VERTEX: MANAGEMENT REPORT AND ANALYSIS OF THE FINANCIAL POSITION AND OPERATING RESULTS (Type 10-Q)

You must learn the next dialogue and evaluation of our monetary situation
and outcomes of operations at the side of the condensed consolidated
monetary statements and the notes thereto included elsewhere on this Quarterly
Report on Type 10-Q. Along with historic monetary info, the
following dialogue accommodates forward-looking statements that replicate our plans,
estimates, beliefs and expectations that contain dangers and uncertainties. Our
precise outcomes and the timing of occasions might differ materially from these
mentioned within the forward-looking statements. Elements that would trigger or
contribute to those variations embrace these mentioned under and elsewhere in
this Quarterly Report on Type 10-Q, notably within the part titled "Particular
Observe Relating to Ahead-Wanting Statements" above.

Overview

Vertex is a number one world supplier of oblique tax software program and options. Our
mission is to ship probably the most trusted tax expertise enabling world companies
to transact, comply and develop with confidence. Vertex gives cloud-based and
on-premise options that may be tailor-made to particular industries for each main
line of oblique tax, together with gross sales and client use, worth added and payroll.
Headquartered in North America, and with places of work in South America and Europe,
Vertex employs over 1,200 professionals and serves corporations throughout the globe.

We've pioneered tax expertise for over 40 years. We first started digital
supply of tax guidelines within the early Nineteen Eighties and we first offered transaction tax
processing software program in 1982. At present, our software program allows tax dedication,
compliance and reporting, tax information administration and doc administration with
highly effective pre-built integrations to core enterprise purposes utilized by most
corporations, notably these purposes which have a major affect on
world commerce. Our software program is fueled by over 300 million data-driven
efficient tax guidelines and helps oblique tax compliance in additional than 19,000
jurisdictions worldwide. As a way to preserve the standard of our content material, our
group consists of many world tax and regulatory specialists from {industry} and the
public sector, who ship month-to-month updates to our tax content material, that are then
integrated immediately into our software program. Our options will be deployed
on-premise, within the cloud, or each, with implementation providers accessible to
allow optimum buyer outcomes and fulfill their distinctive enterprise necessities.

We've gathered industry-specific tax data for over 4 a long time and
our clients leverage our in-depth content material via their use of our software program.
This permits our clients to adjust to the dynamic regulatory panorama in
actual time and mitigates our clients' threat publicity. As our clients broaden
their world footprint and enterprise fashions, we're actively supporting their
growth by repeatedly strengthening our content material providing and permitting for
extra jurisdiction-specific tax compliance.

We derive nearly all of our income from software program subscriptions. These
subscriptions embrace use of our software program and ongoing month-to-month content material updates.
Our software program is obtainable on a subscription foundation to our clients, no matter
their deployment preferences. On-premise subscriptions are usually offered
via one-year contracts and cloud-based subscriptions are usually offered
via one- to three-year contracts. We invoice nearly all of our clients
yearly upfront of the subscription interval.

Our clients embrace a majority of the Fortune 500, in addition to a majority of
the highest 10 corporations by income in a number of industries akin to retail,
expertise and manufacturing, along with main marketplaces. As our
clients broaden geographically and pursue omnichannel enterprise fashions, their
tax dedication and compliance necessities enhance and develop into extra advanced,
offering sustainable natural progress alternatives for our enterprise. Our
versatile, tiered transaction-based pricing mannequin additionally leads to our clients
rising their spend with us as they develop and proceed to make use of our options. We
principally value our options based mostly on a buyer's income base, as well as
to a variety of different elements.

We make use of a hybrid deployment mannequin to align to our clients' expertise
preferences for his or her core monetary administration software program throughout on premise,
cloud deployments or any mixture of those fashions. Over time, we count on each
current and newly acquired clients to proceed to shift in the direction of cloud
deployment fashions. Cloud-based subscription gross sales to new clients have grown at
a considerably quicker fee than on-premise software program subscription gross sales, which
is a development that we count on to proceed over time. We generated 32.3% and 25.1% of
software program subscription income

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from cloud-based subscriptions throughout the three months ended March 31, 2021 and
2020, respectively. Whereas our on-premise software program subscription income includes
67.7% of our 2021 software program subscription income, it continues to lower as a
proportion of whole software program subscription income as cloud-based subscriptions
speed up.

We license our options primarily via our direct gross sales drive, which focuses
on promoting to certified leads offered by our advertising efforts, and thru our
community of referral companions. We additionally make the most of oblique gross sales to a lesser extent
to effectively develop and scale our enterprise and mid-market revenues.

Our associate ecosystem is a differentiating, aggressive power in each our
software program improvement and our gross sales and advertising actions. We combine with
key expertise companions that span ERP, CRM, procurement, billing, POS and
eCommerce. These companions embrace Adobe/Magento, Coupa, Microsoft Dynamics,
NetSuite, Oracle, Salesforce, SAP, SAP Ariba, Workday and Zuora. We additionally
collaborate with quite a few accounting corporations who've constructed implementation
practices round our software program to serve their buyer base.

We imagine that world commerce and the compliance setting gives sturdy
and accelerating progress alternatives for our enterprise. We generated income of
$98.2 million and $89.2 million for the three months ended March 31, 2021 and
2020, respectively. We had web revenue of $2.3 million and a web lack of
$29.1 million for the three months ended March 31, 2021 and 2020, respectively.
Adjusted EBITDA was $18.2 million and $15.3 million for the three months ended
March 31, 2021 and 2020, respectively. Adjusted EBITDA is a non-GAAP monetary
measure. Confer with "Use and Reconciliation of Non-GAAP Monetary Measures" for
additional dialogue of non-GAAP monetary measures and their comparability to GAAP
monetary measures.

Latest Developments

Taxamo Acquisition

On Might 12, 2021, we acquired EVAT Options Restricted and its subsidiaries, doing
enterprise as Taxamo (collectively "Taxamo"), a cloud-based pioneer in tax and
fee automation for world e-commerce and marketplaces for roughly
$200.0 million in money readily available. This acquisition helps and accelerates our
progress methods throughout ecommerce platforms and marketplaces within the enterprise
and mid-market in Europe and North America, and amongst our current world
clients.

Affect of COVID-19

Throughout 2020, the COVID-19 pandemic had minimal affect on our revenues and
outcomes of operations, as we proceed to derive the numerous majority of our
revenues from our current software program subscriptions. As we principally value our
options based mostly on our clients' revenues inside sure income bands,
elongated declines in our current clients' revenues could affect our capability to
develop our current buyer revenues. We didn't expertise an irregular variety of
non-renewals in 2020, nor any materials declines in revenues related to
declines in our clients' revenues, and we at present count on our current
buyer base to stay largely secure, because it did via the recession in 2008
and 2009. Nonetheless, vital will increase in non-renewals or concessions to
renewal clients would have a cloth affect on our revenues and money flows.
Throughout 2020, we did see some delays in signing offers on account of prospects shifting
to working remotely, and a few on account of financial uncertainty. We count on that the
uncertainty brought on by the COVID-19 pandemic might affect our billings to new
clients past 2020 because the pandemic continues to generate financial
uncertainty, and it might additionally negatively affect our efforts to take care of or broaden
revenues from our current clients as they proceed to judge sure
long-term tasks and finances constraints. Nonetheless, we don't anticipate that
total demand for our software program and options, our capability to ship such
software program and options, or our progress methods will likely be materially impacted by
the COVID-19 pandemic, as corporations proceed to depend on us for his or her oblique
tax options.

Our money collections for the yr have been per our expectations as some
of the procedural disruptions that clients skilled as they shifted to
distant work early within the yr stabilized by the tip of 2020. We imagine that we
might even see delays in collections in 2021 because the pandemic continues to generate
financial uncertainty. Nonetheless, we don't imagine that these delays will
materially affect our enterprise; we proceed to count on that we will
gather quantities due underneath subscription contracts from clients experiencing
points on account of the COVID-19 pandemic, and we've

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not recorded extra credit score losses related to the allowance for uncertain
accounts in reference to any delays. Provided that clients can't forgo our
month-to-month content material updates, that are needed to stay compliant with probably the most
present rules, we imagine clients will proceed to pay our renewal
invoices in a well timed, even when barely elongated, method. We imagine that we
at present have ample liquidity and capital assets to proceed to satisfy our
working wants, and our capability to proceed to service our debt or different
monetary obligations just isn't at present impaired. For an extra description of
our liquidity, see "Administration's Dialogue and Evaluation of Monetary Situation
and Outcomes of Operations-Liquidity and Capital Sources."

The extent to which the COVID-19 pandemic impacts our enterprise going ahead
will depend upon quite a few evolving elements that can't reliably be predicted,
together with the period and scope of the pandemic; governmental, enterprise, and
people' actions in response to the pandemic; and the affect on financial
exercise, together with the potential of recession or monetary market
instability. These elements could adversely affect client, enterprise and
authorities spending on expertise in addition to clients' capability to pay for our
services on an ongoing foundation. This uncertainty additionally impacts
administration's accounting estimates and assumptions, which might end in better
variability in quite a lot of areas that depend upon these estimates and
assumptions, together with estimated allowance for subscription cancellations,
product life cycles and estimated helpful lives and potential impairment of
long-lived belongings, intangible belongings and goodwill.

Key enterprise indicators

We often assessment the metrics recognized under to evaluate progress developments, measure our efficiency, formulate monetary projections and make strategic selections.

Annual recurring revenue.

We derive the overwhelming majority of our income from recurring software program
subscriptions. We imagine Annual Recurring Income ("ARR") gives us with
visibility to our projected software program subscription income so as to consider
the well being of our enterprise. As a result of we acknowledge subscription income ratably,
we imagine traders can use ARR to measure our growth of current buyer
revenues, new buyer exercise, and as an indicator of future software program
subscription revenues. ARR relies on month-to-month recurring income ("MRR") from
software program subscriptions for the latest month at interval finish, multiplied by
twelve. MRR is calculated by dividing the software program subscription value, inclusive
of reductions, by the variety of subscription lined months. MRR solely consists of
clients with MRR on the finish of the final month of the measurement interval.


                              Three months ended
                                  March 31,
({Dollars} in thousands and thousands)          2021         2020         Yr-Over-Yr Change
Annual Recurring Income    $    320.1$ 284.2$        35.9          12.6 %




ARR elevated by $35.9 million or 12.6% for the three months ended March 31,
2021, as in comparison with the identical interval in 2020. The rise was primarily pushed
by $14.7 million of progress in revenues from current clients via their
expanded use of our options in addition to value will increase and $21.2 million
of on-premise and cloud-based subscriptions of our tax options to new
clients.

Internet revenue retention fee.

We imagine that our Internet Income Retention Charge ("NRR") gives perception into our
capability to retain and develop income from our clients, in addition to their
potential long-term worth to us. We additionally imagine it demonstrates to traders
our capability to broaden current buyer revenues, which is one in every of our key progress
methods. Our NRR refers back to the ARR growth throughout the 12 months of a
reporting interval for all clients who have been a part of our buyer base on the
starting of the reporting interval. Our NRR calculation takes into consideration any
income misplaced from departing clients or clients who've downgraded or
diminished utilization, in addition to any income growth from migrations, new licenses
for added merchandise or contractual and usage-based value adjustments.

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                                Three months ended
                                    March 31,
                               2021         2020
Internet Income Retention Charge        105 %        109 %




The 400 foundation level decline in NRR from 109% for the three months ended March
31, 2020 to 105% for a similar interval in 2021 was primarily attributable to a
discount in gross sales progress to current clients as in comparison with the prior yr
associated to delays in signing offers on account of their focus shifting to working
remotely, and financial uncertainty in reference to the affect of the COVID-19
pandemic on their companies.

Adjusted EBITDA and Adjusted EBITDA margin.

We imagine that Adjusted EBITDA is a measure broadly utilized by securities analysts
and traders to judge the monetary efficiency of our firm and different
corporations. We imagine that Adjusted EBITDA and Adjusted EBITDA margin are helpful
as supplemental measures to judge our total working efficiency as they
measure enterprise efficiency specializing in money associated expenses and since they
are vital metrics to lenders underneath our New Credit score Settlement. We outline
Adjusted EBITDA as web revenue or loss earlier than curiosity, taxes, depreciation, and
amortization, as adjusted to exclude expenses for asset impairments, stock-based
compensation expense, severance expense and transaction prices. Adjusted EBITDA
margin represents Adjusted EBITDA divided by whole revenues for a similar interval.
For functions of comparability, our web revenue (loss) was $2.3 million and $(29.1)
million for the three months ended March 31, 2021 and 2020, respectively, whereas
our web revenue margin was 2.3% and (32.6%) over the identical intervals, respectively.




                                                             Three months ended
                                                                  March 31
({Dollars} in 1000's)                                       2021           2020
Adjusted EBITDA:
Internet revenue (loss)                                         $    2,288$ (29,064)
Curiosity expense, web                                            535            569
Revenue tax (profit) expense                                   (679)       

250

Depreciation – tangible mounted belongings 2,827

2,869

Depreciation of capitalized software program and bought intangible belongings – price of subscription revenue

                                                       5,905        

4,567

Amortization of acquired intangible belongings - promoting
and advertising expense                                             84       

Inventory-based compensation expense                               6,543       
 34,920
Severance expense                                                531          1,183
Transaction prices                                                150              -
Adjusted EBITDA                                           $   18,184$   15,294

Adjusted EBITDA Margin:
Complete revenues                                            $   98,236$   89,245
Adjusted EBITDA margin                                          18.5 %         17.1 %




The rise in Adjusted EBITDA for the three months ended March 31, 2021 of
$2.9 million over the comparable interval in 2020 is primarily pushed by an
enhance in web revenue of $31.4 million, offset by the lower in stock-based
compensation of $28.4 million. Adjusted EBITDA margin elevated to 18.5% for the
three months ended March 31, 2021 in comparison with 17.1% for the comparable interval in
2020.

Free money movement and free money movement margin.

We use free money movement as a essential measure within the analysis of liquidity in
conjunction with associated GAAP quantities. We additionally use this measure when contemplating
accessible money, together with for determination making functions associated to dividends and
discretionary investments. We take into account free money movement to be an vital measure
for traders as a result of it measures the amount of money we generate from our
operations after our capital expenditures and capitalization of software program

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improvement prices. As well as, we base sure of our forward-looking estimates
and budgets on free money movement and free money movement margin. We outline free money
movement as the entire of web money offered by working actions, adjusted for the
redemption of inventory appreciation rights ("SARs") in 2020 in reference to our
preliminary public providing (the "Providing") mirrored as a discount of money
offered by working actions, much less purchases of property and tools and
capitalized software program. We outline free money movement margin as free money movement divided
by whole revenues for a similar interval. Our web money utilized in working actions
was $(3.0) million and $(6.4) million for the three months ended March 31, 2021
and 2020, respectively, whereas our working money movement margin was (3.0%) and
(7.2%) over the identical intervals, respectively. Internet money utilized in investing
actions was $(14.5) million and $(21.7) million for the three months ended
March 31, 2021 and 2020, respectively. Internet money (utilized in) offered by financing
actions was $(8.1) million and $103.7 million for the three months ended
March 31, 2021 and March 31, 2020, respectively.




                                         Three months ended
                                            March 31,
({Dollars} in 1000's)                  2021          2020

Free Money Circulation: Money utilized in operational actions (2 965) $($ 6,417)
Acquisitions of property, plant and tools (6,195) (5,632) Additions of capitalized software program (2,221) (3,706) Free money movement

                       $ (11,381)$ (15,755)

Free Money Circulation Margin:
Complete revenues                       $   98,236$   89,245
Free money movement margin                    (11.6) %      (17.7) %




Free money movement elevated by $4.4 million for the three months ended March 31,
2021 as in comparison with the identical interval in 2020.  This enhance was primarily pushed
by a rise in web revenue of $31.4 million, offset by the lower in
stock-based compensation of $28.4 million. Traditionally, our money flows within the
first quarter are decrease than the remaining calendar quarters as they're closely
influenced by annual worker bonus and different variable compensation funds.



                    Elements of Our Outcomes of Operations

Income

We generate revenue via software program subscriptions and providers.

Income is acknowledged upon switch of management of promised services or products
to clients in an quantity that displays the consideration anticipated to be
obtained in alternate for these services or products. We enter into contracts
that embrace varied combos of services, that are typically
able to being distinct and accounted for as separate efficiency obligations.
Income is acknowledged web of allowance for subscription and non-renewal
cancellations and any taxes collected from clients which can be subsequently
remitted to governmental authorities.

Software program subscriptions

Licenses for on-premise software program subscriptions, that are typically one yr,
present the shopper with a proper to make use of the software program because it exists when made
accessible to the shopper. Clients buy a subscription to those licenses,
which incorporates the associated software program and tax content material updates and product help.
The updates and help, that are a part of the subscription settlement, are
important to the continued utility of the software program; due to this fact, we've
decided the software program and the associated updates and help to be a single
efficiency obligation. Accordingly, when on-premise software program is licensed, the
income related to this mixed efficiency obligation is acknowledged
ratably over the license time period as these subscriptions are offered for the
period of the license time period. Income recognition begins on the later of the
starting of the subscription interval or the date the software program is made accessible
to the shopper to obtain. Our on-premise software program subscription costs within the
preliminary subscription yr are greater than normal renewal costs. The surplus
preliminary yr value over the renewal value is a cloth proper that gives
clients with the best to this diminished

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Renewal value. We acknowledge the income related to this substantive proper over the estimated buyer profit interval, which is often three years.

Our cloud-based subscriptions permit clients to make use of Vertex-hosted software program over
the contract interval with out taking possession of the software program. The contracts are
typically for one to a few years and are typically billed yearly upfront of
the subscription interval. Our cloud-based choices additionally embrace associated updates
and help. All providers inside the cloud-based contracts constantly present
a profit to the shopper throughout the subscription interval, thus the related
income is acknowledged ratably over the subscription interval. Income recognition
begins on the later of the start of the subscription interval or the date the
buyer is offered entry to the cloud-based options.

Income is impacted by the timing of gross sales and our clients' progress or
contractions ensuing of their must broaden or contract their subscription
utilization, the acquisition of latest options or the non-renewal of current options.
As well as, income will fluctuate with the cessation of prolonged product
help charges charged for older variations of our software program subscription options
when they're retired and these charges are now not charged. Contracts for
on-premise licenses allow cancellations on the finish of the license time period, which
is usually one yr. Legacy cloud-based subscription contracts for multi-year
intervals beforehand offered clients the best to terminate their contract for
providers previous to the tip of the subscription interval at a major penalty.
This penalty requires the fee of a proportion of the remaining months of the
then present contract time period. Present cloud-based contracts don't include such
termination rights. Terminations of cloud-based subscriptions previous to the tip
of the subscription time period have occurred sometimes and the affect has been
immaterial. The allowance for subscription and non-renewal cancellations
displays an estimate of the quantity of such cancellations and non-renewals based mostly
on previous expertise, present info and forward-looking financial
issues.

Service revenues

We generate providers income primarily in help of our clients' wants
related to our software program and to allow them to comprehend the total advantage of
our options. These software program subscription-related providers embrace
configuration, information migration and implementation, and premium help and
coaching. As well as, we generate providers income via our managed providers
providing which permits clients to outsource all or a portion of their oblique
tax operations to us. These providers embrace oblique tax return preparation,
submitting and tax fee and see administration. We typically invoice for providers on
a per-transaction or time and supplies foundation, and we acknowledge income from
deliverable-based skilled providers as providers are carried out.

Fluctuations in providers income are immediately correlated to fluctuations in our
subscription revenues with respect to implementation and coaching providers as we
have traditionally skilled an attachment fee to subscription gross sales for these
providers in extra of 60%. Nonetheless, demand for providers in 2020 exceeded
historic ranges as sure clients migrated to a more moderen model of the
software program which isn't anticipated to be a major driver of our providers
revenues progress in 2021. As well as, our managed providers providing has
continued to expertise elevated revenues related to returns processing
quantity will increase attributable to regulatory adjustments, as clients expanded their
tax filings into extra jurisdictions.

Value of revenue

Software program subscriptions

Value of software program subscriptions income consists of prices associated to offering
and supporting our software program subscriptions and consists of personnel and associated
bills, together with salaries, advantages, bonuses and stock-based compensation. In
addition, price of income consists of direct prices related to info
expertise, akin to information heart and software program internet hosting prices, and tax content material
upkeep. Value of income additionally consists of amortization related to direct
labor and associated bills for capitalized internal-use software program for cloud-based
subscription options and software program developed on the market for brand spanking new merchandise and
enhancements to current merchandise, and prices related to the amortization of
acquired intangible belongings.  We plan to proceed to considerably broaden our
infrastructure and personnel to help our future progress and will increase in
transaction volumes of our cloud-based options, together with via
acquisitions. We count on progress in our enterprise will end in a rise in
price of income in absolute {dollars}.

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Companies

Value of providers income consists of direct prices of software program
subscription-related providers and our managed providers providing. These prices
embrace personnel and associated bills, together with salaries, advantages, bonuses,
stock-based compensation and the price of third-party contractors and different
direct bills. We plan to proceed to broaden our infrastructure and personnel
as essential to help our future progress and associated will increase in our service
income. We count on progress in our enterprise will end in a rise in the associated fee
of providers income in absolute {dollars}, however could lower as a proportion of
revenues as we scale our operations.

Analysis and improvement

Analysis and improvement bills consist primarily of personnel and associated
bills for our analysis and improvement actions, together with salaries,
advantages, bonuses and stock-based compensation, and the price of third-party
builders and different contractors. Analysis and improvement prices, apart from
software program improvement bills qualifying for capitalization, are expensed as
incurred. For the three months ended March 31, 2021 and 2020, $2.2 million and
$3.7 million of software program improvement prices have been capitalized, respectively.
Capitalized software program improvement prices consist primarily of employee-related and
third-party labor prices.

We dedicate substantial assets to creating new merchandise and enhancing
current merchandise, conducting high quality assurance testing and enhancing our core
expertise. We imagine continued investments in analysis and improvement are
essential to achieve our strategic targets and count on analysis and improvement
prices to extend in absolute {dollars}. These investments embrace enhancing our
resolution choices to deal with altering buyer must help their progress,
in addition to implementing adjustments required to maintain tempo with our companions'
expertise to make sure the continued capability of our options to work collectively and
ship worth to our clients. The marketplace for our options is characterised by
fast technological change, frequent new product and repair introductions and
enhancements, altering buyer calls for and evolving {industry} requirements. As a
outcome, though we're making vital analysis and improvement
expenditures, which can be incurred and sure of which can be capitalized,
there isn't any assure these options will likely be accepted by the market. This might
end in elevated prices or an impairment of capitalized improvement prices with
no ensuing future income profit.

Gross sales and Advertising and marketing Prices

Promoting bills consist primarily of personnel and associated bills in help
of gross sales and advertising efforts. These prices embrace salaries, advantages, bonuses
and stock-based compensation. As well as, promoting expense consists of prices
associated to promoting and promotion efforts, branding prices, partner-based
commissions, prices related to our annual buyer conferences and
amortization of sure acquired intangible belongings. We intend to proceed to
spend money on our gross sales and advertising capabilities sooner or later to proceed to
enhance our model consciousness and count on these prices to extend on an absolute
greenback foundation as we develop our enterprise and proceed to broaden our market and
associate ecosystem penetration. Gross sales and advertising expense in absolute {dollars}
and as a proportion of whole income could fluctuate from period-to-period based mostly
on whole income ranges and the timing of our investments in our gross sales and
advertising capabilities as these investments could fluctuate in scope and scale over future
intervals. As well as, journey restrictions on account of COVID-19 proceed to end in
reductions in journey and exterior advertising occasions. These prices are anticipated to
enhance as soon as journey and convention restrictions are lifted, though it's
unsure whether or not they'll return to their historic ranges skilled
pre-COVID-19.

Normal and administrative

Normal and administrative bills primarily embrace personnel prices and associated bills for administrative, monetary, IT, authorized, threat administration, services and human useful resource staffing prices, together with salaries, advantages, bonuses , severance pay, stock-based compensation, skilled charges, insurance coverage premiums, set up prices and different inside help prices.

We count on our basic and administrative bills to extend in absolute {dollars} as we proceed to broaden our operations, rent extra workers, combine future acquisitions, and incur extra prices related to changing into a

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listed firm. As a public firm, we count on to incur elevated bills associated to accounting, tax and audit, authorized, insurance coverage,
SECOND inside management compliance and compliance, together with the design, implementation and testing of more and more formalized inside management methods over monetary reporting.

Depreciation and amortization

Depreciation and amortization expense consists of the allocation of bought
and developed asset prices over the long run intervals benefitted by way of these
belongings. These belongings embrace leasehold enhancements for our services,
computer systems and tools wanted to help our clients and our inside
infrastructure and capitalized internal-use software program related to our
inside infrastructure and instruments. Depreciation and amortization will fluctuate
in correlation with our ongoing funding in inside infrastructure prices
to
help our progress.

Curiosity Expense, web

Curiosity expense, web displays the quantity of our curiosity expense that exceeds curiosity revenue throughout the identical interval.

Curiosity expense consists primarily of curiosity funds and different financing
prices on our financial institution credit score facility. Curiosity expense consists of amortization of
deferred financing charges over the time period of the credit score facility or  write-downs of
such prices upon redemption of debt. Curiosity expense will fluctuate on account of
fluctuations within the stage of debt excellent in addition to rates of interest on such
debt. As well as, curiosity expense will embrace changes to the truthful worth
of contracts which may be entered into to hedge dangers related to forex
fluctuations for money receipts or money funds denominated in currencies different
than U.S. {dollars} and which don't qualify for hedge accounting. As well as,
adjustments within the settlement worth of the long run fee obligation for the Systax
Sistemas Fiscais Restricted ("Systax") acquisition will likely be recorded as curiosity
expense.

Curiosity revenue displays earnings on investments of our money readily available and on
funds held for purchasers associated to our managed outsourcing providers. Curiosity
revenue will fluctuate on account of fluctuations sooner or later stage of funds
accessible for funding and the speed of return accessible available in the market on
such
funds.

Provision for Revenue Taxes

Previous to July 27, 2020, Vertex was taxed as an S-corporation for U.S. federal
and sure state revenue tax functions. Consequently, web revenue or loss previous to
this date has been allotted to and included on the revenue tax returns of the
S-Company stockholders. Vertex was taxed on the company stage in sure
states the place the S-Company standing was not acknowledged or the place the state
imposed a tax on S-Companies. Accordingly, the revenue tax provision or
profit for such intervals was based mostly on taxable revenue allotted to these states.
In sure international jurisdictions, our subsidiaries have been taxed on the company
stage, and the revenue tax provision or profit relies on taxable revenue
sourced to those international jurisdictions.

Efficient from July 27, 2020, Vertex transformed to C-Company, ensuing within the taxation of our web revenue on the company stage. As such, our provision for revenue taxes has elevated since we at the moment are topic to we
federal and state company revenue taxes.

                             Outcomes of Operations

You must learn the next dialogue and evaluation of our monetary situation
and outcomes of operations at the side of our condensed consolidated
monetary statements and the notes thereto included elsewhere on this Quarterly
Report on Type 10-Q, our consolidated monetary statements and the notes with
our Annual Report on Type 10-Okay filed with the SEC on March 15, 2021, and our
Prospectus filed with the SEC on July 30, 2020. The period-to-period comparability
of economic outcomes just isn't essentially indicative of economic outcomes to
be
achieved in future intervals.

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The next desk presents our consolidated statements of complete revenue for the intervals indicated.



                                           Three months ended
                                               March 31,
({Dollars} in 1000's)                     2021          2020         Interval-Over-Interval Change
Revenues:
Software program subscriptions                  $   83,280$   75,760    $         7,520            9.9 %
Companies                                    14,956        13,485              1,471           10.9 %
Complete revenues                              98,236        89,245              8,991           10.1 %
Value of revenues:
Software program subscriptions(1)                   25,590        24,684                906            3.7 %
Companies(1)                                 11,343        14,778            (3,435)         (23.2) %
Complete price of revenues                      36,933        39,462            (2,529)          (6.4) %
Gross revenue                                61,303        49,783             11,520           23.1 %
Working bills:
Analysis and improvement(1)                 11,459        13,079            (1,620)         (12.4) %
Promoting and advertising(1)                    20,150        24,333            (4,183)         (17.2) %
Normal and administrative(1)               24,852        37,636           (12,784)         (34.0) %
Depreciation and amortization                2,827         2,869               (42)          (1.5) %
Different working (revenue) expense,
web                                          (129)           111              (240)        (216.2) %
Complete working bills                    59,159        78,028           (18,869)         (24.2) %
Revenue (loss) from operations                2,144      (28,245)             30,389          107.6 %
Curiosity expense, web                          535           569               (34)          (6.0) %
Revenue (loss) earlier than revenue taxes            1,609      (28,814)             30,423          105.6 %
Revenue tax (profit) expense                 (679)           250              (929)        (371.6) %
Internet revenue (loss)                            2,288      (29,064)             31,352          107.9 %
Different complete loss from
international forex translations and
revaluations, web of tax                       977         2,998            (2,021)         (67.4) %
Complete complete revenue (loss)       $    1,311$ (32,062)    $      

33,373 104.1%


 (1) Contains stock-based compensation bills as follows within the desk under.





                                              Three months ended
                                                   March 31
(In 1000's)                                2021          2020

Inventory-based compensation prices: price of revenues, software program subscriptions $ 560$ 3,492
Value of revenue, providers

                        594        5,238
Analysis and improvement                          561        3,492
Promoting and advertising                           1,287        6,984
Normal and administrative                      3,541       15,714

Complete stock-based compensation expense $ 6,543$ 34,920



                                      -41-

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The next desk presents our working outcomes as a proportion of our whole revenues for the intervals offered.



                                                              Three months ended
                                                                   March 31
                                                              2021         2020
Revenues:
Software program subscriptions                                          84.8 %        84.9 %
Companies                                                        15.2 %        15.1 %
Complete revenues                                                 100.0 %       100.0 %
Value of Revenues:
Software program subscriptions                                          26.0 %        27.7 %
Companies                                                        11.5 %        16.6 %
Complete price of revenues                                          37.5 %        44.3 %
Gross revenue                                                    62.5 %        55.7 %
Working bills:
Analysis and improvement                                        11.7 %        14.7 %
Promoting and advertising                                           20.5 %        27.3 %
Normal and administrative                                      25.3 %        42.2 %
Depreciation and amortization                                    2.9 %         3.2 %
Different working (revenue) expense, web                          (0.1) %     
   0.1 %
Complete working bills                                        60.3 %        87.5 %
Revenue (loss) from operations                                    2.2 %      (31.8) %
Curiosity expense, web                                            0.5 %         0.6 %
Revenue (loss) earlier than revenue taxes                                1.7 %      (32.4) %
Revenue tax (profit) expense                                   (0.7) %         0.3 %
Internet revenue (loss)                                                2.4 %      (32.7) %
Different complete loss from international forex
translations, web of tax                                         1.0 %         3.4 %
Complete complete revenue (loss)                                1.4 %     
(36.1) %




Three Months Ended March 31, 2021 In comparison with Three Months Ended March 31, 2020

Income




                            Three months ended
                                March 31,
({Dollars} in 1000's)       2021         2020         Interval-over-Interval change
Revenues:
Software program subscriptions    $   83,280$ 75,760    $          7,520       
    9.9 %
Companies                      14,956      13,485               1,471           10.9 %
Complete revenues            $   98,236$ 89,245    $          8,991           10.1 %




Income elevated $9.0 million, or 10.1%, to $98.2 million for the three months
ended March 31, 2021 in comparison with $89.2 million for the three months ended March
31, 2020. The rise in software program subscriptions income of $7.5 million, or
9.9%, was primarily pushed by and enhance of $7.3 million in revenues derived
from our current clients and a yr over yr enhance of $0.2 million in
revenues derived from new clients. Software program subscriptions income derived from
new clients averaged 7.5% of whole software program subscriptions income in each
intervals.



The $1.5 million enhance in providers income is primarily pushed by a rise
of $1.0 million in software program subscription associated providers related to the
progress in subscription revenues, which incorporates new clients implementing our
options and current clients upgrading to newer variations of our options.
As well as, our managed providers providing skilled a $0.5 million enhance
in recurring providers income over the prior yr on account of returns processing
quantity will increase associated to regulatory adjustments as clients expanded their tax
filings into extra jurisdictions.

                                      -42-

Contents

Value of income from software program subscriptions



                                             Three months ended
                                                 March 31,
({Dollars} in 1000's)                        2021         2020          Interval-over-Interval change
Value of software program subscription revenues     $   25,590$  24,684    $    
      906             3.7 %



Value of software program subscriptions income elevated $0.9 million, or 3.7%, to
$25.6 million for the three months ended March 31, 2021 in comparison with $24.7
million for the three months ended March 31, 2020. That is primarily pushed by a
$3.8 million enhance in prices of personnel supporting year-over-year progress of
gross sales and clients and ongoing infrastructure investments to help growth
of buyer transaction volumes for our cloud-based subscription clients. This
enhance is partially offset by a $2.9 million lower in stock-based
compensation for the three months ended March 31, 2021 over the identical interval in
2020. As a proportion of whole income, the price of software program subscriptions
income decreased to 26.0% for the three months ended March 31, 2021 in comparison with
27.7% for a similar interval in 2020. After excluding stock-based compensation
expense, as a proportion of whole income, price of software program subscriptions
income elevated to 25.5% in 2021 in comparison with 23.7% in 2020.



Value of Companies Income




                                Three months ended
                                    March 31,
({Dollars} in 1000's)           2021         2020        Interval-over-Interval change
Value of providers revenuess    $   11,343$ 14,778$       (3,435)        (23.2) %



Value of providers income decreased $3.4 million, or 23.2%, to $11.3 million for
the three months ended March 31, 2021 in comparison with $14.8 million for the three
months ended March 31, 2020. This decline is primarily pushed by a stock-based
compensation lower of $4.6 million for the three months ended March 31, 2021
over the identical interval in 2020. After adjusting for the decline in stock-based
compensation expense, price of providers income is rising $1.2 million
primarily pushed by a rise in prices of personnel supporting the service
supply areas to help income progress in software program subscription associated
providers and our managed providers providing. As a proportion of whole income,
price of providers income decreased to 11.5% in 2021 in comparison with 16.6% for the
identical interval in 2020. After excluding stock-based compensation expense, as a
proportion of whole income, price of providers income elevated to 10.9% in
2021
in comparison with 10.7% in 2020.



Analysis and Growth




                              Three months ended
                                  March 31,
({Dollars} in 1000's)         2021         2020        Interval-over-Interval change
Analysis and improvement    $   11,459$ 13,079$       (1,620)        (12.4) %




Analysis and improvement bills decreased $1.6 million, or 12.4%, to $11.5
million for the three months ended March 31, 2021 in comparison with $13.1 million for
the three months ended March 31, 2020. Nonetheless, this decline is primarily pushed
by a stock-based compensation lower of $2.9 million for the three months
ended March 31, 2021 over the identical interval in 2020. After adjusting for the
decline in stock-based compensation expense, analysis and improvement bills
are rising $1.3 million primarily pushed by a rise in prices related
with elevated improvement exercise related to nascent applied sciences and new
options to deal with end-to-end information evaluation and compliance wants of our
clients. As a proportion of whole income, analysis and improvement bills
decreased to 11.7% for the three months ended March 31, 2021 in comparison with 14.7%
for the three months ended March 31, 2020. After excluding stock-based
compensation expense, as a proportion of whole income, analysis and improvement
bills elevated to 11.1% in 2021 in comparison with 10.7% in 2020.

Analysis and improvement prices exclude prices which were capitalized for options that adjust to our capitalization coverage.

                                      -43-

  Desk of Contents

Promoting and Advertising and marketing




                            Three months ended
                                March 31,
({Dollars} in 1000's)       2021         2020        Interval-over-Interval change
Promoting and advertising     $   20,150$ 24,333$       (4,183)        (17.2) %




Promoting and advertising bills decreased $4.2 million, or 17.2%, to
$20.2 million for the three months ended March 31, 2021 in comparison with
$24.3 million for a similar interval in 2020. Nonetheless, this decline is primarily
pushed by a stock-based compensation lower of $5.7 million for the three
months ended March 31, 2021 over the identical interval in 2020. After adjusting for
the decline in stock-based compensation expense, promoting and advertising bills
are rising $1.5 million primarily pushed by a rise in payroll and
associated bills related to the expansion in year-over-year subscription gross sales
and providers income and growth of our associate and channel administration
applications. As a proportion of whole income, promoting and advertising bills
decreased to twenty.5% for the three months ended March 31, 2021 in comparison with 27.3%
for a similar interval in 2020. After excluding stock-based compensation expense,
as a proportion of whole income, promoting and advertising bills decreased to
19.2% in 2021 in comparison with 19.4% in 2020.



Normal and Administrative




                                Three months ended
                                    March 31,
({Dollars} in 1000's)           2021         2020        Interval-over-Interval change
Normal and administrative    $   24,852$ 37,636$       (12,784)        (34.0) %




Normal and administrative bills decreased $12.8 million, or 34.0%, to
$24.9 million for the three months ended March 31, 2021 in comparison with
$37.6 million for a similar interval in 2020. Nonetheless, this decline is primarily
pushed by a stock-based compensation lower of $12.2 million for the three
months ended March 31, 2021 over the identical interval in 2020. After adjusting for
the decline in stock-based compensation expense, basic and administrative
bills are reducing a further $0.6 million primarily pushed by a
lower in journey prices on account of COVID-19 journey restrictions and a rise in
capitalized prices related to inside optimization efforts, partially
offset by elevated prices related to public firm standing. As a proportion
of whole income, basic and administrative bills decreased to 25.3% for the
three months ended March 31, 2021 in comparison with 42.2% for a similar interval in 2020.
After excluding stock-based compensation expense, as a proportion of whole
income, basic and administrative bills decreased to 21.7% in 2021 in contrast
to 24.6% in 2020.

Provision for Taxes




                                  Three months ended
                                      March 31,
({Dollars} in 1000's)             2021          2020       Interval-over-Interval change
Revenue tax (profit) expense    $     (679)$  250$      (929)           (371.6) %



Revenue tax expense decreased $0.9 million, or 371.6%, to $(0.7) million of
revenue tax profit for the three months ended March 31, 2021 in comparison with
$0.3 million of revenue tax expense for a similar interval in 2020. The lower was
primarily on account of a pretax loss ensuing from a rise in stock-based
compensation in 2020 in comparison with the profit for U.S. federal and state revenue
taxes in 2021 now that we're taxed as a C-Company.  The revenue tax profit
within the three months ended March 31, 2021 is primarily pushed by workouts of
inventory choices partially offset by the unfavorable affect of limitations on
deductions of sure staff' compensation underneath Inside Income Code
Part 162(m).







                                      -44-

  Desk of Contents

                        Liquidity and Capital Sources

As of March 31, 2021, we had money and money equivalents of $277.7 million and
retained earnings of $24.7 million. Our main sources of capital up to now have
been from gross sales of our options, and proceeds from financial institution lending services. In
addition, on July 31, 2020, we obtained $423.0 million in proceeds from the
Providing, web of underwriting charges and commissions, from the sale of 23,812,216
shares of Class A standard inventory and used a portion of the proceeds to repay the
$175.0 million time period mortgage underneath the financial institution credit score settlement. Consequently, we've
no excellent financial institution debt after such redemption and at March 31, 2021. The online
proceeds remaining after fee of Providing prices will likely be used for working
capital and different company functions as described within the Prospectus.

At Might 12, 2021, we used roughly $ 200.0 million of our money and money equivalents to amass Taxamo, a cloud-based pioneer in tax and fee automation for e-commerce and world markets.

We imagine that our current money assets and our financial institution line of credit score will likely be
enough to satisfy our capital necessities and fund our operations for at the least
the following 12 months. Nonetheless, if these sources are inadequate to fulfill our
liquidity necessities, we could search to promote extra fairness or debt
securities. If we elevate extra funds by issuing fairness securities, our
stockholders would expertise dilution. Debt financing, if accessible, could
contain covenants proscribing our operations or our capability to incur extra
debt. Any debt financing or extra fairness that we elevate could include phrases
that aren't favorable to us or our stockholders. Further financing could not
be accessible in any respect, or in quantities or on phrases unacceptable to us.

The next desk presents a abstract of our money flows for the intervals
indicated:




                                              Three months ended
                                                  March 31,
({Dollars} in 1000's)                        2021          2020         Interval-Over-Interval Change
Internet money utilized in working actions      $  (2,965)$  (6,417)    $         3,452         (53.8) %
Internet money utilized in investing actions        (14,516)      (21,656)              7,140         (33.0) %
Internet money (utilized in) offered by
financing actions                          (8,140)       103,654          (111,794)        (107.9) %
Impact of international alternate fee adjustments         (226)         (249)                 23          (9.2) %
Internet (lower) enhance in money, money
equivalents and restricted money            $ (25,847)$   75,332    $   
 (101,179)        (134.3) %




Working Actions. Internet money utilized in working actions was $3.0 million for
the three months ended March 31, 2021 in comparison with $6.4 million for a similar
interval in 2020, a lower of $3.5 million. The lower in the usage of money from
working actions was pushed primarily by a rise in web revenue of $31.4
million offset by a lower in stock-based compensation of $28.4 million.
Traditionally, our money flows from working actions are decrease within the first
quarter than the remaining calendar quarters as they're closely influenced by
annual worker bonus and different variable compensation funds made within the
first
quarter of every yr.



Investing Actions. Money utilized in investing actions was $14.5 million for
the three months ended March 31, 2021 in comparison with $21.7 million for a similar
interval in 2020, an lower of $7.1 million. This lower was primarily on account of
a lower in money paid for acquisitions of $6.2 million interval over interval. We
acquired a controlling curiosity in Systax, a Brazilian transaction tax software program
and content material subscription supplier, for money of $12.3 million throughout the three
months ended March 31, 2020, partially offset by the acquisition of Tellutax, an
Oregon-based computing edge expertise firm, for money paid of $6.1 million
throughout the three months ended March 31, 2021. For added info on the
Tellutax acquisition, see "Observe 3 to the Interim Condensed Consolidated
Monetary Statements (unaudited) -Acquisition."

Financing Actions. Money (utilized in) offered by financing actions was
$(8.1) million for the three months ended March 31, 2021 in comparison with
$103.7 million for a similar interval in 2020, a lower of $111.8 million. The
three months ended March 31, 2020 included web borrowings underneath the financial institution credit score
settlement of $121.1 million, offset by distributions to stockholders of $17.2
million. None of this exercise recurred within the comparable interval in 2021. The
three months ended

                                      -45-

  Desk of Contents

March 31, 2021 included $7.2 million in funds for taxes in reference to
the train of inventory choices whereby the award holders returned shares to us to
fulfill their tax obligations.

Debt. As of March 31, 2021, we had a $100 million line of credit score with no
excellent borrowings. Curiosity on excellent borrowings accrue at a Base Charge
plus an relevant margin (3.25% as of March 31, 2021) or the London Interbank
Supplied Charge ("LIBOR") plus an relevant margin (2.00% as of March 31, 2021).
We've no excellent financial institution debt at March 31, 2021.

Funds held for shoppers and monetary obligations of shoppers

We preserve belief accounts with monetary establishments, which permits our
clients to outsource their tax remittance capabilities to us. We've authorized
possession over the accounts utilized for this function. Funds held for purchasers
represents money and money equivalents that, based mostly upon our intent, are restricted
solely for satisfying the obligations to remit funds referring to our tax
remittance providers. Funds held for purchasers will not be commingled with our
working funds.

Buyer funds obligations signify our contractual obligations to remit
collected funds to fulfill buyer tax funds. Buyer funds obligations are
reported as a present legal responsibility on our consolidated stability sheets because the
obligations are anticipated to be settled inside one yr. Money flows associated to
adjustments in buyer funds obligations legal responsibility are offered as money flows from
financing actions.

Off-balance sheet preparations

We don't have any off-balance sheet preparations, as outlined by relevant
rules of the SEC, which can be moderately prone to have a present or future
materials impact on our monetary situation, outcomes of operations, liquidity,
capital expenditures or capital assets.

Obligations and contractual commitments

Apart from the redemption of our excellent debt via use of a portion of
the Providing proceeds, there have been no materials updates or adjustments to our
contractual obligations and commitments in comparison with contractual obligations and
commitments described in our Annual Report on Type 10-Okay for the yr ended
December 31, 2020.

             Use and Reconciliation of Non-GAAP Monetary Measures

Along with our outcomes decided in accordance with GAAP, we've
calculated non-GAAP price of revenues, non-GAAP gross revenue, non-GAAP gross
margin, non-GAAP analysis and improvement expense, non-GAAP promoting and
advertising expense, non-GAAP basic and administrative expense, non-GAAP
working revenue, non-GAAP web revenue, Adjusted EBITDA, Adjusted EBITDA margin,
free money movement and free money movement margin, that are every non-GAAP monetary
measures. We've offered tabular reconciliations of every of those non-GAAP
monetary measures to its most immediately comparable GAAP monetary measure.

We use these non-GAAP monetary measures to know and examine working
outcomes throughout accounting intervals, for inside budgeting and forecasting
functions, and to judge monetary efficiency and liquidity. Our non-GAAP
monetary measures are offered as supplemental disclosure as we imagine they
present helpful info to traders and others in understanding and
evaluating our outcomes, prospects, and liquidity period-over-period with out the
affect of sure gadgets that don't immediately correlate to our working
efficiency and that will fluctuate considerably from interval to interval for causes
unrelated to our working efficiency, in addition to evaluating our monetary
outcomes to these of different corporations. Our definitions of those non-GAAP monetary
measures could differ from equally titled measures offered by different corporations
and due to this fact comparability could also be restricted. As well as, different corporations could not
publish these or comparable metrics. Thus, our non-GAAP monetary measures ought to
be thought-about along with, not as an alternative to, or in isolation from, the
monetary info ready in accordance with GAAP monetary measures, and
ought to be learn at the side of the consolidated monetary statements
included on this Quarterly Report on Type 10-Q.

                                      -46-

Contents

We calculate these non-GAAP monetary measures as follows:

Value of non-GAAP income, software program subscriptions are decided by including once more

the price of GAAP revenues, software program subscriptions, inventory compensation

? the expense and depreciation and amortization of capitalized software program prices and

acquired intangible belongings included in the price of revenue for

intervals.

Value of non-GAAP revenues, providers are decided by including again to GAAP price

? revenue, providers, stock-based compensation expense included in the price of

revenue for the respective intervals.

Non-GAAP gross revenue is decided by including again to GAAP gross revenue the

? stock-based compensation expense and the depreciation and amortization of

capitalized software program prices and bought intangible belongings included in the price of

revenue for the respective intervals.

The non-GAAP gross margin is decided by including to the GAAP gross margin the

? affect of stock-based compensation expense and depreciation and amortization

capitalized software program prices and bought intangible belongings included in the associated fee

   of revenues as a proportion of revenues for the respective intervals.


   Non-GAAP analysis and improvement expense and non-GAAP basic and

administrative charges are decided by including to GAAP search and

? improvement, basic and administrative prices in accordance with GAAP

the compensation expense and severance pay included within the relevant expense

classes for the respective intervals.

Non-GAAP promoting and advertising bills are decided by including to GAAP

? gross sales and advertising prices stock-based compensation prices and

amortization of acquired intangible belongings included within the sale and advertising

bills for the respective intervals.

Non-GAAP working revenue is decided by including again to GAAP working revenue

? or lack of stock-based compensation expense, impairment and amortization of

software program prices capitalized and intangible belongings acquired, and severance funds

expenses included in GAAP working revenue or loss for the respective intervals.

Non-GAAP web revenue is decided by including to GAAP revenue or loss earlier than

revenue taxes stock-based compensation expense, depreciation and

amortization of capitalized software program prices and bought intangible belongings –

price of subscription revenue, amortization of acquired intangible belongings –

? gross sales and advertising bills and severance pay included in GAAP revenue or

loss earlier than revenue taxes for the respective intervals to find out non-GAAP

revenue or loss earlier than revenue taxes. Non-GAAP revenue or loss earlier than revenue taxes

is then adjusted for revenue taxes calculated utilizing the respective statutory tax

   charges for relevant jurisdictions, which for functions of this dedication
   have been assumed to be 25.5%  and a pair of.0% for the 2021 and 2020 intervals, respectively.

Adjusted EBITDA is decided by including to GAAP web revenue or web loss

curiosity revenue or expense, revenue taxes, depreciation and amortization of

tangible mounted belongings, depreciation and amortization of capitalized software program

? prices and intangible belongings acquired – price of subscription revenues,

amortization of acquired intangible belongings – promoting and advertising prices,

asset write-downs, stock-based compensation prices, severance funds and

transaction prices included in GAAP web revenue or web loss for

intervals.

? Adjusted EBITDA margin is decided by dividing Adjusted EBITDA by the entire

revenue for the respective intervals.

Free money movement is decided by the web money offered by (utilized in) the operation

? actions and cut back it for purchases of property, plant and tools and

software program additions in capital letters for the respective intervals.

                                      -47-

  Desk of Contents

? The free money movement margin is decided by dividing the free money movement by the entire

revenue for the respective intervals.


We encourage traders and others to assessment our monetary info in its
entirety, to not depend on any single monetary measure and to view these non-GAAP
monetary measures at the side of the associated GAAP monetary measures.





The next schedules replicate our non-GAAP monetary measures and reconcile
our non-GAAP monetary measures to the associated GAAP monetary measures. Confer with
"Merchandise 2. Administration's Dialogue and Evaluation of Monetary Situation and Outcomes
of Operations - Key Enterprise Metrics" for additional dialogue and reconciliation
of Adjusted EBITDA, Adjusted EBITDA margin, free money movement and free money movement
margin to the associated GAAP monetary measures.




                                                       Three months ended
                                                            March 31
({Dollars} in 1000's)                                  2021         2020

Value of non-GAAP income, software program subscriptions $ 19,125$ 16,625
Value of income, non-GAAP providers

                  $   10,749$  9,540
Non-GAAP gross revenue                                $   68,362$ 63,080
Non-GAAP gross margin                                      69.7 %      70.6 %
Non-GAAP analysis and improvement expense            $   10,898$  9,587
Non-GAAP promoting and advertising expense               $   18,779$ 17,349
Non-GAAP basic and administrative expense          $   20,630$ 20,739
Non-GAAP working revenue                            $   15,357$ 12,425
Non-GAAP web revenue                                  $   11,042$ 11,619




                                      -48-

  Desk of Contents


                                                                    Three months ended
                                                                         March 31
({Dollars} in 1000's)                                              2021          2020

Value of Non-GAAP Income, Software program Subscriptions: Value of Income, Software program Subscriptions

                          $  25,590$   24,684
Inventory-based compensation expense                                      (560)

(3 492)

Depreciation of capitalized software program and bought intangible belongings – price of subscription revenue (5,905)

(4,567)

Non-GAAP price of revenues, software program subscriptions                 $  19,125

$ 16,625

Non-GAAP Value of Revenues, Companies:
Value of revenues, providers                                        $  11,343$   14,778
Inventory-based compensation expense                                      (594)

(5 238)

Non-GAAP price of revenues, providers                               $  10,749
   $    9,540

Non-GAAP Gross Revenue:
Gross revenue                                                      $  61,303$   49,783
Inventory-based compensation expense                                      1,154

8,730

Depreciation of capitalized software program and bought intangible belongings – price of subscription revenue

            5,905         4,567
Non-GAAP gross revenue                                             $  68,362$   63,080

Non-GAAP Gross Margin:
Gross margin                                                           62.5

% 55.7% Inventory-based compensation expense as a proportion of income

                                                                1.2 %         9.8 %
Depreciation and amortization of capitalized software program and
acquired intangible belongings - price of subscription revenues
as a proportion of revenues                                             6.0 %         5.1 %
Non-GAAP gross margin                                                  69.7 %        70.6 %

Non-GAAP Analysis and Growth Expense:
Analysis and improvement expense                                  $  11,459$   13,079
Inventory-based compensation expense                                      (561)

(3 492)

Non-GAAP analysis and improvement expense                         $  10,898

$ 9,587

Non-GAAP Promoting and Advertising and marketing Expense:
Promoting and advertising expense                                     $  20,150$   24,333
Inventory-based compensation expense                                    (1,287)

(6,984)

Amortization of acquired intangible belongings - promoting and
advertising expense                                                      (84)             -
Non-GAAP promoting and advertising expense                            $  18,779

$ 17,349

Non-GAAP Normal and Administrative Expense:
Normal and administrative expense                                $  24,852$   37,636
Inventory-based compensation expense                                    (3,541)
     (15,714)
Severance expense                                                     (531)       (1,183)
Transaction prices                                                     (150)             -
Non-GAAP basic and administrative expense                       $  20,630
   $   20,739

Non-GAAP Working Revenue:
Revenue (loss) from operations                                     $   2,144$ (28,245)
Inventory-based compensation expense                                      6,543

34 920

Depreciation of capitalized software program and bought intangible belongings – price of subscription revenue

            5,905 

4,567

Amortization of acquired intangible belongings - promoting and
advertising expense                                                        84             -
Severance expense                                                       531         1,183
Transaction prices                                                       150             -
Non-GAAP working revenue                                         $  15,357$   12,425



                                      -49-

  Desk of Contents

Non-GAAP Internet Revenue:
Revenue (loss) earlier than revenue taxes                                $   1,609$ (28,814)
Inventory-based compensation expense                                     6,543 

34 920

Depreciation of capitalized software program and bought intangible belongings – price of subscription revenue

           5,905  

4,567

Amortization of acquired intangible belongings - promoting and
advertising expense                                                       84             -
Severance expense                                                      531         1,183
Transaction prices                                                      150             -
Non-GAAP revenue earlier than revenue taxes                                 14,822 

11 856

Revenue tax adjustment at statutory fee                            (3,780) 
       (237)
Non-GAAP web revenue                                              $  11,042$   11,619




                   Vital Accounting Insurance policies and Estimates

The essential accounting insurance policies that replicate our extra vital judgments and
estimates used within the preparation of our condensed consolidated monetary
statements embrace software program improvement prices, goodwill, accounting for
stock-based compensation, income recognition, and revenue taxes, that are
described in "Observe 1-Abstract of Vital Accounting Insurance policies" in Half I, Merchandise
1 of this Quarterly Report on Type 10-Q.

There have been no updates or materials adjustments to our essential accounting insurance policies and estimates from the essential accounting insurance policies and estimates described in our annual report on Type 10-Okay for the interval ended.
December 31, 2020.

Latest accounting statements

For additional info on latest accounting pronouncements, confer with Observe 1 in
the condensed consolidated monetary statements contained inside this Quarterly
Report on Type 10-Q

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