Vertex Inc. Reports Third Quarter Revenue of $170.4 Million

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Vertex Inc. Reports Third Quarter Revenue of $170.4 Million

Vertex Inc. (VERX), a leading provider of tax technology solutions, reported strong financial performance in its third-quarter earnings call, registering significant revenue growth year-over-year. The company’s third-quarter revenue reached $170.4 million, a 17.5% increase, driven by notable growth in software subscriptions and cloud revenue.

The acquisition of Ecosio was a strategic addition, contributing to Vertex’s revenue and enhancing its e-invoicing capabilities. The management team, led by President and CEO David DeStefano and CFO John Schwab, provided a positive outlook for the company, citing strong customer engagement and strategic partnerships as key growth factors.

Key Points

  • Vertex Inc. reported third-quarter revenue of $170.4 million, representing a 17.5% year-over-year increase.
  • Software subscription and cloud revenue saw significant growth, with cloud revenue up 29.9%.
  • The company recorded GAAP net income of $7.2 million and adjusted EBITDA of $38.6 million.
  • The Ecosio acquisition provided $1 million in revenue and is expected to contribute $8 million in ARR.
  • Vertex forecasts its fourth-quarter revenue for 2024 to be between $175 million and $178 million, with full-year revenue projected between $663.3 million and $666.3 million.
  • The company maintains a strong financial position with $279 million in unrestricted cash and $300 million in unused credit facilities.

Company Outlook Vertex expects fourth-quarter revenue for 2024 to range between $175 million and $178 million, with full-year revenue anticipated to grow by 16.1% to between $663.3 million and $666.3 million. Cloud revenue growth for the full year is projected at 28%. An Investor Day is scheduled for March 19, 2025, to discuss long-term financial goals and strategic plans.

Challenges The Ecosio acquisition may temporarily impact adjusted EBITDA as the company integrates the business and invests. The Average Revenue Per Customer (ARPC) experienced a slight decline due to new customers from lower revenue purchases.

Positive Highlights

  • Strong customer engagement and record participation in events.
  • Significant new contracts and expansions with a major electric vehicle manufacturer.
  • The company’s unique market position is strengthened by the complexity of indirect taxes and increasing demand for cloud solutions.

Management noted a slower-than-expected transition cycle among businesses, but demand is expected to rise in the coming years.

Q&A Highlights David DeStefano discussed a high-value contract attributed to a customer’s transition to S/4HANA. John Schwab addressed the slight decline in ARPC and confirmed no significant issues arising from the Pagero agreement withdrawal. The company emphasized ongoing tax complexity and regulatory trends as driving forces behind demand for integrated tax solutions.

In conclusion, Vertex Inc. demonstrated strong performance in the third quarter of 2024, positioning itself for ongoing success with positive growth indicators and strategic advancements. Management remains optimistic about future growth prospects, particularly in e-invoicing and cloud solutions, while acknowledging the challenges and investments necessary to maintain competitive advantages in the market.

InvestingPro Insights Vertex Inc.’s (VERX) strong third-quarter performance is reflected in its recent market valuation and financial metrics. According to InvestingPro data, the company’s market capitalization stands at $7.68 billion, underscoring investor confidence in its growth trajectory. This aligns with the reported 17.5% year-over-year revenue growth, reaching $170.4 million in the third quarter.

The company’s revenue growth is further supported by a reported increase of 16.61% over the last twelve months, reaching $617.83 million as of the second quarter of 2024. This consistent growth model bolsters management’s optimistic outlook for Q4 2024 and full-year revenue projections.

InvestingPro tips highlight that Vertex has been “trading near a 52-week high” and has shown “strong returns over the last three months.” These insights correlate with the company’s positive financial results and the market’s favorable reaction. The stock’s 20.85% price return over the last three months and impressive 96.98% return over the past year further validate the company's robust market position.

Another relevant InvestingPro tip notes, “Net income is expected to rise this year,” aligning with the company’s reported $7.2 million GAAP net income in the third quarter and projected revenue growth for the full year.

It is important to note that Vertex is “trading at a high earnings multiple with a P/E ratio of 381.16,” indicating investor expectations for high growth within the company. This valuation metric reflects the market’s confidence in Vertex’s future earnings potential, especially considering strong performance in cloud revenues and strategic acquisitions like Ecosio.

For investors seeking a more comprehensive analysis, InvestingPro provides 13 additional tips regarding Vertex Inc., offering deeper insights into the company’s financial health and market position.