Vertex, Inc. Q4 FY2025 earnings call

• Christopher Young was drawn to Vertex's blue-chip customer base (over 60% of Fortune 500), strong partner ecosystem, long-standing revenue growth, profitability, and cash flow, and AI opportunity. - Near-term priorities include addressing lower entitlement growth, moderation in upsell/cross-sell, and customer attrition; actions to mitigate attrition include expanding customer success coverage and leveraging AI tools. - Vertex has invested in AI products, launching smart categorization, expanding Vertex CoPilot, and partnering with Kintsugi. - Business wins include examples of wins within installed base (e.g., metals and mining, quick-service food retailer) and new logos (e.g., large European healthcare provider, North American power utility), with strong e-invoicing traction.

In the fourth quarter, revenue was $194.7 million, up 9.1% year over year and in line with guidance. Full-year revenue was $748.4 million, up 12.2% from 2024. Subscription revenue in Q4 was $166.2 million, up 8.9% year over year, and full-year subscription revenue was $639.7 million, up 12.8%. Services revenue in Q4 grew 10.2% to $28.5 million, with full-year services revenue at $108.8 million, up 9.2%. Cloud revenue in Q4 was $94.6 million, up 23% year over year, and full-year cloud revenue was $352.9 million, up 27.9%. ARR at quarter end was $671 million, up 11.3% year over year. Net revenue retention was 105%, gross revenue retention was 94%, average annual revenue per customer was $137,867, up 12.4%, and scaled customer growth was 12%.

• For full year 2026, expect revenues of $823.5 million to $831.5 million, cloud revenue growth of 25%, and adjusted EBITDA of $188 million to $192 million. - For Q1 2026, expect revenues of $193.5 million to $196.5 million and adjusted EBITDA of $40.5 million to $43.5 million.

• Business and market factors like M&A and bankruptcy were major drivers of 2025 attrition, largely uncontrollable by Vertex. - Competitive losses are a modest component of attrition, but Vertex continues to win more ARR from competition than it loses.

Q: Andrew DeGasperi asked about losses to competitors at the lower end of the market.

A: Christopher Young stated that attrition was higher in 2025, concentrated in smaller customers with ARR under $50,000, and Vertex wins more ARR from competitors than it loses.

Q: Christopher Quintero asked about parallels from past experiences and net retention rates.

A: Christopher Young discussed AI opportunities in compliance and e-invoicing, and efforts to improve net retention rates by introducing new products and engaging customers proactively.

Q: Joshua Reilly asked about expanding customer service and customer success.

A: Christopher Young mentioned leveraging AI to make team members more efficient, allowing expanded customer success coverage without proportional headcount scaling.

Q: Brett Huff asked about Vertex's competitive positioning.

A: Christopher Young highlighted Vertex's strong reputation, deep domain expertise, and strong partner ecosystem as differentiators.

Q: Samad Samana asked about AI initiatives.

A: Christopher Young discussed integrating AI into products, internal processes, and exploring new solutions to enhance offerings and drive growth.