ServiceTitan : Annual Report for Fiscal Year Ending 01-31, 2026 (Form 10-K)

About this update from Servicetitan, Inc.

Management's Discu ssion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties and our actual results, events or circumstances could differ materially from those described in forward-looking statements. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled "Risk Factors" and other parts of this Annual Report. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. The last day of our fiscal year is January 31, and our fiscal quarters end on April 30, July 31, October 31 and January 31. Our fiscal years ended January 31, 2024, 2025 and 2026 are referred to herein as fiscal 2024, fiscal 2025 and fiscal 2026, respectively. Unless the context otherwise requires, all references in this Annual Report to "we," "us," "our," "our company," and "ServiceTitan" refer to ServiceTitan, Inc. and its consolidated subsidiaries, and references to our "common stock" include our Class A common stock, Class B common stock and Class C common stock. Overview ServiceTitan is the operating system that powers the trades. We are modernizing a large and technologically underserved industry-an industry commonly referred to as the "trades." The trades consist of the collection of field service activities required to install, maintain, and service the infrastructure and systems of residences and commercial buildings. ServiceTitan was born in the trades and built for the trades. Our founders, Ara Mahdessian and Vahe Kuzoyan (our "Co-Founders"), are the sons of trades business owners and founded ServiceTitan to provide tradespeople, like their parents, with technology that is purpose built to help trades businesses thrive. Our software provides an end-to-end, cloud-based software platform that connects, manages and automates a wide array of business workflows such as advertising, job scheduling and management, dispatching, generating estimates and invoices, payment processing and more. Tradespeople spend their days interfacing with the ServiceTitan platform across what we believe to be the five most business-critical functions, or the "core centers of gravity," inside a trades business: CRM (customer relationship management, including sales enablement, marketing automation and customer service), FSM (field service management, including scheduling and dispatching), ERP (enterprise resource planning, including inventory), HCM (human capital management, including compensation and payroll integration) and FinTech (including payments and third-party consumer financing). By offering interoperable capabilities in all five centers of gravity, we continuously capture comprehensive data insights across key workflows in a trades business. Our close customer proximity and deep connection with the industry enable us to make evidence-based recommendations that can improve our customers' business outcomes by identifying and replicating what works and fixing what does not. Our insights are augmented by the vast amounts of structured and unstructured data that we synthesize into best practices. These insights are then delivered across automated workflows, many of which we enhance with artificial intelligence ("AI"), to address the distinct vertical-specific needs of the trades. Our platform is differentiated by our close customer proximity and deep connection with the trades industry, which enables us to make real-time, evidence-based recommendations to our customers, augmented by the vast amounts of data that we synthesize into best practices. Our platform enables impactful outcomes for our customers, including accelerating revenue and driving operational efficiency, all while improving the experience for both end customers and contractors. As customers experience the significant business acceleration benefits of our platform, we have often observed our customers hire more technicians, increase gross transaction volume ( " GTV " ) , representing total dollars invoiced by our customers through our platform, and adopt more add-on products. Increased customer adoption of our platform leads to further data and insights, allowing us to build more differentiated features and address opportunities in new trades, use cases and customer subsegments. All of this allows us to drive more growth and efficiency for customers, delivering considerable return on investment ("ROI"), in our products. In fiscal 2026 and fiscal 2025, we processed $82.1 billion and $68.5 billion of GTV, respectively. Seasonality and Other Fluctuations Generally, demand for our customers' services tends to increase during the second quarter of our fiscal year, as hot weather in the summer months typically results in higher demand for trades businesses. Given that our revenue model allows our customers to scale as needed (processing more GTV through our platform and adding technicians), our sequential revenue growth has historically been strongest in the second quarter of each fiscal year. This is especially true for our usage-based revenue, which is directly tied to the amount of GTV processed through our platform. As our usage-based revenue consists primarily of payment processing, which we recognize net of interchange and other direct expenses which are passed to the customer, this seasonality also positively impacts our platform gross margin and operating margin for the second quarter of each fiscal year. Our historical growth-including through the acquisition of new customers and the launch of new products, particularly subscription-based products that are less seasonally impacted than our usage-based products-may have made it more difficult to evaluate the impact of seasonality on our business by masking the full impact of the heightened quarter-over-quarter growth we have generally experienced in the second quarter of each fiscal year. Going forward, we believe seasonality may continue to impact our quarterly results, potentially becoming more pronounced, or evolving to reveal novel seasonal trends. Certain recurring operational events that occur through our fiscal year have also historically impacted our financial performance. Specifically, we typically experience higher operating cash outflows during our first fiscal quarter due to payment of annual corporate bonuses. Additionally, our third fiscal quarter performance typically reflects increased sales and marketing expense related to our annual user conferences, Ignite and Pantheon. Key Factors Affecting Our Business Performance We believe that the growth and future success of our business is dependent upon many factors, including those described below. Increase GTV on Our Platform Grow with Our Customers. Our long-term revenue growth is correlated with the success of customers on our platform, and we strive to support the growth of their businesses. We can improve outcomes for our customers across every stage of the go-to-market funnel, from determining which end customers to target, marketing to those end customers effectively and converting and retaining end customers. We empower technicians with the tools and training necessary to drive better end-customer outcomes that, in turn, can generate higher ticket sizes and more repeatable work orders. As our customers grow on our platform and expand into additional locations, generating more sales, hiring more technicians and automating more workflows, they can also significantly increase GTV, and, in turn, drive our growth and financial success. Increase GTV By Serving Additional Customers in Existing Trades and Markets. Increasing our GTV also depends on our ability to serve additional customers in existing trades and markets. As our platform has deepened and expanded in features, we have been able to serve larger customers. The trades industry is also experiencing an influx of professional operators, including private equity owners, who are investing in and consolidating trades businesses, in many cases on our platform. Because of these dynamics, we focus on increasing the GTV on our platform, rather than new customer count. We believe our market opportunity is substantial, and we expect to continue to make significant investments across all aspects of our business to continue to increase the GTV on our platform. We designed our platform to address key workflows within a trades business. In contrast, existing solutions are difficult to adopt and resource-intensive to stitch together in a manner that would address multiple workflows and generate return on investment for trades businesses. This gives us a substantial opportunity to continue to invest in our platform and in our sales and marketing efforts to add more customers in, or help existing customers expand into, the expansive set of trade verticals we have penetrated so far. We also believe that there is further potential to expand our customer base by productizing additional capabilities for these trade verticals, particularly AI-powered capabilities. Increase GTV By Entering New Trades and Markets. ServiceTitan began by serving a single trade-plumbing-and focusing on residential homes, and we now serve many trades that serve all sites: homes, businesses and even new construction. As we have penetrated new trades over time, we have significantly expanded our potential customer reach, unlocking new markets to drive future customer growth. We plan to continue to innovate and expand into new trade verticals through our playbook of harnessing common features of the trades industry, while also identifying and building features specific to each new trade vertical. It takes significant time and research and development to identify new trade verticals to enter and build out functionalities on top of our common products, as well as investment in sales and marketing resources, to ensure we can successfully go to market with an end-to-end offering in such new verticals. Retain and Expand Our Existing Customer Relationships Our ability to retain and increase the revenue we earn from existing customers is a key driver of our future business performance and depends on our customers renewing their subscriptions to our platform, expanding their number of users, increasing their usage of existing solutions and adopting additional products, driven by the three key strategies described below. We have observed that as customers experience the significant business acceleration benefits of our platform, they typically not only remain on our platform but also often hire more technicians and adopt more of our products. Retain Our Customers. Our customer relationship begins with a thorough onboarding process. Then, our customers deploy our platform end-to-end across their entire organization, meaning the ServiceTitan platform powers their workflows and is the primary interface used by their employees. As a result, we become deeply embedded as the operating system that powers our customers' businesses. Over time, our Customer Success Management teams work closely with our customers to assist them in fully utilizing our platform. Drive More Value to Our Customers through Add-on Product Adoption . As we demonstrate the high ROI of our products to our customers, we are able to sell more add-on products to them and increase our share of wallet, which we measure as the portion of our customers' GTV that we are able to earn. We efficiently expand our customer relationships over time to serve their additional needs and automate more workflows through our platform. We believe that the more our customers use our platform to power their workflows, the more value we deliver to them, and the higher revenue we can earn from them. As a result, we continue to invest in research and development to improve the functionality of our existing Core and add-on products. Our ability to increase adoption of our add-on products will depend on customer satisfaction with our platform, competition, pricing and our ability to continuously demonstrate the value proposition of our add-on products. We plan to continue investing in sales and marketing, thought leadership, industry resources and evolving our customer success teams to focus on driving additional expanded value to customers on our platform. Build and Bundle New Products to Extend Our Platform. We have a culture of significant innovation evidenced by the extension of our platform's capabilities over time, producing new workflows across trades. We intend to continue to judiciously invest in research and development to expand the functionality of our platform, to develop and bundle new add-on products and to broaden our capabilities to address new market opportunities across trades. Powering key workflows of our customers through our Core product positions us to deliver value-added Pro, FinTech and other AI-powered products that complement our Core product. We build Pro and FinTech products as an integrated add-on to our expansive Core product offering to deliver our customers business outcomes in a way that we believe no individual, standalone point solution can. As we continue to innovate and execute on our product roadmap, we believe customers will continue to find our new products additive and therefore continue to adopt them. We believe that there is further potential to expand our market opportunity by building new products, particularly those powered by AI, to earn an even greater potential share of our customers' GTV in the future. While our engrained industry position and exposure to the trades facilitate efficient product development opportunities, innovating new products will continue to require substantial time and research and development resources. Components of Results of Operations Revenue We have two general categories of revenue as set forth below: Platform Revenue We principally generate platform revenue through (i) subscription revenue generated from access to and use of our platform, including subscriptions to our Core and certain Pro products, and (ii) usage-based revenue generated from the transactions using our FinTech solutions and usage of certain Pro products and other usage-based services. Our customer contracts are generally based on the number of users, mix of products, number of end customers and the amount of GTV. We offer tiered subscription plans for our Core and Pro products with varying contract lengths. Pursuant to these subscription contracts our customers do not have the ability to take possession of our proprietary software. For new customers, we primarily enter into either annual or multi-year subscription agreements with contract terms typically ranging from 12 to 36 months; however, certain Pro product and legacy customers are on month-to-month contracts. In nearly all cases, these contracts (monthly, annual, or multi-year) are renewed automatically unless cancelled in advance. We generally bill our customers on a monthly basis in advance of services, regardless of contract term. In some cases for certain products, the customer is billed in arrears. Pricing for these subscriptions are driven by the features included in the package and are linked to the size of the customer's business, generally based on the number of field technicians at the customer but in some cases directly tied to the number of end customers or the customer's revenue. In this way, our success is linked to the growth of our customers, which we measure through our net dollar retention rate. Our net dollar retention rate 2 was over 110% for each of the fiscal years ended January 31, 2026, 2025 and 2024. When subscription fees are received in advance of providing the related services, we record deferred revenue on our consolidated balance sheet and recognize the revenue ratably over the related subscription period. We recognize a contract asset when revenue has been recognized but our right to consideration from the customer is conditional upon our future performance. Contract assets are transferred to accounts receivable when our right to the consideration becomes unconditional. 2 Our net dollar retention rate measures the increase in annualized billings across our existing customer base by comparing the annualized billings from the same set of customers across comparable periods. To calculate our net dollar retention rate as of a given quarter, we first calculate annualized billings from the cohort of all customers billed in the same quarter in the prior year (the "prior period annualized billings"). We then calculate annualized billings from these same customers as of the current quarter (the "current period annualized billings"). Current period annualized billings includes the effect of any expansion, contraction or churn over the trailing 12 months. We divide (a) current period annualized billings by (b) prior period annualized billings to arrive at the net dollar retention rate. When calculating net dollar retention rate, we do not include the billings from any customers that were acquired as the result of our acquisition of a business until the completion of the first full quarter following the one-year anniversary of the acquisition. We define annualized billings for a given quarter as the annualized value of the quarterly amount invoiced for our Core and Pro products, net of reserves, and the quarterly revenue recognized for our FinTech products. Contracts for our platform solutions range from monthly to multi-year. While monthly subscribers as a group have historically maintained or increased their subscriptions over time, there is no guarantee that any particular customer on a monthly subscription will renew its subscription in any given month, and therefore the calculation of annualized billings for these monthly subscriptions may not accurately reflect revenue to be received over a 12-month period from such customers. There may be seasonal fluctuations in annualized billings as a result of heightened demand for our customers during peak times. Annualized billings should be viewed independently of, and not as a replacement for, revenue and does not represent our revenue on an annualized basis. Usage-based services primarily consist of payment processing where we connect to third-party processors to allow our customers to accept payments, primarily credit and debit cards, and also includes end-customer financing solutions and other forms of payment. The third-party processor determines the eligibility of the end customer to participate in the programs, provides the payment settlement and financing options to the end customer and is responsible for the provision of the payment or financing services. We receive a fee from the third-party processors, depending on the size and type of the transaction, which we recognize net of interchange and other direct expenses which are passed onto the customer. Revenue from financing and processing payments is recognized at the time of the transaction. In addition to payment processing revenue, we have a number of Pro products that generate revenue depending on the level of usage, which we recognize monthly in arrears based on consumption. Usage revenue also includes fees we earn from third-party partners based on transactions or customer activity facilitated through our platform, which we recognize in the period in which the underlying activity occurs. In addition, usage-based revenue also include revenue from our Virtual Agents, which is consumption-based and recognized in the period in which the underlying usage occurs. Professional Services and Other Revenue Professional services and other revenue is primarily derived from services we provide to our customers, principally onboarding, training, and some ongoing professional services. Professional services and other revenue also includes revenue generated from our live voice and chat services and certain other ancillary hardware products and services sold to customers. Fees for these professional services are generally invoiced separately at the commencement of the contract or as ordered by the customer. Revenue is recognized for professional services as the services are performed or products are delivered. Cost of Revenue Platform Cost of platform revenue consists of personnel-related costs and costs related to the provisioning of our platform services. Personnel-related costs primarily include salary, employee benefits, bonuses and stock-based compensation related to our customer support team and certain customer success personnel. Costs related to the provisioning of our platform services are primarily comprised of fees paid to third-party service providers associated with delivery of Pro and FinTech products, platform infrastructure and server costs, call tracking fees, and payment processing fees. In addition, cost of platform revenue includes amortization of certain acquired intangible assets, amortization of capitalized internal-use software costs directly related to our cloud-based software solution and allocated overhead, which we define as costs such as depreciation, rent, utilities, and other facilities-related costs that are allocated across our expense categories based on headcount. We expect our cost of platform revenue to increase in absolute dollars as the adoption and usage of our platform and product offerings increase. Professional Services and Other Professional services and other cost of revenue consists primarily of personnel-related costs in connection with providing customer onboarding and customer implementation, live voice and chat services. Personnel-related costs primarily include salary, employee benefits, bonuses and stock-based compensation. Professional services and other cost of revenue also includes amortization of certain acquired intangible assets, allocated overhead, and the cost of other ancillary hardware products and services sold to customers. Professional services and other cost of revenue historically has exceeded professional services and other revenue as we invest in providing customers with implementation and onboarding services to enhance customer success. We expect our cost of professional services and other revenue to increase in absolute dollars as the adoption of our product offerings for both new and existing customers increases. Operating Expenses Operating expenses consist of sales and marketing, research and development and general and administrative expenses. We incurred $59.1 million of the stock-based compensation expense associated with certain performance-based options and RSUs, which is included in operating expenses in the fourth quarter of fiscal 2025, resulting from the completion of our IPO on December 13, 2024. In addition, we will incur additional stock-based compensation expense going forward relating to these award, including the performance-based RSU's granted to our Co-Founders . Sales and Marketing Expense Sales and marketing expense consists primarily of personnel-related costs, consulting costs and other costs incurred in connection with our sales and marketing and certain customer success efforts. Personnel-related costs primarily include salary, commissions, employee benefits, bonuses and stock-based compensation for our outbound sales personnel that focus on new customer acquisition and for our customer success personnel that focus on expanding adoption of our products at existing customers. Sales and marketing expense also includes marketing and advertising expenses, such as our annual customer conferences, Pantheon and Ignite, and travel and trade show expenses, amortization of acquired customer intangible assets and allocated overhead. Our annual customer conferences are significant sales and marketing events, so we therefore expect an increase in sales and marketing expense during the fiscal third quarter when they occur. We expect that sales and marketing expense will increase on an absolute dollar basis as we invest to grow our business. We plan to continue to expand sales and marketing efforts to attract new customers, retain existing customers and increase revenue from both new and existing customers by adding sales personnel. Research and Development Expense Research and development expense consists primarily of personnel-related and other costs incurred in connection with product management and development efforts. Personnel-related costs primarily include salary, employee benefits, bonuses and stock-based compensation. Research and development expense also includes fees to third-party product development resources, infrastructure and server costs, and allocated overhead costs. We expect that research and development expense will increase on an absolute dollar basis as we invest to build, enhance, maintain and scale our products. General and Administrative Expense General and administrative expense consists primarily of personnel-related costs for our executive, finance, legal, information systems, operations and human resource teams. Personnel-related costs primarily include salary, employee benefits, bonuses and stock-based compensation. General and administrative expense also includes professional fees, other outside consulting expenses, acquisition-related expenses and allocated overhead. We expect that general and administrative expense will increase on an absolute dollar basis, but over time decrease as a percentage of total revenue, as we focus on the efficiency of our processes and systems that will enable our internal support functions to scale with the growth of our business. We expect increases to general and administrative expense to support our growth and as we continue to incur the costs of compliance associated with being a public company, including increased accounting and legal expenses. Other Income (Expense), Net Other income (expense), net, consists primarily of interest expense related to our debt arrangements with financial institutions, interest income earned on our cash and cash equivalents, gains or losses on foreign currency transactions and miscellaneous other income. Provision For Income Taxes Our income tax provision consists of U.S. federal, state, and foreign income taxes. We maintain a full valuation allowance for our U.S. federal and state deferred tax assets, including net operating loss carryforwards, that are unable to be offset by our U.S. federal and state deferred tax liabilities, as we have concluded that it is not more likely than not that the U.S. deferred tax assets will be realized. Results of Operations For a discussion of our consolidated statement of operations data for fiscal 2025 compared to fiscal 2024, refer to the section titled " Management's Discussion and Analysis of Financial Condition and Results of Operations " in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025 filed with the SEC on April 2, 2025, which is incorporated by reference herein. The following table sets forth our consolidated statements of operations data for the periods indicated: Fiscal 2026 2025 2024 (in thousands) Revenue: Platform $ 925,418 $ 739,486 $ 581,751 Professional services and other 35,547 32,392 32,590 Total revenue 960,965 771,878 614,341 Cost of revenue: Platform 213,544 202,982 169,766 Professional services and other 73,682 67,969 67,945 Total cost of revenue 287,226 270,951 237,711 Gross profit 673,739 500,927 376,630 Operating expenses: Sales and marketing 290,885 253,349 219,994 Research and development 302,589 263,054 203,534 General and administrative 249,470 214,476 135,966 Total operating expenses 842,944 730,879 559,494 Loss from operations (169,205 ) (229,952 ) (182,864 ) Other expense, net Interest expense (7,227 ) (15,517 ) (16,436 ) Interest income 19,279 8,765 7,067 Loss on extinguishment of debt (1,488 ) - - Other income (expense), net 1,528 (72 ) 1,224 Total other income (expense), net 12,092 (6,824 ) (8,145 ) Loss before income taxes (157,113 ) (236,776 ) (191,009 ) Provision for income taxes 2,740 2,318 4,136 Net loss $ (159,853 ) $ (239,094 ) $ (195,145 ) Comparison of Fiscal 2026 and Fiscal 2025 Revenue Fiscal Change 2026 2025 $ Percent (dollars in thousands) Revenue Platform $ 925,418 $ 739,486 $ 185,932 25 % Professional services and other 35,547 32,392 3,155 10 % Total revenue $ 960,965 $ 771,878 $ 189,087 24 % Platform revenue increased by $185.9 million, or 25%, for fiscal 2026, compared to fiscal 2025. This increase was primarily driven by subscription revenue, which increased by $146.6 million, or 26%, for fiscal 2026, compared to fiscal 2025. In addition, revenue from our usage-based products increased by $39.3 million, or 23%, for fiscal 2026, compared to fiscal 2025. This increase was primarily driven by increases in gross transaction volume and a higher earn rate generated on that volume. Professional services and other revenue increased by $3.2 million, or 10%, for fiscal 2026, compared to fiscal 2025. This increase was primarily driven by a higher volume of services performed. Cost of Revenue Fiscal Change 2026 2025 $ Percent (dollars in thousands) Cost of revenue Platform $ 213,544 $ 202,982 $ 10,562 5 % Professional services and other 73,682 67,969 5,713 8 % Total cost of revenue $ 287,226 $ 270,951 $ 16,275 6 % Gross profit $ 673,739 $ 500,927 Platform gross margin 77 % 73 % Professional services and other gross margin (107 )% (110 )% Total gross margin 70 % 65 % Platform cost of revenue increased by $10.6 million, or 5%, for fiscal 2026, compared to fiscal 2025. This increase was primarily due to a $16.4 million increase in the costs related to the provisioning of our platform services products. This increase was partially offset by a $6.0 million decrease in personnel-related costs, primarily due to the shift in roles of our customer success function to sales and marketing activities at the beginning of fiscal 2026. Professional services and other cost of revenue increased $5.7 million, or 8%, for fiscal 2026, compared to fiscal 2025. Personnel-related costs increased by $7.7 million primarily due to an increase in headcount. This increase was partially offset by a decrease of $2.3 million in third-party service fees. Operating Expenses Sales and Marketing Expense Fiscal Change 2026 2025 $ Percent (dollars in thousands) Sales and marketing expense $ 290,885 $ 253,349 $ 37,536 15 % Sales and marketing expense as a percentage of revenue 30 % 33 % Sales and marketing expense increased by $37.5 million, or 15%, for fiscal 2026, compared to fiscal 2025. The increase in sales and marketing expense was primarily driven by an increase of $28.9 million in personnel-related costs, which included increased headcount, an increase of $5.3 million in sales commissions, and an increase of $1.1 million in stock-based compensation. There was an additional increase of $6.5 million in marketing and advertising costs and an increase of $5.5 million in employee benefit expenses primarily related to health insurance. These increases were partially offset by a decrease of $4.6 million in impairment losses on operating lease assets and related property and equipment for office spaces that we ceased to use. Research and Development Expense Fiscal Change 2026 2025 $ Percent (dollars in thousands) Research and development expense $ 302,589 $ 263,054 $ 39,535 15 % Research and development expense as a percentage of revenue 31 % 34 % Research and development expense increased by $39.5 million, or 15%, for fiscal 2026, compared to fiscal 2025. The increase in research and development expense was primarily driven by an increase of $35.7 million in personnel-related costs, which included an increase in headcount and an increase of $6.7 million in stock-based compensation. There was also an increase of $4.9 million in employee benefit expenses primarily related to health insurance and an increase of $4.4 million in infrastructure and server costs. These increases were partially offset by a decrease of $4.6 million in impairment losses on operating lease assets and related property and equipment for office spaces that we ceased to use. General and Administrative Expense Fiscal Change 2026 2025 $ Percent (dollars in thousands) General and administrative expense $ 249,470 $ 214,476 $ 34,994 16 % General and administrative expense as a percentage of revenue 26 % 28 % General and administrative expense increased by $35.0 million, or 16%, for fiscal 2026, compared to fiscal 2025. The increase in general and administrative expense was primarily driven by an increase of $31.7 million in personnel-related costs, which included an increase in headcount and an increase of $24.5 million in stock-based compensation. In fiscal 2026, stock-based compensation includes $53.6 million related to performance-based RSUs granted to our Co-Founders in October 2024. Additionally, there was an increase of $7.1 million in third-party consulting costs related to legal, consulting and audit services, an increase of $5.6 million in our allowance for credit losses as we further integrated acquired businesses, and an increase of $2.5 million in employee benefit expenses primarily related to health insurance. These increases were partially offset by a decrease of $13.2 million in impairment losses on operating lease assets and related property and equipment for office spaces that we ceased to use. Other Income (Expense), Net Fiscal Change 2026 2025 $ Percent (dollars in thousands) Other income (expense), net $ 12,092 $ (6,824 ) $ 18,916 (277 )% Other income (expense), net, increased by $18.9 million for fiscal 2026, compared to fiscal 2025, primarily due to an increase of $10.5 million in interest income related to our higher cash balance and a decrease of $8.3 million in interest expense due to the restructuring of our debt and repayment of our Revolver Facility that occurred in fiscal 2025 . Provision for Income Taxes Fiscal Change 2026 2025 $ Percent (dollars in thousands) Provision for income taxes $ 2,740 $ 2,318 $ 422 18 % Our provision for income taxes increased by $0.4 million, or 18%, for fiscal 2026, compared to fiscal 2025. The change is primarily driven by the deferred tax expense from the amortization of indefinite-lived tax amortizable goodwill. For additional detail, s ee Note 14 to our consolidated financial statements included in this Annual Report. Non-GAAP Financial Measures In addition to our results prepared in accordance with GAAP, we believe non-GAAP gross profit and non-GAAP gross margin (in total and for platform and professional services and other), non-GAAP sales and marketing expense, non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP income (loss) from operations, non-GAAP operating margin, and non-GAAP net income (loss) are useful in evaluating our operating performance. For the reasons set forth below, we believe that excluding the following items provides information that is helpful in understanding our results of operations, evaluating our future prospects, comparing our financial results across accounting periods, and comparing our financial results to our peers, many of which provide similar non-GAAP financial measures. • Stock-based compensation expense and related employer payroll taxes . We exclude stock-based compensation expense, including the performance-based RSU's granted to our Co-Founders, and related employer payroll taxes to allow investors to make more meaningful comparisons of our performance between periods and to facilitate a comparison of our performance to those of other peer companies. Stock-based compensation expense may vary between periods due to various factors unrelated to our core performance, including as a result of the assumptions used in the valuation methodologies, timing and amount of grants, the completion of our IPO, and other factors. We exclude employer payroll taxes because the amounts vary based on timing and settlement or vesting of awards unrelated to our core operating performance. Moreover, stock-based compensation expense is a non-cash expense that we exclude from our internal management reporting processes and when assessing our actual performance, budgeting, planning, and forecasting future periods. • Amortization of acquired intangible assets . We incur amortization expense for acquired intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of acquired intangible assets is a non-cash expense that is significantly affected by the timing and size of acquisitions, and the inherent subjective nature of purchase price allocations. Because these costs have already been incurred, we exclude the amortization expense from our internal management reporting processes. We exclude these charges when assessing our actual performance and when budgeting, planning, and forecasting future periods. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. • Restructuring charges . To better align our strategic priorities with our investments, we implemented workforce reductions in fiscal 2024 and fiscal 2025. In connection with these reductions, we incurred employee-related expenses including severance and other termination benefits. We excluded these charges when assessing our actual performance and when budgeting, planning and forecasting future periods. • Loss on operating lease assets . In fiscal 2024, fiscal 2025 and fiscal 2026, we incurred impairments on certain right-of-use assets and other long-lived assets. See Note 4 of our audited consolidated financial statements included in this Annual Report. We believe that it is useful to exclude these charges when assessing the level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. In addition, we believe excluding such costs enhances the comparability between periods. • Acquisition-related items . We have incurred costs related to acquisitions, including legal, third-party valuation and due diligence, insurance costs, and one-time retention bonuses for employees of acquired companies. In addition, we periodically record the change to the fair value of contingent consideration related to past acquisitions. We exclude these items when assessing our actual performance and when budgeting, planning and forecasting future periods. We believe excluding these items allows investors to make meaningful comparisons between our core results of operations and those of other peer companies. These measures, however, have certain limitations in that they reflect the exercise of judgment by our management about which expenses are excluded or included and do not include the impact of certain expenses that are reflected in our consolidated statement of operations that are necessary to run our business. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, our financial results determined in accordance with GAAP. We caution investors that amounts presented in accordance with our definition of non-GAAP gross profit, non-GAAP gross margin, non-GAAP sales and marketing expense, non-GAAP research and development expense, non-GAAP general and administrative expense, non-GAAP income (loss) from operations, non-GAAP operating margin, and non-GAAP net income (loss) may not be comparable to similar measures disclosed by other companies because not all companies and analysts calculate these non-GAAP financial measures in the same manner. Non-GAAP Gross Profit and Non-GAAP Gross Margin We define non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, excluding stock-based compensation expense and related employer payroll taxes, amortization of acquired intangible assets, restructuring charges, and loss on operating lease assets. Total non-GAAP gross margin represents total non-GAAP gross profit as a percentage of total revenue. Non-GAAP platform gross margin represents non-GAAP platform gross profit as a percentage of platform revenue and non-GAAP professional services and other gross margin represents non-GAAP professional services and other gross profit as a percentage of professional services and other revenue. The following table reflects the reconciliation of GAAP gross profit to non-GAAP gross profit and GAAP gross margin to non-GAAP gross margin for the periods presen ted: Platform Professional Services and Other Total Fiscal Fiscal Fiscal 2026 2025 2026 2025 2026 2025 (in thousands) GAAP gross profit $ 711,874 $ 536,504 $ (38,135 ) $ (35,577 ) $ 673,739 $ 500,927 Stock-based compensation expense and related employer payroll taxes 6,423 5,731 5,563 4,298 11,986 10,029 Amortization of acquired intangible assets 22,102 21,902 1,336 1,786 23,438 23,688 Restructuring charges - 386 - 129 - 515 Loss on operating lease assets 1,312 5,492 1,008 2,608 2,320 8,100 Non-GAAP gross profit $ 741,711 $ 570,015 $ (30,228 ) $ (26,756 ) $ 711,483 $ 543,259 Platform Professional Services and Other Total Fiscal Fiscal Fiscal 2026 2025 2026 2025 2026 2025 GAAP gross margin 76.9 % 72.6 % (107.3 )% (109.8 )% 70.1 % 64.9 % Stock-based compensation expense and related employer payroll taxes 0.7 % 0.8 % 15.6 % 13.3 % 1.2 % 1.3 % Amortization of acquired intangible assets 2.4 % 3.0 % 3.8 % 5.5 % 2.4 % 3.1 % Restructuring charges - % 0.1 % - % 0.4 % - % 0.1 % Loss on operating lease assets 0.1 % 0.7 % 2.8 % 8.1 % 0.2 % 1.0 % Non-GAAP gross margin * 80.1 % 77.1 % (85.0 )% (82.6 )% 74.0 % 70.4 % * Totals may not foot due to rounding. Non-GAAP Sales and Marketing Expense We define non-GAAP sales and marketing expense as GAAP sales and marketing expense excluding stock-based compensation expense and related employer payroll taxes, amortization of acquired intangible assets, restructuring charges and loss on operating lease assets. The following table reflects the reconciliation of GAAP sales and marketing expense to non-GAAP sales and marketing expense for the periods presented: Fiscal 2026 2025 (in thousands) GAAP sales and marketing expense $ 290,885 $ 253,349 Stock-based compensation expense and related employer payroll taxes (27,342 ) (24,630 ) Amortization of acquired intangible assets (21,741 ) (22,237 ) Restructuring charges - (292 ) Loss on operating lease assets (2,377 ) (7,023 ) Non-GAAP sales and marketing expense $ 239,425 $ 199,167 Non-GAAP Research and Development Expense We define non-GAAP research and development expense as GAAP research and development expense excluding stock-based compensation expense and related employer payroll taxes, acquisition-related items, restructuring charges and loss on operating lease assets. The following table reflects the reconciliation of GAAP research and development expense to non-GAAP research and development expense for the periods presented: Fiscal 2026 2025 (in thousands) GAAP research and development expense $ 302,589 $ 263,054 Stock-based compensation expense and related employer payroll taxes (56,255 ) (47,053 ) Acquisition-related items - (250 ) Restructuring charges - (991 ) Loss on operating lease assets (2,261 ) (6,837 ) Non-GAAP research and development expense $ 244,073 $ 207,923 Non-GAAP General and Administrative Expense We define non-GAAP general and administrative expense as GAAP general and administrative expense excluding stock-based compensation expense and related employer payroll taxes, acquisition-related items, restructuring charges, and loss on operating lease assets. The following table reflects the reconciliation of GAAP general and administrative expense to non-GAAP general and administrative expense for the periods presented: Fiscal 2026 2025 (in thousands) GAAP general and administrative expense $ 249,470 $ 214,476 Stock-based compensation expense and related employer payroll taxes (56,778 ) (68,749 ) Stock-based compensation expense - Co-Founders performance based RSUs (53,618 ) (14,980 ) Acquisition-related items (1,155 ) (1,933 ) Restructuring charges - (698 ) Loss on operating lease assets (3,992 ) (17,189 ) Non-GAAP general and administrative expense $ 133,927 $ 110,927 Non-GAAP Income from Operations and Non-GAAP Operating Margin We define non-GAAP income (loss) from operations and non-GAAP operating margin as GAAP loss from operations and GAAP operating margin, respectively, excluding stock-based compensation expense and related employer payroll taxes, amortization of acquired intangible assets, restructuring charges, acquisition-related items, and loss on operating lease assets. Non-GAAP operating margin represents non-GAAP income (loss) from operations as a percentage of total revenue. The following table reflects the reconciliation of GAAP loss from operations to non-GAAP income (loss) from operations and GAAP operating margin to non-GAAP operating margin for the periods presented: Fiscal 2026 2025 (in thousands) GAAP loss from operations $ (169,205 ) $ (229,952 ) Stock-based compensation expense and related employer payroll taxes 152,361 150,461 Stock-based compensation expense - Co-Founders performance based RSUs 53,618 14,980 Amortization of acquired intangible assets 45,179 45,925 Restructuring charges - 2,496 Acquisition-related items 1,155 2,183 Loss on operating lease assets 10,950 39,149 Non-GAAP income from operations $ 94,058 $ 25,242 Fiscal 2026 2025 GAAP operating margin (17.6 )% (29.8 )% Stock-based compensation expense and related employer payroll taxes 15.9 % 19.5 % Stock-based compensation expense - Co-Founders performance based RSUs 5.6 % 1.9 % Amortization of acquired intangible assets 4.7 % 5.9 % Restructuring charges - % 0.3 % Acquisition-related items 0.1 % 0.3 % Loss on operating lease assets 1.1 % 5.1 % Non-GAAP operating margin * 9.8 % 3.3 % * Totals may not foot due to rounding. Non-GAAP Net Income We define non-GAAP net income (loss) as GAAP net loss, excluding stock-based compensation expense and related employ er payroll taxes, amortization of acquired intangible assets, restructuring charges, acquisition-related items, and loss on operating lease assets, adjusted for the income tax effects on the difference between GAAP and non-GAAP expenses. Fiscal 2026 2025 (in thousands) GAAP net loss $ (159,853 ) $ (239,094 ) Stock-based compensation expense and related employer payroll taxes 152,361 150,461 Stock-based compensation expense - Co-Founders performance based RSUs 53,618 14,980 Amortization of acquired intangible assets 45,179 45,925 Restructuring charges - 2,496 Acquisition-related items 1,155 2,183 Loss on operating lease assets 10,950 39,149 Income tax effects related to the above adjustments (1) (1,715 ) 439 Non-GAAP net income $ 101,695 $ 16,539 (1) This amount represents adjustments for the current and deferred income tax effects on non-GAAP net income for the impact of the non-GAAP adjustments above . Free Cash Flow We define free cash flow, a non-GAAP measure, as net cash provided by (used in) operating activities less cash used for investing activities for capitalized internal use software and less cash paid for purchases of, and deposits for, property and equipment. We believe that free cash flow is a meaningful indicator of our sources of liquidity and capital requirements that provides information to management and investors in evaluating the cash flow trends of our business. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth. Free cash flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Other companies may calculate free cash flow or similarly titled non-GAAP measures differently, which could reduce the usefulness of free cash flow as a tool for comparison. In addition, free cash flow does not reflect mandatory debt service and other non-discretionary expenditures that are required to be made under contractual commitments and does not represent the total increase or decrease in our cash balance for any given period. Fiscal 2026 2025 (in thousands) Net cash provided by operating activities $ 110,131 $ 37,053 Capitalized internal-use software (19,877 ) (17,799 ) Purchase of property and equipment (4,704 ) (3,800 ) Deposits for property and equipment (477 ) - Non-GAAP free cash flow $ 85,073 $ 15,454 Liquidity and Capital Resources As of January 31, 2026, we had cash and cash equivalents of $428.8 million, which excludes restricted cash of $0.6 million, and $250.0 million available under the Amended Credit Agreement, as defined below. Cash and cash equivalents consisted of checking accounts and money market funds with maturities less than 90 days from the date of purchase. Our liquidity is subject to various risks including the risks set forth in the section titled " Risk Factors " and the market risks identified in the section titled " Quantitative and Qualitative Disclosures about Market Risk ." Our primary cash needs are for personnel-related expenses, costs related to the provisioning of our platform services, and marketing expenses. The first quarter of our fiscal year is typically the largest operating cash outflow quarter due to the payout of our annual bonuses. We believe that our existing cash and cash equivalents, cash available under our Amended Credit Agreement, and cash receipts from our revenue arrangements will be sufficient to support working capital, operating lease payments and capital expenditure requirements for at least 12 months from the date of this Annual Report. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth in the section titled " Risk Factors ." Further, in the future we may enter into arrangements to acquire or invest in businesses, products, services and technologies. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we cannot be sure that any additional financing will be available to us on acceptable terms if at all. If we are unable to raise additional capital when desired, our business, results of operations and financial condition could be adversely affected. Credit Agreement In January 2023, we entered into a secured credit agreement (the "Original Credit Agreement") with Wells Fargo Bank N.A., as administrative agent and collateral agent, and certain lenders. In September 2024, we amended the Original Credit Agreement (the "First Amendment") to, among other things, convert our existing term loan to a new term loan balance and a revolving credit facility. On January 30, 2026, we entered into a second amendment (the "Second Amendment") to the Original Credit Agreement (as amended by the First Amendment and the Second Amendment, the "Amended Credit Agreement") that increased the total borrowing capacity of the revolving credit facility made available under the Amended Credit Agreement from $140.0 million to $250.0 million and extended the term of the Amended Credit Agreement through January 30, 2031. In addition, the Second Amendment (i) modified pricing and unused commitment fees payable under the Amended Credit Agreement to be based on total net leverage rather than recurring revenue, (ii) replaced the recurring revenue and liquidity financial covenants in the Original Credit Agreement with a total net leverage financial covenant, and (iii) modified certain negative covenants, including liens, indebtedness, investments, dispositions, restricted payments and restricted debt payments, to provide us with more flexibility thereunder. Prior to entering into the Second Amendment we voluntarily repaid, in full, the approximately $107.0 million term loan that was outstanding under the Original Credit Agreement. As of January 31, 2026, no loans were outstanding under the Amended Credit Agreement. Cash Flows The following table summarizes our cashflows for the periods indicated: Fiscal 2026 2025 (in thousands) Net cash provided by operating activities $ 110,131 $ 37,053 Net cash used in investing activities (44,839 ) (22,783 ) Net cash provided by (used in) financing activities (78,786 ) 279,713 Net increase (decrease) in cash, cash equivalents, and restricted cash $ (13,494 ) $ 293,983 Operating Activities Net cash provided by operating activities was $110.1 million for fiscal 2026. This primarily related to our non-cash charges of $324.9 million, adjusted for our net loss of $159.9 million and net cash outflows of $54.9 million from changes in our operating assets and liabilities. The primary drivers of the changes in our operating assets and liabilities related to an increase in deferred contract costs of $22.4 million, an increase in accounts receivable of $20.8 million due to the increase in revenue, a decrease in operating lease liabilities of $12.0 million, and an increase in contract assets of $11.9 million. These were partially offset by an increase in accounts payable and accrued expenses of $12.1 million and an increase in accrued personnel related expenses of $2.7 million. Net cash provided by operating activities was $37.1 million for fiscal 2025. This primarily related to our non-cash charges of $306.2 million, adjusted for our net loss of $239.1 million and net cash outflows of $30.0 million from changes in our operating assets and liabilities. The primary drivers of the changes in our operating assets and liabilities related to an increase in deferred contract costs of $15.8 million and contract assets of $6.6 million, an increase in accounts receivable of $17.7 million due to the increase in revenue, a decrease in accounts payable and other accrued expenses of $9.0 million due to the payment of deferred offering costs related to our IPO, and a decrease of operating lease liabilities of $9.4 million. These were partially offset by an increase in accrued personnel related expenses of $23.2 million due to an increase in headcount and bonus achievement, an increase in deferred revenue of $3.3 million, and an increase in other liabilities of $2.1 million. Investing Activities Net cash used in investing activities was $44.8 million for fiscal 2026. This consisted of cash outflows of $19.9 million for investments in capitalized internal-use software, $19.8 million of cash paid, net of cash acquired, for the acquisition of Conduit, $4.7 million for the purchase of property and equipment, and $0.5 million in deposits for property and equipment. Net cash used in investing activities was $22.8 million for fiscal 2025. This consisted of cash outflows of $17.8 million for the investments in capitalized internal-use software, $3.8 million for the purchase of property and equipment, and $1.2 million of cash paid, net of cash acquired, for the acquisition of Convex. Financing Activities Net cash used in financing activities was $78.8 million for fiscal 2026. This consisted primarily of the repayment of debt of approximately $107.0 million, and the payment of deferred offering costs of $0.6 million. These were partially offset by proceeds from the exercise of stock options of $28.8 million. Net cash provided by financing activities was $279.7 million for fiscal 2025. This consisted primarily of the net proceeds from our IPO of $674.5 million and $6.7 million of proceeds from the exercise of stock options. These were partially offset by the repayment of our non-convertible preferred stock of $310.6 million, the repayment of debt of $71.6 million, and the repurchase of shares for the tax withholdings upon settlement of RSUs of $19.0 million. Recently Adopted Accounting Pronouncements Refer to Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report for recently adopted accounting pronouncements and new accounting pronouncements not yet adopted as of the date of this report. Critical Accounting Estimates Our management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements and the related notes thereto, which are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time the estimate is made. Actual results could differ significantly from our estimates. The significant accounting policies and methods used in the preparation of our consolidated financial statements are discussed in Note 2 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. The accounting policies described below include accounting estimates that may involve a significant degree of judgment and complexity, and accordingly, we believe these are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. Revenue Recognition Revenue recognition represents an important accounting policy to the understanding of our financial condition and results of operations. Our revenue recognition may require the use of significant judgment in determining whether services are considered distinct performance obligations that should be accounted for separately and determining estimated standalone selling prices for the purpose of allocating the transaction price to distinct performance obligations. For information regarding our revenue recognition accounting policy, see Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report. Stock-Based Compensation The value of our common stock is the primary input used to measure the grant date fair value of our stock-based awards. The common stock value used in determining the grant date fair value of awards granted after our IPO is based on our stock price as reported on the Nasdaq on the date of grant. Acquisitions Determining the fair value of assets acquired and liabilities assumed requires management to make judgments and estimates, including the selection of valuation methodologies, assumptions used in revenue, cost and cash flow forecasts and selection of comparable companies. We engage the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in business combinations. While we use our best estimates and judgments, estimates are inherently uncertain and subject to refinement. The valuation of intangible assets, primarily customer relationships and developed technology, includes estimates that are critical accounting estimates. These critical estimates are primarily those relating to forecasted growth rates, customer retention rates and obsolescence rates of acquired technology. We base these estimates using information available regarding historical trends and future industry conditions and macroeconomic events, and judgments regarding the replacement and obsolescence of acquired technologies, among other factors.

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