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]

Financial Data and Key Metrics Changes - In Q1 2025, revenue was $177.1 million, up 12.9% year over year, with subscription revenue growing 14.4% and cloud revenue increasing 29.6% [6][22] - Adjusted EBITDA was $37.2 million, representing an EBITDA margin of 21.3%, exceeding the high end of guidance [6][28] - Annual recurring revenue (ARR) grew 17.9% to $618.5 million, with net recurring revenue (NRR) remaining strong at 109% [6][22] Business Line Data and Key Metrics Changes - Subscription revenue increased to $150.8 million, while services revenue grew 5.4% to $26.3 million [23] - Cloud revenue was $80.2 million, up 29.6% from the previous year, with Ecosio contributing approximately 3.5 points to this growth [23][22] - Average annual revenue per customer for Vertex standalone increased 16% year over year to $141,000 [7][25] Market Data and Key Metrics Changes - Gross recurring revenue (GRR) was 95%, within the targeted range of 94% to 96% [8][24] - The company noted a growing pipeline for its e-invoicing solution, particularly with upcoming mandates in France and Germany [9] Company Strategy and Development Direction - The company announced an equity investment in Kintsugi, a startup focused on AI technology for indirect tax compliance in the small business sector, indicating a strategic move towards enhancing AI capabilities [5][16] - The management emphasized the importance of providing a single solution that combines VAT compliance and e-invoicing, which is expected to be a game changer for companies facing e-invoicing mandates [9][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market for indirect tax technology, noting no signs of a slowdown in buyer behavior or changes in indirect tax momentum [31][21] - The company highlighted the ongoing cloud migration cycle and business changes from mergers and acquisitions as persistent tailwinds for growth [20][21] Other Important Information - The company ended Q1 with over $270.4 million in unrestricted cash and cash equivalents, along with $300 million of unused availability under its line of credit [29] - For Q2 2025, the company expects total revenue in the range of $182 million to $187 million, representing 14.5% year-over-year growth at the midpoint [29][30] Q&A Session Summary Question: What is driving larger customers to migrate to packaged software solutions? - Management noted that the increasing complexity of e-invoicing and audit pressures are prompting organizations to seek more sustainable solutions [35][36] Question: Why did direct customers decline sequentially? - The decline was attributed to lower-end customers migrating away, while the focus remains on scaled customers, which grew by about 15% [37][38] Question: What is the impact of macro volatility on the business? - Management indicated that tax is becoming a higher priority in strategic discussions, and they have not seen any negative impact on deal flow or pipeline [44][45] Question: How applicable is Kintsugi's technology to the Vertex tax business? - Management sees potential for Kintsugi's technology to enhance offerings for small and mid-sized businesses and to integrate AI into their workflows [46][48] Question: What is the company's position on tariff-related products? - Management clarified that they focus on indirect tax solutions and do not have dedicated tariff products, but they are seeing increased discussions around compliance due to supply chain changes [51][54] Question: How has the Ecosio product performed since its general availability? - The integration of Ecosio's e-invoicing with Vertex's VAT compliance has created a seamless process, leading to positive early results [57][58] Question: How is the competitive environment in e-invoicing compared to indirect tax? - Management highlighted that most competitors focus solely on e-invoicing without VAT compliance, which differentiates Vertex's comprehensive offering [70][72] Question: What is the outlook for new logo growth? - Management reported solid growth across key ecosystems, with a focus on enterprise customers, while also seeing some success in the mid-market [80][82]