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01/11 11:27
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
ServiceTitan's earnings call highlights strong enterprise growth, successful Pro product adoption, and progress in the commercial market. The company is improving in areas like ROI and service levels. Revenue and operating income guidance are optimistic, and the focus on automation and AI is promising. While some management responses were vague, the overall sentiment is positive with expectations of increased sales and marketing efforts in Q3. The absence of negative financial surprises and the strategic focus on growth areas suggest a positive stock price movement in the short term.
Subscription Revenue $174.8 million, grew 27% year-over-year. Growth was led by faster-than-expected growth from new customers and healthy expansion trends.
Total Revenue $242.1 million, grew 25% year-over-year. Overperformance was due to strength in usage revenue and faster growth from new customers.
Gross Transaction Volume (GTV) $22.9 billion, representing 19% year-over-year growth. Overperformance was led by commercial customers and non-HVAC residential trades.
Usage Revenue $58 million, grew 23% year-over-year. Growth was driven by higher GTV and a higher mix of on-platform payment solutions.
Platform Gross Margin 80.7%, an improvement of 280 basis points year-over-year. Improvement resulted from the allocation of certain customer success expenses to sales and marketing.
Total Gross Margin 74.4%, up 330 basis points year-over-year.
Operating Income $29.2 million, resulting in a record operating margin of 12.1%, an improvement of 510 basis points year-over-year. Improvement was driven by high-margin usage revenue overperformance and slower-than-budgeted pace of hiring.
Free Cash Flow $34.3 million, up from $18.7 million in the prior year second quarter.
AI Integration: ServiceTitan's AI, Titan Intelligence, enabled the first fully automated job in the company's history, showcasing the potential for automation in the trades.
Pro Products: Pro products like Marketing Pro, Scheduling Pro, Dispatch Pro, Fleet Pro, and Sales Pro are driving growth and automation for customers.
Partnership with Roto-Rooter: ServiceTitan announced a partnership with Roto-Rooter, the largest provider of plumbing, drain cleaning, and water cleanup services in North America, expected to go live in early 2026.
Expansion in Roofing: ServiceTitan is building support for insurance workflows and distributor integrations, including a partnership with ABC Supply Company, to streamline operations in the roofing sector.
Revenue Growth: Q2 total revenue grew 25% year-over-year to $242.1 million, with subscription revenue growing 27% and usage revenue growing 23%.
Gross Transaction Volume (GTV): GTV reached $22.9 billion, representing 19% year-over-year growth, driven by commercial customers and non-HVAC residential trades.
Operating Margin: Operating margin improved by 510 basis points year-over-year to 12.1%, with operating income reaching $29.2 million.
Focus on Automation: ServiceTitan is leveraging AI to automate workflows, aiming to democratize automation across the trades.
Commercial Market Leadership: ServiceTitan is scaling its foundation in the commercial sector to become the market standard, with new products expected to unlock further opportunities.
Market Conditions: Residential HVAC grew slower than prior periods due to challenging comparable periods, indicating potential market saturation or reduced demand in this segment.
Competitive Pressures: The company faces competition in delivering AI-driven automation and integrated solutions, which could impact its ability to maintain market leadership.
Regulatory Hurdles: No explicit mention of regulatory hurdles was made in the transcript.
Supply Chain Disruptions: No explicit mention of supply chain disruptions was made in the transcript.
Economic Uncertainties: The company noted the durability of the trades but acknowledged slower growth in certain segments, which could be influenced by broader economic conditions.
Strategic Execution Risks: The company is heavily reliant on the successful implementation of AI-driven automation and partnerships, such as with Roto-Rooter, which could pose risks if execution falters.
Q3 Revenue Guidance: Total revenue expected in the range of $237 million to $239 million.
Q3 Operating Income Guidance: Operating income expected in the range of $14 million to $15 million.
Full Year Fiscal 2026 Revenue Guidance: Total revenue expected in the range of $935 million to $940 million.
Full Year Fiscal 2026 Operating Income Guidance: Operating income expected in the range of $74 million to $76 million.
Long-term Margin Targets: Committed to achieving 25% incremental margin targets over the long term.
The selected topic was not discussed during the call.
The earnings call summary indicates strong financial performance, with positive revenue guidance and operating income targets. The Q&A section reveals optimism in product adoption, especially in fintech and AI solutions. Despite seasonal moderation, the company shows resilience in key sectors like commercial GTV and residential HVAC. The absence of negative trends or significant risks, coupled with strong product demand and strategic partnerships, suggests a positive sentiment. However, the lack of specific timelines for certain initiatives slightly tempers the outlook, leading to an overall positive sentiment.
ServiceTitan's earnings call highlights strong enterprise growth, successful Pro product adoption, and progress in the commercial market. The company is improving in areas like ROI and service levels. Revenue and operating income guidance are optimistic, and the focus on automation and AI is promising. While some management responses were vague, the overall sentiment is positive with expectations of increased sales and marketing efforts in Q3. The absence of negative financial surprises and the strategic focus on growth areas suggest a positive stock price movement in the short term.
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