On Friday, Pennsylvania-based Conestoga Capital Advisors disclosed selling 855,435 shares of Vertex (VERX +0.43%), an estimated $24.8 million transaction based on average prices in the third quarter.
What Happened
According to an SEC filing released Friday, Conestoga Capital Advisors reduced its position in Vertex by 855,435 shares during the quarter ended September 30. The estimated value of the shares sold was approximately $24.8 million, calculated using the average closing price from July 1 to September 30. At the end of the quarter, the fund reported holding 2.5 million shares of Vertex.
What Else to Know
This was a reduction, not a full exit; Vertex now represents 1.0% of Conestoga’s 13F reportable AUM.
Top holdings after the quarter:
- NASDAQ:CWST: $272.9 million (4.4% of AUM)
- NASDAQ:ROAD: $270.8 million (4.3% of AUM)
- NASDAQ:DSGX: $248.3 million (4% of AUM)
- NYSE:RBC: $244.3 million (3.9% of AUM)
- NASDAQ:FSV: $233 million (3.7% of AUM)
As of Friday’s market close, Vertex shares were priced at $25.41, down 39.5% over the past year and underperforming the S&P 500’s nearly 17% gain over the same period.
Company Overview
| Metric | Value |
|---|---|
| Revenue (TTM) | $710.5 million |
| Net Income (TTM) | ($50.4 million) |
| Market Capitalization | $4.1 billion |
| Price (as of market close Friday) | $25.41 |
Company Snapshot
- Vertex provides tax technology solutions, including tax determination, compliance and reporting, tax data management, and industry-specific software for corporations.
- The company generates revenue primarily through software licenses, software-as-a-service subscriptions, and related implementation, training, and outsourcing services.
- It targets enterprise clients in retail, communications, leasing, and manufacturing sectors across the United States and international markets.
Vertex provides tax technology software and services for corporations. The company leverages a combination of software licensing and cloud-based subscription models to deliver scalable tax compliance solutions. Its focus on automation and integration positions Vertex as a strategic partner for organizations seeking to streamline complex tax processes in multiple industries.
Foolish Take
Conestoga’s decision to pare back its Vertex stake reflects a broader retreat from underperforming software names that weighed on the fund’s returns last quarter. The Pennsylvania-based growth manager sold roughly 855,000 shares—a $24.8 million trade—leaving Vertex at just 1% of its reportable assets. In its third-quarter investor letter, Conestoga singled out Vertex as one of its “biggest detractors,” noting the tax software provider struggled with revenue growth amid elongated enterprise sales cycles.
That weakness showed up in the company’s latest earnings: Vertex’s second-quarter revenue rose 15% year over year to $184.6 million, but the company posted a net loss of $961,000, compared to a $5.2 million profit one year prior.
Conestoga, which manages about $7.5 billion in assets, remains heavily weighted toward quality-growth holdings such as Casella Waste and Descartes Systems. For long-term investors, the Vertex pullback likely reflects short-term performance management, not a rejection of its business model. The company’s recurring revenue and deep enterprise footprint still give it a durable growth runway if margins stabilize.
Glossary
13F reportable assets under management (AUM): The value of securities a fund manager must disclose quarterly to the SEC on Form 13F.
Reduction (in position): When an investor decreases, but does not fully sell, their holdings in a particular security.
Top holdings: The largest investments held by a fund, ranked by their value as a percentage of total assets.
Transaction value: The total dollar amount received or paid in a specific trade, often based on average share price.
Form 13F: A quarterly SEC filing by institutional investment managers listing their equity holdings.
Software-as-a-service (SaaS): A software delivery model where applications are accessed online by subscription, rather than purchased and installed.
Implementation services: Assistance provided to help clients set up and integrate new software or systems.
Outsourcing services: Contracting external providers to handle certain business functions or processes.
TTM: The 12-month period ending with the most recent quarterly report.
Tax determination: The process of calculating the correct tax amount for transactions based on current laws and regulations.
Tax compliance: Ensuring all tax filings and payments meet legal requirements.
Industry-specific software: Technology solutions tailored to the unique needs of particular business sectors.