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.
• Subscription Revenue (Q4): $166.2 million, up 8.9% year-over-year; Full Year: $639.7 million, up 12.8%.
• Adjusted EBITDA (Q4): $42.5 million, 21.8% margin, exceeding guidance; Full Year: $161.5 million, 21.6% margin.
• 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 (Q4): $10.1 million; Full Year: $47.6 million.
• Average Annual Revenue Per Customer (AARPC): $137,867, up 12.4%.

2. Strategic Updates and Business Highlights

• Leadership Transition: Christopher Young joined as President and CEO, emphasizing a focus on innovation and AI integration.
• Customer Base: Vertex serves over 60% of Fortune 500 companies, with strong demand for compliance solutions.
• AI Initiatives: Introduction of AI-driven products like smart categorization and Vertex CoPilot to enhance customer experience and operational efficiency.
• E-Invoicing Growth: Strong traction in e-invoicing solutions, with significant new customer wins and expansion opportunities in compliance mandates.
• New Business Wins: Notable contracts secured in various industries, including healthcare and retail, contributing to revenue growth.

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 Guidance: Anticipated revenue of $193.5 million to $196.5 million and adjusted EBITDA of $40.5 million to $43.5 million.
• Growth Strategies: Focus on expanding customer success, leveraging AI, and capitalizing on e-invoicing mandates.

4. Bad News, Challenges, or Points of Concern

• Customer Attrition: Increased attrition in 2025, particularly among smaller accounts, driven by M&A and bankruptcies. Competitive losses were minimal, but overall attrition metrics were concerning.
• True-Up Revenue Impact: A significant decline in true-up revenue (approximately $10 million lower than 2024) negatively affected growth rates.
• Retention Metrics: NRR decreased, indicating challenges in maintaining existing customer spend levels.
• Market Conditions: Slower decision-making processes among customers regarding tax solutions, particularly in the SAP migration space.

5. Notable Q&A Insights

• Competitive Landscape: Young noted Vertex's strong position against competitors, emphasizing reliability and domain expertise in indirect tax compliance.
• AI Integration: Young highlighted the transformative potential of AI in improving customer workflows and internal processes, aiming for Vertex to become an AI-first company.
• Customer Engagement: Young is personally involved in addressing customer concerns to mitigate attrition and enhance retention.
• Pipeline for 2026: Continued focus on winning SAP ECC customers as a key growth driver, with a steady pipeline but longer timelines for decision-making.

Overall, Vertex reported solid financial performance for Q4 2025, with strategic initiatives focused on AI and compliance solutions. However, challenges in customer retention and declining true-up revenue present headwinds as the company looks to accelerate growth in 2026.