Vertex, Inc. Earnings Call: Growth Amid Challenges

Vertex, Inc. ((VERX)) has held its Q3 earnings call. Read on for the main highlights of the call.

Vertex, Inc. Earnings Call Reveals Mixed Sentiment Amid Growth and Challenges

The recent earnings call for Vertex, Inc. presented a mixed sentiment, highlighting both strong performance and underlying challenges. The company reported impressive growth in cloud revenue and record adjusted EBITDA, alongside promising advancements in AI and e-invoicing initiatives. However, these positives were tempered by difficulties in customer retention, bankruptcies, and consecutive guidance cuts, painting a complex picture of Vertex’s current performance outlook.

Strong Cloud Revenue Growth

Vertex, Inc. demonstrated significant momentum in its cloud initiatives, with cloud revenue growing by 29.6% year-over-year. This robust growth underscores the strategic importance of Vertex’s cloud offerings and their increasing adoption in the market.

Record Adjusted EBITDA

The company achieved a record adjusted EBITDA of $43.5 million, surpassing the high end of its guidance by $2.5 million. This achievement, coupled with an EBITDA margin of 22.6%, highlights Vertex’s operational efficiency and strong financial management.

Significant Free Cash Flow

Vertex reported a free cash flow of $30.2 million for the third quarter, showcasing its strong cash generation capabilities. This financial strength provides Vertex with the flexibility to invest in future growth initiatives.

Successful E-Invoicing Initiatives

The acquisition of Ecosio has proven fruitful, contributing $4.1 million in revenue, a 30% increase from the previous year. The initiative has attracted over 100 new customers since March, indicating successful integration and market penetration.

Share Repurchase Program

Reflecting confidence in its long-term growth potential, Vertex’s Board of Directors authorized a share repurchase program of up to $150 million. This move signals a commitment to returning value to shareholders.

AI Initiatives Progress

Vertex advanced several AI initiatives, including smart categorization and agent-to-agent tax configuration capabilities. These advancements are set to enhance Vertex’s product offerings and competitive edge in the market.

Customer Retention Challenges

Despite the successes, Vertex faced challenges in customer retention, with net revenue retention decreasing to 107% from 108% in the previous quarter. This decline was attributed to large customer bankruptcies and faster-than-expected migrations.

Impact of Customer Bankruptcies

The bankruptcies of key customers, such as Big Lots, Party City, and JOANN Fabrics, significantly impacted Vertex’s retention metrics by approximately $2 million, highlighting the vulnerability of its customer base.

Guidance Cut for Second Consecutive Quarter

For the second consecutive quarter, Vertex reduced its guidance due to customer bankruptcies and faster-than-expected legacy migrations. This adjustment reflects the challenges Vertex faces in achieving its projected growth targets.

Forward-Looking Guidance

Looking ahead, Vertex, Inc. reported strong financial performance in the third quarter of 2025, with revenue reaching $192.1 million, a 12.7% increase year-over-year. The company maintained a stable gross revenue retention rate of 95% and saw a 12.4% increase in annual recurring revenue to $648.2 million. Despite challenges, Vertex remains optimistic about its strategic areas, including cloud migrations and upcoming e-invoicing mandates in countries like Belgium, France, and Germany.

In conclusion, Vertex, Inc.’s earnings call painted a picture of both growth and challenges. While the company showcased strong financial metrics and promising initiatives, it also faced hurdles in customer retention and guidance adjustments. Investors will be keenly watching how Vertex navigates these challenges while capitalizing on its growth opportunities.