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SERVICETITAN, INC.

Date Filed : Nov 18, 2024

S-11d577298ds1.htmS-1S-1
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As filed with the Securities and Exchange Commission on November 18, 2024.

Registration No. 333-   

 

 

 

UNITED STATES

SECURITIESAND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THESECURITIES ACT OF 1933

 

 

ServiceTitan, Inc.

(Exactname of registrant as specified in its charter)

 

 

 

Delaware 7372 26-0331862

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

ServiceTitan, Inc.

800 N. Brand Blvd.

Suite100

Glendale, California 91203

(855) 899-0970

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Ara Mahdessian

ChiefExecutive Officer

800 N. Brand Blvd.

Suite 100

Glendale,California 91203

(855) 899-0970

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

 

Tad J. Freese

Sarah B. Axtell

Latham & Watkins LLP

140 Scott Drive

Menlo Park,California 94025

(650) 328-4600

 

Copies to:

Dave Sherry

OliveHuang

Scott Booth

ServiceTitan, Inc.

800 N.Brand Blvd.

Suite 100

Glendale, California 91203

(855) 899-0970

 

Robert G. Day

Rezwan D. Pavri

Colin G.Conklin

Wilson Sonsini Goodrich & Rosati, P.C.

650 Page Mill Road

PaloAlto, California 94304

(650) 493-9300

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 underthe Securities Act of 1933 check the following box.  ☐

If this Form is filed to register additional securities for anoffering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list theSecurities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Ifthis Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the sameoffering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and“emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
   Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extendedtransition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until theregistrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registrationstatement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and maybe changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities inany jurisdiction where the offer or sale is not permitted.

 

Subject To Completion. Dated      , 2024.

      Shares

 

 

LOGO

Class A Common Stock

 

 

This is aninitial public offering of shares of Class A common stock of ServiceTitan, Inc.

Prior to this offering, there has been no public marketfor our Class A common stock. It is currently estimated that the initial public offering price per share will be between $      and $     . We have applied to list our Class A common stockon the Nasdaq Global Select Market under the symbol “TTAN.”

We have three classes of authorized common stock: Class Acommon stock, Class B common stock and Class C common stock. The rights of holders of Class A common stock, Class B common stock and Class C common stock are identical, except with respect to voting and conversion rights. Each share of Class Acommon stock is entitled to one vote. Each share of Class B common stock is entitled to 10 votes and is convertible at any time into one share of Class A common stock. Each share of Class C common stock is entitled to no votes, except as otherwiserequired by law. Upon the completion of this offering, no shares of Class C common stock will be issued and outstanding.

Upon thecompletion of this offering, all shares of Class B common stock will be held by Ara Mahdessian and Vahe Kuzoyan, or our Co-Founders, who are both current executive officers and directors, and their respective affiliates. Accordingly, upon thecompletion of this offering, the shares held by our Co-Founders (including shares over which they have voting or administrative control) will represent  % of the voting power of our outstanding capital stock, which voting power may increaseover time as our Co-Founders exercise or vest in equity awards outstanding at the time of the completion of this offering. If all such equity awards held by our Co-Founders (including the Co-Founder PSUs referenced below) had been exercised orvested and settled in shares of Class B common stock as of the date of the completion of this offering, our Co-Founders would collectively hold  % of the voting power of our outstanding capital stock. As a result, our Co-Founders will be ableto significantly influence or control any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our amended and restated certificate of incorporation and bylaws and theapproval of any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction.

We are an“emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, may elect to comply with certain reduced public company reporting requirements in future reports after the completion of thisoffering.

See the section titled “Risk Factors” beginning on page 30 to read about factorsyou should consider before buying shares of our Class A common stock.

 

 

Neither theSecurities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

   Per
Share
   Total 

Initial public offering price

  $       $     

Underwriting discount(1)

  $    $  

Proceeds, before expenses, to ServiceTitan, Inc.

  $    $  

 

(1)

See the section titled “Underwriting” for a description of the compensation payable to theunderwriters.

To the extent that the underwriters sell more than       shares of Class Acommon stock, the underwriters have the option to purchase up to an additional       shares of Class A common stock from ServiceTitan, Inc. at the initial public offering price less the underwriting discount.

At our request, the underwriters have reserved up to      shares of our Class A common stock, or 5% of theshares offered in this offering, for sale at the initial public offering price through a directed share program to (i) eligible customers, (ii) friends and family members of our Co-Founders and (iii) certain other persons. See the section titled“Underwriting—Directed Share Program.”

The underwriters expect to deliver the shares against payment in New York, NewYork, on or about      .

 

Goldman Sachs & Co. LLC     Morgan Stanley      Wells Fargo Securities Citigroup

 

KeyBanc Capital Markets   Truist Securities Canaccord Genuity  Needham & Company  Piper Sandler  Stifel William Blair
First Citizens Capital Securities Academy Securities Loop Capital Markets

Prospectus dated      , 2024


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LOGO


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LOGO

Compared to anyone else, I dont think theres even a close second in terms of what ServiceTitan can provide theircustomers. Ken Haines, CEO Wrench Group Before ServiceTitan, I had limited visibility into our operations. We had reached our capacity, which restricted how I managed the company and limited my ability to make critical decisions, ultimatelyhindering our growth opportunities. ServiceTitan has changed all of that. Carrie Kelsch, Owner A Plus Garage Doors ServiceTitan is essential to our scalability. We cant standardize things without this operating system being in place. To be the best,we believe weve got to partner with the best, and thats ServiceTitan. Lincoln Walpole, CFO Any Hour Services As we started to grow, ServiceTitan became a necessity. It wasnt a matter of if wed transition to ServiceTitan, it was just a matter ofwhen. Chris Hoffmann, CEO Hoffmann Brothers I realized ServiceTitan is the only software that has all the facets that we need to handle both commercial service and commercial construction. Kirsta Holliman, CFO Interstate AC I dont know how you canmake good decisions quickly without having everything rolled into one system. Allen Sweeney, Owner APHIX ServiceTitan


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LOGO


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LOGO

$685M $628 >95% Revenue for the 12 months ended July 31, 2024Gross Transaction Volume 1 for the 12 months ended July31, 2024Gross Dollar Retention 1 for each of the last 10 fiscal quarters2 24%23%>110% YoY Revenue Growth3 for the three months ended July 31, 2024YoY Gross Transaction Volume Growth 1 for the three months ended July 31, 2024Net Dollar Retention 1for each of the last 10 fiscal quarters2 $(183M)77%72% Net Loss for the 12 months ended July 31, 2024Non-GAAP Platform Gross Margin 4 for the 12 months ended July 31, 2024Platform Gross Margin 4 for the 12 months ended July 31, 2024 1. Fordefinitions of Gross Transaction Volume, or GTV, and how we calculate net dollar retention rate and gross dollar retention rate, see the sections titled "Management's Discussion and Analysis of Financial Condition and Results ofOperations-Overview," "Management's Discussion and Analysis of Financial Condition and Results of Operations-Our Business Model" and "Management's Discussion and Analysis of Financial Condition and Results of Operations-Key Factors Affecting OurBusiness Performance," respectively. 2. As of July 31, 2024. 3. Our net loss was $51.5 million and $35.7 million for the three months ended July 31, 2023 and July 31, 2024, respectively. 4. See the section titled "Management's Discussion andAnalysis of Financial Condition and Results of Operations- Non-GAAP Financial Measures" for a reconciliation of GAAP Platform Profit Margin to Non-GAAP Platform Profit Margin.


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LOGO


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LOGO

A LETTER FROM OUR FOUNDERS Our History Shapes our Future ServiceTitan was born in the trades and is built for the trades.Our story began in the late 1980s when our families immigrated to the U.S. with no money, no knowledge of the language and no jobs, but filled with optimism that a strong work ethic would bring opportunity. Helping families fix and service theirhomes became precisely that opportunity. First as technicians, then as small business owners, the "trades" ultimately allowed our parents to realize the American dream for our families. But it wasn't easy. Growing up, we'd see our fathers head outevery morning at the crack of dawn only to come home late at night to their second job-managing the business. Our parents routinely spent hours after dinner typing invoices at the kitchen table, processing shoeboxes full of receipts and calculatingtimesheets to pay technicians. Our parents' sacrifice allowed us to study engineering at great universities. When we met during an Armenian Student Association ski trip, we immediately discovered how similar our stories were-our shared immigrantstory, growing up in the trades and the years of having a front row seat to the struggle. After finishing school, we both returned home to see that our parents' businesses were frozen in time. The tools available ranged from legacy desktopapplications to fragmented point solutions, and were simply not capable of supporting their needs. We knew we had to do something to help them, and whatever it was, it could not just be an improvement on what existed. It required a new paradigm thatcompletely reimagined the approach from an end-to-end perspective that connected every aspect of a trades business under the umbrella of a single, unified solution. And ServiceTitan was born. Changing Lives and Achieving the Extraordinary Today,after more than a decade into building ServiceTitan, our parents are thankfully no longer our only customers. We've had the opportunity to partner with some amazing entrepreneurs that inspire us. They combine a selfless dedication to theircommunities with a level of ambition and business acumen rivaling any other industry. We wake up every day feeling blessed to partner with, interact and learn from our customers. When we began this journey, we had no idea how large the market reallywas. The systems that tradespeople service are invisible until they break, and then they're mission critical. Over the years, we've discovered the trades are a cornerstone of our economy. It's why, once you begin noticing trades vans on the street,you see them everywhere. Our mission is to make sure that the next generation of kids watching their heroes waking up at the crack of dawn to put bread on the table, never feel like those heroes are left behind by technology. We believe that thehard- working people in the trades deserve the best that technology has to offer. Our goal is to enable our customers to achieve a level of success in the trades that was once unimaginable. Not only for growing revenue and becoming more efficient intheir businesses, but also for spending more time with their families. We believe the kitchen table is for dinner and homework, not working the night shift to manage the business. We only succeed when our customers succeed. Delivering ROI to ourcustomers is our North Star. We are humbled by the trust that tradespeople put in our hands when they choose to implement ServiceTitan and see no other path but to do everything in our power to make each and every business that chooses ServiceTitansuccessful.


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LOGO

We have seen and heard amazing stories about how ServiceTitan has changed our customers' lives and helped them achieveextraordinary results in every market that we serve. These stories and the impact we deliver is what gets us out of bed every morning and keeps us up late at night. Today, we are a market leader for trades businesses in both residential andcommercial, and we continue to add platform capabilities expanding our solution and market reach every day. We are proud of the progress we have made, but we're just getting started. Since we started, our platform has grown to address more trades,more markets, and even more requirements of tradespeople. Today we serve over 10 trades and customers of all sizes, ranging from small family-owned shops with a few employees to others with over $1 billion in annual gross transaction volume. Alongthis journey, we've discovered that our most successful ventures are not the ones where we tell our customers where they should go next, but rather the ones in which our customers are already heading for a destination and they insist that they needServiceTitan to journey with them. This philosophy has brought us into new trades like HVAC, garage and roofing as well as new markets, such as commercial. Over time, our vision is to be the operating system for all of the trades. Building a DreamTeam Our incredible team of nearly 3,000 Titans has been critical to our success to date as well as our vision for the future. At the core of our cultural DNA lie three fundamental beliefs. First, our number one priority is delivering value to ourcustomers. Customers always come first, the company second and the individual third. We exist to drive ROI to our customers, and every Titan understands that achieving this goal is a team sport. Customer centricity is the very core of who we are.Second, we have broad ambitions to dream big and build a once-in-a-generation company. We strive to achieve extraordinary outcomes for our customers, for our stockholders, and for ourselves. Third, we grow our dream team by cultivating a performanceculture rooted in meritocracy, rewarding those who take ownership, dive deep and speak up. We believe that combining high standards with transparent communication is the bedrock to building a high-trust environment in which we are entitled tonothing and grateful for everything. We are hungry, we believe in our mission and hope you will join us in bringing leading edge technology to the trades to ensure that they never get left behind again. Ara and Vahe


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PROSPECTUS SUMMARY

   1 

RISK FACTORS

   30 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

   75 

INDUSTRY, MARKET AND OTHER DATA

   77 

USE OF PROCEEDS

   79 

DIVIDEND POLICY

   80 

CAPITALIZATION

   81 

DILUTION

   85 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   88 

BUSINESS

   120 

MANAGEMENT

   155 

EXECUTIVE COMPENSATION

   163 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

   178 

PRINCIPAL STOCKHOLDERS

   185 

DESCRIPTION OF CAPITAL STOCK

   189 

DESCRIPTION OF CERTAIN INDEBTEDNESS

   199 

SHARES ELIGIBLE FOR FUTURE SALE

   201 

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

   206 

UNDERWRITING

   210 

LEGAL MATTERS

   217 

EXPERTS

   217 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

   217 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

   F-1 

 

 

Through and including      , 2025 (the 25th day afterthe date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectuswhen acting as an underwriter and with respect to an unsold allotment or subscription.

 

 

Neither we norany of the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. Neither we nor any of the underwriters takeresponsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where itis lawful to do so. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any sale of our Class A common stock.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering orpossession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about,and observe any restrictions relating to, the offering of the shares of our Class A common stock and the distribution of this prospectus outside the United States.


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PROSPECTUS SUMMARY

This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does notcontain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors,” “Special Note RegardingForward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, beforemaking an investment decision. 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, 2019, 2020, 2021, 2022, 2023, 2024and 2025 are referred to herein as fiscal 2019, fiscal 2020, fiscal 2021, fiscal 2022, fiscal 2023, fiscal 2024 and fiscal 2025, respectively. Unless the context otherwise requires, all references in this prospectus 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 Bcommon stock and Class C common stock.

Overview

ServiceTitan is the operating system that powers the trades.

We are modernizing a massive and technologically underserved industry—an industry commonly referred to as the “trades.” Thetrades consist of the collection of field service activities required to install, maintain, and service the infrastructure and systems of residences and commercial buildings. Tradespeople—like your local plumber, roofer, landscaper, HVACtechnician and others who are employed in the trades—are immensely skilled and extensively trained. They are the essential, unsung heroes who work tirelessly to ensure that our needs are met where we live or work, ready at a moment’snotice to leave their families in the middle of the night to go across town to help others. The trades constitute a large, expanding cornerstone of our economy. There are hundreds of thousands of trades businesses providing essential services inevery corner of the country. Based on internal analysis of industry data, we estimate the customers of trades businesses, which we refer to as “end customers,” spend approximately $1.5 trillion annually on trades services for homesand businesses in the United States and Canada alone.1

Despite the size andcriticality of the trades and the specialized skills of tradespeople, technology solutions have generally not evolved to address their needs. Thus, many trades are forced to rely on a variety of inadequate tools to manage their workflows. As aresult, before software like ours was created, we believe tradespeople were unable to fully harness the transformative benefits of modern technology to improve both their businesses and quality of life.

ServiceTitan was born in the trades and built for the trades. Our founders, Ara Mahdessian and Vahe Kuzoyan, are the sons of trades businessowners. They grew up watching their parents work late into the night after full days in the field—balancing the books, preparing invoices and scheduling the next day’s work—manually performing repetitive tasks that consumed their timeand diverted their energy away from what they loved: serving customers and spending time with their families. Ara and Vahe founded ServiceTitan to provide tradespeople, like their parents, with technology that is purpose-built to help tradesbusinesses thrive. We built our cloud-based software platform to offer end-to-end capabilities to manage complex workflows, connect key stakeholders and provide impactful industry best practices. ServiceTitan remains to this day maniacally focusedon the success of our customers as we fundamentally believe that our customers’ success leads to our success.

ServiceTitan providesan end-to-end, cloud-based software platform that connects and manages a wide array of business workflows such as advertising, job scheduling and management,dispatching, generating estimates and invoices, payment processing and more. We designed our platform to be the operating system for the trades, to

 

1 

See the section titled “Industry, Market and Other Data” for a description of how we calculatetrades spend in the United States and Canada.

 

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assimilate features, capabilities and best-practices across trades for all of our customers and to provide them with a playbook to scale and operate more efficiently. Tradespeople spend theirdays 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 salesenablement, 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 payrollintegration) 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.We believe these data insights position us to deliver differentiated value to our customers and to develop durable customer relationships, as demonstrated by our gross dollar retention rate of over 95% for each of the last ten fiscal quarters.2

We are intimately aware of the challenges our customers face every day. Our software hasbeen built on tens of thousands of hours of customer interactions and billions of data points collected from tradespeople’s live usage. Our close customer proximity and deep connection with the industry enable us to make evidence-basedrecommendations 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 intobest practices. These insights are then delivered across automated workflows, many of which we enhance with artificial intelligence, or AI, to address the distinct vertical-specific needs of the trades. Our comprehensive capabilities help ourcustomers manage, grow and further professionalize their businesses, positioning them to realize the following impactful outcomes:

 

  

Accelerate Revenue. Our suite of products provides powerful tools to help our customersdrive more sales by helping them to determine which end customers to target, marketing to end customers effectively and optimizing the process to convert and retain end customers by making the job-bookingprocess as seamless as possible. We also continuously refine and provide data-backed industry best practice playbooks to train technicians to be effective sales representatives and build trust with the end customer.

 

  

Drive Operational Efficiency. Our platform helps to increase overall productivity byseamlessly integrating our customers’ often fragmented business processes. Our tools enable office staff and technicians to collaborate more effectively and focus on their end customers’ needs by providing access to consistent andreal-time information, automating back-office workflows and enabling payment collection on-site.

 

  

Deliver a Superior End-Customer Service Experience.Our tools help the trades provide the kind of modern, convenient, mobile-first end-customer experience that earns five-star reviews and builds brand loyalty, where the end customer is typically ahomeowner, business owner or property manager. Our tools enable customers to deliver transparent, seamless end-customer outcomes from the initial call through job completion and on-site payment collection, andthen receive immediate feedback through reviews to make any necessary refinements or remediations to confirm end-customer satisfaction. Further, our embedded position in the trades ecosystem allows us toproactively monitor shifting end-customer expectations and continuously innovate around them.

 

  

Provide a Differentiated Employee Experience. Our software delivers cutting-edge toolsthat improve experiences for office staff and can increase commissions for technicians. We arm technicians with relevant data and a suite of capabilities that empower them to be more knowledgeable and productive at the job site, ultimatelydelivering an enhanced end-customer experience. These tools are designed to drive higher average ticket sizes and better end-customer reviews and retention, which inturn can lead to higher commissions for technicians while minimizing their time spent on menial tasks. We believe

 

2 

As of July 31, 2024. See the section titled “Management’s Discussion and Analysis of FinancialCondition and Results of Operations—Key Factors Affecting Our Business Performance” for a description of how we calculate gross dollar retention rate.

 

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higher commission opportunities, in tandem with the efficiency and employee experience benefits enabled by our platform, help to increase employee morale and retention in an industry facingcompetition over a shortage of skilled labor. Our customers’ technicians also benefit from being at the forefront of technology powering the trades, which can further drive technician retention at ServiceTitan-poweredbusinesses.

 

  

Heighten Business Owners’ Visibility, Control and Peace of Mind. Our platform offers ourcustomers real-time insights into key business workflows through customizable dashboards that can be accessed essentially anywhere, anytime. We empower our customers to make optimal high-impact, data-driven decisions for their businesses. Throughthis enhanced sense of control combined with the meaningful benefits we can deliver to business owners’ operational results, our tools are designed to deliver peace of mind to owners of trades businesses that their businesses are runningsmoothly and they are on an informed path to success.

We serve many trades, including plumbing, electrical, HVAC,garage door, pest control, landscaping and others. In fiscal 2023, fiscal 2024 and the 12 months ended July 31, 2023 and 2024, we processed $44.9 billion, $55.7 billion, $50.6 billion and $62.0 billion of Gross Transaction Volume, orGTV, respectively. GTV represents the sum of total dollars invoiced by our customers to end customers through our platform in a given period, which is intended to be a proxy for the total revenue our customers generate from their end customers. Wedefine a customer as a parent organization, which may have multiple locations, brands or subsidiaries, that has been billed in the prior three months, and of those customers we define Active Customers as customers with over $10,000 of annualizedbillings.3 Our customers have ranged in size from family-owned contractors with a few employees to large franchises with national footprints of over 500 locations and over $1 billion inannual GTV. As of January 31, 2023 and 2024, we had approximately 6,800 Active Customers and approximately 8,000 Active Customers, respectively, representing over 95% and over 96% of our annualized billings, respectively. During fiscal 2024,our customers performed jobs in zip codes representing approximately 98.5% of the U.S. population, based on U.S. census data as of 2022. In fiscal 2024, approximately 109 million jobs were completed by our customers through our platform. As atestament to our platform’s ability to scale with our customers, as of January 31, 2024, we had over 1,000 customers with annualized billings exceeding $100,000 on our platform, a number which has roughly doubled since January 31,2022. Customers with annualized billings exceeding $100,000 on our platform represented over 50% of annualized billings as of January 31, 2024.

We have two general categories of revenue: (i) platform revenue and (ii) professional services and other revenue. The substantial majority ofour revenue is platform revenue, which we generate through (a) subscription revenue generated from access to and use of our platform, including subscriptions to our Core and certain Pro products, and (b) usage-based revenue generated fromtransactions using our FinTech solutions, usage of certain Pro products and other usage-based services. We land with our Core product, which offers a base-level functionality across all key workflows, including call tracking, scheduling,dispatching, end-customer communications, marketing automation, estimating, job costing, sales, inventory and payroll integration. To supplement our Core product and provide an even higher level offunctionality, we offer our Pro products, which provide value-additive capabilities, as well as our FinTech products, which include payment processing and third-party financing solutions. Together, we refer to our Pro and FinTech products as“add-on products.” Our net dollar retention rate, which we view as a measure of our customers’ growth and success on our platform, was over 110% for each of the last ten fiscalquarters.4 As our customer base has grown, we have seen a gradual normalization of our quarterly net dollar retention rate over the last ten fiscal quarters. During this period, our quarterly netdollar retention rate declined by seven percentage points, of which a two percentage point decline occurred in the last twelve months between July 31, 2023 and July 31, 2024. We also generate a small portion of revenue from professionalservices and other sources, with this type of revenue generally earned when we onboard new customers.

 

3 

See the section titled “Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Our Business Model” for a description of how we calculate annualized billings.

4 

As of July 31, 2024. See the section titled “Management’s Discussion and Analysis of FinancialCondition and Results of Operations—Our Business Model” for a description of how we calculate net dollar retention rate.

 

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We have consistently grown and scaled our business operations organically and throughacquisitions, while investing for the future. From fiscal 2021 to fiscal 2024, our revenue grew from $179.2 million to $614.3 million, respectively, representing a compound annual growth rate of 51%. Most recently, our revenue was$467.7 million and $614.3 million for fiscal 2023 and fiscal 2024, respectively, representing a year-over-year increase of 31%. Our revenue was $292.5 million and $363.3 million for the six months ended July 31, 2023 and2024, respectively, representing a year-over-year increase of 24%. During fiscal 2023 and fiscal 2024, we incurred losses from operations of $221.9 million and $182.9 million, respectively, with $97.1 million and $17.1 million innon-GAAP losses from operations, respectively.5 During the six months ended July 31, 2023 and 2024, we incurred losses from operations of $98.6 million and $86.0 million, respectively,with $14.9 million in non-GAAP loss from operations and $16.8 million in non-GAAP income from operations, respectively. During fiscal 2023 and fiscal 2024, we incurred net losses of $269.5 million and $195.1 million,respectively. During the six months ended July 31, 2023 and 2024, we incurred net losses of $104.1 million and $91.7 million, respectively. Our net loss, loss from operations and non-GAAP income(loss) from operations in recent periods reflect our continued investment in the growth of our business to capture the large market opportunity available to us.

Industry Background

Access to cleanwater, consistent power, heated and ventilated air, an environment free from pest infestations, and a roof overhead are just some of the basic requirements of the modern home and business. We take these standards of living and comforts for granteduntil something goes wrong—a water pipe bursts, the heat goes out in the dead of winter or the power goes down in the middle of the workday. It is in these moments when tradespeople come to the rescue and we remember how much we depend on thetrades.

The Trades Are Massive, Durable and Rapidly Professionalizing

The trades are a cornerstone of our global economy and one of the largest employment categories for the U.S. workforce. They attractconsiderable spending on homes, businesses and other properties. Based on internal analysis of industry data, we estimate end customers spend approximately $1.5 trillion annually on trades services for their homes and businesses in the United Statesand Canada alone. As an industry, this places the trades above other well-known annual spend categories in the United States, such as the approximately $1.1 trillion spent on retail e-commerce, approximately $1.0 trillion spent ontransportation and warehousing and approximately $0.9 trillion spent on accommodation and food services, each in 2023.6

The critical and generally non-discretionary nature of the work conducted by trades businesses alsomakes it a resilient category in times of economic and societal uncertainty. According to an industry report, over 75% of the 666 million jobs completed by trades businesses across U.S. residential home services in 2022 were expected to beimmediate, preventative or non-discretionary in nature.7

In addition to being large and durable, the trades have several tailwinds that we expect to continue for the foreseeable future. First, theU.S. building stock, including homes, businesses, and other properties, are aging, requiring increasing levels of upkeep. In 1991, the median age of a U.S. owner-occupied home was 27 years; by 2021, the median age had increased to 43 years, itshighest in the last three decades.8 Second, homeowners and property managers increasingly lack the technical skills, know-how and willingness to performincreasingly

 

5 

See the section titled “Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Non-GAAP Financial Measures—Non-GAAP Income (Loss) from Operations and Non-GAAP Operating Margin” for a description of non-GAAP income (loss) from operations and a reconciliation of non-GAAP income (loss) from operations toloss from operations, the most directly comparable financial measure calculated in accordance with GAAP, as well as a summary of certain limitations of non-GAAP measures.

6 

See the section titled “Industry, Market and Other Data” for a description of how we calculatetrades spend in the United States and Canada, and spend on other categories in the United States. Comparative spend categories include spend data from the United States only and do not include spend data from Canada.

7 

Angi Inc., The Economy of Everything Home, 2022, https://www.angi.com/research/reports/market/.

8 

Harvard Joint Center for Housing Studies, The State of the Nation’s Housing, 2023, www.jchs.harvard.edu.All rights reserved.

 

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complex projects in a “DIY” manner, driving up demand for professional tradespeople. Finally, climate change has ushered in changing and increasingly extreme weather patterns, includingwarmer summers and colder winters that result in, for instance, a heightened need for HVAC systems. Over time, changing weather patterns can lead to more wear-and-tearon homes and businesses, increasing the frequency of maintenance projects and new installations. In addition, a shift to clean energy would require installation and associated maintenance of new equipment, requiring the expertise of tradespeople.

Historically, the trades consisted of smaller, often family-owned entrepreneurial businesses with limited operational and geographicalfootprints. However, in recent years, more businesses are seeking to integrate modern technologies into their operations. Furthering this paradigm shift is the influx of professional operators, including private equity owners, who are investing inand consolidating the trades, standardizing the operations of their portfolio companies, implementing best practices and accelerating the digital shift with a focus on scaling and improving efficiency. At the same time, end customers increasinglydemand seamless digital experiences that have become commonplace in other industries. These external forces create strong incentives for trades businesses to adopt transformative technology solutions to enhance business operations and deliver anenhanced customer experience.

Existing Tools Are Not Fulfilling the Needs of the Industry

The lack of modern, industry-specific technology solutions has made it difficult for trades businesses to meet the elevated expectations of endcustomers. Other than the solutions provided by ServiceTitan, the technology tools available to the trades broadly fall into one of four categories:

 

  

Multiple Disjointed Point-Specific Tools with Narrow Capabilities, that require a trades business topatch together numerous capabilities to support all its workflows and dedicate significant time, resources, capital and technical expertise, driving up costs without clear upside.

 

  

Horizontal Software Not Purpose-Built for the Trades, which typically require heavy customization aswell as significant ongoing investment to meet the industry-specific needs of the trades and to keep pace with fast-changing industry dynamics, new technology and shifting consumer expectations. These generic tools areill-suited for trades businesses, large or small, that generally do not manage complex IT deployments.

 

  

Legacy On-Premise Technology Tools, which were designedto address specific back-office use cases and fail to serve the end-to-end needs of a modern trades business. Often developedon-premise with unscalable data models, the constrained architectures of these tools generally fail to provide full connectivity between the business owner, field technicians andback-office.

 

  

Limited and Narrow, Down-market Solutions, that offer a thin layer of product capabilities thatonly address a narrow set of workflows to serve down-market trades businesses, which we define as having five employees or fewer. These solutions lack the end-to-end functionality and the deep expertise of the trades to effectively serve largertrades businesses or scale with their customers as they grow.

The Trades Require an Industry-Centric Approach

Trades businesses are complex in nature, servicing many types of jobs across complex workflows in distributed locations. Therefore, we believethat to adequately serve the trades, a software solution needs to be purpose-built for the nuanced dynamics of the trades, including the following:

 

  

Distributed Workforce with Dynamic Workflows. Trade workflows are often fluid and geographicallydistributed as technicians, dispatchers, customer support representatives, salespeople and owners may

 

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all be in separate and changing locations throughout the day but require immediate collaborative capabilities. Each job requires these distinct and separated constituents to frequently anddynamically interact with one another in real time to appropriately address an end customer’s job requirements. Further, jobs are generally complex and varying in scope, often requiring distinct combinations of parts and inventory. With suchdispersed and variable workflows, combined with the scarcity of technicians and inherent costs of dispatching a technician to a job, we believe that establishing operating standards and maintaining real-time connectivity to ensure that all employeesare working in sync can better position trades businesses to deliver high-quality and cost-efficient service.

 

  

Individual Trades Have Similar but Distinct Characteristics. The industry consists of a wide array oftrades that service different needs of households and businesses. Though each trade has similar operational challenges and business goals, there are often many unique workflows and specifications that require configurations based onthe nuances of a particular trade and/or end customer. For example, plumbing, electrical and HVAC services are often provided on-demand and require immediate dispatching, sophisticated in-the-field job estimating and sales enablement solutions on-site. Meanwhile, commercial landscaping projects require sophisticatedmeasurement and estimation for recurring maintenance contracts. Pest control and lawn care are often offered as scheduled recurring services that require membership optimization.

 

  

Technology Adoption Requires Business Transformation. Often there are structural inefficiencies intrades businesses’ historical operational workflows. However, these processes have existed for generations, and trades businesses may be apprehensive to invest in technology solutions that carry the risk of massively disrupting theirestablished norms. Since trades businesses tend to devote their resources to serving their customers, they often lack large IT organizations required to stitch together narrow solutions, build software productsin-house or customize horizontal technology to fit their distinct workflows.

Given the distinct characteristics and challenges of the trades, the need for a software platform built specifically for and trusted by thisindustry is critical.

The ServiceTitan Approach

The trades deserve a modern platform to deliver superior performance from the back-office to field technicians to end customers. ServiceTitanwas born to heed this calling. Our differentiated approach to drive success for our customers is built on three cornerstones:

 

  

Our Software is Trades-Specific andEnd-to-End. We have built what we believe to be the first and only comprehensive cloud-based software solution designed specifically for the diversespectrum of trades businesses, fully integrating across various facets of business operations, including the five centers of gravity (CRM, FSM, ERP, HCM and FinTech). Rather than targeting specific functional areas as is traditional in enterprisesoftware, we target our entire customer—a trades business—and have purpose-built our platform to cover their needs and workflowsend-to-end.

 

  

We Are Experts in the Trades. ServiceTitan lives and breathes the trades. We areemphatically focused on understanding the evolving challenges and workflows of trades stakeholders through continuously engaging with customers and observing their on-site utilization of our products. We alsoemploy in-house industry experts and work closely with customers and industry partners to maintain a constant pulse of the trades.

 

  

We Leverage Our Data Assets to Improve Customer Outcomes and Experiences.The trades live and breathe ServiceTitan. Trades businesses spend their days using our platform and processing key workflows through us. Our platform is typically used by nearly every employee across functions at trades businesses, giving usan unrivaled ability to collect data across all workflows and all users. Our customers rely on the ServiceTitan platform to record and collect operational and end-customer data.

 

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We anonymize, aggregate and analyze this customer data, alongside third-party industry and macro data, to glean insights and productize further improvements for ourcustomers.

We leverage these insights derived from our unique data assets together with our ever-growing expertise tobuild a differentiated perspective on the best way to run a trades business. Because our software is end-to-end, we are able to productize these best practices in ourplatform to drive real value for our customers.

This approach drives a powerful flywheel that reinforces our leadership in the trades. Asthe functionality of our platform expands, our customers can take advantage of that new functionality to increase the usage of our platform, fuel our revenue growth opportunities and enhance our data assets. This allows us to enhance existingsolutions, create new products and enter new trades which further improves our value proposition. In turn, we are able to attract new customers and empower our customers to grow, further driving usage and accelerating a virtuous flywheel thatreinforces our leadership in the trades.

 

 

LOGO

We supercharge this flywheel with our AI capabilities. ServiceTitan has always strived to be at theforefront of bringing data and machine learning to the trades, and now with the proliferation of AI, we continue to utilize the latest innovations to layer both traditional AI and Generative AI, or GenAI, into solutions across our platform.

We believe ServiceTitan has the three necessary ingredients to truly harness the power of AI to drive value for our customers:

 

  

Massive and growing proprietary data assets.

 

  

Similar customer profiles with common workflows.

 

  

An end-to-end platform,allowing us to put insights into action.

We bring AI solutions to our customers in two ways:

 

  

AI Features and Insights. We embed AI-driven features andinsights within certain existing products, enabling our customers to start small and build trust in the AI systems reducing barriers to entry for ServiceTitan AI products.

 

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AI Products. We have launched and plan to launch additional innovative, purpose-built, add-on AIproducts designed specifically for the trades to transform the way our customers perform certain functions.

Our Opportunity

The trades represent a massive, critical industry that has historically been underserved by technology; therefore, we believe the addressablemarket for technology for the trades is large and significantly underpenetrated. Our deep domain expertise, as well as the depth and breadth of our platform, position us to win in this attractive market opportunity.

In the United States and Canada alone, end customers spend approximately $1.5 trillion on trades services annually. Today, we serve trades andmarkets that represent approximately $650 billion of the total $1.5 trillion annual industry spend, which we refer to as our serviceable industry spend. This serviceable industry spend includes work performed in the construction of homes andbuildings as well as the servicing of existing residences and commercial buildings.

Today, we capture on average approximately 1% of ourcustomers’ GTV as revenue from their subscription to and current usage of our products. We estimate that with our current product suite, we have the potential to capture on average approximately 2% of our customers’ GTV as revenue fromtheir subscription to and usage of our full suite of add-on products.

Based on our approximately $650 billion serviceable industryspend and our estimate that we have the opportunity to capture on average approximately 2% of our customers’ GTV as revenue, we estimate ServiceTitan has a serviceable market opportunity of approximately $13 billion.9

We believe that this opportunity will continue to grow as we continue to expand ourplatform to reach trade spend we currently do not fully service. Specifically, we do not serve all trade verticals and businesses focused on heavy commercial and construction work, and we do not focus on down-market trades businesses, which wedefine as having five employees or fewer.

We believe we can further expand our serviceable market opportunity by increasing thepercentage of our customers’ GTV that we are able to capture as revenue, which we aim to do by providing additional value to our customers and potential customers through the development of new add-on products and deploying additional featuresin our Core product.

Our Platform

Our end-to-end platform is purpose-built to enable ourcustomers to accelerate the performance of their businesses. We provide owners, technicians, customer service representatives and other office staff with the tools to accelerate growth, drive operational efficiencies and deliver a superior end-customer and field service technician experience, all while monitoring key business drivers and outcomes.

We designed our platform to address key workflows within a trades business. Our platform offerings include: Core, Pro and FinTech products. Weland with our Core product, which offers a base-level functionality across all key workflows. To supplement our Core product and provide an even higher level of functionality, we offer our Pro products, which provide value-additive capabilities, aswell as our FinTech products, which include third-party payment processing and third-party financing solutions.

 

9 

See the section titled “Industry, Market and Other Data” for a description of how we calculatetrades spend in the United States and Canada and for a description of how we define and calculate our serviceable industry spend and serviceable market opportunity.

 

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Our solutions are designed to be highly configurable to best meet the specific needs of eachtrade vertical. We combine product offerings that are broadly applicable across verticals along with tools that are more trade vertical-specific, including those we acquired through FieldRoutes and Aspire, to ensure we have productized all keyworkflows necessary to deliver meaningful value to our customers. Today, we go to market in nearly all trade verticals we serve with our ServiceTitan solutions, and additionally cover the pest, cleaning, lawncare and commercial landscaping verticalswith our FieldRoutes and Aspire solutions. Over time, we expect to continue investing in the shared services layer across all of the solutions in our platform, increasing the level of integration across workflows. As we continue to innovate anddeliver on our product roadmap, we will thoughtfully configure our platform and introduce solutions to additional trades that are relevant to their specific needs and workflows. Further, Titan Intelligence, our AI engine, is woven into components ofour Core and Pro product offerings and is integrated into our FinTech solutions. We expect GenAI to be a key component of our platform going forward and plan to continue integrating AI across our platform, enhancing our product offerings withdifferentiated data insights.

Why We Continue to Win

We believe we have several distinct competitive advantages that drive our continued success:

 

  

Customer Proximity and Deep Domain Expertise. We understand the challenges that tradespeopleexperience every day in their businesses. Since our founding, we have maintained a singular focus on offering a purpose-built platform leveraging our domain expertise and strong passion for the trades. We talk to our customers constantly and havedifferentiated insight into their behavior, successes and challenges. We employ industry experts and partner with trade industry organizations to ensure we understand trades businesses and address their needs from product innovation to end-customer success.

 

  

End-to-End andTrades-Specific Platform Extensible Across Trade Verticals. We continue to invest in a robust layer of solutions, including add-on products, that can be leveraged across trade verticals, which we refer to as “shared services.” Atthe same time, we have certain focused solutions to enable more vertical-specific workflows, such as those acquired through FieldRoutes and Aspire, to ensure that our offering covers the end-to-end workflows of each trade vertical we serve. Over time, we take aspects of these vertical-specific solutions and make them configurable to other trades, adding to our layer of shared services.As our shared services layer continues to grow, our customers across all trades can benefit from a wider and deeper range of offerings. Our shared services layer also provides us with a head start when entering new trades; we formulate our learningsfrom trades we have penetrated so far into a proven strategy to enter new trades verticals.

 

  

Powerful Data-Driven Insights. In fiscal 2024, customers on our platform completed approximately109 million jobs and $55.7 billion of GTV was processed on our platform. All of this activity provides us with data-driven insights that improve our customer value proposition. Titan Intelligence, our AI engine, is woven into components ofour Core and Pro product offerings and is integrated into our FinTech solutions.

 

  

Innovative Business Model. Our business model deeply aligns with the success of our customers.We often sell to business owners and key executives, who know the needs of their business best, and understand the full breadth of pain points with existing solutions, and our deep domain expertise gives us the credibility to speak their languageduring the go-to-market process, leading to a sales cycle that, between January 1, 2024 and July 31, 2024, was on average less than 60 days. During onboarding, our teamsheavily invest in our customers’ success by providing an effective implementation experience. As customers experience the significant business acceleration benefits of our platform, we have often observed our customers hire more technicians,increase GTV and adopt more of our products, as

 

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evidenced by our net dollar retention rate of over 110% for each of the last ten fiscal quarters, and our gross dollar retention rate of over 95% for each of the last ten fiscal quarters.10

 

  

World Class Team of Titans. Our founders and management teamare well-positioned as champions of the trades with deep domain experience as well as software and FinTech expertise. ServiceTitan is focused on bringing people together onto our team and working together under a strict meritocracy in order to beable to serve a historically underserved industry. Our culture has been a critical component of our success since our founding and tightly connects all of our employees, who we refer to as Titans, to our mission.

Our Growth Opportunities and Strategies

Our growth opportunities and strategies include the following:

 

  

Increasing GTV on Our Platform. We are focused on expanding the $62.0 billion of GTV processedon our platform for the twelve months ended July 31, 2024. We expand the GTV on our platform by enabling our customers to grow their GTV and by serving additional customers, either in trades and markets we operate in today, or in new trades andmarkets we may expand into in the future.

 

  

Growing with Our Customers. As our customers grow their businesses while using our platform, they oftenhire and add more users to their existing subscription and also complete more transactions through our platform.

 

  

Increasing GTV by Serving Additional Customers in Existing Trades and Markets. Our ability to increaseGTV 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 ofprofessional operators, including private equity owners, who are investing in and consolidating the trades, in many cases on our platform. Because of these dynamics, we focus on increasing the GTV on our platform, rather than new customer count. Webelieve there is a significant, untapped opportunity to invest in sales and marketing and add more customers in the trades we already serve. Based on the GTV generated by our customers during the 12 months ended July 31, 2024, we estimate wehave less than 10% penetration in our approximately $650 billion serviceable industry spend.

 

  

Increasing GTV by Entering New Trades and Markets. We believe there is a significant opportunity toexpand to new trades and markets. We intend to continue to invest in our platform to address the needs of additional trades and we believe our track record and continued strategy to build features that directly address key pain points for ourstakeholders across a growing number of trades will continue to differentiate us and help expand our customer base across a growing addressable market.

 

  

Expanding Existing Customer Relationships. As we demonstrate the high ROI of our products to ourcustomers, 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 orient our activities around what is best for our customers, notonly because it is the right thing to do, but also because it drives our growth and financial success.

 

  

Driving Adoption of Add-On Products. As our customers realize the positive impact of using ourplatform, grow and further professionalize, they often adopt additional ServiceTitan features, namely our FinTech and Pro products. This increased adoption not only drives our revenue

 

10 

As of July 31, 2024. See the sections titled “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Our Business Model” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Business Performance” fordescriptions of how we calculate net dollar retention rate and gross dollar retention rate, respectively.

 

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through adoption of existing add-on products, but also gives us a sharper inside perspective of how customers engage with our platform and what additional add-on products might be helpful for us to innovate.

 

  

Building New Add-on Products. We have a history of building and launching add-on products where we seethe opportunity to create significant positive impact for our customers.

Our Capital Structure

Upon the completion of this offering, we will have three classes of common stock. Our Class A common stock, which is the stock we are offeringby means of this prospectus, will have one vote per share, our Class B common stock will have 10 votes per share and our Class C common stock will have no votes per share, except as otherwise required by law. Upon the completion of thisoffering, Ara Mahdessian, our co-founder, Chief Executive Officer and a member of our board of directors, and Vahe Kuzoyan, our co-founder, President and a member of our board of directors, or collectively, our Co-Founders, will, together with theirrespective affiliates, hold all of the issued and outstanding shares of our Class B common stock. Accordingly, upon the completion of this offering, the shares held by our Co-Founders (including shares over which they have voting oradministrative control) will represent    % of the voting power of our outstanding capital stock, which voting power may increase over time as our Co-Founders exercise or vest in equity awards outstanding at the time of thecompletion of this offering. If all such equity awards held by our Co-Founders (including the Co-Founder PSUs referenced below) had been exercised or vested and settled in shares of Class B common stock as of the date of the completion of thisoffering, the shares held by our Co-Founders (including shares over which they have voting or administrative control) would represent    % of the voting power of our outstanding capital stock. As a result, our Co-Founders will beable to significantly influence or control any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our amended and restated certificate of incorporation and bylaws andthe approval of any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction.

Shares ofour Class C common stock, which entitle the holder to no votes per share (except as otherwise required by law), will not be issued and outstanding upon the completion of the offering, and we have no current plans to issue shares of Class C commonstock. These shares will be available to be used in the future for various uses including to further strategic initiatives, such as financings or acquisitions, or issue future equity awards to our service providers.

The multi-class structure of our common stock is intended to ensure that, for the foreseeable future, our Co-Founders continue to control orsignificantly influence the governance of the company, which we believe will permit us to continue to prioritize our long-term goals rather than short-term results, to enhance the likelihood of stability in the composition of our board of directorsand its policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of the company. This multi-class structure is intended to preserve this control or significant influence until, among other events,(i) the number of shares of Class B common stock (including securities convertible or exercisable into Class B common stock) held by our Co-Founders and their permitted entities and permitted transferees after the completion of thisoffering is less than 20% of the number of shares of Class B common stock (including securities convertible or exercisable into Class B common stock) held by our Co-Founders and their permitted entities and permitted transferees on the date of thecompletion of this offering, which we sometimes refer to herein as the 20% Ownership Threshold; (ii) a period of 15 years after the completion of this offering has elapsed or (iii) with respect to the shares of Class B common stock held byone of our Co-Founders, the earlier of such Co-Founder’s death, termination for cause or voluntarily cessation of providing service to us. The timing and mechanics for the conversion of the Class B common stock into Class A common stock, aswell as other terms related thereto, are more fully described in the section titled “Description of Capital Stock” and are set forth in the amended and restated certificate of incorporation to be in effect following the completion of thisoffering, which will be filed as an exhibit to the registration statement of which this prospectus forms a part.

 

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Channels for Disclosure of Information

Investors, the media and others should note that, following the completion of this offering, we intend to announce material information to thepublic through filings with the Securities and Exchange Commission, or the SEC, the investor relations page on our website, press releases, public conference calls and our corporate blog at www.servicetitan.com/blog.

Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on ourwebsite.

Corporate Information

Wewere incorporated in 2007 as LinxLogic, Inc. under the laws of the state of Delaware. In 2014, we changed our name to ServiceTitan, Inc. Our principal executive offices are located at 800 N. Brand Blvd., Suite 100, Glendale, California 91203, andour telephone number is (855) 899-0970. Our website address is www.servicetitan.com. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus andinclusions of our website address in this prospectus are inactive textual references only. You should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our Class Acommon stock.

“ServiceTitan,” our logo and our other registered or common law trademarks, service marks or trade namesappearing in this prospectus are the property of ServiceTitan, Inc. Other trademarks and trade names referred to in this prospectus are the property of their respective owners.

Risk Factors Summary

Our business issubject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. These risks could materially and adversely impact our business, financialcondition and results of operations, which could cause the trading price of our Class A common stock to decline and could result in a loss of all or part of your investment. Additional risks, beyond those summarized below or discussed elsewherein this prospectus, may apply to our business, activities or operations as currently conducted or as we may conduct them in the future or in the markets in which we operate or may in the future operate. These risks include, but are not limited to,the following:

 

  

We have experienced rapid growth in recent periods, and such growth may not be indicative of our futuregrowth. If we fail to properly manage future growth, our business, financial condition, results of operations and prospects could be materially adversely affected.

 

  

We have a history of losses and may not be able to achieve or sustain profitability in the future.

 

  

If we fail to manage our growth effectively, our brand and reputation, business, financial condition andresults of operations could be adversely affected.

 

  

If we fail to effectively develop and commercialize new products, enhance and improve our platform, expand thenumber of trades we support, respond to changes in trades business demands or preferences or adapt to changes in trade industry practices, processes and technological advances, we may not remain competitive.

 

  

Our operations can be seasonal, and the results of our operations can vary from quarter to quarter andyear-over-year, so our financial performance in certain financial quarters or years may not be indicative of, or comparable to, our financial performance in subsequent financial quarters or years.

 

  

Factors that adversely affect the trades industry, including industry consolidation, the increased prevalenceof marketplaces for contractors, supply chain issues and labor shortages, could also adversely affect the demand for our platform and, as a result, our business, financial condition and results of operations.

 

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We engage our team members in various ways, including direct hires, through professional employerorganizations and as independent contractors. As a result of these methods of engagement, we face certain challenges and risks that can affect our business, operating results and financial condition.

 

  

The impact of economic conditions, including the resulting effect on consumer spending and on ourcustomers’ finances and operations, may adversely affect our business, financial condition and results of operations.

 

  

The market for software designed to serve the trades is evolving, and our future success depends on the growthof the trades industry and our ability to adapt, keep pace and respond effectively to evolving markets.

 

  

We face competition from both established and new companies offering services similar to ours, and many of ourpotential customers have developed, or could develop, proprietary solutions, all of which may have a negative effect on our ability to add new customers, retain existing customers and/or grow our business.

 

  

We may be unsuccessful in making, integrating and maintaining acquisitions, including past acquisitions.

 

  

We have incorporated and are incorporating traditional AI, machine learning and GenAI into some of ourproducts. This technology is new and developing and may present operational and reputational risks or result in liability or harm to our reputation, business, results of operations or customers.

 

  

Any failure to offer high quality support for our customers, including throughout the implementation process,may harm our relationships with our customers and, consequently, our business.

 

  

Our ability to increase our customer base and achieve broader market acceptance of our platform will depend onour ability to develop and expand our sales and marketing capabilities.

 

  

A majority of our customers are small- and medium-sized businesses,which can be more difficult and costly to retain than large businesses and may increase the impact of economic fluctuations on us.

 

  

We rely on software and services licensed from other third parties. Defects in or the loss of software orservices from third parties could increase our costs and adversely affect the quality of our service.

 

  

If we or our third-party service providers experience a cybersecurity breach or other incident, including anybreach or incident that allows, or is perceived to allow, unauthorized access to our platform or our Sensitive Information, our reputation and brand, business, financial condition and results of operations could be adversely affected.

 

  

The material weaknesses in our internal control over financial reporting, which we first identified in fiscal2019, have been remediated as of the end of fiscal 2024. While we remediated these material weaknesses, such remediation does not guarantee that our remediated controls will continue to be effective or that we will not experience other materialweaknesses in the future, which could affect the reliability of our financial statements and have other adverse consequences.

 

  

The multi-class structure of our common stock will have the effect of concentrating voting power with ourCo-Founders, which will limit your ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our board of directors, the adoption of amendments to our amended and restated certificate ofincorporation and bylaws and the approval of any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction. Future issuances of our Class C common stock, if any, will not dilute the voting power ofour Co-Founders, but will dilute their economic interest, which could cause their interests to conflict with your interests. Further, the issuance of shares of Class C common stock, whether to our Co-Founders or to other stockholders, could prolongthe duration of our Co-Founders’ voting power.

 

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Implications of Being an Emerging Growth Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As anemerging growth company, we may take advantage of specified reduced reporting requirements that are otherwise applicable generally to public companies. These reduced reporting requirements include:

 

  

the requirement to present only two years of audited financial statements and only two years of relatedmanagement’s discussion and analysis in this prospectus;

 

  

an exemption from compliance with the auditor attestation requirement on the effectiveness of our internalcontrol over financial reporting;

 

  

reduced disclosure about our executive compensation arrangements; and

 

  

an exemption from the requirements to obtain a non-binding advisoryvote on executive compensation or shareholder approval of any golden parachute arrangements.

We may take advantage ofthese provisions until we are no longer an emerging growth company. We would cease to be an “emerging growth company” upon the earliest to occur of: (i) the last day of the fiscal year in which we have more than $1.235 billion inannual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have, in anythree-year period, issued more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of this offering. We may choose totake advantage of some but not all of these reduced reporting burdens. We have taken advantage of certain reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receivefrom other public companies in which you hold stock.

In addition, the JOBS Act provides that an “emerging growth company” candelay adopting new or revised accounting standards until those standards apply to private companies. We have elected to use this extended transition period under the JOBS Act. Accordingly, our financial statements may not be comparable to thefinancial statements of public companies that comply with such new or revised accounting standards.

See the section titled “RiskFactors—Risks Related to Ownership of Our Class A Common Stock, Governance and this Offering—We are an ‘emerging growth company,’ and the reduced disclosure requirements applicable to emerging growth companies may make our ClassA common stock less attractive to investors.”

 

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THE OFFERING

 

Class A common stock offered by us

      shares.

 

Option to purchase additional shares of Class A common stock from us

      shares.

 

Class A common stock to be outstanding after this offering

    shares (or       shares if the underwriters exercise their option to purchaseadditional shares of our Class A common stock in full).

Class B common stock to be outstanding after this offering

    shares.

 

Class C common stock to be outstanding after this offering

None.

 

Total Class A, Class B and Class C common stock to be outstanding after this offering

   shares (or     shares if the underwriters exercise their option to purchase additionalshares of our Class A common stock in full).

 

Use of proceeds

We estimate that the net proceeds to us from the sale of shares of our Class A common stock in this offering will be approximately$      million (or approximately $      million if the underwriters’ exercise their option to purchase additional shares of our Class A common stock in full), based uponthe assumed initial public offering price of $      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts andcommissions and estimated offering expenses payable by us.

 

 

The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for ourClass A common stock and enable access to the public equity markets for us and our stockholders. We intend to use approximately $      million of the net proceeds from this offering to redeem all outstandingshares of our non-convertible preferred stock, at a redemption price per share equal to $1,000 plus all accrued but unpaid dividends on each such share, with the remaining net proceeds to be used for general corporate purposes, including workingcapital, operating expenses and capital expenditures. Additionally, we may use a portion of the net proceeds to acquire or invest in businesses, products, services or technologies. However, we do not have agreements or commitments for any materialacquisitions or investments at this time. See the section titled “Use of Proceeds” for additional information.

 

Voting Rights

We will have three classes of common stock: Class A common stock, Class B common stock and Class C common stock. Sharesof our Class A common stock are entitled to one vote per share, shares of

 

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our Class B common stock are entitled to 10 votes per share and shares of our Class C common stock are entitled to no votes per share, except as otherwise required by law.

 

 

Holders of our Class A common stock and Class B common stock will generally vote together as asingle class, unless otherwise required by law or our amended and restated certificate of incorporation. Upon the completion of this offering, the shares held by our Co-Founders (including shares over which they have voting or administrativecontrol) will represent     % of the voting power of our outstanding capital stock, which voting power may increase over time as our Co-Founders exercise or vest in equity awards outstanding at the time of the completion ofthis offering. If all such equity awards held by our Co-Founders (including the Co-Founder PSUs referenced below) had been exercised or vested and settled in shares of Class B common stock as of the date of the completion of this offering, theshares held by our Co-Founders (including shares over which they have voting or administrative control) would represent     % of the voting power of our outstanding capital stock. As a result, our Co-Founders will be able tosignificantly influence or control any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our amended and restated certificate of incorporation and bylaws and theapproval of any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction. Additionally, the shares held by our executive officers, directors and holders of 5% or more of our capital stock, and theirrespective affiliates (including, with respect to our Co-Founders, shares over which they have voting or administrative control), will represent     % of the voting power of our outstanding capital stock. See the sectionstitled “Principal Stockholders” and “Description of Capital Stock” for additional information.

 

Directed share program

At our request, and reflecting our desire to set aside a significant number of shares for certain of our customers, the underwritershave reserved up to      shares of our Class A common stock, or 5% of the shares offered in this offering, for sale at the initial public offering price through a directed share program to:

 

  

eligible customers;

 

  

friends and family members of our Co-Founders; and

 

  

certain other persons.

 

 

Eligible customers must reside in the United States and be at least 18 years of age. We will invitecustomers to participate in the directed share program on a first-come, first-serve basis, and an invitation to

 

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participate in the directed share program does not guarantee that the participant will receive an allocation of shares. Accordingly, we cannot provide any assurance that any eligible participantwill receive an invitation or will receive an allocation in the directed share program. Current and former ServiceTitan employees are not eligible to participate in the directed share program.

 

 

Shares purchased through the directed share program will not be subject to the terms of the lock-up agreementor market standoff provisions.

 

 

The number of shares of Class A common stock available for sale to the general public will be reduced to theextent that such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus.     , anunderwriter in this offering, will administer our directed share program.

 

 

See the section titled “Underwriting—Directed Share Program” for additional information.

 

Risk Factors

See the section titled “Risk Factors” and other information included in this prospectus for a discussion of factors you shouldcarefully consider before deciding whether to invest in our Class A common stock.

 

Proposed trading symbol

“TTAN”

The number of shares of our common stock that will be outstanding after this offering is based on     shares of ourClass A common stock and 13,404,097 shares of our Class B common stock outstanding as of July 31, 2024, in each case, after giving effect to the Reclassification, the Capital Stock Conversion and the Class B Stock Exchange(each as defined below), and no shares of Class C common stock outstanding.

The number of shares of our Class A common stockand Class B common stock outstanding as of July 31, 2024 exclude the following:

 

  

4,622,817 shares of our Class A common stock issuable upon the exercise of options to purchaseshares of our Class A common stock outstanding as of July 31, 2024, with a weighted-average exercise price of $15.43 per share;

 

  

2,725,410 shares of our Class B common stock issuable upon the exercise of options to purchase shares of ourClass B common stock outstanding as of July 31, 2024, with a weighted-average exercise price of $12.72 per share, of which options to purchase 340,676 shares of our Class B common stock were canceled in October 2024;

 

  

5,307,222 shares of our Class A common stock subject to restricted stock units, or RSUs, outstandingas of July 31, 2024;

 

  

192,786 shares of our Class B common stock subject to RSUs outstanding as of July 31, 2024;

 

  

613,896 shares of our Class A common stock subject to RSUs granted subsequent to July 31, 2024;

 

  

6,483,088 shares of our Class B common stock subject to performance-based RSUs that were granted to ourCo-Founders in October 2024 and that vest upon the satisfaction of a service condition and achievement of certain stock price hurdles, or the Co-Founder PSUs;

 

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250,000 shares of our non-convertible preferred stock outstandingas of July 31, 2024, which we intend to redeem pursuant to the NCPS Redemption (as defined below);

 

  

796,799 shares of our Class A common stock that we are committing to issue and donate over the next tenyears to fund certain of our social impact initiatives, which issuance and donation is conditioned upon the completion of this offering; and

 

  

    shares of our Class A common stock reserved for future issuance under our equitycompensation plans, consisting of:

 

  

    shares of our Class A common stock to be reserved for future issuance under our2024 Incentive Award Plan, or our 2024 Plan, which will become effective prior to the completion of this offering;

 

  

1,550,798 shares of our Class A common stock reserved for future issuance under our 2015 Stock Plan, orour 2015 Plan, as of July 31, 2024, which number of shares will be added to the shares of our Class A common stock to be reserved for future issuance under our 2024 Plan upon its effectiveness, at which time we will cease granting awardsunder our 2015 Plan; and

 

  

    shares of our Class A common stock to be reserved for future issuance under our2024 Employee Stock Purchase Plan, or our ESPP, which will become effective prior to the completion of this offering.

Our 2024 Plan and ESPP will each provide for annual automatic increases in the number of shares of our Class A common stock reservedthereunder, and our 2024 Plan will provide for increases to the number of shares that may be granted thereunder based on shares under our 2015 Plan or our 2007 Stock Plan, or our 2007 Plan, that expire, are tendered to or withheld by us for paymentof an exercise price or for satisfying tax withholding obligations or are forfeited or otherwise repurchased by us, as more fully described in the section titled “Executive Compensation—Employee Benefit and Stock Plans.”

Except as otherwise indicated, all information in this prospectus assumes:

 

  

the reclassification of all outstanding shares of our common stock into an equal number of shares of Class Acommon stock, which will occur immediately prior to the completion of this offering pursuant to the filing and effectiveness of our amended and restated certificate of incorporation, or the Reclassification;

 

  

the automatic conversion of all shares of our redeemable convertible preferred stock outstanding as ofJuly 31, 2024 (other than our Series F redeemable convertible preferred stock, Series G redeemable convertible preferred stock, Series H redeemable convertible preferred stock and Series H-1 redeemable convertible preferred stock) into31,456,905 shares of Class A common stock immediately prior to the completion of this offering pursuant to the terms of our amended and restated certificate of incorporation, or, together with the Series F Conversion, Series GConversion, Series H Conversion and Series H-1 Conversion (each as defined below), the Capital Stock Conversion;

 

  

the automatic conversion of all 2,795,266 shares of our Series F redeemable convertible preferred stockoutstanding as of July 31, 2024 into an aggregate of      shares of Class A common stock immediately prior to the completion of this offering pursuant to the terms of our amended and restated certificate ofincorporation, based on the assumed initial public offering price of $    per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, or the Series F Conversion. A $1.00increase in the initial public offering price would decrease the number of shares of Class A common stock issuable upon the conversion of our Series F redeemable convertible preferred stock by      shares, and a$1.00 decrease in the initial public offering price would increase the number of shares of Class A common stock issuable upon the conversion of our Series F redeemable convertible preferred stock by      shares. Formore

 

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information on the conversion adjustment provisions applicable to our Series F redeemable convertible preferred stock, see “Capitalization—Capital Stock Conversion”;

 

  

the automatic conversion of all 2,207,340 shares of our Series G redeemable convertible preferred stockoutstanding as of July 31, 2024 into an aggregate of      shares of Class A common stock immediately prior to the completion of this offering pursuant to the terms of our amended and restated certificate ofincorporation, based on the assumed initial public offering price of $    per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, or the Series G Conversion. A$1.00 increase in the initial public offering price would decrease the number of shares of Class A common stock issuable upon the conversion of our Series G redeemable convertible preferred stock by     shares, and a $1.00 decrease in the initial public offering price would increase the number of shares of Class A common stock issuable upon the conversion of our Series G redeemable convertible preferredstock by      shares. For more information on the conversion adjustment provisions applicable to our Series G redeemable convertible preferred stock, see “Capitalization—Capital Stock Conversion”;

 

  

the automatic conversion of all 5,604,318 shares of our Series H redeemable convertible preferred stockoutstanding as of July 31, 2024 into an aggregate of      shares of Class A common stock immediately prior to the completion of this offering pursuant to the terms of our amended and restated certificate ofincorporation, based on the assumed initial public offering price of $    per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, or the Series H Conversion. A$1.00 increase in the initial public offering price would decrease the number of shares of Class A common stock issuable upon the conversion of our Series H redeemable convertible preferred stock by     shares, and a $1.00 decrease in the initial public offering price would increase the number of shares of Class A common stock issuable upon the conversion of our Series H redeemable convertible preferredstock by      shares. For more information on the conversion adjustment provisions applicable to our Series H redeemable convertible preferred stock, see “Capitalization—Capital Stock Conversion”;

 

  

the automatic conversion of all 402,026 shares of our Series H-1 redeemable convertible preferred stockoutstanding as of July 31, 2024 into an aggregate of      shares of Class A common stock immediately prior to the completion of this offering pursuant to the terms of our amended and restated certificate ofincorporation, based on the assumed initial public offering price of $    per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, or the Series H-1 Conversion. A$1.00 increase in the initial public offering price would decrease the number of shares of Class A common stock issuable upon the conversion of our Series H-1 redeemable convertible preferred stockby      shares, and a $1.00 decrease in the initial public offering price would increase the number of shares of Class A common stock issuable upon the conversion of our Series H-1 redeemable convertiblepreferred stock by      shares. For more information on the conversion adjustment provisions applicable to our Series H-1 redeemable convertible preferred stock, see “Capitalization—Capital StockConversion”;

 

  

the exchange of an aggregate of 13,404,097 shares of Class A common stock held by our Co-Founders andtheir respective affiliates as of July 31, 2024, for an equivalent number of shares of our Class B common stock immediately prior to the completion of this offering pursuant to the terms of certain exchange agreements to be entered intowith us, or the Class B Stock Exchange;

 

  

the designation of the shares of our common stock underlying all equity awards held by our Co-Founders underthe 2015 Plan, including the Co-Founder PSUs, as Class B common stock, effective immediately prior to the completion of this offering, or the Equity Award Designations;

 

  

the redemption of all 250,000 outstanding shares of our non-convertible preferred stock immediately prior tothe completion of this offering, or the NCPS Redemption;

 

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the filing and effectiveness of our amended and restated certificate of incorporation in Delaware and theeffectiveness of our amended and restated bylaws will each occur immediately prior to the completion of this offering;

 

  

no exercise of outstanding stock options or settlement of outstanding RSUs subsequent to July 31, 2024;and

 

  

no exercise by the underwriters of their option to purchase up to an additional     shares of our Class A common stock from us.

 

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables summarize our consolidated financial and other data. We have derived the summary consolidated statements of operationsdata for fiscal 2023 and fiscal 2024 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary unaudited condensed consolidated statement of operations data for the six months ended July,31, 2023 and 2024 and the unaudited condensed consolidated balance sheet data as of July 31, 2024 from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. In our opinion, the unaudited interim financialstatements have been prepared on a basis consistent with our audited financial statements and contain all adjustments, consisting only of normal and recurring adjustments, necessary for the fair statement of such interim financial statements. Thefollowing summary consolidated financial and other data should be read in conjunction with the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financialstatements and related notes included elsewhere in this prospectus. The summary consolidated financial and other data in this section are not intended to replace, and are qualified in their entirety, by our consolidated financial statements and therelated notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of our results in any future period.

Consolidated Statements of Operations Data

 

   Fiscal  Six Months
Ended July 31,
 
   2023  2024  2023  2024 
   (in thousands, except share and per share amounts) 

Revenue:

     

Platform

  $ 443,523  $581,751  $276,134  $ 348,222 

Professional services and other

   24,211   32,590   16,359   15,100 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total revenue

   467,734   614,341   292,493   363,322 
  

 

 

  

 

 

  

 

 

  

 

 

 

Cost of revenue:

     

Platform

   140,921   169,766   83,903   96,993 

Professional services and other

   60,789   67,945   34,940   33,523 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total cost of revenue

   201,710   237,711   118,843   130,516 
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross profit

   266,024   376,630   173,650   232,806 
  

 

 

  

 

 

  

 

 

  

 

 

 

Operating expenses:

     

Sales and marketing

   196,775   219,994   103,208   115,819 

Research and development

   158,870   203,534   100,020   121,062 

General and administrative

   132,235   135,966   69,049   81,963 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total operating expenses

   487,880   559,494   272,277   318,844 
  

 

 

  

 

 

  

 

 

  

 

 

 

Loss from operations

   (221,856  (182,864  (98,627  (86,038
  

 

 

  

 

 

  

 

 

  

 

 

 

Other expense, net

     

Interest expense

   (54,542  (16,436  (7,987  (8,350

Interest income

   1,624   7,067   
3,117
 
  3,350 

Loss on extinguishment of debt

   (9,607  —    —    —  

Other income, net

   1,801   1,224   1,349   210 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total other expense, net

   (60,724  (8,145  (3,521  (4,790
  

 

 

  

 

 

  

 

 

  

 

 

 

Loss before income taxes

   (282,580  (191,009  (102,148  (90,828

Provision for (benefit from) income taxes

   (13,057  4,136   1,913   863 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss

   (269,523  (195,145  (104,061  (91,691

Accretion of non-convertible preferred stock

   (13,478  (45,873  (21,618  (26,956
  

 

 

  

 

 

  

 

 

  

 

 

 

Net loss attributable to common stockholders

  $(283,001 $(241,018 $(125,679 $(118,647
  

 

 

  

 

 

  

 

 

  

 

 

 

 

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   Fiscal  Six Months
Ended July 31,
 
   2023  2024  2023  2024 
   (in thousands, except share and per share amounts) 

Net loss per share, basic anddiluted(1)

  $(9.31 $(7.24 $(3.84 $(3.44
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted-average shares used in computing net loss per share, basic and diluted(2)

   30,410,373   33,267,131   32,765,776   34,485,622 

Pro forma net loss per share, basic anddiluted(2)

     

Pro forma weighted-average shares used in computing pro forma net loss per share, basic anddiluted(2)

     

 

(1) 

See Note 14 to our audited consolidated financial statements and Note 12 to our unaudited interim condensedconsolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our basic and diluted net loss per share attributable to common stockholders and the weighted-average shares used in computing the pershare amounts.

(2) 

The following table sets forth the computation of our unaudited pro forma net loss per share, basic anddiluted:

 

   Fiscal
    2024    
  Six Months
Ended July 31, 2024
 
Numerator  (in thousands, except share and per share
amounts)
 

Net loss attributable to common stockholders

  $(241,018 $(118,647

Pro forma adjustment to record additional stock-based compensation expense associated with optionsand RSUs that contain a performance-based vesting condition that will be satisfied upon the effectiveness of the registration statement of which this prospectus forms a part, assuming the effectiveness of the offering occurred on February 1,2023

   (24,552  (21,090

Pro forma adjustment to record deemed dividends for the impact of the anti-dilution adjustment tothe conversion prices of the Series F, Series G and Series H-1 redeemable convertible preferred stock as a result of the issuance of shares in this offering at an assumed initial offering price of $  per share, the midpoint of the estimatedoffering price range set forth on the cover of this prospectus, which is below the conversion prices of the Series F, Series G and Series H-1 redeemable convertible preferred stock, assuming the adjustment to the conversion prices and theeffectiveness of the offering occurred on February 1, 2023

   

Pro forma adjustment to record a deemed dividend to the Series H redeemable convertible preferredstock. As the issuance of shares in this offering at an assumed initial offering price of $  per share, the midpoint of the estimated offering price range set forth on the cover of this prospectus, is below the conversion price of theSeries H redeemable convertible preferred stock, the conversion price is adjusted as described in Note 11 to our audited consolidated financial statements included elsewhere in this prospectus. The conversion of the Series H redeemableconvertible preferred stock at the adjusted conversion price upon the completion of this offering is accounted for as a stock-settled redemption feature resulting in the difference between the carrying value and the fair value of the Series Hredeemable convertible preferred stock recorded as a deemed dividend. The pro forma adjustment assumes the conversion of the Series H redeemable convertible preferred stock and the effectiveness of the offering occurred on February 1,2023

   

Pro forma adjustment to record (i) a deemed dividend for the loss on the redemption of thenon-convertible preferred stock for the year ended January 31, 2024 of $87.6 million, measured as the difference between the carrying value of the non-convertible preferred stock of $187.4 million and the redemption price of $275 million as ofFebruary 1, 2023, offset by the (ii) the reversal of the accretion of the non-convertible preferred stock of $45.9 million for the year ended January 31, 2024 and $27.0 million for the six months ended July 31, 2024. These pro forma adjustmentsassume the non-convertible preferred stock was redeemed in full on February 1, 2023 at the then-applicable redemption price

   (41,725  26,956 
  

 

 

  

 

 

 

Pro forma net loss attributable to common stockholders, basic and diluted

  $   $  
  

 

 

  

 

 

 

 

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   Fiscal
    2024    
   Six Months
Ended July 31, 2024
 
   (in thousands, except share and per share
amounts)
 

Denominator

    

Weighted-average shares used in computing net loss per share, basic and diluted

   33,267,131    34,485,622 

Pro forma adjustment for vesting of RSUs that contain a performance-based vesting condition thatwill be satisfied upon the effectiveness of the registration statement of which this prospectus forms a part, assuming the effectiveness of the offering occurred on February 1, 2023

   57,804    185,209 

Pro forma adjustment to reflect the conversion of all shares of redeemable convertible preferredstock into shares of Class A common stock at the applicable conversion prices had the conversion occurred on February 1, 2023

    

Pro forma adjustment to reflect the number of shares sold in this offering at the assumed initialoffering price of $  per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, sufficient to repay the redemption price of the non-convertible preferred stock, had thenon-convertible preferred stock been redeemed in full on February 1, 2023 at the then-applicable redemption price

    
  

 

 

   

 

 

 

Pro forma weighted-average shares used in computing pro forma net loss per share, basic anddiluted

    
  

 

 

   

 

 

 

Pro forma net loss per share, basic and diluted

  $        $      
  

 

 

   

 

 

 

 

The computations of our unaudited pro forma net loss per share, basic and diluted, are illustrative, andassume that the events described above occurred as of Februrary 1, 2023. Our actual net loss per share computations will reflect the effect of the events when they occur, and accordingly, the impact of the above events will differ from the proforma amounts presented above.

 

The computations of our pro forma net loss per share, basic and diluted, exclude the impact of RSUs grantedafter July 31, 2024. In October 2024, we granted the Co-Founder PSUs to our Co-Founders, as described in Note 14 to our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus, with a preliminarygrant date fair value of approximately $264 million which is expected to be recognized over a weighted-average derived service period of approximately 5 years.

Consolidated Balance Sheet Data

 

   As of July 31, 2024 
   Actual  Pro Forma(1)   Pro Forma as
Adjusted(2)(3)
 
   (in thousands) 

Cash and cash equivalents

  $128,101  $128,101   $      

Working capital(4)

   118,891   118,891   

Total assets

   1,486,424   1,486,424   

Total liabilities

   367,410   367,410   

Redeemable convertible preferred stock

   1,395,878   —    

Non-convertible preferred stock

   260,502   260,502   

Total stockholders’ equity (deficit)

   (537,366  858,512   

 

(1) 

The pro forma column in the consolidated balance sheet data table above reflects (a) theReclassification, as if such reclassification had occurred on July 31, 2024, (b) the Capital Stock Conversion, as if such conversion had occurred on July 31, 2024, resulting in a decrease in redeemable convertible preferred stock and anincrease in total stockholders’ equity, (c) stock-based compensation expense of $31.4 million associated with options and RSUs that contain a performance-based vesting condition that will be satisfied upon the effectiveness of theregistration statement of which this prospectus forms a part, as if the offering had occurred on July 31, 2024, resulting in an increase in additional paid-in capital and accumulated deficit within totalstockholders’ deficit, (d) the Class B Stock Exchange, as if such exchange had occurred on July 31, 2024 and (e) the filing and effectiveness of our amended and restated certificate of incorporation in Delaware that will becomeeffective immediately prior to the completion of this offering.

 

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(2) 

The pro forma as adjusted column in the balance sheet data table above gives effect to (a) the pro formaadjustments set forth in (1) above, (b) the sale and issuance by us of shares of our Class A common stock in this offering, based upon the assumed initial public offering price of $      per share, which isthe midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, net of $0.8 million of offering costspaid as of July 31, 2024, and (c) the NCPS Redemption, as if such redemption had occurred on July 31, 2024, resulting in a reduction in cash and cash equivalents, a reduction in the carrying value of non-convertible preferred stockand a reduction in additional paid-in capital for the deemed dividend for the loss on redemption of the non-convertible preferred stock.

(3) 

Each $1.00 increase or decrease in the assumed initial public offering price of$      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the amount of our pro forma as adjusted cash andcash equivalents, working capital, total assets and total stockholders’ equity (deficit) by $     , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains thesame, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, theamount of our pro forma as adjusted cash and cash equivalents, working capital, total assets and total stockholders’ equity (deficit) by $     , assuming the assumed initial public offering price remains the same,and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

(4) 

Working capital is defined as current assets less current liabilities.

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 forplatform 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 and non-GAAP operating margin areuseful in evaluating our operating performance.

For the reasons set forth below, we believe that excluding the following items providesinformation that is helpful in understanding our operating results, 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-basedcompensation expense 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-basedcompensation 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 and other factors. We exclude employer payrolltaxes 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 reportingprocesses and when assessing our actual performance, budgeting, planning, and forecasting future periods.

 

  

Amortization of acquired intangible assets. We incur amortization expense for acquired intangibleassets 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 natureof 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 implementedworkforce reductions in fiscal 2024 and fiscal 2025. In connection with these reductions, we incurred

 

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employee-related expenses including severance and other termination benefits. We excluded these charges when assessing our actual performance and when budgeting, planning and forecasting futureperiods.

 

  

Loss on operating lease assets. In fiscal 2024 and fiscal 2025, we incurred impairments on certainright-of-use assets and other long-lived assets. See Note 2 to our audited consolidated financial statements and Note 5 to our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. We believe thatit 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 comparabilitybetween periods.

 

  

Acquisition-related items. We have incurred costs related to acquisitions, including legal, third-partyvaluation 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 excludethese 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 operating results and those of otherpeer companies.

 

  

Write-off of deferred offering costs. We wrote off previously capitalized costs related to an offeringof our securities that we elected not to pursue in fiscal 2023. These costs are not recurring in nature and we believe excluding these charges allows investors to make meaningful comparisons between our actual performance and those of other peercompanies. We also exclude these charges when assessing our actual performance and when budgeting, planning and forecasting future periods.

These measures, however, have certain limitations in that they reflect the exercise of judgment by our management about which expenses areexcluded 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 measuresshould 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 and non-GAAP operating margin may not be comparable to similar measures disclosed by other companies because not all companies and analysts calculate non-GAAP grossprofit, 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 and non-GAAPoperating margin in the same manner.

Non-GAAP Gross Profit andNon-GAAP Gross Margin

We define non-GAAP grossprofit 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 intangibleassets, restructuring charges, loss on operating lease assets and acquisition-related items. Total non-GAAP gross margin represents total non-GAAP gross profit as a percentage of total revenue. Non-GAAPplatform 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 ofprofessional services and other revenue.

 

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The following table reflects the reconciliation of GAAP gross profit to non-GAAP grossprofit and GAAP gross margin to non-GAAP gross margin for the periods presented:

 

  Platform  Professional
Services and Other
  Total 
  Six Months
Ended July 31,
  Six Months
Ended July 31,
  Six Months
Ended July 31,
 
   2023    2024    2023    2024    2023    2024  
        (in thousands)       

GAAP gross profit

 $192,231  $251,229  $(18,581 $(18,423 $173,650  $232,806 

Stock-based compensation expense and related employer payroll taxes

  2,962   2,527   2,334   2,006   5,296   4,533 

Amortization of acquired intangible assets

  11,004   10,836   968   1,118   11,972   11,954 

Restructuring charges

  1,160   386   1,969   129   3,129   515 

Loss on operating lease assets

     4,201      1,993      6,194 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP gross profit

 $207,357  $269,179  $(13,310 $(13,177 $194,047  $256,002 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Platform   Professional
Services and Other
  Total 
  Six Months
Ended July 31,
  Six Months
Ended July 31,
  Six Months
Ended July 31,
 
   2023    2024    2023    2024    2023    2024  

GAAP gross margin

     70     72  (114)%   (122)%      59     64

Stock-based compensation expense and related employer payroll taxes

  1  1  14  13  2  1

Amortization of acquired intangible assets

  4  3  6  7  4  3

Restructuring charges

  0  0  12  1  1  0

Loss on operating lease assets

  0  1  0  13  0  2
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP gross margin

  75  77  (81)%   (87)%   66  70
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

*

Totals may not foot due to rounding.

 

  Platform  Professional
Services and Other
  Total 
  Fiscal  Fiscal  Fiscal 
   2023    2024    2023    2024    2023    2024  
        (in thousands)       

GAAP gross profit

 $302,602  $411,985  $(36,578 $(35,355 $266,024  $376,630 

Stock-based compensation expense and related employer payroll taxes

  4,204   5,694   4,112   4,424   8,316   10,118 

Amortization of acquired intangible assets

  21,326   21,844   1,268   4,484   22,594   26,328 

Restructuring charges

     1,217      2,181      3,398 

Loss on operating lease assets

     798      347      1,145 

Acquisition-related items

  92      166      258    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP gross profit

 $328,224  $441,538  $(31,032 $(23,919 $297,192  $417,619 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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  Platform  Professional
Services and Other
  Total 
  Fiscal  Fiscal  Fiscal 
    2023    2024    2023    2024    2023    2024  

GAAP gross margin

     68     71  (151)%   (108)%      57     61

Stock-based compensation expense and related employer payroll taxes

  1  1     17     14  2  2

Amortization of acquired intangible assets

  5  4  5  14  5  4

Restructuring charges

  0  0  0  7  0  1

Loss on operating lease assets

  0  0  0  1  0  0

Acquisition-related items

  0  0  1  0  0  0
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP gross margin

  74  76  (128)%   (73)%   64  68
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

*

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 excludingstock-based compensation expense and related employer payroll taxes, acquisition-related items, 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 salesand marketing expense for the periods presented:

 

   Fiscal   Six Months
Ended July 31,
 
     2023      2024     2023  2024 
   (in thousands) 

GAAP sales and marketing expense

  $196,775  $219,994   $103,208  $115,819 

Stock-based compensation expense and related employer payroll taxes

   (13,879  (21,333)    (9,886  (7,644

Acquisition-related items

   (594  —     —    —  

Amortization of acquired intangible assets

   (22,764  (22,489)    (11,486  (11,056

Restructuring charges

   —    (1,674)    (1,647  (292

Loss on operating lease assets

   —    (980)    —    (5,433
  

 

 

  

 

 

   

 

 

  

 

 

 

Non-GAAP sales and marketing expense

  $159,538  $173,518   $ 80,189  $ 91,394 
  

 

 

  

 

 

   

 

 

  

 

 

 

Non-GAAP Research and Development Expense

We define non-GAAP research and development expense as GAAP research and development expense excludingstock-based compensation expense and related employer payroll taxes, acquisition-related items, restructuring charges and loss on operating lease assets.

 

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The following table reflects the reconciliation of GAAP research and development expense to non-GAAP research and development expense for the periods presented:

 

   Fiscal   Six Months
Ended July 31,
 
     2023      2024     2023  2024 
   (in thousands) 

GAAP research and development expense

  $158,870  $203,534   $100,020  $121,062 

Stock-based compensation expense and related employer payroll taxes

   (21,539  (34,408)    (17,402  (17,609

Acquisition-related items

   (761  —     —    (250

Restructuring charges

   —    (1,546)    (1,418  (991

Loss on operating lease assets

   —    (1,007)    —    (5,243
  

 

 

  

 

 

   

 

 

  

 

 

 

Non-GAAP research and development expense

  $136,570  $166,573   $ 81,200  $ 96,969 
  

 

 

  

 

 

   

 

 

  

 

 

 

Non-GAAP General and Administrative Expense

We define non-GAAP general and administrative expense as GAAP general and administrative expenseexcluding stock-based compensation expense and related employer payroll taxes, acquisition-related items, restructuring charges, loss on operating lease assets and write-off of deferred offering costs.

The following table reflects the reconciliation of GAAP general and administrative expense to non-GAAPgeneral and administrative expense for the periods presented:

 

   Fiscal   Six Months
Ended July 31,
 
     2023      2024     2023  2024 
   (in thousands) 

GAAP general and administrative expense

  $132,235  $135,966   $69,049  $81,963 

Stock-based compensation expense and related employer payroll taxes

   (20,841  (39,173)    (20,924  (15,192

Acquisition-related items

   (7,649  1,092    883   (1,927

Restructuring charges

   —    (1,564)    (1,449  (698

Loss on operating lease assets

   —    (1,725)    —    (13,298

Write-off of deferred offering costs

   (5,563  —     —    —  
  

 

 

  

 

 

   

 

 

  

 

 

 

Non-GAAP general and administrative expense

  $98,182  $94,596   $47,559  $50,848 
  

 

 

  

 

 

   

 

 

  

 

 

 

Non-GAAP Income (Loss) from Operations andNon-GAAP Operating Margin

We define non-GAAPincome (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, loss on operating lease assets and write-off of deferred offering costs.Non-GAAP operating margin represents non-GAAP income (loss) from operations as a percentage of total revenue.

 

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The following table reflects the reconciliation of GAAP loss from operations to non-GAAPincome (loss) from operations and GAAP operating margin to non-GAAP operating margin for the periods presented:

 

   Fiscal  Six Months
Ended July 31,
 
   2023  2024  2023  2024 
   (in thousands) 

GAAP loss from operations

  $(221,856 $(182,864 $(98,627 $(86,038

Stock-based compensation expense and related employer payroll taxes

   64,575   105,032   53,508   44,978 

Amortization of acquired intangible assets

   45,358   48,817   23,458   23,010 

Restructuring charges

      8,182   7,643   2,496 

Acquisition-related items

   9,262   (1,092)   (883  2,177 

Loss on operating lease assets

      4,857      30,168 

Write-off of deferred offering costs

   5,563          
  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP income (loss) from operations

  $(97,098 $(17,068)  $(14,901 $16,791 
  

 

 

  

 

 

  

 

 

  

 

 

 
   Fiscal  Six Months
Ended July 31,
 
   2023  2024  2023  2024 

GAAP operating margin

   (47)%   (30)  (34)%   (24)% 

Stock-based compensation expense and related employer payroll taxes

   14  17  18  12

Amortization of acquired intangible assets

   10  8  8  6

Restructuring charges

   0  1  3  1

Acquisition-related items

   2  0  0  1

Loss on operating lease assets

   0  1  0  8

Write-off of deferred offering costs

   1  0  0  0
  

 

 

  

 

 

  

 

 

  

 

 

 

Non-GAAP operating margin

   (21)%   (3)  (5)%   5
  

 

 

  

 

 

  

 

 

  

 

 

 

 

*

Totals may not foot due to rounding.

 

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RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties describedbelow, together with all of the other information in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements andrelated notes included elsewhere in this prospectus before making a decision to invest in our Class A common stock. Our business, financial condition, results of operations or prospects could also be harmed by risks and uncertainties not currentlyknown to us or that we currently do not believe are material. If any of the risks actually occur, our business, financial condition, results of operations and prospects could be adversely affected. In that event, the market price of our Class Acommon stock could decline, and you could lose part or all of your investment.

Risks Related to Our Business and Industry

We have experienced rapid growth in recent periods, and such growth may not be indicative of our future growth. If we fail to properlymanage future growth, our business, financial condition, results of operations and prospects could be materially adversely affected.

We have experienced rapid growth in recent periods; however, our recent revenue growth rate and financial performance should not be consideredindicative of our future performance. Our revenue was $467.7 million and $614.3 million for fiscal 2023 and fiscal 2024, respectively, representing a year-over-year increase of 31% in aggregate. Our revenue was $292.5 million and $363.3 millionfor the six months ended July 31, 2023 and 2024, respectively, representing a year-over-year increase of 24%. Our overall revenue growth depends on a number of factors, including our ability to:

 

  

attract new customers or retain existing customers;

 

  

sell our suite of value-added products, including our Pro product offerings, to our existing customersor earn referral fees from our payment processing and consumer financing partners as part of our FinTech offerings;

 

  

continue to improve the functionality of and develop new products for our platform for the trades we serve;

 

  

enhance our platform and develop new products and serve trades businesses in trades we do not yet serve;

 

  

provide our customers, their technicians, employees and other staff with the onboarding experience and ongoinglevel of support that they require;

 

  

invest financial and operational resources to support future growth in our contractor, partner and otherthird-party relationships;

 

  

expand our operations domestically and internationally;

 

  

partner with third-party financial services and technology providers that are reliable and meet the needs ofthe trades we serve or intend to serve;

 

  

retain and motivate existing personnel, and attract, integrate and retain new personnel;

 

  

successfully identify, acquire and integrate businesses, products or technologies that we believe couldcomplement or expand our platform;

 

  

effectively plan for and model future growth; and

 

  

compete with other providers of software for the trades.

You should not rely on our revenue or key business metrics for any previous quarterly or annual period as any indication of our revenue,revenue growth, key business metrics or key business metrics growth in future periods.

 

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We expect our revenue growth rate to continue to fluctuate over the short term, and even if our revenue continues to increase, our revenue growth rate may decline in future periods as the size ofour business grows and we achieve higher market adoption rates. Our opportunity for future growth also depends on other factors generally outside of our control, including changes in our customers’ budgetary constraints, end-customer use of the trades we serve, regulatory and macroeconomic conditions, business practices within the trades, increased competition and consolidation of businesses within the trades. We also expect tocontinue to make investments in the development and expansion of our business, which may not result in increased revenue. Further, our revenue growth rate may experience increased volatility due to global societal and economic disruption. If we donot effectively address these risks and maintain revenue growth, the value of our capital stock could be adversely affected.

Wehave a history of losses and may not be able to achieve or sustain profitability in the future.

We have incurred net losses ineach year since our inception, and we may not be able to achieve or maintain profitability in the future. We incurred net losses of $269.5 million and $195.1 million in fiscal 2023 and fiscal 2024, respectively. During the six months endedJuly 31, 2023 and 2024, we incurred net losses of $104.1 million and $91.7 million, respectively, and we had an accumulated deficit of $958.3 million as of July 31, 2024. Generally, we expect our costs will increase over time and ourlosses to continue as we expect to invest significant additional funds towards growing our business and operating as a public company. In addition, we have expended, and expect to continue to expend, substantial financial and other resources onproduct development; our technology infrastructure, including systems architecture, management tools, scalability, availability, performance and security, as well as disaster recovery measures; our sales, marketing and customer successorganizations; our onboarding and support organizations; acquisitions or strategic investments; expansion efforts, including geographic, market and new industry expansion; and general administration, including legal and accounting expenses as wellas the increased operating expenses due to being a public company. These efforts may be more costly than we expect and may not result in increased revenue or growth in our business. Any failure to increase our revenue sufficiently to keep pace withour investments and other expenses could negatively impact our gross margins and prevent us from achieving or maintaining profitability or positive cash flows on a consistent basis. If we are unable to successfully address these risks and challengesas we encounter them, our business, financial condition and results of operations could be adversely affected.

If we fail to manageour growth effectively, our brand and reputation, business, financial condition and results of operations could be adversely affected.

We have experienced strong growth in our employee headcount, our reach across trades, the number of customers we serve and the number oftransactions we process on our platform, and we expect to continue to experience growth in the future. For example, our employee headcount increased from 840 as of January 31, 2020 to 2,870 as of July 31, 2024, and we added employees bothat our headquarters in Glendale, California and in a number of locations across the United States and internationally. Further, our revenue increased from $179.2 million for fiscal 2021 to $614.3 million for fiscal 2024. In addition, wehave and may continue to pursue acquisitions to expand our business and operations. This rapid growth and organizational change have placed, and may continue to place, significant demands on our management and our operational and financial resourcesand could challenge our ability to develop and improve our operational, financial and management controls; enhance our reporting systems and procedures; recruit, train and retain highly skilled personnel; and maintain customer satisfaction.

Our ability to manage our growth effectively and to integrate new employees, technologies and acquisitions into our existing business willrequire us to continue to expand our operational and financial infrastructure and to continue to effectively integrate, develop and motivate a large number of new employees, while maintaining the beneficial aspects of our culture. As we serve agrowing number of customers and facilitate a growing number of transactions on our platform, we must continue to improve and expand our IT and financial infrastructure, operating and administrative systems and relationships with various partners andother third parties. We have

 

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established research and development hubs and we rely on engineering contractors in international markets, and we may open additional offices in the future both in the United States and abroad.Because we employ personnel internationally, we are subject to additional risks customarily associated with foreign operations, such as labor and employment related risks, export compliance risks, risks related to political or regional instabilityand national security risks. For example, we previously engaged engineering contractors in Russia, Poland and other Eastern European countries. On February 24, 2022, Russia invaded Ukraine, and soon thereafter, in response to U.S. sanctions, werestricted access to our software for Russian engineers and arranged to move certain contractors out of Russia for the purpose of continuing to perform engineering services for us. These actions led to some limited disruptions in our developmentactivities, and further disruptions may take place in nearby countries where we have operations like Armenia, Macedonia and Poland if the instability were to spread or the United States was to impose additional sanctions. These disruptions, and theoutbreak of war in the area generally, have adversely affected, and could continue to adversely affect our business, financial condition and results of operations.

In addition, our organizational structure is becoming more complex as we improve our operational, financial and management controls as well asour reporting systems and procedures. We will require significant capital expenditures and our calculated allocation of valuable management resources to grow and change in these areas without undermining the corporate culture of rapid innovation,teamwork and attention to customer success that has been central to our growth so far. If we fail to manage our anticipated growth and change in a manner that preserves the key aspects of our corporate culture, the quality of our solutions maysuffer, which could negatively affect our brand and reputation and our ability to retain and attract customers, which could adversely affect our business, financial condition and results of operations.

Our results of operations are likely to fluctuate from period to period, which could cause the market price of our Class A common stockto decline.

Our results of operations may vary significantly from period to period, which could adversely affect our business,financial condition and results of operations and cause the market price of our Class A common stock to decline. As a result, you should not rely upon our historical results of operations as indicators of future performance. We expect that ourresults of operations will vary as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including:

 

  

our ability to increase the number of new customers and expand our existing customers’ use of ourplatform and services;

 

  

our ability to retain existing customers;

 

  

the growth of our existing and future customers and the expansion of their businesses;

 

  

the amount and timing of operating expenses related to maintaining and expanding our business, operations andinfrastructure, including acquiring new and maintaining existing customers;

 

  

the timing and success of new products or platform features introduced by us or our competitors;

 

  

our ability to keep pace with technological advances and changes in practices and processes across the trades;

 

  

the budgeting cycles and purchasing practices of trades businesses;

 

  

general economic conditions, both domestically and in foreign markets;

 

  

changes in spending on home and commercial services, including as a result of economic trends, natural or man-made catastrophes and COVID-19 and pandemics generally;

 

  

the number of transactions processed on our platform;

 

  

changes in trades businesses or partner requirements or market needs;

 

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changes in the way we organize and compensate our employees;

 

  

whether the industry for software for the trades develops more slowly than we expect;

 

  

our ability to successfully expand our business geographically and across the trades;

 

  

the timing and length of our sales cycles;

 

  

our ability to attract, develop, motivate and retain management and other skilled personnel;

 

  

the amount and timing of operating costs and capital expenditures related to the expansion of our business;

 

  

changes in the competitive landscape of our market, including consolidation among competitors or tradesbusinesses;

 

  

changes in our pricing policies or those of our competitors;

 

  

insolvency or credit difficulties affecting our customers’ ability to purchase or pay for our platform;

 

  

significant cybersecurity breaches or other incidents impacting, technical difficulties with, or interruptionsto, the use of our platform;

 

  

unusual expenses such as litigation or other dispute-related settlement payments or outcomes;

 

  

future accounting pronouncements or changes in our accounting policies or practices; and

 

  

changes in governmental or other regulations, including state and federal laws that affect our business andoperations.

The variability and unpredictability of our results of operations could result in our failure to meet ourexpectations or those of analysts that cover us or investors with respect to revenue or other results of operations for a particular period. If we fail to meet or exceed such expectations, the market price of our Class A common stock could fallsubstantially, and we could face costly lawsuits, including securities class action suits.

If we fail to effectively develop andcommercialize new products, enhance and improve our platform, expand the number of trades we support, respond to changes in trades business demands or preferences or adapt to changes in trade industry practices, processes and technological advances,we may not remain competitive.

Our ability to grow our customer base and increase revenue from customers will depend heavily onour ability to develop new products and enhance and improve our platform in order to meet the increasing needs of trades businesses across the trades we serve and intend to serve, respond to changes in customer demands and preferences, adapt tochanges in trade industry practices, processes and technology and interoperate across an increasing range of devices, operating systems and third-party applications. Our customers may demand products and capabilities that our current platform doesnot have, or that our current platform cannot support, and we may need to invest significantly in research and development to build these products and capabilities. In addition, the trades businesses we serve experience their own rapid technologicalchanges and evolving industry practices.

Any new product or platform enhancements we develop or acquire might not be introduced in atimely or cost-effective manner and might not achieve the broad market acceptance necessary to generate significant revenue. If any of our competitors implement new technologies before we are able to implement them, those competitors may be able toprovide more effective products and services than ours at lower prices. Competitors may also develop and introduce new products or entirely new technologies to replace our existing platform, which could make our platform obsolete or adversely affectour business. New products or platform enhancements may initially suffer from performance and quality issues that may negatively impact our ability to market and sell such products to new and existing customers. Additionally, we may experiencedifficulties with software development, design or marketing that could delay or prevent our development, introduction or implementation of new products, features or capabilities. We have in the past experienced delays in our internally plannedrelease

 

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dates of new products, features and capabilities, and there can be no assurance that new products, features or capabilities will be released according to schedule. If our research and developmentinvestments do not accurately anticipate customer demand, if we fail to realize the benefits of these investments by not achieving market acceptance, or our new products or platform enhancements suffer from performance or quality issues or aredelayed, our business, financial condition and results of operations could be adversely affected.

We have incorporated and may continueto incorporate traditional AI, machine learning and GenAI solutions into our platform, offerings, services, and features, including those based on large language models, or LLMs, and these applications may become more important to our operations orto our future growth over time. We expect to rely on AI solutions to help drive future growth in our business, but there can be no assurance that we will realize the desired or anticipated benefits from AI or at all. We may also fail to properlyimplement or market our AI solutions. Our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results ofoperations.

Our operations can be seasonal, and the results of our operations can vary from quarter to quarter and year-over-year,so our financial performance in certain financial quarters or years may not be indicative of, or comparable to, our financial performance in subsequent financial quarters or years.

Our financial results and cash needs may vary greatly from quarter to quarter and year to year depending on, among other things, the businessperformance of our customers, the seasonality inherent in some of our customers’ businesses (e.g., air conditioning demand peaking in summer months), extreme weather patterns (e.g., cold spikes causing increased demand for furnace and otherhome repairs), general economic conditions and the timing of holidays and other seasonal events. Because our results may vary significantly from quarter to quarter and year to year, our financial results for one quarter or year cannot necessarily becompared to another quarter or year and may not be indicative of our future financial performance in subsequent quarters or years. As we serve larger customers and as we enter different trade verticals, the sales cycle may increase the variation ofour results from quarter to quarter and year to year.

Factors that adversely affect the trades industry, including industryconsolidation, the increased prevalence of marketplaces for contractors, supply chain issues and labor shortages, could also adversely affect the demand for our platform and, as a result, our business, financial condition and results of operations.

We derive substantially all of our revenue from sales to trades businesses and transactions processed by such businesses. As aresult, macroeconomic factors that negatively impact the trades industry, including industry consolidation, increased consumer reliance on online marketplaces connecting consumers to contractors, supply chain challenges, labor shortages and a lackof demand by consumers for the services provided by the trades, could also adversely affect our business, financial condition and results of operations.

Consolidation of trades businesses into larger industry participants within the trades has accelerated in recent years, and this trend couldcontinue. We have in the past suffered, and may continue to suffer, reductions in subscriptions or non-renewal of customer subscriptions due to industry consolidation. We may not be able to expand sales of oursubscriptions, Pro and FinTech products to existing or new customers enough to counteract any negative impact of industry consolidation on our business. New companies that result from such consolidation may decide to develop their own internalsolutions or work with alternative providers. As these companies consolidate, competition to provide solutions and services will become more intense and establishing relationships with large industry participants will become more important.Additionally, these industry participants may also try to use their market power to negotiate price reductions for our subscriptions. If consolidation of our larger customers occurs, these consolidated companies may represent a larger percentage ofbusiness for us and, as a result, we are likely to rely more significantly on revenue from such consolidated companies to continue to achieve growth.

 

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Trades businesses are also experiencing supply chain challenges, including shortages ofequipment, manufactured goods and supplies, which negatively affect their ability to accept and perform certain jobs. Additionally, sharply rising prices of gasoline and other fleet management costs may affect the profitability of routes fortechnicians in the field, especially those involving large amounts of driving. When such supply chain shortages and issues arise, our customers may reduce their levels of spending, which could result in decreased demand for our platform, as well asa decrease in the transactions processed on our platform.

Moreover, trades businesses have experienced labor shortages as a result of anaging labor force and difficulty attracting new workers into the trades. These labor shortages can prevent trades businesses from accepting new jobs, limiting their businesses and reducing their revenues. The pricing of our subscription platform ispartially based on the number of technicians employed by each of our customers, and any reduction in the skilled labor force hampers the growth of our customers and may negatively impact our revenues. Accordingly, our ability to efficiently provideour platform to trades businesses and to grow or maintain our customer base, and, as a result, our business, financial condition and results of operations, could be adversely affected by these and other factors that adversely affect the tradesgenerally.

We have a limited operating history at our current scale in an evolving industry, which makes it difficult to evaluateour future prospects and may increase the risk that we are not successful.

We have rapidly grown our business. For example, wefirst launched our platform in 2012, and our revenue has grown from $120.7 million in fiscal 2020 to $614.3 million in fiscal 2024. We have started to expand our sales focus to include large businesses, commercial services and constructioncustomers, and expect to continue to explore new trades. We have also substantially increased our headcount, invested in expanding our direct sales force and customer support teams and otherwise enhanced and developed new solutions. Accordingly, wehave a limited history of operations at our current scale, and our ability to forecast our future results of operations and to plan for future growth is more limited than that of companies with longer operating histories and subject to a number ofuncertainties. These risks and uncertainties include our ability to:

 

  

accurately forecast our revenue and plan our operating expenses;

 

  

expand our sales team and develop an efficient sales, marketing, customer success and onboarding program thateffectively addresses the needs of the customers in the trades that we serve or intend to serve;

 

  

develop a scalable, efficient and reliable high-performance technology infrastructure;

 

  

deploy new products and solutions that address the needs of the trades that we currently serve or intend toserve;

 

  

hire, integrate and retain world-class talent;

 

  

continue to partner with third-party financial services and technology providers that are reliable and meetthe needs of the trades that we serve or intend to serve;

 

  

successfully compete with other companies that currently offer, or may in the future offer, software andsolutions to trades businesses in the trades;

 

  

increase revenue from our platform;

 

  

avoid interruptions or disruptions in our services or slower than expected load times for our services;

 

  

store, protect, use and otherwise process personal information in compliance with governmental regulation,contractual obligations and other legal obligations related to data protection, privacy and cybersecurity;

 

  

successfully expand our business across the trades;

 

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predict and respond to general economic and market conditions, including those caused by pandemics such as theCOVID-19 pandemic, political or social unrest or macroeconomic factors such as rising inflation, increased interest rates and lower consumer confidence;

 

  

successfully expand our geographic reach;

 

  

defend ourselves against litigation, regulatory, intellectual property, data protection, privacy,cybersecurity or other claims; and

 

  

manage a global workforce, including our growing team based in Armenia.

If we fail to address the risks, including those associated with the challenges listed above as well as those described elsewhere in thissection titled “Risk Factors,” and difficulties that we face, our business, financial condition and results of operations could be adversely affected. Further, because we operate in a rapidly evolving market and have limited experiencepreparing financial forecasts, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history at our current scale or operated in a more predictable market. We have encountered inthe past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we useto plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition and results of operationscould be adversely affected.

We engage our team members in various ways, including direct hires, through professional employerorganizations and as independent contractors. As a result of these methods of engagement, we face certain challenges and risks that can affect our business, operating results, and financial condition.

In the locations where we directly hire our employees, we must ensure that we are compliant with the applicable local laws governing teammembers in those jurisdictions, including local employment and tax laws. In the locations where we utilize professional employer organizations, or PEOs, we contract with the PEO for it to serve as “Employer of Record” for those teammembers engaged through the PEO in each applicable location. Under this model, team members are employed by the PEO but provide services to ServiceTitan. We also engage team members through a PEO self-employed model in certain jurisdictions where wecontract with the PEO, which in turn contracts with individual team members as independent contractors. In all locations where we utilize PEOs, we rely on those PEOs to comply with local employment laws and regulations and to ensure our ownership ofthe intellectual property developed by the team members. We also issue equity to a substantial portion of our team members, including team members engaged through PEOs and to independent contractors, and must ensure we remain compliant withsecurities laws of the applicable jurisdiction where such team members are located.

Additionally, in some cases, we utilize independentcontractors. When we utilize a PEO or independent contractors, we may not be operating in strict compliance with local laws and regulations. Additionally, the agreements executed between PEOs and our team members or between us and team membersengaged under the independent contractor model, may not be enforceable depending on the local laws because of the indirect relationship created through these engagement models. Accordingly, as a result of our engagement of team members through PEOs,and of our relationship with independent contractors, our business, financial condition and results of operations could be materially and adversely affected. Furthermore, litigation related to our model of engaging team members, if institutedagainst us, could result in substantial costs and divert our management’s attention and resources from our business.

Theimpact of economic conditions, including the resulting effect on consumer spending and on our customers’ finances and operations, may adversely affect our business, financial condition and results of operations.

The trades are impacted by economic slowdowns, tightening of economic policies, tariffs on imported goods, fluctuations in interest rates,which can increase borrowing costs, and other actions that affect material and

 

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equipment pricing and availability such as higher inflation. Unfavorable or deteriorating market conditions, reductions in maintenance spend by commercial property owners or residentialcustomers, the unavailability of specific materials or supplies, reductions in the availability of business financing, government action which prevents or hinders the rendering of on-premise services orsimilar circumstances could have an adverse impact on our business. Our revenue may decrease because trades businesses may generally choose to delay or decide against purchases of software or information systems in times of unfavorable economicconditions, because workforce challenges or governmental policies prevent sufficient labor to meet demand or because fewer transactions are processed on our platform, resulting in reduced fees to us. Furthermore, if the trades industry experiences adecrease in overall economic activity, the amount our customers are willing to pay for our products could be reduced. Contractors may also work on fewer jobs, which would result in a reduction in transactions processed over our platform. To theextent we do not effectively address these risks and challenges, our business, financial condition and results of operations could be adversely affected.

In addition, in the event of a general economic downturn or sudden disruption in business conditions, consumer and small business confidence,spending levels, access to credit and interest rates could be adversely affected, which could result in consumers delaying or foregoing purchasing primary or vacation residences, or purchasing smaller homes that may require lower-value homeservices, businesses foregoing investment or businesses or consumers delaying, foregoing or changing the scope of potential home or business projects. Decreased spend on home and commercial services could result in fewer transactions being processedover our platform, which could cause our revenue to decrease, and could also result in less income for our customers, hampering their ability to pay for our platform. These effects could adversely affect our business, financial condition and resultsof operations.

Our business is sensitive to events and trends that impact spend across the trades, including natural disasters,pandemics and climate change.

We have historically been, and will continue to be, sensitive to events and trends, includingpandemics, natural disasters, extreme weather events and climate change, that result in changes in demand for trades businesses. For example, during the COVID-19 pandemic, increased time spent in the home ledto a temporary increase in home services projects, and hotter temperatures caused in part by climate change have led to surges in demand during the summer for our customers’ HVAC repair services. Weather events and natural disasters can alsohave drastic impacts on our customers and technical infrastructure and network systems. If we do not adequately prepare our systems and organization, other similar events or trends could cause a surge in activity for our customers and lead to systemfailures and delays in customer support, among other effects, which could harm our brand, reputation and our business, financial condition and results of operations.

Pandemics, natural disasters, political crises and other unexpected events could also have a direct negative impact on our own operations. Ourcorporate headquarters are located in California, a region known for seismic activity and severe fires, and our insurance coverage may not compensate us for losses that may occur in the event of an earthquake or other significant natural disaster,such as a fire, mudslide, flood or significant power outage. In addition, depending on the geographic location of the event, a natural disaster, or a series of smaller weather events caused by climate change, could cause performance problems withour technology infrastructure and operations, which could adversely affect our business, financial condition and results of operations.

Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a natural disaster or man-made problem, or outbreaks of pandemic diseases, including COVID-19, we may be unable to continue our operations and may experience system interruptions, which couldimpede our ability to serve technicians when they are needed most. Acts of terrorism and other geo-political unrest, including in Armenia, Macedonia, and Poland, where certain of our employees and engineeringcontractors are located, could also cause disruptions in our business or the business of our contractors, partners, vendors, or the economy as a whole. For example, we previously engaged engineering contractors in Russia, Poland and other EasternEuropean countries. On February 24, 2022, Russia invaded Ukraine, and soon thereafter, in response to U.S.

 

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sanctions, we restricted our Russian engineering contractors’ access to our software and arranged to move certain contractors out of Russia for the purpose of continuing to performengineering services for us. These actions led to disruptions in our development activities, and further disruptions may take place in nearby countries where we have operations like Armenia, Macedonia, and Poland if the instability were to spread orthe United States was to impose additional sanctions. All of the aforementioned risks may be further increased if our disaster recovery plans prove to be inadequate, and could generally adversely affect our brand, reputation, business, financialcondition and results of operations.

The market for software designed to serve the trades is evolving, and our future successdepends on the growth of the trades industry and our ability to adapt, keep pace and respond effectively to evolving markets.

Widespread acceptance and use of technology by the trades in general, and our platform in particular, is critical to our future growth andsuccess. While we believe that our platform addresses a significant market opportunity, the market may develop more slowly than we expect. If the market for software designed to serve the trades does not develop further or develops more slowly thanwe expect, our business, financial condition and results of operations could be adversely affected. Demand for management software by trades businesses in general, and our platform in particular, is affected by a number of factors, many of which arebeyond our control. Some of these potential factors include:

 

  

general awareness of the availability of software designed to serve the trades;

 

  

ease of implementation of our platform by trades businesses, and our ability to decrease time-to-value for our customers;

 

  

availability, functionality and pricing of platforms and products that compete with ours;

 

  

changes in industry practices or methods that may or may not be addressed by our platform;

 

  

ease of adoption and use of our platform;

 

  

the reliability, performance or perceived performance of our platform, including interruptions to the use ofour platform and products;

 

  

the development and awareness of our brand; and

 

  

privacy, data protection, or cybersecurity breaches or incidents impacting our platform or products.

If we are unable to successfully address these potential factors, our business, financial condition, results ofoperations and prospects could be adversely affected.

We face competition from both established and new companies offering servicessimilar to ours, and many of our potential customers have developed, or could develop, proprietary solutions, all of which may have a negative effect on our ability to add new customers, retain existing customers and/or grow our business.

Our industry is highly competitive, and as we expand to serve additional industries and trades, we will compete against a growingnumber of companies and solutions specific to those industries and trades. We compete either directly or indirectly with software vendors offering point-specific tools for specific elements of trade workflows, horizontal solutions for genericfunctionalities, legacy on-premise field service management applications, and narrow bundled solutions for down-market trades businesses. Examples of these software vendors include Salesforce, SAP, FieldEdge,Workwave, ServiceTrade, AccuLynx, BuildOps, HouseCall Pro, JobNimbus and Jobber. The larger enterprises with whom we currently compete, or with whom we may compete in the future, have significant financial, technical, marketing and other resources,and they are able to devote meaningful resources to the development, promotion, sale and support of their solutions and services. Some existing solutions have extensive installed customer bases and broad customer relationships, together with longeroperating histories and greater name recognition than we have. Moreover, certain trade verticals we explore may already be served by well-established companies, presenting a potential challenge in establishing a foothold within those markets.

 

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As a result, these competitors may be better able to undertake more extensive marketingcampaigns and/or offer their solutions and services at a discount to ours. To the extent any of our competitors have existing relationships with potential customers, customers may be unwilling or unable to purchase our subscriptions because of thoseexisting relationships and this may limit our ability to successfully compete in certain markets or trades. Additionally, new entrants to the market are focused on fast and automated implementation of their solutions, and while their products do nothave our complete product sets, they provide minimum functionality that small businesses may believe to be sufficient, especially if such businesses are willing to sacrifice functionality for speed of deployment. If we are unable to compete withthese existing or potential competitors and/or their products, the demand for our platform, our customer counts, and the revenue we generate could decline, and our business, financial condition and results of operations could be adversely affected.

We have incorporated and are incorporating traditional AI, machine learning and GenAI into some of our products. This technology isnew and developing and may present operational and reputational risks or result in liability or harm to our reputation, business, results of operations or customers.

While we have incorporated a number of AI features into our products and believe that providing AI tools and insights will become increasinglyimportant to the value that our solutions and services deliver to our customers. As with many developing technologies, LLMs in particular are a new and emerging technology that is in its early stages of commercial use and presents a number ofinherent risks and challenges that could affect further development, adoption, and use, and therefore our business. Due to the evolving nature of the algorithms and technology underpinning LLMs, there is a risk that our AI solutions could produceinaccurate or misleading content or other discriminatory or unexpected results or behaviors (e.g., LLM hallucinatory behavior that can generate irrelevant, nonsensical or factually incorrect results). Further, the content, analyses orrecommendations generated by our LLMs could produce information or other content that infringes, misappropriates or violates the intellectual property rights of others. In addition, increasing use of AI creates opportunities for the potential lossor misuse of personal and other data that forms part of any data set, including any of our proprietary data assets derived from our customers’ use of our platform, that was collected, used, stored, or transferred to build our AI solutions. Ifour access to such data sets were materially impaired, we may also be unable to further build, train and offer our AI solutions. The occurrence of any of the foregoing could harm our reputation, business or customers and could result in additionallawsuits and regulatory investigations.

Moreover, our employees, third-party service providers, strategic partners, and other contractorsor consultants may input inappropriate or confidential information into an AI system (in particular a system that is managed, owned or controlled by a third-party), thereby compromising our business operations, which may cause business operationdisruptions, could divert the attention of management and key information technology resources, and possibly lead to security breaches, or the unauthorized access to or loss of our confidential information or other business data.

In addition, the use of AI involves significant technical complexity and requires specialized expertise. This specialized expertise can bedifficult and costly to obtain given the increasing industry focus on AI development and competition for talent. As a result, it could be expensive for us to maintain and advance our AI developments. Further, our AI solutions rely on third-partyproprietary machine learning algorithms and LLMs provided by third parties, such as Microsoft and OpenAI. If we are unable to continue to use such third-party assets, we may be unable to continue to provide our AI solutions which could harm ourbusiness and results of operations.

Additionally, the use of AI applications may result in future cybersecurity incidents that implicatethe personal information of end users of such applications. Any such cybersecurity incidents related to our use of AI applications could lead to litigation or other proceedings and liability, and may adversely affect our reputation, business andresults of operations.

 

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If any of our vendors, service providers, employees or contractors, use any AI solutions inconnection with our business or the services they provide to us, it may lead to the inadvertent disclosure of our confidential information, or that of our customers, into publicly available third-party training data sets, which may impact ourability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or confidential information, harming our customers and our competitive position and business. Our ability to mitigate risks associated withdisclosure of our confidential information, including in connection with AI solutions, will depend on our implementation, maintenance, monitoring and enforcement of appropriate technical and administrative safeguards, policies and proceduresgoverning the use of AI in our business.

Additionally, any content created by using LLMs may not be subject to copyright protectionwhich may adversely affect our intellectual property rights in, or ability to commercialize or use, the content. In the United States, a number of civil lawsuits have been initiated related to the foregoing and other concerns, the outcome of any oneof which may, amongst other things, require us to limit the ways in which we use AI in our business and may affect our ability to develop our AI solutions and features. While AI-related lawsuits to date havegenerally focused on the AI service providers themselves, our use of any output produced by a LLM may expose us to claims, increasing our risks of liability. For example, the output produced by LLMs may include information subject to certain rightsof publicity or privacy laws or constitute an unauthorized derivative work of the copyrighted material used in training the underlying AI model, any of which could also create a risk of liability for us, or adversely affect our customers and ourbusiness or operations. To the extent that we do not have sufficient rights to use the data or other material or content used in or produced by the GenAI tools used in our business, or if we experience cybersecurity incidents in connection with ouruse of AI, it could adversely affect our reputation and expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, publicity, contractual or other rights.

Further, social and ethical issues relating to the use of new and evolving technologies such as AI in our offerings, may result inreputational harm and liability, and may cause us to incur additional research and development costs to resolve such issues. AI presents emerging ethical issues and if we enable or offer solutions that draw controversy due to their perceived oractual impact on society, we may experience brand or reputational harm, competitive harm, or legal liability. Failure to address AI ethics issues by us or others in our industry could undermine public confidence in AI and slow adoption of AI in ourproducts and services.

Moreover, as the regulatory framework for AI (and machine learning technology) evolves, it is possible that newlaws and regulations will be adopted in the United States and in non-U.S. jurisdictions, or that existing laws and regulations may be interpreted in ways that would affect the operation of our business,including the way in which we use AI and machine learning technology. Our ability to provide AI-driven insights and products may also be constrained by current or future regulatory requirements that couldrestrict or impose burdensome and costly requirements on our ability to leverage data in innovative ways. Further, the cost to comply with such laws or regulations could be significant and could increase our operating expenses, which could adverselyaffect our business, financial condition and results of operations.

If the estimates and assumptions we have used to calculate thesize of our addressable market opportunity are inaccurate, our future growth rate may be limited.

We have estimated the size ofour addressable market opportunity based on data published by third parties and on internally generated data and assumptions. While we believe our market size information is generally reliable, such information is inherently imprecise, and relies onour and third parties’ projections, assumptions and estimates within our target market, which are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in this prospectus. If suchthird-party or internally generated data proves to be inaccurate or we make errors in our projections, assumptions or estimates based on that data, including how current customer data and trends may apply to potential future customers and the numberand type of potential customers, our addressable market opportunity or our future growth rate may be less than we currently estimate. In addition, these inaccuracies or errors may cause us to divert resources from more valuable alternative projectsand harm our business.

 

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The variables that go into the calculation of our market opportunity are subject to changeover time, including the amount of customer GTV that we can recognize as revenue, and there is no guarantee that any particular number or percentage of addressable end customers or companies covered by our addressable target market opportunityestimates will purchase our platform at all or generate any particular level of revenue for us. Any expansion in our market depends on a number of factors, including the cost, performance and perceived value associated with our platform and those ofour competitors. Even if our addressable market meets our size estimates, our business could fail to grow at similar rates, if at all, or we could capture a percentage of customer GTV as revenue that is less than we currently expect. Accordingly,the information regarding the size of our addressable market opportunity included in this prospectus should not be taken as indicative of our future growth.

We may be unsuccessful in making, integrating and maintaining acquisitions, joint ventures and strategic investments.

We have in the past sought, and may in the future seek, to acquire or invest in businesses, joint ventures and platform technologies that webelieve could complement or expand our platform, enhance our technology or otherwise offer growth opportunities. We also may enter into strategic relationships with other businesses to expand our platform, which could involve investments in othercompanies. Any acquisition, investment or strategic transaction, including past acquisitions such as Convex, may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or integratingthe businesses, technologies, offerings, personnel or operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, their offerings are not easily adapted to work with our platform, theirsystems and operations are difficult to integrate or we have difficulty retaining their customers. Acquisitions, including integration efforts, may also disrupt our business, require significant resources, divert significant management attention andimpose legal and regulatory burdens to the extent such transactions expand our geographic footprint.

Negotiating these transactions canbe time-consuming, difficult and expensive, and our ability to complete these transactions may often be subject to approvals that are beyond our control. Even if announced, we may not complete a transaction. The benefits of an acquisition orstrategic transaction, including past acquisitions such as Convex, may also take considerable time to develop, and we cannot be certain that any particular transaction will produce the intended benefits. Further, acquisitions could result inpotential dilutive issuances of equity securities, use of significant cash balances, incurrence of debt (and increased interest expense), contingent liabilities or amortization expenses related to intangible assets or write-offs of goodwill andintangible assets. If we are unable to successfully identify, complete and integrate our acquisitions and strategic transactions, we may not realize the expected benefits of such transactions or become exposed to additional liabilities, and ourbusiness, financial condition and results of operations may be harmed.

Our business depends on a strong brand, and if we are notable to maintain and enhance our brand and reputation, our ability to maintain and expand our customer base will be impaired, and our business, operating results and financial condition may be adversely affected.

We believe that the ServiceTitan brand identity and awareness is critical to our sales and marketing efforts. We also believe that maintainingand enhancing the ServiceTitan brand is critical to maintaining and expanding our customer base and, in particular, conveying to customers that our platform offers capabilities that address the needs of the trades across a wide array of verticals.We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive.

In addition, any unfavorable publicity about our company or our management, including about the quality, stability and reliability of ourplatform, changes to our platform, our privacy, data protection and cybersecurity practices, litigation, employee relations, regulatory enforcement and other actions involving us, as well as the perception of us and our platform by our customers andend customers, even if inaccurate, could cause a loss of confidence in us and adversely affect our brand. Such negative publicity also could have an adverse effect on the size and engagement of our customer base and could result in decreasedrevenue, which could have an adverse effect on our business, financial condition and results of operations.

 

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We depend on our management team and other highly skilled personnel, and we may failto attract, retain, motivate or integrate highly skilled personnel, which could adversely affect our business, financial condition and results of operations.

Our future success is substantially dependent on our ability to attract, retain and motivate the members of our management team and other keypersonnel throughout our organization. In particular, we are highly dependent on the services of Ara Mahdessian, our co-founder and Chief Executive Officer, and Vahe Kuzoyan, ourco-founder and President, each of whom is critical to our ability to achieve our vision and strategic priorities. We rely on our management team in the areas of operations, security, research and development,sales and marketing, support and general and administrative functions. Our employees, including our executive officers, work for us on an “at-will” basis, which means they may terminate theiremployment with us at any time. If Mr. Mahdessian or Mr. Kuzoyan or one or more of our key personnel or members of our management team resigns or otherwise ceases to provide us with their services, this could impair our ability to executeour growth strategy, have a negative impact on our business, financial condition and results of operations, cause employee morale problems and the loss of key personnel or members of our management or clients.

Our future success also depends, in part, on our ability to continue to attract and retain highly skilled personnel. Competition for thesepersonnel is intense, and the industry in which we operate is generally characterized by significant competition for skilled personnel as well as high employee attrition. We may not be successful in attracting, retaining, training or motivatingqualified personnel to fulfill our current or future needs. Additionally, the former employers of our new employees may attempt to assert that our new employees have breached their legal obligations, which may be time-consuming, distracting tomanagement and may divert our resources. Our culture and brand help us attract and retain highly skilled personnel in a competitive environment. We have in the past been, and may in the future be, subject to employmentlaw-related claims and disputes. Any negative publicity resulting from such claims or disputes could adversely affect our ability to attract and retain skilled personnel, harm our brand and otherwise requireus to use or divert financial and management resources.

Current and potential personnel also often consider the value of equity awardsthey receive in connection with their employment, and to the extent the perceived value of our equity awards declines relative to our competitors, our ability to attract and retain highly skilled personnel may be harmed.

If we fail to attract and integrate new personnel or retain and motivate our current personnel, our business, financial condition and resultsof operations could be adversely affected.

If we cannot create and maintain a successful company culture as we grow, our successand our business may be harmed.

We believe our current corporate culture fosters innovation, teamwork, passion and focus onexecution and has contributed to our success. As we grow and develop our infrastructure, including as a public company, and expand our operations both geographically and across the trades, we may find it difficult to maintain our corporate cultureand/or successfully adapt our corporate culture to appropriately adapt to ongoing changes. Any failure to preserve our culture and/or successfully adapt our culture to changing conditions could harm our future success, including our ability torecruit and retain qualified personnel, innovate and operate effectively, and execute on our business strategies. If we experience any of these risks in connection with future growth, it could impair our ability to attract new customers and retainexisting customers and expand their use of our platform, all of which could adversely affect our business, financial condition and results of operations.

The adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations, financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments thataffect financial institutions, transactional counterparties or other companies in the financial services industry or the

 

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financial services industry generally or concerns or rumors about any events of these kinds or other similar risks, have in the past led, and may in the future lead, to market-wide liquidityproblems. For example, on March 10, 2023, Silicon Valley Bank, or SVB, was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation, or FDIC, as receiver. Similarly,Signature Bank and Silvergate Capital Corp. were each placed into receivership on March 12, 2023, and First Republic Bank was placed into receivership and substantially all of its assets and deposits were sold to JPMorgan Chase Bank onMay 1, 2023. At the time that SVB failed, we maintained balances at SVB in excess of the federal insured limit. However, despite this circumstance, we successfully regained access to our funds held at SVB without incurring any losses. Thefailure of a bank, or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, could adversely impact our liquidity and financial performance. There can be no assurance that ourdeposits in excess of the FDIC or other comparable insurance limits will be backstopped by the United States or applicable foreign government, or that any bank or financial institution with which we do business will be able to obtain neededliquidity from other banks, government institutions, or by acquisition in the event of a failure or liquidity crisis.

In addition, if anyof our customers, vendors or other parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to pay their obligations to us orto enter into new commercial arrangements requiring additional payments to us could be adversely affected.

Risks Related to OurCustomers and Revenue Model

Any failure to offer high quality support for our customers, including throughout the implementation process, mayharm our relationships with our customers and, consequently, our business.

Our customers depend on our customer success teams toprovide implementation, training and support services. We have previously experienced declines in our net promoter score and if we do not provide effective onboarding services or ongoing support, customers may not receive the full benefits of ourplatform, may delay or forgo future expansion of their use of our platform or may seek to terminate their agreements with us. Our reputation with prospective or current customers or the trades industry could also be damaged. The number of ourcustomers has grown significantly and due to the complexity of our product, they often heavily rely on our customer success team, even for routine matters, which has put additional pressure on our customer success teams. If we experience increasedcustomer demand for support, we may face increased costs that may harm our results of operations. As a result, if we are unable to provide efficient, high-quality customer support services, if we need to hire additional support resources, or ifthere is a market perception that we do not maintain high-quality customer support, our business, financial condition and results of operations could be adversely affected.

Our ability to increase our customer base and achieve broader market acceptance of our platform will depend on our ability to develop and expand oursales and marketing capabilities.

Sales of subscriptions to access our platform will depend to a significant extent on our abilityto expand our sales and marketing capabilities, including adapting to new sales verticals such as commercial services and construction. It is difficult to predict customer demand, customer retention, the size and growth rate of the trades industry,the entry of competitive products or the success of existing competitive products. Our sales efforts involve educating prospective customers about the uses and benefits of our Core and add-on products. We expect that we will continue to needintensive sales efforts to educate prospective customers about the uses and benefits of our platform, and we may have difficulty convincing prospective customers of the value of adopting our platform. Identifying, recruiting and training qualifiedsales representatives is time-consuming and resource-intensive, and they may not be fully-trained and productive for a significant amount of time following their hiring, if ever. In addition, the cost to acquire customers is high due to theseconsiderable sales and marketing efforts.

 

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We also dedicate significant resources to marketing programs, including telemarketing,branded events and digital advertising through services such as Google AdWords. The effectiveness and cost of our online advertising has varied over time, and may vary in the future, due to competition for key search terms, changes in search engineuse, changes in the search algorithms used by major search engines and laws, regulations and other obligations relating to privacy or data protection that affect online advertising. These efforts will require us to invest significant financial andother resources. We rely on a variety of direct marketing techniques, including telemarketing, email marketing and direct mail. Our marketing activities, and the marketing activities of our customers, are regulated under laws such as the TelephoneConsumer Protection Act, the Telemarketing Sales Rule, and any state equivalents, and various other federal and state laws regarding marketing and solicitation, as well as general data protection laws, including the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM, and various state privacy laws, including the California Consumer Privacy Act, or the CCPA, and otherrecently passed state laws, that govern these activities and impose significant restrictions on us and our customers. Any violations or perceptions of violations of these laws and regulations may harm our business, financial condition and results ofoperations. Additionally, any changes to the above-mentioned laws, or any applicable privacy, data protection and cybersecurity laws, their interpretation, or enforcement of such laws by the government or private parties that further restrict theway we interact with our potential customers or generate leads could adversely affect our ability to attract customers and could harm our business, reputation and brand, financial condition and results of operations. See “—Risks Related toData Privacy, Data Protection, Cybersecurity and Technology—The collection, storage, use, disclosure and other processing of personal information are governed by a rapidly evolving framework of privacy, data protection, cybersecurity, datatransfers or other laws or regulations worldwide may limit the use and adoption of our services and adversely affect our business.”

Our business will be harmed if our efforts do not generate a correspondingly significant increase in revenue. Even if we are successful inconvincing prospective customers of the value of our platform, they may decide not to purchase a subscription for a variety of reasons, some of which are out of our control. We spend substantial time and resources on our sales efforts without anyassurance that our efforts will result in a sale. The failure of our efforts to secure sales after investing resources in a lengthy sales process could adversely affect our business, financial condition and results of operations.

In the future, we may implement changes to our pricing model. However, there is a possibility that these modifications may not achieve theintended effectiveness, potentially posing challenges in sustaining customer satisfaction, retention and overall revenue generation. Failure to achieve the desired outcomes could adversely affect our business, financial condition and results ofoperations.

A majority of our customers are small- and medium-sized businesses, which canbe more difficult and costly to retain than large businesses and may increase the impact of economic fluctuations on us.

Amajority of our customers are small- and medium-sized businesses, or SMBs, and we expect they will continue to comprise a large portion of our customer base for the foreseeable future. We define SMBs in thecontext of our customer base as customers that have fewer than 1,000 employees. Selling to and retaining SMBs can be more difficult than retaining large businesses, as SMBs often have higher rates of business failure and more limited resources. SMBsmay not have sufficient office resources or may be constrained by other factors, such as seasonality, which makes it difficult for them to dedicate resources to the implementation, onboarding and training necessary to obtain the full benefits of ourplatform. SMBs are also typically more susceptible to the adverse effects of economic fluctuations. Adverse changes in the economic environment, or business failures of our SMB customers, may have a greater impact on us than on our competitors whodo not focus on SMBs to the extent that we do.

 

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Risks Related to Reliance on Third Parties

We rely on software and services licensed from other third parties. Defects in or the loss of software or services from third partiescould increase our costs and adversely affect the quality of our service.

We rely upon certain partners, vendors and other serviceproviders to provide software employed by our platform or customers using our platform, including to enable cloud-based phones and GPS, payments, and manage customer payroll, and it is possible that such software may not be reliable or easy toreplace. We may in the future have disputes with certain of our partners, vendors and other service providers. If, in connection with such a dispute, a partner, vendor or service provider terminates its relationship with us or otherwise limits theprovision of their software or data to us, the availability or usage of our platform could be disrupted. If the partners, vendors and other service providers we rely upon cease to provide access to the software and/or data that we and our customersand consumers use, whether in connection with disputes or otherwise, do not provide access to such software and/or data on terms that we believe to be attractive or reasonable, or do not provide us with the most current version of such software, wemay be required to seek comparable software and/or data from other sources, which may be more expensive or inferior, or may not be available at all, any of which could adversely affect our business.

Our customers’ experience and satisfaction depend upon the interoperability of our platform across devices, operating systems andthird-party applications that we do not control.

An important feature of our platform is its broad interoperability with a rangeof devices, web browsers, operating systems and third-party applications. We have integrations with Bandwidth, Twilio and DialPad and a variety of other vendors. As part of our integrations with certain vendors, we have had to make concessionslimiting our ability to engage with such vendor’s competitors, which could potentially impact our customer experience and our ability to interoperate with other third-party applications. Our Application Programming Interfaces, or APIs, enablecustomers to connect other third-party software, applications, partner services and data to our platform. Accordingly, we are dependent on the accessibility of our platform across web browsers, operating systems and the third-party applications thatwe often do not control. Third-party applications, products and services are constantly evolving, and we may not be able to maintain or modify our platform to ensure its compatibility with third-party offerings following development changes. Inaddition, some of our competitors may be able to disrupt the operations or compatibility of our platform with their applications that some of our customers may rely upon. If our platform has integration or operability failures with these operatingsystems or third-party applications, customers may not adopt our platform or our APIs and related functionality may not be useful to customers, which could adversely affect our business, financial conditions, results of operations. Additionally, asour platform evolves, we expect the types and levels of competition we face to increase. Should any of our competitors or third-party services on our platform modify their technologies, standards or terms of use in a manner that degrades thefunctionality or performance of our platform or is otherwise unsatisfactory to us or gives preferential treatment to our competitors’ products or services, our platform, business, financial condition and results of operations could be adverselyaffected.

We rely on third-party data centers, such as Azure, to host and operate our platform, and any disruption of orinterference with our use of these facilities may negatively affect our ability to maintain the performance and reliability of our platform, which could cause our business to suffer.

Our customers depend on the continuous availability of our platform. We currently host our platform and serve our customers primarily usingMicrosoft Azure, or Azure. Consequently, we may be subject to service disruptions, as well as failures to provide adequate support, for reasons that are outside of our control, including:

 

  

the performance and availability of Azure and other third-party providers of cloud infrastructure serviceswith the necessary speed, data capacity and security for providing reliable services;

 

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decisions by Azure and other owners and operators of the data centers where our cloud infrastructure isdeployed to terminate our subscriptions, discontinue services to us, shut down operations or facilities, increase prices, change service levels, limit bandwidth, declare bankruptcy or prioritize the traffic of other parties;

 

  

physical break-ins, acts of war or terrorism, human error orinterference, including by disgruntled employees, former employees or customers and other catastrophic events; and

 

  

cyberattacks, including denial of service attacks, targeted at us, our data centers or the infrastructure ofthe Internet.

The adverse effects of any service interruptions on our reputation, results of operations and financialcondition may be disproportionately heightened due to the nature of our business and the fact that our customers have a low tolerance for interruptions of any duration.

To meet the performance and other requirements of our customers, we intend to continue to make significant investments to increase capacityand to develop and implement new technologies in our cloud infrastructure operations. Any renegotiation or renewal of our agreement with Azure, or a new agreement with another provider of cloud-based services, may be on terms that are significantlyless favorable to us than our current agreement. Additionally, these new technologies, which include databases, application and server optimizations, network strategies and automation, are often advanced, complex, new and untested, and we may not besuccessful in developing or implementing these technologies. It takes a significant amount of time to plan, develop and test improvements to our technologies and cloud infrastructure, and we may not be able to accurately forecast demand or predictthe results we will realize from such improvements. To the extent that we do not effectively scale our infrastructure to meet the needs of our growing customer base and maintain performance as our customers expand their use of our platform, or ifour cloud-based server costs were to increase, our business, financial condition, results of operations and prospects could be adversely affected.

We rely primarily on third-party insurance policies to insure our operations-related risks. If our insurance coverage is insufficientfor the needs of our business or our insurance providers are unable to meet their obligations, we may not be able to mitigate the risks facing our business, which could adversely affect our business, financial condition and results of operations.

We procure third-party insurance policies to cover various operations-related risks including employment practices liability,workers’ compensation, business interruptions, cybersecurity and data breaches, crime, directors’ and officers’ liability, occupational accident liability for customers and general business liabilities. For certain types ofoperations-related risks or future risks related to our new and evolving services, we may not be able to, or may choose not to, acquire insurance. In addition, we may not obtain enough insurance to adequately mitigate such operations-related risksor risks related to our new and evolving services, and we may have to pay high premiums, self-insured retentions or deductibles for the coverage we do obtain. Additionally, if any of our insurance providers becomes insolvent, they would be unable topay any operations-related claims that we make. Further, some of our agreements with vendors require that we procure certain types of insurance, and if we are unable to obtain and maintain such insurance, we would be in violation of the terms ofthese vendor agreements.

If the amount of one or more operations-related claims were to exceed our applicable aggregate coverage limits,we would bear the excess, in addition to amounts already incurred in connection with deductibles. Insurance providers have raised premiums and deductibles for many businesses and may do so in the future. As a result, our insurance and claims expensecould increase, or we may decide to raise our deductibles when our policies are renewed or replaced. Our business, financial condition and results of operations could be adversely affected if (i) the cost per claim, premiums or the number ofclaims significantly exceeds our historical experience and coverage limits, (ii) we experience a claim in excess of our coverage limits, (iii) our insurance providers fail to pay on our insurance claims, (iv) we experience a claim forwhich coverage is not provided or (v) the number of claims under our deductibles differs from historical averages.

 

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We are subject to payment processing risk.

We rely on third-party payment processors to collect subscription fees and other usage-based revenue from our customers. Under our commercialagreements, such payment processors may terminate the relationship with advanced notice. If one of our payment processors terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we would berequired to find alternative payment processors and may not be able to secure similar terms or replace such payment processors in an acceptable time frame. An inability to charge our customers or collect revenue for an extended period could affectour cash flows and impair our business, financial condition and results of operations.

While we do not process any payments for the endcustomers, we do have complex relationships with third-party processors where we generate revenue through referral agreements and as an independent sales organization, or ISO. A significant portion of payments by the end customers are made by creditcard or debit card using these third-party payment services to which our customers have a direct contractual relationship. If one of these third-party processors terminates its relationship with us or refuses to renew its partnership with us oncommercially reasonable terms, or the software and services provided by our payment processors does not meet our customer’s expectations, we may be required to find an alternative payment processor or consider offering new payment options andproducts ourselves that may be subject to additional regulations and risks. None of our agreements with payment processors are exclusive, however, our agreements with certain payment processors limit our ability to induce existing customers tomigrate to alternative payment processors, which could potentially impact our customers’ experience or satisfaction with our services. We are also subject to a number of other laws and regulations relating to the financial solutions we offer,including with respect to money laundering, privacy and cybersecurity. If we fail to, or are alleged to fail to, comply with applicable regulations, we may be subject to claims and litigation, regulatory investigations and proceedings, civil orcriminal penalties, fines or higher transaction fees and may lose the ability to offer financial solutions to customers, which could make our platform less convenient and attractive to trades businesses. We also rely on data provided by thirdparties for financial statement reporting, and there could be inaccuracies and other errors in such data. If any of these events were to occur, our business, financial condition and results of operations could be adversely affected.

In addition, we are subject to the Payment Card Industry Data Security Standard, or PCI DSS. The PCI DSS is a specific set of comprehensivesecurity standards required by credit card brands for enhancing payment account data security, including, but not limited to, requirements for security management, policies, procedures, network architecture and software design, certificationrequirements, which could change or be reinterpreted to make it difficult or impossible for us to comply. Our third-party payment processors require us to comply with payment card network operating rules, which are set and interpreted by the paymentcard networks. The payment card networks could adopt new operating rules or interpret or re-interpret existing rules in ways that might prohibit us from providing certain services to some customers, be costlyto implement, or difficult to follow. If we fail to comply with these rules or regulations, we may be subject to fines and higher transaction fees and lose our ability to offer payment solutions to customers. Compliance does not guarantee acompletely secure environment and notwithstanding the results of a compliance assessment there can be no assurance that payment card brands will not request further compliance assessments or set forth additional requirements to maintain access tocredit card processing services. Compliance is an ongoing effort and the requirements evolve as new threats are identified. In the event that we were to lose PCI DSS compliance status (or fail to renew compliance under a future version of the PCIDSS), or if our data security systems are breached or compromised, we may be liable for card-issuing banks’ costs, subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our customers,process electronic funds transfers or facilitate other types of online payments. We have also agreed to indemnify our third-party payment processors for violating payment card networks rules. Any of the foregoing risks could adversely affect ourbusiness, financial condition and results of operations.

 

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Risks Related to Data Privacy, Data Protection, Cybersecurity and Technology

If we or our third-party service providers experience a cybersecurity breach or other incident, including any breach or incident thatallows, or is perceived to allow, unauthorized access to our platform or our Sensitive Information, our reputation and brand, business, financial condition and results of operations could be adversely affected.

We rely on our own, and our third-party service providers’, platforms, computer systems, hardware, software, technology infrastructure andonline sites and networks for both internal and external operations that are critical to our business, or collectively, IT Systems. We own and manage some of these IT Systems but also rely on third parties for a range of IT Systems and relatedproducts and services, including but not limited to cloud computing services. Because we make extensive use of third-party suppliers and service providers, such as cloud services that support our internal and customer-facing operations, disruptionsto or unauthorized access to third-party IT Systems can materially impact our operations and financial results. If we experience difficulties in implementing new or upgraded information systems or experience significant system failures, or if we areunable to successfully modify our information systems to respond to changes in our business needs, our ability to run our business could be adversely affected. It is also possible that our competitors could develop better platforms than ours, whichcould adversely affect obtaining and retaining our customers. Any of these or other systems related problems could, in turn, adversely affect our business, reputation and brand, results of operations and financial condition.

We may rely on third parties when deploying, servicing or otherwise operating our IT Systems, and in doing so, expose them and therefore us tosecurity risks outside of our direct control. Specifically, certain third parties who create applications that integrate with our platform may receive, store or otherwise process our and our customers’ information, including confidential,sensitive, personal information and other information about individuals, our customers, employees, contractors and business partners, including email addresses, physical addresses, phone numbers, Social Security numbers, credit card data andpersonally identifiable information, as well as trade secrets and other proprietary business information, or collectively, Sensitive Information. Our third-party service providers may fail to adequately secure their or our IT Systems or ourSensitive Information. Our third-party service providers’ IT Systems have been, and may in the future be, breached or contain exploitable defects or “bugs” that could result in a breach of or disruption to our or our third-partyservice providers’ IT Systems and other cybersecurity risks discussed below. Our ability to monitor our service providers’ security is limited, and, in any event, third parties may be able to circumvent those security measures. Moreover,techniques used to obtain unauthorized access to systems and networks, as discussed in more detail below, change frequently and may not be known until launched against us or our third-party service providers. These risks also are heightened whenservice providers work remotely.

The use of our platform involves the transmission, storage and processing of Sensitive Information. Thesecure processing, maintenance, transmission and storage of our Sensitive Information is critical to us, and we devote significant resources to protecting this information. Additionally, remote working arrangements at our company, and many of ourthird-party providers, increases cybersecurity risks due to the challenges associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate and homenetworks. The unprecedented scale of remote work may require additional personnel and resources, which nevertheless cannot be guaranteed to fully safeguard all IT Systems and information upon which we rely.

We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems andSensitive Information, including from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists, as well as through diverse attack vectors, such as social engineering/phishing (including on our customers andend customers), malware (including ransomware attacks), malfeasance by insiders, human or technological error, or other techniques used to obtain unauthorized access, disable or degrade services or sabotage systems, and as a result of malicious codeembedded in open-source software, or misconfigurations, “bugs” or other vulnerabilities in commercial software that is integrated into our (or our suppliers’ or service providers’) IT systems, products or services. Cyberattacksare expected to accelerate

 

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on a global basis in frequency and magnitude as threat actors are becoming increasingly sophisticated in using techniques and tools—including AI—that circumvent security controls, evadedetection and remove forensic evidence. As a result, we may be unable to detect, investigate, remediate or recover from future attacks or cybersecurity breaches or other incidents, or to avoid a material adverse impact to our IT Systems, SensitiveInformation or business. In this fast-changing threat environment, our efforts may not be sufficient to identify all gaps, threats and vulnerabilities or prevent a cybersecurity breach or other incident. If we or our third-party service providersfail to respond appropriately to any identified gaps, threats or vulnerabilities, including by providing adequate funding and prioritizing strategic initiatives, or if we or our third-party service providers fail to adequately identify the gaps,threats or vulnerabilities, we face greater risk of a security incident. Notwithstanding our efforts, we and our third-party service providers have failed to and may in the future fail to detect cybersecurity breaches or other incidents, includingbreaches or incidents that may compromise our Confidential Information, and may face difficulties or delays in identifying any such breaches or incidents. Such breaches or incidents have resulted in and may in the future result in theft, loss,damage, or unavailability of, or unauthorized access to or use, disclosure, modification or other processing of, Sensitive Information, loss of access to data or systems or cause other business delays or disruptions.

Third parties may attempt to compromise our employees and their access into internal IT Systems to gain access to accounts, our SensitiveInformation or our IT Systems. Employee error, malfeasance or other errors could result in an actual or perceived cybersecurity breach or other incident. This risk may be heightened as we transition to an increasingly distributed workforce. Inaddition, our employees, customers or end customers may also be subject to cyberattacks (including social engineering/phishing) or otherwise disclose or lose control of their passwords, or use the same or similar passwords on third parties’systems, which could lead to unauthorized access to their accounts on our platform.

Any unauthorized or inadvertent access to, or anactual or perceived cybersecurity breach or other incident impacting, our IT Systems or those of our third-party service providers, could result in an actual or perceived loss or unavailability of, unauthorized access to, or unauthorized use,disclosure, modification or other processing of, our Sensitive Information, regulatory investigations and other proceedings, orders and other obligations, claims, demands and litigation, indemnity obligations, damages, penalties, fines and othercosts in connection with actual and alleged contractual breaches, violations of applicable laws and regulations and other liabilities and our platform may be perceived as insecure and we may lose existing customers or fail to attract and retain newcustomers. We also could be required to divert substantial resources to prevent further cybersecurity breaches or other incidents. We have experienced such incidents in the past and may experience similar incidents in the future. While to date noincidents have had a material impact on our operations or financial results, we cannot guarantee that material incidents will not occur in the future. Any such breach or other incident affecting us, our third-party service providers, customers orend customers, or the perception that one has occurred, could also materially damage our reputation and adversely harm our business, financial condition and results of operations, including reducing our revenue, causing us to issue credits tocustomers, negatively impacting our ability to accept and process customer payment information, eroding our customers’ trust in our services and solutions, subjecting us to costly notifications to customers and individuals and costlyremediation measures, resulting in loss of, and harming our ability to retain customers, harming our brand or increasing our cost of acquiring new customers, or subject us to claims by third parties that we have breached our privacy-, dataprotection-, cybersecurity- or confidentiality-related obligations that could materially increase our costs, adversely impact how we operate our IT Systems and collect and use customer information and competitively disadvantage our business. Inaddition, many governments, including all fifty states in the United States, have enacted laws requiring companies to notify individuals of certain breaches involving Sensitive Information. These mandatory disclosures regarding such a breach arecostly to implement and often lead to widespread negative publicity, which may cause our customers to lose confidence in the effectiveness of our data security measures. The release of Sensitive Information may also lead to identity theft andrelated fraud, litigation, investigations, claims or other proceedings against us by affected individuals, customers and/or by regulators, or public statements against us by advocacy groups or others, and the outcome of such proceedings, which couldinclude penalties or fines and could have a material and adverse effect on our business, financial condition and results of operations. In

 

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addition, we may incur large expenditures to investigate or remediate, to recover information, to repair or replace networks or IT Systems, to protect against similar future events or to complywith existing and future cybersecurity, data protection and privacy laws and regulations. In addition, the costs of maintaining adequate protection and insurance coverage against such threats, as they develop in the future (or as legal requirementsrelated to cybersecurity increase) could be material.

We maintain technology errors, omissions and cyber liability insurance policiescovering certain damages. However, we cannot be certain that our coverage will be adequate for liabilities actually incurred relating to any breach or incident relating to privacy, data protection or cybersecurity, or that insurance will continue tobe available to us on economically reasonable terms, or at all. Further, if another company within our industry experiences a high-profile breach or incident this might lead to a loss of trust in our industry generally, which could adversely impactour reputation and brand, and adversely harm our business and financial condition.

Real or perceived defects, errors, orvulnerabilities in our platform could harm our reputation and adversely affect our business, financial condition and results of operations.

The software underlying our platform is highly complex and may contain undetected errors or vulnerabilities, some of which may only bediscovered after the code has been released. Our practice is to effect frequent releases of software updates, sometimes multiple times per day. The third-party software that we incorporate into our platform may also be subject to errors orvulnerabilities. Any errors or vulnerabilities discovered in our code or from third-party software after release could result in negative publicity, a loss of customers or loss of revenue and access or other performance issues. Such vulnerabilitiescould also be exploited by malicious actors and result in exposure of information of customers on our platform, or otherwise result in a cybersecurity breach or other incident. If we or our third-party service providers experience a cybersecuritybreach or security incident, including any breach or incident that allows, or is perceived to allow, unauthorized access to our platform or our customers’ information, our reputation, business, financial condition and results of operationscould be adversely affected. We may need to expend significant financial and development resources to analyze, correct, eliminate, or work around errors or defects or to address and eliminate vulnerabilities. Any failure to timely and effectivelyresolve any such errors, defects or vulnerabilities could adversely affect our business, reputation, brand, financial condition and results of operations.

Our business could be adversely impacted by changes in the Internet and mobile device accessibility of customers.

Our business depends on our customers’ access to our platform via a mobile device or personal computer and the Internet. Mobile operatingsystems, such as Android and iOS, and their respective application marketplaces that make our mobile applications available, are especially important in the context of our solution, as we address the needs of technicians in the field across tradesbusinesses. Any changes in such systems and application marketplaces that degrade the functionality of our mobile applications or give preferential treatment to our competitors’ mobile applications could adversely affect our platform’susage on mobile devices. If such mobile operating systems or application marketplaces limit or prohibit us from making our mobile applications available to our customers or their end customers, make changes that degrade the functionality of ourmobile applications, increase the cost of using our mobile applications, impose terms of use unsatisfactory to us or modify their search or ratings algorithms in ways that are detrimental to us, or if our competitors’ placement in such mobileoperating systems’ application marketplace is more prominent than the placement of our apps, our platform could be adversely impacted. Further, as new mobile devices and mobile platforms are released, there is no guarantee that certain mobiledevices will continue to support our platform or effectively roll out updates to our mobile applications.

In addition, we may operate injurisdictions that provide limited Internet connectivity. Internet access and access to a mobile device or personal computer are frequently provided by companies with significant market power that could take actions that degrade, disrupt or increasethe cost of customers’ ability to access our platform.

 

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Frequent or persistent interruptions could cause existing or prospective customers to believe that our platform is unreliable, leading them to switch to our competitors, which could materiallyadversely affect our reputation and brand, business, financial condition, results of operations and prospects. In addition, the Internet infrastructure that we and trades businesses rely on in any particular geographic area may be unable to supportthe demands placed upon it and could interfere with the speed and availability of our platform. Any such failure in Internet or mobile device or computer accessibility, even for a short period of time, could adversely affect our results ofoperations.

The collection, processing, storage, use and disclosure of personal information are governed by a rapidly evolvingframework of privacy, data protection, cybersecurity, data transfers or other laws or regulations worldwide and limit the use and adoption of our services and adversely affect our business.

We receive, store, process and use a large volume of personal information and other customer information from a wide range of sources,including customers, potential customers, vendors and employees. There are numerous federal, state, local and international laws and regulations regarding privacy, data protection, cybersecurity, marketing and telemarketing activities and thestoring, sharing, use, processing, transfer, disclosure and protection of personal information and other information, the scope of which are changing, subject to differing interpretations, and may be inconsistent among jurisdictions, or conflictwith other rules or other actual or asserted obligations. We also post privacy policies, which we are legally obligated to comply with and are subject to contractual obligations to third parties related to privacy, data protection and cybersecurity.As a result, we are subject to federal, state, local and international laws regarding data protection, privacy, cybersecurity, and the storing, sharing, use, disclosure and protection of personal information. The regulatory framework for dataprotection, privacy and cybersecurity worldwide is, and is likely to remain, uncertain for the foreseeable future, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that is inconsistentfrom one jurisdiction to another and may conflict with other rules or obligations or our practices.

Regulation of data protection,privacy and cybersecurity in the United States has increased, particularly at the state level. Several states in which we operate or may in the future operate have begun enacting new data privacy laws. For example, California’s Consumer PrivacyAct of 2018, as amended by the California Privacy Rights Act of 2020, collectively, the CCPA, introduces new rights for California residents and obligations for covered businesses collecting, using, disclosing and processing personal information.The enactment of the CCPA has prompted a wave of similar legislative development in numerous U.S. states, including laws in Virginia, Colorado, Connecticut, and Utah. These new laws, and others that will be effective in the coming years, includingprivacy laws in Delaware, Florida, Indiana, Iowa, Montana, New Jersey, Oregon, Tennessee and Texas, could further complicate compliance efforts and increase legal risk and compliance costs for us, the third parties upon whom we rely, and ourcustomers. In addition, the development of numerous U.S. state laws creates the potential for a patchwork of overlapping but different state law requirements. For example, in order to comply with the varying state laws around breaches involvinginformation, we must maintain adequate security measures, which require significant investments in resources and ongoing attention. We also may record phone calls with our customers, and with respect to the use of personal information for directmarketing purposes–both via telephone calls and email and text-based messaging–laws, regulations, and standards covering marketing, advertising, and other activities conducted by telephone, email, mobile devices, and the internet may be orbecome applicable to our business, such as the Federal Communications Act, the Federal Wiretap Act, the Electronic Communications Privacy Act, the Telephone Consumer Protection Act, the CAN-SPAM, and use ofpersonal information in relation to other state consumer protection and communication privacy laws, such as California’s Invasion of Privacy Act. In particular, the Telephone Consumer Protection Act, the Telemarketing Sales Rule as interpretedand implemented by the Federal Communications Commission, or FCC, and U.S. courts, or, collectively, the TCPA, impose significant restrictions on the use of telephone calls and text messages to residential and mobile telephone numbers as a means ofcommunication when prior consent of the person being contacted has not been obtained. Additionally, the CAN-SPAM establishes specific requirements for commercial email messages and specifies penalties for thetransmission of commercial email messages that are intended to deceive the recipient as to source or content, and obligates, among other things, the sender of

 

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commercial emails to provide recipients with the ability to opt out of receiving future commercial emails from the sender. In addition, there is a risk if our customers or end customers use ourplatform in a manner that does not comply with applicable law or our policies. See “—Risks Related to Data Privacy, Data Protection, Cybersecurity and Technology—Our customers’ and end customers’ violation of our policies orother misuse of our platform to transmit unauthorized, offensive or illegal messages, spam, phishing scams and website links to harmful applications or for other fraudulent or illegal activity could damage our reputation and brand, and we may face arisk of litigation and liability for illegal activities on our platform and unauthorized, inaccurate or fraudulent information distributed via our platform.” Our and our customers’ activities must comply with the above-mentioned laws.

In addition, data protection, privacy and cybersecurity laws outside the United States, including in the European Union or United Kingdom, mayimpose obligations on us, directly or by contract. For example, the General Data Protection Regulation imposes various requirements regarding the processing of personal information, including requirements regarding transparency, lawfulness ofprocessing, privacy rights, compliant contracting, data minimization, data breach notification, data re-usage, data retention, security of processing and international data transfers. A number of legislativeproposals in the European Union have imposed, and could continue to impose, new obligations in areas affecting our business, including the Artificial Intelligence Act and the Data Act. Some countries are considering passing, or have passed,legislation implementing data protection requirements or requiring local storage and processing of information, or similar requirements, that could increase the cost and complexity of delivering our services, and new countries and territories areadopting such legislation or other obligations with increasing frequency. With various U.S. and foreign laws and regulations imposing new and relatively burdensome obligations, and with substantial uncertainty over the interpretation and applicationof these laws and regulations, including the potential for various regulatory or other governmental bodies to enact new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations or to increase penaltiessignificantly, we may face challenges in addressing their requirements and making necessary changes to our policies, practices and commercial agreements, and may incur significant costs and expenses in an effort to do so, which could result inpotential liability and adversely affect our business.

These federal, state, local and international laws and regulations, which, asmentioned, in some cases can be enforced by private parties in addition to government entities, are increasingly restricting the collection, processing and use of personal information. We continue to monitor changes and laws and regulations, andcompliance with current and future customer privacy, data protection and cybersecurity laws and regulations could result in higher compliance, technical or operating costs. Any failure or perceived failure by us to comply with these laws andregulations, our privacy policies, our obligations to customers or other third parties, or any of our other actual or asserted obligations relating to privacy, data protection or cybersecurity may result in governmental investigations or enforcementactions, litigation (including individual or class action lawsuits), claims or public statements against us by consumer advocacy groups or others, and could result in significant monetary liability, fines, penalties, loss of customers, reputationalharm and loss of goodwill, or cause our customers to lose trust in us, which could have an adverse effect on our reputation and brand and have a material and adverse effect on our business, financial condition and results of operations.

Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to thebusinesses of our customers may limit the adoption and use of, and reduce the overall demand for, our services. Additionally, if third parties we work with, such as vendors or service providers, violate applicable laws or regulations or ourpolicies, such violations may also put our customers’ information or other information maintained or otherwise processed in our business at risk and could in turn have an adverse effect on our business. Any significant change to applicablelaws, regulations or industry practices regarding the collection, use, retention, security, disclosure or other processing of our customers’ information, or regarding the manner in which the express or implied consent of customers for thecollection, use, retention, disclosure or other processing of such information is obtained, could increase our costs and require us to modify our products and services, possibly in a material manner, which we may be unable to complete, and may limitour ability to store and process customer information or other information or develop new products and services.

 

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Our customers’ and end customers’ violation of our policies or other misuseof our platform to transmit unauthorized, offensive or illegal messages, spam, phishing scams and website links to harmful applications, record calls without consent or for other fraudulent or illegal activity could damage our reputation and brand,and we may face a risk of litigation and liability for illegal activities on our platform and unauthorized, inaccurate or fraudulent information distributed via our platform.

Our customers and end customers may use our platform to make telephone calls and send short message services, or SMS, text messages to ourcustomers. In particular, the TCPA imposes significant restrictions on the use of telephone calls and text messages to residential and mobile telephone numbers as a means of communication when prior consent of the person being contacted has not beenobtained. Our customers’ use of our platform for marketing activities must comply with the above-mentioned laws. Despite our ongoing and substantial efforts to limit such use, certain customers or end customers may use our platform to transmitunauthorized, offensive or illegal messages, calls, spam, phishing scams and website links to harmful applications, reproduce and distribute copyrighted material or the trademarks of others without permission, launder money, traffic drugs,fraudulently sell goods or services, use credit or debit cards in an unauthorized manner, record conversations without proper notice or consent, and report inaccurate or fraudulent data or information. While these actions are in violation of ourpolicies, our efforts to defeat spamming attacks, illegal robocalls and other fraudulent activity will not prevent all such attacks and activity. Additionally, if the measures we have taken are too restrictive and inadvertently screen propertransactions, this could diminish our customer experience. Violations of the TCPA may be enforced by the FCC or by individuals through litigation, including through costly class actions, of which numerous suits under federal and state laws have beenfiled in recent years against companies who conduct telemarketing and/or SMS texting programs, resulting in multi-million dollar settlements to the plaintiffs. In addition to costly and time-consuming litigation, statutory penalties for TCPAviolations range from $500 to $1,500 per violation, which has been interpreted to mean per phone call and/or text message sent and therefore the fines and settlement amounts can be very significant. Due to the evolving interpretation of theTCPA’s restrictions, and the highly litigated nature of the TCPA, our and our customers’ business and results of operations may be adversely affected by regulators, including the FCC, or the courts interpreting the TCPA restrictionsdifferently than we do, by actual or perceived violations of the TCPA, as well as by lawsuits or other claims against us and our customers relating to violations of the TCPA. The outcome of such proceedings may not be favorable, and one or moreunfavorable outcomes could have a material adverse impact on our financial condition. Additionally, any changes to the TCPA, its interpretation, or enforcement of it by the government or private parties that further restrict the way we or ourcustomers’ contact and communicate with potential customers or generate leads could harm our business, financial condition and results of operations. Additionally, we also send marketing messages via email and are subject to the CAN-SPAM, which establishes specific requirements for commercial email messages and outlines penalties for the transmission of commercial email messages that are intended to deceive the recipient as to source orcontent, and obligates, among other things, the sender of commercial emails to provide recipients with the ability to opt out of receiving future commercial emails from the sender. As laws and regulations, including FTC and FCC enforcement thereof,rapidly evolve to govern the use of these communications and marketing platforms, the failure by us or our customers, or our employees or third parties acting at our direction, to abide by applicable laws and regulations could adversely impact ourbusiness, reputation and brand, financial condition and results of operations or subject us to fines or other penalties.

Such illegal useof our platform could damage our reputation and brand and we could face claims for damages, regulatory enforcement, copyright or trademark infringement, defamation, negligence or fraud. Moreover, our customers’ and end customers’ promotionof their products and services through our platform might not comply with federal, state and foreign laws. We rely on contractual representations made to us by our customers that their use of our platform will comply with our policies and applicablelaw. Although we retain the right to verify that customers and end customers are abiding by our policies, our customers and end customers are ultimately responsible for compliance with our policies, and we do not systematically audit our customersor end customers to confirm compliance with our policies. Although Section 230 of the Communications Decency Act currently limits liability for third-party content posted on internet platforms, we cannot predict whether that protection willremain in effect.

 

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We also may record phone calls on behalf of our customers, and our customers may also recordphone calls that are placed through our platform. The actual or perceived improper calling of customer phones or recording of customer calls may subject us to potential risks, including claims, demands and litigation, regulatory demands,investigations and other proceedings, and fines, penalties, monetary and other settlements, and other liabilities relating to laws, regulations or other actual or asserted obligations, including consumer protection laws and regulations or certainlaws and regulations that require consent, including the consent of all parties in certain states, for recording. Any future such litigation or other proceedings against us, regardless of whether or not they have merit, could be costly andtime-consuming to defend and may distract management and technical personnel. Among other potential claims, federal or state regulatory authorities or private groups or individuals may claim that our notices, disclosures, form or manner of obtainingconsent or our policies or practices relating to these matters are not adequate or violate applicable law or other actual or asserted obligations, such as industry standards. For example, there has been a rise in lawsuits alleging violations ofwiretap laws, particularly in California. Successful lawsuits alleging violations of the California Invasion of Privacy Act can result in statutory penalties of $5,000 per violation.

Risks Related to Our Intellectual Property

If we do not adequately protect our intellectual property and our data, our business, financial condition and results of operationscould be materially adversely affected.

We rely on a combination of trademark, trade secret, copyright and patent law andcontractual restrictions to protect our intellectual property. However, effective trademark, trade secret, copyright and patent protection is expensive to develop and maintain, both in terms of initial and ongoing applicable registrationrequirements and expenses and the costs of maintaining, defending and enforcing our registered intellectual property rights. We make business decisions about when to seek patent protection for a particular technology feature of our and when to relyupon copyright or trade secret protection, and the approach we select may ultimately prove to be inadequate. Even when we seek patent protection, there is no assurance that the resulting patents will effectively protect every significant feature ofour platform or other proprietary technology. Given the costs and expenses of obtaining, maintaining, protecting, exploiting, defending and enforcing our registered intellectual property rights, we may choose not to obtain, maintain, protect,exploit, defend or enforce certain intellectual property rights that later turn out to be important. Further, we may not timely or successfully apply for a patent or register our trademarks or otherwise secure our intellectual property. Our effortsto protect, maintain or enforce our proprietary rights may be ineffective and could result in substantial costs and diversion of resources, which could adversely affect our business, financial condition and results of operations.

In addition, we attempt to protect our intellectual property, proprietary technology and confidential information by requiring our employeesand consultants who contribute to the development of intellectual property on our behalf to enter into confidentiality and invention assignment agreements, and our vendors, customers, business partners and other third parties we share informationwith to enter into nondisclosure agreements. These agreements may not effectively assign all intellectual property rights to us or prevent unauthorized use or disclosure of our confidential information, trade secrets, intellectual property orproprietary technology and may not provide an adequate remedy in the event of unauthorized use, misappropriation or disclosure of our confidential information, trade secrets or proprietary technology, or infringement or misappropriation of ourintellectual property. Additionally, any such agreement with respect to the assignment of intellectual property rights may be breached and we may be forced to bring claims against third parties, or defend claims that they may bring against us, todetermine the ownership of what we regard as our intellectual property. Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our platform or other software, technology and functionality or obtain and useinformation that we consider proprietary. In addition, unauthorized parties may also attempt, or successfully endeavor, to obtain our proprietary technology, confidential information and trade secrets through various methods, including throughcybersecurity attacks, reverse engineering and legal or other methods of protecting this data may be inadequate.

 

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We have in the past been, and may in the future be, subject to others infringing ourintellectual property rights. Competitors have adopted, and may continue to adopt, service names similar to ours, thereby harming our ability to build brand identity and possibly leading to end-customerconfusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other trademarks that are similar to our trademarks. We believe that the protection of our trademark rights is an important factor inproduct recognition, protecting our brand and maintaining goodwill and if we do not adequately protect our rights in our trademarks from infringement, any goodwill that we have developed in those trademarks could be lost or impaired, which couldharm our brand and our business. Additionally, litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary in the future toenforce our intellectual property rights and to determine the validity and scope of the proprietary rights of others.

Intellectualproperty infringement or misappropriation assertions by third parties could result in significant costs and adversely affect our business, financial condition, results of operations and reputation.

We operate in an industry with frequent intellectual property litigation. Other parties have in the past asserted, and may assert in thefuture, that we have infringed or misappropriated their intellectual property rights. We could be required to pay substantial damages or cease using intellectual property or technology that is deemed infringing or misappropriating. In addition,despite our efforts to ensure that our employees, consultants, vendors and service providers do not use the intellectual property and other proprietary information or know-how of third parties in their workfor us, we have in the past been, and may in the future be, subject to claims that we or our employees, consultants, vendors or service providers have inadvertently or otherwise used or disclosed intellectual property, including copyrightedmaterials, trade secrets, software code or other proprietary information, of a former employer or other third parties.

Further, we cannotpredict whether assertions of third-party intellectual property rights or claims arising from such assertions would substantially adversely affect our business, financial condition and results of operations. The defense of these claims and anyfuture infringement or misappropriation claims, whether they are with or without merit or are determined in our favor, may result in costly litigation and diversion of technical and management personnel. In addition, we may be unable to meet ourobligations to customers under our customer contracts or to compete effectively, and our revenue and operating results could be adversely impacted. We might also be obligated to indemnify our customers or other companies in connection with any suchlitigation and to obtain licenses, modify our platform or refund fees, which could harm our financial results. Further, an adverse outcome of a dispute may require us to pay damages, potentially including treble damages and attorneys’ fees ifwe are found to have willfully infringed a party’s patent or copyright rights, cease making, licensing or using products that are alleged to incorporate or infringe the intellectual property of others, expend additional development resources toredesign our offerings, and enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies. Royalty or licensing agreements, if required, may be unavailable on terms favorable to us, or atall. In any event, we may need to license intellectual property from third parties which may require us to pay royalties or make one-time payments. Even if these matters do not result in litigation or areresolved in our favor or without significant cash settlements, the time and resources necessary to resolve them could adversely affect our business, reputation, financial condition, results of operations and reputation.

Our platform, including our purpose-built AI solutions such as Titan Intelligence, contains third-party open-source software components,and failure to comply with the terms of the underlying open-source software licenses could compromise the proprietary nature of our platform or could require disclosure of affected proprietary software source code.

Our platform, including our purpose-built AI solutions such as Titan Intelligence, contains software modules licensed to us by third-partyauthors under “open source” licenses. Use and distribution of open-source software may entail greater risks than use of third-party commercial software, as open-source licensors generally do not provide support, warranties, indemnificationor other contractual protections regarding infringement claims or the

 

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quality of the software. In addition, open-source projects may have security and other vulnerabilities and architectural instabilities or may be otherwise subject to security attacks due to theirwide availability, and are provided on an “as-is” basis. Many of the risks associated with the use of open source software, such as the lack of warranties or assurances of title or performance,cannot be eliminated, and could, if not properly addressed, negatively affect our business.

If we combine our proprietary software withopen-source software in a certain manner, we could, under certain “copyleft” open source licenses, be required to release the source code of our proprietary software under the terms of such an open source software license, which couldrequire us to offer our source code at little or no cost or grant other rights to our intellectual property. This could enable our competitors to create similar offerings with lower development effort, resources and time and ultimately could resultin a loss of our competitive advantages. Alternatively, to avoid the release of the affected portions of our source code, we could be required to purchase additional licenses, expend substantial time and resources tore-engineer some or all of our software or cease use or distribution of some or all of our software until we can adequately address the concerns.

Moreover, we cannot assure you that our processes for controlling our use of open source software in our products will be effective. Althoughwe have certain procedures in place to monitor our use of open-source software that are designed to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of anopen source license, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous. In addition, the terms of many open-source licenses have not been interpreted by U.S. orforeign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our platform. From time to time, there have been claims againstcompanies that incorporate open-source software into their solutions, challenging such companies’ rights to use the open-source software against companies that incorporate open source software into their solutions. As a result, we could besubject to lawsuits by parties claiming ownership of what we believe to be open-source software and alleging that we do not have the rights to use, incorporate, distribute, or modify such software. Additionally, if we are held to have breached orfailed to fully comply with all the terms and conditions of an open source software license, we could face infringement or other liability, or be required to seek costly licenses from third parties to continue providing our platform on terms thatare not economically feasible, to re-engineer our platform, to discontinue or delay the provision of our platform if re-engineering could not be accomplished on a timelybasis, or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, financial condition and results of operations.

Risks Related to Legal and Regulatory Environment

We may become involved in claims, lawsuits, government investigations and other proceedings that may harm our business, financialcondition and results of operations.

From time to time, we have been, and may in the future become, involved in variousinvestigations or legal proceedings relating to matters incidental to the ordinary course of our business, including intellectual property, commercial, product liability, employment, class action, whistleblower, wiretapping and other litigation andclaims and governmental and other regulatory investigations and proceedings. For example, plaintiffs have sought to apply federal wiretap laws, such as the Federal Wiretap Act, and similar U.S. state laws, such as California’s Invasion ofPrivacy Act, to certain advertising and online tracking practices. We have received one or more claims of violation of California’s Invasion or Privacy Act, though none resulting in significant liability or expense. Such laws include privatecauses of action, and could result in significant monetary liability to address, including settlement costs, even if these causes of action are meritless. The number and significance of these potential claims and disputes may increase as ourbusiness expands. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability or require us to change our business practices. In addition, the expense of litigation andthe timing of this expense from period to period are difficult to estimate, subject to change and may harm our financial condition and results of operations. Because of the potential risks, expenses and uncertainties of litigation, we may, from timeto time, settle disputes,

 

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even where we have meritorious claims or defenses, by agreeing to settlement agreements. Any of the foregoing may harm our business, financial condition and results of operations.

Our business is subject to extensive government regulation and oversight. Our failure to comply with extensive, complex, overlapping andfrequently changing rules, regulations and legal interpretations could adversely affect our business.

We are subject to a numberof laws and regulations that apply generally to businesses, including laws and regulations governing the internet and the marketing, sale and delivery of services over the internet. These laws and regulations, which continue to evolve, cover, amongother things, taxation, tariffs, privacy and data protection, cybersecurity, pricing, content, copyrights, distribution, mobile and telecommunications, advertising practices, electronic contracts, sales procedures, automatic subscription renewals,credit card processing procedures, consumer and business financial products, insurance products, consumer protection, the provision of online payment services, payroll compliance, the design and operation of websites and the characteristics andquality of products that are offered online. We cannot guarantee that we have been or will in the future be fully compliant with such laws and regulations in every jurisdiction, as it is not entirely clear in every jurisdiction how existing laws andregulations governing such areas apply or will be enforced. Moreover, as the regulatory landscape continues to evolve, increasing regulation and enforcement efforts by federal, state and foreign authorities, and the prospects for private litigationclaims, become more likely. In addition, the adoption of new laws or regulations, or the imposition of other legal requirements, that adversely affect our ability to market or sell our platform could harm our ability to offer, or negatively affectcontractor demand for, our platform, which could impact our revenue, impair our ability to expand our platform and service offerings, and make us more vulnerable to competition. Future regulations, or changes in laws and regulations or theirexisting interpretations or applications, could also require us to change our business practices and raise compliance costs or other costs of doing business.

Additionally, various federal, state and foreign labor laws govern our relationships with our employees and affect operating costs. These lawsinclude employee classifications as exempt or non-exempt, minimum wage requirements, unemployment tax rates, workers’ compensation rates, overtime, family leave, workplace health and safety standards,payroll taxes, citizenship requirements and other laws and regulations. The number and type of laws applicable to us and our workforce will grow as our remote workforce increases.

Significant additional laws or regulations, or our failure to comply with any laws and regulations that now, or could in the future, apply toour business could materially adversely affect our business, financial condition, operating results and prospects.

In addition, changesin regulations could negatively impact the business environment for the trades industry. Laws and regulations are rapidly evolving and may change significantly in the future. In particular, our customers are subject to a wide range of laws andregulations related to payroll, employment, data protection, privacy and marketing, and our business could be adversely affected should our solutions and platform not be able to keep pace with such regulatory changes.

The expansion of our operations outside the United States, which subjects us to additional costs and risks, could adversely affect ourbusiness, financial condition and results of operations.

While we currently operate primarily in the United States and Canada, asignificant portion of our workforce is comprised of engineering contractors distributed internationally, including, but not limited to, persons in Armenia, Macedonia, and Poland, and our international contract workforce has grown as a result of ouracquisitions of ServicePro and FieldRoutes. If our access to this workforce is disrupted, our business may be adversely affected and we may not be able to grow effectively. Geopolitical events and local government and other actions, including armedconflicts, or sanctions imposed by the United States on countries in which members of our workforce reside,

 

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may reduce the availability of or disrupt communication with these workforces, or delay projects under development by the distributed teams. Our continued ability to grow and compete effectivelydepends on these workforces, so their limited availability or unavailability would impact our performance.

We may expand ourinternational operations, which may include opening offices in new jurisdictions and providing our platform in additional countries. Any new markets or countries into which we attempt to sell subscriptions to access our platform may not be receptiveto our efforts. For example, we may not be able to expand further in some markets if we are not able to adapt our platform to fit the needs of prospective customers in those markets or if we are unable to satisfy certain country- andindustry-specific laws or regulations. In addition, future international expansion will also require considerable management attention and the investment of significant resources while subjecting us to new risks and increasing certain risks that wealready face, including risks associated with:

 

  

recruiting and retaining talented and capable employees outside the United States, including employees whospeak multiple languages and come from a wide variety of different cultural backgrounds and customs;

 

  

maintaining our company culture across all of our global offices;

 

  

providing our platform in different languages;

 

  

compliance with applicable international laws and regulations, including laws and regulations with respect toemployment, construction, privacy, data protection, cybersecurity, consumer protection and unsolicited email, and the risk of penalties and fines against us and individual members of management or employees if our practices are deemed to be out ofcompliance;

 

  

managing an employee base in jurisdictions with differing employment regulations;

 

  

operating in jurisdictions that do not protect intellectual property rights to the same extent as the UnitedStates and navigating the practical enforcement of such intellectual property rights outside of the United States;

 

  

the risk of changes in foreign laws that could restrict our ability to use our intellectual property outsideof the foreign jurisdiction in which we developed it;

 

  

compliance by us and our partners with anti-corruption laws, competition laws, import and export control laws,tariffs, trade barriers, economic sanctions and other regulatory limitations on our ability to provide our platform in certain international markets;

 

  

foreign exchange controls that might require significant lead time in setting up operations in certaingeographic territories and might prevent us from repatriating cash earned outside the United States;

 

  

political and economic instability;

 

  

changes in diplomatic and trade relationships, including the imposition of new trade restrictions, tradeprotection measures, import or export requirements, trade embargoes and other trade barriers;

 

  

generally longer payment cycles and greater difficulty in collecting accounts receivable;

 

  

double taxation of our international earnings and potentially adverse tax consequences due to changes in theincome and other tax laws of the United States or the international jurisdictions in which we operate; and

 

  

higher costs of doing business internationally, including increased accounting, travel, infrastructure andlegal compliance costs.

Compliance with laws and regulations applicable to our global operations substantiallyincreases our cost of doing business. We may be unable to keep current with changes in laws and regulations as they occur. Although we have implemented policies and procedures designed to support compliance with these laws and regulations,

 

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there can be no assurance that we will always maintain compliance or that all of our employees, contractors, partners and agents will comply. Any violations could result in enforcement actions,fines, civil and criminal penalties, damages, injunctions or reputational harm. If we are unable to comply with these laws and regulations or manage the complexity of our global operations successfully, we may need to relocate or cease operations incertain foreign jurisdictions, which could adversely affect our business, financial condition, results of operations and prospects.

We are subject to governmental export and import controls and economic sanctions programs that could impair our ability to compete ininternational markets or subject us to liability if we violate these controls.

Certain of our products may be subject to variousrestrictions under U.S. and foreign export control and economic sanctions laws and regulations, including the U.S. Export Administration Regulations and economic and trade sanctions regulations administered by the Office of Foreign Assets Control,or OFAC. The export of or provision of our platform must be made in compliance with these laws and regulations. Although we take precautions to prevent our products and technology from being provided in violation of such laws, our products andtechnology could in the future be provided inadvertently in violation of such laws, despite the precautions we take. For example, following Russia’s invasion of Ukraine, the United States and other countries imposed economic sanctions andsevere export control restrictions against Russia and Belarus. Due to the U.S. sanctions, we restricted access to our software for Russian engineers and arranged to move certain contractors out of Russia for the purpose of continuing to performengineering services for us. These actions led to some limited disruptions in our development activities, and further disruptions may take place, if the United States and other countries could impose wider sanctions and export restrictions and takeother actions. Any exports, even for the purpose of developing software or services sold in the United States and Canada, as well as our ability to use developers in Russia and Belarus, may be impacted by these restrictions.

If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminalpenalties, including the possible loss of export privileges, fines, which may be imposed on us and responsible employees or managers, and, in extreme cases, the incarceration of responsible employees or managers. Obtaining the necessaryauthorizations, including any required license, for a particular deployment may be time consuming, is not guaranteed, and may result in the delay or loss of sales opportunities. In addition, changes in our platform, or changes in applicable exportor economic sanctions regulations may create delays in the introduction and deployment of our platform in international markets, or, in some cases, prevent the export or provision of our platform to certain countries or end customers. A change inexport or economic sanctions regulations, shift in the enforcement or scope of existing regulations or change in the countries, governments, persons or technologies targeted by such regulations, could also result in decreased use of our platform, orin our decreased ability to export or provide our platform to existing or prospective customers with international operations. Any decreased use of our platform or limitation on our ability to export or provide our platform may harm our business,financial condition and results of operations.

Compliance with applicable regulatory requirements regarding the export and provision ofour platform, including with respect to new releases of our platform, may create delays in the introduction of our platform in international markets, prevent our customers with international operations from deploying and using our platformthroughout their globally distributed systems or, in some cases, prevent the export or provision of our platform to some countries altogether.

Russian military action against Ukraine has adversely affected, and could continue to adversely affect, our operations and theproductivity of our employees.

We have a significant number of personnel, including both employees and contractors, in Armenia aswell as Poland and other European countries; we had engineering contractors in Russia prior to U.S. sanctions against Russia. In late February 2022, Russian military forces launched significant military action against Ukraine, which could causesustained conflict and disruption in nearby countries like Armenia, Macedonia, and Poland.

 

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As a result of the situation in Ukraine, new and stricter sanctions have been imposed by the United States, Canada, the United Kingdom, the European Union and other countries and organizationsagainst officials, individuals, regions and industries in Russia. Soon after the Russian military action began, in response to U.S. sanctions, we restricted our Russian engineering contractors’ access to our software and arranged to moveapproximately 50 contractors out of Russia for the purpose of continuing to perform engineering services for us. Prolonged unrest, intensified military activities or the implementation of more extensive sanctions impacting the region could alsoadversely affect our operations and the productivity of our employees in Armenia, Macedonia, and Poland and other European countries.

Inaddition, negative global and regional economic conditions, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, inflation, rising interest rates, and bank failures, internationaltrade relations, geopolitical instability and uncertainty, such as the war in Ukraine and resulting heightened risk of cyberattacks, intellectual property theft, and a reduction in information technology spending regardless of macroeconomicconditions could have adverse impacts on our business, results of operations and financial condition, including longer sales cycles, lower prices for our subscriptions, higher default rates among our channel partners, reduced sales and slower ordeclining growth.

We are subject to anti-corruption and anti-bribery laws and anti-money laundering laws and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.

We are subject to the Foreign Corrupt Practices Act, or the FCPA, the U.S. domestic bribery statute contained in18 U.S.C. § 201, the U.S. Travel Act, and other anti-corruption and anti-bribery laws, U.S. anti-money laundering laws, and similar laws in countries where we conduct activities. Anti-corruption and anti-bribery laws have beenenforced aggressively in recent years and are interpreted broadly and prohibit companies, their employees, agents, representatives, business partners and third-party intermediaries from promising, authorizing, making, offering or providing, directlyor indirectly, improper payments or benefits to recipients in the public or private sector, including anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business, orotherwise obtaining favorable treatment. Anti-money laundering laws generally prohibit persons from engaging in transactions where the proceeds at issue derive from, or are intended to facilitate or conceal, illegal activity, or where a party to thetransaction is “willfully blind” to the illegal sources of the proceeds. If and when we increase our international sales and operations, our risks under these laws may increase.

In addition, we use third parties to sell access to our platform and conduct business on our behalf abroad. We, our employees, agents,representatives, business partners and third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities, and we can be held liable for the corrupt or otherillegal activities of these employees, agents, representatives, business partners or third-party intermediaries, even if we do not explicitly authorize such activities. We cannot assure you that all of our employees, agents, representatives,business partners or third-party intermediaries will not take actions in violation of applicable law for which we may be ultimately held responsible.

These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to preventany such actions. We cannot assure you that none of our employees, agents, representatives, business partners or third-party intermediaries will take actions in violation of our policies and applicable law, for which we may be ultimately heldresponsible.

Any allegations or violations of the FCPA or other applicable anti-corruption laws, anti-money laundering laws or other lawscould result in whistleblower complaints, sanctions, settlements, prosecution, enforcement actions, fines, damages, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and suspension or debarmentfrom government contracts. Responding to any investigation or action will likely result in a materially significant diversion of management attention and resources and significant

 

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defense costs and other professional fees. Any of the foregoing may harm our reputation, growth prospects, business, financial condition and results of operations.

Risks Related to Financial, Tax and Accounting Matters

The material weaknesses in our internal control over financial reporting, which we first identified in fiscal 2019, have been remediatedas of the end of fiscal 2024. While we remediated these material weaknesses, such remediation does not guarantee that our remediated controls will continue to be effective or that we will not experience other material weaknesses in the future, whichcould affect the reliability of our financial statements and have other adverse consequences.

We have been a private company sinceour inception and, as such, we have not had the internal control over financial reporting requirements of a publicly traded company. As a result of becoming a public company, we will be required to furnish a report by management on the effectivenessof our internal control over financial reporting beginning with our Annual Report on Form 10-K for fiscal 2026. This assessment will need to include disclosure of any material weaknesses identified in ourinternal control over financial reporting.

We have previously identified material weaknesses in our internal control over financialreporting, which consisted of the following: (i) lack of an effective control environment including insufficient resources with an appropriate level of controls knowledge and expertise commensurate with our financial reporting requirements,(ii) ineffective controls over our financial close and financial reporting, including controls over cash flow statements, balance sheet reconciliations and journal entries including maintaining appropriate segregation of duties,(iii) ineffective controls related to the identification of, and accounting for, certain non-routine, complex or unusual events or transactions and the adoption of new accounting standards, and (iv) ineffective information technologygeneral controls in the areas of user access, program change-management, program development and computer operations controls over certain information technology systems relevant to our financial statements. After these material weaknesses wereidentified, we implemented a remediation plan that included the following:

 

  

We hired additional qualified accounting and IT personnel to bolster our technical reporting, operationalaccounting, tax and IT compliance capabilities. We implemented controls to formalize roles and review responsibilities to align with our team’s skills and experience and implemented formal controls over segregation of duties. We evaluated ourresource needs and will continue to evaluate and hire additional resources as needed to support our growth.

 

  

We designed and implemented procedures and controls to identify and account for complex accountingtransactions and other technical accounting and financial reporting matters including accounting memoranda addressing these matters.

 

  

We also engaged and will continue to engage external consultants with appropriate expertise for more complextechnical accounting issues, specifically related to acquisitions and new accounting standards, which supplements our internal resources and allows us to scale our accounting processes to match growth and changes in our business and operations.

 

  

We implemented an enterprise resource planning, or ERP, system and other applications to support our businessprocesses. We designed and implemented controls to, among other things, optimize automation to enhance our financial statement close process, reduce the number of manual journal entries, enforce segregation of duties and facilitate the proper reviewof journal entries.

 

  

We formalized accounting processes, policies and procedures supporting our financial close process, includingcreating standard balance sheet reconciliation templates, and formalized procedures over the review of financial statements.

 

  

We enhanced IT governance processes, including implementing a streamlined process to govern access and changemanagement processes across key corporate applications, implementing more robust IT policies and procedures over access and change management and computer operations, automating components of our change management and logical access processes, andenhanced IT controls.

 

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As of January 31, 2024, we completed our remediation efforts, including the testing ofthe operating effectiveness of the controls, and we have concluded that the material weaknesses have been remediated. However, we recognize that maintaining effective internal control over financial reporting will continue to require significantattention from management and expense, and we cannot guarantee that we will not identify material weaknesses in the future.

Ourindependent registered public accounting firm is not required to report on the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At suchtime, our independent registered public accounting firm may issue a report that is adverse, which would occur in the event we have a material weakness in our internal control over financial reporting. If new material weaknesses are identified in ourinternal control over financial reporting, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the SEC, could be adverselyaffected which, in turn, may adversely affect our reputation and business and the market price of our Class A common stock. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities,loss of investor confidence, delisting of our securities and harm to our reputation and financial condition, or diversion of financial and management resources from the operation of our business.

We may be unable to generate sufficient cash flow to satisfy our significant debt service obligations, which could have an adverseeffect on our business, financial condition, results of operations and cash flows.

Our ability to make scheduled payments on or torefinance our debt obligations, including under a secured credit agreement with Wells Fargo Bank, N.A., as administrative agent and collateral agent, and certain lenders, as amended, or the Credit Agreement, depends on our financial condition andresults of operations, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may not be able to maintain a level of cash flows fromoperating activities sufficient to permit us to pay the principal or interest on our indebtedness reflected in our consolidated financial statements. If our cash flows and capital resources are insufficient to fund our debt service obligations, wemay be forced to reduce or delay strategic acquisitions and partnerships, capital expenditures and payments on account of other obligations, seek additional capital, restructure or refinance our indebtedness or sell assets. These alternativemeasures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Anyrefinancing of our debt could be at higher interest rates and could require us to comply with more onerous covenants, which could further restrict our business operations. In addition, we cannot assure you that we will be able to refinance any ofour indebtedness on commercially reasonable terms, or at all.

If we are unable to repay or otherwise refinance our indebtedness when due,if we fail to comply with financial or other covenants in our debt service agreements, which include liquidity covenant and a recurring revenue covenant, or if any other event of default is not cured or waived, the applicable lenders couldaccelerate our outstanding obligations or foreclose against the collateral granted to them to secure that indebtedness, which could force us into bankruptcy or liquidation. In the event the applicable lenders accelerate the repayment of ourborrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. Any acceleration of amounts due under the Credit Agreement or the exercise by the applicable lenders of their rights under the security documents couldhave an adverse effect on our business, financial condition and results of operations and could have a material adverse effect on the trading price of our Class A common stock.

Our non-convertible preferred stock accrues dividends and has other financial and governancerights which could adversely affect our performance and/or our cash available for distribution to other stockholders.

We haveissued non-convertible preferred stock, which provides for certain financial terms in favor of the holders of the non-convertible preferred stock including accruingdividends with respect thereto. Such dividends

 

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are payable in-kind quarterly in arrears and accrue at the rate of (i) 10% per annum until the fifth anniversary of their issuance and(ii) thereafter, 15% per annum until the sixth anniversary of their issuance. Dividends are payable quarterly in cash thereafter at 20% per annum, and are subject to increases in the dividend rate in the event of our failure to pay suchdividends when due.

Our dividend and other obligations with respect to the non-convertiblepreferred stock could adversely affect our cash flow and/or reduce amounts payable to our other stockholders. Payments to holders of non-convertible preferred stock are generally senior in priority to anypayments to our other stockholders (including holders of Class A common stock sold in this offering). In addition, the holders of non-convertible preferred stock have certain specified governance rights, whichinclude the ability to designate a director to our board of directors under certain circumstances and a robust list of stockholder protective provisions, the waiver of which would require the consent of certain holders of our non-convertible preferred stock. Although we plan to redeem all outstanding shares of our non-convertible preferred stock immediately prior to the completion of this offering, if we do not redeem all such shares,these governance rights could limit our ability to freely conduct business and/or enter into certain transactions, any of which could adversely affect our performance. See the section titled “Description of Capital Stock—Non-Convertible Preferred Stock” for further details regarding our non-convertible preferred stock.

The Credit Agreement contains financial covenants and other restrictions on our actions that may limit our operational flexibility orotherwise adversely affect our results of operations.

The terms of the Credit Agreement include a number of covenants that limitour ability and our subsidiaries’ ability to, among other things, incur additional indebtedness, grant liens, merge or consolidate with other companies or sell substantially all of our assets, pay dividends, make redemptions and repurchases ofstock, make investments, loans and acquisitions or engage in transactions with affiliates. The terms of the Credit Agreement also include financial covenants, including a liquidity covenant and a recurring revenue covenant. The terms of the CreditAgreement may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs. In addition, complying with these covenants may make it more difficult for us to successfully executeour business strategy, including potential acquisitions, and compete against companies which are not subject to such restrictions.

We may require additional capital, which may not be available on terms acceptable to us, or at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges,including the need to develop new products or enhance our existing platform, improve our operating infrastructure or acquire complementary businesses and technologies. We may require additional financing to meet our working capital and capitalexpenditure in the future. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity, equity-linked securities or convertible debt securities, ourexisting stockholders could suffer significant dilution, and any new securities we issue could have rights, preferences and privileges superior to those of holders of our Class A common stock. Debt financings increase expenses, may contain covenantsthat restrict the operation of our business, and must be repaid regardless of operating results. For example, covenants contained in our Credit Agreement will limit our ability to pay dividends, to create, incur or assume indebtedness or liens, toconsummate certain strategic transactions, to engage in transactions with affiliates and to make certain investments.

We evaluatefinancing opportunities from time to time, and our ability to obtain financing will depend, among other things, on our development efforts, business plans and operating performance and the condition of the capital markets at the time we seekfinancing. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support ourbusiness growth and to respond to business challenges could be impaired, and our business, financial condition and results of operations could be adversely affected.

 

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Our estimates or judgments relating to our critical accounting policies may be basedon assumptions that change or prove to be incorrect, which could cause our results of operations to fall below expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amountsreported in our financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as described in the section titled“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the recognition and measurement of certain assets and liabilities andrevenue and expenses that is not readily apparent from other sources. Our accounting policies that involve judgment and use of estimates include revenue recognition, fair value of stock-based compensation, fair value of the common stock underlyingour stock-based awards and fair value of assets acquired and liabilities assumed in a business combination. If our assumptions change or if actual circumstances differ from those in our assumptions, our results of operations could be adverselyaffected, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.

We rely on assumptions and estimates to calculate certain of our key metrics, and real or perceived inaccuracies in such metrics mayharm our reputation and our business.

We track certain operational metrics, including number of Active Customers, with internalsystems and tools that are not independently verified by any third party and which may differ from estimates or similar metrics published by third parties due to differences in sources, methodologies or the assumptions on which we rely. Our internalsystems and tools have a number of limitations, and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including the metrics we publicly disclose. We may also discoverunexpected errors in the data that we are using that resulted from technical or other errors. If the internal systems and tools we use to track these metrics undercount or overcount performance or contain algorithmic or other technical errors, thedata we report may not be accurate. If we determine that any of our metrics or figures are not accurate, we may be required to revise or cease reporting such metrics or figures. While these numbers are based on what we believe to be reasonableestimates of our metrics for the applicable period of measurement, there are inherent challenges in measuring these metrics. Limitations or errors with respect to how we measure data or with respect to the data that we measure may affect ourunderstanding of certain details of our business, which could affect our long-term strategies. In addition, our methodology for calculating these metrics may differ from the methodology used by other companies to calculate similar metrics andfigures. If our operating metrics are not accurate representations of our business, if investors do not perceive our operating metrics to be accurate or if we discover material inaccuracies with respect to these figures, we expect that our business,financial condition and results of operations could be adversely affected.

Operating as a public company will require us to incursubstantial costs and will require substantial management attention.

As a public company, we will incur substantial legal,accounting and other expenses that we did not incur as a private company. For example, we will become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the applicable requirements of theSarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the rules and regulations of the SEC and the listing standards of The Nasdaq Stock Market LLC, or the Exchange. The Exchange Act requires, among other things, we fileannual, quarterly and current reports with respect to our business, financial condition and results of operations. Compliance with these rules and regulations will increase our legal and financial compliance costs, and increase demand on oursystems, particularly after we are no longer an “emerging growth company.” In addition, as a public company, we may be subject to stockholder activism, which can lead to additional substantial costs, distract management and impact themanner in which we operate our business in ways we cannot currently anticipate. As a result of disclosure of information in this prospectus and in filings required of a

 

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public company, our business, financial condition and results of operations will become more visible, which may result in threatened or actual litigation, including by competitors.

Certain members of our management team have limited experience managing a publicly traded company, and certain members joined us morerecently. As such, our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuousscrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which may harm our business, financial condition and results of operations.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

Our ability to utilize our federal net operating loss carryforwards, or NOLs, may be limited under Sections 382 and 383 of the Internal RevenueCode of 1986, as amended, or the Code. These limitations apply if we experience an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in the ownership of our equity by certainstockholders over a rolling three-year period.

We conducted a formal study through June 30, 2021 that concluded that although therehad been prior ownership changes, there were no actual limitations on the use of our NOLs. We have not conducted another formal study to assess whether any additional ownership change has occurred. If we have undergone additional ownership changes,or if we undergo an ownership change in the future, including as a result of this offering, our ability to use our pre-change NOLs and other pre-change tax attributes(such as research and development tax credits) to offset our post-change income or taxes may be limited. Similar provisions of state tax law may also apply to limit the use of our state net operating loss carryforwards. Future changes in our stockownership, some of which may be outside of our control, may result in an ownership change under these rules.

There is a risk that due tochanges in tax law, regulatory changes or other unforeseen reasons, our existing NOLs or business tax credits could expire or otherwise become unavailable to offset future income tax liabilities. At the state level, there may also be periods duringwhich the use of NOLs or business tax credits is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed by us. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs or taxcredits, even if we attain profitability.

Our results of operations may be harmed if we are required to collect or pay sales orother taxes in jurisdictions where we have not historically done so.

States and some local taxing jurisdictions have differingrules and regulations governing sales and use and other taxes, such as gross receipts taxes, excise taxes, and telecom taxes, and these rules and regulations are subject to varying interpretations that may change over time. The application offederal, state, local and international tax laws to services provided electronically is evolving. In particular, the applicability of sales taxes and other taxes to our platform in various jurisdictions is unclear. We collect and remit sales tax andother taxes in the United States and value-added tax, or VAT, in a number of international jurisdictions. It is possible, however, that we could face sales tax or other tax or VAT audits and that our liability for these taxes could exceed ourestimates as tax authorities in the United States or other jurisdictions could still assert that we are obligated to collect additional tax amounts from our paying customers and remit those taxes to those authorities. We could also be subject toaudits in states and international jurisdictions for which we have not accrued tax liabilities. A successful assertion that we should be collecting additional sales or other taxes on our platform in jurisdictions where we have not historically doneso and do not accrue for such taxes could result in substantial tax liabilities for past sales, discourage organizations from subscribing to our platform, or otherwise harm our business, financial condition and results of operations.

Further, one or more state or foreign or other tax authorities could seek to impose additional sales, use, telecommunications tax or other taxcollection and record-keeping obligations on us or may determine that such

 

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taxes should have, but have not been, paid by us. Liability for past taxes may also include substantial interest and penalty charges. Any successful action by state, foreign or other authoritiesto compel us to collect and remit sales tax, use tax, telecommunication tax or other taxes, either retroactively, prospectively, or both, may harm our business, financial condition and results of operations.

Changes in U.S. tax laws and regulations and those which we are subject to in various tax jurisdictions could adversely affect ourbusiness, financial condition and results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations,or ordinances could be enacted at any time. Those enactments could harm our domestic and international business operations and our business, financial condition and results of operations. Further, existing tax laws, statutes, rules, regulations orordinances could be interpreted, changed, modified or applied adversely to us. These events could require us or our customers to pay additional tax amounts on a prospective or retroactive basis, as well as require us or our customers to pay finesand/or penalties and interest for past amounts deemed to be due. If we raise our prices to offset the costs of these changes, existing and prospective customers may elect not to purchase our offerings in the future. Additionally, new, changed,modified or newly interpreted or applied tax laws could increase our customers and our compliance, operating and other costs, as well as the costs of our offerings. Further, these events could decrease the capital we have available to operate ourbusiness. Any or all of these events may harm our business, financial condition and results of operations.

As we expand the scale of ourinternational business activities, any changes in the U.S. or foreign taxation of such activities may increase our worldwide effective tax rate and harm our business, financial condition and results of operations. We may be subject to taxation inseveral jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable taxprinciples, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents. An increase in our tax liabilities could harm our liquidity and results of operations. In addition, the authorities in thesejurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or assert that benefits of tax treaties are not available to us, any ofwhich may harm us and our results of operations.

Our results of operations may be adversely affected by changes in accountingprinciples applicable to us.

GAAP is subject to interpretation by the Financial Accounting Standards Board, or the FASB, the SECand other various bodies formed to promulgate and interpret appropriate accounting principles. Changes in accounting principles applicable to us, or varying interpretations of current accounting principles, could have a significant effect on ourreported results of operations. Further, any difficulties in the implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations,which could result in regulatory discipline and harm investors’ confidence in us.

Risks Related to Ownership of Our Class ACommon Stock, Governance and this Offering

The multi-class structure of our common stock will have the effect of concentrating voting powerwith Ara Mahdessian, our co-founder, Chief Executive Officer and a member of our board of directors, and Vahe Kuzoyan, our co-founder, President and a member of our board of directors, which will limit your ability to influence the outcome ofmatters submitted to our stockholders for approval, including the election of our board of directors, the adoption of amendments to our amended and restated certificate of incorporation and bylaws and the approval of any merger, consolidation, saleof all or substantially all of our assets or other major corporate transaction.

Our Class A common stock, which is the stockwe are offering by means of this prospectus, has one vote per share, our Class B common stock has 10 votes per share and our Class C common stock has no votes per share,

 

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except as otherwise required by law. Upon the completion of this offering, our Co-Founders and their respective affiliates will together hold all of the issued and outstanding shares of ourClass B common stock. Accordingly, upon the completion of this offering, the shares held by our Co-Founders (including shares over which they have voting or administrative control) will represent   % of the voting power of ouroutstanding capital stock, which voting power may increase over time as our Co-Founders exercise or vest in equity awards outstanding at the time of the completion of this offering. If all such equity awards held by our Co-Founders (including the Co-Founder PSUs) had been exercised or vested and settled in shares of our Class B common stock as of the date of the completion of this offering, the shares held by our Co-Founders (including shares over whichthey have voting or administrative control) would represent   % of the voting power of our outstanding capital stock. As a result, our Co-Founders will be able to significantly influence or control any action requiring the approval ofour stockholders, including the election of our board of directors, the adoption of amendments to our amended and restated certificate of incorporation and bylaws and the approval of any merger, consolidation, sale of all or substantially all of ourassets or other major corporate transaction. Our Co-Founders may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control or significant influence mayhave the effect of delaying, preventing or deterring a change in control of our company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our company and might ultimately affect themarket price of our Class A common stock. Further, the separation between voting power and economic interests could cause conflicts of interest between our Co-Founders and our other stockholders, which may result in our Co-Founders undertaking, orcausing us to undertake, actions that would be desirable for our Co-Founders but would not be desirable for our other stockholders.

Future transfers by the holders of Class B common stock will generally result in those shares automatically converting into shares ofClass A common stock, subject to limited exceptions, such as certain transfers effected for estate planning. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock uponcertain events specified in our amended and restated certificate of incorporation. If the employment of one of our Co-Founders is terminated by us for reasons other than cause or death, the shares of Class B common stock held by such Co-Founder (andhis affiliates) will not automatically convert into shares of Class A common stock upon such a termination. Under these circumstances, one of our Co-Founders could no longer be employed by us but continue to hold shares of Class B common stock thatrepresent significant voting power of our capital stock and could undertake actions that would be desirable for such Co-Founder but would not be desirable for other stockholders. For information about our multi-class structure, see the sectiontitled “Description of Capital Stock.”

Shares of our Class C common stock, which entitle the holder to no votes per share(except as otherwise required by law), will not be issued and outstanding upon the completion of the offering and we have no current plans to issue shares of Class C common stock. These shares will be available to be used in the future forvarious uses including to further strategic initiatives, such as financings or acquisitions, or issue future equity awards to our service providers. Over time, the issuance of shares of Class A common stock will result in voting dilution to allof our stockholders and this dilution could eventually result in our Co-Founders holding less than a majority of our total outstanding voting power. Once our Co-Founders own less than a majority of our total outstanding voting power, our Co-Founderswill no longer have the unilateral ability to elect all of our directors and to significantly influence or control the outcome of any matter submitted for a vote of our stockholders. Because the shares of Class C common stock have no votingrights (except as required by law), the issuance of such shares will not result in further voting dilution, which will prolong the voting power of our Co-Founders. As a result, the issuance of shares of Class C common stock could prolong theduration of our Co-Founders’ control of our voting power and their ability to elect all of our directors and to significantly influence or control the outcome of most matters submitted to a vote of our stockholders. In addition, we could issueshares of Class C common stock to our Co-Founders and, in that event, they would be able to sell such shares of Class C common stock and achieve liquidity in their holdings without diminishing their voting power. Any future issuances of sharesof Class C common stock will not be subject to approval by our stockholders except as required by the listing standards of the Exchange. See the section titled “Description of Capital Stock—Anti-Takeover Provisions” foradditional information.

 

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We cannot predict the effect our multi-class structure may have on the market price of our Class Acommon stock.

We cannot predict whether our multi-class structure will result in a lower or more volatile market price of ourClass A common stock, adverse publicity or other adverse consequences. For example, certain stock index providers have excluded or limited the eligibility of public companies with multiple classes of shares of common stock from being added tocertain stock indices. The multi-class structure of our common stock would therefore make us ineligible for inclusion in indices with such restrictions and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attemptto passively track these indices may not invest in our Class A common stock.

In addition, several stockholder advisory firms andlarge institutional investors have been critical of the use of multi-class structures. Such stockholder advisory firms may publish negative commentary about our corporate governance practices or capital structure, which may dissuade largeinstitutional investors from purchasing shares of our Class A common stock.

These actions could make our Class A common stock lessattractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.

Therehas been no public market for our Class A common stock prior to this offering, and the trading price of our Class A common stock may be volatile.

There has been no public market for our Class A common stock prior to this offering, and an active trading market for our Class Acommon stock may not develop or be sustained. The initial public offering price of our Class A common stock was determined through negotiation between us and the underwriters. This price does not necessarily reflect the price at which investorsin the market will be willing to buy and sell shares of our Class A common stock following this offering. In addition, the trading price of our Class A common stock may fluctuate significantly in response to a number of factors, most ofwhich we cannot predict or control, including:

 

  

price and volume fluctuations in the overall stock market or of technology stocks from time to time;

 

  

volatility in the market due to macro-economic developments, including but not limited to, the occurrence ofpandemics such as the COVID-19 pandemic and rising interest rates and increased inflation;

 

  

changes in operating performance and stock market valuations of other technology companies generally, or thosein our industry in particular;

 

  

sales of shares of our Class A common stock by us or our stockholders, as well as the anticipation of theexpiration of, or releases from, market standoff agreements or lock-up agreements;

 

  

failure of securities analysts to maintain coverage of us, changes in financial estimates by securitiesanalysts who follow our company or our failure to meet these estimates or the expectations of investors;

 

  

the financial projections we may provide to the public, any changes in those projections or our failure tomeet those projections;

 

  

announcements by us or our competitors of new offerings or products;

 

  

the public’s reaction to our press releases, other public announcements and filings with the SEC;

 

  

rumors and market speculation involving us or other companies in our industry;

 

  

short selling of our Class A common stock or related derivative securities;

 

  

actual or anticipated changes in our results of operations or fluctuations in our results of operations,including due to the seasonality of our business;

 

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actual or perceived cybersecurity breaches or incidents;

 

  

actual or anticipated developments in our business, our competitors’ businesses or the competitivelandscape generally;

 

  

announced or completed acquisitions of businesses, products or technologies by us or our competitors;

 

  

developments or disputes concerning our intellectual property or other proprietary rights;

 

  

litigation involving us, our industry, or both, or investigations by regulators into our operations or thoseof our competitors;

 

  

new laws, regulations, rules or industry standards or new interpretations of existing laws, regulations, rulesor industry standards applicable to our business;

 

  

the impact of political instability, natural disasters, war and/or events of terrorism, such as the conflictin the Middle East and between Russia and Ukraine and the corresponding tensions created from such conflict between Russia, the United States and countries in Europe and the Middle East, as well as other countries such as China;

 

  

changes in accounting standards, policies, guidelines, interpretations or principles;

 

  

any significant change in our management or board of directors; and

 

  

sales of our Class A common stock by us, our founders, officers, directors and employees.

In addition, if the market for technology stocks or the stock market in general experiences a loss of investorconfidence, the trading price of our Class A common stock could decline for reasons unrelated to our business, financial condition or results of operations. The trading price of our Class A common stock might also decline in reaction toevents that affect other companies in our industry even if these events do not directly affect us. In the past, following periods of volatility in the overall market and the trading price of a particular company’s securities, securities classaction litigation has often been instituted against these companies. This litigation, if instituted against us, would result in substantial costs and a diversion of our management’s attention and resources.

Recently, the stock markets in general, and the markets for technology stocks in particular, have experienced extreme volatility. The stockprices of many technology companies have declined significantly and in certain instances the declines have been unrelated or disproportionate to the operating performance of those companies. Furthermore, the trading price of our Class A commonstock may be adversely affected by third parties trying to drive down the trading price of our Class A common stock. Short sellers and others, some of whom post anonymously on social media, can negatively affect the trading price of ourClass A common stock and may be positioned to profit if the trading price of our Class A common stock declines. These broad market and industry factors may seriously harm the trading price of our Class A common stock, regardless ofour operating performance.

A substantial portion of the outstanding shares of our Class A common stock (including shares ofour Class A common stock issuable upon conversion of our Class B common stock) after this offering are restricted from immediate resale but may be sold on a stock exchange in the near future. The large number of shares eligible for publicsale or subject to rights requiring us to register them for public sale could depress the trading price of our Class A common stock.

The trading price of our Class A common stock could decline as a result of sales of a large number of shares of our Class A commonstock in the market after this offering, and the perception that these sales could occur may also depress the trading price of our Class A common stock. Based on    shares of our Class A common stock and 13,404,097shares of our Class B common stock (after giving effect to the Reclassification, the Capital Stock Conversion and the Class B Stock Exchange) outstanding as of July 31, 2024, we will have     shares of ourClass A common stock, 13,404,097 shares of our Class B common stock and no shares of

 

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our Class C common stock outstanding following the completion of this offering. The shares of Class A common stock that we are selling in this offering may be resold immediately. Theremaining shares of our capital stock will become available for sale under the terms of market standoff provisions in agreements with us, and lock-up agreements entered into between the holders of those sharesand the underwriters of this offering.

Our executive officers, directors, and the holders of substantially all of our capital stock andsecurities convertible into or exchangeable for our capital stock will enter into lock-up agreements with the underwriters of this offering under which they have agreed, subject to specific exceptions, not todispose of or hedge any of our capital stock for days following the date of this prospectus. We refer to this period as the restricted period. When the restricted period expires with respect to all or a portion of our shares, our security holderswill be able to sell their shares in the public market. See the section titled “Shares Eligible for Future Sale” for additional information.

As a result of these agreements and the provisions of our amended and restated investors’ rights agreement, dated as of July 27,2023, or our IRA, described further in the section titled “Description of Capital Stock—Registration Rights,” and subject to the provisions of Rule 144 or Rule 701, shares of our Class A common stock (including shares of ourClass A common stock issuable upon conversion of our Class B common stock) became or will become available for sale in the public market as follows:

 

  

beginning on the date of this prospectus, all shares of our Class A common stock sold in this offeringbecame immediately available for sale in the public market; and

 

  

beginning 181 days after the date of this prospectus, the remainder of the shares of our Class A commonstock (including shares of our Class A common stock issuable upon conversion of our Class B common stock) will become immediately available for sale in the public market, subject in some cases to the volume and other restrictions of Rule144.

Upon the completion of this offering, stockholders owning an aggregate of up to    sharesof our Class A common stock will be entitled, under our IRA, to require us to register shares owned by them for public sale in the United States. In addition, we intend to file a registration statement to register shares reserved for futureissuance under our equity compensation plans. Upon effectiveness of that registration statement, subject to the satisfaction of applicable exercise periods and the expiration or waiver of the lock-upagreements referred to above, the shares issued upon exercise of outstanding stock options will be available for immediate resale in the United States in the open market.

Sales of our Class A common stock as restrictions end or pursuant to registration rights may make it more difficult for us to sell equitysecurities in the future at a time and price that we deem appropriate. These sales also could cause the trading price of our Class A common stock to fall and make it more difficult for you to sell shares of our Class A common stock.

Sales, directly or indirectly, of shares of our Class A common stock by existing equityholders could cause the market price of ourClass A common stock to decline.

Sales, directly or indirectly, of a substantial number of shares of our Class A commonstock, or the public perception that these sales might occur, could depress the market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities. Many of our existingequityholders have substantial unrecognized gains on the value of the equity they hold, and may take, or attempt to take, steps to sell, directly or indirectly, their shares or otherwise secure, or limit the risk to, the value of their unrecognizedgains on those shares.

While our executive officers, directors and the holders of substantially all of our capital stock and securitiesconvertible into or exchangeable for our capital stock have entered into lock-up agreements with the underwriters, sales, short sales or hedging transactions involving our equity securities, whetherbefore or after the

 

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completion of this offering and whether or not we believe them to be prohibited, could adversely affect the market price of our Class A common stock. Further, record holders of oursecurities are typically the parties to the lock-up agreements, while holders of beneficial interests in our shares who are not also record holders in respect of such shares are not typically subjectto any such agreements or other similar restrictions. Accordingly, we believe that holders of beneficial interests who are not record holders and are not bound by lock-up agreements could enter intotransactions with respect to those beneficial interests that negatively impact the market price of our Class A common stock. In addition, to the extent an equityholder does not comply with or the underwriters are unable to enforce the terms of a lock-up agreement, such equityholder may be able to sell, short sell, transfer, hedge, pledge or otherwise dispose of or attempt to sell, short sell, transfer, hedge, pledge or otherwise dispose of,their equity interests at any time after the completion of this offering, which could negatively impact the market price of our Class A common stock.

Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make amerger, tender offer or proxy contest difficult, thereby depressing the trading price of our Class A common stock.

Our statusas a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for aperiod of three years after the date of the transaction in which the person became an interested stockholder, even if a change in control would be beneficial to our existing stockholders. In addition, our amended and restated certificate ofincorporation and amended and restated bylaws that will become effective immediately prior to the completion of this offering will contain provisions that may make the acquisition of our company more difficult, including the following:

 

  

our amended and restated bylaws will provide that approval of the holders of at least two-thirds of the votingpower of the outstanding shares of our capital stock voting as a single class is required for stockholders to amend or adopt any provision of our bylaws;

 

  

our multi-class structure, which provides our Co-Founders with the ability to significantly influence orcontrol the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock, Class B common stock and Class C common stock;

 

  

our amended and restated certificate of incorporation will not provide for cumulative voting;

 

  

vacancies on our board of directors will be able to be filled only by our board of directors and not bystockholders;

 

  

our board of directors is classified into three classes of directors with staggered three-year terms anddirectors are only able to be removed from office for cause;

 

  

a special meeting of our stockholders may only be called by the chairperson of our board of directors, ourChief Executive Officer, our President or a majority of our board of directors;

 

  

certain litigation against us can only be brought in Delaware;

 

  

our amended and restated certificate of incorporation will authorize undesignated preferred stock, the termsof which may be established and shares of which may be issued without further action by our stockholders; and

 

  

advance notice procedures will apply for stockholders to nominate candidates for election as directors or tobring matters before an annual meeting of stockholders.

These provisions, alone or together, could discourage, delay orprevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporateactions they desire, any of

 

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which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock and could also affect the price thatsome investors are willing to pay for our Class A common stock.

Our amended and restated bylaws will designate a stateor federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or ourdirectors, officers or employees.

Our amended and restated bylaws, which will become effective immediately prior to the completionof this offering, will provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf,(ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action arising pursuant to any provision of the Delaware General CorporationLaw, our amended and restated certificate of incorporation or our amended and restated bylaws or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware(or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants.

Section 22 of the Securities Act of 1933, as amended, or the Securities Act, creates concurrent jurisdiction for federal and state courtsover all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings bydifferent courts, among other considerations, our amended and restated bylaws will further provide that the federal district courts of the United States will be the exclusive forum for resolving any complaints asserting a cause of action arisingunder the Securities Act. We note, however, that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder, and that there is uncertainty as to whether a court would enforce this exclusive forumprovision. Further, the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicableor unenforceable. For example, in December 2018, the Court of Chancery of the State of Delaware determined that a provision stating that U.S. federal district courts are the exclusive forum for resolving any complaint asserting a cause of actionarising under the Securities Act is not enforceable. Although this decision was reversed by the Delaware Supreme Court in March 2020, other courts may still find these provisions to be inapplicable or unenforceable.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consentedto this provision. This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits againstus and our directors, officers and other employees. This exclusive forum provision will not apply to any causes of action arising under the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusivejurisdiction. If a court were to find either exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions,which may harm our business, financial condition and results of operations.

We are an “emerging growth company” and thereduced disclosure requirements applicable to emerging growth companies may make our Class A common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from variousreporting requirements that are applicable to other public companies that are not “emerging growth companies,” including an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal controlover financial reporting, reduced disclosure obligations about our

 

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executive compensation arrangements and exemptions from the requirements to obtain a nonbinding advisory vote on executive compensation or stockholder approval of any golden parachutearrangements. As an “emerging growth company,” we are also allowed to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. As aresult, our financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates. Any difficulties in implementing these pronouncements could cause us to failto meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us. We may take advantage of these exemptions for so long as we are an “emerging growth company,” which couldbe for as long as five full reporting years following the completion of this offering. We cannot predict if investors will find our Class A common stock less attractive because we will rely on these exemptions. If some investors find ourClass A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and the trading price of our Class A common stock may be more volatile.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us, our business or ourmarket, or if they change their recommendations regarding our Class A common stock adversely, the trading price and trading volume of our Class A common stock could decline.

The trading market for our Class A common stock will depend, in part, on the research and reports that securities or industry analystspublish about us, our business, our market or our competitors. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. Analysts may misinterpret our business and focus on certainstandard SaaS metrics, like calculated billings and remaining performance obligations, that are not as applicable to us as other peer companies. If any of the analysts who cover us change their recommendation regarding our Class A common stockadversely, provide more favorable relative recommendations about our competitors, or publish inaccurate or unfavorable research about our business, the trading price of our Class A common stock would likely decline. If few securities analystscommence coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets and demand for our securities could decrease, which could cause thetrading price and volume of our Class A common stock to decline.

We do not intend to pay cash dividends for the foreseeablefuture on our capital stock.

We have never declared or paid any cash dividends on our common stock and do not intend to pay anycash dividends in the foreseeable future on our capital stock. We anticipate that we will retain all of our future earnings for use in the operation of our business and for general corporate purposes. Except for any dividends we are obligated tomake pursuant to our non-convertible preferred stock, in the event the NCPS Redemption does not occur in full in connection with this offering, any determination to pay dividends in the future will be at the discretion of our board of directors.Further, in the event the NCPS Redemption does not occur in full in connection with this offering, holders of shares of non-convertible preferred stock will have priority in payment of dividends over our common stockholders. Accordingly, investorsmust rely on sales of their capital stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Our principal stockholders will continue to have significant influence over the election of our board of directors and approval of anysignificant corporate actions, including any merger, consolidation, or sale of all or substantially all of our assets.

Ourfounders, executive officers, directors and other principal stockholders, in the aggregate, beneficially own a majority of our outstanding capital stock. These stockholders currently have, and likely will continue to have, significant influence withrespect to the election of our board of directors and approval or disapproval of all significant corporate actions. In addition, certain of these holders have entered into voting agreements and voting proxies that further concentrate influence withrespect to significant corporate actions. The concentrated voting

 

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power of these stockholders could have the effect of delaying or preventing an acquisition of us or another significant transaction. This influence over our affairs could, under somecircumstances, be adverse to the interests of other stockholders.

An entity affiliated with Vahe Kuzoyan, our co-founder and President, borrowed funds from affiliates of an underwriter in this offering and has pledged shares of our Class B common stock to secure such borrowings. The forced sale of these shares pursuant to amargin call would cause these shares of Class B common stock to convert into shares of Class A common stock and could cause our stock price to decline and negatively impact our business.

In December 2021, Goldman Sachs Lending Partners LLC, an affiliate of Goldman, Sachs & Co. LLC, one of the underwriters of thisoffering, entered into a loan agreement and a security and pledge agreement, collectively referred to as the loan agreements, with Vahe Kuzoyan, our co-founder, President and a member of our board of directorsand his spouse, individually and as trustees of the K-A Family Trust dated December 6, 2021, or the Trust. Under the loan agreements, Goldman Sachs Lending Partners LLC made a loan in the principal amountof $20 million to the Trust, which was used in connection with a home purchase and for personal liquidity needs. After certain repayments, the loan principal was reduced to approximately $10.2 million and the loan agreements did notprovide for further borrowing capacity. In September 2022, the loan agreements were amended to allow the borrowers to borrow up to $15 million. After certain repayments, in March 2024, the loan agreements were amended to allow the borrowers toborrow up to $17 million. In November 2024, the loan agreements were further amended to allow the borrowers to borrow up to $22 million. The loan is secured by pledges of a portion of our Class B common stock currently owned by the Trust.Mr. Kuzoyan exercises voting control over the pledged shares of Class B common stock.

If the price of our Class A common stockwere to decline substantially, Mr. Kuzoyan, his spouse and the Trust may be forced by Goldman Sachs Lending Partners LLC to provide additional collateral for the loan or to sell shares of our Class A common stock (after converting shares ofClass B common stock) in order to remain within the margin limitations imposed under the terms of his loan. The loan agreement between Goldman Sachs Lending Partners LLC, on the one hand, and Mr. Kuzoyan, his spouse and the Trust on the otherhand, prohibits the non-pledged shares currently owned by Mr. Kuzoyan, his spouse and the Trust, as well as equity interests in our Company held by Mr. Kuzoyan, from being pledged to secure any otherloans or from being sold, transferred or assigned. These factors may limit Mr. Kuzoyan’s and the Trust’s ability to either pledge additional shares of our Class B common stock or sell shares of our Class A common stock (afterconverting shares of Class B common stock) as a means to avoid or satisfy a margin call with respect to the pledged shares of our Class B common stock in the event of a decline in our stock price that is so substantial as to trigger a margin call.Any sales of Class A common stock following a margin call that is not satisfied may cause the price of our Class A common stock to decline further.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantialrisks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,”“will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,”“predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in thisprospectus include, but are not limited to, statements about:

 

  

our future financial performance, including our expectations regarding our revenue, cost of revenue, operatingexpenses, our ability to determine reserves and our ability to achieve and maintain future profitability;

 

  

the sufficiency of our cash, cash equivalents and investments to meet our liquidity needs;

 

  

the demand for our platform or for similar solutions in general;

 

  

our ability to attract and retain customers;

 

  

our ability to develop new products and bring them to market in a timely manner and make enhancements to ourplatform;

 

  

our ability to compete with existing and new competitors in existing and new markets and offerings;

 

  

any impact of changes in current laws or regulations, or implementation of new laws or regulations;

 

  

our ability to manage and insure risk associated with our business;

 

  

our ability to successfully acquire and integrate companies and assets;

 

  

our expectations regarding new and emerging trades;

 

  

our ability to develop and protect our brand;

 

  

our expectations and management of future growth;

 

  

our expectations concerning relationships with third parties;

 

  

our expectations regarding the size of our addressable and serviceable markets, spend in those markets and ourability to penetrate those markets;

 

  

our expectations regarding the amount of our customers’ GTV that we can recognize as revenue;

 

  

our ability to maintain, protect and enhance our intellectual property;

 

  

industry trends, in particular the rate of adoption of trades-specific and end-to-end technologies and digitization of the trades;

 

  

our ability to anticipate technological and industry developments and our ability to enhance our platform ordevelop new products to respond to such developments;

 

  

our ability to drive growth by incorporating AI and machine learning solutions into our platform;

 

  

our ability to scale our systems and operations as we grow, including through organic and inorganic growth;

 

  

our reliance on key personnel and our ability to attract, maintain and retain management and skilledpersonnel;

 

  

our expectations regarding present and future litigation;

 

  

our expectations regarding the effects of existing and developing laws and regulations, including with respectto taxation and privacy and data protection;

 

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our ability to maintain the security and availability of our platform and protect against data breaches andother security incidents;

 

  

the increased expenses associated with being a public company;

 

  

our commitment to issue and donate 796,799 shares of our Class A common stock to fund certain of our socialimpact initiatives, which issuance and donation is conditioned upon the completion of this offering;

 

  

our ability to avoid any findings of material weaknesses or significant deficiencies in the future; and

 

  

our anticipated uses of net proceeds from this offering, including the NCPS Redemption.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained inthis prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in theseforward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidlychanging environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. We cannotassure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements.Moreover, the forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events orcircumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-lookingstatements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statementsshould not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon thesestatements.

 

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INDUSTRY, MARKET AND OTHER DATA

Unless otherwise indicated, estimates and information contained in this prospectus concerning our industry and the market in which we operate,including our general expectations, market position, market opportunity and market size, are based on industry publications and reports generated by third-party providers, other publicly available studies and our internal sources and estimates. Thisinformation involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Although we are responsible for all of the disclosures contained in this prospectus and we believe the information fromthe industry publications and other third-party sources included in this prospectus is reliable, we have not independently verified the accuracy or completeness of the data contained in such sources. Market and industry data is subject to change andmay be limited by the availability of raw data, the voluntary nature of the data gathering process and other limitations inherent in any statistical survey of such data. In addition, projections, assumptions and estimates of the future performanceof the markets in which we operate are necessarily subject to uncertainty and risk due to a variety of factors, including those described in the sections titled “Risk Factors” and “Special Note Regarding Forward-LookingStatements.” These and other factors could cause results to differ materially from those expressed in the estimates made by third parties and by us. Accordingly, you are cautioned not to place undue reliance on such market and industry data orany other such estimates.

The content of, or accessibility through, the below sources and websites, except to the extent specifically setforth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein and any websites are an inactive textual reference only.

The sources of the statistical data, estimates and market and industry data contained in this prospectus are identified by superscriptnotations and are provided below:

 

  

Angi Inc., The Economy of Everything Home, 2022, https://www.angi.com/research/reports/market/.

 

  

U.S. Bureau of Labor Statistics, or BLS, Quarterly Census of Employment and Wages as of March 31, 2022.

 

  

Harvard Joint Center for Housing Studies, The State of the Nation’s Housing, 2023, www.jchs.harvard.edu.All rights reserved.

 

  

Bureau of Economic Analysis, U.S. Department of Commerce, News Release dated March 28, 2024 for theannual spend on accommodation and food services as well as transportation and warehousing industries in the United States. Figures for industry spend on accommodation and food services and transportation and warehousing in this prospectus are thegross domestic product by such industry groups in 2023.

 

  

Census Bureau, U.S. Department of Commerce, News Release dated May 17, 2024 for the annual spend on theretail e-commerce industry in the United States. The annual spend figure in this prospectus is for 2023 and is adjusted for seasonal variation.

 

  

IBISWorld Inc., Trades Industry Reports (December 2020 - March 2023).

The methodology for calculating non-trades industry spend on accommodation and food services, transportation and warehousing and retaile-commerce excludes applicable industry spend from Canada, which we do not believe materially changes the non-trades U.S. industry spend amounts.

The spend on trades in the United States and Canada referred to in this prospectus, which we also refer to as our total addressable industryspend of approximately $1.5 trillion, is based on our estimate of the combined total annual spend on over 50 different trades in the United States and Canada using data published between December 2020 and March 2023. U.S. trades industry spendis calculated by taking the annual revenue generated for each such trade in the United States according to the most recent full-year actual data in each applicable IBIS World report, mapping those trades by the NAICS codes we utilize and by ourestimates based on analyses of both internal and third-party data, and eliminating any deprioritized business segment focuses (e.g., government).

 

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Canadian trades industry spend is estimated by multiplying the U.S. trades industry spend by the approximate percentage that Canadian gross domestic product represents of U.S. gross domesticproduct in 2023.

The current serviceable industry spend referred to in this prospectus, or approximately $650 billion, is calculated byreducing the total annual spend on each trade that comprises the total addressable industry spend, or approximately $1.5 trillion, based on our estimate of the proportion of any trade not currently serviced or supported by ServiceTitan, and furtherreduced based on our estimate of the proportion of any segment of a trade, such as residential construction and commercial construction, not currently serviced or supported by ServiceTitan, and further reduced by deducting a proportion of businesseswith fewer than five employees. Such employee data is derived from the BLS Quarterly Census of Employment and Wages as of March 31, 2022.

Our serviceable market opportunity referred to in this prospectus, or approximately $13 billion, is calculated by multiplying the currentserviceable industry spend, or approximately $650 billion, by 2%, which is the average percentage of our customers’ GTV that we estimate we could capture as revenue from their subscription to and usage of our full suite of add-on products.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of shares of our Class A common stock in this offering will be approximately$      million (or approximately $      million if the underwriters’ exercise their option to purchase additional shares of our Class A common stock in full), based upon theassumed initial public offering price of $      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts andcommissions and estimated offering expenses payable by us.

Each $1.00 increase or decrease in the assumed initial public offering priceof $      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds that we receive from this offering byapproximately $     , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimatedoffering expenses payable by us. Similarly, each increase or decrease of 1.0 million in the number of shares of our Class A common stock offered by us would increase or decrease the net proceeds that we receive from this offering byapproximately $     , assuming the assumed initial public offering price remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for ourClass A common stock and enable access to the public equity markets for us and our stockholders. We intend to use approximately $    million of the net proceeds we receive from this offering to redeem all outstandingshares of our non-convertible preferred stock, at a redemption price per share equal to $1,000 plus all accrued but unpaid dividends on each such share, with the remaining net proceeds to be used for general corporate purposes, including workingcapital, operating expenses and capital expenditures. Additionally, we may use a portion of the net proceeds to acquire or invest in businesses, products, services or technologies. However, we do not have agreements or commitments for any materialacquisitions or investments at this time.

We cannot further specify with certainty the particular uses of the remaining net proceeds thatwe will receive from this offering. Accordingly, we will have broad discretion in using these proceeds. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growthof our business. Pending the use of proceeds from this offering as described above, we may invest the net proceeds that we receive in this offering in short-term, investment grade, interest-bearing instruments.

 

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain any future earnings and do not expect topay any dividends in the foreseeable future except for cash dividends that have accrued, or in the future accrue, on shares of our non-convertible preferred stock, in the event the NCPS Redemption does not occur in full in connection with thisoffering. Other than with respect to such cash dividends that have accrued, or in the future accrue, on shares of our non-convertible preferred stock, any future determination to declare cash dividends will be made at the discretion of our board ofdirectors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board ofdirectors may deem relevant. In addition, to the extent the NCPS Redemption does not occur in full in connection with this offering, the holders of our non-convertible preferred stock may have priority over the holders of our preferred stock orcommon stock with respect to any future determination to declare cash dividends. See the section titled “Description of Capital Stock—Non-Convertible Preferred Stock” for a discussion of the terms of our non-convertible preferredstock and the rights afforded to holders of such shares and the section titled “Use of Proceeds” for a discussion of our plan to redeem all shares of non-convertible preferred stock in full in connection with this offering. Moreover, theterms of our Credit Agreement place certain limitations on the amount of cash dividends we can pay, even if no amounts are currently outstanding. See the section titled “Risk Factors—Risks Related to Financial, Tax and AccountingMatters—Our Credit Agreement contains financial covenants and other restrictions on our actions that may limit our operational flexibility or otherwise adversely affect our results of operations.”

 

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CAPITALIZATION

The following table sets forth cash and cash equivalents, as well as our capitalization, as of July 31, 2024, as follows:

 

  

on an actual basis;

 

  

on a pro forma basis, giving effect to (i) the Reclassification, as if such reclassification had occurredon July 31, 2024, (ii) the Capital Stock Conversion, as if such conversion had occurred on July 31, 2024, resulting in a decrease in redeemable convertible preferred stock and an increase in total stockholders’ equity,(iii) stock-based compensation expense of $31.4 million associated with options and RSUs that contain a performance-based vesting condition that will be satisfied upon the effectiveness of the registration statement of which thisprospectus forms a part, as if the offering had occurred on July 31, 2024, resulting in an increase in additional paid-in capital and accumulated deficit within total stockholders’ deficit,(iv) the Class B Stock Exchange, as if such exchange had occurred on July 31, 2024, and (v) the filing and effectiveness of our amended and restated certificate of incorporation in Delaware that will become effective immediatelyprior to the completion of this offering; and

 

  

on a pro forma as adjusted basis, giving effect to (i) the pro forma adjustments set forth above,(ii) the sale and issuance by us of       shares of our Class A common stock in this offering, based upon the assumed initial public offering price of $     per share, which is themidpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, net of $0.8 million of offering costs paidas of July 31, 2024 and (iii) the NCPS Redemption, as if such redemption had occurred on July 31, 2024, resulting in a reduction in cash and cash equivalents, a reduction in the carrying value of non-convertible preferred stock and a reductionin additional paid-in capital for the deemed dividend for the loss on redemption of the non-convertible preferred stock.

 

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The as adjusted information set forth in the table below is illustrative only and will beadjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with our consolidated financial statements and related notes and the sections titled “SummaryConsolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are included elsewhere in this prospectus.

 

   As of July 31, 2024 
   Actual   Pro Forma   Pro
Forma As
Adjusted(1)
 
   (in thousands, except share and per share amounts) 

Cash and cash equivalents

  $128,101   $                         
  

 

 

   

 

 

   

 

 

 

Long-term debt (current and long-term portion)

   175,605    175,605    175,605 

Non-convertible preferred stock, par value $0.001 pershare: 250,000 shares authorized, 250,000 shares issued and outstanding, actual and pro forma; no shares authorized, issued and outstanding, pro forma as adjusted

   260,502    260,502    —  

Redeemable convertible preferred stock, par value $0.001 per share: 42,465,855 shares authorized,42,465,855 shares issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted

   1,395,878    —     —  

Stockholders’ equity (deficit):

      

Common stock, par value $0.001 per share: 94,490,000 shares authorized,35,179,456 shares issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted

   35    —     —  

Class A common stock, par value $0.001 per share; no shares authorized, issued and outstanding,actual; 1,000,000,000 shares authorized,     shares issued and outstanding, pro forma; 1,000,000,000 shares authorized,     shares issued and outstanding, pro forma as adjusted

   —      

Class B common stock, par value $0.001 per share; no shares authorized, issued and outstanding,actual; 100,000,000 shares authorized, 13,404,097 shares issued and outstanding, pro forma and pro forma as adjusted

   —     13    13 

Class C common stock, par value $0.001 per share; no shares authorized, issued and outstanding,actual; 100,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

   —     —     —  

Additional paid-in capital

   420,926     

Accumulated deficit

   (958,327)     
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity (deficit)

   (537,366)     
  

 

 

   

 

 

   

 

 

 

Total capitalization

  $1,294,619   $    
  

 

 

   

 

 

   

 

 

 

 

(1)

Each $1.00 increase or decrease in the assumed initial public offering price of$      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the amount of our pro forma as adjusted cash andcash equivalents, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by $     , assuming that the number of shares offered by us, asset forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 1.0 million shares in the number of sharesoffered by us would increase or decrease, as applicable, the amount of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalizationby $     , assuming the assumed initial public offering price remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

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If the underwriters’ exercise their option to purchase additional shares of ourClass A common stock in full, pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ equity (deficit), total capitalization and total shares of common stockoutstanding as of July 31, 2024 would be $     , $     , $      , $      and      ,respectively.

The pro forma and pro forma as adjusted columns in the table above are based on    shares of ourClass A common stock, 13,404,097 shares of our Class B common stock and no shares of our Class C common stock (after giving effect to the Reclassification, the Capital Stock Conversion and the Class B Stock Exchange) outstandingas of July 31, 2024, and exclude the following:

 

  

4,622,817 shares of our Class A common stock issuable upon the exercise of options to purchaseshares of our Class A common stock outstanding as of July 31, 2024, with a weighted-average exercise price of $15.43 per share;

 

  

2,725,410 shares of our Class B common stock issuable upon the exercise of options to purchase shares ofour Class B common stock outstanding as of July 31, 2024, with a weighted-average exercise price of $12.72 per share, of which options to purchase 340,676 shares of our Class B common stock were canceled in October 2024;

 

  

5,307,222 shares of our Class A common stock subject to RSUs outstanding as of July 31, 2024;

 

  

192,786 shares of our Class B common stock subject to RSUs outstanding as of July 31, 2024;

 

  

613,896 shares of our Class A common stock subject to RSUs granted subsequent to July 31, 2024;

 

  

6,483,088 shares of our Class B common stock subject to the Co-Founder PSUs granted subsequent toJuly 31, 2024;

 

  

250,000 shares of our non-convertible preferred stock outstanding asof July 31, 2024, which we intend to redeem pursuant to the NCPS Redemption;

 

  

796,799 shares of our Class A common stock that we are committing to issue and donate over the nextten years to fund certain of our social impact initiatives, which issuance and donation is conditioned upon the completion of this offering; and

 

  

      shares of our Class A common stock reserved for future issuance underour equity compensation plans, consisting of:

 

  

      shares of our Class A common stock to be reserved for future issuanceunder our 2024 Plan, which will become effective prior to the completion of this offering;

 

  

1,550,798 shares of our Class A common stock reserved for future issuance under our 2015 Plan as ofJuly 31, 2024, which number of shares will be added to the shares of our Class A common stock to be reserved for future issuance under our 2024 Plan upon its effectiveness, at which time we will cease granting awards under our 2015 Plan;and

 

  

      shares of our Class A common stock to be reserved for future issuanceunder our ESPP, which will become effective prior to the completion of this offering.

Our 2024 Plan and ESPP will eachprovide for annual automatic increases in the number of shares of our Class A common stock reserved thereunder, and our 2024 Plan will provide for increases to the number of shares that may be granted thereunder based on shares under our 2015Plan or our 2007 Plan that expire, are tendered to or withheld by us for payment of an exercise price or for satisfying tax withholding obligations or are forfeited or otherwise repurchased by us, as more fully described in the section titled“Executive Compensation—Employee Benefit and Stock Plans.”

Capital Stock Conversion

The Capital Stock Conversion reflects the automatic conversion of all shares of our redeemable convertible preferred stock into shares ofClass A common stock immediately prior to the completion of this offering

 

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pursuant to the terms of our amended and restated certificate of incorporation and includes the conversion price adjustments described below. Each share of redeemable convertible preferred stockconverts into a number of shares of Class A common stock determined by dividing the original issue price of such share by the conversion price of such share then in effect. If the conversion price of any series of our redeemable convertiblepreferred stock is adjusted downwards based on this offering, each share of such series may be entitled to convert into more than one share of Class A common stock, as discussed in the following paragraphs.

The Series F, Series G and Series H-1 redeemable convertible preferred stock areentitled to a conversion price adjustment in the event the initial public offering price is less than $105.0878 per share, $115.7635 per share and $84.5712 per share, respectively, based on a broad-based weighted average calculation. Pursuant tothis calculation, the updated conversion price for the respective series of redeemable convertible preferred stock is determined by (i) multiplying the conversion price in effect for such series immediately prior to such issuance by the sum ofthe number of shares of common stock outstanding immediately prior to such issuance (including shares of common stock issuable upon the exercise of outstanding stock options and the conversion or exchange of any outstanding convertible securities,including the redeemable convertible preferred stock), or the Outstanding Common, and the number of shares of common stock that would have been issued if such issuance had been priced at a price per share equal to the conversion price then in effectfor such series of redeemable convertible preferred stock, (ii) divided by the sum of the Outstanding Common and the number of shares actually issued in such transaction.

The Series H redeemable convertible preferred stock is entitled to a conversion price adjustment in the event the initial public offeringprice is less than $84.5712 per share, accreting at a rate of 11% per annum, accruing daily and compounding quarterly from and after May 22, 2024, or the Ratchet Adjustment Denominator. The updated conversion price for the Series H redeemableconvertible preferred stock is determined by multiplying (i) the initial public offering price by (ii) $84.5712 divided by the Ratchet Adjustment Denominator.

The Capital Stock Conversion reflects the automatic conversion of all 31,456,905 shares of our Series A-1, A-2, A-3, B, C, D and Eredeemable convertible preferred stock outstanding as of July 31, 2024 into an equal number of shares of Class A common stock immediately prior to the completion of this offering pursuant to the terms of our amended and restatedcertificate of incorporation and also reflects the automatic conversion of all 2,795,266 shares of our Series F redeemable convertible preferred stock, all 2,207,340 shares of our Series G redeemable convertible preferred stock,all 5,604,318 shares of our Series H redeemable convertible preferred stock and all 402,026 shares of our Series H-1 redeemable convertible preferred stock, in each case outstanding as ofJuly 31, 2024, into      shares,     shares,     shares and     shares, respectively, of Class A common stock immediately prior to thecompletion of this offering pursuant to the terms of our amended and restated certificate of incorporation, based on the assumed initial public offering price of $     per share, which is the midpoint of the estimatedoffering price range set forth on the cover page of this prospectus.

A $1.00 increase in the initial public offering price would decreasethe number of shares of Class A common stock issuable upon the conversion of our Series F, Series G, Series H and Series H-1 redeemable convertible preferred stockby     shares,     shares,     shares and     shares, respectively, and a $1.00 decrease in the initial public offering price would increase the numberof shares of Class A common stock issuable upon the conversion of our Series F, Series G, Series H and Series H-1 redeemable convertible preferred stock by    shares,     shares,     shares and     shares, respectively.

Anincrease of 1.0 million shares in the number of shares of our Class A common stock offered by us would increase the number of shares of Class A common stock issuable upon the conversion of our Series F, Series G and Series H-1 redeemable convertible preferred stock by     shares,     shares and     shares, respectively, assuming the assumedinitial public offering price remains the same. A decrease of 1.0 million shares in the number of shares of our Class A common stock offered by us would decrease the number of shares of Class A common stock issuable upon theconversion of our Series F, Series G and Series H-1 redeemable convertible preferred stock by     shares,     sharesand     shares, respectively, assuming the assumed initial public offering price remains the same.

 

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DILUTION

If you invest in our Class A common stock in this offering, your ownership interest will be diluted to the extent of the difference betweenthe initial public offering price per share of our Class A common stock and the pro forma as adjusted net tangible book value per share of our Class A common stock and Class B common stock immediately after this offering. Dilution per share tonew investors represents the difference between the amount per share paid by purchasers of shares of our Class A common stock in this offering and the pro forma as adjusted net tangible book value per share of our Class A common stock andClass B common stock immediately after completion of this offering.

Net tangible book value (deficit) per share is determined bydividing our total tangible assets less our total liabilities excluding deferred contract cost assets and operating right-of-use assets and liabilities, non-convertible preferred stock, and redeemableconvertible preferred stock by the total number of shares of our common stock outstanding. Our historical net tangible book value (deficit) as of July 31, 2024 was $(1,606) million, or $(45.65) per share. Our pro forma net tangible bookvalue (deficit) as of July 31, 2024 was $    million, or $    per share, based on the total number of shares of our Class A common stock and Class B common stock outstanding as of July 31, 2024,after giving effect to (i) the Reclassification, as if such reclassification had occurred on July 31, 2024, (ii) the Capital Stock Conversion, as if such conversion had occurred on July 31, 2024, resulting in a decrease in redeemableconvertible preferred stock and an increase in total stockholders’ equity, (iii) stock-based compensation expense of $31.4 million associated with options and RSUs that contain a performance-based vesting condition that will besatisfied upon the effectiveness of the registration statement of which this prospectus forms a part, as if the offering had occurred on July 31, 2024, resulting in an increase in additional paid-incapital and accumulated deficit within total stockholders’ deficit, (iv) the Class B Stock Exchange, as if such exchange had occurred on July 31, 2024, and (v) the filing and effectiveness of our amended and restatedcertificate of incorporation in Delaware that will become effective immediately prior to the completion of this offering.

After furthergiving effect to the sale and issuance by us of       shares of our Class A common stock in this offering at the assumed initial public offering price of $      per share, which is themidpoint of the estimated offering price range set forth on the cover page of this prospectus, and the NCPS Redemption, as if such redemption had occurred on July 31, 2024, and after deducting underwriting discounts and commissions and estimatedoffering expenses payable by us, net of $0.8 million of offering costs paid as of July 31, 2024, our pro forma as adjusted net tangible book value as of July 31, 2024 would have been $     , or$      per share. This represents an immediate increase in pro forma net tangible book value of $      per share to our existing stockholders and an immediate dilution in pro forma asadjusted net tangible book value of $       per share to investors purchasing shares of our Class A common stock in this offering at the assumed initial public offering price. The following table illustratesthis dilution:

 

Assumed initial public offering price per share

   $     

Historical net tangible book value (deficit) per share as of July 31, 2024

  $(45.65 

Increase per share attributable to the pro forma adjustments described above

   
  

 

 

  

Pro forma net tangible book value (deficit) per share as of July 31, 2024

   

Increase in pro forma net tangible book value per share attributable to new investors purchasingshares of Class A common stock in this offering

   
  

 

 

  

Pro forma as adjusted net tangible book value per share immediately after this offering

   
   

 

 

 

Dilution in pro forma as adjusted net tangible book value per share to new investors in thisoffering

   $  
   

 

 

 

 

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Each $1.00 increase or decrease in the assumed initial public offering price of$      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma as adjusted net tangible book valueper share to new investors by $     , and would increase or decrease, as applicable, dilution per share to new investors purchasing shares of Class A common stock in this offering by$     , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expensespayable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares of our Class A common stock offered by us would increase or decrease, as applicable, our pro forma as adjusted net tangible book value byapproximately $      per share and increase or decrease, as applicable, the dilution to new investors purchasing shares of Class A common stock in this offering by $      pershare, assuming the assumed initial public offering price remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters’ exercise their option to purchase additional shares of our Class A common stock in full, the pro forma as adjustednet tangible book value per share of our Class A common stock, as adjusted to give effect to this offering, would be $      per share, and the dilution in pro forma net tangible book value per share to new investorspurchasing shares of Class A common stock in this offering would be $      per share.

The followingtable presents, as of July 31, 2024, after giving effect to the Reclassification, the Capital Stock Conversion and the Class B Stock Exchange, the differences between the existing stockholders and the new investors purchasing shares of ourClass A common stock in this offering with respect to the number of shares purchased from us, the total consideration paid or to be paid to us, which includes net proceeds received from the issuance of our Class A common stock and the averageprice per share paid or to be paid to us at the assumed initial public offering price of $    per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, before deductingunderwriting discounts and commissions and estimated offering expenses payable by us:

 

   Shares Purchased  Total Consideration  Average
Price Per
Share
 
   Number   Percent  Amount   Percentage 

Existing stockholders

                $             $     

New investors

        $  
  

 

 

   

 

 

  

 

 

   

 

 

  

Totals

     100    100 
  

 

 

   

 

 

  

 

 

   

 

 

  

Each $1.00 increase or decrease in the assumed initial public offering price of$      per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the total consideration paid by new investors andtotal consideration paid by all stockholders by $     , assuming that the number of shares of our Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same and afterdeducting underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares in the number of shares of our Class A common stock offered by us would increase ordecrease the total consideration paid by new investors and total consideration paid by all stockholders by $     , assuming the assumed initial public offering price remains the same and after deducting the underwritingdiscounts and commissions and estimated offering expenses payable by us.

Except as otherwise indicated, the above discussion and tablesassume no exercise of the underwriters’ option to purchase additional shares of our Class A common stock from us. If the underwriters’ option to purchase additional shares of our Class A common stock is exercised in full, our existingstockholders would own      % and our new investors would own      % of the total number of shares of our Class A common stock and Class B common stock outstanding upon completion ofthis offering.

 

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The number of shares of our common stock that will be outstanding after this offering isbased on      shares of our Class A common stock, 13,404,097 shares of our Class B common stock and no shares of our Class C common stock (after giving effect to the Reclassification, the Capital StockConversion and the Class B Stock Exchange) outstanding as of July 31, 2024, and excludes:

 

  

4,622,817 shares of our Class A common stock issuable upon the exercise of options to purchaseshares of our Class A common stock outstanding as of July 31, 2024, with a weighted-average exercise price of $15.43 per share;

 

  

2,725,410 shares of our Class B common stock issuable upon the exercise of options to purchase shares ofour Class B common stock outstanding as of July 31, 2024, with a weighted-average exercise price of $12.72 per share, of which options to purchase 340,676 shares of our Class B common stock were canceled in October 2024;

 

  

5,307,222 shares of our Class A common stock subject to RSUs outstanding as of July 31, 2024;

 

  

192,786 shares of our Class B common stock subject to RSUs outstanding as of July 31, 2024;

 

  

613,896 shares of our Class A common stock subject to RSUs granted subsequent to July 31, 2024;

 

  

6,483,088 shares of our Class B common stock subject to the Co-Founder PSUs granted subsequent toJuly 31, 2024;

 

  

250,000 shares of our non-convertible preferred stock outstanding asof July 31, 2024, which we intend to redeem pursuant to the NCPS Redemption;

 

  

796,799 shares of our Class A common stock that we are committing to issue and donate over the next tenyears to fund certain of our social impact initiatives, which issuance and donation is conditioned upon the completion of this offering; and

 

  

      shares of our Class A common stock reserved for future issuance under ourequity compensation plans, consisting of:

 

  

      shares of our Class A common stock to be reserved for future issuanceunder our 2024 Plan, which will become effective prior to the completion of this offering;

 

  

1,550,798 shares of our Class A common stock reserved for future issuance under our 2015 Plan as ofJuly 31, 2024, which number of shares will be added to the shares of our Class A common stock to be reserved for future issuance under our 2024 Plan upon its effectiveness, at which time we will cease granting awards under our 2015 Plan;and

 

  

      shares of our Class A common stock to be reserved for future issuanceunder our ESPP, which will become effective prior to the completion of this offering.

Our 2024 Plan and ESPP eachprovide for annual automatic increases in the number of shares of our Class A common stock reserved thereunder, and our 2024 Plan provides for increases to the number of shares that may be granted thereunder based on shares under our 2015 Planor our 2007 Plan that expire, are tendered to or withheld by us for payment of an exercise price or for satisfying tax withholding obligations or are forfeited or otherwise repurchased by us, as more fully described in the section titled“Executive Compensation—Employee Benefit and Stock Plans.”

To the extent that any outstanding options to purchase ourClass A common stock are exercised, RSUs are settled or new awards are granted under our equity compensation plans, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additionalcapital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities,the issuance of these securities could result in further dilution to our stockholders.

For information on the conversion adjustmentprovisions applicable to our Series F, G, H and H-1 redeemable convertible preferred stock, see ”Capitalization—Capital Stock Conversion”.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND

RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with theconsolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties and our actual results, events or circumstances could differmaterially 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 thisprospectus. 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, 2021, 2023, 2024 and 2025 are referred to herein as fiscal 2021, fiscal 2023, fiscal 2024 and fiscal 2025, respectively, and references to our “common stock” includeour 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 massive and technologically underserved industry—an industry commonly referred to as the “trades.” Thetrades consist of the collection of field service activities required to install, maintain, and service the infrastructure and systems of residences and commercial buildings.

Our founders, Ara Mahdessian and Vahe Kuzoyan, founded ServiceTitan to provide tradespeople, like their parents, with technology that ispurpose-built to help trades businesses thrive. We built our cloud-based software platform to offer end-to-end capabilities to manage complex workflows, connect keystakeholders and provide impactful industry best practices. ServiceTitan remains to this day maniacally focused on the success of our customers as we fundamentally believe that our customers’ success leads to our success.

Since our founding, we have translated our passion for the trades into a commitment to innovation.

We serve many trades, including plumbing, electrical, HVAC, garage door, pest control, landscaping and others. In fiscal 2023, fiscal 2024 andthe 12 months ended July 31, 2023 and 2024, we processed $44.9 billion, $55.7 billion, $50.6 billion and $62.0 billion of Gross Transaction Volume, or GTV, respectively. GTV represents the sum of total dollars invoiced byour customers to end customers through our platform in a given period, which is intended to be a proxy for the total revenue our customers generate from their end customers. We define a customer as a parent organization, which may have multiplelocations, brands or subsidiaries, that has been billed in the prior three months, and of those customers we define Active Customers as customers with over $10,000 of annualized billings. Our customers have ranged in size from family-ownedcontractors with a few employees to large franchises with national footprints of over 500 locations and over $1 billion in annual GTV. As of January 31, 2023 and 2024, we had approximately 6,800 Active Customers and approximately 8,000 ActiveCustomers, respectively, representing over 95% and over 96% of our annualized billings, respectively. During fiscal 2024, our customers performed jobs in zip codes representing approximately 98.5% of the U.S. population, based on U.S. census data asof 2022. In fiscal 2024, approximately 109 million jobs were completed by our customers through our platform. As a testament to our platform’s ability to scale with our customers, as of January 31, 2024, we had over 1,000 customers withannualized billings exceeding $100,000 on our platform, a number which has roughly doubled since January 31, 2022. Customers with annualized billings exceeding $100,000 on our platform represented over 50% of annualized billings as ofJanuary 31, 2024.11

We designed our platform to address key workflows within atrades business. Contractors spend their days interfacing with the ServiceTitan platform across what we believe to be the five most business-critical functions, or

 

11 

See “—Our Business Model” below for a description of how we calculate annualized billings.

 

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the “core centers of gravity,” inside a trades business: CRM (customer relationship management, including sales enablement, marketing automation and customer service), FSM (fieldservice 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-partyconsumer financing).

We go to market with our platform in three ways: Core, Pro and FinTech products. We land with our Core product,which offers a base-level functionality across all key workflows, including call tracking, scheduling, dispatching, end-customer communications, marketing automation, estimating, job costing, sales, inventoryand payroll integration. To supplement our Core product and provide an even higher level of functionality, we offer our Pro products, which provide value-additive capabilities such as Marketing Pro, Pricebook Pro, Dispatch Pro and Scheduling Pro, aswell as our FinTech products, which include payment processing and third-party financing solutions. Together, we refer to our Pro and FinTech products as “add-on products.”

We are intimately aware of the challenges our customers face every day. Our platform is differentiated by our close customer proximity anddeep 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 forour 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, wehave often observed our customers hire more technicians, increase GTV and adopt more of our products. Increased customer adoption of our platform leads to further data and insights, allowing us to build more differentiated features and addressopportunities in new trades, use cases and customer subsegments. All of this allows us to drive more growth and efficiency for customers, delivering outsized return on investment, or ROI, in our products. As the functionality and utility of ourplatform continues to expand, we benefit from the growth in the number of customers on, degree of usage of, and GTV flow through our platform.

We have consistently grown and scaled our business operations organically and through acquisitions, while investing for the future. Fromfiscal 2021 to fiscal 2024, our revenue grew from $179.2 million to $614.3 million, respectively, representing a compound annual growth rate of 51%. Most recently, our revenue was $467.7 million and $614.3 million for fiscal 2023 andfiscal 2024, respectively, representing a year-over-year increase of 31%. Our revenue was $292.5 million and $363.3 million for the six months ended July 31, 2023 and 2024, respectively, representing a year-over-year increase of 24%.During fiscal 2023 and fiscal 2024, we incurred losses from operations of $221.9 million and $182.9 million, respectively, with $97.1 million and $17.1 million in non-GAAP losses from operations, respectively.12 During the six months ended July 31, 2023 and 2024, we incurred losses from operations of $98.6 million and $86.0 million, respectively, with $14.9 million in non-GAAP loss fromoperations and $16.8 million in non-GAAP income from operations, respectively. During fiscal 2023 and fiscal 2024, we incurred net losses of $269.5 million and $195.1 million, respectively. During the six months ended July 31, 2023 and2024, we incurred net losses of $104.1 million and $91.7 million, respectively. Our net loss, loss from operations and non-GAAP income (loss) from operations in recent periods reflect our continued investment in the growth of our businessto capture the large market opportunity available to us.

Our Revenue Model

We have two general categories of revenue: (i) platform revenue and (ii) professional services and other revenue.

Platform Revenue. The substantial majority of our revenue is platform revenue, which we generate through(a) subscription revenue generated from access to and use of our platform, including subscriptions to our Core and certain Pro products, and (b) usage-based revenue generated from the transactions using our FinTech

 

12 

See “—Non-GAAP Financial Measures—Non-GAAP Income (Loss) from Operations and Non-GAAPOperating Margin” below for a description of non-GAAP income (loss) from operations and a reconciliation of non-GAAP income (loss) from operations to loss from operations, the most directly comparable financial measure calculated in accordancewith GAAP, as well as a summary of certain limitations of non-GAAP measures.

 

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solutions, 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 amountof GTV. Platform revenue is generated through the following:

 

  

Subscription. We offer tiered subscription contracts to our customers that vary depending on thefeatures and functionality they require for our Core product, which offers a base-level functionality across all key workflows, including call tracking, scheduling, dispatching, end-customer communications,marketing automation, estimating, job costing, sales, inventory and payroll integration. To supplement our Core product and provide an even higher level of functionality, our Pro products, including Marketing Pro, Pricebook Pro, Dispatch Pro andScheduling Pro, provide value-additive capabilities. The majority of our Pro product offerings are sold on a subscription basis, typically as an add-on extension to our Core product subscription offering.

 

  

Usage. We receive a fee from third-party payment processors and third-party financing partners that wehelp connect to the end customers on our platform. Because the third-party processor and third-party financing partners provide the payment settlement and financing options to the end customer and are responsible for the provision of the payment orfinancing services, we do not assume any balance sheet risk for these transactions. Our revenue from these FinTech transactions consists primarily of fees from revenue sharing agreements with payment processing andend-customer financing partners, and we recognize this revenue on a net basis. In addition, usage revenue includes fees from certain Pro product features sold on a usage basis, including direct mail services,and other usage-based services.

We benefit from the predictable nature of our platform revenue. For both fiscal 2023and fiscal 2024, our platform revenue represented 95% of our total revenue, and for the six months ended July 31, 2023 and 2024, represented 94% and 96% of our total revenue, respectively, which we believe demonstrates the general recurring natureof our revenue model.

Professional Services and Other Revenue. We generate a lesser portion of our revenue fromprofessional services to provide onboarding, implementation and configuration support to our customers and training to their employees. Professional services and other revenue also includes live voice and chat services and certain ancillary productsand services sold to customers. Our professional services and other revenue represented 5% of our total revenue for both fiscal 2023 and fiscal 2024 and 6% and 4% of our total revenue for the six months ended July 31, 2023 and 2024,respectively.

Our Business Model

The trades form a critical but heavily fragmented industry. Trades businesses are often difficult to reach through traditional enterprisesoftware sales and marketing approaches, which are designed to engage IT departments as buyers. We engage trades businesses with a deep understanding of their unique needs and objectives and with a mindset focused on creating a clear and immediatevalue add.

Our customers’ success is our first priority. By making our customers more successful, we establish proof points thatstrengthen our brand and attract additional customers to our platform. This powers a referral-based, go-to-market flywheel that furthers our ability to efficiently servethe market.

We employ several strategies to efficientlygo-to-market. These include digital marketing, which draws inbound leads to our website, and outbound direct marketing, such as targeted phone outreach. We also benefitfrom significant word-of-mouth and often generate new business through referrals from current customers and industry partners that are trusted across the trades,including industry associations, original equipment manufacturers, or OEMs, and distributors. We extend our reach further through industry conferences, including our annual customer conferences, Ignite and Pantheon, which were most recently held inthe summer and fall 2024 with collectively over 3,500 customers and over 100 sponsors, including OEMs, technology partners and trade associations, in attendance. These conferences organically grow our brand awareness, reinforce our trusted

 

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leadership within the industry, generate a robust pipeline of potential customers and keep us informed of evolving customer needs to guide our innovation. Combined with a robust outboundmarketing program, these efforts fuel our sales pipeline, resulting in product demonstration requests and sales opportunities.

Ourcustomers’ journey begins with onboarding and training, which we see as essential to our customers’ success. During onboarding, our teams heavily invest in our customers’ success by ensuring an effective implementation experience. Wetrain technicians, customer service representatives and other office employees and integrate their data flows and systems with our platform to maximize the value we can deliver. We accordingly price our onboarding services competitively asacquisition, retention and sales velocity tools. We typically introduce FinTech products at the time of customer onboarding to take advantage of the value such add-on products provide given the importance of being able to process payments and offerfinancing for a seamless customer experience.

Once onboarded, customers often expand their relationship with us by layering on additionalfunctionality as they see the benefit of our platform and their specific needs evolve. We pride ourselves in our ability to anticipate and recommend which products would best serve a customer’s unmet needs. We employ dedicated FinTech and Proproduct sales teams that introduce these products at the right time for each customer, leveraging our industry and

internal expertise toknow the appropriate moment to approach the customer. Our ability to retain and expand customer relationships is evidenced by our net dollar retention rate of over 110% for each of the last ten fiscal quarters.13

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 tosupport 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 andretaining 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 andexpand 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. Our ability to increase GTV also depends on our ability toserve additional customers in existing trades and markets. As our platform has

 

13 

As of July 31, 2024. Our net dollar retention rate measures the increase in annualized billings across ourexisting 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 allcustomers billed in the same quarter in the prior year, or the prior period annualized billings. We then calculate annualized billings from these same customers as of the current quarter, or the current period annualized billings. Current periodannualized 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 retentionrate. 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 anniversaryof the acquisition.

 

We define annualized billings for a given quarter as the annualized value of the quarterly amount invoicedfor 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 maintainedor 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 monthlysubscriptions 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 ourcustomers 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.

 

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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, whoare investing in and consolidating the trades, 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 expectto continue to make significant investments across all aspects of our business to continue to increase the GTV on our platform.

Wedesigned 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 oninvestment 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 tradeverticals 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.

Increase GTV By Entering New Trades and Markets. ServiceTitan began by serving a single trade—plumbing—and focusing onresidential 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 todrive 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 tradevertical. 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 cansuccessfully 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 dependson 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 thatas 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, webecome 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. As a result, we have seenstrong retention of customers using our platform, as demonstrated by our gross dollar retention rate of over 95% for each of the last ten fiscal quarters.14 During the last ten fiscal quarters,our quarterly gross dollar retention rate has remained consistent, moving less than one percentage point over this period, with no change in gross dollar retention rate in the last twelve months between July 31, 2023 and July 31, 2024.

Drive More Value to Our Customers through Add-on Product Adoption. As we demonstrate the high ROI of our products to ourcustomers, 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 servetheir 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

 

14 

As of July 31, 2024. To calculate our gross dollar retention rate as of a given quarter, we first calculateprior period annualized billings. We then identify the value of annualized billings from any customers whose billings were zero in the current period (excluding the impact of one-time credits), which we referto as churn. We then divide (a) the prior period annualized billings minus churn by (b) the prior period annualized billings to calculate the gross dollar retention rate.

 

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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-onproducts. Our ability to increase adoption of our products will depend on customer satisfaction with our platform, competition, pricing and our ability to continuously demonstrate the value proposition of our products. We plan to continue investingin sales and marketing, thought leadership, industry resources and customer success initiatives with a focus on driving additional value to customers on our platform.

Build New Products to Extend Our Platform. We have a culture of significant innovation evidenced by the extension of ourplatform’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 new add-on products and to broaden ourcapabilities to address new market opportunities across trades. Powering key workflows of our customers through our Core product positions us to deliver value-added Pro and FinTech products that complement our Core product. We build each Pro andFinTech product 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 continueto 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 newproducts 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 continueto require substantial time and research and development resources.

Seasonality

Generally, demand for our customers’ services tends to increase during the second quarter of our fiscal year, as hot weather in the summermonths 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 beenhistorically 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 ofpayment 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 moredifficult 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. We believe seasonality may continue toimpact our quarterly results going forward, trends as a result of seasonality may become more pronounced or other seasonal trends may develop.

RecentDevelopments

Business Combination

In April 2024, we acquired 100% of the outstanding equity of Convex Labs Inc., or Convex, a sales and marketing platform built specifically fortrades businesses focused on serving commercial buildings that provides a comprehensive view of commercial properties, for a purchase price of $26.1 million, which consisted of 378,711 shares of our Class A common stock, valued at$23.8 million, in addition to $2.3 million in cash. Of the 378,711 shares, we held back 41,959 shares of Class A common stock, valued at $2.6 million at the acquisition date, to cover post-closing purchase price adjustments andpotential indemnities. See Note 6 to our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus.

 

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Components of Results of Operations

Revenue

We have two generalcategories 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, includingsubscriptions to our Core and certain Pro products, and (ii) usage-based revenue generated from the transactions using our FinTech solutions, usage of certain Pro products and other usage-based services. Our customer contracts are generallybased on the number of users, mix of products, number of end customers and the amount of GTV.

We offer tiered subscription plans for ourCore 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 ormulti-year subscription agreements with contract terms typically ranging from 12 to 36 months; however, some older customers are on month-to-month contracts. In nearlyall cases, these contracts (monthly, annual, or multi-year) are renewed automatically unless canceled in advance. We generally bill our customers on a monthly basis in advance of services, regardless of contract term. In some cases for certainproducts, 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 thecustomer 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.

When subscription fees are received in advance of providing the related services, we record deferred revenue on our consolidated balance sheetand 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 aretransferred to accounts receivable when our right to the consideration becomes unconditional.

Usage-based services primarily consist ofpayment 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 ofpayment. 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 orfinancing 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 andprocessing payments is recognized at the time of the transaction. In addition to payment processing revenue, we have a number of Pro products and other usage-based services that generate revenue depending on the level of usage, which we recognizemonthly in arrears based on consumption.

Professional Services and Other Revenue

Professional services and other revenue is primarily derived from services we provide to our customers, principally onboarding, training, andsome ongoing professional services. Professional services and other revenue also includes live voice and chat services and certain ancillary products and services sold to customers. Fees for these professional services are generally invoicedseparately at the commencement of the contract or as ordered by the customer. Revenue is recognized for professional services as the services are performed.

Cost of Revenue

Platform

Cost of platform revenue consists of personnel-related costs and costs related to the provisioning of our platform services. Personnel-relatedcosts primarily include salary, employee benefits, bonus and stock-based compensation related to our customer support team and certain customer success personnel. Costs related to the

 

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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 andserver 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-usesoftware costs directly related to our product development activities and allocated overhead.

We accumulate certain costs such asdepreciation, rent, utilities, and other facilities related costs and allocate them across our expense categories based on headcount. We refer to these costs as “allocated overhead.”

We expect our cost of platform revenue to increase in absolute dollars as the adoption and usage of our platform and product offeringsincrease.

Professional Services and Other

Professional services and other cost of revenue consists primarily of personnel-related costs in connection with providing customer onboardingand 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 ofcertain acquired intangible assets, allocated overhead, and the cost of other ancillary products and services sold to customers. Professional services and other cost of revenue historically has exceeded professional services and other revenue as weinvest 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 bothnew and existing customers increases.

Operating Expenses

Operating expenses consist of sales and marketing, research and development and general and administrative expenses. For each of thesecategories of expense, personnel-related costs consisting primarily of salary, employee benefits, bonuses and stock-based compensation are the most significant components.

We anticipate incurring significant additional operating expenses during the period in which we complete our initial public offering as aresult of the stock-based compensation expense associated with our options and RSUs as well as additional stock-based compensation expense going forward, including the impact of the Co-Founder PSUs granted in October 2024.

Sales and Marketing Expense

Sales andmarketing 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, bonus 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 allocatedoverhead. As our annual customer conferences are significant sales and marketing events, we expect an increase in sales and marketing expense during the quarter in which they occur. We expect that sales and marketing expense will increase on anabsolute 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 outbound salespersonnel and expanding our customer success team activities.

Research and Development Expense

Research and development expense consists primarily of personnel-related and other costs incurred in connection with product management anddevelopment efforts. Personnel-related costs primarily include salary, employee benefits, bonus and stock-based compensation. Research and development expense also includes fees tothird-

 

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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 weinvest 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, bonus 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 processesand systems that will enable our internal support functions to scale with the growth of our business. In the short term, we anticipate increases to general and administrative expense to support our growth and as we incur the costs of complianceassociated with being a public company, including increased accounting and legal expenses.

Other Expense, Net

Other expense, net consists primarily of interest expense related to our debt arrangements with financial institutions, interest income earnedon our cash and cash equivalents, loss on extinguishment of debt, gains or losses on foreign currency transactions and miscellaneous other income.

Provision For (Benefit From) Income Taxes

Our income tax provision consists primarily of U.S. federal, state, and foreign income taxes. We maintain a full valuation allowance for ourU.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.

 

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Results of Operations

The following table sets forth our consolidated statements of operations data for the period indicated:

 

   Fiscal   Six Months
Ended July 31,
 
   2023   2024   2023   2024 
   (in thousands) 
Revenue:                

Platform

  $443,523   $581,751   $276,134   $348,222 

Professional services and other

   24,211    32,590    16,359    15,100 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

   467,734    614,341    292,493    363,322 
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue:

        

Platform

   140,921    169,766    83,903    96,993 

Professional services and other

   60,789    67,945    34,940    33,523 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

   201,710    237,711    118,843    130,516 
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

   266,024    376,630    173,650    232,806 
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Sales and marketing

   196,775    219,994    103,208    115,819 

Research and development

   158,870    203,534    100,020    121,062 

General and administrative

   132,235    135,966    69,049    81,963 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

   487,880    559,494    272,277    318,844 
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

   (221,856   (182,864   (98,627   (86,038
  

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net

        

Interest expense

   (54,542   (16,436   (7,987   (8,350

Interest income

   1,624    7,067    3,117    3,350 

Loss on extinguishment of debt

   (9,607   —          

Other income, net

   1,801    1,224    1,349    210 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

   (60,724   (8,145   (3,521   (4,790
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

   (282,580   (191,009   (102,148   (90,828

Provision for (benefit from) income taxes

   (13,057   4,136    1,913    863 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   (269,523   (195,145   (104,061   (91,691
  

 

 

   

 

 

   

 

 

   

 

 

 

Comparison of the Six Months Ended July 31, 2023 and 2024

Revenue

 

   Six Months
Ended July 31,
   Change 
   2023   2024   $   Percent 
   (in thousands, except percentages) 

Revenue

        

Platform

  $276,134   $348,222   $72,088    26

Professional services and other

   16,359    15,100    (1,259   (8)% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  $292,493   $363,322   $70,829    24
  

 

 

   

 

 

   

 

 

   

 

 

 

Platform revenue increased by $72.1 million, or 26%, for the six months ended July 31, 2024,compared to the six months ended July 31, 2023. This increase was primarily driven by subscription revenue, which increased by $56.0 million, or 27%, for the six months ended July 31, 2024, compared to the six months ended July 31, 2023.In addition, revenue from our usage-based products increased by $16.1 million, or 24%, for the six months ended July 31, 2024, compared to the six months ended July 31, 2023. This increase was primarily driven by increases in thevolume and value of payments processed using our FinTech offerings.

 

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Professional services and other revenue decreased by $1.3 million, or 8%, for the sixmonths ended July 31, 2024, compared to the six months ended July 31, 2023. This decrease was primarily driven by the disposal of certain marketing solutions in the fourth quarter of fiscal 2024, which contributed $2.9 million inrevenue for the six months ended July 31, 2023.

Cost of Revenue

 

   Six Months
Ended July 31,
  Change 
   2023  2024  $   Percent 
   (in thousands, except percentages) 

Cost of revenue

      

Platform

  $83,903  $96,993  $13,090    16

Professional services and other

   34,940   33,523   (1,417   (4)% 
  

 

 

  

 

 

  

 

 

   

 

 

 

Total cost of revenue

  $118,843  $130,516  $11,673    10
  

 

 

  

 

 

  

 

 

   

 

 

 

Gross profit

  $173,650  $232,806    
  

 

 

  

 

 

    

Platform gross margin

   70  72 

Professional services and other gross margin

   (114)%   (122)%    

Total gross margin

   59  64   

Platform cost of revenue increased by $13.1 million, or 16%, for the six months ended July 31, 2024,compared to the six months ended July 31, 2023. The increase was primarily due to a $6.3 million increase in the costs to deliver our Core and add-on products that was driven by the increase in our subscription and usage-based revenue. We alsorecorded a $4.2 million impairment loss on operating lease assets and related property and equipment for a portion of our headquarters space that we ceased using and determined to sublease during the six months ended July 31, 2024. In addition,personnel-related costs increased by $1.7 million primarily due to an increase in headcount for the six months ended July 31, 2024 compared to the six months ended July 31, 2023, which was partially offset by a $0.4 million decrease instock-based compensation primarily due to incremental stock-based compensation recorded in connection with a tender offer in the first half of fiscal 2024, or the fiscal 2024 tender offer, given that investors in our Series H-1 redeemableconvertible preferred stock financing purchased shares of our Class A common stock from current and former service providers. See Note 10 to our unaudited interim condensed consolidated financial statements included elsewhere in thisprospectus. Amortization of capitalized internally developed software increased $1.6 million for the six months ended July 31, 2024 compared to the six months ended July 31, 2023. Platform gross margin increased to 72% for the six monthsended July 31, 2024, compared to 70% for the six months ended July 31, 2023 primarily due to the increase in revenue and improved efficiencies in delivering our platform at scale.

Professional services and other cost of revenue decreased by $1.4 million, or 4%, for the six months ended July 31, 2024, comparedto the six months ended July 31, 2023. The decrease was primarily due to a decrease in restructuring expenses of $1.8 million, a decrease of $0.8 million in personnel-related costs, of which $0.3 million related to stock-basedcompensation primarily due to incremental stock-based compensation recorded in the first half of fiscal 2024 related to the fiscal 2024 tender offer, and a decrease of $0.6 million in third-partyconsulting costs. These decreases were partially offset by a $2.0 million impairment loss on operating lease assets and related property and equipment for a portion of our headquarters space during the six months ended July 31,2024. Professional services and other gross margin decreased to (122)% for the six months ended July 31, 2024, compared to (114)% for the six months ended July 31, 2023 due to the decrease in revenue.

 

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Operating Expenses

Sales and Marketing Expense

 

   Six Months
Ended July 31,
  Change 
   2023  2024  $   Percent 
   (in thousands, except percentages) 

Sales and marketing expense

  $103,208  $115,819  $12,611    12

Sales and marketing expense as a percentage of revenue

   35  32   

Sales and marketing expense increased by $12.6 million, or 12%, for the six months ended July 31, 2024,compared to the six months ended July 31, 2023. The increase in sales and marketing expense was primarily driven by a net increase of $6.5 million in personnel-related costs primarily due to an increase in headcount, which was partially offset by adecrease in stock-based compensation primarily due to incremental stock-based compensation recorded in the first half of fiscal 2024 related to the fiscal 2024 tender offer. Additionally, we recorded a $5.4 million loss on operating lease assets andrelated property and equipment for a portion of our headquarters space during the six months ended July 31, 2024 and marketing and advertising costs increased $2.1 million. These increases were partially offset by a decrease in restructuringexpenses of $1.4 million.

Research and Development Expense

 

   Six Months
Ended July 31,
  Change 
   2023  2024  $   Percent 
   (in thousands, except percentages) 

Research and development expense

  $100,020  $121,062  $21,042    21

Research and development expense as a percentage of revenue

   34  33   

Research and development expense increased by $21.0 million, or 21%, for the six months ended July 31, 2024,compared to the six months ended July 31, 2023. The increase in research and development expense was primarily driven by an increase of $13.4 million in personnel-related costs primarily related to an increase in headcount. Additionally, we recordeda loss on operating lease assets and related property and equipment of $5.2 million related to a portion of our headquarters space during the six months ended July 31, 2024.

General and Administrative Expense

 

   Six Months
Ended July 31,
  Change 
   2023  2024  $   Percent 
   (in thousands, except percentages) 

General and administrative expense

  $69,049  $81,963  $12,914    19

General and administrative expense as a percentage of revenue

   24  23   

General and administrative expense increased by $12.9 million, or 19%, for the six months endedJuly 31, 2024, compared to the six months ended July 31, 2023. The increase in general and administrative expense was primarily driven by an impairment loss on operating lease assets and related property and equipment of $13.3 millionrelated to a portion of our headquarters space during the six months ended July 31, 2024. In addition, acquisition-related costs increased $2.1 million related to the acquisition of Convex during the six months ended July 31,2024. These increases were partially offset by a decrease in personnel-related costs of $3.8 million for the six months ended July 31, 2024 compared to the six months ended July 31, 2023. The decrease in personnel expenses was due toa decrease of $5.8 million in stock-based compensation primarily due to incremental stock-based compensation related to the fiscal 2024 tender offer, which was partially offset by an increase in headcount.

 

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Other Expense, Net

 

   Six Months
Ended July 31,
   Change 
   2023   2024   $   Percent 
   (in thousands, except percentages) 

Other expense, net

  $(3,521  $(4,790  $(1,269   36

Other expense, net increased by $1.3 million, or 36%, for the six months ended July 31, 2024, compared tothe six months ended July 31, 2023 primarily due to a $1.0 million government grant received during the six months ended July 31, 2023 related to our operations in Armenia.

Provision for Income Taxes

 

   Six Months
Ended July 31,
   Change 
   2023   2024   $   Percent 
   (in thousands, except percentages)