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01/11 16:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Subscription Revenue Growth 26% year-over-year growth. This was driven by strong growth in Pro, commercial, and new trades.
Total Revenue Growth 25% year-over-year growth. This was attributed to steady execution with both new and existing customers and strength in usage revenue.
Gross Transaction Volume (GTV) $21.7 billion, representing 22% year-over-year growth. Growth was led by commercial and consistent growth in HVAC and other trades within residential.
Usage Revenue Growth 24% year-over-year growth, driven by higher-than-expected fintech utilization.
Platform Gross Margin 80.2%, an improvement of 310 basis points year-over-year. Approximately 200 bps of this improvement resulted from the allocation of certain customer success expenses to sales and marketing.
Total Gross Margin 74.3%, up 390 basis points year-over-year.
Operating Income $21.5 million, resulting in an operating margin of 8.6%, an improvement of 780 basis points year-over-year. This was due to pacing ahead of incremental margin goals and steady progress on R&D priorities and hiring plans.
Free Cash Flow $38 million, up from $11 million in the prior year third quarter. Year-to-date free cash flow was $50 million, up from $5 million in the prior year period.
Field Pro: Introduced as the next evolution of Sales Pro, extending AI to technicians in the field.
Virtual agents: Released across the entirety of the Pro portfolio to automate work across trades.
Atlas: Introduced as an agentic command center integrating modern large language models with ServiceTitan's intelligence.
Commercial CRM and construction management capabilities: Final components introduced to form ServiceTitan's end-to-end commercial platform.
Galaxy Service Partners: Went live with this newly formed alliance of commercial door, gate, and access control companies.
Timeproof and Master Roofing: Went live with plans to scale to 50 branches across 30 states within the next year.
Verisk partnership: Announced partnership to integrate ServiceTitan data into Verisk's Xactimate Claims Management System.
GTV growth: Achieved $21.7 billion in gross transaction volume, representing 22% year-over-year growth.
Subscription revenue: Grew 26% year-over-year to $182.8 million, driven by Pro products, commercial, and new trades.
Free cash flow: Achieved a record $38 million in Q3, up from $11 million in the prior year.
AI integration: Focused on leveraging AI to enhance customer experience, including predictive analytics and AI voice agents.
Conduit acquisition: Acquired Conduit for $20 million, with cross-sell opportunities in residential HVAC and other trades.
Market Conditions: The company acknowledges that its GTV is tied to end consumer sales, which are generally insulated from supplier inventory cycles. However, there is a dependency on the durability and diversity of the markets served, which could pose risks if market conditions change.
Regulatory Hurdles: The company emphasizes forward-looking statements that involve risks, uncertainties, and assumptions, which may include regulatory challenges that could impact results.
Economic Uncertainties: The company’s performance is tied to essential services for existing homes rather than new home construction, which may be impacted by broader economic conditions.
Strategic Execution Risks: The company’s growth strategy relies heavily on the adoption of its Pro products and AI-driven solutions. Failure to execute on these strategies or meet customer expectations could adversely impact growth.
Competitive Pressures: The company operates in a competitive market, and its ability to maintain its position as the operating system for trades depends on continuous innovation and customer retention.
Supply Chain Disruptions: Although not explicitly mentioned, the company’s reliance on diverse trades and markets could expose it to supply chain risks, especially in commercial and residential sectors.
Q4 FY 2026 Revenue Guidance: Total revenue is expected to range between $244 million and $246 million.
Full Year FY 2026 Revenue Guidance: Total revenue is expected to range between $951 million and $953 million.
Q4 FY 2026 Operating Income Guidance: Operating income is expected to range between $16 million and $17 million.
Full Year FY 2026 Operating Income Guidance: Operating income is expected to range between $83 million and $84 million.
Business Day Impact on Q4 FY 2026: Q4 FY 2026 will have one fewer business day compared to the prior year, compressing GTV and usage revenue growth by approximately 150 basis points. This will be offset by one additional business day in Q1 FY 2027.
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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