VERX — Vertex, Inc.

Vertex Inc. Q3 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Revenue: $192.1 million, up 12.7% year-over-year.
• Subscription Revenue: Increased 12.7% to $164.8 million.
• Cloud Revenue: Grew 29.6% to $92 million.
• Adjusted EBITDA: Record $43.5 million, exceeding guidance by $2.5 million, with an EBITDA margin of 22.6%.
• Free Cash Flow: Strong at $30.2 million.
• Annual Recurring Revenue (ARR): $648.2 million, up 12.4%.
• Average Annual Revenue per Customer: Increased 12.4% to $133,000.
• Gross Revenue Retention (GRR): Steady at 95%.
• Net Revenue Retention (NRR): Decreased to 107%, down 1 point from Q2.

2. Strategic Updates and Business Highlights

• Continued momentum in cloud revenue and automation initiatives.
• Strong performance in e-invoicing, with ecosio contributing $4.1 million, a 30% increase from last year.
• Successful customer conference with high engagement in AI initiatives, including new product launches like Kintsugi.
• Ongoing partnerships with SAP and Oracle, with increased activity in cloud migrations.
• Share repurchase program authorized for up to $150 million, signaling confidence in long-term growth.

3. Forward Guidance and Outlook

• Q4 Revenue Guidance: Expected between $192 million and $196 million.
• Q4 Adjusted EBITDA Guidance: Projected at $40 million to $42 million.
• Full Year 2025 Revenue Guidance: Revised to $745.7 million to $749.7 million, with cloud revenue growth of 28%.
• Management remains optimistic about long-term growth drivers, particularly in e-invoicing and SAP migrations.

4. Bad News, Challenges, or Points of Concern

• Customer bankruptcies (e.g., Big Lots, Party City) impacted retention metrics, costing approximately $2 million.
• Faster-than-expected migrations to the new cloud platform led to reduced subscription fees from large customers, affecting NRR.
• Persistent lower growth from existing customer entitlements, which management is closely monitoring.
• Recent guidance cuts raised concerns about the company's ability to meet long-term growth targets.

5. Notable Q&A Insights

• Management confirmed that the guidance philosophy remains unchanged despite recent cuts, attributing them to specific customer issues rather than a broader market decline.
• Discussions around SAP migrations indicate a solid pipeline, with expectations for increased activity as deadlines approach.
• Management emphasized the importance of maintaining a human-in-the-loop approach for AI solutions to meet enterprise customer needs.
• Concerns about the retail sector were acknowledged, but management expressed confidence in the overall health of their customer base and the strategic direction moving forward.

Overall, while Vertex faced some headwinds in Q3 2025, particularly related to customer bankruptcies and migration issues, the company demonstrated strong financial performance and strategic initiatives that position it well for future growth.