EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2025

EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS

EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS

13.EMPLOYEE BENEFIT AND DEFERRED COMPENSATION PLANS

The Company maintains a 401(k) plan that covers eligible employees. The Company matches up to 6% of eligible compensation during the period in which an eligible participant contributes to the plan. Matching 401(k) contributions were $14,713, $12,641, and $11,285 for the years ended December 31, 2025, 2024, and 2023, respectively.

Stock-Based Award Plans

The 2020 Incentive Award Plan (the “2020 Plan”) provides the ability to grant cash and equity-based incentive awards to eligible employees, directors and service providers in order to attract, retain, and motivate those that make important contributions to the Company. The 2020 Plan provides for the award of stock options, RSAs, RSUs, PSUs, and other cash compensation. The ESPP provides eligible employees with rights during each six-month ESPP offering period to purchase shares of the Company’s Class A common stock at the ESPP discount through payroll deductions. Amounts withheld or received from participants are included in accrued salaries and benefits in the consolidated balance sheets until such shares are purchased. Amounts withheld from participants for the offering periods ending May 31, 2026 and 2025 aggregated $573 and $496 as of December 31, 2025 and 2024, respectively.

2020 Plan

Upon commencement of the 2020 Plan, an aggregate of 16,500 shares of the Company’s Class A common stock were available for issuance. The number of shares available for issuance are increased annually on January 1 of each calendar year beginning in 2021 and ending in and including 2030, equal to the lesser of (i) 4% of the shares of Class A common stock and Class B common stock outstanding on the final day of the immediately preceding calendar year and (ii) a smaller number of shares as determined by the Board. No more than 3,000 shares of Class A common stock may be issued under the 2020 Plan upon the exercise of incentive stock options. Shares available under the 2020 Plan may consist of authorized but unissued shares, shares purchased on the open market, or treasury shares. If an award under the 2020 Plan expires, lapses, or is terminated, exchanged for cash, surrendered, repurchased, or canceled without having been fully exercised or forfeited, any unused shares subject to the award will again be available for new grants under the 2020 Plan. Awards granted under the 2020 Plan in substitution for any options or other stock or stock-based awards granted by an entity before the entity’s merger or consolidation with or acquisition by the Company of the entity’s property or stock will not reduce the shares available for grant under the 2020 Plan but will count against the maximum number of shares that may be issued upon the exercise of incentive stock options.

As of December 31, 2025, 18,720 shares of the Company’s Class A common stock were available for issuance under the 2020 Plan. No incentive stock options that would be subject to the 3,000 Class A common stock share limit were issued or outstanding under the 2020 Plan at December 31, 2025.

Awards issued under the 2020 Plan vest based on service criteria established by the Board. The Company has elected to account for forfeitures as they occur rather than estimate forfeitures at date of grant.

Options under 2020 Plan

The following table summarizes activity for options outstanding under the 2020 Plan:


				Weighted
			Weighted	Average
			Average	Remaining	Aggregate
			Exercise	Contractual	Intrinsic
2020 Plan Option Activity	Units		Price	Life (Years)	Value
Outstanding at January 1, 2025	2,970	$	6.93	4.4	$	137,857
Exercised	(1,270)		6.41
2020 Plan options outstanding at December 31, 2025	1,700	$	7.32	4.3	$	22,526
2020 Plan options exercisable at December 31, 2025	1,700	$	7.32	4.3	$	22,526

The details of options outstanding, vested and exercisable under the 2020 Plan as of December 31, 2025 are as follows:



		Options Outstanding				Options Vested and Exercisable
				Weighted				Weighted
				Average				Average
Exercise Prices		Units		Life (Years)		Units		Life (Years)
$0.15 to $0.71		310		*		310		*
$2.50		8		0.1		8		0.1
$3.17		58		2.1		58		2.1
$3.73		481		3.8		481		3.8
$4.70		466		4.1		466		4.1
$18.47		190		5.9		190		5.9
$18.96		60		5.6		60		5.6
$19.00		43		5.7		43		5.7
$32.16		84		5.2		84		5.2
		1,700				1,700
*These options have indefinite contractual lives.

The Board intends all options granted to be exercisable at a price per share not less than the per share fair market value of the Company’s Class A common stock underlying the options on the date of grant. Compensation expense to participants under the 2020 Plan is measured based on the grant date fair value of the awards and recognized in the consolidated statements of comprehensive income (loss) over the period during which the participant is required to perform the requisite services. The vesting period is generally one to four years. No options were issued during 2025, 2024 or 2023. At December 31, 2025, the expense was fully recognized on the options.

Restricted Stock Units

The following table summarizes RSU activity for the year ended December 31, 2025:


		Weighted
		Average
		Grant Date Fair
	Units	Value Per Share
Outstanding at January 1, 2025	4,534	$	19.96
Granted	2,762		29.96
Vested	(1,712)		19.21
Forfeited	(172)		27.01
Outstanding at December 31, 2025	5,412	$	25.05

Stock-based compensation cost for RSUs is measured based on the fair value of the Company’s underlying common stock on the date of grant. Compensation cost will be recognized on a straight-line basis in the consolidated statements of comprehensive income (loss) over the period during which the participant is required to perform services in exchange for the award, which is generally one to four years. At December 31, 2025, $85,505 of unrecognized compensation expense for RSUs is expected to be recognized over a weighted average period of approximately 2.9 years.

Performance Stock Units

In connection with the ecosio acquisition, current and newly hired employees of ecosio have or may receive RSUs that vest upon continuing service and performance conditions (“Performance Stock Units” or “PSUs”). These performance conditions are based upon ecosio’s monthly software revenues meeting specified annual targets over a three-year period. The annual targets are based on a range of performance targets in which grantees may earn a prorated portion of the base number of awards granted up to 100%. For further information on the ecosio acquisition, refer to Note 3, “Acquisitions.”

The stock-compensation expense associated with the awards will be accounted for as compensation expense over the vesting periods based on the Company’s assessment of the probability of achieving the targets. If the required conditions are not met, no compensation expense is recognized and any previously recognized compensation expense is reversed. As of December 31, 2025, the first-year target was achieved, and the corresponding PSUs became fully vested. Additionally,

the Company determined that it was probable that the performance targets for the annual measurement periods would be achieved at varying levels across the second and third-year measurement periods.

The following table summarizes PSU activity for the year ended December 31, 2025:


		Average
		Grant Date Fair
	Units	Value Per Share
Outstanding at January 1, 2025	192	$	53.46
Granted	30		34.56
Vested	(71)		50.86
Forfeited	(10)		51.17
Outstanding at December 31, 2025	141	$	50.86

At December 31, 2025, a maximum of $5,941 of unrecognized compensation cost for PSUs, pending achievement of targets, may be recognized over a weighted average period of approximately 1.9 years.

Restricted Stock Awards

The following table summarizes RSA activity for the year ended December 31, 2025:



		Weighted
		Average
		Grant Date Fair
	Units	Value Per Share
Outstanding at January 1, 2025	34	$	35.06
Granted	37		37.55
Vested	(34)		35.06
Outstanding at December 31, 2025	37	$	37.55

Stock-based compensation cost for RSAs is measured based on the fair value of the Company’s underlying common stock on the date of grant. Compensation cost will be recognized on a straight-line basis in the consolidated statements of comprehensive income (loss) over the period during which the participants are required to perform services in exchange for the award, which is one year. At December 31, 2025, $617 of unrecognized compensation expense for RSAs is expected to be recognized over a weighted average period of approximately 0.5 years.

Employee Stock Purchase Plan

The ESPP permits participants to purchase Class A common stock primarily through payroll deductions of up to a specified percentage of their eligible compensation. The maximum number of shares that may be purchased by a participant during any offering period is determined by the plan administrator in advance of each offering period.

A total of 1,000 shares of Class A common stock were initially reserved for issuance under the ESPP. The number of shares available for issuance under the ESPP increases annually on January 1 of each calendar year beginning in 2021 and ending in and including 2030, by an amount equal to the lesser of (i) 1% of the shares of Class A common stock and Class B common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares as is determined by the Board, provided that no more than 16,000 shares of Class A common stock may be issued. The ESPP is administered by a committee of the Board. As of December 31, 2025, there were 6,132 shares available for issuance under the ESPP.

On the first trading day of each offering period, each participant will automatically be granted an option to purchase shares of Class A common stock. The option will expire at the end of the applicable offering period and will be exercised at that time to the extent of the payroll deductions accumulated or contributions made during such offering period. The purchase price of the shares, in the absence of a contrary designation, is 85% of the lower of the fair value of the Class A common stock on the first or last day of the ESPP offering period. Participants may voluntarily end their participation in the plan at any time during a specified period prior to the end of the applicable offering period and will be paid their accrued payroll deductions and related contributions, if applicable, that have not yet been used to purchase shares of Class A common stock. If a participant withdraws from the plan during an offering period, the participant cannot rejoin until the next offering period. Participation ends automatically upon a participant's termination of employment.

As of December 31, 2025 and 2024, there was approximately $582 and $423, respectively, of unrecognized ESPP stock-based compensation cost that is expected to be recognized on a straight-line basis over the remaining term of the offering periods ending on May 31, 2026 and 2025, respectively.

The fair value of ESPP purchase rights for the offering periods is comprised of the value of the 15% ESPP discount and the value associated with the call or put over the respective ESPP offering period. The value of the call or put was estimated using the Black-Scholes model with the following assumptions:


	Offering Period Ending
	5/31/2026			11/30/2025			5/31/2025			11/30/2024			5/31/2024
Fair market value of common stock	$	19.22		$	39.86		$	54.64		$	33.26		$	27.82
Volatility		34.5	%		33.5	%		24.4	%		41.7	%		36.6	%
Expected term (years)		0.5			0.5			0.5			0.5			0.5
Expected dividend yield		-	%		-	%		-	%		-	%		-	%
Risk-free interest rate		3.8	%		4.3	%		4.4	%		5.4	%		5.3	%

Volatility is representative of expected stock price volatility over the offering period. The Company’s volatility is applied to current and future offering periods. The expected term represents the term of the ESPP offering period, which is six months. The Company does not expect to pay dividends. The risk-free interest rate was based on the rate for a U.S. Treasury zero-coupon issue with a term that closely approximates the expected term of the award at the date nearest to the offering term.

Stock-Based Compensation

The Company recognized total stock-based compensation expense related to incentive awards, net of forfeitures, as follows:


	For the year ended December 31,
	2025			2024			2023
Stock-based compensation expense:
Stock options	$	595		$	6,768		$	6,349
RSUs		49,406			37,770			24,257
RSAs		1,315			1,617			2,496
PSUs		5,077			285			—
ESPP		1,370			985			817
Total stock-based compensation expense	$	57,763		$	47,425		$	33,919

The Company recognized stock-based compensation expense in the consolidated statements of comprehensive income (loss) as follows:


	For the year ended December 31,
	2025			2024			2023
Cost of revenues, software subscriptions	$	5,829		$	4,349		$	2,834
Cost of revenues, services		5,062			2,768			1,846
Research and development		12,442			9,548			5,994
Selling and marketing		15,616			13,204			8,380
General and administrative		18,814			17,556			14,865
Total stock-based compensation expense	$	57,763		$	47,425		$	33,919

The total recognized tax benefit related to the stock-based compensation expense for the years ended December 31, 2025, 2024, and 2023 was $23,382, $33,739, and $16,541, respectively. The tax benefit from stock options exercised during the years ended December 31, 2025, 2024, and 2023 was $8,858, $25,306, and $13,079, respectively.

- Definition

The entire disclosure for retirement benefits.

+ References

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+ Details

Vertex, Inc. 10-K