Vertex(US:VERX)2024-05-08 17:33Financial Data and Key Metrics Changes - Total revenue for Q1 2024 was $156.8 million, an increase of 18.1% year-over-year, exceeding the upper end of guidance [27] - Adjusted EBITDA was $36.7 million, up 82% from the previous year, representing 23.3% of revenue [9][33] - Annual recurring revenue (ARR) reached $524.5 million, a 17.5% increase year-over-year [28] - Free cash flow was positive at $4.5 million, a significant improvement from a negative $10.6 million in the previous year [34] Business Line Data and Key Metrics Changes - Software subscription revenue grew by 18.8% to $131.8 million [27] - Services revenue increased by 14.8% to $25 million [27] - Cloud revenue was $61.8 million, reflecting a 28.3% year-over-year growth [27] - Average annual revenue per customer rose to $121,720, a 17% increase year-over-year [11][28] Market Data and Key Metrics Changes - Net revenue retention (NRR) was 112%, up 2 percentage points from the previous year [10][28] - Gross revenue retention (GRR) was 95%, within the targeted range of 94% to 96% [11][28] Company Strategy and Development Direction - The company aims to accelerate global commerce by providing end-to-end capabilities for indirect tax, focusing on seamless integration and compliance [7][8] - Strategic investments in partnerships, particularly with SAP, are expected to drive growth as companies migrate to new ERP systems [14][15] - The company is exploring inorganic growth opportunities, particularly in e-invoicing, while maintaining a disciplined approach to capital allocation [52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong pipeline and market opportunities, particularly in the SAP and Microsoft ecosystems [50] - The company anticipates continued revenue growth driven by regulatory changes and digital transformation trends [88][89] - Management highlighted the importance of customer success and product innovation in driving net revenue retention and customer growth [59] Other Important Information - The company raised $345 million in convertible debt to support growth initiatives and enhance financial flexibility [12] - The first quarter marked the 14th time the company exceeded the high end of revenue guidance since going public [41] Q&A Session Summary Question: Pipeline conversion rates within the SAP channel - Management noted that larger companies are migrating first, with a potential flood of activity expected as smaller companies follow [45] Question: Free cash flow conversion expectations - Management indicated that they expect to return to a cash flow conversion rate of 65% to 70% over time, with positive cash flow trends observed [46] Question: Comparison of pipeline visibility to previous periods - Management confirmed that the pipeline remains solid, with strong traction in various markets including Microsoft and SAP [50] Question: Inorganic opportunities and strategic focus - Management is strategically evaluating opportunities in e-invoicing and has seen positive developments in partnership discussions [52] Question: Impact of new products on customer growth - Management stated that new product rollouts are showing positive results, contributing to net revenue retention growth [59] Question: Support for on-prem customers - Management emphasized their commitment to on-prem solutions while leading with cloud offerings [64] Question: International momentum and pipeline mix - Management highlighted growing international opportunities, particularly in Europe, and the potential for e-invoicing to drive future growth [82] Question: Regulatory tailwinds in different regions - Management noted significant regulatory changes in the U.S. and Europe, with a focus on e-invoicing as a key area for growth [88]