10-Q · May 7, 2026
Vertex reported a solid Q1 2026 with revenues of $196.6 million, reflecting a 11.1% increase from the previous year, and EPS of $0.17, exceeding estimates. However, the company witnessed a net loss of $2.5 million,…
Earnings analysis · 10-Q
VERX earnings analysis
Filed August 4, 2026 · Our reading of the company's report
The latest report
Vertex delivered Q2 revenue of $203.970 million, up 10.5% year over year and approximately 3.5% sequentially, led by 10.7% software-subscription growth. GAAP net income improved to $9.043 million, although the result…
Read full summary
Vertex delivered Q2 revenue of $203.970 million, up 10.5% year over year and approximately 3.5% sequentially, led by 10.7% software-subscription growth. GAAP net income improved to $9.043 million, although the result benefited from a $13.142 million tax benefit; gross margin fell to 64.3% and operating margin remained negative at (2.3)%. Adjusted EBITDA margin expanded to 25.0%, but lower NRR, Q2 free-cash-flow compression, and elevated investment intensity temper the otherwise solid recurring-revenue performance.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
What stood out
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Revenue sustained double-digit growth
Q2 revenue rose $19.411 million, or 10.5% year over year, to $203.970 million. Revenue also increased from $197 million in Q1 2026 to $204 million in Q2 2026, a roughly 3.5% sequential increase.
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Both revenue streams expanded
Software-subscription revenue increased $16.909 million, or 10.7%, to $174.753 million, while services increased $2.502 million, or 9.4%, to $29.217 million. Management attributed subscription growth principally to cross-selling to existing customers.
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Profitability improved on adjusted basis
GAAP net income improved to $9.043 million from a $0.961 million loss a year earlier. Adjusted EBITDA increased $12.646 million to $51.015 million, and adjusted EBITDA margin expanded 420 basis points to 25.0%.
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Recurring and cloud mix advanced
ARR grew $66.8 million, or 10.5%, to $703.4 million; AARPC increased to approximately $142,997 from approximately $130,934. Cloud subscriptions represented 58% of subscription revenue, up from 55%.
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First-half cash generation increased
First-half operating cash flow rose $8.063 million, or 13.3%, to $68.871 million, producing $10.392 million of free cash flow versus $7.337 million a year ago.
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Efficiency plan targets operating leverage
The Board's Value Creation Plan includes a reduction of approximately 170 employees and significant third-party-spend reductions. Management recorded $1.713 million of related Q2 severance and $6.250 million of Q2 execution costs.
What to watch
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Gross margin pressure and GAAP operating loss
GAAP gross margin contracted 140 basis points year over year to 64.3% as cost of subscription revenue rose 17.3%, faster than 10.7% subscription-revenue growth. GAAP operating margin remained negative at (2.3)%, versus (2.1)% a year earlier, despite improving from (5.4)% in Q1 2026.
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Quarterly free cash flow compressed
Q2 free cash flow fell $16.854 million to $2.733 million, with free-cash-flow margin declining to 1.3% from 10.6%. Capital spending plus capitalized software was $28.163 million, equal to 13.8% of quarterly revenue.
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Retention weakened amid delayed large deals
Management said NRR decreased by 3% year over year, citing slower customer growth within usage bands and delayed deal activity among certain large multinational customers amid the macroeconomic environment.
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Cash declined while convertible debt remains
Unrestricted cash declined to $230.5 million at June 30, 2026 from $314.0 million at December 31, 2025. The company has $345.0 million principal of 0.750% convertible notes due May 2029, although its $300.0 million revolver had no borrowings.
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No formal risk-factor update; litigation continues
Item 1A states there were no material changes to risk factors versus the 2025 annual report and Q1 2026 10-Q. Separately, legal costs for the pending Avalara claim were $1.1 million in Q2, and a jury trial is scheduled to begin October 13, 2026.
Management's outlook
The 10-Q does not provide quantitative revenue or EPS guidance; management states that existing cash resources and its $300.0 million revolving facility are sufficient for the next 12 months and longer-term liquidity needs.
Earlier filings 4
10-K · February 24, 2026
Vertex reported continued top-line growth with implied full-year revenue of approximately $749.0M in 2025 versus $666.0M in 2024 (sum of quarterly results), driven by its enterprise tax and compliance platform and…
10-Q · November 3, 2025
Vertex reported Q3 revenue of $192,112,000, up $21,677,000 (12.7%) versus Q3 2024, driven by software subscription growth. Gross margin contracted to ~63.2% and operating income slipped to $4,320,000; net income was…
10-Q · May 7, 2025
Vertex reported Q1 total revenues of $177,062 (vs $156,781 in Q1 2024), driven by software subscriptions of $150,761 and services of $26,301. The company generated operating income of $4,486 and net income of $11,130…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.