Vertex’s (VERX) Q4 Disappointment
A look at the quarters shows some benefits continued while others are fading
In our April 2024 article Tech Revenue Warnings, we cautioned that Vertex’s (VERX) revenue was receiving an unusual boost from rising accounts receivable and lagging deferred revenue. By August, VERX was the only one of the five companies we highlighted that had yet to report disappointing results. (We recommend readers review our follow-up reports from August 21, 2024, and August 23, 2024, for a review of other concerns including declining allowances and aggressive non-GAAP adjustments.) The stock climbed through the fall, reaching a high of $59 in late January, only to give back all its gains following weak guidance after the recently released fourth quarter.
The company’s Q4’24 adjusted EPS of 15 cents beat consensus estimates by only 1 cent. Revenue of $178.5 million beat by only $1.55 million. We are not impressed with either and VERX guided down for Q1’25 calling for revenue of $175-$178 million and adjusted EBITDA of $33-$36 million vs. the $38.1 million in Q4. VERX’s sales growth was driven by another unusual jump in receivables and it would have missed sales estimates had it not been for two unexpected sources of revenue in the quarter. Meanwhile, past accounting-related benefits appear to be playing out.
Let’s get behind the numbers…