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Vertex (VERX)
NASDAQ:VERX
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Vertex
(NASDAQ:VERX)
67Neutral
Positive Factors
Growth Opportunities
Vertex highlighted the durability of demand for tax software solutions, the criticality of e-invoicing and international expansion to the company’s next leg of growth.
Revenue Growth
Medium-term revenue growth targets were a positive surprise driven by a combination of the consistency and long-term durability of Vertex’s revenue growth algorithm, new revenue unlock from AI and product innovation, e-Invoicing mandates globally, and accelerating contributions from partnerships.
Negative Factors
Competitive Market
The margin target of high 20s seems lofty, given the need to invest in the sales tax category, which is not without competition.
Investment Challenges
Despite Vertex’s intention to invest more in AI/e-Invoicing driving a modest margin headwind, management’s track record of delivering returns on investment cycles through growth reacceleration and margin improvements is encouraging.
Market Valuation
Shares have re-rated higher as the defensive growth characteristics of the business have taken greater focus, yet a more balanced risk/reward path is seen in the near term until clarity emerges that the company can accelerate growth and execute against new investments.
Vertex (VERX) vs. S&P 500 (SPY)
Market Cap
$5.62B
Dividend YieldN/A
Average Volume (3M)1.80M
Price to Earnings (P/E)235.5
Beta (1Y)1.31
Revenue Growth16.49%
EPS Growth-279.46%
CountryUS
Employees1,900
SectorTechnology
Sector Strength44
IndustrySoftware - Application
Share Statistics
EPS (TTM)-0.34
Shares Outstanding71,702,440
10 Day Avg. Volume1,356,224
30 Day Avg. Volume1,800,256
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)9.25
Price to Cash Flow (P/CF)37.50
P/FCF Ratio30.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$49.30Price Target Upside40.82% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering12
Vertex Business Overview & Revenue Model
Company DescriptionVertex, Inc. provides tax technology solutions for corporations in retail, communication, leasing, and manufacturing industries in the United States and internationally. It offers tax determination, compliance and reporting, tax data management, document management, pre-built integration, and industry-specific solutions. The company sells its software products through software license and software as a service subscriptions. It also provides implementation and training services in connection with its software license and cloud subscriptions, transaction tax returns outsourcing, and other tax-related services. Vertex, Inc. was founded in 1978 and is headquartered in King of Prussia, Pennsylvania.
How the Company Makes MoneyVertex makes money through a combination of software licensing, subscription fees, and professional services. The company's primary revenue stream is derived from its cloud-based and on-premise software solutions, which businesses subscribe to in order to automate their tax processes. These solutions are offered on a recurring subscription basis, providing Vertex with a steady and predictable revenue flow. Additionally, Vertex generates revenue through professional services, including consulting and implementation support, which help clients optimize the use of their tax technology solutions. The company also benefits from strategic partnerships with major enterprise resource planning (ERP) providers and other technology platforms, which expand its market reach and drive additional adoption of its solutions.
Vertex Financial Statement Overview
Summary
Vertex demonstrates strong revenue growth and effective cash management, with robust cash flow performance. However, profitability challenges persist with a negative net profit margin and low EBIT margins. The balance sheet is stable with low leverage and substantial cash reserves, providing financial stability.Income Statement
Vertex has demonstrated strong revenue growth, increasing from $572.4 million in 2023 to $666.8 million in 2024, a growth rate of 16.5%. However, the company has faced challenges in profitability, with a negative net profit margin of -7.9% in 2024. The gross profit margin remains healthy at 63.9%, indicating efficient cost management. Despite consistent revenue growth, EBIT and EBITDA margins remain low, at -0.3% and 2.8% respectively, reflecting ongoing operational challenges.72
Positive
Balance Sheet
Vertex maintains a solid equity position with an equity ratio of 15.4% in 2024. The debt-to-equity ratio is low at 0.09, suggesting limited leverage and reduced financial risk. Return on equity is negative, at -29.4%, due to net losses, indicating inefficiencies in generating profit from shareholders' equity. The company holds substantial cash reserves, enhancing its financial flexibility.68
Positive
Cash Flow
Vertex shows strong cash flow performance with a significant increase in free cash flow from $6.1 million in 2023 to $99.1 million in 2024, reflecting robust cash generation capabilities. Operating cash flow to net income ratio is notably high, suggesting efficient conversion of income to cash. The free cash flow to net income ratio is also favorable, highlighting effective cash management despite net losses.80
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 456.63M | 666.78M | 572.39M | 491.62M | 425.55M | 374.67M |
| Gross Profit | |||||
| 276.06M | 426.13M | 348.58M | 298.49M | 263.66M | 209.28M |
| EBIT | |||||
| -7.46M | -2.23M | -7.42M | -8.08M | -2.94M | -104.76M |
| EBITDA | |||||
| 40.22M | 102.01M | 56.95M | 53.07M | 41.84M | -72.54M |
| Net Income Common Stockholders | |||||
| -10.43M | -52.73M | -13.09M | -12.30M | -1.48M | -78.94M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 305.21M | 305.21M | 77.72M | 102.98M | 73.33M | 303.05M |
| Total Assets | |||||
| 1.17B | 1.17B | 759.93M | 719.19M | 670.21M | 554.93M |
| Total Debt | |||||
| 16.67M | 16.67M | 66.97M | 73.52M | 28.61M | 1.11M |
| Net Debt | |||||
| -279.38M | -279.38M | -1.21M | -18.29M | -44.73M | -301.94M |
| Total Liabilities | |||||
| 987.44M | 987.44M | 506.95M | 489.47M | 440.12M | 329.44M |
| Stockholders Equity | |||||
| 179.35M | 179.35M | 252.98M | 229.72M | 230.08M | 225.49M |
| Cash Flow | Free Cash Flow | ||||
| 22.29M | 99.05M | 6.10M | 3.43M | 46.92M | 26.74M |
| Operating Cash Flow | |||||
| 80.08M | 164.82M | 74.33M | 76.85M | 91.97M | 59.54M |
| Investing Cash Flow | |||||
| -123.02M | -158.15M | -66.17M | -85.05M | -296.46M | -44.38M |
| Financing Cash Flow | |||||
| 16.65M | 231.26M | -26.48M | 17.09M | -9.10M | 213.63M |
Vertex Technical Analysis
Negative
35.01
Price Trends
44.20
Negative
48.45
Negative
43.12
Negative
Market Momentum
-1.92
Negative
38.47
Neutral
53.46
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VERX, the sentiment is Negative. The current price of 35.01 is above the 20-day moving average (MA) of 34.30, below the 50-day MA of 44.20, and below the 200-day MA of 43.12, indicating a neutral trend. The MACD of -1.92 indicates Negative momentum. The RSI at 38.47 is Neutral, neither overbought nor oversold. The STOCH value of 53.46 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for VERX.
Vertex Risk Analysis
Vertex disclosed 41 risk factors in its most recent earnings report. Vertex reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Vertex Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $167.44B | 55.97 | 17.43% | 0.65% | 13.73% | 9.93% | |
78 Outperform | $122.40B | 31.38 | 83.72% | 1.91% | 7.09% | 11.51% | |
78 Outperform | $12.53B | 24.53 | 34.88% | 0.69% | 11.19% | 51.03% | |
71 Outperform | $5.04B | 65.63 | 10.12% | ― | 18.78% | 15.01% | |
69 Neutral | $9.61B | 21.54 | 12.80% | ― | 0.80% | 10.05% | |
67 Neutral | $5.62B | 235.54 | -24.39% | ― | 16.49% | -279.46% | |
57 Neutral | $20.97B | 10.32 | -14.01% | 2.49% | 4.46% | -23.38% |
* Technology Sector Average
Performance Comparison
VERX
Vertex
35.01
2.98
9.30%
ADP
Automatic Data Processing
305.53
65.38
27.22%
EPAM
Epam Systems
168.84
-103.21
-37.94%
INTU
Intuit
613.99
-21.95
-3.45%
SPSC
SPS Commerce
132.73
-51.51
-27.96%
PAYC
Paycom
218.48
21.75
11.06%
Vertex Earnings Call Summary
Earnings Call Date: Feb 27, 2025 | % Change Since: -17.87% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Positive
Vertex reported strong revenue growth and significant achievements such as surpassing on-premise revenue with cloud revenue, record new logo additions, and successful strategic partnerships. However, a decrease in net revenue retention and increased expenses were noted as challenges. Overall, the sentiment is positive due to the outweighing highlights.Highlights
Strong Revenue Growth
Vertex achieved a revenue of $178.5 million in the fourth quarter, up 15.2% year-over-year, and full-year revenue of $668.8 million, up 16.5% from 2023.
Cloud Revenue Milestone
Cloud revenue grew 28.6% for the full year, now exceeding on-premise revenue for the first time, aligning with Vertex's strategic intent.
Record New Logo Additions
The fourth quarter was a record for new logos from both dollar and unit standpoint, expected to fuel cross-sell and up-sell opportunities.
Strategic Partnerships and Pipeline Growth
Pipeline from SAP channel increased by more than 20%, and referral deals from SAP sales reps also increased by over 20%.
Successful Competitive Takeaways
Vertex won a significant competitive takeaway from a pioneering AI company, encompassing 35 regions and 500 million transactions per year.
Lowlights
Decreased Net Revenue Retention
NRR was 109% compared to 113% in the comparable 2023 period, a decrease due to the strong Q4 in 2023.
Increased Expenses
Research and development expenses increased notably from $11.3 million to $17.3 million year over year in Q4.
Lower True-Ups
Contract renewals resulted in usage true-ups of approximately $2 million to $3 million, which were lower than typical Q4 run rates.
Company Guidance
During the Vertex Incorporated Fourth Quarter 2024 Earnings Conference Call, the company provided guidance for 2025, projecting total revenue in the range of $760 million to $768 million, reflecting an annual growth of 14.6% at the midpoint. Adjusted EBITDA is expected to be between $161 million and $165 million, with a full-year adjusted EBITDA margin of 21.3%. Cloud revenue is anticipated to grow by 28% for the full year. In Q1 2025, Vertex forecasts revenue between $175 million and $178 million, marking a 12.6% increase at the midpoint, and adjusted EBITDA between $33 million and $36 million. The company also plans strategic investments, particularly in e-invoicing and AI initiatives, to fuel long-term growth, with a focus on expanding country coverage and commercializing new AI-based products.Vertex Corporate Events
Business Operations and StrategyFinancial Disclosures
Vertex Highlights Growth Strategies at Investor Day
Positive
Mar 19, 2025
On March 19, 2025, Vertex, Inc. held an Investor Day at its Philadelphia headquarters, presenting key financial highlights and strategic insights. The event emphasized Vertex’s commitment to driving growth by solving indirect tax complexities and highlighted its strong market position, with a focus on expanding customer revenues and maintaining strategic partnerships. The presentation included discussions on the company’s financial outlook and growth strategies, reflecting its robust performance and future potential in the tax technology sector.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.