Vertex (VERX) Goldman Sachs Communacopia + Technology Conference 2024 summary

Business overview and strategy

• Focuses on indirect tax compliance, targeting enterprise and mid-size companies globally.

• Transitioned from a family-owned to a public company to pursue growth and M&A opportunities.

• Completed a disciplined three-year investment cycle to upgrade ERP, expand go-to-market teams, and build customer success functions.

• Sees continued investment in R&D and selective acquisitions, such as Ecosio, to drive product expansion.

• Positioned to benefit from increasing regulatory complexity and global digital tax requirements.

Financial performance and outlook

• Recent quarter showed strong revenue growth, with improved results in the latter part of the period.

• Adjusted EBITDA and free cash flow conversion rates are ahead of targets, with a 60% trailing 12-month conversion.

• Confident in pipeline visibility and expects stronger performance in the second half of the year.

• Investment cycle has led to improved margins and operational discipline.

• Aims for sustainable growth in the mid to upper teens, with margin expansion as a key focus.

Product and market dynamics

• Main competitor is in-house solutions; demand driven by compliance needs, regulatory changes, and ERP transformations.

• ERP migrations, especially SAP’s forced migration, present significant new business opportunities.

• Partnerships with major ERP vendors like SAP and Microsoft are deepening, with earlier involvement in customer projects.

• Customer journey often starts with solving a specific tax problem, then expands through upsell and cross-sell as complexity grows.

• Customer success function is critical for educating clients and driving net revenue retention.