Summary
Vertex reported first-quarter 2024 revenue of $156.8 million, an 18.1% increase from the prior-year quarter. Gross profit rose 18.3% to $95.8 million, and gross margin was 61.1%, flat versus the prior-year quarter. The company still posted an operating loss, but it narrowed by $7.4 million to $1.6 million. Operating margin improved by 5.7 percentage points to negative 1.0%. Net income was $2.7 million, a swing to profit from a loss in the prior-year quarter. Those headline improvements point to better operating leverage, though the net income line also reflects a tax benefit and stock-based compensation remains a large non-cash expense.
The cash flow statement was stronger. Operating cash flow was $24.6 million, up 603.7% from the prior-year quarter. Capital expenditures were $14.4 million, up 43.8%. Free cash flow, which the company defines as operating cash flow less purchases of property and equipment and capitalized software, was $4.5 million, compared with negative $10.6 million a year earlier. Deferred revenue, a proxy for billings momentum, stood at $301.0 million, up 6.3%. The gap between operating cash flow and free cash flow reflects heavy investment in internal-use software and infrastructure.
Management pointed to recurring revenue and customer expansion. Annual recurring revenue was $524.5 million at March 31, 2024, up 17.5% from $446.5 million a year earlier. The company had 4,309 direct customers at March 31, 2024, compared with 4,278 a year earlier. Cloud-based subscriptions generated 47% of software subscription revenue, up from 43%, while on-premise accounted for 53%, down from 57%. The mix shift toward cloud is a positive sign for long-term recurring revenue, even if it pressures near-term margins.
The preliminary 8-K, released April 22, 2024, framed the quarter with ranges before the 10-Q was filed. It projected first-quarter Adjusted EBITDA of $35.5 million to $37.5 million, compared with $20.2 million a year earlier, an increase of approximately 76% to 86%. It projected annual recurring revenue of $523.5 million to $525.5 million, up from $446.5 million, or approximately 17% to 18%. The final MD&A reported Adjusted EBITDA of $36.7 million, with a 23.4% margin, compared with $20.2 million and a 15.2% margin a year earlier. The press release said about $2 million of the expected Adjusted EBITDA improvement came from expenses delayed from the first quarter to future quarters in 2024, and another $2 million came from a higher percentage of capitalized R&D costs. That mix matters because it lifts current-period profitability without improving the underlying expense base.
Guidance context is limited. The company did not provide next-quarter or full-year guidance in these materials. It said full first-quarter results would be released before the market opens on May 8, 2024. The preliminary figures were not audited, reviewed, or compiled by an independent registered public accounting firm, and the quarter's closing procedures were not complete when the 8-K was issued. Investors should weigh that uncertainty alongside the usual risks listed in the 10-K: attracting new customers cost-effectively, renewing and upgrading existing subscriptions, sustaining revenue growth, maintaining profitability, integrating acquisitions, preserving strategic relationships, and managing the effects of a global pandemic. After quarter end, Vertex closed a $345.0 million convertible notes offering and amended its credit agreement, which adds financing considerations to the balance sheet story.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2024 | Q4 FY2023 | QoQ | Q1 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $156.8M | $154.9M | +1.2% | $132.8M | +18.1% |
| Gross profit | $95.8M | $93.6M | +2.3% | $81.0M | +18.3% |
| Gross margin | 61.1% | 60.4% | +0.7 pp | 61.0% | +0.1 pp |
| Research & development | $16.8M | $12.9M | +30.6% | $15.9M | +6.2% |
| Sales & marketing | $40.5M | $37.0M | +9.3% | $35.7M | +13.3% |
| General & administrative | $35.5M | $36.9M | -3.6% | $34.3M | +3.6% |
| Total operating expenses | $97.4M | $96.1M | +1.3% | $89.9M | +8.3% |
| Operating income (loss) | -$1.6M | -$2.5M | +37.2% | -$8.9M | +82.5% |
| Operating margin | -1.0% | -1.6% | +0.6 pp | -6.7% | +5.7 pp |
| Net income (loss) | $2.7M | $15.3M | -82.5% | -$18.1M | +114.8% |
| Net margin | 1.7% | 9.9% | -8.2 pp | -13.7% | +15.4 pp |
| Net retention rate | 112.0% | 113.0% | -1.0 pp | 110.0% | +2.0 pp |
Risks
As of March 31, 2024, Vertex had approximately $436.9 million of indebtedness, and in April 2024 it closed a private offering of $345.0 million aggregate principal amount of 0.750% Convertible Senior Notes due 2029, which could limit cash flow available for operations and dilute existing stockholders upon conversion.
The Credit Agreement contains restrictive covenants, and the Indenture for the Notes may require cash repurchase upon a fundamental change or cash settlement upon conversion. Failure to comply or make payments when due could cause a default and acceleration of indebtedness.
Vertex expects the Notes will be reflected as a liability with issuance costs amortized into interest expense, making recognized interest expense greater than cash interest and lowering reported income or increasing reported loss. The if-converted method may reduce diluted EPS, and reclassification to a current liability could materially reduce reported working capital.
The Capped Call Transactions expose Vertex to unsecured credit risk of the Option Counterparties if any default. Their hedging or unwinding activity could also increase or decrease the market price of Vertex Class A common stock.
MD&A states general and administrative expenses are expected to increase in absolute dollars as Vertex incurs costs of being a public company, including Section 404(b) compliance and additional requirements from losing emerging growth company status.
MD&A reports software subscription revenues from new customers averaged 5.6% of total software subscription revenues in the three months ended March 31, 2024, down from 6.8% in the same period in 2023, indicating growth is increasingly reliant on expansion from existing customers.
Provisions in the Indenture could delay or prevent an otherwise beneficial takeover because a fundamental change could require repurchase of Notes for cash and a make-whole fundamental change could temporarily increase the conversion rate.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA Margin
Free Cash Flow Margin
Direct customers
Net Revenue Retention
ARR
Summary, forecast, risks and KPIs are extracted from Vertex, Inc.'s SEC filings for Q1 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.