Good morning, and welcome to the Vertex Inc. second quarter 2024 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference to Joe Crivelli. Please go ahead. Hello, and thanks for joining us to discuss Vertex's second quarter financial results. I'm Joe Crivelli, Vice President, Investor Relations. David DeStefano, our President and CEO, and John Schwab, our CFO, are also with us today. During this call, we may make forward-looking statements about expected future results. 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. In our remarks today, we will also refer to non-GAAP financial metrics. A reconciliation of these metrics to GAAP is provided in today's press release. The call is being recorded and will be available for replay on our investor relations website. I'll now turn the call over to David. Welcome, everyone, and thank you for joining us. In the second quarter, we delivered on several important strategic and financial priorities. The financial results once again had numerous highlights, but I want to cover the strategic developments that we have announced recently as they position us for sustaining the profit-driven growth that has been the hallmark of our company for more than 45 years. Earlier today, we announced the acquisition of ecosio, a fast-growing Austrian company specializing in e-invoicing and EDI, for $69 million in cash, along with a multiyear revenue-based earn-out. The non-uniform proliferation of e-invoicing mandates, with several large economies soon to adopt new requirements, is making global reporting compliance more challenging for our enterprise customers. With this acquisition, we unlock additional value for our customers while opening new market opportunities for Vertex. This acquisition will enable us to address the burgeoning opportunity of e-invoicing head-on. We were attracted to ecosio for a number of reasons. First, its scalable, fully cloud-based platform. Second, its ability to handle e-invoicing across many countries that have mandates today. Third, its ability to quickly expand coverage as new mandates are introduced. And fourth, the ease with which we can integrate the ecosio offering with the Vertex platform of VAT compliance and O Series tax determination. In fact, we have been working on integrating their technology on our platform since February as a potential partner, so we intend to launch our combined offerings shortly. By bringing together Vertex and ecosio, we can deliver a comprehensive global solution with reliable end-to-end indirect tax reporting, along with continuous transaction control, or CTC capabilities, to mitigate the risk of non-compliance. This, in turn, will streamline the entire compliance life cycle from tax determination through reporting. So I'm pleased to welcome the entire ecosio team to the Vertex family and look forward to bringing the two organizations together in the third quarter. Also, in late June, we announced the acquisition of tax-specific artificial intelligence capabilities. This technology will apply AI to simplify and expedite the manual and time-consuming processes of tax categorization. This involves matching a customer's SKUs with applicable tax rates wherever it does business globally. Tax categorization is required not only when implementing a new Vertex solution, but is also essential ongoing tasks as SKUs, rates, and jurisdictional rules are constantly changing. Getting this right is critical for achieving tax accuracy, especially for high-volume businesses that must manage indirect tax compliance globally at scale. Consistent with the hallmark of our 45 years of success, numerous customers have signed up to be design partners to ensure we deliver with excellence. Additionally, beyond product categorization, we will be deploying the acquired AI capabilities to support furthering our industry-leading tax content database and have application with our data management capabilities. We are excited about the commercial and financial potential of this technology and this acquisition. Now, turning to the financials. When we talk with investors about our financial goals, we typically mention long-term Rule of 40 targets, including mid- to high-teens revenue growth, mid-twenties Adjusted EBITDA margins, and a 65%-70% Free Cash Flow to Adjusted EBITDA conversion rate. For the second quarter results, we are making good progress towards these goals. Revenue was $161.1 million in the second quarter, up 15.3% year-over-year. Software subscription growth was 15.8%, and cloud revenue growth was higher than our full year guidance at nearly 30%. Adjusted EBITDA was $38.5 million, and adjusted EBITDA margin was 23.9%. Notably, since completing our multiyear investment program 1 year ago, we've grown adjusted EBITDA in the mid to high double digits for 4 quarters in a row and seen our adjusted EBITDA margin expand by over 800 basis points. Accelerating our cash flow conversion following our 3-year investment cycle was an essential financial priority of our organization as it demonstrates earnings quality and the power of our financial model. I'm very pleased that the second quarter free cash flow was a record $36.9 million, up from $4 million in Q1. While the increase in free cash flow is in part due to the AR collections catch-up that we have discussed previously, the performance still far exceeded our internal expectations. In addition, this quarter, NRR was 110%, down 1 point from 111% in last year's second quarter. Scaled customer count, which represents customers delivering annual revenue of over $100,000, grew 14% year-over-year, and GRR was 95% in the second quarter, which achieves our targeted best-in-class range of 94%-96%. Two of our customer metrics were impacted by the completion of our Systax acquisition in the second quarter. John will provide more color in a moment. Including Systax, ARR was $548.4 million, up 17.3%, and average annual revenue per customer was 123,560, up 13% year-over-year. While the overall revenue growth rate and customer metrics were strong and in line with our expectations, they were a bit lower than the last two quarters. This is in part due to the planned strategic slowdown in implementation services and the publicly reported slower-than-expected migration acceleration of SAP ECC customers to S/4HANA. Beyond that, we did see somewhat lower cross-sell and upsell activity in the first half of the year. On the flip side, a more positive trend was the second quarter was our second best of the last two years for new logo revenue, and June was the best month of the year for cross-sell and upsell. Given our visibility into second-half opportunities, we remain confident in our outlook and have narrowed our full-year revenue guidance to the upper part of the range. We have also substantially increased our Adjusted EBITDA guidance. John will discuss this in a moment. Finally, I'll note that in the second quarter, we were GAAP earnings positive for the third quarter in a row, and while this may change temporarily in the back half due to integration expenses related to ecosio, we believe the ability to deliver positive GAAP earnings and positive free cash flow makes Vertex an uncommon SaaS company. Now, turning to notable wins in the quarter. One of the biggest wins in the second quarter was with an existing customer in the food delivery industry. This customer renewed its contract with Vertex in May. In addition to a significant increase in entitlements, the customer also upgraded its mobile transaction processing systems to Vertex O Series Edge. The result was more than $1 million of new revenue for Vertex. Also in the second quarter, organic growth for a global specialty food and beverage retailer led to additional tax determination entitlements. As transaction volumes rise with increased adoption of their mobile app, we are expanding our partnership to meet their growing requirements. We've seen increased investment over the life of the partnership, with revenue from this top 10 customer now in the mid-seven figures. An SAP-driven ECC to S/4HANA Cloud transformation resulted in a mid-six-figure competitive upsell for a transportation equipment manufacturer. As part of their move to the cloud, this customer took the opportunity to address increased demand and complexity with their leasing services. Our differentiated industry-specific tax content turned this opportunity in our favor. In total, this ended up being a four-fold increase in ARR for this long-standing customer. As part of their analysis, the customer did solicit competitive bids, and our competition tried very hard to buy the business with significantly discounted pricing. However, Vertex prevailed as we were able to leverage our long-term relationship with the customer and track record of top-notch customer support, as well as our close relationship with SAP. A cloud transformation resulted in a $ mid six-figure win from a national clothing retailer. This long-standing customer had relied on Vertex to support their business in North America, EMEA, and Asia-Pac. The burden of maintaining a tax engine within their infrastructure was great enough to initiate their move to the cloud with Vertex in advance of a larger ERP migration. This 24-year customer did not seek competitive bids during the process, which is evident of their confidence in Vertex and our solutions. Investors are sometimes surprised at the number of major companies that still calculate indirect tax with homegrown solutions. As an example, we had a win in the second quarter with a subsidiary of one of the largest financial services companies in the world that wanted to sunset their internally developed VAT calculation solution. This mid-six-figure deal was catalyzed by the company's continued M&A activity and their inability of the legacy code to seamlessly integrate with a new ERP system. Another along these lines, Vertex won a low-six-figure new customer when a multi-billion-dollar data analytics company reevaluated its approach to indirect tax in conjunction with the consolidation of multiple ERPs to a single instance of Oracle. Due to the nature of their business, they needed a flexible solution that could manage a high volume of transactions when subscription billing activities peaks at month-end. Interestingly, the incumbent solution was a combination of two competitors' data overlaid by the company's own manual processes. On the new logo front, we had a number of competitive displacements. An international professional services provider selected Vertex over an incumbent competitor to support its SAP S/4HANA Cloud transformation journey. This led to high six figures of new revenue for Vertex. Likewise, a national facilities management provider selected Vertex to support its implementation of Workday Financials. Organic growth changed their tax scenarios, requiring greater agility to support business expansion.... Their existing solution was not able to scale and meet their complex needs. Additionally, they were extremely unhappy with the level of customer service from an incumbent competitor who had been largely unresponsive. The result was a new scaled customer for Vertex. On the international front, we had a six-figure new logo win with a Brazilian fashion company that was implementing Oracle Cloud. We were referred into the deal through our partnership with Shopify. The customer was using one of our competitors previously, but they had outgrown their capabilities, which were focused on the small business segment of the market, and were looking for a partner that could support their aggressive worldwide growth plans. Finally, we just went live with a major Japanese conglomerate that selected Vertex to support a 58-country global tax automation project spanning North and South America, EMEA, and APAC. This 18-month implementation project was one of the most complex ever completed by Vertex, and one that we believe our technology is singularly qualified to handle in the indirect tax automation industry. John will now take you through the financials. John? Thanks, David, and good morning, everyone. I'll now review our second quarter financial results and provide guidance for the third quarter and full year of 2024. In the second quarter, revenue was $161.1 million, up 15.3% compared to last year's second quarter. Subscription revenue increased 15.8% period over period to $136.4 million. Services revenue grew at 12.8% to $24.7 million. As we have mentioned previously, we are intentionally slowing services revenue growth this year by steering implementation revenue to our channel partners, who are an important referral source for our new software opportunities. As a result, we expect services revenue growth to continue to decelerate in the third and the fourth quarter. Cloud revenue was $66.3 million in the second quarter, up 29.6% from last year's second quarter, and ahead of our guidance for the year. Net revenue retention, or NRR, was 110%, down one percentage point compared to last year. Gross revenue retention, or GRR, remained at 95% at quarter end, within our targeted range of 94%-96%. As David mentioned, for the first time this quarter, we are including Systax, our Brazilian subsidiary, in our annual recurring revenue and average annual revenue per customer. This is because we acquired the remaining ownership of the company during the second quarter. Note, however, that the Systax financials have been consolidated with ours since 2020. Accordingly, including Systax, ARR was $548.4 million, up 17.3% compared to last year's second quarter, and AARPC was $123,560, up 13%. Excluding Systax, ARR was $542.3 million, up 16%, and AARPC was $126,400, up 15.8%. There was no GRR or NRR impact from the inclusion of Systax. For the remainder of the income statement discussion, I will be referring to non-GAAP metrics. These non-GAAP metrics are reconciled to GAAP results in this morning's earnings press release. Gross profit for the second quarter was $118.8 million, and gross margin was 73.7%. This compares with gross profit of $99.1 million and 70.9% gross margin in the same period last year. Gross margin on our subscription software revenue was 80.4%, compared to 78.4% in last year's second quarter, and 78.6% in the first quarter of 2024. Our gross margin on services revenue was 36.8%, compared to 30.5% in last year's second quarter, and 40.5% in the first quarter of 2024. Turning to operating expenses, in the second quarter, research and development expense was $12.7 million, compared to $11.9 million last year. With capitalized software included, R&D spend was $34.7 million for the second quarter, which represents 21.6% of revenue, as compared to 17.8% of revenue in the prior year period. Selling and marketing expense was $37 million, or 23% of total revenues, an increase of $5.2 million, and approximately 16.5% from the prior year period. General and administrative expense was $30.6 million, down $2.6 million from last year. Adjusted EBITDA was $38.5 million, an increase of $16.5 million, or 75.2% year-over-year, and exceeding the high end of our quarterly guidance by $5.5 million. Our earnings quality is demonstrated by our very strong cash flow in the second quarter. Operating cash flow was a record $57.7 million, and free cash flow was a record $36.9 million. This was in part impacted by improved accounts receivable collections that had been necessary since we converted the ERP system last year. We estimate that this had a positive impact on free cash flow of approximately $10 million-$12 million. We believe that there will be additional gains to be had here, so we are optimistic that we can continue to deliver strong, positive free cash flow on an ongoing basis. We ended the second quarter with $325.5 million of unrestricted cash and cash equivalents, and no bank debt, and our investment securities totaled $8.7 million. For additional liquidity, we also have $200 million of unused availability under our line of credit. As noted in the ecosio press release this morning, we will use approximately $69 million of cash when we close the deal, which is expected to be later this quarter. We expect ecosio to contribute approximately $15 million of revenue in the first full year after closing, and to be modestly dilutive to Adjusted EBITDA for the first two years after closing, as we continue to invest in the business before turning Adjusted EBITDA accretive in the third year. Now turning to guidance for the third quarter of 2024. We expect total revenue in the range of $164 million-$167 million, which would represent 14.1% year-over-year growth at the midpoint. We do not break out revenue guidance between software and services, but I do want to provide some added color here and note that the planned slowdown in services will impact our overall revenue growth rate more noticeably in the third quarter. We do expect software revenue growth to remain in the high teens in the third quarter, fueled by strong cloud growth. Despite accelerating second-half investments, including AI-related R&D, we expect adjusted EBITDA in the range of $33 million-$35 million, which would represent an increase of $7 million at the midpoint. For the full year, we are adjusting guidance as follows: We are narrowing the full-year revenue guidance at the upper part of the range and now expect total revenue of $654 million-$660 million, representing annual revenue growth of 14.8% at the midpoint. Prior guidance was $650 million-$660 million. We now expect Adjusted EBITDA in the range of $139 million-$145 million, representing a year-over-year increase of over $40 million at the midpoint. This is also a significant increase from the prior guidance of $130 million-$135 million. We continue to expect full-year cloud revenue growth of 28%. Note that this guidance does not include any impact from ecosio. We will adjust guidance accordingly after the transaction closes. David will now make some closing comments before we open up for Q&A. David? Thanks, John. In summary, it was an eventful first half of 2024. With the strategic transactions we have announced, we have set the stage for continued technology leadership and accelerating profitable growth in the indirect tax space. We are very excited about the potential our acquisitions bring to the table and what they will enable within the Vertex solution in the coming months and years. Our strong financial performance is possible, thanks to the winning formula we have put in place to drive success. We are extending our global capabilities and the power of our unified platform while strengthening our partner relationships and consistently delivering exceptional customer value and service. Because of this, customers continue to turn to Vertex when their business complexity grows and disrupts their ability to be as tax compliant as they need to be. Our market-leading indirect tax solutions and 900 million rule content database are mission critical for our customers looking to support business growth and manage continuous compliance globally. This was evident in the deals we won this quarter, as customers selected Vertex to effectively manage indirect taxes across multiple enterprise applications, global jurisdictions, and high transaction volumes. With that, operator, please open the call for questions. We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question will come from Brad Reback with Stifel. You may now go ahead. Great. Thanks very much. David, on your commentary around lower cross-sell and upsell in the first half of the year, how would you sort of break that out between a lower renewal cohort in the first half versus sales execution? And then I have a quick follow-up. Yeah, I'm going to let John answer the specifics on that, just to make it simple. Yeah, Brad. Sure. You know, as we think about sort of the change there, again, what I would say is we talked a little bit about softness from the cross-sell and upsell. And we did see a little bit of a pullback. I think if you recall, we did have a very strong Q4, and we got a lot of benefit there. While those numbers are still there, you know, some of that, some of that backlog and some of that activity really got spent, and it's not uncommon for us to see a little bit of a slower start to that cross-sell/upsell activity as the years get going. And so we feel like we're on target there. And I think, you know, from an additional entitlement standpoint, there was also a piece there that was a little bit softer in the second quarter. So that's sort of how you see that kind of a little bit of a pullback that you saw in the NRR ratio. Okay, that's great. And then on NRR, I know it was down 1% year-over-year, but it was actually down two percentage points sequentially, which is a bit of a larger move, given the backward-looking nature of that metric. Was it the same issues impacting that that impacted, you know, the lower cross-sell, upsell, or were there other items there? Thanks. They were the big drivers, Brad. It's a great question. They were the two big drivers. Again, cross-sell, upsell really was the one that was softer. Again, driven by the fact that, of that real strong Q4. Again, the budgets were a bit depleted, so not uncommon to for us to see that. And again, I think that kind of carried its way through. So, we weren't surprised. We weren't really surprised by it. And again, the guidance we gave for the full year, we have confidence in how we're gonna pull, how we're gonna work through the back end of the year. Great. Thanks very much. Thank you. Our next question will come from Joshua Reilly with Needham. You may now go ahead. All right, great. Thanks for taking my questions here. Congrats on the ecosio acquisition. I guess a couple of details on the deal here. First, I believe they operate in about 30 countries. What is the right number?... in terms of where most business and your customers are operating today? And then second, is there any type of provision in the, deal agreement that would allow another bidder to come in with a separate offer? And then I have a follow-up. Yeah, Josh, I appreciate the two questions. And just to satisfy the latter one, because obviously we had an experience here in Q1 of this year. No, this is purely regulatory, perfunctory regulatory. There's no open bidding process, no window, that we can – that can change the outcome. It's just the regulators going through their normal approvals on any transaction. As far as the opportunity here, you know, I think, ecosio really gives us the ability to expand our business in a number of ways, and the technology they have is really the leading reason why we were so excited about the opportunity moving forward. And I see great potential in us bringing that into the market here. We've been working with them for months, so we'll be ready to hit the market here in Q3, with the, you know, with the offering. Got it. And then, you know, just following up on that, it also appears they have an EDI solution, which would be a new market for you guys. There's obviously a lot of legacy and modern cloud players in that, kind of product set. Is that something that you would envision further investment and entering that market kind of aggressively as well as, e-invoicing? Thanks, guys. You know, the focus with the 30 countries they cover is really, Josh, around how do we expand that first and foremost and for the CTC? There was good overlap in terms of what our priority countries were with the portfolio they already cover, and we're really gonna focus there. They have some great EDI customers, and I think as we go through the journey together, we'll explore that further. But they, you know, both sides are exceptionally clear, the focus and the opportunity is really in the CTC space. They give us a platform with what they built in EDI that scales at the volume that we believe is gonna be the invoicing volume we're gonna see, as we move forward here. With the bigger economies that are now starting to move into it, like your France's and your Germany's, this well positions us to be, to, you know, be supportive of our customers' needs in those jurisdictions. Great. Thank you, guys. Our next question will come from Rob Oliver with Baird. You may now go ahead. With your comments, and John, your comments about the first half being slightly weaker on the cross-sell and upsell. On the other hand, David, in your prepared remarks, you said that June was the best cross-sell month of the year. So just wanted to get some incremental color there from you on, you know, is that a change in the market dynamics in terms of people stepping up and a willingness to buy? Is it something you guys are doing internally? And how does that pipeline look here, looking out through into Q3? And then I had a quick follow-up. Yeah, Rob. No, No, Rob, really appreciate the question, and I think you're hitting on the right point. We did a lot of cross-sells in Q4, so we took a lot of budget down, if you would. And our the enterprise customers typically operate on, you know, back half of the year tends to be the stronger half of the year. We see, and June certainly, I think, is an indication of success we expect to see and the pipeline visibility we enjoy in our business. And the reason we raised our guidance to the back half of the year was because we have good visibility to what's coming, and it makes us optimistic about what our, you know, what our team can do in the execution that we expect. So I do view it much more as a timing issue than anything else. I'm not seeing any fundamental competitive dynamic changes at all. Certainly our brand and, and the support we get from our partners, around new, cross-sell opportunities has not changed at all. So I, I'd really be just... I'm, I'm very comfortable saying it's a timing, you know, it's, it's a timing issue. Great, helpful. Then just a quick follow-up relative to the current Pagero partnership. To the extent that you guys can or are willing to comment, would like to hear how should we think about the potential either you know transition there, or unwind, or what the right way, Yeah To think about that is in timing? Thank you. Yeah. Yeah, Rob, spot on, and I should address it head-on. Yeah, we'll, we'll be looking to unwind that, moving forward here. Obviously, it served us, for a period of time, and we enjoyed our, our relationship with them, while we were partners. But now moving forward here, with the wonderful technology we acquired, and actually, the, the scalability of it was, was super impressive to us relative to what we'd seen with other, our other partners. So this is actually a, a good move for us and a, and, it'll be a more efficient move for our customers going forward. Great. Much appreciated. Thanks, guys. Yeah, thank you, Rob. Our next question will come from Chris Quintero with Morgan Stanley. You may now go ahead. Just want to follow up on that ecosio acquisition. Is there any color you can provide on their growth rate? I know you mentioned high growth, and then the $15 million in revenue contribution that you expect over the next twelve months. Are those inclusive of synergies or just standalone ecosio? Yeah, the fifteen million is, you know, we believe that's the standalone ecosio. There'll be a modest amount of synergy that's in there, but that's we'll be getting up and going. But we want to kind of give people a feel for the size and magnitude of ecosio on a standalone basis as they evaluate sort of what we paid versus the size of the acquisition. So that's what we wanted to give from that standpoint. I mean, the growth rate's been impressive. Oh, sorry. We don't give specifics out on their growth rate. We want to go, you know, onto the process of actually auditing. They were a private company, but it was an impressive growth rate that actually attracted us to the business. For sure And their technology. Yeah, for sure. Got it. That's helpful. And then I wanted to take a step back and ask about AI at a higher level. You know, we've seen companies adopt AI to create, you know, internal software tools across multiple different use cases, and there was a recent article that Amazon is using AI to build some of its own internal tax compliance tools. So it'd be great to hear your thoughts on how you think that kind of landscape will shake out, and what are the opportunities and risks for? Yeah, Chris, you know, as we've often said, our number one competitor is the in-house capabilities of the customers we work with. That's often what we're replacing. And so it's not surprising to me that a leading-edge company like Amazon is exploring how they can apply AI. I think in that scenario, they're using it primarily for just invoice validation, which is more of a finance accounting versus a tax compliance solution. But that is part of the reason we made the exciting acquisition we did in June, because it affords us to productize something that when a customer creates a tool, oftentimes the challenge they have is how do they maintain it? It all feels good when they launch it, and then over time, it's like it becomes this unwieldy thing that can't keep up as the business continues to morph and grow. And so one of the things we've been so successful on is taking tools like that and turning them into scalable products that support our customers, not only in the short term, but also are built to design around the changes that are gonna happen with the legislative and business models that they're dealing with. And so I'm very, very well positioned with what we're doing, and the fact that so many customers are interested in being design partners on what we've recently acquired tells me we're on the right track. Excellent. Congrats, guys. Yeah. Thank you, Chris. Our next question will come from Steven Enders with Citi. You may now go ahead. Okay, great. Thanks for taking the questions here. I guess to start, I wanna dig into the comment about, you know, what you're seeing from the SAP ecosystem and maybe some slower than expected upgrade cycles going on there. I guess it'd be just great to kinda get your view on maybe what's changed versus your expectations, and maybe how you kind of see that cycle playing out here over the next few years. Yeah, sure, Steve. The, you know, as we've said in the past, I think from the time we went public, we typically follow two to four quarters behind a big ERP transformation in terms of their success impacts our success, and it typically takes two to four quarters to see that. They announced in June of last year, this end of life, with approximately 10,000 customers. We've seen a little bit of a... You know, we knew the big boys would go first, meaning the largest companies in the world would go first, and there are bigger implementations that take more time to unfold. I think the small companies are, you know, the Gartner data and other SAP data that we're seeing suggests the mid-size companies, when I mean that, like, the, you know, the 1-10 billion size companies are taking a more prudent path, they're meaning they're going slower in their migration center. So I think we had expected a little more of an uptick sooner in the beginning of this year from some of the masses. We saw some of the big boys that we've started to be engaged with, but less so with that midsize, that would create of a volume push. I think as we start to think about our guidance in the second half of the year in the pipeline, that is starting to shift. So again, it just pushed out a couple of quarters, which is gonna have that impact. Obviously, with our revenue recognition policies, that impacts our overall year a little bit from that perspective. But really pleased overall with still the activity we're seeing. Their teams are working incredibly well with us. And with that cloud growth rate, we're still enjoying it, you know, 29.9 or 5%. Just really in a good position to continue to drive cloud through the SAP platform. Okay. That's, that's super helpful context there. I guess maybe just, again, digging into kind of the, the second half expectations, a little bit more here, I guess, both with, you know, it sounds like maybe a little bit of an improvement in upsell, cross-sell in June and some of that pipeline shifting out into the back half. Like, I guess, how comfortable are you feeling about, you know, the ramp up here into second half revenue and the expectations around that? And I guess anything else to kinda call out of, you know, the impact that that might have, or it feels like some of that's shifting over into 2025. Yeah. Right now, I mean, again, with the visibility of activity we have, the customer success team that we've built has just been world-class. It's starting to move that stuff through the pipeline. I'm really pleased with how that function that we've invested in over the last three years is really starting to bear fruit. Well-positioned across the customer base to execute on the opportunities we're seeing. So, I'm feeling very good about that, and, you know, I don't have any reason to suggest the reason we've raised our guidance, both in revenue and in margin, is because we expect really strong execution in the back half of the year. Okay, perfect. Great to hear. Thanks for taking the questions. Yeah, sure. Thanks, Steve. Our next question will come from Daniel Jester with BMO Capital Markets. You may now go ahead. Yeah, great. Good morning, everyone. Thanks for taking my questions. Maybe on ecosio, the two-year sort of investment plan, post-acquisition, are there any sort of big particular projects that you envision? You know, one of the things I noticed, and maybe this is a follow-up on sort of an earlier question, is that, you know, it seems like most of their country base is in Europe, so is there an opportunity to globalize this asset to serve Latin America and other regions? Yeah, really appreciate the question, Dan. So certainly they have global coverage, even though their primary customer base is, is based in, in Europe. Just like our customer base is, a lot of it is based in the U.S., but they have global needs. I think they've experienced the same thing, hence the reason they have, you know, 30+ countries that they're already covering, the CTC requirements for. But I think more importantly, it's the, the investment you talk about is really about how do we move that up, to some of the, the, the, the various jurisdictions that they don't cover, and Latin America would be one. The great news is, with our Systax platform, in Brazil, we're already covering Brazil for e-invoicing, and we can expand from there. So we've got a nice position to work from to expand that. Ultimately, the opportunity we believe that is best served is how do we deliver this value to our existing customers? If you think about the invoicing volume of the multinationals that we work with here based in the U.S., bringing that in, with the scale and efficiency that the ecosio platform brings, we think is a great opportunity to now bring forward into our customer base. Hence, we've been working on that partnership for months because we were planning to do that regardless. This acquisition just makes it a lot, you know, a lot more controlled for our side. Okay, that's, that's very helpful. Thank you. And then on the comment you made about the, the smaller growth of entitlements as you've gone through the, the first half of the year. I'm just wondering, you know, should we be thinking about this, you know, in 2022 and 2023, very high inflation environment, you know, maybe your customers lifted the bans about renewal to sort of a, a, you know, in that environment. Now we're going into a more moderate environment. You know, or, you know, if you look back in the past, do you see, sort of customers being more tactical with how they're thinking about entitlements? And, and if so, you know, how should we expect this sort of to play out for the remainder of this year, maybe into next? Thank you very much. Yeah, thanks for the question, Dan. You know, when we think about entitlements, we typically don't see that... You know, a lot of that really just has to do with demand and their own business demands. As they have needs in other jurisdictions, they move us, and they implement us in other areas, or their volume of their activity picks up to a point where, you know, they break through a band, and we find the renewals coming in at a higher rate. And so, you know, I don't see economy having a massive impact on that. We haven't seen that as we've gone back and looked at it over time. It'll fluctuate a couple of tenths of percentage points here and there, but generally speaking, again, the business demand drivers, the things that are driving their businesses to expand and to move and to accelerate, are things that impact the entitlement activity. So I wouldn't, you know, I don't anticipate seeing a big, you know, change as it relates to that. Again, we saw a little bit of a pullback here over the period, but I don't see this as a recurring something that continues to recur that's gonna, you know, be really impacted dramatically over time. Okay. Thank you very much. Yeah. Our next question will come from Adam Hotchkiss with Goldman Sachs. You may now go ahead. Great. Thanks so much for taking the questions. I guess, just to start, I think you mentioned that this was the second best new logo quarter for the business. Any particular verticals or regions of strength to call out? And then when you think about the partner ecosystem, you know, where have you seen the most traction so far this year, and particularly in the quarter that's worth calling out? Yeah, sure. So I, you know, I think we continue to make nice progress. We've talked about our investment and partnering with the Microsoft community, between going live with Azure, the launch of our TCS solution earlier in the year, some of the things we're doing inside that ecosystem. Highlighted another Shopify success. We continue to appreciate their support in our partnership and enjoy some growth there. And then, you know, we continue to do some nice work in the NetSuite space. Our relationship with Oracle has been wonderful, and then as we've been able to leverage that and partner with them, is going into the NetSuite space. So those would be the ones I'd highlight. Workday continues to be a solid performer in the Workday financials as they continue to enjoy success. But I'd highlight those other two as probably being, you know, those other three, Shopify, Microsoft, and NetSuite, as probably being the call-outs for the quarter. I think that's the primary question you asked. As far as... You want to handle the rest of that? Sure. Yeah. In terms of new logos, I wouldn't say there's been any concentration in any particular, any particular industry or segment of the business. I think we had real nice participation kind of across the, across the spectrum of the, of the companies that we serve and the types of, industries we participate in. Okay. That's great. Really helpful. And then, John, just on gross margin, I think that came in really strong this quarter. Just puts and takes around that metric as we go into the back half and, and going forward, how should we, how should we think about what that looks like over the, the medium term? Yeah. You know, we did see a nice jump in margins. As I think about the rest of the year, I'm not anticipating seeing any additional growth coming out of that area. I think we did have a real good quarter. We've seen success in leveraging, you know, the scale of the business over time. Again, we were a little surprised to see that come in as strong as it did. And so, you know, I think we're somewhere in between in terms of what that looks like for the rest of the year. We expect that they'll, you know, that leverage will continue, but I don't anticipate seeing any upside from sort of where that is right now. Having a point or two increase in margin was certainly very strong, and we're pleased with it. Okay, super helpful. Thank you both. Our next question will come from Alex Sklar with Raymond James. You may now go ahead. Great. Thank you. I had start off with a two-part question on the ecosio. First, maybe for you, David, is this all you need from an e-invoicing kind of technology standpoint, or are there any benefits or kind of scales of scale benefits or technology benefits to owning another ecosio-like solution? And then the second one, just for you, John, on ecosio. Any more context into, on the earn-out targets? What kind of growth is being factored or retention targets that you're embedding in that earn-out, and, and any color on the over what time period? Thanks. Yeah. Okay, I'll take the first one relative to the technology. You know, given our customer base and all, what we've learned is, we really wanna bring forward a single technology platform that best integrates with our current core platform and makes it easier for our customers to have a great experience. So the intent will be to build out on the platform we had versus try to buy small businesses in other jurisdictions and then cobble them together in some way. We think that's a harder road to go at times. And so, we're gonna target our investment on building on the platform. That was a big part of our diligence, and having the good fortune to partner with them for so many months and work on that, gained a lot of confidence that it scales well. So, that's the approach we'll be taking there. In terms of additional color regarding the earn-out, I think we talked. It's revenue-based. It goes over a three-year per-year period. You know, I'm not at liberty to kind of talk through the mechanics of kind of what those earn-out targets are. What I would say is, as you would expect from a smaller company, they had some significant growth over the years. We expect that significant growth will continue, and we base that, you know, we base the earn-out on that, you know, on the growth trajectory of a company sort of in that size range. Oh, okay. I appreciate it. That's great color from both of you. Maybe just one more follow-up, for you, David, on the back of Adam's question. New logo contribution to ARR ticked up this quarter. You called out a few competitive displacements, and I'm just kind of curious if anything's changed in terms of how you're viewing the vendor displacement opportunity going forward. You know, obviously, those are always opportunistic. You know, it continues to be typically as a customer outgrows a competitor or the services, the service of the customer, of the competitor is not where the customer expects it, that we get that phone call. That can be triggered by a transformation they've ongoing, or their business model is just getting more complex, and our competitor can't keep up. But I wouldn't say there's any unique factor that we target in that space, that we're seeing any dynamic that's really fundamentally changed, Alex. We're fortunate to work with a partner ecosystem, you know, the DMAs, Grant Thorntons, PwCs, Deloittes of the world, and they're really supportive in that process for us. All right, great. Thank you. Our next question will come from Pat Walravens with Citizens JMP Securities. You may now go ahead. Oh. Oh, great. Thank you, and congratulations on the acquisition, you guys. One for each of you. Starting in the weeds a little bit, John, why is the allowance for doubtful accounts relatively so high? So this quarter is $17.7 million, I think, or 15% of accounts receivable. And by comparison, I was just looking back, when Avalara was acquired in 2022, it was like 5%. I would have thought it would have been the other way around because you're more enterprise. So, what, what do we need to understand there? Yeah, I can't comment on Avalara's ratios and our ratios. We have our policies we've been maintaining for long periods of time, regarding how we set our allowances and how we work through them. But, you know, our allowance methodology has been very consistent over periods of time. You know, again, because, you know, we bill annually in advance, it sometimes it- Mm-hmm. It's a bit large. It could be a bit larger than others because, again, the offset is, you know, you know, is the full amount of annual billing that goes on. However, that said, I think we've seen that allowance grow over the last year or so, and a lot of it had to do with some of the implementation of our new ERP system. Now that you've seen, you know, kind of the nice quarter we had from a cash flow perspective and an accounts receivable perspective, you know, we're gonna - I expect to see that start to tick down a little bit in terms of kind of what's, you know, the makeup of that. So a little bit had to do with that bump, but, yeah, we feel very good about the progress we made in 2024, and especially the progress in the second quarter, where we really saw that cash flow come out. So, it's in terms of kind of the collectibility on our accounts receivable, it's very, very strong. We have a blue-chip client base and have not, you know, have not experienced any significant issues with respect to collectibility there. Okay, great. And then, David, you know, putting execution to the side for a second, from a strategic point of view, what is the most important thing for you guys to get right over the next 12 months? You know, the two acquisitions we made position us well. So from a strategic perspective, I now see us moving forward with those two, and bringing new things into the market. We've got some interesting things we're doing with AI that we think we can bring forward on in data management and in supporting our customers with the user experience. And then ultimately, the platform, the cloud platform that we're building out, there's now natural adjacencies that start to open up for us as we look at both industry verticals we can exploit, as well as potential other compliance areas over time. Oh, that's interesting. Can we get a hint on what, like, an example of that, of an adjacency? Wanna continue to prove to you that we deserve the right to earn that, Pat, before we share all that. But, trust me, you know, we did what we did as the first two steps, but we're continuing to look at new opportunities. All right, great. Thank you. Again, if you have a question, please press star then one. Our next question will come from Jake Roberge with William Blair. You may now go ahead. Thanks for taking the question. Just from a go-to-market perspective, do you feel like you have the right team in place to address the invoicing opportunity in Europe? Or is there more that you need to kind of ramp up on that front now that you fully have that product in place with ecosio? Yeah, I think in Europe we've got decent coverage. There'll probably be a couple of strategic hires that we'll make in that space. And then obviously, we wanna be really thoughtful about how we go and support our US customer base with the right talent. So, definitely part of our investment over the next two quarters that we teed up in the guidance includes some thinking about, you know, how we're doing that, and we'll give you more specifics on that guidance once the acquisition is actually closed. Okay, helpful. And then I know that the, the former Pagero partnership was still very early days, but for the deals that you had already closed with that partnership, what will happen with those logos now that you're unwinding the relationship? Is that just a smooth transition over to ecosio, or is there, is there anything else to think about on that front? Yeah, the good news is, the way that our team designed the portal, the ability to swap out one provider's backend for another's is pretty straightforward. We never really put that relationship where another partner actually had the direct relationship with our customer. We always own those relationships, so it's a very smooth and easy swap out. Very helpful. Thanks for taking the questions. Yeah, sure, Jake. This concludes our question and answer session. I would like to turn the conference back over to Joe Crivelli for any closing remarks. Thank you, everybody, for joining us today. If you have any follow-up questions or if you'd like to schedule more time with the team, please email me at investors@vertexinc.com. With that, have a great rest of your day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.