VERX — Vertex, Inc.

Vertex (VERX) Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Revenue: $204 million, up 10.5% year-over-year, at the high end of guidance.
• Adjusted EBITDA: $51 million, a 33% increase year-over-year, with a margin of 25%.
• Annual Recurring Revenue (ARR): Increased by 10.5%.
• Cloud Revenue: Grew 17.9%, with year-to-date growth at 19.3%.
• Customer Metrics: Gross revenue retention at 95% and net revenue retention stable at 105%.
• Free Cash Flow: Positive $2.7 million, impacted by costs related to a value creation plan.

2. Strategic Updates and Business Highlights

• E-invoicing Growth: Strong performance driven by upcoming mandates in France and Germany, with significant new revenue and customer wins.
• AI Initiatives: Vertex is transitioning to an AI-first approach, improving internal efficiencies and developing customer-facing AI capabilities. Active use of AI tools increased to 89%.
• Leadership Team: Strengthened with new executives focused on marketing, operations, and product development to enhance execution and growth.
• Customer Engagement: Continued expansion in existing customer relationships and new logo acquisitions, particularly in the context of ERP transformations.

3. Forward Guidance and Outlook

• Q3 Revenue Guidance: Expected between $208 million and $211 million.
• Full Year Revenue Guidance: Narrowed to $825 million to $830 million, with adjusted EBITDA guidance raised to $206 million to $210 million.
• Cloud Revenue Growth: Projected at 18% for the full year, with expectations for improvement driven by e-invoicing mandates.

4. Bad News, Challenges, or Points of Concern

• Slower Cloud Conversions: Cloud migration has been slower than anticipated, impacting revenue growth. Customers are elongating decision-making processes regarding technology moves.
• Expansion Performance: While customer retention metrics are strong, expansion within the installed base and new logo performance is not meeting expectations.
• AI Revenue Contribution: AI-attributable revenue is not yet material, with ongoing efforts to translate internal efficiencies into customer-facing value.
• Sales Cycle Elongation: Notable delays in closing deals, with some expected deals slipping into the next quarter.

5. Notable Q&A Insights

• Customer Adoption of AI: Vertex is engaging customers to facilitate the adoption of AI tools, recognizing the need for operational changes alongside technology implementation.
• E-invoicing Dynamics: Customers are initially driven by compliance mandates but are beginning to consider consolidation of services as they face increasing complexity.
• Competitive Landscape: There is potential for competitive displacement as customers seek to standardize on Vertex solutions, particularly in light of mergers and acquisitions.
• Cloud Revenue Visibility: Guidance reflects a cautious approach, balancing strong first-half performance with the need for careful monitoring of the second half due to elongated sales cycles and customer decision-making.

This summary encapsulates the key points from Vertex's Q2 2026 earnings call, highlighting financial performance, strategic initiatives, guidance, and challenges faced by the company.