Vertex, Inc. (VERX) Q1 2024 Earnings Call Transcript

Greetings, and welcome to Vertex's First Quarter 2024 Earnings Conference Call. Please note, this conference is being recorded. Now I'll turn the conference over to Joe Crivelli, Vice President of Investor Relations. Mr. Crivelli, you may now begin.

Hello, and thanks for joining us to discuss Vertex's first quarter financial results. I'm Joe Crivelli, Vice President of Investor Relations. David DeStefano, our President and CEO; and John Schwab, our CFO, are also with us today. 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. In our remarks today, we will also refer to non-GAAP financial metrics. A reconciliation of these metrics to GAAP is provided in today's press release. This call is being recorded and will be available for replay on our Investor Relations website. I'll now turn the call over to David.

Thanks, Joe. Welcome, everyone, and thank you for joining us. 2024 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. Our consistently solid performance is the result of being crystal clear on where we are going as a company and then being laser-focused on executing our plans to get there. 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. We deliver end-to-end capabilities for indirect tax to seamlessly connect systems, solutions, and data. This unified approach empowers our customers to confidently navigate indirect tax complexities and manage their need for a continuous compliance process. We're able to support our customers throughout their entire digital transformation journey, wherever they run their business, locally, fully in the cloud, or somewhere in between. We provide value-added services that help them efficiently integrate their indirect tax into their infrastructure and stay in compliance. And behind the scenes, we have a world-class team dedicated to our customer success at every touchpoint. This is what enables us to keep delivering differentiated value to our customers with great results for investors. Revenue traction remains strong. Total revenue was up 18.1% in the first quarter and software subscription growth was 18.8%. In addition, cloud revenue growth was 28.3%, which is slightly ahead of our target for the full year. 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. 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. This bodes well for cash production for the rest of the year. In addition, this quarter, ARR was $525 million, up 17.5% year-over-year. NRR was 112%, up 2 full percentage points compared to last year's first quarter. Average annual revenue per customer increased 17% year-over-year to $121,720. Scaled customer count, which represents customers delivering annual revenue of over $100,000 grew 13% year-over-year and GRR was 95% in the first quarter, which falls within our targeted best-in-class range of 94% to 96%. I'm incredibly proud that Vertex's leadership in 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. Convertible debt investors were extremely enthusiastic about Vertex, our business strategy, and our growth prospects. 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. This capital will enable us to be agile, proactive, and decisive in seizing growth opportunities, whether through organic investments or acquisitions. Our financial flexibility and our balance sheet has never been stronger. Now turning to notable wins in the quarter. Our results confirm that the market for indirect tax software is underpenetrated and many companies are still handling their indirect tax needs with homegrown solutions. As the persistent tailwinds of business expansion, regulatory pressures, and digital transformations continue to pressure tax departments, we believe that the opportunity to deliver our tax solutions to the market will grow. I will highlight some key new logo wins which pay this off. In the first quarter, we won a mid-6-figure deal with a global provider of power management solutions. This particular deal highlights 2 growth pillars for Vertex: the anticipated wave of ERP conversions that will happen as a result of SAP's decision to end mainstream support for ECC in 2027; as well as the sales partnership we have built with the SAP direct sales force. In this case, the customer was migrating to S/4HANA as part of their digital transformation project. This was a catalyst for them to evaluate indirect tax and determine it was time to replace their homegrown solution as they were previously manually updating rules and regulations in their purchasing system. As we have discussed, one of our growth investments was building a more tightly aligned partnership with SAP on the go-to-market front, and we are seeing ongoing traction from this investment. This deal is an example of how that partnership is bringing new customers to Vertex as we were referred in by the SAP sales team. In addition to the credibility boost that we enjoy in this case, the SAP referral enabled us to get an early look at the customers' infrastructure and tailor our solution accordingly. 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. 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. Due to the acquisitions, the customer systems environment was extremely complex, which competitively gave us an advantage due to our experience connecting multiple platforms to a single tax solution. In this case, we integrated with multiple systems, including Oracle, Workday, Salesforce, and JD Edwards as well as the customer's homegrown billing systems. We had a great win in the quarter with a cloud-native cybersecurity company. After being acquired, our customer underwent a transformation initiative to move their tax solution to the cloud. Even though the new parent currently uses one of our competitors, our cloud solution was chosen because the team was familiar with our proven track record and we were able to meet their accelerated timeline. We also won a mid-6-figure deal with a new customer as a manufacturer of industrial machinery. It's another case where an S/4HANA transformation led the company to reevaluate how it's handling indirect tax. The company selected Vertex solutions for tax calculation as well as compliance and reporting solutions for both North America and Europe. They also licensed Vertex PLUS tools for SAP and our certificate center. One of the biggest sources of new revenue for Vertex and a sustainable driver of NRR growth is increased business with our existing customers, the expand part of the land and expand equation. A customer in the consumer products space fueled our Q1 growth with a mid-6-figure revenue addition. Their SAP infrastructure upgrade presented an ideal opportunity to move their Vertex solution to the cloud and expand entitlements by $15 billion. They also saw the value of our tax accelerator and Vertex PLUS tools for SAP. While they evaluated competitive options as part of their process, our unmatched SAP expertise and solutions ultimately differentiated Vertex. Our unique capabilities delivered a lower total cost of implementation and ownership while minimizing risk. To further optimize their tax processes, our consulting team is collaborating with them to streamline current indirect tax calculations and compliance. Also in the first quarter, we expanded our relationship with a long-time customer in the medical diagnostics industry. They advanced their corporate cloud strategy by migrating 2 of our legacy solutions to our modern cloud offering. This, in turn, consolidated their tax operations onto a single platform, seamlessly integrating with Salesforce Commerce Cloud, PeopleSoft, and their internal billing systems. Other fundamental business changes such as M&A, divestitures, and the adoption of new modes of commerce can also drive new business for Vertex. 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. Their Big 4 accounting firm conducted an RFP and Vertex prevailed. Similarly, in the security industry, we won a deal with a company that was being sold to a private equity firm. The customer selected Vertex for indirect tax to integrate Microsoft D365. Finally, on the international front, we had a nice win with a growing marketplace provider. When 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 needed. Our competitors' transaction-based pricing model led to massive cost overruns. Ultimately, after 18 months of frustration, the customer changed direction and came back to Vertex. A quick word on how we are addressing e-invoicing. We remain committed to our strategy of delivering a continuous compliance solution, which provides for a single cloud portal to address the e-invoicing through to compliance process, of which e-invoicing is just one piece. As we noted last quarter, after we opted out of the bidding war, in the near term, we continue to utilize Pagero as a partner in alignment with our commercial agreement. However, we are also evaluating our options and developing partnerships with additional players in this space. We will have more to share on this in the coming quarters. As I look back on the strategic growth investments we made from 2020 through 2023 and how they are helping us better serve our customers, I am thrilled with our position in the market and the opportunity in front of us. Our product portfolio, tax content database, go-to-market expertise, and scalable infrastructure has us well positioned for a nice run of revenue growth, increasing profitability, and solid cash flow to reward our investors. John will now take you through the financials. John?

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. 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. Subscription revenue increased 18.8% period-over-period to $131.8 million. Our services revenue grew at 14.8% to $25 million. 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. Annual recurring revenue, or ARR, was $524.5 million at quarter end. This is up 17.5% year-over-year. Net revenue retention or NRR, remains strong at 112%, up 2 full percentage points compared to last year. Gross revenue retention or GRR was 95% at quarter end within our targeted range of 94% to 96%. And our average annual revenue per customer for AARPC, which is based on our direct customer account was $121,720 in the first quarter of 2024, up from $118,910 in the fourth quarter of 2023. For the remainder of the income statement discussion, I will 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. 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. 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. Gross margin on services revenue was 40.5% compared to 37.9% in last year's first quarter and 38.2% in the fourth quarter of 2023. Turning to operating expenses. In the first quarter, research and development expense was $13.5 million compared to $13.6 million last year. 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. 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. And our general and administrative expense was $27.6 million, down $1.7 million from last year. Adjusted EBITDA was $36.7 million, an increase of $16.5 million or 82% year-over-year and exceeding our quarterly guidance. 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 expensed R&D costs in the first quarter. But even excluding these items, adjusted EBITDA would have exceeded the high end of our first quarter guidance. 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 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. Normally, our cash flows in the first quarter are seasonally lower than they are in 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. We are encouraged by the performance and anticipate that our free cash flow will follow our standard seasonality trends. 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. I'll note that with the proceeds of our convertible debt offering, our cash and investment balances now stand at approximately $350 million. For additional liquidity, we also have $200 million of unused availability under our existing line of credit. And now turning to guidance. 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, and adjusted EBITDA in the range of $31 million to $33 million, at the midpoint would represent an increase of approximately $10 million or 45% over the prior year. This would also represent our third quarter in a row with adjusted EBITDA margins over 20% and will fuel ongoing cash flow improvement to further strengthen our balance sheet. 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. Adjusted EBITDA in the range of $130 million to $135 million, representing an increase of $32 million at the midpoint. And we believe that cloud growth will accelerate to approximately 28% in 2024. We expect to reevaluate our full-year guidance in August when we announce our second-quarter results. David will now make some closing comments before we open up for Q&A.

Thanks, John. I want to reiterate that I'm very pleased with our performance in the first quarter. Vertex went public in mid-2020, and we have 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 first quarter of 2024 was the 14th time we exceeded the high end of our revenue guidance 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 struggled. The growth investments we made from 2020 through 2023 are only helping us to build on that track record. Our customer success organization is now mature and driving great results with the expansion of existing customer accounts. Our broader and deeper go-to-market team, including our fully developed partner channel, are finding new opportunities for us to add customers in the largely underpenetrated enterprise space. And the new products we launched over the past several years are gaining traction and differentiating Vertex when we compete for new business. With those investments behind us, the job is execution. 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 2024. With that, operator, please go ahead and open the call for questions.

Our first question comes from Chris Quintero from Morgan Stanley.

Maybe for you, David, I wanted to ask about the pipeline conversion rates within the SAP channel. You mentioned that you haven't benefited yet from some of the ECC migration efforts that will occur over the next 3 years. And now you've got SAP recently with seemingly greater willingness to push those migrations through. So just curious what you're seeing with that large pipeline turning into close deals here?

Yes, sure, Chris. 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, they’re going to need to evolve 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 activity. And we're really seeing that behavior play out.

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 that low point that you mentioned? And then do you have any thoughts on the long-term conversion rate and if there are any blockers for you to get there?

Thank you for the question. I'll address the last point first. Before the investment cycle began, our cash flow conversion rate was around 65% to 70% from adjusted EBIT, with free cash flow at 60% to 75% of adjusted EBITDA. We anticipate returning to those levels over time. As you noted, we had a strong quarter regarding our free cash flow, marking the first time in four years that we generated free cash flow in the first quarter. This is very encouraging. We expect this positive trend to continue, although it will take a couple of years to reach the 65% to 70% conversion rate. Overall, we've made significant progress, the investment cycle is behind us, and the results indicate that cash will start to flow into the business considerably.

Our next question comes from Daniel Jester from BMO Capital.

Maybe you called out that your typical process is to not raise the full-year guidance or adjust the full-year guidance at this point of the year. Maybe you can just kind of compare and contrast the pipeline and your visibility today to other periods, so we can get a sense of your confidence level in 2024?

Yes, I believe the pipeline remains strong. We are seeing positive progress in various markets, particularly with Microsoft and other ERP platforms like Workday and NetSuite, especially with the rollout of our TCS solution in Microsoft, which is gaining traction. Additionally, our engagements with SAP and Oracle are consistently favorable. We have distinct solutions in the SAP sector, and our win rates there remain robust. This gives us confidence as we look ahead for the remainder of the year.

And then you touched on this briefly in the prepared remarks that maybe you can expand a little bit more about how you're viewing in organic opportunities today? Maybe the landscape that you see, kind of areas that you're interested in? An update there would be great.

Yes, sure. We want to continue to be strategic in our thinking there and disciplined in our approach. Obviously, the new source of funding we've raised gives us additional flexibility to be sort of where we need to be, but we're not going to lose sight of being thoughtful with shareholder capital. Obviously, opportunistically in certain areas that we're focused on and our strategy like e-invoicing, we continue to watch for opportunities here. The good news is we've had a number of good acceleration and partnership discussions there. So I'm feeling very confident in our overall solution in that space with flexibility if the right opportunity comes forward.

And our next question comes from Joshua Reilly from Needham.

You've introduced several new products over the past year and a half. It would be helpful to hear how these new offerings have contributed to attracting new customers. Are there any examples of competitive wins or improvements in net revenue retention? How much of the year-over-year growth, which I believe was two points, can you attribute to product innovations compared to the usual business activities?

Yes, Josh. Our track record in launching new products has been proven over time, as we've been doing this for 45 years. When we roll out new products, it typically involves gaining early adopters who go live with the product, which helps us build referenceability, leading to overall growth. This process can take a couple of years, and we're starting to see that progress. The products we launched a few years ago are beginning to show an uptick, and those introduced in the last 12 to 18 months are following the same trend. I'm encouraged by what the team has accomplished, particularly with the Edge solution and the SAP tools and accelerator, which have been well-received in the market. Regarding our net revenue retention growth, we're pleased with our current position compared to where we began in 2023. The growth is a result of a combination of new offerings and significant investments in our customer success organization, which is yielding positive results.

And then while we know you left the EBITDA guidance unchanged kind of per the normal kind of 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?

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 cycle. So I think we're well positioned there. And we're continuing to work through the implementation. We're on the other side of our ERP implementation, and we're continuing to drive leverage through our G&A as we go forward.

Our next question comes from Adam Hotchkiss from Goldman Sachs.

I guess, David, I'd be first curious to hear about the acceleration in revenue actually on the on-prem side. I think we all like to talk about cloud and the success there, but that channel was up for over 10% for the first time in a while. And I think we've been hearing that it's been a bit of a differentiator for you as competitors step back 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 and new relationships for you, if at all?

Sure, that's a great question, Adam. First, it's important to note that we prioritize a cloud-first approach in everything we do. More than 90% of our new customers are in the cloud. However, in terms of cross-selling to some of our largest historical clients, about half of the time, they tend to increase their spending on on-prem solutions as well. We are fully committed to supporting that. Additionally, while we do cater to on-prem needs, much of that software is actually hosted in the customer's cloud environment, especially among our biggest clients. This commitment is a significant competitive advantage for us. As you may remember, we adjusted our pricing structure to ensure that cloud and on-prem offerings are aligned, and this has proven very successful in terms of our gross margin and overall profitability.

And then I'd be curious on the partner side. I know you've called out a number of large ones as drivers of success. But would you say there's any one or 2 that have really outperformed your expectations heading into the year that you're most excited about, future drivers of growth for you?

We've mentioned SAP and Oracle several times, but I'm truly optimistic this year about the investments we've made in our channels and the new offering we recently launched with TCS and Microsoft. Some of our ecosystem partnerships are likely to yield significant benefits. We've also observed strong progress with both Shopify and NetSuite. Shopify is a newer partnership for us, and we've seen encouraging results as their move into higher-end markets aligns well with our area of expertise. It's working out very well for us.

Our next question comes from Brad Reback from Stifel.

David, following up on that last comment on Shopify. Can you maybe remind us how you price on the e-commerce side specifically and just broadly given some of the weakness out there on consumer spending recently?

Yes, Brad, I'll start. And what I would say is pricing is consistent from an e-commerce side as it is with the rest of our business. Again, we base it on revenue bands, and we set that up in advance and bill in advance and recognize the revenue ratably. So that really hasn't changed. So we kind of set it with where we expect the customer is going to operate, and then we adjust from there.

The year has started off very well for the cloud sector. However, the amount of revenue needed this year to reach the 28% increase is noticeably higher than what you have historically needed. So, what gives you confidence in achieving that 28%?

Yes. I think, again, everything we're leading with continues to be the focus. Cloud continues to be the focus, number 1. And 2, 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 revenue opportunities to continue to drive cloud as a key part of our growth going forward. So absolutely no change in our guidance there. Pleased that it's increased over 2023 overall, and I don't see any reason to back off of that.

And our next question comes from Steve Enders from Citi.

I appreciate the comments on the update on e-invoicing and exploring some different opportunities potentially for the future. But maybe you could just talk about what kind of volumes you've seen so far from the Pagero partnership, and based on regulation timing when you kind of expect the bulk of opportunities to come about?

Yes. We don't go into specifics on it. I would say, in general, very comfortable with the way the performance of the relationship is working still. I still think that we're in the first or second inning of true e-invoice adoption because some of the larger economies in Europe haven't moved yet. And so I think we're in a very good position for what's coming and opportunities to accelerate that as we move forward here in '24 and more importantly, probably '25 is where you'll see the real, I think, uptick as companies start making that global decision and move away from point solutions. And that's really what we're positioned for.

And then I think you made a comment about your own internal ERP migration now being in the rearview mirror. Was there any catch-up in terms of cash collections or billings that impacted the quarter? And is it fair to say maybe any of those prior headwinds are now behind us?

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 nice cash collections come in the first quarter, and we're continuing to see nice flow-through coming from there. So we feel that that's in pretty good shape. It's getting better. We can always go to improve, and we're continuing to do so. I think we talked about trying to get a lot of that behind us by the end of the second quarter. And so we feel very well positioned. Again, you can see from the results of some of the cash flows how that worked out. So we feel pretty good about that.

And the next question comes from Brad Sills from Bank of America.

This is Natalie on for Brad. 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 2024 that will continue to drive strength in the cross-selling for the year?

Yes. There are a few areas that we continue to advance. Obviously, we're continuing to expand our compliance and reporting focus. We've highlighted our single cloud portal that's going to have both the e-invoicing all the way through to that compliance. I still think that's a critical part of what the market is looking for. AI, we've talked about this on a couple of past calls. We continue to see opportunity there. We're making some really nice progress. 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 2 areas I would highlight.

And our next question comes from Alex Sklar from Raymond James.

Dave, I just wanted to follow up on kind of the e-invoicing and broader international momentum you've talked. You talked about the nice marketplace win in the prepared remarks. Can you just kind of update us on the mix of your pipeline today coming from international opportunities relative to 1 year ago? And as you matured kind of that international go-to-market motion, I'm curious kind of the opportunity to accelerate that business going forward?

Yes. Obviously, international is a small part of our business, particularly in Europe, and we're very excited about what we're doing. In fact, next week, I'll be over in Europe for our EU customer conference and have a great turnout of customers and partners lined up for that session. So really excited about the momentum the team is building in that space, in particular, the number of prospects that are coming to it. So I think our brand continues to expand in Europe and it's giving us opportunity to grow that pipeline. Obviously, still working off of a small base, but it will be a growth vector for us for years to come. And as we continue to watch the e-invoicing space evolve around it, I think it will only accelerate.

Okay. Great insights there. And then just one more question for you, Dave. Regarding the SAP migration catalyst, has there been any change in when you are included in those discussions? The prepared remarks seemed to suggest that you are being involved earlier in the process. I just want to understand how common that is across your pipeline.

Yes, that's a really exciting development for us, Alex. We have a different relationship with SAP compared to the past. We're collaborating with their sales teams and appreciate the early partnership they are engaging in with us during the sales process, allowing us to work alongside their representatives who are receiving quota relief. This creates a beneficial situation for everyone involved. More importantly, we can provide greater value to customers. I believe this will be reflected in our win rates moving forward, and the earlier engagement will enable us to further stand out with all the SAP tools and accelerators we've developed in recent years. It positions us very well.

Our next question comes from Patrick Walravens from Citizens.

This is Austin Cole on behalf of Pat Walravens. I would like to hear your perspective on where you see the strongest regulatory support emerging in the U.S. and Europe, and particularly in rapidly growing markets like Brazil and India. Are there specific tax compliance products that are well-suited to align with these trends? Are there additional opportunities to tackle these varying trends in different regions for Vertex?

Last year saw a record number of changes in the U.S., indicating it remains a vibrant market for regulatory change. However, the more significant shifts are occurring outside the U.S., particularly with e-invoicing, which is a crucial part of ongoing legislation in Europe. An important vote on this is scheduled for May 14. These developments signal ongoing and consistent regulatory changes, as governments seek new revenue sources. We believe our product offerings are crucial in response to these regulatory trends, particularly the importance of our cloud portal connecting e-invoicing to VAT compliance. Over time, with the emergence of Generative AI, managing data and deriving insights will become increasingly vital for businesses, influencing our future product investments.

And this concludes our question-and-answer session. I would like to turn the conference back over to Joe Crivelli for some closing remarks.

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 e-mail at [email protected]. Have a great rest of your day, and we look forward to speaking with you in the coming weeks.

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect. Have a great day.