"Vertex (NASDAQ: VERX) delivered a split result this morning that left investors parsing mixed signals. The tax technology provider beat on earnings per share but missed revenue expectations, landing at $0.17 versus $0.16 estimated and $192.1M versus $195.5M expected. The stock traded near $22.90 at the filing, down sharply from its 52-week high of $60.71 as the market continues to reassess the company's valuation after a brutal 61% decline year-to-date."
"The real strength in the quarter came from Vertex's cloud business, which expanded 29.6% year-over-year to $92.0M. That's the engine driving the narrative here. Overall revenue grew 12.7% YoY, a solid pace for a software provider, but the company's own guidance suggests deceleration ahead. Cloud revenue is now 48% of the total, and management is leaning hard on the tailwinds from tax complexity and cloud migration demand to justify continued investment."
"Here's the concern: Operating income fell to $4.3M from $4.9M year-over-year, and net income dropped sharply to $4.0M from $7.2M. That's a 44% decline in net income despite 12.7% revenue growth. Operating expenses came in at $125.1M against gross profit of $121.2M, leaving almost nothing on the bottom line. The company is growing the top line but struggling to convert that into earnings leverage."
Vertex reported EPS of $0.17 versus $0.16 estimated and revenue of $192.1M versus $195.5M expected, with the stock near $22.90 after a 61% year-to-date decline. Cloud revenue grew 29.6% year-over-year to $92.0M and comprised 48% of total revenue, while overall revenue rose 12.7% YoY. Operating cash flow was $46.0M and cash on hand totaled $284.4M. Operating income fell to $4.3M and net income dropped to $4.0M as operating expenses of $125.1M exceeded gross profit of $121.2M. Management continues to invest in cloud and sales amid guidance that suggests deceleration.
Read at 24/7 Wall St.
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