Vertex (NASDAQ:VRTX) (VERX), a leading provider of tax technology and services, reported fourth-quarter earnings that surpassed analyst expectations, sending its shares soaring by 26.97%. The company announced a Q4 adjusted EPS of $0.13, which was $0.02 higher than the consensus estimate of $0.11. Revenue for the quarter also exceeded forecasts, coming in at $154.9 million against the anticipated $146.46 million.
The robust financial performance is attributed to the company's strong year-over-year (YoY) revenue growth of 18.1%, marking the highest increase since Vertex became a public entity. Cloud revenues grew by an impressive 29.9% YoY, contributing significantly to the overall revenue surge. Additionally, the company achieved its strongest quarterly free cash flow in over three years, with a positive free cash flow for the full year.
President and CEO David DeStefano expressed confidence in the company's trajectory, stating, "These results once again demonstrate our market leadership, the strength of our brand and the durability of our business." DeStefano's remarks highlight the strategic growth investments that have positioned Vertex to capitalize on future opportunities.
Looking ahead, Vertex provided guidance for the first quarter of 2024, expecting revenues between $152 million and $156 million, with adjusted EBITDA anticipated to be in the range of $29 million to $31 million. For the full year, the company projects revenues between $650 million and $660 million, with cloud revenue growth of 28% and adjusted EBITDA between $130 million and $135 million.
The company's financial outlook reflects a continuation of the positive trend, with CFO John Schwab commenting on the potential for ongoing revenue growth and significant earnings leverage. The guidance suggests that Vertex is on a path to maintain its momentum in the coming year.
Investors have responded positively to the earnings beat and optimistic guidance, as evidenced by the significant uptick in the company's stock price following the announcement. Vertex's performance in the fourth quarter and its forward-looking statements indicate a strong foundation for sustained growth and profitability.
Following the report, analysts at Citi cited the company's record new ARR as driving the solid beat and raise to its 2024 outlook.
"VERX reported a solid 4Q23 rev upside with a $8.5M beat (5.8% vs. 2.0% last Q and 2.3% 4Q ave) including upside of $7.4M, $3.4M, and $17.3M to
software sub, cloud, and ARR, driving a $3.5M adj EBITDA beat, yet, another miss to billings and FCF of ($1.3M) and ($14.5M)," explained the firm.