Greetings. Welcome to Vertex's Second Quarter 2023 Earnings Conference Call. Please note this conference is being recorded. At this time, all participants are in listen-only mode. At this time I'll now turn the conference over to Joe Crivelli, Vice President of Investor Relations. Mr. Crivelli you may now begin.

Hello, and thanks for joining us to discuss Vertex's second quarter financial results. I'm Joe Crivelli, Vice President, Investor Relations. David DeStefano, Vertex's President and CEO; and John Schwab our CFO, are joining me on the call today. As a reminder, during this call, we may make forward-looking statements about expected future results. Our actual financial results may differ due to risks and uncertainties. These risks and uncertainties are described in our filings with the Securities and Exchange Commission. Please note that our remarks today will also include references to non-GAAP financial measures. A reconciliation of these non-GAAP metrics to GAAP is also provided in today's press release. This conference call is being recorded and will be available for replay via webcast on our Investor Relations website. I'll now turn the call over to David.

Thanks, Joe. Welcome everyone and thank you for joining us. Our team continues to execute our strategy with excellence resulting in strong second quarter financial results and furthering our competitive differentiation. I'm very excited about where we are as a company. We've made growth investments over the past three years to accelerate go-to-market success, deliver new products and advance our capabilities through acquisitions and organizational modernization. We're seeing a return from these investments starting to take hold. The second quarter demonstrated our anticipated steady progression of increased revenue growth and margin improvement. We added $21 million of recurring revenue in the second quarter alone the highest we've reported as a public company, driving a 17.5% increase year-over-year in ARR. GRR remained consistent at 96%, while NRR climbed to 111%, which represents another record high for Vertex. Average annual revenue per customer continues to grow quarter-by-quarter and ended over $109,000 in Q2 up 16% year-over-year. Total revenue was $139.7 million exceeding the high end of our financial guidance for the second quarter and adjusted EBITDA was $22 million at the high end of our guidance. John will provide an update on our full year guidance in a moment. Also this quarter because of our scaled customer count, those customers with annual revenues greater than $100,000 accelerated to 15% year-over-year. This reflects our ongoing success in the vastly unpenetrated enterprise market. These are the most dynamic companies in the world spanning every industry. They are the heart of global commerce growth and the durability of their performance is evident even in challenging economic conditions. These scaled customer wins position us for future NRR growth and enhance profitability with the proven land and expand efforts of our market-leading customer success teams. A combination of new logo wins along with major existing customer expansion…

Thanks, David, and good morning everyone. Today, I'm going to review our second quarter financial results and provide guidance for the third quarter and full year 2023. Total second quarter revenues grew 17.1% year-over-year to $139.7 million, exceeding the upper end of our quarterly guidance by approximately $2.7 million. Our subscription revenues increased 16.6% period-over-period to $117.8 million and services revenues grew 20.2% to $21.9 million. Annual recurring revenue or ARR was $467.7 million at quarter end up 17.5% year-over-year. Our net revenue retention or NRR increased to 11% up from 110% for the first quarter of 2023 and the prior year. And our gross revenue retention or GRR was 96% at quarter end consistent with prior quarters and within our historical range of 94% to 96%. Our average annual revenue per customer or AARPC continues to steadily increase and was $109,170 in the second quarter up from $104,370 in the first quarter of 2023. Note that AARPC is based on the direct customer count, which is disclosed in our earnings press release that was issued this morning. Our cloud revenue was $51.2 million in the second quarter, up 27.3% from last year. For the remainder of the income statement discussion, I will be referring to non-GAAP metrics. Gross profit for the second quarter was $99.1 million and gross margin was 70.9%. This compares with gross profit of $84.3 million and a 70.7% gross margin in the same period last year. Gross margin on subscription software revenue was 78.4% compared to 76.9% in last year's second quarter and 78.4% in the first quarter of 2023. Gross margin on services revenue was 30.5% compared to 36% in last year's second quarter. Turning to expenses. In the second quarter research and development expense was $11.9 million compared to $9.8 million last year.…

Thanks, John. I'm extremely proud of the entire Vertex team. Collectively, they are driving this business to grow, profit and build shareholder value. I want to acknowledge and thank them all. Every employee throughout our organization worked extremely hard over the past few years to strengthen our company for the long haul and to build on our 40-year track record of success. From the outset of our journey, I expected us to achieve new heights. Our revenue acceleration and strong profitability in Q2 show me that we are where we expected to be and have good visibility to continue executing on our strategy. Our growth investments are paying off. Our market leadership position is strengthening and we are confident in our ability to sustain increasingly profitable growth. Net-net we believe we are well positioned to continue our current trajectory for the foreseeable future. Our increased guidance for the balance of the year reflects that. With that, we will take your questions. Operator, please go ahead.

Thank you. [Operator Instructions] Our first question is coming from the line of Joshua Reilly with Needham & Company. Please proceed with your question.

All right. Thanks for taking my question. Nice job on the quarter here. Can you just explain how the mix of leads has shifted somewhat with more deals coming from Salesforce Workday and Microsoft Dynamics versus historically primarily Oracle and SAP? And does this shift have any impact on your forecasting or visibility to demand? And has it overall increased your level of net new leads with a bit stronger growth here? Thanks.

Thanks Josh. I would say overall it has increased our number of leads in general. I would say, though, we continue to see with our motions with SAP and Oracle continue to be strong. I view this as being very additive as part of our strategy. We have been very conscious about moving into targeted ecosystems below SAP and Oracle, and we're seeing good progress there. And so to me, it's very additive. What's been fascinating to me is the size of deals that we're getting from those newer ecosystems are still -- we're still able to drive up our AARPC. I mean, I think that, just speaks to the value of how complexity -- solving for complexity is valued in the market as well.

Got it. And then the adjusted EBITDA margin guidance was left unchanged. Even with maybe the slight beat in the quarter, I guess, you would say or the higher end of guidance. And I think investors are expecting some growing operating leverage going forward. How are you thinking about investments versus profitability maybe here in the second half and as we go into 2024?

Well as you may know our EBITDA margin as it progressed in the first two quarters and it's projected to increase notably in Q3 and Q4. So we continue to see operating leverage coming from the business as we move through the back half of the year. That was built into our year and we've now raised that. I continue to see -- because we're ahead of schedule on our revenue forecast we are being mindful of our investments and taking advantage of opportunities we're seeing in the market. AI is an important part of that decision-making rubric right now and we're seeing good opportunity to continue to pursue that. But we -- as we've said all along the margins will increase as the year goes on and we're seeing that and we expect that will continue in the rest of 2023 and into 2024.

Great. Thanks, guys.

Thank you. Our next question is coming from the line of Chris Quintero with Morgan Stanley. Please proceed with your question.

Hey, guys. Congrats on the strong results here. We've been hearing from system integrators and other enterprise software companies that we're seeing a bit of a deceleration in new implementation work around large transformational yields, but it seems like that is not affecting you as much. Is there anything you would attribute your ability to put up these strong results despite that kind of broader backdrop? And then I have a follow-up for John.

Sure. Chris I think that you have to remember there's a number of drivers that lead to our business opportunities. The first is anything that changes in the company's operating business model, which may have nothing to do with their systems. So it could be a change the way they're expanding their revenue model the making acquisitions or expanding into new jurisdictions all which could put pressure on a tax department. That generates demand for us that has absolutely nothing to do with the systems they're running on. The second is the regulatory environment and we are definitely seeing a heated regulatory environment as governments continue to find new ways to generate revenue. Again no impact whether you're changing your systems or not that can cause for an opportunity for us to add value with our capability. And then we see it in the -- and then obviously then we get it from system changes. So I think that's why we're still able to see strong results because we have a diversified source pool of what are the demand drivers for our business.

Got it. Very clear. John, you raised the full year total revenue guidance, but kept the cloud revenue -- so should we interpret that as you're expecting better performance with on-prem and services compared to cloud, or are you confident in better performance across the board?

Well, I think, what we saw in the first half anyway was real strong performance coming out of -- certainly coming out of on-prem. And so I think as we thought about that we wanted to make sure that that was reflected in the guidance that we put forward. Again we feel very good about what the back half of the year looks like for cloud. I think 27% growth is very strong. And again -- and we feel services are in very good shape. We think there's opportunity as we move forward throughout the year for additional service both in the MSO side as well as in some of the consulting implementation.

Excellent. Thank you.

Thanks, Chris.

Thank you. Our next question is coming from the line of Adam Hotchkiss with Goldman Sachs. Please proceed with your question.

Great. Good morning and thanks for taking the question. I guess to start David, would just be great to get an update on how things are going in Europe. I know that things have been improving for you there from a partner and a referenceability perspective and you mentioned some things on the call. I would just be curious if you saw that momentum accelerate this quarter as part of the strength in the quarter.

Yes. No, I wouldn't say it accelerated. We haven't seen any material degradation, but I would not say it's accelerated. I really like the pipeline of SAP activity that we're building. If again you think about it SAP has got 30,000 or 40,000 customers we only have 1,800 or so of those. So as they continue to march to the migration plans that they're driving. We continue to see more opportunities than we ever historically saw because of the new motions we have with SAP. I wouldn't say it's accelerated, but I doubt I'm confident that we continue to see good activity in the space and opportunities for continued growth.

Got it. That's really helpful. And then I would just be curious what kind of demand you're seeing some of your earlier product cycle stories like Chain Flow Accelerator and Edge. How those are evolving just expectations?

Yes, Edge has been a real differentiator -- both of those are real differentiators. I'll focus first on Edge. If you think about how infrastructure is moving to the Edge. Taking apps to the Edge was a key strategic initiative that our team launched a couple of years ago. And we are still in the very early days of traction there which to me is very encouraging because the use cases of how customers are looking to deploy continues to evolve, which just tells us we're going into different industries in different spaces than even the team dreamed of as customers get creative and taking advantage of that technology which to me is very exciting. Chain Flow being the only certified SAP offering in the market a certified by SAP offering from many of our relative to our competitors really gives us the differentiation in that space. We find when we start talking to the SAP sales reps. They see that as a real value add to the customer experience and that has really end up some interesting doors for us. So, both offerings are in a very good place. As I've said in the past referenceability is a huge issue. And as we get these early adopters and they get satisfaction for a year or two, they become very strong references and that really starts the flywheel of opportunity for us. And so I think we're in the -- we're following a traditional pattern where we're seeing that start uptick. And I think that's going to be a tailwind as we go into our installed base for future and our opportunity in the future.

Got it. Really helpful. Thanks David.

Great.

Thank you. Our next question is coming from the line of Daniel Jester with BMO Capital Markets. Please proceed with your question.

Hey good morning. Thanks for taking my question. David maybe just a comment on the competitive environment. You had a lot of big wins that you mentioned in your prepared remarks were those competitive takeaways? And maybe just overall how are you seeing the competitive environment at the moment? Thank you.

Yes. There was -- off the top of my head I think there might have been one or two that were specifically takeaways. The bulk of those were net new. I think we continue to see a large unpenetrated opportunities. As I've said, just the number of installs of Oracle and SAP create enormously fertile ground for us to just to continue to expand penetration in our core segment. The competitive dynamics, what I continue to see is most of a focus on price, which tells me the value of what we're delivering is really differentiated and competitors resorting to price as the only way to try to compete against us being materially lower than us already. And so I think our customers still continue to give us the wins because they value the complexity that we're solving for them. In the upmarket, it continues to be Thomson as our primary competitor. When we get into the mid-market that's where we'll typically see Avalara moving into that middle market space and then largely still Sovos when we're competing in overseas.

Great. And then John I appreciate the color on the operating cash in the quarter and some of the issues there. As I think about the seasonality for the back half, are you going to get some catch-up as some of those billing issues gets done? And maybe you can just give us a little bit more color about the trajectory of cash generation for the remainder of the year? Thank you.

Yes. Dan thanks so much for the question. Yes, you're right. I think what we expect to see in the back half of the year, typically the back half is our strongest. Q4 is our strongest cash generation quarter and we anticipate that to be the same. But as I mentioned in my prepared remarks, we did see an up-tick in cash receipts coming through in July, again, consistent with what we would have expected as we did see a bit of a slower cash month in June. So I think we are seeing that get caught up. And I do anticipate us to get back on -- certainly back on track there in very short order. And that's going to again add to the momentum that we're going to see as we roll into the fourth quarter which is traditionally our strongest quarter. So -- we feel pretty good about how that's going to shape up because I think it's going to follow the same historic patterns as we've seen in the past.

Okay. Thank you very much.

Thanks.

Thank you. Our next question is coming from the line of Matt Stotler with William Blair. Please proceed with your question.

Yeah. Hey there. Thank you for taking my questions. I think first off, let's double-click on some of the commentary you've given around SAP and maybe Oracle as well. I'll just double click on how you're expanding those relationships, right? David, I think you mentioned some new sales motions with SAP you could dig into that a little bit more and then extrapolate that to how you expect it opens up more of the substantial installed bases with those two partners?

Yeah. So -- SAP we continue – Matt, thanks for the question, we continue to expand our motion in a number of ways. So we talked a number of times about the unique product set that we've had through acquisitions and products that we've built. We now have very differentiated product. We need then take that and we moved and to start working with their sales teams where there's actually -- they're being rewarded for bringing us into opportunities. Now, we've reached endorsed app status which will give us a whole new collaboration experience with their sales and marketing teams to get more access to their customer base. So we continue to surround that SAP opportunity in multiple levels. And what it's also done for us, which has really been fascinating is -- they are some of the largest SIs like an IBM who historically did not work with. We're now partnering with them on a number of very large transformations that they're involved in. And so I think it's also moved us into an even broader circle of SI partners that are referred to in opportunities where we're partnering with to bring customer value and customer success. So I'm really pleased with the way the team is continuing to capitalize on this opportunity. As we move down, you mentioned Oracle we continue to enjoy a very strong motion with them as well. They are a longtime trusted partner. They've given us access to both their cloud and their app teams. And so we're working on both sides to access customer opportunities and bring that -- bring joint value prop to the customer. And we've seen great experience from the customer in terms of quality of performance of our products on the OCI platform which really has shown up well in competitive situations.

Very helpful. Thank you. And then, as a follow-up on NRR, I see that tick up again to 100%, I think a new high right? Would you want to just walk through what the drivers are there and where you think that metric can go from here?

Yeah. I'll start with overall and then John, can hit the specifics. I think, we continue to focus on our customer success and function. And I think that's really where we're seeing the up-tick of growth in terms of we continue to build new products. We have a very clear strategy. We build new products we have best customers in the world. We need to be able to bring those products to the customer base successfully educate them on what we have and be there when there's opportunities to add value. And we're seeing a good motion that continues to evolve as the maturity of that function and the investments we've made over the last couple of years to build that out, is playing out. We also saw some very nice entitlement expansions in the quarter which again I think speaks to the largest customers in the world this is the heart of Globe Commerce. They're continuing to drive their businesses forward. And that usage on our – expanding usage on existing products continues to be the backbone of our growth. As for the specifics of the break and I'll let John highlight that.

Yeah. I think it really starts with the stability that you've seen in the GRR that we've had that there posting 96% kind of deal for the last number of quarters. Real strong number there. And again to David's point has to do a lot with the customer success teams and really staying in front of what that order customer needs are. And then, as we think about sort of the growth drivers that kind of take you from there up to your NRR -- again, there are three components that really make it up. It's really the cross -- it's the cross-sell and migration activity that's taking place with those existing customers as they expand into different products that we serve, as well as additional entitlements David touched upon. And then finally the last piece is price increases. And again, we're seeing growth in each -- we saw growth in each of those areas over the last quarter. And so, we feel pretty good about that opportunity that's there. Again, you're right, now this is our first kind of -- that our first 11 that we've seen, we feel very proud of that. But again, it's due to a lot of the hard work on the front end, again followed by good product that's come through and nice adoption of that playing out in the market.

Great. Thank you, again.

Thank you. Our next question is coming from the line of Andrew DeGasperi with Berenberg. Please proceed with your question.

Thanks for my question. First on the guidance for the full year, I mean based on the Q3 that you're laying out, it sounds like you're guiding for an implied growth of 11% in total revenue for Q4. I mean, given your recent history in Q4, you tend to really come in strongly and given your comments on the free cash flow being strong in that quarter. Is there any way that this is really just conservatism on your part for that number? And then I have a follow-up. Thanks.

Yes, Andrew, thanks for the question. Again, I think, as we saw, we had posted some very good results for the first half. As we've set guidance, we continue to be very thoughtful about how we think about what the future looks like, we feel like the business drivers are strong, but we're always mindful of kind of some of that -- the stuff deeper into the year. We just want to make sure that we have confidence in the level that's there. So, we try to be thoughtful as we set that guidance and look at look at what that could be. Again, we did bring up some of that guidance in the back. And again on an overall basis, we're increasing the increasing the amount of revenue growth from our initial guidance that we set. But again, we just always want to be very thoughtful about what the back half looks like.

And then on the cash flow side, I know the ERP modernization is going to improve cash collection, billings growth probably will come in much higher than Q2. But I'm just wondering, what are the benefit besides G&A, what should we see in the model? I mean, is CapEx intensity going to decline or slow -- anything else that you could highlight?

Yes. I think that's a good call out, Andrew. Again, there's a couple of pieces when we think about the ERP modernization. Again, the actual cost of the ERP modernization is certainly built into the free cash flow. And so, that going -- that ending or coming towards an end is really going to allow us to then see a little bit more of the flow-through come to the bottom line. And then again with the kind of the -- getting on -- getting the cadence that we've developed over years and years with our older system is going to allow us to get into much better visibility with respect to kind of future client needs, getting the billings out there ensuring the accuracy, getting stuff done. So, we feel very good about the opportunity to leverage that system to give us better throughput from the beginning of the funnel which starts it sales and goes right through the back end which is the billing and collection on the back side. So, it's going to give us a little bit of benefit throughout the organization. But from a cost standpoint, a lot of that really is resident in the G&A area.

Great. Thank you.

Sure.

Thank you. Our next question is coming from Alex Sklar with Raymond James. Please proceed with your question.

Thank you. Dave, I wanted to start with the eight-figure telecom provider when you talked about in the quarter. Can you just elaborate a little bit more on how you got pulled into that opportunity? What were they using before booking with you? And maybe what catalyst was for them to kind of switch what they've been doing previously? Thanks.

Yes. So, they were existing customer of ours that we were expanding our relationship with. They have -- through acquisitions and others they have a number of diverse systems some of which we didn't have access to previously in terms of working with you oftentimes when we get into a customer, the catalyst is just an initial pain point but there's a series of other parts of their business that we don't get initially get a chance to serve. And that's part of our land and expand motion is we'll continue to work that relationship and that they look to make changes in the system or they run into a challenge with another part of their operating business that's when we step in. What I think was one of the nice catalysts here -- we have two big catalysts here. One was our Edge computing solution. I think again, as they were thinking through the point of need that they were facing. They were struggling with some of the quality and accuracy they were getting from the in-house capabilities they had. And so switching over to our Edge solution really gives them the confidence that they need it. And then the second was, we continue to invest in our telecommunication content. And we covered -- I think we've reached a point with them that we were at the point we can give them this efficiency of coverage that really excited them to handle this new part of their business. And so those are the two big drivers of what we continue to address in content and continue to bring new capability to the market, it just opens up more opportunities with existing customers and it fit really well in this situation.

That's great color. Thank you. And then, John, maybe one for you. As you start to lap kind of the faster investment period started last year, can you just talk about the growth in ramp sales and if you've seen any in terms of the number of reps that are obtaining quota versus prior quarters? Thanks.

Yes. Again as you mentioned, we did make some pretty good investments in the selling and marketing areas to drive opportunity both domestically as well as in Europe, and I think we are starting to see some of that benefit play out. Again some of the investments in the US were focused on some of the channels, as David has mentioned, where we target certain of those, certain of those bigger name, bigger stems and other systems to ensure that we're really canvassing the market to get those opportunities. From an overall productivity standpoint, I really don't have anything to report out in terms of kind of what that looks like. But we are beginning to see the traction of some of those investments that we've been making. We feel pretty good about sort of again, as we continue to develop and nurture some of these newer relationships along, we feel like we're starting to see the opportunities as David had mentioned earlier around some of those second tier -- next level down to ERP groups.

All right. Thank you both for the color.

Thank you.

Thank you. Our next question is coming from the line of Steve Enders with Citi. Please proceed with your question.

Okay. Great. Thanks for taking the questions this morning. I guess I just want to ask first on the strong ARR side. I mean pretty impressive growth there. How are you feeling about the broader demand environment and the pipeline for the rest of the year? And I guess were any larger deal kind of pulled in, or anything maybe surprised you to the upside in the quarter as well?

I don't think anything surprised us for the quarter. I think we had coming out of Q1, we had pretty good visibility to the quarter and the team did a nice job of executing it on plan. We have -- we do have good visibility to our forecasting for the rest of the year. And I think that's why we've been comfortable to raise guidance. Because we enjoy very diverse drivers of opportunity and we've been successful in expanding some of those relationships we've been talking about it Microsoft or SAP et cetera. I think -- those are really good balances to some of the uncertainties that the economy still continues to present for some. And I think that's why we feel confident as we do with our numbers.

Okay. Great. That's a helpful context there. And then John maybe I'll ask the question a little more directly just on the impact in the quarter from -- on the billings in cash flow. I guess, is there any way to think about magnitude or the actual, what the actual impact was in 2Q? And maybe how we should be thinking about that flowing through into 3Q now?

Yes. Again, what I would tell you is again as I saw the results come through our cash collections were a little bit soft were a bit in the month of June. Again, I've seen that then to show back up in July. I still think we've got a little room to go from a cash collection standpoint. So I don't really have a magnitude number to kind of to pass around. So I think but I do feel like again as I mentioned in my prepared remarks the billing delay is resolved. That's done. We're right on target. The cash collections are starting to come in and have been coming in as we saw in July. I anticipate that to continue as we continue to again make for some of that billing that was delayed and we'll start to see that show up. And again, a big piece of some of the driver as we move forward through the back half from a free cash flow standpoint is really going to be around the lack of spend with the implementation fees and everything else that is now largely part of our operating system. So I don't have a full magnitude number for you but I get I think you can see on a 6-month to 6-month basis we're about $10 million behind from where we were about a year ago. And so I anticipate to see certainly hopefully bridging that and making up some pretty good progress on that through the back half of the year.

Okay. Perfect. Thanks for taking the questions.

You bet.

Thank you. Our next question is coming from the line of Patrick Walravens with JMP Securities. Please proceed with your questions.

Great. Thank you. And congratulations. It's great to see. So last quarter I remember you guys told us that January was a little slow and then you made it up in March. What was the linearity like in Q2?

It was better. I think it was definitely better than we had seen. Certainly, Q1 was a little bit of an anomaly for our business. We definitely saw more alignment there across the quarter. We typically as a business do a little better the last month of every quarter that it's not hugely different but it is always a little bit better at the end of the quarter. And I think this quarter was no different. But there was no anomalies like it was in Q1.

Great. And then on the whole AI front David let me ask it this way. What questions have you sort of been exploring internally in terms of how AI may impact your business. What have been the things you've been trying to get the answer to before you determine your strategy?

Yes. Well, we are very active in this area. I appreciate the question Pat. We've been looking at it both internal productivity and external customer experience. I think AI becomes a critical part of our customer experience going forward. And what we're really looking for on the commercial side is, how it can enhance the value we deliver to existing customers and potentially open up new markets for us. And I think the team is doing some very interesting things there that are creating some interesting opportunities for us as we started internally really productivity. Obviously, the large amount of data that we touch and curate how we do that can we be more productive there how we can leverage our tax technologies to do the and most high-value work to add to the customer experience and leverage the technology capabilities which we've always done. We've used ML for years in our business. And now this is just sort of, the next generation of technology to productivity which will ultimately give us more leverage in our bottom line. And those are the really, I think it's important to note that the -- I made the comment about probabilistic and deterministic. It's so important one of the things our brand is built on is the quality of our content. And you can't be approximately right. You've got to be -- our customers count us for the accuracy that we deliver. And so I think that's something I'm very vigilant in making sure we're not doing anything to rush something in that would undermine the brand and trust that we've earned over 45 years.

Great. Thank you.

Thank you. [Operator Instructions] Our next question is coming from the line of Brad Reback with Stifel. Please proceed with your question.

Great. Thanks very much. John just a tactical question. The cost of services was up pretty substantially quarter-over-quarter. Were there any one-time items in there?

Yes. Thanks for the question Brad. Cost of services was up. What we have seen is that there's an opportunity sort of we believe developing in the back end -- and we need to make sure that we get after some additional hiring to ensure we've got the labor in there to manage some of those costs that are going forward. So, there has been some additional headcount that we've added there to get ourselves ready for what we think is coming. And again, early days -- there's a bit of slowness in terms of getting up to full productivity and utilization that we would expect there. So I think that was at play a little bit in that area and developing that. So -- that was one of the -- that was probably the biggest piece that was driving some of that down. Again, I expect we'll see that crew get up to speed and moving fast. And so hopefully, we expect to see that rebound.

Great. And then David, as we think about the cost savings that you'll generate from the new ERP system and the other investments you've made. How do you think about what is to drop to the bottom line versus what gets reinvested in the business? And maybe asking it slightly differently. Do you think there's a step function up in margins in the near term, or is it sort of moderate increase in the margin profile for the next couple of years?

Yes, it's a good question, Brian. I think in the back half of this year, we're already moving margins from EBITDA margin from 15 to 17.5 and then up to 19 in Q4. So we are already planning for an increase in leverage there. And I would expect that we'll continue to see nice solid performance across our EBITDA margin, as we move into 2024. All the investments we're making on the front end of our sales and our customer success and our content has put us in a position now to have more drop to the bottom line. And so I think when we thoughtfully think about it is, if we're seeing acceleration in opportunities, we're not going to let those go. And so I would always invest in sales and marketing and R&D, if it's something that's opportunistic. And again, we're outperforming in revenue, because we're seeing more opportunities than we thought. I'm not going to -- I'm not going to miss those just to throw it to the bottom line. But otherwise there will be a natural progression that's going to happen from this business. We're already building in considerable margin improvement in the back half in our forecast and I would expect that will continue.

Great. Thanks very much.

Thank you. There are no additional questions at this time. So I'd like to pass the floor back over to management for any additional concluding remarks.

All right. Thanks everybody for joining us today. As always, if you have follow-up questions, please reach out to me at ir@vertexinc.com and have a great rest of your day.

Ladies and gentlemen, this does conclude today's teleconference. Once again, we thank you for your participation, and you may disconnect your lines at this time.