On November 14, California-based Tensile Capital Management disclosed a buy of 160,559 shares of Vertex (VERX 0.92%) in the third quarter. Despite the expanded stake, the market value of the position decreased by approximately $34.4 million, according to an SEC filing.

What Happened

According to a Securities and Exchange Commission (SEC) filing dated November 14, Tensile Capital Management LP increased its stake in Vertex by acquiring 160,559 additional shares during the third quarter. The post-trade holding reached 3.8 million shares valued at $94.3 million as of September 30.

What Else to Know

Vertex makes up about 11.8% of Tensile’s 13F AUM, making it the fund’s largest position as of September 30.

Top holdings after the filing: 

• NASDAQ: VERX: $94.3 million (11.8% of AUM)
• NYSE: DKS: $79.5 million (9.9% of AUM)
• NYSE: VVV: $74.7 million (9.3% of AUM)
• NYSE: LAD: $74.4 million (9.3% of AUM)
• NYSE: USFD: $58.5 million (7.3% of AUM)

As of Friday, VERX shares were priced at $19.68, down a staggering 65% over the past year and well underperforming the S&P 500, which is up 13% in the same period.

Company Overview

Company Snapshot

• Vertex provides tax technology solutions, including tax determination, compliance and reporting, tax data management, document management, and pre-built integration for corporations across retail, communications, leasing, and manufacturing sectors.
• The company generates revenue primarily through software licenses and software-as-a-service (SaaS) subscriptions, as well as implementation, training, and tax-related outsourcing services.
• It targets large enterprises and multinational corporations seeking comprehensive, integrated tax compliance and automation solutions in the United States and internationally.

Vertex is a leading provider of tax technology software and services, serving a diverse set of enterprise clients. The company leverages a combination of software licensing and recurring SaaS revenue streams to deliver scalable, integrated solutions for complex tax compliance needs. Its established reputation and broad product suite position Vertex as a strategic partner for organizations aiming to streamline tax operations and manage regulatory risk.

Foolish Take

Vertex’s collapse since January has turned it into a contrarian setup: a market leader with strong fundamentals but sharply discounted sentiment. That context makes Tensile’s increased exposure notable, especially as the company just posted double-digit revenue growth and robust cash generation in the third quarter. Vertex delivered 12.7% revenue growth, 29.6% cloud revenue growth, and $43.5 million in adjusted EBITDA, alongside a new $150 million share-repurchase program—meaningful signals for long-term investors evaluating whether the selloff has overshot fundamentals.

Tensile boosted its position to 3.8 million shares valued at $94.3 million, even as the stake’s market value fell roughly $34 million during the quarter. The position now represents about 12% of the fund’s 13F assets, far larger than any of its other holdings—implying conviction that the drawdown presents an opportunity rather than deterioration.

Vertex shares trade 65% lower than in late January, materially underperforming both peers and the S&P 500. For long-term investors, the key question is whether recurring revenue metrics—including $648 million ARR, 107% net revenue retention, and expanding cloud mix—can reassert themselves as drivers of valuation once macro and customer-expansion headwinds normalize.

Glossary

13F reportable assets under management: The total value of securities a fund manager must report quarterly to the SEC on Form 13F.
AUM (Assets Under Management): The total market value of all investments managed by a fund or investment firm.
Stake: The amount of ownership or interest an investor holds in a company, usually measured by shares owned.
Trailing twelve months (TTM): The 12-month period ending with the most recent quarterly report.
CAGR (Compound Annual Growth Rate): The annualized growth rate of an investment over a specified period, assuming profits are reinvested.
Software-as-a-Service (SaaS): A software delivery model where applications are accessed online by subscription, rather than installed locally.
Implementation services: Professional services that help clients set up and integrate new software or systems into their operations.
Outsourcing services: Contracting external providers to handle business tasks or processes instead of using internal resources.
Tax compliance: The process of ensuring a company meets all tax laws and filing requirements.
Regulatory risk: The potential for losses due to changes in laws or regulations affecting a business.