Q1 2024 Vertex Inc Earnings Call
Greetings and welcome to vertex first quarter 'twenty 'twenty four earnings conference call.
Please note this conference is being recorded.
At this time, all participants are in listen only mode.
And now I'll turn the conference over to Joe Crivelli, Vice President of Investor Relations Mr.
Joe Crivelli: Mr. Crivelli, you may now begin.
Yeah.
Joe Crivelli: Hello, and thanks for joining us to discuss for Texas first quarter financial results I'm, Joe Crivelli, Vice President Investor Relations, David Stefan our President and CEO and John Schwab, Our CFO are also with us today.
Speaker Change: During this call we may make forward looking statements about expected future results actual financial results may differ due to risks and uncertainties. These risks and uncertainties are described in our filings with the Securities and Exchange Commission.
Speaker Change: In our remarks today, we will also refer to non-GAAP financial metrics.
Speaker Change: A reconciliation of these metrics to GAAP is provided in today's press release.
Speaker Change: This call is being recorded and will be available for replay on our Investor Relations website.
Speaker Change: I'll now turn the call over to David.
David DeStefano: Thanks, Joe welcome everyone and thank you for joining us.
David: 24 is off to a very good start as shown in the first quarter results. Once again, we exceeded the high end of our financial guidance for revenue and adjusted EBITDA.
David: Our consistently solid performance is a result of being crystal clear on where we're going as a company and then being laser focused on executing our plan to get there.
David: At vertex, we have a bold vision to accelerate global commerce to achieve this we have built a consistent execution engine that continues to perform quarter after quarter.
David: We deliver end to end capabilities for indirect tax to seamlessly connect system solutions and data this.
David: This unified approach empowers our customers to confidently navigate indirect tax complexity and manage their need for a continuous compliance process.
David: We're able to support our customers throughout their entire digital transformation journey.
David: They run their business locally fully in the cloud or somewhere in between.
David: We provide value added services that help them efficiently integrate their indirect tax into the infrastructure and stay in compliance.
David: And behind the scenes, we have a world class team dedicated to our customer success at every touch point this.
David: This is what enables us to keep delivering differentiated value to our customers a great results for investors.
David: Revenue traction remained strong total revenue was up 18, 1% in the first quarter and software subscription growth with 18, 8%. In addition, cloud revenue growth was 28, 3%, which is slightly ahead of our target for the full year.
David: Earnings leverage continues to build as expected adjusted EBITDA was $36 5 million or 23, 3% of revenue. This is up 80% from last year's first quarter.
David: I'll also note that we delivered positive free cash flow in the first quarter, which is typically our lowest quarter of the year from a cash flow standpoint.
David: This bodes well for cash production for the rest of the year.
David: In addition, this quarter <unk> was $525 million up 17, 5% year over year <unk> was 112% up two full percentage points compared to last year's first quarter average annual revenue per customer increased 17% year over year to 100 and.
David: $21720.
David: Scaled customer count, which represents customers delivering annual revenue of over 100000 grew 13% year over year and.
David: And G. R R with 95% in the first quarter, which falls within our targeted best in class range of 94% to 96%.
David: I'm incredibly proud that vertex is leadership and the indirect tax technology space was recognized by the financial markets last month, when we raised $345 million of convertible debt that we can invest in our business.
David: Convertible debt investors were extremely enthusiastic about vertex our business strategy and our growth prospects there.
David: They appreciate our consistent high teens revenue growth as well as our ability to operate profitably and deliver positive adjusted EBITDA and free cash flow.
David: This capital will enable us to be agile proactive and decisive and seizing growth opportunities whether through organic investments or acquisitions.
David: Our financial flexibility and our balance sheet has never been stronger.
David: Now turning to notable wins in the quarter.
David: Our results confirmed that the market for indirect tax software, it's underpenetrated and many companies are still handling their indirect tax needs with homegrown solutions.
David: As the persistent tail winds of business expansion regulatory pressures and digital transformations continue to pressure tax departments, we believe that the opportunity to deliver our tax solution. So the market will grow.
David: I will highlight some key new logo wins, which pays this off.
David: In the first quarter, we won a mid six figure deal with a global provider of power management solutions.
David: Particular deal highlights two growth pillars for vertex the anticipated wave of ERP conversion that will happen as a result, sap's decision to end mainstream support for E. C. C in 2020 seven as well as the sales partnership we have built with the S. E T direct sales force.
David: In this case the customer was migrating to S for Honda as part of their digital transformation project. This was a catalyst for them to evaluate indirect tax and determined it was time to replace their homegrown solution as they were previously manually updating rules and regulations in their purchasing system.
David: As we have discussed one of our growth investments was building a more tightly aligned partnership with S. A pea on the go to market front, but we are seeing ongoing traction from this investment this.
David: This deal is an example of how that partnership is bringing new customers to vertex as we referred in by the S. E. T sales team. In addition to the credibility boost that we enjoy in this case the S. E. T referral enabled us to get an early look at the customers' infrastructure and tailor our solution accordingly.
David: Another new logo, we won in the first quarter was a global risk management consulting firm that had grown through hundreds of acquisitions over the past several decades.
David: They were using a homegrown indirect tax calculation and compliance system, but recent audit pressure had made it clear that the company outgrew its old ways of doing things and needed a more sophisticated solution.
David: Due to the acquisitions the customer systems environment was extremely complex, which competitively gave us an advantage due to our experienced connecting multiple platforms to a single tax solution. In this case, we integrated with multiple systems, including Oracle Workday, Salesforce and G D Edwards as well as the customers homegrown billing.
David: <unk>.
David: We had a great win in the quarter with a cloud native cyber security company after being acquired or customer underwent a transformation initiative to move their tax solution to the cloud.
David: Even though the new parent currently uses one of our competitors are cloud solution was chosen because the team was familiar with our proven track record and we were able to meet their accelerated timeline.
David: We also won a mid six figure deal with a new customer.
David: Manufacturer of industrial machinery.
David: It's another case, where an S. Four Hornet transformation led the company to reevaluate how it was handling indirect tax.
David: The company selected vertex solutions for tax calculation as well as compliance and reporting solution for both North America and Europe. They also licensed protects plus tools for S. E T and are starting to take its center.
David: One of the biggest sources of new revenue for vertex and a sustainable driver of NR growth as increased business with our existing customers the expand part of land and expand equation.
David: A customer in the consumer products space fueled our Q1 growth with a mid six figure revenue addition, there S. A P infrastructure upgrade presented an ideal opportunity to move their vertex solution to the cloud and expand entitlements by $15 billion.
David: They also saw the value of our tax accelerator and vertex plus tools for S. E T.
David: While they evaluate the competitive options as part of their process are unmatched S E T expertise and solutions that ultimately differentiate at vertex.
David: Our unique capabilities delivered a lower total cost of implementation and ownership while minimizing risk.
David: To further optimize their tax processes, our consulting team is collaborating with them to streamline current indirect tax calculations and compliance.
David: Also in the first quarter, we expanded our relationship with a longtime customer medical diagnostics industry.
David: They advance their corporate cloud strategy by migrating two of our legacy solutions to a modern cloud offering. This in turn consolidated their tax operations onto a single platform seamlessly integrating with Salesforce commerce cloud people soft and their internal billing systems.
David: Other fundamental business changes such as M&A divestitures and adoption of new modes of Commerce can also drive new business for vertex.
David: In the first quarter, we landed a new customer in the contract research industry that was being spun out by its parent in this case the company needed an indirect tax solution to pair with its implementation of workday financials.
David: The big four accounting firm conducted an RFP and vertex prevailed.
David: Similarly in the security industry, we wanted to deal with a company that was being sold to a private equity firm the customer selected vertex for indirect tax to integrate Microsoft D 365.
David: Finally on the international front, we had a nice win with a growing marketplace provider and the customer first looked for an indirect tax solution. They went with a competitor but over the course of their journey things didn't go well they didn't get the support they need it our competitors transaction based pricing model led to mass.
David: Cost overruns ultimately after 18 months of frustration the customer changed direction and came back to vertex.
David: A quick word on how we are addressing E invoicing.
David: We remain committed to our strategy of delivering a continuous compliance solution, which provides for a single cloud portal to address invoicing through two compliance process.
David: Of which he invoicing is just one piece.
David: As we noted last quarter. After we opted out of the bidding war in the near term we continue to utilize the Garo as a partner in alignment with our commercial agreement. However, we are also evaluating our options and developing partnerships with additional players in the space.
David: Have more to share on this in the coming quarters.
David: As I look back on the strategic growth investments, we made from 'twenty 'twenty through 2023 and how they are helping us better serve our customers I'm thrilled with our position in the market and the opportunity in front of us.
David: Our product portfolio tax content database go to market expertise and scalable infrastructure has us well positioned for a nice run up revenue growth, increasing profitability and solid cash flow to reward our investors.
David: John will now take you through the financials.
David: John.
John R. Schwab: Thanks, David and good morning, everyone I'll now review, our first quarter financial results and provide guidance for the second quarter and full year of 2024.
John R. Schwab: In the first quarter revenue was $156 $8 million up 18, 1% compared to last year's first quarter and exceeding the upper end of our quarterly guidance.
John R. Schwab: Subscription revenue increased 18, 8% period over period to $131 $8 million.
John R. Schwab: Our services revenue grew at 14, 8% to $25 million.
John R. Schwab: And cloud revenue was $61 $8 million in the first quarter. This represents 28, 3% year over year growth, which is slightly ahead of our guidance for the full year.
John R. Schwab: Annual recurring revenue or <unk> was $524 $5 million a quarter and this is up 17, 5% year over year.
John R. Schwab: Net revenue retention or NRI remained strong at 112% up two full percentage points compared to last year.
John R. Schwab: Gross revenue retention or <unk> was 95% at quarter end within our targeted range of 94% to 96%.
John R. Schwab: And our average annual revenue per customer or a a R. P C, which is based on our direct customer count was $121720 in the first quarter of 2024 up from $118910 in the fourth quarter of 2023.
John R. Schwab: For the remainder of the income statement discussion I'll be referring to non-GAAP metrics. All of these non-GAAP metrics are reconciled to GAAP results in the earnings press release that was issued this morning.
John R. Schwab: Gross profit for the first quarter was $113 7 million and gross margin was 72, 5%. This compares with gross profit of $95 $3 million and a 71, 8% gross margin in the same period last year.
John R. Schwab: Gross margin on our subscription revenue was 78, 6% compared to 78, 4% in last year's first quarter and 76, 8% in the fourth quarter of 2023.
John R. Schwab: Gross margin on services revenue was 45% compared to 37, 9% in last year's first quarter and 38, 2% in the fourth quarter of 2023.
John R. Schwab: Turning to operating expenses in the first quarter research and development expense was $13 5 million compared to $13 $6 million last year.
John R. Schwab: With capitalized software spend included R&D expense was $28 8 million for the first quarter, which represents 18, 4% of revenue as compared to 17, 9% of revenue in the prior year period.
John R. Schwab: Selling and marketing expense was $35 7 million or 22, 8% of total revenues, an increase of $3 $6 million and approximately 11, 2% from the prior year period.
John R. Schwab: And our general and administrative expense was $27 6 million down $1.7 million from last year.
John R. Schwab: Adjusted EBITDA was $36 $7 million, an increase of $16 5 million or <unk>, 82% year over year and exceeding our quarterly guidance.
John R. Schwab: As we noted in April when we launched our convertible debt offering approximately $2 million of the adjusted EBITDA outperformance was driven by expenses that were delayed from the first quarter to future quarters in 2024, and another $2 million was driven by higher percentage of capitalized R&D costs compared to expense the R&D cost in the first quarter.
John R. Schwab: Even excluding these items adjusted EBITDA would have exceeded the high end of our first quarter guidance.
John R. Schwab: We saw a positive year over year improvement in cash flow, our operating cash flow was $24 $6 million in the first quarter, a $21 $1 million improvement compared to last year's first quarter and.
John R. Schwab: And free cash flow was a positive $4 $5 million in the first quarter compared to a negative free cash flow of $10 $6 million in last year's first quarter.
John R. Schwab: Normally our cash flows in the first quarter are seasonally lower than they are the remaining calendar quarters due to annual bonus payments payroll taxes and sales and marketing expenses that are typically elevated to start the new year.
John R. Schwab: We're encouraged we are encouraged by the performance and anticipate that our free cash flow will follow our standard seasonality trends.
John R. Schwab: We ended the first quarter with $56 $1 million in unrestricted cash and cash equivalents. Our total bank debt was $46 $3 million and investment securities totaled $9 $1 million.
John R. Schwab: I'll note that with the proceeds of our convertible debt offering our cash and investment balances now stand at approximately $350 million.
John R. Schwab: The additional liquidity, we also have $200 million of unused availability under our existing line of credits.
Speaker Change: And now turning to guidance for.
Speaker Change: For the second quarter of 2024, we expect total revenue in the range of $159 million to $162 million, which would represent a solid 15% year over year growth at the midpoint.
Speaker Change: And adjusted EBITDA in the range of $31 million to $33 million.
Speaker Change: At the midpoint would represent an increase of approximately $10 million or 45% over the prior year.
Speaker Change: This would also represent our third quarter in a row with adjusted EBITDA margins over 20% and will fuel ongoing cash flow improvement and further strengthen our balance sheet.
Speaker Change: As in the past years, we have not changed our full year guidance based on our first quarter results and accordingly for the full year. We continue to expect total revenue in the range of $650 million to $660 million, representing annual revenue growth of 14% at the midpoint.
Speaker Change: That EBITDA in the range of $130 million to $135 million, representing an increase of $32 million at the midpoint.
Speaker Change: And we believe that cloud growth will accelerate to approximately 28% in 2024.
Speaker Change: We expect to reevaluate our full year guidance in August when we announce our second quarter results.
Speaker Change: David will now make some closing comments before we open up for Q&A David.
David: Thanks, John.
David: I want to reiterate that I'm very pleased with our performance in the first quarter.
David: Protects went public in mid 2020, we've now been a public company for 15 quarters. We are proud that during that time, our strong base of recurring revenue has enabled us to provide financial guidance that investors can depend on the.
David: The first quarter of 2024 was the 14th time, we exceeded the high end of our revenue guide and the 11th time, we exceeded the high end of our adjusted EBITDA guidance and this was achieved during a time when many other SaaS companies struggle to.
David: Our growth investments, we made from 'twenty 'twenty through 2020 three.
David: Only helping us to build on that track record.
David: Our customer success organization is now mature and driving great results with the expansion of existing customer accounts.
David: Our broader and deeper go to market team, including our fully developed partner channel are finding new opportunities for us to add customers and the largely underpenetrated enterprise space.
David: And the new products, we launched over the past several years are gaining traction differentiating vertex when we compete for new business.
David: With those investments behind us job one is execution.
David: And with the World class team, we have in place all throughout the organization I'm confident we have our eye on the ball and can continue to deliver great results for shareholders again in 'twenty 'twenty four.
Speaker Change: With that operator. Please go ahead and open the call for questions.
David: Yeah.
Speaker Change: And we are going to start the Q&A session now.
Speaker Change: To ask a question you May press Star then one on your Touchtone phone and if youre using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: He said anytime no question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: And again for a question in the queue Star one.
Speaker Change: At this time, let's pause momentarily to assemble the roster.
Speaker Change: Okay.
Speaker Change: Our first question comes from Chris can tear off from Morgan Stanley Chris. Please go ahead.
Speaker Change: Great.
Chris: Thanks for taking my questions here.
Chris: Maybe for you David I wanted to ask about the pipeline conversion rate within that channel you mentioned that you havent benefited yet.
Speaker Change: You can see migration effort that will occur over the next three years and now you've got I think recently you will get.
Speaker Change: Any greater willingness to place those migrate them through so just curious what youre seeing with that large pipeline, bringing it to a close deals here.
David: Sure sure Chris.
Speaker Change: I think what we're seeing is which is pretty typical for other migrations. We've seen over the years. The largest companies go first because they've got the longest timeline that theyre going to need to evolve their E. R. Their ERP infrastructure and smaller companies will continue to push for as long as they can delay before they'll go and then there'll be sort of a flood of <unk>.
Speaker Change: Activity and we're really seeing that behavior play out.
Speaker Change: Got it that's super helpful.
Speaker Change: And then for John I wanted to ask about free cash flow conversion and how we should think about that for the rest of the year. Given that Q1 is usually not that one point that you mentioned and then.
Speaker Change: Do you have any thoughts on like the long term conversion rate and if there are any blockers for you to get there.
Speaker Change: Yes.
John R. Schwab: Pardon me Thanks, Chris for the question, let me take the last one first what we saw when we were you know.
John R. Schwab: Before the investment cycle started as we're become as we're coming public or cash flow conversion rate was about 65% to 70% of it from adjusted EBIT free cash flow of 60% to 75% of adjusted EBITDA. We expect that we'll certainly get back there over some time and we did have a very good quarter. As you pointed out in terms of our free cash flow, we are generating a generator of free cash flow in.
John R. Schwab: The first quarter, which is the first time.
John R. Schwab: In the last four years that we've done that so very good very good and very positive in terms of how that goes we said, we expect that that will continue to ramp through the through the period, but we don't to still take US a couple of years to get to that kind of that 65, 70% conversion rate. So again, we feel like we've made real good strides the investment cycle is behind us and as you can see from the result.
John R. Schwab: What's the cash the cash is going to start to come into the business very very significantly.
John R. Schwab: Yeah.
Speaker Change: Excellent. Thanks, so much guys congrats.
Speaker Change: Our next question comes from Daniel Jester from BMO capital.
Daniel William Jester: Danielle. Please go ahead.
Daniel William Jester: Great. Thanks for taking my question.
Daniel William Jester: Maybe you called out that your typical processes to not raise the full year guidance, our adjusted full year guidance at this point in the year, maybe you can just kind of compare and contrast, the pipeline and your visibility.
Daniel William Jester: Today to other periods. So we can get a sense of your confidence level in 2024.
Daniel William Jester: Yeah.
Speaker Change: Thanks, Dan I think the pipeline remains solid I think the progress we're seeing in some of our other markets like Microsoft Other ERP focus Microsoft Workday net suite remains really positive with the rollout of our Tcs solution to Microsoft I'm seeing traction there that's very encouraging and then again.
Speaker Change: The SAP and Oracle stuff is a very consistent way for us.
Speaker Change: Got really nice differentiated solutions in the SAP space.
Speaker Change: Rates remained really strong there and I think that's going to be a consistent one that gives us confidence as we look forward for the rest of the year.
Speaker Change: Great and then you touched on this briefly in the prepared remarks that maybe you can expand a little bit more about.
Speaker Change: How youre viewing inorganic opportunity today.
Speaker Change: You know, maybe you're you're the landscape that you see kind of areas that you're interested in an update there would be great. Thank you.
Speaker Change: Yes sure.
Speaker Change: We want to continue to be strategic in our thinking there and disciplined in our approach.
Speaker Change: Obviously, the new source of funding.
Speaker Change: <unk> funding, we've raised gives us additional flexibility to be assertive, where we need to be but we're not going to lose sight of.
Speaker Change: Being thoughtful with shareholder capital, obviously opportunistically in certain areas that we're focused on in our strategy like E. Invoicing will we continue to watch for opportunities here. The good news is we've had a number of good acceleration in partnership discussions there so I'm feeling very confident.
Speaker Change: In our overall solution in that space with flexibility if the right opportunity comes forward.
Speaker Change: Great. Thank you very much.
Speaker Change: And our next question comes from Joshua Reilly from Needham.
Joshua Christopher Reilly: Please go ahead.
Joshua Christopher Reilly: Alright, thanks for taking my questions, so you'd come out with a number of new products over the last 12 months to 18 months.
Joshua Christopher Reilly: I think it would be good to get an update on how much are these new products.
Joshua Christopher Reilly: Helping you with net new customer growth any anecdotes on competitive wins and a stronger NR how much year over year I think it was two point how much can you attribute to that are the product innovation versus just the normal course of business.
Speaker Change: Yeah sure Josh So Josh the track record and new product Rollouts as pretty.
Speaker Change: Pretty much proven out over time, we've been doing this for 45 years and we roll out new products at all follows the same pattern.
Speaker Change: Typically need to get your early adopters they need to go live with the product you need to get reference ability and then you see sort of that tail. It takes a couple of years to do that and we're seeing that progress. So that the products. We released a couple of years ago are starting to show more of an uptick the ones. We've released in the last 12 to 18 months are following the same pattern. So I think I'm encouraged by what the.
Speaker Change: The team has done is brought forward.
Speaker Change: <unk> solution some of the tools and the SAP accelerator have really been nicely embraced by the market as for the MLR growth, which we're really pleased because it's already put us in a good position for as we go forward for the rest of the year relative to where we started <unk> in 2023.
Speaker Change: I would say, it's really a combination it's a combination of some of the new offerings and I do want to emphasize the customer success organization, we've really focused investment there and we're seeing nice nice throughput from that team.
Speaker Change: Got it that's helpful. And then while we know you left the EBIT guidance unchanged kind of part of the normal course of business for you guys. After Q1 is there anything investors should be considering in terms of investments during the second half that need to be made for the balance of the year. Thanks guys.
Speaker Change: I think the continued focus is in the R&D space, we've talked about that I'm really comfortable with how we wind up our go to market team relative to demand cycles. So I think we're well positioned there.
Speaker Change: And we're continuing to work through the implementation where on the other side of our ERP implementation and we're continuing to drive leverage through our G&A.
Speaker Change: As we go forward.
Speaker Change: Our next question comes from Adam Hotchkiss from Goldman Sachs.
Adam R. Hotchkiss: Adam go ahead please.
Adam R. Hotchkiss: Great. Thanks for taking the questions I guess, David I'd be curious to hear about the acceleration in revenue actually on the on Prem side I think.
Adam R. Hotchkiss: We all like to talk about cloud and the success there but.
Adam R. Hotchkiss: <unk> was up over 10% for the first time in a while and I think we've been hearing that its been a bit of a differentiator for you as competitive step back from from on Prem. So I'm. Just wondering how you think about your continued support for customers that aren't yet ready to move to cloud and how that's driving more business from new relationships for you at all.
Speaker Change: Sure sure.
Speaker Change: It's a good question there Adam I think you know a few things first of all remember we do lead cloud first in everything we do all of our new logos over 90 plus percent of all of our new logos remain cloud, but in that cross sell market, which oftentimes with some of our largest.
Adam R. Hotchkiss: Historical customers, we've enjoyed long LTV with.
Adam R. Hotchkiss: About 50% of the time, they are going to expand wallet share with more on Prem. So we remain exceptionally committed to that and I think the other thing it's really important to appreciate is while we stay on Prem.
Adam R. Hotchkiss: As most of that software is hosted in an individual cloud environment that the customer has for especially some of the largest customers. So we're very committed to support that it is clearly a competitive differentiator and as you may recall, we modified our pricing to align cloud and on Prem to be the same so it's actually turned out to be very successful.
Adam R. Hotchkiss: When we can deliver that.
Adam R. Hotchkiss: In terms of our gross margin and overall profitability.
Speaker Change: Okay, Great. That's really helpful. And then I'd be curious on the on the partner side I know you've called out a number of large ones as drivers of success, but would.
Adam R. Hotchkiss: Would you say there is any one or two that have really outperformed your expectations.
Adam R. Hotchkiss: Heading into the year that Youre, most excited about future drivers of growth for you.
Adam R. Hotchkiss: You know obviously we.
Adam R. Hotchkiss: We've highlighted a number of times the S&P in Oracle, but I'm really encouraged this year with the channel investments we've made.
Adam R. Hotchkiss: The new offering we just rolled out around Tcs inside of Microsoft some of our ecosystem relationships. There I think are going to pay off well and we've also seen really nice traction across both shopify in that suite.
Adam R. Hotchkiss: If I was a newer partnership for us.
Adam R. Hotchkiss: And we've seen some nice is there move up market as coincides well with the space that we lead and it's really working well for us.
Speaker Change: Okay really helpful. Thanks, David.
Adam R. Hotchkiss: Both of them.
Adam R. Hotchkiss: Our next question comes from Brad Reback from Stifel. Brad May proceed.
Brad Robert Reback: Great. Thanks, very much David following up on that last comment onto Shopify can you maybe remind us how you price on the ecommerce side, specifically and just broadly given some of the weakness out there on consumer spending recently thanks.
David: Yes, Brad I'll start and what I would say pricing is consistent from an ecommerce side as it is with the rest of our business again, we base. It on revenue bands and we set that up in advance.
David: And bill in advance and recognize the revenue ratably, so that really hasnt changed so we kind of said it with where we where we expect the customer is going to operate and then we adjust from there.
Brad Robert Reback: That's great and then on cloud specifically.
Speaker Change: Obviously years off to a really good start there, but the absolute dollars that you need to add this year to get to the 28.
Speaker Change: Somewhat higher than you've had historically, so maybe what informs the confidence on that 28.
Speaker Change: Yeah, I think again everything we're leading with continues to be the focus of cloud continues to be the focus number one and two we brought out a number of new offerings as you know over the past several years and the fact that they're all focused on the cloud just gives us more more revenue opportunities to continue to drive cloud.
David: As our growth is a key.
David: Key part of our growth going forward, so absolutely no change in our guidance there I'm pleased that it has increased over 2023 overall and.
David: Don't see any reason to back off of that.
Speaker Change: Perfect. Thank you very much.
David: Okay.
David: And our next question comes from Steve Enders from Citi. Steve Go ahead. Please.
Steven Enders: So on for Steve Good morning, Thanks for taking the questions.
Steven Enders: I appreciate the comments on you know the update on E invoicing.
Steven Enders: And exploring some different opportunities.
Steven Enders: Essentially for the future, but maybe you can just talk about what kind of volumes you've seen so far from that figure out partnership and based on regulation timing. When you kind of expect the bulk of opportunities to come about.
Steven Enders: Yes.
Speaker Change: We don't go into specifics I would say in general very comfortable with the way the performance of the relationship is working still.
Speaker Change: I still think that we're in the first or second inning of true invoice adoption because of some of the larger economies in Europe Havent moved yet.
Speaker Change: And so I.
Speaker Change: I think we're in very good position for what's coming.
Speaker Change: And opportunities to accelerate that as we move forward here in 'twenty four and more importantly, probably 25 is where you'll see the real I think uptick there is as companies start making that global decision.
Speaker Change: Move away from point solutions, and that's really what we're positioned for.
Speaker Change: Okay. That's helpful. And then I think you made a comment about your own internal ERP migration now being in the rearview mirror.
Speaker Change: Was there any kind of a.
Speaker Change: Catch up in terms of in terms of cash collections or billings that impacted the quarter and is it fair to say, maybe you know any of those prior headwinds are now behind us.
Speaker Change: Yes. This is John I'll start by just saying listen I think we called that out in the fourth quarter and again, we saw a nice cash collections come in in the in the first quarter and we're continuing to see nice nice flow through coming from there. So we feel that that's in pretty good shape, it's getting better. We can always we can always go to improve and we're continuing to do so I think we've talked about trying to get a lot of that behind us by the <unk>.
Speaker Change: The second quarter and so we feel like we're very well positioned again, you can see from the results of some of the cash flows how that how that worked out so we feel pretty good about that we feel good about how we've been able to move that along.
Speaker Change: Great. Thanks for taking my questions you bet.
Speaker Change: Okay.
Speaker Change: And the next question comes from Brad Sills from Bank of America, Brad. Please go ahead.
Speaker Change: Hey, this is Natalie how on for Brad. Thanks for taking my question I wanted to ask where you guys are investing in the business and if there's any capabilities you guys are really focusing on in 'twenty 'twenty four and that will continue to drive strength in the cross selling for a year.
Speaker Change: Yes. Thanks, Natalie you know there's a few areas that we continue to advance obviously we're.
Speaker Change: Continuing to expand our compliance and reporting focus.
Speaker Change: We've highlighted our single cloud portal, that's going to have the both the E. Invoicing all the way through to to VAT compliance I still think Thats a critical part of what the market is looking for.
Speaker Change: AI, we've talked about this on a couple of the past calls we continue to see opportunity there, we're making some really nice progress.
Speaker Change: Our emerging tech team has done some really nice work in bringing that forward and we're going to continue to be pretty disciplined in what we're doing there. So those are two areas I would highlight.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Speaker Change: And our next question comes from Alex Sklar from Raymond James Alex. Please go ahead.
Alexander James Sklar: Great. Thank you Dave just wanted to follow up on on kind of the invoicing and broader international momentum you've talked you talked about the nice marketplace to win in the prepared remarks can you just kind of update us on the mix of your pipeline today.
Alexander James Sklar: Coming from international opportunities relative relative to a year ago.
Alexander James Sklar: [noise] matured kind of that international go to market motion I'm curious kind of the <unk>.
Speaker Change: Opportunity to accelerate that business going forward. Thanks.
Speaker Change: Obviously.
Speaker Change: International is a small part of our business, particularly in Europe, and we're very excited about what we're doing there in fact.
Speaker Change: We can add next week I'll be over in Europe for our EU.
Speaker Change: Customer conference and have a great turn out of customers and partners lined up for that session. So.
Speaker Change: Really excited about the momentum the team is building in that in that space and particularly the number of prospects that are coming to it. So I think our brand continues to expand in Europe and is giving us opportunity to grow that pipeline, obviously still working off of a small base, but it will be a <unk>.
Speaker Change: Growth vector for us for years to come and as we continue.
Speaker Change: Continue to watch the invoicing space evolve around it I think it'll it will only accelerate.
Speaker Change: Okay, great Great color there and then just maybe one more for you David just in terms of the S&P migration catalyst.
Speaker Change: Has anything changed in terms of when you are being brought into those discussed in the prepared remark when maybe it does.
David: Just that you're being brought in earlier in the cycle I just wanted to see how prevalent that was across your pipeline right. Yeah. That's a really exciting development for US Alex is as we've talked about we have a differentiated relationship than we've had with S&P in the past we are working with their sales teams.
David: And really have appreciated the the <unk>.
David: Partnering that theyre doing with us much earlier in the sales process to allow us.
David: To work with their reps, who are actually getting quota relief. So theres a nice win win for all in this process and more importantly, we're able to deliver higher customer value and so I think we're seeing it we're going to see it in the win rates going forward and that earlier visibility will allow us to further differentiate with all the.
Speaker Change: S&P tools and accelerators that we've created over the past several years, it really positions us well.
Speaker Change: Great. Thanks for the color.
Speaker Change: Sure.
Speaker Change: And I'd like to remind you if he was still would like to enter the question queue. Please press star one.
Speaker Change: And our next question comes from Patrick Wall Ravens from citizens Patrick. Please go ahead.
Speaker Change: Hi, Thanks for taking my question. This is Austin call on for Pat Walraven, I'd Love to get your take on where you guys see kind of at a high level, where the greatest regulatory tail winds are coming from in the U S and Europe, and then especially in the fast growing economies like Brazil, and India are there.
Speaker Change: Tax compliance products that are best positioned to satisfy each of those trends and are there opportunities.
Speaker Change: More opportunities to address those different trends in those different regions for vertex. Thank you.
Speaker Change: Last year was a record number of changes here in the U S. So obviously remains a fertile market for regulatory change, but I think the more seismic changes.
Speaker Change: As you note are happening outside of the U S. We can we've highlighted a little bit around E invoicing being one.
Speaker Change: That in the digital age is an important legislation pieces going forward in Europe right. Now is an important vote coming up on may 14th around that at all of those things lined up to be.
Speaker Change: Assistant and consistent regulatory changes governments look for new ways of seeking revenue and so when we think about our product set part of the reason we've been highlighting this importance of this cloud portal linking E. Invoicing all the way through to that compliance is in.
Speaker Change: Is in direct response to those regulatory <unk>.
Speaker Change: <unk>.
Speaker Change: Think overtime with generative AI data management is going to become increasingly important and data insights for businesses as they are doing broad and that's that's fueling some of the the next generation investment that we're thinking about for products.
Speaker Change: Great. Thanks, so much.
Speaker Change: Okay.
Speaker Change: And this concludes our question and answer session I would like to turn the conference back over to Joe Crivelli for some closing remarks.
Joe Crivelli: Thank you everybody for joining us today, if you have any follow up questions or if you'd like to schedule additional time with the team. Please send me an email at investors at vertex Inc. Dot com have a great rest of your day and we look forward to speaking with you in the coming weeks.
Joe Crivelli: Yeah.
Joe Crivelli: The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect have a great day.