Vertex, Inc. (VERX) Earnings Call Transcript & Summary

Great. Thanks, everyone, for being here. We're really excited to have David DeStefano and John Schwab, CEO and CFO of Vertex here with us. Thanks so much for taking the time here.

Great to be here. Thank you very much.

Yes. So David, I guess for those in the audience who might be a little less familiar with Vertex. Could you just talk a little bit about the business and what it is you're trying to build?

Sure, sure. So we focus very much on what we call indirect tax, which for most of us, we know as sales tax, use tax and if you're a broad, VAT. And it's a highly complex regulated space where governments are consistently looking for how they're going to generate revenue and indirect tax is actually the largest form of corporate tax paid around the world. So it's a -- it is the primary most dependable source of revenue for governments. And as we all know, our government consistently create debt, which means they create new rules to fund that. And we're in the business of providing that compliance for businesses. We target the enterprise and midsized companies to do that.

Awesome. David, you've been at the company now for 25 years. And the company has obviously evolved significantly over that time. Maybe just start a little bit with your journey at Vertex, what's kept you at the company? And then in particular, what you've learned as CEO over the last 8 years or so.

What kept me at the company clearly actually is the culture. Family held business for 40 years before we went public, a deep appreciation for investing in the business and growing the talent and the culture of the company. So that's what kept me around. I was afforded the opportunity to become the first non-family CEO in 2016. And basically was granted incredible permissions to grow the company. And we grew nicely. I replaced a fair amount of the Executive team during that journey. And the Board's openness and the family's openness to allow me to do that was critical to me staying. We hit 2019, and I basically approached the Board and said, we either need to continue to pay a lot of dividends out to you as family members or we need to do something with our capital structure because we're missing M&A opportunities. We're missing growth in some key strategic areas and the family very bullishly said, let's go public and go after what's possible and really make this the multibillion-dollar business that we all believe it can be. So that's what's got me excited and keeps me going.

Awesome. That's great to hear. And then, John, maybe just before digging in, I'd love for you to just touch on the most recent quarter. Revenue was in line, some of the key numbers like organic ARR and NRR decelerated a little bit, yet you're still expecting obviously, a very strong second half of the year. So just maybe walk us through what's driving that? Your level of confidence? And then where we should be focused going into the end of the year from a financial perspective?

Yes, we're very excited with the results. Again, real nice revenue growth -- good revenue growth, a little slower as you mentioned, but I think we had a slower start to the quarter. The quarter started a little slower. We saw some good activity towards the back end from a revenue standpoint. And so the results there were very strong. So we're very pleased with how that came in. I think if you look at our guidance for the back half, sort of we said that we expect -- we took it up. We expect that things are going to get better. We have good visibility into pipelines. And so I think we feel very good about sort of what we're seeing from a macro front from the front end. One of the things that we're really pleased with is the adjusted EBITDA and the growth that you've seen there, again, getting through the investment cycle that we did about a year ago, and seeing continued growth in our adjusted EBITDA. It was very exciting for us. We said that, that would happen. We saw that we were able to demonstrate it in our P&L. And not only do we see the revenue growth, but we really see coming from that is free cash flow. The free cash flow coming out of that for the last -- in the trailing 12 months is about a 60% conversion rate. Our target goal is about 65% to 70%. So we're a little bit ahead of the plan that we had offered out there. And so we're excited about that. And again, we want to see this continue and see this continue to grow. But Again, from an initial standpoint, from a top line standpoint, from a revenue standpoint, from a guidance standpoint, adjusted EBITDA and cash flow, we felt like we're kind of one of the things that we need to do in demonstrating that the discipline we have in the business and the durability that exists with it.

Yes. And then David and John, just for those in the audience who might not be as familiar, what was this investment cycle you're talking about? And you're obviously on the other side of it now, why was that so important for the business? What did you learn through the process?

Yes. So when we went public, we talked about, family had rights the rights to the private business, they had taken out a lot of money in dividends. And so it undermined our ability to invest in infrastructure, in go-to-market and in R&D. And so the key thesis that we talked about when we went public was we're going to fix those three things in a very disciplined 3-year cycle. And so we started in July of 2020, when we went public, and we finished it in late May of 2023, and we basically had replaced our ERP system. We had expanded our go-to-market talent in Europe. They built a customer success function from scratch and also built a channel indirect sales team to go after more of that mid-market, upper-end of the mid-market. And then bring new product to market. And so those 3 areas all receive significant investment. We're now -- ERPs implemented, we're seeing G&A improvement coming off of it already. Our go-to-market teams clearly are the growth we've seen from when we went public until now in NRR and ARR has all been driven by those go-to-market investments and the new products we've been able to bring to market. So that was the journey we were on. We will continue to invest in R&D. And just like the acquisition we recently made in Ecosio, we'll do it sometimes through acquisition, more likely through build. But the fundamentals of what we had to get in go-to-market, customer success and G&A infrastructure to build for scale are now in place. And so that's why you're starting to see the flow-through in margins that we are enjoying.

That's great. And then now just taking a step back at the products that you have, who is it within organizations you're selling to? How has that evolved over time? And maybe if there is any relationship that you have to processes like ERP upgrades and things like that would be helpful.

Yes, sure. So important to note, our #1 competitor is actually in-house solutions. The ugly part of my business is nobody ever grew their revenue or improved margins by buying my software. Like XYZ mega company doesn't announce better earnings or better revenue growth than they buy our software. But when they need us, we -- that means they've exhausted their in-house solution and now it's time for a third-party vendor. And so there's one or two reasons we get brought in. One, the company can't be as compliant as they need to be with their in-house solution or, two, it's costing them too much to remain as compliant as they've been. So one of the -- those are the only, and there's three fundamental drivers that caused that to happen, those two results. One is something that's changed in their business model. They've expanded to new geographical locations. They've launched new products. Perhaps they did an acquisition, and they're having troubles with compliance in that new company, and they'll open the door for us. The second reason, a second reason they will bring us in, is something that's changed in the regulatory environment where, as I said earlier, governments are in desperate search of revenues. So they're always changing the rules. Last year, we had the largest number of changes in the U.S. sales tax code that we've ever had. So there -- again, governments are all looking to drive more revenue, and that creates complexity for our customers. And then the third, as you know, will be ERP transformation. So any one of those three can drive demand opportunities for us. We are currently getting some really nice tailwinds in the regulatory space. Obviously, we see -- all seen kind of M&A down in a volatile macro environment. But ERP has picked up. For those who are not aware, at the middle of 2023, SAP announced a large forced migration of 10,000 ECC customers to the HANA platform. And so that is a 4-year cycle where they're going to drive migration. And we will have a chance to compete for those opportunities because what will happen is the customers that have been solving it on an in-house basis will make a decision in that journey, do we want to replace? Do we want to not do it in-house anymore? Do we want to farm it out to a third-party vendor? And so it's a nice place to be right now from that perspective.

That's great. And where do you usually show up in the ERP process? Are you sort of -- how long after they make any...

I use a terrible metaphor, but if you follow baseball, we kind of get involved in like the fourth inning of the game. So a customer makes a decision they have to go to make a migration and the first few months they are, the first few innings, if you use my metaphor, they're focused on how are we going to build the project plan that deals -- they have 15 different GNLs around the world in different acquisitions they've made over time. And now they've got to consolidate this all into one Cloud platform. So they're building out a road map. They're working with a large SI or the Big 4 to start the macro planning of that process and doing some of that work. Round about the fourth inning, what will happen is they will be like the CFO will say, "Hey, how are we going to get invoices out the door because we have to be compliant the day we turn this on. The day we go live, we have to know we can do business everywhere in the world." And the order to cash process is sacred to the CFO. So we get in about the fourth inning. That's when they buy our software. That's when they pay full price because they're going to start to use it for the rest of the game, my metaphor as they're testing out that they're compliant in all their jurisdictions and ready to turn it on at the end of the game. And so the good news is we get in, then what's changed for our business over the last several years is we're now working with SAP salespeople who are bringing us into the game earlier because they're getting quota relief if they sell our product along with the large ERP upgrade that they're doing. And so they have a financial incentive to bring us into those deals, and that has now created a new opportunity set for us to get -- even get into the game a little earlier.

I want to touch on that because I think it's one of the most impressive evolutions of the business. You talked about partners like SAP, Microsoft, Workday, NetSuite Salesforce. I know you all -- you work with them all in different ways. They all have a different end customer bases. But just in broad terms, what's driving their willingness to work with you?

I think the broad terms are, number one, the regulatory environment has just gotten so complex. They know it's a pain point for their customers. It takes like a Coupa or somebody. They launched a great product but procurement use tax is an enormously complex area and their customers were suffering. And so they want to partner with us now. And so I think -- Workday Financials wants to get traction, but they couldn't solve for tax on their platform. So I think I think that's part one. I think the other thing is we were -- have been -- Oracle and SAP and partners, excuse me, for 25, 30 years. And so we've perfected sort of the elegance of our frictionless technology integration, but what we never got to do is work with their go-to-market teams. And I think they're seeing now where the pain points for their customers in moving to an OCI Cloud platform or an SAP HANA platform, without having tax solved for is a real problem for their customers. And so their go-to-market teams have much more incentives from just a customer experience to want to do it, and now they're getting financially rewarded for it. So that combination is working really well here.

Okay. That's really helpful. And then David and John as well on the financial side. Once you have somebody, what is the typical journey of a customer look like from an upsell and a cross-sell perspective?

Yes, it's a great question. I mean it's a challenge to answer because I think when you see these customers come in, and we really focus on scaled customers. They are the 100,000-plus ARR customers that come in because there's a great opportunity to grow them. They typically when we get brought in, we're brought in to solve a problem, depending on where that is in the organization, but let's depend as an example, we'll go in and we'll solve the sales tax problem in the Southeastern United States. We get through that problem. And then over time, then the company says, you know we have the same problem in the Northeast. Why don't we bring you here? And so there's a lot of activity around that. But each one of the customer journeys is a little bit different in terms of exactly how it plays out. But the one thing that they all have in common is these are large enterprises with very complex organizations that require a lot of additional -- a lot of additional work and support. And so again, once we get in there, demonstrate what our product does. The ability to continue to sell within that customer base is very, very strong, and we've continued to see that. And whether it's, again, sales tax, the use tax or just further expansion of sales tax or other products, there's a real nice pathway to success. There's not -- I wouldn't say there's really one way people go. I don't know, David, if...

No, I think it's very rare. We work with 60% of the Fortune 500, and we don't have full wallet share on any of them yet. Because there's so -- they're not single monolithic entities. They're made up of so many different operating businesses that they bought over time. And so, our opportunity is to expand wallet share. And you've seen us since we went public, go from 75,000 to 126,000 in the ARPC just as we're starting to get after that, we still have like upper 300s to get after. So there's still, for an average-sized customer continued wallet share that we need to find, but they won't just -- if there's no pain, if they're solving it in-house, they will not just give it to us because we're good guys and they trust us. And so the point of it is, that's why our LTV is so important to us because over time, we know that complexity will show up and the pain will show up. We just need to be there. And so our customer success function to John's earlier comments, it's really critical to ensure that NRR is going to continue to grow.

And I was going to ask a follow-up to that. So just on the customer success piece, how much of it is push versus pull, right? You mentioned complexity, obviously, is the big driver. But how important is that customer success function, understanding the way your customer operates and then saying, "Hey, you have this, maybe take it as well."

I will say one of the learnings, my 25 years, you commented probably pay off as well is educating the customer even further in all of our product set has proven to be a key part of our NRR driver. And I think previous to having a customer success function, we were just not getting to some of the low-hanging fruit that was in front of us. And so now we've got a customer base that's far more informed about the products we're bringing to market and what we already have, to then make sure if there's even the inkling of pain, we're there to go after. And that's been part of our success lately.

Let's talk a little bit about competitive differentiation. You obviously have competitors that operate on the large end of enterprise and then folks that are a little bit further down market and are trying to move up market. How do you think about your competitive position? And then just broadly, when you think about maintaining competitive advantages versus other companies, what are sort of the calculuses internally you think about?

Yes. So this is an important point to understand about our space. they are very distinct personas of the tax buyer. So if you're a small business, let's say, your $40 million, $50 million business or less, you have a controller, you don't have a tax department, and you're solving this problem with what's the lowest cost to get this off my desk solution problem I can come up with. That's not where Vertex plays. We can't compete there because there's no value in that. It's all about low-cost quick turn. So we have a competitor there named Avalara, and that's their market. If you go to the far end of the extreme, and you call it the enterprise market, which we believe is everything over $500 million for us, that's where we really see where complexity is valued and the buyer is buying to address risk and value, not cost. And so we're often times, 2x to 3x our competitor in pricing, and we still win 70% of the deals we bid on, because of that. And so I think the point there is, that is going to be a CIO, head of tax, maybe a business leader, and there'll be a team of like in some tax departments, 30 or 40 people will be touching 15 of them as part of the sales process. So a very complex decision process. And then you have the middle market, which depending upon the size of the business and where their jurisdictional footprint is they could have a CFO and maybe 2 people in the tax department. Some are going to be complex and some are not. So upper market is Thomson and Vertex. Thomson, a division of Thomson Reuters and Vertex is the primary servers of the enterprise market. The mid-market is where Avalara is trying to move up into, and that's where we run into them in like the Microsoft Dynamics and NetSuite world. And then abroad, we will see a company called Sovos, primarily as our competitor.

Great. And then you mentioned sort of a high-level win rate, but just taking the number aside for a second. How do you think about the evolution of that win rate over time? Is it -- does it feel like you just need to keep that stable. Obviously, it's a great number and everything will be fine. Or are there opportunities for you to grow that?

Yes. It's funny. And that comes down to by ecosystem. So if I were to cite it by the Microsoft ecosystem. When I go back 2 years ago, our win rate was probably 30% or 40% at best. If I go to the SAP space, our win rate right now 2 years ago was probably 70% has now moved to about 75% or 80% because we brought various specialty products out to serve the SAP community. We now have the sales relationship where they're getting rewarded and so it's accelerated. In Microsoft, we're now trying to run the same playbook. So we're bringing specialty products into the Microsoft community. We're now going to go live on Azure this year so we can start to improve our win rate there. So there is opportunity to improve our win rate by bringing more product and more capability sets to market to continue to drive that. I definitely don't think we've maxed that out.

That's great. You recently announced your acquisition of E-Invoicing solution at Ecosio, and I know that deal just closed, so congratulations.

Thank You.

And that was concluding what was obviously a lengthy process of evaluating targets in the E-Invoicing space. So maybe just talk a little bit about where your interest in the space came from, in general, why you see this as an important thing for you. What drove your interest in Ecosio and then what your vision is for those products going forward?

Sure. So E-Invoicing are actually the key part is what's called CTC, continuous transaction controls, is the part of a larger movement where we are creating digital invoicing for AR and AP, that's been underway for years. It's been largely paper-based and it is now moving. And what governments realized was, wait a minute, if you're digitizing all of your invoices, if we could get that data as part of the time of the transaction, then we would be able to assess whether all the business you're doing in our jurisdiction, you're actually giving our fair share because there's a large thing out there called the VAT gap, which is the difference between what countries are receiving in that collection and what they think they should be receiving. And there's public information, it's estimated to be $80 billion to $100 billion. So governments are desperate to close that gap. E-Invoicing has become the new compliance pain, which fits very well in our domain. So historically, we didn't have to deal with this. And over the last several years, larger and larger economies are adopting this new requirement. So a few years ago, we decided we were going to get into this space via partnership. We looked at a company. We looked at a number of companies. We narrowed it down to a few. We actually formed a partnership with a company called Pagero, we tried to buy them at the end of last year, the deal fell through because we were outbid by a staggering amount. I'm really happy they can have that business candidly, given what's happened since. And we have now -- we went through our next in line, and we started a partnership with Ecosio in February of this year. During the journey of that partnership, we had great alignment with their technology and their culture when we made a bid to buy them. As you know that we just closed that. Where I see great value there is we can take that new compliance requirement, which is showing up in 50-plus countries around the world, and go to the largest customers in the world who have the largest invoicing volume in the world and bring this solution to market at a time when those customers are telling us, we want to have our VAT determination, our VAT compliance and our E-Invoicing compliance, all from a single vendor. And so the positioning is really great because we can take our U.S. sales force, which is already in place, and have them take the Ecosio product and bring it to that customer base and start to develop credibility and brand and now the E-Invoicing within our customer base. as well as use it as a catalyst to expand our European growth rate. So it's -- to me, that's the key parts of our strategy here as we now take this acquisition forward is accelerate the product into our core customer base, which our customer success function that we've been highlighting is not going to be a critical element to bring that forward, and then also expand our go-to-market efforts in Europe based on this new compliance regulations, which we'll go live in Germany at the beginning of next year and France in 2 years. So the bigger economies are just coming online with requiring it, which is good timing for us because we'll be ready for that now with this acquisition.

That's great. And how did you think about build, to partner buy for that cut?

So we are primarily a build shop. Our DNA has really been built over the years. We've made a few acquisitions since we went public, which we're very niche and strategic to what we're doing, but it hasn't been like the core, like some of our competitors have made a lot of big acquisitions. We don't see that as the right way to go. But in E-Invoicing, it came down the time to market to have a product that was credible and proven because in tax, if you don't have a proven solution, the buyer won't buy it, like it's just -- because nobody wants to get tax wrong. It's just the nature of the buyer. So we made the decision we couldn't build the robust capabilities fast enough given what was also one we just were on a big 3-year investment cycle. We had a lot of other priorities. We had to get right. And to add this on top was, it was just a bridge too far for us. So I felt like the best execution would be to find the right -- if we could partner or acquire and ultimately acquire fortunately, has become the way we went.

And just to be clear for investors, what's the difference between what you're getting with Ecosio and what you would have gotten with Pagero. How did you think about that?

Yes. So there's 3 distinct elements we looked at. So one, and being all candid, the go-to-market team in Pagero was far larger. And so they already had global coverage in ways that we didn't. And also, they had -- there's about 58 countries that require it, where Ecosio has like 32. So we still have some work to do there that Pagero would have given us. But what Pagero didn't have was a modern Cloud tech stack. They had a legacy platform -- and we never actually had got to this part of our transaction because we didn't -- the deal didn't close, but all of their was run on their own data centers, which had us concerned about how we're going to get them to a modern platform cost-wise. Ecosio was built on both Google Cloud and AWS Cloud from the beginning. So it's highly scalable, highly redundant, which for our customers is essential when you're dealing with the invoice volume. So I love the technology stack by a mile. Well, fortunately, with our U.S. sales base cover for a lot of the global coverage that Pagero would have had.

Okay. That's great. And is E-Invoicing becoming a bigger deal in terms of RFPs that you're in? Are people asking more about it? Is it a really important part of whether they're using a tax vendor?

It's growing as the big economies are now starting to come. So we've seen this wave sort of coming at us where our customers were like "we're solving this with local providers. We don't care about it to wait a minute, we want to have a single provider that does all the countries for us because we see this as a global problem that's only going to continue." The Domino's -- because what's happening is you take a country like Italy, their tax, their VAT gap has closed dramatically because they're now getting full value for all the transactions that are happening in their jurisdictions that maybe they weren't in the past. And so other countries are watching that going "wait a minute, we have got a VAT gap. Can we close it with E-Invoicing?" And so I think there's going to be a continued wave here. And so I think that's where the consolidation is coming.

How much does timeline matter for a customer, if that gets out a year or 2 for any particular country? Will that move the needle?

It's not going to move the needle materially because we're in the long game here. This is -- I mean, there's enough countries that already have it that there's buying -- there's a selling opportunity right now. And I think there's just going to be a Domino's of more countries as we go forward.

Okay. Great. And then turning to AI. You made an acquisition recently of the AI tax-specific capabilities from Ryan LLC. I know you've been using AI for a number of years now, so this is nothing new. But just talk a little bit about your AI strategy, how important it is tax versus not important.

So one of the most critical elements of the moat that we enjoy competitively is what we call our tax content database. We have over a billion rules that take the 20-plus thousand jurisdictions mapped against thousands and thousands of product SKUs to provide a compliance database that every month gets shipped to our customers. Because with indirect tax, you have to file, either your sales tax or your VAT tax every month. So you need that constant update of that database to know in every jurisdiction you're doing business, is my content accurate. So we've been applying AI and machine learning in that space to build the database and to keep it maintained every quarter -- or every month, excuse me. With generative AI, we see a number of things we can do that will accelerate that area where we can go faster in creating more content, which to get us into more verticals, which will give us more customer opportunities that maybe we couldn't compete with, and it also gives the ability to do what we call product categorization. So the big -- one of the biggest challenges our customers face is I'm buying this item in San Francisco, and it's considered as a bottle of water. And this is -- excuse me, I'm touching your coffee cup, but this is a different form of a beverage, how is it taxed? And so that product categorization that they have to do inside their ERP system to make sure everything they're selling is tax is positioned properly, is enormously complex. Generative AI gives them the ability to start to identify what is that product type down to even the specifics of what were the characteristics of the product itself. How much plastic is used in it or if it was a soda beverage, how much sugar is in the product. All of which governments are starting to design specific taxes for. And so generative AI gives us the ability to accelerate their ability to do that, which I think will be a big value add to our customers. Here's the reality of Generative AI, it is a probabilistic technology, meaning it's probably right. Tax is a deterministic requirement. I got to get my taxes right, not probably right. So there's still a mission-critical requirement for us to marry our human in the loop our expertise that we built our brand on for 45 years with this capability. It's not like it could disrupt it and you could just do it without because of that reality.

Yes. John, let's quickly touch on...

There's a hand in the back, if someone wants to...

Oh, yes, please go ahead.

Dave, when you talk about content, what -- maybe if you just -- I don't know how you want to address this, whether it's U.S. or globally, but how -- what percent of tax -- I don't know how you say jurisdictions, taxable items, taxable things, do you have in your database that you can address? So some clients might come to you, but maybe you don't have their content. I guess what I'm trying to get it is 50%? Is it 70%? Is it 80%?

It's a fair question. The jurisdictions, there's about 22,000, I think, roughly, give or take, jurisdictions around the world. There's over a little over 10,000 here in the U.S. We cover all the U.S. jurisdictions, and we cover all the major economies of the world down to 140 countries or something. So we have good global jurisdictional coverage. It's the product SKUs that we don't have. Partially is because sometimes the regulations aren't applied to them. So, for instance, like medical supplies a few years ago didn't have a lot of complex or any tax on them. There's been an acceleration of tax requirements added on medical supply. So we recently launched a vertical with very specialty content for medical supplies, and we're now actually seeing some really nice growth as a result. So some of it is what type of commerce is happening and how the regulatory environment is happening. But as a standard, I'd probably say our general coverage is probably in the 75% range of products used. And then what we did is we designed our -- and that's a ballpark. I don't -- it's like you can't ask me next quarter, is it a 78% because I wouldn't I don't -- we can't discern it. But here's the thing we designed our software to be configurable such that the customer can actually overwrite the rules we have or add their own individuals. So if there's a product they're selling that we don't cover, they can research the rules and put it into our software. And that is really critical because these companies get audited all the time. And being able to document where the rule came from the decided that the taxability of this product, we charge 7% in San Francisco for this water is essential to winning an audit. And so being able to write that feature in is one of our key differentiators that helps us win in the market. Yes. It's a Good question.

Great. John, I just wanted to touch a little bit about on the underlying environment. I think we've been hearing from folks that the percentage of sort of ERP transformation budget that are going to tax seems to be coming up. And obviously, there's some macro challenges that a lot of other companies and software are facing. So where do you sit today? And where do you see that going?

Yes. Again, a lot of it has to just do with what the environment is out there. Again, tax is one of those areas. It's not going to get a lot of attention until there's a real big problem. And I think that's something that's been driving our business for a long period of time. But I think what is also very important for us is that we talked a little bit about them earlier was some of the tailwinds that we're seeing coming out of the ERP conversions that are out there. And so as those ERPs come up, and again, as David said, the majority of our competition is really in-house. So people are using homegrown solutions. They're using programs that they wrote on top of their ERP systems for long periods of time and are using them. They're now not going to work. They're not going to be able to be refactored in the new ERP environment. So we're going to have the opportunity, or the customers are going to have to make the decision of how they're going to solve tax. That's going to give us an [indiscernible]. that's going to give us an opportunity to get in there and pitch our wares. And again, with the close rate that we've demonstrated, we feel like we're in a real good spot there. So from that standpoint, we feel like we're in a pretty good spot. But again, it's those types of things. It's the regulatory drivers, it's the ERP drivers and it's the business drivers. Those three things that David talked about earlier are the key things that keep it coming up.

That's great. And one more for me and then I'll see if anyone in the audience has a question. But just on the company's philosophy around growth and profitability and the trade-off, obviously, now you're expanding margins and your maintaining, if not accelerating growth rates on a trailing 12-month basis. How do you think about that calculus going forward?

Mike, isn't that all you want to do [ accelerate ] bottomlining to that every...

How sustainable is that and where do you get comfortable around?

That's a very [ short ] question. The DNA of the company prior to going public because we had family shareholders, was all about profit-driven growth. Like can we continue to drive margin and fund the dividends. The fundamental of the business model is exactly built to do that, especially for the enterprise market. And so I think we are very well positioned to continue to drive margin leverage. The things we got after with our investment cycle give us the infrastructure for scale at the back end for G&A, and then the go-to-market team is now very well positioned for that. I think with the new regulatory requirements, like E-Invoicing, I see the opportunity to continue to move the needle on growth. I don't see this ever being a 30%, 35% growing business. Tax doesn't get that kind of opportunity because they don't get budget. It's sort of like, " if I ever went into a problem we're solving this in-house," period, full stop, begin. So I see it getting -- I think on our management plan that we talk about is trying to get into that mid- to upper teens pushing 20 margins moving above where we are now for sure, is kind of where I see the sweet spot of this business on a sustainable basis, where because we have strong GRR and we have a strong wallet share opportunity that I highlighted within the customer base, I see that being a very steady thing that gets into that mid- to upper teens and then margins pushing north of where we are. I'll just say that.

Great. Any other questions from the audience?

Just you touched on the potential impact of AI tools also on maintaining the content as [indiscernible] -- of course. You touched on the idea of AI tools impacting the cost of maintaining a content database. Do you think that fundamentally changes over 3 to 5 years, both on like an opportunity for your company to change its cost structure or to change the way you think about your moat.

Yes. I think it's both dimensions, to be honest with you, I think there's an opportunity to expand addressable market because we'll be able to create new verticals that we can get deep enough coverage in. And if you don't have deep coverage like oil and gas, 2.5 years ago, we could not compete in oil and gas at all. We went out and we did some things to build an oil and gas content set that was compelling enough to go to that industry. I think Generative AI gives us the ability to build some more of that out. I also see it as a way to look at the core that we have to we have to update every month and see if we can drive any more cost out of that side of it. We have been using a lot of AI and machine learning in that side of the business for a while. So it's probably a little bit of a margin enhancer, more about getting into new verticals more than anything, I think.

Great. Any other questions? David, last one. What are you most excited about over the next 5 years? What does this platform look like in 5 years?

Most excited. You know what, indirect tax is only getting more complex. And what excites me is we now have across what I call the 12 steps of indirect tax, we have all the areas covered. So there's a huge execution focus across our management team of optimizing and leveraging the assets we've put in place against the market opportunity we see. And that, to me, is great. And I think that will drive this business to be far more global in 3 to 5 years than we are right now because a lot of jurisdictions around the world are accelerating complexity, which will create more demand for us outside the U.S. because it's largely been a North American business. And so I see us being far bigger over time in that space.

Fantastic. David, John, thanks so much for being here.

Thank you, Adam. Appreciate the opportunity.

Thanks so much. Great job.

TThank you, sir. Appreciate it.