Vertex, Inc. concluded its second fiscal quarter of 2026 with notable financial and operational achievements, demonstrating the robustness of its business model. The company reported a substantial increase in adjusted EBITDA, attributed to enhanced cost management and operational focus, which exceeded initial projections. Despite a cautious adjustment to its full-year revenue outlook, Vertex reinforced its commitment to profitability and efficiency. A key strategic focus remains on leveraging global e-invoicing regulations and embedding artificial intelligence functionalities within its central tax compliance platform. Furthermore, the executive team has been bolstered with new senior appointments, signaling a renewed drive towards operational transformation and cloud-centric growth.
Vertex Inc. Reports Robust Q2 2026 Performance and Strategic Focus
On Monday, August 3, 2026, at 5 p.m. ET, Vertex, Inc. (NASDAQ: VERX) held its second-quarter earnings call. Key participants included Vice President of Investor Relations Joseph Crivelli, President and Chief Executive Officer Christopher Young, and Chief Financial Officer John Schwab. The company announced impressive financial results, with total revenue climbing to $204 million, marking a 10.5% year-over-year growth and meeting the upper end of its guidance. Adjusted EBITDA soared by 33% to $51 million, surpassing expectations, driven by stringent cost controls and refined operational strategies. This performance resulted in an adjusted EBITDA margin of 25.0%, an increase of over 4 percentage points compared to the previous year. Software subscription revenue, the primary revenue driver, grew by 10.7% to $174.8 million. Cloud revenue saw a 17.9% increase, reaching $101.7 million, despite some slower-than-anticipated cloud migrations. Services revenue also contributed positively, rising 9.4% to $29.2 million. Annual Recurring Revenue (ARR) reached $703.4 million, a 10.5% increase, reflecting strong customer retention and embedded workflow solutions. Net Revenue Retention (NRR) remained stable at 105% sequentially, while Gross Revenue Retention (GRR) held at 95%. The Average Annual Revenue per Direct Customer (AARPC) grew by 9.2% to $142,997, propelled by customer expansion and enterprise standardization. Scaled customers increased by 8%, bringing the total direct customer count to 4,919.
Looking ahead, Vertex narrowed its full-year revenue guidance to $825 million to $830 million but raised its adjusted EBITDA guidance to $206 million to $210 million. The full-year cloud growth outlook was adjusted to 18% due to conversion timing. For the third quarter, the company anticipates revenue between $208 million and $211 million and adjusted EBITDA of $55 million to $57 million. AI adoption within the organization saw a remarkable increase, with active use of core AI tools rising to 89% from 68% in January. This led to a 34% improvement in engineering efficiency and a 30% increase in pull request merge rates. AI-driven workflows also reduced e-invoicing business rule onboarding time by approximately 50%. Vertex repurchased $26.5 million in shares at an average price of $13.17 during the quarter. GAAP free cash flow stood at $2.7 million, with pro forma free cash flow reaching $13.2 million after accounting for Value Creation Plan costs. Non-GAAP diluted EPS was $0.20, up from $0.15 in the prior year. The company also secured several six-figure e-invoicing enterprise deals, including a significant expansion driven by mandates in France and Finland.
Management highlighted that while cloud conversions were slower than expected, this represented a timing issue rather than a loss of revenue. They remain focused on translating internal AI gains into tangible customer value and product differentiation. Christopher Young emphasized the durability of Vertex's core business, with customer activity demonstrating expansion through increased transaction volumes, standardization during ERP cloud transformations, and competitive displacements in complex tax environments. The company continues to invest in its leadership team, with recent appointments of Allison Cerra as Chief Marketing Officer, Aneel Jaeel as Chief Operations Officer, Chatelle Lynch as Chief People Officer, and Bala Chandran as Chief Product and Technology Officer, to steer its next phase of growth and innovation.
From a forward-looking perspective, Vertex's strategic investments in AI and e-invoicing mandates are poised to redefine the landscape of tax compliance. The company's enhanced operational efficiency and strengthening leadership team indicate a clear trajectory towards sustainable growth and market leadership. The integration of advanced AI capabilities, coupled with an agile response to evolving global regulatory demands, positions Vertex to not only meet but exceed future expectations in the dynamic enterprise software sector. The steady progress in internal efficiencies and product development signals a promising outlook for increased customer adoption and commercial success.
