Vertex aims for $750M–$754M 2025 Revenue as E-Invoicing Grows

Key Highlights from Vertex, Inc.'s Q2 2025 Earnings Call

During the recent earnings call, Vertex, Inc. (VERX) shared insights into its financial performance and strategic outlook for the second quarter of 2025. The company reported revenue of $184.6 million, marking a 14.6% year-over-year increase. Subscription revenue grew by 15.7%, while cloud revenue surged by 29.9%. Adjusted EBITDA reached $38.4 million, with an EBITDA margin of 20.8%. Annual recurring revenue (ARR) increased to $636.6 million, reflecting strong performance in key areas.

The CEO, David DeStefano, noted that while the results aligned with guidance and investor expectations, macroeconomic factors began to influence customer activity during the quarter. This led to a reduction in full-year guidance. He emphasized that the company is taking steps to mitigate these challenges, including cost control measures and strategic investments in internal technology.

Net Revenue Retention and Customer Behavior

DeStefano highlighted a slight decline in net revenue retention (NRR), which dropped to 108% from 109% in the previous quarter. This decrease was attributed to lower growth in additional entitlements and regulatory changes in Brazil. Additionally, the slowdown in ERP migrations and elongated deal cycles were identified as key factors affecting business activity. Enterprise customers are becoming more cautious about software spending, prompting the company to focus on expense management and improved adjusted EBITDA margins.

Despite these challenges, DeStefano expressed confidence in the long-term growth drivers, particularly the ongoing cloud ERP upgrade cycle and global regulatory complexity. He also pointed to the expansion of e-invoicing, driven by mandates in Belgium, France, and Germany. "Our growth thesis in e-invoicing is unfolding as anticipated," he said.

New Business Wins and Strategic Moves

Vertex announced several notable new business wins, including a major automobile manufacturer migration that generated seven figures in additional annual revenue. A food delivery industry customer win, facilitated by KPMG, further demonstrated the company's expanding market presence.

John R. Schwab, CFO, provided additional details on the financial performance. He mentioned that Ecosio contributed $3.4 million in revenue during the quarter, with subscription revenue increasing by 15.7%. Cloud revenue reached $86.2 million, up 29.9% compared to the same period last year.

Outlook and Guidance

Schwab outlined the company’s revised guidance for Q3 2025, expecting revenues between $190 million and $193 million, along with adjusted EBITDA of $38 million to $40 million. For the full year, Vertex now anticipates revenues of $750 million to $754 million, cloud revenue growth of 28%, and adjusted EBITDA of $156 million to $160 million.

The revised guidance reflects the impact of slower ERP conversions, which have affected deal conversion and pipeline build. Additionally, lower entitlements and true-up revenue were cited as contributing factors. Schwab emphasized that these challenges are being addressed through strategic adjustments and cost management.

Financial Performance Overview

In Q2, Vertex reported total revenue of $184.6 million, with organic revenue at $181.2 million. Subscription revenue reached $157.8 million, services revenue was $26.7 million, and cloud revenue stood at $86.2 million. ARR at the end of the quarter was $636.6 million, with Ecosio adding $10.8 million.

Gross profit for the quarter was $140.1 million, with a gross margin of 75.9%. Operating cash flow was $46 million, and free cash flow was $19.6 million. Vertex ended the quarter with over $284.4 million in unrestricted cash and cash equivalents.

Analyst Questions and Management Responses

Analysts raised concerns about the revenue guide and cloud revenue trajectory. Schwab explained that the primary driver behind the changes is the decline in large additional entitlements and true-up revenue. Regarding e-invoicing adoption, DeStefano emphasized the value of the company’s end-to-end offering and the success of the land-and-expand model, with deal cycles ranging from three to six months.

Other questions focused on the impact of deceleration on the long-term outlook and hiring plan changes. DeStefano stated that most of the adjustments are in non-strategic areas, ensuring that core strategies remain unaffected. He also noted that delays in deals are due to ERP adoption pacing, not indefinite deferrals.

Sentiment and Strategic Focus

Analysts expressed concerns about decelerating growth, ERP migration delays, and guidance reductions. While the tone was slightly negative, management maintained a confident but more cautious approach. DeStefano reiterated that the short-term environment does not affect long-term growth expectations.

Compared to the previous quarter, both analysts and management showed increased caution. In Q1, management was highly optimistic, but by Q2, they acknowledged macro headwinds and guided for reduced expectations.

Risks and Challenges

Key risks include macroeconomic headwinds, regulatory uncertainty, especially in Brazil, and slower ERP migrations. DeStefano acknowledged the need for immediate expense control and strategic focus, while emphasizing the durability of the customer base.

Final Takeaway

Vertex delivered solid Q2 results, but macroeconomic slowdown and elongated ERP migration cycles prompted a reduction in full-year guidance. Despite near-term challenges, management remains confident in the company’s long-term growth drivers, particularly the expanding e-invoicing opportunity and resilient customer base. Strategic investments in platform capabilities and AI, along with disciplined cost management, are positioned to support future growth as market conditions stabilize.