10-K: Vertex Inc. Reports Increased Revenue but Net Losses Widen in 2024

Vertex Inc., a leading provider of tax technology solutions, announced a revenue increase for 2024, but also reported a significant widening of net losses compared to the previous year.

Summary

• Vertex Inc., a provider of enterprise tax technology solutions, reported its financial results for the year ended December 31, 2024.
• The company's revenue increased by 16.5% to $666.8 million in 2024, compared to $572.4 million in 2023.
• Software subscriptions revenue grew by 17.9% to $567.1 million, driven by cross-selling, expanded usage, and price increases.
• Services revenue increased by 8.8% to $99.7 million, due to growth in subscription-related services and managed services.
• However, the company's net losses widened to $(52.7) million in 2024, compared to $(13.1) million in 2023.
• Adjusted EBITDA increased to $151.9 million in 2024, compared to $100.8 million in 2023.
• The company's net revenue retention rate was 109% in 2024, while the gross revenue retention rate was 95%.

Sentiment

Score: 6

Explanation: While revenue and Adjusted EBITDA increased, the widening net loss and the establishment of a valuation allowance against U.S. deferred tax assets temper the positive aspects. The company is growing but not yet profitably.

Positives

• Revenue increased by 16.5% to $666.8 million in 2024.
• Software subscriptions revenue grew by 17.9% to $567.1 million.
• Services revenue increased by 8.8% to $99.7 million.
• Adjusted EBITDA increased to $151.9 million in 2024.

Negatives

• Net losses widened to $(52.7) million in 2024, compared to $(13.1) million in 2023.
• The 400 basis point decrease in NRR to 109% at December 31, 2024 from 113% for the same period in 2023 was primarily attributed to a decrease in customer cross-sell and additional entitlements.

Risks

• The company faces risks related to retaining and expanding revenues from existing customers and acquiring new customers.
• The company's business and success depend in part on strategic relationships with third parties, including its partner ecosystem.
• The company may face challenges in using and properly managing use of Artificial Intelligence (AI) in its business, which could result in reputational or competitive harm, and legal liability.
• The company is exposed to cybersecurity and data privacy risks that, if realized, could expose it to legal liability, damage its reputation, and harm its business.
• The company needs to continue making significant investments in software development and equipment to improve its business.
• The company may be unable to raise the funds necessary to repurchase the Notes for cash following a fundamental change, or to pay any cash amounts due upon conversion, and applicable law, regulatory authorities and our other indebtedness may limit our ability to repurchase the Notes or pay cash upon their conversion.

Future Outlook

In 2025, the company is forecasting continued revenue growth and plans to make further investments in ecosio and research and development for AI-based products and other emerging technologies.

Industry Context

The company operates in a competitive and fragmented industry, facing competition from other tax software and services providers, as well as businesses using native ERP functions.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or comparable companies.
• Without more information, it's difficult to assess Vertex's performance against industry benchmarks.
• A deeper analysis would require comparing Vertex's growth rate, profitability, and retention metrics to those of its direct competitors, such as Avalara, Sovos, and Thomson Reuters.
• Additionally, comparing Vertex's cloud adoption rate and international expansion efforts to industry trends would provide valuable insights.

Corporate Governance

Legal Proceedings

• The complaint against Avalara, Inc. alleging unfair competition, intentional interference with contractual relations, and trade secret misappropriation is still before the Court and is proceeding through the discovery process.

Stakeholder Impact

• Shareholders may experience dilution due to potential conversion of the Notes.
• Employees may benefit from the company's continued investments in research and development and expansion into new markets.
• Customers may benefit from the company's enhanced offerings and improved data quality.

Next Steps

• The company plans to continue investing in ecosio to accelerate coverage across countries with e-invoicing initiatives.
• The company expects to make additional research and development investments for the commercialization of its AI-based Smart Categorization product and other emerging technologies.

Key Dates