Earnings Call Transcript: NOTHING WORKS INC. (NASDAQ: NWRK), Q3 2026

OPERATOR: Good afternoon and welcome to the Nothing Works Inc. third quarter fiscal 2026 earnings call. All participants are in listen-only mode, which is also our organizational philosophy. I will now turn the call over to Vice President of Investor Relations, Brent Callahan.

BRENT CALLAHAN, VP INVESTOR RELATIONS: Thanks, operator. Before we begin, I'd like to remind everyone that today's call contains forward-looking statements, and that our actual results may differ materially, historically have differed materially, and at this point differ materially as a matter of corporate tradition. We'll be referencing non-GAAP financial measures, which exclude items management believes are not indicative of core operating performance, such as: restructuring charges, impairment charges, stock-based compensation, litigation settlements, the litigation itself, and this quarter, for the first time, revenue.

With that, I'll hand it to our CEO, Marcus Thorne-Reilly.

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Prepared remarks¶

MARCUS THORNE-REILLY, CHIEF EXECUTIVE OFFICER: Thanks, Brent. Good afternoon, everyone.

I want to start by saying that this was an extraordinary quarter of disciplined execution. Our teams delivered against a challenging macro backdrop, and I could not be prouder of the fourteen hundred people who are no longer here.

As you saw in the release, we took the difficult but necessary step of reducing our workforce by 22% as part of Project Lighthouse, our initiative to become a leaner, more focused, more agile organization. I want to be very clear about something, because I think it gets lost: this was not a cost decision. This was a growth decision. We are investing in growth by having fewer people. The people who remain are more growth-oriented, by definition, because they are the ones we kept.

Turning to the numbers. Revenue came in at $1.84 billion, down 11% year over year, which is ahead of our guidance of "down a lot." Adjusted EBITDA was $412 million, up 34%, reflecting the operating leverage inherent in our model and also in firing people.

Earnings per share came in at $1.61, up from $1.28 a year ago — a 26% increase, which I think speaks for itself.

Now, some of you will note that we recorded a one-time restructuring charge of $290 million this quarter. I want to address that head-on, because I know it's a question. This is a one-time charge. It is not recurring. It reflects a discrete set of actions that we do not expect to repeat.

BRENT CALLAHAN: Marcus, I'm being told this is the ninth consecutive quarter with a one-time charge.

MARCUS THORNE-REILLY: Each one has been one time.

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The strategic pillars¶

Let me spend a minute on our three strategic pillars for fiscal 2027, which I'm excited to share are the same three pillars as fiscal 2026, renamed.

Pillar one: AI-first transformation. We are aggressively embedding AI across the enterprise. I want to be clear that this is not about replacing people. It is about augmenting our remaining people so thoroughly that the question of replacement becomes philosophical. We have appointed a Chief AI Officer, who reports to me, and who has been given a mandate to identify efficiencies. In his first ninety days he identified himself, and we're working through that.

Pillar two: Return to office. Effective October 1, all employees will be in-office five days a week. Our data is unambiguous: collaboration happens in person. Serendipitous hallway conversations drive innovation in a way that simply cannot be replicated remotely.

I'll note for the analysts on the call that in 2021 we permanently closed 60% of our office footprint and took a $1.1 billion gain on the sale-leaseback, at which point our data was unambiguous that distributed work drove focus, and that offices were a legacy cost structure. Both datasets remain unambiguous. We are a data-driven company.

Pillar three: Customer obsession. We are obsessed with our customers. This quarter we discontinued the product tier that 61% of our customers use, because it was not aligned with where our customers are going. Our customers were surprised to learn where they are going. We are helping them get there through a migration path that costs 3.2 times more and does 40% less, which we are calling Nothing Works Pro.

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Q&A¶

OPERATOR: Our first question comes from Jennifer Park at Whitmore Capital.

JENNIFER PARK: Hey, thanks for taking the question, and congrats on a really strong quarter of execution.

JENNIFER PARK: I wanted to ask about the durability of the margin improvement. As you lap the cost actions, how should we think about the algorithm going forward?

MARCUS THORNE-REILLY: Great question, Jennifer. Priya, do you want to take the algorithm?

PRIYA NANDAKUMAR, CHIEF FINANCIAL OFFICER: Sure. Look, we're very confident in the durability here. We see a long runway of continued efficiency capture as we complete Project Lighthouse and move into Project Lighthouse Two, which is a separate and unrelated initiative that also involves reducing headcount by a similar amount for entirely different reasons.

JENNIFER PARK: And on the top line — any color on when revenue growth reaccelerates?

PRIYA NANDAKUMAR: We're not guiding to reacceleration at this time. What I'd point you to is that we've fundamentally changed the quality of our revenue. The revenue we lost was low-quality revenue from customers who were price-sensitive and used the product frequently, generating support costs. The revenue we retained is high-quality revenue from customers who have not yet noticed the migration email.

OPERATOR: Next question, David Osei at Ridgeline Partners.

DAVID OSEI: Thanks. Marcus, a more basic one. Have you used the product?

MARCUS THORNE-REILLY: In what sense?

DAVID OSEI: In the sense of using it. Logging in. Doing the thing it does.

MARCUS THORNE-REILLY: I have seen extensive demos. I've reviewed the roadmap in depth. I would say I have a very strategic familiarity with the product experience.

DAVID OSEI: So no.

MARCUS THORNE-REILLY: I think if you look at the leaders who've built the most enduring franchises, what you find is that they operate at the level of the system, not the interface. Steve Jobs did not personally—

DAVID OSEI: He did, though. That was famously the whole thing about him.

MARCUS THORNE-REILLY: Operator, next question.

OPERATOR: Our next question comes from an unmuted line. Caller, please identify yourself.

UNIDENTIFIED VOICE: Hi, yes, I'm a senior engineer here, I was on the internal all-hands stream and I think the lines got—

BRENT CALLAHAN: We'll go to the next question.

UNIDENTIFIED VOICE: —crossed, but while I have you: the migration path Marcus described doesn't exist. There's no engineering work scheduled for it. I asked in three forums. I want to be respectful here, I just don't think we can ship what we just told the market we—

BRENT CALLAHAN: Operator, we're going to close the queue.

MARCUS THORNE-REILLY: I love the passion. That's the culture we've built.

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Closing remarks¶

MARCUS THORNE-REILLY: Before we close, I want to take a moment to thank the fourteen hundred colleagues who departed this quarter. They gave us their best years. They built the thing that we are now more profitable without. In recognition of their contribution, we have renamed the third-floor conference room Gratitude.

I'd also note that the compensation committee, in light of the difficult decisions leadership was required to make this quarter, has approved an equity grant to the executive team of $46 million, vesting on adjusted EBITDA targets. I want to be clear that this was not my decision — it was the committee's, and the committee met on Tuesday, and I was in the room, but I recused myself for a portion of it.

Thank you all for your continued partnership. We remain confident in our ability to deliver long-term shareholder value through disciplined execution and a relentless focus on our customers.

OPERATOR: This concludes today's call. You may disconnect.

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The part where I stop laughing¶

Here's the problem with writing this kind of thing, and it's the problem with all satire aimed at finance: I had to keep making it less accurate to keep it funny.

Everything the fake executives did is legal and routine, and I want to lay out the real mechanics plainly, because the joke only lands if you know it isn't one.

1. 1

   Buybacks make EPS rise while the business shrinks

   Earnings per share is net income divided by shares outstanding. A company that buys back its own stock reduces the share count, which raises EPS even if net income falls. This is disclosed, legal, and sometimes genuinely the best use of capital. It is also the easiest way to report growth in a year when nothing grew. Always check whether EPS moved because of the numerator or the denominator.

2. 2

   Non-GAAP measures are a company's own scorecard

   GAAP is standardized. "Adjusted" anything is not — companies choose what to exclude, and they are required to reconcile it to GAAP, which is why the reconciliation table at the bottom of a press release is more informative than everything above it. The SEC polices misleading non-GAAP presentation precisely because the incentive to flatter is structural.

3. 3

   'One-time' charges that recur are not one-time

   A restructuring charge every quarter for nine quarters is a cost of doing business wearing a costume. The label matters because excluding it from adjusted earnings makes the underlying business look more profitable than it is. The fix takes ten seconds: pull four years of quarterly releases and count how many contained a one-time item.

4. 4

   The reasoning runs backward from the answer

   The RTO whiplash in the fake call is the real tell, and it generalizes. When an organization's stated rationale reverses completely while its language of certainty never wavers, the rationale was never the driver. Watch what the balance sheet needed in each period. That's the actual argument; everything else is the press release.

And the muted engineer is not a throwaway gag. He is the single most load-bearing person in the fake company — the one with the actual information, four levels down a branch nobody thinks about, which is precisely the dynamic in The Org Chart Is a Lie. Every real earnings call has one. He is not on the call.

None of this requires a conspiracy, which is what makes it durable. Every individual actor is responding rationally to their incentives. The compensation committee grants equity on adjusted EBITDA because that's the metric; the CEO manages adjusted EBITDA because that's the grant; the analyst opens with congratulations because hostility costs access; the engineer who says the migration path doesn't exist gets muted because the call is a performance, and performances have stage management.

The system produces this outcome with nobody in it having decided to. That's not cynicism. Cynicism would be believing they're all villains. They're mostly not. They're people inside a machine that rewards a particular kind of sentence, and after enough years of saying it, it stops sounding like a sentence and starts sounding like the truth.

Which is the whole reason to write the fake transcript. You can't hear the language while you're swimming in it. You can only hear it when someone turns it up two clicks past plausible — and then you go back to the real ones, and they sound exactly the same, and that's the part that should bother you.

It's just business. That's not a defense. It never was — see the corporate-speak field guide for what that phrase is actually doing.

Sources

1. SEC — Non-GAAP Financial Measures: Compliance & Disclosure Interpretations
2. SEC Investor.gov — Stock Buybacks
3. SEC — Earnings Per Share (Investor Bulletin: How to Read a 10-K)