Vertex(US:VERX)2024-08-07 16:35Financial Data and Key Metrics Changes - Revenue for Q2 2024 was $161.1 million, representing a 15.3% year-over-year increase [5][11] - Adjusted EBITDA was $38.5 million, with an adjusted EBITDA margin of 23.9%, reflecting a significant increase of 75.2% year-over-year [11][13] - Free cash flow reached a record $36.9 million, up from $4 million in Q1 2024 [5][11] - Net Revenue Retention (NRR) was 110%, down 1 percentage point from the previous year [5][11] - Average Annual Revenue per Customer (AARPC) increased by 13% year-over-year to $123,560 [6][11] Business Line Data and Key Metrics Changes - Software subscription revenue grew by 15.8% to $136.4 million, while services revenue increased by 12.8% to $24.7 million [11] - Cloud revenue was $66.3 million, up 29.6% year-over-year, exceeding full-year guidance [11] - Annual Recurring Revenue (ARR) including Systax was $548.4 million, up 17.3% year-over-year [6][11] Market Data and Key Metrics Changes - The company noted a strategic slowdown in implementation services, impacting overall revenue growth [6][11] - The second quarter saw strong new logo revenue, with June being the best month of the year for cross-sell and upsell activities [5][6] Company Strategy and Development Direction - The acquisition of ecosio for $69 million aims to enhance e-invoicing capabilities and address global reporting compliance challenges [3][4] - The company is focusing on integrating AI capabilities to improve tax categorization processes and enhance its tax content database [4][5] - The strategic direction emphasizes sustaining profit-driven growth and expanding market opportunities through technology leadership [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the outlook for the second half of 2024, narrowing full-year revenue guidance to the upper range [5][14] - The company anticipates continued strong execution and visibility into upcoming opportunities, despite a temporary impact from integration expenses related to ecosio [6][14] - Management acknowledged slower-than-expected migration of SAP ECC customers to HANA S4, affecting customer metrics [6][34] Other Important Information - The company ended Q2 2024 with $325.5 million in unrestricted cash and no bank debt, indicating strong liquidity [11] - The ecosio acquisition is expected to contribute approximately $15 million in revenue in the first full year after closing [11][14] Q&A Session Summary Question: How would you break down the lower cross-sell and upsell activity? - Management indicated that the softness was due to a strong Q4 in the previous year, leading to depleted budgets and a slower start to cross-sell and upsell activities [16][18] Question: What factors contributed to the decline in NRR? - The decline was primarily driven by lower cross-sell and upsell activity, which was expected after a strong previous quarter [19][20] Question: Can you provide details on the ecosio acquisition? - The acquisition is purely regulatory with no open bidding process, and it is expected to enhance the company's capabilities in e-invoicing and compliance [22][23] Question: What is the growth rate of ecosio? - While specific growth rates were not disclosed, management noted that ecosio has shown impressive growth, which was a key factor in the acquisition [30] Question: How do you view the current SAP ecosystem and upgrade cycles? - Management noted that larger companies are moving first, while mid-sized companies are taking a more cautious approach, impacting expected upticks in revenue [34][35] Question: What are the strategic priorities for the next 12 months? - The focus will be on successfully integrating recent acquisitions and leveraging AI to enhance customer experience and platform capabilities [49][50]