KING OF PRUSSIA, PA — Vertex Inc. (Nasdaq: VERX) reported a $46.6 million third-quarter net loss despite an 11% increase in revenue, as the King of Prussia-based tax software provider expanded its cloud business and raised its full-year revenue and adjusted earnings forecasts.
The company recorded a loss of 29 cents per share for the quarter ended Sept. 30, 2026, reversing net income of $4 million a year earlier. Revenue increased to $213.3 million, driven by growth in software subscriptions and cloud services.
The divergence between revenue growth and reported profitability contrasted with a substantial improvement in Vertex’s adjusted operating results, which exclude certain expenses included under generally accepted accounting principles.
Adjusted earnings before interest, taxes, depreciation and amortization increased 49% to $64.8 million from $43.5 million a year earlier. The adjusted EBITDA margin expanded to 30.4% from 22.6%, an improvement of 7.8 percentage points.
Non-GAAP operating income rose to $57.3 million from $37.1 million, while reported operating income declined to $300,000 from $4.3 million.
Vertex reported non-GAAP net income of $42.9 million, equivalent to adjusted diluted earnings of 26 cents per share.
The company’s cloud business continued to outpace overall revenue growth, reflecting increased demand for subscription-based tax compliance technology.
Cloud revenue increased 20.4% to $110.8 million, while total software subscription revenue rose 10.2% to $181.7 million.
Annual recurring revenue reached $724.3 million at the end of September, up 11.7% from a year earlier, providing a measure of the company’s contracted and recurring business.
Average annual revenue per direct customer increased to $145,793 from $133,484 in September 2025 and $142,997 at the end of June 2026.
Net revenue retention, which measures revenue changes among existing customers, was 106%, compared with 107% a year earlier and 105% in the preceding quarter.
Gross revenue retention remained at 95%, unchanged from both comparison periods.
The retention figures indicate that Vertex continued to generate additional revenue from its existing customer base while maintaining its overall customer revenue retention rate.
President and Chief Executive Officer Christopher Young attributed the company’s performance to improvements in its operating model and continued demand for cloud-based services, including electronic invoicing.
“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,” Young stated.
Vertex provides software that helps businesses calculate, manage and comply with indirect tax obligations across jurisdictions. Its cloud and electronic invoicing offerings are part of its strategy to expand recurring revenue while improving operating efficiency.
The company’s third-quarter performance prompted management to increase its full-year financial outlook.
Vertex now expects 2026 revenue between $828.9 million and $830.9 million, with adjusted EBITDA ranging from $217.9 million to $219.9 million.
The company also projects full-year cloud revenue growth of 19%.
For the fourth quarter, Vertex forecasts revenue of $215 million to $217 million and adjusted EBITDA of $58 million to $60 million.
Chief Financial Officer John Schwab attributed the higher outlook to the company’s year-to-date performance and improved financial position.
“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,” Schwab stated.
The company’s financial results underscore the distinction between its reported earnings and adjusted profitability as it invests in cloud services, electronic invoicing and artificial intelligence.
Vertex’s raised guidance reflects expectations for continued revenue expansion and stronger adjusted operating performance through the end of 2026, even as its third-quarter results showed a substantial GAAP net loss.
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