Vertex, Inc. (VERX)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 revenue was $184.6M, up 14.6% year over year; non‑GAAP diluted EPS was $0.15. EPS beat consensus by ~$0.01 while revenue was essentially in line; Adjusted EBITDA was $38.4M and margin 20.8% . Wall Street consensus: EPS $0.1426*, revenue $184.6M*.
• Management reduced FY 2025 guidance to revenue of $750–$754M and Adjusted EBITDA of $156–$160M, citing extended sales cycles and delayed customer decision‑making late in the quarter; Q3 guidance set at revenue $190–$193M and Adjusted EBITDA $38–$40M .
• Cloud revenue grew 29.9% YoY to $86.2M; ARR reached $636.6M (+16.1% YoY) with AARPC up to $130,934; NRR moderated to 108% and GRR remained 95% .
• On the call, management flagged macro‑driven delays in ERP migrations and lower entitlement growth as drivers of the guidance cut, while reiterating durable tailwinds from global e‑invoicing and ERP cloud conversions .
• Shares traded lower following the guidance update, as Q3 revenue guide fell short of expectations .

What Went Well and What Went Wrong

What Went Well

• Cloud momentum: Cloud revenue rose 29.9% YoY to $86.2M, supported by ERP cloud transitions and e‑invoicing mandates .
• Strong non‑GAAP profitability: Non‑GAAP operating income of $32.2M and adjusted EBITDA of $38.4M (20.8% margin) demonstrated resilient earnings leverage despite GAAP headwinds .
• Strategic positioning: “ERP cloud conversions and the proliferation of e‑invoicing mandates globally are expected to be durable long‑term drivers of growth,” CEO David DeStefano noted .

What Went Wrong

• Guidance reduction: FY 2025 revenue cut to $750–$754M (from $760–$768M) and Adjusted EBITDA to $156–$160M (from $161–$165M), driven by elongated sales cycles and delayed decisions late in Q2 .
• GAAP profitability compression: Loss from operations of $(3.9)M and GAAP net loss of $(1.0)M, reflecting higher operating expenses (S&M, G&A) and amortization/stock‑based comp .
• Slight revenue shortfall vs consensus: Actual revenue $184.559M vs consensus $184.597M*, indicating top‑line essentially in line but modestly below the consensus print; NRR eased to 108% from 110% YoY .

Financial Results

Segment and Mix

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO perspective: “This quarter’s results were in line with expectations, with double‑digit revenue growth and healthy profitability and cash flow… ERP cloud conversions and the proliferation of e‑invoicing mandates globally are expected to be durable long‑term drivers of growth.” — David DeStefano .
• CFO rationale for guidance cut: “Extended sales cycles and delayed customer decision‑making impacted the timing of new contract signings… As a result, we are reducing financial guidance for 2025.” — John Schwab .
• Definitions and non‑GAAP framework: The release provides detailed reconciliation and definitions for non‑GAAP metrics (non‑GAAP operating income, non‑GAAP net income, non‑GAAP diluted EPS, Adjusted EBITDA, FCF) .

Q&A Highlights

• Macro impact and guidance: Management cited macro delays in ERP migrations and lower entitlement growth, prompting the guidance reduction while reiterating confidence in long‑term growth drivers .
• SAP ecosystem and pipeline: Continued engagement with SAP and systems integrators; near‑term timing visibility impacted by customer decision delays .
• E‑invoicing coverage and differentiation: Emphasis on end‑to‑end VAT compliance plus CTC e‑invoicing solution with ERP connectors; country coverage expanding in line with major EU economies’ mandates .
• Customer mix focus: Sustained focus on scaled customers, with GRR at 95%; moderation in NRR acknowledged .

Estimates Context

Values retrieved from S&P Global*. EPS beat by ~$0.01; revenue essentially in line (miss by ~$0.04M). Adjusted EBITDA reported by the company was $38.4M (20.8% margin) .

Key Takeaways for Investors

• Q2 print showed resilient non‑GAAP profitability and strong cloud momentum; the significant narrative shift was the late‑quarter elongation of sales cycles driving a cut to FY guidance — expect near‑term estimate resets and potential multiple compression until visibility improves .
• Maintain focus on structural tailwinds (ERP cloud conversions, global e‑invoicing mandates) and Vertex’s differentiated end‑to‑end VAT+CTC offering; these support medium‑term ARR and AARPC expansion .
• Watch NRR trajectory back toward >110% as management targets; AARPC rising is supportive even with modest low‑end customer churn .
• Q3 guide ($190–$193M revenue; $38–$40M Adjusted EBITDA) provides a near‑term checkpoint; any improvement in deal timing or ERP migration pace would be a positive catalyst .
• Non‑GAAP adjustments (stock‑based comp, amortization of capitalized software and intangibles) are material; GAAP loss from operations underscores the importance of monitoring expense discipline and investment phasing .
• Trading implications: The guidance cut led to negative share reaction; near‑term volatility likely around execution on Q3/Q4 bookings and macro signals in ERP ecosystems .
• Medium‑term thesis: If macro headwinds ease and Vertex executes on e‑invoicing rollouts (France 2026, Germany 2027) and ERP cloud migrations, sustained mid‑teens revenue growth with 20%+ Adjusted EBITDA margins appears achievable .

Additional Relevant Press Releases (Q2 2025 context)

• 2025 Mid‑Year U.S. Rates & Rules Report: Sales tax rate changes up 24% YoY through June 30—underscores compliance complexity tailwind .
• Expanded integrations and AI‑enabled features across ERP/e‑commerce/procurement (SAP, Oracle, Coupa, Shopify) — supports adoption and stickiness .
• Oracle Enhanced PartnerNetwork participation — reinforces ERP ecosystem positioning .