VERX earnings call summary

Prepared Highlights

• Q4 2025 revenue $194.7M, in line with guidance; adjusted EBITDA $42.5M, above high end of guidance (CFO)
• Full-year 2025 revenue $748.4M, up 12.2% YoY; subscription revenue $639.7M, up 12.8% YoY (CFO)
• Q4 subscription revenue $166.2M, up 8.9% YoY; services revenue $28.5M, up 10.2% YoY (CFO)
• Cloud revenue Q4 $94.6M, up 23% YoY; full-year cloud revenue $352.9M, up 27.9% YoY (CFO)
• ARR at year-end $671M, up 11.3% YoY; net revenue retention 105%; gross revenue retention 94% (CFO)
• Average annual revenue per customer $137,867, up 12.4%; scaled customer growth 12% (CFO)
• Q4 gross margin 75.7% (subscription 82.7%, services 34.9%); full-year adjusted EBITDA $161.5M, margin 21.6% (CFO)
• Q4 free cash flow $10.1M; full-year free cash flow $47.6M; cash & equivalents $314M; $140M remaining buyback authorization (CFO)
• True-up revenue in 2025 ~$10M lower than 2024, reducing full-year revenue growth by ~2pp; Q4 impact ~4pp on total revenue, ~5pp on subscription revenue (CFO)
• New logo revenue up 20% in 2025; customer attrition concentrated in smaller accounts (avg revenue <$50K vs overall $138K) (CEO)
• Official guidance: Q1 2026 revenue $193.5M–$196.5M, adjusted EBITDA $40.5M–$43.5M (margin ~21.5% midpoint); FY2026 revenue $823.5M–$831.5M, cloud revenue growth 25%, adjusted EBITDA $188M–$192M (margin ~23% midpoint) (CFO)

Mgmt Quotes

• "Our financial results for the fourth quarter came in as expected. Revenue was $194.7 million, in line with our guidance for the quarter, while adjusted EBITDA exceeded the high end of our guidance at $42.5 million." (CEO)
• "In 2025, we saw lower entitlement growth, a moderation of new upsell and cross-sell revenue and slightly higher customer attrition. This impacted our retention metrics." (CEO)
• "Revenue from new logos remained healthy and was up 20% in 2025. This included both competitive takeaways and customers who previously used homegrown solutions and switched to Vertex." (CEO)
• "Our first full year in the business, we've seen strong traction with both existing customers and new logos, accelerating demand around upcoming mandates, especially Belgium." (CEO)
• "For the full year of 2026, we expect revenues of $823.5 million to $831.5 million, cloud revenue growth of 25% and adjusted EBITDA of $188 million to $192 million." (CFO)

Prepared Metrics

Q&A Batch (1-5 of 9)

Q1 — Andrew DeGasperi

• Topic: 2025 attrition drivers and 2026 guidance confidence
• Key points:
  • 2025 attrition was higher than past years, driven by M&A/bankruptcies and highest churn in customers with ARR <$50k (vs. average ARR of $138k).
  • Some small customers lost to competitors, but Vertex wins more ARR from competitors than it loses head-to-head.
  • 2026 revenue guidance of 10%-11% growth set thoughtfully; plan is to return to beat-and-raise cadence.
  • Growth vectors include e-invoicing mandates (back-half 2026) and SmartCat AI product traction with large customers.
• Mgmt stance: Bullish — confident in guidance and sees clear upside from e-invoicing and AI.

Q2 — Christopher Quintero

• Topic: (Incomplete input — no Q&A content provided)
• Key points: N/A
• Mgmt stance: N/A

Q3 — Christopher Young

• Topic: AI opportunity, net retention rate outlook
• Key points:
  • Vertex sits in finance/accounting where AI can automate manual tasks (e.g., smart categorization, returns processing); parallels to Microsoft’s AI transformation and cyber landscape (ever-changing compliance).
  • Net retention rate declined; focus on improving via new products (compliance, e-invoicing, AI, exemption certificate management) and proactive customer engagement.
  • CEO personally contacting at-risk customers; has turned some challenged situations into expanded relationships.
• Mgmt stance: Bullish — sees AI as huge opportunity and net retention improvement driven by product cross-sell and direct customer outreach.

Q4 — Joshua Reilly

• Topic: SAP ECC migration pipeline and customer success expansion
• Key points:
  • SAP ECC-to-S/4HANA pipeline grew steadily in 2025, but deal timing is harder to predict and customers taking longer; win rates remain consistent.
  • Vertex partners closely with SAP, SIs, and Big Four; they propose Vertex as core enterprise solution.
  • Customer success expansion will use AI to automate back-end tasks, allowing team to cover more accounts; AI tools built into product will directly serve customers.
• Mgmt stance: Neutral-to-bullish — pipeline healthy but timing uncertain; AI will scale customer success without massive hiring.

Q5 — Daniel Jester

• Topic: AI innovation speed and free cash flow trajectory
• Key points:
  • AI roadmap includes faster delivery of SKU categorization, tax content management, return filing; customers want AI now, not in 6-12 months.
  • Inorganic activity continues via partnerships (e.g., Kintsugi) and potential tuck-in acquisitions to add AI capability.
  • 2026 free cash flow expected to improve: R&D spend hit 22% of revenue in Q4 2025; investments will tail off in back half of 2026, driving better profitability and cash conversion.
• Mgmt stance: Bullish — accelerating AI innovation internally and externally; FCF improvement expected from moderating spend.

Q&A Batch (6-9 of 9)

Q6 — Adam Hotchkiss

• Topic: AI竞争威胁与ARR减速归因
• Key points:
  • 税务计算确定性天然抵御AI幻觉，客户要求精确到分，无近似空间
  • 公司专有税则内容和深度ERP集成构成竞争壁垒
  • ARR增速从2023-2024年17%-18%降至2025年11%，减速600-700bp；其中客户流失率降约1个百分点，权益增长贡献约1.5个百分点，交叉销售/增购偏软
• Mgmt stance: 中性（对AI竞争看涨，认为自身更可能受益；对减速承认存在外部与内部因素，新销售增长为亮点）

Q7 — Brett Huff

• Topic: AI预算挤出效应与电子发票进展
• Key points:
  • 未观察到AI预算挤出导致权益增长放缓，部分客户自身也是AI公司且使用Vertex
  • 电子发票已覆盖39个国家，通过ecosio团队整合合规与电子发票方案
  • 已为比利时、法国、德国等即将生效的法规做好准备
• Mgmt stance: 看涨（电子发票执行良好，未受AI预算影响）

Q8 — Patrick Walravens

• Topic: 股价下跌根因与改进方向
• Key points:
  • 股价从$56降至$15；权益增长2024年为高峰年，2025年放缓；小型客户流失增加
  • 产品创新速度需加快，AI尚未产生有意义收入
  • 已加强客户成功团队主动服务小客户群体
• Mgmt stance: 谨慎（承认问题并列出具体因素，但聚焦提升速度与产品价值）

Q9 — John Messina (替Alex)

• Topic: AI预算现状与NRR展望
• Key points:
  • 客户无统一AI授权，但愿意为能展现价值的AI方案拨款
  • NRR因权益阻力有所回落，2026年预计可实现一定增长，但不会迅速恢复至年初水平
  • 定价仍是增长算法的重要组成部分，需持续交付价值以支撑定价杠杆
• Mgmt stance: 中性偏乐观（既承认NRR温和，又认为有机会增长，定价杠杆有效）