Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2021 | Nov. 08, 2021 | |
Document Information: | ||
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2021 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 001-39413 | |
Entity Registrant Name | Vertex, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 23-2081753 | |
Entity Address, Address Line One | 2301 Renaissance Blvd | |
Entity Address, City or Town | King of Prussia | |
Entity Address State Or Province | PA | |
Entity Address, Postal Zip Code | 19406 | |
City Area Code | 800 | |
Local Phone Number | 355-3500 | |
Title of 12(b) Security | Class A Common Stock, Par Value $0.001 Per Share | |
Trading Symbol | VERX | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001806837 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Class A | ||
Document Information: | ||
Entity Common Stock, Shares Outstanding | 40,772,739 | |
Class B | ||
Document Information: | ||
Entity Common Stock, Shares Outstanding | 108,017,000 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 47,481 | $ 303,051 |
Funds held for customers | 27,860 | 9,222 |
Accounts receivable, net of allowance of $8,845, and $8,592, respectively | 73,234 | 77,159 |
Prepaid expenses and other current assets | 18,167 | 13,259 |
Total current assets | 166,742 | 402,691 |
Property and equipment, net of accumulated depreciation | 97,869 | 56,557 |
Capitalized software, net of accumulated amortization | 34,018 | 31,989 |
Goodwill and other intangible assets | 277,924 | 18,711 |
Deferred commissions | 12,583 | 11,743 |
Deferred income tax asset | 32,816 | 29,974 |
Operating lease right-of-use assets | 21,137 | |
Other assets | 2,755 | 3,263 |
Total assets | 645,844 | 554,928 |
Current liabilities: | ||
Accounts payable | 10,701 | 8,876 |
Accrued expenses | 23,467 | 19,176 |
Distributions payable | 2,700 | |
Customer funds obligations | 27,979 | 9,235 |
Accrued salaries and benefits | 26,472 | 17,326 |
Accrued and deferred compensation, current | 23,101 | 24,429 |
Deferred revenue | 211,036 | 207,560 |
Current portion of long-term debt | 882 | |
Current portion of operating lease liabilities | 2,480 | |
Current portion of finance lease liabilities | 276 | |
Deferred rent and other | 939 | |
Deferred purchase consideration, current | 19,705 | |
Purchase commitment and contingent consideration liabilities, current | 478 | 845 |
Total current liabilities | 345,695 | 291,968 |
Deferred compensation, net of current portion | 2,786 | 5,010 |
Deferred revenue, net of current portion | 11,544 | 14,702 |
Debt, net of current portion | 225 | |
Operating lease liabilities, net of current portion | 26,707 | |
Finance lease liabilities, net of current portion | 334 | |
Deferred purchase consideration, net of current portion | 19,319 | |
Purchase commitment and contingent consideration liabilities, net of current portion | 11,049 | 8,905 |
Deferred other liabilities | 4,199 | 8,632 |
Total liabilities | 421,633 | 329,442 |
Commitments and contingencies (Note 13) | ||
Stockholders' equity: | ||
Preferred shares, $0.001 par value, 30,000 shares authorized; no shares issued and outstanding | ||
Additional paid in capital | 215,647 | 206,541 |
Retained earnings | 21,582 | 21,926 |
Accumulated other comprehensive loss | (13,167) | (3,127) |
Total stockholders' equity | 224,211 | 225,486 |
Total liabilities and stockholders' equity | 645,844 | 554,928 |
Class A | ||
Stockholders' equity: | ||
Common stock, value issued | 41 | 26 |
Class B | ||
Stockholders' equity: | ||
Common stock, value issued | $ 108 | $ 120 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Allowance for accounts receivable | $ 8,845 | $ 8,592 |
Preferred stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 30,000 | 30,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Class A | ||
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 300,000 | 300,000 |
Common stock, shares issued (in shares) | 40,574 | 26,327 |
Common stock, shares outstanding (in shares) | 40,574 | 26,327 |
Class B | ||
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 150,000 | 150,000 |
Common stock, shares issued (in shares) | 108,017 | 120,117 |
Common stock, shares outstanding (in shares) | 108,017 | 120,117 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Loss - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenues: | ||||
Revenues | $ 110,718 | $ 94,605 | $ 313,892 | $ 275,121 |
Cost of revenues: | ||||
Cost of revenues | 43,938 | 47,968 | 118,250 | 129,175 |
Gross profit | 66,780 | 46,637 | 195,642 | 145,946 |
Operating expenses: | ||||
Research and development | 9,879 | 16,501 | 33,264 | 43,197 |
Selling and marketing | 25,658 | 29,423 | 70,673 | 78,300 |
General and administrative | 31,237 | 48,043 | 80,954 | 123,437 |
Depreciation and amortization | 3,082 | 2,735 | 8,787 | 8,109 |
Other operating expense (income), net | 538 | (60) | 4,892 | 154 |
Total operating expenses | 70,394 | 96,642 | 198,570 | 253,197 |
Loss from operations | (3,614) | (50,005) | (2,928) | (107,251) |
Interest expense, net | 521 | 1,796 | 671 | 3,424 |
Loss before income taxes | (4,135) | (51,801) | (3,599) | (110,675) |
Income tax benefit | (187) | (30,773) | (2,747) | (31,508) |
Net loss | (3,948) | (21,028) | (852) | (79,167) |
Other comprehensive loss from foreign currency translation adjustments and revaluations, net of tax | 5,704 | 238 | 10,040 | 3,512 |
Total comprehensive loss | (9,652) | (21,266) | (10,892) | (82,679) |
Software subscriptions | ||||
Revenues: | ||||
Revenues | 92,276 | 79,778 | 265,160 | 232,844 |
Cost of revenues: | ||||
Cost of revenues | 32,000 | 29,161 | 84,419 | 79,846 |
Services | ||||
Revenues: | ||||
Revenues | 18,442 | 14,827 | 48,732 | 42,277 |
Cost of revenues: | ||||
Cost of revenues | 11,938 | 18,807 | 33,831 | 49,329 |
Class A | ||||
Operating expenses: | ||||
Net loss attributable to stockholders, basic | $ (1,070) | $ (2,751) | $ (195) | $ (2,427) |
Net loss per share, basic (in dollars per share) | $ (0.03) | $ (0.15) | $ (0.01) | $ (0.40) |
Weighted average common stock, basic (in shares) | 40,141 | 18,124 | 33,775 | 6,129 |
Net income (loss) attributable to stockholders, diluted | $ (1,070) | $ (2,751) | $ (195) | $ (2,427) |
Net income (loss) per share, diluted (in dollars per share) | $ (0.03) | $ (0.15) | $ (0.01) | $ (0.40) |
Weighted average common stock, diluted (in shares) | 40,141 | 18,124 | 33,775 | 6,129 |
Class B | ||||
Operating expenses: | ||||
Net loss attributable to stockholders, basic | $ (2,878) | $ (18,277) | $ (657) | $ (76,740) |
Net loss per share, basic (in dollars per share) | $ (0.03) | $ (0.15) | $ (0.01) | $ (0.64) |
Weighted average common stock, basic (in shares) | 108,017 | 120,417 | 113,646 | 120,417 |
Net income (loss) attributable to stockholders, diluted | $ (2,878) | $ (18,277) | $ (657) | $ (76,740) |
Net income (loss) per share, diluted (in dollars per share) | $ (0.03) | $ (0.15) | $ (0.01) | $ (0.64) |
Weighted average common stock, diluted (in shares) | 108,017 | 120,417 | 113,646 | 120,417 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Equity (Deficit) - USD ($) shares in Thousands, $ in Thousands | Common StockFormer Class AASC 842 | Common StockFormer Class A | Common StockFormer Class BASC 842 | Common StockFormer Class B | Common StockClass A | Common StockClass B | Additional paid in capital. | Retained Earnings (Accumulated Deficit).ASC 842 | Retained Earnings (Accumulated Deficit). | Accumulated Other Comprehensive LossASC 842 | Accumulated Other Comprehensive Loss | Treasury stockASC 842 | Treasury stock | Former Class A | Former Class B | Class A | Class B | Options for redeemable sharesASC 842 | Options for redeemable shares | Total |
Balance at Dec. 31, 2019 | $ 54 | $ (90,701) | $ (491) | $ (38,638) | ||||||||||||||||
Balance (in shares) at Dec. 31, 2019 | 147 | 120,270 | 41,910 | |||||||||||||||||
Options for redeemable shares, bgn at Dec. 31, 2019 | $ 17,344 | |||||||||||||||||||
Remeasurement of options for redeemable shares | $ (15,242) | $ 15,242 | ||||||||||||||||||
Distributions declared | (4,010) | $ (4,010) | ||||||||||||||||||
Foreign currency translation adjustments and revaluations, net of tax | $ (2,998) | |||||||||||||||||||
Net loss | (29,064) | |||||||||||||||||||
Balance at Mar. 31, 2020 | $ 54 | (139,017) | (3,489) | $ (38,638) | ||||||||||||||||
Balance (in shares) at Mar. 31, 2020 | 147 | 120,270 | 41,910 | |||||||||||||||||
Options for redeemable shares, ending at Mar. 31, 2020 | 32,586 | |||||||||||||||||||
Balance at Dec. 31, 2019 | $ 54 | $ (90,701) | $ (491) | $ (38,638) | ||||||||||||||||
Balance (in shares) at Dec. 31, 2019 | 147 | 120,270 | 41,910 | |||||||||||||||||
Options for redeemable shares, bgn at Dec. 31, 2019 | $ 17,344 | |||||||||||||||||||
Foreign currency translation adjustments and revaluations, net of tax | (3,512) | |||||||||||||||||||
Net loss | (79,167) | |||||||||||||||||||
Balance at Sep. 30, 2020 | $ 26 | $ 120 | $ 200,722 | 21,696 | (4,003) | |||||||||||||||
Balance (in shares) at Sep. 30, 2020 | 25,688 | 120,417 | 147 | 120,443 | ||||||||||||||||
Balance at Mar. 31, 2020 | $ 54 | (139,017) | (3,489) | $ (38,638) | ||||||||||||||||
Balance (in shares) at Mar. 31, 2020 | 147 | 120,270 | 41,910 | |||||||||||||||||
Options for redeemable shares, bgn at Mar. 31, 2020 | 32,586 | |||||||||||||||||||
Remeasurement of options for redeemable shares | (14,637) | 14,637 | ||||||||||||||||||
Distributions declared | (123,185) | (123,185) | ||||||||||||||||||
Exercise of stock options, net | 53 | |||||||||||||||||||
Exercise of stock options, net (in shares) | 173 | |||||||||||||||||||
Foreign currency translation adjustments and revaluations, net of tax | (276) | |||||||||||||||||||
Net loss | (29,075) | |||||||||||||||||||
Balance at Jun. 30, 2020 | $ 54 | (305,861) | (3,765) | $ (38,638) | ||||||||||||||||
Balance (in shares) at Jun. 30, 2020 | 147 | 120,443 | 41,910 | |||||||||||||||||
Options for redeemable shares, ending at Jun. 30, 2020 | 47,223 | |||||||||||||||||||
Remeasurement of options for redeemable shares | (21,954) | 21,954 | ||||||||||||||||||
Distributions declared | (5,706) | |||||||||||||||||||
Shares issued upon vesting of Restricted Stock Units, net | (69,177) | $ 69,177 | ||||||||||||||||||
Stock-based compensation expense | 5,661 | |||||||||||||||||||
Recapitalization prior to Offering | $ (54) | $ 120 | (38,704) | $ 38,638 | ||||||||||||||||
Recapitalization prior to Offering (in shares) | (147) | (120,443) | 173 | 120,417 | (41,910) | |||||||||||||||
Reclassification of SAR liability to equity in connection with the Offering | 143,519 | |||||||||||||||||||
Auto-exercised options in connection with Offering | $ 1 | (13,809) | ||||||||||||||||||
Auto-exercised options in connection with Offering (in shares) | 564 | |||||||||||||||||||
Exercise of stock options in connection with the Offering | (7,023) | |||||||||||||||||||
Exercise of stock options in connection with the Offering (in shares) | 510 | |||||||||||||||||||
Vested restricted stock issued in connection with Offering | 361 | |||||||||||||||||||
Vested restricted stock issued in connection with Offering (in shares) | 19 | |||||||||||||||||||
Shares issued in connection with Offering, net of Offering costs | $ 24 | 416,778 | ||||||||||||||||||
Shares issued in connection with Offering, net of Offering costs (shares) | 23,812 | |||||||||||||||||||
Exercise of stock options, net | $ 1 | 1,007 | ||||||||||||||||||
Exercise of stock options, net (in shares) | 610 | |||||||||||||||||||
Reclassification of accumulated S Corporation earnings | (354,291) | 354,291 | ||||||||||||||||||
Foreign currency translation adjustments and revaluations, net of tax | (238) | (238) | ||||||||||||||||||
Net loss | (21,028) | (21,028) | ||||||||||||||||||
Balance at Sep. 30, 2020 | $ 26 | $ 120 | $ 200,722 | $ 21,696 | $ (4,003) | |||||||||||||||
Balance (in shares) at Sep. 30, 2020 | 25,688 | 120,417 | 147 | 120,443 | ||||||||||||||||
Balance (in shares) at Dec. 31, 2020 | 26,327 | 120,117 | ||||||||||||||||||
Foreign currency translation adjustments and revaluations, net of tax | (10,040) | |||||||||||||||||||
Net loss | $ (852) | |||||||||||||||||||
Balance (in shares) at Sep. 30, 2021 | 40,574 | 108,017 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Cash flows from operating activities: | ||
Net loss | $ (852) | $ (79,167) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 31,902 | 23,586 |
Provision for subscription cancellations and non-renewals, net of deferred allowance | 423 | 52 |
Amortization of deferred financing costs | 159 | 356 |
Write-off of deferred financing costs | 1,351 | |
Stock-based compensation expense | 20,250 | 140,890 |
Deferred income tax benefit | (3,075) | (32,004) |
Redemption of Converted SARs | (22,889) | |
Non-cash operating lease costs | 2,867 | |
Other | 280 | 86 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 12,120 | 4,143 |
Prepaid expenses and other current assets | (3,669) | (4,613) |
Deferred commissions | (840) | 824 |
Accounts payable | 1,529 | 1,193 |
Accrued expenses | (2,445) | 1,382 |
Accrued and deferred compensation | (679) | (5,399) |
Deferred revenue | (1,971) | (8,251) |
Operating lease liabilities | (3,685) | |
Other | 354 | (1,496) |
Net cash provided by operating activities | 52,668 | 20,044 |
Cash flows from investing activities: | ||
Acquisition of businesses, net of cash acquired | (251,412) | (12,318) |
Property and equipment additions | (23,899) | (14,982) |
Capitalized software additions | (7,902) | (9,246) |
Net cash used in investing activities | (283,213) | (36,546) |
Cash flows from financing activities: | ||
Net increase in customer funds obligations | 18,744 | 1,158 |
Proceeds from line of credit | 12,500 | |
Principal payments on line of credit | (12,500) | |
Proceeds from long-term debt | 175,000 | |
Principal payments on long-term debt | (226,029) | |
Payments for deferred financing costs, net | (2,436) | |
Proceeds from purchases of stock under ESPP | 1,010 | |
Payments for taxes related to net share settlement of stock-based awards | (12,712) | |
Proceeds from exercise of stock options | 1,212 | 6,023 |
Distributions to stockholders | (146,084) | |
Distributions under Tax Sharing Agreement | (2,700) | |
Proceeds from issuance of shares in connection with Offering | 423,024 | |
Payments for offering costs | (6,222) | |
Payments for taxes on exercised options | (11,999) | |
Payments for purchase commitment liabilities | (10,822) | |
Payments on finance lease liabilities | (685) | |
Net cash (used in) provided by financing activities | (5,953) | 212,435 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (434) | (412) |
Net (decrease) increase in cash, cash equivalents and restricted cash | (236,932) | 195,521 |
Cash, cash equivalents and restricted cash, beginning of period | 312,273 | 83,495 |
Cash, cash equivalents and restricted cash, end of period | $ 75,341 | $ 279,016 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2021 | Sep. 30, 2020 |
Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets, end of period: | ||
Cash and cash equivalents | $ 47,481 | $ 270,271 |
Restricted cash-funds held for customers | 27,860 | 8,745 |
Total cash, cash equivalents and restricted cash, end of period | $ 75,341 | $ 279,016 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Vertex, Inc. (“Vertex”) and its direct and indirect wholly owned subsidiaries (collectively, the “Company”) operate as solutions providers of state, local and value added tax calculation, compliance and analytics, offering software products which 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. (“U.S. GAAP”) and include the accounts of the Company. All intercompany transactions have been eliminated in consolidation. The Company has a 65% controlling interest in Systax Sistemas Fiscais LTDA (“Systax”), a provider of Brazilian transaction tax content and software. Systax is considered a Variable Interest Entity (“VIE”) and its accounts have been included in the condensed consolidated financial statements from the acquisition date. Systax was determined to be a VIE as Vertex is the primary beneficiary of the equity interests in Systax and participates significantly in the variability in the fair value of Systax’s net assets. 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 U.S. 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, 2020, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”) filed with the SEC on March 15, 2021. The interim condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements included in the 2020 Annual Report. The accompanying interim condensed consolidated balance sheet as of September 30, 2021, the interim condensed consolidated statements of comprehensive loss and changes in equity (deficit) for the three and nine months ended September 30, 2021 and 2020, and interim condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 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, 2021 are not necessarily indicative of the results expected for the full year ending December 31, 2021. Segments The Company operates its business as one operating segment. For the three months ended September 30, 2021 and 2020, approximately 6% and 3%, respectively, of the Company’s revenues were generated from customers outside the U.S. For the nine months ended September 30, 2021 and 2020, approximately 6% and 3%, respectively, of the Company’s revenues were generated from customers outside the U.S.. Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date. A three-level fair value hierarchy (the “Fair Value Hierarchy”) prioritizes the inputs used to measure fair value. The Fair Value Hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. Classification in the Fair Value Hierarchy is based on the lowest of the following levels that is significant to the measurement: Level 1 Level 2 Level 3 The Company’s assessment of the significance of an input to a fair value measurement requires judgment, which may affect the determination of fair value and the measurement’s classification within the Fair Value Hierarchy. 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) the reserve for self-insurance, (iv) assumptions related to achievement of technological feasibility for software developed for sale, (v) product life cycles, (vi) estimated useful lives and potential impairment of long-lived assets and intangible assets, (vii) potential impairment of goodwill, (viii) determination of the fair value of tangible and intangible assets acquired, liabilities assumed and consideration transferred in acquisitions, (ix) amortization period of material rights and deferred commissions (x) valuation of the Company’s stock used to measure stock-based compensation awards, (xi) Black-Scholes-Merton option pricing model (“Black-Scholes model”) input assumptions used to determine the fair value of stock-based compensation awards, (xii) measurement of future purchase commitment, contingent consideration liabilities and deferred purchase consideration liabilities associated with acquisitions, and (xiii) 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. Software Development Costs Internal-Use Software The Company follows Accounting Standard Codification (“ASC”) 350-40, Goodwill and Other, Internal-Use Software, 3 software subscriptions and depreciation and amortization expense, respectively, in the condensed consolidated statements of comprehensive loss. Software Developed for Sale The costs incurred for the development of computer software to be sold, leased, or otherwise marketed are capitalized in accordance with ASC 985-20, Costs of Software to be Sold, Leased or Marketed 3 Business Combinations Upon acquisition of a company, the Company determines if the transaction is a business combination, which is accounted for using the acquisition method of accounting. Under the acquisition method, once control is obtained of a business, the assets acquired, liabilities assumed, consideration transferred and amounts attributed to noncontrolling interests, are recorded at fair value. The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired, liabilities assumed, consideration transferred, and amounts attributed to noncontrolling interests at the acquisition date. One of the most significant estimates relates to the determination of the fair value of these amounts. The determination of the fair values is based on estimates and judgments made by management. The Company’s estimates of fair value are based upon assumptions it believes to be reasonable, but which are inherently uncertain and unpredictable. Measurement period adjustments to these values as of the acquisition date are reflected at the time identified, up through the conclusion of the measurement period, which is the time at which all information for determination of the values of assets acquired, liabilities assumed, consideration transferred and noncontrolling interests is received, and is not to exceed one year from the acquisition date (the “Measurement Period”). Thus the Company may record adjustments to the fair value of these tangible and intangible assets acquired, liabilities assumed, consideration transferred and noncontrolling interests, with the corresponding offset to goodwill during this Measurement Period. Additionally, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluate these estimates and assumptions periodically and record any adjustments to preliminary estimates to goodwill, provided the Company is within the Measurement Period, with any adjustments to amortization of new or previously recorded identifiable intangibles being recorded to the consolidated statements of comprehensive loss in the period in which they arise. In addition, if outside of the Measurement Period, any subsequent adjustments to the acquisition date fair values are reflected in the consolidated statements of comprehensive loss in the period in which they arise. Goodwill Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. The Company evaluates goodwill for impairment annually at October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred. Stock-Based Compensation The Company’s Registration Statement on Form S-1 with the SEC was declared effective on July 28, 2020, resulting in the Class A common shares being registered and available for trading on the NASDAQ exchange (the “Offering”). On the effective date of the Offering, the Company adopted the 2020 Incentive Award Plan (the “2020 Plan”) and the 2020 Employee Stock Purchase Plan (the “ESPP”), which provide for the award of stock appreciation rights (“SARs”), stock options (“options”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and participation in the ESPP (collectively, the "awards"). The awards are subject to, and the Company applies, the guidance set forth in ASC 718, Compensation—Stock Compensation The provisions of ASC 718 require a company to measure the fair value of stock-based compensation as of the grant date of the award. Stock-based compensation expense reflects the cost of employee services received in exchange for the awards. SARs are accounted for as liabilities under ASC 718 and, as such, the Company recognizes stock-based compensation expense by remeasuring the value of the SARs at the end of each reporting period and accruing the portion of the requisite service rendered at that date. Prior to July 2, 2020, the date management determined the Company was considered to have become a public entity, the Company measured SARs at their intrinsic value. After such date, management remeasured outstanding SARs using the fair value-based method under ASC 718. Stock-based compensation expense for stock options issued under the 2020 Plan after the Offering is measured based on the grant date fair value of the award and is estimated using the Black-Scholes model. Compensation cost is recognized on a straight-line basis over the requisite service or performance period associated with the award. Stock-based compensation expense for RSAs and RSUs is based on the fair value of the Company’s underlying common stock on the date of grant. Compensation cost is recognized on a straight-line basis over the requisite service or performance period associated with the award. Stock-based compensation expense for awards subject to performance-based measurement criteria is recognized when achievement of performance targets is deemed probable. The ESPP permits participants to purchase Class A common stock through payroll deductions, up to a specified percentage of their eligible compensation or a lump sum contribution amount for the initial offering period. The plan is a compensatory plan as it allows participants to purchase stock at a 15% discount from the lower of the fair value of the Class A common on the first or last day of the ESPP offering period (the “ESPP Discount”).The ESPP is accounted for as an equity classified award. Stock-based compensation expense for the ESPP is measured based on the fair value of the ESPP award at the start of the offering period. The fair value is comprised of the value of the ESPP Discount and the value associated with the variability in the Class A common stock price during the offering period (the “Call/Put”), which is estimated using the Black-Scholes model. Compensation cost is recognized on a straight-line basis over the respective offering period. The Company has elected to recognize award forfeitures as they occur. Revenue Recognition Revenue from contracts with customers The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers Nature of goods and services Licenses for on-premise software subscriptions provide the customer with a right to use the software as it exists when made available to the customer. Customers purchase a subscription to these licenses, which includes the related software and tax content updates (collectively “updates”) and product support. The updates and support, which are part of the subscription agreement, are essential to the continued utility of the software; therefore, the Company has determined the software and the related updates and support to be a single performance obligation. Accordingly, when on-premise software is licensed, the revenue associated with this combined performance obligation is recognized ratably over the license term as these subscriptions are provided for the duration of the license term. Revenue recognition begins on the later of the beginning of the subscription period or the date the software is made available to the customer to download. Certain on-premise software subscription prices in the initial subscription year are higher than standard renewal prices. The excess initial year price over the renewal price (“new sale premium”) is a material right that provides customers with the right to this reduced renewal price. The Company recognizes revenue associated with this material right over the estimated period of benefit to the customer, which is generally three years. Cloud-based subscriptions allow customers to use Company-hosted software over the contract period without taking possession of the software. The cloud-based offerings also include related updates and support. Cloud-based contracts consistently provide a benefit to the customer during the subscription period; thus, the associated revenue is recognized ratably over the related subscription period. Revenue recognition begins on the later of the beginning of the subscription period or the date the customer is provided access to the cloud-based solutions. Revenue from deliverable-based services is recognized as services are delivered. Revenue from fixed fee services is recognized as services are performed using the percentage of completion input method. The Company has elected the “right to invoice” practical expedient for revenue related to services that are billed on an hourly basis, which enables revenue to be recognized as the services are performed. The Company has determined that the methods applied to measuring its progress toward complete satisfaction of performance obligations recognized over time are a faithful depiction of the transfer of control of software subscriptions and services to customers. Significant Judgments Contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Identification of the amortization periods of material rights and contract costs requires significant judgement by management. Payment terms Payment terms and conditions vary by contract, although the Company’s terms generally include a requirement of payment within 30-days. In instances where the timing of revenue recognition differs from the timing of payment, the Company has determined that its contracts do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing products and services, not to receive financing from customers or to provide customers with financing. Cost of Revenues Cost of revenues, software subscriptions includes the direct cost to develop, host and distribute software products, the direct cost to provide customer support, and amortization of costs capitalized for software developed for sale and for internal-use software utilized for cloud-based subscriptions. Cost of revenues, services includes the direct costs of implementation, training, transaction tax returns outsourcing and other tax-related services. Reimbursable Costs Reimbursable costs passed through and invoiced to customers of the Company are recorded as services revenues with the associated expenses recorded as cost of revenues, services in the condensed consolidated statements of comprehensive loss. Income Taxes On July 27, 2020, the Company’s S-Corporation election (the “S Election”) was terminated by the Company’s stockholders in connection with the Offering. As a result, Vertex became taxable at the corporate level as a C-Corporation for U.S. federal and state income tax purposes. In connection with the S Election termination, the Company entered into an agreement with the S-Corporation stockholders pursuant to which the Company has indemnified them for unpaid income tax liabilities and may be required to make future payments in material amounts to them attributable to incremental income taxes resulting from an adjustment to S-Corporation related taxable income (the “Tax Sharing Agreement”). In addition, the Tax Sharing Agreement indemnifies the S-Corporation stockholders for any interest, penalties, losses, costs or expenses arising out of any claim under the agreement. Correspondingly, the S-Corporation stockholders have indemnified the Company with respect to unpaid tax liabilities (including interest and penalties) attributable to a decrease in S-Corporation stockholders’ taxable income and a corresponding increase in our taxable income as a C-Corporation for any period. Prior to July 27, 2020, as Vertex was taxed as an S-Corporation for U.S. federal and certain states income tax purposes, net income or loss was allocated to and included on the income tax returns of the S-Corporation stockholders. Historically, the Company distributed amounts to the S-Corporation stockholders to satisfy their tax liabilities resulting from allocated net income or loss. Vertex was taxed at the corporate level in those states where the S-Corporation status was not recognized or where the state imposed a tax on an S-Corporation. Accordingly, the income tax provision or benefit was based on taxable income allocated to these states. In certain foreign jurisdictions, Vertex subsidiaries were taxed at the corporate level, and the income tax provision or benefit was based on taxable income sourced to these foreign jurisdictions. Supplemental Cash Flow Disclosures Supplemental cash flow disclosures are as follows for the respective periods: For the nine months ended September 30, 2021 2020 (unaudited) Cash paid for interest $ 180 $ 1,912 Cash paid for income taxes, net of refunds $ 1,032 $ 522 Operating cash flows from operating leases $ 4,090 $ — Non-cash investing and financing activities: Purchase commitment and contingent consideration liabilities $ 50,653 $ 14,344 Leased assets obtained in exchange for new finance lease liabilities $ 173 $ — Equipment acquired through capital leases $ — $ 826 Remeasurement of options for redeemable shares $ — $ 51,833 Conversion of SARs in connection with the Offering $ — $ 128,870 Exchange of Amended Options in connection with the Offering $ — $ 69,177 Recently Issued Accounting Pronouncements As an “emerging growth company,” the Jumpstart Our Business Startups Act (the “JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to delay adoption of certain new or revised accounting standards. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies. Deferred Revenue In October 2021, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations Recently Adopted Accounting Pronouncements Leases In February 2016, the FASB issued ASU No. 2016-02, Leases The Company adopted ASC 842 on January 1, 2021 using the modified retrospective transition method, which did not require the Company to adjust comparative periods. The Company’s lease assets and lease liabilities are recognized on the lease commencement date in an amount that represents the present value of future lease payments. The Company’s incremental borrowing rate, which is based on information available at the adoption date for existing leases and the commencement date for leases commencing after the adoption date, is used to determine the present value of lease payments. The Company elected the “package of three” practical expedients permitted under the transition guidance, which allows (i) a carry forward of the historical lease classification conclusions, (ii) management to assess whether a contract is or contains a lease, and (iii) the retention of initial direct costs for any leases that exist prior to adoption of the new standard. As a result of the adoption of ASC 842 on January 1, 2021, the Company recorded both operating lease right-of-use assets of $24,004 and operating lease liabilities of $32,562. An adjustment to retained earnings of $508, net of the deferred tax impact, was also recorded. The adoption of ASC 842 had an immaterial impact on the condensed consolidated statement of comprehensive loss and the condensed consolidated cash flow. The adoption of this standard also resulted in a change in the naming convention for leases classified historically as capital leases. These leases are now referred to as finance leases within property and equipment, with corresponding short-term and long-term debt liabilities being presented as “Current portion of finance lease liabilities” and “Finance lease liabilities, net of current portion,” respectively. See Note 7 for further information. The Company does not recognize leases with an initial term less than one year (“short-term leases”) on its condensed consolidated balance sheets, and recognizes such lease payments in the condensed consolidated statements of comprehensive loss on a straight-line basis over the lease term. Leases with an option to extend the related lease term or terminate early are reflected in the lease term when it is reasonably certain that the Company will exercise such options. Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments Income Taxes In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, Risks and Uncertainties In March 2020, the World Health Organization declared the outbreak of coronavirus disease 2019 (“COVID-19”) to be a pandemic. The COVID-19 pandemic is continuing to have widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. To protect the health and well-being of Company employees and customers, substantial modifications were made to employee travel policies, and our offices were closed, and remained closed through September 30, 2021, with employees directed to work from home. In addition, conferences and other marketing events were cancelled or shifted to virtual-only, and the Company continued to participate virtually through September 30, 2021. The COVID-19 pandemic has impacted, and may continue to impact, Company operations, including employees, customers and partners, and there is substantial uncertainty regarding the nature and degree of its continued effects over time. The Company did not experience any significant reductions in sales, revenues or collections through September 30, 2021 as a result of COVID-19. The uncertainty caused by the COVID-19 pandemic could, however, impact Company billings to new customers for the remainder of 2021, and may also negatively impact Company efforts to expand revenues from existing customers as they continue to evaluate certain long-term projects and budget constraints. In addition to the potential impact on sales, the Company may see delays in collections during 2021 as customers adjust their operating protocols to accommodate implementation of new criteria to protect the health and well-being of their employees and customers. However, these delays are not expected to materially impact the business, and thus the Company has not recorded additional credit losses associated with the allowance for doubtful accounts in connection with any delays. The Company believes it has ample liquidity and capital resources to continue to meet its operating needs and to service debt and other financial obligations. The extent to which the COVID-19 pandemic impacts the business going forward will depend on numerous evolving factors that cannot reliably be predicted, including the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact on economic activity, including the possibility of recession or financial market instability. These factors may adversely impact consumer, business and government spending on technology as well as customers’ ability to pay for Company products and services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including estimated allowance for subscription cancellations, product life cycles and estimated lives of long-lived assets. Reclassifications Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on previously reported comprehensive income or loss. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Sep. 30, 2021 | |
REVENUE RECOGNITION | |
REVENUE RECOGNITION | 2. REVENUE RECOGNITION See Note 1 for a description of the Company’s revenue recognition accounting policy. Disaggregation of revenue The table reflects revenue by major source for the following periods: Three months ended Nine months ended September 30, September 30, 2021 2020 2021 2020 (unaudited) (unaudited) Software subscriptions: Software licenses $ 58,932 $ 56,882 $ 172,807 $ 170,801 Cloud subscriptions 33,344 22,896 92,353 62,043 Software subscriptions 92,276 79,778 265,160 232,844 Services 18,442 14,827 48,732 42,277 Total revenues $ 110,718 $ 94,605 $ 313,892 $ 275,121 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”) $8,845 and $8,592 at September 30, 2021 and December 31, 2020, 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 For the year ended September 30, 2021 December 31, 2020 (unaudited) Balance, beginning of period $ 77,159 $ 70,367 Balance, end of period 73,234 77,159 (Decrease) increase, net $ (3,925) $ 6,792 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 or over the amortization period of material rights. Deferred revenue is reflected net of a related deferred allowance for subscription cancellations (the “deferred allowance”) of $6,284 and $6,432 at September 30, 2021 and December 31, 2020, 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, 2021 2020 Balance Net Change Balance Net Change Allowance balance, July 1 $ (9,399) $ (7,669) Allowance balance, September 30 (8,845) (7,567) Change in allowance $ (554) $ (102) Deferred allowance balance, July 1 6,267 5,335 Deferred allowance balance, September 30 6,284 5,170 Change in deferred allowance (17) 165 Net amount charged to revenues $ (571) $ 63 For the nine months ended September 30, 2021 2020 Balance Net Change Balance Net Change Allowance balance, January 1 $ (8,592) $ (7,515) Allowance balance, September 30 (8,845) (7,567) Change in allowance $ 253 $ 52 Deferred allowance balance, January 1 6,432 5,614 Deferred allowance balance, September 30 6,284 5,170 Change in deferred allowance 148 444 Net amount charged to revenues $ 401 $ 496 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 tables provide information about the balances of and changes to deferred revenue for the following periods: As of September 30, As of December 31, 2021 2020 (unaudited) Balances: Deferred revenue, current $ 211,036 $ 207,560 Deferred revenue, non-current 11,544 14,702 Total deferred revenue $ 222,580 $ 222,262 For the three months ended For the nine months ended September 30, September 30, 2021 2020 2021 2020 (unaudited) (unaudited) Changes to deferred revenue: Beginning balance $ 222,612 $ 198,437 $ 222,262 $ 205,791 Additional amounts deferred 110,686 93,708 314,210 266,870 Revenues recognized (110,718) (94,605) (313,892) (275,121) Ending balance $ 222,580 $ 197,540 $ 222,580 $ 197,540 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 reflected 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 three years. Amortization of these costs are included in selling and marketing expense in the condensed consolidated statements of comprehensive loss. 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 table provides information about the changes to contract cost balances as of and for the following periods: For the three months ended For the nine months ended September 30, September 30, 2021 2020 2021 2020 (unaudited) (unaudited) Beginning balance $ 11,545 $ 10,390 $ 11,743 $ 11,196 Additions 3,866 1,876 8,059 4,570 Amortization (2,828) (1,894) (7,219) (5,394) Ending balance $ 12,583 $ 10,372 $ 12,583 $ 10,372 |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended |
Sep. 30, 2021 | |
BUSINESS COMBINATIONS | |
BUSINESS COMBINATIONS | 3. BUSINESS COMBINATIONS LCR-Dixon On September 22, 2021, the Company executed a stock purchase agreement with LCR-Dixon Corporation (“LCR-Dixon”), an expert in SAP technologies and leading provider of tax intelligence solutions. LCR-Dixon’s solutions were specifically developed to improve functionality and performance for SAP indirect tax processes and are integrated with the Company’s tax determination software. The purchase price was $98,744 as of the acquisition date consisting of (i) $59,720 of cash paid at closing, partially offset by $1,899 of LCR-Dixon cash received in the acquisition resulting in net cash consideration at closing of $57,821 and (ii) non-interest bearing deferred payments aggregating $40,000 to be paid in four installments of $10,000 each every six-months beginning March 2022 and ending September 2023 (the “deferred purchase consideration”). Cash consideration was funded from available cash on hand. Management recorded the deferred purchase consideration at a preliminary fair value at the acquisition date of $39,024, net of a discount of $976 which will be recorded as interest expense over the payment period using the effective interest method. The deferred purchase consideration, net of discount, is included in current liabilities and long-term liabilities at $19,705 and $19,319, respectively, in the condensed consolidated balance sheet at September 30, 2021. The preliminary values recorded will be adjusted during the Measurement Period as more detailed analyses are performed and further information becomes available regarding the fair values of these amounts on the acquisition date. The following table summarizes the preliminary purchase price for LCR-Dixon: September 22, 2021 (unaudited) Cash paid at closing $ 59,720 Fair value of deferred purchase consideration 39,024 Total $ 98,744 The Company’s accounting for the LCR-Dixon acquisition is preliminary. The purchase price is subject to purchase price adjustments related to the final determination of LCR-Dixon’s cash, net working capital, and taxes as of the acquisition date. The LCR-Dixon acquisition was accounted for as a business combination. The total preliminary purchase price was allocated to the net assets acquired based on management’s determination of their estimated fair values using available information as of the acquisition date. The preliminary excess of purchase consideration over the net assets acquired is recorded as goodwill, which primarily reflects the existence of intangible assets not recognized under U.S. GAAP such as the value of expected future synergies, the value of the assembled workforce and other market factors. The Company expects that goodwill associated with the LCR-Dixon acquisition will not be deductible for tax purposes. The preliminary values recorded, which are reflected in the table below, will be adjusted during the Measurement Period as more detailed analyses are performed and further information becomes available regarding the fair values of these amounts on the acquisition date. The Company does not have a preliminary estimate of identifiable intangible assets as of September 30, 2021. A third-party expert has been engaged to assist in the valuation of identifiable intangible assets and deferred payments as part of the acquisition. Any subsequent adjustments to the preliminary values not associated with determination of their fair values on the acquisition date will be recorded in the condensed consolidated statements of comprehensive loss in the period in which the adjustment is identified. LCR-Dixon’s business and product offerings are being integrated into the Company’s one operating segment. The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed as recorded in the Company’s condensed consolidated balance sheet as of the acquisition date: September 22, 2021 (unaudited) Cash and cash equivalents $ 1,899 Accounts receivable 1,002 Prepaid expenses and other current assets 313 Property and equipment 4 Goodwill 97,817 Accounts payable (18) Accrued expenses (438) Accrued compensation (1,796) Deferred revenue (39) Total $ 98,744 The transaction costs associated with the acquisition were not significant. The Company has included the financial results of LCR-Dixon in the condensed consolidated statement of comprehensive loss from the date of acquisition. As the LCR-Dixon acquisition did not have a material impact on the Company’s reported revenue or net loss for the three and nine months ended September 30, 2021, pro forma financial information has not been presented. Taxamo On May 12, 2021, the Company acquired 95% of the outstanding equity of EVAT and its wholly owned subsidiaries (collectively “Taxamo”), a cloud-based provider of tax and payment automation for global eCommerce and marketplaces. This acquisition supports the Company’s growth strategies across eCommerce platforms and marketplaces in Europe and North America. Included in the acquisition agreement is an option to purchase from and an option for the remaining shareholder to sell the remaining 5% of the outstanding equity of EVAT (the “Option”) at a fixed amount between August and December 2021 for an estimated fair value of $10,034. The purchase price for the Taxamo acquisition was $200,689 as of the acquisition date, consisting of (i) $190,153 of cash paid at closing, partially offset by $2,662 of Taxamo’s cash received in the acquisition resulting in net cash consideration at closing of $187,491, (ii) an acquisition holdback with an estimated fair value upon acquisition of $502, and (iii) the Option. The Company recorded the estimated fair value of the Option payment amount in purchase commitment and contingent consideration liabilities, current, on the condensed consolidated balance sheet as of the acquisition date. Cash consideration was funded from available cash on hand. The following table summarizes the purchase price for Taxamo: May 12, 2021 (unaudited) Cash paid at closing $ 190,153 Fair value of acquisition holdback 502 Fair value of the Option 10,034 Total $ 200,689 On August 19, 2021, the Company acquired the remaining 5% equity interest of EVAT for $10,034 through exercise of the Option, giving the Company 100% of the outstanding equity interest of EVAT. The acquisition holdback estimated fair value of $478 is included in purchase commitment and contingent consideration liabilities, current in the condensed consolidated balance sheet as of September 30, 2021. The Company’s accounting for the Taxamo acquisition is preliminary. The purchase price is subject to purchase price adjustments related to the final determination of Taxamo’s cash, net working capital, and taxes as of May 12, 2021. The Taxamo acquisition was accounted for as a business combination. The total preliminary purchase price was allocated to the net assets acquired based on management’s determination of their estimated fair values using available information as of the acquisition date. The preliminary value of the excess of purchase consideration over the net assets acquired was recorded as goodwill, which reflects the value of intangible assets not recognized under U.S. GAAP such as the value of expected future synergies, the value of the assembled workforce and other market factors. The Company expects that goodwill associated with the Taxamo acquisition will not be deductible for tax purposes. The preliminary values recorded will be adjusted during the Measurement Period as more detailed analyses are performed and further information becomes available regarding the fair values of these amounts on the acquisition date. Adjustments identified to date during the Measurement Period based on additional information obtained include increases in property and equipment of $40,746 for acquired developed technology and other intangibles of $1,581 for customer relationships and trade name assets (collectively, the “identifiable intangibles”), and various other adjustments resulting in a net reduction to goodwill of $37,131. Subsequent adjustments to the preliminary values of the net assets acquired after the end of the Measurement Period will be recorded in the condensed consolidated statements of comprehensive loss in the period in which the adjustment is identified. Taxamo’s business and product offerings are being integrated into the Company’s one operating segment. The following table presents the preliminary adjusted purchase price allocation of the assets acquired and liabilities assumed as recorded in the Company’s condensed consolidated balance sheet as of the acquisition date with Measurement Period adjustments through September 30, 2021: Preliminary Unadjusted Measurement Period Preliminary Adjusted May 12, 2021 Adjustments May 12, 2021 (unaudited) (unaudited) (unaudited) Cash and cash equivalents $ 2,441 $ — $ 2,441 Funds held for customers 221 — 221 Accounts receivable 7,783 (5,278) 2,505 Prepaid expenses and other current assets 908 — 908 Property and equipment 46 40,746 40,792 Goodwill 201,580 (37,131) 164,449 Other intangibles — 1,581 1,581 Accounts payable (304) — (304) Accrued expenses (6,615) 5,220 (1,395) Accrued compensation (3,939) — (3,939) Deferred revenue — (2,196) (2,196) Deferred other income (1,432) 1,432 — Deferred other liabilities — (4,374) (4,374) Total $ 200,689 $ — $ 200,689 The preliminary fair value, valuation methodologies, estimated useful lives, and significant assumptions of the identifiable intangibles acquired in the Taxamo acquisition are summarized in the table below: May 12, 2021 Taxamo Identifiable Intangibles Balance Sheet Location Fair Value Valuation Methodology Estimated Useful Life Discount Rate Developed technology Property and equipment, net (Note 5) $ 40,746 Multi-period excess earnings method - income approach 3 years 16.5 % Trade name Goodwill and other intangible assets (Note 8) $ 608 Relief from royalty method - income approach 2 years 16.5 % Customer relationships Goodwill and other intangible assets (Note 8) $ 973 Distributor method - income approach 2 years 16.5 % The Company has included the financial results of Taxamo in the condensed consolidated statement of comprehensive loss from the date of acquisition. Taxamo total revenues and net loss for the three months ended September 30, 2021 reflected in the condensed consolidated statement of comprehensive loss was $2,166 and $(6,419), respectively. Taxamo total revenues and net loss from the date of the Taxamo acquisition through September 30, 2021, reflected in the consolidated statement of comprehensive loss was $2,727, and $(6,814), respectively. Net loss for Taxamo includes depreciation expense for developed technology and amortization expense for other intangibles of $5,217 for the three and nine months ended September 30, 2021. If the business combination had occurred as of January 1, 2021, Taxamo financial results would have increased the Company’s total revenues and net loss excluding transaction costs by $2,816 and $(3,559), respectively through the acquisition date. The transaction costs associated with the acquisition were $4,522 and are recorded in other operating expense (income), net, for the nine months ended September 30, 2021. The Company assumed certain liabilities in the acquisition of Taxamo, including deferred revenue with a fair value of $2,196 million, using a cost-plus profit approach. The Company is amortizing the acquired deferred revenue at its fair value over the period for which it is incurring costs to support the assumed customer obligations. Tellutax On January 25, 2021, the Company executed an Asset Purchase Agreement with Tellutax LLC, a Portland, Oregon-based edge computing technology startup (“Tellutax”), to acquire substantially all of Tellutax’s assets (the “Tellutax acquisition”). Cash consideration paid for the acquisition was $6,100, funded through cash on hand, and serves to strengthen the Company’s technology roadmap and hybrid cloud strategy enabling it to better serve customers in an increasingly hyper-connected environment. The Tellutax acquisition entitles the sellers to contingent consideration if sales targets are met during a period of time following the acquisition. The Tellutax acquisition was accounted for as a business combination. The total purchase price was allocated to the net assets acquired based on management’s determination of their estimated fair values using available information as of the acquisition date. The excess of purchase consideration over the net assets acquired is recorded as goodwill, which primarily reflects the value of expected future synergies, the existence of intangible assets not recognized under U.S. GAAP such as the value of the assembled workforce and other market factors. The Company expects that goodwill associated with the Tellutax acquisition will be deductible for tax purposes. The fair values of these amounts on the acquisition date, which are reflected in the table below, have been finalized. Any subsequent adjustments to these values will be recorded in the condensed consolidated statements of comprehensive loss in the period in which the adjustment is identified. The purchase price for the Tellutax acquisition included cash paid at closing plus an estimated fair value of contingent consideration of $2,200 (the “Tellutax Contingent Consideration”) as of January 25, 2021. The following table presents the final purchase price allocation recorded in the condensed consolidated balance sheet as of the acquisition date: January 25, 2021 (unaudited) Capitalized software - developed technology $ 3,600 Goodwill 4,700 Total $ 8,300 The Company has included the financial results of Tellutax in the condensed consolidated statement of comprehensive loss from the date of acquisition. As the Tellutax acquisition did not have a material impact on the Company’s reported revenue or net loss for the three and nine months ended September 30, 2021, pro forma financial information has not been presented. The fair value of developed technology was valued using the multi-period excess earnings method, which is a variation of the income approach. This method estimates an intangible asset’s value based on the present value of the incremental after-tax cash flows attributable to the intangible asset. The significant assumptions used in the developed technology valuation included forecasted results and discount rate. The fair value of Tellutax Contingent Consideration is estimated using a Monte Carlo Simulation to compute the expected cash flows from earnout payments specified in the purchase agreement. The Tellutax Contingent Consideration is based on three potential earn-out payments determined by periodic revenue achievements over a thirty-month period. Earn-out payments have no maximum limit, but if certain targets are not met, there will be no earn-out payment for the applicable measurement period. The estimated fair value of the Tellutax Contingent Consideration recorded as of the acquisition date was $2,200. See Note 4 for information on recurring fair value adjustments after the acquisition date. Systax On January 7, 2020, the Company acquired a 60% controlling interest in Systax, a provider of Brazilian transaction tax content and software. Cash consideration for the purchase was $12,374. This acquisition provided the Company with full access to a sizeable database of Brazilian tax content that is critical to supporting its global multi-national customers’ business expansion into Brazil. On the acquisition date, the Company had a contractual purchase commitment to acquire the remaining 40% equity interest from the original Systax Quotaholders incrementally between 2021 through 2024. Future purchase commitment payments for these incremental acquisition amounts are based on a multiple of Systax revenue and earnings before interest, depreciation, amortization and income taxes (“EBITDA”) performance at the end of 2020, 2022 and 2023, whereby the Company will have full ownership after the final transaction in 2024. 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. The fair value of the Purchase Commitment Liability at the acquisition date was finalized to be $12,592. This amount will fluctuate as a result of changes in foreign currency exchange rates and is reflected in purchase commitment and contingent consideration liabilities in the condensed consolidated balance sheets, with such changes in exchange rates being reflected in other comprehensive income or loss in the condensed consolidated statements of comprehensive loss. The Purchase Commitment Liability was $9,750 at December 31, 2020, reflecting the impacts of such fluctuations in foreign currency exchange rates. Adjustments to the settlement date value that arise as a result of remeasurement at future balance sheet dates will be recorded as interest expense related to financing costs in the consolidated statements of comprehensive income or loss in the period the change is identified. No such adjustments have been recorded through September 30, 2021. The Company acquired an additional 5% equity interest of Systax in April 2021 for $788 which is reflected in the activity for the nine months ended September 30, 2021, increasing the Company’s equity interest in Systax to 65%. The remaining Purchase Commitment Liability of $8,549 is included in purchase commitment and contingent consideration liabilities, net of current portion in the condensed consolidated balance sheets at September 30, 2021. |
FINANCIAL INSTRUMENTS AND FAIR
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2021 | |
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | |
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 4. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company has investments in money market accounts, which are 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 account fair values are known and observable through daily published floating net asset values. The following table summarizes the Company’s Fair Value Hierarchy for its financial assets and liabilities measured at fair value on a recurring basis: Fair Value Measurements Using As of September 30, 2021 Fair Value Prices in active markets for identical assets (Level 1) Significant other observable inputs Significant unobservable inputs Money market funds $ 10,701 $ 10,701 $ — $ — Tellutax Contingent Consideration $ (2,500) $ — $ — $ (2,500) Fair Value Measurements Using As of December 31, 2020 Fair Value Prices in active markets for identical assets (Level 1) Significant other observable inputs Significant unobservable inputs Money market funds $ 265,270 $ 265,270 $ — $ — Tellutax Contingent Consideration The Tellutax acquisition entitles the sellers to contingent consideration if sales targets are met during a period of time following the acquisition. The estimated fair value of the Tellutax Contingent Consideration as of the acquisition date of January 25, 2021 was $2,200. The Tellutax Contingent Consideration is based on three potential earn-out payments determined by periodic revenue achievements over a thirty-month period. Such estimate represents a recurring fair value measurement with significant unobservable inputs, which management considers to be Level 3 measurements under the Fair Value Hierarchy. The significant assumptions used in these calculations included forecasted results and the estimated likelihood for each performance scenario. The fair value of Tellutax Contingent Consideration is estimated using a Monte Carlo Simulation to compute the expected cash flows from earn-out payments specified in the purchase agreement. The Tellutax Contingent Consideration is based on three potential earn-out payments determined by periodic revenue achievements over a thirty-month period. Earn-out payments have no maximum limit, but if certain targets are not met, there will be no earn-out payment for the applicable measurement period. The fair value analysis of the Tellutax Contingent Consideration was updated as of September 30, 2021, resulting in an adjustment to increase the carrying value to $2,500 at September 30, 2021, from $2,276 as of June 30, 2021, and $2,200 as of the acquisition date. Fair value adjustments of $224 and $300 were recorded in other operating expense, net for the three and nine months ended September 30, 2021, respectively. The Tellutax Contingent Consideration fair value of $2,500 is included in purchase commitment and contingent consideration liabilities, net of current portion in the condensed consolidated balance sheet at September 30, 2021. Tellutax Contingent Consideration fair value as of September 30, 2021 and the acquisition date, and unobservable inputs used for the Monte Carlo Simulation valuation were as follows: September 30, 2021 Liability Fair Value Valuation Technique Unobservable Inputs Tellutax Contingent Consideration $ (2,500) Monte Carlo Simulation Revenue volatility 95.0 % Revenue discount rate 19.0 % Term (in years) 3.6 January 25, 2021 Liability Fair Value Valuation Technique Unobservable Inputs Tellutax Contingent Consideration $ (2,200) Monte Carlo Simulation Revenue volatility 95.0 % Revenue discount rate 20.3 % Term (in years) 4.3 Changes in the fair value of Tellutax Contingent Consideration during the nine months ended September 30, 2021 were as follows: Tellutax Contingent Consideration Balance, January 1, 2021 $ — Acquisition of Tellutax (2,200) Fair value adjustments (300) Balance, September 30, 2021 $ (2,500) Assets and Liabilities for Which Fair Value is Only Disclosed The carrying amounts of cash and cash equivalents and funds held for customers were the same as their respective fair values and are considered Level 1 measurements. The carrying amounts for accounts receivable, accounts payable, and accrued expenses approximate their relative fair values due to their short-term nature. Non-recurring Fair Value Measurements The LCR-Dixon acquisition on September 22, 2021, the Taxamo acquisition on May 12, 2021, and the Tellutax acquisition on January 25, 2021 were accounted for as business combinations and the total purchase price for each acquisiton was allocated to the net assets acquired and liabilities assumed based on their estimated fair values. See Note 3. See Note 3 for information on the LCR-Dixon deferred purchase consideration of $39,024 and the Systax Purchase Commitment Liability of $8,549 recorded in the condensed consolidated balance sheet at September 30, 2021. The carrying amounts of both approximated their respective fair values at September 30, 2021 and are considered Level 3 non-recurring fair value measurements. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2021 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | 5. PROPERTY AND EQUIPMENT The major components of property and equipment are as follows: As of September 30, As of December 31, 2021 2020 (unaudited) Leasehold improvements $ 20,959 $ 20,907 Equipment 42,218 41,410 Computer software purchased 11,782 11,620 Internal-use software developed: Cloud-based customer solutions 109,828 65,423 Internal systems and tools 32,000 25,349 Furniture and fixtures 7,676 7,674 In-process internal-use software 12,714 3,304 237,177 175,687 Less accumulated depreciation (139,308) (119,130) Property and equipment, net $ 97,869 $ 56,557 Depreciation expense for property and equipment, excluding all internal-use software developed and finance leases, was $1,849 and $1,970 for the three months ended September 30, 2021 and 2020, respectively, and $5,658 and $5,918 for the nine months ended September 30, 2021 and 2020, respectively, depreciation for property and equipment, excluding internal-use software developed for cloud-based customer solutions, is reflected in depreciation and amortization in the condensed consolidated statements of comprehensive loss. Finance lease amortization was $363 and $826 for the three and nine months ended September 30, 2021, respectively, and depreciation expense for assets held under capital leases was $178 and $513 for the three and nine months ended September 30, 2020, respectively. Finance lease amortization and depreciation expense for assets held under capital leases are included in depreciation and amortization expense in the condensed consolidated statements of comprehensive loss. Assets under finance leases of $1,533, net of accumulated amortization of $826, at September 30, 2021 are included in property and equipment in the condensed consolidated balance sheets. Assets under capital leases of $1,360, net of accumulated depreciation of $1,370, at December 31, 2020, are included in property and equipment in the condensed consolidated balance sheets. The major components of internal-use software are as follows: As of September 30, As of December 31, 2021 2020 (unaudited) Internal-use software developed $ 141,828 $ 90,772 Less accumulated depreciation (80,222) (65,090) 61,606 25,682 In-process internal-use software 12,714 3,304 Internal-use software developed, net $ 74,320 $ 28,986 Amounts capitalized for internal-use software, excluding acquired technology, and included in property and equipment additions on the condensed consolidated statements of cash flows are as follows: For the nine months ended September 30, For the nine months ended September 30, 2021 2020 (unaudited) (unaudited) Cloud-based customer solutions $ 13,881 $ 12,574 Internal systems and tools 7,762 1,463 Total $ 21,643 $ 14,037 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, 2021 and 2020, was $7,561 and $2,183 respectively, and was $12,906 and $6,647 for the nine months ended September 30, 2021 and 2020, respectively, and is included in cost of revenues, software subscriptions in the condensed consolidated statements of comprehensive loss. During the three and nine months ended September 30, 2021, developed technology with an acquisition date fair value of $40,746 was recorded in connection with Measurement Period adjustments to the preliminary values of assets acquired in the Taxamo acquisition and is reflected in property and equipment, net, in the condensed consolidated balance sheet at September 30, 2021. Depreciation expense from the acquisition date through September 30, 2021 associated with this developed technology was $4,930 for the three and nine months ended September 30, 2021 and was reflected in cost of revenues - software subscriptions in the condensed consolidated statement of comprehensive loss at September 30, 2021. Had the preliminary value of the developed technology been determinable at the date of acquisition, the Company would have recorded $1,643 of this depreciation expense in the condensed consolidated statement of comprehensive loss at June 30, 2021. Depreciation expense for internal-use software developed for internal systems and tools for the three months ended September 30, 2021 and 2020, was $870 and $587, respectively, and was $2,303 and $1,678 for the nine months ended September 30, 2021 and 2020, respectively, and is included in depreciation and amortization in the condensed consolidated statements of comprehensive loss. |
CAPITALIZED SOFTWARE
CAPITALIZED SOFTWARE | 9 Months Ended |
Sep. 30, 2021 | |
CAPITALIZED SOFTWARE | |
CAPITALIZED SOFTWARE | 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. The major components of capitalized software are as follows: As of September 30, As of December 31, 2021 2020 (unaudited) Capitalized software $ 71,209 $ 63,071 Less accumulated amortization (41,690) (32,217) 29,519 30,854 In-process capitalized software 4,499 1,135 Capitalized software, net $ 34,018 $ 31,989 Software development costs capitalized for the three months ended September 30, 2021 and 2020 were $2,777 and $2,591, respectively, and were $7,902 and $9,246 for the nine months ended September 30, 2021 and 2020, respectively. In-process capitalized software at September 30, 2021 reflects the acquisition date fair value of $3,600 for developed technology acquired in the Tellutax acquisition as the Company undertakes necessary enhancements to integrate the technology with the Company’s existing software architecture. Capitalized software amortization expense for the three months ended September 30, 2021 and 2020 was $3,123 and $3,124, respectively, and was $9,473 and $8,702 for the nine months ended September 30, 2021 and 2020, respectively, and is included in cost of revenues, software subscriptions in the condensed consolidated statements of comprehensive loss. |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2021 | |
LEASES | |
LEASES | 7. LEASES The Company leases office space, IT equipment and office equipment. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets and lease expense is recognized over the term of these leases on a straight-line basis. The Company’s leases have remaining terms of up to 7 years. The following table sets forth the Company’s lease assets and liabilities and their balance sheet location as follows: As of September 30, Balance Sheet Location 2021 Lease assets: (unaudited) Operating lease right-of-use assets Operating lease right-of-use assets $ 21,137 Finance lease assets Property and equipment, net (Note 5) 707 Total lease assets $ 21,844 Lease liabilities: Current: Operating lease liabilities Current portion of operating lease liabilities $ 2,480 Finance lease liabilities Current portion of finance lease liabilities 276 Total current lease liabilities 2,756 Non-current: Operating lease liabilities Operating lease liabilities, net of current portion 26,707 Finance lease liabilities Finance lease liabilities, net of current portion 334 Total non-current lease liabilities 27,041 Total lease liabilities $ 29,797 The major components of lease cost are as follows: For the three months ended September 30, For the nine months ended September 30, 2021 2021 (unaudited) (unaudited) Operating lease cost $ 1,177 $ 3,527 Finance lease cost: Amortization of lease assets 363 826 Interest on lease liabilities 5 15 Total lease cost $ 1,545 $ 4,368 The weighted-average term and discount rate for leases are as follows: As of September 30, 2021 (unaudited) Weighted-average remaining lease term (years): Operating leases 6.8 Finance leases 1.5 Weighted-average discount rate: Operating leases 2.3 % Finance leases 2.3 % Lease liability maturities for the next five years and thereafter are as follows as of September 30, 2021: Operating Leases Finance Leases (unaudited) Remainder of 2021 (three months remaining) $ 1,411 $ 264 2022 4,533 289 2023 4,460 60 2024 4,464 10 2025 4,382 — Thereafter 12,531 — Total lease payments 31,781 623 Less: Imputed interest (2,594) (13) Present value of lease liabilities $ 29,187 $ 610 Lease liability maturities for the next five years and thereafter under the previous lease accounting standard are as follows: As of December 31, 2020 Operating Leases Capital Leases 2021 $ 5,442 $ 915 2022 4,518 230 2023 4,459 — 2024 4,464 — 2025 4,382 — Thereafter 12,531 — Total Lease Payments $ 35,796 1,145 Less amount representing interest (38) Present value of minimum lease payments 1,107 Less current portion (882) Capital lease obligations, net of current portion $ 225 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2021 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 8. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and other intangible assets are as follows: As of September 30, As of December 31, 2021 2020 (unaudited) Goodwill $ 274,862 $ 16,329 Other intangible assets, net 3,062 2,382 $ 277,924 $ 18,711 The changes in the carrying amount of goodwill for the nine months ended September 30, 2021 are as follows: Balance, January 1, 2021 $ 16,329 Acquisition of LCR-Dixon 97,817 Acquisition of Taxamo 164,449 Acquisition of Tellutax 4,700 Foreign currency translation adjustments (8,433) Balance, September 30, 2021, gross 274,862 Accumulated impairment losses — Balance, September 30, 2021, net $ 274,862 The Company has recognized various amortizable other intangible assets in connection with acquisitions, including 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: As of September 30, As of December 31, 2021 2020 (unaudited) Other intangible assets Weighted average amortization period (years) 4.3 5.5 Gross value $ 4,210 $ 2,825 Accumulated amortization (1,148) (443) Carrying value $ 3,062 $ 2,382 For the three months ended September 30, 2021 Cost of Revenues, Software Subscriptions Selling and Total Amortization of acquired intangible assets $ 65 $ 375 $ 440 For the nine months ended September 30, 2021 Cost of Revenues, Software Subscriptions Selling and Total Amortization of acquired intangible assets $ 192 $ 545 $ 737 |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2021 | |
DEBT | |
DEBT | 9. Credit Agreement On March 31, 2020, the Company entered into a credit agreement with a bank, which was subsequently amended on April 3, 2020 to permit another bank to be a party to the agreement, consisting of a $175,000 term loan (the “Term Loan”) and a $100,000 committed line of credit (the “Line of Credit”) (collectively, the “Credit Agreement”). A portion of the Offering proceeds was used to repay the $175,000 Term Loan in full on July 31, 2020. The Line of Credit matures in March 2025 and had no outstanding borrowings at September 30, 2021 or December 31, 2020. The Company has the option to select an applicable interest rate at either the bank base rate plus an applicable margin (the “Base Rate Option”) or the LIBOR plus an applicable margin (the “LIBOR Option”). The applicable margins are determined by certain financial covenant performance as defined in the Credit Agreement. At September 30, 2021, the Base Rate Option and LIBOR Option applicable to Line of Credit borrowings were 3.25% and 2.00%, respectively. The Credit Agreement is collateralized by certain assets of the Company and contains financial and operating covenants. The Company was in compliance with these covenants at September 30, 2021. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2021 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | 10 . Termination of S-Corporation status In connection with termination of the Company’s S-Corporation status effective July 27, 2020, the Company had an accumulated deficit of $354,291 pertaining to the S-Corporation shareholders which was reclassified to additional paid in capital upon such termination. Recapitalization 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 of common stock being exchanged for three In connection with the New Capital Structure, Treasury Stock was retired and amounts associated with the Treasury Stock were reclassified to additional paid in capital. Thus, at September 30, 2021 and December 31, 2020, there was no Treasury Stock. Prior to the Share Exchange, the Company had 147 shares of former Class A common stock and 120,443 shares of former Class B common stock outstanding. Members of a family (the “Family”) owned all 147 outstanding shares of former Class A common stock and 120,270 shares of the former Class B common stock. The remaining 173 shares of former Class B common stock outstanding were owned by non-Family members in connection with the exercise of stock options in April 2020 for cash of $53. There were no dividend or liquidation preference differences between the former Class A and former Class B shares. There were common stock equivalents outstanding at September 30, 2020 held by non-Family members that entitled such holders to receive an equivalent number of former Class B shares upon exercise. In connection with establishing the New Capital Structure in July 2020, the stockholders authorized 450,000 shares of common stock, par value $0.001 per share, and 30,000 shares of preferred stock, par value $0.001 per share. In connection with the New Capital Structure, common stock is divided into two classes, Class A with one vote per share, and Class B with ten votes per share. The rights of the holders of Class A and Class B are identical, except with respect to voting and conversion rights. Upon transfer of Class B shares to a non-Family member, such shares will automatically convert to an equivalent number of Class A shares with the respective voting rights attributable to such new shares. Authorized Class A and Class B shares are 300,000 and 150,000 shares, respectively. There are no dividend or liquidation preference differences between Class A and Class B. In connection with the Share Exchange in July 2020, the Family members exchanged each share of former Class A and former Class B for the equivalent number of Class B shares established as part of the New Capital Structure. In addition, the non-Family members exchanged their former Class B shares for an equivalent number of Class A shares established as part of the New Capital Structure. No funds were exchanged in connection with the Share Exchange, and the aggregate number of shares outstanding both immediately prior to and after the Share Exchange remained the same at 120,590. In addition, common stock equivalents, all of which were held by non-Family members and which were previously exercisable into former Class B shares, became exercisable into Class A shares established as part of the New Capital Structure. 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. See Note 11. Common Stock (after the Recapitalization) During the three and nine months ended September 30, 2021, the Company issued 625 and 1,726 shares of Class A, respectively, related to the exercise of options, net of 128 and 703 shares, respectively, returned to the Company in lieu of payment of the exercise price and taxes due on these exercises. During the three and nine months ended September 30, 2021 the Company issued 3 and 8 shares of Class A, respectively, in connection with the vesting of RSUs, net of 2 and 3 shares, respectively, returned to the Company in lieu of payment of taxes due on the vesting of these RSUs. During the three and nine months ended September 30, 2021, 118 and 352 shares of Class A, respectively were issued in connection with the vesting of RSAs, net of 11 and 11 shares, respectively, returned to the Company in lieu of payment of taxes due on the vesting of these RSAs. During the nine months ended September 30, 2021, a stockholder exchanged 12,100 shares of Class B for an equivalent number of shares of Class A. On July 28, 2020, the Company sold 23,812 shares of Class A in connection with the Offering for $423,024, net of underwriting fees. Offering costs paid from these proceeds aggregated $6,222 and are reflected as a reduction of additional Distributions The board of directors (the “Board”) declared distributions of $4,010 ($0.03 per share) and $123,185 ($1.02 per share) during the three months ended March 31, and June 30, 2020, respectively, and $5,706 ($0.05 per share) through July 25, 2020, pro rata to stockholders of the former Class A and Class B common stock. Tax Sharing Agreement Payments In connection with termination of the Company’s S-Corporation status effective July 27, 2020, the Company entered into a Tax Sharing Agreement with the former S-Corporation shareholders. See Note 1. The Tax Sharing Agreement, as amended on June 30, 2021, requires the Company to finalize the S-Corporation income tax returns for the short period ended July 26, 2020 no later than August 15, 2021 (previously June 30, 2021 prior to the amendment). The Company is required to settle any remaining liability for taxes to the former S-Corporation shareholders within 15 days thereafter under the amended Tax Sharing Agreement. All obligations of the Company under the Tax Sharing Agreement are satisfied by adjustments of additional paid in capital. Through the three months ended September 30, 2021, the Company distributed $2,700 to the former S-Corporation shareholders under the Tax Sharing Agreement in connection with preliminary estimates of obligations for income taxes related to the allocation of taxable income to the S-Corporation short tax period ended July 26, 2020. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2021 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 11. EARNINGS PER SHARE The table below illustrates the calculation of basic and diluted net loss per common share for the Class A common and Class B common for the periods reflected below. The weighted average shares outstanding have been retrospectively restated to reflect the Share Exchange for all periods prior to the Offering, resulting in the Class A shares representing non-Family-owned shares and Class B representing Family-owned shares for all periods presented. See Note 10 for further information on the Share Exchange. For the three months ended For the nine months ended September 30, September 30, Class A common stock: 2021 2020 2021 2020 (unaudited) (unaudited) Numerator, basic: Net loss attributable to all stockholders $ (3,948) $ (21,028) $ (852) $ (79,167) Class A common stock as a percentage of total shares outstanding, basic 27.09 % 13.08 % 22.91 % 3.07 % Net loss attributable to Class A stockholders, basic $ (1,070) $ (2,751) $ (195) $ (2,427) Numerator, diluted: Net loss attributable to all stockholders $ (3,948) $ (21,028) $ (852) $ (79,167) Class A common stock as a percentage of total shares outstanding, diluted 27.09 % 13.08 % 22.91 % 3.07 % Net loss attributable to Class A stockholders, diluted $ (1,070) $ (2,751) $ (195) $ (2,427) Denominator, basic and diluted: Weighted average Class A common stock, basic 40,141 18,124 33,775 6,129 Dilutive effect of common stock equivalents 1 — — — — Weighted average Class A common stock, diluted 40,141 18,124 33,775 6,129 Net loss per Class A share, basic $ (0.03) $ (0.15) $ (0.01) $ (0.40) Net loss per Class A share, diluted $ (0.03) $ (0.15) $ (0.01) $ (0.40) 1 For the three months ended For the nine months ended September 30, September 30, Class B common stock: 2021 2020 2021 2020 (unaudited) (unaudited) Numerator, basic: Net loss attributable to all stockholders $ (3,948) $ (21,028) $ (852) $ (79,167) Class B common stock as a percentage of total shares outstanding, basic 72.91 % 86.92 % 77.09 % 96.93 % Net loss attributable to Class B stockholders, basic $ (2,878) $ (18,277) $ (657) $ (76,740) Numerator, diluted: Net loss attributable to all stockholders $ (3,948) $ (21,028) $ (852) $ (79,167) Class B common stock as a percentage of total shares outstanding, diluted 72.91 % 86.92 % 77.09 % 96.93 % Net loss attributable to Class B stockholders, diluted $ (2,878) $ (18,277) $ (657) $ (76,740) Denominator, basic and diluted: Weighted average Class B common stock, basic 108,017 120,417 113,646 120,417 Dilutive effect of common stock equivalents — — — — Weighted average Class B common stock, diluted 108,017 120,417 113,646 120,417 Net loss per Class B share, basic $ (0.03) $ (0.15) $ (0.01) $ (0.64) Net loss per Class B share, diluted $ (0.03) $ (0.15) $ (0.01) $ (0.64) |
STOCK-BASED AWARD PLANS
STOCK-BASED AWARD PLANS | 9 Months Ended |
Sep. 30, 2021 | |
STOCK-BASED AWARD PLANS | |
STOCK-BASED AWARD PLANS | 12. STOCK-BASED AWARD PLANS On the effective date of the Offering, the Company adopted the 2020 Plan and the ESPP. The 2020 Plan provides the ability to grant cash and equity-based incentive awards to eligible employees, directors and service providers in order to attract, retain and motivate those that make important contributions to the Company. The 2020 Plan provides for the award of stock options, RSAs, RSUs, SARs and other cash compensation. The ESPP provides eligible employees with rights during each six-month ESPP offering period to purchase shares of the Company’s Class A common at the ESPP Discount through payroll deductions, except for the initial offering period (July 28 to November 30, 2020) whereby the participants were permitted to make lump sum contributions to the ESPP for such period. Amounts withheld or received from participants are reflected in accrued salaries and benefits in the condensed consolidated balance sheets until such shares are purchased. Amounts withheld from participants for the offering period ending November 30, 2021 aggregated $867 as of September 30, 2021. Prior to the adoption of the 2020 Plan, the Company had a SAR plan for the purpose of providing incentives to key members of management and consultants to contribute to the growth and financial success of the Company. As a result of the Offering, SAR participants were offered the option to either redeem their SARs upon the occurrence of the Offering or amend their SARs pursuant to which, upon effectiveness of the 2020 Plan, such SARs would become options to purchase shares of Class A common stock under the 2020 Plan (the “SAR Exchange Offer”). All SAR participants eligible to receive the SAR Exchange Offer accepted and had their outstanding SARs converted to stock options with equivalent terms under the 2020 Plan at the Offering effective date (the “Converted SARs”) of July 28, 2020. This was considered a modification of these SAR awards which was recorded in the respective quarter this occurred. The SAR plan was subsequently retired (“Retired SAR Plan”) and any SARs issued after such date will be granted under the 2020 Plan. Prior to the adoption of the 2020 Plan, the Company had options outstanding to purchase shares of former Class B common stock. Upon the effectiveness of the Offering these options were amended and exchanged for options to purchase an equivalent number of Class A shares under the 2020 Plan at the same exercise price and vesting, subject to the terms of the 2020 Plan except with regard to certain terms of the original option agreements primarily with respect to expiration in connection with a Triggering Event (the “Amended Options”). Any new options issued subsequent to this exchange will be granted under the 2020 Plan. 2020 Plan As of September 30, 2021, 6,526 shares of Class A common were available for issuance under the 2020 Plan. Awards issued under the 2020 Plan vest based on service criteria established by the Board. The Company has elected to account for forfeitures as they occur rather than estimate forfeitures at date of grant. Retired SAR Plan Prior to the Offering, the fair value of the common stock underlying the SAR Awards was determined by the Board with assistance from management and an independent third-party valuation firm. The determination of value used the market and income approaches, with an adjustment for marketability discount pertinent to private company entities in arriving at the per share fair value (the “valuation methodology”). Under the market approach, the guideline public company method is used, which estimates the fair value of the Company based on market prices of stock of guideline public companies. The income approach involves projecting the future benefits of owning an asset and estimating the present value of those future benefits by discounting them based upon the time value of money and the investment risks associated with ownership. At the end of 2019, due to the consideration by the Board of pursuing the Offering, the valuation methodology began to consider the impact of such an event on the value of the Company’s common stock underlying the awards. As the Company approached the Offering effective date, this resulted in increases in the value of the SAR Awards which resulted in corresponding increases to compensation expense during 2020 which exceeded historical results. Amended Options Prior to the amendment of the options in connection with the Offering in July 2020, the options permitted holders to put their exercised shares back to the Company, thus the options were classified as temporary equity and included in “Options for Redeemable Shares” on the condensed consolidated statements of changes in equity (deficit) through the Offering date. The Company recorded an increase in the value of Options for Redeemable Shares of $21,954 and $51,833 during the three and nine months ended September 30, 2020, respectively, pertaining to the options outstanding through the Offering date. As all options outstanding were fully vested, no related compensation expense was recorded for the three or nine months ended September 30, 2020. In connection with the amendment, the option holders’ ability to put the exercised Amended Option shares to the Company in order to attain liquidity was exchanged for the right by the holders to exercise these options under the terms of the 2020 Plan and sell the related shares on the NASDAQ exchange. As a result of the put right no longer being applicable, the options were no longer considered temporary equity and were reclassified to stockholders’ equity at the time of the exchange. Options under 2020 Plan The following table summarizes activity for options outstanding under the 2020 Plan, including the Amended Options: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic 2020 Plan Option Activity Units Price Life (Years) Value Outstanding at January 1, 2021 11,876 $ 2.44 Granted 566 $ 24.78 Forfeited (293) $ 4.06 Exercised (2,429) $ 2.13 $ 49,205 2020 Plan options outstanding at September 30, 2021 9,720 $ 3.77 5.14 $ 150,182 2020 Plan options exercisable at September 30, 2021 5,258 $ 2.12 3.24 $ 89,924 The detail of options outstanding, vested and exercisable under the 2020 Plan (including the Amended Options) as of September 30, 2021 is as follows: Options Outstanding Options Vested and Exercisable Weighted Weighted Average Average Exercise Prices Units Life (Years) Units Life (Years) $0.15 to $0.71 2,076 * 2,076 * $2.15 472 3.35 472 3.35 $2.50 2,186 4.78 1,557 4.65 $2.67 506 5.43 128 5.44 $3.17 1,286 6.54 536 6.54 $3.73 1,957 8.05 371 7.75 $4.70 683 8.36 — - $18.96 235 9.88 105 9.88 $19.00 68 9.99 — - $32.16 251 9.42 13 9.42 9,720 5,258 *Amended Options have indefinite contractual lives The Board intends all options granted to be exercisable at a price per share not less than the per share fair market value of the Company’s Class A common stock underlying the options on the date of grant. Compensation expense for new option awards issued subsequent to the Offering to participants under the 2020 Plan are measured based on the grant date fair value of the awards and recognized in the condensed consolidated statements of comprehensive loss over the period during which the participant is required to perform the requisite services. The vesting period is generally one The Company issued 303 options and 566 options under the 2020 Plan during the three months and nine months September 30, 2021, respectively. The assumptions used in the Black-Scholes model to determine the value of the options issued during these periods are as follows: Option Valuation Period Q1 2021 Q2 2021 Q3 2021 Q3 2021 Fair market value of common stock $ 32.16 $ 17.66 $ 18.96 $ 19.00 Volatility 36.8 % 36.8 % 37.1 % 37.1 % Expected term (years) 6.0 6.0 5.0 5.0 Expected dividend yield — % — % — % — % Risk-free interest rate 0.4 % 0.4 % 0.8 % 0.9 % The fair market value of common stock reflects the market closing price on NASDAQ on the respective option grant date. As of the valuation dates, the Company lacked sufficient historical data on the volatility of its stock price. Selected volatility is representative of expected future volatility and was based on the historical and implied volatility of comparable publicly traded companies over a similar expected term. The expected term represents the term the options are expected to be exercised over, which differs from the term of the option grants which is ten years. The Company does not expect to pay dividends. The risk-free interest rate was based on the rate for a U.S. Treasury zero-coupon issue with a term that closely approximates the expected term of the option grants. At September 30, 2021, $21,530 of unrecognized compensation expense associated with options and Converted SARs is expected to be recognized over a weighted average period of approximately 2.8 years. Restricted Stock Units The following table summarizes RSU activity for the nine months ended September 30, 2021: Weighted Average Grant Date Fair Units Value Per Share Outstanding at January 1, 2021 101 $ 23.80 Granted 408 28.58 Vested (11) 33.65 Forfeited (28) 24.96 Outstanding at September 30, 2021 470 $ 27.65 Stock-based compensation cost for RSUs is measured based on the fair value of the Company’s underlying common stock on the date of grant and is recognized on a straight-line basis in the condensed consolidated statements of comprehensive loss over the period during which the participant is required to perform services in exchange for the award, which is generally one In connection with the Taxamo acquisition, certain continuing employees of Taxamo received RSUs with service and performance conditions covering up to 1,230 shares of our Class A common stock (“PSUs”) with an aggregate grant date fair value of $21,729 that will be accounted for as post-acquisition compensation expense over the vesting period. The performance-based condition will be satisfied upon meeting certain performance targets for the year ended 2023. As of September 30, 2021, it is not probable that these targets will be met, thus no compensation expense has been recorded to date related to these PSUs. Restricted Stock Awards The following table summarizes RSA activity for the nine months ended September 30, 2021: Weighted Average Grant Date Fair Units Value Per Share Outstanding at January 1, 2021 670 $ 19.00 Granted 59 17.66 Vested (363) 19.00 Forfeited (26) 19.00 Outstanding at September 30, 2021 340 $ 18.77 Stock-based compensation cost for RSAs is measured based on the fair value of the Company’s underlying common stock on the date of grant and is recognized on a straight-line basis in the condensed consolidated statements of comprehensive loss over the period during which the participants are required to perform services in exchange for the award, which is generally one Employee Stock Purchase Plan The ESPP permits participants to purchase Class A common stock through payroll deductions of up to a specified percentage of their eligible compensation. The maximum number of shares that may be purchased by a participant during any offering period is determined by the plan administrator in advance of each offering period. On the first trading day of each offering period, each participant will automatically be granted an option to purchase shares of Class A common. The option will expire at the end of the applicable offering period and will be exercised at that time to the extent of the payroll deductions accumulated or contributions made during such offering period. The purchase price of the shares, in the absence of a contrary designation, is 15% of the lower of the fair value of the Class A common on the first or last day of the ESPP offering period. Participants may voluntarily end their participation in the plan at any time during a specified period prior to the end of the applicable offering period and will be paid their accrued payroll deductions and related contributions, if applicable, that have not yet been used to purchase shares of Class A common. If a participant withdraws from the plan during an offering period, the participant cannot rejoin until the next offering period. Participation ends automatically upon a participant’s termination of employment. A total of 1,000 shares of Class A common were initially reserved for issuance under the ESPP. The number of shares available for issuance under the ESPP will be increased annually on January 1 of each calendar year beginning in 2021 and ending in and including 2030, by an amount equal to the lesser of (i) 1% of the shares of Class A and Class B common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the Board, provided that no more than 16,000 shares of Class A common stock may be issued. The ESPP is administered by a committee of the Board. Class A common stock purchased under the ESPP for the six-month offering period ended May 31, 2021 aggregated 60 shares. As of September 30, 2021, there was approximately The fair value of ESPP purchase rights is comprised of the value of the 15% ESPP Discount and the value associated with the Call/Put over the respective ESPP offering period. The value of the Call/Put for the previous offering period (December 1, 2020 – May 31, 2021) and the current offering period (June 1, 2021 – November 30, 2021) was estimated using the Black-Scholes model with the following assumptions: Previous Current Offering Period Offering Period Fair market value of common stock $ 25.83 $ 19.89 Volatility 35.10 % 35.10 % Expected term (years) 0.50 0.50 Expected dividend yield — % — % Risk-free interest rate 0.12 % 0.12 % The Company lacks sufficient historical data on the volatility of its stock price. Selected volatility is representative of expected future volatility and was based on the historical and implied volatility of comparable publicly traded companies over a similar expected term. The expected term represents the term of the ESPP offering period, which is generally six months. The Company does not expect to pay dividends. The risk-free interest rate was based on the rate for a U.S. Treasury zero-coupon issue with a term that closely approximates the expected term of the award at the date nearest the offering term. Stock-Based Compensation The Company recognized total stock-based compensation cost related to incentive awards, net of forfeitures, as follows: For the three months ended For the nine months ended September 30, September 30, 2021 2020 2021 2020 Stock-based compensation expense: SARs and Converted SARs $ 4,364 $ 62,141 $ 11,275 $ 138,737 Stock options 1,215 — 1,985 — RSUs 908 18 2,137 18 RSAs 799 2,014 4,454 2,014 ESPP 136 121 399 121 Total stock-based compensation expense $ 7,422 $ 64,294 $ 20,250 $ 140,890 The Company recognized stock-based compensation cost in the condensed consolidated statements of comprehensive loss as follows: For the three months ended For the nine months ended September 30, September 30, 2021 2020 2021 2020 Stock-based compensation expense: Cost of revenues, software subscriptions $ 656 $ 6,342 $ 1,788 $ 14,002 Cost of revenues, services 760 9,230 1,976 20,719 Research and development 876 6,340 2,008 14,000 Selling and marketing 2,157 12,821 4,877 28,140 General and administrative 2,973 29,561 9,601 64,029 Total stock-based compensation expense $ 7,422 $ 64,294 $ 20,250 $ 140,890 |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 9 Months Ended |
Sep. 30, 2021 | |
LEGAL PROCEEDINGS | |
LEGAL PROCEEDINGS | 13. LEGAL PROCEEDINGS The Company may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. The Company is not aware of any such legal proceedings or claims that management believes will have a material adverse effect on its business, financial condition, or operating results. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Nature of Business | Nature of Business Vertex, Inc. (“Vertex”) and its direct and indirect wholly owned subsidiaries (collectively, the “Company”) operate as solutions providers of state, local and value added tax calculation, compliance and analytics, offering software products which 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 | Basis of Consolidation The condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) and include the accounts of the Company. All intercompany transactions have been eliminated in consolidation. The Company has a 65% controlling interest in Systax Sistemas Fiscais LTDA (“Systax”), a provider of Brazilian transaction tax content and software. Systax is considered a Variable Interest Entity (“VIE”) and its accounts have been included in the condensed consolidated financial statements from the acquisition date. Systax was determined to be a VIE as Vertex is the primary beneficiary of the equity interests in Systax and participates significantly in the variability in the fair value of Systax’s net assets. |
Unaudited Interim Financial Information | 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 U.S. 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, 2020, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report”) filed with the SEC on March 15, 2021. The interim condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements included in the 2020 Annual Report. The accompanying interim condensed consolidated balance sheet as of September 30, 2021, the interim condensed consolidated statements of comprehensive loss and changes in equity (deficit) for the three and nine months ended September 30, 2021 and 2020, and interim condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020 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, 2021 are not necessarily indicative of the results expected for the full year ending December 31, 2021. |
Segments | Segments The Company operates its business as one operating segment. For the three months ended September 30, 2021 and 2020, approximately 6% and 3%, respectively, of the Company’s revenues were generated from customers outside the U.S. For the nine months ended September 30, 2021 and 2020, approximately 6% and 3%, respectively, of the Company’s revenues were generated from customers outside the U.S.. |
Fair Value Measurement | Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date. A three-level fair value hierarchy (the “Fair Value Hierarchy”) prioritizes the inputs used to measure fair value. The Fair Value Hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. Classification in the Fair Value Hierarchy is based on the lowest of the following levels that is significant to the measurement: Level 1 Level 2 Level 3 The Company’s assessment of the significance of an input to a fair value measurement requires judgment, which may affect the determination of fair value and the measurement’s classification within the Fair Value Hierarchy. |
Use of Estimates | 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) the reserve for self-insurance, (iv) assumptions related to achievement of technological feasibility for software developed for sale, (v) product life cycles, (vi) estimated useful lives and potential impairment of long-lived assets and intangible assets, (vii) potential impairment of goodwill, (viii) determination of the fair value of tangible and intangible assets acquired, liabilities assumed and consideration transferred in acquisitions, (ix) amortization period of material rights and deferred commissions (x) valuation of the Company’s stock used to measure stock-based compensation awards, (xi) Black-Scholes-Merton option pricing model (“Black-Scholes model”) input assumptions used to determine the fair value of stock-based compensation awards, (xii) measurement of future purchase commitment, contingent consideration liabilities and deferred purchase consideration liabilities associated with acquisitions, and (xiii) 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. |
Internal-Use Software | Internal-Use Software The Company follows Accounting Standard Codification (“ASC”) 350-40, Goodwill and Other, Internal-Use Software, 3 software subscriptions and depreciation and amortization expense, respectively, in the condensed consolidated statements of comprehensive loss. |
Software Developed for Sale | Software Developed for Sale The costs incurred for the development of computer software to be sold, leased, or otherwise marketed are capitalized in accordance with ASC 985-20, Costs of Software to be Sold, Leased or Marketed 3 |
Business Combinations | Business Combinations Upon acquisition of a company, the Company determines if the transaction is a business combination, which is accounted for using the acquisition method of accounting. Under the acquisition method, once control is obtained of a business, the assets acquired, liabilities assumed, consideration transferred and amounts attributed to noncontrolling interests, are recorded at fair value. The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired, liabilities assumed, consideration transferred, and amounts attributed to noncontrolling interests at the acquisition date. One of the most significant estimates relates to the determination of the fair value of these amounts. The determination of the fair values is based on estimates and judgments made by management. The Company’s estimates of fair value are based upon assumptions it believes to be reasonable, but which are inherently uncertain and unpredictable. Measurement period adjustments to these values as of the acquisition date are reflected at the time identified, up through the conclusion of the measurement period, which is the time at which all information for determination of the values of assets acquired, liabilities assumed, consideration transferred and noncontrolling interests is received, and is not to exceed one year from the acquisition date (the “Measurement Period”). Thus the Company may record adjustments to the fair value of these tangible and intangible assets acquired, liabilities assumed, consideration transferred and noncontrolling interests, with the corresponding offset to goodwill during this Measurement Period. Additionally, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluate these estimates and assumptions periodically and record any adjustments to preliminary estimates to goodwill, provided the Company is within the Measurement Period, with any adjustments to amortization of new or previously recorded identifiable intangibles being recorded to the consolidated statements of comprehensive loss in the period in which they arise. In addition, if outside of the Measurement Period, any subsequent adjustments to the acquisition date fair values are reflected in the consolidated statements of comprehensive loss in the period in which they arise. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. The Company evaluates goodwill for impairment annually at October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred. |
Stock-Based Compensation | Stock-Based Compensation The Company’s Registration Statement on Form S-1 with the SEC was declared effective on July 28, 2020, resulting in the Class A common shares being registered and available for trading on the NASDAQ exchange (the “Offering”). On the effective date of the Offering, the Company adopted the 2020 Incentive Award Plan (the “2020 Plan”) and the 2020 Employee Stock Purchase Plan (the “ESPP”), which provide for the award of stock appreciation rights (“SARs”), stock options (“options”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and participation in the ESPP (collectively, the "awards"). The awards are subject to, and the Company applies, the guidance set forth in ASC 718, Compensation—Stock Compensation The provisions of ASC 718 require a company to measure the fair value of stock-based compensation as of the grant date of the award. Stock-based compensation expense reflects the cost of employee services received in exchange for the awards. SARs are accounted for as liabilities under ASC 718 and, as such, the Company recognizes stock-based compensation expense by remeasuring the value of the SARs at the end of each reporting period and accruing the portion of the requisite service rendered at that date. Prior to July 2, 2020, the date management determined the Company was considered to have become a public entity, the Company measured SARs at their intrinsic value. After such date, management remeasured outstanding SARs using the fair value-based method under ASC 718. Stock-based compensation expense for stock options issued under the 2020 Plan after the Offering is measured based on the grant date fair value of the award and is estimated using the Black-Scholes model. Compensation cost is recognized on a straight-line basis over the requisite service or performance period associated with the award. Stock-based compensation expense for RSAs and RSUs is based on the fair value of the Company’s underlying common stock on the date of grant. Compensation cost is recognized on a straight-line basis over the requisite service or performance period associated with the award. Stock-based compensation expense for awards subject to performance-based measurement criteria is recognized when achievement of performance targets is deemed probable. The ESPP permits participants to purchase Class A common stock through payroll deductions, up to a specified percentage of their eligible compensation or a lump sum contribution amount for the initial offering period. The plan is a compensatory plan as it allows participants to purchase stock at a 15% discount from the lower of the fair value of the Class A common on the first or last day of the ESPP offering period (the “ESPP Discount”).The ESPP is accounted for as an equity classified award. Stock-based compensation expense for the ESPP is measured based on the fair value of the ESPP award at the start of the offering period. The fair value is comprised of the value of the ESPP Discount and the value associated with the variability in the Class A common stock price during the offering period (the “Call/Put”), which is estimated using the Black-Scholes model. Compensation cost is recognized on a straight-line basis over the respective offering period. The Company has elected to recognize award forfeitures as they occur. |
Revenue Recognition | Revenue Recognition Revenue from contracts with customers The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers Nature of goods and services Licenses for on-premise software subscriptions provide the customer with a right to use the software as it exists when made available to the customer. Customers purchase a subscription to these licenses, which includes the related software and tax content updates (collectively “updates”) and product support. The updates and support, which are part of the subscription agreement, are essential to the continued utility of the software; therefore, the Company has determined the software and the related updates and support to be a single performance obligation. Accordingly, when on-premise software is licensed, the revenue associated with this combined performance obligation is recognized ratably over the license term as these subscriptions are provided for the duration of the license term. Revenue recognition begins on the later of the beginning of the subscription period or the date the software is made available to the customer to download. Certain on-premise software subscription prices in the initial subscription year are higher than standard renewal prices. The excess initial year price over the renewal price (“new sale premium”) is a material right that provides customers with the right to this reduced renewal price. The Company recognizes revenue associated with this material right over the estimated period of benefit to the customer, which is generally three years. Cloud-based subscriptions allow customers to use Company-hosted software over the contract period without taking possession of the software. The cloud-based offerings also include related updates and support. Cloud-based contracts consistently provide a benefit to the customer during the subscription period; thus, the associated revenue is recognized ratably over the related subscription period. Revenue recognition begins on the later of the beginning of the subscription period or the date the customer is provided access to the cloud-based solutions. Revenue from deliverable-based services is recognized as services are delivered. Revenue from fixed fee services is recognized as services are performed using the percentage of completion input method. The Company has elected the “right to invoice” practical expedient for revenue related to services that are billed on an hourly basis, which enables revenue to be recognized as the services are performed. The Company has determined that the methods applied to measuring its progress toward complete satisfaction of performance obligations recognized over time are a faithful depiction of the transfer of control of software subscriptions and services to customers. Significant Judgments Contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Identification of the amortization periods of material rights and contract costs requires significant judgement by management. Payment terms Payment terms and conditions vary by contract, although the Company’s terms generally include a requirement of payment within 30-days. In instances where the timing of revenue recognition differs from the timing of payment, the Company has determined that its contracts do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing products and services, not to receive financing from customers or to provide customers with financing. Cost of Revenues Cost of revenues, software subscriptions includes the direct cost to develop, host and distribute software products, the direct cost to provide customer support, and amortization of costs capitalized for software developed for sale and for internal-use software utilized for cloud-based subscriptions. Cost of revenues, services includes the direct costs of implementation, training, transaction tax returns outsourcing and other tax-related services. Reimbursable Costs Reimbursable costs passed through and invoiced to customers of the Company are recorded as services revenues with the associated expenses recorded as cost of revenues, services in the condensed consolidated statements of comprehensive loss. |
Income Taxes | Income Taxes On July 27, 2020, the Company’s S-Corporation election (the “S Election”) was terminated by the Company’s stockholders in connection with the Offering. As a result, Vertex became taxable at the corporate level as a C-Corporation for U.S. federal and state income tax purposes. In connection with the S Election termination, the Company entered into an agreement with the S-Corporation stockholders pursuant to which the Company has indemnified them for unpaid income tax liabilities and may be required to make future payments in material amounts to them attributable to incremental income taxes resulting from an adjustment to S-Corporation related taxable income (the “Tax Sharing Agreement”). In addition, the Tax Sharing Agreement indemnifies the S-Corporation stockholders for any interest, penalties, losses, costs or expenses arising out of any claim under the agreement. Correspondingly, the S-Corporation stockholders have indemnified the Company with respect to unpaid tax liabilities (including interest and penalties) attributable to a decrease in S-Corporation stockholders’ taxable income and a corresponding increase in our taxable income as a C-Corporation for any period. Prior to July 27, 2020, as Vertex was taxed as an S-Corporation for U.S. federal and certain states income tax purposes, net income or loss was allocated to and included on the income tax returns of the S-Corporation stockholders. Historically, the Company distributed amounts to the S-Corporation stockholders to satisfy their tax liabilities resulting from allocated net income or loss. Vertex was taxed at the corporate level in those states where the S-Corporation status was not recognized or where the state imposed a tax on an S-Corporation. Accordingly, the income tax provision or benefit was based on taxable income allocated to these states. In certain foreign jurisdictions, Vertex subsidiaries were taxed at the corporate level, and the income tax provision or benefit was based on taxable income sourced to these foreign jurisdictions. |
Supplemental Cash Flow Disclosures | Supplemental Cash Flow Disclosures Supplemental cash flow disclosures are as follows for the respective periods: For the nine months ended September 30, 2021 2020 (unaudited) Cash paid for interest $ 180 $ 1,912 Cash paid for income taxes, net of refunds $ 1,032 $ 522 Operating cash flows from operating leases $ 4,090 $ — Non-cash investing and financing activities: Purchase commitment and contingent consideration liabilities $ 50,653 $ 14,344 Leased assets obtained in exchange for new finance lease liabilities $ 173 $ — Equipment acquired through capital leases $ — $ 826 Remeasurement of options for redeemable shares $ — $ 51,833 Conversion of SARs in connection with the Offering $ — $ 128,870 Exchange of Amended Options in connection with the Offering $ — $ 69,177 |
Recently Issued and Recently Adopted Accounting Pronouncements | Recently Issued Accounting Pronouncements As an “emerging growth company,” the Jumpstart Our Business Startups Act (the “JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to delay adoption of certain new or revised accounting standards. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies. Deferred Revenue In October 2021, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations Recently Adopted Accounting Pronouncements Leases In February 2016, the FASB issued ASU No. 2016-02, Leases The Company adopted ASC 842 on January 1, 2021 using the modified retrospective transition method, which did not require the Company to adjust comparative periods. The Company’s lease assets and lease liabilities are recognized on the lease commencement date in an amount that represents the present value of future lease payments. The Company’s incremental borrowing rate, which is based on information available at the adoption date for existing leases and the commencement date for leases commencing after the adoption date, is used to determine the present value of lease payments. The Company elected the “package of three” practical expedients permitted under the transition guidance, which allows (i) a carry forward of the historical lease classification conclusions, (ii) management to assess whether a contract is or contains a lease, and (iii) the retention of initial direct costs for any leases that exist prior to adoption of the new standard. As a result of the adoption of ASC 842 on January 1, 2021, the Company recorded both operating lease right-of-use assets of $24,004 and operating lease liabilities of $32,562. An adjustment to retained earnings of $508, net of the deferred tax impact, was also recorded. The adoption of ASC 842 had an immaterial impact on the condensed consolidated statement of comprehensive loss and the condensed consolidated cash flow. The adoption of this standard also resulted in a change in the naming convention for leases classified historically as capital leases. These leases are now referred to as finance leases within property and equipment, with corresponding short-term and long-term debt liabilities being presented as “Current portion of finance lease liabilities” and “Finance lease liabilities, net of current portion,” respectively. See Note 7 for further information. The Company does not recognize leases with an initial term less than one year (“short-term leases”) on its condensed consolidated balance sheets, and recognizes such lease payments in the condensed consolidated statements of comprehensive loss on a straight-line basis over the lease term. Leases with an option to extend the related lease term or terminate early are reflected in the lease term when it is reasonably certain that the Company will exercise such options. Credit Losses In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments Income Taxes In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, |
Risks and Uncertainties | Risks and Uncertainties In March 2020, the World Health Organization declared the outbreak of coronavirus disease 2019 (“COVID-19”) to be a pandemic. The COVID-19 pandemic is continuing to have widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. To protect the health and well-being of Company employees and customers, substantial modifications were made to employee travel policies, and our offices were closed, and remained closed through September 30, 2021, with employees directed to work from home. In addition, conferences and other marketing events were cancelled or shifted to virtual-only, and the Company continued to participate virtually through September 30, 2021. The COVID-19 pandemic has impacted, and may continue to impact, Company operations, including employees, customers and partners, and there is substantial uncertainty regarding the nature and degree of its continued effects over time. The Company did not experience any significant reductions in sales, revenues or collections through September 30, 2021 as a result of COVID-19. The uncertainty caused by the COVID-19 pandemic could, however, impact Company billings to new customers for the remainder of 2021, and may also negatively impact Company efforts to expand revenues from existing customers as they continue to evaluate certain long-term projects and budget constraints. In addition to the potential impact on sales, the Company may see delays in collections during 2021 as customers adjust their operating protocols to accommodate implementation of new criteria to protect the health and well-being of their employees and customers. However, these delays are not expected to materially impact the business, and thus the Company has not recorded additional credit losses associated with the allowance for doubtful accounts in connection with any delays. The Company believes it has ample liquidity and capital resources to continue to meet its operating needs and to service debt and other financial obligations. The extent to which the COVID-19 pandemic impacts the business going forward will depend on numerous evolving factors that cannot reliably be predicted, including the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact on economic activity, including the possibility of recession or financial market instability. These factors may adversely impact consumer, business and government spending on technology as well as customers’ ability to pay for Company products and services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including estimated allowance for subscription cancellations, product life cycles and estimated lives of long-lived assets. Reclassifications Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on previously reported comprehensive income or loss. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of supplemental cash flow disclosures | For the nine months ended September 30, 2021 2020 (unaudited) Cash paid for interest $ 180 $ 1,912 Cash paid for income taxes, net of refunds $ 1,032 $ 522 Operating cash flows from operating leases $ 4,090 $ — Non-cash investing and financing activities: Purchase commitment and contingent consideration liabilities $ 50,653 $ 14,344 Leased assets obtained in exchange for new finance lease liabilities $ 173 $ — Equipment acquired through capital leases $ — $ 826 Remeasurement of options for redeemable shares $ — $ 51,833 Conversion of SARs in connection with the Offering $ — $ 128,870 Exchange of Amended Options in connection with the Offering $ — $ 69,177 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
REVENUE RECOGNITION | |
Schedule of disaggregation of revenue | Three months ended Nine months ended September 30, September 30, 2021 2020 2021 2020 (unaudited) (unaudited) Software subscriptions: Software licenses $ 58,932 $ 56,882 $ 172,807 $ 170,801 Cloud subscriptions 33,344 22,896 92,353 62,043 Software subscriptions 92,276 79,778 265,160 232,844 Services 18,442 14,827 48,732 42,277 Total revenues $ 110,718 $ 94,605 $ 313,892 $ 275,121 |
Schedule of beginning and ending balances of accounts receivable, net of allowance | For the nine months ended For the year ended September 30, 2021 December 31, 2020 (unaudited) Balance, beginning of period $ 77,159 $ 70,367 Balance, end of period 73,234 77,159 (Decrease) increase, net $ (3,925) $ 6,792 |
Schedule of beginning and ending balances of and changes to the allowance and the deferred allowance | For the three months ended September 30, 2021 2020 Balance Net Change Balance Net Change Allowance balance, July 1 $ (9,399) $ (7,669) Allowance balance, September 30 (8,845) (7,567) Change in allowance $ (554) $ (102) Deferred allowance balance, July 1 6,267 5,335 Deferred allowance balance, September 30 6,284 5,170 Change in deferred allowance (17) 165 Net amount charged to revenues $ (571) $ 63 For the nine months ended September 30, 2021 2020 Balance Net Change Balance Net Change Allowance balance, January 1 $ (8,592) $ (7,515) Allowance balance, September 30 (8,845) (7,567) Change in allowance $ 253 $ 52 Deferred allowance balance, January 1 6,432 5,614 Deferred allowance balance, September 30 6,284 5,170 Change in deferred allowance 148 444 Net amount charged to revenues $ 401 $ 496 |
Schedule of information about the balances of and changes to deferred revenue | As of September 30, As of December 31, 2021 2020 (unaudited) Balances: Deferred revenue, current $ 211,036 $ 207,560 Deferred revenue, non-current 11,544 14,702 Total deferred revenue $ 222,580 $ 222,262 For the three months ended For the nine months ended September 30, September 30, 2021 2020 2021 2020 (unaudited) (unaudited) Changes to deferred revenue: Beginning balance $ 222,612 $ 198,437 $ 222,262 $ 205,791 Additional amounts deferred 110,686 93,708 314,210 266,870 Revenues recognized (110,718) (94,605) (313,892) (275,121) Ending balance $ 222,580 $ 197,540 $ 222,580 $ 197,540 |
Schedule of information about the changes to contract cost balances | For the three months ended For the nine months ended September 30, September 30, 2021 2020 2021 2020 (unaudited) (unaudited) Beginning balance $ 11,545 $ 10,390 $ 11,743 $ 11,196 Additions 3,866 1,876 8,059 4,570 Amortization (2,828) (1,894) (7,219) (5,394) Ending balance $ 12,583 $ 10,372 $ 12,583 $ 10,372 |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
LCR-Dixon | |
BUSINESS COMBINATIONS | |
Schedule of allocation of consideration transferred | September 22, 2021 (unaudited) Cash paid at closing $ 59,720 Fair value of deferred purchase consideration 39,024 Total $ 98,744 |
Schedule of purchase price to assets acquired and liabilities assumed | September 22, 2021 (unaudited) Cash and cash equivalents $ 1,899 Accounts receivable 1,002 Prepaid expenses and other current assets 313 Property and equipment 4 Goodwill 97,817 Accounts payable (18) Accrued expenses (438) Accrued compensation (1,796) Deferred revenue (39) Total $ 98,744 |
Tellutax | |
BUSINESS COMBINATIONS | |
Schedule of purchase price to assets acquired and liabilities assumed | January 25, 2021 (unaudited) Capitalized software - developed technology $ 3,600 Goodwill 4,700 Total $ 8,300 |
Taxamo | |
BUSINESS COMBINATIONS | |
Schedule of allocation of consideration transferred | May 12, 2021 (unaudited) Cash paid at closing $ 190,153 Fair value of acquisition holdback 502 Fair value of the Option 10,034 Total $ 200,689 |
Schedule of purchase price to assets acquired and liabilities assumed | Preliminary Unadjusted Measurement Period Preliminary Adjusted May 12, 2021 Adjustments May 12, 2021 (unaudited) (unaudited) (unaudited) Cash and cash equivalents $ 2,441 $ — $ 2,441 Funds held for customers 221 — 221 Accounts receivable 7,783 (5,278) 2,505 Prepaid expenses and other current assets 908 — 908 Property and equipment 46 40,746 40,792 Goodwill 201,580 (37,131) 164,449 Other intangibles — 1,581 1,581 Accounts payable (304) — (304) Accrued expenses (6,615) 5,220 (1,395) Accrued compensation (3,939) — (3,939) Deferred revenue — (2,196) (2,196) Deferred other income (1,432) 1,432 — Deferred other liabilities — (4,374) (4,374) Total $ 200,689 $ — $ 200,689 |
Schedule of acquired intangible assets | May 12, 2021 Taxamo Identifiable Intangibles Balance Sheet Location Fair Value Valuation Methodology Estimated Useful Life Discount Rate Developed technology Property and equipment, net (Note 5) $ 40,746 Multi-period excess earnings method - income approach 3 years 16.5 % Trade name Goodwill and other intangible assets (Note 8) $ 608 Relief from royalty method - income approach 2 years 16.5 % Customer relationships Goodwill and other intangible assets (Note 8) $ 973 Distributor method - income approach 2 years 16.5 % |
FINANCIAL INSTRUMENTS AND FAI_2
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | |
Schedule of assets and liabilities measured at fair value on a recurring basis | Fair Value Measurements Using As of September 30, 2021 Fair Value Prices in active markets for identical assets (Level 1) Significant other observable inputs Significant unobservable inputs Money market funds $ 10,701 $ 10,701 $ — $ — Tellutax Contingent Consideration $ (2,500) $ — $ — $ (2,500) Fair Value Measurements Using As of December 31, 2020 Fair Value Prices in active markets for identical assets (Level 1) Significant other observable inputs Significant unobservable inputs Money market funds $ 265,270 $ 265,270 $ — $ — |
Summary of estimated fair value of tellutax contingent consideration | September 30, 2021 Liability Fair Value Valuation Technique Unobservable Inputs Tellutax Contingent Consideration $ (2,500) Monte Carlo Simulation Revenue volatility 95.0 % Revenue discount rate 19.0 % Term (in years) 3.6 January 25, 2021 Liability Fair Value Valuation Technique Unobservable Inputs Tellutax Contingent Consideration $ (2,200) Monte Carlo Simulation Revenue volatility 95.0 % Revenue discount rate 20.3 % Term (in years) 4.3 |
Changes in fair value of tellutax contingent consideration | Tellutax Contingent Consideration Balance, January 1, 2021 $ — Acquisition of Tellutax (2,200) Fair value adjustments (300) Balance, September 30, 2021 $ (2,500) |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
PROPERTY AND EQUIPMENT | |
Schedule of major components of property and equipment | As of September 30, As of December 31, 2021 2020 (unaudited) Leasehold improvements $ 20,959 $ 20,907 Equipment 42,218 41,410 Computer software purchased 11,782 11,620 Internal-use software developed: Cloud-based customer solutions 109,828 65,423 Internal systems and tools 32,000 25,349 Furniture and fixtures 7,676 7,674 In-process internal-use software 12,714 3,304 237,177 175,687 Less accumulated depreciation (139,308) (119,130) Property and equipment, net $ 97,869 $ 56,557 |
Schedule of major components of internal-use software | As of September 30, As of December 31, 2021 2020 (unaudited) Internal-use software developed $ 141,828 $ 90,772 Less accumulated depreciation (80,222) (65,090) 61,606 25,682 In-process internal-use software 12,714 3,304 Internal-use software developed, net $ 74,320 $ 28,986 |
Schedule of amounts capitalized for internal-use software and included in property and equipment additions on the consolidated statements of cash flows | For the nine months ended September 30, For the nine months ended September 30, 2021 2020 (unaudited) (unaudited) Cloud-based customer solutions $ 13,881 $ 12,574 Internal systems and tools 7,762 1,463 Total $ 21,643 $ 14,037 |
CAPITALIZED SOFTWARE (Tables)
CAPITALIZED SOFTWARE (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
CAPITALIZED SOFTWARE | |
Schedule of major components of capitalized software | As of September 30, As of December 31, 2021 2020 (unaudited) Capitalized software $ 71,209 $ 63,071 Less accumulated amortization (41,690) (32,217) 29,519 30,854 In-process capitalized software 4,499 1,135 Capitalized software, net $ 34,018 $ 31,989 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
LEASES | |
Schedule of company's lease assets and lease liabilities and their balance sheet location | As of September 30, Balance Sheet Location 2021 Lease assets: (unaudited) Operating lease right-of-use assets Operating lease right-of-use assets $ 21,137 Finance lease assets Property and equipment, net (Note 5) 707 Total lease assets $ 21,844 Lease liabilities: Current: Operating lease liabilities Current portion of operating lease liabilities $ 2,480 Finance lease liabilities Current portion of finance lease liabilities 276 Total current lease liabilities 2,756 Non-current: Operating lease liabilities Operating lease liabilities, net of current portion 26,707 Finance lease liabilities Finance lease liabilities, net of current portion 334 Total non-current lease liabilities 27,041 Total lease liabilities $ 29,797 |
Schedule of company's lease costs, weighted-average term and rate | For the three months ended September 30, For the nine months ended September 30, 2021 2021 (unaudited) (unaudited) Operating lease cost $ 1,177 $ 3,527 Finance lease cost: Amortization of lease assets 363 826 Interest on lease liabilities 5 15 Total lease cost $ 1,545 $ 4,368 As of September 30, 2021 (unaudited) Weighted-average remaining lease term (years): Operating leases 6.8 Finance leases 1.5 Weighted-average discount rate: Operating leases 2.3 % Finance leases 2.3 % |
Schedule of maturity of operating lease liabilities | Operating Leases Finance Leases (unaudited) Remainder of 2021 (three months remaining) $ 1,411 $ 264 2022 4,533 289 2023 4,460 60 2024 4,464 10 2025 4,382 — Thereafter 12,531 — Total lease payments 31,781 623 Less: Imputed interest (2,594) (13) Present value of lease liabilities $ 29,187 $ 610 |
Schedule of maturity of finance lease liabilities | Operating Leases Finance Leases (unaudited) Remainder of 2021 (three months remaining) $ 1,411 $ 264 2022 4,533 289 2023 4,460 60 2024 4,464 10 2025 4,382 — Thereafter 12,531 — Total lease payments 31,781 623 Less: Imputed interest (2,594) (13) Present value of lease liabilities $ 29,187 $ 610 |
Schedule of maturity of capital leases under ASU 840 | |
Schedule of maturity of operating leases under ASU 840 | |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Changes in the carrying amount of goodwill | As of September 30, As of December 31, 2021 2020 (unaudited) Goodwill $ 274,862 $ 16,329 Other intangible assets, net 3,062 2,382 $ 277,924 $ 18,711 Balance, January 1, 2021 $ 16,329 Acquisition of LCR-Dixon 97,817 Acquisition of Taxamo 164,449 Acquisition of Tellutax 4,700 Foreign currency translation adjustments (8,433) Balance, September 30, 2021, gross 274,862 Accumulated impairment losses — Balance, September 30, 2021, net $ 274,862 |
Schedule of other acquired intangible assets | As of September 30, As of December 31, 2021 2020 (unaudited) Other intangible assets Weighted average amortization period (years) 4.3 5.5 Gross value $ 4,210 $ 2,825 Accumulated amortization (1,148) (443) Carrying value $ 3,062 $ 2,382 |
Schedule of future amortization expense | For the three months ended September 30, 2021 Cost of Revenues, Software Subscriptions Selling and Total Amortization of acquired intangible assets $ 65 $ 375 $ 440 For the nine months ended September 30, 2021 Cost of Revenues, Software Subscriptions Selling and Total Amortization of acquired intangible assets $ 192 $ 545 $ 737 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Class A | |
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |
Schedule of earnings per share basic and diluted | For the three months ended For the nine months ended September 30, September 30, Class A common stock: 2021 2020 2021 2020 (unaudited) (unaudited) Numerator, basic: Net loss attributable to all stockholders $ (3,948) $ (21,028) $ (852) $ (79,167) Class A common stock as a percentage of total shares outstanding, basic 27.09 % 13.08 % 22.91 % 3.07 % Net loss attributable to Class A stockholders, basic $ (1,070) $ (2,751) $ (195) $ (2,427) Numerator, diluted: Net loss attributable to all stockholders $ (3,948) $ (21,028) $ (852) $ (79,167) Class A common stock as a percentage of total shares outstanding, diluted 27.09 % 13.08 % 22.91 % 3.07 % Net loss attributable to Class A stockholders, diluted $ (1,070) $ (2,751) $ (195) $ (2,427) Denominator, basic and diluted: Weighted average Class A common stock, basic 40,141 18,124 33,775 6,129 Dilutive effect of common stock equivalents 1 — — — — Weighted average Class A common stock, diluted 40,141 18,124 33,775 6,129 Net loss per Class A share, basic $ (0.03) $ (0.15) $ (0.01) $ (0.40) Net loss per Class A share, diluted $ (0.03) $ (0.15) $ (0.01) $ (0.40) |
Class B | |
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |
Schedule of earnings per share basic and diluted | For the three months ended For the nine months ended September 30, September 30, Class B common stock: 2021 2020 2021 2020 (unaudited) (unaudited) Numerator, basic: Net loss attributable to all stockholders $ (3,948) $ (21,028) $ (852) $ (79,167) Class B common stock as a percentage of total shares outstanding, basic 72.91 % 86.92 % 77.09 % 96.93 % Net loss attributable to Class B stockholders, basic $ (2,878) $ (18,277) $ (657) $ (76,740) Numerator, diluted: Net loss attributable to all stockholders $ (3,948) $ (21,028) $ (852) $ (79,167) Class B common stock as a percentage of total shares outstanding, diluted 72.91 % 86.92 % 77.09 % 96.93 % Net loss attributable to Class B stockholders, diluted $ (2,878) $ (18,277) $ (657) $ (76,740) Denominator, basic and diluted: Weighted average Class B common stock, basic 108,017 120,417 113,646 120,417 Dilutive effect of common stock equivalents — — — — Weighted average Class B common stock, diluted 108,017 120,417 113,646 120,417 Net loss per Class B share, basic $ (0.03) $ (0.15) $ (0.01) $ (0.64) Net loss per Class B share, diluted $ (0.03) $ (0.15) $ (0.01) $ (0.64) |
STOCK-BASED AWARD PLANS (Tables
STOCK-BASED AWARD PLANS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Compensation plans: | |
Schedule of ESPP valuation assumptions | Previous Current Offering Period Offering Period Fair market value of common stock $ 25.83 $ 19.89 Volatility 35.10 % 35.10 % Expected term (years) 0.50 0.50 Expected dividend yield — % — % Risk-free interest rate 0.12 % 0.12 % |
Schedule of stock-based compensation cost related to incentive awards | For the three months ended For the nine months ended September 30, September 30, 2021 2020 2021 2020 Stock-based compensation expense: SARs and Converted SARs $ 4,364 $ 62,141 $ 11,275 $ 138,737 Stock options 1,215 — 1,985 — RSUs 908 18 2,137 18 RSAs 799 2,014 4,454 2,014 ESPP 136 121 399 121 Total stock-based compensation expense $ 7,422 $ 64,294 $ 20,250 $ 140,890 |
Schedule of stock based compensation cost in consolidated statement of operations | For the three months ended For the nine months ended September 30, September 30, 2021 2020 2021 2020 Stock-based compensation expense: Cost of revenues, software subscriptions $ 656 $ 6,342 $ 1,788 $ 14,002 Cost of revenues, services 760 9,230 1,976 20,719 Research and development 876 6,340 2,008 14,000 Selling and marketing 2,157 12,821 4,877 28,140 General and administrative 2,973 29,561 9,601 64,029 Total stock-based compensation expense $ 7,422 $ 64,294 $ 20,250 $ 140,890 |
2020 Plan | |
Compensation plans: | |
Schedule of Option activity | Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic 2020 Plan Option Activity Units Price Life (Years) Value Outstanding at January 1, 2021 11,876 $ 2.44 Granted 566 $ 24.78 Forfeited (293) $ 4.06 Exercised (2,429) $ 2.13 $ 49,205 2020 Plan options outstanding at September 30, 2021 9,720 $ 3.77 5.14 $ 150,182 2020 Plan options exercisable at September 30, 2021 5,258 $ 2.12 3.24 $ 89,924 |
Schedule of outstanding, vested and exercisable | Options Outstanding Options Vested and Exercisable Weighted Weighted Average Average Exercise Prices Units Life (Years) Units Life (Years) $0.15 to $0.71 2,076 * 2,076 * $2.15 472 3.35 472 3.35 $2.50 2,186 4.78 1,557 4.65 $2.67 506 5.43 128 5.44 $3.17 1,286 6.54 536 6.54 $3.73 1,957 8.05 371 7.75 $4.70 683 8.36 — - $18.96 235 9.88 105 9.88 $19.00 68 9.99 — - $32.16 251 9.42 13 9.42 9,720 5,258 *Amended Options have indefinite contractual lives |
Schedule of valuation assumptions | Option Valuation Period Q1 2021 Q2 2021 Q3 2021 Q3 2021 Fair market value of common stock $ 32.16 $ 17.66 $ 18.96 $ 19.00 Volatility 36.8 % 36.8 % 37.1 % 37.1 % Expected term (years) 6.0 6.0 5.0 5.0 Expected dividend yield — % — % — % — % Risk-free interest rate 0.4 % 0.4 % 0.8 % 0.9 % |
Restricted Stock Units | |
Compensation plans: | |
Schedule of restricted activity | Weighted Average Grant Date Fair Units Value Per Share Outstanding at January 1, 2021 101 $ 23.80 Granted 408 28.58 Vested (11) 33.65 Forfeited (28) 24.96 Outstanding at September 30, 2021 470 $ 27.65 |
Restricted Stock Awards | |
Compensation plans: | |
Schedule of restricted activity | Weighted Average Grant Date Fair Units Value Per Share Outstanding at January 1, 2021 670 $ 19.00 Granted 59 17.66 Vested (363) 19.00 Forfeited (26) 19.00 Outstanding at September 30, 2021 340 $ 18.77 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Basis of Consolidation (Details) | Sep. 30, 2021 | Aug. 19, 2021 | May 12, 2021 | Jan. 07, 2020 |
Taxamo | ||||
Summary of significant accounting policies | ||||
Interest acquired (as a percent) | 100.00% | 95.00% | ||
Systax | ||||
Summary of significant accounting policies | ||||
Interest acquired (as a percent) | 65.00% | 60.00% |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Segments (Details) - segment | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Segment information: | ||||
Operating segments | 1 | |||
Revenue | Geographic Concentration Risk | Outside United States | ||||
Segment information: | ||||
Risk percentage | 6.00% | 3.00% | 6.00% | 3.00% |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Useful life (Details) | 9 Months Ended |
Sep. 30, 2021 | |
Internal-Use Software | Minimum | |
Property and equipment | |
Estimated useful lives (in years) | 3 years |
Internal-Use Software | Maximum | |
Property and equipment | |
Estimated useful lives (in years) | 5 years |
Software developed for sale | Minimum | |
Property and equipment | |
Estimated useful lives (in years) | 3 years |
Software developed for sale | Maximum | |
Property and equipment | |
Estimated useful lives (in years) | 5 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Stock-Based Compensation (Details) | 9 Months Ended |
Sep. 30, 2021 | |
ESPP | |
Compensation plans: | |
Discount | 15.00% |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) | 9 Months Ended |
Sep. 30, 2021 | |
Deferred revenue recognition: | |
Payment terms (in days) | 30-days |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-06-30 | |
Deferred revenue recognition: | |
Revenue recognition period | 3 years |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Supplemental Cash Flow Disclosures (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Cash paid for Interest | $ 180 | $ 1,912 |
Cash paid for income taxes, net of refunds | 1,032 | 522 |
Operating cash flows from operating leases | 4,090 | |
Non-cash investing and financing activities: | ||
Purchase commitment and contingent consideration liabilities | 50,653 | 14,344 |
Leased assets obtained in exchange for new finance lease liabilities | $ 173 | |
Remeasurement of options for redeemable shares | 51,833 | |
Conversion of SAR's in connection with the Offering | 128,870 | |
Exchange of Amended Options in connection with the Offering | $ 69,177 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Issued Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2021 | Sep. 30, 2021 | Dec. 31, 2020 |
Recently issued accounting pronouncements | |||
Lease, Practical Expedients, Package [true false] | true | ||
Operating lease right-of-use assets | $ 21,137 | ||
Operating lease liabilities | 29,187 | ||
Retained earnings | $ 21,582 | $ 21,926 | |
ASC 842 | |||
Recently issued accounting pronouncements | |||
Operating lease right-of-use assets | $ 24,004 | ||
Operating lease liabilities | 32,562 | ||
Retained earnings | $ 508 |
REVENUE RECOGNITION - Disaggreg
REVENUE RECOGNITION - Disaggregation of revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Disaggregation of revenue: | ||||
Revenues | $ 110,718 | $ 94,605 | $ 313,892 | $ 275,121 |
Software subscriptions | ||||
Disaggregation of revenue: | ||||
Revenues | 92,276 | 79,778 | 265,160 | 232,844 |
Software licenses | ||||
Disaggregation of revenue: | ||||
Revenues | 58,932 | 56,882 | 172,807 | 170,801 |
Cloud subscriptions | ||||
Disaggregation of revenue: | ||||
Revenues | 33,344 | 22,896 | 92,353 | 62,043 |
Services | ||||
Disaggregation of revenue: | ||||
Revenues | $ 18,442 | $ 14,827 | $ 48,732 | $ 42,277 |
REVENUE RECOGNITION - Accounts
REVENUE RECOGNITION - Accounts receivable, net (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2021 | Dec. 31, 2020 | Jun. 30, 2021 | Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 | |
REVENUE RECOGNITION | ||||||
Allowance for accounts receivable | $ 8,845 | $ 8,592 | $ 9,399 | $ 7,567 | $ 7,669 | $ 7,515 |
Allowance for credit loss | ||||||
Balance, beginning of period | 77,159 | 70,367 | ||||
Balance, end of period | 73,234 | 77,159 | ||||
(Decrease) increase, net | $ (3,925) | $ 6,792 |
REVENUE RECOGNITION - Allowance
REVENUE RECOGNITION - Allowance and deferred allowance (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Allowance for credit loss | ||||
Beginning balance | $ (9,399) | $ (7,669) | $ (8,592) | $ (7,515) |
Ending balance | (8,845) | (7,567) | (8,845) | (7,567) |
Change in allowance | (554) | (102) | 253 | 52 |
Deferred beginning balance | 6,267 | 5,335 | 6,432 | 5,614 |
Deferred ending balance | 6,284 | 5,170 | 6,284 | 5,170 |
Change in deferred allowance | (17) | 165 | 148 | 444 |
Net amount charged to revenues | $ (571) | $ 63 | $ 401 | $ 496 |
REVENUE RECOGNITION - Deferred
REVENUE RECOGNITION - Deferred revenue (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Jun. 30, 2021 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 |
REVENUE RECOGNITION | ||||||
Deferred revenue, current | $ 211,036 | $ 207,560 | ||||
Deferred revenue, non-current | 11,544 | 14,702 | ||||
Total deferred revenue | $ 222,580 | $ 222,612 | $ 222,262 | $ 197,540 | $ 198,437 | $ 205,791 |
REVENUE RECOGNITION - Changes t
REVENUE RECOGNITION - Changes to deferred revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
REVENUE RECOGNITION | ||||
Beginning balance | $ 222,612 | $ 198,437 | $ 222,262 | $ 205,791 |
Additional amounts deferred | 110,686 | 93,708 | 314,210 | 266,870 |
Revenues recognized | (110,718) | (94,605) | (313,892) | (275,121) |
Ending balance | $ 222,580 | $ 197,540 | $ 222,580 | $ 197,540 |
REVENUE RECOGNITION - Contract
REVENUE RECOGNITION - Contract cost balances (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Changes to deferred commissions: | ||||
Beginning balance | $ 11,545 | $ 10,390 | $ 11,743 | $ 11,196 |
Additions | 3,866 | 1,876 | 8,059 | 4,570 |
Amortization | (2,828) | (1,894) | (7,219) | (5,394) |
Ending balance | $ 12,583 | $ 10,372 | 12,583 | $ 10,372 |
Impairment loss | $ 0 | |||
Contract costs, amortization period | 3 years | 3 years |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) $ in Thousands | Sep. 22, 2021USD ($)installment | May 12, 2021USD ($) | Jan. 25, 2021USD ($)payment | Jan. 07, 2020USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2021USD ($) | Sep. 30, 2020USD ($) | Aug. 19, 2021USD ($) | Dec. 31, 2020USD ($) |
BUSINESS COMBINATIONS | ||||||||||
Cash consideration, net | $ 251,412 | $ 12,318 | ||||||||
Deferred purchase consideration, current | $ 19,705 | $ 19,705 | 19,705 | |||||||
Deferred purchase consideration, net of current portion | 19,319 | 19,319 | $ 19,319 | |||||||
Additional equity interests acquired | 5.00% | |||||||||
Payments for purchase commitment liability | $ 10,822 | |||||||||
LCR-Dixon | ||||||||||
BUSINESS COMBINATIONS | ||||||||||
Cash consideration | $ 59,720 | |||||||||
Purchase price | 98,744 | |||||||||
Cash received in the acquisition | 1,899 | |||||||||
Cash consideration, net | 57,821 | |||||||||
Aggregate deferred payments | $ 40,000 | |||||||||
No of Installment of deferred payment | installment | 4 | |||||||||
Amount per installment of deferred payment | $ 10,000 | |||||||||
Fair value of deferred payment, net of discount | 39,024 | |||||||||
Amount of discount of deferred payments | 976 | |||||||||
LCR-Dixon | Current Liabilities | ||||||||||
BUSINESS COMBINATIONS | ||||||||||
Deferred purchase consideration, current | 19,705 | |||||||||
LCR-Dixon | Noncurrent Liabilities | ||||||||||
BUSINESS COMBINATIONS | ||||||||||
Deferred purchase consideration, net of current portion | $ 19,319 | |||||||||
Taxamo | ||||||||||
BUSINESS COMBINATIONS | ||||||||||
Cash consideration | $ 190,153 | |||||||||
Fair value of acquisition holdbacks | 502 | |||||||||
Fair value of purchase commitment liability | 10,034 | $ 10,034 | ||||||||
Purchase price | 200,689 | |||||||||
Cash received in the acquisition | 2,662 | |||||||||
Cash consideration, net | $ 187,491 | |||||||||
Percentage of remaining outstanding share of the acquiree | 5.00% | 5.00% | ||||||||
Interest acquired (as a percent) | 95.00% | 100.00% | ||||||||
Revenue | 2,166 | 2,727 | ||||||||
Net loss | (6,419) | (6,814) | ||||||||
Transaction costs | 5,217 | |||||||||
Pro forma revenue | 2,816 | |||||||||
Pro forma net income (loss) | (3,559) | |||||||||
Tellutax | ||||||||||
BUSINESS COMBINATIONS | ||||||||||
Cash consideration | $ 6,100 | |||||||||
Contingent consideration | $ 2,200 | |||||||||
Number of potential earnout payments | payment | 3 | |||||||||
Revenue achievement period | 30 months | |||||||||
Earn out payment for applicable measurement period | $ 0 | |||||||||
Maximum limit on earnout payments | $ 0 | |||||||||
Systax | ||||||||||
BUSINESS COMBINATIONS | ||||||||||
Cash consideration | $ 12,374 | |||||||||
Fair value of purchase commitment liability | $ 788 | $ 788 | 788 | |||||||
Purchase commitment liability | $ 12,592 | $ 9,750 | ||||||||
Adjustment due to currency exchange rates fluctuation | $ 0 | |||||||||
Interest acquired (as a percent) | 60.00% | 65.00% | 65.00% | 65.00% | ||||||
Payments for purchase commitment liability | $ 8,549 | |||||||||
Systax | Quotaholders | ||||||||||
BUSINESS COMBINATIONS | ||||||||||
Percentage of remaining outstanding share of the acquiree | 40.00% |
BUSINESS COMBINATIONS - Net ass
BUSINESS COMBINATIONS - Net assets and liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Sep. 22, 2021 | May 12, 2021 | Jan. 25, 2021 | Dec. 31, 2020 |
BUSINESS COMBINATIONS | |||||
Goodwill | $ 274,862 | $ 16,329 | |||
LCR-Dixon | |||||
BUSINESS COMBINATIONS | |||||
Cash and cash equivalents | $ 1,899 | ||||
Accounts receivable | 1,002 | ||||
Prepaid expenses and other current assets | 313 | ||||
Property and equipment | 4 | ||||
Goodwill | 97,817 | ||||
Accounts payable | (18) | ||||
Accrued expenses | (438) | ||||
Accrued compensation | (1,796) | ||||
Deferred revenue | (39) | ||||
Total | $ 98,744 | ||||
Taxamo | |||||
BUSINESS COMBINATIONS | |||||
Cash and cash equivalents | $ 2,441 | ||||
Funds held for customers | 221 | ||||
Accounts receivable | 7,783 | ||||
Prepaid expenses and other current assets | 908 | ||||
Property and equipment | 46 | ||||
Goodwill | 201,580 | ||||
Accounts payable | (304) | ||||
Accrued expenses | (6,615) | ||||
Accrued compensation | (3,939) | ||||
Deferred revenue | (2,196) | ||||
Total | $ 200,689 | ||||
Tellutax | |||||
BUSINESS COMBINATIONS | |||||
Capitalized Software - Developed technology | $ 3,600 | ||||
Goodwill | 4,700 | ||||
Total | $ 8,300 |
BUSINESS COMBINATIONS - Intangi
BUSINESS COMBINATIONS - Intangible assets acquired in the acquisition (Details) - USD ($) $ in Thousands | May 12, 2021 | Sep. 30, 2021 | Dec. 31, 2020 |
Business Acquisition [Line Items] | |||
Estimated Useful Life | 4 years 3 months 18 days | 5 years 6 months | |
Taxamo | Developed Technology | |||
Business Acquisition [Line Items] | |||
Fair Value | $ 40,746 | ||
Taxamo | Developed Technology | Property and Equipment, net | |||
Business Acquisition [Line Items] | |||
Fair Value | $ 40,746 | ||
Estimated Useful Life | 3 years | ||
Discount Rate | 16.50% | ||
Taxamo | Trade Name | Goodwill and other intangible assets | |||
Business Acquisition [Line Items] | |||
Fair Value | $ 608 | ||
Estimated Useful Life | 2 years | ||
Discount Rate | 16.50% | ||
Taxamo | Customer Relationships | Goodwill and other intangible assets | |||
Business Acquisition [Line Items] | |||
Fair Value | $ 973 | ||
Estimated Useful Life | 2 years | ||
Discount Rate | 16.50% |
FINANCIAL INSTRUMENTS AND FAI_3
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Details) $ in Thousands | Jan. 25, 2021USD ($)payment | Sep. 30, 2021USD ($) | Jun. 30, 2021USD ($) | Dec. 31, 2020USD ($) |
Fair Value, Recurring | ||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ||||
Money market funds | $ 10,701 | $ 265,270 | ||
Prices in active markets for identical assets (Level 1) | Fair Value, Recurring | ||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ||||
Money market funds | 10,701 | $ 265,270 | ||
Tellutax | ||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ||||
Tellutax contingent consideration | $ (2,200) | (2,500) | $ (2,276) | |
Number of potential earnout payments | payment | 3 | |||
Revenue achievement period | 30 months | |||
Tellutax | Fair Value, Recurring | ||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ||||
Tellutax contingent consideration | (2,500) | |||
Tellutax | Significant unobservable inputs (Level 3) | Fair Value, Recurring | ||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ||||
Tellutax contingent consideration | $ (2,500) |
FINANCIAL INSTRUMENTS AND FAI_4
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS - Estimated fair values of Tellutax contingent consideration (Details) - Tellutax $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021USD ($)Y | Sep. 30, 2021USD ($)Y | Jun. 30, 2021USD ($) | Jan. 25, 2021USD ($)Y | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||
Tellutax contingent consideration | $ (2,500) | $ (2,500) | $ (2,276) | $ (2,200) |
Fair value adjustments to contingent consideration | $ 224 | $ 300 | ||
Revenue volatility | ||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||
Contingent consideration measurement input | 95 | 95 | 95 | |
Revenue discount rate | ||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||
Contingent consideration measurement input | 19 | 19 | 20.3 | |
Term (in years) | ||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||
Contingent consideration measurement input | Y | 3.6 | 3.6 | 4.3 |
FINANCIAL INSTRUMENTS AND FAI_5
FINANCIAL INSTRUMENTS AND FAIR VALUE - Changes in fair value of Tellutax contingent consideration (Details) - Contingent Consideration $ in Thousands | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Acquisition of Tellutax | $ (2,200) |
Fair value adjustments | (300) |
Balance, September 30, 2021 | $ (2,500) |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Property and equipment | ||
Property and equipment, gross | $ 237,177 | $ 175,687 |
Less accumulated depreciation | (139,308) | (119,130) |
Property and equipment, net | 97,869 | 56,557 |
Leasehold improvements | ||
Property and equipment | ||
Property and equipment, gross | 20,959 | 20,907 |
Equipment | ||
Property and equipment | ||
Property and equipment, gross | 42,218 | 41,410 |
Computer software purchased | ||
Property and equipment | ||
Property and equipment, gross | 11,782 | 11,620 |
Internal-Use Software | ||
Property and equipment | ||
Property and equipment, gross | 141,828 | 90,772 |
Less accumulated depreciation | (80,222) | (65,090) |
Property and equipment, net | 74,320 | 28,986 |
Cloud-based customer solutions | ||
Property and equipment | ||
Property and equipment, gross | 109,828 | 65,423 |
Internal systems and tools | ||
Property and equipment | ||
Property and equipment, gross | 32,000 | 25,349 |
Furniture and fixtures | ||
Property and equipment | ||
Property and equipment, gross | 7,676 | 7,674 |
In-process internal-use software | ||
Property and equipment | ||
Property and equipment, gross | $ 12,714 | $ 3,304 |
PROPERTY AND EQUIPMENT - Additi
PROPERTY AND EQUIPMENT - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Property and equipment | |||||
Finance lease amortization | $ 363 | $ 826 | |||
Property and equipment | 97,869 | 97,869 | $ 56,557 | ||
Accumulated depreciation | 139,308 | 139,308 | 119,130 | ||
Taxamo | Developed Technology | |||||
Property and equipment | |||||
Fair Value | 40,746 | ||||
Excluding internal-use software and capital leases | |||||
Property and equipment | |||||
Depreciation expense | 1,849 | $ 1,970 | 5,658 | $ 5,918 | |
Assets under finance leases | |||||
Property and equipment | |||||
Property and equipment | 1,533 | 1,533 | |||
Accumulated depreciation | 826 | 826 | |||
Assets under capital leases | |||||
Property and equipment | |||||
Finance lease amortization | 363 | 826 | 513 | ||
Property and equipment | 1,360 | ||||
Accumulated depreciation | 1,370 | ||||
Depreciation expense | 178 | ||||
Internal systems and tools | |||||
Property and equipment | |||||
Depreciation expense | 870 | 587 | 2,303 | 1,678 | |
Internal-Use Software | |||||
Property and equipment | |||||
Property and equipment | 74,320 | 74,320 | 28,986 | ||
Accumulated depreciation | 80,222 | 80,222 | $ 65,090 | ||
Depreciation expense | $ 7,561 | $ 2,183 | $ 12,906 | $ 6,647 |
PROPERTY AND EQUIPMENT - Major
PROPERTY AND EQUIPMENT - Major components of internal-use software (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Property and equipment | ||
Property and equipment, gross | $ 237,177 | $ 175,687 |
Less accumulated depreciation | (139,308) | (119,130) |
Property and equipment | 97,869 | 56,557 |
Internal-Use Software | ||
Property and equipment | ||
Property and equipment, gross | 141,828 | 90,772 |
Less accumulated depreciation | (80,222) | (65,090) |
Property and equipment, net excluding in-process internal-use software | 61,606 | 25,682 |
Property and equipment | 74,320 | 28,986 |
In-process internal-use software | ||
Property and equipment | ||
Property and equipment, gross | $ 12,714 | $ 3,304 |
PROPERTY AND EQUIPMENT - Amount
PROPERTY AND EQUIPMENT - Amounts capitalized for internal-use software and included in property and equipment additions on the consolidated statements of cash flows (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Property and equipment | ||
Capitalized internal-use software | $ 23,899 | $ 14,982 |
Internal-Use Software | ||
Property and equipment | ||
Capitalized internal-use software | 21,643 | 14,037 |
Cloud-based customer solutions | ||
Property and equipment | ||
Capitalized internal-use software | 13,881 | 12,574 |
Internal systems and tools | ||
Property and equipment | ||
Capitalized internal-use software | $ 7,762 | $ 1,463 |
CAPITALIZED SOFTWARE (Details)
CAPITALIZED SOFTWARE (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Capitalized software, bgn | |||||
Capitalized software, net | $ 34,018 | $ 34,018 | $ 31,989 | ||
Capitalized software additions | 3,600 | ||||
Capitalized software amortization expense | 3,123 | $ 3,124 | 9,473 | $ 8,702 | |
Software | |||||
Capitalized software, bgn | |||||
Capitalized software, gross | 71,209 | 71,209 | 63,071 | ||
Less accumulated amortization | (41,690) | (41,690) | (32,217) | ||
Capitalized software, net | 29,519 | 29,519 | 30,854 | ||
Capitalized development costs | 2,777 | $ 2,591 | 7,902 | $ 9,246 | |
In-process internal-use software | |||||
Capitalized software, bgn | |||||
Capitalized software, gross | $ 4,499 | $ 4,499 | $ 1,135 |
LEASES (Details)
LEASES (Details) | 9 Months Ended |
Sep. 30, 2021 | |
Maximum | |
Remaining lease term (in years) | 7 years |
LEASES - Lease Assets and Liabi
LEASES - Lease Assets and Liabilities (Details) $ in Thousands | Sep. 30, 2021USD ($) |
Lease assets: | |
Operating lease right-of-use assets | $ 21,137 |
Finance lease assets | $ 707 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Property, Plant and Equipment, Net |
Total lease assets | $ 21,844 |
Current: | |
Operating lease liabilities | 2,480 |
Finance lease liabilities | 276 |
Total current lease liabilities | 2,756 |
Non-current: | |
Operating lease liabilities, non-current | 26,707 |
Finance lease liabilities, non-current | 334 |
Total non-current lease liabilities | 27,041 |
Total lease liabilities | $ 29,797 |
LEASES - Lease Costs, Weighted
LEASES - Lease Costs, Weighted Average Term and Rates (Details) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2021USD ($) | Sep. 30, 2021USD ($) | |
Lease Cost, Weighted average term and discount rate: | ||
Operating lease cost | $ 1,177 | $ 3,527 |
Amortization of lease assets | 363 | 826 |
Interest on lease liabilities | 5 | 15 |
Total lease cost | $ 1,545 | $ 4,368 |
Operating leases, weighted-average remaining lease term (in years) | 6 years 9 months 18 days | 6 years 9 months 18 days |
Finance leases, weighted-average remaining lease term (in years) | 1 year 6 months | 1 year 6 months |
Operating leases, weighted-average discount rate | 2.30% | 2.30% |
Finance leases, weighted-average discount rate | 2.30% | 2.30% |
LEASES - Future Maturity of Lea
LEASES - Future Maturity of Lease Liabilities (Details) $ in Thousands | Sep. 30, 2021USD ($) |
Operating Leases | |
Remainder of 2021 (three months remaining) | $ 1,411 |
2022 | 4,533 |
2023 | 4,460 |
2024 | 4,464 |
2025 | 4,382 |
Thereafter | 12,531 |
Total lease payments | 31,781 |
Less: Imputed Interest | (2,594) |
Present value of lease liabilities | 29,187 |
Finance Leases | |
Remainder of 2021 (three months remaining) | 264 |
2022 | 289 |
2023 | 60 |
2024 | 10 |
Total lease payments | 623 |
Less: Imputed Interest | (13) |
Present value of lease liabilities | $ 610 |
LEASES - Future Maturity of L_2
LEASES - Future Maturity of Lease Liabilities under ASU 840 (Details) $ in Thousands | Dec. 31, 2020USD ($) |
Operating Leases | |
2021 | $ 5,442 |
2022 | 4,518 |
2023 | 4,459 |
2024 | 4,464 |
2025 | 4,382 |
Thereafter | 12,531 |
Total Lease Payments | 35,796 |
Finance Leases | |
2021 | 915 |
2022 | 230 |
Total Lease Payments | 1,145 |
Less amount representing interest | (38) |
Present value of minimum lease payments | 1,107 |
Less current portion | (882) |
Capital lease obligations, net of current portion | $ 225 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
GOODWILL AND OTHER INTANGIBLE ASSETS | ||
Goodwill. | $ 274,862 | $ 16,329 |
Other intangible assets, net | 3,062 | 2,382 |
Goodwill and other intangible assets | $ 277,924 | $ 18,711 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Changes (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Balance, January 1, 2021 | $ 16,329 |
Foreign currency translation adjustments | (8,433) |
Balance, September 30, 2021, gross | 274,862 |
Balance, September 30, 2021, net | 274,862 |
LCR-Dixon | |
Acquisition | 97,817 |
Taxamo | |
Acquisition | 164,449 |
Tellutax | |
Acquisition | $ 4,700 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Intangibles (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Sep. 30, 2021 | Dec. 31, 2020 | |
Other intangible assets | |||
Weighted Average Amortization Period (Years) | 4 years 3 months 18 days | 5 years 6 months | |
Gross Value | $ 4,210 | $ 4,210 | $ 2,825 |
Accumulated Amortization | (1,148) | (1,148) | (443) |
Carrying Value | 3,062 | 3,062 | $ 2,382 |
Amortization of acquired intangible assets | |||
Amortization | 440 | 737 | |
Cost of Revenues | |||
Amortization of acquired intangible assets | |||
Amortization | 65 | 192 | |
Selling and marketing | |||
Amortization of acquired intangible assets | |||
Amortization | $ 375 | $ 545 |
DEBT - Credit Agreement (Detail
DEBT - Credit Agreement (Details) - USD ($) $ in Thousands | Jul. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Apr. 03, 2020 |
Debt | |||||
Principal payments on long-term debt | $ 226,029 | ||||
Base rate | |||||
Debt | |||||
Interest rate | 3.25% | ||||
LIBOR | |||||
Debt | |||||
Interest rate | 2.00% | ||||
Term Loan | |||||
Debt | |||||
Face amount | $ 175,000 | ||||
Principal payments on long-term debt | $ 175,000 | ||||
Line of Credit | |||||
Debt | |||||
Line of credit, capacity | $ 100,000 | ||||
Line of credit, outstanding borrowings | $ 0 | $ 0 | |||
In covenant compliance | true |
STOCKHOLDERS EQUITY (Details)
STOCKHOLDERS EQUITY (Details) - USD ($) $ / shares in Units, shares in Thousands | Jun. 30, 2021 | Jul. 28, 2020 | Jul. 25, 2020 | Sep. 30, 2021 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Jul. 27, 2020 |
Common Stock | ||||||||||
Additional paid in capital | $ (6,222,000) | $ 215,647,000 | $ 215,647,000 | $ 206,541,000 | ||||||
Forward Stock Split | three-for-one | |||||||||
Stock split | 0.33 | |||||||||
Treasury stock | 0 | 0 | 0 | |||||||
Liquidation preferences | $ 0 | $ 0 | ||||||||
Common stock, shares authorized (in shares) | 450,000 | |||||||||
Common stock par value (in dollars per share) | $ 0.001 | |||||||||
Preferred stock, shares authorized (in shares) | 30,000 | 30,000 | 30,000 | 30,000 | ||||||
Preferred stock par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||||||
Proceeds from issuance of shares in connection with Offering | 423,024,000 | |||||||||
Proceeds from exercise of stock option | $ 1,212,000 | $ 6,023,000 | ||||||||
Distributions | $ 5,706,000 | $ 123,185,000 | $ 4,010,000 | |||||||
Distributions per share | $ 0.05 | $ 1.02 | $ 0.03 | |||||||
Period with in the company is required settle any remaining liability for taxes to the former S-corporation shareholders | 15 days | |||||||||
Exchange of shares | 12,100 | |||||||||
Former Class A | ||||||||||
Common Stock | ||||||||||
Common Stock, Shares, Outstanding | 147 | |||||||||
Former Class A | Family | ||||||||||
Common Stock | ||||||||||
Common Stock, Shares, Outstanding | 147 | |||||||||
Former Class B | ||||||||||
Common Stock | ||||||||||
Common Stock, Shares, Outstanding | 120,443 | |||||||||
Proceeds from exercise of stock option | $ 53,000 | |||||||||
Former Class B | Selling stockholders | ||||||||||
Common Stock | ||||||||||
Common Stock, Shares, Outstanding | 173 | |||||||||
Class A | ||||||||||
Common Stock | ||||||||||
Common Stock, Shares, Outstanding | 40,574 | 40,574 | 26,327 | |||||||
Common stock, shares authorized (in shares) | 300,000 | 300,000 | 300,000 | 300,000 | ||||||
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | |||||||
Common Stock, Voting Rights | one | |||||||||
Class A | Exercise of outstanding options | ||||||||||
Common Stock | ||||||||||
Exercise of stock options, net (in shares) | 610 | |||||||||
New Issues Vested Restricted Stock, Shares | 19 | |||||||||
Class A | In connection with the offering | ||||||||||
Common Stock | ||||||||||
Exercise of stock options, net (in shares) | 564 | |||||||||
Shares exchanged in lieu | 860 | |||||||||
Class A | Initial Public Offering | ||||||||||
Common Stock | ||||||||||
Offering costs | $ 6,222,000 | |||||||||
Proceeds from issuance of shares in connection with Offering | $ 423,024,000 | |||||||||
Stock issued during the period | 23,812 | |||||||||
Class A | Selling stockholders | ||||||||||
Common Stock | ||||||||||
Auto exercised options in connection with offering shares issued | 510 | 625 | 1,726 | |||||||
Shares exchanged in lieu | 381 | 128 | 703 | |||||||
Class A | Restricted Stock Units | ||||||||||
Common Stock | ||||||||||
Shares issued upon vesting of Restricted Stock Units, net (shares) | 3 | 8 | ||||||||
Shares returned in lieu of payment of taxes | 2 | 3 | ||||||||
Class A | Restricted Stock Awards | ||||||||||
Common Stock | ||||||||||
Shares issued upon vesting of Restricted Stock Units, net (shares) | 118 | 352 | ||||||||
Shares returned in lieu of payment of taxes | 11 | 11 | ||||||||
Class B | ||||||||||
Common Stock | ||||||||||
Common Stock, Shares, Outstanding | 108,017 | 108,017 | 120,117 | |||||||
Common stock, shares authorized (in shares) | 150,000 | 150,000 | 150,000 | 150,000 | ||||||
Common stock par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | |||||||
Common Stock, Voting Rights | ten | |||||||||
Class B | Family | ||||||||||
Common Stock | ||||||||||
Common Stock, Shares, Outstanding | 120,270 | |||||||||
Common Stock | ||||||||||
Common Stock | ||||||||||
Common Stock, Shares, Outstanding | 120,590 | |||||||||
Share exchange, amount | $ 0 | |||||||||
S Corporation | ||||||||||
Common Stock | ||||||||||
Additional paid in capital | $ (354,291) | |||||||||
Amount of estimated dividends liability | $ 2,700,000 | $ 2,700,000 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Numerator: | ||||
Net loss attributable to all stockholders | $ (3,948) | $ (21,028) | $ (852) | $ (79,167) |
Denominator: | ||||
Anti-dilutive shares | 9,598 | 9,707 | 10,488 | 5,654 |
Class A | ||||
Numerator: | ||||
Common stock as a percentage of total shares outstanding, basic | 27.09% | 13.08% | 22.91% | 3.07% |
Net loss attributable to stockholders, basic | $ (1,070) | $ (2,751) | $ (195) | $ (2,427) |
Common stock as a percentage of total shares outstanding, diluted | 27.09% | 13.08% | 22.91% | 3.07% |
Net loss attributable to stockholders, diluted | $ (1,070) | $ (2,751) | $ (195) | $ (2,427) |
Denominator: | ||||
Weighted average common stock, basic (in shares) | 40,141 | 18,124 | 33,775 | 6,129 |
Weighted average common stock, diluted (in shares) | 40,141 | 18,124 | 33,775 | 6,129 |
Net loss per share, basic (in dollars per share) | $ (0.03) | $ (0.15) | $ (0.01) | $ (0.40) |
Net income loss per share, diluted | $ (0.03) | $ (0.15) | $ (0.01) | $ (0.40) |
Class B | ||||
Numerator: | ||||
Common stock as a percentage of total shares outstanding, basic | 72.91% | 86.92% | 77.09% | 96.93% |
Net loss attributable to stockholders, basic | $ (2,878) | $ (18,277) | $ (657) | $ (76,740) |
Common stock as a percentage of total shares outstanding, diluted | 72.91% | 86.92% | 77.09% | 96.93% |
Net loss attributable to stockholders, diluted | $ (2,878) | $ (18,277) | $ (657) | $ (76,740) |
Denominator: | ||||
Weighted average common stock, basic (in shares) | 108,017 | 120,417 | 113,646 | 120,417 |
Weighted average common stock, diluted (in shares) | 108,017 | 120,417 | 113,646 | 120,417 |
Net loss per share, basic (in dollars per share) | $ (0.03) | $ (0.15) | $ (0.01) | $ (0.64) |
Net income loss per share, diluted | $ (0.03) | $ (0.15) | $ (0.01) | $ (0.64) |
STOCK-BASED AWARD PLANS - Stock
STOCK-BASED AWARD PLANS - Stock-Based Award Plans (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2021 | Dec. 31, 2020 | |
Compensation plans: | ||
Accrued salaries and benefits | $ 26,472 | $ 17,326 |
ESPP | ||
Compensation plans: | ||
Offering Period | 6 months | |
Accrued salaries and benefits | $ 867 |
STOCK-BASED AWARD PLANS - 2020
STOCK-BASED AWARD PLANS - 2020 Plan (Details) shares in Thousands | Sep. 30, 2021shares |
2020 Plan | |
Compensation plans: | |
Shares authorized | 6,526 |
STOCK-BASED AWARD PLANS - Amend
STOCK-BASED AWARD PLANS - Amended Options (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Compensation plans: | ||||
Remeasurement of options for redeemable shares | $ 51,833 | |||
Compensation expense | $ 7,422 | $ 64,294 | $ 20,250 | 140,890 |
Amended Options | ||||
Compensation plans: | ||||
Remeasurement of options for redeemable shares | $ 21,954 | 51,833 | ||
Compensation expense | $ 1,215 | $ 1,985 | $ 0 |
STOCK-BASED AWARD PLANS - Optio
STOCK-BASED AWARD PLANS - Options under 2020 Plan (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Weighted Average Per Share | ||||
Compensation expense | $ 7,422 | $ 64,294 | $ 20,250 | $ 140,890 |
2020 Plan | ||||
Units | ||||
Balance, Bgn | 11,876 | |||
Granted | 303 | 566 | ||
Forfeited | (293) | |||
Exercised | (2,429) | |||
Balance, End | 9,720 | 9,720 | ||
Exercisable | 5,258 | 5,258 | ||
Weighted Average Per Share | ||||
Balance, Bgn | $ 2.44 | |||
Granted | 24.78 | |||
Forfeited | 4.06 | |||
Exercised | 2.13 | |||
Balance, End | $ 3.77 | 3.77 | ||
Exercisable | $ 2.12 | $ 2.12 | ||
Remaining contractual life, outstanding | 5 years 1 month 20 days | |||
Remaining contractual life, exercisable | 3 years 2 months 26 days | |||
Intrinsic value, exercised | $ 49,205 | |||
Intrinsic value, outstanding | $ 150,182 | 150,182 | ||
Intrinsic value, exercisable | 89,924 | $ 89,924 | ||
Vesting period | 10 years | |||
Unrecognized compensation expense | $ 21,530 | $ 21,530 | ||
Unrecognized compensation expense period | 2 years 9 months 18 days | |||
2020 Plan | Minimum | ||||
Weighted Average Per Share | ||||
Vesting period | 1 year | |||
2020 Plan | Maximum | ||||
Weighted Average Per Share | ||||
Vesting period | 4 years |
STOCK-BASED AWARD PLANS - Opt_2
STOCK-BASED AWARD PLANS - Options under 2020 Plan Price Range (Details) - 2020 Plan shares in Thousands | 9 Months Ended |
Sep. 30, 2021$ / sharesshares | |
Options outstanding, vested and exercisable: | |
Options outstanding | 9,720 |
Options vested and exercisable | 5,258 |
$0.15 to $0.71 | |
Options outstanding, vested and exercisable: | |
Exercise prices, lower range | $ / shares | $ 0.15 |
Exercise prices, upper range | $ / shares | $ 0.71 |
Options outstanding | 2,076 |
Options outstanding, life | 0 years |
Options vested and exercisable | 2,076 |
Options vested and exercisable, life | 0 years |
$2.15 | |
Options outstanding, vested and exercisable: | |
Exercise prices | $ / shares | $ 2.15 |
Options outstanding | 472 |
Options outstanding, life | 3 years 4 months 6 days |
Options vested and exercisable | 472 |
Options vested and exercisable, life | 3 years 4 months 6 days |
$2.50 | |
Options outstanding, vested and exercisable: | |
Exercise prices | $ / shares | $ 2.50 |
Options outstanding | 2,186 |
Options outstanding, life | 4 years 9 months 10 days |
Options vested and exercisable | 1,557 |
Options vested and exercisable, life | 4 years 7 months 24 days |
$2.67 | |
Options outstanding, vested and exercisable: | |
Exercise prices | $ / shares | $ 2.67 |
Options outstanding | 506 |
Options outstanding, life | 5 years 5 months 4 days |
Options vested and exercisable | 128 |
Options vested and exercisable, life | 5 years 5 months 8 days |
$3.17 | |
Options outstanding, vested and exercisable: | |
Exercise prices | $ / shares | $ 3.17 |
Options outstanding | 1,286 |
Options outstanding, life | 6 years 6 months 14 days |
Options vested and exercisable | 536 |
Options vested and exercisable, life | 6 years 6 months 14 days |
$3.73 | |
Options outstanding, vested and exercisable: | |
Exercise prices | $ / shares | $ 3.73 |
Options outstanding | 1,957 |
Options outstanding, life | 8 years 18 days |
Options vested and exercisable | 371 |
Options vested and exercisable, life | 7 years 9 months |
$4.70 | |
Options outstanding, vested and exercisable: | |
Exercise prices | $ / shares | $ 4.70 |
Options outstanding | 683 |
Options outstanding, life | 8 years 4 months 9 days |
$18.96 | |
Options outstanding, vested and exercisable: | |
Exercise prices | $ / shares | $ 18.96 |
Options outstanding | 235 |
Options outstanding, life | 9 years 10 months 17 days |
Options vested and exercisable | 105 |
Options vested and exercisable, life | 9 years 10 months 17 days |
$19.00 | |
Options outstanding, vested and exercisable: | |
Exercise prices | $ / shares | $ 19 |
Options outstanding | 68 |
Options outstanding, life | 9 years 11 months 26 days |
$32.16 | |
Options outstanding, vested and exercisable: | |
Exercise prices | $ / shares | $ 32.16 |
Options outstanding | 251 |
Options outstanding, life | 9 years 5 months 1 day |
Options vested and exercisable | 13 |
Options vested and exercisable, life | 9 years 5 months 1 day |
STOCK-BASED AWARD PLANS - Opt_3
STOCK-BASED AWARD PLANS - Options under 2020 Plan Options issued (Details) - 2020 Plan - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2021 | |
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items] | ||||
Fair market value of common stock | $ 18.96 | $ 17.66 | $ 32.16 | $ 19 |
Volatility | 37.10% | 36.80% | 36.80% | 37.10% |
Expected term (in years) | 5 years | 6 years | 6 years | 5 years |
Risk-free interest rate | 0.8 | 0.4 | 0.4 | 0.9 |
STOCK-BASED AWARD PLANS - Restr
STOCK-BASED AWARD PLANS - Restricted Stock Units (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | May 12, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 |
Compensation plans: | |||||
Compensation expense | $ 7,422 | $ 64,294 | $ 20,250 | $ 140,890 | |
Restricted Stock Units | |||||
Compensation plans: | |||||
Compensation expense | 908 | $ 18 | 2,137 | $ 18 | |
Unrecognized compensation cost | $ 10,990 | $ 10,990 | |||
Unrecognized compensation expense period | 3 years 4 months 24 days | ||||
Granted (in units) | 408 | ||||
Units | |||||
Balance, Bgn (in units) | 101 | ||||
Granted (in units) | 408 | ||||
Vested (in units) | (11) | ||||
Forfeited (in units) | (28) | ||||
Balance, End (in units) | 470 | 470 | |||
Weighted Average Per Share | |||||
Balance, Bgn (in dollars per share) | $ 23.80 | ||||
Granted (in dollars per share) | 28.58 | ||||
Vested (in dollars per share) | 33.65 | ||||
Forfeited (in dollars per share) | 24.96 | ||||
Balance, End (in dollars per share) | $ 27.65 | $ 27.65 | |||
Restricted Stock Units | Minimum | |||||
Compensation plans: | |||||
Service requirement (in years) | 1 year | ||||
Restricted Stock Units | Maximum | |||||
Compensation plans: | |||||
Service requirement (in years) | 4 years | ||||
PSU | |||||
Compensation plans: | |||||
Compensation expense | $ 0 | ||||
PSU | Employee | Taxamo | |||||
Compensation plans: | |||||
Granted (in units) | 1,230 | ||||
Grant date fair value | $ 21,729 | ||||
Units | |||||
Granted (in units) | 1,230 |
STOCK-BASED AWARD PLANS - Res_2
STOCK-BASED AWARD PLANS - Restricted Stock Awards (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | Jul. 28, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 |
Weighted Average Per Share | |||||
Stock-based compensation expense | $ 20,250 | $ 140,890 | |||
Compensation expense | $ 7,422 | $ 64,294 | $ 20,250 | 140,890 | |
Restricted Stock Awards | |||||
Units | |||||
Balance, Bgn (in units) | 670 | ||||
Granted (in units) | 59 | ||||
Vested (in units) | (363) | ||||
Forfeited (in units) | (26) | ||||
Balance, End (in units) | 340 | 340 | |||
Weighted Average Per Share | |||||
Balance, Bgn (in dollars per share) | $ 19 | ||||
Granted (in dollars per share) | $ 17.66 | ||||
Vested (in dollars per share) | 19 | ||||
Forfeited (in dollars per share) | 19 | ||||
Balance, End (in dollars per share) | $ 18.77 | $ 18.77 | |||
Compensation expense | $ 799 | $ 2,014 | $ 4,454 | $ 2,014 | |
Unrecognized compensation cost | $ 4,955 | $ 4,955 | |||
Unrecognized compensation expense period | 2 years 1 month 6 days | ||||
Restricted Stock Awards | Minimum | |||||
Compensation plans: | |||||
Service requirement (in years) | 1 year | ||||
Restricted Stock Awards | Maximum | |||||
Compensation plans: | |||||
Service requirement (in years) | 4 years |
STOCK-BASED AWARD PLANS - Emplo
STOCK-BASED AWARD PLANS - Employee Stock Purchase Plan (Details) - USD ($) shares in Thousands, $ in Thousands | Jun. 30, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | May 31, 2021 | Sep. 30, 2021 | Sep. 30, 2020 |
Compensation plans: | ||||||
Compensation expense | $ 7,422 | $ 64,294 | $ 20,250 | $ 140,890 | ||
Class A | ||||||
Compensation plans: | ||||||
Offering period | 6 months | 6 months | ||||
ESPP | ||||||
Compensation plans: | ||||||
Purchase price as a percent of fair value | 15.00% | |||||
Reserved for issuance | 1,000 | |||||
Maximum issuance (as a percentage of outstanding) | 1.00% | |||||
Maximum issuance (in shares) | 16,000 | |||||
Compensation expense | 136 | $ 121 | $ 399 | $ 121 | ||
Unrecognized compensation cost | $ 90 | $ 90 | ||||
ESPP | Class A | ||||||
Compensation plans: | ||||||
Shares purchased | 60 |
STOCK-BASED AWARD PLANS - ESPP
STOCK-BASED AWARD PLANS - ESPP - Option-pricing model key input assumptions (Details) - ESPP - $ / shares | 6 Months Ended | 9 Months Ended | |
Nov. 30, 2021 | May 31, 2021 | Sep. 30, 2021 | |
Compensation plans: | |||
Discount | 15.00% | ||
Offering Period | 6 months | ||
Fair Value Assumptions and Methodology | |||
Fair market value of common stock | $ 19.89 | $ 25.83 | |
Volatility | 35.10% | 35.10% | |
Expected term (in years) | 6 months | 6 months | |
Risk-free interest rate | 0.12% | 0.12% |
STOCK-BASED AWARD PLANS - Sto_2
STOCK-BASED AWARD PLANS - Stock based compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Allocation of costs | ||||
Compensation expense | $ 7,422 | $ 64,294 | $ 20,250 | $ 140,890 |
SAR | ||||
Allocation of costs | ||||
Compensation expense | 4,364 | 62,141 | 11,275 | 138,737 |
Amended Options | ||||
Allocation of costs | ||||
Compensation expense | 1,215 | 1,985 | 0 | |
Restricted Stock Units | ||||
Allocation of costs | ||||
Compensation expense | 908 | 18 | 2,137 | 18 |
Restricted Stock Awards | ||||
Allocation of costs | ||||
Compensation expense | 799 | 2,014 | 4,454 | 2,014 |
ESPP | ||||
Allocation of costs | ||||
Compensation expense | $ 136 | $ 121 | $ 399 | $ 121 |
STOCK-BASED AWARD PLANS - Sto_3
STOCK-BASED AWARD PLANS - Stock based compensation, comprehensive income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Allocation of costs | ||||
Compensation expense | $ 7,422 | $ 64,294 | $ 20,250 | $ 140,890 |
Research and development | ||||
Allocation of costs | ||||
Compensation expense | 876 | 6,340 | 2,008 | 14,000 |
Selling and marketing | ||||
Allocation of costs | ||||
Compensation expense | 2,157 | 12,821 | 4,877 | 28,140 |
General and administrative | ||||
Allocation of costs | ||||
Compensation expense | 2,973 | 29,561 | 9,601 | 64,029 |
Software subscriptions | ||||
Allocation of costs | ||||
Compensation expense | 656 | 6,342 | 1,788 | 14,002 |
Services | ||||
Allocation of costs | ||||
Compensation expense | $ 760 | $ 9,230 | $ 1,976 | $ 20,719 |