179,352
Exercise of stock options, net	374		—	—		—		1,165		—		—		1,165
Shares issued upon vesting of Restricted Stock Units, net	863		1	—		—		(25,035)		—		—		(25,034)
Stock-based compensation expense	—		—	—		—		18,780		—		—		18,780
Tax impact on capped call transactions	—		—	—		—		1		—		—		1
Foreign currency translation adjustments and revaluations, net of tax	—		—	—		—		—		—		15,105		15,105
Unrealized loss from available-for-sale investments, net of tax	—		—	—		—		—		—		(9)		(9)
Net income	—		—	—		—		—		11,130		—		11,130
Balance, March 31, 2025	71,907	$	72	86,481	$	86	$	273,300	$	(42,185)	$	(30,783)	$	200,490
Exercise of stock options, net	871		1	—		—		6,371		—		—		6,372
Shares issued upon vesting of Restricted Stock Units, net	52		—	—		—		(921)		—		—		(921)
Shares issued upon vesting of Restricted Stock Awards, net	34		—	—		—		—		—		—		—
Stock-based compensation expense	—		—	—		—		11,545		—		—		11,545
Shares issued under ESPP	53		—	—		—		1,782		—		—		1,782
Class B shares exchanged for Class A shares	4,325		4	(4,325)		(4)		—		—		—		—
Tax impact on capped call transactions	—		—	—		—		1		—		—		1
Foreign currency translation adjustments and revaluations, net of tax	—		—	—		—		—		—		29,734		29,734
Net loss	—		—	—		—		—		(961)		—		(961)
Balance, June 30, 2025	77,242	$	77	82,156	$	82	$	292,078	$	(43,146)	$	(1,049)	$	248,042
Exercise of stock options, net	7		—	—		—		19		—		—		19
Shares issued upon vesting of Restricted Stock Units, net	66		—	—		—		(1,073)		—		—		(1,073)
Stock-based compensation expense	—		—	—		—		13,152		—		—		13,152
Tax impact on capped calls	—		—	—		—		1		—		—		1
Foreign currency translation adjustments and revaluations, net of tax	—		—	—		—		—		—		286		286
Net income	—		—	—		—		—		4,045		—		4,045
Balance, September 30, 2025	77,315	$	77	82,156	$	82	$	304,177	$	(39,101)	$	(763)	$	264,472

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Vertex, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and nine months ended September 30, 2025 and 2024 (unaudited) (continued)

(Amounts in thousands)

									Retained		Accumulated
	Outstanding	Class A		Outstanding	Class B		Additional		Earnings		Other		Total
	Class A	Common		Class B	Common		Paid In		(Accumulated		Comprehensive		Stockholders'
	Shares	Stock		Shares	Stock		Capital		Deficit)		Loss		Equity
Balance, January 1, 2024	60,989	$	61	92,661	$	93	$	275,155	$	(586)	$	(21,742)	$	252,981
Exercise of stock options, net	653		—	—		—		(5,454)		—		—		(5,454)
Shares issued upon vesting of Restricted Stock Units, net	674		1	—		—		(10,899)		—		—		(10,898)
Stock-based compensation expense	—		—	—		—		14,845		—		—		14,845
Foreign currency translation adjustments and revaluations, net of tax	—		—	—		—		—		—		(4,011)		(4,011)
Unrealized loss from available-for-sale investments, net of tax	—		—	—		—		—		—		(17)		(17)
Net income	—		—	—		—		—		2,684		—		2,684
Balance, March 31, 2024	62,316	$	62	92,661	$	93	$	273,647	$	2,098	$	(25,770)	$	250,130
Exercise of stock options, net	194		—	—		—		1,734		—		—		1,734
Shares issued upon vesting of Restricted Stock Units, net	32		—	—		—		(432)		—		—		(432)
Shares issued upon vesting of Restricted Stock Awards, net	62		—	—		—		—		—		—		—
Stock-based compensation expense	—		—	—		—		9,924		—		—		9,924
Shares issued in connection with ESPP	61		—	—		—		1,443		—		—		1,443
Class B shares exchanged for Class A shares	2,500		3	(2,500)		(3)		—		—		—		—
Purchase of capped calls, net of tax	—		—	—		—		(31,517)		—		—		(31,517)
Foreign currency translation adjustments and revaluations, net of tax	—		—	—		—		—		—		(3,335)		(3,335)
Unrealized gain from available-for-sale investments, net of tax	—		—	—		—		—		—		19		19
Net income	—		—	—		—		—		5,164		—		5,164
Balance, June 30, 2024	65,165	$	65	90,161	$	90	$	254,799	$	7,262	$	(29,086)	$	233,130
Exercise of stock options, net	461		1	—		—		1,386		—		—		1,387
Shares issued upon vesting of Restricted Stock Units, net	74		—	—		—		(1,348)		—		—		(1,348)
Shares issued upon vesting of Restricted Stock Awards, net	22		—	—		—		(290)		—		—		(290)
Stock-based compensation expense	—		—	—		—		9,946		—		—		9,946
Tax impact on capped calls	—		—	—		—		1		—		—		1
Foreign currency translation adjustments and revaluations, net of tax	—		—	—		—		—		—		8,955		8,955
Unrealized gain from available-for-sale investments, net of tax	—		—	—		—		—		—		24		24
Net income	—		—	—		—		—		7,221		—		7,221
Balance, September 30, 2024	65,722	$	66	90,161	$	90	$	264,494	$	14,483	$	(20,107)	$	259,026

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Vertex, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 30, 2025 and 2024 (unaudited)

(Amounts in thousands)


	Nine months ended September 30,
	2025			2024

	(unaudited)
Cash flows from operating activities:
Net income	$	14,214	$	15,069
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		70,797		61,448
Amortization of cloud computing implementation costs		2,895		2,994
Provision for subscription cancellations and non-renewals		(498)		(470)
Amortization of deferred financing costs		2,041		1,345
Change in fair value of contingent consideration liabilities		(16,200)		(2,275)
Change in settlement value of deferred purchase commitment liability		—		423
Write-off of deferred financing costs		—		276
Stock-based compensation expense		46,249		36,459
Deferred income taxes		(3,029)		(8,615)
Non-cash operating lease costs		2,440		2,038
Other		(60)		(151)
Changes in operating assets and liabilities:
Accounts receivable		35,819		15,593
Prepaid expenses and other current assets		(14,489)		(10,245)
Deferred commissions		(1,332)		(1,302)
Accounts payable		(963)		4,535
Accrued expenses		4,362		(851)
Accrued and deferred compensation		(10,910)		3,032
Deferred revenue		(6,784)		9,411
Operating lease liabilities		(3,191)		(2,856)
Payments for purchase commitment and contingent consideration liabilities in excess of initial fair value		(200)		(4,367)
Other		2,114		2,197
Net cash provided by operating activities		123,275		123,688
Cash flows from investing activities:
Acquisition of businesses and assets, net of cash acquired		—		(71,755)
Long-term investment		(15,000)		—
Property and equipment additions		(69,342)		(47,520)
Capitalized software additions		(16,444)		(16,357)
Purchase of investment securities, available-for-sale		(2,398)		(12,246)
Proceeds from sales and maturities of investment securities, available-for-sale		11,607		14,610
Net cash used in investing activities		(91,577)		(133,268)
Cash flows from financing activities:
Net increase (decrease) in customer funds obligations		(4,502)		6,032
Proceeds from convertible senior notes		—		345,000
Principal payments on long-term debt		—		(46,875)
Payments on third-party debt		—		(3,904)
Payment for purchase of capped calls		—		(42,366)
Payments for deferred financing costs		—		(11,374)
Proceeds from purchases of stock under ESPP		1,782		1,443
Payments for taxes related to net share settlement of stock-based awards		(27,178)		(19,990)
Proceeds from exercise of stock options		7,706		4,689
Payments for purchase commitment and contingent consideration liabilities		—		(7,580)
Payments of finance lease liabilities		(50)		(70)
Net cash provided by (used in) financing activities		(22,242)		225,005
Effect of exchange rate changes on cash, cash equivalents and restricted cash		3,271		810
Net increase in cash, cash equivalents and restricted cash		12,727		216,235
Cash, cash equivalents and restricted cash, beginning of period		326,066		89,151
Cash, cash equivalents and restricted cash, end of period	$	338,793	$	305,386
Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets, end of period:
Cash and cash equivalents	$	313,506	$	278,979
Restricted cash—funds held for customers		25,287		26,407
Total cash, cash equivalents and restricted cash, end of period	$	338,793	$	305,386

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(Amounts in thousands, except per share data)

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 condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the 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 Company’s condensed 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 LTDA (“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 condensed consolidated financial statements. Vertex did not have full decision-making authority over Systax; however, Vertex was the entity that most significantly participated in the variability of the fair value of Systax’s net assets and was considered the entity most closely associated to Systax. As such, Vertex was deemed the primary beneficiary of Systax and consolidated Systax into its condensed consolidated financial statements. On June 5, 2024, Vertex acquired the remaining 20% equity interest in Systax, resulting in Systax becoming a wholly owned subsidiary of the Company, and is consolidated into the condensed consolidated financial statements.

Unaudited Interim Financial Information

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and include the accounts of the Company. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”) filed with the SEC on February 27, 2025. The condensed consolidated balance sheet as of December 31, 2024 has been derived from audited financial statements included in the 2024 Annual Report. The accompanying interim condensed consolidated balance sheet as of September 30, 2025, the interim condensed consolidated statements of comprehensive income and changes in stockholders’ equity for the three and nine months ended September 30, 2025 and 2024, and the interim condensed consolidated statements of cash flows for the nine months ended September 30, 2025 and 2024 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with that used to prepare the annual audited consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items necessary for the fair presentation of the condensed consolidated financial statements. The operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results expected for the full year ending December 31, 2025.

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

Use of Estimates

The preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues, and expenses during the reporting period. Significant estimates used in preparing these condensed consolidated financial statements include: (i) the estimated allowance for subscription cancellations; (ii) expected credit losses associated with the allowance for doubtful accounts; (iii) allowance for credit losses on available-for-sale debt securities; (iv) the reserve for self-insurance; (v) assumptions related to achievement of technological feasibility for software developed for sale; (vi) product life cycles; (vii) estimated useful lives and potential impairment of long-lived assets, intangible assets, and capitalized cloud computing arrangement software implementation costs; (viii) potential impairment of goodwill; (ix) determination of the fair value of tangible and intangible assets acquired, liabilities assumed, and consideration transferred in acquisitions; (x) amortization period of deferred commissions; (xi) Black-Scholes-Merton option pricing model (“Black-Scholes model”) input assumptions used to determine the fair value of certain stock-based compensation awards and Employee Stock Purchase Plan (“ESPP”) purchase rights; (xii) measurement of future purchase commitment, fair value of contingent consideration liabilities related to cash and stock earn-out payments, contingent consideration and deferred purchase consideration liabilities associated with acquisitions; (xiii) measurements of long-term investment and warrant rights; and (xiv) the potential outcome of future tax consequences of events that have been recognized in the condensed consolidated financial statements or tax returns. Actual results may differ from these estimates.

Supplemental Balance Sheet Disclosures

Supplemental balance sheet disclosures are as follows for the respective periods:


		As of September 30,		As of December 31,
	2025		2024
	(unaudited)
Prepaid expenses and other current assets:
Prepaid expenses	$	21,663	$	15,223
Unamortized cloud computing implementation costs		4,088		4,088
Prepaid insurance		1,149		1,488
Prepaid licenses and support		21,632		15,879
Prepaid expenses and other current assets	$	48,532	$	36,678

Other assets:
Unamortized cloud computing implementation costs	$	9,096	$	10,173
Other assets		4,036		3,900
Total other assets	$	13,132	$	14,073

Accrued expenses:
Accrued general expenses	$	15,294	$	14,862
Accrued contract labor and professional fees		18,307		15,152
Accrued income and other taxes		6,187		5,155
Accrued expenses	$	39,788	$	35,169

Cloud computing software implementation costs incurred in hosting arrangements are capitalized and included as a component of prepaid expenses and other current assets, or other assets, once available for their intended use. These costs are amortized using the straight-line method over their respective contract service periods, including periods covered by an option to extend, ranging from two to five years. Amortization expense for capitalized cloud computing implementation costs for the three and nine months ended September 30, 2025 were $871 and $2,895, respectively, and for the three and

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

nine months ended September 30, 2024 were $1,005 and $2,994, respectively, and are included in general and administrative expense in the condensed consolidated statements of comprehensive income.

Recently Issued Accounting Pronouncements

Targeted Improvements to the Accounting for Internal-Use Software

On September 18, 2025, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 replaces the existing stage-based capitalization model with a principles-based approach. Under the new guidance, software development costs are capitalized only when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform its intended function. The standard also consolidates guidance for website development costs from Subtopic 350-50 into Subtopic 350-40 and introduces enhanced disclosure requirements related to capitalized software costs. The standard is effective for annual reporting periods beginning after December 15, 2027, including interim reporting periods within those fiscal years. The standard can be adopted retrospectively, prospectively or on a modified prospective basis, and early adoption is permitted as of the beginning of an annual reporting period, provided that the financial statements for that period have not yet been issued or made available for issuance. The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures and will determine the appropriate transition method prior to adoption.

Income Tax Disclosures

On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires entities 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. ASU 2023-09 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 standard is effective for annual reporting periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively, and early adoption is permitted. The Company is continuing to assess the potential impacts of the standard, but does not expect this pronouncement to have a material effect on its condensed consolidated financial statements, other than the required changes to the income tax disclosures.

Disaggregation of Income Statement Expenses

On November 4, 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Entities will be required to provide disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements for both interim and annual reporting periods. The standard does not change the expense captions that an entity presents on the face of the income statement. The standard will be effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods for annual reporting periods beginning after December 15, 2027, with early adoption permitted. Entities are required to adopt the standard prospectively; however, entities are permitted to apply the amendments retrospectively to any or all prior periods presented in the financial statements. The Company is continuing to assess the potential impacts of the standard, but does not expect this pronouncement to have a material effect on its financial statements, other than the required changes to the disclosures.

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

2. REVENUE RECOGNITION

Disaggregation of revenue

The table reflects revenue by major source for the following periods:


	Three months ended September 30,				Nine months ended September 30,
		2025	2024			2025	2024

	(unaudited)				(unaudited)
Software subscriptions:
Software licenses	$	72,837	$	75,273	$	215,080	$	215,365
Cloud subscriptions		91,987		70,981		258,349		199,162
Software subscriptions		164,824		146,254		473,429		414,527
Services		27,288		24,181		80,304		73,793
Total revenues	$	192,112	$	170,435	$	553,733	$	488,320

Contract balances

Timing of revenue recognition may differ from the timing of invoicing customers. A receivable is recorded in the condensed 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. 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 $15,069 and $16,838 at September 30, 2025 and December 31, 2024, respectively. The allowance for potentially uncollectible accounts represents future expected credit losses over the life of the receivables based on past experience, current information and forward-looking economic considerations.

The beginning and ending balances of accounts receivable, net of allowance, are as follows:


	For the nine months ended September 30, 2025		For the year ended December 31, 2024
	(unaudited)
Balance, beginning of period	$	164,432	$	141,752
Balance, end of period		131,502		164,432
Increase (decrease)	$	(32,930)	$	22,680

A contract liability is recorded as deferred revenue on the condensed consolidated balance sheets when customers are billed in advance of performance obligations being satisfied, and revenue is recognized after invoicing ratably over the subscription period. Deferred revenue is included net of a related deferred allowance for subscription cancellations (the

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

“deferred allowance”) of $10,682 and $12,028 at September 30, 2025 and December 31, 2024, respectively. The deferred allowance represents the portion of the allowance for subscription cancellations associated with deferred revenue.

The beginning and ending balances of and changes to the allowance and the deferred allowance are as follows:


	For the three months ended September 30,
	2025				2024
	Balance			Net Change	Balance			Net Change

	(unaudited)
Allowance balance, July 1	$	(16,389)			$	(17,704)
Allowance balance, September 30,		(15,069)				(14,273)
Change in allowance			$	(1,320)			$	(3,431)
Deferred allowance balance, July 1,		11,661				12,753
Deferred allowance balance, September 30,		10,682				10,235
Change in deferred allowance				979				2,518
Net amount charged to revenues			$	(341)			$	(913)

	For the nine months ended September 30,
	2025				2024
	Balance			Net Change	Balance			Net Change

	(unaudited)
Allowance balance, January 1,	$	(16,838)			$	(16,272)
Allowance balance, September 30,		(15,069)				(14,273)
Change in allowance			$	(1,769)			$	(1,999)
Deferred allowance balance, January 1,		12,028				11,741
Deferred allowance balance, September 30,		10,682				10,235
Change in deferred allowance				1,346				1,506
Net amount charged to revenues			$	(423)			$	(493)

The portion of deferred revenue expected to be recognized in revenue beyond one year is included in deferred revenue, net of current portion in the condensed consolidated balance sheets. The following table provides information about the balances of and changes to deferred revenue for the following periods:


	For the three months ended September 30,				For the nine months ended September 30,
	2025		2024		2025		2024

	(unaudited)				(unaudited)
Changes to deferred revenue:
Beginning balance	$	347,250	$	299,741	$	344,166	$	292,720
Additional amounts deferred		183,905		175,106		548,610		500,012
Revenues recognized		(192,112)		(170,435)		(553,733)		(488,320)
Ending balance	$	339,043	$	304,412	$	339,043	$	304,412

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

Contract costs

Deferred sales commissions earned by the Company’s sales force and certain sales incentive programs and vendor referral agreements are considered incremental and recoverable costs of obtaining a contract with a customer. An asset is recognized for these incremental contract costs and included as deferred commissions in the condensed consolidated balance sheets. These contract costs are amortized on a straight-line basis over a period consistent with the transfer of the associated product and services to the customer, which is generally one to three years. Amortization of these costs are included in selling and marketing expense in the condensed consolidated statements of comprehensive income. The Company periodically reviews these contract assets to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these assets. There were no impairment losses recorded for the periods presented.

The changes to contract cost balances as of and for the following periods are:


	For the three months ended September 30,				For the nine months ended September 30,
	2025		2024		2025		2024

	(unaudited)				(unaudited)
Deferred commissions:
Beginning balance	$	27,737	$	21,862	$	27,480	$	21,237
Additions		7,205		5,024		18,184		13,793
Amortization		(6,130)		(4,346)		(16,852)		(12,490)
Ending balance	$	28,812	$	22,540	$	28,812	$	22,540

3. INVESTMENTS

In April 2025, the Company entered into a Preferred Stock Purchase Agreement (the “Purchase Agreement”) with Kintsugi AI, Inc. (“Kintsugi”), a San Francisco-based, AI startup focused on automating sales tax compliance for small and mid-size businesses (the “Kintsugi Investment”). The Company completed the Kintsugi Investment with the goal of expanding use of AI in its tax software solutions to deliver new innovations to customers.

Pursuant to the Purchase Agreement, the Company purchased 1,568 preferred shares (the “Preferred Stock”) for aggregate consideration of approximately $15,000 (the “Purchase Price”), representing approximately 10% of the fully diluted shares outstanding of Kintsugi on an “as converted” basis, and received a warrant to purchase 320 shares of Kintsugi’s Class A common stock at a price of $0.01 per share (the “Warrant”). The Warrant will vest subject to Kintsugi failing to achieve a certain annualized recurring monthly revenue threshold as of January 15, 2026.

The Company and Kintsugi also entered into a license and intellectual property sharing arrangement (the “License Agreement”) providing for, among other things, the Company’s use of and collaboration with respect to certain of Kintsugi’s intellectual property. Additionally, the Company has designated one member to Kintsugi’s board of directors.

In accordance with Accounting Standards Codification (“ASC”) 805-50-30-3, the Company allocated the full Purchase Price to the value of the Preferred Stock as the fair value of both the Warrant and the License Agreement were determined to be nil.

The Company classified the Preferred Stock as an equity security under ASC 321, Investments – Equity Securities. As Kintsugi is a privately held company without a readily determinable fair value, the Preferred Stock qualifies for the measurement alternative under ASC 321 and is measured at cost, less impairment, subject to upward and downward adjustments resulting from observable price changes for identical or similar investments of the same issuer. These

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Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

adjustments require quantitative assessments of the fair value, which may require the use of unobservable inputs, which management considers to be Level 3 measurements under the fair value hierarchy. The Company performs a qualitative assessment each reporting period to identify indicators of impairment. No observable price change or impairment adjustments have been recorded for the three or nine months ended September 30, 2025. The $15,000 carrying value of the Kintsugi Investment is presented in the long-term investment line in the condensed consolidated balance sheets.

The fair value of the Warrant was determined by third-party valuation specialists using a Monte Carlo simulation in a risk-neutral framework calibrated to management’s revenue forecasts. The following assumptions were used: expected revenue volatility of 24.5%, equity volatility of 75.0%, a revenue discount rate of 7.2%, and expected term of 0.8 years.

Total transaction costs associated with the Kintsugi Investment are recorded in other operating expense (income), net in the consolidated statements of comprehensive income and amounts are not material.

4. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the Company’s fair value for its financial assets and liabilities measured at fair value on a recurring basis:


	Fair Value Measurements Using
As of September 30, 2025 (unaudited)	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	$	269,664	$	269,664	$	—	$	—
ecosio Cash Earn-outs		83,000		—		—		83,000
ecosio Stock Earn-outs		23,100		—		—		23,100
Long-Term Investment (See Note 3)		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 high quality, short-term money market instruments, which are issued and payable in U.S. dollars (“Money Market Funds”) and included in cash and cash equivalents on the condensed 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.

As of December 31, 2024, the Company had additional investments in bank and corporate issued commercial paper (“Commercial Paper”), corporate bonds (“Corporate Bonds”), and U.S. treasury securities (“U.S. Treasury Securities”). The Company believes that Level 2 designation was appropriate for these securities under ASC 820-10, Fair Value

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

Measurements and Disclosures, as these securities were fixed income securities, none were exchange-traded, and all were priced by correlation to observed market data. For these securities, the Company obtained fair value measurements from an independent pricing service. The fair value measurements considered observable data that may have included dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors. These securities qualified as debt securities per ASC 320, Investments– Debt Securities, and were classified as available-for-sale as they could be liquidated and used for general corporate purposes. These securities were carried at fair value in the investment securities available-for-sale line in the condensed consolidated balance sheets, with the unrealized holding gains and (losses), net of tax, included in other comprehensive (income) loss until realized. During the first quarter of 2025, the Company fully liquidated these securities, which resulted in a realized gain of $19, which is included in the interest expense (income), net line of the condensed consolidated statements of comprehensive income for the nine months ended September 30, 2025.

Tellutax Contingent Consideration

In connection with the January 2021 Tellutax LLC (“Tellutax”) acquisition, the sellers were entitled to contingent consideration if sales targets were met during a period of time following the acquisition (the “Tellutax Contingent Consideration”).

The Tellutax Contingent Consideration was based on three potential earn-out payments determined by periodic revenue achievements over a thirty-month period. The final payment of $200 was made during the second quarter of 2025 and is included in other operating expense, net for the three and nine months ended September 30, 2025. Fair value adjustments of $100 and $(2,275) were included in other operating expense (income), net for the three and nine months ended September 30, 2024, respectively. At both September 30, 2025 and December 31, 2024, the Tellutax Contingent Consideration balance was $0.

Systax Purchase Commitment Liability

The Company had a contractual commitment to acquire the remaining equity interest from the original Systax quotaholders incrementally through 2024. Purchase commitment payments for these incremental acquisition amounts were based on a multiple of Systax revenue and earnings before interest, depreciation, amortization, and income taxes (“EBITDA”) performance at the end of 2023 and 2022. Management determined these future purchase commitments to be a forward contract, resulting in the Company being required to estimate and record an estimated future purchase commitment amount (the “Purchase Commitment Liability”) in connection with recording the initial purchase. Adjustments to the settlement date value that arose as a result of remeasurement at future balance sheet dates were reflected as interest expense related to financing costs in the condensed consolidated statements of comprehensive income (loss) in the period the change is identified. A final adjustment for $423 to interest expense was recorded in the second quarter of 2024.

During the second quarter of 2024, the Company paid $9,622 to acquire the remaining 20% equity interest of Systax, which increased the Company’s ownership percentage of Systax to 100%, and settled the outstanding Purchase Commitment Liability.

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

ecosio Earn-outs

In connection with the August 2024 ecosio acquisition, the sellers are entitled to three annual earn-outs in the form of cash, with an aggregate of up to $94,355 (the “Cash Earn-outs”), and stock, with an aggregate value of up to $35,000 (the “Stock Earn-outs,” and together with the Cash Earn-outs, the “Earn-outs”), assuming maximum payouts. The Earn-outs are based on ecosio’s achievement of certain monthly software revenue targets over a three-year period, measured over an aggregate of 12 months and paid within 90 days after the relevant measurement period. At the acquisition date, the fair value of the Cash Earn-outs and Stock Earn-outs were $71,000 and $34,000, respectively. The fair value of the Cash Earn-out and the Stock Earn-out were measured on the acquisition date using a Monte Carlo simulation in a risk-neutral framework, calibrated to management’s revenue forecasts. Additional information on the Cash Earn-outs and the Stock Earn-outs is presented in the following table:


	Maximum		Fair Value		Fair Value
Cash Earn-outs/ Period (unaudited)	Payout		September 30, 2025		December 31, 2024
Year 1 - December 1, 2024 - December 1, 2025	$	19,600	$	19,100	$	17,900
Year 2 - December 1, 2025 - December 1, 2026		30,625		27,900		24,400
Year 3 - December 1, 2026 - December 1, 2027		44,130		36,000		32,100
Total Cash Earn-outs	$	94,355	$	83,000	$	74,400
	Maximum		Fair Value		Fair Value
Stock Earn-outs/ Period (unaudited)	Payout ⁽¹⁾		September 30, 2025		December 31, 2024
Year 1 - December 1, 2024 - December 1, 2025	$	12,000	$	8,000	$	17,200
Year 2 - December 1, 2025 - December 1, 2026		12,000		8,000		16,300
Year 3 - December 1, 2026 - December 1, 2027		11,000		7,100		14,600
Total Stock Earn-outs	$	35,000	$	23,100	$	48,100
⁽¹⁾ Maximum payout based on Vertex's August 6, 2024 opening share price of $37.02, as referenced in the purchase agreement.

Actual payouts are further adjusted depending on ecosio’s software revenue attainment for each of the measurement periods. In the event that actual software revenues exceed 100% of the target, additional payments may be made up to a maximum of 122.5% of the annual target. If actual software revenues are below 85% of the target, no payouts are made for that measurement period. The Stock Earn-outs are paid in shares of the Company’s Class A common stock.

The Cash Earn-outs and Stock Earn-outs are recorded at fair value in the condensed consolidated balance sheets as follows:


	As of September 30, 2025				As of December 31, 2024
	(unaudited)
	Current ⁽¹⁾		Non-Current ⁽²⁾		Current ⁽¹⁾		Non-Current⁽²⁾
Cash Earn-outs	$	19,100	$	63,900	$	17,900	$	56,500
Stock Earn-outs		8,000		15,100		17,200		30,900
Total	$	27,100	$	79,000	$	35,100	$	87,400

⁽¹⁾Included in purchase commitment and contingent consideration liabilities, current.
⁽²⁾ Included in purchase commitment and contingent consideration liabilities, net of current portion.

These Earn-outs represent recurring fair value measurements with significant unobservable inputs, which management considers to be Level 3 measurements under the fair value hierarchy. The final payments may be adjusted depending on the actual amount, above or below the target. The Earn-outs will be revalued and adjusted quarterly until the end of the Earn-out period, and any fair value adjustments will be recorded in the other operating expense (income), net line of the condensed consolidated statement of income (loss).

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

During the three months ended September 30, 2025, the Company recorded fair value adjustments of $5,100 and $(9,100) to the Cash Earn-outs and Stock Earn-outs, respectively. During the nine months ended September 30, 2025, the Company recorded fair value adjustments of $8,600 and $(25,000) to the Cash Earn-outs and Stock Earn-outs, respectively.

The fair values of the Cash Earn-outs and the Stock Earn-outs and unobservable inputs used for the Monte Carlo Simulation valuation are shown in the table below.


	September 30, 2025 (unaudited)
Liabilities	Fair Value		Valuation Technique	Unobservable Inputs
ecosio Contingent Consideration - Cash Earn-outs	$	83,000	Monte Carlo Simulation	Revenue volatility	22.5	%
				Revenue discount rate	7.1	%
				Term (in years)	2.4

ecosio Contingent Consideration - Stock Earn-outs	$	23,100	Monte Carlo Simulation	Revenue volatility	22.5	%
				Revenue discount rate	7.1	%
				Term (in years)	2.4

	December 31, 2024
Liabilities	Fair Value		Valuation Technique	Unobservable Inputs
ecosio Contingent Consideration - Cash Earn-outs	$	74,400	Monte Carlo Simulation	Revenue volatility	21.0	%
				Revenue discount rate	7.7	%
				Term (in years)	3.2

ecosio Contingent Consideration - Stock Earn-outs	$	48,100	Monte Carlo Simulation	Revenue volatility	21.0	%
				Revenue discount rate	7.7	%
				Term (in years)	3.2

Changes in the fair value of the Company’s Level 3 liabilities during the nine months ended September 30, 2025 were as follows:


	ecosio
	Contingent Consideration					Kintsugi
	Cash Earn-outs		Stock Earn-outs			Long-term Investment

	(unaudited)					(unaudited)
Balance, January 1, 2025	$	74,400	$	48,100	$	—
Initial measurement		—		—		15,000
Fair value adjustments		8,600		(25,000)		—
Balance, September 30, 2025	$	83,000	$	23,100	$	15,000

Assets and Liabilities for Which Fair Value is Only Disclosed

The carrying amounts of cash and cash equivalents and the carrying amount of funds held for customers were the same as their respective fair values and are considered Level 1 measurements.

The carrying amount of the Company’s bank debt approximates fair value as the variable rates on the debt approximate those commercially available in the market and is considered a Level 3 measurement.

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

Non-recurring Fair Value Measurements

The ecosio acquisition on August 30, 2024, the Tellutax acquisition on January 25, 2021, and the Systax acquisition on January 10, 2020 were accounted for as business combinations, and the total purchase price for each acquisition was allocated to the net assets acquired and liabilities assumed based on their estimated fair values.

Derivative Instruments

The Company may periodically enter into derivative contracts to reduce its exposure to foreign currency exchange rates. Historically, the Company has not designated derivative contracts as hedges. Such derivative contracts are typically designed to manage specific risks according to the Company’s strategies, which may change from time to time.

Convertible Senior Notes

As of September 30, 2025 and December 31, 2024, the fair value of the Notes (as defined in Note 8, “Debt”) was $350,003 and $539,494, respectively. The fair value was determined based on the quoted price of the Notes in an over-the-counter market on the last trading day of the reporting period and has been classified as Level 2 in the fair value hierarchy. For further information on the Notes, refer to Note 8, “Debt”.

5. PROPERTY AND EQUIPMENT

The major components of property and equipment are as follows:


	As of September 30,		As of December 31,
	2025		2024
	(unaudited)
Leasehold improvements	$	20,513	$	20,096
Equipment		18,377		14,386
Computer software purchased		1,383		1,344
Internal-use software developed:
Cloud-based customer solutions		313,120		237,232
Internal systems and tools		85,743		72,406
Furniture and fixtures		7,324		7,292
In-process internal-use software		18,243		28,916
Property and equipment		464,703		381,672
Less accumulated depreciation and amortization		(262,048)		(204,113)
Property and equipment, net	$	202,655	$	177,559

Depreciation expense for property and equipment, excluding all internal-use software developed and finance leases, was $1,089 and $1,004 for the three months ended September 30, 2025 and 2024, respectively, and $3,213 and $3,369 for the nine months ended September 30, 2025 and 2024, respectively, and is included in depreciation and amortization in the condensed consolidated statements of comprehensive income.

Finance lease amortization was $18 and $19 for the three months ended September 30, 2025 and 2024, respectively, and $56 and $61 for the nine months ended September 30, 2025 and 2024, respectively, and is included in depreciation and amortization in the condensed consolidated statements of comprehensive income.

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Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

Assets under finance leases of $265 and $172, net of accumulated amortization of $153 and $97, respectively, at September 30, 2025 and December 31, 2024, respectively, are included in property and equipment, net in the condensed consolidated balance sheets.

The major components of internal-use software developed are as follows:


	As of September 30,		As of December 31,
	2025		2024
	(unaudited)
Internal-use software developed	$	398,863	$	309,638
Less accumulated depreciation		(225,652)		(171,181)
Internal-use software developed, net of accumulated depreciation		173,211		138,457
In-process internal-use software		18,243		28,916
Internal-use software developed, net	$	191,454	$	167,373

Amounts included in property and equipment additions related to capitalized internal-use software on the condensed consolidated statements of cash flows are as follows:


	For the nine months ended September 30,
	2025		2024

	(unaudited)
Cloud-based customer solutions	$	49,177	$	32,078
Internal systems and tools		16,001		14,683
Total	$	65,178	$	46,761

In-process internal-use software developed is not depreciated until it is available for its intended use. Depreciation expense for internal-use software developed for cloud-based customer solutions for the three months ended September 30, 2025 and 2024 was $12,522 and $7,909, respectively, and $33,791 and $25,685 for the nine months ended September 30, 2025 and 2024, respectively, and is included in cost of revenues, software subscriptions in the condensed consolidated statements of comprehensive income.

Depreciation expense for internal-use software developed for internal systems and tools for the three months ended September 30, 2025 and 2024 was $5,264 and $4,191, respectively, and $15,170 and $12,002 for the nine months ended September 30, 2025 and 2024, respectively, and is included in depreciation and amortization in the condensed consolidated statements of comprehensive income.

6. CAPITALIZED SOFTWARE

Capitalized software includes acquired software and direct labor and related expenses for software developed for sale for new products and enhancements to existing products.

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Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

The major components of capitalized software are as follows:


	As of September 30,		As of December 31,
	2025		2024
	(unaudited)
Capitalized software	$	156,755	$	140,562
Less accumulated amortization		(121,600)		(105,175)
Capitalized software, net of accumulated depreciation		35,155		35,387
In-process capitalized software		762		963
Capitalized software, net	$	35,917	$	36,350

Software development costs capitalized for the three months ended September 30, 2025 and 2024 were $5,879 and $5,260, respectively, and $16,444 and $16,357 for the nine months ended September 30, 2025 and 2024, respectively.

Capitalized software amortization expense, including amortization of acquired technology, was $5,621 and $6,236 for the three months ended September 30, 2025 and 2024, respectively, and $16,877 and $18,264 for the nine months ended September 30, 2025 and 2024, respectively, and is included in cost of revenues, software subscriptions in the condensed consolidated statements of comprehensive income.

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets are as follows for the periods presented:


	As of September 30,		As of December 31,
	2025		2024
		(unaudited)
Goodwill	$	392,893	$	357,823
Other intangible assets, net		4,104		5,198
Total	$	396,997	$	363,021

The Company has recognized various amortizable other intangible assets in connection with acquisitions related to customer relationships, technology, and tradenames. The following tables provide additional information for other intangible assets, which are individually not material to the condensed consolidated financial statements, for the periods presented:


	As of September 30,		As of December 31,
	2025		2024
		(unaudited)
Weighted average amortization period (years)		1.9		2.6

Gross value	$	17,107	$	15,818
Accumulated amortization		(13,003)		(10,620)
Carrying value	$	4,104	$	5,198

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Vertex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited) continued

(Amounts in thousands, except per share data)

The following table presents amortization of other intangible assets:




For the three months ended September 30,	Cost of Revenues, Software Subscriptions		Selling and Marketing Expense			Total Expense
2025	$	—	$	588	$	588
2024		55		706

Vertex, Inc. 10-Q