Vertex (VERX, Financial) has made a strategic move by investing in Kintsugi, an emerging AI-focused company based in San Francisco. The startup specializes in automating sales tax compliance for small and mid-sized businesses. Vertex's investment involves a $15 million minority stake, equating to a 10% ownership, alongside agreements for intellectual property sharing and commercial collaboration. Vertex is also set to join Kintsugi's Board of Directors.
As businesses increasingly navigate the challenges of eCommerce and cross-border trade, there is a heightened demand for automated tax solutions. Kintsugi addresses this need by streamlining the entire sales tax compliance process for small businesses, covering tasks such as tax calculations, filings, and compliance monitoring across diverse jurisdictions. Established in 2023, Kintsugi has already achieved significant growth within North America and Europe.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 12 analysts, the average target price for Vertex Inc (VERX, Financial) is $46.87 with a high estimate of $61.00 and a low estimate of $31.00. The average target implies an upside of 16.63% from the current price of $40.19. More detailed estimate data can be found on the Vertex Inc (VERX) Forecast page.
Based on the consensus recommendation from 14 brokerage firms, Vertex Inc's (VERX, Financial) average brokerage recommendation is currently 2.1, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Vertex Inc (VERX, Financial) in one year is $32.75, suggesting a downside of 18.51% from the current price of $40.19. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Vertex Inc (VERX) Summary page.
VERX Key Business Developments
Release Date: February 27, 2025
- Revenue: $178.5 million in Q4, up 15.2% year over year; $668.8 million for the full year, up 16.5% from 2023.
- Adjusted EBITDA: $38.1 million in Q4, up 21.3% year over year; $151.9 million for the full year, up 50.7% from 2023.
- Annual Recurring Revenue (ARR): $603.1 million at quarter end, with organic ARR growth of 15%.
- Net Revenue Retention (NRR): 109% in Q4, expected to rebound above 110% in 2025.
- Gross Revenue Retention (GRR): 95% in Q4, within the targeted range of 94% to 96%.
- Cloud Revenue: $76.9 million in Q4, up 27% year over year; $276 million for the full year, up 28.6% from 2023.
- Subscription Revenue: $152.6 million in Q4, up 16.8% year over year; $567.1 million for the full year, up 17.9% from 2023.
- Services Revenue: $25.9 million in Q4, up 6.8% year over year; $99.7 million for the full year, up 8.8% from 2023.
- Gross Margin: 75% in Q4; subscription software gross margin at 81.4%.
- Free Cash Flow: $17.9 million in Q4; $77.7 million for the full year, a significant increase from $6.1 million in 2023.
- Research and Development Expense: $17.3 million in Q4; $56.4 million for the full year.
- Selling and Marketing Expense: $43.7 million in Q4, 24.5% of total revenues.
- General and Administrative Expense: $34.2 million in Q4.
- Cash and Cash Equivalents: Over $296 million at quarter end.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vertex Inc (VERX, Financial) reported a 15.2% year-over-year increase in revenue for Q4 2024, reaching $178.5 million.
- Cloud revenue growth for the full year was 28.6%, with cloud revenue now exceeding on-premise revenue for the first time.
- The company achieved a Gross Revenue Retention (GRR) of 95%, within their targeted range of 94% to 96%.
- Vertex Inc (VERX) has a strong pipeline fueled by Oracle cloud and SAP S4 HANA migration cycles, indicating future growth potential.
- The company has a robust competitive position with a 47-year heritage in the indirect tax software industry, offering sustainable competitive advantages.
Negative Points
- Net Revenue Retention (NRR) decreased to 109% from 113% in the previous year, attributed to a challenging comparison with a strong Q4 2023.
- The company is making significant investments in e-invoicing and AI, which will impact margins in 2025.
- Adjusted EBITDA margin is expected to decrease in 2025 due to strategic investments, despite core business leverage.
- There is a slower start to revenue growth in Q1 2025, with guidance indicating a 12.6% growth at the midpoint.
- The company faces challenges in expanding its e-invoicing coverage to meet global demand, requiring accelerated investment.