Greetings. Welcome to Vertex's Q2 2023 earnings conference call. Please note, this conference is being recorded. At this time, all participants are in a listen-only mode. 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 Q2 financial results. I'm Joe Crivelli, Vice President, Investor Relations. David DeStefano, our 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 Q2 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 the return from these investments starting to take hold. The Q2 demonstrated our anticipated steady progression of increased revenue growth and margin improvement. We added $21 million of recurring revenue in the Q2 alone, the highest we've reported as a public company, driving a 17.5% increase year-over-year in ARR. GR 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 Q2. 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, growth 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 deals, contributed to our strong Q2 performance and reflects the sustained growth of the lifetime value of our customer base. We have a vision to accelerate global commerce. To achieve this, we are building our solutions into all the major platforms powering global commerce, backed by trusted partner relationships that help differentiate us in deals and deliver extended value to our customers. Again, this quarter, we saw how our partnerships are paying significant dividends. We continue to build on the 25 plus year partnership with SAP to extend the value we provide to our joint customers. Vertex has the most complete indirect tax solution in the SAP ecosystem, especially when combined with the unique capabilities of our SAP-certified Chain Flow Accelerator and the uniquely strong customer reference ability we enjoy as the leader in the enterprise market. I've also previously shared how we are driving an entirely new sales motion with SAP, designed for growth, to better support our joint customers and our go-to-market efforts. I'm incredibly proud to announce that Vertex O Series is now an SAP Endorsed App for the North America region. This enables even greater collaboration between our respective sales and marketing teams to accomplish our collective revenue goals. Accordingly, we are seeing accelerating momentum in the SAP ecosystem. We had several high-profile wins in the Q2, including a leading global semiconductor manufacturer and a major manufacturer of private label food products. Both customers engaged Vertex to support tax transformation as part of their S/4HANA migration initiative. We also helped one of the world's largest manufacturers of branded food products automate their manual processes around use tax to ensure they were not overpaying suppliers and creating audit risk. In each case, an SAP platform transition drove $mid-six figures of annual recurring revenue for Vertex, demonstrating the magnitude of this opportunity. We expect this will continue to be a new business driver for Vertex in the coming years, as thousands of customers still on ECC, a platform that SAP has announced they will stop supporting in 2027, migrate to S/4HANA. In the Q2, we also won a $high six-figure deal from a leading medical diagnostics company. Following a company merger, they engaged in a global S/4 migration initiative to consolidate systems and selected Vertex Cloud for tax automation as part of this process. This was a highly collaborative process with the SAP team to provide the best joint solution for the customer. Our Chain Flow Accelerator and data visualization tools, which enhance the company's VAT tax compliance in Europe, were key to their decision, as well as our ability to link multiple systems to a single tax system on a global scale. We're seeing the value of our focused and collaborative approach extend across our entire partner ecosystem as companies leverage our connected solutions as part of their tax transformation efforts. As an example, in the Q2, one of our longtime Oracle customers implemented a cloud-first strategy to support their business growth. Because of the trusted relationship we have earned over the years, they chose to continue their journey with us and transition to our cloud solution. This deal reflects not only how we can seamlessly transition with our customers when they are ready to move to the cloud, but also the importance of our differentiated customer experience. We also significantly expanded our relationship with a major marketplace for tickets to live events. The company's global growth drove their need to move to the cloud and modernize their indirect tax solution. In conjunction with our partners at Oracle, this OCI cloud deployment resulted in $7 figures of new revenue for Vertex. We're also driving customer value with Workday, where we are enabling seamless indirect tax management for our joint customers in the cloud. Their sales team brought us into the conversation with a West Coast healthcare provider to modernize their manual tax processes. Thanks to the strong connections we have built with Workday, we won this six-figure new logo deal to automate consumer use tax. We also won a new logo deal with one of the largest waste management companies in the U.S. This customer was looking to improve their business processes by consolidating their homegrown and disparate billing system on one platform that could work harmoniously with Workday. Their trusted advisor and implementer is a key partner for Vertex and brought us into this competitive evaluation process. In addition, our ability to effectively manage exemption certificates and support real-time jurisdiction classification with our lat/long locator ultimately set us apart from the competition. Tax complexity increases as businesses diversify their offerings, expand in new regions, or grow their customer base. For us, this can mean new opportunities within our existing customer base, either through our new offerings or by increasing use of their existing solution as transaction volumes grow. In the Q2, one of our largest customers, a global food and beverage retailer, signed a contract expansion that included a seven-figure increase due to the high sales volume and user growth. Adoption of their mobile app is rapidly growing, along with the number of items in each order. With this, they needed to support the variety of locations where mobile orders are taking place. The high performance and reliability they've experienced with Vertex cloud solutions are the hallmarks of why they trust us with their thriving business. While I enjoy highlighting how we are selling new offerings through upsells, cross-sells, and new logos, the increased use of our solutions by existing customers represents another pervasive benefit of being the leading provider of indirect tax solutions to the largest companies in the world. Last quarter, we discussed our leadership in the food delivery industry. We expanded our relationship with one of the major players in this space in the Q2. This new 3-year deal augments usage for marketplace support and drove six figures of additional annual revenue for Vertex. Our Edge offering was a significant differentiator as the customer's business model is mobile, requiring pinpoint accurate tax calculation from any location. We believe we're still in the early days of advancing various and diverse business solutions for our Edge offering across multiple industries. Edge deployment enables greater flexibility and scalability regardless of where transactions occur. We also continually invest in our database to drive expansion into key growth markets. As of the end of Q2, our robust tax content database covers over 840 million effective rates and rules. With the rise in mobile commerce, more of our customers are subject to telecommunications taxes. As a result, we are seeing the investment we've made in telecommunications content drive significant new business opportunities. As an example, in the Q2, we won an 8-figure, multi-year contract from one of the big three U.S.-based telecom leaders. This major contract was driven by key Vertex differentiators, including our communications tax content, as well as our Edge product to support the company's nationwide retail presence. I'm also thrilled to highlight in the Q2, one of the world's leading providers of cloud software and infrastructure selected Vertex to support their growing telecommunications business. This upsell to an existing customer relationship will drive mid six figures of additional annual revenue for Vertex. Turning to the international market, we won a six-figure deal with a mid-market gaming company based in Singapore, who was looking for a long-term partner to support their growth in the U.S. The company owns one of the fastest growing free-to-play RPG video games, with numerous avenues for in-game purchases. Getting the tax right was incredibly important to them to create the best user experience for their gamers. Initially, they contracted with us to manage their returns filing in the States. This quarter, we expanded our footprint with a five-year deal that includes our cloud solution for tax determination to create a smooth process end to end. As you can imagine, reducing latency and ensuring uptime are top of mind in their business. We're also able to earn the business of a European manufacturers of aviation products when they acquired a U.S. company that runs Vertex. As a result of this acquisition, we're able to win the parent company's EU business, driving six figures of additional revenue. Before I close, I'd like to take a moment to share my perspective on artificial intelligence and why we are excited to leverage it even further as we incorporate AI technologies into our offerings. At Vertex, we see the adoption of advancements in AI as unambiguously strategic, building on our long history of technology innovation. Over the past few years, we have seen that AI has the power and potential to augment our most valuable resource, our tax technology experts, and revolutionize how we approach indirect tax software. By combining human expertise with AI capabilities, we can optimize workflows and elevate the user experience. We've accelerated our investments in AI to realize and advance our commercial strategy. Our R&D investment is focused initially on streamlining content management, delivering actionable insights, and enhancing the customer experience using AI-powered copilots. Our products interact with many types of data. As a result, we can use AI to correlate data, identify patterns, and offer deeper insights for our customers. We can also leverage AI to automate parts of the tax content curation process while maintaining a control framework to ensure the accuracy, precision, speed, and performance our customers need for taxable transactions. In its current state, AI is a probabilistic technology, which gives an answer that is close or good enough, which is often acceptable for recommendation engines. In the enterprise market we serve, where an incorrect tax answer can lead to massive penalties, a deterministic answer is required. Our solutions combine multiple technologies to take advantage of both probabilistic and deterministic technologies. These pair with the appropriate use cases to work with our tax technologists and customers to increase productivity, improve user experience, and empower decision intelligence. By applying emerging AI technologies in thoughtful ways, we can drive enhanced productivity, usability, and value for our customers. We'll have more to share as these investments evolve. John will now take you through the financials. John? Thanks, David. Good morning, everyone. Today, I'm going to review our Q2 financial results and provide guidance for the Q3 and full year 2023. Total Q2 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 111%, up from 110% for the Q1 of 2023 and the prior year. Our gross revenue retention, or GRR, was 96% at quarter end, consistent with prior quarters and within our historical range of 94%–96%. Our average annual revenue per customer, or AARPC, continues to steadily increase and was $109,170 in the Q2, up from $104,370 in the Q1 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 Q2, 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 Q2 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 Q2 and 78.4% in the Q1 of 2023. Gross margin on services revenues was 30.5%, compared to 36% in last year's Q2. Turning to operating expenses. In the Q2, research and development expense was $11.9 million, compared to $9.8 million last year. With capitalized software spend included, R&D spend was $24.9 million for the Q2, which represents 17.8% of revenue, as compared to 16.6% of revenue in the prior year period. Our selling and marketing expense was $31.8 million, or 22.7% of total revenues, an increase of $3.2 million and approximately 11.3% from the prior year period. The year-over-year increase was a result of the expansion of our go-to-market and customer success organizations in the second half of 2022. Selling and marketing expense growth has since moderated as we reached the end of our heavy investment period. Our general and administrative expense was $33.3 million, or 23.8% of total revenues, an increase of $5 million from the prior year period. The increase is due to the infrastructure investments we are making to support our long-term growth. G&A expense was also up $4 million sequentially. Our ERP modernization went live in the Q2 and was the major driver of the sequential increase. As this investment is now mostly complete, we expect G&A expense growth to moderate going forward. adjusted EBITDA was $22 million in the Q2 of 2023, an increase of $4.2 million year-over-year, in line with the upper end of our quarterly guidance. Both operating and free cash flow were negative in the Q2, this was largely due to the ERP modernization project, which caused a slight delay in the timing of billing and collection activity of certain customer accounts. This billing delay has been corrected, I'm very confident that the cash collections will normalize in the coming months. We continue to expect free cash flow to be positive for the full year. Demonstrating this, we have already seen significantly higher than usual cash collections in July. We ended the Q2 with over $41.9 million in unrestricted cash and equivalents, total bank debt was $48 million. Our investment securities totaled $11.2 million. For additional liquidity, we also have $200 million of unused availability under our line of credit. Turning now to guidance. In the Q3 of 2023, we expect total revenue in the range of $141 million–$143 million, which would represent 13% year-over-year growth at the midpoint, and adjusted EBITDA in the range of $24 million–$26 million, which would represent year-over-year increase of approximately $7.2 million at the midpoint. The strong first half financial results set Vertex up well to outperform our initial expectations for full year of 2023. Accordingly, we are increasing our full year guidance as follows: We now expect total revenues for the year in the range of $556 million–$562 million, which represents 14% full year growth at the midpoint, up from 12.5% growth at the midpoint in our prior guidance. We are also increasing our full year adjusted EBITDA outlook to a range of $93 million–$97 million, up from $92 million–$96 million. Our new guidance represents a year-over-year increase of $16 million at the midpoint. We continue to expect cloud revenue growth of approximately 27% for the full year. David will now make a few closing comments before we open up for Q&A. David? 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. We will now be conducting our question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is coming from the line of Joshua Reilly with Needham and Company. Please proceed with your question. All right. Thanks for taking my questions. 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? 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 the bit stronger growth here? Thanks. Thanks, Josh. I would say overall, it has increased our, our number of leads in general. I would say, though, we continue to see with our, our, our motions with SAP and Oracle continue to be exceptionally 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. So to me, it's, it's very additive. What's been fascinating to me is the size of deals that we're getting from those newer ecosystems, we're still able to drive up our AARPC. I think that just speaks to the value of how solving for complexity is valued in the market so well. Got it. 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, of guidance. You know, I think investors are, are expecting some growing operating leverage here 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, our EBITDA margin has progressed the first two quarters, and it's projected to increase notably in Q3 and Q4. We, we continue to see operating leverage coming from the business as we move to the back half of the year. That was built into our, our year, and we've now raised that. I continue to see, you know, 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, that decision-making rubric right now, and we're seeing good opportunity to continue to pursue that. We, you know, as we've said all along, the margins will increase as the year goes on, and we're seeing that, and we expect that'll continue in the, you know, 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, on the strong results here. you know, we've, 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 deals, 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? Then I have a follow-up for, for John. Sure, Chris. I think that you have to remember, there's, there's a number of drivers that lead to our business opportunities. The first is anything that changes in the, in the company's operating business model, which may have nothing to do with their systems. It could be a change, the way they're expanding their revenue model, but 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, 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 new, you know, our capabilities. Then, then we see it in the. Then obviously, then we get it from system changes. 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, you raised the full year total revenue guidance, but kept the, the cloud revenue. Should we interpret that as, you know, you 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, you know, certainly coming out of on-prem. I think as we, 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, you know, 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, 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, thanks for taking the questions. You know, 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. Would just be curious if you saw that momentum accelerate this quarter as part of the strength in the quarter. Yeah. 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's got, you know, 30,000 or 40,000 customers. We only have 1,800 or so of those. As they continue to, to march through 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 definitely am confident that we continue to see good activity in the space and opportunities for continued growth. Got it. No, that's really helpful. Then would just be curious what kind of demand you're seeing for some of your earlier product cycle stories, like Chain Flow Accelerator and Edge, you know, how, how those are evolving versus expectations? Yeah, Edge has been a real differentiator. Both of those are real differentiators, so I'll focus first on Edge. You know, 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. We are, we are still in the very early days of, 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 and different spaces than even the team dreamed of, as customers get creative in taking advantage of that technology, which, which to me is very exciting. Chain Flow, being the only certified, SAP offering in the market, you know, certified by SAP offering from many of our you know, relative to our competitors, really gives us a 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 opened up some, some interesting doors for us. Both offerings are, 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. I think we're following a traditional pattern where we're seeing that, that start uptick, and I, I think that's gonna be, you know, a tailwind as we go into our install 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 know, a lot of big wins that you mentioned in your prepared remarks. Were those competitive takeaways? Maybe just overall, how are you seeing the competitive environment at the moment? Thank you. Yeah, there, 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, you know, just the number of installs of Oracle and SAP create enormously fertile ground for us, to continue to expand penetration in, in our, 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, and, and, and competitors resorting to price as the only way to try to compete against us being materially lower than us already. 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 overseas. Great, thanks. John, 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 gonna get some catch up as some of those billing issues gets done? Maybe you can just give us a little bit color, more color about the trajectory of cash generation for the remainder of the year. Thank you. Yep, Dan, thanks so much for the question. Yeah, you're, 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. We anticipate that to be the same. As I mentioned in my prepared remarks, we did see an uptick in cash or, you know, 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. I think we are seeing that get caught up, and I do anticipate us to get back on track there in very short order. That's gonna, again, add to the, add to the momentum that we're gonna see as we roll into the Q4, which is traditionally our strongest quarter. We feel pretty good about how that's gonna, gonna shape up, 'cause I, I think it's gonna follow the same historic patterns as we've seen in the past. Okay, thanks very much. Thanks. Thank you. Our next question is coming from the line of Matt Stotler with William Blair. Please proceed with your question. Hey there. Thank you for taking the questions. I think first off, let's double-click on some of the commentary you've given around SAP and, and maybe Oracle as well. Let's just double-click on how you're expanding those relationships, right? David, I think you mentioned some new sales motions with SAP. If you could dig into that a little bit more, and then extrapolate that to, you know, how you expect it opens up more of those substantial installed bases with those two partners. Yeah. SAP, we continue. Matt, thanks for the question. We continue to expand our motion in a number of ways. 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. When you then take that and we moved into 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. We continue to, you know, to surround that SAP opportunity in multiple levels. What it's also done for us, which has really been fascinating, there, there are some of the largest SIs, like in IBM, who historically we had not worked with. We're now partnering with them on a number of very large transformations that they're involved in. So I think it's also moved us into an even broader circle of SI partners that are referring in opportunities or we're partnering with to bring customer value and customer success. So I'm really pleased with the way the team is, is continuing to capitalize on this opportunity. As we move down, you, 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, their cloud and their app teams, and so we're working on both sides to access customer opportunities and bring that, you know, bring, bring a joint value prop to the customer. 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. Then as a follow-up on NRR, you know, nice to see that tick up again to, you know, 111%, I think a new high, right? Would love to just walk through what the drivers are there and where you think that metric can go from here. Yeah, I'll, I'll start with the overall, and then John can hit the specifics. You know, I think we continue to focus on our customer success and, and function, and I think that's really where we're seeing the uptick of growth in terms of we continue to build new products. We have a very clear strategy. We build new products. We have the best customers in the world. We need to be able to bring those products to, to the customer base, successfully educate them on what we have, and be there when there's opportunities to add value. We're seeing a good motion that continues to evolve as the maturity of that, 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 global commerce. They're continuing to drive their businesses forward, and that usage on our, you know, expanding usage on existing products continues to be, you know, the backbone of our growth. As for the specifics of the breakout, I'll let John highlight that. Yeah, I, I think it really starts, you know, with the stability that you've seen in the GRR that we've had out there, posting 96% kind of, you know, 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 our, what our customer needs are. And then, you know, as we think about sort of the growth drivers that kind of take you from there up to your NRR, NRR, you know, again, there, there are 3 components that really make it up. It's really, you know, it's the cross-sell and migration activity that's taking place with those existing customers as they expand into different, you know, different products that we serve, as well as additional entitlements David touched upon. Finally, the last piece is price increases. Again, we're seeing growth in each of we saw growth in each of those areas over the last quarter, we feel pretty good about that opportunity that's there. Again, you're right, Matt, this is our first, you know, kind of high you know, our first 111 that we've seen. We feel very proud of that. Again, it's due to a lot of the hard work on the front end, again, followed by good product that's coming through and nice, you know, nice adoption of that product 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 questions. Just on, first, on the guidance for the full year, I mean, based on the Q3 that you're laying out, it, it sounds like you're, you're guiding for an implied growth of 11% in, 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 that quarter, is there any way that this is really just conservatism on your part, for, for that number? Then I have a follow-up. Thanks. Yeah, Andrew, thanks for the question. Yeah, again, I think as we saw, we had posted some very good results for the first half. 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, you know, the stuff deeper into the year. We just wanna make sure that we have confidence in the level that's there. We try to be thoughtful as we set that guidance and look at, you know, look at what that could be. We did bring up some of that guidance in the back, and again, on an overall basis, we're increasing the, you know, increasing the amount of revenue growth from our initial guidance that we set. We, we just always wanna be very thoughtful about what the back half looks like. Then on the, on the cash flow side, I know the ERP modernization is gonna improve cash collection, billings, growth probably will come in much higher than Q2, but I'm just wondering, what other benefit besides G&A would, should we see in the model? I mean, is CapEx intensity going to decline or slow? Anything else that you could highlight? Yeah, I think, I think that's a good call-out, Andrew. There's a couple of pieces when we think about the ERP modernization. The actual cost of the ERP modernization is certainly built into the free cash flow, so that going away, that ending or coming towards an end, is really gonna allow us to then see a little bit more of the flow-through come to the bottom line. Then again, with the, you know, kind of the, getting on, you know, getting the cadence that we've developed over years and years with our older system, is gonna 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. We feel very good about the opportunity to leverage that system to give us better through, better throughput from the beginning of the funnel, which starts at sales, and goes right through the back end, which is the billing and collection on the backside. It's gonna 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. David, I wanted to start with the 8-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 the catalyst was for them to kind of switch what they had been doing previously? Thanks. Yeah. They were, they were an existing customer of ours that we were expanding our, our relationship with. They have, you know, through acquisitions and other, 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, the, 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. As they, as they look to make changes in a 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 had two big catalysts here. One was, our edge computing solution. I think, again, as they were thinking through the point of need challenges they were facing, they were struggling with some of the, the quality and accuracy they were getting from the, from the, the in-house capabilities they had. So switching over to, to the, our edge solution really gave them the, the confidence that they needed. Then the second was, we continued to invest in our, in our telecommunication content. We, we covered, I think we reached a point with them that we were at the point we could give them the sufficiency of coverage that really excited them to handle this new part of their business. Those are the two big drivers of why we continue to invest in content and continue to bring new capabilities to market. It just opens up more opportunities with existing customers, and it fit really well in this situation. Okay. That's great color. Thank you. 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 reps, and if you've seen any increase in terms of the, the number of reps that are attaining quota versus prior quarters? Thanks. Yeah. Again, as, as you mentioned, we did make some pretty good investments in the selling and, selling and marketing areas to drive opportunity, both domestically as well as in Europe. I think, you know, we are starting to see some of that benefit play out. Again, some of the investments in, in the U.S. were focused on some of the channels, as David has mentioned, where we target certain of those, you know, certain of those bigger named, bigger named ERP systems and other systems, to, to ensure that we're really canvassing the market to get those opportunities. You know, from an overall productivity standpoint, I really don't have anything to report out in terms of kind of what that, 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, you know, we feel like we're starting to see the opportunities, as David had mentioned earlier, around some of those, some of those second tier, or next level down tier, 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 thanks for taking the questions this morning. I, I guess I just wanna ask first on on the strong ARR side, I mean, pretty impressive growth there. How are you feeling about, you know, the broader demand environment and pipeline for the rest of the year? You know, I guess were any, you know, larger deals kind of pulled in or anything that maybe surprised you to the upside in the quarter as well? I don't think anything surprised us to the quarter. I think 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, you know, 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. You know, because we enjoy very diverse drivers of opportunity, and we've been successful in expanding some of those relationships we've been talking about, Microsoft or SAP, et cetera, I think, you know, those are, those are really good balances to some of the uncertainties that, that, the economy still continues to present for some. I think that's why we feel as confident as we do with our numbers. Okay, great. That's a helpful, helpful context there. John, maybe I'll ask the question a little more directly, just on the impact on the quarter from, on, on the billings in, in cash flow. I guess, is there any way to, like, think about, you know, magnitude or, you know, the actual, or what the actual impact was, in Q2, and maybe how we, how we should be thinking about that flowing through into 3Q now? Yeah, again, what I, what I would tell you is, again, as I saw the results come through, our cash collections were a bit soft in the month of June. Again, I've seen that then start to show back up in July. I still think we've got a little room to go, room to go from a cash collection standpoint. I don't really have a magnitude number to kind of pass, to pass around. I do feel like, again, as I mentioned in my prepared remarks, you know, the, 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 up for some of that billing that was delayed, and we'll start to see that show up. Again, a big piece of some of the drivers as we move forward through the back half from a free cash flow standpoint, is really gonna be around, you know, the lack of spend with the, you know, pro, the, you know, implementation fees and everything else that is now, largely part of our operating system. I don't have a full magnitude number for you, but again, I think you can see on a, you know, six-month to six-month basis, we're about $10 million behind from where we were about a year ago. I anticipate to see certainly, hopefully bridging that and making, making up some pretty good progress on that through the back half of the year. Okay, perfect. Thanks for taking the question. Sure. You bet. Thank you. Our next question is coming from the line of Patrick Walravens with JMP Securities. Please proceed with your question. Oh, great. Thank you, and congratulations. It's great to see. Last quarter, I, 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, than we had seen. Certainly, Q1 was, was, was a little bit of an anomaly for our business. We definitely saw more, more alignment there across the, the quarter. We typically, as a business, do a little better the last month of every quarter. That's, it's not hugely different, but it is always a little bit better at the end of, at the end of the quarter. I think that this quarter was no different, but there was no anomalies like it was in Q1. Great. 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, what have been the things you've been trying to get the answer to before you, before you, before you determine your strategy? Yeah, well, we are very active in this area. I appreciate the question, Pat. We have, we've been looking at it both, you know, internal productivity and external customer experience. I think AI becomes a critical part of our customer experience going forward. What we're really looking for on the, on the commercial side is how it can enhance the value we deliver to existing customers and potentially open up new markets for us. I think the team's doing some very interesting things there that are, that are creating some, some interesting opportunities for us as we start to internally, really productivity. Obviously, the large amount of data that we, we touch and curate, how we do that, can we be more productive there? How we can leverage our tax technologists to do the best and most high-value work to add, you know, add to, to the customer experience and leverage the, the, 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 iteration of technology to drive productivity, which ultimately give us more leverage in, in our bottom line. Those are the really two... I think it's important to note that the, you know, I, I made the comment about probabilistic and deterministic. It's so important. You know, one of the things our brand is built on is the quality of our content, and, you know, you can't be approximately right. You've got to be... Our customers count on us for the accuracy that we deliver. I think that's something I'm very vigilant in, in making sure we're not doing anything to rush something in that would undermine the brand and trust that we've, we've earned over 45 years. Great. Thank you. Mm-hmm. Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question at this time, please press star one on your telephone keypad. 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? ... Yeah, thanks for the question, Brad. You know, cost, cost of services was up. What we do-- 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 of the additional hiring to ensure we've got the labor in there to, to manage some of those costs that are going forward. There has been some additional headcount that we've added there to get ourselves ready for what we think is coming. Again, early days, there is some, there's a bit of, you know, slowness in terms of getting up to full productivity and utilization that we would expect there. I think that was at play a little bit in that are- in that area and, and developing that. 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, hopefully, we expect to see that rebound. Great. Then, David, as we think about the, 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 gets to drop to the bottom line versus what gets reinvested in the business? Maybe asking it slightly differently, do you think there's a step function up in margins, you know, in the near term, or is it sort of moderate increase in the margin profile over the next couple of years? Thanks. Yeah, it's a good question, Brad. I think, you know, in, in the back half of this year, we're already moving margins from, EBITDA margins from 15%– 17.5%, and then up to 19% in Q4. We are already planning for an increase in, in leverage there. I would expect that'll, you know, we'll, we'll continue to see nice, solid performance across our, our EBITDA margin as we move into 2024. All the investments we're making on the front end of our, of our sales and our customer success and our content, you know, has put us in a position now to have more drop to the bottom line. I think when we thoughtfully think about it, is if we're seeing acceleration in opportunities, we're not gonna let those go. I, I would always invest in sales and marketing and R&D if it's, if it's something that's opportunistic. Again, we're outperforming in revenue because we're seeing more opportunities than we thought. I'm not gonna let-- I'm not gonna miss those just to throw it to the bottom line. Otherwise, there'll be a natural progression that's gonna happen from this business. We're already building into, you know, considerable margin improvement in the back half, in our forecast, and I would expect that'll 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. 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.