GLOO

Please be advised that today's conference is being recorded. Now it's my pleasure to turn the call to the Chief Marketing and Communications Officer, Oliver Roll. Please proceed.

Thank you, operator, and thank you to all of you for joining our fiscal second quarter earnings conference call. We will be discussing Gloo's performance for the second quarter ending July 31, 2026, as well as providing guidance for our Q3 and full year 2026. Joining me on today's call are CEO and co-founder, Scott Beck, and CFO, Paul Seamon. Our executive board chair and head of technology, Pat Gelsinger, will also join the Q&A session. Before we begin, please be reminded that this call will contain forward-looking statements, including statements related to our business, future growth, strategic initiatives, key priorities, and our financial outlook for Q3 and fiscal year 2026. These statements are based on Gloo's current expectations, but are subject to risks and uncertainties relating to future events and/or the future financial performance of Gloo.

Gloo assumes no obligation to update or revise them, whether as a result of new developments or otherwise. Actual results could differ materially from those anticipated in these forward-looking statements. A discussion of some of the risks that could cause actual results to differ materially from our forward-looking statements can be found in today's press release and are disclosed under the caption "Risk Factors" and elsewhere in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ending January 31, 2026, and in our subsequent quarterly reports on Form 10-Q. Our SEC filings are also available on Gloo's investor relations website at investors.gloo.com and the SEC's website. In addition, during today's call, we'll discuss certain non-GAAP financial measures, including adjusted EBITDA.

We use non-GAAP measures in some of our financial discussions as we believe they provide valuable insights on our operational performance and underlying operating results. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, our GAAP results. Reconciliations of these non-GAAP metrics to the most directly comparable GAAP metrics, as well as the definitions of each measure, their limitations, and our rationale for using them, are included in today's press release and will be included in our Form 10-Q to be filed for the quarter ending July 31, 2026. Now I'll turn the call over to Scott.

Thank you, Oliver, and thank you for joining us today. Q2 was another solid quarter, with revenue increasing 188% year-over-year to $46.6 million. Since becoming a public company, we've been able to improve our financial performance every quarter. We have met or exceeded guidance each time and are raising our full year revenue guidance once again. Our progress continues to demonstrate that our strategy and our execution is on track. One of the key drivers is our leadership in applied AI for the faith and flourishing ecosystem. This strengthens every layer of our platform, from trusted AI capabilities like Gloo AI Studio, to AI-powered solutions like Gloo 360, to helping customers transform their organizations through agentic workflows. Our approach to applied AI reflects a broader shift in how AI-native companies are creating value.

We are increasingly delivering the work and the outcomes our customers need, rather than simply providing a better tool. As AI models improve, that work becomes faster and more efficient to deliver, creating greater value for our customers and expanding operating margins for Gloo. That makes continued advancement in the frontier models a powerful tailwind to our overall strategy and growth. When the models get better, we get better. We are seeing that in our customer momentum. Customers are trusting Gloo with more of their technology and growth needs. They're engaging with more solutions across our platform, as well as adopting capabilities that we've added through acquisitions. All of this is translating into strong top-line growth while we continue to operate with cost discipline and make meaningful progress toward adjusted EBITDA profitability.

Since becoming a public company, we've improved adjusted EBITDA every quarter and continue to approach breakeven in Q3 and are committed to achieving adjusted EBITDA profitability in Q4. Our full year guidance more than doubles revenue in 2026 year-over-year, while holding operating expenses approximately flat in absolute dollars. To support that growth and profitability trajectory, we completed meaningful cost actions in Q2, building on the actions that we took last year. We are demonstrating that we can integrate new capabilities, meet significantly greater customer demand, and grow revenue without building a proportionately larger cost base. Behind these results is a large, growing, fragmented, and underserved market. According to Kentley Insights, faith-based organizations generated over $265 billion in revenue in 2025. That's up 8.2% from $245 billion in revenue in 2024, roughly double the pace of U.S. GDP growth.

At the same time, organizations are under increased pressure to modernize technology operate more efficiently, strengthen donor development, and scale their missions. Our customer needs align directly with our strategy to power technology and to power reach with applied AI. Powering technology helps organizations modernize their systems, data, and workflows so they can spend more time focusing on their mission. Powering reach helps organizations strengthen marketing and engagement, expand awareness, and build the donor relationships that fund their missions so that they can increase their impact in the world. Underpinning both is our leadership in applied AI for the faith and flourishing ecosystem. Organizations are choosing us because they want a trusted partner that can deliver better outcomes with the resources they already have. That's exactly where Gloo is positioned to add value. The people and organizations that we serve are amazing.

They are changing lives for good and transforming communities in thousands of different ways around the country and around the world. These strategic customer relationships matter. We are closing larger, more strategic relationships that expand both the value that we deliver and the markets that we serve. We now have more than 30 customers representing over $1 million each in annual contract value. In Q2, we reached another important milestone with our first customer exceeding $10 million in annual contract value. In addition, with the acquisition of Cedarstone, we have added over 250 new mid-market network capability providers or customers who are well-positioned for cross-selling. We also expanded further into social services and youth-serving organizations where our technology engagement donor development capabilities lift the technology burdens and help them scale.

There are many people and youth in this country who are really struggling, and these organizations are making an enormous difference in their lives and are better able to serve them in partnership with Gloo. These relationships create significant long-term growth opportunities as customers adopt more of the Gloo platform. Universities continue to emerge as a strong growth vertical with over 40 universities in our current client portfolio. Universities face many of the same challenges we see across the broader ecosystem. They have complex technology environments and fragmented data, they have pressure to operate more efficiently, they need to increase enrollment, and they need to strengthen their donor development. Those needs align very well with our platform capabilities. We have added and expanded several university relationships during this quarter, and we have a strong pipeline of additional opportunities ahead.

We are not only adding customers, we are also deepening the relationships we already have. In this market, trusted relationships are a non-negotiable. Each capital partner we add to our platform brings its own deep, trusted customer relationships into Gloo. This creates an increasingly powerful ripple effect within our customers and within the segments. This supports our overall strategy that we call land, expand, and expand. This means once we land with a customer, we not only expand with that specific customer, but we also expand across the segment as well. For example, we already have many of our million-dollar-plus customers adopting solutions from multiple Gloo business units and capital partners. This is an important indicator of the opportunity that lies ahead. AI is another strong tailwind for Gloo.

More organizations are turning to us to apply AI in practical ways that advance their mission, grow their revenue, and make their operations more efficient. We are bringing the power of agentic workflows to organizations in areas like donor engagement, Help Desk automation, project management, and many more. These are tangible applications of AI that also give customers better insights into their enterprises while reducing repetitive administrative work and allowing them to focus more on their mission-aligned outcomes. Importantly, as we increasingly deliver the work itself, we rapidly embrace the AI model improvements to even more efficiently deliver the work. Through our forward deployed engineering model, we work alongside customers to solve specific operational challenges, and then we turn what works into capabilities that can scale across the ecosystem.

On September 8th, the company announced Gloo Code, a new agentic building capability within the Gloo AI Studio that helps developers get more from their tokens by pairing purpose-built agents with the right models for each task. Developers will have the opportunity to use Gloo Code at our annual Gloo AI Hackathon in October, when we expect hundreds of developers to build new applications for the faith and flourishing ecosystem. Our acquisition strategy is a core part of building a stronger, more durable company. Since becoming a public company, we have completed five additional acquisitions. Westfall Gold, XRI, EMD or Enterprise Market Desk, our remaining ownership stake in Midwestern Interactive, and Cedarstone. That is with EMD closing in Q2, and Midwestern and Cedarstone, which have closed in Q3.

Cedarstone is a good example of the cross-selling opportunities that we discussed earlier, with Masterworks providing a natural channel to bring Cedarstone capabilities to more customers. Each one adds capabilities, expertise, customer relationships, or market access that strengthens the broader Gloo platform. As we integrate them, we create new growth opportunities and reduce duplication as we integrate their operations. Our acquisition synergies are working. They improve revenue, financials, and expand what we can do for customers while driving synergies across our platform. This is a powerful flywheel that will ultimately drive meaningful profitability for Gloo. When I look at Q2, I see significant momentum. Our market is massive, growing, and technologically underserved. Our largest relationships are getting bigger and broader. New verticals are opening up. Applied AI is moving into meaningful operational workflows. And the capabilities that we have added across Gloo are increasingly working together as one platform.

We still have a lot of work ahead of us, but we believe the direction of the business is clear and strong. We are building the leading technology platform, including our capital partners and business units, for the faith and flourishing ecosystem, and we are demonstrating that we can grow the platform with increasing operating leverage. We will remain focused on execution through the second half of the year and delivering on our commitment to achieving adjusted EBITDA profitability in Q4. With that, I will turn it over to Paul to walk through our financial results in more detail.

Thank you, Scott. Our momentum continued in the second quarter as we exceeded both revenue and adjusted EBITDA guidance with strong year-over-year growth from both our Powering Tech and Powering Reach businesses. Q2 revenue was $46.6 million, up 188% from the same period last year and 12% sequentially from Q1. Year-over-year growth was driven by Gloo 360 and Workspace, as well as acquisitions including Masterworks, Westfall, and EMD. As we continue to strengthen our platform with new capabilities, we are seeing strong cross-sell momentum across our products and solutions. Our leadership in applied AI enables us to deliver essential business outcomes to our customers. We are delivering the work rather than just a software tool they have to manage. In fact, our platform solutions are helping customers reduce the number of software tools they have to license and pay for.

This is driving strong revenue growth in platform solutions at $22.9 million in Q2 2026, up 209% from $7.4 million in Q2 of last year. This was driven by Masterworks, Westfall Group, and EMD. Platform revenue totaled $23.6 million in Q2 2026, an increase of 170% from $8.7 million in Q2 of last year. This was driven by Gloo 360, Masterworks, and Workspace. Cost of revenue in the quarter was 64.0% of total revenue, an improvement of 10.8 percentage points from 74.8% in the prior year period. This significant improvement was driven by increased scale across our businesses, as well as a favorable shift in mix from our acquisitions over the past year. We expect incremental improvement to continue. Adjusted EBITDA improved $3.2 million sequentially to negative $8.3 million.

This improvement reflects revenue growth across our businesses, along with cost restructuring actions we completed in the quarter to integrate our acquisitions and streamline our corporate services. Also note that general and administrative expenses in Q2 included an impact from the Cedarstone acquisition, which closed in August. As we previously stated, we do not adjust for these costs in our non-GAAP results. In the quarter, we took a $4.4 million restructuring charge, primarily for severance costs related to the integration of our business lines. While we will always seek opportunities to improve our cost structure, we believe the business is in a strong position to continue our focus on growth. We are investing in adding salespeople to drive our top line in the coming quarters. In the quarter, we completed a successful follow-on offering, raising $23.7 million of additional capital net of underwriting fees, commissions, and offering expenses.

As of July 31st, 2026, we had $39.3 million of cash and cash equivalents. Last week, we extended the term of our senior secured loan of $13.2 million by one year to April 2028, providing us additional flexibility in 2027. I'd like to now turn to our full year 2026 and Q3 outlook. We are increasing our full year 2026 revenue outlook by $5 million to $200 million, inclusive of the Cedarstone acquisition. We expect revenue to be $55 million in the third quarter and adjusted EBITDA to narrow to negative $3.5 million, a nearly $5 million improvement over the second quarter. We expect the third quarter to provide a significant step-up in our performance as it is the strongest advertising and fundraising season for Masterworks and Westfall Group. We continue to expect adjusted EBITDA to reach profitability in Q4 2026 as we maintain cost discipline.

One other item to note, for Q3, we expect a weighted average share count of approximately 90 million shares. With that, I'll turn it back to the operator to take your questions.

Thank you. As a reminder, if you do have a question, simply press star one one to get in the queue and wait for your name to be announced. To remove yourself, press star one one again. Please limit your questions to one and one follow-up. One moment while we compile a Q&A roster. First question comes from Richard Baldry with Roth Capital. Please proceed.

Thanks. The improvement on the P&L was pretty marked in the quarter, with most of it driven by improving gross margin dollars. I guess I'd expected a bit more of that improvement driven by cost synergies. Looking forward on the improvements, can you maybe talk about how much more cost synergies you still have ahead, and maybe how much of the improvement you expect driven by more step-ups in gross margin dollars like we saw in the second quarter? Thanks.

Hey, Rich, it's Scott. We did make real good progress in the margin for this quarter. As we look forward, we're going to be seeing more leverage as well in the operating expenses. You can expect that as we move forward over the next couple of quarters.

Okay. My follow-up would be, when you look into the second half and you're getting more of a recurring revenue base, how much of the outlook do you think is driven by contracts you know, contracts that are signed, clients to be deployed out of what you might call a backlog, versus how much of it is a go-get that's still to be captured by your sales teams? Sort of a visibility question. Thanks.

Yeah. From a visibility standpoint, we do have a very strong pipeline. We have the ability to have good levels of projections as we are looking out over the next couple quarters. And that is as a result of having strong recurring revenue, because we do have a lot of our revenue that is in that recurring and reoccurring category, number one. Then number two, we have good visibility into the pipeline. So we feel real solid about what we are looking forward to in Q3 and Q4.

If I can squeeze one extra one in. I know you have said before that you do not need to do incremental acquisitions for the forecast that you put out there. How do you still feel about the M&A pipeline activities in there, interest levels in there, and maybe if that is more of a 2027 thing, how do you feel about the outlook into 2027 for M&A? Thanks.

Yeah, thanks. Also just finishing up on the last question that you asked. In addition to pipeline, from a revenue standpoint, what we are also seeing is increasing cross-selling across our different capital partners and our different offerings. We will delve a little bit deeper into that maybe later under some other questions. As far as the M&A pipeline, the pipeline is strong. We have had extremely good past success with the acquisitions that we have done. You have been able to see that in the performance, not only in terms of them building the base, but also us being able to help them organically grow once they are with us. We are going to be opportunistic in M&A. As we have always been, we are going to be extremely cash efficient. Typically, we are 20%-25% cash, some seller notes or performance, then maybe 50% stock. So we see that as being continued.

As we look into 2027, for sure, we are going to expect that M&A is part of our strategy as it always has been. We are excited about what we are seeing.

Great. Thanks. Congrats on a great quarter.

Thanks.

Our next question comes from Jason Kreyer with Craig-Hallum. Please proceed.

Great. Thank you, guys. Look, you are up to 30 customers now that are producing over $1 million in revenue. By the way, congrats on the first $10 million customer. Can you maybe generally talk about the journey that those customers have been on with Gloo? Maybe just where those relationships started and how you have been successful continuing to expand wallet share over time.

Yeah. This is Pat. Some of those customers have been customers of different portions of Gloo for quite a while. A number of them would have been Masterworks customers for a number of years, and we have been growing those relationships and now cross-selling for more of the portfolio. Some have been more recent. 360, as an example, is only a year and a half old as an offering in the marketplace, so those customers are more recent. Westfall Gold would be another example that we have had long customer relationships with them as well, as they have been doing business for three decades now. So it really crosses the spectrum of recent to long-term customers. What you are seeing very systematically is we are able to increase the size of the relationship, and we are doing that by doing more with them in one product area, then being able to cross-sell.

And this quarter, we have formalized our sales compensation program, so cross-selling across all of our sellers to further incent, and we are seeing good momentum from that cross-selling already. We do believe there is a lot more to do there. As Scott said in his formal remarks, we call it land, expand. We are able to then also move into other customers in similar verticals. For instance, 40 universities now, and I think it was maybe two quarters, maybe three quarters ago, we talked about our first university win, and now we are having very broad success across that category. Overall, land, expand, and seeing that quite consistently now across the portfolio. Now with 30+ at $1 million, we are certainly going to be giving periodic updates on the next milestone for them.

We are looking forward, and several of them are approaching $10 million, so we definitely see that there will be updates there. Overall, our sales momentum is strong, and we see that we have many synergies to harvest in the future.

I will look forward to a continuation of those trends. I am going to kick it over to Paul, just on the numbers. Great to see the leverage in the model. As we get closer to Q4 pivoting into EBITDA profitability, can you just talk about any aspirations beyond that? Should we be expecting some seasonal dips in profitability, or do you anticipate continuing to drive that positive EBITDA into future quarters? Thanks.

Thanks, Jason. To start out, we expect the third quarter to be the strongest sequential growth in terms of quarter to quarter, and that is driven by Westfall and Masterworks. Seasonally, it is very strong for them in advertising and in fundraising. As we think about moving into fourth quarter, that has more moderate growth, given that we have both Christmas and January falling in our fiscal year, which ends January 31st. That is the seasonality we would expect to see going forward with the business mix. That will carry over into next year. So there will be some ups and downs quarter to quarter, with third quarter generally being the strongest sequential growth. Also moving into 2027, as we think about moving beyond adjusted EBITDA, our focus is also getting to free cash flow positive in the back half of the year.

The combination of momentum and revenue, cost efficiency, being careful with the top and bottom line, sets us up for a good 2027.

All right. Thanks, Paul. Thanks, guys.

One moment for our next question. It comes from Yun Kim with Loop Capital Markets. Please proceed.

All right, thank you. Congrats on a strong quarter again. Scott, since you mentioned it, if you can talk about the cross-sell motion, maybe in more details. Obviously you have a lot of products and service offerings, so a lot of different entry points for a customer to your platform, but also obviously expand once you land. How much of your business today is driven by existing customers versus new customers? I think Pat kind of alluded to it a little bit, but is there a specific sales incentive to drive cross-sell? How is the sales organization structured to drive that cross-sell versus new customer acquisition? Thanks.

Thank you. Just adding a little bit to my earlier comments. Clearly, we do see cross-sell as an important aspect of our organic growth and leveraging. Maybe I will ask Scott when I finish here to talk a little bit about Cedarstone, because part of that acquisition was very much driven by the cross-sell opportunities that we saw there. We did roll out a formal sales compensation program this quarter, crossing all of the Gloo sellers across all of our businesses. We have a distributed sales force, and now they are being compensated to drive cross-sell. We are already seeing good momentum from that. We do see that we are already seeing good introductions and good pipeline creation. But with the sales incentive now, we are formalizing that, tracking it more aggressively, and seeing good momentum from that. The bulk of our revenue growth comes from existing customers.

But we are being very focused on continuing to expand the opportunities within those customers and within the verticals, like the university one that we talked about, that we are seeing momentum in. The acquisitions are clearly giving us additional customers that we are then having the opportunity to cross-sell into. Maybe Scott, maybe talk a little bit more about Cedarstone there.

Sure. Thanks, Pat. As we said before, every capital partner that we add brings capabilities, but they also bring trusted relationships. Cedarstone specifically, super excited about it. It is a great business with really awesome leaders. It is about 20 years old. They have been big, massive growth opportunity from our standpoint in cross-selling as a result of the core businesses that they are in. First they do the accounting, right? They actually close the books. We love this, where we are actually taking over responsibility to deliver the work. Because then as we have improvements in technology, improvements in AI, improvements in agentics, we can deliver that work more effectively, give them better results, do it with better margins for ourselves. Then in addition to the accounting, they are also doing what we call donor services. So they are providing donor services and accounting into these organizations. There are over 250 new names.

These are new names that are being served by Cedarstone. I can tell you, I had the opportunity to personally meet and have conversations with over 20 of Cedarstone's larger customers. I was amazed at the depth of the relationship, the commitment, the long-term nature of these relationships, and super excited. Almost every one of those is a potential Masterworks customer or Masterworks partner. Likewise, many of the Masterworks partners are potential Cedarstone customers. We are actually seeing that in spades with Cedarstone. Just like to say welcome, Cedarstone, to being part of the Gloo family here.

Okay, great. My second question. Congrats on introducing the Gloo Code today or yesterday. I lose track of days nowadays. That's a sign that your Gloo AI Studio is gaining traction out there. Continued success with your hackathon events and whatnot. If you can just give us an update on the kind of traction that you are seeing with developer community out there on the Gloo platform. Are these development efforts coming from established partners, including your capital partners, or are you also seeing momentum with smaller startups and individual developers?

Yeah. The answer is yes to the question, where we're able to go back into existing customers and be able to have them start to take advantage of Studio. We have a defined focus on our capital partners to have them become Studio partners as well, and we're using it for our own internal purposes as well. We're measuring every one of the internal users as well as they're building more and more of their applications using Gloo Studio. As you comment, Gloo Code, exciting new offering, really bringing agentic workflows to the coding process. When you think about Claude Code, Cursor, Copilot, Codex, each one of those has clearly seen the coding application create significant momentum for the platform.

Having just rolled it out yesterday, we're anxious to see the market response, but already we have quite a number of new signups coming onto the platform. Obviously, we timed that concurrent with the start of the hacking window for our coming hackathon next month. Clearly, Gloo Code being available with the hackathon, we clearly want to drive many of the, I'll call it, more retail developers who are individuals coming onto the platform as well. Studio covers the full spectrum of our internal, our customers, and the individual user that are aligned. Clearly, part of the Gloo Code value proposition is a cost-effective development platform that preserves the customer's coding privacy, a differentiator for us versus many of the broad market offerings. We do think that will be a very sustainable value proposition for us.

Overall, you're going to see us continue to add capabilities to Gloo Studio going forward as we're just going to incrementally keep putting more and more value into the platform. We hope to have many joining for the hackathon as the hacking window is now open, and we're super excited about the partnership with YouVersion, who's come along to be our lead partner for the hackathon. That relationship is one that really just continues to gain great value for us and YouVersion across many of the portfolio offerings. Look forward to giving updates next quarter on the adoption of Gloo Code, as well as the results of the hackathon.

Okay, great. Thank you so much.

Our next question comes from the line of Matthew Harrigan with Benchmark StoneX. Please proceed.

Thank you. I would like to take credit for this, but there was an executive at IBM, I think, who recently said you do not need your HR chatbot to understand quantum mechanics, with respect to optimizing the use of models and constraining token costs. I am sure you are not using Fable very much, but you said that the real advances in LLMs are really helping your business. Some of what you do really seems to be kind of industrial AI, where you can really identify the ROI. It is pretty discreet. How do you balance the cost of using those models with the excitement of really being at the cutting edge that I know Pat especially can relate to since he was probably a teenager?

Yeah. I was not using AI when I was a teenager, but the opportunity, and this is what we do, and essentially, when you think about Studio, we are acting like an open router, a guardrails, a coding environment all rolled into one. Thus, we are picking the lowest cost models, often open source models, to give the cost-effective platform. But where appropriate or where the customer would pick a certain model, we reflect that choice or a better model for their use for specific activities. So in that way, we are able to potentially manage costs on their behalf, still produce margin for us, and deliver superior experiences.

It is highly automated now, so as new models become available, we are immediately reflecting them into the Studio offering, updating pricing for customers as they flow through quite quickly in that regard, and operating as a leading developer platform and studio environment. We are also increasingly then being able to turn work into agents. For that Gloo 360, like Help Desk is now highly run as an agentic workflow. Our marketing offerings from Midwestern are now agentic workflows, and increasingly, we are able to replace work with agents. As I already said, we are optimizing the cost and operational environments of those agents. So it is producing great work at increasingly lower cost, which is a key margin driver for us over time.

There has been some interesting discussion in The Economist and I think The Telegraph on some of the sophistication of the LLMs, Magisterium AI, I guess, out of the Vatican literally

trying to make answers to moral questions more religion-based versus very reductive and secular. I know that is not a huge priority, and I know it can get kind of Joseph Ratzinger complicated probably if you go into some depth. But they are talking about putting Greek and Latin texts online

Yeah

just everything like that. Is that something you are looking at as well? You are more evangelically Protestant-oriented, but is that kind of an afterthought, or is that something you are really actively engaged in now?

Yeah. Maybe a customer example of that, HelloBible is an example. They were running on OpenAI, and they've moved over to Gloo now, Gloo Studio, and they are specifically doing a chat service that's evangelical Christian-aligned. They would be a strike zone to the question that you would have. We're very familiar with Magisterium AI. We hope to win their business over time. Really, I'll say any values-oriented user, and we think of them as B to B to C. We don't focus on C as much directly, but we focus on businesses that are focusing on consumers and supporting them. For instance, the hackathon, quite a few of those applications that will be created as part of the hackathon will become the future Hello Bibles that are doing exactly what you described.

From our purpose, that very much the strike zone of the kind of developers, applications, and users that we want to be supporting across all of the Gloo customers as well. Sometimes those are going to be using for very specific ministry purposes. Sometimes they'll be broadly consumer available. All of those will be part of the Gloo platform and Gloo Studio target audience.

Great. Hopefully, we'll get to your hackathon this year. Thanks.

Very good. Thank you.

All of that ties into just the fundamental thought of one of our core concepts is to shape technology as a force for good, because that technology is out there, it is being evolved and improved at amazing lightning speed, and how do we keep shaping that so that it can be used for good?

Thank you. Our next question comes from Dan Kurnos with StoneX. Please proceed.

Great. Thanks. Before I get to my question, Scott, that is obviously a good point given some of the news we have seen about people fleeing Anthropic for some pretty negative use cases. Pat, I do want to double down a little bit on Matt's first question. You kind of alluded to this. We have seen LLM token prices fall by 68% or so since May, and I think people kind of lose sight of the ramifications of that. You guys benefit in multiple ways from that. So maybe just talk through that as well as how you think about kind of widening your competitive moat through the multi-agent strategy. Do you see people or already seeing people increase platform usage as token prices continue to come down, and you keep building out those use cases for the community?

Yeah. It is pretty amazing. We are seeing token prices go up, and we have seen them come down. Because more sophisticated reasoning models, right, you are seeing those become more expensive. At the same time, as more open-source models are becoming available, you are seeing the lowering of that, right? It is one of those environments where you just got to ride the wave. For us, we are going to keep riding this wave. Every time token prices come down, we are going to benefit. We are going to benefit directly, right? Because it is going to be lowering our costs, and in many cases, we will be reflecting that through our customers as well, which will drive more customers onto the platform, right, as we scale it. We are definitely seeing that behavior as our token usage continues to rise, and we are monitoring that and running metrics on that quite regularly.

If there's a single day that token usage isn't going up, I'm asking the team what's going on. We really are building very good effectiveness in managing our studio environment. This is something where when you start thinking about these broad agentic workflows, somewhat the sky is the limit. As I've said separately, we see no end to the demand for tokens going forward. It really is an unlimited capacity. They're way too expensive today. Even as you said, prices have come down. We're still far, far from where we see they need to get to over time. Obviously, as Scott said, tech for good. We're uniquely pursuing many of these use cases that really are so aligned with technology for good. Bible translations, conquering languages, many other places of the world.

Enabling ministries to take. I call it any dollar that's given to a ministry that isn't going to ministry purposes is a bad dollar. We see that agentic AI gives us enormous opportunity to give leverage to every one of those customers that is serving others in a more effective way.

Got it. No, that makes sense. I know you guys spent a lot of time talking about the cross-sell motion and really incremental color there. I'm just curious, are we to the scale yet when you guys have new enterprise conversations that weren't? I know when you guys do acquisitions, you pick up customers, but say if you're picking up somebody who's tangential or just outside the ecosystem in your pipeline or you're looking at now, are you able to now bring them on with a multi-product sales strategy, or are we still in the one and then land expand type phase?

Most of them start with one, but almost every customer engagement is presenting the full portfolio. Where is the interest the highest, then that will become the first follow-up for it. In some cases, we've had customers come on to a multi-offering relationship from day one. A couple of the university customers come to mind specifically that way, where we were on day one, bringing them on multiple offerings on the platform. Most end up starting somewhere, and we think that's just good management of the relationship. We're always presenting the portfolio and finding more and more interest across different offerings. So it portends well to the future of accelerating of the cross-sell motion. Scott, anything you'd add?

Yeah. I would say plus one to everything that Pat just said. As you noted, when we do an acquisition, they already have an installed base. Obviously that installed base already starts with that one, and we are super excited about that because they have then long-term, very substantive relationships already in place. When we are doing acquisitions, we are also doing a crossover analysis, and we are typically finding when we do an acquisition that we are going to have 10% or 15% crossover analysis in terms of where we already have multiple value props serving that customer even before the acquisition. We see it as an opportunity to add in both ways.

Got it. If I could just tie it all together, because I just do not want this to get lost in the wash. I know, Paul, you mentioned that there is clearly some seasonality into Q3, but I think if I directionally strip that out and then adjust for the acquisitions, you can see both from a revenue and profitability perspective that the growth is accelerating, as is the margin power in Q3. I just do not want that to get lost in the noise.

It is. It is accelerating in Q3, where we will have a nice step-up sequentially on the revenue side, as well as we have guided on the adjusted EBITDA side. Then like we said, it moderates into fourth quarter with some of the seasonality.

Okay. Well, thanks, guys, and nice to see the continued progress. Appreciate all the color.

Thank you. Our next question comes from Ryan Meyers with Lake Street Capital Markets. Please proceed.

Hey, guys. Thanks for taking my questions. Just as a follow-up to the last one, can you give us what the organic growth was in the second quarter, and then how we should think about that the rest of the year?

We've got very strong organic growth. We've benefited from it all year long. We'll continue to benefit from it. But in addition, you're seeing not only the organic growth, but you're seeing the benefit of being able to do the M&A with new organizations. And then as they come on, they basically help organic growth in two different ways. Number one, we get them into our organic growth motion to be able to help them scale what they're already doing. But the second one is that then that's new offerings for our current customers, which also gives us a next level of organic growth. So yeah, organic growth continues to be very strong. It's an important part of what we're doing. And you'll continue to see that flow through the P&L in terms of better margin and increased revenue growth.

Okay, got it. Obviously, a lot of questions today on AI. So just more directly, where is AI having the biggest financial impact for you guys? Is it just helping win customers, increasing customer spend? Is it lowering delivery costs, or is it just generally reducing your guys' internal expenses? Just so we encapsulate everything you guys have said.

Yeah. We would say probably the biggest impact is accelerating the offerings to customers today. This would be examples like Masterworks and 360, where it is accelerating. As those efforts turn people into agents, it is lowering costs as sort of the second benefit that we are getting. Then it is increasing the offering value itself as we are able to essentially turn Help Desk into an immediate response or being able to fully automate marketing flows for customers. Finally, it is improving the attractiveness of the product offerings themselves. I would say it is somewhat in that order, but to us, they are actually pretty tied together. Because it really is all of them coming together that what AI is enabling for us. We see it across the board, but driving more customer offerings, driving by cost savings, then improving the offering itself.

All three of those are largely being done as a result of the AI capabilities that we are increasingly building into the offerings. Over time, you are going to see us just bring more and more of that value to bear. For it, we meet every week with our leadership team. We are reviewing different AI offerings that are being pursued, driving more accountability toward how we are driving the costs and the benefits of those, getting more discipline with the sales enablement for those. We are finding areas like data in particular, being an extremely interesting way to get started with customers around AI because most AI projects fail because you do not have good access and good consolidation of data. That in particular is becoming a great offering for us, starting with customers with data, which is the enablement pathway for almost every AI use case starts with the data.

It is really across the board of our offerings, and we look forward to updating you more, particularly after the hackathon next month.

Got it. Thanks for taking my questions.

Thank you. Our next question comes from Tim Hwang with Citizens JMP. Please proceed.

Hi, thanks for taking my questions. I wanted to ask about FDEs. You completed the acquisition of EMD and are acquiring the remaining stake in Midwestern, both of which expands your forward deployed capacity. I'm curious how you think about deployment and implementation as the bottleneck on AI adoption, and how much would you say you're winning because you have FDEs?

Yeah. It clearly is a key element of the offering for us. Midwestern is a great complement because in many cases, people just don't have the talent, and we have one of the best talent pathways literally in the industry, much less in the faith and flourishing community. So, having talent is a powerful enabler for us, and we're finding more and more value. If anything, that business area is finding more attractiveness to us. We have now added the international component. As we've indicated, Brazil is another area, so we get lower costs also co-locating with our customers in those locations. Our 360 offering is entirely based on forward deployed engineering, where we're essentially becoming their CIO and CTO for those organizations, which gives them a skilling level they'd never be able to achieve themselves, which further accelerates their ability to drive their AI transformation.

I'd say for Midwestern and 360 in particular, those are probably the most powerful areas. Even areas like Servant, our high-end consulting offering, is transformational for customers where literally we're like McKinsey for this ecosystem of being able to guide the transformative process, which today it's almost always driven by an AI model of how they can change their business operations in a pretty fundamental way. So those would be some of the examples, but forward deployed engineering is a key theme across all of those three.

Great. As a follow-up, as you look at your M&A pipeline, I wonder if there's a piece of the full solution that isn't there yet. You spoke to an opportunistic approach, but curious whether that has to do more with the people and the relationships you can bring on board, or if there are customers who maybe stop at one offering and don't go to two, or have two offerings and don't go to three, if there are reasons or gaps in your product solution that you think you could fill. Thank you.

Yeah, as we're looking at M&A pipeline, we're evaluating all those different components. We're looking at a number of different things. One are capabilities. Are these incremental capabilities that we don't currently have that would be good capabilities to add? Definitely number one. Number two, we're also looking at the customer base. Where are we at from a customer base standpoint, and is that a customer base that's important to be able to draft in? You'll also find that certain of these organizations have more expertise, let's say, in one area of one of the denominational areas versus another. You may find somebody that's stronger in the Catholic market or stronger in more of a Southern Baptist market.

We're looking at it really from a number of different perspectives, capabilities, customer base, and then also what are the areas where they've found favor and how do those fit together and create greater synergies and further advance the flywheel that we find with M&A?

Yeah, maybe if I just add to that, the two examples that we touched on, I think, really clarify your comments nicely, Scott. EMD, we saw Workday in many of our customers, so we sought a Workday capability, and EMD was a perfect fit. For Cedarstone, as we looked at that, we saw a huge synergy potential, particularly with our marketing offerings. Those two were driven by different reasons, but ones that, again, fit exactly what we said. We're enhancing our platform offerings, and we're driving more synergy in the marketplace.

Thanks so much.

Thank you. Ladies and gentlemen, this will conclude our Q&A session. I will pass it back to the CEO, Scott Beck, for closing remarks.

Thank you, operator. Thanks everybody for joining in to today's call. I just want to make a few final comments before we close. First, super pleased with the progress that we're making. Just across the board, the maturity of the organization, the organizations that we're being able to acquire, just super pleased with that progress. Just a reminder, this is such a large fragmented market, and as I said earlier, it remains significantly underserved by technology. Our existing customers are growing, and our verticals are continuing to expand. The universities are a great example. Now we're up to 40 that we're serving there. A lot of the expansion is being accelerated by these great capital partners that we've got out there. We couldn't be more proud of the capital partners in the organizations.

We named quite a few today, but there's 15 more that are just doing a great job. They bring great expertise and trusted relationships. From a business standpoint, the opportunity in front of us is really significant. But there's another bottom line that matters to us as well, and that's the missional impact that these organizations that we work with are serving and helping every day. These organizations that we serve, they're changing lives every day, and it's really an honor to serve them. I can't say enough about the work that they do. In fact, if you look at it, faith-aligned organizations are estimated to provide about 40% of the vital human services across large U.S. cities. A few examples of the organizations that we serve. The rescue missions that we serve had served over 10 million meals last year alone.

These rescue missions, we serve some of the largest rescue missions in the U.S. In addition, those same rescue missions are helping people escape from human trafficking. These are real stories of life change based on the organizations that we serve. The campus ministries that we serve are active on thousands of campuses throughout the U.S., and they are reaching hundreds of thousands of students each year, being able to help them. The churches that we are serving are active in their communities as well. It is not well-known, but there is over 100,000 churches in the U.S. that have embedded recovery programs helping people find freedom from addiction, and that is addictions all across the board. That is why I am so excited about what is happening here is both of the bottom lines. We have an opportunity to build a powerful, durable economic enterprise that creates great long-term value for our shareholders.

At the same time, we get to strengthen organizations that are transforming lives and making changes in communities every day. That is ultimately what Gloo is about, is building a strong economic enterprise that helps people flourish and helps these organizations thrive so that they can do more of what they are uniquely called to do. Thanks for taking time to join us today. May God bless you. May God bless the people that we serve and the organizations that we serve, and also the work ahead of us. Thank you for joining us today, and thank you, operator.

Thank you. This will conclude our conference. You may now disconnect.

To remove yourself from the queue, you may press star one one again. I would now like to hand the call over to Oliver Roll, Chief Marketing & Communications Officer. Please go ahead.

Thank you, operator. Thank you to all of you for joining our fiscal first quarter earnings conference call. We will be discussing Gloo's performance for the first quarter ended April 30th, 2026, as well as providing guidance for our Q2 and full year 2026. Joining me on today's call are CEO and Co-Founder, Scott Beck, and CFO, Paul Seamon. Our Executive Board Chair and Head of Technology, Pat Gelsinger, will also join the Q&A session. Before we begin, please be reminded that this call will contain forward-looking statements, including statements related to our business, future growth, strategic initiatives, key priorities, and our financial outlook for Q2 and fiscal year 2026. These statements are based on Gloo's current expectations, but are subject to risks and uncertainties relating to future events and/or the future financial performance of Gloo.

Gloo assumes no obligation to update or revise them, whether as a result of new developments or otherwise. Actual results could differ materially from those anticipated in these forward-looking statements. A discussion of some of the risks that could cause actual results to differ materially from our forward-looking statements can be found in today's press release and are disclosed under the caption "Risk Factors" and elsewhere in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the fiscal year ended January 31st, 2026. Our SEC filings are also available on Gloo's investor relations website at investors.gloo.com and the SEC's website. In addition, during today's call, we will discuss certain non-GAAP financial measures, including adjusted EBITDA. We use non-GAAP measures in some of our financial discussions as we believe they provide valuable insights on our operational performance and underlying operating results.

These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, our GAAP results. Reconciliations of these non-GAAP metrics to the most directly comparable GAAP metrics, as well as the definitions of each measure, their limitations, and our rationale for using them, are included in today's press release and will be included in our Form 10-Q to be filed for the quarter ended April 30th, 2026. Now I'll turn the call over to Scott.

Thanks, Oliver, and thank you for joining our 2026 first quarter earnings call. Q1 was another strong quarter for Gloo. We exceeded our guidance and street consensus on both revenue and adjusted EBITDA. Revenue came in at $41.5 million, growing 3x over the prior year. This was also 13% above guidance and street consensus. Adjusted EBITDA was negative $11.5 million, also ahead of guidance and street consensus, and representing more than a $7 million sequential improvement from Q4 2025. This represented our third consecutive quarter of sequential adjusted EBITDA improvement. This progress reinforces our confidence in delivering against our adjusted EBITDA profitability goals with adjusted EBITDA expected to approach breakeven in Q3 of 2026 and reach profitability in Q4 2026. Our Q1 results demonstrated that our strategy is working. We're seeing growing demand from large strategic customers.

Our current acquisitions are delivering compounding value, and AI is becoming an increasingly important accelerator across the business. Before turning to the specific drivers for the quarter, I want to connect our results to the broader opportunity. Gloo is building the leading technology platform for the faith and flourishing ecosystem, with Applied AI becoming a defining capability across the platform. This is a large, durable, and highly fragmented ecosystem spanning education, social impact, Bible translation, churches, and the denominations that serve them. Donations remain the economic engine of the ecosystem, funding the mission-driven work of faith and flourishing organizations. In 2025, revenues for faith-based organizations grew 8.2% to more than $265 billion, underscoring both the scale of the opportunity and the importance of donor development. Across these segments, organizations consistently need two things.

They need to modernize technology, and they need to expand marketing reach to attract more donors and more constituents. That is how we have organized the Gloo platform, Powering Tech and Powering Reach. Applied AI has become an increasingly important capability of the platform. Our Powering Tech business is designed to take over the customer's technology operations, modernize them, and then apply agentic AI to deliver significantly better outcomes at lower costs for our customers while creating higher margins and durable revenue streams for Gloo. With Powering Reach, Applied AI helps customers better understand their audiences, personalize engagement, and strengthen donor development. That combination is what makes Gloo distinct. We are not simply providing software or services. We are bringing Applied AI into the workflows that matter most to the organizations that we serve.

We can do this because Gloo has earned a position of trust within the faith and flourishing ecosystem. Over decades, we have built the relationships and credibility needed to convene leaders, understand their most important workflows, and apply AI in ways that are practical and mission-aligned. In Q1, we saw strong momentum across the platform. On the Powering Reach side, Masterworks, Barna, and Westfall delivered one of their best revenue quarters ever. That performance demonstrates the value of combining donor engagement with media, research, and the fundraising capabilities all on one platform. On the Powering Technology side, customers are increasingly selecting Gloo to take over, modernize, and transform core technology operations through offerings like Gloo360. In Q1, that momentum showed up in larger strategic wins, including five new customers contributing more than one million in annual contract revenue.

These larger strategic wins show growing traction across both existing and new segments of the faith and flourishing ecosystem. Assemblies of God is a strong example of a denomination choosing Gloo. They are leveraging Gloo360 across their enterprise by modernizing legacy systems to better serve their 13,000 churches within the United States. Indiana Wesleyan University is another important example. We're partnering with Wesley Seminary at IWU to build VIA Journeys, an AI-powered ministry life cycle ecosystem that connects ministry leaders with personalized resources and mentors. We believe this points to a broader transformation in how universities will equip students and the communities where they lead. For example, our work with Jessup University, announced earlier this year, is progressing extremely well and running ahead of schedule. Beyond the customer examples, we continue to build broader ecosystem momentum around Applied AI.

Our 2026 fourth annual Gloo Hackathon will bring together more than 700 developers, engineers, and mission-driven builders in Boulder this October for 48 hours of hacking and building mission-aligned apps and technology. This quarter, we announced the general availability of Gloo AI Studio, a comprehensive set of AI tools and capabilities for developers in the faith and flourishing ecosystem. This release includes support for over 80 LLM models. It includes new safety capabilities, varied subscription options to pay for token usage, and a free sandbox for developers to experience our values-aligned guardrails. The goal is to accelerate practical AI solutions that advance human flourishing. Moving now to acquisitions, which remain a key part of how we're strengthening the Gloo platform. Our strategy is to add best-in-class providers that expand our ability to Powering Tech and to Powering Reach. Q1 provided strong evidence that strategy is working.

Westfall Group and Masterworks both delivered one of their best quarters ever. That validates the strength of those businesses and the compounding value of bringing them onto the Gloo platform. During Q1, we signed a purchase agreement to acquire EMD, which we closed at the beginning of Q2. EMD expands our Powering Tech portfolio with Workday consulting, implementation, and support capabilities for not-for-profit, small, and mid-market organizations. EMD also aligns directly with our broader strategy that I mentioned earlier. We take on and modernize critical customer workflows, then apply specialized engineering talent and agentic AI to deliver them better outcomes at a lower cost. Over time, this creates a strong customer value proposition while also improving Gloo's margin profile. Today, we're also announcing the acquisition of the remaining stake in Midwestern, bringing our ownership to 100%. Midwestern increases our investment in the cost-effective global talent capability area.

We believe this will continue to be a significant growth opportunity as we combine lower-cost delivery capabilities with agentic AI. This also eliminates the call option, which will result in a one-time improvement by removing the associated $12.1 million liability from Gloo's balance sheet. Together, these acquisitions strengthen the platform, expand customer value, and reinforce the flywheel that we're building. Our approach with acquisitions is always disciplined. We continue to see a strong pipeline, but we will only pursue opportunities that are best in class, strategically aligned, and accretive to the Gloo platform. Even though we have a strong pipeline, as we previously stated, our current plan does not depend on additional acquisitions to achieve our revenue or adjusted EBITDA profitability guidance. As we look ahead, our priorities remain clear.

We're focused on deepening strategic customer relationships, scaling our platform, and applying AI in ways that improve outcomes for our customers while creating durable value for Gloo. At the same time, we will keep integrating acquisitions with discipline and executing against our path to profitability. Q1 was a strong start of the year. We remain confident in our strategy, our 2026 plan, and the long-term opportunity to build the category-defining technology platform for the faith and flourishing ecosystem. Paul, I'll turn it over to you to walk through the numbers in more detail.

Thank you, Scott. We delivered strong first quarter results with both revenue and adjusted EBITDA beating guidance. This performance reflects solid business momentum and disciplined execution, giving us a solid financial start to the year. Q1 revenue was $41.5 million, an increase of 238% compared to the same period last year, and 23.5% sequential growth compared to Q4. Year-over-year revenue growth was driven by momentum in several business lines, most notably Gloo 360, as well as the acquisitions of Capital Partner businesses such as Masterworks and Midwestern. Platform revenue totaled $24.1 million, an increase of $15.6 million from Q1 of last year, and up 19.9% over Q4 2025. Platform solutions revenue was $17.4 million, up $13.6 million from the same period in 2025, and about 29% sequentially. Cost of revenue in the quarter was 67.7% of total revenue, an improvement from 72.1% in the prior year period.

That increase was driven by improvements in margins at our Workspace and Outreach business lines, as well as the full quarter of Westfall Group. We expect improvement to continue through the year. Adjusted EBITDA improved $7.1 million sequentially to negative $11.5 million. This significant improvement reflects the impact of our cost-saving actions implemented in Q4, along with the growth already mentioned. In particular, our operating expenses decreased $8.4 million sequentially, while revenue grew 24%. Also note that general administrative expenses include acquisition costs related to the EMD acquisition, which closed in the second quarter. We do not adjust for these costs in our non-GAAP results. We expect continued sequential improvement in Q2 as we aim to achieve adjusted EBITDA profitability in Q4.

As Scott described earlier, we recently agreed to purchase the remaining 20% of Midwestern that we did not previously own, as well as eliminate the call option permitting the holder of the remaining 20% from reacquiring a controlling interest of Midwestern from us. We anticipate closing on the transaction later this quarter. The elimination of the call option will result in no longer having large swings in the financial statement reporting line titled "Gain or Loss from Change in Fair Value of Financial Instruments." As of April 30th, 2026, we had $33 million of cash and cash equivalents. We believe that we have the liquidity to reach positive adjusted EBITDA in Q4, which we expect will put us on a path of sustainable, positive free cash flow growth in future quarters.

With significant momentum across the business, we also believe we have multiple options to further strengthen the balance sheet, fund our growth, and support future acquisition opportunities should we choose to pursue them. I'd like to now turn to our full year 2026 and Q2 outlook. For full year 2026 revenue, we're increasing our outlook $5 million-$195 million. In the second quarter, we expect revenue to be $44 million and adjusted EBITDA loss to narrow to a -$8.5 million. We continue to expect adjusted EBITDA to approach breakeven in Q3 2026 and reach profitability in Q4 2026. For Q2, we expect a weighted average share count of approximately 81 million shares. With that, I'll turn this call back to Scott.

Thanks, Paul. With that, operator, we're ready to take the first question.

As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. Please limit yourself to one question and one follow-up to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster. Our first question comes from the line of Daniel Kurnos of Benchmark. Your line is open, Dan.

Great. Thanks. Good afternoon, Scott, Paul. Congrats on another great quarter. I guess first question, the revenue cadence implies a bit of a re-acceleration in the back half. Not to say that the growth hasn't been impressive, and I just want to get a sense from you guys. I know you said in the last call, starting to see larger customer wins. You flagged the $5 million annualized contracts this quarter. And how much line of sight do you have into stuff like that, and how much is coming from, let's call it the more recently acquired business, and how has that mix changed since the April guidance?

Yeah, thanks. Good to hear from you, Dan. We definitely have been able to have continued acceleration. I wouldn't say that it is accelerating any different than it has been. We've been super pleased with the growth. The growth has been a combination of scaling some of the core Gloo offerings like 360 and Gloo AI. At the same time, it's also been able to continue to scale and get synergies across the different Capital Partners that we've acquired over the years as well. We've been able to drive really strong organic growth in our core offerings, as well as really strong organic growth in the offerings from the different Capital Partners. One of the great things that we're excited about is being able to see the synergies that are taking place in the cross-sell.

More and more of the organizations that we're serving, they have one offering, but when we see them get to that second offering, we see a significant step-up, almost two times the revenue. When they get to three or more offerings, we're now then seeing that to be closer to sometimes 5x-10x the volume of what just a single offering should be. It's really a combination of the two. Overall, we're seeing more than 30% sort of coming from a lot of these organic growth and the organic growth of the new acquisitions.

Scott, that's a great segue into my next question. I'm just trying to understand, you talked about land and expand, right? You just outlined the way that you guys attack that. I just want to get a sense from you, when you win one of these larger contracts, are they taking multiples at once? Is it dip the toe in the water, and then all of a sudden you think that that contract can be 10x over time? I just want to get a sense from you, we know that this is a massive TAM and you guys are the undisputed leader with really no competition out there, I'm just trying to get a sense of how quickly some of these major deals can expand, because you guys have had a lot of very early success, even earlier than I think most of us anticipated.

Yeah. Thanks, Dan. This is Pat. I'll just say that, as we, I think, noted in the formal comments, 30% of our customers over $1 million now are on more than one, which means the large majority are only one. Typically, a sale will be a single product area that we then expand one or two quarters later over time. Most of them start with one, right? Some of our sales strategy is to keep things simpler and moving forward. I will say, we have had a couple that we've landed more than one product area at the same time for them. I expect that that will become a larger aspect of our sales motion as each of the sales offerings becomes more mature, we have more customers in the land expand, and then we'll be able to land expand over time.

So far, it's mostly one landing in a quarter, then we're following it with a subsequent offer later in time.

Got it. Thank you, Pat. That's super helpful, you're already putting up the numbers, excited to see what you guys do next. Thanks, guys.

Thank you.

Thank you. Our next question comes from the line of Richard Baldry of Roth Capital. Your line is open, Richard.

Thanks. When we look from Q4 to Q1, the revenue increase had about a 70% gross margin contribution on the quarter. I'm sort of curious if you can look into that and talk about how much would be because of the organic growth, and how much might have been sort of cost realignment. It's 2x where your normal gross margins are sitting today. I'm sort of curious how sustainable that sort of drop-down could be as we move forward.

Yeah, great question, Rich. Thanks for chiming in. I think there's a balance between the two in the quarter. We definitely got some significant benefit from overall reduction in our operating expenses, that you saw that flow through in terms of contribution to adjusted EBITDA which was obviously very significant relative to the revenue increase. I would say that you've got somewhere between 50% and 60% of that probably came from the operating expense, and the remainder came from just continuing to get leverage across the cost basis associated with what you would think of as the cost of goods sold or contribution margin.

Thanks. You're still early into some of the larger deals on the Gloo360 side, I'm curious as those are under your umbrella a little bit longer, are you seeing incremental headcount synergies? Are you starting to see early cross-selling or upselling opportunities? How are the earlier large deals playing out?

Yeah, every one of them is causing us to just get more mature, Rich. This is Pat again. We're getting more proof points of different offerings. As we get more and more customers, hey, we already have some level of expertise on some of the tools that we're picking up from them. We already have more maturity in some of the agentic workflows that we're applying to them. Of course, our HR systems are getting more mature of being able to bring them in, onboard them, and make the best application of good HR disciplines to those as well. I'll say every one of these is making us better. We still, I'd say, are not fully mature in those offerings because several of them are ones that we're still picking up and learning.

I think we still have a lot of margin improvement to get, as well as rapidity of the motions and the ability to onboard and then to be able to commercialize. The good aspect of this is that every one of those that we do, we are now creating the agentic workflows that the next one is just easier and faster. We just see this as an engine that we are going to be able to rinse and repeat over and over again, and each one of those is showing more maturity in the offering. A long way to go. The ecosystem is large, but we are now having more and more proven capabilities that can be applied against them.

If I can squeeze one last one in. When you look at the five deals over $1 million, can you talk about, are there any commonalities across those or are there multiple entry points you can do those in now? Just so we can sort of see how extensible that is going forward. Thanks.

Maybe Scott, you can add as well, but we are starting to see a lot more pipeline in the university segment, in particular, which is one that we have highlighted. William Jessup was our first major example. We are now closing more of those offerings. That is an area that, as you said, there is over 900 faith-based universities in the U.S. We have a long path to go. We are clearly a critical mass in some sectors, such as Bible translation, campus ministry, and other areas like rescue mission is an area that our work that we have specifically on Powering Reach is well proven. There is a lot more opportunities there. Finally, I think as we noted in our formal comments, we have started to have some success in the Catholic segment, which is a very large space for us that we are just getting started.

I think more replicable, big opportunities that we see the land expand just as enormous pathway in front of us. Scott, anything else you would add?

Thanks, Pat. I really like what you've coined there in terms of land, expand and expand, because we're landing and expanding within a specific account. When we find ourselves into a category like campus ministries or a category like faith-based universities or rescue mission, when we find ourselves getting into a different segment, that segment also has the dynamic of expand as well. We've got really the power of landing and expanding within an account and expanding again within a category. We've been adding categories extremely quickly. Really sort of surprising in terms of how quick the categories are expanding. One of the things I would like to anchor us back in is they are looking for the same thing, okay?

There's a commonality in terms of, hey, help me Power Tech, help me get more Power Reach so I can have more donors, more constituents, more students, more volunteers, you name it. They're really Power Tech, Power Reach, just being able to then apply AI to be able to give them the lower cost, better benefit, and to give us an ever-increasing margin as we bring more AI-executed work into the program.

Got it. Congrats on a great quarter.

Thank you.

Thank you. Our next question comes from the line of Yun Kim of Loop Capital Markets. Your line is open, Yun.

Okay, great. Thank you. Congrats on a strong quarter. On the Enterprise Marketdesk business, can you update us on the progress that you have made since the acquisition closed? And for the Enterprise Marketdesk customers, I know there's some who are not faith-based customers or organizations. Do you expect the non-faith-based customer base to show growth there? Or is your near-term go-to-market primarily focused on faith-based organizations?

Yeah. As you're aware, they do have both faith-based and not faith-based, and we're growing them both. Obviously, we've got some obvious synergies within the faith-based where we can do a lot of cross-selling immediately, but also in the non-faith-based. That's on its own growth plan as well. Relatively new, right? It just closed at the beginning of this quarter. We're five or six weeks in now. We're liking what we're seeing. Additionally, Midwestern, which we just went to 100% ownership from 80%, those guys have pretty much the same profile. A significant amount of Midwestern is also non-faith-based. It's pretty much about the same percentage, say about a third faith-based and about two-thirds not faith-based. It's nice to be able to see some of the synergies there between, let's say, a Midwestern and an EMD on the non-faith-based side. Yeah, they're both growing.

We're committed to growing them both. For the last few years at Midwestern, we've grown both sides of it as well.

Is there an opportunity to cross-sell Gloo360 to the non-faith-based customers of EnterpriseMarketdesk?

Yeah, there are. There's no question that the small to mid-size organizations are coming up against the same set of issues, which is, "Hey, help me with my tech, help me with my reach." Those are common concerns, common value propositions, whether they're faith-based or not faith-based organizations. Everybody needs help applying AI into their specific organizational workflows. Likewise, when you've got a workflow that helps somebody engage with employees on an ongoing basis, that workflow is the same, whether it's a faith-based or a non-faith-based workflow. There's a lot of commonality against that as well.

Okay, great. Maybe this question is for Pat, but I know it's very early, what's been the early feedback on Gloo AI Studio? Was that part of your Gloo AI Hackathon at all? Thanks.

Yeah. The early feedback is strong. Obviously, as you open a new service like that, there's lots of learnings. As developers come on and we're getting more efficient at bringing developers on, bringing the billing systems up and operating for them. We did have a big customer, HelloBible, that does a consumer chat service move over to Gloo AI Studio. They were public on LinkedIn or one of the other social channels about that and the good experience that we're having. We're now starting to have, I'll say, real customers who are bringing their workloads onto the platform. We also, as a result of Studio, we will have more to talk about as we go through our virtual Gloo AI Hackathon events and then our big Gloo AI Hackathon in the fall.

They will be very heavily featured and announcements of new capabilities, new services, new customers coming on the platform as part of the Hackathon is a big thing when we come up on that in the fall. Overall, we're happy with the momentum that we're seeing. 1,000+ developers now on platform. We have to grow this much faster, much larger, and we believe that we now have a mature offering that will enable us to do exactly that.

Okay, great. Looking forward to it. Thank you very much.

Thank you. Our next question comes from the line of Jason Kreyer of Craig-Hallum. Your line is open, Jason.

Great. Thank you, guys. Scott, great to hear the early success with cross-sell here in the first quarter. Wanted to ask just about the go-to-market for cross-selling these new solutions to existing customers. If we think about a Westfall or an EMD, how quickly can you get customers interested in the new solutions? How quickly can you get them up and running? And just what that upsell process looks like.

Generally, there's a strong effort and our Chief Revenue Officer, Rebecca, runs a very aggressive process across the different sales teams to drive exactly that. We're seeing a good effect from that already. I'll say we're pleasantly surprised how easy it is to get that process underway. We do see that Westfall Gold with Masterworks, 360 into Masterworks accounts, Servant into our 360 accounts. These motions are ones that we think have a lot of replicability, a lot of scale. Overall, we're just building more sales capacity. We're bringing sales teams on. We're getting more rigorous in our processes to manage large account pipelines. Then building more cross-sell mechanisms across the portfolio. We just see ourself at the beginning of the cycle, and every element of the portfolio gives us more opportunity to cross-sell.

Perfect. One follow-up just on the M&A has continued to expand your addressable market. When you think about the bigger customers that you have today, curious what you think your penetration is into the existing base? I'm trying to figure out how much runway is there ahead with such a large customer base into a large addressable market.

The runway is truly enormous. That's why we somewhat easily talk about TAMs in excess of $100 billion. This is just a large market for it. When we talk about universities, we now have several closed, 900 to go. Even where we're pretty well penetrated in a few accounts at this point, we're not well penetrated across the portfolio. We even in our land expand into the account have room to grow. We would consider our effective SOM to be in very low % at this point. The TAM is enormous. The SAM that's reachable is very large. We don't see ourself as anywhere close to saturation on any dimension of the business.

Wonderful. Thank you.

Thank you. Our next question comes from the line of Ryan Meyers of Lake Street Capital Markets. Please go ahead, Ryan.

Hey, guys. Thanks for taking my questions. First question here. Have you seen any changes in customer budgets or any other major changes across the ecosystem in terms of appetite for more digital offerings?

Thanks, Ryan. For sure. As I said in my prepared remarks, the revenue in this ecosystem grew at 8.2% last year. For a very significant, what is an old ecosystem, to be able to have that kind of growth is remarkable. As a result of that, you get more budget dollars to work with. There's no question that that kind of growth in the core donations that are funding this ecosystem definitely allows us to be able to have more dollars to work with. We feel it. I would say there's another thing, too, and that is that younger people are re-engaging at a much bigger and higher number than others in spirituality and faith. That bodes really well for where we're at in the overall cycle.

Because if you look at that growth and you were to segment that, I would imagine that you'll definitely see the younger people having a very significant positive influence on the market. Not only in terms of there's more dollars to be worked with, no question, but it's just encouraging. Our market is encouraged. They're seeing a lot of opportunity to serve in the community. When you have younger people starting to show up, that's a very big encouragement to this ecosystem.

Got it. Thank you. Second question here. You mentioned 30% organic growth. How much of this do you think will come from new customer wins versus new customers expanding their spend?

Yeah, I said 30% plus. We're above that. We're very comfortable with that continued organic growth. Our big driver is new customers. That is what's really driving our growth in terms of within that organic growth, so much of it is new people that are getting introduced to Gloo 360, Gloo AI, Masterworks, Barna, across the board. It is really about attracting new into that growing the ones that we currently have. Both are happening, absolutely new names is super important. Pat, what would you add to that?

Not too much to add. The opportunity for us as we build our sales force is one that we just get more and more account coverage over time. We're regularly adding more salespeople to 360, to Masterworks, to our Westfall Gold. Every one of our offerings is getting more sales capacity, we'll be able to invest more into it. We do not see that there's budget limitations, even though we don't really fundamentally view that tighter budgets is a bad thing for us. Fundamentally, they're looking for cost savings, we also present cost savings to them as well. We do see ourself in many respects as not particularly vulnerable to cost issues. This is a good time for our ecosystem, as Scott has said. It's a good time for our offering.

As we build more capacity to sell and deliver, we do think that we see a very clean line of sight to a rapidly growing revenue customer base and land expand for many quarters to come.

All right. Thanks so much, though. Super helpful.

Thank you. Our last question comes from the line of Matthew Harrigan of Benchmark StoneX. Your line is open, Matthew.

Thank you. Good to book-end the call. You made a reference at the end of one of your answers to getting traction with the Catholics. Clearly you've been focused on Evangelicals relative to Catholics or Anglicans. It's interesting, the Catholic Church certainly was arguably the most successful hierarchical global organization for a long time. Obviously it's unique on the educational side, both on the secondary schools and a lot of universities, although they're becoming, I guess, increasingly secularized.

If you really get traction on the Catholic side or some of the other denominations where you're not as penetrated, could you hit a pretty fast tipping point where at a higher level, you could have a lot of acceptance of a broad bouquet of products relative to, I think, some of the denominations you're dealing with maybe more on a grassroots basis where you get really good word of mouth. You have to convince a lot of people to get momentum. Thanks. Congratulations on the results, clearly.

Yeah. Thank you. Well, I think first I'd say that we're probably not far enough along to know the repeatability of the sales patterns yet in the Catholic segment. I'd say it's a great question for us to come back to in future quarters as we have more Catholic customers, we see more of the sales motion. That said, given the hierarchical nature that you point to, we think that you actually have very referenceable relationships across them. As you get success in one, it'll be very repeatable across others. We do, for that very reason, think that we will have good sales productivity as we engage. We have also had the most success so far Powering Tech in that sector, but we do see that the full range of our offerings could be applicable there at scale.

We've also had good affinity for some of the AI opportunities that we uniquely have and gaining more momentum with customers there. Overall, I say it's very early for us, but we're super happy because of the size. When you look at the size of that portion of the marketplace, archdioceses across the nation are large. They have large technology needs, and as you say, they're structured, organized, and we believe will be very repeatable.

Could that extend into the university side as well, or is that kind of?

Yes

different animal?

No.

Okay

We see it as very replicable into the university side. Of the 900 that we've quoted, a little bit, sort of 2/3, 1/3. 2/3 are evangelically oriented and 1/3 Catholic oriented. We do hope to have several successes in the university side of the Catholic community as well.

Great. Thank you.

Thank you. I would now like to turn the conference back to Scott Beck for closing remarks. Sir?

Thanks a lot. Appreciate that. As you can tell in the call, we're super excited about the performance. We're also really excited about the progress. This faith and flourishing ecosystem needs what Gloo is providing. The technology and the marketing reach, all being powered by AI. It is just incredibly good timing for us to be sort of at the point that we're at. It's still early. We're still early on in our journey as a public company. The momentum's strong and it's growing. We really do have an opportunity to build a category-defining technology platform for this ecosystem. In doing that, one of the things that excites us the most is that we can actually be engaged in shaping technology as a force for good.

If you think about it, the time and the intensity of the technology changes that are taking place right now, it's one of the most consequential periods of change in our lifetime. To be able to be there and to be able to be on the front lines with these organizations is super encouraging to our organization. As we're doing this, we always have to remember that we're serving those who serve. That's the ministers, the campus ministries, the rescue missions, the world child development organizations, the global water organizations, the faith-based universities, the churches and the denominations that serve them. In doing that, they're out on the front line, and they're out there changing lives for real people. They're changing families, they're changing cities. As we pursue this all together, we're pursuing it so that we can accomplish the vision that we have.

That's a world where every person can flourish and be all that they were born to be. That's what fires us up. That's what gets us out of bed in the morning and gets us pressing so hard. You all, as shareholders, are part of that. You're making a difference in these organizations. You're being able to give them access to capabilities and capital that allow them to scale what they love to do and what they're called to do. We're grateful. We're grateful for the champions that we serve, and we're grateful for the shareholders that are serving on behalf of them with us. On behalf of all of us, we say thank you. Thanks for tuning in today. God bless you. God bless you in all your efforts and Gloo in its efforts as well. Thank you.

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