Vertex(US:VERX)2026-02-11 14:30Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $194.7 million, up 9.1% year-over-year, and in line with guidance [20] - Full-year revenue reached $748.4 million, an increase of 12.2% from 2024 [20] - Adjusted EBITDA for Q4 was $42.5 million, reflecting an 11.6% year-over-year increase [27] - Annual recurring revenue (ARR) at year-end was $671 million, up 11.3% year-over-year [23] Business Line Data and Key Metrics Changes - Subscription revenue in Q4 increased 8.9% year-over-year to $166.2 million [20] - Services revenue grew 10.2% year-over-year to $28.5 million in Q4 [22] - Cloud revenue for Q4 was $94.6 million, up 23% year-over-year, with full-year cloud revenue at $352.9 million, up 27.9% [22] Market Data and Key Metrics Changes - New logo revenue was up 20% in 2025, indicating healthy demand from competitive takeaways and customers switching from homegrown solutions [8] - Customer attrition was concentrated in smaller accounts, with the average annual revenue per lost account under $50,000 compared to an overall average of $138,000 [6] Company Strategy and Development Direction - The company aims to accelerate revenue growth through AI transformation and innovation in compliance and e-invoicing [5][19] - Vertex is focusing on expanding customer success coverage and leveraging AI tools to enhance customer engagement and retention [7][9] - The company plans to broaden its Smart Categorization offering and expand into additional industries [10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in 2025, including lower entitlement growth and higher customer attrition, primarily driven by M&A and bankruptcies [6] - The company is optimistic about restoring growth, particularly through AI and e-invoicing opportunities [19] - Management emphasized the importance of customer trust and the need for continuous innovation to maintain market leadership [47][48] Other Important Information - The company repurchased approximately $10 million of its shares in Q4 under its stock buyback authorization [28] - Vertex ended Q4 with over $314 million in unrestricted cash and cash equivalents [28] Q&A Session Summary Question: Can you elaborate on the losses to competitors at the lower end of the market? - Management noted that attrition was higher in 2025, primarily due to M&A and bankruptcies, with the highest churn in smaller customers [35] Question: How confident are you in achieving the guidance for next year? - Management expressed confidence in the guidance, citing e-invoicing and AI products as potential growth drivers [37][39] Question: What parallels can you draw from your previous experiences that will help at Vertex? - Management highlighted the importance of AI transformation and the need for accurate tax compliance as key areas of focus [44][47] Question: What is the outlook for net retention rates? - Management is focused on improving net retention rates through new product offerings and proactive customer engagement [49][51] Question: How is the pipeline for 2026 shaping up, particularly with SAP customers? - Management indicated steady growth in the SAP pipeline, with ongoing partnerships and win rates remaining strong [55][57] Question: Have you seen any AI tech budget crowding out affecting entitlement slowdown? - Management has not observed explicit budget crowding out in their business, indicating continued demand for their solutions [90]