Vertex(US:VERX)2025-02-27 21:31Financial 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]