ServiceTitan Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
September 4, 2025

Key Takeaways

  • Positive Sentiment: ServiceTitan delivered 25% total revenue growth and 27% subscription revenue growth in Q2 along with a record operating margin improvement of 510 basis points.
  • Neutral Sentiment: For Q3, the company guided total revenue of $237–$239 million and for full-year FY2026 expects $935–$940 million in total revenue with operating income targets maintained.
  • Positive Sentiment: ServiceTitan’s AI platform, Titan Intelligence, supported Gulf Shore Air Conditioning & Heating in executing the first fully automated job—booked, dispatched, and completed without human intervention.
  • Positive Sentiment: The company announced a strategic partnership with Roto-Rooter, signaling growing traction in the enterprise commercial segment and expanding construction project management capabilities.
  • Negative Sentiment: Residential HVAC gross transaction volume growth moderated due to a tougher year-ago summer comp and more dispersed weather patterns affecting end-market demand.
AI Generated. May Contain Errors.
Earnings Conference Call
ServiceTitan Q2 2026
00:00 / 00:00

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Operator

Good day, everyone, and welcome to the ServiceTitan second quarter fiscal year 2026 earnings results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press *11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press *11 again. Please note this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Jason Recko. Please go ahead, sir.

Jason Rechel
Jason Rechel
VP - Investor Relations at ServiceTitan

Thank you, operator, and welcome everyone to ServiceTitan's fiscal second quarter 2026 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'll review our fiscal second quarter 2026 results. We'll also discuss our guidance for the fiscal third quarter and full fiscal year 2026. Before we get started, we want to draw your attention to the safe harbor statement included in today's press release and emphasize that information discussed on this call, including our guidance, is based on information as of today and contains forward-looking statements that involve risks, uncertainties, and assumptions. All statements, other than statements of historical facts, should be deemed to be forward-looking. Forward-looking statements reflect our views as of today only, and except as required by law, we undertake no obligation to update or revise these forward-looking statements.

Jason Rechel
Jason Rechel
VP - Investor Relations at ServiceTitan

Please take a look at our filings with the SEC for a discussion of the factors that could cause our actual results to differ. We also want to point out that we present non-GAAP measures in addition to and not as a substitute for financial measures prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliation 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.

Jason Rechel
Jason Rechel
VP - Investor Relations at ServiceTitan

With that, let me turn the call over to Ara. Ara?

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Thank you, Jason, and thank you for joining us as we update you on our progress. Our growth formula remains the same and simple. We deliver real ROI to our customers, helping them further their success and reach even greater financial outcomes. This allows them to grow their businesses, which drives more technicians and GTV on our platform and leads to higher subscription and usage revenue for us. As they realize the value of our software, they buy more Pro products, which continues to drive our growth and allows us to reinvest in more high ROI solutions. I am grateful for the way our team empowered our customers to perform well during the seasonally strongest quarter for the trade. Year-over-year, we delivered 27% subscription revenue growth, 25% total revenue growth, and record operating margins, which improved 510 basis points.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Our overall financial performance was greater than we expected due to strengthened usage revenue and faster growth from new customers. The breadth of execution against each of our four main priorities this year continues to underscore our opportunity to transform the lives of every hardworking contractor in the trade. Creating transformational value for our customers has always been our mission. The introduction of AI has now made it possible for our customers to reimagine the way their businesses operate. This quarter, ServiceTitan's AI, Titan Intelligence, enabled the customer to organically book, schedule, dispatch, and perform the first fully automated job in our history. I'd like to share this story and reflect on the possibilities that are increasingly clear to the future of the trades. Gulf Shore Air Conditioning and Heating has over 30 employees who have been successfully serving customers in the Florida Panhandle for 30 years.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Only recently did the company realize its goal of compounding growth through increasing levels of automation. Gulf Shore has been a prolific user of our platform, with each expansion leading to higher and compounding ROI. Gulf Shore initially onboarded with ServiceTitan in early 2023 and expanded with Marketing Pro, Scheduling Pro, and Dispatch Pro later that year. In January of this year, Gulf Shore expanded with Fleet Pro and Sales Pro. With a new goal of fully automating the business adjacencies around core technician workflow, Gulf Shore next turned to AI in the contact center and in June purchased Contact Center Pro along with our virtual agent. The team named their virtual agent Finn after their namesake dolphin logo. As Finn learned, Gulf Shore set the stage for something magical.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

On a busy morning in June, virtual agent Finn was answering inbound customer calls and responded to an issue about a 10-year-old piece of equipment. Based on Finn's knowledge of the equipment and real-time capacity available that day, Finn booked a same-day on-demand service job. ServiceTitan automatically attributed the inbound call to the correct Google Ad campaign, and email and SMS confirmations were automatically sent to the customer, while Dispatch Pro dynamically assigned the optimal technician to the job. Later that morning, Dispatch Pro learned there was a better-suited technician available based upon both a schedule change and the predicted value of the job, so this new tech was routed to the job. Less than 90 minutes after the initial inbound customer call, the perfect tech was dispatched to the home and their bio message delivered to the homeowner. To this point, no human being had touched the job.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Sales Pro automatically turned on when the tech arrived on site, and when the $1,200 job was paid for with ServiceTitan payment, the job was completed and Sales Pro shared the recording, performance, and analytic metrics back to the home office. From ad optimization to marketing campaign execution to job completion in the home, the technician in the field was the only human who touched the job. This business automation Gulf Shore achieved can only be delivered with a platform like ServiceTitan because the data, system, and business processes required for end-to-end automation are reliant on one another. We believe this kind of automation is the future of the trades, and the depth of our platform capabilities is accelerating our platform progress. It doesn't just sound good. The results are clear.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Gulf Shore told us that they increased their close rate last month by 22% compared to the same period last year with a combination of Sales Pro and PriceBook Pro. Moreover, their average ticket has increased $150 with Dispatch Pro. They shared with us that in June, they saw a $370,000 increase in revenue just by running automated marketing campaigns with Marketing Pro. That contact center virtual agents booked five after-hours jobs within 24 hours of going live. Gulf Shore told us that these financial results of the automation that can only come from a single integrated platform were immediate. This is a turning point for the trades. Leveraging the foundation of workflow that already happens in ServiceTitan, we now have an opportunity to democratize automation across the industry. We have an entrenched and expanding ecosystem, compounding data-related network effects, and industry-specific benchmarking that allows ServiceTitan to deliver differentiated outcomes.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Our customers are phenomenal business operators, and I can't wait to watch what they'll continue to do. We hold ourselves accountable to delivering focused execution measured over a series of quarters, years, and decades. I am proud of where we are today, and as always, I believe our opportunity to build the operating system for the trades is only just beginning. I'll now pass it to Vahe, who will share more details on our progress.

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

Thanks, Ara. I'm super excited about the way Titans continue to create value for our customers and proud of what we accomplished this quarter. Ara talked about our opportunity to deliver automation to the trades. I'm going to update you today on our four key areas of focus. We improved on each goal over the past 90 days, and we're doing it more efficiently than we had planned. In enterprise, industry consolidation and professionalization continue to drive growth of our largest customer tier. Our largest customers drive our top-down product strategy, playbook for new markets and trades, and are our most aggressive users of advanced AI. We expect this to become an accelerant to industry consolidation. This quarter, we are proud to announce a partnership with an iconic enterprise brand that is synonymous with the trades, Roto-Rooter.

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

Roto-Rooter has been the gold standard in plumbing for nearly a century and is today the largest provider of plumbing, drain cleaning, and water cleanup services in North America. We'll work hard together on implementation and expect to go live in early calendar year 2026. Shifting to pro products, which continue to deliver fast growth at scale as the fastest growing area of our business, our customers are leaning into AI in a way that we did not originally experience with the early promise of the cloud. Customers are eager to automate operations to drive faster revenue growth and greater efficiency. As you heard from Gulf Shore, we now have the ability to fully automate our customers' processes with comprehensive AI capabilities that leverage our core workflow to go beyond what any point solution can deliver.

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

The organic pull from customers to fully automate workflow is an encouraging indication of the flywheel that we expect will continue to drive pro product attach rates higher. We are our customers' system of record, and we have a closed-loop system that allows customers to turn data and insights directly into automated action. Our pro story has become the tangible AI story for customers, and I'm excited to share more innovations at Pantheon this month. In commercial, we delivered overperformance across all customer tiers, especially in the large enterprise market. The breadth of our enterprise capabilities and success getting customers live are both increasingly recognizable strengths and significant competitive advantages. Our progress building the key project management capabilities to unlock construction is beginning to yield results.

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

Our emphasis over the last several years has been to build the product, brand, and organizational foundation that would be required to win in commercial. Now, as the leader, we are tasked with scaling on this foundation to become the market standard. This means perfecting the product for dedicated commercial contractors and delivering differentiated value that becomes increasingly challenging to replicate. We are at the precipice of this important S-curve in commercial with a slate of new products coming this year that will mature the product-market fit of our core platform and unlock new opportunities. We now expect that the next several years will be about execution on our vision. Concluding with roofing, we continue to lay our foundation for the future.

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

While still early in our S-curve, we are maturing our go-to-market notion, maturing our implementation playbook, and making progress on our key product and ecosystem priorities. We are building support for insurance workflows to allow our customers to automate work and to manage claims and collaborate with insurance providers. We also continue to deliver distributor integrations that will streamline our customers' workflow and build the ecosystem around ServiceTitan. Our recent partnership with ABC Supply Company, the largest wholesale distributor of roofing and other select building products in North America, builds on our ecosystem success so far this year. This is an exciting time in the trades. The resilient execution by our existing customers and the conversion of new customers like Roto-Rooter are a testament to both our current strengths and future opportunity. As Ara said upfront, we intend to deliver on our mission with focused execution.

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

With that, I'll turn it over to Dave to run through the financials. Dave?

Dave Sherry
Dave Sherry
CFO at ServiceTitan

Thanks, Vahe. I am proud of how our teams performed this quarter. Today, I'll run you through Q2 financial results in detail and provide guidance for Q3 and update our full fiscal year 2026 guidance. For more detailed financial results, please refer to our press release issued earlier today. Q2 gross transaction volume, or GTV, was $22.9 billion, representing 19% year-over-year growth. This was faster than we'd expected in light of the challenging comparable period from last year. Overperformance was led by our commercial customers as well as non-HVAC residential trades. Though residential HVAC grew slower than in prior periods against the challenging comparable, these customers continued to grow well in Q2, demonstrating the durability of the trades and strong execution by our customers. Q2 total revenue of $242.1 million grew 25% year-over-year.

Dave Sherry
Dave Sherry
CFO at ServiceTitan

Subscription revenue of $174.8 million grew 27% year-over-year, led by faster-than-expected growth from new customers and healthy expansion trends. Usage revenue grew 23% year-over-year to $58 million, outpacing our prior guidance driven by two factors. First, as noted above, GTV grew more than expected. Second, this was compounded by a higher mix of on-platform payment solutions, leading to strong usage take rates. Together, the high GTV and high usage take rate led to strong growth during our seasonally largest quarter. Total platform revenue for Q2, the sum of subscription and usage revenue, grew 26% year-over-year to $232.7 million. Q2 professional services revenue was $9.4 million. Net dollar retention was greater than 110% for the quarter. Q2 platform gross margin was 80.7%, an improvement of 280 basis points year-over-year. As a reminder, roughly 200 bps of this improvement resulted from the allocation of certain customer success expenses to sales and marketing.

Dave Sherry
Dave Sherry
CFO at ServiceTitan

Total gross margin for Q2 was 74.4%, up 330 basis points year-over-year. Q2 operating income of $29.2 million resulted in a record operating margin of 12.1%, an improvement of 510 basis points year-over-year. As a result of the year-to-date strength in operating income, particularly driven by high margin usage revenue overperformance and slower-than-budgeted pace of hiring, we are now well ahead of our expected incremental margins. Q2 free cash flow was $34.3 million, up from $18.7 million from the prior year's second quarter. FY2026 to date, free cash flow of $12 million is up from -$5.9 million through the first half of FY2025. Shifting to formal guidance. For the third quarter, we expect total revenue in the range of $237 to $239 million. We expect to generate operating income in the range of $14 to $15 million.

Dave Sherry
Dave Sherry
CFO at ServiceTitan

For the full year fiscal 2026, we expect total revenue in the range of $935 to $940 million. We expect to generate operating income in the range of $74 to $76 million. We are pleased with our business performance year to date. This puts us in a favorable position to deploy more capital towards high ROI growth opportunities. Given our overperformance year to date, we expect to overachieve our incremental margin targets in the fiscal year. Over the long term, we remain committed to the 25% targets we've consistently articulated. Our goal remains to durably compound growth over many years and increase margins. We see healthy performance in this quarter as further evidence that our strategy to become the operating system for the trades is working. With that, I'll turn the call back to the operator for Q&A. Operator?

Operator

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

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

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

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

What was the business justification ROI parameter that they were using to go with ServiceTitan? Thank you so much.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Thank you, Kash. Always a pleasure hearing from you. Sorry about the troubles with the systems in your home, but thank you for the contribution to GTV. We're very excited by the Roto-Rooter partnership. They're a household brand. We're, of course, deeply grateful for their trust and the partnership here. I think what we're seeing is that ServiceTitan continues to be the platform of choice for the largest trades businesses because we uniquely have both the trade-specific workflows that they need, as well as the enterprise capabilities that the largest customers need. In Roto-Rooter's case, their business spans across both residential and commercial, and that really aligns well with our strengths. The specific business outcomes that they look for are very consistent to the business outcomes that most other, both large and smaller shops look for.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

A lot of it centers on revenue growth by way of generating more leads, at a lower customer acquisition cost, converting more leads into booked appointments, increasing close rates, increasing average tickets, and then, of course, all the automation in the back office that allows one to grow revenue with a lower cost structure. We very much look forward to this partnership. We will celebrate once we get them successfully live and realizing the value on ServiceTitan and delivering the ROI that they're looking for on both the top line and the bottom line.

Kash Rangan
Kash Rangan
Managing Director at Goldman Sachs

Excellent. Thank you so much.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Thank you, guys.

Operator

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

Joshua Baer
Joshua Baer
Executive Director & Software Equity Research Analyst at Morgan Stanley

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

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

Good question. What we find is that the vast majority of our customers have some degree of one or the other. Very rarely is it purely exclusive. What we find is, generally speaking, as the size of the business tends to get bigger, there does tend to be more specialization. Roto-Rooter is unique in this sense. What we do see is that we rarely land just one or the other. We almost always land with both sides of the house. The only scenario where, historically at least, we didn't get the whole business was if they had a large construction portion, which has been the focus that we've had this year so that we can serve the entire business. We don't believe that there is a big opportunity within our existing customer base for, for example, a large commercial service part of their business not being on the platform.

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

What we do think, though, is because there's such a common instance of the business needing to have both sides, our ability to be excellent in both residential and commercial, we see as an enduring competitive advantage because it's very difficult to do those two things well. That's why we're so focused on becoming world-class for purely commercial contractors, just like we are for the residential side.

Joshua Baer
Joshua Baer
Executive Director & Software Equity Research Analyst at Morgan Stanley

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

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

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

Joshua Baer
Joshua Baer
Executive Director & Software Equity Research Analyst at Morgan Stanley

Great. Thank you.

Operator

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

Michael Turrin
Michael Turrin
MD & Equity Research Analyst at Wells Fargo

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

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

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

Michael Turrin
Michael Turrin
MD & Equity Research Analyst at Wells Fargo

Thanks very much.

Operator

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

Faith Brunner
Equity Research Senior Associate at William Blair

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

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

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

Faith Brunner
Equity Research Senior Associate at William Blair

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

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

Got it. A couple of things. One is we had some more fundamental foundational things that we had to do for B2B businesses that took a bulk of the early days of our efforts to go into commercial. The features that we're talking about that drove the progress on the construction side are primarily around the project management and operational aspects. Those were the big deliveries that we've made so far that are driving kind of the traction that we're seeing. In terms of where we're focused on for the rest of the year, it's primarily going to be around crews, daily logs, RFIs, submittals, change orders, financials, document management, and a better mobile experience. That's going to be the focus for the rest of the year.

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

Throughout the end of the year and beyond, we'll start shifting focus more towards the upfrontal aspects of the construction business, the bid management, dealing with requests for bids, and so forth. That's the strategy, and that's where we're seeing traction on the construction side.

Faith Brunner
Equity Research Senior Associate at William Blair

Awesome. Thanks for the call.

Operator

Thank you. Our next question comes from David Hynes with Canaccord Genuity. Please proceed.

David Hynes
MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets

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

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Hey, DJ. Great question. Thanks for getting me involved. I think you're right that we had a strong quarter where we overperformed, particularly on usage where GTV came in higher than what we would have expected. What that informs is what we've talked about before. We'll continue to deploy capital where we can towards a 25% incremental margin target. We're doing that today. We're a bit behind in hiring, but I think that we expect to catch up sometime later in the year. We'll continue to evaluate what is the best investment. Currently, our primary source of investments continue to be in R&D because we think it's a large market. Where we see good investments in sales and marketing, we'll do so. We continue to hire, continue to have exciting events.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

What you'll see in Q3 is a big step up in sales and marketing because of our user conferences of Pantheon and Ignite. We're excited about where we're going.

David Hynes
MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets

Sounds good. Thank you.

Operator

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

Jason Celino
Jason Celino
MD & Equity Research Analyst at KeyBanc Capital Markets

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

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

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

Jason Celino
Jason Celino
MD & Equity Research Analyst at KeyBanc Capital Markets

Perfect. Thank you for the clarification.

Operator

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

Brent Bracelin
Brent Bracelin
MD & Senior Research Analyst at Piper Sandler Companies

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

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Fantastic questions. As you could probably tell, our DNA is all about creating value for customers. We've been investing in automation and AI, and particularly our AI, Titan Intelligence, for years. We heard with Gulf Shore, being the system of action across nearly every workflow in a trades business and having the data-related network effects through such breadth and depth of data and being the default UI in a trades business and being that hub of that vast ecosystem of integrations, all these things allow us at ServiceTitan to create unmatched value through automation for our customers. In Gulf Shore's case, they use our pro products: Scheduling Pro, Dispatch Pro, Marketing Pro, Sales Pro, etc., etc. Whereas the core product will deliver, call it, a medium level of sophistication and automation across most workflows, it's the pro products that deliver the most advanced and most complete level of automation.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Therefore, the most sophisticated customers seek out the most advanced level of automation, both for revenue growth as well as for cost optimization and benefit from the much larger ROI. I'll chime in quickly, Brett, on your second question. As you noted, total platform gross margins increased nearly 300 bps in the quarter versus prior year. It's important for us to remember that about 200 bps of this improvement was led by the reclass of certain customer success expenses from gross margin into sales and marketing. Nevertheless, we saw healthy leverage on gross margin. It's driven by a couple of things. One, leverage on infrastructure costs. Second, some improvements in sales and marketing. Third, to your question, is this sustainable? There is a seasonal peak in Q2 given usage is high in incremental margins. We do see overall trends towards higher platform gross margin like we've talked about before.

Brent Bracelin
Brent Bracelin
MD & Senior Research Analyst at Piper Sandler Companies

Helpful color. Good to hear. Thanks.

Operator

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

Terry Tillman
Terry Tillman
Managing Director at Truist Securities

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

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Sure. I'll answer the first part quickly and then dial in more color on Contact Center. I think like most customers, we expect folks to start with just the core, realize the value, and then adopt our pro products. That's the first part of the answer. It's important to note on Roto-Rooter, we've signed them. They're not yet live. It's not impacting the results of the quarter. We expect them to go live sometime early next fiscal, and that's when you'll see the results flowing through our financials. Do you want to talk a bit about Contact Center Pro?

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

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

Terry Tillman
Terry Tillman
Managing Director at Truist Securities

All right. Thank you.

Operator

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

Parker Lane
Parker Lane
Director at Stifel Financial Corp

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

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Hey, Parker. Great question. I think we've been pretty transparent that we're probably not the most optimized in terms of packaging here. I think our customers often tell us that the buying experience can be difficult with so many a la carte products. I think we're still early in the days of figuring that out. I would not assume that the past of what we've done is what we expect in the future. We've not yet nailed it better than that would look. It's a great question that we think about a lot internally.

Parker Lane
Parker Lane
Director at Stifel Financial Corp

Got it. Thanks, guys.

Operator

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

Scott Berg
MD & Senior Research Analyst at Needham & Company

Hi, everyone. Thanks for taking my questions. I have two. Wanted to touch on Roto-Rooter because I know we all have lots of questions on it. What does this partnership include in terms of functionality? Is this the base platform? Is there some pro functionality that's kind of included with the agreement here? They're a company-owned entity versus a lot of the franchise entities that you're used to working with. Just trying to understand maybe what's included with the initial transaction as it differs from most of your other constituents. Thanks.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

What I'll take here is that like most customers, we expect them to leave wall-to-wall with our core solution. We don't sell our core in piecemeal, and we expect them to land wall-to-wall as part of what implementation should take now through the next fiscal year. Nothing super out of the ordinary with Roto-Rooter other than the fact that it's a household brand that's quite large. We expect it to land like most of our customers.

Scott Berg
MD & Senior Research Analyst at Needham & Company

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

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Sure. I think, first of all, it was a strong quarter, our customers exceeded expectations. As I mentioned on the prior call last quarter, last summer was one of the hottest summers on record. In fact, I can imagine the second hottest summer on record. It produced a difficult comp. This was a warm summer, but not as hot as last summer, and that primarily impacted HVAC. Our customers continue to grow, but at a lower rate than they've seen in prior quarters, just purely based on the comp. That's what drove it. Nothing struck short or different there other than it was a difficult comp and weather patterns.

Scott Berg
MD & Senior Research Analyst at Needham & Company

Very helpful. Nice quarter.

Operator

Thank you so much. Our next question is from Yun Kim with Loop Capital. Please proceed.

Yun Kim
Managing Director at Loop Capital Markets LLC

All right. Great. Under GTV growth, how much of that growth was driven by volume or the number of jobs versus the average ticket price for each of those jobs? Is there any underlying trend that you're seeing on the GTV growth?

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

Yeah. What I'll say is that the quarter had pretty similar patterns of what we've seen in the prior periods, where both job growth and ticket growth were contributing factors to it. What I'll say is that in the non-HVAC residential trades, we saw a pickup across the board, and that was driven mostly by jobs.

Yun Kim
Managing Director at Loop Capital Markets LLC

Okay. Great. In terms of the platform gross margin, you know, good to see a strong performance there. How much is the AI driving that efficiency there? Is there a further opportunity to leverage AI to really drive a more cost-effective onboarding process and maybe even streamline that process quicker?

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

What I'll say is that we're excited about the progress we made and the solutions our team are driving to use AI to help improve the customer experience. I think we still feel like it's early days in the AI journey, both internally for our operations as well as for the operations of our customers.

Yun Kim
Managing Director at Loop Capital Markets LLC

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

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

I think it depends on the Pro products. Some have high gross margins. Some, like our Fleet Pro solutions at Telematics, have some real cost in it. It will depend on the mix. We think that it should be a contributor to our top line. It has efficiencies more than on cost of revenue. It has efficiencies in sales and marketing because it's much more efficient to go after and sell to an existing customer than new ones.

Yun Kim
Managing Director at Loop Capital Markets LLC

Okay. Great. Thank you.

Operator

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

Peter Griffith
Peter Griffith
Senior Equity Research Associate at Citi

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

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

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

Peter Griffith
Peter Griffith
Senior Equity Research Associate at Citi

All right. Thanks, guys.

Operator

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

Andrew Sherman
Andrew Sherman
Vice President at Cowen

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

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

I think I'll jump in quickly. Ara and I can jump as they'd like. I think what you saw, the OEMs and some of the industry data come out was more a reflection of the inventory buildup and build-downs that you see in the end consumer demand. That was much more stable both in the first half of this year as well as we saw it through the first quarter of this year as what we saw in Q2. I don't think the refrigerant inventory buildup is what drove the results in Q2.

Vahe Kuzoyan
Vahe Kuzoyan
Co-Founder & President at ServiceTitan

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

Andrew Sherman
Andrew Sherman
Vice President at Cowen

Okay. Perfect. Thank you.

Operator

Thank you. This concludes our Q&A session. I will turn the call back to Ara Mahdessian for his closing comments.

Ara Mahdessian
Co-founder, Chairperson & CEO at ServiceTitan

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

Operator

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

Executives
    • Jason Rechel
      Jason Rechel
      VP - Investor Relations
    • Vahe Kuzoyan
      Vahe Kuzoyan
      Co-Founder & President
    • Dave Sherry
      Dave Sherry
      CFO
Analysts
    • Ara Mahdessian
      Co-founder, Chairperson & CEO at ServiceTitan
    • Kash Rangan
      Managing Director at Goldman Sachs
    • Joshua Baer
      Executive Director & Software Equity Research Analyst at Morgan Stanley
    • Michael Turrin
      MD & Equity Research Analyst at Wells Fargo
    • Faith Brunner
      Equity Research Senior Associate at William Blair
    • David Hynes
      MD - Software Lead Analyst at Canaccord Genuity - Global Capital Markets
    • Jason Celino
      MD & Equity Research Analyst at KeyBanc Capital Markets
    • Brent Bracelin
      MD & Senior Research Analyst at Piper Sandler Companies
    • Terry Tillman
      Managing Director at Truist Securities
    • Parker Lane
      Director at Stifel Financial Corp
    • Scott Berg
      MD & Senior Research Analyst at Needham & Company
    • Yun Kim
      Managing Director at Loop Capital Markets LLC
    • Peter Griffith
      Senior Equity Research Associate at Citi
    • Andrew Sherman
      Vice President at Cowen
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