Good day, and welcome to the Vertex Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joe Crivelli, Vice President, Investor Relations. Please go ahead.

Hello, and thanks for joining us to discuss Vertex's fourth quarter results. Chris Young, our President and CEO; and John Schwab, our CFO, are also with us today. During this call, we may make forward-looking statements about expected future results. Actual 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 metrics. A reconciliation of these 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 Chris.

Welcome, everyone, and thank you for joining us. It's great to join you on my first earnings conference call as President and CEO of Vertex. Our financial results for the fourth quarter came in as expected. Revenue was $194.7 million, in line with our guidance for the quarter, while adjusted EBITDA exceeded the high end of our guidance at $42.5 million. For the full year, Vertex delivered double-digit revenue growth along with solid profitability. Since this is my first time speaking to our investors and analysts, I wanted to cover a few topics. First, why I'm excited to join Vertex at this point in the company's history. Second, I'll give you a perspective from my conversations with customers, partners and employees over the past 3 months. And third, my view on how we can accelerate our revenue growth. Then I'll share some exciting new business wins from the fourth quarter. Many investors have asked me what attracted me to come to Vertex? Well I'll start there. First, I was drawn to Vertex's incredible blue-chip customer base, which includes over 60% of the Fortune 500. Around the world, leading enterprises trust Vertex to stay compliant with ever-changing indirect tax requirements. Our customers describe to me that Vertex is trusted, reliable, flexible and has the deepest domain expertise in the industry. Likewise, our partner ecosystem is built on strong, long-standing relationships with the key technology and implementation partners that serve this customer base. These partners consistently recognize Vertex as the leading provider of indirect tax solutions for the enterprise. At the same time, both groups want to see us move faster and drive more innovation and meeting that mandate will be job one for us in the near term. Second, Vertex has a long-standing track record of revenue growth, profitability and positive…

Thanks, Chris, and good morning, everyone. I'll now review our results in detail and provide financial guidance for the first quarter and full year of 2026. In the fourth quarter, revenue was $194.7 million, up 9.1% compared to last year's fourth quarter and in line with our guidance. For the full year, total revenue was $748.4 million, up 12.2% from 2024. In the fourth quarter, our subscription revenue increased 8.9% year-over-year to $166.2 million. For the full year, subscription revenue was $639.7 million, up 12.8% year-over-year. I want to provide additional details and clarity around the impact of true-up revenue on our revenue growth. True-up revenue is the payment that is owed to Vertex when a customer overruns its contracted entitlements. It is recognized as revenue in quarter and the payment of a true-up typically coincides with the corresponding increase in entitlements. As a reminder, we historically have realized $1 million to $2 million of true-up revenue in the first 3 quarters of the year and $2 million to $4 million in the fourth quarter. In the third and fourth quarter of 2024, we called out elevated true-up amounts relative to expectations. However, in 2025, as we had mentioned, this did not recur and renewing customers were generally within the usage limits of their contracted entitlement amounts. As a result, true-up revenue in 2025 was approximately $10 million lower than 2024. This alone reduced our 2025 full year revenue growth rate by just under 2 percentage points. Lower true-up revenue in the fourth quarter reduced the year-over-year revenue growth rate by approximately 4 percentage points, and the impact on subscription revenue was approximately 2 percentage points for the year and 5 percentage points for the fourth quarter. Turning now to services revenue. Our services revenue in the fourth quarter grew…

Thank you, John. And before we take your questions, I want to thank all of our Vertex employees around the world for their unwavering dedication to serving our customers in 2025. Their commitment to our mission to accelerate global commerce with a global compliance platform strengthened by AI is evident in everything they do. They exemplify the strong culture that defines Vertex, and I'm truly proud to join this team and honored to be able to lead it. Earlier this year, I introduced our employees to my foundational tenets to make 2026 and beyond a success for our company and for our investors. And I'll share them with you now. First, we play to win. That mindset raises our bar on product quality, customer outcomes and how we show up from one another. We put the customer at the center of everything we do. We are constantly asking how will what I'm doing today help a customer succeed. We earn trust through outcomes. We achieve results with speed, agility and integrity. We'll move faster, adapt quickly and never compromise on doing things the right way for teammates, customers and partners. We will innovate boldly without fear. Progress demands smart risk, and we'll try new approaches, learn fast and keep pushing the boundaries, especially where AI can remove friction and unlock value. And finally, we will communicate with candor and transparency. We'll speak plainly about what's working and what isn't and help each other improve. That's how I've operated through my career, and that's the ethos that I'm committed to bringing to Vertex. On that foundation, I'm confident that we will continue to win in the market, accelerate growth and capitalize on our market position as the leading provider of indirect tax solutions for the enterprise. And with that, operator, please open the call for questions.

[Operator Instructions] Our first question comes from Andrew DeGasperi from BNP Paribas.

Maybe Christopher, can you -- I know you've been there only a few weeks, so maybe this is a little unfair to ask, but maybe elaborate a little more in terms of what you said were the losses to competitors at the lower end of the market. Was there -- was this like a price-driven change? Or -- and I assume this is not AI related. Is that correct?

That is correct. And thank you for the question. You can call me Chris, no problem on here. I appreciate it. In reference to that to those remarks, what I was talking about is our overall attrition. As you saw from some of the numbers, attrition was higher in 2025 than we've experienced in the past. And some of the drivers of that were, number one, M&A and bankruptcies, which we've talked about on prior earnings calls that, that was up this year, and that was a significant factor in this. But the second one is that we saw our highest amount of churn in our smaller customers, those that would have had ARR of under $50,000 per year, and that compares to an average ARR per customer of $138,000 per year. So it was concentrated in smaller customers. Some of those went to competition. But when we look at our head-to-head performance to competition with competition, we're winning more ARR from our competitors than we're losing to competitors.

That's helpful. And I guess in terms of -- maybe as a follow-up to John, in terms of the confidence that you have in achieving the guidance for next year. I know this year, you've had a lot sort of variables to play with. How confident are you on the growth for 10% to 11% next year? And what sources of upside or surprises do you think could be in store for you? Is it e-invoicing? Is it the AI product that could potentially do better?

Yes. Thanks, Andrew, for the question. In terms of our guidance philosophy, it hasn't changed. Again, we took a very thoughtful approach to setting it where we set it. We feel very good about it. And we took into consideration a lot of the activity and the things that we saw develop during 2025 into it as we set it. And so listen, our plan is to get back to that beat and raise cadence that we've had for a number of years, and we want to make sure that -- we wanted to make sure that we took everything into consideration and set it at the right levels to do that. So we feel good about that. And listen, when I think about 2026, clearly, we think there is good opportunity there for activity around the e-invoicing, which is many of the mandates are coming live at the back half of the year. And so that is certainly one of the growth vectors that we see out there that we're chasing after. And I think Chris talked a little bit about SmartCat and the activity there. I mean that's a nice product. It's got a lot -- it got some traction with some very big customers. And I think that's an exciting tool out there, and it's going to be interesting to see how that plays out over time.

The next question comes from Chris Quintero from Morgan Stanley.

Chris, it's great to meet you. My first question is for you. So you have a really interesting background and set of experiences at Microsoft, McAfee, Cisco. Curious what parallels you can draw from your time at each one of these and what you think will be particularly helpful from those experiences here as you lead Vertex?

Yes. It's -- thanks for the question, Chris, and I appreciate it. And when I look at our company and I look at our business, there's a couple of parallels that stand out for me. The first one, I'll go to my most recent. Obviously, I spent a lot of time at Microsoft. A lot of the time there was when -- generative AI first, I think, really kind of started to change what we were seeing in the industry, including what we were doing with OpenAI. And I -- you could see that there was going to be a real opportunity for companies to transform themselves using AI, both what they do internally and in the technology industry, what we would deliver to our customers. And so I spent actually a lot of last year really looking at what do I think would be the industries where there was opportunity to transform. And this was one category that I thought because of where we sit, because of the kinds of work that happens in finance and accounting departments that given the position we sit in, we can offer them AI capabilities that would really take a lot of the task work off of their plates. And that's something that we think is a huge opportunity. It's why I spent some time talking about what we do with smart categorization. You could look at returns processing as another category where it's heavily manual, and we believe there's opportunities like that to help our customers just automate what they do using generative AI, which will save them time, it will save them cost and improve their overall experience. If I kind of go back from there, I think Vertex does have some similarities to what I saw in the cyber landscape. Cyber is one of those categories that you constantly are refreshing your content. One of the things that makes cyber companies great is they understand the threat landscape, and it's ever changing. And in our business, the compliance landscape is ever changing. There's constantly new tax rules. There's new compliance mandates. That's what we're seeing in the e-invoicing space. We -- and I think one of the things that customers have told me about Vertex, which gives me a lot of confidence in what we're doing and our position in the market is that they really trust our content work. They purchase from us because they see us as delivering the best content in the industry. And they recognize that it's ever changing and that they look to Vertex to stay on top of it. I had one customer tell me -- in specific, he said, I'm able to run a lean tax department because I rely heavily on Vertex to deliver both the accuracy of your calculations, but the updates of your content that keep us up to date on what we've got to comply with across our different jurisdictions where we operate.

That's super helpful context. And then I also wanted to ask about the net retention rates. Obviously, that came down a bit, and it makes sense from the commentary you all gave. Curious about your expectations around where that should be on a kind of more medium-term normalized basis and how long you think it can take to get back there?

We obviously, we're very focused on improving our net retention rates, and there's a tremendous amount of effort that's going in right now to both introduce our newer product offerings like compliance and e-invoicing to our existing customer base. And that every customer that I've talked to, this is either something they are actively doing or it's certainly on their radar screen, whether it's U.S. customers that are doing business in other countries with those mandates or whether it's customers in Europe or in Latin America that obviously have those mandates in their home countries and in other countries where they're doing business. So we see that as an opportunity to grow -- to help our customers grow spend with us, and they're looking for us to help consolidate some of the work that they're doing in that category. We believe AI is it's earlier still than where we are with compliance and e-invoicing, but we see AI as an opportunity there. We've introduced other additional products in our portfolio, services we're offering around returns, processing, certificate -- exemption certificate management is another category where we brought some new product to market just last year. So we see opportunities for growth with our customers, and we're really trying to lean heavily into new products that we can bring to them. And then as I said on the call, where we're also trying to engage customers more directly to prevent attrition and some of that's about just understanding their needs, being proactive about that. Even to the point where as we identify customers who are at risk, I'm getting on the phone with them myself and talking to them and making sure that we understand what their needs are so we can better serve them going forward. And in some cases, I've seen some examples where we've been able to turn a situation that might have been challenged into one where we're able to do more with those customers. And that's what I'm shooting for here with our team.

The next question comes from Joshua Reilly from Needham.

Congrats, Chris, on joining the company here. As we think about the pipeline for 2026, it seems like the biggest swing factor for accelerating ARR growth is still winning those SAP ECC customers, given the size of those potential deals and volume of customers. Is that how you're thinking about things as well? And how is that pipeline shaping up today?

Yes. We've had a good -- so we had a good 2025 in our SAP pipeline, and I shared with you all some of the wins that were part of that migration that customers are doing with SAP to -- ECC to S/4HANA. We -- the way I would characterize it is I think some of the expectations that were there a year ago are we didn't realize it the way -- I think the way it was expected a year ago, but we do continue to see sort of a steady -- I would say, a steady growth of these opportunities. And we're winning our same win rates on each one of these opportunities as they come up. But I think a couple of things that we're seeing. One is it's taking customers longer. I think you've seen some of that in the broader market space. And we're also seeing that it's not necessarily like the timing is a little harder to predict when the tax engine decision will happen in their overall migration process. But we're -- we have a very close partnership with SAP. We work very closely with their teams. We also obviously work very closely with the big -- a lot of our SIs and The Big Four accounting firms that work very closely in this space. They always propose us as the core enterprise solution for this because of the work and the value that we're able to bring to customers. And so we feel good about this pipeline. We feel good about our win rates. But I think we just want to be balanced about how we're going to see that business flow over the course of the next couple of years.

What does it look like in terms of the expanding customer service or customer success to a wider group of customers in terms of do you need to hire more people? Can you give us a sense of what are the thresholds to get this expanded service and how quickly that's going to be implemented?

It's actually one of the -- it's actually, Josh, one of the biggest focus areas for me with AI is our customer success and customer support. I think we can do both. Like we will add people in some targeted places. But more importantly, this is an area where we have an opportunity to make our team members more efficient so they can actually spend more time with customers and less time filling out paperwork on the back end or hunting for information, understanding because as you can imagine, every interaction with a customer requires them to get information, understand what's happening in the customer's environment. We believe we can -- we're going to automate all of that with AI, and that will allow our customer success team to spend more time being proactive with customers. We can help cover more accounts. In some accounts, we believe we can help cover just even directly with AI. There are a lot of customers who just want to get answers to the questions that they have or just want us to be able to surface ways in which they can get more value out of the product, and we're doing that through some of the AI tools that are built directly into the product itself. So this is an area where AI will play a larger and larger role for us. The goal is really to just drive more customer satisfaction, drive higher touch. And that is something customers are asking for. The reason they rely on Vertex is that we solve, in many cases, complex problems for them. And so at times, they need us to help sort through that complexity with them. And we'll do that with great people like the ones that we have on the team today, and we'll do that by augmenting those people with AI as well as bringing AI directly to the customer.

The next question comes from Daniel Jester from BMO Capital Markets.

So Chris, maybe to sort of pull a little bit more on the AI thread. You commented in your prepared remarks about the need to innovate faster. And I suspect I'd love your perspective on how you can do that. And maybe as a follow-up to that, what's the philosophy around inorganic opportunities, tuck-ins on the technology side to help along that journey?

Look, I think that we just -- every company can move faster in this regard. So I'll just say that at the top. And I think we have done some good work, as I mentioned. I like what we've done with smart categorization. I like the copilot that we have in our product. But I'm working with our teams and our focus is on just speeding up everything that we're doing, bringing AI to our product portfolio in more places. For example, we have opportunities not only to help our customers with categorizing SKUs and making sure we're mapping that to appropriate tax rules, but also helping our customers manage high volumes of tax content, helping our customers with return filing. As I mentioned, there's a series of processes that go on in and around everything that we deliver through tax calculation or determination. And this is where I believe we can move more quickly to deliver AI. Much of it is in our road map for this year. But as I tell our teams, our customers don't want it -- they want it now. They don't want it in 6 months from now or a year from now. So we're shifting our priority in that direction, and a lot of it is in response to helping our customers get more value from what we do. And as it relates to inorganic, we continue to be active in the market through partnerships like the one we have with Kintsugi, and we're looking at opportunities to add capability to our portfolio. And so you'll see us be active where we think that makes sense for the business. But we are looking at all ways in which we can deliver more value to customers, all ways in which we can bring more AI innovation into the company. And we're doing it -- and I just want to be clear about this, we're doing it both internal to the company itself as well as through our product portfolio.

That's great perspective. And then, John, maybe on free cash flow and cash generation. I appreciate the comments that you made in the prepared remarks. Any other color that you would be willing to share about how we should be thinking about the trajectory of cash generation this year?

Yes. No, thanks, Dan, for the question. When I think about 2026 and sort of cash flow generation, again, I think as you saw, we did make some pretty significant investments in 2025. You saw our R&D spend as a percent of revenue in the fourth quarter jump up to that 22%, again, reflecting our need to lean into product opportunities that are out there. And so that activity was certainly relevant in the fourth quarter. But as I think about '26, I expect that we'll see continued improvement in free cash flow and conversion because of some of those spend initiatives that we've talked about, they will be very relevant in the first half of the year. They should start to tail off towards the back end, and we'll see some nice pull-through from both the profitability standpoint as well as from a cash flow standpoint.

The next question comes from Adam Hotchkiss from Goldman Sachs.

And Chris, it's good to speak with you in a public forum. A bit of an offshoot to Dan's question. I think there's a lot being made of this idea that the deterministic nature of tax calc lends itself well to broader-based AI agent disintermediation. And I'd love for you to just address what in your mind, a competitor looking to do something like this would have to do to be taken seriously by an enterprise customer that you currently serve and maybe how you're positioning the company in light of that?

Thanks for the question, Adam. And yes, I think, number one, as you said, the deterministic nature of tax calculation is a fortification in and of itself against AI, which is more of a probabilistic approach to the answers that they generate. And so that's number one. And the customers would tell you -- they tell me, we have to be accurate to the penny. And so there's no room for hallucination. There's no room for approximation. You have to be accurate. So I think, look, in the fullness of time, and that could be over a long period, there's a lot that can be done, and I think that there's a lot that will change. But I see it more as an opportunity for us rather than a detriment. Other parts of what we do that are, I think, very much in the proprietary nature of our business is all the work that we do around tax content. It's around the rules that we work with our customers to build into their determination engines, much of that is proprietary. It's not as simple as doing a web search. And there's a tremendous amount of expertise that goes into it. It's not dissimilar, for example, obviously, there's a lot going on out there in the market in terms of using tools to develop code. And there's been a lot of talk about vibe coding as an example. But the reality is vibe coding is a heck of a lot harder than it is for an experienced engineer to pick up a coding tool and get it to help that person become a lot more productive. And in this case, our expertise in tax is something that I think we can use to leverage the power of AI, and it would take a lot longer for an inexperienced person to somehow figure out how to use that to do what we do with the kind of expertise that we have in-house for the company. Along with that, we're deeply embedded in our customers' infrastructure, deeply integrated with the ERP. Those are not insignificant points of integration. We integrate with point-of-sale systems. We integrate with payroll systems, HR systems, CRM tools. So the integration points in and of themselves are also quite complex in many organizations. And so there's -- all that being said, I think we sit in a very strong position in the long, long run, anything can happen, but I also believe that we're more well positioned to benefit from AI and to bring AI-related capabilities to our customers than I worry about AI disintermediating us in any sort of a reasonable time frame.

Okay. Great. That's really insightful. I appreciate that. And then John, when you think about the decel from sort of the 17% to 18% ARR growth you were doing in '23, '24 to the 11% we're at now, how would you sort of stack order what has contributed most to that 600 to 700 basis points of decel across things like entitlements, cross-sell, upsell, attrition, market momentum in cloud ERP. Just any way you think about that breakdown and how you plan on addressing that as we go forward would be really helpful.

Yes. Just maybe walking through the breakdown of the different components that drive it. I think we talked a little bit about churn, churn is down 1 point or so in that time frame. Again, you've seen entitlement -- you've seen that's one that gets the GRR and working through the NRR calculation. No, NRR, we've seen entitlements contributing 1.5 points or so to that flow, which again, we talked a little bit about that and talking about how that we've seen that kind of ebb and flow, and many times, that's been really related to specific factors in the business. And so that is something that we do anticipate that we ought to see get back to a more normalized rate over time. And then again, there's been a little -- there's been some softness in the cross-sell and upsell and those that migration activity that takes place. And so again, all of the different factors are contributing in there. I think one of the real strong bright spots that we've seen is that new sales opportunity. New sales grew significantly in 2025. And so I think that was a very strong point for us. But again, there has been a little bit of push as we've talked about throughout the year around that additional entitlements being a big piece of that. And again, some factors within our control, some -- many of those factors are not in our control. And then the cross-sell, upsell has been a bit softer -- been a little bit softer over time. And I think Chris talked about the ways that we're developing new products to really address customer needs and ensuring we're taking the customer-first approach into addressing them on our product map as we move forward.

The next question comes from Brett Huff from Stephens Inc.

Chris, I'll echo the welcome, looking forward to working with you. And John and Joe, nice to speak with you also. One more question on AI relative to the entitlements question. Some of the folks we've been talking with, given the AI disintermediation sort of hair on fire hysteria, I want to ask the explicit question. Have you seen any AI tech budget crowding out that might have driven the entitlement slowdown or some of the ARR slowdown you guys have seen? I know it's probably hard to define -- to discern that, but I wanted to ask that question explicitly.

We have not seen that explicitly in our -- in the activity that's going on in the field. In fact, we have customers in the AI space, ourselves that are doing business with us, which is a good testament to how they see the strength of our solution. But it's hard to characterize where all the budget is going, but we have not seen that in our particular business as of yet.

Okay. That's super helpful. And then on the e-invoicing, we're really excited about that opportunity and think the right to win for you all is great. But know that you were working on sort of getting to more countries as quickly as possible with the tech that you guys bought, just knowing there's the mandates coming down the pipe so that people are starting to make decisions. Can you give us an update on that? And are we getting to the critical mass relative to the mandate timing that were set up to be well positioned to win some of those deals?

We are -- Brett, we're in 39 countries now. That was a big push that the company made over the last -- the back half of last year, I would say, and it's been a big push for us going into and through 2026. The ecosio team has been executing really, really well in this regard as well as has the rest of the Vertex team. We've now got a combined compliance and e-invoicing offering, which allows us to basically connect our customers' VAT calculation with e-invoicing because if you think about this, it's an end-to-end compliance solution that our customers, particularly the large companies ultimately want. But on the ground, we just had a mandate from Belgium, which we're in market, able to serve. We'll be ready for France as it comes up, ready for Germany as it comes up. And we've been marching down the path of making sure that we've got coverage for all the major countries where we sell and where our customers are focused.

The next question comes from Patrick Walravens from Citizens JMP Securities.

Great. And Chris, let me add my congratulations. We are all really excited when we saw that you were taking this role. So this is sort of the one time to ask this question, I think. But the stock has gone from $56 to $15 in a year, right? And investors just want to understand, I think, what went wrong and you coming in from the outside and having had these 3 months gives you a really unique perspective on it. First step to recovery is acknowledging the problem, right? So you touched on a number of things. You touched on the pace of innovation, downmarket churn, SAP didn't come in as expected. But what did you figure -- what was the root cause? What was the biggest thing? If you look at Sridhar, when he came in at Snowflake, I think you determined that the product velocity just wasn't there under prior administration. But in this case, what do you think the root cause was?

Here's -- first of all, Patrick, thanks for the question. And I definitely know that none of our investors want to see that kind of activity. And obviously, my goal is to actually turn it around in the opposite direction from where it's been. There's a few things. One are some of the factors we talked about on the call. Entitlement growth did slow. We had a big entitlement year in 2024. That came back down in 2025, and that was a factor in our growth. We did see more attrition in 2025 than we had seen in previous years. And that's -- I think some of that is due to a growth in smaller customers that we didn't serve as well as we could, which is why we're expanding some of our focus there with our customer success teams to make sure that we're solving their problems and that we're proactive about making them successful. That's something that's not unique in the SaaS business for many of our peers and others out there in the market landscape. And so we're taking a more proactive approach, particularly around that cohort. And then I do think that there is more need for us to move faster on our product innovation as well. It's a little -- it's congruent with what I spoke about on the call, which is our customers want to see us move more quickly. Like as proud as I am of the work that we've done around AI, as I also mentioned, there's so much more that we could be doing. And we're not at a point yet where we're generating meaningful revenue from that part of our business, and that's a place where we just got to move more quickly and pivot our product portfolio more in that direction to give more value to our customers. And so that's a big piece of what I'm focused on. I think the -- I mean, I know the opportunity is there. That's one of the reasons why I wanted to come to Vertex. But there's definitely a speed element for us that we have to improve, a lot of that is about our product, delivering value from our product portfolio. It's a place where I'm very focused personally with our teams because I think this is something that if we can do it well, if we can move more quickly here, and you see some signs of that in terms of what we've done with e-invoicing and compliance. But even there, the teams and I are pushing very hard to go faster, to meet more of our customers' needs more quickly than we have in the past.

The next question comes from Alex Sklar from Raymond James.

This is actually John Messina on for Alex. Chris, I realize you talked about it quite a bit on the call here in the prepared remarks and the Q&A, but I wanted to ask on AI. Have you seen customers adopt specific budgets targeted towards AI investments? And any color you can share on how you're benefiting from those budgets with smart categorization or if it's acted as a spark around your product road map? Just anything you can touch on there tapping into those AI budgets.

I'm asking -- thanks, Alex, for that question. I'm asking that question in every customer conversation I have, do you have a mandate? Do you have a specific budget? Is there something that's coming down from the CEO or the CFO, CIO, where they're expecting you to do certain thing? And I will tell you, the answers are kind of all over the map. Some organizations are front foot forward on this. Others aren't quite sure where they need to be. What I will say is everybody is open to getting more value. But I will say I haven't seen -- there's not across-the-board mandate to do more with AI. However, what I am hearing from customers is that they want -- if they can show value with AI, they believe they're able to get budget for it. And that's something that we'll want to -- we're going to be leaning into a lot harder because we think that's where our opportunity exists.

That was helpful color there. And then I realize it's been touched on, but John, NRR has moderated some given the entitlement headwinds that you've called out and things like that. But given that dynamic and maybe the mixed macro backdrop here moving forward, can you talk about what NRR exit rate is really embedded in your outlook? And I realize it's been relatively consistent. But how should we think about pricing as a growth lever?

Yes. No, thanks for the question, John. Appreciate it. In terms of NRR, you're right. I mean it has -- we have seen that moderate a bit over the last couple of years. And when I think about sort of where the exit rate is, we do think there -- we should be able to grow through our implications of the guidance that we've delivered. There should be some growth in that coming out. We don't expect to snap ourselves back to kind of where we started the year. But I think we do think that there is opportunity to grow that and see some nice activity and good movement over time. And we've tried to build what we've seen in the market in 2025 into the budget and then with kind of what our -- what the pipelines look like and how the environment feels. I think that's been built in nicely. And then in terms of pricing, I think pricing has continued to be a big part of the algorithm. It's something that we always are very mindful of because again, delivering value to our customers and having -- making sure that they understand that the value that we're delivering allows us to be very front foot leaning on that -- on the pricing toggle. So that's just an area that we continue to rely on, again, and we need to continue to deliver value to make that a continued large part of the algorithm.

Ladies and gentlemen, this concludes the question-and-answer session. I would now like to turn the conference back over to Joe Crivelli for any closing remarks.

Thanks, everybody, for joining us today. Apologies to the folks in the queue that we didn't get to. We'll certainly get to you in the follow-up calls. If anyone else has follow-up questions or would like to schedule more time with the team, please reach out to me at investors@vertexinc.com, and have a great rest of your day. We look forward to speaking with you in the coming weeks.

Ladies and gentlemen, the conference is now over. Thank you for attending today's presentation. You may now disconnect your lines. Goodbye.