Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

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Vertex (VERX US), a provider of tax software solutions, set the terms for its upcoming IPO. The company plans to offer<a href="https://www.marketwatch.com/story/tax-software-company-vertex-to-offer-212-million-shares-in-planned-ipo-priced-at-14-to-16-each-2020-07-20" target="_blank" rel="noopener"> 21.2 million shares</a> priced at $14 to $16 per share. If the underwriters exercise their greenshoe option, there will be a total of 23.8 million shares that will be offered. At the high end of the IPO price range, the company would be able to raise $339 million. At the mid-point of the IPO price range, the company would have an implied market cap of $2.3 billion. 
Our valuation analysis of Vertex suggests an implied market cap of $4.8 billion or $31.6 per share, representing a 111% upside to the mid-point of the current IPO price range of $15 per share.
To value Vertex, we used a P/S multiple of 10.9x (2021), which is a 40% discount to Avalara's P/S multiple of 18.1x (2021E). This also represents a 52% discount to the comps' average P/S multiple of 22.5x in 2021.
The global investors have been pouring enormous amounts of capital into the U.S. software sector (SaaS) recently as evidenced by strong recent performances of nCino (NCINO US) and <a href="https://www.smartkarma.com/entities/zoominfo-technologies" target="_blank" data-smartkarma-citation="entities:28879:1" rel="noopener">Zoominfo Technologies (ZI US)</a> and it appears that Vertex could once again become a big winner in the U.S. software sector. 
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Vertex (VERX US), a provider of tax software solutions, set the terms for its upcoming IPO. The company plans to offer 21.2 million shares priced at $14 to $16 per share. If the underwriters exercise their greenshoe option, there will be a total of 23.8 million shares that will be offered. At the high end of the IPO price range, the company would be able to raise $339 million. At the mid-point of the IPO price range, the company would have an implied market cap of $2.3 billion. 
Our valuation analysis of Vertex suggests an implied market cap of $4.8 billion or $31.6 per share, representing a 111% upside to the mid-point of the current IPO price range of $15 per share.
To value Vertex, we used a P/S multiple of 10.9x (2021), which is a 40% discount to Avalara's P/S multiple of 18.1x (2021E). This also represents a 52% discount to the comps' average P/S multiple of 22.5x in 2021.
The global investors have been pouring enormous amounts of capital into the U.S. software sector (SaaS) recently as evidenced by strong recent performances of nCino (NCINO US) and Zoominfo Technologies (ZI US) and it appears that Vertex could once again become a big winner in the U.S. software sector. 


Vertex (VERX US) is getting ready to complete its IPO in the U.S. market in the coming weeks, trying to raise $100 million. Vertex provides comprehensive tax solutions and its focus has been on providing automated solutions to companies’ indirect tax processes, including sales tax, seller's use tax, consumer use tax, and value-added tax ("VAT"), among others.
The company’s software is more effective and comprehensive in calculating and automating the indirect tax reporting as compared to numerous other existing enterprise resource planning (ERP) software which was not built for complex tax management. Established in 1978, Vertex has more than 4,000 customers, including over half of the Fortune 500, and provides tax support to its customers in over 130 countries.
Competition - Vertex’s major competitors include Avalara, Thomson Reuters, Davo, Exactor, Walters Kluwer, Sovos, and Tax Jar. Most of its competitors are privately held but a few including <a href="https://www.smartkarma.com/entities/avalara-inc" target="_blank" data-smartkarma-citation="entities:27276:1" rel="noopener">Avalara Inc (AVLR US)</a>  are publicly traded. Among the competitors, Vertex will be most closely compared to Avalara which completed its IPO in June 2018 at the stock price of $24 per share and Avalara's stock price has surged 485% since its IPO. 
The company generated sales of $321.5 million (up 18% YoY) and an operating profit of $31.9 million in 2019, from an operating loss of $2.8 million in 2018. The company had an impairment of assets totaling $32.7 million in 2018. Excluding this amount, it would have had an operating profit of $30 million in 2018. The company had sales of $89.2 million (up 19.6% YoY) in 1Q 2020. However, it had an operating loss of $28.2 million in 1Q 2020, from an operating profit of $7.8 million in 1Q 2019.

Vertex (VERX US) is getting ready to complete its IPO in the U.S. market in the coming weeks, trying to raise $100 million. Vertex provides comprehensive tax solutions and its focus has been on providing automated solutions to companies’ indirect tax processes, including sales tax, seller's use tax, consumer use tax, and value-added tax ("VAT"), among others.
The company’s software is more effective and comprehensive in calculating and automating the indirect tax reporting as compared to numerous other existing enterprise resource planning (ERP) software which was not built for complex tax management. Established in 1978, Vertex has more than 4,000 customers, including over half of the Fortune 500, and provides tax support to its customers in over 130 countries.
Competition - Vertex’s major competitors include Avalara, Thomson Reuters, Davo, Exactor, Walters Kluwer, Sovos, and Tax Jar. Most of its competitors are privately held but a few including Avalara Inc (AVLR US)  are publicly traded. Among the competitors, Vertex will be most closely compared to Avalara which completed its IPO in June 2018 at the stock price of $24 per share and Avalara's stock price has surged 485% since its IPO. 
The company generated sales of $321.5 million (up 18% YoY) and an operating profit of $31.9 million in 2019, from an operating loss of $2.8 million in 2018. The company had an impairment of assets totaling $32.7 million in 2018. Excluding this amount, it would have had an operating profit of $30 million in 2018. The company had sales of $89.2 million (up 19.6% YoY) in 1Q 2020. However, it had an operating loss of $28.2 million in 1Q 2020, from an operating profit of $7.8 million in 1Q 2019. 

Vertex IPO Preview - A Tax Service SaaS Solution Provider

United States

Vertex, Inc. provides tax compliance software. The Company offers tax management solutions for sales, value added, consumer use, communication service, lease, lodging, and payroll taxes. Vertex serves retail, telecom, publishing, information systems, and industrial machinery industries in the State of Pennsylvania.

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Vertex Inc (2870526 US)

Vertex IPO Valuation Analysis

Vertex (VERX US), a provider of tax software solutions, set the terms for its upcoming IPO. The company plans to offer 21.2 million shares priced...

Douglas Kim

Vertex IPO Preview - A Tax Service SaaS Solution Provider

Vertex (VERX US) is getting ready to complete its IPO in the U.S. market in the coming weeks, trying to raise $100 million. Vertex provides...

Douglas Kim

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