VERX — Vertex, Inc.

Vertex (VERX) Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Q4 Revenue: $194.7 million, up 9.1% year-over-year, in line with guidance.
• Full Year Revenue: $748.4 million, up 12.2% from 2024.
• Adjusted EBITDA: $42.5 million for Q4, exceeding guidance; full-year adjusted EBITDA was $161.5 million, a 6.3% increase.
• Subscription Revenue: Q4 subscription revenue was $166.2 million (up 8.9%); full-year subscription revenue was $639.7 million (up 12.8%).
• Annual Recurring Revenue (ARR): $671 million, up 11.3% year-over-year.
• Net Revenue Retention (NRR): 105%; Gross Revenue Retention (GRR): 94%.
• Free Cash Flow: $10.1 million for Q4; $47.6 million for the full year.
• Average Annual Revenue per Customer (AARPC): $137,867, up 12.4%.

2. Strategic Updates and Business Highlights

• Leadership Transition: Chris Young joined as President and CEO, emphasizing a focus on innovation and AI integration.
• Customer Base: Vertex serves over 60% of the Fortune 500, with a strong emphasis on compliance and e-invoicing solutions.
• AI Initiatives: Significant investments in AI, including the launch of smart categorization and Vertex Copilot, aimed at enhancing customer service and operational efficiency.
• E-invoicing Growth: Strong traction with existing customers and new logos, particularly in response to global compliance mandates.
• New Business Wins: Notable contracts with large enterprises, including a major healthcare provider in Europe and a North American power utility.

3. Forward Guidance and Outlook

• 2026 Revenue Guidance: Expected between $823.5 million and $831.5 million, with cloud revenue growth projected at 25%.
• Q1 2026 Revenue Guidance: Anticipated between $193.5 million and $196.5 million.
• Adjusted EBITDA for 2026: Expected between $188 million and $192 million, reflecting a margin of 23%.

4. Bad News, Challenges, or Points of Concern

• Customer Attrition: Higher attrition rates in 2025, particularly among smaller accounts, driven by M&A and bankruptcy factors.
• Slower Growth: Lower entitlement growth and a moderation in upsell/cross-sell revenue impacted overall revenue growth.
• Competitive Pressures: While Vertex continues to win more ARR from competitors than it loses, there are concerns about maintaining market share, especially in the lower end of the market.
• Cash Flow Concerns: Q4 free cash flow was lower than expected, attributed to lower collections.

5. Notable Q&A Insights

• Customer Budgeting for AI: Mixed responses regarding specific budgets for AI; while some customers are proactive, others are still uncertain.
• NRR Expectations: Management is focused on improving NRR through new product offerings and proactive customer engagement.
• SAP Migration Pipeline: Steady growth in opportunities related to SAP migrations, although timing remains unpredictable.
• AI as a Competitive Advantage: Chris Young emphasized that Vertex's expertise in tax compliance positions it well against potential AI-driven competitors.

Overall, Vertex reported solid financial results for Q4 2025, but faces challenges with customer attrition and growth moderation. The company is focusing on AI and e-invoicing as key growth drivers moving forward, with a cautious yet optimistic outlook for 2026.