Group 1 - Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) experienced a price decline of approximately 20% over the past month, which aligns with the anticipated correction [1] - The decline was expected, but the specific reasons for the correction were not detailed in the article [1] Group 2 - The article mentions the author's background as a macroeconomist with over 20 years of experience in investment management, stock broking, and investment banking [1] - The author runs a profile called Long Term Tips (LTT), focusing on opportunities in the green economy, and leads an investing group named Green Growth Giants, which explores deeper opportunities in this sector [1]

Core Insights - Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) has been previously analyzed, indicating a consistent interest in the company's performance and potential [1] - The author emphasizes the importance of patient investing and the accumulation of high-quality assets, suggesting a long-term investment strategy [1] Company Overview - Vertex Pharmaceuticals is recognized for its commitment to improving the world through its business practices, aligning with ethical investment principles [1] - The company is involved in transformative technologies, which may present high-risk, high-reward investment opportunities [1] Investment Philosophy - The investment approach combines steady accumulation of quality assets with opportunities in underappreciated turnaround plays [1] - The author advocates for dividend reinvesting as a method to enhance wealth creation over time [1]

[Special Note Regarding Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Forward-looking statements are subject to risks and uncertainties, with actual results potentially differing due to operational, technological, and economic factors - **Forward-looking statements** in this report are subject to risks, uncertainties, and assumptions, and actual results may differ materially from expectations[9](index=9&type=chunk) - Key risk factors include the ability to maintain and grow revenue, expand strategic relationships, adapt to technological change (including **AI**), manage **IT** risks, attract and retain talent, and navigate competitive and economic pressures[9](index=9&type=chunk) - Additional factors include risks related to failures in information technology, incorrect solution implementation, changes in tax laws, cybersecurity, legal proceedings, global economic weakness, and intellectual property protection[11](index=11&type=chunk) Part I - Financial Information [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Vertex's unaudited condensed consolidated financial statements for Q2 2025 and FY 2024, covering balance sheets, income, equity, cash flows, and detailed accounting notes Condensed Consolidated Balance Sheets (Amounts in millions) | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :--------------------------------- | :------------------------ | :------------------ | | **Assets** | | | | Total current assets | $502.731 | $536.333 | | Property and equipment, net | $195.034 | $177.559 | | Capitalized software, net | $35.659 | $36.350 | | Goodwill and other intangible assets | $397.312 | $363.021 | | Long-term investment | $15.000 | — | | **Total assets** | **$1,198.189** | **$1,166.791** | | **Liabilities** | | | | Total current liabilities | $506.324 | $537.376 | | Debt, net of current portion | $336.349 | $335.220 | | **Total liabilities** | **$950.147** | **$987.439** | | **Stockholders' Equity** | | | | Total stockholders' equity | $248.042 | $179.352 | | **Total liabilities and stockholders' equity** | **$1,198.189** | **$1,166.791** | Condensed Consolidated Statements of Comprehensive Income (Loss) (Amounts in millions, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $184.559 | $161.104 | $361.621 | $317.885 | | Gross profit | $121.200 | $102.688 | $234.194 | $198.480 | | Income (loss) from operations | $(3.864) | $7.545 | $0.622 | $5.980 | | Net income (loss) | $(0.961) | $5.164 | $10.169 | $7.848 | | Net income (loss) per share, basic | $(0.01) | $0.03 | $0.06 | $0.05 | | Net income (loss) per share, dilutive | $(0.01) | $0.03 | $0.06 | $0.05 | Condensed Consolidated Statements of Changes in Stockholders' Equity (Amounts in millions) | Metric | Balance, January 1, 2025 | Balance, June 30, 2025 | Balance, January 1, 2024 | Balance, June 30, 2024 | | :--------------------------------- | :----------------------- | :--------------------- | :----------------------- | :--------------------- | | Total Stockholders' Equity | $179.352 | $248.042 | $252.981 | $233.130 | | Net income (loss) (6 months) | $10.169 | $10.169 | $7.848 | $7.848 | | Stock-based compensation expense (6 months) | $30.325 | $30.325 | $24.769 | $24.769 | | Foreign currency translation adjustments (6 months) | $44.839 | $44.839 | $(7.346) | $(7.346) | Condensed Consolidated Statements of Cash Flows (Amounts in millions) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $60.808 | $82.292 | | Net cash used in investing activities | $(59.262) | $(47.837) | | Net cash provided by (used in) financing activities | $(20.157) | $238.126 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(15.304) | $271.792 | | Cash, cash equivalents and restricted cash, end of period | $310.762 | $360.943 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed explanations for Vertex's condensed consolidated financial statements, covering accounting policies, revenue, investments, and other key financial areas [Note 1. Summary of Significant Accounting Policies](index=10&type=section&id=1.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - **Vertex provides state, local, and value-added tax calculation, compliance, and analytics solutions through software license and cloud subscriptions, along with implementation, training, and tax-related services to U.S. and international customers**[24](index=24&type=chunk) - The company completed the acquisition of **ecosio GmbH** on **August 30, 2024**, and acquired the remaining **20% equity interest** in Systax Sistemas Fiscais LTDA on **June 5, 2024**, making both wholly-owned subsidiaries[26](index=26&type=chunk)[27](index=27&type=chunk) - New accounting pronouncements, **ASU 2023-09** (Income Tax Disclosures) and **ASU 2024-03** (Expense Disaggregation Disclosures), are effective for fiscal years beginning after **December 15, 2024**, and **December 15, 2026**, respectively, and are not expected to materially affect financial statements other than disclosures[32](index=32&type=chunk)[33](index=33&type=chunk) [Note 2. Revenue Recognition](index=12&type=section&id=2.%20REVENUE%20RECOGNITION) Revenue by Major Source (Amounts in millions) | Revenue Source | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Software licenses | $71.632 | $70.098 | $142.243 | $140.092 | | Cloud subscriptions | $86.212 | $66.345 | $166.362 | $128.181 | | Total software subscriptions | $157.844 | $136.443 | $308.605 | $268.273 | | Services | $26.715 | $24.661 | $53.016 | $49.612 | | **Total revenues** | **$184.559** | **$161.104** | **$361.621** | **$

Core Insights - Vertex reported revenue of $184.56 million for the quarter ended June 2025, reflecting a 14.6% increase year-over-year, and EPS remained stable at $0.15 compared to the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $184.25 million by 0.17%, while the EPS surpassed the consensus estimate of $0.14 by 7.14% [1] Financial Performance Metrics - Annual Recurring Revenue (ARR) was reported at $636.6 million, slightly below the estimated $639.12 million [4] - The Net Revenue Retention Rate was 108%, which fell short of the average estimate of 109.5% [4] - Revenue from Services reached $26.72 million, exceeding the estimated $25.58 million, marking an 8.3% increase year-over-year [4] - Revenue from Software Subscriptions was $157.84 million, slightly below the estimated $158.73 million, but represented a 15.7% increase compared to the previous year [4] Stock Performance - Vertex shares have declined by 8.5% over the past month, contrasting with a 0.5% increase in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - For the second quarter, revenue was $184.6 million, up 14.6% year over year, with subscription revenue growing 15.7% and cloud revenue increasing by 29.9% [6][27] - Adjusted EBITDA rose to $38.4 million, representing an EBITDA margin of 20.8% [6][30] - Annual recurring revenue (ARR) grew 16.1% to $636.6 million, with average annual revenue per customer increasing 12.7% year over year to $142.6 thousand [6][28] Business Line Data and Key Metrics Changes - Subscription revenue increased to $157.8 million, while services revenue grew 8.3% to $26.7 million [28] - Cloud revenue was $86.2 million, up 29.9% from the previous year, with Ecosio contributing approximately four points to cloud revenue growth [28] - Net revenue retention (NRR) decreased to 108%, down from 110% in the previous year, attributed to lower growth of additional entitlements and regulatory changes in Brazil [7][29] Market Data and Key Metrics Changes - The company noted a slowdown in ERP migrations, elongating deal cycles, which is consistent with trends observed in publicly traded ERP providers [8][9] - In Europe, annual recurring revenue for Ecosio reached $10.8 million, a 33% increase from the prior quarter, driven by upcoming e-invoicing mandates [14] Company Strategy and Development Direction - The company is focused on leveraging internal technology investments and controlling expenses to maintain adjusted EBITDA margins while navigating macroeconomic challenges [9][10] - The ongoing cloud ERP upgrade cycle is expected to accelerate over the next two and a half years, with increasing demand for solutions due to global tax complexities [11][12] - The company is investing in AI and automated workflows to enhance its global compliance platform, which is expected to drive future growth [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic factors impacting customer activity and necessitating a reduction in full-year guidance, but expressed confidence in long-term growth expectations [5][10] - The company highlighted strong underlying demand and customer commitment, with churn lower on a dollar basis compared to previous quarters [13] - Management remains optimistic about the long-term growth drivers, including e-invoicing mandates and cloud migrations [34][50] Other Important Information - The company ended the second quarter with over $284.4 million in unrestricted cash and cash equivalents, along with $300 million of unused availability under its line of credit [32] - The guidance for the third quarter is expected to be between $190 million to $193 million in revenue, with full-year revenue guidance adjusted to $750 million to $754 million [33] Q&A Session Summary Question: Impact of macro factors on guidance - Management indicated that the macro impact is primarily affecting on-premise and services revenue, while cloud revenue guidance remains intact [37][38] Question: E-invoicing adoption rates - Management noted that the end-to-end offering is differentiating and that early customers are expanding their coverage, indicating a strong land-and-expand model [42][43] Question: Long-term growth outlook - Management expressed confidence in long-term growth due to strong transactional volume in e-invoicing and ongoing cloud migrations [49][50] Question: Changes in hiring plans - Management stated that most hiring pullbacks are in non-strategic areas, focusing on efficiency and core strategies related to e-invoicing [51][52] Question: Deal progression in Q2 - Management observed a softness in deal activity towards the end of Q2, with elongation in sales cycles impacting revenue [56][57] Question: Delayed deals from Q2 to Q3 - Management clarified that delayed deals are not indefinitely postponed but are tied to customer migration processes [63][64] Question: Guidance philosophy - Management confirmed that guidance adjustments reflect observed trends in the second quarter without changing their overall conservative philosophy [66][67] Question: SAP comments and visibility - Management noted that the softness is primarily in the US market, impacting their larger market opportunity, while European performance remains strong [74][75] Question: E-invoicing competition in Europe - Management highlighted that the mid and enterprise market seeks a single provider for multiple jurisdictions, which aligns with their strategy [97][98]

Financial Data and Key Metrics Changes - For Q2 2025, revenue was $184.6 million, up 14.6% year over year, with subscription revenue growing 15.7% and cloud revenue increasing by 29.9% [5][26] - Adjusted EBITDA rose to $38.4 million, representing an EBITDA margin of 20.8% [5][30] - Annual recurring revenue (ARR) grew 16.1% to $636.6 million, with average annual revenue per customer increasing 12.7% to $142.6 thousand [5][27] - Gross revenue retention (GRR) remained at 95%, while net revenue retention (NRR) decreased to 108%, down from 109% in Q1 2025 [6][28] Business Line Data and Key Metrics Changes - Subscription revenue increased to $157.8 million, while services revenue grew 8.3% to $26.7 million [27] - Cloud revenue was $86.2 million, up 29.9% year over year, with Ecosio contributing $3.4 million to revenue [27] - Ecosio's ARR reached $10.8 million, a 33% increase from the prior quarter [13][27] Market Data and Key Metrics Changes - The company noted a slowdown in ERP migrations, elongating deal cycles and impacting pipeline build [6][7] - In Europe, there was strong momentum driven by the upcoming e-invoicing mandates, particularly in Belgium, France, and Germany [13][20] Company Strategy and Development Direction - The company is focused on leveraging cloud ERP upgrade cycles and addressing regulatory changes globally to drive growth [8][11] - Investments in AI and e-invoicing solutions are prioritized to enhance customer experience and operational efficiency [15][16] - The company aims to maintain a strong position in the enterprise market, with a focus on expanding its global compliance platform [14][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic factors impacting customer activity and necessitating a reduction in full-year guidance [4][6] - Despite short-term challenges, management remains confident in long-term growth drivers, including e-invoicing and cloud migrations [8][48] - The company is taking steps to control expenses and improve adjusted EBITDA margins while focusing on long-term strategic goals [7][25] Other Important Information - The company ended Q2 2025 with over $284.4 million in unrestricted cash and cash equivalents, along with $300 million of unused availability under its line of credit [31] - Guidance for Q3 2025 expects revenues of $190 million to $193 million and adjusted EBITDA of $38 million to $40 million [32] Q&A Session Summary Question: Impact of macro factors on guidance - Management indicated that the macro impact primarily affects entitlements and deal activity, leading to a cautious revenue outlook [36][37] Question: E-invoicing adoption rates - Management noted that the end-to-end offering is differentiating and that early customers are expanding their coverage, indicating strong adoption [40][41] Question: Long-term growth outlook - Management remains confident in long-term growth despite short-term deceleration, citing strong regulatory tailwinds and customer durability [46][48] Question: Changes in hiring plans - Management is adjusting hiring plans to focus on strategic areas while leveraging internal efficiencies [49][50] Question: Progression of the quarter - Management observed a strong start in Q1, but noted softness in May and June, impacting deal cycles [55][56] Question: SAP deal activity - Management indicated that uncertainty in the macro environment is causing delays in cloud transformation decisions among customers [57][58] Question: E-invoicing opportunities in Europe - Management highlighted the competitive landscape and the importance of being a single provider across multiple jurisdictions [99][100]

Group 1: Earnings Performance - Vertex reported quarterly earnings of $0.15 per share, exceeding the Zacks Consensus Estimate of $0.14 per share, with an earnings surprise of +7.14% [1] - The company has surpassed consensus EPS estimates for four consecutive quarters [2] - Revenue for the quarter ended June 2025 was $184.56 million, surpassing the Zacks Consensus Estimate by 0.17%, and up from $161.1 million year-over-year [2] Group 2: Stock Performance and Outlook - Vertex shares have declined approximately 38% since the beginning of the year, contrasting with the S&P 500's gain of 7.1% [3] - The company's earnings outlook is crucial for assessing future stock performance, with current consensus EPS estimates at $0.17 for the upcoming quarter and $0.64 for the current fiscal year [4][7] - The Zacks Rank for Vertex is currently 3 (Hold), indicating expected performance in line with the market in the near future [6] Group 3: Industry Context - The Internet - Software industry, to which Vertex belongs, is currently ranked in the top 32% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

[Vertex Second Quarter 2025 Financial Results](index=1&type=section&id=Vertex%20Second%20Quarter%202025%20Financial%20Results) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Vertex reported double-digit revenue growth for Q2 2025, with total revenues up 14.6% year-over-year to $184.6 million, driven by a 29.9% increase in cloud revenues, though profitability declined with a GAAP operating loss of $3.9 million compared to income of $7.5 million in the prior year, and a slight decrease in Adjusted EBITDA to $38.4 million Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $184.6 million | $161.1 million | +14.6% | | Software Subscription Revenues | $157.8 million | $136.4 million | +15.7% | | Cloud Revenues | $86.2 million | - | +29.9% | | **ARR** | $636.6 million | - | +16.1% | | **Loss from Operations (GAAP)** | ($3.9 million) | $7.5 million (Income) | - | | **Net Loss (GAAP)** | ($1.0 million) | $5.2 million (Income) | - | | Net Loss per Share (GAAP) | ($0.01) | $0.03 (Income) | - | | **Adjusted EBITDA** | $38.4 million | $38.5 million | -0.3% | | Adjusted EBITDA Margin | 20.8% | 23.9% | -3.1 p.p. | - Annual Recurring Revenue (ARR) grew **16.1% YoY** to **$636.6 million**, with organic ARR growth at **14.1%** excluding the **$10.8 million** contribution from the ecosio acquisition[5](index=5&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted that Q2 results were in line with expectations, citing strong underlying demand and long-term growth drivers like ERP cloud conversions and e-invoicing mandates, but the CFO noted that extended sales cycles and delayed customer decisions late in the quarter negatively impacted new contract signings, leading to a reduction in the full-year 2025 financial guidance - CEO David DeStefano expressed optimism, stating that growing indirect tax complexity, ERP cloud conversions, and global e-invoicing mandates are durable long-term growth drivers[2](index=2&type=chunk) - CFO John Schwab announced a reduction in the 2025 financial guidance due to extended sales cycles and delayed customer decision-making that impacted the timing of new contracts in late Q2[8](index=8&type=chunk) [Financial Outlook](index=1&type=section&id=Financial%20Outlook) [Third Quarter 2025 Guidance](index=1&type=section&id=Third%20Quarter%202025%20Guidance) For the third quarter of 2025, Vertex projects total revenues to be between $190.0 million and $193.0 million, with Adjusted EBITDA expected to be in the range of $38.0 million to $40.0 million Q3 2025 Financial Guidance | Metric | Guidance Range | | :--- | :--- | | Revenues | $190.0 million - $193.0 million | | Adjusted EBITDA | $38.0 million - $40.0 million | [Full-Year 2025 Guidance](index=1&type=section&id=Full-Year%202025%20Guidance) The company has lowered its full-year 2025 guidance, now expecting total revenues between $750.0 million and $754.0 million, cloud revenue growth of 28%, and Adjusted EBITDA between $156.0 million and $160.0 million Full-Year 2025 Financial Guidance | Metric | Guidance Range | | :--- | :--- | | Revenues | $750.0 million - $754.0 million | | Cloud Revenue Growth | 28% | | Adjusted EBITDA | $156.0 million - $160.0 million | - The reduction in full-year guidance is attributed to delays in new contract signings experienced in the latter part of the second quarter[8](index=8&type=chunk) [Key Business Metrics](index=1&type=section&id=Key%20Business%20Metrics) [Revenue Retention and Customer Value](index=1&type=section&id=Revenue%20Retention%20and%20Customer%20Value) In Q2 2025, Net Revenue Retention (NRR) was 108%, a slight decrease from 110% a year ago and 109% in the previous quarter, while Gross Revenue Retention (GRR) remained stable at 95%, and the Average Annual Revenue per direct customer (AARPC) increased to $130,934 from $123,570 in the prior year Key Performance Indicators (as of June 30, 2025) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | NRR | 108% | 109% | 110% | | GRR | 95% | 95% | 95% | | AARPC | $130,934 | $126,534 | $123,570 | [Customer Count](index=6&type=section&id=Customer%20Count) As of Q2 2025, Vertex had a total of 5,366 customers, including 4,862 direct customers, a slight decrease from the previous quarter, and 504 indirect small business customers, which saw continued growth Customer Count Trend | Customer Type | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Direct | 4,862 | 4,888 | 4,438 | | Indirect | 504 | 481 | 460 | | **Total** | **5,366** | **5,369** | **4,898** | [Financial Statements](index=12&type=section&id=Financial%20Statements) [Consolidated Balance Sheets](index=12&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, Vertex reported total assets of $1.20 billion, up from $1.17 billion at year-end 2024, while total liabilities decreased to $950.1 million from $987.4 million, and total stockholders' equity increased to $248.0 million from $179.4 million over the same period Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $284,386 | $296,051 | | Total current assets | $502,731 | $536,333 | | **Total assets** | **$1,198,189** | **$1,166,791** | | Total current liabilities | $506,324 | $537,376 | | **Total liabilities** | **$950,147** | **$987,439** | | **Total stockholders' equity** | **$248,042** | **$179,352** | [Consolidated Statements of Comprehensive Income (Loss)](index=14&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) For the three months ended June 30, 2025, Vertex's total revenues grew to $184.6 million from $161.1 million in the prior-year period, but despite higher gross profit, increased operating expenses led to an operating loss of $3.9 million and a net loss of $1.0 million, a reversal from the net income of $5.2 million in Q2 2024 Income Statement Highlights - Three Months Ended June 30 (in thousands) | Account | 2025 | 2024 | | :--- | :--- | :--- | | Total revenues | $184,559 | $161,104 | | Gross profit | $121,200 | $102,688 | | Total operating expenses | $125,064 | $95,143 | | **Income (loss) from operations** | **($3,864)** | **$7,545** | | **Net income (loss)** | **($961)** | **$5,164** | [Consolidated Statements of Cash Flows](index=16&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was $60.8 million, a decrease from $82.3 million in the same period of 2024, while net cash used in investing activities increased to $59.3 million, and financing activities used $20.2 million, with the company ending the period with $284.4 million in cash and cash equivalents Cash Flow Highlights - Six Months Ended June 30 (in thousands) | Account | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $60,808 | $82,292 | | Net cash used in investing activities | ($59,262) | ($47,837) | | Net cash provided by (used in) financing activities | ($20,157) | $238,126 | | **Net (decrease) in cash** | **($15,304)** | **$271,792** | | Cash and cash equivalents, end of period | $284,386 | $325,535 | [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) [Summary of Non-GAAP Results](index=17&type=section&id=Summary%20of%20Non-GAAP%20Results) On a non-GAAP basis, Q2 2025 operating income was $32.2 million, compared to $33.3 million in Q2 2024, with non-GAAP net income flat at $24.9 million, resulting in a Non-GAAP diluted EPS of $0.15, consistent with the prior year, while Adjusted EBITDA was $38.4 million, with the margin contracting to 20.8% from 23.9%, and free cash flow significantly decreased to $19.6 million from $36.9 million year-over-year Q2 Non-GAAP Financial Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Non-GAAP operating income | $32,182 | $33,303 | | Non-GAAP net income | $24,891 | $24,991 | | Non-GAAP diluted EPS | $0.15 | $0.15 | | Adjusted EBITDA | $38,369 | $38,515 | | Adjusted EBITDA margin | 20.8% | 23.9% | | Free cash flow | $19,587 | $36,944 | [Reconciliation of GAAP to Non-GAAP Measures](index=18&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) The report provides detailed reconciliations of GAAP to non-GAAP financial measures, with key adjustments to reconcile GAAP operating loss to non-GAAP operating income for Q2 2025 including adding back $12.0 million in stock-based compensation and $16.7 million in depreciation and amortization of software and intangible assets - To reconcile GAAP Net Loss to Adjusted EBITDA for Q2 2025, major adjustments include adding back stock-based compensation (**$12.0 million**), various depreciation and amortization charges (totaling **$23.4 million**), and transaction costs (**$3.0 million**)[42](index=42&type=chunk)[44](index=44&type=chunk) - Free Cash Flow is calculated by subtracting property/equipment additions (**$21.5 million**) and capitalized software additions (**$4.9 million**) from cash provided by operating activities (**$46.0 million**) for Q2 2025[44](index=44&type=chunk)

Core Viewpoint - Vertex, Inc. reported strong financial results for Q2 2025, with double-digit revenue growth and healthy profitability, despite challenges in contract signings due to extended sales cycles and delayed customer decision-making [2][4]. Financial Performance - Total revenues reached $184.6 million, reflecting a year-over-year increase of 14.6% [5]. - Software subscription revenues amounted to $157.8 million, up 15.7% year-over-year [5]. - Cloud revenues grew significantly by 29.9% to $86.2 million [5]. - Annual Recurring Revenue (ARR) was $636.6 million, a 16.1% increase year-over-year, with a 14.1% growth excluding the impact of the ecosio acquisition [5]. - Average Annual Revenue per direct customer (AARPC) increased to $130,934 from $123,570 a year ago [5]. - Net Revenue Retention (NRR) was 108%, slightly down from 110% a year ago [5]. - Gross Revenue Retention (GRR) remained stable at 95% [5]. Profitability Metrics - The company reported a loss from operations of $3.9 million, compared to an income of $7.5 million in the same period last year [5]. - Non-GAAP operating income was $32.2 million, down from $33.3 million year-over-year [5]. - Net loss was $1.0 million, compared to a net income of $5.2 million in the prior year [5]. - Non-GAAP net income stood at $24.9 million, with diluted earnings per share (EPS) of $0.15 [5]. Financial Outlook - For Q3 2025, Vertex expects revenues between $190.0 million and $193.0 million, and Adjusted EBITDA between $38.0 million and $40.0 million [6]. - The full-year 2025 revenue guidance has been reduced due to the impact of delayed contract signings [4][6]. Customer Metrics - The total number of direct customers was 4,862 as of June 30, 2025, showing a slight decrease from the previous quarter [20]. - Indirect customers increased to 504, up from 481 in the previous quarter [20]. Cash Flow and Liquidity - Cash and cash equivalents were reported at $284.4 million as of June 30, 2025 [26]. - The company generated net cash provided by operating activities of $60.8 million [32]. Strategic Insights - The company remains optimistic about future growth driven by increasing complexity in indirect taxes and the ongoing shift to ERP cloud conversions and e-invoicing mandates [2].

Core Viewpoint - Vertex Pharmaceuticals experienced a significant stock sell-off despite reporting solid Q2 results, primarily due to two pipeline disappointments, which may present a buying opportunity for investors [1][2]. Group 1: Pipeline Developments - Vertex's VX-993 did not meet the primary endpoint in a phase 2 study for treating acute pain, and the FDA does not currently see a path for a broad label for suzetrigine in peripheral neuropathic pain [3]. - The company will not proceed with VX-993 as a monotherapy but continues to market Journavx for acute pain and is focusing on diabetic peripheral neuropathy (DPN) as its first indication for suzetrigine [4][5]. Group 2: Financial Performance - Vertex reported a 12% year-over-year revenue increase in Q2, reaching $2.96 billion, with adjusted profits of $1.2 billion, a significant recovery from a $3.3 billion loss in the previous year [7]. Group 3: Cystic Fibrosis (CF) Market Position - Vertex's position in the CF market is strengthened by the new drug Alyftrek, which is gaining traction, particularly among patients who have not previously used CFTR modulators [8]. - Alyftrek is expected to be the most profitable CF drug due to a lower royalty burden and patents extending through 2039 [9]. Group 4: Future Drug Approvals - Vertex anticipates filing for regulatory approvals for zimislecel for severe type 1 diabetes in 2026 and may seek accelerated approval for povetacicept in IgA nephropathy in the first half of next year [10]. Group 5: Regulatory Environment - Vertex is not expected to be significantly impacted by the Trump administration's tariffs on pharmaceutical imports or the most-favored-nation drug pricing policy, with CFO indicating an immaterial cost impact from tariffs [12][13]. Group 6: Valuation - The stock's price-to-earnings-to-growth (PEG) ratio is low at 0.58, suggesting that Vertex remains attractively valued despite recent pipeline setbacks [15].