Earnings Call Transcript - GLOO Q4 2025

Operator, Operator

Thank you for standing by. Welcome to the Gloo Holdings Fiscal Fourth Quarter 2025 Earnings Conference Call. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Oliver Roll, Chief Marketing and Communications Officer. Please go ahead, sir.

Oliver Roll, Chief Marketing and Communications Officer

Thank you, operator. And thank you to all of you for joining our fiscal fourth quarter and full year 2025 earnings conference call. We will be discussing Gloo's performance for the fourth quarter ended January 31, 2026, as well as our results for the full year 2025. We'll also be providing guidance for our Q1 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, which are based on Gloo's current expectations, but which are subject to risks and uncertainties relating to future events and/or the future financial performance of Gloo. 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 elsewhere in our filings with the Securities and Exchange Commission, including our prospectus dated November 18, 2025, and our annual report on Form 10-K that we expect to file later this week. 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. 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 in our Form 10-K. And now, I'll turn the call over to Scott.

Scott Beck, CEO and Co-Founder

Thank you, Oliver, and thank you for joining our 2025 fourth quarter and year-end earnings call. Q4 was a strong quarter for Gloo that exceeded our guidance and capped a strong year in 2025, our first year as a public company. In Q4 2025, we more than quadrupled our revenue compared to the prior year period. We also exited 2025 with a much stronger balance sheet following our November IPO and the conversion of a significant majority of our debt into equity. We're also making good progress towards adjusted EBITDA profitability as reflected in our Q1 guidance of more than 30% improvement in adjusted EBITDA from Q4. We remain confident in achieving adjusted EBITDA profitability in Q4 2026 and continue to expect to approach adjusted EBITDA profitability in Q3. These results and our confidence in the future reflect the unique value that we are delivering against two mission-critical needs across the faith and flourishing ecosystem: the need to modernize technology and the need to expand reach. Our growth is driven organically as well as through continued expansion from accretive, strategic acquisitions that strengthen our platform. Before I go deeper into our strategy, I want to briefly revisit the ecosystem that we serve because that context is important to understanding both our opportunity and our results. Gloo is building the leading technology platform for the faith and flourishing ecosystem. This is one of the oldest and largest sectors in the world, yet one that remains highly fragmented and materially underserved by modern technology. At the center of this ecosystem are two interconnected groups. First are churches and frontline organizations, or CFLs, which serve people and communities directly. The second are network capability providers, or NCPs, which equip them with the tools, services, resources and infrastructure that they need to succeed. At the heart of the ecosystem, we also see two mission-critical and unmet needs. One is the need to modernize technology, including systems, data, workflows and core operating infrastructures. The other is the need to expand reach, deepen engagement and increase donor support in more effective and scalable ways. The Gloo platform is built to address those needs through two core areas of focus: powering technology and powering reach. Our solutions that power tech help organizations modernize their operations and build the foundation required to adopt new technologies effectively. Our solutions that power reach help organizations expand awareness, strengthen engagement and grow support through differentiated marketing, media and fundraising. Underpinning everything is the company's growing leadership in applied AI. We're leveraging the latest innovations in agentic AI, foundational models and services from top AI companies. We're combining that with the AI advancements across our own platform. As part of this strategy, we're taking over more of our customers' work that can now be executed by AI. We take over a customer's technology operations, we modernize them, and then we apply agentic AI to deliver significantly better outcomes at lower costs, while also creating higher margins for Gloo and highly durable revenue streams. This allows AI to be uniquely applied to the real operations, workflows and mission-critical activities of churches, ministries and not-for-profits in ways that protect theological integrity, strengthen relational ministry and advance human flourishing. This approach is supported by forward-deployed engineers, similar to the models used by Palantir. We understand customer operations and build tailored agentic solutions that create meaningful, repeatable value. Over time, we believe that expands our opportunity well beyond software spend into the much larger labor budgets that sit behind it. We believe Gloo is uniquely positioned to lead applied AI in the faith and flourishing ecosystem by helping customers harness those capabilities in practical, mission-aligned ways. I now want to turn to our broader platform strategy and how we continue to strengthen it over time. As the platform expands, it benefits from a powerful flywheel effect. Each new capability, solution and network capability provider makes the platform even more valuable to the churches and the frontline organizations that we serve. And as more of these organizations engage, the platform becomes more valuable to the network capability providers and the partners serving them. Strategic acquisitions are a key part of strengthening that flywheel, enhancing our ability to power tech and power reach for our customers. Earlier today, we announced our latest example of that flywheel in action. Today, we announced a definitive agreement to acquire Enterprisemarketdesk, known as EMD, a leading Workday Service Partner that provides consulting, implementation and operating services to small and midsized organizations and not-for-profits. This is an important addition to our solutions for powering tech. Workday is a leading ERP platform in the faith and flourishing ecosystem and often the preferred solution for many of the Gloo enterprise customers, creating clear synergies between the two companies. EMD offers a full suite of services, including Workday deployments, application management services and staff augmentation. This strengthens the Gloo 360 value proposition and expands our ability to help customers modernize core systems and transform IT in more strategic ways through our applied AI. This aligns with our core strategy of taking over and modernizing the work of an organization, using forward-deployed engineers, then applying agentic AI, thereby delivering better results at lower cost while at the same time creating higher margins for Gloo. Workday offers a major set of capabilities that we see many of the organizations in the faith and flourishing ecosystem using more often. Workday implementations are long-cycle engagements that will lead to larger digital transformation mandates that Gloo 360 is uniquely able to support. In addition, we successfully completed the acquisition of Westfall Group during the quarter. Westfall is the leading platform for major donor engagement in the faith and flourishing ecosystem. Its addition has expanded our donor development capabilities and strengthened the strategic fit and synergies with Masterworks, which we acquired in 2025. Together, these moves reflect our disciplined approach of adding best-in-class network capability providers as Gloo Capital Partners, strengthening the platform and reinforcing the flywheel. Westfall Group has been immediately accretive since close, and we anticipate EMD will be immediately accretive upon close as well. Now let me turn back to the importance of AI to our strategy. Underpinning everything we do is our growing leadership in applied AI. Our applied AI strategy is focused on three areas. First, we're building the core AI capabilities we believe the ecosystem needs, including agents, values-aligned AI, unified data infrastructures and trusted chat-based interfaces. Second, we're embedding AI across our solutions to improve automation, personalization, data integration and overall customer outcomes. Third, we're helping both our customers and Gloo itself put AI agents to work and evolve toward more agentic operating models so that the ecosystem can focus more time, energy and resources on mission. We believe this strengthens our platform, accelerates innovation across our portfolio and reinforces our leadership in applied AI for the faith and flourishing ecosystem. Let's turn to customer momentum. We're seeing strong customer momentum across our portfolio. We continue to close larger strategic deals with two customers now expanding to almost $10 million of annual revenue. We also closed several agreements valued at more than $1 million, including an exciting expansion in the university segment through our work with Jessup University. This is the first example of us bringing the full breadth of the Gloo platform to a large university, and it's a strong validation of the value that we can provide this very large market segment. We also announced a new strategic technology partnership with InterVarsity Christian Fellowship/USA with Gloo's 360 powering its enterprise technology operations. That will enable InterVarsity to spend less time managing systems and more time engaging students and faculty across more than 700 campuses in the United States. It's a strong example of how, by powering their technology, we can help organizations modernize operations while increasing mission impact. Separately, we also expanded our partnership with YouVersion in Brazil, establishing a co-located engineering presence alongside their regional hub to strengthen the cultural alignment with their team while building engineering capacity in the region. In a moment, Paul will take you through our guidance for Q1 and the year ahead. We remain very confident in our strategy and our outlook for 2026. Our confidence reflects the strength of the platform that we're building, the flywheel to continue to strengthen as we scale and the momentum that we're seeing across the business. It also reflects the role AI is increasingly playing as an accelerator across both powering tech and our powering reach solutions. We believe our AI is unlocking enormous possibilities for ministries, churches and network capability providers to grow their reach and to expand their impact. Our focus on applied AI and bringing agentic workflows into the faith and flourishing ecosystem in practical mission-aligned ways uniquely positions us to capture that opportunity. Taken together, that gives us confidence in our guidance, our path to profitability and the long-term value that we believe we are delivering to our customers and to our shareholders. Paul, over to you to talk about our numbers in more detail.

Paul Seamon, CFO

Thank you, Scott. Our fourth quarter 2025 results were strong, with revenue beating our guidance and adjusted EBITDA at the upper end of our guidance range, giving us solid momentum as we ended the year. Revenue for the quarter was $33.6 million, an increase of 418% compared to the same period last year, and 3.3% sequential growth compared to Q3, which is good performance given the seasonality characteristics of our industry. Year-over-year results were driven by solid organic growth across our portfolio as well as the acquisitions of several capital partner businesses, most notably, Masterworks and Midwestern. Platform revenue totaled $20.1 million, an increase of $13.8 million from Q4 of last year, and 1.6% sequential growth. As a reminder, platform revenue includes advertising, marketplace and subscription offerings. Much of the sequential growth was driven by Gloo 360 and Igniter, partially offset by some Masterworks advertising revenue that shifted into Q3 as we previously discussed. Platform solutions revenue was $13.5 million, up 6% sequentially, supported by strong performance from Barna and the addition of Westfall Group. Going forward, Westfall's donor events and design business will primarily contribute to Platform solutions revenue, and together with Masterworks, will strengthen our solutions for powering reach by supporting customers' fundraising throughout the year and around key events. Cost of revenue in the quarter was 76.5%, an improvement from 83.4% in the prior year period. That improvement was driven by growth in higher-margin business lines and improved pricing in some areas. We expect improvement to continue throughout the year. Adjusted EBITDA improved $0.7 million sequentially to negative $18.6 million. This improvement reflects incremental gains across nearly all of our Gloo businesses and capital partners and includes acquisition costs related to the Westfall Group acquisition, which we do not adjust out. Westfall did not contribute to adjusted EBITDA as January is seasonally slower for fundraising activity. There are also two important noncash items to note that significantly reduced net income in the quarter. First, share-based compensation was higher than normal due to nonrecurring IPO-related award activity as noted in our Q3 10-Q. Second, the line item loss from the change in fair value of financial instruments reflects derivative calculations affected by our share price. If our price declines in a quarter, we will generally record a loss in this line, and if our share price increases in a quarter, we will generally record a gain. In Q4, this number pressured net income and therefore, EPS. As of January 31, 2026, we had $57.3 million of cash and cash equivalents. I'd like to now turn to our Q1 and full year 2026 outlook. As Scott mentioned, we continue to guide to first quarter revenue of $36 million. For the quarter, we expect adjusted EBITDA loss to narrow to negative $12 million, representing more than $6 million of sequential improvement as we grow revenue, improve cost of revenue and continue to aggressively manage operating expenses. We remain focused on progressing towards adjusted EBITDA profitability in Q4. Our full year 2026 revenue outlook is now $190 million, which includes the addition of EMD. While we continue to see M&A opportunities, we are confident in our ability to achieve this guidance without any additional acquisitions. As we move through 2026, we continue to expect meaningful sequential improvement each quarter and expect profitability in Q4 2026. For Q1, we expect a weighted average share count of approximately 80 million shares. Looking ahead, we're excited about scaling the business and applying Gloo AI internally as we become more efficient and using it externally to help customers better serve their constituents. With that, back to you, Scott.

Scott Beck, CEO and Co-Founder

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

Operator, Operator

And our first question comes from the line of Richard Baldry from ROTH Capital.

Richard Baldry, Analyst (ROTH Capital)

You probably don't want to name them, but I'm curious if you can maybe just broadly describe the two customers that are nearing $10 million a year in revenue and maybe how replicable that could be across the total addressable market you're looking at?

Patrick Gelsinger, Executive Board Chair and Head of Technology

Yes. Thank you. This is Pat. And we see that these customers are now taking more of the different offerings of Gloo. And that's part of what's making these accounts larger: they're Masterworks, Westfall Group, Gloo 360, AI customers. So as we're aggregating more of those capabilities, these account relationships are becoming very large. Obviously, these are some of the larger customers in the ecosystem, but we continue to win more customers at the million level; a number of those are maturing into multimillion customers, and we do see that these are very large customers in the ecosystem. So we do think it is replicable to have more customers get to that level of relationship. Overall, the key point is that these are big accounts, and we're establishing big trust and deep, enduring relationships with them across the increasing breadth of the portfolio of our offerings.

Richard Baldry, Analyst (ROTH Capital)

Then maybe you addressed it a little bit, but can you talk about sort of the funnel for $1 million-plus deals, how that's changing now that you're a public entity with greater visibility, how that's changed as you've rapidly scaled the portfolio and your revenues? Is that pipeline picking up because of the capabilities you have now?

Patrick Gelsinger, Executive Board Chair and Head of Technology

Yes. I'll say there are probably three aspects to the pipeline to highlight. One is, it is just getting bigger. The more we're building our sales capacity, we're seeing more accounts that we are engaging with, and more salespeople have reference accounts that they can leverage. Secondly, we are able to move horizontally. That's one of the exciting things. We do see that we're able to move to other customers in that segment, landing and expanding within an account and within the segment. We're also seeing the sales cycle, if anything, shorten. That's probably the most exciting aspect of the growing momentum in sales: the more reference accounts we have, the more we're able to replicate that into other segments. As we saw this quarter, we closed our first major multi-offering university, and we expect that we'll have many other universities that will be able to replicate that kind of sales motion, with InterVarsity serving as one of the reference customers. The campus ministry segment is showing replicability as well. So it really is a very positive aspect to the business. As the accounts get bigger, we're able to see the sales funnel increase and the acceleration in those accounts as well.

Richard Baldry, Analyst (ROTH Capital)

Switching gears, if we look at the AI part of the business, can you talk about how far into it you feel you are in terms of rolling out products and services based upon it? And then maybe secondarily, how far you're into adopting internal tools for efficiency purposes operationally?

Patrick Gelsinger, Executive Board Chair and Head of Technology

Yes. Maybe I'll start and ask Scott to add to this one. First, I see AI overall in the first inning for the industry writ large. There's a lot to go. For most of our accounts, we're even earlier than the first inning; we're just getting started because in many cases, we're just starting the 360 engagement. We're about to turn on some of the first agentic capabilities. So I'd say this is very early, and we see tremendous opportunity to build on those offerings for the accounts, internally and externally. We have more of our internal businesses, our capital partners, taking advantage of our AI capabilities today. We're using it across many different aspects of our business today. But again, we see a lot more opportunity, which will only improve our speed of operation and the margin of the business. This idea of applied AI is one that we really believe we can operate in for many years because the market is large, the customer needs are large, the gap in technology is large and the benefits of AI—particularly agentic applied AI—are significant. It's not just addressing how to do things better; it's literally transforming manual processes in service offerings. This is an industry trend and something we're uniquely applying to this segment of the market. Scott?

Scott Beck, CEO and Co-Founder

Yes. Thanks, Pat. Rich, in addition to that, AI is actually driving a lot of demand for Gloo 360. It's one of the reasons that we're seeing these bigger deals come in because it's now reached the point where keeping up with technology for ministries is increasingly difficult. Their primary job is not to be a technology company; their primary job is mission—translating Bibles, working on campuses and helping communities. With AI, it has accelerated the reality of not being able to fully keep up. Us being able to show up and help them with that is a big driver for overall demand. With 360, what we've been able to do is pull work out of these different organizations—pull the SaaS technologies as well as the people out of the organization—helping that move to a whole next level and then applying AI to deliver better results to the organizations we serve at a lower cost. We can keep applying AI to improve margins and pass benefits along to the rest of the system. Also, we announced this quarter our Gloo AI Studio, which provides developer infrastructure that can be used beyond Gloo.

Patrick Gelsinger, Executive Board Chair and Head of Technology

Yes. To add to that, we just finished Missional AI, a major AI conference for the faith and flourishing industry. At it, we announced Gloo AI Studio, now a full set of API services, pay-for services. We have a growing set of developers taking advantage of that because we see part of our mission as not just what we do in our offerings, but enabling a broad ecosystem to build on the foundational capabilities that Gloo AI provides.

Richard Baldry, Analyst (ROTH Capital)

Maybe last for me. Could you just generally discuss the M&A environment? I'm curious how it's impacting the faith and flourishing world. Valuations are pretty depressed in the open market as people are fearful about the disruptions of generative AI. If you can walk through that backdrop, it would be helpful.

Scott Beck, CEO and Co-Founder

Sure. It basically goes back to what I was just talking about. AI, from our standpoint, is definitely a friend in that entire process. As the SaaS tools out there and the big systems of record tools exist, for us to be able to take on those tools, integrate with them and build AI-powered agentic workflows on top of those historical infrastructures—whether it's a church management system in a church or whether it's Salesforce or Workday in some of these big enterprise customers—our ability to build the workflows on top of that and to power that back into the ecosystem is a great thing for us. We don't see ourselves being negatively impacted by conversations around SaaS. In fact, we see AI as further powering our business and our strategy.

Richard Baldry, Analyst (ROTH Capital)

Thanks. Congrats on a great quarter and a great outlook.

Operator, Operator

And our next question comes from the line of Yun Kim from Loop Capital.

Yun Suk Kim, Analyst (Loop Capital)

All right. Congrats on the quarter, Scott, Paul and Pat, and also on the EMD acquisition announcement. First, maybe, Paul, can you answer this: obviously, Gloo 360 is doing very well. Is scaling that business a key driver behind your margin improvement this year? Or are there other parts of your business that are even bigger margin drivers than Gloo 360?

Paul Seamon, CFO

Gloo 360 is definitely key each quarter. It steps up incrementally, both on the growth side and on the margin side. So it's a big contributing factor along with AI rolled into that. I'd say those are the number one and number two contributors together.

Yun Suk Kim, Analyst (Loop Capital)

Okay. And then on EMD, any additional details you want to share with us, like the revenue run rate and the margin profile?

Patrick Gelsinger, Executive Board Chair and Head of Technology

Yes. A few things on EMD to start with. Part of what motivated us to do this acquisition was that Workday was already being well adopted by our ecosystem. In fact, some 40-plus percent and growing of 360 customers are already using Workday. So we saw it as a great fit for our offerings and an acceleration of what we're doing with areas like 360. We're super excited about the fit, and we see our deep relationships with customers only enhanced. As Scott mentioned in his formal remarks, EMD is accretive from day one, so we see it as beneficial to our journey. As we indicated earlier, we expected a couple of M&A moves, and we've now completed both of those. We're confident and we raised our guidance as a result financially. We're not giving specific deal sizing or revenue numbers on the deal itself, but between this and Westfall Group now being completed, we satisfied that portion of the growth we had indicated for inorganic growth this year. Overall, we see great synergies as well. EMD services many customers we are already engaging with, so we expect synergy sales to benefit our ecosystem. Finally, this is a path for improving margins over time. As we expand our unique relationship with Workday and the benefits it brings to the ecosystem, this will be more accretive over time as we get deeper on these key assets. Building our AI capabilities, as Scott indicated, will only enhance what we can do using the unique capabilities both at Workday and the broader capabilities of Gloo AI.

Yun Suk Kim, Analyst (Loop Capital)

Okay. I just want to better understand the cross-sell opportunity with EMD. Is that primarily selling Workday and related services to your current installed base or even more around converting certain customer segments of EMD to Gloo 360?

Patrick Gelsinger, Executive Board Chair and Head of Technology

Yes. It's quite a bit of both. Some of the accounts that were in the Gloo 360 pipeline were already being serviced by EMD, and that's part of what got us excited because some accounts we hadn't yet broken into were now becoming Gloo customers. We expect the land-and-expand opportunity as a result to accelerate. We'll also be introducing Gloo capabilities into accounts where we already have activities, which will accelerate Workday deployments into many Gloo accounts. Finally, EMD was servicing customers that weren't in our pipeline today, so we see a market expansion opportunity. In short: yes to selling Workday services to our base, yes to converting EMD customers to Gloo 360, and yes to expanding into new accounts.

Yun Suk Kim, Analyst (Loop Capital)

And then just lastly on Gloo AI Studio: is that targeted at customers wanting to customize their Gloo AI solutions? Or is it a precursor to potentially opening up your platform and developing a partner ecosystem where you try to develop an ISV ecosystem?

Patrick Gelsinger, Executive Board Chair and Head of Technology

We unquestionably see this as building an ecosystem of developers aligned with faith and flourishing. Some customers are already doing AI app development and may be deciding whether to use Anthropic, Google, Amazon or Microsoft. We offer all of those models through the Gloo AI Studio, but we add guardrails, protections and testing to validate that it meets the values and expectations of these customers. That's part of what Gloo AI Studio provides. We're finding increasing resonance: customers want the best models in the industry, but they also want them to be safe and trusted. That's the value Gloo 360 is adding on top of enabling the best AI capabilities. We expect to service big customers like YouVersion and a much broader set of customers as they want to build their own applications with a trusted partner like Gloo.

Operator, Operator

And our next question comes from the line of Matthew Harrigan from Benchmark.

Matthew Harrigan, Analyst (Benchmark)

I'm curious what the reaction right out of the blocks is on Gloo AI Studio in terms of partners who have used it. In February, you saw a rapturous reaction to certain AI tools in other industries; that's probably an overreach comparison. But do you think the ease of use is good? Are people really interested? Are people getting utility out of it right away?

Patrick Gelsinger, Executive Board Chair and Head of Technology

It's super early. In a quarter or two, when we've been in market for more than a couple of weeks, we'll have a much better signal. The response so far is positive: we've had emails from people using other platforms who are excited to move their apps over to Gloo AI Studio. We have early positive anecdotal signals that give us a lot of confidence. We're entering a developer season for Gloo: we just had Missional AI and we launched Studio in front of that on purpose. We have a virtual developer event over the summer and a big Hackathon in the fall. Every two months, we have a major developer event over the next four months. It's an exciting time to build momentum. We're measuring results daily and weekly: token counts, API calls and revenues are beginning to materialize. It's just the beginning of an exciting new capability for Gloo.

Matthew Harrigan, Analyst (Benchmark)

Since we have a two-headed monster here between myself and Dan, a question from Dan: when you add these capabilities and you're getting a lot more pull demand and awareness in the marketplace, when you win a big contract in a given vertical, does the next win come pretty quickly in a tighter sales cycle? Or are people looking to emulate what others are doing and not wanting to be left behind in terms of implementation and AI capabilities?

Patrick Gelsinger, Executive Board Chair and Head of Technology

We're definitely seeing that. We're able to see the sales cycle close more quickly for the next account within a segment. As we saw with InterVarsity this quarter, it's in the same segment where we had other activity with campus ministries. We expect to see similar results within the university segment. When we have reference accounts, we're able to move across segments effectively. It's land, expand and expand within the segment and expand the offerings from Gloo as we build more capabilities for those customers. Overall, the sales cycle and our ability to convert accounts has been pretty impressive so far.

Operator, Operator

And our next question comes from the line of Jason Kreyer from Craig-Hallum.

Jason Kreyer, Analyst (Craig-Hallum)

I'll echo my congrats on the quarter. Wanted to maybe start on the M&A front. We went into the year expecting a couple of deals and kind of a defined revenue contribution. You've done a couple of deals. It seems like we're in the vicinity of that revenue contribution. Just curious, we're pretty early in fiscal '26 yet, so what are your thoughts on other M&A opportunities that might present themselves over the duration of the year?

Scott Beck, CEO and Co-Founder

Thanks, Jason. We've got a significant acquisition pipeline. However, we've been really focused on getting the synergies out of the transactions we've done. That's been a big focus so far this year, and it's going to be an important driver to get to EBITDA profitability by Q4. That being said, we do have a pretty significant pipeline. We will be very disciplined. There may be more this year, but we need no more to hit the numbers in our guidance and to get to EBITDA profitability. We have had the good fortune of being best in breed for this ecosystem and have been picky about transactions we enter into. A great example is Masterworks and the boost that has given us in terms of synergy across reach. As Paul mentioned earlier about organic growth from 360 and margin improvement, we're seeing the same thing in Masterworks. One powers tech; the other powers reach. We can continue to be disciplined even though we have a good pipeline.

Jason Kreyer, Analyst (Craig-Hallum)

Thanks, Scott. I want to build on that. You're seeing more profitability flow earlier in the model than we anticipated. Nice guide in terms of improvement for Q1. You're moving forward that profitability for FY '26. Maybe just talk about the drivers there. Are you finding you don't need as much OpEx as you thought? Or is it more a product of the revenue outperformance and getting scale there? Any way to define it would be great.

Paul Seamon, CFO

Great question, Jason. It's a combination of both. First, as we announced in December, we reviewed our cost structure and removed some redundancies, which flows through in the first quarter and helped our guide with incremental EBITDA improvement. Second, the businesses are scaling nicely across everything we talked about—reach, tech, Masterworks, 360, all the different businesses. As those take steps each quarter, you start to see it in the first quarter and then each incremental one going forward as we work toward adjusted EBITDA profitability in the fourth quarter.

Scott Beck, CEO and Co-Founder

I'd add a lot of operating discipline as well. We're proud of our capital partners and the organizations we've invested in and acquired. Leadership has stayed and been invigorated. We're bringing synergies in technology and cross-selling, and the capital partners are doing great. It's exciting to see the synergy coming through and the enthusiasm that continues to be there.

Operator, Operator

And our next question comes from the line of Ryan Meyers from Lake Street Capital Markets.

Ryan Meyers, Analyst (Lake Street Capital Markets)

I guess the first question: are there any material cost pressures or risks we should be aware of in fiscal year '26?

Paul Seamon, CFO

I don't think there's anything significant that we haven't talked about before that's not normal. Nothing stands out in terms of cost pressures.

Ryan Meyers, Analyst (Lake Street Capital Markets)

Got you. And then I know you don't disclose the actual number, but are you seeing more of the revenue base becoming recurring? How is that shaping up?

Scott Beck, CEO and Co-Founder

Yes. As you look at the work we're doing with Gloo 360 and Masterworks, more and more of that is locked-in recurring revenue. I really like the concept of taking over work. There's been recent commentary and research noting that services are becoming the new software model. Historically, companies sold tools and others performed the work on those tools. Now, by pulling the work out and providing those services, you capture both the tool revenue and the labor/work revenue, which is larger and incredibly sticky. For example, a company might spend $10,000 on QuickBooks and $120,000 on the accountant to close the books. The next legendary company will just close the books. That's what we're focused on: not just 360 but Masterworks as well, forward-deploying people into organizations, pulling work out and delivering better results at lower cost. That creates deeply embedded, long-term recurring agreements that free organizations to focus on mission. It's very durable in nature even if it looks like a service, because it's deeply embedded in their operations.

Operator, Operator

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Scott Beck, Co-Founder and CEO for any further remarks.

Scott Beck, CEO and Co-Founder

Yes. Thanks a lot. Let me start by saying I couldn't be more excited by where we're at today. We've been on a long journey here. We spent more than a decade building the foundation for this business, investing in the platform and the trusted relationships in the mission that continues to guide our work. Today, I believe that Gloo is better positioned than ever as the leading technology platform for this ecosystem and as the leader in applied AI for this ecosystem. All of this is pointed toward using technology as a force for good. Our aim has always been that. We've made tremendous progress toward that. I'm also super thankful for the organizations that trust us. We do this with humility and care, and we're getting better every day. We're super grateful for them. I'm also thankful for the team, for our capital partners, as well as the investors who got us to this point and new investors who have joined the journey. Our goal remains clear: to build a large, profitable mission-driven business that serves those who serve. We're committed to doing that with discipline, transparency and a focus on long-term value creation for our shareholders and the customers we serve. Personally, I thank God for the opportunity to serve this ecosystem and to help organizations thrive so they can go into their communities and help people flourish to become all that they're called to be. Thank you all for taking time today to listen to our call. As always, we remain available to answer questions. Feel free to reach out at any time. With that, operator, that concludes our time.

Operator, Operator

Thank you. And thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.