Pivotree Inc.

Good morning, everyone, and welcome to the Pivotree Q2 2026 earnings call for the three months ended June 30th, 2026. All participants are in listen-only mode. Following the presentation, we will open for analyst questions. Pivotree would like to remind listeners that certain information discussed today may be forward-looking in nature, reflecting the company's current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. For more information on risks and uncertainties, please refer to Pivotree's public filings available on CDAR. During this call, we'll reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they're not recognized measures and do not have standardized meanings under IFRS. Please see our MD&A for additional information regarding our non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Now I'd like to turn over the call to Pivotree's CEO, Bill Di Nardo.

Thank you, Andy. Good morning, everyone. Thanks for joining us on our Q2 2026 conference call. With me today, as usual, is Mo Ashoor, our Chief Financial Officer. As we do each quarter, we've published a CEO letter alongside these results. It's available on our website and filed on CDAR. I'll be covering key themes from that letter today. Q2 was another quarter of disciplined execution during what continues to be a deliberate transition year. Our first half was really about building more of the AI enabled capabilities across our service catalog, put it in front of clients, prove it works in production. And the Q2 results reflect that. The underlying work of converting our catalog and our people to an AI augmented delivery model reached a number of important milestones. I'm going to talk a bit about that today. So let me start, as I have been lately, with a quick reminder of what Pivotree does and why the market opportunity ahead of us is significant. So we really are a technology services firm that helps our clients drive towards a frictionless buying experience for their customers. We help enterprise clients get the right data in the right format into the right systems. And increasingly, that is at AI powered speed and a fraction of the traditional cost. That market shift we're seeing really is profound. Client conversations are moving from should we invest in AI to how do we deploy AI against specific outcomes on top of our data? And that is exactly the conversation where our domain expertise, what we call that real intelligence, is the most relevant. So we're not applying AI as a buzzword, but as a practical accelerant. It's a tool. It's a very powerful tool. And it's on top of decades of accumulated domain knowledge and commerce platforms, data and integration. So RI and AI is our operating philosophy for 2026. Ultimately, the benefit for our clients is we're delivering services that are better, cheaper and faster than ever before. And we're really actively preparing our clients for that agentic future of commerce. Let me show you a little bit about what that means. I'm going to give you a specific example. And again, part of the reason I'm sharing this is we get a lot of questions around explain what you do. And I think probably the easiest way to explain it is to use a customer example. So a specialty retailer came to us running its product data across categories as different as automotive parts and food. They were doing it on a homegrown system they had outgrown. So we started by building them a proper governed product data platform and cleaning up the data underneath it. And that work is still underway. This started at the end of last year. The kind of work we've done for many years. Now, here's the really important part of the change that's going on. This same client was in the early stages of overhauling its entire technology stack, legacy systems that all needed to connect to each other. So getting data to the right systems. They initially planned to do the integration work themselves with another partner. When the real scope of that became clear, neither their team nor their partner could handle the speed they needed to get it done in and the complexity. And so they came to us and asked. We didn't win that business just because we had a good relationship with them. We won it because we could show them exactly how we deliver on time with quality to competitive price. But again, the kicker here was we used our AI capabilities to show them a really accelerated delivery timeframe. and how we would do this with AI POCs. I mean, this is the new economy. It's a show me, not tell me economy. We could show them. So now we're building and running 140 of those integrations restructured into a multi-year AI powered service. So it wasn't just build the system that would move the data. It was manage the system using the same AI scaffolding we used to build it. And this is where I really want to be precise. AI was accelerating, cutting the design, the build, and the QA time by 50% to 70%. It's not a marketing number. That's what our delivery team is actually seeing on this account. And given the really aggressive timeframes that the customer needed this done by, you couldn't do this manually. You couldn't throw enough people at it. In fact, quite often putting more people on things ends up slowing them down. So this was all about our capability, accelerating our ability to get this done quickly and effectively. So what started as a one time million dollar engagement, the product data, is now over a three million dollar deal. So that's really about how we land a customer with some of that capability we have and then expand it through all the capabilities we're building now with AI. This is really grounding who we are and how we deliver. Again, real world example, but let me talk about how that came about. So we're really working our way through transforming our service catalog. It's not a one-time initiative. It's a sequence we run continuously. Now it really started last year with enabling our workforce. This is true for everyone in our industry. We had to take our workforce and build those extended capabilities, training, tools, process, work to discover who our force multipliers are. Those are people. Our force multipliers are those real intelligence folks that we now enable with AI. So then those force multipliers build new processes. They prove capabilities internally. They document the outcomes before we ever take them to a client. From there, we demonstrate those capabilities to clients and prove the outcomes in their environment. That's when we begin delivering with the new capability live. Yeah, I think what's really important about our transition, unlike some of what you hear in the world of AI where lots of failed experiments, our experiments don't fail. These are people that are transforming existing known processes using AI to heavily automate and accelerate them. And because these folks really know their domains well, when we teach them how to use AI, they're able to leverage the tool to automate their process. They're not really inventing anything new. They're just doing something they already know much better, much faster, and ultimately for our customers cheaper. So once we have that capability, we prove it works both to ourselves and to our clients, we really now have to establish an effective go-to-market new capability. And this is all going on at the same time our customers themselves are going through an AI adoption journey. This is happening across the industry. Everybody is exploring and trying to understand how to effectively apply AI. We're doing it in our catalog. Our customers are starting to expect from all their service providers. They want things better, cheaper, faster. They still aren't all aware how to leverage AI effectively. And there's an important relationship that has to happen. Those capabilities, customers have to have their own capabilities in this front. If they're not able to handle the speed of AI, The whole process breaks down. And so this is again a journey that's evolving where both client and service provider have to be working at the same pace. So really now the key is all this has to show up in our pipeline. As we go through this go-to-market motion, as customers begin to understand what to ask for, how to ask for it, how to accept it and work with it, this starts turning into added pipeline. So when that new capability starts pulling qualified opportunities in the pipe, that's our earliest signal that the go-to-market motion is working. Well ahead of it converting into bookings and revenue, and that's what we're seeing right now. We called it out in the letter, we called it out in the PR, but it's also why we think our pipeline is probably the strongest it's been. We had one of our biggest pipeline ad quarters in almost two years. So we're seeing the early signals. Now, again, pipeline is an early indicator of bookings. Bookings is an early indicator of revenue. All these things have to convert in order to get to revenue growth. But this is, again, what we're seeing, we're excited about. We're starting to see that pipeline build. So against that backdrop, if you just put it into numbers, here's what it's telling us about the state of the transition. In order to get to these capabilities, we had to transform our workforce. So 100% of our workforce is now AI enabled. They've completed basic training. 63% of them are using it daily in their roles ahead of our Q2 internal milestones, and we have quite a few that have moved into advanced use capabilities. These are our force multipliers. Our Q3 focus shifts to building the next tier of advanced practitioners. We want everyone in Pivotree to become a force multiplier. That enablement has turned into 22% of our revenue this quarter had AI enabling it. 33% of PS revenue was AI enabled in the quarter. But just to show you how fast things are moving, by the time we got to June, we were running closer to 50% of PS being AI enabled. Based on what we see in the pipeline and the current transformation process by Q3, more work will be done with AI than not. And I expect by the end of the year, very little in our catalog won't be AI assisted. And over the next 24 months, the actual percentage of work completed by AI will keep climbing towards the majority. While a lot of transformation has been in the delivery of PS work, the foundations of the scaffolding put in place to build PS with AI, it forms the basis for ongoing AI managed services. We've now launched eight new or transformed AI enabled services so far this year, with only a handful of legacy offerings left to convert. The shift is already showing up in the top line. So 22% of our Q2 revenue, again, came from AI enabled services. as we're measuring it today. We expect by Q4 everything we sell will carry an AI enabled component or be completely deliverable with AI. We ended the second quarter with $13 million of cash. And the reason I raise this is this is up $600,000 in the quarter. It's the highest cash balance we've held since the first quarter of 2023. And that's including spending $400,000 on an NCIB. But what this keeps reinforcing is the discipline of the management team, that this group has retooled the org, created all kinds of great capabilities, is starting to show real benefit to customer through the R&D work we're doing. and through all of that transformation, they continue to show they can build cash. So again, I think what's really exciting about this is the optionality on what we're building and we're funding it ourselves and we're producing cash at the same time. I think this is a team that's betting on. So I'm going to transition this to Mo to take you through the detailed financials.

All right. Thanks, Bill. So we'll talk through the financials. I'll start with our bookings for the quarter. Total bookings was twelve point five million in the second quarter and excluding LMS, MIPS and PS bookings was ten point six million. And that was up sequentially quarter over quarter, 18 percent. Let me talk about the MIPS bookings first. So 3.6 million in the quarter. And I'll highlight two kind of keynote contracts. I think that helps illustrate some of the success and the strategy behind what we're doing and how we're going to continue to drive recurring and sustainable growth. We closed the contract with an existing fluent professional services customer. We built, we stood up fluent and we extended our services now to manage services to help support their fluent OMS. And we also closed a three-year contract. And this three-year contract was to optimize the client's technology roadmap and assets over that period of time. So that aligns well with our strategy. And that three-year contract is off of our AI capabilities, which the customer saw and saw confidence in our ability to help them drive their roadmap over the next three years. Professional services bookings were 7 million and that's driven by a reduced volume of new system implementations as we experienced customers pushing out decisions but we still remain optimistic the conversations are continuing and these opportunities are still live and available for us to continue to pursue the market. The LMS bookings was $1.9 million in the quarter. Again, whenever you see this, this is largely on renewals with existing customers. As this customer base continues to shrink, there are a few remaining customers that look to extend the life of the legacy technology. Obviously, with that booking, do not expect that to yield revenue growth. And we expect this business to continue to decline over time as they transition away from those legacy technologies. So as we all know, and Bill touched on it, pipeline is a good leading indicator into bookings and future revenue. And we are encouraged by what's in our pipeline and the ramp up of activities and conversations that happen in the quarter and going into Q3. So as Bill mentioned, this was our strongest pipeline building quarter in almost two years. And we view that as a positive leading indicator into the market and the opportunities out there. So let me shift to revenues. Total revenue was $12.6 million in the second quarter. MIPS revenue was $3.5 million. The decline is attributed to the completion of a SKU enrichment project. And as we mentioned on prior earnings call, we had a ramp up of SKU enrichment. The customer came to us, they requested faster completion of the SKUs than we originally contracted. and we applied our automation to exceed that expectation and complete that program in Q2 of this year. So as a result, this ramped up our revenues and you can see that in the bar chart in the dark blue and we started to ramp down in Q2 of 2026. So that's the primary driver behind the MIPS trend that you see in this chart and if you exclude that program, that SKU enrichment program, the underlying MIPS revenue delivered modest growth quarter over quarter of roughly $100,000. Our legacy managed services business continued to decline year over year to 1.6 million. That's entirely consistent with the continued fully anticipated wind down of our Oracle ATG customers. Professional services was 7.4 million, reflecting the completion of system integration projects across our categories and the result of a slower year to date bookings for our professional services. So we expect near-term revenue moderation. We deliberately are looking to convert our PS to outcome-based PS with AI-enabled managed service structures as we build our service catalogs and support. And that's the right trade-off for the long-term. It improves revenue quality. It improves margin and durability of our customer relationship. So as we mentioned, this revenue trend is largely predicted on bookings and converting pipeline to bookings. We have the pipeline of opportunities. It really focuses on closing them. Reporting the bookings will be the first leading indicator to turning around this revenue trend that we see here. So on to profitability. Gross margins was 46.9% in the second quarter, and it's up 70 basis points year over year. And we continue to maintain the improved margins over recent years. So that improvement reflects the cost efficiency of our professional services delivery, the discipline across our cost management, MIPS, LMS, and as LMS winds down, and the continued leverage of automation and AI as well this year. We continue to structure this organization to generate positive adjusted EBITDA. Our adjusted EBITDA was $900,000 for the quarter, 7.2% compared to $1.7 million in the prior year and 10.1%. So the decline reflects the revenue contraction, obviously, while we optimize our operating expenses and we are still continuing to maintain spend to focus on growth initiatives. Adjusted EBITDA excludes a $600 million restructuring charge that we took in the quarter. So in reviewing net income, the prior year comparable of $2.4 million. Let me address that first, just to set a reminder. Net incomes are $2.5 million. That included $2.4 million from the sale of our WMS business, which you can see from the gray bar on this chart. So normalized and adjusted to exclude that sale, the comparable period produced $200,000 of net income. So during this quarter, Q2 2026, we reported a net loss of $400,000, and that included a $600,000 restructure investment. So in adjusting the comparable for the divestiture and the one-time restructure investment to support future profitability and growth, the year-over-year comparison is less dramatic. We will continue to manage this business in a way that considers future profitability and maintaining the healthy balance sheet we have in place today. So with that, let me move on to the balance sheet. So we ended the second quarter generating cash and closing with a balance of $13 million, which is up from $8.6 million in the prior year. Cash flow from operating activities was $1.2 million in the quarter, up from $700,000 in the prior year same quarter, reflecting an improved pace of collection on our trades and cash receivable. In Q2, we repurchased 241,000 common shares for approximately $400,000. Sorry, in the six-month ended June 30th, 241,000 shares for $400,000. And we'll continue to look for opportunities to buy back shares through our NCIB, but while also considering the cash balance health. In addition to our $13 million cash balance, we have no long term debt. We have access to an undrawn secured line of credit with the National Bank, plus a $15 million accordion to support any future acquisitions. So with that, I'll turn it back to Bill for our strategic priorities.