Q1 2026 ServiceTitan Inc Earnings Call

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Operator: Thank you for standing by, and welcome to ServiceTitan's first quarter, fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode.

Thank you for standing by and welcome to surface tightens first quarter fiscal year, 2020 six earnings conference call. At this time, all participants are in a listen only mode.

Operator: After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again.

After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one one again.

Jason Rechel: I would now like to hand the call over to Jason Rechel, VP of Investor Relations. Please go ahead.

Speaker Change: I would now like to hand, the call over to Jason record VP of Investor Relations. Please go ahead.

Jason Record: Thank you operator, and welcome everyone to service Tightens fiscal first quarter 2026 earnings conference call.

Jason Rechel: Thank you, operator, and welcome everyone to ServiceTitan's fiscal first quarter 2026 earnings conference. With me are ServiceTitan's co-founder and CEO Ara Mahdessian, co-founder and president Vahe Kuzoyan, and CFO Dave Sherry. During today's call, we will review our fiscal first quarter 2026 results. We will also discuss our guidance for the fiscal quarter and full fiscal year 2026.

Speaker Change: With me are service Titans, co founder and CEO, RM Mcgough Yan co founder and President and.

Dave Sherry: And CFO, Dave Sherry.

Dave Sherry: During today's call we will review our fiscal first quarter 2026 results. We will also discuss our guidance.

Dave Sherry: Fiscal quarter and full fiscal year 2026.

Jason Rechel: Before we get started, we want to draw your attention to the Safe Harbor Statement included in today's press release and emphasize that information discussed on this call, including our guidance, is based on information as of today and contains forward-looking statements that involve risks, uncertainties, and assumptions. All statements other than statements of historical fact could be deemed to be forward-looking. Forward-looking statements reflect our views as of today only, and except as required by law, we undertake no obligation to update or revise these forward-looking statements. Please take a look at our filings with the SEC for a discussion of the factors that could cause our actual results to differ.

Dave Sherry: Before we get started we want to draw your attention to the Safe Harbor statement included in today's press release and emphasize that information discussed on this call, including our guidance is based on information as of today and contains forward looking statements that involve risks uncertainties and assumptions.

Dave Sherry: All statements other than statements of historical fact could be deemed to be forward looking forward.

Dave Sherry: Forward looking statements reflect our views as of today, only and except as required by law, we undertake no obligation to update or revise these forward looking statements.

Dave Sherry: Please take a look at our filings with the SEC for a discussion of the factors that could cause our actual results to differ.

Jason Rechel: We also want to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures prepared in accordance with generally accepted accounting Thank you. definitions of these non-GAAP financial measures, along with reconciliation to our GAAP financial measures are included in our earnings release, which we have furnished with the SEC and is available on our website at investors.servicetitan.com. Unless otherwise stated, all references on this call to platform growth margin, total growth margin, operating income, operating margin, free cash flow, and related growth rates are on a non-gap basis.

Dave Sherry: We also want to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures prepared in accordance with generally accepted accounting principles.

Dave Sherry: Definitions of these non-GAAP financial measures along with reconciliations to our GAAP financial measures are included in our earnings release, which we have furnished with the SEC and is available on our website at investors <unk> service tightened dot com.

Dave Sherry: Unless otherwise stated all references on this call to platform gross margin total gross margin operating income operating margin free cash flow and related growth rates are on a non-GAAP basis.

Jason Rechel: Finally, we've posted an updated investor presentation that can be found on our investor relations website at investors.servicetitan.com, along with a replay of this call.

Dave Sherry: Finally, we have posted an updated investor presentation that can be found on our investor Relations website at investors Dot service tightened dot com along with a replay of this call.

Ara Mahdessian: And with that, let me turn the call over to Ara. Ara?

Ara: And with that let me turn the call over to Ara Alright.

Ara Mahdessian: Thank you, Jason. And thank you for joining us as we update you on our progress against our Our growth formula is simple. We deliver real ROI to our customers, helping them further their success and reach even greater financial outcomes. And this allows them to grow their businesses, which drives more technicians and GTV on our platform and leads to higher subscription and usage revenue for us. As they realize the value of our software, they buy more pro products, which continues to drive our growth and allows us to reinvest in more high ROI.

Ara: Thank you Jason and thank you for joining us as we update you on our progress against that mission.

Ara: Our growth Formula is simple, we deliver real ROI to our customers, helping them further their success and reach even greater financial outcomes and this allows them to grow their businesses, which drives more technicians and GTD on our platform and leads to higher subscription and usage revenue.

Ara: For us.

Ara: As they realize the value of our software they buy more products, which continues to drive our growth and allows us to reinvest in more high ROI solutions.

Ara Mahdessian: I am humbled by the way that our team, in partnership with our customers, performed this quarter to get us off to a good start in FY22. Year over year, we delivered 29% subscription revenue growth, 27% total revenue growth, and record operating margins, which improved 560 base. Our sales team delivered consistent performance. Our product and engineering teams are executing well on our roadmap.

Ara: I am humbled by the way that our team in partnership with our customers perform this quarter to get us off to a good start in FY 'twenty six.

Ara: Year over year, we delivered 29% subscription revenue growth.

Ara: 7% total revenue growth and record operating margins, which improved 560 basis points.

Ara: Our sales team delivered consistent performance.

Ara: Product and engineering teams are executing well on our roadmap and I am pleased that several of the largest and most strategic accounts, both residential and commercial.

Ara Mahdessian: And I am pleased that several of the largest and most strategic accounts, both residential and commercial went live this Against the backdrop of economic uncertainty, this quality and breadth of execution underscores our opportunity to transform the lives of every hardworking contractor in the trade. Our focus on delivering ROI and obsession with the financial outcomes of our customers extends from the sales process to implementation and go live and to ongoing customer success.

Ara: <unk> this quarter.

Ara: Against the backdrop of economic uncertainty this quality and breadth of execution underscores our opportunity to transform the lives of every hard working contractor in the trades.

Ara: Our focus on delivering ROI and obsession with the financial outcomes of our customers extends from the sales process to implementation and go live and to ongoing customer success.

Ara Mahdessian: Our customers are our most important partners, and I'd like to today share two customer stories to demonstrate how our customer success translates into our own. In 2016, our software had not yet been built for the garage door. And then I received a call from Tommy Mello, who was ready to take A1 Garage Door to the next level. We work together to augment service guidance for the needs of garage door customers, optimizing workflows that are unique to the trade. Tommy took an early risk on ServiceTitan, but the bet paid off. A1 doubled revenue to almost $20 million in its first year on the platform and hasn't looked back.

Ara: Our customers are our most important partners and I'd like to today sure to customer stories to demonstrate how our customer success translates into our own success.

Ara: In 2016, our software had not yet been built for the garage door industry.

Speaker Change: And then I received a call from Tommy Mellow, who is ready to take a one garage door to the next level.

Ara: We work together to augment service tightened or the needs of garage door customers optimizing workflows that are unique to the trade.

Ara: Tommy Silicon early risk on service tightening.

Ara: Debt paid off.

Ara: <unk> doubled the revenue to almost $20 million in its first year on the platform and Hasnt looked back.

Ara Mahdessian: With the full capabilities of ServiceTitan, A1 Garage has expanded into 22 states with hundreds of technicians and nine-digit revenue. After recently deploying Dispatch Pro to simplify and automate dispatching, A1 took its most recent step forward in efficiency. And with Dispatch Pro, A1 told us they added another 150 technicians to the platform without adding a single additional dispatch. This allowed A1 to nearly double its tech to dispatcher ratio from around 10 to 1. to 20 to 1, while also improving lead conversion at the same time. As a result of this most recent success, A1 shared with us in February that they had just surpassed $21 million in monthly revenue for the first time.

Ara: With a full capability of the service Titan.

Ara: Wanted to Raj has expanded into 22 states with hundreds of technicians and nine digit revenues.

Ara: After recently deploying dispatch pro.

Ara: Simplify and automate dispatching <unk> took its most recent step forward inefficiency and.

Ara: And with this bass pro.

Ara: Told us they added another 150 technicians to the platform without adding a single additional dispatcher.

Ara: So I have a want to nearly double its tech to dispatch a ratio from around 10 to one.

Ara: Two two to one.

Ara: While also improving lead conversion at the same time.

Ara: As a result of this most recent success <unk> shared with US in February that they had just surpassed $21 million in monthly revenue for the first time.

Ara Mahdessian: quote, ServiceTitan has been a game changing partner in our success. Tommy Sherry.

Tommy: Quote service Titan has been a game changing partner in our success Tommy shared.

Ara Mahdessian: This is our model as we extend into new trades. We're pulled by customers. We create outsized value as we build trade-specific workflows on our platform, and that attracts a new industry onto ServiceTitan.

Ara: This is our model as we expand into new trades.

Ara: <unk> by customers, we create outsized value as we build trade specific workflows on our platform and that attracts a new industry onto service guidance.

Ara Mahdessian: The current breakout success of Guild Garage demonstrates this.

Ara: The current breakout success of Guild garage demonstrates this maturity.

Ara Mahdessian: Guild Garage is a national residential garage door services platform founded in 2024 by three young entrepreneurs who saw an opportunity to consolidate what they perceive to be a large, fragmented and recession resilient market. The team shared the quote, the decision to use ServiceTitan products across the entire platform was a no brainer. ServiceTitan has been our secret weapon since day one. to inflect faster growth with higher margins. The Guild shared that in 2024 alone, the team completed 14 acquisitions and has since grown to over 20 operating companies. 700 employees, 400 managed technicians, and is on track to surpass $250 million of revenue in 2025.

Ara: Gil the garage is a national residential garage door services platform founded in 2024 by three young entrepreneurs, who saw an opportunity to consolidate what they perceive to be a large fragmented and recession resilient market.

Ara: The team shared the quotes.

Ara: Decision to your service tightened products across the entire platform was a no brainer.

Ara: Service Titan has been our secret weapon since day one.

Ara: And quotes to inflect faster growth with higher margins.

Ara: Yields fared better in 2024, along the team completed 14 acquisitions.

Ara: Since grown to over 20 operating companies.

Ara: 700 employees.

Ara: 400 managed technicians and is on track to surpass $250 million of revenue in 2025.

Ara Mahdessian: ServiceTitan enables Guild to not only fully integrate their partner companies in less than 60 days, but also continue to achieve high-teens organic growth as the platform has scaled. The team shared that they standardized all operations and all workflows on ServiceTitan across all portfolio companies, which allows them to streamline operations to drive growth, improve decision-making, strengthen the technician experience, and enhance the customer experience. The Guild has deployed Pro Products wall-to-wall. Capabilities like Ads Optimizer deliver ROI that dynamically optimizes marketing spread across multiple campaigns for all portfolio companies. with a centralized marketing platform and a model that combines the benefits of local autonomy with centralized leadership, it's no surprise that Guild is one of our fastest growing customers.

Ara: Service type enables guild to not only fully integrate the partner company in less than 60 days, but also continue to achieve it.

Ara: <unk> organic growth as the platform is scale.

Ara: <unk> shared that they standardized all operations in all workflows on service tightened across all portfolio companies, which allows them to streamline operations to drive growth improve decision, making ranked them the technician experience and enhance the customer experience.

Ara: Guild has deployed brought products wall to wall.

Ara: Capabilities like gas optimizer deliver ROI that dynamically optimizes marketing spend across multiple campaigns for all portfolio companies.

Ara: With a centralized marketing platform and a model that combines the benefits of local economy with centralized leadership. It's no surprise that guild is one of our fastest growing customers.

Ara Mahdessian: From zero to 200 million in less than 18 months is truly inspirational, but we know that the team is only just warming up and we can't wait to watch what they'll do next. These types of business transformations are all that we care about. I receive texts and calls daily from our customers with similar stories.

Speaker Change: From zero.

Speaker Change: $200 million in less than 18 months is truly inspirational, but we know that the team is only just warming up and we can't wait to watch what they'll do next.

Speaker Change: These types of business transformations.

Speaker Change: All that we care about IRA.

Speaker Change: I receive texts and calls daily from our customers with similar stories.

Ara Mahdessian: To build on the foundation of this success, we're building a series of stacking S-curves that will put us in a position to continue to deliver transformative customer outcomes.

Speaker Change: Built on the foundation of their success, we're building a series of stacking S curves that will put us in a position to continue to deliver transformative customer outcomes.

Ara Mahdessian: Last quarter, we outlined our four primary areas of focus for this fiscal year. further expand our enterprise capabilities, to further expand pro product adoption, to go deeper in commercial, and to grow in real We are executing well against each priority, which has established a strong foundation for ServiceTitan to begin FY21.

Speaker Change: Last quarter, we outlined our four primary areas of focus for this fiscal year.

Speaker Change: Further expand our enterprise capabilities to further expand <unk> product adoption.

Speaker Change: Deeper and commercial and to grow in roofing we are.

Speaker Change: We're executing well against each priority, which has established a strong foundation for service Titan to begin FY 'twenty six I'll now pass it to <unk>, who will share more details on our progress.

Vahe Kuzoyan: I'll now pass it to Vahe, who will share more details on our progress. Thanks, Ara. Very proud of the way Titans are helping our customers navigate these unpredictable economic The ROI we deliver to our customers continues to be our greatest. and the foundation for why each of our four primary areas of focus are off to a strong start. Let's dig into how we are progressing against these. Beginning with enterprise, which is increasingly the tip of the spear for all. As the industry consolidates and further professionalizes, our largest customers continue to be our fastest growing cohort, as well as leading the way in our top-down strategy for entering into new markets.

Speaker Change: Thanks, Sarah very proud of the way it tightens are helping our customers navigate these unpredictable economic times.

Speaker Change: Roy we delivered to our customers continues to be our greatest advantage and the foundation for what each of our four primary areas of focus are off to a strong start this year.

Speaker Change: Let's dig into how we are progressing against these goals beginning with enterprise, which is increasingly the tip of the spear for our growth as the industry consolidates and further professionalize. This our largest customers continue to be our fastest growing cohort as well as leading the way in our top down strategy for entering into new markets. They also have a shoe.

Vahe Kuzoyan: They also have a huge appetite for standardizing their businesses around the AI and automation we For all these reasons and more, our enterprise customers attract a major portion of our focus from the product roadmap. This quarter, one of the largest and most well-respected residential windows and doors players selected ServiceTitan as the best platform to power their future growth. The customer's private equity sponsor pulled them onto ServiceTitan after realizing the demonstrable value with ServiceTitan across multiple residential home services portfolios.

Speaker Change: The appetite for standardizing their businesses around the AI and automation we enable for.

Speaker Change: All of these reasons and more our enterprise customers attract a major portion of our focus from a product roadmap perspective.

Speaker Change: This quarter, one of the largest and most well respected residential windows and doors players selected service tightened as the best platform to power their future growth.

Speaker Change: The customers private equity sponsor put them onto service site and after realizing demonstrable value with service tightening across multiple residential home services portfolio companies.

Vahe Kuzoyan: shifting to pro products, which continue to perform well. Our largest customers continue to ask me and our how to fully automate their operations to both drive faster revenue growth and greater efficiency. Marketing, Dispatch, Fleet, and Schedule Pro are each notable examples. Our newest AI-native products are ramping well and round out our ability to automate our customers' process. Beyond just passively processing recordings, we have successfully deployed conversational agents that interact with technicians and customers and office staff with strong early signals in terms of validating a broader thesis around the readiness of the core technology. Our new field assist technology, empowering technicians to ask Titan intelligence questions from the field, went live during Q1.

Speaker Change: Shifting to pro products, which continued to perform well our largest customers continue to ask me how to fully automate their operations to both drive faster revenue growth and greater efficiency.

Speaker Change: Marketing dispatched fleet and schedule a pro are each notable examples our newest AI native products are ramping well and round out our ability to automate our customers' processes.

Speaker Change: Beyond this passively processing recordings, we have successfully deployed conversational agents that interact with technicians and customers and office staff with strong early signals in terms of validating a broader thesis around the readiness of the core technology.

Speaker Change: Our new field assist technology empowering technicians to ask tightened intelligence questions from the field.

Speaker Change: During Q1 and in April we launched our new contact Center pro virtual agents native to our platform unlocking opportunities to automate our customers see us operations.

Vahe Kuzoyan: And in April, we launched our new Contact Center Pro virtual agents, native to our platform, unlocking opportunities to automate our customers' CS operations. We were excited to see the first jobs booked on our platform using exclusively agents, and our broader AI opportunities increasingly In commercial, our focus and roadmap investments are paying off. We today leverage the breadth of our enterprise capabilities and success getting customers live on service. progress building the key project management capabilities required to unlock construction use cases, we believe will position us to unlock a new set of commercial During Q1, we delivered enhancements to invoicing and dispatch crew schedules.

Speaker Change: We're excited to see the first jobs booked on our platform using exclusively agents and our broader AI opportunity is increasingly probable.

Speaker Change: In commercial our focus on roadmap investments are paying off we today leverage the breadth of our enterprise capabilities and success getting customers live on service tightened.

Speaker Change: Progress building the key project management capabilities required to unlock construction use cases, we believe will position us to unlock a new set of commercial customers.

Speaker Change: During Q1, we delivered enhancements to invoicing and dispatch crew scheduling as we work towards the larger unlocking construction workflow are commercial in your deals and customer go lives are trending in the right direction. We successfully took four major strategic commercial accounts lives, including a top five mechanical firm we remain focused on insurer.

Vahe Kuzoyan: As we work towards the larger unlock and construction workflow, our commercial new deals and customer goal lives are trending in the right direction. We successfully took four major strategic commercial accounts live, including a top-five mechanical. We remain focused on ensuring that specialty trades subcontractors can run all of their work on our platform. Promotional Maintenance, On-Demand Service, Replacements, and Winning and Managing Construction Projects.

Speaker Change: That specialty Tracy subcontractors can run all of their work on our platform.

Speaker Change: Maintenance on demand service replacements, and winning in managing construction project or product capabilities are moving quickly and we expect to have more updates for you as FY 'twenty six unfolds.

Vahe Kuzoyan: Our product capabilities are moving quickly, and we expect to have more updates for you as FY26 continues. In roofing, the combination of our brand leadership and partnership with the largest enterprise players have increasingly made us the first call for customers as roofing undergoes a wave of professionalization. We delivered on our key technology roadmap items during Q1, most notably enhanced estimating functionality, and we were selected by one of the nation's largest residential roofing and exteriors businesses to run their more than 80 locations on service. Looking ahead, we're focused on delivering distributor integrations and adding support for insurance that will allow our customers to automate workflow, manage claims, collaborate with insurance providers, and get We are pleased with the early leads from our GAF partnership, and we are excited to announce the availability of our new partnership with EagleView that will deliver faster, more accurate measurements, and streamlined bid workflow to contractors.

Speaker Change: In roofing the combination of our brand leadership in partnership with the largest enterprise players have increasingly made us the first call for customers as roofing undergoes a wave of professional organization.

Speaker Change: We delivered on our key technology will help items during Q1, most notably enhanced estimating functionality and who we.

Speaker Change: Were selected by one of the nation's largest residential roofing and exteriors businesses to run them more than any locations on the service side.

Speaker Change: Looking ahead, we're focused on delivering distributor integrations and adding support for insurance that will allow our customers to automate workflow manage claims collaborate with insurance providers and get paid.

Speaker Change: We are pleased with the early reads from our <unk> partnership and we're excited to announce the availability of our new partnership with Eagle deal that will deliver faster more accurate measurement and streamlined bid workflow to contractors.

Vahe Kuzoyan: Because of our end-to-end platform and large existing footprint, we are able to help customers turn insights into action and deliver growth and efficiency. Our success this quarter in winning new customers, getting the most strategic accounts in our industry live on ServiceTitan, and innovating at an accelerating pace helps position us well for the future.

Dave Sherry: Because of our end to end platform and large existing footprint, we are able to help customers turn insights into action and deliver growth and efficiency. Our success this quarter in winning new customers getting the most strategic accounts in our industry live on service tightened and innovating at an accelerating pace helps position us well for the future and with that I'll turn it over to Dave.

Dave Sherry: And with that, I'll turn it over to Dave to run through the financials. Thanks, Vahe. I'm proud of the way our customers and business are performing to begin FY20.

Dave Sherry: You run through the financials Dave.

Dave Sherry: Thanks, Bob Hi, I'm proud of the way our customers and business are performing to begin FY 'twenty six.

Dave Sherry: Today, I'll run you through Q1 financial results in detail and provide guidance for Q2 and update our full fiscal year 2026 guidance. For more detailed financial results, please refer to our press release issued earlier today. Q1 gross transaction volume, or GTV, was $17.7 billion, up 22% year-over-year, with healthy growth from both residential and commercial customers. Q1 total revenue was $215.7 million of 27% year-over-year. This healthy growth to begin the year was led by subscription revenue, which was $162.7 million of 29% year-over-year, as well as consistent usage revenue, which was $45.3 million of 22% year-over-year. When normalizing for the $1.5 million in one-time subscription items which positively impacted Q4 FY25 results, our subscription revenue growth and net new subscription dollars added during Q1 each continue to perform well on a year-over-year basis.

Speaker Change: I'll run you through Q1 financial results in detail and provide guidance for Q2 and update our full fiscal year 2026 guidance.

Dave Sherry: Our detailed financial results. Please refer to our press release issued earlier today.

Dave Sherry: Q1, gross transaction volume or <unk> was $17 7 billion up 22% year over year with healthy growth in both residential and commercial customers.

Dave Sherry: Q1, total revenue was $215 7 million or 27% year over year. This healthy growth to begin the year was led by subscription revenue, which was $162 $7 million of 29% year over year as well as consistent usage revenue, which was $45 3, million% to 22% year over year.

Dave Sherry: When normalizing for the $1 5 million in one time subscription items, which positively impacted Q4, FY 'twenty five results our subscription revenue growth and net new subscription dollars added during Q1, each continue to perform well on a year over year basis.

Dave Sherry: Total platform revenue for Q1, the sum of subscription and usage revenue, grew 27% year-over-year to $208 million. Q1 professional service revenue was $7.7 million. Net dollar retention was greater than 110% for the quarter. Q1 platform gross margin was 79.7%, an improvement of over 300 basis points year-to-year, of which approximately 200 basis points was due to the allocation of certain customer success expenses to sales and marketing, which we mentioned last quarter. Total gross margin for Q1 was 73.6%, up 390 basis points year over year. Q1 operating income was $16.2 million, leading to record operating margin of 7.5% and improvement of 560 basis points year over year.

Dave Sherry: Total platform revenue for Q1, the sum of subscription and usage revenue grew 27% year over year to $208 million.

Dave Sherry: Q1 professional service revenue was $7 7 million.

Dave Sherry: Net dollar retention was greater than 110% for the quarter.

Dave Sherry: Q1 partner in gross margin was 79, 7% an improvement of over 300 basis points year over year of which approximately 200 basis points was due to the allocation of certain customer success expenses sales and marketing.

Dave Sherry: We mentioned last quarter.

Dave Sherry: Total gross margin for Q1 was 73, 6% up 390 basis points year over year.

Speaker Change: Q1, operating income was $16 $2 million, leading to record operating margin of seven 5% an improvement of 560 basis points year over year.

Dave Sherry: We're pleased with how we are pacing against our incremental margin goals, especially as we layer in the expected headwind of public company costs. However, we measure incrementals on a full year basis, and we encourage you not to look at each quarter as the timing of spend may vary from year to year. In fact, the timing of expenses in Q1 this year was more favorable than a prior year. Q1 free cash flow was negative $22.3 million, better than negative $24.6 million for the prior year first quarter in spite of greater cash bonus attainment this year compared to the prior year.

Speaker Change: We're pleased with how we're pacing against our incremental margin goals, especially as we layer in the expected headwind of public company costs. However, we measure incrementals on a full year basis, and we encourage you not to look at each quarter as the timing of spend may vary from year to year. In fact, the timing of expenses in Q1. This year was more favorable than in prior years.

Speaker Change: Q1 free cash flow was negative $22 $3 million better than negative $24 6 million for the prior year first quarter in spite of greater cash bonus attainment. This year compared to the prior year as mentioned previously our annual bonuses are paid in Q1 of each fiscal year.

Dave Sherry: As mentioned previously, our annual bonuses are paid in Q1 of each fiscal year.

Dave Sherry: Shifting to guidance. For the second quarter, we expect total revenue in the range of $228 to $230 million. We expect to generate operating income in the range of $17 to $18 million. For the full year of fiscal 2026, we expect total revenue in the range of $910 to $920 million. We expect to generate operating income in the range of $54 to $59 million. As we highlighted to many of you in the past, our business is not a cyclical business, but it is a seasonal business. This has historically been most positively pronounced during Q2 due to weather-driven seasonality in many trades.

Speaker Change: Shifting to guidance for the second quarter, we expect total revenue in the range of $228 million to $230 million, we expect to generate operating income in the range of $17 million to $18 million.

Speaker Change: For the full year fiscal 2026, we expect total revenue in the range of $910 million to $920 million, we expect to generate operating income in the range of 54% to $59 million.

Speaker Change: As we highlighted to many of you in the past our business is not a cyclical business, but is this seasonal business has historically been most positively pronounced during Q2 due to weather driven seasonality in many trades.

Dave Sherry: This leads to a typically stronger usage-revenue mix in Q2, which carries more variability than subscription. We are cognizant that weather patterns vary from year to year, and the fact that last year was quite hot. We have prudently incorporated each of these factors in our Q2 Revenue and Martin Guide.

Speaker Change: It's a typically stronger usage revenue mix in Q2, which carries more variability than subscription we're cognizant that weather patterns vary from year to year and the fact that last year was quite high.

Speaker Change: Incorporating each of these factors into our Q2 revenue and margin guidance.

Dave Sherry: We're managing the business for a marathon, not a sprint. Our goal remains to durably compound growth over many years and expand margins at the same time. Our continued focus on incremental operating margins is the path to delivering on our long-term non-gap operating margin target of 25%. We see healthy performance this quarter as evidence that our strategy to become the operating system for the trades is working.

Speaker Change: We're managing the business for a marathon not a sprint our goal remains to durably compound growth over many years and expand margins at the same time.

Speaker Change: Can you focus on incremental operating margins as the path to delivering on our long term non-GAAP operating margin target of 25% we.

Speaker Change: We see healthy performance this quarter as evidenced that our strategy to become the operating system for the trades is working with that I will turn the call back to the operator for Q&A operator.

Operator: With that, I'll turn the call back to the operator for Q&A. Operator? Thank you.

Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May Press Star. One again, you will be limited to one question to allow everyone the opportunity to participate.

Operator: As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. You will be limited to one question to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster.

Speaker Change: Please standby, while we compile the Q&A roster.

Kash Rangan: Our first question comes from the line of Kash Rangan of Goldman Sachs. Please go ahead, Kash. Hi, thank you very much.

Speaker Change: Our first question.

Speaker Change: Comes from the line of Kash Rangan of Goldman Sachs. Please go ahead cash.

Kash Rangan: Hi, Thank you very much congratulations on a fantastic start to the fiscal year.

Kash Rangan: Congratulations on a fantastic start to the fiscal year. One more of a longer term, maybe in the in the context of tariffs, whatnot. If the tariffs do go through, I'm curious to see how that would perhaps positively and also negatively affect the business. I wonder if you could make a case for extended lifetimes of the equipment that we've all installed that cannot be procured and replaced as cheaply. If tariffs do go into effect, that means the servicing opportunity for this equipment and therefore the option for ServiceTitan could be a more longer, durable path and also at the same time, the transaction volumes also.

Speaker Change: One more for longer term maybe.

Speaker Change: In the context of care or whatnot, if the tariffs do go through I'm curious to see how that would.

Speaker Change: Perhaps positively or negatively affect the business I wonder if you could make a case for extended lifetimes of the equipment that they've evolved installed that cannot be procured and replace as cheaply. If tariffs do good if that means the servicing opportunity for this equipment and therefore, the option because service type or could be more longer durable patent also.

Speaker Change: At the same time the transaction volumes also maybe im over the cycle.

Kash Rangan: Maybe I'm overanalyzing the effect of tariffs if they do go into effect, but strategically, since you guys have built a business from ground zero, how do you think about this potential structural change as a positive or not so positive? Thank you so much.

Speaker Change: They do could do think but strategically since you guys have built the business from zero, how do you think about potential structural changes as a positive.

Speaker Change: Not so positive thank you so much.

Speaker Change: Yes.

Ara Mahdessian: Kash, it's always a pleasure to hear from you, and thank you all for all your continued coverage and support. I think most importantly, our customers have proven the ability to execute through various business environments, and this resilience is further enabled by ServiceTitan. There are compound factors from tariffs, which could affect our customers' growth. It's possible that we see a return of supply chain inflation, although I would say in the past, our customers have proven their ability to pass through rising costs.

Speaker Change: Yes, it's always a pleasure to hear from you.

Speaker Change: And thank you all for all your continued coverage and support.

Speaker Change: I think most importantly, our customers.

Speaker Change: The ability to execute through various business environments.

Speaker Change: And this resilience is further enabled by service Titan.

Speaker Change: There are.

Speaker Change: Compounding factors from tariffs, which could affect our customers' growth.

Speaker Change: It's possible that we see a return of supply chain inflation, although I would say in the past.

Speaker Change: Our customers have proven their ability to pass through rising costs.

Ara Mahdessian: But I think because the the macro is outside of our control, we elect to forecast pretty prudently, especially on GTV.

Speaker Change: But I think because.

Speaker Change: The macro is outside of our control.

Speaker Change: Ill, let to forecast pretty prudently.

Speaker Change: Especially on CTV.

Kash Rangan: Thank you.

Speaker Change: Thank you. Our next question comes from the line of.

Josh Baer: Our next question comes from the line of Josh Baer of Morgan Stanley.

Speaker Change: Josh Baer of Morgan Stanley. Please go ahead Josh.

Josh Baer: Please go ahead, Josh. Great, congrats on a strong quarter.

Josh Baer: Great Congrats on a strong quarter. Thanks for the question.

Josh Baer: Thanks for the question. I was hoping you could shed some light on the stacking S curve strategy. Should we be thinking about entering new trades, new market segments, rolling out new pro products like on a planned or consistent basis to drive durable growth? You know, what would you change from sort of that line of thinking anything else that you'd add there?

Speaker Change: Was hoping you could shed some light on the stacking S curve strategy should we be thinking about entering new trades, new market segments Rolling out new pro products like on a planned or consistent basis to drive durable growth.

Speaker Change: What would you change from sort of that line of thinking anything else that you would add there.

Ara Mahdessian: Yeah, for us, we're big proponents of focus. And, you know, we live in a very target rich environment. So we try our best to stay on the ball on what the priorities are.

Speaker Change: Yes for us we're big proponents of focus and we live in a very target rich environment. So we try our best to stay on the ball on what the priorities are and so today, we're focused on enterprise commercial and.

Ara Mahdessian: And so today, we're focused on enterprise, commercial, flow, and roofing. And those are the S-curves that are attracting kind of the primary source of attention for us. As we mature in these focus areas, you know, there's a pretty long tail of S-curves that are beyond that. But right now, we should be focused on those priorities.

Speaker Change: In roofing and those are the S curves that are attracting kind of.

Speaker Change: Primary source of attention for us as we mature in these focus areas.

Speaker Change: A pretty long tail of S curves that are beyond that but right now we should be focused on those priorities.

Speaker Change: Thank you.

Michael Turrin: Our next question comes from the line of Michael Turrin of Wells Fargo Securities. Your question please, Michael. Hey, great. Thanks so much. Appreciate you taking the question.

Speaker Change: Our next question comes from the line of Michael <unk> of Wells Fargo Securities. Your question. Please Michael.

Michael: Hey, great. Thanks, so much I appreciate you taking the question Dave you touched on it a bit but maybe just remind us in more detail. What you typically see from a seasonal perspective in the first half and the visibility you have into various scenarios that could play out and maybe as a second part just touch on from the broader team what you see.

Michael Turrin: Dave, you touched on it a bit, but maybe just remind us in more detail what you typically see from a seasonal perspective in the first half and the visibility you have into various scenarios that could play out. And maybe as a second part, just touch on from the broader team what you're seeing in terms of pro product attach. If there are Yes, I'll hit the first one pretty quickly here. GTV is a bigger factor in Q2 than any other quarter of the year. It's a seasonally strong period for our customers, especially in trades like landscape, pest, HVAC and others.

Michael: In terms of pro product attach if there are certain product areas you'd point us towards and how we should think about the contribution from those products over time. Thank you.

Michael: Yes.

Michael: And the first one pretty quickly here at <unk> is a bigger factor in Q2 than any other quarter of the year, it's a seasonally strong period for our customers, especially in trades like landscape past HVAC and others.

Dave Sherry: This makes Q2 particularly sensitive to weather, both in terms of absolute temperature, but also the degree of temperature change. Because usage is a larger portion of our mix in Q2, there's a slightly wider range of possible outcomes. This year ago period I talked about in the prepared remarks was pretty hot and consistent with our approach to be prudent forecasting GTV internally, this is already captured in the guidance.

Michael: Q2, particularly sensitive to weather both in terms of absolute temperature, but also the degree of temperature change.

Michael: Because you just usage as a larger portion of our mix in Q2, there was a slightly wider range of possible outcomes.

Michael: This year ago period, I talked about in the prepared remarks.

Michael: Pretty hot and consistent with our approach to be prudent forecasting GDP internally. This is already captured in the guidance.

Dave Sherry: And so I think that's the answer on GTV and the seasonality. The only other part I'd say in the first half is bonuses are paid in Q1. And so as you saw in the free cash flow change in Q1, that's mostly driven by bonus payment.

Michael: And so I think that's the answer on <unk> and the seasonality only other part I'd say in the first half is bonuses are paid in Q1 and so as you saw on the free cash flow change in Q1, that's mostly driven by bonus payment.

Dave Sherry: Michael, could you repeat the pro part of the question? Actually, Michael is no longer in queue. Okay, I think the core question was on how pro products are driving the growth. The pro products are the fastest growing portion of our business, which is what you're seeing in the subscription growth, you know, performance versus prior year. I think what we talked about is some new pro products at Pantheon that did have some, you know, they're continuing to be strong performers for us in new sales, but they're still not huge drivers to revenue. But I think that the pro product contribution continues to be a significant part of our subscription revenue.

Speaker Change: Could you repeat that.

Michael: The pro product part of the question.

Michael: Okay.

Michael: Actually Michael is no longer in queue.

Michael: Okay.

Michael: Yes.

Michael: Core question was.

Michael: On how pro products are driving the growth the pro products are the.

Michael: The fastest growing portion of our business, which is what youre seeing in the subscription growth.

Michael: Performance versus prior year, I think what we talked about some new pro products that pantheon that did have.

Michael: So they are continuing to be strong performers for us in new sales, but there is still not huge drivers of the revenue, but I think that the pro product contribution continues to be a significant part of our subscription revenue.

Dave Sherry: Thank you.

Speaker Change: Thank you. Our next question comes from the line of.

David Hynes: Our next question comes from the line of David Hynes of Canaccord Genuity.

Speaker Change: David Hynes of Canaccord Genuity. Please go ahead David.

David Hynes: Please go ahead, David. Hey, thank you guys.

David Hynes: Hey, Thank you guys all I'd love to get an update on commercial from you just.

Ara Mahdessian: Ara, I'd love to get an update on commercial from you. You talked about four go-lives in the quarter. That's great to see. I'm curious what you're seeing from a bookings perspective with pure commercial customers, the pipeline on that front. And then maybe you can talk a little bit about where you think you are from a product perspective as you look to kind of build out a full complement of capabilities for those buyers.

Speaker Change: You talked about four go lives in the quarter Thats, great to see I'm curious, what you're seeing from a bookings perspective with pure commercial customers. The pipeline on that front and then maybe you could talk a little bit about where you think you are from a product perspective, as you look to kind of build out a full complement of capabilities for those buyers.

Ara Mahdessian: Great question. Commercial bookings and customer go-lives are performing well, even, as you mentioned about product roadmap, while we continue to build out that dedicated commercial CRM, as well as the key project management capabilities we've discussed before, that are required to fully unlock construction use cases that our customers have. Those four major commercial go-lives in April was a very important moment for us. We activated more ARR in 28 hours than our enterprise commercial team typically does in a month. So, successfully standing up all those highly strategic accounts is really a testament to how far we've come on commercial.

David Hynes: Great question.

David Hynes: Commercial bookings and customer go lives are performing well.

David Hynes: As you mentioned about product roadmap, while we continue to build out.

David Hynes: Dedicated commercial CRM as well as the key project management capabilities, we've discussed before.

David Hynes: We're required to fully unlock construction use cases that our customers out.

David Hynes: Those four major commercial go lives in April was a very important moment for us we activated more <unk>.

David Hynes: In 2008 hours.

David Hynes: <unk> enterprise commercial team typically does in a month.

David Hynes: So successfully expanding up all those strategic accounts is really a testament to how far we've come on commercial and we remain very much focused on ensuring that the specialty trade subcontractors can run all of their work on our platform and that includes commercial maintenance that includes on the mens service inclusive.

Ara Mahdessian: And we remain very much focused on ensuring that the specialty trade subcontractors can run all of their work on our platform, and that includes commercial maintenance, it includes on-demand service, it includes replacement, and it also includes winning and managing construction projects. Yeah, and while we're continuing to evolve the full footprint of our commercial offering, the thrust of development right now is focused on construction, specifically around crews, daily logs, RFIs, submittals, change orders, financials, document management, and a better mobile experience. We're pacing well and expect big advancements later this year. Up-leveling commercial service with enhanced service agreements, equipment pull-through agreements, mobile app improvements, and a new customer portal.

David Hynes: And it also includes winning and managing construction projects.

Speaker Change: Yes, and while we're continuing to evolve the full footprint of our commercial offering the thrust of development right. Now is focused on construction specifically around cruise daily logs RFID. The Middles change orders financials document management and a better mobile experience, we're pacing well unexpectedly.

Speaker Change: Investments later this year.

Speaker Change: Upload one commercial service with enhanced service agreement equipment pull through agreements mobile Abu <unk> and a new customer portal.

Ara Mahdessian: We need to be in every deal, and we need to nail every customer implementation and onboarding. We're making great progress here.

Speaker Change: We need to be in every deal and we need to nail every customer implementation and Onboarding, we're making great progress here and finally, we need to fully evolve evolve our brand from residential to commercial as the operating system for the trades.

Ara Mahdessian: And finally, we need to fully evolve our brand from residential to commercial as the operating system for the trade.

Speaker Change: Thank you.

Scott Berg: Our next question comes from the line of Scott Berg of Needham & Company. Your question please, Scott. Hi, everyone. Thanks for taking my questions and nice quarter here. I guess my question involves moving into new trades. We hosted a customer call with someone from the glass industry, which is not a stated trade that you all are in, but this customer is going to roll your platform out to, I believe, 800 different locations over a period of time, which is kind of fascinating because it's not a stated trade that you're in, but they're able to leverage the platform as is.

Speaker Change: Our next question comes from the line.

Speaker Change: Scott Berg of Needham <unk> Company. Your question. Please Scott.

Scott Berg: Hi, everyone. Thanks for taking my questions and nice quarter here.

Speaker Change: I guess my questions too.

Speaker Change: Involves moving into new trades.

Speaker Change: Also the customer call with someone from the glass industry, which is not a stated trade that you all are in but this customer is going to roll your platform out to I believe 800 different locations over a period of time, which is kind of fascinating because thats not a stated trade that youre in but they are able to leverage the platform has is but how do you think about us.

Ara Mahdessian: How do you think about other opportunities or other trades that you don't have this? David Hynes, Kasthuri Rangan, Joseph Vruwink, Tyler Radke, Jason Rechel, Joshua Baer, Michael Turrin, Terrell Tillman, Scott Berg, Jason Rechel, Joseph Vruwink, Tyler Radke, Jason Celino, Brent Bracelin, Dave Sherry, Vahe Kuzoyan, ServiceTitan Sure, absolutely. My assumption is that there's a broader set of verticals that could be using ServiceTitan than there is today. The challenge is, because of the end-to-end scope, it's not always obvious who's going to be a fantastic fit and who's going to find certain gaps in their workflow where it's a problem.

Speaker Change: They're opportunities or other trades that you don't have this stated target set of use cases for are there more that you can move into their or apply to maybe that you arent stay or.

Speaker Change: Just trying to understand if there's more opportunities like that.

Speaker Change: Okay.

Speaker Change: Sure absolutely.

Speaker Change: My assumption is that there is a broader set of verticals that could be using service Titan than there is today the challenges because of the end to end scope.

Speaker Change: Not always obvious who is going to be a fantastic fit and who is going to find certain gaps in their work towards a problem. So our current approach is to spend most of our energy proactively on areas that were focusing on along the lines that I mentioned earlier and so that's where most of our energy goes into now what we have.

Ara Mahdessian: So our current approach is to spend most of our energy proactively on areas that we're focusing on along the lines that I mentioned earlier. And so that's where most of our energy goes into. Now, when we have an existing relationship and there's a new trade or there's something that comes up that's opportunistic, and we have a high degree of conviction that we can make those successful, then we may take those on. But generally, we try to stay kind of focused on where we're prioritizing debt resources on and making a concentrated effort versus chasing opportunistic deals in kind of areas that may not be in the focus area.

Speaker Change: Of an existing relationship and there is a new trade or there's something that comes up that opportunistic and we have a high degree of conviction that we can make those successful then we may take those on but generally we try to stay kind of.

Speaker Change: Focused on where we're prioritizing debt resources on and making a concentrated effort.

Speaker Change: Versus chasing opportunistic deals and kind.

Speaker Change: Kind of areas that may not be and a focus area.

Speaker Change: Thank you our next question.

Tyler Radke: comes from the line of Tyler Radke of Citi. Please go ahead, Tyler. Yes, hi, thanks for taking the question. Can you talk a little bit more? I know you're getting a lot of questions on the macro, but I believe in the past, you've just talked about average ticket sizes being impacted by macro cycles. So did you see any impact on average ticket sizes across your trades? And then just to clarify on Q2 guidance, I know there's a lot of seasonal impacts in there, be it weather and a lot of sensitivity to GTV. Did you include a wider range because of macro or weather factors than you normally would?

Speaker Change: It comes from the line of Tyler Radke Citi. Please go ahead Tyler.

Tyler Radke: Yes, hi, thanks for taking the question.

Speaker Change: Can you talk a little bit more.

Speaker Change: I know you're getting a lot of questions on the macro but I believe in the past you've just talked about average ticket sizes being impacted by macro cycles. So did you see any impact on average ticket sizes across your trades and then.

Speaker Change: Just to clarify on Q2 guidance I know theres a lot of seasonal impacts in there be it weather.

Speaker Change: A lot of sensitivity. The GTP did you include a wider range because of macro or.

Speaker Change: Weather factors than you normally would just a quick clarification on those two would be helpful. Thanks, So much.

Tyler Radke: Just a quick clarification on those two would be helpful. Thanks so much.

Dave Sherry: I'll take this one. You nailed it. The two largest inputs of GTV are the number of jobs that are completed and the average ticket per job. Both these factors were pretty stable in terms of their growth rates through Q1. And though some of the large OEMs have talked about price increases, we're not embedding any change or acceleration average tick at this point. Q2 is dependent on macro that you talked about, I guess, a bit, but it's heavily dependent on the weather. And there are a bunch of very hot days last year. That's factored into the guide.

Speaker Change: Hey, Tyler I'll take this one.

Speaker Change: You nailed it the two largest inputs of CTV or the number of jobs that are completed and the average ticket per job.

Speaker Change: These factors were pretty stable in terms of their growth rates through Q1, and some of the large Oems have talked about price increases, we're not embedding any change or acceleration average ticket at this point.

Speaker Change: Q2 is dependent on macro that you talked about I guess a bit but it's heavily dependent on the weather.

Speaker Change: And as there are a bunch of very high days last year.

Speaker Change: That's factored into the guide I think that there is a bit more variance in the guide excuse me in Q2, which we have factored prudently in our GDP forecast so yes.

Dave Sherry: I think that there is a bit more variance in the guide, excuse me, in Q2, which we have factored prudently in our GDP forecast. So, yes. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Brent price lit up.

Brent Bracelin: Our next question comes from the line of Brent Bracelin of Piper Sandler. Please go ahead, Brent. Good afternoon. Thank you. Great to see another quarter of strong execution here.

Brent: Piper Sandler. Please go ahead Brent.

Brent: Good afternoon. Thank you great to see another quarter of strong execution here I wanted to go back to the commercial discussion.

Vahe Kuzoyan: I wanted to go back to the commercial discussion. It sounds like there's some momentum there. I think you referenced maybe a top five win at a mechanical firm. Could we just step back and maybe frame how much of the commercial markets penetrated today? It sounds like you're investing in the construction part of that market. It sounds like there's some momentum in the mechanical part of it. Walk us through what's your penetration rate today, and as you make these investments, how much more of that opportunity does it lock? Thanks.

Brent: It sounds like there's some momentum there I think you referenced maybe a top five a win at a mechanical firm could we just step back and maybe frame how much of the commercial market is penetrated today it sounds like youre investing in construct in the construction part of that market. It sounds like there's some momentum in the mechanical part of it.

Brent: He will walk us through whats your penetration rate today.

Brent: And as you make these investments how much more of that opportunity does not lock. Thanks.

Vahe Kuzoyan: I'll let Dave speak to any specific figures. But when we look, when we take a step back and we look at the overall opportunity, we still believe that we're very early in the commercial story. And so that's what driving so much investment and focus is because we see that this is a deep well that we're just getting started in.

Brent: Thanks, Dave.

Brent: Dave speak to any specific figures, but when we look when we take a step back and we look at the overall opportunity.

Brent: We still believe that we're.

Speaker Change: Very early in the commercial story and so that's what driving so much investment and focus is because we see that this is a deep well that we're just getting started and then in terms of what we are disclosing Dave do you want to jump in and share on that Bob.

Dave Sherry: In terms of what we're disclosing, Dave, do you want to jump in and share on that front? You're on mute. I think you nailed it, Vahe. We're still very early days here in terms of our penetration commercial. We have a lot of success so far, but we're still quite early in the penetration. I think we're making a lot of progress so far.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: I think you nailed it right. We're still very early days here in terms of our penetration commercial we have a lot of success.

Speaker Change: So far but we're still quite early in the penetration I think we're making a lot of progress so far.

Speaker Change: Okay.

Speaker Change: Thank you.

Dylan Becker: Our next question comes from the line of Dylan Becker of William Blair. Your question, please, Dylan. Good, gentlemen, maybe Ara or Vahe for you.

Speaker Change: Our next question.

Speaker Change: It comes from the line of Dylan Becker of William Blair. Your question. Please.

Speaker Change: Hey, gentlemen, maybe our Bahar for you I Wonder if you could kind of dive into a lot of the conversation around the commercial segment and maybe in particular, the partnership angle and what we've seen kind of come out with with cobalt and others, maybe how you think about the opportunity for the roll up opportunity within the commercial.

Ara Mahdessian: I wonder if you could kind of dive into a lot of the conversation around the commercial segment, but maybe in particular, the partnership angle, and what we've seen kind of come out with with Cobalt and others, maybe how you think about the opportunity for the roll up opportunity within the commercial side of the equation, which has been so successful and transformative for you as we think about the residential Sure. Cobalt is a new customer and a very fast-growing commercial consolidated that is backed by Alpine. And we have a great relationship with Alpine as a well-known thought leader in the commercial space.

Speaker Change: The equation, which has been so successful and transformative for you as we think about the residential opportunity.

Speaker Change: Sure Colby.

Speaker Change: The new customer and a very fast growing commercial consolidated that is backed by alpine and we have a great relationship with our client as a well known thought leader in the commercial space cobalt validating our technology and approach in commercial is a key point of validation for us David leverage the full power service tightened and as the consolidated operating system across 12 brands. We are the <unk>.

Ara Mahdessian: Cobalt validating our technology and approach in commercial is a key point of validation for us. They will leverage the full power of ServiceTitan and as a consolidated operating system across 12 brands, we are the software best suited to make them successful over time. Our ecosystem playbook in commercial continues to mature. Private equity awareness and validation is growing and Alpine Cobalt being a great example. And, you know, this is where we've seen, as we mentioned before, this customer cohort is the one that's growing the fastest and is the tip of the spear as we enter basically all new markets.

Speaker Change: We're best suited to make them successful overtime, our ecosystem playbook and commercial continues to mature private equity awareness and validation is growing and alpine cobalt being a great example, and this is where we've seen as we mentioned before this customer cohort is the one that's growing the fastest and.

Speaker Change: In the tip of the spear as we enter basically all new markets.

Ara Mahdessian: Similar play is happening on the roofing side as well. And so we're fully banking on the consolidation trend continuing, particularly in commercial. And that's why we have both enterprise and commercial as such big focus areas for us from that perspective overall.

Speaker Change: Similar.

Speaker Change: Play is happening on the roofing side as well and so we are fully banking on deconsolidation trend continuing particularly in commercial and Thats why we have both enterprise and commercial as such big focus areas for us from that perspective overall.

Speaker Change: Thank you.

Jason Celino: Our next question comes from the line of Jason Celino of KeyBank Capital Markets. Please go ahead, Jason. Great, thanks for taking my question. Maybe just one clarification for Dave.

Speaker Change: Next question comes from the line of Jason Salina of Keybanc capital markets. Please go ahead Jason.

Speaker Change: Great. Thanks for taking my question, maybe just one clarification for Dave I think last quarter, you talked about earlier than normal linearity just wanted to ask if linearity. It was more normal this quarter and then if we think about your subscription sales cycles, our pipeline generation, if you've seen any.

Dave Sherry: I think last quarter, you talked about earlier than normal linearity, you just wanted to ask if linearity was more normal this quarter. And then if we think about, you know, your subscription sales cycles or pipeline generation, if you've seen any changes to those, either positive or negative. Thank Hey, Jason, yeah, linearity was much more normal. This quarter, I think last quarter was sort of a one time exception. In terms of pipeline, and New Deal volume, it was a strong quarter, nothing out of the ordinary there to know. Thank you.

Speaker Change: <unk>.

Speaker Change: Either positive or negative thank you.

Speaker Change: Hey, Jason linearity was more normal business.

Speaker Change: Last quarter was sort of a one time exception in terms of pipeline and.

Speaker Change: And new deal volume it was a strong quarter nothing.

Speaker Change: Out of the ordinary there to note.

Speaker Change: Thank you our next question.

Parker Lane: Our next question comes from the line of Parker Lane of Stiefel. Please go ahead, Parker. Yeah, guys, thanks for taking the question.

Speaker Change: Comes from the line of Parker Lane of Stifel. Please go ahead Parker.

Speaker Change: Yeah, Hi, guys. Thanks for taking the question.

Vahe Kuzoyan: Vahe, when you look at the opportunity to drive efficiencies for your customers through agentic AI and, you know, digital agents, is the contact center the primary area that you would see that benefit first? Or do you think there's a broad-based appeal across areas like dispatch, marketing, etc? Great question.

Speaker Change: When you look at the opportunities to drive efficiencies for your customers through <unk>.

Speaker Change: Digital agents is the contact center. The primary area that you would see that benefit first or do you think there is a broad based appeal across areas like dispatch marketing et cetera.

Speaker Change: Great question No. This is actually part of the core.

Vahe Kuzoyan: No, this is actually part of the core aspect of our approach to AI that we think is a durable, sustainable, competitive advantage. We have a product that operates our customers' businesses end-to-end, from the clicks on the website all the way to when the cash hits the bank. And everything within that range is within striking distance of creating some either AI or specifically agentic experience that adds value, either by replacing work that's being done by humans today, by machines, or by just doing things that aren't even possible. And so specifically within commercial and construction, we believe that there's a lot of work that's being done today in the back office that can be automated and enhanced.

Speaker Change: Aspect of our approach that we think is a durable sustainable competitive advantage, we have a product that operates our customers' businesses and to and from the clicks on the website all the way to win the cash in the bank and everything within that range is within striking distance of creating some either AI or specifically.

Speaker Change: <unk> experience that adds value either by replacing work that's being done by humans today by machines for by just doing things that arent, even possible and so specifically within commercial and construction.

Speaker Change: We believe that there is a lot of work that's being done today in the back office that can be automated and enhanced and so we expect that a big driver of the value that we've been to our customers will be increasing the productivity and the back office. There's also opportunities in the field as well and so for US we look at the end.

Vahe Kuzoyan: And so we expect that a big driver of the value that we bring to our customers will be in increasing the productivity in the back office. There's also opportunities in the field as well. And so for us, we look at the entire range that our product touches as being the surface area on which we can innovate from a specifically AI and agentic AI perspective.

Speaker Change: Higher range that our product touches as being the surface area on which we can innovate from in any specifically AI and <unk> AI perspective.

Speaker Change: Thank you. Our next question comes from the line of Terry Tillman of Truest. Please go ahead Terry.

Terry Tillman: Our next question comes from the line of Terry Tillman of Truist. Please go ahead, Terry. Yeah. Hey, guys. Congrats on the quarter. Hey, Ara, Vahe, Dave and Jason.

Speaker Change: Hey, guys congrats on the quarter.

Terry Tillman: A lot of my questions have been answered, but I just wanted to go back to, I like hearing about customers going live. I think you all talked about a couple of residential key customers or large ones, and then four signature commercial customers going live.

Terry Tillman: David Jason a lot of my questions have been answered, but I just wanted to go back to I'd like to turn about customers going live I think you all talked about a couple of residential key customers are large win and then for signature commercial customers going live I'm curious what kind of visibility does that create going forward on when they go live I'm, assuming they are not live across the board in all of the businesses.

Terry Tillman: I'm curious though, what kind of visibility does that create going forward on, when they go live, I'm assuming they're not live across the board and all the businesses, what kind of visibility that creates on your subscription revenue and then usage, and then what's their propensity or how quickly they move to pro products. I know there was a lot in there, but just would love to know what that means when they go live and how that affects the model over the next 12 to 18 months. Thanks.

Terry Tillman: Kind of visibility that creates on your subscription revenue and then usage and then what's the propensity or how quickly you can move to pro products. I know there was a lot in there, but just would love to know what that means when they go live and how that affects the model over the next 12 to 18 months. Thanks.

Dave Sherry: Hey, Terry, thanks for the question. I think on the visibility of subscription revenue, it's it's pretty clear, given the the ramp and ASU 606 nature of the contract, that's pretty high visibility when a customer goes live. GTV, we have a view of it, but of course, it will depend on how we use that, as we said, as locations go live and how much they actually ramp, which directly flows into usage revenue. Pro-product propensity, we focus principally on delivering the ROI of our core product. And as they start to deliver that ROI, we then go and upsell them the pro-products.

Terry Tillman: Hey, Terry Thanks for the question I think on the visibility of subscription revenue.

Terry Tillman: Pretty clear given the ramp in ASC 606 nature of the contracts, that's pretty high visibility when a customer goes live GTD, we have a view of it but of course it will depend on.

Terry Tillman: How we use that as I believe you said locations go live and how much they actually ramp.

Terry Tillman: Which directly closing the usage revenue pro product propensity.

Terry Tillman: <unk>.

Terry Tillman: We focused principally on delivering the ROI of our core product and as they start to deliver that ROI. We then go and upsell them the pro products and.

Dave Sherry: And so that's generally the model. I think we have a view of when and where we should be pushing for certain pro-products, but I would say at initial go-live, our core focus on making sure that the customer realizes the ROI. That's true for any product. It's when they go live on a new pro-product, we're hyper-focused on delivering ROI to them. By delivering ROI, we earn the right to sell them more products. It's the core of our formula. Thank you.

Terry Tillman: And so that's generally the model I think we have a view of when and where we should be pushing for certain pro products, but I would say at initial go live our core focus on making sure that the customer realize the ROI. That's true for any product is when they go live on a new pro product, we're hyper focused on delivering ROI to them by delivering ROI, we earn the right to sell them more products into the core of our formula.

Speaker Change: Thank you. Our next question comes from the line of Andrew Sherman of TD Cowen. Please go ahead Andrew.

Andrew Sherman: Our next question comes from the line of Andrew Sherman of TD Cohen.

Andrew Sherman: Please go ahead, Andrew. Oh, great. Thanks.

Andrew Sherman: Oh, great. Thanks.

Ara Mahdessian: Maybe one for Ara or Vahe. Home equity loan applications, HELOC hit a 17-year high this week. Wondering if you think that can drive bigger projects this year? Any sign or indication of that when you talk to customers yet? We do hear from customers that turnover in the housing market is a driver of doing work in the home and so I would anticipate that any meaningful change in that direction is going to be positive but it's hard to say the magnitude or the severity at this point. Great, thank you.

Speaker Change: Maybe one for our Irvine.

Speaker Change: Home equity loan applications HELOC had a 17 year high. This week wondering if you think that can drive bigger projects. This year any sign or indication of battery when you're talking to customers yet.

Speaker Change: We do hear from customers that turnover in the housing market is a driver of doing work in the home and so I would anticipate that any meaningful change in that direction is going to be positive, but it's hard to say the magnitude or the severity at this point.

Speaker Change: Great. Thank you.

Ara Mahdessian: Thank you.

Speaker Change: Thank you our next question.

Igor Tomachev: comes from the line of Igor Tomachev of Freedom Broker.

Speaker Change: Comes from the line of Igor Thomas.

Speaker Change: Freedom broker. Please go ahead Igor.

Igor Tomachev: Please go ahead, Igor. Hi, thank you for taking my questions. A short question about gross margins. Gross margin performance was quite impressive this quarter, even if we take into account that transition of customer success team. but what was really driving this performance? Was it like just a matter of scale or some efficiency?

Speaker Change: Hi, Thank you for taking my questions.

Speaker Change: About gross margins gross margin performance was quite impressive this quarter.

Speaker Change: Doug I won't say it organization a customer success team.

Speaker Change: But what was really driving this performance was it just a matter of scale.

Speaker Change: Alright efficiencies.

Dave Sherry: Hey, Igor, thanks for the question. You know, as you said, we had a pretty strong gross margin quarter, total platform gross margins expanded over roughly 300 base points in the quarter. Of that, about 200 came from the CSM reclassification, and just under 100 base points came from the organic platform margin expansion. That has to do with scale, product selection, and, you know, we do, we look a lot at the incremental gross margins, and those continue to be strong and similar as what they were last year. From here, looking forward, you should probably expect platform gross margin to remain relatively comparable to Q1 to the balance of this year.

Igor Tomachev: Hey, great. Thanks for the question.

Speaker Change: As you said, we had a pretty strong gross margin quarter total platform gross margins expanded over roughly 300 basis points in the quarter of that about 200 came from the CSM reclassification and just under 100 basis points came from the organic platform margin expansion that has to do with scale product selection.

Speaker Change: We look a lot of the incremental gross margins and those continue to be strong in the similar as what they were last year from here looking forward you should probably expect from gross margin to remain relatively comparable to Q1 through the balance of this year.

Speaker Change: Okay.

Dave Sherry: Thank you.

Speaker Change: Thank you. Our next question comes from the line.

Yun Kim: Our next question comes from the line of Yun Kim of Luke Capital. Please go ahead, Yun. All right, thank you.

Speaker Change: Kim.

Speaker Change: Loop capital. Please go ahead.

Speaker Change: Alright, thank you.

Vahe Kuzoyan: I have really a product question. Vahe, agentic AI obviously has been the buzzword for a while recently. What's interesting is that technology is introducing new products for the software vendors, but also gives the software vendors an opportunity to introduce a new type of pricing model, whether that's usage or consumption based. Obviously, you guys have a payment and FinTech products, but maybe you can give us a quick thought around potentially introducing a new pricing model based on consumption or usage beyond FinTech. And when you're thinking about that, if you are, when you're designing a new product, do you have a particular pricing model in mind?

Speaker Change: Really a product question.

Speaker Change: Again think AI, obviously has been the buzzword for for a while.

Speaker Change: Ill.

Speaker Change: Whats interesting is that.

Speaker Change: It.

Speaker Change: That technology is introducing new products for.

Speaker Change: But the software vendors, but also give default prevented an opportunity to introduce a new type of Pla.

Speaker Change: Pricing model.

Speaker Change: Like whether it is can you say to a consumption based.

Speaker Change: Obviously, you guys have a payment and fintech products, but.

Speaker Change: Is there.

Speaker Change: Maybe you can give us a quick thought around.

Speaker Change: All of these.

Speaker Change: Rhonda potentially introducing a new pricing model based on consumption of usage beyond Fintech and when you thinking about that if you are.

Speaker Change: When you're designing a new product you have to have a predict I mean.

Speaker Change: Have a particular pricing model in mind. Thanks.

Vahe Kuzoyan: Thanks. Yeah, great question. So if you look at our current suite of pro products, we have some that are by seats in the field, seats in the office, some of them are based on consumption, for example, direct mail. And so we've got a pretty broad range of how we price and package the pro products. And we believe that that mechanism allows us to kind of have a monetization path that is familiar with our customers. And that kind of fits into how we do business with them. And that's the structure that we're going to be using to then capture, you know, all the opportunities within the agentic AI space.

Speaker Change: Yeah, Great question. So if you look at our current suite of pro products. We have some that are bi seats in the field seats in the office. Some of them are based on consumption for example, direct mail.

Speaker Change: And so we've got a pretty broad range of how we price and package the pro products and we believe that that mechanism allows us to kind of have a monetization path that is familiar with our customers and that kind of fits into how we do business with them and that's the structure that we're going to be using to them.

Speaker Change: Capture all.

Speaker Change: All the opportunities within the agent take AI space.

Ara Mahdessian: Thank you.

Speaker Change: Thank you.

Ara Mahdessian: I would now like to turn the conference back to Ara Mahdessian for closing remarks, sir. I just want to thank everyone for joining us today.

Speaker Change: I would now like to turn the conference back to our Modesto Yearn for closing remarks, Sir.

Speaker Change: Okay.

Speaker Change: Just want to thank everyone for joining us today.

Ara Mahdessian: Vahe and I are actually signing off from our office in Armenia. We've been spending time with our teams. We're doing great work to transform the lives of our customers. We are inspired by the quality of our collective execution during Q1, but as always, we know we're just getting started.

Speaker Change: And are actually signing off from our office in Armenia, we've been spending time with our teams were doing great work to transform the lives of our customers. We are inspired by the quality of our collective execution during Q1, but as always we know we're just getting started we hope to see many of you soon and we just want to thank you for your continued.

Operator: We hope to see many of you soon, and we just want to thank you for your continued support for our mission and our journey. Thank you.

Speaker Change: Support for our mission and our journey. Thank you.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

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