Vertex(US:VERX)2026-02-11 14:32Financial Data and Key Metrics Changes - Revenue for the fourth quarter was $194.7 million, up 9.1% year-over-year, and in line with guidance [21] - Full-year revenue reached $748.4 million, an increase of 12.2% from 2024 [21] - Adjusted EBITDA for the fourth quarter was $42.5 million, an increase of 11.6% year-over-year [28] - Annual recurring revenue (ARR) was $671 million at quarter end, up 11.3% year-over-year [24] - Gross profit for the fourth quarter was $147.4 million, with a gross margin of 75.7% [25] Business Line Data and Key Metrics Changes - Subscription revenue in the fourth quarter increased 8.9% year-over-year to $166.2 million [21] - Services revenue grew 10.2% year-over-year to $28.5 million in the fourth quarter [23] - Cloud revenue for the fourth quarter was $94.6 million, up 23% year-over-year [23] Market Data and Key Metrics Changes - New logos increased by 20% in 2025, indicating healthy revenue from new customers [9] - E-invoicing mandates are expected to drive growth, particularly in the second half of 2026 [39] Company Strategy and Development Direction - The company aims to accelerate revenue growth through AI transformation and innovation [7][10] - Focus on expanding customer success coverage and leveraging AI tools to enhance customer service [9][60] - Plans to broaden the functionality of Smart Categorization and expand into additional industries [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in 2025, including higher customer attrition primarily due to M&A and bankruptcies [8] - Confidence in achieving 2026 revenue guidance of $823.5 million to $831.5 million, with expected cloud revenue growth of 25% [30] - Emphasis on restoring growth and capitalizing on AI and e-invoicing opportunities [20] Other Important Information - The company repurchased approximately $10 million of its shares in the open market [29] - Ended the fourth quarter with over $314 million in unrestricted cash and cash equivalents [29] 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, considering various factors and aiming to return to a beat-and-raise cadence [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 accuracy in tax compliance, drawing parallels from experiences at Microsoft [44][48] Question: What are your expectations around net retention rates? - Management is focused on improving net retention rates through new product offerings and proactive customer engagement [50] Question: How is the pipeline for 2026 shaping up, particularly with SAP customers? - Management reported steady growth in the SAP pipeline, with ongoing partnerships and win rates remaining strong [55] 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 strength in their solutions [88]