Vertex (VERX) Q1 2026 earnings summary

Executive summary

• Q1 2026 revenue reached $196.6M, up 11.1% year-over-year, exceeding guidance, with adjusted EBITDA at $44.1M (22.4% margin), reflecting strong customer retention and stable usage patterns despite a mixed macro environment.

• The Value Creation Plan was launched, including a 9% workforce reduction and operational efficiency initiatives, expected to yield $14–$16M in 2026 adjusted EBITDA improvement and $60–$70M in annualized savings from 2027.

• Acquisition of Brinta, an AI-first e-invoicing and compliance startup in Latin America, expands regional coverage and brings advanced AI-native architecture.

• AI is being embedded across products and operations, with Smart Categorization as the first commercial AI product, demonstrating productivity gains for customers.

• Notable customer wins and expansions occurred across AI, airline, social media, healthcare, chemical manufacturing, and fashion sectors, driving new and recurring revenue.

Financial highlights

• Total revenue: $196.6M (+11.1% YoY); software subscription revenue: $167.1M (+10.9% YoY); services revenue: $29.5M (+12.2% YoY); cloud revenue: $96.8M (+20.7% YoY).

• Annual recurring revenue (ARR) reached $687.6M, up 11.2% year-over-year; gross revenue retention was 95%.

• Adjusted EBITDA rose 18.4% year-over-year to $44.1M; margin improved to 22.4%.

• Free cash flow was $7.7M (3.9% margin), positive for only the second time in Q1 since going public.

• Net loss was $2.5M, compared to net income of $11.1M last year, due to higher operating expenses and restructuring charges.

Outlook and guidance

• Q2 2026 revenue expected at $200M–$204M; adjusted EBITDA at $47M–$50M.

• Full-year 2026 revenue guidance at $823.5M–$831.5M; adjusted EBITDA guidance raised to $202M–$208M.

• Full-year cloud revenue growth projected at 25%, with acceleration in the second half due to e-invoicing mandates in France and Germany.

• Medium-term revenue growth rate reset to low double-digits (10–13%) due to macro environment and business mix.

• Profitability and free cash flow targets set for 2028 are now expected to be achieved in 2027.