Vertex — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenues reached $213.3 million, an 11.0% increase year-over-year.
• Software subscription revenues were $181.7 million, up 10.2% year-over-year.
• Cloud revenues totaled $110.8 million, representing a 20.4% year-over-year increase.
• Annual Recurring Revenue (ARR) was $724.3 million, up 11.7% year-over-year.
• Average Annual Revenue per direct customer (AARPC) was $145,793, compared to $133,484 in the prior year period.
• Net Revenue Retention (NRR) was 106%, compared to 107% in the prior year period.
• Gross Revenue Retention (GRR) was 95%, consistent with the prior year period.
• Income from operations was $0.3 million, down from $4.3 million in the prior year period.
• Non-GAAP operating income was $57.3 million, up from $37.1 million in the prior year period.
• Net loss was $(46.6) million, compared to net income of $4.0 million in the prior year period.
• Net loss per basic and diluted share was $0.29, compared to net income per basic share of $0.03 and diluted share of $0.02 in the prior year period.
• Non-GAAP net income was $42.9 million, and Non-GAAP diluted EPS was $0.26.
• Adjusted EBITDA was $64.8 million, up from $43.5 million in the prior year period, with an Adjusted EBITDA margin of 30.4% compared to 22.6%.
• Free cash flow for the quarter was $25.2 million, with a free cash flow margin of 11.8%.
• Cash and cash equivalents were $217.8 million as of September 30, 2026, down from $314.0 million as of December 31, 2025.
• Total liabilities were $987.9 million as of September 30, 2026, compared to $1,011.9 million as of December 31, 2025.
• Debt, net of current portion, was $339.2 million as of September 30, 2026, compared to $337.5 million as of December 31, 2025.

Guidance and Future Outlook:

• For the fourth quarter of 2026, the Company expects revenues of $215.0 million to $217.0 million.
• For the fourth quarter of 2026, the Company expects Adjusted EBITDA of $58.0 million to $60.0 million.
• For the full year 2026, the Company expects revenues of $828.9 million to $830.9 million.
• For the full year 2026, the Company expects cloud revenue growth of 19%.
• For the full year 2026, the Company expects Adjusted EBITDA of $217.9 million to $219.9 million.
• Management raised full-year revenue and Adjusted EBITDA outlook based on year-to-date performance.
• The Company stated it is unable to reconcile forward-looking Adjusted EBITDA to net income without unreasonable efforts due to uncertainties regarding stock-based compensation, amortization, severance, and acquisition-related costs.

Business Segments and Product Lines:

• Continued momentum in e-invoicing contributed to accelerating ARR and cloud revenue growth.
• Investments in AI are improving operational efficiency and creating new opportunities to extend value to customers.
• The Company serves more than 60% of the Fortune 500.
• Direct customer count increased to 4,968 as of September 30, 2026, compared to 4,856 in the prior year period.
• Indirect customer count increased to 547 as of September 30, 2026, compared to 516 in the prior year period.
• Total customer count reached 5,515 as of September 30, 2026, compared to 5,372 in the prior year period.

Market and Competitive Landscape:

• The Company operates as the global indirect tax and compliance company, focusing on the full transaction lifecycle from tax determination and e-invoicing through reporting, filing, and audit defense.
• Management noted competitive pressures from other tax software and service providers and challenges in convincing businesses using native enterprise resource planning functions to switch to Vertex software.

Risks and Challenges:

• Risks include the ability to maintain and grow revenue from existing and new customers, adapt to technological change, and successfully introduce new solutions.
• Risks related to reliance on government infrastructure for e-invoicing services and challenges in managing Artificial Intelligence usage.
• Risks include potential errors, delays, fraud, or system failures, and exposure to liability not covered by insurance.
• Risks related to changes in tax laws, regulations, and their interpretation or enforcement.
• Risks related to cybersecurity, data privacy, and the protection of intellectual property.
• Risks related to indebtedness and adherence to debt covenants.
• Risks associated with the Value Creation Plan and Capped Call Transactions.
• Actual results may differ materially from forward-looking statements due to various risk factors, uncertainties, and assumptions.

Management Commentary and Tone:

• Christopher Young, President and CEO, described the quarter as strong and evidence of delivering on commitments to investors, citing a stabilized core business, strengthened financial profile, and more efficient operating model.
• Mr. Young expressed confidence in building on growth momentum driven by e-invoicing and AI investments while maintaining operating discipline.
• John Schwab, CFO, stated that results reflect continued progress against priorities with solid revenue growth and a strengthened financial profile.
• Management emphasized the ability to invest selectively in opportunities supporting durable long-term growth.

Other Key Points:

• The Company acquired Finta Inc. and its subsidiaries ("Brinta"), incurring additional cash consideration payments of $10.0 million to sellers.
• The Company executed a Value Creation Plan, incurring $3.3 million in severance costs for the quarter and $13.5 million for the nine months ended September 30, 2026.
• The Company repurchased shares totaling $73.7 million during the nine months ended September 30, 2026.
• The Company paid $19.6 million for acquisition contingent cash earn-outs during the nine months ended September 30, 2026.
• Legal expenses associated with litigation claims against a competitor were included in transaction and other business transformation costs.
• The Company hosts a conference call on November 4, 2026, at 5:00 p.m. Eastern Time to discuss results.
• The Company does not intend to update its financial outlook until the next quarterly results announcement.