ACME Q3 '26

Moments, ranked

1. 110:12 ETprepared▲ +1.67%

   “We are raising our full year fiscal 2026 revenue guidance to $1.64 billion to $1.65 billion.”

   Marcus Lee, 4.4x volume, adj. next 5 min: +1.81% raw vs +0.14% sector

   New, abnormal minute +1 min after the statement

   high confidence

1. -0.22%0:00OperatorGood morning and welcome to the Acme Software third quarter fiscal 2026 earnings call. At this time all participants are in a listen-only mode. I would now like to turn the call over to Dana Whitfield, Chief Executive Officer.
2. -0.10%0:26Dana WhitfieldThank you and good morning everyone. Q3 was a strong quarter across the board. We saw growth in every region and record enterprise bookings. Our AI assistant, which we launched to all enterprise customers in June, is now used weekly by more than half of them.
3. +0.05%1:36Dana WhitfieldWe added 84 customers with more than $100,000 in annual recurring revenue this quarter, bringing the total to 1,240. Our largest deal of the quarter was a seven figure expansion with a global bank. I will now hand it to Marcus to walk through the numbers.
4. +0.01%3:00Marcus LeeThanks Dana. Third quarter revenue was $412 million, up 18% year over year. Subscription revenue was $371 million, up 21%. Non-GAAP operating margin was 23%. Free cash flow was $96 million. Net revenue retention was 114%.
5. +0.02%4:22Marcus LeeGross margin was 79% in the quarter, flat with Q2. Sales and marketing was 34% of revenue, down two points year over year as our enterprise sales motion continues to get more efficient.
6. +0.02%5:35Marcus LeeTurning to the balance sheet, we ended the quarter with $1.9 billion in cash and investments and no debt. Deferred revenue grew 20% year over year. Remaining performance obligations were $1.52 billion, up 24%.
7. -0.11%7:05Dana WhitfieldBefore guidance, a word on the market. Buying behavior in the enterprise has been steady. Deal cycles in Q3 were about the same length as a year ago and we are not seeing the elongation some peers have described.
8. +0.79%8:45Marcus LeeNow to guidance. For the fourth quarter we expect revenue of $425 million to $429 million and non-GAAP operating margin of approximately 23%, consistent with the release this morning.
9. +1.86%10:05Marcus LeeFor the full year we had previously guided to $1.61 billion to $1.62 billion. Given the strength we saw in Q3 and the pipeline we see for Q4, we are now in a position to update that.
10. +1.67%12:10Marcus LeeWe are raising our full year fiscal 2026 revenue guidance to $1.64 billion to $1.65 billion. In addition, the board has authorized a $300 million share repurchase program, our first.
11. +0.79%13:15Marcus LeeWe expect to execute the repurchase opportunistically over the next four quarters. With that, operator, we are ready for questions.
12. +0.02%14:30OperatorThank you. Our first question comes from Priya Nair at Harbor Capital. Please go ahead.
13. -0.52%15:02Priya NairCongratulations on the quarter. Marcus, the raise is bigger than the Q3 beat alone would explain. What is driving the confidence in Q4, and is any of it pull forward?
14. -0.33%16:05Marcus LeeIt is not pull forward. About half of the raise is the Q3 beat flowing through and half is Q4 pipeline that has already converted to signed, uninvoiced contracts. We have better visibility into Q4 today than we have had at this point in any prior year.
15. -0.22%17:45Dana WhitfieldI would add that the AI assistant is starting to show up in expansion deals. Customers who use it are expanding at a higher rate than those who do not, though it is early.
16. -0.30%18:55OperatorOur next question comes from Tom Ellery at Ridgeline Research.
17. -0.26%19:25Tom ElleryThanks. Dana, can you talk about the competitive environment? One of your larger competitors cut prices in September.
18. -0.04%20:25Dana WhitfieldWe saw the price cut. We have not matched it and we have not needed to. Our win rate against that competitor in Q3 was actually a bit higher than in Q2. We compete on the depth of the product, not on price, and customers are telling us the same thing.
19. +0.08%22:05OperatorOur next question comes from Lena Osei at Cobalt Securities.
20. +0.08%22:35Lena OseiHi, thanks. On the international business, how did Europe do this quarter and are you seeing any macro softness there?
21. +0.22%23:35Dana WhitfieldEurope grew faster than the company average again this quarter. We opened our Frankfurt data center in August and that has helped with public sector deals in Germany. We are not seeing macro softness in our pipeline there.
22. +0.41%25:05OperatorOur next question comes from Sam Okafor at Meridian Partners.
23. +0.41%25:35Sam OkaforThanks. Marcus, gross margin has been very steady. With the Frankfurt data center and the AI workloads, how should we think about gross margin going forward?
24. -0.29%26:45Marcus LeeGood question. The AI assistant runs on GPU capacity that we are bringing online over the next two quarters, and Frankfurt is still ramping. Both of those are a headwind to gross margin in the near term.
25. -1.27%31:00Marcus LeeTo be specific, we expect gross margin to come down about 150 basis points in Q4 as the new data center capacity comes online, so roughly 77.5%. We expect it to recover through fiscal 2027 as utilization improves.
26. -0.32%32:15Sam OkaforThat is helpful. And the operating margin guide of 23% for Q4 already absorbs that?
27. -0.29%33:15Marcus LeeYes, the 23% Q4 operating margin guide includes the gross margin step down. We are offsetting it with the sales and marketing efficiency I mentioned.
28. -0.25%34:05OperatorOur next question comes from Priya Nair at Harbor Capital with a follow up.
29. -0.25%34:35Priya NairJust on the buyback, why now, and should we read it as a change in how you think about capital allocation?
30. -0.24%35:35Marcus LeeWe have $1.9 billion in cash and we generate close to $400 million of free cash flow a year. The business does not need all of it. The buyback is about returning excess cash, it does not change our appetite for organic investment or tuck-in acquisitions.
31. -0.27%37:15Dana WhitfieldLet me close. We are growing 18% at scale, we are more profitable than a year ago, and our newest product is landing with customers. Thank you all for joining and we will talk to you next quarter.
32. -0.15%38:55OperatorThis concludes today's conference call. You may now disconnect.