My previous investment thought on Vertex, Inc. (NASDAQ: VERX ) (published on 7th November) was a downgrade to a hold rating because I felt that the valuation was too high. I wouldn’t call thisI focus on long-term investments while incorporating short-term shorts to uncover alpha opportunities. My investment approach revolves around bottom-up analysis, delving into the fundamental strengths and weaknesses of individual companies. My investment duration is the medium to long-term. Ultimately, I aim to identif ...

Global tax technology provider finds retail consumers want free, easy product returns -- or they’ll shop elsewhere to find themKING OF PRUSSIA, Pa., March 26, 2025 (GLOBE NEWSWIRE) -- Vertex Inc. (NASDAQ:VERX) (“Vertex” or the “Company”), a global provider of indirect tax technology solutions, reveals that while free, easy product returns are paramount for consumer loyalty, they also create significant indirect tax complexities for retailers managing a surge of returns. Data from the post-holiday ‘Returnuar ...

Core Viewpoint - Goldman Sachs analyst Adam Hotchkiss has a positive outlook on Vertex, Inc. (VERX) ahead of its first Investor Day, maintaining a Buy rating with a price target of $48, citing the company's resilience against macroeconomic uncertainties due to the essential nature of tax software [1] Group 1: Revenue Growth and Market Dynamics - The analyst expects management to discuss the sustainability of mid-teens or higher revenue growth in the medium term [2] - Key points anticipated include the sustainability of demand and market dynamics within the enterprise tax software market [2] - The importance of e-invoicing and international expansion in driving future revenue growth is also expected to be highlighted [2] Group 2: Investment Roadmap and Margins - Clarity on the future investment roadmap and monetization of new product initiatives is anticipated [3] - The impact of these investments and scale-driven efficiencies on the company's medium-term margins is expected to be addressed [3] Group 3: Stock Performance - As of the last check, VERX shares have increased by 1.95%, reaching $34.25 [3]

Core Viewpoint - Vertex Pharmaceuticals has experienced a significant stock decline of 25.3% this year, contrasting with a 5.4% increase in the industry, despite recent product approvals that could drive future growth [1][2]. Group 1: Product Approvals and Sales Growth - Vertex gained approval for two new products: Journavx, a non-opioid pain medicine, and Alyftrek, a new cystic fibrosis (CF) treatment, which are expected to enhance sales [3][8]. - Vertex's CF product sales have consistently risen, with revenues increasing in the double-digit range for 10 consecutive years, driven by strong demand for Trikafta/Kaftrio, particularly in younger age groups [4][5]. - The launch of Alyftrek is anticipated to contribute to medium-term growth, while the ongoing demand for Trikafta/Kaftrio is expected to sustain sales in the near term [5][9]. Group 2: Diversification and Pipeline Development - The approval of Casgevy, a gene therapy for sickle cell disease and beta-thalassemia, diversifies Vertex's commercial opportunities, with an estimated patient population of around 60,000 in the U.S. and Europe [6][7]. - Vertex is advancing its pipeline with a focus on CF and other disease areas, including acute and neuropathic pain, with multiple candidates representing multibillion-dollar opportunities [13][14]. - The acquisition of povetacicept is expected to enhance Vertex's pipeline, targeting serious autoimmune diseases, with ongoing phase III and phase II studies [15]. Group 3: Financial Performance and Valuation - Vertex's stock is currently trading at a premium compared to the industry, with recent earnings estimates for 2025 and 2026 showing slight declines [16][19]. - Despite the premium valuation and declining estimates, Vertex is expected to achieve around 8% sales growth in 2025, driven by CF franchise growth and contributions from new products [25][26].

Company Overview - Vertex, Inc. is a leading global provider of indirect tax solutions, focusing on delivering trusted tax technology for global businesses to transact, comply, and grow with confidence [3] - The company offers tailored solutions for major lines of indirect tax, including sales and consumer use, value added, and payroll [3] - Vertex is headquartered in North America and has offices in South America and Europe, helping leading brands simplify the complexity of continuous compliance [3] Investor Day Announcement - Vertex, Inc. will host an Investor Day on March 19, 2025, in Philadelphia, PA, featuring presentations and a Q&A session with the executive leadership team [1] - The event will start at 8:30 a.m. ET and is expected to conclude around 12:00 p.m. ET, with in-person attendance being by invitation only and requiring advanced registration [2] - A live video broadcast of the event will be available on the company's Investor Relations website, with a replay accessible shortly after the event concludes [2]

Core Insights - Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) has experienced a modest stock price increase of 4% since mid-December, indicating a period of recovery after facing challenges [2]. Company Overview - Vertex Pharmaceuticals is based in Boston and is recognized as a significant player in the pharmaceutical industry [2]. - The company has been under the coverage of a biotech consultant with over 5 years of experience in the sector, who has produced detailed reports on more than 1,000 companies [2]. Investment Insights - The investment group Haggerston BioHealth offers resources for both novice and experienced biotech investors, including catalysts to monitor, buy and sell ratings, and forecasts for product sales across major pharmaceutical companies [2]. - The group also provides integrated financial statements, discounted cash flow analysis, and market-by-market analysis, which are essential for informed investment decisions [2].

Financial Performance - Vertex generated revenues of $666.8 million in 2024, up from $572.4 million in 2023, representing a year-over-year increase of approximately 16.5%[205] - The company reported net losses of $(52.7) million in 2024 compared to $(13.1) million in 2023, indicating a significant increase in losses[205] - Adjusted EBITDA was $151.9 million in 2024, an increase from $100.8 million in 2023, reflecting a growth of approximately 50.6%[206] - Total revenues grew by 16.5% year-over-year, totaling $666,776,000 in 2024, up from $572,387,000 in 2023[252] - Software subscription revenue increased by 17.9% year-over-year, reaching $567,124,000 in 2024 compared to $480,830,000 in 2023[252] - Services revenue rose by 8.8% year-over-year, amounting to $99,652,000 in 2024, compared to $91,557,000 in 2023[252] - Gross profit increased by 22.2% year-over-year, reaching $426,125,000 in 2024, up from $348,579,000 in 2023[252] - The net loss for 2024 was $52,729,000, a significant increase from a net loss of $13,093,000 in 2023, representing a 302.7% increase[252] - Total comprehensive loss for 2024 was $76,866,000, compared to a loss of $7,083,000 in 2023, marking a 985.2% increase[252] Revenue Retention and Customer Metrics - The net revenue retention rate (NRR) was 109% in 2024, down from 113% in 2023, while the gross revenue retention rate (GRR) remained stable at 95% for both years[208] - Software subscriptions accounted for 85.1% of total revenues in 2024, up from 84.0% in 2023, while services decreased to 14.9% from 16.0%[256] - ARR increased by $90.6 million, or 17.7%, to $605.6 million as of December 31, 2024, compared to the previous year, driven by $47.3 million from existing customers and $29.5 million from new customers[303] - The number of direct customers rose to 4,915 in 2024 from 4,310 in 2023, with AARPC increasing to approximately $122,706 from $118,910[304] Expenses and Investments - Research and development expenses grew by 14.5% year-over-year, totaling $66,666,000 in 2024, compared to $58,212,000 in 2023[252] - Selling and marketing expenses increased by 21.6% year-over-year, amounting to $170,574,000 in 2024, up from $140,237,000 in 2023[252] - General and administrative expenses rose by 4.7% year-over-year, totaling $152,835,000 in 2024, compared to $145,936,000 in 2023[252] - The company plans to make further investments in research and development for new product initiatives and emerging technologies in the upcoming year[281] - Vertex plans to continue investing in growth and scaling its business, anticipating increased expenses in advance of revenue benefits from these investments[213] Cash Flow and Financing - The company experienced a net cash provided by operating activities of $164.8 million for the year ended December 31, 2024, representing a year-over-year increase of 121.7% from $74.3 million in 2023[283] - The company reported a net cash used in investing activities of $158.2 million for the year ended December 31, 2024, which included $65.8 million in property and equipment investments and $71.8 million related to acquisitions[286] - The company reported a net cash provided by financing activities of $231.3 million for the year ended December 31, 2024, a significant increase of 973.3% from a net cash used of $26.5 million in 2023[288] - As of December 31, 2024, the company had unrestricted cash and cash equivalents of $296.1 million, along with $9.2 million in investment securities[282] Acquisitions and Strategic Initiatives - Vertex issued $345.0 million in Convertible Senior Notes on April 26, 2024, with net proceeds of $333.7 million after expenses, intended for working capital and potential acquisitions[215][216] - The company acquired tax-specific AI capabilities for approximately $6.1 million to enhance its tax mapping solutions, supporting its AI innovation strategy[218] - Vertex paid $9.6 million to acquire the remaining 20% equity interest in Systax, making it a wholly owned subsidiary, enhancing its Brazilian tax content offerings[219] - The acquisition of ecosio GmbH was completed for $169.0 million, aimed at integrating its EDI and e-invoicing services with Vertex's tax solutions[220][221] - The company added 597 customers in 2024 due to the acquisitions of Systax and ecosio[304] Tax and Interest Expenses - Income tax expense was $54.6 million in 2024, a significant increase from an income tax benefit of $8.6 million in 2023, primarily due to changes in valuation allowances on deferred tax assets[274] - Interest expense decreased by $8.3 million, or 199.4%, resulting in net interest income of $4.1 million in 2024, driven by higher investment income and reduced interest costs[273] Future Outlook - The company anticipates an increase in operating expenses in future periods as it invests to support ongoing business expansion[279] - The company forecasts continued revenue growth in 2025, driven by a strong pipeline and market position, alongside investments in AI-based products and e-invoicing initiatives[281] Non-GAAP Metrics - Non-GAAP gross profit for 2024 was $492,544 thousand, up from $407,307 thousand in 2023, representing a 21% increase[327] - Non-GAAP gross margin improved to 73.9% in 2024 from 71.2% in 2023[329] - Non-GAAP net income increased to $100,984 thousand in 2024, compared to $63,699 thousand in 2023, reflecting a 58.5% growth[331] - Non-GAAP operating income rose to $130,989 thousand in 2024, compared to $85,646 thousand in 2023, marking a 52.8% increase[329] - Non-GAAP research and development expenses were $56,395 thousand in 2024, up from $52,218 thousand in 2023, a 7.5% increase[329] - Non-GAAP selling and marketing expenses increased to $154,892 thousand in 2024 from $129,216 thousand in 2023, reflecting a 19.8% rise[329] Currency and Inflation Impact - Approximately 4% of the company's revenues for the years ended December 31, 2024 and 2023, and 3% for 2022 were generated in currencies other than U.S. dollars[352] - The company has experienced fluctuations in net income due to transaction gains or losses from revaluing certain asset and liability balances in foreign currencies[353] - The company may hedge selected significant transactions denominated in currencies other than the U.S. dollar as it expands international operations[354] - The company increases product and service selling prices to offset inflationary pressures but may not fully offset significant future inflation[355] - To date, inflation has not had a material effect on the company's business, financial condition, or results of operations[355]

Financial Data and Key Metrics Changes - In Q4 2024, Vertex reported revenue of $178.5 million, a 15.2% increase year-over-year, and adjusted EBITDA of $38.1 million, up 21.3% compared to the same quarter last year [6][34][43] - For the full year, total revenue reached $668.8 million, reflecting a 16.5% increase from 2023 [34] - Subscription revenue in Q4 increased by 16.8% to $152.6 million, while full-year subscription revenue was $567.1 million, up 17.9% year-over-year [36][34] - Annual recurring revenue (ARR) grew nearly 18% to $603.1 million by the end of the quarter [6][37] Business Line Data and Key Metrics Changes - Cloud revenue for Q4 was $76.9 million, a 27% increase year-over-year, with full-year cloud revenue at $276 million, up 28.6% [36][37] - Services revenue in Q4 grew by 6.8% to $25.9 million, with full-year services revenue at $99.7 million, an 8.8% increase [36][34] - The average annual revenue per customer (AARPC) for Vertex standalone increased by 14.8% year-over-year to $136,000 [8][40] Market Data and Key Metrics Changes - The company noted a healthy increase in new logo revenue in Q4, contributing positively to the revenue mix and impacting net revenue retention (NRR) [38][39] - NRR was reported at 109%, down from 113% in the previous year, attributed to a strong comparison from Q4 2023 [38][39] - Gross revenue retention (GRR) remained stable at 95%, within the targeted range of 94% to 96% [10][39] Company Strategy and Development Direction - Vertex is focusing on the ongoing migration cycles of Oracle, Cloud, and SAP S/4HANA, which are expected to drive future growth [5][20] - The company is accelerating investments in e-invoicing and expanding its go-to-market capacity to capture new opportunities in the evolving VAT landscape [16][18] - Vertex aims to leverage its competitive advantages in the enterprise indirect tax software market, emphasizing its extensive tax content database and strong relationships with major ERP vendors [11][12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline for 2025, noting no slowdown in SAP activity and an increase in pipeline visibility [57][58] - The company anticipates a rebound in NRR above 110% throughout 2025, supported by increased cross-sell opportunities [8][39] - Management highlighted the importance of addressing the complexities of indirect tax compliance, which continues to drive demand for Vertex's solutions [30][15] Other Important Information - Vertex's free cash flow for Q4 was $17.9 million, with a full-year total of $77.7 million, a significant increase from $6.1 million in 2023 [44] - The company ended Q4 with over $296 million in unrestricted cash and cash equivalents, along with $300 million of unused availability under its line of credit [45] - Vertex plans to invest approximately $16 million to $20 million in e-invoicing and $10 million to $12 million in R&D for AI-related initiatives in 2025 [48][49] Q&A Session Summary Question: Insights on ERP migrations and pipeline development - Management confirmed strong relationships with Oracle and SAP, with no observed slowdown in SAP activity and an increase in pipeline as they entered 2025 [57][58] Question: Margin outlook and investment rationale - Management explained the decision to increase spending on ecosio and R&D, emphasizing the need to prepare for future growth despite a temporary impact on margins [60][64] Question: Drivers of gross margin improvement - Management noted that revenue true-ups contributed to higher margins in Q4, but advised caution in extrapolating these margins into the future [68][72] Question: Services revenue expectations for 2025 - Management indicated a strategy to keep services growth flat, focusing on enhancing customer experience rather than driving revenue [74] Question: AI product investments and monetization timeline - Management expects smart categorization to generate ARR lift in 2025, with a focus on advancing data management capabilities [81][83] Question: Ecosio customer adoption and market strategy - Management highlighted a mix of customer sizes and geographies adopting ecosio, with a focus on expanding product offerings and market presence [95][98] Question: Demand environment and deal flow - Management reported a healthy demand environment, with processes in place to minimize surprises in revenue recognition [137][138]

Financial Data and Key Metrics Changes - Vertex reported Q4 revenue of $178.5 million, a 15.2% increase year-over-year, and adjusted EBITDA of $38.1 million, up 21.3% compared to the previous year [6][34] - For the full year, total revenue reached $668.8 million, reflecting a 16.5% increase from 2023 [34] - Annual recurring revenue (ARR) grew nearly 18% to $603.1 million [6][37] - Net revenue retention (NRR) was 109%, down from 113% in the previous year, attributed to a strong Q4 last year [7][38] - Gross profit for Q4 was $133.9 million with a gross margin of 75%, compared to 70.7% in the same period last year [41] Business Line Data and Key Metrics Changes - Subscription revenue in Q4 increased 16.8% year-over-year to $152.6 million, while services revenue grew 6.8% to $25.9 million [36] - Cloud revenue for Q4 was $76.9 million, up 27% year-over-year, with full-year cloud revenue at $276 million, a 28.6% increase [36][37] - Average annual revenue per customer (AARPC) for Vertex standalone increased 14.8% year-over-year to $136,000 [8][40] Market Data and Key Metrics Changes - The company noted a significant increase in new logo additions, with a record number of new logos in Q4 [9] - The growth in the enterprise market is driven by the ongoing ERP migrations, particularly with Oracle and SAP [5][21] - The indirect tax regulatory environment is becoming increasingly complex, creating demand for Vertex's solutions [14][15] Company Strategy and Development Direction - Vertex is focusing on expanding its e-invoicing solution, which integrates VAT compliance and is well-received in the market [16][18] - The company plans to accelerate investments in e-invoicing and AI-related tools to enhance its product offerings [49][50] - Vertex aims to leverage its strong relationships with ERP vendors to capture more market share and drive growth [11][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the pipeline for 2025, noting no slowdown in SAP activity and an increase in pipeline visibility [57][58] - The company anticipates NRR to rebound above 110% in 2025, supported by increased cross-sell opportunities [8][39] - Management highlighted the importance of addressing the evolving indirect tax compliance landscape as a key growth driver [30][31] Other Important Information - Vertex ended Q4 with over $296 million in unrestricted cash and cash equivalents, with an additional $300 million available under its line of credit [45] - The company expects total revenue for 2025 to be in the range of $760 million to $768 million, representing a year-over-year growth of 14.6% [46] Q&A Session Summary Question: Can you provide more detail on the ERP migrations around Oracle and SAP? - Management confirmed strong relationships with both Oracle and SAP, with no observed slowdown in activity and an increase in pipeline as they entered 2025 [57][58] Question: Why is the company increasing investments despite expected margin declines? - Management indicated that the acquisition of ecosio and the need to grow that business justified the increased spending, which is seen as a strategic move for long-term growth [62][64] Question: What is driving the improvement in gross margins? - Management noted that revenue true-ups contributed to higher margins in Q4, but advised caution in extrapolating these margins into the future [68][72] Question: How should we think about services revenue growth in 2025? - Management expects services revenue to remain flat, focusing on enhancing customer experience rather than being a primary revenue driver [74] Question: What are the expectations for AI-related investments and their impact on revenue? - Management anticipates that smart categorization will be available this year, potentially leading to ARR lift, although revenue recognition may lag [83][85] Question: Can you elaborate on the early adopters of ecosio? - Management reported a mix of larger and mid-sized customers adopting ecosio, with positive feedback on the integration of VAT compliance and invoicing solutions [95][98] Question: What is the strategy for go-to-market investments in Europe? - The majority of investments will focus on product development for ecosio, with some resources allocated for market coverage to support growth in Europe [121][123]

Core Insights - Vertex reported revenue of $178.46 million for the quarter ended December 2024, reflecting a year-over-year increase of 15.2% [1] - The earnings per share (EPS) for the quarter was $0.15, up from $0.13 in the same quarter last year, with a surprise of +7.14% over the consensus estimate of $0.14 [1] - The reported revenue exceeded the Zacks Consensus Estimate of $176.63 million by +1.03% [1] Financial Performance Metrics - Annual Recurring Revenue (ARR) was reported at $603.10 million, slightly below the two-analyst average estimate of $604.93 million [4] - Revenue from services reached $25.86 million, surpassing the average estimate of $24.35 million, marking a year-over-year increase of +6.8% [4] - Software subscription revenues were $152.60 million, slightly above the estimated $152.36 million, representing a +16.8% change compared to the previous year [4] Stock Performance - Vertex shares have declined by -26.6% over the past month, contrasting with the Zacks S&P 500 composite's decline of -2.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]