Vertex, Inc.

Vertex reported second-quarter revenue of $204 million, up 10.5% year over year, with subscription software revenue up 10.7%, services revenue up 9.4%, annual recurring revenue up 10.5%, and cloud revenue up 17.9% (19.3% year to date). Adjusted EBITDA was $51 million, up 33% year over year, and adjusted EBITDA margin was 25%, more than 4 percentage points higher than last year. Non-GAAP gross margin increased 15 basis points year over year. Free cash flow was $2.7 million on a reported basis, or $13.2 million pro forma, with a 6.5% pro forma free cash flow margin and 26% conversion to adjusted EBITDA. For guidance, management expects Q3 revenue of $208 million to $211 million and adjusted EBITDA of $55 million to $57 million; full-year revenue guidance was narrowed to $825 million to $830 million and full-year adjusted EBITDA guidance was raised to $206 million to $210 million from $202 million to $208 million previously. Full-year cloud revenue growth is now expected to be 18%.

Chris Young framed the quarter as proof that Vertex’s core business is durable and that cost discipline is starting to create real operating leverage. He said the company still has work to do on expansion and new-logo growth, especially because cloud migrations have been slower than expected, but highlighted strong momentum in e-invoicing and early progress on AI. His tone was constructive and candid: upbeat about customer retention, compliance demand and leadership changes, but clear that growth execution still needs improvement.

John Schwab emphasized that the value creation plan is already showing up in margins and cash generation. He pointed to $204 million in revenue, $51 million in adjusted EBITDA, 25% adjusted EBITDA margin, a 15-basis-point gross margin improvement, and pro forma free cash flow of $13.2 million with 26% conversion. He also highlighted share repurchases of $26.5 million in the quarter at an average price of $13.17, bringing total repurchases under the $150 million program to $56.6 million and leaving $93.4 million remaining. On the outlook, he said the company expects a steady progression toward a high-20s EBITDA margin by the end of 2027 and a free cash flow conversion rate of about 70% exiting Q4 2027.

Analysts focused on three issues: whether slower cloud migration is temporary or structural, how much e-invoicing can offset that weakness, and when AI will become a customer-facing revenue driver. Management said the cloud shortfall is mainly timing and conversion delay, not customer loss, and that the year’s lower cloud guide reflects a slower-than-expected conversion ratio. On e-invoicing, they said mandate-driven demand is strong and they are beginning to see multi-country expansion and both cross-sell and new-logo wins. On AI, Chris Young said internal adoption is high and customer engagement is increasing, but commercial revenue remains early and the real monetization push is more likely in 2027 than 2026.