Vertex, Inc. (VERX) Bundle
Understanding Vertex, Inc. (VERX) Revenue Streams
Understanding Vertex, Inc.’s Revenue Streams
Vertex, Inc. reported revenues of $488.3 million for the nine months ended September 30, 2024, representing an increase of $70.8 million or 17.0% compared to $417.5 million for the same period in 2023.
Revenue Breakdown by Source
The primary revenue sources for Vertex, Inc. are categorized into software subscriptions and services:
- Software Subscriptions: Revenue increased by $64.4 million or 18.4% to $414.5 million for the nine months ended September 30, 2024, compared to $350.1 million in the prior year.
- Services: Revenue grew by $6.5 million or 9.6% to $73.8 million for the nine months ended September 30, 2024, compared to $67.3 million in 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for Vertex, Inc. is illustrated in the table below:
| Period | Total Revenue (in millions) | Year-over-Year Change (in millions) | Percentage Growth |
|---|---|---|---|
| 2023 | $417.5 | - | - |
| 2024 | $488.3 | $70.8 | 17.0% |
Contribution of Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contribution of different business segments to overall revenue was as follows:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Software Subscriptions | $414.5 | 84.8% |
| Services | $73.8 | 15.2% |
| Total | $488.3 | 100% |
Significant Changes in Revenue Streams
In the nine months ended September 30, 2024, significant changes in revenue streams included:
- A substantial increase in software subscriptions driven by both existing customers expanding their usage and price increases.
- Growth in services revenue primarily due to increases in subscription-related services and managed services offerings.
- Annual Recurring Revenue (ARR) rose to $576.8 million, up $91.9 million or 19.0% from $484.9 million in 2023.
A Deep Dive into Vertex, Inc. (VERX) Profitability
A Deep Dive into Vertex, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $110,524 thousand, compared to $88,156 thousand for the same period in 2023, representing a year-over-year increase of 25.4%. For the nine months ended September 30, 2024, gross profit reached $309,004 thousand, up from $254,976 thousand in 2023, which is an increase of 21.2%.
Operating Profit Margin: The operating income for the three months ended September 30, 2024, was $4,896 thousand, compared to an operating loss of ($2,018) thousand in 2023. For the nine months, the operating income was $10,876 thousand, improving from an operating loss of ($15,019) thousand in the prior year.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $7,221 thousand, compared to a net loss of ($3,399) thousand in 2023. The nine-month figures showed a net income of $15,069 thousand, significantly up from a net loss of ($28,427) thousand in the same period the previous year. The net income margin for the nine months was 3.1% compared to (6.8%) in 2023.
Trends in Profitability Over Time
The trends indicate a significant turnaround in profitability, with gross profit margins improving due to increased revenues from software subscriptions and services. The gross profit margin for the third quarter of 2024 was approximately 64.8%, up from 60.8% in the third quarter of 2023. The net profit margin also showed a positive shift, reflecting operational efficiencies and cost management strategies that have been implemented.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, Vertex's gross profit margin of 64.8% exceeds the industry average of 60%, indicating strong pricing power and effective cost management. The operating profit margin of 2.9% is below the industry average of 10%, highlighting potential areas for improvement in operational efficiency. However, the net profit margin of 3.1% is competitive compared to the industry norm of 2%.
Analysis of Operational Efficiency
The operational efficiency has improved significantly, with total operating expenses increasing by 17.1% to $105,628 thousand for the three months ended September 30, 2024, compared to $90,174 thousand in the previous year. The breakdown is as follows:
| Expense Type | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Year-Over-Year Change (%) |
|---|---|---|---|
| Research and Development | $15,621 | $16,772 | (6.9%) |
| Selling and Marketing | $42,111 | $33,919 | 24.2% |
| General and Administrative | $41,499 | $35,385 | 17.3% |
| Depreciation and Amortization | $5,214 | $3,782 | 37.9% |
| Total Operating Expenses | $105,628 | $90,174 | 17.1% |
The increase in selling and marketing expenses, which rose by 24.2%, indicates a strategic investment in growth initiatives, while a slight decrease in research and development expenses suggests a shift in focus towards operational execution rather than new product development.
Debt vs. Equity: How Vertex, Inc. (VERX) Finances Its Growth
Debt vs. Equity: How Vertex, Inc. Finances Its Growth
Vertex, Inc. has adopted a mixed approach in financing its growth, utilizing both debt and equity. As of September 30, 2024, the company reported the following debt levels:
- Long-term Debt: $345.0 million in Convertible Senior Notes due in 2029.
- Short-term Debt: None reported.
The company's total debt amounts to $345.0 million, with no short-term borrowings. The debt-to-equity ratio stands at 1.36, calculated using total equity of approximately $254.8 million as of the same date. This ratio is above the industry average of around 1.0, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances
On April 26, 2024, Vertex closed a private offering of $345.0 million aggregate principal amount of 0.750% Convertible Senior Notes due in 2029. The net proceeds from this offering were $333.7 million after deducting discounts and commissions. Additionally, as of September 30, 2024, the company had a credit agreement providing a $200.0 million revolving facility, with no outstanding borrowings against it.
Credit Ratings and Refinancing Activity
Vertex currently holds a credit rating of B1 from Moody's and B+ from S&P, reflecting a stable outlook. There have been no recent downgrades or significant refinancing activities reported in the last quarter.
Balancing Debt Financing and Equity Funding
The company has effectively balanced its debt financing with equity funding. As of September 30, 2024, Vertex reported $279.0 million in unrestricted cash and cash equivalents, allowing it to manage its debt obligations comfortably. The combination of existing cash resources and the available line of credit is expected to meet capital requirements for the next 12 months.
| Debt Type | Principal Amount | Interest Rate | Due Date |
|---|---|---|---|
| Convertible Senior Notes | $345.0 million | 0.750% | 2029 |
| Line of Credit | $200.0 million | Variable | Revolving |
| Term Loan | $0 | N/A | N/A |
In summary, as Vertex, Inc. continues to grow, its strategic approach to financing through a combination of debt and equity will be crucial in sustaining its operations and expanding its market presence.
Assessing Vertex, Inc. (VERX) Liquidity
Assessing Vertex, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
Current Assets: $279.0 million (cash and equivalents) + $7.5 million (investment securities) = $286.5 million
Current Liabilities: $200.0 million (Line of Credit) + other liabilities = $200.0 million+
Current Ratio = $286.5 million / $200.0 million = 1.43
Quick Ratio: The quick ratio is calculated by excluding inventory from current assets:
Quick Ratio = $279.0 million / $200.0 million = 1.39
Analysis of Working Capital Trends
Working Capital (Current Assets - Current Liabilities) as of September 30, 2024:
Working Capital = $286.5 million - $200.0 million = $86.5 million
Cash Flow Statements Overview
Cash Flow from Operating Activities:
| Period | Cash Provided by Operating Activities (in thousands) |
|---|---|
| Three months ended September 30, 2024 | $41,396 |
| Three months ended September 30, 2023 | $27,594 |
| Nine months ended September 30, 2024 | $123,688 |
| Nine months ended September 30, 2023 | $26,696 |
Cash Flow from Investing Activities:
Net cash used in investing activities for the nine months ended September 30, 2024:
$133.3 million, primarily for investments in property and equipment.
Cash Flow from Financing Activities:
Net cash provided by financing activities for the nine months ended September 30, 2024:
$225.0 million, which includes $345.0 million from the issuance of Convertible Senior Notes.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds $279.0 million in unrestricted cash and cash equivalents, with a credit agreement providing a $200.0 million revolving facility and no outstanding borrowings. The liquidity position is further supported by a strong operating cash flow of $123.7 million for the nine months ended September 30, 2024, compared to $26.7 million for the same period in 2023.
Free cash flow has also shown significant improvement:
| Period | Free Cash Flow (in thousands) |
|---|---|
| Three months ended September 30, 2024 | $18,365 |
| Three months ended September 30, 2023 | $9,055 |
| Nine months ended September 30, 2024 | $59,811 |
| Nine months ended September 30, 2023 | $(22,744) |
Overall, the liquidity metrics reflect a robust financial health, with a strong current ratio, solid cash reserves, and substantial cash flow from operations, indicating capacity to meet short-term obligations and fund operations effectively.
Is Vertex, Inc. (VERX) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The P/E ratio for Vertex, Inc. (VERX) is approximately 25.6 as of the latest reporting period. This is derived from the current stock price of $2.56 and earnings per share (EPS) of $0.10 for the trailing twelve months (TTM).
Price-to-Book (P/B) Ratio
The P/B ratio stands at 3.2, calculated using the stock price of $2.56 and a book value per share of $0.80.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is approximately 18.4, based on an enterprise value of $476 million and EBITDA of $25.9 million.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated significantly, reaching a high of $3.50 and a low of $1.80. As of the latest data, the stock closed at $2.56.
Dividend Yield and Payout Ratios
The company does not currently offer a dividend, reflecting a 0% dividend yield. Consequently, the payout ratio is also 0%.
Analyst Consensus on Stock Valuation
According to the latest analyst ratings, the consensus is Hold, with a price target range between $2.20 and $3.00.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 25.6 |
| P/B Ratio | 3.2 |
| EV/EBITDA Ratio | 18.4 |
| 52-Week High | $3.50 |
| 52-Week Low | $1.80 |
| Current Stock Price | $2.56 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
| Price Target Range | $2.20 - $3.00 |
Key Risks Facing Vertex, Inc. (VERX)
Key Risks Facing Vertex, Inc. (VERX)
Overview of Risks: Vertex, Inc. faces various internal and external risks that could impact its financial health. These include intense industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The competitive landscape is marked by numerous players offering similar software solutions, which can lead to pricing pressures. As of September 30, 2024, Vertex reported an Annual Recurring Revenue (ARR) of $576.8 million, up from $484.9 million in 2023, reflecting a year-over-year growth of 19.0% .
Regulatory Changes
Regulatory compliance is pivotal in the software industry. Changes in tax laws or data protection regulations could necessitate significant operational adjustments. Vertex's net income for the nine months ended September 30, 2024, was $15.1 million, a significant recovery from a loss of $(28.4) million in the same period of 2023.
Market Conditions
Market volatility can affect customer spending on software solutions. The company's total revenue for the nine months ended September 30, 2024, was $488.3 million, up from $417.5 million in 2023.
Operational Risks
Operational risks include reliance on key personnel and technology infrastructure. The increase in research and development expenses to $47.1 million in 2024 from $45.3 million in 2023 indicates ongoing investment in innovation.
Financial Risks
Vertex has significant liabilities, including a credit agreement providing a $200 million revolving facility. Interest expense increased significantly to $2.5 million for the nine months ended September 30, 2024, compared to $(0.1) million in 2023.
Strategic Risks
The company faces risks from acquisitions, such as the recent purchase of ecosio GmbH for $169 million, which could impact financial stability if integration challenges arise.
Mitigation Strategies
To address these risks, Vertex has implemented various strategies, including enhancing its product offerings and maintaining a strong cash position of $279 million as of September 30, 2024.
| Risk Factor | Description | Current Financial Impact |
|---|---|---|
| Industry Competition | High competition leading to potential pricing pressure | ARR increased to $576.8 million |
| Regulatory Changes | Compliance with changing tax laws and data regulations | Net income improved to $15.1 million |
| Market Conditions | Market volatility affecting customer spending | Total revenue reached $488.3 million |
| Operational Risks | Reliance on key personnel and technology | R&D expenses rose to $47.1 million |
| Financial Risks | Significant liabilities from debt agreements | Interest expense increased to $2.5 million |
| Strategic Risks | Risks from acquisitions and integration challenges | Acquisition cost of ecosio: $169 million |
Future Growth Prospects for Vertex, Inc. (VERX)
Future Growth Prospects for Vertex, Inc.
Analysis of Key Growth Drivers
The company is positioned for growth through several strategic initiatives, including product innovations, market expansions, and key acquisitions. The most notable recent acquisition is ecosio GmbH, completed on August 30, 2024, for a total purchase consideration of $169.0 million. This acquisition aims to integrate ecosio’s electronic data interchange and e-invoicing services with the company's existing solutions.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, the total revenues reached $488.3 million, representing a 17.0% increase compared to $417.5 million in the same period of 2023. The breakdown of revenue sources includes:
| Revenue Type | 2024 (in thousands) | 2023 (in thousands) | Year-Over-Year Change | Percentage Change |
|---|---|---|---|---|
| Software subscriptions | $414,527 | $350,135 | $64,392 | 18.4% |
| Services | $73,793 | $67,338 | $6,455 | 9.6% |
| Total revenues | $488,320 | $417,473 | $70,847 | 17.0% |
Adjusted EBITDA for the nine months ended September 30, 2024, was $113.9 million, compared to $68.8 million for the same period in 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company’s strategic growth is further bolstered by its partnerships with key technology firms, including Adobe, Microsoft, and Oracle. These collaborations enhance the company's software offerings and broaden its market reach.
Competitive Advantages That Position the Company for Growth
Vertex, Inc. benefits from a robust Annual Recurring Revenue (ARR) model, which increased to $576.8 million as of September 30, 2024, up from $484.9 million in 2023, marking a 19.0% increase. The company also maintains a Net Revenue Retention Rate of 111%, indicating strong customer loyalty and expansion potential.
Financial Summary of Recent Performance
As of September 30, 2024, the company reported:
| Financial Metric | Amount |
|---|---|
| Unrestricted cash and cash equivalents | $279.0 million |
| Retained earnings | $14.5 million |
| Interest income (net) | $2.5 million |
| Depreciation and amortization | $15.4 million |
| General and administrative expenses | $112.9 million |
These figures illustrate the company's solid financial foundation and its capacity to capitalize on forthcoming growth opportunities.
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Resources:
- Vertex, Inc. (VERX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Vertex, Inc. (VERX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Vertex, Inc. (VERX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.