Vertex (VERX) The 44th Annual William Blair Growth Stock Conference summary

Business overview and market position

• Specializes in indirect tax solutions, including sales, use, and VAT tax, with a focus on enterprise and mid-market clients.

• Maintains a comprehensive tax content library with over 900 million rules, updated monthly, serving as a key differentiator.

• 60% of the Fortune 500 are customers, with strong penetration across major industry verticals.

• Focuses on land-and-expand strategy, driving high net revenue retention (NRR) of 112% and gross revenue retention of 95%.

• Competes primarily against homegrown solutions, with significant opportunity as companies migrate to new ERP and cloud platforms.

Financial performance and investment phase

• Achieved $600 million in trailing 12-month revenue and $117 million in adjusted EBITDA as of March.

• Adjusted EBITDA margins have improved from 15% to over 20% post-investment phase, with expectations to reach mid-20s in the next 18 months.

• Free cash flow conversion is expected at 65%-75% of adjusted EBITDA.

• Investments from 2020-2023 focused on new products, go-to-market expansion, and infrastructure, now largely completed.

• Subscription revenue is the core business, with services comprising about 15% of total revenue.

Growth drivers and market opportunities

• Total addressable market (TAM) is $22 billion globally, with $7 billion in the US and $15 billion internationally.

• Complexity in tax regulations, business expansion, regulatory changes, and technology migrations are key growth tailwinds.

• Digital transformation, especially ERP cloud migrations (e.g., SAP ECC to S/4HANA), presents a major catalyst, with a 30% revenue uplift expected per conversion.

• Only about 10% of the market is currently vended, with the rest using legacy or homegrown solutions.

• 70% of new revenue comes from existing customers, with the remainder from new client acquisitions.