Greetings. Welcome to Vertex's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. At this time, I'll now turn the conference over to Joe Crivelli, Vice President, Investor Relations. Mr. Crivelli, you may now begin.

Hello and thanks for joining us to discuss Vertex's financial results for the fourth quarter and full ended December 31st, 2022. I'm Joe Crivelli, Vice President, Investor Relations. With me on the call today are David DeStefano, Vertex's President and CEO; and our CFO, John Schwab. As a reminder, during this call we may make forward-looking statements related to expected future results. Our actual results may differ materially from our projections due to risks and uncertainties. These risks and uncertainties are described in our earnings release and filings with the Securities and Exchange Commission. Today's remarks will also include references to non-GAAP financial measures. Additional information, including reconciliation between non-GAAP financial information to the GAAP financial information is provided in the press release. This conference call is being recorded and will be available for replay via webcast on our Investor Relations website. With that, I'll now turn the call over to David.

Thank you, Joe. Welcome everyone and thank you for joining us. I'm pleased to speak with you today about Vertex's financial results. Businesses today face immense regulatory change and indirect tax complexity. These challenges intensify as they expand into new regions, diversify offerings, and accelerate e-commerce growth and that's why we continue to see tax technology growing in both value and demand. Our company's vision to accelerate global commerce has never been more relevant. Our solutions give enterprise and mid-market businesses alike the confidence to manage tax compliance at scale in over 20,000 jurisdictions around the world. Against this backdrop, Vertex executed extremely well in 2022, finishing on a high note with our best quarter of the year. Revenues in the quarter reached a record $131.1 million, up 17.4% from Q4 2021. This is the highest year-over-year revenue growth that we have delivered as a public company and we closed the fourth quarter with adjusted EBITDA of $20.8 million, up 8% from last year. Our strong performance in an uncertain economic environment reinforces the durability of our business, the financial strength of our customer base, and our ability to sustain profitable growth. Free cash flow in the quarter was $24 million, which helped us deliver positive free cash flow for the full year, while making a multimillion dollar growth investment. We are seeing benefits from our strategic acquisition and the targeted investments we are making in R&D, go-to-market, and ecosystem expansion. These investments are helping us further penetrate the $22 billion addressable market for tax automation solutions. Our investments are focused in four key areas; first, expanding our installed base through accelerated go-to-market investment to drive customer success and high-value new logos within our target markets. Second, broadening and deepening our strategic partnerships; third, strengthening our global presence with a…

Thanks, David. And good morning, everyone. I'll now review our results in detail and provide financial guidance for the first quarter and year. In the fourth quarter, revenue was $131.1 million, up 17.4% compared to last year's fourth quarter. And for the full year, total revenue was $491.6 million, up 15.5% from 2021. This exceeded the high end of both our fourth quarter and full year revenue guidance by $4.1 million. Annual recurring revenue, or ARR, was $431.1 million at the end of the year, representing 16.5% year-over-year growth. Net revenue retention, or NRR, remained strong at 110%. This was up from 108% in the comparable 2021 period and up a point from 109% in the third quarter. Gross Revenue Retention or GRR, was 96% at quarter end, consistent with prior quarters and within our targeted range of 94% to 96%. These metrics continue to demonstrate the stickiness of our solutions as well as the strength of our customer relationships. Our returns processing Managed Services business generated recurring service revenue of over $24.4 million for the full year compared to $20.8 million for the comparable prior year period. We also processed over $13 billion of tax payments for our customers and earned over $1 million of cash from the float on the funds. Customer count increased in the fourth quarter. At December 31, we had 4,559 total customers, up by 61 from 4,498 at the end of the third quarter. As we've discussed with investors previously, customers with ARR greater than $100,000 or scaled customers is a better metric than gross customer count to gauge our sales performance in the enterprise space and upper middle market where we focus. Accordingly, in the fourth quarter, scaled customers grew 15% compared to the prior year and 17% on an annualized sequential basis.…

Thanks, John. A few points to leave you with before we open the call for questions, first, I'm very pleased with our performance in the fourth quarter and in 2022 as a whole. It's clear to me the investments we've made are helping us attack the significant growth opportunity in front of us. This is showing up in our double-digit growth, strong profitability and positive cash flow in the fourth quarter. We are where we had expected to be when we began our investment strategy two years ago. Second, while we continue to invest in our strategy and growth intentions, we are nearing the point we're no longer intending to accelerate investments. In the back half of 2023, these should taper off and the growth trends will start to be even more visible to our investors. And finally, we will continue to take prudent steps to invest wisely and strengthen our financial position, as we have throughout our 40-year history. During economic downturns, taxing authorities rely heavily on revenues from indirect taxes to fund budgets and enterprise customers still invest for the future. This drives ongoing demand for our solutions and allows us to continue to grow even in recessionary times. Our team is executing well, and we are energized about 2023 and beyond. With that, we'll take your questions. Operator, please go ahead.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question today is coming from the line of Matt Stotler with William Blair. Please proceed with your questions.

Hi, there. Appreciate you guys taking the questions. Maybe just to start off with one on the macro, obviously, some interesting commentary, it seems like you guys are obviously not seeing particular difficulties and talked about the criticality of the task compliance here. We love to just double-click on some of the observations that you're seeing within the business, how customers are coping. If there's any changes in usage and there's just kind of stability based on the pricing structure that you guys have put in place. If you're seeing any differences in deal cycles, what have you? I would love to just double-click on your observations there?

Sure, Matt. So fundamentally, no usage concerns. The product is exceptionally sticky. We have pretty strong price uptake relative to our GRR and our installed base, that we're not seeing any downward pressure there at all. I think on the deal cycle, I think customers remain thoughtful. The value prop of our software and our solutions continues to show through versus our competitors and that customers continue to drive both digital transformations, and this is really what enterprise customers are focused on digital transformation, ERP upgrades and other system upgrades to get – drive more efficiency in their business. And both of those things continue to serve us well. We do see occasional deals that will miss by a month of when we expect them, but we have not seen material push off, or we're canceling budget on this project. We've not experienced that yet.

Got it. That's helpful. And then maybe one kind of looking forward, I mean, you mentioned emerging tech and some of your investments in Emerging Tech there. I would love to kind of get your view on where you're focused on in terms of additional kind of capabilities there and what you're most excited about in the R&D pipeline at this point?

Yeah. So we continue to expand on our edge and edge solutions and cloud platform. I continue to think that, that is a strength for us that will be a differentiator looking forward, we've had a number of healthy discussions about data, data transformation, data intelligence, and we see some opportunities there. And then we're always staying close to driving ML and AI and thinking about more automation, both in our business and in our solutions. And so those are areas that I think will continue to push forward in 2023 and beyond.

Great. Thanks, again.

Thank you, Matt.

Our next question is from the line of Joshua Reilly with Needham & Company. Please proceed with your question.

Hey, guys. Thanks for taking my questions. Nice job on the quarter here. I think, if you look at in-store retail, I think it continued to be stronger in Q4 than maybe what people expected. Can you just discuss your exposure to in-store retail versus e-commerce? And how is the edge cloud solution, which I think has been out now for roughly a year, how that's either helping you win net new customers or retain customers you have and migrate them to the cloud?

Sure. Josh, I think the great news is our customer base is really well-balanced across both e-commerce and in-store. So, it's sort of like left pocket, right pocket. We've enjoyed success on both sides. So, when the pandemic hit and we saw people start shifting heavily to e-commerce we were running omnichannel for our customer base. And so we enjoyed sort of an uptick there. And now we're seeing it more on the in-store side. And I think that's the benefit of our position with the enterprise customer base. We're on both sides, and edge is really furthering that experience. It's really getting uptake across not only retail, but we're seeing other deployments where customers really want to containerize their solutions, and they're seeing value in what we're doing there. So, it is -- we're seeing good uptake there.

Got it. That's helpful. And then if you look at your Q4 subscription revenue, I guess, a couple of quick questions there. Was there any overages in the quarter there can note in the subscription revenue line item? And then as you look at how customers are buying based on revenue bands for 2023, would you say that people are being cautious with their expectations around revenue growth, or are the buying patterns normal?

Yes, Josh, thanks for the question. First, on overages, there wasn't anything in the fourth quarter that was notable in terms of -- to call out in terms of what -- if there's anything that was above normal. So, I would say there's really nothing there. And then we think about kind of new opportunities and what people are buying from a band level. I wouldn't say that there's anything there that's driving us causing for change. We're not seeing people taking anything down or buying less than they normally would in anticipation of something in the future. So, again, that stuff does get trued up, so it really gets caught up. But we're not seeing people we're not seeing people buy anything lower. There's really nothing meaningful in the numbers yet that are indicating any kind of a pullback there.

Got it. Super helpful. Thanks guys.

You bet.

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

Hey, good morning everyone. Thanks for taking my question. Maybe first to start off on the guidance for 2023, 27% growth in the cloud. If I have my math right, implies maybe 5% growth in the rest of the business. So, can you just provide a little bit more context about Beyond the Cloud? What your growth expectations for the different other parts of the business are this year?

Yes. Thanks for the question, Dan. Much appreciate it. Again, as we think about growth, again, you called out cloud, and we feel pretty good about where that's going to come in. Again, as we've talked about, the on-prem business is going to continue to be there and be something that our customers use and those that have it may continue to add on to that. But we've seen a nice split between people adding additional cloud under their existing on-prem infrastructure as well as adding some on-prem activity if they need it. So, we're seeing some modest growth that's going to come out of that. And then from a services standpoint, we're going to see that increase a little bit over last year in terms of kind of what our growth expectations are. My guess is that's going to be in that kind of 13%-ish kind of zone kind of year-over-year basis. So, that's kind of how we break that out.

We're always mindful Dan to work closely with our ecosystem partners because we really -- there's a nice symbiotic relationship between our organizations and theirs, and we gone mindful about the growth there versus our relationships.

Got you. That's helpful context. Thank you. And then on the free cash flow, certainly, a big improvement in the fourth quarter. As I think to 2023 in your comments that we're sorting to nth investments, how should we think about the EBITDA to free cash flow conversion? Can that tighten up into later this year into 2024? I know that's a long way out, but just how should we be thinking about that? Thank you.

Yes, great question, Dan. I think you're thinking about it correctly, and as David talked to and I talked to in some of our prepared remarks, we do anticipate as we kind of get through this big investment cycle, some of which has started to end, but then some of the bigger projects will be wrapping up here in the first half of 2023. We will start to see a little bit of leverage show through in the back half of the year. I think it's more a 2024 thing. And again, I don't -- I anticipate that we'll see a bit of improvement from a free cash flow standpoint, but I'm really looking towards 2024 to see that start to move more meaningfully as we get ourselves past these investment cycles.

Great. Thank you very much.

You bet.

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

Thanks for taking my question. I guess the one question I have is in terms of the direct customer count increasing sequentially by such a large amount in Q4. Maybe can you elaborate a little more what drove that new logo growth? And then in terms of SAP, obviously, that's a relatively new relationship, if you could elaborate as well in terms of what the contribution was from them. Was it more meaningful in Q4 than you've seen it before? Thanks.

Sure, Sure. So I think a couple of things there. The first is the continued investment we made in Microsoft and the Microsoft connectors and our strength growing in that ecosystem I think, as well as Workday. Those would be the two areas that I think we saw some real nice new logo wins. I would add Salesforce as well. That partnership continues to grow nicely. And I think those three ecosystems and the investments we've made there are starting to drive more activity, which serves the new logo growth that you referenced. I think broader SAP, while the -- obviously, we've got a 30-plus year relationship with SAP, the relationship and working with their sales team is a new experience for us, and we're definitely seeing a new rhythm in working with that organization, really driving more customer value and better customer experience. And so when you think about it having the most robust tax technology solutions for SAP between our Chain flow accelerator, our Plus tools, the depth of our integration, you bring that together and you start going and talking to the SAP sales teams, we're really able to differentiate in a meaningful way. And so I think that supports both our European growth and on some of our North American growth that you saw in 2022 and we'll continue in 2023.

I think from a customer count perspective, as David was alluding to, there's a lot of drivers there that are pushing things along and giving us opportunity for growth. And again, we continue to see good logo growth in each of the periods, and we feel good about the motions that are there. Again, we did have a nice Q4 in terms of that. And again, we started to see some of that mid-market activity go along. But one of the things that we called out this quarter, and I think is really important is that thinking about those scaled customers, looking at those guys that deliver over $100,000 of ARR. I think that's the important metric when we think about our customers, not necessarily the total numbers that are there, but it's really what are the ones that are playing in the field where we do our best and that's that scaled customer. So we're going to continue to report that. And hopefully, that will give people a real good understanding of kind of how the business drivers are moving.

That's helpful. And then maybe on the margins. Just wondering, is there any movement on the stock-based comp that we should be aware of? I mean, it seems to have gone down this year relative to 2021 as a percent of revenue. Just maybe if you can elaborate a little more on that, that would be helpful?

Yes. Historically, when you take a look at it, Andrew, as we came through the IPO that we had some overhang of things that kind of had the best of some old granted things that we really had to get caught up on just in the normal accounting pace. So I think we're seeing a little bit of that and a little bit of that go away. And now we've got our normal pace as we go forward in terms of kind of what we've been granting. We'll continue to be very thoughtful about that and the level of stock-based comp that goes into the grants, but I don't think there's any material change there to call out. And the number from 2021 into 2022, the fact that it's gone down has more to do with some of the older stuff pre-IPO.

Got it. Thank you

You bet.

The next question comes from the line of Samad Samana with Jefferies. Please proceed with your questions.

Hi. Good morning. Thanks for taking my questions. Maybe, first, just I wanted to follow up on the cloud revenue outlook. John, could you maybe unpack how you're thinking about conversions versus new attach at existing customers versus new customer acquisition as one of the three main drivers of cloud in 2023 and how we should model that?

Yes. That's -- I'll unpack it a little bit. I'm not going to -- I’m going to be a little thoughtful in terms of kind of how we sort of give guidance here. I mean, I think, we guide to the total amount of 27%. But, I think, as we think about the drivers there, that we'll have the new logos that will be coming straight into cloud that are looking for it. We continue to see, with our existing customers that have on-prem, that as they look to buy, it's about a 50-50 kind of ratio, that 50% are buying additional on-prem, other 50% are buying into the cloud and using the cloud in addition to their on-prem, creating a hybrid environment. So I think that's -- that continues to be a very strong motion there. And, again, given some of the uncertainty as we kind of look forward, we're not exactly sure how this is going to impact people's move to further digitization. We haven't seen any impact on our pipeline yet, as it stands. But I think as people think about where to spend money, I think that's something out there that they may kind of hold on and use the on-prem for slightly -- a little bit longer perhaps -- and so I think about that as I think about sort of that conversion or that migration, if you will, Samad, from on-prem to cloud. And we'll see how that kind of susses out as the year kind of plays through. But right now, it's hard to really give guidance on exactly each of those three components. But, I think, I don't expect to see a whole lot different, but it's something that we're going to certainly keep our eye on and probably be talking to you guys about going forward. Thanks.

Very helpful. And then, maybe, David, a follow-up for you. Just thinking about the partnerships and how they've ramped, would you say that, from a distribution perspective that the partnerships are kind of firing on all cylinders? Is there more gas left in terms of how they could ramp? And just how should we think about that in the context of your own sales and marketing investments as well in 2023?

Yes. I'm really pleased with the maturity of each of them. They're all in different stages. Obviously, if you think about our relationship with Vodafone SAP, they go back generations. And so we've really enjoyed wonderful experiences there. They moved to a new level with working with their sales teams. And so that's a new motion for us. I still think we're in early days of getting the uptake there, which is great, because that gives me more confidence in the opportunities moving forward, given the massive installed base that they both have that we don't have access to yet. So I think there's considerable upside there. I'm really encouraged by some of the motions we're seeing with folks like Workday and Salesforce, as they're expanding their indirect tax partnership. Workday is expanding in Europe, which will give us another partnership there. We're also seeing good motion now starting up in Microsoft. I think, that's probably the one that I see the most growth potential in, both within the ecosystem and some of the work we're doing with them, as both a customer and a partner, where I see great opportunity.

Great. Very helpful. Thank you.

Our next question from the line of Keith Weiss with Morgan Stanley. Please proceed with your questions.

Hey, good morning. This is Jonathan or for Keith. Thanks for taking my questions. I think you've already touched on macro to a degree, but want to understand what's contemplated in your outlook from a macro perspective?

Yes. I think as we built the guidance, we're trying to be very thoughtful kind of with what we've done kind of what we've done in the past and how we've delivered. I think we've had a pretty good pace of sort of I'll say under-promising and trying to over-deliver in terms of kind of expectations. And I think as we thought about guidance and we thought about the future, we built some of that into mind as we look forward. And so that's kind of how that's -- how we've built that in a very general standpoint. So again, we do know that there's some tensions out there that are in the marketplace that are concerns on people's minds. We've not yet started to see them show up. But that said, I think we wanted to be mindful as we build guidance that could start to manifest itself at some point. But we feel good about what we've put out there for now.

Got it. That's helpful. And can you help us understand what you're thinking around the opportunities and incremental investments in the mid-market?

Sure. We are laser-focused in the ecosystems of Microsoft Workday. We're seeing great uptake in sales force -- and being targeted, again, we look at the platforms that a majority of mid-market businesses run on and the growing into corporate and enterprise customers. That's really our focus. We really don't want to peanut butter spread with 1,000 connectors. We don't see that as the right strategy for the target customers we run it, because they all end up consolidating on the primary platforms, whether it be a Coupa or Workday, et cetera. And I think that's really where our focus is. Our investments, I think, are well suited for that right now. I comfortable with our go-to-market team, and we continue to just add quality around both the content that we use to support that customer base as well as some of the new offerings that we have coming forward.

Helpful color, guys. Thank you.

Thanks.

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

Okay. Great. Thanks for taking the question here. I guess I want to ask a little bit about the kind of key catalysts for adoption and what you've been seeing both within the quarter and if there's been any change as you think about new top of funnel or new opportunities coming in that are in the pipeline right now?

Sure, sure, Steve. So there's three fundamental drivers for our business. They are either going to be a business model transformation, whether you're adopting omnichannel, you're making acquisitions, something that's fundamentally disrupting the normal way of business operates as they search for or pursue revenue growth, which makes it hard for a tax department to keep up. The second will be in the regulatory space, either come in the form of new regulations or audit pressure. Either one of those things can again attack an in-house team to say, hey, we're going to have to do something different and our in-house solution is no longer viable. And then the third is the technology refresh part of their business. Remember, these large multinationals have multiple ERP systems, multiple invoicing billing systems. And so they can be upgrading any one of those through an acquisition they had made over the years and that, again, will be a disruptive force for change. And that will be our entree into an organization that we then land and expand, which has sort of been our motion, our success. And so I think when we look at it in -- if you go back a couple -- two years ago in the pandemic, omnichannel and business model where changes were really -- and acquisitions became very hot. And so that was a real driver. Our experience in the recessionary times, the regulators are always looking for more revenue. They need to get their portion to fund their budgets. And so they'll increase audit pressure or they will -- when we'll see continued complexities we are seeing around the world. And then we're fortunate enterprise customers that we target are really still very much focused on digital transformation and system upgrades for efficiencies. So we're still seeing really good drivers in those areas in the dialogues we're having.

Okay. So I guess as you think about like the new top of fuel coming in, in the pipeline, has there been any change in that and a mix there because I think there has been a lot more maybe commentary on this call versus some of the past macro impacts beginning to come in there. So just wondering how you're seeing new opportunities flowing in, given some of those…?

No, I think I would say it's still running the traditional way that we have experienced in the past. And again, when I add to it the new motions we have with the sales teams of some of these larger ERPs, that's giving us good insights into where they are in their dialogues with their customers. And I think I still feel very -- that's why we're not seeing any material change, and we're able to drive our guidance up over expectations.

Okay, perfect. That's helpful context there. I guess just as we think about the kind of geographic, dealer footprint in Europe has been a good point of growth for a bit now. So just wondering how you're thinking about Europe going forward from a demand perspective and there's been anything to call out there in terms of the strength or potential macro impacts in that region?

Yeah. We had a record year in Europe last year, and I think that team is very well-positioned for 2023. I mean, when you look at what we have the largest platform over there for, again, our customer target customer base is SAP. We have the most differentiated set of capabilities between our chain flow, the LCR-Dixon PLUS Tools that we've added, the depth of integrations and now this customer reference-ability, I can't emphasize that enough, having the largest customers in Europe working with our software has really given us a further differentiation, because it's a small community of tax players and so they really want to talk to who else you're doing business with in the region, and that has helped us. And then when I look at some of the new reg changes as they continue to evolve near and real-time reporting, all those things play well in our favor as we look forward in Europe. So I remain confident that the team is going to continue to execute well.

Okay, perfect. Great to hear. Thanks for taking the question.

Our next question is from the line of Alex Klar with Raymond James. Please proceed with your question.

Great. Thanks. I wanted to follow-up on Steve's question on the international. What are you seeing in terms of overall pipeline makeup from businesses outside of the US? And then specifically, David, you called out a real-time win in terms of in the prepared remarks, how do you feel about your positioning to address the real-time compliance challenges? Thanks.

Yeah. I guess when we think about pipeline and what we're seeing European companies focused on, clearly, we've got a lot of US companies doing business in Europe, but the European companies certainly are focused on -- certainly focused on some of the vast solutions that we've been offering. I think David called out and mentioned the chain flow, et cetera. But I think more and more as Europe continues to evolve, complexity is coming into its -- that needs and those needs are requiring automated solutions to get through. And we're seeing it start with only the largest companies in Europe, and I think that's going to continue to proliferate and follow its way down. I don't know that there's a whole lot again. I think he talked about chain flow, we talked about those things. I think they are the key drivers, and they're a little bit, perhaps a little bit different things that could solve in the US, which perhaps can start a little bit more with sales and use, which are a little more US-centric type things. As far as the real-time reporting, we continue to advance some of the work we're doing in that area, and we're being pretty thoughtful about watching health and talking to our customers about what their demands are. We are seeing a growing conversation and opportunity to expand our product portfolio in that area, and it is something we are actively pursuing.

Okay. Great. And then John, one for you. In terms of kind of the embedded assumptions around hiring for 2023, how are you thinking about growth investments broadly? And any areas you're going to be pulling back on in the back half of the year?

No. David touched a little bit on it earlier in his remarks. As we think about growth, we do anticipate we'll be hiring certainly in 2023. We continue to focus on our engineering teams and bringing new products to market and those new products to market require additional investment in personnel. I think that, I mean, that's very important. And I think as we think about some of the other go-to-market activities that we feel really good about the positioning of our go-to-market teams in terms of the growth that they've seen over the last couple of years. So we feel pretty -- we feel good about that. But I think we're going to be looking across the board at different opportunities there. But I think, again, our growth focus continues to be on new product, go-to-market, looking at Europe, just as David has kind of discussed throughout here. So there are kind of the areas that we're going to continue to lean in on. Again, we do see some of the internal projects that we're doing -- we've been doing for the last year or so start to lighten up, but that's more internal stuff and outsourced resources there.

All right. Great. Thank you both.

Great. Thanks, Alex.

Our next question comes from the line of Adam Hotchkiss with Goldman Sachs. Please proceed with your question.

Great. Good morning and thanks for taking my questions. Great to see the success of some of the new logos you called out. Could you just give us a quick update on what you're seeing on the competitive front, how you're feeling about win rates relative to the prior quarter and sort of the first half of the year? And then sort of breaking that down between folks who are competing against you in the enterprise versus some of those that are more down market and trying to work their way up market?

Sure. I think we've enjoyed a strengthening in our competitive dynamics from our side. I think with the product portfolio, and the focus we put into the platforms that we focus on. The team is doing exceptionally well in that area. Our primary competitor in the enterprise market remains Thomson, no change there whatsoever, and we treat them obviously as a very formidable competitor. Our tax content database, the depth of our ERP, the referenceability, the Big 4 relationships, all of those dynamics come into play as a differentiator for us. And I would be remiss if I didn't highlight the customer success and customer experience organization. big customers, larger enterprises are very discerning about that customer experience and support that they're going to get, and we continue to leverage that, Adam and differentiate in our win rate across that. As far as we go into the mid-market, that's where we're running the competitors that are looking to move into that space from the SMB side. And I'd say in the ecosystem that we're focused on, we're starting to see growing traction and success with our solutions and our win rate. We're not intending to, again, peanut butter spread the market there. I don't think that's a sustainable economic model for us. We really want to be able to drive EBITDA as well. And so our focused investments are in the ecosystems that we see the largest number of players that will evolve to be enterprise companies for us in the long-term. That served us well for 40 years, and we're very focused there.

Great. No, that's really helpful. Thanks. And then, John, when you think about the major growth drivers that are embedded in the guidance, how are you approaching expectations for new logos versus net expansion drivers like new geos products, volume in this environment? Any particular strength to call out?

Yeah. I think as we thought about guidance, again, I think we – as I mentioned earlier, we feel pretty good about kind of what we've built in Europe and how that's been going. We've been building that for the last – since the IPO for the last couple of years. And so that group is largely getting in place, and now we're getting some time with everybody to really kind of hone our skills. So I think feel good about that. From a new logo standpoint, that's always an area of focus for us. We think the opportunity there to continue to kind of lean in and work with some of these partners that David talked about, is really going to help us some new logos and generate some new logo activity. But we'll start to see incremental improvement there. Again, the customer base we have is so strong. That's why historically we've seen kind of 70% of new opportunities come from existing customers. But we intend to kind of to drive new logo opportunity and grow that over time. I think that's an area that we think there's opportunity for improvement. So we're going to keep focused on that. But I can't call out anything specifically to say we expect that to change by a certain – a certain number of percentage points.

Really helpful. Thanks, John. Thanks, David.

You bet. Thanks, Adam.

Thank you.

Our last question comes from Pat Walravens with JMP Securities. Please proceed with your questions.

Great. Thank you. Congratulations. All right, David. So summing it all up, what are your top two or three priorities for this year?

Execution, execution and execution. I think we have invested heavily in our new product portfolio, our sales and marketing capacity, our customer success and customer experience organizations and Pat, I really want to see the team just continue to stay focused on that. I think we're fortunate to work with the best customers in the world with through the best partners in the world, and it's really on us to execute. So that would be number one. I think number two is continuing to advance the Vertex team and its talent. I think, we fortunate to attract some of the best people in the industry, and we want to keep doing that. We've really been able to differentiate with our people over the years. And so investing in those folks is really critical to our success.

All right. Congratulations again. Thank you, guys.

Thank you, Pat.

Thank you. At this time, we've reached the end of our question-and-answer session. And I'll turn the call to Joe Crivelli for closing remarks.

Thanks, everybody, for joining us today. If you have any follow-up questions, or if you'd like to schedule additional time with the team, please reach out to me via e-mail at ir@vertex.com. Thanks, and have a great day.

This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.