Third Quarter 2026
Filed Nov 4, 2026Vertex Announces Third Quarter 2026 Financial Results
Total revenues increased 11.0% year-over-year, cloud revenues increased 20.4%, ARR increased 11.7%, and non-GAAP operating income and Adjusted EBITDA increased versus the prior-year quarter. GAAP net income was a loss of $(46.6) million, while free cash flow declined from the prior-year quarter.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenues, three months ended September 30, 2026GAAP | $213.3M | – | up 11.0% year-over-year |
| Software subscription revenues, three months ended September 30, 2026GAAP | $181.7M | – | up 10.2% year-over-year |
| Services revenues, three months ended September 30, 2026GAAP | $31.60M | – | – |
| Total cost of revenues, three months ended September 30, 2026GAAP | $73.07M | – | – |
| Gross profit, three months ended September 30, 2026GAAP | $140.2M | – | – |
| Research and development expense, three months ended September 30, 2026GAAP | $24.68M | – | – |
| Selling and marketing expense, three months ended September 30, 2026GAAP | $49.65M | – | – |
| General and administrative expense, three months ended September 30, 2026GAAP | $51.67M | – | – |
| Depreciation and amortization, three months ended September 30, 2026GAAP | $7.48M | – | – |
| Total operating expenses, three months ended September 30, 2026GAAP | $139.9M | – | – |
| Income from operations, three months ended September 30, 2026GAAP | $300K | – | – |
| Net income (loss), three months ended September 30, 2026GAAP | −$46.6M | – | – |
| Net loss per basic Class A and Class B shares, three months ended September 30, 2026GAAP | $0.29 | – | – |
| Net loss per diluted Class A and Class B shares, three months ended September 30, 2026GAAP | $0.29 | – | – |
| Non-GAAP gross profit, three months ended September 30, 2026non-GAAP | $165.5M | – | – |
| Non-GAAP gross margin, three months ended September 30, 2026non-GAAP | 77.6 % | – | – |
| Non-GAAP operating income, three months ended September 30, 2026non-GAAP | $57.3M | – | – |
| Non-GAAP net income, three months ended September 30, 2026non-GAAP | $42.9M | – | – |
| Non-GAAP diluted EPS, three months ended September 30, 2026non-GAAP | $0.26 | – | – |
| Adjusted EBITDA, three months ended September 30, 2026non-GAAP | $64.8M | – | – |
| Adjusted EBITDA margin, three months ended September 30, 2026non-GAAP | 30.4% | – | – |
| Net cash provided by operating activities, three months ended September 30, 2026GAAP | $53.29M | – | – |
| Free cash flow, three months ended September 30, 2026non-GAAP | $25.20M | – | – |
| Free cash flow margin, three months ended September 30, 2026non-GAAP | 11.8 % | – | – |
| Total revenues, nine months ended September 30, 2026GAAP | $613.9M | – | – |
| Software subscriptions revenues, nine months ended September 30, 2026GAAP | $523.6M | – | – |
| Services revenues, nine months ended September 30, 2026GAAP | $90.31M | – | – |
| Gross profit, nine months ended September 30, 2026GAAP | $396.4M | – | – |
| Income (loss) from operations, nine months ended September 30, 2026GAAP | −$14.73M | – | – |
| Net income (loss), nine months ended September 30, 2026GAAP | −$40.1M | – | – |
| Net income (loss) per diluted Class A and Class B shares, nine months ended September 30, 2026GAAP | $(0.25) | – | – |
| Non-GAAP gross margin, nine months ended September 30, 2026non-GAAP | 76.4 % | – | – |
| Non-GAAP operating income, nine months ended September 30, 2026non-GAAP | $139.2M | – | – |
| Non-GAAP net income, nine months ended September 30, 2026non-GAAP | $104.9M | – | – |
| Non-GAAP diluted EPS, nine months ended September 30, 2026non-GAAP | $0.63 | – | – |
| Adjusted EBITDA, nine months ended September 30, 2026non-GAAP | $159.8M | – | – |
| Adjusted EBITDA margin, nine months ended September 30, 2026non-GAAP | 26.0 % | – | – |
| Net cash provided by operating activities, nine months ended September 30, 2026GAAP | $122.2M | – | – |
| Free cash flow, nine months ended September 30, 2026non-GAAP | $35.59M | – | – |
| Free cash flow margin, nine months ended September 30, 2026non-GAAP | 5.8 % | – | – |
| Annual Recurring Revenue at September 30, 2026other | $724.3M | – | up 11.7% year-over-year |
| Average Annual Revenue per direct customer at September 30, 2026other | $145,793 | – | – |
| Net Revenue Retention at September 30, 2026other | 106% | – | – |
| Gross Revenue Retention at September 30, 2026other | 95% | – | – |
| Direct customers, Q3 2026other | 4,968 | – | – |
| Indirect customers, Q3 2026other | 547 | – | – |
| Total customers, Q3 2026other | 5,515 | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Software subscriptionsThe Company stated that continued momentum in e-invoicing contributed to accelerating ARR and cloud revenue growth. | $181.7M | – | up 10.2% year-over-year |
| ServicesNo segment-specific driver was provided. | $31.60M | – | – |
| Cloud revenuesThe Company cited continued momentum in e-invoicing. | $110.8M | – | up 20.4% year-over-year |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Fourth quarter of 2026 and full-year 2026 outlook
- RevenueRevenues of $215.0 million to $217.0 million; Revenues of $828.9 million to $830.9 million
- NoteFourth quarter of 2026 Adjusted EBITDA of $58.0 million to $60.0 million.
- NoteFull-year 2026 Cloud revenue growth of 19%.
- NoteFull-year 2026 Adjusted EBITDA of $217.9 million to $219.9 million.
Capital returns
- Repurchases of shares of $(73,662) for the nine months ended September 30, 2026.
- Treasury stock, at cost, was $(83,757) as of September 30, 2026, compared to $(10,094) as of December 31, 2025.
What drove it
- Continued momentum in e-invoicing contributed to accelerating ARR and cloud revenue growth.
- The Company said it stabilized the core business, strengthened its financial profile, and built a more efficient operating model.
- The Company said its investments in AI are improving operations and creating opportunities to extend customer value.
- The Company said it is continuing to invest selectively in opportunities it believes can support durable growth over the long term.
Concerns
- GAAP net income (loss) was $(46.6) million for the third quarter of 2026, compared to $4.0 million for the same period in the prior year.
- Income from operations was $0.3 million, compared to $4.3 million for the same period in the prior year.
- Free cash flow was $25,197, compared to $30,152 for the same period in the prior year.
- Net Revenue Retention was 106%, compared to 107% at September 30, 2025.
- The third-quarter income tax expense was $47,289, compared to $1,520 for the same period in the prior year.
- The quarter included $3,324 in severance costs related to the Value Creation Plan and $5,550 in costs incurred to support execution of the Value Creation Plan.
What to watch
- Fourth-quarter revenues guidance of $215.0 million to $217.0 million.
- Fourth-quarter Adjusted EBITDA guidance of $58.0 million to $60.0 million.
- Full-year 2026 revenues guidance of $828.9 million to $830.9 million and Adjusted EBITDA guidance of $217.9 million to $219.9 million.
- Full-year 2026 cloud revenue growth guidance of 19%.
- ARR, cloud revenue growth, NRR, GRR, and AARPC.
- Free cash flow and the impact of property and equipment additions and capitalized software additions.
- Execution of the Value Creation Plan and associated severance and business transformation costs.
Balance sheet and cash flow
- Cash and cash equivalents were $217,797 as of September 30, 2026, compared to $314,009 as of December 31, 2025.
- Debt, net of current portion, was $339,170 as of September 30, 2026, compared to $337,477 as of December 31, 2025.
- Total liabilities were $987,868 as of September 30, 2026, compared to $1,011,915 as of December 31, 2025.
- Net cash provided by operating activities was $122,165 for the nine months ended September 30, 2026, compared to $123,275 for the nine months ended September 30, 2025.
- Property and equipment additions were $(70,607) and capitalized software additions were $(15,969) for the nine months ended September 30, 2026.
- Acquisition of businesses and assets, net of cash acquired, was $(22,070) for the nine months ended September 30, 2026.
- Cash, cash equivalents and restricted cash were $251,230 at September 30, 2026, compared to $338,793 at September 30, 2025.
Analysis
Vertex reported third-quarter revenue of $213.3 million, up 11.0% year-over-year. Software subscription revenue was $181.7 million, up 10.2%, while cloud revenue was $110.8 million, up 20.4%. ARR was $724.3 million, up 11.7%, and AARPC was $145,793 compared with $133,484 a year earlier and $142,997 at June 30, 2026. Direct customers reached 4,968 and total customers reached 5,515. The Company attributed the acceleration in ARR and cloud revenue growth to continued momentum in e-invoicing.
Profitability improved materially on the Company’s non-GAAP measures. Non-GAAP gross margin was 77.6%, compared with 73.9%, non-GAAP operating income was $57.3 million compared with $37.1 million, and Adjusted EBITDA was $64.8 million compared with $43.5 million. Adjusted EBITDA margin was 30.4%, compared with 22.6%. These results accompanied a GAAP operating income result of $0.3 million, compared with $4.3 million in the prior-year quarter.
GAAP earnings diverged from the adjusted results. Net income (loss) was $(46.6) million, compared with $4.0 million of net income a year earlier, and diluted loss per share was $0.29 compared with diluted earnings per share of $0.02. The reconciliation shows $47,289 of income tax expense, $15,381 of stock-based compensation expense, $9,089 of transaction and other business transformation costs, and $3,378 of severance expense in the quarter. The Company said $3,324 of severance costs related to its Value Creation Plan, while $5,550 of costs incurred to support that plan were recorded in general and administrative expense.
Cash generation moderated despite the stronger adjusted profitability. Third-quarter operating cash flow was $53,294 compared with $62,467, and free cash flow was $25,197 compared with $30,152. For the nine months ended September 30, 2026, operating cash flow was $122,165 compared with $123,275 and free cash flow was $35,589 compared with $37,489. Cash and cash equivalents were $217,797 at September 30, 2026, debt net of current portion was $339,170, and the Company repurchased $(73,662) of shares during the nine-month period.
Management guided fourth-quarter revenue to $215.0 million to $217.0 million and Adjusted EBITDA to $58.0 million to $60.0 million. For full-year 2026, it guided revenue to $828.9 million to $830.9 million, cloud revenue growth to 19%, and Adjusted EBITDA to $217.9 million to $219.9 million. The Company stated that it was raising its full-year revenue and Adjusted EBITDA outlook based on year-to-date performance while continuing selective investment for long-term growth.
Management, verbatim
The third quarter was a strong quarter for Vertex and, more importantly, clear evidence that we are delivering on our commitments to investors.
Christopher Young, President and Chief Executive Officer
Continued momentum in e-invoicing contributed to accelerating ARR and cloud revenue growth, while our investments in AI are improving how we operate today and creating new opportunities to extend the value we deliver to customers.
Christopher Young, President and Chief Executive Officer
Based on our year-to-date performance, we are raising our full-year revenue and Adjusted EBITDA outlook, while continuing to invest selectively in the opportunities we believe can support durable growth over the long term.
John Schwab, Chief Financial Officer
Not in the filing
stated, not guessed- Previous-release outlook was not provided, so prior-guidance comparisons are unavailable.
- GAAP gross margin was not reported.
- GAAP operating margin was not reported.
- Third-quarter revenue, profitability, ARR, customer, and retention metrics by geographic segment were not reported.
- Dividend declarations or payments were not reported.
- A forward-looking GAAP net income (loss) reconciliation for Adjusted EBITDA was not provided because the Company stated it could not provide the reconciliation without unreasonable efforts.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was checked against the filing text, and a metric whose value, prior period and change do not add up is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.