ServiceTitan, Inc.

Good day, everyone, and welcome to the ServiceTitan second quarter fiscal year 2026 earning results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Jason Reckel. Please go ahead, sir.

Thank you, Operator, and welcome everyone to Service Titans Fiscal Second Quarter 2026 Earnings Conference Call. With me are Service Titans Co-Founder and CEO, R.M. Adessian, Co-Founder and President, Vahe Kazoyan, and CFO, Dave Sherry. During today's call, we'll review our fiscal second quarter 2026 results. We'll also discuss our guidance for the fiscal third 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 facts should 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've 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 the 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. Our growth formula remains the same and 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 am grateful for the way our team empowered our customers to perform well during the seasonally strongest quarter for the trade. Year over year, we delivered 27% subscription revenue growth, 25% total revenue growth, and record operating margins, which improved 510 basis points. Our overall financial performance was greater than we expected due to strength in usage revenue and faster growth from new customers. The breadth of execution against each of our four main priorities this year continues to underscore our opportunity to transform the lives of every hardworking contractor in the trade. Creating transformational value for our customers has always been our mission. And the introduction of AI has now made it possible for our customers to reimagine the way their businesses operate. This quarter, Service Titans AI, Titan Intelligence, enable the customer to organically book, schedule, dispatch, and perform the first fully automated job in our history. I'd like to share this story and reflect on the possibilities that are increasingly clear to the future of the trades. Gulf Shore Air Conditioning and Heating has over 30 employees who have been successfully serving customers in the Florida panhandle for 30 years. But only recently did the company realize its goal of compounding growth through increasing levels of automation. Gulfshore has been a prolific user of our platform, with each expansion leading to higher and compounding ROI. Gulfshore initially onboarded with Service Titan in early 2023 and expanded with Marketing Pro, Scheduling Pro, and Dispatch Pro later that year. And in January of this year, Gulfshore expanded with Fleet Pro and Sales Pro. With a new goal of fully automating the business adjacencies around core technician workflow, GulfShore next turned to AI in the contact center and in June purchased Contact Center Pro along with our virtual agent. The team named their virtual agent Finn after their namesake dolphin logo. And as Finn learned, GulfShore set the stage for something magical. On a busy morning in June, Virtual agent Finn was answering inbound customer calls and responded to an issue about a 10-year-old piece of equipment. Based on Finn's knowledge of the equipment and real-time capacity available that day, Finn booked a same-day on-demand service job. Service Titan automatically attributed the inbound call to the correct Google ad campaign, and email and SMS confirmations were automatically sent to the customer. while Dispatch Pro dynamically assigned the optimal technician to the job. But later that morning, Dispatch Pro learned there was a better suited technician available based upon both a schedule change and the predicted value of the job. And so this new tech was routed to the job. And less than 90 minutes after the initial inbound customer call, the perfect tech was dispatched to the home and their bio message delivered to the homeowner. To this point, no human being had touched the job. SalesPro automatically turned on when the tech arrived on site, and when the $1,200 job was paid for with service type and payment, the job was completed, and SalesPro shared the recording, performance, and analytic metrics back to the home office. From ad optimization to marketing campaign execution to job completion in the home, the technician in the field was the only human who touched the job. This business automation Gulf Shore achieved can only be delivered with a platform-like service type because the data, system, and business processes required for end-to-end automation are reliant on one another. We believe this kind of automation is the future of the trade, and the depth of our platform capabilities are accelerating our platform progress. But it doesn't just sound good. The results are clear. Golf Shore told us that they increased their close rate last month by 22% compared to the same period last year with a combination of SalesPro and PricebookPro. Moreover, their average ticket has increased $150 with DispatchPro. They shared with us that in June, they saw a $370,000 increase in revenue just by running automated marketing campaigns with MarketingPro. and that contact center virtual agents booked five after-hours jobs within 24 hours of going live. GulfShare told us that these financial results of the automation that can only come from a single integrated platform were immediate. This is a turning point for the trades. Leveraging the foundation of workflow that already happens in Service Titan, we now have an opportunity to democratize automation across the industry. We have an entrenched and expanding ecosystem, compounding data-related network effects, and industry-specific benchmarking that allows service titans to deliver differentiated outcomes. Our customers are phenomenal business operators, and I can't wait to watch what they'll continue to do. We hold ourselves accountable to delivering focused execution measured over a series of quarters, years, and decades. I am proud of where we are today, and as always, I believe our opportunity to build the operating system for the trades is only just beginning. I'll now pass it to Vahe, who will share more details on our progress.

Thanks, Ara. I'm super excited about the way Titans continues to create value for our customers and proud of what we accomplished this quarter. Ara talked about our opportunity to deliver automation to the trades. I'm going to update you today on our four key areas of focus. We improved on each goal over the past 90 days and that we're doing it more efficiently than we had planned. In enterprise, industry consolidation and professionalization continues to drive growth of our largest customer tier. Our largest customers drive our top-down product strategy, playbook for new markets and trades, and are our most aggressive users of advanced AI. We expect this to become an accelerant to industry consolidation. This quarter, we are proud to announce a partnership with an iconic enterprise brand that is synonymous with the trades, Roto-Rooter. Roto-Rooter has been the gold standard in plumbing for nearly a century and is today the largest provider of plumbing, drain cleaning, and water cleanup services in North America. We'll work hard together on implementation and expect to go live in early calendar year 2026. Shifting to pro products, we should continue to deliver fast growth at scale as the fastest growing area of our business. Our customers are leaning into AI in a way that we did not originally experience with the early promise of the cloud. Customers are eager to automate operations to drive faster revenue growth and greater efficiency. As you heard from Gulfshore, we now have the ability to fully automate our customers' processes with comprehensive AI capabilities that leverage our core workflow to go beyond what any point solution can deliver. The organic pull from customers to fully automate workflow is an encouraging indication of the flywheel that we expect will continue to drive pro product detach rates higher. We are our customer system of record, and we have a closed-loop system that allows customers to turn data and insights directly into automated action. Our pro story has become the tangible AI story for customers, and I'm excited to share more innovations at Pantheon this month. In commercial, we delivered overperformance across all customer tiers. especially in the large enterprise market. The breadth of our enterprise capabilities and success getting customers live are both increasingly recognizable strengths and significant competitive advantages. And our progress building the key project management capabilities to unlock construction is beginning to yield results. Our emphasis over the last several years has been to build the product, brand, and organizational foundation that would be required to win in commercial. And now, as the leader, We are tasked with scaling on this foundation to become the market standard. This means perfecting the product for dedicated commercial contractors and delivering differentiated value that becomes increasingly challenging to replicate. We're at the precipice of this important S-curve in commercial with a slate of new products coming this year that will mature the product market fit of our core platform and unlock new opportunities. We now expect that the next several years will be about execution on our vision. Concluding with roofing, where we continue to lay our foundation for the future. While still early in our S-curve, we're maturing our go-to-market motion, maturing our implementation playbook, and making progress on our key product and ecosystem priorities. We're building support for insurance workflows to allow our customers to automate work and to manage claims and collaborate with insurance providers. We also continue to deliver distributor integrations that will streamline our customers' workflow and build the ecosystem around service typing. Our recent partnership with ABC Supply Company, the largest wholesale distributor of roofing and other select building products in North America, builds on our ecosystem success so far this year. This is an exciting time in the trades. The resilient execution by our existing customers and the conversion of new customers like Roto-Rooter are a testament to both our current strengths and future opportunity. As Aura said up front, we intend to deliver on our mission with focused execution. And with that, I'll turn it over to Dave to run through the financials.

Dave? Thanks, Vahe. I am proud of how our teams performed this quarter. Today, I'll run you through Q2 financial results in detail and provide guidance for Q3 and update our full fiscal year 2026 guidance. For more detailed financial results, please refer to our press release issued earlier today. Q2 gross transaction volume, or JTV, was $22.9 billion, representing 19% year-over-year growth. This was faster than we'd expected in light of the challenging comparable period from last year. Overperformance was led by our commercial customers as well as non-HVAC residential trades. Though residential HVAC grew slower than in prior periods against the challenging comparable, these customers continue to grow well in Q2, demonstrating the durability of the trades and strong execution by our customers. Q2 total revenue of $242.1 million grew 25% year-over-year. Subscription revenue of $174.8 million grew 27% year-over-year, led by faster-than-expected growth for new customers and healthy expansion trends. Usage revenue grew 23% year-over-year to $58 million, outpacing our prior guidance driven by two factors. First, as noted above, GTV grew more than expected. Second, this was compounded by a higher mix of on-platform payment solutions, leading to strong usage take rates. Together, the high GTV and high usage take rate led to strong growth during our seasonally largest quarter. Total platform revenue for Q2, the sum of subscription and usage revenue, grew 26% year-over-year to $232.7 million. Q2 professional services revenue was $9.4 million. Net dollar retention was greater than 110% for the quarter. Q2 platform gross margin was 80.7%, an improvement of 280 basis points year-over-year. As a reminder, roughly 200 BIPs of this improvement resulted from the allocation of certain customer success expenses to sales and marketing. Total gross margin for Q2 was 74.4% of 330 basis points year over year. Q2 operating income of $29.2 million resulted in a record operating margin of 12.1%, an improvement of 510 basis points year over year. As a result of the year-to-date strength in operating income, particularly driven by high margin usage revenue over performance and slower than budgeted pace of hiring, we are now well ahead of our expected incremental margins. Q2 free cash flow was $34.3 million, up from $18.7 million from the prior year's second quarter. FY26, to date, free cash flow of $12 million is up from negative $5.9 million through the first half of FY25. Shifting to formal guidance. For the third quarter, we expect total revenue in the range of $237 to $239 million. We expect to generate operating income in the range of $14 to $15 million. For the full year fiscal 2026, we expect total revenue in the range of $935 to $940 million. We expect to generate operating income in the range of $74 to $76 million. We are pleased with our business performance year-to-date. This puts us in the favorable position to deploy more capital towards high ROI growth opportunities. Given our overperformance year to date, we expect to overachieve our incremental margin targets in the fiscal year. Over the long term, we remain committed to the 25% targets we've consistently articulated. Our goal remains to durably compound growth over many years and increase margins. We see healthy performance in this quarter as further evidence that our strategy to become the operating system for the trades is working. With that, I'll turn the call back to the operator for Q&A. Operator?

Thank you so much. And as a reminder, to ask a question, simply press star 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again. We ask that you please limit yourself to one question and requeue for additional questions. Please stand by while we compile the Q&A roster. Our first question. comes from the line of Cash Rangan with Goldman Sachs. Please proceed.

Hi. Thank you very much. Every quarter I seem to be using some service. This time we had a water main break, and one of the services happened to use your software. So it's good to see a footprint spread wide and far, although I had to go through a pretty tough evening. But my experience proves that the software can be hugely valuable. And, Ari, you talked about the Roto-Rooter. They were one of the people that responded as well. It does look like it's a fairly large business. It's a billion-dollar revenue run rate, and they have not been doing particularly well. So what was the business objective that they had in mind when they picked server-side? Obviously, in an industry that's growing, they're not growing, so obviously they want to reverse course. But how did you guys win this deal? Who was the incumbent? And what was the business justification ROI parameter that they were using to go with service?

Thank you so much. Thank you, Cash. Always a pleasure hearing from you.

Sorry about the troubles with the systems in your home, but thank you for the contribution to GTV. We're very excited by the Roto-Rooter Partnership. They're a household brand. We're, of course, deeply grateful for their trust in the partnership here. I think what we're seeing is that ServiceTitan continues to be the platform of choice for the largest trade businesses because we uniquely have both the trade-specific workflows that they need as well as the enterprise capabilities that the largest customers need. In Roto-Rooter's case, their business spans across both residential and commercial, and that really aligns well with our strengths. And the specific business outcomes that they look for are very consistent to the business outcomes that most other both large and smaller shops look for. A lot of it centers on revenue growth by way of generating more leads at a lower customer acquisition cost, converting more leads into booked appointments, increasing close rates, increasing average tickets. And then, of course, all the automation in the back office that allows one to grow revenue with a lower cost structure. And so we very much look forward to this partnership. We will celebrate once we get them successfully live and realizing the value on service titan and delivering the ROI that they're looking for on both the top line and the bottom line.

Excellent. Thank you so much. Thank you, Josh.

Thank you. Our next question is from Josh Baer with Morgan Stanley. Please proceed.

Great. Thanks for the question. Congrats on a great quarter. You mentioned Roto-Rooter's business expands across residential and commercial. I wanted to ask one around that. When you think about the market opportunity and one of your priorities is on the commercial side, Think about your existing customer base. What percentage of your customer base is hybrid, spanning across residential and commercial? Are you prioritizing landing on the commercial side for your existing customers where they're not using you in that business? More broadly, do you look at overall trades and what mix is also have hybrid businesses where potentially you are in a better position than just winning a standalone commercial trade, which might, you know, lean into point solutions. Like any context to the mix of your business or the market and hybrid, and if that is a focus area for you.

Yeah, good question. So what we find is that the vast majority of our customers have some degree of one or the other. Very rarely is it purely exclusive. What we find is generally speaking, as the size of the business tends to get bigger, there does tend to be more specialization. Rural-rural is unique in this sense. But what we do see is that we rarely land just one or the other. We almost always land with both sides of the house. The only scenario where historically at least we didn't get the whole business was if they had a large construction portion, which has been the focus that we've had this year so that We can serve the entire business. But we don't believe that there's a big opportunity within our existing customer base for, for example, a large commercial service partner business not being on the platform. And what we do think, though, is because there's such a common instance of the business needing to have both sides, our ability to be excellent in both residential and commercial we see as an enduring competitive advantage because it's very difficult to do those two things well, and that's why we're so focused on becoming world-class. We're purely commercial contractors, just like we are for the residential side.

Thank you. You sound great across your key initiatives, large customers, pro products, commercial roofing, and the numbers back that. I am wondering... Is there anything that is not going as well as you would hope or that you're, you know, working on fixing, anything that's underperforming? Thanks.

That's a great question.

I can tell you we are happy with the progress that we're seeing, but we always want to be better across the board. We want to be better in the markets where we are the market standard. We want to be even better in the markets where we're not yet. We want the product to deliver even more ROI. We want the implementation to be even more flawless, and we want the service level to be that which our hardworking contractors deserve.

Great. Thank you.

Thank you. Our next question is from Michael Turin with Wells Fargo Securities. Please proceed.

Hey, great. Thanks very much. Congrats on the results here. I was hoping we could just go back and double-click on the change you're calling out in large enterprise commercial. Maybe given still newer to the public market, for added perspective, you can just speak to how long you've been investing towards that opportunity, what you're seeing today to call that out now, and maybe how it impacts your view on the overall TAM or longer-term opportunity for the business here. Thanks very much.

Sure.

It's been about three years that we've been investing on the commercial side. And what's happening now is basically what we said was going to happen when we laid out what we're going to focus on for the rest of the year, which is in order to crack the enterprise commercial space, we needed to have an answer for construction. And what we're seeing now and the results that you're seeing is the market's reaction to the beginning of us delivering on that construction vision. We still have work to do and we'll be delivering more throughout the rest of the year. But that's the fundamental driver of what we're seeing in terms of traction on the commercial side is the gaps that we're filling on construction.

And we're really excited because it's still very early days in a gigantic town.

Thanks very much.

Thank you so much. And our next question comes from the line of Dylan Becker with William Blair. Please proceed.

Hey, guys. It's Faith on for Dylan. Maybe just diving deeper into what you guys were just talking about with commercial and construction. I guess where are you guys at being able to move earlier into the construction phase to help win that market? And what are you doing from a product perspective to increasingly unlock more strategic value on that side?

I'm sorry. Was the question about why we didn't go earlier? It was hard to hear.

Just within the commercial phase, what are you doing maybe from an innovation roadmap product perspective to kind of further unlock this opportunity and move earlier in the construction phase in the sense of like the actual build earlier in the phase in the decision making?

Got it. So, a couple of things. One is we had some more fundamental foundational things that we had to do for B2B businesses that took a bulk of the early days of our efforts to go into commercial. And the features that we're talking about that drove the progress on the construction side are primarily around the project management and operational aspect. And those were the big deliveries that we've made so far that are driving kind of the traction that we're seeing. In terms of where we're focused on for the rest of the year, It's primarily going to be around crews, daily logs, RFIs, submittals, change orders, financials, document management, and a better mobile experience. That's going to be the focus for the rest of the year. And then, throughout the end of the year and beyond, we'll start shifting focus more towards the up-frontal aspects of the construction business, the bid management, dealing with requests for bids and so forth. And so, that's the strategy, and that's where we're seeing traction on the construction side.

Awesome. Thanks for the caller.

Thank you. Our next question comes from DJ Hines with Canaccord. Please proceed.

Hey, guys. Congrats on the nice results. Maybe I'll ask one of Dave to get him involved. Dave, it looks like CAC payback period picked down a bit again. You know, by our math, it looks like it's below 20 months. You also talked about outperforming incremental margin targets this year. All of that's awesome. But how does that inform your views on sales and marketing investments and kind of what is it telling you today?

Hey, DJ, great question. Thanks for having me involved.

I think you're right that we had a strong quarter where we overperformed, particularly on usage where TTP came in higher than we would have expected. What that informs is what we talked about before. We'll continue to deploy capital where we can towards the 25% incremental margin target. We're doing that today. We're a bit behind on hiring, but I think that we expect to catch up sometime later in the year. And we'll continue to evaluate what is the best investment. Currently, our primary source of investments continue to be in R&D because we think it's a large market. But where we see good investments in sales and marketing, We'll do so. We continue to hire, continue to have exciting events. What you'll see in Q3 is a big step up in sales and marketing because of our user conferences of Pantheon and Ignite.

But we're excited about where we're going. Sounds good. Thank you.

Thank you so much. One moment for our next question. That comes from Jason Celino with KeyBand Capital Markets. Please proceed.

Hey, thanks for taking my question, you know, kind of feeding off of DJ's question and keeping you tagged in, Dave. But, you know, from what I remember, Service Titan has fairly short sales cycles, and you generate a good amount of your leads from SEO. With some of the changes we're seeing in search from AI, we're all trying to understand what this might mean for PLG-type companies. Obviously, with your results, it doesn't look like you're seeing any disruption. So, curious what you can tell us from any changes in behavior on the lead gen side or sales effectiveness. Obviously, you know, Pantheon's coming up, and we'd love to hear from Ross on this topic, but curious what you can share us right now.

Sure. Our demand generation machine is delivering strong results across both corporate and enterprise pipeline, has consistently performed all year. Our go-to-market efforts are balanced across different demand generation efforts, and fundamentally, we are not a PLG model. We do utilize organic search, which is performing well in leads, pipeline, and bookings. It's worth remembering that organic search composes a small portion of our total demand gen. Beyond search, we utilize paid marketing channels, email, YouTube, TV, radio events, traditional outbound lead gen, and then obviously our extensive partner ecosystem is critical to scaling these efforts. We think a balanced go-to-market machine helps us execute consistently through time. We do think that AI search will change the organic SEO game. We are the brand leader and the thought leader in the trade, so we feel well-positioned to actually lead this change.

Perfect. Thank you for the clarification.

Thank you. Our next question is from Brent Braslin with Piper Sandler. Please proceed.

Thank you for taking the question here. Good afternoon. Aura, I wanted to go back to AI. I know contractors don't buy AI. They buy automations. But GulfShore, super interesting. I'd be curious to understand what solutions from Service Titan are they using? Do you need Pro to be able to light up a lot of these automations? And if so, are you seeing any sort of change in the pro interest attach rates from other customers. And then quickly for Dave, platform gross margins did cross over 80% for the first time ever this quarter. Is that sustainable or is there some seasonal tailwinds that help? Thanks.

Fantastic question.

As you can probably tell, our DNA is all about creating value for customers. And so we've been investing in automation and AI and particularly our AI Titan intelligence for years. We heard with Gulf Shore being the system of action across nearly every workflow in a trades business and having the data-related network effects through such breadth and depth of data and being the default UI in a trades business and being that hub of that vast ecosystem of integrations, All these things allows us at Service Tidings to create unmatched value through automation for our customers. In Gulfshore's case, they use our pro products, Scheduling Pro, Dispatch Pro, Marketing Pro, Sales Pro, et cetera, et cetera. And whereas the core product will deliver, call it a medium level of sophistication and automation across most workflows, It's the pro products that deliver the most advanced and most complete level of automation. And therefore, the most sophisticated customers seek out the most advanced level of automation, both for revenue growth as well as for cost optimization and benefit from the much larger ROI.

And I'll chime in quickly, Brett, on your second question. As you noted, total platform gross margin increase nearly 300 bits in the quarter versus prior year. It's important for us to remember that about 200 bps of this improvement was led by the recast of certain customer success expenses from gross margin into sales and marketing. Nevertheless, we saw healthy leverage on gross margin that's driven by a couple of things. leverage on infrastructure costs. Second, some improvements in sales and marketing. And then third, to your question, is the sustainable. There is a seasonal peak in Q2, given usage is high in criminal margins.

We do see overall trends towards higher platinum gross margin, like we talked about before, however.

Good to hear. Thanks.

Thank you. Our next question is from Terry Tillman with Tourist. Please proceed.

Yeah, good afternoon, Ara, Valhe, and Dave, and Jason. My question is related to Contact Center Pro. I remember when you all launched that, people were literally clapping during that presentation. It seems like automation is a real key there, and it's timely considering maybe some of your trade businesses are under some pressure cost-wise. First, I guess, is Roto-Rooter. It mentioned in the press release three customer service centers, so curious if they'll be using the product, and just generally because of The play on automation, what are you seeing with the uptake on contact center pro? Thank you.

Jared, I'll answer the first part quickly and then provide a bit more color on contact center. I think, like most customers, we expect folks to start with just the core, realize the value, and then adopt our pro products. And so, that's the first part of the answer. On ROTO, we've signed them. They're not yet live, so it's not impacting the results in the quarter. We expect them to go live sometime early next fiscal, and that's when you'll see the results flowing through our financials. Do you want to talk about contact center growth?

Yeah, not much to report here. We're making steady progress on our roadmap, and the results that we're seeing are very promising, but we still have a long way to go to complete the vision, and so we'll be continuing to release features over the next several quarters within contact center growth.

All right, thank you.

Our next question comes from the line of Parker Lane with CFO. Please proceed.

Hey, guys. Thanks for taking the question. Clearly, the Gulf Shore example is displaying the art of the possible for some of your customers that really want to drive automation and efficiency in their business. Do you think as we look at similar examples of customers that are trying to go down that path, the primary way you monetize this today is just through pro product attacks, or is there going to be an evolution? maybe in the near term or midterm, of some of these pricing dynamics and models as you really thrive that demonstrable value for customers, both on the top line and bottom line?

Marker, a great question. I think we've been pretty transparent that we're probably not the most optimized in terms of packaging here. I think our customers often tell us that the buying experience can be difficult with so many a la carte products, and I think we're still – early in the days of figuring that out. So I would not assume that the past, the way we've done it, is what we expect in the future. But we've not yet nailed exactly how it will look.

But it's a great question that we think about a lot internally. Got it. Thank you, guys.

Thank you. Our next question is from the line of Scott Berg with Needham & Company. Please proceed.

Hi, everyone. Thanks for taking my questions. I have two.

Wanted to touch on Router because I know we all have lots of questions on it. But I guess what does this partnership include in terms of functionality? Is this the base platform? Is there some pro functionality, you know, that's kind of included with the agreement here? I mean, they're a company-owned entity versus a lot of the franchise entities that you're used to working with. So I'm just trying to understand maybe What's included with the initial transaction if it differs from most of your other constituents? Thanks.

What I'll say here is that, like most customers, we expect them to land wall-to-wall with our core solution.

We don't sell our core in piecemeal, and so we expect them to land wall-to-wall, part of what implementation should take now through the next fiscal year. But nothing super out of the ordinary with Roto other than the fact that it's a household brand that's quite large, but we expect it to land like most of our customers.

And, Dave, from a follow-up perspective, one of the things you called out was HVAC didn't necessarily have as good of a quarter as other aspects of your business, if I heard that correctly. Is there something in particular with an HVAC in the quarter that maybe, you know, drove a little less, I guess, positive performance there, or is maybe seasonality-based? Just maybe try to help unpack that comment a little. Thanks.

Sure. I think, first of all, it was a strong quarter. Our customers exceeded expectations. As I mentioned in the prior call last quarter, Last summer was one of the hottest summers on record. In fact, we can fire measure the second hottest summer on record, so it produced a difficult calm. This was a warm summer, but not as hot as last summer, and so that primarily impacted HVAC. Our customers continue to grow, but the lower rate in the Cedar Park was just purely based on the calm, and so that's what drove it.

Nothing structural or different there other than that difficult calm and weather patterns. Very helpful in this quarter.

Thank you so much. And our next question is from June Kim with Luke. Please proceed.

All right, great. On the GTV growth, how much of that growth was driven by volume or the number of jobs versus average ticket price for each of those jobs? And is there any underlying trend that you are seeing on the GTV growth?

Yeah, what I'll say is that the quarter had pretty similar times what we've seen in prior periods

both job growth and ticket growth were contributing factors to it. What I'll say is that in the non-HVAC residential trades, we saw a pickup across the board, and that was driven mostly by jobs.

Okay, great. And then in terms of the platform growth margin, you know, good to see a strong performance there. But how much is the AI driving that? efficiency there, and is there a further opportunity to leverage AI to really drive, you know, more cost-effective onboarding process and maybe even streamline that process, you know, quicker?

What I'll say is that we're excited about the progress we've made and the solutions our team are driving to use AI to help improve the customer experience.

I think we still feel like it's early days in the AI journey, both internally for our operations as well as for the operations of our customers.

If I could just squeeze in one more, would the ramp of pro products drive gross margin tailwind?

I think it depends on the pro products. Some have high gross margins.

Some, like our fleet gross solutions at Telematics, have some real cost in it, so it'll depend on the mix. But we think that it should be a contributor to our top line, and it has efficiencies more than on cost of revenue. It has efficiencies in sales and marketing because it's much more efficient to go out there and sell to existing customers than new ones.

Okay, great. Thank you.

Thank you. Our next question is from Peter Griffith with Citi. Please proceed.

Hey, thanks. This is Peter on the line for Tyler Radke. Thanks for taking the question, and great quarter for you guys. I was just wondering if you could touch a little bit more on any displacements you've seen on the commercial side, why you're winning against the competitors there, and what products you're initially landing with on those commercial deals. Thanks.

Sure.

The primary difference between what's happening now and prior quarters has been really the quality of the product, first and foremost, especially on the construction side, but then also a successful track record of taking large enterprise customers live, which is very difficult to do in this particular space. And so those are the two primary things that have underwrote kind of our traction boosts.

Thank you so much. And we have time for one last question from Andrew Sherman with TD Cowen. Please proceed.

Oh, great. Thanks. Hey, guys. Nice quarter. For our, I wanted to come back to the Resi HVAC. Given how hot it was throughout the summer, I know it was tough comp, but would have thought that would have been a little bit stronger. The OEMs called out higher interest rates, weaker consumer, that kind of thing. Do you think that had any impact on replacements in the quarter? And maybe in some cases, if those were just pushed out, did you see any of that in Q3? And then did the refrigerant change for the HVAC this year, did that have any incremental benefit in the quarter? Thanks.

I think I'll jump in quickly and then, or I can jump in if you'd like, but I think what you saw the OEMs and some of the industry data come out was more a reflection of inventory buildup build down than you see in end consumer demand. That was much more stable both in the first half of this year as well as we saw in Q2. So I don't think the refrigerant inventory buildup is what drove the results in Q2.

And the other point that I'll add is that if you notice, our customers are not the entirety of the market. And what we see is that they continue to take share within the HVAC space. And even though it was a warm summer, it was still dispersed geographically. And compared to last summer, it was cooler from what we can tell.

And so, those are the primary drivers of the HHGTV. Okay, perfect. Thank you.

Thank you. And this concludes our Q&A session. I will turn the call back to Aram Adassian for his closing comments.

I just want to thank you. Thank you all for joining us today.

I know you have the opportunity to spend time with great companies, and so I greatly appreciate the fact that you choose to spend your time with us. And for those that will be making it to Pantheon, I really look forward to seeing you. It's in a few weeks' time. It will be productive and hopefully a good time as well. Thank you again.

Thank you all for participating in today's conference. You may now disconnect.