Good morning, everyone, and welcome to the Pivotree Q1 2026 earnings call for the three months ended March 31st, 2026. All participants are in listen-only mode. Following the presentation, we will open for analyst questions. Pivotree would like to remind listeners that certain information discussed today may be forward-looking in nature, reflecting the company's current views with respect to future events. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. For more information on risks and uncertainties, please refer to Pivotree's public filings available on SEDAR.
During this call, we'll reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they're not recognized measures and do not have standardized meanings under IFRS. Please see our MD&A for additional information regarding our non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Now I'd like to turn over the call to Pivotree's CEO, Bill Di Nardo.
Thank you, Andy. Good morning, everyone. Thanks for joining us on our Q1 2026 conference call. With me as usual is Mo Ashoor, our Chief Financial Officer, and as we do each quarter, we've published a CEO letter alongside these results. It's available on our website, filed on SEDAR, and I'll be covering many of the key themes from that letter today.
Q1 was the kind of transition quarter we expected. Solid profitability and cash generation with real strategic effort being redirected toward retooling our service catalog around AI-enabled delivery. I'm really proud of how the team is executing through this transition. We are certainly living through interesting and exciting times.
Let me start with a quick grounding in what Pivotree does and why the market opportunity ahead of us is significant. I get a lot of requests after these quarterly earnings to please explain the business as simply as possible and with as few acronyms as possible. We're gonna give a little bit of that background to set up the context for the results we keep talking about.
The core problem we solve is really about a simple but massive challenge. Businesses lose millions of dollars to the wrong product specs, the wrong customer information, missing details, and incompatible data formats across their enterprise systems, and the enterprise systems we're talking about are commerce systems. Our solution is really ensuring enterprise clients have the right data in the right format in the right systems, increasingly at AI-powered speed and at a fraction of the traditional cost.
The market shift we're seeing is profound. Client conversations have genuinely moved from should we invest in AI to how do we deploy AI against specific outcomes on top of our data? That's exactly the conversation where our domain expertise, what we call Real Intelligence or RI, is the most relevant. We're applying AI not as a buzzword, but as a practical accelerant on top of decades of accumulated domain knowledge in commerce platforms, data, and integration.
RI plus AI is our operating philosophy for 2026. The result is we're delivering services that are better, cheaper, and faster than ever before, and in the process, we're also actively preparing our client for a future of agentic commerce. Let me show you more practically what that means really quickly. Every enterprise commerce transaction flows through three interconnected layers. Understanding them is key to understanding our business. At the core is data. Clean, accessible, single source of truth data. Our multi-year investment in data quality is increasingly the most strategic layer as AI becomes more prevalent and relies even more heavily on good, clean data.
The integration layer, it connects the data across commerce systems. You know, I have some acronyms here, but OMS, order management systems, ERP, enterprise resource planning, like your financial systems, e-commerce platforms, master data management systems, CRM, client relationship management, warehouse, WMS. All of these integrations are required in order to move the data to where it's most needed. They go to the systems layer, where it's activated, and it's activated to execute commerce functions. Every product search, every checkout, a return is a chain reaction that flows through all these systems and across that integration.
Biggest change in the last 12- 18 months is now AI is permeating all three layers simultaneously, helping to clean data, connect data, and increasingly activate data autonomously. All of this data gets triggered when a buyer or prospect begins their search. Even just the act of searching triggers all of this. What do I have? What's available? What price is it at? In order for that to work, all these systems have to work in concert. The full impact gets felt effectively in a great system when that client actually checks out and buys the thing that they were looking for, and it doesn't get returned.
Similarly, on the business side, the back office leverages all those same systems, getting information into it and making the system work. Back office triggers all the same effect. This is the full ecosystem we help customers design, build, and optimize. We've been doing this for many, many years. We've really been driving AI penetration into it, but it is that combination of all those years of experience doing this with AI that makes our AI systems work effectively.
Before we get into the numbers, I think it's really important to understand the changing landscape. There are multiple parallel shifts going on in the market. Clients are moving from experiments to projects and programs with AI. Initiatives are moving from assistive, you know, a simple search, to agentic. Far more complex, also far more valuable. They're now needing to move to operational orchestration rather than just writing code with AI, and domain knowledge and expertise is providing the critical link on these multiple shifts.
As an investor, you're probably hearing all kinds of stuff about software being dead. You've certainly seen it in the valuations of many of the software companies today, but i t isn't dead. All categories are changing to adapt to AI, but software is not dead by any stretch of the imagination. Customization takes on new meaning now. AI makes customization faster and easier. Complex core applications are not going away soon. Think about ERP. Think about commerce systems. They're big, they're complex. AI's not gonna replace those in the short term. Software around the fringes, however, is being tested for replacement by AI. Those smaller niche solutions that solve a very specific problem are starting to get replaced by AI, or at least experiments running on them. The more focused, narrow, and needing more client-specific workflows that historically required customization is being tested for AI-specific solutions.
The new is looking a lot like a return to the old, build-it-yourself, but it's not because software's gonna evaporate and all this. Next-generation orchestration really is the new digital nervous system. AI initiatives are growing in number and complexity. Agents are scaling management complexity, and as a result, orchestration and managed services is gonna be part of that next-generation. Again, it's really important to have the context of what's going on out in the marketplace, so you understand the transformation we're trying to take the company through, and then make sense of some of the numbers that we're gonna share with you.
Again, one of the things that we're continuing to harness is this AI capability embedded in our solutions, and you see that in our MIPS. Revenue was CAD 4 million on MIPS in Q1 2026. It was up 7.9% year-over-year. A lot of that being driven by, you know, one of the things we talked about in the past, transactional SKU volumes. We really accelerated those this quarter, and that again helped provide a lift in our MIPS revenue. Adjusted EBITDA was CAD 1.2 million, representing close to 9% margin, our sixth consecutive quarter, positive adjusted EBITDA, and net income was CAD 500,000 , up meaningfully from CAD 230,000 in Q1 of 2025. Again, our fifth consecutive quarter of positive net income.
Now, I want to address the bookings number head-on, because you've heard me talk about how important bookings are as a leading indicator. While CAD 3.8 million in MIPS booking is not bad, it's clearly not on trend. I think it's really important to have context. We had a meaningful contract renewal that was expected to sign in Q1 for continuing work that was already underway, and it's the signature slipped into the quarter end due to client legal delays. That contract was signed. It was a CAD 2.5 million contract, and about CAD 800,000 of that was MIPS. Forgetting, you know, the time slippage, the MIPS bookings would've been closer to CAD 4.6 million, and that's closer to our regular pace.
Again, bookings are an indicator of revenue, and what's important to note on this one is that booking was already going to be in the revenue and is in the revenue. We're very, very factually correct in our reporting, which is why you see the CAD 3.8 million, but practically speaking, we hit the CAD 4.6 million that, you know, we were expecting and needed to continue the MIPS trend. With that, I'm gonna hand it over to Mo to take you through the detailed financials.
Great. Thanks, Bill. Let me walk you through the financials for the three-month ended March 31st, 2026, and we'll start with the Total Contract Value bookings. Total Contract Value bookings were CAD 9.4 million in Q1 2026. The Professional Services and MIPS portion made up most of it at CAD 8.9 million. As Bill described, CAD 2.5 million of bookings from an existing customer was delayed into Q2. This booking is inclusive of the CAD 800,000 of MIPS. It was largely, again, as Bill described, an extension to provide funding for the rest of the year on an existing account and project.
Normalizing for Q1 for this late PS, late booking, PS and MIPS would've totaled CAD 11.4 million, which is more a representative picture for our PS and MIPS booking for the quarter. PS bookings were CAD 5.1 million in Q1 2026, or CAD 6.8 million if you include the PS portion of that CAD 2.5 million. The year-over-year decline reflects a completion of significant multi-phase projects and also a delay in some project start dates. Despite, we had a very strong quarter in adding new logos. Those deals were shorter duration, which obviously hence means smaller average deal size. We are excited about the potential for expansion within those customers and should show in future quarters' bookings.
MIPS bookings was CAD 3.8 million in Q1 2026, or CAD 4.6 million if you include a portion of that delayed booking, which you'll see in Q2. The year-over-year decline reflects a significant multi-year contract that was recorded in Q1 of 2025, that elevated the prior- year comparison. When you normalize for that multi-year contract, we continue to remain in the range of CAD 4 million in MIPS as we've been expecting. LMS bookings of CAD 446,000, that continues with the expected decline as Oracle ATG customers transition off the platforms. Overall, again, looking forward, with the mentioned CAD 2.5 million delayed bookings that will show up in Q2 and the pipeline we've been building, we still see the demand in the market to support an improved bookings trajectory for our PS and MIPS segments.
Let me turn it over to revenue. Total revenue was CAD 13.9 million in Q1 2026. It's down 27.6% year-over-year or just about 25% in constant currency. MIPS revenue was CAD 4 million. It was up 8% year-over-year. Again, as described earlier, it's driven by the higher transactional SKU volumes as we deliver faster outcomes through our SKU enrichment process.
Legacy Managed Services, LMS, revenue declined 52% to CAD 2.1 million, consistent with the planned winding down of Oracle ATG customers, which we've anticipated. Professional Services revenue was CAD 7.9 million. It's down just about 30% or 27% in constant currency. The decline due to the completion of larger multi-phase projects I described earlier, delays in some project start dates, and also the impact on some bundled solution where we've sold PS outcome-based driven through AI tools, but also includes Managed Services, which will be higher-margin, longer-term contracts for our business. We expect the continued near-term revenue moderation as we deliberately convert some T&M PS to outcome-based PS with Managed Services follow on that are both enabled by our AI methodology and tools. This is the right trade for long-term. It improves our revenue quality, durability, and a longer relationship with our customers.
Let's move to profitability. Q1 2026 was 47.3%. That's the highest gross margin we've had in three years, and it's 320 basis points higher than Q1 of 2025. This has been part of the transformation and structural improvement we've deployed in just over a year ago. These results were made possible through improved cost efficiency in our PS delivery. It's our overall MIPS and LMS cost management and our process in delivering SKUs enrichment to our customers and the automation and AI we've applied there.
Adjusted EBITDA was CAD 1.2 million or 8.9% of revenue, essentially flat with the most recent quarter, Q4 2025, at CAD 1.2 million, despite lower revenues. It also benefited from stronger U.S. dollar. Net income was CAD 574,000, up from CAD 232,000 to the prior year, same period the prior year, marking our fifth consecutive quarter of positive net income. The year-over-year improvement reflects the improved gross margins, the OpEx spend management, lower depreciation amortization of and completion of intangibles, benefits from foreign exchange.
Let me take you to the balance sheet. We ended Q1 with cash of CAD 12.4 million, you know, in the books. The year-over-year cash improvement was 90% reflects the sustained profitability transformation. Cash flow from operations was CAD 100,000. The first two bars on this chart provides further visibility to the cash drivers. Within the cash from operations of Q1, you would have seen we generate CAD 1.2 million when you exclude the impact of working capital and foreign exchange. On the second bar, working capital was the biggest consumer of cash as it included the payout of 2025 accrued performance-related variable compensation. Q1 continued to support building a stronger balance sheet. Working capital expanded to CAD 19.2 million from prior year's CAD 12.9 million.
We closed with CAD 12.4 million in cash. We have an undrawn credit facility with National Bank of CAD 8 million and access to a CAD 15 million accordion. We have the balance sheet flexibility to pursue 2026 investment priorities, and we'll continue to explore opportunities to buy back shares through our NCIB. I'll turn it back to Bill for our strategic priorities. You're on mute, Bill.
You'd think AI would be able to, you know, do this automatically by now. Thanks, Mo. I'd like to just take you through two more slides to wrap up. We are in a very interesting and exciting time, you know, as you can see with the way the market overall is reflecting on AI's impact in our industry, it's the messy middle. Real transformation is rarely linear, we're right in the thick of things. It's exciting. Our team is excited by many of the challenges. We're excited by the conversations we're having with customers. We're getting opportunities to solve even more problems using our RI and AI capabilities. I really take a minute just to take you through what's happening beneath the surface.
The mixed shift is real, the direction is clear. One milestone I'm particularly proud of with 2025 was the 1st year that MIPS bookings outpaced LMS bookings on a full- year basis, and the quality of those MIPS bookings is improving. We're now signing multi-year managed service deals, many of which incorporate AI-led delivery from day one. These contracts create the kind of predictable revenue foundation we've been building toward. You saw, as Mo talked about, there's trade-offs. We're trading off shorter term PS projects for longer- term managed service run. There is a mixed shift that's happening, and it's a good one, but there's gonna be some short-term impacts of that that we've got to address.
That transition is not visible in the financials yet. Again, I wanna be really direct. There are a lot of good things happening right now that you simply cannot see in the financial numbers. We're training our people. We're developing more advanced AI practitioners and expanding AI enablement across the entire company. Delivery, sales, operations, all of it. This is the RI plus AI thesis playing out across the entire company.
Our Real Intelligence, and we've got a lot of it in this company, is being amplified by AI. It's not theoretical. An integration that used to take an experienced architect 11 days to complete one full integration now takes one day for that same skilled integrator to develop and execute QA test and produce that code. It's a material savings that our customers are benefiting from. As Mo highlighted before, when you were selling time and materials for 11 days worth of work, you gotta change the way you sell a one-day output. Those are the kind of transformations that are going on across the whole industry.
Again, we're excited to be part of that transformation, but it comes with some complexity. We are seeing the early signals. Gross margin expanding to 47% isn't by accident, and those PS and MIPS bookings are increasingly including those AI components, and we are trying to shift to an outcome-oriented payment or contracting relationship, which should allow for further margin expansion. Again, I wanna set realistic expectations. You're gonna continue to see some volatility in our reported numbers as we move through this transformation. LMS is continuing to decline as expected, but we continue to deliver for these customers. I'm really pleased when I see them bring us into other parts of the business. While the LMS revenue's declining, the client revenue retention's actually trending really positively.
MIPS bookings continue to be lumpy by nature, and they're gonna be until more of them really are that longer- term managed service. Revenue's not gonna grow in a straight line. We're intentionally prioritizing the long-term quality of our revenue over the short-term shape of any single quarter. It's not a warning, it's just being, you know, really honest about the business transforming, and what matters is the direction of the trend and not a quarterly up or down. We try to be transparent, and we've told you about the, you know, example with the CAD 2.5 million booking. You shouldn't be surprised if we've got a really strong booking, you know, in Q2, knowing that there was some stuff that really belonged in Q1.
Look, I think the most important message in all of this, we're going through a transformation. We're investing to transform, but we're choosing to do it with discipline. We could invest more aggressively, but we're choosing not to burn cash right now. We ended Q1 with CAD 12.4 million in cash. It's up almost 100% year-over-year.
That really is a position of strength. We're going faster on this transformation than most companies in our position, and we're doing it without putting the balance sheet at risk. I think the optionality on this is really, really high. Again, those two things combined means we can really control our future. It's an exciting time. The AI-driven commerce opportunity is real. It's large, and Pivotree is increasingly well-positioned to capture it, but we need to be patient with ourselves on how long that full transformation will take. We also need to keep moving with urgency. The rest of the world is moving quickly too. That's exactly what we're doing.
With that context, you know, I'll wrap it up by saying our priorities remain. Protect and differentiate the core business by leveraging AI, transform the revenue mix, which we just talked a lot about, and maintain positive cash flow. I think it's gonna be an exciting couple of years. It's probably one of the single biggest transformations of industry in our recent memory. I think this is bigger than the, you know, dot-com era and the internet era. This is an exciting time to be in the middle of this transformation. I will turn it over to our analyst now for questions.
Thank you, Bill. We'll now take questions from analysts. To ask a question, please click the icon to raise your hand. You'll need to accept permissions to speak and unmute. Our first question comes from Daniel Rosenberg from Paradigm Capital. Please go ahead, Daniel.
Hi. Good morning, guys. Thanks for taking my question. First off, I just wanna talk about the path to growth. I mean, you guys have been working through this Legacy business. You know, it's still producing cash. I just wanna understand how you're thinking about what are the kinda key steps and things that we're gonna see that gets you back to the growth trajectory.
Daniel, I would keep focusing on MIPS. That is the place where we are putting most of our efforts and energy. We're seeing the greatest conversations happening in the MIPS category. As it grows, and again, it's gonna be a lumpy, bumpy ride for sure, we're seeing it, you know, play out in front of us right now, but MIPS is gonna be the place we see growth for the future, the growth that is quality growth. I think the other thing everybody probably needs to be aware is, look, our PS today, Professional Services, I'll stop using the acronyms, historically has been time and materials, and it's been unleveraged by AI. We are literally in the process of transforming all of our Professional Services to leverage AI.
My expectation is, as we get close to the end of the year, there will be very little project-based revenue that isn't AI-enabled, and with that AI enablement comes opportunities for the recurring and the MIPS. I think you're gonna continue to see some pressure on even PS as you move from time and materials to outcome-oriented, which is why I encourage everyone, just keep focusing on how we're doing on MIPS, 'cause that's gonna be your best indicator of not just growth for growth's sake, but actual sustainable, defendable growth for the long term.
When you think about the product portfolio that you're delivering within MIPS, you know, does that require expansion? Is it just doubling down on all the things you've already developed to date? I know you had success in several of those initiatives, but, could you speak to that product set?
I think the biggest change we're observing in the market is we're using the word product less and solution more, and in part because our RI has always had a service orientation to it, and AI is bringing trappings of software, but the reality is it's applying AI into a service. I would say one thing that hasn't changed is where do we have Real Intelligence? Where's our domain knowledge? That's where we were building products before. I think what they're really becoming is embedded services and solutions. It's continuing to be the same area. It's, you know, it's integration. Integration is probably one of our fastest growing right now. There is nothing easier to explain than a better, cheaper, faster integration.
What's really being worked on is the contracting approach to it. Integration, core part of our business historically continues to be, but now heavily leveraged by AI. Data cleaning, no question continues to be. A lot of the stuff you've heard us talk about as products in the past are being leveraged in the AI service and solution we're delivering. I think we've met with resistance around buying new software.
In fact, I think that's one of the reasons why we're seeing software get punished is people aren't really buying software the same way, especially the, what I'll call the fringe software. They're buying services. It's really transitioning into a service as software model rather than the other way around. The domains remain the same, I guess, to make the answer shorter. Same areas we've always been focused in, but, you know, less concerned about whether we're selling a license versus trying to sell more of a managed service.
Backwards SaaS, I think you just coined a new term, for tech.
I didn't coin it. I didn't coin it. Yes, it is. It's backwards SaaS, and that's the reality of what we're seeing in the market. People are really experimenting with building their own solutions and then having them managed. At the end of the day, you still have an operating system doing and performing some function, so it looks like software, but it really is being delivered as a service now.
It's, yeah, it goes down this interesting path of AI and its implications. You mentioned the word a lot. You know, one thing that does kind of strike me in your financials is just basically your productivity. You're becoming a lot more productive even with limited resources. I guess, could you help me just quantify that? Talk about that. How much more productive do you see yourself in terms of those go-to-market functions? How much further do you see that going leveraging these tools?
Yeah, I mean, look, that is a loaded question that could be unpacked for a while because we've embraced AI everywhere. Mo is leveraging tools now that leverage AI significantly, so a very lean finance team gets a lot done because of the AI capabilities that have been deployed in there. The sales function, interestingly enough, has started replacing a number of what I'll call fringe go-to-market solutions with homegrown and home-built that are as equally effective and a fraction of the price.
It's remarkable seeing the level of productivity gains at the senior levels of the company, and with that championship at the top, it's cascading down through the org. Some of the margin stuff, again, I think you'll continue to see improvements on. Even monitoring and alerting tools, we're starting to displace and replace with our own, internally built by our experts knowing our systems really well. It's also, what's remarkable is when you do these things, they become demonstrations that you can share with your customers.
While I'm talking to senior executives about the speed at which we can do an integration now, you know, it's very straightforward answer to your question, 10 days down to one day to create the code to complete an integration. That's the level of efficiency our teams are seeing. When you can demonstrate that, but then you can demonstrate five other business applications that you've been developing internally, we start getting a lot of questions from customers, "What else can you do for us?" The caution I have in all this, we're not building new products.
We are helping customers move data between systems. We know how to do that really well. We can start solving very specific business problems with our AI capabilities and our domain knowledge, but we really have started to look at each customer's requirements independently. There's reusability, but in some contexts, but the practical reality quite often is just as fast and just as easy as starting from scratch for a customer leveraging our AI platform. It really is changing the way we go to market, both back office and what we're showing customers.
Great. Thanks for taking my questions. I'll pass the line.
All right.
Bill, there are no more questions, so I'll pass it back to you to close the call.
All right. Daniel, I'll give you another chance if you had any other questions you wanna follow up on. Otherwise, we'll wrap it up. I know we only just had our last quarter 60 days ago, so, if there's no follow on, I'll wrap it up and we'll see everybody in 90 days. Thanks everyone for attending.