Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Our Class A common stock has been listed on the NASDAQ exchange, under the symbol “VERX” since July 28, 2020. Prior to that date, there was no public trading market for our common stock.
Our Class B common stock is not listed on any stock exchange nor traded on any public market.
Holders
As of December 31, 2020, we had 3 holders of record of our Class A common stock. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of shareholders, we are unable to estimate the total number of shareholders represented by these record holders.
As of December 31, 2020, there were 25 stockholders of record of our Class B common stock.
Dividend Policy
We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.
Stock Performance Graph
The graph below compares the cumulative total return on our Class A common stock with that of the S&P 500 Index and the NASDAQ U.S. Benchmark Software TR Index. The period shown commences on July 28, 2020, and ends on December 31, 2020, the end of our most recent fiscal year. The graph assumes an investment of $100 in each of the aforementioned on the close of market on July 28, 2020. The stock price performance graph is not necessarily indicative of future price performance.
Base Date
Company / Index
7/28/2020
9/30/2020
12/31/2020
Vertex, Inc.
$
100.00
$
96.11
$
145.63
S&P 500
$
100.00
$
103.54
$
116.12
NASDAQ U.S. Benchmark Software TR
$
100.00
$
105.29
$
114.08
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Recent Sales of Unregistered Securities
None.
Use of Proceeds
On July 28, 2020, the SEC declared effective our Registration Statement on Form S-1 (File No. 333-239644) for our offering of Class A common stock (the “Registration Statement”). On July 31, 2020, we received $423.0 million in proceeds, net of $26.1 million of underwriting fees and commissions, from the sale of 23,812,216 shares of our Class A common stock. Subsequently, we paid $6.2 million for offering costs and used a portion of the net proceeds of $416.8 million to pay off all amounts outstanding under our term loan facility, which aggregated $175.0 million. There has been no material change in the planned use of proceeds from our offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b).
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6. Selected Financial Data
The following table sets forth our selected historical consolidated financial information for the periods and dates indicated. The consolidated balance sheet data as of December 31, 2020 and 2019 and the consolidated comprehensive income (loss) data for the years ended December 31, 2020, 2019 and 2018 have been derived from our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The consolidated balance sheet data as of December 31, 2018 has been derived from our consolidated financial statements not included in this Annual Report on Form 10-K.
Our financial information has been impacted by certain events which occurred in 2020 and which are described below. The financial information set forth in this section is not necessarily indicative of future results of operations.
We have historically been taxed as an S-Corporation for U.S. federal income tax purposes and for income tax purposes in most states. As a result, net income or loss has been allocated to our stockholders and included on their individual income tax returns prior to July 27, 2020. Effective July 27, 2020 we converted to a C-Corporation, which has resulted in our net income or losses for all future periods to be taxed at the corporate level. As such, our income tax provision will not be comparable for periods prior to the C-Corporation conversion.
On July 28, 2020, the Company filed its amended and restated certificate of incorporation with the Delaware Secretary of State to: (i) effect a three-for-one forward stock split (the “Stock Split”); (ii) establish a new capital structure for the Company (the “New Capital Structure”); and (iii) effect a share exchange (the “Share Exchange”) (collectively, the “Recapitalization”). The Stock Split resulted in each one share owned by a stockholder being exchanged for three shares of common stock, and the number of shares of the Company’s common stock issued and outstanding was increased proportionately based on the Stock Split. After the Stock Split, the Share Exchange occurred, resulting in stockholders of record exchanging their existing Class A and Class B common stock (“former Class A” and “former Class B,” respectively) for newly created shares of Class A and Class B common stock (“Class A” and “Class B,” respectively) issued in connection with the New Capital Structure. The effect of the Stock Split and the Share Exchange are recognized retrospectively in our consolidated financial statements.
Our Registration Statement was declared effective on July 28, 2020, resulting in our Class A common stock being registered and available for trading on the NASDAQ exchange (the “Offering”). On July 31, 2020, the Company received $423.0 million in proceeds from the sale of 23,812,216 shares of Class A common stock at the Offering price of $19.00 per share on July 28, 2020, net of underwriting fees, and used a portion of the proceeds to pay off all amounts outstanding under our term loan facility, which aggregated $175.0 million.
Historical earnings per share information for all periods presented prior to the Offering was retrospectively restated similar to the treatment of a stock split to reflect the Share Exchange as management concluded that there was no economic value attributable to such exchange of shares in connection with the Recapitalization. Class A common stock issued in connection with the Offering are reflected in the weighted average share calculation from their issuance date.
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This data should be read in conjunction with and is qualified in its entirety by reference to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto for the periods and dates indicated beginning on page F-1 of this Annual Report on Form 10-K. Revenues are reflected in accordance with Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers , (“ASC 606”), which we adopted on January 1, 2018.
For the Year Ended
December 31,
(In thousands, except per share data)
2020
2019
2018
Consolidated Comprehensive Income (Loss) Data:
Revenues:
Software subscriptions
$
316,763
$
275,629
$
235,663
Services
57,902
45,871
36,740
Total revenues
374,665
321,500
272,403
Cost of Revenues:
Software subscriptions (1)
105,676
77,259
68,945
Services (1)
59,711
33,119
26,753
Total cost of revenues
165,387
110,378
95,698
Gross profit
209,278
211,122
176,705
Operating expenses:
Research and development (1)
54,340
30,557
23,755
Selling and marketing (1)
99,418
68,127
56,898
General and administrative (1)
149,057
71,014
58,947
Depreciation and amortization
11,018
8,996
7,937
Impairment of asset (2)
—
—
32,692
Other operating expense (income), net
203
573
(691)
Total operating expenses
314,036
179,267
179,538
(Loss) income from operations
(104,758)
31,855
(2,833)
Interest expense, net
3,111
953
1,594
(Loss) income before income taxes
(107,869)
30,902
(4,427)
Income tax (benefit) expense
(28,932)
(155)
1,679
Net (loss) income
(78,937)
31,057
(6,106)
Other comprehensive loss (income) from foreign currency translation adjustments and revaluations, net of tax
2,636
(5)
355
Total comprehensive (loss) income
$
(81,573)
$
31,062
$
(6,461)
Net (loss) income attributable to Class A stockholders, basic
$
(6,660)
$
23
$
(16)
Net (loss) income per Class A share, basic
$
(0.60)
$
0.20
$
(0.08)
Weighted average Class A common stock, basic
11,096
118
210
Net (loss) income attributable to Class A stockholders, diluted
$
(6,660)
$
965
$
(16)
Net (loss) income per Class A share, diluted
$
(0.60)
$
0.25
$
(0.08)
Weighted average Class A common stock, diluted
11,096
3,861
210
Net (loss) income attributable to Class B stockholders, basic
$
(72,277)
$
31,034
$
(6,090)
Net (loss) income per Class B share, basic
$
(0.60)
$
0.26
$
(0.05)
Weighted average Class B common stock, basic
120,415
120,417
120,417
Net (loss) income attributable to Class B stockholders, diluted
$
(72,277)
$
30,092
$
(6,090)
Net (loss) income per Class B share, diluted
$
(0.60)
$
0.25
$
(0.05)
Weighted average Class B common stock, diluted
120,415
120,417
120,417
(1) Includes stock-based compensation expense as follows in the table below. For more details, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Seasonality and Quarterly Trends” included elsewhere in this Annual Report on Form 10-K.
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For the Year Ended
December 31,
(In thousands)
2020
2019
2018
Stock-based compensation expense:
Cost of revenues, software subscriptions
$
14,663
$
946
$
512
Cost of revenues, services
21,472
1,419
765
Research and development
14,694
946
511
Selling and marketing
29,551
1,892
1,022
General and administrative
67,524
4,257
2,298
Total stock-based compensation expense
$
147,904
$
9,460
$
5,108
(2) During the year ended December 31, 2018, we recorded an impairment of $32.7 million for capitalized internal-use software previously utilized to provide cloud-based services to customers, net of accumulated amortization of $11.9 million. This impairment was related to a product strategy shift that resulted in this cloud offering no longer being made available for sale to customers after 2018. The capitalized development costs were deemed to be fully impaired due to the net book value of the asset exceeding its future expected cash flows.
As of December 31,
(In thousands)
2020
2019
2018
Consolidated Balance Sheet Data:
Cash and cash equivalents
$
303,051
$
75,903
$
55,838
Total assets
$
554,928
$
264,623
$
215,072
Deferred revenue (current and non-current)
$
222,262
$
205,791
$
178,703
Debt (current and non-current)
$
1,107
$
51,486
$
54,883
Total liabilities
$
329,442
$
377,055
$
326,768
Options for redeemable shares
$
—
$
17,344
$
14,581
Total stockholders' equity (deficit)
$
225,486
$
(129,776)
$
(126,277)
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.