Summary
Vertex closed FY2024 with a quarter that paired revenue growth with a much wider GAAP loss. Fourth-quarter revenue was $178.5 million, up 15.2% from the prior-year quarter, and full-year revenue was $666.8 million, up 16.5%. Annual recurring revenue (ARR) ended the year at $603.1 million, up 17.7%. That ARR figure included $5.9 million from Systax and $7.9 million from ecosio; excluding both acquisitions, ARR growth was 15.0%. Deferred revenue was $344.2 million, up 17.6% from the prior-year quarter. The mix shift toward cloud remains a central part of the story, and management expects it to continue.
The GAAP profit picture was split between strong gross profit and a swing to a large net loss. Fourth-quarter gross profit was $117.1 million, up 25.1%, and gross margin was 65.6%, up 5.2 percentage points from the prior-year quarter. Full-year gross profit was $426.1 million, up 22.2%, and full-year gross margin was 63.9%, up 3.0 percentage points. Operating results moved the other way in the quarter. Vertex reported an operating loss of $13.1 million, and the loss widened, while operating margin was -7.3%, down 5.7 percentage points. The full-year operating loss was $2.2 million, and the loss narrowed, with operating margin of -0.3%, up 2.7 percentage points. Net loss was $67.8 million in the quarter, compared with net income in the prior-year quarter. For the full year, net loss was $52.7 million, and the loss widened. Management pointed to a valuation allowance against U.S. deferred tax assets taken in the fourth quarter, based on cumulative losses recognized in the U.S. entity over the past three years, as a factor in the quarter's tax expense and net loss.
Non-GAAP measures show a profitable operating model beneath the GAAP loss. Fourth-quarter non-GAAP operating income was $32.5 million, up from $28.2 million in the prior-year quarter. Adjusted EBITDA was $38.1 million, up from $32.0 million, and Adjusted EBITDA margin was 21.3%, up from 20.7%. Non-GAAP net income was $25.5 million, and non-GAAP diluted EPS was $0.15. For the full year, non-GAAP operating income was $131.0 million, up from $85.6 million, Adjusted EBITDA was $151.9 million, up from $100.8 million, and Adjusted EBITDA margin was 22.8%, up from 17.6%. Full-year non-GAAP net income was $101.0 million, and non-GAAP diluted EPS was $0.61. The gap between GAAP and non-GAAP results reflects stock-based compensation, depreciation and amortization of capitalized software and acquired intangible assets, amortization of cloud computing implementation costs, severance expense, acquisition contingent consideration, changes in the fair value of acquisition contingent earn-outs, and transaction costs.
Cash generation was mixed by period. Fourth-quarter operating cash flow was $41.1 million, down 13.7% from the prior-year quarter. Full-year operating cash flow was $164.8 million, up 121.7%. Free cash flow, a non-GAAP measure, was $17.9 million in the quarter compared with $28.8 million in the prior-year quarter, and $77.7 million for the full year compared with $6.1 million. Retention softened at the margin. Net revenue retention was 109%, compared with 113% at December 31, 2023, and 111% at September 30, 2024. Gross revenue retention was 95%, consistent with both December 31, 2023, and September 30, 2024. Direct customers totaled 4,915 at Q4 2024, up from 4,310 at Q4 2023, and indirect customers totaled 464, up from 404. Total customers were 5,379, up from 4,714.
Guidance points to continued growth but also higher investment. For the first quarter of 2025, Vertex expects revenues of $175 million to $178 million and Adjusted EBITDA of $33 million to $36 million. For full-year 2025, the company expects revenues of $760 million to $768 million, cloud revenue growth of 28%, and Adjusted EBITDA of $161 million to $165 million. The CFO said the 2025 Adjusted EBITDA guidance includes an additional $4 million investment in ecosio and approximately $10 million to $12 million across research and development for commercialization of the AI-based Smart Categorization product, other AI-related internal tools, new product initiatives, and other emerging technologies. Risks include the NRR decline, which management attributed to a decrease in customer cross-sell and additional entitlements, and the possibility that gross margin may decrease as cloud-based solutions become a larger part of total revenues and the company scales its multi-cloud offerings. The company also carries acquisition-related earn-outs and plans more headcount and investment ahead of expected benefits.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2024 | Q3 FY2024 | QoQ | Q4 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $178.5M | $170.4M | +4.7% | $154.9M | +15.2% |
| Gross profit | $117.1M | $110.5M | +6.0% | $93.6M | +25.1% |
| Gross margin | 65.6% | 64.8% | +0.8 pp | 60.4% | +5.2 pp |
| Research & development | $19.6M | $15.6M | +25.4% | $12.9M | +51.9% |
| Sales & marketing | $47.4M | $42.1M | +12.6% | $37.0M | +28.0% |
| General & administrative | $39.9M | $41.5M | -3.8% | $36.9M | +8.3% |
| Total operating expenses | $130.2M | $105.6M | +23.3% | $96.1M | +35.5% |
| Operating income (loss) | -$13.1M | $4.9M | -367.6% | -$2.5M | -426.1% |
| Operating margin | -7.3% | 2.9% | -10.2 pp | -1.6% | -5.7 pp |
| Net income (loss) | -$67.8M | $7.2M | -1038.9% | $15.3M | -542.1% |
| Net margin | -38.0% | 4.2% | -42.2 pp | 9.9% | -47.9 pp |
| Customers | 597 | 574 | +4.0% | 4,300 | -86.1% |
| Net retention rate | 109.0% | 111.0% | -2.0 pp | 113.0% | -4.0 pp |
Risks
Vertex is launching a product leveraging generative AI and paid about $6.1 million on May 31, 2024 to acquire tax-specific AI capabilities; the filing warns that deficient, inaccurate, or biased AI outputs, AI-related cybersecurity incidents, and evolving AI laws could cause reputational, competitive, and legal harm.
In April 2024 Vertex issued $345.0 million aggregate principal amount of 0.750% Convertible Senior Notes due 2029, and as of December 31, 2024 it had approximately $923.4 million of indebtedness; the filing warns this may limit cash available for operations, increase vulnerability to adverse conditions, and dilute existing stockholders upon conversion.
A substantial portion of revenue depends on subscriptions to its indirect tax software, and customers have no obligation to renew; the MD&A reports NRR was 109% in 2024 and 113% in 2023, while GRR was 95% in both years.
Vertex depends on tax-content specialists, software developers, and technical support personnel, and it has recently experienced efforts by a significant competitor to solicit its employees; competition for skilled personnel is intense.
Vertex acquired ecosio for $169.0 million in 2024 with Cash Earn-outs up to $94.4 million and Stock Earn-outs up to $35.0 million, and recorded a $17.5 million change in fair value of acquisition contingent earn-outs for FY2024; the filing warns future acquisitions may not yield expected benefits and integration may divert management.
Vertex holds significant amounts of customer money that it remits to taxing authorities, and cash deposits with financial institutions may exceed federal insurance limits; errors, fraud, system failures, or bank insolvency could expose it to financial loss and liability to customers.
During Q4 2024 Vertex established a full valuation allowance against U.S. deferred tax assets, contributing to income tax expense of $54.6 million for FY2024 compared with an income tax benefit of $8.6 million for FY2023.
Changes in tax laws or regulations, or their interpretation or enforcement, may reduce complexity, decrease the frequency of tax filings, or require substantial investment to modify its software, each of which could harm revenue.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA Margin
Free Cash Flow Margin
Free Cash Flow
Total customers
Non-GAAP operating income
Annual Recurring Revenue (ARR)
Net Revenue Retention (NRR)
Non-GAAP Gross Margin
Direct customers
Average Annual Revenue per direct customer (AARPC)
Gross Revenue Retention (GRR)
Indirect Customers
Summary, forecast, risks and KPIs are extracted from Vertex, Inc.'s SEC filings for Q4 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.