{ "type": "DocxDocument", "pageSize": "letter", "metadata": { "title": "Q2 FY2026 Quarterly Business Review — Lattice Harbor Software", "author": "Office of the CFO", "subject": "Board pre-read, quarter ended 31 May 2026", "language": "en-US" }, "theme": { "preset": "classic", "colors": { "primary": "0B2F6B", "secondary": "315A8C", "accent": "2F6BFF", "text": "172033", "background": "FFFFFF" }, "fonts": { "heading": "Georgia", "body": "Aptos", "monospace": "Consolas" } }, "header": { "text": "Lattice Harbor Software, Inc. — Board pre-read (internal)" }, "footer": { "text": "Q2 FY2026 QBR", "includePageNumber": true }, "options": { "pagination": "reflow" }, "pages": [ { "elements": [ { "type": "heading", "level": 1, "text": "Q2 FY2026 Quarterly Business Review", "style": { "fontFamily": "Georgia", "fontSize": 28, "fontWeight": "bold", "color": "0B2F6B", "margin": { "top": 0, "right": 0, "bottom": 8, "left": 0 } } }, { "type": "paragraph", "runs": [ { "text": "BOARD PRE-READ / QUARTER ENDED 31 MAY 2026 / OFFICE OF THE CFO", "style": { "fontFamily": "Aptos", "fontWeight": "bold", "fontSize": 9, "color": "315A8C", "letterSpacing": 0.5 } } ] }, { "type": "heading", "level": 2, "text": "1. Quarter in brief", "style": { "fontFamily": "Georgia", "fontSize": 18, "fontWeight": "bold", "color": "0B2F6B", "margin": { "top": 10, "right": 0, "bottom": 5, "left": 0 } } }, { "type": "table", "tableStyle": "minimal", "keepTogether": true, "tableCaption": "Quarter at a glance", "rows": [ { "cells": [ { "elements": [ { "type": "paragraph", "runs": [ { "text": "$214.3M", "style": { "fontFamily": "Georgia", "fontSize": 22, "fontWeight": "bold", "color": "0B2F6B" } } ], "style": { "margin": { "top": 0, "right": 0, "bottom": 2, "left": 0 } } }, { "type": "paragraph", "runs": [ { "text": "ENDING ARR", "style": { "fontSize": 8, "fontWeight": "bold", "color": "607087", "letterSpacing": 0.4 } } ], "style": { "margin": { "top": 0, "right": 0, "bottom": 0, "left": 0 } } } ], "style": { "backgroundColor": "EEF3F9", "padding": { "top": 9, "right": 10, "bottom": 8, "left": 10 }, "borderTop": { "width": 3, "color": "2F6BFF" } } }, { "elements": [ { "type": "paragraph", "runs": [ { "text": "116%", "style": { "fontFamily": "Georgia", "fontSize": 22, "fontWeight": "bold", "color": "0B2F6B" } } ], "style": { "margin": { "top": 0, "right": 0, "bottom": 2, "left": 0 } } }, { "type": "paragraph", "runs": [ { "text": "NET REVENUE RETENTION", "style": { "fontSize": 8, "fontWeight": "bold", "color": "607087", "letterSpacing": 0.4 } } ], "style": { "margin": { "top": 0, "right": 0, "bottom": 0, "left": 0 } } } ], "style": { "backgroundColor": "EEF3F9", "padding": { "top": 9, "right": 10, "bottom": 8, "left": 10 }, "borderTop": { "width": 3, "color": "2F6BFF" } } }, { "elements": [ { "type": "paragraph", "runs": [ { "text": "Q4 FY26", "style": { "fontFamily": "Georgia", "fontSize": 22, "fontWeight": "bold", "color": "0B2F6B" } } ], "style": { "margin": { "top": 0, "right": 0, "bottom": 2, "left": 0 } } }, { "type": "paragraph", "runs": [ { "text": "FCF BREAKEVEN", "style": { "fontSize": 8, "fontWeight": "bold", "color": "607087", "letterSpacing": 0.4 } } ], "style": { "margin": { "top": 0, "right": 0, "bottom": 0, "left": 0 } } } ], "style": { "backgroundColor": "EEF3F9", "padding": { "top": 9, "right": 10, "bottom": 8, "left": 10 }, "borderTop": { "width": 3, "color": "2F6BFF" } } } ] } ] }, { "type": "paragraph", "text": "Revenue beat plan on expansion, while new-logo bookings missed for a third consecutive quarter. Workflow Automation attached to 31% of eligible renewals and lifted NRR to 116%; the constraint is now mid-market cycle time and unfilled enterprise sales capacity in EMEA. Gross margin held at 79.8%, operating burn improved to $4.1M, and free-cash-flow breakeven remains on track for Q4 FY2026 — one quarter ahead of plan.", "style": { "fontSize": 10.5, "lineHeight": 1.3, "color": "27364A", "margin": { "top": 7, "right": 0, "bottom": 5, "left": 0 } } }, { "type": "heading", "level": 2, "text": "2. KPI summary", "style": { "fontFamily": "Georgia", "fontSize": 18, "fontWeight": "bold", "color": "0B2F6B", "margin": { "top": 9, "right": 0, "bottom": 4, "left": 0 } } }, { "type": "paragraph", "keepNext": true, "text": "Status key: figures compared against the FY2026 operating plan approved 27 February 2026. Variances beyond ±3% of plan are flagged." }, { "type": "table", "pagination": { "minimumFirstPageRows": 3 }, "tableStyle": "modern", "repeatHeaders": true, "tableCaption": "Q2 FY2026 KPI summary versus plan and prior quarter", "rows": [ { "isHeader": true, "cells": [ { "text": "KPI" }, { "text": "Q2 FY26 actual" }, { "text": "Q2 FY26 plan" }, { "text": "Q1 FY26" }, { "text": "YoY" }, { "text": "Status" } ] }, { "cells": [ { "text": "Ending ARR" }, { "text": "$214.3M", "style": { "textAlign": "right" } }, { "text": "$211.8M", "style": { "textAlign": "right" } }, { "text": "$202.0M", "style": { "textAlign": "right" } }, { "text": "+27.4%", "style": { "textAlign": "right" } }, { "text": "Ahead", "style": { "color": "1B7837", "fontWeight": "bold" } } ] }, { "cells": [ { "text": "Net new ARR" }, { "text": "$12.3M", "style": { "textAlign": "right" } }, { "text": "$11.4M", "style": { "textAlign": "right" } }, { "text": "$10.8M", "style": { "textAlign": "right" } }, { "text": "+15.0%", "style": { "textAlign": "right" } }, { "text": "Ahead", "style": { "color": "1B7837", "fontWeight": "bold" } } ] }, { "cells": [ { "text": "New-logo bookings" }, { "text": "$6.2M", "style": { "textAlign": "right" } }, { "text": "$7.5M", "style": { "textAlign": "right" } }, { "text": "$6.6M", "style": { "textAlign": "right" } }, { "text": "-8.8%", "style": { "textAlign": "right" } }, { "text": "Behind", "style": { "color": "B2182B", "fontWeight": "bold" } } ] }, { "cells": [ { "text": "Net revenue retention" }, { "text": "116%", "style": { "textAlign": "right" } }, { "text": "112%", "style": { "textAlign": "right" } }, { "text": "113%", "style": { "textAlign": "right" } }, { "text": "+4 pts", "style": { "textAlign": "right" } }, { "text": "Ahead", "style": { "color": "1B7837", "fontWeight": "bold" } } ] }, { "cells": [ { "text": "Gross logo churn (annualized)" }, { "text": "7.9%", "style": { "textAlign": "right" } }, { "text": "8.5%", "style": { "textAlign": "right" } }, { "text": "8.8%", "style": { "textAlign": "right" } }, { "text": "-1.6 pts", "style": { "textAlign": "right" } }, { "text": "Ahead", "style": { "color": "1B7837", "fontWeight": "bold" } } ] }, { "cells": [ { "text": "Gross margin (non-GAAP)" }, { "text": "79.8%", "style": { "textAlign": "right" } }, { "text": "79.0%", "style": { "textAlign": "right" } }, { "text": "79.9%", "style": { "textAlign": "right" } }, { "text": "+1.1 pts", "style": { "textAlign": "right" } }, { "text": "On plan", "style": { "color": "666666" } } ] }, { "cells": [ { "text": "Operating cash burn" }, { "text": "$4.1M", "style": { "textAlign": "right" } }, { "text": "$5.6M", "style": { "textAlign": "right" } }, { "text": "$6.9M", "style": { "textAlign": "right" } }, { "text": "-58%", "style": { "textAlign": "right" } }, { "text": "Ahead", "style": { "color": "1B7837", "fontWeight": "bold" } } ] }, { "cells": [ { "text": "CAC payback (blended, months)" }, { "text": "23.1", "style": { "textAlign": "right" } }, { "text": "24.0", "style": { "textAlign": "right" } }, { "text": "25.4", "style": { "textAlign": "right" } }, { "text": "-3.9", "style": { "textAlign": "right" } }, { "text": "On plan", "style": { "color": "666666" } } ] }, { "cells": [ { "text": "Ending headcount" }, { "text": "743", "style": { "textAlign": "right" } }, { "text": "754", "style": { "textAlign": "right" } }, { "text": "718", "style": { "textAlign": "right" } }, { "text": "+19%", "style": { "textAlign": "right" } }, { "text": "Behind", "style": { "color": "B2182B", "fontWeight": "bold" } } ] }, { "cells": [ { "text": "Rule of 40 (growth + FCF margin)" }, { "text": "34.7", "style": { "textAlign": "right" } }, { "text": "31.2", "style": { "textAlign": "right" } }, { "text": "29.5", "style": { "textAlign": "right" } }, { "text": "+8.3", "style": { "textAlign": "right" } }, { "text": "Ahead", "style": { "color": "1B7837", "fontWeight": "bold" } } ] } ] } ] }, { "elements": [ { "type": "heading", "level": 2, "text": "3. ARR trajectory", "style": { "fontFamily": "Georgia", "fontSize": 18, "fontWeight": "bold", "color": "0B2F6B" } }, { "type": "chart", "chartType": "line", "title": "Ending ARR by quarter ($M)", "categories": [ "Q3 FY25", "Q4 FY25", "Q1 FY26", "Q2 FY26", "Q3 FY26E", "Q4 FY26E" ], "series": [ { "name": "Actual / forecast", "values": [ 176.4, 191.2, 202, 214.3, 226.5, 240.1 ] }, { "name": "FY26 plan", "values": [ 176.4, 191.2, 201.1, 211.8, 223, 235.6 ] } ], "axes": { "y": { "title": "ARR ($M)", "min": 150, "gridLines": true } }, "legend": { "position": "bottom" } }, { "type": "heading", "level": 2, "text": "4. Regional performance", "style": { "fontFamily": "Georgia", "fontSize": 18, "fontWeight": "bold", "color": "0B2F6B" } }, { "type": "paragraph", "text": "North America continues to carry the expansion story; EMEA underperformed on both new logos and expansion, which we attribute to the unfilled enterprise AE seats (4 of 9 open all quarter) and to two slipped seven-figure renewals that closed in the first week of June and will be recognized in Q3." }, { "type": "table", "tableStyle": "striped", "tableCaption": "Regional bookings and retention, Q2 FY2026", "rows": [ { "isHeader": true, "cells": [ { "text": "Region" }, { "text": "Net new ARR" }, { "text": "% of plan" }, { "text": "NRR" }, { "text": "Gross churn" }, { "text": "Commentary" } ] }, { "cells": [ { "text": "North America" }, { "text": "$8.6M", "style": { "textAlign": "right" } }, { "text": "114%", "style": { "textAlign": "right" } }, { "text": "119%", "style": { "textAlign": "right" } }, { "text": "6.8%", "style": { "textAlign": "right" } }, { "text": "Automation add-on attach at 36%; two $1M+ expansions closed early" } ] }, { "cells": [ { "text": "EMEA" }, { "text": "$2.4M", "style": { "textAlign": "right" } }, { "text": "71%", "style": { "textAlign": "right" } }, { "text": "108%", "style": { "textAlign": "right" } }, { "text": "10.2%", "style": { "textAlign": "right" } }, { "text": "AE coverage gap; two renewals slipped into Q3 (both since closed)" } ] }, { "cells": [ { "text": "APAC" }, { "text": "$1.3M", "style": { "textAlign": "right" } }, { "text": "98%", "style": { "textAlign": "right" } }, { "text": "111%", "style": { "textAlign": "right" } }, { "text": "9.1%", "style": { "textAlign": "right" } }, { "text": "First two ANZ public-sector wins; Japan reseller ramp on track" } ] } ] }, { "type": "heading", "level": 2, "text": "5. Churn and save-desk analysis", "style": { "fontFamily": "Georgia", "fontSize": 18, "fontWeight": "bold", "color": "0B2F6B" } }, { "type": "paragraph", "text": "We churned 41 logos representing $3.9M ARR. Exit interviews attribute 14 losses to budget elimination (the customer retained no replacement vendor), 11 to consolidation onto a suite vendor, 9 to price, and 7 to product gaps — of which 5 named the absence of field-level audit history, which ships in the September release. The save desk retained 26 of 67 at-risk accounts (39% save rate, versus 31% last quarter) at a median concession of 12% for a median term extension of 14 months. Concession-adjusted, saved ARR carried a 96% net present value relative to list renewal, which supports continuing the program at current authority levels." }, { "type": "paragraph", "text": "Cohort behavior remains encouraging: the FY2024 cohort shows 121% cumulative net retention at month 24, against 109% for the FY2022 cohort at the same age. The difference is almost entirely seat expansion in accounts that adopted the API integration pack during onboarding — reinforcing the onboarding-scope changes rolled out in April." } ] }, { "elements": [ { "type": "heading", "level": 2, "text": "6. Pipeline and coverage", "style": { "fontFamily": "Georgia", "fontSize": 18, "fontWeight": "bold", "color": "0B2F6B" } }, { "type": "paragraph", "text": "Q3 opens with $31.4M of qualified pipeline against a $9.1M net-new bookings target — 3.5x coverage, up from 3.1x entering Q2. Coverage quality improved as well: 58% of pipeline is in stage 3 or later, versus 49% a quarter ago. The concentration caveat is that the top five opportunities represent $6.8M (22%) of total pipeline; slippage of even two of these would take coverage below 3.0x." }, { "type": "table", "tableStyle": "bordered", "tableCaption": "Pipeline by stage entering Q3 FY2026", "rows": [ { "isHeader": true, "cells": [ { "text": "Stage" }, { "text": "Opportunities" }, { "text": "Value" }, { "text": "Weighted value" }, { "text": "Median age (days)" } ] }, { "cells": [ { "text": "Stage 2 — Qualified" }, { "text": "184", "style": { "textAlign": "right" } }, { "text": "$13.2M", "style": { "textAlign": "right" } }, { "text": "$2.6M", "style": { "textAlign": "right" } }, { "text": "38", "style": { "textAlign": "right" } } ] }, { "cells": [ { "text": "Stage 3 — Solution validation" }, { "text": "96", "style": { "textAlign": "right" } }, { "text": "$9.7M", "style": { "textAlign": "right" } }, { "text": "$3.4M", "style": { "textAlign": "right" } }, { "text": "61", "style": { "textAlign": "right" } } ] }, { "cells": [ { "text": "Stage 4 — Commercial negotiation" }, { "text": "44", "style": { "textAlign": "right" } }, { "text": "$6.1M", "style": { "textAlign": "right" } }, { "text": "$3.7M", "style": { "textAlign": "right" } }, { "text": "83", "style": { "textAlign": "right" } } ] }, { "cells": [ { "text": "Stage 5 — Contract out" }, { "text": "17", "style": { "textAlign": "right" } }, { "text": "$2.4M", "style": { "textAlign": "right" } }, { "text": "$2.0M", "style": { "textAlign": "right" } }, { "text": "97", "style": { "textAlign": "right" } } ] } ] }, { "type": "container", "keepTogether": true, "children": [ { "type": "heading", "level": 2, "text": "7. Priorities for Q3 FY2026", "style": { "fontFamily": "Georgia", "fontSize": 18, "fontWeight": "bold", "color": "0B2F6B" } }, { "type": "list", "listType": "number", "items": [ { "text": "Close the EMEA enterprise coverage gap: all four open AE seats accepted-offer by 31 July; interim coverage via two NA overlay reps continues through September." }, { "text": "Ship field-level audit history (September release) and proactively re-engage the seven product-gap churns and 23 open opportunities where it was cited as a blocker." }, { "text": "Mid-market cycle-time program: introduce mutual close plans at stage 3 and a pre-approved security review packet; target median cycle back under 80 days by Q4." }, { "text": "Extend save-desk authority to 18-month term extensions (currently 14) based on the concession NPV analysis in section 5." }, { "text": "Complete SOC 2 Type II renewal fieldwork by 15 August to keep the two public-sector stage-4 deals on their award timelines." } ] }, { "type": "paragraph", "runs": [ { "text": "Appendices distributed separately: ", "style": { "fontWeight": "bold" } }, { "text": "A — GAAP to non-GAAP reconciliation; B — cohort retention triangle; C — top-25 account plan summaries. Questions to " }, { "text": "fp&a@latticeharbor.com", "style": { "color": "0B3954" } }, { "text": " ahead of the 24 June board session." } ] } ] } ] } ] }