Summary
Vertex closed fiscal 2025 with a fourth quarter that showed better operating leverage even as GAAP profitability remained negative. Revenue rose 9.1% year over year to $194.7 million. Gross profit was $126.1 million, up 7.7%, but gross margin slipped to 64.8%, down 0.9 percentage points. The operating loss narrowed to $2.6 million, and operating margin improved to -1.3%, up 6.0 percentage points. The net loss narrowed to $7.0 million. On a non-GAAP basis, operating income was $36.1 million, Adjusted EBITDA was $42.5 million, and Adjusted EBITDA margin was 21.8%. Operating cash flow for the quarter was $42.3 million, up 2.8%. Deferred revenue was $388.0 million, up 12.8% from the prior-year quarter.
Full-year results carried the same theme. Revenue increased 12.2% to $748.4 million. Gross profit rose 13.0% to $481.6 million, and gross margin was 64.3%, up 0.4 percentage points. Operating income was $2.3 million, a swing to a profit, and operating margin was 0.3%, up 0.6 percentage points. Net income was $7.2 million, also a swing to a profit. Operating cash flow was flat at $165.5 million, a 0.4% increase. Non-GAAP operating income was $136.7 million, and Adjusted EBITDA was $161.5 million, though Adjusted EBITDA margin fell to 21.6% from 22.8%. Free cash flow, a non-GAAP measure separate from operating cash flow, decreased to $47.6 million from $77.7 million as investments in infrastructure and product development increased.
Operational metrics were mixed. ARR was $671.0 million, up 11.3%, split between $31.8 million of growth from existing customers and $36.1 million from new customers. AARPC was $137,867 at December 31, 2025, compared with $122,706 at December 31, 2024, and $133,484 at September 30, 2025. Direct customers were 4,867 at December 31, 2025, compared with 4,915 at December 31, 2024. Indirect customers were 515, compared with 464 at December 31, 2024. NRR was 105%, compared with 109% at December 31, 2024, and 107% at September 30, 2025. GRR was 94%, compared with 95% at both December 31, 2024, and September 30, 2025. Management attributed lower NRR to slower customer growth, slightly higher attrition, and delayed deal activity for some large multinational customers due to the macroeconomic environment. GRR attrition was concentrated in smaller customer accounts.
Risks remain. The company maintained a valuation allowance against its U.S. deferred tax assets. It recorded legal costs tied to a pending legal claim and foreign currency transaction losses during the year. A greater cloud mix could pressure gross margin as Vertex scales its multi-cloud offerings. The CEO transition took effect on November 10, 2025, when Christopher Young became CEO, President, and a Class III director after David DeStefano retired. Vertex also completed a $15.0 million minority investment in Kintsugi for a 10% ownership interest. The company repurchased approximately $10 million of Class A common stock in the fourth quarter under a $150 million authorization, and had $139.9 million remaining after repurchasing 503,890 shares for $10.1 million during 2025.
Guidance points to another year of double-digit growth. For the first quarter of 2026, Vertex expects revenues of $193.5 million to $196.5 million and Adjusted EBITDA of $40.5 million to $43.5 million. For the full-year 2026, the company expects revenues of $823.5 million to $831.5 million, cloud revenue growth of 25 percent, and Adjusted EBITDA of $188.0 million to $192.0 million. Management said the outlook reflects continued double-digit revenue growth and improving profit margins. The company also cited upcoming e-invoicing mandates in France and Germany and early traction with its AI-driven Smart Categorization offering as near-term growth drivers.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2025 | Q3 FY2025 | QoQ | Q4 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $194.7M | $192.1M | +1.4% | $178.5M | +9.1% |
| Gross profit | $126.1M | $121.3M | +3.9% | $117.1M | +7.7% |
| Gross margin | 64.8% | 63.1% | +1.6 pp | 65.6% | -0.9 pp |
| Research & development | $22.3M | $19.9M | +12.0% | $19.6M | +13.9% |
| Sales & marketing | $52.5M | $47.4M | +10.8% | $47.4M | +10.7% |
| General & administrative | $45.7M | $44.6M | +2.3% | $39.9M | +14.4% |
| Total operating expenses | $128.7M | $117.0M | +10.0% | $130.2M | -1.2% |
| Operating income (loss) | -$2.6M | $4.3M | -160.4% | -$13.1M | +80.1% |
| Operating margin | -1.3% | 2.3% | -3.6 pp | -7.3% | +6.0 pp |
| Net income (loss) | -$7.0M | $4.0M | -273.1% | -$67.8M | +89.7% |
| Net margin | -3.6% | 2.1% | -5.7 pp | -38.0% | +34.4 pp |
| Net retention rate | 105.0% | 107.0% | -2.0 pp | 109.0% | -4.0 pp |
Risks
Vertex launched a generative AI product (Smart Categorization) and made a $15.0 million minority investment in Kintsugi, but the risk factor warns that failing to generate sufficient usage may not grow revenue in line with AI investment, and that inaccurate or unsubstantiated 'AI-powered' claims could trigger securities law claims and significant civil penalties.
Other operating expense, net increased to $12.6 million of expense in 2025 compared to $(0.2) million of income in 2024, driven by $10.3 million of legal costs associated with a pending legal claim related to claims Vertex has made against a competitor.
Net revenue retention rate was 105% in 2025 and 109% in 2024, and gross revenue retention rate was 94% and 95% over the same periods, while a substantial portion of revenue depends on retaining and expanding indirect tax software subscriptions.
Christopher Young was appointed CEO effective November 10, 2025 following David DeStefano's retirement, and the filing notes that a significant competitor has recently solicited Vertex employees, raising risk of lost institutional knowledge and competitive harm.
Expansion into e-invoicing increases dependency on government clearance platforms, and the EU's VAT in the Digital Age package scheduled for 2028 plus fragmented standards such as Peppol, XML and UBL will require substantial R&D investment to remain compliant across jurisdictions.
Vertex disclosed prior phishing attacks and incidents involving unauthorized access to confidential information, and notes that AI-leveraged attacks plus third-party integration code it does not always review increase exposure to material reputational and financial harm.
As of December 31, 2025, Vertex had approximately $957.7 million of indebtedness, including $345.0 million of 0.750% convertible senior notes due 2029, which could limit cash flow available for operations and reduce financial flexibility.
Cloud-based subscriptions generated 55% and 49% of software subscription revenues in 2025 and 2024, and the filing states gross margin may decrease as multi-cloud offerings scale; gross margin was 64.8% in Q4 2025, down 0.9 pp versus the prior-year quarter.
Free cash flow decreased by $30.1 million to $47.6 million in 2025 and free cash flow margin fell to 6.4% from 11.7% in 2024, primarily due to $30.8 million in additional investments in property and equipment and capitalized software.
SaaS KPIs
All quarters →Adjusted EBITDA
Adjusted EBITDA Margin
Free Cash Flow Margin
Free Cash Flow
Total customers
Non-GAAP operating income
Net Revenue Retention (NRR)
Non-GAAP Gross Margin
Direct customers
Average Annual Revenue per direct customer (AARPC)
Gross Revenue Retention (GRR)
Indirect Customers
ARR
Summary, forecast, risks and KPIs are extracted from Vertex, Inc.'s SEC filings for Q4 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.