ServiceTitan (TTAN) Q1 2027 Earnings Transcript

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Date

Thursday, June 4, 2026 at 5 p.m. ET

Call participants

• Co-Founder and Chief Executive Officer — Ara Mahdessian
• Co-Founder and President — Vahe Kuzoyan
• Chief Financial Officer — Dave Sherry
• Head of Investor Relations — Jason Rechel

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Takeaways

• Gross transaction volume (GTV) -- $21.7 billion, up 23% year over year, benefiting from approximately 300 basis points of tailwind (150 from an extra business day, 150 from weather effects).
• Total revenue -- $268.8 million, increasing by 25% year over year.
• Subscription revenue -- $202 million, up 24% year over year, led by Pro commercial growth and initial Max contribution.
• Usage revenue -- $58.5 million, rising 29% year over year; management expects usage revenue to grow faster than GTV for the fiscal year.
• Platform revenue -- $260.6 million, up 25% year over year (subscription plus usage revenue).
• Professional services revenue -- $8.3 million for the quarter.
• Non-GAAP platform gross margin -- 81.3%, an improvement of 160 basis points year over year.
• Total gross margin -- 75.3%, up 170 basis points year over year.
• Operating income -- $40.8 million, with operating margin of 15.2%, up 770 basis points year over year.
• Free cash flow -- Negative $9.6 million, improved from negative $22.3 million in the prior-year period.
• Net dollar retention -- Greater than 110% for the quarter.
• Annualized billings over $100,000 -- More than 2,000 enterprise customers, now making up over 60% of annualized billings and identified as the fastest-growing segment.
• Max program location growth -- More than doubled the number of locations in the quarter, with expectations to double again next quarter.
• Max program operational impact -- Over 10% of jobs at fully ramped Max customers are now fully automated, with every such customer running at least one fully automated job.
• AI monetization -- Virtual agent offerings are showing strong early adoption, with new outbound calling and receptionist capabilities added to broaden job automation potential.
• Updated guidance -- Q2 revenue expected at $284–$286 million and operating income at $38–$39 million; full-year 2027 revenue is projected at $1.13–$1.14 billion, operating income at $142–$147 million; incremental operating margins for the year now expected to exceed the initial 25% target.
• Non-GAAP tax rate policy -- Adopting a long-term 18% non-GAAP tax rate for fiscal 2027 through 2030.
• Max program customer impact -- E.D.S. Air Conditioning & Plumbing saw a roughly 16-point higher call booking rate, over 9-point higher close rate, more than 30% higher average ticket, and more than 50% increase in average revenue per technician.
• Go-to-market update -- Max is now being offered to new customers at the point of onboarding, in addition to cross-selling to the existing base.
• Organizational velocity -- Accelerated R&D with AI-driven product development, including code generation, bug detection, and process automation throughout the life cycle.
• Commercial and roofing segment developments -- Launched new commercial invoicing agents, equipment systems, and enhanced CRM features; roofing workflows being further hardened to fuel next growth phase in that trade.
• Business day seasonality -- Q2 expected to have one extra business day, benefiting GTV and usage revenue; Q3 will have one fewer business day; Q4 expected to be comparable to the prior year.

Summary

ServiceTitan (NASDAQ:TTAN) reported platform-level financial and operational growth highlighted by accelerating adoption of its Max and virtual agent offerings. The company confirmed a strong enterprise trend, with customers billing over $100,000 now accounting for the majority of total billings and representing the fastest-growing segment. Operationally, automation is delivering measurable gains—over 10% of jobs at fully ramped Max customers are fully automated, and leading clients report outsized improvements in booking rates, close rates, ticket size, and revenue per technician. The management team signaled increased investment in Max, AI, and accelerated R&D while raising full-year revenue and operating income guidance on the back of broad-based strength.

• Management initiated a new long-term non-GAAP tax rate of 18% through fiscal 2030, affecting financial modeling for analysts.
• The company highlighted that the initial Q1 GTV and usage revenue uptick benefited from unusual timing—both calendar (extra business day) and weather—suggesting normalization in coming quarters absent similar tailwinds.
• Internal process improvements and new Chief Technology and Product Officer appointments are intended to increase development velocity and product quality, with early signals of foundational impact.
• Virtual agent penetration remains low but is ramping quite well. Company leadership emphasizes confidence in significant future adoption.
• Incremental operating margin exceeded plan due to outsized first-quarter usage revenue and lower near-term costs. Increased investment in Max and AI is expected to moderate the pace of quarterly margin expansion.
• Vahe Kuzoyan said, "We have way more demand than what we've been onboarding, and we expect to continue to be in that same state. But we want to be very, very intentional with the success that we deliver, the brand and reputation of Max and the durability of the customers on the program."
• Management commented that usage revenue is expected to outpace GTV growth for the remainder of the year due to expansion in ecosystem and virtual agent monetization.
• Dave Sherry stated, "Max is more than just a collection of Pro products. It's not just a bundle. It's incremental capabilities."
• Early customer case studies, such as E.D.S. Air Conditioning & Plumbing, demonstrated both increased efficiency and net new technician hiring, implying growth extends beyond pure productivity gains.
• The company addressed competitive and market expansion questions by reiterating it does not target the low end of the market, and enterprise remains the primary focus area for growth.

Industry glossary

• Max: ServiceTitan's agentic operating system, integrating AI-driven automation and advanced workflow orchestration across trades, delivering end-to-end job automation and measurable ROI improvements.
• Virtual agent (VA): AI-powered digital assistants within the ServiceTitan platform that automate customer engagement tasks such as voice call handling, outbound calls, and receptionist activities, driving operational efficiency.
• Gross transaction volume (GTV): The total dollar value of transactions processed on the ServiceTitan platform during a reporting period, used as a key performance and usage indicator.
• Pro products: Advanced, modular add-on features or products previously sold by ServiceTitan, some of which are now subsumed or expanded upon within the Max platform.

Full Conference Call Transcript

Jason Rechel: Thank you, operator, and welcome, everyone, to ServiceTitan's Fiscal First Quarter 2027 Earnings Conference Call. With me are ServiceTitan'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 2027 results. We will also discuss our guidance for the second fiscal quarter and full fiscal year 2027. 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 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?

Ara Mahdessian: Thank you, Jason, and thank you for joining us. Our customers are off to a strong start in fiscal year 2027. We continue to execute on our core multiyear growth vectors. We're delivering the agentic operating system to the trades, and we're improving our organizational velocity. During Q1, our focus on delivering customer ROI resulted in 25% year-over-year revenue growth, healthy efficiency and record operating margins. As I spoke about last quarter, our vision since founding ServiceTitan has been to transform the lives of hard-working contractors by helping them grow revenue and increase margins.

From day 1, we imagined the world where technicians focused on serving customers in the field, owners focused on business outcomes and ServiceTitan increasingly handled the operational complexity in between. I outlined the evolution of our platform and opportunity to build Max and the agentic operating system for the trades. Today, I'd like to share the story of E.D.S. Air Conditioning & Plumbing, one of South Florida's premier HVAC and plumbing contractors serving the residential and commercial service and construction markets for decades. They were among the first to adopt Max and E.D.S.' business performance speaks for itself across virtually every aspect of the funnel.

While the first quarter has previously been a slower quarter for E.D.S. they delivered striking improvements during Q1 2026 compared with Q1 2025. Year-over-year, call booking rates increased roughly 16 points. Close rate in the field increased more than 9 points, average ticket size increased more than 30%. And as the compounding result of these improvements, average revenue per technician increased more than 50%. These significant revenue outcomes with minimal incremental overhead are powered by agentic workflows across the platform that complement the work that is required to be touched by humans. ServiceTitan's agents are generating leads, booking them into appointments, and helping technicians convert them into revenue at higher average tickets.

Of all E.D.S. jobs during Q1 of this year, nearly half were touched by the optimization engine. E.D.S. Founder, Ed Sasso, shared with me, "We can now manage our jobs, our accounting and our overall costs without adding layers of people. And our tradesmen and women are put in the best position to perform their best work every day without worrying about unnecessary clerical work. This improves job performance, job satisfaction, and career development in a way we never thought possible. They have automated workflows that can create dramatic efficiency improvements, and we're now able to significantly scale our business without adding additional overhead." All told, both productivity improved and technician count grew.

E.D.S. is using ServiceTitan Max to accelerate the capabilities of their best people and create even greater future growth opportunities with enhanced efficiencies across the business. Proof that Max doesn't just allow for improved operations, it compounds them. The best part Ed Sasso told me is that the technology gets better every single day. The power of Max is amplified beyond merely a collection of underlying pro products because there are 25 agentic capabilities optimizing the platform to generate more leads and a higher conversion rate at higher average tickets, all while orchestrating the back office.

During Q1, we introduced speed to lead, inbound call booking automation, auto inventory replenishment and invoice protection, among others, that compound capabilities across the management, the back office and the field. The power that is unlocked with this platform means that what used to require a group of people manually coordinating an operation is now being orchestrated by the system itself with humans and AI agents working together seamlessly where each player does what they do best. This end-to-end orchestration gets worked on in the trades faster, more reliably and more efficiently.

We're leveraging this end-to-end platform and massive proprietary data set alongside our expanding ecosystem, brand leadership and distribution across more than 10,000 high-performing contractors to bring the magic of end-to-end automation to life for operators. And our internal leverage of AI tooling is allowing us to accelerate development velocity to create more value for customers faster than ever. We are well on our way to delivering the agentic operating system to the trades. I continue to be inspired watching Titans execute for our customers every day. And now let's hear more about our execution from my co-founder, Vahe.

Vahe Kuzoyan: Thanks, Ara. I'm excited about our progress so far this year as we build the agentic operating system for the trades. Last quarter, we talked about our 3 major priorities this year: one, to execute against our multiyear growth vectors in enterprise, commercial and roofing; two, to build out Max and the agentic operating system on top of which it sits. Three, to accelerate our organizational velocity. I'd like to highlight important progress that we made during Q1. I'll begin with a brief update of our primary existing growth vectors. Within commercial, we made significant product enhancements this quarter with the launch of our invoicing agents, equipment systems and enhanced CRM capabilities.

In roofing, we continue working to harden roofing-specific and insurance workflows to unlock the next leg of our growth in this trade. Finally, in enterprise, during Q1, we surpassed 2,000 total customers with annualized billings greater than $100,000. Customers in this greater than $100,000 cohort now represent greater than 60% of our annualized billings and remain our fastest-growing segment. The health of this enterprise ecosystem was made clear during our annual private equity symposium. We brought together dozens of the largest operators in the trades and leading sponsors representing more than $3 trillion in AUM to speak about our collective vision for the future evolution of our industry.

Shifting to Max and the agentic operating system for the trades, which we continue to intentionally roll out across our customer base to lead this industry evolution. Last quarter, we talked about doubling our Max capacity. During Q1, we more than doubled the number of locations on Max. Behind ongoing strong demand for Max, we're optimizing our internal processes, accelerating our capabilities, automating customer onboarding and expect to again double the number of locations on Max during Q2. Most importantly, every fully ramped Max customer is running at least one fully automated job where the only human intervention is the technician in the field. Across fully ramped Max customers, on average, more than 10% of jobs are now fully automated.

And as a result of this end-to-end orchestration, Max customers are overperforming their peers across relevant funnel metrics. An additional pillar of our AI monetization strategy, our virtual agents, are experiencing strong early customer adoption to clear customer ROI and the advantages of a singularly integrated platform. We recently introduced outbound calling and receptionist capabilities which we believe will further expand the addressable opportunity for virtual agents while making it even easier for customers to fully automate a greater proportion of jobs. Closing with our organizational velocity. Our goal at ServiceTitan is to build a software factory where AI agents play a central role in all code developments to accelerate velocity.

Over the past quarter, I've worked closely with our new CTPO to hire an industry-leading R&D leadership team that we expect will raise the industry standard of innovation and efficiency. One example of software factory in action, we are using AI through the full life cycle of product development. From collecting user feedback across forums, to design ideation to code-creation and bug detection and prevention across both sandbox environment and live in production. We are accelerating our pace of product development.

Stepping back, the continued success that we are seeing on our primary growth vectors, the clear opportunity to deliver the agentic operating system for the trades and the notable improvements I have already seen in our internal velocity are each clear signals. It is inspiring to see our vision come to life, and I want to thank Titans everywhere for delivering value to our customers every day and our customers for your partnership and trust. With that, I'll turn it over to Dave to run through the financials. Dave?

Dave Sherry: Thanks, Vahe. Our start to the year underscores the durability of our opportunity. Today, I'll run you through Q1 financial results and provide an update to our guidance for fiscal year 2027. For more detailed financial results, please refer to our press release issued earlier today. Q1 gross transaction volume or GTV was $21.7 billion, representing 23% year-over-year growth. Q1 benefited from 1 additional business day as compared to the year ago period, resulting in a roughly 150 basis points tailwind to GTV. Weather contributed roughly another 150 basis points tailwind due to both January ice storms pushing GTV into our fiscal Q1, an unusually early start to the cooling season. Underlying growth across residential and commercial trades remains healthy.

Q1 total revenue of $268.8 million grew 25% year-over-year. Subscription revenue of $202 million grew 24% year-over-year, led by strong growth in Pro commercial and initial upside for Max. Usage revenue grew 29% year-over-year to $58.5 million. Fintech revenue was driven by a combination of higher on-platform monetization and strength in commercial GTV, which, as a reminder, has lower monetization given the mix of payment volume. Beyond Fintech, both ecosystem and virtual agent revenue are growing well, and we continue to believe that growth from these factors will likely lead usage revenue to grow more quickly than GTV in FY '27. Total platform revenue for Q1, the sum of subscription and usage revenue grew 25% year-over-year to $260.6 million.

Q1 professional services revenue was $8.3 million. Net dollar retention was greater than 110% for the quarter. Q1 platform gross margin was 81.3%, an improvement of 160 basis points year-over-year. Total gross margin for Q1 was 75.3%, up 170 basis points year-over-year. Q1 operating income of $40.8 million resulted in operating margin of 15.2%, an improvement of 770 basis points year-over-year. We overperformed our expectations during the quarter, primarily due to stronger-than-expected GTV combined with lower costs, which is partially driven by the timing of certain expenses. As always, we're managing against a full year incremental margin plan by reinvesting behind strength we saw in the quarter.

Looking ahead, we expect the timing of expense growth to normalize as well as incremental investments in Max and inference. We expect investments in these areas to precede the benefits and reduce our future hiring needs over time. In total, we now expect our incremental operating margins for the full fiscal year 2027 to be higher than our initial target of 25%. Q1 free cash flow was negative $9.6 million, an improvement compared to negative $22.3 million for the prior year first quarter. We pay our annual cash bonuses during Q1 and continue to expect the annual free cash flow will roughly approximate annual non-GAAP operating income over the course of the full fiscal year.

Two quick model notes before shifting to formal guidance. First, we have conducted an analysis of our appropriate non-GAAP tax rate moving forward. Beginning this fiscal year, we will adopt a long-term non-GAAP tax rate of 18% to be applied for fiscal 2027 through fiscal 2030. Second, I'd like to remind you of business day seasonality this year. Compared to the prior year, GTV and usage revenue will benefit from 1 additional business day in Q2. Q3 will have 1 fewer business day and Q4 will have a comparable number of business days. Now shifting to formal guidance. For the second quarter, we expect total revenue in the range of $284 million to $286 million.

We expect to generate operating income in the range of $38 million to $39 million. For the full fiscal 2027, we expect total revenue in the range of $1.13 billion to $1.14 billion, and we expect to generate operating income in the range of $142 million to $147 million. Underpinning our outlook is a sustainably high ROI that we deliver our customers who operate in the resilient trades that keep our economy running. We're excited by the progress we're seeing as we build the agentic operating system for the trades with greater operational velocity than ever before. With that, I'll turn the call back to the operator for Q&A. Operator?

Operator: [Operator Instructions] Our first question comes from the line of Josh Baer of Morgan Stanley.

Josh Baer: I was hoping that you could provide some insights and key takeaways from your private equity symposium to start.

Ara Mahdessian: Great question. As you know, our job as the operating system for the trades is to help our operators thrive and, of course, to help sponsors earn even higher returns. And that is our mandate, and our mandate is to deliver AI for the trades, particularly for the largest operators. And those operators and sponsors are standardizing their operations on ServiceTitan. We believe the reason for this is where the vast majority of the work happens in the trades, and it's done by technicians and others that are already working inside of our -- inside ServiceTitan across all the end-to-end workflows. And that is where we get to leverage data and ecosystem advantages.

I think, in particular, being the end-to-end platform makes us the natural destination for, like, the execution layer, the orchestration layer and the interaction layer. Because ultimately, ServiceTitan is not some small piece of our customers tech-stack. It's the primary platform. It's where the work has been done historically for a decade. And so it's natural for us to automate this work now as the execution layer. It's where all the workflows have been coordinated for a decade. And so it's natural for us to coordinate now as the orchestration layer. And of course, for the parts that continue to be manual is very natural for us to remain as the interaction layer.

And our PE companies continue to do well. They continue to be a very fast-growing part of our business, and the PE symposium just reiterated the excitement for how far we've all come together. But more importantly, how much further we have yet to go with AI on the frontier.

Josh Baer: That's great. And just to follow up on that point, is there any way to provide context for the contribution to growth from private equity or how to think about the durability of that tailwind and this great trend for you?

Dave Sherry: Josh, I'll take this one. I think in the quarter, we announced a big milestone of crossing 2,000 customers, north of $100,000 ARR each. I think that you can assume is pretty heavily concentrated with private equity partners, and that represents north of 60% of our ARR today, and it's probably the fastest-growing component of the business.

Operator: Our next question comes from the line of DJ Hynes of Canaccord.

David Hynes: And I'll echo Josh's congrats. Great quarter. Ara, for customers that have moved to Max, what kind of usage are you seeing of Pro products that they didn't previously have access to? I guess I'm curious how much of that is natural experimentation versus led by a ServiceTitan customer success team? I'm sort of getting at, like, scalability of the rollout and utilization as a leading indicator of retention.

Ara Mahdessian: Great. Maybe I'll provide some context if I can comment on the scalability pieces. We have customers that start from different places, some with little to no Pro products, others with more meaningful access to Pro products before switching to Max. I want to remind ourselves that Max is far more than simply the aggregation of Pro products. Max represents 25 different agentic capabilities. Of those 25 before Max, about 7 of them were available in the form of Pro products. The rest have been net new since Max. And they span the, call it, the 3 most important areas of our customers' businesses that are correlated to revenue.

These are the direct drivers of revenue, how they generate demand or leads, how they convert that demand into booked appointments and then ultimately, what is the close rate and average ticket on those booked appointments. And so for example, on the demand side, whether it's optimizing ads on Google and Meta, it's e-mail marketing to the customer base, it's things like speed to lead. On the conversion into booked appointments, it's the voice agents that field voice calls, it's the SMS agents that field text messages and automatically book them. Or it's for the calls that are handled by CSRs, it's the AI that scores how well they perform and coaches them to improve performance.

And then, of course, on the average ticket size, things like assigning the right technician to the right job to maximize close rates in average tickets or follow up on unsold estimate. For folks who've spent time building agents in real life like production businesses, there's a lot of work that's necessary to be done to truly automate everything and drive the types of results that we're seeing with Max. And it's been incredibly exciting to see the outcomes. I shared E.D.S.'s in the prepared remarks. But to see the level of performance from the Max customers makes us very excited for the future.

Vahe Kuzoyan: And I'll just add on in terms of the scalability portion of that answer. For us, the focus has been maniacally emphasizing the ROI that our customers get. And we're doing that primarily through making sure that we've got all hands on deck. And to the extent that we've got an executive sponsor, including myself and Ara, on every single Max customer right now. And so this first cohort, we're not focusing on the automation and the scalability of the setup. Secondly, we started with a lot of customers that had some of the Pro products already. And so there was less set up to do than a greenfield customer.

All that being said, the focus right now is exactly on the scalability aspect and being able to deliver the type of ROI we're seeing, but without having to have all the various manual work that's involved today. And so as we think about how we scale Max, the ability to automatically get everything dialed in without needing work either from the customer or from us or I should say, minimize that work as much as possible is where the focus is now. And we expect to see the benefits of that scalability to show up throughout the rest of the year.

David Hynes: Yes. Yes. Okay. Very helpful. And Dave, maybe a follow-up for you on a separate topic. Q1 GTV as a percent of the full year, would you expect that ratio to be similar to what we've seen over the past couple of years? Or could Q1 skew a little heavier given some of the dynamics you talked about, demand push out from Q4, the extra day? Like, how should we think about that as we set our models?

Dave Sherry: Thanks for getting me involved, DJ. I'll say -- it's going to really depend on what happens during the peak season this summer. If the summer is hot, I'd expect it to be sort of a normal pattern. If the summer is more mild, then I expect it to be maybe a little bit higher in Q1. It's hard for us to know to develop a real conviction on what it's going to be because it's impacted by factors outside of our control, principally weather. But I don't think we see very much that's driving an unusual trend in terms of seasonality this year.

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

Scott Berg: Really nice quarter here. I guess 2 questions. Let's start off with on the Max deployments that you've done so far. I guess, have most of the deployments gone pretty much as expected and very consistently? Are you seeing any sort of variations from deployment to deployment that would be maybe interesting to call out?

Vahe Kuzoyan: So overall, we're incredibly proud of like the results that we've been able to drive for customers. And I would say are generally on the optimistic end of the spectrum. We are, of course, learning some of the subtleties around how previous configurations affect future configurations, how the different products work together and generally, the ability of customers to change and go through that process, which is exactly what this first cohort was intended to produce. That being said, we are focusing on those customers that have the best fit for Max today. And as we start to scale it out across our entire customer base, I'm sure there's a lot more learnings to be had.

If we go to your question, we've been very happy with the ability for our customers to both use Max and get the value out of it.

Ara Mahdessian: I think their needs are largely homogenous. At the same time, building agents for production use cases, there are a lot of such use cases to manage. I think, for example, thinking about something like voice agent might seem as simple as handling the call and booking the appointment. But there are dozens of additional related use cases. You need to handle from things like prioritizing capacity for high-value jobs or having receptionist capabilities to connect the caller to, for example, billing, if it's a billing question, to being able to support rescheduling deployments to, I don't know, notifying on-call text when calls are booked after hours.

So there are these dozens of additional use cases that you must support in order to turn it into a real production grade system that a customer running mission-critical operations can rely on for effectively 100% of their calls, but those needs are homogenous across our customer base.

Scott Berg: Understood. And then for me, follow-up perspective, Dave, there's a lot of concern around some of the initial AI usage amongst the application software vendors and how it has a chance maybe in early stages to gross margins as customers maybe use more functionality that has token use than maybe what some of us are expected or what vendors are expected. As these customers have ramped their usage of tokens, et cetera, has it been within your realm of expectation? Has it been maybe more or less? And should we expect any real impact to gross margins as we think about more and more customers ramping over the next year?

Dave Sherry: I think a couple of things to say. First, our usage of AI for the customer end is not code creation, video creation. And so it's not as token-intensive. With regards to the margins from Max, I think both Max and virtual agents are additive to gross profit dollars. And while this may change over time so far, what we've seen is the combination of the 2 to be roughly consistent with our total gross margins at scale.

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

Jason Celino: Just a couple for Dave. The incremental margin improvement is very, very good in Q1. I heard you on the incremental margins for the full year up ticking to 29%. And I understand like the timing differences, but where are you -- do you think you're getting like more efficiency? Because the alternative would be it'll be reinvesting that back. So help me kind of understand where you saw some upside and kind of your process there?

Dave Sherry: Absolutely. With regard to incremental this year, 3 key things. First and foremost, as I mentioned in the script, in the prepared remarks, it's important to remember, we manage the business on a full year basis. not quarterly, and I encourage investors to not look at incremental margins on any given quarter. Second, in Q1 we saw strong performance. That was driven both by the outperformance from high GTV, which drove usage revenue, which is high margin and lower expenses. Part of that was in regards to timing. Looking forward, I expect that timing to normalize. Third, behind the strength of Q1, we are increasing our investments in both Max and AI inference inside the business.

This will roll out throughout the year. Now that said, despite these increased investments, factoring both the Q1 strength and those investments, we do expect to overperform our full year incremental targets this year.

Jason Celino: Wonderful. And then if we look at the usage take rates, they improved quite a bit on a year-over-year basis for Q1. I think in the past, you've talked about driving better payments utilization. Was that the same driver here? Or was there something more at play?

Dave Sherry: Yes, absolutely, Jason. Usage take rate performed really well this quarter. We were able to maintain our take rate relative to Q4, even with the GTV overperformance. A couple of things, first, as I mentioned in my prepared remarks, Fintech is driven by 2 really opposing forces. The first is on-platform payment monetization. It inched up this quarter. And on the other hand, is a mix shift towards commercial, which has lower monetization due to different mix of pay methods. So that's the first and the second, beyond Fintech, our AI monetization, both ecosystem and virtual agents are growing quite well. Ecosystem is larger, VA is growing faster.

As I look forward, I'd expect usage take rates to remain roughly at these levels. We don't foresee further improvements in the on-platform monetization and we do expect GTV mix to continue to shift towards commercial. I'd expect this shift to commercial to be offset by the growth in our AI usage products from an earn rate perspective. Now given the way that usage earn rate has ramped over the last year, this means that we expect usage revenue to continue to outpace GTV throughout the balance of the year.

Operator: Our next question comes from Dylan Becker of William Blair.

Jackson Bogli: This is Jackson Bogli on for Dylan Becker. Vahe, you noted that more than -- you guys more than doubled Max locations in the first quarter and you expect to double them again in the second quarter. I'm just curious if your thoughts on how sustainable that doubling cadence is beyond the first half? And maybe -- is that a function of being capacity constrained by demand or by onboarding throughput? Just curious to get your thoughts on that cadence going forward?

Dave Sherry: Jack, this is Dave. Before Vahe jumps in, I just wanted to send a big congratulations to Dylan and the Becker family for the addition to their family. With that, Vahe can go ahead and answer Jackson's question.

Vahe Kuzoyan: Yes. Ultimately, what we really care about is having every customer on Max. And so the sustainability of the growth rate is really around the fastest path for that full coverage. And as we think about how we maintain that growth as much as possible. One of the other exciting things that we've started this quarter is being able to get brand new customers directly on to Max versus just going after the existing customer base. And we're seeing some promising early signals there. And so -- in terms of how long we could keep the doubling over quarter, as you mentioned, that's a pretty aggressive growth rate.

But that's what we're trying to orient is, ultimately, we want to be intentional about what expectations we're setting, how we're laying the foundations for a durable growth story and ultimately optimizing for getting all of ServiceTitan onto Max, not necessarily any particular growth rate in the journey.

Jackson Bogli: Got it. That's super helpful. And then maybe, Ara, we're talking about the agentic operating system for the trades. And you guys have been improving organizational velocity as well. I know we've talked about what agentic capabilities are live and resonating most with customers today. But really, I'm curious how you're thinking about the improved internal velocity translating into the faster product delivery and ROI? And kind of how this just reinforces your core multiyear growth vectors?

Vahe Kuzoyan: Yes. Ultimately, we are a tech company, and our business is predicated on delivering solutions for our customers. And there is no greater driver of that, both in terms of value to customers and revenue to us than the quality of the product and the velocity with which it progresses. And so any time we get even a little bit of an acceleration on the R&D side, there are massive long-term consequences here.

And what we're seeing now with the more and more effective utilization of AI is that the signals across the board, whether it's the overarching amount of code and the quality with which it's produced, or the entire life cycle of understanding what to build, how to build it and so on. What we're trying to focus on most is making sure that we're holding a high-quality bar as we see this acceleration materialize. And that we're able to do it in a way that allows sustainable velocity improvements over time.

And if we're able to maintain this pace, I think, our ability to deliver outcomes for our existing markets becomes accelerated, our ability to grow into adjacent markets will become accelerated. And ultimately, the value we drive and the revenue we generate is going to be accelerated. So as far as I'm concerned, there is nothing more important than the long-term success of our company than our ability to get the benefits of AI, particularly within our R&D org.

Ara Mahdessian: We are excited about what the software factory will do for our future. From scouring all the tens of thousands of live conversations we have with customers to the support tickets to the underlying product utilization data to help figure out and prioritize what to build. And then, of course, for agentic coding to build what we need to build, test it, deploy it, monitor it in production and self-evolve over time. This is the frontier that we are very excited about and what it'll mean for our future.

Operator: Our next question comes from the line of Billy Fitzsimmons of Piper Sandler.

William Fitzsimmons: Great. You touched on this in your prepared remarks, but it's been a couple of months now since you've had your new Chief Technology and Product Officer. He has a track record at some of the largest software companies. Anything you can provide on either how we should think about some of the processes and procedures he has brought or is able to bring to the engineering organization? Or maybe more broadly, you touched on the use of AI tools internally? And went through some of the use cases. And I got to imagine it's evolving day-to-day.

But to kind of double-click on that, are there any additional anecdotes you can talk about it to kind of help us think through things you could not do or can now do faster than you could previously with some of these tools.

Vahe Kuzoyan: Yes, absolutely. So I would say, by far, the most important aspect of being able to do what we're talking about is to build a strong team. But there will be no bigger driver of any of those things. And this is the first area that Abhi has been focusing on in terms of increasing the talent density within the team and making sure that we've got the right leaders in the right seats in order to take us to where we need to go. Secondly, in order to get the benefits of AI, particularly around the acceleration, what you need is a foundation that allows you to have resiliency and quality as you gain those benefits.

And so his experience at companies at scale that have proven to scale their R&D work and be able to grow their footprint. In terms of the products they create, the value that they deliver, it's what is allowing us to see the benefits in terms of having those foundational quality harnesses, processes and ultimately, the teams that are building the foundation on top of which what the software factory is ultimately going to be able to do. All that being said, we are early days. And so we are very excited to see these early signals start to accelerate ultimately the velocity and quality with which we can serve our customers.

William Fitzsimmons: Awesome. And then if I could sneak a second one for Dave. When we think about the revenue upside in 1Q and the increase for the year, there's a few different growth drivers here. Max is ramping, voice agents, roofing and commercial are all ramping. And more broadly, it seems like end customer demand is strong. The GTV line accelerated. Can you just help us rank order or think through the different drivers driving the upside versus kind of initial expectations?

Dave Sherry: Yes. I mean I think a couple of things here. First, Max and VA are both really exciting for us long term. And although our expectations are higher today as compared to 90 days ago, these deals generally have meaningful ramps built in to enable customers to align their usage with their bill. So though the contribution is higher today in Max than it was a quarter ago, it does remain small. With regard to GTV, our approach, as always, is to not roll forward GTV overperformance in the future periods. And so despite the strength in Q1, we're expecting a normal summer consistent with the last few years.

So the raise for the rest of the year is simply just execution of the business. And it's these factors that's the foundation for the improved FY '27 outlook. And I think we're fortunate to be able today to raise our total guidance by $20 million.

Operator: Our next question comes from the line of Nick Altmann of BTIG.

Nicholas Altmann: Awesome. I wanted to circle back on a prior comment around how some of the net new customers are actually starting on Max and can you just expand on that a bit because it's kind of interesting in the sense of whether Max is actually acting as sort of a front door to ServiceTitan or whether you're seeing more net new logo opportunities because of Max. So just any additional color on that comment would be interesting.

Ara Mahdessian: Great question. First and foremost, this is very new and very small. But the thesis is when switching software is a moment of great change management it may make sense that this be the time to switch software and deploy agents at the same time. The other part of the thesis is that in the traditional world where you had software that you manually use, it required a lot of training and coaching and monitoring in order to get utilization. Whereas in the agentic world, when you deploy agents upfront, you naturally get effectively 100% utilization with less -- much less effort on training, monitoring, support and coaching.

And so we are excited to do this on a small scale and see the results for these contractors that adopt Max from the beginning. And then depending on the results that we see, to determine how to scale moving forward.

Operator: Our next question comes from the line of Parker Lane of Stifel.

John McShane: This is Jack McShane on for Parker. I'd be curious with customers in the Max program seeing such strong productivity gains, you mentioned E.D.S., I believe it was 50% average revenue per technician improvement. Are you seeing customers in the Max program start to talk about making plans of hiring more? And do you think that this can be a growth driver towards the back half of the year and into fiscal year '28?

Ara Mahdessian: In the E.D.S.' case, they not only saw an increase in revenue per technician, but they also added technicians. Generally, when customers increase the number of leads that they generate or their booking rates increase or both. They end up with more appointments that they need to run and one way of meeting the increased demand for appointments is greater technician efficiency that allows an individual tech to get to more appointments, although there's a pretty strict limit on how much efficiency you can gain there. And so therefore, in almost every case, it ends up in the hiring of additional techs.

John McShane: Yes, it's great to hear. And then second question, obviously, headless is a focal point with investors in the space now. I'd be curious to just get your guys' thoughts on its applications to ServiceTitan. Are you seeing technicians on-site or maybe it's back office employees using general purpose models outside of the ServiceTitan platform. And is there an opportunity to build out headless functionalities so you start to capture some of that usage?

Vahe Kuzoyan: Yes. So what we're seeing is a pretty broad, let's say, desire to start using all of the AI tools available on the market. And especially with our larger customers, huge amounts of experimentation, whether it's Claude Cowork or tools like that, that are similar. What we're noticing is that part of the main challenge they experience is, in order to do anything useful, they ultimately need to be able to access data in order to get information. And then once something useful is discovered through an insight, they need to take some sort of action into the real world. And this is the role that we think that we can play and we want.

This is why it's so important to become that orchestration layer, that end-to-end intelligence both in terms of reads and writes. And so we're still early on in thinking about how we plug into the broader ecosystem of AI tools. Right now, there's so much low-hanging fruit in terms of delivering direct functionality to our customers that, that's what's taking up the majority of our time. But I can very easily see a future where both individually and as businesses, there's all sorts of AI tooling and we want to be able to provide a platform through which customers can get the most out of AI.

Ideally, it's solutions that we offer directly, but we also want to become a platform and an orchestration layer that can be leveraged through external tools as well. And this is why we think the ecosystem and having a strong and thriving ecosystem is such a strategic area for us to invest in.

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

Andrew Sherman: Ara, on VA wanted to drill in a little bit more on what you're seeing from early customers and trials. What percentage of your customer base has reached out and expressed a lot of interest. What's the sales motion to target these? And how quickly are the rollouts going wall-to-wall or kind of slower and then ramping and the competitive landscape, any differentiating factors you want to call out?

Ara Mahdessian: Very good question. So we gave select customers access to the early version of our voice agents in Q4. And then as I described earlier, for one of the questions. We then built out support for like dozens of additional of these real-life production use cases through Q1. And then we began more expanded go-to-market late Q1. Of course, like given the recency of the more expanded go-to-market, you can imagine the penetration is naturally low today, but ramping quite well.

And then to the latter half of your question, I think nearly all of our customers face situations where there's a sudden surge of calls and that surge overwhelms their staff or calls come in after hours and somebody needs to pick those up and especially when each one of these calls might represent thousands of dollars of revenue. Our thesis is that a lot of customers will move in this direction over time. Now naturally, some will start with overflow on after hours, but then others may choose to let voice agents handle incremental volume as they see CSR attrition in their business especially because CSR attrition tends to be fairly high in contracting businesses.

But we see this as a very meaningful opportunity for growth.

Operator: Our next question comes from the line of Richard Poland of Wells Fargo.

Richard Poland: On for Michael Turrin here. I guess when we just think about like the broader let's call it, Pro products suite. How is adoption going there? I know a lot of the focus right now is on Max, and it sounds like that's kind of ramping nicely. But just in this interim period, while that's not fully available to everyone else, how do we think about just kind of where you're seeing strength in certain Pro products and how that's kind of developed over the last 90 days?

Dave Sherry: What I'll say here is Pro continues to sell well. We have not seen a headwind from Pro adoption while we're selling Max. I think that over time, our packaging will encourage customers to adopt Max more. And remember, it's really, really important that everyone understands it. Max is more than just a collection of Pro products. It's not just a bundle. It's incremental capabilities. And so while Pro continues to sell, we think customers are going to increasingly have interest in Max or versions of Max.

Richard Poland: Great. And then I guess, Dave, just on GTV. When we think about just kind of average ticket size and any differences in just number of jobs in the quarter, some of the core on GTV. Any color there?

Dave Sherry: Yes. I mean nothing really stood out this quarter. It was -- we see pretty balanced growth from average ticket and number of jobs. The bigger variants, obviously, the big driver was weather and of course, business days in the period.

Operator: Our next question comes from the line Brian Peterson of Raymond James.

Brian Peterson: Just on Max, like obviously doubling this quarter and expecting doubling or more than doubling and expected to double next quarter, I'm actually just curious, what is the gating factor on growth at this point? And is there anything that customers are pushing back on? And why should we not see that adoption accelerate from what you're seeing so far?

Vahe Kuzoyan: So the primary gating factor is us wanting to go through a very intentional sequential process of first and foremost, nailing the ROI story. We feel very confident that we've done this already. So that has been the first constraint. Now we're in the phase of making sure that we can continue to deliver those same types of results, but with a more scalable and efficient implementation effectively. And so that's where the focus is right now, and that's the gating factor. And then the last phase is really making sure that Max is a fantastic fit across all of our customers, not just the ones that are best fit today.

And so going back to your question, it's really around optimizing for the long-term durable success of Max versus selling the most we possibly can today. We have way more demand than what we've been onboarding, and we expect to continue to be in that same state. But we want to be very, very intentional with the success that we deliver, the brand and reputation of Max and the durability of the customers on the program.

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

Tyler Radke: There's been a lot of headlines out in terms of the big data center build-out projects, of shortage of workers, electricians, plumbers, HVAC, et cetera. How are you thinking about the medium and long-term impact to ServiceTitan? And obviously, these are workers that are critical to the platform today?

Vahe Kuzoyan: Yes. This is where we see mostly affecting the commercial part of our business. As you'd imagine, the residential businesses are not really involved on the data center build-outs. And on the commercial side, we are certainly hearing and seeing from our customers the huge kind of tidal wave of work coming in from data centers. I think it's really hard to predict exactly what the impact is going to be because as you know, these data centers are built typically way off site.

And so what I'm hearing from our customers is it's not so straightforward to get -- first of all, just the number of plumbers and electricians needed, much less to get them to move to those areas for the construction period and so on. And so for the foreseeable future, we are not anticipating any meaningful impact to our business or to our customers' businesses in terms of the labor disruptions from the build-out, but it's a fast-moving situation, and we continue to monitor it closely.

Tyler Radke: And just a quick follow-up on the weather dynamics that you called out. Given what sounded like kind of a benefit both from the early start to the cooling season, is there any sort of timing issues we should be aware of in terms of that follow-on impact in Q2? Any pull forward from that should take some momentum out of Q2 or would you not associate that directly with Q2?

Ara Mahdessian: Great question, Tyler. The warmer spring means our customers' busy season started earlier, how the peak performance will really be driven by the peak summer months. If it's a hot summer, I could see GTV being higher. If it's a milder summer, it's possible that it will appear to be a pull forward from Q2 to Q1. It's hard to know until we really see the quarter evolve. As always, we're not taking a differentiated view on the weather and just as I said before, assuming a consistent summer with the prior years.

Operator: Our next question comes from the line of Adam Hotchkiss of Goldman Sachs.

Adam Hotchkiss: Dave, I know historically, you've talked a little bit about this dynamic of repair versus replace impacting ticket sizes for your customers. Would just be curious what you're observing on that front and what it tells you about consumers in the space?

Dave Sherry: Thanks for the question, Adam. I don't think we saw anything stand out in the quarter. Ticket sizes were up a little bit, but not -- there was no fundamental shift from repair to replace.

Adam Hotchkiss: Okay. Super clear. And then on the competitive environment, I appreciate the commentary around the architectural vision when it comes to third-party AI tools. But any changes you're just -- you're seeing more broadly given what AI is doing to product development velocity in the broader competitive environment in your space?

Vahe Kuzoyan: Not necessarily in our space. I think as just a technologist, it's a crazy time to be in the game. We're just seeing incredible things being possible, both internally as well as what other companies are doing. But there's nothing particularly special in our corner of the universe. We're kind of seeing the magic of AI continue to play out, and we continue to be super excited about what it means for us.

Operator: Our next question comes from the line of Daniel Jester of BMO Capital Markets.

Will Hancock: This is Will Hancock on for Dan Jester. And congrats on the quarter. So you're putting a lot of resources into expanding the Max program. Can you talk about how you weigh that opportunity versus investing in entering and scaling new trades? And has that prioritization shifted given the success that you've seen so far in Max?

Vahe Kuzoyan: So I would say there's definitely been an increase in the weight in terms of Max and resources we've been putting into it over the last few quarters. The early signals have been promising enough for us to be increasing that level of investment. We're trying very hard not to have a huge pullback in other areas. And so we're being thoughtful about how we're shifting resources in that direction. But generally speaking, I would describe it as increased priority and importance for Max. And that we're trying to be balanced in terms of where we take those resources from in order to increase that investment.

Dave Sherry: Fundamentally, we run the business like a marathon, not a sprint. We do continue to believe that we will be the operating system for all the trades. Right now, there is a near-term very exciting opportunity around building out and delivering Max. But over the long term, we continue to believe we will extend beyond the trades. I think today, the focus has, as you said, shifted more towards Max.

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

Connor Passarella: This is Connor Passarella on for Terry. Just first on the broader landscape or the broader AI adoption. How does the level of customer interest and urgency around AI digital transformation and commercial compare to residential today? Maybe what's driving that difference as well?

Vahe Kuzoyan: Yes, I would say that there's a general similar level of excitement. And I would say both for us and the market in general, there is more maturity on the residential side. And I think a lot of it comes from the fact that residential transactions tend to be simpler. If you have even a booking situation, the systems involved and the dynamics involved are generally less complex to deal with than in a commercial use case. As we think about the longer arc, we see a very similar opportunity in both, but we anticipate that both the market in general and our level of product maturity for residential to lead commercial.

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

Yun Suk Kim: Following up on a couple of questions on competitive landscape and also the last question. If you can give us just an update on the overall competitive landscape, especially at the low end of the market, just picking up a lot more players in that end of the market, maybe if they're using Vibe coding and such, I don't know. But given that you are seeing faster growth from the enterprise to the larger end of the market, the higher end of the market and more of your go-to-market focus?

Ara Mahdessian: Great question. We don't really sell to the lower end of the market. So we haven't seen any dynamics that necessarily materialize in the way that you're describing.

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

Ara Mahdessian: I just want to thank everyone for the call today. In particular, a special thank you to our customers who work tirelessly to serve their communities, particularly with the upcoming busy season coming up. A special thank you to our Titans all around the world, who work tirelessly for our customers and especially to our investors who support our mission. We hope to be good stewards of your capital and aspire to build a generational company. Thank you all and look forward to seeing you all soon.

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

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