Vertex, Inc.

What they do

Vertex sells cloud-based and on-premise software subscriptions that calculate indirect taxes such as sales, use, VAT, communications, payroll, and lodging tax, supported by a proprietary database of more than one billion tax rates and rules covering over 20,000 jurisdictions. The software embeds into enterprise systems including ERP, CRM, procurement, billing, POS and eCommerce platforms, with partners such as SAP, Oracle, Microsoft Dynamics, NetSuite, Salesforce, Shopify and Workday. It also provides implementation and professional services. The company reports over 4,800 direct customers, including the majority of the Fortune 500, and supports compliance in more than 195 countries and territories.

Revenue drivers

• Software subscriptions — The largest revenue source, comprising cloud-based and on-premise subscriptions typically sold on one- to three-year contracts and billed annually in advance; 58% of software subscription revenue came from cloud in the six months ended June 30, 2026, versus 42% from on-premise.
• Cloud subscriptions — Cloud revenue was $101.7 million in Q2 2026, up 17.9% year-over-year; management guides to roughly 18% cloud revenue growth for full-year 2026.
• On-premise subscriptions — Still 42% of software subscription revenue in the first half of 2026, but declining as a percentage of the total as cloud grows.
• Services and other — Total Q2 2026 revenue of $204.0 million less software subscription revenue of $174.8 million implies about $29.2 million from services and other sources in the quarter, tied largely to implementation and professional services.

Recent performance

Q2 2026 total revenue was $204.0 million, up 10.5% year-over-year, with software subscription revenue of $174.8 million, up 10.7%. Cloud revenue rose 17.9% to $101.7 million, and Annual Recurring Revenue was $703.4 million, up 10.5%. The company reported a GAAP loss from operations of $4.4 million but net income of $9.0 million, or $0.06 per share, and non-GAAP operating income of $44.3 million. Adjusted EBITDA was $51.0 million, a 25.0% margin, versus $38.4 million and 20.8% a year earlier. Net Revenue Retention was 105%, down from 108% a year earlier, while Gross Revenue Retention held at 95%.

Strategy

Management describes an "AI-First" strategy intended to improve the speed and efficiency of selected engineering and customer-delivery workflows, alongside a broader transformation of the business. The company continues to shift its mix toward cloud subscriptions, and cited improved e-invoicing momentum as enterprises prepare for expanding global mandates. Vertex invests through a partner ecosystem spanning major ERP, CRM and commerce platforms, including a 2025 launch of Kintsugi powered by Vertex for small and medium-sized businesses, and works with over 45 accounting and professional services firms. Management says it has strengthened its leadership team to accelerate product innovation and operational execution, and frames the priority as balancing growth investment with operating discipline.

Risks

• Customer growth and retention — The company states that failing to add new customers, retain existing ones, or expand their use of its solutions would harm results, and Net Revenue Retention slipped to 105% in Q2 2026 from 108% a year earlier.
• Competition and ERP alternatives — Vertex cites competitive pressure from other tax software and services providers and the difficulty of convincing businesses using native ERP tax functions to switch.
• Partner dependence — The company states its business would be harmed if it fails to maintain or expand strategic relationships with third parties, and it relies on integrations with platforms such as SAP, Oracle, Microsoft Dynamics and Salesforce.
• Cloud transition and legacy mix — On-premise subscriptions still generated 42% of software subscription revenue in the first half of 2026, and changes to customers' or partners' software systems could impair the company's ability to offer a given deployment method.

Outlook

For Q3 2026, management guides to revenue of $208.0 million to $211.0 million and Adjusted EBITDA of $55.0 million to $57.0 million. For full-year 2026, it guides to revenue of $825.0 million to $830.0 million, cloud revenue growth of 18%, and Adjusted EBITDA of $206.0 million to $210.0 million. Management said the first-half consistency and operating model strength allowed it to narrow the revenue range while raising the Adjusted EBITDA outlook, and it expects expanding profitability and stronger cash generation in the third and fourth quarters.