Thank you for standing by, and welcome to ServiceTitan's First Quarter Fiscal Year 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Jason Rechel, VP of Investor Relations. Please go ahead.

Thank you, operator, and welcome, everyone, to ServiceTitan's Fiscal First Quarter 2026 Earnings Conference Call. With me are Service Titan'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 fiscal quarter and full fiscal year 2026. 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. 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. 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.servicetitan.com. 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. 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. And with that, let me turn the call over to Ara. Ara?

Thank you, Jason, and thank you for joining us as we update you on our progress against our mission. 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 solutions. I'm humbled by the way, that our team, in partnership with our customers, performed this quarter to get us off to a good start in FY '26. Year-over-year, we delivered 29% subscription revenue growth, 27% total revenue growth and record operating margins, which improved 560 basis points. Our sales team delivered consistent performance. Our product and engineering teams are executing well on our road map and I'm pleased that several of the largest and most strategic accounts, both residential and commercial went live this quarter. 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. 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. Our customers are our most important partners, and I'd like to today share 2 customer stories to demonstrate how our customer success translates into our own success. In 2016, our software had not yet been built for the garage door industry. And then I received the call from Tommy Mello, who was ready to take A1 Garage Door to the next level. We…

Thanks, Ara. Very proud of the way Titans are helping our customers navigate these unpredictable economic times. The ROI we deliver to our customers continues to be our greatest advantage and the foundation for why each of our 4 primary areas of focus are off to a strong start this year. 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 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. They also have a huge appetite for standardizing their businesses around the AI and automation we enable. For all these reasons and more, our enterprise customers attract a major portion of our focus from a product road map perspective. 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 on to ServiceTitan after realizing demonstrable value with ServiceTitan across multiple residential home services portfolio companies. Shifting to Pro products, which continue to perform well. Our largest customers continue to ask me and Ara how to fully automate their operations to both drive faster revenue growth and greater efficiency. Marketing, dispatch, fleet and Scheduling Pro are each notable examples. Our newest AI-native products are ramping well and round out our ability to automate our customers' processes. 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 the broader thesis around the readiness of the core technology. Our new field assist technology, empowering technicians to ask…

Thanks, Vahe. I'm proud of the way our customers and business are performing to begin FY '26. 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, up 27% year-over-year. This healthy growth to begin the year was led by subscription revenue, which was $162.7 million, up 29% year-over-year as well as consistent usage revenue, which was $45.3 million, up 22% year- over-year. When normalizing for the $1.5 million in onetime subscription items, which positively impacted Q4 FY '25 results, our subscription revenue growth and net new subscription dollars added during Q1 each continue to perform well on a year-over-year basis. 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-over-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 a record operating margin of 7.5%, an improvement of 560 basis points year-over-year. 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…

[Operator Instructions] Our first question comes from the line of Kash Rangan of Goldman Sachs.

Congratulations on a fantastic start to the fiscal year. One more of a longer term maybe 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 go into effect that means the servicing opportunity for this equipment and therefore, the opportunity for ServiceTitan could be a more longer durable path and also at the same time, the transaction volumes also. Maybe I'm overanalyzing the effect of tariff if they do go into effect. But strategically, since you guys have built the business from ground zero, how do you think about this potential structural change as a positive or not so positive?

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

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

Congrats on a strong quarter. 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, what would you change from sort of that line of thinking? Anything else that you'd add there?

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, Pro 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, there's a pretty long tail of S curves that are beyond that. But right now, we should be focused on those priorities.

Our next question comes from the line of Michael Turrin of Wells Fargo Securities.

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 certain product areas you'd point us towards and how we should think about the contribution from those products over time?

Yes. I'll hit the first point pretty quickly here. GTV is a bigger factor in Q2 than any other quarter in the year. It's a seasonally strong period for our customers, especially in trades like landscape, pest, HVAC and others. This makes Q2 particularly sensitive to weather, both in terms of absolute temperature but also 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. 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 on the free cash flow change in Q1, that's mostly driven by bonus payment. 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 performance versus prior year. I think what we talked about is some new Pro products at Pantheon, that did have some -- there continue to be strong performance for us in new sales, but there's still not huge drivers of the revenue. But I think the Pro product contribution continues to be a significant part of our subscription revenue.

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

Ara, I'd love to get an update on commercial from you. Just what -- you talked about 4 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.

Great question. Commercial bookings and customer go-lives are performing well, even as you mentioned about product road map, while we continue to build out the 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 4 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. And we remain very much focused on ensuring that the specialty trade subcontractors can run all of their work on our platform. It includes commercial maintenance. It includes on-demand service. It includes replacements and it also includes winning and managing construction projects.

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 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 agreement, equipment pull-through agreements, mobile app improvements and a new customer portal. 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 our brand from residential to commercial as the operating system for the trades.

Our next question comes from the line of Scott Berg of Needham & Company.

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. It's not a stated trade that you're in, but they're able to leverage the platform as is. But how do you think about other opportunities or other trades that you don't have this stated kind of target set of use cases for. Are there more that you can move into there or apply to maybe that you are today? Or just trying to understand if there's more opportunities like that.

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. 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.

Our next question comes from the line of Tyler Radke of Citi.

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? Just a quick clarification on those 2 would be helpful.

I'll take this one. You nailed that the 2 largest inputs of GTV are the number of jobs that are completed in 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 in average tick at this point. Q2 is dependent on macro. You talked about, I guess, a bit, but it's heavily dependent on the weather. And as there are a bunch of very hot days last year, 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 GTV forecast. So yes.

Our next question comes from the line of Brent Bracelin of Piper Sandler.

Great to see another quarter of strong execution here. I wanted to go back to the commercial discussion. It sounds like there's some momentum there. I think you referenced maybe a top 5 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 on 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 unblock?

Thanks. 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. In terms of what we're disclosing, Dave, do you want to jump in and share on that front? You're on mute -- you're still on mute.

I think you nailed it, Vahe. We're still very early days here in terms of our penetration in 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.

Our next question comes from the line of Dylan Becker of William Blair.

Maybe Ara or Vahe for you. 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 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 opportunity.

Cobalt is a new customer and a very fast-growing commercial consolidator that is backed by Alpine, and we have a great relationship with Alpine 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. They will leverage the full power of ServiceTitan and as the 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 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. 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 a debt perspective overall.

Our next question comes from the line of Jason Celino of KeyBanc Capital Markets.

Maybe just one clarification for Dave. I think last quarter, you talked about seeing earlier than normal linearity. I just wanted to ask if linearity was more normal this quarter? And then if we think about your subscription sales cycles or pipeline generation, if you've seen any changes to those either positive or negative?

Jason, linearity was much more normal this quarter. I think last quarter was sort of a onetime exception. In terms of pipeline and new deal volume, it was a strong quarter, nothing out of the ordinary there to note.

Thank you. Our next question comes from the line of Parker Lane of Stifel.

Vahe, when you look at the opportunity to drive efficiencies for your customers through agentic AI and 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.

Great question. 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. 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 specifically AI and agentic AI perspective. Thank you.

Our next question comes from the line of Terry Tillman of Truist.

Congrats on the quarter. Ara, Vahe, Dave and Jason, 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 4 signature commercial customers going live. 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 in all the businesses. What kind of visibility that creates on your subscription revenue and then usage? And then what's the 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.

Terry, thanks for the question. I think on the visibility of subscription revenue, it's pretty clear given the ramp in ASC 606 nature of the contracts. 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 you said -- 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. 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 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. It's the core of our formula.

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

Great. Maybe one for Ara or Vahe. Home equity loan applications, HELOC hit a 17-year high this week. Wondering if you think that could 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 of the severity at this point.

Our next question comes from the line of Egor Tolmachev of Freedom Broker.

So a question about gross margins. Gross margin performance was quite impressive this quarter, even if we take into account the transition of customer success teams. But what was really driving this performance? Was it like just a matter of scale or some efficiencies?

Thanks for the question. 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. And we look a lot of 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 through the balance of this year.

Our next question comes from the line of Yun Kim of Loop Capital.

I have really a product question, Vahe, agentic AI obviously has been the buzzword for a while recently. What's interesting is that, 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, like whether that's usage or consumption based. Obviously, you guys have a payment and fintech product. But is there -- maybe you can give us a quick thought around all these around the 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 to have a -- I mean, do you have a particular pricing model in mind.

Yes, 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 product. 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 all the opportunities within the agentic AI space.

Thank you. I would now like to turn the conference back to Ara Mahdessian for closing remarks. Sir?

Just want to thank everyone for joining us today. 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. 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.

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