Core Insights - Vertex Inc. has been recognized as a finalist for the 2025 SAP Pinnacle Award in the SAP Store category, highlighting its strong partnership with SAP and commitment to customer success [1][2] - The SAP Pinnacle Awards celebrate partners that excel in delivering innovative solutions and value to customers, with evaluation criteria including solution visibility and pipeline impact [2][3] Company Overview - Vertex, Inc. is a leading global provider of indirect tax solutions, focusing on enabling businesses to transact, comply, and grow confidently [4] - The company offers tailored solutions for various industries, covering major lines of indirect tax such as sales and consumer use, value-added tax, and payroll [4] - Vertex has over 25 years of collaboration with SAP, delivering integrated tax solutions that enhance business performance [2][4]

Vertex (VERX) FY Conference Summary Company Overview - Vertex has been operating for 47 years, initially focusing on sales and use tax in the US and evolving to handle all indirect taxes globally, including VAT [3][4] - The company serves approximately 60% of the Fortune 500 and has over 4,000 customers worldwide, addressing challenges in indirect tax compliance as companies expand into new geographies [4] Core Business Insights - **Pricing Model**: Vertex raises prices annually, typically realizing a 4% to 5% increase. Customers on three-year contracts may see larger increases upon renewal [6][7][8] - **Market Exposure**: Vertex operates across various sectors, including manufacturing, retail, technology, and oil and gas, providing a diversified revenue stream that mitigates risks from market anomalies [12] - **Product Mix**: The largest revenue source is sales and use tax determination, followed by VAT and compliance services. The company employs a "land and expand" strategy to increase wallet share over time [15][19] E-Invoicing Market Development - E-invoicing has become a regulatory requirement in many jurisdictions, initially gaining traction in Latin America and now expanding into Europe. Governments are adopting e-invoicing to close the VAT gap [27][30] - Vertex aims to be a global provider for e-invoicing, addressing the needs of multinationals that currently use multiple point solutions [30][31] - The company anticipates significant growth opportunities as more countries adopt e-invoicing regulations, with a focus on providing comprehensive solutions that integrate with existing systems [32][33] AI Integration and Opportunities - Vertex views AI as a tool to enhance its offerings but does not see it as a threat to its value proposition due to the unique manual processes involved in tax compliance [42][47] - The company has launched AI-driven features like SmartCat to improve product categorization, which is crucial for accurate tax determination [48][49] Financial Performance and Growth Drivers - Vertex targets over 20% growth in software subscriptions and aims for high EBITDA margins, with a focus on leveraging investments made in recent years [83][84] - Key growth drivers include the ongoing migration to cloud-based ERP systems and the expansion of e-invoicing capabilities [86][88] - The company expects to see improved EBITDA margins as it moves past its current investment phase, with projections of around 21% for 2025 [93] Competitive Landscape - Vertex differentiates itself through its extensive tax content library, strong relationships with major accounting firms, and the ability to integrate multiple systems into a cohesive tax solution [78][81] - The company emphasizes the importance of referenceability and the ability to customize solutions for complex enterprise needs [81][82] Conclusion - Vertex is well-positioned for growth in the evolving landscape of tax compliance, particularly with the increasing regulatory focus on e-invoicing and the migration to cloud-based solutions. The company's strategic investments and diversified product offerings are expected to drive future performance and profitability [98][99]

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, with additional offices in South America and Europe, aiming to simplify the complexity of continuous compliance for leading brands [3] Upcoming Events - David DeStefano, CEO, and John Schwab, CFO of Vertex, will participate in a fireside chat at the 20th Annual Needham Technology, Media, & Consumer Conference [1] - The event is scheduled for May 12, 2025, at 9:30 AM Eastern Time [1] - Live webcasts and replays of the presentations will be available on Vertex's investor relations website [2]

Financial Performance - Vertex generated revenue of $177.1 million for the three months ended March 31, 2025, representing a 12.8% increase from $156.8 million in the same period of 2024[114]. - Net income for Vertex was $11.1 million for the three months ended March 31, 2025, compared to $2.7 million for the same period in 2024, indicating a significant improvement[114]. - Adjusted EBITDA was $37.2 million for the three months ended March 31, 2025, slightly up from $36.7 million in the same period of 2024[115]. - Total revenues increased by $20.3 million, or 12.9%, to $177.1 million for the three months ended March 31, 2025, compared to $156.8 million for the same period in 2024[151]. - Software subscriptions revenues rose by $18.9 million, or 14.4%, driven by existing customer growth and price increases[151]. - Net income for the three months ended March 31, 2025, was $11.1 million, compared to $2.7 million for the same period in 2024, representing a 314.7% increase[144]. - Total comprehensive income for the period was $26.2 million, compared to a loss of $1.3 million in the prior year, marking a significant turnaround[144]. - Non-GAAP gross profit increased to $132.8 million for the three months ended March 31, 2025, compared to $113.7 million in 2024[203]. - Non-GAAP gross margin improved to 75.0% for the three months ended March 31, 2025, from 72.5% in 2024[203]. - Non-GAAP net income increased to $24,494 thousand in Q1 2025 from $23,431 thousand in Q1 2024, reflecting a growth of 4.5%[204]. Revenue Streams - Cloud-based subscription revenue accounted for 53% of total software subscription revenue in Q1 2025, up from 47% in Q1 2024, highlighting a shift towards cloud deployment[110]. - Vertex expects continued growth in cloud-based subscription sales, which have been growing at a faster rate than on-premise sales[110]. - Annual Recurring Revenue (ARR) increased by $94.0 million, or 17.9%, to $618.5 million as of March 31, 2025, compared to $524.5 million in 2024[185]. - Average Annual Revenue Per Customer (AARPC) increased to approximately $126,534 as of March 31, 2025, compared to $121,720 in 2024[186]. Expenses and Costs - Research and development expenses are expected to increase in absolute dollars as Vertex continues to enhance its product offerings and integrate new technologies[131]. - Cost of software subscriptions revenues decreased by $0.9 million, or 2.0%, to $44.2 million for the three months ended March 31, 2025[153]. - Cost of services revenues increased by $4.0 million, or 25.0%, to $19.8 million, driven by higher service delivery personnel costs[154]. - Research and development expenses increased by $4.0 million, or 24.0%, to $20.9 million, reflecting investments in new solutions and AI-related initiatives[155]. - Selling and marketing expenses rose by $7.7 million, or 18.9%, to $48.2 million, primarily due to increased payroll and advertising expenses[156]. - General and administrative expenses increased by $9.5 million, or 26.7%, to $45.0 million, driven by strategic investments in IT infrastructure and business processes[157]. Cash Flow and Liquidity - Net cash provided by operating activities decreased by 39.7% to $14.8 million for the three months ended March 31, 2025, compared to $24.6 million in 2024[168]. - Net cash used in financing activities increased significantly to $20.7 million for the three months ended March 31, 2025, compared to $1.2 million in 2024[174]. - As of March 31, 2025, the company had unrestricted cash and cash equivalents of $270.4 million and a $300.0 million Line of Credit with no outstanding borrowings[165]. - Operating cash flow decreased to $14.8 million for the three months ended March 31, 2025, down from $24.6 million in 2024[195]. Investment and Strategic Initiatives - Vertex completed a strategic investment of $15.0 million in Kintsugi AI, Inc., acquiring a 10% ownership interest to enhance its sales tax compliance solutions[116]. - The company plans to invest $10.0 to $12.0 million in AI technologies during 2025, separate from the Kintsugi investment[116]. - Vertex's flexible pricing model allows customers to increase spending as they grow, providing sustainable organic growth opportunities[109]. - Vertex's partner ecosystem includes major technology firms like Microsoft, Oracle, and Salesforce, enhancing its competitive strength in the market[111]. Market Metrics - Net Revenue Retention Rate (NRR) decreased to 109% for the three months ended March 31, 2025, down from 112% in 2024[188]. - Gross Revenue Retention Rate (GRR) remained stable at 95% for both March 31, 2025, and 2024[190]. - Adjusted EBITDA margin decreased to 21.0% for the three months ended March 31, 2025, from 23.4% in 2024, primarily due to strategic investments[193]. - Free cash flow decreased by $16.8 million to $(12.3) million for the three months ended March 31, 2025, compared to $4.5 million in 2024[196]. - Free cash flow margin decreased to (6.9)% for the three months ended March 31, 2025, from 2.9% in 2024[196]. Risk Factors - Approximately 4% of the company's revenues for both Q1 2025 and Q1 2024 were denominated in currencies other than U.S. Dollars, indicating exposure to foreign currency exchange risk[211]. - The company is exposed to interest rate risk on outstanding borrowings, which bear variable interest rates[209]. - The fair value of fixed-rate debt instruments may fluctuate with changes in interest rates, although the company carries the Notes at principal value[210]. - The company may hedge selected significant transactions denominated in currencies other than the U.S. dollar as it expands international operations[212].

Core Insights - Vertex reported revenue of $177.06 million for the quarter ended March 2025, reflecting a year-over-year increase of 12.9% [1] - The earnings per share (EPS) was $0.15, unchanged from the same quarter last year, with a surprise of +15.38% compared to the consensus estimate of $0.13 [1] - The revenue exceeded the Zacks Consensus Estimate of $176.57 million by +0.28% [1] Financial Metrics - Annual Recurring Revenue (ARR) reached $618.50 million, slightly above the average estimate of $617.91 million from two analysts [4] - Service revenues were reported at $26.30 million, surpassing the estimated $25.12 million by four analysts, marking a +5.4% increase year-over-year [4] - Software subscription revenues totaled $150.76 million, slightly below the estimated $151.50 million, but still showing a +14.4% increase compared to the previous year [4] Stock Performance - Vertex shares have returned +10.3% over the past month, compared to a +10.6% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - In Q1 2025, revenue was $177.1 million, up 12.9% year over year, with subscription revenue growing 14.4% and cloud revenue increasing 29.6% [6][22] - Adjusted EBITDA was $37.2 million, representing an EBITDA margin of 21.3%, exceeding the high end of guidance [6][28] - Annual recurring revenue (ARR) grew 17.9% to $618.5 million, with net recurring revenue (NRR) remaining strong at 109% [6][22] Business Line Data and Key Metrics Changes - Subscription revenue increased to $150.8 million, while services revenue grew 5.4% to $26.3 million [23] - Cloud revenue was $80.2 million, up 29.6% from the previous year, with Ecosio contributing approximately 3.5 points to this growth [23][22] - Average annual revenue per customer for Vertex standalone increased 16% year over year to $141,000 [7][25] Market Data and Key Metrics Changes - Gross recurring revenue (GRR) was 95%, within the targeted range of 94% to 96% [8][24] - The company noted a growing pipeline for its e-invoicing solution, particularly with upcoming mandates in France and Germany [9] Company Strategy and Development Direction - The company announced an equity investment in Kintsugi, a startup focused on AI technology for indirect tax compliance in the small business sector, indicating a strategic move towards enhancing AI capabilities [5][16] - The management emphasized the importance of providing a single solution that combines VAT compliance and e-invoicing, which is expected to be a game changer for companies facing e-invoicing mandates [9][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market for indirect tax technology, noting no signs of a slowdown in buyer behavior or changes in indirect tax momentum [31][21] - The company highlighted the ongoing cloud migration cycle and business changes from mergers and acquisitions as persistent tailwinds for growth [20][21] Other Important Information - The company ended Q1 with over $270.4 million in unrestricted cash and cash equivalents, along with $300 million of unused availability under its line of credit [29] - For Q2 2025, the company expects total revenue in the range of $182 million to $187 million, representing 14.5% year-over-year growth at the midpoint [29][30] Q&A Session Summary Question: What is driving larger customers to migrate to packaged software solutions? - Management noted that the increasing complexity of e-invoicing and audit pressures are prompting organizations to seek more sustainable solutions [35][36] Question: Why did direct customers decline sequentially? - The decline was attributed to lower-end customers migrating away, while the focus remains on scaled customers, which grew by about 15% [37][38] Question: What is the impact of macro volatility on the business? - Management indicated that tax is becoming a higher priority in strategic discussions, and they have not seen any negative impact on deal flow or pipeline [44][45] Question: How applicable is Kintsugi's technology to the Vertex tax business? - Management sees potential for Kintsugi's technology to enhance offerings for small and mid-sized businesses and to integrate AI into their workflows [46][48] Question: What is the company's position on tariff-related products? - Management clarified that they focus on indirect tax solutions and do not have dedicated tariff products, but they are seeing increased discussions around compliance due to supply chain changes [51][54] Question: How has the Ecosio product performed since its general availability? - The integration of Ecosio's e-invoicing with Vertex's VAT compliance has created a seamless process, leading to positive early results [57][58] Question: How is the competitive environment in e-invoicing compared to indirect tax? - Management highlighted that most competitors focus solely on e-invoicing without VAT compliance, which differentiates Vertex's comprehensive offering [70][72] Question: What is the outlook for new logo growth? - Management reported solid growth across key ecosystems, with a focus on enterprise customers, while also seeing some success in the mid-market [80][82]

Financial Data and Key Metrics Changes - In the first quarter, revenue was $177.1 million, up 12.9% year over year, with subscription revenue growing 14.4% and cloud revenue increasing 29.6% [5][21] - Adjusted EBITDA was $37.2 million, representing an EBITDA margin of 21.3%, which was above the high end of the guidance range for the quarter [5][26] - Annual recurring revenue (ARR) grew 17.9% to $618.5 million, with net recurring revenue (NRR) remaining strong at 109% [5][22] Business Line Data and Key Metrics Changes - Subscription revenue increased to $150.8 million, while services revenue grew 5.4% to $26.3 million [22] - Cloud revenue was $80.2 million, up 29.6% from the previous year, with Ecosio contributing approximately 3.5 points to cloud revenue growth [22] - Average annual revenue per customer for Vertex standalone increased 16% year over year to $141,000, with a 15% growth in scaled customer count [6][22] Market Data and Key Metrics Changes - Gross recurring revenue (GRR) was 95%, within the targeted best-in-class range of 94% to 96% [6] - The company noted that the proliferation of e-invoicing mandates globally is expected to be a significant tailwind for the business in the coming years [6][19] Company Strategy and Development Direction - The company announced an equity investment in Kintsugi, a startup focused on applying AI technology to indirect tax in the small business sector, indicating a strategic move towards AI integration [4][14] - The company aims to provide a single solution that combines VAT compliance and e-invoicing, which is expected to be a game changer for companies facing e-invoicing mandates [6][7] - The ongoing cloud migration cycle and business changes from mergers and acquisitions are seen as persistent tailwinds for growth [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the balance of 2025, noting no signs of a change in buyer behavior or a slowdown in indirect tax momentum [30] - The company highlighted that it has never experienced a year-over-year revenue decrease, even during recessionary periods, due to the consistent demand for automated tax solutions [17][20] - The management emphasized the importance of maintaining a strong pipeline and monitoring it closely as the year progresses [20] Other Important Information - The company ended the first quarter with over $270.4 million in unrestricted cash and cash equivalents, along with $300 million of unused availability under its line of credit [27] - For the second quarter of 2025, the company expects total revenue in the range of $182 million to $187 million, representing 14.5% year-over-year growth at the midpoint [28][29] Q&A Session Summary Question: What is driving larger customers to migrate to packaged software solutions? - Management noted that the increasing complexity of e-invoicing and audit pressures are prompting customers to seek more sustainable solutions [35][36] Question: Why did direct customers decline sequentially? - The decline was attributed to lower-end customers migrating away, while the focus remains on scaled customers, which grew by about 15% [38][39] Question: What is the impact of macroeconomic conditions on buyer behavior? - Management indicated that there has been no change in buyer behavior, and indirect tax discussions are becoming more strategic as companies move to the cloud [43][44] Question: How applicable is Kintsugi's technology to the Vertex tax business? - Kintsugi's technology is seen as a potential fit for small and mid-sized businesses, and there are opportunities to apply elements of their technology to Vertex's offerings [46][47] Question: What is Vertex's position on tariff-related products? - Vertex does not focus on tariff solutions as it is primarily an indirect tax provider, but discussions around supply chain changes have led to increased interest in e-invoicing and compliance [51][52] Question: How has the Ecosio product's general availability performed? - The general availability of the Ecosio product has been positive, with strong scalability in transaction processing being a key differentiator [55][56] Question: How is the competitive environment in e-invoicing compared to indirect tax? - Vertex differentiates itself by offering both e-invoicing and VAT compliance, which many competitors do not provide [70][71] Question: What is the outlook for new logo growth? - New logo growth has been diverse across key ecosystems, with a focus on enterprise customers, particularly in the SAP and Oracle ecosystems [78][80]

Vertex (VERX) came out with quarterly earnings of $0.15 per share, beating the Zacks Consensus Estimate of $0.13 per share. This compares to earnings of $0.15 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 15.38%. A quarter ago, it was expected that this company would post earnings of $0.14 per share when it actually produced earnings of $0.15, delivering a surprise of 7.14%.Over the last four quarters, the company has surpas ...

Financial Performance - Total revenues for Q1 2025 were $177.1 million, representing a 12.9% year-over-year increase[4] - Software subscription revenues reached $150.8 million, up 14.4% year-over-year[4] - Cloud revenues grew to $80.2 million, marking a 29.6% year-over-year increase[4] - Annual Recurring Revenue (ARR) was $618.5 million, up 17.9% year-over-year, with a 15.1% growth excluding acquisitions[4] - Net income for Q1 2025 was $11.1 million, compared to $2.7 million in the same period last year[4] - Non-GAAP net income was $24.5 million, with a diluted earnings per share (EPS) of $0.15[4] - Adjusted EBITDA for Q1 2025 was $37.2 million, with an adjusted EBITDA margin of 21.0%[4] - Total revenues for Q1 2025 reached $177,062 thousand, a 12.9% increase from $156,781 thousand in Q1 2024[34] - Software subscriptions revenue increased to $150,761 thousand, up 14.4% from $131,830 thousand year-over-year[34] - Gross profit for Q1 2025 was $112,994 thousand, compared to $95,792 thousand in Q1 2024, reflecting a gross margin improvement[34] - Non-GAAP gross profit for Q1 2025 was $132,772,000, up from $113,735,000 in Q1 2024, representing a 16.7% increase[38] - Non-GAAP gross margin improved to 75.0% in Q1 2025, compared to 72.5% in Q1 2024[39] - Non-GAAP net income increased to $24,494,000 in Q1 2025, compared to $23,431,000 in Q1 2024, reflecting a 4.5% growth[40] - Adjusted EBITDA for Q1 2025 was $37,219,000, slightly up from $36,743,000 in Q1 2024, with an adjusted EBITDA margin of 21.0%[42] - Non-GAAP operating income remained stable at $31,339,000 in Q1 2025, compared to $31,737,000 in Q1 2024[40] - Non-GAAP diluted EPS for both Q1 2025 and Q1 2024 was $0.15[40] Cash Flow and Assets - Free cash flow for Q1 2025 was $14,805 thousand, down from $24,566 thousand in Q1 2024, primarily due to increased capital expenditures[36] - Cash and cash equivalents at the end of Q1 2025 were $270,395 thousand, down from $296,051 thousand at the end of Q4 2024[32] - Free cash flow for Q1 2025 was $(12,250,000), a decline from $4,502,000 in Q1 2024, resulting in a free cash flow margin of (6.9)%[42] Expenses - Research and development expenses increased to $16,534,000 in Q1 2025 from $13,472,000 in Q1 2024, marking a 22.8% rise[39] - Selling and marketing expenses rose to $41,818,000 in Q1 2025, up from $35,674,000 in Q1 2024, indicating a 17.5% increase[39] Guidance and Outlook - The company expects Q2 2025 revenues to be between $182 million and $187 million[11] - Full-year 2025 revenue guidance is projected between $760 million and $768 million, with cloud revenue growth expected at 28%[11] - The company is optimistic about its long-term market opportunity in indirect tax automation despite recent geopolitical events[2] Balance Sheet - Total current assets decreased to $504,962 thousand as of March 31, 2025, from $536,333 thousand as of December 31, 2024[32] - Total liabilities decreased to $953,654 thousand as of March 31, 2025, compared to $987,439 thousand as of December 31, 2024[32] - The company reported a change in fair value of acquisition contingent earn-outs of $(14,700) thousand in Q1 2025, indicating adjustments related to acquisitions[34]

Core Insights - Vertex, Inc. reported strong financial performance in Q1 2025, with total revenues of $177.1 million, reflecting a year-over-year increase of 12.9% [5] - The company is optimistic about its financial outlook for 2025, driven by strategic initiatives in e-invoicing and artificial intelligence [2][5] - Vertex's investment in Kintsugi AI is expected to enhance its R&D efforts and expedite the development of AI-driven products [2] Financial Performance - Total revenues for Q1 2025 were $177.1 million, up 12.9% from $156.8 million in Q1 2024 [5] - Software subscription revenues reached $150.8 million, a 14.4% increase year-over-year [5] - Cloud revenues grew significantly by 29.6% to $80.2 million [5] - Annual Recurring Revenue (ARR) was $618.5 million, up 17.9% year-over-year, with a growth of 15.1% excluding acquisitions [5] - Net income for Q1 2025 was $11.1 million, compared to $2.7 million in Q1 2024 [5][34] Key Metrics - Average Annual Revenue per direct customer (AARPC) increased to $126,534 from $121,720 a year ago [5] - Net Revenue Retention (NRR) was 109%, down from 112% a year ago [5] - Gross Revenue Retention (GRR) remained stable at 95% [5] - Adjusted EBITDA for Q1 2025 was $37.2 million, with an adjusted EBITDA margin of 21.0% [5][39] Guidance and Outlook - For Q2 2025, Vertex expects revenues between $182 million and $187 million, and Adjusted EBITDA between $35.5 million and $39.5 million [6][7] - The company anticipates continued financial momentum throughout 2025, supported by favorable market conditions for indirect tax automation [7]