Good morning and welcome to the Vertex, Inc Fourth Quarter 2024 Earnings Conference Call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the Star key followed by zero. After today's remarks, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your touchtone phone. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Joe Crivelli, Vice President of Investor Relations. Please go ahead. Hello and thanks for joining us to discuss Vertex's fourth quarter financial results. I'm Joe Crivelli, Vice President, Investor Relations. David DeStefano, our President and CEO and. John Schwab, our CFO, is also with us today. During this call we may make forward. Forward-looking statements about expected future results. Actual financial results may differ due to risks and uncertainties. These risks and uncertainties are described in. Our filings with the Securities and Exchange Commission. Our remarks today will also include references. To non-GAAP financial measures. A reconciliation of these non-GAAP metrics to GAAP is also provided in today's press release. This call is being recorded and will. Be available for replay on our investor relations website. I'll now turn the call over to. David. Welcome everyone and thank you for joining us. Vertex's strong execution continued in the fourth quarter, wrapping up what was a very consistent year for the company. More importantly, I'm excited about our growing pipeline which is fueled by the ongoing tailwinds of the Oracle Cloud and SAP S/4HANA migration cycles that are underway and the new products we are bringing to market. In the fourth quarter, the Vertex team delivered revenue of $178.5 million, up 15.2% year over year, and adjusted EBITDA was $38.1 million, up 21.3% compared to last year's fourth quarter. This reflects investments made in our e-invoicing product in the fourth quarter, as well as previously discussed expenses that were delayed from earlier in the year while we focused on completing our acquisitions. In addition, this quarter ARR grew nearly 18% to $603.1 million. Cloud revenue growth for the full year was 28.6%, and I'm pleased to share that total cloud revenue now exceeds on-premise revenue for the first time, in line with our strategic intent for future growth. NRR was 109%. While still extremely healthy, this is lower than in recent quarters due to a challenging comparable to our very strong Q4 last year. We fully expect it to rebound above 110% throughout the coming year given that actual full year cross-sell units increased over 2023, which validates our customers' continued appetite to buy more from us. Average annual revenue per customer for Vertex standalone increased 14.8% year over year to $136,000. Growth in scaled customer count was 15% year over year. As a reminder, this number represents our customers with annual revenues greater than $100,000 and demonstrates our ongoing success in the underpenetrated enterprise market. Beyond scaled customers, our new logo additions from our expanded ecosystem efforts are kicking into high gear. The fourth quarter was a record for new logos from both dollar and unit standpoint. We believe this new logo success will fuel our proven model of ongoing cross sell and upsell opportunities in the future. Finally, GRR was 95% in the fourth quarter within our targeted best-in-class range of 94%-96%. Our 2024 results demonstrate the durability and consistency of Vertex's business model we lead in the enterprise space for indirect tax software because our 47-year heritage serving the industry has given us several competitive moats that we believe are sustainable. These are highlighted by first, the know-how to connect to disparate enterprise systems that sit within the critical order to cash process to a single cloud platform without creating any friction. Second, the ability for our applications to operate at the enterprise scale and speed standards that multinational corporations require. As an example, on Black Friday weekend, we processed over one billion transactions in our cloud environment in addition to similar transaction volume in our other deployed solutions. Third, we have created one of the most extensive tax content databases, including over one billion rates and rules supporting indirect tax compliance across more than 20,000 tax jurisdictions worldwide. Fourth, trusted relationships with the influencers who drive decision making for indirect tax solutions, including the sales team of the major ERP vendors to the enterprise sector and the largest accounting firms and system integrators in the world, many who have built multimillion dollar professional services practices around Vertex integrations. And fifth, we have an unparalleled stable of reference enterprise accounts, many who have been Vertex customers for decades. These customers champion our solutions at industry events and are willing to speak to prospects on our behalf to help us win deals. All this commands premium value for our offerings. Even though we are often two to three times the price of competition, we routinely win the majority of enterprise deals we compete for. This has been the case throughout our history. The indirect tax regulatory environment is increasingly complex as governments seek new sources of revenue to reduce debt while providing needed services to their constituents. As an example of the complexity our customers must address, in January we published our annual Rates and Rules report for 2024 which noted significant growth in U.S. district level tax activity. These special purpose tax districts add another variable and layer to complexity to indirect taxes. This in turn creates demand for our solutions as enterprises automate tax to stay up to date and in compliance in Latin America, Europe and Asia-Pac value-added tax has not historically been a growth area for Vertex. Because VAT determination was straightforward, compliance was the bigger challenge. This is changing with the proliferation of e-invoicing mandates and evolving VAT requirements and opens overseas markets in a way we've not seen in our history. On that note, our e-invoicing solution is proving to be very well received and the market is responding positively to our approach which integrates e-invoicing and VAT compliance on one platform with inherent data sharing capabilities. This allows customers to stay ahead of changing mandates, remain in compliance on a country by country basis and do so in an efficient manner. In the fourth quarter we began selling our offering in limited availability. Several key customers quickly filled the available slots and yesterday we announced general availability. Our early e-invoicing wins highlighted several key proof points for us. They included a competitive takeaway, they triggered broader end-to-end product sales and they were all connected to the core ERP platforms where we have developed deep relationships. Thus, we have decided to accelerate our investment in e-invoicing, including the roster of countries we can support as well as our go-to-market capacity. John will provide additional details in a moment. Technology changes continue to challenge global enterprises who are still using legacy homegrown solutions to tackle indirect tax compliance, leading them to evaluate partners like Vertex. This trend is expected to increase as the major ERP software providers aggressively work to move their long-standing customers to modern cloud platforms. The most prominent of these changes is the impending 2027 end of mainstream support for SAP ECC, accelerating the need for businesses to modernize. Last month SAP announced that they are maintaining the 2027 deadline but allowing large and complex customers who make a long-term commitment to remain on ECC through 2033. In our view this is a positive development as it will enable us to build connections to more customers as they evaluate their indirect tax obligations as part of their migration process. This will also help prevent a logjam for integration resources and enable customers to migrate steadily and in turn it extends the tailwind for Vertex. We are excited about the continued acceleration of deal flow in the SAP channel. SAP is one of our long-standing partners, but I can say that our relationship has never been stronger or our opportunity more exciting. Our pipeline is more than 20% higher than it was last year at this time, and likewise in 2024, referral deals from SAP sales reps increased more than 20%. In short, we are not seeing any indications of a slowdown in the channel in either the U.S. or abroad. I'll now share a few key new business wins from the fourth quarter. Our ability to win when sophisticated market leaders are modernizing their indirect tax platform validates that Vertex's technology is built to seamlessly serve the most dynamic and fastest growing businesses in the world. In recent quarters we've highlighted new logo wins with the leading electric vehicle manufacturer, a leading provider of public cloud infrastructure and software, and a global semiconductor manufacturer, among others. We were extremely proud when Vertex was selected by one of the pioneering companies in artificial intelligence research, a company that has been in the headlines since AI first hit mainstream awareness two years ago. This comprehensive seven-figure deal for global e-commerce and tax determination, which is integrated across their global sales channels, encompasses 35 regions around the world and an estimated 500 million transactions per year with the potential for significant growth over time. One question we often get from investors is why don't we force migrate our self-hosted customers to the cloud as that would provide a significant revenue tailwind for Vertex. Our experience has proven that by meeting our customers where they are and supporting their transformation journey on their timeframe, they stay with us when migrating. A leading energy utility validated this strategy when one of our competitors tried to do just that, force the customer to move from a self-hosted platform to their cloud offering. Instead of transitioning with the incumbent, the customer issued an RFP and selected Vertex as their new indirect tax provider, resulting in nearly seven figures of new revenue for us. A global industrial manufacturer selected Vertex to be its indirect tax partner as part of a global technology transformation that included migrating its existing ERP solution to Oracle Cloud. This competitive displacement was a high six-figure deal including VAT calculation compliance in 21 countries, our e-invoicing solution as well as Certificate Center and Address Cleansing. Finally, in Europe, we won a new logo with an up-and-coming cybersecurity training company that was seeking to improve compliance with global tax rules for its e-commerce operations. While this new customer is a relatively small company revenue-wise, given they were launched only six years ago, their complexity across multiple geographic regions made them an ideal Vertex customer. Accordingly, this mid-six-figure deal was one of our largest in Europe in 2024. Now turning to upsell and cross-sell wins with existing customers. In partnership with SAP, a global fashion brand increased its business with Vertex due to a global cloud transformation initiative. In making the move to the cloud, the customer increased its entitlements with Vertex for sales and use and VAT tax and added our Edge product. This resulted in mid-six figures of new revenue, nearly doubling our business with this customer. Finally, a specialty chemical manufacturer had been a non-scaled Vertex customer for several years as they were relying on a homegrown solution for the bulk of their needs. But in the fourth quarter this changed. During an S/4HANA cloud transformation, the customer is consolidating three instances of ECC into one global S/4HANA environment and adopting Vertex O Series as part of the process. After integration is complete, this will be a broad-based mid-six-figure relationship. In conclusion, we continue to benefit from our position at the intersection of commerce and compliance and in a way that enables durable and profitable long-term revenue growth with increasing earning leverage. When a company is struggling with indirect tax compliance, our solutions are not optional. This is because we provide a regulatory focused solution, not a nice to have SaaS solution, and by and large this minimizes the risk to our business from outside influences like changes in the macroeconomic environment. At Vertex, our focus is on indirect tax compliance. In the U.S. this means we address sales and use tax regulated at the state and local government level. Our market opportunity is not impacted by potential changes to the U.S. federal income tax system. Accordingly, we believe a transition to a tariff based funding structure at the U.S. federal level would have no impact on Vertex's business. In closing, we continue to see deals moving through the sales funnel in a normal and consistent way. Our financial track record of delivering what we say we will do since we became a public company demonstrates our team's ability to execute our strategy, differentiate our solutions, deliver value to our customers and partners, and consistently drive great results quarter in and quarter out that our investors can count on. John will now take you through the financials for 2024 and our guidance for 2025. John. Thanks David and good morning everyone. I'll now review our results in detail and provide financial guidance for the first quarter and full year of 2025. In the fourth quarter revenue was $178.5 million, up 15.2% compared to last year's fourth quarter and exceeding the high end of our fourth quarter guidance by $500,000. For the full year, total revenue was $668.8 million, up 16.5% from 2023. Excluding Ecosio revenue was $175.5 million in the fourth quarter and $662.8 million for the full year. Note that in the fourth quarter, contract renewals with several major customers resulted in usage true ups of approximately $2 million-$3 million above our typical Q4 run rate. While true ups can occasionally skew sequential comparisons, they increase annual recurring revenue in subsequent periods. Subscription revenue in the fourth quarter increased 16.8% over last year's fourth quarter to $152.6 million. Full year subscription revenue was $567.1 million, up 17.9% year over year. Services revenue in the fourth quarter grew at 6.8% over last year's fourth quarter to $25.9 million. Full year services revenue was $99.7 million, up 8.8% year over year. Cloud revenue was $76.9 million in the fourth quarter, up 27% from last year's fourth quarter. Full year cloud revenue was $276 million, up 28.6% year over year. Annual recurring revenue or ARR was $603.1 million at quarter end. Ecosio added $7.9 million to ARR and Systax added $5.9 million. Excluding these amounts, organic ARR growth was 15% compared to our very strong fourth quarter of 2023. Net revenue retention or NRR was 109% compared to 113% in the comparable 2023 period, down from 111% in the third quarter. The year over year decrease was largely driven by the comparison to last year's fourth quarter results which were unusually strong. A healthy increase in new logo revenue in the 2024 fourth quarter revenue mix also impacted NRR comparisons both on a quarterly and on a year over year basis. As David mentioned, we do expect NRR to rebound to above 110% during 2025. Gross revenue retention or GRR remained at 95% at quarter end within our targeted range of 94%-96% for Vertex standalone average annual revenue per customer or AARPC was $136,475, up 14.8% from last year's fourth quarter. Including the impact of Ecosio and Systax, AARPC was $122,706. For the remainder of the income statement discussion, I will be referring to non-GAAP metrics. These non-GAAP metrics are reconciled to our GAAP results in this morning's earnings press release. Gross profit for the fourth quarter was $133.9 million and gross margin was 75%. This compares with gross profit of $109.6 million and 70.7% gross margin in the same period last year. Gross margin on subscription software was 81.4% compared to 76.8% in last year's fourth quarter and 80.5% in the third quarter of 2024, and gross margin on services revenue was 37.6% compared to 38.2% in last year's fourth quarter and 35% in the third quarter of 2024. Now turning to expenses in the fourth quarter, research and development expense was $17.3 million compared to $11.3 million last year. For the full year, R&D was $56.4 million, with capitalized software spend included. R&D spend was $35.5 million for the fourth quarter and $123.1 million for the full year, which represents 19.9% of revenue for the fourth quarter and 18.5% of revenue for the full year. Selling and marketing expense was $43.7 million, or 24.5% of total revenues, an increase of $9.4 million and approximately 27.3% from the prior year period. For the year, selling and marketing expense was $154.9 million, up 19.9% from last year, and our general and administrative expense was $34.2 million, up $2.8 million from last year. For the full year, general and administrative expense was $128.2 million compared to $124.9 million last year. Adjusted EBITDA was $38.1 million, an increase of $6 million or 18.8% year over year. This was approximately $1.1 million above the high end of our quarterly guidance. Full year adjusted EBITDA was $151.9 million, representing an increase of $51.1 million or 50.7% over 2023. As you look at our GAAP income statement, I want to call out that GAAP profitability in the fourth quarter was impacted by a defer. As well as the valuation of the Ecosio earnout which contains a fixed share component which is impacted by changes in our stock price. Fourth quarter free cash flow was $17.9 million and for the full year free cash flow was $77.7 million, a significant increase from the $6.1 million of free cash flow in 2023. We ended the fourth quarter with over $296 million of unrestricted cash and cash equivalents, and investment securities totaled $9.2 million. For additional liquidity, we also have $300 million of unused availability under our line of credit. Next, turning to guidance for the full year of 2025, we expect total revenue in the range of $760 million-$768 million, representing annual revenue growth of 14.6% at the midpoint. Adjusted EBITDA in the range of $161 million-$165 million, representing a year-over-year increase of $13.5 million at the midpoint and a full year adjusted EBITDA margin of 21.3%. And the full year cloud revenue growth is expected to be 28%. For the first quarter of 2025, we expect total revenue in the range of $175 million-$178 million, representing revenue growth of 12.6% at the midpoint. While this represents a slower start to the year than normal, we are very confident in our full year guidance given the current level of sales activity and pipeline and adjusted EBITDA in the range of $33 million-$36 million, representing a decrease of approximately $1.7 million at the midpoint. Our Adjusted EBITDA guidance reflects certain strategic investments we are making in 2025, excluding these investments and the dilutive impact of Ecosio on a standalone basis, Vertex's full-year guidance would have approximated an Adjusted EBITDA margin of over 25%, demonstrating the leverage we are seeing from our previous investment cycle. Last quarter we noted that investments associated with the e-invoicing would be approximately $3 million-$4 million per quarter in 2025 or $12 million-$16 million for the full year. However, as we mentioned in this morning's press release, we are accelerating our worldwide country coverage and making additional go-to-market investments. This will increase the full-year investments related to e-invoicing to approximately $16 million-$20 million of $4 million from our original guidance. In addition, we are making approximately $10 million-$12 million of incremental R&D investments across major initiatives including the commercialization of our AI-based Smart Categorization product, other AI-related tools and new product initiatives and other emerging technologies. We believe that these strategic actions are the right thing to do for our customers and will result in continued momentum in the business over the long term. Before I turn the call over to David, we hope that you will join us for our Investor Day which is scheduled to take place at 8:30 AM on March 19. We're all very excited to give you a deeper dive into our business drivers and our strategy to execute on that. We also look forward to introducing you to the rest of the Vertex leadership team. Please visit our investor relations homepage to register in advance or to view the live broadcast on the day of the event. If you have any questions regarding Investor Day, you can reach out to Joe Crivelli, our VP of Investor Relations. David will now make some closing comments before we go on to Q&A. David? Thanks John. As I said at the top of the call, I'm very pleased with our execution in 2024. We believe we have all pieces in place to continue to grow shareholder value in the coming years. We have a differentiated market position in a critical market segment with significant competitive advantages and competitive moats. We have several multi year tailwinds that we expect to accelerate new logo growth and enable us to increase our wallet share with existing customers, and we have a great team executing this business day in and day out to ensure that we seize on our opportunity. With that, we will take your. Questions. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Rob Oliver from Baird. Please go. Ahead. Great. Thank you guys. Good morning. I appreciate you taking the questions. I have two. David, I'll start with you right at the top of your prepared remarks. You cited ongoing enthusiasm for the ERP migrations around Oracle and SAP. And you know, that's been somewhat of a question mark within the investment community lately, so I was hoping you could touch on that in a little bit more detail. I know you also said you weren't impacted by the move to tariffs, but just if we can get your sense of how those pipelines continue to develop, particularly relative to some of the concerns here globally. What you're seeing and how much of that perhaps is stuff within your own control. The unique relationship you guys have had with SAP, any more color on those pipelines to get us comfortable would be helpful. I had a quick follow-up for. John. Thanks. Sure. Thanks, Rob. Yeah, you know, the maturity of the relationships with both Oracle and SAP continue to be strengths for the business and we're not seeing any slowdown in the SAP activity at all. Specific to your question, we saw a nice, actually, increase in our pipeline as we rolled into 2025, and when we look forward, there's really no slowdown. In fact, I was really encouraged when SAP reinforced not only the 2027 deadline, but also the 2033 opportunity. Because what that's going to do is it's going to allow us to actually market to a broader group of SAP prospects before they make the decision on indirect tax, whether they stay with native functionality or move. So it actually gives us a nice tailwind that's going to persist into the future that I'm very encouraged by. And I will tell you that the processes that these companies are going through started well before we got into the pipeline and they're all moving at the same pace. We're not seeing any slowdown in those decisions in terms of when they're making their migration decision. So it's actually moving quite healthily and it's increasing. Great. Thanks. I appreciate that. And then, John, you guys have been very disciplined on the margin front, you know, and now looking at margins, they're going to be down this year. And I know you guys have called out here, you know, the incremental investment in Ecosio as well as across the rest of R&D. And I just would love to hear from you. You know, obviously, given the judicious approach you guys have taken to margins. What, you know, why now? And what was the sort of cost benefit trade off that went into that calculus to say, okay, we are going to spend this year and not have an up margin year in 2025. Love to hear your thoughts on that. Thanks. Yeah, no, Rob, appreciate the question. And as we thought about it, obviously the acquisition of Ecosio at the. End of the year, we were very excited by. We knew we'd be making some spend there to grow that business because. Again, we want to put it into. A position where we can deliver the solutions that the largest enterprise customers need throughout the world. And so we feel like it's the right time, based on some initial indications we have, is to step on the accelerator, move forward and make those investments now, not just in e-invoicing, but in some of the other areas of AI and some of the smart categorization tools that we have there. So we really feel that now's the time to make those investments, to get ourselves prepared. So when we looked at sort of the ending results of kind of where we ended up with the budget, we really look at the core and. Focus on where the core. And if you exclude the investments we're making in AI code and you exclude some of this, what I would consider kind of somewhat anomalous investment that we're going to be making in 2026 to chase after some of this investment. Our adjusted EBITDA margin is in excess of 25%. And it really demonstrates that leverage that we've been able to get over, you know, from our, you know, our previous investment activity that we did. Over the last couple of. Years. So we feel very good about where that stands and we look at the core business versus some of the other things and that really gives us the. Confidence. Great. I appreciate the. Commentary. Thank. You. The next question comes from Chris Quintero from Morgan Stanley. Please go. Ahead. Hey. David. Hey. John. Thanks for taking the questions and congrats on the solid quarter here. Actually, I wanted to ask on gross margins, nice to see that really expand in 2024 here. Just curious if you can give us a bit more color on unpacking the driver there of that improvement on the gross margin side and what should we expect for? 2025? Yeah, Chris, thanks very much for the question. We have seen some nice growth in margins over time. And as we've talked about over the years, over time we expected that we would see some leverage in the margin area. And so we are certainly seeing. That growth through the. Business. I will point out, as we did mention to you in the third quarter and a bit in the fourth quarter, some of those revenue true ups have come in at a bit higher margin certainly than some of the other items. So there's a little bit of an impact there. So I wouldn't take we don't guide to margins, but what I would say to you is that I wouldn't take these margins and extrapolate them out over the longer term. I think we feel very good about. Margins and how they're operating right now, but I wouldn't certainly be expanding these, and again, I think we had a little bit of benefit in the third and fourth quarter by some of the true-up activity that we've called out. Previously. Got it. That's, that's super helpful, John. Yep. And then on services, how should we think about that for 25? I know Q3 was only about 2% growth and Q4 a little step up to close to 7%. So just curious how we should think about that Pro Services run rate as you continue to work with your implementation partners there. Yeah, you know, I'm going to take that, Chris. I think our strategy of minimizing services growth to support a more durable ARR growth is really working. We're seeing it in increased pipeline with our alliance partners and that's something we're going to continue to focus on. So we envision a pretty flat year candidly with our services, really using it more as a harvester for great customer experience and driving innovation into our products as opposed to being a primary revenue driver. Really want to continue to push everything we can into our advisory community with our business wherever. Possible. Super helpful. Thanks guys. See you in. Philly. Thanks. Chris. Thanks. Chris. The next question comes from Joshua Reilly from Needham. Please go. Ahead. All right, thanks for taking my questions. So you highlighted some additional product related investments for AI. If you look at Smart Categorization and the investments for the internal AI tools as well, you see this is like a front loaded investment period when monetization is more in 2026 and beyond. Or do you think there is a quicker payback opportunity in terms of margin benefits for customer support? And do you expect to see some revenue from Smart Categorization in some of these AI products in 2025 as. Yeah, I think there's two aspects to that. Yes, I think smart categorization will be in the market this year and so we will see some more probably ARR lift than we will necessarily revenue, obviously just with our revenue recognition. But we're also seeing it and we've talked about this, I think, Josh, in the past, you and I, the conversation about our data management capabilities. One of the areas that's adjacent to this increase in investment that is part of what we're focused on here is advancing a more commercial data management offering into the market. And so part of this investment is because we're seeing some of the power of what we can do with that AI across our platform, especially as we look at agentic AI being added into our platform. And it just has us really excited about what we're seeing and how we continue to bring our customers along in the journey of those conversations and the feedback they're giving us about why this is a good opportunity to pursue. Now tying to the question of why are we accelerating in the face of margins? It's because some of the feedback we get from customers about bring it to market now so you can get that adoption longer. Term. Got. It. That's super. Helpful. And then as we look at some of these investments for the AI products and tools, how should we think about how much of the incremental expenses will be expensed versus capitalized? And then how are we thinking about the conversion of EBITDA to free cash flow for this year? Thanks. Guys. Yeah, a couple of things I think in terms of kind of the capitalization, typically we are running around kind of 50%, give or take. Hard for me to say right now, Josh, exactly how that would play out, but that's generally the rate at which we consider that so. Hard to say with that, but that's kind of the guidance I would give you there in terms of free cash flow for this year. Again, we feel we don't guide to free cash flow. What I can say is that we were on a very nice pace to achieve our free cash flow goals. As we've talked about that 65%-70% you saw we increased in the full year, we're up to $77 million of free cash flow, up from about $6 million last year. So we've made a lot of good strides. Josh, what I would tell you is obviously the acquisition of Ecosio and some of the other investments we're making is going to slow that down. And my expectation it'll slow that down. I think we talked about 18-24 months of investment. As I see us exiting 2020, as I see us exiting 2026 having made those investments, I think we'll then be on track for that 65%-70%. Got. It. Thanks, guys. You got. The next question comes from Samad Samana from Jefferies. Please go. Ahead. Thanks for taking my question. Maybe first just on the early customers that have adopted Ecosio or that you've made it available for the joint offering, anything that you can tell us about that cohort, whether they're your larger customers, more mid-sized? What GEO specifically they're working on, or how they're early on thinking about leveraging it, and just what you've learned. I know it's been a short period of time, but just anything we can use to start to think about what the opportunity could mean in a more meaningful. Yeah. Yes, Samad, I appreciate the question. It was a combination. We had a nice competitive takeaway here in the States. We won a nice deal in Europe that actually led to a much bigger, broader relationship, meaning the customer came in with the pain point around the invoicing. And as we laid out our vision around linking VAT compliance and then VAT determination and the client actually stepped back and bought a much broader suite than actually the initial pain point. So I think the addition, the ability to add on other product sales as our team begins to take this to market and gets our referenceability is really encouraging to me in terms of what we're seeing in the conversations. So I would say, you know, U.S. base is going to still be our primary focus, but we are seeing we did pick up wins in Europe. Some were new logo, some were competitive takeaways, some were existing customers just adding it into their mix. All were critical proof points. I think the other big thing I would acknowledge is the fact that they're all running on the core ERP systems that we have deep relationships with, which is critical to our strategy as we want to further wallet share and advance our strategic relationships with those. Partners. Understood, and then maybe a follow-up on just John. I thought it was interesting that some of the incremental investments are around internal AI, and so can you maybe help us flesh that out for us a little bit? Is that in terms of AI that you want to use internally for your own development? Is that something that you look at as a potential something that drives efficiency or cost savings, whether that's an R&D development or in the cost to serve? And are there commercial prospects for whatever you end up? Yeah, certainly Samad. From additional cost that we'd be talking about when we talk about the AI investment, there's certainly a lot there that's focused on external commercial opportunities within the products and that's really our main focus. We are making some investment for internal use but that's much smaller. Piece of the majority. Of it is really focused on external customer opportunities and being able to leverage that along with some other data management tools that we think will be certainly useful to our customers as they continue to navigate tax and. A good example of that is Smart Categorization that will be an independent commercial offering that can be bolted on to existing customers as well as help us land new. Logos. Great. Look forward to hearing more at the analyst. Day. Yes, look forward to having you. There. The next question comes from Steve Enders from. Citi. Please go. Ahead. All right. Great. Thanks. Thanks for taking questions this morning. I guess maybe just following on the AI conversation here. I guess interesting to hear you talk about the agentic AI experience in the Vertex opportunity there. But yeah, can you just maybe give a little bit more detail on how you're thinking about what that agentic experience looks like or maybe some of the use cases or opportunity around that. Obviously early days, but as we're looking at it across our platform, I think we see opportunities for it to improve both the customer experience as well as, which I think is going to be interesting, some of our partners are also in the market. Technology partners are working with agentic AI. And I think you're going to see how agentic AI can work to improve actually the relationship and the engagement. Between some of our ecosystem. Partners. And so I think we're looking at it in two dimensions about how we can improve the end-to-end workflow. Along the lines of our data fabric and what it can do, the jobs it can do for a tax department and bring value there, and then also how we can think about it on a broader level as we look out further where it may fit in the ecosystem with some of our ecosystem. Partners. Okay, gotcha. That's helpful. And then I guess maybe on kind of the pipeline development or I guess it seems like that's kind of like what's given you confidence for the back half of the year. But can you just maybe help us think through some of the moving pieces or maybe the linearity through the year, you know, as we kind of accelerate off of 1Q levels and maybe what that looks? Like? Yeah, I'm really glad you asked this question because obviously when you look at Q1 you may say, well, how are we going to get to the exciting guidance that we have for the full year and the growth and that suggests much stronger ARR as the year goes on. I think that's just a function of really deep understanding of and visibility into our pipeline. When we look at our coverage ratios of what we're going to need in pipeline both in Europe and the U.S. to achieve our goals. And what we're seeing is already building as we rolled into 2025 is very different than we rolled in in 2024. We definitely see across, we highlighted some of our new logo wins. So the broadening of the ecosystem of where we're seeing pipeline build is very encouraging to me. It's not just single threaded. And so I think our progress there is one reason I have the confidence. I think the second reason is some of the feedback we're getting about the new offerings and where we're envisioning bringing products to market. That combination along with just the core execution of the team, I also think you're going to see and we highlighted this a nice movement back in NRR. So while NRR pulled back a little bit in Q4, I think you have to look at the actual unit opportunities actually increased for us, which tells me the customer appetite and the pain they're still dealing with is there. It's a question of what products they buy that oftentimes drives that NRR, but I think you're going to see that come back nicely. So, when I look across the business across all those dimensions, that's the confidence I have for the nice growth through the year and that snapback that you. Acknowledged. Okay, perfect. No, great to hear and thanks for taking the. Questions. Yeah, thank you. Steve. The next question comes from Daniel Jester from BMO Capital Markets. Please go ahead. Hey, good morning. Thanks for taking my question. Just on Ecosio and e-invoicing, I'm sorry if I missed this. In terms of the investments you're making, how much of this is product related and how much of this is getting go to market investments and getting sort of boots on the ground in Europe and I think maybe more generally, I'd love to kind of hear an update as you see your go to market investments in Europe. David, you talked about VAT unlocking more opportunities. Is that going to require you to put more sales resources into Europe in the coming years to attack that? Thank you very. Much. Thanks for the question and it's a good one. What I would tell you is this. As we think about the investment in Ecosio, you're right, there are two pieces to it. There's the go to market aspect and then there's the product aspect. The biggest piece certainly is the product getting the country coverage that we need, ensuring that we've got great integration across the product set that we offer and that is where the majority of the spend is. That said, we certainly still have to ensure that we have the right amount of coverage out there. Again, as we expand and get usage throughout Europe and elsewhere, we want. To make sure we've got feet on. The street as well as other subject matter experts to be able to articulate the story, but that is certainly a much lesser part than the product aspect of. Yeah, I would just add, I think, you know, I'm really encouraged. One thing I should have said earlier when we talked about what's happening invoicing is the talent that we've actually drawn into our organization around e-invoicing who are people who worked at other competitors, Big Four partners, et cetera, that have now come and joined our organization because of the strategy we've adopted here and the offering that we're bringing forward in the market. So I just really like our positioning and their energy around why we're going to succeed. So I think John hit it really well. We're going to see much more about accelerating the product. But that positions us in the long run to execute in the go-to- market. Okay, that's really. Helpful. Color. Thank you. And then on the record improvement in new logos. That's great to hear. I think throughout the conversation you've touched on it a few times about what drove that. But I just, you know, can you be a little more explicit? Is this actually seeing new sort of SAP and Oracle related customers as they go through their digitization journey coming to Vertex or is this maybe a broader set of different opportunities? I just, I just. If you can give any more clarity what's driving those, that'd be very. Helpful. No, we look carefully at this. So thank you for the question. It is the combination. It's the broadening of that ecosystem relationship, so I think we highlighted, you know, a 20% increase in pipeline and referrals in SAP. That's new logos. Really pleased with how we're working with our alliance partners and we continue to advance in Oracle. Again, new logos, but going further, we continue to nurture our ecosystem relationships with Shopify, Microsoft, Salesforce, NetSuite. And the investment we have made in channel over the last several years is really starting to bear fruit that is opening up that aperture of broadening the revenue base for more durable, sustainable revenue growth into the future, and to me that is really encouraging, so we're not as single- threaded. Thank you very. Much. The next question comes from Jacob Roberge from William Blair. Blair. Please go. Ahead. Yeah, thanks for taking questions. You talked about Ecosio needing to add those geographies and you've been talking about that the past few quarters to kind of get in the right place for some of your larger global customers in terms of where it sits today. Are you able to address the markets that are starting to get lit up this year and next year and these are more forward looking or is there a little bit of a catch up that you need to do to address the current demand that you're seeing with? Ecosio. Certainly we want to be most importantly focused on the greenfield countries that are coming, meaning countries like France and Germany where they didn't, where the requirements didn't exist because that's going to be a greenfield where all customers. All the markets are trying to figure out how do we solve for those jurisdictions. And there are certain prime jurisdictions that had already adopted e-invoicing that Ecosio didn't cover. And we want to make sure, given where our customers do business, we make sure we hit the ones that are most prevalent. So there might be a small jurisdiction, pick a region, let's say Africa, that we don't have a lot of customers doing a lot of business in that region, we will push that out on the roadmap. But if you've got a big LATAM jurisdiction where your customer is doing a lot of business, you're going to want to make sure you cover that, even though they may have had the. Invoicing in place for several. Years, and so it's making sure we hit the green fields first and foremost where we know regulations are coming and then looking at areas where the largest economic activity from our customers perspective is happening and making sure we're adding those into the queue as quickly as possible and then again pushing out the ones that are further down the. We don't see as much urgency because we don't see as much demand in that jurisdiction. Okay, that's helpful. And then we'd love to just get a little more detail on the overall demand environment. I know it sounds like deals are still moving through the funnel at a normal pace, but would love to hear kind of how general consumption on the platform was and you had slightly lower true-ups this Q4 when compared to last year. Was there anything specific that drove that or just a really tough comp? I think it was a really tough comp. I think we are also, to the team's credit, we're putting in processes to try to minimize the surprises going forward. We're trying to see where we can get more advanced knowledge and either put that into our guide more specifically or even better actually reconcile it into ARR sooner so that we don't create those in the future. And I think we've instituted some new processes to do that. Is how I would largely say that. Johnny can build on. That. No, I think that's fair. I think that's something that we certainly want to make sure that we have and have better visibility to going forward. And I think as David talked about, some of those processes will help give us that. But again, we did have some, you know, we like to call out when those things, you know, those anomalous things are there just to, you know, set people straight with sort of the trajectory of the business. And I, we wanted to make sure that that came out. Obviously. I was going to say obviously as we continue to drive cloud as our primary go to market and the success we're having in SAP and Oracle around cloud, you know, it's now over 50% of our subscription revenue. We're excited about that because it's just showing adoption of cloud and it's also positioning us to have better visibility going forward which again will help minimize this into the future and give us a, you know, a cleaner profile on the true ups going forward. That's really helpful. Thanks for taking the questions and look forward to seeing you all in a few weeks. Yes, thank you. The next question comes from Alex Sklar, from Raymond James, please go. Great, thank you David. I appreciate the call out on that competitive takeaway where they were being forced to migrate to the cloud and you were able to win that business away. Can you talk about that opportunity? And was that a cloud win for? Are you seeing a broader displacement opportunity arise from any competitors kind of forcing broader migration activity or was that just kind of a one off? Thanks. I will say that. That was an on-premises replacement. Just to be clear, we met the client where they were at, but in doing so, the loyalty and the appreciation we got gives us the confidence, given our historical track record, of when they are ready to migrate; they're going to migrate with us. And so being that flexibility ensures high six figures of ARR and revenue for us, you know, position us for revenue and it gives us that position for sustained relationship going forward. So that was; I don't want to mislead you; that wasn't a cloud conversion at that time, but it will set up a cloud conversion going forward. I think the second thing is we don't have great visibility to every customer's view of our competitor strategies by any means. But we have seen this play out over time where customers are being forced to do something they're not ready to do. And being the organization that we are, it gives them the confidence we're going to be with them for when the needs are and it has played to our favor every time and it's why our win rates are where they. Are. Okay, great, great color there. And then just maybe a two part question on partnerships and then the second part on SAP specifically. But just given the commentary about partner contributions ramping into 2025, the strong new customer activity in Q4, can you talk about what was factored in 2025 from a new logo standpoint? Relative to 24 and then on SAP specifically the 20% pipeline growth, really strong. Outcome for you all just given the magnitude of that opportunity. Is that like a level we should think about kind of being sustainable for a multi-year period? Is that something that maybe could even accelerate from here? I'm just kind of curious how you think about 20% growth from that channel just given the longer-term opportunity. Thanks. Sure. So I think relative to new logos, we don't certainly guide to that. Historically our business was 75% existing new revenue. Every quarter came 75% from existing customers, 25% from new logos. We've certainly seen that shift to 30%. We have a goal, we've talked about trying to get that to like 35%. We still think that working with the best customers in the world is going to be an increasing wallet share is going to be the primary driver. But we are definitely seeing traction towards moving towards, you know, trying to get towards that 35% of, you know, each quarter being coming from new logos because again, we think that positions us for that proven land and expand model that we demonstrated to customers and investors over the years where once we're in, we develop loyalty and we solve broader problems, especially as we bring products to market. As far as the SAP pipeline, you know, I think we just continue to expand our footprint inside of that ecosystem with their channel reps, the sales reps, our relationship with the alliance partners and the work we're doing there and the preference we're getting, I think all that is contributing to the expansion as well as the deadline of 2027 for customers that are trying to move in that way. So certainly encouraged by that, we're not taking our foot off the gas and in fact looking at new ways to bring more value to SAP customers with some of our product extensions to make sure not only is the win rate continuing to grow, but also the value proposition to more new logos. Continues. Okay, great. Color. Thanks. Guys. The next question comes from Patrick Walravens from. Citizens. Please go ahead. Oh, great. Thank you. Congratulations. Hey, David, can I just start your big picture tone of business. So how was Salesforce attainment in Q4? And you're 2/3 of the way through Q1, so how's it looking so far and how does that tie to your, you know, a bit of a slower start for the year. Commentary? Yeah, I think this super engaged Salesforce. I just came back from our SKO roughly 400 people and really, there's really great energy in terms of the team's confidence in the growth and in fact, Pat, as you noted, you know, that's why our guidance for the full year is as high as it is relative to Q1. Even though we recognize revenue ratably, we have strong confidence and the sales team has good confidence in our pipeline build and their visibility to opportunities as we move forward here into Q2 and beyond. So I'm really bullish on the way the team is seeing the goals for 2025 and capitalizing on the opportunities that are in front. Of. Okay, and then if I could just ask sort of a follow-up here on all the questions about. e-invoicing. I think when we had you out meeting with investors in December, it came up that there's about 50 countries worldwide that have e-invoicing mandates. And at the time I think you guys said you had coverage of 26 of those. Hopefully I wrote that down. Right. Where are we now? And sort of how do you see. If we're 26 now, how do you see that gap filling over the next couple years to get to. 50? Yeah, I wish I had that definitive answer. I will get you that offline. I don't have the exact amount as of now. I will tell you the acceleration investment is intended to address just that. But what I will say is what you can see that evolving to over the next 18-24 months is we will be at the country coverage that we need, which would be, you know, essentially everywhere. We know that there's important adoption we will have covered in that time frame. That's why you're seeing the slight uptick in investment, because of the feedback we're getting from the customers with the opportunity we brought in, as well as some of that talent I brought in, I referenced a moment ago in terms of their giving us the really good clarity in terms of where to build next for where the opportunities are the. Strongest. All right. Great. Thank. You. The next question comes from William Jellison from D.A. Davidson. Please go. Ahead. Hi, good morning and thanks for taking the question. I have just one and it is, you know, in light of the strength of the long-term drivers you've called out, you know, maybe even the incremental strength you've seen over the last few months in conjunction with the accelerated rate of investments across a couple of important drivers in the business. Does it change how you think a bit longer term about a metric like AARPC and wanting it to about triple from current levels to 300,000+? And forgive me if this is something that you're going to articulate further in the Investor Day in a couple. Weeks. No, it's a very fair. Question. Yeah. Certainly the acceleration of investment in our new products, whether it be invoicing or some of the AI and data management capabilities, are all based on the continual feedback and demonstrated ability of our customers to want us to bring more value to market and then move that and is allowing us to drive that AARPC up. And so I think that's a direct correlation. We spend a lot of time in user group meetings and our advisory board meetings talking to our customers about what their next needs are and their willingness to buy from us and how we can drive more wallet share and bring more value ultimately to our customers, which drives wallet share. And so I think all those things are coming across strong signals of continue to do what we're doing, which should continue to move that number up nicely. I think we've been growing it roughly 10%-15% a quarter, and I think that's continuing, and so no reason that it shouldn't going. Forward. Great. Thanks. David. The next question comes from Adam Hotchkiss from Goldman Sachs. Please go ahead. Great. Thanks for taking the questions. David, it would be great just to take a step back and talk a little bit about how you think about the adoption curve for dedicated tax systems in the broader market. Do you generally think of this as more linear as more companies hit complexity thresholds and general ledger migrates to cloud? Do you think of this more as like an S- curve when things accelerate once you get enough referenceability? Any color there would be. Helpful. Yeah. It's a very interesting question, I think, and well framed. I will tell you that for the core challenges they're facing now, meaning, let's just say determination and calculation of sales tax in the U.S. That's really driven a linear thing of as they mature in complexity, as a business gets, you know, more diverse jurisdictions, they're dealing with more diverse business platforms they're running on, they will cross that tipping point. The second part of your question that really ties into my other part of my answer is when you get outsized regulatory change like the phenomenon of e-invoicing and real-time reporting that's now occurring and is really sort of disrupting and transforming. That's more of an S- curve where we're getting in the market with something new. As we get that reference ability that we've proven in other parts of the end to end life cycle, it will have a differentiated growth rate as I think about 2026 and beyond. 2025 is our proving year. I think we said that from the moment we bought the Ecosio was 2025 is our proving year to build out the product, build up the reference ability, train up the alliance partners, because we're going alliance only in terms of our implementations, in terms of everything we're doing there so that we can position ourselves for the demand cycle of 2026 and beyond, and I think we're just accelerating our readiness in investment for that because we see the feedback we're getting from our alliance partners. and our early adopters about what we're bringing to market. so that's more of that S- curve that you. Reference. Okay, understood. That's really helpful, thanks. And then just John, on NRR components, I know historically you've talked about a mix of geo new product price and volume. I'm curious if in either Q4 or the way you think in the ramping of NRR throughout the year there are any changes to sort of the mix you've laid out historically. Thanks. Yeah, Adam, thanks for the question. You know, we didn't see a big change in that in the fourth quarter. We really saw fairly consistent sort of that, you know, 50% coming from cross sells migrations, another 25% from price and the other 25% from the additional entitlement. So it really didn't move too much. And when we look at the 2025 budget again, we don't see a big change coming out of that. Again, as David did talk about, we were very excited when we think about the whole ARR walk of the activity we saw in the new logos. But that's outside the NRR calculation. But that's about the way we see. So thank you very much for the question. Great. Thanks so. Much. This concludes our question and answer session. I would like to turn the conference back over to Joe Crivelli for any closing. Remarks. Thanks, everybody, for joining us today. Apologies if we didn't get to you in the queue. If you have any follow-up. Questions or would like to schedule additional time with the team, please send me. email at investors@vertexinc.com. Have a great rest of your day, and we look forward to. Speaking with you in the coming weeks and seeing you at our Investor Day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.