Vertex, Inc. Q1 FY2025 earnings call

• Vertex executed well in Q1 2025, with revenue up 12.9% YOY. Subscription revenue grew 14.4%, cloud revenue up 29.6%. Adjusted EBITDA was $37.8 million, above guidance range. ARR grew 17.9% to $618.5 million, NRR was 109%. • Highlighted new business wins: existing customers like a fast-growing specialty retailer and a U.S. toy manufacturing company expanded with Vertex; new logo wins include one of the world’s largest electronic payments processors and a major lodging industry customer. • Announced an equity investment in Kintsugi, a startup focused on AI in indirect tax for SMBs, and discussed how Kintsugi's technology can complement Vertex's business. • Joint e-invoicing solution with ecosio achieved general availability, with e-invoicing expected to be a major topic at the European Customer Conference.

In the first quarter, revenue was $177.1 million, up 12.9% year-over-year. Subscription revenue grew 14.4% to $150.8 million. Services revenue grew 5.4% to $26.3 million. Cloud revenue was $80.2 million, up 29.6% from last year’s first quarter. Annual recurring revenue (ARR) was $618.5 million at quarter end. Net revenue retention (NRR) was 109%. Gross recurring revenue (GRR) was 95% in the first quarter. ecosio contributed $3.3 million of revenue during the quarter. On an organic basis, revenue was $173.8 million and growth was 10.8%. Excluding ecosio and Systax, organic ARR growth was 15.1%.

• Second quarter 2025: expected total revenue in the range of $182 million to $187 million, adjusted EBITDA in the range of $35.5 million to $39.5 million. • Full year 2025: expected total revenue in the range of $760 million to $768 million, adjusted EBITDA in the range of $161 million to $165 million, with full year adjusted EBITDA margin of 21% and full year cloud revenue growth expected to be 28%.

Q: Joshua Reilly asked about larger customers converting from homegrown solutions to packaged software and why now.

A: David DeStefano said e-invoicing is a growing problem and audit pressure are drivers, and Vertex has a complete end-to-end suite.

Q: Joshua Reilly asked about direct customers declining.

A: John Schwab said it's some lower-end customers migrating away, but focus is on scaled customers with GRR remaining solid.

Q: Christopher Quintero asked about macro and buyer behavior.

A: David DeStefano said tax is moving up in strategic discussions and there's diverse growth.

Q: Christopher Quintero asked about Kintsugi's applicability.

A: David DeStefano said Kintsugi can be applied in SMB space and IP side with Vertex's AI.

Q: Adam Hotchkiss asked about tariff solutions and ecosio product.

A: David DeStefano said tariff is more income tax related, ecosio's product went live with general availability and has strong EDI foundation.

Q: George Cruz asked about SAP ecosystem and pipeline.

A: David DeStefano said tracking well to SAP activity and working well with ecosystem partners.

Q: George Cruz asked about sub-revenue vs ARR.

A: John Schwab said nothing anomalous in the quarter.

Q: Jake Roberge asked about e-invoicing competition and coverage.

A: David DeStefano said Vertex's solution differentiates with VAT compliance and reconciled approach, and is well-positioned for major economies.

Q: Jake Roberge asked about macro impact on model.

A: David DeStefano said revenue bands are wide and e-invoicing customers are large.

Q: Kyle Aberasturi asked about new logo growth.

A: David DeStefano said wins in enterprise market and investment in customer success helps.

Q: Alexander Sklar asked about win rates and new logo takeaways.

A: David DeStefano said competitive takeaways from complex businesses and investment in customer support helps.

Q: Alexander Sklar asked about implied license revenue.

A: John Schwab said no change in migration activity.

Q: William Jellison asked about AI investment.

A: David DeStefano said AI strategy tied to customer feedback and positive feedback on smart categorization.

Q: William Jellison asked about Kintsugi and Shopify.

A: David DeStefano said Kintsugi strengthens relationship with Shopify.

Q: Rob Oliver asked about Kintsugi and Oracle.

A: David DeStefano said good relationship with Oracle and new go-to-market program.

Q: Andrew DeGasperi asked about supply chains and marketplaces.

A: David DeStefano said conversations about supply chains but not direct driver yet.

Q: Patrick Walravens asked about reacceleration.

A: David DeStefano said cloud migration and cross sell are drivers.